Labor Day in the United States marks an important juncture in the political calendar. It is the time of the year when US lawmakers roll up their sleeves and get down to serious business now that the summer break is over. Yet as eager as President Barack Obama might be to go back to work and get things rolling, he will be faced with at least five major issues, four of which are in the Middle East.

The American president’s first major challenge, however, will be a domestic issue and very likely the one to give him greater hassles than the Middle East dossiers he will have to tackle.

On the US front, Obama will be kept busy with his plan to convince his fellow Americans that it is time to enact into law a universal health care coverage plan. Indeed, it is hard to believe that the US remains the only country in the developed world that does not have universal health care, when there are 40 million Americans living under the poverty line and some 45 million Americans without health coverage.

Obama’s plan, though thinned somewhat down so as not to face too stiff a resistance from the Republicans, and even some Democrats who worry that they may upset their constituents, is still facing opposition from many quarters.

Billions upon billions of dollars are at stake and the anti-health care reform groups are taking no prisoners. Fear, once again, is being used to conscript people against the project. You may recall that fear was used very successfully by the Bush administration after the September 11, 2001 terrorist attacks on New York and Washington, DC, to allow the Bush team to enact a number of laws and get away with decisions which under normal circumstances they would have never been able to.

The health care industry is the holy cow of Capitol Hill, where legions of highly paid and very influential lobbyists will do what it takes to keep any changes away. Some have tried to spread the message that universal health care coverage is the first step to socialism. And many Americans are falling for that.

Now in the Middle East, Obama’s problems stem from a) the war in Iraq; b) the war in Afghanistan; c) the stalled peace talks between Israel and the Palestinians, and d) Iran’s nuclear ambitions.

In Iraq, violence is on the rise once again and relations with Syria have reached an all-time low after a spate of suicide attacks claimed the lives of hundreds of victims. Indeed, Iraqi Prime Minister Nouri al-Malaki wasted no time in pointing the finger at Syria, where just days earlier he had met with President Bashar al-Assad. Malaki accused the regime in Damascus of abetting those responsible for the August 19, “Black Wednesday” attacks that left more than 100 people dead. Baghdad is demanding that Damascus hand over two suspects to face justice in Iraq.

In Afghanistan, the level of violence is increasing and raising concerns among allied forces backing up US and NATO troops fighting the Taliban. Eight years after the US invasion the Taliban, who were to have been destroyed by now, are still a force to be reckoned with. Support for the war effort among US allies is waning. In Germany, for example, the government is facing increasing pressure from the public to bring their troops home.

In regards to Israel and Palestine, Obama’s other problem comes from the more “traditional” Middle East conflict and, more precisely, from Israel where Prime Minister Benjamin Netanyahu, in defiance of Obama’s request and world public opinion, has given the green light for 500 new housing units to be built on land belonging to the Palestinians.

Obama had hoped to bring the Arabs and Israelis together and to finalize a peace deal that would see the end of the 61-year conflict that spurred five wars in as many decades. Obama had hoped to see the creation of a Palestinian state that would normalize relations between Israel and the Arab world. However, following Israel’s latest announcement, the Palestinians said they would suspend all negotiations with Israel.

And last but by no means least, is the Iranian nuclear dossier, an issue which remains as hot as the spent uranium rods from Iran’s facilities. The challenge for Iran will be to hold the West off until Washington goes into re-election mode. But will they be able to?

Claude Salhani is editor of the Middle East Times and a political analyst in Washington

A year after the global financial crisis erupted, is it business as usual for banks in the Middle East? Their counterparts in the West have been battered and otherwise have gone through a lot. As Western bankers marked the first anniversary of the collapse of investment bank Lehman Brothers in September 2008, which triggered the crisis and bank failures around America continue. At the same time, the authorities in the US warn that in some cases the bad old ways that led to major problems are still there. A recent twist in the changed Western financial scene is the seeming tilt in attitudes away from banking secrecy, with the Swiss financial giant UBS turning over client records to the American government. More such changes are no doubt on the way; otherwise, we may be in for another unpleasant greed-driven episode of financial collapse a few years down the road.

So are there nasty surprises still in store for the region’s banking sector? The answer seems to be that while there have certainly been problems in the region’s financial sector, the worst is over. With the United Arab Emirates issuing $20 billion in bonds to boost banks’ liquidity last year, the Saudis injecting cash into their financial system and the Qatari government buying loan portfolios in each of the country’s banks, the banking system has largely stabilized in Gulf Cooperation Council countries. The exception seems to be Kuwait, where the government has already stepped in and taken over two banks, with other financial firms currently waiting on a $5 billion rescue package from the state to counter the effects of the crisis.

