Strategic perspectives for the Sultanate of Oman post-Qaboos

Since January 2020 Oman has been led by a new sultan, Haitham bin Tariq al Said, successor to Sultan Quaboos. After half a century marked by Sultan Quaboos’ strategic neutrality, its continuity should be assured thanks to the new foreign minister, Sayyid Badr Albusaidi, and Crown Prince Sayyid Theyazin bin Haitham. Oman will continue to adopt a position on various regional matters (Iran, Yemen, Syria) determined by the aims of contributing to conflict reduction, protecting its own security and promoting its own role as a diplomatic actor. The sultanate will also be looking to attend to its economic future in order to make up for the end of its income from hydrocarbons and to deal with unemployment amongst the young. Sultan Haitham bin Tariq’s principal challenge will be to maintain the balance between the United States and China, while still making the most of their investment potential.

On 10 January 2020, Qaboos bin Said left Oman orphaned: after half of century of uninterrupted reign over the sultanate on the southern shores of the Arabian Peninsula he was succeeded on the throne by the new sultan, his cousin Haitham bin Tariq. Qaboos left the new sultan a country that had achieved modernity in record time thanks to the exploitation of its hydrocarbon resources and which was able to create a place for itself at the heart of the region thanks to a singular foreign policy of neutrality, earning it the nickname of the ‘Switzerland of the Middle East’.  While still spending a lot of money on defence the Sultanate of Oman has made its mark thanks to its diplomatic policy of peaceful co-existence between countries, of dialogue and of non-interference in its neighbours’ affairs. In his first speech, which was attended by Boris Johnson, Mohammad Javad Zarif, Mohammed Ben Zayed and Tamim al Thani, the new sultan declared that he wanted to continue the effective foreign policy of neutrality that had been put in place by his late cousin[1].

During the fifty years of his reign Qaboos succeeded in modernising his country, which under his father had still lived by the codes of the 19th century.  Today Oman is one of the most developed countries in the region (HDI of 0.83 in 2013). This exceptional development allowed Qaboos to rule the country as an autocrat (he was simultaneously head of state, prime minister, and minister of defence, the interior and finance) only allowing the Omani people a minor participation in political life. His reign ended with the conclusion of the ‘Vision 2020’ development plan that he had initiated, but whose objectives had not all been achieved.  As things stand, even if the country has improved its indicators, there still remain some challenges that the new sultan will have to address.

At the dawn of Sultan Haitham’s reign, a leader more specialised in economic than military questions, the future ending of oil income raises question marks about the country’s stability: Oman’s major challenge therefore consists of successfully transiting the post-hydrocarbon era that has been precipitated by the need for environmental change. To the fall in the price of a barrel of oil caused by Saudi Arabia’s trade war, subsequently aggravated by the Covid pandemic, must be added Oman’s very limited reserves in comparison to its neighbours. The Omani oil reserves, estimated to be only 5.5 billion barrels (compared to Saudi Arabia’s 320 billion) will be exhausted in 15 years; and its natural gas reserves will be exhausted in 18 years[2]. The recent attacks on shipping in the Gulf of Oman, a critical pinch point shared by the sultanate with Iran, only add to the uncertainty over income from hydrocarbons. To this existing situation must be added debt that has exploded in recent years, rising from 5% of GDP in 2014 to 81% in 2020, caused by variations in the price of oil: these have had a significant impact on the Omani economy which relies more than 70% on hydrocarbons and their derivatives[3]. Therefore, one of the first objectives laid out in the new ‘Vision 2040’ is the diversification of the economy into petrochemicals, tourism, semi-conductors, renewable energy, robotics and the exploitation of raw materials (mining for copper, gold, zinc, manganese, and ‘rare earth’ materials).

Another pressing concern is finding a solution to the unemployment (49% in 2018), that is having a serious impact on young people while opportunities for employment in public service are diminishing. Despite an enforced retirement of older civil servants and a policy of ‘Omanisation’ of jobs in the sultanate, the government’s efforts are coming up against a disconnect between the education and training of young Omanis and the requirements of business, along with the rational preference of a good number of employers for foreign workers, the majority of whom come from Asia under the system of kafalah (sponsorship)[4]. Ten years after the demonstrations of the Arab Spring that also affected Oman, reducing unemployment amongst the young has become a pressing matter for the new sultan: in 2019 and 2021 there were new demonstrations in several of the country’s cities against certain austerity measures, in particulier the removal of some subsidies and the introduction of VAT (sales tax) for the first time in the country’s history.[5]

These matters of internal politics should not be ignored when it comes to analysing the new sultan’s foreign policy: the post-oil world and the pressing need for economic development permeate Omani foreign policy. A year and a half after Sultan Haitham’s coronation, Oman is managing to preserve the diplomatic ethos that has been at the root of its success for half a century.

