End of Story, Morning Glory?

The United Arab Emirates (UAE) is experiencing the antithesis of the “Dubai Chalo” mantra of the ’60s and ’70s.  Dubai is likely the shed 10% of its population over the next two years, as a result of unmanageable debt, failing businesses and shrinkage of property values.   This is only to be expected —  unsound economics have driven Dubai’s growth in recent years.  Unlike other states in the Arabian Peninsula, Dubai has no oil of its own.  Indeed, from the emirati pearl merchants of the early 1900s to the establishment of the Jebel Ali Port in the 1970s, its historic strength has been trade.

However, the single minded pursuit of turning this free-trade town into a megacity rivaling New York or Los Angeles is as bad an idea today as it was when it was conceived.  And now, conservative but oil-rich Abu Dhabi, who many said was slow off the mark in this maddening real estate circus, is having the last laugh.  The Maktoums of Dubai have had to had to swallow their pride and approach Abu Dhabi to bail them out.  But even Abu Dhabi’s bailout of Dubai comes with strings attached:

[T]he rapid deceleration had given rise to speculation that Abu Dhabi, the richest member of the UAE, might have to bail out its flashier neighbour. Rumours spread that Abu Dhabi would only stump up the cash if Dubai ceded control of its successful airline, Emirates.

Federal support has come through folding Dubai’s troubled mortgage companies into well-capitalised Abu Dhabi banks. There have been other direct discussions between Dubai and Abu Dhabi state companies, although none has reached agreement.

Sheikh Mohammed’s Dubai International Capital fund, whose assets have shrunk sharply, briefly courted investment from Mubadala, the Abu Dhabi investment arm. No substantive discussions ensued, people close to the matter say, but the incident fuelled rumours of a bail-out. Well before the credit crisis raised questions about Dubai’s solvency, Mubadala and Dubai Aluminium had been discussing equity restructuring of their joint venture, Emirates Aluminium, a vast smelter on the Abu Dhabi/Dubai border.

What Dubai needs to do now is to rightsize.  New York City was not built overnight.  Even if NYC’s economy relies heavily on financial markets, these markets trade against tangible products — from the pharmaceuticals of New Jersey, to the automobiles of Detroit.  Dubai’s financial markets trade in recycled financial instruments, which have a tendency to flourish during the good times, and falter during the bad.  This blogger also feels that Dubai (and the UAE as a whole) needs to address debt insolvency.  Given that foreigners and foreign owned entities form the majority of Dubai’s demographic and economic footprint, a credit history check system such as the one in the United States would be ineffective.  Yet, there is an urgent need to address the frequency with which expatriates and foreign-owned companies run up substantial debt and abscond from the country.  The current economic crisis in Dubai is as much a result of a nonexistent debt reconciliation system, as it is due to building artificial islands, skyscrapers and magical kingdoms that no one could afford.

The one benefit of an Abu Dhabi bailout might be that the UAE would start functioning more like a federation with a visible nucleus (Abu Dhabi) than the disagreegated collection of city-states that it now is.

Filed under: Abu Dhabi, Dubai, economics, Financial Crisis, Middle East, Politics, UAE, United Arab Emirates, World, Abu Dhabi, bailout, burj dubai, Dubai, emirates airlines, jebel ali, recession, United Arab Emirates

US – UAE Nuclear Deal

Very quietly, the United States and the United Arab Emirates have signed a deal that will allow the UAE to develop nuclear reactors and obtain nuclear fuel from the US, under the 123 Agreement framework. Under the agreement, the UAE, which is already a signatory to the Nuclear Non-Proliferation Treaty (NPT) and the Comprehensive Test Ban Treaty (CTBT), will be subjected to nuclear safeguards inspection from the International Atomic Energy Agency (IAEA), and will forgo the right to enrich/reprocess spent Uranium fuel. The whole nuclear program of the UAE will apparently be under US management, pending IAEA approval.

Since its birth in December 1971, the UAE has experienced massive economic growth on account of its petroleum reserves. This initial economic growth gave rise to two main economic power centers in this federation of seven emirates — Abu Dhabi, the capital of the UAE and largest emirate by area, whose revenues are driven by oil, and Dubai, the most populous emirate, whose revenues are driven by trade and financial services.

Economic growth lead to investments in infrastructure and construction, resulting in the arrival of hoards of blue – and white collar workers, primarily from the Indian subcontinent, to fill the employment vacuum. This sustained population growth, particularly in Dubai, has forced the UAE to consider alternative sources of energy. By some estimates, UAE’s demand for electricity is likely to rise to 40,000 megawatts (MW) by 2020. However, UAE’s energy sector is projected to be capable of meeting only about 50% of this demand.

