The Arab Gas Pipeline: Problems with the Pipes

Revolve-magazine.com

The Arab protests and additional European Union sanctions against Iran and Syria have had major ramifications on current and future natural gas supplies and trade. What has made serious dents in national energy portfolios has garnered surprisingly little coverage in the international media, but involves a vast network of pipelines that are intended to connect the Middle East, Central Asia and Europe, reports Paul Cochrane in Beirut.

Delays and Sabotage

The first setback was to a pipeline project that was supposed to enable, in the words of a pan-Arabist at the Egyptian Natural Gas company, “the dawn of Arab integration” when work started in 2003. The Euro-Arab Mashreq Gas Pipeline (AGP) was intended to run 1,200 kilometers through Egypt, Jordan, Syria and end in Turkey. Egypt was to provide gas to Jordan and an off-shoot pipeline of the AGP from Arish, Egypt to Ashkelon, Israel. What gas Jordan did not consume would be piped to Syria, where Syria would then add its gas into the mix – with an off-shoot pipeline to Tripoli, Lebanon – and export gas onto Turkey, whether for Turkish consumption or to be transported onto gas-hungry Europe.
While the AGP had delays and was supposed to be finished by 2007, the pipeline had reached the last leg, from Aleppo, Syria, to Kilis, Turkey, slated for completion by the end of 2011. But the Egyptians took to the streets, President Hosni Mubarak was overthrown, and the AGP came under sustained attacks in Egypt's Sinai Peninsula with 14 acts of sabotage and attempted attacks throughout the year and well into 2012.
Egypt's gas supplies plummeted from 220 million cubic feet (mcf) per day in 2010 to 80 mcf in 2011 to negligible levels in 2012, when the pipeline was shutdown. It has cost the Israelis at least $4 billion to source gas from elsewhere, as well as having lost the highly controversial, preferential pricing deal that Mubarak and his cronies had inked with Tel Aviv in 2005, at anywhere from $0.70-$1.50 per million British thermal units (BTU), according to Egyptian media, to $2-$4 per million BTU, according to Israeli media – both well below the global average of $6-7.
Jordan also had a special price arrangement with Cairo of $3 per million BTU, but with no Egyptian gas through the pipeline, Amman has lost access to 20-25% of its gas needs, prompting the government to raise electricity prices by 9% in early 2012, which it later back-tracked on due to public outcry (Amman is keen to avoid any further reasons for the populace to protest). To make up for the short fall, Jordan has had to switch to heavy fuel oil and diesel, adding on a projected $2.4 billion to the cash-strapped kingdom's energy bill.
Syria has been marginally affected as well, having received around 50 million mcf a day of Egyptian gas – or 8% of the country's annual needs – prior to the shutdown.
Egypt turning off the pipeline has shown a chronic weakness of the AGP: the pipeline was simply over-dependent on Egyptian gas. If Egypt stopped piping gas, then Syrian gas could be piped in the opposite direction to make up for the short-fall in Jordan, but despite Syria having some 8.5 trillion cubic feet (tcf) of gas reserves, domestic and projected consumption is higher than production, meaning Syria is, and will remain, a net importer.
Egypt's domestic consumption has also been steadily rising – as has Jordan's.
So even if the AGP had been completed, whether in 2007 or the end of 2011, the only real beneficiary was Jordan, and to a lesser degree Lebanon (while the Egyptians were financially losing out due to Mubarak’s deal-making). The AGP is a nice idea, like Egyptian President Gamal Abdel Nasser's pan-Arabist ideals of the 1950s and the attempt at an United Arab Republic, but has proved equally untenable. What could inject new life into the AGP is if gas were piped from Qatar and Iraq to Syria, as well as from Iran and Central Asia via the projected Nabucco pipeline through Turkey.

An LNG tanker sails through the Bosphorus (Paul Cochrane)

The Turkish Connection

“If a pipeline comes from Iraq or Qatar there would be a principle pipeline, and a viable network,” said Ziad Ayoub Arbahe,an energy consultant in Damascus. However, piping gas from the east would require greater stability in Iraq, as well as of course in Syria now. The ongoing uprising in Syria caused the final leg of the AGP to be put on hold until the situation calms down. Given stability and willing investors in both Syria and Iraq, Damascus would stand to gain as a major transit hub. As Naeem Danhash, Project Director of the Euro-Arab

Mashreq Gas Co-operation Center (EAMGCC) in Damascus explained: “the medium- to long-term prospects for Syria to become a gas hub are excellent.”

Turkey also has greatprospects if regional geopolitics allowed for the stability needed for pipeline investment, given the country's strategic position at the crossroads between the energy-rich East and the energy hungry West.

The most audacious plan came following a meeting of five companies in 2002 (OMV of Austria, MOL Group of Hungary, Bulgargaz of Bulgaria,Transgaz of Romania and BOTAŞ of Turkey) to establish a pipeline to transport Middle Eastern and Central Asian gas some 3,000 kilometers via Turkey to Baumgarten in Austria. After the five companies met, the executives attended a performance of Verdi's Nabucco at the Vienna Opera House, and the name for the pipeline was coined: Nabucco. By 2009, deals had been inked and pipes were to be laid in 2010 with gas to flow by 2013.

Back then, Nabucco was big news and hailed as the EU's future gas lifeline after Russia caused serious alarm about energy security when Moscow stopped exports to Europe via Ukraine in the icy winter of January 2009. The impetus was there, but the Nabucco pipeline has not materialized due to ongoing financial issues – costs were projected at $10.25 billion but recent forecasts estimate it could cost over $25 billion – and the realization that the project is only commercially viable if there is access to the world's second largest gas reserves for the Nabucco mix. That possibility is now impossible, as the EU, following the U.S. lead, recently smacked sanctions on Iran to pressure the country to abort its alleged nuclear weapons program. This resulted in the EU stopping all imports of Iranian oil – some 4-5% of the EU's oil imports – as well as gas. As Dr. Tugce Varol, a Scientific Advisor at the 21st Century Turkish Institute in Ankara, stated bluntly: “Nabucco is dead.”

The irony is that the EU has repeatedly denounced the stranglehold Russia has over Europe's natural gas imports, accounting for 34.2% of total European imports, and that Nabucco was meant to loosen Moscow's grip. This is a similar story in Turkey, also not keen to have to rely on Russian gas, yet Ankara – for political reasons – has commissioned the Russians to build a $20 billion nuclear power plant in which Russia will retain 51% shares, as well as having all the technical know-how.

Turkey was also pressured by Washington to lower its oil imports from neighboring Iran (about 30% of Turkish demand) by a tenth in March 2012. And then there is a serious possibility of a falling out between Ankara and Tehran over the explosive situation in Syria. In the end, Turkey needs pipelines to be constructed on its soil.

Varol concluded that: “an energy crisis is coming. Turkey will need more than 60 billion cubic meters (bcm) of natural gas in the next five to 10 years. There are contracts for 52 bcm, and some liquefied natural gas (LNG) contracts, but there is a need to find new energy. Turkey gets 10 bcm gas from Iran but if that stops, then Turkey is in a catastrophic situation.”

 A man works on part of the AGP in Syria (courtesy EAMGCC)


The Russian Play

With Nabucco dead in the water, a new project is to be fast-tracked, the TransAnatolian Pipeline (TANAP), announced in November 2011 at the 3rd Black Sea Energy and Economic Forum in Istanbul, and a memorandum of understanding was signed between Ankara and Baku to establish a consortium to build and operate the pipeline, which is to run from Azerbaijan through Georgia to Turkey and onto Europe. Despite claims that TANAP will eventually be realized, it is still years off and Azeri gas alone will not be sufficient to cater to Turkish and European needs or have the capacity to provide enough gas for the countries connected via the Arab Gas Pipeline.
Iranian gas is needed, but the West's hypocritical stance over Tehran's nuclear program (Israel can have an undeclared nuclear arsenal but Iran cannot develop nuclear energy for civilian purposes like the Emirates) has squandered any possibility of accessing such needed energy. The winner from Europe's strategic mistake of blindly following Washington and Tel Aviv's stance on Iran is Russia, which will be able to bolster its gas export capabilities to Europe, consolidate its power in Central Asia, and have a firm friend in energy-starved Turkey. Moscow's assertiveness could sabotage another pipeline that would give Europe indirect access to Central Asian gas – the Trans-Caspian Pipeline between Turkmenistan and Azerbaijan – to give preference to the Russian-Italian backed South Stream pipeline.