RELATIONS WITH NEIGHBOURS IN THE GULF COOPERATION COUNCIL

Omani foreign policy is first and foremost structured around the issues relating to the Gulf Cooperation Council (GCC), an organisation the country has been a member of since its foundation in 1981. Even if Oman is an active member, Sultan Qaboos had always been a restraining influence on a too rapid expansion of the GCC’s powers (often driven by Saudi Arabia, particularly in relation to financial matters) so as to preserve Omani independence and sovereignty. The United Arab Emirates and Saudi Arabia therefore remain Oman’s two most important economic partners.

Qaboos nonetheless worked to keep his ambitious Saudi neighbour at a distance, despite the important trade links between the two states: Saudi Arabia invested $210 million in the Omani port of Duqm (pronounced ‘Doqum’) in 2018. The visible rapprochement between the two monarchies represents the first strategic reorientation since Haitham’s accession to power.  In this way, the new sultan’s first foreign visit was to Saudi Arabia in July 2021, in particular to discuss Yemen and a strengthened economic partnership between Riyad and Muscat. During this historic visit Haitham was accompanied by several ministers (the ministers of defence, internal security, foreign affairs, trade and industry, communications, and investment). Several new economic agreements were signed and a coordinating council for the two countries was approved. The old project of building a road and railway line between both states was raised once again; this new communications axis would allow trade in the Arabian Peninsula to develop by opening a route from Saudi Arabia to the Indian Ocean and also permeating the Omani economy with Saudi products.[6] This economic rapprochement, above all linked in with Saudi economic support for its eastern neighbour, nonetheless raises strategic questions because Muscat and Riyad disagree on a number of things, in particular on  Yemen and Iran; Oman has been in the habit of using its relations with Saudi Arabia’s opponents to limit Riyad’s influence. Will Saudi aid therefore be conditional on a diplomatic realignment in these two regional concerns?

Relations between Oman and the United Arab Emirates are somewhat strained too. The sultanate has two enclaves in Emirati territory (the peninsula of Musandam and the city of Madha) that give rise to territorial differences. To add to that, in 2011 and again in 2019, Muscat revealed that it had broken up Emirati spy rings that had been gathering intelligence on Oman’s relations with Iran and the question of the Omani succession.  Beyond that, Abu Dhabi is more and more active in the region and would like to see Oman more in alignment with its own postures[7].  Although they are major economic partners, the Emiratis are also competitors of Oman in the fields of energy and transport: the development of windfarm projects and the international port at Duqm cast a shadow over Abu Dhabi and Dubai (the port of Jabal Ali). Despite these difficulties, both states are showing evidence of pragmatism and are cooperating on a number of issues.

Will the rapprochement between Muscat and Riyad continue to deepen the fault line between Saudi Arabia and the United Arab Emirates a little more? Some experts believe it is Saudi Arabia that is changing its strategy on alliances, seeing in Oman a bridge to its main regional competitor, Iran[8]. Muscat will surely seek to preserve the balanced posture that has always been its own, but the urgent needs of economic support may alter Oman’s strategic balance over the coming years, which would have consequences within the GCC: the 600 km (375 miles) road linking Saudi Arabia and Oman will have a negative impact on the United Arab Emirates which has up to now provided the route for trade.[9]

As far as the smaller states of the GCC are concerned, Oman moved particularly close to Qatar during the blockade imposed on the latter, and which Oman refused to sign up to, in fact playing the mediator’s role that culminated in the Declaration of Al-Ula in January 2021. During the blockade Omani exports to Qatar doubled and Qatari imports increased five-fold. In addition, Oman’s air and sea traffic increased thanks to Qatari investment, helping to transform the country into a true regional hub. Beyond the economic benefits it is also important to emphasise the rapprochement of both countries at a strategic level: during the summer of 2021 both chiefs of staff paid each other visits. Both states have traditionally refused to become Riyad’s vassals and have important relationships with Teheran, which explains their convergence of interests. [10] In the longer term, relations between Muscat and Doha should become stronger, making Qatar an important ally of Oman’s compared to Bahrain and Kuwait which nevertheless remain important economic partners of the sultanate.