The 123 Agreement is yet to be ratified by Congress, and will still need to be approved by the President of a new US administration. Barack Obama has not publicly stated his views on the issue. The deal has already met with vociferous disapproval from members of Congress. Rep. Brad Sherman, the chairman of the House Foreign Affairs Terrorism, Nonproliferation, and Trade subcommittee, said:

“Any (nuclear cooperation) agreement between the United States and the UAE should not be submitted to Congress until, at a minimum, the UAE has addressed the critical issue of transshipments and diversion of sensitive technologies to Iran.”

If that’s the Congressman’s line of thought, then this is yet another classic example of the kind of cluelessness that has come to typify the thinking of successive US administrations on matters concerning the Middle East. Indeed, Iran is the one country that can be counted on to get irked by the proposed deal.  Relations between “Shi’a” Iran and “Sunni-Arab” UAE have always been icy.

A major bone of contention between the UAE and Iran is with regard to the Abu Musa and Lesser Tunb islands, unilaterally occupied by Iran, but claimed by the UAE. The Abu Musa archipelago lies within the strategic Straits of Hormuz corridor, an area vital to the petroleum driven economies of the Arabian Peninsula. In addition, as Anthony Cordesman points out, there are two specific areas of concern for Abu Dhabi — (a) the presence of a significant Iranian immigrant (potential “fifth column”) population in the UAE, and (b) the strategic proximity of Dubai and Sharjah to the old Iranian port-town of Bandar Abbas. The vulnerability of the northern emirates’ shipping channels to Iran’s airbase in Bandar Abbas is a source of worry for UAE’s rulers.

For its part, Iran can’t be too pleased with the cosiness exhibited smaller Arabian Peninsular countries like the UAE and Qatar towards the United States. US military bases in the UAE, like those in Jebel Ali and Al Dhafra, and UAE’s ambivalence towards the US invasion of Iraq can’t have helped matters much either.

This nuclear deal is a bad idea — not because of an alleged UAE-Iran nexus, but because the UAE will be susceptible to an Iranian military assault either if Iran-UAE relations deteriorate, or if Iran has its back to the wall in any future US-Iran military confrontation. The UAE can ill afford be in a military conflict with Iran — the repercussions will be felt far beyond the region, given that expatriates make up about 80% of the total population of the UAE.

Allowing the accumulation of nuclear material in a politically and militarily weak country situated in the most unstable region on earth, and in the proximity and cross-hairs of Iran, is foolish. To think that this will impress upon Iran the virtues of towing Washington’s line with regard to nuclear technology is an exercise in naiveté. Far from making the UAE politically and strategically more secure, the deal will prove to be an albatross around Abu Dhabi’s neck.

Filed under: 123 Agreement, Abu Musa, America, Barack Obama, Business, Dubai, Iran, Nuclear Energy, Politics, UAE, United Arab Emirates, World, 123 Agreement, Abu Dhabi, Abu Musa, ahmedinajad, brad sherman, ctbt, Dubai, iaea, Iran, npt, Nuclear Energy, qatar, sharjah, sheikh mohammed, straits of hormuz, tehran, UAE, United Arab Emirates, United States, US, Washinton

Bouquets and Brickbats: 2008 in Review

We’re fast approaching the end of 2008, and it is customary to a look back at the year. 2008 was the year of rebates and debates, of bailouts and sellouts. In 2008, pigs accessorized with lipstick, surges worked, several people participated in waterboarding (some albeit involuntarily), and the fundamentals of our economy were deemed to be strong. Natural disasters claimed the lives of hundreds of thousands of people in Cuba, China and Myanmar. Businesses around the world collapsed and unemployment rates in industrialized nations crossed 6% for the first time in decades. In India, the lady from Rome did little the ease the miseries of the common man, and the Home Minister, like Nero, played the fiddle while the country burned.

Thankfully, there were the few welcome moments that diverted everyone’s attention from the forgettable events that have consumed us in 2008. The Beijing games were one of the better Olympics in recent memory; that China was able to undertake and successfully execute such a massive project should be an inspiration to other developing nations. Barack Obama’s election in the United States means that there will be responsible leadership at home, and consensus driven decision making when it comes to America’s foreign policies.

But without further ado, here now are the “bouquets”….

