Oil sheikhdoms and the rise of Islamist threat

Oiling transnational terrorism

Oil prices are sure to rebound before long, ensuring that the Gulf sheikhdoms enjoy overflowing coffers and a growing heft to fund extremist groups, like the Lashkar-e-Taiba, long fattened with Saudi petrodollars, says Brahma Chellaney

The Economic Times, December 24, 2008

There is an inverse correlation between the price of oil and the price of freedom, as has been pointed out by American commentator Thomas Friedman. An oil-price spike not only spurs greater transfer of wealth to the oil-exporting nations, but also undercuts the spread of freedom by instilling or strengthening authoritarianism and arming the Gulf states with greater clout to fund fundamentalism and extremism elsewhere.

The current oil-price crash might create an illusion that the era of sky-high international prices is over. Before plummeting below $50 a barrel in November-end, the price of crude oil had gone from $30 in 2001 to as high as $147 in July 2008, creating an unprecedented bonanza for oil-exporting nations.

But for many oil-consuming states in the developing world, the high price of oil created an unfavourable balance-of-payments position. One such state, the terror-exporting Pakistan, has just been pulled back from the brink of bankruptcy through US munificence, including a $7.6 billion IMF bailout package announced on the eve of the Mumbai terrorist assaults. The precipitous drop in the oil price, on the other hand, spells trouble not only for petro-states like Russia, Iran, Venezuela and Bolivia, but also nations like Egypt and Jordan where gulf money has helped shore up strained economies.

When viewed against a long-term picture of demand and supply, the sudden price crash is just not sustainable. Compared to the 1974 level, the price of oil, if adjusted against inflation, ought to be about $100 a barrel today. Given that there are 159 litres in one barrel of oil, the current price of “black gold”, as oil is called, is indeed cheaper than that of bottled mineral water.

Unlike the oil-price increases in the 1970s and early 1980s — triggered by cartelization and deliberate supply restriction — the price spike in recent years arose from two fundamental factors: mounting demand, especially in the emerging economies; and the flattening of production in key non-OPEC countries.

Finding new sources of oil is already becoming harder, with the environment now more difficult geographically and geologically. Also, as history attests, every phase of cheaper oil prices has carried the seeds of the next price spike and energy shock. For example, when in 1985-86 the price crashed from $45 to $9, energy saving and efficiency fell out of fashion. Today, suppliers are already cutting back on production and postponing new projects.

In that light, the oil price is sure to rebound before long. However, even if the price were to stay ridiculously low at $50 a barrel, the oil sheikhdoms of the Gulf will still receive more than $350 billion a year at their current rate of production. And if the price spirals to $150, their oil revenue will surpass $1 trillion a year. Such continuous transfers of immense wealth to the sparsely populated sheikhdoms — which have more foreign workers than citizens — holds major long-term strategic implications, including for the global fight against fundamentalism and terrorism.

Soaring wealth, coupled with their control over the world’s most-bountiful oil resources, gives these weak, feudal, internally-troubled sheikhdoms a disproportionate clout in world affairs — a heft they have misused.

After the 1970s’ oil-price shocks opened the flow of rising revenues, several sheikhdoms began funnelling some of their earnings to the promotion of Wahhabi Islam, including the establishment of jihad-spouting madrassas overseas. It was not an accident that the rise of Islamic conservatism and extremism — from Morocco and Sudan to Malaysia and Indonesia — began from the 1980s with the aid of petrodollars. Today, funds continue to be channelled to Islamist groups.

Take the Al Qaeda-linked Lashkar-e-Taiba. Although it was established as a front organization of the Pakistani intelligence to bleed India, this Punjabi-dominated outfit has long been fattened with Saudi petrodollars. As Husain Haqqani, now Pakistan’s ambassador in Washington, put it in a 2005 article, the Lashkar-e-Taiba is a Wahhabist group, “backed by Saudi money and protected by Pakistani intelligence services”, that targets India, Israel and the US as “existential enemies of Islam”. 

From the United Arab Emirates’ sheltering of international fugitives and terrorism-financing conduit role to Saudi Arabia’s continued bankrolling of jihadist groups overseas, the oil sheikhdoms have shown contempt for international norms. Their post-9/11 promises to clean up their alleged philanthropic acts have not been fully honoured.

This state of affairs is simply intolerable. Can the security of secular, pluralistic states be allowed to be undermined by despots whose wealth and power flow from the gigantic oil reserves on which they sit, often by usurping the resources of minorities?

Saudi Wahhabi wealth has been built from Shiite resources. The two million Shiites of Saudi Arabia may constitute only up to 15 per cent of the national population. But they dominate the oases of Qatif and al-Hasa in the Eastern Province, the source of 90 per cent of Saudi oil production and the seat of the world’s greatest oil reserves. In Iraq, too, the oil resources are concentrated in non-Sunni areas. The US occupation has helped end, however inadvertently, the Iraqi Sunni domination of the majority Shiite population.

Take another Sunni-governed oil sheikhdom, Bahrain, where the Shiites form up to 75 per cent of the population. The Bahraini Sunni elites have cosy tribal affiliations with the Saudi elite (going to the extent of granting Bahraini citizenship to Saudi Sunnis on demand) but maintain a distance from the majority Shiite population at home. 

Shiites have been suppressed and treated as second-class citizens in a number of societies since the time the Prophet’s grandson, Hussein, was beheaded by Sunnis in A.D. 656. Today, there is a Shiite reawakening across West Asia, with Jordan’s King Abdullah II even raising the spectre of a “Shiite crescent” stretching from Iran and Iraq to Syria and Lebanon.

Given that the Sunni-run sheikhdoms plus Iran hold some two-thirds of the global oil reserves and that Saudi Arabia alone is projected by 2025 to produce more oil than Africa and the Caspian Sea basin combined, international security will be better served by actively promoting democratization in the region than by propping up tyrannical regimes such as the one run by the House of Saud. 

(The writer is a strategic affairs expert.)

(c) The Economic Times

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