The British are coming

Since the UK general election a year ago, waves of British politicians have made their way to the Gulf. Their mission? Business ties that might just help the UK pull away from the recession
London generic, London flags, British flags
By Ed Attwood
Tue 14 Jun 2011 01:15 PM

Cast your mind back, if you will, to around fourteen months ago — just prior to the general election in the UK. In April 2010, Arabian Business interviewed the two candidates most likely to become British foreign secretary, Labour’s David Miliband and the Conservatives’ William Hague. Their answers as to what British expatriates in the Gulf could expect from a new government were very different; Miliband stressed - somewhat irrelevantly - how important that Europe was to British interests, while Hague pointed out that many Gulf countries had “complained to various degrees about a lack of support and cooperation from Britain” and how a Conservative government would strive to put that right.

As we all now know, the Tories were victorious in the May election last year, and Hague is now foreign secretary. But has he held true to his word? Well, in terms of high-level visits to the Gulf, there seems to have been an endlessly revolving door of British officials making their way to the UAE, in particular. Just days after taking up residence in 10 Downing Street, Prime Minister David Cameron made the trip to the UAE as one of his first international visits, meeting President and Ruler of Abu Dhabi HH Sheikh Khalifa Bin Zayed, as well as Crown Prince HH Sheikh Mohammed Bin Zayed and Prime Minister and Ruler of Dubai HH Sheikh Mohammed Bin Rashid. In November last year, Queen Elizabeth also journeyed to the country she last visited in 1979 — only six years after the UAE declared independence from the UK.

Behind the glitz and the photographs, the underlying agenda has clearly been one of closer business ties; in the UAE, in particular, there is a feeling that British business interests have lost out to extensive lobbying from other European countries and the US — particularly on the defence side.

Against that backdrop, the UK sent just the latest in a series of ministerial expeditions to the region last week, led by Lord David Howell, who is the minister of charge of Foreign & Commonwealth Office (FCO) activities in the House of Lords, the second chamber of the UK parliament. Howell is in no doubt as to the importance of the Gulf in a world where the economic balance is shifting from west to east.

“We needed to make a vigorous effort to refresh and develop our outside and non-European, non-OECD relations. So that’s why you have seen a lot more ministers, and you’ll see a lot more in the future,” he says. “If you add the GCC up — I’m not saying its unified on everything — but if you add it up it’s a very substantial market, with very rapidly rising consumption demands and the British would be crazy not to be here. Indeed we’ve got to be here for our own prosperity, we’ve got to market here and we’ve got to draw capital from here and invest it in our own country where we need tens and hundreds of billions even to refresh our own infrastructure, particularly in the energy sector.”

Of Britain’s relationship with the UAE, specifically, Howell cites one of the officials he has met during the tour — which included Minister of Foreign Trade Sheikha Lubna Al Qasimi, Minister of Economy Sultan Saeed Al Mansoori, and Mubadala CEO Khaldoon Al Mubarak — as saying that “it’s the best it’s ever been”.

“We’re dealing with a very fluid situation in the Middle East, and day-to-day you get different assessments of what’s happening in Libya, Syria, Yemen and so on,” he says.  “We’re steering the boat together as we go through these storms. On the political front, a particular concern of UK foreign policy, the UAE is absolutely central to the developments in the region and to the role of the GCC generally.”

But the message is very different when it comes to Bahrain, a country with which Britain retains close political and military ties. The Gulf state has been wracked with protest during the course of this year.

“I think, basically, we view a settled Bahrain in the camp of those countries with which we want to be friends,” says Howell. “But we can’t just condone and tick the box over evidence of direct violence against protesting citizens — that’s something that I’m afraid we can’t agree to.”

In fact, Bahrain is somewhat conspicuously not on the list of five regional countries that Howell’s whistle-stop tour is including. Perhaps that’s not surprising; at the time of his visit, the Bahraini government was lifting its state of emergency — with tanks and soldiers pulling back from the centre of Manama — and was anticipating further unrest in its wake. “What has gone on is not very attractive,” Howell adds, with classic English understatement. “We don’t want to see anything more develop in that direction. We have said again and again and again that we want to see dialogue between the Bahraini government and the protestors. And that if there are arguments to be had out, let them be had out, but in a peaceful way.”

Howell’s assessment of Bahrain runs parallel with what he describes as British “concern” about how the pattern of the Arab Spring has run during the course of this year. In meetings with Saudi officials — including assistant energy minister Prince Abdulaziz and Riyadh governor Prince Salman — Howell admits that the UK doesn’t have “exactly the same perspective on everything” but is keen to accentuate the positives.

