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.”

The GCC and Bahrain

A super-sized photo of Bahraini King Hamad Al Khalifa at a roundabout in Manama prior to the demonstrations that started mid-Feb (Paul Cochrane)

In 2008, I wrote an article about the Gulf Cooperation Council (GCC)'s common market, what I termed the GCM - http://backinbeirut.blogspot.com/2008/01/looks-good-on-paper-advent-of-gulf.html

Giving some background, I wrote about the GCC's creation, which I think is worth reiterating given the Saudis, the Emiratis and the Qataris deployment of armed forces to crush the demonstrations in fellow GCC country Bahrain, while Kuwait has sent warships but not ground forces (currently onboard the vessels). Amid all the hubbub surrounding this development, many people don't know the history of the GCC or that under the council's rules, the 'intervention' is totally legal. The GCC consists of Saudi Arabia, Kuwait, the UAE, Oman, Bahrain and Qatar.

Here's what I wrote:

“Since the establishment in 1981 of the Cooperation Council for the Arab Gulf States, to use its official title, the regional body has to a large degree failed in its objectives, which, much like the EEC, were initially not about economic unification but rather to act as a forum for conflict prevention. After all, the body was established following a proposal by Saudi Arabia for an internal security pact among the Gulf monarchies after the armed uprising in Mecca in late 1979, and given further impetus after the Iran-Iraq war erupted in 1980.
The objectives of the council were to coordinate internal security, procurement of arms and national economies of member states, and to settle border disputes under the leadership of the Supreme Council. Yet despite the creation of a Saudi-led Rapid Deployment Force in 1984, the GCC could not broker a ceasefire between Baghdad and Tehran, and failed to present a united front in 1990 when Iraq invaded Kuwait. Even a committee to facilitate talks between Iran and the UAE over Iranian military exercises in the Straits of Hormuz in 1999 came to nothing.”

How effective the current use of force by the GCC will be in Bahrain remains to be seen, with an estimated 15 people killed and over 1,000 injured since the anti-government protests started in mid-February. What is happening there deserves far more media coverage (with Al Jazeera Arabic's silence an indicator of Gulf monarchical unity), for how the GCC handles the situation in Bahrain will dictate what it will do in the rest of the Gulf if there are further uprisings and unrest.

Bahrain is also a very interesting case, given its small population of 800,000 and that the populace has no access to arms – unlike many other countries in the region – and being an island only connected by a bridge to the mainland (and that is to Saudi Arabia), means the smuggling in of weapons is near impossible. The Bahrainis, unlike the Libyans, have no option but to resist peacefully or with crude homemade weapons. If the uprising is successful, it will be a case study in how to overthrow a regime without any recourse to (serious) violence and would be a further example of the power of the people following the successes in Tunisia and Egypt. Since the GCC's military move into Bahrain however, I am not very optimistic about a positive outcome.

Guns for hire: Pakistani soldiers in the Middle East

On March 20, it was reported that a 1,000 Pakistani troops had been recruited to serve in the Bahrain National Guards to put down the intifada there. This is not the first time Pakistani soldiers have come to the region to prop up the monarchies. During the Black September events in 1970 by Jordan's King Hussein to crush the Palestinians, the US-trained Zia ul-Haq (later Saudi-sponsored President of Pakistan) lead a group of mercenaries (see Tariq Ali, 'The Colour Khaki', New Left Review, Jan/Feb 2003,p.6)

Between 1983 and 1987, Pakistan deployed 20,000 troops to Saudi Arabia to protect the royal family. In 1991, 'following Saddam Hussein's invasion of Kuwait, Pakistan dispatched roughly 6,000 soldiers to join the multi-national force defending the Saudis from any spillover of hostilities.' (see The East Moves West, Geoffrey Kemp, pg 106)

Saudi Arabia's oily ambiguity

Exaggerated fuel reserves could have major implications

Aramco's headquarters

Comment for Executive magazine

While the cache of diplomatic cables recently released by WikiLeaks may have caused a number of international stirs, the majority have been largely ignored, causing little political, diplomatic or economic fallout. The revelations in early February that Saudi Arabia overstated crude oil reserves by up to 40 percent falls in the latter category, generating little more than newswire buzz. But should that have been the case?

With Saudi Arabia a top oil producer, the cable could have sparked a reaction on the world markets, driving the price of oil even higher and causing havoc with future oil supply projections. The kingdom itself would have had its position as the de-facto head of the Organization of the Petroleum Exporting Countries (OPEC) challenged, and its sovereign risk ratings would have been battered, given the country’s overwhelming dependency on hydrocarbons to balance the books.

But there was no reaction on the markets, nor was there a flurry of stories in the press querying Saudi Arabia’s oil reserves and reigniting the debate about “peak oil.” The only reaction from the Saudi side was by the man who told United States diplomats in 2007 that the reserves were overstated. Sadad al-Husseini, a former vice president and head of exploration at Aramco, Saudi Arabia’s oil monopoly, said he had been “misrepresented” by the diplomats and the press and “did not question in any manner the reported reserves of Saudi Aramco.”

