When the American and French presidents visited the Gulf last month, both leaders received the same red-carpet treatment. Both met with their regional counterparts, both talked about politics and security, the need for finding peaceful solutions to the various crises troubling the Middle East and both called for stronger engagement and deeper ties between the two regions, their peoples and their economies.
But when it came to the business aspect of their respective visits, the differences could not have been greater.
As the main course, George W. Bush brought with him parts of a $20 billion arms deal with some GCC countries that had been announced in 2007. Saudi Arabia is to receive 900 Joint Direct Attack Munitions (JDAM) satellite-guided bomb kits worth $123 million, Kuwait and the UAE will acquire Patriot missiles worth $1.63 billion and $1.9 billion respectively, and the US will share its Littoral Combat System technology with the GCC. Together with other, unspecified packages it all adds up to $11.5 billion or slightly over half of the whole arms deal.
This arms sale is just a parcel of current US military contracts with Middle Eastern governments. Just days before Bush’s tour of the Gulf, the Libyan foreign minister, Abd al-Rahman Shalgam, was given a personal tour of the White House, meetings on Capitol Hill and a luncheon with Lockheed Martin, Boeing, Northrop Grumman, Occidental Petroleum and Raytheon, in a bid to convince his government to buy American hardware for the Libyan armed forces. This should increase the US-Libya trade volume from its 2006 level of $3 billion, 80% of which were oil exports to the US.
The only non-arms, private sector contract that was timed to coincide with Bush’s visit happened when indebted Gulf Air (solely owned by Bahrain since 2005), signed a $6 billion deal with Boeing for delivery of 16 Boeing 787 Dreamliners to begin in 2016. The deal also included an option for eight more planes as part of the airline’s plans to renew its current fleet of 25 aging aircraft and to grow to 45-50 planes by 2013. However, the airline is also in talks with Airbus to buy planes and thus Boeing will have to work hard to turn that option into a second sale.
Still, the Dubai-based American Business Group (ABG) is optimistic about US-Gulf economic ties, and especially about energy projects in the UAE. They are also excited about Emirati investments in the US, with hopes of bolstering the real estate sector after the sub-prime crisis. In 2007 the US-UAE Business Council, co-chaired by Joseph E. Robert Jr., chairman and CEO of JE Robert Companies, and Khaldoun al-Mubarak, CEO of Mubadala Development Company, was established in Washington, D.C. and is to become the main lobbying group to “resolve any misunderstandings regarding investments from the UAE,” according to Elias B. Sayah, vice-president of ABG.
Bush’s visit closes down Dubai
However, not everything went smoothly for Bush during his visit. After the American president’s remarks that $100 per barrel of oil is too high, the price did drop to $90 pb — mainly because of speculation that the US is going into a recession, but Gulf producers reacted coolly to, or even ignored, his demands that they increase production to lower oil prices permanently.
In the end, the big story during the American president’s visit to Dubai was not about business deals, or even politics, but about the emirate’s losses from the security measures put in place during Bush’s stay in Dubai that are said to have amounted to more than $118 million. And since the measures were done as an emergency shutdown, with businesses having had little to no time to prepare, lost opportunities add to that figure. DIFC and DIFX were closed, in addition to most businesses, except for neighborhood stores and restaurants.
Some analysts think that the long-term opportunities brought by the US president’s visit may outweigh the short-term losses, but in the short-term a lot of businessmen were very unhappy.
In contrast, Nicolas Sarkozy’s tour was a business tour par excellence. While his criticism of the high oil price — he said that “the realistic price for oil should be $70” — also did not result in any immediate policy shift of the Gulf producers, the answer he received — Qatar’s energy minister, Abdullah Bin Hamad al-Attiyah, responded to him by calling the $100 price a “fleeting development caused by the global market” — was a much more diplomatic response than the one his American counterpart got, and it exemplified Sarkozy’s reception and his visit as a whole.
On his first stop, in Saudi Arabia, he pushed for French companies to get a share of the kingdom’s $500 billion non-defense budget, especially in the energy, transport, and water distribution sectors. He also discussed $58.4 billion worth of contracts, among them a $15 billion security contract on monitoring KSA borders (previously known as MIKSA and now called “Saudi Border Guard Development Project”), $14.6 billion in railway and $2.25 billion in aviation contracts, as well as $9 billion worth of water and electricity contracts. The main companies to benefit are Alstom, Bouygues, EADS, Vinci, Veolia, Accor, Carrefour, Thales, Eurocopter, and Dassault Aviation. Among the projects under discussion are a high-speed rail link between Mecca and Madinah and a railway between Riyadh and Jiddah, the expansion of the French-built Jiddah airport, and an upgrade of the Saudi Airlines’ fleet. Saudi Airlines already concluded a deal in December 2007 with Airbus for twenty-two A320 aircraft, its first order with Airbus in two decades and at the Paris Air Show in June 2007, National Air Service (NAS) signed a deal for twenty A320s with an option for 18 more. Accor Hotels announced that it will be the first French hotel group to open in Makkah and Madinah and Total and Saudi Aramco join in a $13 billion project to build a 400,000 bpd heavy crude refinery in Jubayl.
