04 JAN – The Gulf Cooperation Council: A bloc in crisis

 

RIYADH: The Gulf Cooperation Council (GCC), set to meet Tuesday in Saudi Arabia amid a prolonged crisis, is a group of conservative Sunni monarchies sitting on a third of the world’s oil reserves.

 

The political and economic bloc — a regional counterweight to Shiite Iran — comprises Saudi Arabia, Bahrain, Kuwait, Oman, the United Arab Emirates and Qatar.But it has been in crisis since June 5, 2017 when Saudi Arabia, UAE and Bahrain, along with non-GCC member Egypt, severed diplomatic ties with Qatar.

 

They accused Doha of supporting “terrorists” and being too close to Iran, something the small, gas-rich state denies. Kuwait and Oman maintained links with Qatar, and Kuwait has tried to mediate in the crisis — to no avail so far.

 

The GCC was formed in May 1981, at the height of the Iraq-Iran war and two years after the Islamic revolution in Iran, which had sent tremors across the Sunni-led Gulf states, many of which have sizable Shiite populations.

 

The six countries, which are mostly desert, have a combined population of some 52 million, half of whom are expatriates. Only Kuwait and Bahrain have elected parliaments with legislative powers.

 

In 1984 the GCC formed a joint military force, the Peninsula Shield, but it was not able to prevent Iraq’s 1990 invasion of Kuwait.Since US-led forces drove Saddam Hussein’s army from Kuwait the following year, GCC members have individually signed major defence pacts with Washington.

 

GCC states largely dodged the pro-democracy protests unleashed by the 2011 Arab Spring, except for Bahrain, where authorities crushed a movement demanding a constitutional monarchy and an elected prime minister.

 

At the height of the unrest, in which dozens of people were killed and hundreds of mainly Shiite activists detained, the Gulf force rolled into Bahrain to bolster the kingdom’s security forces.

 

The GCC has sought to deepen economic links among members by approving a common market, customs union, a shared currency and central bank, but most of the decisions have not been put into practice.

 

The GCC does allow for the free movement of citizens and capital, but restrictions remain for hundreds of economic activities.Despite long-running projects aimed at diversification, GCC economies remain heavily dependent on oil revenues, which make up 70 to 90 percent of total public income.

 

The six countries currently produce a fifth of the world’s crude oil supply.A fall in oil prices in 2014 strained their finances, forcing them to borrow and draw on assets to cover their generous public spending commitments.

 

In January 2018, Saudi Arabia and the UAE, which account for 75 percent of the GCC’s economy, introduced a five percent value-added tax, a first for the Gulf, on most goods and services.Bahrain and Oman later followed suit.

 

The coronavirus pandemic last year compounded the impact of low oil prices, which remain volatile, the International Monetary Fund warned in December. It said GCC countries faced a six percent drop in GDP for 2020, their worst slump in decades.

 

In mid-September, the UAE and Bahrain formalised US-brokered deals to normalise ties with Israel. Some analysts predict Saudi Arabia and Oman could follow.Concern about Iran, accused of extending its influence in the region, was a key factor in the rapprochement between Israel and the Gulf countries.

 

ETEW