Major economic publications also dismissed the revelations: Petroleum Intelligence Weekly, considered “the bible” of the energy industry, called the cables a “false alarm” while a Wall Street Journal (WSJ) blog downplayed concerns because of Husseini’s apparent volte-face.

So is the cable just an example of US diplomats playing a game of what the WSJ referred to as “Chinese whispers?” Or was Husseini pressured into denying his original statements, meaning Aramco really has fiddled with the figures? It is, of course, hard to know, and that is the crux of the problem. Even if the contents of the cables are false, Aramco has not been transparent with its figures since the company was nationalized. According to a former Aramco employee, only the company’s nine-member executive committee is privy to the actual figures, despite the need of departments to have access to such information to carry out research, implement long-term plans and so on.

Like Aramco employees, the world is expected to believe what the company tells us, as they have always delivered enough oil to the market; but should we, in the same way the world took at face value the kingdom’s stated gold reserve until the Saudi Arabian Monetary Agency revealed last year it had 180 tons more than it originally accounted for? After all, Aramco is still peddling the lie that it is the world’s largest producer of oil. Exporter yes, producer no. In fact, Russia became the world’s biggest producer in 2009, according to the BP Statistical Review of World Energy 2010, with an average output of 10 million barrels per day (bpd), or 12.9 percent of total production worldwide, whereas Saudi produces 9.7 million bpd.

A primary reason the cable didn’t result in a media frenzy was that the revelations were nothing particularly new. Many oil experts have queried Aramco’s figures before, noting in particular that 90 percent of all the oil that Saudi Arabia has ever produced has come from seven giant fields that are now maturing, three of which are more than 50 years old.

In the case of these US embassy cables, the debate centers around Husseini questioning Aramco figures that put Saudi Arabia’s reserves at 716 billion barrels, of which 51 percent are recoverable. It is the recovery figures that are the questionable part, as the global recovery average is some 30 percent, which suggests Aramco is being overly optimistic about what it will be able to extract.

The real estimates need to be revealed. If Aramco’s numbers do come up short, the ramifications on the world economy of a Saudi oil shock would be devastating. Perhaps the best solution would be for the world to start moving more quickly toward alternative fuels rather than relying on debatable recovery estimates.

ADDITION (March 25): A source close to Aramco spoke with a retired senior player at the company a few weeks ago (early March) and asked him whether Al Hussaini's original doubts about Saudi's inflated reserves were true. The former executive, who had been involved in exploration, confirmed that they had "played too much" with the recovery levels of oil in place, but would not go on the record with the press to go public on this contentious issue.

Clearly Al-Hussaini was pressured by Aramco management/KSA government to do a u-turn. What is striking is how industry publications and the WSJ took Al-Hussaini's statement in February as 'gospel truth' and didn't investigate further. Then again, how informed the author of the WSJ blog article, Angus Mcdowall, is about oil is questionable, given that he reiterated the lie that Saudi is the top oil producer - "Saudi Arabia set to remain the world’s biggest producer for some time yet" - see (http://blogs.wsj.com/source/2011/02/09/saudi-oil-reserves-and-the-wikileaks-chinese-whispers-effect/) - when, as I state in the commentary, it is in fact Russia with 10.23m bpd as of March, 2011 and Saudi with 10.121m bpd. - See http://www.bloomberg.com/news/2011-03-02/russian-oil-output-remains-near-post-soviet-record-in-february.html and http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/03/23/investopedia51363.DTL

PAUL COCHRANE is the Middle East correspondent for International News Services

Photo via Wikicommons

Book review: Secret Affairs by Mark Curtis

Britain's collusion with radical Islam

By Paul Cochrane for Executive magazine

Britain has played a nefarious role in the Middle East’s history. We all know that London re-drew the region’s borders after World War I as part of a “divide and rule” strategy, but few are aware of Britain’s divisive and often contradictory efforts in the region that have remained a core part of its foreign policy. Instead, the United States and Israel tend to get all the “credit” when it comes to the dark arts of Machiavellian political subterfuge.

In ‘Secret Affairs: Britain’s Collusion with Radical Islam,’ author Mark Curtis uses declassified official documents and leaked reports to lay bare Britain’s policies of destabilization and the political-economic ties Britain developed to ensure energy security and financial co-dependence. What Curtis exposes is as damning to Britain as the WikiLeaks US embassy cables have been to Washington, revealing the decisions made away from public scrutiny and what really makes up official policy. It is not, unfortunately for the establishment and its cheerleaders, conspiracy theory.

“It is clear that Britain has an interest in divide and rule in the Middle East. If it sounds conspiratorial, it is there, spelled out in the planning files,” said Curtis to Executive. “The most obvious is dividing the Middle East after 1918, and throughout the 1950s and 1960s - which I refer to in the book – by keeping oil countries under separate political control so no one can gang up on the West.”