For the moment therefore, Oman is succeeding in maintaining its security in the region by continuing its traditional neutrality vis-à-vis its neighbours and continues to be seen as a useful mediator in the different crises that perturb its neighbourhood.

OMAN IN THE EYE OF THE CYCLONE

Four areas in particular are occupying the Omani government’s attention: Iran, Yemen, Syria and Israel-Palestine.

Since the 1970s Oman has elected not to fall out with Iran as certain of its neighbours have done. Both countries have always respected each other’s sovereignty and today Muscat is one of Teheran’s principal partners, something that is all the more paradoxical since Oman hosts American bases on its territory. After America’s unilateral withdrawal from the Vienna Accords tensions over the question of Iran’s nuclear capability have resurfaced. With Joe Biden’s election there is the possibility of a new JCPOA, and Oman will no doubt seek to position itself as the preferred interface between Washington and Teheran to facilitate negotiations. Thus, following a telephone call between Ebrahim Raïssi and the sultan, the Omani foreign minister Badr al-Busaidi was received in Iran in August 2021 by the new Iranian president. It is noteworthy that Oman has refused to take sides in any of the numerous incidents that have taken place near its coasts, and that Iran appears responsible for, in order to preserve its relations with the current regime. Nevertheless, a multiplication of incidents in the Straits of Hormuz could handicap Oman which is trying to become independent of the straits by developing the ports of Duqm and Salalah that open out directly onto the Indian Ocean. Iranian-Omani cooperation has however not been free of obstacles: due to American sanctions Iranian investments in Oman have been slow to materialise. The underground pipeline project, 1,400 km (850 miles) between Iran and India that passes through Oman has been at a standstill for many years, although the minister for oil and gas, Mohammed al-Rumhy, announced in January 2021 that Oman intends to import Iranian gas as soon as the JCPOA has been reinstated, allowing Iran to use 25% of the sultanate’s gas plants.[11]

In the dynamic of Oman’s rapprochement with Saudi Arabia, Yemen is an important card in Sultan Haitham’s hand. The government is close to the Houthi rebels, some of whom have taken refuge in Oman (notably Mohamed Abdel Salam, the group’s spokesman). In fact, Muscat would like to preserve its influence in Marah province, neighbouring Yemen. The sultanate has often been accused by Riyad of tolerating deliveries of arms coming from Iran through its territory [12], an indulgence that constitutes a not insignificant means of pressure from Muscat on the Houthis. If Yemen has been a source of tension between the two capitals since 2015, discussions around the end of hostilities are once again helping Oman to present itself as the preferred neutral mediator in any future negotiations, helping to reduce tensions in the peninsula. In this way Muscat is strengthening its place in the community of nations particularly in Washington’s eyes.  Sultan Haitham, following Qaboos’ footsteps, should be able to present himself as the deliverer of the newfound peace in Yemen[13].

The same strategy applied to Syria: Oman refused to take part in sanctions against Damascus or to undertake any military participation in the conflict. The sultanate was the first country to reopen its diplomatic mission in Damascus in January 2020, and the only Gulf state to congratulate Bashar al-Assad on his re-election in May 2021. By doing so, Haitham chose to follow the diplomatic line of his predecessor, prioritising dialogue with all actors and encouraging Damascus’ return to the Arab League. In the framework of Syria’s upcoming reconstruction this strategic choice relies not just on seeing Syria as a potential market for Omani products, but also for Oman to contribute to the resolution of a strategic confrontation that has involved the world’s major powers. The sultanate can in this way hope to become an important humanitarian actor and a neutral mediator between the Syrian regime and the United States, the Europeans, Russia, China, Turkey and the other members of the GCC.[14]

Finally, the continuation of the foreign policy inherited from Qaboos can be seen in the approach to Israeli-Palestinian issues. Wishing to retain its own decision-making capacity in order to preserve a delicate balance, Oman refused to sign the Abraham Accords. In 2019, Muscat announced its intention to open an embassy in the West Bank, a project that has however yet to materialise. Nonetheless these decisions do not put jeopardise the friendly relationships that the country has been able to establish with both the Palestinians and the Israelis: in 2018, Benjamin Netanyahu travelled to Muscat. In June 2021, both foreign ministers discussed regional issues on the phone. Oman already runs a desalination plant used by both Arabs and Israelis. Even during the periods of Intifada both countries maintained discreet links. The foreign minister, Badr al-Busaidi, frequently states that Oman is happy with its current relations with Israel, while at the same time repeating his country’s attachment to a two-state solution, with East Jerusalem as its capital. In fact, a relationship with Israel that was too open would risk damaging Iranian-Omani relations, that are viewed as essential in Muscat’s and Teheran’s eyes. Any normalising of relations with great ceremony, something that could bring economic advantages to Oman, is therefore unlikely for the moment since all sides benefit from the current status quo.[15]

