Oil riches, vulnerability in a new desert state

By , Staff correspondent of The Christian Science Monitor

More than 50 billion recoverable barrels of oil lie beneath the sands of the United Arab Emirates.

That fact has made the U.A.E. one of the richest countries per capita in the world. It has also helped make it among the most vulnerable.

With annual oil revenues of more than $15 billion and a government development policy of extending the benefits of oil wealth to every citizen, a land of desert Bedouin and Gulf traders has in the past decade been transformed into the beginnings of a modern society.

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But it is a society being built in a volatile region near the strategic Strait of Hormuz oil route and in the shadow of warring Iran and Iraq.

The U.A.E. is therefore forced to work toward development of a credible defense capability. It is doing this by buying advanced antiaircraft missiles and jet fighters from Western countries, and by joining the other wealthy and vulnerable Gulf states in the Gulf Cooperation Council.

But Sheikh Zayid ibn Sultan al-Nuhayan, president of the U.A.E. and ruler of the richest emirate, Abu Dhabi, sees neutrality, diplomacy, and international cooperation as ultimately contributing far more than military might to the stability of the region and his regime.

Since the outbreak of the Gulf war in September 1980, the U.A.E. has maintained diplomatic relations as well as trade links with the unpredictable Shiite Muslim government of Ayatollah Khomeini, while at the same time contributing about $1.5 billion in aid to the Sunni Muslim government of Iraqi President Saddam Hussein.

There are challenges as well on the domestic front.

The construction and development boom of the 1970s saw an increase in the foreign labor force to the extent that the local population is presently outnumbered by expatriates four to one in a total population of 1 million. And because of the low educational level of most of the indigenous population, foreigners will continue to be needed in great numbers run the country.

Despite the current low demand for oil and a production cutback of about 200, 000 barrels a day by Abu Dhabi, construction is continuing throughout Abu Dhabi, and there has been no significant effect so far on the economy as a whole. This, despite projections that the U.A.E. faces a deficit in its federal budget this year. Some development projects have been delayed or reduced in scope, but it appears the only seriously affected sector in Abu Dhabi has been oil. Offshore drilling rigs that a year ago were for hire for $40,000 a day are now available for $22,000 a day. The rate for onshore rigs has also fallen, from $25,000 a day to $15,000 a day.

In Dubai, where construction has for the most part been completed, merchants and traders are riding out a period of stagnation primarily the result of the Gulf war and increased trade restrictions by Iran. Trade with Iran, Dubai's largest market two years ago, is said to be down 75 percent from 1981 levels.

On other fronts, the fallout from the Israeli invasion of Lebanon - and the widespread perception here that the United States could have stopped the Israelis, but didn't - is of concern to Sheikh Zayid, as it is to other moderate Arab regimes friendly with the US. Sheikh Zayid is concerned that, unless the Reagan Middle East peace initiative bears at least some fruit, his government must distance itself from the US.

''We have a special relationship with the US, since we share the same ideology and sell them oil,'' says a senior U.A.E. official, quoting Sheikh Zayid. ''But even if we chose to maintain this friendship, eventually our people will not let us continue.''

There is no immediate internal threat to Sheikh Zayid or his government. The Shiite community has not been discriminated against here as it has in other Gulf states, and the Palestinians are for the most part employed, well paid, and secure. In addition, Sheikh Zayid himself enjoys widespread support and admiration from the population.

He is seen as a charistmatic natural leader with a traditional Bedouin sense of honor. And he is generous. In Abu Dhabi, any national who asks for it will receive land on which to build a house. In addition, if he asks, he will receive a government loan at one-half of 1 percent interest to pay for the construction.

In one sense, it is Sheikh Zayid's way of spreading the oil wealth and ensuring the well-being of the population; in another, it ensures that complaints and opposition to the government are kept to a minimum.

''If they complain, they just get money,'' says a Western observer. A senior official said: ''Much of the problem in the world is material security. If your people have material security, you are ensuring that the future of the country is secure.''

On the federal level, in addition to government subsidies for electricity, gasoline and fuel, and basic foods, $54.5 million in the $6.1 billion 1982 budget is allocated to constructing low-cost housing. Most of it will be built in the northern emirates - Ajman, Umm al Qaiwain, Fujairah, and Ras al Khaimah - which have not yet discovered oil. Such federal contributions funded by Abu Dhabi are intended in part to bridge the gap between the rich oil-producing emirates and the poorer northern emirates that rely for income on trade, oasis farming, and fishing.

Since he became the first President of the U.A.E., when the state was formed in 1971, Sheikh Zayid has worked to draw the emirates closer by working for the increased authority of the federal government over the local sheikhdoms. It has been an uphill journey, due in part to the reluctance of the ruling sheikhs to surrender their absolute local authority to the federal authority of the Supreme Council of Rulers, on which each of the seven ruling sheikhs sits, and the 40 -member Federal National Council.

Sheikh Zayid remains a major driving force in strengthening the federation. And Abu Dhabi is said to still be contributing more than 85 percent of the federal budget.

The U.A.E. became a state on Dec. 2, 1971, as a result of the union of six Gulf sheikhdoms - Abu Dhabi, Dubai, Sharjah, Ajman, Umm al Qaiwain, and Fujairah. A seventh sheikdom, Ras al Khaimah, joined the federation in 1972. The sheikhs' decision to unite came after the ending of more than 150 years of protective treaty arrangements with the British.

In 1958 oil was discovered in Abu Dhabi, and in 1962 it was first exported. Neighboring Dubai began pumping oil in 1969, and Sharjah began its oil production in 1974

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