Effectively, the reason the Gulf banking sector has not been decimated in the wake of the global financial crisis is because the governments have used their petro-dollar surpluses to keep the sector afloat. Though proportionally, liquidity injections into Western banks compared to the regional ones were lower, the GCC region’s cash-rich governments have helped cushion the magnitude of the downturn in the Gulf.

A particular bright spot has been Islamic banks, which as a whole have managed to expand in a turbulent year. Assets held by the world’s 100 largest Islamic banks increased 66 percent in 2008 from the previous twelve months despite the global financial turmoil. The top 100 Islamic financial institutions — mostly in Asia, the GCC states and Iran — held assets totaling $580 billion last year, up from $350 billion in 2007. In the same period, the 300 largest Asian banks of all types saw their assets rise by a much lower 13 percent. The blot in this picture came from Islamic banks in the UAE that were heavily exposed to the property market which, especially in Dubai, had crashed. Islamic banks in the Gulf have also been exposed to the sub-prime mortgage meltdown in the US, but due to lack of transparency, it is difficult to determine the extent of total losses.

Iranian banks were the biggest players in the global Islamic banking sector, with seven out of the largest ten such institutions headquartered in Tehran, but Saudi Arabian Islamic lenders were generally more profitable. Not that the Saudi financial sector hasn’t had its share of problems in the past few months, as banks in the kingdom cope with the fallout from debt restructuring at two family-owned Saudi conglomerates — Saad Group and Ahmad Hamad Algosaibi & Brothers. These problems came to light in May when the Saudi Arabian Monetary Agency, the kingdom’s central bank, froze the accounts of the chairman of Saad Group.

Banks in the UAE also have significant exposure to the faltering groups: Mashreqbank is suing the Algosaibi organization, and the Abu Dhabi Commercial Bank is suing a unit of the Saad group. In July, the UAE central bank directed banks to take provisions of 50 to 75 percent of their exposure to the troubled conglomerates. In fact, the problem transcends the region, as several regional and international banks, including Citigroup and BNP-Paribas, are also exposed.

At the same time, Middle East banks are profiting from business associated with large government-driven infrastructure projects. In Saudi Arabia, the locomotive that spurs the GCC economy, as it does with the rest of the region, the 2009 budget projects a 16% increase in spending to reach a record $126 billion equivalent. Several projects, in areas including power generation, desalination and transport will provide good business for Saudi banks that have cut back on lending to the private sector. The bottom line is that, unlike the West, banking in Saudi Arabia and much of the rest of the region looks to remain strong due to adequate liquidity to cover for the hits taken so far.

RIAD EL-KHOURI is the senior associate consultant at the William Davidson Institute of the University of Michigan in Ann Arbor, and dean of the business school at the Lebanese French University in Erbil.

There’s a popular quip that speakers love to use at press conferences in Lebanon. An orator will typically begin by chastising the government for its lack of efficiency, then point to the several hundred railway workers the government employs despite there being no rail network in the country since the 1970s.

While Lebanon’s pontificators may disagree on the exact number of railway employees (estimates range between 200 and 900), the fact that this situation has been allowed to perpetuate is emblematic of the nonchalance of the country’s politicians when it comes to implementing reform.

Lebanon’s latest political debacle renders the lethargy of the country’s public figures ever more palpable.

The divvying up of cabinet seats in Lebanon has always been a game for the numerous political and commercial interests of international players, who kick Lebanon around the proverbial stadium until they get what they deem is rightfully theirs. Whichever unlucky soul is assigned the task of balancing these interests ends up in the firing line and the debate over who should get what duly turns into a political crisis.

Cabinets come and go, but no one seems to ask the obvious question of why politicians actually deserve to have control over basic public services, besides having curried favor with one of the powerful political parties in the country.

The current political quandary facing Lebanon is no different. But this crisis could be resolved if the politicians were willing to address the issues that will build the foundations of a functioning state instead of a banana republic.

Instead of being interested in Israeli microwave signals providing the Lebanese public with much-needed Internet capacity, the next prime minister could steer the debate over the next telecom minister toward the creation of the non-existent and legally mandated company, Liban Telecom, that will begin to reform the sector. If, as stated, telecommunications privatization is the ultimate goal of the ruling coalition, a plan contrary to the one proposed by the current minister needs to be articulated. That may be a wiser course of action than to nominate a candidate for the post whose party has come out against privatization of the sector.

Given the lack of political interest in reform, it is not surprising that there is also little debate over who will be burdened with becoming the next energy minister — in charge of the state-run electricity company that continues to drain the government’s coffers year after year.

Instead of pawning this ministry off, the next minister could be nominated on the basis of implementing a law that would facilitate offshore oil and gas exploration at a time when energy companies are licking their chops in anticipation of a bidding round. That may be a good option, considering that Israel has already found a large deposit of natural gas off its northern coastline next to the Lebanese border. Implementing the electricity law that would create an independent regulatory authority would also be a good first step. 

