Saddam Exploits Wealth Inequities

THE present Persian Gulf crisis reignites Middle East tensions between oil-rich Arabs and those who resent having to rely on their largess. ``The Arab conflict of the 1990s looks like that of the 1950s - again the question arises to whom the Arab wealth belongs and to whom it is distributed,'' says Shireen Hunter, deputy director of the Middle East Program at the Washington-based Center for Strategic and International Studies. From Egypt's charismatic Pan-Arabist leader, Gamel Abdul Nasser, to the present, says Dr. Hunter, ``Arab oil has been a burning issue.''

Redressing the imbalance of Arab wealth has been Saddam Hussein's rallying cry for his invasion of Kuwait. Addressing his people, the Iraqi president has said that by raiding Kuwait's coffers and seizing control of its oilfields, he has unleashed pent-up Arab condemnation of kingdom rule, run by selfish sheikhs.

For perspective, analysts point to important developments, including Arab-to-Arab assistance and capital flight from the Gulf compared to regional investment.

Since the 1973 Arab oil embargo, the richest Arab members of the Organization of Petroleum Exporting Countries (OPEC) - Saudi Arabia, Kuwait and the United Arab Emirates (UAE), - have transferred huge, though uneven sums of aid and investments to needy Arab countries.

Hunter, author of ``OPEC and the Third World: The Politics of Aid,'' says security concerns motivated Gulf transfers, followed by political, ideological, and then economic interests. She stresses that aid - money largely put to military use - falls short of Arab recipients' expectations.

Since 1974, roughly $45 billion has been transferred from the Gulf states to non-oil-producing states and to countries like Syria and Egypt, smaller-scale producers whose masses remain impoverished. Riad Ajami, a Middle East expert at Ohio State University who compiled the updated estimates, says there are political and financial demarcations of Arab-to-Arab aid.

Just after the 1973 Arab-Israeli war and during the 1974-1978 oil price hikes, ``the official plan was to finance front-line states in confrontation with Israel, in addition to the Palestinians, Oman, and other Arab countries,'' says Ajami. Egypt received the lion's share, with Syria second and Jordan third. Egypt later fell from donor favor when it signed a peace treaty with Israel in 1979.

By 1978, the Arab Summit met in Iraq to conclude the Baghdad Pact, another multibillion commitment to the so-called front-line states. ``Nobody met the terms of the agreements,'' says Ajami. ``This is very consistent with Arab gatherings. There is always fanfare about aid and sharing the burden, but money never comes as promised.''

Broken promises, he says, breed Arab resentment. ``The poor Arabs are suffering while the Gulf rich live beyond anybody's means or imagination. Just compare Kuwait's $24,000 per capita income today with Egypt's $1,200 average.''

Declared and real aid transfers from the Gulf fell dramatically after the mid-1980s, says Ajami, when oil revenues plummeted due to soft world oil prices.

The eight-year Iran-Iraq war also contracted Saudi, Kuwaiti, and UAE budgets. Baghdad claimed $50 billion from Gulf providers in what Iraq's Central Bank Gov. Subhi Frangoul calls ``nonrepayable aid for our defense of our Arab brothers.''

As Gulf states amassed their fortunes, they followed international investment patterns, says Ajami. ``Inter-Arab trade composes 6.5 percent of total Arab trade. Since investments follow trade opportunities, the Gulf states invested abroad. Of $125 billion total Arab direct foreign investment, just 3 percent has been invested regionally. That makes sense to a Kuwaiti investor but not to the average Arab worker. Demands of a world economy naturally conflict with sentiments echoed on Arab TV sets and radios that propagate a shared Arab destiny,'' says Ajami.

``Regionally, Kuwait, Saudi Arabia, and the Emirates could have done more, but there is a limit to how far capital can go toward producing results,'' says Hunter. ``Developmentally, there have been tremendous bottlenecks - the infrastructure is not ready to channel productive investments.''

A United States Treasury economist specializing in the Middle East detects strong resentment from regional government officials who say lack of help from oil-rich Gulf states has forced them ask the World Bank and the International Monetary Fund (IMF) for development assistance.

In recent years, both these institutions recently increased their regional activity, with limited success. In dire financial straits, Algeria and Jordan erupted in riots in 1988 and '89 respectively. Algeria was reacting to planned IMF-World Bank interference; Jordan was assuaged by World Bank assistance. These same institutions are urging Egypt to lift subsidies as part of an austerity program that Cairo fears could be explosive for its own population, which broke out in food riots in 1977.

``If there were better income distribution, Saddam wouldn't have so much appeal,'' says Ajami. ``Whether he's an imposter or not, Saddam sells to these masses, and he sells well. He's simply articulating their rage.''

Gulf investors ``see oil as a means of carving out a role in a stable international economy ... where their investments are worth something,'' says the US Treasury economist. ``In this way they find the capitalist system is in their national interest.'' The ``Arab have-nots,'' he says, want to see the oil wealth evenly distributed throughout the region. Internationally, ``these Pan-Arabists see oil as a weapon to redress historical differences.

``What rankles the majority of have-nots is that the Saudis, for example, have fabulous visible wealth and they are the protectors of two of the Muslim world's three holiest shrines, Mecca and Medina. If they have money for a chateau in France, with wine and women, and return home as the keeper of the Mosque, there is bound to be resentment,'' he says.