Shady goings-on

‘Secret Affairs’ is an eye opening read that charts the beginnings of British collaboration with radical Islamic forces, a relationship that began during the occupation of India over 150 years ago, was used extensively post-1945 and continues to this day. Britain worked with Islamist groups, particularly the Muslim Brotherhood, and friendly authoritarian Islamic regimes in Egypt, Syria, Saudi Arabia, Iran, Iraq, Bosnia, Indonesia, Pakistan and Afghanistan to ensure that communism, nationalism, pan-Arabism and anti-Western policies didn’t take hold.

Britain would cultivate relationships on both sides of the political fence, showing a willingness to work with essentially anyone, whether the Mahaz-i-Milli Islam (National Islamic Front of Afghanistan), the Libyan Islamic Fighting Group or the ayatollahs in Iran, to achieve short-term goals, irrespective of the longer-term implications, in order to maintain a balance of power.

“In [my] analysis of British foreign policy, it is not all down to economics,” said Curtis. “The collaboration with Islamist groups in the Middle East has been about power status, to not be relegated to a bit player on the fringes. It has seen those groups as essential allies in a region where Britain has often lacked dependable allies. In a lot of the episodes where Britain collaborated with Islamic groups, it was essentially to do the dirty work that the US couldn’t do due to Congressional oversight and the fear of being found out.”

The dirty deeds include assassination attempts – for example on Egypt’s Gamal Abdel Nasser, Libya’s Muammar al-Qadhafi, and Lebanon’s late Ayatollah Mohammad Fadlallah – military assistance and the dissemination of propaganda tools, such as Korans and Islamic literature. British operatives also orchestrated “false flag” operations, such as the one in Iran in 1953 when mosques and public figures were attacked by agents and paid supporters appearing to be members of the communist Tudeh Party. British intelligence also worked in collaboration with Ayatollah Kashani, the mentor of Ayatollah Khomeini, to stir up sentiment against nationalist Prime Minister Muhammad Mossadiq.

Alongside maintaining its power status and ensuring energy security, Britain also worked to make sure oil-producing countries invested their petro-dollars in London to shore up the city’s global financial position. To do so, Britain needed to maintain its status as a power broker and to curry favor with regimes, regardless of the means. One example of this is the “fabricated invasion” of Kuwait by Iraq in 1958, during which Britain intervened to protect its newly-independent former colony against a threat that they had themselves concocted, as British files explicitly show. “Britain wanted to exaggerate the threat to Kuwait so [Britain] would continue its protection and Kuwait would keep investing revenues in the British banking system,” said Curtis.

Blow back

Such covert operations — all documented in ‘Secret Affairs’ — have been just one part of Britain’s foreign policy that has gone against London’s purported democratic ideals. The backing of Islamist forces, and its hidden alliance with two chief state sponsors of radical Islam, Saudi Arabia — which has spent more than $50 billion to spread the Wahhabi brand of Islam around the world and is a major sponsor of Islamist groups — and Pakistan, have also had major negative repercussions.

By preventing independent and secular governments from coming to power in much of the Islamic world, Britain’s policies have nurtured the current socio-political malaise and resulted in what the late Chalmers Johnson famously termed “blow back,” when the very forces the West aided and abetted came back to bite the hand that once fed them. Curtis shows how Britain in the 1990s allowed Islamist groups to operate out of London, which they believed could be used to destabilize governments in, among other places, Syria, Iraq and Libya. This was possible through a ‘covenant of security’ between radical Islamists and the security services.

A former Cabinet Office intelligence analyst explained: “The long-standing British habit of providing refuge and welfare to Islamist extremists is on the unspoken assumption that if we give them a safe haven here they will not attack us on these shores.”

This pact meant Britain could keep tabs on such groups’ memberships and finances, and enabled British intelligence access to groups linked to militancy from Afghanistan to Yemen. Even Al Qaeda had an office, the Advice and Reformation Committee, in London until 1998.

Alongside the US and Saudi Arabia, Britain equipped and bankrolled Islamist groups in Afghanistan, Pakistan and Bosnia that were later involved in the September 11 attacks in the United States, terrorist attacks in Saudi Arabia, and the July 7, 2005 bombings in London. Indeed, as Curtis’s research shows, the history of the ongoing “war on terror” is rooted in covert support for the Afghani Mujahedin in its fight against the Soviets and for the terrorism infrastructure co-established with Pakistan’s notorious Inter Services Intelligence (ISI), which trained fighters for operations in Central Asia, India, Bosnia, the Middle East and elsewhere.

It also goes further back in time, to the British-backed partition of India in 1947, which led to the creation of the Islamic Republic of Pakistan and the current imbroglio in Kashmir. Curtis quotes former Indian Ambassador Narendra Sarila as saying, “Many of the roots of Islamic terrorism sweeping the world today lie buried in the partition of India.”

