April 1, 2002 Special Dispatch No. 361

Arab Television Channels Interview Arafat

April 1, 2002
Palestine | Special Dispatch No. 361
Following the Palestinian terrorist attacks during the Jewish holiday of Passover, on March 29, 2002, Israel launched a military operation against the Palestinian Authority. As the Israeli army entered Arafat's headquarters in Ramallah, Arafat granted interviews to leading Arab television channels. Following are excerpts from these interviews: Interview With Al-Jazeera[1] Arafat: "They decided to take me as a prisoner, a deportee, or to kill me. No. I say to them [that I will be] a martyr, a martyr, a martyr, and a martyr. …'And they will be in the front line until Judgment Day'… and 'one of their martyrs [who falls in the battle for Jerusalem] is worth 40 martyrs'[2]... Allah, give me martyrdom in… [Jerusalem], the place from which the Prophet Muhammad ascended to the heavens, and the place our lord Jesus was born… I may be martyred, but certainly one of our boys or one of our girls will wave the flag of Palestine over the walls of Jerusalem, over the minarets of Jerusalem, and over the churches of Jerusalem. 'They think it is distant, but we know it is imminent, and we are right'… 'They will enter the mosque as they entered it for the first time'[3]... This is the path I have chosen… Allah, give me martyrdom..." "We defend not only Palestine, the Arab nation, and not only the holy Islamic and Christian places ­ but also all men of freedom and honor in the world. This is our destiny. This is a divine decree..." "Let those far and near understand: None, among the Palestinian people or the Arab nation, will be willing to bow and surrender. But we ask Allah to grant us martyrdom, to grant us martyrdom. To Jerusalem we march ­ martyrs by the millions. To Jerusalem we march ­ martyrs by the millions. To Jerusalem we march ­ martyrs by the millions. To Jerusalem we march ­ martyrs by the millions." "This is a call to the Arab and Islamic nations and to all the Christians in the world. This is the sacred land called in the West 'Terra Sancta,' Holy Land. We defend these holy places..." "We said to the Americans: You must act. Where are you going? Don’t you know this will shake the Middle East? I say to our Palestinian people: 'Oh mountain, the wind will not shake you.' I say to our Arab nation: 'To Jerusalem we march ­ martyrs by the millions.'" Question: "Mr. President, Sharon said in his press conference that you have become an enemy, that you are not a partner for peace, and that Ramallah has become a den of terrorism. How do you respond to that?" Arafat: "Isn’t he [Sharon] a den of terrorism? The occupation is not a den of terrorism? The F-15 and F-16 warplanes are not a den of terrorism? The tanks that place me under siege are not a den of terrorism? Bombing civilians is not a den of terrorism? Forty-seven thousand Palestinian martyrs and wounded in this Intifada are not a den of terrorism? Destroying the institutions of the Palestinian people is not a den of terrorism? Destroying all the farms of the Palestinian people is not a den of terrorism?..." Question: "Is it possible that the Israeli forces will try to assassinate you?" Arafat: "They are more than welcome. I seek martyrdom. Allah, grant it to me. Am I better than that heroic youth Fares Odeh? We are seekers of martyrdom. We are all seekers of martyrdom. The entire Palestinian people is a seeker of martyrdom..." Question: "Mr. President, do you think that this extensive invasion by the occupation forces is in response to the Netanya operation,[4] or a response to the Arab initiative at the Arab summit?" Arafat: "No. It is a response to the Arab summit in Beirut…to Crown Prince Abdullah’s initiative... This is an Israeli response to all the peace attempts because they do not want peace. They do not want peace!!! (sic) We must remember these things. These extremist elements