In recent years, investing has gradually become a more moral affair, as shareholders have grown aware of the fact that owning a company stake, however small, brings along a shared responsibility for any illegal or harmful actions. Consequently, they may voice concerns at annual meetings or opt to divest, as French companies Alstom and Veolia Transport (VT) have encountered due to their participation in the Jerusalem light rail project.

Formulated in 2000, the project foresees the construction of eight tramways by 2020. A 30-year-BOT contract with a value of some $500 million to construct the first line was awarded to Citypass, a consortium of several Israeli firms, Alstom and VT. Alstom started construction in 2006 and will also supply the carriages, while VT is to operate the line from 2010 onward.

As part of the project, in June 2008 the Jerusalem municipality inaugurated the landmark Bridge of Strings, which with a height of 119 meters now dominates the city skyline. So far, it seems all business as usual. Due to the hike in oil prices, public transport is making a grand comeback all over the world and the Holy City is no exception.

But then business is never just “as usual” in Jerusalem. The problem with the 13 km railway is that it links West Jerusalem, via East Jerusalem, with two of the largest settlements in the West Bank. Opponents argue the project violates the 4th Geneva Convention and UN Resolution 242, which calls for a complete withdrawal of Israeli forces from the territories occupied during the 1967 War. By participating in the project, Alstom, VT, and their shareholders help strengthening an illegal occupation.

As soon as news of the Citypass contract reached Europe, pro-Palestinian organizations started to vent their objections, which rapidly reached the ear (attention) of shareholders. In March 2006, some 1,000 made their concerns heard at the Alstom annual general meeting. Two French pro-Palestinian organizations even went on to sue Alstom and VT for violating international law. The next hearing will take place on September 15.

The French firms have so far downplayed allegations, arguing that both Palestinians and Jews can use the tramline, and that the Palestinian Authority (PA) has embraced the project. The first may be true, although most of the tramway clearly aims at connecting Jewish suburbs. However, PA President Mahmoud Abbas has objected to the project. And so did the Arab League.

The story did not stop in France. In May 2006, a group of account holders at the Dutch ASN Bank raised questions over the bank’s shares in VT’s mother company Veolia Environment. ASN markets itself as an “ethical bank,” which means it does not only apply financial criteria when selecting investments, but also takes into account environmental and social criteria, including human rights violations, whereby UN resolutions are perceived as a moral guide.

The shareholders’ protest was joined by two peace organizations, including a prominent Jewish one, which prompted ASN by the end of 2006 to announce: “We believe Veolia’s involvement in the light rail project is not in line with the UN’s demand to stop all support for Israel’s settlement activities, and is therefore not in line with the ASN Bank’s social criteria.” ASN is the first European bank to withdraw from a company linked to the Israeli occupation.

VT ran into some sort of trouble in Ireland as well. Having heard about the details of the Citypass contract, Dublin tram drivers working for VT Ireland called off a plan to train Israeli employees who are to operate the future railway. The Jerusalem project may have further consequences for the two French firms, while it could set a precedent for other companies doing business in Israel.

One of the most pressing questions Alstom shareholders presented the board of directors was if the Citypass contract might lead to negative repercussions elsewhere. A fair point, seeing that Alstom is one of the world’s leading suppliers of rail and tramway equipment and is active in Arab cities such as Tunis, Casablanca and Algiers.

Meanwhile in Holland it is expected that more investment and pensions funds may withdraw investments from Veolia, while ASN Bank has come under pressure to also end its relationship with the Irish company Cement Roadstone Holdings (CRH), which is the co-owner of the Israeli Mashav Group and as such a major supplier of cement in the construction of settlements and the wall between Israel and the West Bank.

Furthermore, there is increasing pressure on the Dutch ABN AMRO Bank, as it has shares in Caterpillar, a major manufacturer and supplier of bulldozers to the Israeli army, some of which come tailor-made with heavy armor and machine guns. While it is too early to tell if the actions by French and Dutch shareholders will set a precedent, the case did prove that the actions of a few can influence the policies of banks and major corporations. Who knows, maybe the private sector can succeed where politicians have failed for decades?