More than 60 years later, Britain is still using divide and rule as a strategy and is contending with the repercussions of what in many ways its foreign policy has created. “There is still this resort to rely on particular Islamist forces to achieve objectives, whether in Southern Iraq [post-2003], where Britain worked with Islamist forces and now [has] a de-facto working arrangement with the Taliban, in the sense that Britain is reliant on them for an honorable exit from Afghanistan,” said Curtis. In a previous book, Curtis called Britain’s foreign policy a “web of deceit.” In his latest, he has further shown how that web was spun and, crucially, how British foreign policy has nurtured global terrorism and instability.

Unlocking the grid: Alternative fuels for Lebanon's vehicles

By Paul Cochrane for Executive magazine

Alternative fuels could offer a panacea for Beirut’s congestion-caused smog

Congestion in Beirut has reached the point of crisis. Traffic levels have become intolerable, with jams and “road rage” a part of everyday life. There is little public transport and, as a result, no feasible initiatives to encourage people to give up driving. The situation is clearly unsustainable.

Oil prices are hovering around $100 per barrel these days and the cost of fuel has soared in Lebanon over the past year. Consumers are feeling the effects on their wallets, compounding the hurt on their lungs from the amount of pollution generated by the 1.6 million cars in the country, some 76 percent of which are more than 10 years old, and 50 percent more than 20 years old.

In a recent study by the American University of Beirut’s Air Quality Research Unit, “fine” air particles in the capital were found to be three to four times higher than World Health Organization standards, while the unit noted that carbon emissions from vehicles posed a “serious risk to public health” and have “proven to be carcinogenic.” Indeed, environmentalists estimate that 60 to 70 percent of air pollution in the country is generated by vehicles.

So what is to be done? The traffic is detrimental to people’s health, mentally as well as physically, while with roughly 100,000 new and used cars sold every year, more and more carbon emitting vehicles are hitting Lebanese roads. Despite the rising costs of gasoline people have not been discouraged from driving, although there has been a noticeable shift over the past few years in the car market toward more fuel efficient compacts over larger vehicles.

There are options on the table but, in typical Lebanese political fashion, no common policy toward a workable solution. The plan proposed in 2010 by the Ministry of Energy and Water to introduce compressed natural gas (CNG) vehicles has been opposed by the Parliamentary Energy and Public Works Committee, ostensibly over safety concerns.

A draft law to allow four-cylinder hybrid cars to be imported tax free has yet to be passed, the previous parliament having been too occupied with the Special Tribunal for Lebanon to enact it and now, with no cabinet in place, the bill is gathering dust. In any case, the energy ministry is more pro-CNG than hybrid, citing CNG’s questionably better safety record than hybrid technology and dismissing hybrids as not suitable for Lebanon’s topography.

Meanwhile, car dealers are waiting in limbo over whether the draft laws will be passed and what this will mean for their business strategies. Dealerships, such as the industry’s representative body, the Automobile Importers Association (AIA), have serious objections to CNG and query the feasibility of introducing hybrids without financial incentives to encourage consumers away from cheaper traditional models. They also view the law as limited — it does not include, for instance, six cylinder hybrids.
On both sides there is ignorance of the way these alternative fuel technologies work, in some cases confusing CNG with Liquefied Petroleum Gas (LPG) and in others reiterating the myth that all hybrids need to be plugged into electric mains to charge up.

There is also an expectation that the free market will compel consumers to take up either CNG or hybrids despite the global precedent of government-assisted incentives to encourage citizens to switch to more environmentally friendly vehicles.

EXECUTIVE takes a look at the proposed policies, the pros and cons of CNG and hybrids, the investments needed and what is being done elsewhere in the world, and offers some realistic solutions to help clear the air and roads in Lebanon and change this unsustainable status quo.

The ministry’s case

In November 2010, the Ministry of Energy’s proposal for CNG was shot down by three out of four parliamentary experts, with the head of the Parliamentary Energy and Public Works Committee Mohammad Qabbani deeming the fuel un-safe, despite the ministry’s call for a re-evaluation of the criteria used.

“Our proposal was [for] CNG cars, which has not been accepted across the board,” said Cesar Abu Khalil, advisor to Gebran Bassil, caretaker Minister of Energy and Water. “I’m not sure why Qabbani took such a hostile position; the proposal is to allow the use of CNG — it is not obliging people to. We wanted to create an alternative fuel for consumers. Fuel costs have been increasing very fast, by $4 for 20 liters in less than six months, and has become unbearable for those on minimum wage and everyone else. We’ve been urging the Council of Ministers since 2009 to reduce taxes on fuel gasoline but to no avail.”

The ministry’s proposal is based on socio-economic and environmental grounds. CNG is some 40 percent cheaper than gasoline, which would help consumers financially and reduce the amount of gasoline fuel the country would have to import. Environmentally, CNG emits carbon dioxide levels that are 10 to 30 percent lower than gasoline, while emitting 27 times less nitroxide pollutants. CNG has been discussed in Lebanon over other natural gas options such as LPG or newcomer gas-to-liquids (GTL) due to its more extensive adoption worldwide.