murdered my partner Yitzhak Rabin. Why did they murder him? Because they do not want peace." "Why do they distort Camp David? They ask why we did not accept Camp David. Should I surrender Jerusalem to them? Who can accept such a thing? Tell me, who can accept such a thing?... They are the plunderers, the murderers, the real terrorists in the entire world, in the entire world. We are the only people in the world under occupation. We put our hand in your [the Israelis'] hand... If this is the response to the Arab initiative, what does it mean? Who are the terrorists? The Palestinians? The Arabs? The Muslims? The Christians? Did we bomb the statue of the Virgin Mary [in Bethlehem]? The entire world turned upside-down because of the Taliban's attempt to destroy the statue of Buddha ­ is the statue of Mary not sacred? Is she not the only woman mentioned in the Koran? Is there not a Koranic chapter bearing her name?" Question: "Sharon says that now there is a war without geographical borders. How do you assess the situation?" Arafat: "By Allah, we consider all possibilities. Nobody is shaken, nobody is scared, nobody is retreating. To Jerusalem we march ­ martyrs by the millions." Interview With Egyptian TV [5] Arafat: "I want to tell you something: The world went wild because of what the Taliban did to the statue of Buddha. But when they destroyed the statue of the Virgin Mary, who is the only woman mentioned in the Koran, no one in the world says a word... We defend these holy places: To Jerusalem we march ­ martyrs by the millions." Question: "...What do you plan to do while the tanks are two meters away..." Arafat: "What two meters?!! They are bombing me. Can’t you hear the bombing?" Question: "...Actually, we hear it from a distance..." Arafat: "They attacked positions within the leadership compound." Question: "...The question was, what will you do in this situation? How can the Palestinian leadership calm the situation?" Arafat: "We are all seekers of martyrdom. We will not hesitate and will not retreat... As I told you: To Jerusalem we march ­ martyrs by the millions." Question: "Is this a specific response to the Netanya operation?" Arafat: "Great! All this in response to the Netanya operation?…" Question: "It is obvious that the sympathy and enthusiasm of the Arab street is not enough. What do you demand now from the Arab leaders?" Arafat: "To act in the international and global sphere with all the leaders in the world, in order to stop this international and global terrorism led by Sharon. Don't talk to me about terrorism in Kandahar, don't talk to me about Taliban terrorism, and don’t talk to me about terrorism anywhere. The most important and most dangerous terrorism is the terrorism going on in the sacred land..." Question: "Mr. President, we are following [events] with you and we see the Israeli tanks approaching... We are with you in our hearts and souls and we pray for your safety and the safety of the Palestinian people." Arafat: "Man, don’t wish me safety! Pray for me to attain martyrdom! Is there anything better than being martyred on this holy land? We are all seekers of martyrdom..." Interview With Abu Dhabi TV[6] Arafat: "Allah, grant us martyrdom in defense of the Christian and Muslim places holy to you... We are in the front line, and this people is defending these holy places…" "True, he [Sharon] besieges us…True, he uses all the weapons prohibited by international law. True he uses depleted uranium, true he uses toxic gases…but we are steadfast… 'And they will be in the frontline until Judgment Day'…" [1] Al-Jazeera TV/Palestinian Authority TV, March 29, 2002. [2] This is a reference to a Koranic verse. [3] This is a reference to a Koranic verse. [4] The March 27, 2002 bombing of a Passover Seder held at a Netanya hotel. [5] Egyptian TV/Palestinian Authority TV, March 29, 2002. [6] Abu Dhabi TV/Palestinian Authority TV, March 29, 2002.