ECONOMIC DIPLOMACY TO HELP ‘VISION 2040’

The new sultan’s arrival on the throne has coincided with the economy’s accelerating needs for diversification. In consequence, Oman has had to intensify its efforts in economic diplomacy to increase its trade links and investments in the private sector, particularly in those areas not connected to oil. This strategy forms a direct part of the sultanate’s ‘Vision 2040’ project that aims to make Oman into a commercial and tourist hub. Oman could be tempted to follow the example of the United Arab Emirates and create futuristic and extravagant tourist complexes like those of Dubai, or alternatively decide to remain once more with Qaboos’ strategy that consists of preserving Omani heritage and the authentic character of the sultanate; if the official documents establishing the country’s tourist strategy are to be believed, the second solution could be the preferred one, turning Oman into a top end destination. 

The sultanate’s investment efforts can be seen on the east coast of Africa. In the Zanzibar archipelago, Oman has signed an agreement with Tanzania for the development of ports (for container ships, tankers, fishing vessels, as well as a naval dockyard). If there is little information available about the project for the moment, it nonetheless confirms the strong links between Muscat and its former trading post, since Oman sees Zanzibar as its gateway into the African continent. The sultanate is the third largest investor in the area after the United States and Kenya[16]. It also declared during a forum with Ethiopia in May 2021 that it intended to develop its trade with the country.

Oman is also turning towards Asia: India, Pakistan, Sri Lanka and Bangladesh are vital trading partners. India historically had strong links with Oman: as well as being Oman’s fourth largest supplier of imported goods, it is the second largest export destination for non-oil Omani products ($67 billion of trade per annum). 800,000 Indians live in Oman and 12,000 of their compatriots visit the country each year; there are many Indo-Omani joint-ventures working together in pharmaceuticals and energy. Old military allies due to their shared strategic interests, their cooperation was strengthened in 2018 during a visit to Muscat by the Indian prime minister when both countries signed security treaties (dealing in particular with the fight against piracy in the Gulf of Aden). A pipeline project linking Iran with India, via Oman, has been on the books since 1985. Currently concentrated on defence matters (India has negotiated military access to the port of Duqm), Indo-Omani cooperation should continue to develop, making India one of Oman’s most important partners.

There is one thing however that risks causing tension between Oman and some of its partners in Asia: the policy of Omanisation of jobs in the sultanate. In fact, before the pandemic, a significant part of the foreign workforce in Oman was made up of 44% of Indians, 33% of Bangladeshis and 17% of Pakistanis (78% of the country’s labour force coming from abroad, or 40% of the total population)[17]. Their jobs, a source of indirect revenue for their countries of origin, have been threatened by the implementation of more drastic measures aimed at tackling unemployment amongst the young in Oman. More than 200,000 foreign workers have since left Oman.

Oman is also seeking to develop partnerships with other countries, such as Russia, Malta, South Korea, Egypt, Brazil, Germany or the Netherlands. The three last are amongst the largest direct investors in Oman. The sultanate enjoys a growing trade dynamic with Brazil and the Arab states[18]. As regards Russia, the alignment of geo-strategical postures on regional issues allows for good relations between the two countries, as was demonstrated by the visit of the Russian director of foreign intelligence services in February 2020, one month after the inauguration of the new sultan. That said, trade between the two countries ($143 million in 2018) remains weak in comparison to other Gulf states.[19]

OMAN AT THE CENTRE OF CHINESE-US RIVALRIES

Beyond the rivalries that shape the Gulf, Oman, through its geographical position at the edge of the Indian Ocean finds itself at the heart of the power struggle between China and the United States, who are both investing in Omani ports.