In terms of safety, the ministry dismisses concerns that CNG is dangerous and not suitable for Lebanon, citing the fact that there are 12.5 million natural gas vehicles (NGVs) in use today worldwide, with the biggest users in Pakistan, Iran, Argentina, India and, slightly further down the list, Egypt.
“CNG is lighter than air, which means any leakages rise in the air; there are no spillages, and if ever this gas catches fire it burns high in the air, unlike LPG,” said Abu Khalil. He added that CNG cylinders undergo rigorous testing, are capable of withstanding penetration by a 30-caliber bullet without rupturing, are designed for a specific life span and only need to be inspected every three years or 58,000 kilometers.

According to documents given to EXECUTIVE by the ministry, data from the United States showed the vehicle injury rate of the 8,331 natural gas vehicles surveyed was 37 percent lower than gasoline vehicles and that there were no reported fatalities, compared with 1.28 deaths per 100 million miles for gasoline vehicles.

“For over three months we were searching for an accident related to CNG, but all accidents were due to gasoline and hybrids,” said Minister Bassil’s advisor Michel-Ange Medlej. “We are not against hybrids but want all the alternatives available for the consumer. The Lebanese consumer should be able to choose what they want their vehicle to run on.”

Rolling out CNG

The ministry is keen to emphasize CNG as an alternative fuel choice. They feel that market fundamentals will provide the incentives for consumers to convert vehicles to CNG and that fuel distributors will make a return on investment from installing CNG pumps at stations.

“The real subsidy is the fuel, as it is cheap and a retro conversion [of a car’s engine from gasoline to CNG] is around $2,000. The return on investment would be very quick,” said Abu Khalil. The advisors cited service taxi drivers as prime target users of CNG, given an average monthly fuel bill of some $600.
“The encouragement comes when you commercialize CNG. Service taxis, light vehicles and special vehicles are the users we want to attract to CNG,” said Medlej. “Most private owners will not opt for a change to CNG but if the fuel bill increases it will give the [impetus] to switch to CNG,” he added.

In terms of infrastructure, CNG would come from the Arab-Mashreq Gas Pipeline that enters Lebanon from Syria. With the prospect of Lebanon having gas in its territorial waters, this could be a further incentive for adopting CNG. “Why did Pakistan reach 2.5 million CNG cars? [Because] it is a natural gas producer and an oil importer,” said Medlej. “If we become a gas producing country, why not use CNG?”
Lebanese natural gas will not be coming anytime soon, however, and in the meantime gas stations would have to offer imported CNG to consumers if the law is passed. “It is around $300,000 in investment per pump to install CNG at an existing fuel station. That is nothing compared to the amounts of money paid by companies to build new gas stations, and as CNG is cheaper there will be a higher profit margin,” added Medlej. Others in the private sector, however, have cited concerns over the costs, saying that they can reach up to $500,000. While the advisors concede that demand will be related to the availability of CNG, they expect a gradual uptake of the fuel.

“It will take time. You can’t just flip a switch and change to have 500,000 CNG cars,” said Dany Samaha, advisor to minister Bassil. “CNG roll out will need quality control, procedures, employees and mechanics, but the law needs to [be passed] first and then we can address the private sector for investment. It will not take more than a year.”

With no incentives to consumers or financial assistance for fuel companies to install CNG pumps, the adoption of CNG will not impact the government’s financial budget, nor will the treasury lose out on taxes generated from CNG, confirmed Abu Khalil. While no parliament has been formed as of Executive going to print, the expected dominance of the upcoming cabinet by the former opposition March 8 coalition is considered a green light for the ministry’s plan, especially as it is in the hands of the Free Patriotic Movement (FPM). “We are optimistic [that] with the imminent change in government we will have the upper hand and not face all the hurdles faced in the last government, and that should be reflected in many other projects,” said Abu Khalil.

Opposition to CNG

CNG has been opposed not only by the parliamentary committee but also by car dealers. The AIA has opposed the move on safety grounds and dealerships are keener on introducing hybrid technology.

Opposition to the plan is also seen as politically motivated, with opponents even suggesting, off the record, that the energy ministry, which is in the hands of March 8’s FPM and allied to pro-Iranian Hezbollah, is pushing for CNG because of the Islamic Republic’s widespread adoption of the alternative fuel. If Lebanon hitched onto the CNG wagon, so the argument goes, this would result in preferential business deals with Iranian companies for gas conversion, infrastructure installation, rollout expertise and even importation of Iranian-made CNG vehicles. Indeed, Syria recently asked for Iran’s guidance in implementing CNG — Iran has converted 1.9 million vehicles to CNG and in the next four years aims to be a global leader in CNG stations and consumption.

On the other hand, sources close to the energy ministry say that the parliamentary committee’s decision was due in part to “ignorance” about CNG, confusing it with LPG. It is also said that the committee was influenced by car dealers and oil companies, both of which oppose CNG for commercial reasons; leading manufacturers do not produce CNG cars and the conversion would render many marketable attributes essentially obsolete, such as engine size and sound damping technology. It would also affect vehicles’ overall design, with CNG typically increasing a vehicle’s weight due to the tanks fitted in the trunk (although other options are available such as cylinders made of composite materials).