The Israel-Greece-Cyprus Axis

Natural gas is proving to be a useful foreign policy tool in the eastern Mediterranean. All countries are waiting and hoping for more stability in Egypt and Syria for the gas to start flowing again, and for the AGP to be completed so that gas can be piped in from Turkey.
The politically-motivated preferential gas deal between Egypt and Israel that ended in the wake of the ouster of Hosni Mubarak has been a setback for Israel, costing an extra $4 billion a year and enabling Cairo to make more commercially viable demands of the Israelis for the gas to start flowing again.
However, the discovery in 2010 of the underwater natural gas field – the “Leviathan” – off of Israel's northern coast provided some leverage. The Leviathan could offer enough for domestic consumption and potentially for export. Lebanon shares the gas field with its southern neighbor but politicians just bicker over which ministry will get the spoils even before prospecting has begun.
In 2011, the Israeli gas find was used as a bargaining chip with Greece to prevent a second freedom flotilla from setting sail to attempt breaking the blockade of the Gaza Strip. As confirmed by a Greek consular official in Canada, Athens put its economic interests at the fore in cooperating with Israel to prevent the flotilla from departing from Greek ports. The incentive for cash- strapped Greece was future gas and electricity sharing deals with Israel.
Greece currently consumes 3.75 billion cubic metres (bcm) of gas per year, which is slated to rise to 9.3 bcm by 2020. Not wishing to be reliant on Russian gas via the South Stream pipeline, Athens was scouting for other sources – Israel and Cyprus' gas finds seemed ideal to offset forecasted demand.
In March 2012 the energy ministers of Greece, Israel and Cyprus agreed to bolster cooperation to exploit natural gas deposits in the eastern Mediterranean. The long-term plan is for gas exports to go from Israel and Cyprus to Greece, but the laying of pipe on the sea bed is slated to take at least eight years, meaning sharing of gas-produced electricity via undersea cables is more probable in the short-term.
“At the moment two major natural gas fields have been identified... both of them will suffice for Israel's needs for 50 to 60, some say 70, years,” Associated Press reported Israel's Energy Minister Uzi Landau as saying in Athens. “In the Middle East that is now caught in a tremendous earthquake, stretching from the Atlantic to the Persian Gulf and beyond, the axis of Greece, Cyprus and Israel will provide an anchor of stability.”

•

The politics of pipelines and the changes underway across the region are going to cause many challenges in the years ahead until some of these competing gas projects become more than just pipe dreams.

Box: Syria's “Four Seas Strategy”

Syria could be one of the region's key energy transit hubs with some 6,300 kilometers of oil and gas pipelines. But geopolitical events have thwarted Syria's “four seas strategy” which was aimed, when it was announced in 2009, at making the country a transit hub for hydrocarbons between the Persian Gulf, the Black Sea, and the Caspian and Mediterranean seas.
Instability in Iraq has been one of the biggest setbacks to the plan – the pipeline going from Kirkuk in Iraq to Banias on the Syrian coast was still not back online after the U.S. bombed it during the 2003 invasion of Iraq. Given ongoing instability in Iraq and now in Syria, it is unknown when the pipeline will be operational again, as well as when work will start on two new pipelines: one carrying 1.5 million barrels per day (bpd) of heavy crude oil from Iraq to Syria; and a smaller pipeline with a capacity of 1.25 million bpd of light crude.
Instability has also delayed the roll out of a gas pipeline from the Akass region in the west of Iraq, which is only 50 kilometers from the Syrian border that could provide up to 30 million cubic meters of gas a day and feed into the AGP. The export of Persian Gulf gas, particularly from Qatar, which has the third largest gas reserves in the world, is also dependent on a stable Iraq for the relevant pipeline infrastructure to be developed.
The viability of such connections and the “four seas strategy” will equally hinge on stability returning to Syria and for the AGP to be finished, which had reached the last stage of completion between Aleppo and Kilis, Turkey, before the uprising broke out in March 2011.
What state Syria's oil and gas infrastructure will be in following the end of hostilities will be another factor to consider with the EU having slapped sanctions on Syria in 2011 that resulted in the country losing 94% of its oil exports and prompting oil production to drop by up to 30-35% to 260,000 bpd.
Rebels also target infrastructure to debilitate further the regime.

Conflict Versus Consumerism: Middle East Cosmetics Market

Soap Perfumery and Cosmetics magazine

The conflict in Syria has impacted on sales in the Middle East cosmetics market, but in the Gulf sales are buoyant, as Paul Cochrane reports from Beirut

It has been a been a turbulent time in the Middle East since the Arab uprisings swept much of the region over the past year and a half, not only with sales of cosmetics, toiletries and perfumes being depressed by losses in consumer confidence but also with distribution being harmed, especially by the protracted conflict in Syria. But while some markets have been particularly affected by regional instability, notably the Levant, the more stable Gulf market is coming out of recession and experiencing a return to growth.

The conflict in Syria is having a wider impact on the cosmetics and toiletries trade than just sales lost in a country which had been a burgeoning market for multinationals and regional players since its economy opened up less than a decade ago. The sanctions imposed on Syria by the US and the European Union in 2011 resulted in multinational corporations (MNCs) such as Procter & Gamble having to exit the market last November, leaving local distributors with no MNC products for retailers.

While the sanctions have directly affected MNCs, which account for an estimated 70%-80% of the Middle East and North Africa (MENA) cosmetics and toiletries market, what has hit all players is the way the conflict is impeding distribution as Syria was a major transit route for goods moving between Turkey, Lebanon, Iraq, Jordan, Saudi Arabia and the Gulf.

“We’ve made contingency plans for transportation by sea as there is the possibility of Syria blocking the route to Jordan and into the Gulf,” says Nizar Raad, managing director of Universal Metal Products, a Lebanese company that makes aluminium tubes for the cosmetics industry. “We are facing a lot of obstacles: risk, the shortage of drivers, visa delays and visa costs, all this is adding up. There are also more checks at Masnaa [the Lebanon–Syria crossing] and at Dera’a [Syria to Jordan], which holds up convoys for three to five days.”

Within Syria, demand for cosmetics and toiletries has plunged. “Demand is half of what it used to be as purchasing power is down and it is only products of first necessity which are selling, although shampoo still is,” comments Joanne Chehab, general manager of Lebanese cosmetics firm Ch. Sarraf & Co, part of the Malia Group. Malia has its own line of cosmetics, Cosmaline, and distributes for Shiseido and Wella. “We are also facing export and distribution difficulties and there is a lot of money in the market we are unable to collect. Very few companies are active today compared to before.”

IMPACT ON LEBANON

The conflict has also hit the economy in neighbouring Lebanon as well contributing to a drop in tourists, which has hit sales at Lebanese cosmetics outlets. Some have even closed down. In marketing terms Lebanon is considered the ‘window dressing’ of the Middle East due to its cosmopolitanism. New products are launched in the Lebanese market during the summer season and up until this year tourists from the region, particularly affluent Gulf citizens, visited the country. “Lebanon is a test market for elsewhere in the region,” says Chehab.

However while sales of more luxurious items have been affected by the economic downturn, the Lebanon mass market remains buoyant and the relationship between MNCs and local producers is highly competitive. Retail outlets are diverse: around 60% of cosmetics and toiletries are sold at supermarkets with mini-markets following close behind. And while “pharmacies do not account for much volume [they] are important for a brand’s image, so we do special sales and promotions,” Chehab says.

In Lebanon, the personal care market is increasingly sophisticated and mirrors trends in Europe. Chehab says that for hair care products, brands have recently started to heavily market hair serums in addition to shampoos and conditioners. “Hair serums have been in the market for decades but only as of last year have all brands been simultaneously marketing them,” she explains. Cosmaline has its own line of shampoos and conditioners: Softwave is exported to Europe, the Gulf and North Africa. It changes its packaging every three years to stand out in an increasingly saturated but fast growing segment. “In shampoo there is no loyalty at all. When people see adverts or because of the smell, packaging or the perfume, they switch,” Chehab says. “Before people had just one conditioner. Now they have seven. But because of the lack of loyalty we can compete with the multinationals which is why they are still spending on marketing.”

