Whisky: A popular cheer in down times

Consumers in Lebanon shift away from the brash high-end

Executive magazine

Amid the current economic recession, there has been a general downward shift from luxury spirits to medium-priced bottles, while most distributors have put the launch of new brands on hold. With competition getting tougher, brands are working on revamping their image to appeal to the high-end drinker, while distributors are still paying eye-watering sums to get exclusive rights at the capital’s premier nightspots.

“The market always strives to go upwards, but it has been a difficult year globally and in the Middle East, and it is maybe not the right time to introduce new brands,” said Wadih Riachi, cellar manager at Vintage in downtown Beirut. “Yet the drinks sector has not reached a critical mass in Lebanon, by far, in terms of new products, spirits and packaging.”

The spirits segment has developed over the past few years, evident in the rise in premium vodkas, gins, brandies, rums and tequilas on offer. Vodka sales grew by up to 4 percent over the past year, above the 120,000 cases benchmark, but Lebanon is still very much a whisky market, with more than 450,000 cases imported every year.

It is in whiskies that there has been a maturing of the segment, with tipplers increasingly opting for single malts instead of reaching for the ubiquitous Johnny Walker Black Label. “Knowledge about single malts really started last year; we’re on the right track,” said Paul Atallah, wine and bar manager at Le Gray Hotel. “I think single malts will boom, and it is a great match with cigars,” he added.

Currently, imported fine and single malt whiskies average more than 8,000 cases per year, far more than cognac, at around 1,000 cases. Of those 8,000 cases, an estimated 70 percent are the 12 and 15-year-old single malts.

To differentiate the malts from the mass whisky market, companies are working on packaging. For instance, Glenfiddich, the biggest selling single malt label in the world, realized that the packaging for its 21 and 30-year-old malts being the same as the significantly cheaper 12 and 15-year-old malts was detrimental to sales.

To make these older and super premium malts stand out, Glenfiddich got rid of the cardboard tubes in favor of wooden boxes, first for the 30-year malt and later this year for the 21-year. There has been a corresponding 15 to 20 percent rise in the price, but the brand is banking on the improved aesthetic appeal.

The bottle has also changed, along with specific numbering on the labels, which has an appeal to collectors. “Some people want special numbers, such as one customer asking for the ‘600’, for example,” said Vintage’s Riachi.

Glenfiddich’s re-packaging seems to have worked. Vintage typically sold one to two bottles of the 30-year malt a month, but after the makeover they sold two cases in three days. “They got it right,” said Riachi.

Outlets are also emphasizing the range of whiskies a distillery offers. “People like collecting whisky in the same way as wine; instead of a 2001 or 2003 vintage it is a 12, 15, 17, 21 or 30-year-old malt. You drink less but better. And that is the magic of spirits; wine is drunk immediately [after opening], but spirits keep for ages,” added Riachi.

Rising from the snow

Rare malts and varieties from specific years are also proving attractive.

“Scarcity is the best salesman of wine or spirits,” said Riachi. The Camus 1971 Armagnac, for instance, is likely to sell well this year as a lot of people will be turning 40. And in terms of a unique drinking experience, one of the most sought after this year by whisky connoisseurs is Glenfiddich’s Snow Phoenix.

The Snow Phoenix is a one-off combination of single malts that came about following heavy snowfall at Glenfiddich’s distillery in the Scottish Highlands in January 2010 that caused some warehouse roofs to collapse. With casks exposed to sub-zero conditions, the master distiller decided to bring together the whiskies from ex-bourbon and Oloroso casks that had aged for 13 to 30 years into a non-aged single malt. It is now being hailed as a cult malt; some websites selling the Snow Phoenix have already sold out, while in Lebanon only 250 bottles are to be available for sale and half have already been pre-ordered ahead of the July launch.

The region’s window display

With the summer season not expected to be as dynamic as in years past due to a dearth of tourists, and Ramadan falling in August, drinks sales are expected to be down. But Lebanon still remains a top venue for marketing spirits, from the low to the premium level.

“Lebanon has become a Club Med destination, with two seasons, and the rest of the year having to survive on the Lebanese,” said Carlo Vincenti of Vincenti & Sons, distributor of St. James, Label 5, Glen Moray and Pitu Cachaca. “Lebanon is a window display for the whole region, as a big percentage of the profits from spirits sales in the United Arab Emirates and Saudi Arabia is spent on marketing in Lebanon.” Surprising though it may seem, Saudi Arabia is unofficially the fifth largest whisky market in the world.

Marketing is evident at Beirut’s infamous Sky Bar, where distributors have been spending ever-increasing sums over the past three years to target trendsetters. This year, according to distributors, some $630,000 was spent by Diageo for exclusive rights to sell its brands and by distributor Etablissements Antoine Massoud to plug its Russian Standard vodka at the rooftop bar.

“It is ridiculous, but more outlets are asking for money in advance to exclusively sell alcohol brands, despite the downturn,” said Nagi Hmouda, business manager at Fattal, distributor of Dewar’s, Grey Goose and Patron. “We are skeptical about the season as a lot of losses will be incurred.”

Fattal will not be introducing any new brands this year. Vincenti has launched the premium cognac Bisquit, but is focusing on faster moving spirits such as cachaca — the fastest growing spirits category in the world — rum and vodka.

Yet Vincenti also expects the upward swing in vodka to tail off. “Vodka was a discovery drink and many new brands were introduced to the market, but I think people will shift back to something less neutral in terms of taste, to whisky, rum and tequila, which are taking off.”

With sales down in on-trade — at bars, restaurants and hotels — the less glamorous supermarket has become an important point of sale. Indeed, supermarkets are now charging higher listing fees and investments to display brands.

“High-end brands are on supermarket shelves, but in terms of shelf off-take it is very weak,” said Vincenti. “Such brands shouldn’t be there as the consumers are not the type of people that go to supermarkets. There is a question mark on prestige if a bottle is on a supermarket shelf for months.” The supermarket as a high-end spirit venue may constrain the launching of new products and curb rise in consumption of single malts.

“Demand for single malts has risen over the last two years but I’m not sure it can go on. If on-trade doesn’t evolve, launching luxury spirits will not succeed. You can’t launch a 16-year old whisky in a supermarket, and you can’t sell more than one case per month,” said Vincenti. “But the downturn is not necessarily a bad thing. Lebanon was living in an imaginary world, as you never saw anyone in Europe paying $400 for a bottle in a club. It wasn’t healthy.”

Lebanon: Excessive taxes put the brakes on super-car sales

Executive magazine

There are around 200 super cars in Lebanon tucked away in garages, strategically parked by valets outside high-end night spots and, on occasion, swerving around suspension-wrecking potholes on Lebanon’s mountain roads. In the summer months, a further 100 Lamborghinis, Ferraris and Maseratis with Gulf license plates are to be seen zipping around town, the cars having been sent ahead by container ship for their holidaying owners.

Luxury cars are a tiny niche market and are likely to remain so due to the high level of cumulative taxation levied on imports, value-added tax (VAT) and registration, starting at 60 percent of the car’s value, and at its highest exceeding 70 percent. Given such costs, it is little surprise that owners of such vehicles are part of a very exclusive club. But that does not mean there is no demand.

“We would double or triple sales of luxury cars if taxes were reduced,” said Michel Trad, director of Saad and Trad, dealership for Lamborghini, Bentley, Jaguar and, as of this year, McLaren. Sales would also be made not just to Lebanese buyers, who are “99.9 percent of clients” in the luxury segment, added Trad.

Expatriate Lebanese and frequent visitors with cash to burn would undoubtedly boost sales, allowing dealerships such as Saad and Trad to shift more than the one Lamborghini sold over the past year, or the 17 Bentleys, nine Aston Martins and 27 Maseratis purchased by wealthy Lebanese. Indeed, at the height of the economic boom in the United Arab Emirates, Lamborghini alone sold 60 models in 2008.

As Nabil Bazerji, dealer for Maserati, noted, “sales are always to the Lebanese, as luxury cars are highly taxed, so foreigners are not happy to pay that and they bring over their cars, especially the Gulfies as taxes are much lower there on high-end cars.”

The joys of mountain roads

The fact that British super car manufacturer McLaren selected Beirut as one of its regional hubs as part of its global expansion gives some indication of its potential as a luxury car market. “There are very few McLaren dealers as the network is not finished yet,” said Trad. Indeed, while Saad and Trad joined other dealerships in Jeddah, Riyadh and Doha in having joint Lamborghini-McLaren showrooms, the McLaren MP4-12C super car has yet to be launched in Beirut, with New York, London and Dubai up first before the car will grace the roads of Lebanon.

