United Arab Emirates 1975/76-2018 [1 ed.] 9789004408265, 9789004408258

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United Arab Emirates 1975/76–2018

Contemporary Archive of the Islamic World volume 2

The titles published in this series are listed at brill.com/caiw

United Arab Emirates 1975/76–2018 Edited by

Anthony Axon Susan Hewitt

leiden | boston

The Library of Congress Cataloging-in-Publication Data is available online at http://catalog.loc.gov LC record available at http://lccn.loc.gov/2019941165

Typeface for the Latin, Greek, and Cyrillic scripts: “Brill”. See and download: brill.com/brill-typeface. ISSN 2589-8124 ISBN 978-90-04-40825-8 (hardback) ISBN 978-90-04-40826-5 (e-book) Copyright 2019 by Koninklijke Brill NV, Leiden, The Netherlands. Koninklijke Brill NV incorporates the imprints Brill, Brill Hes & De Graaf, Brill Nijhoff, Brill Rodopi, Brill Sense, Hotei Publishing, mentis Verlag, Verlag Ferdinand Schöningh and Wilhelm Fink Verlag. All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission from the publisher. Authorization to photocopy items for internal or personal use is granted by Koninklijke Brill NV provided that the appropriate fees are paid directly to The Copyright Clearance Center, 222 Rosewood Drive, Suite 910, Danvers, MA 01923, USA. Fees are subject to change. This book is printed on acid-free paper and produced in a sustainable manner.

Contents Preface XI Acronyms XIII Map XVIII Introduction XX 1975/76 1 Diplomatic Troubles – Federal Cabinet – Abu Dhabi and Dubai, Rivals United? – Oil, 100 per cent Nationalisation – Development Spending – Port Zayed – Port Rashid 1977 8 Constitution – Supreme Council – Aid Programme – Qawasimi Legacy – Industrialisation – Jebel Ali Plans – Currency Board – One Market? 1978 21 Minor Hiccoughs – Federalisation – UAE Mediation in Gulf war – Banks Galore Competitive Rivalry – Capital Expenditure Reduced – ADNOC Dominance – Taweelah – Renewed Investment Confidence 1979 39 Rumours of Discontent – Provisional Constitution – Secession? – Metres, not Kilometres – Sharjah’s Status – OPEC Alignments – Omani Discontent – Common Economic Trends – Dirham Revalued – TEPCO – Social Infrastructure – Recession – Gas Engineering Concerns – Banking Reforms – Agriculture’s Future 1980 60 Government Crisis – Abu Dhabi-Dubai Rivalry – Questioning the Sheikhly System – Currency Board – Ruwais – GASCO – Das Island Disappointment – Industry – Economic Slowdown 1981 77 Cabinet Reshuffle – Economic Imbalance – UAE University – Hospital Growth – Desalination – Business, not Boom – Dubai: Efficiency and Profit – Over-banking 1982 117 Federation, not Unity – Imbalance, Over-dependence on Oil – After-effects of Construction Boom – Economics Override Politics – Hospitals, and a University – Economic Duplication – Abu Dhabi

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Calls the Shots – Dubai’s Mercantile Expertise – Stately Sharjah – Rocky Ras al-Khaimah – Ajman’s Marbles – Umm al-Quwain: More than a Dormitory – Fujairah: Natural Advantages 1983 137 Memorandum Movement – Five-Year Plan 1981–85 – Gulf Co-operation Council (GCC) – Sharjah-Dubai Border Dispute – Economic Re-thinking – OPEC – Budget Deficit – Tourism 1984 166 OPEC London Agreement – Defence Expenditure – Expatriate Community – ADNOC and Upper Zakum – Taxation – Local Banks Benefit 1985 190 Gulf War – Economic Depression – Banking Crisis – Company Law – ADIA – Galadari-Recession Recedes – Jebel Ali Success 1986 208 Role of Federal National Council – The Question of Quotas – Oil Price Disputes – Aid Expenditure Falls – Central Bank Policy – Banking Contraction 1987 221 Changing Fortunes – Uncertainties – Power Cuts – Lack of Bankruptcy Law – Iran and Iraq – Defence and Neutrality – Industrial Scepticism – Generation Changes 1988 228 Gulf War’s Mixed Blessings – Provisional Constitution Extended – Capital Expenditure Reduced – ADNOC Dominance – Taweelah – Renewed Investment Confidence 1989 236 Business Confidence Returns – Abu Dhabi’s Downstream Investments – Troubled Banking Sector – Dubai Business Booms – Central Bank Activity – New Generation of Leaders 1990 244 Optimistic Predictions – Diversification – Hydrocarbon Reserves Treble – Four Major Projects – Niscorp – Abu Dhabi Master Plan – Jebel Ali Free Zone 1991 254 Provisional Constitution – Territorial Disputes – Attempted Coup d’état – Budget Delays – Foreign Policy Changes – Oil Politics Emerge – Construction Sector Grows – Trade Buoyancy

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1992 263 War Costs Contribution – Damascus Declaration – Oil Revenue Grows – Banking Sector Recovers – Defence Expenditure – Sharjah’s Economic Development – Mina Zayed 1993 275 World Recession – Quota Busting – GCC Army Proposal – Bi-lateral Defence Pacts – Port Rashid – Jebel Ali – Saddam Hussein – Background – Traditional Loyalties 1994/95 284 Balance of Payments Surplus Falls – Strait of Hormuz – Bab Field – Non-oil Sector Growth – ‘Have-nots’ – 100 Years’ Oil Reserves 1996 294 Loosely Structured Alliance – Oman-Qatar Axis – Qatar Coup – Employment Imbalances – Tourism Growth 1997 300 Healthy Economy – Tourism – Demand for Power – Saadiyat Development – Iranian Expansionism 1998 305 Intra-family Rivalries – Iranian Ambivalence – Summit Boycotted – Unemployed Nationals – Dubai Diversifies 1999 309 Succession Tensions – Iran Concerns – Sharjah Suffers – Strong Banking Sector – OPEC Quotas – Privatisation and Diversification 2000 314 Separate Development Strategies – Oil Prices Soar – Construction Boosted – Trade Surplus – Stock Exchange Starts 2001/02 319 Political Maturity – Unemployment Concerns – Palestine – Regional Financial Hub? – Healthy External Accounts – Oil Dependence Continues 2003 324 Emiratisation – Palestinian Support – Financial Hub – Healthy Accounts 2004 329 Migrant Amnesty – Hawala – Gas Exploration – Economic Reforms – Foreign Investments 2005 334 Saudi Arabia – Omani Border – Unemployment Edges up – Stable Inflation – Central Bank Reservations – Etihad Airways – GCC Customs Union

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2006 341 Abu Dhabi:Dubai Rivalry – Dubai Diversifies Further – Sheikh Mohammed Becomes Ruler of Dubai – Camel Racing Reforms 2007 346 Macroeconomic Management – Transition – Natural Gas – Increased Investor Confidence – Public Quiescence 2008 352 Foreign Direct Investment – Industrial Sector – Taweelah – Violence Free 2009 357 Recognition – PDRY – A High Income State – Real Estate Slow-down – Dubai Debts – Nakheel Liability – Deflationary Pressures 2010 362 Cultural and Commercial Divisions – Oil Receipts Fall – Federal Funding – Dubai World – First Deficit in Decades – Cash Injections and Debt Extensions – Recovery Anticipated 2011/12 369 Local Unemployment – KIZAD – Real Estate Overhang – Open and Outward Orientation – Nasr and Umm al-Lulu – ADCOP – Real Estate Overhang – Downside Risks – Fragile Economic Recovery – GREs 2013 375 Arab Spring Nervousness – Human Rights Concerns – Guggenheim on Hold – Revalries Continue – Taj Mahal vs Louvre – Dolphin Pipeline 2014 382 Racing or Race-Bling? – Political Sub-Currents – Alleged Plot – Muslim Brotherhood – Judicial Process Doubts – Economic Portfolio Solidified – Dubai Megaprojects 2015 390 Financial Reserves – Healthier Banks – Abu Dhabi Economic Vision 2030 – Dubai’s Recovery – IMF Warnings – Growth Rate Forecasts 2016 397 Stock Market Slide – Oil Price Risks – Importance of Real Estate – Fuel Subsidies Relaxed – Generous Welfare State –Natural Gas Consumption

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2017 403 Khalifa’s stroke – Mohammed as de Facto Ruler – Labour Market Reforms – Post-oil Knowledge Economy – Production-sharing Agreements (PSAs) 2018 411 2018 ‘Clear Way’ – Feud with Qatar – National Service – Little Sparta – Yemen Civil War – Regional Expansion Postscript 418 Arabic Naming Practice 425 Notes 427 These notes do not claim to be exhaustive or comprehensive. They are for the most part, directly related to the names (of people, places, political movements, parties and events) referred to in Contemporary Archive of the Islamic World: United Arab Emirates 1974–2018. They are not claimed to be comprehensive, but it is hoped that they help clarify some aspects of this young country’s history. Timeline 519 Country Profile 524 Bibliography 539 Index 541

Preface In the early 1970s the founders of World of Information identified the need for a comprehensive but readily accessible source of information on the countries of the Middle East. The ‘oil shock’ rises in the price of a barrel of oil saw queues grow at petrol stations across Europe and North America. The world’s fragile dependency on a handful of little-known Middle Eastern countries had become plain to see. This vulnerability was not matched for some time by an increase in regional coverage on the part of the traditional news media. Thus the Middle East Review was launched, rapidly establishing itself as an objective, affordable information source. Published from leafy Saffron Walden some 100km north of London and just south of the university city of Cambridge, the Middle East Review appeared annually. It soon established itself internationally, with subscribers in over 100 countries and a strong bookshop presence throughout the Middle East, from Beirut to Muscat, Khartoum to Kuwait. This volume re-publishes the Middle East Review’s annual appraisals of the United Arab Emirates (UAE), the background to the country’s formation, its economy and, as far as it goes, its politics. Effectively, the period covered corresponds to the first four decades or so of the UAE’s existence. Its initial inaccessibility, its relative remoteness meant that news coverage was limited. In 1973 there was a Reuters correspondent and not much more. However, those journalists that did visit were always made welcome. In 1975 when the first edition of the Middle East Review was published, the United Arab Emirates had existed for little more than three years; it was then the youngest independent country on the planet. Its first President, Sheikh Zayed bin Sultan al-Nahyan (universally known as Sheikh Zayed) was also the Ruler of Abu Dhabi, the richest of the seven sheikhdoms, and also the location of its capital city. The first vice president and prime minister was Sheikh Rashid ibn Saeed al-Maktoum (known as Sheikh Rashid), the Ruler of Dubai. In the UAE’s early days, its continued existence very much depended upon the relationship between these two men. Although Abu Dhabi was the capital and centre of the all-important oil industry, long before independence Dubai was established as a trade and business centre. Not much love was lost between the two ruling families, the al-Nahyan in Abu Dhabi and the al-Maktoum in Dubai. Indeed there existed something of a philosophical divide between the two, a divide which has virtually ceased to be a cause of tension, but which, even in the twenty-first century can be detected. This was certainly so when following the

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global financial crisis, in 2009, Dubai’s burgeoning real estate business was saved from crashing by a bail-out from Abu Dhabi. Over the four decades covered by this volume, many observers have pondered on the likelihood of the UAE undergoing an inevitable political change. This was particularly true during the 2011 Arab Spring. But those expectations proved misplaced. This volume, the first in a series of six on the countries of the Middle East, is an attempt to explain why, to show the UAE as seen through the eyes of the journalists, consultants and academics who were writing for the Middle East Review at the time. Our thanks are due to countless people for their help in the publication of this volume. Particularly with articles published over the years in the Middle East Review, with research and documentation, editing and proof reading. With apologies to those we have inadvertently left out, we would like to mention: Philip Alexander, Kathleen Bishtai, Rennie Campbell, Enver Carim, Naomi Collet, Roger Cooper, Lucien Dahda, Michael Field, Graham Hancock, Michel Kaikati, Anthony McDermott, Peter Kemp, Chris Kutschera, Andrew Lycett, Katya Maddison, James McCarter, Anthony McDermott, Anthony Morbin, Alice Morrison, Marianne Morse, John Murray, Maggie Ray, Pamela Ann Smith, Doina Thomas, Charlie Weeks, Rosemarie Said Zahlan. We would also like to thank the staff of a number of organisations that allowed us to use their facilities in the preparation of this book, notably: Cambridge City Library, Cambridge University and the University Library. The Middle East Association, the Hong Kong FCC and the Tokyo Foreign Press Club.

Acronyms AAOIFI ABB ABC ABIFT ACC ADCO ADCOP ADDF ADF ADFAED ADFD

Accounting and Auditing Organisation for Islamic Financial Institutions Asea Brown Boverei Arab Banking Corporation Arab Bank for Investment and Foreign Trade Arab Co-operation Council Abu Dhabi Company for Onshore Oil Operations Abu Dhabi Crude Oil Pipeline Abu Dhabi Defence Force Arab Deterrent Force Abu Dhabi Fund for Arab Economic Development, later changed to: Abu Dhabi Fund for Economic Development

ADGLC/

Abu Dhabi Gas Liquefaction Company Abu Dhabi Investment Authority ADIC Abu Dhabi Investment Company ADMA Abu Dhabi Marine Areas ADMA-OPCO Abu Dhabi Marine Operating Company ADNIC Abu Dhabi National Insurance Company ADNOC Abu Dhabi National Oil Company ADNOC-FOD Abu Dhabi Company for Oil Distribution ADNATCO Abu Dhabi National Tanker Company ADOC Abu Dhabi Oil Company ADPC Abu Dhabi Petroleum Company (formerly known as Petroleum Development Trucial Coast (PDTC)) ADWEA Abu Dhabi Water and Electricity Authority AFESD Arab Fund for Economic and Social Development ALBA Aluminium Bahrain AMF Arab Monetary Fund AMOCO Standard Oil of Indiana ARAMCO Arabian American Oil Company ARCO Atlantic Richfield Oil Company AREC Arab Engineering Comoany ASRY Arab Shipbuilding and Repair Yard AWQAF General Authority of Islamic Affairs and Endowments (GAIAE) BADEA Arab Bank for Economic Development in Africa BBC British Broadcasting Corporation ADGAS

ADIA

XIV BBME BCCI BICC BIS BNOC BP CBO CCC CEPSA CFP CIA CIS CNPC DDF DEOL DIFC DFIX DFM DIC DPC DSP DSCE DUBAL DUCAB DWTC EBI EC

Ecu EEC EGA EIC EIU EDB EGPC EMGAS

Emirtel ENOC EOR EU EZW

ACRONYMS

British Bank of the Middle East Bank of Credit and Commerce International British Insulated Callender’s Cables Bank for International Settlements British National Oil Company British Petroleum Central Boycott Office Consolidated Contractors International Co Companía Espanola de Petróleos Compagnie Française des Pétroles Central Intelligence Agency Commonwealth of Independent States China National Petroleum Corporation Dubai Defence Force Dubai Exploration Onshore Dubai International Financial Centre Dubai International Financial Exchange Dubai Financial Market (Stock Exchange) Dubai International Capital Dubai Petroleum Company Dubai Strategic Plan 2015 Dubai Supreme Council of Energy Dubai Aluminium Company Dubai Cable Company Dubai World Trade Centre Emirates Bank International European Community European Units of Account/European Currency Unit European Economic Community Emirates Global Aluminium Emirates Insurance Company Economist Intelligence Unit Emirates Development Bank Emirates General Petroleum Corporation Emirates Gas Bottling Company Emirates Telecommunications Corporation Emirates National Oil Company Enhanced Oil Recovery European Union Economic Zones World

ACRONYMS FAO FCA FCI FERTIL FGB FNC FZE GASCO GCC GECF GHC GIC GDP GNP GODE GOIC GRE HBME HCT HRW HSBC ICARDA ICD IDB IDEX IFC IMF IPIC IPC IPC IS ISDB ISIL JGC JODCO KD KFAED KBR KIZAD LNG

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Food and Agriculture Organisation Federal Customs Authority Fujairah Cement Industries Company Ruwais Fertiliser Industries First Gulf Bank Federal National Council Dubai Ports International Abu Dhabi Gas Industries Gulf Co-operation Council Gas Exporting Countries Forum General Holding Company General Industries Corporation Gross Domestic Product Gross National Product Gulf Organization for the Development of Egypt Gulf Organisation for Industrial Consulting Government-related entities Hongkong Bank of the Middle East Higher Colleges of Technology Human Rights Watch Hongkong & Shanghai Banking Corporation International Centre for Agricultural Research in the Dry Areas Investment Corporation of Dubai Islamic Development Bank International Defence Exhibition & Conference International Finance Corporation International Monetary Fund International Petroleum Investment Company Iraq Petroleum Company Iranian Petroleum Company Islamic State Islamic Development Bank Islamic State of Iraq and the Levant Japan Gasoline Company Japan Oil Development Company Kuwaiti Dinar Kuwait Fund for Arab Economic Development Kellogg Brown and Root Khalifa Industrial Zone Liquid Natural Gas

XVI LPG MEED MEES NATO NBAD NBD NBF NBS NLF NPCC OAPEC ODA OECD OGJ OIC OPEC PCC PDRY PDTC PFLO PFLOAG PLO QDR SAF SAVAK SPC TAQA TDIC TEPCO TMA TPC TSDF UAE UAEU UBF UBME UDECO UDF UN UNDP

ACRONYMS

Liquid Petroleum Gas Middle East Economic Digest Middle East Economic Survey North Atlantic Treaty Organisation National Bank of Abu Dhabi National Bank of Dubai National Bank of Fujairah National Bank of Sharjah National Liberation Front National Petroleum Construction Company Organisation of the Arab Petroleum Exporting Countries Overseas Development Administration (UK) Organisation for Economic Co-operation and Development Oil & Gas Journal Organisation of Islamic Co-operation Organisation of the Petroleum Exporting Countries Pipeline Construction Company People’s Democratic Republic of Yemen Petroleum Development Trucial Coast Popular Front for the Liberation of Oman Popular Front for the Liberation of Oman and the Arab Gulf Palestine Liberation Organisation Qatar & Dubai Riyal Sultan’s Armed Forces Iranian Secret Police Supreme Petroleum Council Abu Dhabi National Energy Company Tourism Development and Investment Company Tokyo Electric Power Company Trans-Mediterranean Airways Turkish Petroleum Company Trucial States Development Fund United Arab Emirates UAE University (al-Ain) UAE Banks Federation Union Bank of the Middle East Umm al-Dalkh Development Company Union Defence Force United Nations United Nations Development Programme

ACRONYMS UNESCO UNFAO UNHCR UNHRC UOG USSR YAR ZADCO

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United Nations Educational, Scientific and Cultural Organisation UN Food and Agriculture Organisation United Nations High Commissioner for Refugees UN Human Rights Commission UAE Offsets Group Union of Soviet Socialist Republics Yemen Arab Republic Zakum Development Company

Introduction In 1969 the estimated population of what was to become the United Arab Emirates (UAE) was 180,184, a figure that included 1,100 officers and men of the Trucial Oman Scouts many of whom were of Baluchi or other origin. By 2016 the figure had risen to around 9.5 million, of whom just over 10 per cent were UAE nationals. The mainspring of this incredible growth has not been the area’s traditional source of income – for centuries Gulf pearl-divers had managed to make a living by diving for pearls. The eighteenth century advent of increased trade between the Gulf States, India, Iran and Europe had offered another opportunity: piracy. For a time the region was known as the ‘Pirate Coast’ until in the nineteenth century truces were declared – in 1853 the naval forces of the British East India Company imposed what was known as the Treaty of Maritime Peace in Perpetuity and the region became better known as the Trucial Coast. Until 1858 all contacts between Britain and the Trucial States relating to diplomatic or administrative matters were conducted through the East India Company. From 1858 they were handled by the Government of Bombay acting for the British Crown and from 1873 until Indian independence in 1947 by the Government of British India. By virtue of a further treaty made in 1892, the British government became responsible for the external affairs of the Trucial States through a Political Resident for the Gulf with an office at first located in Bushire (Iran) but later transferred to Bahrain. The first Political Officer on the Trucial Coast was based in Sharjah and when this post became a Political Agency it was transferred to Dubai with a Political Officer at Abu Dhabi, later upgraded to Political Agent. Back to Camels? On independence in 1971, the population of the UAE corresponded to a medium sized provincial English town such as Oxford. In 2016 it corresponded more to that of London. In Dubai it boasted one of the world’s busiest international airports, a metro railway system and the world’s tallest building. Although Abu Dhabi has somewhat slavishly followed Dubai in building ports and free zones, these are peripheral rather than central to its continued growth. Sheikh Rashid bin Saeed al-Maktoum of Dubai, who died in 1990, might have been impressed by the changes. However, he had been well aware that Dubai’s oil reserves were expected to dry up by 2020, and that diversification was essential. His famous quote: ‘My grandfather rode a camel, my father rode a camel, I drive a

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Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel’ still risked becoming true. His contemporary and fellow founder of the UAE, Sheikh Zayed bin Sultan al-Nahyan of Abu Dhabi (who died in 2004) lived to see much of the infrastructure and development get under way. Quoted in the London Economist, the political scientist Abdulkhaleq Abdulla described the UAE as ‘a bird that flies with two wings, Dubai and Abu Dhabi.’ The quote stopped at exploring what would happen if either wing (or indeed both) ceased to function. The UAE has little agriculture and minimal rainfall; some emirates have large debts and all a small native population. Fortunately, for the time being, what Dubai lacks Abu Dhabi has in abundance. Its oil reserves are the seventh largest in the world. But both emirates are exposed in different ways. Abu Dhabi is doubly vulnerable to oil price shocks – its revenues suffer, as does its inwards investment. In 2018 the most obvious symbol of that vulnerability was the development of the electric car: the more widespread the replacement of fuel tanks by batteries, the more reason for concern in Abu Dhabi. In contrast to Abu Dhabi, Dubai has twice teetered on the brink, bailed out by Abu Dhabi. A repeat of the Lehman Brothers crash, or of the Spanish construction implosion risks placing Dubai once again at its neighbour’s mercy. Abu Dhabi’s largesse is one of obligation rather than compassion; the history of the two emirates is one of friction rather than of friendliness. Yemen In 2018 all seven emirates also had to contend with a further eventuality. The risks posed by regional insecurity abounded. Tensions between Iran, Saudi Arabia and the USA were rife. The civil war in Yemen had a religious dimension that also endangered relations between Iran and the UAE. Following its walk-on role in the response to the Arab Spring in the Arabian Peninsula, the UAE was an enthusiastic participant in the mid-2017 blockade of Qatar. The country also began to beef-up its military strength. A US$1.6 billion agreement with Lockheed Martin for the upgrade of its air force was signed. However, the UAE involvement in the Saudi-led anti-Houthi coalition in the Yemen is a different ball-game. To begin with, although the coalition is described as ‘Saudi-led’, when the heavy military lifting is needed, it is normally the Afghanistan trained UAE forces that take the lead. Emirate forces have dislodged Iranian-backed Houthi forces from the port of Aden, and re-taken Mukalla from the Yemeni al-Qaeda franchise. While Saudi Arabia’s Mohammed bin Salman’s (MBS) motives in ridding Yemen of the Houthi rebels appear clear enough, those of the UAE are less clear. However, there is a commercial common denominator. The UAE’s DP World is

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one of the world’s largest port operators. Inevitably it is an arm of the UAE government. That being the case, the UAE presence on the Yemeni island of Socotra, its desire to control the Bab al-Mandab Strait off the southern shores of Yemen, its presence in the Somali breakaway states of Puntland and Somaliland all – alongside Hodeidah and Aden – add up to a very firm grip on the ports of the Horn of Africa. There were those, however, who saw the UAE’s involvement in the war as a step too far. UAE forces might be competent, but it was hard to argue that the war in Yemen constituted a direct threat to the UAE. Others doubted that the UAE forces were sufficiently trained in this specialist type of war. The doubting voices saw themselves justified when, in late August 2018 a report published by the Group of Eminent Experts on Yemen (YemenGEE), established in 2017 by the UN High Commissioner for Human Rights (UNHCR), concluded that individuals in the government of the UAE alongside those of Yemen and Saudi Arabia could be prosecuted for acts that amount to international crimes ‘subject to determination by an independent and competent court.’ The Group of Experts’ report, which covers the period from September 2014 to June 2018 noted that ‘coalition air strikes have caused most direct civilian casualties’, going on to say that ‘There is little evidence of any attempt by parties to the conflict to minimise civilian casualties.’ The UN experts also believed that, since September 2014, parties to the conflict in Yemen ‘have severely restricted the right to freedom of expression. Human rights defenders and journalists have faced relentless harassment, threats and smear campaigns by the government of Yemen, coalition forces, including those of Saudi Arabia and the United Arab Emirates, and by the de facto authorities in blatant disregard of human rights law.’ Victims and witnesses also described to the UN Experts ‘persistent and pervasive aggressive sexual violence perpetrated (inter alia) by United Arab Emirates personnel.’ Howdy, Saudi Yemen apart, the UAE’s commercial clout clearly makes it an attractive ally. Particularly for Saudi Arabia which despite its vast wealth has, for the most part, failed to diversify its economy. But small countries (and they don’t come much smaller than the UAE) need big friends. For the UAE any NATO alliance would be inevitably remote. The obvious partner is Saudi Arabia, which under Crown Prince Mohammed bin Salman al-Saud (MBS) direction seeks to modernise and develop in ways that internally were previously off-limits. In June 2018 the two countries signed a number of economic and military agreements. In 2018 it did seem as though the security of the Arabian Gulf region depended to a large degree on three men. Most important in this troika was

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Mohammad bin Salman himself. Second came the UAE’s Crown Prince Mohammad bin Zayed al-Nahyan (MBZ), third Sheikh Tamim bin Hamad al-Thani, the Ruler of Qatar. The Economist concluded that the three men ‘betray a rashness, especially in foreign policy.’ The alleged rashness in foreign policy risked, if not kept in check, becoming a problem for the UAE. Since the UAE’s creation in 1971, its rulers have distinguished themselves by their cautious, astute approach to international relations. Purchasing sophisticated weaponry is much easier than knowing how to use it wisely. Close, and large, allies may be important; but so is genuine independence.

1975/76 Diplomatic Troubles – Federal Cabinet – Abu Dhabi and Dubai, Rivals United? – Oil, 100 per cent Nationalisation – Development Spending – Port Zayed – Port Rashid

The United Arab Emirates (UAE) consists of the seven former Trucial Sheikhdoms of Abu Dhabi (area approx 25,000 sq miles; population approx 90,000), Dubai (area approx 15,000 sq miles; population approx 75,000). Sharjah (area approx 1,000 sq miles, population approx 60,000), Ajman (area approx 100 sq miles; population approx 5,000), Umm al-Quwain (area approx 300 sq miles; population approx 5,000), Ras al-Khaimah (area approx 650 sq miles; population approx 25,000) and Fujairah (area approx 450 sq miles; population approx 10,000). The state was set up in 1971 following British withdrawal from the Gulf when London’s responsibility for the defence and foreign relations of the Sheikhdoms was ended. The initial federation had six members, Ras al-Khaimah joining in February 1972. The UAE is a member of both the United Nations and the Arab League. The union’s early months were not without their diplomatic troubles. A serious incident arose when Iran seized the two Tunb Islands in the Strait of Hormuz from Ras al-Khaimah in late November 1971. (An Iranian claim to the island of Abu Musa was settled by peaceful arrangement with Sharjah.) It took over twelve months for relations between the UAE and Iran to improve to the extent that a UAE ambassador could be sent to Tehran. The Iranian envoy to the UAE had already arrived in Abu Dhabi. Relations with the Shah of Iran are, however, now quite cordial. The only Arab states which have not yet given diplomatic recognition to the UAE are the People’s Democratic Republic of Yemen (PDRY) and Saudi Arabia. The absence of relations with the former is of little real consequence but the lack of recognition by Riyadh is more serious. The major obstacle is Saudi Arabia’s territorial claim to a large area of Abu Dhabi’s territory. The claim is widely known as the Buraimi Oasis dispute but in fact the area involved is much larger and includes the important regions of the Zarrar oilfield. Saudi Arabia has not pressed the claim with any vigour in the recent past but neither have there been any sustained attempts at settlement on the part of the Saudi government. Abu Dhabi would certainly like to see the issue resolved for apart from this dispute there are no major international threats to the Union’s territory. The highly complex pattern of internal political and tribal boundaries could,

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however, provide material for future political disputes between the seven member states, such as occurred in 1972 between Sharjah and Fujairah. The UAE’s first President is Sheikh Zayed bin Sultan al-Nahyan, the ruler of Abu Dhabi since 1966 and the Vice President is Sheikh Rashid bin Saeed al-Maktoum, Dubai’s ruler since 1958. These Federal offices are to be held for five-year terms. In December 1973 the local government of Abu Dhabi under the Crown Prince, Sheikh Khalifa bin Zayed al-Nahyan, was abolished and a new federal government set up as a step towards the eventual unification of the seven separate state administrations. The new Federal Government is headed by the Crown Prince of Dubai, Sheikh Maktoum bin Rashid, and the deputy prime minister is Abu Dhabi’s Crown Prince. The swearing in ceremony took place before Sheikh Zayed bin Sultan, on 24 December 1974 in Abu Dhabi, which is serving as the UAE’s centre until a new capital is built on the borders of Abu Dhabi and Dubai. The new cabinet has 25 members in addition to prime minister and his deputy. The distribution of seats is currently as follows: Abu Dhabi nine, Dubai four, Ras al-Khaimah four, Sharjah three, Ajman two, Umm al-Quwain two, Fujairah one. This distribution is an attempt to reflect differences in wealth and population among the seven members but a superficial comparison of the number of cabinet seats can be misleading. In fact two ‘states’ have an over-riding importance: Abu Dhabi and Dubai. If these two can continue to agree on the broad lines of policy (rivalries between them are old and deep-seated) then the Federation may yet grow to maturity, If, however, the big two have a series of profound disagreements, then the union could be endangered. The views of the five smaller members cannot prevail if the two big southern states are united in their stand. Abu Dhabi’s preponderance is reflected in the size of its military machine. The Abu Dhabi Defence Force (ADDF) now has a strength of over 7,000 men and an annual budget of some US$75 million). The Union Defence Force (UDF) was formed from the Trucial Oman Scouts (TOS) and has a total strength of about 2,000 men. Smaller defence forces also exist in Dubai and Ras al-Khaimah. There were reports at the end of 1973 that those forces were to be merged during 1974. At the moment, however, several of them still contain a significant number of former British army officers. The pressure for their removal and for the removal of British police advisors is growing and changes may be expected in this direction. Attempts have already been made, by various radical groups, particularly the Popular Front for the Liberation of Oman and the Arabian Gulf (PFLOAG), to infiltrate the armed forces and arrests of alleged PFLOAG members in both the

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ADDF and the UDF were reported, during 1973. The political loyalty of the armed

forces is essential for the Union’s future stability. The Economy The most important source of income for the UAE is oil. This discovery of petroleum in Abu Dhabi was announced in October 1960 but exports did not begin until 1962. Until the end of 1972 production was in the hands of two Western companies, the Abu Dhabi Petroleum Company (ADPC) and Abu Dhabi Marine Areas (ADMA). A Japanese company, Japanese Overseas Petroleum, bought 45 per cent of British Petroleum‘s holdings in ADMA in December 1972. During 1973 another Japanese Company, Abu Dhabi Oil Company (ADOCO), began production from the Mubarraz field. Three other companies have concessions in the state –Japan’s Middle East Oil, a US consortium led by Pan-Ocean Oil and a Canadian-French consortium, set up in January 1973 to develop the Al-Bukush field. Under the Organisation of the Petroleum Exporting Countries (OPEC) agreement of 1972 on participation, Abu Dhabi received a 25 per cent share in concessionaire’s operations with a gradual increase to 51 per cent by 1982. Since then, however, Abu Dhabi has indicated that it wished to obtain a majority holding before that date. Total crude output in 1972 was 49.7 million tons, an increase of 11.5 per cent on 1971. ADPC produced 28.8 million tons and ADMA 20.9 million tons. The 1973 figures are not yet available as we go to press, but in the nine months up to October production was running at 32 per cent above the corresponding period in 1972. Abu Dhabi gained considerable respect in the Arab world during the October war by its militancy on the oil front and put an embargo on oil exports to the Netherlands and the USA. Oil income leapt from £97 million in 1970 to £220 million in 1972. Figures for 1973 will probably exceed £300 million. The posted price for oil was raised to US$12.086–US$12.636 per barrel on 1 January 1974, of which the government take is US$7.162–US$7.598. During 1973 Abu Dhabi reached an agreement with a Japanese shipping company – Japan Line – for the disposal of almost all the participation crude which the government expected to receive from ADMA and ADOC under the 1972 Opec agreement. Under the agreement Japan Line agreed to purchase 730 million barrels of crude oil over eight years. In return Abu Dhabi was to participate in a joint venture with Japan Line to own and operate 18 tankers ranging from 200,000–260,000dwt. The only other member state of the UAE which exports petroleum is Dubai. Commercial quantities of crude oil were discovered in 1966, and exports began in 1969. Production remains very low by Gulf standards – less than 250,000bpd – but revenue of nearly £50 million in 1973 provided a useful supplement to

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Dubai’s trading income. All production is from offshore wells and Dubai was the first state to use submarine oil storage for its crude oil. No commercial discoveries have yet been made ashore despite drilling at depths of over 15,000ft. In May 1973 it was announced in Sharjah that crude oil of low sulphur content had been found off Abu Musa. The area involved however is the subject of a dispute, between Sharjah and Umm al-Quwain and the two states concessionaires are currently involved in litigation in the American courts over the ownership of the area in question. Production at 101,000bpd was scheduled to begin in March 1974. Under the 1971 Sharjah-Iran Agreement the latter country is also entitled to a share of any oil revenues produced in the vicinity of Abu Musa. Finance Abu Dhabi’s economic preponderance is reflected in its contribution to the UAE budget. In 1972 the budget amounted to BD21 million (BD = Bahraini Dinar; £1= BD0·98). In March 1973 the new budget of BD51 million was announced and Abu Dhabi’s contribution rose from BD16.5 million to over BD44 million. Of the total sum, BD18 million was allocated to new projects, the balance going to defence, foreign affairs and ongoing development projects. The latter have consisted primarily of improvements in communications, transport and the provision of electricity and water supplies throughout the seven states. Housing projects too have received federal funds. Many of the UAE’s development schemes – particularly in terms of agriculture, veterinary services, fisheries, health, education, public works and social welfare – were begun by the Trucial States Development Plan set up with British funds in 1956. These tasks have now been divided among the UAE cabinet. Other major developmental funds have come from Kuwait (particularly for education), Saudi Arabia (also used for education and the building of the Dubai to Ras al-Khaimah road) and Iran (for hospitals and dispensaries). UN agencies have in the past given assistance with water, child health and maternity welfare surveys. The greater richness of Abu Dhabi was revealed in the publication of its 1973 budget in May. This amounted to over BD280 million (over five times as big as the UAE budget) and included BD95 million for new developmental projects. Projects recently completed include a bridge linking Abu Dhabi town with the mainland, a dual carriageway, tree-lined road to Buraimi, two power stations, a cement factory, a water desalination plant and low-cost housing including a new town at Al-Ain. Extensions to the international airport are proceeding and the first phase of the new deep water port was opened and accepted ships in 1973. In March 1973

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a scheme was announced to build a US$300 million gas liquefaction plant on Das Island and in December the foundation stone of the plant was laid. The plant should come into full production in 1976 and will have an annual output of 3 million tons of liquid gas. Other products will include naptha and sulphur. Other industrial plans include a steel-rolling mill, an aluminium smelter, and a larger cement plant. Fourteen commercial banks are represented in Abu Dhabi including the National Bank of Abu Dhabi and a local insurance company, the Abu Dhabi Insurance Company, is being established. Abu Dhabi followed Kuwait’s lead in 1971 and set up the Abu Dhabi Fund for Arab Economic Development (ADFAED) with a capital of BD50 million, to finance economically viable development projects in the Arab world. Dubai’s development expenditure has continued to be devoted to largely improving its trading capacity since oil incomes remain relatively small. The 15-berth deep-water port which was opened in October 1972 showed its value in 1973 and reinforced Dubai’s position as the Gulf’s outstanding entrepôt port. In February 1973 plans were announced for the construction of massive dry-dock facilities in Dubai. The scheme will provide two berths for tankers of up to 0.5 million dwt and one for ships of up to 1 million dwt. This is a far bigger scheme than the one in Bahrain and the first part is due to be operational by the end of 1976. The ceremonial signing of the contract took place on 30 December with finance of £120 million arranged in London. The construction work will be in the hands of Costain Civil Engineering and a work force of over 4,000 is expected when the berths are fully operational. The bulk of this skilled labour will have to be drawn from overseas. Costains are already at work in Dubai on the largest cement works yet to be built in the Arab world with an annual capacity of 0.5 million tons. Production will begin on a smaller scale in 1974. A tunnel linking Deira and Dubai is also being built by the same firm at a cost of £7.5 million. A £6 million hospital, a £4 million sewage scheme and mains water improvements are also in hand. The international airport which can receive jumbo jets (as guerrilla groups demonstrated during the year) continued to have average daily traffic movements of between 35 and 45. Banking is active in Dubai with over 16 foreign banks in operation in addition to the National Bank of Dubai. Construction of the new port at Sharjah continued to make progress throughout the year but with a maximum capacity of 20,000dwt it will not be a serious rival to Dubai. The economy has not yet recovered from the loss of income, foreign exchange and employment which it suffered when the British military base was closed down at the end of 1971. Electricity and piped water are now available throughout Sharjah town and an expansion of the telephone system is going ahead. A new hospital and hotel are nearing completion. At

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Sharjah’s enclave on the Gulf of Oman – Khor Fakkan – there are plans for a major fishing centre. Eleven banks, including two Iranian ones are represented in Sharjah and in 1970 the government set up the Sharjah Insurance Company based on the models of the national insurance companies already operating in Qatar and Kuwait. In neither Ajman nor Umm al-Quwain have industrialisation schemes been started but the provision of piped water and electricity have gone ahead. Both states now possess power stations and useful creek improvements have been made for the use of local craft in each of the two small harbours. Three banks are represented in Ajman – including an Iranian one, and two banks exist in Umm al-Quwain. Ras al-Khaimah has yet to discover the oil reserves that were once predicted but capital from oil exploration has been used to develop the township. Electricity and piped water had been provided both there and in several of the nearby villages. Harbour improvements too are going ahead and local quarries at Khor Khuwair continue to provide much of the stone for the major construction projects in Abu Dhabi and Dubai. A £3.5 million cement plant is being built and will use local raw materials. A radio station began broadcasting in 1972 and the hotel boasts the Gulf’s only fully-fledged-and well patronised-casino. Six banks are represented in Ras al-Khaimah and the Chamber of Commerce, which was established in 1967, has recently been more active in promoting contacts between its members and foreign businessmen. Agricultural development in Ras al-Khaimah is promising – the experimental farm at Digdagga (which was established in1955) has shown what can be done in terms of both improved local and new crops and now runs a three-year course in both theoretical and practical agriculture. Evening courses are also given. Local livestock has been improved and a fine herd of 30 Friesian dairy cattle which was imported from the UK has been well acclimatised. The agricultural potential of Ras al-Khaimah is considerable and when considered with the rainfall, which exceeds that of the other emirates, has given rise to the hope that farming may yet provide the means of preventing the current drain of manpower resources to the richer and more rapidly developing states of Abu Dhabi and Dubai. The UAE as a whole certainly needs to improve its agricultural base – expensive hydrophonics experiments on Saadiyat Island (Abu Dhabi) are all well and good, and intensive poultry farming in Dubai can help too, but the only real hope of significant expansion in farm output must be in the exploitation of the richer water and soil resources of Ras al-Khaimah. Fujairah remains the most isolated of the states for it is the only one situated entirely on the Al-Batinah coast with no direct access of its own to the Gulf. The narrow strip of land between the mountains and the Gulf of Oman is, however,

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very fertile. In Fujairah over 60 per cent of the population still earn their living from agriculture and a further 15 per cent from fishing. Dates, fruit and vegetables are grown but the only significant export crop is tobacco. The building of the trans-peninsula road through the Wadi Ham and Wadi Siji should help Fujairah’s crops to penetrate the growing markets of Abu Dhabi and Dubai but until the road is completed transport facilities will remain primitive. The fish resources of the Gulf of Oman are among the largest in the world and are being investigated thoroughly by the Food and Agriculture Organisation (FAO) of the United Nations. Local fishermen are skilled in the traditional crafts, but a modern fishing industry will need much more money than has yet been provided for bigger boats as well as for the plant for the freezing or drying of the catch. Such schemes would not aid Fujairah alone for the harbour at Khor Fakkan, which belongs to Sharjah, would also be a potential centre for development.

1977 Constitution – Supreme Council – Aid Programme – Qawasimi Legacy – Industrialisation – Jebel Ali Plans – Currency Board – One Market?

The United Arab Emirates (UAE), a federation of seven sheikhdoms of assorted sizes and riches, is now in its fifth year, and as a federation it has a little more backbone than when it was first cobbled together as the British formally withdrew from the Trucial Coast at the end of 1971. Early 1976 saw laid two important foundation stones which will probably ensure the future of the federation as a federation better than the organic foundation stone of Abu Dhabi’s generous attitude to its own wealth could do by itself. The first foundation stone was the formal decision of the Supreme Federal Defence Council to merge the defence forces of the seven sheikhdoms – which in practice means the merging of the Abu Dhabi Defence Force, the Dubai Defence Force and the Ras al-Khaimah Mobile Force (Sharjah’s troops were put under federal authority under pressure of rumoured financial necessity in 1975). While the reality of a merged UAE defence force may take some time to create, at least the intention has now been formally signed. This has meant a considerable sacrifice of autonomy, on paper at first but in practical terms later, on the part of two highly individualistic rulers, Sheikhs Rashid al-Maktoum of Dubai and Saqr al-Qasimi of Ras al-Khaimah. (As the main proponent of federation, the position of Sheikh Zayed al-Nahyan of Abu Dhabi is somewhat different.) And that in itself augurs well. Federal Ties The second foundation stone was the creation of a formal Constitution to replace the provisional measures that came into being after independence in 1971, when Ras al-Khaimah, in hope of oil, deferred joining until February 1972. It was hoped originally that the new constitution would be adopted on Independence Day, 2 December, but in July 1976 the rulers of the seven member states decided to extend the existing interim constitution by five years from December that year, though it was not felt that their decision would necessarily be final. It had been assumed that the federal government would take responsibility for health, education, water, electricity, immigration and customs as well as defence and the exceedingly important area of economic planning. At present the

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only co-ordination of economic planning among the seven states is dependant on those same states’ need for federal funds to fulfil their plans. This largely gives Abu Dhabi and Dubai their heads and to a lesser degree Ras al-Khaimah also, insofar as it can obtain finance from Saudi Arabia or Kuwait. This degree of freedom in what is a relatively small, under-populated (a lot of it uninhabitable) land area has given the UAE such oddities as three international airports, two within half an hour’s drive of each other, and the third only a couple of hours away. There are also great plans in all the states for increasing port capacities – without much thought of the needs of the federation as a whole. What has kept the federation together over the past five years is the counter-play of needs among the seven states that compose it, though the federation is more normally thought of by outsiders as comprising the two states of Abu Dhabi and Dubai and then the others, which maybe a trifle unfair to Sharjah, and probably Ras al-Khaimah too. For Abu Dhabi, and thus Sheikh Zayed, the federation has added influence to its standing in international politics, a standing that is much enhanced by its liberal aid programme – it disbursed over a billion dollars in aid during 1975. Sheikh Zayed is the first and present President of the UAE. Although, in theory, a new president should be elected this year, it is unlikely that Sheikh Zayed will not be president in 1977. His continued presidency is virtually ensured by two factors, the first being that the natural second president, Sheikh Rashid of Dubai, is reputed not to be very interested in the job, and the second factor is that Abu Dhabi is very generous to the other emirates through its own as well as through the federal purse. The federation is very much dominated by the two sheikhs of the two principal (by virtues of wealth) emirates who both have a veto in the Supreme Council. But while it is easy to see what benefits (psychological) Abu Dhabi gets from being in the federation, it is less easy to define how Dubai profits, though easier to show how the federation (at present) needs Dubai. Before the federation existed, and indeed before oil was discovered off the shores of the emirate, Dubai had a thriving economy based on the import/export business. Few Arabs, except perhaps the Bahrainis and Kuwaitis, understand better the concept of buying cheap and selling dear than the Dubai merchants. The Dubai merchants made quite a speciality out of smuggling – that is to say exporting goods quite legally from Dubai but to countries (principally India) that strictly controlled the import of those same goods. When the federation came about, therefore, Dubai already possessed an efficient port and economy. When the oil price rise of 1973 sent Abu Dhabi’s income skyrocketing, Dubai’s port extended and modernised, was able to act as entrepôt for the

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whole of the UAE (a role coveted quietly by Sharjah) which has not made it wholly popular, particularly with Abu Dhabi. The state that arguably stands to gain most from the success of the federation and the possibility of federal economic planning is Sharjah, which is geographically, though not economically at the centre of the UAE. Not that Sharjah is relying on this presently distant possibility. The state was once the dominant influence in the area when it was still the Trucial Coast for it was the main home of the British presence on the Coast. It had also a considerable past as a trading nation, but the gradual silting up of its natural harbour rather neglected by a feuding ruling family, deprived the state of its trading role and many of its merchant families moved up the road (metaphorically speaking. as it did not exist then) to Dubai to continue their businesses. The Qawasimi, whose descendants now rule Sharjah, Ras al-Khaimah and Fujairah, were historically a powerful and important tribe with a great maritime power during the eighteenth and early nineteenth century. They, as much as any tribe of the Gulf states, were responsible for it getting the name ‘the Pirate Coast’. At the beginning of the nineteenth century the Qawasimi ran a fleet comprising some 63 large vessels and over 800 smaller ones. Exasperated by their continual forays against British ships – designated piracy by those on the receiving end and retaliation for interference with trade by the initiators – the East India Company launched an expedition to destroy the fleet. This expedition also destroyed the fort of Ras al-Khaimah town and it was the beginning of the series of truces with the sheikhs which were to give the states a new name – the Trucial States. For the businessman at present the United Arab Emirates is very much composed of these three distinct markets – Abu Dhabi, Dubai and Sharjah – with Ras al-Khaimah perhaps as a fourth, and the other three Emirates being jointly considered as ‘The North’. Indeed each of the three principal Emirates has its own pattern of development, attitude to business and ambitions for the future, and each requires a different approach from the Western businessman. Newcomers to the area are well advised by old hands to take each Emirate separately, preferably one per trip if such luxury can be permitted, for it is not easy to get into the rhythm of their way of business. A prolonged sojourn in these states, without at least the appearance of achievement is apt to lead to a depression that even a recital of those same states’ wealth will do little to alleviate Abu Dhabi Abu Dhabi’s still simple economy, unlike Dubai’s, has a sole wellspring – its hydrocarbon resources, which are vast. Oil reserves have been put at 30 billion

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barrels and gas reserves at 33 billion barrels (oil equivalent), output last year was of the order of 1.4 million barrels per day (bpd). The Abu Dhabi government’s relationship with the producer companies in the state was slightly acrimonious during 1975 but has considerably improved in the early months of 1976 – to the extent that the Abu Dhabi National Oil Company (ADNOC) has eventually come to an agreement with Abu Dhabi Petroleum Company (ADPC) over the natural gas liquids project, which at one point looked like failing. In addition to the government oil marketing company, ADNOC, holder of the government’s 60 per cent stake in the two main producing companies, ADPC which produces onshore and Abu Dhabi Marine Areas (ADMA) which produces offshore, there are also two smaller producing companies in the state. The Abu Dhabi Oil Company (ADOC), a Japanese consortium in which the government has an option, unexercised as of May 1976, to take up a 51 per cent stake, is only producing around 20,000bpd and that at a loss. The other small company, Al-Bukush, is producing around 70,000bpd and the Abu Dhabi government shows no great interest in taking a stake in it. Abu Dhabi’s professed reasons for not allowing its brother Arab states on the path towards 100 per cent ownership of the producing companies are that it does not yet have the skilled people to take on the job, that its offshore fields have complex production characteristics, and that its territory, both onshore and offshore, is still relatively unexplored – all of which factors argue for the retention of a major foreign oil company presence. These are the companies that in 1975 produced US$4 billion in revenue for Abu Dhabi – a revenue to which the various gas utilisation projects have yet to make a contribution. Of this money just under three-quarters was spent in 1976, divided between the state’s own development budget, its donations to the federal budget, and its aid budget which it actually exceeded. Abu Dhabi’s open handed attitude to aid has earned it a high standing in the world of Middle East politics and also a steady stream of visitors with evermore interesting projects for Sheikh Zayed’s attention. Sheikh Zayed’s personal decisions are one avenue through which aid is channelled to projects outside Abu Dhabi and the UAE. The other, more formal, channel is the Abu Dhabi Fund for Arab Economic Development (ADFAED). The two main ways in which ADFAED gives aid are straight cash grants or more usually very soft loans tied to specific (and genuinely feasible) projects. Bahrain, Egypt, Jordan and Tunisia are among the recent recipients of project aid from the Fund which, although now five years old, has barely got going. About US$130 million of its authorised US$500 million capital has been paid up, but only around a tenth of its US$160 million of loan agreements have yet been disbursed.

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While these projects, and the size of these soft loans, occupy the thoughtful Western businessman (and his Japanese and South Korean counterparts) in careful study of the possible trade opportunities following on them, the internal development budget of the state itself opens equally entrancing possibilities of business. Last year the state of Abu Dhabi budgeted some US$900 million for its own development needs. It actually spent around US$600 million, but the shortfall need not dismay. The bulk of Abu Dhabi’s development spending on itself is still on infrastructure; over a fifth of the total allocated was given to the municipality which is seeking to build itself into a fitting city for a federal capital, another fifth went to the supply of water and power, over a tenth to ‘public works’ and another tenth to transport. In fact Abu Dhabi city, no less than the interior town of Al-Ain (Sheikh Zayed’s home town), is expanding almost faster than the attendant services can supply. Roads, electricity, water, housing and schooling (the last two both allotted a twentieth of the budget) and other municipal services still dominate Abu Dhabi’s development budget needs. This is borne out by the fact that machinery and transport equipment, together with general manufactured goods have dominated Abu Dhabi’s import scene for the past four years, accounting for roughly three quarters of the value of the goods imported. The fact that Abu Dhabi needed so much infrastructural construction and that its merchant community was, relatively speaking, so little developed before the advent of oil and the oil price hike, has led to two developments: a greater degree of public servant (be it municipal or governmental) decision-taking on projects and second a greater degree of protection for the local business community than is apparent in, for example, Dubai or Sharjah. Given the relative scarcity of Abu Dhabi and UAE nationals the state and federal civil service are both largely staffed by Arabs from the Levant and Egypt, who may be referred to as the Northern Arabs with the odd European advisor. This is a factor that the Western businessman would do well to allow for in his proposed dealings with either the state or the federation – there are, as both sides acknowledge, great differences in business style between Northern and Gulf Arabs. (One estimate now suggests that the Northern Arab civil servant may outnumber the native born citizens of Abu Dhabi.) It is suggested that whereas a Gulf Arab will work on trust, a Northern Arab works on systems. The greater degree of public projects in Abu Dhabi has of necessity meant a greater involvement of foreign contractors and their management. But the local business community, although it started later than those of Dubai and Sharjah, is rapidly catching on to modern business and forming contracting companies in addition to its main function as general or exclusive agents. The

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fact that business got off to a later start in Abu Dhabi – before oil, Abu Dhabi was really a marginal pearling and fishing village – has meant that the business community itself is more restrictive, and the Abu Dhabi government more protectionist. So at present it is obligatory that any company dealing in physical goods in Abu Dhabi must find an Abu Dhabi citizen to take at least a 25 per cent interest in the venture – the local chamber of commerce is pushing for 51 per cent though it is thought that this may not become law as it would put Abu Dhabi at a disadvantage with the more liberal attitudes of Dubai and Sharjah. With the encouragement of past successes and such institutions as the UAE Development Bank, the Abu Dhabi business community is beginning to broaden its horizons beyond simple agency holding. Some merchant families that have ventured into contracting are now operating outside the confines of Abu Dhabi. Part of the functions of the UAE Development Bank is to help all UAE citizens to get involved in businesses, principally light industry, retailing, or some aspect of the service industries. Industrialisation in Abu Dhabi, however, is very much the province of the government’s planners, principally those employed by ADNOC, and is centred round the use of natural gas in processing plants to be built round the Jebel Dhanna oil terminal. A three year plan is being created in Abu Dhabi though most Western visitors find it difficult to understand the urgent need to diversify Abu Dhabi’s economy and create other productive assets. But the Abu Dhabians, however successful the strategy of their investment advisors, have no desire to be oil pensioners Dubai Dubai already had a flourishing economy before oil was discovered and though its oil income is expected to touch US$1.1 billion in 1976, its import export trade too, is expected to increase. The port may handle 4 million tons in 1976. Trade was the original foundation of Dubai’s prosperity, the discovery of oil and the oil price rise, has enabled the state to set about creating a third support to its economy – industry. And in its choice of industries to develop, Dubai has run headlong into some controversy. The principal projects that give rise to dispute are Dubai’s US$467 million aluminium smelter and the US$300 million-odd dry dock – the world’s largest. The questions on both projects now centre around manpower and the state of their respective markets. The assumption in the case of the smelter is that by the time it starts production – it is scheduled to start up at 20,000 tons in 1979 – the world market for aluminium will have picked up. By 1979 the dry dock too is scheduled to be operational, though by May 1976 the name of the operator had

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not yet been announced. The choice of operator is vital, for the training of manpower must start soon if the operating schedule is to be complied with – and Bahrain’s Organisation of Arab Petroleum Exporting Countries (OAPEC) dry dock management, Lisnave of Portugal, is training shipyard workers concurrent with the building programme. (Ironically, the UAE has a stake in the rival Bahrain dock through Abu Dhabi’s membership of OAPEC). Both projects are of course bound to call into being ancillary industries; an aluminium extrusion factory has already been planned, to name just one project. As to the matter of manning them, Dubai does not seem to share Abu Dhabi’s nervousness about immigration, though it did follow that state in restricting 96-hour visas when it found these had been abused by illegal immigrants. Although only about one in six of the population of Dubai is likely to be a citizen, relations between the expatriate community and its hosts so far have been relatively cordial. There has been the odd strike by construction workers (at the dry dock for example) but these are very rare. It is worth pointing out how extremely popular Sheikh Rashid (and his state), is with the resident Western expatriate community. It seems to have adopted Sheikh Rashid as its own highly successful enfant terrible, and many stories are told of his wry sense of humour and formidable business acumen. Although there are one or two small factories in the state of Dubai, industry has held no great attractions for the state’s wealthy and experienced merchant community. The Dubai merchant class is, with the Kuwaiti and Bahraini, the most sophisticated business community in the Gulf littoral states. Already it has passed beyond the stage of holding and profiting from exclusive agencies, it is heavily into contracting, with the well established British contracting fraternity reckoning it to be capable of handling contracts in the US$20 million bracket and since there is construction work worth around US$2 billion in hand in Dubai there must be sufficient moderate contracts for the ‘smaller’ contractor. One Dubai merchant was briefly involved in a factory converting steel billets into more useful items – but it failed. Nothing daunted, Dubai is now planning a vast industrial free zone at Jebel Ali, also the site of the proposed aluminium smelter. Currently under discussion for the site are a refinery, an LPG plant, a fertiliser factory, a steel plant and a cable manufacturer. So far a letter of intent has been signed with a West German steel company for the construction of the steel plant. It is envisaged that Dubai will put up 80 per cent of the cost and the Germans the rest, and that the latter will also give an undertaking on the purchase of the steel. On a slightly more controversial level it has been suggested that Jebel Ali will also become a free zone in labour terms. In other words foreign workers could

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enter Jebel Ali without visas or contracts. Although so far the indigenous population has seemed very relaxed about the influx of foreign workers, this possibility of open floodgates may arouse some anxiety. Dubai nationals now form about a fifth of the total 200,000 population of their state. Dubai’s merchants appear to be following their Kuwaiti brothers into the area of financial services. There are already an inordinate number of banks in the Emirate and the recent Currency Board decision to permit offshore banking will probably increase their number. Many of the merchants have direct stakes in the locally incorporated banks, and some are now turning their minds to insurance in its various forms. As elsewhere in the Gulf states, property speculation has also become an obsession of the business class, and as long as rents remain as high as they were early in 1976 – around £12,000 per annum in advance for a villa – property speculation is likely to continue. Although bank credit in Dubai is mainly trade oriented, the promise of returns within 3–5 years keeps the merchants interested in property. Hotels are all the rage, too. The rapid expansion of business in Dubai has called in an Asian middle class of managers, also some Western managers, as well as some Asian entrepreneurs who have been freely allowed to set up in business (Sheikh Rashid does not believe in interfering with market economy rules). This has created a lively and wealthy consumer market in the state, as is amply demonstrated by the number of extremely modern fashion boutiques in the main Deira shopping area and the profusion of objets in what can only be described as high class gift shops. This same phenomen may begin in Abu Dhabi as its civil servants get more settled in. The influx of wealthy Lebanese fleeing the Beirut troubles, temporarily or otherwise, has given an added fillip to this conspicuous consumer market. Dubai, or rather Sheikh Rashid, has a very liberal attitude to business. In strict theory a local partner is not necessary for a foreigner to start business but long time residents suggest that it is advisable to find one. Just as local intelligence is needed to help the foreign businessman find his way through the maze of Abu Dhabi’s governmental structure, so a local guide is necessary for the uncharted and undefined paths of Dubai’s government. This free and easy attitude, Dubai hopes, will attract many companies to set up in the state (and as long as its rents remain below the astronomic levels of those in Abu Dhabi and Bahrain, this will be an added incentive). Dubai has particular hopes of becoming the financial as well as the trade centre of the UAE although the bulk of UAE money is in Abu Dhabi; and Abu Dhabi is extending its port to lessen its dependence on trade through Dubai. Dubai (not exactly by way of retort) is building a large trade and exhibition centre.

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Sharjah Twenty minutes (on a relatively traffic free day) down the road from Dubai, Sharjah is beginning to flex the muscles given it by the discovery of oil in July 1974, and to compete with Dubai for some of the trading glory. The Emirate was the centre of the British presence on the Trucial Coast and does have a trading history of some distinction. It is now actively planning, and constructing, the infrastructure necessary to regain this position. Since Sharjah really only got started on this programme a couple of years ago discussions of the state inevitably centre on what will be, rather than what is. Underpinning its hopes of becoming a trade and financial centre are first the state’s plans for its transport system, its new international scale airport and the planned container port at its dependancy of Khor Fakkan on the Gulf of Oman coast. The management contract for the new airport, which should open in October 1976 has gone to an affiliate of the company running Frankfurt Airport, which bodes well. The management contract for both of Sharjah’s ports, Mina Khalid on the Gulf and Khor Fakkan on the Gulf of Oman, has gone to Seatrain, an American company experienced in the container business. No target date for the completion of Khor Fakkan has yet been set, however. To cope with the future influx of business visitors a rash of hotels is springing up along Sharjah’s beach – one of the most attractive in the Gulf. An InterContinental Hotel is planned, a Meridien is under construction as is a Novotel and a Holiday Inn. Altogether another 1,000 hotel rooms should be available in Sharjah before the end of 1978. And for those companies Sharjah hopes will set up their local headquarters in the state (some quite good names have already done so – 3M, Westinghouse, Wood Grundy, Hederwicks) – office blocks are rising on either side of the main road into town. An official financial centre is planned also, which will possibly incorporate a stock exchange (Dubai’s stock exchange is presently housed in rooms above the chairman’s office), where the 49 banks presently licensed to operate in the state (32 are doing so) will be collected together. At the moment Sharjah imposes no tax on banking profits, in the other two states the tax is negotiable with the Ruler but tends to settle at around 20 per cent of net profits. Above all Sharjah hopes to attract business by its exceedingly liberal attitudes; there are no taxes in Sharjah; foreign companies considered desirable can get land on long leases; the accessible Ruler actively discourages middlemen; and there is very little ‘government’ interference. By itself Sharjah could not finance all its ambitions – its oil income was limited to perhaps US$40 million in 1975 – so it encourages foreign investment. But this dependence on outside finance also means greater dependence on the federal budget which may in future somewhat hamper the state’s ability to attract

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business by liberal attitude alone, as it might be persuaded to line up more with Abu Dhabi’s practices in these matters. Where Sharjah could benefit from greater federal planning is in the case of its port and airport with the latter gearing up to cope with bulk airfreight. Ras al-Khaimah Sharjah has chosen to finance its development through the federal budget (and it is traditionally a friend of Abu Dhabi) but the other option open to federation members who, while having little income of their own, wish to retain a certain degree of independence is to look for finance from outside. This is what Ras al-Khaimah has done; it gets some assistance from the federal budget particularly for the development of its agricultural potential, but has also attracted Kuwaiti investment on a significant scale. The Saudis are thought to have financed its international sized airport, but Kuwait Airways is the only airline flying there at present. Kuwaitis are financing hotels and also putting some money into the National Bank of Ras al-Khaimah. Ras al-Khaimah has long had friendly ties with Saudi Arabia and has hopes that its new port, Mina Saqr, may act as entrepôt for the Eastern Province. The other important feature of Ras al-Khaimah, apart from the independent nature and stature of its Ruler, Sheikh Saqr bin Mohammed al-Qasimi, is as a potential food basket for the other states of the federation. However it has not given up its hopes of oil or of minerals in commercial quantity. Together with Fujairah it is the most physically attractive of the emirates and so has hopes of tourism which it has reinforced by opening a casino, the only one in the Gulf. The point about Ras al-Khaimah for the Western businessman is that it is trying and that it has moneyed friends outside the federation as well as inside. Although it may seem a small market now it is worth bearing in mind that Arabs work on trust: trust takes a long time to build up but is repaid many fold over succeeding years. It is a lesson that British consultants and contractors have learnt well. What is true of Ras al-Khaimah is, of course, applicable to the other Northern Emirates, Fujairah, Umm al-Quwain and Ajman, though perhaps in smaller degree and on a longer time scale. Ajman The smallest of the three remaining emirates physically is Ajman whose principal land area is a small enclave in the territory of Sharjah. Its physical nearness to both Sharjah and Dubai means that it will inevitably benefit from the overspill of development in both those booming Emirates, especially as road connections between the three are improved. There are already signs that it could

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become a dormitory town for Dubai as with the increase in available accommodation rents in Ajman are considerably lower and the commuting time is only around half an hour on a reasonable day. However the Emirate also has plans for industry of various kinds. It is involved with Japanese companies in setting up a small dry dock to cater for the numerous oil rig supply boats in the Gulf. This is one of the rapidly growing number of joint venture industrial operations in the Gulf states. Another such is the company which is exploiting Ajman’s fresh water resources. With a French mineral water company to mastermind production the first bottles of Gulfa, Ajman’s own spring water, were test marketed in the Gulf states in the early months of this year. The continuing Lebanese crisis means that a local substitute for that state’s bottled waters should do extremely well, and Gulfa – it comes from the Ajman dependancy of Masfut – is a very high quality mineral water. Early estimates suggest that Masfut springs are capable of producing over 10,000 bottles a day. A third industry in Ajman is quarrying, for it has good reserves of marble in many varied colours. The building boom in the three principal states of the UAE has considerably increased the demand for Ajman’s marble and the cost of imported building materials reinforces the demand. The background industry in Ajman, however (as in most other Gulf states), is fishing and there are plans to both improve and extend its port, hopefully to divert some of the Dubai and Sharjah bound cargo boats, but principally to cater for fishing vessels. Umm al-Quwain Sandwiched between Ras al-Khaimah is the Emirate of Umm al-Quwain, whose ruler, Sheikh Ahmed bin Rashid al-Mu’alla is the doyen of UAE rulers (and Gulf rulers generally) having come to power in 1929. In the days of the Trucial States Sheikh Ahmed was frequently called upon by the British to act as mediator. Apart from Sheikh Ahmed’s ex-officio position on the Supreme Council, the Mu’alla family’s political .power is now shown by the two federal ministers for Economics and Trade and Communications. What distinguishes Umm al-Quwain from the other two small Northern Emirates is its share in the Abu Musa offshore oil field which is principally claimed by Sharjah. It receives a 30 per cent share of Sharjah’s share of the income from that field and thus, in a sense, is one of the ‘oil rich’ states. However it is not in reality very rich, and principal hopes for local employment rely on a small amount of agricultural activity and a greater degree of traditional fishing business – the inevitable fish processing plant is under study, Otherwise the main source of employment for Umm al-Quwain’s educated population is the ever growing federal government apparatus.

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Fujairah While Umm al-Quwain can boast of being ruled by the doyen of Gulf Emirs, the Emir of Fujairah is conversely the youngest of the UAE rulers, but not the least ambitious. Sheikh Hamad bin Mohammed al-Sharqi is British educated and enthusiastic for the development of his state, which was until very recently isolated from the other six Emirates of the federation by the Hajar mountains. Now a new tarmac road links its fishing town on the Gulf of Oman directly with the booming business towns of Sharjah and Dubai. Apart from minerals exploration in its bordering mountains, Fujairah’s principal asset which it is trying to exploit at present is its position on the Gulf of Oman coast. There is the possibility of developing its port to handle cargo destined for towns inland in the Arabian peninsula (an idea that Sharjah too is following at its neighbouring town of Khor Fakkan) and there are determined attempts to revive and modernise its fishing potential. Otherwise the state stands a good chance of becoming the holiday weekend centre for the UAE. It shares spectacular mountain scenery with Oman and international standard tourist hotels will be built. It must slightly regret that Ras al-Khaimah latched onto the idea of a casino first (though first come has never stopped Gulf states imitating each other) even though its natural beauties should provide sufficient attractions to other UAE residents. Spillover development from Sharjah’s Khor Fakkan plans is also expected, and it is hoped that the Hunting Surveys exploration of the UAE generally will produce some good mineral news for Fujairah. (Neighbouring Oman has already found workable copper deposits.) Banking and business generally in these three Northern Emirates has yet to reach the frenetic levels seen in Dubai, Sharjah or Abu Dhabi. But on a smaller scale projects are going ahead. The infrastructure development financed by the federal budget is bringing water, health services, electricity, roads and schooling to the people of these states. Outlook The United Arab Emirates are probably the most difficult of all the Gulf states in which to operate, particularly for newcomers. As yet – and for the foreseeable future – the seven sheikhdoms cannot be treated as one market. The net effect is to demand a greater investment of time and manpower on the part of Western companies wanting to do business in the federation than many had originally budgeted. The constant evolution of government, federal and local, institutions has to be charted, monitored and evaluated equally constantly. There is much solid business to be done in the Emirates; the public infrastructure of the states is far from complete and as a federation they can afford

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the best; the private infrastructure too is developing and again it wants and can afford of the best. The talk of stock exchanges is not fanciful, it is the result of an English language educated business minded population trying to explain its view of its own future; just as the Emirates will evolve their own style of federation so they will evolve their own ‘joint stock’ companies. But in such a. booming economy a lot of froth is inevitable and, unless identified quickly, can prove to be expensive – wasting executive time and damaging executive morale.

1978 Minor Hiccoughs – Federalisation – UAE Mediation in Gulf war – Banks Galore Competitive Rivalry – Capital Expenditure Reduced – ADNOC Dominance – Taweelah – Renewed Investment Confidence

A glimpse at the history of the region known today as the United Arab Emirates (UAE) is testimony to the remarkable achievement the forging of seven independent sheikhdoms into one nation has been. Less than forty years ago, Dubai was sending raiding parties into neighbouring Sharjah and minor wars were fought between Dubai and Abu Dhabi. More often than not the opposing armies were led by the same personalities who are now the federation’s greatest supporters. The United Arab Emirates was established under the sponsorship of the British in 1971, and in the six years which have ensued, slow but steady progress has been made towards transforming the UAE into one credible nation with one federal administration. Sheikh Zayed bin Sultan al-Nahyan, the ruler of the richest emirate, Abu Dhabi, and president of the union since its inception, has trod a delicate path between the interests of the construction of a nation and the authority of the other six ruling sheikhs. The federation has grown with the development of its federal structure, and is now a fine balance allowing each ruler to determine the style and economic future of his emirate while the wealth of Abu Dhabi provides the infrastructure and the platform for greater prosperity. True, there have been minor hiccoughs and obstacles to the cementing of the federal structure, but none which would halt the drift towards gradual federalisation. Following Sheikh Zayed’s threat to resign as president in the summer of 1976, rapid progress was made in unifying a number of government departments into national ministries. The most important step was the unification of the numerous defence forces which used to proliferate the area. Now for the first time ever the 1977 budget will include one budget for the ministry of defence, the departments of information, internal security, immigration and police were also federalised. Minor concessions as they were, all the rulers realised that without Abu Dhabi and its oil revenues, the union could lose its one financial backer, and in the same manner Abu Dhabi knows that the union only strengthens year by year because of the support from Dubai, the seat of the vice presidency. Old political

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quarrels between the ruling families of the area have now been transformed into commercial rivalry, which explains to some measure the reasons why the UAE has 200 shipping berths under construction, four operating airports and five more under study. Federalisation Process The ancient border dispute between Dubai and Sharjah is largely fuelled by such rivalry, and the squabble only resurrected when Sharjah began construction of a multi-towered office and residential block, which resembled in its ambitions, Dubai’s own trade centre and residential complex. Dubai claimed the land which Sharjah was building on, and even the personal intervention of Sheikh Zayed has failed to reconcile the old rivals. The problem has now been passed over to a panel of international lawyers, and hopefully, in many peoples’ eyes, put in cotton-wool for a few years. Many of the rulers view the growing powers of the Abu Dhabi-based federal administration as a challenge to their authority in their own emirates, and frequently try to side-step it. A number of emirates have signed oil concession agreements without reference to the federal oil ministry, and until recently refused even to supply Abu Dhabi with production statistics. Ras al-Khaimah, always the most suspicious of far-off Abu Dhabi, went ahead and built a new telecommunications earth station and refused to become a member of the national telecommunications authority, Emirtel. It is going ahead with its plans to build a hospital, even though the federal ministry is building one there also. All of the emirates dish out airline landing rights like confetti, for as yet no federal authority has been able to forge a national aviation policy. In the spring of 1977, Dubai gave approvals to two new banks and a money broker in a direct challenge to the Abu Dhabi-headquartered Currency Board, the central monetary authority. Yet the process to greater internal political cohesion continues. Dubai appears quite happy that Abu Dhabi is the seat of the federal government and its mammoth lethargic administration, for its ruler. Sheikh Rashid bin Saeed al-Maktoum, has always tried to discourage the flood of foreign bureaucrats from setting up in his emirate. His own administration is remarkably lean and streamlined and he still manages to maintain highly personalised control over his emirate. Sheikh Rashid’s commercial flair and ambitious ideas have maintained Dubai’s predominant role as the trading centre of the UAE. Jebel Ali and all its associated projects represents Dubai’s bid to stay on the map and remain independent, for most of the major developments there, have been financed by eurodollar loans without recourse at all to Abu Dhabi Sharjah, in contrast, remains much more a federal appendage, for with its meagre 37,000 barrels per day (bpd) of oil production, much of its prosperity is

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owed to the general rise of wealth in the UAE, and also its proximity to Dubai, the larger business centre. Its ruler, Sheikh Sultan bin Mohammed al-Qasimi has assumed greater federal responsibilities of late, chairing the many months of discussions on the budget for 1977. Some observers believe that he is being groomed for later stardom, certainly the Sharjah sheikh has been one of the greatest supporters of the federation. Ras al-Khaimah was the last emirate to join the union and its ruler, Sheikh Saqr bin Mohammed Qasimi has always hoped that the results of oil exploration would enable him to assert a more independent air. Umm al-Quwain is harbouring hopes of an oil bonanza, and so far results have only shown sufficient quantities of oil and gas for UAE domestic needs with a bit left over for export. Ajman, small and unpretentious, has made a sterling success of its mini-dry dock, though it took a step back with the suspension of the Ajman Arab Bank in May 1977. Fujairah, the remotest and poorest emirate of the union, is largely dependent on Abu Dhabi for its development, though drilling in a promising offshore structure has begun. Its young ruler, Sheikh Hamad bin Mohammed al-Sharqi has hopes of putting his east coast emirate on the world tourist map, and is going ahead with the construction of a Hilton Hotel, financed by the UAE Development Bank. Federal Budget Each emirate regards the federal government with varying points of view, usually relative to the size of their income. Yet it is Abu Dhabi that is inevitably going to foot the bulk of the annual federal budget despite resolutions made in the new constitution that all emirates should contribute a share. Abu Dhabi officials estimate 1977’s oil revenue will amount to US$5.2 billion compared with US$4.9 billion the previous year. Its own development budget for 1977 is put at around US$1.33 billion. The UAE 1977 budget, the subject of six month long discussions chaired by the ruler of Sharjah, Sheikh Sultan bin Muhammed Al-Qasimi (commonly known as Sheikh Sultan III), has been considerably trimmed from its original estimate of US$4 billion, to a final total of US$2.82 billion. Considerations which played a part in the cutting down of the federal bill were believed to be size of the contributions of the emirates, the inflationary effects of a large budget and manpower problems. The federal administration now numbers around 24,000 civil servants, and only a small per centage are the cream of the Arab world, its technicians and experts; the vast bulk are lower paid clerical staff. The desire to trim this part of the government’s wage bill was impressed on all ministries during the budget discussions, but nevertheless this year’s coming intake is estimated to be more than 8,000 new recruits.

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Abu Dhabi’s contribution is expected to be 50 per cent of its revenue, and Dubai is expected to contribute 20 per cent of its income. Other rulers are not expected to make more than symbolic contributions. For the first time in the 1977 federal budget the country’s equity participations in pan-Arab institutions, a burden formerly assumed by Abu Dhabi, are to be included, though it is likely that the emirate will not continue to pay the foreign aid bill. The aid paid by Abu Dhabi is the cornerstone of the UAE’s foreign policy. It is one of the world’s most generous nations and last year gave away US$1.2 billion, which amounted to about 30 per cent of its income. It is believed that about three quarters of this goes to the Arab frontline states, though the foreign ministry never reveals exactly how much. Another major part flows through the Abu Dhabi Fund for Arab Economic Development (ADFAED). In the past two years, the Fund’s commitments have become increasingly wide with long term soft loans going to numerous African and Asian states as well as the poorer Arab nations. However, of late, the Fund’s officials appear to be giving greater attention to the viability of each project as the Kuwaitis have done with their own aid-giving institution. Nevertheless. political considerations still play their part, as witnessed, for example, by the new flows of aid to South Yemen (PDRY) recently. Externally, the United Arab Emirates has risen to greater prominence in Arab and international affairs. It participated in the Arab Peacekeeping Force in Lebanon by sending a contingent of 700 troops, though most of them were of Omani origin. Within the Gulf region the Emirates are coming under increasing influence of Saudi Arabia, the most dramatic example of this trend being the almost total identification of oil policies between them. The UAE was the only oil producer to come out with Saudi Arabia for a 5 per cent increase in oil prices against the majority Organisation of the Petroleum Exporting Countries (OPEC) decision of a two stage 15 per cent increase at the December 1976 conference in Doha. Internally too, the symptoms of ‘Saudiasation’ are becoming increasingly apparent. Alcohol is now banned in all restaurants in Abu Dhabi and the Gulf’s only casino in Ras al-Khaimah has been closed, there is talk of asserting Sharia (Islamic law) to cover certain crimes, and the UAE internal security and police forces are going in increasing numbers to be trained and advised in Saudi Arabia. The symptoms of these trends have yet to penetrate the more liberal emirates of Dubai and Sharjah, which rely on their liberal atmosphere to attract foreign businessmen. Currency Board Inflation continues to be one of the UAE’s greatest economic problems, for the UAE has to remain competitive in the Gulf employment market. For some time

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now, the central monetary authority has been pressing upon the federal government the need to slow up the pace of development and cut down on the size of the annual jumps in the budgets. Officially, the rate is put at between 25–30 per cent, though officials concede privately that the rate is nearer 40 per cent. Some action is now being taken by Dubai and Sharjah to stop the rents spiral, which many believe is the single most influential factor contributing to the high rate of inflation. No such measures have yet been talked of in Abu Dhabi, where most of the federal government employees live. The Currency Board, on its side, believes credit to be another factor and has sought to bring down the rate of credit expansion by introducing new measures controlling the banks. Demand for credit to the private sector soared by 85 per cent in 1976 after a 69 per cent increase the year before. The measures brought in by the Currency Board called on banks to comply with certain liquidity and capital ratios, and have generally been well received by the majority of the UAE banking community. Some of the banks, particularly the newcomers and the locally incorporated banks with no foreign connections, may experience some difficulties with the new measures. The Currency Board felt some of the banks had become over-extended on loans to the local property market, while the banks complained that there was not sufficient control of the banking community itself. The government’s decision not to move in to protect the depositors in the failure of the Ajman Arab Bank led to the resignation of its managing director, and his replacement by a three-man panel of UAE nationals. The general lack of confidence and the suspension of two banks in the country has created an air of nervousness, and together with the new liquidity measures, will inevitably lead to a tightening of bank credit. Already businessmen are referring to it as a ‘credit squeeze’. The property market, the spectre of the banking community, has been experiencing a ‘dull period’ since the early part of 1977 and for the first time supply exceeds demand, a trend which is already beginning to show benefits to tenants. A draft law to create a UAE central bank has been in existence for more than two years, and the need for a strong central monetary authority becomes acute as individual rulers give approvals for new banks to open up within their own emirates. Dubai has already given the go ahead to two, which the Board was more or less obliged to licence; Ras al-Khaimah says it will licence more if it feels it is in the interests of the emirate. The UAE is probably the most over-banked country in the world having over 60 banks with over 300 operating branches for a population of around 650,000. Upon Sheikh Zayed’s instructions, the Currency Board has now issued an indefinite moratorium on new bank openings in the country, but as with most attempts at federalisation in the UAE, the establishment of a central bank with

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authority to enforce the moratorium and other measures, will need some delicate footwork by Abu Dhabi and its ruler. Foreign Labour Though these minor tribulations continue to affect the development of the federation, ethnically and culturally the nationals are drawing together. The development of their country which largely began after the increase of oil prices in 1973, has opened a floodgate of foreigners and even official estimates put the proportion of nationals to non-nationals at only 20 per cent. As with other Gulf states in the region, the UAE suffers from a lack of people, and the principle of pushing development as fast as it has been in the past is being questioned increasingly – not for reasons of money, or even other economic factors, but because of the social implications. There are already attempts to cut down on new recruiting required by the government ministries and Abu Dhabi placed a three-month stop on all new appointments in 1977. Indians and Pakistanis now constitute the largest sector of the population, although no or little permanent provision is made for these unskilled or semi-skilled workers, despite the manpower shortage in the construction industry. The development of two new cities – Jebel Ali in Dubai and Ruwais in Abu Dhabi – will be interesting to watch, for they could end up as cities full of foreigners, with less than five per cent of their population UAE nationals. The UAE is gaining all the characteristics of a modern Gulf state, the ‘Us and Them’ mentality is being fostered by various laws which give priority to nationals. The country will need a strong crop of educated nationals in order to maintain a firm grip on the country in future, to avoid becoming an idle privileged class. Sadly, the ministry of education is one of the most bureaucratic of all, and UAE graduates from foreign universities only number just over 1,000 a year. The economic, social and political problems which stem from the make up of the population will be the UAE’s greatest challenge in the years to come. Abu Dhabi Abu Dhabi is the UAE’s largest oil producer; present development plans will put the emirate in the rank of major Middle East producers, for by the end of the decade daily production will have passed the two million barrels mark. The two main producing companies are the Abu Dhabi Marine Areas (ADMA) operating the offshore fields and the Abu Dhabi Petroleum Company (ADPC) the onshore areas. Both are 60 per cent owned by the government through its own oil marketing company, the Abu Dhabi National Oil Company (ADNOC). 1976–77 has been a telling year for Abu Dhabi’s oil industry, most notable for the decision that ADNOC should go it alone on the Ruwais gas liquefaction project.

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Discussions with the foreign oil companies finally broke down in April 1977 and ADNOC is to finance the project last estimated at US$1.1 billion, from its own available sources. When completed, the plant will use daily more than a billion cubic feet of gas, which is now being flared, to produce 175,000bpd of propane, butane and natural gasolines. The gas will be taken from the onshore Asab, Bab and Sahil fields. Onshore production from ADPC is expected to rise from an average of 1.025mbpd to 1.28mbpd during 1977, 48 per cent of it coming from the Bu Hasa field. Long-term plans for the offshore fields aim at almost doubling production within the next five years. The development programme will principally involve the Upper Zakum field, the upper stratas having been left virtually untouched by ADMA, which is currently pumping 200,000bpd from Lower Zakum. Production is to go up to 500,000bpd in stages over the five-year period. The project will also involve the construction of an island terminal, probably to be located on the island of Zirku and the total cost of the development programme has been estimated at US$1.5 billion. Early in the spring of 1977, the Das Island gas complex was brought on stream with the first shipment of liquefied gas to the Tokyo Electric Power Company. The plant produces approximately three million tons a year of liquefied natural gas (LNG) and liquefied petroleum gas (LPG) and total investment is put around US$350 million. The Das Island plant absorbs about 500 million cubic feet of associated gas which would otherwise have been flared. Other notable events in the oil industry in 1976–77 include the creation of a new company to take over the operations of ADMA. The agreement was designed, the government says, to give ADNOC a greater and more effective participation in planning and decision-making in proportion to its 60 per cent shareholding. The government also approved the establishment of the Abu Dhabi Gas Liquefaction Company, which transferred ownership of the Das Island complex from a Bermuda registered company to an Abu Dhabi organisation. The oil industry will absorb the major part of the government’s industrial investment for the next five years at least. Ruwais, an area 110 miles from the capital, is to be the centre of the government’s industrial strategy, and current plans include a fertiliser plant, the gas liquefaction plant and many other gas fuelled ventures. The idea of the steel mill seems to have been withdrawn for more appraisal. Abu Dhabi Plan According to the soon-to-be-published Abu Dhabi Development Plan, the emirate plans to spend a total of US$8.7 billion over the next three years. Of this

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US$5.05 billion will be spent by government departments and, taking into ac-

count investment by government companies, combined public investment will make up 79 per cent of total outlays. The remaining 21 per cent will come from the private sector. The need for a long-term development plan for Abu Dhabi has been acute for some years now; such was the emirate’s desire to develop with all possible speed that the inevitable Gulf style bottlenecks had appeared. Government departments were finding it difficult to spend their annual allocations, buildings were completed without a hope of electricity or water for months to come, and no procedure existed to take account of projects that the private sector was engaged in. In 1976 actual expenditure out of the US$1.3 billion development budget only amounted to 60 per cent. The drawing up of the 400 page development plan entailed two years of research into consumer needs, salaries and other basic economic data which hitherto had never been calculated. Some assessment has also been made of the role of the private sector, though it is thought that this sphere will account for a very small margin of the emirate’s industrial growth in the future. At the moment, the government’s priorities are still centred around the building up of the emirate’s infrastructure, and the priorities are clearly shown in the figures for future investment in the three-year plan. Broken down into sectors, the plan envisages the following expenditures: agriculture US$205 million or 2 per cent, industry US$3.23 billion or 38 per cent, services US$3.4 billion or 39 per cent, public facilities US$1.85 billion or 21 per cent. Services include such items as transport, telecommunications and housing. The plan aims to stimulate an average growth in GDP of 13.5 per cent a year; 1976’s GDP was estimated at around US$7.25 billion. The petrochemical industry will witness the most dramatic growth rates during this period. Oil is still expected to form 96 per cent of the emirate’s revenues by the end of the decade. The most influential factor in all these calculations will be manpower, for local experts estimate that to enact the three-year development programme, the emirate will need to import 183,000 more people, which will mean almost doubling the present population. The majority of the workers will be in Abu Dhabi city itself, which has a population of 210,000 according to the last census published in late 1975, though a significant number will be working in the new city of Ruwais, which it is thought will have an eventual total of 85,000. Such an influx of workers (over 60 per cent of whom will be unskilled and probably from the Asian countries) will have untold economic and social effects, not only on society, but its Arab character as well. The population problem and the future manpower requirements are now under close study by Abu Dhabi’s planning department in conjunction with the World Bank.

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The immediate priority of the emirate is housing, and the 1977 development budget for Abu Dhabi shows an increase of 338 per cent in the allocation for this sector. Some US$118 million is to be spent on building 10,000 more homes, 7,000 of which will be prefabricated. The publicly stated aim of this crash programme is to provide homes for nationals, though inevitably some of them will be given over to foreign government employees. Other items in this year’s development budget include the building of 146 new schools. Health is to receive US$92 million, services US$361 million, sewerage US$100 million, agriculture US$30 million, transport US$208 million and public buildings US$296 million. Some of the items previously carried in Abu Dhabi’s own budget have now been incorporated into the federal budget, and there are hopes that the emirate may manage to spend all of its departments’ allocations, despite the lateness of the budget approval. By June 1977 the UAE budget had not yet been given the go ahead. The two largest projects in Abu Dhabi are the airport and the new port. The new airport will be the most futuristic in the Middle East, designed along the lines of the Charles de Gaulle airport in Paris, and will cost just under US$1 billion to construct. Al-Ain is also to have its own airport built to Category II standards, capable of handling 707s and 727b’s, though government officials admit that they are not expecting any commercial scheduled airline service to operate there. Al-Ain airport will most likely be used for private flying (many of the UAE’s prominent personalities live there at weekends) or for the military services. Abu Dhabi’s port Mina Zayed is currently undergoing expansion to 25 berths and contracts were awarded in 1977 for the construction of the inner harbour plan. Built entirely on reclaimed land, the inner harbour will have a total complement of 34 berths, some of which will be specially equipped for the container and roll-on roll-off trade. All of these major projects are being built with seemingly little regard to the plans and aspirations of other emirates. Competitive rivalry between the emirates is most evident in their plans for airports and ports, for Dubai’s Jebel Ali harbour of 74 berths will be less than 90 minutes drive away from Abu Dhabi’s development. The airports will be less than that, for Abu Dhabi is planning its new airport considerably into the hinterland, not on the island itself. With its enormous oil income, Abu Dhabi can afford such extravagances such as two airports and an agricultural industry being forced out of unwilling desert sands. For the businessman, Abu Dhabi is the most moneyed centre in the UAE, but the hardest to work in. Government documentation can take months to secure, the administration being staffed with elusive arch-bureaucrats. Yet it is the

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source of all federal government contracts, and for many it is where the action really is. Dubai Dubai, in contrast to Abu Dhabi, is a relaxed place to do business and live in. Its merchant community began the development of the state some twenty years ago, when most Dubai fortunes started with the gold trade to the Asian countries. Nowadays the merchants are multi-lingual, speaking Arabic, English, Farsi and more than a sprinkling of Urdu, and their influence and commercial dealings cover the entire country. The top merchant of all, and the largest landowner of the emirate is the Ruler, Sheikh Rashid bin Saeed al-Maktoum, who continually leads his merchant community on to larger and larger projects, in order to maintain Dubai’s predominant position as the trading centre of the UAE. His most ambitious project to date is Jebel Ali, the site of a new 70 berth port and industrial free zone. The largest development here is the US$612 million aluminium smelter being built by British Smelter Construction, a combination of Wimpey and Selection Trust, a UK finance group. The plant is 80 per cent owned by the Dubai government with the remaining interests held by Japanese, American and local UAE interests. The smelter is due to go into production by 1981 with an annual capacity of 135,000 tons. A sideline development to the smelter is the US$220 million DUGAS plant which will provide the smelter with associated gas and will absorb almost all of Dubai’s gas supplies. The plant is also 80 per cent owned by the government, and will produce, when completed, 5,500bpd of natural gasoline and 9,200bpd of propane and butane for export. Other projects in the pipeline for Jebel Ali include a US$350 million steel mill which will combine government and German interests, and also a refinery. Another project is a cable manufacturing plant between the government and British Insulated Callender’s Cables (BICC), and a local merchant is now building a steel fabrication plant. Jebel Ali is also to have a new airport, designed to be the largest in the Middle East. This will become the emirate’s main airport. In Dubai town itself, Port Rashid continues to be the mainspring of the emirate’s economy, and in the period 1974 to 1976 cargo has jumped from 2.7 million tons to 5.28 million. Despite new storage rates brought in during 1977, Dubai’s Port Rashid remains basically a warehouse port in philosophy, but it also has the reputation of being the cheapest and most efficiently run in the Gulf. Dubai is reckoned to handle two-thirds of the UAE’s imports. The total value of imports in 1976 into Dubai amounted to US$2.46 billion, out of an estimated UAE

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total of US$3.3 billion. Top suppliers to the emirate were Japan, Britain and the United States, with India coming fourth above West Germany, Holland and France. Dubai’s airport has been one of the busiest in the Middle East, for what has been Lebanon’s loss seems to have been Dubai’s gain. Passenger traffic in 1976 totalled 1.3 million and cargo increased from 14.5 million kg in 1975 to 51.8 million kg the following year, mainly due to the decision of the Lebanese cargo carrier, TMA, to switch to Dubai as a base during the Lebanese troubles. A reflection of Dubai’s trading role can be seen in the direction of bank credit, for about two-thirds went to the financing of trade, rather than to investment in the local property market as it did in Abu Dhabi. In the past two years the emirate, or rather its ruler, has become an important euro-dollar borrower, and except for the 74-berth port at Jebel Ali, all of the projects in the new industrial city have been financed in this way. This in itself is a reflection of the confidence that international bankers have in Dubai and Sheikh Rashid’s ability of being right and far-seeing. Nevertheless, a number of the larger projects such as the aluminium smelter and the increasingly conspicuous million ton tanker dry dock, will be very much subject to outside influences and to the vagaries of the world market. The dry dock is now more than half way to completion, work has started on the construction of ancillary buildings, and yet no operator has been named. Government officials believe Sheikh Rashid tends to write off the construction of ports, airports and other major infrastructure developments as essential capital investments. The philosophy seems to be that it doesn’t matter if certain projects do not make large profits – it’s the air of activity that counts. Most of that activity is generated from Dubai’s oil revenues, and during 1976 production went up by 27 per cent to 325,000bpd. Projected income from Dubai’s oil exports for the full year is calculated by the Currency Board to be around the US$1.4–1.5 billion mark. This is still about one-fifth that of Abu Dhabi’s, but then Dubai’s style of doing business, and the speed of decision-making counts for a lot. It is Jebel Ali that will be the centre of activity over the next five years; so far Sheikh Rashid has not released land for private development, but when he does, this is expected to lead to a development bonanza all over again. With the new banking measures in force, however, the local banks are expected to take a more cautious attitude to large scale private projects. The one thing that Dubai seems to lack at the moment is gas in ample supplies, for unlike Abu Dhabi which has vast reserves of gas, almost all of Dubai’s gas is already committed to projects in Jebel Ali. To make the city grow, it will

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need a source of cheap energy, and though the logical decision would be to ask Abu Dhabi, Dubai never would – for like all the other emirates, Dubai likes most of all to maintain at least a semblance of independence. Sharjah The property market ‘depression’ which agents refer to in other parts of the UAE, is most evident in Sharjah. The ‘To Let’ signs are in abundance, a rare phenomenon in a country where most office and residential blocks are let three months in advance of completion. What has made the problem even more obvious in Sharjah is that the emirate’s development can really only be dated back to three years ago, and now all the schemes of those years are coming on stream at the same time. Not only are several hundred apartment and office developments presently empty, but the emirate is also embarking on the construction of several thousand hotel rooms. There is a certain amount of nervousness about the basis for all this activity, for Sharjah’s oil production is only about 37,000bpd. Half of the oil income goes to Iran following a dispute over the ownership of Abu Musa Island where the principal oil field is located, and 30 per cent of Sharjah’s share goes to nearby Umm al-Quwain following the settlement of an old border dispute. Much of Sharjah’s rise to prosperity is due to its proximity to Dubai, the larger business centre. This is partly because living in Sharjah is about 20 per cent cheaper and partly because of the lower rents prevailing in the emirate. Sharjah has also gained because of the general rise in wealth in the UAE as a whole, and its ruler, Sheikh Sultan bin Mohammed al-Qasimi also enjoys the confidence of Abu Dhabi. Sheikh Sultan has always been one of the federation’s greatest supporters. The Sharjah formula is going to be severely tested in the coming few years, and already measures have been taken to preserve the emirate’s reputation for being inexpensive. All rents in Sharjah have been frozen for an indefinite period. Not surprisingly, Sharjah is one of the few emirates that goes out and markets itself to the foreign businessman. It offers free advice to incoming visitors on how to set up, who to set up with, and has also attempted to cut down the necessary preliminary red tape as much as possible to smooth the entry of new businesses. Land ownership, unlike in Abu Dhabi and Dubai, is not restricted to nationals only – other Arabs are allowed to buy land. This factor probably explains why the emirate has attracted over 600 Lebanese owned establishments, for many thousands of Lebanese streamed into Sharjah in the aftermath of the civil war. Their presence has undoubtedly added to the emirate’s flair. Pains have been taken in planning the town into industrial and residential areas. It also has some of the most attractively designed buildings in the UAE

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and some effort is made towards making Sharjah not only a cheap place to live, but a pleasant one also. In 1977 Sharjah’s economy was considerably boosted with the opening of the new airport and port. The increase in traffic and airlines into the new airport has been slow but sure; many of the major international airlines feared some repercussions to their Dubai services if they opted to split runs into efficiently run Sharjah. Yet this fear is being overcome, and now the airport has most of the major Arab airlines and will shortly gain its first international European carrier. Sharjah’s new port can claim to be the first operational container port in the Gulf, and unlike Dubai’s Port Rashid which operates as a warehouse port, Mina Khalid, as it is known, runs on a strict direct delivery basis. Punitive rates of storage apply after 60 days. The new port is run by an affiliate of the American container operator, Seatrain, and has attracted a lot of interest from shipping lines. Being first into the container business has given Sharjah a valuable headstart. Now, more than half the incoming cargo goes to Dubai, an irony after the number of years that Sharjah was obliged to rely on Dubai for all of its imports. A most promising venture is the Khor Fakkan container terminal under construction on the east coast. The building of a port on this side of the country will allow large container vessels to offload their cargo without passing through the congested Strait of Hormuz and will also shorten steaming time. Sharjah is planning two fully equipped berths with large container gantry cranes, and depth of water is already up to 50ft in this natural deepwater harbour. The emirate also has its eye on a tourist future and, though there seem to be insurmountable obstacles to this aim, it is now drawing up detailed plans to attract the adventure type traveller. The east coast has unpeopled beaches and clear, coral filled waters, and has already attracted a lot of foreign investment. Three hotels are outlined for the Khor Fakkan area, one of them from Trust Houses Forte. However, before tourism can ever take off from Sharjah, hotel prices in the country will have to come down from their norm of US$70 a night. Ras al-Khaimah This northern-most emirate of the UAE has always been its most independent, and while its ruler, Sheikh Saqr bin Mohammed al-Qasimi, can produce federal rhetoric on the appropriate occasions, he has always been the most suspicious of Abu Dhabi and its federal administration. The ruler has always hoped that an oil bonanza will provide the path to greater prominence in the UAE, and greater independence. At the moment, oil has been found in only one structure, where it flowed at the rate of 4,000bpd, not enough to consider the well commercially

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viable. However, the find has encouraged drilling in two other areas, and plans are now going ahead for another one, possibly two, exploration wells. There have also been changes in the shareholders of the offshore concession in 1977, with Vitol, the Dutch concern which held a 17.5 per cent interest, handing over to a German company, Deminex. The operating side of the company has been given over to DST, also of Germany. Saudi Arabia still provides aid on certain projects to Ras al-Khaimah, and investment from Kuwait has flowed in large amounts, though of late it has slowed down. The emirate closed down its casino, the only one in the Gulf, though the government deny that the decision was due to Saudi pressure, despite the visit of the Saudi justice minister the same week. Historically, the citizens of Ras al-Khaimah have been seafarers by tradition, but within the UAE, the emirate has found its niche in the field of agriculture. Because of its wetter weather remotest Ras al-Khaimah has proved a wealthy provider of vegetables and dairy products for the Northern Emirates. Its other principal industry is aggregate, large amounts going not only to UAE domestic use, but to nearby Saudi Arabia. Its cement factory, a venture jointly owned by a Norwegian company and the Ras al-Khaimah government, is under-going expansion to increase capacity from planned 700 tons to 2,900 tons daily. The expansion plan is likely to be financed by a euro-dollar loan. The major project under way at the moment is the construction of a seven-berth port by Archicat at a cost of US$116 million. The port will be designed to handle Ras al-Khaimah’s special trade in aggregate, rocks and cement. and will have a fully-equipped container terminal. The last acquisition of the emirate – built almost in expectations of an oil bonanza – is the telecommunications earth satellite station owned by the Ras al-Khaimah Telecommunications Authority (RAKTA). RAKTA is not a member of Emirtel, the national network. Characteristically, the emirate is paying for a new hospital even though the federal health ministry is planning a unit there also. Above all, the Ras al- Khaimah ruler does not like to be seen accepting help from federal sources. The land boom which has marked Ras al-Khaimah’s early stages of development, has calmed down despite the current high expectations of oil. Kuwaiti investment is still coming in, though not in the amounts that it has done in previous years. Much of the development which can be seen in the emirate is in the property development field, and bank credit to this market accounted for 36 per cent of all advances to the private sector. Lending to the government represented 21 per cent of all loans, though deposits of Ras al-Khaimah banks with the central monetary authority constituted no more than 1.1 per cent of the total deposits of the Currency Board. The

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Ras al-Khaimah ruler is known to want to encourage more banks to set up in the emirate despite the moratorium on new bank openings imposed by the federal authorities in Abu Dhabi. Fujairah In certain areas, Fujairah is the most spectacular emirate in the UAE. It varies from rugged mountain passes to Bermudaesqe white beaches dotted with crab holes and edged with coral. For the sturdy resident, it is a weekend paradise about three hours’ drive from the Dubai area. Tucked away on the other side of the country, Fujairah is the remotest and poorest emirate in the UAE, largely dependent on federal largesse. But like the other ‘have not’ emirates, it has hopes of finding oil, and drilling by the Reserve Oil and Gas Co of Denver began in mid-1977. Though there are reportedly difficulties with shale in the first well, the structure looks promising and a further two exploratory test drillings are planned. Until such time that the exploration shows benefits, Fujairah has few natural resources except that of its beauty and its fish. A Hilton Hotel is going up in the centre of town financed by the UAE Development Bank, and a small motel opened in the spring. A Japanese company, Daiei Fishing, signed an agreement with the ruler for fishing rights, and is planning to set up a canning factory producing mainly tuna, with lobster and crab as possible products later. Other developments in the emirate include a tile and marble factory, a blocks factor, an aggregate industry and a new port, which is being built by the federal ministry of public works. The port will have 12 berths and is being designed by the Professional Group of Australia. Fujairah’s young ruler, Sheikh Hamad bin Mohammed al-Sharqi is still trying to avoid altering the land ownership laws in the emirate which forbid the sale of property to foreigners. Nevertheless, his advisors are urging him that to encourage foreign commercial investment the law must be made more flexible. The largest project under consideration is Garden City, a complex of 400 luxury villas, a hotel, nightclubs, a yacht marina, cinemas and other facilities. A British firm, Associated Gulf Consultants, has drawn up the plans, but as yet no firm agreement has been signed by an operator for the complex. The government is hoping for a package deal which would lease the complex for a certain number of years, and thereafter revert to government ownership. There is, at this time, no luxury accommodation in the entire emirate, and with an increasing number of expatriates residing and visiting there, the need is becoming acute.

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Umm al-Quwain Umm al-Quwain is perhaps the sleepiest emirate in the UAE, sandwiched between the Sharjah/Ajman area and Ras Al-Khaimah. Only a few years ago, it used to make its living, as did several other sheikhdoms in the UAE, from the sale of stamps. Today it receives the 30 per cent share of Sharjah’s oil income and looks to oil to provide additional scope for its development. So far, very little has been officially announced about the find of oil and gas offshore, except that the gas supply would be enough for the whole of the country’s needs, plus some left over for export. The major development in the emirate is the creek extension which is underway under the supervision. of British consulting engineers, W S Atkins. Some consideration is being given to the possibility of a small port, and work has started by Falcon Dredging of Holland to provide a depth of water varying from four metres to ten. However, the thrust of the emirate’s development is still on housing and a number of commercial blocks are under construction, as well as numerous federally financed developments such as a new hospital, low cost housing and more school places. Ajman Ajman, the smallest emirate in the UAE, took a step back in 1977 with the suspension by the Currency Board of its bank, the Ajman Arab Bank. The institution was part owned by members of the ruling Nuaimi family and part by the WFF Corporation of Miami, which is run by a Miami Cuban with interests in several South American banks. The refusal by the federal authorities to move in and protect depositors was a blow to the community, and sent a clear message to many other emirates that in future Abu Dhabi is not going to bail them out of any financial difficulties generated by unwise commercial dealings. Other banks in the area interpreted the move as a salutary lesson in banking by the Currency Board, which has persistently criticised banks for becoming overextended to the property market. The suspension of the bank did not affect the euro-dollar loans which were signed earlier in 1977 by the Ajman government. The first, for only US$2 million was for the finance of a sheet piling contract, the second was a US$6 million loan for general infrastructure, and the third was for US$5 million for the development of the Ajman creek. The last loan, signed only a few weeks before the closure of the bank, was for US$8 million for a fishmeal plant. The creek development was originally begun by the federal authorities and started as a 1,000 metres development. Now it is going up to 2,500 metres and the plans include the construction of a small port designed to handle mini-bulkers of up to 5,000 tons dwt and dhows. The eventual aim is to put the

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port out to foreign management and already offers have been received from Germany, South Korea and Japan. Ajman really took off when Sharjah rose to prominence, for the emirate is only a ten minutes’ drive away and offers rents 25 per cent cheaper than Sharjah. Ajman also allows land to be sold to foreigners, though because no land can be released by the government this is only through private sale. Its most successful project to date is the mini-dry dock operated by Mitsui – since it began operations in December 1976, a three months waiting list has developed. The Ajman dry dock has managed to maintain its competitiveness against its nearest rivals in Bahrain and Bombay. Other notable projects in Ajman include the Gulfa Mineral Water Company, in which the government recently negotiated a 50 per cent stake. The Cypriot construction company, Joannou and Paraskevaides also have a marble and mosaic factory, and a Lebanese concern has a stone crushing plant. The inimitable South Koreans are also planning to set up a furniture factory staffed fully by South Korean craftsmen. The most ambitious project on the drawing boards, for which Ajman is seeking backing is Garden City, a complex of villas, apartments and office blocks which is designed to house 30,000 people. The new town has been drawn up by a firm of Japanese architects, Kisho Kurokawa, though the project lacks one overall financier at the moment. The government is hoping that foreigners will be attracted by the low rents of Ajman and the availability of land there. The Ruler of Ajman, Sheikh Rashid bin Humaid al-Nuaimi has now more or less retired from day-to-day decision making in the emirate, and commercial dealings have now been taken over by his son, Sheikh Humaid bin Rashid al-Nuaimi. The closure of the Ajman Arab Bank may prove a blow to confidence in Ajman, but its proximity to the greater area of Dubai/Sharjah is a factor that Ajman can always capitalise on. Doing Business in the Emirates Though enormous progress is made each year in forming the United Arab Emirates into one credible nation, commercially it is advisable for the foreign businessman to treat it as seven different mini-states. There is no such thing as a UAE trade licence, for each emirate issues its own, and a Dubai licence will not allow a company to have any governmental dealings in Abu Dhabi for example. Each emirate varies also in its partnership laws, the less rich emirates eager to encourage foreign investment usually being easier than Abu Dhabi. Bank guarantees, which are necessary in Abu Dhabi and Dubai, may not be necessary in other areas. It is not necessary in certain emirates to have a local partner, while it is in Abu Dhabi. However, a local partner is advisable everywhere, for he can

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not only be a company’s ear to the ground, a liaison with the ruler’s majlis, but also a source of contracts, as many UK building companies are finding out. The ruling families vary in accessibility; in Ajman it is relatively easy to see the Crown Prince, but in Dubai, waiting to see Sheikh Rashid can involve weeks, maybe months of waiting. It is no good coming out bright-eyed and bushy-tailed to the Emirates offering little more than Western expertise. Local partners of any worth may wish to see a little more than demonstrations of enthusiasm. Joint ventures where the foreign company is also committed financially to the success of a project are more likely to secure an active and influential partner. Setting up in the Emirates is still expensive, despite the ‘depression’ in the property market that the agents complain about. Abu Dhabi is the most expensive with villas going for US$25,000 upwards and ordinary apartments being rented at US$20,000. Some companies have found that it is cheaper to fly a man in regularly rather than going to the expense of establishing him in the UAE. It can also be more productive, for several companies have found their executives tend to slow down to the pace of UAE business, and become more lethargic as the temperature hovers at the 120 degree Fahrenheit mark as it does for a large part of the year. The past three years have been a boom period in the UAE, and though this is not likely to change in any drastic way, some slackening of the pace can be expected. Bank credit is going to tighten up following the introduction of new banking regulations, and less private construction is likely to go on. There is still a lot of work around and a lot of opportunities for companies fleeing their own home market depressions.

1979 Rumours of Discontent – Provisional Constitution – Secession? – Metres, not Kilometres – Sharjah’s Status – OPEC Alignments – Omani Discontent – Common Economic Trends – Dirham Revalued – TEPCO – Social Infrastructure – Recession – Gas Engineering Concerns – Banking Reforms – Agriculture’s Future

After six years of slow progress, marked by successes that few would have thought possible at the start, there were disquieting signs in the summer of 1978 that in terms of federal unity all was not well with the United Arab Emirates. For the first time there was real talk of secession by three of the seven Rulers, but by the early autumn it was understood that the crisis had passed. Rumours of discontent with the union’s federal structure were abundant in 1976, at the time of the UAE’s first presidential elections since independence when the provisional constitution was due for revision. But Sheikh Zayed’s threat not to stand for re-election as president, which was a response to a serious territorial dispute between two of the emirates, and to a failure by Dubai, Sharjah and Ras al-Khaimah to contribute to the federal budget, had then been enough for the differences to be papered over, although agreement could not be reached over the constitution and the boundary issue remains unsolved. In the summer of 1978 the discontent seemed more serious and for the first time was openly voiced. This is not to say that the federation was in imminent danger of disintegration. Feelers believed to have been put out by the Ruler of Dubai as to whether a new grouping of his emirate, Ras al-Khaimah and Umm al-Quwain could achieve international recognition were firmly rebuffed by Britain, apparently after consultations with the United States, Iran and Saudi Arabia. Instead, Sheikh Rashid has been advised to patch up his quarrel with Sheikh Zayed of Abu Dhabi and warned that secession could easily lead to foreign intervention, putting the whole future of sheikhly rule in doubt. Origins of the Federation Many blame the British for the problems of the UAE. The decision to end Britain’s political and defence commitments in the Gulf, announced in 1968, was followed by three years of feverish consultations between the rulers of the nine Lower Gulf states to find a political solution that would ensure viable independence. For more than a century Britain had exercised quasi-colonial power

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over these states, with responsibility for their foreign relations and external defence but generally without being involved in such matters as tribal and family feuds or economic affairs. The result was that in the middle of the twentieth century their political institutions and internal boundaries were maintained very much in traditional form. Even so, there were several occasions when the British removed difficult or over-conservative rulers who had caused them offence, and there was considerable quasi-official British involvement in economic development and the provision of modern services such as police forces. For most of this period of British control, their economies had been at or below the subsistence level, particularly when the depression, changes in fashion and the cultured pearl put an end to their only profitable industry – pearling. The population of the Trucial States before oil was discovered never exceeded a few tens of thousands and their importance to Britain’s imperial interests was best expressed in terms of nuisance value, as their name implied. This was the main reason why they were never formally incorporated into the Raj. Such was the background to the shuttle diplomacy by Sir William Luce, Britain’s special envoy to the Gulf, who successfully negotiated the Shah of Iran’s agreement to drop a longstanding claim to Bahrain and the formation of a Supreme Council by all nine rulers. But Bahrain, with 40 per cent of the population of the nine states and a more advanced economy, insisted on a proportionate say in the running of the proposed federation. When this proved unacceptable to the others, Bahrain opted for full independence, as did Qatar for similar reasons, and for a time Ras al-Khaimah. In July 1971 the six remaining states announced the formation of the United Arab Emirates, which in December of that year became a fully independent sovereign state. Ras al-Khaimah which had hoped for an oil strike to provide an economic base for separate independence, returned to the fold early in 1972 when these hopes faded. The federation received its first jolt on the very eve of independence when Iran invaded the islands of Abu Musa and the Greater and Lesser Tunbs, to which it had old territorial claims. The Ruler of Sharjah, who had exercised authority over Abu Musa under British tutelage, had earlier agreed to share the island’s oil revenue with Iran, an agreement which later cost him his life. Iran in time recognised the UAE, and Saudi Arabia, which had territorial disputes with Abu Dhabi over the Buraimi Oasis, did so only after gaining a strategic coastal strip between Qatar and Abu Dhabi. Relations with both the regional great powers are today cordial, but these recent events are a constant reminder to the individual rulers that their freedom of action is in the last resort subject to Saudi and Iranian veto, and this has apparently been cast against any change in the status quo.

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Pressures Strengthening Federal Identity In several fields federalisation has already achieved success. Education, road construction and maintenance, foreign affairs, justice, information and culture, police, telecommunications, health and welfare have all been federalised. In some cases though, important reservations must be made as noted in the case of defence which in 1977 would automatically have been included in such a list. In the economic sphere, however, federalisation has scarcely made any headway, except for monetary policy and even there qualifications have to be made, as will be seen. The provisional constitution which the Supreme Council in 1976 voted to keep on for a further five years, clearly recognises the supremacy of Abu Dhabi and Dubai. Apart from the right of veto, these two emirates have the lion’s share of members in the Council of Ministers and the Federal National Council, a purely consultative body. In the absence of a consensus on some important matters, such as population policy and economic planning, some of the ministries have few real functions at present. Despite these negative influences, a sense of national rather than purely emirate identity is beginning to be felt among the indigenous population of the UAE. Among the factors at work here are the educational system, which now includes a university, anxiety over the rapid influx of foreign workers, who now outnumber citizens by at least four to one, and the recession, which has brought home to many the need for less wasteful use of resources and the kind of economic co-ordination that only nation-wide discipline can provide. Indeed, there is a strong case for believing that much of the existing friction is based on misunderstandings and a lack of proper communications between the emirates, sometimes caused by clumsy actions on the part of expatriate civil servants who do not fully understand local sensitivities or who deliberately choose to ignore them. There are signs too, that a generation is growing up without the inborn distrust of one’s neighbours that many of the older generation still seem to have. Meanwhile many of the big trading houses are operating on an emirates-wide basis. Threats to Federal Unity The actual causes leading up to the talk of secession in the summer of 1978 appear rather trivial to outsiders. In February 1978 Sheikh Zayed appointed his second son Sheikh Sultan bin Zayed as Commander-in-Chief of the Union Defence Force (UDF) which had come into being less than two years earlier. The UDF was formed by merging the separate defence forces of Abu Dhabi, Dubai and Ajman, the Ras al-Khaimah mobile strike force and the Sharjah National Guard, the latter formed around the Trucial Scouts left behind by the

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British. The merger of these forces, each virtually a private army of the ruler concerned, remained somewhat theoretical. They were renamed the Western, Central and Northern Regions Forces, but in practice continued to be based in their respective states and ultimately commanded by their respective rulers. Sheikh Zayed, who as President is constitutionally also Supreme Commander, had decreed earlier in 1978 that the three regions should become divisions under a central command, and followed this by appointing Sandhurst-trained Sheikh Sultan to this command, with the rank of brigadier. To complicate the issue, his eldest son and heir apparent, Sheikh Khalifa bin Zayed, is Deputy Supreme Commander, while the son of Sheikh Rashid of Dubai, Sheikh Mohammed bin Rashid, is minister of defence. The appointment of Sheikh Sultan was held by the Rulers of Dubai and Ras al-Khaimah to be unconstitutional, although it was apparently based on a recommendation by a committee of the Supreme Council of Rulers. Sheikh Rashid argues that since the appointment was made when the President was on a hunting trip in Pakistan he, as Vice President and acting head of state, should at least have been consulted. The Rulers of Dubai and Abu Dhabi are the only members of the Supreme Council with the right of veto. The upshot of this was that the Dubai and Ras al-Khaimah contingents in February 1978 refused to obey orders from the central commander, while Sheikh Rashid placed some independent arms orders for British Scorpion tanks. While this is the main ostensible cause of the rift between Dubai and Abu Dhabi, relations between Dubai and Sharjah are also poor. Here the trouble lies in a claim by Dubai to a small stretch of land on their joint border where Sharjah wants to build a US$8 million shopping centre. After the dispute brought the two emirates to the brink of hostilities in 1976, Sheikh Zayed’s intervention led to a period of détente, and the matter has been referred to arbitration by two British and one French jurists. Each side has engaged a firm of London solicitors to represent them and the hearing should be completed by the autumn of 1978. Other inter-emirate quarrels revolve around the refusal of the federal authorities to recognise birth certificates issued by Dubai hospitals, which are not part of the federal health service; disagreements over nominations to key government and diplomatic posts’ and dissatisfaction, chiefly on the part of Dubai and Ras al-Khaimah, with federal regulations from Abu Dhabi that individual emirates consider against their interests. To some extent, such friction is inherent in all federations, from Switzerland to the US, but in the UAE they seem deeper-rooted than usual. Behind each of the particular quarrels that have marred the federal image lie not only historical feuds and jealousies but wide differences in government and business philosophy. While Abu Dhabi has emerged under Sheikh Zayed’s confident and

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competent leadership as the classic rich Arab welfare state, with a desire for international prestige which generosity with its oil wealth can buy, Dubai, under the no less competent guidance of Sheikh Rashid, has remained one of the world’s last bastions of laissez-faire private enterprise. While Abu Dhabi’s own government, and the federal agencies that have evolved from it, have spawned a vast bureaucracy chiefly of expatriate Arabs, Dubai does not seem to have any government at all, except perhaps its municipality. Sheikh Rashid has no intention of allowing his emirate, which grew rich by trade before oil was discovered, to be swallowed up by what he considers incompetent federal free-loaders. Abu Dhabi is by far the largest of the seven emirates in terms of land area, and its chief town and inland oases of Al-Ain and Liwa are all far from the other six members of the UAE. This remoteness, particularly before the emirates were connected by roads, means that Abu Dhabi has avoided the territorial disputes that have characterised relations between the Northern Emirates. It has, however, quarrelled with Saudi Arabia over Buraimi, where Al-Ain is situated, and with Qatar, formerly over pearling rights and more recently over oil rights on the maritime border. The UAE’s international boundaries have now been more or less settled, with one important exception, but the same cannot be said for the inter-emirate boundaries. Apart from the Dubai-Sharjah dispute already mentioned, there have been disagreements over offshore oil rights between Sharjah, Umm al-Quwain and Ajman. As in the case of the Dubai-Abu Dhabi quarrel the dispute over boundaries between Dubai and Sharjah, which Sheikh Zayed described as one involving ‘metres not kilometres’, has deeper causes. Earlier this century Sharjah was the most important sheikhdom on the coast, with an advanced educational system, a strong trade base, the first airport in the region and the prestige and income conferred by the British military presence. But feuding within the ruling family weakened its drive, the creek on which its trade depended was allowed to silt up, and Sharjah lost the initiative to neighbouring Dubai, which, benefiting from Sheikh Rashid’s long rule and uncanny business acumen, became the most successful entrepôt in the Gulf. In recent years, under its ambitious but federally minded Ruler, Sheikh Sultan bin Mohammed al-Qasimi, Sharjah began to undergo a development boom that resurrected the jealousy between the two emirates. To underline its displeasure Dubai has imposed some minor restrictions on contacts between the two states, such as not permitting taxis to take passengers between the two city centres. Another aspect of the poor neighbourly relations is the long tradition among the Gulf states of feuding with their immediate neighbour and allying themselves with their neighbour’s neighbour. This has created a leapfrog pattern of relationships, traces of which can still be seen. With its roots in tribal disputes

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over pearl banks and water wells, it continues today over commercial banks and oil wells. Thus, Bahrain has traditionally had poor relations with Qatar but been on good terms with Abu Dhabi, the two states at one time having a common currency, while the ruling families of Qatar and Dubai were related by marriage and also had a joint currency. This leapfrog theory helps to explain the present Dubai, Ras al-Khaimah, Umm al-Quwain alliance ‘versus’ Abu Dhabi, Sharjah, Ajman and Fujairah. The centrifugal forces at work within the United Arab Emirates have been examined here in detail because of their sudden topicality. They have existed to some extent since the federation was born, but were never mentioned in public. The fact that they have now been brought into the open at the highest level may prove a blessing in disguise, for a public debate could lead to the realisation that the federation does more good than harm, genuine compromises could be made and the emirates might emerge with greater unity than in the past, when lip-service was often a substitute for real co-operation Foreign Relations and Aid The foreign policy of the UAE, masterminded by Sheikh Zayed and largely implemented through his personal diplomacy, must be counted as one of the country’s main successes, although it can be argued that it is his own policy rather than that of the UAE as a whole. Certainly its important financial element is entirely the responsibility of Abu Dhabi and Sheikh Zayed’s well-known munificence, but Dubai’s contribution, one might say trade not aid, should not be overlooked. Dubai’s large import bill, currently over US$3 billion, largely accounts for the fact that more than a dozen countries maintain direct diplomatic links with Dubai, in addition to their main embassies in Abu Dhabi. To the Organisation for Economic Co-operation and Development (OECD) countries the UAE is triply important: as a reliable source of oil, a moderating voice in the Organisation of the Petroleum Exporting Countries (OPEC) and a trading partner. Combined oil exports from the three UAE producers in 1977 were slightly more than those of Kuwait and slightly less than those of Iraq, Venezuela, Nigeria and Libya. More important than the quantity in that year was the price. Abu Dhabi aligned itself with Saudi Arabia at the Doha OPEC conference that led to the two-tier price system during the first half of the year, and although the prospect of unlimited cheaper oil from the rebel two did not materialise, their policy did prevent a further price escalation for the next 18 months at least. Significantly, however, Dubai and Sharjah, with their greater need for cash, did not follow Abu Dhabi, but instead raised prices immediately by the full 10 per cent – despite the three states having a single membership of OPEC in the name of the UAE.

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The UAE currently enjoys good relations with almost all the regional countries. There is a basic understanding on matters of substance with Iran, which has always had closer ties with Dubai than with Abu Dhabi, partly because of the large presence of Iranians in the former. As a trading centre, Dubai is very much the result of a migration of merchants from the Iranian township of Bandar Lengeh in the early twentieth century, and there is still considerable traffic and trade between the two countries. Since the oil boom the emirates have provided opportunities for work to the depressed regions of south Iran, and this (often technically illegal) flow of people and goods was tolerated and even welcomed by both sides. With the creation of the UAE, however, Abu Dhabi began to impose restrictions that irritated both Iran and Dubai. With boom conditions in the Bandar Abbas area of Iran and the influx of workers from the subcontinent this traffic is less important today than it was, and Abu Dhabi’s immigration policies are no longer a cause of friction with Iran. But after the Abu Musa and Tunbs incidents some justifiable suspicion of the powerful northern neighbour remains. Since the territorial settlement with Saudi Arabia relations between Abu Dhabi and that country have also improved considerably, as can be seen in their close co-operation within OPEC and other international bodies. Dubai and the Northern Emirates, where the way of life has always been more relaxed, have little direct contact with Saudi Arabia, but feel some apprehension for Saudi influence, for the strict tenets of Wahhabi Islam are not their style at all. By contrast, all is not well on the Oman front. The Sultanate was apparently unhappy at not being consulted over the Abu Dhabi-Saudi settlement, in which it has a direct interest in view of its own borders. But at the time Sultan Qaboos was too busy fighting the Dhofar rebellion, with some aid from Abu Dhabi, to take umbrage. Abu Dhabi has also earned goodwill in Oman through carrying out road-building projects. In 1978, however, relations became strained when Oman laid claim to land that Ras al-Khaimah wished to develop, and a state of armed confrontation ensued. Oman, which in an apparent geographic anomaly, controls the southern side of the Strait of Hormuz, has the backing of its comrade-in-arms Iran, a further complication. Conflicting claims to offshore oil rights in the area add yet another dimension to a difficult situation. But it is generally considered that good sense and behind-the-scenes prodding by the two major powers should be able to resolve this particular issue. Of the Arab states in the Gulf only Iraq and Kuwait maintain diplomatic relations with the Soviet Bloc, so the proposal by the UAE’s foreign minister that links with the Soviet Union should be established as a counterweight to the existing preponderance of US influence, largely through Iran and Saudi Arabia, was all the more controversial. Mr Ahmed Khalifa al-Suwaidi’s remarks made

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at the 1976 security conference attended by all the Gulf states in Muscat, fell on deaf ears, however, because most of the participants, especially Iran, distrusted Soviet intentions and feared Iraqi influence to be a Communist Trojan horse. But since then, the growing instability in Pakistan, Afghanistan and the Yemens may have made this proposal more realistic, and it is likely to remain a plank in the UAE’s long-term foreign policy platform. The UAE minister of defence was due to visit East Germany in mid-1978, the first official visit by a minister to a Communist country. China still has no links with the Gulf south of Kuwait. As a member of the non-aligned bloc, the UAE has expended considerable diplomatic effort in wooing the Third World. In this it has been highly successful largely because of the foreign aid programme, which has won friends in Africa, Asia and the Arab world, while enhancing the country’s’ international stature even further afield. Abu Dhabi’s foreign aid programmes have been running at slightly over US$1 billion for each of the past three years, and this level is expected to be maintained in 1978. Most of the aid is channelled through Abu Dhabi’s finance department on the direct instructions of Sheikh Zayed, with some three-quarters of it going to the front-line Arab states and the Palestine Liberation Organisation (PLO). Other major beneficiaries are the Gulf Organisation for the Development of Egypt, and various inter-Arab development companies. Increasingly, however, Abu Dhabi aid is being disbursed through the Abu Dhabi Fund for Arab Economic Development (ADFAED). The Fund is an unusual body, since it acts as an independent consultant to the government on financial and economic affairs, and represents the UAE in the World Bank and other international agencies. The Fund was established in 1971 and began its project-oriented loan programme in 1973, since when it has paid out about US$220 million against commitments of about double that amount. In 1974 it widened the scope of its activities to non-Arab countries and in 1977 some 35 per cent of its commitments were to such countries, about two thirds of them in Africa and the remainder in Asia. Latin America may be included when the necessary staff and expertise have been built up. In its short life the Fund has already won a well-deserved reputation for generosity based on project evaluation undertaken by other oil agencies or international consultants. Technical assistance has on occasion been provided in grant form, and the Fund has equity stakes in one or two projects, but the commonest form of aid is soft cash loans denominated in dirhams. Interest rates and repayment terms vary with the nature of the project in the range of 3 to 6 per cent and 10 to 20 years, infrastructural projects attracting the softest terms and industrial loans,

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which account for almost half the total, the hardest. The Abu Dhabi Fund has been particularly prominent in encouraging co-operation among all seven Arab and mainly-Arab project aid funds – mainly with the intention of avoiding duplication in project appraisal work. Emergence from Recession It is somewhat misleading to talk about ‘the UAE economy’, since this is an area where federalisation made the least progress, and in several fields there has been wasteful duplication of projects and rivalry between emirates. Nevertheless, certain economic trends have occurred that are common to all. Directly or indirectly, oil is the key to all development in the UAE, even in Dubai, for there has been a change in the conditions that enriched that emirate in the pre-oil era, when it was one of the world’s largest importers of gold and Swiss watches which together with other goods were smuggled to the sub-continent. Dubai remains a large importer, and most of the incredible quantities of consumer goods that are sold over its counters are still re-exported by returning foreign workers and businessmen. But without its oil revenues of some US$1.3 billion, Dubai would have problems borrowing internationally for development projects on the scale of the recent past. It would also suffer from a foreign exchange shortage, which at present is covered by Abu Dhabi’s oil revenues. Sharjah, Umm al-Quwain and Ras al-Khaimah, the first two with very small oil revenues, the latter with none, have all embarked on ambitious development projects on mainly borrowed money, with some help from federal loans and grants, ultimately paid for by Abu Dhabi, while Ajman and Fujairah have been almost totally dependent on Sheikh Zayed’s largesse, which is why they are such staunch federalists. The years 1977 and 1978 have been characterised by a recession from which most of the emirates are only gradually emerging, a process most observers think will continue through at least the first half of 1979. This follows the profligate spending of the two previous years, when Abu Dhabi pumped enormous funds into its own economy and through the federal budget into the UAE as a whole. The banks helped fuel the boom with often unwise loans, particularly for construction projects. Rapid monetary growth and inflation in excess of 40 per cent quickly followed. A shake-out had to happen and did so in 1977, when a run on the dirham put great pressure on banks with exposed positions, two of which failed in May. Since then credit regulations have been tightened and a more cautious mood has prevailed. The monetary authorities went as far as they could without causing any failures, and the somewhat chastened banks have likewise avoided foreclosing on

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the many speculative traders, property companies and contractors that had mushroomed in the boom for fear of a cumulative chain of bankruptcies, from which they would lose more. Most believe that the underlying strength of the oil-backed economy is enough to ensure that the recession will be a mild one and that on the next upswing lessons will have been learned. The dirham has meanwhile been re-valued to restore its previous parity with the Qatar and Bahrain currencies, and in mid-1978 the authorities eased some of their tight money policies, which with the belated approval of the federal budget is expected to provide a welcome stimulus to the economy. Development of the Oil Industry – Abu Dhabi As an oil producer the UAE is slightly below the OPEC average, with 1977 production running at just over two million barrels per day (bpd). This represents 6.4 per cent of total OPEC production and makes the UAE the fourth largest Middle East producer, or fifth if Libya is included. Of the UAE total, Abu Dhabi with 1.7 million bpd accounted for 83 per cent, Dubai with 0.3 million bpd 16 per cent, and Sharjah with 0.03 million bpd slightly over 1.0 per cent. Despite the favourable trading conditions for the first six months of the year, when the two-tier price system gave Saudi and Abu Dhabi crude a marketing edge of almost 5 per cent over other OPEC oil, Abu Dhabi’s production grew by less than that amount during the year as a whole, reflecting the generally sluggish international market for oil. Dubai’s production also showed a slight increase, while Sharjah’s plunged by 20 per cent in the wake of production problems. Oil was discovered in Ras al-Khaimah, but not in commercial quantities, while Umm al-Quwain, which receives a small cut of Sharjah’s revenues, seems to have made a commercial gas discovery. Prospects of oil or gas discoveries in the other two emirates are poor. From the granting of the first oil concession to the start of production in Abu Dhabi there elapsed almost a quarter of a century. The onshore concessionaire was the Abu Dhabi Petroleum Company (ADPC), a consortium of British Petroleum (BP), Shell, Compagnie Française des Pétroles (CFP), Exxon, Mobil and Partex, the Gulbenkian interest. The four onshore fields, Bu Hasa, Asab, Murban (or Bab) and Sahil together produce about one million bpd, a small part of which is used for power generation and local refining while the rest exported as crude from the Jebel Dhanna terminal, some 180km west of Abu Dhabi. Offshore development was quicker. Here the operator was Abu Dhabi Marine Areas (ADMA), originally two-thirds BP and one third CFP, which in 1977 produced some 410.000bpd. from the Zakum and Umm Shaif fields. Production is pumped by submarine pipeline to Das Island, where it is loaded into tankers.

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There are three other fields, two of which extend beyond Abu Dhabi’s boundaries, one into Iranian territory, the other into Qatar. The latter field, Al-Bunduq, is operated by ADMA, but the revenues are shared jointly with Qatar. The Abu Dhabi National Oil Company (ADNOC), an agency of the Abu Dhabi government, now has a 60 per cent equity share in both ADPC and ADMA. Although, a full takeover would by now be normal procedure under OPEC participation guidelines, ADNOC has decided not to exercise this option yet. For the time being it feels that the early stage of development of its territory from the exploration point of view and special conditions of its oilfields (relatively low reservoir pressures and a high proportion of offshore reserves) make it more sensible for it to leave several major oil companies with a direct interest in the success of the ventures. There are also two smaller groups in production – the Abu Dhabi Oil Company, a Japanese group, and the Abu al-Bukhoosh Oil Company, which operates the part Iranian field and is owned by CFP and a group of US independents, in which ADNOC has left the foreign shareholding intact. In the autumn of 1977 Mr Mana Said al-Otaiba, Abu Dhabi’s oil minister, announced a significant shift in the emirate’s oil policy. Since prices are depressed and Abu Dhabi still cannot absorb all its oil revenues, a production ceiling has been imposed. For 1978 offtake is limited to below the 1977 level, and in fact production has been running at slightly lower than this, an average of just over 1.4 million bpd for the first four months of 1978. The lower rate will undoubtedly be beneficial from the reservoir engineering point of view and will enable existing fields to be operated for about 20 years at 1978 rates before production begins to decline. With oil prices likely to rise in real terms it clearly makes better sense to leave at least part of the excess to revenue requirements in the ground. A further short-term advantage is that it helps to narrow the gap between the supply and demand of OPEC oil, thus marginally firming the present weak market. But Otaiba’s oil policy does not end there. The foreign partners in ADPC and ADMA have been requested to increase exploration and production capacity at the risk of expropriation of undeveloped parts of their concession areas. Here the argument is that the government needs to evaluate and if possible increase its reserves before allowing the present production ceiling to be lifted. Among the topics for negotiation between ADNOC and its partners in ADMA has been the development of the Upper Zakum field, a large oil accumulation lying above the Zakum field. Upper Zakum is already in production, but because of low reservoir pressures at a rate of only 50.000bpd. To raise output to the full potential of some 500.000bpd an expensive development programme was proposed involving secondary recovery water injection. At current prices

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this was estimated to cost at least US$4.8 billion. BP and CFP declined to exercise their equity rights in this development, but JODCO, the Japanese shareholder taken on in 1973 opted in with 12 per cent, the balance being taken up by ADNOC itself. CFP then formed an operating company jointly with ADNOC, thus in effect becoming a contractor, with the right to take up to 20 per cent of future production at posted price less its fee. The project has got off to a fast start, with expenditure in 1978 budgeted at US$1 billion. This includes work on a new export terminal on Zirku island, closer to the field than now overcrowded Das island. Oil in Dubai and Sharjah Dubai’s oil industry, apart from being much smaller, differs substantially from Abu Dhabi’s. The first onshore concession was awarded in 1937, but no oil has so far been discovered despite much exploration effort. Offshore the, Fateh (meaning ‘good fortune’) field was discovered in 1966 and a second field, known as South-West Fateh four years later. The operator is the Dubai Petroleum Company (DPC), a subsidiary of Continental Oil Company, the US independent that owns the UK distributor Jet Petroleum. In 1975 Sheikh Rashid made a peculiar 100 per cent takeover of the oil industry, acquiring all the offshore assets for US$110 million, but keeping DPC on as operator, and retaining DPC and the other foreign shareholders in the concession as participants in future equity expenditure. While Abu Dhabi has been reducing output, Dubai’s production has been steadily rising, with the figures for the first four months of 1978 showing an 11 per cent increase over the same period of 1977 to reach an all-time high of just over 350,000bpd. The production levels of small producers of Dubai’s size though, are determined more by technical factors than by market conditions or state petroleum policies. At current production rates, Dubai’s reserves, although unpublished, are generally expected to last about 15 to 20 years. Although 40 years in the Dubai wilderness have failed to find oil, the onshore search is to continue under a new 35-year exploration agreement with the US drilling company Sedco and Houston Oil & Minerals. Their 630,000 acre concession includes a small offshore area relinquished by DPC. There are two unusual features of Dubai production. One is the sophisticated self contained water injection plant, which lifts and treats seawater and injects it under high pressure at 800,000 gallons per hour, the first large capacity unit of its kind in use. The other is the unique system of storing oil offshore. This consists of two 500,000 barrel steel vessels, each 200 feet high and weighing 12,000 tons, which have been sunk near the wells and pinned to the sea-bed with their tops protruding. Known as khazzans, an Arabic word meaning ‘container’ from which our ‘magazine’ is deserved, they have no base, so that when oil is pumped into the top seawater is forced out at the bottom. As oil is drawn

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off into a tanker’s holds water flows in again, but being heavier than oil remains beneath and separate from it. In nearby Sharjah the oil picture is not nearly so bright. The sole field, Mubarak, lies off Abu Musa island and under an agreement with Iran the revenue is split equally between them. Under a border settlement Sharjah then pays 30 per cent of its share (15 per cent of the total) to Umm al-Quwain, and a further five per cent to Ajman. Production has been disappointing, and in 1977 fell to 27,000bpd from a high of 50,000bpd in 1976. Relations with Crescent Petroleum, a consortium of six US independents that operate the field, have been strained since the ruler of Sharjah imposed a US$34 million backdated increase in royalty and tax. Until the matter is settled by negotiation or arbitration it is unlikely that the development needed to expand output from the Mubarak field will proceed. Ras al-Khaimah has several times announced that commercial production was imminent, and in 1977 even prophesied an annual revenue figure. But a promising first well, which showed oil and gas, but below commercial levels, was followed by two dry holes, and several of the foreign partners in the group have indicated their unwillingness to continue exploration. The Ruler’s advisers are said to remain confident, and drilling will probably continue, using funds borrowed on the euromarkets. Gas Projects Closely linked to the UAE’s oil industry is its much more recent gas industry. The only project so far operational is the Abu Dhabi Gas Liquefaction Company’s (ADGLC) project on Das Island, which came on stream in 1977 with a rated throughput capacity of 550,000 million cubic feet a day of gas. At full capacity production would be 2.2 million tons of liquid natural gas (LNG), over one million tons of liquid petroleum gas (LPG), and 220,000 tons each of condensate (natural gasoline) and sulphur pellets. The whole gas output has been purchased by a single customer – the Tokyo Electric Power Company (TEPCO) under a 20-year contract. The Norwegian-built gas carriers, owned by Abu Dhabi, are the largest in the world. ADGLC’s shareholders are ADNOC 51 per cent, BP 16.3 per cent, CFP 8.2 per cent, Mitsui 22 per cent and Bridgestone Liquefied Gas Co 2.5 per cent. Unfortunately the project has not run smoothly. The plant is the first or its kind in the Gulf, and involves a number of revolutionary design features to deal with complex fluctuations in the pressures and quantities of feedstock gas. These include sophisticated flare systems and safety devices to deal with failures in the compressors, generators or other components, all of which had to be thoroughly re-checked after the disastrous explosion that destroyed the natural gas liquids plant in Qatar just as the Das project went on

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stream. Engineering worries to date, officially described as teething problems, have included the discovery of foreign bodies in the first shipment of gas, hairline cracks in critical pipework and a leak in one of the two storage tanks, which will be out of commission for about six months. Some people believe that these problems may have been caused or aggravated by the hot, humid and corrosive environment. Even when they are solved, hopefully during 1978, there has been the additional problem of the oil production ceiling, since the feedstock is associated gas from the Umm Shaif field. The reduced production of oil, which is likely to be permanent, means a shortfall of gas at the plant. The short-term solution has been to tap the gas-cap of an otherwise undeveloped oil field nearby, but this practice, which will not help that field’s production performance is a temporary measure until a new pipeline is completed to transport associated gas from the Zakum field, at present flared, to the island. As a result of the reduced deliveries, sales revenue has fallen well short of the projected US$1 million a day, so short-term borrowings were necessary to improve the cash flow and finance the additional expenditure. When completed, the project had already cost US$500 million, twice the original estimate. Abu Dhabi’s second major gas project ran into difficulties much earlier. When first mooted, the project to process and export natural gas liquids (NGL) (rather than LNG) from associated gas from the four onshore fields, a project about twice the size of the ADGLC one, was to have the same shareholding as ADPC itself. But after starting work on the gas-gathering scheme the foreign partners decided not to proceed because of cost and financing difficulties. After a delay of some three years the project was finally restructured in mid-1978 around a new company, to be known as Gasco, in which ADNOC will have 68 per cent of the equity, CFP and Shell each 15 per cent, and Partex 2 per cent, after BP, Exxon and Mobil failed to exercise their options. As currently envisaged, the Gasco project will involve a fields gathering system, a pipeline to Ruwais, near Jebel Dhanna, a fractionator that will extract propane, butane and natural gasolines from the gas, and a loading terminal. The plant will process some 800 million cubic feet a day and estimated cost of the whole project is over US$1·3 billion. Dubai does not have nearly such abundant gas reserves, but is planning to use what it has to the full and to import additional quantities. Gas from the emirate’s Fateh and South-West Fateh fields will be piped to the Jebel Ali industrial area, where propane, butane and condensate will be extracted for export, leaving some 80 million cu ft per day of dry fuel gas to power an aluminium smelter, power plant and desalination plant. These projects are all due for completion in late 1979 or early 1980. If the gas field discovered by Umm al-Quwain proves big enough, Dubai will also finance

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a US$40 million project to pipe this gas to Jebel Ali to augment its own supplies; there are even plans to pipe gas to Dubai from a large discovery across the border in Oman. Banking – Reform Regulations Banking has been a major growth industry in the UAE, which has frequently been described as the most over-banked country in the world. At the latest count there were 52 fully-licenced banks, 21 of them locally incorporated, five RLB’s (restricted licence banks) and 10 licensed representative offices, as well as a number of other specialised financial institutions. Despite potentially big deposits and loan opportunities that is still a large number of banks. In fact, a handful of big banks account for much of the business. Two banks between them account for 43 per cent of total deposits, while the smallest 17 share 2 per cent of the total. As mentioned earlier, a period of rapid economic expansion was followed in 1977 by a recession which created serious problems for a number of smaller and over-extended banks. This gave both the dirham and the UAE banking industry a dubious reputation, which on the whole neither deserved. The resulting crisis led to the resignation of the British managing-director of the Currency Board, whose impatience at the lack of co-ordinated banking and financial policy seems to have lead to the imposition of a cure worse than the disease. For a while the Board was managed by a three-man board of senior civil servants, but now it has a new managing-director, who together with two IMF experts is attempting to regulate banking and prepare the way for the transformation of the Board into a central bank. In the last year the Board has tried to introduce several regulations that are standard practice in many countries but unheard of in the laissez-faire conditions of the UAE, particularly Dubai and Sharjah. These include a moratorium on new banks and branches, unless a new branch replaces an old one; the presentation on time of audited accounts; a raising of reserve ratios from 5 per cent to 7.5 per cent for dirhams and from 1 per cent to 5 per cent for foreign currency; a capital-asset ratio of at least 1 to 15 for locally incorporated banks; and the establishment of a local capital base by foreign banks. Abdul-Malik al-Hamar, the new managing-director, hopes to persuade banks to adopt these regulations voluntarily and on the whole the response has been favourable, but until a fully-empowered central bank is established, which for the time being is unlikely, there seems little the Board can do to banks that do not comply, particularly if they have the backing of individual rulers. The board would also like to see several of the smaller banks merge, but it is difficult to see this happening, either voluntarily or otherwise, unless a new banking crisis develops.

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Balance of Trade About 75 per cent of UAE bank credits go to trade and construction, the two chief activities of both the local, and indeed the foreign, population. In 1978 the Currency Board published the first-ever balance of payments account, based largely on estimates in the almost total absence of officially published figures. The Board estimates that in 1977 the trade balance grew by only one per cent to US$5·7 billion despite the continuing rise in exports and re-exports (up 11 per cent to just over US$10 billion). The reason for the steady trade balance, almost unchanged since 1974, is of course that imports have continued to race ahead as the absorptive capacity of the economy improves. In 1977 imports grew by 29 per cent, following rises of 24 per cent and 57 per cent in the previous two years, and the estimated total for the year was about US$4.4 billion. Of this, some 75 per cent was imported by Dubai, which continues to be the main merchandise gateway to (and from) the UAE, despite attempts to increase their share of the lucrative import business by Abu Dhabi, Sharjah and to a lesser extent the other emirates. Japan, the UK, the US and West Germany account for over half of Dubai’s imports. Abu Dhabi’s credit rating and its substantial reserve position means that this trend of rising imports could continue for some time before a real balance of payments crisis occurred, and by the time the UAE ran into payments difficulties other OPEC countries would probably be even worse off and upwards pressure on oil prices would intensify. The possibility of reserves stabilising at their current level seems likely, however, at least until the export-oriented diversification of industry begins to bear fruit. There is also the possibility of cutting back foreign aid, although for political reasons Abu Dhabi might be reluctant to do this. The overall payments surplus in 1977 was in fact only US$378 million, and even with the slow-down in development spending and high existing inventories the position is unlikely to improve significantly in 1978. Construction Boom Levels Off The construction industry has been the sector of the UAE economy worst hit by the mini recession, but even here the picture is not all black. In Sharjah, it is true, over-expansion in the boom years, particularly by the private sector, without the support of the substantial oil revenue and established trade that Abu Dhabi and Dubai enjoy, has left dozens of construction projects half finished. Estimates of bank involvement in dubious projects run as high as US$200 million. Parts of Sharjah certainly look like a space-age ghost town. Hotel projects were the major casualty with several cancelled, others delayed and room occupancy rates in some of the completed ones too low to cover operating expenses.

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But in Abu Dhabi and Dubai the construction boom continues, though perhaps at a slower rate, since the banks are being more cautious in lending for construction purposes. In Dubai the enormous trade and exhibition centre, which includes a 39-storey main tower, the highest building in the Gulf, and a 330-room hotel, is proceeding on schedule. Costing slightly over US$100 million, the centre is due for completion in 1979. Abu Dhabi is building a more modest but still impressive centre, and there are over a dozen projects for office and commercial buildings in the US$10 to US$20 million class in the two emirates. There has been a levelling off in new residential projects, with rents stabilising and in some cases declining, although at levels which elsewhere would be considered extremely high. There is still an acute shortage of low-and medium-cost housing available, partly because the unofficial landlord cartel would rather keep property empty than lower rents in response to demand. Industrial Infrastructure and Heavy Industries But the really large construction projects are civil and industrial rather than urban. The biggest of these is at Jebel Ali, 40km south-west of Dubai, where a 66-berth port is being built. This multi-million dollar project will create the largest port in the Gulf, while Mina Rashid, Dubai’s existing commercial port is being more than doubled in size to 37 berths. Jebel Ali is to be the base of a vast industrial zone that will eventually link up with Dubai as the present city expands south-westward. Yet another large project in Dubai – albeit one with doubtful prospects – is the dry-dock, now nearing completion, which will accommodate the largest VLCCs afloat or at present planned. In this field of construction, Abu Dhabi cannot at present match Dubai, having cancelled its proposed port extension and postponed a planned Jebel Ali type industrial development at Ruwais, where for the time being only the Gasco project and a refinery will go ahead. But the volume of new housing and infrastructural projects is probably higher in Abu Dhabi than in any other emirate. Many of the UAE’s industrial projects are inevitably related to petroleum. Apart from the gas projects on Das Island and those planned for Ruwais and Jebel Ali, several oil refinery plans have been proposed. As with most other economic sectors there is little federal control or co-ordination over industry, and secrecy about future plans is common. There is a small (15,000bpd) refinery in Abu Dhabi, but output falls short of local demand and in 1977 Dubai alone imported over US$250 million of fuels and lubricants. Abu Dhabi and Dubai are proceeding with export oriented refineries, though both realise that with much of world refinery capacity idle, now is not the best time to enter the products markets, especially with other Gulf states expanding their already substantial

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capacities. Still another refinery project is planned by Ras al-Khaimah, an oil-less emirate, using crude oil and capital. Dubai already has a flourishing industrial base, mainly involved in light engineering and the production of construction materials, but the big thrust is still to come at Jebel Ali. Inland from the huge new port a 135,000 ton aluminium smelter, 525 megawatt power station and 25 million gallon desalination plant are taking shape, power and water will be available by the end of 1978, and the smelter should be in production a year or so later. The power station and desalination plant have capacities far greater than the smelter’s own heavy requirements, so as to feed other industrial projects. Indeed, one or two, including a steel fabricating and an aluminium extrusion plant, are already completed and a cable plant is under construction. Large projects still to be finalised, but not unlikely to be postponed indefinitely, include a steel mill and 150,000bpd oil refinery. While Dubai is still moving full steam ahead on industry, Abu Dhabi is beginning to have second thoughts and seems to have shelved the non-petroleum side of its Ruwais plans. The worry here is not investment finance of which the government has ampler supplies than Dubai, or profitability, although the federal minister of finance and industry, ironically a son of Sheikh Rashid, recently warned that most industrial projects in the Gulf are operating at a 10–15 per cent annual loss. It is simply manpower. Abu Dhabi is afraid of creating an industrial state entirely run by foreign labour, and until a population and immigration policy has been established does not wish to aggravate a situation where the indigenous population is already greatly outnumbered. It has been estimated that if all the projects planned for Ruwais materialise a work force of about 100,000, some 30 per cent of the emirate’s present population, would be required. While Dubai is well aware of these dangers, it clearly feels that by concentrating foreign labour, over whom it has always had complete control, in a single self-contained industrial city the risk is not great. In addition, it sometimes acts as if it has a regional monopoly in efficient industrial and commercial management, a view shared by many outsiders. The construction boom has triggered off a massive demand for cement and other materials. Not surprisingly, this has led to an upsurge in local plants producing building materials, particularly cement. Here, the less rich emirates have made much of the running, particularly Ras al-Khaimah, which is exceptionally well endowed with raw materials. The northern-most emirate already has a large 220,000 ton cement mill, jointly owned with Norwegian interests, and is planning with Kuwaiti investors to triple capacity, while its high-quality stone and aggregate are exported to as far away as Jubail in Saudi Arabia. Sharjah, too, has a cement mill, and Ajman is planning one. Meanwhile, Abu

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Dhabi has a medium-sized mill at Al-Ain and Dubai will soon open another. Although demand for cement continues to be high some critics have pointed to this massive increase in capacity as an example of unco-ordinated industrial growth. What will happen to all these mills, they ask, when the building boom subsides? Perhaps the most anomalous, yet successful, industrial project in the smaller emirates is in Ajman where the efficient Arab Heavy Industries shipyard, which opened in 1977, has a full order book. Although the scales are not of course comparable, that is something less likely to happen at Dubai’s huge dry-dock, due to open in 1979, where in July 1978 a management contract had yet to be signed. Ras al-Khaimah also has a successful steel-rolling plant, owned and operated by the US offshore oil contractor McDermott. But two of its industrial projects folded soon after opening, both over supply difficulties. One processed scrap steel, the other manufactured fish meal. Umm al-Quwain and Fujairah, realistically aware that they lack the necessary finance and experience, are the only emirates not to have announced large industrial gardens, while tiny Ajman has talked of a US$10 million fishmeal plant and already has a successful mineral water bottling plant and marble plant. Fishing and Agriculture Little is heard today of the former backbones of the sheikhly economies, fishing and agriculture, the latter perhaps an unsuitable word for the camel-herding and date-cultivating, that are about all the harsh desert climate can support. Although pearling had died almost completely by 1950, fishing has remained a major occupation, especially in the emirates without oil or a trading tradition. The experience of Ras al-Khaimah in industrialising fishing through a fish meal plant proved a failure because of an over-optimistic survey of the available fish catch, which may prevent Ajman from embarking on an even larger fish-meal project. But traditional small-boat netting continues to provide a livelihood for many citizens, with fresh shrimp, sardines and mullet fetching high prices in the big town markets. Traditional farming has proved less hardy. The camel-herders of Abu Dhabi are now largely settled in concrete encampments along the Al-Ain road and around the Liwa oasis, and are subsidised by the government for old times’ sake and their loyalty factor. But it is doubtful if this semi-bedouin life will survive another generation. After spending some 20 years as governor of Al-Ain, Sheikh Zayed has a strong feeling for agriculture, which now comes out in tree planting and urban park projects, as well as experimental market gardening schemes. On Saadiyat Island a futuristic complex of inflatable greenhouses produces a ton of vegetables a day from the sand using desalinated seawater

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and chemical nutrients. In the Al-Ain oasis water is conserved by layers of sub-surface asphalt while sun-shelters reduce the full glare of the long summer. In Ras al-Khaimah, where the Hajar mountain-range ensures a much higher rainfall than in arid Abu Dhabi, agriculture is better established, and supplies the Northern Emirates with most of their fresh fruit and vegetables. But even here the potential is limited, with fewer young people prepared to enter this less prestigious and worse paid sector of the economy. Indeed, many of the agricultural labourers in Ras al-Khaimah are now imported from the subcontinent. Communications and Social Spending If the absence of national planning and co-ordination in the UAE can be seen in the haphazard lurch towards industrialisation, they are even more evident in the development of the economic infrastructure, particularly communications. The number of international airports and commercial port berths continues to increase, and if all projects are completed as planned the UAE will soon have almost as many of these facilities as the rest of the Gulf put together. In addition to Dubai’s and Abu Dhabi’s well-established airports, Sharjah and Ras al-Khaimah each opened theirs in 1977. Abu Dhabi, meanwhile, is building a second airport near the coast and a third at Al-Ain, while Dubai has longer-term plans for a second one near Jebel Ali. The port expansion programme looks less excessive now that Sharjah’s bubble has been pricked and the Mina Zayed extension at Abu Dhabi has been postponed. The port schemes of the smaller emirates, ranging from the dredging of silted creeks to Ras al-Khaima’s purpose-built jetties for loading building stone, look entirely reasonable, and there are sound economic reasons for Sharjah’s east coast development at Khor Fakkan, particularly if economic federalisation ever takes place. One sometimes wonders, however, what the UAE’s road system, hitherto mainly funded from the federal budget, would be like if toll roads were still the thing. Duplication of telecommunications is, more difficult to achieve, but has occurred. In 1977 Ras al-Khaimah inaugurated a US$12 million earth satellite station of its own, with 1,000 channels available to its 700 subscribers, surely a suitable entry for the Guinness Book of Records, like so many other features of the UAE. Although telecommunications have been federalised through the Emirtel organisation, managed by Cable and Wireless, Ras al-Khaimah once again asserted its independence by opting out of the federal scheme to create its own telecommunications authority, RAKTA. In the field of social infrastructure, particularly education, federalisation is seen at its best. Starting from a base of almost nothing ten years ago, the emirates have built an impressive structure of schools and training colleges,

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culminating in the opening of a university in Al-Ain in 1977. By the start of the 1978/79 academic year the number of federal schools will exceed 200, and school enrolment will total over 100,000, excluding private schools. Education is easily the second largest item in the federal budget (after defence and excluding foreign investment) and probably the largest in terms of current domestic expenditure. Students in secondary schools receive an incentive payment of US$40 a month, which has helped to keep them at school. Even so, families where the parents themselves are uneducated often prefer to see their boys in a job, preferably a family business, and their girls married off as soon as their primary education is complete. The educational system also includes schools for the children of the non-Arab population, which tend to be expensive and insufficient although since the vast majority of these are single-status employees, the numbers of such children are not as great as might be supposed. The UAE health service has done much to improve medical care, particularly in the poorer Emirates, and in the current federal budget health has the third highest allocations. But the more independent emirates are still building and operating their own hospitals outside the federal system. The staff needed to run the hospitals and clinics are likely to be almost entirely foreign for many years to come. Such then is the current state of the United Arab Emirates, a loose grouping of states rather than a tight union, where the Arab population is a minority in a largely non Arab environment. But whatever you call it (or them) the UAE is still a prosperous and interesting concept, a hotbed of social and economic experimentation like nowhere else in the world, where the noble virtues of the bedouin and the canny shrewdness of the oriental merchant have often proved better guides than the numerous foreign experts. The main weakness the UAE suffers from today is a failure by some parties to understand that despite growing individual strengths, the emirates need each other more than ever before. They may have been brought together reluctantly, but shotgun marriages can lead to conjugal bliss, even though it takes the partners longer to realise it.

1980 Government Crisis – Abu Dhabi-Dubai Rivalry – Questioning the Sheikhly System – Currency Board – Ruwais – GASCO – Das Island Disappointment – Industry – Economic Slowdown

It is hard to judge the seven-Sheikhdom federation of the United Arab Emirates (UAE) in conventional Arab or Western terms. The union, (ittihad) has never implied unity, which in Arabic is a different word. But few countries could go through the sort of prolonged government crisis which gripped the UAE in 1979 with so little outward sign of disturbance or tension. The government formed by the Ruler of Dubai Sheikh Rashid on I July 1979 in his new office of federal prime minister made only four changes from the Council of Ministers (cabinet) which had resigned on 25 April. The new faces were technocrats replacing technocrats rather than any fundamental realignment in the balance of power between the emirates. The most significant change was the replacement of education minister, Abdullah Omran Taryam, an advocate of political reform, by Said Salman, a former housing minister who since January 1977 had been UAE ambassador to Paris. The other new faces were Humaid Nasser al-Owais as electricity minister, Hamad Abdel Rahman al-Madfa as health minister and Saif al-Jarwan as labour and social affairs minister. Abdullah’s brother, Omran Taryam, speaker of the Federal National Council (advisory assembly), had been as outspoken as Taryam himself in criticising divisions between the emirates and his departure had been widely predicted. Sheikh Rashid’s cabinet brought in the outgoing prime minister, Sheikh Maktoum bin Rashid, Sheikh Rashid’s son, as deputy prime minister. This portfolio is also held by Sheikh Hamdan Bin-Mohammed, the president’s cousin. The 66 days during which Sheikh Rashid haggled with the other rulers over the choice of his government would have worried most other governments in the region but the reality in the UAE is rather different. Its destiny is still firmly controlled by its seven ruling families: by sheikhs wearing dishdashas rather than by cabinet ministers in bespoke tailored suits. Families Behind the Federation Of the ruling families, the largest, richest and most powerful is the al-Nahyan family, whose overseas interests include a stake in the world’s fastest growing bank, the Luxembourg-based Bank of Credit and Commerce International

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(BCCI), as well as property on both sides of the Atlantic, racehorses, and investments in third world countries such as Pakistan. It is oil, of course, which has brought the wealth. The UAE’s biggest oil reserves lie under the desert west of the capital Abu Dhabi and in the shallow waters of the Gulf, offshore from the capital. But the al-Nahyan were prominent in the region more than a hundred years before the oil wells and Sheikh Zayed (head of the family, president of the UAE and ruler of Abu Dhabi) has a belief in federalism which is something to do with his wish to continue the ‘reconciliation work’ of his ancestor Zayed the Great who died in 1909. When the succession to Sheikh Zayed, a healthy virile man in his sixties, is eventually decided, it is certain that other voices outside his immediate family circle will have a say, particularly in the family’s power base at Al-Ain, 160 kilometres inland from the capital. The moving force of the federation, for better and occasionally for worse, has long been the rivalry between Abu Dhabi and Dubai, where Sheikh Rashid, lean and sparkling in his seventies, has built his emirate on ‘trade, luck and a little oil’, to use the words of former British ambassador, Dan McCarthy. The Dubai-Abu Dhabi polarity has something of the good humoured one-upmanship of two towns with rival football teams, but the divide has its serious side. Dubai stands for free trade, an open house for foreigners and a parochial approach to foreign affairs. Abu Dhabi stands for a tough line on foreign investment in the local economy, jobs for nationals and a closer identity with pan-Arab policies in general and Saudi policy in particular. It came as a surprise to most observers when Sheikh Rashid appeared to accept the gauntlet from Abu Dhabi in April 1978 by agreeing to form a new government to succeed that of his son Sheikh Maktoum bin-Rashid. Sheikh Rashid, known for his financial acumen, had always been more interested in talking business than talking politics. The UAE’s population, estimated at 877,340 at the end of 1978, lives in a country the size of Scotland or Maine almost totally dependent on oil. Since the British pulled out of the Gulf in 1971, the UAE has established the framework of a modern state with a Council of Ministers (cabinet), Supreme Court, Currency Board (central bank) and unified Chamber of Commerce and Industry. For all this, however, power rests largely with the Supreme Council of Rulers, the seven rulers meeting as an executive body, who have powers of veto over cabinet decisions. Many progressive proposals aimed at strengthening the political and economic framework have been quashed by the Supreme Council. Since less than 30 per cent of the population is native-born there are few technocrats in the government. Those who hold high office, such as petroleum minister, Mana

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Said al-Otaiba (the 1979 President of the Organisation of the Petroleum Exporting Countries (OPEC)), are few in number. Power still rests largely with the sheikhs and elders of the ruling families. Repercussions from Iran For the first time since independence, 1979 saw public and open questioning of the sheikhly system. The fall of Sheikh Maktoum’s government was initially seen as a response to these questions. The 43-year-old Speaker of the Federal National Council (advisory assembly) Omran Taryam, who was also education minister in Sheikh Maktoum’s government, urged direct elections. Taryam, the Tony Benn-style radical of UAE politics, argued that the sheikhs should ‘move with the times’, an oblique reference to the overthrow of the monarchy in Iran. But the impact of the Iranian revolution in the UAE was more apparent than real. A spate of newspaper articles warned of reactionary regimes and advocated a more democratic form of government. If anything, however, the appointment as premier of Sheikh Rashid indicated an attempt to close ranks, at least within the ruling families. Taryam’s future, in particular, looked doubtful and the choice of cabinet posts was once again likely to be based on family considerations. The rivalries between the ruling families have an importance in determining the pattern of politics. The Abu Dhabi camp contains the oil-less emirates of Umm al-Quwain, Ajman and Fujairah, although the first has strong links by marriage with Dubai. The Ruler of Sharjah, Sheikh Sultan, who is in his early forties, has been a firm supporter of Abu Dhabi since he succeeded to the emirate in 1972. His support for Abu Dhabi derives from his belief in the federation and because of commercial antagonism with Dubai. Umm al-Quwain and Ajman, whose aged rulers are effectively retired, tend to follow the Abu Dhabi line since their regents are federalists. Dubai, whose ruler always emphasises his commitment to the federation, even at moments of great stress, is supported by Ras al-Khaimah. The two rulers would like to see a looser union with individual emirates retaining a larger measure of autonomy than that envisaged by Abu Dhabi. It is sometimes hard to understand this opposition to federalist Abu Dhabi, except perhaps in terms of the fierce independence of the sheikhdoms, particularly Ras al-Khaimah, which was the last to join the union. Its expression in public has at times been bitter. The 1978 appointment of Zayed’s son, Sheikh Sultan, as commander-in-chief of the UAE defence forces was made by Abu Dhabi without consulting Dubai, and this deeply embittered Sheikh Rashid, who continued to refer to the appointment for months afterwards as ‘illegal’. But the picture of quarrelling sheikhs suggested by the events of 1979’s cabinet crisis is a little misleading. The UAE ambassador to London, Mohammed

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Mahdi al-Tajir, in letters to the UK press, was at pains to point out that disagreements were normal ‘in any family’ and insisted that all the rulers were fully committed to the federal ideal, although this interpretation is at times hard to reconcile with the facts, the cabinet resignation apparently engendered agreement among the rulers on several important issues. The Crown Prince of Ras al-Khaimah, Sheikh Khaled, speaking shortly after the resignation of Sheikh Maktoum, said the oil-producing emirates had agreed to place 50 per cent of their oil revenues with the Central Bank of the United Arab Emirates, once it is established. The channelling of oil revenues through the commercial banking system has been a weakness of the federal structure. Sheikh Khaled also predicted that the federal budget, at Sheikh Rashid’s disposal as premier, would be larger than before: between Dh16 billion (US$4.177 billion) and Dh18 billion (US$4.699 billion). He felt that for the first time, the budget would be fairly spread among the seven emirates. The resolution of these issues was regarded by many observers as of ultimately more importance than the choice of the cabinet itself. Abu Dhabi: Pre-eminence from Oil Abu Dhabi’s importance as a political centre for the lower Gulf has greatly increased. The Arab Monetary Fund (AMF) chose Abu Dhabi as its headquarters, as have a number of powerful banks, including the Middle East regional office of the BCCI. At the same time the Abu Dhabi Fund for Arab Economic Development has continued to play a role in channelling soft loans to Arab, Islamic and third world countries and the OPEC December 1978 conference in Abu Dhabi was a suitable showpiece for a capital which is no longer the ‘one vast building site’ of the early years following independence. Crude Oil Dominates Economy Crude oil accounts for about two thirds of the federation’s gross domestic product (GDP) and the short-term outlook centres on developments in Abu Dhabi (accounting for 83 per cent of UAE oil revenue), where government policy is to safeguard the longer-term productivity of the major oilfields against the background of the world oil market and government revenue requirements. Production ceilings for the two main operating oil companies, Abu Dhabi Marine Operating Company (ADMA-OPCO) and Abu Dhabi Company for Onshore Oil Operations (ADCO), were cut in 1978 and 1979. Production declined for the first time since oil was produced in 1962 by about 8 per cent to 1.83 million barrels a day (bpd). Production ceilings for the main companies are expected to remain the same in 1980, despite, fluctuating prices, although the smaller producers, including. Abu Dhabi Oil Company (Japan), which is operating in areas

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relinquished by ADMA-OPCO, is expected to increase its output marginally and was to be joined by another producer, Amerada Hess, in late 1979. Consequently production could be about 1.85 million bpd in 1980. ADNOC’s Supremacy for Foreign Contractors The state owned Abu Dhabi National Oil Company (ADNOC), which is a fully owned agency of the Abu Dhabi government, is the most important single source of business for foreign contractors. Its director-general, Mahmoud Hamra Krouha, a modest but tough Algerian, is one of the most influential figures in the business world of the lower Gulf yet remarkably little is known of him outside Abu Dhabi. He was recommended to President Sheikh Zayed as the man to run his national oil company by the late President Boumedienne of Algeria. The oil companies operating on- and offshore as partners in ADMA-OPCO and ADCO have often resented the ‘third world’ emphasis which Krouha has brought to the oil politics of Abu Dhabi. Krouha has publicly clashed with the ADCO partners (British Petroleum, Shell, Compagnie Française des Pétroles, Mobil, Exxon and the Gulbenkian interest, Partex) over the future of the Bab onshore. oilfield and investment in a programme to support the crude oil production. In one interview Krouha made the remark that he thought the Western partners ‘often make use of technical arguments in order to avoid having to put up money’. To disagree over how much water injection should be used is perhaps a healthy sign, but ADNOC’s abrasive approach has resulted in the state concern being left to ‘go it alone’ in several oil field developments where a more conciliatory approach would have brought in the Western partners. Nevertheless, ADNOC declares that it favours the joint venture approach. In fact, Abu Dhabi is one of the few OPEC members in which the foreign partners are still present with 40 per cent equity and ADNOC has repeatedly stated that it sees no reason to change the relationship. It has no interests in the minor producers offshore. The Upper Zakum oilfield, which will eventually produce 1.3 million bpd oil equivalents, is by far the biggest capital development in the lower Gulf. The big contracts have gone to the US-French consortium Ammeron-Serette for the offshore complex, Foster Wheeler France for the Zirku Island offshore oil export terminal, and RJ Brown & Associates of Switzerland for the pipe line network, in association with Omnium Technique des Transports par Pipelines (OTTP) of Paris. ADNOC’s grip on the oil field business has begun to extend to oilfield services. Legislation by the Abu Dhabi Executive Council (the emirate’s cabinet), which

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emerged in mid-1978, compels companies wishing to offer oilfield services to establish a presence in Abu Dhabi. This move caused some concern to several foreign companies which hoped to do business in Abu Dhabi but settled in Dubai and Sharjah, where rents and working conditions are easier. Not only have some companies had to move house, they have also noted the growing strength of ADNOC’s oil services joint venture companies, such as the National Drilling Company (NDC), a wholly owned subsidiary, and the Abu Dhabi Drilling Chemicals & Products Ltd, which is building facilities on Saadiyat Island, close to Abu Dhabi’s main port, Mina Zayed. The drilling chemicals company is a joint venture with NL Industries of the US. It has successfully raised US$14 million in the Euromarkets to finance its programme and is being advised on its marine facilities by Rendel, Palmer & Tritton, the UK consulting engineers. ADNOC’s marine services and pipeline joint ventures had yet to show themselves in mid-1979, but once ADNOC’s subsidiaries become fully operational they can be expected to get preference on oilfield contracts. ADNOC is generally considered to be a fair client but it is often felt that ADNOC shortlists are ‘a little too short’, with companies eliminated because there are more than two firms from one country. But what is at last being recognised is that ADNOC defers many of its most important decisions to the Abu Dhabi Executive Council, the decision-making body for the emirate of Abu Dhabi chaired by the Crown Prince, Sheikh Khalifah bin Zayed. Ruwais and the Industrial Future Ruwais, the planned industrial zone for Abu Dhabi, is a barren flat expanse of sabkha (salt flats), close to the oil export terminal of Jebel Dhanna, about 100 miles west of Abu Dhabi. Camps have already been built for 6,000 workers, and the contractors for the onshore gas programme facilities and the 120,000bpd export refinery are expected to be working at full swing by early 1980. The refinery brings in SNAM-Progetti, a subsidiary of the Italian state oil company, Ente Nazionale Idrocarburi (ENI). Another ENI subsidiary, Saipem, is to build a gas loading jetty at Ruwais for Gasco. Taking subcontracts into consideration, the work is broadly spread. Site preparation brought in UK firms; Engineering Projects India is doing civil work at the refinery; Imsay ETS of Belgium is contracted for electrical work; the British Steel Corporation has supplied steel. Even a local company, Arab Heavy Industries of Ajman, has won work. Speaking in London in January 1979, the UAE’s petroleum and mineral resources minister, Mana Said al-Otaiba, quoted a figure of US$20 billion by 1985 as the expected outlay on Ruwais. This official figure is remarkably close to the figure diplomats in Abu Dhabi have been working on for some time, although it is possible that not all the money will be spent. The consultant for the master

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plan for Ruwais, Arthur D Little of London, estimated that for every dollar spent on industry at Ruwais, another dollar would go on infrastructure. The limited nature of the capital intensive projects started so far is indicative of the care with which ADNOC approaches heavy industry. Creusot Loire of France has been invited to take part as project manager for an ammonia and urea plant, but little has been done. Talks aimed at establishing a joint venture for a steel industry with India have been taking place at regular intervals since 1976, but agreement is still far from realisation. Ruwais is destined to become Abu Dhabi’s main industrial centre. It already has a 200-room Ramada Hotel. A population of up to 80,000 is envisaged, although the exact size depends on whether the steel project goes ahead. The population, for which permanent housing is being designed by CRS Design Associates of Houston, will be largely immigrant, although some management work may be done by nationals, who are going to the US in increasing numbers for education. Gasco The biggest single project under way is the Gasco onshore gas project and ADNOC is already talking to several potential customers in Japan. Gasco has involved engineering giants such as Bechtel and Fluor Corporation of the US in the engineering project management. At one time the technical team was based in London, where procurement was co-ordinated. ADNOC has clearly learned from the experience at Umm Said, Qatar’s,industrial zone, in ensuring that the base project gets under way first and the energy hungry industries come second. Gasco will also profit from the disappointments experienced at Das Island, 220km north-east of Abu Dhabi, by the Abu Dhabi Gas Liquefaction Company (ADGLC). This 51 per cent ADNOC company opened an LNG and LPG complex in 1977 but constant misfortune and technical difficulties have kept production low. Leaks in the gas tanks alone have taken US$15–20 million to repair. Three of the ADCO partners – Shell, Compagnie Française des Pétroles and Partex – joined the US$1.6 billion Abu Dhabi Gasco venture. The other three – Mobil, Exxon and BP – refused to take up their options. There were some signs in mid-1979 that with Gasco moving ahead fast, BP, at least, would like to get back, but for the huge US$4.8 billion offshore oil field development, only the Japan Oil Development Company (Jodco) has exercised its option. ADNOC has awarded a contract to CFP-Total to manage the field as contractor on a fee basis. This arrangement seems to have worked to the satisfaction of both parties. ADNOC also has some industrial ventures near the capital, notably a refinery at Umm al-Nar island, outside the city, and an alkaline chloride electrolysis

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plant, which is also at Umm al-Nar. The latter is being built by Uhde of West Germany under a DM160 million (US$80 million) contract signed in September 1978. Some industrial ventures in Abu Dhabi come under the emirate’s department of petroleum and industry which has promoted several projects including a flour mill and a steel re-rolling factory. The department is developing a light industrial zone at Moussafah outside the city and workshops and back-street industry are being progressively removed there from the city, although this has been delayed by lack of co-ordination between vital services such as water, electricity and telephones. Jebel Ali Industrial Zone Abu Dhabi’s industrial programme is matched by the Ruler of Dubai’s ambitious hopes for Jebel Ali, an industrial zone 35km south-west of the city. Here in 1976 work started on a 66-berth industrial port under a US$1.6 billion civil works programme which, if completed as planned, will be the biggest port in the Middle East. The joint venture building Jebel Ali – known as MJAC – was put together by a young Dubaian, Ahmad Baqr, who heads a local company, Dubai Transport Company (Dutco), started by his father and uncle with one lorry 20 years ago. Contractors for the port project received a 20 per cent advance payment to help them to mobilise, so that the project was about a year ahead of the six year schedule by mid-1979 and dredging was 55 per cent complete. The consulting engineer for the port and infrastructure is Halcrow Middle East of Dubai, now known as Halcrow International Partnership. The relationship of trust with Halcrow was confirmed in the 1950s, when a representative was asked to ‘guarantee’ that a breakwater at the entrance to the creek would not be swept away by a storm if the Halcrow design was adopted. The Ruler was told: ‘I cannot guarantee that because I am not God.’ The latest Halcrow representative, Bill Briggs, has had to face a number of crises in the life of the project so far, notably a feeling that 66 berths are over-ambitious in the light of the ‘over-berthing’ in the Gulf that followed the port congestion of the mid-I970s. Dubal and DUGAS The rationale for Jebel Ali was that it would form the skeleton for an industrial zone. To date the government of Dubai has attracted foreign participation in only two big projects: an aluminium smelter (Dubal) and an LPG plant (DUGAS). However, as an adviser to the government commented: ‘Dubal and DUGAS between them don’t make an industrial zone.’ Dubal and DUGAS have also faced considerable cost overruns which have made bankers rather nervous about their future. To publicly air the argument that Dubal and DUGAS are ‘white elephants’ is hardly popular. Yet the argument has to be faced.