Region wide, shampoos are primarily marketed towards women, with men typically only selecting shower gels and body washes. Hair care lines for men are still small by volume in the region although that is changing, as is demand for shampoos for children. “Ten years ago we started Softwave for men but it didn’t do very well. Every two or three years we re- study the market and now there is a market for men but volumes are not very big, although the Shiseido range for men is growing year on year,” Chehab notes.

In terms of packaging, designs are the same for the whole region but languages differ. In the Levant product descriptions are in French, English and Arabic while in Algeria it is mandatory to have descriptions in French. Elsewhere in the region descriptions are in Arabic and English, with the main product language and the brand name in English. Shampoo product sizes also differ with the 400ml bottle more popular in Lebanon, Syria and the Gulf than the typical European size of 250ml, while Egyptians are big consumers of shampoo sachets at 5ml and 12ml. Larger sizes are also popular for family use at 700ml and 4kg.

DEODORANTS WIDESPREAD

In other segments, deodorant sales are growing with sprays particularly popular in the region, especially in emerging markets Iraq, Syria and Libya. They are used not just to combat body odour but also for spraying on the body. In Lebanon however mass sales are mainly of roll-ons, a segment dominated by the MNCs.

Meanwhile “skin care is a growing segment [in Lebanon] and we saw the possibility of competing with Nivea as it is not a very crowded market,” says Chehab. The company has used its distribution agreement with a mineral water producer to market skin creams by giving away a free 500ml bottle of water and tap into growing health consciousness in Lebanon as well as much of the rest of the region.

There has also been a notable trend across the region in brands releasing rival products swiftly once a company launches a new line, whereas previously there was a gap of two to three years. “If say Lancôme launches a new face cream product, another brand responds almost immediately,” Chehab comments.

While Sarraf ’s revenues have been affected by the drop in sales in the Syrian market and the downturn in Lebanon, with 70% of its products exported the company will ride out the current storm. This year it expects to grow by 10% compared to 2011. Chehab predicts that sales volumes will continue to grow in coming years and that Lebanon will ultimately only account for 5% of overall business.

In recent years sales have been bolstered by rising demand in Iraq, North Africa, Oman and Saudi Arabia whose relatively wealthy 28 million people are currently the largest Middle East market in terms of cosmetics and toiletries consumption, followed by the United Arab Emirates (UAE) and Iran, according to market research company Euromonitor International. “A very important market for us is Saudi Arabia as there is the scale there that smaller countries like Lebanon don’t have,” says Chehab.

The oil rich Gulf countries, with the exception of Saudi Arabia, have a smaller population than the rest of the MENA region, but their significantly higher income levels make the Gulf a core market for cosmetics, toiletries and fragrance companies. According to Euromonitor statistics, the average annual spend on cosmetics and fragrance in the Gulf is $334 per person. Its hair care market was estimated to be worth $584.3m in 2010 and projected to grow 16% to $679.4m by 2014. Such growth is reflected in a rebound in sales over the past two years following a dip in the wake of the financial crisis that hit the Gulf countries in 2008.

“There was a slowdown in terms of year on year growth during 2010; the average ticket size had decreased as customers were weighing each purchase decision with added scrutiny. Currently I would say we are on the road to recovery, where we find that footfall is down but average ticket size has increased,” says Abdulla Ajmal, general manager of Ajmal Perfumes, a leading oriental perfume brand based in Dubai, UAE. Ajmal expects its growth to be 10% this year, building on last year’s turnover of $220m.

UAE based Chalhoub Group Retail which sells commercial, luxury and Arab- oriented brands throughout the MENA, has also had an uptick in business. “We experienced a rapid growth in 2011, up 25% versus 2010 brought about by the huge government social handouts in our major markets. As of August 2012, sales have not slowed down and we expect to end the year up 20 per cent,” says Salah Al Sagha, general manager, Beauty.

FRAGRANCE CONSUMPTION HIGH

In the fragrance sector demand is high in the region due to the social emphasis put on smelling good, with men and women alike reapplying a fragrance or applying another fragrance throughout the day. “Perfumes are bought largely for regular use in the Gulf unlike our western counterparts who link perfumes to occasions,” says Ajmal. “For us every day is an occasion to wear your favourite perfume.” Indeed the Gulf perfume market is estimated to be worth $3bn, according to Euromonitor, while the market size for premium women’s fragrance in Saudi Arabia is estimated at $121m and for men at $101m.

“The sector has performed fairly reasonably for us, the prime reason being that fragrances are largely classified under the need rather than want set within the region,” Ajmal remarks. He says fragrance consumption is five times higher in the Gulf than anywhere else in the world.

To keep up with such demand and what Ajmal calls a “thirst for new products that never diminishes”, the company launches ten new fragrances a year. So popular is oriental perfume within the region – and it is growing globally – that major brands have introduced oriental type fragrances and are regionalising fragrances by putting an emphasis on darker colours and Arabic motifs. “We see a lot of international brands experimenting with what they classify as oriental fragrances,” he says. “It’s a phenomenon that I like to call ‘oud mania’ where every fragrance brand of repute is launching fragrances under the oud banner. Since the market potential exists, the Gulf is the right area to target where oriental perfumery is strong and growing year on year.”

In terms of retail, beauty and perfume space has grown by 30% over the past three years in the UAE, according to Euromonitor and point of sale is increasingly important for consumers as well as brands. “We are seeing a greater emphasis on customer engagement on a one-to-one basis encouraging product trail and equipping the customer with the right knowledge so that they can make an informed decision,” Ajmal comments.

Another regional trend is the growing demand for halal personal care products which are free of gelatine and animal products, particularly pork derivatives. Estimated to be worth $560m in the Gulf by Euromonitor, sales grew by 20% in 2011 and the UAE is estimated to account for half of the segment’s sales. “What’s really driving demand is the fact that the Muslim population is now dominated by a demographic of young, educated professionals and they know how to balance their Muslim and cultural identity,” says Shamalia Mohamed, founder of Amara Halal Cosmetics, a recently established company in the US that is aiming to enter the Gulf market (especially the UAE). “For young Muslims, halal has to be healthy, socially responsible and appealing. They have no problem with paying a little more for premium organic and natural cosmetics to suite their modern lifestyle.”

Mohamed forecasts further growth in the sector as awareness increases about halal m certified products. “I can see big brands jumping into this multi-million dollar market. Initially anything that is new to the market has an advantage and after a while it becomes a norm or just a regular mainstream item,” she adds.

Photo and content copyright CosmeticsBusiness.

Architecture - David Adjaye: Going against generics

Celebrated architect David Adjaye shares his singular design vision

A magazine - http://www.aishti.com/16844

David Adjaye uses the word “generic” quite frequently in conversation. The gentrification of urban space and architecture is something the British architect is not happy about, as it wipes out cultural differences and geographical specificity, as well as undermining what “good architecture” should be about.
“There is a strong influence of generics in the world right now, that is affordable and fashionable. But we need brave steps, and I believe architectural urbanism is required,” he says. “Some say that architecture is not necessary. I say it is more important than ever before – it is a vision.”
Adjaye, who was in Beirut last September, takes his counter-generic architectural mission seriously, being a “Robin Hood” architect, a metaphor he has used to describe using proceeds from previous commissions to allow him the financial space to design buildings for charities and clients with little money. “It is a slightly Marxist view, to work with rich people to pay for other projects,” he says.
Talking about his seven-volume photographic survey of metropolitan architecture in 53 African cities, the Tanzanian-born architect laments the way the continent is generically referred to as Africa rather than in terms of regions. “It’s about not looking at the continent as a continent but rather as six regions – Sahel architecture, desert architecture, Savanna architecture and so on,” he says. “We need divergent views, not singularity. I prefer a planetary idea, the diaspora of the planet, rather than a singular globalization.”
Such an outlook and Adjaye’s internationalism – his father was a diplomat from Ghana and he lived in several countries as a child, including Lebanon – has made Adjaye one of the world’s most sought-after architects and designers of his generation. Last year he won Design Miami’s Designer of the Year award, and his design of the Nobel Peace Center in Norway garnered him accolades when it opened in 2004.