Perhaps the 28 percent of the country’s population that lives under the poverty line would appreciate it if the next minister of social affairs spearheaded a plan to allow microfinance organizations to practice financial intermediation and increase their outreach. That might be a better alternative to politicians giving the poor handouts come election time, then ignoring them for four years until the next time their votes are needed.

The gridlocked commuters on Beirut’s crowded streets may find it useful if their roads were widened through a policy to create more parking in the city. The post of transport minister could be awarded to a nominee based on a solid plan to decrease congestion, instead of wasting government funds on traffic lights in areas where they are unnecessary and redundant, given that there is often also a police officer directing traffic instead of fining drivers for running red lights.

Another way to start may be by opening up the unused Charles Helou parking lot that has stood eerily vacant for years to alleviate the parking problem around the Gemmayze district. Perhaps the next minister could also have a degree in civil engineering or urban planning instead of physics. Getting rid of those railway workers might help as well.

It is natural that after a civil war as devastating as Lebanon’s the country needed time to put the pieces together. But after almost two decades there is no excuse for the current state of affairs, let alone a cabinet that is disinterested in implementing reforms. Unless the next cabinet has a real intention to truly begin working on reforming the public sector, there seems little point in appointing them in the first place since their presence will be just as relevant as their absence.

Sami Halabi is a Deputy Editor at Executive Magazine

Last month, Libyan leader Muammar al-Qaddafi’s son, Saif al-Islam al-Qaddafi, said the case of the Libyan convicted by a Scottish court for the bombing of PanAm Flight 103 over Lockerbie in 1988 “is over for good.”

It would seem to be over for the convicted bomber, Abdelbaset al-Megrahi, who is terminally ill with cancer and was returned to Libya in August on compassionate grounds after serving eight years in prison. But the Lockerbie issue, in which 270 people were murdered, is far from over.

On an almost weekly basis, certain British publications have been running articles that something was amiss in both the decision to free Megrahi and the investigation into the bombing.

The first major story was that oil giant BP signed major oil deals with Libya in the week following Megrahi’s release. It could be coincidence, but the timing is certainly fishy. The British government of course claimed nothing of the sort. There could be no “trade for terrorists.”

BP then came out and scuppered that whole premise, saying it had lobbied the British government in late 2007 that a delay in concluding a prisoner-transfer agreement with the Libyan government could hurt a $900 million deal it had inked with Tripoli.

Then it was revealed that the new international mediator on the bloc, Qatar, had put its oar in, with the Minister for International Cooperation, Khalid bin Mohammed al-Attiyah, pressing Scottish First Minister Alex Salmond over Megrahi in June. Scotland is in talks with Qatar to fund a $3.4 billion road bridge, major subsea electricity cables and other projects.

So, this seems to be yet another case of the sleazy troika of money, oil and dirty politics coming together — but that appears to have been the case from the start. When Libya was accused of being the mastermind behind the bombing, Tripoli eventually paid out compensation to families of the murdered passengers as part of a deal to lift economic sanctions. While Tripoli paid up, it refused to accept guilt. “We thought that it was easier for us to buy peace,” said Libyan Prime Minister Shukri Ghanem in a 2004 interview with the BBC.

Adding to this curiosity was the mainstream Western media’s silence on why the Libyans were so jubilant when Megrahi touched down in Tripoli. It was seen as callous and miscalculated. Prime Minister Gordon Brown was “repulsed,” and Barack Obama “outraged;” but Libyans, publicly and privately, consider Megrahi to be innocent.

Yet if the mainstream media reported this, it would imply a cover up at worst, and a miscarriage of justice at best. Explaining all the ins and outs of a stitch-up would have been too much for a report on the 10

o’clock news. Indeed, there are a reported 600 pages of new and deliberately suppressed evidence that would have cleared Megrahi’s name if the case had continued, and if Megrahi had not been pressured by the British government to drop his appeal in exchange for immediate release. Even the Scottish judges admitted there was a “mass of conflicting evidence.”

Let’s look at a few puzzling parts of the investigation. A “key secret witness” at the original trial, who claimed to have seen Megrahi putting the bomb on to the plane in Frankfurt, was exposed by the defense as a CIA informer that would have been paid up to $4 million if Megrahi were convicted. Then there is the circuit board and bomb timer “found” around Lockerbie which a forensic scientist proved had no trace of explosives on them. But the crucial, damning evidence that put Megrahi away was the clothes found in the wreckage of the plane. A Maltese store owner claimed he sold Megrahi the clothes, yet he gave a false description of Megrahi in 19 separate statements and couldn’t even recognize him in the courtroom.