Oil companies would, of course, have less gasoline to market, even though they could sell CNG instead, but margins would be lower due to the limited options of where suppliers may obtain it. Costs are also cited as being prohibitive. On top of the cost of new pumps, CNG would also have to be far better regulated than gasoline, requiring more work by the fuel companies and regular governmental inspections.

The dealerships’ stance

Nabil Bazerji, managing director of GA Bazerji and Sons, the dealer for Suzuki, Lancia and Maserati, said, “CNG is something unrealistic for a country like Lebanon. Automotive sales will not be affected as mass production is not available at the majority of automotive brands, while adaptation of vehicles is done by specialized companies.”

Other dealers oppose CNG on similar grounds, citing market fundamentals. “When we were asked by the AIA whether we were interested in gas cars and [which] manufacturers produced them, we said it was not for us,” said Anthony Boukhater, deputy general manager of ANB Boukhater, dealer for Mazda and Aprilla, Vespa and Piaggio motorbikes.

“Mazda will never produce special cars just for Lebanon as it is such a small market. This needs to be thought about market-wise. For India, Pakistan and Egypt these are large markets [with] over one million vehicles [sold] a year. Not the new and used 100,000 vehicles a year market like in Lebanon,” he added.

But the car dealers’ primary opposition is on safety grounds and the feasibility of investing in the necessary infrastructure.

“Countries that have adapted vehicles to natural gas do so under severe controls. This will never be the case for Lebanon. [That’s] where the danger comes from,” Bazerji said.
On concerns over safe implementation of CNG, dealers do have a point, which has been echoed by environmentalists.

“In principle I am not against CNG but we need the infrastructure and rigorous standards as it is dangerous. In Lebanon, it is a pity to say, we cannot rely on law enforcement to make sure the laws are respected,” said Hassan Jaber, vice president of the Lebanese Association for Energy Saving and for the Environment (ALMEE). “At the méchanique [annual vehicle inspection], they are supposed to have checked 1.1 million vehicles since 2009 but so far only checked 160,000. Some people are even using additives in the fuel to get their car passed. The checks should be continuous, not [every other year].”

Indeed, consistency is a major concern. When the previous government started cracking down on reckless driving and introduced speed cameras last year, road accidents dropped by 10 percent in October and November, with the death-rate down 43 percent and injuries down 12.5 percent. But once the parliament dissolved in January, the police crackdown tailed off, as it has in the past when enforcing seat belt laws, stopping drivers using mobile phones or ensuring that motorbike riders wear helmets and refrain from driving the wrong way up one-way streets. “Motorbikers are like motorized pedestrians — they drive on the sidewalks and go through red lights, right in front of the police and they do nothing,” said Bazerji.

Furthermore, there are an estimated 20,000 cars that have been converted to run on natural gas canisters — the kind found in most kitchens. “Nobody is stopping these vehicles and there are no regulations or controls. If the government cannot stop this illegal usage, who will guarantee that this parallel production will not grow and put the country into real danger?” said Bazerji.

While the ministry claims that they have scoured the world for cases of accidents related to CNG and failed, there have been several cases of CNG-related accidents and even deaths. The potential hazards are illustrated by two examples from India this year, one where 15 passengers on a CNG bus were lucky to escape unscathed when a leakage in a fuel pipe caught fire, the other in February when a New Delhi woman was killed after the CNG vehicle she was in hit a divider and burst into flames.

With that said, properly regulated CNG vehicles are, according to expert analysis cited earlier, less dangerous than combustion engines.

The diesel disaster

A further reason dealerships are wary about the proposed introduction of CNG is over the government’s prior handling of diesel fuel. In the 1990s, the government encouraged the use of diesel over gasoline, with a high percentage of cars switching to diesel due to its lower costs and the efficient mileage attained. But after a few years it became apparent that many cars were running on substandard diesel that was highly pollutive. In 2002, the government banned diesel for private vehicles, limiting usage to buses and vehicles over a certain tonnage. This volte-face by the government caused havoc in the sector as consumers had to change back to vehicles powered by gasoline.

“We had to make the diesel switch possible to drivers as there were protests outside our showroom. That government policy put us in a bad situation,” said Rachid Rasamny, marketing manager of Century Motors, a dealership for Hyundai.

As of January, a parliamentary committee approved the import of new cars and vehicles that run on “green diesel” that complies with Euro 5 standards and banned the import of regular diesel vehicles, although the law still has yet to be passed. It appeared to imply that private diesel vehicles would be allowed but this was in the end not the case, provoking confusion at dealerships.
“I don’t understand this non-diesel policy. A comprehensive car policy has not been thought through. It is more short-term fighting over current high oil prices,” Rasamny said.

Hybrids

While the ministry is not against hybrids per se, it cites the same concerns the parliamentary committee voiced about CNG: safety.

