One stated justification for US strikes in Syria and Iraq is to protect the Hashemite Kingdom of Jordan.
Indeed, the status of the Hashemite monarchy as Washington’s protectorate has a long history. And while Jordanian society certainly feels the impact of regional insecurity, whether to the north, west or east, the more persistent and serious threats to Hashemite rule have been internal and generally socio-economic. It was mobilization by opposition parties and professional associations in the 1950s that led a young King Hussein to disband Parliament for decades. It was a sudden currency devaluation and impending economic collapse in the late 1980s that compelled him to bring Parliament back. And since then, episodic public protest and unrest in the southern parts of the country have centered on socio-economic grievances that show few signs of abating.
It was curiously ironic, then, that on the day before the US commenced bombing Syria, a federal jury in New York held Jordan’s most important financial institution, the Arab Bank, liable for supporting terrorism. The penalties, to be determined in separate proceedings, threaten the survival of Washington’s close ally in Amman.
Understanding why requires a bit more background on the Arab Bank. Established in Jerusalem during the British Mandate, the Arab Bank quickly evolved into one of the region’s most respected financial institutions. Its Palestinian founder, Abdul Hameed Shoman, had first tried to establish the Arab American Bank in New York City but failed. By the end of his career in the 1970s, Abdul Hameed was an icon in Palestinian and Jordanian societies and one of the region’s most highly regarded bankers. His biography is entitled The Indomitable Arab.
The old quip in Jordan is that sons of the East Bank elite went to work for the state, while the scions of the Palestinian elite went to work at the Arab Bank. Yet in economic and political terms, the Arab Bank transcended these dividing lines of identity in the kingdom. With headquarters in Amman’s tony Shumaysani neighborhood and fast-expanding regional business, the Arab Bank became Jordan’s most important economic institution by the 1980s. It was hardly aloof from regional or domestic politics, as attested to by the close relations between the Hashemites and Abdul Hameed and his heirs. The bank’s financing operations in Iraq figured in tensions between Jordan and Iraq when the latter country was under the rule of the US-led Coalition Provisional Authority. Today, the Arab Bank represents nearly one third of Amman’s shaky stock market. There are no recent direct measures of the Arab Bank’s contribution to Jordan’s economy. But given the critical importance of banking to the services sector, which comprises nearly 70 percent of Jordan’s gross domestic product, informal estimates suggest the Arab Bank’s investments and activities constitute at least one third if not one half of Jordan’s total economic output.
Today, Jordan weathers one of the highest levels of debt in the world with 18 percent of GDP in external debt and over 85 percent of GDP in public-sector debt. The unemployment rate is among the highest in the region. Thus, the penalties in the New York case have the potential to create havoc in an already tense country. Reputational costs aside, the verdict erodes Jordan’s already poor ability to attract productive investment. And it puts numerous obstacles in the way of integrating regional economies, another long-standing goal of Washington’s policy toward Amman. An appeal may be successful or the US government could weigh in to reduce whatever damages are awarded by the next court.
For the moment, in the midst of the Obama administration’s complex, contradictory policies toward the Arab world, the Arab Bank case has a low profile. It does, however, lay bare the failures of America’s protection policies and the pretense of two sovereign allies working to stabilize the region.