While there is a lot of competition in the luxury car segment to get the country’s few affluent car aficionados to splash out on a new set of wheels, it is Lebanon’s position as a window display of the latest trendy products that gives the nation a special significance for luxury car brands.

“A lot of people summer here so Beirut is important for visibility, and [since] people come from the GCC. We have double the business at our repair center in the summer as our after sales department is well equipped and we have the only aluminum body repair shop in Lebanon,” said Trad.

Further reflecting Lebanon’s marketing importance, in May the country was chosen by Bentley to host a Beirut Drive day for VIP guests to test drive the Flying Spur, Supersports and Mulsanne models on the roads to Beit Misk and Broumana in the hills above the capital.

“Why pay millions to hire a circuit when you can just do it on the roads?” said Trad of the event. “Circuits are boring, and the conditions of the roads here add to the driving experience. In Dubai you go straight and then stop. The configuration of mountain roads is much better. My customer is Lebanese, not a foreigner coming here that doesn’t know about the road conditions or how to drive in Lebanon.”

The Trofeo Cup

While Bentley opted for the everyday extreme driving of Lebanon’s roads to showcase its latest models, Italy’s Maserati has gone for extreme speed to show off the new GranTurismo. For the first time outside of Europe, the brand has organized the Maserati GranTurismo MC Trofeo race in the Middle East for what Bazerji calls “gentlemen drivers and rookies.”

Running from October until April 2012, the cup allows drivers that stump up to $135,000 to rent the racing version of the GranTurismo for the season to compete with up to 16 identical versions of the car in more than seven races, from the Formula One tracks in Abu Dhabi and Bahrain, to Qatar’s Lusail Circuit and the Dubai Autodome.

“The purpose is to initiate people into safer driving, the pleasure of a luxury car and the driving experience,” said Bazerji.

The new GranTurismo MC Stradalé was launched in May, “despite what’s happening in the neighboring countries and the economic and political crisis in Lebanon,” added Bazerji. “We hope to exceed a sales mix of 20 to 24 Maseratis this year. But if the government reconsiders taxation and reduces it, the luxury segment should grow considerably.”

Is that a no. 9?

Telling the Cubans from the copies
Executive magazine

Demand for cigars is so strong that the sector is inundated with counterfeits. An estimated two thirds of cigars smoked in Lebanon are “fake”, with a Honduran, Dominican or Nicaraguan stogie attempting to pass itself off as the crème de la crème of smokes, the Cuban cigar. It is not easy to notice the difference until one sparks up, as the counterfeiters are pros, switching the paper ring around the cigar for a Cuban brand and using real or counterfeit boxes.

The situation has become such a concern to the legitimate sector that leading distributor, La Casa del Habano, owned by Phoenicia Trading, spent $50,000 this year on a billboard and media awareness campaign to inform consumers about fake cigars, particularly the Cohiba brand.

“The Cohiba Behike is the most expensive and the most popular right now,” said Wael Zeidan, executive manager at Phoenicia Trading. “We classify consumers of fakes into two segments — one, a consumer that knows it is a fake Cuban but smokes it to show off and doesn’t care. The second is a beginner that is easily bluffed, so we focus on him.”

To ensure that fake Cubans are not being put in boxes as the container empties — a classic scam to bump the price of a $2 cigar up to, say, $30 — Phoenicia has undercover employees that go in to check for fakes at its 300 wholesale customers. They are also opening a new outlet to better distribute Cubans from its current five stores.

While Honduras and the Dominican Republic do produce high quality cigars, primarily for the American market due to the trade embargo with Cuba since 1962, such brands are more expensive in Lebanon than Cuban cigars. Hence the fake Cubans are lower quality and normally machine made. One to watch out for is the Cohiba Siglo no.9, as real Cohibas only go up to size six. “It’s so big, it’s crazy,” said Zeidan.

Cohiba is the number one brand around the world, and in Lebanon this is no exception. Top sellers are the Robusto size (50-54 ring gauge), which is ideal for a half hour to one-hour smoke. Cigarillos — the small, lean cigar just a centimeter longer than a cigarette — are also becoming more popular, with Phoenicia Trading bringing out its own brand, Phoenicio.

“Demand for cigarillos is starting to grow, and women are increasingly smoking cigarillos,” said Zeidan. As cigars have a somewhat “old man” reputation, every month Phoenicia holds a breakfast cigar event for women in Ashrafieh, and has introduced cigarettes into Casa del Habano “to get youngsters into the shop and to find out about cigars,” said Zeidan. Pushing sales further are the cigar lounges at some of the capital’s leading hotels. At Le Gray, cigar nights are coupled with tastings of single malt whiskeys. And awareness of cigars is rising, said Paul Atallah, wine and bar manager at Le Gray.

“Some 80 percent of people know what they’re smoking. The rest, it’s just to show off that they are cigar smokers while swallowing the smoke,” he said. “But the culture has changed, and we’re seeing more people go for [brands] Partagas and Hoyo instead of Cohiba; this shows a change in awareness.” Most of the hotel’s cigar aficionados are guests from out of town but it is increasingly attracting non-guests to come to enjoy a cigar, sip an Armagnac and relax.

The economic downturn in the country has affected sales but the 400 percent rise in people smoking cigars since 1980 has provided a loyal customer base. “People get used to smoking cigars, and they continue to buy them,” said Zeidan. Indeed, big spenders are still out there. On a recent Saturday at La Casa del Habano in downtown, a customer bought a whopping five boxes of Cohibas as well as several packs of cigarillos.

The bookish type – Harland Miller

By Paul Cochrane for Aishti magazine

British artist Harland Miller is that relatively rare thing, an artist in the all encompassing definition of the word, being both an acclaimed author and a renowned painter.

Surging through the art world in the ‘80s and ‘90s, Miller published his debut novel Slow down Arthur, Stick to Thirty in 2000. Being an artist, Miller wanted to design the cover to his novel.

“In my experience in the publishing world, which is different as an artist, I worked out that publishers think the book should do the work and people should not be seduced by the cover. When it came to the cover of my book I thought, no worries, I can do it,” says Miller.

“But the publishers said what I came up with looked ‘too second hand.’ We hit on a compromise, with the artistic team giving their input. But I ended up with the worst cover in the world. I definitely think this experience influenced my paintings and going for classic covers.”

The paintings Miller developed took a page out of Andy Warhol’s and Larry Rivers’ pop art book.

He artistically played around with a modern icon, the covers of Penguin books during their heyday, when the publisher democratized the British book market in the ‘30s by bringing out quality literature in cheap paperback form.

“I like pop art in that it can be appropriated,” says Miller. “And book cover design is not really a developed art form.”

Spinning this on its head, Miller took the remarkably simple covers of Penguin books – classics of graphic design that lack any artwork by emphasizing typography – and turned them into a form of art known as text- based art.

Painted on wall-filling canvases, Miller uses subtle – and not so subtle – titles to make a statement, like “Incurable Romantic – Seeks Dirty Filthy Whore,” “International Lonely Guy – My Story,” “Blonde, But Not Forgotten,” “Too Cool to Die” and “You Can Rely on Me – I’ll Always Let You Down.”

Miller also played with the dust jackets of classic works of Ernest Hemingway, F. Scott Fitzgerald and Evelyn Waugh. An Edgar Allan Poe cover reads “Murder – We’ve All Done It.”

Miller followed this series with the Pelican book cover series, which he calls “the bad weather pictures.”

He’s currently working on a new series of paintings based on obituaries he reads in the newspapers. “The obituary paintings are always portraits in miniature of somebody. I started the series ages ago in Paris, when [British politician] Stephen Milligan died [of autoerotic asphyxiation] and I always wanted to do more. I’ve been collecting obituaries since then, choosing people I feel sorry for or ones that go un-noticed,” says Miller.

With his book cover series around for a decade, few are left for collectors to buy, but some nine were on sale during Miller’s first exhibit in Lebanon, “Have You Ever Stopped to Wonder Why You’re Not Here,” held last May in Downtown Beirut.

Boon time for mercenaries

Nervous and embattled Arab regimes look abroad for help

Commentary - Executive magazine

Erik Prince holds up a photo during a hearing in the US

The wars in Afghanistan and Iraq are supposedly winding down, Osama Bin Laden is dead, and the so-called ‘Arab Spring’ is eroding the iron-fisted regimes that have for so long held sway over the Middle East and North Africa (MENA). For private military contractors (PMCs) — a polite name for professional mercenaries — such developments might be considered a harbinger of tough times. But business is better than ever in Iraq and Afghanistan, and the suppression of internal revolts throughout the MENA is presenting new opportunities for this multi-billion dollar industry.

Last month details emerged that the infamous founder of Blackwater, Erik Prince, was forming an 800-strong secret army for the United Arab Emirates, for a price tag of $529 million. Prince moved to the UAE after Blackwater, later renamed Xe Services, faced legal problems in the United States, notably in a case against four Blackwater operatives accused of killing 17 Iraqi civilians in Baghdad in 2007, which has recently been reopened.