 

Currently,

Adjaye is overseeing the building of the $500 million Smithsonian National Museum of African-American History and Culture in Washington DC, which is slated for completion in three years. “It’s pretty heavy, very emotional and celebratory,” he says of the project. “It’s about 200 years of history and not just about slavery, but about how African-Americans confronted the United States to modernize; how civil liberties changed the world to face up to discrimination. The issue is how to deal with modernity, and how to talk about identity and narrative, so we are using artifacts in a different way. Before it was about the value of artifacts, but such trophyism, power and colonialism is disturbing for me.”
One of Adjaye’s other projects fits into his interest in urbanism and going against – that word again – generics. He has been commissioned by the Qatari government to design a street in the Dohaland project, which is recreating downtown Doha in a traditional style with a modern edge. “The 21st century is the beginning of Qatar’s urbanism,” he says, and this presents great opportunities for architecture. “It is about geography first, culture second. If this disconnected, it would be very problematic,” he says.
With his design, Abjaye has been able to create a new public realm, while apartments are Qatari-orientated, with male and female spaces, as well as the public and private. “It is on an incredible human scale, a walking city space and a very interesting Art Deco Arabist modern style. It is not generic but culturally specific. A richer architecture that acknowledges culture yet is still modern.”

Would a US redraw of its energy map truly achieve self-sufficiency?

Global Times
http://www.globaltimes.cn/content/746805.shtml


Reducing the US' dependency on energy imports, from the Middle East in particular, has been a major policy issue for decades, and was a recurring theme in this year's US presidential elections.

A report released in the wake of the elections by the Paris-based International Energy Agency (IEA) on November 12 stating that the US could become the world's largest oil producer in a decade and be self-sufficient in energy needs was resultantly warmly welcomed in North America.

Over time, the US would hypothetically be able to finally wipe its hands of the Middle East's problems, and no longer be hand-in-glove with Gulf monarchies in return for regular oil deliveries and petrodollars pumped into the American financial system.

With the world's largest energy consumer not buying from the region anymore, this would free up Middle Eastern exports, with the IEA predicting that more than 90 percent of the region's oil and gas trade would be destined for Asia. The result would be a major shift in global geopolitics.

That is one take, that an energy self-sufficient US would exit the Middle East if energy was removed from the equation. However, there is a lot of hyperbole to this prediction.

Whether the US becomes less import-reliant is largely dependent on domestically extracting more oil and gas from shale - of which there has been a bonanza over the past decade - but the fracking process is facing major opposition due to environmental impacts and high greenhouse gas emissions.

When exports of US-produced energy and forecasts on consumption are also factored in, the indicators suggest the US cannot be independent. The US could only be largely self reliant with the remainder coming from neighboring Canada.

This leads to the myth about the US' over-reliance on Middle Eastern oil. Canada is in fact the US' largest supplier of oil, at 29 percent, while the US' overall oil imports from 2005 to 2011 fell from 60.3 percent of consumption to 47 percent. From the Persian Gulf, imports have dropped from 26.7 percent to 18 percent of total imports, according to Energy Information Administration figures, the lowest it has been in decades. Out of the top 15 countries the US imports crude oil from, Middle Eastern countries account for a third: Saudi Arabia, Iraq, Kuwait, Algeria and Oman.

The US has paid a high price for ensuring oil keeps flowing from the Persian Gulf, with the Strait of Hormuz the conduit for over 20 percent of the world's oil and 40 percent of traded oil. To project military force in the Gulf, the US has spent an estimated $6.8 trillion between 1976 and 2007, according to research by Princeton's Energy Policy department, averaging $492 billion annually between 2003 and 2008. With 6.2 billion barrels of oil transported through the Strait every year, this means Washington is spending $79 a barrel to make sure that the US and everyone else can fill their cars with Gulf oil.

Washington has also spent an estimated $3 trillion on the invasion and occupation of Iraq, which we were told was "not about oil," but tapping Iraq's colossal energy reserves was of course a factor - Iraq is now the US' seventh largest importer.

In essence, the US is acting as the "world's policeman" to make sure that the global economic system keeps operating. The question is if the US is going to give up that role in the Middle East and, if so, who would step in to fill the vacuum? With Asia more reliant on Gulf oil, would India and China do so?

Even if Asia's two major powers could, the US is not likely to give up its current hegemonic role. More is at stake than the Middle East's oil and gas.

Military contracts for one, with Gulf states last year purchasing $66.3 billion of military hardware from the US, and Qatar this month ordering $6.5 billion worth of missile-defense systems. That is just the tip of the financial-military industrial complex iceberg.

Strategically, such arms deals are related to the perceived threat of Iran getting nuclear weapons and to contain Tehran, a common goal of the Gulf states, Israel and its main backer the US. On top of this the Gulf states and the US are trying to steer the outcomes of the Arab uprisings, from Libya to Egypt and Syria.

Ultimately, even if the US could be independent of Middle Eastern oil, it is unlikely to change its foreign policy which has been expansionary for over a century.

And a decade is certainly too short a time for any major shift in policy to occur when the US is operating according to long-term global spectrum dominance.

Foreword to the Arabic translation of Howard Zinn's "Artists in Times of War"

Foreword to Howard Zinn's "Artists in Times of War", translated into Arabic as "Stories Hollywood Never Tells" by Hamad Alisa

Published by Al Maaref Forum, Beirut, Lebanon, 2012

By Paul Cochrane

You hold in your hands something powerful: the texts of speeches and essays by the late Howard Zinn that could very well alter the way you see and interact with the world. That is a bold statement, but it is no hyperbole. Zinn had that power as a writer, political activist and historian to make people question power, society, politics and entertainment.

One of Zinn's abilities was explaining an idea or a period of history in engaging, straightforward prose. On first read the thrust of his statements are clear, allowing further re-readings to be the fodder for deeper reflection on his concepts. That was one factor contributing to the success of his most renowned work, “A People's History of the United States” (1980). But writing style is a means to deliver content, the story, and Zinn did this by rendering the past, as the title implies, from the people's perspective, which is not that of the elite, that line up of history's usual suspects: kings, emirs, presidents, generals, ladies and gentlemen.

History is more than dates and names of big men – behind those figures, slightly blurred out of focus in the lens finder of the cameraman, are the unheralded people: the masses, you and me. Among us are those that support and work to forward the aims, wittingly or unwittingly, of the current political-economic set up; others are ambivalent about power and those who wield it; there are those who complain of the ills of the status quo and others who want to tear down the system by any means necessary – everyone plays their microscopic part that contributes to the macro level of human history.

Zinn uses this approach to engage the reader, to show that the past is indeed interesting, as interesting as the present, and that there is a crucial need to understand history to help us understand the world we live in. This can come through discussions with “ordinary” people who have lived the history being discussed – the eyes of my 97 year old grandmother have seen the world transformed since her birth in 1915, and instilled in her are the stories of her own grandmother, which means going back well over 150 years. The past really is not that distant. But for numerous reasons, history is not taught like this in most schools. What is taught is selective, and to fill in the gaping moments in between, one must apply one's own initiative.

Which returns us to this collection of works and interviews in the twilight of Zinn's life – he passed away in 2010. The first two speeches were written in response to the September 11, 2001 attacks – Zinn wanted people to question government motivations and uses history as an example, highlighting individuals that resisted and spoke truth to power.

Zinn considers this a primary role of the artist, of creators, especially in a time of conflict. This is where the importance of “edutainment” comes in, educational entertainment, which Zinn superbly addresses in the third speech, “Stories Hollywood Never Tells”. It makes one think comparatively of all the stories that could be told of the Arab world's long and vibrant history that are not being told in musalsals (soap operas) and Middle Eastern films. Indeed, this pamphlet, while focused on the United States, can be a spring board for ideas.

The events of the Arab uprisings (and the counter-revolutions that followed), where the people rose up to challenge and overthrow power, are a testament to the role of the people in history. From this pamphlet (in which pamphleteering is the subject of an essay in this collection) the reader recognizes the struggles that took place in American history, short though it is by global standards, involving the Industrial Workers of the World, Emma Goldman, and others. After all, American history, like the rest of the world's modern history, is one of struggles by, and for, the people.

Hamad Alisa has done a great service to humanity in translating such a succinct pamphlet that is crammed with possibilities and lessons to be learned from history. How the pamphlet “Artists in Times of War” was passed from hand to hand to finally be received by Hamad also speaks to its authenticity as a document of the people, as I was first given it by a friend, Karim, as a photocopy, and I in turn copied it for Hamad when he was visiting Beirut. When Hamad decided to translate the pamphlet into Arabic, he beefed it up by adding a 2009 essay by Zinn on President Barack Obama that was published inThe Progressive magazine, and two interviews with Zinn, of which one is a debate with Thom Yorke, an artist and the lead singer of British band Radiohead, on the artist's role in saving the world.

