Posted by Joshua on Friday, August 20th, 2010
I have returned from Vermont and having no internet. I thank Alex for helping keep SC hobbling along while I was off line. Here are a few articles of interest that appeared over the last two weeks. Best, Joshua
Iraq to Allow Iranian Gas Pipeline to Syria, VOA News 12 August 2010
Iraq says it has agreed to allow its neighbor, Iran, to build a natural gas pipeline to Syria through Iraqi territory.
The Economist’s latest Business summary of the MENA states includes this happy quote. – (See the entire summary copied below)
Aside from Qatar, the only country to improve it overall rating in the region was Syria, which has moved up over the past year to B from CCC. Syria ran into difficulties with its external debt in the 1990s and was obliged to restructure its loans from the World Bank. More recently it signed a deal in 2005 to reschedule about US$13bn in debts to Russia (much of which was written off). Consequently Syria now has a relatively small burden of external debt, and ac debt-service ratio of only 1%.The economy is showing robust rates of growth, and the role of the private sector is increasing thanks to recent structural reforms….
Is Syria the Next Hot Market? Watch this report by Lara Setrakian
Poverty in Syria is projected to reach 40% of population by 2015. See article at Syria Steps in Arabic.
Syrians dissatisfied, survey shows
August 19, 2010|By Meris Lutz, Los Angeles Times
A survey conducted in secret because of a ban finds most of more than 1,000 respondents are unhappy with political and economic conditions and want emergency rule to end.
A survey of Syrians, conducted in secret because of government prohibitions, shows strong dissatisfaction with prevailing political and economic conditions. Though that may not be a surprise, the fact that any kind of opinion poll could be conducted in Syria, was certainly an eye-opener, the study’s authors say.
Syrian Muslim Brotherhood opposition activity still on hold officially, with internal discussions on dissolving the movement!
How did Iran’s role evolve in Lebanon over the last decade?
Baer: In 1982, the IRGC [Iranian Revolutionary Guard Corps] arrived in Lebanon with the express purpose of driving out the Americans and the French. Having forced them to withdraw their forces, Iran consciously turned its energy to driving out the Israelis. Currently, Iran is supporting Hezbollah’s shift to becoming a force for stability. Iran intends to prove that it is not only a revolutionary, anti-colonialist force but also one that can govern – or, in Hezbollah’s case, a backer of a local force that can govern.
You say in your book that Iran was able to win the hearts of the Lebanese and Palestinian people by adopting national causes they can relate to, i.e. the struggle against Israeli occupation. Did the end of Israeli occupation over Lebanon weaken the Iranian argument of legitimacy?
Baer: Yes, the Iranians have a reduced role in Lebanon now that the war is more or less over. But the point remains the vast majority of the people in the Middle East look at Israel as an occupying military power, and the irreducible fact is that Iran (and Hezbollah) took it on and won. Samson and Goliath; that distinction will serve Iran for a long time.
Do you believe that Syrian President Bashar al-Assad’s visit to Lebanon with Saudi King Abdullah a few weeks ago is an indicator of Saudi’s attempt to curb Iran’s power over Lebanon? How successful was that?
Baer: The great divide in the Middle East is Saudi Arabia and Iran. If Saudi Arabia’s influence in Lebanon were to completely vanish, it would be a great loss. What Saudi Arabia is trying to do now is bring Syria back into its fold, counting on [it] for helping with Lebanon. Without Syria, Saudi Arabia doesn’t have a chance in Lebanon.
How far would such an alliance go? Is it threatening for Hezbollah?
Baer: Syria will never abandon Hezbollah. The Party of God is an integral piece of its armature of military defense, and no amount of Saudi money will change this reality.
In your book you spoke at length about Hezbollah military commander Imad Mugniyah, describing him as “freelancer,” someone Iran could not completely rely on. What type of relations did Iran maintain with Mugniyah before his death? What about his role within Hezbollah?
Baer: Mugniyah was a fighter. He bridled at Iranian caution and wanted to carry the war to the West Bank and Gaza – and even Western Europe. At the same time he was considered untouchable in Tehran, an icon of the Islamic Resistance.
What is your take on his assassination in Syria in 2008?
Baer: I’ve heard all the theories, but in all honesty I don’t have an answer.
How do you view accusations of the possible involvement of Hezbollah members in the 2005 assassination of Rafik Hariri?
Baer: Let’s wait until the evidence comes out.
