A New Iraq Policy? Gulf Finance

New Direction in Iraq Policy?

There are several reasons to think some changes are on the way in Iraq:

- James Baker, head of a bipartisan Iraq Commission appointed by the congress with White House approval, has been making the media rounds. The commission is supposed to look into possible changes in the Iraq policy. Baker has a long resume as a Republican honcho: Secretary of State, Secretary of Treasury, White House Chief of Staff, Campaign Manager, Bush Florida Recount Legal Council. Mr. Baker is not normally interested in media appearances.
Arab newspapers like Asharq Alawsat and Alquds Alarabi, both London-based, report that the Baker commission will recommend splitting Iraq into three Federal regions, Shi'a, Sunni, and Kurd. Each region will control its own internal security. This would solve the problem of the militias, except in Baghdad.

- Senator John Warner, Chair of Armed Services Committee, back from another trip to the Iraqi front, has been making noises to the effect that things are not going right, and that 'something, some progress, must be done within two or three months' in Iraq.

- Secretary Rice flew to Baghdad last week, met the leaders, then went to Kurdistan and met with Kurdish leaders.

- U. S. Ambassador in Baghdad Zalmay Khalilzad has been quoted (ABC, George Stephanopoulos, Oct 8) as saying that "the problem in Iraq is not the terrorism, but the sectarian violence". Try telling that to the families of the daily victims, Iraqis and Americans, who are maimed and killed every day. Clearly Iraq's main problems, terrorism and sectarianism, are related: without the Salafi and Ba'athist terrorism, which is basically sectarian instigated, people would not seek the dubious and illusory protection of the sectarian militias. As mentioned in an earlier posting here, the failure of the Iraqi government to contain the militias is a direct function of the failure of the Coalition (U.S.) policy to control the terrorism. Nevertheless the terrorists are invisible, especially around Baghdad. The militias are quite visible, and by their visibility they weaken and undermine the sovereignty of the state. This is something that no government can tolerate and survive.

- Some media in the Persian Gulf oil states have been hinting at the possible overthrow of the elected Iraqi government. There have been claims that al-Malki's government will be replaced with a regime of 'National Salvation' or 'National Unity'. If these reports are beyond wishful thinking, and have some elements of truth, then prehaps Secretary Rice's visit had something to do with that as well. This is the least likely and most dangerous scenario, because it undermines the post-war rationale for the war- in this case the Liberation of Iraq becomes the mere Invasion of Iraq. The United States has never invaded an independent country and then forced a dictatorship: Germany, Japan, Italy, Austria, even Grenada and Haiti were eventually allowed to hold elections. It is not likely to depart now from this quintessentially American principle that has defined United States policy since World War I.

GCC Finance:
Dubai is working to attract biotechnology industries, by developing a Dubai (Complex) Center for Biotech, with extensive laboratories and advanced research centers. The plan is code-named Dubiotech (Du-Bio-Tech). Apparently the major competitor anywhere within reach is India, which has a huge reservoir of skilled staff in the field of technology and presumably in biotech as well. India, however, has not been known for its research in biotech, so this may not be an issue. But it has the advantage of low cost of operations. Dubai has the advantages of a more cosmopolitan environment and an interesting lifestyle which will make it easier to attract talent.
The Gulf Emirate was edified by having the IMF meetings held there in 2003, the first Arab country to host the annual meetings.

One problem with Dubai is the extremely high inflation rate. According to media reports many expatriate workers in the UAE already seek second or third jobs in order to be able to meet the costs of living and send money home for their families. Alaswaq.net reports that price increases have ranged between 30%-70% during the period 2003-2006. Rents are reported to have increased by up to 90% for that period. The report said that many people have started speculating in the stock marke in order to supplement their incomes. IMF data show inflation for the GCC countries at 3.2% for this year (for the Middle East oil producers as a group it is 7.6%). These figures, officially sanctioned, do not seem to match anecdotal evidence.

In the Gulf states (GCC) the effects of collapsing stock markets effects tend to be less than in other regions. Government intervention often keeps a floor under share prices. Authorities occasionally purchase shares through their local investment arms in order to shore up prices (the Kuwait Investment Authority is a clear example of this, as well as a new public fund started in Saudi Arabia by the King earlier this year).

Cheers
Mohammed