Reflex Responses, Prince’s new venture in conjunction with a 51 percent Emirati stake, features South African and Latin American mercenaries, the latter brought into the UAE disguised as construction workers, according to the New York Times, hired to protect under-construction nuclear power plants and oil infrastructure from terrorist attacks, and to “put down internal revolts” and “unrest in crowded labor camps.”

What is curious is the UAE’s need for Prince’s firm, as the country already ranked 16th worldwide in 2010 for military expenditure, at $15.74 billion, or 7.3 percent of gross domestic product, according to the Stockholm International Peace Research Institute. If such a high cost for the conventional military cannot guarantee security, but a half billion dollar private force can, it puts into question the rationale for such a high defense budget. Furthermore, it sheds doubt on the UAE’s belief in the Gulf Cooperation Council — dominated by Saudi Arabia — to come to its aid to squash an uprising, as happened when GCC forces rolled into Bahrain this year.

The UAE is clearly worried about instability amid uprisings nearby and has taken a page out of other government manuals by resorting to guns for hire. In March, it was reported that up to 1,000 Pakistani troops had been recruited to serve in the Bahrain National Guard to put down the uprising, as local troops could not be relied upon. In Saudi Arabia, which recently signed a $60 billion arms deal with the US, Associated Press reported that a top secret project is underway with the US Central Command supervising and training a 35,000-strong Saudi force to protect oil infrastructure and, presumably, to crush any unrest. Reports also abound of Muammar al-Qadhafi using mercenaries in his ongoing war against the rebels in Libya.

Last year in Iraq, security was the second most common service provided by contractors to the US government, accounting for approximately 13,000 personnel, or 18 percent of all contractors, according to a recent report by the Congressional Research Service. But while US troop levels have dropped in Iraq since 2008, along with support service contracts as a result, PMCs actually increased by 39 percent, or 3,500 personnel, by the end of last year.

The US Department of Defense does not give a breakdown of contractor services in Afghanistan, but contracts have soared over the past five years, from $2 billion in 2005, to $11.8 billion for some 87,000 contractors in 2010. It appears as though demand for PMCs will remain high so long as governments carry out policies unpopular in the eyes of the public. After all, mercenaries are useful assets to perform tasks that might strain the loyalty of a country’s regular armed forces. Indeed, Reflex Responses will reportedly not hire Muslim mercenaries given that, in the words of Prince, “They could not be counted on to kill fellow Muslims.”

The regional spike in demand for mercenaries and private armies speaks volumes about the insecurities of the UAE and Saudi Arabia. More chillingly, it raises concerns about the destiny of the ‘Arab Spring’ when governments resort to such forces to quell revolt.

Obedient Al Jazeera

Silence on Bahrain puts objectivity into question

Commentary - Executive magazine

Since Al Jazeera’s launch in 1996 its slogan has been “the opinion and the other opinion.” Its objective of telling both sides of the story has won over many audiences, while at the same time making the channel more than a few enemies — namely Saudi Arabia, which set up Al Arabiya in response to the Qatar-based network’s regional and global rise.

Banned at one point or another in nearly every Middle Eastern country, Al Jazeera has for the most part lived up to its truth-seeking pledge, but its slogan is now in danger of being undermined by its lop-sided coverage of the Arab revolts. The year began all roses for Al Jazeera, credited with being instrumental to the overthrow of the Tunisian and Egyptian regimes due to its round-the-clock coverage of demonstrations and its ability to give the uprisings widespread visibility. As a result, Al Jazeera has been praised in the Western media and by the White House, which was apparently glued to Al Jazeera English’s (AJE) coverage of Egypt. British newspaper The Daily Telegraph gushed in April: “The ‘Arab Spring’ uprisings of 2011 are being hailed in Washington as the ‘Al Jazeera moment’,” and Australia’s Sydney Morning Herald trumpeted: “Al Jazeera is changing minds and hearts.”

Missing from these glowing accounts, though, was that the uprising in Bahrain was barely covered by Al Jazeera Arabic, with only slightly better coverage on AJE. Given Al Jazeera’s integral role in the Tunisian and Egyptian revolutions, its muted coverage of the Bahraini uprising since it began in mid-February has come as a slap in the face to the countless demonstrators there. Furthermore, Al Jazeera gave the detention and alleged torture of hundreds of Bahraini demonstrators scant coverage compared to similar events in Egypt, while the channel also failed to air potentially damning footage of the demolition of the symbol of the uprising, the Pearl roundabout, and 16 Shia mosques — a silence that could only be called an abdication of Al Jazeera’s self-proclaimed duty to objectively inform regional opinion.

At the heart of the matter is Qatar’s membership in the Gulf Cooperation Council (GCC), established in 1981 as a security pact among the Gulf monarchies in the wake of the 1979 siege of Mecca. Qatar’s position in the GCC pushed Doha to deploy troops to Bahrain when martial law was declared on March 15, but a casualty of this military intervention has been Al Jazeera’s objective news coverage.

With regard to Bahrain, Al Jazeera seems quite clearly to be acting as an extension of the Qatari government’s foreign policy and leaves the channel vulnerable to accusations of “double standards,” politically acceptable uprisings in the name of democracy — in Libya, Egypt, Tunisia and Yemen for instance — are covered and supported; uprisings against the Qatari national interest — such as in Bahrain — are largely dismissed. Ironically, Al Jazeera was banned in Bahrain last year, which the channel suggested may have been because of a report it aired on the country’s poverty, but which Bloomberg suggested was related to Manama’s wanting to increase Qatar’s rent for use of the Hawar islands.

A 2009 United States diplomatic cable, released by Wikileaks, highlights the geo-political role of Al Jazeera, with US ambassador to Qatar, Joseph LeBaron, noting: “Al Jazeera’s ability to influence public opinion throughout the region is a substantial source of leverage for Qatar… Moreover, the network can also be used as a chip to improve relations. For example, Al Jazeera’s more favorable coverage of Saudi Arabia’s royal family has facilitated Qatari-Saudi reconciliation over the past year.”

Al Jazeera’s “objective coverage” should also come under greater scrutiny in regards to Libya given Qatar’s vested interests there, including Doha’s role in the NATO-led air strikes and the inking of an oil distribution agreement with the Libyan rebels the day before the strikes began. Uncritical coverage of Qatari issues has also been a hallmark of the station since its inception. Thus, while Al Jazeera has generally helped raise the bar on network news coverage and pushed television reportage to a new level, those who’ve championed the channel as some sort of media Messiah immune to the failings of major Western news outlets should take heed — there is “the opinion and the other opinion”, and then there is the opinion of the Emir of Qatar.

Book review: America's Kingdom

Robert Vitalis takes a no-holds barred look at Aramco

By Paul Cochrane, Executive magazine

Saudi Aramco, valued anywhere from $2 trillion to $7 trillion and employing more than 55,000 people, is the world’s largest unlisted company. How it got there is a story that has been told before — from the first discovery of oil to the entrance of the American oil majors, to the development of the so-called “special relationship” between Saudi Arabia and the United States.

But Robert Vitalis’s newly updated book, the product of a decade of research and writing, charts the history from a different perspective, viewing Aramco as a microcosm of the colonial order. It describes an ‘oil-garchy’, the partnership that began decades ago with some of the largest oil companies in the world — Socal, later renamed Chevron, Standard Oil of New Jersey, later Exxon, and Socony-Vacuum Oil, later Mobil — and the relations between Washington DC and Riyadh until Aramco was fully nationalized in 1980, becoming known in 1988 as the Saudi Arabian Oil Company or Saudi Aramco.

It is not a telling of history financed by Aramco or seeking to enter the good books of the Saudis or the oil industry — an independence that aids its veracity. As Vitalis notes: “Companies are like authoritarian countries. They keep records hidden...They open their archives only to those they hire [and] insist on the right to approve what is written... There are no sunshine laws and no Freedom of Information Acts against corporate privilege.”

Indeed, like other tomes exposing the costs of oil development, America’s Kingdom is blacklisted in Saudi Arabia alongside works like the late Saudi novelist Abdelrahman Munif's superlative quintet Cities of Salt.

Vitalis blasts commercially successful accounts of Aramco and Saudi Arabia that conveniently gloss over the company’s less than exemplary past and uncritically repeat Aramco’s creed that it acted differently from other oil companies; the company claims to have helped Saudi Arabia modernize through what Aramco President Frank Jungers called its “farsighted policies” and a “55-year record of cooperation and mutual respect.”

