AngloArabia why gulf wealth matters to britain

Contents Cover Copyright Acknowledgements Introduction Notes Empire’s Legacy Britain’s Arabian empire takes shape The long retreat: the Second World War to 1971 Empire’s sunset, imperialism’s survival Conclusions Notes Oil and Gas: The Strategic and Commercial Prize The strategic importance of Gulf energy to the UK Strategic importance of Gulf energy – the ‘dual logic’ British commercial interests in Gulf energy Conclusions Notes British Neoliberalism and Gulf Capitalism: A Perfect Fit Britain in the global economy: 1991–2017 The GCC economies: opportunities for British capitalism Conclusions Notes How Important is Gulf Wealth to British Capitalism? UK–GCC trade and investment: 1991–2017 Conclusions Notes Arming Authoritarianism The political economy of British arms sales UK–GCC arms sales in the modern era Major deals and inter-Western competition Questions of corruption and malfeasance Military cooperation Conclusions The Arab Uprisings and the War in Yemen The Arab uprisings British support for the Saudi-led intervention in Yemen Conclusions Notes Conclusion Some wider lessons Notes Index End User License Agreement Table Table 2.1 Share of global proven oil reserves, 2016 Table 3.1 Leading sovereign wealth funds, including all from GCC, June 2016 Table 4.1 UK exports of goods and services worldwide, 2015, in current prices Table 4.2 UK primary income, 2015, in current prices Table 4.3 Liabilities to counterparties resident in GCC, by location of bank Table 4.4 External liabilities of monetary financial institutions operating in the UK Table 4.5 External assets of monetary financial institutions operating in the UK Table 4.6 UK current account balances worldwide, 2015, in current prices Table 4.7 Gulf region contributions to total UK current account balance by sector, 2015, in current prices Table 4.8 The UK’s net international investment position and selected sources of capital imports, 2015, in current prices Table 6.1 Value of export licences approved by the UK government in respect of Bahrain Figures Figure 2.1 UK petroleum and gas imports as a percentage of primary supply Figure 2.2 UK crude oil imports by country/region of origin Figure 3.1 UK current account deficit since the end of the Cold War, as a percentage of GDP Figure 3.2 GCC major hydrocarbon producer-state current account balances, in current prices Figure 3.3 GCC total current account surpluses in global context, in current prices Figure 4.1 UK exports of goods and services, in current prices Figure 4.2 UK asset ownership in the Gulf region over time, current prices Figure 4.3 UK current account balances with the Gulf region, in current prices Figure 4.4 UK net international investment position with Saudi Arabia and other Gulf Arabian countries, in current prices Figure 5.1 Leading sources of major arms transfers to Saudi Arabia, 1991–2015 Figure 5.2 Values and overall linear trend of major arms transfers from the United Kingdom, 1991–2015 AngloArabia Why Gulf Wealth Matters to Britain David Wearing polity Copyright © David Wearing 2018 The right of David Wearing to be identified as Author of this Work has been asserted in accordance with the UK Copyright, Designs and Patents Act 1988 First published in 2018 by Polity Press Polity Press 65 Bridge Street Cambridge CB2 1UR, UK Polity Press 101 Station Landing Suite 300 Medford, MA 02155, USA All rights reserved Except for the quotation of short passages for the purpose of criticism and review, no part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher ISBN-13: 978-1-5095-3206-3 A catalogue record for this book is available from the British Library The publisher has used its best endeavours to ensure that the URLs for external websites referred to in this book are correct and active at the time of going to press However, the publisher has no responsibility for the websites and can make no guarantee that a site will remain live or that the content is or will remain appropriate Every effort has been made to trace all copyright holders, but if any have been inadvertently overlooked the publisher will be pleased to include any necessary credits in any subsequent reprint or edition