China has invested in the industrial park of Duqm, a strategic position for future new routes for its Belt and Roads Initiative (BRI), allowing them to avoid the Straits of Hormuz. The future hub is planned around heavy and light industry, a refinery, an international airport, and tourist complexes. Beijing has promised $10.7 billion over a period of 10 years. For the moment, six Chinese companies are planning to build factories for a total expenditure of $3 billion, and then to refine oil imported by China on site[20]. Beijing has also started investing in other ports in the country (al Sohar and Sur) which will allow them to free themselves from the Straits of Hormuz as well. Taking advantage of the Omani government’s policy of privatisation to reduce the country’s debt, China, through the state-owned corporation State Grid, bought a 49% share in the Oman Electricity Transmission Company in December 2019 for a billion dollars.[21] In 2016, the Omani government had already borrowed $3.6 billion from Chinese financial institutions. It should be noted that China is also the destination for 85% of Oman’s oil exports and that it is very interested in the sultanate’s gas resources. A few months after the visit of Foreign Minister Wang Yi, the Omani tourism minister opened a tourist agency in China to promote the huge influx of Chinese tourists in the sultanate[22]. These massive investments already seem to have had an impact on Oman’s foreign policy, for it was one of the 53 countries that supported China when it implemented its national security law in Hong Kong.

Already with a military presence on the island of Masirah, in Thumrait and near Muscat Seeb airport, in 2019 the United States signed a long-term agreement allowing access for their 7th fleet to the ports of Duqm and Salalah. The former is also capable of docking an aircraft carrier and nuclear submarines that could easily thereafter deploy to the Arabian Sea. To counteract Chinese influence, the US is also looking to enhance its economic position[23]. But the Trump presidency that neglected Oman in favour of the Emirates and Saudi Arabia dented relations between the two countries, damage that the new democrat administration is struggling to repair.

A Sino-US standoff would have major consequences for all these investments. Oman, whose ties with the US strengthened in the 1980s, could also be a focal point for Chinese ambitions. The port of Duqm, where the Chinese are investing but where the Americans, British and Indians have warships stationed (thereby preventing the establishment of any Chinese base) has therefore become a strategically important square on the chessboard of the Indian Ocean.[24] Muscat’s game therefore consists of maintaining a complex balancing act between the two major powers, while still profiting from their capacity for investment.[25]

The sultanate has close links with the United Kingdom, the former colonial power that helped Qaboos in the overthrow of his father in 1970. Despite a decrease in the British military presence, Oman still hosts three British intelligence gathering bases as well as a naval base. In 2018 both countries signed security treaties that allow British ships to access the port of   Duqm and in 2020, the British Ministry of Defence announced that it would invest €25 million to enlarge its naval base. The UK is also a serious competitor of the US’ in arms exports, particularly in aircraft (Typhoon fighters and helicopters), while still remaining an important investor in hydrocarbons through British Petroleum. The personal links between the Omani leadership and its former colonial power should also be noted: Haitham is a member of the Anglo-Omani Society, studied at the University of Oxford and then worked at the Omani embassy in London, just as Foreign Minister Badr Al Busaidi did. There is no doubt that after Brexit, the British are ready to do battle to regain some of the ground lost to the Americans.

In the midst of these struggles for influence, the European Union (EU) is finding it hard to secure a place for itself. Its only diplomatic links with Muscat are through the European delegation to the Gulf Cooperation Council, thus depriving itself of a direct strategic dialogue with what is nonetheless a crucial regional actor[26]. European presence in Oman is evidenced in oil companies such as Italy’s Eni and France’s Total which are developing reserves of hydrocarbons. For Oman, the European Union is more a reservoir of well-to-do tourists.

France, which has an embassy in Muscat, does not appear to have been able to create strong political links with the new sultan and his administration: since Haitham’s inauguration only one treaty, dealing with military cooperation, has been signed and there have been no meetings at ministerial level. All the same, economically speaking, Paris remains an actor of the first order as demonstrated by the choice of the French company SME Lorient-Keroman to contribute to developing the hub of Duqm, even if in 2019 France was only the sultanate’s 25th largest trading partner, well behind the UK, Germany and Italy.[27] Faced with the pressing need for university education for the current generation of young Omanis, an educational partnership with France, which is known for its contribution to the education of the region’s elites, would be particularly useful to Oman and would strengthen Franco-Omani links.

*****

Within the context of geopolitical standoffs, Oman’s challenge is to preserve its neutrality, its sovereignty and its strategic autonomy, diplomatically as well as economically. Only a successful economic restructuring will allow the sultanate to avoid being dependant on another power. The diplomatic doctrine put in place by Sultan Qaboos that has borne fruit for so long should continue to support his successor in a strategic setting that is ever more competitive.


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