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Dubal has attracted Alcan of Canada and Southwire of the US as 20 per cent equity holders with a commitment to take the whole production of 135,000 tonnes a year. Dubal’s chief executive, Ian Livingstone, who joined the company after running the Gulf’s first smelter, in Bahrain, is confident that rising aluminium prices in the early 1980s will provide a justification for increasing production perhaps by adding a fourth potline to give another 45,000 tonnes a year. But it is difficult to reconcile Dubal’s optimistic view of the soundness of the project with the reticence of the banking community to take part in the syndication of the extra US$230 million Dubai needs to meet the soaring costs of the project though a mandate was awarded finally in June 1979 to Lloyds Bank International. Originally slated as a US$612 million project, Dubal is now billed at well over US$1 billion. Dubal has reacted angrily to press comment on reports that because of delays with the Dugas project, Dubal will have insufficient inputs of energy. Livingstone does, however, concede that without adequate gas supplies from Dugas, depending in turn on the highly sulphurous gas associated with Dubai’s crude oil production, it will be hard to meet production targets. In mid-1979 Dubal and Dugas combined to borrow a US$670 million financing package. Dugas is 80 per cent owned by the Dubai government with the balance held by Scimitar Oils (Dubai), a subsidiary of Sunningdale Oil of Canada. The products will be propane, butane, condensates and residue gas (methane and ethane). The original date for production to start was 1 November 1979, but this deadline was certain to be missed. Hopes of a steel venture, together with the government’s desire for an oil refinery, have yet to be clarified. The light industrial projects already attracted to Jebel Ali include a cable factory, Dubai Cable Company (Pty) Ltd (DUCAB) (a joint venture between the Dubai government and British Insulated Callender’s Cables, an aluminium extrusions factory owned by the Ghurair merchant family of Dubai, a steel fabrication factory started by local businessman, Abdul-Wahab Galadari in association with Cleveland Bridge & Engineering and a colony of soft drinks factories. There has been continued speculation in Dubai that the government might consider admitting a US military presence by granting a lease on part of Jebel Ali to the US navy. The UAE ambassador to London, Mohammad Mahdi al-Tajir, in an interview with the London daily The Guardian in mid-1979 described the suggestion as ‘ridiculous’ and indeed it would run counter to everything that is known of UAE foreign policy, which is determined to keep the big powers out of the Gulf. Arab press reports of ‘sophisticated’ listening devices being moved into Jebel Ali after the Shah’s fall have been similarly denied by official sources.

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Dubai Dry Dock Jebel Ali is only one arm of Dubai’s industrial growth and is overshadowed by the giant US$460 million dry dock completed in 1979. The dry dock, adjacent to Port Rashid which is currently being extended, was still empty five months after its completion by the Costain Taylor Woodrow joint venture. An agreement was reported to have been reached in late 1978 between the government and C H Bailey of the UK and its subsidiary Channel Ship Repairers. Exactly what this agreement covered is unclear; but in mid-1979 the Dubai government was still looking at other proposals, including one by the Korean Shipbuilding & Engineering Corporation for managing and operating the yard, which could dock a one million ton ‘supertanker’ – if one is ever built. Meanwhile about US$16 million worth of equipment was stacked in the warehouses awaiting the appointment of an operator. In contrast to the dry dock, over which considerable controversy remains, Dubai has had success with its 1,500 tonne a day cement works, which is already serving the needs of the local market after-opening in September 1978. Indeed the company which handled most of the imported cement through Port Rashid has been squeezed from the market as far as serving local importers is concerned. Oil in Dubai and the Northern Emirates In Dubai and Sharjah oil production is expected to decline gradually in the next few years, although exploration is continuing in both emirates. Dubai’s 16 per cent share of UAE oil revenues comes from fields which are reaching their peak, giving production in 1978 of close to the 1977 level of 361,622bpd. A small field, called Rashid, came on stream in 1979 adding 2,000bpd. But a 35 year concession granted in mid-1978 to South Eastern Drilling Company (Sedco) and Houston Oil & Minerals of the US, by mid-1979 had experienced no more luck than under the previous concessionaire, Texas Pacific Dubai, a subsidiary of Texas Pacific Oil of Dallas. Equally in Sharjah, where drilling was abandoned offshore in June 1978, the Mubarak field has proved a disappointment. Most sources suggest that the Ruler of Sharjah, Sheikh Sultan, gets only half the revenue of this field which, these sources say, is shared with Iran. No confirmation exists of this arrangement. The operator for the concessionaire, Crescent Petroleum Company, is Buttes Gas & Oil Company of California, who say that: ‘Any agreement that Sharjah may have with Iran is outside our knowledge. We deal only with the government of Sharjah and as far as we know have had no contact with Iran. We are not aware of any such agreement and it would not be our place to comment on the existence of such an agreement.’

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Inquiries in Tehran with the National Iranian Oil Company confirm the Buttes comment and suggest that Iran, while maintaining a claim to the field, has received no oil revenue from Sharjah. Politically, the revolutionary government in Iran was in mid-1979 maintaining its claim to the island of Abu Musa – near the Mubarak field – which was seized by the Shah in 1971. Buttes settled a dispute with Sheikh Sultan in 1978 over taxes and royalties, and, in the light of rising oil prices, said it felt confident future operations would ‘generate profits’. By contrast, late in the same year, the company was pessimistic. Production dropped to 22,100bpd in 1978 from 28,200bpd in 1977. This was the lowest output since production began in July 1974 and Buttes blamed difficulties with the gas compression system which, by mid-1979, had been corrected. The Sharjah government releases no official data on production and the confusion over the real technical status of the field has produced a widespread feeling in Sharjah’s oil industry that the field is drawing down. The government will only admit to ‘technical difficulties’ although some opinion suggests that the problems were caused by exploiting the field too quickly and at an unrealistic rate of production in the early years. In mid-1979 Buttes had no immediate plans to explore for more oil. On-shore, 1979 saw a preliminary survey programme completed by Amoco Sharjah Oil Company, whose executives hope to see drilling start in early 1980 at a wadi area west of the Hajar mountains. If this proves successful, the Sharjah government’s financial prospects could be considerably enhanced, since Amoco executives have let slip the estimate of a potential of 200 million barrels of recoverable reserves in the area chosen for the initial survey. The only other emirate with any immediate hope of oil production is Ras al-Khaimah, where the government is hopeful of results on-shore after some initial survey work by Gulf Oil Corporation. The government had hoped that its offshore concession, for which Deminex of West Germany and Vitol of the Netherlands have acted as operators, would start producing by 1978. These hopes proved unfounded and by mid-1979 the future of the offshore concession was again in the balance as the government entered new talks aimed at finding new partners. In addition, exploration has been somewhat hampered by a dispute with Oman over sovereignty in the area north of Ras al-Khaimah town. Troops have been deployed at intervals along the border but no success had been achieved by mid-1979 in mediation attempts. Umm al-Quwain is the other emirate which had hopes of becoming a gas producer. A tentative agreement was reached with the Dubai government for the export of gas to Jebel Ali, Dubai’s industrial zone, but the gas wells proved to be ‘dry holes’ and further exploration seems unlikely.

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An agreement between the Sharjah government and Umm al-Quwain, under which Umm al-Quwain had a 15 per cent share in the revenue of the Mubarak field, has always seemed obscure, but it may partly explain the subsidy which the Abu Dhabi government gives Sharjah – reliably said to be Dh200 million (US$52 million) a month. ‘The legal fiction by which Umm al-Quwain’s ruling family is able to control some oil revenues is compensated for by Abu Dhabi bankrolling Sharjah,’ as one diplomat explained, ‘Because Abu Dhabi finds it embarrassing to be directly funding a traditionally minded ruler, it is done in this backstairs sort of way.’ Industry in the Northern Emirates Sharjah’s industrial undertakings are on a smaller scale than Ruwais and Jebel Ali although it also has a cement factory and a share issue for a cement company attracted Kuwaiti investment. Companies such as the Sharjah Oxygen Company have been successful in offering products to the local market and Sharjah Oxygen’s industrial gases have sold well in Abu Dhabi. Ajman and Umm al-Quwain have developed infrastructure to improve their creeks, but their futures seem dependent on becoming ‘dormitory towns’ for the Sharjah-Dubai conurbation. Ajman’s Arab Heavy Industries is a successful steel fabrication and ship repair business with Japanese participation and management. Many companies, such as Silentnight, the UK bed manufacturer, have been attracted to Ajman by the liberal legislation on company law. Driving round Umm al-Quwain’s potholed roads, it is difficult to see that the smaller emirates have much future other than as appendages to their neighbours. Only the prospect of attracting a tourist industry can provide Fujairah, on the Gulf of Oman coast, with much of a living, although some attempts have been made to stimulate agriculture. Ras al-Khaimah has made the most progress in diversifying its economy. In making the most of its excellent aggregates its has established a heavy industrial zone at Khor Khuwair, north of the town, where a small port has been built. As well as supplying rock for Saudi Arabia’s Jubail harbour, exports have gone to Kuwait and Bahrain and interest has been shown even by Iraq. The aggregates industry is supported by a number of ventures including a cement factory (with another owned by Kuwait now under construction), a lime factory, which began production in 1979, and an explosives factory which started production in 1978. But lack of progress on the oil front is the most disappointing news for the government, which has hopes of building a 100,000bpd oil refinery after feasibility work by Kellogg International Corporation of the US.

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The International Monetary Fund (IMF) staff reports, based on yearly consultations with the government, form the most objective guide to the economy. Total expenditure in the public sector increased at an annual rate of about 75 per cent and development outlays at about 93 per cent during the 1973–76 period. The IMF says one result was the establishment of a basic infrastructure and basic social services, but the rising level of spending, together with easy bank credit, brought sharp inflationary pressures. Since l977 the authorities have been actively trying to correct the growth of spending and to rein in bank credit. During 1978 the rate of monetary expansion slowed to about 8 per cent for the 12 month period ending in September, compared with 34 per cent in the corresponding period ending in September 1977. The IMF reported in December 1978: ‘This slowdown, together with the elimination of supply bottlenecks, helped restore a large measure of balance between aggregate demand and supply, and the annual rate of inflation is estimated to have been reduced to about 12 per cent during 1978. The slowdown of aggregate demand also had a dampening effect on economic activity and the rate of growth in real non-oil GDP is estimated to have declined to 11 per cent in 1977 and to about 3 per cent in 1978.’ The balance of payments recorded large current account surpluses averaging more than US$4 billion a year during the 1974–77 period. The rapid growth in imports and services, as well as in remittances by expatriate workers, during the period was offset by the continuing growth in the value of oil exports and the rise in investment income on external assets. Despite a high level of foreign aid spending (on the average about US$1 billion a year on IMF figures) and a large outflow of private capital, large overall surpluses were recorded up to 1976. In 1977, however, the overall surplus fell to about US$400 million, mainly reflecting a large increase in outflow of capital because of the closure of two banks. Preliminary estimates suggested a current account surplus of about US$3.6 billion in 1978, but with a decline in private capital outflows the overall surplus was likely to be a little higher than 1977. The main slice of official foreign assets is held by the Abu Dhabi government. Although no official data on their size and composition exist, they are currently estimated by the IMF to be more than US$8 billion. The foreign exchange reserves held by the Currency Board amounted to only US$800 million at the end of October 1978, equal to about two months of estimated imports for that year. Over banking Poses Problems The UAE, with its liberal attitude towards foreign investment, has some 51 commercial banks, 31 of which are foreign, as well as to 11 representative offices of

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international banks and half a dozen other banks operating as offshore restricted licence banks. In short, the influx of banks, which together have 340 branches, has resulted in chronic over-banking. This over-banking has harmed the economy chiefly by allowing speculative real estate financing. But, in addition, the concentration of business banks in which the ruling family has equity, such as the BCCI has made it difficult for some of the smaller banks. In May 1977 two banks were suspended by the Currency Board and the ensuing crisis of confidence left scars. One of the two banks which closed soon reopened (the Janata Bank of Bangladesh) after a rescue operation by the Currency Board. The other bank (Ajman Arab Bank) was expected to be reconstituted by 1980 with new shareholders as First Gulf Bank. Among the changes which resulted from the Janata-Ajman Arab Bank affair was the replacement of Ronald Scott, a UK expatriate, as head of the Currency Board; first by a triumvirate of nationals then by a Bahraini-born teacher, Abdel Malik al-Hamar. He came: to his job without previous experience of banking and is advised by a Banque de France man, Denis Ferman, who was seconded by the IMF. No foreign currency was deposited at the Currency Board in 1975 by the emirate governments, which instead have tended to channel their oil revenues through one or two nationally owned local banks. This has had the effect of locking up funds which many bankers would like to see being used to massage the economy back into life. Apart from central bank legislation to give more weight to the Currency Board (a plan which was still under wraps in mid-1979), the government has proposed, in response to IMF promptings, the creation of specialised banks such as a real estate bank, an industrial development bank and a housing bank. It is the real estate bank which has brought hope for the commercial banking sector of relief from the heavy burden of real estate loans advanced by the commercial banks during the boom of 1974–76. This would happen by the simple expedient of switching the loans to the books of the real estate bank, although the details are unclear. Disenchantment for Foreign Banks The two best known banking institutions are the National Bank of Abu Dhabi and the Abu Dhabi Investment Company (ADIC), which is the merchant banking arm of the Abu Dhabi Investment Authority (ADIA). ADIA operates not only like the Kuwait Fund for Future Generations but also as a conduit for funds on behalf of the Abu Dhabi ruling family. ADIC and the National Bank of Abu Dhabi have played an important part in bringing down interest rates for prime Arab and Gulf borrowers, but there are inevitably charges from foreign bankers that

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they have cornered the market. There was some evidence to suggest in mid-1979 that foreign bankers were disenchanted with Abu Dhabi, since it has not proved to be the ‘city paved with gold’ that drew many of them to seek licences in the boom years of 1974–76. Unlike more traditional states such as Qatar where the long-established UK banks like Standard and Chartered Bank look after some government accounts, Abu Dhabi has tended to work through its own nationally owned institutions or banks in which the ruling family has equity, such as the BCCI. At least one US bank closed its foreign exchange operation in early 1979 and others began to wind down staff levels. One bank – the First National Bank in Dallas – actually left and relocated its representative office in Bahrain. Economic Slowdown Affects Contractors Next to hydrocarbons, the construction industry, in which expatriate workers account for 85 per cent of the workforce, is the economy’s biggest, sector. Following the completion of many of the infrastructure projects begun in the post-1973 boom, most companies are now facing a slow-down. Indeed, marginal operators, many of whom are unable to wait for delayed payments from government, have left. Those which remain believe the 1980s will see continuing, but reduced, profits. In Dubai, where UK companies such as Costain, Taylor Woodrow and Wimpey were embarking on jumbo contracts five years ago, managements are tightening their belts. One view is that the expenditure on Jebel Ali absorbed all the Dubai government’s surplus money, forcing a slowdown on other projects. But the bleak overview fails to take account of the way the established giants in the market have themselves adapted to change. Costain’s Dubai area manager Samir Said, an Iraqi who acquired British nationality when Dubai was still part of the Trucial States, is forthright: ‘There is work here, there’s no doubt about that, and we are very busy. The only thing that is changing is that there has been a switch of emphasis away from construction and the jobs that are coming up are much smaller. We are looking at wharves, marine works, marinas – that sort of thing.’ Doing Business The UAE has no uniform company law and only in Abu Dhabi is business in any sense codified. Attempts have been made to bring in federal legislation, making it compulsory for all companies to be 51 per cent locally owned, but this ideal is a long way from realisation. Even Abu Dhabi, traditionally the most hawkish, has found its own emirate law on this principle difficult to enforce. At the other extreme Sharjah gained a reputation as an offshore centre during

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1974–76, when expatriate advisers were particularly strong, but appears now to be less tolerant of ‘brass plate’ operations. A foreign business cannot trade, carry out construction work or other contracting without a licence from the municipality (baladiyya). An enterprise licensed in one emirate must have a separate licence to trade in another emirate. In Abu Dhabi it is even necessary to have a separate licence for Al-Ain, issued by the baladiyya, (dominated by the powerful al-Darmaki family). If the activities are limited to trading with, as opposed to trading in, an emirate, then a licence will not be required. The important differences in the UAE centre on the role of the ‘sponsor’. Prospective sponsors even stand on the airport tarmac with forms waiting for visitors to arrive. In Abu Dhabi to obtain a licence for contracting, the foreign enterprise must have a sponsor who must be an Abu Dhabi national (a Dubaian will not do). A sponsor can act purely as a commission agent but this is rarely satisfactory. The sponsor will always get more out of the relationship than lie is prepared to put in, so he must be chosen with care. The best arrangements are those with powerful traders who are not already active in the particular field in which the foreign company has expertise. In return for his services the sponsor will get a commission on all contracts awarded which in Abu Dhabi is limited by law to a per centage of the contract value. Elsewhere, custom and practice applies. In Sharjah the government is prepared in a limited number of cases to allow companies to do business ‘offshore’ without sponsorship, although exactly how such companies do business elsewhere is rather unclear. The law in Dubai requires a company which is not sponsored by a Dubai national to deposit Dh100,000 (US$25,000) in a local bank. In the smaller emirates it is largely a case of handling registration through the ruler’s office, where custom and practice is the only guide. Nationals and Immigrants A welfare state exists for nationals and the better paid expatriate usually has access to privileged facilities to educate his children and to get medical treatment. The only real ‘have-nots’ are the immigrant labourers, who live in shanty towns on the outskirts of the big cities. Legislation stopping the sale of alcohol to Muslims in Dubai in 1979 was largely prompted by official fears at the growth of these shanty towns. The emirate governments have expressed their fears and concern about the conditions in which some immigrant labour is housed. The Ruler of Sharjah, Sheikh Sultan, told visiting journalists in December 1978 that he favoured housing immigrant labour in camps. The ministry of labour and social affairs has carried out frequent purges of illegal workers but visitors to Abu Dhabi still see

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the unofficial labour exchange of Baluchi labourers functioning at the junction of Airport Road and Zayad II Street (formerly Electra Road). Educational Development The sensitivity over immigration gives an added impetus for the education of nationals. The UAE University at Al-Ain plans to admit 1,000 students in the 1979–80 academic year. Although thought of as an Abu Dhabi institution, it draws students from all over the emirates and has expatriate Arab students, including many Palestinians. Many UAE students study abroad under the generous scholarships provided by the government to encourage the development of ‘national cadres’. In 1979 the government and private schools had a record intake of 97,274 pupils and there were 8,777 adults undergoing part-time education.

1981 Cabinet Reshuffle – Economic Imbalance – UAE University – Hospital Growth – Desalination – Business, not Boom – Dubai: Efficiency and Profit – Over-banking

Since 1971/72 the seven sheikhdoms of the lower Gulf, following the withdrawal of a UK presence and cancellation of their position as protected states with special treaty relationships, have been the internationally recognised federal state of the United Arab Emirates (UAE). Abu Dhabi, the largest in the territory, is the most westerly but also, owing to the Gulf’s curvature, lies south of the other six (thus often referred to as the Northern Emirates), and is the capital. Though other sites have been mooted, it could remain so since large sums have been spent in building a ‘federal city’ on the outskirts of Abu Dhabi City. As noted in the Middle East Annual Review 1980 (later Middle East Review) the expression ‘ittihad’ used in the country’s title has never implied unity, which in Arabic is a different word. ‘Federation’ is the best translation – certainly, for some years after the UAE’s creation disunity seemed more likely than unity, a state of affairs resulting in part from the complex patchwork of territorial distribution and in part from the strongly independent nature of certain members. In particular, the powerful al-Nahyan family, the ruling group in Abu Dhabi, were scarcely close friends of Sheikh Rashid bin Said al-Maktoum, Ruler of Dubai. Sheikh Rashid has had the disadvantage of less oil money but the advantage of the mercantile development of his city when Abu Dhabi comprised only a mud-built village on a barren island plus an interior oasis. Sheikh Rashid has showed strong tendencies to continue to run his own state, in the shrewd fashion of the chairman of a major conglomerate, rather than to co-operate in close federalisation. Of the other states, Sharjah has always taken the federal line, though perhaps over-imaginative in development. Conversely Ras al-Khaimah, the last emirate to join the federation (1972 instead of 1971), has shown such a degree of independence that it has relinquished only recently its costly personal control of some infrastructure. The causes are historical (little wars are well within living memory), and the results in the UAE’s early days were economically unfortunate. But in April 1979 Sheikh Rashid was persuaded to use his powerful administrative talents in a new capacity as federal prime minister, and after 66 days of negotiation produced a slightly larger but balanced federal cabinet. Though this has since unfortunately lost its brilliant foreign minister, Ahmad al-Suwaidi, a local man,

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the few immediate changes made were more technocrat to technocrat than liberal to conservative. And, most important, the new prime minister immediately started to push federal expenditure, development and perhaps even federalisation as a concept. The specific form of the constitutional system is covered in the Country Profile (but it must be noted that in 1980 some elements in theory ‘federalised’ did not appear so in practice e.g. Dubai’s armed forces were to some extent separate, traffic rules differed, and police operations were still sometimes partly separate in different states and a great deal of economic co-ordination was still lacking). Education, health, general water/mineral surveys (but not necessarily production) with, recently, agriculture, postal operations, roads, and notably the internal customs union and at least some elements of power and water, particularly distribution, are perhaps the most successful aspects of the federal operation. The Effect of External – and Internal Pressures Whether Sheikh Rashid was influenced by arguments from the Kuwaiti foreign minister in spring 1979, whether he suddenly experienced a conversion to the notion of federalisation or whether he realised that some of Dubai’s locally financed operations (including borrowing) could best be federalised, is not certain. But there is no doubt that external pressures must have played a part in aligning the most businesslike of the rulers with the most idealistic federalist (the UAE President, Sheikh Zayed of Abu Dhabi) and the most imaginative, though not the most successful (Sheikh Sultan of Sharjah). It is also noteworthy that Ras al-Khaimah has ‘come into’ the federation more strongly through merging its previously independent telecommunications authority with the federal Emirtel. Small, and more neutral, Umm al-Quwain, Ajman and Fujairah, lacking oil, are really supported by federal money which in practice has meant Abu Dhabi money – and have only one route to follow. The External Threats Nearly two years have now passed since external threats to the UAE first began to appear. During the period these threats have grown, beginning with the slow, complicated and almost entirely non analysable revolution in Iran, which has led to a strange, inchoate and religious government. This could break up at any time and meanwhile is producing economic disaster; yet before it veers (most probably to the left) the Iranian revolution cannot fail to affect the Gulf states, if only through its religious aspect: there is a substantial Iranian population among the immigrants to the Gulf and a relatively strong Shi’ite minority. A second threat is not only the possible Russian reaction to Iranian pinpricks to

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the Soviet economy, but the Russo-Afghan crisis and still more the reaction of the USA thereto. A third, also involving the USA, is the ham-handed attempt to reconcile Egypt and a Begin-led Israel. The first threat has removed from the Gulf states the protective wing of the now dead Shah, which was never welcome (indeed Iran had seized some islands which the UAE claimed). It could produce internal difficulties and has already produced, not only in the UAE but throughout much of the Muslim world, a much harder attitude to the not infrequently ‘unacceptable’ face of the joy-making of Western capitalism. The second threat could produce anything from minor military problems to nuclear war. The third threat has hardened the UAE’s attitude to Egypt, even if not necessarily to the USA, and has involved some withdrawal of investments and certain stoppages of aid. One practical result of all this has been a steady increase in defence spending (though what the federation could do against an attack by Soviet airborne troops or seaborne tank divisions is perhaps a little open to doubt). Another development has been a keener eye on immigration reflected in a recent federal labour law (not, however, without balancing rights elements). Weaknesses in an Apparently Booming Economy It is impossible to avoid the conclusion that the economy of the UAE is mainly, fundamentally, based on oil and gas and that production or transformation of hydrocarbons remains the main activity. However rapidly the people take in each others’ washing, however much scanty indigenous materials have been developed into industries, it is recognised that none of this could have happened except for oil – save perhaps the entrepôt trade, though even this has been aided by improvement of facilities directly or indirectly related to the revenue flow. There is the usual sequence of money movement (and money-growth), supply/demand steps between the emergence of a small shop in Fujairah and a barrel of oil exported from Abu Dhabi or a ton of goods landed at Dubai and then re-exported. But the original generator of almost the entire economic activity of the federation is now the hydrocarbon output. Of course some emirates have no oil and therefore depend on federal funds, coupled in some cases with their own ingenuity (Sharjah and Ras al-Khaimah). Dubai, oil or not, would be a mercantile centre. In such a federation there is bound to be a certain imbalance in the individual economies. Moreover, the degree of this imbalance, of over-dependence on a main predominant base and of earlier too rapid expansion has shown up federally. Thus in its early days the federation seemed politically weak, with strong fissiparous tendencies. Now it

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is beginning to cohere at the political level but the economy is showing some warning, if not alarming, underlying trends. In part, of course, the UAE is a kind of collection of economies, with Dubai the predecessor of all as a self-supporting entity, and still the main business centre. Dubai was always the main town and port of the lower Gulf – although Sharjah, now running hard in a most enterprising way to stay in the same place, was also a town of long standing when Abu Dhabi was a mere village. Apart from these two centres, and ignoring Abu Dhabi’s oil boom (which has produced in two decades a large modern city in place of a small collection of mud-built houses), the economies of the remaining four emirates and their new buildings, roads, ports, industries etc., have all developed from the spread of federal money – which until very recently has meant Abu Dhabi money. Because mainly directed towards infrastructure, this process has amazingly altered the face of the northern part of the Ras Musandam Peninsula. Roads of a quality which would not disgrace the United States or the better served parts of Western Europe have opened up the entire area. Villages have been settled and improved by better water supplies, small power stations and schools. Order and discipline have been imposed by means ranging from the creation of police barracks to better administration. The citified Arab from the main towns on the west coast, or the innocent tourist, can drive almost to the heart of the Hajar mountains on high class tarmac with a cheery wave, rather than a possible bullet from the local inhabitants. The general effect of all this federal spending, and the partly self-generated supply/demand steps between the development of Dubai, Sharjah and indeed Ras al-Khaimah, has been, however, more a political factor than an economic one. It is of course economic in a limited sense but ‘social improvement’ would probably be a better term. To appreciate this, it is only necessary to consider what the position of a village in the middle of the Hajar would be if the whole of Abu Dhabi’s oil suddenly dried up or became unnecessary through some traumatic global discovery, particularly if this were accompanied, as it might be, by a sharp shrinkage in the trade, financial and commercial operations of the principal cities. Thus, weaknesses in the economy taken as a whole are very important and could both have political implications and override any economic advantages in individual states. Moreover, they are of paramount importance to the foreign, notably British, consultants and contractors who have done good business in the Northern Emirates in recent years. To take only one example, when you have designed and built three ports and several international airports only a few miles apart, what else can you reasonably do? The great housing, hotel and public building boom is already almost over, given completions.

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There are few local raw materials on which to base further industries, and import-substitution plants may be restrained by the size of the market. Even if the huge flow of oil money continues there must be a social limit (and here the effect of Islamic austerity could come into play) to the amount of conspicuous consumption. One ice rink in a hot city – OK; two ice rinks – possibly; three ice rinks where do we go from here? Exporters from Japan, the USA, Western Europe etc. still find the UAE a good market – rising, perhaps in real terms, and certainly in value total. But it must be remembered that even trade figures can be misleading. First, they are generally late. Secondly, they can include large items such as generators or equipment for a drydock which may be one-offs. Thirdly, the current strange surge in imports results mainly from deviation in the form of re-exports really intended for boycotted Iran In depth, there are four economic factors – or symptoms – which for the past few years have indicated that all is not really well with the UAE economy, despite the increased 1980 federal budget and other large budget, revenue and trade figures. The first problem is that the area is heavily over-banked – and this situation is exacerbated by the fact that while the federation’s institutions participate in boycotted foreign loans, there has also been drawn-in lending, notably to Dubai and Sharjah. Moreover, the unfortunate Currency Board has been supposed for years to be pregnant with the production of a central bank (which may now materialise). However, it has lacked the foreign exchange necessary for central banking control since most of the (predominant) Abu Dhabi oil revenues have been passed direct to that state’s investment institutions. The Board also had to suffer, in earlier years, legal and institutional constraints on its powers, and even a by-passing of its later regulation that no new banks should be established. Secondly, a construction boom developed in Abu Dhabi and Sharjah in the 1970’s (and to some extent still continues in Dubai), which resulted in whole streets of empty apartment blocks, financed by over-lending by smaller banks, and over-building of hotels throughout the emirates. Now some projects are slowed, some are built but unused and the main operating enterprises are not full, with a few being finished. Earlier construction work was often of such low quality that the apartment owner could recover his capital cost and his bank loan interest in three to four years while the building degenerated. These are not healthy symptoms. Thirdly, not only apartment, hotel and office construction, but the entire spending on physical, and social infrastructure went through a remarkable expansionary period in the middle years of the last decade. Between 1973 and 1976, public sector spending rose at an annual rate of 72 per cent. To quote an

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International Monetary Fund (IMF) survey, ‘during this expansionary phase, the UAE experienced serious inflation’. Though imports were rapidly drawn in, indeed virtually quadrupled, ‘the rate of monetary expansion far exceeded the rate of increase in the availability of goods and services’. This was the case particularly because of supply bottlenecks, resulting in an estimated annual inflation rate of about 25 per cent in the three years ended 1976 (some authorities have set the figure much higher). The Currency Board itself was not entirely innocent in this respect through permitting over-banking and easy credit. Fortunately, the government stabilised its spending growth and, in the summer of 1977, it enhanced the Currency Board’s powers. A moratorium was imposed on the opening of new banks (which has been by and large observed), and much tighter control was imposed on balance sheets and reserve requirements. The rise in bank credit to the private sector was also sharply reduced. As a result, the IMF reckons that the rate of monetary expansion slowed from an annual average of 73 per cent in 1974–76 to about 13 per cent in the three-year period ended 1979. This also led to a fall in the inflation rate to perhaps 15 per cent on an annual basis in 1979, partly because of the easing in port bottlenecks and the distribution system. To prevent dirham liquidity from being squeezed too much, Abu Dhabi in 1977 bought up most of the Currency Board’s foreign assets. Finally, the UAE has particularly suffered from the duplication of costly infrastructural or industrial projects. Fertiliser plants, perhaps even more important, petrochemical plants, can at the moment find a market even if duplicated, and form an important part of the political/psychological concept that the oil states should utilise their main raw material and not leave the transformation operation to Western countries to which the raw material is transported as crude or gas. But though the same concept applies, the economics of building offshore refineries are still doubtful except, for example, in Abu Dhabi, where ‘ADNOC’s expansion of its Umm al-Nar refinery alone is necessary because it cannot supply the product needs of the UAE, which thus have to be imported, involving a state subsidy. For the time being, also, aluminium plants can be duplicated within economic bounds. But a very large query must be written against the enormous expansion of ports, even airports, competing within a few miles of each other in the peninsula, dry-docks (Dubai’s huge enterprise lies empty) and iron and steel plants also need to be carefully thought out. It is locally argued that the creation of such enterprises has important social effects – training etc – and that this justifies the loss in the richer states (if you can spend money on an ice rink it would be better spent on dry-docks). Nevertheless, the trend towards

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duplication has attracted the attention of pan-Arab organisations and some steps are being taken to reduce it. The Currency Board, Banking and Money The federation’s currency is controlled by the UAE Currency Board, which exercises many of the functions of a central bank, such as control of banking institutions, interest rates etc. but which has not yet quite effected the full metamorphosis. Some of the reasons for this are given above. But another difficulty has been the time required to correct the antics of the earlier period when the Board seemed willing to release money too freely to over-expanded states and permitted an extraordinary expansion of local banking. This harmed the economy, especially since real business was concentrated in the hands of no more than a dozen out of the 52 banks now licensed (21 localIy incorporated, 31 foreign). Speculative real-estate financing and chronic over-banking were the most dangerous results and, in May 1977, there was a crisis of confidence which led to two banks actually being suspended by the Board. One of these, the Janata Bank of Bangladesh, re-opened after a Board rescue operation but the other, the locally-based Ajman-Arab Bank, remained closed until reconstituted in 1979 as the First Gulf Bank with new shareholders and Currency Board aid guaranteed by Sheikh Zayed. Meanwhile, the Board had, as noted, forbidden the creation of any new banks though its authority was by-passed by the establishment of two banks in Dubai. These operations resulted in much stiffer regulations and in changes in the Board’s personnel, notably the replacement of Ronald Scott, a UK expatriate, as its head. The new philosophy involved abandoning an attempt to produce an offshore banking system like that of the Offshore Banking Units (OBUs) of Bahrain through the medium of Restricted Licence Banks (RLBs). Twelve RLB’s were originally licensed by end-1977 but only five now operate (there has been, of course, a considerable proliferation of financial houses of other kinds – insurance companies etc). In fact the Currency Board bore the brunt of the over-expansion. It now aims at a strong push towards development into a central bank – and indeed the constituting law was signed in August 1980. A real-estate bank and perhaps an industrial development bank (to replace the enfeebled UAE Development Bank) are further targets. Meanwhile, a committee has been distributing funds from the Dh1 billion allocated for the purpose in the latest federal budget to liquidate part of the construction loans extended by, and now weakening, many banks. Though a certain amount of money is still syphoned off from Abu Dhabi through its Investment Authority while commercial banking is partly a mechanism for exporting local money, the Currency Board’s foreign assets are already rising. If

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the promise is kept that 50 per cent of oil revenues from oil producing states will be placed at the disposal of the federal budget, eventually through the Board or, rather, the proposed Central Bank (and if this and a real-estate bank are created) an important degree of balance will finally be achieved. Federal Finance Federal finance is important, estimated at US$9.03 billion – US$9.2 billion in 1977, US$8.6 billion in 1978 and US$12.8 billion in 1979. It should be noted that these figures are not accounting ones but a conversion of IMF totals for export trade in crude oil, slightly adjusted for Sharjah/gas and agreeing with Currency Board figures in 1978 but not precisely in 1977 and 1979. The IMF itself believes that, as against gross receipts, actual net revenues (a figure almost impossible to calculate for individual states) could have been US$7.81 billion in 1977, US$7.34 billion in 1978 and US$11.42 billion in 1979. The 1979 budget was balanced at Dh9,716 million but actual income was set beginning 1980 at Dh8,416 million, of which almost the whole – Dh8.2 billion – came from Abu Dhabi oil contributions, and perhaps Dh216 million from ministerial revenues. Expenditure was of course balanced in the original budget, with Dh7,818 million set against current spending, Dh1,154 million against development and Dh744 million against foreign investment and aid. In fact, according to the most recent Currency Board figures in its Statistical Supplement, actual spending totalled Dh8.43 billion, or somewhat more than previous estimates. Of this, current spending amounted to Dh7,366 million – the biggest outlays being on education (Dh864 million), health (Dh667 million) and electricity/water (Dh156 million). There was also an enormous outlay of more than Dh4.5 billion on defence plus the interior ministry. Development actuals shrank against hopes to Dh571 million on latest figures, including Dh148 million on education, Dh95 million on electricity/water, Dh82 million on housing etc and almost Dh80 million on health. Overseas participation and aid did not reach the budgeted figures but it now seems that as an actual this exceeded earlier ‘actual’ estimates, at about Dh493 million. If the budget pattern was followed, money under this category must have gone to the IMF, Arab Monetary Fund (AMF), the Currency Board, Arab Bank for Economic Development in Africa (BADEA), Inter-American Development Bank (IDB), Emirtel and pan-Arab semi-commercial operations, a curious mixture of true overseas aid and federal government. The 1980 budget was not only marked by a very large increase to a balanced Dh15,972 million (US$4.27 billion), the highest on record, but took up some outstanding semi-obligations as well as increasing defence. The hand of the new

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premier may be seen in this. Of the total revenues, only Dh205 million was expected to come from ministerial income, and the budget as a whole was 64 per cent up on that of 1979. No less than Dh12.3 billion was allocated to current expenditures, but this included the large sum of Dh4.5 billion for defence – Dh5.7 billion if the interior ministry is added. Over Dh1 billion was allocated to education and health respectively, as well as subsidies for petroleum products, increased pay for the armed forces and some power expenditure included in a large ‘general’ figure. Foreign investments appear to have risen in the 1980 budget to Dh1.769 billion. But this figure includes Dh1.0 billion for the settlement of real estate loans to local banks. Federal Development The UAE has survived as a federation for nearly 10 years. In this it is almost unique in the Arab world: in the last three decades Egypt-Libya-Sudan, Egypt-Yemen Arab Republic-Syria, and the short-lived pre-Qasim Jordan-Iraq conjunction, among others, have passed into the same limbo as the Churchillian 1940 concept of an Anglo-French community. The UAE’s success cannot merely be due to common fears and common interests since in fact there has been marked uneconomic competition between the emirates and external pressures are relatively recent. It might be suggested that the most important and the most subtle federalising influence exercised by Sheikh Zayed has been federally financed development, notably social development in the tiny villages of the interior enclaves of the smaller states. Like a well organised nationalisation of a major group of industries in a country run by a socialising government, economic and social interests have become so tied together, and so dependent on the one source, that disentanglement is virtually impossible. This may well be an example of economics overriding politics – and certainly it would now be difficult to cut the major federal roads in the peninsula into individual emirate pieces or indeed for most of the emirates to maintain them individually. This process whereby essential infrastructure in innumerable small populated points became enmeshed is reflected in the fact that certain vital functions have been federalised (police, though perhaps incompletely; the armed forces, though perhaps with hiccoughs; health, save for private enterprise operations; and, above all, education). This last is not only federal almost everywhere from the primary school level upwards but higher education is virtually centralised in the UAE University at Al-Ain. Though sometimes thought of as an Abu Dhabi institution, the university draws students from all the emirates including expatriate Arabs, while the passing of UAE students to overseas countries under generous scholarships is

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predominantly a federal operation. Hence the probable return of highly trained, federally aligned ‘national cadres’. Apart from the road system, further physical links are represented by such elements as water/irrigation/agriculture when federally planned; to a large extent security; and notably telecommunications, which are operated by the federal organisation Emirtel. General surveys of potential needs in regard to minerals, power and underground water are also frequently federal and inseparable state-wise. Hidden Elements in Trade: Reminders of the Past In the ‘old’ days, before oil – mattered and these days are not so old that they are not within the memory of even comparatively young citizens – virtually the whole imports for the now UAE came through Dubai. Dubai not only distributed goods to the other emirates but had an entrepôt trade serving Oman and Saudi Arabia, some of which continues. Dubai also sends substantial (still partly unrecorded) exports to the small ports on the Iranian Gulf coast. These activities were strongly supported by a trade in gold which was passed by various means to the gold-hungry Indian peninsula. The gold trade has now declined, but business with Iran is likely to rise following the European boycott, not only from Dubai but from other UAE states recently equipped with ports. Much of the re-export from Dubai in particular is, however, lost from the official statistics, though taken into account in the Currency Board‘s balance of payments. The Currency Board’s, and other statistical calculations, have tried hard to produce an all-UAE set of trade statistics but because of re-exports, these are not complete. Moreover, they have only recently included the trade of Sharjah. There is, in addition, some movement from Ras al-Khaimah etc, notably, again, re-exports to Iran. While the boycott prevails a merchant importing, say refrigerators, has only to double his requirements and send half on to minor Iranian ports. Dhows, which are particularly prolific in the Dubai creek (and a picturesque source for tourist photography), are the main means of such transport. Since the formation of the UAE, inter-emirate trade has been excluded from the total statistics. All emirates now have their own ports, and those at Sharjah, Abu Dhabi and Ras al-Khaimah are important; if, however, their imports are passed merely to other emirates, they are not counted as re-exports, though there are some genuine local exports from Ras al-Khaimah. Abu Dhabi Dealing with the UAE federation as a whole has to some extent also meant dealing with Abu Dhabi – and not just because it holds the federal capital or because the Ruler is President and the keenest of federalists. Discussion of the

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government system, the general economic commentary, even the budgetary notes have already given an impression of this emirate – not only the most striking example of an oil state in the UAE and the federal paymaster, but to a large extent setting the character of the others and thus the prototype of federal characteristics. But there are of course important local features too and, still more, some local facts which require separate, and indeed detailed, record. The Importance of Abu Dhabi Abu Dhabi is by far the largest of the emirates: out of the UAE’s total area it actually covers some 67,000 square km or about 80 per cent. Alas, much is infertile desert, with coastal salt flats. The coastline is 480km long, running from the base of the Qatar peninsula to the frontier of Dubai; and the offshore islands must be counted in if only because of their economic importance. The capital itself is on an island. Two adjacent islands, Saadiyat and Umm al-Nar, are rapidly becoming important industrial centres. Smaller islets far out at sea such as Das and Zirku are or will be major terminals. Population based on the accurate figure of December 1975 was 235,662, with about 128,000 in Abu Dhabi City proper (over 140,000 in the whole urban area) and nearly 60,000 in the Al-Ain oasis, 160km inland. This last, with its natural water supplies, and the oases of the Liwa (a line of villages in the interior) form the only real agricultural centres save for special operations near the capital. By end-1978 the total population was estimated for gross domestic production (GDP) purposes at 285,000, of which 187,000 in Abu Dhabi City and 72,700 in Al-Ain. The population today is probably around 300,000–350,000 of which more than half (possibly even a quarter of a million) are in the Abu Dhabi conurbation. As elsewhere in the Gulf, immigrant population is important: perhaps only 25 per cent of the total is indigenous, and much work is done by Palestinian and Indian officials, not to speak of immigrants from the poorer Arab (and indeed European) countries. Abu Dhabi’s power rests on its huge wealth, which it spends generously not only on local development, especially its own oil, but in supporting the federal budget and in aid. There are also some less overt operations such as guaranteeing loans to entrepreneurs in other states or, at one time, pressing the Currency Board to make helpful releases of funds. Yet there is so much money around that a large reserve has also been built up through the Abu Dhabi Investment Authority (ADIA) and its merchant bank, Abu Dhabi Investment Company (ADIC). The precise surplus is not revealed. The effect on GDP has, however, been carefully calculated. The 1978 total at current prices gave no less then US$31,502

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per capita, man, woman, child and immigrant on a then-estimated population of some 285,000. The Power of ADNOC Despite the financial power of the newly formed (end 1980) Central Bank of the United Arab Emirates and the aid dispensation mechanisms, the most important single entity in the state (besides the Ruler and his government) is probably the Abu Dhabi National Oil Company (ADNOC). ADNOC is rapidly reaching the stage where it can claim to be the most important national oil company in an oil-producing state in the world – with the possible exception of Algeria’s Sonatrach, from which the ADNOC management came. The state company is a large participant in current major oil and gas producing operations. It also controls a large onshore gas operation and oil-transformation industries which will surround this in the new industrial area of Ruwais, as well as all, save minor, offshore developing oil/gas fields. It is much concerned not only with these but with the development of general Ruwais infrastructure – so that it could almost be said that Ruwais = ADNOC and ADNOC = oil. The resemblance to Sonatrach is particularly noteworthy in the policy of surrounding ADNOC with a satellite group of predominantly state-owned oil-ancillary companies, but in this case with foreign expertise and subordinate shareholding added. The main difference between Sonatrach and ADNOC is that the former went for outright nationalisation in crude and basic gas production, possibly a reflection of political relations with France. Ruwais Apart from the basic Abu Dhabi oil and gas industry there is immense development of hydrocarbon based industries now occurring at Ruwais, the major industrial area sited in what was once a desert at the extreme west of Abu Dhabi, some 200km from the capital. The rationale behind Ruwais is the possession at once of onshore oil resources and much gas, and the capacity of the coastline at that point to provide a deepwater port. The Ruwais area is chiefly controlled by ADNOC. Its core project is a major US$1.6 billion LNG plant using onshore associated gas and handled by Abu Dhabi Gas Industries (GASCO). The plant could produce five million tons/year or more of LPG and natural gasolines, leaving a substantial dry gas availability. US$1.2 billion of the cost is being met by a loan from ADIA. Advance sales have been arranged for 1981. Construction management is by Bechtel and involves, of course, gas gathering and processing plants (Bechtel and Fluor), pipelines (Crest of the UK), a fractionation plant (Bechtel) and a loading jetty (Saipem).

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Many other contracts have been awarded for subsidiary activities and ancillary works. The situation has been somewhat confused by the fact that some infrastructure is being built on the basis that Ruwais will be a general industrial area – or, more immediately, quays for the import of material for the construction of roads, drainage, water etc, though these are interconnected not only with the plant but the planning management of the ‘infrastructure in general (Fluor), town planning and utilities. Thus there is a certain development towards a general industrial area, covering more than the requirements merely of the LNG plant (e.g. a completed Ramada Hotel, and (Sir) Alexander Gibb and Partners of the UK have designed, a general and dry bulk cargo terminal, CRS of Houston the town planning and Fichtner of West Germany a power plant). Of non-LNG activities the most important is probably the 120,000 barrels per day (bpd) refinery, which should be completed by SNAM-Progetti in 1981. An important fertiliser plant (originally envisaged as having Creusot Loire as project manager) will now be built as a US$300 million joint venture, two-thirds ADNOC, one-third Compagnie Française des Pétroles (CFP), to produce perhaps 1,000 tons/day ammonia and 1,500 tons/day urea from associated onshore gas. Prequalification of contractors has already begun, though it may take three years to build. A projected steel mill has been studied and is still possible. The total cost of all this development is almost incalculable. A fair guess might be US$20 billion by 1985. All the projects are extremely capital-intensive and the direct costs can be greatly increased if the original concept of a new 80,000 population city continues to be implemented, certainly producing a huge infrastructural bill – even if disentangled from the infrastructure directly related to the hydrocarbon projects. Figures available suggest that in particular more might have to be spent on power and water than has so far been indicated. The Social Infrastructure Development of social infrastructure in Abu Dhabi has been strong, perhaps in some fields too strong. These do not include education and health, the value of which can scarcely be over-stressed. Furthermore education and health costs are little reflected in Abu Dhabi’s development budget since they are financed out of the federal purse. In Abu Dhabi in 1977/78 there were 99 federal schools, 29,525 pupils and 2,525 teachers. Though strictly speaking it is a federal project, it should also be noted that a fine new UAE university is being built at Al-Ain, advised by an Oxford team, which started operations in 1977. The picture of current health facilities is complicated by the rapidity and immense scale of new developments. In earlier (though recent) days Abu Dhabi possessed a 600-bed general hospital (750 beds by 1978), the so-called Corniche

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Maternity Hospital of 100 beds, and 220 hospital beds at Al-Ain. But there was a great expansion in 1978, when two 320-bed hospitals were completed, designed by Gibb of the UK and built by Polensky and Zollner of West Germany. The first, known as Al-Jazeerah Hospital, is an addition to the Abu Dhabi general hospital, while the second is military. The Corniche Hospital is now being extended to 150 beds. A new 500-bed hospital is under construction at Mafraq. The current capacity figure is thus difficult to assess, allowing for the time required for construction, fitting out, management contracts, staffing and general completion. But it must be very much larger than the 1,448 hospital beds and 448 doctors/dentists effective at end 1978. These developments present at least much less of a social/economic query than the rapid expansion of, for example, hotels. There is now an over-supply at least of luxury-class hotel rooms – though little, if any, reduction in luxury-class prices. In 1977 the UAE Statistical Abstract showed eight principal hotels in Abu Dhabi, with 964 rooms, or 1,966 beds. The number of beds rose to 2,358 in 1978, though capacity utilisation fell from 90 per cent in 1976 (visitors might have thought it was over 100 per cent) to 80 per cent in 1978. Important high-class hotels which have existed for some time include the Abu Dhabi Hilton of 176 rooms, the Khalidiya Palace Hotel of 122 rooms, the Al-Ain Palace (a family hotel in Abu Dhabi town) of 104 rooms, and the Omar Khayyam of 100 rooms. There is also a Hilton at Al-Ain of 100 rooms. A Ramada Hotel of some 200 rooms near the airport, opened in 1977,was transferred as regards ownership, along with the two Hiltons, in spring 1978 to the Abu Dhabi National Hotels Co (35 per cent state-owned), which now also owns the 250-room Meridien opened in spring 1979 and the Sheraton of 300 rooms opened in September 1979. It will also effectively own a major InterContinental Hotel (750 rooms) at the end of the corniche near the federal city, which should be complete in 1981, as well as a Gulf Hotel of 340 rooms near the Ramada (which is likely however, to end up as something other than a hotel). An InterContinental Hotel of 265 rooms is also being built at Al-Ain, but a further 422-rooms hotel to be financed by the somewhat moribund UAE Development Bank seems, sensibly, a ‘frozen’ project. However, a Holiday Inn of 288 rooms, locally owned with the aid of a euroloan, is already complete, and there is of course the 200-room Ramada at Jebel Dhanna forming part of the Ruwais development. Except for this last, the conclusion cannot be avoided that Abu Dhabi, like Dubai, may soon be over-provided with hotel accommodation – though the vast oil developments may produce a greater stream of visitors than in other emirates. Another doubtful proposition is the continued construction of public

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buildings, housing and office blocks. To say that this has been enormous is misleading, since it suggests expansion from an existing urban base, whereas Abu Dhabi as a city has been built in less than two decades from a village capital, and much of the early rapid construction was not good enough and has had to be replaced. Within this context, housing development is substantial and many public buildings have been, or are being constructed, including the ‘Federal City’ and the new Currency Board building, occupied in December 1978. Other new and important emirate/federal buildings created or intended are those for the department of finance (July 1978), the Municipality (Abu Dhabi), the National Assembly (design already awarded to White Young of the UK), the federal ministry of foreign affairs (design stage), the information ministry (federal, to be built), new Amiri courts, a new local Chamber of Commerce (planned), prisons, a theatre, a national library (effectively complete) and a new AMF building (in hand), plus rebuilding of the sea-wall of the fine Corniche (completion 1981), and numerous other planned federal/emirate constructions. Many bank headquarters and office complexes have also been built, coupled with a massive development of apartment blocks – some of which still stand empty. In the mid-1970’s there was an almost unbridled property boom, producing whole streets of empty apartments. Nevertheless, this does not mean that the government has been wrong in allocating large contracts for state financed low-cost housing (which is obviously not the same thing). At one time, it was said that many thousands of apartments were empty in the city; and it is not likely that many more such-blocks will be completed (except to replace those that fall down, the earlier ones having been as noted, in the main rather badly built). What all this means is that, except for the completion of public buildings and the erection of a few more, and some infrastructural developments, the city is no longer a contractor’s paradise. General Development Spending As has already been made clear, Abu Dhabi’s development expenditure in recent years is somewhat confused with that of the federation as a whole, for the simple reason that Abu Dhabi has traditionally financed the federation’s budget. However, Abu Dhabi had its own development plan for the five-year period 1968–72 totalling some Dh3 billion, which followed the important change of Sheikh Zayed’s accession [in 1971], after which allocation for development spending within the emirate rose from virtually zero to about Dh870 million in the 1972 budget estimates. This last point alone will show that the five year plan quickly became obsolete; it was followed by a three-year plan that was intended to come into effect during 1977 and that provided for an estimated Dh34 billion expenditure.

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If the former plan was superseded, the second, conversely, was frozen, mainly because over-expansion and a sort of recession were becoming evident, and partly because policy on oil production and immigration tended to fluctuate. Hence the government announced that there would be no new development projects in 1978 or 1979, this being not actually a cut-back, since many unfinished projects remained to be completed. Moreover, despite the enormous activity, the development expenditures budgeted for 1976 and 1977 were implemented only to an extent somewhat exceeding two thirds. A new plan has since been developed. Other Industrial Development, Physical Infrastructure In a state as wealthy as the UAE, economic duplications can be locally acceptable, if apparently excessive in a world context. It is not surprising, therefore, that Abu Dhabi is not only expanding its local refinery but has invested considerably in an entirely new industrial area near the capital at Musafah (itself a replacement of a previous local industrial area) and, still more, in large power and water operations which have no economic connection with Ruwais. As regards industry, for example, the projected Ruwais steel mill must not be confused with a small steel rolling mill local to the city, still less a probable plant to produce spiral-welded steel pipe. A compost fertiliser plant was opened in 1976 and a plant making paper bags for cement was opened in 1977. A sizeable brick factory already operates at Al-Ain, where there is also a successful cement plant – opened in June 1976 on a 200,000 tons/year level and by mid-1980 due to reach a capacity of 750,000 tons/year. For a time there was a query against the flour mill and silos completed in 1978 at Abu Dhabi’s port, but it seems that these too are now sufficiently successful to permit expansion. There are numerous projects which should emerge from the 1979 establishment of a General Industries Corporation (GIC) (which excludes oil/ADNOC and thus effectively Ruwais operations save for the possible iron and steel plant). Takeovers by the GIC include the cement, brick and paper-bag plants and the small steel mill. The organisation is responsible for general industrial plans, the development of state industry and its operation, and the encouragement of private enterprise. Because of the lack of natural water except at Al-Ain, desalination, associated with power and sewerage is vital. The water distribution/sewerage systems at Abu Dhabi City and Al-Ain are relatively simple to note. Large contracts are in hand and the water systems are connected by a pipeline, being built by a joint venture including Bovis, with Binnie of the UK as consultants. Work is neither small nor cheap and depends, of course, partly on the natural resources of

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the Al-Ain oasis but now very considerably on the large desalination capacity connected with a whole series of power stations on Umm al-Nar Island near Abu Dhabi City (power at inland Al-Ain, though also under constant development, obviously does not imply desalination). Details of size, arrangement, consultants and contractors would be confusing, but the Umm al-Nar development though built somewhat out of the planned order, comprises a major station, with desalination, at Umm al-Nar West and another ‘interim’ station at Umm al-Nar East, almost completed in mid-1980, both of which are being expanded. A huge 1,500 mw plant is even contemplated. These supplement the already substantial power/distillation facilities which now supply Abu Dhabi City. Important and costly distribution systems are in hand, including not only power but a pipeline compiex (e.g. to islands) other than the main Abu-Dhabi–Al-Ain link. Further important physical infrastructure has been created in the form of a first class port, designed by Sir Alexander Gibb and Partners of the UK and built in stages to a total of 21 berths, including specialised facilities (two ro-ro, two container). Further expansion (e.g. to the originally planned 29 berths – the latest was only five as against a planned 13) would reflect an over-optimistic approach as against the recent US$29 million improvement of handling facilities, since the port seems adequate for the amount of trade, given, for example, Dubai’s commercial pre-eminence and the many competing ports now built. In the growth of any new city, there must come a time of slowing up once most of the essential infrastructure has been built; and save for the completion of projects in hand, trimmings, re-building of bad work and rectification of planning errors, this is perhaps the case with Abu Dhabi. Further port expansion, for example, has been postponed. Total trade has risen in value terms; but from 1975 to 1977 there was little increase in real terms and even a volume fall from 1,558 million tons in 1976 to 1.437 million tons in 1977. There was a rise to a figure reported as 2.6 million tons in 1979 – which seems high and may, therefore, have included country craft; whatever the actual figure, the port clearly handled it without overcrowding or-noticeable waiting time. Perhaps the Mina Zayed port has reached a kind of balance point in the light of economic conditions. But this is not the case, in practice if not in theory, in regard to aviation or road development, both of which are still in the throes of a remarkable physical expansion. Travellers will know that Abu Dhabi has for many years possessed a good international airport, set in a pleasantly improved environment but short on passenger handling facilities. Now, apart from a civil airport being designed by Scott Wilson Kirkpatrick and Partners and other UK consultants at Al-Ain, a

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large new airport is well advanced, although a good deal further (36km) from the capital’s centre than the present one but, equally, more splendid. Aéroport de Paris is handling the design and the Cypriot firm of Joannou and Paraskevaides, which deserves credit for providing many excellent roads in the UAE peninsula, has been the main civil contractor as well as building the, 19km dual carriageway access link. Other French, Japanese, Finnish and British companies are handling the power complex, terminal, communications etc. The big new complex should start operations in 1981, with the terminal effectively complete, and eventually include a US$150 million maintenance base for the regional airline, Gulf Air. The old airport may become military. Telecommunications, as elsewhere in the UAE, are run by Emirtel and are excellent. To those who prefer to drive themselves throughout the UAE, not only the fine new roads in unexpected areas in the north but the extensive road pattern in Abu Dhabi state are a boon. The vehicle park, concentrated in the two cities, is surprisingly larger than that in urban Dubai but minor by Western standards, and the capital, laid out on a positively Roman grid, with almost every street a dual carriageway and ample parking, might seem a motorist’s paradise in Genoa, Paris, London or even Tehran. But the Abu Dhabi citizen does not like delays, and in 1980 the US consultants, De Leuw Cather, were contracted to create a 10-year transport improvement programme in the capital. This is not a small operation since new roads, new interchanges and intersections (eliminating roundabouts) and other improvements will cost in all US$1.5 billion. But the most remarkable development has been the long-distance road construction. Where only a decade or so ago there were little more than tracks, Abu Dhabi now has links of high quality to every important centre in the region and indeed a long stretch of a direct road to Europe – which extends northwards right through to the north of Ras al-Khaimah. Trucks from London can now if necessary reach Ras al-Khaimah’s northern frontier, if not always easily because of bureaucratic complications en route, at least rapidly and without breaking an axle. The key point is not Abu Dhabi City itself but a previously virtually non-existent place called Mafraq on the mainland some distance from the original bridge link with Abu Dhabi island – which is now also the centre of a major hospital, a central sewerage treatment plant and some other developments. As with the village of Tarif, location here appears to be all-important; and on the map, Mafraq, where a major road interchange/flyover complex has been built, is now the midpoint of a star where the dual-carriageway road from Abu Dhabi to Dubai (and thence northwards) via the older Muqtaa bridge (now paralleled

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by a second at Musafah, leading to the Abu Dhabi-Al-Ain road) projects two important offshoots. One of these leads to the Al-Ain road (now to be three lanes each way), and the other to the western extension of the great trans-Gulf highway which runs from Mafraq first to Tarif, thence to Jebel Dhanna, and thereafter to the base of the Qatar peninsula, effectively completing the entire European link. There are of course other completed links not entirely in Abu Dhabi state e.g. the fine trans-peninsular road from Sharjah to Fujairah, which joins the excellent Dibba–Khor Fakkan–Fujairah–Kalba–Muscat east coast road; a link from Al-Ain to Dubai; an excellent road running from Ras al-Khaimah to Musafah on the Sharjah-Fujairah transverse; a modern road through the mountain gorge country from Musafah northwards to Dibba; an asphalted road from Al-Ain to Sohar on the Al-Batinah coast where it joins the main coastal highway north of Muscat; and a road running from Al-Ain via Ibri to Nizwa in Oman to join the road from the Omani interior to Muscat. Entirely within Abu Dhabi proper, a surfaced road now runs south from Tarif to the interior Liwa. A map will make this linkage clear and show how easy it now is to drive (provided licence regulations are observed), from one centre and one of the many emirate enclaves to another especially since some of the highways are of almost racetrack standard and many are, or soon will be, dual-carriageways (notably Abu Dhabi to Ras al-Khaimah; the trans-peninsular road; parts of the east coast road; and the great western highway at least as far as Jebel Dhanna). Agriculture Sheikh Zayed’s heart is in Al-Ain, of which he was governor for many years while his older brother, Sheikh Shakhbut, was exercising his over-cautious control as ruler, tucking away the earlier oil revenues in cash (a process, some environmentalists or adherents to the old way of life would say, not quite so unwise as seemed at the time). Total agricultural holdings and output are not large but at least not minute. The principal producing areas are on the ingenious Arid Land Research Centre on Saadiyat Island, the Liwa string of small oases deep in the south west desert and, above all, the major Al-Ain (Buraimi) oasis, where a well-watered city has grown up. Here dairy, poultry, pilot development, vegetable and other special farms are being developed, and work is likely on a plastic-covered system of vegetable production. It must be realised that in between these areas there is little or nothing save the seasonal herbage which sustains some wandering camels (as much a traffic hazard as an asset) and occasional bedu flocks of sheep and goats. The Ruler is

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trying to fill up some of the spaces with arid land forestry, for which sizeable sums are allocated at intervals. 1977 figures, which are perhaps still the most specific, show a fish catch of over 4,000 tons, a domestic animal population of about 113,000 and no fewer than 324,000 fruit bearing trees, mostly, of course, date palms. But apart from appearance of fresh vegetables on the Abu Dhabi market, the most important development has possibly been the improvement of the environment, not just in Al-Ain but in Abu Dhabi itself (where it cannot fail to strike the regular visitor), whereby parks and gardens have appeared and the main streets are now graced with flowers, trees and flowering shrubs. Psychologically, this is a major factor. Actual expenditure by the emirate government on agriculture is not in fact an important element in the development budget, and agriculture and fishing is still the smallest element in the GDP. Income and Outlay, Finance and the Budget What is the total income and outlay of Abu Dhabi? The question is difficult to answer because of the enormous preponderance of oil revenues and their immense size, which has given the emirate its peculiar position within the UAE. Local development expenditure, too, has been often large but fluctuating, partly because of the notorious paradox that it is sometimes easier to earn large sums than to spend them quickly in a useful way. Aid dispensation has been large but to some extent imponderable. At least no-one will quarrel with the absolute statement that the principal source of Abu Dhabi’s income is oil – still, despite development and greater sophistication, the major element in the GDP and a complete dominant in state finance. A proportion of this revenue is earned directly from those oil companies which still retain a production ‘shareholding’ or operate alone, and this is paid direct to the department of finance. A large share (usually 60 per cent) of production is, however, attributable to ADNOC, which also pays royalty and tax to the department. ADNOC itself sells its production share, some to the original concessionaire companies, now partners, some directly. In theory at least, any excess of ADNOC profit on this and its direct or satellite operations over expenditure, current and capital, including loan interest and repayment, also goes to the finance department: and the latter’s excess, after meeting the local current and development budget expenditure and contributing directly to the federal budget and aid, is transferred to the ADIA. ADIA in turn, is advised by international bankers and holds Abu Dhabi reserves – which could be US$8–9 billion upwards or indeed more, bringing in annual interest of perhaps now US$1 billion. ADIA is the dominant shareholder in the investment company Abu Dhabi Investment Co (ADIC) and the National Bank of Abu

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Dhabi, which are its merchant and commercial banking arms. In accounting terms as early as 1974, Abu Dhabi made Dh13.7 billion from net oil revenues (97 per cent of a total revenue of Dh14.1 billion). This flowed out as follows: Dh4.7 billion current expenditure; Dh1 billion development; and Dh1.2 billion capital payments including aid, leaving a nice surplus of Dh7.2 billion. In 1975 the emirate earned Dh14.4 billion net from oil (95.8 per cent of total receipts of Dh15.0 billion) and spent Dh6.5 billion on current expenditure, Dh2.25 billion development and Dh2.7 billion on capital payments and aid, leaving another large surplus of Dh3.6 billion. In 1976 net oil revenues were almost Dh19 billion or 96.4 per cent of the Dh19.7 billion revenues. Current expenditure in 1976 (but remember the federal element) was Dh9.5 billion, development expenditure was Dh3 billion and capital payments were Dh7.36 billion. This was the year in which capital payments were allocated for the purchase of the Currency Board’s foreign holdings and in fact there was a tiny deficit. In 1977 net oil revenues were Dh20.8 billion or 96 per cent of total revenues of.Dh21.7 billion, and current expenditure (again qualified by the federal element) was Dh11.4 billion, development expenditure was Dh3.85 billion, and capital payments (again including both aid and some transfers to reserve) were Dh6.1 billion, leaving a small surplus. 1978’s net oil revenues were Dh17.76 billion or 87.6 per cent of all revenues. Other revenues rose because of grants by the Ruler (possibly from his four per cent share of oil receipts). Current spending, again obviously including the federal provision, was Dh12.4 billion in 1978, development spending Dh5.47 billion, and capital payments, including a small transfer to reserve, Dh1.96 billion. On the accounting system, there was a surplus of Dh456.8 million. In 1979, the Currency Board valued Abu Dhabi’s crude oil exports at Dh42.25 billion. The Great Aid Dispenser If Abu Dhabi is an exemplar of conspicuous wealth, the state, or Sheikh Zayed and his advisers, also show a strong conscience in respect of aid dispensation. Aid distribution is, quite literally, phenomenal. Apart from its almost entire support until 1980 of the federal budget – from which in turn substantial participation in international fundings and aid emerged – Abu Dhabi gave over Dh4 billion, i.e. over 20 per cent of its total income in 1978 to aid assistance and participations. This was also about 20 per cent of the GNP; so if Abu Dhabi is rich in revenues, it cannot be said that it is not trying to assist the needy in a manner far exceeding that of the industrialised countries. Direct foreign grants and capital payments, both loans and participations, according to the Currency Board, may even have been almost as much as 25 per cent of Abu Dhabi’s oil revenues in 1971-1976, with a peak outflow in 1973 at the

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time of the Arab-Israeli war, when about 40 per cent of oil revenues were thought to have been dispensed abroad. Excluding the federal budget, but remembering the possible overlap, local grants, loans and participations have been given as totalling Dh4,811 min 1975 (out of Dh15 billion revenues), Dh5,010 million in 1976, (out of Dh19.7 billion revenues), Dh4,422 million in 1977 (out of Dh21.5-21.7 billion revenues) and Dh4,203 million in 1978 (out of Dh19.3 billion revenues). The most significant individual dispenser of aid is the Abu Dhabi Fund for Arab Economic Development (ADFAED), the state’s bilateral lending agency and an important member of the major group of bilateral funds sited in the Arab world. Like the other agencies, ADFAED is deeply concerned with economic implications in its beneficiaries. It assesses its loans on, effectively, World Bank criteria, and is one of the intellectual and aid peaks in the Arab scene. Formed in 1971, it has a capital of Dh2 billion (over US$500 million), and its scope has been extended not only to Arab but other Third World or Islamic countries. It is unusual in having a tripartite operation in the Sudan combining ADFAED finance, local provision and British Overseas Development Agency (ODA) expertise. Loan commitments to end-1979 were Dh2.9 billion (US$775 million), but the fund also managed some direct government loans. Interest rates are low and grace periods long. The programme has been aligned to production-oriented projects (hence a loan of over US$170 million to Oman for oilfield development, and US$59 million lent to Tunisia, following earlier loans, for phosphate fertiliser production). Transport is also an important sector besides industry, followed by water improvement. ADFAED and other Arab funds often co-operate in joint financing of important projects; and the largest recipients are the Arab states and Africa, followed by East Asia. Abu Dhabi is also the headquarters of the important pan-Arab AMF. Banking and Investment Within the expansion of banks in the UAE, Abu Dhabi has been no laggard. Though possessing fewer locally incorporated banks than Dubai these, notably the National Bank of Dubai, are perhaps more active in participating in Eurobond issues, and the slant is perhaps more outward-bound. At end 1979 there were 37 banks operating in the emirate (26 foreign, 11 incorporated in the UAE, of which five locally incorporated), with 95 branches – a more than adequate number, it might be thought – for a population estimated at 300,000-350,000. The oldest (1968) and most important local bank is the National Bank of Abu Dhabi, which has a wide network of branches elsewhere. It is claimed to be the

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largest bank in the UAE with total assets of almost Dh14 billion even at end 1978, and has recently established an internationally operative subsidiary in the shape of the Abu Dhabi International Bank, registered in Curaçao. It plays a sizeable role in Eurobond issues. During 1979 the bank was wholly UAE-owned and 70.1 per cent held by ADIA. A good deal of government money passes through it, thus it is not entirely inaccurate to describe it as ADIA’s commercial arm. An important recent arrival has been Arab Bank for Investment and Foreign Trade ABIFT which, unusually, includes participation by the Libyan Arab Foreign Bank and the Banque Extérieure d’Algérie and, like the National Bank, plunged quickly into Eurobond issues and has had its capital raised. Among other local banks may be noted the Khalij Commercial Bank, which in mid-1979 issued the first certificates of deposit (COS) in the UAE and continues this activity. Abu Dhabi has for some years been the site of the UAE Development Bank, in theory a federal operation and in practice, for somewhat obscure reasons, moribund. It was originally intended to provide soft loans for UAE citizens and corporate bodies for the development of real estate, agriculture, light industry etc, and indeed financed some projects. It also had the power to take up equity holdings. Perhaps the real-estate element was a mistake; at any rate, this seems to be a vanishing bank and could be replaced not only by the potential real-estate bank but by an industrial bank – a project that has been discussed for years but in mid-1980 was still uncertain in regard to its final ownership and constitutional position. There are upwards of 30 insurance companies operating in Abu Dhabi alone, plus a number of investment, money broking and finance house facilities. The most important local investment institution is the Abu Dhabi Investment Company (ADIC), to a large extent the merchant banking arm of ADIA. This has been remarkably active since its inception in 1977, entering the Eurobond market not only as a participant but a lead manager and co-manager in issues so numerous as to resemble the major Kuwaiti investment companies. It is in fact owned 60 per cent by ADIA, with another ten per cent by the National Bank. Another investment institution is the National Company for Investment in Real Estate, which is 15 per cent ADIA and 10 per cent the Ruler. Abu Dhabi’s Foreign Trade Trade in Abu Dhabi forms only part of the general foreign trade of the UAE – in which Dubai is the master operator. As remarked in a recent article in an official publication, Abu Dhabi is still providing ‘good business, but not boom’. Mainly because of the importance of the port, coupled with the steady development of mercantile expertise in the emirate as distinct from Dubai’s built-in

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mercantile capacity, plus liberal banking credits, a large construction flow and the big oil and infrastructural developments, Abu Dhabi’s import trade – which was once almost a nothing (Dh353 million even in 1970) has risen in value fairly steadily from the Dh2,266 million of 1974 to its present level despite a temporary recession effect. Inflation, Ruwais, and the completion of other infrastructural projects have raised imports to a high figure. Main categories of imports are usually machinery/transport equipment (Dh3.735 billion 1978), classified manufactured goods (Dh1.164 billion 1978), food and live animals (Dh464 million 1978), miscellaneous manufactured items (Dh4S1 million 1978), petroleum products (Dh220 million 1978) and chemicals (Dh151 billion 1978). The leaders in the suppliers league have for some years been Japan (17.4 per cent 1978, 16.8 per cent 1979), West Germany (16.7 per cent with the second place in 1978 but falling to fourth position, 11.3 per cent in 1979), and the USA and UK (virtually equal third and fourth at 12.8 per cent and 12.7 per cent in 1978, though the UK was previously a leader). In 1979 the USA moved up to second place with 15.6 per cent and the UK to a close third with 15.1 per cent. Indeed, the first four suppliers seem merely in recent years to have shuffled positions, with West Germany falling back in 1979 to the place it occupied in 1976 and the UK recovering, so that the first three 1979 providers were very close indeed. After the Boom is Over: Some Notes on Regulations The emirate’s trade/contrasting regulations have become more complicated in recent years. Perhaps it would be too harsh to say that, as elsewhere in the Arabian Peninsula, they are designed to give the maximum local advantage combined with a minimum rake-off by the foreign constructor or exporter. After all, the latter have done pretty well in the past, and the local businessman might riposte that without his country’s money, the particular export or major construction work would not have occurred at all. These two-edged and potentially unpopular remarks must be softened by the fact that both the local and foreign ends of the joint operation have, for a good many years, made substantial profits – though in some cases, mainly on the Western side, disasters have occurred through initial misjudgements or over-pressure by the recipients. Regulations have continued to tighten and become more favourable everywhere to the inhabitants of the states who hold the money. The boom is over, but the (very modest) recession in the UAE has merely contributed to this tightening – and also does not mean that there are no more contracts to be signed or no more demand for sophisticated goods. The main conclusion from the point of view of the European Economic Community (EEC), US or Japanese exporters/contractors is simply that they must

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now treat the area as a hard-nosed market, as they would each other, stick by the tightening rules and do a good job at a fair price. The developing regulations in Abu Dhabi, though confusing and not always definite, illustrate this conclusion. The emirate originally had few formal regulations, whether on trade or the establishment of an industry. Nor indeed was there a coherent body of federal commercial legislation, though general rules applied to such points as quarantine of imported livestock and control of pharmaceuticals. The need for a licence for importers and foreign enterprises was general in the federation – as were also the complete freedom from exchange control or inter-emirate customs duties. But in Abu Dhabi in particular the local rules have gradually tightened and, also, become somewhat confusing. On such minor points as the import of pharmaceuticals, controlled by the federal ministry of health, the ban on pig products, and regulations on food labelling, the position is relatively clear – as also in the matter of customs duties which are, in Abu Dhabi excluding imports from other emirates, one or two per cent on imports and re-exports but nil on a wide range of foreign imports such as foodstuffs, machinery and plant etc. The exemption may well cover about half total imports. There is a small transit charge. But there are two important basic requirements. First, all firms exporting to Abu Dhabi must soon have a local agent. This has been for some time an absolute in regard to exporters to the oil industry and government departments, and has been highly desirable even for consumer products sold in retail shops. In spring 1980 an edict was issued that all local firms should register their agencies within three months from 1 March. Previously the minimum definition of an agent was a company which held an Abu Dhabi trade licence, and this could be held by a foreign firm with an office in the emirate (possessing a UAE sponsor who simply took part of the profits, or, a joint venture with a 51 per cent Abu Dhabi shareholding). Now it seems almost certain that, by the end of a grace period on 28 February 1981, exporters, even of consumer goods to the private sector, will require an agent and that the latter will have to hold a licence, only to be granted to 100 per cent UAE companies. In Abu Dhabi there is a strong tendency to consider this expression as referring to wholly Abu Dhabi companies rather than, say, Dubai operators; but federal legislation may ensure that the requirement applies to UAE ownership as a whole. Secondly, foreign contractors must always have an Abu Dhabi partner for oil work and, generally, state contracts, with a guarantee system on top. The emirate is not therefore a complete free paradise for the contracting industry and a joint venture with a local firm is highly desirable even for private work.

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If the foregoing seems confusing, so is the situation: at least, also, the repatriation of capital and profits is unrestricted, professional companies (consultants etc) do not actually need a local representative/partner and taxation is minimal; while import agents and contracting partners, if sometimes literally ‘sleeping’, can be useful in solving local problems. Dubai For most foreign businessmen, Dubai is the magnet of the UAE, large, sophisticated, efficient and experienced in business, and bustling. Its capital city – really the twin towns of Deira and Dubai proper on the north and south sides of a creek respectively – has long existed. And historically, the deep and long (12km) creek has helped to produce a major entrepôt trade, a re-export of goods not only to the interior but to Iran and, in the shape of gold – now perhaps less important – to the Indian subcontinent. There is, as a result, a high calibre of mercantile expertise which makes Dubai the Kuwait of the lower Gulf. Some would indeed say that it is more sophisticated than Kuwait (though not, surely, as regards its money market). Local businessmen are unusually efficient and enterprising (and almost automatically rich). But on the one hand, the business efficiency still depends, indeed more than in Kuwait, very much on the expensive import of high-class Western expatriates – and this does not necessarily mean Western Arab and the less expensive but invaluable labour of Indian clerks and artisans. It has been said that only 20 per cent of the population is in fact indigenous. Secondly, the great decision which the Ruler – as is his wont, without a public trumpeting of policy – made at some time in the past to change Dubai from a merely mercantile centre to a huge industrial base, with large ports supplying both, has yet to be proved in practice. And, thirdly, Dubai must still depend economically partly on its established trade and partly on the huge gamble on industry – and the latter is financed only in part by its medium-grade oil revenues and in large part depends on the international borrowing which many banks hastened at one stage to proffer. The Government, and Some Data These rather sour comments give, for those who have not visited Dubai, a more pessimistic view of the state of the nation than may be justified. Certainly the main word for Dubai is still ‘efficiency’ and the main corollary profit; and the state is run effectively, by a shrewd and able Ruler in the shape of Sheikh Rashid. His ultimate and powerful control is exercised through several state departments, but these have been kept to the minimum in number and personnel (mainly Finance/Customs and Ruler’s Affairs), although he has accepted the

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headquarters of related federal activities such as Public Works, and may well be producing a great change – or at least a drawing together – in the federal operation by his acceptance of the premiership in 1979. Apart from the departments noted, the main power centre is the Dubai Municipality, run by the Dubai Municipal Council – the nearest thing to a local parliament, which since 1980 has had 32 members headed by the Ruler’s son Sheikh Hamdan, with the able Kamal Hamza as Director. This body has, among other things, the power of levying taxes on rentals or rental values, somewhat equivalent to rates in the UK, and thus is important not only as a forum or development agency but because it enjoys a budget of its own. Early steps by Sheikh Hamdan to reduce, taxes in 1980 were naturally widely welcomed. Minimal Agriculture The indigenous inhabitants of Dubai are more at home with cashbooks than cows. Agriculture is minimal despite the comparative size of the country and the existence of a natural piped fresh water supply (now being heavily supplemented by distillation plants, while, unusually for the area, a proper sewerage system operates). Such items as edible oil hydrogenation and dairy reconstitution plants of course fall under industry rather than agriculture. True, there is an extended fishing/small craft port at Hamriyyah, but the agriculture/fishing sector is unimportant. Even the Municipality, though there have been obvious efforts, seems to have devoted less attention to ‘greenery’ than, say, Abu Dhabi or adjacent Sharjah – though a scheme is in hand to use 1.5 m, rising to 5 million gallons per day of treated sewage effluent for this purpose. What has already been achieved environmentally may well be masked for the visitor (who can also be distracted by the picturesque nature of the dhow-packed creek) by the crowding of huge new buildings, the pouring traffic and the general bustle. Dubious Edifices In fact, the general construction of huge buildings has already reached in every sense a high point (there seems to be almost a prestige race in the straining towards record building heights or internal luxury) and more are under completion. One commentator has even said that Dubai has more ‘dubious edifices’ than any other state in the Gulf. The over-building of ordinary apartment and office blocks is perhaps more visible in Abu Dhabi or Sharjah, no doubt partly owing to the skill of Dubai’s businessmen in making almost anything work. The city is nevertheless remarkable for the large number of luxury hotels opened or in hand and the many multi-purpose commercial centres under constructio, one of which alone would probably serve a similar sized city in the West.

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Some of the construction work is obviously valuable – the development of schools, for example, which is partly federal but includes an important private school, Al-Ittihad. Also important are the high class health provisions which started with the opening of the 400-bed Rashid Central Hospital in 1973, followed by phased extensions designed by John R Harris of the UK, the original architects. A central medical complex has been built, and a further major 638-bed hospital, again designed by Harris, is effectively complete. Work has begun on a maternity and paediatric hospital, and other developments include the 100-bed Jumeirah Mental Hospital (federal), also Harris, a private 100-bed hospital etc. The most remarkable development – and some might query them – have been in the fields of hotels and multipurpose centres. Of the latter, a feature more of Dubai than of other emirates, a whole group has already arisen. One of the first of these (of course state) has, though spectacular, a specific purpose: this is the important international trade and exhibition centre on the Abu Dhabi road, designed by Harris and built by Bernard Sunley of the UK, which includes a 39-storey main tower, said to be the highest in the Middle East, a Hilton Hotel and a range of apartment blocks. Other developments, normally private and excluding useful multi-storey car parks, include the Satwa residential/commercial complex, opened mid-1979; the Al-Ghurair centre, luxurious for a shopping/commercial/residential complex and well sited in mid-Deira; the Al-Mulla Centre on the Dubai-Sharjah road; the Deira Tower (architects Hart, contractors al-Naboodah-Laing) in central Deira, topped out in 1978 at 28 storeys; the spectacular Galadari Galleria complex on the Corniche on the Deira side of the creek, which reaches 32 storeys and includes the Hyatt Regency Hotel; the InterContinental Plaza of Galadari Brothers which is in effect an extension of the InterContinental Hotel; and the Rostamani twin-tower complex on the Abu Dhabi road. Oil: Helpful but not Everything Dubai is certainly a factor, not unimportant, in all-UAE oil production. But the producing emirates are very different. Apart from Abu Dhabi only Dubai can truly be said to be a proper oil/gas producer: Sharjah is a featherweight, and the other emirates live on hopes. Nor is Dubai itself an archetypal oil state, having generated prosperity and even built its original infrastructure before oil was discovered in the offshore Fateh Field, followed by South West Fateh, with production beginning in 1969. These fields are gradually declining and total flow is now being boosted by production from the more recent, mainly condensate, Rashid oilfield and the

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later Falah, as well as gas drilling on account of DUGAS. Thus though reserves remain reasonably large and crude production moderate, the latter is falling gently (354,000bpd in 1979). Dubai Petroleum Company (DPC Conoco) is the operator (and 30 per cent shareholder) through the Dubai Producing Group, but the largest interest is held by the original concessionaire Dubai Marine Areas (DUMA), now 50-50 Compagnie Française des Pétroles (CFP) and Hispanoil. Three other companies are partners. However, a fairly recent, but somewhat indefinite takeover by the state means that the producing concessionaire group works under a service contract. By an autumn 1979 agreement, it could re-acquire, after completion of a specified work programme, exploration and production rights covering an offshore area of over 30,000 acres. Meanwhile, apart from an apparent Sedco/Houston failure, the only ‘live’ exploration at mid-1980 was the allocation to Atlantic Richfield of an onshore concession which, it is hoped, will be successful than Sedco’s, which covered both an onshore and an offshore area. Oil is always a complex subject, involving both factual detail and analysis, but in the Middle East it is also fundamental. Three further points may therefore be made. First, the supply of gas for Dubai’s huge new industrial area at Jebel Ali involves both the offshore fields and other possible sources. Second, Dubai’s strongly commercial character is particularly evident in the fact that in mid-1979, the state informed the crude production operators that it would take part of the output itself for direct marketing (or, perhaps, at least as long as spot sales were profitable). The operators were given the right to buy back some of this proportion at a high-ish price, and actually exercised this during the last half of 1979 before the spot market began to decline. But this mercantilist approach implies that the state should accept, as well as enjoy, the advantages of free sale – and by mid-1980 – there was at least a ‘mini-glut’ despite heavy stocking-up, sharply affecting the marginal spot market. Thirdly, it is somewhat surprising that Dubai has not built its own refinery: its own demand – and through Dubai, that of the Northern Emirates – for products is so large that this is one of the main import categories in the state’s trade: nor can needs be supplied by ADNOC’s small refinery in Abu Dhabi. Hence the troubles over shortage of petrol in particular, the quite recent signs ‘sorry, no petrol’ on Dubai’s pumps and the eventual ‘soft sell’ by the federal government in its large product subsidies. The shortage was due to specific local factors; but it is impossible to avoid a certain ironic comparison with the 1979 petrol queues in the USA and Western Europe. However in the light of ADNOC‘s projected expansion of its own refinery, and the near-completion of its main Ruwais refinery, the time for refinery construction at Jebel Ali is now probably past.

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Finance and Development The character of Dubai is to some extent the character of Sheikh Rashid through the grip he exercises by personal decision on almost every major change. Particularly noteworthy are his skilful use of foreign credit for development, his ability to inspire support from hard-headed foreign lenders, and his capacity as an entrepreneur. In line with the Ruler’s philosophy and outlook, Dubai has never issued a development plan nor an officially published budget. It would be misleading here to give too many estimated figures, but it is generally thought that foreign loans received totalled about US$2.7 billion before end-l979. As regards oil income, the Currency Board gave Dubai receipts in trade terms at Dh6.60 billion in 1978 (US$1.7 billion) and an estimated Dh9.76 billion or US$2.6 billion in 1979. Actual net revenues may have been somewhat smaller, especially in the later year. Industry and Infrastructure: Thinking Big The industrial area of Jebel Ali, close to Dubai City on the Abu Dhabi road, is not Dubai and Dubai is not Jebel Ali. But the concept is of immense importance for the future of the emirate, enormously expensive and, above all, enormously large. Travellers who have seen the initial operations must have been astounded by the size of even the port work, representing one of the biggest holes in the ground ever made, as well as impressed by the frenetic activity and the fact that the main Abu Dhabi-Dubai road has had to be diverted and even provided with flyovers not only to accommodate the eventual development but to permit the passage of the almost endless stream of trucks involved in the construction operation. Since the projected steel plant seems to have been shelved, the main works at Jebel Ali are the large 66-berth port, the Dubai aluminium smelter and the DUGAS LPG plant, though an power station for use in the state generally is completed, and the area has already attracted two cement plants and many other industries. It has not, however, produced the new city envisaged by its original imaginative planning, and this may not be built since there is so much empty accommodation in the Dubai/Deira urban complex. A Well-Banked State The UAE is over-banked. Whether this is true specifically of Dubai, where finance operations flourish in relatively open freedom in the lee of trade and development spending, cannot precisely be determined, at least statistically since the Currency Board subsumes into one group (the ‘Dubai sector’) all the indicator figures for banking not only in Dubai but Sharjah and the three smaller emirates – figures which might otherwise have given a picture of local liquidity, the credit/deposit ratio, the sectoral extension of credit etc.

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Dubai is not so obedient to the Board’s behest as, say. Abu Dhabi, though moreso than some other emirates (having, perhaps, a more solid position to reveal); and at least on one occasion it locally founded two banks during the ‘new bank’ moratorium of the Currency Board which, retrospectively, the Board was obliged to accept. Certainly Dubai has a great many banks. At the end of 1979 43 different banks operated, with 118 branches in a city of perhaps a quarter of a million people. Twenty-seven of these were foreign but 16 were UAE incorporated, and of these latter, nine were incorporated in Dubai and wholly or partly locally-owned. Important, and the oldest (1963), is the National Bank of Dubai, and others include the Commercial Bank of Dubai (in which Chase Manhattan, Commerzbank of Dusseldorf and the Commercial Bank of Kuwait hold altogether 70 per cent), the Dubai Bank (Galadari Brothers with foreign participation e.g. Credit Suisse), the big and new Union Bank (Abdul-Wahab Galadari of the Galadari Galleria centre, 50 per cent Rostamani, Saudi Finance Corporation, etc) and the Emirates National Bank and Bank of Oman (both controlled by the al-Ghurair family – the latter having Bank of America management and despite its name no Omani base). Partly because there is a substantial local alignment in loans and credits, the banking sector participates only slightly in Eurobond operations. But Dubai is a great hive of other financial activities, ranging from finance houses through merchant banking, discount houses, investment dealers and money brokers to a reported total of some 40 insurance companies. The Dubai Union (Federal) Investment Co, 31 per cent state, 10 per cent local founders, 50 per cent local public, was formed in 1977 with the large capital of Dh1,000 million. A further investment company is being launched. Trade In 1979, Dubai’s imports took a sharp upward turn of about 31.7 per cent to Dh16,737 million.This was a marked rise in real terms, even allowing for world inflation, but was affected statistically by a change in the treatment of mineral fuels (or products). The make-up was much as usual, save that mineral fuels rose higher in the league. Of the suppliers, Japan remained the leader with a somewhat modified proportion of 17.9 per cent with the UK hard on its heels at 16.1 per cent, followed by the USA with 10.5 per cent. If an allowance be made for inflation, the mineral fuel change and the effective operation of their own ports by states previously supplied by Dubai, the boost is less impressive than appears. Exports/re-exports also rose rather sharply in 1979, even in recorded terms, in fact virtually doubling at Dh2,253 million – of which Dh237 million actually

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represented exports of local origin, reflecting industrialisation. The residual Dh2,0l6mn re-export was, if authority estimates are correct, nothing like the real re-export total (notably in the second half of the year, when Iran became particularly important), which could be estimated at 30 per cent of the Dh16,737 million in imports. If Iran continues its policy of official non-import of anything involving Western technology or a Western type of life-style, there is no reason why Dubai’s import trade should not continue to rise, partly in line with hidden re-exports. Dubai customs duty is three per cent for items entering by sea and air, save for some exceptions, and transit duty is two per cent, again with exemptions. Alcohol imports are heavily taxed, and indeed sale since end May 1979 has been prohibited in restaurants and all save eight hotels, while licences for private consumption have been restricted. Generally foreign companies can trade and open branches freely, though a local sponsor is required unless there is half local participation. Foreigners cannot acquire land. Sharjah: Imaginative, but Unlucky Sharjah is probably, the most imaginative state in the UAE, its Ruler as kind and gentle as the gazelles in his garden, much of its modern architecture of a higher quality than elsewhere in the Peninsula, and its whole ambience such as to make it a pleasant place in which to live. Yet it is only now reviving from what was a near catastrophe in its development phase, and although prosperity is returning, the state may never reach the heights to which it once aspired. This is partly because the economy of a city, sizeable by any standards, has been based mainly on invisibles (plus a physical advantage of position in regard to transport), partly because invisibles have a habit of living up to their name, however imaginative the concept, partly because of a decline in oil support and partly because of the emirate’s over-close proximity to powerful Dubai. Like its big neighbour, Sharjah has existed for a long time and was an early entrepôt , indeed a stopping point on the old Imperial Airways route to India; as well as a base for some RAF hot and reluctant heroes during the war. But the entrepot trade faded with the silting up of the creek, Rulers became less enterprising, the RAF withdrew, and aircraft now have a range which eliminates Sharjah unless there is actual traffic. Hence, when Sheikh Sultan took over in 1971 it was necessary to develop a new strategy if the state was to expand and prosper. Not by any means the smallest in area (2,590 square km), and one of, the largest emirates in regard to population (over 80,000 December 1975, now probably well over 100,000), it possessed some natural resources: small agricultural areas around Dhaid; – and the positional advantage of having two coastal strips including the main city on the west coast of the Ras Musandam Peninsula

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and a potential deep-water port at Khor Fakkan on the eastern side, that is, outside the narrow and overcrowded Hormuz Strait. Two Routes to Development Sharjah therefore chose two routes to development – apart, of course, from what could be afforded in normal expansion of ‘physical infrastructure and the creation of some industry. The first was an ingenious multi-modal transport system based on the positional advantage and the second, more ‘invisible’, the creation of a financial centre accompanied by high class recreational facilities. No doubt, both were to some extent based on the idea that the offshore Mubarak field, discovered in 1972 by Buttes Gas & Oil Company, working through Crescent Petroleum as operator and producing since 1974, would provide a large income. In fact, though the field reached over 38,000bpd production in 1975 there has since been an alarming fall to a low level of both production and reserves. Some other possibilities may emerge, but meanwhile, the oil income cannot be large, especially since it is supposedly shared (in theory) 50 per cent with Iran and 15 per cent with Umm al-Quwain. Thus a good deal of the state’s development financing has had to come from banks, helpful Currency Board deposits, private investment and Eurodollar loans, including US$200 million in 1978 backed by Sheikh Zayed. The multi-modal transport concept has gone ahead and shows signs of prospering. At Sharjah City, Mina Khalid (or Sharjahport) has been built to a total of at least eight berths including container, ro-ro and reefer), while a two-berth container pier with other facilities has been completed at Khor Fakkan and is managed by the Jeddah company MTI (Alireza interests). These points, using the positional advantages and hence the by-passing of the Strait of Hormuz, are strengthened not only by the high class transverse road but also by a new international airport sited on the cross-road, specialised for cargo and thus permitting a complicated movement of containers between the three points and beyond. Khor Fakkan is still only gathering traffic but Mina Khalid landings are substantial and total imports were valued at Dh2.16 billion in 1979, no doubt substantially re-exported. The second element in the development strategy – as a financial and recreation centre – may not have been so successful. The magnificent new 800-shop suq, designed by the British architects White Young and surely one of the most fantastic and beautiful modem buildings in the Middle East, now operates. However, the potentially splendid Spanish-designed Boorj Avenue office/residential blocks surrounding a square in the centre of the city has been somewhat slow in attracting banking, insurance, consultancy etc occupants. There are many streets of comfortable villas with attractive gardens on the outskirts

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of the city. Recreational facilities, centring on the development of the lagoon, are nearing completion with the luxury Marbella Club opened, as well as luxury villas and a hotel at Khor Fakkan. At least one hospital and numerous schools of course already operate. Flyovers have been built in the city to relieve traffic congestion but these do not appear to be among the most attractive architectural conceptions. Finance and Industry All this, on the one hand, has produced a fairly substantial financial sector, and on the other has required further infrastructure. Very large power, water and drainage facilities have been in hand, while, conversely, there are 29 banks operating in the emirate of which eight were UAE incorporated and 21 of foreign ownership at end-1979, with a total of 58 operating branches. Four of the UAE-incorporated banks are locally owned, though all with some external participation: the Bank of Sharjah; the National Bank of Sharjah; the United Arab Bank; and the Investment Bank for Trade and Finance. There is a locally owned insurance company. Numerous investment companies exist, some with Kuwaiti interests and many local industries. The 220,000 tons/year cement plant, a polypropylene rope plant and a cement-bag plant were taken over in 1979 by the Sharjah Cement and Industrial Development Company, which also has Kuwaiti interests. Other industries include the production of oxygen etc, terrazzo tiles, steel building components and sanitary ware Customs duties are minimal Ras al-Khaimah Ras al-Khaimah is one of the most interesting emirates – and also, of course, the fourth largest both in extent, nearly 1,700 square km, and population, which was over 57,000 even at the December 1975 census and may now approach 70,000. It probably has a much larger indigenous proportion than most of the rest. If some of the smaller emirates have rather negative characteristics, while Abu Dhabi is a special case, Ras al-Khaimah at least resembles Dubai and Sharjah in its unusual and enterprising character. Yet new visitors to the Gulf, who have been told that the state is a paradise of greenery as compared to the others, may be disappointed: the scenery is spectacular and there is a genuine agricultural resource, but this last should not be expected to show anything comparable to the Thames or Loire valleys, let alone the vivid green of Indonesia. But the state at least has relatively substantial agricultural holdings, including even rain-fed, and considerable irrigated cultivation helped by springs from underground water in the nearby Hajar mountains.

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The sizeable palm groves and fruit, vegetable and livestock development, especially round the experimental station and agricultural college at Digdagga, just south-east of the capital, do indeed present a striking contrast to the barren peaks which lie behind and the endless monotonous yellow-brown of most of the other emirates. The current dairy farm should, by end-1982, have been absorbed and developed by the Livestock Breeding Company, a subsidiary of the Arab Company for the Development of Animal Resources; and as part of its effort to maintain the water table, the federal Ministry of Agriculture intends to build a dam, supervised by the US Bureau of Land Reclamation, within the emirate (and a parallel construction in Fujairah). Meanwhile, a large poultry farm has been created, aided by a loan from the Industrial Bank of Kuwait. Actually Ras al-Khaimah was an early recipient of technical aid in this field (from the UK) and, when smaller, was self-sufficient. No doubt its agricultural production will always be small on a world scale; but it will almost certainly remain the UAE’s principal agricultural producer and even develop on these lines. A House Built on Sand? But also Rock Built on sand is of course a true enough description of the actual physical base of most of the buildings in the twin-town capital of Ras al-Khaimah and Al-Nakhil (on the other side of the creek – the two may be joined by a federal bridge) and also some elements in an economy which is difficult to describe because of contrasting features. Some development has been loosely based (a traumatic disappointment was the early closure of a fishmeal plant, started in early 1977, which stopped for the very simple reason that there was not enough fish). More generally, up to 1977 this independent minded state intended to develop both housing and hotel/tourism accommodation on a substantial scale. Despite drawings on the Currency Board estimated at as much as Dh1.1 billion, and total borrowings of perhaps as much as US$0.5 billion., and the hope, because of its resources, of the creation of a self-sustaining viable economy, the emirate was particularly hit by the comparative recession of 1977–79, which might have been cushioned by closer federalism. It may now be partly rectifying its financial position, and has abandoned its costly independence in such fields as telecommunications, which it ran itself with its own satellite station, and is likely to be federally aided in its substantial locally financed power development. Particularly noteworthy for the visitor are the groups of unfinished houses, including high-class housing sited between the twin towns, and the fact that only the long established Ras al-Khaimah Hotel in the same area, run by the important Lebanese firm of Albert Abela, is actually operative, while work has

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stopped on the InterContinental Hotel and, at last sight, the completed Bin Majid Landmark was standing empty. Moreover, education, health etc are steadily becoming federalised (e.g. the 307-bed Saqr Hospital was only completed in June 1980, after long delays, because the federal ministry took over the project). The Importance of Rock Rock, then, seems still, as usual, a solid base, and it is rock which has really created the quite important industrial sector and, indirectly, the expensive port. Ras al-Khaimah is fortunate in having large and readily available supplies of sulphur-free rock, the use of which started many years ago by its supply for the construction of Abu Dhabi port, when a small quay was built at Khor Khuwair, north of the capital. If the phrase may be permitted, this quay was the key; on the one hand, it made possible the siting of the state’s first big industry, the 250,000 tons/year cement plant of the Union Cement Co (initially 25 per cent Abu Dhabi, 75 per cent Ras al-Khaimah), which produced such high-quality cement that its capacity was doubled and then doubled again to 3,000 tons/day (over one million tons/year, completed mid-1979). Moreover, the Ras al-Khaimah Rock Co was given a new lease of life in regard to direct rock and aggregate export by a large contract for Saudi Arabia’s huge new port at Jubail, and other rock exports have been handled by the Stevin Groep working on Dubai’s Jebel Ali development. These operations have attracted many ancillaries such as contractors’ plants, tile and cement-block production etc, including the plants of Raymond International (USA) making large concrete structures and cylindrical piles, while a McDermott plant rolling steel pipe has been sited at al-Nakhil. A commercial explosives factory (French, Ras al-Khaimah and Dubai) and a pharmaceuticals plant (the latter with Dibba) at Digdagga have also been established. A further pharmaceutical plant is planned. Meanwhile, two more major developments have occurred in the rock field – the first being the opening, also near Khor Khuwair, of a Lebanese-owned lime factory (Noora), which began production in spring 1979 aided by foreign loans. The second major recent development is the Gulf Cement Co, now building a second plant, to be completed mid-1981 with production destined for Kuwait, which has shown a strong financial interest in the emirate. A further result of the original rock sale/quay construction has been the building of a large port at Khor Khuwair, which now includes five conventional berths (one rock/aggregate etc), two container berths and roll-on/roll-off facilities. The Iranian crisis has probably improved the trading prospects, though

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the pleasing international airport, completed in 1976, has still not attracted much traffic. As noted earlier, there are first class road connections both to the west coast emirates and through Masafi and the Sharjah-Fujairah trans-peninsular highway, to the east coast of the peninsula. Oil Disappointments For years it has been considered that Ras al-Khaimah is a potential oil state, though it has always been claimed that the development process is being carried out as though this possibility were merely a bonus. In fact, Ras al-Khaimah oil has provided one of the major disappointments among all Middle East hopes. Details of the varying concession holdings are unnecessary. The main point is that a consortium originally led by the Dutch company Vitol, operating on behalf of the local Ras al-Khaimah Oil Company (involving foreign loan financing), actually struck a 4,000bpd offshore well in mid-1976; but though a follow-up was successful, a third well proved dry. In fact, what seemed to be a good field shrivelled away, the offshore consortium concession expired, and the main hope now lies with onshore work by Gulf and Amoco near the hot springs at Khatt south-east of the capital. This consortium also holds rights in territorial waters up to five miles offshore (incorrect reports of strikes have appeared), and Gulf and a Canadian company have a further offshore concession. A careful feasibility study has been made of a potential 100,000bpd refinery using Kuwaiti crude, but the position is now obscure. Far more than the fishmeal plant collapse, these events have been traumatic since success could have meant a glorious future for the emirate, given its already hard-won development and its actual other resources. Not a Financial Centre Twenty-three banks operated in Ras al-Khaimah at end-1979, but only two were locally established and owned. Of these the National Bank of Ras al-Khaimah is managed by Hill Samuel and has participated in loans. Claims on, i.e. credit extended to, the government represented an important part of, the consolidated bank balance sheet against minimal government deposits, according to separated Currency Board figures (also included in the Board’s ‘Dubai sector’ total), a sign of continuing state financial dependency. An investment company is being established. There is practically no import duty (two per cent, and transit duty is one per cent). Ajman and Umm al-Quwain Any visitor, at a glance, will recognise that Ajman and Umm al-Quwain are really very small towns – with a few agricultural enclaves inland. Of their recent

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development, which can only be described as rather messy, much is due to the two factors of the dependence of becoming ‘dormitory towns’ for the Sharjah Dubai conurbation, with something of a recent decline. Both have developed infrastructure by improving their creeks to provide small but quite usable ports, and both have gone for the construction of housing, even blocks of flats and some business centres. But in both cases the infrastructure is really provided by federal funds e.g. power development, especially in Ajman. Ajman: Enterprising However, Ajman, though basically a small onshore area ,with a population between 20,000 and 35,000 and minimal agriculture, has been in many ways remarkably enterprising. An attempt at a fishmeal plant, in conjunction with a Peruvian corporation, was suspended owing to the small catch. Quite a large industry has been developed in the shape of Arab Heavy Industries (AHI), a dry dock/ship repair/steel-fabrication yard with state, other UAE and Japanese participation, which has actually been successful though a loan has been refinanced. There are also some small industries (including the UK bedding producer Silentnight and an important photographic laboratory). Moreover, Ajman’s small interior areas have provided raw material for a marble/terrazzo tile exploitation with Cypriot participation and the bottling of a very successful mineral water (Gulfa), aided by Evian, which is sold as far away as the hotels of Kuwait. There is also a local insurance company. Some years ago, also, Ajman attempted to create a local bank, the Ajman Arab Bank, which unfortunately collapsed – but was replaced with new participation in September 1979 by the First Gulf Bank, which has enjoyed aid from the Currency Board, guaranteed by Sheikh Zayed, and appears to be prospering. Many other banks (13) operate in the small state but none is local; and expansion must still depend to a considerable extent on federal expenditure e.g. on a new power station (water supply is natural) and of course education and the like, as well as such items as a loan backed by Abu Dhabi and housing help from Sheikh Rashid. No commercial oil has been found but Forman/Lasmo now hold an offshore concession (1978), and more recently, Reynolds Diversified plus Australian interests. Umm al-Quwain Like Ajman, Umm al-Quwain is essentially a minor enclave on the coast of the Gulf north of Sharjah. It has a coastal strip of some 30km and extends inland about 50km (total area about 177 square km). Like its area, its population, which could be estimated at about 20,000 or a little more, is equivalent to that

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of a small town/parish in the eastern USA, the UK or France, but without the usual surrounding heavy agricultural support. Earlier visitors may consider that the previously picturesque appearance of the capital has been lost with its partial development as a dormitory town. Certainly some housing and the like has been built, though federal funds have actually provided for schools, police stations and roads. The federation has also recently financed a sizeable power station and must play a part in the development of a commercial poultry farm and an asbestos plant as well as the substantial port improvement. In the past Umm al-Quwain depended mainly on some trade to minor Iranian ports, fishing and agriculture. But though the port has been improved (and could benefit from diversion of trade to boycotted Iran), the actual agriculture is small. There are 12 bank branches in Umm al-Quwain, though none are local. The most potentially useful Umm al-Quwain aspects concern oil – and both have a melancholy tinge. First, by an agreement with Sharjah, the Umm al-Quwain government has had a 15 per cent share in the revenue from Sharjah’s offshore Mubarak field (i.e. 30 per cent of the half of the revenues which were not supposed to go to Iran). But the decline of this field (ignoring any complicated financial operations), can hardly have improved Umm al-Quwain’s position. Secondly, Umm al-Quwain offshore oil concessionaires, led by Canadian Superior Oil and Zapata Exploration, also of Canada, discovered gas in 1976, and an agreement was actually signed with DUGAS of Dubai which was expected to spend a substantial sum on development in order to ensure off-take. Unfortunately, further drilling of Umm al-Quwain had non-commercial results, the agreement was dropped and Dubai will get any extra gas elsewhere, while it seems that even Umm al-Quwain’s offshore concession has died. There is, however, a Houston/Deutsche Texaco concession onshore Fujairah Fujairah is the only emirate entirely situated on the east coast of the Ras Musandam Peninsula, i.e. the opposite side of the Hajar mountains from the urbanised west coast, except for Sharjah’s offshoots. A jigsaw puzzle on the political map, it really comprises territories running westward from the coastal town of Fujairah itself and south-westwards through interesting mountain gorges from Dibba in the north. Total area and population are small (1,165 square km, and perhaps a population of just over 30,000 now, but something over 20,000 at December 1975). Hence, though a recognisable economy, Fujairah, like the other smaller

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emirates, must be considered as equivalent to something rather parochial in USA or Western European terms. Making the Most of Natural Advantages However, the emirate possesses some natural advantages, notably its picturesque mountains and fine coastal strip, even though agricultural production is small, if partly commercial. It also has a young and intelligent Ruler who, although enterprising, is not addicted to frenzied uneconomic development. Hence discovery of some ore has not been much followed up; but tourism, for which local beauty and quietude provide a rationale, has been pursued, e.g. through the Fujairah Hilton Hotel. The Ruler has accepted individual aid from Sheikh Rashid in the construction of a fishing harbour, and of course federal aid regarding the usual roads, education, minor power and other facilities. A hospital has been on-and-off for some years. There are bank branches (14) but no locally financed banks. There is only one insurance company, and only small local industries have been established (marble, mineral water, shoes). The main developments – or queries – lie against the projected establishment of a large port at Fujairah itself (unless this can become an oil bypass to the Hormuz Straits). It is also expected that a major cement plant (520,000 tons/year) will be established by the Gulf Cement Co, in which Abu Dhabi, the Islamic Development Bank and the Gulf Financial Centre will hold shares. Offshore oil concessions have been awarded, with several changes, resulting in the present activity of Reserve Oil and Gas (Getty), Denison Mines and Mitsubishi.

1982 Federation, not Unity – Imbalance, Over-dependence on Oil – After-effects of Construction Boom – Economics Override Politics – Hospitals, and a University – Economic Duplication – Abu Dhabi Calls the Shots – Dubai’s Mercantile Expertise – Stately Sharjah – Rocky Ras al-Khaimah – Ajman’s Marbles – Umm al-Quwain: More than a Dormitory – Fujairah: Natural Advantages

The United Arab Emirates federation was founded in 1971. Two years later a massive rise in oil prices hurtled it into a ‘big projects’ era as its infrastructure developed rapidly. Then in 1977 the economy cooled and many people wondered what the future had in store. But in the past two years the emirates have proved their development has by no means petered out. The UAE is flourishing again but this time in a steadier, more measured manner. In 10 years the federation has gone through centuries of change, and it has been forced to mature quickly. Initially, many felt that the bonding together of the seven separate states would not last. In fact, the cohesion between the emirates has strengthened and they now appear set for their renascence. But things certainly looked different in 1971. At that time the businessman looking for a secure base would have been far more tempted to cross the Gulf to Iran. After all, until commercial production of oil from the Murban field began in late 1963, the area was one of the poorest in the Middle East. Moreover, there are even today only three really successful partners in the federation: Abu Dhabi, Dubai, and Sharjah were the trio that uncovered viable oil reserves. Which means that the other four – Fujairah, Ajman, Umm al-Quwain and Ras al-Khaimah – have to rely on an ‘allowance’ from the others. And this has to be spent sensibly. Most oil money comes from Abu Dhabi, which, as the emirates’ capital, takes its responsibilities seriously. It is certainly disinclined to bail out any of the poorer emirates that use federation funds too ambitiously. Naturally, this imbalance of wealth has caused tensions but perhaps the greatest strain has been the natural rivalry between Abu Dhabi and Dubai. Abu Dhabi is austere and rather conventional, while Dubai is far more liberal in spirit, in keeping perhaps with its past as a busy trading post and smuggling centre. Nevertheless, despite rivalries, personality clashes and a tremendous pace of development, integration has continued.

© koninklijke brill nv, leiden, ���9 | doi:�0.��63/9789004408�65 _008

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The emirates have now moved towards integrating many governmental functions, including the establishment of federal water, agricultural and defence policies, forming a central bank and creating a civil service to serve the whole UAE. On top of this, what were formerly dirt tracks have now been turned into roads that are of international standard; free medical care is available to everyone; industry has been propped up with generous federal subsidies; and targets have been set to take electricity and education to the emirates’ remotest corners. Work is also going on to build up an industrial base that will allow the UAE to continue to thrive even when the oil runs out, which could be within 30 to 45 years at present production levels. Third Largest Oil Producer The war between Iran and Iraq which broke out in September 1980 made the UAE the Middle East’s third biggest oil producer after Saudi Arabia and Libya respectively. Abu Dhabi was producing 1,195,000 barrels a day; Dubai, 354,000 barrels; Sharjah 9,000 barrels. Together, it was expected that sales would produce a revenue in 1981 of more than £21,000 million. This forecast was based on the official selling price, so the eventual figure could be a lot more because Dubai and Sharjah sell at spot prices. Much of Abu Dhabi’s capacity has, however, been frozen for conservation reasons. In the summer of 1980 it was producing 1,275,000 barrels a day and before that the figure was 1,355,000. However, it was hoped that extra capacity would come on stream in 1981 from the off-shore Upper Zakum field. It has been estimated that initial output will be 300,000 barrels a day rising eventually to 500,000 barrels. Last year the price of turning on this tap had risen to £2,500 million, well above the original costing. Despite its careful husbandry, Abu Dhabi has not insisted on high prices and has remained a moderate at the Organisation of the Petroleum Exporting Countries (OPEC) meetings. Dubai and Sharjah, though, follow their own noses: oil policies are still considered a matter for individual emirates to decide themselves. Abu Dhabi did make one exception to its new ruling last year, when, on a temporary basis, it allowed an extra 50,000 barrels a day to be produced for France to help compensate for losses brought about by the Gulf war. Over the next five years the Abu Dhabi National Oil Company (ADNOC) has plans to spend a massive £4,000 million to finance further oil and gas exploration and to increase investment in downstream industry. The company is possibly the most important single entity in the UAE and is rapidly reaching the stage where it could claim to be the most important national oil company in an oil-producing state ill the world – with the possible exception of Algeria’s Sonatrach, which supplied ADNOC with its management. The company is a

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large participant in current major oil and gas-producing operations. It also controls a large offshore gas plant and oil-transformation industries at the new US$20 billion industrial area of Ruwais, in the west of the UAE, which was due for completion at the end of last year. Until Ruwais comes fully on stream the UAE will have to continue to import 80 per cent of its refined-product needs. That is why it is one of ADNOC’s priorities to double the 120,000-barrels-a-day refinery at the complex. The cost of that alone will be £300 million. The core of the Ruwais project is a £1.6 billion natural gas liquids (NGL) plant using onshore associated gas and handled by Abu Dhabi Gas Industries (GASCO). The plant could produce 5 million tons a year or more of LPG and natural gasolines, leaving a substantial dry-gas availability as well. The third part of the scheme is a £150 million fertiliser plant, which, it is hoped, will produce 1,000 tons a day of ammonia and 1,500 tons a day of urea from associated onshore gas. Eventually, the plan is for Ruwais to become a general industrialised area. The original master plan, drawn up by a firm of US consultants, envisaged a town of about 80,000 people. However, many of the projects originally conceived have proved uneconomic on closer examination or have been duplicated elsewhere in the region. Present plans now provide for an eventual population of 20,000. Dubai is not an archetypal oil state, having generated prosperity and even built its original infrastructure before oil was discovered in the offshore Fateh field, followed by south-west Fateh, with production beginning in 1969. Supplies from these fields are now dwindling, and total flow is being boosted by production from the more recent, mainly condensate, Rashid field (named after the ruler) and the later Fateh field. One disappointment for Dubai was the recent failure by Sedco, of Houston, USA, to find oil in an offshore area at Jebel Aid. Now hopes are being pinned on two other companies that have expressed an interest in the area. They are Atlantic Richfield, which has signed a geophysical studies agreement, and the British National Oil Company, whose interest has not yet been specified. The real success of 1981 belonged to Sharjah. In December 1980, Amoco, part of the US giant Standard Oil, announced an offshore discovery that could eventually yield 80,000 barrels a day. The company said at the time that it was prepared to invest whatever it cost to bring the field on stream. Although the field is small by Abu Dhabi standards, it would provide a great rejuvenation for Sharjah’s comparatively limp economy. The UAE also believes that it could have the biggest gas reserves in the Gulf. Work in this area has proceeded at a more leisurely pace than oil exploration

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because the price of gas is still relatively low. Once again, Abu Dhabi is in the forefront, especially with a deep-drilling programme, which, in 1979, unearthed a large accumulation in the Khuff formation with a discovery well testing at 80 million cubic feet a day of quality gas with a 90 per cent methane content. The well was at Umm Shaif, and another dug in the Zakum field, also in the Khuff formation, yielded oil as well. Onshore, a well was last year being dug at Bab to test again the Khuff formation. The target was a depth of 22,000 feet, which would make it one of the deepest ever drilled in the Middle East. The Abu Dhabi Gas Industries programme is now expected to be fully operational, with a capacity for 1,230,000 tonnes a year of propane, 1,410.0 tonnes a year of butane and 2,110,000 tonnes a year of gasoline. The GASCO project teams up ADNOC with Compagnie Francaise des Petroles, Shell and the Gulbenkian interest Partax. And the project was helped along with loan finance granted by the Abu Dhabi Investment Authority. ADNOC is likely to sell its share of production to Japan, where it already has seven companies lined up as potential customers. Abu Dhabi’s long-established gas project is at Das Island, where it has an offshore liquefied natural gas (LNG) plant capable of producing 2.200.0 tonnes of LNG a year and 1,200,000 tonnes of natural gas liquids. It has, however, been producing only about 65 per cent of capacity because of problems with the plant’s storage tanks which were due to be replaced. Another problem at Das is that bad weather sometimes delays loading. Because of this, it is possible that ADNOC may try to encourage ADGLC to invest in another gas production line. But this may have to await the completion of a planned gas gathering scheme. On the brighter side, the UAE gas industry is at present enthusiastic about ADNOC’s plans to exploit the Themama C strata, on which site work was due to start at the end of last year. This project would help ADNOC to meet a commitment to supply gas to Dubai through a 100-kilo-metre pipeline for the Dubai aluminium smelter. One quarter of the flow will go to Dubai. The rest will be needed for domestic consumption at Abu Dhabi’s power and water desalination complex at Umm al-Nar island outside the capital. (This is a good example of the increased co-operation between the emirates mentioned earlier, because Dubai’s oilfields may later be unable to satisfy the smelter’s demands for gas). In Dubai the Jebel Ali fractionation plant, run by the Dubai National Gas Company (DUGAS), has been operating for nearly two years. Its output consists of 260,000 tonnes a year of butane, 371,000 tonnes a year of propane and 270,0 tonnes a year of gasoline. The remaining dry gas is supplied to the smelter, while the other products are exported to Japan from the gas liquids loading facility at Jebel Ali.

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There is also talk of an integrated gas grid within the UAE, but increased political co-operation between the emirates is needed before this could become a reality. Development is Governed by the Federal Budget Within the UAE as whole, all development policy is governed by the federal budget. The 1980 budget totalled about Dh16 billion (the 1981 budget was late in being announced) – an increase of just over 50 per cent on the previous year. The extra funds were available as a result of large oil-price increases in 1979. The vast bulk of the money – more than 90 per cent – came from Abu Dhabi. And both Abu Dhabi and Dubai have pledged to set aside 50 per cent of their oil revenues for future federal budgets. It is believed that discussions about this could have delayed the 1981 budget. In 1980, 1.9 billion dirhams was set aside for development projects. The breakdown was as follows: Fujairah Dh257 million, Ras al-Khaimah Dh256 million, Abu Dhabi Dh224 million, Sharjah Dh215 million, Dubai Dh138 million, Umm al-Quwain Dh96 million, Ajman Dh89 million. A further Dh624 million was allocated for federal projects. Another Dh700-800 million was allowed for common services, including health, agriculture, education and electrification. The remainder was for current expenditure, including Dh4.5 billion for defence – Dh5.7 billion if the interior ministry’s costs are added. One key question in considering the future course of economic expansion is the UAE’s manpower problem. It has been estimated that expatriates make up about 70 per cent of the total population and so, naturally, an even higher proportion of the workforce. It is clear that continued rapid growth would require a.greater influx of foreign labour, which could lead to serious economic and social problems. The size of the domestic population, therefore, would seem to be an important factor militating against a high rate of economic growth. The influx has, though, been eased as the rate of growth has slowed down in the more labour- intensive sections, such as construction; capital-intensive industries have been developed and training programmes for UAE nationals have been expanded. The authorities have also tightened up the labour laws considerably to reduce the problem of people living and working in the UAE illegally. No-one is allowed a residence permit without the sponsorship of a locally-based company. Overall, though, a marked upturn was forecast for the UAE economy during 1981. Once again, as in recent years, this will be brought about by more industrialisation, and the duplication of the past will not be repeated. One of the main props of the federation’s five-year plan, announced in 1980, is a target of diversification. There was also a call for a new specialist state bank covering the funding of industry, agriculture and real estate, and in 1980 the

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UAE Currency Board was transformed into a new Central Bank – yet another

step forward in the continuing integration of the seven states. The Central Bank has the currency-issuing role and also supervises and regulates banks and banking practices throughout the federation. It is taking on a growing role as financial adviser to the government as well. An important change in the operation of the bank over the Currency Board is that it has been guaranteed a share of government income. The government will make a permanent deposit with the bank of US$2,000 million within two years, which will keep rising at 10 per cent a year until it reaches US$4,000 million. Additional requirements for the needs of the economy are also guaranteed by the government. Total oil receipts in 1980 were between US$18 billion and US$19 billion, and imports amounted to US$8.5 billion, leaving a trade surplus of about US$10 billion. Taking expatriate remittances and speculation on overseas markets into account, the federation’s overall investable surplus in 1980 – after other commitments, including foreign aid – was about US$4.5 billion. The level of oil revenue in 1981 was expected to be about the same, with, perhaps, a fall in the overall surplus of about US$500 million. Inflation, estimated to have been between 25 and 30 per cent between 1975 and 1977, fell to 15 or 16 per cent in 1978 and 1979. But it started to creep up again in 1980, reaching 20 per cent. For the time being the UAE’s economic profile is likely to remain fairly constant. Its one possible problem – which continues to make it a haven from an exporter’s point of view – is its high level of imports. Spending on defence and large industrial schemes is also expected to rise. Most of these large industrial projects, as has already been outlined, are related to oil and gas. But in Abu Dhabi, apart from the schemes mentioned, there are plans for a glass industry, a ceramics factory, a sugar refinery and cable, wire and metalworking plants. Several other smaller factories are already in existence or planned. Dubai intends to concentrate all its large-scale industry at Jebel Ali, the industrial zone and port 30 kilometres west of the city. Jebel Ali is expected eventually to become the city’s industrial suburb with its own township. The aluminium smelter, costing more than US$600 million, went into production in 1979, and output was expected to reach 135,000 tons a year by the end of 1981. About 20 per cent will be processed locally and the balance exported. Other large projects are a cement mill, a steel mill, an oil refinery, a cable plant and a steel fabrication complex. Dry Dock is Dubai’s Biggest Project But Dubai’s biggest industrial project of all is a dry dock, by far the largest in the area, capable of handling tankers bigger than any so far afloat or even under

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construction. The dock cost US$340 million and is not far from Port Rashid. The other emirates also have industrial ambitions, some of which have already been realised. Sharjah has its own cement mill and a number of factories producing rope, paper bags, paint and ready-mixed concrete. Ras al-Khaimah also has a cement mill, which it is planning to extend, and is the main supplier of aggregate in the whole area. Stone is being exported as far as Jubail in Saudi Arabia, as well as to Abu Dhabi and Dubai. Ajman, the smallest emirate, hopes to attract light industry and a small dry dock has already been completed. Overall, the UAE construction industry is well developed with a number of local firms now handling a wide range of civil engineering works, particularly apartment blocks. However, it would be foolish to assume that industrialisation will bring its own reward. The power of oil can help to create factories, smelters, dry docks, cement plants or anything else. But giving birth is one thing; reaching maturity is another. And in this respect the UAE has a double problem. First, its population, according to a 1980 census, is 1,040,000 – which means a very limited home market not only to buy but even to find a use for everything that the emirates could afford to produce. The alternative is, of course, to export. But, apart from finding the markets and training the salesmen, there is in this a second problem for the UAE. Much of what it makes is already made elsewhere (import substitution, for example, being the purpose of such things as cement manufacturing) and if it was able to gear itself up to high technology manufacturing it would have to compete with sophisticated, long-established rivals. Look first at the UAE’s limitations. It is impossible to avoid the conclusion that the economy is fundamentally based on oil/gas and that production or transformation o£ hydrocarbons remains the main activity. However rapidly the people take in each other’s washing; however much the scanty indigenous materials have been developed into industries, it is recognised that none of this could have happened except for oil – save perhaps the entrepôt trade, though even this has been aided by improvement of facilities, directly or indirectly related to the revenue flow. There is the usual sequence of money-movement (and money-growth), supply/demand steps between the emergence of a small shop in Fujairah and a barrel of oil exported from Abu Dhabi or a ton of goods landed at Dubai and then exported. But the original generator of almost the entire economic activity of the federation is now the hydrocarbon output. To appreciate this, it is only necessary to consider what the position of a village in the middle of the Hajar would be if the whole of Abu Dhabi’s oil suddenly dried up or became unnecessary through some traumatic global

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discovery, particularly if this were accompanied, as it might be, by a sharp shrinkage in the trade, financial and commercial operations of the principal cities. Thus, weaknesses in the economy taken as a whole are very important and could both have political implications and override any economic advantages in individual states. Moreover, they are of paramount importance to the foreign, notably British, consultants and contractors who have done good business in the Northern Emirates in recent years. To take only one example, when you have designed and built three ports and several international airports only a few miles apart, what else can you reasonably do? The great housing, hotel and public building boom is already almost over given completions; there are few local raw materials on which to base further industries, and import-substitution will be restrained by the size of the market. Even if the huge flow of oil money continues there must be a social limit (and here the effect of Islamic austerity could come into play) to the amount of conspicuous consumption. There are four economic factors – or symptoms – that for the past few years have indicated that all is not really well with the UAE economy, despite the increased 1980 federal budget and other large budget, revenue and trade figures. The first problem is that the area is heavily over-banked, and this is exacerbated by the fact that while the federation’s institutions participate in foreign loans, there has also been drawn-in lending, notably to Dubai and Sharjah. Secondly, a construction boom developed in Abu Dhabi and Sharjah in the 1970s (and to some extent still continues in Dubai), which resulted in whole streets of empty apartment blocks, financed by over-lending from smaller banks, and over-building of hotels throughout the emirates. Now some projects have slowed down, while others have been completed but are unoccupied. Earlier construction work was often of such low quality that the apartment owner could recover his capital cost and his bank loan interest in three to four years while the building degenerated. These are not healthy symptoms. Thirdly, not only apartment, hotel and office construction, but the entire spending on physical and social infrastructure went through a remarkable expansionary period in the middle years of the last decade. Between 1973 and 1976 public sector spending rose at an annual rate of 72 per cent. To quote an International Monetary Fund (IMF) survey, ‘during this expansionary phase, the UAE experienced serious inflation’. Though imports were rapidly drawn in, indeed virtually quadrupled, ‘the rate of monetary expansion far exceeded the rate of increase in the availability of goods and services’. This was the case particularly because of supply bottlenecks, resulting in an estimated annual inflation rate of about 25 per cent in the three years ended

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1976 (some authorities have set the figure much higher). The Currency Board itself was not entirely innocent in this respect through permitting over-banking and easy credit. Fortunately, the government stabilised its spending growth and, in the summer of 1977, it enhanced the Currency Board’s powers. A moratorium was imposed on the opening of new banks (which by-and-large has been observed), and much tighter control was imposed on balance sheets and reserve requirements. The rise in bank credit to the private sector was also sharply reduced. As a result, the IMF reckons that the rate of monetary expansion slowed from an annual average of 73 per cent in 1974–76 to about 13 per cent in the three-year period ended 1979. This also led to a fall in the inflation rate to perhaps 15 per cent on an annual basis in 1979, partly because of the easing on port bottlenecks and the distribution system. To prevent dirham liquidity from being squeezed too much, Abu Dhabi in 1977 bought up most of the Currency Board’s foreign assets. Duplication of Projects is Rife Finally, the UAE has particularly suffered from the duplication of costly infrastructural and industrial projects. Fertiliser plants, perhaps even more important, petro-chemical plants, can at the moment find a market even if duplicated, and form an important part of the political/psychological concept that the oil states should utilise their main raw material and not leave the transformation operation to Western countries to which the raw material is transported as crude oil or gas. But, though the same concept applies, the economics of building offshore refineries are still doubtful except, for example, in Abu Dhabi where ADNOC’s expansion of its Umm al-Nar refinery is necessary because it cannot supply the product needs of the UAE, which thus have to be imported, involving a state subsidy. For the time being, also, aluminium plants can be duplicated within economic bounds. But a very query must be written against the enormous expansion of ports, even airports, competing within a few miles of each other in the peninsula. Dry docks and iron-and-steel plants also need to be carefully thought out. It is argued locally that the creation of such enterprises has important social effects – training and so on – and that this justifies any loss. But this duplication has also occurred within the Gulf as a whole. Dubai and Bahrain, for example, have acted like industrial Siamese twins. Bahrain has a dry dock; Bahrain has an aluminium smelter; Bahrain is a banking and service centre; so is Dubai. Both dived into the trade fair business, too. Dubai has the huge international World Trade Centre; Bahrain also has an exhibition centre.

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Admittedly, this duplication has attracted the attention of pan-Arab organisations and steps are being taken to reduce it. But this hasn’t entirely silenced the sceptics. The head of one of the Gulf’s largest trading companies, based in the UAE, was quoted as saying in 1980, ‘There is nothing at the moment to encourage me to believe that the Dubai dry dock will be profitable.’ Others, at the time, were just as cynical. The head of another large Gulf concern said: ‘Duplication is rife here. There is a competitive Indian mesh factory down the road and there are five major cement plants in Dubai. Dubai is self-sufficient in cement and yet it hasn’t come to terms with the export industry yet. There are too many taxes. We don’t talk about exports here. We are presently looking towards Oman, Qatar and North Yemen and hoping to supply the domestic market in Saudi Arabia. Jebel Ali’s getting off the ground and the smelter is probably the most up-to-date in the world, using cheap gas linked with desalination. But at the end of the day, it depends on whether we can attract the industry.’ Many people also envisage a decline in the population of Dubai that will hit the service industries and the retail trade in turn. It may be that the Gulf, to avoid a serious economic downturn, will have to: build up an export trade outside oil; find a particular industrial niche that keeps the world knocking on its door; or, to some extent, learn to live on a fixed income, that is, it should invest as much as it can of its oil revenue and back this up by importing as little as possible. Whatever happens, though, some things will continue, as they have always done. There is no reason why, for example, Dubai should not continue as a trading centre as it has done for centuries. Another traditional industry is fishing. Fish has long been the main source of animal protein in the emirates and efforts are now being made to exploit the rich stocks of fish off the UAE’s long coastline by modernising both methods and equipment. But there have been snags. Ras al-Khaimah and Ajman both planned fish meal plants where mackeral and sardine would be processed into animal food for export, but catches proved unreliable. The emphasis now is on greater research to ensure that the right kinds and quantities of fish are caught without damaging the long-term stock position. Fish is one area in which the Gulf could become self-sufficient. The Gulf waters teem with life and remain relatively unpolluted despite the number of heavy oil tankers that pass up and down each day. Another area that the UAE is keen to develop is agriculture, initially regarded by some almost as a novelty. The problems are obvious: too much desert and not enough rainfall. But Abu Dhabi has taken the subject seriously and with some success. Crops are now also grown at the desert oasis Al-Ain, the .

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emirates’ second largest town, although the cost of turning arid land into an area fit for farming has been high. Farmers receive state subsidies, which bring seeds and fertilisers down to 50 per cent of cost price, and there are grants and loans for buying new machinery. The ministry of agriculture and fisheries will also be willing to help with ploughing, crop spraying and some mechanical maintenance. Hectares under cultivation have risen from 2.0 in 1968 to 23,000 in 1979, with a further 26.0 hectares devoted to forestry. And agricultural output rose from Dh138 million in 1972 to Dh647 million in 1978. The main products are dates, limes and other citrus fruits, mangoes, guavas, vines and figs and a wide range of vegetables. Two of the smaller emirates, Ras al-Khaimah and Fujairah, are particularly involved in agriculture. Ras al-Khaimah is the northernmost and most fertile of the emirates, benefiting from winter rain and underground water supplies. And about 15 per cent of its total land area of 650 square miles (consisting of two separate territories of roughly equal size) is arable land. About half its population of 62,000 is engaged in agriculture and fishing, and the state is the main source of agricultural produce for the UAE. It provides fruit, vegetables and animal fodder, while intensive research is being carried out towards improving farming methods and production and expanding the livestock breeding sector. Plans to develop Fujairah’s agriculture have been enhanced by the discovery of an underground water reservoir in the Dibba mountains and a large dam is to be built in the Ham valley. A programme of drilling 90 wells was completed in mid-1980; and it is now hoped to be able to increase exports of the traditional produce of dates, tobacco and citrus fruits that are cultivated on the narrow coastal plain. Tourism Could be Developed One area that the federation has hopes of developing in the future is tourism. At one time finding a room in the Gulf caused a businessman more trouble than winning an order. Today it would probably be the least of his problems. As the area boomed in the mid-seventies, so the big hotel groups moved in, and the tills could hardly click up the dirhams quickly enough, prices were high, but even the willingness to pay wasn’t enough to guarantee a room. But now the guest actually has a choice. It is no longer a case of having to scratch around to see where there’s a vacancy. The switch to a buyer’s market is particularly noticeable in Dubai, but, generally, it is easier to find a room anywhere in the emirates. In Dubai, there are now six first class hotels and 60 smaller ones. The top ones – the InterContinental, Hilton, Carlton Tower, Sheraton and the Jubai Metropolitan – between them offer 2,000 rooms.

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The first sign of the change was a headline late in 1979 in one of the emirates’ leading newspapers which read ‘Hotelier calls for positive action’. The hotelier was Helmut Hoermann, the area director of Hilton International (Middle East), whose hotel had an occupancy rate rumoured to be about 12 per cent. Hoermann suggested that it was in the interests of all the hotels in the area not to cut room rates – although some had already been doing so. Harry Bosschaart, manager of the Sheraton, agreed that the price war was nonsensical. ‘Room rates here in Dubai are going down while the costs are going up. But it is against our policy to reduce rates.’ He added that the Sheraton, after a slow start, was satisfied with its own business and he claimed an occupancy rate of more than 60 per cent. Certainly, as fewer foreign visitors find it necessary to visit the Gulf as the bigger projects come to an end, the hotels in particular have every reason for wanting to see tourism encouraged. In fact, private enterprise in general would welcome a flow of overseas money to replace that being lost as expatriates decamp. But there are problems. The first is that governments usually promote tourism heavily when there is a financial need. Clearly, this isn’t the case in the UAE, which accounts for a certain ambivalent attitude in the official approach to tourism. Secondly, although the UAE has over the last decade caught the imagination of the thousands of businessmen and construction workers whose first view of the Middle East was while coming down to land at Dubai, the question is: has the country got the facilities to make it attractive to holidaymakers? A mass tourism market is not being sought – and probably is not possible anyway – but, even so, many of the ‘upper end’ tourists would not want to spend their time simply lying on the sand or dawdling by the Creek. Which raises another point – the right promotion of what is available. And, with that in mind, the third problem is persuading potential visitors that the emirates are not as expensive as they may have been led to believe. Costs were high once, but prices now are comparable to London or New York. Perhaps the highest hurdle of all though is the cost of air fares. Tour operators have been able to negotiate substantial reductions for inclusive holidays. But, as yet, they are not down to a price that would be low enough for competitive tourism. But there still is optimism. ‘This is definitely a market for tourism, but a lot of things have to be overcome,’ Massimo Bisio, area director of sales and marketing at the Dubai Sheraton, said last year. The government needs to be more elastic on visa regulations. We have had meetings with the labour department to try to help with this. Dubai has got potential for tourists – no doubt about it. But before you sell a product you have to sell a destination. We need a lot of

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support from the local government like Sharjah has had. It will take at least two or three years to build up tourism in the UAE. We have to sell it as a destination first.’ Louisa Montague, director of tourism in Sharjah, said: ‘Our first tourist season was in 1980, so the business is still very new to us. But Freddie Laker (the British airline operator famous for providing cheap flights from London to America) would be most welcome/ As an adjunct, Louisa Montague also runs the Sharjah Safari Company, which specialises in desert rides and camping trips. And something of that nature may well be what tourists would be looking for. But what, apart from that – and the dunes and sos – has the UAE got to offer? Certainly, there still are wonderful opportunities for swimming, snorkelling, scuba-diving, sailing and sunbathing in all the emirates, particularly on the east coast, between Fujairah and Dibba, where there are some lovely combinations of sandy beaches, rocky promontories and nearby islands. (The use of harpoon-guns has been banned because some species of crustaceans were in danger of extinction.) In Abu Dhabi the most popular beach is off the Corniche, virtually in the centre of the town, and at the Khalidia Palace Hotel, while the breakwater by the Abu Dhabi Hilton is the place for anglers. Although most of the UAE is desert, there are numerous oases, not only large ones such as Al-Ain, Liwa and Dhaid, but also those in the form of small farming villages inland of Dubai and Sharjah and especially in Ras al-Khaimah and along the east coast. The UAE’s second museum is housed in the old fort at Dubai, which gives a good idea of everyday life until the recent past, illustrated by actual artifacts. There is also a fine collection of local shells. Further museums are planned for Abu Dhabi and Sharjah. Abu Dhabi already has a first-rate audio-visual ‘oil exhibition’ on the Corniche, near the centre of town. Arranged jointly by the two main oil companies, this is primarily designed for the local populace, but is strongly recommended for visitors and expatriates. The desert itself is a fascinating spectacle, even for a short stroll beside the highways linking Abu Dhabi with Dubai and Al-Ain, where grazing camels are a frequent sight (and sometimes a traffic hazard). If time and inclination permit, a full-scale expedition, which might include falconing with a well-equipped party, would be well worth while. Equally exciting can be an offshore expedition in a motorised dhow or modern sailing cruiser. The larger towns provide many Western social and sporting attractions and the growing size of the foreign communities is providing scope for a wide range of hobbies and pastimes. Al-Ain has a well-stocked zoo. The Creek of Dubai, and to a lesser extent the other emirates, with their photogenic dhows and

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mariners recalling an ancient seafaring tradition that refuses to die, also provide some unique sights, sounds and smells. Archaeology provides further attractions. The museum at Al-Ain displays some of the most interesting discoveries made in Abu Dhabi, particularly from the island of Umm al-Nar and nearby Hili, late third millennium sites that reveal strong cultural links with the Indus Valley. Fascinating Archaeological Discoveries There is now evidence of a cultural past that seems to suggest that the UAE and particularly the area around Al-Ain may have reached a high level of civilisation long before early European tribes had developed more than the bare rudiments of living. In 1977 a group of French archaeologists discovered the remains of a settlement that seems to date to the third millennium BC and to establish the link that experts have come to suspect in only comparatively recent times between the Gulf and the advanced, and still largely mysterious, civilisation of the ancient Sumerians, centred on what is now modern Iraq. Using the very latest methods of processing and evaluating data, the team is now hoping to piece together the entire fabric of life of the people of the settlement, from their economy to their beliefs, as a prelude to a survey of the whole country. It is hoped that findings will advance the knowledge first triggered by the excavation of stone-covered tombs dating from around 3000BC at Jebel Hafit and Hili by a Danish team in 1970, and in particular to draw a complete chronology for the emirates. So far the objects discovered at Hafit tombs include a bronze spear-head linking the area to Mesopotamia and in Hili remains of at least three periods, including a new type of ceramics, up to about 2000 BC have been uncovered. Recent discoveries in southern Russia as well as in the Gulf have been fascinating archaeologists the world over. They suggest that the Gulf was used as a major trading route to many parts of the world as long as 5,000 years ago and extended a common culture over most of the area now known as Asia Minor. What is particularly interesting is that they included parts which are today arid and abandoned desert. In the Hili area of the UAE, for example, there is a deep change between the third millennium BC, where no sand exists on the site, and the first millennium, where houses are built on sand dunes and covered with sand after being abandoned. The belief is that these regions may have been in part man-made – reinforced by the findings of a recent United Nations survey on the spread of deserts in other parts of the world today – and that they once flourished and

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bore fruit. The theory of a once fertile land since turned to desert (also said of the Sahara desert) in fact reinforces the conviction of the UAE government that a concerted effort with the right irrigation and planting can return the desert to its former green state. The Threat Testability One other disadvantage that the area has to contend with as far as tourism is concerned is a rather oblique one but, nevertheless, significant. That is simply the question of stability, not in the UAE as such but in the Gulf as a whole. Before the Soviet occupation of Afghanistan, the UAE could fairly be seen as the quiet corner of Arabia. Possession of oil in itself has always meant living under a ‘threat’, but it was one that was principally borne by Saudi Arabia, especially when oil prices were rocketing and Sheikh Ahmed Zaki Yamani, the country’s oil minister, was at the centre of events in Europe during the mid-1970s. But, with the Russians ensconced in Kabul and Iran and Iraq, two other major oil powers, at war, tension increased. The West wondered whether the Russians might take advantage of this by, for example, offering Iran military aid and then moving in, thus establishing a presence in the Gulf. Moscow would then have had effective control over the country’s oil, so the speculation went. However, such encroachment, although worrying for the UAE, would have been a mighty strategic blow for the West. And it would almost certainly have lead to a strong Western military force being sent out to stand guard on the UAE’s side of the water. But the emirates would not have been particularly keen on such a posture, fervently believing as they do in a policy of non-alignment. In fact, a statement in 1980 by the British prime minister, Mrs Margaret Thatcher, about her willingness to allow UK troops to join America’s ‘Rapid Deployment Force’ in the Gulf in the event of trouble angered the UAE. Mrs Thatcher was talking to President Reagan, and her words echoed a statement by President Carter, Reagan’s predecessor, that America would do everything necessary to protect its oil links with the Middle East. In the West such statements are seen as being vital for keeping the Russians in check. In the Gulf they are thought of as being threats to intervene militarily against states normally thought to be allies. After Carter’s speech, one UAE official observed: ‘This is like saying that Britain’s North Sea oil is the property of those who need it rather than those who own it.’ In essence, it could be said that the UAE values its Western friends but it would rather they didn’t behave like feudal barons believing that the world was their estate to strut about in as they please. The point seems to be: these are our waters, if we need help, we’ll ask.

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Abu Dhabi also sits upright when the Iranians – or the Palestine Liberation Organisation (PLO) – threaten to set the Gulf alight, although they realise that it would take a cataclysmic event for this to actually occur. Or, indeed, for it even, physically, to be arranged. The federation’s rulers become concerned from time to time about historic Iranian aspirations towards the Arab side of the Gulf, and Tehran-sponsored broadcasts from a group calling itself the Revolutionary Organisation of the Arabian Peninsula (ROAP). However, since the Iran-Iraq war Iran has become too busy patching itself up to worry overmuch about expansion. Its war with Iraq will have also made the ROAP realise that more than a good radio voice is needed for territorial gains. Despite the temptations to seek the necessary protection, the UAE is keen to preserve and consolidate its independence as a way of fending off its neighbours and the super-powers. If it does have a protector, it is Saudi Arabia. Although the UAE has mixed feelings about such a giant at its backdoor, it tends to await the Saudi stand on foreign political issues and then take a similar view. But, basically, the UAE would appear to want to be left alone – and in peace. Individual Emirates in Brief Abu Dhabi Abu Dhabi is by far the largest of the emirates: out of the UAE’s total area it covers some 67,000 square kilometres or about 80 per cent. But much of the land is infertile desert with coastal salt flats. The coastline is 480 kilometres long, running from the base of the Qatar peninsula to the frontier of Dubai; and the offshore islands must be counted in if only because of their economic importance. The capital itself is an island. Two adjacent islands, Saadiyat and Umm al-Nar, are rapidly becoming important industrial centres. Smaller islets far out at sea such as Das and Zirku are or will be major terminals. As elsewhere in the Gulf, the immigrant population is important: perhaps only 25 per cent of the total is indigenous, and much work is done by Palestinian and Indian officials not to mention immigrants from the poorer Arab, and indeed European, countries. Abu Dhabi’s power rests on its huge wealth, which it spends generously not only on local development, especially its own oil, but in supporting the federal budget, and in aid. There are also some less overt operations such as guaranteeing loans to entrepreneurs in other states, or, at one time, pressing the Central Bank to make helpful releases of funds. Yet there is so much money around that a large reserve has also been built up through the Abu Dhabi Investment Authority (ADIA) and its merchant bank, Abu Dhabi Investment Company (ADIC).

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Despite the financial power of the reserve authority and the aid dispensation mechanisms, the most important single entity in the state, besides the Ruler and his government, is probably the Abu Dhabi National Oil Company (ADNOC). The discoveries and production which have transformed an originally poor village, based chiefly on pearling and fishing, into a modern conglomeration of multi-storey buildings, began with the finding of onshore oil in 1959 at Murban by the Iraq Petroleum Company. There was a parallel offshore strike at the end of 1958 at Umm Shaif by the then ADMA (Abu Dhabi Marine Areas) – which at that time was two-thirds BP, one-third CFP held. The oil was found 130 kilometres offshore near Das Island, which was quickly transformed by great construction effort into a terminal (exports began in 1962). Abu Dhabi’s main output is still essentially controlled by these two groups; however, the onshore operation has been transformed into ADCO – the original Abu Dhabi Petroleum Company (ADPC) shareholders plus 60 per cent ADNOC. The main fields are Bu Hasa, an offshoot of the original Murban, Asab and, less importantly, Sahil and Shah. Dubai For most foreign businessmen, Dubai is the magnet of the UAE – large, sophisticated, efficient and experienced in business. Its capital city, really the twin towns of Deira and Dubai proper on the north and south sides of the Creek, has had a long existence. And, historically, the deep and 12 kilometre long creek has helped to produce a major entrepôt trade, and re-export of goods not only to the interior but to Iran and, in the shape of gold – now perhaps less important, to the Indian sub-continent. There is, as a result, a high calibre of mercantile expertise which makes Dubai the Kuwait of the lower Gulf. Local businessmen are unusually efficient and enterprising (and almost automatically rich). But, on the one hand, the business efficiency still depends, indeed more than in Kuwait, very much on the expensive import of high-calibre Western expatriates and the less expensive but invaluable labour of Indian clerks and artisans. It has been said that only 20 per cent of the population is, in fact, indigenous. On the other hand, the decision which the ruler, Sheikh Rashid bin Saeed al-Maktoum, made – as is his wont, without a public trumpeting of policy – in the past to change Dubai from a merely mercantile centre to a huge industrial base, with large ports supplying both, has yet to be realised in practice. Moreover, Dubai must still depend partly on its established trade and partly on the huge gamble on industry – and the latter is financed only in part by its medium-grade oil revenues and in large part by the international borrowing that many banks hastened at one stage to proffer.

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These comments give, for those who have not visited Dubai, a more pessimistic view of the state of the nation than may be justified. Certainly the main word for Dubai is still ‘efficiency’ and the main corollary ‘profit’; and the state is run effectively, by the shrewd and able ruler Sheikh Rashid. His ultimate and powerful control is exercised through several state departments, but these have been kept to the minimum in number and personnel, although he has accepted the headquarters of related federal activities such as public works, and may well be producing a great change – or at least a drawing together – in the federal operation by his acceptance of the emirates’ premiership. Apart from the departments noted, the main power centre is the Municipality, run by the Dubai Municipal Council – the nearest thing to a local parliament, which, since 1980, has had 32 members headed by the ruler’s son, Sheikh Hamdan bin Rashid al-Maktoum. This body has, among other things, the power of levying taxes on rentals or rental values, somewhat equivalent to rates in the UK, and thus is important not only as a forum or development agency, but also because it enjoys a budget of its own. Sharjah Sharjah is probably the most imaginative state in the UAE, its ruler as kind and gentle as the gazelles in his garden, much of its modern architecture of a higher quality than elsewhere in the peninsula, and its whole ambience such as to make it a pleasant place in which to live. Yet it is only now recovering from what was a near catastrophe in its development phase, and though prosperity is returning the state may never reach the heights to which it once aspired. This is mainly because the economy of the city, sizeable by any standards, has been based mainly on invisibles, partly because invisibles have a habit of living up to their name however imaginative the concept, partly because of a decline in oil support and partly because this emirate is so close to powerful Dubai that it seems almost like a suburb. Like its big neighbour, Sharjah has existed for a long time and was an early entrepôt centre and a stopping point on the old Imperial Airways route to India, as well as a base for RAF personnel during the war. But the entrepôt trade faded with the silting up of the creek, rulers became less enterprising, the RAF withdrew, and aircraft now have a range which eliminates Sharjah unless there is actual traffic to be picked up. Sharjah, therefore, chose two routes to development – apart, of course, from what could be afforded in normal expansion of physical infrastructure and the creation of some industry. The first was an ingenious multi-modal transport system based on the positional advantage, and the second, more ‘invisible’, the creation of a financial centre accompanied by high-class recreational facilities.

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The multi-modal transport concept has gone ahead and shows signs of prospering. At Sharjah City, Mina Khalid (or Sharjahport) has been built with at least eight berths (including container, ro-ro and reefer), while a two-berth container pier with other facilities has been completed at Khor Fakkan and is managed by the Jeddah company MTI. These points, using the advantage of by-passing the Strait of Hormuz, are strengthened not only by the high-class transverse road, but also by a new international airport sited on the cross-road, specialised for cargo, thus allowing a complicated movement of containers between the three points and beyond. Khor Fakkan is still gathering traffic but Mina Khalid landings are substantial and total imports were last valued at Dh2.16 billion, much of which was no doubt re-exported. The city is now slowly attracting banking, insurance and consultancy firms. Recreational facilities, centring on the development of the lagoon, are nearing completion now that the Marbella Club has opened, and luxury villas and a hotel have been built at Khor Fakkan. Fujairah Fujairah is the only emirate entirely situated on the east coast of the Ras Musandam peninsula, that is, the opposite side of the Hajar mountains from the urbanised west coast, except for Sharjah’s offshoots. A jigsaw puzzle on the political map, it really comprises territories running westward from the coastal town of Fujairah itself and south-westwards through mountain gorges from Dibba in the north. The total area and population are small (1,165 square kilometres and perhaps 30,000-plus now, but 20,000 at December 1975). However, this emirate possesses some natural advantages, notably its picturesque mountains and fine coastal strip, even though agricultural production is small, if partly commercial. It also has a young and intelligent ruler who is enterprising but not addicted to frenzied uneconomic development. Hence discovery of some ore has not been much followed up; but tourism has been pursued, for example through the Fujairah Hilton Hotel. Ras al-Khaimah Ras al-Khaimah is one of the most interesting emirates – and also the fourth largest both in extent, nearly 1,700 square kilometres, and population, which was more than 57,000 at the December 1975 census and may now be approaching 70,000. It probably has a much larger indigenous proportion than most of the others, and resembles Dubai and Sharjah in its unusual and enterprising character. Yet new visitors to the Gulf, who have been told that the state is a paradise of greenery as compared to the others, may be disappointed: there is spectacular

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scenery and there is a genuine agricultural resource, but the latter is not particularly stunning. The state, however, has relatively substantial agricultural holdings, including rain-fed ones, and considerable irrigated cultivation helped by springs from underground water in the nearby Hajar mountains. The sizeable palm groves and fruit, vegetable and livestock development, especially around the experimental station and agricultural college at Digdagga, just south-east of the capital, do indeed present a striking contrast to the barren peaks which lie behind and the endless yellow-brown of most of the other emirates. The dairy farm should, by the end of 1981, have been absorbed and developed by the Livestock Breeding Company, a subsidiary of the Arab Company for the Development of Animal Resources. As part of its effort to maintain the water table, the federal ministry of agriculture intends to build a dam, supervised by the US Bureau of Land Reclamation, within the emirate (and a parallel construction in Fujairah). Meanwhile, a large poultry farm has been created, aided by a loan from the Industrial Bank of Kuwait. Actually, Ras was an early recipient of technical aid in this field (from the UK) and, when smaller, was self-sufficient. No doubt its agricultural production will always be relatively small, but it almost certainly remains the UAE’s principal agricultural producer. Umm al-Quwain and Ajman Any visitor will recognise at a glance that Ajman and Umm al-Quwain are really very small towns, with a few agricultural enclaves inland. Their recent development, which can only be described as rather untidy, is due to their being ‘dormitory towns’ for the Sharjah/Dubai conurbation. Both have developed infrastructure by improving their creeks to provide small but quite usable ports, and both have opted for the building of houses, blocks of flats and some business centres. But, in both cases, the infrastructure has really been paid for by federal funds.

1983 Memorandum Movement – Five-Year Plan 1981–85 – Gulf Co-operation Council (GCC) – Sharjah-Dubai Border Dispute – Economic Re-thinking – OPEC – Budget Deficit – Tourism

One of the most interesting features of the events during the past 12 months in the United Arab Emirates (UAE) has been the gradual strengthening of the federation in a quiet and steady manner. This move is particularly noteworthy in view or the great attention focused by observers in the past on the imminent dissolution of the state because of tensions and conflicts between the seven emirates which constitute the federation. Of course, the most serious of these conflicts has always been the tensions between the emirates of Abu Dhabi and Dubai, between their rulers, and between their differing interpretations of what shape the federation should assume in local and international affairs. Since 1979, when Sheikh Rashid bin Saeed al-Nahyan of Dubai agreed to become prime minister of the UAE, his policy has taken a firm step in the direction of closer co-ordination with all the emirates. Before he assumed power, the young intellectuals of the country had started to express their anxieties about a number of issues concerning the future of the country. They were led by Tiriem Tiriem, the speaker of the Federal National Council, a consultative body whose members are selected by the seven emirates. As the differences between Dubai and Abu Dhabi grew, so too did the opposition to both. In early 1979, a Memorandum was presented by Tiriem’s group to the Supreme Council. It called for, among other things, an acceleration of the federation process and for greater representation in decision-making. The Memorandum expressed great concern over the constantly growing number of foreigners who had already made the citizens of the UAE a minority in their own country, and asked for the co-ordination and control of immigration. Sheikh Rashid pre-empted the growth of the Memorandum Movement by taking steps during the past three years to strengthen the central government; he unified many aspects of the community; and he introduced measures to control immigration. One of the outcomes of this has been the Five-Year Plan, 1981–85, the first of its kind in the country. Although the Plan has still to be ratified, many of its suggestions seem on the way to being fulfilled. Dubai has always had a different outlook to that of Abu Dhabi concerning the nature of government. The former thrives on a laissez-faire economy, and

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has in the past profited greatly from being an important entrepôt for the entire Gulf region and India; in recent months Dubai traders have been exploring East Africa as a possible new market. Abu Dhabi, by contrast, is the major oil producing emirate, and derives a huge income which it carefully distributes amongst the poorer emirates to elicit their continued loyalty to the federation. One of the best indicators of the recent rapprochement between the two emirates has been the adoption by the federal government during the past three years of a number of the laws established earlier in Abu Dhabi but previously rejected by Dubai. International Relations The rapidly changing situation in the Gulf region during the past three years, starting with the fall of the Shah of Iran and continuing with the Iran-Iraq war, has had the effect of stimulating change within the UAE. The changes have been gradual and far from dramatic, but the cumulative effect could be felt for the first time in 1982. The UAE celebrated its tenth anniversary in December 1981, and as it entered the second decade of its young life, it faced the growing changes in the Gulf region with not a little apprehension. In many ways, of course, its reactions to these changes are limited by the many constraints acting upon it. Perhaps the most important of these are the strong contrasts between its small national population and the overpoweringly large number of expatriates living there; the inherent difficulties in cementing a true federation between seven tiny emirates with vastly different economic characteristics; the strong reliance on non-UAE (mostly Omani) nationals for the maintenance of the armed forces; and a planned budget deficit as a result of the world oil glut and falling oil prices. These and other constraints are made more acute by the intense international interest and rivalry in the Gulf at large, and by the threat of US military intervention in the region should the flow of oil supplies be interrupted. The attempted uprising in Bahrain in December 1981 was a reminder to the Gulf states, including the UAE, of the continuation of their own internal problems, albeit against a background of the changing external situation. Most of these states during the past six or seven decades have experienced moves by their citizens towards greater representation in government policies and decisions. Bahrain, in many ways the most advanced of the Gulf states, has witnessed the growth of such movements in various forms since the early years of the present century. The aborted movement of December 1981 was another manifestation of the continuing frustrations of Bahraini youth with their isolation from decision-making, particularly after the suspension in 1975 of the Bahrain National Assembly. The fact that the young rebels looked towards Iran for

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inspiration was merely a reflection of the new order in the Gulf; during the 1950s, it was from Nasser‘s Egypt that other, similar, movements drew their ideas. The immediate response of the UAE, together with its fellow members of the Gulf Co-operation Council (GCC), was to strengthen their security links with each other. Most of the decision-makers must have realised that the Bahrain rebels were not a direct result of the Iranian revolution, and did not in themselves present an external threat to security; they must have known that the December 1981 movement was symptomatic of discontent with the internal status-quo. During the era of British domination which ended a mere 11 years ago, similar events were conceived of as threats to the Pax Britannica in the Gulf region as a whole. This pattern of externalising internal discontent continues to prevail. Saudi Arabia is the dominant power of the GCC. With its special relationship with Washington, it seemed only natural that bilateral mutual defence pacts with the other members of the GCC should be signed as an immediate reaction to the events in Bahrain. Bahrain was the first to sign such a pact in early January 1982. The UAE mutual defence pact with Saudi Arabia was signed in Riyadh on 21 February 1982. It provides for security co-operation in the fields of exchange of expertise, training, extradition and other matters concerning borders and equipment. These pacts were the outcome of a decision taken at a meeting in the UAE of the GCC in early January 1982 that all member states would take active steps to co-ordinate their security arrangements with the ultimate objective of a total security agreement between all GCC members and the establishment of a central headquarters for information. The war between Iran and Iraq (which broke out when Iraq invaded Iran on 22 September 1980) has given added impetus to the forging of closer links between the member-states of the GCC, as each of the states feels threatened by the spreading potential of the conflagration. The attitude of the UAE towards the war has been ambivalent. On the one hand, it fears the revolutionary potential of Iran’s new government, particularly after the latter has renewed its claims to both Bahrain and the Tunbs and Abu Musa islands occupied by the Shah’s government on the eve of Britain’s withdrawal. On the other, the powerful merchant class of Dubai, which itself has a large Shi’a population, has gained from the closure of the Iranian ports and from the consequent boom in the re-export trade to the southern port of Bandar Abbas. Although the expansion of this trade has levelled in recent months, there have been signs of a revival of the earlier boom, particularly after the Iranian military victories in April and May 1982.

