The traveler landing at Kuwait does not have to wait long for signs that the small city-state is in some kind of crisis. While citizens of the six countries belonging to the Gulf Cooperation Council (GCC) proceed swiftly through immigration, the rest of us stand in long, slow-moving lines before submitting to the detailed check of visas, work permits and residences introduced to maintain a tight control over new arrivals. In the city itself, the low walls of concrete blocks around the American Embassy — just like the ones surrounding the White House in Washington — are an ugly reminder of the truck bomb attack by partisans of Iraq’s outlawed Da‘wa Party in December 1983. It takes only a little longer to notice that the big hotels are starkly empty and that many of the stores in the smart new air-conditioned shopping centers — some of which commanded $2 or $3 million in key money only a few years ago — have closed down.
Kuwaitis, of course, are used to living on their nerves. And never more so since the start of the Iran-Iraq war, which brought fighting close to Basra, only two hours’ drive to the north. In many ways, 1984 seems to have been the most difficult yet. Kuwaiti shipping was directly affected by the intensification of the Gulf tanker war not many miles offshore. Security has been stepped up drastically; regular police sweeps of political undesirables and illegal immigrants produce at least 200 deportations a month. Perhaps most dangerous of all, Iran appears convinced, in spite of official Kuwaiti denials, that Kuwait has leased two uninhabited northern islands, Bubiyan and Warba, to Iraq for military purposes. This has exposed the country to the threat of direct Iranian armed intervention. The uncharacteristically outspoken attacks on Tehran for allegedly aiding and abetting the hijackers of the Kuwaiti plane just before Christmas illustrated just how frayed some nerves have become.
1984 had important implications for Kuwait’s traditional policy of neutrality and independence in the face of increasing pressure from its three most powerful neighbors, Iran, Iraq and Saudi Arabia. Determined to find better ways of defending its airspace after three Iranian raids, it turned to Moscow for supplies of SAM (surface-to-air) missiles and to Paris for Mirage interceptor planes after Washington had vetoed its request for Stinger anti-aircraft missiles. Perhaps to hammer the point home, Kuwait also refused to accept the credentials of the new American ambassador-designate, on the grounds that he had previously served in Israel.
At the same time, Kuwait continued to come under ever increasing pressure to coordinate its defenses with the other GCC countries under the American AWACS umbrella. A meeting of the Gulf rulers in Kuwait, held in great splendor yet amid signs of an almost paranoid obsession with security in late November, decided to set up the GCC’s own small rapid deployment force of perhaps two battalions, probably to be stationed in Saudi Arabia. By making concessions on relatively unimportant points, the Kuwaiti ruling family evidently hopes to postpone acceptance of the larger Saudi demands for an integrated Gulf Defense Command until the war is over and the international situation looks a bit better.
Kuwait’s present economic situation constitutes just as much of a minefield. The recession triggered off in 1982 by falling oil prices, the disruptive effect of the Iran-Iraq war and the traumatic crash of the unofficial stock exchange, the Suq al-Manakh, continues. Of these, the war seems to have had the most serious immediate consequences. It has cut Kuwait’s lucrative transit trade with both Iran and Iraq severely. It has also forced the government to pay so much attention to local security that many would-be visitors are having the greatest difficulty in obtaining visas. Indeed, many here believe that one reason the government agreed to house the Gulf rulers’ conference in some of the bigger hotels was to meet their owners’ criticism that the new regulations had turned nearly all their trade away.
The Stock Market Crash
In the long run, the Suq al-Manakh crash may prove to have been the more dangerous event. For one thing, it has ruined the country’s hard-won reputation for careful fiscal management. It has also planted a future time bomb by leaving almost every important financial institution in possession of many heavily over-valued assets such as real estate and the postdated checks used by brokers to meet their debts in the Suq al-Manakh. It seems that if they employed proper accounting methods in their annual balance sheets, many of them would prove to be technically bankrupt.