Vitalis exposes the situation of Saudi and non-American workers, their decades-long struggles for better accommodation, wages and rights, how protests were squashed, and the eventual ending of a system that divided labor based on race, imported from the US and similar to the ‘Jim Crow’ laws used in America to pay white workers more than African Americans and Hispanics.

He also exposed as myths many claims that Aramco still expounds; the company’s website states that, “Since 1940, Saudi Aramco schools have provided educational services to dependents of Saudi Aramco employees.” In fact, Aramco’s management worked to prevent Saudis and their dependents from being educated, arguing “the company should not engage in a general education program,” despite a 1942 Labor Law that required Aramco to do so. It was not until 1955 that the labor movement and the Saudi government forced Aramco to “pay for a system of schools, training institutes, and, ultimately, an engineering college.”

The book debunks the notion of Saudi “exceptionalism” — the doctrine that its leadership steered the fledgling kingdom through the miasma of empire and imperialism without external influence; while Saudi Arabia became a state in 1932, what “everyone seems to forget is that (the Saudi Emir, later king) Ibn Saud signed a treaty in 1915 with Great Britain that conceded sovereignty rights for protection,” writes Vitalis. The kingdom has been keen to downplay such reliance on outsiders for its survival ever since, whether on Britain or later on Aramco and the US.

America’s Kingdom is an important contribution to the often-neglected field of oil history, and a powerful critique of the US-Saudi relationship and of Aramco, a company with monumental sway over the world’s energy markets.

Qatar's foreign policy - The Tiny Giant: LNG fuels Qatar's massive global clout

By Paul Cochrane for Executive magazine

In 2004, American magazine The Weekly Standard ran an op-ed on Qatar entitled “A Country With No Politics.” A tongue in cheek title (what country has no politics?) it is nevertheless indicative of how far Qatar has come in just seven years.

Back then, Qatar’s politics were most on display in the frequently ire-raising broadcasts of its most famous asset, the state-owned Al Jazeera news network, which managed to antagonize nearly every Middle Eastern government as well as that of the United States. Since then, Qatar has molded itself into a major economic and political player.

First came the mediator role, which helped Doha to usurp the region’s traditional go-between, Saudi Arabia, by attempting to broker a peace deal in Darfur, resolve the border dispute between Eritrea and Djibouti, and the (now failed) Doha Accord in 2008 that brought together the rival Lebanese political camps. A bevy of cash — rumors abound of the millions of dollars Lebanese political leaders were paid to sit down together — and supposed neutrality enabled the Qataris to play the middleman.

If Qatar is seen as neutral — like a Switzerland or Sweden of the Middle East — it is due to the kingdom’s efforts to befriend virtually everyone. Qatar’s foreign policy has been called paradoxical as a result. It hosts a United States air force base, which Doha financed in part, which was instrumental in the US-led invasion of Iraq in 2003; yet then-President of the United States George W. Bush threatened to bomb Al Jazeera’s headquarters in 2004, and earlier this year leaked US embassy cables leaked by Wikileaks revealed that US Secretary of State Hillary Clinton criticized Qatar’s efforts to tackle terrorist financing for militant Sunni groups. On top of this, Qatar inked a defense pact with America’s nemesis, Iran, in 2010.

Doha was involved in conflict mediation in the Horn of Africa, yet Ethiopia broke off diplomatic ties with Qatar in 2008, alleging the Qataris were funding Islamic militant groups in Somalia — including US-designated terrorist organization Al Shebab — that were attacking Ethiopian troops following Addis Ababa’s invasion of the beleaguered East African state in 2006. Qatar said it was “surprised” by Addis Ababa’s decision. And, while having links to Hamas and to Hezbollah, Doha also has diplomatic and economic ties with Israel, having hosted an Israeli consulate until Qatar broke off relations in 2009 during the war on Gaza. Doha tried twice in 2010 to restore diplomatic ties and was rebuffed by Tel Aviv, but the economic ties remain — if perhaps more symbolic than of consequence — with exports to Qatar totaling some $1 million [AED 3.67 million] and imports $1.9 million [AED 6.98 million] in 2010, according to the Manufacturers Association of Israel.

Cultural normalization with the Jewish state is equally apparent, with Israeli conductor Daniel Barenboim’s orchestra giving a private concert for the Qatari elite during the Arab Cultural Capital events in Doha last year (local press coyly referred to the orchestra as “Western musicians”).

Mehran Kamrava, director of the Center for International and Regional Studies at Georgetown University-Qatar, sees Qatari policy, even in its contradictions, as being a product of its size and location: “Qatar’s foreign policy is typical of small states in the sense that it is driven by a survival strategy. It is a small country in a very rough neighborhood; tensions between Iran and the US, and with Saudi Arabia, with whom relations have not been the most friendly, are on the doorstep .”

“I wouldn’t call [Qatar’s] foreign policy paradoxical — creative it might be, but certainly strategically informed,” he added.

Behind this policy is the al-Thani ruling family. “An elite couple of people make the policy and what they say goes,” said David Roberts, deputy director of Britain’s Royal United Services Institute, a defense think tank in Doha. “The emir can pick up the phone and make foreign policy if he wants.”

Qatar shows its colors

Over the past six months Qatar has substantially flexed clout internationally, including beating global competition to win the bid to host the 2022 World Cup, and in March made arguably its boldest foreign policy moves. On March 18, Qatar sent troops to join the Gulf Cooperation Council’s efforts to “restore law and order” in Bahrain following an uprising that started against the ruling family in mid-February. Just 10 days later, Qatar became the first Arab country to recognize the legitimacy of the Libyan rebel movement when it inked an agreement to market and distribute oil from Eastern Libya. The next day Qatar signed up to be part of the air strikes against Muammar al-Qadhafi’s regime.

As a result, Qatar threw to the wind a $2 billion [AED 7.35 billion] joint investment fund launched in 2007 between the Libyan Investment Authority and the Qatar Investment Authority (QIA), along with further investments of $8 billion in Libya announced in 2008 and 2009. “This is a leadership that is not risk averse,” said Kamrava. “They took a risk by entering an agreement with the Libyan rebels, and it remains to be seen how the events in Libya turn out. It could be a very popular thing, siding with people’s aspirations in the Middle East and North Africa (MENA) and a popular position to take.” If there is a paradox in Qatar’s foreign policy it is most evident in its response to revolts in the Middle East — helping to fight an authoritarian regime in Libya and having stoked support for other Arab uprisings through Al Jazeera on one hand, while propping up another regime in Bahrain on the other.

“Qatar hasn’t directly participated in (military) actions in Bahrain, but as a part of the GCC and done in [the Council’s] name, it undermines Qatar’s support for Libya. It is leading the international campaign while hoping no one will ask questions about tacit support for intervention against democracy in Bahrain and such contradictions,” said Kristian Coates Ulrichsen, a research fellow specializing in the GCC at the London School of Economics (LSE) global governance program. “The perception in other (Arab) countries is that Al Jazeera is controlled by the al-Thani family. Even if not true [the sentiment] is there and could come back to bite Qatar if there is any blowback.”

He added that: “Qatar has made many enemies by covering revolutions and fanning revolutionary fervor, in Libya and Egypt, and works on the premise not to cover Qatar, yet what if something happened there? Would Al Jazeera cover it? I doubt it. If something were to happen I suspect Qatar would have very few friends that would come to its defense, over the perception Al Jazeera has been playing a role in messing with the affairs [of other regimes].”

Yet, while Al Jazeera may be an asset that has made Qatar enemies, the country’s colossal gas and oil reserves play an important role in ensuring its security.

LNG masters of the universe

Despite having the world’s third largest gas reserves, Qatar came later to the hydrocarbons game than any of its regional competitors, due to the fact that the technology needed to extract gas from the depths of the North Field only became commercially viable in the 1990s.

The country has since put an estimated $137 billion [AED 503.23 billion] into developing the North Field and associated projects, increased natural gas output more than five times over since 1995, and reached a new benchmark last year of 77 million tons a year of liquefied natural gas (LNG) once a total of 14 LNG ‘mega train’ production facilities became operational. Coming later to the game has had advantages for Qatar in developing an energy policy that has been to its benefit rather than weighted in favor of international oil companies (IOCs), as was the case in the early years of oil development in Saudi Arabia, Nigeria, Iran and elsewhere.

Qatar took inspiration from Saudi Arabia’s state-owned mega oil company Aramco, which, once nationalized in 1980, developed oil terminals and established a shipping subsidiary with 27 oil tankers. Qatar has gone further than Riyadh, however, by creating an integrated LNG value chain in conjunction with IOCs, which has made it the world’s largest exporter and trans-shipper of LNG, supplying 23 countries.