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The UAE has of course lent large sums of money – estimated by some to be as much as US$5 billion – on a ‘soft’ basis to Iraq as its contribution to the Iraqi war effort. In doing this, it has acted as an Arab country helping another Arab country. Contacts with Iran have not stopped, however. A number of senior Iranian officials visited the UAE in 1982, particularly after the Iranian recapture of Khorramshahr. In June, the deputy foreign minister of Iran visited the UAE with a personal message for Sheikh Zayed from President Ali Khamenei. A few days later, a senior official of the UAE went to Tehran with an answer to the President’s message. Earlier, the Iranian foreign minister had visited Abu Dhabi. In many ways, the UAE cannot afford to antagonise either Iraq or Iran. Both are much more powerful, much more developed, and much more heavily populated. In attempting to steer clear of any overtly antagonistic stand vis-à-vis either of the parties to the conflict, the UAE has learned a valuable lesson in self-reliance. It has promoted the federal process and strengthened internal unity. This evolution has acted to reduce the possibilities of its internal conflicts being involved in any wider regional conflict. By contrast, the UAE has taken a firm stand regarding the Israeli invasion of Lebanon. Sheikh Zayed was one of the few Arab heads of state who responded positively to the urgent need for an Arab summit in the early days of the aggression. Feelings for Palestine run high in the UAE, and manifestations of support for the Palestine Liberation Organisation (PLO) and Lebanese fighters took the form of financial donations which ranged from that of Sheikh Rashid, who gave around US$5.5 million, to that of Sheikh Humaid bin Rashid al-Nuaimi III of Ajman who gave around US$17,000. The armed forces of the UAE also donated half their pay to the Lebanese and Palestinian fighters, and fund-raising drives were undertaken in different towns of the country. The UAE broke off diplomatic relations with Zaire in May 1982 after the latter restored diplomatic relations with Israel. It also severed relations with Costa Rica in June after the latter moved its embassy from Tel Aviv to Jerusalem. In June 1982, it was announced that Kenya was to become the third non-Arab African state in full diplomatic relations with the UAE; Niger and Gabon are the other two. The 1982 Budget The past year was a momentous one for all states of the Gulf. The Iraqi reversals in Iran in April and May were not the end of the Gulf war, and the renewal of the conflagration by the Iranian counter-attack in the Basra area had again threatened the shipping and trade of the region. The Israeli threat to the western part of the Arab world and the unco-ordinated reaction of the Arab states to that threat was a major setback

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for the Arab League nations. It is still too early to foresee the full effects of the September summit in Fez. The vulnerable position of the UAE in the Gulf war has already been referred to above. What is equally important, however, is its economic vulnerability to the international financial and oil markets. 1982 was a year in which this vulnerability was made obvious. Because its economy is inextricably linked to the world economy, the 1982 federal budget allows for a 10 per cent deficit. This planned deficit is the first in the young life of the UAE. The reasons for its existence are clear: the oil glut and the falling world prices of oil, on the one hand; and, as a result of inflation, the rise in the costs of imports upon which the UAE is heavily dependent, on the other. The total planned expenditure of the 1982 federal budget of the UAE will be around US$6.06 billion, and the total revenues will be around US$5.52 billion; government spending in 1982 will be 17 per cent lower than in 1981. An examination of the allocations of the budget will reveal where the cuts in spending are to be, and in what priority the government places its allocations. One of the major areas where cuts have been introduced is in foreign aid. The UAE has always been very generous in its donations to Third World countries. Although their exact size is never very accurately provided, it is known that the UAE usually lends around 8 per cent of its gross national product (GNP) every year. This makes it one of the world’s highest aid donors on a per capita basis. But the present financial constraints have called for a curbing of these disbursements, and it has been reported that in 1982 they will only be around 45 to 50 per cent of what they were in 1981. Development spending will change somewhat in that priority will go to those projects already started rather than to new schemes. The current planning mood implies a tightening in the selection of projects and a more unified approach to the developmental process. Draft proposals by the different ministries are being cut in size, and in most cases, only around 50 per cent of their requests are being granted. The only area where cuts are not reported, and indeed where an increase over 1981 is registered, is in defence spending. In recent years, the defence forces of the UAE have received growing attention from officials, and the dramatic growth in the defence spending over the past few years is a clear indication of this. In 1973, the defence budget was around US$60 million; in 1979, it was US$750 million; and estimates of the 1982 defence budget range from US$1.1 billion to US$3 billion. These figures reflect the concern of the UAE government about the security of the country in view of the rapidly changing political situation in the region. The main objective of the UAE in expanding its armed forces is to be able to defend its oil resources, both the oilfields and the installations. The total number

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of personnel in the armed forces is somewhere in the region of 25,000, of whom a large fraction, probably up to 80 per cent, are expatriates. The 1982 budget, although considerably different from that of 1981, will not cause great hardship in the UAE. There can be no question of any kind of austerity there during 1982. The per capita income of the UAE remains one of the highest in the world, and the advanced social welfare provided for UAE citizens still makes it a very desirable place in which to live. Some reports have suggested that the planned deficit may be the outcome of a careful decision by the government to avoid lending Iraq much more money in its continued war effort. The budget above all reveals an attitude towards government spending which is new to the UAE. The excesses of the past appear to have been controlled as more careful planning for the future is being registered. The regional problems seem to have awakened an awareness of the need for self-restraint and for self-reliance. Although the UAE is far from being totally self-sufficient, there seems to be an attempt to integrate the economy. Internal Developments The respective contributions of Abu Dhabi and Dubai, the richest emirates, to the federal budget have long been a major bone of contention between the two. For the first few years of its existence, the UAE relied almost totally on Abu Dhabi’s contributions. In 1980, the first major change occurred when Dubai agreed to contribute 50 per cent of its oil revenues to the federal budget. That year the Central Bank was established and the old Currency Board dissolved. Abu Dhabi remains, however, the financial mainstay of federal finances. In 1982, it will have contributed around 82.2 per cent of the federal budget; Dubai’s share will have been 15.8 per cent. In 1981, by contrast, Dubai’s share was slightly higher: 18 per cent. In May 1982 the first onshore oil and gas deposits were discovered in Dubai by ARCO Dubai, a subsidiary of the Atlantic Richfield Company. This hydrocarbons find is located in Mirghim, around 45 kilometres east of Dubai city, and is said to be on the same formation as the field discovered in Sharjah last year. Plans were for a second exploration to begin in the autumn of 1982, and indications are that production could start around 1984. The hydrocarbons discovery, which is regarded as being fairly significant, could well alter not only the financial status of Dubai, but also the financial leverage of the latter in the federal government. The federal process was strengthened in 1982 by the resolution in October/November 1981 of the Sharjah-Dubai border dispute. One of the main stumbling blocks to the internal unity of the UAE has been inter-emirate border conflicts. The patchwork mosaic which constitutes the map of the United Arab

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Emirates is a direct legacy of the 1930s when the definition of emirate borders assumed significant proportions: for it was then that oil concessions were first signed. The Sharjah-Dubai border was one on which no agreement could be reached, and much tension has resulted over the years. Other inter-emirate border conflicts still exist, however, those between Sharjah and Fujairah being the most outstanding. Expatriate Manpower By far the most serious problem of the UAE today, however, remains that of the large expatriate population. The heavy dependence of the country on a non-national labour force has attracted much attention and concern during the past year in both the Federal National Council and the national press. Exact figures for 1982 are not available, but the Five-Year Plan gives some indication of past, present, and future trends. In 1980, for example, UAE nationals constituted barely 12 per cent of the economically active population of the federation, and only around 27 per cent of the total population. It is expected, however, that if appropriate measures are taken, the national labour force could increase from 65,700 in 1980 to 78,000 in 1985; and, for the same period, the expatriate labour force would decrease from 541,000 to 539,000. The Five-Year Plan identifies many characteristics of the labour force which have helped to keep it at a high level. Some of the most important of these are: the high illiteracy rate among expatriates; the low utilisation of appropriate mechanical devices to improve labour productivity; the excessive use of such unnecessary jobs as office boys and guards; and the low level of participation by national females in the labour force. The Plan notes the high correlation between education and the level of female participation. For example, only 2 per cent of those UAE women who have not completed primary schooling are gainfully employed; the figure grows to 49 per cent of those with secondary schooling; and jumps to 63 per cent of all university graduates and 88 per cent of those UAE women with post-graduate degrees. The importance of this trend is that in the years ahead, a dramatic increase in female participation can be expected in view of the rapidly expanding educational system. In January 1982 it was announced by the ministry of education that during the coming three years, the UAE expects to double the number of schools in the country. There are 383 schools now; their number is expected to grow to 762. Legislation to control the continued influx of expatriate labour has been introduced during the past four years. But whereas population growth was rarely

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discussed openly before, it became an issue of public debate in 1982. This is another sign of the internal consolidation of the country whereby issues of great importance are no longer regarded as potential threats to the unity of the federation, and therefore taboo. Moreover, many of the recommendations of the Five-Year Plan, although not officially accepted, are being implemented without undue publicity. A number of measures were taken during April and May 1982 to try to cut down on the employment of expatriates. The most numerous of these are the unskilled, who in 1980 constituted 45 per cent of all expatriate labour. A new move to halt their recruitment undertakes to find UAE nationals to fill unskilled positions first; if they are not available, UAE residents, Gulf nationals or Arabs must be found. Moreover, the directorate general of nationality and immigration has started to withdraw residence permits from expatriates who leave the country for more than six months at a time. Group-party visas for non-Arab workers are now limited to groups of 25 or more in an effort to limit the unnecessary entry of expatriates. The ministry of labour and social affairs, the ministry of planning, and the Abu Dhabi planning department have all, during the period from April to August 1982, put forward propositions regarding other methods to control the influx of foreigners. Some of these are: the introduction of exit visas for foreigners; the establishment of deposits to be paid by companies on every foreigner they employ, returnable when that foreigner completes his work and leaves the country; the deportation of foreigners who are unemployed; and a tightening of controls to prevent the illegal entry of immigrants. Commercial Legislation The recent strengthening of the central government is expected to be reflected in the enactment of these and other laws, and has given a new purpose to the federal process. Although, for example, the Provisional Constitution (Article 23) states that the natural wealth and resources of each emirate is the public property of that emirate, recent legislation has to a certain extent unified the control of different aspects of commercial life. In February 1982 the new Federal Commercial Agencies Law came into being. It aims to strengthen the involvement of UAE nationals in business in all the emirates in the same manner. All commercial agents in foreign companies in the country must now be UAE nationals. This law marks a departure from previous practice whereby each emirate set up its own commercial regulations. It was received with considerable misgivings in Dubai where free enterprise has always been the norm in business and where any such control has been unknown. The law therefore has broken new ground in that the traditions of

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Dubai were changed to allow for national integration in the commercial life of the country. It is significant to add that the law had been applied previously in Abu Dhabi alone, and this year it became a federal law. Another commercial law in draft form but expected to be enacted by the end of 1982 is the controversial Trade and Commerce Law. According to its provisions, most businesses operating in the UAE must be owned by UAE nationals only. This includes banking, insurance, import and export, brokerage, oil, manufacturing, supply contracts, construction, hotels, restaurants and publishing. Representative offices of foreign banks and other companies operating in the UAE would not, however, be included; nor would consultancy or professional services. Other exemptions are the small one-man businesses with a capital of less than US$27,000; these would require a local sponsor but not a local partner. Amendments to the draft law continued to be made towards the end of 1982, but its essence is in the nationalistic viewpoint governing its implementation. In the past, customs dues varied from emirate to emirate, causing considerable disunity in the commercial structure of the federation. Abu Dhabi had levied the lowest tax, and Sharjah and Dubai the highest. Since April 1982, the latter two emirates have brought down their duties to conform with those prevailing in Abu Dhabi. Moreover, the recent move to create a federal Higher Council for Customs was endorsed by the cabinet in May. The plans are that the Council will have one representative from each of the seven local customs departments, and will operate under the supervision of the ministry of economy. Its main objectives will be to unify customs systems, practices and dues. The Gulf Co-operation Council (GCC) In a sense, of course, the UAE has two sets of federations to cope with: its own, and the GCC, of which it is a member. The Council was established as a direct consequence of the outbreak of the Iran-Iraq war, and its principal objectives are to increase efforts to co-operate and integrate in all spheres. Co-operation between Gulf states had had rather tentative beginnings in the 1970s when all obtained independence. Agreements regarding economic, cultural and informational co-operation were signed, usually between two states. The UAE, for example, signed an economic agreement with Kuwait in 1973, and another one with Saudi Arabia in 1978. The many features the Gulf states share in common – their small size, strategic location, and vast oil reserves – have acted to bind them together in many domains besides the military. The GCC is an attempt to formalise the interdependence of these states, and to strengthen the ties which link them together. One of the objectives is to create a Gulf common market. The economic charter of the Council calls for free

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trade and travel between the member states, and for co-ordinated policies on oil, trade and industry. The finance ministers of the GCC states met in June 1982, and decided to abolish customs tariffs between member-states on domestic products as a first step towards economic integration. They also decided to apply a freer set of travel and transit regulations for their citizens. Work on finding other measures to unify their economies – a common currency, a unified customs tariff system, and so on – is continuing in the various sub-committees set up for the purpose. There are fears, however; within the smaller states of the GCC – the UAE, Qatar, and Bahrain – that further moves towards economic integration could conflict with their own national interests. One case in point is the application of the Commercial Agencies Law of the UAE which does not have any provisions for members of the GCC; another is the future application of the Trade and Commerce Law. The GCC charter specifically states that GCC agreements supersede national legislation. But the UAE has shown a marked reluctance to accept this principle in the commercial field. Saudi Arabian and Kuwaiti business concerns hold a dominant position which the UAE feels incapable of withstanding. The short history of the UAE has shown that its rulers can live and cope with contradictions. The contradictions are gradually being resolved, and the federation has withstood a fair number of crises which threatened its survival. The conclusion drawn is that the rulers are capable of making the necessary compromises to attain a specific goal. It is not unlikely therefore that this pattern will continue both within the UAE and within the larger federation which constitutes the GCC. Economic Developments The depressed oil market of the last year has required some rethinking by the UAE’s economic planners. For the first time the Emirates have been planning for a budget deficit, and half-year figures available in August 1982 indicated that this shortfall was much worse than expected. This had led to belt tightening all round, with a distinct lack of cash for certain projects in the northern states. It has also led to further encroachment of federal agencies on the autonomous powers of the various emirates, particularly in the areas of banking, customs and business law. But this process has had some advantages. Duplication of effort and expenditure has been cut down. The government has tended to concentrate on projects to which funds had already been committed. Since the bonanza years of the 1970s witnessed a proliferation of grandiose schemes, this has been no bad thing. It has also allowed some of the smaller emirates to come up to date with their planning.

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Business Confidence Maintained On the private side, UAE businessmen seem to have maintained their business confidence. Despite government regulation which, for example, has curtailed their freedom to establish speculative investment companies, their interests have been boosted by a spate of nationalistic business legislation, such as the decree which lays down that all agencies should be 100 per cent UAE-owned. There have also been moves to restrict foreign commercial banks operating in the Emirates, and this can only have pleased some of the major trading families who have diversified into their own locally established banks. Meanwhile wealthy businessmen have continued to look abroad for investments, particularly, in the last year, to South Asia and the Far East. For, basically, as government spokesmen will tell you if pressed, the UAE economy is still in good shape. The Organisation of the Petroleum Exporting Countries (OPEC) precepts may have caused the oil ministry to cut back from output levels of 1.8 million barrels a day (bpd) in 1978 to a ceiling of 1 million bpd for much of 1982. But continuation of the ambitious US$4.8 billion development of the offshore Upper Zakum field, which is scheduled to come on stream in April 1983 producing 200,000bpd initially, rising to one million bpd eventually, together with on-going development and exploration programmes, means that towards the end of the decade the UAE could be sitting on capacity of around 3 million bpd. Oil planners are reported to be very happy about this prospect, as it will give them an unprecedented flexibility in production and marketing. Of course, it all depends on how the world oil market develops over the next few years, and UAE oil minister, Dr Mana Said al-Otaiba, has already indicated that he does not foresee any improvement on the current official price of US$34 a barrel for higher quality crudes before 1985. But the general inference is that the United Arab Emirates will not be hurting for funds in the near future. Oil Production Cutbacks The crucial equations inevitably are in the oil industry. Over the past three years, as part of production cuts introduced by OPEC, the UAE’s quota has been steadily revised downwards. In the first quarter of 1982 the emirates were producing an average of 1.35 million bpd. After OPEC’s extraordinary meeting in Vienna in March, this figure was reduced to 1.00 million bpd, while the premium for Abu Dhabi Murban crude was cut from US$1.50 a barrel to US$0.56 cents, pricing it at US$34.56 a barrel rather than US$35.50 which had been agreed at the Organisation’s previous regular meeting in December 1981. The UAE’s 1.00 million bpd quota was divided between Abu Dhabi and Dubai in the ratio 75:25, with Sharjah producing a minimal 10,000bpd. As the biggest

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producer in the Emirates, most of the cuts had to come from Abu Dhabi. As a result Abu Dhabi allowables which had already been reduced to 1.065 million bpd as from 1 January were further sliced back to 865,000bpd from 1 April, following the Vienna meeting in March. Within Abu Dhabi the brunt of the squeeze was borne by the Abu Dhabi Marine Operating Company (ADMA-OPCO), owned by the Abu Dhabi National Oil Company (ADNOC) with 60 per cent, British Petroleum 14.66 per cent, Compagnie Française des Pétroles (CFP) 13.33 per cent and Japan Oil Development Company (JODCO) 12 per cent. ADMA-OPCO’s offtake from its Umm Shaif and Zakum fields was reduced from 435,000bpd to 250,000bpd as of 1 April. The reason for this choice was that Abu Dhabi did not yet depend on Zakum for supplies of associated gas. At the same time the small Sahil field, which had been producing 15,000bpd was temporarily shut down. But these cuts still did not bring the UAE as a whole down to within its quota. As a result the Abu Dhabi Company for Onshore Oil Operations (ADCO) – 60 per cent owned by the government; the rest by BP, Shell, CFP 9.5 per cent each, Mobil and Exxon 4.75 per cent each, and Partex 2 per cent – was prevailed upon to cut back production at its Bu Hasa, Asab and Bab fields (which in 1981 accounted for 578,386bpd) by a further 50,000 to 60,000bpd. Dubai’s output was also reduced from around 350,000bpd to nearer 250,000bpd (though the emirate’s recourse to the spot market sometimes makes exact figures impossible to give). As a result the UAE as a whole corseted itself within OPEC’s one million barrels-a-day quota. The immediate effects were not good. The government, which had previously made an unprecedented provision in its budget for a deficit of Dh2.3 billion (US$626 million) for 1982 suddenly found that this deficit had already reached Dh4 billion (US$1.09 billion) in the first six months of the year (see below). It also became apparent that the country’s oil industry was suffering. Dr al-Otaiba, normally one of the most diplomatic and uncomplaining of oil ministers, admitted in an interview in June that cutbacks in oil production had led to parallel reductions in associated gas supply, with the result that the gas plant at Ruwais was only running at 50 per cent of capacity. The minister said in as forceful a way as possible that, ‘We are losing a lot of money on the onshore gas plant (at Ruwais), so I think that as soon as this oil market problem clears up, we have to raise our oil production so as to obtain an acceptable minimum supply of associated gas for our plants.’ In addition there were problems arising from the supply of associated gas to the LNG plant at Das Island, and the minister appeared worried that some of the UAE’s traditional customers might seek other sources of supply. By September

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1982, there had been no significant increase in the OPEC quota, so the UAE oil industry was still languishing. Promising Oil and Gas Discoveries The country has been able to make up for this by investing more time, energy and money in its oil and gas development plans. As indicated above, the UAE’s future hopes are tied in with exploitation of the huge offshore Upper Zakum oil field, which is due to come on stream in April 1983. Originally it had been hoped that the project would be ready for production in August 1982, but there were difficulties because of the complexity of recovery techniques. Initial predictions from UAE oil ministry officials suggest that production in the first year will be 200,000bpd, rising to 350,000bpd and 500,000bpd. The Zakum Development Company (ZADCO), the joint-venture between Adnoc and CFP which is managing the field, has already been talking of eventual expansion to 800,000bpd and the figure of 1 million bpd bas also been officially mentioned. An export terminal is being built at Zirku Island, some 60 kilometres from the field. Eventual beneficiaries will be the equity holders in the field, Adnoc (88 per cent) and the Japanese group JODCO (12 per cent). Abu Dhabi officials are clearly elated by the prospect of Upper Zakum coming on stream shortly. It was not so long ago that Adnoc’s foreign partners were arguing strongly against·further exploration and refused to enter an equity-sharing venture to exploit Upper Zakum. (Thus it was left to the oil-hungry Japanese to make the commitment.) There is also another group of smaller onshore fields waiting to come on stream – Umm Addalkh, Satah, Dalma and Jamain, again all operated by a joint-venture between Adnoc and Jodco. The combined capacity of these fields has been put at around 50,000bpd–25,000bpd from Umm Addalkh and 25,000bpd from the others. Start-up date for Umm Addalkh is scheduled for mid-1983, with the other fields following later. The export terminal for these four fields is being built at Dalma Island where the Abu Dhabi government appears keen to promote general social and economic development amongst the people who already live there. Another onshore field which is set to come on stream in 1983 is Shah, operated by ADCO, with a capacity of 30,000bpd. In addition, the last couple of years have witnessed a number of promising oil and gas discoveries elsewhere in Abu Dhabi, including: – the Ghasha structure (in part of the ADMA-OPCO onshore area) which could eventually produce an estimated 200,000bpd of oil, as well as considerable quantities of gas – Zubbaya (onshore south-west of Abu Dhabi) where ADCO are engaged in optimistic drilling

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– Umm al-Lulu (offshore, about 15 kilometres north of Abu Dhabi city) where ADMA-OPCO has tested at a rate of 24,000bpd – Hair Dalma (offshore just east of Dalma Island) where ‘significant’ oil and gas/condensate discoveries are reported. However, these discoveries are said to pale into insignificance beside the non-associated gas found by ADMA-OPCO offshore in the Permian Khuff zone underlying the Zakum oilfield. Tests are reported to have confirmed reserves of over 75 million cubic feet a day. These lie close to another recent non-associated gas discovery underlying the Umm Shaif offshore fields, where a well tested at over 80 million cubic feet a day. The Umm Shaif reserves are now estimated at around 100 trillion cubic feet, while an earlier discovery in the Thamama F and C formations of the onshore Bab field is put at 90 trillion cubic feet. All in all, some experts have suggested that Abu Dhabi could be second only to the Soviet Union in the volume of its gas reserves. Currently most of Abu Dhabi’s gas is channelled through the Abu Dhabi Gas Liquefaction Company‘s US$550 million plant at Das Island. The Abu Dhabi Gas Liquefaction Company is owned by Adnoc (51 per cent), Mitsui (22.05 per cent), BP (16.33 per cent), CFP (8.17 per cent) and Bridgestone (2.45 per cent). Its Das Island terminal, which came on stream in 1977, has the capacity to produce 2.7 million tons of LNG and one million tons of LPG annually, most of it exported to Japan. In 1981 a US$525 million project to expand and develop the Das Island plant was initiated. Adnoc is now playing with various possibilities for exploitation of its new gas discoveries. One involves construction of a third train at the Das Island plant, another the building of a second LNG plant, perhaps at Ruwais. But in fact the downturn in the oil market has hit Abu Dhabi’s gas industry rather severely. Traditional customers such as Japan have begun looking elsewhere for cheaper supplies of gas. Particularly hard hit has been the Abu Dhabi Gas Industries (Gasco) US$2.2 billion LPG plant at Ruwais. As reported above, the Ruwais gas-gathering and fractionation plant for associated gas from the Bab, Bu Hasa and Asab onshore fields is operating at under 50 per cent of capacity. Partly this is due to cutbacks in oil production from the fields themselves, partly to high prices. So looking at their gas industry as a whole, Abu Dhabi officials are content for the moment to let the current downturn in the oil market allow them a breathing space to delay having to take binding decisions on the future of gas development. In the long term they seem convinced that ‘gas is the fuel of the future’ and that their mammoth reserves will stand them in good stead. Apart from new discoveries and gas development, Abu Dhabi is also engaged on ambitious development programmes for its existing oil fields. Offshore this means that ADMA-OPCO is in the middle of a three-year (1981–83)

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programme, budgeted at US$2.9 billion, to maintain production capacities over the next 20 years of 320,000bpd from Lower Zakum and 250,000bpd from Umm Shaif. At the start of the year the allowables from these two fields were fixed at 210,000bpd for Lower Zakum and 200,000bpd for Umm Shaif. But in the event, with Abu Dhabi having to squeeze cutbacks in production in order to stay within its OPEC quota, Lower Zakum allowable was sharply reduced to 50,900.bpd, as suggested above, because, alone among Abu Dhabi’s major oil fields, Zakum is not an essential source of associated gas for its LNG and LPG plants. To complete the picture of on-going development of Abu Dhabi’s fields, Adco is also in the middle of a five-year (1981–85) plan, budgeted at US$2.1 billion, to stabilise production capacity of its Bu Hasa, Asab, Bab and Sahil onshore fields at 900,000bpd. This compares with allowables in April 1982 totalling 500,000bpd – all of it prime Murban crude which helped appease Japanese customers for shortfalls in Zakum crude. The main components of the programme are a selective injection and production scheme at Asab, Bab and Sahil, involving the drilling of 121 new oil production and water injection wells into various strata, and further development of Bu Hasa, including the drilling of 234 new production and water injection wells. Dubai and Sharjah in on the Act While Abu Dhabi still remains the centre of the UAE hydrocarbon industry, there have also been significant developments along the coast in Dubai and Sharjah in the past year. In Dubai, where OPEC quotas meant a cutback in production from around 350,000bpd to 250,000, 1981 output by the Dubai Petroleum Company which operates four offshore fields off Dubai, in fact averaged 358,598bpd, compared with 349,274bpd in 1980. Breakdown of the 1981 production by field was: Fateh 184,178bpd, South-west Fateh 161,568bpd, Falah 9,296bpd and Rashid 3,556bpd. More interestingly, Dubai has proved rather spectacularly successful with its first onshore oil and gas discovery, announced in May 1982. Arco Dubai, a subsidiary of the US Atlantic Richfield Company, struck oil and gas 45 kilometres east of Dubai City in the Margham concession it shares 2:1 with the British National Oil Corporation. In August Arco awarded the main consultancy contract (worth some US$20 million) for the first phase development of Margham to the British subsidiary of Fluor Corporation of the United States. At that time it was announced that production of 20,000bpd of oil and 250 million cubic feet a day (cfd) of gas was envisaged, rising to a possible 100,000bpd and 1,000 million cfd. Fluor will be providing engineering and procurement services for a gas gathering network

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and separator/treatment plant capable of coping with the first set of figures. The oil will be pumped through a 64 kilometre pipeline to storage tanks and an export terminal at Jebel Ali. About 150 million cfd of gas will be re-injected into the field. In September Arco was set to begin drilling a second exploration well about three-and-a-half kilometres south of Margham One. Actual drilling is entrusted to Santa Fe International, now owned by Kuwaiti interests. Dubai’s Margham is reported to be in the same formation as Sharjah’s high-yielding onshore Sajaa field which came on stream in summer 1982. Last year’s Middle East Review reported how the real success of 1981 belonged to Sharjah where Amoco Sharjah Oil Company, a subsidiary of the Standard Oil Company of Indiana, had discovered an oil and gas field some 20 miles inland with a production capacity of 25,000bpd, rising later to 50,000bpd. Gas reserves located at Sajaa and related Mawa’id are estimated at 10 trillion cubic feet. Since production at Sharjah’s main Mubarak oilfield has been steadily running down, the Saaja field is a lifeline to the small northern emirate which only two years ago was considered the worst credit risk in the world and now is one of the best. As we shall see below, businessmen are flocking back to the previously ghost-town atmosphere of Boorj Avenue, and confidence is looking up. Moves Towards Integration Not only that but, following the discovery of sizeable deposits of gas in Sharjah, the state-owned Emirates General Petroleum Corporation (EGPC) which markets petroleum products in the Northern Emirates, has begun looking into plans for using the gas for power generation and for industrial development. This would give an important boost to the integration of oil, gas and energy matters in the UAE as a whole. At the moment development of the hydrocarbon sector is the responsibility of the individual emirate concerned. The federal oil ministry only fully comes into play when it represents the country as a whole at OPEC meetings. In Abu Dhabi, the most influential oil state, the Abu Dhabi National Oil Company (ADNOC) and the oil department are responsible for all oil sector activities including product marketing. However, the EGPC, established in November 1980 chiefly for product marketing in the other six emirates, has given a boost to federal activity in hydrocarbons. In June the Federal National Council (parliament) took matters somewhat further when it recommended that the UAE ministry of petroleum and mineral resources should play a greater role in the overall supervision and co-ordination of the oil policies of the seven emirates. It also called upon the rulers of the various emirates to work closer with the federal oil ministry in order to achieve

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a unified federal oil policy and help conserve the country’s dwindling oil resources. Interestingly, there has been more advance on co-ordination of oil policies in the Gulf region as a whole than in the UAE alone. In March 1982, as an offshoot of the burgeoning Gulf Co-operation Council (GCC), oil ministers of the six member states agreed to draw up a unified oil policy and adopt common positions vis-a-vis the outside world in international and specialised organisations. The ministers also agreed to set up a permanent GCC oil committee to deal with oil policy co-ordination, emphasising that it should operate in ‘all phases’ of the industry, including ‘production, refining, industrialisation, pricing, utilisation of natural gas and the development of (alternative) sources of energy’. It was further suggested that co-ordination of oil policies should go hand in hand with co-ordination of industrial policies. In this context Abu Dhabi is to be the site for one of the next major Gulf co-operation exercises. The Doha-based Gulf Organisation for Industrial Consulting (GOIC), which comprises GCC members plus Iraq, has put forward plans (including a feasibility study) for construction of the region’s first petroleum coke plant which would be built in the Ruwais industrial zone. The US$200 million project would be a joint-venture between Adnoc and GOIC member states. It would have a capacity of 160,000 tons of coke which is said to be required to meet the needs of aluminium smelters in the area, particu1arly DUBAL in Dubai and ALBA in Bahrain. No date has been given for go-ahead on the project. In a related move, which suggests its commitment to Gulf co-operation, Abu Dhabi has become one of the first countries to award contracts to the new Arab Engineering Company (AREC), an offshoot of the Organisation of Arab Petroleum Exporting Countries (OAPEC). One contract, involving the assessment of the UAE’s energy needs over the next 15 years, is said to be the first of its kind undertaken by an Arab company in the Gulf. The second is for support for Adnoc in management supervision of development of the Thamama C gas reserves, the Upper Zakum oil field and the new hydro-cracker to be built at Ruwais. Abu Dhabi has also been looking further afield for co-operation in the energy field. Oil minister Dr Mana Said al-Otaiba has been seriously considering a French offer to supply an atomic reactor for peaceful purposes. This is part of the UAE’s policy of diversifying its energy and power sources. In recent months there have been a number of contracts signed for the construction or upgrading of power-generation schemes. In January 1982, for example, a British firm, Keir International, won the construction contract and the French firm Alsthom-Atlantique the contract to supply gas turbines for a new 75MW power station to be built on Das Island for ADMA-OPCO. The station should make

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ADMA-OPCO, which currently depends on Abu Dhabi Gas Liquefaction Com-

pany supplies, self-sufficient in energy. As far as the general consumer demand for power is concerned, Abu Dhabi is currently putting its faith in development of its US$1.5 billion 1,500MW power station and desalination complex at Taweelah, near the border between it and Dubai. Work on levelling and preparing a three-square kilometre site is well under way. Brown Boveri of West Germany and Skoda (of Czechoslovakia) have been short-listed to carry out the construction work on the two 160MW units which together with four desalination units, will make up the first stage of the power station work. In July, however, Abu Dhabi authorities were said to be undecided whether to continue with oil as the main source of fuel for the complex or switch to natural gas, now in increasingly abundant supply. A second stage will add a further 750MW of power-generating capacity and more desalination plants. It is expected that the Tawila plant, situated as it is so close to the Abu Dhabi-Dubai border, will eventually be tied into a national grid. For the time being, however, electricity supply is on an emirate-by-emirate basis, with some of the northern ones frequently running into power-shortage difficulties because of lack of funds to improve their generating capacity. Budget Deficit Hits Spending Inevitably, with both oil production and prices on the skids, most financial and trade statistics in the past year have made gloomy reading. The process started in March when the UAE Council of Ministers approved the 1982 federal budget which for the first time allowed for a deficit. Total revenues were estimated at Dh20,276 million (US$5,520 million) and total expenditures at Dh22,559 million (US$6,142 million), leaving a gap of Dh2,298 million (US$626 million). This deficit was apparent even after ministers had managed to trim expenditure by 13.9 per cent from the previous year’s figure of Dh26,200 million (US$7,133 million). The main allocations were wages Dh3,893 million (US$1,060 million), current spending Dh2,694 million (US$733.5 million), capital expenditure Dh286 million (US$77 million), development projects Dh1,950 million (US$531 million) and investments Dh1,590 million (US$433 million). Then in July came official figures from the UAE Central Bank which showed that the UAE balance of payments surplus fell to US$3.5 billion in 1981 from US$4.9 billion the previous year. The balance of trade surplus also showed a drop from US$13.5 billion in 1980 to US$12 billion in 1981, mainly as the result of a fall in oil exports from US$19.6 billion to US$18.3 billion. Some countries might not consider these bad statistics to report, particularly as the UAE showed an increase in non-oil exports from US$2 billion to US$2.3 billion. Rather, it was the shock of a budget deficit as such which hurt, particularly after mid-year figures

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suggested the deficit was worse than expected. In August the finance and industry ministry under secretary Ahmad al-Tayer admitted that the estimated deficit for the first six months of 1982 had reached Dh4.0 billion (US$1,089 million), more than scheduled for the whole of the year. However, analysis of the UAE’s investment income indicates that this should be just enough to cover the growing budget deficit. In January Central Bank Governor Abdal Malik al-Hamar stated that the country’s accumulated surplus in foreign assets and reserves since 1980 was in the order of US$10 billion, and that projected investment income would be US$1 billion. Other sources have suggested that foreign reserves in fact stand much higher and that investment income may be correspondingly higher. Either way the UAE is not likely to have too much difficulty finding funds to cover its budget deficit. The main casualty of reduced revenues is development spending. The ministry of planning is reported to have said that, apart from a nominal Dh10 million, all the Dh1,950 million allocated to development is being spent on projects already in hand. Main beneficiaries are electricity and water, followed by communications, education and public works. In all sectors of the economy, it seems, modest to swingeing cuts in expenditure have been demanded. The ministry of defence, for example, had its demand for Dh14 billion cut to Dh8 billion, still a Dh500 million (6.7 per cent) increase on last year. Electricity and water projects are having to make do with Dh500 million when almost twice as much had been requested. Fuel subsidies, at Dh700 million, are down from the Dh1.35 billion allotted to subsidise petroleum products in the Northern Emirates in 1981. Meat subsidies for the month of Ramadan are also down from Dh450 million in 1981 to Dh150 million in 1982. Following the deteriorating half-year budget figures, finance and industry minister Sheikh Hamdan bin Rashid al-Maktoum warned ministries that finance would be tight, even in 1983. He issued a directive which observers note did not specifically order cuts but which advised ministries to keep a ‘tight hold’ on expenditure and not to plan projects requiring large-scale investment. The minister also called for closer scrutiny and feasibility studies for all projects. Nevertheless, cash shortages have already begun to hit some of the municipalities in the smaller emirates, particularly on the east coast. Fujairah city is said to be running a deficit of Dh38.5 million (US$10.5 million) and has shelved plans for a slaughterhouse, municipality offices and staff housing. New roads are being delayed because the town cannot pay compensation for private land and buildings which have to be demolished. Similar difficulties have been reported elsewhere. However, cutbacks in expenditure have also had a beneficial effect because the lack of new projects to which to devote energy and funds has

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meant municipal and emirate authorities have had to finish off old ones. Thus Fujairah has a new port, Ras al-Khaimah a new cement plant at Khor Khuwair and Ajman’s Arab Heavy Industries in August launched the largest vessel ever built in the UAE, a 60-metre long barge built for Adnoc subsidiary National Petroleum Construction Company. Indeed, today’s straitened financial circumstances have concentrated decision-making minds rather positively. Thus Abu Dhabi and Dubai managed to agree fairly amicably what their respective contributions to the 1982 federal budget should be. Abu Dhabi no longer seems adamant that each emirate should pay 50 per cent of its revenues into a central kitty. Thus Abu Dhabi and Dubai, the two main oil producers, will be providing 98 per cent of total revenues: Dh16,675 million (82.2 per cent) from the former and Dh3.0 billion (15.8 per cent) from the latter. This means that Abu Dhabi is again paying more than it did in 1981, when it contributed 78 per cent of the budget. But it is generally agreed that the oil downturn hits the smaller producers worst and that Abu Dhabi has more ‘fat’ to live off. ‘ Regulation by Federal Authorities The ‘recession’ has also ‘stimulated a new round of empire building by federal authorities, most of it far-sighted and effective, some of it rather petty. Thus the Central Bank has been maintaining its determined efforts to keep federal finances under control. In 1981 when vast sums of dirhams were finding their way into the Bahrain offshore market, the Central Bank introduced a 15 per cent reserve requirement on local banks’ lending activities outside the UAE. In March 1982, when the faint-hearted might have been getting jittery about the prospects for the economy, the Central Bank raised this requirement to 30 per cent. The reason, according to Abdal Malik al-Hamar, was to maintain a high level of local liquidity, ensure reasonable interest rates to facilitate local lending at reduced cost and spur economic development. Other moves by the Central Bank have included a call for import tariffs and an order to unlicensed money-exchange dealers to close. The Central Bank has also tried to ensure that the local banking business is more controlled by UAE nationals or, at least, companies. In 1981 it ordered foreign banks operating in the country to reduce the number of their branches to eight by January 1984. Some of the more widely extended foreign banks such as the British Bank of the Middle East (BBME) immediately began closing some of its branches. One year later there appears to have been a sort of compromise whereby some of the banks worst affected by the order, such as the BBME and the Bank of Credit and Commerce International (BCCI), are said to be thinking of becoming

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locally incorporated, with a majority (60 per cent) UAE shareholding. In the meantime some of the local banks are happily taking the opportunity to expand rapidly. The directive on banks is part of a general policy of rationalisation of the laissez-faire wheeling and dealing which went on during the UAE’s first decade. The federal authorities have been trying to rationalise customs procedure across the emirates. They have managed fairly successfully to limit agency business to UAE nationals, but moves to introduce a countrywide commercial law which limits ownership of businesses to locals have been postponed for the time being though they could well be revived at any time. Insurance companies have been subjected to the same restrictions as banks, and advertisers have been ordered that 70 per cent of their displays should be in Arabic. The public works and housing ministry is seeking to classify contractors, while Abu Dhabi is even debating a draft scheme for regulation and classification of consultants. In the wider labour market there have been efforts to cut back on the employment of foreign workers. Each of these measures is in its way revolutionary, and none more so than the attempt to establish federal uniformity on customs dues. As from February 1982 the UAE has had a Higher Council for Customs charged with rationalising the country’s differing import duties, customs procedures and fees, and regulations covering warehousing, transit goods and free-trade zones. From April a start was made in this direction with both Dubai and Sharjah cutting their basic import duties from three to one per cent to bring them in line with Abu Dhabi. Dubai has also dropped a two per cent duty on transit goods which have up to 30 days to clear the country. Such brisk acceptance of uniformity had not been expected of Dubai, where the ruler Sheikh Rashid has traditionally relied on customs dues for a proportion of his income. Analysts suggest that Dubai’s cutting of its duties is designed as a fillip for the economy. Local newspapers reported that the cuts were worth at least Dh240 million (US$65.4 million) to local businessmen who were very appreciative. As for the other moves to extend nationalistic cover to UAE businessmen, the most immediate is the federal law governing commercial agencies which came into effect in February 1982. From then on all the emirates, and that meant particularly Dubai, had to follow Abu Dhabi’s practice of allowing only UAE nationals to carry on agency business. Provisions such as the right of an agent to claim compensation if an agreement is terminated without ‘justifiable reasons’ have made some foreign firms uneasy. Agencies had until 24 August to register with the economy and commerce ministry, otherwise they lose the protection of the law and the ministry. Now the government is hoping to introduce a federal company’s law which would require all businesses setting up in the UAE to be locally owned. Existing

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business will have to be 51 per cent controlled by a UAE national. However, this piece of legislation has been withdrawn for further study following objections that it would be unworkable as drafted. For example, it is suggested by critics that foreign participation in local businesses is no bad thing. If a foreign company is willing to put equity into a project, that shows its commitment to the whole enterprise. Undeterred, the authorities are pushing ahead with further measures to bring businessmen under control and boost local interests. Since the beginning of 1982 Abu Dhabi has had a code for classifying contractors. This has six project categories – depending on value – and only firms registered as experienced in each category can submit tenders. The system is reported to have worked fairly well in Abu Dhabi, though there has been criticism that local firms have been boosted into categories where they lack experience. Now the ministry of public works and housing is examining plans to extend Abu Dhabi’s code to the whole of the UAE. As with many aspects of the UAE’s social and political development, Abu Dhabi leads the way and the others follow. The government has also begun to tackle the vexed question of foreign labour. A Sharjah newspaper recently reported that 80 per cent of the total workforce in the country was Asian, chiefly Pakistani, Indian and Bangladeshi. In May, government departments were officially told to stop recruiting expatriates for unskilled jobs. Later the civil service commission specified that if vacancies in government departments remain after being advertised, then suitably qualified UAE nationals should be nominated for the jobs. If that brings no appropriate personnel, then priority goes to UAE residents who are not nationals, followed by nationals of other Gulf states and nationals of other Arab states. The directorate general of nationality and immigration has also announced that residence permits are being withdrawn from expatriates who spend more than six consecutive months outside the UAE. Specific manpower agreements have been entered into with Sudan, Tunisia, Morocco and Jordan, while group entry visas for non-Arab workers are no longer being issued for groups of less than 25. The general policy seems to be that jobs should be reserved for UAE nationals, or, if none are available, for Arabs (with preference for those from the Gulf), and only in the last resort should additional labour be introduced from outside. Moves to restrict various categories of immigrant labour coincide with the general recession in oil and then by association in industry. Unsurprisingly, there is not the seemingly insatiable demand for workers which there was in the mid-1970s.

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Development of Industry Nevertheless, the two major industrial centres envisaged in those years – one at Ruwais in Abu Dhabi and the other at Jebel Ali in Dubai – have been growing without too many hitches, often confounding those critics who dismissed the schemes at the start. Abu Dhabi’s Ruwais industrial complex, which was officially inaugurated by Sheikh Zayed in March 1982, is the more specifically tied to hydrocarbon development of the two. Centrepiece of the complex is a 120,000bpd refinery, which came on stream in 1981, and is now capable of supplying all UAE’s domestic demand for refined petroleum products. (There is also a small 15,000bpd refinery at Umm al-Nar which will eventually be upgraded to a capacity of 70,000bpd.) Over the past few months ADNOC, the operator of the complex, has been deliberating over whether to expand the capacity of the refinery to 300,000bpd by 1984 as had been originally planned. It appears to have decided against this option, arguing that the export demand for refined products is still sluggish. Instead, it will concentrate on the installation of a 27,000bpd hydro-cracker to upgrade fuel oil residue into lighter products, such as benzene, diesel and aviation fuel suitable for the domestic market. The Italian company Snamprogetti was reported in August to have won the US$300 million contract to build the hydro-cracker. Ruwais also acts as the terminal for gas from the onshore Bu Hasa, Asab and Bab oil fields. It has a fractionator capable of producing 4,750,000 tons of LPG and condensates for export, mainly to Japan. A urea-ammonia fertiliser factory is under construction, and, as reported earlier, there are plans to build a US$200 million petroleum coke plant. Additional desalination facilities and power plants will be added. However, some of the proposals in the original master plan for Ruwais, such as the construction of a petrochemical plant and a steel mill, have been dropped for the time being. Much of the basic infrastructure for an industrial city has been provided, but there are not yet many spin-off businesses capable of taking advantage of these facilities. Dubai’s Jebel Ali complex is more advanced in this respect. It is not so tied to the oil industry, though gas from the Emirate’s offshore fields is the basic fuel for all developments, particularly the energy-hungry aluminium smelters of Dubai Aluminium (DUBAL). Like the overall complex itself, the construction of DUBAL had come in for considerable criticism from cynics who doubted the need for a small emirate to enter such an undertaking. But since DUBAL came into full operation in autumn 1981, it has been producing at a rate of 140,000 tons a year, some of which is exported to markets including Japan. Other major developments at Jebel Ali include a desalination plant which can contribute 10 million gallons to Dubai city when the municipal supplies dry

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up. It also provides up to 150MW of surplus power into the Dubai system. There is a port which is gradually drawing off the traffic in industrial cargo from Port Rashid. Major regional freight carriers such as United Arab Shipping are now developing container terminals at Jebel Ali because they feel it has proved its worth. In 1981, 1,091 ships used Jebel Ali port compared with only 484 in 1980. Container traffic reached 108,231 20ft container units (TEUs) in 1981, 70 per cent up on the 1980 figure of 63,792 TEUs. Now that Jebel Ali port has been put on the map leasing of plots for manufacturing industry began to take off in the last year. There were reported to be 12–15 tenancy agreements signed before the end of 1982. Companies already in the zone include Cleveland Bridge & Engineering which makes steel structures for export throughout the Middle East, Milchem of the United States, Costain, the British construction firm, Gulf Extrusions, using DUBAL’s aluminium for door and window frames, DUCAB, a joint-venture between the Dubai government and British Insulated Callender’s Cables, producing heavy-duty cable, and Coflexip, a French company concentrating on marine cables. Dubai has other large-scale industrial projects in the offing, including a US$340 million dry dock which has been severely criticised for duplicating facilities further up the Gulf in Bahrain. Perhaps the most dynamic local industry on a countrywide basis (apart from oil and general trading) is construction, particularly construction materials such as cement. Although there has been a significant downturn in the construction market since the heady days of the mid-1970s, a welcome sign today is that sophisticated companies such as Eastern International of Sharjah are winning contracts to build in other emirates, including Abu Dhabi. Other raw materials being generally lacking, most emirates have invested in cement production. A sixth cement plant in the UAE, the Fujairah Cement Industries Company, was due to start production at its 500,000 ton a year plant in October 1982, The others are in Sharjah, al-Ain (Abu Dhabi), Dubai and two in Ras aI Khaimah. Already combined capacity is more than 3.5 million tons a year, and proposed new plants (in Umm al Quwain, Ras al-Khaimah, Sharjah and Ajman) could push capacity up to 10 million tons by the mid-1980s. Already Mohammed Nizar Sibai, general manager of Dubai’s National Cement Company, owned by the al-Ghurair trading family, has said that the market is over-subscribed and that construction of additional cement works will spark a price war which could destroy the industry. Mr Sibai suggests that internal demand for cement is 2.5 million tons a year, with an additional 300,000 tons for export. He has called on ADNOC to supply subsidised fuel to cement plants.

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Agriculture and Tourism Promising If construction is the most dynamic local industry, agriculture is in many ways the most important. Although many steps have been taken to develop agriculture, its share of GDP has actually fallen from 1.8 per cent in 1972 to 0.9 per cent in 1979. The ministry of agriculture has claimed that local production could cover 57 per cent of the country’s food needs if sufficient funds were invested. Currently it estimates 60 per cent of fodder requirements, 20 per cent of livestock, 38 per cent of eggs, 29 per cent of fruit and vegetables and 88 per cent of fish are locally produced. By the end of the current development plan in 1985 it hopes to have increased annual production of certain commodities (1980 figures in brackets) to: vegetables 200,000 tons (125,000 tons); fruit and dates 65,000 tons (51,000 tons); milk 36,000 tons (23,000 tons); eggs 260 million (54 million); meat and poultry 8,700 tons (2,600 tons); and fish 106,000 tons (64,000 tons). The main food-producing emirates are Abu Dhabi, where agriculture is heavily subsidised and supported by the Ruler, and Ras al-Khaimah, which benefits from winter rain and underground water supplies. Abu Dhabi’s agricultural development is centred on al-Ain, though there are ambitious projects elsewhere in the emirate for the ‘greening of the desert’. Abu Dhabi has proved one of the most successful countries in the world at growing crops hydroponically. Ras al-Khaimah has some 15 per cent of its total land area under agriculture. About half its 62,000 population are engaged in the production of fruit, vegetables, animal fodder and other crops. The main problem with agriculture in Ras al-Khaimah is that underground water reservoirs are being depleted. Indeed, the federal ministry of agriculture and fisheries recently warned that underground reserves – currently estimated at 9,700 cubic metres – throughout the UAE could run dry within 30 years unless conservation measures were introduced. Agriculture is reported to account for 90 per cent of the 355 million cubic metres of water used annually, and the ministry estimates that wastage could be cut by 60 per cent. An interesting new development in the UAE in the last year has been the increase in tourism. The great hotel building boom of the 1970s now appears to have come to a stop. But there are still around a dozen top class hotels, particularly in Dubai and Sharjah, competing for a not very huge market in business visitors. Occupancy rates in even the best of these hotels is often not much more than 20 per cent. (Abu Dhabi is slightly different because it never had visions of itself as an international leisure centre, so its main hotels are expensive and tend to be fully booked by businessmen.) Consequently the federal tourism ministry is beginning to promote the advantages of holidays in the UAE in the wider world.

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For some people a holiday in such an environment might mean time spent in the oasis of Al-Ain in Abu Dhabi. To the more adventurous it could be a few relaxing days in Dubai or Sharjah, soaking up the atmosphere of the souks, before an exciting ride across the desert to the unspoilt beaches of the Northern Emirates. To cater for increasing traffic Abu Dhabi inaugurated a new airport in January 1981. The new Abu Dhabi International Airport is designed to cope with 3 million passengers a year, with scope for further expansion well up on 1981 arrivals of 1,850,000 passengers flown by 33 international airlines. In addition, there are international airports in Dubai, Sharjah and Ras al-Khaimah. Sharjah International Airport has recently had a marked upturn in traffic, though travellers through Ras al-Khaimah are still few and far between. The following is a brief round-up of developments in individual emirates: Abu Dhabi After oil, which has already been dealt with, the most active economic sector in Abu Dhabi, the largest emirate, is construction. In the past year there have been conflicting reports about the pace of construction in Abu Dhabi. On the one hand there have been rumours that budgetary constraints have forced the postponement of the planned 135-metre-high tourist tower. Cost of the scheme was estimated at just under US$100 million and it had been suggested that the motivation for the project was that Sheikh Zayed wanted a taller building than the Dubai International Trade Centre. But reports of the cancellation have been denied in Abu Dhabi. On the other hand, there has been evidence of a continuing boom in the housing sector, with rents as high as they have ever been. The underlying reason is that supply of housing has failed to keep pace with demand. One cannot rent an average three-bedroomed flat for less than US$20,000 a year. Leases on four and five-bedroom villas in the recently completed Madinat al-Karamah luxury private-sector development for the Abu Dhabi Investment Company (ADIC) range between US$41,000 and US$55,000, with demand reportedly high. ADICs involvement suggests another feature of Abu Dhabi economic life. With few resources except oil and continuing financial surpluses, much of the creative energy in the emirate goes into trying to find additional outlets for investment. In April 1982 a new international oil investment company, owned by ADNOC and the Abu Dhabi Investment Authority, was established. The US$500 million company, known as the International Petroleum Investment Company (IPIC) is looking to build or finance projects in oil, petro-chemicals, refining, transport and energy resources. Only UAE nationals and businesses will be able to buy shares in the new investment company, which may take over Adnoc’s existing stakes in projects like the Suez-Mediterranean Pipeline (Sumed).

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Dubai The traditional entrepôt of the Lower Gulf, Dubai suffered at first from the effects of the Iranian revolution and the Iran-Iraq war. However, recent reports suggest that the emirate has recovered its position as a trading centre. Certainly most of the evidence points to a buoyant economy. For example, Dubai town suffered few of the cutbacks encountered in other parts of the country. The municipal budget for 1982 was set as Dh1.5 billion, well up on 1981’s Dh900 million. Of this, some Dh251 million is allotted to new projects (almost half of it for new roads), while Dh438 million is for completion of projects already in hand. The most ambitious new scheme is a sewage treatment network which is expected to cost Dh2,800 million (US$762 million) over 10 years. Since most of the development in the UAE in the 1970s happened so quickly and so haphazardly, Dubai is only just getting round to allowing itself the luxury of a master development plan. Traffic flow is a major problem and needs attention immediately. Meanwhile private commercial interests that have benefited from Dubai’s capitalist development have been enjoying continuing success. There is still a considerable amount of money floating around in the economy, to the extent that shares in the Commercial Bank of Dubai were oversubscribed, causing the bank to raise its authorised capital from Dh150 million to Dh500 million, and to increase its paid-up capital to Dh200 million. Prominent traders and financiers such as the Galadari brothers have maintained their high profile. The Galadaris in particular have been looking at investment opportunities outside the Gulf and traditional havens for capital in Europe and North America. In the past year, for example, they have been negotiating deals in India and the Far East. Sharjah Sharjah is the great success story of the past year. Exports from Amoco‘s Sajaa field have started and production is scheduled to rise from 25,000bpd to 80,000 within 12 months. This has led to renewed interest in business development in Sharjah. The depressed market in offices, apartments and hotels has started picking up. As one indication of the new atmosphere, four more airlines were expected to start using Sharjah international airport in 1982, bringing the number of airlines using its facilities to 15. In 1981, before the boom fully got under way, 71,852 incoming and 66,220 outgoing passengers used the airport, compared with 27,051 and 29,318 respectively the previous year. Amongst the new visitors to Sharjah have been bankers. An important development was the National Bank of Sharjah‘s apparently successful negotiation with Crédit Suisse to lead-manage a US$300 million syndicated loan to help

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restructure the emirate’s debts and finance future development plans. In addition, the Sharjah government decided in late April to take up a US$150 million loan from the British Bank of the Middle East. Outstanding debt still stands at US$800 million, according to one estimate. But Sharjah is no longer considered the sick man of the Gulf. Ras al-Khaimah Ras al-Khaimah’s agricultural potential has been referred to above. In the past year there has been evidence that the emirate has a future as a minor industrial centre as well. In April the one million tons-per-year Gulf Cement Company was officially opened by Sheikh Saqr, the ruler of Ras al-Khaimah. But it had in fact been running for a year during which time its net profits amounted to US$7.2 million – mostly from exports to Kuwait. A new drug company, Gulf Pharmaceutical Industries (GPI), was scheduled to start production in September, following an extraordinary general meeting in February which doubled the company’s capital to Dh200 million (US$54.4 million). These and other industrial enterprises are capitalising on Ras al-Khaimah’s promise as a centre for exports. Mina Saqr is the most northerly port in the UAE, close to the Strait of Hormuz and well placed for shipments to Iran and up the Gulf. Recognising this, the government has tried to encourage the re-export trade through Mina Saqr, which in February 1982 announced it was no longer charging customs duty on transit goods. New sheds at the port, which is managed by an affiliate of the British company Gray Mackenzie, have recently been built, giving it 29,000 square metres of covered storage space. However, the emirate’s economy as a whole has been experiencing a downturn, for the first time since its recession between 1977 and 1980. Zaki Saqr, director of the emirate’s Chamber of Commerce, told the Khaleej Times recently that government spending was down and a drop in economic activity had been experienced since July. Fujairah, Ajmam and Umm al-Quwain Developments in these small emirates have been dominated by their aggregate stone and cement business. In February 1982 Sheikh Saud bin Rashid al-Mu’alla, a member of Umm al-Quwain’s ruling family, announced that his emirate was building a one million-tons-a-year cement plant, capitalised at Dh50 million (US$13.6 million), 30 per cent of which will be held by Sharjah’s Khor Fakkan Cement Company, the rest by· Kuwaiti investors. In Fujairah the 500,000 tons a year Fujairah Cement Industries Company was hoping to come on stream by October. In the same emirate a Dh18 million (US$4.9 million)

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rockwool (asbestos) factory built by Saudi Arabia’s Bin Laden Organisation started operations in February and a new ceramics plant was due to begin production in June. Both these factories are developments by the federal government using local materials and fostering export-oriented industry. There is some excitement about a copper deposit which is thought to run through Fujairah. Ajman too is to have a new 500,000-tons-a-year US$26.5 million Portland cement works, to be built by Japan’s Nissho Iwai Corporation (NIC). Integrated industrial development seems the order of the day, with the ministry of electricity and water choosing Ajman as the site for a 3.6 million gallons a day reserve osmosis desalination plant. This facility, which will include 10MW of installed electric power units, will be one of the largest of this type in the Gulf. There are also good prospects for finding an extension of Sharjah’s Sajaa oil field in Ajman. The US South Eastern Drilling Company (Sedco) has been drilling at a site near Hamadiyah, 6.5 kilometres west of the Sajaa field.

1984 OPEC London Agreement – Defence Expenditure – Expatriate Community – ADNOC and Upper Zakum – Taxation – Local Banks Benefit

The past year saw important developments in the United Arab Emirates which could well set the pattern for the near future. The most outstanding has been the fact that major policy decisions in the country were undertaken in a collective manner by the UAE in conjunction with its partners in two organisations: the Organisation of the Petroleum Exporting Countries (OPEC) and the Gulf Co-operation Council (GCC). During the first decade of its young life, from 1971 to 1981, the UAE had been primarily absorbed in its birth pangs, the most acute of which was how to effect a coherent and structured federation of seven tiny emirates with disparate populations, sharply different incomes, and opposing outlooks on what the federation entailed. The greatest weakness occurred as a result of the differences between Abu Dhabi and Dubai: Sheikh Zayed bin Sultan al-Nahyan of Abu Dhabi was the very active President of the UAE, and Sheikh Rashid bin Saeed al-Maktoum of Dubai adopted a stand which did not encourage the strengthening of central authority. In 1979, two major events occurred which were to alter the course. The first was the premiership of Sheikh Rashid, thus heralding the effective incorporation of Dubai into the daily administration of the federation. The second was the Islamic revolution in Iran which radically altered the balance of power in the Gulf region, and ultimately brought about the Iran-Iraq war which is still in progress. The first of these changes has led to steady progress in the internal consolidation of the country which continues to evolve in a positive manner. The second made the UAE vulnerable to external forces over which it has little power. The result has been that the country has taken steps to act on a more collective basis with the other Gulf states, albeit under Saudi leadership, while at the same time continuing the process of integration on the local level. OPEC: Prices and Production Quota Perhaps the most far-reaching decision taken by the UAE during 1983 was as a member of the OPEC. This was, of course, the London Agreement announced on 14 March 1983. According to the agreement reached after weeks of intensive negotiations, all OPEC members would cut the price of Arabian Light marker

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crude by US$5 a barrel to US$29. The oil minister of the UAE, Mana Said al-Otaiba, told a press conference a few weeks later that his country would have preferred the price of US$30 a barrel, but that the UAE would abide by the London Agreement which was expected to hold for some time. But more important to the UAE than the pricing of the oil was the production quota also agreed on in London. For the UAE, this was limited to 1.1 million barrels a day (bpd). Since the emirate of Abu Dhabi is the largest oil producing emirate in the UAE, it stood most to suffer from the cutback in production. Dubai, which is the other oil producing emirate (Sharjah produces only condensate, which was not restricted in output by the OPEC agreement), will only need to cut production from 360,000bpd to 300,000bpd. It is known that Mr al-Otaiba was extremely reluctant to accept the production quota, particularly since it would drastically affect the huge investments made in the Upper Zakum field of Abu Dhabi which would not then yield anywhere near the projected level for the expected returns. At the OPEC meeting in Vienna in December 1982, he had rejected the quota assigned to the UAE of 1.1 million bpd. Moreover, he had publicly refused to lower the price of UAE crude below US$34 a barrel. Oteiba only accepted the slowdown in production after the direct intervention of King Fahd of Saudi Arabia. The King sent an emissary to Sheikh Zayed to convince him of the importance to OPEC of such a level. In accepting the price and production level set by OPEC, the UAE has embarked on a new course whereby it has made important concessions in favour of a collective decision. The UAE has therefore linked its economy to those of its fellow member-states in OPEC, the most important of which, of course, is Saudi Arabia. The immediate consequence of’ the London Agreement was the reduction in oil revenues on which the entire economy of Abu Dhabi, and a minor part of that of the UAE, depends. This has affected public spending on development projects, and on social and welfare services; it has also had a noticeable impact on the large expatriate community. The Cutback in Spending In 1982 the UAE had the first planned budget deficit in its history; by the end of the year, the actual deficit had risen by 25 per cent of the original estimate. It was obvious that a similar situation would occur in 1983. The 1983 budget, whose announcement was delayed until August 1983, was to carry a deficit of around US$1.5 billion. A period of relative austerity is ahead for the UAE, with the emphasis clearly on, the word ‘relative’. For there can be no question that the country is far indeed from being on the verge of penury, but the lavish spending of the period from 1975 to 1980 is no longer feasible.

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Several major projects in the planning stage are being shelved, and a number of relatively unimportant projects are either being cancelled or postponed. Moreover, delays in all phases of projects under way are being experienced, together with the deferment of payments. The development process, however, has not been discontinued. Rather, it is that priority is being given to those projects of immediate importance, together with those that adhere to the UAE’s long-term requirements. Oilfield development continues; together with hydrocarbon and petrochemical projects. The increase in general industrial projects since 1981 seems set to continue. One form of public expenditure appears to be totally unaffected by the declining oil revenues: spending on defence requirements. In 1982 alone, defence accounted for around half of the total UAE budget. In 1983, it was to reach 60 per cent. The UAE concentrated in 1983 on expanding its air force; it has already purchased combat aircraft and anti-aircraft defence systems including ground to-air missiles. It is also constructing a large military complex in Abu Dhabi. The purchase of such arms and ammunition seems to have been made at the expense of social services on which the UAE has always prided itself. During the 1982/83 scholastic year, the salaries of primary and secondary school teachers were delayed for months at a time, and many teachers have been made redundant for the 1983/84 year. Moreover, a system to cut down on medical expenses has been introduced; it includes the curtailment of patients going abroad for medical treatment at government expense. The contrast between defence spending and budget cuts for social services provides a good indicator of the nervousness of the government regarding national security. The UAE signed a bilateral defence agreement with Saudi Arabia in 1982, but the GCC mutual defence agreement, which has been discussed almost since the birth of the Council, has not yet been finalised; this is largely due to the stand taken by Kuwait, which is the only Gulf state not to have signed a defence agreement with Saudi Arabia, and which is clearly reluctant to sign away what it regards as its sovereignty. But other aspects of co-operation between the member states of the GCC have continued. The GCC Umbrella As in the case with OPEC, the UAE has demonstrated its willingness to act collectively within the GCC, even if some of the decisions taken are not necessarily advantageous to it. The increasing insecurity of the Gulf environment as a result of the continuing Iran-Iraq war, compounded by the special position of the UAE towards that war, have been the major factors influencing this stand. The UAE has, for example, contributed substantially to the Iraqi war effort by lending that country large sums of money. In doing so, it has acted to support

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another Arab country and a fellow-member of the League of Arab States. Of late, however, it has had to discontinue the loans because of its own financial restrictions. Another reason for the UAE’s reluctance to lend Iraq more money is due to its wish to steer clear of the possibility of angering the government of Iran. For the UAE also has a large Iranian population, mostly centred in Dubai, which it has no wish to alienate. Moreover, Dubai has in the past run a very profitable entrepôt trade with Iran which at the moment is suffering a decline due both to the shortage in Iran of foreign currency and the general insecurity of the Gulf waters as a result of the continuing war. The UAE has therefore attempted to run an even course between the belligerents. It has unceasingly supported the repeated Iraqi calls for a fair end to the war and the mediation of the United Nations to bring this about. At the emergency meeting of GCC foreign ministers in May 1983, the UAE, along with its fellow member-states, agreed to increase its efforts to bring about the cessation of hostilities. The UAE is also keenly aware of its own Iranian and Shi’a population, and the fact that Iran is a fellow Muslim country. It therefore sanctioned the arrival of the first Iranian ambassador to the UAE since the revolution. But the government is wary of any Iranian activity that might disturb the delicate balance in the country, and in July 1983 some Iranians who tried to enter the UAE illegally during the Ramadan feast, were arrested. Economic Participation in the GCC One of the important decisions taken by the GCC this year was the formation of the Gulf Organisation for Investment which was announced after a summit meeting in November 1982. The organisation, which will be based in Kuwait, will have a capital of US$2.1 billion. It had been expected that the November summit would result in the final version of the unified economic agreement which had been in the making since an earlier summit in November 1981. One of the reasons for the delay was due to the difficulties of applying some of the clauses of the agreement in the member-states without certain qualifying conditions. An important and difficult problem that has to be solved before the final agreement can be reached concerns the UAE Commercial Agencies Law which does not conform with a united Gulf market, particularly since the Law makes no provisions for non-UAE nationals who are also nationals of the GCC member-states. Another problem was the application of a unified levy for GCC member-states. This was set at 4 per cent to 20 per cent, but the corresponding figures in the UAE have traditionally been one per cent to four per cent.

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During the course of further GCC meetings, provisions for the final agreement were worked out. Regarding the Commercial Agencies Law of the UAE, a legal loophole has been provided. Member-states with conflicting local legislation will be temporarily exempt from applying certain clauses of the final agreement for a finite period, the length of which will be decided by the governing body of the Council. Regarding the unified customs of the member states, the UAE announced in May 1983 that it would raise its customs dues in September to conform with those of the GCC. This announcement is more meaningful if placed in perspective: Abu Dhabi and Dubai, the two leading emirates of the UAE, only agreed to unify their customs dues one year earlier. The ability of the country to adapt to new measures in favour of collective benefits is amply demonstrated. Other GCC agreements in effect in 1983 related to customs exemptions of agricultural imports from member-states and permission for GCC nationals to run certain types of businesses in member-states. Future plans to regulate economic co-operation include the unification of the prices of petroleum products, water and electricity. Feasibility studies are also under way on how to integrate the electric power networks of the member-states, and what measures to adopt to prevent maritime fraud. The UAE thus continues to link its economic future with those of the other states in the GCC. Further economic integration was to be discussed at the meeting of GCC ministers at Taif in Saudi Arabia. Foreign Relations The UAE continues to act in conjunction with its fellow members of the GCC regarding broad political objectives, and here, once again, the lead has been taken by Saudi Arabia. Thus, at the November GCC summit, the UAE, along with the other states, endorsed the decisions taken at the Fez summit following the war in Lebanon. The GCC summit also expressed its support for the sovereignty of Lebanon and called on Israeli forces to withdraw from that country. The UAE joined with other Gulf states in refusing to welcome the British foreign secretary in January 1983 following the objections of the British government to the participation of the Palestine Liberation Organisation (PLO) in the Arab League delegation to London. Once the compromise solution of Walid Khalidi was accepted, the visit of Francis Pym took place in April. The war closer to home, however, has been of greater concern. As all the Gulf states spend more and more on buying military hardware, they appear to be standardising their equipment with that available in Saudi Arabia. Since the Saudi defence system is heavily reliant on US arms, the UAE, along with other Gulf states, has sought this past year to purchase US advanced combat aircraft.

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But the US government refused to sell the most advanced of these weapons to any Gulf country other than Saudi Arabia. The US government sanctioned the sale of less advanced aircraft instead, and claimed that those would be adequate to meet the short-term requirements of the Gulf states. A few weeks later, in late July 1983, a spokesman for the State Department declared that it was a policy of the US government to maintain freedom of navigation in the Gulf; this statement was made shortly after an Iranian threat to block oil movement in the Gulf if Iraq disrupted Iranian shipping. Clearly, then, the implications are that the US does not consider the Gulf states capable of protecting their own interests. Even more alarming to the UAE during the past year has been another aspect of the consequences of the Gulf war: the oil slick which has been spreading as a result of the seepage caused by the destruction of Iranian oil wells. The slick is around 20,000 square kilometres and could pose a serious threat to the UAE’s desalination and power plants, and, if continued unchecked, could obstruct navigation; the ecological implications are obvious and need no elaboration. Although American, German and Dutch companies have been trying to contain the slick, the latest round of the war which started in the summer threatens to undermine these attempts. Federal Affairs The policies implemented by the government in conjunction with its partners in both OPEC and the GCC have had inevitable repercussions locally. The deferment of teachers’ salaries and the redundancies of many teachers have already been referred to above; they have also been contrasted with the continued spending on military hardware bought from the USA, France and Switzerland. The financial constrictions have focused the attention of the government even more on the huge expatriate community. Many measures were taken during the past year to reduce the number of foreigners living and working in the country. The declared policy of the UAE is to increase the proportion of Arab workers and to reduce the number of Asians, mainly from India, Pakistan and Bangladesh, who at present represent at least half of the non-national labour force. Bilateral labour agreements with Morocco and the Arab Republic of the Yemen during the past year implemented such a policy by favouring the workers of both these countries. Measures to curb the number of expatriate workers have been growing. Foreign workers now have to leave the country for a minimum of six months before returning to take up a new job. They have to leave within a week of the termination of their contracts, and their employers have to provide a bank deposit equivalent to the return fare to their own country before a work permit is

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issued. Expatriates in the private sector now have to retire at the age of 60, and from the end of 1983, foreign residents have had to meet their own medical expenses, hitherto provided free of charge. The application of the Commercial Agencies Law has also acted to reduce the number of foreigners, particularly the Western businessmen. Foreign companies which have no local partners are no longer entitled to work permits for their foreign employees. The cuts in public expenditure have necessarily created redundancies, and with the slowing down of projects, less high-level manpower is needed. For the first time in many years, more Europeans are leaving the UAE than are arriving. A recent report by the ministry of planning has shown that the growth rate for nationals during the past year exceeded that for expatriates for the first time. Of course, the country is not going to be suddenly bereft of its expatriate community which was estimated to represent anywhere between 75 per cent and 80 per cent of the total population in 1982. But the growth of the past decade or so has come to a halt and will start to reverse if the present economic climate continues. Expatriates and Education Education is one field which is still almost totally dependent on expatriates. Over 90 per cent of teachers in primary and secondary schools are foreign. The ministry of education has to cut its annual budget by 10 per cent during the coming scholastic year, and teachers have been dismissed in an effort to reduce the running costs of education. Another field dependent on foreigners is medicine. Here pay rises were introduced during the past year, since many of the top level specialists, mostly Western, wished to resign because salaries were too low. A number of bilateral agreements have been signed during the past year with friendly countries to promote co-operation in various domains. Two such agreements have been signed with Pakistan: the objective of one is to co-operate in mass media, particularly radio and TV, and to produce culturally important programmes; the second aims to promote agricultural development which is becoming a priority in the UAE’s long-term objectives, particularly in places like Ras al-Khaimah where projects with the United Nations Food and Agriculture Organisation (FAO) are under way. Other bilateral agreements signed in 1983 were with Oman to promote educational, scientific and cultural co-operation; with Qatar, the People’s Democratic Republic of Yemen (PDRY) and Iraq to promote educational cooperation. The financial situation will undoubtedly change the proportion of aid donated by the UAE to other countries, although officials have indicated

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that the level will be maintained. The UAE is one of the largest aid providers in the world, at one point having donated around 20 per cent of its GNP. Priority will continue to be aid for Arab countries, then Muslim countries, and finally for friendly Third World states. One big question mark surrounds the future of the UAE, and more particularly, that of Dubai: the continuing poor health of Sheikh Rashid. His role in federation affairs since 1979 has already been referred to above; whether his successor will continue his policies remains to be seen. The new, collective associations of the UAE, such as those in OPEC and the GCC, have depended on the nature of the relationship between Dubai and Abu Dhabi. Since the institutionalisation of government is still in its most rudimentary form, much will depend on the personal rapport of the future rulers of both emirates. Sheikh Rashid‘s wife, Sheikha Latifa bin Hamdan, died in May 1983 together with a chapter in the history of the UAE. She was a cousin of Sheikh Zayed of Abu Dhabi, her own father having been the ruler of Abu Dhabi from 1919 to 1922 when his brother, Sheikh Zayed’s father, murdered him and took his place as ruler. Sheikha Latifa, along with her immediate family, then took refuge in neighbouring Dubai whose relations with Abu Dhabi had always been strained. In 1938, she married Sheikh Rashid whose father was the ruler of Dubai, and one of her sons will become the next ruler. As the new generation comes forward to participate in federation affairs, a new phase in the country is unfolding. The rivalry between Abu Dhabi and Dubai has changed in many ways; it has now been superseded by their common interest in effective security arrangements and long-term stability. Economic Affairs Do not believe all the hard luck stories about the business environment. In the UAE, oil prices may have dropped by US$5 a barrel over 1982/83, and total oil revenues fallen from a high of US$18 billion in 1980 to an estimated US$11 billion in 1983, but Abu Dhabi has not begun running down its foreign reserves which total something like US$18 bi1lion (providing an income of over US$1 billion a year), and the UAE in general is still the world’s richest country in terms of per capita income (US$24,660 according to the World Bank). Even though the country does not have the vast oil wealth of Saudi Arabia or the internal market of Iran, this is a comfortable cushion on which to refashion an economy which may have been somewhat artificially nurtured during the oil boom 1970s. That having been said, no one in the UAE, and certainly not oil minister Dr Mana Said al-Otaiba, was particularly happy that continuing lack of world demand caused OPEC to restrict its overall output in March 1983 to 17.5 million bpd, of which the UAE’s share was only 1.1 million bpd. This was in fact

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100,000bpd more than the emirates had been producing throughout much of 1982. But Dr al-Otaiba had let it be known that UAE had been squeezed particularly hard with a one million bpd ceiling. Gas plants, particularly Ruwais, which was running at only 50 per cent of capacity, had been severely affected. And in 1983 the UAE had to accommodate its massive new US$4.8 billion development of the offshore Upper Zakum field, capable of producing one million bpd on its own. As a result, at the beginning of the year Dr al-Otaiba was saying that on no account could the UAE contemplate output of less than 1.6 million bpd, of which Abu Dhabi would account for 1.2 million bpd. In the event it was only the reported intervention of King Fahd of Saudi Arabia, who contacted UAE President Sheikh Zayed while the latter was on holiday in India, which ensured that the UAE would come within the OPEC production quota. Abu Dhabi Bears Brunt of Cuts This lower than expected ceiling also called for some hard bargaining between Abu Dhabi and Dubai over their respective shares of the 1.1 million bpd quota. In the past Dubai has been fairly oblivious to any OPEC restrictions. But this time Abu Dhabi was not willing to have all the cuts in production made from its fields. Eventually, about a month after the OPEC agreement of 14 March, Dr al-Otaiba announced that Dubai had agreed to cut its oil production from 360,000bpd to 300,000, leaving Abu Dhabi’s share at 800,000bpd, scheduled to be made up from 500,000bpd from onshore fields and 300,000bpd from offshore. However, throughout the next few months there were signs that Abu Dhabi was smarting from having to continue to endure reductions in its output (and contribute to the bulk of the UAE federal budget as well). Restrictions on the new Upper Zakum field, which had been expected to be producing at 200,000bpd in its first year, appeared to hurt most. Output from Upper Zakum was actually running at 25,000bpd when Mahmoud Hamra-Krouha, general manager of the Abu Dhabi National Oil Company (ADNOC) admitted in June that his company had been selling crude from Upper Zakum at US$28 a barrel, one dollar below the official US$29 a barrel price of similar Arabian Light. However, Mr Hamra-Krouha denied this was ‘under-cutting’. He argued that Upper Zakum crude had turned out to be inferior to Arabian Light, with a lower yield of middle distillates and higher sulphur content. Therefore, he said, Upper Zakum could not be compared to or priced the same as Arabian Light. Since oil minister Dr al-Otaiba is himself chairman of the OPEC Monitoring Committee looking into violations, of the March price and production agreement, Adnoc, the major shareholder in the Zakum Development Company (Zadco) with the

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Japan Oil Development Company (Jodco), is unlikely to have been acting against the OPEC consensus. The coming on stream of Upper Zakum, however, has meant further cuts in production for Abu Dhabi’s other fields, particularly the Lower Zakum field operated by the Abu Dhabi Marine Operating Company (ADMA-OPCO), a joint venture between Adnoc (60 per cent), British Petroleum (14.66 per cent), Compagnie Française des Pétroles (13.33 per cent) and Jodco (12 per cent). ADMA-OPCO’s main fields are the old Abu Dhabi Marine Areas concessions offshore at Umm Shaif and Upper Zakum. As recently as January 1982 these two fields were producing 410,000bpd, mainly for export through the nearby Das Island terminal. This output was split roughly 50:50 between the two. In February 1983 production was cut to 250,000bpd (125,000 each). Then in June ADMA-OPCO’s allowables were further cut to 215,000, with Lower Zakum’s share drastically slashed to 65,000bpd. Lower Zakum can stand such reductions, because, alone amongst Abu Dhabi’s major oil fields, it is not an essential source of associated gas for LNG and LPG plants. In addition to ADMA-OPCO’s output, Abu Dhabi also produced 4–500,000bpd from three large onshore fields – Bu Hasa, Asab and Bab operated by the Abu Dhabi Company for Onshore Oil Operations (Adco), owned 60 per cent by Adnoc and 40 per cent by the Iraq Petroleum Company partners (BP, Shell, CFP, Exxon, Mobil and Gulbenkian interests). To make up Abu Dhabi’s 800,000bpd quota additional production comes from four minor fields offshore – Mubarraz, run by the Abu Dhabi Oil Company (Adaco) comprising a group of Japanese companies; Arzanah, operated by a group of US independents headed up by Amerada Hess; Al-Bunduq operated by ADMA-OPCO on behalf of BP, CFP and a Japanese consortium; and Abu al-Bulrush, run by a company led by CFP. The main Abu Dhabi government vehicle in all its oil production ventures is the state oil company, Abu Dhabi National Oil Company (Adnoc). Besides its holdings in ADMA-OPCO and Adco, Adnoc is the major shareholder in the Abu Dhabi Gas Liquefaction Company (ADGAS) whose US$550 million Das Island plant has the capacity to produce 2.7 million tons of LNG and 1 million tons of LPG annually, mostly for export to Japan. Japan is also the main customer for another Adnoc venture (with Shell, CFP and Partex), Abu Dhabi Gas Industries (Gasco), which runs the US$2.2 billion plant at Ruwais extracting propane, butane and condensate from associated gas produced by the onshore Bu Hasa, Bab and Asab oil fields. This LPG plant is the main feature of the growing Ruwais industrial zone. Other Adnoc interests include refineries at Umm al-Nar and Ruwais; its marketing subsidiary, the Abu Dhabi National Oil Company for Distribution, and

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bodies like the Abu Dhabi Pipeline Construction Company and the Abu Dhabi National Tanker Company. Adnoc is beginning to build up its involvement in downstream projects outside the emirates, notably a refinery and fertiliser plant in Pakistan where it holds, respectively, 40 per cent and 48 per cent of the shares. The drop in oil output in the last two years has now caused Adnoc to cut back on new staff recruitment. All companies in the group, which in all employs 19,000 people, have been told to cut back on personnel and administrative costs. It has also encouraged ADGAS – 51 per cent owned by Adnoc, with BP, CFP and Mitsui as minority shareholders – to look to the Euromarkets for a substantial US$500 million loan for general purposes and project financing. Unlike the case of the Emirates General Petroleum Corporation (EGPC), see below, the seven lead managers in the ADGAS loan (Abu Dhabi Investment Company, Arab Banking Corporation, Arab Petroleum Investment Corporation, Chase Manhattan, Gulf International Bank, Bank of Tokyo and National Bank of Abu Dhabi) were successful in getting a reported 42 banks in on the loan which is fully guaranteed for eight years with a spread 0.5 per cent above Libor for the first four years and 0.625 per cent for the second. The loan is earmarked for the completion of construction of seven new storage tanks on Das Island and for the longer term project of piping gas from Khuff below the offshore Umm Shaif oil field to Das Island. So despite the need for outside finance Adnoc is still bent on expansion. This is borne out by its activities in related fields. In June the US$300 million extension to its Umm al-Nar refinery (raising capacity from 15,000bpd to 75,000bpd) was commissioned. Its main task will be to provide 2.6 million tons of gas oil, fuel oil and other products to Abu Dhabi and the other emirates. Then at the end of the year the Ruwais Fertilizer Company (Fertil) was due for completion. Fertil (two thirds owned by ADNOC) will use natural gas from Abu Dhabi’s onshore fields to produce 1,000 tons of ammonia and 1,500 tons of urea a day. 50 per cent of output is contracted to go to Japan’s Mitsubishi and India’s Minerals and Metals Trading Corporation. Renewed Interest in Dubai Compared with Abu Dhabi, developments in the hydrocarbon industry elsewhere in the emirates have been somewhat small beer. In Dubai there was nevertheless a marked renewal of interest in opportunities following confirmation of a large onshore oil and gas field at Margham owned 2:1 by Arco Dubai, a subsidiary of US Atlantic Richfield, and by the British National Oil Corporation. The Margham field, which has a possible capacity of 100,000bpd of oil and 1,000 million cf/d of gas is now expected to come on stream at the end of 1984. At

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least four concessions have now been awarded by Sheikh Rashid since the last quarter of 1982 – the first onshore to BP, then in March offshore to a consortium made up of Taylor Woodrow Energy, Cluff Oil and Saxon Oil, and onshore to KCA International of the UK, and finally in June onshore and offshore to the Adolf Lundin Group of Sweden. In neighbouring Sharjah it has been a matter of attempting to maximise returns from the Sajaa and related Mawa’id fields discovered by the Amoco Sharjah Oil Company, a subsidiary of the Standard Oil Company of Indiana in 1981. Oil condensate output from the two fields could reach 80,000bpd, while gas reserves are estimated at 10 trillion cubic feet. Over the past year Amoco Sharjah has embarked on a project to double the output of condensate to 55,000bpd over 15 months. However, there is now a pressing need to find uses for the huge amounts of gas produced with the condensate. One estimate says that 10,000 cubic feet of gas are produced per barrel of condensate, which means that in mid-1983 250–300 million cf/d of gas were having to be flared. There are plans to deliver a proportion of the Sharjah gas to the Emirates General Petroleum Corporation (EGPC) to fuel power stations and industry (mainly cement) in the Northern Emirates. It had been hoped to start production in 1983, rising to 200 million cf/d by the end of 1984 and 300 million cf/d by 1987. This project is certain to go ahead, but it was set back in mid-summer when a proposed US$190 million loan for EGPC was cancelled owing to confusion about where and how much the Corporation could borrow. It appears EGPC’s constitution prevents it borrowing from financial institutions outside the emirates without UAE federal shareholding. It also does not allow EGPC to borrow more than 25 per cent of its capital which, although authorised at Dh3 billion (US$818 million) is actually paid up at Dh800 million (US$1.09 million). Another difficulty is that, according to some sources, bankers took a now somewhat less enthusiastic look at EGPC’s finances following the removal of certain subsidies on petrol and other products. This led to cash-flow problems which frightened off some bankers. Now a US$32 million loan, provided by APICORP (either on its own or jointly with Gulf International Bank) may go ahead. If EGPC does eventually take 300 million cf/d of gas, what is to become of the additional 300 million cf/d of gas output brought about by the condensate expansion programme? Amoco has been studying a plan for a gas re-injection scheme, which may become feasible when the reservoir has been drawn down a little in a few years. Meanwhile in May 1983 seven international groups – led by Amoco, Japan Gasoline Company, Mitsui, Voest Alpine (of Austria), Davy McKee of the UK, Snamprogetti of Italy and Ferrostaal of West Germany- submitted bids for a US$300 million LPG plant to process Sajaa gas. The project,

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which would be run by a 70:30 joint-venture between the Sharjah government and the selected partner, involves construction of an LPG separation plant at the Sajaa field, an 84 kilometre pipeline from the field to the terminal on Sharjah’s east coast and a propane/butane fractionation plant at the terminal. Oil Prospects for Smaller Northern Emirates In the smaller emirates too there has been some, but not particularly large-scale, activity in the oil sector. In Ajman a state oil company capitalised at US$35 million, the Ajman National Oil Company (ANOC), was set up in July. It is to be responsible for all oil-related activities in the emirate, including exploration, drilling, surveying and granting of licences to foreign companies. In August the Ajman government signed a contract with the Kuwait-owned company Santa Fe International for the drilling of the second of three onshore exploratory wells, following the successful completion in March of the first well (drilled by the US South Eastern Drilling Company (Sedco)), which tested 640bpd of 56° API condensate and 2.7 million cubic feet a day of gas. The three wells are in a concession covering both onshore and offshore Ajman and owned 18.4 per cent by ANOC, 56.5 per cent by the Bahrain-based consortium Gulf Consolidated Services and Industries (GCSI), 17.6 per cent by Reynolds Diversified of the US and 7.5 per cent by Canadian companies. Operator of the two wells is Landoil, a subsidiary of Basic Petroleum and Minerals, both of the Philippines. Finally, amongst the emirates, Ras al-Khaimah is moving quickly to exploit its recently discovered Saleh offshore fields. Saleh IX has been tested at 6,000bpd, and it is hoped to raise this figure to 30,000bpd. Wardley Middle East, part of the Hongkong and Shanghai Banking Corporation, and Gulf International Bank are reported to be amongst international banks raising US$73 million to finance the first stage of development to production. The Ras al-Khaimah concession is owned 50 per cent by the Ras al-Khaimah National Oil Company, 25.23 per cent by the operator Gulf Offshore Ras al-Khaimah, a wholly owned subsidiary of the US Gulf Oil Corporation, 10.61 per cent by Taiwan’s Overseas Petroleum and Investment Corporation, 8.66 per cent by International Petroleum Corporation owned by Swedish entrepreneur Adolf Lundin, and the remainder by two European groups Petrokal and Wintershall. Budget Deficit – after Long Delay Clearly, continued low (in comparison to potential) output of oil in the emirates has taken its toll on the federal budget. As early as January finance and industry minister, Sheikh Hamad Bin Rashid al-Maktoum, was predicting overall spending would be down on 1982’s Dh22,259 million (US$6 billion). But in

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fact the budget for the fiscal year 1 January to 3 December 1983 was not approved by the UAE until the beginning of August – a delay which caused not a little anxiety since the country’s provisional constitution lays down that the budget should be presented two months prior to the end of the previous fiscal year. In the event the budget showed the federal deficit more than doubling from Dh2,283 million (US$627 million) to Dh5,506 million (US$1.5 billion), the largest shortfall in the UAE’s 12-year history. Revenues were down 36 per cent to Dh12.9 billion (US$3.5 billion), while expenditure was set to be squeezed back a further 18.4 per cent to Dh18.4 billion (US$5 billion). All major items of expenditure were due to be cut back except wages and salaries (up 3.8 per cent) and current expenditures (up 4.3 per cent). There was a marked drop in the sum allotted for financial investments – down 69 per cent to Dh495 million (US$135 million). At the same time the individual emirates have been posting their own deficits. Indeed, one of the reasons for the lateness of the federal budget was said to be non-payment of budget contributions by the various emirates. One deputy in the Federal National Council was reported as saying, ‘There are emirates which have resources but don’t make contributions.’ He added that, out of the US$6 billion contributions to the 1982 federal budget, just under half had actually been paid. Figures in the Central Bank’s report issued in May seem to put both revenue and expenditure for 1982 somewhat higher than the federal budget. However, the Bank agrees on the Dh2,283 million (US$627 million) budget deficit in 1982, which follows a surplus of Dh5.7 billion (US$1.5 billion) in 1981. The Bank also has its own figure for the balance of payments, which, contrary perhaps to expectation, remained in surplus in 1982. According to the Bank, oil revenues in 1982 fell to Dh34.6 billion (US$9.4 billion) from Dh45.5 billion (US$12.4 billion) in 1981, helping halve the balance of payments surplus from Dh12.9 billion (US$3.5 billion) in 1981 to Dh6 billion (US$1.6 billion) in 1982. The report admits in fact that the final balance of payments surplus figure for 1982 may be even smaller. This is partly because there was little hard information during the year about oil prices and production. Rethinking of Economic Priorities The combined effect of rising budget deficit and declining balance of payments surplus has led to debate about the priorities of the UAE economy. Over 12 years of independence a laissez-faire system of running the country has developed. But it has been very dependent on the oil revenues of one emirate, Abu Dhabi, which still contributes about 80 per cent of the overall budget. Now there is much more thinking about rational planning of the economy and, allied to

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that, about how best to pay for federal services. One side-effect of this has been a certain xenophobia. UAE nationals have started asking why expatriates, who still make up an incredible 82 per cent of the population, should be able to benefit from free health, education and water, like themselves. This kind of thinking has spread to the business environment, where there have been moves to reduce foreign holdings in various enterprises There has even been previously unheard of talk about the introduction of taxation, including income tax, into the emirates. Predictably this has led to a marked difference of opinions. In March the influential under-secretary in the finance ministry, Ahmed al-Tayer, was quoted as saying, ‘We are studying ways and means of taxation, though no clear decision has been arrived at yet. We are going into the question of types of taxation – whether it should be a tax on imports or services, or income tax. There is no way to face the budget deficit and control government expenditure without deciding on some form of taxation.’ However, a few weeks earlier, his minister, Sheikh Hamdan bin Rashid al-Maktoum, had told Al-Bayan that he did not think it was necessary to impose any taxes on incomes. A certain rethinking of the state’s foreign-aid policy might be called for, he felt. Clearly there is a lot of thinking and talking to be done on this subject still. Nevertheless the government has had to take steps to increase revenue at home. In May, for example, it introduced medical charges for non-nationals and raised fuel prices. A law introduced on 11 May 1983 now requires non-nationals to pay Dh250 for an annual medical card, which will entitle the holder to treatment at a cost of Dh10 a time. Additional charges of Dh600 are to be made for major operations, Dh300 for minor ones, Dh50 for most types of dental treatment and Dh100 for a comprehensive check up. Immunisation, child and maternity care remain free of charge. UAE nationals are to continue to receive medical care free of charge, but health minister Hamad Abdel-Rahman al-Madfa has made clear that patients will not be sent for treatment abroad unless it is absolutely necessary. Cost Cutting the Order of the Day In addition the government has taken measures to reduce fuel subsidies. In early May petrol prices were raised by between 31 and 36 per cent, with the price of super grade petrol rising from Dh3.70 to Dh4.90 a gallon. One interesting factor about this increase is that it was the first time a unified price system had been agreed throughout the emirates. Previously ADNOC set prices for Abu Dhabi, and the state-owned Emirates General Petroleum Corporation (EGPC) for the remaining six emirates. Now the whole country is to have the same prices on the petrol pumps. An estimated Dh1.4 billion a year in fuel subsidies will be saved by the increases. But some dissatisfaction has been voiced at the

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subsequent 20 per cent increase in taxi fares in the Northern Emirates, where the EGPC ran into cash-flow difficulties when expected subsidies did not materialise. There are many other areas where cost-cutting is the order of the day, particularly in the civil service. In August the education ministry decided to stop serving school meals and to end its uniform allowance. Earlier it had said it would dismiss staff in an effort to cut its 1983 budget by 10 per cent. In the civil service generally a freeze on appointments was imposed, and the federal government said it intended to layoff 8.5 per cent of its 20,000 workforce. The 1,700 people scheduled for dismissal were mainly Asians and Arabs from outside the Gulf, according to Abdel-Rahman al-Rustomani of the Civil Service Commission. Cuts in manpower were blamed for lateness in payments to contractors at the start of the year. In fact the delays were part of a deliberate government belt-tightening exercise. In an effort to allay fears of a cash-flow crisis, in May the finance ministry announced a new scheme for payment by instalments to contractors. As suggested by finance minister Sheikh Hamdan, further cuts in expenditure have been made in the aid budget. According to the Central Bank’s 1982 report, foreign aid fell substantially during 1982 from Dh9.4 billion (US$2.6 billion) to Dh6.5 billion (US$1.8 billion). Officials at the finance ministry and the Abu Dhabi Fund for Arab Economic Development (ADFAED) confirmed that this trend would continue. Nasser al-Nowais, a director general of ADFAED, told the Dubai daily Al-Bayan that the UAE would continue to be a generous aid donor (in 1979 it gave away a reported 20 per cent of GNP), but that ‘a complete revision of internal and foreign policy is needed in the light of the facts produced by the present oil crisis.’ He added that ADFAED would continue its existing order of priorities for aid – first projects in Arab countries, then Muslim states, and finally friendly Third World nations. Up to the end of 1981 ADFAED had been involved in 41 projects in 12 Arab states, 29 in 17 African countries, 10 in eight Asian countries, and three in Malta and Turkey. Exception Made for Defence One area where spending has not been cut is defence. Indeed, in March deputy defence minister Sheikh Mohammed bin Obaid al-Maktoum confirmed that expenditure on defence, which in 1982 accounted for approximately half the federal budget of US$6 billion, would be increased by 10 per cent in 1983. In an interview with Al-Bayan the deputy minister said the additional resources would be spent on modernising equipment, particularly in the air force. He referred to the imminent delivery of 24–26 Hawk Mark 61 super-trainer strike aircraft from British Aerospace. In addition he spoke of an undisclosed number of

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tanks and armoured vehicles which would be bought from British, French and Italian suppliers. However, the main beneficiary from the UAE’s procurement was France. Following a visit by French defence minister, Charles Hernu, in May 1983, Abu Dhabi contracted to purchase 18 Mirage 2000 jet fighters from the French firm Dassault Breguet, with an option on a further 18. In this respect, and in its reported interest in Gazelle helicopter gunships, the UAE was following the lead of Kuwait, with which it appeared to be co-ordinating its supplies in the context of the GCC common defence policy. Despite the government’s commitment to defence spending the general aspect of the economy has been one of cutbacks, if not of recession. In the marketplace there was throughout 1983 some confusion as to what exactly was happening. On the one hand the federal authorities were cutting back on new development projects. But at the same time they were encouraging local businessmen to take over joint-venture companies. In addition UAE financial institutions, in their eagerness to demonstrate the cutting of ties with foreign partners, sometimes tended, in a sort of nationalistic gesture, to over-extend their credit to local companies. Together with the continuance of the Gulf war between Iraq and Iran, which has emphasised the role of Lower Gulf ports for entrepôt traffic, these factors have meant little real slowdown in local business. Banking Sector still Profitable, though Confused The performance of the major banks on the whole reflected the conflicting pressures which affected the overall economy. Figures for 1982 showed local banks’ profits generally up, mainly because of record interest rates. However, according to informed sources trade-related business was down, often by 20 per cent. In 1982 the government introduced a directive which stipulated that no bank should lend more than 5 per cent of its capital to its directors. However, contrary to the general move towards local control of business and finance, this measure had the effect of increasing foreign bank activity, particularly in transactions such as letters of credit. The reason for this was that many of the Dubai private banks (such as the Bank of Oman owned by the al-Ghurairs) were established mainly to fund a particular merchant family’s business. When the government sought to cut back lending to directors to 5 per cent, some banks asked for an extension to come into line with the new directive. Others looked around for other institutions to finance the family business. Since it was unthinkable that one should ask the tied bank of a rival to fund one’s own trade, this meant giving the work to foreign banks. An alternative procedure was to set up a network of foreign-based branches, with the intention that these

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branches could finance one’s trade beyond the eye of the UAE regulatory authorities. But this latter approach was frowned on by the Central Bank. Giving more business to foreign banks was rather the reverse of the general direction of the economy. In 1983 the Federal Commercial Companies Law, originally passed in November the previous year, came into force. If anything the final version of the law strengthened the requirement that all corporations and partnerships formed in the UAE should have local ownership. In three out of four types of business association the law now says local interests must have 100 per cent control. The exception is the ‘private unlimited company’ in which foreigners can have up to 49 per cent of the equity. However, in joint stock limited liability and private stock companies, local businessmen must have complete control. Already a number of established foreign owned companies have reacted against legislation which requires them to divest themselves of ownership. For example, the British money broker Tullet & Riley was reported to be closing its Abu Dhabi office rather than give up majority ownership. Until now the banking sector has been spared any nationalisation moves. But since 1981 foreign banks have theoretically been supposed to be cutting back the number of their branches in the country to eight. In 1982, however, there were still 31 branches of the British Bank of the Middle East, 28 of the Bank of Credit and Commerce International (BCCI) and 19 of the United Bank in operation. Some Banks such as BCCI were reported to be considering incorporating in the UAE, while others were in fact slowly reducing their branch network. In the last year, however, the threat of nationalisation (or, at least, partial nationalisation) seems to have seized foreign bankers more strongly. This is partly a reaction to the order from the Abu Dhabi ruler’s office in January that all foreign banks in the emirate should pay 20 per cent of their annual profits to the ruler. Initially it was thought that this royalty would have to be paid retrospectively to 1973 when the old UAE Currency Board (now the Central Bank of the UAE) was originally set up. The reason for this idea was that it was thought it would bring in line all foreign banks in the emirate since some of them had been paying a ‘sponsorship’ fee since 1973. However, it was later confirmed that the 20 per cent tax would only be backdated as far as 1982. Even this was too much for some banks. Spain’s Banco Urquijo downgraded its presence in Abu Dhabi from a branch to a representative office, reportedly because of the combined effects of lack of business and the profits tax. Other banks were said to be considering similar action. Curiously, this mixture of circumstances has led to a situation where many local banks are awash with funds, many of which continue to be lent out to UAE

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businesses in an effort to win custom from more established, often foreign-based competitors. As a result the Central Bank is still battling for control of the banking sector and the UAE remains probably the most over-banked country in the world. Partly for this reason the World Bank-affiliated International Finance Corporation (IFC) advised the Central Bank against establishing a stock exchange in May. The IFC suggested that an exchange might encourage undue speculation because of the small number of the UAE population who could be involved. In addition, it said the level of local savings was already high, and a stock exchange was needed as a further means of encouragement in this direction. However, the IFC report did not rule out the setting up of stock exchange in the future, particularly when government revenues might be in need of replenishment. As a footnote to recent developments in the banking sector, a new specialised institution, the Federal Industrial Bank, opened in March. The bank, based in Abu Dhabi, is 51 per cent owned by the ministry of finance and industry and 49 per cent by local banks and insurance companies. Authorised capital is Dh500 million and the bank will provide subsidised loans to public and private sector companies, providing they have over 70 per cent local funding. Overall, lending to industry has accounted for no more than 8 per cent of UAE banks’ advances over the past decade. This investment helped raise output in manufacturing industry by 76 per cent in 1982, according to the Central Bank. Nevertheless manufacturing accounted for only 3.8 per cent of GDP (and 10 per cent of non-oil related GDP) in 1980. Unlike other areas of the economy (such as banking and construction), manufacturing industry has tended to develop on an emirate-by-emirate basis. Most large-scale industry is concentrated in the two main. industrial zones – Ruwais in Abu Dhabi and Jebel Ali in Dubai. Industries at Ruwais are largely oil-based and the overall development is in the hands of ADNOC. To date, a refinery and gas liquefaction plant have come on stream and a fertiliser complex (Fertil) was due for completion at the end of 1983. Jebel Ali is rather more diversified with an aluminium smelting and gas liquefaction plant, as well as factories making cables, soft drinks, steel pipes and soda ash. Otherwise industrial activity is limited. In the smaller Northern Emirates there is a variety of industrial ventures relating to building and construction. Trade Virtually Undiminished However, the relative paucity of industrial activity has not diminished the commercial acumen of emirates’ merchants. Although there is a desire to develop manufacturing industry and so structure the economy away from dependence

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on hydrocarbons, the majority of local people still work in trade. And over the past year a number of factors have served to ensure that, even in a period of relative economic downturn, the UAE merchants, particularly those in Dubai, have not suffered. The reasons for this are both domestic and external. On the home front, there has, as noted above, been an excess of liquidity, with banks still falling over one another to find new customers in the wake of the ‘emiratisation’ of business. As a result a trading house such as A W Galadari, which has popularly been thought to be over extended for large periods of the last four years, has been getting its house in order. Press comments suggest that A W Galadari’s large loans on its Dubai property portfolio, which includes the Hyatt Regency Hotel and the Galadari Galleria, are almost paid off. The company has been investing widely abroad, including in a hotel in Sri Lanka, and its subsidiary, A W Galadari Commodities extended its operations to Abu Dhabi in January. In addition the UAE has begun to come into its own as a market. Recently issued population statistics show that in December 1981 there were 1,122,000 people in the country, a 7.5 per cent increase over December 1980. Although only 20 per cent of these are nationals, the Abu Dhabi planning department has come up with figures which show that the average UAE citizen spends US$636 per month, compared with US$397 for other Arabs in the country and US$398 for non-Arabs. According to the study the average UAE family, which ranges in size from eight to nine people, spends US$5,698 a month. Interestingly, while non-nationals are forced to spend 60 per cent of their monthly outgoings on rent and food, citizens spend only 28.6 per cent on them. That leaves a not inconsiderable sum to be spent on consumer goods and other items which help fuel the local economy, benefiting trader and burgeoning manufacturer alike. On the external side, boosts to the UAE merchant economy have come above all from the continuation of the Iran-Iraq war. A common practice has been to transport goods for either of the combatants to a UAE port, where they are transferred to a smaller ship for onward passage up the Gulf. Although figures indicate that the UAE’s entrepôt trade is not what it was when the Iranian economy in particular was thriving, they also show some impressive improvements in port activity. In Dubai both Port Rashid and Jebel Ali reported records for container traffic during the first half of 1983. At Abu Dhabi’s smaller Port Zayed, the number of cargo ships increased by 17 per cent between 1981 and 1982, with a further 11 per cent increase predicted for 1983. Container traffic jumped 40 per cent in 1982 over 1981. Not only goods and commodities have used UAE trans-shipment and berthing facilities. It has also become the practice for oil tankers to wait in UAE ports

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(particularly the new Fujairah port) for orders to load up with crude and thus take advantage of spot market deals. Ports on the east coast lie outside the Strait of Hormuz and therefore do not incur additional insurance premiums. So great was the number of ships anchoring off Fujairah in March that the emirate was forced to introduce charges. This move, however, failed to breathe much life into business at Sharjah’s Khor Fakkan. Agriculture Under-performs One important area of the UAE’s economy continues to under-perform the rest, however. Agriculture still accounts for less than 1 per cent of GDP and employs only 6 per cent of the workforce. Despite some forward-thinking patronage by Sheikh Zayed, the area under cultivation is 23,700 hectares, or less than 0.4 per cent of the total land area of the UAE. The main farming areas in the country are around Al-Ain in Abu Dhabi, the Dhaid oasis in Sharjah and the coastal plains of Fujairah and Ras al-Khaimah. At the last count the ministry of agriculture and fisheries claimed the UAE was producing 60 per cent of its fodder requirements, 20 per cent of livestock, 38 per cent of eggs, 29 per cent of fruit and vegetables, not to mention 88 per cent of fish. The ministry claimed that if sufficient funds were invested local farms could provide nearly 60 per cent of the UAE’s total food requirements. In 1982 the funds spent on agriculture and fisheries from the development budget jumped sharply to Dh195 million from Dh72.8 million in 1981, as the government sought to raise production of vegetables to 200,000 tons by the end of the current development plan in 1985 (compared with 125,000 tons in 1980), of fruit and dates to 65,000 tons (compared with 51,000 tons), milk to 36,000 tons (23,000 tons), meat and poultry 8,700 tons (2,600 tons), eggs 260 million (54 million), and fish 106,000 tons (64,000 tons). The ministry of agriculture and fisheries provides a variety of incentives to encourage agricultural production. Capital equipment such as tractors and even fishing boats can attract grants of 50 per cent. Seeds, fertilisers and other inputs are available at subsidised prices. Recently a Central Marketing Organisation has been set up to encourage production and marketing of agricultural produce through fixing of prices and stabilisation of farm incomes. One constraint on agricultural production is uncertainty over water supplies. A number of reports suggest a marked fall in the water table in recent years, particularly in Ras al-Khaimah. This has stimulated thinking on water conservation and on desalination, as water resources have been brought under federal control.

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The following is a brief round-up of developments in individual emirates: Abu Dhabi Abu Dhabi is the largest emirate, both geographically (covering upwards of 65,000 square km) and in terms of population (with around 400,000 inhabitants, or one-third of the country’s total). Over 70 per cent of its local GDP comes from oil, and inevitably it has suffered from the recent downturn in the oil market. Indeed the emirate’s budget for the fiscal year January to December 1983, announced in July, revealed Abu Dhabi would have its first ever budget deficit of Dh2.9 billion (US$790 million). Total revenues for the year were projected at Dh21.3 billion (US$5.8 billion) and expenditures at Dh24.2 billion (US$6.6 billion), of which Dh6.2 billion (US$1.7 billion were allocated for development projects – slightly less than the Dh7 billion (US$1.9 billion) set aside for that purpose in 1982. Nevertheless of all the emirates, Abu Dhabi has the greatest concentration of financial reserves (US$18 billion, according to one recent estimate). This has meant that, at the end of the day, the emirate has funds to complete its ambitious development programme. Although the majority of the major projects have been completed, a number of new ones are still in the offing, including the modernisation and expansion of Abu Dhabi Central Hospital. And there is one mammoth construction project that will still be implemented – the proposed city centre complex, with shops, houses, offices and apartments, for which over 100 international firms are reported to have competed. An announcement is expected shortly. In the meantime the accent is on the development of secondary sectors of the economy, such as telecommunications, roads, hospitals and schools. Despite everything, housing still remains scarce. A number of residential projects have been started, including a 25-storey apartment block for long stay visitors on the Corniche. Since housing continues to come on the market at the same time as there is a squeeze on employment of expatriates, the property market has witnessed a slight decline. According to one source, rents on luxury villas had fallen by 20 per cent in mid-1983 and were likely to drop further. Dubai Dubai, the second largest emirate, has enjoyed continued prosperity in the wake of renewed oil exploration activity. As recorded above, the onshore Margham oilfield, discovered by Arco Dubai, a subsidiary of Atlantic Richfield, is scheduled to come on stream at the end of 1984, producing 100,000bpd of oil and one billion cu ft a day of gas. A number of other new concessions were sold in 1983.

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This activity has rubbed off on the business community, not just on Dubai’s traditional merchants, but also on its fledgling industrial sector. The emirate’s major industrial area is the Jebel Ali estate, 35km south-west of Dubai city. There are concentrated an aluminium smelter and associated gas processing plant, as well as a number of subsidiary industries, some of them (such as extrusions) relying on output from the smelter. Latest figures from the Dubai Aluminium Company (Dubal) show that 1982 was a very good year: 148,739 tons of pure aluminium were produced, compared with 106,670 tons in 1981. This indicates the success of the reorganisation programme introduced during the year in order to boost production. Nearby the troubled US$485 million Dubai dry dock was scheduled to open in September 1983, despite having been officially completed in February 1979. The reason for the delay in starting up operations is that, with the fall in demand for the services of u1tra-large crude carriers (ULCCs), there was little custom for the new dry dock, particularly with competition from OAPEC sponsored Arab Shipbuilding and Repair Yard (ASRY) dry dock in nearby Bahrain. As a result, the Dubai authorities could not agree terms with the initial managers, C H Bailey of the United Kingdom. Now they have hired another British company, A & P Appledore International, to run the dry dock on a contract tied to performance. Chief Executive of the Dubai dry dock is now Torsten Andersson, who previously managed the Neorian Shipyards in Greece and the Lisnave yard in Portugal. Mr. Andersson reportedly sees an important market in Japanese ship-owners. He told the Middle East Economic Digest in May: ‘It is my intention to see an operating profit in the second year. If I can’t do that I have failed. If I can’t, with the team I have, make a profit here, I would like to know who can and where.’ Within three months of the dry dock opening in May, there were five vessels undergoing repairs, including a 250,000 ton Finnish tanker. Five local companies had won significant subcontracts for work on the ships. Sharjah Sharjah stretches on both sides of the Ras Musandam Peninsula, covering 2,590 square kilometres. As reported in 1982, the exploitation of Amoco’s Saaja field brought business life back to the temporarily depressed emirate. The general interest in opportunities in Sharjah was maintained in 1983. For the first time for a number of years there were attempts to revive building projects abandoned in the late 1970s because of lack of finance. Meanwhile tourism to the emirate has picked up. In 1982/83 8,349 tourists visited Sharjah, almost double the figure for the previous 12 months, though not quite as many as the 10,000 target figure. The shortfall may have been due to the Gulf oil slick, which, despite scare stories, had no effect on the UAE coastline. Despite contin-

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uing trade passing through the lower Gulf ports, Sharjah’s Khor Fakkan port on its east coast missed out, with port dues not even able to pay overheads. (Mina Khalid serving Sharjah city was more successful.) Ras al-Khaimah, Fujairah, Ajman and Umm al-Quwain Developments in the smaller Northern Emirates continue to be dominated by their aggregate stone and cement businesses. With one cement factory already operating, Ras al-Khaimah contracted with Hitachi Zosen of Japan to build another US$62 million 300,000-tons-a-year white cement plant at Khor Khuwair. The plant will be owned by the Ras al-Khaimah Company for White Cement and Construction Materials, a joint-venture between local and Kuwaiti interests. Following recent promising discoveries of oil and gas, the government is considering running the factory on gas. The hydrocarbon development has been a spur to other industries, including existing cement and lime works. For Ras al-Khaimah until now has been without oil, and has had to rely on often fitful supplies from other emirates. Meanwhile Fujairah is seeking to develop its aggregate and port industries. The budgets of the smaller emirates remain dependent on federal aid.

1985 Gulf War – Economic Depression – Banking Crisis – Company Law – ADIA – Galadari -Recession Recedes – Jebel Ali Success

1984 was the year when the United Arab Emirates (UAE) began to take its regional responsibilities seriously. President Sheikh Zayed bin Sultan al-Nahyan of Abu Dhabi was tireless in his efforts to weld the Gulf Co-operation Council (GCC) into an effective body and to bring an end to the Gulf war. However, the UAE was hit by the downturn in the oil market, and this had its repercussions at home. Most obviously, government spending was reduced. This unwelcome development caused severe cash flow problems for a number of businessmen. Another consequence of the mini slump was a general reduction in manpower, particularly the expatriate manpower which the UAE had employed probably more than any other Arab country. Expatriates also found themselves having to pay for state services which had previously been free. For example, modest charges (Dh10 or US$2.70 for a government employee, Dh20 or US$5.40 for a non-government employee) were introduced in May for expatriates visiting state hospitals or clinics. During the year the government was forced to become more aware of resentment among certain sections of the expatriate population, especially the less well-off ones who suffered most from the new measures. Diplomacy in the Gulf The UAE has good reason not to antagonise the mullahs in Tehran. It takes particular care to maintain an even balance between the belligerents in the Gulf War, believing that the war is unnecessary, harmful and destructive to both countries and to the region. In 1983 Sheikh Zayed visited both Baghdad and Damascus in an attempt to mediate between Iraq and Iran. He was reportedly promoting a ‘Marshall Plan’ to assist in the reconstruction of both countries. Meanwhile his ministers liaised directly between Baghdad and Tehran. Sheikh Zayed’s genuine search for peace convinced him of the need and indeed helped him to build up the institutions of the GCC. The first practical measure of the council was the implementation of its First Unified Economic Agreement in March 1983. This called for the elimination of tariffs between member states. Reportedly the immediate consequence of the agreement was an increase in trade between member states. But it met with some opposition

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in the UAE where traders, particularly in Dubai, complained it would damage their reputation for providing the cheapest goods in the Gulf. For a while UAE customs officials refused to implement the agreement. This kind of reaction was generally the price Sheikh Zayed was forced to pay for his increasingly activist role in regional politics. In many ways Sheikh Zayed’s desire to develop the various arms of the GCC proved more important even than his need to maintain a balance in his dealings with Iraq and Iran. In October 1983 Abu Dhabi itself (or rather the Hamra desert, 320km east of the capital) hosted the GCC’s first ever military exercises (attended by contingents from all member countries). Prominent in setting up the exercises was Lieutenant General Sheikh Khalifa bin Zayed, Crown Prince of Abu Dhabi and deputy supreme commander of the UAE forces. He declared in an interview that the exercises showed the Gulf states were ‘fully committed to defend their integrity, sovereignty and natural resources’ and called for the establishment of a joint force, a kind of localised rapid deployment force, which was ‘a vital necessity, dictated by the need to preserve the region’s security in the face of any foreign threat’. During 1984 Sheikh Zayed chose his partners and his hosts with consummate political skill. For example, in May he visited Kenya, where he helped counter growing anti-Arab feeling in one of Africa’s most important countries, Pakistan, a traditional port of call, and Bangladesh, where his role as a regional diplomatist was emphasised when he met Palestine Liberation Organisation (PLO) Chairman Yasser Arafat in Dhaka airport. At home Sheikh Zayed continues to demonstrate his commitment to the federal nature of the UAE. However, this carries its own problems. Sheikh Zayed tends to devote himself pretty fully to federal affairs now, leaving control of Abu Dhabi in the hands of his eldest son, Crown Prince Khalifa. The 38-year-old prince is chairman of Abu Dhabi Executive Council which oversees projects in the country’s largest emirate. Effects of Recession Minimised The UAE’s political problems have not grown out of proportion because the authorities skilfully managed to make the country’s economic depression in 1983–84 look less dramatic than it might otherwise have been. In 1983 they were predicting a budget deficit of Dh5.5 billion (US$1.5 billion). But with the adoption of austerity measures all round (including the cancellation of the Dh1.4 billion (US$381 million) state subsidy on petroleum products marketed in the Northern Emirates), federal spending was reduced substantially from an estimated Dh18.4 billion (US$5 billion) to Dh16.2 billion (US$4.4 billion). The effects of this cut-back were particularly marked towards the first part of the year.

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At the same time revenues were more than expected. While the 1983 budget had forecast a drop in revenues from Dh20.3 billion (US$5.5 billion) to Dh12.9 billion (US$3.5 billion), actual revenues for the year were Dh14.4 billion (US$3.9 billion). As a result the 1984 budget, which, true to form, was not presented to the UAE Cabinet until 9 July, reported the 1983 deficit had been Dh1.8 billion (US$490 million) rather than Dh5.5 billion (US$1.5 billion) as originally planned. The 1984 budget plans for a deficit of Dh4.4 billion (US$1.2 billion), 20.5 per cent less than that estimated in last year’s budget, but nevertheless a hefty 140 per cent more than the actual figure recorded in 1983. Expenditure for 1984 is estimated at Dh17.3 billion (US$4.7 billion), less than the planned but more than the actual expenditure in 1983, while revenues are forecast to reach Dh12.9 billion (US$3.5 billion), the same as in the budget for 1983, but below the previous year’s actual revenues. Of this total revenue Dh9.5 billion (US$2.6 billion) is scheduled to come from Abu Dhabi, Dh2.6 billion (US$695 million) from Dubai and most of the remainder from various ministries. On the expenditure side the government has budgeted for a substantial cut-back in its financial investments (down from Dh495 million or US$136 million in the 1983 budget to Dh211 million or US$57 million in the 1984 budget) and in its current expenditures minister of state for financial and industrial affairs Ahmad al-Tajir has stated that the cut in foreign investments will affect the UAE’s involvement in foreign aid programmes and in multinational financial institutions. He added that the planned drop in current expenditures would reflect a continuation of the government’s austerity programme, while no funds had been earmarked for new development projects – only Dh1.6 billion or US$436 million set aside to complete those projects already started. However, preliminary figures for the first quarter of 1984 suggest that once again the budget deficit for the whole year could not be as high as the government has suggested. In the first quarter federal spending was limited to Dh3.3 billion (US$899 million), which, taken over the year, means government expenditure will be Dh13.2 billion (US$3.6 billion), significantly down on the projected Dh17.2 billion (US$4.7 billion). Although kept within reasonable bounds, the UAE’s continuing budget deficit reflects its problems in the world oil market. UAE ministers have long protested that they were forced to make more cuts than their competitors when the March 1983 Organisation of the Petroleum Exporting Countries (OPEC) meeting set its quota at 1.1 million barrels a day (as well as reducing the price of Arabian Light marker crude by US$5 a barrel to US$29). They said that this ceiling hit strongly at the planned US$4.8 billion development of Abu Dhabi’s offshore Upper Zakum field, capable of producing one million barrels per day

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(bpd) on its own. It also put at risk the UAE’s gas plants which were forced to run at up to 50 per cent of capacity because of the quota. Predictably, therefore, oil and gas exports in 1983 fell (but only slightly in the circumstances) from Dh67 billion (US$18.2 billion) the previous year to Dh57 billion (US$15.4 billion). Meantime imports dropped from Dh34 billion (US$9.26 billion) in 1982 to Dh33 billion (US$8.99 billion) in 1983. Helped by a favourable exchange rate, the UAE recorded a current account balance of payments surplus of Dh16.7 billion (US$4.5 billion) – down from Dh25.7 billion (US$6.7 billion) the previous year. Overall balance of payments surplus for the year was Dh600 million (US$162.6 million), a significant drop from Dh6 billion (US$1.6 billion) in 1982 and Dh12.9 billion (US$3.5 billion) in 1981. The general air of recession contributed not only to a budgetary deficit but also to a fall in GDP by 13.5 per cent from 1982 to 1983. The country still sits comfortably on oil reserves estimated by the Organisation of Arab Petroleum Exporting Countries (OAPEC) in mid-1984 at 2,400 million barrels (enough for 72 years at present production levels – which means rather longer than Saudi Arabia’s reserves but not as long as those of Iraq or Kuwait). Nevertheless, recent developments have forced UAE authorities to look carefully at its foreign investment policies. Investment Authority Gears up for Action During the course of 1984 the Abu Dhabi Investment Authority (ADIA) began to act more obviously like one of the financial institutions created by Kuwait and Saudi Arabia to invest present oil wealth abroad for the benefit of future generations. Officially ADIA, which is headed by Secretary General Ghanem alMazrouei, is in business to invest abroad what remains of Abu Dhabi’s oil income after the oil industry’s expenses and federal and local budget contributions have been made and after the ruling family has taken its 10 per cent cut. In May ADIA announced the formation of a new US$500 million investment corporation with the Abu Dhabi National Oil Company (ADNOC) to fund jointly high-technology and oil sector related projects. In June the previously low-profile ADIA surprised the financial community by publicly taking a 9.6 per cent stake in the total capital of the newly floated British news agency Reuters. It did this by purchasing over 36 million Reuters B shares (12.5 per cent of the total B shares) worth US$100 million. Within a week the shares had shown a healthy gain of nearly 20 per cent. In July ADIA increased its muscle power by purchasing a further 30 per cent (until then owned by private UAE citizens) in the Abu Dhabi Investment Company (ADIC). That pushed ADIA’s holding in ADIC, the country’s top merchant or

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investment bank, up to 90 per cent. The remaining 10 per cent is owned by the National Bank of Abu Dhabi, which itself is majority owned by ADIA. The same month ADIA took a substantial (though undisclosed) stake in the Khalij Commercial Bank, one of the country’s largest commercial banks with assets in 1983 of US$961 million. ADIA’s purchase was brought about by an increase in the Khalij Commercial Bank’s capital to Dh100 million (527 million). Until this development the bank’s largest shareholder had been the personal affairs department of UAE President Sheikh Zayed, which held 52.5 per cent. Earlier in its history ADIA had stuck chiefly to investing in safe issues such as US Treasury bonds. However, it is thought to have built up stakes in a number of US companies (including US airlines), it was the vehicle which provided UAE funds for the establishment of the Arab Banking Corporation (ABC) in Bahrain, and it also has holdings in various Arab banks, including the Bank of Credit and Commerce International. Even now it guards the secrecy of its portfolio closely. Its acquisition of a substantial stake in Reuters was carefully played down within the UAE. Nevertheless ADIA’s assets in mid-1984 were estimated at around US$45 billion. Other institutions sought to jump on the investment bandwagon. This reflected the high liquidity of some official bodies in the UAE (while others at the same time were experiencing the opposite – severe cash flow problems). One of those to take the plunge in this direction was the successful Emirates Telecommunications Corporation (Emirtel) which in January announced the formation of a new investment company capitalised at US$1.3 billion. The new company’s shareholders are exactly the same as the parent company’s – 60 per cent UAE Government and 40 per cent shared between 8,000 UAE individuals. In recent years Emirtel has emerged as one of the UAE’s most successful businesses with a turnover of nearly US$300 million. Its development budget for 1984 was fixed at US$160 million, to be spent largely on a ground station linked to the Pan-Arab communications satellite and on a submarine cable between the Emirates and Pakistan. The new investment company is expected to have a wide brief regarding the kind of projects it backs. Crisis in Domestic Banking Industry This enthusiasm for investment banks rather glossed over the crisis in the domestic banking industry which resulted mainly from the slowdown in UAE development activity in the past two years. Since taking over from the Currency Board in 1980 the Central Bank of the UAE (headed by Abdel Malik al-Hamar) has gradually been putting the country’s banking house in order. For example, it laid down minimum capital requirements for UAE banks and stipulated that foreign banks should cut the number of their branches to eight. Nevertheless

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the UAE remains one of the most over-banked countries in the world with 51 banks operating through 324 branches in a country of slightly over one million at the start of 1984. Observers had been hinting at a possible disaster for some time. It came in November 1983 when the Union Bank of the Middle East (UBME), one of Dubai’s largest banks with assets at the end of 1982 of Dh4.5 billion announced it was unable to meet the Central Bank‘s decree that no more than 5 per cent of any bank’s capital should be lent to one director and no more than 25 per cent to the board as a whole. This caused problems for UBME (capitalised at Dh1 billion). It had been founded in 1977 by prominent Dubai entrepreneur Abdul-Wahab Galadari and used by him to fund and build up his vast commercial empire. This embraced trading and commodity firms, offices and residential complexes, including the Galadari Galleria in Dubai, and hotels such as the Hyatt Regency. By November it was clear that UBME could not meet the Central Bank requirement since some 30 per cent of its total lending had been made to Galadari himself. Subsequently the Dubai government and the Central Bank weighed in with an injection of Dh1.4 billion between them to keep UBME afloat. This had the desired effect of maintaining confidence in the bank and in the UAE banking system as a whole. However there were some raised eyebrows when, in announcing in April that Galadari’s assets had been placed in the hands of the receiver, the government issued what amounted to an amnesty for any officials who had been involved in the affair. Ironically it was not just UBME which was unable to comply with the Central Bank’s stipulation on loans to directors. In January the local commercial banks called upon the Central Bank to grant them an extension on the deadline. They argued that many of their loans to directors were long-term and that if they were called in, it could lead to a collapse of confidence in the banking system. One banker was quoted as saying that it would take up to 20 years before the local commercial banks could comply with the Central Bank’s request. Nevertheless, the authorities were keen to do all they could to bolster up confidence where possible. At the start of the year the Central Bank announced it was drawing up a plan to insure small investors against the possibility of any further hiccoughs in the banking system. The scheme was to be compulsory for UAE banks, which will pay a premium based on deposits insured. The maximum deposit insured has not been fixed, but is unlikely to be more than US$100,000. Further Regulation of Economy Regulation is the order of the day in other parts of the economy. The government clearly wishes to put a stop to some of the freewheeling commercial ways

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of the UAE’s first 13 years of independence. It has tried to sugar the pill for local businessmen and investors by giving them distinct legal and institutional advantages over foreign competitors. The apparently discriminatory nature of certain pieces of legislation suggested for the business and commercial sector has not always pleased foreign companies, though they have generally complied with it (as, for example, in the banks) in realisation that some sort of regulation of a wayward market is required. Interestingly UAE nationals themselves have not always welcomed their government’s moves in this direction. The introduction of the UAE’s long delayed Company Law in July was held back yet again when President of the Abu Dhabi Chamber of Commerce and Industry Saeed Ahmad al-Otaiba warned that it would lead to further recession and hinder the growth of further commercial activity. Oteiba called for a further postponement of one year before the law was implemented. The proposed law lays down that UAE citizens should hold a minimum 51 per cent stake in all companies. It defines seven categories of corporate structure – unlimited, limited and share partnerships restricted to UAE nationals, limited liability joint shareholding companies, closed and public joint stock companies and private unlimited companies (joint ventures). One objective of the new law was to create the right environment for the establishment of a UAE stock market. But that also has been postponed for the time being. Another law in this protective genre is the new UAE insurance law introduced in June. It stipulates that all property in the UAE must be insured through a 100 per cent UAE-owned company, that re-insurance has to be placed with a 100 per cent UAE company, and that every insurance company must have a UAE national agent. It also lays down minimum capital and reserve requirements for different types of insurance business. However, a number of anomalies in the law remain. It is not clear whether it stipulates that all reinsurance should be done by 100 per cent UAE companies. If it does, this would rule out the Bahrain-based Arab Insurance Group (ARIG) which is part-owned by the UAE government. Also it is not clear whether brokers must be 100 per cent UAE nationals. Nevertheless, the law will bring some order to a fragmented market. In Dubai there are some 80 insurance companies, in Abu Dhabi around 60, with a handful around the smaller emirates. Already in Abu Dhabi government business, particularly that of Adnoc has to go through a company in the emirate. That usually means one of the big four United Arab Emirates – the Abu Dhabi National Insurance Company (ADNIC), Al-Ain Al-Ahlia Insurance Company, the Emirates’ Insurance Company and the Al-Dhafra Insurance Company.

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Additional protective measures which have been suggested but are yet to be implemented include the restriction of the UAE’s import and export trade to UAE nationals (a recommendation of the UAE Federation of Chambers of Commerce and Industry) and the introduction of high tariffs on goods in the cement, steel and aluminium industries. Oil Sector Survives Setbacks Such measures are designed, among other things, to bring an element of equilibrium to an economy which continues to be dominated by hydrocarbons. In general 1984 was a successful year for the UAE oil industry, with markets and prices maintained, with some projects abandoned, but with enough progress made on others to ensure a considerable sense of progress and achievement. Although UAE’s nominal OPEC quota is 1.1 million bpd, industry sources suggest it may actually be producing slightly more. If the quota allows Abu Dhabi to produce 800,000bpd and Dubai 300,000 (with Sharjah providing just 7,000bpd), it is thought that Abu Dhabi has been producing nearer 900,000bpd and Dubai 350,000bpd. Clearly the UAE oil industry continues to be dominated by Abu Dhabi, operating chiefly through the Abu Dhabi National Oil Company (ADNOC). Adnoc has the majority interest in Abu Dhabi’s three main oilfield operating companies the Zakum Development Company (together with the Japan Oil Development Company, known as Jodco) for the massive Upper Zakum field, which has been producing around 35,000bpd from its 14–20 billion barrels of recoverable reserves, Abu Dhabi Marine Operating Company (ADMA-OPCO) (together with British Petroleum, Compagnie Francaise des Petroles and JODCO) for the offshore Umm Shaif and Lower Zakum fields, which produce around 200,000bpd, and the Abu Dhabi Company for Onshore Oil Operations (ADCO) (together with the old Iraq Petroleum Company partners – BP, Shell, CFP, Exxon, Mobil and Gulbenkian interests) which produce a further 500,000bpd from the three large onshore fields at Bu Hasa, Asab and Bab. In addition there are four minor offshore fields – Mubarraz, Arzana, Bunduq and Abu al-Bukhoosh – which together account for 100,000bpd. In 1985 new fields are expected to start producing at Satah and Umm al-Dalkh. Satah is planned to yield 10,000bpd, rising to 25,000bpd, and Umm al-Dalkh 10,000bpd, rising to 17,000. They are operated by the Umm al-Dalkh Development Company (UDECO) a joint venture between Jodco and Adnoc. Investment in the fields was scaled down from US$2 billion to US$1 billion during 1984 because of the depressed state of the oil market. Adnoc is also the major shareholder in the Abu Dhabi Gas Liquefaction Company (ADGAS) whose US$550 million Das Island plant has the capacity to

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produce 2.7 million tonnes of LNG and 1 million tonnes of LPG annually, mostly for export to Japan. Japan is also the main customer for another Adnoc venture (with Shell, CFP and Partex), Abu Dhabi Gas Industries (GASCO), which runs the US$2.2 billion plant at Ruwais extracting propane, butane and condensate from associated gas produced by the onshore Bu Hasa, Bab and Asab fields. This LPG plant is the main feature of the expanding Ruwais industrial zone. Other Adnoc interests include refineries at Umm al-Nar and Ruwais; its marketing subsidiary, the Abu Dhabi National Oil Company for Distribution, and bodies like the Abu Dhabi Pipeline Construction Company and the Abu Dhabi National Tanker Company. During the early part of 1984 the UAE oil industry was pessimistic. Owing to the OPEC quota, production at Upper Zakum, which has a capacity of 800,000bpd, has been kept down to 35,000bpd. The Japanese had cut their proposed US$2 billion investment in the development of the Umm al-Dalkh and Satah fields by half. Gasco’s US$2.2 billion gas extraction plant at Ruwais was operating at 50 per cent of capacity and there were serious doubts about its viability and safety at this level. There was also disappointing news about new exploration, particularly in the onshore Khuff fields where four wells drilled to depths of 4,000-4,500 metres had proved dry. However, towards the middle of the year there were more encouraging signs for the industry. First there were good new finds offshore at Umm Shaif’s Dhuff field and at Abu al-Bukhoosh (operated by CFP). Then plans were revived for a water injection scheme at the onshore Bu Hasa field, where earlier compromised attempts at injection intended to raise the recovery levels of the field were reported to have been unsuccessful. One of the long-term problems under review in Abu Dhabi is that the oil industry has begun to compete strongly with other sectors of the economy for water and electricity. Consequently the government has committed itself to the construction of a major new desalination and power complex at Taweelah. This will require around 500 million cubic feet of LNG a year. However, during the year there was a hold-up on the implementation of the Taweelah project when the Abu Dhabi authorities demanded that companies biding for five valuable associated contracts should lower their prices. In August the majority of the contracts were awarded. The Lebanese-owned, Athens-based Consolidated Contractors International Company (CCIC) won the prestige US$37.5 million civil works contract, Belgium’s Six Construct a US$22.7 million order for the seawater intake system, South Korea’s Dong Ah Construction a US$13.1 million order for offshore marine works and France’s Merlin Gerin a US$15 million order for electrical equipment. At the beginning of

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September only the gas turbine contract had not been awarded. Overall consultant for the project is Egypt’s Dr Ali al-Saie. Oil Outside Abu Dhabi In neighbouring Dubai there is still optimism about the prospects for the large onshore oil and gas field at Margham. The field, owned by Arco Dubai, a subsidiary of Atlantic Richfield, and by the British National Oil Corporation, has an expected capacity of 100,000bpd of oil and 1,000 million cubic feet per day (cfd) of gas. According to Arco Dubai, the operator, condensate production from Margham was scheduled to start in October at an initial rate of 25,000bpd from 12 producing gas wells. Work has been completed to carry the condensate from a 330,000 million cfd processing plant (said to be 70 per cent complete in June) to storage tanks at Dubai’s Jebel Ali port, from where it will be exported, mainly to India. An Indian company, Dodsal, is building the pipeline joining the plant and Jebel Ali. During 1984 work was begun on the four concessions granted onshore by Sheikh Rashid two years previously. BP is drilling south-west of Jebel Ali port, close to where the Lundin Group and a consortium headed by Taylor Woodrow are also operating. New discoveries continue to be made in Dubai. In March a new wildcat was discovered in the Khuba onshore structure, 8km north of the Margham field. Testing was due to begin within three months. Meanwhile the Dubai authorities have been actively trying to woo consumers towards using liquid petroleum gas (LPG) rather than petrol. In March the Emirates Gas Bottling Company announced a 10 per cent cut in the prices of LPG in Dubai. This meant that householders were able to buy a 50-pound bottle of gas for Dh27 rather than Dh30. In addition the price of bulk supplied gas was reduced from Dh3.50 per imperial gallon to Dh3 in order to encourage the conversion of oil powered plants to gas. In June the Dubai Natural Gas Company (DUGAS) announced it was starting to supply natural gas to power the turbines of the Dubai Aluminium Company (Dubal). Sharjah too is trying to wean its citizens away from petroleum on to gas. Its Sajaa and related Mawa’id fields, discovered by the Amoco Sharjah Oil Company, a subsidiary of the Standard Oil Company of Indiana, in 1981, enjoy reserves of 10 trillion cubic feet, as well as producing condensate which could be collected at 80,000bpd. A proportion of this vast reservoir of gas is planned to be deliver up to 300 million cfd to the Emirates’ General Petroleum Corporation (EGPC) to fuel power stations and industry (mainly cement) in the smaller Northern Emirates. But in 1983 plans to raise funds for the Cinderella EGPC ran adrift

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when it was discovered that the parastatal was prevented by its constitution from borrowing abroad from organisations in which there was not a federal shareholding. During 1984 plans emerged for the partial privatisation of EGPC (thus precluding the need to go to the international capital markets). In March EGPC Deputy Chairman Shaiba al-Hamili indicated that up to 40 per cent of the EGPC share capital would be reserved for private UAE national investors, while the remainder would be held by the government. Already part of the piping for a gas network for the Northern Emirates has begun to be built The first power station in place was Layyah in Sharjah – a facility which combines both power generation with water desalination. Now there are already plans for the extension of Layyah. Lloyds Bank International and the National Bank of Sharjah were reported in July to have arranged US$100 million letter of credit (US$74 million of it long-term) for the project. Turning to the smaller Northern Emirates, Ras al-Khaimah appears finally to have succeeded in its long-held ambition to become an oil producer. In March 1983 a consortium led by Gulf Oil discovered oil 28 miles offshore and, unlike previous strikes, this one appears to be commercial. The field has been named Saleh, and is reported to have a flow rate of around 6,000bpd. Other emirates are not so lucky. Ajman however has decided to fly in the face of fortune and build a reconditioned refinery. In June 1984 its Ajman Saudi Refinery Company purchased a refinery formerly used by Esso at Milford Haven in Wales (UK). The refinery will be stripped down and shipped to Ajman for reconstruction. Officials believe that this will enable them to buy a refinery for around half the world market price. They argue that a refinery will act as a magnet for the development of industry in Ajman. Fujairah also may get an unexpected boost to its economy if a planned pipeline linking Abu Dhabi’s onshore Habshan field with Fujeirah port ever goes through. The project, which is well advanced, took root during 1984 when tanker traffic in the Gulf was threatened by the Iran-Iraq war. According to Sheikh Tahnoun bin Mohammed al-Nahyan, chairman of ADNOC’s board of directors, studies on the construction of the 360km pipeline have started. It will take 15 months to build and could be ready by 1986. Proposed capacity is 500,000bpd, rising to 800,000bpd and the estimated cost of construction is US$500 million. Apart from the oil industry the main area of business activity in the UAE is infrastructural development, particularly construction. As already noted, a number of projects have been delayed because of the UAE’s reduced income. Consequently in Abu Dhabi a prestige tourist tower and a television and communications complex have been shelved. But road and bridge construction,

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improvement and maintenance remain a priority, and there is particular interest in projects in the field of information technology. The main projects under way in each emirate will be touched on in the brief synopses of activity in individual emirates at the end of this article. Local Contractors Flourish Against the Odds An important development during 1984 was the markedly increased activity of local firms in contracting and other industrial projects. In August, for example, two local concerns, Cordoba Development Company and Altaf Hussain and Company, won contracts worth Dh86 million (US$23.6 million) to build two new military schools in Abu Dhabi. In June the Zakum Construction Company emerged as the low bidder for a contract worth around US$10 million to build a new central bus station in Abu Dhabi. In Dubai the local Al-Mulla Construction won a sought-after Dh60 million (US$16.3 million) contract to build an effluent transmission and distribution network for Dubai municipality. Local contractors were assisted in their efforts to find work by a 10 per cent bidding preference and a 25 per cent mobilisation fee. It is generally felt that these measures have helped them keep their prices low. However, their profits have tended not to suffer, as they have often been on site to negotiate increased payments after the initial award of the contract. Nevertheless, local contractors have come under a lot of pressure to compete. This pressure has come from two sides: on the one hand, from foreign contractors still looking for business in the Middle East and willing to cut costs to the bone in order to win it, and, on the other, from government authorities which have not always been swift in meeting their financial obligations. Outside the construction field, development of industry has been slow. The newly-established Emirates Industrial Bank is still at the stage of identifying and costing projects. Shortage of trained manpower continues to be a constraint on industrial development, though each emirate can boast its own industrial projects. The most concerted effort to forge a federal plan in this sector has been in the cement industry, which is strongly based in the northern Emirates. In March minister of state for finance and industry Ahmed al-Tayer announced that cement production capacity had grown from 250,000 tonnes in 1975 to 8 million tonnes in 1983. He said that, following a proposed government development plan for the industry, the UAE was capable of exporting 5.5 million tonnes, as well as producing 2.5 million tonnes for the domestic market The minister said cement was the second largest industry in the country and one of the most important ‘in diversifying sources of income’. But he confirmed that, even in this relatively thriving area of UAE industry, there were problems

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caused by current over-capacity. The problems could be dealt with, he said, both at the local level and in the context of the GCC’s economic integration accord which gave priority to the cement, aluminium and petrochemical industries. Agricultural Development Remains Controversial Federal authorities have also been taking an initiative in promoting a vital but often neglected sector of the economy, agriculture. 1983 was a good year for farmers: total agricultural output jumped by 40 per cent to 623,000 tonnes and its value by 24 per cent to Dh1,432 million. (This compares with food imports of around Dh3 billion). Although agriculture is confined (mainly because of lack of adequate water resources) to 3 per cent of the UAE land area, there were at the start of 1984 12,584 farms in the UAE, covering 26,776ha, with a further 32,199ha given up to arable crops. A significant development was the increase in the number of greenhouses from 410 in 1982 to 1,071 in 1983. One further encouraging sign is that the UAE is now almost totally self-sufficient in poultry products, producing in 1983 300 million eggs and 11,035 tonnes of poultry meat As far as livestock is concerned it still has some way to go before achieving self-sufficiency. In 1983 the country had 138,000 sheep, 357,000 goats, 26,000 cattle and 61,000 camels, providing an estimated 25,000 tonnes of milk and 6,00 tonnes of meat. The government’s support services remain important to farmers. In 1983 the Ministry of Agriculture and Fisheries provided subsidies worth Dh80 million to farmers (in the form of chemical and organic fertilisers, seeds, insecticides and pesticides, farm engines and fences, all available at half price). In addition it increased the number of its extension visits and services. Surprisingly, however, agriculture is one of the most controversial and hotly debated subjects in the UAE political arena In May the Federal National Council took the bit between its teeth and called upon the government to streamline its policy towards agriculture, to take immediate steps to safeguard the country’s scarce water resources and to provide all possible assistance to farmers to enable them to market their produce profitably. One of the council’s main complaints was that agricultural commodity prices are notoriously unstable in the UAE. There were also criticisms of the failure of the co-operative agricultural marketing experiment in Abu Dhabi. The ministry has taken these criticisms seriously. It is particularly concerned about the UAE’s food deficit and its water resources. In order to build up domestic agricultural production, the ministry has begun to take a direct interest in farming. It has initiated a number of projects, which private investors are free

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to join. Among them are an onion and potato farm, a model fruit farm, a number of nurseries and a fish culture project. To preserve water the ministry of agriculture and fisheries has set up a General Water Organisation to regulate water use in the various emirates. It has installed 16 automatic water-level recorders in different parts of the country, as well as monitoring levels in 92 observation wells. It has also begun a programme of construction of dams to preserve water from 15 wadis which transfer up to 100 million cubic metres of water (cum) of water a year. In all the UAE requires 565 million cum of water a year (410 million cum for agriculture, 95 million cum for domestic use and 60 million cum from water losses). Currently it obtains 100 million cum from rainfall and a further 100 million cum from desalination. The annual shortfall, and the figure which causes for worry, is 355 million cum. The following is a brief round-up of developments in the individual emirates: Abu Dhabi Abu Dhabi is the largest emirate, both geographically (covering upwards of 65,000 square km) and in terms of population (with around a third of the country’s 1.1 million inhabitants). It is also the most prosperous emirate, with the largest concentration of hydrocarbon-related industry, contributing some 70 per cent of its local GDP. Developments and problems in the UAE as a whole tend to be those of Abu Dhabi writ large. Abu Dhabi planners are concentrating in the petroleum sector on the development of its gas production, centred on Das Island. Industry tends to be located in Ruwais, where a refinery, the Gasco gas-gathering and liquefaction plant, and an ammonia/urea fertiliser plant are all in place. A hydro-cracker is currently under construction and due to be opened in 1985. But planned developments in the petrochemical field have been held back for lack of funds and markets. Of all the emirates, Abu Dhabi is best equipped to maintain its development programme as fully as possible. Its assets alone are thought to total over US$20 billion, giving it an income of around US$1.5 billion a year. Nevertheless there have been some stringent cuts in Abu Dhabi’s development programme. At one stage Jaqwan Salim al-Dhaheri, director of the emirate’s finance department, was saying that US$1 billion-worth of projects would have to be either cancelled or frozen. In the event the number of projects thus affected has been limited. Schemes currently in abeyance include the widening of the road from Mafraq to Al-Ain, reclamation of islands near Abu Dhabi, a desalination plant in West Umm

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al-Nar, and US$136 million of recreational facilities, as well as a number of electricity and public works projects. Nevertheless the Abu Dhabi authorities have been able to afford to keep up some schemes which are likely to have been cancelled by its neighbours. During 1984, for example, they found funds for two ice rinks (one in Abu Dhabi city, the other in Al-Ain) which in 1983 had been costed at US$16 million but the following year had risen to US$27 million. Other perhaps more essential schemes still definitely in the pipeline include Al-Ain airport, a variety of defence facilities (particularly at Suweihan), a US$400 million bridge at Saadiyat, the second phase of a similar bridge linking Hodaryat Island with the mainland, and a new US$200 million international conference centre. What remains of the public works programme is substantial too. An estimated Dh2 billion-worth of road improvement projects are currently under discussion and 15 sewerage contracts were expected to be awarded in 1984. Retrospectively it was announced that in 1983 1,848km of road had been built in Abu Dhabi at a cost of Dh1,600 million (US$436 million), along with 45 sewerage schemes at a cost of Dh1,230 million (US$335 million). Apart from a few necessary buildings, the construction in the real estate sector has been quiet. The winner of a 1982 design competition for a 36ha town within the Abu Dhabi city centre has yet to be announced. The relative lack of interest in real estate development reflects social changes in Abu Dhabi just as much as the general economic malaise. For the downturn in the oil market has led to the laying off of large numbers of employees in both companies (particularly ADNOC) and the civil service (where 10,000 jobs are reported to have been cut in the past year). The consequent exodus of expatriates bas led to a dramatic drop in rents in Abu Dhabi apartments and little enthusiasm for creating an uneconomic property glut Significant development is also taking place in and around Al-Ain, Abu Dhabi’s second city, and the seat of the Nahyan family. During 1985 work is expected to be completed on Al-Ain’s new international airport, which will be able to accommodate 1,000 passengers at one time. A new university is being developed, with construction expected to start in 1985. Around the city new roads are being built to various provincial centres. During the summer the Dubai-based company Al-Futtaim Wimpey was being tipped (as low bidder) to win the plum road contract for the 23km US$30 million first phase of a road linking Al-Ain and Dubai. An example of the kind of ambitious construction project within the city is the Dh79 million (US$21 million) turnkey contract awarded to Abu Dhabi’s Al-Darmaki Trading and Contracting in June to built a meat, chicken, fish, fruit and vegetable market in the

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centre of Al-Ain. This reflects growing and important agricultural development around the city. Dubai Dubai, the second largest emirate, continues to enjoy relative prosperity hand-in-hand with renewed oil industry interest within its borders. Dubai’s wealth has traditionally been generated by its merchants and their involvement in entrepôt trade, particularly with Iran. During the first couple of years of the Iran-Iraq war this activity was depressed, but the indications are that it has grown substantially again more recently. In 1983 Dubai’s non-oil trade (that is, to all intents and purposes, its re-export trade) rose 89 per cent in value to Dh5.2 billion (US$1.4 billion) and 54 per cent in volume to 513,557 tonnes. For comparison, Dubai’s total exports, including oil, were worth Dh26.3 billion (US$7.1 billion). So re-exports account for around 20 per cent of the emirate’s overseas trade. In recent years the centre of economic interest has shifted to oil and to oil-related industry. Sheikh Rashid, ruler of Dubai, has been keen to promote Jebel Ali, 35km south-west of Dubai, as something like the industrial park of the Lower Gulf. Concentrated there are a number of industries, including an aluminium smelter and associated gas processing plant, as well as a number of subsidiary industries, some of them (such as extrusions) relying on output from the smelter. Official figures on the Jebel Ali complex relate a story of continuing success. In April the UAE news agency WAM reported that the Dubai Aluminium Company (Dubal) had in March established new production records for both hot metal and extrusion billet. The company was expecting output for 1984 to total 156,000 tonnes, well above the designed capacity of 135,000 tonnes and up on the 1983 record of 151,170 tonnes. The same month WAM reported that Jebel Ali port had completed a record-breaking quarter, handling 49,826 tonnes of general cargo – a 52 per cent increase on the same period of 1983. Container tonnage had increased 60 per cent and bulk cargo 288 per cent. To meet increasing demand, the port was going ahead with an expansion programme, with new cranes and a newly-opened 10,000 tonne cold store. Meanwhile a surprisingly large number of public works projects were under discussion or construction during the year. Late in 1983 the go-ahead for the Dh850 million (US$231 million) improvements to the Dubai sewer system was given. In May letters of intent were awarded to South Korea’s Keang Nam Enterprises for the project. Also approved were designs for a Dh30 million (US$8 million) underpass at Al-Nahda roundabout on the Dubai to Sharjah road. In

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July five consultants were appointed (from 90 applicants) to design and oversee all new roads in Dubai. Following a 6.8 per cent increase in the number of passengers using Dubai International Airport in 1983 (compared with the previous year), work is going ahead on a second terminal costing around US$30 million. During 1984 additional check-in counters and a new 4,000m runway were also opened. Sharjah Sharjah, covering 2,590 square km on both sides of the Ras Musandam peninsula, is also enjoying relative prosperity on the back of renewed oil and gas discoveries. In the past business activity in Sharjah has tended to be rather speculative. But in the last two years large-scale oil related projects have begun to materialise. Early in 1984 Japan’s JGC Corporation won a US$180 million contract to build an LPG plant to process gas from the new Sajaa field. A US$13 million sub-contract for civil works and mechanical erection was subsequently awarded to the Lebanese-owned Consolidated Contractors International Company (CCC). By the end of the year work is likely to have been completed on the pipe network taking Sharjah’s gas to power stations in the Northern Emirates. Meanwhile the (until now) small fishing resort of Hamriyyah in the north of Sharjah between Ajman and Umm al-Quwain is about to be developed as the Northern Emirates’ first purpose built oil export terminal. While much of the basic infrastructure in Sharjah has already been completed, Switzerland’s Brown Boveri & Cie was expected in August to win a US$3 million contract to extend the emirate’s 132kVA transmission network. Another significant development in Sharjah is the tourist industry. Over four seasons from 1980–81 the number of tourists visiting the emirate has grown from 2,500 to 5,000 (in 1983–84). This last figure was actually down on 1982–83’s 8,500 as a result of fears about the oil slick in the Gulf and the Iran-Iraq war. Tourists come mainly from West Germany, and also from Austria and Switzerland. Ras al-Khaimah, Umm al-Quwain, Fujairah and Ajman At last there appears to be a chance of real development in the smaller Northern Emirates. Ras al-Khaimah has made its way until recently with its agriculture (including important vegetable and fruit exports to Europe) and its aggregate industry (the largest in the Middle East). Developments have tended to be related to these two industries. Ras al-Khaimah has two main cement plants, plus a newer factory for white cement. These industries, and others, use the excellent port facilities at Mina Saqr.

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Now a sizable oil reservoir has been discovered off-shore and hydrocarbon-related development appears imminent. The first project under discussion is to build a methanol plant. The other Northern Emirates – Umm al-Quwain, Fujeirah and Ajman – have not been so lucky (though, as noted above, an oil pipeline is planned to be built to Fujeirah). Umm al-Quwain is in the throes of construction of a 500,000 tonne cement works, and a 9 million litre a day desalination plant was put out to tender at the start of 1984. Ajman has (as noted above) opted to establish a refinery. It also boasts Ajman Heavy Industries, a ship repair and fabrication company, on the north side of the creek. Fujeirah has probably excited most interest because of its strategic position and its valuable mineral deposits in the Hajar mountains. A variety of light industry has been introduced to the emirate, including poultry, spring water production and a small steel fabrication plant.

1986 Role of Federal National Council – The Question of Quotas – Oil Price Disputes – Aid Expenditure Falls – Central Bank Policy – Banking Contraction

Paradoxically, the oil price fall and current economic recession in the Gulf has brought benefits to the United Arab Emirates (UAE). If you lived in the 14-year-old country, you might not think so: you might see around you collapsing businesses, banks with problems and growing unemployment. However, the general belt-tightening, which led to greatly reduced expenditure (16 per cent down in 1983 from 1982, and a further 14 per cent down in 1984) while revenue has not actually fallen as much as expected (mainly because of Dubai’s insistence on maintaining its old production levels), has meant that in 1984 the UAE’s budget deficit was 64 per cent down on 1983 at Dh900 million (US$245 million) and the balance of payments surplus well up at US$1.1 billion (compared with just US$150 million in 1983). This has put some vigour back into the conduct of federal government. The previous two years saw a revival of the old-established rivalry between the two most powerful Emirates, Abu Dhabi and Dubai, with the former drawing down on its ample foreign reserves to maintain its predominance, and the latter simply refusing to comply with Organisation of the Petroleum Exporting Countries (OPEC) quotas or anything which seemed to compromise its independence. One manifestation of this tension has been the failure of the government to announce its budget in time each year since 1983. The budget still had not been announced by the beginning of September 1985, three months before the end of the 1985 fiscal year. Problems between the two main Emirates have not been improved as a result of the serious illness since the beginning of 1983 of Sheikh Rashid, ruler of Dubai. Hard-working Leader Nevertheless, the slightly happier economic position at the end of 1984 meant that, in general, differences have been played down again as the hard-working president of the federation, Sheikh Zayed bin Sultan al-Nahyan of Abu Dhabi, continued the work of state which now takes up most of his time – moulding the young country into a viable whole internally, dealing with developments resulting from membership of the Gulf Co-operation Council (GCC), limiting damage from the Iran-Iraq war, and representing the UAE on the world stage.

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The leader’s most difficult task among these four has been extending the scope and improving the image of federal government at home. Thus an important meeting of the UAE Supreme Council, comprising the rulers of the seven Emirates, was postponed. It had been scheduled for the end of June 1985 to discuss political and economic reforms suggested by a committee of ministers and members of the Federal National Council. The committee, set up by Sheikh Zayed in December 1984 ‘to prepare a comprehensive economic plan’, had suggested that the Federal National Council should take a more active part in running the economy and should meet more frequently. Sheikh Zayed himself clearly saw a strengthened GCC as a means of guarding his government against hostile acts at home and abroad. Following joint military exercises in the UAE in October 1983, the GCC took additional measures during 1984–85 to improve co-operation on internal security, economic policy and defence amongst its members. In keeping with these moves the UAE cabinet agreed, among other measures, to give priority to companies from GCC countries when awarding government supply contracts and to permit all GCC driving licences to be used within its borders. Sheikh Zayed has continued his policy of explaining UAE policy abroad. As in previous years, two of his country’s closest partners were China and France. In October 1984 the UAE agreed to establish diplomatic relations with China. In July 1985 as head of state Sheikh Zayed accepted an invitation to visit the Chinese capital Beijing, though no date was fixed. Sheikh Zayed is also set to visit France in the coming months, but again the date of the trip is unknown. French companies continued to pick up contracts, particularly in Abu Dhabi. Oil in the Economy As always, the country’s economy has been determined by the vicissitudes of the world oil market. However, it is wrong to see it as totally dominated by hydrocarbons. Although oil and gas account for around 98 per cent of exports (worth Dh51.8 billion in 1984, a Dh3.33 billion reduction on the previous year’s figure, and the lowest total since 1978), this sector makes up only 50.3 per cent of GDP, the rest being accounted for by construction (14.9 per cent), trading and finance (14.6 per cent), manufacturing (10 per cent), services (9.1 per cent) and agriculture (1.1 per cent). Nevertheless, although the UAE has diversified its economy remarkably well (managing to cushion itself against catastrophic reactions from oil price reductions), it is oil which provides the motor of the economy. Although OPEC production quotas for the UAE were set in October 1984 at 950,000 barrels a day (bpd), the Paris-based International Energy Agency (IEA) reports that the country has since been pumping around 1.1–1.2 million bpd.

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For some reason UAE officials, including oil minister Mana Said al-Otaiba, regularly, but apparently unilaterally, state that the UAE’s quota is in fact 1 million bpd (700,000bpd for Abu Dhabi and 300,000bpd for Dubai). There is little doubt that the latter figure is also exceeded by Dubai which sees no reason why it should be bound by OPEC quotas essentially entered into by Abu Dhabi. Consequently, Abu Dhabi has had to get used to acting basically as the UAE’s swing producer. Officially, following the October OPEC meeting which set the UAE’s quota at 950,000bpd rather than the former 1.1 million bpd, Abu Dhabi adopted new production levels of 420,000bpd for onshore fields (a fall of 16 per cent), 180,000bpd for offshore fields operated by the Abu Dhabi Marine Operating Company (ADMA-OPCO) (a drop of 16.3 per cent) and a further 85,000bpd for independent offshore producers. The Abu Dhabi oil industry continues to be dominated by the Abu Dhabi National Oil Company (Adnoc), which has a majority interest in the Emirate’s three main oilfield operating companies: the Abu Dhabi Company for Onshore Oil Operations, which works the onshore Bu Hasa, Asab and Bab fields, in conjunction with the old Iraq Petroleum Company partners (Shell, British Petroleum (BP)), Compagnie Française des Pétroles (CFP), Exxon, Mobil and Gulbenkian interests (Partex); the Abu Dhabi Marine Operating Company (ADMA-OPCO) which concentrates on the offshore Umm Shaif and Lower Zakum fields in partnership with BP, CFP and the Japan Oil Development Company (Jodco); and the Zakum Development Company, which has recently started producing at the vast offshore Upper Zakum field (although its already quite sizeable output is not officially counted under OPEC quotas because Upper Zakum is still ‘testing’). In addition there are four minor offshore fields Mubarraz, Arzana, Bunduq and Abu al-Bukhooosh, as well as new offshore fields, operated by the Umm al-Dalkh Development Company (UDECO) a joint venture between Jodco and Adnoc at Satah and Umm al-Dalkh. Adnoc‘s other interests include the Abu Dhabi Gas Liquefaction Company (ADGAS) whose US$550 million Das Island plant can produce up to 2.7 million tonnes of LNG and 1 million tonnes of LPG annually, currently exclusively for its single customer, the Tokyo Electric Power Company (TEPCO); the Abu Dhabi Gas Industries (GASCO), which runs the US$2.2 billion LPG plant at Ruwais, in partnership with Shell, CFP and Partex; refineries at Umm al-Nar and Ruwais; and additional companies such as the Abu Dhabi National Oil Company for Distribution, the Abu Dhabi Pipeline Construction Company, National Chlorine Industries (NCI), the National Drilling Company (NDC) and the Abu Dhabi National Tanker Company. Development of these assets has been held back during 1984–85 because of a dispute between Adnoc and its major customer, Japan, which takes around half

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its output, over prices. This led to onshore production dropping to 320,000bpd during the first few weeks of 1985. Offshore production was the accepted 180,000bpd, but that does not include a further 120,000bpd from the important Upper Zakum field which officially does not count towards the OPEC quota because it is still in the testing stage. (Meanwhile Dubai was producing 350,000bpd and Sharjah 60,000bpd, mainly condensate.) Japan‘s price dispute with Abu Dhabi resulted from the former’s desire, in the unsettled state of the world oil industry, to impress on the UAE authorities the value of an assured market. During the year Japanese officials lobbied hard for a discount even on the quite strictly adhered to official UAE prices. In June Adnoc agreed discounts of up to US$1.00 a barrel and extended credit terms on certain crudes for Japanese customers. This follows a marked reduction in Japanese contract purchases over the years – from 185,000bpd in 1983–84 to 90,000bpd in 1985–86. Industry observers forecast that Abu Dhabi’s other customers, particularly its equity partners in ADNOC, would soon follow suit with requests for discounts. In November 1984 they won an increase in their margin from US$1 to US$1.80 a barrel. Foreign operators claim that low output has cut into their profit margins so that, in some cases, their investments in Abu Dhabi are greater than their returns. Abu Dhabi does not appear too worried about this. As indicated, it has had to bear the brunt of OPEC-inspired cuts in oil production. Its own output of oil has fallen from 883,931bpd in 1982 to 787,819bpd in 1983 and as low as 600,000bpd in 1985. Abu Dhabi Oil Development Projects Abu Dhabi currently has a number of projects on its books designed both to improve yields and output from existing fields and to boost exploration. Reduction of capital expenditure over the last two or three years is now allowing the relevant authorities once more to allocate funds for future development of the oil industry. Interest centres on the Upper Zakum field where reserves of sought-after extra light crude are now estimated to total as much as 60 billion barrels. During 1983, when 218 exploratory and development wells were drilled offshore and onshore, six new oil-bearing areas were discovered in Upper Zakum. A US$7 billion plan was formulated to raise production from the field from its current 120,000bpd to 500,000bpd. In July, Abu Dhabi’s National Petroleum Construction Company (NPCC), a joint venture between Adnoc and the Lebanese-owned Consolidated Contractors Company (CCC), won a US$72 million order for the third stage of development of the offshore Zakum and Umm Shaif fields. This follows the original US$300 million contract for the project, awarded to the same company in 1982.

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The third stage, which involves building and installing 18 wellhead towers and jackets, is due for completion in January 1986. Elsewhere, testing on the new US$300 million hydro-cracker at Ruwais was due for completion in September 1985. Feedstock for the 27,000bpd complex, built by the Italian company Snamprogetti, is due to come from the existing 120,000bpd Ruwais refinery. However, in May the Abu Dhabi Company for Onshore Oil Operations (Adco) did postpone two contracts totalling US$40 million for two enhanced oil recovery schemes at its Sahil and Bab fields. The contracts, to be managed by Adnoc, had only been awarded to Fluor Middle East and the local Arab Engineering Company (Arec) in February. Sahil and Bab are two of the smallest fields in Abu Dhabi. Production at Sahil, which has a capacity of 35,000bpd, fell to 612bpd in 1984 compared with a 1979 peak of 25,000bpd, while output at Bab, with a capacity of 134,000bpd, produced only 15,440bpd in 1984 compared with 54,000bpd in 1979. Adco‘s onshore fields have experienced much of Abu Dhabi’s cut-backs in production. Its five fields produced 453,000bpd in 1984, approximately half their 1979 figure. While Abu Dhabi’s production policy has been strictly conservationist, that of the Dubai Petroleum Company (DPC) at its four main existing fields, Fateh, South-west Fateh, Falah and Rashid, has been rather the opposite. Latest developments in the Dubai oil industry centre on the production of condensate from the new Margham field, from which Atlantic Richfield (ARCO) detailed plans to sell 25,000bpd of condensate in 1985. Since sales of condensate are considered outside the OPEC quotas, Dubai claimed its production of 350,000bpd (including condensate) was not exceeding the cartel guidelines. Industry insiders say that recent condensate finds in Dubai could push its output to 400,000bpd. Sharjah Gas Neighbouring Sharjah has seen its share of crude from the Mubarak offshore field fall from 10,000bpd in 1982 to around 6,000 in 1985. However, exports of condensate from the Sajaa gas field discovered by Amoco Sharjah Oil Company in 1981 have increased to 25,000 (and are outside the OPEC quota), while gas sales from the same reservoir are beginning to come on stream. Following resolution of an oil-based border dispute which threatened to damage relations between the two Emirates, Sharjah is now set to supply gas to Dubai early in 1986. In May, the Lebanese-owned Consolidated Contractors International Company was awarded a US$25 million contract to build a 75km pipeline between the Sajaa gas field and the Dubai Electricity Company’s power and desalination plant at Jebel Ali. This means 70,000 million BTUs of gas a day will be piped to Dubai, and there is a strong probability that and the

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Dubai Aluminium Company (Dubal) will take a further 100,000 million BTUs a day. Currently, all gas from Dubai’s own Margham field, which produces 350 million cu ft of gas a day is re-injected. Dubai is reported to have negotiated a much cheaper price for the gas than that paid by Sharjah’s biggest customer, the Emirates General Petroleum Corporation, which takes up to 300,000 million BTUs a day. This gas goes mainly to feed the Northern Emirates’ gas network and has required the construction of a new liquefied petroleum gas plant which will be completed in 1986. Dubai’s cheaper price may be a reward for clearing up the border dispute. As for hydrocarbon production in other Emirates, Ras al-Khaimah is now producing around 9,000bpd of light crude from its offshore Saleh field, discovered by Gulf Oil Corporation of the United States in March 1983. However, funding for further development of the field has been slow to come forward. Financiers have reportedly been scared off by two earlier oil finds in the Northern Emirate, which subsequently petered out completely. Stranger still are the ambitions of nearby Ajman which has no proven oil reserves at all. In 1981, Lebanese-born Saudi entrepreneur Abdel-Rahim al-Rahbani proposed building a 100,000bpd refinery in the Emirate, using crude from Saudi Arabia and Abu Dhabi. A feasibility study was done by Technip of France, but nothing further was heard of the project until mid-1984 when it was announced the proposed Ajman Refinery Company (Arcol) had bought a cut-price second-hand refinery, formerly based at Milford Haven in Wales, from the Esso Petroleum Company. In August 1985 plans to ship the refinery to Ajman and have it onstream by 1988 were announced. Spending Beginning to Pick-up Reduced oil revenues were compensated for by reduced expenditure all round in 1984. Figures released at the start of 1985 showed that federal spending during the first 10 months of 1984 had been kept down to a remarkably low Dh504 million (US$137 million), or just 44 per cent of the overall budget allocation of Dh1,250 million (US$340.4 million). The public works and housing ministry spent Dh363 million (US$98.8 million) or just above half its budget, while other ministries were even more parsimonious, saving up to three-quarters of their allocations. Another area where expenditure has been greatly reduced over the past two or three years is foreign aid. Although in real terms the UAE remains one of the largest donors of development assistance, spending in this field has dropped by nearly half in each of the past two years – from Dh6 billion in 1983 to Dh3.1 billion in 1984 and just Dh1.2 billion in 1985. However, spending on both defence and, as noted above, oil development, picked up, while Abu Dhabi began implementing the US$2.4 billion transport

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and road improvement programme designed by the US company De Leuw Cather International in the late 1970s. One contract (Number 24) dusted down from this plan was to build a new road and repair existing roads near the Abu Dhabi Meridien Hotel, where the Cypriot construction company, Joannou and Paraskevaides submitted the low bid of Dh83.5 million (US$22.7 million) in June. A similar movement, not experienced in the last couple of years, was evident in the crucial water and electricity sector. During the summer Abu Dhabi’s water and electricity department, as well as its independent consultant, Merze & McLellan of the United Kingdom, finally got down to assessing bids from five major international companies and consortia for the supply of three turbines with a combined output of 250MW for the Taweelah power and desalination project. Bidding started as far back as August 1983, after which there were seven calls for rebids. In July, a letter of intent for the contract was finally awarded to General Electric of the United States which bid US$68 million, plus a further Dh15 million (US$4.1 million) in local costs. However, the Taweelah scheme is nowhere near as big as the vast US$6 billion scheme which was originally scheduled to produce up to 3,000MWof electricity and 100 million gallons of water a day for the whole country. The slump in oil revenues has led to a downgrading of the UAE energy requirements, while nationalistic tendencies in other Emirates have made it difficult to co-ordinate a nation-wide power grid. Consequently when the scheme comes on stream in 1989 its capacity will be approximately one tenth that originally envisaged. Funds for Development Dubai has also been spending more than in recent years. It, too, has a major power and desalination project in the offing, this one a US$130 million extension (involving the construction of three 200MW gas turbines) at the 600MW Jebel Ali thermal power station. A major project on the drawing board throughout the year has been a new US$30 million diwan or palace for Sheikh Rashid. In July the local Dutco Construction Company won a Dh92 million (US$25.1 million) contract to build a 3,000 seat multi-function sports arena, to be attached to Dubai’s main football clubs. Having refused to cut back its oil production along OPEC guidelines, Dubai in fact has more funds to spend on development projects than its richer and more powerful neighbour in Abu Dhabi. This has led it to invest in prestige local projects which have not always won the support of other members of the federation. One such project is the new Dubai-based airline, Emirates Airlines, which was due to begin operations in October. The Dubai authorities claimed they

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were not receiving an effective enough service from the regional carrier Gulf Air, which is owned by the governments of Abu Dhabi, Bahrain, Oman and Qatar. Gulf Air reportedly offered to improve the frequency of its flights to Dubai and even suggested the Dubai government should take a 20 per cent stake in its equity. However, Dubai seemed set on going it alone. Sheikh Ahmed bin Said al-Maktoum, younger brother of the ailing ruler, was tipped to become chairman. Sharjah’s Economic Ups and Downs While 1983 and 1984 were years of considerable business optimism in Sharjah, where new oil and gas reserves had recently been found, 1985 saw perhaps a more marked depression in this particular Emirate than anywhere else in the country. For some time there was considerable doubt about Sharjah’s ability to make repayments on a US$200 million loan made in 1978 by the Paris-based Banque Arabe et Internationale d’Investissement (BAII). In the event, the Sharjah government made the necessary US$18 million payment, allowing a new two-tranche US$154.5 million loan to be signed in June. The new loan is specifically designed to allow the government to restructure its own debts to banks and contractors, and finance current and future development work. Successful conclusion of the new loan reflects continuing optimism about Sharjah’s economic prospects. By 1988 the Emirate’s debt repayments will have fallen to US$150 million compared with US$260 million in 1985. Expenditure in 1988 is likely to drop from US$550 million to US$300 million, while revenues which in 1985 were forecast to reach US$400–US$500 million should rise to US$650 million. Revenues will come mainly from the Sajaa gas and condensate field, which is estimated to have a life of 20 years. Apart from actual sales of gas from the field (see above), the government expects to gain increasing income from its new liquid petroleum gas (LPG) plant and from its Mubarak oil field. During the year the government announced that construction of its new 500,000 tonnes a year LPG plant was on schedule. The plant, which is being built by Japan’s JGC Corporation, will use feedstock from Sharjah’s Sajaa gas field. It will produce propane and butane, and is planned to come on stream in summer 1986, when it should earn US$20 million a year, rising to US$60 million in 1987–88. Demonstrating the Emirate’s efforts to diversify industrially, in June the British firm Allott & Lomax announced it had completed a Dh50 million (US$13.6 million) preliminary study for a building materials plant in Sharjah. The proposed factory is designed to produce 100,000 cu metres of aerated concrete and

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30,000 cu metres of calcium silica a year. However, the future of an ammonia/urea plant, in which both CdF Chimie of France and M W Kellogg of the United States were interested, remains uncertain. Social Services One area where expenditure has not kept pace with demand is social services. The UAE has made sterling efforts during the years to provide housing and medical services for its citizens. However, over the last couple of years it has been overwhelmed by claims on its resources, mainly, so officials say, from immigrant families. This has led to unprecedented restrictions on the activities of foreigners, who, for example, have been banned from applying for jobs when they are already employed and have had their use of public health facilities curtailed. This is not to say spending on health and social services has ceased completely; far from it. In June 1985 the federal health ministry announced a Dh4 million (US$1.1 million) programme to upgrade the Al-Jazeera and Central hospitals in Abu Dhabi as well as a scheme to attract foreign specialists to train local doctors. In May, upgrading of the Al-Jeemi (aka Al-Jimi) hospital in Al-Ain was completed at a cost of Dh66 million (US$18 million), with new departments in high-tech specialities such as nuclear medicine, while the British Allied Medical Group’s US$23 million contract to run the prestigious Ruwais hospital for Adnoc was renewed – but this time only for three months. There is strong competition from the Saudi-US Charter Medical International. In Dubai, the Swedish firm Teleplan won a US$900,000 contract to computerise three hospitals (the Dubai, Rashid and Wasl). Financial Losses Despite the general feeling that the worst of the UAE’s economic problems may be over, there have been business collapses and financial losses over the course of the year. Many such situations come to light when business principals allegedly leave the country, such as the Pakistani owner of the Taj Store Group (where a liquidation sale was ordered in June by Abu Dhabi and Sharjah courts) and the Hongkong-based managing partners of Harvest Commodities, a money exchange and precious metals dealer in Dubai, which collapsed with debts of Dh20 million (US$5.4 million). Larger businesses were able to weather the storm, often with the help of friendly creditors. The largest, certainly the most public, debt restructuring exercise was carried out during the year at the A R E Galadari Brothers Group (AREG), where total indebtedness was put at Dh860 million (US$234.2 million). In July 19 banks, including the largest single creditor bank, Dubai Bank, which

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was owed about Dh460 million (US$125 million) in secured and unsecured loans, agreed a debt rescheduling plan for the group (owned as its name implies by Abdul Rahim Galadari and Abdul Latif Galadari, brothers of the rather higher profile Abdul-Wahab Galadari, who was one of the more spectacular casualties of 1983). Banking – Problems and Rationalisation In the banking field three former executives of the Emirates National Bank (ENB) were charged with alleged fraud involving loans worth more than Dh80 million (US$21.8 million). Following a rescue by the central bank, ENB, together with the Dubai Bank, was merged with the Union Bank of the Middle East (UBME) in January 1985, thus bringing together the former banking interests of all three Galadari brothers. ‘There were also well-publicised problems at the Bank of the Arab Coast (BOAC) based in Ras al-Khaimah. British former general manager Len Forsyth was arrested and charged with failing to keep proper bank records. In September it was announced that Ajman-based First Gulf Bank was likely to take over BOAC. Generally speaking, though, banking has been a sector where the benefits of general rationalisation following a scare period have been most apparent. Central Bank of the United Arab Emirates governor, Abdul-Malik al-Hamar, and his colleagues in the finance and economy ministry have taken the opportunity afforded by a spate of troubles caused by bad loans to slim down the number of banks in what is still one of the most over-banked countries in the world. Mr Al-Hamar has said: ‘We want fewer banks, better quality banks and stronger banks.’ The Central Bank’s supportive but clear-sighted policy first became apparent in November 1983 when it stepped in to help out the struggling Union Bank of the Middle East (UBME), where the Dubai government subsequently took a 73 per cent stake. As indicated, UBME was formerly closely linked with the business interests of the Dubai entrepreneur Abdul-Wahab Galadari, whose assets were placed in the hands of the receiver in April 1984: A similar process of consolidation was going on in Abu Dhabi. In July 1985 a new bank, the Abu Dhabi Commercial Bank (ADCB), opened its doors for business – the product of an Abu Dhabi government assisted merger between the troubled Khalij Commercial Bank, Emirates Commercial Bank and Federal Commercial Bank. The new bank has assets of Dh7 billion (US$1.9 billion), one of the highest figures in the country. Rather on the perimeter of the Central Bank’s area of influence, there has also been a tightening of banking controls in Sharjah where the National Bank of Sharjah announced a 46 per cent drop in income (from Dh61.5 million

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(US$16.7 million) to Dh33.2 million (US$9 million)) in 1984 , mainly the result of increased provisions for bad loans. The National Bank of Sharjah was by no means the only institution to experience such a drop in income. Even the well-established and well-connected Bank of Credit and Commerce Emirates had a 20.6 per cent fall in profit, to Dh24.6 million (US$6.7 million). However, the bank’s generally healthy position was indicated by a rise of a fifth or more in assets, loans and customer deposits. In December 1984 and January 1985 Central Bank of the United Arab Emirates issued two important circulars (numbers 313 and 318) laying down procedures for classifying, accounting for, and declaring bad loans. Investment Banking The same process of contraction and consolidation – pour mieux sauter – was visible in investment or merchant banking, recently touted as the area of business banks should get into to increase fee income in lieu of margins on syndicated loans. Here, too, there has been a reassessment of the objectives sought by local operations. During the first half of the year, the Abu Dhabi Investment Company (ADIC), set up in 1977 as the investment banking arm of the Abu Dhabi Investment Authority (ADIA), announced it was undergoing a thorough review by the UK auditor Ernst & Whinney. In July 1984 ADIA was forced to buy in all 30 per cent of the publicly held shares in ADIC when private stockholders complained they were not getting a high enough level of returns. Now ADIA owns 90 per cent of ADIC, with the National Bank of Abu Dhabi (itself 70 per cent owned by ADIA) owning the remainder. Since mid-1984 ADIC’s business has been mainly locally based. It has established a share trading department, which acts as a market maker as long as the UAE remains without a stock exchange. In 1984 it co-lead managed an important US$300 million loan for Oman. Although falling property prices led its main investment (105 villas in Abu Dhabi) to decline in value from roughly US$30 million to US$11 million, assets grew by 14 per cent in 1984 to Dh3.96 billion (US$1.08 billion). Somewhat contrary to trends in the rest of the economy, where new projects were in fashion once again, the Emirates Investment Bank (EIB) announced in its annual report published in June that it was not going to invest in new industrial ventures, but rather concentrate on financing renovations and improvements in existing industries. In 1984 the bank, which was established in 1982 with capital of Dh500 million (US$136.1 million), approved 18 grants worth Dh97.4 million (US$26.5 million).