“We don’t understand proposing hybrids and opposing CNG on safety, as hybrids are the real threat,” said the ministry’s Abu Khalil. “Hybrids are an alternative but [are] not as safe — a 400 volt battery alongside a gas tank… any spark would very easily ignite it, making it a car bomb.”

The car dealers dispute this claim, highlighting the awards hybrid cars have received and the billions of dollars spent on research and development that have gone into producing dual gasoline and electric powered vehicles.

“The Toyota Prius has been on sale in Japan since 1997, before even Google and Facebook were around,” said Philip Fred Boustany, managing director at BUMC, exclusive distributor of Toyota and Lexus. “As of September 2010, Toyota has sold 2 million units globally. The fact that hybrids run on electricity as well as gas is completely irrelevant when it comes to their safety. For example, Toyota designs its hybrids to withstand the same crash specifications as normal cars.”

Dealers also dismiss the ministry’s claim that hybrids are not suitable to Lebanon’s mountainous topography. “Hybrids are based on filling up the battery when running, but when climbing uphill the electric battery doesn’t work, so you have to use the regular engine, which doesn’t resolve the problem environmentally or economically,” said Abu Khalil.

Boustany counters that “the biggest misconception about hybrids is that they are not powerful cars.” Equipped with three different modes, Boustany said, the Prius is a very efficient car regardless of topography. “When climbing uphill, the regular engine will be doing its main job of power transfer to the wheels but at the same time recharge the batteries which will be used downhill, or further recharged through regenerative braking. In addition, if you end up stuck in traffic or at a standstill, your Prius will shut off its gas engine, saving you gas and protecting the environment from harmful emissions.”

He added that it was a “myth” that all hybrids need to be plugged into a charger on a daily basis, or that the batteries require replacement every three years.The major obstacle to introducing hybrids in Lebanon is the high costs of the vehicles themselves due to high customs and registration fees.

Boustany says the gas and environmental savings justify the price and he foresees 50 percent of all models offered by BUMC in 2015 will be hybrids or fully electrical vehicles. To Charles Tarazi, assistant general manager of Porsche, the cost of a hybrid — 7 to 8 percent more than a conventional vehicle — is a deterrent to consumers unless there are substantial tax incentives. “Why would you buy a hybrid in Lebanon? There is no point; you are paying more just to make a statement: ‘I’m driving a hybrid.’ It won’t save the world [if] a few guys drive hybrid cars,” he said, adding: “The main issue is tax advantages, yet in Lebanon there is no plan for the six-cylinder hybrid engines.”

Tarazi cited the tax advantages introduced in other countries for the six-cylinder Porsche Panamera, which has helped bolster sales: in the US, tax benefits reach up to $2,200, in Spain a 5 percent registration tax reduction was implemented and in France there is a $2,500 one-off tax reduction on car registration. “I think Syria was clever in changing the laws to promote hybrids, offering 50 percent less tax than on normal cars,” added Tarazi.

In Lebanon, it is the opposite; taxes are actually higher for hybrids than conventional vehicles, with the registration fee of a Toyota Prius 1.8L hybrid around $2,600, whereas a non-hybrid Corolla 1.8L is some $1,800.

A further impediment to hybrid adoption is that there has not been a big uptake throughout the Middle East and North Africa, with Lebanon’s small car market particularly susceptible to regional trends.
“The trend toward hybrids in the region has not really been successful. It is something we’ve discussed with the Hyundai Motor Company in South Korea,” said Rasamny. “I’m not sure we could get hybrids even if the law passes as there is not enough demand for it, especially since the high demand markets of Saudi Arabia, Syria, Egypt and Iraq are not buying hybrids. If there’s no demand in the more populous markets, Hyundai will not send us hybrid vehicles.”

With the law still pending, the nation’s dealers are reluctant to even come up with a marketing strategy.
“When I approached Hyundai about hybrids I had to give demand figures, but due to the draft law being unclear I couldn’t give adequate figures,” said Rasamny. “Once the law passes, we will see how it will alter our sales strategy.”

The road ahead

With the car industry backing hybrids (especially if taxes were lowered), it would seem a sensible option for the government to promote a technology being rapidly adopted around the world. To ensure its uptake, the Lebanese government should follow the lead of other countries by reducing or even scrapping taxation on the vehicles to make the cost difference between hybrids and conventional cars more attractive to consumers.

If the difference were, for instance, $5,000 between the two, hybrid consumers would get a return on investment over a few years given a much lower fuel bill, with hybrids able to cover on average some 450 kilometers per 20 liters of fuel. The proposed law allowing hybrids should also be expanded to include six-cylinder hybrids, made by luxury car manufacturers such as Porsche and Lexus.
As to which is cleaner for the environment — CNG or hybrids — it is a tough call. The technology is continuously being updated, as exemplified in the American Council for an Energy Efficient Economy’s “Greenest Vehicles of 2011” listing, which put the natural gas powered Honda Civic GX in first place, followed by the all-electric Nissan Leaf.