It has stakes through state-owned Qatargas and Rasgas in gas production, liquefaction through the gas trains developed at Ras Laffan, transportation through its 70 LNG ships, and has jointly financed LNG receiving and re-gasification terminals in consumer countries. In 2009, the South Hook LNG terminal opened in Wales, which provides 15 percent of Britain’s gas, and soon after the Adriatic LNG terminal started providing 10 percent of Italy’s natural gas needs. In April, the Golden Pass LNG terminal opened in Texas and is slated to provide gas to 10 million American homes each year. A fourth international terminal is to be developed, with Qatar inking an agreement with Argentina this year.

The development of such terminals have tied countries into long-term agreements — ranging from three to 25 years — with Qatar for LNG, a policy it has adopted with Asia, which accounted for 57 percent of LNG exports in 2009, with South Korea the top importer, followed by India, China and Japan. Conversely, European markets, including Belgium, Britain and Spain, imported 33 percent of Qatari LNG in 2009, according to the US Energy Information Administration (EIA). Such moves ensure profitability throughout the length of the value chain while causing others to be energy dependent on Qatar. “Locking countries into long term agreements is one of cleverest things they’ve done and a good way to ensure long term security and to have strong leverage,” said Ulrichsen.

Britain, the former colonial power until 1971, is particularly tied to Doha. The relationship will only grow stronger, as by 2025 Qatar is slated to provide 50 percent of Britain’s LNG. Furthermore, the British-Dutch oil major Shell has sunk an estimated $21 billion [AED 77.14 billion] into Qatar, its biggest investment in one single country; America’s ExxonMobil has invested $16 billion [AED 58.77 billion].

“If you look at Qatar supplying Britain with 15 percent, if not more, of its gas needs, then that ties Britain to Qatar,” said Roberts. “If something catastrophic happened to Qatar, it would certainly get Britain’s attention. There are definitely geo-political considerations in addition to the investment.”

Qatar has also made a firm friend in Japan, exporting 7.63 million tons in 2010, and following the earthquake that ravaged the country earlier this year bolstered LNG exports by 4 million tons to become Japan’s fourth largest gas supplier. Although Japan does not have the military reach to protect Qatar, it would bring diplomatic clout and financial assistance in the event of conflict, as happened during the 1991 Gulf War, with Tokyo contributing $12 billion [AED 44.1 billion] to finance the war, the third largest supplier of funds after Saudi Arabia and Kuwait, in order to ensure energy supplies kept flowing from the Gulf.

“When your foreign policy is guided wholly or in part by commercial or economic relations, you cannot rule out Asia. But if there is a tilt towards East Asia it would not be at the expense of the West,” said Kamrava, noting that security interests maintain the Western outlook of the kingdom.

The balance of gas

This position is reflected in Qatar’s locking up of export destinations to ensure that it has friends in the right places. For instance, the price of LNG in the US is $4.41 [AED 16.2] per million metric British thermal unit (mmbtu), whereas in Europe it is $9.55/mmbtu and in Asia $13/mmbtu as of Executive going to print. In essence, Qatar is paying for its security by shipping lower priced LNG to Europe and the US while extracting its most profitable sales in Asian markets — a somewhat similar “deal” Saudi Arabia has with the US in exporting oil at lower transportation costs and with strategic tax breaks in the US.

“The East can never replace the West’s commitment to Qatari security,” noted Ulrichsen. Getting the export balancing act right has been critical to Qatar; when Doha agreed to ship over the next 12 months an extra 60 cargo loads of LNG to Japan, concerns were initially raised in the markets that LNG would be diverted away from Europe.

Qatar now has the extra capacity to meet demand, however, which has effectively turned the country into a swing supplier of LNG in much the way Saudi Arabia is for oil; a strong global position to hold as LNG demand grows in the coming decades. But while such energy agreements ensure Qatar’s is protected internationally, in the Gulf it is a policy that could have rather different ramifications, with a unified natural gas pipeline in the GCC still not in place despite years of planning.

“Qatar has been prioritizing long term agreements at the expense of GCC states as they all have gas shortages, and this could be a bone of contention,” said Ulrichsen.

Furthermore, Qatar’s North Field borders Iran’s South Pars field, which Tehran has not been able to profit from to the same degree as Qatar due to international sanctions on the technology needed for extraction. Iranian officials estimate that more than $200 billion [AED 734.65] is needed to bring development up-to-speed. Qatar’s aggressive development of its side of the field raises concerns for Iran of draining the reserves. To stave off a potential crisis, Qatar declared a moratorium on North Field development from 2005 until 2014 to assess the impact of increased production.

“As Qatar moves ahead and Iran doesn’t, this could generate a feeling of mistrust. Kuwait and Iran have never been able to agree on the maritime boundaries of their gas fields. Just because [Qatar and Iran have an] agreement doesn’t mean [that] it will always be the case,” said Ulrichsen.

Qatar’s bold foreign policy moves this year have ushered in a new era for the country on the world stage. How they will pay off in the medium-to-long run will depend on the success of its role in Libya, and how Doha plays its hand in the Gulf. LNG energy dependency will buy Qatar friends but Doha will also have to play an increasingly precarious balancing act keeping everyone happy — a task further complicated in a region undergoing profound political and social change.

How Qatar will steer through such choppy waters in the years to come is likely only to become more audacious, and perhaps paradoxical, as its rapidly expanding international clout powers its foreign policy strategy.

TBA

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Time to rethink a nuclear Middle East

Commentary - Executive

Just days after the Fukushima disaster, work started on the UAE's first nuclear power plant

Three days after an earthquake measuring 9.0 on the Richter scale critically damaged Japan’s Fukushima Daiichi nuclear power plant (NPP), the president of South Korea and the crown prince of Abu Dhabi attended a ground-breaking ceremony of the Braka NPP in the United Arab Emirates; it is the first of four to be built under a $20 billion contract inked in 2009 between the Emirates Nuclear Energy Corporation and a consortium of South Korean and American companies.

The inauguration celebration could hardly have been more inopportune. In the course of a week the incident at the Fukushima NPP went from being rated four on the International Atomic Energy Agency’s (IAEA) International Nuclear and Radiological Event Scale, “an accident with local consequences,” to level five, “an accident with wider consequences.” The Fukushima disaster is the only level five rating since the Three Mile Island meltdown in the United States in 1979. There has only been one level seven, the highest rating, in Chernobyl in 1986, which, according to research by New York’s Academy of Sciences published last year, resulted in the deaths of 985,000 people from cancer and related diseases.

The global “nuclear renaissance” touted just a few years ago seems far less secure, a fact reflected in investor sentiment: uranium prices on the spot market following the Japanese calamity plunged 27 percent to $50 per pound as countries started reconsidering the construction of new NPPs.

If there were ever a time to rethink nuclear power it is now, certainly before the dozen Middle Eastern and North African countries that have signed nuclear cooperation agreements start building NPPs. And the risks need to be seriously assessed, not just in terms of security, the logistics of storing spent fuel for thousands of years and so on, but also in terms of earthquake risk.

The Middle East is chock full of tectonic plates, with the Arabian plate in the middle flanked by the Eurasian, African and Indian plates. One of the most seismically active continental regions on earth is just across the sea from the United Arab Emirates, the Zagros Thrust in Iran. Of equal concern is the fact that modern systems to measure seismic activity have only recently been introduced in Saudi Arabia and Oman, while the UAE set one up just this year.

While there is little chance of a tsunami, an earthquake of a magnitude of 5.1 shook the emirate of Fujairah in 2002, and repeated seismic activity in the locality suggests that other, more sizable earthquakes are likely in the future. “When?” is of course the question, and the world can only hope that those building NPPs will do so with the worst-case scenario in mind; the Fukushima NPP was built at a time when the thought of it having to withstand a 9.0 magnitude earthquake was considered unlikely.

Braka was chosen as the site for the UAE’s first NPP as it is “an area with a very low probability of earthquakes — what is called low seismicity,” Ambassador Hamad al-Kaabi, UAE Permanent Representative to the IAEA, told the press after the Fukushima disaster. Yet it is not just unexpected earthquakes that are a concern when it comes to nuclear power. Transparency has been a major issue in the nuclear industry globally; in a 2008 US diplomatic cable released by WikiLeaks, a Japanese politician said the country’s Ministry of Economy, Trade and Industry, the department responsible for nuclear energy, has been “covering up nuclear accidents and obscuring the true costs and problems associated with the nuclear industry.”

The UAE hardly has a sterling reputation for transparency and accountability — think back to how the Dubai debt imbroglio was handled in 2009. If the Japanese, with 54 nuclear reactors, cannot be relied upon to be transparent, can we be sure the UAE will be?

Let us hope the UAE’s decision to go ahead with nuclear power, just as news of Fukushima’s fallout was dominating headlines, will not be retold through history as the epitomic example of a warning unheeded.