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Northern Emirates The smaller Northern Emirates, Ras al-Khaimah, Ajman, Fujairah, and Umm al-Quwain have had budgetary problems over the past year as declining revenues at the federal level have taken longer than usual to filter through. As noted above, Ras al-Khaimah is experiencing its third potential oil boom. However, financing of hydrocarbon development is proving difficult. Otherwise, Ras al-Khaimah’s economy relies on its two major cement companies, the Union Cement Company, mainly owned by the government, and the Gulf Cement Company, which has a Kuwaiti controlling interest. The Damascus-based Arab Company for Livestock Development owns a dairy farm at Digdagga in what is the most agriculturally developed and most fertile of the Emirates. This farm now produces 2,000 tonnes of milk a year, or 5 per cent of total UAE demand. Ras al-Khaimah has also found itself progressively pencilled on to the international air transport map, as its still-small international airport continues to attract transit custom. In June, Egyptair became the fourth major airline to contract to use the Emirate’s airport facilities. Ajman, with Arab Heavy Industries (AHI) dominating its economy, is still seeking to attract investment. The 750,000 tonnes a year Ajman Cement Company was recently opened, but is having difficulty finding markets. The same may be the case when the Ajman Refinery Company (Arcol) comes on stream (see above). Fujairah’s geographical position has led to plans – as yet not implemented – by Adnoc to build a pipeline to its port in order to bypass the Strait of Hormuz. Work has been progressing steadily on the new Fujairah airport, the fifth in the UAE. The local company, Al-Naboodah, was scheduled in June to start work on the main terminal and additional buildings, while during the same month the last main contract on the airport went to tender. However, the generally depressed economic climate in the Emirate has led to large losses over the past two years in Fujairah’s main business, Fujairah Cement Industries Company (FCI), which was forced to cut its workforce by 10 per cent to around 200. FCI’s problems are blamed partly on the world economic difficulties, and partly on over-capacity in the cement industry in the UAE. FCI, set up in 1979, produces 520,000 tonnes a year, but although local demand is just 1.7 million tonnes a year, overall capacity in the UAE is 8.7 million tonnes. However, the Emirate’s limited raw materials have been put to good use. Apart from FCI, they have been used in the Emirates Ceramics Company, the Fujairah Rockwool Company (developed with help from the Abu Dhabi Fund for Arab Economic Development), and the Fujairah Rock and Aggregate Company (in formation).

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Umm al-Quwain remains the poorest of the Emirates. It still receives some of its revenue from the small proceeds of the Mubarak oilfield. However, for the majority of its budget it has to rely on federal funds. In 1982 it was allocated a generous 8 per cent (US$531 million) of federal development expenditure. This has led to much unfinished work on infrastructure. There are plans to revive the Emirate’s fishing industry, develop tourism, and continue the search for further oil deposits.

1987 Changing Fortunes – Uncertainties – Power Cuts – Lack of Bankruptcy Law – Iran and Iraq – Defence and Neutrality – Industrial Scepticism – Generation Changes

With a trade surplus of over US$8 billion and a per capita income of over US$20,000, one might ask why the words ‘recession‘ and ‘uncertainty’ are so frequently used to describe the economy of the United Arab Emirates. On paper the country still looks good. Oil, gas and other exports amounted to US$14.8 billion In 1986 – all for a population of only 1.4 million. The problem though is one of relativity. While the economic situation may still look enviable, the overall picture is one of stagnation compared with the almost frenzied growth rates achieved in the late 1970s and early 1980s. The Emirates are therefore having to adjust to changing fortunes at a time of increasing popular expectations. Life is no longer easy for UAE nationals and a lucrative livelihood is no longer assured. Effects of a Fluctuating Oil Market Wild fluctuations in world oil markets have created uncertainty about the country’s economic future. Oil, once considered a blessing from God is now blamed for the government’s inability to calculate the annual budget, and for the forced cutbacks in government spending which have proved painful to local companies. Further, the internal wranglings within the Organisation of the Petroleum Exporting Countries (OPEC) have also hung another question mark over the actual amount of oil the country is allowed to produce under the quota system, while prices in the last 18 months have swung between a low of US$8 a barrel to a slightly less harrowing US$20 a barrel. In the Emirates as a whole, although the hydrocarbons sector accounts for only 45 per cent of gross domestic product (GDP), the sector still finances 98 per cent of the federal spending budget. Inevitably, the decline in government spending has impacted on the political profile of the federation. Once seen as the source of unending beneficence, the government’s withdrawal from the commercial scene has weakened its once dominant place in the political arena. The federal government was formed in 1971, filling the vacuum left by the exodus of British troops. By the late seventies, the government had been successful in forging a national identity which was beginning to transcend tribal and emirate affiliations. However, it

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was somewhat suspiciously regarded by a number of ruling sheikhs, particularly among those from the smaller, poorer emirates who saw the disposal of federal money from the government, which was based in Abu Dhabi, as an attempt by the largest emirate to increase its influence in the country. Those suspicions have now diminished. In addition, the degree of popular support for the union, particularly among the younger generation who know of no other kind of government, is such that any symptoms of lessening in the degree of support given to the federation by the various sheikhs has led to outbursts of popular criticism. But as oil revenues have declined, a number of leading rulers have opted to concentrate on spending in their own emirates, rather than contributing to the general pool so that money can be spread more evenly. Constitutionally, all seven rulers are required to hand over 50 per cent of their revenues into the federal government, but in practice this has never been the case. Only two emirates, Abu Dhabi and Dubai, had sufficient funds to comply with the regulations. As the income dropped, so budget deficits emerged. In reality, the deficits were far smaller than outlined in the annual budgets, for spending was regulated strictly according to the amount coming in each month from oil. The shrinkage in spending power of the federal government has particularly affected the small, Northern Emirates. Power cuts are frequent because the federal government cannot proceed with the building of new generating stations, or hold back on the fuel subsidies required to run them. Ajman, for example, suffers a chronic water shortage because the federal government did not go ahead with a proposal to build a desalination plant. With such drawbacks questions inevitably arise about the future of general activity in the emirate. This is just one example, but there are countless others in the other Northern Emirates which face a future without oil, and little or diminishing funds to finance the pace of continuing economic activity. Lessening Job Opportunities Neither is the federal government the guaranteed source of employment it once was. Nationals from the smaller emirates were once eagerly recruited into the federal government, often with scant regard to the skills they could bring to it. Now, it is becoming difficult to get a job with a high salary in either the public or private sector. Although nationals are still legally preferred over non-nationals, much more is now required from them. In the new’ hard’ times, private sector employers are reluctant to hire nationals at a starting salary of US$2,000 a month unless they perform as efficiently as a cheaper foreigner. The federal government and other state organisations such as the Abu Dhabi National Oil Company (ADNOC) are all cutting back on labour. Naturally,

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none of the redundancies have affected nationals, but the repatriation of thousands of foreigners has had enormous impact on consumer spending levels. Rents continue to fall precipitously in the two main cities, fewer cars are being bought, and in the current climate foreign nationals are deciding that it is better to save rather than spend their money. Hence the private sector has been affected, not only in terms of delays in payment on contracts, but also in general trading. Economic Planning Many leading businessmen feel that the situation cries out for good economic planning, and a harnessing of resources to protect the economy from going into an unwarranted nosedive. To a large extent, such complaints are disguised demands for a bail-out, and a renewal of the government generosity which marked business practice some years ago. Many hundreds of local companies are in difficulties, and the only reason why they have not been declared bankrupt is that there is no bankruptcy law in the country. Local traders point out that if they were assured of efficient economic management at the top, then the outflow of funds from the country would decline and confidence could return, despite the deteriorating security situation in the Gulf. At present, family ties are more important qualifications for government leaders than experience and talent. Businessmen point to the irregular meetings of the cabinet, and the frequent absences from the country of leading sheikhs. These criticisms come at a time when the UAE leadership is called on to make more and more complex and sophisticated decisions. Ironically, it is this factor – more than any other – which is blamed for the current stagnation in the economy. Sitting on Defence Surprisingly, little concern is expressed at the continuation and possible expansion of the Gulf War. In I986 for instance, the conflict was brought to the very doorsteps of the UAE, when a number of attacks on shipping took place within the country’s territorial waters. Moreover, it is suspected that Iran has made use of the island of Abu Musa, off the coast of Sharjah as a base from which to mount their helicopter raids on tankers in Gulf waters. Theoretically, half the island is still UAE territory, under the terms of an agreement reached with the Shah in 1971 after Iran had tried to seize the island by force. The UAE, and in particular Dubai, have always tried to guarantee their neutrality in the Gulf War conflict by maintaining good diplomatic and trade relations with Iran. In the past it has faced criticism from fellow Gulf Co-operation Council (GCC) members over its relations with Iran. But in recent months, it has

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become clear even to the Emirates that good trade ties do not guarantee protection from involvement in the war. The Iraqi raid on Sirri Island in August 1986 emphasised the risk of escalation in the conflict to include the southern part of the Gulf. Although there has been progress in cementing defence ties between the Emirates and its fellow members in the GCC, the country is still not in a position to be able to ward off any concerted effort by Iran to widen the scope of its conflict with Iraq. Nevertheless, it is generally perceived throughout the Gulf that Kuwait and Saudi Arabia are perhaps more likely targets for Iranian wrath than the Emirates. But this alone cannot account for the air of unconcern which seems to prevail in the country about the conflict. So far, the only symptom of concern is the decision to spend US$1 billion on a naval base located between Dubai and Abu Dhabi. But there is still little sign however of any concrete plans to integrate the various armed forces in the Emirates, apart from the occasional joint manoeuvre. Defence expenditure is also likely to suffer the similar, though not so severe, restraints experienced by other sectors. However it is presently considered an off-budget item and increasingly equipment is being sought on an oil barter basis, rather than for cash. Deficit Budgeting Deficit budgets have now become an annual affair since the oil price collapse in 1982, and few ideas have come forward on how to finance these deficits in the long term. Federal spending in 1985 was down to US$4.5 billion, while revenues from the contributions of Dubai and Abu Dhabi were estimated at US$53.5 billion. Nevertheless, the resulting deficit of just under US$51 billion was 15 per cent down on the previous year with efforts being made by the government to cutback even more. In reality, government spending came out at much less over the year, and the deficit worked out at only US$602 million according to Central Bank of the United Arab Emirates figures. Further cutbacks could prove more difficult to initiate. Of the US$53.6 billion actually spent in 1985, only US$154 million went on new capital projects; the rest went into paying ongoing contracts, old debts, and current items such as supplies and salaries. Moreover, the government has so far proved reluctant to cut down on the massive electricity and fuel subsidies which are among the largest items on the current budget. The government has made progress in clearing off the backlog of contractors’ debts in the last two years, simply because not to do so would have worsened the already difficult situation in which many local companies find themselves.

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Liquidity Problems Delays in debt payments and the general mismanagement of local companies have been the principal causes of the high proportion of bad debts in the Emirates. Non-performing loans on bank books have affected even the strongest members of the UAE banking community, while others have had to be taken over by the government or receive long term-cheap deposits. A number of foreign banks have decided to leave the market entirely. The largest bank in the country, the National Bank of Abu Dhabi, witnessed a 66 per cent drop in profits in 1985, and the Abu Dhabi Commercial Bank, (itself an amalgamation of three troubled banks), suffered a US$48 million loss in the same year. In addition, another US$130 million was reported to have been made available to the bank in the form of cheap deposits from either the Central Bank or the Abu Dhabi government, which is a 60 per cent shareholder in the bank. Similarly in Dubai, a number of banks had to be merged, while others had to receive further funds from the local government. Bank rescues are becoming an increasingly expensive exercise for emirate governments, and ruling sheikhs are proving reluctant to continue their bail-outs. The Central Bank is not obliged to act as lender of last resort to the banking community. These days it wants to see more funds going into the institution before it is willing to provide assistance to ailing banks. Further, the dilemma about who is to bail out these banks (so that the public’s money can be protected) is harder to resolve when the institution is owned and operated by individuals in the smaller emirates in the north. Despite these liquidity problems, the government is reluctant to introduce bankruptcy laws, so that banks can take steps to recover assets. A number of the larger debtors, for reasons of political discretion, are still immune from prosecution, while others are proving hard to pin down in court. Bankers complain that in the absence of bankruptcy laws, court liquidation procedures are lengthy and difficult to achieve. To compound this situation, another legal problem emerged in 1986 in connection with the recovery of bad debts. A bank client in Abu Dhabi who was being pressed on his loans, retaliated by initiating a counter case which sought the return of the compound interest portion of his debt which he had paid on his overdraft over a number of years. Compound interest (or interest paid on interest) is legally forbidden in the Emirates, and in the past the courts have endorsed only simple interest tariffs which are further limited to twelve per cent on commercial loans and nine per cent per annum on personal credits. This test of the principle of paying compound interest had led banks to question the rules of the game. The uncertainty that the case has generated is such that a number of banks have stopped lending money altogether until the government

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can guarantee the basis on which loans are given. This has placed the government in an invidious position. At a time when many local companies simply cannot afford to pay normal rates of interest, a government decision which favours the banks would prove politically damaging, particularly as the religion of Islam considers the charging of interest as haram or forbidden. The Industrial Sector The industrial sector, once considered to be the answer to unhealthy reliance on oil revenue, is now regarded with some scepticism in the country. Effective co-ordination between Gulf states to avoid duplication of industries has only had limited success to date, and its scope has been restricted in the main to embrace only the larger projects planned by governments. Nevertheless, Dubai is going full steam ahead with its industrial free-zone in Jebel Ali, where, it hopes, foreign companies will be attracted to establish assembly plants and small industries. The northern emirate of Umm al-Quwain is hoping that an aluminium smelter will provide an answer to the questions about its economic future. A project is being proposed by a group of offtakers, including the Chinese, to create a 120,000 ton annual capacity plant with finance put forward on a purely project basis. Although interest has been expressed in this new source of aluminium, the project still depends on the establishment of guaranteed gas supplies. A programme of exploration is now being re-started in the offshore waters of the emirate. Industry in Ras al-Khaimah and Fujairah has had mixed success. Many of the companies owning industrial plants in Ras al-Khaimah were listed on Kuwait’s Souk al-Manakh stock exchange, and have been badly mauled by the experience. For some, their future relies on the survival packages being put forward in Kuwait. Oil, the largest industry of all in the Emirates, is, naturally, experiencing a period of retrenchment. Redundancies are being declared in Abu Dhabi by a number of national oil subsidiaries, and several associated companies are being merged to reduce on costs. Abu Dhabi’s production levels in 1987 will probably be determined by market forces and the resultant negotiations within OPEC. In late 1986, production was running around 1.2 million barrels per day (bpd) in defiance of a quota set for it at 950,000bpd. This is no doubt a reflection of Abu Dhabi’s frustration at having to regulate its output around that of Dubai. Dubai meanwhile still pumps at maximum capacity regardless of the quotas set on the UAE by OPEC. In the last year, Dubai has faced criticism from other Arab Gulf producers for its trend-setting crude

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prices, which have been used increasingly as a marker crude for Gulf prices overall. In this little wrangle, Abu Dhabi government officials argue that as the Emirate is the largest contributor to the federal budget, it should be allowed to produce as much oil as its quota allows under OPEC rules. Dubai, on the other hand, does not consider itself a member of OPEC, despite its membership of the union of seven sheikhdoms. Changes In the future, the government of the Emirates will have to face up to some changes. The country’s prime minister, Sheikh Rashid bin Saeed al-Maktoum has been in ill health for a number of years, and has now been obliged to take a backseat in government. His three sons now help run the country on a day to day basis. Abu Dhabi, too, is facing a generation change, and increasingly Sheikh Khalifa bin Zayed al-Nahyan is taking an active part at the helm in both the Abu Dhabi and federal governments. The country’s elders have been largely successful in cementing the union of the seven emirates, but it will be the difficult task of their sons to maintain the union as a prosperous and secure nation, ruled by a government which responds to the political and economic needs of its people.

1988 Gulf War’s Mixed Blessings – Provisional Constitution Extended – Capital Expenditure Reduced – ADNOC Dominance – Taweelah – Renewed Investment Confidence

Political and business confidence in the United Arab Emirates (UAE) was beginning to pick up towards the end of 1987. In Abu Dhabi projects which had been delayed for sometime were at last being given the go-ahead. Further down the Gulf, Dubai continued to be the centre of a nourishing re-export trade with Iran, while neighbouring Sharjah seemed also to have recovered. Some of the smaller emirates, particularly Fujairah, suddenly found themselves thrust into the world limelight because of the extension of the Gulf tanker war outside the Strait of Hormuz. They demonstrated their stability and confidence in the way they coped with this and with the arrival of foreign warships off their shores. In all, the Gulf War brought mixed blessings to the UAE. In November 1986 there was an Iraqi air raid on Abu Dhabi’s Abu al-Bukhoosh oilfield operated by France’s Total (Compagnie Française des Pétroles). This caused extensive damage and resulted in at least eight deaths. On the other hand the proximity of the hostilities offered the UAE an important mediating role in the conflict. The importance of this was demonstrated by the efforts of the Soviet Union and some of its allies to improve relations with the UAE. Developments in Foreign Affairs The country’s general political tone was set at a meeting of the Supreme Council in October 1986, when it was decided to continue with the UAE’s existing temporary constitution for a further five years. The Supreme Council re-elected Abu Dhabi’s powerful Sheikh Zayed bin Sultan al-Nahyan as federal president, with Dubai’s ruler Sheikh Rashid bin Said al-Maktoum as his deputy. On a federal level the main developments were in the field of foreign affairs. Sheikh Zayed acted as a mediator between the various parties in the Gulf War and proved an able negotiator in resolving problems which arose in the Gulf Co-operation Council (GCC) . As noted above, one interesting development during the year was the way the UAE, and in particular Abu Dhabi, was courted by the Soviet Union. In October 1986 a new Russian ambassador, Felix Nikolaevich Fedotov, arrived in Abu Dhabi. In June 1987 Aeroflot signed a new civil aviation agreement with the UAE. By July the ambassador had ten diplomats and 31 support staff working

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with him. This led to a somewhat lopsided relationship since the UAE still had no embassy in Moscow. Indeed the UAE did little to encourage this relationship: UAE banks declined to take part in a much touted US$200 million loan to the Soviet Union, and trade between the two countries remained miniscule. Soviet goods imported through Dubai amounted to US$327,000 in 1985. Nevertheless the Soviet presence in Abu Dhabi gave the emirate increased prestige in the diplomatic affairs of the region. Oil and Gas On the economic side, UAE performance was dominated by fluctuations in the price of oil. Oil revenues fell by 40 per cent in 1986, leading to a dramatic decline in GDP. In all, gross domestic product dropped by over 20 per cent from Dh10l billion (US$28 billion) to Dh80 billion (US$21 billion). Oil’s contribution fell by almost half from Dh45 billion (US$12 billion) to Dh26 billion (US$7 billion). Exports, mainly of oil and gas, fell by 33.5 per cent during the year. However measures introduced by the government restricted the fall in annual national consumption to 6 per cent, helping stem the increase in imports to 4 per cent. As a result the UAE kept in the black on its trade account, although its trade surplus suffered a 58 per cent drop (compared with the previous year) to Dh12.7 billion (US$3.7 billion) in 1986. The effect of this on the overall balance of payments surplus was a fall of more than 70 per cent to Dh6.8 billion (US$1.85 billion) in 1986 from Dh25.5 billion (US$7 billion) the previous year, according to the Central Bank of the United Arab Emirates‘s annual report. The Central Bank put a cheerful face on these figures, stating that the continued surplus ‘strengthens confidence in the ability of the UAE economy to overcome the sharp negative effects of the oil market and leads one to expect positive developments in the years to come.’ As presented, the 1986 budget planned for a small increase in spending over estimated actual expenditure the previous year. Most of the allocation of Dh14 billion (US$3.8 billion) was for current expenditure. Capital expenditure was reduced for the third consecutive year – to Dh550 million (US$150 million). Revenue was forecast to reach Dh12.8 billion (US$3.5 billion). In April 1987 finance ministry undersecretary, Nasser al-Nowais, predicted that the UAE budget would continue to show a deficit during the year. He warned that further falls in oil revenue would lead to draw-downs in the UAE’s international financial reserves, officially put at US$3.2 billion. ‘These revenues could be depleted after a while,’ Mr al-Noweis told the daily Al-Khaleej, ‘and we must think of diversifying sources of revenue.’ As a safeguard for the UAE he

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suggested that the country’s currency, the dirham, should be linked to a basket of currencies rather than just to the dollar as at present. Nevertheless, some simple economic figures remained favourable. Liquidity did not suffer during the year, and inflation was contained in the range of 1–2 per cent. All these developments forced a radical reassessment of the UAE’s economic role during the year. It is too early to say what new directions it will take, but there were moves to bolster certain aspects of the economy, particularly industrial development, the country’s potential as a trading centre for the area (currently epitomised by Dubai’s re-export business), and co-operation between GCC countries. Planning minister, Mumaid al-Mu’alla, said 1986 would ‘remain a turning point in the history of the UAE economy’. He noted that improving oil prices and greater co-operation among GCC countries would lead to better results in 1987. Early figures of oil production in 1987 indicated that the minister was correct. Oil revenues in the first quarter of the year were up 13 per cent on the previous year to US$1.7 billion. At the start of 1987 Abu Dhabi and Dubai together were producing around 1.2 million barrels per day (bpd), Abu Dhabi 800,000 and Dubai 380,000bpd. Local Industry Abu Dhabi’s domination of the UAE economy is reflected in figures of the individual emirates’ contributions to GDP: Abu Dhabi 61.3 per cent; Dubai 25 per cent; Sharjah 8.2 per cent; Ras al-Khaimah 3 per cent; Fujairah 1.1 per cent; Ajman 0.9 per cent and Umm al-Quwain 0.5 per cent. The leading firm in the oil sector in Abu Dhabi is the state-owned Abu Dhabi National Oil Company (ADNOC), which has the majority interest in Abu Dhabi’s three main oil field operating companies. These are first, the Abu Dhabi Company for Onshore Oil Operations (ADCO), a joint venture with the old Iraq Petroleum Company partners British Petroleum (BP), Shell, CFP, Exxon, Mobil and Gulbenkian interests producing 500,000bpd from the two large onshore fields at Bu Hasa and Asab; second, the Zakum Development Company (together with the Japan Oil Development Company (JODCO), currently producing up to 150,000bpd from its 14–20 billion barrels of recoverable reserves in the massive Upper Zakum field; and third, Abu Dhabi Marine Operating Company (ADMA-OPCO) (together with British Petroleum, Compagnie Française des Pétroles and JODCO) for the offshore Umm Shaif and Lower Zakum fields, producing around 200,000bpd. ADNOC has a 60 per cent stake in ADCO and 50 per cent in the other two companies. In addition it has interests in four minor offshore fields Mubarraz, Arzanah, Bunduq and Abu al-Bukhoosh – which together account for 100,000bpd.

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A new field came on stream in 1985 – Umm al-Dalkh, which produces 10,000bpd. It is operated by the Umm al-Dalkh Development Company (UDECO), joint venture between Jodco and ADNOC. ADNOC is also the major shareholder in two gas producing companies – the Abu Dhabi Gas Liquefaction Company (ADGAS) and Abu Dhabi Gas Industries (GASCO). ADGAS’s US$550 million Das Island plant has the capacity to produce 2.7 million tonnes of liquefied natural gas (LNG) and 1.0 million tonnes of liquefied petroleum gas (LPG) annually, mostly for export to Japan. GASCO is a joint venture with Shell, CFP and Partex, and runs a US$2.2 billion plant at Ruwais extracting propane, butane and condensate from associated gas produced by the onshore Bu Hasa and Asab fields. Again the main export market for its products is Japan. GASCO’s LPG plant is the main feature of the expanding Ruwais industrial zone. ADGAS and GASCO have produced contrasting results in recent years. In 1985 ADGAS reported a 17 per cent increase in LNG production to 3.2 million tonnes, while GASCO’s output of natural gas liquids was down 11 per cent at 2.0 million tonnes. Other important ADNOC interests include refineries at Umm al-Nar and Ruwais (which achieved a combined production increase of 2.7 per cent in 1985 to 7.1 million tonnes), its marketing subsidiary – the Abu Dhabi National Oil Company for Distribution – and bodies like the Abu Dhabi Pipeline Construction Company, Ruwais Fertilizer Industries (Fertil) and the Abu Dhabi National Tanker Company. There was more promising news in mid-1987 when it was announced that production at Abu Dhabi’s Abu al-Bukhoosh oilfield, operated by Total, had resumed at 30,000bpd or half its capacity at the time of the Iraqi air raid in November. Possible changes in ADNOC’s direction were signalled in April 1987 when Mahmoud Hamra Krouha, its Algerian-born general manager since its inception in 1974, announced his resignation. He was succeeded by his deputy, Sohail al-Mazrui. The move is seen as a response to government exhortations to replace expatriate staff, where possible, with qualified nationals. In Dubai hydrocarbon production is centred on the large onshore oil and gas field at Margham. The field, owned by Arco Dubai, a subsidiary of Atlantic Richfield, and by the British National Oil Corporation, has an expected capacity of 100,000bpd of oil and 1 billion cubic feet per day (cfd) of gas. A 330,000 million cfd processing plant carries condensate from Margham to storage tanks at Dubai’s Jebel Ali port, from where it is exported, mainly to India. In addition there are four more concessions onshore. BP is drilling south-west of Jebel Ali port, close to where the Lundin Group and a consortium headed by Taylor Woodrow also operate.

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Neighbouring Sharjah’s oil industry is dominated by the Sajaa and related Mawa’id fields, discovered in 1981 by the Amoco Sharjah Oil Company, a subsidiary of the Standard Oil Company of Indiana, These enjoy reserves of 10 trillion cu ft, as well as producing condensate which could be collected at 80,000bpd. Some 300 million cfd from this vast reservoir of gas are planned to be piped to the Emirates General Petroleum Corporation (EGPC) to fuel power stations and industry (mainly cement) in the smaller Northern Emirates. In the Northern Emirates, Ras al-Khaimah started oil production in early 1984. Its output of between 30,000 and 40,000bpd comes from four wells located on its Saleh field. Salih, 28 miles offshore, was discovered in March 1983 by Gulf Oil Ras al-Khaimah. During 1987 Gulf sold its 50.46 per cent stake in the field. The remaining concessionaires are Canada’s International Petroleum Corporation, Taiwan’s Overseas Petroleum Investment Corporation and West Germany’s Wintershall. Following Ras al-Khaimah’s success Fujairah and Umm al-Quwain are redoubling efforts to discover commercially recoverable oil. Encouraging results have been reported in Umm al-Quwain where a 60,000 hectare concession was granted to an American company. Ajman took a different approach, opting to buy a reconditioned refinery which, it claimed, would stimulate industry in its emirate. In June 1984 its Ajman Saudi Refinery Company purchased a refinery formerly used by Esso at Milford Haven in Wales. The refinery was scheduled to be stripped down and shipped to Ajman for reconstruction. Efforts have been made to co-ordinate the country’s oil development on a federal level. The UAE oil ministry has formulated plans for an oil stockpile to be used in periods of emergency. In late 1986 this stood at 47 million gallons of petrol, kerosene, gas oil and fuel oil – enough for the country’s needs for 45 days. There are plans for pipelines to link the country’s various refineries and storage facilities. Upturn for Contracts However by the second half of 1987, as oil prices began to rise, projects which had been in abeyance were suddenly resurrected, particularly in Abu Dhabi. In August consultants were invited to bid for the second phase of the vast Taweelah water transmission scheme, designed to carry an additional 40 million gallons of water a day from the Taweelah power and desalination plant to the city of Abu Dhabi and Al-Ain. In the same month local firm Al-Aweidha-Polimex won a Dh88.5 million (US$24.1 million) contract to build water tanks and a pumping station at the Taweelah plant. Taweelah is currently one of the most ambitious projects in the UAE. Like many in Abu Dhabi, it links the oil sector with developments in other parts of

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the economy. The new power and desalination complex currently under construction at Taweelah will require around 500 million cubic feet of LNG a year, much of it coming from the US$379 million gas plant opened in 1985 using gas from the onshore Habshan field. The main contractor on the project is the Athens-based Consolidated Contractors International Company which has a US$37.5 million civil works contract. It is working with Belgium’s Six Construct, South Korea’s Dong Ah Construction and France’s Merlin Gerin. Overall consultant for the project is Egypt’s Dr Ali al-Saie. As 1987 progressed, announcements of plans for other development projects became more regular. In March the Abu Dhabi Executive Council gave the go-ahead for a Dh170 million (US$46m) upgrading of the road between Jebel Dhanna and Silla. In June a Dh183 million (US$50 million) contract was awarded to the local Al-Habtoor Engineering Enterprises to build another delayed project – an officers’ club in Abu Dhabi. In July the executive council called for design bids for a medical faculty at the US$1.3 billion university at Al-Ain, which is to be built in four phases. On completion in 2002 it will take up to 16,000 students. In the private sector, a new joint venture Abu Dhabi/Omani company is to set up a Coca Cola bottling plant to serve their local markets. Renewed confidence among private investors was underlined when a group of Abu Dhabi financiers, led by Abdul-Jabbar al-Sayegh, deputy managing director of the Abu Dhabi Commercial Bank, announced plans to set up the country’s first private investment firm, the National Security Company, capitalised at Dh200 million (US$54.5 million). The company’s aim is to ‘identify international investment opportunities and to service the vast investment and banking needs of individuals and institutions in the Gulf region’. Reflecting an upturn in the economy, Abu Dhabi’s Mina Zayed recorded an increase of 40 per cent in container traffic and 14 per cent in the number of ships calling in the second quarter of 1987. It was no surprise that bids were invited for a Dh50 million (US$13.6 million) expansion at the port. Another sign of a more favourable business environment was the decision by the Abu Dhabi government in March to appoint a US consultant to help clear up financial claims against it from certain firms, mainly in the contracting industry. In Dubai there was a similar flurry of announcements of (albeit smaller) new development projects in mid-1987. In August firms were invited to pre-qualify for an estimated Dh80 million (US$21.8 million) wholesale food market in Dubai. The government announced its intention to build two new cultural centres costing Dh100 million (US$27 million). These announcements were accompanied by good results from the emirate’s industrial companies situated largely in the Jebel Ali Free Zone. The Dubai

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Cable Company (DUCAB) forecast large-scale expansion when it reported 1986 sales up 22 per cent to Dh63.5 million (US$17.3 million). General manager Colin Paskins said that the company intended to take advantage of the 10 per cent price preference available to companies manufacturing locally. However, DUCAB’s most important advance was probably breaking into the Saudi market. Dubai Drydocks announced that it had repaired 152 vessels in the year to the end of February 1987, compared with 113 in the previous year. Turnover was up by 24 per cent. BP Arabian Agencies started up a 30,000 tonnes-a-year lube oil plant costing US$10 million in Jebel Ali. Thirty licences to operate in the zone were issued in the first half of 1987 (compared with 65 between mid-1985 and end of 1986). One of these new licences was for a US$60 million phosphoric acid plant where work was scheduled to begin towards the end of 1987. The project is a joint venture between India’s Gujarat Narmada Valley Fertilizers and a British firm. Activity in Jebel Ali reflected Dubai’s predominance as an entrepôt port in the region. During 1986 its re-exports rose by 21.5 per cent to Dh4 billion (US$1.2 billion). A major market continued to be Iran, where re-exports continued to grow in 1987. In the first quarter of the year they totalled Dh432.8 million (US$117.8 million) compared with Dh732.6 million (US$199.4 million) for the whole of 1986. Iran imports large quantities of electrical goods, textiles, food and tyres through Dubai. Dubai’s general buoyancy was underlined when its one-year-old airline Emirates took delivery of its second Airbus A31D-300 aircraft in July 1987. Emirates carried one third more passengers in the first half of 1987 than in the corresponding period of 1986, up from 140,000 to 196,000. The smaller emirates were slower in responding to new business opportunities. Khor Fakkan port on Sharjah’s east coast enjoys increasing traffic, since the United States Line decided to use it in September 1985 as a major hub for its round-the-world container service. Now other companies are following suit, including East Germany‘s Deutsche Seereederei Rostock which now call every fortnight, as part of a new service from the Far East to Northern Europe. A US line, American President Lines, also dominates business at Fujairah port. The government is keen to promote the port’s new free trade zone where plots of a minimum 3,000 square metres are available. In August 1987 the Indian-owned Palmon (UAE) became the first company to lease space in the zone. Fujairah’s increasing importance as a communications centre was emphasised when its new US$45 million, 1,200km submarine telecommunications cable link with Karachi in Pakistan was formally opened in April. In Umm al-Quwain, despite uncertainties about gas supplies and finance, the government is proceeding with its ambitious plan to build a 240,000 tonnes-a-year aluminium smelter, costing an estimated US$l billion.

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These developments reinforce the UAE’s fierce entrepreneurial traditions. It is no surprise to learn that the country is the world’s leading per capita exporter, ahead of Singapore and Hong Kong, according to the Geneva-based General Agreement on Tariffs and Trade (GATT). Each individual in the UAE exports the equivalent of US$10,500 worth of goods. In real terms, the UAE is the 30th largest exporter in the world, with 0.7 per cent share of the world market; not a bad record for a country with a population of 1.6 million. Outlook Since its federation in 1971 the UAE has developed into a strongly unitary state. It is unthinkable that there will be any going back on this. UAE planners can take heart from the rise in business confidence during 1987. They must develop strategies they have already initiated, particularly diversifying the country’s economy and seeking greater co-operation (political, military and economic) with fellow members of the GCC.

1989 Business Confidence Returns – Abu Dhabi’s Downstream Investments – Troubled Banking Sector – Dubai Business Booms – Central Bank Activity – New Generation of Leaders

At the end of 1988 hopes were high that the end of the Gulf War would herald a new period of calm and prosperity in the region. Throughout the conflict, the United Arab Emirates (UAE) maintained model relations with both protagonists and are well-placed to gain from the expected trade boom. Business recovered its confidence after the recession of the mid-1980s but hydrocarbons remained the key to prosperity, providing about 75 per cent of export and re-export revenue. Changes in Oil Industry Gross domestic product (GDP) rose by 9 per cent in 1987 to Dh88,000 million, an increase almost entirely due to the rise in oil revenues. Earnings remained dependent on oil prices and production levels, which both moved erratically in 1988. Abu Dhabi made concerted efforts early in the year to keep production close to the Organisation of the Petroleum Exporting Countries (OPEC) assigned quota of 948,000 barrels a day (bpd). A few months earlier, in late 1986, the Emirate was the principal violator of OPEC quota restrictions, maximising output to net maximum earnings. The new policy cast the Emirates as the champion of OPEC price and production restraints. To defend the target price of US$18 a barrel, discounts demanded by long-term contract buyers were refused. While other OPEC members discounted heavily, Abu Dhabi found its crude oil unsold and production dropping precariously. Long-term contract buyers failed to take up their full nominations while crude oil was available cheaper elsewhere. Mid-year contract renewal talks with Japanese bulk buyers risked foundering unless retroactive price discounts were forthcoming. The stand-off forced the Abu Dhabi National Oil Company (ADNOC) into an embarrassing climb-down which ended its claim to be the last defender of OPEC price and production targets. With reserves now estimated to be at least 100,000 million barrels, Abu Dhabi has always lived uncomfortably with production quotas. Dubai ignores OPEC altogether and produces a near constant 400,000bpd.

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In May, the veteran oil minister, Mana Said al-Otaiba, formally renounced the OPEC quota, saying it had been accepted under pressure from Saudi Arabia and on condition that it was temporary. The allegation sparked an unseemly dispute with Riyadh which denied al-Oteiba’s version of events. Abu Dhabi now proclaims 1.5 million bpd to be a legitimate production level and has raised output. The margin between official prices and retroactive discounts has widened steadily. Abu Dhabi was quite prepared to risk being accused of sabotaging the OPEC quota system, a charge duly levelled by several member states. Although officially committed to OPEC policy, the Emirate has clearly decided to pursue a more autonomous line to secure the volume of oil revenue it requires. Growing confidence and a drive to cut a sharper profile were evident in a radical reorganisation of the oil industry in Abu Dhabi, which alone provides more than two-thirds of UAE hydrocarbon production. The emirate abolished both its own petroleum ministry and the board of ADNOC, replacing them with a new Supreme Petroleum Council headed by Crown Prince Sheikh Khalifa bin Zayed al-Nahyan. The changes removed several layers of bureaucracy, placed the ruling family in direct contact with operations and entrusted daily management to ADNOC’s widely-respected general manager Sohail Fares al-Mazrui. As a result, the industry can respond more readily to government decisions on output and the complex web of relations between ADNOC and its foreign equity partners – including Mobil Oil, British Petroleum, Royal Dutch/Shell, Exxon an Total – has been greatly simplified. Activity by the major on and offshore oil companies in Abu Dhabi is still very restrained as long-term efforts to cut spending and improve efficiency continue. The Abu Dhabi Marine Operating Company (ADMA-OPCO) had only five rigs drilling in late 1988 and stacked rigs in the emirate outnumbered those in use by nearly two to one. The process of replacing expatriates with nationals has proceeded apace and overall staffing levels in the sector have dropped by a third. Plans for exploratory drilling are minimal and the operating companies are busy with conservation and the elimination of waste. Abu Dhabi is moving cautiously downstream with a growing range of investments in international oil operations. The highly secretive Abu Dhabi Investment Authority (ADIA) has lifted its stake in Total to 8.4 per cent to become the largest shareholder after the French state. ADIA is aiming at a 10 per cent holding but disclaims any ambition to seek either representation on the Total board or influence over corporate policy. Total lifts about 20 per cent of its oil supplies from Abu Dhabi but there are no arrangements for fixed volume deliveries. Another Abu Dhabi government-owned entity, International Petroleum Investment Company (IPIC) has secured a 10 per cent stake in Spain’s Compañía

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Española de Petróleos (CEPSA) in a deal whereby CEPSA takes about 60,000bpd of Abu Dhabi crude oil for its refinery. IPIC is considering similar deals in Turkey, the Far East and North America and is spearheading the emirate’s drive to establish firmer ties to downstream crude takers. Investment in two new refinery schemes could secure outlets for 200,000bpd of crude oil. An outline joint venture with Pakistan calls for the construction of an 80,000bpd refinery at Multan and plans for a 60,000bpd refinery at Shenshen in China were revealed in August. While overseas investments attract attention the budget of the federal government suffers from neglect. The federal budget depends for revenue on inflows from Dubai and Abu Dhabi, ostensibly equal to half their annual oil revenues. In practice, payments are sporadic and sparing, to the continued detriment of the poorer Northern Emirates which have no oil revenue of their own and depend heavily on federal spending to fulfil basic development requirements. Increased revenues allowed a 22 per cent cut in the deficit on the consolidated federal accounts in 1987, to Dh10,900 million (US$2,968 million), but spending in 1988 was frozen. Nearly 75 per cent of the federal outlay was absorbed by recurrent costs and spending on development schemes was pegged at Dh5,400 million (US$1,470 million) for the year. Water and electricity schemes, school building construction and defence projects absorbed most of this. Funds for water desalination projects, road rehabilitation or the provision of basic infrastructure in the Northern Emirates are still provided by President Sheikh Zayed on an ad-hoc basis. Industrial Development Throughout the emirates, industrial development is no longer regarded as a panacea for the over dependence on oil revenues. The modest size of the local market, the need to import labour and the lack of coherent planning have all reduced the attractions of industrial investment. Dubai Aluminium (Dubal) has proved to be an outstanding success, seizing the opportunity of record aluminium prices to exceed rated capacity and lay plans for future expansion to 180,000 tonnes a year. Dubal is more than an aluminium producer as it sells excess power to Dubai as well as supplying nearly a quarter of the town’s water needs from its desalination plant. The success of Dubal has prompted plans for a second smelter at Umm al-Quwain. The proposed 240,000 tonne a year plant, backed by an international consortium of investors, has been delayed by nagging doubts about the availability of gas to use as feedstock. Proven supplies from offshore would be adequate for less than 10 years’ production and there are fears the ambitious

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US$1,000 million project may collapse. The investment group has made preliminary contact with Qatar where almost indefinite gas supplies are assured. The most ambitious industrial scheme, the Jebel Ali Free Zone in Dubai, is making steady progress. Over 180 companies held leases by the end of 1988 compared with just 25 three years earlier. Clients include Arco, Black & Decker, McDermott and Cleveland Bridge. British Petroleum (BP) brought its lubricant plant in the zone into operation in 1988 and plans for a US$60 million phosphoric acid plant have been agreed. France’s La Mole Industries has opened a 10,000-skin-a-day tannery in a joint venture with Dubai’s Al-Bawardy Group. Hide production could later be integrated into a leather garment or shoe industry. The local Mitsubishi importer. Al-Habtoor Motors, is pressing ahead with plans to assemble its own four-wheel drive vehicle at a plant to be built inside the zone. The new arrivals are widening and the scope of activity at Jebel Ali shifting, moving the emphasis away from warehousing and distribution towards more genuine local manufacture. Dubai’s Port Rashid is at the hub of the emirate’s booming business activity. Container throughput is growing by at least 35 per cent a year and reached 523,000 TEUs in 1987. Sea-air cargo has recorded some of the most impressive growth, doubling to l6.5 million tonnes in 1987, compared with 8.5 million tonnes a year earlier. It rose by a further 17 per cent in the first half of 1988. The cargo – mostly from Taiwan, Hong Kong and South Korea – is flown on to Europe through Dubai airport which is served by 55 international carriers. Dubai is the centre of a busy regional re-export trade and the speed and efficiency of Port Rashid have secured its leadership over both Abu Dhabi and Sharjah, where port activity is virtually static. Dubai’s official re-exports to Iran reached a record US$355 million in 1987 despite the intensity of the naval conflict in the lower Gulf and tough import restrictions in Iran. Abu Dhabi is picking up slightly more of the re-export trade to Saudi Arabia and Qatar through reduced duties and the modernisation of its main port, Mina Zayed. Ironically, the end of the Iran-Iraq war could reduce the level of activity at Fujairah port which has just begun to benefit from its safe location on the Gulf of Oman away from the mines and foreign naval activity inside the Strait of Hormuz. Seven shipping lines call regularly at Fujairah which opened its own airport in 1988 with hopes of cashing in on the sea-air cargo boom. As insurance rates inside the Gulf drop back to reasonable levels, those hopes have dimmed. Since 1986, Dubai’s own airline, Emirates, has been successfully challenging established rivals for market share on 12 routes. Although presenting itself as the national carrier, Emirates is in fact a private local venture strongly backed by the ruling Maktoum family. The airline plays a major role in the extremely

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successful promotion of Dubai as a winter tourism destination. On regional routes, Emirates competes with Gulf Air in which Abu Dhabi is a leading shareholder along with Bahrain, Qatar and Oman. In a similar commercial challenge to the viability of federally-owned companies, Dubai-based Emirates Petroleum Products Company (EPPCO) is building 50 petrol stations in the Northern Emirates where fuel was previously sold exclusively by Emirates General Petroleum Corporation (EGPC). The stations were to begin operations by early 1989. Eppco is majority owned by the Dubai government and will purchase fuel from Bahrain. ADNOC’s distribution arm, the Abu Dhabi National Oil Company for Distribution (ADNOC-FoD) declared similar intentions to open outlets to compete with both EGPC and Eppco. A far more hard-headed and challenging business climate emerged after the recession of the mid-1980s. The troubled banking sector has been in the forefront of moves towards more rigorous standards but has to cope with a legacy of debt problems. The country is seriously over-banked, making competition for local business very intense and marginally profitable. The sector is recovering slowly from the crisis of the mid-1980s which culminated in several banks being forced to merge. It also left a mountain of unrecoverable private sector debt which is only slowly being eroded. One of the largest mergers involved three banks which came together as Abu Dhabi Commercial Bank (ADCB) in May 1985. The bank posted its first profit, of US$11 million, in 1987 after combined losses of US$67 million in its first two years. ADCB was helped towards recovery by a US$1,300 million indemnity from the government of Abu Dhabi and provisions for loan losses have since been reduced. ADCB aggressively expanded its customer base by offering new customer services ranging from automated teller machines (ATMs) to new branches and investment funds for small investors. The National Bank of Abu Dhabi (NBAD) ranks seventh among Gulf banks in asset terms but reported a US$39 million loss in 1987. The bank has a conservative reputation in keeping with its role as bank to the government of Abu Dhabi but has a heavy exposure in Third World debt, notably in Latin America. Although it has swapped some debt in Sudan, Morocco and Latin America, NBAD was obliged to nearly double its loan loss provisions to US$64 million in 1987. The National Bank of Dubai is by far the most profitable local bank and registered profits of US$103 million in 1987. Its 1.79 per cent return on assets was the highest of any commercial bank in the Gulf. However such success stems from a low level of lending and the bank has a loans to assets ratio of just 7.2 per cent. Banks in Abu Dhabi in particular have suffered from the hitherto loose regulation of the sector and the problems of non-performing loans. Some clients have successfully disputed the banks’ right to charge compound interest on

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overdrafts and have invoked Islamic law in their defence. The legal issues will take years to resolve and government decrees have tended to confuse rather than clarify the issue of liability. There is no bankruptcy law and the intervention of the local judiciary has produced contradictory rulings. The banking sector has retreated steadily from ambitious international involvements and new local lending is very cautious. Corporate commercial business is now focused on blue chip firms and the size of loans and range of clients are much reduced. In the carefree atmosphere of the oil boom years credit controls were negligible. Far greater attention is now paid to salaried employees as a source of business and wider spread, short-term lending is growing. Asians form 72 per cent of the non-national population and many reside long-term. The potential of lending to this community or tapping its funds for transfer to affiliates in the Indian subcontinent is just starting to be exploited. The Central Bank of the United Arab Emirates is moving slowly towards a more activist role. The bank intervenes more frequently and effectively to ensure that regulations are respected and is expanding its lending to commercial banks. It has urged the smaller banks actively to consider mergers to create more viable units but the advice has been coolly received. Despite its growing stature, the Central Bank is too weak to impose itself unless is it guaranteed the backing of the government in each emirate. This is not always forthcoming and the Central Bank suffers the same weakness as all federal institutions. An attempt to charge commercial banks an annual licence fee was hastily suspended in mid-1988 when the bankers’ association voiced its opposition. Foreign banks enjoy a relatively relaxed regulatory climate although the Central Bank is keen to see the ratio of local to foreign staff improved. Contractors have seen the scale of local opportunities shrink steadily in recent years. Major infrastructure projects arc largely complete and official spending is now much more cautious. Capital spending by the federal authorities has tapered off dramatically and the separate emirate governments pay for most development work. Despite the general downturn a significant volume of work is being let. The pricing of contracts is fiercely competitive, which has worked to the disadvantage of European suppliers who have seen their currencies appreciate against the US dollar. The dirham is pegged to the US currency and depreciated by 11.3 per cent against a basket of currencies in 1987. Local firms are exhibiting far greater ability to execute medium-scale projects, sometimes in joint venture with a foreign company but increasingly in their own right. The most populous emirate, Abu Dhabi, has a series of infrastructure projects under way. The Taweelah power and desalination complex is moving into a critical phase with the first stage of the water transmission network due for

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completion by 1990. The 400MW power plant with associated desalination units is the centrepiece of Abu Dhabi’s future power generation plans. In June international consultants were asked to submit offers for design and supervision of an US$800 million expansion which will cover electricity and water needs into the next century. Water shortages could become critical at the inland oasis of Al-Ain where groundwater reserves arc likely to be fully depleted within 15 years. Desalinated supplies from Taweelah will be piped in to support the growing urban population and the dramatically expanded agricultural acreage in the area. Work is proceeding with construction of the UAE’s sixth international airport at Al-Ain. South Korea’s Hyundai Engineering and Construction has the runway construction contract and in July 1988 a joint venture of the local Rapco Buildings and Zurich-based Asea Brown Boveri (ABB) was appointed for the main electrical power and ground lighting work in a US$37 million award. A control tower, terminal buildings and a royal pavilion have still to be tendered. Al-Ain hosts the UAE University and several ministries and could eventually become the federal capital. The area’s housing stock is steadily expanding and local contractors have won a string of awards for main drains, road improvements and street lighting. Plans to expand the university have stalled over funding and a variety of schemes for developing the facility are under review. As an interim measure, small technical institutes are being set up in each emirate to teach practical skills. On Abu Dhabi island itself, the upgrading of urban roads and the electricity supply to the city are receiving attention. Highways to Suweihan and up the coast to the border with Saudi Arabia at Silla are being widened and improved. Italy’s Italconsult has drawn up plans to expand the main road from Abu Dhabi to Al-Ain with additional lanes and flyovers. Asea Brown Boveri, Toshiba, Siemens and Alsthom are vying for major electrical supply and installation contracts in Abu Dhabi and the Al-Ain region. Spending is clearly earmarked for the repair and improvement of ageing infrastructure or the needs of the new generation. Nearly one-fifth of the national population is under five and more than 49 per cent are under 15, so a massive school building programme is under way. At Suweihan, midwav between Dubai and Abu Dhabi several local and international firms are building facilities for the federal armed forces. Orders for the Suweihan military city include a US$70 million equipment supply contract agreed with Italy’s Techint. Plans for a US$1,000 million naval base at Samha, near Taweelah have not progressed and may be postponed indefinitely if shipping security improves with the end of the Gulf War.

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Vulnerability to naval attack was exposed by several incidents during the conflict when Iranian gunboats attacked oil installations at Abu al-Bukhoosh, Sirri Island and near Abu Musa island. Abu Dhabi has two 62 metre fast patrol boats on order from West Germany’s Lurssen shipyard to improve its coastal defences. Dubai has a far more active private sector than Abu Dhabi and local contractors depend less on government projects to maintain their activity. Nevertheless, Dubai municipality is spending close to US$80 million annually on storm and wastewater drainage schemes as part of an integrated plan to improve local utilities. The main treatment plant, handed over in late 1988, was built by South Korea’s Daewoo, but most of the related sewerage work is being done by local firms under the supervision of international consultants. The addition of new generating capacity at the Jebel Ali power station is under study and a US$100 million expansion of the highway linking Jebel Ali to the city of Dubai will be tendered in 1989. This will include construction of seven interchanges with underpasses and flyovers between Dubai’s international trade centre and Jebel Ali. Trade trends in 1989 will determine the future of plans to build a new cargo terminal at Dubai airport. Designed by the US Bechtel Corporation, the project was delayed by concern about its cost and the outcome of the Gulf War. Another prestige project awaiting the go ahead is a cultural complex to be built on the Deira side of Dubai Creek. The city is concentrating on sprucing up its image with an extensive landscaping programme. This extends from pavements and central reservations to beaches and parks. Outlook It was apparent that the next few years would see the slow handover of authority to a new generation of leaders. A non-aligned, highly cautious foreign policy would continue to be defined in close association with the Gulf Co-operation Council (GCC). The likely decline in oil revenues in the 1990s would not hasten the evolution of federal institutions. This would slow the development of more coherent economic planning, for which the need was widely recognised. The society is sufficiently small for conflicts to be easily contained and quickly resolved. The challenge for the younger leadership would be to keep it so.

1990 Optimistic Predictions – Diversification – Hydrocarbon Reserves Treble – Four Major Projects – Niscorp – Abu Dhabi Master Plan – Jebel Ali Free Zone

The UAE faces the 1990s in a much stronger position after emerging from economic and regional uncertainty in the 1980s. Key challenges facing the emirates in the next 10 years will be to continue to diversify the economy, to maintain the internal political balance that unites seven independent states, and to maximise the potential of its vast oil reserves. The effects of the cease-fire between Iran and Iraq in August 1988 have made themselves felt. A new sense of security is apparent in the emirates, which spent eight long years on the fringes of major hostilities. Oil, a major revenue earner, has stabilised since the dramatic slump in the mid-1980s and the emirates, in particular Abu Dhabi, can take comfort from the optimistic predictions for oil markets in the 1990s. The UAE has a better reputation for economic and financial management than some of its Gulf neighbours. The aftershock of the oil slump meant introducing sweeping cutbacks and reorganisation to cope with the sudden loss of oil revenues. It has resulted in a rationalisation and streamlining of the major government departments and industries, allowing a trimmer economy to emerge. The federation has survived the difficulties attached to 20 years of rapid oil-led growth. Abu Dhabi and Dubai are the main contributors to the federal budget, and the falling oil revenues have meant that smaller states, such as Ras al-Khaimah, Ajman, Umm al-Quwain, and Fujairah, have seen reduced federal spending on infrastructure in the late 1980s. Nevertheless, the smaller emirates have pushed ahead with plans to build up light industry and attract tourists. Umm al-Quwain suffered a major disappointment in 1989 when the team of investors who planned to set up a new aluminium plant in the emirate, pulled out. Instead, they offered the scheme to neighbouring Qatar, attracted by readily available gas supplies. However, in the end another group won the smelter project. Economy Diversification has become an economic watchword in the Gulf and the UAE is no exception, but the fall in oil revenues has slowed the flow of funds necessary

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to develop alternative domestic industries. However, the UAE appears to be making some progress. Oil and gas exports fell in 1988 by 4.5 per cent but this was offset by a rise in other exports and re-exports. The squeeze that falling oil prices have put on the federal budget which has been running a deficit for some years, became apparent when the government announced in mid-1989 that the draft UAE budget for 1989 would have to be cut to reduce the proposed deficit of US$900 million. Budgets begin on 1 January each year, but have been late for the five years 1985–89. Ministries and government departments are instructed not to exceed the previous year’s allowances. The 1989 budget was due in the last quarter of 1989. The budget relies heavily on contributions from the main oil producers Abu Dhabi and Dubai, which have decreased in recent years as the emirates suffered financial pressures of their own. Nearly 75 per cent of the federal budget is taken up by recurrent spending. President Sheikh Zayed still provides funds for the Northern Emirates from time to time. The deficit increased by 5.5 per cent in 1988 on gross revenues and expenditure of Dh11,500 million (US$3,133 million) in 1988, according to a preliminary report from the Central Bank of the United Arab Emirates released in 1988. The increase was attributed to a 22 per cent fall in the total value added from the oil sector, which stood at Dh15,200 million. Other revenues rose by 49 per cent to Dh6,100 million. Gross expenditure was reduced by 3.2 per cent to Dh34,100 million. Gross domestic product (GDP) fell by 1.2 per cent to Dh87,550 million in 1988. Oil’s contribution to GDP fell to 33 per cent, from 36.5 per cent in 1987. Imports increased 19 per cent to Dh31,000 million, causing the trade surplus to fall sharply in 1988 by 26 per cent to Dh14,000 million. The USA accounted for 10 per cent of imports, while 63 per cent came from European and other industrialised countries. The 1989 draft budget stood at US$1,410 million, against expected revenues of US$2,510 million, according to minister of state for finance and industry, Ahmad Humaid al-Tayer. However, by October 1989 it became apparent that oil revenues for the year would be much higher than could have been predicted at the start of the year, increasing from an average yearly forecast of US$13.80 a barrel in January to US$16.20 a barrel by September, even with the higher production levels in the latter part of the year. Oil Markets and the OPEC The UAE has waged a long-standing battle to get its share of the Organisation of the Petroleum Exporting Countries (OPEC) production quota increased. One of the UAE’s main arguments was that the quotas should be shared out in line with

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production capacity and reserves. In the peak year of 1977, the UAE was producing a daily average of 1,998,700 barrels per day (bpd). Abu Dhabi dominates the UAE oil scene, producing two-thirds of the total UAE hydrocarbon production, which is controlled by the Abu Dhabi National Oil Company (ADNOC). ADNOC has the main shareholding in the three main oil field operating companies: the Abu Dhabi Company for Onshore Oil Operations (ADCO), Zakum and Abu Dhabi Marine Operating Company (ADMOC). ADNOC also has the majority control of the Emirate’s two gas companies Abu Dhabi Gas Liquefaction Company (ADGAS) and Abu Dhabi Gas Industries (GASCO) as well as refineries at Umm al-Nar and Ruwais. Dubai continues to charge market related prices, while Abu Dhabi tends to base its prices on OPEC pricing formulas. Aware of the short life span of its oil reserves, Dubai has continued to pump close to its maximum of 400,000bpd. Towards the end of 1987, the UAE produced a new estimate of its hydrocarbon reserves which nearly trebled previous predictions for proven oil reserves. Reserves were put at 97,200 million barrels, against 33,000 million in 1986. If this level were proven, the UAE would have the largest reservoir in the world after Saudi Arabia and Iraq, accounting for about one seventh of proven global reserves. Natural gas reserves were also raised to 183,545,000 million cu feet. These claims underpin the UAE’s demand for a higher quota. Throughout 1988, the UAE’s minister for petroleum and mineral resources, Dr Mana bin Said al-Otaiba pushed for a 1.5 million bpd quota to match its large reserves. The UAE’s quota at the end of 1988 was 948,000bpd. In 1988 the quota was increased to 988,000, to 1.480 million and eventually lowered again to 1.094 million when OPEC agreed to raise the ceilings in response to strong winter demand. The emirates continued to produce well over quota throughout 1989 and had reached 859,000bpd over quota by September to total 1.96 million bpd. However, oil industry observers in Abu Dhabi are at last more optimistic about Abu Dhabi’s OPEC future. Predictions of strong oil demand in the 1990s and beyond have bolstered OPEC confidence. The stronger prices throughout 1989, despite higher production ceilings, have made OPEC producers more flexible on the quota issue, recognising the need for a restructuring of the system. This was amply illustrated in the autumn 1989 OPEC conference in Geneva when Iran put forward a new proposal for settling quotas. It proposed to increase the quota proportions for countries like the UAE, Kuwait, Gabon and Ecuador and raising the overall ceiling to 215 million bpd. The scheme would upgrade the UAE’s quota to 1.35 million bpd. However, it was strongly opposed by some of the smaller countries, such as Libya and Nigeria, which would lose out under the plan. The plan has been welcomed in Abu Dhabi as a first step towards settling the quota question.

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The turbulent oil years of the mid-1980s led the UAE to reorganise and restructure its oil management in mid-1988, aimed at cutting some of its bureaucracy. The department of petroleum was abolished and a new higher council for petroleum was created. ADNOC‘s board was replaced by an 11-member Petroleum Council and Sohail Fares al-Mazrui was appointed as new ADNOC general secretary and secretary general to the higher council, chaired by President Sheikh Zayed. The move was designed to allow the industry to respond more readily to the government’s decisions and to improve relations between ADNOC and the foreign equity partners. The changes continued into 1989 when Mr al-Mazrui was also appointed head of the Abu Dhabi National Oil Company for Distribution (ADNOC-FOD). Two offshore oil operators, the Zakum Development Company (Zadco) and Umm al-Dalkh Development Company (UDECO), were merged. During 1987, and 1988 oil exploration and development spending were put on hold and only essential maintenance and operations projects were carried out. By mid-1989, improved oil revenues were making themselves felt. At least four major projects were given the go-ahead and plans for several more were being dusted down. Abu Dhabi is planning to increase its refining capacity at home for export and for home use. Domestic consumption of refined products is about 80,000bpd. Abu Dhabi has two refineries, at Umm al-Nar and Ruwais with a combined design capacity of 180,000bpd. The expansion of Abu Dhabi’s Umm al-Nar and Ruwais refineries was approved. Sulphur production was also being restructured with facilities at Ruwais and Das Island being overhauled and expanded. Expansion in Abu Dhabi’s refining and gas export capacity was prompted by an increased demand for oil and gas from Japan, Abu Dhabi’s largest customer. Many Japanese companies hold interests in Abu Dhabi operations. In 1989, two Japanese oil companies, Nippon Oil Company and Showa Oil Company, set up liaison offices in the emirate, joining Mitsui, Cosmo Oil Company and Idemitsu. The Abu Dhabi Gas Liquefaction Company (ADGAS), which is owned by ADNOC, Mitsui, BP and CFP Total, exported a record 204 million tonnes of LNG to Japan from Das Island in 1988, up from 2.28 million tonnes in 1987. The Das Island plant sells all of its output to Tokyo Electric Power Company (TEPCO). TEPCO’s 20-year contract with ADGAS runs out in 1997. It is one of the world’s largest gas plants and has 11 gas streams feeding two identical process trains. In October 1989, local press reports said that a plan to build a further liquefaction train to increase the output at Das Island was given approval and the US consultants, Arthur D Little, were appointed to undertake feasibility studies.

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In 1989, the second phase of the Upper Zakum field was commissioned. Over 100 production and water injection wells were planned to increase production from the current level of 350,000bpd to 500,000bpd within two years. The offshore Umm al-Anbar structure in the West Mubarraz oilfield began producing 8,000bpd in February 1989. Like other Gulf countries Abu Dhabi is intensifying its interests in downstream operations; a policy that was continued in 1989. The International Petroleum Investment Company (IPIC) took out an option to increase its stake in Spanish refinery operator CEPSA. Its stake had increased from 10 to 12 per cent by mid-1989. IPIC said it would continue to search for additional downstrean1 investments, particularly in the Far East. The Abu Dhabi Investment Authority (ADIA), which invests most of the personal fortune of the ruling al-Nahyan family, also increased its investments in downstream refineries, with an increase in its holding in French oil major Total to around 9 per cent. In 1989, local press reports said that the Authority was holding talks with Japanese trade officials about taking out a shareholding in a major Japanese refinery. ADIA suggested that the reports were premature. Investment continued to be an important source of income for Abu Dhabi. Bankers estimated that before 1995 the emirate could find itself in the same position as Kuwait where investment income contributes more to the economy than oil revenue. This trend was behind the success of organisations such as National Investment and Securities Corporation (NISCORP) which showed a profit in its first year of operations. Niscorp has set its sights on the small to medium investor and increased its ties with the Far East during 1989. Trade, Dubai’s traditional activity, cushioned the emirate during the poor oil years. Dubai has used its oil revenues from the 400,000 barrels of oil a day that it produces to lay the foundations of a modern Gulf state. However, Dubai’s planners are increasingly aware that unlike Abu Dhabi, which has reserves that will last more than 100 years, Dubai has only about 30 years of oil wealth left. Oil exploration and the maximisation of existing oil revenues have become a priority for the emirate. Consultants say they expect to see oil maintenance and exploration projects intensify. In October 1989, the Dubai Petroleum Company (DPC), the state-owned organisation that operates the emirate’s four onshore producing fields, granted a new exploration concession to a group led by Dubai Exploration Onshore (DEOL). The concession is south of the city and the first exploration well was due to be spudded in January 1990. The Fateh field, Dubai’s oldest and largest field, has been continuously developed since its discovery in 1966. Oil from the second largest south-west field is piped to Fateh for processing, storage and export. DPC began tendering for the installation of a third central compression plant in the field. The platform

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will be connected to the field’s existing facilities. It includes a bridge link to the field’s second platform and will allow additional gas injection compressors to be installed later. A new development well was spudded in September 1989 at Dubai’s condensate and gas producing onshore Margham field, operated by Arco Dubai and the UK’s BP. In October 1989, BP announced that its one third share in the Margham concession was included in a worldwide package of hydrocarbon assets which it was selling to the US Oryx Energy for US$1,300 million. The sale was due to go through in early 1990. Dubai has plans to set up the emirate’s first ever refinery, in the Jebel Ali free zone. The estimated US$900 million project is being set up by an Indian joint venture led by Reliance Industries. Reliance is putting together financing proposals from a variety of Gulf investors, among them the ADIA. The Dubai Natural Gas Company (DUGAS) built a new gas line from the onshore Margham field to the Dugas liquefaction plant at Jebel Ali to process the gas produced by ARCO and BP. Abu Dhabi’s Star Energy opened a privately-owned products terminal at Jebel Ali with a storage capacity of 2 million barrels. Consultants in Dubai saw plenty of opportunities in the oil and gas sector. Dubai’s producing fields are old and require constant maintenance. Added to this the emirate is keen to keep up exploration activity in the hope of extending its reserves. Sharjah produces about 10,000bpd of crude, and 60,000bpd of condensate and about 27 million cu feet a day of gas. Sharjah also produces some LPG and supplies natural gas direct to Dubai and to the Abu Dhabi owned Emirates General Petroleum Corporation (EGPC). The emirate began supplying EGPC about 200 million cu feet of gas a day in 1982; however, disputes arose over payment levels which are still unsettled. The UAE plans a census in 1990, the first since 1985. It will be used as the basis for plans to develop the seven emirates into the 1990s and beyond. It should reveal the changes that have taken place in the emirate since the mid-1980s and the rate of growth of the UAE’s 1.6 million population. The cease-fire appeared to be a turning point for the UAE. Up to August 1988, the emirates had struggled nervously through eight years on the sidelines of a major conflict, which had several times threatened the UAE’s security and its investment potential. A new sense of confidence has returned to the emirates, borne up by the improved markets for oil and aluminium – Dubai’s largest non-oil export – and by the new security in the region which has proved a boost to trade in the UAE. Abu Dhabi’s size guarantees it a major say in the emirates’ affairs and its ruler Sheikh Zayed is president of the federation set up in 1971 following the

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UK’s termination of its treaties with the seven emirates on what was known as the Trucial Coast. The UAE takes an assertive role in regional issues and is an active member of regional organisations such as the Gulf Co-operation Council (GCC). The UAE has taken a supportive stance towards the Palestinian issue and has attempted to act as a mediator between Iran and Iraq. The emirates have good foreign relations with Europe, including traditionally strong links with the UK and with the USA and Japan. During the 1980s the emirates have tried to expand links with less traditional trading partners. Talks with the Soviet Union began in 1985 and more recently China which is becoming an increasingly important trading partner. A new aviation agreement was signed with China in 1989. Eastern bloc countries have sent several trade delegations to the emirates during 1989, including Poland, Romania and Hungary. Development in Abu Dhabi Abu Dhabi has commissioned a comprehensive master-plan study to guide the development of the emirates for the next 20 years. The plan will look at population, employment, industry and land use and study the co-ordination of the emirate’s resources. In April 1989, under secretary for planning, Sheikh Said bin Zayed al-Nahyan, said that the emirate proposed to spend Dh14,800 million on development planning and infrastructure projects over the next 10 years. Power and water schemes came top of the list. The first phase of the massive Taweelah power plant was well under way by 1989, and tenders were due for the main construction work on phase two, with Belgium’s Tractebel and West Germany’s Fichtner competing. Spreading power resources to rural areas is also a priority. Abu Dhabi is also planning further work on hospitals, roads and bridges, expecting eventually to extend the city beyond the Maqta Bridge. The expansion would include building other bridges to the Saadiyat islands and developing the infrastructure of the islands. Abu Dhabi’s man-made island, eventually planned to be a leisure and recreational facility for Abu Dhabi, went into the second construction phase. Also in the recreational sector. The Abu Dhabi National Hotels Co said it planned to expand its existing hotels and acquire new ones abroad, with North Africa, particularly Morocco and Egypt, appearing to be target areas. Al-Ain‘s new airport will be operational in the early 1990s. The university project is moving slowly ahead with consultants drawing up plans for a medical faculty at Al-Ain. The city is also overhauling its electrical distribution network to link into the Taweelah project.

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Development in Dubai Now that the immediate security threat of the Gulf War is over, Dubai’s planners are thinking of the 1990s and beyond, so that the decline in oil revenues a few decades hence can be comfortably managed. In October 1989 the Dubai Commerce and Tourism Promotion Board opened, headed by executives with considerable experience in Hong Kong. The board was given the mandate to co-ordinate Dubai’s efforts to diversify its economy away from oil. The Board includes representatives from Dubai’s major commercial sectors and businesses. The group was told to stimulate increased investment in Dubai in manufacturing, processing. distributing, trading, transport, finance and other service industries, and to further the development of the emirate as a tourist destination particularly . It will draw up ideas for enhancing the city as a business and tourist centre. Its functions are also to promote and publicise Dubai abroad and it will be opening representative offices in target markets in Europe, the USA, and the Far East. Dubai hopes to build on its reputation as a centre for regional business and government investment. One of the most important innovations for Dubai is the Jebel Ali Free Zone industrial base. The free zone was born just before the Gulf War broke out and has managed to expand during the war years. By 1989 prospects had revived and more than 250 companies had joined the free zone, up from 180 at the end of 1988 and just 25 three years earlier. The free zone is building on Dubai’s reputation as the traditional supplier to Iran and attracting many new distribution and warehousing customers including those who were interested in side-stepping political difficulties by trading with Iran through a third party. These firms were encouraged by the large reconstruction spending programmes that Iran was drawing up. The free zone is trying to attract heavy industrial ventures, as well as light industry and distribution operations. In mid-1989. the free zone’s chairman Sultan bin Sulayem said that he expected the capital invested in the free zone, which stood at US$600 million in 1989, to increase to US$1,000 million in 1990. This is dependent on attracting several new heavy industry projects to the zone; for example, Reliance Industries (of India) wants to set up Jebel Ali’s first oil refinery, which could supply the India National Oil Company. Financing proposals were being put together in October 1989. ADIA, the Abu Dhabi government’s investment arm, had shown an interest in the project in line with its current policy of increasing downstream investment. The free zone has also had some success in attracting distribution companies like Sony, and Philips of the Netherlands, which set up in the zone in 1989.

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The Dubai Natural Gas Company (DUGAS) built a new gas line from the onshore Margham field to the Dugas liquefaction plant at Jebel Ali to process the gas produced. Abu Dhabi’s Star Energy opened a privately owned products terminal with a storage capacity of 2 million barrels. Traditionally Iran is Dubai’s top re-export partner. During the Gulf War, Iranian merchants based in Dubai kept Iran supplied with nearly all its basic commodities. The peak year was 1987 when re-exports reached Dh306 million and total trade US$360.7 million. Exporters were disappointed when Iranian currency restrictions led to a 60 per cent drop in re-exports to Iran in the first half of 1988. After the cease-fire, traders bought in large stocks in anticipation of a boom in trade with Iran, which took a long time to develop because the Iranian government laid down stringent trade rules. However, by 1989 currency restrictions had been eased and re-exports recovered enough to attract the attention of international firms interested in taking part in Iran’s lucrative reconstruction plans. By October 1989, Dubai’s trade had fully recovered. In the first half of 1989, total re-exports increased by 21 per cent to Dh3,228.5 million. Re-exports to Iran increased to Dh813.1 million. Aluminium is Dubai’s leading export and the rising prices for aluminium in 1989 boosted export revenues. In 1989, the Dubai Aluminium Company (DUBAL) embarked on a major upgrading programme to increase its hot metal capacity by around 40 per cent. The development includes a new pot line installation which will increase hot metal capacity by 235,000 tonnes a year, against an original design capacity of 135,000 tonnes. Dubai has been working on a continuous programme to improve operations which have already included projects in power generation, anode manufacturing, casting process computer systems, and cell technology. The smelter development’s improvements are due to be fully operational by 1991. The upgrading is a timely one for Dubai, since the new operation will be ready well before other Gulf smelters and upgrading, prompted by better world prices, will be ready. Dubai is also giving new attention to the Far East as a trading partner to take advantage of its geographical proximity to the area. UAE banks have built close working relationships with the Far East and Abu Dhabi is increasing its investments there. Japan is one of the largest trade partners throughout the emirates. Several new Japanese oil companies set up new offices in Abu Dhabi in 1989 and Abu Dhabi is planning to buy into Japanese refining operations. Japan’s large projected demand for gas in the 1990s has also attracted Abu Dhabi’s interest. As part of plans to develop Dubai as a hub for the region’s transport and commerce, Dubai’s municipality is pressing ahead with several road, landscaping and power projects, including a new 400MW power and water plant at

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Al-Mamzar. Two of the emirate’s largest park projects are out to tender and beach development is under way. The municipality is also pressing ahead with road and creek crossing projects to ease the heavy burden of traffic in the area. Transport All of the emirates ports have reported improved results since the ceasefire. Abu Dhabi has appointed consultants from West Germany to redevelop Mina Zayed and attract more shipping to the port. Port Rashid is studying the reorganisation and upgrading of its facilities to cope with record levels of cargo. Jebel Ali Port brought in crane equipment in 1989 as capacity expanded when the Sealand Norasia consortium began operating from the port in early 1989. Both Port Rashid and Fujairah experienced an increase in the level of sea and air cargo during 1989. Sharjah port also restarted a link to Bandar Abbas in Iran during the year. A US$70 million cargo terminal is under way in Dubai to increase the airport’s ability to handle the large volumes of cargo to the Far East. Tourism is also on the up-and-up, a relatively new sector given a considerable boost by the Gulf cease-fire. The leisure facilities and comparatively relaxed attitudes for an Islamic country, and the exceptional array of merchandise, draws a large number of intra-Gulf visitors each year. The prospect of winter holidays in the sun is now drawing visitors from Europe and hotels are being upgraded. The expected increase in traffic to the region has prompted both Dubai ‘s four-year-old Emirates airline and Gulf Air, which is part-owned by Abu Dhabi, to go ahead with massive investments in new aircraft. In October 1989 Emirates announced it would be buying an additional five new aircraft, to double its cargo and passenger handling capacity in the early 1990s. Bahrain-based Gulf Air announced plans to buy 12 new Airbus A320s. Outlook The federation has withstood many tests during the 1980s and seems set to survive into the 1990s. The Gulf War cease-fire has given the emirates a new lease of life and the UAE is in a good position to benefit from the return of optimism to the area. The uncertainty of the oil markets in the mid-1980s has strengthened the emirates’ determination to continue economic diversification. However, this process will require careful husbanding and forward planning. The death of deputy prime minister, Sheikh Hamdan, in October 1989 was a timely reminder that the management of government will gradually pass into younger hands as the decade progresses.

1991 Provisional Constitution – Territorial Disputes – Attempted Coup d’état – Budget Delays – Foreign Policy Changes – Oil Politics Emerge – Construction Sector Grows – Trade Buoyancy

The 1990s began showing every sign of being a decade of increased prosperity and stability for the Gulf, and particularly so for the United Arab Emirates (UAE), which was already beginning to enjoy benefits accruing from the end of the Iran-Iraq war. The volume of trade passing through the UAE because of its strategic position on the major sea routes to Iran and Iraq significantly increased following the cease-fire, and while the Iraqi invasion of Kuwait on 2 August 1990 altered the nature of the flows, UAE trade patterns were not completely undermined in the following months. The UAE was set to make real gains as a result of the extraordinarily high oil prices arising from the invasion – and particularly Abu Dhabi and Dubai which are the most richly endowed emirates in terms of oil reserves. Since the federation was first formed in 1971, Abu Dhabi and Dubai have emerged as the wealthiest of the emirates because of their oil and gas reserves. The UAE as a whole holds 9.5 per cent of the world’s oil reserves and 4.8 per cent of its identified gas reserves, of which the overwhelming majority is in Abu Dhabi and, to a lesser extent, in Dubai. These emirates have consequently also become the more generous contributors to the federal budget, effectively subsidising expenditure in the smaller states of Ras al-Khaimah, Ajman, Fujairah, Umm al-Quwain and Sharjah. The arrangement has tended to cause tensions and frictions between the states, but the loose nature of the federation – which is designed to allow the individual states room for self expression – has ensured its continuation. The informal nature of the grouping is shown by the fact that two decades after its formation the federation still has no permanent constitution but continues to function under the terms of the provisional constitution sketched out at its inception. The arrangement has been reviewed every five years, and was therefore due for review in 1991. Under the terms of the Provisional Constitution, the Supreme Council, which consists of the rulers of all seven states, is the highest authority. The members of the UAE government are appointed by the council, before which all laws must, in theory, come for ratification. In practice, the members of the council rarely convene more often than once in every year.

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While the looseness of the arrangement has had the benefit of allowing individual leaders to preserve their authority and avoid the adoption of policies which go against their interests, it has also meant that it has only limited effectiveness. The reluctance of some of the smaller states to make contributions to the budget has meant the starvation of some of its institutions. Moreover, some of the institutions, such as the judiciary and defence, have in the past come under pressure because of the individualistic policies followed by some of the emirates. The majority of the emirates, for example, have their own private defence forces. The increasing strains have been particularly apparent on the economic front where Abu Dhabi looked likely to have to carry the future burden of the federal budget alone. Domestic Politics The political system of the UAE is very traditional, if not tribal, in nature. The individual rulers of the seven states have considerable powers, and loyalty is due to the ruler as opposed to the state. The rulers of the seven emirates are for the most part drawn from one or two lines of the same family, and they have traditionally faced challenges from other lines of the same family. The deposition of a ruler and his replacement with another family member is not infrequent, and is the way in which three of the present rulers, including Sheikh Zayed of Abu Dhabi, came to power. There are also a number of long-running territorial disputes in the UAE and the delineation of territory is extremely messy. An attempt in 1979 to abolish all internal boundaries was suppressed as individual emirates were reluctant to relinquish their own powers and to share the full benefits of their highly unequal distribution of oil reserves. For this reason, and because of the apparent impermanency of the federal grouping, politics in the UAE is of an unstable nature. In 1987, there was an attempt at a coup in Sharjah headed by Sheikh Abdul Aziz bin Mohammed al-Qasimi, the older brother of the ruler. Although it appeared initially to have been successful, the other emirates were divided in their response, with Abu Dhabi supporting the pretender and Dubai standing firm behind the ruler. A compromise was reached with the ruler, Sheikh Sultan bin Mohammed al-Qasimi, being restored to power and Sheikh Abdul Aziz being nominated crown prince. Sheikh Sultan’s return to power was due in large part to the regional reluctance to set a precedent for usurpation of power by force. This chapter was brought to a close in July 1990 when Sheikh Abdul Aziz was removed as crown prince, exiled, and replaced by Sheikh Ahmed bin Mohammed al-Qasimi, head of the petroleum and minerals office. 1990 was a year of closing chapters in more ways than one. The death of the long-time ruler of Dubai, Sheikh Rashid bin Saeed al-Maktoum, and the

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smooth accession of Sheikh Maktoum bin Rashid al-Maktoum, spelt the end of an era in the UAE and paved the way for a shake-up in the federal government. Sheikh Rashid had been in power in Dubai since 1958. Since the formation of the federation, the ruler of Dubai has also been the vice-president and prime minister of the UAE, and Sheikh Maktoum formally assumed those roles. Soon after his appointment, the UAE cabinet was reshuffled to include eight new members. A new arrival, Sheikh Sultan bin Zayed al-Nahyan, was made deputy prime minister. Four senior ministers lost their posts, including the petroleum and mineral resources minister, Mana Said al-Otaiba. He was replaced by Yousef al Omeir, who was new to a cabinet post. Other important new appointments were seen at the ministries of justice and health. The posts of ministers for these departments were filled respectively by Abdullah bin Omran Taryam and Ahmed bin Said al-Badi. Sheikh Hamdan bin Zayed al-Nahyan became a new minister of state for foreign affairs. A change of minister was seen at the ministry of the interior, which was now headed by Hamouda bin Ali. Rashid Abdullah al-Nuaimi was appointed to the council of ministers in charge of foreign affairs, and Said Ghobash became a minister for economy and commerce. The ministries of labour and social affairs, information, and culture and education were represented in the council by Saif Ali al-Jarwan, Khalfan al-Roumi and Hamad Abdulrahman al-Madfa. External Relations The UAE’s external policies were, during the second half of 1990, heavily coloured by the fact that Iraq was blaming the federation, as well as Kuwait, for damage to its economic interests by keeping the oil price down because of excessive oil production. After the invasion of Kuwait, the UAE had no option but to move smartly in step with the Gulf Co-operation Council (GCC) and Arab League resolutions condemning Iraq, sensitive to the vulnerability of the Gulf states. The crisis engendered in the UAE a more direct foreign policy, and the UAE – although it remained extremely sensitive to the ramifications of such a move – allowed foreign forces on to its soil and received a number of Western officials. Similarly, the long-standing rivalries between the seven emirates were eclipsed by the greater Iraqi threat. Indeed, towards the end of 1990 it seemed that a greater sense of unity might emerge from the crisis as all seven states responded to the common threat. Almost as a counterweight to Iraq‘s aggressive stance, relations with Iran improved visibly, although they have traditionally been stable. Territorial disputes, as elsewhere in the Gulf, colour the UAE’s relationships with other countries, including Iran. Since before the withdrawal of the British from the

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region in 1971, Iran has occupied the islands of Abu Musa and the Tunbs which were the property of Sharjah and Ras al-Khaimah respectively. Nevertheless, relations with Iran have been good, partly because of the significant number of residents of Iranian origin, particularly in Dubai and Sharjah. For some time after the beginning of the Iran-Iraq war, the UAE received visits from Iranian officials. The good relations between the two countries has resulted in the UAE acting in difficult times as an important conduit of information and views between the GCC and Iran. Dubai, which is the most active emirate commercially, and which relies for much of its revenue on this trade activity, depends for about one-third of its trade on Iran. Sandwiched tightly between the Iranian and Saudi Arabian regional superpowers, the UAE has developed a network of diplomatic relationships and has managed to placate most powers, It has diplomatic relationships with the USSR and China, but also manages to maintain good relations with NATO members, The UAE was in a good position to act as mediator between Iran and Iraq, having healthy relations with both. It has also acted as mediator in other regional disputes including those between former South Yemen and Oman, and Algeria and Morocco. The UAE’s foreign relations are mostly directed by Abu Dhabi but as in all matters, the individual emirates are allowed to develop their own policies and relationships. The Budget Although the federal budget is almost always approved well into the-year, the 1990 budget was published particularly late, obtaining final approval only on 10 December. The extreme fluctuations of the oil price and additional expenditure required by the Gulf crisis made it difficult for officials to forecast the main elements. The UAE government forecast a 64 per cent reduction in the budget deficit, with revenue 16 per cent up at Dh14,978 million, and expenditure also higher by 6.7 per cent at Dh15,645 million. Initial responses suggested that some of the extra revenue would be targeted at health and educational development. Expenditure had previously been forecast to be frozen. Oil Sector In no sector is the issue of federation and individual state policy as topical as in the oil sector, which together with gas remains the bedrock of the UAE economy. Despite its membership of the Organisation of the Petroleum Exporting Countries (OPEC), the individual emirates do not conform to a uniform production and pricing policy. Abu Dhabi produces some two-thirds of the UAE’s total output, with reserves equivalent to 94 per cent of the federal total, and has tended to price its oil on the basis of OPEC formulae. In contrast, Dubai – where

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reserves are much smaller and face possible exhaustion within 30 years – has tended to charge market-driven prices and pump out oil at close to its maximum capacity. The UAE’s oil policy underwent a radical change in the late 1980s. Only in 1987, Abu Dhabi – the main producer in the UAE – was keen to cut production to maintain stable oil prices. However, a steady growth in demand and in oil prices caused it to revise this policy. For some time, the UAE believed the quota allocated to it by OPEC to be inequitable. In June 1990, the then oil minister, Mana al-Otaiba, announced that oil reserves were larger than previously believed at 116,000 million barrels, second only within OPEC to those of Saudi Arabia. Nevertheless, allegations continued for most of the first part of the year that the UAE was over-producing. Reponses produced by the oil industry suggested that production was indeed reaching double the quota allocation of 1.095 million barrels a day (bpd). Rising demand and stable prices had certainly convinced the Abu Dhabi Supreme Petroleum Council of the need to increase production capacity, and in February 1990 it announced its intention to increase oil capacity by between 500,000 and 1 million bpd from its estimated 1.8 million bpd. Five months later, the Council also approved plans to double the production of liquified natural gas from the operation of the Abu Dhabi Gas Liquefaction Company (ADGAS) on Das Island by 1994. Although the UAE responded to Iraq‘s aggressive accusations and threats in July by reducing output, it quickly reverted to high production after the invasion of Kuwait in August to compensate for the loss in world capacity and, more importantly, to capitalise on the higher prices. The UAE’s oil output was therefore allowed to reach an all-time high in October of 2.27 million bpd, and the underlying quota question was left to be addressed at a later date. In the months following the Iraqi invasion of Kuwait, the much higher oil prices transformed the prospects for the UAE’s finances during 1991. With revenues forecast to increase by 35 per cent – to US$13,500 million – in 1990, there was greater scope for development expenditure. However, the issue highlighted the UAE’s inability to-agree quota levels within OPEC, and the lack of co-ordination between the emirates, both subjects which would need to be addressed in the future. The UAE – which enjoys remarkably low production costs of US$1–US$2 per barrel of crude – reinforced its position in the oil-producing hierarchy during the crisis. The longevity of its reserves also suggested that it would take a more pivotal role in oil politics in future years. Expansion plans unveiled at the start of 1990 centred quite naturally on Abu Dhabi. The government controls the rate of production through the state company Abu Dhabi National Oil Company (ADNOC), which is active all the way

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through from upstream to downstream projects. Abu Dhabi planned to raise production at the Bab field, which was only brought back into operation in mid-1989, to 200,000bpd from its 1990 level of 40,000bpd. This field is operated by the private sector company the Abu Dhabi Company for Onshore Oil Operations (ADCO), which is owned 60 per cent by ADNOC. The same company would be directing plans to expand capacity at the Asab, Bu Hasa, Asil and Shah fields, whose capacity is estimated at 800,000bpd. The 300,000bpd capacity of the Upper Zakum field – which is managed by ADNOC and the Japan Oil Development Company (JODCO) – should also be boosted by 66 per cent. The UAE’s gas reserves are also considerable, estimated at the beginning of 1990 at 354 million cubic feet. Again, Abu Dhabi is the main federal player in this area. Abu Dhabi is keen also to exploit its reserves of natural gas, the large part of which is associated to oil production. In response to higher world prices and demand, Abu Dhabi also revealed a plan to double production of liquified natural gas (LNG) from Das Island to 4.6 million tonnes a year by 1994. While Dubai is the UAE’s second most important producer, declining reserves have forced it to develop other economic activity. It produces some 400,000bpd of oil, close to its maximum capacity, and has only another 30 production years left to it. Sharjah produces about 10,000bpd of crude and 60,000bpd of condensate, Ras al-Khaimah is also an oil producer, but their combined reserves are believed to have an even shorter prospect than Dubai’s. The Non-oil Economy If 1989 turned out to be a good year for the UAE, as the effects of the new regional peace infused both private sector and public sector activity, 1990 looked set to be an exceptionally buoyant year. Levels of private investment rose, the construction business appeared to be regaining its momentum, and real estate prices were on the up. As the Iranian and Iraqi economies came back into commission the volume of trade channelled through the UAE rose. Dubai, the bulwark of UAE trade, witnessed increases of 24.6 per cent and 20.7 per cent in re-exports and imports in the first quarter of 1990. While the events of August 1990 severely shook local confidence, the underlying economic patterns were not completely disrupted in the following months, although volumes were deflated. With greater oil revenues flooding in, and no prospect of a quick resolution to the crisis, the UAE government seemed persuaded that progress on major industrial projects such as the dhow wharf scheme in Dubai and the Das Island gas plant should continue. With throughput in UAE ports reasonably stable, UAE showed itself best placed of all Gulf states to weather the crisis. During the latter part of 1990 the crisis, however, took its toll, in particular on the construction sector, where the high war risk premiums that were charged

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on imported materials placed upward pressure on the cost of raw materials. Both Abu Dhabi and Dubai had committed themselves during 1989 to a new programme of construction, but the invasion slowed progress significantly. The steady rise in oil prices over the year before August had had its effect on real estate and rent prices, propelling the construction sector into preparing further development plans. The most significant projects were on sewerage, communications and land reclamation. A number of new road building plans were also embarked on during the year, but the biggest project was the US$100 million expansion plan for the Mafraq sewage treatment plant in Abu Dhabi. The Société Générale de Travaux du Maroc won a US$37 million contract to build a new airport in Al-Ain; Dubai airport was scheduled to receive a new cargo terminal built by Six Construct of Belgium and the Consolidated Contractors International Company (CCIC) was mandated to build a US$54 million headquarters for Emirates Telecommunications Corporation (Etisalat). In addition to these major municipal projects, the private sector was also busy on hotel and leisure projects, although a number of the plans were over-ambitious and were later scaled down or scrapped. For as long as the government remained determined to maintain an appearance of normality, the fortunes of the construction sector – a good barometer of general economic health – would be mixed. However, while new contracts appeared to be being awarded still at the end of 1990, although at a slower rate, there was always the possibility that construction would be delayed or abandoned in the event of further hostilities breaking out. Industry The industrial sector, which was almost non-existent in the 1970s, made giant strides in the 1980s. As the government became increasingly conscious of the need to diversify away from its dependence on oil revenues it began to plough significant resources into industrial development. Many of the industries which were established are fuelled or related to the abundant supplies of oil and gas. The 1980s was a boom period for industrial production which grew at an average rate of around 8 per cent per annum. However, in this sector too, the problems of federalism are evident as each emirate sets its own guidelines and this results in only a per centage of industrial capacity being employed. The establishment of free zones in the UAE has begun a new phase in the UAE’s industrial and commercial activity. The Jebel Ali Free Zone (Jafza) in particular, which was formed primarily to promote industrial investment, boasted more than 300 companies in 1990. Some 40 per cent of the companies based there were involved in manufacturing or goods assembly, with the remainder being distribution companies.

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The Jebel Ali Free Zone allows companies to be 100 per cent foreign owned, and allows them a 15-year tax holiday. According to government estimates, investments in the Jafza were expected to reach Dh1,500 million by the end of 1990, a 50 per cent rise on 1989 levels. Trade and Commerce Five of the seven emirates have their own ports, and trade has always been an important activity for the region. The UAE has three major ports – Abu Dhabi’s Mina Zayed experienced an upsurge in activity as the emirate’s trade links with other GCC states strengthened. But two of the largest ports, Jebel Ali and Mina Rashid are in Dubai. The port at Jebel Ali was constructed to cater for the heavy cargo destined for the free zone, while Mina Rashid services Dubai’s valuable re-export business. Already in 1989 there were signs of frenetic activity as the volume of business soared as a result of firmer oil prices and the cease-fire between Iraq and Iran. 1989 was also characterised by heavy investment on the expansion of facilities for loading and other port services. But 1990 looked set to be a bumper year for trade. However, the Iraqi invasion of Kuwait and the consequent arrival in the area of the multilateral forces brought mixed results for UAE shipping. Traffic through UAE ports fell where it was subject to high war premiums. However, Fujairah Port, which with Khor Fakkan Port is exempt from the risk premiums, reported a 43 per cent increase in twenty-foot equivalent units (TEUs) over the previous year’s corresponding period. Despite the introduction of war risk premiums on cargoes destined for the Gulf or the region, traffic in the more vulnerable ports did not drop off completely. Figures produced by the government of Abu Dhabi showed that re-exports fell 21.9 per cent against 1989 in October and non-oil exports were down 22.8 per cent. While Dubai’s September forecast assumed a 25 per cent reduction in the number of TEUs, the situation might well have been worse. The UAE ports also hoped to gain some of the traffic lost to the Gulf’s more northern ports. Dubai’s two ports are the leading centres of re-export, and 1989 and the first half of 1990 saw remarkable growth of business. In 1989, re-exports from Dubai surged by 28 per cent to new heights at Dh6,541 million, due in large part to the traffic with Iran. Re-exports during the first quarter of the year grew 25 per cent to Dh 1,610 million. The port registered throughput of 644,230 TEUs in 1989, a rise of 15 per cent, fuelling predictions that the burgeoning trade in the Far East and Iran would not be too long in taking throughput over the 1 million mark. The Jebel Ali port handles somewhat less business but it too registered strong growth due particularly to the success of the Jebel Ali Free Zone. In the

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first nine months of 1990, the port handled 218,325 TEUs – 66 per cent more than in the corresponding period in 1989. The Gulf coastal ports are highly competitive and Abu Dhabi’s Mina Zayed had implemented measures to undercut other ports by price. The announcement was made in July that importers would be allowed 90 days’ grace on their duty payments. Imports in Abu Dhabi were up 11.5 per cent in 1989, at Dh7,426 million and cargo handled rose 18 per cent to 1.08 million tonnes, with container throughput up 7 per cent. Finance Sector In line with the increasingly buoyant local economy, the banking sector in the UAE was looking forward at the start of 1990 to a decade of increased prosperity. Although plagued still by the overcrowded nature of the market, prospects were looking up as the pie which had to be shared increased in size. The upsurge in local trade was expected to translate itself into higher profits. With oil revenues up 34 per cent in 1989 to US$10,672 million, profits in UAE banks were also higher on the back of trade-finance and an improvement in retail business. The events of 2 August (the Iraqi invasion of Kuwait) shook the banks and shattered the confidence of their clients. Central Bank statistics which emerged in the following months showed that deposits had declined by 11 per cent. The government took a number of measures to combat the threats to banking liquidity and-ensured sufficient currency deposits were in the banking system. However, the industry was generally believed to be in a state of suspended animation. The result was a contraction in lending as banks were wary of expanding the asset side of their balance sheets. Combined bank balance sheets declined. The UAE Central Bank governor, Abdul Malik al-Hamar, made it clear that he would welcome merger activity to alleviate the pressures on the market. Confidence was unlikely to return until the Gulf crisis was resolved.

1992 War Costs Contribution – Damascus Declaration – Oil Revenue Grows – Banking Sector Recovers – Defence Expenditure – Sharjah’s Economic Development – Mina Zayed

Throughout 1991 the United Arab Emirates (UAE) and the Arab world as a whole continued to feel the enormous political and economic consequences of Iraq’s 1990 invasion of Kuwait and subsequent expulsion by Arab and Allied military forces in February 1991. Economically, the Kuwait crisis brought windfall profits from high world oil prices, as the UAE increased output to compensate for the loss of Iraqi and Kuwaiti output – the Organisation of the Petroleum Exporting Countries (OPEC) quotas becoming temporarily suspended. The country’s oil income in 1990 was US$16.2 billion – an incredible 54 per cent up on 1989. This resulted in increased government spending, the mainspring of the hydrocarbon based economy. However, the boost was partially offset by the UAE contribution toward the Allied war costs, with US$3.87 billion paid in cash and US$197 million in kind to the United States and US$500 million to the United Kingdom by June 1991. It was estimated that 1991 oil revenues would be slightly lower than 1990 revenues, but without war costs there would be more available to spend during 1992. Politically, the alignment of the cautiously conservative UAE leadership has tilted more openly toward the West, though it formally maintains a non-aligned stance, playing an active part in the Non-Aligned Movement and the League of Arab States (Arab League). The federation of the United Arab Emirates was formed in 1971 when the British pulled out of their ‘protective’ role in what were then known as the Trucial States, so called because of a maritime treaty with Britain dating back to 1820. Initially six of the newly independent emirates – Abu Dhabi, Dubai, Sharjah, Ajman, Umm al-Quwain and Fujairah – combined to form the new state, joined a year later by Ras al-Khaimah. Abu Dhabi is by far the larger of the emirates, and the richest, containing the majority of the UAE’s oil and gas reserves. Abu Dhabi’s contribution to the federal budget (about 70 per cent) essentially subsidises the poorer emirates, with Dubai taking as much as it puts in. Abu Dhabi is the capital, seat of government, and focus of the oil industry, while Dubai dominates trade and commerce. There remains great rivalry between these two emirates in particular, though all cherish their independence.

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Theoretically, the Provisional Constitution provides for all laws in the country to come before the government appointed by the Supreme Council (comprising the Rulers of each emirate). In practice, the council rarely meets, and the emirates have many differing laws – for example, alcohol is banned in Sharjah but not in the other emirates. Another notable example of the independence of the individual emirates is the separate defence forces and facilities which exist. Traditional System Faces Change The experience of the Gulf crisis has encouraged moves toward greater integration between the federation members, an aim long sought by the poorer emirates. In addition to the experience of war, UAE success in the World Cup soccer tournament in 1990 was welcomed throughout the emirates, and served as an aid to establishing national identity. The younger generation are more federally minded, mixing together at Al-Ain University, but generally each emirate puts its own concerns as a higher priority than federal matters. Traditional loyalties are to the tribe, and beneath the concrete and glass facade, the UAE political system remains essentially tribal – though the sheikhs are reportedly not as accessible as they used to be. This has not yet become a significant problem and dissent is minimal; there is disagreement on the strength of federalism wanted, and the practice of patronage is widespread, though censorship of the media and the absence of political parties makes the strength of opposition difficult to gauge. At the time of the Kuwait invasion there was discussion of moves toward more participatory government, and any fundamental change in Kuwait’s post-war political structure would influence the other Gulf states, but there had been no practical change in the UAE system of government. The majority of the national population are Sunni Muslim, though there are Shi’a families originating from Iran, and among the expatriate population. Historically, succession in the UAE’s ruling families was not always by the eldest son; often the member of the ruling family winning public and family acclaim as the most fit to rule would seize or be thrust into the post. This system achieved strong leaders in a harsh world, but provided an unstable system where the legitimacy of the ruler could be contested by rivals. The ruling families are from different branches of the same families, and these different branches were traditionally the source of power groupings. An example of the potential for instability was the attempt by Sheikh Abdul Aziz bin Mohammed al-Qasimi, elder brother of Sultan bin Mohammed al-Qasimi, the ruler of Sharjah, to stage a coup in 1987. Initially Abu Dhabi supported the pretender, and Dubai firmly backed the ruler. The Maktoums

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(Dubai’s ruling family) were particularly anxious to prevent acceptance of coups in the country, and mediation resulted in the ruler, Sheikh Sultan, being restored to power, and Sheikh Abdulaziz being nominated crown prince. In July 1990, Sheikh Abdulaziz was declared no longer the successor, exiled, and replaced by Sheikh Ahmed bin Mohammed al-Qasimi, head of the petroleum and minerals office. Later that year saw the death of Sheikh Rashid bin Saeed al-Maktoum, the Ruler of Dubai since 1958, and vice president and prime minister of the UAE since its foundation. Sheikh Rashid was the architect of Dubai’s development, though he had been incapacitated for many years prior to his death, with his sons effectively running the emirate. Rashid’s eldest son and heir, Maktoum bin Rashid al-Maktoum, had already begun to be more active politically following the death of Sheikh Hamdan bin Mohammed al-Nahyan of Abu Dhabi, his fellow deputy prime minister who had taken charge of UAE cabinet meetings. Maktoum assumed the roles of vice president and prime minister of the UAE and ruler of Dubai, becoming more prominent in affairs of state than his brothers Hamdan and Mohammed. The smooth transition of power refuted the expectations of those who had suggested that the charismatic Mohammed, UAE defence minister and head of Dubai’s armed forces, would be persuaded to take power. In fact, Mohammed was instrumental in opposing change by force in Sharjah; he appears to have been steadfastly loyal to his brother, and the likelihood of a successful palace coup is far less today than just a few years ago. If this proves to be the case, it should strengthen the status quo. However, in the event of an unsatisfactory leader, the rigidity of the system could actually undermine the structure as it does not contain a mechanism for change. Following Sheikh Maktoum‘s appointment as vice president and prime minister, a new cabinet was appointed on 20 November 1990, the first cabinet reshuffle in a decade. Sheikh Sultan bin Zayed al-Nahyan became deputy prime minister and Dr Mana Said al-Otaiba, who had been minister of petroleum and mineral resources for 19 years, was replaced by 32-year-old Yousef al-Omeir. A new ministry of higher education was created, headed by chancellor of the United Arab Emirates University, Sheikh Nahyan bin Mubarak al-Nahyan. The portfolio of Islamic affairs was separated from that of justice, the latter being filled by Abdullah bin Omran Taryam; Ahmed bin Said al-Badi became minister of health. Rashid Abdulla al-Nuaimi was made foreign minister, filling a vacancy, and his post as minister of state for foreign affairs was taken by Sheikh Hamdan bin Zayed al-Nahyan. Hamad al-Madfa was appointed minister of education; Hamouda bin Ali became minister of the interior and Said Ghobash became minister for economy and commerce. In November 1991 Sheikh Zayed

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was re-elected by the cabinet as President for another five-year term, and Sheikh Maktoum re-elected vice president. A More Overt Political Role Foreign policy of the UAE is declared to be based upon membership of the Arab League and the Organisation of Islamic Conference, but there is also increased emphasis on the UAE’s membership of the United Nations (UN) following the UN role in the Kuwait crisis. Membership of the Arab League has not been affected by the crisis except in so far as a cooling of relationships with those countries that supported Iraq (Jordan, Yemen, Sudan, Libya, the Palestine Liberation Organisation (PLO)). Conversely, Arab allies in the crisis, Egypt and Syria, have now extended co-operation with the UAE and the Gulf Co-operation Council (GCC) following the signing of the Damascus Declaration in 1991. Abu Dhabi dominates foreign relations, but the individual emirates also maintain their own policies and relationships. During 1991 Sheikh Zayed declared that it was not possible to deal with the current leadership of Iraq (Saddam Hussein) whereas relations with Jordan, Yemen and the PLO would not be broken, but could not be as they were before, ‘at least for the present’. There is still strong support for the Palestinians’ demand for their own state on their own land. Within the Gulf the role of the GCC, founded in Abu Dhabi in 1981 to foster economic, cultural and political co-operation among the six oil-rich Gulf states (Saudi Arabia, Kuwait, Bahrain, Qatar, the UAE and Oman) has strengthened following the crisis, which pushed the GCC into taking an overtly political and military role. However, some observers suggest that the crisis showed the grouping’s lack of co-ordination, for when Iraq first invaded Kuwait, most GCC countries were unsure how to respond. Iraq had singled out the UAE as a culprit in keeping oil prices down and damaging Iraq’s economy, and the UAE recognised its vulnerability and endorsed joint GCC condemnation of Iraq’s actions. Its support of lower OPEC production ceilings at the July 1990 emergency meeting, intended to raise oil prices, had obviously been treated by Iraq as inadequate. However, there are still active territorial disputes between GCC members. It was not possible to disguise the need for outside, and particularly Western, assistance to overcome the threat from Iraq and so Western military forces were invited to use UAE facilities during the war. The inevitable criticism of this action, and continuing enhanced post-war relations with Western countries, was countered by Sheikh Zayed with the comment, ‘We are eager to work with our friends, whom we have tested, even if others are angry. We will not put either an Arab country or a non-Arab country between ourselves and our

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friends.’ One non-Arab country that could be considered a source of criticism would be Iran, with whom the UAE has excellent relations, Dubai and Sharjah being major trade partners with large numbers of residents of Iranian origin. Relations with Iran remain good, notwithstanding territorial disputes over the islands of Abu Musa and the Tunbs, occupied by Iran but formerly property of Sharjah and Ras aI Khaimah. While Iran tries to lessen its dependence on the UAE ports, particularly trans-shipment from Dubai, its plans for its own free zone are unlikely to counteract Dubai’s advantages of established trade and shipping patterns, excellent infrastructure, and minimum of red tape. Integration of the economies of the GCC continues, although there are occasional disputes such as the 4 per cent minimum trade tariff stipulated, with some UAE ports accused of effectively charging only one per cent on imports. Major Oil Sector Expansion under Way The UAE’s oil reserves of 116 billion barrels of crude are second only to those of Saudi Arabia within OPEC; the UAE accounts for 9.5 per cent of the world’s oil reserves and 4.8 per cent of identified gas reserves, but these resources are not evenly distributed among the emirates. Abu Dhabi, by far the largest of the emirates, also contains the majority of the UAE’s oil and gas reserves, and was the first of the emirates to discover oil, in 1958, with exports starting in 1962. Dubai, the second largest producer, discovered oil in the mid-1960s although its reserves are only 4 per cent of the UAE total; Sharjah discovered limited hydrocarbons in the 1980’s, as did Ras al-Khaimah. Umm al-Quwain has limited gas but could not justify development when its aluminium smelter project was cancelled. Long-term prospects are good with world oil demand expected to grow from 52 million barrels per day (bpd) in 1991 to 58.6 million bpd by the year 2000. Accordingly, the UAE plans to boost its capacity from 2.5 million bpd to 3.5 million bpd. Any reductions or increases in production come primarily from Abu Dhabi which tends to conform to OPEC production and pricing policies. In contrast, Dubai produces at its capacity of 400,000bpd and expects to see this figure decline rapidly over the next 25 years as reserves are depleted. Prior to the Gulf crisis, a 10 per cent drop in oil revenue had been forecast, but revenues actually jumped from US$12 billion in 1989 to US$16 billion in 1990. Oil prices rose from US$15.68 per barrel in July 1990 to US$34.38 per barrel in October 1990, dropping again to US$17.39 per barrel by April 1991. By mid-1990 production had fallen near to the OPEC quota, which had officially just been revised upward to 1.5 million bpd, but with the shortage of world supply during the crisis, production rose to a peak of 2.2 million bpd in December 1990, with an average for the year of 2.1 million bpd. Average production in 1990 comprised Abu

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Dhabi 1.6 million bpd; Dubai 400,000bpd; Sharjah and Ras al-Khaimah 50,000bpd (condensate). In the first quarter of 1991 production rose to 204 million bpd, reducing to 202 million bpd by August. Abu Dhabi had a programme to increase its production capacity from 13 million bpd in 1991 to 2.2 million bpd in 1992, and up to 3 million bpd by the end of 1994. The Bab field was being stepped up from 60,000bpd to 200,000bpd through a full field development programme. In 1990 a re-evaluation of gas reserves put the total at 345 trillion cu ft, a 71.6 per cent increase on previous estimates. In November 1991 Abu Dhabi Gas Industries (Gasco) planned to spend US$40 million increasing gas production facilities. Another 30 gas wells were to be drilled in the Habshan area of the offshore Bab field to enable a further 300 million cu ft per day of gas to be extracted, while a reservoir in the Khuff formation of the offshore Abu alBakhoosh oilfield was being developed and was scheduled to enter production at the end of 1991. Upgrading of production and efficiency (from 93 per cent to 99 per cent) at the Bu Hasa field was due to start mid-1992 at a cost of US$30.8 million. The Abu Dhabi Marine Operating Company (ADMA-OPCO) was planning to begin production from the new offshore Nasr field in 1992, initially producing 50,000bpd. When the field is fully developed, by 1998, ADMA Opco plans to have increased its total capacity by one third from around 450,000bpd in 1991. Brown and Root had been studying the entire onshore gas development programme for ADMA-OPCO and working on a water injection programme for the onshore Bab oil field for the Abu Dhabi Company for Onshore Oil Operations. Das Island’s LNG/LPG plant capacity was to be doubled by April 1994 through the installation of a third gas train with a capacity of 2.3 million tonnes/year of LNG and 250,000 tonnes per year of LPG at a cost of US$1 billion. Sharjah’s Mubarak field, which came on stream in 1974, was producing 11,000bpd in 1991, with the Sajaa gas field down to 25,000bpd condensate. Iran claims half the Mubarak field, Umm al-Quwain 20 per cent, and Ajman 10 per cent. Sharjah’s hydrocarbon revenues are worth about US$250 million per year. In 1986 Sharjah began a ten-year, US$100 million secondary development programme. Sharjah is to supply natural gas to industrial plants in Jebel Ali from early 1993, 100 million cu ft/day from the offshore Mubarak field via an 87km pipeline primarily to the Jebel Ali power stations, allowing Dubai to use its own gas for a gas injection programme starting in 1993. Ras al-Khaimah’s Saleh gas and condensate field was forecast to have ceased production by the end of 1991, or early 1992. However, the Bukha oilfield which Ras al-Khaimah shares with Oman was expected to come on stream in 1992 at an initial rate of 12,000bpd condensate and 130 million cu ft of gas/day.

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Business Confidence Shaken Initially the Gulf crisis undermined business confidence in the UAE, hitting trade and investment, which was on an upswing following the cessation of hostilities between Iran and Iraq. There was an outflow of private finance totalling US$1.9 billion by November 1990 (representing 15 to 30 per cent of bank deposits), but governmental pressure and moves to increase liquidity in the market succeeded in encouraging a recovery of assets by the start of 1991. The country’s 47 foreign and locally-incorporated commercial banks saw their consolidated balance sheets rise 9.5 per cent to US$35.5 billion between August and December 1990. In the construction sector, most projects under way continued, but there was a delay in the implementation of new projects – with the exception of government-sponsored ‘confidence builders’ such as the Dubai Creek golf course, hotel and marina contract, let after the Iraqi invasion of Kuwait, and the Dh200 million dhow wharfage contract let in January 1991. Traders generally ran down their stocks, unwilling to pay the higher shipping costs due to the insurance surcharge, and not wishing to commit money when the situation was so uncertain. By the end of February 1991, there was an immediate restoration of trade confidence in Dubai, aided by Dubai’s role as a regional entrepôt for goods required in Kuwait’s vast rebuilding programme. Abu Dhabi meanwhile was hit by a different crisis when the Bank of England suspended trading at the Bank of Credit and Commerce International (BCCI), alleging it had swindled US$20 billion. In April 1990 the al-Nahyan family had acquired a majority share in BCCI for US$1.2 billion. At the time of the suspension, Sheikh Zayed, the Crown Prince Sheikh Khalifah bin Zayed al-Nahyan, the finance department of the Abu Dhabi government and the Abu Dhabi Investment Authority (ADIA) owned a combined 77.4 per cent of BCCI. There has been no suggestion or knowledge of any illegal activity on the part of the ruling family or government of Abu Dhabi. The local affiliate Bank of Credit and Commerce Emirates (BCCE) (40 per cent owned by BCCI) was only owed US$10 million by BCCI; it was bailed out, broke its ties with BCCI on 9 July 1991 and its name was changed to Union National Bank on 3 August 1991. The UAE Central Bank took over the BCCI branches in the country, and after an unsuccessful attempt to restructure, BCCI started to liquidate assets in October 1991. Despite the war, most UAE banks registered healthy profits in 1990 thanks to a buoyant first half year. Elsewhere on the banking scene, the cabinet gave approval to the finance and industry ministry and Central Bank on 13 May 1991 to prepare a study on setting up offshore banking units. It was expected that there

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would be further bank mergers in 1991/92 and that these would be encouraged by the government. In the wake of the Kuwait crisis, Abu Dhabi was expected to spend US$2 billion to US$4 billion on defence equipment and services; it proposed that future sales be linked to an offset agreement following the establishment of an offset committee in August 1991. The first such deal was a US$250 million order in mid-1991 for 20 Apache helicopters from McDonnell Douglas of the United States, containing a 65 per cent offset element. Increased Budget Expenditure The UAE federal budget is often approved late in the year, with the 1990 budget exceptionally late, coming out in December, but just half a year later, the 1991 budget was issued with spending put at Dh16.4 billion and revenues put at Dh15.3 billion. This represents an increase in budget expenditure of almost 5 per cent (Dh768.3 million) over 1990’s expenditure of Dh15.6 billion. There were significant increases in power and water expenditure, up from Dh884.2 million in 1990 to Dh1.4 billion in 1991; education spending up from Dh2.2 billion in 1990 to Dh2.5 billion in 1991; health up from Dh1.0 billion to Dh1.1 billion. Budget allocations for the new ministries of justice, higher education, youth and sports reached Dh16.6 million, while spending on the UAE University was around Dh502 million. Industrial Growth Continues Manufacturing accounted for 10 per cent of the emirates’ economic output by 1990, compared to one per cent in 1980. Only 2 per cent of private sector employees were UAE nationals, emphasising the dependence on expatriate labour in the private sector. In March 1991 the Abu Dhabi government launched a four-year economic plan entailing capital spending of Dh25.3 billion; this included Dh9.5 billion for oil and gas expansion, Dh6.1 billion for power and desalination expansion, Dh4.5 billion for transport and communications, and Dh4.0 billion on social services. Some projects were delayed during the war, but these resumed once hostilities ceased. Power generation capacity is to be boosted to 1,000MW and the electricity supply network to be streamlined. Taweelah ‘A’ power station came on stream in 1989 producing 250MW and 91 million litres/day of desalinated water and was undergoing a US$220 million expansion. Taweelah ‘B’ began in 1991 to expand generating capacity by 400MW and increase desalination capacity by 182 million litres/day. Work was tendered in May 1991 with a three-year building schedule. A new 200MW power station was also being developed in Al-Ain in a

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contract awarded to Electricité de France International in May 1990. Future work includes expansion of the Umm al-Nar power station, upgrading the emirate’s power and water control systems, new substations, and power and water lines. Early in 1991 US$300 million worth of contracts were awarded by the water and electricity department to five companies for sub-stations and interconnection work in Abu Dhabi. In Dubai electricity generating capacity was 1,190MW in 1991, but demand was forecast to increase to 1,590MW by 1995. During 1991 Jebel Ali ‘E’ power station was being expanded by 200MW to 240MW; in the Jebel Ali Free Zone Dh394 million turnkey ‘F’ project two 106MW dual fuel turbines were being installed and it was due to come on stream by the end of 1992. A further contract, Jebel Ali ‘G’, was planned to have a generating capacity of 440MW and desalination capacity of 252,000 cu metres/day. The US$840 million contract was awarded to a Siemens-led consortium in May 1991, and was due for completion in 1994. On completion the Dubai Electricity Company (DEC) will have installed capacity of 1,857MW and 525 million litres/day desalinated water. In Sharjah a US$23 million, 60MW gas turbine power station was due to be completed by GEC Alsthom by the end of 1991. Among other construction projects planned or under way were: a new bridge alongside the Maqta bridge to Abu Dhabi island tendered in November 1991 and estimated to cost between Dh150 million and Dh175 million; a Dh180 million, 95-hectare park for which Halcrow International Partnership is the consultant, was planned for the Mamzar area of Dubai; another 96 hectare park on Dubai Creekside was under construction by Belhasa Six Construct in a Dh90 million contract; a Dh100 million to 150 million coastal protection development was planned for Dubai’s Jumairah beach; lowest of eight bidders for a 27 hole championship golf course in Abu Dhabi was Shelter Contracting at Dh44 million for the 18-month contract; new road projects are to be awarded in Abu Dhabi and Dubai in 1992, with a mid-1992 start expected on the Jebel Ali-Abu Dhabi boarder road; a Dh250 million, 250–300 bed accident and emergency hospital was to be built in Abu Dhabi; the Mafraq sewage treatment plant was expected to go to tender in early 1992 and cost around US$163 million. A masterplan for Abu Dhabi International Airport was being evaluated to forecast activity into the twenty-first century; the US$100 million Bur Juman shopping centre was scheduled to open in Dubai in late 1991; the US$500 million Lulu Island project off the Abu Dhabi corniche was ongoing; in July 1991 work began on a 30 month Dh173 million contract awarded to Dutco Balfour Beatty for the expansion of Maktoum bridge and flyovers; a US$600 million masterplan for expansion of Dubai International Airport entails a new terminal, new runway and ancillary buildings to cater for demand up to 2030, drawn

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up by Bechtel; a US$54 million Marriott Hotel Complex under construction in Dubai was due for completion by the end of 1992. In 1991 Emirates Telecommunications Corporation (Etisilat) was allocated Dh1.4 billion for development projects over the next three years, including the new headquarters buildings in Dubai and Abu Dhabi, a fibre optic cable connection with Iran, and the expansion of the mobile telephone network. More than 320 companies have established themselves in the 100 square km Jebel Ali Free Zone, including 48 companies signing up during the Gulf crisis. The forecast private investment of US$1 billion by 1990 was not attained, but more than US$650 million had been committed, and in April 1991 the government of Dubai established the Jebel Ali Refinery Corporation in the zone with plans to build a US$900 million, 150,000bpd capacity oil refinery. Bechtel Corporation was retained to carry out design work having already completed the second phase feasibility study. The largest non-hydrocarbon related industrial concern was Dubai Aluminium (Dubal) which, in early 1991, completed its expansion programme to achieve an installed capacity of 235,000 tonnes per year of cast and ingot aluminium. Dubai Cable (DUCAB) is another important manufacturer which increased its production capacity in 1991. A fertilizer and aromatics facility was established in 1990 and other chemical projects planned include a phosphoric acid plant and latex factory. A paper mill was scheduled to start up in early 1992. Trade Rebounds In May 1991 Jebel Ali Port and Port Rashid merged under the new Dubai Ports Authority (DPA), strengthening their position against anticipated increased competition in the UAE shipping market over the next decade. Millions of dirhams are expected to be spent on new handling equipment to meet rising demand. In the first six months of 1991 DPA handled 414,000 tonnes of general cargo compared to 417,000 tonnes for the whole of 1990. This was due to a strong demand for re-stocking by those traders who had failed to replenish stocks after the Iraqi invasion, as well as direct shipments for rebuilding Kuwait, and good demand from Iran. On the day war stopped 340 vehicles were shipped from Jebel Ali to Kuwait. Containers told a similar story, with Dubai ports registering a 25.1 per cent increase in containers handled in the first nine months of 1991, up from 702,317TEU in 1990 to 878,278TEU in the same period in 1991. Re-exports increased by 30 per cent in 1990, primarily though Port Rashid, but with an overspill benefiting Mina Zayed, Jebel Ali, and Fujairah ports. Dubai’s re-exports reached Dh6.5 billion in 1990, compared to oil exports of Dh8 billion and non-oil exports of Dh2.2 billion. Dubai’s gold trade, already importing about

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160 tonnes per year (equal to a tenth of world gold production), received a boost in November 1991 when Iran liberalised its gold landing policy. Mina Zayed also benefited from increased traffic to Kuwait, and after the war it announced the availability of one years’ free storage for goods going to Kuwait. On the east coast, Fujairah port saw a 20 per cent rise on shipments in the first half of 1991, compared to the same period in 1990, reaching 231,732TEU. Sea/air trade (where shippers take advantage of the low air rates and good connections out of the UAE, particularly Dubai, and the excellent trans-shipment infrastructure to transport intercontinental goods by ship then plane) has not bounced back as quickly as container traffic. In June 1990 Dubai registered 1,267 tonnes compared to 824 tonnes in June 1991, but this is considered a temporary setback, with the trade expected to double by the year 2000. ‘Handling time from ship to plane is expected to be not more than four hours,’ declares the department of civil aviation. Growth is expected to be greatly aided by the opening in July 1991 of the 250,000 tonnes per annum capacity Dubai Cargo Village at Dubai International Airport. By September 1991, 17 agents had signed up to use the Cargo Village. Tonnage through Dubai airport in 1990 was 145,000 tonnes, of which 20,000 tonnes were sea/air, another 12,000 tonnes of sea/air cargo being routed through Sharjah International Airport. Fujairah has also benefited from sea/air trade, with 2.2 million kg in May 1991, and a site just four hours by road from Dubai’s Cargo Village. Sharjah is a highly industrialised emirate, with more than 320 factories, and 42 per cent of production exported. These include Sharjah Economic Development Corporation projects such as the cement plant and steel pipe plant. Development in this emirate is constrained due to debts, rescheduled and spread to 1993. Nonetheless, in 1988 the local government drew up a five year Sharjah Development Plan (1988–93) to promote hydrocarbons, the development of new industries and the streamlining of the public sector. The emirate also enacted laws to allow foreign investors more than 49 per cent equity in new companies in 13 sectors, just paying an agent on a fixed salary. In October 1991 plans were announced for the establishment of a five square km Sharjah industrial zone. Trade and shipping in Sharjah is quite successful as the emirate is able to take advantage of ports on both coasts, inside and outside the Gulf. Three cement plants and large limestone quarries are the main source of income in Ras al-Khaimah, and almost the sole users of the port; Ajman has a 600 tonne per day fertiliser plant and a cement plant, Umm al-Quwain has a clinker grinding plant, Fujairah has a cement plant, aggregate quarries, and plans the development of other minerals such as chromite, the plentiful marble, ceramic shale and clay.

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Outlook There is expansion on all fronts in the UAE, underpinned by growing world demand for oil and reducing world supply. In the non-oil industry, particularly in the shipping and re-export trade, and the provision of services for Gulf-wide organisations, continued growth is forecast, and the nascent tourist industry is also picking up, with new hotels and golf courses being built as well as a host of other leisure facilities and events. Record numbers of new companies are establishing themselves, and evidence of renewed US interest in the region includes the Washington-based Overseas Private Investment Corporation setting up in the UAE to offer insurance and finance to potential US investors in the area. The US presence and awareness of the region has increased greatly since the war, with many companies that came to take advantage of the Kuwait market finding Dubai currently a more suitable place from which to serve the Gulf as a whole. UK interest remains strong and a UK trade exhibition, ‘Britain and the Gulf 1992’, was scheduled for the Dubai World Trade Centre in April 1992. With the war behind it, the UAE looked set to enjoy a mini boom in 1992 with particular emphasis on trade and industrialisation. One cautionary note would be that political development has not kept pace with economic development, and the Gulf monarchies appear increasingly anachronistic in the face of global moves toward democratisation. But the country’s wealth and unique social composition, whereby the strongly traditional national population forms a privileged elite utilising expatriate labour, may allow the system to survive for quite some time, long enough to allow gradual change.

1993 World Recession – Quota Busting – GCC Army Proposal – Bi-lateral Defence Pacts – Port Rashid – Jebel Ali – Saddam Hussein – Background – Traditional Loyalties

Although the United Arab Emirates (UAE), and the Gulf countries in general, were forced into taking an overtly pro-Western stance in the Gulf War to liberate Kuwait, disillusionment with the United Nations (UN) has set in. Particularly, there is disappointment that similar vigour has not been exercised in enforcing UN resolutions against Serbia and Israel. As a result, the UN is often viewed as an instrument of United States (US) foreign policy. Indicative of this view was the lack of UAE endorsement for US air raids on Iraq in early- and mid-1993, with only Kuwait offering unqualified support. Economic stability and modest growth has been forecast for the UAE for the later part of 1993 and throughout 1994 – despite a cut in its Organisation of the Petroleum Exporting Countries (OPEC) quota. However, the favourable conditions rely on an uneventful oil market and peaceful settlement of regional disputes, including Iran’s claim to the islands of Abu Musa and the Tunbs. Growth in non-oil trade is expected to continue with increased diversification of the industrial base and away from the core hydrocarbon industry which continues to account for almost 40 per cent of gross domestic production (GDP). Economy In the face of world recession, the UAE economy looks not only resilient, but positively booming. A current account surplus of US$1.7 billion in 1992, achieved due to higher than expected oil prices, is likely to have been repeated in 1993 with improvement in 1994 to US$2.7 billion as growth in invisibles such as tourism and transport continues. These figures would have been still higher but for an ongoing surge in imports. Forecast growth in GDP of 4.5 per cent in 1993 is set to rise to 5.5 per cent in 1994 as the government encouraged diversification of industry takes place – particularly in Dubai where tourist and business facilities and attractions (especially sporting events) are now well developed. In addition, Gulf War-related payments will end. The continuation of hostility between Kuwait and Iraq, further US raids on Iraq in June 1993, and Iraq-Iran sabre rattling have strengthened the relative position of the lower Gulf as an area for investment. The non-oil economy has

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seen growth rates of 8 to 10 per cent over the past two years. The real estate market is also proving popular with Gulf investors, achieving yields of 10 to 15 per cent. The Budget The federal budget announced in January 1993 does not cover the many items financed by individual emirates, such as defence and oil development, and the many disbursements made by Dubai and Abu Dhabi. Consequently, it can only provide a guide to some areas of expenditure. It entails total spending of Dh18.53 billion, compared to 1992’s total of Dh17.38 billion – which represents a drop in real terms once inflation of 3 to 4 per cent is taken into account. No new taxes or duties were levied despite calls by the State Audit Institution to broaden the tax revenue base by the introduction of a company tax. All deficit is funded by borrowing. According to the ministry of planning, imports in 1992 rose to Dh62 billion – up from Dh51 billion in 1991. Exports rose to Dh809 billion, from Dh77.6 billion, while re-exports fell from Dh13.5 billion to Dh12.5 billion. Energy Oil is of fundamental importance to the economy and this is expected to be true long into the future, with reserves sufficient to last 110 years at 1992 production rates. Oil revenues were expected to remain stable in 1993 despite the February 1993 OPEC cut in the UAE quota from 2.3 million barrels per day (bpd) to 2.17 million bpd – which became effective in the second quarter of 1993. This compares to a 1992 average of 2.4 million bpd when revenues of US$14.4 billion were achieved. The average price of US$18.5 per barrel in 1992 is expected to hold in 1993 and may rise to US$19 per barrel in 1994. This would result in revenue increases to US$14.7 billion in 1993 and US$15.9 billion in 1994. The June 1993 OPEC meeting maintained the January quota levels, but Kuwait declared its intention to produce to capacity as it was not satisfied with its quota level. It was also appreciated that the eventual re-emergence of Iraq onto the scene as an oil producer could result in an entirely different scenario. In February 1993, Iraqi oil minister Usama al-Hiti said that Iraq intends to re-enter the oil market on the basis of the July 1990 agreement, since it was not party to later OPEC agreements. If there is an increase of oil on the market, OPEC would be expected to cut individual countries’ quotas still further to maintain prices around the US$18 per barrel mark. Dubai crude had already dropped below US$16 per barrel by mid-1993 in the wake of Kuwait’s quota busting – hence the likelihood of production cuts being sought.

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In terms of facility maintenance, expansion and repair, it is estimated that the UAE will need to invest some US$8 billion in the hydrocarbon sector to maintain production levels of 2.6 million bpd until the year 2000, or production capacity would decline to 1.8 million bpd. Around US$13 billion would be required to sustain production capacity of 3.5 million bpd. Reserves of more than 110 billion barrels of crude are second only to Saudi Arabia within OPEC; the UAE accounts for 9.5 per cent of the world’s oil reserves and 4.8 per cent of identified gas reserves. Abu Dhabi contains the majority of the UAE’s oil and gas reserves. Oil was discovered there in 1958 and exports were started in 1962. Dubai, which began producing oil in the 1960s, has fast diminishing reserves, down to 350,000bpd by the end of 1992 compared to a peak of 420,000bpd. This level is forecast to remain until the end of 1993, but decline to 260,000bpd for 1994, and run out within 20 years. Abu Dhabi’s Gas Liquification Company, ADGAS, plans to almost double its production capacity from 2.6 million to 5 million tonnes per year in a project scheduled for completion in April 1994. This entails installation on Das Island of a third gas train with a capacity of 2.3 million tonnes per year LNG and 250,000 tonnes per year of LPG at a cost of US$l billion. In 1986 Sharjah began a 10 year US$100 million condensate secondary development programme and in 1993 it began supplying natural gas to Dubai at the rate of 100 million cu ft/day from its offshore Mubarak field via a 87km pipeline, primarily for the Jebel Ali Power Stations. This allows Dubai to use its own gas for a gas injection programme intended to boost production in its diminishing oil fields. Drilling and exploration company International Petroleum Corporation is to recommence drilling in Ras al-Khaimah where disputes with Oman over the shared Bukhas oil field are now reportedly settled. Foreign Policy and Defence Syria’s foreign minister, Farouk al-Sharaa, has been mediating between the UAE and Iran over the islands of Abu Musa and the Greater and Lesser Tunbs which Iran now occupies; they were formerly administered by Sharjah and Ras al-Khaimah emirates respectively. All efforts so far have been unsuccessful, and Iran now claims that its dispute is only with the individual emirate of Sharjah whose nationals lived on Abu Musa, and, according to Sharjah, were evicted by Iran in April 1992. The UAE is using the issue as a means of further unifying the country. The Gulf Co-operation Council (GCC) meeting held in September 1992 condemned Iran’s occupation of Abu Musa. The full meeting was only able to go ahead because Qatar agreed to attend despite its border dispute with Saudi Arabia. In fact, the UAE dispute with Iran is only one of many border disputes in the area

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(all of the GCC countries currently have border disputes), which undermines the GCC as a political force, and negates any moves for a regional security structure. No progress has been made toward Oman’s proposal for a 100,000 strong GCC army, though the UAE in particular could be expected to increase its ties with Oman. Despite the rhetoric of support for bringing Egypt and Syria into a regional security structure, the co-operation between GCC countries still appears far less than the degree required to make the implementation of the Damascus Declaration a viable proposition. It is hardly surprising that it has not been possible to establish a Gulf-wide defence force when the UAE itself does not have an integrated defence. Abu Dhabi’s forces make up the Northern Command, Dubai’s form the Central Command, and the remainder are the Western Command, with Abu Dhabi and Dubai making their own defence purchases and classing it a contribution to the federal budget. In the short-to-medium term, the GCC countries feel safer relying on bilateral defence pacts with the West (US, UK and France). However, their unease with the US underscores a long-term desire to achieve a local self defence policy. Relations with Western allies remain exceedingly strong, with various military facilities available for use which include new land, air and sea facilities in Abu Dhabi. Wider Arab unity and pan-Arabism has been dealt a harsh blow by the side-taking provoked by the Gulf war and disparity in wealth across the region underlies much of the area’s instability. This sense of insecurity has resulted in massive defence expenditures – estimated to average US$2 billion per year for the first half of the 1990s. At the IDEX 93 exhibition alone several billion dollars worth of orders were signed, including the US$3.5 billion order won by France’s Giat Industries for 390 Leclerc battle tanks. Some 60 per cent of this sum is to be spent on offset contracts which will see reinvestment in the UAE by France. Trade and Industry Economically, the GCC countries continue to discuss moving closer together, though progress is far slower than had initially been envisaged. A common import tariff has been proposed, but few co-operative ventures have been achieved. It was proposed that a unified customs tariff should be signed at the 1993 GCC summit with tariffs limited to between 4 to 8 per cent (rather than the general range of 1 to 20 per cent). This progress is needed before a free trade agreement could be signed. As a re-export centre, the UAE has a laissez faire approach, and thus is keener on lower tariffs than the rest of the GCC. Construction is way down compared to the boom in the late 1970s and early 1980s when the region’s infrastructure was built from scratch. Never-the-less, it

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remains an important industry locally which has benefited from the general rise in business confidence in the post-war period. The demand includes investment in real estate, construction of offices, warehousing and light manufacturing as well as tourist facilities including new hotels, road upgrading and infrastructure expansion. The rapid pace of growth in the construction market has led to shortages of materials including steel and cement – despite the UAE having seven cement plants. One reason for this shortage in the face of extensive production facilities is the fact that local plants were obliged to enter into long-term export contracts to maintain operations during the region’s construction slump in the late 1980s. Traditional suppliers, such as Saudi Arabia and Qatar, have cut back to meet their own increasing domestic demand. In the face of such shortages, prices have risen by 25 to 30 per cent. The UAE contractors are urging a reduction in cement tariffs of 4.6 per cent, and some ready-mixed concrete companies are considering combining to import cement. There are also plans for the development of a steel mill with 700,000 to 800,000 tonnes per year capacity. Other projects include consultancy awards for Dh200 million worth of roads in the Liwa oasis, another Dh300 million road project for expansion of the Abu Dhabi to Dubai highway and other road contracts including expansion of the Abu Dhabi to Al-Ain highway. Though the federal budget has cut power and water expenditure, expansion continues at Taweelah and Jebel Ali power stations. In October 1992 the UAE brought into force a Trademark Law which threatens its own billion dollar fake goods business. A new independent Centre for Trade Arbitration was opened in Abu Dhabi in April 1993 to settle disputes between local and foreign companies. Trade is led by Dubai, which established a remarkable transport infrastructure early on and developed into an entrepôt for the entire Gulf. In 1992, total non-oil trade for Dubai rose 23.6 per cent to US$16,303 million. In addition to re-exports, Dubai’s non-oil exports rose 19 per cent to US$900 million in 1992 – including US$400 million base metals and US$200 million textiles. The combined ports of Rashid and Jebel Ali (DPA) continue to increase throughput. This reached 7.86 million tonnes in the first four months of 1993 (up 18 per cent) and was on target to reach 1.5 million 20-foot equivalent units (TEUs) in 1993. The west coast ports of Fujairah and Khor Fakkan were expected to add another million TEUs. Mina Zayed boosted its throughput and the east coast ports of Sharjah and Ras al-Khaimah also competed for business. All of this kept rates down to among the lowest in the world. Dubai especially is playing the role of a hub port for east-west intercontinental shipping with feeder services running out of Dubai. Half of Dubai’s re-exports go to Iran.

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With the ready availability of low air rates, good connections out of the UAE, and excellent trans-shipment infrastructure – including a 250,000 tonne per annum capacity cargo village in Dubai – shippers are also taking advantage of the opportunities for intermodal (sea-air) trade. A main area for outside investment is in the Jebel Ali Free Zone where about 360 companies have started up. About 40 per cent of the companies are involved in manufacturing and assembly and the remainder are involved in warehousing and distribution. Banking The Central Bank of the United Arab Emitates has drawn up plans for a supervision committee with wide ranging powers to oversee the running of the country’s banks. Stricter examination procedures will be introduced for foreign and domestic banks in the wake of the Bank of Credit and Commerce International (BCCI) scandal. Bank for International Settlements Guidelines for capital adequacy will be implemented, covering all banks in the country. While bank results for 1992 are described as good, the UAE is still considered to be over banked. It has not yet opened off-shore banking, which is currently centred on Bahrain, but Dubai has investigated this as a possibility for the future. Three out of four Sharjah banks revised their 1991 results following government debt rescheduling. Payments relating to the Gulf war, which had reached Dh35 billion by 1991 and were expected to have exceeded that during 1992, were financed solely from the local market or by disposal of assets. Agriculture, Water and Fisheries In revenue terms the UAE agricultural sector is insignificant, but it is accorded a high priority in view of the greater involvement by the national workforce, and for its strategic importance. General labour force participation is 7 per cent. The number of UAE farms has increased by 11 per cent on average since 1977. The GCC has drawn up fish protection plans and instigated research to conserve stocks against both over-fishing and environmental problems, particularly oil spills – especially in the wake of the Gulf war. About 50,000 tonnes of fish are caught by the GCC countries annually, primarily for local consumption. Water production has risen 50 per cent since the mid-1980s, mainly from desalination plants as the use of local brackish water has fallen to less than 20 per cent of potable water supplies. The country’s 18 desalination plants produce some 77 billion gallons (mostly in Dubai and Abu Dhabi) and total production had reached 93 billion gallons by 1991. Major expansion continues at the Taweelah plant in Abu Dhabi, and at the 60 million gallon Mushrif reservoir. A Dh865 transmission project was

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scheduled to begin in 1993 to take water from Taweelah on the Abu Dhabi coast to the inland oasis of Al-Ain some 120km inland, where development has outstripped natural water supplies. Outlook In the short term the UAE’s prospects are excellent, with high income, substantial oil reserves and reasonable oil prices. Liberal trade policies and an excellent infrastructure point to the UAE as a first choice site for the location of international companies’ Middle East offices. The Jebel Ali Free Zone provides excellent low cost warehousing and light industry to supply the region, serviced by ample, varied, low cost shipping and air freight services. Standards of living continue to improve, with infrastructure continually being upgraded, and industry expanded to broaden the country’s industrial base – and the Emirates are a profitable place in which to do business with no tax, personal or corporate. Long term, dependence on oil leaves the country susceptible to the vagaries of the market where uncertain factors include re-entry of Iraq, Kuwait’s production policies, and those of the Commonwealth of Independent States (CIS or Russian Commonwealth). There is a high risk of further military conflict, with Saddam still in power (it was the UAE and Kuwait which were criticised by Saddam for over-producing oil). Territorial disputes remain with Iran, whose regional role is still unclear. The only certainty is that defence sales will remain high for many years to come. In all likelihood, the worst case scenarios will not happen, demand for change and change itself will be gradual and modest, and the country’s special trading role will buffer it against fluctuations in the oil market. In addition, its energy based industries such as aluminium smelting, and its down stream hydrocarbon industries will reap the reward of international shortages anticipated in the mid-1990s. With the advantage of ready finance to implement the latest information technology, and a fast growing manufacturing sector, the ‘mini-Hong Kong’ scenario is just as probable – if not more so. The Emirates: a Background Since its formation in 1971, the United Arab Emirates has achieved remarkable success in remaining together as an entity comprising a federation of seven independent emirates – Abu Dhabi, Dubai, Sharjah, Fujairah, Ajman, Umm al-Quwain, and Ras al-Khaimah (the latter joining in 1972). The formation of the Federation was precipitated by the withdrawal of the British from their ‘protective’ role in the then Trucial States. Each Emirate’s Ruler has ultimate control over affairs within his own domain, but the rulers come together to form the Supreme Council which ratifies all new laws in the country.

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New laws are drawn up by the Federal National Council which was reconvened in mid-January 1993 by the President for the first time in two years. This appointed body – which had an injection of new blood from the younger generation in January 1993 – comprises eight members each for Abu Dhabi and Dubai, six members each for Sharjah and Ras al-Khaimah, and four each for Fujairah, Ajman and Umm al-Quwain. The Ruler of Abu Dhabi, Sheikh Zayed bin Sultan al-Nahyan, is the UAE President and Head of State – elected to his fifth five year term in October 1991 by the Supreme Council. The Ruler of Dubai, Sheikh Maktoum bin Rashid al-Maktoum, is the prime minister and head of government. Abu Dhabi, the largest and richest of the emirates, contributes some 70 per cent of the federal budget – this effectively subsidises the poorer emirates. Most of the remainder of the budget comes from Dubai, which receives as much as it puts in. Abu Dhabi is the capital, seat of government and focus of the oil industry while Dubai dominates trade and commerce with its combined ports of Jebel Ali and Rashid, and free zone in the former. Traditional Loyalties Remain Traditional loyalties are to the tribe, and in the absence of political parties, the UAE political system remains essentially tribal. There is some question as to whether the Sheikhs are accessible enough, and the level of federalism desired varies from emirate to emirate, but dissent is minimal – so far as can be gauged in the absence of political parties, and with censorship of the media. The indigenous population of around 382,000 retain a privileged position in society, and their high per capita income has muted any criticism of the system. The majority of the national population are Sunni Muslim, though there are Shi’a families originating from Iran and among the expatriate population. There is fierce inter-emirate rivalry, particularly between Dubai and Abu Dhabi whose leading tribes (the al-Bu Falah and the al-Bu Falasah) last fought a war in 1958. Both are branches of the Bani Yas tribe, though Abu Dhabi also contains other branches. The main potential for instability is not so much inter-tribal but rather is succession-related rivalries within the ruling families. Historically, succession in the UAE’s ruling families was not always by the eldest son; often the member of the ruling family winning public and family acclaim as the most fit to rule would seize, or be thrust into, the post. The different branches of the ruling families are the traditional power groupings in the country. While this system has ensured strong leaders, it is inherently unstable as the legitimacy of a ruler can be contested by rivals. Three of the current rulers are not eldest sons – Sheikh Zayed deposed his elder brother in 1966, Sheikh Saqr of Ras al-Khaimah deposed his uncle in 1948,

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and Sheikh Sultan bin Mohammed al-Qasimi in Sharjah become the ruler after his brother was assassinated by a previously deposed ruler. Sheikh Sultan’s elder brother, Sheikh Abdulaziz, attempted an overthrow in June 1987. Initially Abu Dhabi supported the pretender to the throne, but was persuaded by Dubai and Saudi Arabia to oppose change by force as this would legitimise the continued use of coups in the region to change governments. Sheikh Abdulaziz was made Deputy Ruler, but this title was later removed and he was replaced by Sheikh Ahmed bin Mohamed al-Qasimi – who has not been given the title Crown Prince. This throws some doubt on the line of succession, and hence the potential for instability on the death of the ruler if clear guidelines are not drawn up in advance. When Dubai’s charismatic ruler Sheikh Rashid al-Maktoum of Dubai died in 1990, his eldest son and heir, Maktoum bin Rashid al-Maktoum, automatically replaced him as ruler of Dubai, vice president of the UAE and prime minister. The smooth transition was aided by the fact that Sheikh Rashid’s sons had jointly been running Dubai emirate during their father’s last 10 years when he had been incapacitated by ill health. The steadfast loyalty of the brothers has been reassuring for investors in the region. In Abu Dhabi, Sheikh Zayed’s many sons could dispute succession in view of the Crown Prince suffering a cerebral haemorrhage in 1987. Succession, and the possibility of an unsuitable or incapable ruler emerging are the most likely potential causes for instability, rather than a flare-up of inter-emirate rivalries, or popular demands for change. There have been discussions about more participatory government throughout the Gulf in the wake of the invasion of Kuwait, but few have come to anything, and discussion in the UAE has died down with no real changes. It is not expected that the UAE would take a lead in any such changes, and would, conversely, be among the last to do so. It is unlikely, though, that the UAE could indefinitely resist change around it if the other GCC countries all introduced ‘parliaments’. Another flaw with the system is that the independence of each emirate, and their widely contrasting incomes, has led to very uneven development and a lack of strategic planning, as each emirate puts itself first. Dubai in particular has been criticised for just this by Abu Dhabi which bankrolls the federal budget. While the younger generation are more federally minded, it would appear that loyalty to the tribe still comes first.

1994/95 Balance of Payments Surplus Falls – Strait of Hormuz – Bab Field – Non-oil Sector Growth – ‘Have-nots’ – 100 Years’ Oil Reserves

Despite the oil price fall at the end of 1993 and forecast sustained low prices in 1994, the UAE has managed to maintain a policy of planned growth, with Abu Dhabi increasing its oil production facilities, and Dubai rapidly diversifying the non-oil sector of its economy. However, the poorer Northern Emirates will be hit disproportionately hard by the reduction of capital expenditure resulting from low oil prices. Growing Economy Even with the oil price drop, the UAE’s gross domestic production (GDP) rose by 1.15 per cent in 1993 to reach Dh131.7 billion (US$35.9 billion), with the non-oil sector growing by 4.2 per cent during the year to reach 60 per cent of total GDP for the first time. This figure is likely to be even larger in 1994, given that a weak oil market is expected, putting the onus on the non-oil sector to achieve GDP growth. But while growth in the non-oil sector is forecast to be maintained, it is expected to slow to 3 per cent in 1994 according to the Emirates Industrial Bank. However, the UK’s Economist Intelligence Unit forecasts that real GDP will fall in 1994 and 1995 and the current account surplus fall below US$600 million. The problem is simply that, impressive though the diversification of the UAE’s industrial base may be, it is underpinned by government sector awards of capital and infrastructure projects, which are in turn dependent on the oil market. In the 1994 federal budget, expenditure was set at Dh17.61 billion, 2 per cent up on 1993, with a projected deficit of Dh1.39 billion given forecast revenues of Dh16.23 billion. Given inflation in the UAE of up to 7 per cent, this represents a cut in real spending. It compares to a 1993 deficit of Dh1.71 billion. The oil price on which these estimates were made is not given. Major expenditures include civil servants salaries – 30.3 per cent at Dh5.35 billion; education – 15.7 per cent at Dh2.77 billion; health – 12.8 per cent at Dh2.25 billion; new and existing development projects – 6.8 per cent at Dh1.20 billion; and water and electricity – 6.4 per cent at Dh1.12 billion. In 1993 the balance of payments surplus was down to Dh5.1 billion from Dh11.5 billion in 1992, and consumer spending was up 6.5 per cent on 1992 to

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Dh86.5 billion. Imports grew from Dh64.2 billion in 1992 to Dh67.7 billion in 1993. Re-exports rose by 5 per cent. Adjustments to take into account transactions that contribute to the country’s external accounts, but for which there is no statistical data, suggest a 1993 current account surplus of Dh15 billion. The effect of the weak hydrocarbon sector in late 1993 and during 1994 is expected to have hit public sector finances in the latter part of 1994. There is a great economic disparity between the emirates, essentially based on who has the most hydrocarbons. In 1993 contributions to GDP were: Abu Dhabi 62 per cent, Dubai 24 per cent, Sharjah 7.8 per cent, Ajman 1.2 per cent, and the remaining 5 per cent divided between Ras al-Khaimah, Umm al-Quwain and Fujairah. The average UAE per capita income in 1992 was US$21,000 – ranging from US$32,000 in Abu Dhabi to US$6,311 in Ajman. Abu Dhabi, the richest of the emirates, pays into the federal budget which effectively subsidises the poorer Northern Emirates. Dubai takes out roughly as much as it puts in, counting the cost of its own defence force as part of its contribution. Sharjah does have a profitable gas field (Sajaa), and plans to develop its Kahaif gas deposits; it also has a thriving small-scale industrial estate and its airport and east coast port of Khor Fakkan are also very active. Ajman is effectively a suburb of Sharjah. Fujairah is virtually limited to its successful port and quarry – although its airport has picked up, tourism is growing and it has a small free-trade zone. Fujairah and Khor Fakkan ports trade on being outside the Strait of Hormuz, hence are quicker to access, and strategically more secure. Ras al-Khaimah has a less successful port and airport, with more successful quarrying, cement plants and farming, and Umm al-Quwain is a fishing village with a clinker plant – now out of mothballs with the boom in demand for cement. The main expenditure areas of hydrocarbons and defence are not paid out of the budget, but by the individual emirates themselves. In fact Abu Dhabi is believed to spend more annually itself than the entire federal budget and was estimated to have around US$6 billion to spend in 1993. More drastic falls in revenue are expected in 1994 when oil prices are expected to continue to fall after the Organisation of the Petroleum Exporting Countries (OPEC) decision not to cut its production. They may reach around US$10 per barrel once Iraq’s output returns to the world market – which could happen in 1995, but is not expected for as long as Saddam Hussein remains in power. Abu Dhabi and Dubai share a 2.16 million barrel per day (bpd) OPEC quota, but as Dubai’s production declines, Abu Dhabi is pursuing a US$5 billion programme to boost production to about 2.6 million bpd by 1997. Under this programme the Abu Dhabi Company for Onshore Oil Operations (ADCOO) has increased its production facilities at the Bab oilfield, boosting its oil production capacity to 250,000bpd by January 1994 in the US$400 million second stage of

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the field’s expansion. Expansion work was also completed offshore on the new Jarn Yaphour field in early 1994. Funds are reported to be allocated for refinery expansion and a petrochemical scheme. The Ruwais refinery berth expansion project and a liquefied petroleum gas tankage project for Abu Dhabi Gas Industries were expected to be awarded during 1994. The UAE has also announced plans to sell a 49 per cent share in the Abu Dhabi based Emirates General Petroleum Corporation. In Dubai, the emirate has established a new parent company for its oil interests, Emirates National Oil Company (ENOC), initially looking at UAE projects in oil storage, marketing, trading and technology, and later becoming international. On the quiet east coast emirate of Fujairah, Metro Oil of Athens plans to set up a 35,000bpd oil refinery, producing heavy bunker fuel for shipping which takes advantage of Fujairah’s strategic location outside the Strait of Hormuz. Trade and Industry Growth in the non-oil sector compensated for any fall in the oil and gas industries during 1993, with continued high spending on infrastructure boosting construction – a trend expected to continue through 1994. Trade, real estate, manufacturing, finance, retail and construction showed average growth of 4 to 5 per cent per annum. Growth in non-oil GDP was 4.2 per cent in 1993, and what is particularly interesting is that the growth in manufacturing was due to private investment, according to a report by the Emirates Industrial Bank. Continued high levels of infrastructure spending have boosted construction activity and this boom is forecast to continue for another 18 to 24 months based on projects approved or initiated, though some commentators suggest the market will become overheated in 1995. Non-oil income of Dh3.25 billion is scheduled to account for 20 per cent of budget revenues in 1994 according to Ahmed al-Tayer, minister of state for financial and industrial affairs. Of this, some Dh2 billion will come from the finance ministry’s investments and the balance from local fees including power and water, health and justice ministries. This compares to Dh2.75 billion in non-oil revenues in 1993. Hydrocarbons Abu Dhabi’s oil reserves of 92.2 billion barrels are more than 20 times as great as neighbouring Dubai’s 4 billion barrels. But whereas Abu Dhabi produced around 1,784,000 barrels per day (bpd) in 1993, which is below its maximum capacity, Dubai produces at its maximum capacity. Dubai’s rate was some 364,000bpd in 1993 and this is expected to fall to less than 300,000bpd in 1994 and possibly as low as 260,000bpd. Oil revenues fell 3.3 per cent in 1993 and oil

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accounted for just 39 per cent of GDP that year, but they remain the main source of revenue for Dubai and Abu Dhabi. Oil prices fell 20 per cent in 1993. Crude oil production over the next two to three years was put at US$8 billion by a US embassy report. In 1993 there were shortages of both steel and cement, and plans to build a 700,000–800,000 tonne per year capacity steel mill were considered, but shelved because of fears about long term over-capacity – as was seen in the UAE cement industry in the 1980s. The government aims to keep spending within budget, but the effects on the economy from lower oil prices were just starting to filter through by mid-1994. Eagerly awaited plans for a US$900 million expansion of Dubai Airport are currently on hold. By April 1994 Dubai Aluminium Company (Dubal) announced that its entire production for 1994 – just under 250,000 tonnes – had already been sold – accounting for a third of Dubai’s non-oil exports. The company is now planning to increase capacity by 100,000 tonnes and expand into the European market. The project will also increase Dubal’s power generating capacity by 50MW. Feasibility studies were being carried out in the last quarter of 1994 on plans by Etisalat, the UAE’s telecommunications utility, to have its own satellite in orbit by 1997 or 1998. Over two thirds of manufacturing units in the country are in Dubai and Sharjah. In January 1994 Dubai’s Economic Department issued 424 licences for new businesses, compared to 347 in January 1993. The UAE had a total of 1,528 manufacturing establishments in operation in 1993, Dubai having the most at 585, up 19 per cent on the previous year, Sharjah saw a 38 per cent increase to 466, and Abu Dhabi saw a 25 per cent increase, but a total of just 207. The evidence suggests that private sector manufacturing for the domestic market is now nearing saturation given existing capital resources, management and skills. But in the more regionally oriented Jebel Ali Free Zone, where there are now 625 companies, the government is pushing for investors to establish assembly and manufacturing operations – such as the ACER computer assembly plant started in June 1994 to supplement distribution activities. The Western Oil Company of India started operations at its new oil waste recycling plant in Jebel Ali during 1994 with plans to produce up to 25,000 tonnes of base stock, with a second phase of the plant bringing production up to 60,000 tonnes by the end of 1994. Investment in Jebel Ali had reached US$1.1 billion by the end of 1994, compared to US$600 million in 1990. Banking and Finance A dynamic banking sector continues to consolidate with some banks merging, and growth in assets speeded up, though at less than 1991’s rate of 10 per cent.

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The Central Bank of the United Arab Emirates announced in April that total assets of the country’s 47 banks had increased by 4.6 per cent during the year to reach Dh161.6 billion and the emirates have no official foreign debt. The absence of an organised stock market means half these assets are invested outside the UAE – but the UAE’s unofficial stock market soared in 1993 with speculative buying of Etisalat shares. The Central Bank has clarified its bank lending rules, and is aiming to provide guarantees for bank deposits. Once again Dubai is looking at the possibility of becoming an offshore banking centre, which could result in an influx of offshore banks now based in Bahrain. However, further strengthening of the legal framework would be required. The legal infrastructure of the UAE has already been tightened up since the Bank of Credit and Commerce International (BCCI) crisis, making the Emirates a more secure and hence attractive place for foreign investment. The BCCI affair is continuing however, with the Abu Dhabi authorities saying their offer to creditors of US$1.7 billion for no further liability should be accepted or it will consider counter-suing for its own US$7 billion in claims. This would leave nothing for other creditors. Action against the president, Sheikh Zayed bin Sultan al-Nahyan, has been dropped. At the end of March 1994 the finance and industry ministry established a special department for the protection of intellectual property rights, covering piracy of books, tapes, computer software and other products. This follows on from the introduction of trade mark protection in 1993 stimulating the software industry in particular which largely has its regional base in Dubai. Dubai has established itself not only as the trading heart of the UAE, but its combined ports of Rashid and Jebel Ali (under the Dubai Ports Authority) figure highly in the world’s top 20, its international airport is one of the world’s busiest (5.67 million passengers and 218,264 tonnes of cargo in 1993), and the emirate has performed an excellent marketing job of presenting itself as a cosmopolitan base from which to do business in the Gulf. And it is not just marketing hype – Dubai has delivered on ease of restrictions and level of communications, and long stolen Bahrain’s position as first choice for internationals to establish a regional base. The Dubai Ports handled a record 24.14 million tonnes of cargo in 1993, a rise of 12 per cent over the previous year, with more moving to Jebel Ali to relieve congestion in Port Rashid. Port Rashid is increasing the number of gantry cranes from 17 to 23 by mid-1995. The re-export trade with Iran reached some Dh3.29 billion in 1993 when re-exports rose by five per cent, and trade in consumer electronics with Russia and the former Soviet states is now worth about US$1 billion a year, with daily flights from Dubai to the CIS.

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The UAE joined the General Agreement on Tariffs and Trade (GATT) in April 1994 – which should accord well with Dubai’s free trade policies. It remains to be seen how this will fit in with Gulf Co-operation Council (GCC) tariff harmonisation which has progressed slowly, especially its subsidies for farming. Intra-GCC trade is expected to benefit from the December 1993 agreement on unified trade tariffs, with the UAE a major beneficiary as the region’s main re-exporter with the lowest tariffs (1 to 4 per cent compared to up to 30 per cent in Bahrain). The unified tariff of 10 per cent is not likely to appear in practice during 1994 and moves toward a real common market are expected to progress slowly. Agriculture The more mountainous, hence marginally wetter Northern Emirates of Ras al-Khaimah and Fujairah, and the oasis region of Al-Ain are the main agricultural areas, the latter comprising 14,000 farms with a total production capacity of 500,000 tonnes. Production includes fresh vegetables, some fruit, particularly dates, and dairy products from the country’s largest dairy herd at Digdagga. The emirates are looking at ways to meet the growing demand for power and water, with the main option being desalination plants and associated power plants utilising waste heat. In addition, the federal budget includes spending of around Dh350 million (US$95 million) on power contracts to supply an extra 50MW for the Northern Emirates. A study is also being examined on the feasibility of privatising the electricity and water networks in some areas. Subsidies are to be reduced, raising consumer prices for non-nationals from 7.5 fils to 10 fils per KWh – compared to a production cost of 25 fils. In Sharjah a 96MW gas turbine installed in the Layyah power station in 1994 will have boosted generating capacity to 728MW, following installation of a US$27 million 40km gasline from Sharjah’s Sajaa gas field. A five million gallon per day multi-stage flash desalination plant and two waste-heat recovery boilers are also being installed in a contract valued at up to Dh250 million. In Dubai, the Jebel Ali E power station is being converted to a combined cycle operation under an US$80 million contract to install a 100MW steam turbine and two waste heat recovery boilers, due for completion in mid-1996. In May 1994 the Dubai Electricity and Water Authority (DEWA) awarded a contract to upgrade two gas turbine generators to raise DEWA’s installed capacity by 5.8 per cent from 1,859MW to 1,967MW. DEWA is also to add a new Dh32 million, 10 million gallon water reservoir to its 20 million gallon reservoir at Jebel Ali. A 300MWgas turbine project at Al-Awir could be expanded to 1,200MW.

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Tourism Under Dubai’s leisure facilities expansion programme, the emirate opened a series of parks including the Dh96 million beachfront Al-Mamzar Park located by the Dubai -Sharjah border, and the Dh109 million 96 hectare Creekside Park whose facilities include an 18 hole mini-golf course. The private sector is also getting in on the act – the Hareb Group of companies has launched a Dh60 million leisure development of Dubai Creek, comprising marina, gardens, restaurants, wedding halls, chalets and other leisure facilities. Although a spate of hotel building has been primarily at the low-cost and low-size end of the market, it has also included a new Marriott Hotel, a Holiday Inn and the 242 bed Forte Grand Jumeirah Beach Hotel opened during 1994, further boosting visitor facilities. About 85 per cent of rooms available in the emirate are deluxe or first class categories, and these sectors also receive the highest occupancy – often with no rooms available in Dubai during major trade shows, exhibitions and conferences. It is the business-cum-leisure visitor that is being particularly sought, such as the conference industry. Dubai currently gets some 200,000 tourists per year. Federation is Solid The UAE nationally acts as one, even though the individual emirates may have fine nuances in their outlook – such as their approach to their bigger neighbours Iran and Iraq and relations with the GCC. Dubai and Abu Dhabi each have their own military forces which pointedly emphasise the rivalry and independent spirit of each. But despite the differences between Dubai and Abu Dhabi, the individual emirates are committed to the federation and there appears to be no constituency in any emirate for secession. In Dubai the sons of former Ruler Sheikh Rashid jointly run their emirate very ably, with the eldest, Maktoum bin Rashid al-Maktoum as the actual Ruler. In Abu Dhabi the president, Sheikh Zayed, though active, is quietly bringing the less dynamic Crown Prince Sheikh Khalifah more into affairs of state. The likelihood of internal unrest such as a fundamentalist upsurge in the UAE is seen as very remote – the vast majority of ‘have-nots’ in the country are expatriate labourers who are pleased to have a job, while the average national has a privileged position in his society. However, the UAE population has risen rapidly, to reach 2.08 million in 1993, with a workforce of around 794,400 people. In the less wealthy Northern Emirates particularly, employment opportunities are growing scarce in the government sector, while the private sector often entails competing unsuccessfully against more experienced, or lower paid, foreigners.

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Civil servants in Ras al-Khaimah went on strike to protest at frozen pay and declining conditions, indicating dissatisfaction with declining prospects. Wages in the UAE tended not to rise after years of negative or no inflation, but by early 1994 inflation in the country hit 6.5 per cent, and was expected to have risen to 7 per cent by the end of the year. Regional Relations On a regional basis, the UAE is a member and strong supporter of the Gulf Co-operation Council (GCC) (with Bahrain, Saudi Arabia, Kuwait, Qatar and Oman). The GCC can already claim many advantages over the European Union (EU), by having a common language, religion, social outlook and more similar levels of prosperity, with relatively easily converted currencies. Nonetheless, differences of opinion between member states of the GCC are more noticeable than those between individual emirates, as each state pursues its own national interests, and in that forum the UAE provides, a more liberal counterweight to Saudi Arabia, politically, economically and socially. The UAE is more conciliatory towards Iraq‘s former allies – the Palestine Liberation Organisation (PLO) has opened a trade office in Dubai – and in many respects is on better terms with Shi’a Iran than Saudi Arabia – notwithstanding the continuing dispute over the island of Abu Musa and the Greater and Lesser Tunb Islands. But this dispute does sour relations with Iran, which occupied Abu Musa and deported the inhabitants who were citizens of the UAE (Sharjah). The inhabitants were later allowed back, but Iran has now appointed a governor of Abu Musa island to emphasise its claim. This latter move followed the UAE declaring its territorial waters to extend 12 miles from its coastline, and a 200 nautical mile economic zone applying to the mainland and islands – including Abu Musa and the Tunbs. As an inhabited island within the oilfield area, and strategically located in the Gulfs ship-ping lanes, Abu Musa is more important than the smaller Tunbs. The UAE is seeking a United Nations (UN) assessment of the situation, and may apply to the International Court of Justice or United Nations Security Council over the matter. International opinion – and the United States government in particular – would be expected to side with the militarily far weaker UAE as the victim of aggression, especially should the dispute escalate to hostilities. But both sides are keen to avoid this scenario as there are strong commercial and family ties on both sides of the Gulf, and little immediate gain from military action. Iran is the UAE’s biggest re-export market, and these exports were once again growing during 1994, and for Iran, dhow traders from Dubai provide an unofficial source of ‘walk in’ imports which might otherwise encounter US technology export restrictions.

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Given its lack of political unity, the GCC is not seen as a force able to back any dispute with Iran – even if it had the military capability – which it does not. But the GCC countries did stand by Kuwait (eventually), and as the moves toward economic integration grow, so political and military co-operation will too. On Yemen’s civil war, the UAE, like Saudi Arabia, sides with South Yemen – nolonger Marxist – rather than the more fundamentalist inclined tribal north. It was the first to condemn North Yemen for initiating fighting in Yemen’s civil war, but has held back from recognition of the south’s declaration of secession pending the Arab League meeting. Defence Currently the UAE is more reliant on its western allies, with whom it co-operates militarily, than its GCC neighbours as guarantors of security. But the USA is reportedly encouraging upgrading of the GCC’s Peninsula Shield force, based in Riyadh, to a unified force with units from each member state, so that the region is ‘weaned’ from military dependence on the USA. An international coalition like the one which ousted Iraq from Kuwait would be unlikely to be repeated. Iraq remains a threat, Iran is a current antagonist and potentially far greater threat, and instability in the Yemen(s) is cause for concern. Even with the other GCC allies there are border disputes – not to mention inter-emirate rivalry. Hence, the UAE is a major arms purchaser. The UAE’s offset programme established in 1990 requires 60 per cent of the value of the imported content of overseas sourced procurements for the armed forces to be offset – and for some civil procurements where the imported content exceeds US$10 million. Contracts covered so far include a US$3.5 billion contract in 1993 for Leclerc battle tanks from Giat Industries, a US$60 million contract for McDonnell Douglas to supply Apache helicopters, and a US$300 million project to Westinghouse for an automated command and control air defence system. Offset credits can be used to establish viable businesses or carry out contracts/projects which would not otherwise have been undertaken. About US$120 million is reported to have been invested so far on 24 projects out of 600 project proposals. Outlook The future of the Emirates as a whole is assured, based on Abu Dhabi’s 100 years-worth of oil reserves alone. This situation would not suit Dubai which is determined to build a non-oil economy of its own despite the low margins on transit trade and tourism. It is striving hard to establish an information technology manufacturing centre in Jebel Ali and has begun to have some success.