Could party members be involved without the knowledge of Hezbollah or Iran?
Baer: I’ve been in and out of Lebanon for 25 years, and I have to admit there’s no better country in the world for making and hiding conspiracies. I can make a convincing case that Arafat assassinated President Bachir Gemayel [in 1982 through the Syrian Social Nationalist Party], but most people would scoff at the idea. Sometimes we never get answers.
Do you think that the argument of Hezbollah’s possible involvement in the Hariri assassination would serve Israel’s objectives? How would this translate across the Middle East?
Baer: I don’t see a clear case that Hariri’s assassination served anyone’s interests, neither Syria’s nor Israel’s. Both countries need a stable Lebanon, with a strong central government. Taking the decision to assassinate Hariri must have involved an extraordinary set of circumstances – ones I can only speculate on.”
Steven Heydemann has a smart assessment at the Channel: “The real deal for Lebanon.” He explains why a Saudi-Syrian-Hizb deal to keep Hariri in power and preserve Lebanon’s calm and economic growth as a winner for the US.
Israel’s Hidden Hands in Lebanon:
Who Killed Hariri?
By ESAM AL-AMIN in Counter Punch
Monday, August 16, 2010
This year’s tourist season in Lebanon has been even more hyped than most. Fadi Abboud, the tourism minister, predicted a 20 per cent increase on last year’s nearly 2m visitors, and pitched this summer as “probably the best in our history”. …
Lebanon Grants Palestinians Work Rights: Lebanon’s Parliament passed a law allowing the country’s Palestinian refugees the right to work in the same professions as other foreigners.
MORE SYRIA ECONOMY
Economist Intelligence Unit – Business Middle East
Business Middle East
The world economy is well into recovery, albeit with some developed economies looking like they might slip back into recession (not our core forecast, however). The global financial system has received a severe battering, and analysis of the various risks within markets remains as important as ever. The Economist Intelligence Unit’s Risk Ratings Review provides such information for 120 countries, using a rating system from AAA to D. Included in these monthly reviews are assessments of banking sector risk, currency risk, and sovereign risk, which feed into a rating for overall country risk. Also included are political and economic structure risk ratings, which inform the other assessments. Ratings for the MENA states vary considerably, with the Gulf Arab states and Israel figuring among the top-ranked countries, while the likes of Sudan, Iraq and Yemen are in the bottom cluster.
The MENA region in general weathered the recession reasonably well. The main exception was the emirate of Dubai, which has been obliged to restructure about US$23.5bn in debts owed by Dubai World, a government-owned conglomerate with heavy exposure to the real estate sector. Thanks to the support of Abu Dhabi and of the UAE federal government, the Dubai debt crisis has been contained. Nevertheless, we maintain a cautious outlook, and we have kept the UAE’s risk rating at BB, the lowest in the Gulf Co-operation Council (GCC). The ratings of three other GCC member states—Saudi Arabia, Bahrain and Kuwait—also remain constrained owing to their banking sector risk, stemming from the Saad/Algosaibi defaults (see page 4) and the collapse of a number of Kuwaiti investments. Qatar, by contrast, has moved back up to an overall A rating, the highest in the region, mainly owing to the exceptionally strong position of the state’s finances. Israel has also edged up the ranking as a result of a marginal improvement in banking risk.
At the other end of the scale, Yemen has also seen a significant fall in its ranking, dropping from B to CC in the space of two years. This is in light of the country’s worsening fiscal position, mounting pressures on the local currency and the increased threat to security, with a rebellion in the north, unrest in the south and growing activity by al-Qaida. Yemen has now resorted to seeking financial support from the IMF (see page 3).
Aside from Qatar, the only country to improve it overall rating in the region was Syria, which has moved up over the past year to B from CCC. Syria ran into difficulties with its external debt in the 1990s and was obliged to restructure its loans from the World Bank. More recently it signed a deal in 2005 to reschedule about US$13bn in debts to Russia (much of which was written off). Consequently Syria now has a relatively small burden of external debt, and ac debt-service ratio of only 1%.The economy is showing robust rates of growth, and the role of the private sector is increasing thanks to recent structural reforms.
Other countries to have registered improvements to some of their ratings include Turkey (currency risk moving from B to BB as the economy has emerged swiftly from recession) and Jordan (sovereign risk up to B from CCC following signs that the economy was not as severely impacted by the recession as earlier feared). Algeria’s sovereign risk has slipped to BB from BBB, largely owing to an increase in its fiscal deficit and a worsening of the investment environment.
