Syrian Foreign Minister Walid Muallem points out several obvious but oft-overlooked truths in an interview with Foreign Policy. Firstly, he notes that keeping Syria on a state-sponsors of terror list while asking the Assad regime to assist in combating terrorism in Palestine. His point, most likely, was that Syria is too important for the United States to be sanctioned and isolated the way it has been in the recent past. Decontextualized from Syrian interests, it seems clear that the term “terrorist” has been thrown around by the US government enough to make it entirely devoid of meaning. It’s unfortunate, because it obscures our understanding of Middle Eastern politics.

Second, he points out that part of the US strategy in the region in the past, (as outlined in this op-ed by Max Boot, and which may change as more diplomatic channels open up between Washington and Tehran, Washington and Damascus, et cetera) has been to bring Arab nations and Israel together against Iran. If the objective is long term peace, then this is … a weak approach. He’s certainly not the first to point this out. Gulf states, who host many Iranian expatriates and are only a short swim away from Iran, and generally militarily weaker, have been much more pragmatic in their approach to Iranian relations than has the United States. (Hillary Mann Leverett and Stephen Leverett adopted this position in the NYT only a couple of weeks ago).

The Brookings Institution's Middle East Youth Initiative is following the developments of the global economic whatever-we-are-calling it in a series called Food, Fuel and Finance: How Will the Middle East Weather the Global Economic Crisis? Slipping Oil Prices: is the Oil-Rich Middle East Prepared?, the first installment, offers a brief history of oil revenues over the last 20 years in the Persian Gulf. It's conveniently arranged in Q and A format, which helps if you are someone who (like me) feels a strong temptation to let their eyes glaze over when they start to see a series of words like “revenue” and “inelastic demand” one after another. Politics, however, always capture my attention, and I want to draw attention to one crucial point that the report makes in this arena:

For these countries, bringing their economies to a soft landing may prove much easier than managing the downsizing of expectations without a political backlash. Leaders in the region have offered scant warning to their citizens regarding the end of the petro-boom. Even after the global financial crisis had begun, mega projects were being announced in the GCC as if to defy the reality of what the global downturn will do the region's economies.

The Gulf countries’ generous spending has kept citizens relatively happy - textbook rentierism - and as spending is curtailed because of falling oil prices, there will be a backlash in public sentiment.

The one bright spot in all of this is that hard times make the case for policy reform more persuasive. The oil rich countries have a list of policy options before them, including reorienting education away from mere seeking of formal degrees toward acquisition of skills, transforming the search for government jobs into a search for careers in the public or private sector, and giving the youth a greater voice in shaping their own destiny.With the oil feast all but over, the time has come to set the incentives for the region's youth to become tomorrow's productive middle class.

This may be true. The relative weakness of the Gulf states’ militaries make total-police-state-mode to stifl uprisings unlikely. (Although this weekend's piece in the New York Times magazines drew some clear lines between the Emirates and Iran, and this wouldn't be first time the United States stepped in to contain a popular uprising against a government they consider convenient). It's naive, though, to think that threatened and weakened Gulf governments’ first responses will be to open up their political systems on their own. Egypt's Hosni Mubarak doesn't seem to have any trouble maintaining a corrupt and undemocratic regime on a shoestring budget. Bashar al Assad is still around. Ali Abdullah Saleh might control only a small corner of his country, but he's still president. Seeing political reform as an inevitable consequence of economic failure sounds to me like a “birth pangs of the new Middle East” argument. (To be clear, I don't think that's precisely what Salehi-Isfahani is arguing here). He's right that the case is more persuasive when the governments can no longer purchase their citizens’ loyalty. And the Gulf countries may arrive at that conclusion on their own. Then again, some may not. I would approach any framing of a global economic meltdown as an “opportunity” skeptically.

Yousif Khalaf, CEO of Ajman Bank, predicts that the financial woes of the present will increase demand for Islamic banking. Hence, the bank is focusing its expansion efforts within UAE.