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In the short term, falling oil revenues could leave a shortfall in income required to meet spending commitments and economic growth plans. This could be met by drawing on foreign assets or, later, could conceivably result in the introduction of tax, which would hit the freewheeling nature of Dubai in particular, even if it did provide a welcome renewable source of non-oil government revenue. Now that Bahrain has set the precedent of full foreign control of companies – not just in free zones such as Jebel Ali – this too could become an option. Dubai’s self fulfilling prophecy of success appears to be maintaining growth and expansion of the non-oil sector, while Abu Dhabi’s wealth provides it (and ultimately the country) with the underlying economic well-being to be able to ride out what is seen as a temporary period of low oil prices. Building up a regional alternative to the Western allies will be expensive, and a further drain on resources, but one that would be expected to be put as a priority to ensure the country’s security. The internal situation is stable, and even in the unlikely event of there being a disputed succession to one of the Rulers, it would be expected to be decided within the Ruling families and not affect the business community. So far as can be seen in a country with no political parties and a censored media, there is no real dissent in the country. However, the poorer Northern Emirates will be worst affected by de facto cuts in federal funds and projects on which they depend, and Abu Dhabi and Dubai will have to integrate their successful economies more fully with those of their less wealthy neighbours to avoid discontent and ensure the success of the federation whose prospects are currently so bright.

1996 Loosely Structured Alliance – Oman-Qatar Axis – Qatar Coup – Employment Imbalances – Tourism Growth

The seven emirates that make up the United Arab Emirates (UAE) have continued to withstand the pressures of more straightened times better than many of their neighbours, thanks mainly to Abu Dhabi’s considerable enduring oil stocks and to Dubai’s imaginative investment programme in alternative economic strategies. There remain, however, enough ghosts of the past and pre-sentiments of the future within the Gulf region to ensure that the country will not get complacent again. A Stable Status Quo The UAE has always been a loosely structured alliance between the ruling families of each emirate, with the major players being Abu Dhabi and Dubai, followed by Sharjah. Executive positions are granted a five year tenure and are, theoretically, up for renewal in 1996, but any significant changes from the current status quo are unlikely. Sheikh Zayed bin Sultan al-Nahyan of Abu Dhabi is likely to remain President and Sheikh Maktoum bin Rashid al-Maktoum Prime Minister. Sheikh Maktoum’s brother, Sheikh Mohammed, the UAE’s minister of defence, was appointed crown prince of Dubai in January 1995, an indicator of his eventual succession and a recognition of the greater role he is playing in day-to-day political affairs. The Gulf Perspective Relations with Iraq and Iran and the continuing peace process in Israel continue to dominate Gulf affairs. In a speech in Dubai, Sheikh Mohammed indicated what many observers took to be a shift in the UAE’s position on Iraq. He drew comparison with the slow progress being made on the Israeli question and the continuing sanctions enforced against Iraq. Leaning away from the US line, he spoke of the need for building bridges and of the necessity of re-integrating Iraq within a strong pan-Arab grouping. Within the context of the Gulf Co-operation Council (GCC), this was taken as a further indication of the UAE’s alignment with the Oman/Qatar axis and a shift away from Saudi Arabia, Kuwait and Bahrain, where distrust of Baghdad remains dominant. A similar trend could be noted when Mr Ahmed Humaid

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al-Tayer, the minister of state for financial and industrial affairs, attacked proposals for a Middle East development bank and a Middle East common market. In an interview with the government-run al-Ittihad newspaper, Mr al-Tayer said that such overtures were unacceptable while the current Israeli peace talks remain log-jammed. He suggested that such proposals may even be against Islamic law while Israel occupied Arab lands. There remains within the GCC a clinging suspicion that Israel continues to benefit from the peace process at the expense of Arab aspirations. While reconciliation with Iraq remains to be fully achieved, the seemingly interminable wrangle with Iran over the islands of Abu Musa and the Greater and Lesser Tunbs continues. The temperature rose somewhat when US defense secretary William Perry, during a tour of Gulf states, described these as ‘occupied’ and went on to accuse Iran of stockpiling chemical weapons there. On the wilder shores of this issue there were reports in the foreign press of Iranian nationals being landed on UAE shores. UAE officials did not seem unduly worried and commendably chose not to be drawn into a talking war. The UAE seeks to have the dispute resolved by the International Court of Justice or perhaps through the United Nations Security Council. Meanwhile, Mr Ali Mohammad Besharati, Iran’s interior minister, called for further friendly bilateral talks on the issue. With both Iraq and Iran potentially unstable in the region, defence remains a key priority for the UAE and other GCC states. Moves for a GCC defence force remain to be cohesively formulated. On the one hand, substantial cost benefits would be achieved, on the other there are misgivings of a Saudi dominated hegemony. However, critics of the status quo suggest that over-reliance on the future aid of US and other western allies to protect oil sources is short sighted. Again, indicators are that UAE, Qatar and Oman will resist any immediate pressures on the independence of their forces. Since each Emirate operates its own defence procurement, further rationalisation would be difficult to achieve. Indications from IDEX 95 (military equipment exhibition) held in March in Abu Dhabi were that future arms contracts would have strong offset venture components linked with them. Trade at IDEX was sluggish, although an up-coming US$4 billion deal for 80 attack aircraft is keenly anticipated by US, European and Russian suppliers. Internally, the UAE has remained resistant to the forces of unrest that neighbouring states have suffered. This was partly due to economic buoyancy and partly to a delicate balancing act between acceptable social change and maintaining traditional Islamic virtues. The UAE has a significant Shi’ite minority which could be influenced by fundamentalist pressures, but there appear at present to be no vehicles for such pressures to emerge. The decision to try a

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wider range of offences in sharia courts rather than through civil jurisdiction pre-empts conservative fears. The UAE is well aware of possible tensions between non-national resident communities that have occurred elsewhere in the Gulf and maintains effective vigilance. The bloodless June 1995 coup in neighbouring Qatar by Sheikh Hamad bin Khalifa al-Thani, ousting his father Sheikh Khalifa may have caused tremors in Saudi Arabia but was cautiously welcomed by the UAE. Sheikh Hamad has been in effective control of Qatar in recent years and little change in the direction of foreign policy is expected. Steady Economic Expansion The UAE’s economy continued to withstand the pressures of stagnant oil prices and a falling dollar. With the dirham pegged to the dollar at Dh3.671, there is added pressure on imports and a depreciation in real terms on revenue. The UAE’s oil quota under the guidelines of the Organisation of the Petroleum Exporting Countries (OPEC) at 2.2 million barrels per day (bpd) was slightly exceeded in the early months of 1995, and prices were bracketed within the US$17.30 to US$17.90 range, short of the US$18.00 baseline that some analysts had hoped for. Sustainable capacity was estimated to be 2.6 million bpd. However, overall oil revenue for 1995 was expected to reflect a similar decline of around 4.4 per cent which was seen in 1994. Contrary to forecast budget expectations, 1994 saw an overall trading surplus of US$381 million, as opposed to a projected deficit of US$719 million. According to the Central Bank of United Arab Emirates figures half-yearly public spending was US$2.94 billion, almost all of which was current expenditure. A combination of increased exports from the non-oil sector of the economy and a continued government curb on the state exchequer is reflected here. Inflation, which caused a measure of concern in 1994 when it reached 7 per cent, was expected to fall to 4 per cent by mid-1995. Restraint rather than retrenchment seems to be the watchword. The UAE is determined not to buy its way out of a straightened market, but nor will it put the brakes on necessary development. Although Abu Dhabi’s oil reserves are secure for at least 100 years, those of Dubai will be exhausted within 10 to 20 years and there is little possibility of any new discoveries. The UAE knows that it must develop an alternative underpinning economy. The non-oil sector of the economy registered growth of 7 per cent in 1994 and forecasts for 1995 anticipate an equivalent performance. The announced budget of 1995 contained a surprise increase of 1.9 per cent in government expenditure – in previous years the line has been set at parity. The UAE can expect revenues derived from the unified import tariff of 4 per cent

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(introduced in 1994) to generate some US$468 million, accounting for approximately 10 per cent of federal requirements – a fourfold increase on the previous tariff structure. The tariff move also paved the way for a GCC free trade zone and possible concessionary links with EU markets in the future. In addition, new levies have been raised on government services such as power supply and health provision. These have been targeted at the non-national section of the population (about 80 per cent of total). The measures are two pronged in intention – additional revenue plus a disincentive to foreign workers. The UAE seeks to redress the employment imbalance between nationals and ex-patriots and reduce the non-national population by some 10 per cent over the next two years. In the 1995 budget statement, the Mr Ahmad al-Tayer, repeated assurances that the introduction of income and sales taxes were not on the agenda for the foreseeable future Within a global context, the UAE austerity measures look generous enough. Despite the fact that the announced increase in spending represents, in real terms, a cut of around 3.2 per cent. Such savings will be achieved by more stringent financial control and increased competition at tender. Confidence has returned enough for a decision to have been made at last on the upgrading of the refinery facility at Ruwais, a major move following five years’ deliberation. The first stage, a contract valued at US$1.8 billion, has already been tendered for and a decision is expected before the end of 1995. The planned new facility will not only allow an increase in production volume but will also upgrade product quality. Completion is expected within five and a half years. The second stage of the project, scheduled to run two years behind the first, is still in planning. Gas production in 1995 was set to increase considerably following the completion of a third liquefaction unit at Das Island, now on stream. Estimated production volumes were a 1.3 million cubic metres (mcm) per day rise on the 1994 figure of 3.5mcm per day. In addition, new gas deposits found at Kahaif in Sharjah are entering full extracting phase and set for profitability in 1997. Banking and Markets The spectre of the failed Bank of Credit and Commerce International (BCCI), has been finally laid to rest, at least officially. Abu Dhabi agreed a settlement of US$1.8 billion with liquidators Touche Ross in return for all other claims to be dropped, with further payments in escrow of US$250 million spread over the next three years. Touche Ross will, however, continue with their case of negligence against the Bank of England, but it is unlikely that further developments in the saga will erode confidence in UAE banking. The overall 5 per cent rise in

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banking assets seen in 1994 was expected to be smaller in 1995, reflecting a more cautious market. Underlying the financial markets in the UAE is the continued debate about privatisation and the creation of an official trading floor. Both Sheikh Hamdan, minister of finance and industry. and Mr Ahmad al-Tayer have indicated that the UAE intends in the long run to move in this direction. Certainly, the consensus is that private capital will play an increasingly significant role in development projects – the Abu Dhabi National Oil Company (ADNOC) is currently seeking a major overseas partner in a US$1 billion petrochemicals complex. State-run UAE companies are increasingly being asked to be financially self-reliant and joint capital projects, combined at times with offset agreements, are the mood of the moment. A public stock market, currently being assessed with the aid of Canadian advisors, seems also a matter of time. The UAE recognises that it has the capacity to challenge Bahrain as a market centre in the Middle East. Other Developments In the construction field, two other major projects have the go-ahead – a new mosque and the extension to Dubai airport. Both contracts are ticketed around the US$500 million mark. Etisalat announced a US$388 million expansion to fulfil growing business telecommunications needs. Hotel and leisure development is still strong, particularly in Dubai and Sharjah; however demand for new housing has slackened following the boom in the early 1990s. Dubai has been quick to identify the UAE as a new, up-market, safe and tax-free tourist destination, one that also has potential as a medium stay stop-over on European routes to the Far East. Premium sporting events such as international cricket tournaments in Sharjah and horse-racing in Dubai (greatly supported by the Maktoum family) have given the UAE an international prestige. The visitor growth rate of 20 per cent in 1994 was expected to fall slightly in 1995 and achieve a steady 10 per cent expansion by 2000. Currently, the visitor-base is from within the Gulf, the Indian sub-continent and Europe, but there are initiatives to expand the country’s profile in the US and other markets. Peripherally, the UAE’s free trade zones, particularly Jebel Ali, continue to attract investment and generate income, much of it in the form of re-export marketing within the Middle East. Current investment stands at around US$3 billion, although major international companies have yet to use the zones as major production bases as the UAE hopes will happen in the future. In other areas of industry, the Dubai Aluminium Company (Dubal), announced plans to increase production by 40 per cent over the next two years

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under a joint stand-alone financing arrangement with Merrill Lynch and the National Bank of Dubai and the Emirates Bank International. The UAE’s major cast metals markets continue to be Japan, Taiwan and Korea. Outlook The UAE’s policy of conservative expansion has served it well in the past and there is nothing on the current political or economic horizon that suggests any need for a change of tack. In an increasingly competitive world economy, he who pays the piper calls the tune, and the UAE is fully aware of that fact.

1997 Healthy Economy – Tourism – Demand for Power – Saadiyat Development – Iranian Expansionism

The United Arab Emirates (UAE) boasts an enviable economy, which, combined with political stability, has led to yet another year of growth. Abu Dhabi’s oil and Dubai’s commercial flair are a perfect partnership and have made the tiny country into a magnet for business and trade. Strong oil prices have provided an unexpected boost to the economy but even a drop in oil prices would have been compensated for by growth in trade and profits from increasingly successful diversification. The 1996 budget reflected the healthy state of the UAE’s economy. The federal government announced a budget which allows for spending of Dh18.25 billion (US$4.97 billion) over the year, an increase of 1.7 per cent over the previous year – and a 3 per cent rise in revenue to Dh17.40 billion. The budget deficit was projected to fall by 18 per cent to Dh850 million, largely as a result of better than expected oil revenues. The individual emirates – primarily Dubai and Abu Dhabi – were put down to contribute Dh12.7 billion, three-quarters of the annual revenue. The government is aiming to eventually eliminate the budget deficit by increasing revenue rather than cutting spending. Further growth was expected for 1996/97. The planning ministry forecast in March 1996 that gross domestic production (GDP) would rise by 5.5 per cent in 1996 – a figure that did not even take into account the higher than expected oil prices during the first two quarters of 1996. In 1995, GDP grew by a record 6.5 per cent to Dh143.5 billion while total public spending reached 40 per cent of that figure at Dh55.9 billion. IMF Report In spite of this impressive performance, the International Monetary Fund (IMF) called on the UAE to practise more budgetary restraint by cutting subsidies, reducing the size of the state bureaucracy, and introducing some tax. The report was based on analysis of the UAE’s budget deficits which are constantly questioned by local economists who suggest that due to the lack of public information on the finances of Dubai, Abu Dhabi and Sharjah, and the strong link up between the personal fortunes of the Emirs and the state finances, the UAE may actually be performing at a surplus rather than a deficit.

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Oil and Gas Abu Dhabi’s oil capacity provides the capital drive for much of the UAE’s expansion, and with huge reserves and big development plans both in the oil and gas sectors this shows no sign of changing. In June 1996 the UAE agreed to maintain its oil production quota at 2.16 million barrels per day (bpd) thus leaving it unchanged since September 1994. The UAE’s policy has been to strictly comply with the Organisation of the Petroleum Exporting Countries (OPEC) quotas. The Abu Dhabi Company for Onshore Oil Operations (ADCO) is the largest oil producing company in the UAE producing around 950,000bpd. Dubai lags behind with a total output of about 300,000bpd; its oil production has been steadily falling in recent years. In 1995 Abu Dhabi supplied an extra 1.9 million bpd to make up the shortfall. Abu Dhabi is moving ahead quickly with a huge programme to develop its energy resources. It is planning to raise crude oil production capacity to 2.5 million bpd in 1997 and to increase volume export by exploiting its huge gas capacity which will also ensure feedstock for a planned petrochemicals plant at Ruwais and for water desalination and power generation. The emirate also intends to upgrade its petrochemicals and refining facilities at Ruwais with the US$1.5 billion petrochemicals plant and a US$1.8 billion expansion of the refinery. The UAE is a fertile ground for foreign companies seeking local contracts. Snamprogetti of Italy won a US$1.00 million contract to expand capacity at Abu Dhabi’s Shahil field from 30,000bpd to 85,000bpd. The Scandinavian group Borealis in a 60/40 joint venture with the government won the US$1.5 billion contract for the Ruwais petrochemical plant; France’s Technip Geoproduction carried out a feasibility study for the US$1 billion phase two of the onshore gas development project for the Abu Dhabi National Oil Company (ADNOC). In Dubai, an Indian firm, Southern Petrochemicals, announced plans to build a US$165 million fertiliser plant at the Jebel Ali Free Zone and it was announced that a new US$45 million unleaded petrol plant is also to be commissioned at Jebel Ali in late 1997. Plans are going ahead for a 500 kilometre pipeline from central Oman to Sharjah which should meet growing domestic demand for gas which is forecast to rise by 1.2 billion cubic feet per day (cfpd) over the next six years. The project is being run by Amoco of the US which estimates the pipeline could be operational by as early as the end of 1998. Trade Although Abu Dhabi undoubtedly wields the bigger stick when it comes to oil, it is Dubai which excels in entrepreneurial matters. The re-export trade is booming, tourism is becoming a real force in the economy and the Jebel Ali

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Free Zone continues to be a crucial centre. Imports to Dubai rose by almost 5 per cent in 1995 to Dh56.64 billion but this was offset by a massive leap of 43 per cent by non-oil exports – helped by a large increase in base metal sales after aluminium prices went up – and another jump of 22 per cent for re-exports. There had been some worry that the re-export trade would suffer as a result of a large drop in sales to Iran, traditionally Dubai’s biggest re-export market. The question now is whether Dubai’s domination of the region in trade will be challenged by Abu Dhabi’s plans to build a US$3 billion free trade zone of its own on the island of Saadiyat. Abu Dhabi says it doesn’t want to rival Dubai but naturally there will be a strong element of competition. Saadiyat will include massive storage facilities, a new port and airport and commodity trading exchanges. It will be a free trade zone with no taxes or custom duties. The official decree establishing the zone was announced in July 1996 when the free zone authority’s board of directors was also announced. The free zone will have dedicated storage facilities for 67 basic commodities including precious metals, gems and grain, ores and oils as well as food stuffs. There will also be several specialised trading floors and exchanges. A six kilometre bridge will link the zone to Abu Dhabi city. Sharjah is also pressing ahead, with work on a US$100 million World Trade Centre due to start at the beginning of 1997. The centre will include a large exhibition complex and is designed to complement a new free-trade zone which was set up in June 1996. Tourism One area where Dubai holds an unparalleled lead is in tourism. When it first began its drive to attract tourists to the Emirate many thought it was chasing the wrong dream, but the cynics have been proved wrong by the annual growth rate in visitors of between 10 and 15 per cent. Hotel rooms are now difficult to find in spite of the fact that the number doubled to 10,400 between 1988 and 1994. Tourism revenue is projected to provide 20 per cent of the Emirate’s GDP by the end of the century. To fulfil this quota, the government is encouraging the addition of another 5,000 hotel rooms. Tourism brings big benefits to the retail trade as well as hoteliers as one of the major attractions in the Emirate is its good duty free shopping. Typical of the projects underway to cater for tourists, is the Chicago Beach Hotel complex. Its focal point will be a tower hotel which is being designed in the shape of a sail. There will also be a tourist hotel with 600 rooms all of which have a sea view, a conference centre and an aqua park. The government is keeping pace with other projects to develop the sector, including the Dh100 million wonderland water theme, a fourth golf course, and more investment in beach resorts.

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Aviation One of the crucial factors in the development of trade and tourism is transport and here Emirates Air (owned by Dubai) has made a significant contribution. It has consistently expanded its services with a new route to Melbourne via Singapore launched in June 1996. It has also signed a new agreement for its first Boeing 777. In 1995 it carried more than 2.5 million passengers and net profit for 1995/96 was projected at around US$20 million – much of the gross profit has been ploughed back into the company. In contrast Gulf Air, which is partly owned by Abu Dhabi, lost ground. It cancelled the purchase of new aircraft and then was forced to sell four planes and close three destinations. The Dubai airport expansion plan was revised upwards by two thirds when the budget was increased from US$300 million to US$500 million. The increase reflects Dubai’s confidence in its role as a commercial entrepôt. Bechtel Corporation of the USA is managing the project which will include a new concourse building with 28 gates, a transit hotel and a huge duty free complex. Ports With the increasing amount of trade through the UAE, it has been a busy period for the country’s ports. The Dubai Ports Authority runs Port Rashid and Jebel Ali and in the first four months of 1996 handled 12 per cent more container traffic than the previous year. It is now the 13th largest container handling body in the world. Abu Dhabi plans to invest in its two ports, Mina Zayed and Musafah, as well as bringing on stream the new free trade zone to attract new business. It has been encouraged to do so by figures which showed an increase of 97 per cent in twenty-foot equivalent units (TEU) between 1994 and 1995. Sharjah is to expand its port at Khor Fakkan by a quarter of its capacity to around a million TEUs by the end of the century. It has moved up to second place in the UAE after Jebel Ali at the expense of Fujairah which lost its business from French container group CMA to Sharjah and experienced a resultant fall in handling of nearly 20 per cent. Power and Water The demand for power is rising too fast for the utilities to keep up. An annual growth of 10 per cent in demand means that the UAE may have to bring in a new 450MW of capacity every year. A major project is going ahead at Al-Awir in Dubai, and there are also huge contracts planned for the Ruwais petrochemicals project. Abu Dhabi’s water and electricity department is to increase power and desalination capacity at Al-Taweelah and Sharjah is evaluating bids to interconnect the west coast power grid. It is also going ahead with a desalination and power plant at Layyah.

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Telecommunications The Emirates Telecommunications Corporation (Etisalat) plans to launch two satellites to meet new demand. Between them the satellites will provide audio data and fax to mobile uses and fixed line communications improvements as well as capacity for television broadcasting. Etisalat is constantly struggling to keep ahead of demand both for new lines and for mobile capacity. Banking The banks showed big earning growth in 1995/96, although there was some drop in assets. This is in spite of the large number of banks in the UAE – 47 to cater for a population of 2.3 million. The UAE Central Bank has moved to tighten financial legislation with new rules governing the activities of finance companies. The UAE Stock Exchange was scheduled to begin operations in late 1996/early-1997. Outlook The prospects for growth in the UAE over the next five years look remarkably strong. Oil plays its part but the move towards diversification is also bearing fruit. The UAE have good relations with most of their neighbours and have strengthened their ties with Saudi Arabia. Iran remains a thorn in their side with the two states disputing the right to three small Gulf islands. The underlying fear is one of Iranian expansionism. But at the same time, Dubai in particular remains closely tied to its large neighbour and would be very unwilling to see relations deteriorate badly.

1998 Intra-family Rivalries – Iranian Ambivalence – Summit Boycotted – Unemployed Nationals – Dubai Diversifies

Abu Dhabi’s ruler and President of the United Arab Emirates (UAE), Sheikh Zayed bin Sultan al-Nahyan, has handed day to day control to his son and chosen successor, the crown prince Sheikh Khalifa bin Zayed al-Nahyan. Sheikh Zayed remains involved in international affairs and, in December 1997, was prominent during the high profile visit of French President Jacques Chirac. Succession Moves Sheikh Khalifa, the de facto ruler, is not as popular a figure as his father, although he has considerable experience of the emirate’s financial affairs. Described by one local diplomat as the man ‘who signs the cheques’, Sheikh Khalifa is the chairman of the massively wealthy Abu Dhabi Investment Authority, the Supreme Petroleum Council, as well as being the president of Abu Dhabi’s Executive Council. The greatest challenge to Sheikh Khalifa’s authority is likely to come from his two-half brothers, the army chief of staff Sheikh Mohammed bin Zayed al-Nahyan, and the deputy prime minister of the UAE, Sheikh Sultan bin Zayed al-Nahyan. Given the Gulf states’ propensity for carrying out intra-family rivalries behind closed doors, Sheikh Khalifa is likely to have already hammered out a power sharing agreement with the two men as well as with other members of the ruling family. Sheikh Zayed is already following a policy of allowing his younger sons to assume government positions in both the state and the federal administration, with a cabinet reshuffle in early 1997, seeing Sheikh Zayed’s younger son Sheikh Abdullah bin Zayed al-Nahyan appointed minister of information and culture. The political situation has remained stable since the formation of the UAE in 1971. As politics are centred around the intrigues of the ruling family clique, it remains difficult to gather information. Nevertheless, by the end of 1997, it was clear that the situation will remain stable, as potential rivals await the inevitable succession. Relations between the UAE and Iran remain poor as a result of the latter’s continued occupation of the disputed Abu Musa and Tunb Islands. Iranian ambivalence towards entering into new negotiations over the islands has led the

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UAE to forge closer ties with Iran’s traditional enemy Iraq as a counter-balance to what the UAE perceives as Iran’s growing hegemony in the Gulf region.

However, Dubai greatly benefits from re-export trade with Iran (traditionally Dubai’s biggest re-export market) and as a result, will be unwilling to allow relations with its Persian neighbour to deteriorate further. The UAE has criticised the US for its treatment of Iraq, mainly with regard to the effect of sanctions on the welfare of the general population of the country. As well as such humanitarian considerations, the UAE has one eye on future economic opportunities in post-sanctions Iraq. Plans are currently underway to set up a Dubai Ports Authority office in Iraq as well as a direct shipping link. In 1997, the UAE was criticised by the US for its continued dhow trade with Iraq. The partial lifting of the Iraqi embargo led the Iraqi minister of trade to claim that the volume of trade for 1997 was likely to be US$400 million; this looks set to increase in 1998. The UAE, like Egypt, Saudi Arabia and Morocco, boycotted the US sponsored Middle East and North Africa Summit (MENA) held in November 1997 in Doha, primarily in protest at Israel’s failure to honour commitments to Palestinians, as outlined in the Oslo Accords. Economy Overall prospects for the UAE economy are among the healthiest in the region. With oil only contributing 35 to 40 per cent of GDP, the country is able to withstand fluctuating oil prices more robustly than many of its neighbours. The UAE posted between 3–5 per cent GDP growth rates in the early 1990s, when oil prices were as low as US$13 per barrel and growth has accelerated in 1996 and 1997 as prices have risen. A growing gas industry and significant aluminium production output also contribute to the economy. The rapid expansion of Dubai’s Jebel Ali Free Zone is indicative of the country’s attractiveness to international business. Against this backdrop, minor concerns for the UAE government are the high level of unemployed nationals (20 per cent of the labour force) and an inflation rate which may be well above the official 3.7 per cent estimate for 1997, at a rate of 7 or 8 per cent. Increases in government wages of 15 per cent in 1997, as part of a wider trend of pay rises, continue to add to inflationary pressure. Demand for gas outstripped supply in 1997, raising concerns that this is affecting potential new industrial investment. This has prompted US$10 billion worth of investment in the gas industry by the UAE government in a plan designed to increase production capacity to three billion cubic feet per day in 2000, rising to three billion cubic feet per day in 2005.

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Government revenues in oil-rich Abu Dhabi have remained buoyant as higher than expected oil prices boosted government coffers. As in Kuwait, Abu Dhabi has seen an increase in income from overseas assets. Nonetheless, the government is committed to attracting foreign and private sector investment. Abu Dhabi is making great strides towards diversifying away from oil production by moving into the petrochemical export market. An ethylene and polyethylene facility valued at US$1 billion is being built at Ruwais to produce 600,000 tonnes per year (tpy) of ethylene cracker and 450,000tpy of polyethylene. The plant is scheduled to come on stream by the end of the decade. As well as providing the emirate with a further opportunity to diversify, the move into exporting petrochemicals has a number of competitive advantages for Abu Dhabi, chief of which is the availability of cheap upstream assets, including gas supplies. As a way of boosting growth forecasts, Abu Dhabi has opened up downstream activities in the oil sector which had been previously closed to foreigners and has turned to a foreign partner for access to modern technology and expertise. Borealis, a joint company formed out of Finland’s Neste Oil and the Norwegian company Statoil, will partner the Abu Dhabi National Oil Company (ADNOC) with a 40 per cent stake. The Borealis’ deal has been described as the most sought-after prize in the Gulf’s burgeoning petrochemicals industry. Dubai Dubai has continued its drive to diversify the economy away from oil and into sectors such as trade, tourism and industry in order to boost the non-oil sector’s contribution to growth to an ambitious 88.7 per cent by the year 2000. Dubai makes no secret of its ambition to become the leading financial centre of the Gulf, a title traditionally claimed by Bahrain. The government is also pursuing a policy of heavy investment in the ports of Jebel Ali and Mina Rashid, to maintain Dubai’s position as the regional trading hub. Success to date has been underlined by growth in Dubai’s non-oil exports with re-exports also performing strongly. Privatisation Abu Dhabi is poised to take great strides towards liberalisation in 1998 as the pace of sales of state assets increases. This policy is attractive politically as a revenue raising measure and as a means of diversifying the economy by creating investment opportunities by mobilising local capital. Tax (as with the other Gulf states) contributes a very small proportion to government revenue, and so privatisation provides a healthy fillip to the budget. There has been talk (within

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the petroleum and mineral re-sources ministry) of privatising the petro-chemical industry, although this is unlikely in the near future. Concerns in Abu Dhabi about the im-pact of privatisation on inequalities in wealth will make the sale of public ser-vices less likely, as the government fears the effect this may have on its national workforce. Adapting to the private sector could mean job losses and wage cuts, further adding to the number of unem-ployed nationals. In addition, any comprehensive state sale programme will depend on the intro-duction of an official stock exchange to regulate government sales. It is important to recognise that although Abu Dhabi has made important moves towards privatisa-tion, the other emirates have made very little progress. Trade Higher than expected oil prices boosted UAE trade in 1996, as oil export revenues grew by 17 per cent on the previous year. Non-oil exports also grew, by 10 per cent, in 1996, but imports grew by only 3 per cent. As a result, the UAE recorded a trade surplus of US$7.4 billion, up from US$4.3 billion in 1995. Similar results were expected for 1997 as oil prices re-mained above US$19 per barrel. How-ever, indications that the UAE Government’s expenditure levels were 10 per cent above target by the end of June 1997, suggest that import levels may be higher. A lower trade surplus is therefore likely. Outlook Growth in 1996 and 1997 was driven by high oil prices; a fall in oil prices will affect 1998’s growth. Stronger oil prices have boosted the government’s fiscal position allowing growth to be underpinned by increased gov-ernment spending. Non-oil growth will be facilitated by private sector investment in infrastructure. However, the Asian financial crisis of late 1997 has affected the UAE‘s largest export markets and lower growth rates in these markets will reduce export revenues and may lower oil prices. 1998 is likely to produce slower GDP real growth than the previous two years as export revenues falter. Dubai’s attempts at diversification are set to move one step further and the emirate’s importance as an offshore centre will grow with the long-awaited opening of a stock exchange, now scheduled for 1998. Privatisation will move higher up the UAE government agenda in 1998.

1999 Succession Tensions – Iran Concerns – Sharjah Suffers – Strong Banking Sector – OPEC Quotas – Privatisation and Diversification

The outlook for the United Arab Emirates (UAE) is certainly at its bleakest for several years – low oil prices, the Asian financial crisis and Russia’s instability dented the Emirates 1998 economic performance. And 1999 promises little improvement. Continued political uncertainty about the presidential succession adds to the generally pessimistic forecast. However, the expansion of the petrochemical sector, the slow liberalisation of the financial sector and the substantial size of the UAE’s hydrocarbon reserves mean it is better placed than most countries to withstand any global economic crisis. It is likely that economic necessity will force through much needed reforms, putting the country on a much firmer footing in the future. Succession Issues As the UAE’s president, 81-year old Sheikh Zayed bin Sultan al-Nahyan, slowly retreats-from the political stage, his increasing frailty is creating tensions about his succession. The Sultan’s eldest son and chosen successor, crown prince Sheikh Khalifa bin al-Nahyan, will certainly become Abu Dhabi’s Emir, but his assumption of the presidency of the UAE remains in question. Sheikh Khalifa’s main challenger is his half-brother Sheikh Mohammed bin Zayed, who is army chief of staff and son of the Sultan’s favourite wife Fatima bin Mubarak al-Qudera. Although Sheikh Khalifa has probably agreed a power sharing arrangement with Sheikh Mohammed and another rival deputy prime minister of the UAE, Sheikh Sultan, internal family feuds within the al-Nahyan family will dominate the political environment. These rivalries are unlikely to lead to violence between the emirates. The political climate will remain stable and family feuds rarely affect the environment for foreign business. International Relations Disputes over the southern Gulf islands of Abu Musa and the Greater and Lesser Tunbs continue to cause tension with Iran. On 4 February 1999 UAE officials formally protested against Iranian naval manoeuvres in the Gulf. Iran’s de facto annexation of the islands in August 1992 – which abrogated an ill-defined shared administration agreement with Sharjah – sparked off fears of Iranian

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expansionism in the Gulf. However, the issue has prompted neither a military confrontation nor a break in relations between the two states, and trade relations between Dubai (the entrepôt emirate) and Iran remain extensive (Iran is Dubai’s largest re-export market – re-exports exceeded US$2 billion in 1997). The UAE’s claims to the islands have the full backing of the Gulf Co-operation Council (GCC) and the Arab League. Despite Iraq‘s continued economic isolation, Dubai continues to trade with Iraq. Increases in the amount of imports Iraq is permitted under the oil-for-food agreement have increased trade levels and Dubai has direct shipping links and has opened a Dubai Ports Authority office in Iraq. US and UK bomb attacks on Iraq at the end of 1998 were criticised by the UAE, partly because of humanitarian concerns for Iraq’s general population, but also in order to build relations with Saddam Hussein’s regime. For the UAE, positive relations with Iraq are valuable both for trade and also as a counterbalance to difficult relations with Iran. Low Growth Forecast Although the UAE economy is shielded from oil price fluctuations to a greater extent than other Gulf states (oil revenues make up only 30 per cent of gross domestic production (GDP)), the manufacturing and re-export sectors have been hit by the Asian and Russian economic crises. According to government officials, the UAE’s GDP in 1997 was Dh180 billion (the non-oil sector contributed Dh127 billion), while in 1998 it fell to Dh170 billion (the non-oil sector contributed Dh133 billion). In 1998 the non-oil sector consisted of: manufacturing 15.5 per cent, wholesale and retail 15.4 per cent, government 14.8 per cent, real estate sector 13.7 per cent, construction sector 12.2 per cent, transport and telecommunications 9.2 per cent. Officials optimistically forecast 1999 GDP of Dh176 billion (with the non-oil sector growth. The different emirates have been hit by the global financial crisis in different ways. Abu Dhabi produces 60 per cent of the UAE’s GDP and 85 per cent of its revenue stems from the production of around two million barrels of crude oil per day. Although oil prices have dropped from their US$21 per barrel peak in 1997 to under US$10 per barrel by the end of 1998, Abu Dhabi is more resilient towards oil price fluctuations because it can rely on income from overseas assets valued at over US$150 billion. Dubai, which accounts for 25 per cent of the UAE’s GDP, is the UAE’s principal manufacturing and re-export, tourism and financial services centre. Manufacturing and re-exports are dominated by textiles and electronics and these have been hit hard by the Asian crisis. Japan accounts for over 35 per cent of UAE non-oil exports, while South Korea accounts for nearly 10 per cent. Dubai has

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also been hit by low oil prices; it produces 240,000 barrels per day (bpd) of oil, while relying on income from foreign assets of around US$35 billion. Dubai has a much greater need to expand revenues by increasing utility charges, developing large infrastructure projects and continuing to expand its successful Jebel Ali Free Zone. Of the other five emirates, Sharjah (where the manufacturing sector contributes 5 per cent of GDP) has probably been hit hardest. Other emirates continue to receive limited levels of investment, particularly within their free trade zones, especially in textiles, medical equipment, electrical appliances and electronics. Unemployment, Inflation Official data for the UAE is not widely available and information that is published is of limited value. In a bid to deal with unemployment of around 20 per cent for UAE nationals, the labour and social affairs ministry is pushing its policy of Emiratisation. For instance in the banking sector the ministry is demanding that the number of UAE nationals employed by each bank increases by 4 per cent per year to 40 per cent over the next 10 years. The ministry faces a difficult task – UAE citizens often refuse to work long hours, refuse trainee jobs and demand large salaries. Expatriates will remain highly influential in UAE’s economy for some time to come. Official figures state that inflation has dropped from its high in the early 1990s of 4.7 per cent to 3.7 per cent in 1997. However some analysts believe that real annual price increases were nearer 7–8 per cent in 1997. 1998/99 official figures are expected to be around 3.5 per cent as the economic slowdown reduces inflationary pressure. The dirham remains pegged to the US$ at Dh3.67, leading UAE interest rates to follow US interest rates. The UAE has foreign exchange reserves of US$8.65 billion, but these may fall as they are used to defend the fixed exchange rate. Falling Trade The UAE’s trade position weakened in 1998. The trade surplus dropped from Dh23.86 billion in 1997 to Dh8.4 billion (US$2.29 billion) in 1998. Exports fell from Dh123.2 billion in 1997 to Dh109.2 billion in 1998, while imports increased slightly from Dh99 billion in 1997 to Dh100.8 billion in 1998. Little improvement in the trade position is expected in 1999. Abu Dhabi plans to open its Saadiyat Free Trade Zone in 1999, in a project worth US$3.3 billion. Investment in the zone which specialises in commodity trading, storage and transport, will be open to both foreign and local investors and will include standard incentives of 100 per cent foreign ownership, free capital flows, no taxes and simplified custom procedures.

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Stock Market Reform A by-product of the UAE’s stalling economic growth may be an improvement in the regulation and transparency of the financial sector. Following the collapse of the unofficial market in September 1998, a draft law in November paved the way for the establishment of an official stock exchange. Trading floors will be established in Dubai and Abu Dhabi where the regulatory authority will be based. Previously, the UAE market had no formalised trading or pricing system, with the consequence that most trading was based on insider information and personal contacts. The market’s overall growth for the year was 23.55 per cent while capitalisation increased by 22.1 per cent. The banking sector was the strongest performer with an annual increase of 26.2 per cent. A number of new equity funds operated by Abu Dhabi banks listed on the UAE market including the Abu Dhabi Commercial Bank. Trading activity was boosted by a number of initial public offerings (IPOs). The UAE remains a healthy, stable investment location – the country is ranked thirty-first on the International investment index, the highest position of any GCC country. Infrastructure The UAE government believes that infrastructural projects are crucial tools for job creation and stimulating the non-oil sector of the economy and will work to develop new projects during 1999. 1998 marked a new stage in the development of private sector infrastructural projects, not only in the UAE but throughout the Gulf. The UAE’s first private sector project, the Taweelah A-2 development, was agreed in October by the Abu Dhabi Water and Electricity Authority (ADEWA). As a result, a 710MW and 50 million gallon per day water and power combined-generation plant is due to be commissioned in 2001. Other projects include a US$630 million expansion programme of the Abu Dhabi international airport which will lead to the construction of a new terminal and a second runway. Meanwhile, both Mina Zayed and the Abu Dhabi shipping facility will be expanded in 1999. This followed record cargo throughput at Mina Zayed in 1998, with levels reaching 250,000 tonnes. Activity at Mina Zayed is set to increase further when the Ruwais petro-chemical complex opens. Oil, Gas and Petrochemicals OPEC quotas continue to limit the UAE’s oil production. UAE has over

500,000bpd of spare capacity and, although not as reliant as some of its neighbours, is still too dependent on oil revenues. The government’s policy is to move further into the downstream sector.

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Emirates National Oil Company (ENOC) will open its largest investment in May 1999 – the US$300 million, 120,000bpd condensate plant based in the Jebel Ali Free Zone will supply marine and jet fuel as well as petrol for local consumption. Diversification into the petrochemical and natural gas sectors is a clear government priority. The Abu Dhabi National Oil Company (ADNOC) has invested US$2.1 billion in the gas sector in a bid to increase production capacity to three billion cubic feet per day by 2000. Two new projects will be completed in 2000: the US$700 million, 800 cubic metres per day (cmd) Asab gas development and the US$1.4 billion, 1,000cmd onshore gas development (OGD-2) of the Thamrna reserves. A further US$8 billion will be spent to boost output to five billion cubic feet per day by 2005. Although the UAE has the fourth largest natural gas reserves in the world, production is costly because most gas is oil-associated and therefore dependent on oil production. The UAE, particularly Dubai, has a very high domestic demand for gas and this is set to increase, stimulating further investment. Although the petrochemical sector has been hit by the slump in Asian demand, foreign investment continues with work on a number of projects ongoing in 1999. ADNOC is building the US$1 billion Ruwais 600,000 tonnes per year (tpy) ethylene and 450,000tpy polyethylene plant. The Adnoc-Borealis joint venture Borouge will begin phase II of the development in 1999; it is due for completion in 2001. The oil, gas and petrochemical sectors in UAE are likely to be more tightly regulated in 1999 as environmental legislation is set to be promulgated. The Federal Environment Agency (FEA) is working on a new environment law, but environmental protest groups fear that the new legislation will prove toothless. Outlook The UAE’s development has been based on expanding world trade and strong oil prices, but with Asia’s financial difficulties causing a slowdown in world trade and a slump in oil prices, the country’s vulnerability has been exposed. The trade surplus has been sharply reduced, the current account was estimated to have slipped into deficit in 1998 and growth predictions have been cut. However, this worsening economic outlook could provide the reform impetus that the economy needs, encouraging the government to speed up the privatisation programme and diversification efforts.

2000 Separate Development Strategies – Oil Prices Soar – Construction Boosted – Trade Surplus – Stock Exchange Starts

The United Arab Emirates (UAE) is one of the most stable countries in the Middle East and offers one of the most comfortable environments for regional operations. Its diversified economy cushions it against oil recessions, with the non-oil sector smoothing out fluctuations in oil industry earnings. However, windfall oil revenues in 2000 will further reduce incentives to adopt market reforms and reduce subsidies, although Abu Dhabi appears determined to press on with the privatisation of water and power in its own emirate. Underpinned by Abu Dhabi’s oil wealth and Dubai’s entrepreneurial instincts, the federation will continue to prosper, despite the regional backdrop of instability. Domestic Politics The UAE’s sustained record of domestic political stability and economic affluence has helped the federation evolve into a leading regional centre for business, trade, industry and finance, in addition to its role as a major Organisation of the Petroleum Exporting Countries (OPEC) oil producer. Interdependence between the two largest emirates will increase as Dubai looks to Abu Dhabi for gas supplies from 2001, but the two emirates will continue to forge their own separate development strategies. Abu Dhabi will concentrate on diversifying within hydrocarbons and heavy industry, while Dubai is busy expanding its revenue base in anticipation of the post-oil era, promoting a range of services from entrepôt trading to e-commerce and from tourism to trade and finance. The UAE’s traditional methods of consultation have proved adequate for the small local population and, given the excellent standards of living and high disposable incomes, few social or political problems are likely to occur. Emiratisation The main grievance is the growing number of unemployed UAE nationals and the predominance of expatriates (who outnumber locals by five to one). This prompted the government to formulate an Emiratisation strategy, in which private sector companies are required to take on local employees, a trend which looks set to continue.

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Foreign Policy The main threat to stability arises from the UAE’s location in a turbulent region. However, the UAE has defence pacts with the United States (US), the United Kingdom (UK) and France which ultimately guarantee its safety. In return the federation is a major purchaser of Western weaponry. In March 2000, the UAE confirmed a US$6.4 billion contract to buy 80 F-16 fighter aircraft from the US. The main regional dispute is the conflict with Iran over the sovereignty of three Gulf islands – Abu Musa and the Greater and Lesser Tunbs which Tehran effectively annexed in 1992. In September 2000, Iran offered to hold talks with the UAE to resolve the ‘misunderstanding’ but declined to receive a Gulf Co-operation Council (GCC) mediation committee. The UAE restored diplomatic relations with Iraq in April 2000, partly to counter Iran’s military dominance in the region and partly to boost traditional trade ties between Dubai and Iraq. Settlement of a long-standing border dispute with Oman in March 2000 ended a potential source of tension with a GCC neighbour. Economic Policy Abu Dhabi pressed ahead with its ambitious water and power privatisation programme during 2000, finalising plans for three independent water and power plants. Dubai is also outsourcing various utilities such as waste water treatment, although it has no plans to privatise major state holdings such as the Emirates (airline) or the Dubai Aluminium Company (Dubal) which, it insists, are run on commercial lines. Smaller emirates are also using financing mechanisms such as BOOT (build-own-operate-transfer) to install utilities without unduly burdening state finances. No changes to the federation’s largely tax-free operating environment are envisaged. Dubai’s latest diversification drive is to promote the emirate as a regional e-commerce centre. The US$400 million first phase of Dubai Internet City, an information technology (IT) free zone launched in October 2000, attracted interest from global computer companies such as IBM and Microsoft. Two other offshoots, Dubai Ideas Oasis and the Dubai Media City, launched in November 2000, aim to encourage the development of new IT ventures and attract regional press agencies. Meanwhile, entrepôt trading, warehousing and manufacturing will continue in the traditional free zones. Dubai’s Jebel Ali Free Zone (Jafza) is by far the most sophisticated, but all the other emirates now have free zones in varying stages of development. In October 2000, tenders were invited for the infrastructure contract for the most ambitious of all – Abu Dhabi’s US$3 billion Saadiyat Island, which is to have a commodities exchange, offshore banking centre and stock exchange, as

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well as trading, storage and trans-shipment facilities. The US$1 billion first phase will include a new town with offices, residential and leisure facilities. Economic and Fiscal Trends The UAE federal planning ministry judged that nominal gross domestic production (GDP) grew by 10 per cent in 2000 to US$58.4 billion, while the Central Bank of the United Arab Emirates estimated that it expanded by 17 per cent. Inflation was estimated at around 3 per cent in 2000. The 2000 federal budget, approved in March 2000, projected a deficit of US$665 million, but the out-turn is likely to show a surplus, in view of the strengthening of oil prices during 2000. The budget projects expenditure of US$6.3 billion in 2000 and revenue of US$5.6 billion. Abu Dhabi contributes 60 per cent, Dubai 10 per cent, with the remainder raised through government fees and charges (mostly to expatriates). The federal budget covers only about a third of the UAE’s total estimated state expenditure as details of spending by individual emirates are not published. Oil and Gas The oil sector received a massive boost in 2000 from soaring prices and increased volume as OPEC relaxed its quota restrictions on three occasions (April, July and October) allowing the UAE to increase crude oil production by 7 per cent to an average of 2.22 million barrels per day (bpd) in 2000. The OPEC basket price increased by 58 per cent in 2000 to US$27.6 per barrel from US$17.5 per barrel in 1999 and US$12.3 per barrel in 1998. However, prices and volume are expected to subside in 2001. OPEC pledged to cut output by 5.6 per cent (1.5 million bpd) from February in a bid to stabilise prices at around US$25 per barrel. Abu Dhabi, which produces over 90 per cent of the UAE’s oil, plans to maintain capacity at levels above actual production, allowing it to respond to any future OPEC quota increases. Capacity is scheduled to rise from around 2.4 million bpd in 2000 to 2.5 million bpd by the end of 2001 and to three million bpd by 2002. Abu Dhabi’s gas production will expand to 4.1 million-cubic feet a-day by 2003, up from 1.7 billion cubic feet a day in 1999 following the completion of two onshore gas projects and the Khuff offshore gas development. The additional output will allow Abu Dhabi to supply Dubai with up to 1,000 million cubic ft a day of gas from 2001. Meanwhile, over the longer term, the ambitious Dolphin Gas Project aims to develop Qatar‘s massive gas reserves and set up a regional gas grid supplying the UAE, Oman and, in time, the Indian subcontinent. In March 2000, agreements were concluded with the United State’s Enron and France’s TotalFinaElf on a 25-year joint venture to develop the US$10 billion project.

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Non-oil Sectors Output of refined petroleum products from Abu Dhabi’s Ruwais refinery trebled to 425,000bpd following the September 2000 installation of two condensate distillation trains. Ruwais is also the site for a US$1.2 billion petrochemicals plant being built by the Abu Dhabi Polymers Company (Borouge – a joint venture between the Abu Dhabi National Oil Company and Denmark’s Borealis). Production of ethylene and polyethylene is scheduled to begin before 2002. Fujairah’s 105,000bpd refinery reopened in September 2000 following a rescheduling of US$150 million of debt. Capacity at Dubai’s aluminium smelter (Dubal, based at the Jebel Ali Free Zone) increased to 530,000 million tonnes a year in 2000 following completion of an expansion programme. Water and Power Plant Abu Dhabi is contracting foreign companies to build and operate three independent water and power plants. The largest will be Shuweihat, a new power station to be built west of Abu Dhabi city. The first phase will have a capacity of 1,500MW and 100 million gallons per day (gpd) rising in two additional stages to 5,000MW and 300 million gpd by 2009. The first, being built by the US’s CMS, is the Taweelah A-2 plant with a capacity of 770MW and 50 million gpd. The second is Taweelah A-1, being installed by France’s TotalFinaElf and Belgium’s Tractebel. Capacity is to be expanded to 1,350MW and 84 million gpd by 2003 at a cost of around US$1.5 billion. Meanwhile, tenders were issued for a 100MW and 100 million gpd station at Fujairah in early 2001. The upturn in oil revenues in 2000 boosted the flagging construction industry, which suffered a contraction in 1998/99. New capacity is being added, particularly in Dubai, in residential, commercial, retail and corporate headquarters, mostly at the top end of the market, although contracts were awarded in September 2000 for the construction of US$370 million of low cost housing at Jebel Ali. Infrastructural spending also strengthened in 2000, when Dubai municipality allocated US$375 million for roads and water treatment systems. Stock Market After years of delay, the UAE’s formal dual-floor stock exchange was finally installed in two stages in 2000. The Dubai Financial Market began trading in March and was followed by the launch of the Abu Dhabi Financial Market in November. The unofficial over-the-counter exchange continues to operate in parallel with the formal market, but will be gradually phased out. Business remained generally depressed throughout 2000, reflecting the overhang from a market crash in 1998.

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External Position Price and volume-gains in the oil sector led to record external surpluses in 2000. Crude oil exports rose by over a third to an estimated US$17 billion while Dubai’s traditional re-export trade benefited from higher import demand from regional oil producers such as Saudi Arabia, Iran and Iraq. Trade with Japan, the UAE’s main client, surged in the first half of 2000, reflecting higher energy prices. Japan’s purchases of crude oil nearly doubled to US$7 billion from US$3.6 billion in January–June 1999. And imports of aluminium rose by 48 per cent to US$90 million. Japan’s exports to the UAE rose by 9 per cent to US$1.3 billion. The main categories were machinery and capital equipment and transport. The UAE’s total exports and re-exports rose by over a fifth to an estimated US$41 billion in 2000, while imports increased by around 10 per cent to US$33 billion, leaving a merchandise trade surplus of US$8 billion. The current account surplus is estimated to have increased to nearly US$8 billion, from US$3 billion in 1999. The surpluses are expected to reduce in 2001 as oil prices undergo a correction, but will remain very substantial, allowing the accumulation of further foreign reserves, which are unofficially estimated at over US$150 billion. In June 2000, the UAE’s net assets reported by overseas banks totalled nearly US$28 billion. Outlook Oil sector growth will slow markedly in 2001 from the breakneck speed of the past two years, as oil prices subside and OPEC tightens its quotas, but the knock-on effect of strong oil revenue flows in 2000 will continue to drive the non-oil economy during much of 2001. Abu Dhabi will press ahead with diversification into petrochemicals and heavy industry, while speeding up delivery of power and water services through its privatisation programme. Dubai will remain the most innovative of the emirates as it seeks to promote a range of modern services to supplement its entrepôt trade and replace dwindling oil income. Shortages of national skills will leave the country heavily reliant on expatriates, possibly causing tensions with UAE nationals.

2001/02 Political Maturity - Unemployment Concerns - Palestine - Regional Financial Hub? Healthy External Accounts - Oil Dependence Continues

On 2 December 2001 the once improbable country, the United Arab Emirates (UAE) happily celebrated thirty years of independence - and a period of growing prosperity and stability. The people of the UAE are of Arab stock, descended from tribes-people who were settled for much of the year and engaged in agriculture, fishing or pearl diving, and also from nomadic Bedouins. The discovery and exploitation of the country’s vast oil reserves proved to be a catalyst beyond expectations. By the twenty-first century the UAE’s economy has already overtaken those of its neighbours and other countries in the region. It is also already one of the most diversified in the Middle East and massive investment is now being directed at boosting non-oil sectors. Breakthrough developments in Abu Dhabi included the completion of the first independent power/desalination plant and first major petrochemicals complex. Meanwhile, Dubai is bidding to become the Middle East’s top tourist destination by spending US$15 billion on new aircraft for its Emirates airline and US$2.5 billion on expanding its already impressive airport. Increasingly sophisticated marketing has established the Emirates Airline as much more than just a regional airline, and Dubai’s proximity to new tourist markets in Russia and Asia makes it a natural choice for millions of tourists. Dubai’s regional co-operation will increase as the ambitious Dolphin Gas Project forges commercial and financial links between the UAE, Qatar and the Asian sub-continent. Old Rivalries Fade The UAE has matured significantly on both the political and economic front since it was set up as a loose confederation in December 1971. Rivalry between the two largest emirates, Abu Dhabi and Dubai, dwindled as economic co-operation developed. Abu Dhabi’s wealth is based on its large reserves of oil, while Dubai is rapidly diversifying its economy in preparation for a post-oil era, building up financial and commercial services, tourism and e-commerce to supplement its ancient role as entrepôt for the region. With a per capita income averaging around US$20,000 a year, the UAE is one of the richest states in the Middle East and consequently political and social problems are very few. The main domestic issue is the level of unemployment among UAE citizens and

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the predominance of expatriates, who outnumber locals by five to one. The population growth rate among nationals is rising rapidly and 14,000 new graduates are joining the labour market each year. The traditional remedy of expanding the civil service to satisfy growing demand for jobs is not sustainable over the long term. The government has pressed private sector employers to take on nationals via a policy of ‘Emiratisation’, a strategy which is likely to continue. No Terrorists Here The 11 September 2001 terrorist attacks in the US certainly shook business confidence in the UAE, particularly in tourism, but the setback was temporary and the number of visitors to Dubai’s hotels grew by 6 per cent in 2001. Some global and regional investors withdrew or put expansion plans on hold, but the productive sectors were largely unaffected. Abu Dhabi and Dubai moved swiftly to denounce the attacks and agreed to co-operate fully with the US in freezing the bank accounts of alleged terrorist individuals and organisations. The UAE also plans to boost anti-money laundering legislation. In November 2002, the central bank announced that it was tightening regulations on the hawala, the Islamic money transfer system, in an attempt to curb money laundering. The UAE reacted angrily to Israel’s incursions into Palestinian areas in March and April 2002. The UAE ambassador to the UN warned the international community not to classify Palestinian resistance to Israeli occupation as terrorist acts. To show solidarity with the Palestinian cause, the UAE authorities authorised the holding of mass marches and demonstrations in April. All Fingers and Tunbs A 10-year old dispute with Iran over the sovereignty of three islands, Abu Musa and the two Tunbs, which Iran invaded in 1992, moved no nearer to resolution. Iran has ignored repeated calls by the Arab League, the Gulf Co-operation Council (GCC) and the European Union (EU) to submit to international arbitration and continues to consolidate its presence on the islands. Trade with Iraq could increase following the implementation in April 2002 of a trade agreement, two years after the restoration of diplomatic relations. Economic and Financial Trends Gross domestic product (GDP) actually contracted by 20 per cent in 2001 and oil production fell back from the 2000 level, but non-oil sectors expanded by an encouraging 6.6 per cent. The federal budget for 2002 projected a 2 per cent rise in spending to US$6.3 billion and a 3 per cent increase in revenues to US$5.7 billion, leaving a deficit of

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US$0.6 million, slightly lower than the previous year. Accounting procedures

are less than transparent - in most years the budget is not approved until March or April and budgeted expenditure amounts to around a third of total state expenditure. The rest is spent directly by individual emirates, which are independent of the central accounts. The federal authorities brought in international consultants in 2001 in a bid to upgrade the system over the following three years. The stock exchange rebounded in 2001 largely reflecting buoyant activity in Abu Dhabi’s banking, insurance, hotel and properties sectors and robust growth in Dubai’s diverse economy. The bourse was set up in 2000 with dual trading floors in Abu Dhabi and Dubai. The Dubai government is intensifying its efforts to promote foreign investment and attract regional and global capital. In April 2002, the Dubai Authority for Investment and Development (DAID) was set up to grant concessions, franchises and incentives and to issue licences to large investors. The DAID is authorised to set up, own and develop investment companies on its own or with other organisations. Tourism is a key element in Dubai’s post-oil development strategy. The staging of the World Bank and International Monetary Fund (IMF) 58th annual meeting in Dubai in September 2003 will put the emirate on the map as a prestigious business conference venue. Hotel construction continues apace. Shortage of prime building land has not deterred planners - the latest scheme, the US$3 billion Palm Islands project, involves the construction of two man-made islands off the Dubai coast, each in the shape of a palm tree. Tourism will benefit from a US$2.5 billion airport expansion project, due for completion by 2004, and a US$15 billion programme to increase Emirates airline fleet from 36 aircraft in 2001 to 100 by 2010. Dubai’s largest manufacturing enterprise, the state-owned Dubai Aluminium Company (Dubal), outlined plans to expand output from 536,000 tonnes to 691.0 tonnes. Dubai is based in the thriving free trade area, the Jebel Ali Free Zone. Dubai is also keen to develop information technology, setting up the Dubai Internet City in 2001. The Emirates’ standing as a regional financial hub will be enhanced by the planned launch of a Dubai government bond in 2003. The Dh1.5 billion (US$409 million) bond will be denominated in dirhams and listed on the Dubai Financial Market (DFM). It will finance infrastructural developments in preparation for the 2003 World Bank/IMF summit. The new instrument follows an Dh1.5 billion (US$409 million) bond issued in July 2001 by the Dubai-owned airline, Emirates, which was heavily oversubscribed.

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Oil and Gas Oil production declined by 4.1 per cent in 2001 to 2.13 million barrels per day (bpd) as the Organisation of the Petroleum Exporting Countries (OPEC) cut quotas in a bid to shore up prices. The OPEC basket fell by 16.3 per cent in 2001 to US$23.1 per barrel from a record US$27.6 per barrel in 2000. However, this is still significantly higher than the 1995-99 five-year average of US$17.1 per barrel. The UAE’s quota was cut further in January 2002 to 1.89 million bpd, from 2.03 million bpd in September 2001, compared with an actual capacity of 2.6 million bpd. There are plans to raise capacity further, to 3.6 million bpd in 2005 and 4.0 million bpd in 2010, allowing the UAE to take advantage of any future interruption in world supplies. The main oil field developments involve the offshore fields of Zakum and Umm Shaif, and the onshore Bab, Bu Hasa and north-east Abu Dhabi fields. Gas output is due for rapid expansion over the medium term. The main projects are the third phase of the Onshore Gas Development (OGD-3) and the second phase of the Asab Gas Development (AGD-2), costing US$2.5 billion. In 2001, for the first time, Abu Dhabi began supplying gas to Dubai, following the completion of a US$85 million pipeline from Maqta in Abu Dhabi to Jebel Ali in Dubai. The most ambitious scheme is the Dolphin Gas Project, which involves the piping of Qatari gas to Abu Dhabi, Dubai and eventually to the Indian sub-continent. Managed by the UAE’s Offsets Group (UOG), contracts for the first US$3.5 billion phase were signed in December 2001. Production from the Das Island gas liquefaction plant is set to expand with the addition of one million tonnes a year of liquefied petroleum gas (LPG), mostly for export to Japan. The smaller emirates are also seeing better times. A gas field was discovered in Umm al-Quwain in 2001. Atlantis Holdings Norway, which took out a concession in 2001, estimated reserves at 14.2 billion cubic metres. A US$120 million processing plant is scheduled to come on stream in 2003, treating some 4.2 million cubic metres of gas per day, which will be used for power and water desalination in the Northern Emirates. Non-oil Sectors Petrochemical production took a leap forward in December 2001 when Abu Dhabi’s first major petrochemical complex came on stream. The Abu Dhabi Polymers Company (Borouge) which cost US$1.2 billion, will produce 600,000 tonnes per year of ethylene, and 450,000 tonnes a year of polyethylene, mostly for sale in Asia. Borouge is a joint venture between Abu Dhabi and Denmark’s Borealis. There are already plans to expand ethylene production by some 50 per cent.

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Abu Dhabi is leading the way in privatising power and water facilities. The first privatised plant, Taweelah A-2, began operating in April 2002, and three more are under way, the largest of which is Shuweihat S1 with a capacity of 1.5GW and 380 million litres of water per day. In the Northern Emirates, Fujairah signed contracts in 2001 for a US$800 million plant producing 620MW of electricity and 380 million litres of water per day. Ajman is planning the UAE’s first privately-financed integrated waste water and water treatment network, costing around US$140 million. There are also developments in the construction industry. Abu Dhabi is building a US$270 million convention centre and a new US$270 million fishing harbour, while Dubai is the focus for hotel building and luxury residential complexes. External Position The exceptionally large surpluses of 2000 were not repeated in 2001 and 2002, when oil prices and volume retreated from their 2000 peak. Nevertheless, the external accounts remain healthy, with the trade balance recording an estimated surplus of US$3 billion and the current account a surplus of US$3 billion. Total exports fell to an estimated US$36 billion, while imports remained steady at US$33 billion in 2001, slightly lower than in the previous year. Foreign reserves are estimated at over US$150 billion, though no official figures are published. Outlook The UAE will remain broadly insulated from growing regional instability by its high levels of prosperity and no threat to the present system of government is anticipated. Despite considerable success in diversifying the economy, dependence on oil will remain significant and economic growth rates will be largely determined by international oil prices. As a result, growth could be badly affected if there is a US-led war against Iraq in 2003. Forward-looking Dubai is investing heavily in high-tech industry, e-commerce, financial services and tourism as a buffer against its dwindling oil reserves which are forecast to last only another decade. Abu Dhabi will continue diversifying into petrochemicals and heavy industry and has called in foreign operators to ensure the timely delivery of power and water for both industrial and domestic use.

2003 Emiratisation – Palestinian Support – Financial Hub – Healthy Accounts

On 2 December 2001 the federation celebrated 30 years of independence – a period of growing prosperity and stability. The UAE’s economy is already one of the most diversified in the Middle East and massive investment is directed at boosting non-oil sectors. Breakthrough developments in Abu Dhabi included the completion of the first independent power/desalination plant and first major petrochemicals complex. Meanwhile, Dubai is bidding to become the Middle East’s top tourist destination by spending US$15 billion on new aircraft and US$2.5 billion on expanding its airport. Regional co-operation will increase as the ambitious Dolphin Gas Project forges commercial and financial links between the UAE, Qatar and the Asian sub-continent. Old Rivalries Fade The UAE has matured significantly on both the political and economic fronts since it was set up as a loose confederation in December 1971. Rivalry between the two largest emirates, Abu Dhabi and Dubai, dwindled as economic co-operation developed. Abu Dhabi’s wealth is based on its large reserves of oil, while Dubai is rapidly diversifying its economy in preparation for a post-oil era, building up financial and commercial services, tourism and e-commerce to supplement its ancient role as entrepôt for the region. With a per capita income averaging around US$20,000 a year, the UAE is one of the richest states in the Middle East and consequently political and social problems are very few. The main domestic issue is the level of unemployment among UAE citizens and the predominance of expatriates, who outnumber locals by five to one. The population growth rate among nationals is rising rapidly and 14,000 new graduates are joining the labour market each year. The traditional remedy of expanding the civil service to satisfy growing demand for jobs is not sustainable over the long term. The government has pressed private sector employers to take on nationals via a policy of ‘Emiratisation’, a strategy which is likely to continue. No terrorists Here The 11 September 2001 terrorist attacks in theTwin Towers in New York shook business confidence in the UAE, particularly in tourism, but the setback was

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temporary and the number of visitors to Dubai’s hotels grew by 6 per cent in 2001. Some global and regional investors withdrew or put expansion plans on hold, but the productive sectors were largely unaffected. Abu Dhabi and Dubai moved swiftly to denounce the attacks and agreed to co-operate fully with US investigators in freezing the bank accounts of alleged terrorist individuals and organisations. The UAE also plans to boost anti-money laundering legislation. In November 2002, the central bank announced that it was tightening regulations on the hawala, the Islamic money transfer system, in an attempt to curb money laundering. The UAE reacted angrily to Israel’s incursions into Palestinian areas in March and April 2002. The UAE ambassador to the UN warned the international community not to classify Palestinian resistance to Israeli occupation as terrorist acts. To show solidarity with the Palestinian cause, the UAE authorities authorised the holding of mass marches and demonstrations in April. All Fingers and Tunbs A 10-year old dispute with Iran over the sovereignty of three islands, Abu Musa and the Tunbs, which Iran invaded in 1992, moved no nearer to resolution. Iran has ignored repeated calls by the Arab League, the Gulf Co-operation Council (GCC) and the European Union (EU) to submit to international arbitration and continues to consolidate its presence on the islands. Trade with Iraq could increase following the implementation in April 2002 of a trade agreement, two years after the restoration of diplomatic relations. Economic and Financial Trends Oil GDP contracted by 20 per cent in 2001 and production fell back from the 2000 level, but non-oil sectors expanded by an encouraging 6.6 per cent. The federal budget for 2002 projected a 2 per cent rise in spending to USS6.3 billion and a 3 per cent increase in revenues to US$5.7 billion, leaving a deficit of US$0.6 million, slightly lower than the previous year. Accounting procedures are less than transparent – in most years the budget is not approved until March or April and budgeted expenditure amounts to around a third of total state expenditure. The rest is spent directly by individual emirates, which are independent of the central accounts. The federal authorities brought in international consultants in 2001 in a bid to upgrade the system over the following three years. The stock exchange rebounded in 2001 largely reflecting buoyant activity in Abu Dhabi’s banking, insurance, hotel and properties sectors and robust growth in Dubai’s diverse economy. The bourse was set up in 2000 with dual floors in Abu Dhabi and Dubai.

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Dubai Prepares for New Era The Dubai government is intensifying its efforts to promote foreign investment and attract regional and global capital. In April 2002, the Dubai Authority for Investment and Development (DAID) was set up to grant concessions, franchises and incentives and to issue licences to large investors. The DAID is authorised to set up, own and develop investment companies on its own or with other organisations. Tourism is a key element in Dubai’s post-oil development strategy. The staging of the World Bank/IMF 58th annual meeting in Dubai in September 2003 will put the emirate on the map as a prestigious business conference venue. Hotel construction continues apace. Shortage of prime building land has not deterred planners – the latest scheme, the US$3 billion Palm Islands project, involves the construction of two man-made islands off the Dubai coast, each in the shape of a palm tree. Tourism will benefit from a US$2.5 billion airport expansion project, due for completion by 2004, and a US$15 billion programme to increase Emirates’ airline fleet from 36 aircraft in 2001 to 100 by 2010. Dubai’s largest manufacturing enterprise, the state-owned Dubai Aluminium Company (Dubal), outlined plans to expand output from 536,000 tonnes to 691,000 tonnes. Dubal is based in the thriving free trade area, the Jebel Ali Free Zone. Dubai is also keen to develop information technology, setting up the Dubai Internet City in 2001. The Emirates’ standing as a regional financial hub will be enhanced by the planned launch of a Dubai government bond in 2003. The Dh1.5 billion (US$409 million) bond will be denominated in dirhams and listed on the Dubai Financial Market (DFM). It will finance infrastructural developments in preparation for the 2003 World Bank/IMF summit. The new instrument follows a Dh1.5 billion (US$409 million) bond issued in July 2001 by the Dubai-owned airline, Emirates, which was heavily oversubscribed. Oil and Gas Oil production declined by 4.1 per cent in 2001 to 2.13 million barrels per day (bpd) as Organisation of the Petroleum Exporting Countries (OPEC) cut quotas in a bid to shore up prices. The OPEC basket fell by 16.3 per cent in 2001 to US$23.1 per barrel from a record US$27.6 per barrel in 2000. However, this is still significantly higher than the 1995–99 five-year average of US$17.1 per barrel. The UAE’s quota was cut further in January 2002 to 1.89 million bpd, from 2.03 million bpd in September 2001, compared with an actual capacity of 2.6 million bpd. There are plans to raise capacity further, to 3.6 million bpd in 2005 and 4 million bpd in 2010, allowing the UAE to take advantage of any future interruption in world supplies. The main oil field developments involve the offshore fields of Zakum

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and Umm Shaif, and the onshore Bab, Bu Hasa and North-east Abu Dhabi fields. Gas output is due for rapid expansion over the medium term. The main projects are the third phase of the Onshore Gas Development (OGD-3) and the second phase of the Asab Gas Development (AGD-2), costing US$2.5 billion. In 2001, for the first time, Abu Dhabi began supplying gas to Dubai, following the completion of a US$85 million pipeline from Maqta in Abu Dhabi to Jebel Ali in Dubai. The most ambitious scheme is the Dolphin Gas Project, which involves the piping of Qatari gas to Abu Dhabi, Dubai and eventually to the Indian sub-continent. Managed by the UAE’s Offsets Group (UOG), contracts for the first US$3.5 billion phase were signed in December 2001. Production from the Das Island gas liquefaction plant is set to expand with the addition of one million tonnes a year of liquefied petroleum gas (LPG), mostly for export to Japan. The smaller emirates are also seeing better times. A gas field was discovered in Umm al-Quwain in 2001. Atlantis Holdings Norway, which took out a concession in 2001, estimated reserves at 14.2 billion cubic metres. A US$120 million processing plant is scheduled to come on stream in 2003, treating some 4.2 million cubic metres of gas per day, which will be used for power and water desalination in the Northern Emirates. Non-oil Sectors Petrochemical production took a leap forward in December 2001 when Abu Dhabi’s first major petrochemical complex came on stream. The Abu Dhabi Polymers Company (Borouge) plant, which cost US$1.2 billion, will produce 600,000 tonnes per year of ethylene, and 450,000 tonnes a year of polyethylene, mostly for sale in Asia. Borouge is a joint venture between Abu Dhabi and Denmark’s Borealis. There are already plans to expand ethylene production by 50 per cent. Abu Dhabi is leading the way in privatising power and water facilities. The first privatised plant, Taweelah A-2, began operating in April 2002, and three more are under way, the largest of which is Shuweihat S1 with a capacity of 1.5GW and 380 million litres of water per day. In the Northern Emirates, Fujairah signed contracts in 2001 for a US$800 million plant producing 620MW of electricity and 380 million litres of water per day. Ajman is planning the UAE’s first privately-financed integrated waste water and water treatment network, costing around US$140 million. There are also developments in construction. Abu Dhabi is building a US$270 million convention centre and a new US$270 million fishing harbour, while Dubai is the focus for hotel building and luxury residential complexes.

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External Position The exceptionally large surpluses of 2000 were not repeated in 2001 and 2002, when oil prices and volume retreated from their 2000 peak. Nevertheless, the external accounts remain healthy, with the trade balance recording an estimated surplus of US$3 billion and the current account a surplus of US$3 billion. Total exports fell to an estimated US$36 billion, while imports remained steady at US$33 billion in 2001, slightly lower than in the previous year. Foreign reserves are estimated at over US$150 billion, though no official figures are published. Outlook The UAE will remain broadly insulated from growing regional instability by its high levels of prosperity and no threat to the present system of government is anticipated. Despite considerable success in diversifying the economy, dependence on oil will remain significant and economic growth rates will be largely determined by international oil prices. As a result, growth could be badly affected if there is a US-led war against Iraq in 2003. Forward-looking Dubai is investing heavily in high-tech industry, e-commerce, financial services and tourism as a buffer against its dwindling oil reserves which are forecast to last only another decade. Abu Dhabi will continue diversifying into petrochemicals and heavy industry and has called in foreign operators to ensure the timely delivery of power and water for both industrial and domestic use.

2004 Migrant Amnesty – Hawala – Gas Exploration – Economic Reforms – Foreign Investments

The UAE, a loose federation of seven emirates, is the richest state in the Middle East on a per capita basis. This wealth is built on high oil reserves and a small but rapidly expanding population. The high standard of living as a result of the oil wealth has allowed the country to resist the pressures of democratisation and the social problems experienced by a number of its neighbours. A surprise move announced in April 2003 to introduce democratically elected local councils, with the remit to focus on education, health, sport, culture, residence and other economic aspects, is unlikely to reduce the power of the ruling emirs. Quotas for Locals The only cloud on the horizon is the high level of migrant workers, who represent around 80 per cent of the population of three million. While the problem is not as acute as in other members of the Gulf Co-operation Council (GCC), unemployment is edging up (officially 2.4 per cent in 2003). In common with other GCC states, the UAE has implemented a multi-faceted policy aimed at increasing the number of locals in the workforce at the expense of migrant workers – emiratisation. Under this policy, quotas are restricted to the public sector and to the banking sector. In January 2003, the government launched a four-month amnesty for all illegal migrants, which at the end of the first quarter of 2003 had netted only 10,000. A previous amnesty in 1997 saw 200,000 illegal migrants leave the country. In April 2003, the authorities announced their intention to clamp down on visitor visas for certain nationalities. While emiratisation keeps a check on social tensions, the policy increases staff costs for local businesses; locals are unwilling to work for the low pay received by the migrants. In addition, an International Monetary Fund (IMF) report published in March was critical of the process of emiratisation, which it felt would be better achieved through improved education standards and training rather than by the use of quotas. War Creates Problems Much is made of the rivalry between the two largest emirates, Abu Dhabi and Dubai, and the question of succession on the eventual death of President

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Sheikh Zayed bin Sultan al-Nahyan, who has governed the country since its formation in 1971. However, with the question of succession apparently settled in favour of his son, Crown Prince Sheikh Khalifa bin Zayed al-Nahyan, political rivalry is giving way to a less divisive economic competitiveness. Although political stability is not threatened by domestic factors, external pressures have created problems for the federal government. The regional involvement of the US, particularly in the Israeli-Palestinian dispute, Afghanistan and Iraq, has created problems for the UAE. The government has had to tread a fine line between being overtly critical (to maintain public support) while being covertly supportive of the US’s regional initiatives. The UAE has actively supported the US-led ‘war on terrorism’ by tightening its regulation of the hawala system, a low-cost informal system of transferring funds between countries which by-passes official channels and is usually used by the migrant workforce. The system is widely regarded in the West as an important aspect in terrorism funding. The new regulations introduced in 2002 require the system to become more formalised through the recording of transactions. In addition, the hawaladha (the middle men who process the transactions) are now required to be authorised and listed on a central register maintained by the government. Focus on Regional Disputes One problem for the UAE is the issue of sovereignty over the three Gulf islands, Abu Musa and the Greater and Lesser Tunbs, which are also claimed by Iran. The UAE has suggested either direct talks or international arbitration. However, Iran has rejected both options and has said that it is only prepared to resume bilateral talks if the UAE does not question Iranian sovereignty over the islands. Since 1992, in breach of agreements between the two countries, Iran has built an airstrip, substantially increased its military presence (from 700 to 4,000 troops) and opened a university on the islands. The GCC’s reluctance to actively promote the UAE’s claim has resulted in tension between the UAE and Saudi Arabia. Ras al-Khaimah, the emirate which lays claims to the islands, has planned a series of events throughout 2003 to mark the occupation of the islands, which will undoubtedly provoke a response from Iran. However, the tensions that surface periodically over the issue are invariably constrained and the situation is unlikely to escalate into military conflict. Another source of potential regional tension was eradicated in June 2002 when the UAE and Oman signed a final agreement delineating their entire 1,000km border. In 1999, the two countries had signed a partial agreement concerning 350km of the border. The new agreement reduces the potential for conflict over any hydrocarbon reserves in the area.

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Internal Economic Rivalries The UAE’s federal nature gives individual emirates considerable power over their economic policies. Each emirate has its own development plans, including infrastructural development, a different economic structure and a separate budget. The federal budget is small in comparison with those of the individual emirates. As with the other GCC states, the UAE is overly reliant on hydrocarbon revenues and also requires to reduce the role of the government in the economy. The annual IMF/World Bank meeting, which will be held in August 2003 in Dubai, will focus international attention on the UAE’s economic environment and should provide the impetus to speed up the liberalisation process. The economy of the largest emirate, Abu Dhabi, is unhealthily dependent on hydrocarbon exports. Previously, this dependence was solely concentrated on oil (both extraction and refining) but it has pursued an aggressive expansion policy in developing its gas sector. The second largest emirate, Dubai, has been considerably more successful in diversifying its economic base, particularly as a regional trading and services hub, and as a result dominates the non-oil sector of the UAE economy. The Dubai government has established a series of free trade zones to attract foreign investment, the most developed of which is the Jebel Ali Free Zone – the third largest in the world – hosting over 2,300 companies. In recent years, specialised zones, such as the Dubai Investment Park, Dubai International Financial Centre (DIFC), Dubai Knowledge Village, Dubai Internet City, Dubai Media City and the Palm leisure project, have all been established. Abu Dhabi and Dubai provide development funding to the other emirates from their government revenues. Analysis of the economy is constrained by the lack of official economic figures. An IMF report published in March 2003 concluded that despite real GDP growth, a low inflation environment and a comfortable external position, the UAE economy requires structural reforms and consolidation in fiscal policy. Despite a rise in oil prices in 2002, the OPEC-driven quota cut-backs resulted in a fall in government revenue. GDP growth in 2002 was estimated at 1.7 per cent, although the non-hydrocarbon sector registered strong growth. The IMF strongly recommended a list of policies to reduce the government’s dependence on the volatile hydrocarbon earnings, including establishing a broad-based taxation system and phasing out subsidies on water, electricity and agriculture. Among the latest plans announced by Dubai to reduce oil dependency are the DIFC, Dubai Silicon Oasis (DSO) and Dubai Pearl. The DIFC is an attempt to establish Dubai as a regional financial centre concentrating on asset management, Islamic finance, regional and financial exchange, and insurance and re-insurance.

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Around 100 companies are reported to have registered an interest in the project, which faces competition from the long-established and well-regulated financial centre in Bahrain. Construction of the US$2 billion DIFC real estate project is under way in the heart of Dubai, while the regulatory framework to international standards is being finalised. Its chairman, Anis al-Jallaf, has indicated his plans to have the DIFC contribute 10 per cent of GDP by 2010. DSO, which aims to attract IT investment through the production of semiconductors, was launched in October 2002. Dubai Pearl, a US$3 billion multi-purpose city announced in April 2003, is the largest private sector development in the UAE. The city will have 1,500 rooms in a five-star hotel and two four-star hotels, over 2,000 residential units, while more than 360,000 square metres of space will be allocated for commercial property, including shops, restaurants, a theatre and an opera house. Free Trade Blossoms The UAE is part of the GCC customs union which came into being at the beginning of 2003. The customs union is the first step towards monetary union by 2005, a common market by 2007 and a single currency in 2010. The common external tariff was set at 5 per cent for most imports from non-member states, with the exemption of basic foodstuffs and higher rates for goods such as alcohol and cigarettes. A few minor problems need to be resolved between the countries and although the agreement is not expected to significantly increase the low levels of intra-GCC trade, it is a key step in securing a trade deal with the EU, which is expected to lead to an EU-GCC free trade area by 2005. According to official sources, negotiations between the two groups have accelerated and by early 2003 around 70 per cent of the clauses had been agreed. Outlook The UAE should benefit from any agreement as a result of its position as a regional trading hub and its positive investment environment: the UAE is ranked 24 in the 2003 Index of Economic Freedom published by the right-wing US think tank, the World Heritage Foundation. However, the UAE will face competition for inward EU investment from Bahrain, which is ranked at 16. Moves towards economic liberalisation continue to edge forward slowly. A foreign investment law, which will allow 100 per cent foreign ownership in certain sectors, will be enacted during 2003. In addition, privatisation of Abu Dhabi’s power and water sector continued with the announcement of the al-Mifra independent water and power project (IWPP). Abu Dhabi plans to complete privatisation of the sector by 2006. At present around 32 per cent of generation and desalination is carried out by the private sector. In the medium

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term the high oil revenues and low population will guarantee the economy continues to achieve positive real GDP growth, while ensuring that social pressures are kept in check, despite the lack of democracy. Risk assessment Economic Political Regional stability Stock market

Good Good Poor Under-developed

2005 Saudi Arabia – Omani Border – Unemployment Edges up – Stable Inflation – Central Bank Reservations – Etihad Airways – GCC Customs Union

To have created the richest state in the Middle East out of a disparate group of sheikhdoms in the space of thirty years is no mean achievement. Not more than a few decades ago, Dubai was still sending raiding parties out to neighbouring Sharjah and minor wars continued to be fought between Dubai and Abu Dhabi. More often than not the opposing armies were led by the same personalities who subsequently became the federation’s greatest supporters. The United Arab Emirates (UAE) was established under the sponsorship of the British in 1971. In the framework of its withdrawal from East of Suez the British foreign and commonwealth office had recognised the vulnerability of the individual sheikhdoms. The tiny emirate of Fujairah, for example, had already been targeted as a mafia base. In three decades, the transformation from the Trucial States as they were known prior to federation, to a modern nation state has been dramatic. Sheikh Zayed bin Sultan al-Nahyan, ruler of the richest emirate Abu Dhabi and president of the UAE since its inception, has trodden a delicate path between the interests of the new nation and the authority of the other six ruling sheikhs. The federation has grown alongside the development of a federal structure and is today a fine balance, allowing each ruler to determine the style and economic future of his emirate, while Abu Dhabi provides the infrastructure and (with the exception of Dubai, which in commercial terms follows its path) a platform for greater prosperity. Not that the UAE hasn’t had its moments: in 1976 Sheikh Zayed threatened to resign in frustration over slow progress, which caused the other rulers to realise that without Abu Dhabi and its massive oil revenues, the union could lose its one financial backer. Gradually, common cause enabled the individual emirates to put their rivalries aside, or at least to express them in commercial, rather than in military terms. The initial federation consisted of only six emirates, as Ras-al-Khaimah’s ruler optimistically hoped that successful oil exploration would enable him to stick out for a better deal. One problem for the UAE is the issue of sovereignty over the three Gulf islands, Abu Musa and the Greater and Lesser Tunbs, which are also claimed by Iran. The UAE has suggested either direct talks or international arbitration. To push through the federation’s creation, the British rather fudged the issue of

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the Tunbs. Since then, Iran has rejected both options and has said that it is only prepared to resume bilateral talks if the UAE does not question Iranian sovereignty over the islands. Since 1992, in breach of agreements between the two countries, Iran has built an airstrip, substantially increased its military presence (from 700 to 4,000 troops) and, somewhat ludicrously, opened a university on the islands. The Gulf Co-operation Council’s (GCC) reluctance actively to promote the UAE’s claim has resulted in tension between the UAE and Saudi Arabia. Ras al-Khaimah, is the emirate which lays claims to the islands. However, the tensions that surface periodically over the issue are invariably constrained and the situation is unlikely to escalate into military conflict. Another source of potential regional tension was eradicated in 2002 when the UAE and Oman signed a final agreement delineating their entire 1,000km border. In 1999, the two countries had signed a partial agreement concerning 350km of the border. The new agreement reduces the potential for conflict over any hydrocarbon reserves in the area. The UAE’s wealth depends on two principal factors: Abu Dhabi’s oil and Dubai’s entrepreneurial flair. The flagship airline may be called ‘Emirates’, but is Dubai based and Dubai owned. (In 2003 Abu Dhabi announced the formation of its own airline, Etihad Airways, designed to compete with the now well-established Emirates.) Politically, whatever tensions and rivalries may still exist, the UAE is remarkably stable. The position of Sheikh Zayed bin Sultan al-Nahyan, who is in his late 80s and is also the ruler of Abu Dhabi, is not likely to be challenged in his lifetime. Speculation about his likely successor, which might have become a destabilising fact, died down in 2004 when his son, Sheikh Khalifa bin Zayed al-Nahyan was named Crown Prince of Abu Dhabi and Sheikh Zayed’s successor in the UAE presidency. Sheikh Zayed is not the only elderly ruler in the UAE; in some of the smaller emirates the succession question is also likely to become an issue. Emiratisation What is becoming a major issue is the high level of migrant workers, who represent around 80 per cent of the population of three million. While the problem is not as acute as in other members of the GCC, unemployment is edging up (officially 2.4 per cent in 2003). In common with other GCC states, the UAE has implemented a multi-faceted policy aimed at increasing the number of locals in the workforce at the expense of migrant workers – ‘Emiratisation’. Under this policy, quotas are restricted to the public sector and to the banking sector. In January 2003, the government launched a four-month amnesty for all illegal migrants, which at the end of the first quarter of 2003 had netted only

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10,000. A previous amnesty in 1997 saw 200,000 illegal migrants leave the country. In April 2003, the authorities announced their intention to clamp down on visitor visas for certain nationalities. While Emiratisation keeps a check on social tensions, the policy increases staff costs for local businesses; locals are unwilling to work for the low pay received by the migrants. In addition, an International Monetary Fund (IMF) report published in March 2003 was critical of the process of Emiratisation, which it felt would be better achieved through improved education standards and training rather than by the imposition of quotas. Economy Analysis of the UAE economy is constrained by a lack of reliable official figures. Estimates for gross domestic production (GDP) growth in 2003 range from 7 per cent to 4.6 per cent. Even at the lower end of the range, this represents a significant improvement over 2002, when the overall economy actually shrank by 0.9 per cent. Inflation is estimated at between 2.8 per cent and 3.2 per cent for 2003 and is expected to remain stable in 2004. High oil prices should benefit the current account, generating surpluses for 2004 well up on the estimated US$12.5 million in 2003, which corresponded to 16 per cent of GDP. According to ministry of finance and industry figures, the budget deficit for 2003 was Dh2.21 billion, (US$0.6 billion), little different from the 2002 deficit of Dh2.17 billion and representing 0.8 per cent of GDP. The UAE’s GDP figures do not accurately represent the true state of the economy, as they exclude earnings from overseas assets – estimated by some observers to be as high as US$250 billion – and from oil production earnings that do not feature as recorded government revenues. Taking these elements into account, there would be no fiscal deficit at all. In a report published at the end of June 2004, the IMF commended the UAE’s prudent macro-economic policies, judicious use of the oil price windfall and its receptiveness to foreign investment, stating that these had created ‘conditions of high non-oil growth, low inflation and ample fiscal and current account surpluses’. The UAE’s progress with structural reforms was also commended, stimulating the private sector and building up resilience to external shocks. Despite the problems with the Dubai International Financial Centre (DIFC) in Dubai (see below), the country’s financial sector was given a tick. ‘The UAE banks remained well capitalised and profitable.’ Banking The UAE’s banking sector did indeed remain profitable in 2003, despite fears that the country was at risk of being ‘over-banked’. The booming construction

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centre generated new lending opportunities and, in the case of some of the larger companies, bond issues. Profits at the UAE’s largest financial institution, the National Bank of Abu Dhabi, rose by 12 per cent, despite the bank being down-graded by credit rating agency Fitch to ‘c’ from ‘bc’ in December 2003, reflecting concerns over an over-extended retail loan portfolio. The National Bank of Dubai (once known as the ‘national bank of Scotland’ due to the large number of expatriate Scots it employed) increased its profits by 42 per cent. It also saw its credit rating raised to 1 from 2 by Fitch. Emirates Bank saw its profits rise by 8 per cent in 2003. The proposed DIFC, a major initiative designed to strengthen the emirate’s role as a financial centre, has been beset by problems from the outset. Matters came to a head in June 2004 when, following disagreements between the DIFC and the Dubai Financial Services Authority (DFSA), a number of high profile expatriates – including Sir Ian Hay Davison, who had been chairman of Lloyds the insurance centre and a well-known figure in the City of London, – were peremptorily dismissed amidst allegations of procrastination and unacceptable transparency standards. The very concept of the DIFC had been met with reservations by the Abu Dhabi based Central Bank of the United Arab Emirates, which saw it as diluting its own powers while strengthening those of Dubai. The delays and sackings have done little to encourage the international finance sector to get behind the project. In July 2003 the DFSA announced that Dubai Crown Prince and UAE defence minister, Sheikh Mohammed bin Rashid al-Maktoum, would personally guarantee the DFSA’s independence. The statement coincided with an announcement that UAE President Sheikh Zayed had finally issued the decree formally establishing the DIFC as the UAE’s first financial services free zone. Not to be outdone by Dubai, in July 2004 Abu Dhabi launched its own financial initiative, the creation of a new holding company aimed at privatising state-owned industries in the emirate. Companies formerly owned by the government’s defunct General Industries Corporation (GIC) would have their assets transferred to the new General Holding Company (GHC). The first initial public offering (IPO), scheduled for September 2004, was for the Emirates Foodstuff and Mineral Water Company. The stated aim of the privatisation initiative was to ‘create a partnership between the public and the private sectors’. Air Contest Both Abu Dhabi and Dubai have embarked on massive airport expansion plans. The US$600 million expansion of Abu Dhabi international Airport is designed to accommodate the emirate’s new airline, Etihad Airways, which was launched in November 2003. Owned by the Abu Dhabi government, plans have

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been announced to create a fleet of 50 aircraft over a five year period – although initial plans had set the more modest target of acquiring 6 aircraft by the end of 2004. In July 2004, Etihad signed a memorandum of agreement undertaking to purchase 24 aircraft from Europe’s Airbus Industrie, with deliveries due to begin in 2006. Abu Dhabi’s aviation expansion plans are dwarfed by Dubai’s US$4,200 million expansion of Dubai International Airport, which will see a new terminal and increased car parking facilities. Dubai’s well-established airline, Emirates, also announced in July 2004 that it was purchasing four Boeing 777-300ER aircraft, with an option for a further nine, bringing its Boeing order book to 39 aircraft, in addition to the 21 Boeing aircraft it currently operates. Energy The UAE’s oil reserves of 97.8 billion barrels, are around 10 per cent of the world total. Abu Dhabi holds the lion’s share, 94 per cent of this amount, or about 92.2 billion barrels. Dubai contains an estimated 4.0 billion barrels, followed by Sharjah and Ras al-Khaimah, with 1.5 billion and 100 million barrels of oil, respectively. Most of the UAE’s oil fields have been producing since the 1960s or early 1970s. Proven oil reserves in Abu Dhabi have doubled in the last decade, mainly due to significant increases in rates of recovery. Abu Dhabi has continued to identify new finds, especially offshore, and to discover new oil-rich structures in existing fields. Abu Dhabi joined OPEC in 1967 (four years before the UAE was formed), Dubai does not consider itself part of OPEC or bound by its quotas. The UAE’s OPEC quota at the beginning of November 2003 was 2.14 million bpd and its crude oil production in January 2004 was 2.25 million bpd. The UAE’s total production capacity is 2.50 million bpd, making it second only to Saudi Arabia for excess production capacity among OPEC member states. Several projects to upgrade infrastructure at existing oilfields are planned or underway. These projects are part of an overall goal of raising the UAE’s production capacity to 3 million bpd by the end of 2006, at an overall cost of US$1.5 billion. The UAE’s natural gas reserves of 212 trillion cubic feet (Tcf) are the world’s fifth largest after Russia, Iran, Qatar and Saudi Arabia. The largest reserves of 196.1Tcf are located in Abu Dhabi. Sharjah, Dubai and Ras al-Khaimah contain smaller reserves of 10.7Tcf, 4.1Tcf and 1.1Tcf, respectively. In Abu Dhabi, the non-associated Khuff natural gas reservoirs beneath the Umm Shaif and Abu al-Bukhoosh oilfields rank among the world’s largest. Current natural gas reserves are projected to last for about 150–170 years.

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Increased domestic consumption of electricity and growing demand from the petrochemical industry have provided incentives for the UAE to increase its use of natural gas. Over the last decade, natural gas consumption in Abu Dhabi has doubled and is projected to reach 4 billion cubic feet per day (bcf/d) by 2005. The development of natural gas fields also results in increased production and exports of condensates, which are not subject to OPEC production quotas. The past few years have seen the UAE embark on a massive, multi- billion dollar programme of investment in its natural gas sector including a shift toward natural gas-fired power plants and the transformation of the Taweelah commercial district into a natural gas-based industrial zone. An ambitious plan, the Dolphin Gas Project, to interconnect the natural gas grids of Qatar, the UAE and Oman, also is underway. The Dolphin Project aims to develop links between the natural gas infrastructures of Qatar, the UAE and Oman. It will allow the export of non-associated natural gas from Qatar’s massive offshore North Dome field. A Statement of Principles for the project was signed in March 1999 between the UAE Offsets Group (UOG) and Qatar Petroleum. The two firms signed a natural gas sales agreement in March 2001, with natural gas supplies expected to start in late 2006. Estimated to cost US$8–10 billion over the next decade, the project will begin as a sub-sea pipeline from Ras Laffan in Qatar to a landfall in Abu Dhabi, which will then be extended to Dubai and northern Oman. It will start at 48 inches in diameter, narrowing to 30 inches by the time it reaches Oman. In its initial phase, the pipeline is to carry 3Bcf/d of Qatari natural gas to the UAE and Oman, accounting for nearly 10 per cent of total world natural gas supplies shipped by pipeline. GCC The UAE is part of the GCC customs union which came into being at the begin-

ning of 2003. The customs union is the first step towards monetary union by 2005, a common market by 2007 and a single currency in 2010. The common external tariff was set at 5 per cent for most imports from non-member states, with the exemption of basic foodstuffs and higher rates for goods such as alcohol and cigarettes. A few minor problems need to be resolved between the countries and although the agreement is not expected to significantly increase the low levels of intra-GCC trade, it is a key step in securing a trade deal with the EU, which is expected to lead to an EU-GCC free trade area by 2005. The UAE should benefit from any agreement as a result of its position as a regional trading hub and its positive investment environment: the UAE is ranked 24 in the 2003 Index of Economic Freedom published by the right-wing US

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think tank, the World Heritage Foundation. However, the UAE will face competition for inward EU investment from Bahrain, which is ranked at 16. Moves towards economic liberalisation continue to edge forward slowly, including a foreign investment law, which will allow 100 per cent foreign ownership in certain sectors. In addition, privatisation of Abu Dhabi’s power and water sector continued – Abu Dhabi plans to complete privatisation of the sector by 2006. At present around 32 per cent of generation and desalination is carried out by the private sector. In the medium term the high oil revenues and low population will guarantee the economy continues to achieve positive real GDP growth, while ensuring that social pressures are kept in check, despite the lack of democracy. The announcement that the UAE’s succession has been decided upon has removed fears of political instability following Sheikh Zayed’s death. Risk assessment Economic Political Regional stability Stock market

Good Good Poor Under-developed

2006 Abu Dhabi:Dubai Rivalry – Dubai Diversifies Further – Sheikh Mohammed Becomes Ruler of Dubai – Camel Racing Reforms

The United Arab Emirates is the only genuine federation in the Middle East. In the late twentieth century, the drafting skills of civil servants from the British foreign and commonwealth office combined with the common sense of a group of South Arabian rulers to produce a constitution which has proved remarkably durable. The country consists of seven tribally-based emirates that effectively control the south-eastern portion of the Arabian Peninsula south of Bahrain and Qatar. The federation covers 83,600 square kilometres and is bordered on the north by the Arabian Gulf and Iran, on the east by the Sultanate of Oman, and on the south and west by the Kingdom of Saudi Arabia. The UAE also separates Oman from its territory on the Musandam Peninsula and extends 90 kilometre s along the Gulf of Oman, an area known as the Al-Batinah coast. Most of the federation is arid desert and salt flats, but there are mountains in the north-east that rise to 1,200 meters. Rainfall is very low and there are few fertile areas except in the north and among the oases. The UAE is strategically important not only because it produces 10 per cent of the world’s oil supply and has the fourth-largest natural gas reserves in the world. Its strategic location enables it to monitor and even control shipping passing through the Strait of Hormuz, through which passes much of the oil consumed in Europe and Asia. In a period of 30 years, the UAE has wielded its resources and strategic location to become one of the richest states in the world. The UAE was also a founding member of the Gulf Co-operation Council (GCC). Transition 2005 was a transitional year in many respects for the United Arab Emirates (UAE). It was President Sheikh Khalifa bin Zayed al-Nahyan’s first year in office. The country’s founding president, Sheikh Zayed bin Sultan al-Nahyan, had died in November 2004. Moreover, more change was to come, with the death in office of Vice President and Prime Minister Sheikh Maktoum bin Rashid alMaktoum (of Dubai) on 4 January 2006. In the more than four decades or so since its creation as a country, the UAE has made extraordinary progress. The death of Sheikh Zayed offered a moment

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in which to take stock of his considerable achievement. Sheikh Zayed was thought to have been born in 1918. He was a member of the al-Nahyan sub-section of the Al-Bu Falah branch of the important Bani Yas tribe, who lived mainly in the village (it was barely a town) of Abu Dhabi and also in the Liwa Oasis region of Dhafra, which was their original home. The al-Nahyan had been present in the area for some 150 years, owning farms and houses in the Buraimi area, especially in Al-Ain. Sheikh Zayed was directly descended from Sheikh Issa Bin Nahyan who had ruled in Abu Dhabi towards the end of the eighteenth century and who is regarded as the first of the al-Nahyan rulers. In 1946 Sheikh Zayed was made responsible for the running the affairs of Abu Dhabi’s eastern province – with its capital at Al-Ain. He became the ruler of Abu Dhabi in 1996, replacing his brother, Sheikh Shakhbut who had ruled since 1928. In his book The Trucial States the author K G Fenelon attributes Sheikh Shakhbut’s long rule (38 years) to the intervention of his mother Sheikha Salama bint Butti al-Qubaisi who had made all her sons swear that they would not attempt to depose Sheikh Shakhbut by violence. Although many of the anecdotal accounts of Sheikh Shakhbut’s dated approach to economics and governance were true, there was something to be said for his views that his subjects should not become a minority in their own country as had happened in Kuwait, and he was conscious of the risks posed by accelerated development. The peaceful transfer of power to Sheikh Zayed offered a more balanced perspective to development. Zayed’s time in Al-Ain, albeit under the close financial control of his brother, had enabled him to appreciate Bedouin customs and traditions, as well as gaining an awareness of the need for, and possibilities of, development, not only in Al-Ain and Abu Dhabi, but throughout the Arabian Gulf. Major achievements attributed to Sheikh Zayed were the clearance of ancient underground canals (falaj) and the construction of the 1,500 metre long Falaj al-Sarouj underground canal, which took no less than 18 years to complete lying at depths of up to 65 feet below ground level. Its completion meant that water resources could be more equitably shared between rich and poor farmers. A critical step towards the creation of a viable union between the sheikhdoms of the Lower Gulf, was a meeting between Sheikh Zayed and Sheikh Rashid the ruler of Dubai in February 1968 at which the two formally agreed to merge their two sheikhdoms into a union under which key areas of governance and administration such as defence, security, foreign affairs, social services would be handled jointly and the sheikhdoms would no longer rely on the UK for defence and international relations. As pointed out by Frauke Heard-Bey in From Trucial States to United Arab Emirates. ‘The agreement of February 1968

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was inadequate as an instrument for welding the nine sheikhdoms into a political organism functioning as one federal state or union. It was not a constitution but more the expression of an intention.’ Early Population Figures The estimated population figures for the seven sheikhdoms in 1968 provide a dramatic measure for the social changes that have subsequently taken place. That of Abu Dhabi was put at 46,375, (males 34,863, females 11,512) of which over 20,000 lived in the township of Abu Dhabi and 14,000 in Al-Ain. The economically active number was estimated to be 29,284 (males 28,891, females 303). The expatriate population (largely engaged in the oil related industries) was 26,023, ninety per cent of whom were males. In 1968 about one third of the total population of the Trucial States, some 60,000 people, lived in Dubai. Most of this number were Arab, but there was a significant contingent (estimated at 11,000) of Iranians. Europeans and Americans numbered only 500. In contrast to Abu Dhabi, few restrictions were placed on foreigners opening or running businesses in Dubai. The 1968 merchant community in Dubai could safely be described as cosmopolitan, consisting (alongside Arab merchants and traders) of Indians, Iranians and Pakistanis. The population sizes of the other five emirates were smaller. Sharjah was the largest, with a total of 31,668 inhabitants. Of these 19,198 lived in Sharjah town, 2,860 in Khor Fakkan and 3,119 in Kalba. Only 10,642 of these were classed as economically active. Ajman’s population in 1968 was only 4,246, of which only 1,222 were economically active. Perhaps surprisingly, the population of Ras al-Khaimah numbered 24,387 in 1968, of which (in sharp contrast to some of the other emirates) just over half (13,269) were males and 11,138 were females. However, in Ras al-Khaimah the economically active totalled less than one third of the population, 7,585. The population of Fujairah (described in 1970 by Fenelon as the ‘forgotten state of Trucial Oman’) was less than a third of that of Ras al-Khaimah, only 9,735. The inhabitants were evenly spread between the towns of Fujairah, Ghurafa and Dibba and the coastal villages and mountain villages. According to the 1968 census, the smallest of the Emirates, Ajman, had a population of 4,200, of whom 3,700 lived in Ajman itself, and 500 elsewhere. Some of its people were Bedouin. A Diversifying Economy Underpinned by Hydrocarbons The UAE economy grew by around 6.5 per cent in 2005, much of it fuelled by the booming emirate of Dubai. The Dubai authorities have long been aware of the

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fact that if they are to maintain their position as a trading and financial centre, no longer dependent on oil revenues, they will need to develop alternative centres of revenue. This will enable Dubai not only to compete with Abu Dhabi for influence within the UAE, but also with other would-be financial centres such as Bahrain, Kuwait and even Qatar. In September 2005, Dubai launched an ambitious plan to become the financial services centre of the Middle East, in competition with Bahrain, when it officially opened the Dubai International Financial Exchange (DFIX). The DFIX forms part of the Dubai International Financial Centre (DIFC), established in 2002. Both of these projects were the brainchild of the then de facto emir of Dubai, Sheikh Mohammed bin Rashid al-Maktoum. Sheikh Mohammed succeeded his brother Sheikh Maktoum as Emir of Dubai and Prime Minister and Vice President of the UAE in January 2006. The UAE sits on about 10 per cent of the world’s proven oil reserves and also has the fifth largest gas reserves in the world. About 30 per cent of its gross domestic product is based on oil exports but recent developments in Dubai and elsewhere in the country have seen large strides forward taken in the financial and petrochemical sectors. The rivalry between Dubai and Abu Dhabi is certainly more than a joke. Dubai can hardly be blamed for seizing so successfully on every possible opportunity to keep afloat and even develop. Dubai is all about the survival of a less well-endowed emirate in the face of powerful competition. After all, it only has one per cent of Abu Dhabi’s hydrocarbon reserves. That its choice of activities are sometimes less than respectable – alcohol and horse-racing are not necessarily a ticket to respectable prosperity – is beyond doubt. But Dubai needs success as much as respectability. Its mix of tourism and commercialisation is apparently beginning to work well. Nowhere is there a greater awareness of Dubai’s success than in Abu Dhabi, which has been the UAE’s ‘temporary’ capital for some decades. The original plan was to create a new capital city located on the border midway between the two emirates. By dint of some deft constitutional drafting, Abu Dhabi became referred to as the UAE’s permanent capital. Dynastic Musical Chairs With the death of founding President Sheikh Zayed in November 2004, a new member of the al-Nahyan clan stepped forward to claim not only the family emirate of Abu Dhabi but also the virtually hereditary presidency of the UAE. A similar change took place in January 2006, when Sheikh Mohammed inherited the emirate of Dubai and took on the UAE’s vice-presidency and prime ministerial office.

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Democratic Reform, Sort of, Some Time In December 2005, President Sheikh Khalifa announced plans to institute a partially-elected Advisory Council. Khalifa also stated that suffrage would be limited to a small number of electors who would in turn be chosen by the country’s seven emirs. No date was given for the election and political parties will remain banned. Also in December, the Emirate of Abu Dhabi held its first ever elections for its Chamber of Commerce and Industry. Women were also allowed to vote and two seats were reserved for women candidates. Reforms In July and September 2005, the UAE government announced new laws regulating camel racing in the country. Camel racing is one of the most popular sports in the Gulf region but the UAE and others states such as Qatar have been criticised in recent years by anti-slavery groups and Western governments. These accuse the UAE of turning a blind eye to the trafficking of children into the country, where the victims live in virtual slavery as camel jockeys. The reforms raised the minimum age of camel jockeys from 16 to 18 and instituted an ID card system to enforce this regulation. The UAE also attracted international criticism in 2005 for its policy of pressuring gay men to undergo controversial hormone and psychiatric treatment. Homosexuality is illegal in the UAE. In the latest in a series of raids across the country, 26 men were arrested in November on homosexuality-related charges, provoking a rebuke from the United States government. Outlook The UAE has remained violence-free in a region hyper-charged in the wake of the US-led invasion of Iraq. There have been no reports of Islamist terrorism or politically inspired attacks on the UAE’s large expatriate population. There is also little to suggest so far that the country’s citizens are agitating for democratic reform. The combination of public quiescence and restricted political freedom look set to continue as long as economic prosperity continues. Risk Assessment Politics Stable Economy Booming Regional stability Fragile

2007 Macroeconomic Management – Transition – Natural Gas – Increased Investor Confidence – Public Quiescence

The United Arab Emirates (UAE) was set up in 1971 following the British withdrawal from the Gulf under the East of Suez overall withdrawal. Under the revised arrangements, British responsibility for the defence and foreign relations of the Sheikhdoms was ended. The initial federation had only six members, the emirate of Ras al-Khaimah joining, with a degree of reluctance, in February 1972. Two states have an over-riding importance in the UAE – Abu Dhabi and Dubai. Despite their historic rivalries, the two have managed to agree on the broad lines of UAE policy, while pursuing very different development agendas. An outward-oriented development strategy, good macroeconomic management and a business-friendly environment have all contributed to high growth in the UAE in recent years. In 2006 gross domestic product (GDP) grew at an impressive 11.5 per cent, driven largely by strong growth in both the oil and non-oil sectors, which benefited by an effective depreciation of the dirham and strong global demand. According to the International Monetary Fund (IMF) the UAE’s growth was broad-based, led by manufacturing followed by services and construction. The UAE’s strong economic fundamentals have increased investor confidence, resulting in high levels of domestic and foreign investment in manufacturing and energy-intensive sectors. The UAE economy is obviously well-positioned to consolidate recent gains from sustained high oil prices. 2006 followed what had been a significant transitional year for the UAE. It was President Sheikh Khalifa bin Zayed al-Nahyan’s first year in office. The country’s founding president, Sheikh Zayed bin Sultan al Nahyan, had died in November 2004. Moreover, more change was to come, with the death in office of vice president and prime minister Sheikh Maktoum bin Rashid al-Maktoum on 4 January 2006. A Diversifying Economy Dubai, by now well known internationally for its entrepreneurial spirit, had embarked upon an ambitious plan to become the financial services centre of the Middle East, in competition with Bahrain, when it officially opened the Dubai International Financial Exchange (DFIX). The DFIX forms part of the Dubai International Financial Centre (DIFC), established in 2002. Both of these

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projects were the brainchild of the then de facto Emir of Dubai, Sheikh Mohammed bin Rashid al-Maktoum. Sheikh Mohammed succeeded his brother Sheikh Maktoum bin Rashid al-Maktoum as Emir of Dubai and prime minister and vice president of the UAE in January 2006. In addition to his role in ruling Dubai, Sheikh Mohammed had a high profile outside the Gulf as an important figure in international horse-racing. His Godolphin Racing horse-training establishment in Newmarket (UK) was among the most successful in the world, and he had established other training and breeding operations in the United States, Australia and France. Statements that the UAE sits on about 10 per cent of the world’s proven oil reserves and also has the fifth largest gas reserves in the world are correct; however, what is generally meant is that Abu Dhabi is the country’s oil force. Dubai’s reserves are minimal by comparison and estimated to have only a few years’ production left. Thus, about 30 per cent of the UAE’s GDP is based on oil exports, although recent developments in Dubai and elsewhere in the country have seen large strides taken in the financial and petrochemical sectors. With Dubai playing a major role, in recent years the UAE has undertaken several projects to diversify its economy and to reduce its dependence on oil and natural gas revenues. The non-oil sectors of the UAE’s economy presently contribute around 70 per cent of the UAE’s total GDP, and about 30 per cent of its total exports. The federal government has invested heavily in sectors such as aluminium production, tourism, aviation, re-export commerce and telecommunications. As part of its strategy to further expand its tourism industry, the UAE is building new hotels, restaurants and shopping centres, and expanding airports and duty-free zones. Dubai has become a central Middle East hub for trade and finance, accounting for about 85 per cent of the Emirates’ re-export trade. The UAE has been a member of the World Trade Organisation (WTO) since 1995, and has one of the most open economies in the region. It began negotiations in March 2005 with the United States on a possible free trade agreement. The Oil and Gas According to the Oil and Gas Journal (OGJ) the UAE contains proven crude oil reserves of 97.8 billion barrels, or slightly less than 8 per cent of the world total. Abu Dhabi holds 94 per cent of this amount, or about 92.2 billion barrels. Dubai contains an estimated 4.0 billion barrels, followed by Sharjah and Ras al-Khaimah, with 1.5 billion and 100 million barrels of oil, respectively. Dubai’s production has been falling in recent years due to the decline of its modest reserves. Most of the UAE’s oilfields have been producing since the 1960s or early 1970s. However, proven oil reserves in Abu Dhabi have roughly

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doubled in the last decade, mainly due to significant increases in rates of recovery. Abu Dhabi has continued to identify new finds, especially offshore, and to discover new oil-rich structures in existing fields. Under the UAE’s constitution, each emirate (where it is appropriate) controls its own oil production and resource development. Although Abu Dhabi joined the Organisation of the Petroleum Exporting Countries (OPEC) in 1967 (four years before the UAE was formed), Dubai does not consider itself part of OPEC or bound by its quotas. The UAE’s current OPEC production quota (effective 1 July 2005) is 2.44 million barrels per day (bpd), and its current crude oil production as of May 2006 is 2.50 million bpd. The UAE’s total production capacity is 2.50 million bpd, so it does not have any spare capacity at the current level of production. According to the OGJ the UAE’s natural gas reserves of 214.4 trillion cubic feet (Tcf) are the world’s fifth largest after Russia, Iran, Qatar, and Saudi Arabia. The largest reserves of 198.5Tcf are located in Abu Dhabi. Sharjah, Dubai, and Ras al-Khaimah contain smaller reserves of 10.7Tcf, 4.0Tcf, and 1.2Tcf, respectively. In Abu Dhabi, the non-associated Khuff natural gas reservoirs beneath the Umm Shaif and Abu al-Bukhoosh oilfields rank among the world’s largest. Increased domestic consumption of electricity and growing demand from the petrochemical industry has provided incentives for the UAE to increase its use of natural gas. Over the last decade, natural gas consumption in Abu Dhabi has doubled, and it currently stands at around 4 billion cubic feet per day (bcf/d). The development of natural gas fields also results in increased production and exports of condensates, which are not subject to OPEC production quotas. According to the US Energy Information Administration (EIA) the past few years have seen the UAE embark on a massive, multi- billion dollar programme of investment in its natural gas sector including a shift toward natural gas-fired power plants and the transformation of the Taweelah commercial district into a natural gas-based industrial zone. An ambitious plan, the Dolphin Gas Project, to interconnect the natural gas grids of Qatar, the UAE and Oman, is also underway. Most of the UAE’s increased natural gas needs in the next decade are to be satisfied with imported natural gas from Qatar. Much of the natural gas development in the UAE itself involves the extraction of natural gas liquids (NGLs) and reinjection of the gas to maintain pressure in oilfields. Friends and Neighbours A Wiki-leaked cable dated 2006 gave details of a report from the United States embassy in Abu Dhabi in which it examined the UAE’s position in relation to terrorist activity in the region, including that related to Iran. The cable noted

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that for historical reasons – some quite recent and others long-established – the UAE regards its neighbour across the Gulf as one of the most serious threats to national security. However, UAE officials are hesitant to take up positions or embark on actions that might either provoke Iran, placing it in an impossible position and possibly compromise the extensive trading relationship between the countries, which is centred on Dubai. The report observed that there was a greater willingness on the part of the UAE government to support United States’ initiatives without the full approval of the Gulf Co-operation Council (GCC). According to the report, as tensions escalate between Iran and the international community, the UAE is growing increasingly nervous. The UAE leadership has allegedly informed the US government that it considers Hamas to be a terrorist organisation. The UAE had also re-confirmed its intention to uphold its commitments of humanitarian assistance to the Palestinian people. It has also taken an active role in encouraging Sunni participation in the Iraqi political process and continues to condemn the sectarian violence that is preventing stabilisation of the country. In the face of growing ideological extremism in the Gulf, the UAE leadership appears to be politically determined not to allow Islamist extremists to gain a foothold on UAE soil. The US embassy report also noted that the UAE is concerned about the terrorist threat to the country, but lacks a ‘comprehensive implementation strategy for reducing its vulnerability.’ Although the UAE considers homeland security one of its top priorities, it has not sought to prioritise national security projects; its efforts have instead focussed on ‘contracting risk assessments, forming committees, and procuring equipment.’ There was talk of a UAE government plan (announced by President Khalifa in December 2005), to place all the security agencies under a newly established National Security Council. Although the UAE government was worried about its oil infrastructure, the response seemed to be the appointment of three international companies currently conducting risk assessments of the UAE oil infrastructure and maritime security. In the view of the US Embassy the UAE reacts quickly when presented with evidence of a terrorist presence inside the UAE, but does not appear to approach the problem from a transnational posture. The Embassy’s view is that the UAE’s immediate response when terrorists pose a risk is simply to deport them. UAE agencies do not apparently investigate to see how far the problem goes or whether there is an international network involved. The Emirates government does not consistently share information found in the possession of individuals in their custody with other governments. This approach limits law enforcement and the intelligence services’ ability to use intelligence to disrupt extremist cells and planned attacks. The UAE’s insistence on deportation as a

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solution does not, in the view of the US government, protect the country long-term or truly address the nature and scope of the problem. Counter-terrorism Finance The leaked cable also contained information on the UAE’s progress in regulating the financial sector against money laundering and terrorist financing. Although the UAE now has a strong legal framework in place, it must turn its efforts to enforcement. The US government also considered it imperative that the UAE authorities investigate and prosecute violators of terror finance/anti-money laundering, cash courier, and charity laws and regulations. To date, however, investigation and prosecution have been weak. In an effort to increase US and UAE co-operation on terrorist financing, the first meeting of the US/UAE Joint Terrorist Finance Co-ordinating Committee (JTFCC) was held in Abu Dhabi in January 2005.The UAE team had representatives from the Central Bank, state security, ministries of interior, foreign affairs, and justice. However, no one participated from Dubai. In order for the JTFCC to be an effective committee, Dubai’s police, state security, customs, and the department of Islamic affairs and charities must participate. Iran According to the leaked US document, UAE leaders are concerned about the escalating tensions between Iran and the international community. The country’s leaders had publicly expressed their concern at the entire region’s ‘vulnerability’ at a press conference in Kuwait. As noted above, the commercial ties between Dubai and Iran are significant (Dubai is Iran’s largest non-oil trading partner). The leaked document noted that the UAE’s government walks a fine line between maintaining and encouraging this trade and working to prevent suspected Iranian proliferation activities. Although the UAE is worried about Iran’s nuclear ambitions, its short-term policy decisions regarding Iran centre on not provoking its neighbour. The US government has reportedly approached the UAE government four times since January 2006 asking it to interdict and inspect cargo suspected of going to Iran’s nuclear and/or missile programmes. None of these efforts has actually resulted in a successful interdiction. In the first two instances UAE officials apparently refused to take action. The Director of Dubai’s state security organisation explained during the February US/UAE Counter-proliferation Task Force meeting that the decision not to inspect the containers had been a political decision based on the UAE’s concern that Iran might retaliate. In the two later instances, ships that had been scheduled to arrive in Dubai went directly to Bandar Abbas. Government

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ministers had reportedly advised their US counterparts that UAE was in the final stages of ratifying its export control law and that it would be announced ‘soon.’ The leaked report stated that Abu Dhabi’s ruling family has expressed clear support for US initiatives against Iran. (The same support was apparently not immediately forthcoming from Dubai’s ruling family). The leaked report also stated that UAE ministers and their US counterparts agreed about the need to counter Iran’s growing influence in the region and its nuclear ambitions, although they specified that any sanctions should target the key Iranian leadership, not the Iranian people. The UAE felt that it was not necessary to wait for all GCC countries to agree before proceeding with any US plans against Iran. The UAE proposed to prepare a paper responding to US government concerns about Iran and mechanisms for addressing the challenge posed by Iran. In a March meeting with US Central Command Commander General Abizaid, the UAE rulers spoke about the Iranian threat with a greater sense of urgency. They were strongly in favour of taking action against Iran and its president sooner rather than later. New Brooms Following the death of founding President Sheikh Zayed in November 2004, a new member of the al-Nahyan clan, Khalifa bin Zayed, stepped forward to inherit not only the family emirate of Abu Dhabi but also the virtually hereditary presidency of the UAE itself. A similar change took place in January 2006, when, following the death of his brother Sheikh Maktoum, Sheikh Mohammed became the ruler of the emirate of Dubai, and the UAE’s vice president and prime minister. In December 2005, the new president, Sheikh Khalifa, announced plans to institute a partially-elected advisory council. Khalifa also stated that suffrage would be limited to a small number of electors who would in turn be chosen by the country’s seven emirs. No date was given for the election and political parties will remain banned. Also in December, the emirate of Abu Dhabi held its first ever elections for its Chamber of Commerce and Industry. Women were also allowed to vote and two seats were reserved for women candidates. Outlook The UAE has remained violence-free in a region hyper-charged in the wake of the US-led invasion of Iraq. There have been no reports of Islamist terrorism or politically inspired attacks on the UAE’s large expatriate population. There is also little to suggest so far that the country’s citizens are agitating for democratic reform. The combination of public quiescence and restricted political freedom look set to continue as long as economic prosperity continues.

2008 Foreign Direct Investment – Industrial Sector – Taweelah – Violence Free

The United Arab Emirates (UAE) economy expected 7.8 per cent growth in 2008, mostly on the strength of the contributions of its rising non-oil sectors such as real estate, tourism, construction and finance. Quite remarkably, at the beginning of 2008, the UAE economy was the second largest in the Arab world. For a country little more than 30 years old, this was indeed an achievement. ‘As long as there is strong demand for oil and gas and the oil prices average US$60 to US$80 a barrel, the UAE economy will be in good shape,’ said the UAE Central Bank Governor, Sultan bin Nasser al-Suweidi. However, Mr al-Suweidi warned that the UAE economy may only register 6.6 per cent growth in 2008 in the light of the slump in oil prices. With the oil price hovering around US$99 a barrel in mid-2008, there was no immediate threat of a sudden decline in prices. According to preliminary reports released by the UAE ministry of economy, the country’s gross domestic production (GDP) grew 16.48 per cent at current prices in 2007, primarily because of the expansion of the oil and gas sector and the growth of various non-oil segments, including real estate. Figures from an International Monetary Fund (IMF) report showed GDP increased by 16.7 per cent to Dh730 billion (US$198.9 billion) in 2007. The country’s trade balance surplus reached Dh178 billion (US$48.5 billion), with exports rising to Dh664 billion (US$180.8 billion), 39.4 per cent of which was from crude oil exports. The volume of the UAE’s foreign trade stood at Dh1.151 trillion (US$313.6 billion) in 2007, accounting for 158 per cent of the country’s GDP. Ranking Success The UAE rose to eighth position in the Foreign Direct Investment Confidence Index (FDICI) as a destination for foreign direct investment (FDI), while ranking 15th out of 141 countries in the Inward FDI Performance Index for 2006, according to the 2007 World Investment Report. In 2007 the UAE drew the highest number of new investment projects in the region, rising from 88 in 2002 to 282 in 2006; with total FDI in the country valued at Dh70 billion (US$19 billion). This figure had risen to around Dh75 billion (US$20.4 billion) in 2007. The UAE ranked 37 globally on the Davos World Competitiveness Index for 2007/08, and first on the Arab World Competitiveness Index. The country came 23rd globally on the Business Competitiveness Index (BCI) for 2008 released by the © koninklijke brill nv, leiden, ���9 | doi:�0.��63/9789004408�65 _03�

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Davos-based World Economic Forum. It was also generally ranked first in the cargo handling reports for the Gulf region reflecting the advanced services provided by its ports. One driving force between the UAE’s rapid non-oil development was the deep seated-rivalry between Abu Dhabi and Dubai. Both emirates could not only boast world-class ports and airports, but also airlines and industrial free zones. As a whole, the UAE’s industrial sector achieved an impressive growth of 19.7 per cent in 2007, contributing 12.4 per cent to national GDP. This sector has thus emerged as the second largest contributor to the UAE economy behind the oil industry. Tourism has also developed fast, helped significantly by the two home-based airlines, Emirates (Dubai) and Etihad Airways (Abu Dhabi) contributed Dh19 billion (US$5.2 billion) to the economy during the past 10 years as reported by the Global Association of the Exhibition Industry. Eight million tourists travel to the UAE, twice the number of inhabitants; this figure was expected to reach 10 million by 2010. The UAE has been most successful in attracting tourists from countries as diverse as Kazakhstan and Sweden. The number of hotels exceeds 450, with an annual occupancy rate of about 97 per cent. The UAE’s airports handled around 38 million travellers in 2006, affirming their operational success and highlighting the adoption of the most advanced services. Both airlines could also advertise the most modern fleets in the world. The tourism figure was expected to increase by 55.4 per cent to 240 million travellers by 2015. Furthermore, the UAE’s, air transport services ranked a very high 4th out of all the countries assessed by the Davos World Competitiveness Index in 2007/08. The World Economic Research Centre has also awarded the UAE an ‘A’ ranking in terms of its exceptionally low levels of political and security risks for investment. None the less, as already pointed out in the Middle East Review, concerns have been expressed about the UAE’s security risk handling as well as its reluctance to share sensitive security information with its allies. The UAE was, however, commended for its currency level, as the country enjoys a low debt-to-GDP ratio. The government liquidity level has so far been able to bridge the deficit in foreign debt. The World Bank has ranked the UAE first among the Middle East and North African countries in terms of managing counterfeiting and corruption and in the efficiency of its regulatory framework and government. The UAE was set up in 1971 following the British withdrawal from the Gulf under the East of Suez overall withdrawal. The UK’s post-colonial preference for creating federations and unions out of its smaller colonial possessions had not always worked. It was therefore understandable that some scepticism surrounded the putative creation of a full-bodied nation out of seven little known

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emirates in a largely neglected and under-populated region mid-way between the Suez Canal and India. Under the revised arrangements, British responsibility for the defence and foreign relations of the Sheikhdoms was ended. The initial federation had only six members, the emirate of Ras al-Khaimah joining in February 1972. The only three of the emirates whose names rang bells in the UK were those of Abu Dhabi (for its oil-wealth), Dubai (for its trading reputation, notably of gold) and Sharjah (where the UK had a modest military presence and which had long been a staging post for the commercial flights of the British Overseas Airways Corporation (BOAC). However, there were two UAE member states that had over-riding importance in the context of the new country: Abu Dhabi and Dubai. Despite their historic rivalries, the two have managed to swallow their differences and notionally agree on the broad lines of UAE policy, while pursuing very different development agendas. While Abu Dhabi is a diligent, and important member of the Organisation of the Petroleum Exporting Countries (OPEC), Dubai is not a member and does not seek to join, preferring to adopt a rather cavalier attitude to the organisation’s quota recommendations. Despite these differences, both emirates are internationally aware and known. This outward-oriented development strategy, combined with good macro-economic management and a business-friendly environment have all contributed to high growth in the UAE, a phenomenon that does not show signs of abating. Diversifying Economy Dubai’s reputation as a commercial and financial centre was originally based on its sophisticated – if unregulated – ability to smuggle gold into India. Large cargo aircraft from Zurich or London would land in Dubai, their holds apparently empty, but carrying a full weight of pallets laden with gold ingots. Such was the sophistication of the arrangements, involving the transfer of funds from one country to another, offset payments made in third party countries and complex accountancy records, it was not difficult for Dubai to become the financial services centre of the Middle East, a position originally claimed by Bahrain. Dubai’s position was cemented with the opening of the Dubai International Financial Exchange (DFIX). The DFIX forms part of the Dubai International Financial Centre (DIFC), which was established in 2002. Both of these projects were the brainchild of the then de facto Emir of Dubai, Sheikh Mohammed bin Rashid al-Maktoum. Sheikh Mohammed succeeded his brother Sheikh Maktoum bin Rashid al-Maktoum as Emir of Dubai and prime minister and vice president of the UAE in January 2006. The UAE possesses about 10 per cent of the world’s proven oil reserves and also has the fifth largest gas reserves in the world. About 30 per cent of its GDP is

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based on oil exports, although recent developments in Dubai and elsewhere in the country have seen large strides taken in the financial and petrochemical sectors. There have been several projects to diversify its economy and to reduce the UAE’s dependence on oil and natural gas revenues. The non-oil sectors of the UAE’s economy presently contribute as much as 70 per cent of the UAE’s total GDP, and about 30 per cent of its total exports. The federal government has invested heavily in sectors such as aluminium production, tourism, aviation, re-export commerce and telecommunications. As part of its strategy to further expand its tourism industry, the UAE is building new hotels, restaurants and shopping centres, and expanding airports and duty-free zones. Dubai accounts for about 85 per cent of the UAE’s re-export trade. The UAE has been a member of the World Trade Organisation (WTO) since 1995, and has one of the most open economies in the region. The Oil and Gas The UAE had proven crude oil reserves of 97.8 billion barrels at the end of 2007, or slightly less than 8 per cent of the world total. Production was 2.92 thousand barrels per day (bpd). Abu Dhabi holds 94 per cent of this amount, or about 92.2 billion barrels. Dubai contains an estimated 4.0 billion barrels, followed by Sharjah and Ras al-Khaimah, with 1.5 billion and 100 million barrels of oil, respectively. Dubai’s production has been falling in recent years due to the decline of its modest reserves. Most of the UAE’s oil fields have been producing since the 1960s or early 1970s. Proven oil reserves in Abu Dhabi have roughly doubled in the last decade, mainly due to significant increases in rates of recovery. Abu Dhabi has continued to identify new finds, especially offshore, and to discover new oil-rich structures in existing fields. Under the UAE’s constitution, each emirate controls its own oil production and resource development. Although Abu Dhabi joined OPEC in 1967 (four years before the UAE was formed), Dubai does not consider itself part of OPEC or bound by its quotas. The UAE’s natural gas reserves of 215.07 trillion cubic feet (Tcf) (end 2007) are the world’s fifth largest after Russia, Iran, Qatar, and Saudi Arabia. The largest reserves of 198.5Tcf are located in Abu Dhabi. Sharjah, Dubai, and Ras al-Khaimah contain smaller reserves of 10.7Tcf, 4.0Tcf, and 1.2Tcf, respectively. In Abu Dhabi, the non-associated Khuff natural gas reservoirs beneath the Umm Shaif and Abu al-Bukhoosh oilfields rank among the world’s largest. According to the US Energy Information Administration (EIA) the past few years have seen the UAE embark on a massive, multi- billion dollar programme

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of investment in its natural gas sector including a shift toward natural gas-fired power plants and the transformation of the Taweelah commercial district into a natural gas-based industrial zone. An ambitious plan, the Dolphin Gas Project, to connect the natural gas grids of Qatar (including the Energy Gas Processing Plant in Ras Laffan) the UAE and Oman was opened in 2008. Most of the UAE’s increased natural gas needs in the next decade are to be satisfied with imported natural gas from Qatar. Much of the natural gas development in the UAE itself involves the extraction of natural gas liquids (NGLs) and reinjection of the gas to maintain pressure in oilfields. Outlook The death of founding president Sheikh Zayed coincided with tentative steps towards incipient democracy. In December 2005, President Sheikh Khalifa announced plans to institute a partially-elected advisory council. Khalifa also stated that suffrage would be limited to a small number of electors who would in turn be chosen by the country’s seven emirs. No date was given for the election and political parties will remain banned. A year later, the first elections ever to be held in the UAE took place on in December 2006. Half of the Federal National Council which has forty members, were elected. One of the four seats in Abu Dhabi went to a woman, Amal Abdullah al-Kubaissi. The UAE government has said that future elections will be more participatory, including that the powers of the Federal National Council will be expanded and that the right to vote will be granted to all citizens.

2009 Recognition – PDRY – A High Income State – Real Estate Slow-down – Dubai Debts – Nakheel Liability – Deflationary Pressures

In 1974 the first edition of the Middle East Review celebrated the formation in 1971 of the United Arab Emirates (UAE). At the time, many observers doubted the federation’s ability to survive for long, at least as originally constituted: this improbable gathering of tiny tribal enclaves hardly had the feel of a modern body politic. Its very creation was borne out of the British withdrawal from east of Suez, when London’s responsibility for the defence and foreign relations of the Sheikhdoms was ended. The initial federation had six members, Ras al-Khaimah not joining until February 1972. Birth Pangs The UAE’s early months were not without their diplomatic troubles. A serious incident had arisen when Iran seized the two Tunb Islands in the Strait of Hormuz from Ras al-Khaimah in late November 1971. (Under British tutelage the Iranian claim to the island of Abu Musa was settled by peaceful arrangement with Sharjah.) However, it took over twelve months for relations between the UAE and Iran to improve to the extent that a UAE ambassador could be sent to Tehran. The Iranian envoy to the UAE had already arrived in Abu Dhabi. Relations with Iran (which following the British departure had become the region’s pre-eminent military power) soon became quite cordial. The only Arab states which did not give diplomatic recognition to the UAE were the People’s Democratic Republic of Yemen (PDRY) and Saudi Arabia. The absence of relations with the former – a Soviet client state engaged in a sporadic war with the Sultanate of Oman – was of little real consequence, but the lack of recognition by Riyadh was more serious. The major obstacle was Saudi Arabia’s territorial claim to a large area of Abu Dhabi’s territory. The claim was widely known as the Buraimi Oasis dispute but in fact the area involved was much larger than the oasis itself and included the important region around the Zarrar oilfield. Saudi Arabia did not press its claim with any vigour, but neither were there any sustained attempts at settlement on the part of the Saudi government. Apart from this dispute there were no major international threats to the union’s territory. The complex pattern of internal political and tribal boundaries could, however, provide material for future

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political disputes between the seven member states, such as occurred in 1972 between Sharjah and Fujairah. The Importance of Oil The UAE is a high-income state, the second largest Arab economy in the Middle East. Despite substantial diversification, the UAE remains dependent on oil revenue, and the government has announced large oil production capacity increases up to 2015. Abu Dhabi is the major hydrocarbon and industrial power while Dubai is the trading, financial, and tourist centre. Abu Dhabi and Dubai account for 80 per cent of the UAE’s income. Hydrocarbon revenues account for around one-third of the UAE’s GDP, though the non-oil finance and service sectors in Dubai are making the city a favoured base for multinational corporations in the Gulf. The UAE produced 2.9 million barrels per day (bpd) of oil in 2008, of which 2.5 million bpd was crude oil. The majority of production is exported to Asian countries. The UAE also produced an estimated 50.2 billion cubic metres of natural gas. UAE oil consumption averaged 467,000bpd in 2008. Foreign minister Sheikh Abdullah bin Zayed al-Nahyan announced in April 2007 that UAE oil production capacity will increase to 5 million bpd by 2014, increasing the UAE’s profile in the region. The UAE’s proven oil reserves were 97.8 billion barrels at the end of 2008. Abu Dhabi comfortably leads the other emirates with 92.2 billion barrels, followed by Dubai some way behind with 4 billion barrels. Sharjah has 1.5 billion barrels, and Ras al-Khaimah 500 million barrels. The UAE holds the fifth largest proven oil reserves in the region. UAE crude streams are expensive due to their light and sweet composite compared to other Middle East producers. ADNOC

The largest state owned company is the Abu Dhabi National Oil Company (ADNOC), which operates 17 subsidiary companies in the oil and natural gas sectors. ADNOC maintains the right to take up to 60 per cent stake in new major oil projects. Hydrocarbon production is handled on a production sharing basis between state-owned companies and foreign investors. The majority of Abu Dhabi’s oil production is under the Abu Dhabi Company for Onshore Oil Operations (ADCO), as well as the Abu Dhabi Marine Operating Company (ADMA-OPCO) and the Zakum Development Company (ZADCO.) The Supreme Petroleum Council sets energy policy. Foreign investors play a relatively limited role with the exception of exploration activities. The UAE’s oil reserves account for 8.5 per cent of total world reserves, most of which are located in Abu Dhabi. The Zakum oilfield is the largest in the country, and the third largest in

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the Middle East, with an estimated 66 billion proven barrels. According to the Energy Information Administration (EIA), Japan imported 1.36 million bpd from the UAE in February 2007, 54 per cent of the UAE’s total net petroleum exports. The UAE’s proven natural gas reserves were 227.1 trillion cubic feet (Tcf) at the end of 2008. The UAE holds the fourth largest proven natural gas reserves in the Middle East after Iran, Qatar, and Saudi Arabia. The largest reserves of 198.5Tcf are located in Abu Dhabi. Sharjah, Dubai, and Ras al-Khaimah contain smaller reserves of 10.7Tcf, 4.0Tcf, and 1.2Tcf, respectively. In Abu Dhabi, the non-associated Khuff natural gas reservoirs beneath the Umm Shaif and Abu al-Bukush (Iran) oilfields rank among the world’s largest. Rising energy prices placed a new emphasis on the UAE’s large natural gas reserves, even though high extraction costs and sulphur content pose difficulties for the industry. In 2008 the UAE produced 1,773.8 billion cubic feet (Bcf) and consumed 2,053Bcf. Cracks Appear In 2009, in the face of the global recession, some cracks began to show in what had long been the UAE’s apparently successful economic façade. Embarrassingly, conservative, oil rich Abu Dhabi, found itself having to bail out the more entrepreneurial, even profligate, Dubai. The cranes and dredgers that had once marked the rhythm of Dubai’s development had for the most part ground to a halt. Dubai’s once rock solid development company, Nakheel Properties, had become a liability. In the wider context of the UAE, the misfortunes of one of the Emirate’s developers did not necessarily represent catastrophe. What it did do, however, was question the long term feasibility of the UAE’s governance model, which by early 2009 appeared to leave a lot to be desired. As long as property values rose, transparency and accountability had not been important. But as the bubble appeared to burst, things looked a lot different. The anecdotal evidence began to mount up, as Dubai’s airport car parks were reportedly filling up with abandoned cars as expatriates who had lost their jobs simply departed, leaving the keys in the ignition. In the absence of public information, accurate figures were hard to come by. Analysts put Dubai’s debt at between US$80 and US$120 billion. In an attempt to cover this, the Dubai government issued the first (US$10 billion) tranche of a US$20 billion bond to give it some breathing space. It was reported in some quarters that international banks had been hesitant to guarantee the bond, obliging the UAE government (in reality Abu Dhabi) to step in. In simple terms, this intervention amounted to a bail-out. The failure of the Dubai government to respond quickly to the crisis was thought to have created tensions between Abu Dhabi and Dubai; the two emirates competed for tourists and much of

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Dubai’s property development was geared to its once-booming tourist industry. The irony that Abu Dhabi should have to underwrite developments embarked upon by bodies such as Nakheel was as obvious as it was embarrassing. IMF Concerns In its October 2008 report on the UAE economy the International Monetary Fund (IMF) noted that the emirates continued to perform strongly in 2007 and in the first nine months of 2008. According to the IMF the government’s outward-oriented development strategy, combined with high international oil and gas prices had boosted domestic and foreign investment, as well as fostering strong growth in the construction and services sectors. However, as the worsening global environment started to take its toll in the second half of 2008, the UAE’s non-oil growth was projected to ease to 8.6 per cent in 2008. Both budget and external current account surpluses remained large in 2007 (25 and 16 per cent of GDP, respectively) and (at least in late 2008) were projected to remain at similar levels in 2009, with higher oil exports offset by increases in government imports. The IMF observed that inflationary pressures were likely to ease and that managing the vulnerabilities arising from the global downturn has become the key policy challenge. Since 2004 inflation has steadily accelerated and was projected to reach 12.7 per cent in 2008, reflecting housing shortages, imported inflation, US dollar depreciation, and strong domestic demand fuelled also by the expansionary monetary policy imported from the United States through the dollar peg. However, in the second half of 2008, the sharp appreciation of the US dollar and declining global food and commodity prices had put downward pressures on tradable prices and looked set to ease inflation. An active member of the global financial community, the UAE was adversely affected by the turmoil in financial markets, as evident in a widening of sovereign risk spreads and the sharp downturn in stock markets – which was most pronounced in the case of real estate companies. Capital inflows, driven by expectations of a revaluation of the dirham vis-à-vis the US dollar, largely reversed in mid-2008. Anecdotal evidence suggested that foreign financing for the corporate sector had tightened, and by late 2008 a slowdown in the real estate and construction sectors appeared to have taken hold. The IMF considered the UAE’s banking system to be adequately capitalised and highly profitable, but noted that the risk of a future deterioration in asset quality had become apparent. Banks’ assets and profits had increased sharply in 2007 and the capital adequacy ratio stood at 13.3 per cent by mid-2008, above the regulatory minimum of 10 per cent even if below the level seen in 2007. However, the fast pace of growth of consumer and real estate loans along with

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the uncertain outlook for asset prices had raised the risk of increased numbers of non-performing loans. In mid-2008 capital outflows, and growing concerns about counterparty risk had affected the functioning of the interbank market. Credit to the private sector rose by 51 per cent on an annualised basis in September 2008, up from 40 per cent in December 2007. This growth was driven by the still continuing economic boom and highly negative real interest rates. Credit was financed by strong deposit growth, but in 2007 also by large foreign borrowing. From March 2008, however, the UAE’s central bank had taken several steps to address a drying-up of liquidity following the outflow of foreign deposits. To pre-empt spill-overs from the global financial turmoil and address rising liquidity pressures in the banking system, the UAE government declared in October 2008 a blanket guarantee of deposits and inter-bank lending for three years, and put in place an additional US$19.1 billion emergency liquidity support fund (in the form of interest-yielding government deposits) to provide banks with long-term funding relief. Independently, the Abu Dhabi government also provided some of its banks and companies with financial support. Outlook A report published by Barclays Capital in mid-2009 forecast that the UAE economy would experience deflation in 2009 due to a significant weakening of domestic demand, particularly in private consumption. Inflation was expected to reverse from an average of 12.3 per cent in 2008 to -1.5 per cent in 2009. In spite of the government’s expansionary fiscal policy and liquidity injections, the Barclays report expected the economy’s mounting deflationary pressures to persist until the end of 2009. These increasing deflationary pressures looked likely to last until the end of 2009, notwithstanding the effects of the UAE government’s expansionary fiscal policy and the various capital and liquidity injections that had been injected into the banking system and the corporate sector in Dubai. Continuing weakness in domestic demand, driven by a projected decline in population and falling wages, would be a key short-term driver. Risk Assessment Politics Fair Economy Good Regional stability Good

2010 Cultural and Commercial Divisions – Oil Receipts Fall – Federal Funding – Dubai World – First Deficit in Decades – Cash Injections and Debt Extensions – Recovery Anticipated

At the end of 2009 and in early 2010, the cultural and commercial divisions that had characterised the United Arab Emirates (UAE) since its creation in 1972 re-surfaced alarmingly and embarrassingly. The alarm was caused by the straightforward size of the problems, the embarrassment stemmed from the fact that the UAE had long promoted itself internationally as a well managed economy. In the case of oil rich Abu Dhabi that was still the case. The same could not be said of Dubai, where the image of ‘bling’ capital of the Gulf spilled over into reality. Constructing the tallest building in the world – the Burj Khalifa – invited the inevitable claims of hubris; however nemesis, in the form of the global financial crisis, was waiting in the wings. The building was originally called the Burj Dubai, but when Dubai had to do cap in hand to its old rival Abu Dhabi, changing the name was part of the rescue package. Sheikh Khalifa bin Zayed al-Nahyan is the ruler of Abu Dhabi, as well as the UAE’s head of state. After a building boom that had lasted some ten years, Dubai needed the world’s tallest building like a hole in the head. The building sadly symbolised a lot that had gone wrong in Dubai: much of its prosperity was based on capricious luxury rather than need. Thus, most of the Burj Khalifa’s accommodation is not office space but condominium apartments designed for absentee owners for investment purposes. The Bubble Bursts In its January 2010 report on the UAE economy, the International Monetary Fund (IMF) reported that a combination of the global recession, the bursting of the Dubai property bubble, and the post-Lehman shutdown of international capital markets had hit simultaneously, and adversely, all of the UAE’s three growth engines in 2009. Oil receipts plummeted, global trade and logistics contracted, and property development all but ground to a halt as incomes fell and property prices fell though the floor. Expatriates made redundant simply left their cars, ignition keys in place, at Dubai’s airport and boarded an aircraft bound for home before their creditors could arraign them. Offices and apartments fell empty, prices dropped.

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As if this wasn’t bad enough, an unnerving second bout of disruption arose when the government of Dubai announced in late November 2009 that the Dubai World conglomerate would seek a six-month standstill on repayments while its unprecedented US$26 billion in debt was restructured. After three weeks of increasing tensions with nervous creditors, Dubai World at least managed to pay off its subsidiary company Nakheel Properties’ bond on time, settling market nerves in the short term. At the end of the six-month period, the creditor banks involved were less than delighted by the terms offered by Dubai World. Trade creditors would receive only 40 per cent of their debt in cash (paid over eight years) and the balance paid in tradable securities. Dubai had benefited from some assistance from neighbouring Saudi Arabia which had not been affected by the global crisis. The Greek crisis, which risked affecting European banks and economies more directly, had also taken Dubai’s problems off the financial pages. At least Dubai’s difficulties related to an over-ambitious construction boom, rather than the need to make ends meet. The situation represented a new form of challenge for the UAE – and more particularly, for Dubai. The IMF noted that the government had ‘responded decisively to contain strains in the banking system and sustain economic activity.’ Oil rich Abu Dhabi boosted the fiscal stance via equity injections and the Central Bank of the UAE deployed bank liquidity support facilities and lowered interest rates. The federal government rolled out large scale recapitalisation measures and provided funding to the country’s banks. Despite the measures adopted by the authorities, the UAE’s gross domestic product (GDP) was estimated by the IMF to have contracted by about 0.5 per cent in 2009. After years of high oil prices and production at full capacity, oil production averaged only 2.6 million barrels per day (bpd) in 2009, as the UAE’s hydrocarbon share of GDP dropped by 6.25 per cent. At the same time, non-hydrocarbon growth, which had averaged 8 per cent in the three previous years, was estimated to have slowed to about 1 per cent. The figure disguised the contrasting fortunes of Abu Dhabi, where growth was sustained by public sector investment spending, and the Northern Emirates (in particular Dubai and Sharjah), where economic activity fell owing to the bursting of the property bubble and a general drop in world trade. The IMF also noted that after peaking at about 12 per cent in 2008, inflation declined to 1 per cent in 2009, reflecting lower import prices (a drop of 10 per cent in 2009) and a reduction in rents as an increased share of rental contracts were renewed at deflated market prices and new buildings came on stream. Of particular concern to the international financial markets was the fact that the UAE government made it more than clear that the debt of Dubai World was not guaranteed by the government. What had become clear in the view of the

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IMF as a result of the Dubai World affair was the need for the UAE to increase the

transparency of its economic and financial data, including the financial accounts and business strategies for government-related enterprises, and at the same time put in place some form of corporate insolvency regime at the federal level, to provide a transparent framework for debt resolution. Thus, after years of uninterrupted growth, at the end of 2009 the UAE’s non-oil economy looked strangely vulnerable. There had already been signs of deceleration in 2008, particularly in Dubai as the property bubble burst. What became apparent was the contrast between Abu Dhabi’s growth – based on hydrocarbon resources, and that of Dubai – based on non-hydrocarbon diversification, largely funded by property based leverage and borrowing. The Dubai World debt announcement certainly undermined the widely held market perception of implicit government support, especially from the government of Abu Dhabi. To the certain relief of the UAE government, the IMF was at pains to point out that developments in Dubai, needed to be seen in the ‘wider perspective of the UAE as a whole.’ The UAE has a net external creditor position well in excess of 100 per cent of GDP, among the largest in the Fund’s membership. If anything the ‘crisis’ illustrated the contrasting positions between the two major emirates: Abu Dhabi has substantial ‘liquid unencumbered external assets’; in contrast Dubai has experienced major economic difficulties based on the weaknesses of the business model it had adopted. However, a number of Dubai’s major companies had none-the-less accumulated substantial assets abroad. Deficit According to the IMF, the UAE’s external current account balance was estimated to have moved to a deficit of 2.7 per cent of GDP in 2009, the first deficit in decades. As a result of Organisation of the Petroleum Exporting Countries (OPEC) mandated production cuts and lower prices, hydrocarbon export revenues dropped by about 45 per cent in 2009, while imports fell 22 per cent owing to a sharp contraction in consumer goods imports, despite the large investment projects supported by the government of Abu Dhabi. The UAE’s fiscal position was estimated by the IMF to be in balance in 2009, following a surplus of 21 per cent of GDP in 2008. Both oil and non-oil revenues fell owing to the decline in oil prices and the slowdown in economic activity. At the same time, total spending is estimated to have increased by 14 per cent – a continuation of the expansionary fiscal stance adopted in 2008 – with capital outlays rising by about 20 per cent. The UAE’s non-hydrocarbon deficit widened by about 7 percentage points to 34 per cent of non-oil GDP owing mainly to higher spending by the government of Abu Dhabi, which provided substantial equity and loans (6.25 per cent

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of GDP) to strategic Abu Dhabi state-owned companies involved in large projects. Dubai World The IMF noted that Dubai’s fiscal stance was mildly expansionary, reflecting the implementation of large infrastructure projects (metro, airport and roads). In late March 2010 Dubai’s stock market reached a three month high responding to hopes that an acceptable proposal was forthcoming for creditors of the Dubai World conglomerate. The deal on the table involved the re-structuring of a staggering US$25 billion of Dubai World’s debt. Investors in the project hoped that all the major parties involved would accept the offer, whereby US$9.6 billion of ‘new’ money would be injected into Dubai World’s Nakheel Properties business. The injection of new capital raised total government support to a massive US$20 billion since the global financial crisis began in 2008. The Dubai government announced that it would use US$5.7 billion remaining from a loan made by neighbouring Abu Dhabi in December 2009. This was not the first time in the short history of the UAE that Abu Dhabi had had to come to Dubai’s rescue. The balance of the amount due was to come from ‘internal Dubai government resources’ according to a report in the Wall Street Journal (WSJ). Quite how this was to be achieved was not altogether clear, as Dubai World apart, ‘Dubai-controlled entities are facing their own significant debt-repayment deadlines.’ The report went on to observe that: ‘excluding debt from Dubai World… Dubai entities still owe another US$3.55 billion in publicly disclosed debt this year (2010). Next year that jumps to US$13.29 billion, including a US$6 billion facility borrowed by Dubai’s main investment vehicle, the Investment Corporation of Dubai.’ The hope within Dubai’s financial community was that the stock market would continue to rise; news of the Dubai World settlement caused the shares of Arabtec, a major construction group, to rise by 15 per cent in the expectation that the rescue of Nakheel would allow Arabtec to settle its extensive trade debts. Among the lenders to Dubai World were such blue chip names such as the UK’s Standard and Chartered Bank, LloydsTSB and HSBC. Glimmerings of Hope By March 2010 things looked a little brighter for Dubai. The government of Dubai had managed to come up with what the WSJ described as a ‘creditor friendly deal on Dubai World and Nakheel debt’. Ironically, the fact that the deal appeared to be so much better than market expectations brought about almost as much nervousness in the markets as the collapse had caused in the first place. The deal was generous: the WSJ went on to report that the government in

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Dubai was proposing to convert its US$10.1 billion debt claims on Dubai World and Nakheel into equity, thereby subordinating its claims to those of other creditors. On top of this subordination, the Dubai government proposed to inject a massive amount of cash – US$9.5 billion – into the two companies. US$3.8 billion of this money was supposedly from its own resources and the balance of US$5.7 billion from the loan from Abu Dhabi. The significance of the sourcing of this second tranche was that it conferred a seal of approval on the arrangement from the government of Abu Dhabi. Implicit in the arrangement was the payment in full of Nakheel’s bonds (sukuk) due in 2010 and 2011. Dubai stocks rose on the announcement of the rescue; any default would have severely limited the ability of Dubai companies to seek international finance. Nevertheless the jury remained out as to whether Dubai could adhere to its battered economic model. The hope that real-estate prices would recover their former glory looked misplaced. In March 2010 Dubai World announced that it had agreed in principle with its creditors to restructure US$23.5 billion of its debt, and hoped to secure a final deal with all its creditors as soon as the end of June 2010. Later in the year, Dubai International Capital (DIC), an investment arm of the Dubai Holdings conglomerate, had asked its lenders for a three-month extension on some of its debts. This served to underline the fact that, as a whole, by mid-2010 Dubai was not out of the wood. Putting a brave face on its situation, the Dubai government advised in rather vague terms that the debt extension until the end of September 2010 would allow it to implement ‘a consensual longer term plan’, allowing it to ‘maximise the value of its business for the benefit of all its stakeholders’. Perhaps embarrassingly for Dubai’s ruling family, the al-Maktoums, the Emirates’s economy is dominated by ‘Dubai Inc’, a network of commercial entities, financial institutions, and investment arms owned directly by the Dubai government or by the ruling family under the umbrella of three major holding companies – Dubai Holding (DH), Dubai World (DW) and the Investment Corporation of Dubai (ICD). Each holding company includes several property developers and is involved in assorted property ventures in Dubai and around the world. The problems had begun when the companies borrowed extensively in 2004–08 to fund a major push into large scale commercial and residential property development. Thanks to the Oil… In January 2009, according to the US-based Oil & Gas Journal (OGJ) the UAE had the seventh largest proven oil reserves in the world at 97.8 billion barrels. With 214 trillion cubic feet of proven natural gas reserves, the UAE also has the sixth largest reserves. The US government’s Energy Information Administration (EIA)

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notes that, in terms of reserves, Abu Dhabi outstrips all the other emirates with 92.2 billion barrels, followed by Dubai some way behind with 4 billion barrels, Sharjah with 1.5 billion barrels, and Ras al-Khaimah with 100 million barrels. The largest state-owned energy company is the Abu Dhabi National Oil Company (ADNOC), which operates a further 17 subsidiary oil and gas companies. Hydrocarbon production is handled on a production-sharing basis between state-owned companies and a few key major foreign oil investors. ADNOC holds a majority share in the leading oil-producing consortia, notably in the Abu Dhabi Company for Onshore Oil Operations (ADCO), as well as the Abu Dhabi Marine Operating Company (ADMA-OPCO), and the Zakum Development Company (ZADCO). The major foreign investors include BP, Petrofac, ExxonMobil and Total. In 2009, the UAE produced around 3 million barrels per day (bpd) of total oil liquids, of which 2.57 million bpd was crude oil and 356,000bpd was natural gas liquids (NGLs). The UAE’s domestic oil consumption averaged only 455,000bpd in 2009, leaving the majority of oil production for export to Asian countries. Sector Development The EIA notes that the extensive Upper Zakum expansion project is at the centre of the government’s expansion. The project is a partnership between ADNOC, ExxonMobil, and the Japan Oil Development Company (JODCO) designed to increase production capacity from its current 550,000bpd to 750,000bpd by 2015 and eventually increase it to 1.2 million bpd. Abu Dhabi’s onshore Zakum oilfield is the largest in the UAE and the third largest in the Middle East, with reserves of an estimated 66 billion proven barrels. The Umm Shaif project also aims to maintain and increase production capacity. It has been underway since 2007. In June 2009, Hyundai Industries announced that the third of its three offshore oil platforms had been completed for the Umm Shaif oilfield. The field’s current oil production is estimated at between 220,000bpd and 280,000bpd, and will expand to 300,000bpd of oil plus 990 million cubic feet of gas per day by 2010. According to the EIA, Abu Dhabi’s Asab-3 project is also aimed at increasing oil production from the Asab, Shah, and Sahil oilfields by 400,000bpd from their current average of 1.4 million bpd, which is roughly half of the UAE’s current production. In November 2009, three contracts worth a total of US$3.5 billion were awarded, including a US$408 million engineering, procurement and construction (EPC) contract for natural gas facilities at the fields. The project is expected to produce about 150 million cubic feet per day of additional associated gas when it is completed in the third quarter of 2012.