What the ministry did not discuss, nor did car dealers, is that the development of ultra-layered sulfur fuel and associated engine technology has narrowed the gap between CNG and other alternately powered vehicles in terms of meeting many countries’ national motor vehicle standards. The improvements have come so far that the mayor of London recently proposed replacing the city’s “Alternative Fuel Discount” — an exemption from fees that covered fully electric vehicles, hybrids and the cleanest gas powered cars — with a “Greener Vehicle Discount,” as some modern cars with conventional engines emit less carbon dioxide than most hybrids.

Lebanon will have to come up with a solution that is more environmentally friendly on one hand and, on the other, conducive to the particularities of the country. If only a limited number of consumers purchase hybrids, CNG or electric cars, the positive effects on the environment would naturally be minimal.
A high degree of realism is certainly needed to ascertain what is best for Lebanon, given the constraints and issues enumerated above. Hybrids, for instance, would cut down on fuel consumption without requiring installation of CNG infrastructure throughout the country. Furthermore, with the major brands manufacturing hybrids this would keep both dealers and car enthusiasts happy, as they wouldn’t have to retrofit vehicles for CNG.

The wheels on the public bus

The argument for CNG seems strongest when applied to service taxis, commercial vehicles and buses as a more limited roll out would enable better regulation to prevent CNG-related safety accidents and would limit the required number of fueling stations. Such a policy could also help revive public transport, with the number of blue and white public buses on the roads — as opposed to the private clunkers that do cover some parts of the city — dropping from 271 in 2008 to less than 15 today, according to Jaber of ALMEE.

While the cash-strapped government might oppose investing in public transport, the long-term benefits for the populace and the environment would be enormous. Alternatively, the government could enter into public-private partnerships to roll out a reliable bus network.

“We should have buses run on CNG as it would solve two problems in one: a new public transport with very low emissions and low cost of adaptation, as gas would be limited to stations owned by the transport ministry. Interfering with the daily life of the citizen and adding an alternative gas to the system is nonsense,” said Bazerji of GA Bazerji and Sons.

Improving the overall quality of fuel imported into Lebanon is a further solution to the country’s environmental woes, with imports, according to a source familiar with the issue, frequently substandard, highly pollutive and not well regulated by the government. Yet even if the green light is given to both CNG and hybrids it will do little to clean up the country’s air unless a comprehensive transport policy is developed.

“CNG will help reduce pollution and the cost of fuel, but CNG will not be the alternative,” said Yasmine Mahdi, senior transport engineer at SETS, a specialist engineering solutions firm. “Instead of technology, I’d think of alternative modes of transport for people to reduce the number of cars on the roads, the congestion and pollution. A feasible solution is to have a regulated bus transport network and get competitive companies to operate it. Other solutions are a congestion charge and increasing parking fees. There are many ideas that can be implemented by the government with no costs.”

Other alternatives

Further ideas floated by interviewees include car pool lanes to reduce the number of vehicles on the roads and the promotion of motorbikes to curb congestion, with hybrid bikes now available and, in any case, two-wheelers polluting far less than cars. “Putting in motorbike lanes would be very easy to do, and then people would want bikes and not take a car if on their own,” said Boukhater, the dealer for Mazda, Aprilla, Vespa and Piaggio. “It would also make insurance cheaper, while getting rid of all the cars parked on highways and big streets. Also, a motorbike can be bought on credit for $60 a month, whereas a car is $200 plus.”

“When I suggest this to people they say it is not in our mentality. But CNG is? It wouldn’t cost the government anything and they could do a test for a few months that limited the coast road [north from Beirut] to bikers,” he added. The idea could be taken further to restrict certain roads to vehicles with more than one person, buses and motorbikes.

Congestion in itself poses a significant environmental problem. According to the International Organization of Motor Vehicle Manufacturers, test-drives in the Stuttgart area of Germany “showed that a car’s fuel consumption can be 60 percent higher with congestion compared to driving the same route when there is free flow.”

Encouraging consumers to trade in old vehicles for more fuel efficient new models is also one option on the table, although this would require financial incentives from the government to do so, which is unlikely given the country’s poor fiscal health.

Implementing higher taxes on large vehicles such as sports utility vehicles (SUVs) — which emit 30 percent more carbon dioxide and 75 percent more noxious gases than a normal car, depending on the fuel used — is a further option to limit environmental pollution. Such a policy would meet resistance from dealerships, but if higher taxes were levied on SUVs the revenues could be used to finance the trade-ins of old cars for new cleaner vehicles.

Financial assistance from the European Union or the United States Agency for International Development could also be sought as well, as suggested by the AIA.

All options should be reviewed and considered objectively by the government for implementation — perhaps while stuck in traffic on the way to and from their parliamentary offices.

Ultimately, the traffic problem and the associated environmental pollution is not going to abate unless consumers are encouraged to switch to more eco-friendly vehicles and a viable public transport system is made available to lower the number of cars on the roads.

“The media and TV talk of socio-economic problems, but transport is not discussed in its own right. We should keep asking officials about transport solutions,” said Mahdi from SETS. “We are way behind other countries and need to catch up."