Peter Speetjens is a Beirut-based journalist.

Would a naval blockade by the United States, France and Britain on the Islamic Republic of Iran succeed in forcing the mullahs in Tehran to abandon their nuclear dream and turn the population against the ruling theocracy, and maybe with a little bit of luck and a discreet nudge from the West, help bring about regime change in the country? That is what the Bush administration is betting on. It would be Bush’s final hurrah before leaving the White House in about five months. Five months during which the oil markets — and Iran — will remain jittery.

Or instead, would an intervention by the Western powers have the opposite effect by uniting the population against the “foreign invaders,” giving the mullahs and their maverick President Mahmoud Ahmadinejad unexpected support they might otherwise never dream to win?

Indeed, as one observer pointed out, sanctions could have a positive effect with the government mandating that domestically produced cars migrate towards compressed natural gas.

Iran ranks fifth on the list of the world’s top producers of crude oil and second in the Middle East, pumping 4.15 million barrels a day (behind Saudi Arabia, the world’s top producer, at 11 million barrels a day). But Iran’s problem, dating back to the days of the shah, is that it never invested enough in developing its refining capacity, electing instead to ship its crude oil to other countries, principally India, and then re-importing the refined product.

If it made sense at the time, that decision is now coming back to haunt the Iranians because it is that very dependence on importing oil that renders Iran so vulnerable to potential foreign naval interventions and blockades.

In the event that US and allied fleets elect to impose a military blockade on the Islamic republic, it would cripple the country’s economy, though perhaps not entirely to the degree the foreign powers might expect. There are several reasons for that.

First, as mentioned above, the knee-jerk reaction from the Iranian people to foreign interference in their internal affairs might well be the catalyst which ends up uniting Iranians around the country’s leadership, thus producing the reverse effect that Washington, London and Paris (and Jerusalem) wish for.

Thus such a move would re-enforce the mullahs’ position and raise the level of anti-Americanism in the region. This would not be good news for US troops currently serving in Iraq, and one must not forget Iran’s proxy militia in Lebanon, Hizbullah, which could be directed to launch hostilities against Israel from southern Lebanon.

Second, no blockade could really be effective against Iran given its advantageous geographic position. The only possible scenario under which US/EU sanctions and a blockade could truly affect Iran would be if it was total: meaning that not only the shoreline along the Persian Gulf would need to be monitored, but the thousands of miles of border separating Iran from its neighbors through some of the planet’s most inhospitable terrain.

Additionally, sanctions against Iran would never work as long as Iran keeps its umbilical cord linking it to its century-old trading partner, Dubai. Imposing a trade ban on the UAE and policing the 250 miles of coastal waters between Iran and the United Arab Emirates, including all the coves the region’s dhows can sneak in and out of undetected by larger Western gunboats, will be close to impossible.

Also, given the fact that the UAE is a close US ally, it would be unthinkable to impose a ban on the Emirates.

Furthermore, an international military force would have to police — and prevent — contraband trade from finding its way across the 550-mile Iraq-Iran border. We have seen the inability of Iraqi, US and coalition forces in preventing anti-US jihadists from entering Iraq across the Syrian border since the US invasion. Why should things be any different on Iraq’s eastern border?

That same international police force would also be tasked with controlling the 560 miles of border between Iran and Armenia, Azerbaijan and Turkey and across the 500-mile border between Iran and Turkmenistan. Add to the list another 275 miles shoreline of the Caspian Sea; and the 400-mile border Iran shares with Afghanistan and another 400 miles or so shared with Pakistan. That represents close to 3,000 miles of land borders and 900 miles of shoreline.

So, would diplomacy stand a better chance? It has been tried, argue those hawks in favor of an aggressive response, and without result. In the meantime, no doubt Iran’s leadership is keeping eyes out on two fateful dates, probably marked in large red circles on their calendars: November 4, the day the United States votes for a new president, and January 20, the day the new president moves into the White House. If Iran’s leadership manages to deter any intervention until then, they win this match in the great Middle East chess game.