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Development of the offshore Nasr oilfield project is part of the UAE’s long-term plan to increase offshore oil production capacity from its current 1.1 million to 1.75 million bpd by 2019. In August 2009, the Italian company Technip won a contract for the first phase of development. Offshore operator ADMA-OPCO, which owns the field, hopes to produce 25,000bpd from the field by 2015 and 65,000bpd by 2018. This is the first new field for commercial use to be developed since the Lower Zakum field came on-stream in 1966. According to the OGJ, the UAE’s proven natural gas reserves were 214.4 trillion cubic feet (Tcf) as of 1 January 2009. The UAE holds the sixth largest proven natural gas reserves in the world after Russia, Iran, Qatar, Saudi Arabia and the United States. The largest reserves of 198.5Tcf are located in Abu Dhabi. As is the case with oil, Sharjah, Dubai, and Ras al- Khaimah contain much smaller reserves. The UAE established its first LNG plant in 1977 on Das Island, operated by the ADNOC subsidiary, Abu Dhabi Gas Liquefaction Company (ADGAS). The plant is run on associated natural gas from the Umm Shaif, Lower Zakum, and Bunduq oilfields. UAE natural gas exports are managed by ADGAS. The National Gas Shipping Company (NGSCO), which operates eight LNG carriers, handles the shipments from the LNG plant. Outlook Despite the problems that have beset Dubai, the UAE will continue to benefit from its large external creditor position, its excellent infrastructure and business conditions, and its prime location between Europe and Asia. The IMF envisages that the recovery, when it comes, will depend on global demand for Dubai goods and services, whether and when the property market begins to recover (construction and property-related activity account for 25 per cent of Dubai’s GDP), and how protracted is the emirate’s debt restructuring. Given that Dubai’s share in the UAE’s non-oil GDP is over 50 per cent, GDP growth for the UAE as a whole will inevitably be low – the IMF puts it at about 0.5 per cent. Growth is likely to recover in 2011 owing both to higher activity in the oil and trade sectors in response to the recovery in Asia and the likely restructuring of Dubai’s debt situation. In the view of the IMF, non-hydrocarbon growth will average about 4.5 per cent a year over the medium term, or 4 per centage points lower than the growth rate before the global crisis. Risk Assessment Regional stability Good Politics Poor Economy Fair

2011/12 Local Unemployment – KIZAD – Real Estate Overhang – Open and Outward Orientation – Nasr and Umm al-Lulu – ADCOP – Real Estate Overhang – Downside Risks – Fragile Economic Recovery – GREs

To the relief of international financial markets, not to mention the rulers of Abu Dhabi and the errant Dubai, 2011 was a year in which some sort of economic stability could be seen to be restored to the United Arab Emirates (UAE). Of even greater concern to the authorities, however, was the risk of contagion from the so-called Arab Spring. Perhaps reluctantly, the UAE had contributed troops to the Gulf Co-operation Council (GCC) force sent in to neighbouring Bahrain to ‘keep the peace’, by which was meant, keep the island state’s ruler in place in the face of street protests for greater liberty and freedom of expression. The turmoil in parts of the Middle East and North Africa also posed downside risks. The re-pricing of risk in the region could result in more difficult financial market conditions. On the positive side, there are indications that the UAE may benefit from increased tourism and investments looking for diversification within the region. Higher oil prices are also benefiting the UAE as a hydrocarbon exporter, though if sustained, they may affect the recovery if demand from Asia falls. The Economy While the UAE has a federal structure and some wealth is shared between emirates, each emirate manages its own budget independently. The UAE government is pursuing economic diversification through investment in infrastructure in transport, trade and tourism. Abu Dhabi has made a concerted effort to increase its industrialisation through projects such as the Khalifa Industrial Zone Abu Dhabi (KIZAD), which will allow 100 per cent foreign ownership of companies. This infrastructure project will be one of the largest integrated industrial zones in the world and will further serve the aims of economic diversification held by the government. It is strategically (diplomatically?) placed mid-way between Abu Dhabi and Dubai. Although the economic crisis had necessitated the bailing out by Abu Dhabi of the most prominent of Dubai‘s state-run firms, Dubai World (DW), these financial difficulties did not precipitate a flight of foreign capital. Indeed, the UAE

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has returned to positive and increasing growth once again, with a gross domestic product (GDP) growth forecast of 3.1 per cent for 2011. The UAE’s non-hydrocarbon GDP growth was projected to increase from 2.1 per cent in 2010 to 3.3 per cent in 2011, led by strong tourism, logistics and trade in Dubai, and large public investment spending in Abu Dhabi. However, the real estate overhang and short term refinancing needs from overleveraged government-related entities (GREs) weighed on the near-term outlook. Although GREs have contributed significantly to UAE’s economic growth, the recent bailouts (in particular of Dubai World), the size of Dubai’s GRE debt and the significant short- and medium-term roll-over needs call for containing the risks posed by these entities. This entails better governance within the GREs, as well as assessing, monitoring, reporting and disclosing GRE contingent liabilities in government accounts. Containing GRE borrowing is key for fiscal sustainability at the emirate level. The UAE’s banking sector has remained resilient to shocks, thanks to high capital and strong earnings. Although non-performing loans have doubled since the global economic crisis, banks have increased provisioning. In the light of the ongoing restructuring of Dubai’s GREs, the International Monetary Fund (IMF) considers that the Central Bank of United Arab Emirates should continue to ensure that banks provision adequately, monitor the performance of restructured loans and encourage banks to retain more earnings to handle potential risks in the medium term. After the alarums of 2010, it should be remembered that the UAE has the fifth-largest oil and gas reserves in the world. Abu Dhabi produces 95 per cent of the country’s oil and gas and owns one of the largest sovereign wealth funds in the world, with more than US$300 billion assets under management. In contrast, Dubai, the second largest emirate, has a more diversified economy, driven by re-export trade, services and real estate and is highly leveraged, with a gross debt-to-GDP ratio above 100 per cent. It should also be remembered that the UAE has had remarkable achievements over the last decade with its open and outward orientation, which has led to a diversified and steadily growing economy. Even so the temporary decline in oil prices, the post-Lehman shut down of international capital markets and the price correction in the property market in Dubai did put significant strains on the economy. GDP grew by an estimated 3.2 per cent in 2010, somewhat below the regional average of 5 per cent. The 12-month consumer price inflation (CPI) rate was subdued at 1.7 per cent in December 2010, up from -0.3 per cent at end-2009. With exports increasing by 15 per cent in 2010 and imports by 6 per cent, the current account balance is estimated to have reached 7.7 per cent of GDP in

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2010. Deposit inflows in the second half of 2010 helped improve the financial account balance. As a result, the Central Bank’s foreign exchange reserves recovered from the losses sustained in 2009 (US$7 billion), reaching US$32 billion by year-end (corresponding to 1.7 months of imports). The successful restructuring of Dubai World’s (DW) debt had improved market confidence, allowing top-grade Dubai issuers to regain market access. However, Dubai spreads remain high reflecting the risks posed by further restructuring needs. Many Dubai GREs initiated DW style restructuring talks, while Abu Dhabi stepped up support to some of its GREs. With continued pressures in Dubai’s real estate market in 2010, several GREs and other private companies restructured their bank loans. Dubai banks reduced lending to improve liquidity, while Abu Dhabi banks continued to expand in line with the emirate’s fiscal expansion. Nevertheless, overall credit to the private sector remained sluggish and non-performing loans (NPLs) increased to 5.9 per cent from 4.3 per cent in 2009, reflecting mainly the deterioration of loan quality in Dubai banks (8.8 per cent). Of particular concern to the international financial markets after the DW debacle was the fact that the UAE government made it more than clear that the debt of DW was not guaranteed by the government. What had become clear in the view of the IMF, as a result of the DW affair was the need for the UAE to increase the transparency of its economic and financial data, including the financial accounts and business strategies for GREs and at the same time put in place some form of corporate insolvency regime at the federal level, to provide a transparent framework for debt resolution. The Dubai World debt announcement certainly undermined the widely held market perception of implicit government support, especially from the government of Abu Dhabi. To the certain relief of the UAE government, the IMF was at pains to point out that developments in Dubai needed to be seen in the ‘wider perspective of the UAE as a whole.’ The UAE has a net external creditor position well in excess of 100 per cent of GDP, among the largest in the Fund’s membership. If anything the ‘crisis’ illustrated the contrasting positions between the two major emirates: Abu Dhabi, has substantial ‘liquid unencumbered external assets’. In contrast Dubai had experienced major economic difficulties based on the weaknesses of the business model it had adopted. However, a number of Dubai’s major companies have none the less accumulated substantial assets abroad. Thanks to the Oil… According to the Oil & Gas Journal (OGJ), the UAE had reserves of 97.8 billion barrels of oil on 1 January 2011, making up 7 per cent of global oil reserves. The

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UAE has been able to maintain its proven reserves over the last decade primarily due to enhanced oil recovery (EOR) technologies increasing extraction rates

of mature oil projects, combined with higher oil prices making more reserves commercially viable. Few new concessions have been made, as exploration has met with little success and most foreign companies lack market access. However, in late 2008, Occidental Petroleum won the first concession offered in decades, earning the right to develop the Jarn Yaphour and Ramhan oilfields. The oil policy of the UAE government is carried out mainly by the Supreme Petroleum Council (SPC) through the Abu Dhabi National Oil Company (ADNOC), operating 14 subsidiaries which participate at every level of the oil and natural gas sectors. The contract structure is based on a long-term, production-sharing basis with the state mandated to own a majority of the equity stake in a project, often through joint venture companies. The most noteworthy of the oil-producing consortia include the Zakum Development Company (ZADCO), the Abu Dhabi Company for Onshore Operations (ADCO) and the Abu Dhabi Marine Operating Company (ADMA-OPCO). International oil majors operating in the UAE include BP, Shell, Total, ExxonMobil, Petrofac and Partex. In 2010, the UAE produced approximately 2.81 million barrels per day (bpd) of total oil liquids, of which 2.3 million bpd was crude oil. Crude oil production capacity is currently estimated at 2.6 million bpd. However, increases in capacity have not been reflected in increased production due to limits imposed by Organisation of the Petroleum Exporting Countries (OPEC), which constrain UAE’s production around its quota of 2.223 million bpd. The government has pushed back plans to increase capacity to 3.5 million bpd to 2018, pending acceptance of fellow OPEC members. Much of the oil production in the UAE is from the Zakum oil system, a collection of oilfields which together make up the third largest oil zone in the world. The Upper Zakum field is run by ZADCO, 60 per cent owned by ADNOC with the Japanese Oil Development Company (JODCO) and ExxonMobil holding the remaining stakes. In order to boost production capacity, ZADCO is reviewing the possibility to use extended reach drilling from four artificial islands to expand production from the current 550,000bpd to 750,000bpd by 2015, increasing the oil recovery rate to 70 per cent. The largest onshore oilfields are operated by ADCO – the Bu Hasa oilfield, which produces as much as 600,000bpd, as well as the Murban Bab, Sahil, Asab and Shah oilfields, contributing another 705,000bpd of light, sweet crude. Additionally, two new fields are being developed by ADCO – the Qusahwira and Bab oilfields, adding 250,000bpd by 2014. ADCO will also redevelop Bida al-Qemzan field, adding 20,000bpd to its current production of 225,000bpd by the third quarter of 2012. These projects are components of a plan to boost

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ADCO’s aggregate production to 1.8 million bpd from its current 1.4 million bpd

by 2017. ADMA-OPCO operates the main offshore assets in Abu Dhabi, which have been in redevelopment to maximise output. The Umm Shaif and Lower Zakum offshore oilfields have a capacity of 520,000bpd combined, although after an expansion at each they will have a production capacity of 425,000bpd and 300,000bpd, respectively. Two new oilfields have also come into development: Nasr and Umm al-Lulu. These will add a further 170,000bpd capacity by 2018. Dubai and Sharjah produce relatively minor amounts of crude oil. Dubai adds 100,000bpd from four separate fields, the older and more abundant Fateh and South-west Fateh oilfields, with extra production from the Falah and Rashid fields. Sharjah’s only significant oilfield is the Mubarak field, which produces 60,000bpd. Sharjah-based Crescent Petroleum operated this field for 35 years before handing control to the government in December 2009. In November 2010, the ruler of Sharjah, Sheikh Sultan bin Muhammad al-Qasimi, issued a decree which created the Sharjah National Oil Corporation (SNOC). The new firm is owned by the emirate of Sharjah and has legal, financial and administrative independence to carry out operations in the upstream and downstream markets, as well as investing in other firms engaging in similar activities. SNOC manages those projects formerly operated by Crescent Petroleum in the emirate. The Emirates have an extensive network of domestic pipelines linking fields with processing plants and ports. There are also inter-emirate pipelines primarily for natural gas injection to increase oil recovery rates in mature Dubai oilfields. There are two pipelines which deliver natural gas to Dubai for injection and use for electric generation – one originating in Sharjah, while the other begins in Abu Dhabi. The largest export pipeline project in development currently is the Abu Dhabi Crude Oil Pipeline (ADCOP) Project. The International Petroleum Investment Company (IPIC) is spearheading the project, along with the China Petroleum Engineering & Construction Corporation (CPECC), a subsidiary of the China National Petroleum Corporation (CNPC). The 230-mile pipeline is scheduled for completion by June 2012 and will transport 1.5 million bpd from ADCO’s Habshan facility to the Fujairah export terminals on the Gulf of Oman coast. Significantly, this will allow more than half of UAE’s exports to bypass the strategic chokepoint at the Strait of Hormuz. In late 2011 Iran had threatened to close the Strait in response to the application of sanctions by the US and the European Union (EU). Japan is the main market for UAE petroleum exports, encompassing 40 per cent of its export volumes. South Korea and Thailand are the other important

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destinations for Emirati crude. The Abu Dhabi National Tanker Company (ADNATCO) is the subsidiary of ADNOC responsible for the transportation of petroleum products. Fujairah is rapidly expanding its export capability. A second oil terminal, composed of three moorings and a new four-berth facility for tanker bunkering, has been built, as well as storage capacity and a 400,000bpd terminal for refined products and petrochemicals, all of which are expected to be operational before the end of 2012. According to the OGJ, the UAE possessed 214.4 trillion cubic feet (tcf) of proven natural gas reserves as of 1 January 2011, although some industry estimates place it slightly higher at 227.2tcf. This amounts to the seventh largest natural gas reserves globally, following Russia, Iran, Qatar, Saudi Arabia, Turkmenistan and the United States. The majority of these reserves are located in Abu Dhabi (198.5tcf), with marginal amounts found in Sharjah (10.7tcf), Dubai (4tcf) and Ras al-Khaimah (1.2tcf). In 2010, the UAE produced 51 billion cubic metres of marketed natural gas, which is equal to around 5 billion cubic feet per day (bcf/d). In 2007, domestic consumption outstripped production for the first time. Domestic demand for electricity continues to rise, spurred by subsidies. Most electricity generated in the UAE uses natural gas as a feedstock, causing the government to look for ever increasing volumes to compensate for increased demand from economic expansion and high population growth. The reliance upon natural gas for injection into mature oilfields further compounds the strain on natural gas supplies. Despite the UAE’s large natural gas reserves, capital costs and high sulphur content present major impediments to development. Risk Assessment Regional stability Good Politics Fair Economy Fair/improving

2013 Arab Spring Nervousness – Human Rights Concerns – Guggenheim on Hold – Revalries Continue – Taj Mahal vs Louvre – Dolphin Pipeline

The United Arab Emirates (UAE) may be one of the most liberal countries in the Gulf, with other religions and cultures tolerated – but only to a degree. The rulers’ nervousness in the face of the 2011 Arab Spring – it supported the Bahraini ruling family by sending armoured cars – dissipated in 2012. It nonetheless sees fit to restrict its citizens’ access to the Internet as well as passing legislation that made it a crime even to endorse any ‘change in the political system’. Human Rights? The human rights record of the UAE had come under fresh scrutiny in late 2011 after five pro-democracy activists boycotted their own trial in a protest over prison conditions and the lack of opportunity to defend themselves. The very existence of the trial had rather contradicted the UAE’s efforts to promote itself internationally as a benign Benidorm where revellers were welcome and the sun always shone. Quoted in the London Economist, the editor of the London based Al-Quds al-Arabi considered that this ‘reflected Gulf rulers’ anxieties about a regional domino effect’. When the activists’ cases came to court in November 2012 a blogger and four other democracy activists were sentenced to prison terms. The blogger, Ahmed Mansoor, received a three-year prison sentence and the four activists each received two years. There was no question of an appeal. The court also ordered the closure of the Hiwar (Dialogue) internet forum. The sentences were passed for using the internet to insult leaders of the United Arab Emirates, calling for a boycott of the September 2011 Federal National Council elections and for anti-government demonstrations. The trial was criticised as ‘grossly unfair’ by a coalition of no less than seven human rights watchdogs including Amnesty International and Human Rights Watch (HRW). In a joint statement, the seven organisations had called for ‘all five to be released immediately and unconditionally’. The HRW representative described it as ‘A complete miscarriage of justice.’ Despite the anger over the sentencing, the UAE Federal Supreme Court, acting in its role as the special security court, pressed ahead with its verdict. The verdict was also criticised by HRW, which pointed out that previous cases in which people were charged

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based on Article 176 of the UAE’s penal code were dealt with as misdemeanours, not at a security court. Government supporters claimed that the protestors had threatened the security and stability of the UAE, as well as insulting its leaders. The Economy According to the National Bank of Kuwait (NBK) in its mid-year review of the Gulf economies, the UAE’s non-oil growth was likely to continue at a below-trend pace of 3–4 per cent in 2013–14. Data received for the first quarter of 2012, including on credit, real estate transactions and a survey of private sector firms, were positive. But these might overstate the underlying pace of improvement since activity in the UAE is typically stronger early in the year before easing back in the summer. Although gradually recovering, the economy was likely to be held back by concerns over the restructuring and refinancing of Dubai Inc debt and any continuing fiscal consolidation. With its strong trade and transport links, the UAE is also more heavily exposed than its neighbours to any global economic turmoil. In its April 2012 report the International Monetary Fund (IMF) confirmed that while the Dubai World Inc debt restructuring had been successfully completed, UAE government-related entities (GREs) still had some US$185 billion (51 per cent of GDP) of debt outstanding, with repayments and redemptions of US$25–30 billion (7–8 per cent of GDP) due in each of the next 3 years. This heavy financing schedule left GREs reliant upon favourable capital market conditions and respectable economic growth to shore-up cash flows and asset values. Given the uncertain global outlook, neither of these can be guaranteed. Even if the world economy were to avoid a big downturn, the continued consolidation and deleveraging of GREs was likely to remain a drag on UAE growth for the foreseeable future. The UAE’s hydrocarbon sector output was forecast to rise 3 per cent by the end of 2012 and level-off in 2013, as oil prices remained close to US$100 per barrel and Gulf members at the Organisation of the Petroleum Exporting Countries (OPEC) seek to guard against potential supply disruptions elsewhere. This will leave crude oil output close to its maximum potential of 2.7 million barrels per day (bpd), although capacity was scheduled to rise to 3.5 million bpd over the next few years. Overall real gross domestic product (GDP) growth was seen at 3.3 per cent in 2012, down from 4.9 per cent in 2011. The UAE’s inflation is likely to remain amongst the lowest in the region. Consumer price inflation has been below 1 per cent since mid-2011 and averaged 0.7 per cent in the first four months of 2012. Excluding food, inflation would have been negative, at -0.6 per cent, by mid-2012. The rate of decline in housing rents recently showed signs of bottoming out, but with the oversupply in residential

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property expected to persist, a rebound in rents looks unlikely. Moderate economic growth, weak credit conditions growth and softer global food prices are expected to see inflation average 2.0 per cent or below in 2012 and 2013. Government spending was estimated to have increased by 19 per cent in 2011 thanks partly to higher loans and equity outlays, probably linked to the Abu Dhabi government’s assistance to local corporates. Nevertheless, with oil prices and production high, the budget balance improved, registering its first surplus for three years at 3 per cent of GDP. Slightly larger surpluses were expected to be seen in 2012 and 2013, as bailout expenses decline and the authorities seek to rationalise current and project spending where possible. Meanwhile, the slight dip in oil prices combined with rising imports could see the current account surplus shrink from 7 per cent of GDP in 2012 to 2 per cent of GDP in 2013. Monetary conditions in the UAE remained soft compared to most other countries in the Gulf Co-operation Council (GCC), reflecting weak economic activity and the struggle for financial normalisation in the aftermath of the property market crash. Weak demand, corporate sector restructuring and continued concerns over asset quality kept credit growth subdued. End-year private sector claims and more recent loans and advances figures show lending growth at an annual 2–3 per cent. Provisions against non-performing loans (NPLs) continued to rise, up by an annual 30 per cent in May 2012 and were expected to increase further given weakness in the property sector and the heavy corporate debt burden. IMF stress tests suggested that the banking system could cope with rising NPLs or tighter funding conditions (from links to European banks, for example), but that individual banks might suffer disproportionately. Meanwhile, the Central Bank of the United Arab Emirates announced in April new exposure limits for bank lending to local governments and all GREs. The new conditions should improve risk levels and reduce credit concentration, but could also interrupt the flow of credit from individual banks with large single party exposures. Despite the problems that have affected it since 2008 – mostly focussed on Dubai – the UAE is one of the world’s wealthiest nations, with a GDP per capita (at purchasing power parity) estimated at around US$67,000 in 2011 ranking it eighth in the world in 2011 (directly behind the United States). Beyond the hydrocarbon economy – which continues to account for approximately 80 per cent of total government revenues – the UAE is one of the world’s most important financial centres and a major entrepôt in the Middle East. Investments in infrastructure and technology and the development of projects such as the Khalifa Industrial Zone Abu Dhabi (KIZAD) and other economic free zones,

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continue to provide the UAE with insurance against oil price declines and global economic stagnation. Since 2009, the UAE has solidified its economic portfolio, but continues to rely on its vast hydrocarbon resources for the majority of its economic activity. Recovering oil prices and robust trade growth have buoyed the economy and forecasts expect modest growth of 2.3 per cent in 2012. This figure could change significantly if the geopolitical pressures of the region worsen – for example, through an expansion of international sanctions on key trading partner Iran – or oil prices decline due to economic slowdowns in developed economies. The UAE is likely to be in a better position to cope with such disruptions than most of its neighbours, but its economy is still heavily dependent on its hydrocarbon resources. The diversification of its economy should continue over the next several years, but for economists studying the UAE the most important indicator to watch remains the price of crude oil. Hydrocarbons According to Oil & Gas Journal (OGJ) 2012 estimates, the UAE holds the seventh-largest proved reserves of oil at 97.8 billion barrels, with the majority of reserves located in Abu Dhabi (approximately 94 per cent). The other six emirates combined account for just 6 per cent of the UAE’s crude oil reserves, led by Dubai with approximately 4 billion barrels. Production of these resources is dominated by the state-owned Abu Dhabi National Oil Company (ADNOC) in partnership with a few large international oil companies under long-term concessions, though the impending (in late 2012) expiration of two existing concession licences could create opportunities for new entrants into that exclusive club. The ADNOC-led consortia continue to keep the UAE near the top of the list of the world’s largest crude oil producers, ranking seventh in 2011 at 3.32 million barrels per day (bpd). According to the US government’s Energy Information Administration (EIA), the likelihood of further major discoveries in the UAE is low, but enhanced oil recovery (EOR) techniques are being successfully utilised to increase the extraction rates of the UAE’s mature oil fields and the recovery of oil prices following the global financial crisis will help maintain the commercial viability of such endeavours. Leaders in the UAE hope to increase crude oil production to 3.5 million bpd over the next few years. Each of the seven Emirates is responsible for regulating the oil industry within their borders, creating a mix of production-sharing arrangements and service contracts among the seven Emirates. In Abu Dhabi, the Supreme Petroleum Council (SPC) is the entity charged with setting Abu Dhabi’s petroleum-related objectives and policies. Given Abu Dhabi’s status as the central

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player in the UAE’s oil industry, the SPC is the most important entity in the country when it comes to establishing oil policy. ADNOC, which operates 15 subsidiaries throughout the oil and gas sector, leads the day-to-day operations and implementation of SPC directives and is the key shareholder in nearly all upstream activity in the Emirate. ADNOC’s subsidiaries are organised into six different categories, including oil and gas exploration, processing and distribution, among others. Some of the most notable of these subsidiaries are the Abu Dhabi Company for Onshore Oil Operations (ADCOO), the Abu Dhabi Marine Operating Company (ADMA-OPCO), the Zakum Development Company (ZADCO) and the Abu Dhabi National Tanker Company (ADNATCO), which is operated under the same management team as the National Gas Shipping Company (NGSCO). ADNATCO has a fleet of 22 vessels, including two oil tankers, nine bulk carriers and four crude tankers and is responsible for the transport of a range of products, including crude oil, petrochemicals and sulphur. Dubai’s energy sector is run by the Supreme Council of Energy (SCE), which oversees the Emirate’s energy-policy development and co-ordination. The SCE includes representatives from several key entities, including the Emirates National Oil Company (ENOC), the Dubai Petroleum Establishment (DPE) and the Dubai Nuclear Energy Committee (DNEC). The SCE seeks to ensure that Dubai’s economy has adequate and sustainable access to energy resources. In Abu Dhabi, contract structures are based on long-term, production-sharing agreements between the state-run ADNOC and private actors (primarily large international oil companies), with the state required to hold a majority share in all projects. With the exceptions of Dubai and Sharjah – which both have service contracts to manage their declining reserves – the smaller Emirates all utilise some form of production-sharing agreements similar to those in Abu Dhabi. Major international oil companies involved in the oil and gas sector in the UAE include British Petroleum, Shell, Total, ExxonMobil and Occidental Petroleum, which in 2008 had secured the first new concession offered by the UAE in more than 20 years. Although the UAE holds more than 7 per cent of the world total, recent exploration has not yielded any significant discoveries of crude oil. What it lacks in new discoveries, however, it makes up for with an emphasis on EOR techniques designed to extend the lifespan of existing oil fields. By improving the recovery rates at those fields, such techniques have helped the UAE to nearly double the proved reserves in Abu Dhabi over the last decade-plus. Production targets are set by the Organisation of the Petroleum Exporting Countries (OPEC) and any increases of UAE’s output requires approval from fellow members. The inauguration of the Habshan–Fujairah oil pipeline also known as the Abu Dhabi Crude Oil Pipeline (ADCOP) on 15 July 2012 was the most significant

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development in the UAE’s midstream profile to date. The pipeline enables oil supplies to be sent directly to Fujairah on the Arabian Sea, by-passing the vulnerable Strait of Hormuz. With a capacity of 1.5 million bpd – and expectations of that figure reaching 1.8 million bpd in the near future – this pipeline provides the UAE with the ability to export close to 75 per cent of its daily production without passing through the Strait of Hormuz. The International Petroleum Investment Company (IPIC) – owned by the government of Abu Dhabi – led the pipeline project, which is operated by ADCO. Exports of 2.1 million bpd in 2010 meant the UAE ranked fourth in the world, behind only Saudi Arabia, Russia and Nigeria. Approximately 95 per cent of UAE’s exports are sent to Asian markets – with the largest share going to Japan – and are primarily sold on a term basis (though some crude is sold in spot markets). Currently the UAE has six export terminals with the capability to handle crude oil, but only the terminal in Fujairah is free from the risks associated with the Strait of Hormuz. Beyond its vast oil reserves, the UAE had 215 trillion cubic feet (tcf) of proved natural gas reserves at the end of 2011, ranking it seventh in the world, according to the British Petroleum Statistical Review of World Energy June 2012 (BP 2012). The UAE is not as prolific a producer of natural gas as it is of oil, nevertheless it was the 11th-largest producer of natural gas in the world in 2011 (51.7 billion cubic metres). Despite its large endowment, the UAE became a net importer of natural gas earlier this decade. This phenomenon is a product of two things: first, nearly 30 per cent of natural gas produced in recent years was re-injected into existing fields as part of EOR techniques, second, the country’s inefficient and rapidly-expanding electricity grid – which is being taxed by the rapid economic and demographic growth of recent decades – relies on natural gas for the majority of its feedstock. To help meet the growing demand for natural gas, the UAE boosted imports from neighbouring Qatar via the Dolphin Gas Project‘s export pipeline. The pipeline runs from Qatar to Oman via the UAE and is one of the principal points of entry for UAE natural gas imports. In addition to the imports from Qatar, Dubai and Abu Dhabi both engage in LNG trading; the former as an importer and the latter an exporter. As with oil, Abu Dhabi holds the largest share of natural gas reserves, accounting for approximately 94 per cent of the country’s total; Sharjah (4 per cent), Dubai (1.5 per cent) and Ras al-Khaimah (0.5 per cent) make up the balance. Most of the UAE’s natural gas has relatively high sulphur content, making the development and processing of the country’s vast reserves economically challenging. Because of this, nearly 30 per cent of UAE’s gross production is re-injected into oilfields as part of the nation’s EOR techniques.

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The recovery of the non-hydrocarbon economy is expected by the IMF to continue in 2012, backed by strong trade, tourism, logistics and manufacturing. It will also be helped by high oil prices. While increases in oil production are set to slow in the near future, overall GDP growth is expected to moderate to 2.3 per cent. Downside risks relate to a possible increase in regional geopolitical tensions, a potential decline in oil prices, a renewed worsening of global financial conditions, or a marked slowdown in Asia. Culture Vultures The October 2012 announcement that Abu Dhabi’s plans for a Guggenheim museum were ‘on hold’ did not come as a total surprise when the developers in charge of the controversial building confirmed the cancellation of their construction contracts. The museum on Saadiyat Island, designed by Frank Gehry, would have been one of the biggest building projects in the Middle East. At 30,000 square-meters, it would be the world’s largest Guggenheim museum, intended to put the Emirates on the world ‘culture’ map. The plans for the museum were first announced in 2006, when Abu Dhabi’s crown prince modestly claimed that the project would ‘set the benchmark for museums’. Work on the site had begun in 2009 but in mid-2012 it was reported that the government-owned Tourism Development and Investment Company (TDIC) had recalled the tender for the concrete works and returned bids to contractors. The TDIC later confirmed that the museum’s 2013 opening date had been put back, due to the ‘immense magnitude’ of the work. Speculation about the building delay had for some time been centred on regional financial uncertainty. In 2012 Dubai unveiled plans for a US$1 billion reproduction of the Taj Mahal that would not only be four times bigger than the 17th century original but, to maintain Dubai’s image as the capital of ‘bling’, contain a shopping centre, a 300-room five-star hotel, serviced apartments and bridal wear stores. Not to be outdone, also in 2012, Abu Dhabi awarded a US$653 million contract to build a branch of France’s Louvre museum, signalling that the oil-rich Emirate was again moving ahead with flamboyant development projects. Risk Assessment Politics Poor Economy Good Regional stability Fair

2014 Racing or Race-Bling? – Political Sub-Currents – Alleged Plot – Muslim Brotherhood – Judicial Process Doubts – Economic Portfolio Solidified – Dubai Megaprojects

The television coverage of horse racing in Dubai shows elegant race-goers strolling across the manicured lawns at the Meydan racecourse, the ladies wearing extravagant hats and expensive dresses, the men carrying binoculars and race-cards. One commentator described the pastime in Dubai as ‘not so much racing, but race-bling’. For Dubai has styled itself as the consumer shop window of the United Arab Emirates (UAE), attracting tourists from Europe (notably the UK), Russia, Africa, the Indian sub-continent and, of course, the Middle East. The foundations of Dubai’s development as a commercial centre were laid in the 1960–70s by Sheikh Maktoum bin Rashid al-Maktoum, the father of the current ruler, Sheikh Mohammed bin Rashid al-Maktoum. Frictions between shop window Dubai and neighbouring Abu Dhabi, the UAE’s financial engine room, date back to the nineteenth century. More recently, on a number of occasions Dubai’s profligacy has had to be bailed out by Abu Dhabi’s petro-dollars, the last occasion triggered by the financial crisis following the collapse of Lehman Brothers in 2008. On Trial A March 2013 article by David Hearst, a leader writer for the London Guardian newspaper shone an embarrassing light on the UAE’s political sub-currents. According to Mr Hearst, for over six months, some 70 of 94 activists accused of plotting to overthrow the government of the United Arab Emirates had been held in secret detention. It was only after their families threatened a sit-in that the accused were brought to the court blindfolded, some showing obvious signs of torture, malnutrition and mistreatment. The evidence against them was also a mystery. The state prosecutor’s file, which was only sent to the court a few days before the trial began, relied heavily on the forced confessions of two of the accused. On the first day, one of them, Ahmed Ghaith al-Suwaidi, had a dramatic change of heart. Denying the charges, he pleaded with the court to protect his family, saying that: ‘I know that what I am going to say may cost me my life, but I deny the charges and I ask the court to protect my life and the life of my family.’

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Interestingly, the accused came from all walks of Emirati life. The leader of the alleged plot, Sheikh Sultan bin Kayed al-Qasimi, is the cousin of the ruler and a member of one of the UAE’s seven ruling families. Present at his arraignment were three judges, two human rights defenders, lawyers, teachers, academics as well as students. Mr Hearst noted that the social spread of the group was at least consistent with the sweeping nature of the charges. The state hoped to convince the court that the members of the group were plotting to form nothing less than a parallel government with links to the Muslim Brotherhood. Announcing the trial in January 2013, the attorney general, Salem Saeed Kubaish, had claimed that the group had sought to infiltrate schools, universities and ministries. Its ‘unannounced aims were to seize power and confront the main principles on which the ruling system is based’, he alleged. The prosecutor claimed that this secret society had set out its seditious purpose on paper, but strangely acknowledged that these ‘documents’ had been destroyed. At the beginning of the trial, Dubai’s chief of police, Dhahi Khalfan, maintained that all the Gulf states faced an existential threat in the form of Egypt’s Muslim Brotherhood. The group from which most of the defendants came, Al-Islah (Reform), did not hide its ideological sympathies with Egypt’s then ruling Islamist group. Ahmed al-Nuaimi, a leader of al-Islah, whose brother Khaled was one of the 94, had stated: ‘Egypt is a republic where you can have established parties. But we are Bedouin and we agree to a ruling family leading the country. All we are saying is that it has to be done under a democratic system.’ Many other relatives of the accused also claimed loyalty to al-Nahyan, Abu Dhabi’s ruling family. To clarify its political stance, al-Islah issued a second petition (the first triggered the initial wave of arrests) on the eve of the trial. It grounded its demands in the UAE’s constitution and the aims of the country’s Founding Fathers. Such demands were not unusual in a post-Arab Spring world – the group wanted all the members of the UAE’s parliament, the Federal National Council, to be elected and the granting to that body of full legislative and regulatory powers. They also called for judicial independence, the retreat of the security state and basic human rights. The Abu Dhabi trial certainly sat uncomfortably alongside the UAE’s image as one of the Gulf’s most stable, modern and advanced states. But with modernity comes certain obligations. The good news that the UAE had acceded to the UN Convention Against Torture in July 2012 was tempered by its refusal to allow the UN committee to investigate individual allegations of torture. In an effort to have its cake and eat it, the UAE government had also registered a reservation to the convention, blandly stating that ‘pain and suffering arising from lawful

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sanctions’ did not, in its view, amount to torture. Ironically, the trial itself was announced on the eve of a UN human rights review. Both Human Rights Watch (HRW) and Amnesty International had already criticised the trial; the UAE’s judicial process had been found wanting – among concerns were limited access to lawyers and withholding key documents concerning charges and the evidence against them. Concluding his excellent article, Mr Hearst observed that whatever emerged from the trial, the UAE would continue to be viewed as a key Western Gulf partner. In December 2012 the UAE signed up for 60 Eurofighter Typhoon jets from British Aerospace after an official visit by British Prime Minister David Cameron. The UAE had also signed 17 defence contracts for US-built drones worth US$1.42 billion. The UAE is also France’s biggest arms export destination. The article concluded by noting that ‘British, French, US and even Turkish unqualified support for a régime cracking down so crudely on democracy activists is, however, another uncomfortable example of how key Western powers in the Middle East bestride the fence that divides the Arab world after its revolution. They support free elections in Egypt and Tunisia and yet maintain the closest of military and security relationships with a government in the UAE that does the opposite. I suppose it’s called keeping all their options open, but in this trial at least, they overtly conflict.’ The UAE may be one of the most liberal countries in the Gulf, with other religions and cultures tolerated – to a degree. The UAE rulers’ nervousness in the face of the 2011 Arab Spring – it had supported the Bahraini ruling family by sending armoured cars to join a Gulf Co-operation Council (GCC) force began to dissipate in 2012. The UAE nonetheless saw fit to restrict its citizens’ access to the Internet as well as passing legislation that made it a crime even to endorse any ‘change in the political system.’ Human Rights? The human rights record of the United Arab Emirates also came under scrutiny in 2012 after five pro-democracy activists boycotted their own trial in a protest over prison conditions and the lack of opportunity to defend themselves. The very existence of the trial rather contradicted the UAE’s efforts to promote itself internationally as a benign Benidorm where revellers were welcome and the sun always shone. It certainly didn’t shine in the cells of the human rights activists arrested, nor in those of the bloggers who found themselves stripped of their citizenship. A further 200 ‘borderline’ cases were denied the right to travel. Quoted in the London Economist, the editor of the London based Al-Quds al-Arabi considered that this ‘reflected Gulf rulers anxieties about a regional domino effect’. When the activists’ cases came to court in November

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2012 a blogger and four other democracy activists were sentenced to prison terms. The blogger, Ahmed Mansoor, received a three-year prison sentence and the four activists each received two years. There was no question of an appeal. The court also ordered the closure of the Hiwar (Dialogue) internet forum. The sentences were passed for using the internet to insult leaders of the United Arab Emirates, calling for a boycott of the September 2012 Federal National Council elections and for anti-government demonstrations. The trial had been criticised as ‘grossly unfair’ by a coalition of no less than seven human rights watchdogs including Amnesty International and HRW. In a joint statement, the seven organisations had called for ‘all five to be released immediately and unconditionally.’ The HRW representative described it as ‘A complete miscarriage of justice.’ Despite the anger over the sentencing, the UAE Federal Supreme Court, acting in its role as the special security court, pressed ahead with its verdict. The verdict was also criticised by HRW, which pointed out that previous cases in which people were charged based on Article 176 of the UAE’s penal code were dealt with as misdemeanours, not at a security court. Government supporters claimed that the protestors had threatened the security and stability of the UAE, as well as insulting its leaders. The Economy On the strength of its hydrocarbon sector the UAE is one of the world’s wealthiest nations, with a gross domestic product (GDP) per capita (at purchasing power parity) estimated at US$48,158 in 2011, ranking it eighth in the world in 2011 (directly behind the United States). Beyond the hydrocarbon economy, which continues to account for approximately 80 per cent of total government revenues, the UAE is becoming one of the world’s most important financial centres and a major trading centre in the Middle East. Investments in infrastructure and technology and the development of projects such as the Khalifa Industrial Zone Abu Dhabi (KIZAD) and other economic free zones, continue to provide the UAE with insurance against oil price declines and global stagnation. Since the bottom of the economic recession in 2009, the UAE has solidified its economic portfolio, but it continues to rely on its vast hydrocarbon resources for the majority of its economic activity. Recovering oil prices and robust trade growth have buoyed the economy and the International Monetary Fund (IMF) forecast non-oil growth of 4.3 per cent in 2013. This figure could change if the geopolitical pressures of the region deteriorate – for example, through an expansion of international sanctions on key trading partner Iran – or oil prices decline as a result of economic slowdowns in developed economies. The UAE is likely to be in a better position to cope with such disruptions

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than most of its neighbours, but its economy is still heavily dependent on its energy resources. The diversification of its economy is likely to continue over the next several years, but for economists studying the UAE the most important indicator to watch remains the price of crude oil. In its July 2013 assessment of the UAE economy, the IMF noted that the economic recovery continued in 2012 supported by favourable oil prices, capital inflows and the UAE’s safe-haven status amid the regional political and social unrest. Overall GDP growth is projected to have reached 4.3 per cent in 2012 as hydrocarbon production expanded by around 5.2 per cent and non-oil growth accelerated to 3.8 per cent. The external current account surplus rose to almost 17 per cent of GDP supported also by buoyant non-hydrocarbon exports. A broadening recovery in construction and real estate and continuing growth in tourism-oriented sectors are expected to underpin a further acceleration in non-oil growth to 4.3 per cent in 2013. At the same time, growth in oil production will likely slow in the context of ample global supply. Non-hydrocarbon growth is expected to remain strong at above 4 per cent in the medium term, though subject to substantial external risks. Inflation remained subdued at 0.7 per cent in 2012 and was expected to pick up only moderately in 2013. Aiming to build on its achievements in becoming a regional services and tourism hub, Dubai had announced plans for several new megaprojects in real estate and tourism that would be executed to a large extent through its government-related entities (GRE). Dubai’s GREs are increasingly regaining access to external financing in an environment of ample global liquidity, while their debt continues to be high. While GRE debt restructurings related to the 2009 crisis were nearing completion, several large maturities were drawing closer, including on restructured debt, between 2014 and 2018. According to the IMF, the UAE’s banking system maintained significant capital and liquidity buffers and non-performing loans may finally have peaked at 8.7 per cent in December 2012. Nonetheless, further restructuring of GRE debt, including possibly on already restructured debt, could still add materially to this level. Despite the accommodative monetary stance under the peg to the US dollar, lending to the private sector had remained sluggish. The October 2012 announcement that Abu Dhabi’s plans for a Guggenheim Museum were on hold did not come as a total surprise when the developers in charge of the controversial build confirmed the cancellation of their construction contracts. The museum, on Saadiyat Island, designed by Frank Gehry, would have been one of the biggest building projects in the Middle East. At 30,000 sq m, it would be the world’s largest Guggenheim museum, intended to put the Emirates on the world culture map. The plans for the museum were

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first announced in 2006, when Abu Dhabi’s crown prince modestly claimed that the project would ‘set the benchmark for museums’. Work on the site had begun in 2009 but in mid-2012 it was reported that the government-owned Tourism Development and Investment Company (TDIC) had recalled the tender for the concrete works and returned bids to contractors. The TDIC later confirmed that the museum’s 2013 opening date had been put back, due to the ‘immense magnitude’ of the work. However, in March 2012 plans for the museum had been criticised by a group of artists who took exception to the living and working conditions of the labourers on the site. Speculation about the building delay had for a while been centred on regional financial uncertainty. In the twenty-first century the rivalry between Dubai and Abu Dhabi often showed itself in competing grandiose projects that both attract international attention and flatter the egos of its seemingly insecure rulers. Such was the competitive sensibility that in the 1980s an edition of the Middle East Review was censored by the authorities in Abu Dhabi for referring to Dubai’s plans to build the highest building in the UAE. Later, Dubai built the Burj Khalifa skyscraper, which had been known as Burj Dubai prior to its inauguration; the name change followed the 2009 bail-out of Dubai by the richer Abu Dhabi. The 2009 rescue was in fact the second time in the UAE’s short history that the more conservative Abu Dhabi had come to the rescue of its apparently profligate neighbour. In 2012 Dubai unveiled plans for a US$1 billion reproduction of the Taj Mahal that would not only be four times bigger than the seventeenth century original but, to maintain Dubai’s image as the capital of ‘bling’ contain a shopping centre, a 300-room five-star hotel, serviced apartments and bridal wear stores. Not to be outdone, also in 2012, Abu Dhabi awarded a US$653 million contract to build a branch of France’s Louvre museum, signalling that the oil-rich emirate was again moving ahead with flamboyant development projects. Hydrocarbons A member of the Organisation of the Petroleum Exporting Countries (OPEC) since 1967, the UAE is one of the most significant oil producers in the world. According to the Oil & Gas Journal (OGJ) 2012 estimates, the UAE holds the seventh-largest proved reserves of oil in the world at 97.8 billion barrels, with the majority of reserves located in Abu Dhabi (approximately 94 per cent). The other six emirates combined account for just 6 per cent of the UAE’s crude oil reserves, led by Dubai with approximately 4 billion barrels. Production of these resources is dominated by the state-owned Abu Dhabi National Oil Company (ADNOC) in partnership with a few large international oil companies under long-term concessions. The impending expiration of two existing concession

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licences could create opportunities for new entrants into the UAE’s energy sector. The ADNOC-led consortia continue to keep the UAE near the top of the list of the world’s largest crude oil producers, ranking seventh in 2012 at 3.3 million barrels per day (bpd). According to the US government’s Energy Information Administration (EIA) the likelihood of further major oil discoveries in the UAE is low, but enhanced oil recovery (EOR) techniques are being successfully used to increase the extraction rates of the UAE’s mature oil fields; the recovery of oil prices following the global financial crisis should help maintain the commercial viability of such endeavours. The UAE hopes to increase crude oil production to 3.5 million bpd over the next few years from 3.3 million bpd in 2012. Each of the emirates is responsible for regulating the oil industry within their borders, creating a mix of production-sharing arrangements and service contracts among the seven emirates. In Abu Dhabi, the Supreme Petroleum Council (SPC) is the entity charged with setting Abu Dhabi’s petroleum-related objectives and policies. Given Abu Dhabi’s status as the central player in the UAE’s oil industry, the SPC is the most important entity in the country when it comes to establishing oil policy. ADNOC – which operates 15 subsidiaries throughout the oil, gas and petrochemical sector – leads the day-to-day operations and implementation of SPC directives and is the key shareholder in nearly all upstream activity in the emirate. ADNOC’s subsidiaries are organised into six different categories, including oil and gas exploration, processing and distribution, among others. Some of the most notable of these subsidiaries are the Abu Dhabi Company for Onshore Oil Operations (ADCO), the Abu Dhabi Marine Operating Company (ADMA-OPCO), the Zakum Development Company (ZADCO) and the Abu Dhabi National Tanker Company (ADNATCO), which is operated under the same management team as the National Gas Shipping Company (NGSCO). ADNATCO has a fleet of 22 vessels, including two oil tankers, nine bulk carriers and four crude tankers and is responsible for the transport of a range of products, including crude oil, petrochemicals and sulphur. Dubai’s energy sector is run by the Dubai Supreme Council of Energy (DSCE), which oversees the emirate’s energy policy development and co-ordination. The DSCE includes representatives from several key entities, including the Emirates National Oil Company (ENOC), the Dubai Petroleum Establishment (DPE) and the Dubai Nuclear Energy Committee (DNEC). The SCE seeks to ensure that Dubai’s economy has adequate and sustainable access to energy resources into the future. With the world’s seventh-largest proved reserves of crude oil (97.8 billion barrels at the end of 2012), the UAE holds some 6 per cent of the world total.

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Nevertheless, recent exploration has not yielded any significant discoveries of crude oil. What it lacks in new discoveries, however, it makes up for with an emphasis on EOR techniques designed to extend the lifespan of the existing oil fields. By improving the recovery rates at those fields, such techniques helped the UAE to nearly double the proved reserves in Abu Dhabi over the last decade-plus. Production quotas are set by OPEC and any increase of UAE’s output requires approval from fellow members. ADCOP boosted UAE crude oil export capacity when it began operations in June 2012 and will add to the already-impressive total of 2.1 million bpd that the UAE exported in 2010. That total ranked fifth in the world, behind only Saudi Arabia, Russia, Iran and Nigeria. Approximately 95 per cent of UAE’s exports are sent to Asian markets – with the largest share going to Japan – and are primarily sold on a term basis (although some crude is sold in spot markets). Currently the UAE has six export terminals with the capability to handle crude oil, but only the terminal in Fujairah is free from the risks associated with the Strait of Hormuz. Natural Gas Beyond its vast oil reserves, according to the EIA, the UAE has 215 trillion cubic feet (Tcf) of proved natural gas reserves, ranking it seventh in the world, according to Cedigaz. The UAE is a more prolific oil producer, but it was the fourteenth largest producer of natural gas in the world in 2012 (1.8Tcf). Despite its large endowment, the UAE became a net importer of natural gas earlier this decade. This phenomenon is a product of two things: first, nearly 30 per cent of natural gas produced in recent years was re-injected into existing fields as part of EOR techniques and second, the country’s inefficient and rapidly expanding electricity grid – which is being taxed by the rapid economic and demographic growth of recent decades – relies on natural gas for the majority of its feedstock. To help meet the growing demand for natural gas, the UAE boosted imports from neighbouring Qatar via the Dolphin Gas Project‘s export pipeline. The pipeline runs from Qatar to Oman via the UAE and is one of the principal points of entry for the UAE’s natural gas imports. In addition to the imports from Qatar, Dubai and Abu Dhabi both engage in LNG trading; the former as an importer and the latter as an exporter. As with oil, Abu Dhabi holds the largest share of reserves, accounting for approximately 94 per cent of the country’s total; Sharjah (4 per cent), Dubai (1.5 per cent) and Ras al-Khaimah (0.5 per cent) make up the balance. Most of the UAE’s natural gas has relatively high sulfur content, making the development and processing of the country’s vast reserves economically challenging. Because of this, nearly 30 per cent of the UAE’s gross production is re-injected into oilfields as part of the nation’s EOR techniques.

2015 Financial Reserves – Healthier Banks – Abu Dhabi Economic Vision 2030 – Dubai’s Recovery – IMF Warnings – Growth Rate Forecasts

It is impossible to give broad generalisations about the United Arab Emirates (UAE). The country’s very make-up brings together emirates of differing sizes, wealth, economies and history. Abu Dhabi is by a long chalk, the largest and most powerful, oil-based traditional Emirate. However, what neighbouring Dubai lacks in oil resources it makes up for in bling; it has the altogether different atmosphere to be expected from an Emirate which has become a major tourist attraction as well as a banking centre of sorts. The other five emirates inevitably play something of a subordinate role; to compete with Dubai’s national carrier, Emirates, Abu Dhabi now has an airline of its own, Etihad Airways, which is expanding fast. Sharjah has an under-used airport, Ras al-Khaimah once had hopes for tourism, Ajman and Umm al-Quwain are so small as to barely register on the international map. Fujairah, the only Emirate on the Indian Ocean, has long hoped to become a significant port and tourist resort but those hopes have yet to bear fruit. Largely thanks to Abu Dhabi’s oil revenues, the UAE has managed to build up substantial financial reserves since independence. In 2013 per capita gross domestic product (GDP) was comparable to that of most European countries, although the equal distribution of that wealth left something to be desired. When independence loomed, the two major emirates already had a number of highly competent European and North American advisers in place. The National Bank of Dubai was jokingly referred to locally as the National Bank of Scotland, reflecting its habit of recruiting canny Scotsmen. The then Ruler of Dubai, Sheikh Rashid bin Saeed al-Nahyan, was known not just for his accessibility, but also for his simple tastes. One wonders what he would make of the mega-city his sons have built up. Sheikh Rashid also had his Richelieu, a Bahraini adviser by the name of Mahdi al-Tajir. No signing ceremony, bank opening or official representation was complete without a photograph of Sheikh Rashid with Mahdi Tajir at his side. Together, the emirates appear to have deployed successful economic policies, creating a relatively diverse and open economy which depends on hydrocarbons for 25 per cent of its GDP. But the economy’s openness made it inevitably vulnerable across the board to the global economic crisis of

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2008–09. Financial services, manufacturing, retail, as well as the hospitality and real estate sectors were all severely hit by the downturn in regional and global growth, nowhere more so than Dubai. Although the UAE authorities have emphasised the importance of other non-oil sectors for the country’s future economic growth, the real estate market has remained an important component of the economy. In 2012, the real estate and business services sectors accounted for 10.2 per cent of GDP and construction for 11.4 per cent of GDP. Property market trends will probably continue to play a disproportionately important role in the UAE’s economic development. In early 2013, most analysts expected the UAE’s oil output to fall and global oil prices to slip. This suggested that that the UAE’s non-oil sector would be doing the heavy lifting for a while. However, consumer spending and investment should hold firm, since the UAE continues to benefit from its relative (see below) stability on the social-political front. Credit growth remains sluggish and looked unlikely to increase significantly. The UAE’s banking sector in general remains well-capitalised and profitable. It was generally accepted that the UAE’s banks had worked toward healthier balance sheets, which should begin to improve credit conditions in 2015. Economic growth was estimated at around 3–4 per cent in 2013, but several downside risks continued to exist. If tensions in the Middle East, such as the conflicts in Syria, Yemen or between Israel and Iran, were to escalate, the drop in consumer and investor confidence would rapidly make itself felt in deteriorating trade, tourism and foreign investment. In a wider context, continuing sluggish economic growth in the US and the lingering euro-zone crisis were likely to subdue global oil prices. The UAE’s largest export partners are Japan, South Korea and Thailand, all of which have economies that are dependent on exports to the US and Europe. Falling demand from the US and Europe, would inevitably lower Asian demand for the UAE’s exports. Abu Dhabi The largest of the emirates, Abu Dhabi has set out its road-map in a document entitled Abu Dhabi Economic Vision 2030. The document recognised that Abu Dhabi’s economic development in recent years had been largely based on substantial investments in non-oil activities. The plan was to advance diversification of the economic base and sources of income. The government has also endeavoured to stimulate the private sector. The latest edition of the Annual Economic Report of the Emirate of Abu Dhabi reflected the economy’s return to healthy growth, due in part to the emirate’s diversification strategy, which had seen non-oil activities assume a greater importance. The report highlighted the fact that Abu Dhabi had achieved a growth rate of 5.6 per cent in 2012. During

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the period 2007–12, Abu Dhabi’s non-oil economic activities grew by between and 5 and 9 per cent, resulting in a modestly increased contribution to overall GDP of one per cent. The report claimed that the Abu Dhabi economy was transforming into a knowledge-based economy, ‘capable of attaining sustainable development, enabling Abu Dhabi to assume regional leadership and enhancing competitiveness at the global level.’ Dubai If oil revenues cushioned Abu Dhabi from the shocks and reverses of the global economy, the same was not the case with Dubai. Regarded as a troublesome upstart by its wealthier neighbour, in 2009 within a short space of time Dubai’s property market simply collapsed. Real estate prices fell by as much as 60 per cent as one by one a large number of ambitious projects were mothballed. By 2012 the real estate market was showing signs of recovery although prices remained well below the levels reached in 2008. A number of factors contributed to this recovery, probably none more than the deep pockets of Abu Dhabi which, not for the first time, came to Dubai’s rescue. That’s not to say that there was some progress with re-structuring its debt; Dubai also found itself in the regional ‘safe-haven’ bracket, a more secure place to leave funds than many regional capitals. However well Dubai’s rulers thought they had responded to the financial crisis, the blunt truth was that the emirate had found itself staring into the prospect of a sovereign default at the end of 2009. After a short period of uncertainty, there was as it turned out, no technical default, but many fortunes were lost or severely shrunk. Jobs were lost, there was a huge exodus of expatriate workers – not only senior managers, but also lowly construction workers. Dubai’s reputation as a responsible financial centre also took something of a hammering. By 2013 things seemed to have recovered significantly; work on many of the infrastructure projects had re-commenced – Dubai’s mass transit system was now functioning, new roads and road extension/widening projects were up and running. The crisis certainly underlined the fundamental differences between the economies of Abu Dhabi and Dubai and the other smaller emirates. These can be summarised quite simply: the combination of oil reserves and financial deposits mean that Abu Dhabi is unlikely to run into financial trouble so long as there is oil in the ground. Not so Dubai, which no longer had access to oil fields of any consequence, relying instead on an economy based on business, tourism, finance and real estate. In summary, Abu Dhabi’s bail-out was the only reason Dubai avoided defaulting in 2009. In early 2014, mentioning the recovery in Dubai’s real estate industry, the International Monetary Fund (IMF) saw fit to warn of the potential for another

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property bubble. The IMF saw a large proportion of Dubai’s growth emanating from a number of large projects, including hosting the Expo 2020 exhibition. Knight Frank, the property consultancy, noted that house prices in Dubai had climbed 27.7 per cent year on year in the first quarter of 2014 and there were areas where prices were back at pre-crisis levels. The Central Bank of the United Arab Emirates had broken with its custom by issuing a warning about low residential yields in Dubai and Abu Dhabi, which in its view indicated growing imbalances and overheating in the real estate sector. High Society The television coverage of horse racing in Dubai shows elegant race-goers strolling across the manicured lawns at the Meydan racecourse, the ladies wearing extravagant hats and expensive dresses, the men carrying binoculars and race-cards. One commentator described the pastime in Dubai as ‘not so much racing, but race-bling’. Dubai has styled itself as the UAE’s consumer shop window, attracting tourists from Europe (notably the UK), Russia, Africa, the Indian sub-continent and, of course, the Middle East. The foundations of Dubai’s development as a commercial centre were laid in the 1960–70s by Sheikh Rashid, the father of the current ruler, Sheikh Mohammed bin Rashid. Frictions between shop window Dubai and neighbouring Abu Dhabi, the UAE’s financial engine room, date back to the nineteenth century. On a number of occasions Dubai’s profligacy has had to be bailed out by Abu Dhabi’s petro-dollars, the last occasion (as mentioned above) triggered by the financial crisis following the collapse of Lehman Brothers in 2008. On Trial An earlier edition of the Middle East Review has already quoted the March 2013 article by David Hearst of the London Guardian newspaper which shone an embarrassing light on the UAE’s political sub-currents. According to Mr Hearst, for over six months, some 70 of 94 activists accused of plotting to overthrow the government had been held in secret detention. It was only after their families threatened a sit-in that the accused were actually arraigned. The evidence against them was something of a mystery. The state prosecutor’s file had relied heavily on the confessions of two of the accused. On the first day, one of them, Ahmed Ghaith al-Suwaidi, had a dramatic change of heart. Denying the charges, he pleaded with the court to protect his family, saying that: ‘I know that what I am going to say may cost me my life, but I deny the charges and I ask the court to protect my life and the life of my family.’ The leader of the alleged plot, Sultan bin Kayed al-Qasimi was the cousin of the ruler and a member of one of the UAE’s seven ruling families. Announcing

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the trial in January 2013, the attorney general, Salem Saeed Kubaish, had claimed that the group had sought to infiltrate schools, universities and ministries. Its ‘unannounced aims were to seize power and confront the main principles on which the ruling system is based, he alleged. The prosecutor claimed that this secret society had set out its seditious purpose on paper, but strangely acknowledged that these ‘documents’ had been destroyed. The Abu Dhabi trial certainly sat uncomfortably alongside the UAE’s image as one of the Gulf’s most stable, modern and advanced states. The UAE had acceded to the United Nations convention against torture in July 2012; however, it had refused to allow the UN committee to investigate individual allegations of torture. In an effort to have its cake and eat it, the UAE government had also registered a reservation to the convention, blandly stating that ‘pain and suffering arising from lawful sanctions’ did not, in its view, amount to torture. The Economy Reuters had reported that the UAE authorities had forecast an economic growth rate of up to five per cent during 2014. The UAE minister of economy, Sultan bin Saeed al-Mansouri, was on record as saying that ‘I am conservative so I would put it [2014 growth] between 4.5 per cent and 5 per cent.’ UAE officials downplayed warnings by private economists that a rebound in the property market might boost inflation. As noted above, Dubai’s house prices and rents increased by 20 per cent during 2013. Abu Dhabi’s GDP growth was projected at 6.7 per cent in 2014, according to the department of economic development. Abu Dhabi had registered GDP growth of 7.4 per cent in 2013, up from 5.6 per cent in 2012, according to Reuters. Officials added that Abu Dhabi’s oil production would rise steadily to 3.114 million barrels per day (bpd) in 2017 from 2.907 million bpd in 2015. But it expected oil prices to fall moderately, to US$95 a barrel in 2017 from US$109 last year. Dubai expected its economy to grow by an inflation-adjusted 4.7 per cent in 2014, rising to over 5 per cent in 2015, according to the department of economic development. Dubai’s economy was reported to have expanded by 4.9 per cent in the first half of 2013. In mid-2014, the IMF raised its 2014 UAE economic growth forecast to 4.5 per cent, the same level as 2013. In its June 2014 assessment of the UAE economy, the IMF considered that the UAE had continued to benefit from its perceived safe-haven status amid regional instability. The economic recovery had been solid, supported by the tourism and hospitality sectors and a rebounding real estate sector. While growth in oil production moderated, public projects in Abu Dhabi and buoyant growth in Dubai’s service sectors continued to underpin growth, which had reached 5.2 per cent in 2013. The real estate sector had been recovering quickly

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in some sectors, especially in the Dubai residential market. As a result, headline inflation had started to increase moderately. The current account and fiscal surpluses continued to be sizeable owing to high hydrocarbon prices. In the view of the IMF, the macro-economic outlook was positive. Economic growth is expected at 4.8 per cent in 2014 and about 4.5 per cent in the coming years (a figure lower than the UAE government’s own forecast of ‘over five per cent’), supported by a number of megaprojects announced over the previous 18 months and the successful bid for the Expo 2020. Inflation was projected to further increase, driven by higher rents. The strengthening real estate cycle, particularly in the Dubai residential market, could attract increased speculative demand, creating the risk of unsustainable price dynamics and an eventual, potentially disruptive, correction. Hydrocarbons Since its full independence from the United Kingdom in 1971, the UAE has relied on its large oil and natural gas resources to support its economy. In 2012, hydrocarbon export revenues were US$118 billion according to the IMF, up from approximately US$75 billion in 2010. Overall, the hydrocarbon economy accounts for approximately 80 per cent of government revenues and more than half of the country’s goods exports. According to the US government Energy Information Administration (EIA), the likelihood of further major oil discoveries was low, but the UAE had used enhanced oil recovery (EOR) techniques to increase the extraction rates of the country’s mature oil fields. Continued higher oil prices would help increase the commercial viability of EOR. Domestic gas demand was likely to draw heavily on the UAE’s potentially-exportable natural gas resources. Presently, the UAE both imports and exports liquefied natural gas (LNG) and shares international natural gas pipelines with Qatar and Oman.The UAE is also one of the world’s leaders in the use of natural gas in EOR techniques, but with natural gas demand rising, the government plans to expand into other EOR techniques to divert the gas volumes for domestic consumption. Each of the seven emirates is responsible for regulating the oil industry within their borders, creating a mix of production-sharing arrangements and service contracts. In Abu Dhabi, the Supreme Petroleum Council (SPC) sets Abu Dhabi’s petroleum-related objectives and policies. Given Abu Dhabi’s status as the central player in the UAE’s oil industry, the SPC is the most important entity in the country when it comes to establishing oil policy. The Abu Dhabi National Oil Company (ADNOC) – which operates 15 subsidiaries throughout the oil, gas and petrochemical sector – leads the day-to-day operations and implementation of SPC directives and is the key shareholder in nearly all upstream activity

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in Abu Dhabi. ADNOC‘s subsidiaries engage in oil and gas exploration, processing and distribution, among other activities. The Dubai Supreme Council of Energy (DSCE) oversees Dubai’s energy-policy development and co-ordination. The DSCE includes representatives from several key entities, including the Emirates National Oil Company (ENOC), the Dubai Petroleum Establishment (DPE) and the Dubai Nuclear Energy Committee (DNEC). The other five Emirates have small oil and natural gas sectors, but details on their structures are limited. Natural gas production and regulation also falls to the individual Emirates and is often carried out under the same leadership as their oil sectors. ADNOC leads Abu Dhabi’s natural gas sector through its subsidiaries, with the exploration and production of gas resources carried out by ADCO and ADMA-OPCO, as in the case of oil. The Abu Dhabi Gas Industries Limited Company (GASCO), created as a joint venture between ADNOC, Shell, Total and Partex, oversees processing. The DSCE is also the central figure in Dubai’s natural gas sector. Led by Dubai’s ENOC group – a state-owned entity made up of dozens of subsidiaries – Dubai’s natural gas sector operates similarly to its counterpart in Abu Dhabi. The Dubai Natural Gas Company (DUGAS) oversees engineering, construction, management and operation of Dubai’s natural gas infrastructure. According to the Oil & Gas Journal (OGJ) estimates, the UAE holds the seventh-largest proved reserves of oil in the world at 97.8 billion barrels, with the majority of reserves located in Abu Dhabi (approximately 94 per cent of the UAE’s total). The other six Emirates combined account for just 6 per cent of the UAE’s crude oil reserves, led by Dubai with approximately 4 billion barrels. The UAE holds approximately 6 per cent of the world’s proved oil reserves. Recent exploration in the UAE has not yielded any significant discoveries of crude oil. What the UAE lacks in new discoveries it makes up for with an emphasis on EOR techniques designed to extend the lifespan of the Emirates’ existing oil fields. Risk Assesment Politics Poor Economy Good Regional stability Good

2016 Stock Market Slide – Oil Price Risks – Importance of Real Estate – Fuel Subsidies Relaxed – Generous Welfare State –Natural Gas Consumption

In the heat of the Arabian summer and as the fasting month of Ramadan approached, the government in Abu Dhabi could have done without continued bad news. In August 2015 the United Arab Emirates (UAE) stock markets slid steadily downwards in response to further weakness in oil prices and the decision by Fitch Ratings to cut its outlook for Saudi Arabia‘s debt, essentially because – as was the case in Abu Dhabi – the oil price continued to fall. The prospect of the region’s most important economy going into the red gave cause for concern among all its neighbours. What had traditionally underpinned most of the region’s economies was not just abundant oil supplies – and revenues – but also an oil price that had once seemed immovably entrenched around the US$150 per barrel mark. In mid-August 2015 oil was trading at per barrel prices even below US$40, the first time it had been so low in six years, when the global financial crisis had dragged it south. Bad news comes in threes; in August Fitch Ratings lowered its Saudi Arabia outlook to ‘negative’ from ‘stable’. In effect this was a shot across the bows for all the oil-dependent Gulf States. As if on cue, the third bit of bad news came from the Dubai stock exchange. Admittedly the region’s most volatile market, in one day in August the Dubai exchange fell by 4.0 per cent, to 3,563 points, a four-month low. Less volatile, Abu Dhabi’s exchange sank by 1.4 per cent. Among the major losers, Dubai’s largest property firm, Emaar Properties, fell by 5.9 per cent and Abu Dhabi’s biggest developer, Aldar Properties, also dropped, by 4.4 per cent. In theory, with its relatively diversified economy and strong government finances, the UAE was better placed than most Gulf economies to ride out an era of cheap oil. But investors were concerned that a further plunge in the Saudi stock exchange and slowing growth there could have an impact on asset prices around the region. Riding out a period of low oil prices was one thing; Abu Dhabi was known for its conservative approach to fund management. But ‘Bling’ Dubai had twice been bailed out by Abu Dhabi and in the view of many investors, might well be heading for another rescue. Dubai’s Sheikh Mohammed bin Rashid al-Maktoum looked relaxed enough as he strolled over the manicured greensward of the Meydan racecourse; had he subcontracted the worrying to his advisers?

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The Economy In its early August assessment of the UAE economy, the International Monetary Fund (IMF) considered that lower oil prices risked eroding the UAE’s long-standing fiscal and external surpluses, but that the impact on economic activity in the UAE had been limited owing to large buffers. Real estate prices had declined somewhat since mid-2014, but rents were rising, driving up inflation. Following the fiscal consolidation of 2013, the fiscal stance had been expansionary in 2014. In the perhaps predictable view of the IMF, the economic outlook was expected to moderate reflecting the lower oil prices. Non-oil growth was projected to slow in 2015, before accelerating in the medium term. Export and revenue losses from lower oil prices would be the most significant concern for the UAE economy. With persistently lower oil prices, gradual fiscal consolidation had become important to strengthen long-term fiscal sustainability while cushioning the negative effects on growth. Achieving sustainability would require what the IMF described as the rationalisation of spending and the further mobilisation of non-hydrocarbon revenues. Efforts on strengthening the medium-term budget frameworks needed to continue. Liquidity management needed to remain supportive of credit growth. The UAE banking sector was, in the view of the IMF, well capitalised, liquid, profitable and with low non-performing loans. The IMF concluded by recommending that the implementation of structural reforms should be pursued to strengthen competitiveness and accelerate private sector-led job creation for nationals. This could focus on further opening up foreign direct investment (FDI), improving selected areas of the business environment and easing access to finance for start-ups and small- and medium-sized enterprises (SMEs). Jig-saw Make-up As is the case with most countries it is impossible to make broad generalisations about the United Arab Emirates (UAE). But the UAE can beg to differ: one of the world’s youngest countries, emerging from the relics of Britain’s post-colonial aspirations, its very make-up brings together an improbable mixture of emirates of differing sizes, wealth, economies and history – once simply branded ‘pirate’ states. Abu Dhabi is, by a long chalk, the largest and most powerful oil-based ‘traditional’ emirate. However, what neighbouring Dubai lacks in oil resources it makes up for in enterprise, much of which successful, described by more conservative observers as ‘bling’. With indoor ski-slopes and countless hotels, Dubai has an altogether different atmosphere than that to be expected from an emirate on the Arabian Peninsula. As its oil reserves have diminished, it has managed to become a major tourist attraction as well as a banking centre of sorts.

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To compete with Dubai’s national carrier, Emirates, Abu Dhabi now has an airline of its own, Etihad Airways, which is expanding fast. Meanwhile, the other five emirates inevitably play something of a walk-on, subordinate role. Sharjah has an under-used airport, Ras al-Khaimah once (but no longer) had hopes for tourism and the creation of an international airport; Ajman and Umm al-Quwain are so small as to barely register on the international map. Fujairah, the only emirate on the Indian Ocean, has long hoped to become a significant port and tourist resort but those hopes have yet to bear fruit. Largely thanks to Abu Dhabi’s oil revenues, the UAE has managed to build up substantial financial reserves since independence. In 2013 per capita gross domestic product (GDP) was comparable to that of most European countries, although the equal distribution of that wealth left a lot to be desired. When independence loomed, the two major emirates already had a number of highly competent European and North American advisers in place. The National Bank of Dubai, one of the first banks established before the UAE was created, was jokingly referred to locally as the National Bank of Scotland, reflecting its habit of recruiting canny Scotsmen. The then Ruler of Dubai, Sheikh Rashid bin Saeed al-Nahyan, was known not just for his accessibility (your correspondent was able to meet him – without so much as an appointment – in his Majlis in 1971), but also for his simple tastes. One wonders what he would make of the mega-city and its culture that his sons have built up. Sheikh Rashid also had his Richelieu, his éminence gris was a Bahraini adviser by the name of Mohammed Mahdi al-Tajir. No signing ceremony, bank opening or official representation was complete without a photograph of Sheikh Rashid with Mahdi Tajir at his side. Reportedly, before the creation of the UAE, Mr Tajir, a customs officer in Bahrain, was sent by the Bahraini government’s adviser, Sir Charles Belgrave, to strengthen the Dubai customs office. Together, the emirates appear to have deployed successful economic policies, creating a relatively diverse and open economy which depends on hydrocarbons for 25 per cent of its GDP. But this very openness made it inevitably vulnerable across the board to the global economic crisis of 2008–09. Financial services, manufacturing, retail, as well as the hospitality and real estate sectors were all severely hit by the downturn in regional and global growth, nowhere more so than Dubai. Although the UAE authorities have emphasised the importance of other non-oil sectors for the country’s future economic growth, the real estate market has remained an important component of the economy. In 2012, the real estate and business services sectors accounted for 10.2 per cent of GDP and construction for 11.4 per cent of GDP. Property market trends will probably continue to play a disproportionately important role in the UAE’s economic development.

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At the beginning of August 2015, as the temperature steadily rose, the government relaxed the fuel subsidies that had kept the UAE’s petrol and diesel prices some 30 per cent below market rates. In 2013 the fuel subsidies had cost the government around US$7 billion. The move reflected the continued fall in oil prices. It had been estimated by the IMF that together, the Arabian Gulf states would see export revenues in 2015 drop by around US$380 billion. According to the IMF, only Kuwait and Qatar will avoid a budget deficit. The relaxation of the subsidies had pushed the price of UAE petrol to the highest level in the Gulf. Oman came next, where petrol was about half as dear. The UAE’s prices were not completely free of control. August’s price was only 13 US cents below the US retail price. In contrast to some other Gulf States, in the UAE the price increase would largely be met by expatriates, who make up some 90 per cent of the population. According to a report in the London Economist, Arab Youth Survey polls among Middle Eastern and North African youth had named the UAE as the most popular place to work for the previous four years. Perhaps surprisingly, the US consultancy Mercer recently made Dubai the most-searched after international destination for American job-seekers. UAE nationals, according to the Economist benefited from a generous welfare state that assists them with everything, from education and health care to housing and even the cost of marriage. Generous public-sector wage increases had helped the 80 per cent of nationals employed by the state. It was hoped that the UAE’s move on relaxing fuel subsidies would embolden its neighbours. Low oil prices represented a unique opportunity to get rid of fuel subsidies. Hydrocarbons According to the US government Energy Information Administration (EIA), the UAE is the sixth-largest petroleum producer in the world. In 2013, hydrocarbon export revenues were US$123 billion, up from approximately US$75 billion in 2010, according to the IMF. In addition to the growing hydrocarbon economy, the UAE has become an important financial centre and a major trading centre in the Middle East. Investments in non-energy sectors, such as infrastructure and technology, along with a rapidly recovering real estate sector, continued to provide the UAE with insurance against oil price declines and global economic stagnation. IMF data indicate that the UAE’s real gross domestic product grew by 5.2 per cent in 2013. However, a sustained decline in oil prices could lead to a reduction in spending in the near future. The likelihood of further major oil discoveries is low, but the UAE uses enhanced oil recovery (EOR) techniques to increase the extraction rates of the country’s mature oil fields.

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Natural gas use in the UAE has been rising. Although the country is a member of the Gas Exporting Countries Forum (GECF), domestic demand is likely to draw heavily on the UAE’s natural gas reserves. Currently, the country both imports and exports liquefied natural gas (LNG) and shares international natural gas pipelines with Qatar and Oman. The UAE is also one of the world’s leaders in the use of natural gas in enhanced oil recovery (EOR) techniques. With natural gas demand rising, the government plans to expand domestic production using EOR techniques to meet the demand for domestic consumption and exports. Each of the seven emirates is responsible for regulating the oil industry within its borders, creating a mix of production-sharing arrangements and service contracts. In Abu Dhabi, the Supreme Petroleum Council (SPC) sets Abu Dhabi’s petroleum-related objectives and policies. Given Abu Dhabi’s status as the central player in the UAE’s oil industry, the SPC is the most important entity in the country when it comes to establishing oil policy. The Abu Dhabi National Oil Company (ADNOC) – which operates 16 subsidiaries throughout the oil, natural gas and petrochemical sector – leads the day-to-day operations and implementation of SPC directives and it is the key shareholder in nearly all upstream activity in Abu Dhabi. ADNOC’s subsidiaries engage in oil and natural gas exploration, processing, and distribution, among other activities. The Dubai Supreme Council of Energy (DSCE) oversees Dubai’s energy-policy development and co-ordination. The DSCE includes representatives from several key entities, including the Emirates National Oil Company (ENOC), the Dubai Petroleum Establishment (DPE) and the Dubai Nuclear Energy Committee (DNEC). The DSCE seeks to ensure that Dubai’s economy has adequate and sustainable access to energy resources. The other Emirates have small oil and natural gas sectors, but details on their structures are limited. Natural gas production and regulation are the responsibilities of the individual emirates and are often carried out under the same leadership as their oil sectors. According to Oil & Gas Journal (OGJ) estimates, in January 2015 the UAE held the seventh-largest proved reserves of oil in the world at 97.8 billion barrels, with most of the reserves located in Abu Dhabi (approximately 94 per cent of the UAE’s total). The other six Emirates combined accounted for just six per cent of the UAE’s crude oil reserves, led by Dubai with approximately 4 billion barrels. The UAE holds approximately 6 per cent of the world’s proved oil reserves. The UAE produced 3.5 million barrels per day (bpd) of petroleum and other liquids in 2014, of which 2.7 million bpd was crude oil and the remainder was non-crude liquids (condensate, natural gas plant liquids and refinery processing gain), ranking them second in petroleum production in Organisation of the

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Petroleum Exporting Countries (OPEC) behind Saudi Arabia. The UAE was the fourth-largest crude oil producer in OPEC in 2014, behind Saudi Arabia, Iraq and Iran. The UAE plans to increase crude oil production by 800,000bpd to 3.5 million bpd in 2020. With limited prospects for major discoveries, production increases in the UAE will come almost exclusively by using EOR techniques in Abu Dhabi’s existing oil fields. However, EOR projects are typically based on oil prices around US$100 per barrel, which may prove these projects uneconomic at current price levels. The EIA estimates that the UAE exported more than 2.5 million bpd of crude oil in 2014, with most of it going to markets in Asia. The UAE holds the seventh-largest proved reserves of natural gas in the world, at slightly more than 215 trillion cubic feet (tcf). Despite its large endowment, the UAE became a net importer of natural gas in 2008. This phenomenon is a result of two things: (1) the UAE re-injected approximately 30 per cent of gross natural gas production in 2012 into its oil fields as part of EOR techniques and (2) the country’s inefficient and rapidly-expanding electricity grid – already taxed by the swift economic and demographic growth of recent decades – relies on electricity from natural gas-fired facilities. In 1977, the UAE became the first country in the Middle East to export LNG, sending its first load to the Tokyo Electric Power Company (TEPCO) as part of a long-term supply agreement. The UAE signed a second contract in 1990 to double LNG exports to Japan and in 1994, a third LNG train at Das Island began operations to help fulfil the terms of the agreement. In 2013, the UAE exported 284bcf of natural gas, mostly in the form of LNG (more than 90 per cent) and the remainder via pipelines. All of the UAE’s exported LNG cargoes (260bcf) went to Japan. With planned expansion at the terminal at Das Island and the country’s new focus on developing its vast natural gas reserves, the UAE could experience export growth in the short to medium term. Risk Assessment Economy Good Politics Poor Regional stability Fair

2017 Khalifa’s stroke – Mohammed as de Facto Ruler – Labour Market Reforms – Post-oil Knowledge Economy – Production-sharing Agreements (PSAs)

In mid-2016 the United Arab Emirates’ (UAE) President, Sheikh Khalifa bin Zayed al-Nahyan returned to Abu Dhabi after a private trip abroad. In most countries this would hardly be a headline event, but in the UAE it was seen as significant. In 2014 Sheikh Khalifa had suffered a stroke and the succession rumour mill had inevitably got under way. There was no information about where the President had been, or for what purpose. Sheikh Khalifa, President since the death of his father, Sheikh Zayed bin Sultan al-Nahyan, in 2004, is known as a moderniser; he is the head of the ruling family of Abu Dhabi, the largest of the federation’s seven emirates. Each of the seven emirates is represented on the Supreme Council, the UAE’s governing body. Carefully considered intermarriage has also strengthened the links between the emirates, although the differences in the political and economic philosophies of Abu Dhabi and Dubai are often only lightly plastered over. Since his brother’s stroke, for much of the past decade, Sheikh Khalifa’s younger brother Sheikh Mohammed bin Zayed al-Nahyan, the Crown Prince of Abu Dhabi, had led negotiations on behalf of the UAE in sectors ranging from energy and defence to investment and politics. Productivity If there was a UAE political buzzword in 2015 and 2016 it was either ‘oil prices’ or, more importantly for the long term, ‘productivity’. The virtually automatic employment of nationals in state-owned enterprises (SOE) and in so-called ‘government-related entities’ (GRE) had long been a convenient means of creating employment, but certainly wasn’t a productive solution. These enterprises were, for the most part, as inefficient as the bureaucratic government departments. If the UAE was ever to develop its non-oil economy and become internationally competitive, then substantive labour market reforms would be essential. The challenge for the government was to find ‘productive’ employment for UAE nationals in the growing private sector. In government departments and GREs Emiratisation (affirmative action to create employment for UAE nationals

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in government departments) was already under way, at least in the administrative and management ranks. It appeared that this had been achieved without prejudicing their international competitiveness. The objective remained to persuade more nationals to seek employment in more responsible and productive jobs. Although this risked creating a culture of ‘presence’ rather than of productivity, a side benefit was that as more nationals held down responsible jobs, the need to recruit non-nationals diminished, together with their inevitably higher pay packets. This in turn made the salaries paid to nationals more affordable, higher, and more competitive. The UAE’s minimum wage system, the ‘national reservation wage’, could be afforded and wage levels for nationals ceased to appear prohibitive. However, Emiratisation had not, for the most part, been a success in the private sector. Job specifications had to be matched to applicants’ skills and experience. Where enforced, Emiratisation had often resulted in inefficiently run businesses that were clearly not internationally competitive and required continued subsidies. In the private sector, Emiratisation was largely seen as a form of taxation, which force majeure needed to be factored into the costs of establishing businesses in the UAE. Until the skills levels of UAE nationals were improved, this would continue to be the case. Gradually the ratio of non-nationals to nationals was changing, but of the total UAE population of some 9.5 million, in 2016 just over 10 per cent were UAE nationals. Although the UAE’s dependence on low skilled non-national labour was a constant, UAE nationals often felt themselves to be unemployable. Oil, Bling and Money Since the country’s creation in 1971, following the merger of the improbably named Trucial States, it has been both fruitless and generally impossible to make broad generalisations about the United Arab Emirates. The country’s very make-up brings together emirates of differing sizes, wealth, economies, and history. Abu Dhabi is by a long chalk, the largest and most powerful, oil-based traditional emirate. However, what neighbouring Dubai lacks in oil resources it makes up for in bling; it has the altogether different atmosphere to be expected from an emirate that has become a major tourist attraction as well as a banking centre – of sorts. If Abu Dhabi and its wealth have traditionally provided the UAE with its wealth and security, Dubai provides the country with its risk and its often hyperactive international profile. On more than one occasion, however, Abu Dhabi has had to prop up Dubai’s floundering finances. The other five emirates inevitably play something of a subordinate role. In a high-profile sector, to compete with Dubai’s national carrier, Emirates, Abu Dhabi has for some years developed an airline of its own, Etihad Airways,

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which has been expanding fast. Sharjah has an under-used airport (but business is picking up now it is the base for Air Arabia, the UAE national budget airline), Ras al-Khaimah once had hopes for oil deposits and tourism, Ajman and Umm al-Quwain were so small as to barely register on the international map. Fujairah, the only Emirate on the Indian Ocean, had long hoped to become a significant port and tourist resort but those hopes have yet to bear fruit. Largely thanks to Abu Dhabi’s oil revenues, the UAE has managed to build up substantial financial reserves since independence. In 2013 per capita gross domestic product (GDP) was comparable to that of most European countries, although the equal distribution of that wealth left something to be desired. When independence loomed, the two major emirates already had several highly competent European and North American advisers in place. The National Bank of Dubai was jokingly referred to locally as the National Bank of Scotland, reflecting its habit of recruiting canny Scotsmen. The then Ruler of Dubai, Sheikh Rashid was known not just for his accessibility, but also for his simple tastes. One wonders what he would make of the mega-city his sons have built up. Sheikh Rashid also had his Richelieu, a Bahraini adviser by the name of Mahdi Tajir. For many years no signing ceremony, bank opening or official representation was complete without a photograph of Sheikh Rashid with Mahdi Tajir at his side Together, the emirates appear to have deployed successful economic policies, creating a relatively diverse and open economy which depends on hydrocarbons for 25 per cent of its share of total GDP. However, the economy’s openness made it inevitably vulnerable across the board to the global economic crisis of 2008–09. Financial services, manufacturing, retail, as well as the hospitality and real estate sectors were all severely hit by the downturn in regional and global growth, especially Dubai. The Economy Although the UAE authorities have emphasised the importance of other non-oil sectors for the country’s future economic growth, the real estate market has remained an important component of the country’s economy. Property market trends looked set to play a disproportionately important role in the UAE’s economic development. However, according to the National Bank of Kuwait (NBK) the growth in sales prices in Dubai’s residential property sector continued to fall throughout 2015. In the latter part of the year there had at least been some cause for optimism as prices at least seemed to have stabilised. The NBK put the UAE’s growth rate for 2015 at 3.9 per cent. Oil related GDP was inevitably affected by the slump in global oil prices. The UAE’s relatively resilient non-oil sector and an expected (but possibly misplaced) recovery in oil

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prices were deemed sufficient by the UAE government to drive oil GDP up in 2017. Meanwhile, oil GDP growth was expected to be weak in 2016 having already slowed from an annual 4 per cent in 2014 to 1.6 per cent in 2015. Increased oil production was also expected to improve revenues in 2017. Non-oil sector growth was thought likely to accelerate to 5.5 per cent in 2016 and to 6 per cent in 2017. The more vibrant activities in the sector were tourism, financial services, and construction. The catalyst for the latter was the imminence of the Dubai Expo 2020 event. The UAE’s President, Sheikh Khalifa had also announced that the UAE government would be investing some US$82 billion in fostering a post-oil ‘knowledge economy’. It was planned to triple the number of people engaged in this economy by 2021. Grand plans apart, the news from the UAE’s market Purchasing Managers’ Index (PMI) was less encouraging. The headline PMI fell from 56 in September 2015 to a two year low of 54 in October. The critical level for this indicator was 50, at which point the economy is contracting. Following a period of acceleration in early 2015, inflation appeared to have stabilised in the latter part of the year. The rise in housing costs seemed to have peaked at an annual 10.2 per cent in June 2016, having been on an upward trajectory since the end of 2013. The UAE’s fiscal projections for 2015 had been based on a per-barrel oil price of US$70. Thus, the deficit for 2015 had been expected – although in 2014 a budget surplus of 4.2 per cent of GDP had been posted. The figure for 2015 was expected to be a deficit of 1.2 per cent and for 2016 a deficit of 1.5 per cent. The NBK noted that with reserves amounting to 200 per cent of GDP there was little need for major fiscal consolidation. Nonetheless, the larger emirate had seen some belt-tightening: Abu Dhabi had cut back on some lower-priority projects and in late 2015 Dubai had passed legislation enabling public-private partnerships. One major fiscal reform was the reduction in subsidies, especially those of petrol pump prices which were finally deregulated in August 2015. The budget is expected to return to a surplus figure in 2017. The current account was doing much better and was projected to record a surplus of between 14 and 15 per cent in 2016 and 2017. The strong performance of the non-oil economy had offset the negative effects of the low oil price. However, this in turn was to an extent threatened by the rise in value of the dirham, pegged to a buoyant US dollar. The NBK noted that most visitors to Dubai were from the neighbouring Gulf Co-operation Council (GCC) countries, whose currencies were also pegged to the dollar, so the impact would be softened to an extent. A further positive for the UAE was the ending of the sanctions imposed on Iran. The UAE, with close links, is also Iran’s biggest non-oil trading partner. To the extent that there was any fiscal tightening, its immediate effect had been on Dubai’s small- and medium-sized enterprises (SMEs), which make up

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an important component of the economy. According to a 2013 report on SMEs, they accounted for around 95 per cent of what was termed the ‘enterprise population’ and 43 per cent of the workforce. Many of the SMEs (around 57 per cent) were involved in trading; those engaged in exporting had also been adversely affected by the strength of the dirham against most international currencies. Such were the concerns that the UAE Banks Federation estimated that between US$1.36 billion and US$1.9 billion were at risk of default. Energy Since declaring total independence from theUnited Kingdom and seeking unification in 1971, the UAE – initially a federation of the six emirates of Abu Dhabi, Ajman, al-Fujairah, Dubai, Sharjah and Umm al-Quwain (Ras al-Khaimah – which translates as the ‘Point of the Tent’ dragged its feet, hoping that oil deposits would be found on its territory. This did not happen, so the ‘rogue’ emirate belatedly joined the UAE in 1972, bringing the number of member emirates up to seven) had relied on its large oil and natural gas resources to support its economy. The UAE is currently the sixth-largest petroleum producer in the world. In 2013, hydrocarbon export revenues were US$123 billion, up from approximately US$75 billion in 2010, according to the International Monetary Fund (IMF). In addition to its growing hydrocarbon economy, the UAE is becoming one of the world’s most important financial centres and a major trading centre in the Middle East. Investments in non-energy sectors, such as infrastructure and technology, along with the recovering real estate sector, continue to provide the UAE with insurance against oil price declines and global economic stagnation. International Monetary Fund (IMF) data indicate that the UAE’s gross domestic product grew by 5.2 per cent in 2013. However, according to the United States Government Energy Information Administration (EIA), a sustained decline in oil prices could lead to a reduction in spending in the near future. A member of the Organisation of the Petroleum Exporting Countries (OPEC) since 1967, the likelihood of further major oil discoveries is low, but the UAE uses enhanced oil recovery (EOR) techniques to increase the extraction rates of the country’s mature oil fields. Natural gas use in the UAE is rising. Although the country is also a member of the Gas Exporting Countries Forum (GECF), domestic demand is likely to draw heavily on the UAE’s natural gas resources. Currently, the UAE both imports and exports liquefied natural gas (LNG) and shares international natural gas pipelines with Qatar and Oman. The UAE is also one of the world’s leaders in the use of natural gas in EOR techniques. With natural gas demand rising, the government planned to expand domestic production using EOR techniques to meet the demand for domestic consumption and exports.

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Although the UAE has been making notable progress in diversifying its economy through tourism, trade and manufacturing, in the near term, according to the EIA, oil, natural gas and associated industries look likely to account for most of the economic activity in the seven emirates. Each of these is responsible for regulating the oil industry within its borders, creating a mix of production-sharing arrangements and service contracts. In Abu Dhabi, the Supreme Petroleum Council (SPC) sets Abu Dhabi’s petroleum-related objectives and policies. Given Abu Dhabi’s status as the central player in the UAE’s oil industry, the SPC is the most important entity in the country when it comes to establishing oil policy. The Abu Dhabi National Oil Company (ADNOC) – which operates 16 subsidiaries throughout the oil, natural gas and petrochemical sector – leads the day-to-day operations and implementation of SPC directives and it is the key shareholder in nearly all upstream activity in Abu Dhabi. ADNOC’s subsidiaries engage in oil and natural gas exploration, processing and distribution, among other activities. Some of the most notable subsidiaries are the Abu Dhabi Company for Onshore Oil Operations (ADCO), the Abu Dhabi Marine Operating Company (ADMA-OPCO), the Zakum Development Company (ZADCO) and the Abu Dhabi National Tanker Company (ADNATCO), which operates under the same management team as the National Gas Shipping Company (NGSCO). The Dubai Supreme Council of Energy (DSCE) oversees Dubai’s energy-policy development and co-ordination. The DSCE includes representatives from several key entities, including the Emirates National Oil Company (ENOC), the Dubai Petroleum Establishment (DPE) and the Dubai Nuclear Energy Committee (DNEC). The DSCE seeks to ensure that Dubai’s economy has adequate and sustainable access to energy resources. The other Emirates have small oil and natural gas sectors, but details on their structures are limited. Abu Dhabi bases contract structures on long-term, production-sharing agreements (PSAs) between state-run ADNOC and private actors (primarily large international oil companies) with the state holding a majority share in all projects. With the exceptions of Dubai and Sharjah – which have service contracts to manage their declining reserves – the smaller Emirates all use PSAs similar to those found in Abu Dhabi. Major international oil companies involved in the UAE oil and natural gas sector include BP, Shell, Total, ExxonMobil and Occidental Petroleum – which in 2008 secured the first new concession offered by the UAE in more than 20 years. International oil companies involved in the UAE’s upstream oil sector received just US$1 per barrel produced under the decades-old ADCO concession. After the legacy concession expired in January 2014, nine companies qualified to submit bids for 5 per cent and 10 per cent stakes in a new 40-year concession offering US$3 per barrel and the ability of

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companies to book reserves. In January 2015, Total was the first company to sign a new contract, agreeing to a 10 per cent participating interest in the onshore concession for 40 years. In April 2015, Japan’s Inpex was also awarded a 5 per cent concession. According to the US-based Oil & Gas Journal (OGJ) estimates in January 2015, the UAE held the seventh-largest proved reserves of oil in the world at 97.8 billion barrels, with most of the reserves located in Abu Dhabi (approximately 94 per cent of the UAE’s total). The other six Emirates combined account for just 6 per cent of the UAE’s crude oil reserves (led by Dubai with approximately 4 billion barrels). The UAE holds approximately 6 per cent of the world’s proved oil reserves. Recent exploration in the UAE has not yielded any significant discoveries of crude oil. What the UAE lacks in new discoveries it makes up for with an emphasis on EOR techniques designed to extend the lifespan of the Emirates’ existing oil fields. By improving the recovery rates at the existing fields, such techniques helped the UAE to nearly double the proved reserves in Abu Dhabi over the past decade. The UAE produced 3.5 million barrels per day (bpd) of petroleum and other liquids in 2014, of which 2.7 million bpd was crude oil and the remainder was non-crude liquids (condensate, natural gas plant liquids and refinery processing gain). This ranked them second in petroleum production in OPEC behind Saudi Arabia. The UAE was the fourth-largest crude oil producer in OPEC in 2014, behind Saudi Arabia, Iraq and Iran. The UAE planned to increase crude oil production by 800,000bpd to 3.5 million bpd in 2020. With limited prospects for major discoveries, production increases in the UAE would come almost exclusively by using EOR techniques in Abu Dhabi’s existing oil fields. However, EOR projects are typically based on oil prices around US$100 per barrel, which might render these projects uneconomic at current price levels. The EIA estimated that the UAE exported more than 2.5 million bpd of crude oil in 2014, with most of it going to markets in Asia. The UAE holds the seventh-largest proved reserves of natural gas in the world, at slightly more than 215 trillion cubic feet (tcf). Despite its large endowment, the UAE became a net importer of natural gas in 2008. According to the EIA this phenomenon was a result of two things: (1) the UAE reinjected approximately 30 per cent of gross natural gas production in 2012 into its oil fields as part of EOR techniques and (2) the country’s inefficient and rapidly-expanding electricity grid – already taxed by the swift economic and demographic growth of recent decades – relied on electricity from natural gas-fired facilities. To help meet the growing demand for natural gas, the UAE had boosted imports from neighbouring Qatar via the Dolphin Gas Project’s pipeline over the past several

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years. The pipeline runs from Qatar to Oman via the UAE and is one of the principal points of entry for the UAE’s natural gas imports. Risk Assessment Economy Good Politics Poor Regional stability Good

2018 2018 ‘Clear Way’ – Feud with Qatar – National Service – Little Sparta – Yemen Civil War – Regional Expansion

The international image of Dubai as a centre of trade and tourism saw itself encouragingly repositioned in 2017 by the ground-breaking use of poetry as a diplomatic instrument. In what was recognised as an international ‘first’, the Ruler of Dubai, and the United Arab Emirates (UAE’s) Vice President Sheikh Mohammed bin Rashid al-Maktoum, took to the poet’s pen to exhort the Ruler of Qatar, Sheikh Tamim bin Hamad al-Thani to accept the 13 conditions that the UAE and its allies Bahrain, Egypt and Saudi Arabia said had to be met by Doha if the embargo placed on Qatar in late May 2017 was to be lifted. Using his Instagram account, the UAE’s vice president published a long poem divided in to two parts, which in a matter of hours had received over 80,000 ‘likes’. The poem, entitled Clear Way (in Arabic: Aldarbu uadijun), seeks to persuade Qatar to abandon its maverick foreign policy and return to the fold of the Gulf Co-operation Council (GCC) within which Saudi Arabia is the force majeure. Although several volumes of Sheikh Mohammed’s verses have been published, to judge from Clear Way he is no William Shakespeare:

From the same roots, people, existence, Flesh and blood, the same land, the same faith. Now is the time to unite, with a single heart, To protect each other from those beyond hatred. Sheikh Mohammed’s speciality is a poetic form known as Nabati, a traditional verse form popular among the Bedouin. Verse composition in this format is known to be one of Sheikh Mohammed’s pastimes. ‘All my poems are the product of experience, of personal situations and events. I have never written a verse that has not been about my life…’ Sheikh Mohammed has said. The Qatar Question There was some surprise at the poetic initiative of Clear Way, since for almost two months Sheikh Mohammed had refrained from commenting on the Qatari blockade and isolation. Whatever his public comments on the feud, it was

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highly unlikely that Sheikh Mohammed was not privy to the events leading up to the decision to wind up Qatar’s membership of the GCC. A report published in the Washington Post alleged that the UAE had arranged the hacking of a number of Qatari government news and social media sites in order to post inflammatory – probably false – quotes attributed to Sheikh Tamim, on the eve of the announcement by its neighbours that they were breaking off all diplomatic relations with his country. In late May 2017, US officials reported that information gathered by US intelligence agencies indicated that on 23 May, senior members of the UAE government discussed the plan and its implementation. According to the US sources, it was not clear whether the UAE carried out the hacks itself or arranged for them to take place. The Washington Post article suggested that Qatar’s Emir had called Iran an ‘Islamic power’ and praised Hamas. To raise both the level of confusion and blame, the hacking appeared to have taken place shortly after President Trump completed a lengthy counter-terrorism meeting with Gulf leaders in neighbouring Saudi Arabia. The US President later declared them to be ‘unified’. Quoting the Qatari Emir’s reported comments, the UAE alongside its anti-Qatari allies, broke off relations with Qatar and declared a trade and diplomatic boycott, involving the closure of all air, sea and land transport links with Qatar. Although between 1971 and 1973 in the years preceding the establishment of the UAE dirham, Dubai and Qatar had shared their currency, (the Qatari and Dubai riyal); Abu Dhabi had preferred to link up with Bahrain and simply use the Bahraini dinar as its currency. The UAE ambassador in Washington, Yousef al-Oteiba, claimed that the Washington Post article was ‘false’, going on to say that ‘The UAE had no role whatsoever in the alleged hacking described in the article. What is true is Qatar’s behaviour. Funding, supporting and enabling extremists from the Taliban to Hamas and the late Muammar al-Qadafi. Inciting violence, encouraging radicalisation and undermining the stability of its neighbours.’ Mr al-Otaiba had himself been the victim of hackers, apparently by a pro-Qatari association calling itself GlobalLeaks. The leaked e-mails aimed to highlight the UAE’s determination over the years to rally Washington thinkers and policy-makers to its side on the issues at the centre of its dispute with Qatar. Tensions between Qatar and the UAE were not new. They had sharply increased in 1995 following the deposition of Sheikh Khalifa al-Thani by his son Sheikh Hamad bin Khalifa al-Thani. Sheikh Khalifa had vowed to regain power and in the interim would establish himself in Abu Dhabi. The UAE, Saudi Arabia and Bahrain were accused by Sheikh Hamad’s supporters of plotting to stage a coup to restore Sheikh Khalifa to power with the support of mercenaries from

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Yemen and other countries. Qatar had responded by mobilising its élite Emiri Guard and arresting those suspected of supporting the deposed Sheikh Khalifa. If 1995 saw tensions flare between Qatar and the UAE, there was a much longer historical perspective. In 1818 the Ruler of Abu Dhabi, Sheikh Mohammed bin Shakhbut al-Nahyan was deposed by his brother Sheikh Tahnoun bin Shakhbut al-Nahyan. Sheikh Mohammed moved to Qatar, but never returned to Abu Dhabi. Following Qatar’s independence from Bahrain in 1869, there had been disputes over the ownership of Khor al-Udaid. The ruler of Abu Dhabi, Sheikh Zayed bin Khalifa (1855–1909) considered it a part of his territories, while the foreign minister of the Ottoman Turks, with the predictable support of Sheikh Jassim bin Mohammed al-Thani of Qatar, declared it to be in Qatari Territory. The British government supported the Abu Dhabi interpretation. Although the dispute was eventually settled, the rivalry between Abu Dhabi and Qatar continued, worsening in 1888 when the son of Sheikh Jasem al-Thani was killed in an insurgency launched by Abu Dhabi against Qatar. The skirmishes continued for a number of years but were eventually resolved, or at least papered over. In 2014 the editor of the Al-Ittihad Arabic newspaper, Mohammed al-Hammadi suggested that ‘For years now, Qatar has opted for taking the opposite direction of the GCC members. So it seems that membership of the GCC is no more important to Doha.’ The regional political analyst described Qatar as ‘having got intoxicated by having emerged as an influential player in shaping regional and international events.’ Ironically, in 1974, Sheikh Zayed, the UAE President and Ruler of Abu Dhabi, had sought to resolve a border dispute between Qatar and Saudi Arabia. The dispute was over territory along the coast between Qatar and Saudi Arabia and over the Buraimi Oasis. The disputes were resolved following a trade off under which the UAE granted Saudi Arabia a 25km corridor on the Gulf – Khor al-Udaid – between Qatar and the UAE in return for Saudi Arabia relinquishing its claims in the Buraimi and al-Ain areas. The UAE delegation considered that with the Treaty of Jeddah, the deal was a done deal, but then discovered that the written text of the Treaty did not correspond to the verbal agreements. From an export perspective, the UAE is by far the largest recipient of Qatari exports, receiving about 5 per cent of total exports, in addition to being a major transit hub for trade to other parts of the world. However, given that the majority of Qatar’s exports are hydrocarbon and predominantly natural gas, which is predominantly exported by sea to countries that have not taken action against Qatar, the most likely outcome will be a relatively muted impact on foreign-exchange inflows and on government revenues. Even though the UAE has announced that it would close its maritime area to Qatari vessels, tankers carrying

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Qatari gas would still be able to use Iranian and Omani waters to reach the Indian Ocean. Punching above its Weight? In 2017 the UAE seemed set on expansion, an objective that had inadvertently been catalysed by the Qatari flare-up. The UAE’s officials describe their country’s stance as one of strengthening ‘regional influence’. At the heart of the UAE’s expansive policies lies the desk and the telephone of Abu Dhabi’s Crown Prince, Muhammad bin Zayed, the younger brother of the UAE’s President. His brother seems content to leave much of the UAE’s foreign policy to his sibling. Prince Mohammed has certainly responded to the opportunity, changing the UAE into a proactively interventionist state – and worryingly for some, the world’s third largest importer of arms. However, in the view of the London Economist magazine, Prince Mohammed has taken his country beyond the ‘cheque-book diplomacy’ that had long characterised the diplomatic efforts of most Gulf states. In 2014 the UAE had introduced national service (military conscription) and soon afterwards, in July 2015, the UAE, in a bold initiative, had sent dozens of conscripts to fighting the Saudi-led campaign against Houthi rebels in Yemen. Before becoming America’s defence secretary, General James Norman Mattis had named the UAE a ‘Little Sparta’ (without making it clear which country was the ‘big’ Sparta). The Economist noted that the UAE had won Berbera and Eritrea’s Asaab base ‘by agreement’, but elsewhere it applied force. In July 2015 it surprised its allies – including Saudi Arabia – by capturing Aden, a port city that was once a major hub of the British Empire. With the only Arab base in the southern half of the Arabian Peninsula, the UAE was able to launch an offensive that succeeded in capturing a run-down Aden from the Houthi rebels. Reportedly with American help, Emirati soldiers went on to capture the ports of Mukalla and Shihr to the east and two Yemeni islands in the strategically vital Bab al-Mandab strait, through which passes some four million barrels of oil per day en route to the Suez Canal and beyond. The UAE had also upstaged Qatar by sending aid to the Yemeni island of Socotra; the island looked like becoming a de facto UAE territory as construction companies arrived on the island reportedly with a view to building some sort of military facility. Earlier in 2017 Emirati troops took the port of Mokha, leaving Hodeidah, Yemen’s largest port, as the country’s only port not under UAE control. On the Horn of Africa, the Economist noted that the UAE had also given support to Somali separatists in Somaliland and in the so-called Puntland, where funding had gone to the improvement of the Maritime Police Force. In distant North Africa the UAE had provided military support for Field Marshal Khalifa

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Haftar’s Libyan National Army, a force vying for control of the whole country. Other international sideshows had included the opening of an embassy in Cyprus and participation in military exercises with Greece and Israel. But the regional plot had thickened since the beginning of the war in Yemen and however impressive the UAE’s regional expansion, it risked over-reaching in a crowded and often confused military arena. On the western coast of the Arabian Peninsula, Israel, France and the United States already have a substantial presence. China’s activities in Djibouti, where it has built a large port, could not be ignored; it was also rumoured that Iran had put out feelers for naval bases in the Houthi controlled parts of Yemen. Embarrassingly, as coalition allies, the UAE and Saudi Arabia had clashed over the control of Aden’s airport. Somalia, notionally an ally of Saudi Arabia, had taken exception to the establishment of the UAE base in Berbera, politely describing it as ‘unconstitutional’. Lower-for-Longer In a wider context, the International Monetary Fund (IMF) in its June 2017 assessment of the UAE economy noted that ‘the UAE was adjusting to the ‘lower-for-longer’ oil price environment from a position of strength, which was reflected in its large financial buffers, its long-standing safe-haven status, diversified and business-friendly economy and sound financial system.’ According to the IMF, the UAE authorities were further streamlining expenditure and improving the business environment. However, fiscal and external balances had weakened, the economy had decelerated and its banks were adapting to a more challenging environment. Growth was expected by the IMF to recover as the pace of fiscal consolidation eases, domestic investment rises, (including that allocated to the Expo 2020 project), and global trade begins to recover. The uncertainty over oil prices, financial conditions, the policies of major economies and regional conflicts (such as the war in Yemen and the dispute with Qatar described above) suggested that there existed risks to this outlook. The IMF stressed that intergenerational equity required the budget balance to be improved over the medium term. Following significant subsidy reforms, the UAE needed to focus on raising spending efficiency and on non-oil revenues, while maintaining spending restraint. According to the IMF, a stronger and more transparent fiscal policy framework and closer co-ordination among key stakeholders ‘would help set clear fiscal policy objectives and reduce the procyclicality (sic) of fiscal spending.’ The continued strengthening of monitoring and control of contingent liabilities would help contain fiscal risks.

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The Central Bank of the UAE’s efforts to further up-grade the supervisory and regulatory framework were improving financial resilience. Swift approval of the improved draft Central Bank and banking law is needed to support these efforts. More active liquidity management by the Central Bank along with debt market development would promote healthy credit. Any continuing enhancements in the business environment should attract more foreign investment and further diversify growth. The IMF considered that the UAE’s efforts to promote innovation, improve energy efficiency and the quality of education and healthcare could also raise productivity. The production of improved economic statistics was essential to facilitate policy analysis and decision-making. Hydrocarbons It almost goes without saying that the UAE owes much of its wealth to the simple fact that in 2017 it was – according to the US government’s Energy Information Administration (EIA) the seventh-largest petroleum producer in the world. Hydrocarbon export revenues were projected to account for US$65 billion in 2017, roughly 20 per cent of all export revenues. The share of hydrocarbon export revenues, which amounted to US$129 billion (35 per cent of total export revenue), had fallen since 2013 according to the IMF as a result of the decline in oil prices. However, according to the EIA the UAE’s crude oil and other petroleum liquids production had grown over the same period. Although the hydrocarbon economy had been the mainspring of the economy, the UAE was steadily becoming one of the world’s most important financial centres and a major trading centre in the Middle East, benefiting from close links with Europe (particularly with the UK) and (significantly) Iran. Its investments in non-energy sectors, such as infrastructure and technology, looked likely to provide the UAE with some long-term insurance against any further oil price declines or international financial crises or trade stagnation. As noted above, IMF data indicated that the growth in the UAE’s gross domestic product (GDP) had slowed from 4.7 per cent in 2013 to 4.0 per cent in 2015 as a result of persistently low oil prices. The IMF expected the UAE’s economic growth to hover around the 3.5 per cent mark over the medium term. Although the EIA considered that the likelihood of further major oil discoveries was low, it also noted that the UAE used enhanced oil recovery (EOR) techniques to increase the extraction rates of the country’s mature oil fields. The UAE is a member of the Gas Exporting Countries Forum (GECF); however, domestic demand draws heavily from the country’s natural gas resources. Currently, the UAE both imports and exports liquefied natural gas (LNG) and shares international natural gas pipelines with Qatar (however, the trade boycott with Qatar has affected the arrangement) and Oman. The UAE is also one of the

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world leaders in the use of natural gas in EOR techniques. With natural gas demand rising, the UAE plans to expand domestic natural gas production by applying EOR techniques to gas wells. Risk Assessment Economy Good Politics Poor Regional stability Fair/poor

Postscript One way and another, the UAE did not receive particularly benevolent press coverage in 2018. Described as a ‘Little Sparta’ by General James Norman Mattis who was to become US President Donald Trump’s defence secretary, the UAE’s involvement in the Yemeni civil war, and its apparent willingness to participate in the blockade of Hodeidah, Yemen’s major port, did not get many plaudits. Quite the contrary, by the end of 2018 Yemen teetered on the brink of the world’s worst ever humanitarian crisis, and Hodeidah, through which 70 per cent of Yemen’s imports would normally pass, had been reduced to rubble. Within the anti-Houthi (ergo, anti-Iranian) coalition, the war’s predominant partner was Saudi Arabia. However, the UAE had created the image of being the willing fixer, ever-ready to do its ally’s bidding. The war gave the UAE the opportunity of deploying its British, American and French arms. The UAE is, after all, the world’s third-largest importer of arms. Western military training officers had reportedly been in the command room assisting with the guidance of air-strikes. For some time, observers had wondered just who were the enemies that justified such a massive arms budget. For a nation with a population of 10 million, of which only one million were nationals, the UAE’s defence expenditure looked to be simply excessive. However, this view did not necessarily take account of the expansionist ambitions of Abu Dhabi’s Crown Prince, Mohammad bin Zayed al-Nahyan. He is the deputy commander of the UAE’s armed forces, and the younger brother of the emir of Abu Dhabi, who is also the president of the UAE. Although not the ruler, within the UAE his writ runs large. In terms of pure real-politik, the UAE now styles itself as something of a regional military force. While control of port facilities was quietly established by agreement in Berbera (Somaliland) and Asaab (Eritrea) in mid-2015 the UAE mounted a successful amphibious attack on Aden. Here the wheel had come full circle; Aden was once the busiest port in the British empire and continues to be of strategic importance. This was followed by the capture of the Yemeni ports of Mukalla and Shihr, as well as a couple of Yemeni islands in the key Bab al-Mandab Strait. A budding Qatari presence on the Yemeni island of Socotra in the Arabian Sea was also seen off. In 2017, UAE forces also took over the port of Mokha before advancing towards Hodeidah. The United Nations Report In August 2018 the United Nations High Commissioner for Human Rights (UNHCR) released a report on the status of human rights in Yemen. Worryingly,

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alongside Saudi Arabia the report held the UAE responsible for the massacres committed against civilians and effectively causing the starvation of the Yemeni people by shutting air, sea and land facilities, notably by the bombing of the Hodeidah port facilities. The report singled out the Saudi Crown Prince, Mohammed bin Salman al-Saud (MBS), and Crown Prince, Sheikh Mohammed bin Zayed by name, together with a number of senior officers as particularly responsible. If that was bad news, worse was to follow, the UN document suggested that the crimes caused by their forces might constitute war crimes. The UN report seemed to endorse the view of a number of Islamic countries including Pakistan and Malaysia that the UAE’s involvement in the Yemen war was probably futile. Curiously the UN report did not mention any Iranian involvement in the war. It was the alleged Iranian support for the Houthi forces that triggered the Saudi-UAE intervention. A major concern for the anti-Houthi coalition was that arms from Iran were being smuggled into Yemen through Hodeidah. Peace Talks In December 2018, representatives of Yemen’s pro-Houthi group were expected to travel to Sweden for peace talks, after the Saudi-led coalition approved the evacuation of some of their wounded for treatment, permitting the opening of negotiations to end the war which had already lasted almost four years. According to Reuters, at the beginning of December the United Nations special envoy Martin Griffiths had arrived in the Houthi-held city of Sana’a to escort the Houthi delegation to Sweden. The Saudi-UAE backed government had indicated that it too would be in Sweden for the talks. This was the first peace initiative in over two years. A key, if almost invisible player in any possible progress towards peace, was the United States which was known to have exerted pressure on the Saudi government. The US was probably the only entity able to command Riyad’s attention, especially following the high profile murder of Saudi journalist Jamal Khasoggi by Saudi agents in the Saudi Arabian consulate in Istanbul, Turkey. Despite mounting evidence that MBS had prior knowledge of the assassination, in early December 2018 US secretary of state Mike Pompeo and secretary of defence Jim Mattis continued to adhere to the line that MBS had no ‘direct’ involvement in Mr Khasoggi’s murder. Quite what the UAE’s Founding Fathers, Sheikh Zayed (Abu Dhabi) and Sheikh Rashid (Dubai) would have made of their country’s active involvement in the Yemeni civil war and its fallout could only be speculated upon. Many UAE nationals felt uneasy about their country’s role in a war that has killed more than 10,000 people and pushed Yemen to the brink of the worst famine the

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Middle East has ever seen. Both the founding Sheikhs had adhered to Churchill’s doctrine that ‘jaw jaw’ was always preferable to ‘war war’. Qatar In 2018 the quarrel (for some), dispute (for others) between the UAE and Qatar appeared to be playing out more in the New York headquarters of the United Nations rather than in the Arabian Gulf as verbal attacks triggered verbal counter-attacks throughout 2018. Qatar’s fundamental allegation as explained to the UN General Assembly, was that the UAE has been destabilising countries in the region. Qatar claimed that the UAE mounted operations aimed at undermining the stability and security of different countries. In response, Abu Dhabi renewed its accusations that Qatar was supporting terrorism, prompting a Qatari counter claim that the financial sector in the UAE has become a haven for money laundering and illegal financial transactions. Qatar also claimed that the UAE did not respect its international obligations, referring to international reports on alleged human rights violations in the UAE. An alleged example of such violations was the UAE’s decision to sentence a citizen to 15 years in jail for voicing his opinions. This, claimed the Qatari authorities, is in sharp contrast to UAE claims of being a sponsor of democracy and modernism in the region. Qatar’s perception was clear enough. A spokesman told the UN that ‘It has been clear that the regime in Abu Dhabi has been directing fabricated accusations against Qatar.’ This is a continuation of a series of fabrications and claims that aim at justifying the illegal measures taken against Qatar. The UAE paved the way for such actions by resorting to electronic piracy at a time when the international community is collaborating to fight cyber-crimes that threaten international peace and security. The UAE Ambassador to the United Nations, Lana Nusseibeh, countered that ‘the claims regarding piracy’ and the ‘fabricated statements’ are completely false allegations. She was referring to the accusations made by Doha of hacking the Qatar News Agency (QNA) website, just before the blockade on Qatar was announced by Saudi Arabia, UAE, Bahrain and Egypt on 5 June 2017. She added that the four countries reject what she called the conspiracy theory regarding cyber-security, and instead encouraged Qatar to stop changing the topic and start changing its provocative behaviour. Supporting the UAE, the representative of Bahrain at the UN said that the four countries had taken a sovereign decision to boycott Qatar to maintain their security and stability because of what he described as Qatari interference in their internal affairs. He further added that Qatar had supported what he called the

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‘terrorist’ groups inside Bahrain, and offered them media and financial assistance. A Breath of Fresh Air If the UAE has been attracting adverse international coverage of its military forays, at least in 2018 its economy (see below) was holding up satisfactorily. An important component of what is described as the ‘non-oil’ economy is the UAE’s tourism sector. However, according to official sources the first half of 2018 saw the growth in tourist arrivals for Dubai, the hub of the UAE’s tourism industry, falter. ‘Dubai’s department of tourism and commerce marketing (DTCM) announced that there were 8.10 million visitors in the first six months of 2018, an increase of only 0.5 per cent on the 8.06 million seen in the same period of 2017. In the first half of 2017 the growth figure was 10.6 per cent. The largest tourism contingent was from India, where the growth figure was 3 per cent. The second and third most important tourist markets were Saudi Arabia and the United Kingdom. China took fourth place after seeing visitors increase 9 per cent on the same period last year to 453,000, while Russian visitors were up 74 per cent to 405,000. Arrivals from the US and Germany, the seventh and eighth largest source markets, also increased to 327,000 and 302,000 respectively. Perhaps optimistically, the department of tourism reported that Dubai would achieve its targeted growth rate in the second half of 2018. Quoted in Gulf Business the director of Dubai Tourism Helal Saeed Almarri claimed that Dubai was on track to achieve its ‘visionary aspiration of becoming the most visited city in the world.’ The DTCM, and the UAE government in Abu Dhabi, had not been amused, however, when in 2015, the World Health Organisation (WHO) and the World Bank awarded the UAE the accolade of being the most polluted country in the world. Local newspapers quoted government sources as protesting about the assessment; the WHO report claimed that the UAE’s air was worse than that of China, and more than twice as bad as that found in India. However, the news was by no means a total surprise; it was accepted by the government that it was the world’s eighth largest emitter of carbon dioxide per capita. The UAE authorities argued that one of the biggest contributors of the critical PM2.5 particles was the dust made of sand. Mr Fahed Hareb, director of air quality at the ministry of environment and water claimed that carbon-based particles and dust ‘needed to be viewed differently. Otherwise it is unfair to countries with deserts.’ The UAE has 46 monitoring stations and considered that even with the dust, its average PM2.5 levels were ‘not even half of the WHO figure.’

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Whatever distinctions might be drawn between natural and man-made pollutants, the UAE was not on a strong wicket. The consensus view of scientists seemed to be that PM2.5 is toxic regardless of its source or composition. A spokesman from the Desert Research Unit (USA) noted that ‘Whether it contains dust or not, there is a severe health effect,’ adding that that the WHO measurements were broadly similar to those already taken in the region. Studies have found that exposure to wind-generated dust is associated with higher hospital-admission rates for respiratory illnesses and other problems. The Economy A preliminary report published by the International Monetary Fund (IMF) in September 2018 noted that the UAE economy has been adapting well to the prolonged decline in oil prices seen since 2014. A gradual recovery in non-oil activity is under way. Oil production and government spending were both set to rise. According to the IMF, overall growth is projected to strengthen to 2.9 per cent in 2018 and to 3.7 per cent in 2019. Inflation is projected by the organisation to rise to 3.5 per cent for 2018 largely owing to the introduction of value added tax (VAT) and looks set to ease thereafter. The fiscal deficit is expected to remain stable at about 1.6 per cent of GDP in 2018 and turn to a surplus in 2019. The current account surplus will exceed 7 per cent of GDP in 2018. The IMF went on to note that ‘given large fiscal buffers, ample spare capacity, and rising investment needs for Expo 2020, the government has appropriately switched to providing stimulus to the economy.’ These measures, consistent with the Vision 2021 goals of diversifying the economy and raising productivity, would augment their impact on growth. Over the medium term, as the economic recovery gains momentum, a return to the path of gradual fiscal consolidation would, in the view of the IMF, help save an adequate portion of the exhaustible oil income for future generations. Continued improvements in spending efficiency and strengthening non-oil revenue, including by gradually reforming corporate taxation, was aimed at achieving these goals. In this context, the introduction of VAT in 2018 was a historic milestone and is expected to substantially strengthen and diversify government revenues. None the less, the IMF considered that improving medium-term growth and job prospects and advancing to a competitive knowledge-based economy require far reaching structural reforms aimed at increasing the role of the private sector and fostering talent and innovation. The UAE authorities’ plans to liberalise foreign investment, introduce long-term visas for professionals, and ease licensing requirements and business fees (once implemented) were seen as a welcome step in this regard. Promoting competition, privatising non-strategic government-related entities (GREs) were important measures. The IMF

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considered that in particular, developing domestic government debt markets would catalyse any financial market development and expand sources of financing for small- and medium-sized enterprises (SMEs). The background of tightening financial conditions and increased global and regional uncertainty called, in the opinion of the IMF, for continued vigilance in monitoring financial sector risks, including those from a downturn in real estate and concentrated loan portfolios. These were areas of the economy that had caused considerable difficulties for the UAE in the past, to the extent that the central government in Abu Dhabi had to come to the rescue of Dubai where a number of property companies were facing insolvency. The IMF also stressed that the continued upgrading of bank regulations and strengthening bank supervision are essential to maintain the resilience of the banking system. In its Economic Outlook for the UAE, the National Bank of Kuwait (NBK) saw headline growth edging up from the 0.8 per cent seen in 2017 to around 2.5 per cent for the full 2018 year. This forecast was principally posited on an increase in oil production and the knock-on effect of preparations for the Dubai Expo 2020 event. The NBK also forecast that consumer price inflation would rise to 3.5 per cent in 2018, well up on the 2.1 per cent seen in 2017, an increase triggered by the introduction of VAT. The NBK expected credit growth to remain subdued in 2019 due to tighter lending criteria, higher interest rates and the continuing weakness of the real estate market. However, after ‘moderating’ for two years, real GDP growth in the UAE was expected to accelerate, rising from the anticipated 2.5 per cent of 2018 to a respectable 3.3 per cent in 2018. Oil production was expected to increase, recovering from the contraction of 3.0 per cent seen in 2017 to 0.6 per cent in 2018 and to 1.5 per cent in 2019. Energy According to the United States government Energy Information Administration (EIA), in mid-2017 the UAE was the seventh-largest petroleum producer in the world, and hydrocarbon export revenues were projected to account for US$65 billion in 2017, roughly 20 per cent of all export revenue. The share of hydrocarbon export revenues, which amounted to US$129 billion (35 per cent of total export revenue), had fallen since 2013 according to the IMF, as a result of the decline in oil prices. Nonetheless, the UAE’s crude oil and other petroleum liquids production had grown over the same period. A member of the Organisation of the Petroleum Exporting Countries (OPEC) since 1967 – when Abu Dhabi joined before the formation of the UAE as a nation state – the UAE is one of the most significant oil producers in the world. The likelihood of further major oil discoveries is low, but the UAE uses enhanced oil

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recovery (EOR) techniques to increase the extraction rates of the country’s mature oil fields. Natural gas use in the UAE is rising. Although the country is a member of the Gas Exporting Countries Forum (GECF), domestic demand is likely to draw heavily from the UAE’s natural gas resources. Currently, the country both imports and exports liquefied natural gas (LNG) and shares international natural gas pipelines with Qatar and Oman. The UAE is also one of the world leaders in the use of natural gas in EOR techniques. With natural gas demand rising, the UAE plans to expand domestic natural gas production by applying EOR techniques to gas wells.

Arabic Naming Practice Traditional Arabic names consist of five parts: the ism, kunya, nasab, laqab and nisba. The ism is the given name, that is to say the names given to children at birth The kunya is an informal name used within family circles. Almost a family ‘nickname’ and does not constitute a part of a person’s ‘official’ or formal name and would not normally be seen in print. It is however an important identity component. The nasab is the patronymic and starts with bin or ibn, which means ‘son of’, or ‘bint’, which means ‘daughter of’. It acknowledges the father of the child. Matronymics are not used in Arabic. The nasab generally follows the ism, so that you have, for example, Mohammed ibn Faysal Ahmed, which means Mohammed, son of Faysal Ahmed. A daughter would be Miriam bint Abdul Aziz. In principle, the names of grandfathers and grandmothers can be added. There are variations within this formula. In Iraq, for example, the nasab is normally omitted. The use of bin, ibn or bint is not, however, essential. Mohammed bin Abdullah means exactly the same as Mohammed Abdullah. However, bin, ibn or bint can be put in front of a distinguished ancestor. The laqab, when used, would normally follow the ism. It generally assumes a religious or favourably descriptive dimension. Thus ‘Abdullah al-Rashid ibn Faysal Darwish’ is Abdullah the rightly guided son of Faysal Darwish. The nisba corresponds to the ‘Western’ surname. Significant territorial exceptions are Egypt and Lebanon where the nisba is not used; the laqab includes its meaning. Elsewhere, the nisba is often used as the last name and usually represents an occupation, a geographic location, or a tribe or family. One divergence from Western practice is that Arabic women do not take their husband’s names when they marry. They retain the names they were given at birth. Children, however, take their father’s name. The use of ‘al’ is delightfully vague. If it is included in front of a family name it translates as ‘the family’. Unfortunately this practice has been adopted by the region’s social climbers anxious to improve their own status. Similarly, although ‘sheikh’ is a respectful term applied to tribal and religious leaders it is occasionally used by employees and junior civil servants to address their employers and line managers. This is akin to the use of academic titles (‘doctor’ and ‘licenciado’) in Latin American countries. We are indebted to Beth Notzon and Gayle Nesom of the University of Texas for their paper on the often complicated subject of Arabic nomenclature.

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Thanks also, to Michael Field (who for some years edited the Middle East Review) for his helpful Appendix ‘Note on Arab Names’ in: The Merchants: the Big Business Families of Arabia, originally published in 1985 by the Overlook Press, Woodstock, N.Y.

Notes These notes do not claim to be exhaustive or comprehensive. They are for the most part, directly related to the names (of people, places, political movements, parties and events) referred to in Contemporary Archive of the Islamic World: United Arab Emirates 1974–2018. They are not claimed to be comprehensive, but it is hoped that they help clarify some aspects of this young country’s history.

Abbas, Mahmoud: (b. 1935) (aka Abu Mazen), President of the Palestinian Authority since January 2005. Founder member of the Palestinian political wing, Fatah. Mr Abbas worked his way up the PLO hierarchy but remained opposed to force. He played an important role in obtaining international agreement on the 1993 Oslo Peace Agreement. Mr Abbas’ position was weakened by the division within the Palestinians produced by the 2005 elections in Gaza, which were won by the hard-line Hamas grouping, opposed to negotiating with Israel. Under Abbas, the Fatah group retained control of Palestine and the West Bank; Mr Abbas could take credit for the improved security situation under Fatah, and the strong support he had orchestrated from the international community, best symbolised by the rapprochement with the United Nations (UN). Before becoming the Fatah leader, Mr Abbas had fallen out with his predecessor Yasser Arafat, opposed to PLO violence and the Hamas leaders in Gaza. However, his failure to secure an independent Palestine had lost him popularity within the Palestinian community, to the extent that a majority of Palestinians wanted him to resign. By 2017 his potential successors were already jockeying for position.

Abra: small (generally) motorised boat used for ferrying passengers, notably (across Dubai creek. Abu al-Bukhoosh: (aka Abu alBakush) part Abu Dhabi, part Iranian offshore oilfield originally developed in 1973 by a Canadian-French consortium, later owned by Compagnie Française des Pétroles (CFP) and a group of US independent oil companies. The Abu al-Bukhoosh field is located around 45 kilometres north-east of Das Island, 180 kilometres north of Abu Dhabi city, and straddles the Abu Dhabi-Iran maritime boundary. The Iranian portion of the field (known as Salman) was discovered in 1965 and its extension into Abu Dhabi was confirmed in 1969. The field is not unitised and has been developed completely independently on each side of the boundary. Abu al-Bukhoosh produces medium gravity sour crude from Jurassic carbonates. Abu Dhabi (City): capital of the emirate originally situated on a triangular shaped island originally connected to the mainland by a causeway, later replaced by a bridge. The city is the second most populous city of the UAE (after Dubai) with an estimated population of 1.5 million in 2014.

428 Abu Dhabi (Emirate): (literally translates as Father of the Gazelle) the richest member state and the seat of government of the United Arab Emirates. A British protectorate from 1892 (until independence in 1971), Abu Dhabi is the westernmost and the largest of the UAE’s six emirates, reaching from the Khor al-Odaid on the frontier with Qatar to the border of Dubai near Jebel Ali. Its area is 67,000sq km, representing almost 90 per cent of total UAE territory and about four times that of Kuwait. Until the late 1970s Abu Dhabi consisted mostly of desert, with only two towns, the city of Abu Dhabi and the almost village sized but strategically important Al-Ain. Abu Dhabi (Islands): west of Abu Dhabi lies a string of some twenty-four coastal islands (off which are found some of the Gulf’s pearling banks). There are six islands further out in the Arabian Gulf. The most important of these is Das Island, 170 kilometres from the city of Abu Dhabi, which has facilities for producing, storing and exporting oil. Oil handling facilities are also on Zirku Island, 140 kilometres from Abu Dhabi. One of the largest islands is Sir Bani Yas. Abu Dhabi Company for Onshore Oil Operations (ADCO): (sometimes referred to as the Abu Dhabi Company for Onshore Petroleum Operations) operating onshore and in the coastal waters of Abu Dhabi. The original concession agreement was made with Petroleum Development (Trucial Coast) Ltd (PDTC) in January 1939, but geological work did not begin until after the Second World War. Exploratory drilling began in Abu Dhabi in February 1950. The First commercial oil discovery was made at Bab in 1960, and exports began from the Jebel

NOTES Dhanna terminal in December 1963. In 1962, the company was renamed the Abu Dhabi Petroleum Company (ADPC). In January 1973, the government of Abu Dhabi acquired a 25 per cent interest, which was increased to 60 per cent from January 1974. ADCO works the onshore Bu Hasa, Asab and Bab oilfields. The government interest is held by the Abu Dhabi National Oil Company (ADNOC). ADCO was incorporated under Law No. 14 in 1978, and has been responsible, since February 1979, for operations in the concession area, which covers more than 21,000sq kms. The ADCO concession area includes the 15 major onshore oilfields of Abu Dhabi, which represent more than half of the emirate’s production. The initial concessions expired in 2014, since when ADNOC has signed new concession agreements with Total in January 2015, Japan’s Inpex in April 2015, GS Energy in May 2015 and BP in December 2016. ADCO had hoped to raise production in the concession area to 1.8 million bpd by 2017. Abu Dhabi Crude Oil Pipeline (ADCOP): also known as the HabshanFujairah oil pipeline, runs from the major Habshan oil and gas onshore field in Abu Dhabi to Fujairah on the Gulf of Oman. Abu Dhabi Defence Force (ADDF): Formed in 1965, drawing on growing oil revenues, the Emir of Abu Dhabi gave high priority to the development of the ADDF when the British withdrawal from the Arabian Gulf was announced in 1968. The officer corps were mainly British and Jordanian. In 1974 the ADDF had a strength of over 7,000 men and an annual budget of some £50 million (US$75 million). By 1975 it had grown to 15,000 men. The ADDF became the Western Command of the UDF in 1976.

NOTES Abu Dhabi Economic Vision 2030: the year 2030 is held out as an important milestone for the Emirate of Abu Dhabi. To ensure the continued success of the Emirate’s development, the government’s Policy Agenda has set guidelines and priorities for socio-economic progress. With these as its parameters, the Abu Dhabi Economic Vision 2030 has been developed by the government, in consultation with the private sector, as a long-term strategy to ensure that all stakeholders in the economy are focussed on compatible goals. The strategy aims to achieve the effective economic transformation of Abu Dhabi’s economic base and to secure enduring benefits for all. This is to be achieved by broadening the sectors of economic activity, enlarging the enterprise base and expanding into external markets. To ensure that social and regional development reaches the whole of society equitably, the emirate hopes to enable its youth to enter the workforce, while maximising the participation of women, particularly nationals. Abu Dhabi also seeks to attract a skilled workforce from abroad and stimulate faster economic growth in regional areas. To achieve these ambitious goals, the regulatory and legislative environment will need to improve, reflecting best practices from around the world and applying them to the local context. Additional human and financial capital will be needed if the vision is to materialise. Abu Dhabi Executive Council: responsible for overseeing projects in the emirate. Abu Dhabi’s cabinet was abolished in December 1973, to be replaced by the Executive Council made up of the chairmen of Abu Dhabi’s government departments. In essence, the Council is the emirate’s executive authority, assisting

429 the ruler to carry out his duties. The Council holds weekly meetings to review the progress of government sponsored projects, the development of services and the improvement of government performance. The Council meetings are chaired by the emirate’s crown prince. Abu Dhabi Fund for Arab Economic Development (ADFAED): the ADFAED (later shortened to the Abu Dhabi Fund for Development (ADFD)) was launched in 1971 and began its operations in 1973 with an initial capital of US$105 million BD41.45 million) to finance viable development projects in the Arab world. The fund’s capital was subsequently increased several times to accommodate expanding loan requirements, to the equivalent of US$1 billion. Lending grew rapidly during the second half of the 1970s when disbursements averaged some US$125 million per year. Lending slowed down in the 1980s reflecting the decline in oil export prices and a shift in priorities toward domestic activities. In broad terms, 75 per cent of loan commitments are for Arab countries followed by Asia and Africa with 15 per cent and 8 per cent, respectively. Before the formation of the UAE in 1971 there had existed a Trucial States Development Fund (TSDF) which was disbanded in 1972. Abu Dhabi’s contribution had represented 80 per cent of the TSDF’s total budget. In 2019 the ADFD was headed by Mansour bin Zayed al-Nahyan, its chairman. The fund’s mission statement is straightforward: ‘To help developing countries achieve sustainable economic growth and reduce poverty by providing financial resources, forging partnerships in the public and private sectors, and adopting international best practices to ensure aid

430 effectiveness.’ By 2010 the Fund had invested in 52 countries in Africa, the Middle East, central and south Asia. Abu Dhabi Gas Industries (GASCO): incorporated in 1978 and established as a joint venture between Abu Dhabi National Oil Company (ADNOC) with a 68 per cent shareholding, Shell and Total each with a 15 per cent holding, and PARTEX (Gulbenkian) with the remaining 2 per cent. GASCO was established following the directive of Sheikh Zayed (UAE President 1971–2004) the Ruler of Abu Dhabi, to use Abu Dhabi’s substantial reserves of associated gas which had formerly been flared during oil production operations. In 2001 the Abu Dhabi Gas Company (ATHEER), a fully owned ADNOC company, was integrated with GASCO, making it one of the biggest industrial concerns in the UAE, but also one of the largest gas processing companies in the world, with a processing capacity in excess of 5,300 million standard cubic feet per day. Later, in 2017, consolidated with other ADNOC companies as ADNOC Gas Processing. Abu Dhabi Gas Liquefaction Company (ADGLC-ADGAS): established in 1973, the first gas liquefaction company in the Middle East region. An agreement was then signed with Tokyo Electric Power Company (TEPCO), to build a plant on Das Island with an initial annual production capacity of 2.5 million tons of liquefied natural gas (LNG) and 800,000 tons of liquefied petroleum gas (LPG). The agreement provided that TEPCO would buy the plant’s production for 20 years. The first LNG shipment left Das Island in April 1977. Another agreement was signed with TEPCO in 1990, under which ADGAS was to double its production from 1994, and

NOTES TEPCO was to import most of the doubled

production for 25 years. For this purpose, another gas processing train was built on Das Island, adding another 2.5 million tons annually to the plant’s production. Then the world’s largest and most advanced facility, the new train was commissioned in 1994, incorporating the latest technologies in the gas liquefaction industry. Abu Dhabi International Airport: the original international airport began operations in 1982. The new airport included a circular satellite terminal (with aerobridges) which allowed more aircraft to park simultaneously. During the late 1990s and early 2000s, substantial work was carried out on improving the satellite terminal. Later, Terminal 2 was created to relieve the pressure of the main terminal. Terminal 2, however, did not have aerobridges, using buses to move passengers between aircraft and the terminal. Terminal 3 began construction in 2011 and was intended to be mainly used by Etihad. Etihad, Abu Dhabi’s national airline conveniently stepped into the gap left by Gulf Air after nearly five decades and was to be based at the upgraded airport. The new US$270 million Terminal 3, an interim facility, was designed to allow for the airport’s passenger growth before the planned opening of the new Midfield Terminal in December 2017. In March 2017 it was announced that the opening had been further delayed, until 2019. Abu Dhabi International Bank: registered in Curaçao offering commercial banking services. The company is based in Washington, DC. The company operates as a subsidiary of the National Bank of Abu Dhabi. For a period it played a sizeable role in Eurobond issues.

NOTES Abu Dhabi Investment Authority (ADIA): responsible for investing most of the personal fortune of the ruling Al-Nahyan family. In 1976 Sheikh Zayed bin Sultan al-Nahyan, the founding President of the UAE and ruler of Abu Dhabi made the decision to create the Abu Dhabi Investment Authority and separate it from the government as an arms-length organisation with its own management. The objective was to invest the Abu Dhabi government’s surpluses across various asset classes, with low risk. Over time, ADIA increased its investments in downstream refineries, notably increasing in its holding in French oil major Total to around 9 per cent. In 2012 the fund held an estimated US$627 billion in assets, second only to Norway’s sovereign fund. ADIA’s investments are in many different sectors, including public listed equities, fixed income, property and private equity. Abu Dhabi Investment Company (ADIC): established in 1977, ADIC also trades under the name Invest AD. The company operates in private equity, corporate finance, local shares, property, and other investments. ADIC also specialises in investments in hedge funds across all investment strategies. In 2007 ADIC changed its focus from proprietary investing to managing third party investments. In 2008 it created a joint venture with UBS (Switzerland) to create funds investing in infrastructure in the Middle East and Africa. Abu Dhabi Investment Council: the investment arm of the government of Abu Dhabi. The Council started its operations in April 2007 and is responsible for investing part of the government’s surplus financial resources. The council is

431 also empowered with an important direct investment mandate to broaden Abu Dhabi’s economic base and facilitate the international development of local companies. Abu Dhabi Marine Areas (ADMA): originally two-thirds British Petroleum (BP) and one third Compagnie Française des Pétroles (CFP) ADMA was incorporated in the UK in May 1954. Its role was taken over by the Abu Dhabi Marine Operating Company (ADMA- OPCO) in 1974. Abu Dhabi Marine Operating Company (ADMA-OPCO): a joint venture between ADNOC (60 per cent), British Petroleum (14.66 per cent), Compagnie Française des Pétroles (13.33 per cent) and Japan Oil Development Company (JODCO) (12 per cent) which took over the role and activities of ADMA in 1974. Adma-Opco’s main fields are the old Abu Dhabi Marine Areas concessions offshore at Umm Shaif and Upper Zakum. Abu Dhabi National Energy Company (TAQA): founded in 2005 with the objective of becoming a global leader in the energy sector. In 2010 TAQA was operating in nine international markets including Canada, India and the United Kingdom (UK). TAQA is 51 per cent owned by the Abu Dhabi Water and Electricity Authority (ADWEA). In November 2006 TAQA paid US$694 million for BP’s Dutch exploration and production subsidiary, US$540 million for the oil driller Pioneer Canada and US$5 billion for the Canadian oil and gas producer PrimeWest Energy Trust. Abu Dhabi National Hotels Company: owner and operator of a number of UAE hotels, including: Ritz Carlton Abu Dhabi Grand Canal, Park Hyatt, Abu Dhabi, Sofitel Dubai, Jumeirah Beach (Dubai), Le Meridian, Abu Dhabi,

432 Sheraton Abu Dhabi, Hilton Al-Ain (Abu Dhabi), Hilton Abu Dhabi (City). Abu Dhabi National Insurance Company (ADNIC): founded in 1972, the Abu Dhabi National Insurance Company PSC is the third largest insurer in the UAE. It reports to the Abu Dhabi Investment Council. Abu Dhabi National Oil Company (ADNOC): in 1974, as revenues from oil production started to grow, ADNOC was established. The company has played an integral role in Abu Dhabi’s economic development, managing, producing and preserving the emirate’s hydrocarbon reserves on behalf of the Abu Dhabi government. ADNOC has in many respects been a catalyst for growth in Abu Dhabi and, indirectly, in the UAE as a whole. By 2016 ADNOC was overseeing the production of around three million barrels of oil per day – placing it among the largest oil producers in the world. The company’s portfolio also includes refining and petrochemicals businesses, a network of gas and petrol service stations, and a transport fleet of LNG and LPG carriers, oil and chemical tankers, bulk carriers and container vessels. Abu Dhabi National Oil Company for Distribution: established in 1973, the company focusses on the distribution of petroleum products including petrol (gasoline), marine and jet fuel, lubricants and greases; natural gas, liquefied natural gas and liquefied petroleum gas; it also provides bunkering and refuelling services; ownership and operation of petrol (gasoline) stations and convenience stores; and the provision of automotive services including car wash, lube, car care, inspection, repair and maintenance services.

NOTES Abu Dhabi National Tanker Company (ADNATCO): established in 1975 for the shipping of petroleum products, ADNATCO is a wholly owned subsidiary of the Abu Dhabi National Oil Company (ADNOC). ADNATCO owns and operates a fleet of oil tankers, a molten sulphur carrier and two Ro-Ro (Roll on – Roll off) vessels. Since 2002, ADNATCO has transported polyethylene produced by ADNOC’s petrochemicals subsidiary Borouge from its plant in Ruwais to global markets. ADNATCO took delivery of 15 new ships in 2010 and 2011, expanding its fleet to a total of 22 ships at the time. Abu Dhabi Oil Company (ADOC): Japanese owned oil company. In 1967 the Ruler of Abu Dhabi allowed Japanese companies to acquire oil concessions in Abu Dhabi, which until then had only been granted to Western companies. Three Japanese independent oil-refining companies, Maruzen Oil Co Ltd, Daikyo Oil Co Ltd (subsequently merged into Cosmo Energy Holdings Co Ltd) and Nippon Mining Co Ltd (later JX Holdings Inc) submitted the winning bid for a concession area relinquished by Abu Dhabi Marine Areas Ltd (ADMA). In December 1968 an agreement relating to the concession area in Abu Dhabi offshore areas was signed. In January 1968, the Abu Dhabi Oil Co Ltd (Japan) (ADOC), was established with a capital of 600 million yen, equally subscribed to by the three companies. ADOC is currently operating three oilfields in offshore Abu Dhabi areas, namely Mubarraz, Umm al-Anbar (AR) and Neewat Al-Ghalan (GA) fields. Abu Dhabi Petroleum Company (ADPC): established to carry out oil exploration and extraction. The ADPC was formerly known as Petroleum Development (Trucial States) Ltd. It changed its

NOTES name in 1962. The ADPC was founded in 1935 and is based in the UK. Abu Dhabi Water and Electricity Authority (ADWEA): owner and operator of the UAE’s first private sector public utility project, the Taweelah A-2 development finalised in October 1998. The plant comprises a 710MW and 50 million gallon per day water and power combined-generation plant which was commissioned in 2001. Abu Musa Island: a dependency of Sharjah, from which it is some 70km due north in the Arabian (Persian) Gulf. The Mubarak oilfield is virtually adjacent. At the time of the formation of the UAE in 1971, Abu Musa had been occupied by a small number of settlers, subjects of the Ruler of Sharjah, for some time. Many more used the island for grazing purposes in winter. ADCO: see Abu Dhabi Company for Onshore Petroleum Operations. Aden: a port city that in the days of the British Empire was one of the busiest in the world. In 2018 Aden was the temporary capital of Yemen. In January 2018 the Yemen Civil War saw southern separatists backed by the UAE seize control of a military base in Aden after a UAE fighter jet had bombed the facility. The fighters were from the Southern Resistance Forces (SRF) – the armed wing of the Southern Transitional Council (STC), a political movement demanding secession for southern Yemen. The fighters seized the base despite the introduction of a ceasefire brokered by Saudi Arabia and the UAE hours earlier. ADNOC: see Abu Dhabi National Oil Company Aeroflot: the national airline of the former USSR (Soviet Union). Following the collapse of the USSR in 1989, Aeroflot

433 was eventually privatised and continued to operate as a Russian private airline. Aéroport de Paris: French airport design and construction consultants. Responsible for various elements of the 2008 Dubai International Airport (2 concourses and a baggage handling system). Afghanistan (Soviet invasion): the deployment of Soviet (USSR) troops in Afghanistan began in August 1978. The withdrawal of the last troops started in May, 1988, and finally ended in February 1989. The presence of the Soviet army relatively close to the UAE’s border was a cause for nervousness and was a factor in the UAE’s purchase of expensive military hardware. In the twenty-first century, the UAE has participated in the NATO lead coalition pitched against Afghanistan’s rebel Taliban forces. Troops from the UAE Armed Forces have been in Afghanistan since 2003, for the most part to support reconstruction, but the UAE has also sent its elite special forces to Afghanistan. Al-Ain: an important Abu Dhabi oasis and inland centre some 165km from the capital, often (incorrectly) referred to as the Buraimi oasis and generally known as Al-Ain. Al-Ain is the largest inland city in the United Arab Emirates, the fourth-largest overall and the second-largest in the Emirate of Abu Dhabi. With a population of 766,936 (in 2017), Al-Ain has long been important as the meeting point of the trade routes crossing south-east Arabia. It originally consisted of around ten villages, of which seven belonged to Abu Dhabi and the other three to Oman. In 1955 the oasis was the subject of a sovereignty dispute with Saudi Arabia, eventually settled (with British support) but which flared up again with the creation of the UAE.

434 In 1974, Sheikh Zayed bin Sultan al-Nahyan, the then UAE President and Ruler of Abu Dhabi, had managed to resolve the Al-Ain (and Buraimi) dispute with Saudi Arabia by a trade-off under which the UAE granted Saudi Arabia a 25km corridor on the Gulf – Khor al-Odaid – between Qatar and the UAE, in return for Saudi Arabia relinquishing its claims in the Buraimi and Al-Ain areas. The agreement – known as the Treaty of Jeddah – was later called into question as the written version did not, apparently, properly reflect the verbal agreement. Al-Ain and what once were neighbouring villages now constitute Abu Dhabi’s share of the Buraimi oasis. The oasis is situated to the east of the emirate near the mountain range which accounts for its plentiful supply of fresh water via a system of underwater canals known as falaj. Air Arabia: Based in Sharjah, Air Arabia flies to over 101 destinations with a concentration in North Africa and the Middle East. Air Arabia was established in 2003. Ajman: the smallest of the seven emirates with an area of some 260sq km (100sq miles). Ajman’s territory is surrounded by Sharjah, notionally between the Sharjah villages of Hamriyah and Hirah. By 2016 it effectively formed part of the conurbation of Dubai and Sharjah, the UAE’s largest population centre. Ajman has two agricultural villages outside its primary borders. These have an estimated population of 15,000. The Ajman village of Hadf was claimed by Oman and had been under joint Ajman-Oman control. Ajman Bank: an Islamic bank incorporated in the Emirate of Ajman, established in 2007. Its shares were listed on

NOTES the Dubai Financial Market in February 2008 and the bank opened officially and started operations in 2009 from two branches in Ajman. Ajman Arab Bank: closed in 1978 until reconstituted in 1979 as the First Gulf Bank later known as FGB. Aluminium Bahrain (ALBA): one of the largest aluminium smelters in the world. Principal competitor of Dubai Aluminium (DUBAL) Aldar Properties: Abu Dhabi’s biggest developer whose shares fell by 4.4 per cent in the UAE’s 2015 property crash. (Sir) Alexander Gibb and Partners: a British firm of Consulting Civil Engineers active in the UAE during the 1970–90s. Responsible, inter alia, for the design and development of the Mina Zayed port complex in Abu Dhabi. al-Ali: an Arab tribe originally from Saudi Arabi which moved to Persia and other Gulf areas in the sixteenth century, including Umm al-Quwain, an emirate in which the al-Mu’alla family (tradionally head of the al-Ali tribe) are still the ruling family. The al-Ali once maintained population centres in southern Iran, controlling key pearl diving sites and operating commercial ports servicing the pearling fleets. Allah: The sole deity of Islam. Altaf Hussain and Company: UAE construction company. Amir: (more commonly spelt Emir) title of respect used by Gulf rulers and other dignitaries. The original sense was ‘army commander’. Amnesty International: international human rights pressure group founded in 1961, headquartered in London. Amoco: US oil company, part of Standard Oil of Indiana.

NOTES Amoco Sharjah Oil Company: a subsidiary of Standard Oil of Indiana Anglo-Persian Oil Company: later to become British Petroleum. After the First World War (1914–18) geologists of the Anglo-Persian Oil Company began to seek oil deposits in what was still known as Trucial Oman. In 1935 the Iraq Petroleum Company (IPC), a subsidiary of Anglo-Persian, secured concessionary rights through agreements with ‘the Rulers and governments of the entire Arabian peninsula excluding the newly proclaimed Kingdom of Saudi Arabia.’ A and P Appledore International: the British company originally responsible for operating the Dubai dry dock. Arab and Allied military forces: generic term used to describe the coalition forces that united to evict occupying Iraqi forces from Kuwait in February 1991. Arab Bank for Economic Development in Africa (La Banque Arabe pour le Développement Economique en Afrique) (BADEA): founded in 1974, BADEA is headquartered in Khartoum (Sudan). The Bank, owned by eighteen Arab countries including the UAE, began operations in March 1975. Arab Bank for Investment and Foreign Trade (Al-Masraf): founded in 1975 and headquartered in Abu Dhabi. Unusually shareholders included the Libyan Arab Foreign Bank and the Banque Exterieure d’Algérie. The Libyan shareholding caused ABIFT to be adversely affected in the 1990s by the Libyan embargo. Also because of its Libyan connection it was boycotted by the US and some of its assets were frozen, despite protests from the UAE. Arab Banking Corporation (ABC): (aka Bank ABC) an international bank headquartered in Manama, Bahrain,

435 with a network in the Middle East, North Africa, Europe, the Americas and Asia. Bank ABC was founded in 1980, and is listed on the Bahrain Bourse. The major shareholders are the Central Bank of Libya and the Kuwait Investment Authority. Arab Boycott: see League of Arab States. Arab Co-operation Council (ACC): a regional grouping that was inaugurated in Baghdad in February 1989 by the heads of state of Egypt, Jordan, Iraq and North Yemen. The creation of the Gulf Co-operation Council (GCC) prompted the formation of the ACC. However, following the Iraqi invasion of Kuwait, the ACC became defunct. Arab Engineering Company (AREC): an offshoot of the Organisation of Arab Petroleum Exporting Countries (OAPEC). Arab Heavy Industries: ship repair company formed in 1975 and headquartered in Ajman. The shareholders are the Ajman government, Keppel Industries (Singapore) and the Al-Futtaim company (UAE). Arab Israeli conflict: October war of 1973 fought between Israel and a coalition of Arab states lead by Egypt and Syria from 6–25 October 1973. Egypt and Syria’s principal objectives were to recapture the territories that were taken by Israel in the Six-Day War in 1967. Most of the fighting took place in the Golan Heights and in the Sinai Desert. The Arab forces were defeated; Syria occupied the Golan Heights. Arab League: (See League of Arab States). Arabian Light: a type of crude oil used as a price marker. Normally a blend of light crudes from various fields, high in sulphur.

436 Arab Monetary Fund (AMF): a regional Arab organisation, founded in 1976, which started operations in 1977. The AMF has 22 member countries (Jordan, United Arab Emirates, Bahrain, Tunisia, Algeria, Djibouti, Saudi Arabia, Sudan, Syria, Somalia, Iraq, Oman, Palestine, Qatar, Kuwait, Lebanon, Libya, Egypt, Morocco, Mauritania, Yemen, and Comoros.) The AMF objectives include: -correcting disequilibria in the balance of payments of Member States -striving for the removal of restrictions on payments between Member States. -establishing policies and modes of Arab monetary co-operation -providing advice on policies related to the investment of the financial resources of member States in foreign markets. -promoting the development of Arab financial markets. -paving the way towards the creation of a unified Arab currency. Arab Petroleum Investment Corporation (APICORP): created by the Organisation of Arab Petroleum Exporting Countries (OAPEC) in 1975. APICORP is a commercially-focused financial institution charged with providing financing options to the Arab energy industry. Over four decades, APICORP has worked to raise capital access and enhance the financial stability and the Arab energy industry. Arab Shipbuilding and Repair Yard (ASRY): dry dock, in Bahrain. Founded in 1977 ASRY claimed to be the Arabian Gulf’s most experienced ship and rig repair yard, (competing with the Dubai (UAE) facility) with over 35 years of experience in marine asset optimisation.

NOTES ASRY’s range of facilities include a 500,000 dwt dry dock, two floating docks of 252m and 227m in length, 15 repair berths with a total length of approximately 4,000m, twin 255m slipways, as well as a full range of workshops and service centres. Arab Spring: a popular movement whose origins were in Tunisia and which in 2011 brought about political reform (in Tunisia) political change (in Egypt), regime change (in Tunisia and Yemen) and political chaos (in Libya). The movement’s common denominator was discontent over economic hardship, and opposition to de facto dictatorships and autocratic rule. The Arab Spring triggered protests in Bahrain, but elsewhere its effects did not appear to reach the Arabian Gulf. Arabian Gulf: (aka Persian Gulf by Iran) since the 1960s the term Arabian Gulf has become more widely used. The Gulf was known historically and internationally as the Persian Gulf as Persia (Iran) was the region’s only recognised body politic. Iran insists that this is remains the only correct term. The Ottoman authorities used the term Gulf of Basra. Arabian Sea: a term used to refer to a region within the northern Indian Ocean bounded on the north by Iran and Pakistan, on the west by the Gulf of Aden and the Arabian Peninsula and on the east by India. Arabtec: founded in 1975, Arabtec benefited from the UAE’s construction boom of the 1970s. The company began as a construction company specialised in high tech civil engineering and infrastructure works. Arafat, Yasser: (full name Mohammed Abdel-Raouf Arafat al-Qudwa

NOTES al-Husseini)(b. 1929, d. 2004). Chairman of Palestinian Liberation Organisation (PLO) from 1969 until his death in 2004. Archirodon: Greek construction enterprise formed in 1959 and responsible for constructing three ports in the UAE. ARCHOSI: a consortium of construction enterprises made up of Archirodon of Greece, Hochtief of Germany and Six Construct of Belgium. ARCO Dubai: a subsidiary of the Atlantic Richfield Company. Arid Land Research Centre: The centre was founded at Al-Ain, (Abu Dhabi) to seek improved methods of vegetable growing. Abu Dhabi also has a number of terrestrial and marine wildlife research centres. Arthur D Little: USfirm of consultants appointed to undertake feasibility studies in the UAE in the late 1980s. Arzanah: a minor offshore oilfield in Abu Dhabi operated by a group of US independents headed by the Amerada Hess company. After nearly 20 years of production, the Arzanah oilfield was decommissioned in late 1998. It had been operated by the Zakum Development Company (ZADCO) an affiliate of the Abu Dhabi National Oil Company(ADNOC). Arzanah produced its last oil (from well AZ-19) on 30 September 1998. Asab: oilfield 85km north-west of Abu Dhabi Islands. The Asab field was discovered in 1965 and owned and developed by the Abu Dhabi National Oil Company (ADNOC). The development was reported to have cost US$700 million. The Asab field was expected to produce 800 cubic metres per day (cmd) of gas. The total proven oil reserves of the Asab oilfield were estimated at around 3.6 billion barrels and production was around 450,000 barrels per day (bpd).

437 Asea Brown Boveri (ABB): Swissbased engineering and construction company with extensive interests and activities in the Middle East. Present in the UAE for nearly forty years ABB has been associated with many projects, including Dubai’s Burj Khalifa, Dubai Airport, Dubai Metro, Palm Jumeirah and the Dubai Sustainable City, as well as Abu Dhabi’s Yas Marina Hotel and the Mohammed bin Rashid Solar Park. Atlantic Richfield Company (ARCO): US oil company headquartered in Los Angeles and purchased by BP (British Petroleum) in 2000. Al-Aweidha-Polimex LLC: Abu DhabiPoland joint-venture construction company (based in Abu Dhabi). Bab Field: in October 1960 the operating company Petroleum Development Trucial Coast (PDTC) announced that oil had been struck in commercial quantities in Abu Dhabi. To reflect the location of the first discovery, PDTC changed its name to Abu Dhabi Petroleum Company (ADPC). BADEA: see Arab Bank for Economic Development in Africa) al-Badi, Ahmed bin Saeed: appointed UAE minister of health in 1990. al-Badi, Sultan bin Saeed: appointed in 2014 as UAE minister of justice. In addition, Mr al-Badi is chairman of the board of directors of the UAE Zakat Fund, and chairman of the Judicial Co-ordination Council. Previously he had held other positions, including the head of public prosecution in Al-Ain, undersecretary of the ministry of justice, and undersecretary of Abu Dhabi judicial department. Bahrain (Kingdom of): a Gulf Sheikhdom and archipelago, Bahrain was ruled in the sixteenth Century by Portugal and

438 intermittently from 1602 until 1783 by Persia (Iran). The Persians were expelled by an Arabian family that established the current ruling dynasty. In 1861 Bahrain became a British protectorate. In 1971, after Britain (as part of the East of Suez policy) withdrew from Bahrain, Bahrain became fully independent. Oil was found in Bahrain in 1931, but (further discoveries notwithstanding) Bahrain is expected to be the first Gulf state to run out of oil. With 40 per cent of the population of the nine Lower Gulf states and a more advanced economy, Bahrain had insisted on a proportionate say in the running of the originally proposed federation. When this proved unacceptable to the other members, Bahrain opted for full independence. Bahrain (attempted uprising in December 1981): seventy-three people, said to be members of the Tehran-based Islamic Front for the Liberation of Bahrain, headed by an Iraqi cleric, Hojjat ol-Eslam Hadi al-Mudarrisi, were arrested and accused of conspiring to overthrow the government on 16 December, Bahrain’s National Day. At the time, Shi’a made up 65 per cent of the 375,000 population. Bahraini Dinar: in June 1966, India devalued the rupee, which – even in its lesser role as the Gulf rupee – had long been the de facto currency of the Gulf States. To avoid following this devaluation, several of the states using the rupee decided to adopt their own currencies. Qatar and most of the former Trucial States adopted the Qatar and Dubai riyal, while Abu Dhabi adopted the Bahraini dinar. Baluchistan: the southernmost of the four provinces of Pakistan, effectively making up the south-western region of

NOTES the country. The provincial capital and largest city is Quetta. Since Pakistan’s independence in 1947, largely secular Baluchi nationalist movements had spasmodically fought for a separate Baluchi state. Barely an hour’s flight from the Gulf, in 2015 Pakistan’s Civil Aviation Authority granted the Dubai carrier, Emirates, rights to fly from Dubai to the Baluchi cities of Quetta, Panjgur, Turbat and Gwadar. In 2015 the number of Baluchi in the UAE was estimated to be between 215,000 to 468,000, well up on the 2006 estimate of 100,000. A substantial number of Baluchi serve in the UAE’s armed forces. Bandar Abbas: an Iranian (Persian) town situated on the mouth of the Strait of Hormuz. Long an important trading centre, Bandar Abbas is the focal point of the trading routes of southern Iran. In the early sixteenth century Bandar Abbas was captured by the Portuguese, who fortified the town whilst also taking the islands dominating the Strait of Hormuz. The Safavid Shah Abbas I (1571–1629) re-captured Bandar Abbas in 1615 and later expelled the Portuguese from the islands. Later both the Dutch and the British set up trading stations in Bandar Abbas. Bandar Lengeh: Iranian Gulf port, capital of Bandar Lengeh province. A number of Iranian merchants from the area emigrated to what is now Dubai in the early twentieth century. Bank of Credit and Commerce International (BCCI): the BCCI was an international bank founded in 1972 by Agha Hasan Abedi, a Pakistani financier. The BCCI was registered in Luxembourg with head offices in Karachi and London. Within ten years the BCCI had over 400 branches in 78 countries, and assets in

NOTES excess of US$20 billion, making it the seventh largest private bank in the world. Mr Abedi was a close associate of Kamal Adham, appointed by Saudi Arabia’s King Faisal as the first head of Saudi intelligence, a post he held until 1979. Mr Adham’s close links to the Saudi hierarchy and Royal Family gave him unparalleled access to the Saudi nomenklatura. When the BCCI’s affairs eventually unravelled Mr Adham was accused of playing a key role in the takeover of the First American Bank. In 1992, Adham pleaded guilty in the US under a plea bargain with prosecutors, acknowledging that he had been a BCCI front man in the US, and co-operated with US law enforcement investigations. He was fined US$105 million but received a suspended sentence. Hearings in the case against Mr Adham revealed that the BCCI had actively sought the banking business of known terrorist and criminal organisations with a view to gaining information and passing it to intelligence organisations, notably the CIA. Thousands of depositors lost heavily when the BCCI was wound up in 1991 amid accusations of money laundering and fraud. The BCCI fraud still ranks as one of the biggest banking scandals of all time. The BCCI went bust owing more than US$18 billion to its creditors. The bank had registered large losses from its lending operations, its foreign currency dealings and its deposit accounts. It was (as noted above) also the go-to bank for money-launderers and terrorists. Drug money from Colombia and Panama, funding for the Mujahideen in Pakistan, and Abu Nidal in the Middle East were all channelled through the BCCI. The losers also included Sheikh Zayed bin Sultan al-Nahyan, the ruler of Abu Dhabi and

439 the first President of the UAE. When the BCCI was first set up in 1972, the financial backing provided by Abu Dhabi was vital. The ruling family, headed by the late Sheikh Zayed, was said to have a very close relationship with the BCCI. Abu Dhabi was the bank’s largest depositor, largest borrower, and for most of its existence its largest shareholder. La Banque Arabe pour le Développement Economique en Afrique: see Arab Bank for Economic Development in Africa Barclays Capital: a UK headquartered brokerage firm and investment advisor. The company manages investment portfolios and provides financial planning services. Basra: Iraqi city at the head of the Arabian (Persian) Gulf. Dating back to AD636, as Iraq’s only port, Basra’s advantageous position has always fuelled its high level of prosperity. The location of a number of oil refineries, from which refined oil products were exported, Basra suffered considerable damage in both the Iran-Iraq war and during the occupation by US lead coalition forces following the expulsion of Saddam Hussein. Batinah: located in Oman, the Batinah Coast is a relatively fertile plain located on the Arabian Sea and extending between the western Hajar mountains and the Gulf of Oman. It is some 400km long, with an average width of between 10–50km. al-Bawardy Group: Dubai manufacturing company that in the late 1980s established a 10,000-skin-a-day tannery as a joint venture with France’s La Mole Industries. Al-Bayan: Dubai based daily newspaper established in 1980. Al-Bayan is one of four UAE Arabic language dailies,

440 including Emarat Alyoum, the semi official al-Ittihad and the Sharjah-based Al-Khaleej. Al-Bayan is part of the government-owned Dubai Media Inc. BBC Brown Boveri: Swiss engineering group. Bedouin (adj bedu): a corruption of the Arabic word Badawiyin, meaning desert dweller. Until the discovery of oil, the area that became the UAE primarily consisted of Bedouin and a smaller number who made a living from the sea including pearl diving. In the twenty-first century an estimated 180,000 Bedouin were in the UAE most from the Rwala, Dhafir and Baqqarah tribes. Benn, Tony (Anthony Wedgewood Benn): (b. 1925, d. 2014) UK politician and former minister. Labour member of parliament known for his support for left-wing policies. Besharati, Ali Mohammad: Iranian interior minister responsible for 1970s talks with the UAE authorities over the territorial disputes pertaining to the Abu Musa islands. BICC: see British Insulated Callender’s Cables Bida al-Qemzan: The first commercial oil production began in Abu Dhabi from the Murban-3 well, at the modest rate of 3,674 barrels per day. The first tanker of Abu Dhabi crude departing Jebel Dhanna port on 14th December, 1963. Subsequent fields were quickly discovered – one of which was the Bida Al-Qemzan. In 1971, as revenues from oil production started to grow, the Abu Dhabi National Oil Company (ADNOC) was created. Binnie: Canadian engineering consultants founded in 1969, focusing on civil engineering, surveying, and project

NOTES management services in the public and private sectors. al-Bitar, Ahmed-Adi Nasib: (b. 1924 in Jerusalem) a naturalised Emirati originally from Palestine, in 1964 Judge al-Bitar moved to Dubai where he became the legal advisor to the ruler of the emirate and eventually Chief Justice of the emirate. In the run-up to the formation of the UAE Judge al-Bitar was appointed as secretary general to the Trucial States Council (1967 – 1971) and was the author of the UAE constitution. His son, Omar al-Bitar, has served as the UAE’s ambassador to China. al-Bitar, Nasib: founder of Channel 33, Dubai, launched in 1979. During his tenure Channel 33 set the standard in the UAE for both Western and Eastern television programming. Black & Decker: US manufacturer of hand held electrical tools that in the 1980s established a presence in the Jebel Ali Free Zone. Bombay: (modern name Mumbai) from 1858 until 1873 all diplomatic and administrative matters relating to what were then known as the Trucial States were handled by the Government of Bombay acting for the British Crown. Borealis: a joint company formed out of Finland’s Neste Oil and the Norwegian company Statoil, signed an agreement in 1997 to partner the Abu Dhabi National Oil Company (ADNOC) with a 40 per cent stake in the Borouge project (see below). The Borealis’ deal was described as the most sought-after prize in the Gulf’s growing petrochemicals industry. Borouge: a joint venture project between the Borealis consortium (see above) and ADNOC, which got underway in 1999, due for completion in 2001.

NOTES Bovis: UK construction company involved in the construction of the Red and Green lines of the Dubai Metro system. BP: see British Petroleum. Bridgestone Liquefied Gas Co: established in 1960. In March 1973 Bridgestone participated in an LNG project in Abu Dhabi and acquired a shareholding in the Abu Dhabi Gas Liquefaction Co (ADGAS). In 1991 Bridgestone withdrew from the Abu Dhabi LNG project. The company subsequently merged with the Mitsui Oil Co Ltd which in 2008 merged with JXTG Nippon Oil and Energy Corporation, changing its name to ENEOS Globe Corporation. British Aerospace: UK based military and aviation equipment manufacturer with its largest markets in the US, UK, Saudi Arabia and Australia. The company has a sales office in Abu Dhabi. British Bank of the Middle East (BBME): A British owned bank operating in many Middle East countries. Originally known as the Imperial Bank of Persia under a concession granted for 60 years, the Bank began to operate as, in effect, the central bank of Persia, issuing bank notes and conducting other essential operations. In 1935 the bank’s name was changed to the Imperial Bank of Iran. After the Second World War, in 1949 the bank’s concession expired and the name was again changed, this time to The British Bank of Iran and the Middle East. Following political upheaval in Iran and the volatile premiership of Mr Mossadeq, the bank was no longer allowed to operate in Iran, again changing its name – to the British Bank of the Middle East (BBME). In January 1960 the Hongkong and Shanghai Banking Corporation (HSBC) acquired 99.5 of the Bank’s shares. HSBC’s

441 presence in the UAE dates back to 1946 when the bank, as the British Bank of Iran and the Middle East opened its doors to the merchants and citizens of the Emirates. In 2016, the Bank confirmed that it had transferred its place of incorporation and head office from Jersey to the Dubai International Financial Centre. As a result of the transfer, the holding Bank, now known as the Hongkong Bank of the Middle East (HBME) became regulated by the Dubai Financial Services Authority. British Foreign Office: the beginning of the British Political Residency in the Gulf occurred in the late eighteenth century as the East India Company’s factories were replaced by a number of British Residencies and Agencies. The principal objective remained the protection of the sea and overland routes to India and to safeguard British interests from interference from other European powers. In the 200 years between 1763 and 1947, Residencies and Agencies were established and maintained at Bushire (Iran), Muscat (Oman), Basra (Iraq), Baghdad (Iraq), Bahrain, Kuwait and Sharjah. In 1820, the British entered in to the General Treaty of Peace with the sheikhs of the Arab coast by which the rulers agreed to end disturbances at sea forever and were prohibited from building large ships and erecting fortifications along this coast. Article 9 of this treaty contained the first denunciation of the slave trade ever written into a formal treaty. Its terms granted Britain the right to police the seas of the lower Gulf and marked a turning point for British interests in the area. The general terms and conditions laid down in the 1820 treaty were to form the basis of all future agreements between

442 Great Britain and the coastal sheikhdoms. The policy was described by the British as a system of ‘steady control combined with friendly intercourse’. The Resident at Bushire took over responsibility for the affairs of the whole area, although the term Political Resident was not actually used until the middle of the century. In 1822 the Resident at Bushire was told to study the political system of the Gulf and to submit regular detailed news reports to his superiors. While attempts were made by the Turks to assert their authority over the Arabian coast in the 1880s, the Persians showed interest in what had become known as the Trucial Coast with a view to establishing some kind of hegemony. However, French activities in Muscat and on the Trucial Coast in particular during the next few years, ultimately led the British government to enter into Exclusive Agreements with the Gulf sheikhdoms. The Exclusive Agreements of 1892 made it obligatory for the Trucial Sheikhs not to enter into agreement or correspondence with any power other than the British government. In return, the British assumed the responsibility of defending the emirates from foreign aggression. The Exclusive Agreements represented the final tier in the treaty structure created by Britain in the Gulf in the nineteenth century, and continued to be the cornerstone of the British presence in the Gulf until its withdrawal from the area in 1971. British Insulated Callender’s Cables (BICC): a twentieth century British cable manufacturer and construction company, later renamed after its former subsidiary, Balfour Beatty. BICC was a major shareholder in the Dubai Cable

NOTES Company (DUCAB) a cable manufacturing company that was established in 1979 by the government of Dubai as a joint venture. DUCAB was later owned by the governments of Abu Dhabi and Dubai. British National Oil Corporation: (BNOC): formed in 1975 as the British National Oil Corporation (BNOC), a nationalised body. The business of BNOC was transferred to a new company, Britoil, in August 1982. The company was bought by British Petroleum (BP) in 1988. BNOC was also a shareholder in Britoil Offshore Services based in the Ras al-Khaimah Free Zone engaged in barge and tug charters, and ship piloting and towing services. British Petroleum (BP): Originally formed as the Anglo-Persian Oil Company a subsidiary of the Burmah Oil Company exploiting deposits originally found in Persia in 1908. The company’s early history was not easy – following a cash crisis, and prompted by Winston Churchill who could see oil replacing coal as the Royal Navy’s principal fuel, the UK government became a major shareholder in the company. Ironically, the British Petroleum brand had originally been created by a German company as a way of marketing its products in Britain. During the First World War, the British government seized the company’s assets, and the Public Trustee subsequently sold them to Anglo-Persian in 1917. In 1927 oil had also been discovered in in Iraq – in what was to become the immense Kirkuk field. To process crude oil, in Persia Anglo-Persian built a refinery complex to process crude oil into a usable product. In 1935 Persia changed its name to Iran and the company followed suit. The company also had a 47.5 per

NOTES cent holding in the Turkish Petroleum Company. In 1951 the Iranian Parliament nationalised Iranian oil operations. However, governments around the world boycotted Iranian oil. Within 18 months, the Iranian economy was in a parlous state. Eventually the parties returned to the table and reached an agreement whereby a consortium of companies, including Anglo-Iranian (with 40 per cent), Standard Oil of Indiana (Amoco) and others, would run the oil operations in Iran. In 1954, the board changed the company’s name to The British Petroleum Company. The company’s relationship with the United Arab Emirates dates back to the days of the Trucial Coast when, in the early 1930s, Air BP established a refuelling depot in Sharjah to serve the first air services from the UK to India. By 2017 the head office for the company’s regional upstream activities was in Abu Dhabi. Dubai is the regional hub for the company’s refining and marketing businesses known as BP Middle East. BP markets oil products, including aviation and marine fuels and lubricants, and provides technical support and other related services across the region – from Egypt in the west to Sri Lanka in the east. The regional office of BP’s trading division is also based in Dubai and is involved in the regional markets for crude and refined products. In Abu Dhabi, BP has joint-venture partnerships with the Abu Dhabi National Oil Company (ADNOC) and a shareholding of 14.67 per cent in the Abu Dhabi Marine Operating Company, of 10 per cent in both the Abu Dhabi Gas Liquefaction Limited and the Natural Gas Shipping Company. It also has a holding

443 of three per cent in the Bunduq Company Limited. BP’s equity production from Abu Dhabi is around 90,000 barrels of oil per day. Air BP in Dubai is responsible for sales to airlines in more than 20 countries, from Egypt in the west to Bangladesh in the east. It also participates in other joint-venture operations in the UAE and is the sole provider of storage and into-plane refuelling services at Sharjah International Airport. British withdrawal from East of Suez: a foreign policy shift in the 1960s saw the UK begin the process of withdrawing from the Asia Pacific region, symbolised by the end of its presence in Singapore and the high profile handover of Hong Kong to the Chinese (but also by the reduction of its forces and naval presence in the Gulf and other parts of the Middle East). None the less, small training links and informal links remained and by 2016 it appeared that, in some degree, the policy had been reversed – Britain was re-opening a naval support facility in Bahrain, creating a permanent army presence in Oman and establishing new defence staff centres in Dubai and Singapore. Brown Boveri: part of the Swiss ABB group. Brown and Root: US oilfield contracting company with a long history of oilfield activities in the UAE with offices in Abu Dhabi and Dubai. In 1998 Brown & Root merged with MW Kellogg, a subsidiary of the US Halliburton group. In 2006 Kellogg Brown & Root (KBR) was formed when it separated from Halliburton and floated on the New York Stock Exchange. The Middle East remained an important region for KBR, in upstream, midstream and downstream projects.

444 Bu Hasa: an important Abu Dhabi oilfield which contributes (2016) 34 per cent of ADCO’s daily oil production. The overall area covers 600sq kms and includes three distinct fields: Bu Hasa, Huwaila and Bida Al-Qemzan. The major oilfield is Bu Hasa itself, which contributes 96 per cent of the area’s total daily oil production, followed by Huwaila that is located 37km south of Bu Hasa Field and Bida Al-Qemzan (BQ) which is located 32km north of Bu Hasa, contributing 2 per cent of the overall field’s daily oil production. Located onshore, 200km south-west of Abu Dhabi City, In terms of proven oil reserves, Bu Hasa is one of the top twenty fields in the world. Associated gas is treated at the Bu Hasa Gas Processing Plant and the crude oil is pumped to Jebel Dhanna Terminal. al-Bunduq: minor offshore oilfield operated by ADMA-OPCO; revenues from the field’s production of crude oil are shared jointly with Qatar. Buraimi Oasis/Buraimi dispute: for what is a relatively small area, the Buraimi oasis has a disproportionate historical resonance. Located on the border between Abu Dhabi and Oman, at the time of the formation of the UAE, Saudi Arabia continued to maintain territorial disputes with Abu Dhabi over the oasis. The background to the tension went back over a hundred years; during much of the nineteenth century, long before the creation of Saudi Arabia as a nation state, and against the backdrop of attempted Egyptian expansion into the region, Wahhabis had periodically occupied the Buraimi oasis where they had built a fortress called the Qasr al-Subara. In 1839 the acting British political resident, Captain S Henell, on the instructions of Lord Auckland, the

NOTES Governor-General of India, had been despatched to the Gulf with the sole objective of halting any Egyptian advances towards or on the Arabian (i.e. the Gulf) coast. The British feared any threat to the Gulf, long established as an important strategic and commercial route to India. The occupation of the oasis by Wahhabi forces under Emir Faisal bin Turki from 1853 to 1869 made Buraimi part of the Ottoman Porte (central government of the Ottoman) empire. This Wahhabi period of occupation came to an end in June 1869 with the defeat of the Wahhabi garrison by Na’im tribesmen (who had opposed both Wahhabi and Egyptian expansionism) assisted by the forces of the Sultan of Muscat, Azziz bin Qais. Later there were sporadic Wahhabi incursions, but after 1873 there was no Wahhabi (or Saudi) presence in Buraimi for some 50 years. In the twentieth century the area became the subject of border disputes between Abu Dhabi and Dubai, resulting in occasional casualties, and hindering any exploration and commercial development. Part of the problem was that however much the rulers of the two Emirates involved were anxious to reach a peaceful settlement, they had little control over their inland tribesmen. Indeed, it was often unclear whether the coastal rulers did exercise any control over the inland tribes at all. After the Second World War, the geologists of Petroleum Development (Trucial Coast) Ltd (PDTC) endeavoured to renew their exploration, but failed as hostilities persisted, prompting the British government to involve itself and virtually dictate the adoption of a borderline between Abu Dhabi and Dubai drawn up by British cartographers after local soundings. In

NOTES the interim, however, Wahhabi interests had become Saudi Arabian interests following the definitive creation of that nation in 1932. Saudi Arabia now claimed ownership of the Buraimi Oasis. Matters were further aggravated by the interest of the Saudi based Arabian American Oil Company (ARAMCO) in the area. Following the failure of conferences, international arbitration and lengthy discussions to reach any sort of agreement, matters came to a head when it emerged that, in contradiction to arbitration agreements, Saudi Arabia had airlifted forces and supplies into the area. In October 1955 the forces of the Sultan of Muscat and Oman alongside the forces of the Ruler of Abu Dhabi reinforced by the Trucial Oman Levies (later Scouts) re-took the Buraimi Oasis, forcing the bloodless surrender of the Saudi forces. The British government, acting as spokesman for the Emirate of Abu Dhabi unilaterally declared what had become known as the Riyadh Line the frontier between Abu Dhabi and Saudi Arabia. Saudi Arabia’s territorial claim to what represented a large area of Abu Dhabi’s territory (including the Zarrar oilfield) persisted until settlement was reached during the Islamic summit in Lahore in February 1974. As a result Saudi Arabia agreed to relinquish its long-standing claim on the Buraimi Oasis in return for territorial concessions by Abu Dhabi on the southern and western frontiers of the two territories. A corridor on the Gulf coastline between Abu Dhabi and Qatar – Khor al-Odaid – became part of Saudi Arabia’s territory and, as a consequence, Abu Dhabi and Qatar no longer had a common frontier.