“We do want to see regimes and patterns of government reform steadily towards greater freedoms,” he says. “We do want to see this done in ways that are peaceful and without bloodshed and violence. I’m not saying that there’s any disagreement with Saudi Arabia on that — there isn’t at all — but there may be certain disagreements on the pace of reform. That’s about all — on the whole relations are pretty good, but pace of reform, it’s difficult, and our assessments of what’s going right and what’s going wrong and how regimes should develop is probably slightly different, but not very different.”

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Saudi Arabia, more generally, has been by far the largest regional recipient of British investment in recent times, and the kingdom has repaid that faith in spades. On energy, education, healthcare and research and development, British nationals have close ties with the kingdom.

“We look upon them [the Saudis] as very close friends, and we obviously have very strong ties through the energy industry and through basic industries,” says Lord Jonathan Marland, a parliamentary undersecretary of state for the Department of Energy and Climate Change and chairman of the Business Ambassadors Group, who is accompanying Howell on his Gulf visit. “Not only in Saudi Arabia, we can help with the exchange of knowledge and developing the skill-base for young populations. There will obviously be exchanges through universities, educations and medicine — where we have great expertise in our country — and development through financial services, where we are thought to be a world centre.”

Britain’s biggest ever export deal, the now-infamous Al Yamamah rolling contract to sell Tornado fighter jets to the Royal Saudi Air Force, began in the 1980s. BAE Systems, which brokered the deal, said in 2005 that the value of past, present and future contracts could amount to as much as $61bn (at today’s exchange rate). Building on that relationship has been further contracts to buy 72 Typhoon fighter jets in 2009, in a deal worth an estimated $9.5bn.

But while sales to Saudi Arabia have been strong, it has not been the same story in the UAE, where representatives from the trade association that represents British defence manufacturers told this magazine last year that the French already have the fighter jet market in the Gulf state “pretty well sewn up”. At some point during the course of this year, the UAE is expected to purchase the next-generation Rafale fighter jet from France, with the Typhoon barely believed to have had a look-in, despite interest from Oman, Qatar and Saudi Arabia.

Given that decisions on military hardware are normally political decisions, is it the case that the UK’s lack of interest in the Gulf relationship over the past decade is now backfiring on its biggest exporters? Unsurprisingly, both ministers are quick to deny this.

“I think Typhoon is the best product of its type. Maybe it’s just not the cheapest — but that doesn’t mean it’s not the best,” says Marland. “People think our Lynx helicopters are very good. We have a fantastically strong defence side but people take different decisions in relation to purchasing equipment.”

“The big hardware arms sales go up and down; in some countries we score, in others we don’t,” adds Howell. “But the fascinating thing here in the UAE is that at the level of personnel the British military and the UAE military are intertwined. That goes on through places like Sandhurst [the British army’s officer training academy] and so on, on a very intimate basis. At the human level, it’s very very close, but it doesn’t always work out with the big contracts, but sometimes it does. So we keep trying.”

The Typhoon, like the Rafale, has recently been plying its trade in the skies above Libya — the perfect window for curious Gulf countries willing to invest in their own arsenals. But on the ground, Howell says that the widely held view that the NATO operations against Colonel Muammar Gaddafi have reached stalemate is misconceived.

“I don’t think there is an impasse, I think the pressure is mounting on Gaddafi all the time,” he points out. “There are more and more desertions every day that we hear of from his entourage. He failed to walk into Misurata – everyone said he would take it, but he hasn’t. And he seems to have gone to ground — no-one can trace where he is. So I don’t think it is a stalemate — it’s a situation that is working against Gaddafi, but I couldn’t say is whether it will take days, weeks or months. The measuring of time is impossible.”

According to Howell, ministers in the Gulf countries are certainly singing from the same hymn sheet as NATO as far as the Libyan mission is concerned — a mission in which Qatari and UAE jets are involved.

“I think they want the procedure to continue under UN Security Council Resolution 1973 until Gaddafi goes and that’s the view we’ve heard from everybody,” the minister adds. “Whether they’re going to agree to every single operative measure that we do every day…well, I hope they do because we’re conforming very strictly to Resolution 1973, but sometimes — it probably looks a bit rough to them — but we do have to take out the tanks, we do have to take out the anti-aircraft missiles, we do have to take out the command and control.”

For now, however, Britain’s focus on the Gulf appears to be one of making up lost ground. In the UAE, specifically, the country is targeting an almost doubling of bilateral trade to £12bn ($19.7bn) annually by 2015. Given that the UK has been hit far harder than the Gulf by the recession, the benefits that closer economic integration will bring are obvious. But the GCC can also gain from British experience in certain key industries.

“So the whole thing is really taking stock, saying we’ve got to here — now the economic event is behind us, how do we go forward with these countries who’ve been great friends of ours and we’ve been very interdependent with for many, many years,” Howell says. “Of course we all know that to lead us out of any economic recession, trade is how you do it, and that is where we will continue to build on our existing links. We’ll sell our expertise to them and vice versa.”

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