The whole saga of the actual bombing, the reasons behind it and the trial itself — held in Holland without a jury — would make for a good Hollywood thriller. The Lockerbie bombing is a story of double crosses, bribed and dodgy witnesses, government corruption, CIA rogue agents, drugs-for-hostages deals in Lebanon, and tampered evidence. It is also a story about the ongoing ‘war on terror,’ and how geopolitical strategic interests get in the way of real justice.

Qaddafi junior saying that the issue is over is somewhat true for Libya. The country has successfully come in from the cold and is now part of the club again; Megrahi is home, guilty in the eyes of the Scottish courts and much of the West but considered innocent in Libya. As for finding the culprit, the Lockerbie case is yet another file in that ever growing pile of unsolved, politically charged cases of murder and mayhem.

PAUL COCHRANE is the Middle East correspondent for the International News Service

During a recent meeting in Damascus with a senior Syrian official, an American diplomat relayed a request from Washington concerning a human rights issue in Syria. The Syrian official paused a moment and then replied that if the appeal had been raised in say, six months, it would not be received well, but it would still be considered. Now, however, while the official would pass on the request, it would stand no chance of being fulfilled because Syria and the United States have not yet established the “basis of a relationship.”

That anecdote illustrates the achingly slow progress made since the Obama administration began its cautious re-engagement with Syria, and how much farther both sides have to go before the fruits of their labor can be harvested.

Recent signals emanating from Washington suggest that the Obama administration may be losing hope that a breakthrough can be achieved with the Damascus. Both sides acknowledge that they are still groping for the seemingly elusive basis of a relationship upon which outstanding grievances can be aired and resolved.

As far as the US is concerned, Iraq’s security is the testing ground for improved relations with Syria, while other areas of mutual interest, such as resuming peace talks with Israel and stabilizing Lebanon, can wait their turn.

For now, George Mitchell is focused on the Israeli-Palestinian track, though the Israelis themselves are showing little inclination to resume even the indirect talks with Syria brokered by Turkey. Lebanon, in which the Bush administration invested so much diplomatic energy, is even further down Obama’s list of priorities.

In June, General Ray Odierno, the top US commander in Iraq, acknowledged that there had been a significant decrease in the number of militants entering Iraq from Syria. But US officials remain concerned that Syria is not doing all it can to stem the flow.

In August, a delegation from US Central Command visited Damascus and hammered out a tripartite agreement in which security along the joint frontier would be coordinated on the ground by US, Syrian and Iraqi forces. The agreement was seen in Washington as the first concrete positive move from Syria since the engagement process began earlier in the year. That soon went sour.

Nouri al-Maliki, the Iraqi prime minister, was piqued at being left out of the talks between the US and Syria and traveled to Damascus for his own discussions on border security issues. Negotiations were promising according to respective spokesmen in Baghdad and Damascus.

The next day, Baghdad was struck by simultaneous truck bombs and mortar barrages killing almost 100 people in the worst bout of violence in Iraq for months. A furious Maliki blamed Syria for harboring Baathist militants, and Iraqi television aired alleged confessions from an arrested Baathist and an Al Qaeda militant.

The bombs that struck Baghdad also blew up the tentative border security arrangement and the Americans found themselves back at square one with the Syrians. Even if the border agreement had proceeded, US officials still maintain that Damascus must clamp down on its homegrown militants and deny entry to other Arab militants. Securing the border should be the last resort, not the sole means of blocking militants from entering Iraq, they say.

So far the outreach between Washington and Damascus appears distinctly one-sided. Obama has dispatched more than half a dozen high profile visitors to Syria, lifted the ban on spare parts for Syrian Air’s fleet of ageing Boeing airliners, and announced that an ambassador will return to Damascus after a near five-year absence.

Although the announcement was made in late May, a new US ambassador has yet to be appointed, let alone returned to the embassy in Damascus. The delay has prompted speculation that the Obama administration may have decided to hold off on naming a new ambassador until further progress is made with Damascus. However, a US official told me recently that the delay is only administrative and due to nothing more than the logistical difficulties of finding a diplomat willing to take up the job.

According to the official, the Bush administration made a mistake in recalling the ambassador in February 2005, describing it as a “unilateral diplomatic freeze” that only prolonged the hostile climate between the two countries.

The collapse of the tripartite border security agreement has dampened hopes of an imminent breakthrough with the Syrians and US State Department officials appear to possess a dogged realism about the chances of successful rapprochement with Damascus.

Given the snail-like pace of progress so far, perhaps the Syrian official was being overly optimistic in suggesting that it would take only six months for Damascus to grow more receptive to US demarches on human rights issues.

Nicholas Blanford is the Beirut-based correspondent for The Christian Science Monitor and The Times of London