In Qatar, the French president focused on energy, resulting in memoranda of understanding on cooperation on traditional energies and on nuclear/renewable energies and the announcement of major deals. Electricité de France (EDF) will cooperate on nuclear, solar and wind power for an initial feasibility study and Gaz de France (GDF), about to merge with Franco-Belgian Suez, signed deals with Qatar Petroleum International, the investment arm of Qatar Petroleum on international cooperation, whereby GDF will use Qatar as a focal point in Gulf.
French nuclear power contracts
Areva Transmission & Distribution, part of the world’s biggest producer of nuclear reactors, signed a $695 million electricity engineering project with Qatar’s Kahrama (Qatar General Electricity & Water Corporation) to supply 14 turnkey gas-insulated substations to develop and improve the electrical grid in the Doha region. These should be delivered in the first quarter of 2010. A second contract was also inked on technology in order to upgrade the National Control Center built by Areva in the late 1990s. Further accords, worth up to $9.3 billion were discussed but not specified.
By the time Nicolas Sarkozy made it to the UAE, the words “nuclear energy” had become the leitmotif of his trip. Having already offered French help in developing a civilian nuclear power industry in Saudi Arabia and including nuclear power in the French-Qatari feasibility study, before he touched down in Dubai rumors had been floated about a nuclear deal with the UAE. The ensuing results were not a disappointment.
In France’s third nuclear accord with an Arab country, after having signed the two others with Libya and Algeria, Areva, Suez and Total will possibly build two 1,600 MW EPR (European Pressurized Reactor) nuclear reactors and provide fuel-cycle products and services, Areva’s main product. Of course, the necessary groundwork — security, training and operational expertise — could take years. The current plan is to build the reactors by 2025. According to the agreement, Suez will hold equal shares with Total in the construction and operating consortium, at least 50% of which will be held by the Abu Dhabi Water & Electricity Authority (ADWEA). Total and Suez are already partners in the UAE’s Taweelah gas-fired power and desalination plant. The complete accord, including the training of local engineers in France and construction and other contracts bid for by French companies, could amount to up to $6 billion. As analysts have noted, this agreement could even provide the basis for a future nuclear accord with Iran, whereby nuclear material for Iranian nuclear power plants is enriched in the UAE under third-party supervision.
Concomitantly with the French president’s visit to the Emirates, Al-Yah Satellite Communications Company (Yahsat), a subsidiary of Mubadala Development Company, signed a letter of intent with Arianespace to launch the Yahsat 1A communications satellite, the UAE’s first satellite that is manufactured by EADS, Astrium and Thales Alenia Space. The satellite is due to be launched in the second half of 2010 from the Guiana Space Center — Europe’s spaceport — on an Ariane 5 rocket.
After laying the foundation stone of Paris-Sorbonne University Abu Dhabi, the first branch of the university outside France, built by Mubadala Development Company, Nicolas Sarkozy signed a defense cooperation agreement, following a 1995 defense accord, on the establishment of a permanent French military base in the UAE. On an invitation from the UAE, France will station 400 to 500 navy, army and air force personnel in the base. According to French sources, it is to have “a significant intelligence aspect” and will also serve as a maintenance station for French ships. An agreement on setting up a branch of the French military academy St. Cyr in Qatar, right next to the biggest US base in the region and coming on the heels of the France-KSA joint exercise accord, rounded up the French president’s checklist.
With this visit, part and parcel of Sarkozy’s activist foreign policy, the Gulf states are signaling a diversification, not only in matters of defense and security, but also in terms of energy policy and business. And France is on a path to move beyond its traditional regional spheres of interest — the Maghreb and Lebanon. The cultural/educational initiatives of the last years — bringing the Louvre to Abu Dhabi and dependencies of French universities to various Gulf countries — were only harbingers of a grander move by French companies and businessmen. The anecdotes about an increase of French-speakers in the lobbies of Dubai’s hotels and Abu Dhabi’s restaurants seem to confirm that perception. And the era of the Gulf as an anglosphere just may be over.
