THE ARAB WORLD
Why the EU, for all its problems, is still a model for the Arab World
Summer 2010
The countries of the Gulf Co-operation Council (GCC) often look with admiration at the EU. Abdulaziz Sager who chairs the Gulf Research Centre, assesses what the GCC can and cannot learn from the EU
It is sometimes easy for Europeans to forget how successful the EU has been. After all, the EU has united a continent that was once bitterly divided, it has improved its own defences and has begun to speak with a common voice on international issues. The very fact that EU integration has brought prosperity and structural growth to its member states explains why the Gulf Co-operation Council (GCC) – a group made up of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates – often uses the EU as a model.
As far as members of the GCC are concerned, Europe’s greatest achievement has been the peace and political stability achieved in the wake of World War II. Earlier incarnations of the EU like the European Coal and Steel Community and the European Economic Community created the sort of stability that people in the Gulf crave.
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Despite the euro’s ills the Gulf’s single currency still beckons
Gulf Co-operation Council (GCC) leaders have long said that the experiences of the euro showed that a common currency for the Gulf could promote crossborder trade and encourage more intra-GCC mergers and acquisitions. “The Khaleeji” as the currency would be known could also promote the political integration of Bahrain, Saudi Arabia, Qatar, Kuwait, Oman and the United Arab Emirates (UAE). But now that the eurozone is reeling from the pressures of the Greek debt crisis, introducing a GCC currency looks foolish. Saudi finance company, Jadwa has lost no time in warning GCC leaders to take heed of the eurozone’s troubles.
But quick comparisons between the euro and the Khaleeji could well be misleading. The eurozone discrepancies as Greece’s budget deficit hitting 13.9% of GDP in 2009 when Germany’s was 3.3% are not a feature of the mainly oil-based GCC countries’ economies. By 2006 every GCC country had met the convergence criteria for the common currency, and each had a budget deficit of less than 3% and an inflation rate no higher than 3%. GCC economies are anchored by oil exports so they haven’t drifted apart since 2006, and most probably won’t in the future.
Some economic observers have even suggested that the eurozone’s weakness is the Gulf’s opportunity, so that the Khaleeji could muscle its way on to the currency markets as a new rival to the U.S. dollar.
Although GCC leaders know the Khaleeji wouldn’t be prey to the same problems as the euro, enthusiasm for the idea is already waning. Oman opted out of the common currency project in 2006, Kuwait broke away by floating its currency in 2007, and the UAE withdrew last year.
The GCC’s six member countries clearly won’t meet the 2010 deadline that had been set for introducing the Khaleeji. The more optimistic estimates say they may bring it in by 2013 but 2020 is now looking a more realistic deadline. In private, GCC leaders know the Khaleeji’s economic benefits are overstated because while the Khaleeji would help regional trade in the Gulf, this makes up only 10% of total GCC trade, as oil and gas exports account for 75%.
| In the last 40 years, the countries of the Gulf – the members of the GCC plus Iran, Iraq and Yemen – have lurched from one security crisis to another. The Iranian revolution gave way to the Iran-Iraq War, which in turn led to the Iraqi invasion of Kuwait. Countries in the Gulf face a host of challenges ranging from terrorism and political instability to Iraqi tensions and Iran’s nuclear aims. And international interest only deepens the woes of these countries by meddling in their affairs. The second U.S.-led invasion of Iraq took the lid off long-simmering ethnic and sectarian tensions. Terrorist attacks in the country are still common, and the withdrawal of U.S. security forces is likely to expose fault lines that had hitherto been hidden. The internal strife in Iraq has been a bleak reminder of what many already knew: removing Saddam Hussein was never going to be a recipe for instant peace.
Aside from the Iraq problem, Gulf countries worry that Iran’s nuclear ambitions may spark a nuclear arms race or, worse, a pre-emptive strike by the U.S. or Israel. GCC members know that Iran and Iraq need an inclusive security arrangement to allow them work towards greater stability. But neither Iran nor Iraq is in the mood for building bridges, and that makes a security-based multi-lateral agreement in the Gulf seem like a distant dream. Iran and Iraq shouldn’t take all of the blame, members of the GCC have made only half-hearted attempts at multi-lateralism, and in debates between GCC countries multi-lateralism is rarely mentioned.
In a situation which often seems hopeless, the long-term stability created by the EU, NATO, and the OSCE provides much-needed encouragement. In Europe, historic enemies have been able to put their pasts behind them to build peaceful relationships. The countries of the Gulf might one day be able to do the same, but only if they have a common security framework. In many ways, the EU represents the sort of model that current GCC members aspire to. The EU’s ability to make countries grow at national level while encouraging them to work towards common security goals is particularly attractive.
Of course, policymakers in the Gulf know there is no panacea for the region’s ills and that European institutions can’t be directly replicated in a different political setting. Security aims in the Gulf should be advanced through modest co-operative steps in which GCC countries gradually take control of the region’s security issues. GCC countries should take heart from their ability to co-operate on economic issues, and their combined management of the flow and price of oil. On economic and security matters, motivation for co-operation must come from within the Gulf region, and not from without. And all GCC countries must be involved in this, together with Iraq, Iran and Yemen.
Against this backdrop it is encouraging that Europe has started to take a strategic interest in the Gulf. European policymakers know that turmoil and instability in the region can have global repercussions. Although Europe won’t replace the U.S. as the region’s predominant military influence, it has a lot to offer. It can support interaction between different regions and set up mechanisms that constructively and peacefully deal with potential conflicts. Europe’s renewed interest is another opportunity for Gulf countries to look at European integration and learn from it.
On many specific points, the EU has already shaped GCC thinking on integration. The GCC has set up partnerships that bear a striking resemblance to EU agreements. It established a customs union in 2003, a common market in 2008, and in spite of some potential obstacles may establish a common currency in the not so distant future.
These projects need EU support. For instance, GCC member states are divided on aspects of the common currency and can’t agree on a proper timetable for its introduction. The EU’s experience with the euro could point the way forward, while also highlighting the pitfalls to watch out for. The EU should also bolster the EU-GCC framework by getting western institutions like NATO and the OSCE on board. And finally it should address the stalemate on the impeding EU-GCC, Free Trade Agreement (FTA). If this agreement were to be successful, it would underline the EU’s commitment to the Gulf.
Working with the GCC would give the EU much greater influence on politics and security in the Arab world. Those pundits who argue that Europe is not capable of tackling security problems in the region are missing the point. The EU has already taken on security challenges and is well-suited to deal with future ones like military security, political instability and transnational crime. But collaboration between the EU and the GCC will only be successful if the EU tries to complement existing arrangements and not to substitute them. In this way the EU can be more than just a model for people in the Gulf.
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