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from Breakingviews:
Saudis wouldn’t gain much from a union with Bahrain
By Una Galani
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
Saudi Arabia’s call for Gulf nations to combine into a single entity appears to lay the ground for some kind of union with Bahrain. King Abdullah first highlighted the security issues facing the region when its leaders met in December - nine months after the kingdom sent tanks to tame a pro-democracy movement in Bahrain. Speculation is now swirling about how the relationship between the strongest and weakest members of the six-nation bloc could evolve, ahead of a meeting of the Gulf Cooperation Council this week.
The old idea of a Gulf union has taken on a new meaning after the Arab uprisings. Saudi Arabia hasn’t given any details on what it envisions beyond the existing cooperation on security and selected financial issues. But the six Gulf countries won’t easily set aside their political differences just to please each other. And plans for a Gulf monetary union, loosely based on the European model, appear to be stuck following the intention of the UAE and Oman to opt out.
That leaves the focus on Bahrain and Saudi Arabia, which already share strong links. As well as underwriting security of the island state, the house of Saud already partially bankrolls its finances. Bahrain gets roughly 150,000 barrels per day of oil from the offshore Abu Safah field, operated by Saudi Aramco under a decades old agreement. The revenues generated from its share of the field accounted for as much as 70 percent of Bahrain’s budget revenues in 2010.
A full fiscal union would help Bahrain lower its borrowing costs. Even with current Saudi support, it may run a budget deficit at four percent of GDP this year. The IMF estimates Bahrain’s gross public debt is around 40 percent of GDP. Total foreign debt is almost 15 percent. Bahrain’s gross domestic product is barely five percent of that of the two kingdoms taken together.
But a union formalising the status quo carries risks that don’t make it worthwhile. A pre-emptive move would pour fuel on the flame of the protests. It would also antagonise Iran, which once laid claim to the majority Shi’ite island. Any transfer of Saudi social austerity would also kill Bahrain’s raison d’etre among the Saudi businessmen and expatriates who escape to Manama to relax. Saudi rhetoric paves the way for a stronger union in the event that Bahrain’s regime is overwhelmed - but in that case, union would be just a name for annexation. In the meantime, the move isn’t worth the bother.
from Full Focus:
Images of April
Photographer Bobby Yip traveled to North Korea for a rare look inside the secretive nation as they prepared to launch a rocket. Protests continued in Bahrain ahead of the Formula One Grand Prix and Los Angeles marked 20 years since the riots sparked by the beating of Rodney King. Other subjects included in the gallery include a goat in New York City and Olympic preparations around the globe. WARNING: GRAPHIC CONTENT
from Breakingviews:
Formula One has much to lose in Bahrain race
By Una Galani
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
Formula One has failed to see the red flag in Bahrain. The prestigious sporting event won’t gain much from holding a fixture on this tiny Gulf island still in turmoil from its Arab uprising, amid sharp condemnation of human rights abuses. Pushing on with the weekend event looks like a stubborn and risky miscalculation.
Emerging markets do offer major sporting events a chance to grow their fan base and ensure a stronger financial future. The F1 racks up an annual revenue of $2 billion through 20 events. The Grand Prix is now held in India and China. Gulf countries have tiny populations, but they are cash-rich. Bahrain’s sovereign fund owns part of the McLaren team. Abu Dhabi has a Ferrari World theme park, and a race car even decorates the lobby of one of its plush government offices.
Yet abandoning the Bahrain race for a second consecutive year would not have amounted to an exit from the Gulf. The F1 already has another foot in the lucrative market with the Yas Marina circuit in the UAE, one of Bahrain’s richer and more stable neighbours. Without too much trouble, the F1 could have relocated the race without losing out on the revenue or regional brand building provided by the events.
As it stands, the Bahrain F1 race is a shadow of itself. Major sponsors of the sport include Royal Dutch Shell, Vodafone, Unilever, Total, Siemens, UBS, News Corp, Hugo Boss, ExxonMobil, Deutsche Post, Daimler and Thomson Reuters. Some of these companies are sufficiently wary of how the turmoil might impact the weekend’s event to pare back usual efforts to entertain clients around the race.