How these developments affect the markets remains to be seen.

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

Unlike the heady summer of 2006, this year’s season is hardly a memorable one. It was back to business as usual, and as the summer winds down and tourists pack their bags to head home, the tourism sectors of Lebanon and Syria are no doubt pleased there actually was a summer season.

That Lebanon needed a calm summer far more than Syria is a given, particularly following the July War and the ensuing 18-month political debacle. But Syria has also benefited from greater stability in Lebanon, especially when it comes to attracting tourists from the West who have a tendency to lump the Levantine countries together and avoid the region if there is a crisis.

Both countries were therefore lucky that the May clashes and the resulting Doha Agreement happened when they did, giving ample time for tourists to plan a summer visit.

The big difference between Lebanon and Syria’s tourism sectors, however, is that Syria is beating Lebanon hands down when it comes to attracting visitors.

Earlier this year Syria made the sound decision to advertise in the Gulf — bar Saudi Arabia — and the county is resultantly chock-a-block with khaliji tourists, reflected in the joke circulating around Damascus that if you want to get a taxi outside any of the major hotels you have to wear a white dishdasha or otherwise you’ll never get a ride.

The other noticeable difference is that Syria is getting tour groups by the busload, sweating their way around Damascus’ old city and the country’s numerous historical sites. Indeed, sitting in the lounge area of a hammam after a rigorous scrub one sultry August afternoon, I was taken aback by a dozen South American tourists that swarmed in and started snapping away at everything in sight. My fellow hammam clientele also seemed a little bewildered, with a chap opposite me rolling his eyes. But as soon as all the ajnabi tourists left, he then thrust a camera in the hands of a hammam attendant to take a photo of himself bedecked in towels, and then asked me to join him. Ahmed, as he introduced himself, was from Libya and marveled at what Syria had to offer, regaling me with his trip around the country.

Lebanon on the other hand doesn’t seem to be doing much to attract tourists other than appealing to expatriate Lebanese to come home for the summer. True enough, expat Lebanese spend a bundle when they are over here, as a trip any night of the week to Sky Bar and downtown shows, but Lebanese returnees with foreign passports aren’t exactly tourists, particularly as most stay with friends or family. And while Gulf Arabs are back on the streets of Beirut, the tour groups are conspicuously absent. It is quite clear Lebanon needs to develop a tourism plan and start marketing the country globally.

After all, if tiny Dubai with just shopping malls and flashy hotels can attract 6.4 million tourists a year, then Lebanon can surely boost figures from an estimated 1.5 million, especially if a modicum of stability prevails.

Lebanon has much to offer, and has a clear advantage over Syria when it comes to quality accommodation, restaurants and services. That isn’t to say that Syria does not have the latter, but the country is desperately short of hotel rooms, reflected in a supply gap of 2 million nights per year in the four to five-star range.

But while Lebanon has few plans to boost tourism numbers, Syria aims to turn the country into a prime tourism destination, with 377 investment projects underway worth some $3.3 billion and international chains clamoring to get in. Damascus has also offered three huge locations for tourism development that are expected to attract up to $15 billion in investment.

How successful Syria’s tourism developments have been so far is reflected in the stats, with tourism numbers surging from 2 million in 2004 to some 4.6 million last year, spending $2.8 billion and accounting for 14.5% of the country’s GDP. Of the tourist numbers, 73% were Arabs, a figure that has increased 15% since 2005, and some 500,000 were from Iran, predominantly coming on pilgrimage. As Faisal Najair, director of Damascus’ Tourism Department was quoted as saying: “We hope to make Syria a resort for all Arab and Gulf tourists.”

With such developments underway, Syria could soon surpass — if it hasn’t already — Lebanon as the preferred destination in the Levant for higher-end tourism and even tourism of the more dubious kind. According to reports, the number of super nightclubs in Damascus has soared in the last three years from 15 to 40.

