Kuwait’s Arab Spring
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By Charles Krakoff

With the exception of Bahrain, where anti-government protests were violently suppressed by the ruling royal family with military support from Saudi Arabia, the kingdoms and sheikhdoms of the Arabian Gulf – in America we refer to it as the Persian Gulf, but that terminology does not sit well with the Arabs – have appeared largely immune from the struggles of the Arab Spring. There have been no street demonstrations, no tear gas, no bullets, rubber or live.

I have just returned from a three-week stay in the Middle East. A few days in Doha, the Qatari capital, to attend the World Petroleum Congress and then the rest of the time in Kuwait, where I am part of a team doing a feasibility study for a technology park. It was my first-ever visit to Qatar and my first to Kuwait since 1986. Doha, flush with money from natural gas, a small low-slung, dun-colored city 20 years ago, now resembles a sci-fi movie set, all futuristic towers glowing with neon, surrounded by the most barren of landscapes. Kuwait City has expanded enormously, and sprawls almost from the Saudi border in the South to the Iraqi frontier in the north. Areas that were empty desert 25 years ago are now studded with new suburbs filled with enormous mansions and shopping malls. Young Kuwaitis zoom around town in Hummers, Range Rovers, and Maseratis or on Japanese super-bikes, stopping to eat at any of a mind-boggling array of Western restaurant chains. Applebee’s, Chili’s, Taco Bell, Burger King, McDonald’s, Pizza Hut, TGI Friday’s, they are all there. The 1991 Iraqi invasion seems impossibly distant.

Part of the reason for the region’s tranquility is money, lots of it. Even in normal times, the citizens of these states enjoy generous social benefits, which include free or subsidized housing, education, and health care, armies of low-paid immigrants to perform all the menial work, and a government job for almost anyone who wants one, not to mention gasoline so cheap they practically give it away. Most of the Gulf kingdoms, however, upped the ante when they saw they wave of protest sweeping the Arab world.

Days after the fall of the Mubarak regime in Egypt last February, Saudi Arabia announced a social welfare package for its citizens worth $10.7 billion, which included pay raises for government employees, new jobs and loan forgiveness schemes. Since then, the Saudi Government has sweetened the pot with more than $120 billion in additional spending, according to a report by the Wharton School at the University of Pennsylvania. Qatar announced an $8 billion package of pay rises for state employees, while Abu Dhabi launched a $2 billion housing loan program.

If these figures seem small by the standards of U.S. stimulus and bank bailout packages, remember that apart from Saudi Arabia, which has a population of 25 million, the other Gulf sheikhdoms are tiny. Qatar has a population of about 1.8 million, of which only 300,000 are Qatari citizens. The United Arab Emirates, of which Abu Dhabi is the capital, has 8.3 million people, but only 948,000 of them are citizens. Kuwait, with somewhere between 2.6 million and 3.5 million people – countries in the region tend to be coy about demographic data, which can be politically inflammatory – counts only a million Kuwaiti citizens. The subsidies are lavished only on the citizen populations, of course. Apart from a small number of managers and professionals from Europe and North America, who enjoy gilded salary and benefits packages, the vast majority of expatriates, most of them from poorer Arab countries like Egypt and Palestine or from the Philippines and the Indian subcontinent, endure low pay and harsh working conditions which, nonetheless, are better than what they could get at home.

Kuwait, for its part, recently raised government salaries by around 20%, making it even harder for private companies to hire locals at a reasonable cost. The government has for many years provided each Kuwaiti family with subsidized rice, lentils, frozen chicken, and other foodstuffs, but earlier this year announced that for the next two years these supplies would be free of charge. Each Kuwaiti is also entitled to a $3,500 annual payment from the state. The state can certainly afford it. With oil at around $100 a barrel, Kuwait’s daily production of around three million barrels works out to $110 billion a year, or over $100,000 a year for every citizen. The Kuwait Investment Authority, which manages the country’s wealth, has about $265 billion invested offshore, providing a cushion against any precipitous drops in the oil price.

In this kind of environment, it is hard to create any sense of urgency about reforming a business environment that most foreign business people and quite a few Kuwaitis consider unwelcoming to investors. Businesses complain about long delays in getting operating licenses and project approvals. Kuwait, it is said, means “queue and wait.”

The government, and the state-owned Kuwait Petroleum and its subsidiaries, have announced major projects only to suspend them. In one of the most notorious examples, the Kuwaiti government in 2008 cancelled a multi-billion joint venture between the state-owned Petrochemical Industries and Dow Chemical in the face of parliamentary opposition. The project, which was to be the world’s largest producer of polyethylene, went to Saudi Arabia instead.