“Artists in Times of War” could not come at a better time in translation, given what is happening regionally and globally. What is going on is not a straight-forward affair and cannot be viewed in the black and white of mainstream media portrayals. The boundaries must be pushed for there to be progressive change. And artists are at the forefront of this.

Occurrences like what happened in March, 2012 in Kuwait City when an exhibition by Kuwaiti artist Shurooq Amin called “It's A Man's World” was shut down by the state censors must be challenged, if not just to embarrass those in power. A crucial point is that power wants to be taken seriously – by laughing at and ridiculing the authorities we undermine their power simply because we do not take them seriously.

An event last year (2011) neatly exemplifies this, when the Sharjah Foundation in the United Arab Emirates dropped a film it had commissioned by Iranian-American film maker Caveh Zahedi, which was on, of all topics, “art as a subversive act.” The film was banned because Zahedi poked fun at the ruler of Sharjah. As Zehadi remarked: “In a place where there is no freedom of speech, you cannot say there is no freedom of speech.”

Let us not be in any doubt. Artists, writers, teachers and the wider populous have a duty to stand up and speak out in the Middle East, as anywhere else on the planet. As Zinn writes of the need for people to participate, whether against war or in political policy in general: “The historian says, 'It's not my business.' The lawyer says, 'It's not my business.' And the artist says, 'It's not my business.' Then whose business is it? Does that mean you are going to leave the business of the most important issues in the world to the people who run the country? How stupid can we be?”

We are living in extraordinary times, and it is not a time to be consumed by the spectacle flickering on TV screens but by what is real, and to actively be involved in progressive change. This can only happen when the public opposes and challenges those in power, and does so with those most dangerous of weapons: knowledge and ideas.

An anecdote from the Hungarian uprising against the Soviet Union in 1956 is worth relating: A dissident is taken in for questioning by the secret police. He is asked if he is armed. The dissident replies “yes”, and reaches slowly into his jacket pocket. He pulls out a pen and puts it on the table.

Today a dissident may well pull out a smart phone or a laptop rather than a pen, but the saying the “pen is mightier than the sword” still holds true. Power can be challenged via a computer keyboard, a camera, the artist's brush, the graffiti artist's spray-can or the musician's microphone.

I will end this foreword with the poem “Questions from a Worker who Reads” (1935) by the German writer Berthold Brecht. This poem is also found in the introduction to a book inspired by Zinn's history of America, which became a book on Zinn's own book shelf: Chris Harman's “A People's History of the World” (1999).

Who built Thebes of the seven gates?

In the books you will find the name of kings.

Did the kings haul up the lumps of rock?

And Babylon, many times demolished

Who raised it up so many times? In what houses

Of gold-glitering Lima did the builders live?

Where, the evening that the Wall of China was finished

Did the masons go? Great Rome

Is full of triumphal arches. Who erected them? Over whom

Did the Caesars triumph? Had Byzantium, much praised in song

Only palaces for its inhabitants? Even in fabled Atlantis

The night the ocean engulfed it

The drowning still bawled for their slaves.

The young Alexander conquered India.

Was he alone?

Caesar beat the Gauls.

Did he not have even a cook with him?

Philip of Spain wept when his armada

Went down. Was he the only one to weep?

Frederick the Second won the Seven Years War. Who

Else won it?

Every page a victory.

Who cooked the feast for the victors?

Every ten years a great man.

Who paid the bill?

So many reports.

So many questions.

Note: The Arabic translation of the foreword was an abbreviated version of the above.

Oil and gas-rich MENA countries look to nuclear and renewables

 Abu Dhabi aims to have 7% of its energy from renewables by 2020
 

What are the prospects for the development of nuclear power in countries of the Middle East and North Africa? And why has progress on renewable energy been relatively slow there, despite rapidly increasing energy needs? Paul Cochrane, in Beirut, and Mark Gao, in Istanbul, report.

First published in the July/August 2012 issue of Energy World from the Energy Institute, www.energyinst.org

Most states in the Middle East and North Africa region (MENA) have mulled developing nuclear power over the past decade, from Morocco to Egypt, and Jordan to Saudi Arabia, but only the United Arab Emirates (UAE) is coming close to embarking on the nuclear option thus far. Energy consultancies are often optimistic – arguing that the MENA region, including Saudi Arabia, the UAE, Jordan and Egypt will account for $300bn worth of nuclear new builds up to 2030.

That is based on plans for nuclear new builds in the region. But the real question of course, as is usually the case with nuclear energy, is which projects will see talk converted into split atoms? Also, with the region full of sun and sea, plus empty desert where wind turbines would disturb few bar some wandering camels – what role could renewables play in this energy rich region in the future?

These are not hypothetical questions. While the region is famously rich with hydrocarbons – its oil and gas producers usually make more money by exporting than by selling cheap energy at home.

And with economic development proceeding apace, especially in the Gulf, the region really does need alternative energy sources. Nuclear is some way ahead of renewables in this regard, although this far there has been more talk than action.

Nuclear prospects for Egypt, Jordan, UAE, Saudi Arabia

Australia-based WorleyParsons in 2009 secured a $160mn, eight-year contract to advise the Egyptian Nuclear Power Plant Authority on building a reactor in Al- Dabaa, a Mediterranean site first selected in 1983 but shelved post-Chernobyl. With politics still far from stable in Egypt, progress on such a sensitive file as nuclear power is not likely in the short term. Meanwhile, the Jordan Atomic Energy Commission (JAEC) in 2010 announced it would build a single 1,000 MW reactor in Mafraq province, in the middle of the country. However, a final deal is awaited here too – although the smart money appears to be on a French-Japanese ATMEA1 unit, supplied with fuel by France’s AREVA, which has a uranium mining joint venture with the Jordanian Energy Resources. JAEC chairman Khaled Touqan has said that Jordan has no option but to investigate nuclear, given extreme energy shortages and political uncertainty in the region undermining faith in the reliability of international gas pipelines.

But here too, there are plenty of obstacles, even though Jordan remains relatively stable politically for now. An energy investment conference scheduled for November in Amman will help decide how these reactors are funded: $5bn estimates exclude a required revamp of the electricity grid. Site selection may prove the biggest headache. Residents of the site have protested, pointing to shortage of water. The local arm of the Muslim Brotherhood warned against Jordan building reactors ‘for selling others clean energy at cheap prices and on their terms.’

Kenneth McKellar, an energy and resources leader for the Middle East at consultants Deloitte in Saudi Arabia, sees potential problems with both countries’ plans: ‘Egypt has been talking about the initiative the longest and the Jordanian initiative has been bubbling along but there is still a way to go. I see regulatory issues further down the page, which I think is critical for any energy source in the region,’ he said.

His view is that the Gulf is where the non-fossil fuel energy action will be in the near future: ‘Which NPPs [nuclear power plants] stand a real chance of being built? It has to be those with significant amounts of capital available, and the priority is then the Gulf countries.’

The UAE is certainly the region’s leader here. It has a reactor deal which might actually go ahead. This was picked up by a consortium led by South Korea power plant supplier Kepco in 2009: it has been contracted to supply four reactors worth $20bn to the UAE national nuclear utility ENEC for four new units. ENEC says it will build 12 more units, and Kepco has said it will begin talks later this year on building four of these. ENEC said last month that it hoped to start building the first plant by December this year, assuming regulatory approval was secured by September. The UAE aims to generate 25%, or 5.6 GW, of its power needs from these first four nuclear power plants, which are scheduled for completion by 2020.

The other big potential Gulf market is Saudi Arabia, which wants to build 16 units, according to Saudi government sustainable development agency the King Abdullah City for Atomic and Renewable Energy (KA CARE). It aims to build a zero-emission city run on nuclear and renewable energy. A $250bn project includes 16 reactors. Furthermore, the Saudi Arabian government has said it wants the country’s first reactor brought online by 2020, with 60 reactors in total online by 2030. That would mean six reactors would be installed annually between 2020 and 2030. But the Saudis are far behind the UAE in working out the details – formal tenders are awaited by the end of the year on even reactor number one. A Saudi consultant said: ‘Finance won’t be a problem but the legal framework and the expertise are two shortcomings that require a lot more detail.’ 