It’s time Lebanon, for once, took a leaf from Syria’s book if it wants to remain the region’s playground, as well as give the economy a much need boost.

PAUL COCHRANE is a freelance journalist based in Beirut.

The century-old concept of ‘economic quasi-rent’ is a return to factors of production in inelastic supply — or in layman’s terms income going to producers of relatively scarce commodities getting a lot of income for little extra effort. The outstanding examples of this in modern times are celebrities and oil-producers. The latter in particular have been having a great run over the past few years (the former have always done well). As the price of oil remains high, despite recent corrections, the Arab Gulf states are making even more unearned income. In other words, for a very small effort, they get a large return.

Aside from limited examples of diversified commerce, and some other services including tourism in a few places like Dubai, the Gulf countries can be described as “rentier states.” In the 1980s, writing on the notion of a “rentier state,” Giacomo Luciani implied that democratization in the Middle East was not viable. So long as states have sufficient income they may have little reason to reform, and into the 1990s and the beginning of the 21st century, his theory seemed to describe the facts.

The need to raise revenue is a basic reason why the state has an interest in the prosperity and economic well-being of its people. Without such an interest, it is possible that “rentier states” could display little tendency to evolve democratic institutions.

One factor that impedes democracy in the Middle East and North Africa, especially in oil-producing countries, is the lack of government dependence on citizen support, the state instead relying on oil revenues, of which there are plenty. However, Kuwait’s example over the last few years shows that this relationship of no-taxation/no-representation may not be immutable. Politics and the public space in Kuwait are becoming broader. The potential for a democratizing Kuwait is greater now that the price of oil has gone up, contrary to the theory’s prediction. Rentierism may thus not be the enemy of democracy.

Democracy in Kuwait is still a long way from what prevails in Western Europe or North America, but the emirate is far from being just a petro-state with nothing happening except oil gushing out of the ground and money being pumped into state and private coffers. The country is undergoing open debate about state institutions. Parliament requests ministerial testimony about possible corruption, prompting government interference in the legislature. Islamists have influence, and promise laws against the secular character of the state.

What is happening in Kuwait is partly a direct result of the modernization of politics that could become a formula for a limited form of rentier state democracy. While Kuwait is a typical rentier state where petroleum accounts for over 90% of exports and government income, its politics differ from those of typical rentier states, and parliamentary elections produce a collection of disparate political actors with different interests increasingly independent of the ruling family. In turn, the emir prefers to interfere more as a caretaker than a tyrant, and to allow for a modicum of open democratic politics according to constitutional rules.

Although these Kuwaiti experiences of representation leave much to be desired, despite all these limitations democratic development may be possible in the rentier state because of competing economic and social elites who benefit from the state’s drives for modernization. Future pressure may gradually produce better representation and participation.

As the price of oil soared from under $30 a barrel in most of 2003 to well over $100 during the last few months, the past half-decade has proven to be very good for oil-exporting states. With world demand for energy strong and its price rising, government coffers in the Arab Gulf countries have during that time benefited in a spectacular way. Kuwait is a case in point, as official revenues during the past fiscal year almost trebled from their 2003/4 level, mostly thanks to oil.

The bad news is that these numbers viewed in isolation suggest that Kuwait remains a classic rentier state, unwilling or unable to democratize or otherwise change for the better. If anything, the emirate should be wallowing deeper in rentierism as state dependence on oil rises. Yet the politics of the country may belie this. 

The idea of rentierism is clearly valuable, and it is also being applied to non-energy economies and sectors. For example, talking about Jordan as a quasi-rentier state, or analyzing the case of tourism in Egypt in terms of rentierism, as various writers have done recently, is instructive. However, as the last five years have shown, as far as the GCC states are concerned, the old equation of oil wealth with anti-democratic rentierism may need to be refined.

Riad al Khouri, co-founder and principal of KryosAdvisors, is Senior Fellow of the William Davidson Institute at the University of Michigan, Ann Arbor