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March 27, 2002 Special Dispatch No. 360

Saudi Government Paper: 'Billions Spent by Saudi Royal Family to Spread Islam to Every Corner of the Earth'

March 27, 2002
Saudi Arabia | Special Dispatch No. 360
The March 1, 2002 edition of the Saudi government English weekly Ain Al-Yaqeen extensively detailed the Saudi royal family's efforts to spread (Wahhabi) Islam throughout the world. The following are excerpts taken from the article: Efforts to Spread [1](Wahhabi) Islam "…The determination of the Kingdom to support Islam and Islamic institutions to the best of its ability was evident from the formation of the Kingdom by King Abdul Aziz but it was only when oil revenues began to generate real wealth that the Kingdom could fulfill its ambitions of spreading the word of Islam to every corner of the world, of assisting Muslim countries less well endowed economically and of alleviating the suffering of Muslim minorities wherever they might live." "When King Fahd gave his support, either personally or through his government, to these institutions, it was also part of his purpose to challenge and expose the caricature of Islam, which is widely promoted by sections of the Western media…" "The voice of Islam and Arab culture is stronger now than it has been for many decades and certainly far stronger than it would have been without King Fahd's contribution, but the bias against Islam, the tendency, in some quarters, to identify Islam with fanaticism or even terrorism persists and has not been completely erased from the popular mind in the West." The Cost is Astronomical"The cost of King Fahd's efforts in this field has been astronomical, amounting to many billions of Saudi Riyals. In terms of Islamic institutions, the result is some 210 Islamic centers wholly or partly financed by Saudi Arabia, more than 1,500 mosques and 202 colleges and almost 2,000 schools for educating Muslim children in non-Islamic countries in Europe, North and South America, Australia and Asia… All over the world the Kingdom of Saudi Arabia has supported and contributed in the establishment of mosques and Islamic centers…" Efforts in the U.S."The Kingdom of Saudi Arabia under the leadership of King Fahd Ibn Abd Al-Aziz, has given support to the following institutions in the United States: Dar Al-Salam Institute, the Fresno Mosque in California, the Islamic Center in Colombia, Missouri, the Islamic Center in East Lansing, Michigan, the Islamic Center in Los Angeles, California, the Islamic Center in New Brunswick, New Jersey, the Islamic Center in New York , the Islamic Center in Tida, Maryland, the Islamic Center in Toledo, Ohio, the Islamic Center in Virginia, the Islamic Center in Washington, the Islamic Cultural Center in Chicago, the King Fahd Mosque in Los Angeles, the Mosque of the Albanian Community in Chicago, the South-West Big Mosque of Chicago, and the Omar Ibn Al-Khattab Mosque in Los Angeles." Efforts in Canada"Also in Canada the Kingdom under King Fahd, has given support to the following institutions in Canada: the Calgary Mosque, the Islamic Center in Quebec, the Islamic Center in Toronto and the Ottawa Mosque. King Fahd has donated five million U.S. dollars for the cost of the Islamic Center in Toronto, in addition to 1.5 million U.S. dollars annually to run the facility." Efforts in Europe"In Europe, the Kingdom of Saudi Arabia has supported and contributed in the establishment of many mosques and Islamic centers amongst which the Cultural Center in Brussels, Belgium which has received total support of SR 19 million. The Islamic Center in Geneva, Switzerland, which receives annual support of SR 19 million, and contains a large mosque, a cultural center, a school and a lecture hall, the Islamic Center in Madrid, Spain, which has had total support of SR 27 million, is one of the largest in Europe. It comprises a very capacious mosque, a prayer hall for women, a library, a lecture hall and a medical clinic, the Islamic Center in London, England in which the Kingdom has contributed some SR 25 million to the cost of the London Islamic Center. The Islamic Center in Edinburgh, Scotland, which is located in the city center, contains a mosque which can accommodate 1,000 worshippers, and includes a library, a lecture hall and classrooms. It cost around SR 15 million. The Islamic Center in Rome, Italy that comprises a mosque, a library and a lecture hall. King Fahd donated US$ 50 million (some 70% of the total) to cover the cost of construction. The Center also receives an annual donation of US$ 1.5 million. The Mosque of the Custodian of the Two Holy Mosques in Gibraltar, which cost in excess of SR 30 million and comprises a mosque for men, a prayer hall for women, a school, a library and a lecture hall…" "…Among the biggest is King Fahd Islamic Center in Malaga, Spain, on an area of 3,848 sq. m., whose foundation stone was laid in 1998. The university-like center embraces academic, educational, cultural, and