For further information on Polity, visit our website: politybooks.com Acknowledgements While responsibility for any errors – grammatical, factual or analytical – is entirely my own, I owe a debt of gratitude to many whose help was crucial in carrying out this research Gilbert Achcar has been an invaluable mentor and a formative intellectual influence I am very grateful to him, and to Adam Hanieh and Alfredo Saad Filho, for their guidance and advice on the doctoral thesis that formed the basis of this book In general, the academic community at the University of London’s School of Oriental and African Studies – both staff and students – provided the perfect environment in which to develop and sharpen my understanding of this complex topic The Lipman–Miliband Trust was kind enough to award me a small grant from the Peter Gowan Prize fund to support my endeavours Campaign Against Arms Trade kindly provided access to their meticulously curated archives and to their considerable collective knowledge and expertise Rosemary Hollis and Tony Norfield were both very generous with their time, and I learned a great deal from our conversations In attempting to turn my thesis into a manuscript that retained its academic rigour while becoming accessible and engaging for a general audience, I am indebted to the patience and professionalism of Louise Knight and Nekane Tanaka Galdos at Polity, and to the wisdom of a very kind and constructive academic reviewer Thanks must also go to David Gee, Caroline Richmond and everyone involved in the production of the book, which has benefited significantly from their input For a mixture of helpful chats, support and good company, heartfelt thanks go to Mike Walton, Rachel Shabi, Nithya Natarajan, Maya Goodfellow, Niheer Dasandi, Sarah Crook and Clare Clark For their unique insights and their inspiration to me, I am deeply grateful to Ala’a Shehabi, Maryam al-Khawaja, Iona Craig, Rasha Mohamed and Sayed Alwadaei Above all, this work is dedicated to my family and to the fond memory of my grandparents, with much love Introduction The Gulf Arab monarchies, and Saudi Arabia in particular, are among Britain’s most important allies in the world – arguably more important than any other states in the global south Investment from the Gulf is becoming highly visible in the UK economy, and controversy over British arms sales in the region – in the context of the Arab uprisings or the war in Yemen – is rarely far from the news At the time of writing, a major humanitarian catastrophe is unfolding in Yemen, in large part as a result of a military intervention led by Saudi Arabia in which Britishsupplied arms have played a very significant role Yet, until now, no detailed and comprehensive study of Britain’s relationships with the Gulf states has been produced in the modern era This book attempts to map the deep, material structures of Britain’s relations with the states of the Gulf Cooperation Council (the GCC), a grouping of Arab monarchies comprising Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates (UAE) and Oman It will trace the historical background to these relationships, the arms that have been sold, the investments that have been made, the real significance of oil, and the balance of power between the two sides What emerges is a unique Anglo-Arabian nexus of power and interests holding major importance for British capitalism and foreign relations The reader will hopefully come away with a rich and detailed sense of why the Gulf Arab monarchies matter to the UK, and why the UK matters to them The key arguments of the book can be summarised as follows First, UK–GCC relations in the modern era are the product of historical processes, particularly relating to the century and a half when the British Empire was the dominant power in the Gulf Second, British power has been an important factor (among others) in the promotion and preservation of monarchical rule in the region Third, the UK’s current interest in Gulf oil and gas is less about direct energy supply and more about strategic, geopolitical and commercial interests Fourth, the current forms of capitalism that exist in the UK and in the GCC area have come to complement each