One project more or less – even a huge one – is not going to make or break Kuwait. Still, the country probably can’t survive as a rentier economy forever. A former finance minister I spoke with, now a senior economic advisor to the Emir, says the breakeven price of oil – that is, the price at which the government budget switches from surplus to deficit – is now between $85 and $90 a barrel. With oil now trading at around $100 a barrel, this is not a crisis, but it is cause for some concern as the days of peak oil recede into the future.

As little as a year ago you could find plenty of so-called experts predicting a steady rise in the price of oil for the foreseeable future, but their voices are now muted. Increased drilling and production in the United States, the prospect of Libyan oil fields coming back on-stream, and huge new contracts that promise to lift Iraqi oil production from its current level of less than three million to as much as 12 million barrels a day by 2017, all point to minimal growth if not outright drops, in the oil price, for many years to come.

Despite this small cloud on the horizon, a senior government advisor and businessman I spoke with says Kuwait is the most stable country in the Gulf. Iraq and Iran, of course, are a mess, Saudi Arabia, a pure theocracy, is still ruled by the geriatric sons of King Abdulaziz, who unified the kingdom in the 1920s, and lacks a clear plan for succession by the next generation of princes. Oman’s Sultan Qaboos, who overthrew his father in 1970 and dragged his country out of the 14th century torpor in which it had languished, is now 71. A confirmed bachelor, he has produced no successor, and as an only child he has no brother or nephew who might succeed him. Qatar, recently awarded the right to host the 2022 soccer World Cup, is seen by much of the Arab world as too brash and too ambitious. Although the Arab League backed NATO action against the Qaddafi regime in Libya, Qatar was the only Arab country to provide material support to the rebels. This did not win it many friends among its fellow rulers in the region, who fear unrest at home. The ruling Al Thani family has bankrolled the Al Jazeera television network, which has upset Arab rulers as much as it has the U.S. Department of Homeland Security. The UAE looks stable for now, though Dubai remains on shaky ground financially. In 2010 Abu Dhabi’s ruler, Sheikh Khalifa, provided $25 billion to bail out several bankrupt companies owned by Dubai’s ruling Makhtoum family (the world’s tallest building, Burj Dubai, which was then under construction, was renamed Burj Khalifa in gratitude), but a repeat rescue, which could yet prove necessary, is far from assured.

Kuwait, meanwhile, has avoided the flashy excesses of Qatar and Dubai and appears less susceptible to the kind of sectarian violence that has torn Bahrain apart. Though Kuwait has a sizable Shia minority, estimated at around 30% of the population, it is far more stable than Bahrain, where a Sunni minority and ruling family have lorded it over a Shia majority. It is not simply demographics, though, that keep the country stable.

The Dow Chemical fiasco, however embarrassing it may have been, illustrates one of Kuwait’s signal strengths, its democratic character. Many people in Kuwait will tell you that no one person can approve a project but anyone can block it. This is quite different from autocratic rule, under which projects get approved without delay, provided the rulers want it. In a democracy it is not so easy. It is a price, however, that many countries, including most of those we consider democracies, are willing to pay. In China you would not see the kind of protest and debate that has surrounded the planned Keystone XL pipeline in the U.S.

No one would mistake Kuwait’s government for a Westminster-style democracy, but its Parliament has substantial influence, even if it lacks real power. Kuwaiti women have the right to vote, and in 2009 voters elected four women MPs in the 50-seat assembly. Though there are no official political parties, there are recognized blocs, representing secularists, Islamists, and conservative tribal groups. The CEO of Kuwait Energy, one of the country’s most prominent private companies, is a woman, and she has surrounded herself with other smart, educated, and motivated women.

In late November, hundreds of protesters, led by several elected officials and former Parliamentarians, burst into the chamber to demand the resignation of the Prime Minister, Sheikh Nasser Al Mohammed Al Sabah, who is accused of bribing 15 MPs to support the government. A week later the Prime Minister, who is a member of the ruling family, stepped down. Several editorials in the Kuwaiti press criticized the protesters for their lawlessness and called on the authorities to bring charges against them, but the fracas more closely resembled the occasional fistfights that break out in Taiwan’s and South Korea’s legislative bodies than it did the pitched street battles that have occurred over the past year in Egypt, Tunisia, Yemen, and Syria. No tear gas, bullets, or batons were used to break up the ruckus, and so far no one has been jailed.

It helps to be rich. But plenty of countries that possess enormous resource wealth are political and social failures. In a region not noted for democracy or sexual equality, Kuwait seems to be moving towards both. Slowly and deliberately, to be sure, but it is encouraging and could even be a model for some of its neighbors to follow.

Posted 02-03-2012 9:46 AM by Charles Krakoff