The countries in the middle of the regional rankings have remained relatively stable in our risk assessment, with Egypt, Libya, Morocco and Tunisia all retaining the BB overall rating that they had one year ago. This reflects the relatively effective way in which these countries have dealt with the global recession. In Egypt, for example, real GDP growth has steadily increased since it bottomed out at 4.1% in the second quarter of 2008/09 (July-June fiscal year), reaching 5.9% in the fourth quarter of 2009/10, and 5.3% over the fiscal year as a whole.
Ranking by risk
Syria: Banks reaching new heights
Oxford Business Group, 18 August 2010
The Syrian banking sector appears to be in rude health, reporting record figures at a time when many banks in the region are still absorbing the impact of the global financial crisis. In July 2010, the Central Bank of Syria released figures showing that bank assets in the country have topped $40bn for the first time.
With banking expanding across a number of business lines, growth levels have outstripped neighbours in the region. Both state-owned and private banks have been performing strongly this year. While the former still dominate the sector, accounting for 74.5% of banking assets ($31.5bn), the most impressive growth has been witnessed among the latter. Indeed, year-on-year (y-o-y) asset growth increased by 29.04% among private banks, with an impressive expansion rate of 5% for the first quarter of 2010 alone. This compares to state-owned bank asset growth of 9.5% and 1.3% for annual and quarterly increase, respectively.
The uptick in private sector banking is welcome news as the government looks to encourage further competition in the sector and broaden the scope of private financing, for both government projects and private enterprise. The central bank signalled its intent in this regard in January 2010 when it increased the ceiling for foreign ownership stakes in local banks from 49% to 60%. The 14 existing private banks in Syria all have foreign participation, although none of this comes from outside the Arab world.
It is expected that the central bank’s new regulation will encourage additional foreign participation in the sector. A number of companies have already expressed an interest in the Syrian market, with particular and persistent attention from Turkish financial institutions. Türkiye İş Bankası, Ziraat Bank, and two state-owned Turkish banks, Halkbank and Vakıfbank, have all been eyeing the Syrian market this year.
However, the high cost of opening a Syrian affiliate is proving to be an obstacle for many foreign entities. Alongside the foreign ownership reform in January, the central bank also introduced a measure raising the minimum capital requirements of affiliates from S£1.5bn ($32.15m) to S£10bn ($214.4m) for conventional banks and from S£5bn ($107.2m) to S£15bn ($321.5m) for Islamic financial institutions.
The move, ostensibly aimed at making local institutions more robust, has made potential investors somewhat wary. Türkiye İş Bankası and Vakıfbank have said that the high capital requirements mean that they are only likely to open representative offices rather than full affiliates. Furthermore, in mid-July the general manager of Halkbank, Hussein Aydin, told the Turkish press that “Damascus was too expensive to invest in,” and that the bank would rather focus on the Balkans.
However, most private sector banks seem to be making healthy profits and all the indicators point to a thriving sector. Indeed, the banking industry has become increasingly aggressive and ambitious, helping to drive the whole Syrian economy forward. The total loan portfolio of the sector, excluding loans made to the central government, increased 14.7% y-o-y to $22.1bn, according to the central bank’s latest statistics.
The majority of this growth was recorded in the private sector, with private conventional banks’ loan portfolios increasing by 33% and private Islamic banks by 64%. This growth has impacted all sectors of the economy. With the exception of wholesale and retail trade, bank financing has increased across all economic activities, with agriculture recording the biggest jump in lending of 59.2% in the first quarter of 2010 compared to the same period of the previous year. Mining and manufacturing and building and construction also recorded double-digit growth in bank financing.
Such figures illustrate the growing confidence and ambition of the sector. They are also a reflection of government incentives and regulations to encourage banks to support economic development. For example, in May 2009, the central bank took a decision to encourage lending to the manufacturing sector by reducing banks’ reserve requirements based on increased lending.
Following the success of this measure, a similar regulation governing lending to small and medium-sized enterprises (SMEs) went into force from July 2010. Under the decision, banks will be offered a discount in their reserve requirements on a sliding scale dependent on increased lending to SMEs up to a discount level of 5% of reserves for a lending ration of more than 45% to SMEs.
Through this combination of government oversight and private sector involvement, the Syrian banking sector is building momentum. With deposits to the sector also increasing dramatically, the financial industry is buoyant. All indicators are moving in the right direction, and while the record peak in assets is currently seen as something of a landmark, it is likely to be soon forgotten as it is surpassed and new heights are reached.