other in a series of important ways Fifth, and relatedly, the GCC area is as important to British capitalism as – and, in some crucial senses, more important than – any other part of the global south Sixth, UK arms exports to the Gulf Arab monarchies are less about commercial profit and more about their strategic value to British military power, which value is highly significant and growing Seventh, the British government has in recent years played a key enabling role in supporting both the authoritarian backlash against the ‘Arab Spring’ in the Gulf and the disastrous Saudi-led intervention in the war in Yemen The primary focus of this book is the period following the end of the Cold War up until the present day This is a distinct epoch in the modern history of international relations, part of the broader era of neoliberal ‘globalisation’ in international political economy The period after 1991, the fall of the USSR and the end of the Gulf War to expel Iraqi forces from Kuwait is also a specific historical chapter in the international relations of the Middle East Coutts, K 92, 95 current account balances 97–101, 141–4 UK deficit 91–2 financing 92–3, 144–6 see also balance of payments, UK Curtis, M 9–10, 19, 38–9, 159 D Daily Telegraph 182, 190–1 Darling A 135–7 Defence and Security Organisation (DSO), UK 158 Department for International Trade, UK 121, 123, 158 Department of Trade, UK 150 domestic growth areas, GCC 106–7 dual logic: strategic importance of Gulf energy 58–67 Dubai International Capital 137–8 E Ellwood, T 207 energy supply, UK 51–3 European Central Bank (ECB) 98–9, 102, 129 European colonialism and capitalism 6–10 Western discourse on Middle East 4–7 European Union (EU): Brexit 114, 147, 151–2 Evening Standard 181 Export Credit Guarantee Department, UK 158 exports see arms sales; trade and investment F F&C Asset Management 173–4 Faisal, King (Saudi Arabia) 28, 31, 32 Fallon, M 184, 211 financial/banking sector (City of London) 86–88 arms deals: corruption allegations 173–4, 185 and balance of payments 91–2 and current account deficit 93 global importance of 94, 111–12, 113 history of 22 importance of Gulf capital to 128–34, 137–9, 147–8, 152 financial/banking sector, GCC 89–90, 96 financial crisis (2008) 68, 70–1, 105, 106, 129–30 Barclays, Qatar and 135–7 Financial Times 79, 80, 123, 130, 135, 136, 137, 175, 177–9, 191–2 First World War 14–15, 16 Foreign Affairs Committees Arab uprisings 5, 63–4, 192, 199, 200–1, 203–4 arms sales and military cooperation 156, 182–3, 214 energy security 63–4 Iraqi invasion of Kuwait 49 trade and investment (1991–2017) 115, 120, 123–4, 128 Foreign and Commonwealth Office (FCO) 63–4, 160 foreign direct investment (FDI) 126–7, 153 France arms market competition 161, 162, 166, 169 capitalist power 112 colonialism 7, 9, 13 oil market competition 66, 70 Suez crisis 26 G Galpern, S 21 gas see under oil geopolitical logic in respect of Gulf energy UK articulations 65–6 US articulations 60–2 Gieve, J 100, 128, 129, 139–40 Gilmour, I 170 global capitalism financial industry, UK 94, 111–12, 113 financial markets and GCC SWFs 102–4 and power 7–8, 18–20, 112–13 global context of Gulf energy 53–6 global economy (1991–2017), Britain in 91–5 Goldsmith, Lord 172–3 Goldthau, A 56–7 The Guardian 80, 151, 167–8, 174, 175, 181, 196, 208 Gulf Cooperation Council (GCC) and Asia 57–8 economies: opportunities for British capitalism 95–107 founding of 42–3 investment in UK and state encouragement 146–50 UK relations: overview 1–10, 216–24 see also specific issues and countries ‘Gulf Strategy Unit’ 193 Gulf War (1991) 43–4, 49–50, 157, 165 Gulf wealth and British capitalism 110–12, 150–3 British capitalist power, key components 112–14 trade and investment (1991–2017) 115–50 H Hadi, president of Yemen 205–6 Hague, W 129, 190, 194 Halliday, F 36 Hamad, king of Bahrain 190–1, 202–3 Hammond, P 206 Hanieh, A 29–30, 96, 97, 99, 130 Harvey, N 199 Hendy, C 123 hierarchical relations: colonialism and capitalism 6–10 Hollis, R 12, 71–2, 90, 196, 205 Hopkins, A 22, 87 Hourani, A 23 House of Commons Joint Committees on Arms Exports Controls 196–7, 198, 209 see also Foreign Affairs Committees House of Lords 176–7 Houthi rebels, Yemen 