445 The Treaty of Jeddah was signed in 1974 and initially considered to have ended the dispute. However, in 1975 the UAE authorities realised that there were discrepancies between the oral agreement and the text of the final document. It also emerged that the UAE had not actually signed the document. In 2004 the UAE embarked on a diplomatic offensive to persuade Saudi Arabia to return to the table and reconsider those parts of the agreement that concerned the Zararah/Shaybah oilfield. A thesis published by the University of Exeter and written by Noura Saber Mohammed Saeed al-Mazrouei suggests that the Khor al-Odaid issue, the most visble aspect of the agreement was much less important than the oil and gas sharing arrangements for the oilfield due to their ‘huge economic implications’. Burj Dubai: the name originally given to what was to be the tallest building in the world. The name change (to Burj Khalifa) was one of the conditions attached to the refinancing of Dubai’s property sector. (See below). Burj Khalifa: constructing the tallest building in the world – the Burj Khalifa – invited the inevitable claims of hubris; nemesis, in the form of the global financial crisis, was waiting in the wings. The building was originally to be called the Burj Dubai, but when Dubai had to go cap in hand to its old rival Abu Dhabi, changing the name was part of the rescue package. Sheikh Khalifa bin Zayed al-Nahyan is the ruler of Abu Dhabi, as well as the UAE’s head of state. Bushire (Bushehr): port on the south-west coast of Iran. Buttes Gas & Oil Company: with its UAE headquarters in Ajman, Buttes, a Californian company, had been the

446 operator of the 2,000sq km offshore Mubarek concession. Cable and Wireless: a British company, Cable and Wireless could trace its history back to the 1860s. It was one of the main telecommunications providers when the UAE was formed in 1971. There were some other companies also operating in the UAE, before their amalgamation in 1976 into the Emirates Telecommunications Corporation, or Emirtel. This later became re-named Etisalat. Cairo: capital of Egypt and its Cairo governorate, Cairo is a port on the Nile near the head of its delta. Cairo has always played an important, if emotional, role in Arab history and culture. Founded in 969 by the Fatimids to replace nearby al-Qatai as the capital of Egypt, the Fatimid period of rule was ended by Saladin in the century century. To defend Cairo against Crusader attacks Saladin constructed Cairo’s Citadel, which still stands. In 1517, after a period of Mameluke reign, Cairo became an Ottoman possession until its capture by French forces led by Napoleon I in 1798. French rule did not last long, however, as the French were expelled by British and Ottoman forces in 1801 and Cairo was returned to Ottoman rule. Ottoman control ended in 1918 and Egypt became a de facto British protectorate. During the Second World War Cairo was the Allied headquarters for the Middle East. From 1958 to 1961 it was the capital of the short lived United Arab Republic, which unified Egypt and Syria. In 2019 a new capital was nearing completion to the east of Cairo; its name has yet to be confirmed. Carter, Jimmy: US President 1977–81. His presidential visits to the Middle East

NOTES were confined to Egypt, Iran, Israel and Saudi Arabia. Central Bank of the United Arab Emirates: Following the formation of the United Arab Emirates in 1971, a Currency Board was established in May 1973. The Currency Board was charged with issuing the national currency that replaced the Bahraini Dinar and the Qatari and Dubai Riyal currencies. Initially, the Currency Board’s functions were limited to issuing the UAE Dirham (introduced in May 1973) and ensuring its full coverage in gold and foreign currencies. The value of the UAE Dirham in gold stood at 0.186621 grams and it was pegged to the US Dollar at a rate of 3.94737 to a dollar, within a narrow margin. Despite its limited mandate, the Currency Board was instrumental in ensuring the efficient organisation and soundness of the banking sector. With technical support from the International Monetary Fund (IMF), the Currency Board prepared collected and classified detailed monetary and banking statistics. The Currency Board also issued annual reports and bi-annual economic bulletins. In December 1980 the Central Bank of the UAE was created with authority over the organisation of monetary and banking systems in the UAE. This included the organisation of monetary, credit and banking policy in the UAE and the supervision of its implementation. Central Boycott Office (CBO): See League of Arab States. Central Marketing Organisation (Trucial States): established in 1963 with a view to encourage the production and marketing of home-grown agricultural production through the fixing of prices and the stabilisation of farm incomes.

NOTES CFP: see Compagnie Française des Pétroles Chase Manhattan (Chase): the forerunner in the Middle East of the J P Morgan Bank. Chase had been active in the Middle East since the 1960s when it opened an office in Beirut. Later part of J P Morgan, which, in February 2010 had opened an office in Abu Dhabi. China National Petroleum Corporation (CNPC): a major international company with oil and gas assets and interests in more than 30 countries. CNPC is China’s largest oil and gas producer and supplier, as well as one of the world’s major oilfield service providers and a globally reputed contractor, with businesses covering petroleum exploration and production, natural gas and pipelines, refining and marketing, oilfield services, petroleum equipment manufacturing and new energy development, as well as capital management, finance and insurance services. Citibank (Citi): present in the United Arab Emirates since 1964 when the bank opened its first branch in Dubai. Citibank is the consumer division of financial services multinational Citigroup. Citibank was founded in 1812 as the City Bank of New York, later the First National City Bank of New York. Clayco Petroleum Corporation: exploited a 2,000sq km onshore concession shared with Buttes Oil (US). Cleveland Bridge and Engineering: UK engineering company which makes steel structures for export throughout the Middle East. In the 1980s the company established a presence in the Jebel Ali Free Zone. Clock Tower, Dubai: built in 1963, the iconic structure was designed by Syrian immigrant architect Zaki al-Homsi.

447 At the time it was described as ‘Dubai’s first modern landmark’. Commonwealth of Independent States (CIS): created in December 1991 following the collapse of the USSR (Soviet Union). Very much Russia’s answer to the perceived progress of the European Union (EU). Its member states were Azerbaijan, Armenia, Belarus, Georgia (ended its membership in 2008), Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan and Ukraine. In October 2005 Uzbekistan announced its intention to join the CIS. Compagnie Française des Pétroles (CFP): a major French oil company established in the 1920s and focussing on the Middle East. A major development was the formation, in 1954, of the Abu Dhabi Marine Areas Company (ADMA) in which CFP had a 33.3 per cent share, BP held 67 per cent. Other CFP shareholdings included those in the Abu Dhabi Company for Onshore Oil Operations (ADCO), in which an international consortium held a 40 per cent share, of which CFP/Total had 9.5 per cent. In the Abu Dhabi Marine Operations Company (ADMA-OPCO) an international consortium held 40 per cent, of which Total CFP/Total in turn held 13.33 per cent. In the Zakum Development Company (ZACO) an international consortium held 12 per cent, one third of which belonged to CFP/Total. The corporate name Total had first appeared in 1953, but the CFP brand continued to exist up until 1991 when it was finally replaced by Total. Consolidated Contractors International Company (CCC): Lebaneseowned, Athens-based company. Constitution: in July 1971 the rulers of six emirates from those formerly

448 known as the Trucial Coast states, ratified the Provisional Constitution of the UAE. This document was based on one originally drawn up by Qatar for what was intended to be a nine-member confederation (which would have also included Bahrain, Qatar and Ras alKhaimah, the latter as an independent state). The constitution was a product of more than three years of discussion and debate among the rulers. The document was finally promulgated on 2 December, (which became the UAE’s National Day) 1971. (Ras al-Khaimah did not join the union until February 1972). The provisional constitution of the UAE provided for the separation of powers into executive, legislative, and judicial branches. Additionally, it separated legislative and executive powers into federal and emirate jurisdictions. Certain powers were expressly reserved for the central government, including foreign policy, defence, security, immigration, and communications. The individual emirates exercised residual powers. The UAE’s Provisional Constitution, which the Supreme Council in 1976 voted to keep on for a further five years, recognised the supremacy of Abu Dhabi and Dubai. Apart from the right of veto, these two emirates also had the lion’s share of members in the Council of Ministers and the Federal National Council, a purely consultative body. Corniche Maternity Hospital (Abu Dhabi): the Al-Corniche Hospital has been providing obstetrics and gynaecological services for the women of the region since 1984. With more than 10,000 births a year, the Al-Corniche is the busiest maternity hospital in Abu Dhabi. There are also more than 400 outpatient visits per day.

NOTES Cosmo Oil Company: Japanese oil company which established liaison offices in Abu Dhabi in late 1980s. The company traces its corporate roots to Maruzen Petroleum established in 1931, although the oil business operated by Maruzen was originally established in Kobe in 1907. Cosmo Oil Company was formed in April 1986, through the merger of Maruzen Petroleum and Daikyo Petroleum, a group of oil businesses based in Niigata Prefecture which had merged in 1939. Costa Rica: Central American republic with which the UAE severed diplomatic relations in June 1982 after it moved its embassy in Israel from Tel Aviv to Jerusalem. Costain Civil Engineering Ltd: founded in Lancashire in 1865, the company’s only pre-Second World War international experience was on the TransIranian Railway and at Abadan, Iran and for BP in Iraq. Losses on the railway contract almost bankrupted the company. However, the increased revenues generated by the oil-producing states led to a construction boom in the Middle East in the 1970s. Costain was a major beneficiary, particularly in the UAE. Council of Ministers: the Council is the Cabinet of the United Arab Emirates, the Executive Branch of the Federation, handling the execution of all internal and external affairs related to the Federation according to the UAE Constitution and the federal laws, under the supervision of the President and the Federal Supreme Council. The cabinet consists of the prime minister, two deputy prime ministers, the ministers of the UAE, and an active General Secretariat. Council for Mutual Economic Assistance (Comecon): an economic organ-

NOTES isation under the leadership of the Soviet Union consisting of the Eastern Bloc countries and a number of communist Central Asian countries. It lasted from 1949 to 1991. Creek: (Arabic: Khor) many of the towns and villages on the Arabian Gulf were grouped around creeks providing basic mooring facilities. Dubai’s creek was the best known in the region. Crescent Petroleum Company: a consortium of six American companies – operating an offshore concession near Abu Musa Island which produces crude oil with the lowest sulphur content in the Arabian Gulf. 1974 production was 60,000bpd with the 10 million barrel mark being surpassed in early February 1975. Under the 1971 Sharjah-Iran agreement the latter country was entitled to share in the oil revenues resulting from the development of this field. For a period the company’s relations with Sharjah became strained after the ruler of Sharjah imposed a US$34 million backdated increase in royalty and tax, thereby hindering the development of the field. Crystal Oil Company: of the United States was scheduled to begin drilling operations offshore in Sharjah waters in June 1975 in a concession owned 70 per cent by Crystal and 30 per cent by Norsk Hydro. Another concession was awarded offshore in the Gulf of Oman to the Reserve Oil and Gas Company – also of the United States. Currency: Until May 1973 two currencies were used within the UAE. Abu Dhabi used the Bahraini Dinar (BD) and the other six states used the Qatar-Dubai Riyal (QDR). Within weeks, other currencies in use were replaced by the UAE Dirham, at the rate of one UAE Dirham to

449 a Qatari/Dubai Riyal and ten UAE Dirhams to a Bahraini Dinar. Currency Board: see Central Bank. Czechoslovakia: official name of Central European republic until its division into the Czech Republic and Slovakia in 1993. Dalma Island: an Arabian Gulf island belonging to Abu Dhabi, some 42km north-west of the al-Dhannah Mount and about 210km from Abu Dhabi. The island’s area is about 33km. In the heyday of the pearling industry the island was heavily populated in seasons of activity. Al-Darmaki Trading and Contracting: Abu Dhabi based trading group owned by the al-Darmaki family, originally of Al-Ain. The al-Darmakis have strong family ties with the ruling al-Nahyan family of Abu Dhabi. The company’s activities included operations in trading, civil and mechanical construction, sponsorship and the representation of international companies. Das Island: until the 1950s Das Island was just a barren, rocky, territory of about 2.5sq km located midway between the Qatar Peninsula and Abu Dhabi. Thirty years later it was an important gas-gathering and oil storage centre, close to the Zakum field. The first tanker, the British Signal loaded a cargo of crude oil (from Umm Shaif field) in July 1962. Dassault Breguet: French manufacturer of the advanced Mirage jet fighter aircraft first purchased by the UAE in 1983. Davy McKee: international engineering company long active in the UAE formed by the merger of the US McKee company with the Davy Corporation of London in November 1978. Re-named the Davy McKee Corporation in 1979.

450 Deira: district of Dubai on the opposite side of Dubai Creek. A 1969 report noted that ‘Dubai is linked with Deira by a bridge over the creek which with its approach and embankments has a length of 2,500 feet, the road being 24 feet wide and having six feet wide pavements. A small toll is charged for the use of the bridge. The airport is situated at Deira as well as one of the large hotels...’ In the immediate post-independence period Deira was very much the commercial centre of Dubai. Following the extensive development along Dubai’s Sheikh Zayed Road, including the Dubai World Trade centre and the Dubai Financial Centre as well as, further down the road, the Jebel Ali Free Trade Zone, the Dubai side has certainly re-asserted itself. The once tranquil Jumairah beach now accommodates the Dubai Dry Dock as well as luxury hotel developments and large shopping malls. Deira is now accessible by both overhead and underground railway services. De Leuw Cather: US firm of consultants. In 1985 Abu Dhabi began re-implementing the US$2.4 billion transport and road improvement programme designed by the US company in the late 1970s. Delfezee Dubai Petroleum: a Wintershall subsidiary with a shareholding in the Dubai Petroleum Company. Deminex: German oil company which took over a 17.5 per cent interest in Ras al-Khaimah’s oil concession in 1976. Departments of finance: the individual emirates, notably Abu Dhabi and Dubai have their own departments responsible for administering local budgets. The federal ministry of finance is responsible for the national budget.

NOTES Deutsche Texaco: In July 1975 the government of Dubai (in consort with Abu Dhabi and Sharjah) decided to take control of all foreign oil and gas operations in the state. The corporate infrastructure was to remain unchanged while the shareholdings altered. A Dubai producing group – the Dubai Petroleum Company (DPC) – was set up to comprise the interests of US and European companies. A subsidiary of Continental Oil (USA) held a 30 per cent shareholding; The other shareholders were Dubai Marine Areas (CFP) with 50 per cent, Deutsche Texaco with 10 per cent, Dubai Sun Oil – 5 per cent and Delfzee Dubai Petroleum (Wintershall) with 5 per cent. Al-Dhafra Insurance Company: a publicly listed insurance company entirely owned by UAE nationals. It was incorporated in Abu Dhabi in 1979 and later registered under the provisions of the 2007 UAE Insurance Law. Dhaid: the capital of the central district of the Emirate of Sharjah. An oasis town, Sharjah has extensive irrigated date palm plantations with water fed from underground aquifers channelled from the nearby Hajar mountains at least in part through ancient tunnels – falaj – dug for that purpose. Dhaid is located on the desert plain east of the coastal City of Sharjah and is bisected by the east/west Road from Sharjah to Masafi in the foothills of the Hajar. To its north lies the inland oasis town located in Umm al-Quwain emirate, Falaj al-Mu’alla, while the road south leads to the town of Madam on the Dubai to Hatta Road. The Sharjah/ Mileiha/Kalba Road passes to the south. Dhaka: the capital city of Bangladesh, formerly principal city of East Pakistan.

NOTES Dhofar: a southern province of the Sultanate of Oman. Since the 1960s Dhofar had been in a state of civil war. The guerrillas of the Popular Front for the Liberation of the Occupied Arabian Gulf (later renamed the Popular Front for the Liberation of Oman and the Arab Gulf (PFLOAG)) were fighting the Sultan’s Armed Forces (SAF) to take control of the province, regarded by strategists as the soft under-belly of the whole Arabian Peninsula containing over half of the world’s oil reserves and a few hours drive from Abu Dhabi and Dubai. By the winter of 1974–75 the PFLO (the guerrillas had shortened their name – and their ambitions – to the Popular Front for the Liberation of Oman) insurgents had been driven back to the Yemeni frontier due to the combined efforts of the SAF and an Imperial Iranian Brigade Group sent by Shah Reza Pahlavi who had decided to assist a fellow absolute monarch, Sultan Qaboos bin Said, to withstand a radical leftist rebellion. By December 1975 the PFLO had effectively been defeated, although elements of the movement continued low-level guerrilla warfare for the remainder of the decade. Dibba: an urban region in Fujairah on the east coast of the Arabian Peninsula, astride the border of the UAE and Oman, backed by the Hajar Mountains. Dibba-Khor Fakkan-Fujairah-KalbaMuscat east coast road: linking the eastern UAE with the Sultanate of Oman. Digdagga: location of an experimental farm in Ras al-Khaimah established in 1955. In 1973 the farm was providing three year courses in both theoretical and practical agriculture. In 1973 the farm also hosted a herd of 30 Friesian cattle imported from the UK.

451 Dirham: until May 1973 two currencies were used within the UAE. Abu Dhabi used the Bahraini Dinar (BD) (£ = BD0.98) and the other six states used the Qatar-Dubai Riyal (QDR) (£1 = QDR9.3). The agreement creating the new currency had been signed in March 1955 and came to an end on 9 May 1973. There then came into existence the new UAE currency whose fundamental unit is the dirham. Dodsal: Indian construction company responsible for building the pipeline joining the Margham plant and Jebel Ali. Doha: capital city of Qatar. Until the discovery of oil in 1949 Doha was a small fishing village. In 1977 Doha hosted an OPEC conference at which Abu Dhabi aligned itself with Saudi Arabia in an initiative that lead to a two-tier price system during the first half of the year, their policy was claimed to have prevented a further price escalation for the next 18 months. Although the UAE was a member of OPEC, in the early days of the Federation its individual members did not always agree with each other, or with OPEC policy. Dolphin Gas Project: a dry gas sales and distribution network being organised byAbu Dhabi’s UAE Offsets Group, in co-operation with the state-owned Abu Dhabi National Oil Company (ADNOC) and its foreign partners – Enron of the US and Elf of France. The scheme envisaged Abu Dhabi importing dry gas from Qatar to meet the needs not only of the UAE, but also for distribution further afield, including to Oman and eventually Pakistan. However, regional political sensitivities, as well as cost (US$10 billion for the first seven-year phase), were expected to slow progress.

452 DP World: a subsidiary of Dubai World, a holding company owned by the Emirate of Dubai. In 2006 Dubai World purchased the UK company Peninsula and Oriental Steam Navigation (P&O), the fourth largest ports operator in the world. P&O’s company headquarters remain in London. DST: German offshore company operating in Ras al-Khaimah in 1977. Dubai: the name is thought to be derived from the Arabic word for a young locust and possibly refers to a stretch of sand or desert where locusts lay their eggs. Dubai’s area is approximately 15,000sq miles (38,900sq km). Dubai’s early history is ill-documented, but it appears to have been a dependency of Abu Dhabi until 1833. The 1820 peace treaty which was agreed by the coastal emirates was signed by the uncle of Muhammad bin Hazza of Dubai. Dubai became a British protectorate after the signing of the Exclusive Agreement in 1892. After prolonged internal disputes the al-Maktoum family left Abu Dhabi for Dubai. Dubai Aluminium Co (DUBAL): an operating subsidiary of Emirates Global Aluminium (EGA). Founded in 1979, the company’s roots date back to May 1975, when the late Sheikh Rashid (then Ruler of Dubai) signed a decree establishing Dubal as a joint-venture company. The smelter complex was to be built on a 475 hectare site near Jebel Ali village, 35km south-west of Dubai alongside the then two-lane highway to Abu Dhabi. Five months later, in October 1975, Sheikh Rashid laid DUBAL’s foundation stone. Construction began in May 1976 on what was reportedly the biggest basic industry development project in the world. The official ‘birth’ of DUBAL took place in February 1979, when the UK’s Queen

NOTES Elizabeth II turned on the tap at the DUBAL desalination plant, in the company of Sheikh Rashid, thereby officially commissioning the facility. Dubai Commerce and Tourism Promotion Board: opened In October 1989 headed by executives with considerable experience in Hong Kong. The board was given the mandate to co-ordinate Dubai’s efforts to diversify its economy away from oil. Dubai Creek: (Arabic: Khor) the best known creek on the Arabian Gulf is that of Dubai which once wound some 12 kilometres inland and provided a haven for boats and ships (and for a period flying boats en route to India and beyond). It was the creek and its strategic location that initially enabled Dubai to become the region’s trading hub. Dubai Defence Force (DDF): formed in 1971, by 1975 the DDF had 3,000 men. It later expanded to 20,000 men in one infantry brigade group. The DDF became the Central Command of the Union Defence Force (UDF) in 1996. Dubai Drydocks: the inspiration for building and operating a dry dock facility in Dubai goes back to 1971. After the feasibility studies were completed and construction got under way, the facility opened in 1983. The only other large dry dock facility in the Arabian Gulf is the (smaller) ASRY dry dock in Bahrain, which opened in 1977. The Dubai Drydocks have been building new ships since 1994, and have since completed over 70 projects. The parent company, (itself a subsidiary of Dubai World Corporation) Dubai Drydocks World, LLC, operates a network of shipyard facilities through various subsidiaries from the Middle East to South-east Asia.

NOTES Dubai Exploration Onshore (DEOL): in 1989 DEOL was granted a new exploration concession to the south of Dubai city. The first exploration well was due to be spudded in January 1990. Dubai Financial Services Authority: the financial regulatory agency of the special economic zone and the Dubai International Financial Centre. Dubai Group: the financial services company of Dubai Holdings, focussing on banking and insurance investment regionally and globally. Dubai Group was first created in 2000 under the name of Investment Office but was renamed Dubai Investment Group in 2004 and again in 2007 when it was restructured and re-branded as Dubai Group. Dubai Group played a pivotal role in the Dubai Strategic Plan 2015 designed to take Dubai to a new level of development. Dubai Group’s investment portfolio includes Dubai Investment Group, Dubai Capital Group, Dubai Financial Group, Dubai Banking Group, Dubai Insurance Group and Noor Investment Group. Dubai Holdings: one of Dubai’s major investment vehicles. It is divided into a number of subsidiaries, including Dubai International Capital (DIC) (see below) and Dubai Group (see above). Dubai Inc: is an informal term for the large number of companies owned by the government of Dubai, or more precisely by the al-Maktoum family. At the more high profile end, these include Dubai World and its subsidiaries, Dubai Holdings and the Emirates airline. Dubai Integrated Energy Strategy 2030 (DIES): under Sheikh Mohammed bin Rashid al-Maktoum DIES was developed in 2010 and deployed in 2011 to set the strategic direction of Dubai towards

453 securing sustainable supply of energy and enhancing demand efficiency (water, power and transportation fuel). Dubai International Capital (DIC): established in 2004 as the international investment arm of Dubai Holdings. The DIC is structured into three divisions: global buy-outs, primarily in Europe but also in North America and Asia; investments in the Middle East and North Africa; and equity investments in publicly quoted companies such as the HSBC Holdings banking group, EADS (Europe’s largest aircraft and aerospace manufacturer) and Japan’s Sony. Dubai International Financial Centre (DIFC): established in 2002 on a 110-hectare site the DIFC is a major global financial hub for the Middle East, Africa and South Asia (MEASA) markets. The DIFC has its own independent, internationally regulated regulator and judicial system, common law framework, global financial exchange, tax-friendly regime, and a large, cosmopolitan business community. The district houses hundreds of financial institutions, including wealth funds and private investors, although it also hosts multinationals, retail outlets, caf‚s, restaurants, residential space, public green spaces, hotels and art galleries. The DIFC is one of Dubai’s independent free-zones, which means it offers companies 100 per cent ownership without the need for a local partner. Dubai International Financial Exchange (DFIX): hosts a range of international financial and non-financial firms. The areas of business within the Exchange include banking, professional services, global corporations, insurance, wealth management, and access to capital markets.

454 Dubai Municipal Council: the nearest thing to a local parliament, which, since 1980, has had 32 members headed by Sheikh Hamdan bin Rashid alMaktoum as chairman. Since 2018 the Council’s director general has been Sheikh Dawood Abdulrahman al Hajiri. Dubai Natural Gas Company (Dugas): a member of the ENOC Group, which is wholly owned by the government of Dubai. Dugas played an important role in the development of Dubai. Engaged in the planning, engineering, construction, operations, maintenance and management of complex infrastructure and industrial facilities, Dugas has a strong presence in the oil, gas and petrochemical industry in the Gulf and Middle East. The company’s base is just outside the Jebel Ali Free Zone. Dubai Petroleum Company (DPC): state-owned organisation established to operate the emirate’s four onshore producing fields. Dubai riyal (QDR): the agreement creating this unit of currency had been signed in March 1955 and came to an end on 9 May 1973. There then came into existence the new UAE currency whose fundamental unit, the Dirham, was equivalent to QDR1.0 and is subdivided into 100 fils. Dubai Stock Exchange: the Dubai Financial Market (DFM), also known as the stock exchange was founded in March 2000. Dubai Strategic Plan 2015 (DSP 2015): Dubai’s ambitions were summarised in The DSP 2015, which was launched in 2007 by Sheikh Mohammad. Through DSP 2015, Dubai established its first documented long-term strategy, enabling it to claim to be one of the first entities to do so in the region.

NOTES DSP 2015 outlined the emirate’s strategic priorities in 5 main areas: - Economic development - Social development - Security, justice, safety - Infrastructure, land, environment - Government excellence DSP 2015 set ambitious targets for Dubai’s growth for the long-term, highlighting key sectors of focus, and priorities areas that would shape the emirate. Dubai Supreme Council of Energy (DCSE): the governing body tasked with policy development, planning and co-ordinating with concerned authorities and energy bodies to deliver new energy sources while employing a balanced approach to protecting the environment. Under Sheikh Mohammed bin Rashid al-Maktoum, Vice President and prime minister of the UAE, and Ruler of Dubai, the Dubai Integrated Energy Strategy 2030 (DIES) was developed in 2010 and deployed in 2011 to set the strategic direction of Dubai towards securing sustainable supply of energy and enhancing demand efficiency (water, power and transportation fuel). Dubai World Corporation (DWC): global holding company of the government of Dubai that, according to its corporate profile, focusses on the strategic growth areas of transport and logistics, drydocks and maritime, urban development and investment and financial services. The portfolio contains a number of the world’s leading companies in their industries, including Drydocks World, Economic Zones World, Istithmar World and majority ownership of DP World. It took a knock in 2009 when the government of Dubai announced in late November that the DWC conglomerate would seek a six-month standstill on

NOTES repayments while its unprecedented US$26 billion in debt was restructured. After three weeks of increasing tensions with nervous creditors, DWC at least managed to pay off its subsidiary company Nakheel’s bond on time, settling market nerves in the short term. At the end of the six-month period, the creditor banks involved were less than delighted by the terms offered by DWC. Trade creditors would only receive 40 per cent of their debt in cash and the balance on a ‘never-never’ instalment basis. Of particular concern to the international financial markets was the fact that the UAE government had made it more than clear that the debt of DWC was not guaranteed by the government. Dubai World Trade Centre (DWTC): organises a year-round calendar of international trade fairs, consumer exhibitions and prestigious international conferences. Since its inauguration in 1979 it has played an important role in the growth of international trade in the Middle East. Originally it was through the landmark 39-storey Sheikh Rashid Tower. By 2017 the DWTC site also included the Convention Tower as well as two international hotels. The DWTC site can claim to be the region’s largest purpose-built complex for events and exhibitions. East Germany: until 1989 former communist state also known as the German Democratic Republic (GDR). The official title was the Deutsche Demokratische Republik (DDR). Unification with West Germany officially took place in 1990. East India Co: founded in 1600 by merchants in London, the Company’s mission was essentially mercantile. The

455 name was a misnomer – its first activities were focussed on Persia, where it was well received and granted (1617) a monopoly on all silk leaving Persian ports. In 1619 an English factory (trading post) was established at Jashk. The Company’s representatives later established a representation at Bandar Abbas which for some 50 years became a centre of commercial activity. It also began to take an interest in the opportunities offered by India. Such had been the company’s initial success that it was soon emulated, and surpassed by the Dutch East India Company. Dutch trade and influence prevailed in the Gulf until 1765, when the Dutch presence ceased. Until the end of the seventeenth century the Company managed to continue as an essentially commercial operation. That changed when in 1688 it took over the government of Bombay (Mumbai) from the Portuguese. It was allowed to raise a small military force but its presence in Bandar Abbas had become precarious and was relocated to Bushire. By the beginning of the nineteenth century, pirate fleets in the Gulf had begun to pose a chronic threat to the company’s cargoes – of gold and silver outwards to India, and of silks and spices in the opposite direction. Finally, the company sent a significant flotilla to the Gulf and attacked Ras al-Khaimah, the pirates’ stronghold, reducing the town and the pirate fleet to ashes. The Gulf rulers signed a peace treaty agreeing to the cessation of plunder. Another treaty was signed in 1835, followed by the Treaty of Maritime Peace in Perpetuity in 1853. Until 1858 all the region’s contacts of a diplomatic or administrative nature were conducted through the Company.

456 East of Suez: in 1968, the United Kingdom’s Labour government lead by Harold Wilson was obliged to come to terms with its diminished international position. A combination of financial constraints, a developing reluctance to be involved in imperial adventures and after the withdrawals from Aden and Cyprus, an awareness of anticolonial hostility lead to the East of Suez withdrawal. In 2013 there were press reports that the UK government was considering a partial reversal of the East of Suez decision. This represented a strategic reorientation of defence and security requirements towards the Gulf region. The new British presence was to be focused on the United Arab Emirates, where the RAF would use the al-Minhad base. The Royal Navy had always kept three minesweepers and at least one frigate or destroyer in the Gulf, supported by a small permanent staff in Bahrain. Eastern bloc: term commonly used at the time to describe former Soviet dominated Eastern European communist countries. Egypt: the Arab conquest of Egypt over AD639–42, only two decades after the rise of Islam, made Egypt an integral, and important, part of the Muslim world. Subsequent Egyptian political history was one of constant change. The Umayyad caliphate (661–749) was followed by the Abbasayid caliphate which fell to the Fatimids (969–1171). The period of the Crusades coincided with the fall of the Fatimids and the creation of the Ayubid dynasty under Saladdin. The Mamelukes seized control of Egypt in 1250, eventually to be replaced by Ottoman rule. Following the First World War Ottoman rule came to an

NOTES end. Egypt became notionally independent in 1922, although the British protectorate and military presence was maintained until 1956. Following the election of Gamal Abdel Nasser as President in 1954 Egypt adopted an increasingly Arabist stance, causing concern among the former colonial powers and eventually prompting an invasion by France and the UK to protect their interest in the Suez Canal. The reversal of the Suez invasion, and the failure of the US and the international community to support the UK and France marked a sea-change in Arab international politics. Cairo (Egypt’s capital city) became an international Arab beacon, supporting Arab independence movements throughout the Middle East, not least in the Arabian (Persian) Gulf to the concern of Western powers who perceived their oil supplies to be at risk. Emaar Properties: a major loser in the 2015 Dubai property crash. At the time Dubai’s largest property firm, Emaar’s shares fell by 5.9 per cent. Emarat: see General Petroleum Corporation as it was known until 1996. Emirates (airline): Dubai based Emirates airline formed in October 1985 with US$10 million provided by the government of Dubai via the Investment Corporation of Dubai. The airline remains government-owned and has been self-financing since the initial investment. Initially the airline operated just two leased aircraft, a Boeing 737–300 and an Airbus A300. By late 2016 Emirates ranked among the top ten airlines in the world in terms of passengers flown, and had become the largest airline in the Middle East in terms of revenue, fleet size, and passengers carried. Despite its

NOTES name, the airline does not fly to the UAE’s capital city Abu Dhabi, where its competitor, Etihad (see below), is based. Emirates Development Bank (EDB): launched in 2015 with capital of Dh10 billion (US$2.7 billion), the EDB mandate provides for more housing and jobs for cities, as well as support smart industries. This extends to the financing of home-ownership programmes, key industrial sectors as well as small and medium-sized enterprises. These were perceived by the UAE authorities as those most vulnerable to any slowdown in projects arising from infrastructure spending cuts. In 2016 the EDB disbursed funding of US$1.4 billion for use in developing, housing and industrial projects in the UAE, just over ten per cent of the annual federal budget of US$13.2 billion. Emirates Gas Bottling Company (EMGAS): established in Dubai in as a joint venture of the government of Dubai which was then called Calgas Bottling Company. The bottling plant was moved to Jebel Ali in 1981. Emirates General Petroleum Corporation (EGPC) (Emarat): local fuel distribution company majority owned by the government of Dubai. EGPC’s effective monopoly on fuel distribution in the Northern Emirates was ended in 1988 when the Dubai-owned Eppco opened the first of a number of outlets selling petrol (gasoline) products imported from Bahrain. In 1996 EGPC was relaunched as Emarat with a new corporate identity. Emirates Global Aluminium (EGA): EGA is owned equally by Mubadala Investment Company of Abu Dhabi and Investment Corporation of Dubai. It is the largest company jointly owned by the two Emirates.

457 Emirates Global Capital Corporation: Established in July 1999 to promote investment in Abu Dhabi’s planned US$3.3 billion Saadiyat free trade zone, an ambitious long-term project that would eventually house commodity trading, storage, transport and other facilities. Emirates Industrial Bank (EIB): in October 2009 the UAE ministry of finance signed an agreement to buy the remaining 49 per cent stake in the EIB from 13 public institutions, banks and insurance companies. This added to the 51 per cent already owned by the government and completed the buyout of the bank. The agreement marked a key moment in the formation of the Emirates Development Bank (EDB), the government entity established to fund the UAE’s industrial sector, witnessing the formation of numerous sustainable small- and medium-sized businesses with UAE ownership, as well as funding for development projects across the UAE. The EDB became operational in 2010 and was the culmination of the merger of the Emirates Real Estate Bank and the Emirates Industrial Bank, both of which became 100 per cent government- owned. Emirates Insurance Company: one of the first insurance companies in the region established in 1982 with one branch in Abu Dhabi, and later, another in Al-Ain. Partly government owned, in 2016 the company had 30 offices across the country and employed over 250 staff. Emirates National Oil Company (ENOC): a diversified energy group, it was established in Dubai in 1993. ENOC is a wholly owned company of the Investment Corporation of Dubai, itself wholly owned by the government of Dubai. The company has operations in Dubai and the Northern Emirates of the UAE (but

458 not in Abu Dhabi). One of ENOCs subsidiaries, the ENOC Processing Company LCC (EPCL) runs the Jebel Ali refinery in Dubai. Emirates Petroleum Products Company (EPPCO): Dubai-owned local fuel distribution company with its own chain of petrol (gasoline) stations. Emirates Real Estate Bank: see Emirates Development Bank above. Emirates Telecommunications Corporation (Emirtel): Founded in 1976 by the amalgamation of a number of smaller private telephone companies (including Cable and Wireless) in 1982 Emirtel launched the first mobile telecommunications service in the Middle East. In 1983 the ownership changed when the federal UAE government acquired a 60 per cent shareholding; the remaining 40 per cent began to be publicly traded. The company’s branded trade name also changed to Etisalat. In 1991 federal legislation granted the company the right to provide wired and unwired telecommunication services throughout the UAE and between the UAE and other countries. Internet services began in 1995, another regional first. By 2017 Etisalat was operating in 16 countries across Asia, the Middle East and Africa. Emiratisation: a government affirmative action initiative introduced in 2017 to improve employment prospects for UAE citizens. The results appear to have been minimal in the private sector but more successful in the public sector. Enclaves: until 1949 there were no such things as territorial borders in what was to become the UAE. Instead of borders, there were tribal allegiances, which could change according to shifting tribal loyalties. Allegiances were the product of to whom tribal members would turn to

NOTES for advice and arbitration and to whom zakat would be paid. The dictionary definitions of an enclave differ slightly, most broadly defining it as ‘a portion of territory within or surrounded by a larger territory whose inhabitants are culturally or ethnically distinct.’ In the case of the UAE, in the absence of firm territorial borders, the concept of nation state citizenship was replaced by tribal loyalty rather than any cultural or ethnic considerations. The dictionary also defined as an ‘exclave’ any ‘portion of territory of one state completely surrounded by territory of another or others, as viewed by the home territory.’ The first map delineating the Northern Trucial States’ tribal allegiances and divisions, as well as traditional grazing and water rights, was drawn up in 1971 by Julian Walker, a British consulate official in Dubai. Enhanced oil recovery (EOR): given the UAE’s abundant oil reserves, there are obvious opportunities for enhanced oil recovery (EOR) methods in declining fields. The longest established fields have been producing since the 1960s giving scope for EOR to improve or enhance production. The potential gain from EOR is thought to be considerable and the UAE is considered a world leader in the application of EOR technology. Enron Corporation: in 2001 Enron was revealed to be a fraudulent operator and eventually went bankrupt as a series of well planned accountancy frauds involving its auditors Arthur Andersen were revealed. At one stage Enron held a 24.5 per cent stake in the Dolphin gas project, but sold its equity to the UAE Offsets Group (UOG) for an undisclosed amount.

NOTES Etihad Airways: international airline founded in 2003 and wholly-owned by the emirate of Abu Dhabi. With its centre of operations in Abu Dhabi, Etihad can claim to be the UAE’s flag carrier although the Emirates airline, from neighbouring Dubai, is larger in fleet and turnover. In July 2008, Etihad had signed one of the largest aircraft orders in history for 205 aircraft worth approximately US$43 billion at list prices, including an order for 62 Airbus A350. In one respect, Etihad’s development strategy differed significantly from its principal competitor. It acquired shareholdings in a number of smaller airlines, notably minority equity stakes in Alitalia, Airberlin, Air Serbia, Air Seychelles, Etihad Regional (operated by Darwin Airline), Jet Airways (India), and Virgin Australia. However, the strategy appeared not to work – the investments in Airberlin and Alitalia reportedly ran up losses of US$2.6 billion. Etihad’s Chief Executive Australian James Hogan and its Australian financial director, James Rigney both departed the company in mid-2017. Three members of the international management team, from the US, Canada and Ireland, remained in place. The investment by the Abu Dhabi government was estimated to be some US$43 billion at list prices, designed to meet the airline’s ambitious long-term growth plans. Etihad reported its first full-year net profit – of US$14 million – in 2011, in line with its strategic plan goals announced in 2006. Etihad Rail: established in June 2009 with a mandate to manage the development, construction and operation of the UAE’s national freight and passenger railway network. The railway network would

459 be built in phases to link the principal centres of population and industry, as well as to be a part of the planned GCC railway network linking the six countries of the GCC. It is hoped that the network will act as a catalyst for economic growth and sustained social development. Etisalat: branded trade name of Emirates Telecommunications Corporation (Emirtel). Europe in the Gulf: in the sixteenth century the region first attracted the interest of the European maritime powers. The first to arrive were the Portuguese, who for a century established settlements and trading stations up and down the coast. However, by the late seventeenth century other European powers began to challenge the Portuguese presence. For a period the Dutch took over from the Portuguese, only to be steadily replaced by the British, who saw the Gulf as an important link for trading communications. Initially the power behind the British presence was not the British government, but the East India Company. Eventually the British Indian government took over from the East India Company, until Indian independence in 1947. European Community (EC): forerunner of the European Union (EU). European Currency Unit (ECU): forerunner of the Euro. European Economic Community (EEC): forerunner of the European Union (EU). European Union (EU): an economic and political union of 28 European member states (2017). With almost 500 million citizens, the EU is the world’s largest single market. Exclusive Agreement: dated 1892 between the British authorities and the

460 rulers of the Trucial States was known as the ‘third commandment’. The Rulers were invited to state that: 1. ‘On no account will I enter into any agreement or correspondence with any Power other than the British government. 2. ‘Without the assent of the British government I will not consent to the residence within my territory of the agent of any other government. 3. ‘That I will on no account cede, sell, mortgage or otherwise give for occupation any part of my territory, save to the British government.’ In a rather delayed response, dated August 1911, the Ruler of Abu Dhabi, Tahnoun bin Zayed al-Nahyan (Sheikh Tahnoun II) confirmed that: ‘This has been duly understood by ourselves and, God willing, no opposition will be seen on our part.’ Expo 2020: an exhibition to be hosted by Dubai cascheduled to open in October 2020. Exxon: now known as ExxonMobil following the merger between Exxon (formerly Esso) and Mobile, the company was granted its first oil concession in Abu Dhabi in 1939. ExxonMobil is active in oil development and production in Abu Dhabi and the marketing of lubricants and petrochemicals from its Dubai office for the Middle East and North Africa region. In 1939 Petroleum Development (Trucial Coast) Ltd (PD (TC)), a subsidiary of the Iraq Petroleum Company, signed a 75-year concession agreement with the Ruler of Abu Dhabi, Sheikh Shakhbut bin Sultan which covered the whole of the emirate’s land area and part of the offshore territory. In 1960 PD (TC) made its first discovery at Murban (Bab) followed

NOTES by finds at Bu Hasa in 1962, Asab in 1965 and Sahil in 1972. In 1962 PD (TC) changed its name to the Abu Dhabi Petroleum Company (ADPC), which still today is the company through which ExxonMobil holds the interest in the onshore concession. Processing facilities were constructed and a 112km pipeline was built to the coast at Jebel Dhanna, from where the first cargo of about 240 thousand barrels of crude oil from Bab were exported on the Esso Dublin tanker in December 1963. To support a major planned expansion of the upper Zakum field, the Supreme Petroleum Council invited international companies to submit bids. ZADCO Offshore Petroleum Ltd was the successful bidder and acquired a 28 per cent participating interest from ADNOC. Major field redevelopment and expansion continued based on artificial islands and extended reach drilling. Falaj: (plural aflaj) underground canals resembling the Persian qanat. Once found in many parts of the Arabian Peninsula, the Al-Ain aflaj were often as long as twenty miles (32km). The tunnels are driven into water-bearing mountain rocks. It is not clear whether the construction technology for the falaj was imported from Persia; the system was also found in Oman and in Iraq, where they were known as karaz. The Roman equivalent is that of foggaras built in several areas of the Levant for irrigation purposes. Falaj al-Mu’alla: Umm al-Quwain’s second township. Fateh: (meaning ‘good fortune’) offshore Dubai oilfield discovered in 1966. A second field, known as South-west Fateh, was discovered four years later.

NOTES Federal Commercial Agencies Law: came into being in February 1982. It aimed to Strengthen the involvement of UAE nationals in business in all the emirates. Aka Federal Commercial Companies Law. Federal Customs Authority (FCA): the concept of customs levies has existed in the UAE for over one hundred years. These might have been levies on pearl fishers, transit fees for vessels making their way up the Gulf or simple landing fees. Before the creation of the FCA in 2003, calls for the creation of a unified customs system had been made. There was, however, an almost philosophical divide. While Abu Dhabi and some of the smaller emirates were in favour, the very idea was almost anathema to the free traders of Dubai, including the Ruling Family. It was some time before these differences could be reconciled, but eventually, in 2002 steps were finally taken to establish the FCA. An international consultancy was contracted to oversee the FCA’s establishment, which needed to take into account the UAE’s obligations to the customs union already established by the Gulf Co-operation Council (GCC). The ministry of finance and industry was given the responsibility of preparing the FCA draft law and the UAE unified customs law. This resulted in the FCA Federal Decree Law No. 1 of 2003. Federal Industrial Bank: established in 1982 the bank, based in Abu Dhabi, was 51 per cent owned by the ministry of finance and Industry and 49 per cent by local banks and insurance companies. Authorised capital was Dh500 million and the bank was set up to provide subsidised loans to public and private sector

461 companies, providing they had over 70 per cent local funding. Federal National Council (FNC): the fourth federal authority in terms of order in the hierarchy of the five federal authorities identified in the UAE constitution, namely: the Supreme Council of the Federation, the Federation President and Vice president, the Federation Cabinet, the Federal National Council, and the Federal Judiciary Constitution. The Federal National Council (FNC) is comprised of 40 members: - 8 seats for each of the emirates of Abu Dhabi and Dubai - 6 seats for each of the emirates of Sharjah and Ras Al-Khaimah - 4 seats for each of the emirates of Ajman, Umm Al-Quwain and Fujairah. Fenelon, K G: author of The Trucial States – a Statistical Survey (1969), The Trucial States – A Brief Economic Survey (1967) and The United Arab Emirates – An Economic and Social Survey (1973). Ferrostaal: in 2011 Abu Dhabi’s International Petroleum Investment Company (IPIC), sold its majority stake in Ferrostaal, a German project management company. IPIC took a loss on the sale, receiving €350 million (Dh1.71 billion) for its 70 per cent stake in the company from Germany’s lorry manufacturer MAN, which had sold it to IPIC for €450 million in 2009. A bribery scandal had erupted at the European company when an internal probe in May found it had paid close to €9 million to win business, and a further €81m was unaccounted for. Although IPIC had lost €100 million on the sale, it was pleased to distance itself from the German company according to Khadem al-Qubaisi,the managing director of. IPIC owned the Abu Dhabi Crude Oil Pipeline that connected Abu Dhabi’s

462 Habshan oilfields with the emerging crude transport hub in the northern emirate of Fujairah. IPIC also owned a stake in the Austrian petrochemicals company Borealis, which had in turn invested in the burgeoning Abu Dhabi Polymers Company (Borouge) petrochemicals complex. Ferrostaal had been a part of IPIC’s strategy to develop its footprint in the petrochemicals industry and contribute to the growth of the downstream industry in the emirate. FERTIL: established in October 1980 as a joint venture between the Abu Dhabi National Oil Company (ADNOC) and TOTAL (France), with a shareholding ratio of 2:1 respectively. The Fertil plant is located in Ruwais Industrial Zone, about 250km from the city of Abu Dhabi. Construction of a processing plant began in 1980 and production started in December 1983. The prime objective was to use the associated gas supplied from the onshore fields to manufacture industrial fertilisers and to market them locally and internationally. The plant consisted of one processing unit each of Ammonia and Urea with a production capacity of 1,300 metric tons per day (mtpd) and 2,300mtpd respectively. In early 2013, a new expansion project FERTIL-2 was completed with a capacity of 2,000mtpd Ammonia and 3,500mtpd Urea, which increased FERTIL’s production capacity and strengthened the company’s position in the global petrochemical sector. In 2013, the production of Ammonia reached 3,300mtpd and Granulated Urea 5,800mtpd. About 2 per cent of annual Urea production is marketed locally within the UAE while 98 per cent is exported to the Indian sub-continent,

NOTES Far East, Africa, USA, Latin America and Australia. First Gulf Bank (FGB): formed from the Ajman Arab Bank at one stage the FGB came to be the third largest bank by assets in the UAE. FGB is headquartered in the emirate of Abu Dhabi. First Unified Economic Agreement: in March 1983 this agreement called for the elimination of tariffs between member states. Reportedly the immediate consequence of the agreement was an increase in trade between member states. But it met with some opposition in the UAE where traders, particularly in Dubai, complained it would damage their reputation for providing the cheapest goods in the Gulf. Fischner: German engineering company that tendered for the second phase of the Taweelah power plant. Five-Year Plan 1981–85: the first of its kind to be adopted by the UAE, in 1981. Fluor Corporation: oilfield contracting company. Food and Agriculture Organisation (FAO): UN agency based in Rome. Forhistorik Museum of Aarhus: from the late 1960s a Danish archaeological team from Aarhus worked in Al-Ain and in Ras al-Khaimah. Prehistoric pottery had been found in cairns on Umm an-Nar Island (belonging to Abu Dhabi) which indicated that there were possible links with the cultures of Pakistan, Baluchistan and Persia around 3000BC. Fracking: (hydraulic fracturing) a method of extracting oil and gas trapped in shale and other rock formations. In fracking, large amounts of water are pumped down a well at high pressure, along with sand and chemicals that make up a tiny fraction of the volume. This stimulation fluid fractures the rock and

463

NOTES releases the gas or oil, which flows to the surface. In 2017 about half of US crude production was derived from fracking and some 80 per cent of the global oil production growth comes from the US. Front-line Arab states: those countries bordering, and in conflict with, Israel, viz. Jordan, Lebanon, Palestine and Syria. The establishment of full diplomatic relations between Egypt (once the most prominent member of this group) and Israel in 1980 disrupted its relations with many Arab nations. Fujairah: the only one of the UAE’s seven emirates to lie wholly on the Gulf of Oman (in the Arabian Sea), on what is known as the Batinah Coast. The emirate has an area of approximately 450sq miles (1,165sq km). Until 1952 it formed a part of Sharjah. Kalba, to the south of the town of Fujairah is a dependency of Sharjah, as are Khor Fakkan and Dibba to the north. Fujairah, like Ras al-Khaimah, has its territory split in two, and is the only one of four regions that broke away from Sharjah at the turn of the twentieth century that remains independent. Fujairah Cement Industries Company (FCI): established in the Fujairah in December 1979. FCI is a consortium of the government of Fujairah, government of Abu Dhabi, the Islamic Development Bank, and shareholders from the UAE and other GCC countries. The company’s plant is located in Dibba, Fujairah. It was supplied and erected by Voest Alpine of Austria on a turnkey basis. Al-Futtaim Wimpey: UAE/UK joint venture construction and engineering company. GASCO:

Ltd

see Abu Dhabi Gas Industries

GDP/GNP: Gross National Product (GNP) differs from Gross Domestic Product (GDP). GDP refers to and measures the domestic levels of production, whereas GNP measures the levels of production of any citizen or nationally owned entity, regardless of where in the world the actual production process is taking place. GNP also measures the compensation and investment income received by nationals working or investing abroad. GNP is less commonly referred to than GDP, but is considered by many economists to be a better measure of national output. GNP can be either higher or lower than GDP, depending on the ratio of domestic to foreign manufacturers in a given country. In broad terms, in 2016 China’s GDP was US$300 billion greater than its GNP, according to some estimates, due to the large number of foreign companies manufacturing in the country. Conversely, the GNP of the USA was US$250 billion greater than its GDP, because of the amount of US owned production taking place outside the country. Although both calculations attempt to measure the same thing, generally speaking, GDP is the more commonly used method of measuring a country’s economic activity. Galadari, A W: major Dubai trading house – named after its founder – which was generally considered to be over-extended in the early 1980s. Press comments suggested that A W Galadari’s large loans on its Dubai property portfolio, which included the Hyatt Regency Hotel and the Galadari Galleria, had almost been paid off by the mid-1980s. However, in 1984 Mr Galadari’s business empire crashed. He was forced to resign as chairman of the Union Bank of the Middle East (UBME), one of the largest banks in the UAE, which he had

464 founded six years earlier. The Galadari company had invested widely abroad, including in a hotel in Sri Lanka. Its subsidiary, A W Galadari Commodities, had extended its operations to Abu Dhabi in 1983. However, it soon became clear that the UBME had been used by its founder to fund and build up his commercial empire. This caused problems for UBME (capitalised at Dh1.0 billion). By November 1984 it was clear that UBME could not meet the Central Bank lending requirements since some 30 per cent of its total lending had been made to Mr Galadari himself. The UBME was eventually rescued by the government of Dubai, which took a 73 per cent holding in the bank. Gas Exporting Countries Forum (GECF): an international governmental organisation providing a framework for exchanging experience and information among its member countries: Algeria, Bolivia, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Qatar, Russia, Trinidad and Tobago, United Arab Emirates and Venezuela. Azerbaijan, Iraq, Kazakhstan, the Netherlands, Norway, Oman and Peru have Observer Member status. General Authority of Islamic Affairs and Endowments (GAIAE) (AWQAF): chairman (June 2017) Dr Mohammed Matar Salem bin Abid al-Kaabi. The authority works on promoting religious awareness, developing mosques and Quranic centres, producing Fatwas, managing Hajj and Umrah, developing Waqf and promoting innovative systems for community welfare. General Holding Company (GHC): (aka Senaat) one of the UAE’s largest industrial investment holding companies, mandated by the Abu Dhabi government to ‘create, optimise, promote and champion capital-intensive

NOTES assets’. As a key contributor to Abu Dhabi’s Economic Vision 2030, Senaat operates in four of the main industrial sectors listed in the vision through its portfolio companies. These are metals; oil and gas services; construction and building materials and food and beverages manufacturing. General Industries Corporation (GIC): the company’s assets were taken over in 2004 by the General Holding Company (GHC) with a view to their eventual privatisation. General Petroleum Corporation: established in 1981, renamed Emarat in 1996. General Treaty for the Cessation of Plunder and Piracy: drawn up in 1819 and signed in 1820, this was the first treaty to impose an obligation on any part of Arabia and it imposed the first of the three commandments which governed relations between Britain and the Trucial States: Thou shalt not commit piracy against British shipping. General Water Organisation: The UAE’s GDP and purchasing power rank it among the wealthiest nations in the world. However, since its first census, conducted in 1968, the population has increased more than 40-fold creating a barely sustainable demand for water. Geography/Topography: the boundaries of the UAE’s sheikhdoms resemble a jigsaw puzzle. The total area of what was once known as the Trucial Coast extends to around 82,890sq km (32,000sq miles) and comprises two distinct regions – the eastern mountainous region and the western desert area. The mountain zone is roughly eighty kilometres from north to south and twenty miles across. It forms part of the al-Hajar range (mostly in Fujairah).

NOTES Ghasha: geological structure (in part of the ADMA-OPCO onshore area) which it was hoped could eventually produce an estimated 200,000bpd of oil, as well as considerable quantities of gas. Ghobash, Omar Saif: (b. 1971) UAE diplomat (and author), appointed UAE minister for economy and commerce in 1990, appointed ambassador to Russia in February 2009 and to France in 2017. al-Ghurair: Dubai family with extensive business interests including the National Cement Company Gibb: see Sir Alexander Gibb and Partners Gold: by 1970 an estimated 250 tons of gold passed through Dubai each year, making it the emirate’s most prosperous trade, ahead of oil. Most of the gold was smuggled to India. On the back of the gold business, the number of banks operating in Dubai rose from one in 1963 to twelve in 1970. Government-related entities (GRE): a legal entity formed to undertake commercial activities on behalf of its government owner. A GRE’s legal status may vary; there is no standard definition. The defining characteristic is that they have a distinct legal form and they are established by the UAE authorities to operate in commercial affairs. Gray Mackenzie: Gray, Dawes and Company, London agents of the British India Steam Navigation Company Limited, established Gray, MacKenzie and Company as a partnership in Basra, Iraq, in 1869. In common with its associated firm, Gray, Paul and Company (launched by Gray, Dawes in Bushire, Persia, in 1865), Gray, MacKenzie and Company acted as shipping agent for British India steamers sailing between India, the Gulf ports and Europe. The business quickly

465 expanded into the import of British and Indian goods (including cotton, coffee, guns and rice) and the export of silk, wood, specie, oilseeds and, especially, dates. Gray Mackenzie also operated as insurance agents, lighterage contractors and ship repairers. From the 1860s onwards, branches of Gray, Paul and Company opened at Bandar Lingah, Bandar Abbas (both in Persia) and Bahrain, while Gray, MacKenzie and Company established an offshoot at Mohammerah (modern Khorramshahr) in Iraq. In 1920, it was decided to continue more closely earlier co-operation with the shipping agents Lynch Brothers Limited, by combining the resources of all three firms (Gray, MacKenzie and Company, Gray, Paul and Company, and Lynch Brothers Limited) as the Mesopotamia Persia Corporation Limited. Earlier joint activity had included the formation of the Persian Transport Company to operate a concession on the River Karun in Persia and proposals to launch the Ottoman River Navigation Company on the Tigris and Euphrates rivers in Iraq. The new corporation took over the entire operations of Lynch Brothers Limited and secured a monopoly of navigation rights on the Tigris and Euphrates rivers from the Imperial Ottoman government. Mutual co-operation ended in 1936 when the component firms reverted to their separate identities. Gray, MacKenzie and Company and Gray, Paul and Company were thereupon transformed into one limited liability company registered in Britain – Gray, MacKenzie and Company Limited. The new company increased the number of its branches and its dealings in local produce and mail. It was also active in the expanding oil industry of the region. Gray, MacKenzie

466 later developed as an important port manager and operator in the Gulf into the 1970s, providing technical engineering services for oilfield supply bases. In the second half of the twentieth century, Gray Mackenzie continued to support the ambitious growth of Dubai and opened its new headquarters in the emirate. Maritime business boomed as oil tankers and offshore wells provided new opportunities. In 1983 Gray Mackenzie changed its name to Maritime and Mercantile International LLC (MMI), following government legislation requiring that all agents and trading companies’ business names accurately reflected their trade. Guggenheim Museum: the October 2012 announcement that plans for an Abu Dhabi Guggenheim museum were on hold was followed by the announcement of the project’s cancellation. The museum, designed by the US architect Frank Gehry, would have been on Saadiyat Island. It would also have been one of the biggest building projects in the Middle East. The plans for the museum were first announced in 2006, when Abu Dhabi’s crown prince modestly claimed that the project would set the benchmark for museums. Work on the site had begun in 2009 but in mid-2012 it was reported that the government-owned Tourism Development and Investment Company (TDIC) had recalled the tender for the concrete works, and returned bids to contractors. The TDIC later confirmed that the museum’s 2013 opening date had been put back, due to the ‘immense magnitude’ of the work, and then, in mid-October, that the project had been cancelled.. Gulbenkian: through its oil industry subsidiary Partex, Gulbenkian has been

NOTES involved in Abu Dhabi’s oil and gas industry since 1939. According to company sources, Calouste Gulbenkian was instrumental in putting the Emirate of Abu Dhabi in touch with international oil companies to establish the joint venture to exploit the onshore concession that was later designated as the ADCO Concession. In spite of being a minority shareholder, Partex often saw itself as a mediator among the major companies. Gulf: Term generally used to refer to the Arabian Gulf – Al-Khaleej al-Arabi. Iran calls it the Persian Gulf. Arabian Gulf is adjectivally used to describe the coastal states of the Arabian Peninsula (Kuwait, Qatar, Bahrain, the UAE and Oman). The United Nations and other international bodies have traditionally used the Persian Gulf (Khalij-e Fars) as the accepted term. That had also been the official position of the USA and many other countries, a state of affairs that appeared to be changing in the twenty-first Century. Gulf Air: Bahrain based airline and national carrier of the Kingdom of Bahrain. Gulf Aviation (later Gulf Air), commenced operations in 1950, becoming one of the first commercial airlines established in the Middle East, in which the government of Abu Dhabi was originally a shareholder alongside Bahrain, Qatar and Oman. In 2005 Abu Dhabi sold its shareholding in Gulf Air coinciding with the launch of its own airline Etihad. Similarly Qatar had sold its shareholding in 2002 and Oman in 2007, as each launched its own national carrier. In 2016 Gulf Air served 42 cities in 25 countries in three continents. Gulf cease-fire: term often used to describe the cessation of hostilities between Iran and Iraq in August 1988

NOTES Gulf Co-operation Council (GCC): A regional Co-operation body established in 1981 and headquartered in Saudi Arabia (Riyadh) with the objectives of improving the co-ordination, integration and inter-connection between the member states (Bahrain, Kuwait, Oman, Qatar (membership suspended in 2017), Saudi Arabia and the UAE) in order to achieve greater unity between them. The GCC’s emphasis is on economic and financial affairs, commerce, customs and communications and education and culture. In late-2017 the UAE announced the creation of a new political and military alliance with Saudi Arabia, questioning the founding principles of the GCC. The announcement, made at a GCC summit in Kuwait represented a hardening of the dispute between Qatar and the UAE, Bahrain and Egypt (which is not a GCC member). The dispute had seen Qatar isolated by a land, sea and air blockade. Saudi Arabia and the UAE (allies in the Yemen civil war) had accused Qatar of funding terrorism, supporting and funding the Muslim Brotherhood and Hamas. The Saudi-UAE alliance – no more than a committee in mid-2018 – was perceived as an alternative, or possibly a substitute, to the often ineffectual, GCC. Gulf crisis: somewhat vague term used to refer to the events surrounding and following the Iraqi invasion of Kuwait in 1991. Gulf International Bank (GIB): established in Bahrain in 1975, and commenced operations in 1976. GIB opened representative offices in Abu Dhabi in 1990 (which became a full wholesale commercial branch in 2015). Gulf Oil Corporation – Ras alKhaimah: owned 10.61 per cent by

467 Taiwan’s Overseas Petroleum and Investment Corporation, 8.66 per cent by International Petroleum owned by Swedish entrepreneur Adolf Lundin, with the remaining shares owned by Petrokal (of Libya) and Wintershall (Germany). During 1987 the US oil company Gulf Oil sold its 50.46 per cent stake in the Ras al-Khaimah field. Gulf of Oman: the westernmost part of the Arabian Sea, situated between Iran to the north, Oman and the UAE to the south. The Gulf of Oman is a strategically important maritime thoroughfare for the region’s oil exports. Gulf Organisation for the Development of Egypt (GODE): Gulf donors (including the UAE) had rescued Egypt’s solvency with loans of U$2.6 billion in 1975 and US$1 billion in 1976. The GODE was established in mid-1976 with US$2.6 billion to finance long-term projects over five years. The shareholders were the governments of Saudi Arabia (40 per cent), Kuwait (35 per cent), the UAE (15 per cent) and Qatar (10 per cent). In the second half of 1976 the GODE granted Egypt only US$250 million. In late 1977 the GODE agreed to make US$550 million in cash payments to Egypt. The signature of the Egypt-Israel Peace Treaty in 1979 resulted in the economic and political isolation of Egypt from most Arab states. The loss of aid from the Gulf states and the GODE also resulted in Egypt ceasing to pay interest on existing loans totalling about US$2,000 million. Gulf Organisation for Industrial Consulting (GOIC): founded in 1976 by the Gulf Co-operation Council (GCC) member states (UAE, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait, and – in 2009 – Yemen). A regional organisation created

468 to achieve industrial co-operation and coordination between GCC member states. Headquartered in Doha, Qatar. Gulf States: a term generally understood to include, Bahrain, Kuwait, Qatar and the UAE. It can sometimes also include Oman, but not generally Saudi Arabia, although both these countries are members of the GCC. Gulf War: hostilities between Iran and Iraq which lasted from 1980 to 1988. The cease-fire, in August 1988, provided the UAE with a new sense of security. Gulfa Mineral Water Company: mineral water extracted from springs in Ajman. Production started in 1975 when Gulfa became the first brand of bottled mineral water in the GCC. Gulfa water has established itself as a household name throughout the region. The source is in Mafout, in Ajman. Gwadur: (aka Gwadar) a Pakistani coastal city in the south-western region of Baluchistan. Following a period of Portuguese sovereignty, Muhammad bin Qasim captured Gwadur in the sixteenth century. For some time Gwadur was also contested by the Moghuls from the east and the Safavids from the west. This era was considered as an era of Islamic rule in the history of Gwadur. After years of Omani rule, Pakistan purchased Gwadur from Oman for US$3 million dollars in September 1958 and Gwadur officially become part of Pakistan. In July 1977 the Pakistani government integrated Gwadur with Baluchistan. Habshan: an area in the south-western part of Abu Dhabi containing a major oil and gas field operated by the ADCO and GASCO companies. Habshan is also a major production area for sulphur, a

NOTES by-product of the oil industry. It is also the terminal station of a new railway network in the United Arab Emirates developed by Etihad Rail. Commercial operations on this railway commenced in December 2015. Haftar, Khalifa: Libyan field marshal commanding the (so called) Libyan National Army. In 2017 the UAE supplied US-made warplanes to General Haftar’s forces, which were fighting against the US and UN-backed Tripoli government. The UAE initiative violated American policy on Libya and a UN arms embargo aimed at stopping the flow of weapons which have sustained the civil war. Hair Dalma: offshore oilfield just east of Dalma Island Hajar Mountains: mostly situated in Fujairah, the name is translated as the ‘stony’ or ‘rocky’ mountains. The highest mountain in the Hajar range, Jebel Shams (Mountain of the Sun), is 3,009 metres. Ham: Abu Dhabi family whose Ham agglomeration, head-quartered in Al-Ain is involved in a wide range of business activities including real estate, foreign exchange, hospitality, education etc. al-Hamar, Abdul Malik: (b. 1935) a Bahraini national, Mr al-Hamar served as an under-secretary at the UAE ministry of education 1971–73. Later appointed an ambassador at the ministry of foreign affairs, then becoming the managing director of the United Arab Emirates Currency Board, 1978–80. Appointed governor of the Central Bank of United Arab Emirates on its creation in 1980. Hamas (aka Harakat al-Muqawama al-Islamia (Islamic Resistance Movement): Hamas is the largest and probably the most influential Palestinian militant movement.

NOTES Hamas evolved from the Muslim Brotherhood, the religious and political organisation founded in Egypt by the organisation’s spiritual leader, Sheikh Ahmed Yassin. Yassin founded Hamas as the Muslim Brotherhood’s local political arm in December 1987, following the eruption of the first intifada, a Palestinian uprising against Israeli control of the West Bank and Gaza. In its early years Hamas divided its strategy into social programmes – schools, hospitals etc – and a militant offensive carried out by its Iss al-Din Qassam Brigades. In the reign of Jordan’s King Hussein (1952–99), Hamas was headquartered in Jordan, but his successor, King Abdullah II, had the movement’s headquarters closed, causing the leadership to move to Qatar. In January 2006, Hamas won the Palestinian Authority’s (PA) general legislative elections, defeating Fatah, the party of the PA’s president, Mahmoud Abbas. Following the Gaza elections, Ismail Haniyeh, the Hamas prime minister and senior figure in Gaza, often appeared at odds with Khaled Meshal, Hamas’s overall leader living in Syria. Hamas has refused to recognise Israel, instead carrying out suicide bombings and attacks using mortars and short-range rockets. Hamas has launched attacks in the Palestinian territories of the West Bank and Gaza Strip. In Arabic, the word ‘hamas’ means ‘zeal’. Hamouda, Hamouda bin Ali bin Ghamin: (b. 1940, d. 2001) appointed UAE minister of the interior in 1991, Mr Hamouda served as a special adviser to Sheikh Zayed bin Sultan Al-Nahyan, the UAE’s first president. He also held the rank of General in the UDDF. Hamra: desert area, 320km east of Abu Dhabi.

469 Hamra-Krouha, Mahmoud: appointed general manager of the Abu Dhabi National Oil Company (ADNOC) in 1974 after holding senior posts with Algerian government-owned Sonatrach. Mr Hamra-Krouha – an Algerian – resigned his post in 1987 citing medical reasons. In 1983, Mr Hamra- Krouha had admitted that the company had been selling crude from the Upper Zakum field at US$28 a barrel, one dollar below the official US$29 a barrel price for similar Arabian light. Mr Hamra-Krouha was eventually succeeded by his deputy, Suhail Mazroui. The move was seen as a response to government exhortations to replace expatriate staff, where possible, with qualified nationals. Mr Hamra-Krouha’s fate was sealed when it emerged that he had taken the initiative of allowing the Upper Zakum field to be developed by ADNOC-hired contractors in the 1970s. In the event, ADNOC had to spend US$7 billion on the development of Upper Zakum, a very complex structure which required highly qualified companies and advanced technology not normally available to ADNOC. The field’s production declined considerably in the first half of the 1980s and Mr Hamra-Krouha was seen as responsible for the huge loss. This coincided with the slump in oil prices and oil glut that began in 1982. Hamriyyah: a free zone in the city of Sharjah established in November 1995. The Free Zone is 24sq kms in area with a 14 metre deep port and seven metre deep inner harbour. Hamza, Kamal: director of the Dubai Municipality from 1961 to 1985. He replaced Mr Ali al-Bustani who had held the position from 1957. Mr Hamza signed the historic order in August 1966 for road

470 traffic in Dubai to switch from driving on the left to the right hand side of the road. Harakat al-Muqawama al-Islamia (Islamic Resistance Movement): see Hamas Hawala: the original name of the Qawasim. Hernu, Charles: French defence minister who visited the UAE in May 1976. Higher Colleges of Technology (HCT): established in 1988, the HCT soon became one of the largest institutions of higher learning in the UAE. (In the 2015–16 academic year there were 14,829 female and 8,644 male students enrolled at 17 campuses throughout the country). In 2017 over 55,000 UAE nationals were graduates of the institution. English is the language of instruction, with faculty recruited from around the world. Hili: archaeological park – the location of a Bronze Age site near Al-Ain. Hiwar (Dialogue): an internet forum closed by the UAE authorities in November 2012. Hochtief: German engineering and construction group. Hodaryat Island: in 1989 Abu Dhabi was planning to extend the city of Abu Dhabi beyond the Maqta bridge. The expansion was to include building other bridges to Hodaryat and Saadiyat islands and developing the infrastructure of these islands. Hongkong and Shanghai Banking Corporation (HSBC): see British Bank of the Middle East. Hormuz: historically a Persian entrepôt on the coast facing the UAE and which gave its name to the narrow strait at the foot of the Arabian/Persian Gulf. According to the United States Energy Information Administration (EIA) the Strait of Hormuz is the world’s most

NOTES important oil chokepoint due to its daily oil flow of almost 17 million barrels per day (bpd) in 2011, up from between 15.5–16.0 million bpd in 2009–10. Horn of Africa: a strategically important region through which a large proportion of the world’s oil supply passes daily. The Horn of Africa is a peninsula in East Africa lying along the southern side of the Gulf of Aden and the south-west Red Sea. Houston Oil & Minerals: US drilling company which in the mid-1970s signed a 35-year onshore exploration agreement in Dubai. Houthi: (aka Ansar Allah – Supporters of God), is a principally Shi’a (Zaidi sect) Islamist movement from northern Yemen. The name Houthi comes from the leadership of Hussein Badreddin al-Houthi. The Houthis were originally a grouping opposed to the rule of former Yemeni President Ali Abdullah Saleh whom they accused of corruption and of being a US lackey. Mr Hussein was killed by the Yemeni army in a 2004 Houthi insurgency, led by Mr Hussein’s brother Abdul-Malik. The Houthi’s war-cry is simple enough ‘God is great, death to the US, death to Israel, curse the Jews, and victory for Islam.’ The Houthis participated in the 2011 Yemeni Revolution and participated in the GCC sponsored National Dialogue Conference. However they rejected the outcome, opting for an alliance with former President Saleh. With the support of Iran, the Houthis soon controlled Sana’a and much of North Yemen. Since 2015 Houthi forces have been resisting the Saudi-led coalition within which UAE forces have played a significant role. Human Rights Watch (HRW): founded in 1978 as the Helsinki Watch

NOTES (a reference to the 1975 Helsinki accords which announced that ‘the participating States will respect human rights and fundamental freedoms’) is an international non-governmental organisation, headquartered in New York (USA) that conducts research and advocacy on human rights. Hunting Surveys: a UK aerial survey company, formed in 1937 and which ceased trading in the mid-1980s. The company was responsible for the first road map of the UAE (1981) as part of a road map covering most of the Arabian Peninsula. Hyundai Engineering and Construction: Korean based company with extensive activities in the Middle East, notably in the Gulf. Idemitsu: a Japanese oil company that set up liaison offices in Abu Dhabi in the late 1980s. International Defence Exhibition and Conference (IDEX): a biennial arms and defence technology sales exhibition held in Abu Dhabi. According to Jane’s Defence Weekly website, IDEX is the largest arms exhibition in the Middle East. Imperial Airways: an early British commercial long range air transport company, operating from 1924 to 1939 and serving parts of Europe but especially routes to South Africa, India and the Far East. Imperial was formed by the amalgamation of a number of small airlines. The British Marine Air Navigation Company contributed three flying boats to establish a London-Australia flight which used facilities at Sharjah where the al-Mahatta fort was used as a rest house for passengers. The service ceased with the outbreak of the Second World War.

471 India: in the late eighteenth century British influence gained strength in India through the trading and administrative influence of the East India Company which pertained until 1858. From then on all diplomatic and administrative contacts were conducted by the Government of Bombay acting for the British Crown. This arrangement ceased in 1873 when the responsibility passed to the Government of British India. Following India’s independence in 1947 contacts were made through the Foreign Office in London or through the British High Commission and its Consulates in India. Indus Valley: in prehistoric times an advanced civilisation grew up along the valley of the Indus, the longest river of Pakistan. Archeological finds suggest that there were trading links between the Harappan Civilisation (so named after Harappa, the first site to be excavated in the 1920s, in the Punjab) and that of Mesopotamia. This established the Arabian Gulf as an important trading link between the two civilisations. Information ministry: The ministry was first established in 1972 under the name of the ministry of information and culture. In 2006, the ministry of information and culture became the ministry of culture, youth and community development. In February 2016 the Council of ministers issued a decision to add some specialties and change the ministry’s name to the ministry of culture and knowledge development. Inpex: Japanese oil company. Inpex was awarded a 5 per cent onshore oil concession in April 2015. International Finance Corporation (IFC): the private sector arm of the World Bank, offering investment, advisory, and asset management services to

472 encourage private sector development in developing countries. Established in 1956 and headquartered in Washington, DC. International Monetary Fund (IMF): the International Monetary Fund (IMF) is an organisation of 185 countries, ‘working to foster global monetary Co-operation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.’ The IMF came into existence in 1944 to meet the challenge of rebuilding national economies after the end of the Second World War. As the post-war reconstruction phase came to an end, the IMF became charged with overseeing the international monetary system to ensure exchange rate stability and encouraging members to eliminate exchange restrictions that hinder trade. International Petroleum Corporation (IPC): a Canadian oil company active in the 1980s in Ras al-Khaimah. International Petroleum Investment Company (IPIC): IPIC was established in 1984 and is wholly owned by the Abu Dhabi government. Its investment strategy includes the crude oil downstream sector, petrochemicals, oil, product and gas pipelines, the oil services sector, the hydrocarbons shipping sector, the hydrocarbon based power sector and other hydrocarbon intensive process industries. One of its longest standing investments is its stake in the Spanish refinery operator CEPSA, increased from 9.5 to 12 per cent in mid-1989. Investment Corporation of Dubai (ICD): a sovereign wealth fund with stakes in a number of important major Dubai-based corporations. The ICD announced a 3.8 per cent year-on-year fall in net profits for 2015 to Dh22.9 billion

NOTES (US$6.2 billion) in June 2016. The decline was largely attributed to the decline in revenue from oil and gas and services, to less than Dh50 billion, from Dh71.2 billion in 2014. Dubai was not alone in this respect – Abu Dhabi’s Government Related Entities (GREs) were also affected by reduced spending. However, Abu Dhabi’s GREs had much lower debt obligations (30 per cent of GDP) than their Dubai counterparts (140 per cent). In 2009 the ICD had found itself in the embarrassing position of needing to borrow US$6 billion to stay in business. Iran: in geopolitical terms, during the period covered by the first 43 years of the Middle East Review, and following the deposition of the ruling Shah Mohammad Reza Pahlavi (aka Mohammad Reza Shah), after the 1979 revolution (see below) Iran moved away from its relatively cosy relationship with the Western US influenced camp, forming strategic alliances with Shi’a groupings such as Hamas and Hezbollah. These it saw as posing a threat both to incumbent (largely Sunni) Arab regimes as well as to the US and Israel. The UAE’s relationship with Iran is both symbolised and influenced by the high volume of the two countries’ bilateral trade and traditionally friendly relations. Informal consultation between the two countries has existed for some time, despite the January 2016 recall of the UAE Ambassador in Tehran following attacks on the Saudi Arabian Embassy in Iran. Iran, 1979 revolution: In the 1960s Shah Mohammad Reza Pahlavi (aka Mohammad Reza Shah) set about the modernisation and Westernisation of Iran with the White Revolution, a programme of land reform and social and economic modernisation. However,

NOTES the lack of representative democracy in Iran lost the Shah his authority and legitimacy, making him dependent on the secret police (SAVAK) in confronting those opposition movements critical of his reforms. In 1978 the Shah’s policies appeared to have alienated the clergy and his increased authoritarian rule lead to social disorder and eventually to strikes and mass demonstrations. Martial law was imposed in September 1978 but before long the Shah and his family were forced into exile. In February 1979 the iconic Islamic fundamentalist, Ayatollah Ruhollah Khomeini, returned to Iran after 14 years of exile in Iraq and France and in April 1979 the Islamic Republic of Iran was proclaimed following a referendum. Iran-Iraq war: in September 1980 Iraq invaded Iran, starting an eight-year war. Iraq, under Saddam Hussein claimed that the reason for the invasion was a territorial-maritime dispute over the Shatt al-Arab, the waterway which formed the boundary between the two countries. This was dismissed by most observers, who saw the conflict as rooted in regional and religious rivalry between the two countries. For Saddam Hussein, the Iraqi objective was to overthrow Iran’s Khomeini regime before that regime could overthrow him. Saddam’s hopes that he could achieve a quick victory were misplaced. The war dragged on until 1988, with an estimated death toll of a million for Iran and between 250,000 and 500,000 for Iraq. Iraq Petroleum Company: originally known as the Turkish Petroleum Company (TPC). At the outbreak of the First World War in 1914, the British-government, through the government

473 controlled Anglo-Persian Oil Company, had acquired 50 per cent of the shares of TPC. Britain was seeking the approval of the Turkish government to grant the Anglo-Persian Oil Company a concession in Iraq, but this had to be put on hold until the end of the war. TPC began exploratory drilling after the war once agreement was reached with the Iraqi government. Oil was discovered near Kirkuk in October 1927. In 1929 the TPC was renamed the Iraq Petroleum Company (IPC). In 1937 some of the rulers of the (then) Trucial States granted concessions to Petroleum Concessions Ltd, an associate company of the IPC. Iraq – Invasion of Kuwait: At an Arab summit of May 1990, Iraq’s President Saddam Hussein had singled out the oil production policies of Kuwait and the UAE as an act of war against Iraq. In January 1991 Iraqi military forces invaded Kuwait without warning. A military coalition led by the United States, was formed to eject the Iraqis, made up of other Arab nations, the USA, the UK and France (after some hesitation). The invasion lasted for 43 days, until the end of February 1991. al-Islah: an Islamist grouping that can trace its presence in the UAE back to the 1970s, when Egyptians were first recruited to work as teachers in the Trucial States. A number of those who arrived were disaffected members of the Muslim Brotherhood. They began to recruit not only young Emiratis, but also immigrants from other Middle Eastern states. In the period following the Arab Spring in 2011, it appeared that al-Islah and the Muslim Brotherhood in Egypt were attempting to destabilise the United Arab Emirates. In a police

474 operation by Saudi Arabian and Emirates forces, 11 Egyptian expatriates in the UAE were arrested on charges of subversion, stealing state secrets and belonging to the the Egyptian Muslim Brotherhood. Later, in March 2013, a trial began in Abu Dhabi of 94 individuals linked to al-Islah for what was described as an attempted coup in 2012. The high profile hearing attracted the attention of Emirati civil society groups, and human rights organisations criticised the secrecy of the trials. In July 2013 a verdict was issued in the trial of the 94; 56 received prison sentences ranging between three and ten years. Eight were sentenced in absentia to 15 years in jail and 26 were acquitted. In March 2014 the Muslim Brotherhood was classified a terrorist group by the UAE government. The alleged leader of the 2012 plot to overthrow the UAE government was Sheikh Sultan bin Kayed al-Qasimi. Sheikh Sultan was a cousin of the Ras al-Khaimah ruler and a member of one of the UAE’s seven ruling families. His fellow accused included three judges, two human rights defenders, lawyers, teachers, academics as well as students. Italconsult: Italian firm of engineering consultants with an office in Abu Dhabi. The company’s projects have included the Medinat Zayed to Ghayathi Road, south Shamka infrastructure, fibre cable infrastructure and the department of customs headquarters. Islamic Development Bank (ISDB): headquartered in Saudi Arabia the membership of the Bank consists of 56 countries. The UAE has a 7.54 per cent shareholding. Saudi Arabia is the largest shareholder with 26.57 per cent. A condition for membership is that the prospective member country should be a

NOTES member of the Organisation of Islamic Co-operation (OIC). Al-Ittihad: government owned newspaper (the title translates as ‘Gulf’) launched in 1969, initially as a weekly with a print run of 5,000. By April 1972 al-Ittihad was being published seven days a week and in 1981 it began printing in Dubai. Janata Bank: second largest commercial bank in Bangladesh. Stateowned with four branches in the UAE: Abu Dhabi, Al-Ain, Dubai and Sharjah. Japan Gasoline Company (JGC): founded in 1928 the company changed its name in 1976 to JGC Corporation. In the UAE, JGC has two major plants, one completed in 2004 for a 350,000bpd plant for ADCO in Bab (Abu Dhabi), the other in Habshan (also in Abu Dhabi) for a 2,150 million Standard Cubic Feet per Day (SCFD) facility for GASCO. Japan Line: in 1972 the Japan Line reached an agreement with Abu Dhabi for the disposal of almost all the participation crude which the government expected to receive from ADMA and ADOC under the 1972 OPEC agreement. Under the agreement Japan Line agreed to purchase 730 million barrels of crude oil over eight years. In return Abu Dhabi was to participate in a joint venture with Japan Line to own and operate 18 tankers ranging from 200,000–260,000dwt. Japan Oil Development Company (JODCO): established in 1973 with capital provided by nine major oil companies. The ADMA concession originally purchased by the Overseas Petroleum Corporation was ceded to JODCO and further capital was provided by the Japan Petroleum Development Corporation. In 1978 agreement was reached with ADNOC to

NOTES develop the Upper Zakum field; agreement was also reached in 1978 with ADNOC to develop the Umm al-Dalkh structure. In 1980 agreement was reached with ADNOC to develop the Satah, Jarnain and Dalma structures. Production from the Upper Zakum field started in December 1980. In 1985 production from the Umm al-Dalkh field got under way followed by the Satah field on 1987. In 1993 the landmark figure of one billion barrels of crude oil sold was celebrated followed by the two billion figure in 2004. In 2014 the extension of the Upper Zakum field and production from the Umm Lulu field began, and in 2015 production from the Nasr field began. Japanese Overseas Petroleum: company established in 1970 to acquire oil and natural gas interests and invest in oil and gas exploration, production and development activities. Since 2005 the company has been a subsidiary of Mitsui and Co Ltd. Jarnain: (the name is shared with a small offshore island) oil and gas field discovered in 1978 in the area of the Rub al-Khali desert belonging to Abu Dhabi. In 1980 ADNOC and the Japan Oil Development Company signed a US$700 million dollar agreement to develop the Jarnain and two other fields. Jarn Yaphour: in late 2008, Occidental Petroleum won the first concession offered in decades, earning the right to develop the Jarn Yaphour and Rahman oilfields. al-Jarwan, Jamal Saif: appointed secretary general of the UAE International Investors Council in November 2014. Saif played a prominent part in the development of the UAE’s telecommunications sector, joining Etisalat in 1988. In 1990 he

475 was appointed representative on the Supreme Council responsible for the ministry of labour and social affairs. Later, in 1996, he joined Thuraya Telecommunications Company returning to Etisalat in 2006 where he lead the International Investments Division until 2011 when he was appointed chief regional officer for the Asia region until leaving in March 2014. Jawasmis: (aka – Qawasim) the name of the tribe predominant along the Arabian Gulf’s coast between Qatar and Ras al-Musandam. In 1800 the Jawasmis converted to the Wahhabi interpretation of Islam. Al-Jazeera: a Doha (Qatar) based state-owned news broadcaster largely funded by Qatar’s al-Thani family. Launched in 1996 following the decision of the BBC (London) not to continue with its regional Arabic language television news service. Many former BBC staff were recruited by Al-Jazeera and in 2003 the two broadcasters signed an agreement to share certain facilities. Al-Jazeera officials have claimed that although based in Doha the broadcaster is editorially independent from the government of Qatar. Jebel Ali: a port area 35 kilometres (22 miles) south-west of Dubai. The Jebel Ali Port serves the UAE and the al-Maktoum International Airport has been constructed just outside the port area. The area’s most important development is the Jebel Ali Free Zone established in 1985. The free zone enables international companies to relocate and benefit from the special privileges of the free zone, including exemption from corporate tax for 50 years, no personal income tax, no import or re-export duties, no restriction on currency, and easy

476 labour recruitment. Jebel Ali is reportedly the port most frequently visited by ships of the United States Navy outside the United States. Jebel Dhanna: oil terminal, some 180km west of Abu Dhabi Jebel Hafeet: at 1,240 metres (4,000 feet) the emirate of Abu Dhabi’s highest peak, and the UAE’s second highest. The rocky outcrop is close to Al-Ain and borders Oman. Joannou and Paraskevaides (J&P): Cypriot construction firm founded in 1941 and active in the UAE since independence. Projects included the Dubai-Fujairah Freeway and the Ras al-Khor flyover crossing in Dubai. Jotun Dubai: Norwegian paint manufacturer which opened a manufacturing facility in Dubai in 1975, its first in the Middle East. Kakaif (Sharjah): gas deposits found at Kakaif were due to enter the full extracting phase and profitability in 1997. Kalba: a town in Sharjah on the Gulf of Oman coast north of Oman and south of Fujairah. Khor Kalba (Kalba Creek) is now a nature reserve to the south of the town by the Omani border. Kalba was captured by the Portuguese in the sixteenth century and was referred to as Ghallah. Re-taken, it was eventually overrun by the Sultan of Muscat’s forces in 1811 in the British/Omani campaigns against the maritime forces of the al-Qasimi. Kalba was an independent Trucial State from 1936 to 1951 before being re-incorporated into Sharjah. Keang Nam Enterprises: South Korean construction company specialising in housing development and civil engineering projects. In 2017, amid bribery scandals, the company’s chairman

NOTES committed suicide and the loss-making company was delisted by the Korea (stock) Exchange, subsequently going in to receivership. Kellogg Brown & Root (KBR): see Brown & Root. Kenya: East African republic. In June 1982, it was announced that Kenya was to become the third non-Arab African state to have full diplomatic relations with the UAE. Niger and Gabon were the others. Khalfan, Dhahi: in a January 2013 trial, Mr Dhahi, Dubai’s chief of police, maintained that all the Gulf states faced an existential threat in the form of Egypt’s Muslim Brotherhood. The group from which most of the defendants came, al-Islah (Reform), did not hide its ideological sympathies with Egypt’s ruling Islamist group. al-Roumi, Ohood Khalfan: appointed minister of state for happiness in the 2016 UAE Cabinet. The new ministry aimed to promote happiness of UAE society. Ms al-Roumi was also director general of the UAE prime minister’s office. She also oversaw, inter alia, strategic initiatives such as UAE Vision 2021, the National Agenda, UAE government strategy and the National Strategy for Innovation. Additionally Ms al-Roumi was the vice president of the World Government Summit Organisation. She had formerly held several positions within the government of Dubai and the federal government. Elsewhere the UN Foundation had selected her for membership of the Global Entrepreneurship Council (GEC), making her the first Arab member in the council. Khalid Lagoon: an artificial lagoon of 172,000sq hectares of water surface in Sharjah.

NOTES Khalidi, Walid: distinguished Palestinian historian, general secretary and co-founder of the Institute for Palestine Studies, established in Beirut in December 1963. Khalifa Industrial Zone Abu Dhabi (KIZAD): in its efforts to achieve economic diversification by 2030, the Abu Dhabi government opened the KIZAD project in 2012. It is located on a greenfield site in Taweelah (next to the Khalifa Port). It was Abu Dhabi’s first industrial free zone offering 100 per cent foreign ownership. By 2030 KIZAD is expected to contribute some 15 per cent of Abu Dhabi’s non-oil gross domestic product (GDP). Close to Khalifa Port, the KIZAD is almost equidistant between Abu Dhabi and Dubai. The Abu Dhabi government plans to build a road from KIZAD to Al-Ain. It is anticipated that 60–80 per cent of the goods manufactured within the KIZAD will be exported. Khalij: Arab word for ‘Gulf’ as in ‘Khalij al-Arabi’ (‘Arabian Gulf’) rather than ‘Khalij al-Farsi’ which would mean ‘Persian Gulf’. Al-Khaleej: A Sharjah based Arabic newspaper owned by the Taryam family. Al-Khalij Commercial Bank: Qatari owned bank with (2016) four branches in the UAE. Khamenei, Sayyid Ali Hosseini: the second and (2018) current Supreme Leader of Iran. Elected in June 1989 after the death of the first Supreme Leader, the iconic Ruhollah Khomeini. As Supreme Leader, Khamenei is effectively the head of state of Iran and the commander-in-chief of its armed forces. He is also empowered to make final decisions on the economy, the environment, foreign policy, national planning, and virtually everything else in Iran.

477 Khansaheb Civil Engineering Co: founded in 1935, the company is thought to be the oldest local contractor in the UAE. Khazzan: Arabic word meaning ‘container’ from which the English ‘magazine’ is derived. In oil industry, Khazzans, unique to Dubai, are submersible marine crude oil storage units. They have no base, so that when oil (which is lighter than sea-water) is pumped into the top seawater is forced out at the bottom. Khor Dubai: see Dubai Creek. Khor Fakkan: (aka Khorfakkan) is a Sharjah enclave town located along the Gulf of Oman on the east coast of the UAE. The town, the second largest on the east coast after Fujairah is the home of the Khorfakkan container trans-shipment port It is located on Sharjah’s Indian Ocean coast, outside the often congested Strait of Hormuz but close to the main east-west shipping routes. It is only three hours from the UAE’s main centres of population, Dubai, Sharjah and Abu Dhabi on the Arabian Gulf coast. Khorfakkan’s location makes it an obvious choice for shipping lines with large trans-shipment volumes, which also require easy access to the UAE hinterland. Khor Khuwair: a coastal settlement in the emirate of Ras al-Khaimah. Khor al-Odaid: in the first half of the nineteenth century, Khor al-Odaid served as a refuge for pirates from Abu Dhabi fleeing British patrols. Its importance was such that some of the Bani Yas tribe migrated and settled in the area twice, in 1835 and in 1849. The residents of eastern Qatar helped the pirates of Khor al-Odaid in their attacks on vessels off the coast of Abu Dhabi, leading to a British naval force being sent to the settlement in 1836 to end the piracy.

478 The British stopped the pirates and their crews from sending supplies to the pirates and instructed them to seize the pirate’s boats. With British agreement, in 1837, the ruler of Abu Dhabi sent his troops in to quell the piracy; 50 of its inhabitants were killed and its houses and fortifications razed. In the mid-1800s, the settlement at Khor al-Odaid was inhabited by approximately 200 Bani Yas tribesmen who owned a total 30 pearling ships. In 1878, the British and Abu Dhabi governments planned to invade Khor al-Odaid in order to end the piracy. In response, Jassim bin Mohammed al-Thani threatened to occupy Khor al-Odaid as he saw the proposed military excursion as riding roughshod over Qatar’s territorial integrity. This ended in a war between Abu Dhabi and Qatar which continued until the late 1880s. Khorramshahr: a western Iranian port city in Khuzestan Province. Located approximately 10 kilometres north of Abadan, once the oil refining centre of Iran. Khuff: offshore oilfield. In early 1996 the Abu Dhabi government announced plans to develop its offshore Khuff gas deposit to enable energy supplies to Dubai and other parts of the UAE to be maintained without resorting to imported supplies. Following the political decision to proceed with developing the field, it entered production. Kier International: UK construction company founded in 1928. In 1934 Kier had been active in Iran where it was responsible for a mountainous section of the Trans-Iranian railway. In 2014 Kier secured contracts for a US$70 million mixed use development in Dubai and a US$40 million project for Dubai University.

NOTES Kubaish, Salem Saeed: in January 2013, in his role as attorney general Mr Kubaish had claimed that an unnamed disaffected group had sought to infiltrate schools, universities and ministries. Its alleged aims were to seize power and confront the main principles on which the UAE’s ruling system is based, he alleged. The prosecutor claimed that this secret society had set out its seditious purpose on paper, but strangely acknowledged that these documents had been destroyed. Kuwait: the northern-most Gulf state, Kuwait’s massive oil reserves make it one of the world’s richest countries per capita. Compared to the UAE, Kuwait is a more conservative state also with a Sunni Muslim majority. It stands out from the other Gulf monarchies for having the most open political system. For some time (since 2016) tensions have persisted between parliament and the cabinet, controlled by the ruling and largely conservative Al-Sabah family. For decades Kuwait was the principal centre of commerce in the Gulf. In 1899 Mubarak I signed an agreement with the British making Kuwait a British Protectorate. The agreement gave the British responsibility for Kuwaiti foreign policy in exchange for military protection. In 1938, oil was first struck at the Burgan oilfield in Kuwait, and by 1946, after the Second World War crude oil exports began. In 1961, Kuwait became an independent nation. Kuwait (1990 Iraqi invasion): in August 1990 Iraqi forces invaded Kuwait. Kuwait’s defence forces were rapidly either overwhelmed or destroyed. Some Kuwaiti military retreated to Saudi Arabia, as did the emir of Kuwait with his family and other government leaders. In

NOTES less than a day Kuwait City was captured and the Iraqis had established a provincial government. The United Nations Security Council denounced the invasion and demanded Iraq’s immediate withdrawal from Kuwait. On 6 August, the Security Council imposed a worldwide ban on trade with Iraq. The occupying Iraqi army in Kuwait rapidly rose to about 300,000 troops. On 29 November 1990 the UN Security Council passed a resolution authorising the use of force against Iraq if it failed to withdraw by 15 January 1991. Saddam Hussein refused to withdraw his forces from Kuwait, which he had declared to be a province of Iraq, and some 700,000 allied troops, primarily American, prepared in January 1991 for Operation Desert Storm to recover Kuwait. After less than four days, Kuwait was liberated, and most of Iraq’s armed forces had either surrendered, retreated to Iraq, or been destroyed. The cost of the war to the United States was estimated by the US Congress to be US$61.1 billion. About US$52 billion of that amount was paid by other countries: US$36 billion by Kuwait, Saudi Arabia and other Gulf states including the UAE. La Mole Industries: a French engineering group that in the late 1980s opened a 10,000-skin-a-day tannery in the Jebel Ali Free Zone as a joint venture with Dubai’s Al-Bawardy Group. Land Reclamation: the more recent phenomenon of land reclamation has significantly altered the geography of the UAE. In Abu Dhabi this is the case with Yas Island, Al-Reem Island and Al-Lulu Island. More spectacular projects in

479 Dubai have included the Palm Islands, the World Islands, the Dubai Marina and the Burj al-Arab. Landoil: a subsidiary of Basic Petroleum and Minerals of the Philippines. Latif Khan: appointed Admiral of the Gulf by Nadir Shah of Persia in 1734. The early seventeenth century saw a revival of Persian power and activity in the Gulf. In 1717–18 Latif Khan re-took Bahrain from the Sultan of Oman. Layyah: village in Sharjah. League of Arab States (Arab League): the Arab League was founded in Cairo (where it was headquartered) in 1945 by Egypt, Iraq, Lebanon, Saudi Arabia, Syria, Jordan (Transjordan up to 1950) and Yemen. The following countries joined later on the dates shown: Algeria (1962), Bahrain (1971), Comoros (1993), Djibouti (1977), Kuwait (1961), Libya (1953), Mauritania (1973), Morocco (1958), Oman (1971), Qatar (1971), Somalia (1974), South Yemen (1967), Sudan (1956), Tunisia (1958) and the United Arab Emirates (1971). The Palestine Liberation Organisation (PLO) was admitted to membership in 1976. Following its signature of a peace treaty with Israel, Egypt’s membership was suspended in 1979 and the League’s headquarters was moved from Cairo to Tunis. In 1987 Arab leaders decided to renew diplomatic ties with Egypt. Egypt was readmitted to the League in 1989 and the League’s headquarters was moved back to Cairo. The Arab League’s boycott of Israel (the Arab Boycott) is a somewhat ineffectual economic measure on the part of Arab League member states in support of Palestine, designed to isolate Israel. The boycott applies to products and services that originate in Israel, businesses that operate in Israel and businesses that

480 have relationships with other businesses trading in Israel. The boycott’s offices are headquartered in Damascus. Lehman Brothers: In September 2008 Lehman Brothers, the fourth largest US investment bank entered bankruptcy after trading for 158 years. The damage to the US economy was put at US$22 billion; ten years later, the effects of the Lehman crash were still being felt in 2018. Liquid natural gas (LNG): is natural gas (predominantly methane, with some mixture of ethane that has been converted to liquid form for ease of storage or transport. It is about 1/600th the volume of natural gas in the gaseous state. Liquid petroleum gas (LPG): is used as a fuel in a wide range of applications including in heating and cooking appliances, industrial applications, in vehicles and as a propellant and refrigerant. LPG can be obtained primarily as propane, butane or a mixture of the two. A powerful odorant is often added so that the LPG is easily detected. Livestock Breeding Company: a subsidiary of the Arab Company for the Development of Animal Resources (ACOLID) established in 1977 to encourage private and government sectors in establishing livestock development projects and training Arab managers to develop their abilities and enhance their performance and leadership skills in livestock and agricultural management. The government of the UAE has a 16.7 per cent shareholding. al-Liwa: a group of some 30 small oases located some 150km south-east of the city of Abu Dhabi. Al-Liwa once was the state of Abu Dhabi’s third largest urban centre with a settled community known for its date plantations.

NOTES Louvre (Abu Dhabi): the opening of the museum in Abu Dhabi in 2017 was the result of an intergovernmental agreement signed on 6 March 2007, between the United Arab Emirates and France. The Louvre Abu Dhabi was claimed to be the first universal museum in the Arab world. However, the opening had to be delayed for two years due to construction problems. Lower Gulf: the decision to end Britain’s political and defence commitments in the Gulf, announced in 1968, was followed by three years of consultations between the rulers of the ten Lower Gulf states (the seven UAE states plus Bahrain, Oman and Qatar) to find a political solution that would ensure viable independence. For more than a century Britain had exercised quasi-colonial power over these states, with responsibility for their foreign relations and external defence. Luce, Sir William: (1907–77) a retired diplomat who was appointed Britain’s special envoy to the Gulf, and who successfully negotiated the Shah of Iran’s agreement to drop a longstanding claim to Bahrain, and the formation of a Supreme Council by all ten (the seven – although Ras al-Khaimah was a reluctant participant – Trucial States, Bahrain, Oman and Qatar) Lower Gulf rulers. After four years as Governor of Aden, Luce had been the Political Resident in the Gulf from 1961 to 1966. McDermott: US engineering company long established in the UAE (Dubai). In 1970 McDermott moved its Middle East fabrication yard and Marine base from Saudi Arabia to a 100 acre area on Dubai Creek. In 1972 McDermott also built and installed three innovative Khazzan oil storage tanks for Dubai

NOTES Petroleum Company. In the mid-1980s the company established a base in the Jebel Ali Free Zone. al-Madfa, Hamad Abdel-Rahman: appointed UAE minister of education in 1990, in 2015 Secretary-General of the Supreme Council of the UAE at the ministry of presidential affairs, and subsequently ambassador to the USA. Madha: an enclave of Oman located within UAE territory on the Musandam Peninsula. As the formation of an independent state approached, the leaders of the four tribes who ruled the area were asked whether they wished to align themselves with Oman or with the tribes inclined towards the idea of the UAE. While the leaders of most of the towns and villages aligned themselves with the ruling families of what are now Sharjah, Fujairah and Ras al-Khaimah, the Madhanis were swayed by the local representative, or wali, of the Sultan of Oman. Nobody involved in the decision could have envisaged how an alliance of convenience made by a generally autonomous village in the first half of the twentieth century would impact so greatly on their descendants, resulting years later in near neighbours facing dramatically different economic and social circumstances. Mafraq: a small town 35 kilometres from Abu Dhabi and the location of the UAE’s major maternity hospital. Mafraq Hospital has 451 beds serving a fast-growing area. With 2,000 staff, the hospital specialises in obstetrics, and paediatrics. It also operates the largest burn unit in the UAE. The Abu Dhabi Health Services Company (SEHA) had reportedly invested US$ 750 million in building a new Mafraq Hospital campus, which was due to open in 2017.

481 al-Maktoum (family): the ruling family of Dubai. al-Maktoum, Hamdan bin Rashid: (b. 1945) former deputy ruler of Dubai and, in 2019, the minister of finance of the United Arab Emirates. Born in 1974 he is the second son of the late ruler, Rashid bin Saeed al-Maktoum. al-Maktoum, Hamdan bin Rashid: (b. 1982) son of Sheikh Rashid, finance and industry minister and chairman of the Dubai Municipal Council – the nearest thing to a local parliament, which, since 1980, has had 32 members. al-Maktoum, Maktoum bin Hashar: Ruler of Dubai from 1894–1906 al-Maktoum, Maktoum bin Rashid: Ruler of Dubai from 1990–2006. Born in 1943 he first became prime minister of the UAE in December 1971, but in April 1979 he was replaced by his father, Sheikh Rashid bin Saeed al-Maktoum. Following the latter’s death in October 1990 he resumed his position as prime minister and also took over as Ruler of Dubai. He served in both positions until his death on 4 January 2006. He also briefly served as acting President of the UAE for two days in November 2004 following the death of Sheikh Zayed bin Sultan al-Nahyan until Sheikh Khalifa bin Zayed al-Nahyan was proclaimed and installed as President of the United Arab Emirates in November 2004. al-Maktoum, Mohammed bin Obaid: a cousin of Sheikh Mohammed bin Rashid al-Maktoum, ruler of Dubai. al-Maktoum, Mohammad bin Rashid: (b. July 1949), Ruler of Dubai from 2006 and vice president, minister of defence and prime minister of the UAE. al-Maktoum, Rashid bin Saeed: Ruler of Dubai from 1958–90. The first vice president and prime minister of

482 the UAE. Generally known simply as Sheikh Rashid. Sheikh Rashid is considered the original visionary responsible for the growth and development of Dubai into an international trading centre. al-Maktoum, Saeed ibn Maktoum ibn Hasher: Ruler of Dubai from 1912–58 (except for from 15–18 April 1929). al-Maktoum Bridge: opened in 1975 providing an additional connection across the creek between Dubai and Deira. Manama: capital of Bahrain and its largest city. Mansoor, Ahmed: UAE blogger who, in November 2012 received a three year prison sentence. Another blogger and four other democracy activists were also sentenced to prison terms. Margham: Dubai’s largest onshore gas field located 55km from Dubai on the Dubai / Hatta road. The field contains three gas-bearing geological formations located more than 10,000 feet below the ground surface. The Margham field started production in 1984 and is connected through a gathering system to the Margham processing plant. The dry gas is sent by pipeline to the Dubai fuel gas pipeline grid. Maritime Treaty (aka General Treaty of Peace with Britain of 1820): signed by the rulers of Dubai and the other Sheikhdoms agreeing to the cessation of plunder and piracy. It was signed at different dates between January and March 1820. Marshall Plan: in November 2013 the UAE minister for economy, Sultan bin Saeed al-Mansouri, (appointed 2008) suggested that the world should put together a new Marshall Plan to help the economies of Middle East and North African countries shattered by the social

NOTES and political upheaval of the Arab Spring. Speaking at the World Economic Forum, the UAE minister noted that: ‘Some have asked for an Arab bank of reconstruction and development for the region, but it should not be just Arab. It should be a global response, like the Marshall Plan put into effect by the Americans in Europe after the Second World War.’ Masafi: a village located on the edge of the Hajar Mountains straddling the border between Fujairah and Ras al-Khaimah. Of certain strategic importance, Masafi is best known for its eponymous mineral water. Masfut: exemplifies the complex politico-geographical structure of the UAE. It is a village that although part of an exclave of Ajman, is surrounded by the Dubai exclave of Hatta, and is only accessible from Ajman itself by crossing territories claimed by Sharjah, Oman and Dubai. Mattis, James Norman: (b. 1950) the 26th United States secretary of defense. General Mattis was confirmed as Secretary of Defense in January 2017 by the United States Senate. He was the first cabinet member in the Trump administration to be confirmed by the Senate. In 2014, General Mattis, called the UAE Little Sparta adding ‘They’re not just willing to fight – they’re great warriors.’ He resigned in December 2018. al-Mazroui, Suhail Fares: UAE national appointed general manager of ADNOC in April 1987 (he had previously been deputy general manager) reflecting government pressure to replace expatriate staff where possible. Mahmoud Hamra-Krouha, an Algerian National, had served as ADNOC’s general manager since the company’s inception in 1974.

NOTES Mr al-Mazrui, was also appointed secretary to the newly formed Petroleum Council in 1989 as well as head of the Abu Dhabi Company for Oil Distribution (ADNOC-FOD). Mecca (Makkah): followers of Islam make an annual pilgrimage (Haj) to Mecca, a Saudi Arabian city where the Ka’ba, the sacred house of Islam, is located at the centre of Masjid al-Haraam. The city is located in, and is the capital of, Makkah Province in the Hejaz region. Medina, (The City of the Prophet): originally known as Yathrib, an oasis town not far from Mecca, where the prophet Mohammed’s father was buried. In 622 (approx.) Mohammed and his followers settled in Medina; Mohammed remained in Medina for some six years. Memorandum Movement: name given to a loose grouping formed around the speaker of the Supreme Council, Tiriem Tiriem in 1982 that had expressed concern at the growing number of immigrants in the UAE. Merlin Gerin: French engineering company specialising in electrical distribution which became part of Schneider Electric in 1994. Merlin Gerin was one of the contracting companies involved in the Taweelah project in Abu Dhabi. Merz & McLellan: UK firm of consultants, responsible for assessing bids from five major international companies and consortia for the supply of three turbines with a combined output of 250MW for the Taweelah power and desalination project. Mesopotamia: (from the Greek, meaning ‘between two rivers’) known as ‘the cradle of civilisation’, Mesopotamia was the region in the eastern Mediterranean bounded in the north-east by the Zagros Mountains and in the south-east

483 by the Arabian Plateau and, to an important degree, the Gulf. The two rivers of the name referred to the Tigris and the Euphrates rivers, both of which flow into the Gulf. The land area was known as Al-Jazirah (the island, later dubbed the Fertile Crescent.) In the fourth century BC, Mesopotamia was a collection of disparate cultures linked, essentially, by their religion. The wider legacy of the Mesopotamian civilisation included the concept of the city and the skill of writing. More specifically for the communities bordering the Gulf, the waterway was established as the principal communication link between Mesopotamia and the Indus Valley civilisation to the East. Meydan: horse-racing stadium and training complex in Dubai. Middle East (Annual) Review: first published in 1974, an annual title of the UK reference publisher World of Information in which much of the information published in this volume first appeared. Middle East Economic Digest (MEED): magazine and business information publisher founded in London by Elizabeth Collard in 1957 as a weekly magazine. For some 20 years MEED was owned by the EMAP magazine publishing conglomerate and is now owned by GlobalData Plc and based in Dubai. Middle East Oil: a US consortium led by Pan-Ocean Oil. Milford Haven: Welsh tanker terminal and refinery. At the beginning of the 1980s the refinery was deemed surplus to the requirements of its owners, Esso, and shut down. The plant was sold to the Ajman Saudi Refinery Company, dismantled and shipped to Ajman, reassembled and began operating in 1988, with a capacity of 100,000 barrels a day.

484 Mina Rashid (Port Rashid), Dubai: Mina Rashid, which opened in 1972, was an initiative originally inspired by Dubai’s former Ruler, Sheikh Rashid. When it opened Mina Rashid only had modest facilities, but in 1978 it was expanded to 35 docking berths five of which were dedicated to container ships. However, in the early 1980s, Port Rashid had been supplemented by the Port of Jebel Ali, further from the commercial centre of Dubai and near the Abu Dhabi border. In January 2008, it was announced that Mina Rashid would be redeveloped. All cargo operations were due to move to Jebel Ali Port by the end of March 2018, and Mina Rashid would become a cruise terminal. In 2014 the port’s owners, DP World, had opened a third cruise terminal at Mina Rashid; it was the world’s largest, covered cruise facility capable of handling 14,000 passengers per day. By 2016 Port Rashid catered for container ships, general cargo, RoRo and passenger vessels. Mina Zayed (Port Zayed), Abu Dhabi: the construction of Mina Zayed started in 1968. Prior to its inauguration larger cargo ships used to anchor some 8km away from the coast and unload their shipments on barges and small dhows which then transported the cargo to the beach. Port Zayed’s facilities include 21 berths for handling all kinds of general cargo including bulk cargo, RoRo, project cargo, reefer cargo and petroleum products. The Port has 17 general cargo berths. The container terminal has four berths and additional container berths are planned, as well as the Saadiyat Free Trade Zone to be built on nearby Saadiyat Island.

NOTES Minerals and Metals Trading Corporation (India): the largest international trading company in India. Dubai’s regulators claimed that gold trading in the emirate had reached US$70 billion by 2012, a 25 per cent increase on 2011. Middle East Economic Digest reported that Dubai was rivalling London and Shanghai as a gold trading centre. In 2014 Dubai was estimated to account for approximately 25 per cent of the world’s annual gold trade. Ministry of economy: minister (June 2017) Sultan bin Saeed al Mansoori. The ministry’s mission statement aims to: To develop the national economy and create a pro-business environment that contributes to achieve balanced and sustainable development of the country, through the enactment and modernisation of economic legislations, foreign trade policies, development of national industries and exports, promotion of investment, regulation of the competition and small- and medium-enterprises (SMEs) sector, protection of consumer and intellectual property rights, and diversification of economic activities, under the leadership of efficient nationals, in line with international standards of creativity, excellence and knowledge economies. Ministry of finance (MoF): minister (2018) Sheikh Hamdan bin Rashid al-Maktoum; the UAE’s administrative department responsible for managing and developing the financial resources of the federal government efficiently and creatively. Since 1972 the UAE’s budget has increased over 200 times from the AED200 million figure of 1972 to the AED48.5 billion of 2016. The federal budgeting process consists of five phases, namely planning,

NOTES preparation, reviewing, approval and execution. Budget expenses and allocations are distributed to six sectors – social development, social benefits, infrastructure and economic resources, government affairs, financial assets and investments, and other federal expenses. The UAE’s financial year lasts from January to December. During the third month of the financial year, the MoF normally issues a guideline circular for the preparation of the following year’s draft budget. Ministry of foreign affairs: (minister (June 2017) Dr Anwar bin Mohammed Gargash) The ministry’s overview of the UAE’s foreign policy highlights Iran’s occupation of the Gulf islands of Abu Musa and the Greater and Lesser Tunbs as a major issue, stating that ‘although the UAE has sought to resolve the dispute peacefully and conclusively through the process of international dispute resolution, Iran remains obdurate.’ Ministry of higher education and scientific research (MOHESR): minister (June 2017) Sheikh Hamdan bin Mubarak al-Nahyan. Established in 1976, the ministry’s departments include the Commission for Academic Accreditation (CAA), which provides institutional licensure and degree accreditation for private universities and their academic programmes in the UAE, the National Admissions and Placement Office (NAPO) which provides admissions and placement services for the federal institutions of higher education and the Common Educational Proficiency Assessment (CEPA) which assesses the English and Maths skills of applicants to higher education. Mir Mahanna (of Bandar Rig): legendary eighteenth century pirate

485 described by the Danish traveller Niebuhr as ‘the most execrable tyrant who ever existed’. Mitsui: Japanese conglomerate. Mitsui’s oil division participated in the Umm al-Nar water and power project. Mobil: see ExxonMobil. Mocha (aka Mokha): a port city on the Red Sea coast of Yemen. Until the development of Aden and Hodeida as ports in the nineteenth century, Mocha was Yemen’s principal port. Mohammed: (b. 570, d. 632) the Praised One, was the prophet (or Messenger of God) of Islam and the founder of Mohammedanism. He was born in Mecca (Saudi Arabia) between AD570 and AD580 the only son of Abd Allah bin al-Muttaib and Amina bint Wahab of the Quraysh tribe. His father died before his birth and his upbringing was originally entrusted to his paternal grandfather Abdul al-Muttaib, a respected leader in Mecca who often presided over the city’s Council of Elders. On his grandfather’s death in 578 Mohammed passed into the care of a paternal uncle, Abu Talib, under whose protection he remained for the remainder of his childhood.In his twenties Mohammed entered the service of a widowed merchant trader Khadija bint Khawalayd, who he eventually married. They had six children. Most of Mohammed’s early life was spent as a merchant. At the age of 40 he began to have revelations from Allah that became the basis for the Koran and the foundation of Islam. In 622 (approx) Mohammed and his followers settled in Yathrib where his father was buried. Yathrib later became known as Medina (The City of the Prophet). By 630 he and his followers had unified most of what

486 was then known as Arabia under a single religion. Mothercat: part of the C.A.T. (Contracting and Trading) company established in Haifa (then Palestine) in 1937. One of the few, if not the only, Arab owned construction companies, C.A.T. was active in engineering projects in the UAE before and after independence. Its emblem – a black cat – was well known. After the death of its founders in 1993, the remaining partners established an international corporate structure, C.A.T. Holding SA, registered in Luxembourg and responsible for all contracting activities. In 2005 C.A.T. handled the Asab water injection upgrade project and in 2007 worked on the Dubai metro network. In 2008 the company worked on a US$39 million chilled water network on Yas Island’s Tabreed project. C.A.T. was awarded a further US$110 million contract on the Asab project in 2009. Later contracts included the Yas Island (Sharjah) gas pipeline in 2010 and in 2011 a US$32 million gas supply project in Al-Ain and infrastructure works for the Al-Raha Beach, Abu Dhabi development. MTI: Jeddah (Saudi Arabia) based port management company. al-Mu’alla, Rashid bin Ahmad: (b. 1876, d. 1922) Ruler of Umm al-Quwain 1904–22. al-Mu’alla, Rashid bin Ahmad II: (b.1932, d. 2009) the ruler or head of state of Umm al-Quwain from 1981 to 2009. His reign commenced when he succeeded his father, Sheikh Ahmad bin Rashid al-Mu’alla on 21 February 1981. He died in January 2009, in London. He was succeeded by Saud bin Rashid al-Mu’alla. al-Mu’alla, Saud bin Rashid: ruler of Umm al-Quwain since 2009 and a member of the UAE Federal Supreme Council.

NOTES His son, Sheikh Rashid bin Saud bin Rashid al-Mu’alla is (2019) the Crown Prince of Umm al-Quwain. Mubadala Development Company: headquartered in Abu Dhabi, Mubadala is wholly owned by the Abu Dhabi government. Mubadala’s US$10 billion investment fund includes a 7.5 per cent holding in US private equity company Carlyle. Unlike the Abu Dhabi Investment Authority (ADIA), Mubadala may take controlling investments in companies in which it invests. Other investments include port operator Abu Dhabi Terminals and its 51 per cent shareholding in Dolphin Energy. Mubarak: sole Sharjah oilfield, lying off Abu Musa island. Under an agreement with Iran, oil revenues from the field are split equally. Mubarraz: Abu Dhabi island and oilfield. al-Muhairi, Yousef bin Omeir bin Yousef: appointed minister of petroleum and energy resources in 1992 at the age of 32. He replaced Dr Mana Said al-Otaibah who had held the post since the creation of the federation. Mukalla: in April 2016 UAE forces forming part of the Saudi-lead coalition entered the Yemeni town of Mukalla, killing a number of al-Qaeda in the Arabian Peninsula (AQAP) fighters. The remaining AQAP fighters retreated to other parts of the Hadramaut region. The action enabled pro-Yemeni government and UAE forces to complete the recapture of Mukalla, the major town on the coast of the Hadramaut. Multan: Pakistani city located in Punjab province. Multan is Pakistan’s fifth most populous city. Municipality: normally meant to describe an urban administrative area often

NOTES with powers of self-government as provided for by relevant national and state laws. The UAE’s municipalities are (mid-2017), in order of approximate population: Dubai 2.7 million, Abu Dhabi 1.5 million, Sharjah 720,000, Al-Ain (Abu Dhabi) 650,000, Ajman 518,000, Ras al-Khaimah 263,000, Fujairah 152,000 and Umm al-Quwain 44,000. Muqtaa: bridge across Dubai Creek (now paralleled by a second at Musafah, leading to the Abu Dhabi/Al-Ain road). Murban (Bab): onshore Abu Dhabi oilfield. Musafah: industrial town to the south-west of Abu Dhabi, designated a special economic zone. Muslim: a follower of Islam. (The older term Mohammedan should be avoided.) Nahwa: a village that is part of the Emirate of Sharjah. It is a counter-enclave within the Omani territory of Madha, which is itself an exclave of Oman and an enclave within the UAE. al-Nahyan: one of the six ruling families of the United Arab Emirates, loosely based in the UAE capital Abu Dhabi. The al-Nahyan are a branch of the House of Al-Falahi, in turn a branch of the Bani Yas tribe. They are related to the House of al-Falasi and also to the House of al-Yassi. The ruling family of Dubai, the al-Maktoum, are also descended from the Bani Yas tribe. The Al-Nahyan came to Abu Dhabi in the eighteenth century from the Liwa oasis. They have ruled in Abu Dhabi since 1793, but in the Liwa Oasis they had been in power for hundreds of years. al-Nahyan, Hamdan bin Mohammed: (b. 1930s, d. late 1990s) cabinet member 1973–97. UAE deputy prime

487 minister (1977–90) a distant cousin of Sheikh Zayed, in charge of UAE cabinet meetings. al-Nahyan, Hamdan bin Zayed: (b. 1963) the fourth son of the UAE’s first president Sheikh Zayed bin Sultan al-Nahyan. Along with his half-brother Sheikh Sultan bin Zayed al-Nahyan, Sheikh Hamdan served as deputy prime minister of the UAE in the cabinet from 1990 to 2009. Sheikh Hamdan was also appointed minister of state for foreign affairs in 1990, a post in which he served until 2006. On leaving the cabinet he became the ruler of Abu Dhabi’s representative for the emirate’s Western Region. al-Nahyan, Hamdan ibn Zayed: Ruler of Abu Dhabi from 1912–22. al-Nahyan, Khalifa bin Zayed: elected Ruler of Abu Dhabi and President of the UAE in 2004, following the death of his father the late Sheikh Zayed bin Sultan Al-Nahyan who had been President of the UAE from 1971 to 2004. After assuming the presidency, Sheikh Khalifa set about a major re-structuring of both the federal government and the government of the Emirate of Abu Dhabi. This included the appointment of a new cabinet in February 2006, with vice president and Dubai Ruler Sheikh Mohammed bin Rashid Al-Maktoum as prime minister. There were also changes in ministerial portfolios following the creation of new ministries with greater focus on community development. A new ministry of federal national council (FNC) affairs was established with the novelty of indirect elections for half of the FNC’s membership. al-Nahyan, Latifa bint Hamdan bin Zayed: (d. 1983) wife of Sheikh Rashid of Dubai and a cousin of Sheikh Zayed of Abu Dhabi, her own father having been

488 the ruler of Abu Dhabi from 1919 to 1922 when his brother, Sheikh Zayed’s father, murdered him and took his place as ruler. Sheikhah Latifa, with members of her family took refuge in Dubai whose relations with Abu Dhabi had always been strained. In 1938, she married Sheikh Rashid whose father was the ruler of Dubai. al-Nahyan, Mohammed bin Zayed: (b. 1961), is the Crown Prince of Abu Dhabi (since November 2004) and deputy supreme commander of the UAE’s Armed Forces (since December 2004). He is considered to be the architect of the UAE’s activist foreign policy. Following the ill health of UAE president Sheikh Khalifa bin Zayed, Mohammed bin Zayed has assumed many of the presidential duties and is often considered to be the UAE’s de facto ruler. al-Nahyan, Nahyan bin Mubarak: (b. 1951) minister of tolerance from 2017. UAE minister of culture and knowledge development from 2016, minister of higher education and scientific research from 1983. Chancellor of UAE University (1983– 2013), chancellor of Zayed University (1998–2013). al-Nahyan, Saif bin Zayed: (b. 1968) a member of the al-Nahyan royal family from Abu Dhabi and minister of interior from October 2004 and deputy prime minister from May 2009. al-Nahyan, Saqr ibn Zayed: Ruler of Abu Dhabi from 1926–28. Al-Nahyan, Shakhbut bin Sultan (Sheikh): Elder brother of Sheikh Zayed of Abu Dhabi and ruler of Abu Dhabi from 1928–66. Sheikh Shakhbut was peacefully deposed by his younger brother when members of the ruling family decided that a change was called for. Shakhbut was opposed to change.

NOTES al-Nahyan, Tahnoun bin Mohammed: (b. 1946) Ruler of Abu Dhabi’s representative in the Emirate’s Eastern Region. Previously chairman of ADNOC’s board of directors and deputy chairman of the Executive Council of Abu Dhabi and deputy chairman of the Supreme Petroleum Council. Al-Nahyan, Tahnoun bin Zayed: Ruler of Abu Dhabi from 1909–12 al-Nahyan, Zayed bin Abdullah: (b. 1972) appointed foreign minister 2006. al-Nahyan, Zayed I ibn Khalifa: Ruler of Abu Dhabi from 1855–1909 al-Nahyan, Zayed II bin Sultan: (b. 1918, d. 2004) UAE President following the death of his father Sheikh Shakhbut in 1966 and was both the ruler of Abu Dhabi and president of the United Arab Emirates from independence in 1971 until his death in 2004. In February 1978 Sheikh Zayed appointed his second son, Sandhurst trained Sultan bin Zayed al-Nahyan, as Commander-in-Chief of the Union Defence Force (UDF). The appointment of Sheikh Sultan was held by the rulers of Dubai and Ras al-Khaimah to be unconstitutional, although it was apparently based on a recommendation by a committee of the Supreme Council of Rulers. Sheikh Zayed was first appointed to the presidency of the UAE in 1971 and was re-appointed on four further occasions: in 1976, 1981, 1986, and 1991. In company with Sheikh Rashid of Dubai, Sheikh Zayed was considered by many to be the architect of the UAE as a body politic with a sound economy. He certainly oversaw – with the help of advisors – the transition from a group of feuding sheikhdoms to a functioning state that by the time of his death was beginning to play a role in international politics.

NOTES Nakheel: subsidiary company of Dubai World. Nakhuda: the captain or helmsman of sailing craft plying the Arabian Gulf. Nasr: offshore oilfield. National Bank of Abu Dhabi (NBAD): founded in 1968 NBAD was Abu Dhabi’s first bank, and the first UAE bank to expand overseas with the opening of its branch in Cairo, Egypt, in 1975. In 2017 NBAD’s international presence consisted of a branch, representative office and subsidiaries network in 17 countries. In total, NBAD has nearly 60 branches and offices outside the UAE. It is the second largest bank in the UAE. In April 2017 NBAD merged with the First Gulf Bank (FGB). The merged bank adopted the name of First Abu Dhabi Bank. National Bank of Dubai (NBD): The bank was the first locally established bank in Dubai. (In its early days often called locally the National Bank of Scotland, a term of recognition by the expatriate community for its preference for recruiting and appointing Scotsmen to senior management positions.) In 2007 the NBD merged with Emirates Bank International (EBI) and the National Bank of Dubai (NBD) a merger of the second and fourth largest banks in the UAE. The re-named Emirates NBD was formed in mid-October 2007 and the NBD shares were listed on the Dubai Financial Market (DFM). In 2017 the new bank employed over 9,000 people, making it one of the largest employers in the UAE. National Bank of Fujairah (NBF): incorporated in 1982 and headquartered in Fujairah. National Bank of Sharjah: established in 1976. In 2004 the bank converted into a Shariah compliant bank known as the Sharjah Islamic Bank.

489 National Cement Company: (of Dubai) owned by the al-Ghurair family. National Consultative Assembly: the UAE’s 40-member National Assembly is generally known as the Federal National Council, a consultative body whose members are partially appointed by the rulers of each emirate and partially elected. National Day: 2 December. The formation of the UAE as an independent state was on 2 December 1971. National Investment and Securities Corporation (Niscorp): Niscorp started business in 1989 focussing on the smallto medium-investor with a focus on the Far East markets. National Petroleum Construction Company (NPCC): a public joint-stock company established by the Abu Dhabi National Oil Company (ADNOC) and the Consolidated Contractors Company (CCC) in 1973. The plant was originally located on Saadiyat Island, but in 1995 moved its base to Musafah, 35km from Abu Dhabi city. National Reservation Wage: the UAE’s minimum wage system, whereby rates are fixed for different categories of employment. National Service: compulsory national (military) service for all young Emirati men aged between 18 and 30 was introduced in 2014. Women of the same age group can volunteer, as can men aged between 30 and 40. In 2017 military service was extended to 16 months for young men holding a secondary high school certificate and above. It was previously set at 12 months. Nippon Oil Company: established a liaison office in Abu Dhabi in 1989. Nomenclature: The structure of Arab names is somewhat more complex than

490 in most other cultures. For more details see the previous chepter. Non-Aligned Movement: a loose grouping of states that, theoretically, are not formally aligned with or against any major power bloc. Founded in1961 with Yugoslavia’s Marshal Tito and Pandit Nehru as founding fathers, by 2012, the movement had 120 members – including the UAE. The movement is headquartered in Jakarta, Indonesia. Non-performing loans (NPL): a generally accepted description of a sum of borrowed money on which the debtor has not made the scheduled payments (re-payments or interest payments) for a period of usually at least 90 days for commercial banking loans and 180 days for consumer loans. Northern Emirates: a loose term used to refer to the five emirates other than Abu Dhabi and Dubai, viz: Ajman, Fujairah, Ras al-Khaimah, Sharjah and Umm al-Quwain. Most of the Northern Emirates are heavily subsidised by Abu Dhabi in terms of water, electricity and infrastructure; Sharjah occasionally seeks to distance itself from the grouping. al-Nowais, Nasser: a prominent UAE businessman whose career started as managing director of the Abu Dhabi Fund for Arab Economic Development (ADFAED) where he administered numerous touristic, industrial and agricultural investments as well as infrastructural projects in the Middle East and Africa. Mr Al-Nowais went on to serve as chairman of Rotana Hotel Management Corporation and Aswaq Management and Services. Other positions he held were as director of the Abu Dhabi International Hotels Company, and as under secretary in the ministry of finance. In mid-2017 he

NOTES was also serving as managing director of the Abu Dhabi Trade Centre. al-Nuaimi, Humaid bin Abdulaziz: Ruler of Ajman 1908–28. al-Nuaimi, Humaid bin Rashid: (b. 1931) the ruler of Ajman and a member of the Supreme Council of the UAE. He is the tenth ruler of Ajman, succeeding his late father Sheikh Rashid bin Humaid al-Nuaimi in September 1981. He had been the deputy ruler (crown prince) of Ajman since 1960. al-Nuaimi, Rashid Abdulla: in 1975 named as the director of the political affairs department at the foreign ministry. In 1976, he became under secretary for foreign affairs and then served as the minister of state for foreign affairs from 1977–90. al-Nuaimi, Rashid III bin Humaid: Ruler of Ajman 1928–81. Nusseibeh, Zaki: recruited in 1967 by Sheikh Zayed as his personal interpreter and press advisor, a post he held until the death of Sheikh Zayed in 2004. Born in Palestine, Mr Nusseibeh was educated at Cambridge University, UK, and is the father of the UAE Ambassador to the United Nations, Lana Nusseibeh. Occidental Petroleum: often known by the abbreviation Oxy, in the UAE, Occidental has a 40 per cent participation in the a 30-year old Al-Hosn Gas Project joint venture with the Abu Dhabi National Oil Company (ADNOC). The Al-Hosn Gas project became fully operational in 2015. Occidental also supplies natural gas to markets in the UAE through its participation in Dolphin Energy, one of the region’s largest energy initiatives. Offtake Agreements (Offtakers): given the often high risks associated with extracting oil, exploration companies

NOTES can often reduce these risks by making offtake agreements. An offtake agreement is reached between an oil producer and a company that seeks to buy oil. In essence it formalises the buyer’s intention to purchase a certain amount of the oil producer’s future output. Oil and Gas Journal (OGJ): a petroleum industry weekly publication with a worldwide coverage. It is headquartered in Tulsa, Oklahoma (USA) with offices in Houston, Texas (USA). Oil Reserves: The UAE holds approximately 6 per cent of the world’s proven oil reserves. Oman, Sultanate: the independent Sultanate of Oman shares a border of some 400km with the UAE. Oman’s area is 82,000sq miles and in 2016 the Sultanate had a population of 4,65 million. Oman also shares borders with Saudi Arabia to the west, and Yemen to the south-west, as well as marine borders with Iran and Pakistan. Organisation of Arab Petroleum Exporting Countries (OAPEC): Kuwait, Libya and Saudi Arabia signed an agreement in January 1968 in Beirut establishing OAPEC. By 1982 the membership of the Organisation had risen to eleven (Algeria, Bahrain, Egypt, Iraq, Kuwait, Libya, Qatar, Saudi Arabia, Syria, Tunisia and the UAE). Members are Arab countries which rely on the export of petroleum; OAPEC is head-quartered in Kuwait, and is concerned with the development of the petroleum industry by fostering co-operation among its members. The Organisation’s mission statement somewhat loftily states that it ‘is guided by the belief in the importance of building an integrated petroleum industry as a cornerstone for future economic integration among Arab countries’.

491 Organisation for Economic Co-operation and Development (OECD): Paris Based think tank formed in 1960 with 20 member states. By 2019 the number of members had grown to 36. Its objective is to ‘promote policies that will improve the economic and social well-being of people around the world’ and provide a forum in which governments can work together to share experiences and seek solutions to common problems. The UAE is not a member. Organisation of Islamic Co-operation (OIC): an international organisation founded in 1969, with (in 2017) 57 member states. The OIC claims to be ‘the collective voice of the Muslim world,’ working to ‘safeguard and protect the interests of the Muslim world in the spirit of promoting international peace and harmony.’ Headquartered in Jeddah, the OIC has permanent delegations to the United Nations (UN) and the European Union (EU). The official languages of the OIC are Arabic, English, and French. Organisation of the Petroleum Exporting Countries (OPEC): headquartered in Vienna, Austria. OPEC’s members in 2009 were: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Nigeria, Qatar, Saudi Arabia, UAE and Venezuela (Indonesia suspended its membership in January 2009; Gabon was a member 1975–94; Ecuador suspended its membership from December 1992 to October 2007). Described by its critics as a cartel, OPEC’s best known activity is the determination of members’ production levels in the light of world supply and demand conditions. In early 2009 OPEC controlled some 76 per cent of world reserves and produced nearly 28 million barrels per day (33 per cent of world consumption). The UAE was the fourth-largest crude oil

492 producer in OPEC in 2014, behind Saudi Arabia, Iraq, and Iran. al-Otaiba, Dr Mana Said: (b. 1946). Mr al-Otaiba served as OPEC Conference President a record six times, for its 26th, 52nd, 53rd, 54th, 62nd and 63th conferences, held during 1971–83 and secretary general of the organisation from 19 Jul 1983–31 Dec 1983. He caused some controversy in the 1970s by disregarding OPEC agreements that he considered harmful to the economy of the UAE. He was the UAE’s first minister of petroleum and mineral resources under President Zayed bin Sultan al-Nahyan and subsequently became the personal advisor of Sheikh Zayed until the president’s death in 2004, after which he became the private advisor to President Khalifa bin Zayed al-Nahyan. al-Otaiba, Yousef: (b. 1974) his father was the UAE’s first minister of petroleum, Mana Said al-Otaiba, one of the UAE’s elder statesmen, a close adviser to the UAE founder and president, Sheikh Zayed bin Sultan al-Nahyan. After completing high school Yousef al-Otaiba went on to study international relations at Georgetown University, Washington DC. Although the UAE embassy claims that Mr al-Otaiba graduated, the university is unable to confirm this. He later became senior adviser to Sheikh Mohammed bin Zayed al-Nahyan and, until his new posting, as director of international affairs for the court of the Crown Prince, he also served as the country’s principal security, anti-terrorism and defence liaison with other governments. In 2008 Mr al-Otaiba was appointed UAE ambassador to the United States. In November 2017 he was promoted to the rank of minister, while remaining the UAE’s ambassador to the United States.

NOTES Ottoman Empire: in the eleventh century a grouping of central Asian nomads converted to Islam and succeeded in conquering what was to become Syria. From this exercise there emerged, in the late thirteenth century, a new Islamic empire within which the dominant factor was the Turks. By the sixteenth century the Ottoman Empire had become the most important regional force. It was the collapse of Ottoman power more than three hundred years later, in the later stages of the First World War that preceded an era of change, allowing European colonial powers to make their presence felt. By the end of 1917 forces commanded by the British General Allenby had captured Damascus. The Ottomans did not take much interest in the Gulf, with the exception of Kuwait in the north which had strategic importance for navigation in the Gulf. Kuwait’s rulers allowed the Ottoman flag to fly over Kuwait, in return for the ability to run their emirate as they saw fit. Overseas Development Administration (ODA): the UK’s foreign aid agency. Prior to the UAE’s independence in 1971 and the discovery of oil, aid came from other Gulf states (notably Kuwait) and European entities (notably the UK); the UAE relied on development grants. British aid for the UAE was originally channelled through the department of technical co-operation and the overseas aid functions of the foreign, commonwealth relations, and colonial offices and of other government departments. Projects such as the funding of the Trucial States Development Scheme (£100,000) and the Trucial States Development Office and Fund (£1 million) featured prominently. In 1970, what had become the ministry of Overseas Development was

NOTES incorporated into the foreign office and renamed the overseas development administration (ODA). Although it was a section of the foreign office, the ODA was relatively self-contained with its own minister. The 1974 Labour government announced the formation of a separate ministry of overseas development. After the 1979 election, the ministry was transferred back to the foreign office, and again renamed the overseas development administration. The department was once again separated from the foreign and commonwealth office in 1997. Overseas Petroleum and Investment Corporation: (of Taiwan), active in Ras al-Khaimah in the 1980s. Palestine: Homeland of the Palestinians which, with the exception of Gaza Strip and the West Bank (of the Jordan River) is occupied by Israel. On 29 November 2012 the United Nations agreed that Palestine should be upgraded from ‘observer entity’ to ‘non-member observer state’. 2017 marked the fiftieth anniversary of what became known as the Six Days War in which Israeli forces occupied large swathes of Palestinian land. Palestine Liberation Organisation (PLO): a political and military grouping formed in 1964 to unite the Palestinian groups opposed to the Israeli presence in the territory of Palestine. From 1967 onwards the PLO was dominated by al-Fatah, headed by Yasser Arafat. Originally headquartered in Jordan, which soon took exception to the activities of the PLO’s more radical factions. In 1970, the PLO decamped to Lebanon and Syria. In 1974 the PLO had been generally recognised as the representative of all Palestinians.

493 Panjgur: a district in the south-western Pakistani province of Baluchistan. Pan Ocean Oil Corporation: Nigerian oil company. Partex: see Gulbenkian. Participation agreement: (of 1972). In October 1972 agreement on participation (the term used to define the distribution of income from oil exploration) was reached between the major international oil companies and four Gulf states, Kuwait, Qatar the UAE (represented by Abu Dhabi) and Saudi Arabia. The agreement established an immediate 25 per cent government participation in established Gulf concessions starting in – and extending through – 1978 rising by gradual stages to 51 per cent by 1983. The payments to be made by the governments for this equity should be shared between the countries, to be paid over the three year period. This meant that the companies would lose about half the profit they might otherwise have made. Pax Britannica: (British Peace) an expression reflecting Britain’s often self styled designation as the world’s policeman in the nineteenth century. The anti-piracy treaties signed between the rulers of the Trucial States and the East India Company reflected this de facto arrangement. The British objective was, above all, to allow the unimpeded transit, loading and unloading of goods. Pearl divers: pearl diving provided an important source of revenue for what were then known as the Trucial States. One source estimated that in 1909 the Sheikh of Abu Dhabi earned £20,000 from the levy on the pearl fishing boats. The season, known as ghaus in Arabic, lasted from mid-May to mid-September. In the 1930s the pearl industry fell upon hard times due to the world

494 economic depression as well as the advent of Japanese cultured pearls. India remained a profitable market until 1946 when the Indian government decided to ban the import of pearls. People’s Democratic Republic of Yemen (PDRY): ometimes referred to as South Yemen, Democratic Yemen, Yemen (Aden) or – in the run-up to independence – as the South Arabian Federation. Soon after independence the PDRY (originally known as the People’s Republic of Southern Yemen) came under the rule of the revolutionary National Liberation Front (NLF) and became the region’s only avowedly Marxist state, made up of the southern and eastern provinces of the present-day Republic of Yemen, including the island of Socotra. In June 1969, the Marxist wing of the NLF gained power and in December 1970, reorganised the country into the People’s Democratic Republic of Yemen (PDRY). The PDRY established close ties with the USSR, China, Cuba, and the PLO. A new constitution was modelled on that of the DDR (GDR). The PDRY was united with the Yemen Arab Republic (YAR – or North Yemen) in May 1990, to form the state of Yemen. Four years later South Yemen declared its secession from the north, resulting in the north occupying South Yemen and the 1994 civil war. From the mid-sixties until 1975, PDRY forces were used to support the insurgency attacks of the Popular Front for the Liberation of Oman and the Arabian Gulf (PFLOAG (originally known as the Popular Front for the Liberation of the Occupied Arabian Gulf)) insurgents operating along the porous border between Oman and the PDRY. They were eventually defeated by a coalition of Omani, British and Iranian forces. All three countries

NOTES had cause to prevent the PFLOAG from reaching Oman’s border with the UAE. Perpetual Maritime Truce 1853: was negotiated by the British Political Resident in the Gulf between all the Sheikhs of what was formerly known as the Pirate Coast. Known as the second commandment, it stated that ‘Thou shalt not commit piracy against one another at sea.’ Petrofac: a UK based international service provider to the oil and gas production and processing industry. Petrokal: Libyan oil company. Petroleum Council: formed in 1988, the Council is the supreme governing body for Abu Dhabi’s oil and gas industries. The Council is charged with supervising all oil and gas companies that operate in Abu Dhabi and the UAE. It also serves as the board of directors for the Abu Dhabi National Oil Company (ADNOC). Pipeline Construction Company (PILCO) (Abu Dhabi): contracting company based in Abu Dhabi, established in June 1968. Pirate Coast: in the eighteenth century the absence of any recognised maritime authority in the seas of the Arabian Gulf lead to it being called the Pirate Coast. In the nineteenth century it fell to the naval force of the British East India Company to restore order. The company began by attacking Ras al-Khaimah which was considered to be a pirate stronghold. The Company sent a significant flotilla to the Gulf, and attacked the pirates’ stronghold, reducing the town and the pirate fleet to ashes. The Gulf rulers subsequently signed a peace treaty agreeing to the cessation of plunder Polensky and Zollner: Abu Dhabi based subsidiary of a German company, with an extensive portfolio of projects

NOTES including the Al-Jazeera medical centres in Abu Dhabi, Dubai and Sharjah as well as several residential developments. Political Officer: the first British Political Officer (reporting to a Political Agent) on the Trucial Coast was based in Sharjah. When this post was upgraded to Political Agent, it was transferred to Dubai, replaced by a Political Officer in Abu Dhabi, a position later upgraded to Political Agent. Political Resident: under a treaty of 1892 the British government became responsible for the external affairs of what were still known as the Trucial States. These were handled by a Political Resident for the Gulf with an office originally in Bushire (Iran), but later moved to Bahrain. Political Agents were also appointed in Kuwait and Bahrain. Popular Front for the Liberation of Oman and the Arabian Gulf (PFLOAG): the Marxist and Arab nationalist revolutionary organisation based in what was known as the People’s Democractic Republic of Yemen (PDRY). Founded in 1968 as the successor to the Dhofar Liberation Front, PFLOAG (originally standing for the Popular Front for the Liberation of the Occupied Arabian Gulf) succeeded for a time in controlling parts of Western Oman (Dhofar). PFLOAG’s activities peaked during and after the Dhofar Rebellion in Oman in the 1960s and 1970s, but by 1975 the war had ended and so had PFLOAG’s apparent motivation. Provisional Constitution: see Constitution. Puntland: the Puntland State of Somalia is an autonomous region in north-eastern Somalia. Its leaders declared the territory autonomous in 1998. However, it is recognised internationally as a region of the state of Somaila. In 2017

495 the UAE was providing a military training unit to Puntland. Qaboos, Sultan: see al-Said, Qaboos bin Said. al-Qasimi, Abdulaziz bin Mohammed: was ruler of Sharjah for less than one week in 1987 (from 17–23 June). The elder brother of Sultan bin Mohammed al-Qasimi, the ruler of Sharjah, he attempted to depose him in a coup attempt. Although the coup at first appeared to have been successful, the other emirates were divided in their response, with Abu Dhabi supporting the pretender and Dubai standing firm behind the ruler. A compromise was reached with the ruler, Sheikh Sultan, being restored to power and Sheikh Abdulaziz being nominated crown prince. Sheikh Sultan’s return to power was due in large part to the regional reluctance to set a precedent for usurpation of power by force. This chapter was brought to a close in July 1990 when Sheikh Abdulaziz was removed as crown prince, exiled, and replaced as crown prince by Sheikh Ahmed bin Mohammed al-Qasimi, the head of the petroleum and minerals office. al-Qasimi, Ahmed bin Mohammed: (aka Sheikh Sultan III)(b. 1939) ruler of Sharjah since 1972 apart from a six day interruption in June 1987, following an attempted coup led by his elder brother Sheikh Abdul-Aziz bin Muhammad al-Qasimi. Sheikh Sultan is a member of the UAE’s Federal Supreme Council. The 1987 coup was at the time the worst political crisis in the history of the UAE. Leaders of the other Emirates responded by appointing a royal committee to help resolve the situation. Sheikh Abdul’s position as commander of the

496 national guard (he was also chairman of the UAE Federation of Chambers of Commerce and of the UAE’s Union of Contractors) stood him in good stead for mounting his coup d’état. Military helicopters hovered overhead and troops from the National Guard patrolled the streets. Sharjah’s airport was closed as was the local edition of the Al-Khaleej daily newspaper. The coup highlighted the divisions existing between the rulers. News of the coup was broadcast in all the emirates except Dubai, suggesting that the coup was generally supported. However, Dubai said it still considered Sheikh Sultan to be the ‘legitimate ruler of the emirate of Sharjah’ and described the coup as a ‘reckless act’. On his return to the UAE (he had been vacationing in the UK) Sheikh Sultan appears to have won a surprising victory by securing the backing of the UAE’s Supreme Council; the decision effectively marked the end of the coup. After the coup, Sheikh Abdul Aziz was removed as crown prince, exiled, and replaced by Sheikh Ahmed, head of Sharjah’s petroleum and minerals office. al-Qasimi, Hamad bin Mohammed: ruler of Fujairah, (2017). Son of Sheikh Mohammed bin Hamad, who died in September 1974, to be succeeded by his son. Sheikh Hamad bin Mohammed. al-Qasimi, Khalid III bin Mohammed: the Ruler of Sharjah (from 1965) killed in January 1972 during a failed coup mounted by Saqr bin Sultan, the former ruler (May 1951–June 1965). Initially replaced by Saqr bin Sultan al-Qasimi as interim ruler but replaced within days by Sultan bin Mohammed al-Qasimi.

NOTES al-Qasimi, Saqr bin Mohammad: (b. 1918, d. 2010) ruler of Ras al-Khaimah (RAK) from 1948 to 2010. Sheikh Saqr became ruler of Ras al-Khaimah in July 1948, when he deposed his uncle – and father-in-law – Sheikh Sultan bin Salim al-Qasimi in a bloodless coup. Sheikh Saqr exiled his uncle to Sharjah. In February 1972, under his leadership, Ras al-Khaimah became the seventh Trucial State to join the United Arab Emirates. Sheikh Saqr was one of the more colourful and without doubt the most canny of the UAE’s seven emirate rulers. He oversaw the transformation of Ras al-Khaimah from a small backwater that was once the hub of pirate activity in the Gulf, later dependent on a declining pearling and fishing industry into one of the more economically diverse emirates. Under his rule, Ras al-Khaimah maintained its fierce independence from its neighbours. Sheikh Saqr only reluctantly allowed the emirate to become part of the UAE in 1972. Membership turned out to be the right option for Ras al-Khaimah, as hopes for significant reserves of oil or gas failed, replaced by a dependency on federal subsidies. Born in RAK, Saqr was one of the sons of Sheikh Mohammed, who ruled only briefly before being sidelined by the British in favour of his supposedly more compliant younger brother, Sultan. When Sultan was declared ruler in 1921, the emirate had fewer than 15,000 inhabitants, no schools and very little infrastructure, other than a small port in a sheltered creek. Like most of his generation, Sheikh Saqr was educated at home by local and Saudi Arabian Islamic clerics. Although lacking in formal education, he was something of an amateur historian. His

NOTES other passion was falconry. Following the deposition of his uncle Sultan in a bloodless coup in 1948, he set about uniting and winning the loyalty of his emirate’s disparate population, which included fishermen, Bedouin and indigenous mountain tribes. He also disputed what he claimed to be the illegal Iranian occupation of three islands that had traditionally been under al-Qasimi control. Thanks partly to exploration fees from foreign oil companies, and subsequently to federal funding, Sheikh Saqr was able to fund the establishment of schools for boys and girls, a hospital and the expansion of the port. But the failure to find much oil meant RAK instead relied increasingly on the exploitation of minerals in its Hajar mountains, agricultural activity and the production and export of ceramics. In the 1980s, Sheikh Saqr handed much of the day-to-day running of RAK to his eldest son, Khalid, who oversaw much of the emirate’s modernisation. It therefore came as something of a shock in 2003 when Saqr replaced Khalid with his younger half-brother, Saud. Khalid went into exile in Muscat and Sharjah, but returned to RAK on learning of his father’s death, in order to stake his claim to be the rightful heir. Sheikh Saud has been accused by critics of being too friendly to Iran, from which RAK is separated by the Strait of Hormuz. As the UAE is one of the US’s closest allies in the region, this friendly disposition towards Iran risked creating diplomatic tensions. At the time of his death in 2010, Saqr was thought to be the world’s oldest reigning monarch, aged 90. Al-Qasimi, Saqr bin Sultan: ruler of Sharjah from 1951 until deposed in 1965, when he moved to Egypt. Saqr

497 sympathised with Nasser, who in turn saw him as a useful ally in strengthening Egypt’s position in the Gulf. In early 1972 bin Sultan returned to Sharjah with a party of Bedouin and seized control of the palace. The attempted coup was swiftly put down by a combined force of the Union Defence Force (UDF) and the Abu Dhabi Defence Force (ADDF). al-Qasimi, Saud bin Saqr: (b. 1956) Ruler of Ras al-Khaimah since 27 October 2010. Sheikh Saud went to the American University of Beirut and the University of Michegan. He returned to Ras al-Khaimah in 1979 and became crown prince and deputy ruler of Ras al-Khaimah in 2003 after his father Saqr bin Mohammed al-Qasimi removed his half brother Khalid bin Saqr al-Qasimi when he refused to support the US-lead invasion of Kuwait in 2003. al-Qasimi, Sultan bin Kayed: the alleged leader of a 2012 plot to overthrow the UAE government. Sheikh Sultan was the cousin of the UAE ruler and a member of one of the UAE’s seven ruling families. His fellow accused included three judges, two human rights defenders, lawyers, teachers, academics as well as students. al-Qasimi, Sultan bin Mohammed: (b. 1939) generally known as Sheikh Sultan III, ruler of Sharjah since January 1972, save for a six-day period in June 1987, during an attempted coup led by his brother Abdulaziz bin Mohammad al-Qasimi. He is also a recognised historian and has published several theatrical and literary works. After completing his secondary education in the Gulf, he went on to study agricultural engineering at Cairo University (graduating in 1971). He then completed a PhD with distinction in history at Exeter University (UK) in 1985, and another in the political

498 geography of the Gulf at Durham University (UK) in 1999. al-Qasimi Hospital: in Sharjah was established as a government hospital in 1988. It is well known in the UAE. Qatar: 10,500sq km in area Qatar is a peninsula some 160km long, 90km wide. It has land frontiers with both the UAE and Saudi Arabia. As was the case with most of the Trucial States, in the nineteenth century Qatar suffered from the decline of the pearling industry. However, oil was discovered in Qatar some 15 years earlier than in the UAE. None the less, it was almost the last Gulf sheikhdom (Fujairah’s recognition was later), to be recognised as an independent state. In terms of social development, Qatar had also been seen as one of the least advanced of the Gulf states. As the pace of development picked up, Qatar’s natural inclination was to model itself on Kuwait, their fellow Sunni state to the north. However, the Qataris had traditionally been close to Saudi Arabia. By 1966 Qatar had achieved a higher per capita income than Kuwait. In mid-2017 the UAE joined other Gulf Co-operation Council (GCC) countries in blockading Qatar. Flights between the other GCC countries and Qatar were stopped, sea-routes closed and Qatari nationals living in the UAE and other GCC countries were threatened with repatriation. The blockade threatened to cause Qatar severe economic problems. The causes of the blockade were, inter alia, GCC disapproval of Qatar’s allegedly close relationship with Iran and its support of the Islamist Muslim Brotherhood. In mid-2018 it was reported that the UAE and Saudi Arabia were exploring the

NOTES possibility of a closer alliance between the two countries. Qatar and Dubai riyal: in June 1966, India devalued the rupee, which – even in its lesser role as the Gulf rupee – had long been the de facto currency of the Gulf states. To avoid the effects of this devaluation, several of the states using the rupee decided to adopt their own currencies. Qatar and most of the Trucial States adopted the Qatar and Dubai riyal, but Abu Dhabi adopted the Bahraini dinar. al-Qawasim: (plural of Qasimi aka Jawasmis) Arab tribe originally from Ras al-Khaimah. In the early nineteenth century the Qawasim adopted the fanaticism of the Wahhabis, attacking other tribes and Europeans at random. This attracted the opprobrium of the British, who finally attacked the Qawasim in Ras al-Khaimah in 1819. Al-Quds al-Arabi: an independent London-based daily pan-Arab Arabic language newspaper (the title translates as: Arab Jerusalem). Published in London since 1989 it is owned by expatriate Palestinian interests. Quetta: capital city of the Pakistani province of Baluchistan. Qur’an (aka Koran): Islam’s sacred scripture, believed to be based on the words of Mohammed as received from Allah (God). Qusahwira: in November 2013 the Abu Dhabi Company for Onshore Oil Operations (ADCO), a subsidiary of the Abu Dhabi National Oil Company (ADNOC) began production from the Qusahwira oilfield. The initial production capacity was 30,000 barrels of oil per day and the development cost of the project is about US$1.0 billion. The Qusahwira field is located approximately 162 miles (260km) south of Abu Dhabi city, and about 50

NOTES miles (80km) south-east of Asab field. The field is part of the South East Asset (SEA) that contributes to almost one-third of ADCO’s daily production. It covers an extensive area of 2,905sq miles (7,525sq kms) in a difficult terrain. SEA has 5 major fields which include Asab, Shah, Mender and Sahil. RAK Petroleum plc: assumed all the assets, liabilities of its former parent company RAK Petroleum PCL in November 2014. Registered in the UK, the company is listed on the Oslo stock exchange (Oslo Bourse) and focuses on oil and gas activities in Africa and the Middle East. Ramada: US based group operating hotels in Abu Dhabi, Ajman, Dubai (four) and Sharjah. Ras al-Khaimah: (translates as point or ‘promontory of the tent’) An Italian source claims that before this name was adopted, the emirate was known as Gulvar or Julvar. Until 1819 Ras al-Khaimah was the notional capital of the region. In area approximately 1,680sq kms (650 miles) Ras al-Khaimah was the last of the seven emirates to join the UAE after some months of hesitation. The original federation of six was formed on 2 December 1971, with Ras al-Khaimah joining on 10 February 1972. A population census in late 2015 resulted in a revised population estimate of 345,000 people, down by as much as about 100,000 from previous estimates according to the UAE National Bureau of Statistics and quoted by Fitch ratings. Ras al-Khaimah was once the capital of the surrounding Trucial Coast. Occupied by Persia until 1744, following the defeat of the Persians it became the headquarters of the Qawasim tribe whose rule (according to the eighteenth century

499 German explorer Carsten Niebuhr extended to Sharjah, Musandam and the UAE’s east coast). Unlike most of the emirates, Ras al-Khaimah has a good supply of fresh water. Ras al-Khaimah is divided into two parts, the southern section is cut off from its northern counterpart by a strip of territory belonging to Fujairah. Jebal Jais, at 1,925 metres (6,315ft) is in Ras al-Khaimah and is the UAE’s highest named peak. Ras al-Khaimah once possessed a large maritime fleet and was something of a regional sea power. In the early years of the nineteenth century it became a centre of piracy. The number of pirate vessels based in Ras al-Khaimah was estimated at 60 and there were as many as 20,000 available sailors. In 1820 the East India Company despatched a large force to the Gulf commanded by Major General Sir William Grant Keir to destroy the pirate fleets. The town of Ras al-Khaimah, the most notorious pirate stronghold, was attacked, the pirate ships were destroyed and Ras al-Khaimah’s fort demolished, ending its regional hegemony. Ras al-Khaimah Mobile Force: Formed in 1969, the force initially had 300 men organised into one armoured squadron and two infantry squadrons. It eventually expanded to 9,000 men. It became the Northern Command of the UDF in 1996. Ras al-Khaimah Transport Authority (RAKTA): a local agency established to regulate and control the transport activities of the emirate. Ras Laffan: the first phase of the Dolphin Project involved the development of two platforms in Qatar’s North field and two multi-phase offshore sea-lines to

500 connect to the processing facilities and the gas treatment and compression plants at Ras Laffan. Ras Musandam: historical references to a Cape of Arabia called Maketa date back to AD326. The peninsula of Ras Musandam is on the Strait of Hormuz, separated from the rest of Oman by the east coastline of the UAE (Fujairah and Sharjah on the Gulf of Oman) and Ras al-Khaimah on the Gulf. Rashid oilfield: offshore Dubai oilfield named after the former ruler of Dubai Sheikh Rashid bin Said alMaktoum. Reagan, Ronald: US President 1981– 89. Red Sind: breed of cattle thought to be heat resistant and well-suited to Gulf temperatures. Reefer: refrigerated cargo ship. Reliance Industries: an Indian engineering company responsible for the refinery project in the Jebel Ali free zone. Reliance was responsible for arranging the project’s investment finance, which included an investment from the Abu Dhabi Investment Authority (ADIA). Reserve Oil and Gas Company: in 1975 Reserve Oil and Gas of West Virginia (US) was awarded an offshore exploration zone in Sharjah waters in the Gulf of Oman. Drilling operations began in mid-1975, but along with other exploration contracts in Sharjah waters eventually proved uncommercial. Crescent Petroleum, a private Sharjah company with US investors, produced oil from the Mubarak field in the Gulf, near Abu Musa Island until the end of 2009, when it determined that the field had reached the end of its productive life and returned the concession to the government of Sharjah. The offshore Zora gas field in

NOTES waters shared between Sharjah and Ajman was developed by Sharjah-based Dana Gas and Crescent Petroleum. Production was estimated at between 50–60 million standard cubic feet per day (scf/d). Dana Gas and Emirates General Petroleum Corporation (Emarat) had also developed a common-user gas pipeline to serve Sharjah customers. Crescent Petroleum and Russia’s Rosneft had also explored for gas under a Sharjah onshore concession. In March 2018 Dana Gas continued to evaluate the viability of the Zora field, commissioning a geotechnical study as well as a field development plan to help assess its options. Reuters: the British news agency has had an Arab news service for decades. In 2010 the company announced that it was increasing its general Arabic content, which included articles translated from other languages, by 12 per cent under an expansion programme that had already begun in 2009. Revolutionary Organisation of the Arabian Peninsula (ROAP): also known as the Organisation for the Islamic Revolution in the Arabian Peninsula (OIR). After the 1990 invasion of Kuwait by Iraq, the OIR changed its name to The Reform Movement (al-Haraka Islahiyah). Riyadh: capital city of Saudi Arabia. Population (2016) 5,188 million. Ro-ro: an acronym for roll-on/rolloff. Roll-on/roll-off ships are vessels that are used to carry wheeled cargo. The Ro-ro ship is different from lo-lo (lift on-lift off) ship that uses a crane to load the cargo. The vehicles in the ship are loaded and unloaded by means of built-in ramps. al-Roumi, Khalfan: appointed (1990) representative to the UAE Supreme

NOTES Council responsible for the ministry of information. Rub al-Khali: the Empty Quarter – an area of about 650,000sq kms (290,000sq miles) widely considered to be one of the hottest, driest, most inhospitable and loneliest places on earth. The Empty Quarter spreads over parts of Saudi Arabia, Oman, Yemen and the UAE. In area it is calculated to be bigger than France, Belgium and the Netherlands combined. Ruwais: an industrial centre near the Jebel Dhanna, some 240 kilometres west of Abu Dhabi city. The Ruwais industrial and housing area was developed by ADNOC and represented a multi-million-dollar investment by the company. Once a small fishing headland, Ruwais was transformed into one of the most modern industrial complexes in the Middle East. Plans were drawn up in the 1970s to transform the area into an industrial development to provide the downstream requirements of Abu Dhabi’s booming oil and gas industry. Centred on Takreer’s Ruwais Refinery, the complex was opened in 1982. In addition to the original 120,000 barrels per-day (bpd) refinery, which was expanded in 1985 with the commissioning of a 27,000bpd hydro-cracker complex. The facilities at Ruwais included a natural gas liquids fractionation plant operated by Abu Dhabi Gas Industries Ltd (GASCO), a fertiliser plant run by Ruwais Fertiliser Industries (FERTIL), a Petrochemical Complex by Abu Dhabi National Polymers Company (Borouge), a marine terminal and a sulphur handling terminal. Saadiyat Island: in 1989 Abu Dhabi was planning to extend the city beyond the Maqta bridge. The expansion was to

501 include building other bridges and the development of the infrastructure. Sabkha: salt flats found in many of Abu Dhabi’s coastal areas. There are two types of sabkha, coastal and continental. They have developed where hard rock lies below the groundwater table, allowing water to remain close to the surface and susceptible to evaporation. Radiocarbon dating shows that the coastal sabkha of Abu Dhabi was formed some 7,000 years ago. The sabkha land area has steadily expanded seaward. The areas of lagoons are eventually expected to dry out and the islands to coalesce. The UAE sabkha area runs approximately parallel to the coast and in some places is up to 16km wide. Extensive flooding can take place when offshore winds (the shamal) combine with high spring tides and during sporadic torrential rainfall. After the floods, the pools on the sabkha evaporate and leave salt-crusts 7–8cm thick. These crusts are later dissolved when the surface is flooded or washed by rain. Abu Dhabi’s monthly average air temperature ranges from 47C to 12C but the temperature of the sabkha surface can reach 60C or more in summer. As a consequence, evaporation is intensive and the salinity of the open Gulf waters ranges from 40 to 45 per cent while the lagoons can reach a high of 70 per cent in their shore areas. Sahil: onshore Abu Dhabi oilfield first identified in 1972, located 180 kilometres south-west of the city of Abu Dhabi. al-Said, Qaboos bin Said: (b. 1940) Became Ruler (Sultan) of Muscat and Oman from 1970. A member of the Al-Bu Said Dynasty, Sultan Qaboos was educated in England where he attended the Sandhurst Royal Military Academy. He

502 returned to Oman in 1965 and in 1970 with British support took over the palace in a peaceful coup d’état from his father, Said bin Taimur. In a royal decree issued on 3 March 2017 Sultan Qaboos appointed his cousin Sayyid Asaad bin Tariq al-Said as deputy prime minister for international co-operation and the sultan’s special representative, an apparent step towards nominating a successor. His son, Taimur bin Asaad bin Tariq al-Said, is seen as second in line. Saipem: a major Italian petro-engineering group, Saipem’s activity in Abu Dhabi dates back to 1970s. Since then, Saipem has carried out numerous large-scale engineering projects onshore and offshore, making it one of the main oil and gas contractors in the Emirate through its subsidiary, Saipem SpA Abu Dhabi. In the twenty-first century Saipem headed up many of the most important and large-scale engineering, procurement and construction (EPC) projects in the UAE, notably the Shah Gas Development Programme and the first UAE railway system. In the 45 years since independence, Saipem has designed and built several cutting edge projects. Saleh: (aka Salih) offshore field in Ras al-Khaimah. Development of the Saleh-5 well began in July 2011 as part of a RAK Petroleum initiative to redevelop the Saleh gas and condensate field. However, difficulties and delays were encountered, requiring additional technical studies to be conducted before resuming drilling operations. In the understandably optimistic view of RAK Petroleum the outcome of the studies would not affect the value of the field, given the existence of plans to re-enter, deepen and test other wells.