The Suq crash had its origins in the acute shortage of local investment opportunities for the huge private fortunes made during the oil boom of the late 1970s. This led to the emergence of an unofficial market in the shares of companies located in other Gulf states, which could not be legally traded in Kuwait, as well as in paper companies, many of which were created simply for the purpose of having some marketable stocks to play with. Soon the amounts involved in buying and selling such shares exceeded even the astronomical sums available to the oil millionaires. Traders and speculators took recourse to payments by postdated check: This form of credit is perfectly legal in Kuwait, where banks are required to clear any check presented to them regardless of its date. The system worked so long as those holding such checks kept to a kind of gentleman’s agreement not to try to cash them. But as soon as some of the very big ones came up for presentation, credit and confidence evaporated and the bubble simply burst. During the boom itself, the universal desire to make money out of what seemed like a special Kuwaiti version of Monopoly drew in a large proportion of the local population, both Kuwaiti and non-Kuwaiti. The crash, when it came, left few households unscathed.
Why the government — the Al Sabah ruling family — let the whole business get so out of hand in spite of repeated warnings from some of its own ministers, such as the well-respected ‘Abd al-Latif al-Hamad, is still a matter of debate. At least one member of the royal family was himself heavily involved; it turns out that he owes his small creditors alone at least a billion dollars. Also involved were any number of rulers and their relations in surrounding Arab countries. Darker rumor has it that the whole thing was deliberately allowed to balloon by other members of Al Sabah on the grounds that this would destroy much of the economic (and thus political) power of the merchant class, which had grown so rich from the oil boom that it could no longer be controlled by the traditional reins of state patronage.
The immediate result of these triple blows — the war, falling oil prices and the Suq al-Manakh crash — came in 1982, when the gross national product actually fell. This was followed by a longer period of economic stagnation marked by a drop in civilian imports, an increase in the number of unoccupied buildings, a huge reduction in private lending and, until it was checked a few months ago, a significant flight of Kuwaiti capital abroad. The general loss in business confidence has led to louder and louder calls for government intervention. But the government itself has moved at only a snail’s pace to sort out the tangled web of credit and obligations left by the Suq al-Manakh crash, prosecuting just a few of the major brokers, paying off some of the smaller investors who had lost money and, for the rest, trying to get some of the larger debtors — like Sheikh Khalifa Al Sabah — to make individual repayment arrangements. It has resisted all calls to pump large sums of money into the economy, preferring to refer the matter to a high-level commission under the minister of oil, which has been asked to produce its own plan for economic revival by February 1985.
The government has also signally failed to press on with its policy of using a temporary budgetary deficit on current account as a justification for charging money for services which are now free, such as health. Plans to introduce such charges were hastily withdrawn in September 1984. One reason may have been the vocal criticism in the National Assembly and the feeling that the issue could easily be used as an effective rallying cry by opposition forces during the forthcoming general election. In particular, the new charges might provoke further militancy from members of Kuwait’s 40,000-strong trade union movement; some had already organized a series of work stoppages in the oil industry to protest plans to withdraw privileges granted in the days of foreign control. But almost certainly the most telling argument must have been the one which asked how the government could possibly expect the people to bear new burdens at a time when Suq al-Manakh brokers were still making free with billions of dollars of investors’ money, and when the government itself was earning so much from its overseas investments that it could easily meet any temporary shortfall in its ordinary revenues over and over again.
Some of these issues have been aired in the campaign for the general election scheduled for February 20. The electorate is confined to those 57,747 male Kuwaitis over 21 — 3.5 percent of the population of 1.7 million — who are first-category citizens (those who can prove that their family lived in Kuwait in 1920). The 25 two-member constituencies have been gerrymandered in such a way as to give a built-in majority to the bedouin supporters of the royal family. Still, it will be taken as an important test both of public opinion and of government intentions. Speech is relatively free. Public meetings of over 20 persons require a special permit; much of the electioneering goes on either in special tents put up so that a candidate can entertain his electorate (never more than 2-3,000) or in informal meetings in private houses (diwaniyyas) where family members and their friends meet to hear the candidate speak or to ask him questions.