205–6 Howell, Lord 115, 146–7 HSBC 137–8, 149–50 human rights and political violence 157, 181–2, 188, 194–200, 201–2, 223 Yemen 207–11 Human Rights Watch 188, 196, 202, 203, 208–9 I The Independent 168, 181–2, 207 Independent on Sunday 172 India arms exports to 164 BRICS countries and Gulf, compared 118, 126, 133 colonialism 13, 14–15, 17, 19, 20, 27, 84 energy demand 56, 61, 83 infrastructure GCC 88, 106–7, 147 Kuwait 121–2 Qatar 121 Saudi Arabia 75, 121 UAE 124 UK 147 insurance firms, UK 123 International Crisis Group 208 international investment position (IIP), UK 93 International Monetary Fund 100–1 international oil companies (IOCs), UK changes in 68–70 current health of 70–1 in Gulf 74–81 relations with British government 71–3 International Petroleum Investment Corp 135 investment and trade (1991–2017) 115–50 Iran Anglo Persian Oil Company (APOC) 14–15, 21, 24, 25 coup (1953) 24–5 Houthi rebels, Yemen 206 and Oman 36 and US 24–5, 33, 39–40 Iran–Iraq war 33, 42–3, 158 Iraq economy 117 and Kuwait 29 oil 15, 66–7 Iraq wars 1991 (Gulf War) 43–4, 49–50, 157, 165 2003 61, 62, 72–3, 178 post-invasion investment 125–6 Islamic finance 128–9 J Jane’s Defence Weekly 169, 179 Jessop, B 7–8 Joshi, S 179 K bin Kamal, Y (Qatar) 130 Al Khalifa monarchy (Bahrain) 138, 181, 200, 201–2, 203 Khalilzad, Z 61 King, T 165 Kinninmont, J 204 Kuwait arms deals 157, 165 and Arab uprisings 190 independence 28–9 investment in UK 150 Iran–Iraq war 42–3 and Iraq 29 invasion (Gulf War 1991) 43–4, 49–50, 157, 165 nationalism 35 oil 29 British IOCs in 76–7 trade and investment 121–2 Kuwait Investment Authority (KIA) 102, 104, 105, 148 Kuwait Investment Board (KIB)/ (KIO) 89, 90 L Lacey, R 200–1 M manufacturing, UK 86, 87, 88–9 enduring importance of 95 exports 118 May, T (PM) 151–2, 211 Mayall, S Middle East and North Africa (MENA) region 121, 196–7 military, British 29–30, 33–4 Aden 27–8, 31 Iran–Iraq war 43 Oman 36 Suez crisis 25–7, 29, 31 see also Iraq wars; military cooperation; military training military cooperation 177–9, 186, 191–3 post-Cold War developments 179–83 Yemen civil war 206–7, 211 military goods see arms sales military training police and 180–2 Saudi Arabian National Guard 28, 34, 182, 199, 200 Ministry of Defence (MOD) 41, 127, 158–9, 175, 180 monarchical rule fortifying 33–6, 222–4 Mossadeq, Mohammad (PM of Iran) 24–5 Munro, A 214 Muslim Brotherhood 80, 183, 191–2 N Al Nahyan, Sheikh (president of UAE) 191 Nasser, Gamal Abdul 25–7 national oil companies (NOCs) 48, 68, 69, 73, 74, 75 National Security Strategy, UK 62–3, 65–6 nationalism, threat of 23–31, 35–6 neoliberalism see also British neoliberalism Nonneman, G 41 Norfield, T 111, 112–14, 136 North Atlantic Treaty Organization 60 North Sea oil 39, 51, 52, 89 Nsouli, S 100–1 O The Observer 72, 170, 173 offshore wealth, GCC 138 oil crisis (1973–4) 37, 86–7, 155, 161 and gas 9–10, 47–50, 81–3, 216–8 strategic importance 50–67 UK commercial interests 67–81 post-2000 boom and current account balances 97–101 domestic growth 106–7 sovereign wealth funds (SWFs) 101–6 and sterling 20–2, 24, 26 supply routes 55–6 see also British Empire; petrodollars; specific countries Oman arms deals 165, 190 Dhofar rebellion 28, 35–6 foreign direct investment (FDI), UK 127 military cooperation 179, 193 oil 74 British IOCs in 77 and Saudi Arabia 25 uprisings (2010–11) 188, 189 OPEC 37–8, 39, 43, 48, 55–6, 150–1 Ottoman Empire 15, 16, 29 P Partrick, N 205 ‘Peninsula Shield’ force 181, 188 petrodollars 89–91, 97, 99, 130–1, 156, 165 crisis and opportunity, US 37–40 recycling 86–7, 100–1, 156, 217–8 Phillips, T Phythian, M 155, 157, 158, 213–14 police and military training 180–2 political violence see human rights and political violence Pollack, K 59–60, 61 Portillo, M 166, 179–80 private security firms, UK 198 Q Qatar arms deals 157, 165, 166, 183–4, 190 Barclays and financial crisis (2008) 135–7 coup 157, 166 crisis 183–4 gas (LNG) 52, 53, 57, 77–8, 79 investments in UK 146–7, 149–50, 152 foreign direct investment (FDI) 127 oil: British IOCs in 77–9 UK export market and investment 121, 122, 123 Qatar Investment Authority (QIA) 102, 105, 130, 135, 146, 149–50 R Rabi, U 29 Raphael, S 58, 193, 198 Rayner, C 124 ‘Red Line Agreement’ 