Bouquets

Hemant Karkare, Maj. Sandeep Unnikrishnan, other martyers who laid down their lives to defend India in the face of a series of unprecedented assaults. The “Do Nothing” government did, well, nothing to provide the equipment, training and funding necessary to counter the enemy. If the National Security Guards were able to flush out the terrorists in three days, it wasn’t because of the government’s involvement, it was despite the government’s involvement. This UPA administration has the blood of 160 citizens on its hands.

Somnath Chatterjee for standing up to the despicable tactics of Prakash Karat and his band of merry Commies and executing his duties as Speaker of the Lok Sabha. The scheming Left has shown yet again that it puts Party diktat and anti-Americanism over the rule of law and the country’s democratic process. With the nail firmly entrenched in the coffin of relevance, the CPI(M) can go back to being the trivial jokers they always were, and the nation will be better for it.

The Faceless, Nameless Gulf Laborer who is sandwiched between several devils and deep seas, but continues to toil for his family in conditions of virtual slavery. His day involves at least 12 hours of finger to bone work building extravagant skyscrapers and artificial islands, under the wrath of an unsparing sun. He is a victim of immoral agents in the subcontinent, construction companies in the Gulf, and their patrons in the palaces of Dubai, Riyadh, Abu Dhabi, and Doha. He lives in total squalor, shares accommodation with several other construction workers, and remits 60% of his income back to his family in Nizamabad or Haripur, if he should be so lucky as to be paid his wages once in seven months.

The Fab Four of Indian Cricket — Ganguly and Kumble hung up their spurs in 2008, each a true champion in his own right. Ganguly will be remembered as the man who gave Indian cricket its swagger, and Kumble as the workhorse who ground many an opponent to the dust. Although a forgettable year for Rahul Dravid, felicitations are due for becoming only the third Indian batsman to have aggregated 10,000 runs in Test cricket. Speaking of great aggregators, a tip of the hat to Sachin Tendulkar as well, who, by becoming the highest run scorer in Test cricket history, owns just about every batting record there is in Test and One Day cricket.

Sam Manekshaw and Baba Amte, RIP This year’s Vijay Divas (December 16) had special meaning as India lost a true Son of the Soil in Field Marshall Sam Manekshaw. Thirty seven years ago, this bahadur orchestrated the dismemberment of the Pakistan Army and liberated Bangladesh (then East Pakistan) from the clutches of cowards who engaged in state sponsored genocide against Bengalis. Another great Son of Bharata was laid to rest this year — Baba Amte, whose social service and fight against leprosy lead to the establishment of several rehabilitation ashrams in the country, at a time when those afflicted with the disease were ostracized by society.

Madhavan Nair, Mylaswamy Annadurai, and ISRO Thirty-three years after Aryabhata, and twenty-four years after Rakesh Sharma became the first Indian to travel in space, ISRO successfully launched India’s first lunar probe, Chandrayaan-1, on a shoe string budget ($80 million).

Other honorable mentions: Indian Premier League (I know purists called it a farce and a bastardization of cricket, but I thoroughly enjoyed it, despite being a fan of the Bangalore Royal Challengers); Muntadar al-Zaidi (of “Shoegate” fame — say what you will, Peyton Manning couldn’t have thrown better spirals); Katie Couric (for flat out owning the train wreck that is and was Sarah Palin).

Brickbats

And now for the not-so-fabulous. This year has been very ordinary, by every standard, so shortlisting the most truly repugnant characters was not an easy task.

Corporate Executives, Investment Banks, Realtors, Richard Fuld, Bernie Madoff, et al: How the mighty have fallen…and have dragged us down with them in the process. As I write this, B-Mad, who swindled the world off of $50 billion, is cooling it at his crib — yes, he’s under “house arrest”. That seems a little extreme…why don’t they just give him $100 billion from the bail-out money and send him on an all expenses paid vacation to Maui. It’ll do him some good…help him take his mind off the little “pickle” he’s in.

Prakash Karat and the Red Army Prakash Karat is the kind of guy who could give the Bush Administration lessons on being incompetent. The CPI(M) has never done anything, couldn’t do anything even if it wanted to, and has never been right on anything. Yet, the chest thumping campaign since 2005 would have you believe that they lead the UPA coalition. Brinda Karat is so annoying, her bindi looks like bullseye. Two states that they do have power in — Kerala and West Bengal — are suffering from chronic mismanagement. Kerala’s State Domestic Product relies mostly on remittances from NRIs in the Middle East, while trade unionism has run Kolkata’s once strong public sector economy to the ground.