“Syria: Luxury Rentals With a Turkish Backstory.”
By Matthew Stevenson’s
Syria, while a rich tourist area, has much of its reconstruction wealth devoted to apartments, which can cost about $2 million. While Syria and its neighboring countries have had their conflicts in the past, this money should go to a transnational rail line to not only increase tourism, but regional trade as well.
U.S., Israel Build Military Cooperation
Amid Fitful Diplomatic Relations, White House Fosters Defense Ties to Reassure a Pivotal Ally, Advance Mideast Peace
By CHARLES LEVINSON in WSJ
TZEELIM, Israel—While the U.S. and Israeli diplomatic relations weather their choppiest phase in years, behind the scenes, military commanders from the two countries have dramatically stepped up cooperation.
The intensified partnership is part of the Obama administration’s broader policy of boosting military support for American allies in the Mideast amid heightened tensions with Iran and its allies such as Hezbollah and Hamas, according to U.S. officials. The Obama administration believes it may also help induce Israeli Prime Minister Benjamin Netanyahu to make concessions in talks with Palestinians, these officials said.
U.S. military aid to Israel has increased markedly this year. Top-ranking U.S. and Israeli soldiers have shuttled between Tel Aviv and Washington with unusual frequency in recent months. A series of joint military exercises in Israel has included a record number of American troops.
This month, about 200 U.S. Marines joined a battalion of Israeli soldiers for an all-night march through the Negev desert, the culmination of three weeks of joint drills. As dawn approached, they crept up on a mock village, an Israeli military-built recreation of a typical Palestinian hamlet, used for combat training.
Explosions, triggered by pyrotechnics engineers, shook the night. Soldiers from another Israeli unit, playing the role of Arab guerrillas, crouched in the fake village’s narrow allies and empty cinderblock homes. They rattled off rounds of blank ammunition from machine guns at the invading U.S. and Israeli forces.
Behind a dune on the village’s edge, a U.S. Marine company commander conferred with his Israeli counterpart before the two barked orders—the Marine in English, the Israeli in Hebrew—to soldiers scattered behind them. As dawn gave way to the Negev desert’s grinding August heat, the forces battled house-to-house in mock battle, as Israeli and Marine generals watched on from the sidelines.
The exercise was the biggest U.S.-Israeli joint infantry exercise ever, according to officials. By comparison, at the same exercise last year, there were only around 20 U.S. Marines involved. In the fall, there will be an even bigger joint infantry exercise involving tanks and armored vehicles, officials said.
Two joint U.S.-Israel committees, the U.S.-Israel Joint Political Military Group and the Defense Policy Advisory Group, which were established years ago and had fallen into disuse, have been beefed up with senior officials, including Undersecretary of Defense for Policy, Michele Flournoy, the top-ranking civilian at the Pentagon, Israeli and U.S. officials said.
The military cooperation began to intensify even as diplomatic relations between Washington and Israel frayed. The effort stems from policy directives the White House gave the Pentagon early in Mr. Obama’s presidency to “deepen and expand the quantity and intensity of cooperation to the fullest extent,” according to a senior administration official.
Officials in Washington and Israel continue to say they haven’t ruled out a military strike against Iran amid Tehran’s nuclear standoff with the West. But the new cooperation appears to be part saber-rattling at Iran and part reassuring Israel that the U.S. is fully committed to its security.
The senior U.S. official said President Barack Obama felt the increased military support is necessary to assure Israel’s security against mounting regional threats, including Iran and its allies: Syria, the Gaza-based Hamas and Hezbollah in Lebanon. “History has shown that Israel is more willing to take risks for peace when it feels it is capable of addressing its security needs,” the official said.
U.S. military aid to Israel reached a high of $2.78 billion in 2010, up from $2.55 billion in 2009. It is slated to jump to $3 billion in 2011. The Obama administration has also requested an additional $205 million to fund a short-range rocket defense shield.
Washington’s stepped-up military support comes amid similar moves to strengthen military ties with America’s Arab allies in the region, including those that don’t maintain ties with Israel.
This week, the Obama administration said it intended to provide new Patriot missile batteries to Kuwait. And Washington is readying a $60 billion sale of advanced F-15 fighter jets and attack helicopters to Saudi Arabia.