This weekend Kuwait's government bailed out the country's second largest bank , Gulf Bank, guaranteeing all its deposits. (I’d be interested to know why this article from the Kuwait Times puts the word “losses” in scare quotes). Yesterday, Kuwaiti traders staged their second walk out of the past week (they walked out Thursday as well; Kuwait's market trades Sunday through Thursday). The governments of Abu Dhabi and Saudi Arabia are both prepared to step in and support banks in their respective nations. The GCC countries plan to introduce a value added tax (VAT) of 5% on consumer goods starting in 2012 as insurance against falling oil prices; 2012 looks to be a long way away given the 60% drop in oil prices since July.

Since the Gulf countries aren't known for their robust democracies but rather for their high oil revenues and the consequent rentierism those revenues enable, it will be interesting to observe the ways they choose to deal with their diminished ability to avoid taxing their citizens. Will the global economic slump prove destabilizing for any of these countries?

Umer Chapra, Saudi economist and winner of the King Faisal International Prize for Islamic Studies, is quoted in the Arab News as saying that adopting the parameters of Islamic finance would protect the financial system from crises the nature of the current one in the future. Dr. Chapra was raised in Pakistan and received his Ph. D. in the United States, at the University of Minnesota. Since 1965 he has worked in Saudi Arabia, until 1999 as an economic advisor to the Saudi Arabian Monetary Agency (SAMA). Navigate to his complete bio from his website.

Calls for adherence to Islamic principles in finance have been frequent in this period of global economic distress. There has also been talk of sovereign wealth funds, abundant in the Gulf, investing in failing banks, which they have been understandably hesitant to do. I would be curious to know whether any of the economists advocating Islamic finance have any influence over the funds’ decisionmaking - might such investment come with conditions that make the American banking system more halal?

GCC states don't anticipate much fallout from the current … situation on Wall Street at this point (this point being Wednesday … so we’ll see). Many of the Gulf currencies, though, are pegged to the dollar, so it remains to be seen how effectively they can avoid the impact of US market fluctuation. The GCC is continuing efforts toward a common currency a la the Euro, with the previous goal launch date of 2010 now looking a little ambitious.

An editorial in today's Middle East Times nails it:

And if indeed the president's concern is the Arab-Israeli dispute, then why the stops in four Gulf countries? Why the visits to Kuwait, Bahrain, the UAE and Saudi Arabia? It is interesting to note that those four countries share the same concerns over Iran's rising influence in the region.

…Bush's visit to the region — the Gulf region, that is — might well have more to do with Iran than with the question of Palestine.

Iran has become the single-biggest issue for policy-makers in the region- possibly even more than Iraq.  Bush would love an Israeli-Palestinian peace deal to his legacy, but the real interest is Iran.    The maneuvering between the Gulf States- along with the broader Arab world- and Iran changes on a day-to-day basis.  My guess is Bush wants to shore up support and make some kind of cohesive policy.   He must not like the new willingness to at least partially co-operate with the Iranian government. 

This is especially true in light of the confrontation between the US Navy and the speedboats of the Islamic Revolutionary Guard Corp.  According to the US Navy “as the Iranian boats neared the American vessels, a radio threat was issued that the American ships would explode. The verbal warnings broadcast over the internationally recognized bridge-to-bridge radio channel said, "I am coming at you, and you will explode in a few minutes.”

 The Iranian government has denied this.

“What happened between the Guards and foreign vessels was an ordinary identification,” Ali Reza Tangsiri, commander of the Guards naval forces in the region, told the Mehr news agency.

“No special engagement took place between the Guards and the foreign side,” he said, adding that the Guards naval forces had a right to control and identify “any vessel entering Persian Gulf waters” to the northwest.  (AFP)

Tensions are rising in anticipation of Bush's visit.  Iran is now, and will remain for at least the rest of his term, at the front of the President's mind.

The Gulf Research Center has published a series of articles Nuclearization of the Gulf, which can be downloaded for free as a .pdf file from their main page, or you can order a hard copy if you want something impressive on your bookshelf.    Interesting and comprehensive site in and of itself, and the paper looks very interesting.  The contents are…
- Nuclear Development in the Gulf: A Strategic or Economic Necessity

- Official Documents on the GWMD Free Zone