PAUL COCHRANE is the Middle East correspondent for International News Services

Kashmir: A wedding under curfew

Revolve magazine - www.revolve-magazine.com

It is mid week, the middle of the day and the streets of Srinagar are deserted. It’s like this four days out of every six. The “Quit Kashmir Movement” and “All Parties Hurriyat Conference” call for a hartal (strike) to demonstrate for azadi (freedom) and the Indian military responds by imposing a curfew to prevent the Kashmiris from taking to the streets. Road blocks are put in place, military vehicles move into strategic positions and troops go on patrol.

The violence has claimed over 100 Kashmiri lives since June 11, 2010 when the Indian Army shot at unarmed demonstrators. This violence has occurred most often when the Kashmiris challenge the curfew, swarming to junctions and the major arteries of Srinagar, with young men – and women – throwing projectiles, chanting slogans and, in general, resisting India’s occupation. Curiously, the slogans painted and chalked on roads, walls, shop shutters and in the grime of car windows are mostly in English: “Freedom”, “Go India Go Back”, and “Go Indian Dogs”.

The Indian Army is predominantly made up of Hindi speakers, with little Kashmiri known. Kashmiris are conversant in Hindi but lack literacy skills, so the default language of both sides – and useful for international media attention – is that of the former colonizer, Great Britain. Indeed, Britain was instrumental to Partition, promoting a separate Pakistan and after Pakistan invaded and occupied Kashmir in October 1947, Britain lobbied at the UN in favor of Kashmir becoming a Pakistani province.

Foreign Secretary Ernest Bevin told US Secretary of State George Marshall that “the main issue was who would control the main artery leading into Central Asia.” And as the then Chancellor of the Exchequer Hugh Dalton put it, Pakistan was central to Bevin’s ambition to organize “the middle of the planet.” (Read Mark Curtis, Secret Affairs: Britain’s Collusion with Radical Islam (London: Serpent’s Tail, 2010).

On the two days that are hartal and curfew free, Srinagar turns into a mad house, with people trying to pack a week’s business into 48 hours and families stock-piling food for the inevitable next shutdown. This is the Kashmiri status quo. In the midst of all this a wedding was to take place, for life must go on, but the guest list was to prove rather unpredictable and the ongoing situation generating a rather somber tone to the celebrations.

Gilani’s On Board

I had been to Kashmir before in slightly more ‘normal’ times; at least there were no curfews and daily life was able to go on, while there were some tourists but not on the scale of the boon times in the 1970s and early 1980s. Kashmiris I had met in Srinagar on my inaugural visit had family members in New Delhi that I later befriended and stayed with on return visits to India. It was this extended family, that shall go under the pseudonym of Manzar due to the fear – alas very valid – of repercussions from the Indian authorities given their opinions on the occupation, that invited me to join them for the wedding of one of their daughters.

Having endured the bum breaking 24-hour, 1,000 kilometer bus journey between Srinagar and New Delhi before, I decided on the easier option of flying to the Vale of Kashmir instead. One of my fellow travelers was none other than Sayyed Ali Shah Gilani, the Chairman of the Hurriyat Conference (HC). Gilani was warmly greeted by the Kashmiris waiting at the departure gate, going up to shake hands, the young ones to have their hair ruffled and smiles all round. Gilani was clearly admired.

Gilani and the HC call for the hartals to take place and demands hurriyat (freedom), while intractably involved in a decades-long game of cat-and-mouse with the Indian government. On arrival in Srinagar, Gilani was detained by the authorities and later placed under house arrest, contributing to some 140 days spent in the confinements of his property during 2010, along with 40 days of imprisonment under India’s Public Safety Act. One of the Manzar’s commented: “It is a part of daily life for him, like having a cup of chai (tea).”

As a foreigner, I had to register at the airport with a plain clothes member of Indian intelligence, and upon being greeted by the Manzar’s at the entrance, was accosted by a Kashmiri tourist policeman in a disheveled uniform, who took down my particulars only as “Mr. Paul from Ireland.” It was a quick drive through the empty streets of Srinagar to the Manzar’s three-story home near Lake Dal. Once installed, I related that Gilani was on the plane, but this aroused little curiosity. And for a reason indicative of the sectarianism that is as rife in Kashmir as in the rest of India.

This is not the Muslim-Hindu fitna (discord) that has flared off-and-on in Indian politics since the 1947 Partition with Pakistan – a controversial government paper has shown that Muslims are under-represented, and politically and socially disadvantaged in India. In Kashmir, one million Hindu Pandits were forced out over the years due to religious extremism and the perception that they sided with the predominantly Hindu national government rather than with Kashmir.

While this is a lingering scar, contemporary Kashmiri sectarianism is between the majority Sunni population and the Shia, the latter only having marginal political representation in the Hurriyat Conference. It is a similar story for minority Shia in other Islamic countries, such as neighbouring Pakistan, Afghanistan and Saudi Arabia, and an issue in countries where the Shia are in the ascendancy, namely Bahrain and Lebanon.

“I don’t like Gilani,” said Reza, the brother of the bride to be. “Gilani hates Shias.” This is not to insinuate that the Manzar’s dislike Sunnis – indeed, Reza is engaged to a Sunni and one of his father’s best friends is a Sunni – but that the Shia feel discriminated against by the likes of Gilani and other sectarian leaders. Division has become an obstacle for the Kashmiri resistance, as it has with every other occupied people, such as the Palestinians, when the occupying and neighboring powers successfully drive a wedge between, and pit the locals against, each other.

Internal Kashmiri rifts have been exacerbated by the Pakistan’s notorious Inter-Services Intelligence (ISI) sponsorship of militant groups, and bank-rolled by the Saudi Kingdom, ever keen to export its version of Islam, Wahhabiism, spending over $50 billion globally in the past decades. Propped up financially by the unlikely trio of China, Saudi Arabia and the United States, Pakistan has backed Kashmiri militant groups for over 30 years. Former Pakistani President, Pervez Musharraf, admitted in October 2010 in London that the ISI set up groups in the 1980s and early 1990s to attack India.

Another Bad Year

2010 was another bad year in Kashmir. In 1989, a popular rebellion – the Kashmiri intifada – against Indian misrule began, further stoked by militant Islamic groups connected to the ISI in the wake of the end of the Soviet occupation of Afghanistan, sending scores of Afghan veterans and Pakistani Kashmiris across the Line of Control (LoC) that separates Indian Jammu and Kashmir (J&K), and the Pakistani Azad (free) Kashmir (China has the remaining 20 percent called Aksai Chin, which is claimed by India). This proxy war between Pakistan and India, that remnant of the 1947 Partition, put the Kashmiri populace in the middle. Intifada after intifada has occurred since 1989 and the Indian Army has cracked down hard, notably in 2001, when over 1,000 civilians were killed. Over 45,000 Kashmiris have been killed since 1989.

One major difference over the past year from former crises, when feelings rose to a boiling point and Kashmiris took to the streets, is that this time there has been minimal militancy – apart from the stone throwing and rioting. Sympathy with the militants has waned – particularly for Pakistani-backed groups – but anger with New Delhi’s political dillydallying and iron fist policy in tackling the “Kashmir issue” has spiked. The youth are not interested in siding with New Delhi or Islamabad. The youth want independence, or, at worst, autonomy from India.

A poll released in May 2010, carried out by Chatham House on both sides of the LoC, affirms that just 2 percent of respondents in J&K want to join Pakistan, and only 28 percent want to join India. More than four in 10, or 43 percent of the total adult population, want independence, particularly in the Kashmir Valley Division (between 75 and 95 percent), and 82 percent of those polled in Srinagar (in Jammu just 1 percent, Leh 30 percent and Kargil 20 percent). Some 44 percent of Pakistani Kashmiris also want sovereignty over their own affairs. (See Robert Bradnock, Kashmir: Paths to Peace. London: Chatham House, May 2010.)

The results show an overwhelming desire of the estimated 12 million Kashmiris for independence. But this in itself poses a particular problem. The options for the Kashmiris is tied up with UN resolutions dating back to 1948-49 that call for a referendum to take place for the people to decide whether they want to join India or Pakistan. Clearly, if the survey truly reflects the opinions of the people, the Kashmiris want neither, but rather prefer total independence. But independence for Kashmir is the last thing Islamabad or New Delhi wants, despite talks between the two sides that have been off and on since 2003 and gained new momentum in 2011.