The Middle East is increasingly developing renewable energy, such as at Masdar in Abu Dhabi.

Three Russian reactors for Turkey?

There could be slower but steadier progress away from the Gulf – in Turkey – which in 2006 announced a plan for three reactors producing 4,500 MW to be built between 2012 and 2015. The Ankara parliament in 2007 passed a bill legislating for construction and operation of the reactors as well as energy sale. The three locations are Akkuyu, on the Mediterranean coast; Sinop, on the Black Sea; and Igneada, near Bulgaria. The Akkuyu deal (four 1,200 MW VVER pressurised water reactor units) was won by Russia’s Rosatom which has been contracted to put the first reactor into service in 2018. According to Turkish energy minister Taner Yildiz the three separate plants will be operational by 2023, although talks with Kepco to build the Sinop plant have been inconclusive.

Turkey certainly needs to diversify its energy sources though. ‘An energy crisis is coming. Turkey will need more than 60 billion cubic metres (bcm) of natural gas in the next five to ten years. There are contracts for 52 bcm, and some liquefied natural gas (LNG) contracts, but there is a need to find new energy. Turkey gets 10 bcm of gas from Iran but if that stops, then Turkey is in a catastrophic situation,’ said Dr Tugce Varol, a scientific advisor at the 21st Century Turkish Institute in Ankara.

Meeting growing demand, protecting exports

Pushing all governments in the region to consider the nuclear option is the sheer growth in energy demand, driven by economic growth and in particular by demographics, which is only set to become more pressing over time, with an estimated 50% of the MENA region under the age of 30 years old. Indeed, energy demand has been so significant that the World Bank estimates that energy consumption between 1980 and 2009 grew faster in the MENA than another other region on earth, with energy intensity increasing 14% between 1990 and 2005, some 60% above the OECD average and 40% above the global average.

McKellar says the key issue is a shortage of other fuels to fuel conventional power plants – rather ironic given the huge domestic fossil production in the region (much of which is exported). ‘Gas is in quite short supply for domestic consumption, and heavy fuel oil or diesel is environmentally unsustainable and can be exported for a high price and refined for more marketable products,’ he noted. Big money is to be gained from exporting gas for power production elsewhere in the future, with ‘demand in particular for electricity generation ... to go through the roof.’ And, meanwhile, many Middle East and North African countries have yet to be converted to the benefits of renewables, despite plentiful sunshine: ‘So, the primary motivation for NPPs is simply there is no alternative for a rapidly growing population and high electricity demand.’

McKellar’s view is echoed by other analysts – economic necessity requires export sales by developing NPPs and venturing into renewables. ‘I think the reasons are for oil and gas exports. It is not a green argument but to protect revenues and the integrity of reserves as a long-term strategy,’ said Phil Dominy, a senior executive at consultants Ernst & Young. And yet energy demand continues to soar, especially in the six Gulf Cooperation Council (GCC) countries (Saudi Arabia, the UAE, Oman, Bahrain, Qatar and Kuwait), with domestic demand growing by an estimated 8.5% annually.

The issue is particularly problematic in Saudi Arabia, with domestic demand for its own oil and gas growing at an estimated 7% per year, double the rate of GDP growth, while a third of the kingdom’s population of 27mn are below the age of 14 years. Current electricity generation capacity has doubled in Saudi Arabia over the last decade to 50 GW, and demand doubles in the scorching summer months when air conditioning accounts for around 52% of total consumption.

Currently the kingdom consumes over one-quarter of its total oil output, some 2.8mn barrels per day (bpd), according to BP, and its total primary energy consumption is around 4mn bpd, similar to the UK, despite the UK having double Saudi Arabia’s population. All natural gas in Saudi Arabia is consumed domestically, accounting for 38% of power generation, with the remaining 62% from diesel, heavy fuel oil, crude oil and LPG.

At the trajectory of consumption based on the BP figures, according to a Chatham House report: Burning Oil to Keep Cool: The Hidden Energy Crisis in Saudi Arabia, published in December 2011, Saudi Arabia will become a net oil importer by 2038. As a result of such demand, the kingdom aims to have 7–10% of electricity from renewables by 2020, according to Saudi Aramco figures, and for 16 nuclear reactors by 2030 to provide 20% of demand.

Seth Grae, CEO of Lightbridge Corp, a US-based consultancy and technology developer, underlined the trend, noting that states in the region ‘don’t want to consume oil internally when there’s a feeling there’s a limited timeframe to be able to export these.’ Grae also points out that some countries in the region lack either oil or gas, while hydro is ‘not an option’ for most states in the region.

There’s also a regional wish, particularly in Saudi Arabia, to keep pace with nuclear development of Iran – with whom relations are frosty – and Israel.

Filling a self-inflicted energy gap

Given these pressures – it is worth asking what role renewables can play in helping the region bridge its own self-inflicted energy gap. At present, this role is not large. While many renewables initiatives have been announced over the past several years in GCC countries, the financial crisis has slowed their roll-out.

‘It boils down to a very uneven energy regime in many of the GCC states, and I am quite cautious about how quickly renewable energies will develop,’ said McKellar. Potential political instability has also drained renewable energy budgets, with the region’s generally undemocratic governments seeking to purchase support through increased social spending. This is particularly important for renewable energy, which is grant and capital intensive – and hence commanding juicy budgets that have been transferred to areas such health, education and defence because of the Arab spring.

Leading United Arab Emirate Abu Dhabi is one hopeful for green energy – it aims to have 7% of its energy from renewables by 2020, with developments currently underway two 100 MW solar power plants and a 28 MW wind plant.

Meanwhile, neighbouring emirate Dubai plans to generate 1 GW of solar power by 2030. But even in property rich Dubai, this is not a sure bet. So, with renewables not able to provide enough energy, and nuclear reactors taking years to build once legislation is passed and tenders agreed, more conventional fossil fuel-based power will be needed.

In the GCC zone, an estimated $45bn is to be invested until 2015 to boost capacity by 32 GW, and some $252bn is to be spent over the next decade on new power plants and upgrades of all kinds, according to research by the Kuwait Financial Centre and Ventures Middle East respectively. Some 361 power projects – with an average size of 500–600 MW – are under construction or upgrades in the GCC area, with 161 in Saudi Arabia and 70 in the UAE, according to regional business intelligence service MEED. However, an estimated 14% have been put on ice or cancelled due to the financial crisis.

Presenting a further obstacle to any energy solution is the lack of cooperation between states, creating a kind of European energy market that would enable the sale of power across borders. That has yet to occur and is impeding project finance and development, said McKellar. And, with the Arab Spring making the unreformed traditional monarchies of the Gulf nervous, this kind of liberalisation is highly unlikely – governments need to make sure there is no surge in electricity prices. ‘We have seen that around the GCC when oil companies have been forced to provide long-term energy contract prices to energy companies overnight on what is basically a spot price, so they end up losing money,’ noted McKellar. This does not foster confidence amongst energy investors. In the short term, whatever the energy source, the likely winners in MENA energy diversification drive will be consultants – private advisers such as WorleyParsons and Lightbridge who can for instance help navigate the labyrinth of International Atomic Energy Agency (IAEA) rules and regulations. Lightbridge, for instance, has bagged a consulting contract with the GCC ‘to assess regional cooperation in the development of civilian nuclear power programmes.’

Lightbridge has partnered with US utility Exelon, consultants Rizzo & Associates as well as international law firm Winston & Strawn to evaluate GCC members’ approaches on legal issues and liability as well as nuclear regulation, site assessment and training. Lightbridge, whose associates include former Westinghouse Energy Systems CEO Charles Pryor, also advises on human resource capacity building and fuel cycle and nuclear waste management.

And there is a long way to go in terms of creating the necessary reserves of local expertise and supply chains. Noticeably, Turkey is addressing the skills issue by sending 600 students to the Russian National Nuclear Research University in Moscow: the students will, after graduation, staff the Akkuyu NGS Power Production Corp. Meanwhile, Abu Dhabi Polytechnic has started a new atomic energy training programme. And Saudi Arabia has signed agreements with China, France, Argentina and South Korea on nuclear cooperation, which include the transfer of knowledge and know-how.