Back to Basics on Israel’s Security Needs
Vol. 10, No. 7 19 August 2010 The Jerusalem Center for Public Affairs
* The letter from President Bush to Prime Minister Sharon of April 14, 2004, was a return to the key elements of U.S. policy since 1967 developed under President Johnson – the idea that there would be no return to the situation before June 1967; that the so-called ’67 borders were incapable of providing Israel with adequate defense and would change. The Bush letter makes no reference to the ’67 borders. It refers to “the armistice lines of 1949.”
* President Bush stated U.S. policy in a speech in the Rose Garden on June 24, 2002, where he called for “new Palestinian leadership.” It included the understanding that peace was not going to be made as it had been made with Jordan and Egypt, because Israel and the Palestinians were more deeply intertwined. Security for Israel depended also on what happened inside Palestinian society.
* The “incitement” issue is not trivial or marginal. In the case of Israel and the Palestinians, the location of the border and what is on the other side of that border are equally important. President Bush said that the Palestinians needed institutions of statehood where those who are in charge of education policy are not nursing ancient hatreds. Israel should not back away from the incitement issue because it is a security issue.
* Similarly, those who back away from the idea of defensible borders are making a huge mistake. Presumably they think defensible borders are too much to ask for. But there will be no peace with the ’67 lines, as has been understood since 1967. Clarity about the fact that those lines will change actually promotes peace. The point is to reflect the reality on the ground and establish the basis for a peace that can last. We need to stick to the basics and what is most basic is security. Click here to read the full article.
A huge trove of newly declassified documents subpoenaed during a 1962-1964 Senate investigation reveals how Israel’s lobby pitched, promoted, and paid to have content placed in America’s top news magazines with overseas funding. The Atlantic (and many others) received hefty rewards for trumpeting Israel’s most vital – but damaging – PR initiatives across America. The relevant documents are now online.
NPR has a good conversation with both Goldberg and Jon Lee Anderson who have major articles on Iran: Jon Lee Anderson’s “After The Crackdown” is in the most-recent issue of The New Yorker, and Jeffrey Goldberg’s “The Point of No Return” is The Atlantic‘ cover story.
“…If someone will ‘do’ Iran, it will be the US, not israel…”
… Says Martin Indyk …In the Atlantic:
“…My interpretation of the facts, for what it’s worth, is a little different:
President Obama came into office determined not to use force against Iran — partly because he faced two other wars in the Middle East, but mostly because he was determined to engage Iran and saber-rattling would have been inconsistent with that approach.
By the end of his first year, however, he reached the conclusion that engagement had failed and that it was time to put force back on the table. In January he began to do so. That’s when Gates traveled to the Gulf and delivered a message from the President to the leaders there: “The President is determined to prevent Iran from acquiring nuclear weapons.”
This shift in rhetoric was backed by the deployment of missile defense systems to the Gulf and a bolstering of the U.S. force presence there. The rhetorical shift was made public by NSC Adviser Jim Jones in a speech to the Washington Institute for Near East Policy in the spring.
It was also backed by a Pentagon study of the requirements for a U.S. strike on Iran’s nuclear facilities (foreshadowed in David Sanger’s New York Times’ article about Secretary of Defense Gates’ memo to President Obama). The conclusion of that study was that, in the words of one senior White House official, “The Iranians are not ten feet tall — we can do this.”
And it was backed by what Denis McDonough (the chief of staff of the National Security Council) said to you – that Iran’s nuclear program poses a grave threat to Obama’s vision of a new multipolar world order based in part on the twin pillars of nuclear disarmament and non-proliferation.
The Israelis started to pick up on this shift, approving of the fact that “the Pentagon had done its homework” and noting the change in Obama’s rhetoric. Their focus now shifted to putting salt on Obama’s tail. Hence Defense Minister Barak’s multiple visits to Washington in the last four months.
The Israelis today are more relaxed than your article allows. This is in part because of the shift in Obama’s posture but also because the sanctions are beginning to bite and the Iranians are having real problems with their centrifuges. One of the same generals you quote explained to me at the end of June how far the Iranians were from achieving their objective of a robust breakout capacity.
My interpretation doesn’t change your bottom line that if all these efforts fail and Obama doesn’t take action then the Israelis likely will. But it does lower the odds of Israeli action in the next year substantially below your “better than 50 percent” estimate. Indeed, I would argue that, if current trends continue, it’s actually more likely that the United States will bomb Iran than Israel. …”