K is for Kashmir

The religious dimension of the Kashmir conflict, sandwiched between Muslim Pakistan and Hindu India, has deeply ingrained the mutual hatred over the past 65 years. Pakistan is against an independent Kashmir that unites both sides, losing its border and access to China, not to mention a major dent to its pride and the all powerful military that forms the backbone of the Pakistani nation. Azad Kashmir is so integral to Pakistan that the country’s name means “land of the pure” and is an acronym, according to the popular saying: P for Punjab, A for Afghanistan, K for Kashmir, and STAN for Baluchistan. Take out the K and Pakistan wouldn’t quite have the same ring to it. India’s Hindu populace – which has become far more radical and militant over the past 20 years – would equally be against losing a major part of the Northern provinces, especially to Muslim rule.

While international observers are calling for the LoC to become an international border, for joint institutions to be developed and for the United States to partake in ‘quiet diplomacy’ and utilize its relations with Islamabad and growing alliance – particularly militarily and on nuclear power – with New Delhi, a far more radical solution is called for. One fitting with what India champions itself as, “the world’s largest democracy” – a referendum on what the Kashmiri people want, not Delhi, its puppets or the Kashmiri dynasties that have ruled the region for generations.

Young Kashmiris think this could work – with the state having abundant land and resources and more than enough people for a viable country, plus a flourishing tourism sector if there were peace. Kashmir is land-locked and would require the good will of its neighbors – the very same from which it would secede – for trade to take off. Unified with Azad Kashmir, a free Kashmir would have access to the large markets of China and Central Asia.

But India is not ready: the diabolical Armed Forces Special Powers Act (AFSPA) goes unpunished and lets soldiers, quite literally, get away with murder. In 2010, Mian Qayoom, President of the Kashmir Bar Association, was arrested under the Public Safety Act for protesting human rights violations and sentenced to two years in jail, while peaceful protesters engaged in sit-ins are accused by the police of “offences” and “disobedience to order duly promulgated by public servants” while others were accused of spouting “anti-national slogans.”

The most sensational case was Booker Prize winning author and activist Arundhati Roy, along with Gilani and five others, being booked for “sedition” for making anti-India speeches at an event in Srinagar. In late 2010, Roy said the charge “is meant to frighten civil rights groups and young journalists into keeping quiet.” The case is to go on trial in April 2011. Read her book on what’s really happening in India: Listening to Grasshoppers, Field Notes on Democracy (London: Penguin, 2009).

“Suspect All, Respect All”

A slogan on an army road block: “Suspect All, Respect All”. This is India’s policy in Kashmir, although leaning to suspecting all, rather than respecting all. The slogan drew smirks from the young Kashmiri men I went around Srinagar with, as they saw little respect from the authorities. They related how during curfews Kashmiris were pulled from their vehicles at checkpoints and beaten by soldiers, for no apparent reason. They described how at hartals the army used live ammunition on the unarmed protesters, and how, during curfews, sticking one’s head out of your front door could also result in a beating. There was a sense of despondency about the situation and it being rectified anytime soon.

One of the failures of New Delhi in Kashmir is how little it has done to endear Kashmiris towards India. There has been no “nation building” or investing in infrastructure and improving living standards. Kashmiris view the Indians as exploiting their land – natural resources, water and the hydro-power that provides electricity to New Delhi and the populous state of Punjab while Kashmir experiences power shortages.

A major shortcoming is providing employment. Recent statistics show that 590,000 educated youth in the state are unemployed, while in the Chatham House survey in J&K, 81 percent of those polled said the most significant problem was unemployment, with government corruption and poor economic development in second and third place respectively.

The lack of work in Kashmir was reflected by the Manzar’s, their friends and extended family. A middle class family, the men had to work elsewhere in India to earn a decent wage, while some of the young men helping out at the wedding worked in Singapore, Dubai and Australia. With no opportunities in Srinagar, there was little choice but to head down to Delhi or further afield. But that didn’t mean the problems of Kashmir disappeared. The diaspora in India keep firmly attuned to what is happening through Kashmiri TV channels and newspapers, while trying to keep a low profile, particularly following terrorist attacks in the capital due to fear of anti-Muslim and anti-Kashmir bashing.

Due to the virulent anti-Muslim prejudices of the Indian media, which jumped to conclusions that Muslims were behind the majority of bombings in New Delhi in 2007 and 2008, one of the Manzar’s living in the capital refused to go out on the streets for fear of being arrested. Subsequent evidence has shown that in several cases it was right-wing Hindus behind the bombings rather than the familiar culprit of radical Islamists. Investigations have shown the deep-seated prejudices within the police and security apparatus against Indian Muslims. Indeed, a Wikileaks cable showed that prominent politician Rahul Gandhi told the U.S. Ambassador in 2009 that while “there was evidence of some support for [Islamic terrorist group Laskar-e-Taiba] among certain elements in India’s indigenous Muslim community, the bigger threat may be the growth of radicalized Hindu groups, which create religious tensions and political confrontations with the Muslim community.”

Wazwan!

Weddings in Kashmir are major social events, bringing together families, friends and neighbors. Given the current situation, weddings are one of the few positive occasions and a good way to also bring the diaspora together. Weddings are protracted events, with visits and gift-giving ceremonies between the families of the bride and groom that go on well before the wedding day and in the following weeks. The festivities take place separately for the bride and groom, who are brought together only on the final day, once the imam has formalized the marriage.

The wedding day requires days of preparation, with some 20 cooks working for two days on the menu, the famous wazwan of dozens of dishes. Some 25 sheep, 70 chickens and 100 kilos of rice are prepared for the 280 guests at the wedding, all cooked on open fires and the meat cooked in multi ways – bashed to a pulp to make huge meatballs, called gostaba, mutton cooked slowly in sweet milk, grilled chicken, stewed mutton, and skewered kebabs.

The morning of the wedding, Reza gets a phone call from a guest asking about the extent of the curfew. “Is it a whole valley curfew?” he asks the other seven young men sleeping in the room. Yes, the whole valley. One of the guests managed to get through the checkpoints by showing his wedding invitation, but he had to go through 12 checkpoints and take alternative routes when the Indian Army would not let him through at certain road blocks – 12 checkpoints to cover less than 15 kilometers.

Reza keeps getting calls throughout the day – cancellations and questions about the checkpoints. There is no text messaging as the Indian authorities have banned SMS in Kashmir. Will the groom make it tonight? “Inshallah (God Willing)…” The curfew tends to be stricter in the morning. The preparations continue, the people are resigned, yet they tell jokes and drink tea. The Kashmiris are used to waiting, sitting around chatting and passing the time – no jobs, schools closed, no business, and nowhere to go except for the immediate neighborhood.

The wedding day goes off without a hitch, with enough guests showing up that the large tent erected in an uncle’s garden is not empty, and the groom is able to arrive that evening. But the wazwan is consumed quickly, without a jubilant atmosphere due to the situation and the curfew. In the past, said the elders, the wazwan would have been eaten slower with the festivities carrying on for five days rather than just two. Reza’s uncle remarked that he was one of the last to get married the old way, just before the troubles erupted in 1989.

The end of the wedding is however affected by the curfew. Usually dozens of cars would accompany the new couple to the groom’s house, but Reza forbids too many from going due to the curfew and that the groom’s relatives will not be expecting guests. While the Indian Army says they “respect all,” they don’t allow for special circumstances during curfews, even for weddings.

Returning the Keys

In 2011, the Indian-administered Kashmiris have kept up the struggle for their rights and freedom. To have effect, the hartals will have to continue – as in Azad Kashmir – while Delhi will have to meet the Kashmiri leaders instead of continuously imprisoning them and enter into constructive dialogue with Pakistan to hammer out a solution. Until a viable solution is enacted, Kashmir will remain a bleeding wound of Partition and a paradise lost. It was a place once called the Switzerland of Asia due to its snow-capped mountains, rivers and forests, but this beauty – also under threat environmentally – merely masks the oppression and violence that torments Kashmir.

As the late Kashmiri poet Aha Shahid Ali wrote from his deathbed in the U.S. in 2001, in a poem dedicated to a Kashmiri Hindu friend:

We shall meet again, in Srinagar
By the gates of the Villa of Peace
Our hands blossoming into fists
Till the soldiers return the keys
And disappear.

Photos courtesy of Sarwar B.

The taking down of Lebanese-Canadian Bank

By Paul Cochrane for Executive magazine

Two become one as Lebanon’s alpha banks feel heat from US

The United States Department of the Treasury’s designation in early February of Lebanese Canadian Bank (LCB) as a “financial institution of prime money laundering concern” hit the bank like a missile strike. And, as so often is the case with American ‘operations’ in the region, the collateral damage was high.

Immediately blacklisted the world over and unable to deal in US dollars, LCB was “crippled,” in the words of a source close to Banque du Liban (BDL), Lebanon’s central bank. The Lebanese banking sector went into damage control mode, concerned it could be part of a wider targeting of the industry, with the designation the worst blow to the sector’s reputation since 2000, when Lebanon was placed on the Non-Cooperative Countries and Territories list of the Financial Action Task Force (FATF), a Paris-based inter-governmental body set up to promote the adoption of anti-money laundering and counter-terrorist financing regulations (it was taken off the list in 2002).