United Progressive Alliance Where do I begin? From the veritable Dick Cheney-like Party leader, to a comatose Prime Minister, to five years of vision and leadership deficit, to pandering to the Communist agenda, to a fundamental mismanagement of the nation’s security apparatus, this UPA government has run my country to the ditch. No one cares about India any more. It’s always about brown-nosing to some community or the other, or some regional political party or the other. Why can’t a nation of one billion produce leaders that have better scruples than Sonia Gandhi, Advani and Mayawati?

Mwai Kibaki and Raila Odinga Unfortunately, moral bankruptcy among leaders in the developing world isn’t the exception, its the norm. When Kibaki and Odinga tussled, the political vacuum created a free-for-all in Kenya that resulted in about 2,000 deaths and the displacement of about 250,000 people. Human Rights Watch blamed Odinga’s Orange Democratic Movement (ODM) party for targeting Kikuyus in the Rift Valley, including killing 30 unarmed civilians at a church. With the power-sharing agreement, which made Odinga the Prime Minister of Kenya, and Kibaki the President, all seems to be well in Nairobi. Things aren’t so well though for the hundreds of thousands of Kenyans who still remain without shelter or food.

Indian Media: Just how the Indian media manages to churn out third rate programming day after day is beyond me. In between the 10 minute commercial breaks, the twenty seconds of actual “news” programming is fraught with newscasters who can’t read or speak English. Why every news report must sound like a trailer for The Matrix, I don’t know. The sensationalism, the shrill pitches, the purposeful misrepresentation of facts, the chest-thumping nationalist rhetoric…the media claims it’s watching over India’s politicians…but who’s watching over the media? The Sardesais, the Goswamis, the Dutts, India’s media universe is replete with a satanic herd of yellow journalists. They are “newsmakers” in the most literal sense — the just make stuff up as they go along.

Arundhati Roy This storybook writer fancies her ability to break down and analyze “root causes” of many of India’s problems. In the wake of the Gujarat riots, she extended a heartrending apology, that wasn’t hers to tender, to “victims” who hadn’t actually been victimized. And now she wrote this swill, a 5,300 word blathering piece of an essay, where she blames everyone and anyone for the Mumbai attacks, except of course, the 10 terrorists and their sponsors in Pakistan. She even takes issue with everyone’s favorite (“news anchor”, “journalist”; insert noun here, I’m not quite sure what he does on Times Now) Arnab Goswami, for calling her “disgusting” on air. She calls this an “incitement” and a “threat”. Of course, Arundhati is not one to personally attack anyone herself. She wouldn’t have, for example, called Ramachandra Guha a “stalker” for merely pointing out that her analysis of the Sardar Sarovar dam issue was unoriginal. Would she? In 1997, Roy said “I had two options — writing or madness”. Well, Arundhati, this 5,300-word equestrian excrement of an article may have spared your sanity, but you haven’t made any such accommodation for the poor bastards that are subjected to it.

Rapid Fire: Raj Thackeray and his ilk (where were you when your city needed you most?); Russia (military interference in Georgia, economic muscle flexing against Ukraine…Big Red is back); AR Antulay (what a waste of space); and Robert Mugabe (who won’t be satisfied until he squeezes every last pumping drop of life out of the Zimbabweans) .

Filed under: 11/25/2008, anil kumble, Barack Obama, black cat, bouquets and brickbats, Congress I, India, isro, Mumbai Terrorist Attack, National Security Guard, saurav ganguly, Uncategorized, 1971 war, 2008 bailout, 2008 kenyan violence, 9 is not 11, ar antulay, arnab goswami, arundhati roy, baba amte, bangalore royal challengers, barkha dutt, bernard madoff, brinda karat, cnn-ibn, CPI(M), Dmitry Medvedev, Dubai, dubai labor, gazprom, georgia, gujarat riots, hemant karkare, indian media, indian premier league, ipl, isro, katie couric, kenya, kerala, leprosy, lk advani, madhavan nair, Manmohan Singh, Mayawati, Mikheil Saakashvili, muntadar al-zaidi, mwai kibaki, mylaswamy annadurai, narmada bachao andolan, ndtv, orange demoratic movement, Prakash Karat, pranoy roy, rahul dravid, raila odinga, raj thackeray, rajdeep sardesai, ramachandra guha, richard fuld, rift valley, robert mugabe, russia georgia war, sachin tendulkar, sam manekshaw, sandeep unnikrishnan, Sarah Palin, sardar sarovar dam, shoegate, somnath chatterjee, Sonia Gandhi, team india, times now, UPA, vladimir putin, west bengal, zimbabwe