18 ‘Red Sea Oil and Gas’ project, Saudi Arabia 75 ‘rentier state’ paradigm 95–6 Rifkind, M 166–7 Roberts, D 193 Rogan, E 156 Rolls-Royce 89, 122, 123, 127 Rowthorn, R 92, 95 Royal Dutch Shell see Shell Royal United Services Institute 179, 182–3, 205 S Saddam Hussein 42, 43–4, 62 Said, E Al Said, Qaboos (sultan of Oman) 35, 36, 138 St John, J 193, 198 Al Salam arms deal, Saudi Arabia 168–9, 171–2, 175–6 Sampson, A 20 Sassoon, Lord 115, 122–3, 146 Saud, King (Ibn Saud) 15, 16, 17, 28 Saudi Arabia arms deals 118–9, 141, 158–9, 162–4 corruption and malfeasance allegations 169–77, 185, 192 Al Salam 168–9, 171–2, 175–6 and uprisings 189, 194, 199 Al Yamamah 40–2, 127–8, 158, 162, 166–8, 171 Yemen civil war: Coalition intervention 5, 205–12, 213–15 Bahrain uprising, intervention 188, 199, 200–1 Gulf war 43–4 history 15–18 military training 28, 34, 182, 199, 200 nationalism 30 oil 17–18, 54, 55, 97 British IOCs in 74–6 crisis 38–9 and Oman 25 security logic, UK 64 trade and investment 107, 115, 121, 123 financing current account deficit 144–6 foreign direct investment (FDI) 127–8 and US 39–40 dollar 97 Saudi Arabian Monetary Authority (SAMA) 102, 104, 105 Saudi Arabian National Guard 28, 34, 182, 199, 200 Saudi Arabian National Guard Communications Project (SANGCOM) 159 Saudi British Offset Programme 127–8 Second World War 17–18 and post-war era 18–31, 88–91 security and intelligence services 33, 34–5, 158, 174–5 security logic in respect of Gulf energy UK articulations 62–4 US articulations 59–60 Serco 124 Serious Fraud Office (SFO), UK 136, 169, 171–7 Shell 67–8, 70, 71, 74 and Anglo Iranian Oil Company (APOC/AIOC) 21, 25 Iraq 72–3 and Al Yamamah arms deal 41 Silverfarb, D 16 Sluglett, P 13 sovereign wealth funds (SWFs), GCC 101–6, 128, 129, 130, 147–8 Stavrianakis, A 195, 210 sterling crisis (1966) 31 importance of GCC 139–41, 152–3 and oil 20–2, 24, 26 Stockholm International Peace Research Institute 159, 160 Stokes, D 58 Straw, J 62 Suez Canal 14, 15, 19–20 Suez crisis (1956) 25–7, 29, 31 T terrorist groups, Yemen 209 Al Thani, Sheikh (Qatar) 135, 137 Thatcher, M (PM and government) 40–1, 43, 87–8 The Times 181, 197–8 Tomkys, R 200 trade and investment (1991–2017) 115–50 Trucial States 30–1, 32 U UK Export Finance (UKEF) 123, 124 UK Trade and Investment (UKTI) 123–4, 147–8, 158 UK Working Group on Arms 198 Ulrichsen, K C 203–4 UN High Commissioner for Human Rights 207–8 UN Security Council 206, 208, 209, 214–15, 220 United Arab Emirates (UAE) arms deals 161–2, 191 and military cooperation 179–80, 191–2, 193 foreign direct investment (FDI) 127 oil 74 British IOCs 79–81 trade, UK 107, 120–1, 124 UK investment in 147, 148–9 US arms exports 160–1, 162, 163, 164, 165, 166, 167–8 dual logic: strategic importance of Gulf energy 58–62 Energy Information Administration 54 global economic power 112–13 hegemony 7, 9, 27, 49, 58–9 Iran 24–5, 33, 39–40 military cooperation 177–9 petrodollars: crisis and opportunity 37–40 Qatar crisis 183–4 and Saudi Arabia 17–18, 105 US–UK relations 8, 9–10, 65–6, 221–2 colonial decline and withdrawal from Gulf 18–20, 31–2, 33 Iran coup (1953) 24–5 power and geopolitics of Gulf energy 66–7 Suez crisis (1956) 26–7, 31 Al Yamamah arms deal 41–2 criminal inquiry 176, 177 see also Iraq wars V values, UK 5–6 Varley, J 135 Vosper Thorneycroft 165, 166 Y Al Yamamah arms deals, Saudi Arabia 40–2, 127–8, 158, 162, 166–8, 171 Yemen Aden 27–8, 31 Bab el-Mandeb Strait 55–6 civil war, Saudi-led intervention in 5, 205–12, 213–15 economy 117 Z Zinni, A 59 POLITY END USER LICENSE AGREEMENT Go to www.politybooks.com/eula to access Polity’s ebook EULA ... dimensions of AngloArabian trade and investment today and attempts to ascertain precisely how much Gulf wealth matters to British capitalism Gulf wealth does not simply matter to Britain in a... is through the sweep of this historical narrative that we learn how Gulf wealth came to matter to Britain in the way it does today Gulf oil and gas are best understood, first, as a source of geostrategic... arms transfers to Saudi Arabia, 1991–2015 Figure 5.2 Values and overall linear trend of major arms transfers from the United Kingdom, 1991–2015 AngloArabia Why Gulf Wealth Matters to Britain David