The governor of BDL, Riad Salameh, flew to Washington to discuss the charges, where the US reassured him that the measure was not politically motivated, despite LCB’s alleged connection with Hezbollah, which the US designates as a terrorist organization. Nor, he was told, was it related to the fact that Lebanon’s next government will be led by the Hezbollah-backed March 8 coalition.

“The designation of LCB made people scared,” said the source close to BDL. “The Treasury assured BDL that they didn’t target the Lebanese banking sector and said Lebanon is a friendly nation. The US says it is not a political act but the timing of the designation is a bit precarious. I personally believe politics was involved. [But] I’m not saying the evidence is unfounded — the US has promised to provide information — as there is no smoke without fire.”

Rumors began to circulate that three to four other Lebanese banks were in the sights of the Treasury’s Financial Crimes Enforcement Network (FinCEN). “This is a completely unfounded rumor, and Salameh said this publicly. He told us that during the meeting [in Washington] this was not mentioned,” said Makram Sader, Secretary General of the Association of Banks in Lebanon (ABL). LCB’s designation came as a surprise to the ABL. “It is a specific case but really surprised us as Lebanon is dealing with the world through a large network and with over 250 correspondent banks,” he said.

The designation drove LCB’s reputation into the gutter and stimulated a limited run on the bank by depositors. The designation is just a first step before further action against the bank is taken, with LCB allowed, under US law, 60 days to appeal, which they are doing as the management have denied any wrong doing.

But the damage has already been done; to stave off a crippling run on the bank, LCB had to act fast. “LCB’s shareholders decided to sell, as they couldn’t deal in US dollars, which killed the bank. It wasn’t a decision by the US or BDL,” said the source.

With BDL against the acquisition or merger of any of the top three Alpha banks — Bank Audi, BLOM Bank or Byblos Bank — with LCB, for fear that it would create a ‘super-bank’ and kill competition in the market, four other banks sought LCB assets and liabilities. Société Générale de Banque au Liban (SGBL) made the winning offer and, as Executive went to print, SGBL and LCB representatives were in Paris, along with members of BDL and SGBL’s part shareholder, French bank Société Générale, to hammer out a deal. The consolidation will boost SGBL from the 10th largest bank in Lebanon to fifth.

The charges

In the words of US Treasury publication The Federal Register, “FinCEN has reason to believe that LCB has been routinely used by drug traffickers and money launderers operating in various countries in Central and South America, Europe, Africa and the Middle East; that Hezbollah derived financial support from the criminal activities of this network; and that LCB managers are complicit in the network’s money laundering activities.” In the notice, FinCEN lays out a case stating Lebanese-Colombian citizen Ayman Joumaa, who was named a “specially designated narcotics trafficker under the Foreign Narcotics Kingpin Designations Act on January 26, laundered “as much as $200 million a month” from cocaine sales. The proceeds were ‘cleaned’ through foreign exchange houses linked to Lebanon, LCB and its Gambian subsidiary Prime Bank, as well as through Trade Based Money Laundering (TBML) activities involving used car dealers in the US and the trading of consumer goods.

FinCEN then laid out LCB’s connection in rather unclear language and dubious math: “With respect to the exchanges and companies related to Ayman Joumaa, numerous instances indicate that substantial amounts of illicit funds may have passed through LCB. Since January 2006, hundreds of records with a cumulative equivalent value of $66.4 million identified a Lebanese bank that originated the transfer; approximately half of those were originated by LCB, for a cumulative equivalent value of $66.2 million, or 94 percent, thus, indicating that LCB probably is the favored bank for these exchange houses, particularly in the context of illicit banking activity.” FinCEN did not reply to queries by Executive asking how, if $66.4 million is the total and LCB was the origin of half the transfers, this is equal to $66.2 million, or how the latter figure is 94 percent of $66.4 million.

With the BDL still to carry out an internal investigation, as it does not yet have the full American report, the details are still vague regarding the accusations of LCB’s possible money laundering activity or knowingly acting as a financial conduit for Hezbollah. The language within the designation (“may have”, “believed to be” or “probably”) is an indication of its ambiguity.

The bank has also been suspected through what is legally referred to as “guilt by association,” with LCB managers accused of having ties with Iranian officials through Hezbollah’s Tehran-based envoy Abdallah Safieddine. The bank is also implicated via a Lebanese shareholder in LCB subsidiary Prime Bank who is “known to be a supporter of Hezbollah.”An indication of the political motivations of the designation is the discrepancy between the punishments of LCB and Jordan-based Arab Bank, which was forced to pay $24 million in 2005 for allegedly inadequate controls against money laundering at its New York branch.

“Why wasn’t LCB fined? They wanted the bank closed. It’s a wake up call for the Lebanese banking sector and the threat posed by Hezbollah,” said a senior compliance officer (CO) at a Lebanese bank who requested anonymity. “The US has the power to sanction a bank anytime and put anyone away. We’re helpless here and need to be very careful to protect the banking sector. I’d give up a suspicious customer, even if it lost millions to protect the bank.”

Collateral damage?

LCB is not the only financial institution to have been shaken by FinCEN’s designation; all Lebanese banks and foreign exchange houses’ relations with the US have been affected.

“The effect from American banks was bad, by two banks in particular; we were not allowed to send from a Lebanese exchange house to an exchange house anywhere via the US. They don’t want any payments from banks related to the exchange dealers. It has created panic and is putting exchange dealers out of business,” said the CO. “The US banks also don’t want us to deal with used car dealers. But they cannot penalize other banks for what happened or consider all transfers as suspicious,” the CO added. “Deal with us or not, period. The banking sector is not loose and American banks shouldn’t be scared of Lebanese banks; banks are cooperating and closing accounts with exchange dealers, even good exchange dealers.”

The FinCEN links LCB and Joumaa to foreign exchange dealers in Lebanon. But those interviewed denied involvement. “We don’t know Joumaa. We’re a Category A listed exchange company and don’t know him,” said a manager of Hassan Ayash Exchange in Beirut. “This designation against us is not right, from A to Z. I will of course appeal with a lawyer and provide all the documentation and transfer records.” Another exchange manager noted: “Hezbollah doesn’t need the money; it gets it from Iran. So why would they use my exchange? And if I have to close my company [because of the designation], Hezbollah will not look after me.”

Joumaa is also linked to Elissa Holding, based in downtown Beirut, which owns Phenicia Shipping, the Elissa Exchange bureau in Sarafand, near Saida and companies in the Republic of Congo and Benin. The Elissa Holding manager, who was not at the holding’s office on a visit by Executive, did not answer further calls. The US also labeled Caesar’s Park Hotel in Beirut, next door to Hassan Ayash Exchange, as a meeting point for money launderers and a front company.

Jalal Joumaa, general manager of Caesar’s Park Hotel, declined to comment on the issue or on whether he would appeal. The exchange houses, Elissa Holding and the hotel are still operating, with no apparent action taken against them by the Lebanese authorities.

Upgrading the law

Ayman Joumaa was publicly designated as a drug kingpin in late January, two weeks before LCB was labeled a prime money laundering concern; this ought to have set off warning bells at LCB’s compliance department, at exchange houses and with Lebanese regulators. If the FinCEN report is to be believed and Joumaa has links to LCB that stretch back to 2006, what it would suggest is that there are certain weaknesses in Lebanon’s anti-money laundering (AML) regime.

The BDL has said that, in line with recent US requests and following a mutual evaluation of the country’s AML regulations in 2009 by FATF’s regional body, MENA-FATF, it will upgrade procedures. Current proposed laws include cross-border cash regulations, declarations and disclosures, and the addition of another 10 predicate offenses to the current seven.

“The procedures also have to be more explicit on terrorist financing, as according to MENA-FATF they are not clear,” said the source close to BDL.

Lebanon is also being pushed to ratify the United Nation’s International Convention for the Suppression of the Financing of Terrorism (1999). That it has not shows there “is no political commitment, and this sheds doubt on how committed the government is to the whole process,” said the source.

The ABL, however, said it has been in favor of signing the convention since 2000. “Reputational risk is important to us and we will double and review the procedures, as the authorities are doing. And we will try to push and accelerate the introduction of new laws and regulations to fill all the gaps,” said Sader.

The designation of LCB has certainly been a wake-up call for Lebanese banks and how the sector is regulated. “Banks have learned a lesson, for example closing exchange bureaus because they believe, [as do I], that it has a lot of risk,” said the source. As to LCB’s guilt and whether the designation was a carefully timed political move, only time will tell. According to Sader, “LCB’s appeal could take months or years.”