All of the above makes the F1’s decision to stick with Bahrain high-risk and low-reward. While the situation in the Gulf state has calmed somewhat since Saudi Arabia sent in its tanks last year, life in many poorer suburbs is now a new normal of tear-gas and running battles with the police. Bahrain is a divided Shi’ite majority country where even the Sunni-monarchy is split. This week-end’s F1 bet could misfire badly, and then it will be too late to realise that it wasn’t worth taking.
from Full Focus:
Images of March
WARNING: GRAPHIC CONTENT Japan marked the one year anniversary of the devastating earthquake and tsunami. Voting took place in Myanmar in what was hailed as a step towards democratic change. A shooting at a Jewish school in Toulouse rocked France.
from Breakingviews:
Hedge funds show banks how to recoup loans to Gulf
By Una Galani
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
Hedge funds are showing banks how to get their money back from Gulf borrowers. Privately-owned Bahraini investment house Arcapita is following in the footsteps of General Motors and Chrysler by filing for U.S. Chapter 11 bankruptcy protection after non-bank creditors opposed extending a $1.1 billion loan facility due in March.
That’s an important first in a region grown accustomed to “extend and pretend” debt deals. In the three years since its debt crisis began, there has been no high-profile haircuts or debt-for-equity swaps – staple features in mature markets.
Dubai World, the region’s largest restructuring, benefitted from a massive government cash injection. Bank lenders only took an effective haircut after agreeing to be repaid their principal in full over a five-to-eight year period. Optimistic assumptions have already run Kuwait’s Global Investment House back into trouble on its original $1.7 billion debt deal agreed in 2009.
Arcapita isn’t a willing trail blazer. It wanted to delay repayment for three years. Most of the investment firm’s 50-odd creditors agreed, presumably keen to preserve local relationships. But hedge funds, thought to hold around 18 percent of the maturing security, were ready to take a tougher line. The threat of a forced liquidation prompted Arcapita, which owns assets around the world, to seek refuge.
Hedge funds may have wanted a quick pay off for loans that recently traded around 40 cents on the dollar through a capital injection. They might now need to wait longer. But at least all creditors should walk away with some certainty for full or partial repayment. Chapter 11 is designed to help firms rebuild a sustainable balance sheet. A solution based on Arcapita’s current liabilities, worth $2.6 billion, is likely to mean more upfront pain.
from Global Investing:
A scar on Bahrain’s financial marketplace
Bahrain's civil unrest -- which had a one-year anniversary this week -- has taken a toll on the local economy and left a deep scar on the Gulf state's aspiration to become an international financial hub.
A new paper from the Sovereign Wealth Fund Initiative, a research programme at Center for Emerging Market Enterprises (CEME) at the Fletcher School at Tufts University, examines how the political instability of 2011 is threatening Bahrain's efforts in the past 30 years to diversify its economy and develop the financial centre.
Asim Ali from University of Western Ontario and Shatha Al-Aswad, assistant vice president at State Street, argue in the paper that even before the revolt, Bahrain lagged in building the foundations of a truly international hub in the face of competition from Dubai and Qatar.
Unlike DIFC (Dubai International Financial Centre) and QFC (Qatar Financial Centre), Bahrain insists upon local labor; currently 70% of employees in its banking and financial services industry are Bahrainis. Bahrain’s reluctance to hire non-resident talent has made Dubai...an alternative for those investors looking for a centre with more flexible labor practices such as DIFC provide... The constraints – a lack of formalized institutional and regulatory structure, along with an ad hoc business environment, underdeveloped infrastructure, and under-supplied skilled workforce – have negatively affected its growth and potential to become the financial gateway in the Middle East.
Then came the crackdown of protesters.
Its ruling Al-Khalifa family unleashed a ferocious extra-judicial crackdown against the opposition. It appeared the standard axiom of Gulf ruling families – securing legitimacy and counter-acting political opposition through redistribution of oil wealth – was sorely insufficient to address citizens’ grievances. These led not only to international opprobrium of the Bahrain government but also made foreign businesses reconsider Bahrain as a financial center – with many foreign business shifting workers and operations to Dubai... Indeed, confidence in Bahrain as a financial hub took a major blow along with its image as a stable, tolerant and liberal state.