Political parties are banned by ministerial order, but certain recognized trends exist among some of the candidates. These include the associates of the veteran Arab nationalist politician and social reformer, Ahmad al-Khatib, and two religious organizations, the Muslim Brothers and the more conservative salafis. Most of the other candidates are identified simply in terms of their community of origin, like the Shi‘a, or particular bedouin tribes. For al-Khatib, the main issues of the campaign are the state of the economy, the government’s failure to punish people who acted illegally during the Suq al-Manakh frenzy, and the government’s short-lived attempt to amend the constitution — attempts withdrawn after provoking widespread opposition in May 1983. This last issue, generally taken as an example of the ruling family’s desire to obtain greater powers for themselves against the National Assembly, probably at the insistence of the Saudis, can be used to generate discussion about some of the larger questions relating to Kuwait’s difficult political future. While no one believes that more than a handful of the government’s critics can possibly get elected, it may well suit the royal family to be able to point out that the National Assembly is not simply a rubber stamp, particularly when it comes to trying to protect Kuwaiti independence against Saudi pressure.
Beyond the short-term interest in the election and its outcome, there is a great deal of both fatalism and fear. Conversations with Kuwaitis of all classes have a way of coming to a sharp halt when they bump suddenly up against the brute facts which underlie their economic and political position. There also seems to be a general feeling that, whatever opportunities there may have been a few years ago to transform Kuwait into a different type of society, this time is now past; there is now nothing left to do but to play out the role of being a tiny rentier state, heavily reliant on foreign labor and foreign expertise and threatened by powerful and greedy neighbors. Politically, the ruling family once tried to establish a neutral position in the Gulf, friendly to all (it was the only GCC country to recognize the People’s Democratic Republic of Yemen) and always ready to use its wealth for constructive development through respected institutions like the Kuwait Fund. Today they find themselves forced to take sides in the Iran-Iraq war and simultaneously regarded as a threat by their own ally, Saudi Arabia, as they hold out against Saudi plans to place Gulf defense on a new footing. Economically, the ruling family tried to diversify activity while spreading the wealth — albeit unequally — to most Kuwaitis, giving them jobs and allowing them to derive great benefit from their extremely privileged position vis-a-vis the foreigners who now make up over three quarters of the labor force. But diversification has gone no further than a successful move downstream to refine and export a larger share of its own oil, leaving the government with little alternative but to invest more and more of its revenues abroad in other people’s industry rather than its own.
Meanwhile, with few honorable exceptions, including some senior members of the Kuwaiti trade union movement, the Kuwaiti population has gotten so used to its privileges that it is ready to support ever more extreme measures to deny them to anyone else, even to the extent of contemplating rules which would make it difficult for Kuwaiti citizens to marry non-Kuwaitis without giving up their children’s right of citizenship. If there was a moment when the trading city of Kuwait might have seemed on its way to becoming the Venice of the Gulf, it now seems more and more like a Middle Eastern version of Miami — palm trees, air conditioning, migrant labor, manipulation from outside political centers and all.
Postscript: Kuwaitis went to the polls on February 20. Out of 50 seats in the National Assembly, 28 new members were elected. The results were important for three reasons. One was the return to the Assembly, after a four-year absence, of Khatib, together with three others associated with his group, including Sami al-Manis, the editor of the group’s weekly journal, al-Tali‘a. The second was the defeat of two of the leading Muslim fundamentalists, leaving only two others in the Assembly to represent this trend. The third was the high turnover of members and the defeat of a number of prominent men close to the ruling family. Although the Assembly will maintain its large majority of conservatives loyal to the Sabah family, many have interpreted the results as a significant vote of protest against the government’s failure to stimulate the stagnant economy. Other significant features were the election of only one prominent Shi‘i and the victory of ‘Abdallah al-Nafisi, a man close to the Muslim Brothers but a bitter critic both of the government and of Saudi interference in Kuwaiti affairs. The new Assembly can be expected to be both active in its debates and more watchful of what members take to be the interests of native-born Kuwaitis as against migrants or outside economic interests.