Photos by Paul Cochrane

Above it all: Venturing into Ladakh

Selections magazine

Ladakh was cut off from the world until 1974, when the Indian government opened up its northern most region to tourism. It took time for outsiders to venture into the “land of high passes” or “Little Tibet” as it is also known, bordering as it does Western China-Tibet and surrounded by the mighty Himalayan mountains. 

 

Today, while the capital Leh is geared towards tourism with plenty of hotels, guesthouses and restaurants, and the markets crammed with Tibetan, Buddhist and Ladakhi trinkets, it is still relatively off the beaten track. This has been a blessing, curbing the region from becoming overly touristic, unlike other Indian mountain retreats like Darjeeling, Dharamsala-Mcleod Ganj, and Shimla, and is due to what has kept the region so isolated for so long: its geography. 

 

Leh is at 3,500 meters, and is an oasis amid a high altitude desert and mountains towering over 6,000 meters that are evident everywhere you go in the capital. With temperatures in the low degrees at night even in the summer, Leh is off-limits during the freezing winter months and only accessible for four months or so of the year, certainly by plane, between June and late September. The only other ways to get in and out are gruelling overland journeys, whether from Srinagar in Kashmir to the South-West, a 20 hour journey to cover just 450 kilometers, or a similarly long bum-breaking ride that traverses 5,000 meter high passes to Manali in the south. 

Such altitude requires a few days of acclimatization. Even clambering up 300 meters of stairs to visit the Shanti Stupa – a Buddhist shrine – on the outskirts of Leh requires a few breaks due to shortness of breath and the heart beating like piston as you reach 3,800 meters. There's a similar sensation when you walk up to the 17^th century Leh Palace that dominates the skyline of the city, with its nine floors built into the rockface and the architecture a smaller replica of the original seat of the Dalai Lama, the Potala Palace in Lhasa, Tibet. The lungs get a further workout when you climb up from the palace to an old castle garlanded in colorful Tibetan prayer flags blowing in the wind. 

 

However, a few days at over 3,000 meters in Leh and day trips to surrounding Tibetan Buddhist monasteries such as Thikse is only minimal preparation for a jeep trip to Pangong Lake, some 160 kilometers away. The route goes over Changa-La, the second highest motorable pass in the world at 5,360 meters (17,586 feet). With that height about half of what commercial airliners fly at, it is no wonder visitors are not recommended to spend more than 20 minutes at the pass. 

En route, the road passes through streams heavy with snow melt, past grazing dzo, a hybrid of the big hairy yak and the cow, until reaching Pangong, one of the world's highest brakish lakes at 4,300 meters. Shimmering with seven shades of blue, magical may be an overly used cliche, but such a sight at the rooftop of the world is no understatement, or to describe the wonders of this formerly inaccessible mountainous region.

Text and photographs by Paul Cochrane

Tweeted into shame

Social media holds MEA to account for racist behavior

Commentary - Executive magazine

 

Social media’s role in bringing about progressive change is a hot topic in the Middle East as much as, if not more than, elsewhere given the ongoing debate about its use in the Arab uprisings. On a collective level it is hard to gauge due to the multitude of factors that contribute to people taking to the streets —  mass demonstrations can and of course have happened without any social media — but when it comes to smaller, localized events social media’s power is clear. The online exposure last month of a Middle East Airlines (MEA) employee’s racist remarks toward Asian passengers is a clear case, and one that other companies should take heed of if they don’t want their name or brand dragged through the mud. 

In early October, passengers were waiting in Rafiq Hariri International Airport at a departure gate for a flight to Dubai, including a group of Nepalese women, when a MEA employee got on the public announcement system and said, “Filipino people, stop talking.” The woman told the “Filipinos” to stop talking twice more, giggling as she did so and goaded on by a male colleague. 

The incident outraged fellow passenger Abed Shaheen, who tried unsuccessfully to make a complaint. In the past Shaheen might have told just family, friends and colleagues about the incident, and his complaints would have had minimal if any effect. In our new world of social media, Shaheen wrote about the experience on Facebook and Twitter. The story was quickly shared and within three days 1,600 people had signed a petition on change.org, calling for “MEA to apologize publicly for their staff’s behavior.” 

The media promptly picked up the story as well, initially in Lebanon and then abroad. Under fire, MEA eventually came out to say they had launched an investigation, and the employee was first “disciplined,” then reportedly fired.

While justice has arguably been done, and a strong message sent to MEA staff to think before they speak, MEA’s reputation has been negatively impacted. A scroll through the 200 plus comments following the airline’s apology on its Facebook page shows a great deal of animosity toward MEA: “service sucks,”  “airline crew impolite” and, more worryingly for the carrier in these difficult financial times, is the number of people that wrote they would “vote with their feet” by no longer flying with MEA. Judging from the comments, many Lebanese opt for MEA out of solidarity with the nation’s carrier, despite its invariably higher ticket price. But patriotism only goes so far, and this incident will no doubt lose the airline old as well as potentially new passengers. 

MEA, and subsidiary MEAG that runs the airport, say they have gone beyond “damage control” mode and made effective changes that can be immediately seen; this includes mandating that staff be trained to treat everyone equally and respectfully, as paying customers. Numerous times on flights to the Gulf and East Africa, acquaintances and I have seen African and Asian passengers seated together at the back of the plane away from passengers despite numerous seats being available. This happens too often to be coincidence and the check-in staff, by designating seats in this way, creates segregation. Such a policy is racist, and even more insulting when it occurs on the national airline of the segregated passengers, such as Ethiopian Airlines. This has to change.

Then there is the small boxy room that domestic workers are forced to wait in upon arrival at Beirut airport until their new employers come to collect them, rather than being met like everybody else in the arrivals lounge. It is reminiscent of a prison with inmates awaiting bail. For many of these women, it is the first time out of their country; they are unsure, scared perhaps about what’s next, and they should be treated in a more dignified manner. Both MEA and the airport are, after all, people’s first impressions of the country, no matter where a passenger is from, and customer service should reflect that. 

Ultimately, MEA has now put itself under the spotlight of social media, and activists will be on the lookout for further misdemeanors. It is a useful lesson for MEA to change its policies and better manage employee behavior, as well as for other companies to realize the power of social media to hold them to account.

Lebanon: Big sales for small cars

Executive magazine

 

If you go by the headlines in financial reports, the car market is doing surprisingly well given the staid economic climate;  growth of 7.6 percent was registered in the first eight months of the year, relative to 2011, and up 2.1 percent on the same period in 2010. But delve further into the Automobile Importers Association (AIA) monthly reports and all is not well, certainly for most dealerships, with just three brands accounting for 61.37 percent of sales this year.

“The market is very bad. People feel all is well as volumes are up but turnover is much lower than last year,” said Samir Homsi, president of the AIA. “Only baby cars are selling, in the $10,000 to $12,000 range. The situation is very lousy and profit margins are down.”

Brands which have had strong sales this year all have compact models in the A, B and C categories, which have steadily grown in recent years, with low horsepower vehicles currently accounting for an estimated 80 to 90 percent of sales. For Rymco, dealer of Nissan, the A category (think of the Micra) has gone from 18 percent of sales in 2010 to 21 percent this year, and the B category (the Sunny) from 15 percent to 20 percent, while other categories have contracted by 10 percent.

“We are seeing a trend where nearly every household has a small car now; it is a must,” said Farid Homsi, general manager of IMPEX, distributor for GM, Chevrolet, Cadillac, Hummer and Isuzu. “The Chevrolet Spark is by far our number one seller, by a big, big margin.”

Kia, Hyundai and Nissan are the top three sellers, with the next leading four brands — Toyota, Chevrolet, Renault and Volkswagen — accounting for 15.21 percent [see page 64]. Out of some 70 car brands available in the market, these seven account for 76.58 percent of sales.

“It is amazing if you look at the sales results that three brands control around 60 percent of the market and all the others share the rest. There is something wrong. Consumers are being followers rather than choice makers,” said Nabil Bazerji, managing director of G.A Bazerji and Sons, distributor of Suzuki, Lancia and Maserati.

The shift toward smaller vehicles is driven primarily by rising fuel costs, the lack of public transport and financial constraints. “People don’t have the budget anymore, fighting to get $4,000 for a down payment, and some distributors are even selling without a down payment,” said Samir Homsi. “People are only buying because there is a need, not to put a key holder on the table to say I own X or Y. It is for commuting, so they want a small, economical car.”