It remains to be seen what impact last year’s pro-democracy uprising will have on the state of Bahrain and its ambition as a regional financial gateway– especially at a time when Dubai (DIFC) and Qatar (QFC) remain serious contenders to become dominant financial centers in the Middle East.
Bahrain had shown perseverance and strength in building its financial center, but democracy efforts and human right violations were able to threaten the hard work of more than 30 years.
Bahrain's sovereign wealth fund Mumtalakat, which is leading the country's efforts to diversify its economy away from the hydrocarbon sector, suffered a series of ratings downgrades last year as a result of sovereign downgrades. Mumtalakat is rated triple-B.
from Full Focus:
Images of September
September marked ten years since the attacks on the World Trade Center and Pentagon. The fighting continued in Libya as the rebels closed in on Gaddafi strongholds and Palestinian President Abbas made a bid for statehood recognition at the U.N. This selection of our top photos of the month includes these news stories alongside the ongoing Dale Farm case, New York fashion week and a giant vegetable contest. WARNING: Graphic content
from FaithWorld:
Sunni-Shi’ite sectarian divide widens after Bahrain unrest
(A new sign showing the direction towards Al Farooq Junction, previously known as Pearl Square, stands along a road in Manama May 31, 2011. Bahraini authorities demolished the monument in Pearl Square in March following the country's unrest where thousands of Shiite Muslims protested by camping there/Hamad I Mohammed)
Sectarian tension between Sunni and Shi'ite Muslims has reached new heights in Bahrain after pro-democracy protests that the Sunni minority government crushed with martial law and foreign military forces. Inspired by the uprisings in Egypt and Tunisia, Sunni and Shi'ite Bahrainis took to the streets in early February to demand political reforms in a country where the ruling Al Khalifa family appoints cabinet ministers and an upper house of parliament, neutering the powers of the elected assembly.
An idealistic movement began with slogans such as "No Sunni, No Shi'ite -- Just Bahraini", but now sectarian fear and anger are uppermost on this small island state where Saudi Arabia and Iran are playing out a proxy contest for regional supremacy. Sunnis and Shi'ites talk of friends lost and of a rift that once seemed manageable. Sunnis feel threatened, Shi'ites abused.
Fatima, a Shi'ite accountancy graduate, recalled past tensions when Shi'ites clashed with police and faced trials in the 1990s, but said the government response was harsher this time because the protest movement was so large and unexpected. "It hurts me. I have very close Sunni friends. People inter-married and had close personal relations," she said. "Even if the government took a step back now, the Sunnis have been convinced that we are criminals."
Shi'ites have long complained of discrimination in Bahrain, saying the government distributes jobs and housing on a pro-Sunni sectarian basis, to the extent of giving nationality to Sunnis from other countries to offset Shi'ite numbers. There are few Shi'ites in the army and their number in the state bureaucracy has steadily dwindled since independence from Britain in 1971, Shi'ites say. The government denies this.
from FaithWorld:
Protests in Bahrain’s Shi’ite neighbourhoods fall on deaf ears
(Shi'ite protesters march in the Sanabis neighbourhood in Manama June 3, 2011/Hamad I Mohammed)
In a poor district of Bahrain's capital, a few hundred people marched through cramped, crumbling alleyways banging pans and screaming, "Down with the regime." A mile (1.5 km) away, in the city centre, with its gleaming malls and office blocks, no one heard them.
A week after the tiny Gulf island kingdom repealed martial law, and despite the lingering presence of a few checkpoints, much of Manama seems almost back to normal. "Everything is quiet, there's nothing wrong. I haven't heard about any problems," a man who gave his name as Khalifa said as he walked to a Starbucks coffee shop.
Not so in the Shi'ite neighbourhoods where protests first erupted in February, inspired by upheaval elsewhere in the Arab world that toppled longtime rulers in Egypt and Tunisia. "They're saying that security has returned. Look at this, there is no security," a protester said, ducking into a neighbour's home as a sound grenade fired by police shrieked past.
Shi'ite residents say that if this is the new normal, tense days lie ahead. "I think we'll remain in this unstable situation until there is some kind of political solution. It's not going back to normal," well-known activist Nabeel Rajab said.