NOTES The Saleh field had begun production in the mid-1980s. A total of 106 billion cubic feet of gas and 14 million barrels of condensate had been produced from seven wells through six existing wellhead platforms. The field had continued to produce small volumes of gas and the Thamama reservoir within the Saleh field is a proven, but untapped, producing reservoir. Samha: coastal town in the Abu Dhabi emirate, near Taweelah. Santa Fe International: a US company offering removal, relocation, property and visas and immigration services with its UAE headquarters in Abu Dhabi. Satah: offshore oilfield 180 kilometres north-west of Abu Dhabi city. Exploited by ADNOC (60 per cent) and JODCO (40 per cent). al-Saud, Abdullah bin Abdelaziz: (b. 1 August 1924, d. 23 January 2015) King of Saudi Arabia (from 1 August 2005 until his death on 23 January 2015), Head of the House of Saud and Ruler of Saudi Arabia. He assumed the throne and the title of King on the death of his half-brother Fahd in August 2005. al-Saud, Fahd bin Abdulaziz: (b. 1921, d. 2005) King of Saudi Arabia (1982–2005). One of the 36 sons of the founder of Saudi Arabia Ibn Saud, and the fourth of his five sons to rule the country, Fahd ascended to the throne on the death of his half-brother, Khalid in June 1982. Fahd had become Crown Prince when his brother Khalid succeeded Faisal, who was assassinated in 1975. Having been considered the King in all but name during the latter stages of Khalid’s reign, Fahd himself suffered a stroke in November 1995, which left him unable to perform all his official duties. Fahd was succeeded by Abdullah, the

NOTES Kingdom’s Crown Prince, upon his death in August, 2005. Fahd had tried to end the 15-year civil war in Lebanon by bringing the leaders of the warring factions together for talks in the Saudi city of Taif. al-Saud, Faisal bin Abdulaziz: (b. 1903 or 1906, d. 1975) King of Saudi Arabia from 1964 to 1975. Faisal was credited with reforming Saudi Arabia’s finances and introducing a policy of reform while maintaining a close alliance with the USA. al-Saud, Mohammed bin Salman (popularly known as MBS): (b. 1985) is the crown prince (heir apparent) and first deputy prime minister of Saudi Arabia. He is also Saudi Arabia’s minister of defence, making him responsible for the progress of the Saudi-led coalition seeking to restore presidential rule in Yemen. The UAE is a leading member of the coalition often supplying ground forces for military engagements. al-Saud, Salman bin Abdulaziz: (b. 1935) King of Saudi Arabia from 23 January 2015. Saudi Arabia: The border dispute on-going between the UAE and Saudi Arabia at the time of the formation of the United Arab Emirates reflected two factors: first, the latter’s underlying objection to the creation of a new body politic within what it regarded as its natural sphere of influence. Secondly, the more practical question of the Buraimi oasis, and whether it was in Saudi or UAE territory. Efforts on the part of the UK and the USA to end the dispute resulted in the Treaty of Jeddah, which it was announced in 1974 had resolved the dispute. The provisions of the treaty were not publicly disclosed until 1995, when it was registered with the United Nations (UN). The validity of the treaty was

503 questionable – it was never ratified by the government of the UAE. The Jeddah Agreement granted Saudi Arabia a 25km corridor to the Gulf, just east of Qatar. (Most maps published in the UAE fail to acknowledge this provision). Conversely, the UAE kept six villages located in the area of Al-Buraimi, including Al-Ain where, somewhat improbably, a Hilton Hotel had been built in 1971. Article 4 of the agreement required Saudi Arabia and the UAE ‘to refrain from engaging in and from permitting the exploitation of hydro-carbons in that part of its territory to which the hydrocarbon fields primarily located in the territory of the other state extend.’ The border dispute still remained an issue in 2006. The UAE reclaimed some of the territory ceded by the Treaty. The neo-colonial mindset that prevailed at the time meant that no consideration was given at the time to the Qatari involvement. When the treaty became public, Qatar found that notionally it no longer had a land border with the UAE. However, in 1965 Qatar had entered an agreement of its own which agreed its border with Saudi Arabia. Saudi Arabia – mutual defence pact: the UAE mutual defence pact with Saudi Arabia was signed in Riyadh on 21 February 1982. It provides for security co-operation in the fields of exchange of expertise, training, extradition and other matters concerning borders and equipment. Scorpion: British-made tank, supplied to the UDF and other Middle Eastern armies. Scott Wilson Kirkpatrick and Partners: UK construction consultants responsible for (inter alia) the Dubai Lagoon, The Atlantis Palm Building

504 (Dubai), the Sahara Centre (Sharjah) the Manazel Medical City (Abu Dhabi), the ACT Towers (Dubai) and numerous residential projects. Senaat: see General Holding Company (GHC) Shah of Iran: Mohammad Reza Shah Pahlavi: (b. 1919, d. 1980) Mohammad Reza Shah Pahlavi followed his father, Reza Shah as self-appointed ruler (Shah) of Iran from 1941 to 1979. On taking power he found himself struggling for control of the government with elected politicians headed by Mohammed Mossadeq. With the discreet collusion and support of the UK and the US, Mossadeq’s protest was stifled. Relying more on scheming than leadership, the Shah strengthened his control of the army and the secret police organisation, SAVAK. The 1963 reform programme, the White Revolution, was perceived by most Iranians to be half-hearted in concept and in execution. A serious incident between the newly formed UAE and Iran arose when Iran seized the two Tunb Islands in the Strait of Hormuz from Ras al-Khaimah in late November 1971. An Iranian claim to the island of Abu Musa was settled by peaceful arrangement with Sharjah. It took over 12 months for relations between the UAE and Iran to improve to the extent that a UAE ambassador could be sent to Tehran. The Iranian envoy to the UAE had already arrived in Abu Dhabi. Relations with the Shah of Iran, considered to be the cause of the Iranian claims, subsequently appeared to be quite cordial. However the continuing repressiveness of the regime, the widespread corruption that benefited some classes at the expense of others, led to an increased

NOTES gap between an out of touch ruling elite and a disaffected populace. Iran’s clerics, Islamic leaders, particularly the exiled Ayatollah Khomeini, were easily able to channel this dissatisfaction into popular protest, calling for the overthrow of the Shah. The Shah’s government collapsed in 1979 with the return of Ayatollah Khomeini and an Islamic Republic succeeded his regime. Relations with the UAE did not appear to suffer from Iran’s political upheaval. Shah gas field: the Shah gas field in Abu Dhabi was discovered in 1967 but did not begin production until 2014. The total proven reserves of the gas field are estimated at some 17 trillion cubic feet and production in 2016 was put at one billion cubic feet per day. Sharjah: the most easterly (with its enclaves on the Gulf of Oman) of the UAE’s seven sheikhdoms; the name is probably derived from an Arabic term meaning ‘east’. The sheikhdom of Ras al-Khaimah originally formed part of Sharjah but separated in 1866 when the domains of the former ruler of Sharjah were divided among his four sons. Fujairah also asserted its independence from Sharjah in 1901. Sharjah’s Gulf coastline is some 17km (11 miles) long and the Emirate has an area of approximately 1,000 sq miles (2,590sq km) with a population of approximately 1.4 million according to the 2015 census, made up of 175,000 Emiratis and over 1.2 million expatriates. Sharjah is the Emirate with the oldest ruling family and was once the dominant power in the northern region. Over the nineteenth century, many of the towns in its territory sought to establish their own emirates, including Ras al-Khaimah and Fujairah. Perhaps because of its

NOTES historical power, it has five enclaves peppered in the east, as local chiefs may have owed a historical loyalty to the Sheikh of Sharjah, or not known (or trusted) the new masters. Or there may have been tribal hierarchy issues at play – the new Emirs in Ras al-Khaimah or Fujairah may have seemed like peers rather than superiors. Sharjah also includes Nahwa, itself an enclave within an Omani enclave, and claims the three islands in the Arabian Gulf that were occupied by Iran in 1971. Sharjah-Dubai border dispute: in 1969 it had been reported that clashes between Dubai and Sharjah took place after an attack on installations in Dubai by an armed group from the Bani Qitab tribe of Sharjah. The first conflict between the two Emirates after the establishment of the federation came in August 1973 over an artesian well originally drilled by Dubai but sited on Sharjah’s side of the border which led to an armed clash. The then UAE defence minister, Sheikh Mohammed bin Rashid al-Maktoum (subsequently Ruler of Dubai and the federation’s vice president) and a posse of Dubai soldiers flew over the well in a helicopter and fired on Sharjah civilians to prevent them from drawing water from it. Sharjah forces retaliated and the helicopter was shot down. Sheikh Mohammed escaped alive. The dispute between the two Emirates was renewed in 1974 when Dubai began work on a corniche from the entrance to Dubai Creek up to Abu Hail and attempted to expand the corniche further into the disputed area. Sharjah protested to the federal government. The dispute continued to fester until it intensified in 1975 when Sharjah began the construction of a shopping and business complex in the disputed

505 area. Dubai’s commercial élites saw the schemes as a bid by Sharjah to lure away firms that were already located in, or were contemplating moving to, Dubai. This boundary dispute was a principal reason behind a UAE leadership crisis when President Zayed threatened to resign if the dispute was not settled peacefully. In October 1976 it was reported that the Ruler of Dubai, Sheikh Rashid bin Said al-Maktoum, and the Ruler of Sharjah, Sheikh Sultan al-Qasimi, ‘... had agreed an important principle to be announced soon, regarding the settlement of the border differences between the two Emirates.’ In November 1976 the Supreme Council of the UAE agreed to refer the dispute to an arbitration committee composed of legal experts from Britain (two) and France (one). In October 1981 the committee submitted its proposals – arrived at by two votes to one – for a settlement. These lengthened Dubai’s coastline by 3.5km, but inland the new border cut back across the old boundary in favour of Sharjah. Further inland the border was largely unchanged. In practical terms, the ruling meant that the Atlantic Richfield Company (ARCO) Dubai subsidiary was able to start drilling near the Sharjah border, knowing that Dubai was still its client. Also unaffected by the settlement was Sharjah’s ownership of the significant hydrocarbon reserves discovered north of the border by Amco Sharjah. Sharjah Insurance Company: established in 1970 by the decree of the Ruler of Sharjah and registered with the UAE federal ministry of economy. Sharjah-Iran Agreement (of 1971): the agreement granted Iran a share in the oil revenues resulting from the development of the Abu Musa Island field.

506 Sharjah National Guard: formed in 1972. It was essentially a paramilitary force of 500–600 men. The National Guard merged with the Federal Police in 1976. Sharjahport: Sharjah was the first port in the Middle East to possess fully equipped container facilities – at its Sharjah Container Terminal. Sharjah’s Arabian Sea port at Khorfakkan provides facilities for ships to unload without having to negotiate the Strait of Hormuz and entering the Gulf. Sheikh Zayed: (see al-Nahyan, Zayed bin Sultan) Shell (full name Royal Dutch Shell): Anglo-Dutch oil company. Shell Abu Dhabi BV offers oil and gas exploration and production services. The company was founded in 1980 and is based in Abu Dhabi. Shell Abu Dhabi BV operates as a subsidiary of Royal Dutch Shell plc. The company consists of four different businesses – Shell Markets (Middle East) Ltd Shell Exploration and Production, Shell Gas and Power and Shell Global Solutions. Shi’a (adj. Shi’ite): one of the two principal branches of the Islamic faith, the other being the larger Sunni branch. The origins of the split date from the death of the prophet Mohammed in the eighth century. Shi’a believe that the prophet Mohammed’s designated successor – the first Imam – was Ali bin Abi Talib because of his blood ties to the Prophet Mohammed. The Sunni understanding is that the religion’s hierarchical succession should be governed by a consensus of the faithful and that Abu Bakr was appointed Caliph through a community consensus to be the correct Caliph. Between 10 and 13 per cent of Muslims are considered to be Shi’a. Although

NOTES there are a number of Shi’a faith communities, the three principal groups are the Twelvers (the largest group), the Ismailis and the Zayedis. In 2012 it was estimated that perhaps 85 per cent of Shi’as were Twelvers. Sila: small town in western Abu Dhabi close to the UAE’s borders with Saudi Arabia and (notionally) Qatar. Simon, William E: US secretary of the treasury under the (Republican) Nixon administration from May 1974. Re-appointed by Presidents Ford (Republican) and Carter (Democratic), he served until 1977. Six Construct: a Belgian construction company founded in 1909 as the Société Belge des Bétons (SBB). In the 1980s SBB became a holding company with shareholdings in two newly created construction companies: Les Entreprises SBBM and Six Construct International. The latter was responsible for numerous construction projects in the UAE. Snam Progetti (Saipem): Italian oil and gas construction group active in the UAE since the 1970s. Société Nationale Elf Aquitaine: French state-owned oil company. Generally known simply as Elf, it is France’s largest oil company and one of the world’s top ten petrochemical companies. Its more than 800 subsidiaries include hydrocarbon, chemical, and health care interests. Elf is a fully integrated oil and gas company, combining upstream production capacity from fields in more than a dozen countries. Socotra: Yemeni island forming part of the Hadhramaut governate. In May 2018 UAE forces disembarked on Socotra without the approval of their Yemeni allies. Protests by the Socotra local government resulted in the UAE announcing the

NOTES withdrawal of its troops, apparently to be replaced by Saudi Arabian soldiers. Reportedly the UAE troops had begun work on basic military infrastructure. Yemen’s sovereignty over Socotra is challenged by Somalia. Sohar: Omani town on the Batinah coast where it joins the main coastal highway north of Muscat. Somaliland: the Republic of Somaliland is a self-styled state internationally recognised as an autonomous region of Somalia. Somaliland regards itself as the successor state to the former British Somaliland protectorate which united in 1960 with the Trust Territory of Somaliland to form the Somali Republic. Somaliland is located in north-western Somalia, on the Gulf of Aden. Sonatrach: state-owned Algerian oil and gas company operating in Africa and internationally. The company engages in the exploration, production, pipeline transportation, and marketing of hydrocarbons and by products. In the early days of the UAE, Sonatrach provided a number of middle and senior managers for the UAE’s oil companies. Souk: see Suq. Southeastern Drilling Company (SEIDCO): a US-based company which in 1975 established a UAE subsidiary in partnership between Saif Ali al-Darmaki and Atef Hamid Ajjaoui. SEIDCO has been engaged in a wide range of projects in the UAE including hotels and apartment buildings, hospital compounds, military office buildings, industrial parks housing complexes, airport terminals, university campuses and military works. South Yemen: shorthand term for the People’s Democratic Republic of the Yemen ( PDRY), formerly the People’s

507 Republic of South Yemen. The PDRY, centred on the British colonial port and coaling station of Aden, formed the south-western coast of the Arabian Peninsula. Founded in 1967 it was renamed the PDRY in 1970. A de facto client state of the USSR, the sole legal political party was the Yemen Socialist Party, founded in 1978. In 1990, the PDRY and its northern neighbour the Yemen Arab Republic (YAR) established a single state – the Republic of Yemen. Soviet Bloc: Term generally applied to the Soviet Union (USSR) and its satellite (i.e. neighbouring) states, viz Bulgaria, Czechoslovakia, East Germany, Estonia, Hungary, Latvia, Lithuania, Poland, Romania. This grouping of countries was also known as the Warsaw Pact countries. Soviet Occupation of Afghanistan: in late December 1979, the Soviet Union sent thousands of troops into Afghanistan and immediately assumed complete military and political control of the capital city, Kabul, and large portions of the country. This event, anticipated in the 1979 edition of the Asia and Pacific Review (World of Information), began a prolonged attempt by the USSR to create a new client state on its border. This was the first time that the USSR had invaded a country outside the Eastern Bloc. This move prompted the Carter administration to begin supplying non-lethal aid to Afghan mujahedeen, or Islamic insurgents. In August 1980 , a high-ranking Soviet military delegation arrived in Kabul to assess the situation. Soviet Union (official title Union of Soviet Socialist Republics (USSR) (Soyuz Sovetskikh Sotsialisticheskikh Respublik): officially a federal union in which all the states were equal, the USSR (which

508 endured from 1940 to 1991) was dominated by Russia and the constituent states had little influence in domestic or foreign policy. The 15 member states were Armenia, Azerbaijan, Belorussia (now Belarus), Estonia, Georgia, Kazakhstan, Kirghizia (now Kyrgyzstan), Latvia, Lithuania, Moldova, Russia, Tadzhikistan (now Tajikistan), Turkmenistan, Ukraine, and Uzbekistan. Standard and Chartered Bank: a British multinational banking and financial services company headquartered in London, England. Standard and Chartered operates a network of more than 1,200 branches, some 80,000 employees and outlets across more than 70 countries. Standard Oil: the Standard Oil Company (Indiana) was founded in 1889 by the Standard Oil Trust. The company’s first refinery, near Whiting, Indiana, produced various petroleum products. Beginning in the late 1890s, the company’s production of gasoline (petroleum) increased to meet the demands of the US automotive market. A recognised industry pioneer, in 1910 Standard Oil developed the first thermal cracking process, an important method for producing high-octane gasoline from petroleum. In 1911 the company’s headquarters were moved to Chicago. In 1988 Amoco acquired Dome Petroleum, Ltd which held large oil and natural gas reserves in Canada and in 1998 British Petroleum (BP) of the UK acquired Amoco for US$43.2 billion. BP Amoco eventually became part of BP PLC. In 1980 the Standard Oil Company of Indiana (later Amoco) and the Sharjah Petroleum Department discovered the giant onshore Sajaa gas field. In the 1980s the Amoco Sharjah Oil Company started

NOTES producing natural gas and natural gas products in Sharjah. Star Energy: Abu Dhabi based oil exploration company. In 1989 Star Energy opened a privately-owned products terminal at Jebel Ali with a storage capacity of 2.0 million barrels. Sterling Area: until the Second World War the Sterling Area was a zone of relative stability. The area’s decline was simply related to the decline of the British pound as a reserve currency. In 1950, more than 55 per cent of the world’s reserves were estimated to be in sterling. By 2011, the proportion was put at about 2 per cent. In July 1973, two years after the unification of the seven emirates, formal ties with sterling were ended coinciding with the launch of the UAE’s new currency and legal tender, the UAE Dirham. The Dirham replaced the range of currencies that had all been legal tender, including the Indian rupee, the Gulf rupee, the Qatari riyal, Dubai riyal and Bahraini dinar (principally used in Abu Dhabi). Strait of Hormuz: see Hormuz. Sub-continent: geographical term commonly used to refer to the area made up by Bangladesh, Bhutan, India, Maldives, Pakistan, Nepal and Sri Lanka. Sudan: the influence of Sudan on the formation and development of the UAE was important. According to the Sudanese writer Shawgi Badri at one point the seven directors of the UAE municipalities were all Sudanese, including Ahmed Awad al-Kareem in Abu Dhabi, Kamal Hamza al-Hassan in Dubai, Mukhtar Makki in Ajman, (al-Sayed) al-Atbani and Mokhtar al-Toum al-Jarq in Sharjah and Abdul Latif Fadl. Sukuk: the Arabic for a particular form of financial certificates often

NOTES referred to as sharia compliant bonds. Sukuk are defined by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) as ‘securities of equal denomination representing individual ownership interests in a portfolio of eligible existing or future assets.’ Different types of sukuk are based on different structures of Islamic contracts (Murabaha, Ijara, Istisna, Musharaka, Istithmar, etc.) depending on the project the sukuk is financing. Sumerians: it is thought that approximately around 4000BC in what is now Iraq, the Sumerian culture established itself along the banks of the Tigris and Euphrates river. What is known about the Sumerians is impressive – especially the invention of the cuneiform script, thought to be the world’s oldest writing system. The relatively prosperous Sumerian communities are thought to have established trading links with the Hindu civilisation of the sub-continent, making the Arabian Gulf an important sea route. The Sumerians also developed religious and literary traditions that were the architects of progress in government, mathematics, urban planning and agriculture. Sunni: the main branch of Islam, whose adherents practice a generally simpler and more fundamental form of the religion. Sunnis hold that on the death of the Prophet Mohammed, no successor had been appointed to lead the Muslim community and that the religion’s hierarchical succession should be governed by a consensus of the faithful. The Battle of Karbala in 680AD (known as the fitna) between supporters of the prophet’s grandson Hussein and the forces of Yazid the First, the Ummayad Caliph, saw Yazid’s forces defeat

509 Hussein’s supporters. The rise to power of Syria’s Umayyad dynasty which took control of the Caliphate and ruled until 750AD, marked the beginning of Sunni predominance. This division became a permanent split in Islam with all the attendant consequences. The sects and sub-sects that emerged after the fitna were dismissed as illegitimate by Sunnis. Islamic Law (Sharia) evolved over the religion’s first four centuries, dividing into four different interpretations – madhab – each reflecting the beliefs and understandings of their founders and the scholars that advised them. By the twenty-first century more extremist Sunni factions such as the Muslim Brotherhood and Hamas had attempted to impose more severe interpretations, dividing the Sunni community by their attempts at eliminating other religious and secular communities. Sunningdale Oil: this Canadian oil and gas company was one of the original owners – with 12.25 per cent – of the Total Abu al-Bukhoosh company formed in 1973 to develop the offshore Abu al-Bukhoosh oilfield, discovered in 1969 which eventually came on stream in 1974. It later sold its shareholding to Amerada Hess. Sunningdale was also the joint leader – with Pan Ocean Oil of the USA – of a concession in Abu Dhabi and had a shareholding in the later de-commissioned Arzanah field. Supreme Council: the highest government authority in the UAE made up of the seven ruling Sheiks – one from each emirate. In 2017 Sheikh Khalifa bin Zayed al-Nahyan, the UAE’s President represented Abu Dhabi, and Sheikh Mohammed bin Rashid al-Maktoum, the Vice President, represented Dubai.

510 Supreme Petroleum Council (SPC): formed in 1988 in Abu Dhabi, the SPC is the entity charged with setting Abu Dhabi’s petroleum-related objectives and policies. The SCP is responsible for supervising all the oil and gas companies that operate in Abu Dhabi and the UAE. Given Abu Dhabi’s status as the central player in the UAE’s oil industry, the SPC is the most important entity in the country when it comes to establishing oil policy. Suq: (also souq, souk, suk) Arabic for market place or bazaar. Often the very raison d’être of a town or village, the suq was where sea routes and camel trails converged, a meeting point and melting pot of tribesmen and sailors, sellers and buyers, travellers and locals. Fellow tradesmen preferred to be in stalls alongside each other. Throughout the Gulf the silver Indian rupee was the currency for years, as to a lesser degree was the 1780 Maria Theresa dollar. al-Suweidi, Ahmed Khalifa: the UAE’s first foreign minister who prior to the creation of the UAE played a key role in the country’s formation. Mr al-Suweidi chaired the 1970 meeting of the Deputy Rulers of nine (Bahrain and Qatar were still included) Gulf States convoked to discuss the formation of the single political unit that was to become the UAE. al-Suweidi, Sultan Yasser: served as Central Bank of the UAE governor from 1991 to 2014 when he retired. Mr al-Suweidi presided over the UAE’s integration into the global economy and oversaw the rebuilding of the country’s banking sector in the aftermath of the financial crisis, when the government supported many lenders and helped out Dubai with US$10 billion in funding.

NOTES Suweihan: the midway point between Dubai and Abu Dhabi and the location of a military city (garrison town) for the federal armed forces. TAQA: see Abu Dhabi National Energy Company. al-Tajir, Ahmad: The UAE’s first ambassador to Morocco and later (in 1984) appointed minister of state for financial and industrial affairs. al-Tajir, Mahdi: (b. 1931, Bahrain). A prominent businessman and diplomat, Mahdi al-Tajir played a key role in the economic development of Dubai. He became the first head of Dubai customs in the mid-1950s and played a leading role in the negotiations to form the UAE federation. He was appointed as the UAE’s first ambassador to London in 1971, a position he retained until 1987. Appointed head of customs in Dubai by Sheikh Rashid, Mahdi al-Tajir became one of Sheikh Rashid’s most trusted advisors, In 1963 Mr al-Tajir became director of Sheikh Rashid’s department of petroleum affairs and effectively the most powerful man in Dubai after Sheikh Rashid himself. For unspecified reasons Mr al-Tajir lost or resigned his position in 1981 with the worsening of Sheikh Rashid’s health and the inevitable weakening of his personal power. He remained UAE ambassador to the United Kingdom until 1987. Mr al-Tajir worked closely with the UK’s Costain construction group in the early 1970s. By the end of the decade Costain had gained over £280 million of contracts thanks in part to Mahdi al-Tajir. However, by 1977 his influence in Dubai was perceived to be waning. Mohammed Alabbar, the director of Dubai’s

NOTES department of economic development, had been appointed by Sheikh Rashid to eradicate the system of large commission payments from previous decades. Mr al-Tajir was challenged in the British courts to repay the allegedly excessive profits earned from the construction of Dubai’s aluminium smelter. The construction of the DUBAL aluminium smelter caused Mr al-Tajir to fall out with Sheikh Rashid’s sons. In a judgement issued by a British court, al-Tajir and certain associates had conspired to defraud Dubai Aluminium of millions of dollars. Mr al-Tajir still owned a glass-bottling company in Dubai and a private bank in the Cayman Islands. Tarif: a small Abu Dhabi inland town, some 76km south-west of Abu Dhabi city. Taryam, Abdullah bin Omran: (b. 1948, d. 2014) Dr Abdullah completed his primary, secondary and high school education in Sharjah and Kuwait. He then studied for a degree in History from Cairo University and completed his PhD in Modern History at the University of Exeter in the UK in 1986. Dr Abdullah also established the Al-Khaleej newspaper with his brother, the late Taryam Omran, in 1970, which subsequently evolved into the Dar Al-Khaleej newspaper group. After working as a secondary school teacher at the Al-Orouba School, he became a director of the department of education in Sharjah. He was a member of the team that negotiated the establishment of the UAE and held the posts of minister of education and minister of justice. Taweelah: (aka Tawilah) large energy project based in Abu Dhabi. The first phase of the project Taweelah A came into operation in 1989, producing 250MW

511 and 91 million litres/day of desalinated water. Taweelah B began in 1991 to expand generating capacity by 400MW and increase desalination capacity by 182 million litres/day. Work was tendered in May 1991 with a three-year building schedule. al-Tayer, Ahmad Humaid: appointed minister of state for finance and industry in 1989. Mr al-Tayer was later chairman of Emirates NBD, the banking group formed in October 2007 when the shares of Emirates NBD were officially listed on the Dubai Financial Market (DFM). The 2007 merger between Emirates Bank International (EBI) and the National Bank of Dubai (NBD) had combined the second and fourth largest banks in the UAE. Taylor Woodrow: UK based construction company active in the UAE and responsible for a number of major projects including Port Rashid, the dry docks, harbour works and ship repair shops, which at the time was one of the largest civil engineering projects in the world. Technip: French engineering and consulting company which commenced operations in Abu Dhabi in the 1980s. Tehran: (aka Teheran) capital city of Iran, population (2016) almost 9 million, 15 million including greater Tehran. Thales: French military equipment manufacturer, an important supplier to the UAE armed forces since 1978. Until 1983 known as Thomson-CSF. Thamma: onshore gas field. A US$1.4 billion project development commissioned in 1999, and designed to produce 1,000cmd of gas from the Thamma reserves. al-Thani: the ruling family of Qatar, the al-Thanis settled in Qatar in the mid-eighteenth century. Doha was

512 adopted as the capital in the nineteenth century. The current (2019) ruler (since 2013) is Sheikh Tamim bin Hamad al-Thani, who was educated in the UK. al-Thani, Khalifa bin Hamad: ruler of Qatar until 1995 when he was deposed by his son, Tamin bin Hamad al-Thani. Following his deposition, Sheikh Khalifa established himself in Abu Dhabi. He was later accused by his son of plotting to return to power with the assistance of the UAE, Bahrain and Saudi Arabia. al-Thani, Tamin bin Hamad: (b. 1980) ruler of Qatar since 2013. Educated at Sherborne School (UK). Thatcher, Margaret: British prime minister 1979–90 and leader of the Conservative Party from 1975–90. In the early 1980s Mrs Thatcher made a high profile visit to the UAE. Third World: term originally coined to describe the countries of the developing world. Tiriem, Tiriem: the speaker of the UAE Supreme Council around whom, in 1982, there formed a loose but short-lived political grouping that had expressed concern at the growing number of immigrants in the UAE. Tokyo Electric Power Company (TEPCO): An agreement was signed between the Abu Dhabi Gas Liquefaction Company (ADGAS) (the first gas liquefaction company in the Middle East) and TEPCO, to build a plant on Das Island with an initial annual production capacity of 2.5 million tons of liquefied natural gas (LNG) and 800,000 tons of liquefied petroleum gas (LPG). The agreement provided that TEPCO would buy the plant’s production for 20 years. The first LNG shipment left Das Island in April 1977. Four 786,000-barrel tankers were chartered for LNG transport,

NOTES as well as three 503,000 barrel ships for LPG transport. A further agreement was signed with TEPCO in 1990, under which ADGAS was to double its production as from 1994, and TEPCO was to import most of the doubled production for 25 years. For this purpose, another gas processing train was built on Das Island, adding another 2.5 million tons annually to the plant’s production. Then the world’s largest and most advanced facility, the new train was commissioned in 1994, incorporating the latest technologies in the gas liquefaction industry. Tourism Development and Investment Company (TDIC): established in April 2006, is entrusted with the development of major tourism destinations in Abu Dhabi, including Saadiyat Island and the Desert Islands. Tractebel: Belgian engineering company that tendered for the second phase of the Taweelah power plant. Trade and Commerce Law: according to the law’s provisions, most businesses operating in the UAE must be owned by UAE nationals only. This includes banking, insurance, import and export, brokerage, oil, manufacturing, supply contracts, construction, hotels, restaurants and publishing. Representative offices of foreign banks and other companies operating in the UAE would not, however, be included; nor would consultancy or professional services. Other exemptions are those small one-man businesses with a capital of less than US$27,000; these would require a local sponsor but not a local partner. Trans Mediterranean Airways (TMA Cargo): a cargo airline headquartered in Beirut (Lebanon). TMA ceased operations

NOTES in 2004, restarting in 2010. It ceased trading again in September 2014. Treaty of Jeddah: signed in 1974 the treaty was between Saudi Arabia, Qatar and the UAE. The treaty intended to resolve the Saudi Arabia/UAE dispute over the Buraimi Oasis. Saudi Arabia ratified the treaty in 1993, but the UAE has not yet ratified it. The legal validity of the treaty has since been questioned, first because Qatar was not included in the negotiations, and second because in the view of the UAE negotiators, the written text of the Treaty did not correspond to the verbal agreements. Trucial Coast: following the signature of the General Treaty of Peace in 1820, what had previously been known as the Pirate Coast became known instead as the Trucial Coast. Trucial Oman Scouts (TOS): originally the Trucial Oman Levies, renamed the Trucial Oman Scouts in 1956. Small (in 1969 1,100 officers and men) force raised by the British in the early 1950s to keep the peace between the sheikhdoms on land. The formation of the TOS brought peace to the smaller states that had often been at war. Absorbed into the Federal Union Defence Force (UDF) in 1971. Trucial Sheikhdoms: see Trucial States below. Trucial States: the seven Trucial States occupied the area of eastern Arabia once known geographically as Trucial Oman, a definition attributed to the British Political Agent in Bahrain, Captain F B Prideux. In Arabic the area was known as Sahel Oman (the coast of Oman). Trucial States Development Fund: established in 1966 with a capital grant of over œ1.5 million over a period of three years. Qatar initially provided £250,000,

513 Abu Dhabi £100,000, and Bahrain £40,000. By 1971 Abu Dhabi had provided a total of œ13 million. It was disbanded in 1972. Trucial States Development Office: established in 1965. Trucial States Development Plan: set up with British funds in 1955, the plan was based on a series of five-year development plans that concentrated on the health and education sectors, aiming to construct and strengthen administrative and institutional capacity. Financed by the British government, the first five-year-plan (1955–60) was granted £450,000; the second plan (1961–66) was allocated £500,000. Tunb(s): (Greater and Lesser) islands in the Strait of Hormuz. Iran had long claimed sovereignty over the islands, which until late 1971 were occupied by British forces on behalf of the Trucial States, where Sharjah claimed sovereignty. In the run up to federation, the UK sought Iran’s acceptance, eventually drawing up a Memorandum of Understanding dated 18 November 1971 which referred to the shared occupation of the Islands by Iran and Sharjah, stating that ‘Exploitation of the petroleum resources of Abu Musa (the larger of the two islands)... will be conducted by Buttes Gas and Oil under the existing agreement which must be acceptable to Iran’. This was also to be subject to a ‘financial assistance agreement’ to be signed by Iran and Sharjah. Turbat: (also known as Kech). A Pakistani city located in south Baluchistan. UAE Banks Federation (UBF): a not for profit organisation representing 50-member banks operating in the UAE,

514 is the leading industry association for the national banking sector. UAE Offsets Group (UOG): established in 1998, UOG is controlled by the governments of Abu Dhabi and Dubai. The group is in charge of channelling defence-related investments into profitable projects in various sectors to help diversify the UAE economy. The funds emanate from the offset investment programme of the federal defence ministry, a programme which requires foreign defence suppliers to invest locally an the production of a significant part of their UAE orders. The UOG identifies projects in which offset investments can be placed by the foreign suppliers in partnership with local investors. Several huge defence companies have set up offices in Abu Dhabi to launch offset projects identified by UOG. UAE University (UAEU) (Al-Ain): the first university to be established in the UAE, in 1976, five years after full independence from the UK. The UAE’s other higher education establishments are the Higher Colleges of Technology and Zayed University (campuses in Dubai and Abu Dhabi). Umm al-Dalkh: offshore oilfield 20 kilometres north-west of Abu Dhabi city. Exploited by Umm al-Dalkh Development Company (UDECO) (owned by ADNOC 88 per cent). Umm al-Dalkh Development Company (UDECO): the offshore oil operator merged in 1989 with the Zakum Development Company (ZADCO). Umm al-Lulu: an offshore field, about 30 kilometres north of Abu Dhabi city. The field is being developed by ADMA-OPCO, a joint venture of the Abu Dhabi National Oil Company (ADNOC, 60

NOTES per cent), BP (14.67 per cent), Total (13.33 per cent) and Japan Oil Development Company (JODCO, 12 per cent). The front-end engineering and design (FEED) for the project was completed in 2011. The field development is divided into two phases. The engineering, procurement and construction (EPC) contract for both phases was awarded in 2013. The project was expected to be completed in 2018. Production from the field began in October 2014 using existing facilities of the nearby Umm al-Dalkh Oilfield. The field is expected to produce up to 105,000 barrels of crude oil a day when fully developed. Umm al-Nar: refinery built by BP. ADNOC was appointed to operate the 15,000bpd refinery at Umm al-Nar that BP was to finance at a cost of US$35 million as compensation for selling a stake in ADMA to the Japanese company Mitsui. Umm al-Quwain: the name means Mother of Quwain although it is not clear who Quwain was. Its area is approximately 777sq km (300sq miles) with an estimated population of 75,000 in 2016. Umm al-Quwain, in the form of a wedge, shares with Abu Dhabi the status of having all its territory consolidated in one piece. Umm al-Quwain is also, with Abu Dhabi, the only emirate without exclaves, and has very few people for its size, only 75,000 people in a territory three times the size of Ajman. Umm al-Shaif: offshore Abu Dhabi oilfield. United Nations Develoment Programme (UNDP): the UNDP focusses on a number of objectives including the eradication of poverty, the elimination of hunger, the establishment of health and well-being, education, gender equality, clean water and many more. Since its

NOTES inception in 1966, the UNDP claims to have created three million jobs (41 per cent for women) in over 100 countries. Disaster risk reduction programmes have been put in place in over 60 countries. United Nations High Commissioner for Refugees (UNHCR): the UN Refugee Agency, was established to protect refugees, forcibly displaced communities and stateless people, and assist in their voluntary repatriation, local integration or resettlement to a third country. Union Bank of the Middle East (UBME): see Galadari, A W Union Defence Force (UDF): in November 1976 the Supreme Council abolished Article 142 of the Constitution, which had continued to permit individual emirates to form their own defence forces. The UDF was formed by merging the separate defence forces of Abu Dhabi, Dubai and Ajman, the Ras al-Khaimah mobile strike force and the Sharjah National Guard, the latter formed around the Trucial Oman Scouts (TOS) left behind by the British. For some time, the merger of these forces, each virtually a private army of the ruler concerned, remained somewhat theoretical. They were renamed the Western, Central and Northern Regions Forces, but in practice continued to be based in their respective states and ultimately commanded by their respective rulers. Alongside these three military commands the TOS was re-named the al-Yarmouk Brigade, closely linked to the UAE’s federal ministry. The UAE President is also constitutionally Supreme Commander of the UDF. United Nations (UN): the UAE became a member of the (UN) in 1971.

515 United States: generally accepted (but unofficial) title of the United States of America, or USA. Upper Zakum: field, a large oil accumulation lying above the Zakum field (qv). Vision 2030: in mid-2017 the government of Abu Dhabi announced a long-term plan for the transformation of the emirate’s economy, including a reduced reliance on the oil sector as a source of economic activity over time and a greater focus on knowledge-based industries in the future. Entitled Abu Dhabi Economic Vision 2030, it identifies the following as the government’s immediate economic priorities: 1. Building an open, efficient, effective and globally integrated business environment 2. Adopting a disciplined fiscal policy that is responsive to economic cycles 3. Establishing a resilient monetary and financial market environment with manageable levels of inflation 4. Driving significant improvement in the efficiency of the labour market 5. Developing a sufficient and resilient infrastructure capable of supporting anticipated economic growth 6. Developing a highly skilled, highly productive work force 7. Enabling financial markets to become the key financiers of economic sectors and projects. Vitol: Dutch company engaged in offshore oil exploration in Ras al-Khaimah in the 1970s. Voest Alpine: long present in the UAE, in 2015 the Austrian company was awarded a contract by the UAE’s Gas Industries Ltd (GASCO) to supply 95,000 tons of pipe plates for the high pressure

516 114km pipeline project in Abu Dhabi. Construction was completed in 2017. Wadi: river bed or water course – generally seasonally dried up, but often capable of a swift transformation from dried up river bed into rushing water course. Wadi Ham: the largest and longest wadi (water course) in the UAE. It runs for some 30km from Masafi (Fujairah) to its end dam. Wadi Siji: built in the 1970s 50km north of Fujairah (city), Wadi Siji has the oldest dam in the UAE capable of containing 1,200,000 cubic metres of water. Wahhabi(s): (aka Muwahhidoun) following the teaching of Mohammed ibn al-Wahhab, a recognised religious reformer, the Wahhabis Unitarian (tawhid) teaching spread throughout Saudia Arabia, often resulting in an austere fanaticism. This spread to the Qawasim who adopted similarly aggressive tactics. The Qawasim had originally been known as the Hawala, hailing from Julfar. The Wahhabi doctrine also spread to Kuwait. Wall Street Journal (WSJ): a daily business newspaper published in New York (US). The WSJ was founded in 1889. WAM: UAE official news agency, established in 1976 and headquartered in Abu Dhabi. The agency began broadcasts in Arabic in 1977 and in English in 1978. West Germany: the term often used for the Federal Republic of Germany (Bundesrepublik Deutschland – FDR), created after the Second World War (in May 1949). The FDR and its East German communist counterpart, the GDR (Deutsche Demokratische Republik (DDR)) were (re) unified in late 1990. (Sir) William Halcrow and Partners: UK consultant engineers

NOTES responsible for a number of major projects in the UAE including the Sheikh Zayed Mosque (Abu Dhabi 2007), Abu Dhabi International Airport (second runway – 2008), Al-Garhoud bridge (Dubai – 2008), Yas Island Development (Abu Dhabi – 2009). Halcrow was acquired by CH2M of the USA in 2011. Wintershall: West German oil and construction company active in the UAE since the 1980s. World Bank: the UAE became a member of the World Bank in 1972. World Trade Organisation (WTO): the UAE became a member of the WTO in 1995. Yamani, Zaki: Saudi Arabian oil minister who first came into international prominence during the Arab oil embargo of the USA in 1973. He held the ministerial post from 1962 to 1986 and was a minister in the Organisation of the Petroleum Exporting Countries (OPEC) for 25 years. His dismissal in 1986 by King Fahd was attributed to resentment among the Saudi royals that Yamani, the architect of the quadrupling of oil prices in the 1970s, had acquired an unacceptably important international profile. Yathrib: the original name of the oasis Saudi Arabian town that became Medina (The City of the Prophet), where the prophet Mohammed’s father was buried. In 622 Mohammed and his followers settled in Medina. Yemen Arab Republic: (YAR – also formerly known as North Yemen – existed as an independent republic from 1962 to 1990.). The YAR’s differences with its Marxist neighbour to the South, the People’s Democratic Republic of the Yemen (PDRY – consisting of the Hadramaut and Aden)

NOTES were settled – with mediation by the USSR – in 1990. However, Yemen’s post-independence history is one of political feuds and upheavals. In March 2015 a Saudi-led coalition, Operation Decisive Storm which included the UAE as well as other Gulf Co-operation Council (GCC) members Bahrain, Kuwait and Qatar, as well as Egypt, Jordan, Morocco, and Sudan, launched a military operation in Yemen against Iran backed-Houthi rebels, nominally at the request of Yemen’s President Abd-Rabbu Mansour Hadi. The involvement of so many disparate countries underlined the perception that Yemen had become the epicentre of a proxy war between Saudi Arabia and Iran, with backing from the UAE, which continued into 2019. Zakat: the giving of alms to the poor and needy is one of the Five Pillars of Islam (the others are declaration of faith, prayer, fasting in Ramadan and Haj). It is obligatory upon every adult Muslim of sound mind and means. The individual must own a specific amount of wealth or savings (after living costs, expenses etc). This is referred to as Nisaab and is the threshold at which Zakat becomes payable. The amount of Zakat to be paid is 2.5 per cent of Nisaab. Zakum: offshore Abu Dhabi oilfield which in 2016 was producing 640,000 barrels a day from around 450 wells. Processed oil from the Upper Zakum field is transported by pipeline to Zirku Island for processing. Zakum is the largest in the UAE and the third largest in the Middle East with reserves estimated at over 60 billion barrels. Zakum Development Company (ZADCO): merged in 1989 with the Umm

517 al-Dalkh Development Company (UDECO). Zakum Construction Company: Abu Dhabi based construction company. Zararah/Shaybah: (aka Zarrar), Abu Dhabi oilfield, Saudi Arabia’s territorial claim to what represented a large area of Abu Dhabi’s territory (generally known as the Buraimi dispute) included the Zararah oilfield. The claim persisted until settlement was reached during the Islamic summit in Lahore in February 1974 and later signed as the Treaty of Jeddah. In 2004 the UAE embarked on a diplomatic offensive to persuade Saudi Arabia to return to the table and reconsider those parts of the agreement that concerned the Zararah/Shaybah oilfield but which as set out in the written treaty did not apparently correspond to the verbal agreements reached at the time. A thesis published by the University of Exeter and written by Noura Saber Mohammed Saeed al-Mazrouei suggests that the Khor al-Odaid issue, which was the most visible aspect of the agreement was much less important than the oil and gas sharing arrangements for the oilfield due to their ‘huge economic implications’. Zayed University: Founded in 1998 Zayed University has two modern campuses – in Dubai and Abu Dhabi – that welcome both national and international students. Until 2008 the university was accepting only UAE national women, but after the opening of Sweihan campus, a collaboration between Zayed University and the UAE Armed Forces, approximately 200 male students were admitted. The university has connections with a number of institutions throughout the world. In 2014, Zayed University was ranked 23 out of 25 in the QS World

518 University Arab Rankings. It does not feature in any world rankings. Zirku: an island located 140km north-west of Abu Dhabi where ADMA-OPCO has a number of oil and gas

NOTES installations for the processing, storage and export of oil from Upper Zakum, Umm al-Dalkh and Satah fields. Zubbaya: onshore oilfield southwest of Abu Dhabi.

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The Portuguese occupied the Arabian (Persian) Gulf region. The Dutch turned the Portuguese out of their trading posts, to be ousted in their turn, by the British. Britain (represented by the East India Company) and a number of Arabian Gulf state rulers signed a treaty to combat piracy. This began a series of agreements which led to the area becoming known as the Trucial Coast, comprising the Trucial States (Abu Dhabi, Dubai, Sharjah, Ras al-Khaimah, Umm al-Quwain, Fujairah and Ajman). Exclusive Agreements between the Trucial States and Britain were signed, which effectively gave the British control over foreign affairs, while each emirate retained control over internal affairs. The seven emirates formed a Trucial Council to promote increased co-operation. Oil was discovered off Abu Dhabi. Oil was exported for the first time from Abu Dhabi. Oil was discovered off Dubai. Britain announced its intention to withdraw from the Gulf by 1971. A British plan to form a single state consisting of Bahrain, Qatar and the Trucial States did not take place. The independence of Bahrain and Qatar was negotiated. Iran occupied the islands of Greater and Lesser Tunb and Abu Musa. Abu Dhabi, Dubai, Sharjah, Fujairah, Umm al-Quwain and Ajman formed the United Arab Emirates (UAE), a loose federation. Sheikh Zayed bin Sultan al-Nahyan (ruler of Abu Dhabi) was elected president of the federation. Ras al-Khaimah’s ruler did not join at this point; he optimistically hoped that successful oil exploration would enable him to hold out for a better deal. Following its failure to discover oil, Ras al-Khaimah joined the federation; the Federal National Council (FNC) was created as a 40-member consultative body, appointed by the seven rulers of the UAE. The UAE supported Iraq during the Iran-Iraq war (the Gulf War). A political and economic union, the Co-operation Council for the Arab States of the Gulf (CCASG) (which soon became known as the Gulf Co-operation Council (GCC)) was formed by Bahrain, Kuwait,

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TIMELINE Oman, Qatar, Saudi Arabia and the UAE. The GCC’s inaugural meeting was held in Abu Dhabi. The UAE joined the US-led alliance against Iraq following its invasion of Kuwait in August 1990. The Bank of Credit and Commerce International (BCCI), in which the Abu Dhabi royal family owned a 77.4 per cent stake, collapsed. Iran insisted that visitors to the islands of Abu Musa and Greater and Lesser Tunb must have Iranian visas. Abu Dhabi sued BCCI’s executives for damages. A court in Abu Dhabi convicted 11 of the 12 former BCCI executives accused of fraud. They were given prison sentences and ordered to pay compensation. Iran’s dispute with the UAE over the islands of Abu Musa and the Tunbs was further fuelled by Iran when it built an airport on Abu Musa and a power station on Greater Tunb. Two BCCI executives were cleared of fraud charges on appeal. Diplomatic relations with Iraq were restored – the UAE had severed them at the outbreak of the Gulf War. The GCC reiterated its support for the UAE over the three disputed islands of Greater and Lesser Tunb and Abu Musa. Six thousand prisoners were pardoned by the President on humanitarian grounds. The government ordered financial institutions to freeze the assets of 62 organisations and individuals suspected of funding terrorist movements. The UAE and Oman signed a final agreement delineating their entire 1,000km border. Crown Prince Sheikh Khalid bin Saqr al-Qasimi of Ras al-Khaimah, who had been handling day-to-day affairs of state, was dismissed by his father in favour of his brother (a traditionalist), Sheikh Saud bin Saqr al-Qasimi. President Sheikh Zayed died. Sheikh Khalifa bin Zayed al-Nahyan succeeded his father as ruler of Abu Dhabi. The Federal National Council (FNC) elected him president of the UAE. Sheikh Khalifa announced plans to elect half of the 40 members of the FNC, by a limited number of citizens. Sheikh Maktoum bin Rashid al-Maktoum, ruler of Dubai, Vice President and Prime Minister of the UAE, died. He was succeeded by Sheikh Mohammed bin Rashid al-Maktoum. The state-owned company, Dubai Ports, purchased the UK shipping line P&O, which in turn controlled the management-company of six of the largest

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2010

521 ports in the US, which sparked a US national controversy concerning border security. Dubai Ports was forced to sell its US assets to American International Group within weeks. The working week was changed to bring it into line with Western nations. The first indirect elections of half the membership of the FNC were held; of the more than 300,000 people eligible to vote, only 6,595 were chosen by the authorities and given the right to vote, and of these 1,163 were women. A common market was created by Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE, the six wealthiest Gulf States. Citizens of these countries are now allowed to travel between and live in any of the six states, where they may find employment, buy properties and businesses and use the educational and health facilities freely. France was given permission to set up a permanent military base in Abu Dhabi. The Emir of Dubai, Sheikh Mohammed bin Rashid al-Maktoum, issued a decree appointing his son Sheikh Hamdan bin Mohammed bin Rashid al-Maktoum as crown prince of the Emirate. The entire debt owed to the UAE by Iraq was cancelled. The parliamentary term for the FNC was extended from two years to four. Sheikh Rashid bin Ahmad al-Mu’alla, the ruler of Umm al-Quwain, died, his son Sheikh Saud bin Rashid al-Mu’alla succeeded him. The UAE federal government bought US$10 billion of Dubai government bonds to ease Dubai’s liquidity problems. The money was used to pay off debts, which had accumulated in real estate and tourism projects. The Dubai bonds were for five-year terms at 4 per cent annual interest. The UAE withdrew from the proposed Gulf region monetary union, preferring to retain the dirham. The French opened a permanent military base in Abu Dhabi, called the Peace Camp. The Burj Khalifa, the world’s tallest building at 828 metres, with 160 floors, was opened. It was originally called the Burj Dubai but was renamed in honour of the ruler of Abu Dhabi and the UAE after Abu Dhabi had loaned Dubai US$10 billion to help pay off its construction debts. The Hamas leader from Palestine, Mahmoud al-Mabhouh, was killed in a Dubai hotel, with most observers believing the Israeli secret service, Mossad, to be responsible. The perpetrators used fake UK, Irish, French and German passports to enter and leave the UAE, prompting international condemnation from the countries involved. The population grew by 65 per cent over

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TIMELINE 2006–10, according to official statistics, reaching 8.26 million, of which only 948,000 were UAE nationals. Sheikh Saqr bin Muhammad al-Qasimi, Emir of Ras al-Khaimah, died; he was aged 90 and had been the world’s oldest and longest serving monarch. His son Sheikh Saud bin Saqr al-Qasimi became Emir. In August the Central Bank of the United Arab Emirates announced that the UAE’s currency, the dirham, would continue to be pegged to the US dollar ‘without change’, as bank deposits in June increased by 0.2 per cent from May, and reached Dh1.126 trillion (US$4.134 trillion). The UAE became a net lender to the international money markets as its banking system moved from deficit to surplus. A new law was introduced in August that prescribed a jail term of three to five years for anyone spreading rumours using social network media, such as BlackBerry, the Internet, Twitter and Facebook. In parliamentary elections held in September, 554 independent candidates took part, including 85 women. Of the 40 members making up the new legislature, 20 were elected and 20 were appointed by the Emirs. Turnout was 27.8 per cent. The Dubai Electricity and Water Authority (DEWA) began construction of a new water extension pipeline to meet the growing demand for drinking water to the new and heavily populated areas along Emirates Road. On 15 July a new overland oil pipeline became operational from the oil fields in the UAE’s western desert to Fujairah, a major oil storage hub in the east. Shipments of up to 1.5 million barrels of crude oil per day can now by-pass the Strait of Hormuz (which Iran threatened to blockade in 2012) with direct access to the Indian Ocean. A new visa system (similar to the European Schengen agreement) allowing multiple entry for foreigners to the six GCC countries was introduced in November. President Sheikh Khalifa bin Zayed al-Nahyan paid a state visit to Britain beginning 30 April. He was greeted by the Queen and taken by horse drawn carriage to Windsor Castle. The UAE government announced plans to send an unmanned spacecraft to the planet of Mars by 2021 to coincide with the 50th anniversary of the country’s founding. This will represent the first space probe by an Arab or Islamic country. As part of the plan, the UAE will set up a new agency to oversee its nascent space industry and to marshal the Mars mission. The UAE and four other members of the GCC took part in Saudi-led coalition (of which the UAE was a member) air strikes on Houthi

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2018

2019

523 rebels in Yemen. Sheikh Rashid bin Mohammed bin Rashid al-Maktoum, eldest son of Sheikh Mohammed bin Rashid al-Maktoum, ruler of Dubai and Vice President and Prime Minister of the UAE, died on 19 September. He had previously been the heir apparent until 2008 when he was replaced by his younger brother, Sheikh Hamdan bin Mohammed, Crown Prince of Dubai. In September, UAE warplanes launched pre-dawn bombing raids against the rebels in Maarib, the eastern province of Yemen, where 60 coalition troops had been killed – and on Yemen’s rebel held capital Sana’a, as well as on Houthi strongholds of Saada in the far north, and the central city of Ibb. Houthi rebels from the Yemen claimed they had scored a hit on a vessel operated by the UAE military on 1 October. The UAE is part of an Arab coalition fighting in support of Yemen’s government. In early December the UAE appeared on the EU’s first ‘blacklist’ of 17 tax haven countries it said failed to match up to international standards. The EU said the move was an attempt to clamp down on the estimated US$650 billion lost to ‘aggressive avoidance’ every year. A further 47 countries were placed on a ‘grey list’ and warned to complete their tax reforms. Countries on the blacklist will no longer be eligible for EU funds except where it is to aid development. In July 2017 a decision was taken by its fellow members to terminate Qatar’s membership of the GCC. A report published in the Washington Post alleged that the UAE had arranged the hacking of a number of Qatari government news and social media sites. US General James Mattis named the UAE a Little Sparta, (without making it clear which country was the ‘big’ Sparta). A new law coming in to effect in 2019 will make investors eligible for a five or 10-year residency visa depending on the size of their investment. While the full ownership of companies based in the UAE is currently limited to free zones, the new law is expected to attract foreign investors looking to set up or acquire local companies. A new quota system to come into effect with the 2019 Federal National Council (FNC) elections will guarantee 50 per cent of the seats be for women. The move will result in the election or appointment of 20 women out of the 40 members of the FNC.

Country Profile Risk assessment Economy Politics Regional stability

Good Poor Fair/poor

Political structure Constitution A temporary constitution came into effect on 2 December 1971 in an effort to form a political union between the seven Gulf Arab states of Abu Dhabi, Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah and Umm al-Quwain. It was formally accepted in May 1996 after an amendment removed the word ‘interim’, with Abu Dhabi being acknowledged as the permanent capital. Highest government authority is vested in the Supreme Council of Rulers, which consists of the rulers of the seven emirates which comprise the UAE. It is responsible for most internal and external affairs. Abu Dhabi and Dubai hold the power of veto on the Supreme Council. The Supreme Council meets four times a year, and elects the president and vice president (each for terms of five years). The president appoints the prime minister and the Council of Ministers. The 40 members of the Federal National Council (FNC), drawn proportionately from each emirate, are appointed by the rulers (Abu Dhabi and Dubai appoint eight members each, Sharjah and Ras al-Khaimah appoint six members each and Ajman, Fujairah and Umm al-Quwain appoint four members

each). The individual emirates have retained a great degree of autonomy and all local powers which are not specifically reserved for the federal government belong to them. Since 1971, the President has been the ruler of Abu Dhabi and the Prime Minister and Vice President the ruler of Dubai, suggesting that elections are a matter of form and that in fact the two emirates with the largest economic and political muscle tend to dominate the federation. Independence date 2 December 1971 Form of state Federal monarchy The executive The Head of State is president for a term of five years, chosen by the seven hereditary rulers of the Emirates who make up the membership of the Federal Supreme Council (FSC). The President, Vice President and FSC comprise the executive branch. The FSC convenes four-times annually to set policies and sanction federal legislation. Within the FSC, Abu Dhabi and Dubai have effective veto power. National legislature The UAE parliament, Majlis al-Watani al-Ittihadi (Federal National Council) (FNC), has 40 members, Abu Dhabi and Dubai appoint eight members each, Sharjah and Ras al-Khaimah appoint six members each and Ajman, Fujairah and Umm al-Quwain appoint four members

COUNTRY PROFILE each. Of these, half the members are chosen by indirect votes through electoral colleges in each Emirate (the size of each college is 100 times the number of FNC members held by each Emirate) and the other half are appointed by each Emir. All FNC members serve for four-year terms. Under the constitution the FNC is a consultative body with legislative and supervisory roles, with the authority to review and amend proposed federal legislation, although it cannot veto proposed legislation. It may also assess the performance of any minister or ministry. Last elections 3 October 2015 (parliamentary) Results: Parliamentary: 20 independent candidates were elected and 20 candidates were appointed. Turnout was 35.3 per cent, and voters were handpicked by the ruling government. Next elections 2019 (FNC) Political parties Party political activity is not officially permitted in the UAE. Ruling party There are no official political parties Legal system The federal courts, which consist of the Union Supreme Court and primary tribunals, were established by law in 1979. The former primary tribunals in Abu Dhabi, Sharjah, Ajman and Fujairah became federal primary tribunals and the former primary tribunals of other towns became circuits of the federal primary tribunals. The law applied is Sharia (Islamic Law).

525 Population 9.86 million (2016) (*) About 28 per cent of the population is under 14 years of age with 70 per cent between 15–64 years and 2 per cent over 65 years of age. Abu Dhabi has the highest population (40 per cent of total), Dubai (25 per cent), Sharjah (17 per cent), Ras al-Khaimah (7 per cent), Fujairah (4 per cent), Umm al-Quwain (3 per cent), Ajman (4 per cent). Last census 5 December 2005: 4,106,427 Population density 30 inhabitants per square km. Urban population 84 per cent (2010 Unicef). Annual growth rate 7.1 per cent, 1990-2010 (Unicef). Ethnic make-up A fifth of the population are UAE nationals. Around 80 per cent are expatriates, with those from the Indian subcontinent accounting for about 40 per cent. The second largest group is Iranians, who make up about 17 per cent. Non-UAE Arabs make up about 13 per cent and Westerners about 5 per cent. Abu Dhabi is dominated by the Bani Yas tribe of which the al-Bu Falasah is the most important section (to which the al-Maktoum of Dubai belong). Religions The majority are Muslims; about 85 per cent of whom are Sunni and 15 per cent are Shi’a Muslims. Many expatriates from the Indian subcontinent are Christian. The constitution guarantees full religious rights to all. The Apostolic Vicariate of Arabia is in Abu Dhabi.

526 Muslims in UAE (2016) % of population Sunni (% of Muslims) Shi’a (% of Muslims)

COUNTRY PROFILE 76 85 15

Languages spoken Languages of the Indian sub-continent are widely spoken among the expatriate community. Persian (Farsi), Urdu and English are also spoken. Officual language/s Arabic Education Primary education is compulsory and is followed by three years’ preparatory education which qualifies students for general or technical secondary education. The language of tuition is English. General secondary education lasts for three years. It consists of a common first year followed by specialisation in science or the humanities. At aged eighteen, students take an examination for progression to higher education. Technical secondary education lasts for six years following primary school and comprises three main streams: technical, agricultural and commercial in both preparatory and secondary cycles. At aged eighteen, a Technical Secondary Diploma is awarded. Secondary education is also offered in religious institutions. Higher education is offered in public and private universities and Higher Colleges of Technology. These include the United Arab Emirates (UAE) University, and the Dubai University College (a private college).

Emirate and federal politics can at times threaten academic standards. Education is allocated some 20 per cent of the federal budget. Literacy rate 77 per cent adult rate; 91 per cent youth rate (15–24) (Unesco 2005). Compulsory years 6 to 12. Enrolment rate 89 per cent gross primary enrolment; 80 per cent gross secondary enrolment, of relevant age groups (including repeaters) (World Bank). Pupils per teacher 16 in primary schools. Health In October 2012, the first phase of the private health insurance scheme for government employees of Sharjah was launched. Life expectancy 77 years, 2004 (WHO 2006) Fertility rate/Maternal mortality rate 1.7 births per woman, 2010 (Unicef); maternal mortality 3 per 100,000 live births (World Bank). Child (under 5 years) mortality rate (per 1,000) 8 per 1,000 live births (WHO 2012). Head of population per physician 2.02 physicians per 1,000 people, 2001 (WHO 2006) Welfare In 2008 a mandatory health insurance policy called Thiqa (trust) was established, which entitles all UAE nationals to free extensive primary, secondary and

COUNTRY PROFILE tertiary healthcare. Expatriate workers are insured under the National Health Insurance Company (Daman) scheme, established in 2006. In 2012 Daman was the largest health insurance company in the Gulf region, with 2.1 million customers. Main cities Abu Dhabi (federal capital estimated population 613,368 in 2012), Dubai (commercial capital, 1.8 million), Sharjah (941,424), Al-Ain (502,035), Ajman (255,869), Ras al-Khaimah (124,005), Al-Fujairah (104,375), Umm al-Quwain (51,868). Media Dubai is the hub of the UAE’s media industry and the dedicated Dubai Media City, which assures clients freedom of speech, is growing as an important regional centre attracting distinguished international media outlets. Press While the press is largely independent, in November 2007, Reporters Without Frontiers reported that press freedom in the UAE was bound by widespread self-censorship which eschewed any criticism of the government to avoid prosecution. Dailies: Most newspapers are published in either Abu Dhabi or Dubai. Newspapers in Arabic that comment on news and politics include Al-Bayan (www.albayan.ae), Akhbar al-Arab (www.akhbaralarab.co.ae), also has economic and sports editions, Emarat al-Youm (www.emaratalyoum.com), AlKhaleej (www.alkhaleej.co.ae). In English

527 newspapers include Emirates Today (www.emiratestodayonline.com), Gulf News (www.gulf-news.com), Khaleej Times (www.khaleejtimes.com) and 7 Days (www.7days.ae). Weeklies: In Arabic, Al-Azmina Al-Arabia (www.alazmina.info), bi-weekly for politics, culture and economics, Al-Sada (www.e-sada.com) is a magazine for women. In English, The Dubai Life (www.thedubailife.com) and Time Out Dubai (ww.timeoutdubai.com/dubai), covers entertainment and consumer items. Business: English language monthly publications include the monthly Capital (www.capital-me.com), and UAE Banking & Business Review (www.sterlingp.ae) and Gulf Business (www. gulfbusiness.com) monthly magazine. The CPI Financial services published an online newsletter concerning banking and the financial services (www. cpifinancial.net). Periodicals: There are over 30 magazines in Arabic and English. Al-Shindagah (www.alshindagah.com), published six times a year and Review (www. sterlingp.ae) covers current affairs, Al-Shumookh (www.alshumookh.net) monthly magazine lists cultural events. Broadcasting The state-owned Emirates Media Inc (EMI) operates a number of satellite TV channels,radio stations, publications and interactive internet websites. The switchover to digital signals was completed by 2013, according to the Director General of the Telecoms Regulatory Authority (TRA).

528 Radio: Each Emirate has its own radio station, although most are located in either Abu Dhabi or Dubai. There are general interest music and news radio stations, broadcasting throughout the Emirates, while some are dedicated to religious texts or programmes for immigrant populations. Apart from EMI (www. emi.co.ae), another national network is the popular commercial Arabian Radio Network (ARN) (www.arnonline.com), including in English, Dubai 92. A shortwave world service broadcasts to North America, Asia and Europe. Television: Of the six TV networks based in UAE, three are pan-Arabic. The state-owned, Dubai Media Incorporated (DMI) produces a number of local TV programmes and operates four domestic channels (http://www.dubaitv.gov.ae), which provides programmes of information, entertainment, religion, culture, news and politics. In 2007 tests were undertaken by DMI to evaluate the viability of mobile digital video broadcasting. MBC (http://www.mbc. net) operates a four channels including the Al-Arabiya News Channel (www. alarabiya.net). The private and independent satellite broadcaster Showtime Arabia (www. showtimearabia. com), based in Dubai, which operates over 30 channels showing imported programmes, by subscription. Residents also have a choice of hundreds of regional channels broadcasting via foreign satellite or cable TV companies. Many commercial channels broadcast foreign programmes in English with Arabic subtitles.

COUNTRY PROFILE Residents have a choice of hundreds of regional channels broadcasting via satellite or cable. Many commercial channels broadcast foreign programmes in English with Arabic subtitles. There are two local TV stations operating from Ajman (www.ajmantv.com) and Sharjah (www.sharjahtv.ae). Advertising The UAE is the region’s marketing gateway. Dual English and Arabic usage is common on signs and in many publications. National news agency Emirates News Agency Other news agencies DPM News Agency: www. dpmnewsagency.com Economy The UAE is a free-market economy, initially dominated by hydrocarbons. It has a high per capita income and a sizable annual trade surplus. Successful efforts at economic diversification have reduced the portion of GDP based on oil and gas to 40 per cent, an achievement that has helped the UAE weather the drop in oil prices better than other oil producing countries. Since its transformation to a developed state because of oil, the government has increased spending on job creation, infrastructure expansion and is opening up utilities to greater private sector involvement. The country’s free trade zones – offering 100 per cent foreign ownership and zero taxes – are helping to attract foreign investors. Dependence on oil, a large expatriate workforce, and growing inflation pressures are signifi-

COUNTRY PROFILE cant long-term challenges. GDP per capita was US$36,060 in 2015, placing the UAE just inside the top 20 in the world. Proven oil reserves were 97.8 billion barrels in 2017, with annual production of 3.9 million barrels per day. Proven natural gas reserves were 5.9 trillion cubic metres in 2015, with annual production of 60.4 billion cubic metres. The richest Emirates, Abu Dhabi, Dubai and Sharjah, account for approximately 50 per cent, 30 per cent and 8 per cent respectively of overall GDP. They transfer revenue to other emirates to ensure similar standards in basic public goods and services (health, education and transport) are maintained. GDP growth was 5.3 per cent in 2008, falling to -3.3 per cent in 2009 as the global economic crisis cut demand for oil, but recovering to 2.3 per cent by 2018. In 2009, the credit rating agency Standard and Poor’s cut its ratings for six Dubai government-backed entities to A- and Emaar Properties from A- to BBB+. The Dubai building boom was badly hit by the global recession. Dubai World, including a series of artificial islands built in Dubai’s shallow waters, was an ambitious multimillion-dollar project that had to be bailed out of near collapse in November 2009 by the Dubai government. Although losses were incurred by Dubai, ultimately international financial pressure on the UAE economy was eased when Abu Dhabi agreed to buy fiduciary bonds in 2010 and allow Dubai to avoid defaulting on an estimated US$87 billion in debt. As the economy declined, so imports fell and inflation dropped from 12.3 per cent in 2008

529 to 1 per cent in 2009. The crisis resulted in pressures on the banking sector and a contraction in the availability of credit. In 2010, GDP growth was 0.9 per cent as global trade picked up and increased continually to 5.2 per cent in 2013. GDP growth has shrunk to a modest 4.6 per cent in 2014 and shrunk further 3.9 per cent, as oil prices remain persistently low, cutting revenues in UAE since mid-2014. Overall GDP growth was put at 3.9 per cent in 2015. Non-oil growth was expected to accelerate to 5.5 per cent in 2016 and to 6 per cent in 2017. The UAE has developed a range of manufacturing industries, financial services and a tourist industry, and is emerging, because of its favourable tax regime, as an important international diamond centre. Overseas companies and foreign direct investment have been attracted to the UAE by the creation of a dozen free trade zones, which offer special advantages, while enabling the UAE to expand its non-oil exports. The UAE has made good progress in privatising small agricultural enterprises and has broadened the programme to include larger-scale industrial projects and public utilities. The tourist industry plays a very big part in contributing to GDP and the UAE has some of the most luxurious hotels in the world. Other important industries include aluminium, fishing, cement, fertilizers, commercial ship repair, construction materials, handicrafts and textiles. External trade The UAE is part of the Greater Arab Free Trade Area (Gafta) along with 16

530 other members, including Saudi Arabia, which creates an Arab economic bloc. Gafta includes a customs union in which tariffs are to be reduced by a per centage each year, until none remain. The UAE also belongs to the Gulf Co-operation Council (GCC), which negotiates bilateral free trade agreements on behalf of members. The GCC’s effectiveness was badly damaged in 2017 by the divisions between its members; the UAE and Saudi Arabia objected to the behaviour of Qatar – its interference in the Syrian civil war, support for the Muslim Brotherhood and its close relations with Iran. The UAE declared Qatar a non-grata state, denying it use of airspace and UAE waters. Residency permits held by Qatari citizens were not renewed. The government has encouraged new manufacturing enterprises in metal processing, furniture and jewellery making and food processing. However, the service sector achieves more foreign earnings than any other except oil and natural gas, through tourism, financial services and banking and transport. The Dubai Ports Authority is one of the largest container handling bodies in the world. Imports Main imports are machinery and transport equipment, chemicals and food. Main sources: China (8.4 per cent of total in 2017), US (6.8 per cent), India (6.6 per cent). Exports Main exports are crude oil, natural gas, pearls and precious stones, elec-

COUNTRY PROFILE tronic equipment and vehicles, re-exports, dried fish and dates. Main destinations: Iran (11.3 per cent of total in 2017), India (9.9 per cent), Japan (9.1 per cent) Re-exports Rice, dried fish and dates and aluminium. Agriculture Farming Agriculture contributes around 0.6 per cent to GDP and employs 7 per cent of the workforce. A harsh climate and sandy soil make self-sufficiency in food production an unlikely prospect. The northern Emirates of Ras al-Khaimah, Fujairah (on the western Gulf of Oman coast) and Ajman supply 25 per cent of local demand. Ajman is the most productive and has been a focal region for agricultural development. Ras al-Khaimah and Fujairah produce a more diverse selection of agricultural produce as a result of the higher rainfall they receive. Very few nationals still work on farms, where labour is mostly from Bangladesh and Baluchistan in south-west Pakistan. Government farm subsidies are generous. Many farms are supported through funding available on easy credit terms, seed allocations and technical advice on fertilisation, irrigation, mechanisation and marketing of crops. Earth-moving and wells are free, and seeds, fertilisers and insecticides are half the market price. Abu Dhabi gives land to its citizens without charge, as well as underwriting other Emirates’ grants of land to other UAE citizens via its financing of the federal bud-

COUNTRY PROFILE get. The main state-funded agricultural research centres and extension services are at al-Dhafra, Liwa and Madina Zayed. The Arid Lands Research Centre operates experimental vegetable greenhouses on Saadiyat Island near Abu Dhabi town. The UAE is self-sufficient in various winter vegetables and excess crops of vegetables are sometimes dumped in the desert, due to a lack of processing facilities. The government already buys crops at ‘favourable’ prices, before selling them at discounted rates in the market. Forestry The UAE has around 3.8 per cent forest cover, almost all of which is plantation. The government has initiated a longterm programme of afforestation. Abu Dhabi’s western region now has about 5,000 hectares of mature tree plantations, including 120 million tamarind, tamarisk, acacia, neem and cork trees, as well as some 30 million date palms. Fishing Fish is a major source of protein in the Emirates with local fishermen able to supply the needs of the country until 2012 when the catch was 73,000 tonnes, down from 100,000 in 2006. consumption has continued to fall as the price of fresh fish increses and the cost of maintaing fishing boats goes up. The rise in tourist numbers has however given rise to an increse in more profitable game fishing. Industry and manufacturing The industrial sector accounted for 49.4 per cent of GDP in 2015 and was driven mainly by hydrocarbons and alu-

531 minium (the UAE’s second largest export after oil) as well as fishing, fertilisers, commercial ship repairs, construction materials and textiles. In line with the UAE’s diversification policies the Minister of Economy, Sultan bin Saeed alMansouri, has stated that the UAE aims to have the non-hydrocarbon based industries contribution to GDP to more than double from some 10 per cent in 2015 to 20 per cent in 2020 and 25 per cent in 2025. Sultan al-Mansouri has stated that ‘Petrochemicals, aluminium, glass, steel and its downstream industry should be the cornerstone for the UAE’s drive to establish an industrial footprint’ as well as the emerging food and IT industries. The key to this will be increasing foreign investment, of which the UAE is already a high recipient with US$11 billion in 2015, as well as the reforming of some industrial and investment laws, which are expected to be passed sometime in 2017. The UAE already has good and reliable infrastructure around industrial bases, a fact that has helped the already strong growth of the sector, and hopes to use this as well as its location to offer an attractive location for a gateway to the GCC, India and the sub-continent for prospective investors and companies. Industrial output growth was 2.8 per cent in 2015. Tourism The two largest Emirates, Dubai and Abu Dhabi, each have their own strategies for tourism. The UAE has an overarching development strategy, which has identified tourism as a key element and the potential to become an important

532 component of the economy. Dubai is the largest tourist market, attracting both business travellers and an increasing number of leisure tourists. In 2015 the travel and tourism sector directly contributed 4.2 per cent to the UAE’s GDP and in total, including all economic activity indirectly resulting from the industry, contributed 8.7 per cent to GDP. Similarly direct employment in the industry stood at 5.7 per cent of total employment (330,000 jobs) and taking into account all jobs indirectly supported by the industry this figure stood at 9.6 per cent (557,000 jobs). Visitor exports in 2015 amounted to US$26 billion, 6.7 per cent of total exports, and capital investment stood at US$7.5 billion, 7.3 per cent of all investment in the UAE. Dubai, the most popular destination in the UAE, received 14.3 million overnight visitors in 2015, up from 13.2 the year before, with tourists from India representing the largest source market with 1.6 million visitors, followed by Saudi Arabia with 1.54 million visitors. Like many tourist destinations the Chinese market offers great potential, and in 2015 Chinese arrivals grew by 22 per cent to 450,000. Abu Dhabi attracted 4.1 million overnight guests in 2015, 18 per cent up on the 2014 figure, with India again representing the largest source market, followed by the UK, China and the US though domestic tourism still outstripped them representing 34 per cent of total guest arrivals. Mining The development of non-hydrocarbon minerals plays a role in the government’s

COUNTRY PROFILE policy of diversification away from dependence on the oil sector. Limestone, gypsum and dolerite are exploited. Celestite is known to exist but has not yet been extracted. Copper is known to exist in Fujairah and Ras al-Khaimah. There is also thought to be talc in Fujairah, chromium in Sharjah, Ajman, Fujairah and Ras al-Khaimah, and manganese throughout the northern Emirates. Mineral studies are being undertaken in the Madah region of Fujairah, in al-Siji in Sharjah and in the Masfouyt and Manama areas of Ajman. Ras al-Khaimah already has two quarries, four cement companies and further downstream factories, with annual cement production of 2.3 million tonnes. Hydrocarbons Energy 2016 Oil

Reserves (end 2017) 97.8bn b Production 3.935m bpd Consumption 1,008m bpd Gas

Reserves (end 2017) 5.9tn cum Production 60.4bn cum Consumption 72.2bn cum Coal

Consumption

1.6mtoe

The UAE is one of the world’s largest producers of crude oil and natural gas, which together account for around 25 per cent of GDP. Under the UAE’s constitution, each emirate is responsible for its own production and resource development. Abu Dhabi holds approximately 94 per cent of total reserves.

COUNTRY PROFILE On 15 July 2012, a new overland oil pipeline became operational from the oil fields in the UAE’s western desert to Fujairah, a major oil storage hub in the east. Shipments of up to 1.5 million barrels of crude oil per day can now bypass the Strait of Hormuz (which Iran threatened to blockade in 2012) with direct access to the Indian Ocean. The first tanker of oil was shipped to Pakistan for refining. Proven oil reserves were 97.8 billion barrels at the end of 2017, with annual production of 3.9 million barrels per day. Refinery capacity was 1.1 million bpd in 2017, with production located at Ruwais, Umm al-Nar and Jebel Ali. Abu Dhabi holds 92.5 per cent of the total natural gas reserves, with 5.0 per cent in Sharjah. Domestic consumption has grown, mainly in the production of electricity, particularly during summer. Dubai’s consumption has been growing at almost 10 per cent annually, as its industrial sector has expanded. Proven natural gas reserves were 5.9 trillion cubic metres in 2015, with annual production of 60.4 billion cubic metres. Power consumption is projected to rise to 40GW by 2025 from the current 22GW. Energy Total installed generating capacity was 135.8 teraWatt hours in 2017 (latest available figures), producing about 84 billion kilowatt hours (kWh). Consumption is among the largest in the region due to expansion of tourism, financial projects and an increased population. A Gulf Co-operation Council (GCC) project to link the six member states

533 (Saudi Arabia, Qatar, Bahrain, Kuwait, Oman and the United Arab Emirates) to an integrated power-grid began in 2005. The first phase of the GCC power grid was completed in 2009 at a cost of US$1,095 million, linking the six countries through 800km of transmission lines. Kuwait and Saudi Arabia will each receive an extra 1,200MW of power capacity and later, the UAE will receive 900MW, Qatar 750MW, Bahrain 600MW and Oman 400MW. In the first phase, a 400kV overhead line links Kuwait’s Al-Zour power station with Doha, and a 400kV submarine line to Saudi Arabia with Bahrain. The second phase will link the UAE with Oman. The resulting two mega-grids will be joined in the final phase. The government is seeking to open up the sector with limited privatisation in order to inject new capital and increase capacity to meet soaring demand. Abu Dhabi is leading the way, with the creation of new independent power and water projects and joint ventures with minority interests held by foreign firms. The Abu Dhabi government has rejected full privatisation of the water and power sector. The Abu Dhabi Water and Electricity Authority (ADWEA) commissioned the building of a 1,500MW power station in October 2011. Other new plants already under construction will supply 2,500MW to the system, (1,600MW by the Shuweihat 3 power plant which became operational in 2013), for ultimate use among GCC member states. In 2015, the UAE invested US$35 billion to diversify its energy mix and reduce its

534 dependence on natural gas imports. Over 99 per cent of power generation in the UAE is fuelled by natural gas. The aim is to decrease dependence on natural gas from 100 per cent to 70 per cent by 2021. Those investments are going to be in nuclear and renewable energy projects. The UAE is one of the world’s top 20 gas producers, but the country became a net importer of natural gas in 2008. Its natural gas consumption stood at a high 69.1 billion cubic metres in 2015. The US$20 billion Barahkah project to start building nuclear power plants is expected to provide 24 per cent of the UAE’s energy by 2020, when all four reactors come on stream. Financial markets Stock exchange Abu Dhabi Securities Exchange (ADX) Commodity exchange Dubai Mercantile Exchange (DME) Banking and insurance Financial services constitute a key sector throughout the Emirates, with Dubai at the leading edge and hoping to overtake Bahrain as the Gulf’s leading financial centre. The UAE’s banking sector has attracted more foreign interest than other Gulf states due to its liberal banking regime and low level of taxation. Development of the sector is focussed on the Dubai International Financial Centre (DIFC), which was launched in 2001 as a link between the financial markets of Africa, Asia, the Middle East and the West. The DIFC has concentrated on the development of asset management,

COUNTRY PROFILE administration, reinsurance and Islamic finance in an attempt to develop a niche market. Continuing large-scale infrastructure projects, growing prospects in the tourism industry and the creation of an automated stock exchange all represent considerable opportunities for banks. WTO membership, effective from 2003, obliges the UAE authorities to admit new foreign banks and help to increase competition in the sector. On the downside, the UAE’s banking sector lacks transparency, although the OECD’s Financial Action Task Force (FATF) declared the UAE’s performance in 2002 as ‘satisfactory’. The merger of Emirates Bank International (EBI) and the National Bank of Dubai (NBK) into the Emirates NDB, created the largest bank by assets in the Gulf region. By order of the Emir of Dubai, the failing Dubai Bank was taken over by the Emirate’s largest lending institute, NBD on 13 October 2011. In May 2011, the government had to save Dubai Bank as loan losses mounted, brought about by the Dubai property bubble; the bank had remained weak and lacked a diverse business foundation. Central bank Central Bank of the United Arab Emirates Time GMT+4.

Geography The UAE is bordered by Oman to the east, Saudi Arabia to the west and south,

COUNTRY PROFILE Qatar to the north, and by a coastline of approximately 650km on the southern shore of the Gulf. Much of the land is sand desert or salt flats. Six of the Emirates lie on the Arabian Gulf coast. Fujairah, the seventh, lies on the Gulf of Oman. The region is one of shallow seas and offshore islands and coral reefs. The UAE’s two coasts are divided by the Hajar Mountains stretching through the Musandam Peninsula to the Strait of Hormuz. Hemisphere Northern Climate Summer temperatures are hot, reaching 49 degrees Celsius (C) in the shade, while January, the coldest winter month, sees temperatures ranging from three to 28 degrees C Humidity, particularly on the coast, can be extreme. Average annual rainfall is very low, ranging between 100mm and 200mm. Dress codes A lightweight suit or lightweight jacket and trousers are advised. A tie used to be de rigueur at business meetings but that is no longer the case; a jacket need not be worn. Long-sleeved shirts should be worn at business and official meetings. In public places, women should dress discretely and men should wear shirts and long trousers. Bikinis are allowed on certain beaches. Entry requirements Visa Required by all, except citizens of EU, North America, Australasia, Japan and a

535 few other Asian countries, for visits up to one month. For a full list of exceptions visit www.UAE-embassy.org and follow the link from Travel to UAE to consular services where a visa application form can also be found. All visits for those requiring a visa must be arranged through a sponsor such as tour operator or UAE resident or company. The sponsor organises a visa and will provide a letter of invitation, giving details of the sponsor’s residency permit, and a copy of their passport. Visas for business visits are arranged by invitation only. Company credentials must be provided including a trading licence to a sponsor who arranges the visa and will meet the traveller at the airport. A visa system (similar to the European Schengen agreement) allows multiply entry for foreigners to the six Gulf Co-operation Council (GCC) countries. Passports Required by all. Prohibited entry Israeli nationals and holders of passports with Israeli visas stamped in them. Currency advice/regulations The import and export of local and foreign currency is limited to Dh40,000 (or equivalent). Amounts in excess of this must be declared on entry. Customs Personal effects are duty-free. Small quantities of alcohol are allowed entry (non-Muslims only). Prohibited imports Firearms and ammunition require a special permit. Illegal drugs (drug trafficking is a capital offence), poppy seeds

536 in all forms, religious propaganda, commercial loose pearls, raw seafood and fruit and vegetables from cholera infected areas are prohibited. Health (for visitors) Mandatory precautions None. Advisable precautions Inoculations and boosters should be current for hepatitis A, polio, tetanus and typhoid. There may be a need for vaccinations for tuberculosis, hepatitis B and diphtheria. Anti-malaria precautions are recommended if travelling to Oman. NB Some drugs normally taken under a doctor’s supervision are classified as narcotics in the UAE. A doctor’s prescription should be carried along with any medication that is brought into the country. If suspected of being under the influence of drugs or alcohol, individuals may be required to submit to blood and/or urine tests and may be subject to prosecution. Hotels Excellent standards throughout the UAE, and rooms are generally in adequate supply although advance booking is always advisable. A 20 per cent tax is included in all bills. Credit cards Major credit and charge cards are widely accepted. Public holidays (national) The working week was altered in 2006, to bring it into line with Western nations (Saturday and Sunday weekend),

COUNTRY PROFILE although a two-day weekend was not made compulsory for the private sector. Fixed dates 1 Jan (New Year’s Day), 6 Aug (Sheikh Zayed’s Accession), 2 Dec (National Day). Variable dates Eid al-Adha (three days), Islamic New Year, Birth of the Prophet, Ascension of the Prophet, Eid al-Fitr (two days). Islamic year 1442 (31 Aug 2019–19 Aug 2020): The Islamic year has 354 or 355 days, with the result that Muslim feasts advance by 10-12 days against the Gregorian calendar each year. Dates of the Muslim feasts vary according to sightings of the new moon, so cannot be forecast exactly. Working hours Working hours may vary between Emirates and change from summer to winter. The working week was altered in 2006, to bring it into line with Western nations (Saturday and Sunday weekend), although a two-day weekend was not made compulsory for the private sector. During Ramadan, the Muslim holy month of fasting, working hours are reduced with most people working during daylight hours 0900-1300. Banking Mon-Thu: 0800-1300, 1500/1600-1800/1900; Fri: 0800-1300. Business Mon-Thu: 0800-1300, 1500/1600-1800/ 1900; Fri: 0830-1300. Some businesses operate on Saturday. Government Mon-Fri: 0700-1430.

COUNTRY PROFILE

537

Shops Sat-Thu: 0930-1300, 1630-2130; Fri: 1400/1500-2100. Shopping centres general do not close during the day. Telecommunications Mobile/cell phones There is a 900 GSM service operating throughout the country.

greedy in some quarters – if in doubt follow the example of your host. Most restaurants and hotels have bars and licensed restaurants, although a licence, which lays down a monthly quota, is required for purchase for consumption at home. Licences are not issued to Muslims.

Electricity supply 240/415V AC (Abu Dhabi) and 220/380V AC (Northern Emirates), with three-pin round or flat type plug fittings.

Security Visitors should keep in touch with developments in the Middle East as any increase in regional tension might affect travel advice. The level of street crime has been traditionally far lower than in the West because of the severity of the penalties imposed. The influx of expatriate workers since the early 1970s has encouraged incidents of theft. Murder and violent crimes such as mugging and rape remain rare. Generally speaking the UAE has a very low incidence of crime.

Weights and measures Metric system (imperial system and local units also used). Social customs/useful tips Pork should not be eaten in the presence of Muslims. It is discourteous to eat, drink or smoke in front of Muslims in daylight hours during Ramadan (when it is illegal to do so in public). Avoid using the term ‘Mohammedan’. Avoid asking personal questions, especially about wives. Always shake hands on meeting and leaving. You may find the handshake lasts longer than in the West, but this is a sign of friendship. If you have made a good impression, the handshake on departure will be longer than that on arrival. If coffee is served it is courteous to accept it. Cups will generally be refilled automatically unless the cup is shaken from side to side as it is returned to the server. To take only one cup of coffee is an insult, and to take three or more is considered

Getting there Air Air Arabia, the Middle East’s first low-fare airline, is headquartered in Sharjah and flies within the region and to the Indian subcontinent. National airlines: Etihad Airways and the airline Emirates are owned by the governments of Abu Dhabi and Dubai respectively. International airport/s: Abu Dhabi International Airport (AUH); 35km from city. Expansion with a new terminal has increased facilities with duty-free shop, bar, bank, hotel reservations, post office, shops, car hire.

538 Dubai International (DXB), 4km from city, with duty-free shop, bar, bank, hotel reservations, post office, shops, car hire. Sharjah International (SHJ), 10km from city, with duty-free shop, bar, restaurant, bank (restricted hours), hotel reservations. Ras al-Khaimah International (RKT). The Al-Maktoum International Airport (DWC) (Jebal Ali), was opened in June 2010. When fully operational airport will be the largest in the world with five runways, through-flow of five million passengers annually and 250,000 tonnes capacity for cargo. Other airport/s: Al-Ain is Abu Dhabi’s second airport 23km from the oasis of Al-Ain. Fujairah has an airport. Airport tax: None Surface Road: Road links are through Oman and Saudi Arabia. Buses run between Dubai and Muscat. Water: Passenger services run between Sharjah and Bandar-é Abbas in Iran. Getting about National transport Air: There are several daily services between Dubai and Abu Dhabi. There are numerous airstrips thoughout the region for charter hire flights. Road: Good, surfaced roads along the coast links all the Emirates. City transport Taxis: Taxis are plentiful and English is widely understood if not spoken. Metered taxis are available in Abu Dhabi and Dubai; the rounding-up of the

COUNTRY PROFILE charge is typical for a tip. It is advisable to negotiate fares in advance in other Emirates as taxis are not usually metered. City traffic in Dubai has become very congested and it is advisable to allow plenty of time to reach a destination. Taxis on stands outside hotels charge more than those flagged in the street. Fixed fares are available for pre-paid journeys from Dubai airport to the city. Some hotels offer a courtesy pick-up service; others offer the service but charge. A limousine can be booked through the hotel. Buses, trams & metro: Dubai’s metro system began operations in 2009 along the 52.9km, 29 station, Red Line, which runs both over and under the city, from the airport terminal to the Jebel Ali seaport terminal. Ticket prices are divided into three zones, with payment via different modes including a pre-paid, smart card. The second metro rail network in Dubai became operational on 9 September 2011. The Green Line runs for around 23km from Etisalat to Dubai Health Care City. Car hire Personal and chauffeur-driven car hire is available. International licences are acceptable only for short-term visitors and requirements should be checked on arrival. Driving is on the right, with speed limits of 60kph in towns and 80-100kph elsewhere.

Bibliography Abdullah, Muhammad Morsy. (1978). United Arab Emirates – A Modern History. London: Croom, Helm. Aitchison, C.U. (1933). A Collection of Treaties, Engagements and Sanads Relating to India and Neighbouring Countries. Calcutta: Office of the Superintendent of Government Printing, India (first published 1909). Albaharna, Husain, M. (1968) The Arabian Gulf states. Their legal and political Status and their International Problems. Manchester University Press. (Reprint: 1975. Librairie du Liban). Bin-Abood, Saif Mohammad Obaid. (1992). Britain’s Withdrawal from the Gulf: with Particular Reference to the Emirates. Durham theses. Durham: Durham University. Bradshaw, Tancred. (2019). End of Empire in the Gulf: The Trucial States and the Origins of the UAE. London: I. B. Tauris. Coates-Ulrichsen, Kristian. (2016). The United Arab Emirates, Power, Politics and Policy-Making. Abingdon: Routledge. Codrai, R. (1990). The Seven Sheikhdoms. London: Stacey International. Davidson, Christopher. (2005). The United Arab Emirates: A Study in Survival. Boulder, Colorado: Lynne Rienner Publishers. Dresch, Paul; Piscatori, J.P. (2017). Monarchies and Nations: Globalisation and Identity in the Arab States of the Gulf. London: I.B.Tauris. Hawley, Donald. (1970). The Trucial States. Australia: Allen & Unwin. Heard-Bey, Frauke. (1982) From Trucial States to United Arab Emirates. Harlow: Longman. Fenelon, K.G. (1967) The Trucial States – A Brief Economic Survey. Beirut: Khayats. Fenelon, K.G. (1973) The United Arab Emirates – An Economic and Social Survey. Harlow: Longman. Field, Michael. (1984). Merchants. London: John Murray. Green, Timothy. (1968). The World of Gold. London: Michael Joseph. Halliday, F. (1974). Arabia Without Sultans. London: Pelican. Herb, Michael. (2014) The Wages of Oil: Parliaments and Economic Development in Kuwait and the UAE. Ithaca, New York: Cornell. Holden, David. (1966). Farewell to Arabia. London: Faber & Faber. Kelly, J.B. (1964) Eastern Arabian Frontiers. London: Faber & Faber. Lorimer, J.C. (1908–15). Gazeteer of the Persian Gulf, Oman and Central Arabia (2 Vols). Calcutta: Government Printing Office. Morsy, Muhammed Abdullah. (1987). The United Arab Emirates: A Modern History. Abingdon: Routledge.

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Bibliography

Morton, Quentin Michael. (2016). Keepers of the Golden Shore. Abingdon: Routledge. Mostyn, Trevor. (1986). United Arab Emirates (Middle East Economic Digest). Abingdon: Lynne Rienner Publishers. Sadik, M.J. & Snavely, W.P. (1972). Qatar and the United Arab Emirates. Lexington Books: Maryland, USA. Said Zahlan, Rosemarie. (1972). Origins of the United Arab Emirates. A Political and Social History of the Trucial States.London: Macmillan. Taryam, Abdullah Omram. (1987). The Establishment of the United Arab Emirates. Abingdon: Routledge. Ulrichsen, Kristian Coates. (2016) The United Arab Emirates: Power, Politics and Policymaking. Abingdon: Routledge. Wilson, Arnold T. (1959). The Persian Gulf. Australia: Allen & Unwin.

Index See Abu Dhabi Company for Onshore Oil Operations ADGAS See Abu Dhabi Gas Liquefaction Company ADIA See Abu Dhabi Investment Authority ADMA-OPCO Abu Dhabi Marine Operating Company ADNOC See Abu Dhabi National Oil Company 196, 210, 219, 231 price dispute with Japan 211 ADNOC-FOD See Abu Dhabi National Oil Company for Distributio ALBA See Aluminium Bahrain ARCHOSI 437 ARCO See Atlantic Richfield ARCO Dubai See Atlantic Richfield Dubai ARIG See Arab Insurance Group Abbas, Mahmoud 427 Abdulla, Abdulkhaleq XVIII Abedi, Agha Hasan 438 Abela, Albert 111 General Abizaid 351 Abra 427 Abu al Bukush (Iran) oilfield 359 Abu al-Bukhoosh 243, 427 oilfield 198, 228, 230–231, 268, 338, 348, 355 Abu al-Bukhoosh Oil Company 49 Abu Dhabi 1, 10, 26, 117, 132 agriculture 58 aid contribution 24, 97 City 427 corniche 271 Emirate 427 Foreign Trade 99 industrialisation 369 Island 242, 428 master plan 250 planning department 144, 185 Qatar fall out 420 relations with Oman 45 Stock Exchange 397 ADCO

Abu Dhabi Central Hospital 187 Abu Dhabi Chamber of Commerce and Industry 196, 351 Abu Dhabi city 427 Abu Dhabi Commercial Bank 217, 225, 233, 240, 312 Abu Dhabi Company for Oil Distribution 247 Abu Dhabi Company for Onshore Oil Operations 63, 148, 197, 210, 212, 230, 246, 259, 268, 285, 301, 358, 367, 379, 388, 396, 408, 428 Abu Dhabi Crude Oil Pipeline 373, 379, 428 Abu Dhabi Defence Force 2, 8, 428 Abu Dhabi Development Plan 27 Abu Dhabi Drilling Chemicals & Products Ltd 65 Abu Dhabi Economic Vision 2030 429 Abu Dhabi exchange 397 Abu Dhabi Executive Council 64, 191, 233, 429 Abu Dhabi Financial Market 317 Abu Dhabi Fund for Arab Economic Development 5, 11, 24, 46, 63, 98, 181, 219, 429 Abu Dhabi Fund for Development 429 Abu Dhabi Gas Industries 88, 150, 198, 210, 231, 246, 268, 286, 396, 430 Abu Dhabi Gas Liquefaction Company 27, 51, 66, 150, 175, 197, 210, 231, 246–247, 258, 368, 430 Abu Dhabi Hilton 90 Abu Dhabi Insurance Company 5 Abu Dhabi International Airport 162, 271, 430 Abu Dhabi International Bank 99, 430 Abu Dhabi Investment Authority 73, 87, 96, 99, 132, 193, 218, 237, 248–249, 251, 269, 305, 431 Abu Dhabi Investment Company 73, 87, 96, 99, 162, 176, 193, 218, 431 Abu Dhabi Investment Council 431 Abu Dhabi Marine Areas 3, 11, 26, 48, 431

542 Abu Dhabi Marine Operating Company 63, 148, 175, 197, 210, 230, 237, 246, 268, 367–368, 379, 388, 396, 408, 431 Abu Dhabi National Energy Company 431 Abu Dhabi National Hotels Co 90, 250 Abu Dhabi National Hotels Company 431 Abu Dhabi National Insurance Company 196, 432 Abu Dhabi National Oil Company 11, 26, 49, 64, 66, 88, 96, 118, 133, 148, 152, 175, 193, 210, 222, 230, 236, 237, 240, 246–247, 258–259, 298, 301, 307, 313, 317, 358, 367, 372, 378–379, 387–388, 395–396, 401, 408, 432 Umm al-Nar refinery 82 Abu Dhabi National Oil Company for Distribution 175, 198, 210, 231, 240, 247, 432 Abu Dhabi National Tanker Company 176, 198, 210, 231, 379, 388, 408, 432 Abu Dhabi Oil Company 3, 11, 49, 432 Abu Dhabi Oil Company (Japan) 63 Abu Dhabi Petroleum Company 3, 11, 26, 48, 432 Abu Dhabi Pipeline Construction Company 176, 198, 210, 231 Abu Dhabi planning department 144 Abu Dhabi Polymers Company 322, 327 Abu Dhabi Water and Electricity Authority 312, 433Abu Mazen 427 Abu Musa 18, 45, 223, 243, 257, 267, 291, 295, 315, 334, 357, 433 agreement with Iran 51 airstrip 335 dispute 309 invaded by Iran 40 Iranian claim 1, 139, 320 oil discovery 4 oilfield 32 seized by the Shah of Iran 70 university 335 Abu Nidal 439 ACER 287 Aden XIX, 414, 418, 433 airport 415 ADGAS 231 Adham, Kamal 439 Adma-Opco 197 Adnic 196

INDEX ADNOC-Borealis joint venture 313 Adolf Lundin Group 177 advertising in Arabic 157 Advisory Council 345 Aeroflot 228, 433 Aéroport de Paris 94, 433 Afghanistan XVIII, 46, 330 Soviet invasion 433 aggregate 34 agricultural 136, 202, 205, 280 Digdagga 136 output 127 Agriculture 57, 95, 126, 289 Aid Abu Dhabi 97 foreign donations 172 Al-Ain 4, 12, 29, 43, 76, 85, 87, 90, 126, 186, 196, 232–233, 250, 270, 342, 433 agricultural development 161 civil airport 93 ground water reserves 242 mill 57 University 59, 242, 264 air pollution 421 Air Arabia 405, 434 Airbus Industrie 338 Ajman 1, 6, 17, 36, 117, 123, 136, 200, 206, 222, 434 industry 57 integrated waste water plant 323 Ajman Arab Bank 25, 36, 73, 83, 114, 434 suspension 23 Ajman Bank 434 Ajman Cement Company 219 Ajman Heavy Industries 207 Ajman National Oil Company 178 Ajman Refinery Company 213, 219 Ajman Saudi Refinery Company 200, 232 Alcan 68 Aldar Properties 397, 434 Aldarbu uadijun poem by Mohammed bin Rashid al-Maktoum 411 Alexander Gibb and Partners 89, 93, 434 Algeria 257 bin Ali, Hamouda 256, 434 minister of the interior 265 Allah 434 Allied war costs 263

INDEX Allott & Lomax 215 Alsthom 242 Alsthom-Atlantique 153 Altaf Hussain and Co 201, 434 aluminium smelter 30 rising prices 252 Aluminium Bahrain 153, 434 Amerada Hess 64, 175 American President Lines 234 Amir 434 Amiri courts 91 Ammeron-Serette 64 amnesty illegal migrants 335 Amnesty International 375, 384, 434 Amoco 113, 163, 177, 301, 434 Amoco Sharjah Oil Company 70, 152, 177, 199, 212, 232 Anglo-Persian Oil Company 435, 442 Apache helicopters 270, 292 Apicorp 177 A & P Appledore International 188, 435 Arab Bank for Economic Development in Africa 84, 435 Arab Bank for Investment and Foreign Trade 99, 435 Arab Banking Corporation 176, 194 Arab Boycott 435, 479 Arab Co-operation Council 435 Arab Company for Livestock Development 219 Arab Company for the Development of Animal Resources 111, 136 Arab Engineering Company 153, 212, 435 Arab Heavy Industries 65, 71, 114, 156, 219, 435 Ajman shipyard 57 Arab Insurance Group 196 Arab League 1, 141, 170, 256, 266, 292, 310, 325, 435 Tunb islands dispute 320 Arab Monetary Fund 63, 84, 91, 98, 436 Arab Peacekeeping Force in Lebanon 24 Arab Petroleum Investment Corporation 176, 436 Arab Shipbuilding and Repair Yard 188, 436 Arab Spring XVIII, 369, 375, 383, 436 Arab World Competitiveness Index 352

543 Arab Youth Survey 400 Arab and Allied military forces 263, 435 Arab world 263 Arabian Gulf 436 security XIX states 400 Arabian Light 174, 192, 435 price 166 Arabian Peninsula 100, 341, 398, 414 western coast 415 Arabian Sea 418, 436 Arabtec 365, 436 Arafat, Yasser 191, 427, 436 Archaeology 130 Archicat 34 Archirodon 437 Arco 239 Arco Dubai 151, 176, 187, 199, 231, 249 Arid Land Research Centre 95, 437 Arthur D Little 66, 247, 437 Arzanah 437 oilfield 175, 230 Asaab 418 Asaab base Eritrea 414 Asab associated gas 150 gas field 27, 313 oilfield 48, 133, 148, 175, 210, 230–231, 259, 367, 372, 437 Asab Gas Development AGD-2 322, 327 Asab-3 project 367 Asea Brown Boveri 242, 437 Asia Minor 130 Asian financial crisis 308 Asil oilfield 259 Associated Gulf Consultant 35 W S Atkins 36 Atlantic Richfield 105, 142, 176, 199, 212, 231, 249 Atlantic Richfield Dubai 142, 437 Atlantis Holdings Norway 322, 327 Al-Aweidha-Polimex 232, 437 Al-Awir 289 BADEA See Banque Arabe pour le

Développement Economique en Afrique 437

544 BICC See British Insulated Callender’s

Cables 440 BOOT (build-own-operate-transfer) 315 BP See British Petroleum 231, 247, 249, 367 BP Arabian Agencies 234 Bab associated gas 150 gas field 27 oilfield 48, 64, 148, 175, 210, 212, 259, 268, 285, 322, 327, 372, 437 Bab al-Mandab Strait XIX, 414, 418 Badawiyin 440 al-Badi, Ahmed bin Said 256, 437 minister of health 265 Baghdad 294 Bahrain XVII, 40, 146, 240, 266, 288, 291, 293–294, 298, 307, 340–341, 344, 346, 411–413, 420, 437 1981 attempted uprising 438 attempted uprising 138 dinar 438 financial centre 332 National Assembly 138 Qatar blockade 420 Ruling family 375 C H Bailey 69, 188 baladiya (municipality) 75 balance of payments 54 surplus 284 Baluchi XVII Baluchistan 438 Banco Urquijo 183 Bandar Abbas 45, 139, 350, 438 link to Sharjah restarted 253 Bandar Lengeh 45, 438 Bangladesh 191 expatriates 171 Bani Yas tribe 282, 342 Bank for International Settlements 280 Bank of Credit and Commerce Emirates 218, 269 Bank of Credit and Commerce International 60, 73, 156, 183, 194, 269, 288, 297, 438 Bank of England 269, 297 Bank of Oman 107, 182 Bank of Sharjah 110 Bank of Tokyo 176 Bank of the Arab Coast 217

INDEX Banking 336, 360, 370, 386, 398 reform regulations 53 Banking and finance 287 bankruptcy law 223, 225 Banque Arabe et Internationale d’Investissement 215 Banque Arabe pour le Développement Economique en Afrique 435, 439 Banque Extérieure d’Algérie 99 Banque de France 73 Baqqarah tribe 440 Baqr, Ahmad 67 Barclays Capital 361, 439 Basic Petroleum and Minerals 178 Basra 140, 439 Al-Batinah coast 6, 95, 341, 439 Al-Bawardy Group 239, 439 Al-Bayan 180–181, 439 Bechtel Corporation 66, 88, 243, 272, 303 Bedouin 342–343, 383, 411, 440 bedu 95 Begin, Menachem 79 Belgrave, Charles 399 Belhasa Six Construct 271 Benn, Tony 62, 440 Berbera 414, 418 UAE base 415 Bernard Sunley 104 Besharati, Ali Mohammad 440 Iran interior minister 295 Bida al-Qemzan 372, 440 big projects era 117 bilateral talks 335 Bin Laden Organisation 165 Bin Majid Landmark 112 Binnie 92, 440 al-Bitar, Ahmed-Adi Nasib 440 Black & Decker 239, 440 bling capital 362, 397 Boeing 338 bomb attacks on Iraq 310 Government of Bombay XVII, 440 Boorj Avenue 109, 152 border dispute between Qatar and Saudi Arabia 413 Borealis 301, 307, 317, 322, 327, 440 Borouge 313, 317, 327, 440 Boumédienne, Houari President of Algeria 64

INDEX bourse dual trading floors 321 Bovis 92, 441 boycott Qatar 412 Bridgestone Liquefied Gas Co 51, 441 Britain 39 British Aerospace 181, 384, 441 British Allied Medical Group 216 British Bank of the Middle East 156, 164, 183, 441 British Crown XVII British Empire 414 British Foreign Office 441 British Foreign and Commonwealth Office 334, 341, 441 British Government XVII Government of British India XVII British Insulated Callender’s Cables 30, 68, 442, 160 British Marine Air Navigation Company 471 British National Oil Corporation 151, 176, 199, 231, 442 British Overseas Airways Corporation 354 British Petroleum 3, 48, 64, 148, 230, 237, 239, 379, 442 Statistical Review of World Energy June 2012 380 British Residencies and Agencies 441 British Smelter Construction 30 British Steel Corporation 65 British withdrawal from East of Suez 256, 443 RJ Brown & Associates 64 Brown Boveri 154, 206, 440, 443 Brown and Root 268, 443 al-Bu Falah 282, 342 al-Bu Falasah 282 Bu Hasa 231, 444 associated gas 150 gas field 27 oilfield 48, 133, 148, 175, 210, 230, 259, 268, 322, 327, 372 budgetary restraint 300 budget 285 1977 21 1982 deficit 167 1983 192 1984 192

545 1985 208 1986 229 1993 276 1994 296 1996 deficit 300 Abu Dhabi deficit 187 expenditure 2002 321 Federal 23, 132, 257, 263, 270, 284, 289, 316 1982 141 1996 300 2002 320 deficit 179 UAE contribution 4 building boom 124 Bukha oilfield 268 Al-Bukush 11 oilfield 3 Al-Bunduq 175, 444 oilfield 49, 230, 368 Bur Juman shopping centre 271 Buraimi 433 Buraimi Oasis 4, 40, 43, 95, 342, 413 dispute 1, 357, 444 Burj Dubai 362, 387 Burj Khalifa 362, 387, 445 Burmah Oil Company 442 Bushire XVII, 445 Business Competitiveness Index 352 Buttes Gas & Oil Company 69, 109, 445 CCC See Consolidated Contractors

International Company 206 CEPSA See Companía Espanola de

Petróleos 248 CFP See Compagnie Française des

Pétroles 447 CFP Total 247 CMA 303 CMS 317 CRS Design Associates CRS of Houston 89

66

cabinet 1974 2 1979 62 Cable and Wireless 58, 446 Cairo 446 camel-herders 345

546 Abu Dhabi 57 Qatar 345 Cameron, David British Prime Minister 384 Canadian Superior Oil 115 Carter, Jimmy 131, 446 casino 24, 34 CdF Chimie 216 cease-fire 249 Cedigaz 389 cement factory 34 censorship 264 census 249 1980 123 central bank draft law 25 Central Bank of the United Arab Emirates 63, 194–195, 217–218, 224–225, 229, 241, 245, 269, 288, 304, 316, 337, 363, 370, 377, 393, 416, 446 report May 1993 179, 181 Central Boycott Office 446 Central Command (US) 351 Central Hospital 216 Central Marketing Organisation 186, 446 Centre for Trade Arbitration 279 Chamber of Commerce and Industry Abu Dhabi 345 unified 61 Channel Ship Repairers 69 Charter Medical International 216 Chase Manhattan 107, 176, 447 chemical weapons 295 cheque-book diplomacy 414 Chicago Beach Hotel 302 China 209, 250, 257, 415 China National Petroleum Corporation 373, 447 China Petroleum Engineering & Construction Corporation 373 Chinese 226 Chirac, Jacques 305 Churchill, Winston 420 Citibank 447 civil service 118, 158 Clayco Petroleum Corporation 447 Clear Way 411 Cleveland Bridge & Engineering 68, 160, 239, 447 Clock Tower 447

INDEX Cluff Oil 177 Coca Cola bottling plant 233 Coflexip 160 Comecon 448 Commercial Agencies Law 144, 146, 169, 172 Commercial Bank of Dubai 107, 163 Commercial Bank of Kuwait 107 Commerzbank 107 Commonwealth of Independent States 447 Compagnie Française des Pétroles 48, 64, 66, 89, 105, 148, 210, 228, 230, 447 Compañía Española de Petróleos 237 Company Law 196 Competitiveness Index 353 concessions 177 Consolidated Contractors Company 211 Consolidated Contractors International Company 198, 206, 212, 233, 260, 447 Constitution 8, 39, 383, 447 provisional 41, 264 construction industry 74, 123–124, 259, 360 consumer spending 284 Continental Oil Company 50 contract structure 372 Cordoba Development Company 201 Corniche Maternity Hospital 89, 448 Cosmo Oil Company 247, 448 Costa Rica 140, 448 Costain 74, 160 Civil Engineering 5, 448 Taylor Woodrow joint venture 69 Council for Mutual Economic Assistance 448 Council of Ministers 41, 60–61, 154, 448 Counter-proliferation Task Force 350 Counter-terrorism finance 350 Credit Suisse 107 Creek 449 Creekside Park 290 Crescent Petroleum Company 51, 69, 109, 373, 449 Crest 88 Creusot Loire 66, 89 Crown Prince of Abu Dhabi 2 of Dubai 2 Crusaders 446 Crystal Oil Company 449 Crédit Suisse 163

INDEX

547

Curaçao 99 currency restrictions 449 Iran 252 Currency Board 15, 22, 25, 31, 34, 36, 53, 61, 72, 81, 97, 106, 111, 113–114, 125, 183, 194, 446, 449 Statistical Supplement 84 current account 318 surplus 284–285 Cyprus 415 Czechoslovakia 154, 449 DFIX See Dubai International Financial

Exchange 346 DFSA See Dubai Financial Services

Authority 337 DIFC See Dubai International Financial Centr

337, 346 DP World XVIII, 452 DPC see Dubai Petroleum Company DPC Conoco 105 DSCE See Dubai Supreme Council of

248

Energy 396 DUBAL See Dubai Aluminium Company

67, 153, 317, 321 DUGAS See Dubai National Gas Company 30, 105, 115 liquefaction plant 252 LPG plant 67, 106 Daewoo 243 Daiei Fishing 35 dairy farm 136 Dalma Island 449 Dalma Island oilfield 149 Damascus Declaration 1991 266, 278 dams 203 al-Darmaki family 75, 204, 449 Das Island 5, 48, 66, 87, 132, 150, 153, 231, 247, 258–259, 268, 402, 449 gas complex 27, 55, 297, 322 LNG and LPG plant 210 LNG plant 148, 327, 368 oil exports 133, 175 storage tanks 176 Dassault Breguet 182, 449 Davos World Competitiveness Index 352–353 Davy McKee 177, 449 De Leuw Cather 94, 450

De Leuw Cather International 214 debt restructuring 368 defence forces 8, 255, 278, 292 bilateral 168 mutual 168 spending 122 defence expenditure 224, 418 Deficit budget 224 Deira 102, 133, 243, 450 shopping area 15 Tower 104 Delfezee Dubai Petroleum 450 Deminex 70, 450 Denison Mines 116 department of finance 91, 96, 273, 394, 450 departments of finance 450 desalination plant 207, 280 desert 129 Desert Research Unit (USA) 422 Deutsche Seereederei Rostock 234 Deutsche Texaco: 450 Dhafir tribe 440 Al-Dhafra Insurance Company 196, 342 al-Dhaheri, Jaqwan Salim 203 Dhaid 108, 186, 450 Dhaka 191, 450 Dhofar 451 rebellion 45 dhow wharf scheme 259, 306 dhows 129 Dhuff oilfield 198 Dibba 95, 112, 115, 135, 451 Khor Fakkan-Fujairah-Kalba-Muscat east coast road 95 mountains 127 Digdagga 6, 111–112, 219, 289, 451 dinar, Bahraini 412 directorate general of nationality and immigration 144 dirham 230, 451 revaluation 360 UAE 412 discounts oil price 236 dishdashas 60 dissent 264 diversifying economy 307 Djibouti 415 Dodsal 199, 451

548 Doha 24, 411, 413, 451 OPEC Conference 44 dollar peg 360 Dolphin Gas Project 316, 319, 322, 324, 327, 339, 348, 380, 451 natural gas grids opened 2008 356 pipeline 389 domestic political stability 314 Dong Ah Construction 198, 233 dormitory towns 136 dry dock 31, 122 Dubai 1, 13, 117, 133, 452 bail out 359, 369 debt 359 development expenditure 5 government 195, 321 leading export 252 mercantile centre 133 merchants 9 oil reserves 50, 373 oilfield 373 sewer system 205 shared currency with Qatar 412 Dubai road to Ras al-Khaimah 4 Dubai Airport 287 expansion 303 Dubai Aluminium Company 159, 188, 199, 205, 213, 238, 272, 287, 315, 321, 326, 452 expansion plans 298 upgrading programme 252 Dubai Authority for Investment and Development 321, 326 Dubai Bank 107, 216–217 Dubai Cable Company (Pty) Ltd 68, 233–234, 272 Dubai Cargo Village 273 Dubai Commerce and Tourism Promotion Board 251, 452 Dubai Creek 133, 243, 269, 290, 452 Dubai Creekside 271 Dubai Defence Force 8, 452 Dubai Drydocks 234, 452 Dubai Electricity Company 212, 271 Dubai Electricity and Water Authority 289 Dubai Exploration Onshore 248, 453 Dubai Expo 2020 406 Dubai Financial Market 317, 321, 326 Dubai Financial Services Authority 337, 453

INDEX Dubai Group 453 Dubai Holdings 366, 453 Dubai Ideas Oasis 315 Dubai Inc 366, 453 Dubai Integrated Energy Strategy 2030 453 Dubai International Airport 271, 273 Dubai International Capital 366, 453 Dubai International Financial Centre 331, 336, 344, 346, 354, 453 Dubai International Financial Exchange 344, 346, 354, 453 Dubai International Trade Centre 162 Dubai Internet City 315, 321, 326, 331 Dubai Investment Park 331 Dubai Knowledge Village 331 Dubai Marine Areas 105 Dubai Media City 315, 331 Dubai Municipal Council 103, 134, 454 Dubai Natural Gas Company 199, 252, 396, 454 new gas line 249 Dubai Nuclear Energy Committee 379, 388, 401 Dubai Pearl 331 Dubai Petroleum Company 50, 105, 151, 212, 248, 454 Dubai Petroleum Establishment 379, 388, 401 Dubai Ports Authority 288, 303, 306 merger 272 Dubai Producing Group 105 Dubai property bubble 362 Dubai riyal 454 Dubai Silicon Oasis 331 Dubai Stock Exchange 454 Dubai Strategic Plan 2015 454 Dubai Supreme Council of Energy 388, 401, 408, 454 Dubai Transport Company 67 Dubai Union (Federal) Investment Co 107 Dubai World 363, 365–366, 369 debt 371 Dubai World Corporation 454 Dubai World Inc 376 Dubai World Trade Centre 274, 455 Dubai department of tourism and commerce marketing visitor analysis 421 Ducab 160

INDEX

549

duplication of infrastructural and industrial projects 125 Dutch 519 Dutco Balfour Beatty 271 Dutco Construction Company 214 duty free shopping 302 EGPC See Emirates General Petroleum

Corporation 199 EIA See Energy Information

Administration 367, 402 ENB See Emirates National Bank ENOC See Emirates National Oil

217

Company 396 EOR techniques See enhanced oil recovery

396, 402, 407 332

EU investment EU-GCC

free trade area 339 East Germany 46, 234, 455 East India Company XVII, 10, 441, 455 East of Suez 334, 346, 456 Eastern International 160 Eastern bloc 456 Eastern bloc countries 250 economic crisis 369, 399 Asian 310 Russian 310 Economic priorities 179 Economist 375, 384, 400, 414 Economist Intelligence Unit 284 Economy 123, 320, 398 1974 3 1979 72 1993 275 2010 369 2012 376, 385 growing 284 IMF assessment 386 non-hydrocarbon 381 Ecuador OPEC quota 246 Education 59, 172 Egypt 79, 139, 250, 266, 411, 456 Qatar blockade 420 Egyptair 219 elections first in UAE 356 Electricité de France International 271

Emaar Properties 397, 456 Emarat 456 emergency liquidity support fund 361 Emirates (airline) 214, 239, 253, 303, 315, 326, 338, 353, 390, 404, 456 Airbus A31D-300 234 expansion 319 Emirates Bank International 299 Emirates Ceramics Company 219 Emirates Commercial Bank 217 Emirates Development Bank 457 Emirates Foodstuff and Mineral Water Company 337 Emirates Gas Bottling Company 199, 457 Emirates General Petroleum Corporation 152, 176–177, 180, 213, 232, 240, 249, 286, 457 Emirates Global Aluminium 452 Emirates Industrial Bank 201, 284, 286 Emirates National Bank 107, 217 Emirates National Oil Company 286, 313, 379, 388, 401, 457 Emirates Petroleum Products Company 240, 458 Emirates Real Estate Bank 458 Emirates Telecommunications Corporation 194, 260, 272, 304, 458 Emirates’ General Petroleum Corporation 199 emiratisation 185, 311, 314, 320, 324, 329, 335, 403, 458 Emiri Guard 413 Emirtel 22, 34, 58, 78, 84, 94, 194 Enclaves 458 Energy Information Administration 348, 359, 366, 378, 388, 395, 400, 407, 416, 423 Engineering Projects India 65 enhanced oil recovery 378, 388, 395, 400, 416, 423, 458 Enron Corporation 316, 458 Ente Nazionale Idrocarburi 65 entrepôt 123 equity funds 312 Eritrea 414, 418 Ernst & Whinney 218 Esso Petroleum Company 213, 232 Etihad Airways 335, 337, 353, 390, 404, 459 Etihad Rail 459

550 Etisalat 287, 459 shares 288 expansion 298 Eurobond 107 issue 98–99 Eurofighter Typhoon jets 384 Europe XVII Europe in the Gulf 459 European Community 459 European Currency Unit 459 European Economic Community 100, 459 European Union 291, 320, 325, 459 Evian 114 Exclusive Agreement 459 Executive Council 305, 429 expatriate workers 171 expatriates 204, 320 population 345 Expo 2020 393, 395, 415, 460 export revenues 400 exports 221 1992 276 increasing 370 Japan 389 non-oil 302 external current account 364, 386 Exxon 48, 64, 148, 230, 237, 460 ExxonMobil 367, 379 King Fahd 167, 174 fake goods 279 Falah oilfield 105, 212, 373 Falaj 342, 460 Falaj al-Mu’alla 460 Falaj al-Sarouj 342 Falcon Dredging 36 falconing 129 Far East 261 Fatah 427 Fateh 50, 460 oilfield 52, 104, 212, 248, 373 South-West Fateh oilfield 52 Fatimids 446 Federal affairs with GCC 171 with OPEC Federal budget 118 aid 11 Federal City 91

INDEX Federal Commercial Agencies Law 461 Federal Commercial Bank 217 Federal Commercial Companies Law 183 Federal Customs Authority 461 Federal Environment Agency 313 federal government 8 Federal Industrial Bank 184, 461 Federal National Council 41, 60, 137, 143, 152, 179, 202, 209, 282, 356, 383, 448, 461 2012 elections 385 election 2011 375, 385 Federal Supreme Court 375, 385 federation 138, 254 Fedotov, Felix Nikolaevich 228 Fenelon, K G 342, 461 Ferman, Denis 73 Ferrostaal 177, 461 Fertil 462 fertile land 131 Fertiliser plant 125 Fez 170 Arab League conference 1982 141 Fichtner 89, 250 finance department 203 financial reserves 229, 307, 399, 420 Asian 309 First Gulf Bank 73, 83, 114, 217, 462 First National Bank in Dallas 74 First Unified Economic Agreement 190, 462 Fischner 462 fish meal plant 126 Fishing 57, 126 Fitch Ratings 337 Saudi Arabia 397 fitna 509 Five-Year Plan 1981–85 137, 143, 462 Fluor Corporation 66, 88, 151, 462 Fluor Middle East 212 food deficit 202 Food and Agriculture Organisation 7, 462 foreign labour 26, 56, 122, 141, 181, 213, 250, 371, 398 Foreign Direct Investment Confidence Index 352 Foreign banks disenchantment 73 Foreign contractors 64 Foreign trade Abu Dhabi 99

INDEX Forhistorik Museum of Aarhus 462 Forman/Lasmo 114 Forsyth, Len 217 Forte Grand Jumeirah Beach Hotel 290 Foster Wheeler 64 Founding Fathers 419 Fracking 462 France 118, 209, 415 Frankfurt Airport 16 freedom of navigation in the Gulf 171 Front-line Arab states 46, 463 Fujairah 1, 6, 19, 23, 35, 117, 135, 200, 206, 226, 286, 374, 389, 463 electricity plant 323 export terminals 373 geographical position 219 increase in cargo 253 port 239, 261 tourism 135 tourist industry 71 Fujairah Cement Industries Company 160, 164, 219, 463 Fujairah Hilton Hotel 116 Fujairah Rock and Aggregate Company 219 Fujairah Rockwool Company 219 fundamentalist upsurge 290 Al-Futtaim Wimpey 204, 463 GASCO See Abu Dhabi Gas Industries

246, 463 GCC See Gulf Co-operation Council 209, 224, 230, 250, 257, 266, 295, 331, 351, 413 common market 332, 339 customs exceptions 170, 332, 339 free trade zone 297 monetary union 332, 339 single currency 332, 339 Taif ministerial meeting 170 Tunb Islands dispute 330 GDP See Gross Domestic Product 300, 463 2012 growth 386 GNP See Gross National Product 463 GRE See government-related entities 386 Gabon 140 OPEC quota 246 A W Galadari Commodities 185, 216 Galadari, Abdul Latif 217 Galadari, Abdul Rahim 217

551 Galadari, Abdul-Wahab 68, 107, 185, 195, 217, 463 Galadari Brothers 104, 163 Galadari Galleria 104, 195 Garden City 35, 37 gas industry 51, 306 output 322 reserves 11, 347–348, 355 Ruwais gas plant 174 Gas Exporting Countries Forum 401, 407, 416, 424, 464 GASCO 52, 66, 198, 231 refinery go-ahead 55 Gaza Strip 493 Gazelle helicopter gunships 182 GEC Alsthom 271 Gehry, Frank 381, 386 General Agreement on Tariffs and Trade 235, 289 General Authority of Islamic Affairs and Endowments 464 General Electric 214 General Holding Company 337 General Industries Corporation 92, 337, 464 General Petroleum Corporation 464 General Treaty for the Cessation of Plunder and Piracy 464 General Water Organisation 203, 464 Geography/Topography 464 Getty 116 Ghasha 149, 465 Ghobash, Omar Saif 465 Ghobash, Said 256 minister for economy and commerce 265 Ghurair 68, 104, 107, 465 Giat Industries 292 Gibb 465 Global Association of the Exhibition Industry 353 GlobalLeaks 412 Godolphin Racing 347 gold 465 re-exports 133 smuggling 354 government wages 306, 359, 370, 376–377, 386, 403, 422 Government-related entities 465 Gray Mackenzie 164, 465

552 Greater and Lesser Tunbs 295, 334 Greece 415 Griffiths, Martin 419 gross domestic product 300, 320, 346, 352, 363, 370, 416 1987 236 per capita 377, 385 gross national product 141 Group of Eminent Experts on Yemen XIX Guggenheim Museum 381, 386, 466 Gujarat Narmada Valley Fertilizers 234 Gulbenkian 48, 64, 210, 230, 466 The Gulf 113, 138, 266, 341–342, 466 British withdrawal from 1 crisis 269 Lower 39, 342 Gulf Air 94, 215, 240, 253, 303, 466 Gulf Arabs 12 Haftar, Khalifa 414, 468 Hair Dalma 150, 468 Hajar 123 mountains 19, 58, 80, 110, 115, 135–136, 207, 468 Halcrow International Partnership 67, 271 Halcrow Middle East 67 Ham 468 Hamadiyah 165 al-Hamar, Abdul-Malik 53, 73, 155–156, 194, 468 governor of Central Bank of UAE 217, 262 Hamas 349, 412, 468 bin Hamdan, Latifa wife of Sheikh Rashid 173 al-Hamili, Shaiba EGPC deputy chairman 200 al-Hammadi, Mohammed 413 Hamouda, Hamouda bin Ali bin Ghamin 469 Hamra desert 191, 469 Hamra-Krouha, Mahmoud 469 ADNOC general manager 174 Hamriyyah 103, 206, 469 Hamza, Kamal 469 director of Dubai Municipal Council 103 Harakat al-Muqawama al-Islamia (Islamic Resistance Movement) 470 haram 226 Harappan Civilisation 471

INDEX Hareb Group 290 John R Harris architects 104 Hart Architects 104 Harvest Commodities 216 have-nots 290 hawala 320, 325, 330, 470 hawaladha 330 Hawk Mark 61 super-trainer strike aircraft 181 Hay Davison, Ian 337 head of government 282 Head of State 282 health service 59 Heard-Bey, Frauke 342 Hearst, David 382, 393 Hederwicks 16 Hernu, Charles 470 French defence minister 182 Higher Colleges of Technology 470 Higher Council for Customs 145, 157 Hili 130, 470 Hill Samuel 113 Hilton Hotel 23, 104 Fujairah 35, 135 Hispanoil 105 Hitachi Zosen 189 al-Hiti, Usama Iraq oil minister 276 Hiwar (Dialogue) 375, 470 internet forum 385 Hochtief 470 Hodaryat Island 204, 470 Hodeidah XIX, 414, 418–419 Holiday Inn 16, 290 homeland security 349 Homosexuality 345 Hong Kong 239, 251 Hongkong and Shanghai Banking Corporation 178, 470 Hormuz 470 Horn of Africa XIX, 414, 470 hotels price war 127 housing 29 Houston Oil & Minerals 50, 69, 470 Houston/Deutsche Texaco 115 Houthi 418, 470 anti-Houthi coalition 419 forces 419

INDEX Iranian backed XVIII pro-Houthi group 419 rebels XVIII, 414 human rights record UAE 375 Yemen 418 Human Rights Watch 375, 384, 470 Hungary 250 Hunting Surveys 19, 471 Hussein, Saddam 266, 281, 285 Hyatt Regency Hotel 104, 185, 195 hydrocarbon export revenue 364, 395, 423 Hydrocarbons 286 Hyundai Engineering and Construction 242, 471 Hyundai Industries 367 IBM 315 IDEX 95 295 IMF See International Monetary Fund

300, 363–364, 368, 394, 398, 400, 416, 422 recommended list of policies 331 IMF/World Bank meeting 2003 331 IPIC International Petroleum Investment Company 237 Ibri 95 Idemitsu 247, 471 illegal migrants amnesty 335 imbalance of wealth 117 immigrant population 132 Imperial Airways 108, 134, 471 Imperial Iranian Brigade Group 451 import-substitution 124 imports 122, 302 1992 276 increasing 370 Imsay ETS 65 independence 132 thirty years of 319 Independence Day 8 Index of Economic Freedom 332, 339 India XVII, 9, 354, 471 expatriates 171 India National Oil Company 251 Indian workers 133 Indian Ocean 405, 414 Indian independence XVII

553 Indian sub-continent 133 Indus Valley 130, 471 industrial zone 230, 260, 353 Jebel Ali 184 Ruwais 184 Industrial Bank of Kuwait 111, 136 Inflation 122, 124, 291, 306, 363, 386 inflationary pressure 306, 360 injection and production scheme 151 Inpex 471 Inter-American Development Bank 84 inter-emirate rivalry 282 InterContinental Hotel 16, 90, 112 InterContinental Plaza 104 Interdependence 314 international crimes XIX International Court of Justice 291, 295 International Defence Exhibition and Conference 471 International Energy Agency 209 International Finance Corporation 184, 471 International Monetary Fund 82, 124, 300, 321, 329, 336, 346, 352, 360, 362, 370, 376, 385, 392, 398, 407, 415, 472 International Petroleum Corporation 178, 232, 277, 472 International Petroleum Investment Company 162, 237, 248, 373, 380, 472 intra-GCC trade 289, 339 Investment Authority 83 Investment Bank for Trade and Finance 110 Investment Corporation of Dubai 365–366, 472 Inward FDI Performance Index 352 Iran 39, 79, 108, 115, 223, 228, 234, 254, 256–257, 261, 267, 272–273, 290–291, Iran (contd.) 294, 302, 309, 318, 338, 341, 351, 355, 357, 378, 391, 406, 412, 415–416, 472 1979 revolution 472 economy 259 expansionism 304, 309 international sanctions 385 Islamic revolution 166 Mubarak oilfield 268 naval manoeuvres 309 re-exports from Dubai 252 relations with UAE 1 revolution 78 sanctions 373

554 Iran (cont.) Sheikh Zayed mediation 190 terrorist activity 348 Tunb islands annexation 309 Tunb islands dispute 275, 295, 305, 320, 330 Iran-Iraq war 132, 138–139, 145, 163, 166, 168, 182, 200, 205–206, 208, 239, 251–252, 254, 257, 473 ceasefire 244, 253 Iranian ambassador 169 arrests in 1983 169 envoy to UAE 357 merchants 252 Iranian (cont.) population in Dubai 169 Iraq 193, 246, 254, 256, 258, 266, 290–291, 294, 315, 318, 325, 330 closer ties 306 countries supported Kuwait invasion 266 Dubai trade 310 economy 259 invasion of Kuwait 254, 258, 261, 263, 272 lifting of embargo 306 ousted from Kuwait 292 Sheikh Zayed mediation 190 trade with UAE 320 Iraq Petroleum Company 133, 175, 210, 230, 473 Iraqi air raid 231 Al-Islah 383, 473 Islamic Development Bank 116, 474 Islamic Front for the Liberation of Bahrain 438 Islamic finance 331 Islamic law 241, 295 Islamic virtues 295 Islamist extremists 349 terrorism 345 Israel 306, 320, 391, 415 Israeli forces 170 invasion of Lebanon 140 peace talks 295 question 294 Israeli-Palestinian dispute 330 Italconsult 242, 474

INDEX ittihad 60, 77, 104, 295, 413 JGC Corporation

206, 215 Jafza 261 al-Jallaf, Anis 332 Jamain oilfield 149 Janata Bank 73, 83, 474 Japan 100, 107, 206, 231, 299, 318, 327, 359, 373, 391 LPG exports 322 price dispute 210 Japan Gasoline Company 177, 474 Japan Line 3, 474 Japan Oil Development Company 66, 148, 175, 197, 210, 230, 259, 367, 474 Japanese Overseas Petroleum 3, 475 Jarn Yaphour oilfield 286, 372, 475 Jarnain 475 al-Jarwan, Saif 256, 475 labour and social affairs minister 60 Jashk 455 Jawasmis 475 Al-Jazeera 216, 475 Jebel Ali 22, 26, 29, 55–56, 67, 105–106, 159, 212, 226, 231, 239, 252, 268, 292, 475 E power station 271, 289 export terminal 152 industrial free zone 14, 52 industry 58 large scale industry 122 low cost housing 317 port 261 power station 243 thermal power station 214 Jebel Ali Free Zone 233, 239, 251, 260–261, 272, 280, 287, 306, 311, 313, 315, 317, 321, 326, 331 aluminium smelter 122 fertiliser plant 301 Jebel Ali Port 261, 303, 307 capacity expansion 253 merger 272 Jebel Ali Refinery Corporation 272 Jebel Ali-Abu Dhabi 271 Jebel Dhanna 52, 65, 90, 95, 233, 476 oil terminal 13, 48 Jebel Hafeet 476 Jebel Hafit 130

INDEX Jebel Jais 499 Jeddah Agreement 503 Al-Jeemi Hospital 216 Jerusalem 140, 448 Joannou and Paraskevaides 37, 94, 214, 476 Jodco 197, 210, 230 Joint Terrorist Finance Co-ordinating Committee 350 Jordan 266 Jotun Dubai 476 Jubail 56, 71, 112, 123 Julvar 499 Jumeirah beach 271 Jumeirah Mental Hospital 104 KCA International

177 Kabul 131 Kahaif gas deposit 285, 297 Kakaif 476 Kalba 476 Karachi 234 Karbala, Battle 509 Kazakhstan 353 Keang Nam Enterprises 205, 476 Keir International 153 M W Kellogg 216 Kellogg Brown & Root 476 Kellogg International Corporation 71 Kenya 191, 476 Al-Khaleej 229, 477 Khaleej Times 164 Khalfan, Dhahi 383, 476 Khalid Lagoon 477 Khalidi, Walid 170, 477 Khalidiya Palace Hotel 90 Khalifa Industrial Zone Abu Dhabi 369, 377, 385, 477 Khalij 477 Khalij Commercial Bank 99, 194, 217 Khamenei, Ali President of Iran 140 Khamenei, Sayyid Ali Hosseini 477 Khansaheb Civil Engineering Co 477 Khatt 113 Khazzan 50, 477 Khor Dubai 477

555 Khor Fakkan 6, 16, 19, 109, 135, 186, 189, 285, 477 container terminial 33 development 58 port 234, 261, 303 Khor Fakkan Cement Company 164 Khor Khuwair 112, 156, 189, 477 heavy industrial zone 71 quarries 6 Khor al-Udaid 413, 428, 477 Khorramshahr 140, 478 Khuba 199 Khuff 176, 268, 359, 478 natural gas reservoirs 338, 348, 355 Khuff offshore gas development 316 Kier International 478 Kirkuk oilfield 442 Kisho Kurokawa 37 Knight Frank 393 Korean Shipbuilding & Engineering Corporation 69 Krouha, Mahmoud Hamra 64, 231 Kubaish, Salem Saeed 383, 478 attorney general 394 al-Kubaissi, Amal Abdullah member of FNC 356 Kuwait 24, 34, 102, 112, 168, 193, 224, 226, 256, 258, 266, 269, 291–292, 294, 307, 342, 344, 400, 478 economic agreement 145 invasion by Iraq 263, 473, 478 investment income 248 Liberation 275 OPEC quota 246 quota busting 276 rebuilding 272 Kuwait Airways 17 Kuwait Fund for Future Generations 73 Kuwait crisis 266 LNG production 277 La Mole Industries 239, 479 Laker, Freddie 129 Land Reclamation 479 Landoil 178, 479 Latif Khan 479 Layyah 479 Layyah power station 200, 289, 303 League of Arab States 169, 263, 479

556

INDEX

Lebanon 170 Leclerc battle tanks 278, 292 Lehman Brothers XVIII, 382, 393, 480 lending Iraq war effort 168 Levant 12 Libor 176 Libya 266 Libyan Arab Foreign Bank 99 Libyan National Army 415 liquefied natural gas 27, 231, 424, 480 liquefied petroleum gas 231, 480 Lisnave 14, 188 Little Sparta 414, 482 livestock 202 Livestock Breeding Company 111, 136, 480 Livingstone, Ian 68 Liwa 43, 87, 95, 480 oasis 57, 342 Lloyds Bank International 68, 200 Lloyds of London Insurance 337 LloydsTSB 365 Lockheed Martin XVIII London XVII London Agreement 166 Louvre (Abu Dhabi) 480 Louvre museum 381, 387 Lower Gulf 205, 480 Luce, Sir William 40, 480 Lulu Island 271 Lundin Group 199, 231 Lundin, Adolf 178 Lurssen shipyard 243 MBS (Crown Prince Mohammed bin Salman

al-Saud) XIX MJAC 67 MTI 135, 486

Jeddah 109 al-Mabhouh, Mahmoud 521 al-Madfa, Hamad Abdel Rahman 180, 256, 481 health minister 60 minister of education 265 Madha 481 Madinat al-Karamah 162 mafia base 334 Mafraq 90, 94, 481 sewage treatment plant 260, 271

al-Mahatta fort 471 Majlis 399 al-Maktoum 8, 481–482 Ahmed bin Said 215 deputy defence minister 181 Dubai ruling family 264, 366 finance minister 181 Hamad bin Rashid finance and industry minister 178 Hamdan bin Rashid 134, 155, 265 Chairman of Dubai Municipality 103 minister of finance 180, 298 Maktoum bin Hashar 481 Maktoum bin Rashid 256, 265, 341, 346, 382, 481 Crown Prince 2 Dubai Ruler 290 Emir of Dubai 354 Prime Minister 294 UAE deputy prime minister 60 Mohammed bin Obaid 481 Mohammed bin Rashid 344–345, 347, 397, 412, 481 Crown Prince of Dubai 294, 337 Emir of Dubai, vice president of the UAE 351, 354 minister of defence 42, 265, 294 poem 411 UAE Vice President Dubai Ruler 411 Rashid bin Saeed XVII, 9, 14, 22, 30, 39, 133, 166, 208, 227, 255, 342, 344, 405, 482 death 265 deputy federal president 228 health 173 re-elected vice president 266 Ruler of Dubai 77 UAE Prime Minister 60 Vice President 2 Rashid bin Sultan 102 Saeed bin Maktoum bin Hasher 482 UAE prime minister 265 Maktoum bridge 271 Malaysia 419 Mameluke reign 446 Al-Mamzar power and water plant 253, 271, 290 Manama 482

INDEX manpower agreements 158 Mansoor, Ahmed 375, 482, 385 Maqta Abu Dhabi to Jebel Ali pipeline 322 bridge 250, 271 Marbella Club 110, 135 Margham 199, 231, 482 concession 151 gas field 213, 249, 252 oilfeld 176, 187, 212 Maritime Police Force 414 maritime security 349 Maritime Treaty 482 al-Marri, Helal Saeed Director of DTCM 421 Marriott Hotel Complex 272 Marriott Hotel 290 Marshall Plan 190, 482 Marxist 292 Masafi 113, 482 Masfut 18, 482 mass transit system 392 Mattis, James Norman 414, 418, 482 Mawa’id 232 gas reserves 152 oilfield 177, 199 al-Mazrouei, Ghanem 193, 517 al-Mazrui, Sohail Fares 237, 247, 482 ADNOC secretary general 231 McCarthy, Dan 61 McDermott 112, 480 McDonnell Douglas 270, 292 Mecca (Makkah) 483 medicine Western specialists 172 Medina 483 Memorandum Movement 137, 483 mercantile development 77 Mercer 400 merchant Iranian 45 in Dubai 30 Meridien Hotel 16, 90, 214 Merlin Gerin 198, 233, 483 Merrill Lynch 299 Merz & McLellan 214, 483 Mesopotamia 130, 483 Metro Oil 286 Meydan 483

557 Meydan racecourse 382, 397 Meydan stadium 393 Microsoft 315 Middle East Annual Review 1980 483 (later Middle East Review) 77 Middle East Economic Digest 188, 483 Middle East Oil 3, 483 Middle East Review 353, 357 Middle East and North Africa Summit Doha, 1997 306 Middle East common market proposals 295 Middle East development bank proposals 295 al-Mifra 332 Milchem 160 Milford Haven 200, 213, 232, 483 military force 131, 171, 281, 335 Mina Khalid 16, 33, 109, 135, 189 Mina Rashid 55, 261, 307, 484 Mina Saqr 17, 164, 206 Mina Zayed 29, 93, 233, 239, 261–262, 272–273, 303, 312, 484 extension postponed 58 re-development 253 Minerals and Metals Trading Corporation 176, 484 ministry 26, 91, 101 agriculture and fisheries 127, 161, 186 defence 21, 155 economy 145, 157, 352, 484 education 143, 181 budget cut 172 electricity and water 165 environment and water 421 federal planning 316 finance 181, 217, 269, 484 foreign affairs 485 health 216 higher education and scientific research 485 Islamic affairs 265 labour and social affairs 311 oil 147, 152 planning 144, 172, 300 public works and housing 157 social and labour affairs 144 tourism 161 information 471

558 Mir Mahanna 485 Mirage 2000 jet fighters 182 Mirghim 142 Mitsubishi 116, 176, 239 Mitsui 37, 51, 150, 177, 247, 485 Mobil 48, 64, 148, 230, 237, 485 Mocha 485 Mohammed 485 Mokha 414, 418 money laundering 325, 350, 420 Montague, Louisa 129 moratorium on banking 125 Morocco 250, 257 labour agreement 171 Mossad 521 Mossadeq, Mohammed 504 Mothercat 486 Moussafah 67 al-Mu’alla Ahmed bin Rashid 18, 486 Rashid bin Ahmed II 486 Mumaid 230 Saud bin Rashid 164, 486 Mubadala Development Company 486 Mubarak 220, 486 gas field 212 oilfield 51, 69, 109, 115, 152, 215, 268, 277, 373 Mubarraz 486 oilfield 3, 175, 230 al-Mudarrisi, Hojjat ol-Eslam Hadi 438 al-Muhairi, Yousef bin Omeir bin Yousef 486 Mujahideen 439 Mukalla XVIII, 414, 418, 486 Al-Mulla Centre 104, 201 Multan 238, 487 multi-modal transport system 134 Mumbai 440 Municipality 91, 134, 487 Muqtaa 487 Muqtaa bridge 94 Murban 487 crude 147, 151 oil discovery 133 oilfield 48 Murban Bab oilfield 372 Musafah 95, 487

INDEX industrial area 92 Musafah Port 303 Musandam Peninsula 341 museum 130 Mushrif reservoir 280 Muslim 487 Muslim Brotherhood 383 Muslim world 79 NATO (North Atlantic Treaty

Organisation) 257 Nabati 411 Al-Naboodah-Laing 104, 219 Nahwa 487 al-Nahyan 8–9, 60, 305, 429, 487 Abu Dhabi ruling family 77, 248, 269, 383 Abdullah bin Zayed 305 foreign minister 358 family feud 309 Hamdan bin Mohammed 265, 487 deputy prime minister 253 UAE deputy prime minister 60 Hamdan bin Zayed 256, 487 minister of state for foreign affairs 265 Issa bin 342 Khalifa bin Zayed 191, 227, 309, 330, 341, 345, 362, 406, 487 Crown Prince 2, 65, 191, 269, 290 Deputy Supreme Commander 42 Supreme Council for Petroleum Chairman 237 UAE President 356, 403 Latifa bint Hamdan bin Zayed 488 Mohammed bin Salman XVIII, XX Mohammed bin Shakhbut Ruler of Abu Dhabi 413 Mohammed bin Zayed 305, 309, 488 Crown Prince of Abu Dhabi XX, 403, 414, 418–419 Nahyan bin Mubarak minister of higher education 265, 488 Rashid bin Saeed 137, 390, 399 Said bin Zayed under secretary for planning 250 Saif bin Zayed 488 Saqr bin Zayed 488 Shakhbut bin Sultan 95, 342, 488 Sultan bin Zayed 41, 256 deputy prime minister 265, 309

INDEX Tahnoun bin Mohammed 488 chairman of ADNOC 200 Tahnoun bin Shakhbut 413 Tahnoun bin Zayed 460, 488 UAE President 166 Zayed I bin Khalifa 488 Zayed II bin Sultan 488 Zayed bin Abdullah 488 Zayed bin Khalifa 413 Zayed bin Sultan XVIII, 21, 39, 83, 109, 140, 162, 190–191, 208, 238, 255, 266, 269, 288, 294, 305, 309, 330, 334–335, 341–342, 344, 403, 434 accession 91 death 351 federal president 228 founding president 356 funds for Northern Emirates 245 President 2 Zayed bin Sultan XVIII (cont.) UAE President 78 UAE President, ruler of Abu Dhabi 61 re-elected President 265 sub-section of Al Bu Falah 342 Nakheel 489 Nakheel Properties 359, 363, 365 Al-Nakhil 111–112 Nakhuda 489 Nasr 489 Nasr oilfield 268, 368, 373 national security 404, 414 threat 349 National Assembly 91 National Bank of Abu Dhabi 5, 73, 96, 98, 176, 194, 218, 225, 240, 337, 489 National Bank of Dubai 5, 98, 107, 240, 299, 337, 390, 399, 405, 489 National Bank of Fujairah 489 National Bank of Kuwait 376, 405, 423 National Bank of Ras al-Khaimah 17, 113 National Bank of Sharjah 110, 163, 200, 217, 489 National Cement Company 160, 489 National Chlorine Industries 210 National Company for Investment in Real Estate 99 National Consultative Assembly 489 National Day 489

559 National Drilling Company 65, 210 National Gas Shipping Company 368, 379, 388, 408 National Investment and Securities Corporation 248, 489 National Iranian Oil Company 70 National Petroleum Construction Company 156, 211, 489 National Reservation Wage 489 National Security Company 233 National Security Council 349 National Service 489 National Strategy for Innovation 476 natural gas 424 consumption 339, 348 extraction costs 359 grid 339, 348 imports 389 injected 389 injection 374 production 374 reserves 338, 359, 366, 368, 374, 380, 389, 401 pipeline from Qatar to Oman 339 Neorian Shipyards 188 Neste Oil 307 Newmarket 347 Niebuhr, Carsten 499 Niger 140 Nippon Oil Company 247, 490 Niscorp 248 Nissho Iwai Corporation 165 Nizwa 95 Nomenclature 490 non-aligned bloc 46 Non-Aligned Movement 263, 490 non-alignment policy 131 non-hydrocarbon GDP growth 370 Non-oil economy 259 non-oil exports 279, 307, 358 growth 360 Non-oil growth 398 Non-oil sectors 322 non-oil trade 205, 279, 347, 355, 363–364 non-performing loans 371, 490 Noora 112 North Africa 414 North Dome natural gas field 339

560 North Yemen 292 North-east Abu Dhabi fields 327 Northern Arabs 12 Northern Emirates 222, 232, 284, 363, 490 funds from President Zayed 245 Industry 71 Novotel 16 al-Nowais, Nasser 490 ADFAED 181 under secretary, ministry of finance 229 Nuaimi 36, 383 Humaid bin Abdulaziz 490 Humaid bin Rashid 37, 140, 490 Rashid Abdulla 256, 490 foreign minister 265 Rashid III bin Humaid 490 Rashid bin Humaid 37 Nusseibeh, Lana 420 Nusseibeh, Zaki 490 OGJ See Oil & Gas Journal 348 OPEC See Organisation of the Petroleum

Exporting Countries 63, 166, 226, 258, 266–267, 312 Abu Dhabi joined 338 basket 326 Dubai quota cut 151 Geneva conference 1989 246 Monitoring Committee 174 pricing formulas 246 quota 174, 197, 209–212, 246, 285, 301, 316, 355, 389 UAE quota 338, 348 Vienna meeting 1982 167 Occidental Petroleum 372, 379, 490 Offsets Group 322, 327 Offshore Banking Units 83 offshore restricted licence banks 73 Offtake Agreements 491 oil 171, 347 boom 45 discovered in Dubai 3 embargo 3 exports 272 exports begin 3 fall 208 industry 353 Abu Dhabi 48 Dubai 50

INDEX Ras al-Khaimah 51 Sharjah 51 infrastructure 349 pipeline 207 policy 258 price 276, 308, 364, 369, 376, 397 prices 131 production 3, 118, 151, 167, 301, 322, 348, 355, 358, 363, 367, 372, 388 reserves 10, 267, 277, 347, 355, 358, 366, 371, 378, 388, 401 revenue 73, 276, 358 rights 45 Oil & Gas Journal 366, 387, 396, 401, 409, 491 Oil reserves 491 Oil sector 257 Oman 86, 218, 240, 257, 266, 291, 295, 315, 339, 341, 357, 380, 400–401, 407 agreement on education 172 border agreement 330, 335 dispute 70 loan for oilfield development 98 natural gas grid 356 pipeline 395, 416 Oman, Sultanate 491 Oman/Qatar axis 294 al-Omeir, Yousef 256 minister of petroleum and mineral resources 265 Onshore Gas Development OGD-3 322, 327 Organisation for Economic Co-operation and Development 44, 491 Organisation of Arab Petroleum Exporting Countries 14, 153, 188, 193, 491 Organisation of Islamic Co-operation 491 Organisation of Islamic Conference 266 Organisation of the Petroleum Exporting Countries 24, 44, 147, 166, 192, 221, 257, 263, 285, 296, 314, 348, 354, 364, 372, 376, 379, 387, 401, 407, 423, 491 Also see OPEC President 62 quota 208, 236, 275, 322 sharing out quotas 245 Oryx Energy 249 Oslo Accords 306 Oslo Peace Agreement 427

INDEX al-Otaiba, Mana Said 148, 153, 196, 210, 246, 256, 258, 265, 412, 492 minister of petroleum and mineral resources 65, 147 oil minister 49, 167, 173, 237 President of OPEC 62 al-Otaiba, Yousef 492 Ottoman Empire 492 Ottoman Porte 444 Ottoman Turks 413 over-banked 124 over banking poses problems 72 Overseas Development Administration 98, 492 Overseas Petroleum Investment Corporation 232 Overseas Petroleum and Investment Corporation 178, 493 al-Owais, Humaid Nasser electricity minister 60 Oxford XVII, 89 Pakistan 46, 191, 419 Pakistan (cont.) agricultural development agreement 172 expatriates 171 media agreement 172 Palestine 493 Palestine Liberation Organisation 46, 140, 170, 191, 266, 291, 479, 493 Palestinian areas 320 humanitarian assistance 349 issue 250 Palestinian Authority 427 Palestinians 266, 306 palm groves 136 Palm Islands project 321, 326 Palmon (UAE) 234 Pan Ocean Oil 493 pan-Arab grouping 294 Pan-Ocean Oil 3 Panjgur 493 Partex 48, 64, 148, 210, 231, 396, 493 Participation agreement 493 Pax Britannica 139, 493 pearl divers XVII, 493 pearling 133 penal code 385

561 Peninsula Shield 292 People’s Democratic Republic of Yemen 357, 494 See Also PDRY Permian Khuff 150 Perpetual Maritime Truce 1853: 494 Perry, William 295 petro-chemical plant 125 petro-chemical industry 28 Petrofac 367, 494 Petrokal 178, 494 Petroleum Council 247, 494 Petroleum Development (Trucial Coast) Ltd (PDTC) 428, 444, 460 Petroleum Exporting Countries 326 Philips 251 pipeline domestic 373 Maqta to Jebel Ali 322, 327 Oman to Sharjah 301 sub-sea from Qatar to Oman 339 Pipeline Construction Company 494 Pirate Coast XVII, 10, 494 planned growth 284 Poland 250 Polensky and Zollner 90, 495 Policy Agenda 429 political system 255, 356 Political Agency XVII Political Agent XVII Political Officer XVII, 495 Political Resident XVII, 495 polyethylene Ruwais 307 Popular Front for the Liberation of Oman 451 Popular Front for the Liberation of Oman and the Arabian Gulf 2, 451, 495 Popular Front for the Liberation of the Occupied Arabian Gulf 451 population decline in Dubai 126 Population 1969 pre-federation XVII Population figures in 1968 343 Port Jebel Ali 288 Port Rashid 30, 33, 160, 185, 239, 288, 303 increase in cargo 253 merger 272 re-organisation 253 Port Zayed 185

562 Portuguese 519 post-oil development strategy 321 post-oil era 314 poultry farm 136 Power cuts 222 Presidential succession issues 309 private unlimited company allowable foreign equity 183 Privatisation 307, 318 Professional Group of Australia 35 property market depression 32 Provisional Constitution 144, 254, 495 public investment spending 370 public sector spending 124 Puntland XIX, 414, 495 Purchasing Managers’ Index 406 Pym, Francis 170 Qaboos, Sultan 45, 495 al-Qadafi, Muammar 412 Qais, Azziz bin 444 al-Qasimi 498 Abdul Aziz bin Mohammed 255, 264, 495 Ahmed bin Mohammed 255, 265, 495 Hamad bin Mohammed 496 Khalid III bin Mohammed 496 Khalid bin Saqr Crown Prince of Ras al-Khaimah 63 Saqr bin Mohammed 8, 17, 23, 33, 164, 496 Saqr bin Sultan 497 Saud bin Saqr 497 Sultan bin Kayed 497 Plot leader 393 leader of Islamist group Al-Islah 383 Sultan bin Mohammed 23, 32, 43, 62, 69, 255, 264, 497 Ruler of Sharjah 78, 108, 373 al-Qatai 446 Qatar 40, 95, 146, 239–240, 266, 291, 295, 319, 324, 338–339, 341, 344, 355, 380, 400, 407, 413–414, 420, 498 agreement on educational cooperation 172 blockade XVIII, 411, 420 coup 296 dispute 415

INDEX embargo 411 Emir 412 exports 413 foreign policy 411 gas to Abu Dhabi and Dubai 322 government 412 independence from Bahrain 413 natural gas grid 356 pipeline 395, 416 shared currency with Bahrain 412 trade and diplomatic boycott 412 Qatar News Agency 420 Qatar Petroleum 339 Qatar and Dubai riyal 498 Qawasimi 10, 498 al-Qudera Fatima bin Mubarak 309 Al-Quds al-Arabi 375, 384, 498 Quetta 438, 498 Qur’an 498 Qusahwira 498 Qusahwira oilfield 372 RAF 108, 134 RAK (Ras al-Khaimah) Petroleum plc

499 al-Rahbani, Abdel Rahim 213 Ramada 499 Ramada Hotel 66, 89–90 Ramadan 397 Ramhan oilfield 372 Rapco Buildings 242 Rapid Deployment Force 131 Ras Laffan 339, 356, 500 Ras Musandam 500 Ras Musandam Peninsula 80, 108, 135, 188 Ras al-Khaimah 1, 6, 8, 17, 117, 206, 226, 273, 499 Abu Musa and Tunb Islands 330, 335 agricultural development 6, 172 agriculture 58, 135 cement mill 123 dam 136 dispute with Oman 277 joining UAE 1 oil discovery 48, 213 telecommunications opt out 58 Ras al-Khaimah Company for White Cement and Construction Materials 189 Ras al-Khaimah Mobile Force 499

INDEX Ras al-Khaimah National Oil Company 178 Ras al-Khaimah Oil Company 113 Ras al-Khaimah Rock Co 112 Ras al-Khaimah Telecommunications Authority 34, 58 Ras al-Khaimah Transport Authority 500 Ras al-Khaimah to Musafah highway 95 Rashid oilfield 212, 373 Rashid Central Hospital 104 Rashid oilfield 104, 212, 373 500 Raymond International 112 Reagan, Ronald 131, 500 real estate market 391, 399 real estate 360 Recession 47, 221 Red Sind 500 Reefer 500 regional instability 323, 335, 384 Regional relations 291 Reliance Industries 249, 500 Rendel, Palmer & Tritton 65 Reserve Authority 88 Reserve Oil and Gas 116 Reserve Oil and Gas Co of Denver 35 Reserve Oil and Gas Company 500 Restricted Licence Banks 83 retail trade 126 Reuters 193–194, 394, 500 Revolutionary Organisation of the Arabian Peninsula 132, 500 Reynolds Diversified 114, 178 Richelieu 399 rivalries 256 rivalry 387 between Dubai and Abu Dhabi 208, 263, 344 Riyadh 1, 292, 500 Riyadh Line 445 riyal Qatari and Dubai 412 Ro-ro 500 Romania 250 Rostamani 107 twin tower complex 104 al-Roumi, Khalfan 256, 476, 501 Royal Dutch/Shell 237 Rub al-Khali 475, 501 Russia 338, 355 instability 309

563 Russians 131 Russo-Afghan crisis 79 USA reaction to crisis 79 al-Rustomani, Abdul-Rahman 181 Ruwais 26, 65, 88, 90, 92, 100, 159, 210, 216, 231, 246–247, 501 ethylene facility 307 gas liquifaction project 26, 148, 159 hydro-cracker 212 industrial project postponed 55 Industrial Zone 175 petrochemical plant 301 pipeline 52 refinery 105, 175, 286, 297, 317 work force 56 Ruwais Fertilizer Industries 176, 231 Rwala tribe 440 SAVAK 473, 504 SNAM-Progetti 65, 89 Saadiyat bridge 204 commodities exchange 315 plans for free trade zone 302 Saadiyat Free Trade Zone 311 Saadiyat Island 6, 57, 65, 87, 95, 132, 250, 381, 386, 501 sabkha 65, 501 Sahil 148, 501 gas field 27 oilfield 48, 212, 367, 372 al-Said, Qaboos bin Said 502 Said, Samir 74 al-Saie, Ali 199 Saipem 65, 88, 502 Sajaa 232 gas field 177, 212, 215, 268, 285, 289 oilfield 152, 163, 177, 199, 206 Saladin 446 Sheika Salama bint Butti al-Qubaisi 342 Saleh 502 Saleh gas field 268 Saleh oilfield 178, 200, 232 Salman oilfield 427 Salman, Said ambassador in Paris 60 Samha 502

564 Samha naval base 242 sanctions international 378 Iraq 294 Santa Fe International 152, 178 Saqr Hospital 112 Saqr, Zaki 164 Satah 210 oilfield 149, 197 Satwa complex 104 al-Saud Abdullah bin Abdelaziz 502 Fahd bin Abdulaziz 502 Faisal bin Abdulaziz 503 Mohammed bin Salman 503 Crown Prince of Saudi Arabia 419 Salman bin Abdulaziz 503 Saudi Arabia XIX, 1, 24, 39, 44–45, 86, 132, 167, 193, 224, 237, 239, 246, 257, 266, 291–292, 294, 318, 330, 335, 338, 341, 355, 357, 363, 411–412, 414, 418–419, 503 clash over Aden port 415 debt 397 Saudi Arabia (cont.) defence pact 139 economic agreement 145 mutual defence pact 503 oil reserves 258 Qatar blockade 420 Saudiasation 24 Saxon Oil 177 al-Sayegh, Abdul-Jabbar 233 Scimitar Oils (Dubai) 68 Scorpion tanks 42, 504 Scott Wilson Kirkpatrick and Partners 93, 504 Scott, Ronald 73 Sealand Norasia 253 Seatrain 16, 33 security conference, Muscat 1976 46 Sedco 50 Sedco/Houston 105 Selection Trust 30 Senaat 504 service industries 126 sexual violence XIX Shah Abbas I 438 Shah gas field 504 Shah oilfield 133, 149, 259, 367, 372

INDEX Shah of Iran 1, 40, 138, 223 Abu Musa island 70 Mohammed Reza Shah Pahlavi 504, 451 Shahil oilfield 301 Shaiba al-Hamili 200 shamal 501 al-Sharaa, Farouk Syria foreign affairs minister 277 Sharia 24, 296 Sharjah 1, 32, 37, 117, 129, 134, 206, 273, 357, 504 cement mill 123 coup 1987 255 economic planning 10 financial centre 134 free trade zone 302 multi-modal transport system 134 oil production 249 recreational facilities 134 Sharjah Cement and Industrial Development Company 110 Sharjah Development Plan 1988–93 273 Sharjah-Dubai border dispute 142, 505 Sharjah/Dubai conurbation 136 Sharjah Economic Development Corporation 273 Sharjah industrial zone 273 Sharjah Insurance Company 6, 505 Sharjah International Airport 273 Sharjah-Iran Agreement 4, 506 Sharjah National Guard 41, 506 Sharjah Oxygen Company 71 Sharjahport 109, 135, 506 al-Sharqi Hamad bin Mohammed 23, 35 Emir of Fujairah 19 Sheikh Zayed 506 Shell 48, 64, 230, 379, 396, 506 Shelter Contracting 271 Shenshen 238 Sheraton 90 Shihr 414, 418 Shi’a 264, 282, 291, 506 population 139 Shi’ite 78, 295 Showa Oil Company 247 Shuweihat 317

INDEX Shuweihat S1 power plant 327 Sibai, Mohammed Nizar 160 Siemens 242, 271 Sila 506 Silentnight 71, 114 Silla 233, 242 Simon, William E 506 Sir Bani Yas 428 Sirri Island 224, 243 Six Construct 198, 233, 260, 506 Skoda 154 small- and medium-sized enterprises 398, 406, 423 Snam Progetti 506 Snamprogetti 159, 177, 212, 301 social infrastructure 58, 124 Société Générale de Travaux du Maroc 260 Société Nationale Elf Aquitaine 506 Socotra XIX, 414, 418, 507 Sohar 95, 507 Somali breakaway states XIX Somali separatists 414 Somalia 415 Somaliland XIX, 414, 418, 507 Sonatrach 88, 118, 507 Sony 251 Souk 507 Souk al Manakh 226 South Eastern Drilling Company 69, 165, 178 South Korea 239, 373, 391 South West Fateh oilfield 104, 212 South Yemen 24, 257, 292, 507 Southeastern Drilling Company 507 Southern Petrochemicals 301 Southern Resistance Forces 433 Southern Transitional Council 433 Southwire 68 Soviet airborne troops 79 occupation of Afghanistan 131 Soviet Bloc 45, 507 Soviet Occupation of Afghanistan 507 Soviet Union 45, 150, 228, 250, 508 Spanish construction implosion XVIII sporting attractions 129, 275 Standard Oil Company 199, 232 Standard Oil Company of Indiana 152, 177, 508

565 Standard and Chartered Bank 74, 365, 508 Star Energy 249, 252, 508 state security organisation 350, 403 State Audit Institution 276 Statoil 307 Sterling Area 508 Stevin Groep 112 stock exchange 321 Abu Dhabi 325 Dubai 308, 365, 397 Saudi Arabia 397 draft law 312 Strait of Hormuz 1, 33, 45, 109, 116, 135, 164, 219, 228, 239, 285, 341, 380, 389, 508 Sub-continent 508 subsidies 127 farming 202 fuel 222, 400 succession 282 Sudan 266, 508 Suez Canal 354 Suez-Mediterranean Pipeline 162 sukuk 366, 509 bin Sulayem, Sultan Chairman, Jebel Ali Free Zone 251 sulphur content 374 Sultan’s Armed Forces 451 Sumerians 130, 509 Sunni 264, 282, 509 Sunningdale Oil 68, 510 supply bottlenecks 124 Supreme Commander 42 Supreme Council 137, 209, 228, 254, 264, 282, 403, 448, 510 formation 40 veto 9 Supreme Council of Energy 379 Supreme Council of Rulers 42, 61 Supreme Court 61 Supreme Federal Defence Council 8 Supreme Petroleum Council 237, 258, 305, 378, 388, 395, 401, 408, 510 Suq 510 al-Suwaidi, Ahmed Khalifa 45, 77, 382, 393 al-Suweidi, Sultan bin Nasser 510 Governor of Central bank of UAE 352 Suweihan 204, 242, 510 Sweden 353, 419 Syria 266, 391

566 TAQA See Abu Dhabi National Energy

Company 510 TEU See wenty-foot equivalent unit 261 TMA 31 Taiwan 239, 299 Taj Mahal 387 Taj Mahal reproduction 381 Taj Store Group 216 al-Tajir, Mohammed Mahdi 62, 68, 192, 390, 399, 405, 510 Taliban 412, 433 Tarif 95, 511 Tariff harmonisation 289 Taryam, Abdullah bin Omran 256, 511 education minister 60 minister of justice 265 speaker of Federal National Council 60 Taweelah 154, 198, 232, 303, 339, 511 ‘A’ power station 270 A-2 power plant 327 ‘B’ 270 industrial zone 348, 356 power and desalination project 214, 241, 250 Taweelah A-2 317, 323 tax holiday 261, 300, 307 taxes 134 al-Tayer, Ahmad 155, 201, 297–298, 511 minister of state for finance and industry 245, 294 ministry of finance under secretary 180 Taylor Woodrow 74, 199, 231, 511 Taylor Woodrow Energy 177 Techint 242 Technip 213, 368, 511 Technip Geoproduction 301 Tehran 1, 140, 190, 511 Tel Aviv 140 telecommunications 58 Teleplan 216 tensions increase 131 between Abu Dhabi and Dubai 359 territorial disputes 255 Texas Pacific Dubai 69 Texas Pacific Oil 69 Thailand 373, 391 Thales 511 Thamma 512

INDEX al-Thani 512 Hamad bin Khalifa 296, 412 Jassim bin Mohammed Emir of Qatar 1878—1913 413 Khalifa bin Hamad 296, 412 Tamin bin Hamad XX, 411, 412 Thatcher, Margaret 131, 512 The Gulf diversification 244 third commandment 460 Third World 141, 512 debt 240 nations 181 3M 16 Tiriem, Tiriem 137, 512 Tokyo Electric Power Company 27, 51, 210, 247, 402, 512 Torsten Andersson 188 Toshiba 242 Total 228, 231, 237, 248, 379, 396 TotalFinaElf 316–317 Touche Ross 297 Tourism 127, 290, 347, 353 boost from cease-fire 253 revenue 302 Tourism Development and Investment Company 381, 387, 512 tourist destination 298 Tractebel 250, 317, 512 Trade 301, 318, 323 Britain and the Gulf 1992 274 falling 311 non-oil exports 272 re-export 272, 276, 347, 355, 370 surplus 311 Trade and Commerce Law 145–146, 512 Trade and Industry 286 Trademark Law 279 trading route 130 Traditional loyalties 282 Trans Mediterranean Airways 513 Treaty of Jeddah 413, 445, 513 Treaty of Maritime Peace in Perpetuity XVII, 455 tribal boundaries 357 Trucial Coast XVII, 8 British presence 10 Trucial Oman 343 Trucial Oman Scouts XVII, 2, 513

INDEX Trucial Scouts 41 Trucial Sheikhdoms 1, 513 Trucial States XVII, 10, 40, 334, 404, 513 maritime treaty with Britain 263 Trucial States Development Fund 429, 513 Trucial States Development Office 513 Trucial States Development Plan 4, 513 Trump, Donald US President 412 Trust Houses Forte 33 Tullet & Riley 183 Tunb Islands 1, 45, 257, 267, 291, 315, 325, 357, 513 claimed by Iran 330 dispute with Iran 139, 309, 320 invaded by Iran 40 Tunisia 98 Turbat 514 Turkey 238 Turki, Feisal bin 444 twenty-foot equivalent units (TEU) 261 266 advisory council 351 ambassador to Tehran 357 OPEC quota 258 UAE Banks Federation 407, 514 UAE Development Bank 13, 23, 35, 83, 90, 99 UAE Offsets Group 339, 514 UAE Statistical Abstract 90 UAE Stock Exchange 304 UAE University Al-Ain 265, 270, 514 UBME 195 US Bureau of Land Reclamation 136, 138 US Energy Information Administration 355 USSR 257 UDECO See Umm al-Dalkh Development Company 197, 247 Umm Addalkh oilfield 149 Umm al-Anbar 248 Umm al-Dalkh 231, 514 oilfield 197, 210 Umm al-Dalkh Development Company 197, 210, 231, 247, 514 Umm al-Lulu 150, 514 oilfield 373 Umm al-Nar 87, 210, 231, 246–247, 514 East 93 expand capacity 159 UAE

567 Island 66, 93, 132 power station 271 refinery 125, 175–176 West 93 Umm al-Quwain 1, 6, 23, 36, 117, 136, 206, 220, 238, 273, 514 gas field discovery 322, 327 share of Mubarak oilfield 71 Umm Said 66 Umm Shaif 148, 151, 175, 198, 367, 515 oil discovery 133 oilfield 48, 52, 210, 230, 322, 327, 338, 348, 355, 359, 368, 373 underground water 136 unemployed nationals 306 unemployment 335 UAE citizens 319 unified customs 278, 296 GCC 170 Union Bank 107 Union Bank of the Middle East 195, 217, 515 Union Cement Company 112, 219 Union Defence Force 2, 41, 515 Union National Bank 269 Union of Soviet Socialist Republics 508 United Arab Bank 110 United Arab Emirates Central Bank 296 United Arab Shipping 160 United Bank 183 United Kingdom 100, 342, 407 United Nations 1, 266, 291, 515 FAO 7 General Assembly Qatar 420 mediation 169 United Nations Convention against Torture 383 United Nations Develoment Programme 515 United Nations High Commissioner for Human Rights XIX, 418 United Nations High Commissioner for Refugees 515 United Nations Security Council 291, 295 United States 515 United States Line 234 United States of America 39, 100, 345, 347, 415 government 291 Upper Zakum 248, 515

568 visa regulations 128, 522 Vision 2021 goals 422 Vision 2030 515 Vitol 70, 113, 516 Voest Alpine 177, 516 WAM 516 WFF Corporation

36 Wadi 516 Wadi Ham 7, 516 Wadi Siji 7, 516 wadis 203 Wahhabi 516 Wahhabi Islam 45 Wahhabi forces 444 Wall Street Journal 365, 516 war on terrorism 330 Wardley Middle East 178 Washington Post 412 water reservoir 127, 202, 222, 271 West Bank 493 West Germany 54, 70, 100, 516 West Mubarraz oilfield 248 Western Oil Company 287 Western, Central and Northern Regions Forces 42 Westinghouse 16, 292 White Young 91, 109 Wikileaked cable 348 William Halcrow and Partners 516 Wimpey 30 Wintershall 178, 232, 516 Wood Grundy 16 World Bank 46, 173, 321, 353, 421, 516 World Bank/IMF 2003 meeting, Dubai 326 World Economic Forum 353 World Health Organisation 421 World Heritage Foundation 332, 340 World Investment Report 352 World Trade Centre 125, 302 World Trade Organisation 347, 355, 516

INDEX Yamani, Ahmed Zaki 131, 516 Yathrib 516 Yemen XVIII–XIX, 266, 391, 413–414 agreement on educational co-operation 172 anti-Houthi coalition XVIII civil war 292, 415 labour agreement 171 peace talks 419 war Iranian involvement 419 UAE involvement 419 Yemen Arab Republic 517 Yemen civil war 418 Yemen government XIX Yemeni islands 414 Yemeni al-Qaeda XVIII Yemens 46 ZADCO See Zakum Development

Company 247 Zaire 140 Zakat 517 Zakat Fund 437 Upper Zakum 48, 151, 167, 230, 246, 367–368, 517 oilfield 27, 49, 52, 64, 118, 147, 149, 174–175, 192, 210–211, 230, 259, 322, 326, 367, 372 oil reserves 211, 372 production restriction 174 Zakum Construction Company 201, 517 Zakum Development Company 149, 174, 197, 210, 230, 247, 367, 379, 388, 517 Zapata Exploration 115 Zararah/Shaybah 517 Zarrar oilfield 1, 357 Zayed University 517 Zayed the Great Zayed bin Khalifa Al Nahyan 61 Zirku 518 Zirku Island 27, 87, 132, 149 oil export terminal 64 Zubbaya 149, 518