With dealerships offering warranties and free servicing deals for up to five years, and banks aggressively financing loans, this has helped drive the surge in sales of lower-end models. For market leader Kia for instance, 60 percent of sales are through financing. 

On the positive side, demand for more fuel efficient vehicles has resulted in a drop in sales of used cars — in addition to individuals banned from importing second-hand cars — which plunged 28.89 percent last year on 2010, and year-to-date down 17 percent on 2011, from 25,281 cars to 21,424 in 2012.

Asian invasion

The biggest gainers from the shift to smaller cars and new vehicles, over buying that long popular second-hand choice of a Mercedes or BMW, are the Korean brands, which have a staggering 44.81 percent of the market — Kia with 26.88 percent and Hyundai with 17.92 percent. Cheap Chinese brands have also made gains this year, up 85 percent, albeit only selling 308 cars and accounting for just 1.18 percent of the market, indicative of how price sensitive consumers are. 

Kia has been number one for three consecutive years since knocking Nissan from the top spot, and sales are up 13 percent this year. “Lebanon is the only country in the world where Kia is number one, everywhere else it’s Hyundai,” said Dayala Dagher Hayeck, general manager of NATCO, distributor of Kia. “We’ll be number one again next year and in the coming years. The challenge is to remain there. As long as there’s no public transport it’s good for sales.” 

Korean cars have been popular in the Lebanese market before, when in 1995 five brands were available (including the now defunct Daewoo, which was absorbed by Hyundai) with 43 percent of the market share. The share steadily dropped to 18 percent in 1999, to 7 percent in 2003, and then started to steadily rise from 2008 with a 19.3 percent share until the current new peak. The rise in Korean sales correlates to an exchange rate change in the Japanese yen to the dollar, from over 100 yen to the dollar for a decade until late 2008, when the yen’s value rose. As of the end of October, the exchange rate was around 80 yen to the dollar, and sales of Japanese cars were down 1.8 percent on last year.

Bazerji argues that the exchange rate has made Japanese cars uncompetitive versus Korean brands, as Japanese vehicles would be on par price-wise if not actually cheaper. “Japanese cars are cheaper than Korean cars. If you take for example a Toyota Rav 4, Honda CRV or Suzuki Grand Vitara versus the Kia Sportage, with the exchange rate at 78 yen it is $34,000, whereas at 110 yen it is $24,400,” said Bazerji. “Koreans are taking advantage of the yen’s appreciation to sell cars for more than they should be, but the consumer is not looking at this; they should bargain for Korean products and not accept the prices.”

If the yen managed to trade at over 100 to the dollar again — and there is a lot of pressure on Tokyo to do so to bolster exports — Japanese brands might regain some of the ground lost to the Koreans. “From my experience automotive sales are cyclical. Nobody stays at the top,” said Bazerji. “Till 2009 the Japanese were market leaders then they lost ground. But if the yen improves they [the Koreans] will be killed in the market as they were unable to sell in 2008 when the yen was at 110.”

Manufacturers, however, are not banking on a weaker yen. “It would be fantastic as it is a head wound at 79 yen to the dollar, but you can’t run a company on hope,” said Trevor Mann, senior vice president of Nissan, at the launch of the new Altima in Beirut. 

What may impact on Korean brands’ competitive pricing is the recent decision by Hyundai and Kia to scrap overnight shifts at manufacturing facilities, replacing two 10-hour shifts with an eight to nine hour workday, while wages have also been increased.

But it is not just pricing that has made Korean brands cars of choice in the Lebanese market. The improvements in Korean car quality, design and re-salability over the past decade have made it harder for Japanese, as well as European and American brands, to tout their advantages of heritage, safety, reliability and so on. In global brand recognition for instance, Koreans are on the up. Interbrand’s survey of brand values for 2012 showed Hyundai and Kia’s respective brand worth improve 24.4 percent and 50 percent, respectively, with Kia in the survey’s top 100 for the first time, ranked 87th. Among automotive brands, Toyota remained on top (ranked number 10 among all brands), followed by Mercedes in 11th place, BMW (12), Honda (21), Volkswagen (39), Ford (45), Hyundai (53), Audi (55), Porsche (72), Nissan (73), and Ferrari (99).

The Koreans are equally upping their game, bringing out hybrids, and Kia is soon launching a new sedan, the Quoris. “In 2013 we’ll launch a new model that’ll compete with BMW and Mercedes, a high class luxury sedan to attract a new category. This will be a big challenge to make people buy Kia at a high price,” said Dagher Hayeck. 

Middling along

The bulk of automotive sales, some 65 percent, used to be in the $22,000 to $90,000 price bracket, but with an increasingly financially squeezed middle class, brands selling in that range are having to go the extra mile to generate sales. Extended warranties and competitive pricing are major tactics, with a shift over the past year toward advertising the cost, which used to be primarily in the lower price segment. “You used to advertise to emphasize the brand image. Now it is what GM calls ‘bretail’ — a focus on retail with some branding,” said Farid Homsi.

Price wars between dealers are also generating sales, enabling certain luxury European and American brands to have had a relatively good year. As of the end of September, BMW has sold 524 units compared to 396 in the same period last year, while for Audi it was 422 compared to 462 last year, and Mercedes 514 compared to 616 units.

“Everyone says business is bad but when I see the figures it is not too bad, and there’s been growth. It is a bit weird,” said Cesar Aoun, general manager at Gargour & Fils, dealership of Mercedes, Smart, Jeep, Chrysler and Dodge. “In general, consumers are getting good deals due to price wars  between dealers.”

Gargour arranged with Mercedes-Benz to only buy cars in dollars to avoid price fluctuations in the euro and remain competitive, as the brand can oly offer incentives by way of free optional extras; price discounts are only allowed for year-end specials. Instead, Gargour is planning to introduce securitization to self-finance sales, working on improved customer service and building a new showroom in Dora. 

Volvo is also banking on financing to bolster sales. “We want to double sales in the next few years through financing, to 200 to 300 cars a year,” said Marwan Naffi, general manager of Gabriel Abou Adal and Partners, distributor of Volvo. 

Building new showrooms is a recent strategy among dealers. Volvo plans to build a flagship showroom in Ashrafieh, while Mazda and Nissan look to new showrooms on the coastal road north of Beirut. Impex plans to build a new one in Beirut, and dealerships are going more regional in outlets rather than being focused on the capital. 

While such a move is considered necessary to bolster sales and retain customers in the lucrative after-sales market, some dealerships are not happy about it due to the current tight margins, as the new spaces are being forced on them by regional headquarters in the Gulf. 

“We wouldn’t have invested now due to the situation, but regional management is based in Dubai where it is stable and there is the mood for branding. If the region were broken down, to Syria, Lebanon and Jordan, they wouldn’t have asked for expansion but we’re included in their Middle East plans,” said one dealer.

Optional extras

With the market extremely competitive, as it is around the world with car sales projected to grow by just 5 percent this year, from 75.69 million cars in 2011 to 79.70 million, it is optional extras and new technologies that are setting brands apart in the higher end categories. Volvo is to introduce its Polestar technology — similar to Mercedes’ AMG — which is a chip that boosts engine power by up to a fifth, and next year will launch the V40, which will have a pedestrian airbag, a global first as part of its 2020 strategy to have no mortalities connected with a Volvo, whether inside or outside the vehicle. 

Meanwhile Cadillac is to launch a new compact luxury model, the ATS, to tap into the trend for smaller vehicles, and in other models introducing its CUE technology, a combination of intuitive control, like smart phones and tablets within the car, with the US brand having patented the technology for two years. 

Such extras are expected to bolster sales in what has been a poor year for sales of luxury and premium vehicles. No Ferraris, Lamorghinis, Rolls Royce or Maybach have been sold so far, and just two Aston Martins and eight Bentleys, whereas by the same time last year 10 Aston Martins, nine Bentleys, and one Lamborghini were sold. Maserati, however, is up by two units on last year to 17.

As we move into the last two months of the year, dealers are hoping that the government does not decide to reintroduce diesel for passenger cars [see page 68] or increase value added tax from the current 10 percent. “It would be stupid to raise VAT as it would kill the market completely, which is already going through a very severe crisis,” said Samir Homsi.