propagatory activities…" Establishing Islamic Centers in the U.S. and Europe"…The Kingdom of Saudi Arabia has also contributed to the establishment of a number of Islamic centers e.g. The Islamic Center in Geneva; Islamic Cultural Center in Brussels; Islamic Center in Madrid; Islamic Center in New York; Islamic Center in Australia; Islamic Center in Zagreb, Croatia; Cultural Center in London; Islamic Center in Lisbon, Portugal; and Islamic Center in Vienna, Austria." Establishing Mosques"The Kingdom has established more than 1,359 mosques abroad at a cost of SR 820 million. Other mosques partially financed by the Kingdom included mosques in Zagreb, Lisbon, Vienna, New York, Washington, Chicago, Maryland, Ohio, Virginia and 12 mosques in a number of countries in South America. " "Amongst mosques which received the Kingdom's or King Fahd's personal financial support are Lyon Mosque in France (SR 11 million); Bilal Mosque in Los Angeles." "King Fahd also established a number of scholarships and academic chairs in foreign prominent universities and colleges." Efforts at Universities"In addition to establishing and contributing in the establishing of mosques and Islamic centers, the Custodian of the Two Holy Mosques King Fahd Ibn Abd Al-Aziz Al Saud, in the course of his reign, has overseen the establishment of a number of academic chairs in some of the most respected universities in the developed world." "In setting up these prestigious chairs, the Kingdom has pursued a number of objectives. They are further evidence of King Fahd's determination to encourage and enhance communications between Islamic culture and other cultures; to encourage understanding of the true nature of Islam by explaining clearly Muslim beliefs and by correcting common misconceptions and misrepresentations; and to show that Islam embraces knowledge with enthusiasm." "In this context the King Abd Al-Aziz Chair in Islamic Studies at the University of California, Santa Barbara was set up by the Saudi royal family in 1984. The King Fahd Chair in Islamic Shari'a Studies was set up in 1993 at the College of Law at Harvard University, with a donation of US$ 5 million from King Fahd himself, the King Fahd Chair in Islamic Studies at the School of Oriental and African Studies 'SOAS,' University of London was set up in 1995, with a grant from King Fahd of £1 million, and the Custodian of the Two Holy Mosques Chair at the Gulf University was set up to provide a resident professor in the Faculty of Medicine and Science and Prince Naif Department for Islamic Studies at the University of Moscow." Establishing Islamic Schools"With his lifelong commitment to education as the key to unlocking the potential of the individual, it is not surprising that King Fahd Ibn Abd Al-Aziz initiated a program to establish Islamic academies in some of the major capitals of the world. These academies were conceived in order to provide Muslim children abroad with the opportunity to attend an institution of academic excellence which could reinforce their commitment to their culture, religion and language while at the same time opening constructive dialogue with the societies in which they lived." "Amongst them are the Islamic Academy in Washington Established in 19845 [sic], where multinational students are studying. The Islamic Academy in Washington teaches Arabic and Islamic studies. The academy has 1,200 students, both male and female. Of these, 549 are Saudis. The rest represent 29 nationalities. In the ten-year period 1984 to 1994, the costs of establishing and running the academy were in excess of SR 100 million." "King Fahd Academy in London, United Kingdom of Great Britain. The King Fahd Academy in London caters for 1,000 students, amongst them the children of Arab diplomats serving in London, as well as other Arab and Muslim children living in London and belonging to 40 nationalities…" "King Fahd Academy in Moscow, Russia…Is not only a major educational institution; it is a resolute attempt to undo the harm done to Islam and Islamic culture by the totalitarian communist regime of the erstwhile Soviet Union. Under communism, Muslims were persecuted, mosques were desecrated and an alien ideology of materialism was imposed on the individual by the State. The King Fahd Academy in Moscow is one step towards reasserting Arab and Islamic culture and values…" "King Fahd Academy in Bonn. The King Fahd Academy, opened in Bonn in 1995, it comprises a school catering for 500 students and a mosque which can accommodate 700 worshippers. It combines education in Arabic and Islam with a concerted effort to build bridges with German society by increasing understanding of Arab and Islamic culture. The total cost of the Academy was DM 30 million (equivalent to SR 76.5 million)." "The Bihac Islamic Academy The Kingdom of Saudi Arabia allocated SR 5 million for the establishment of this important educational institution, as part of its extensive aid program for the Republic of Bosnia-Herzegovina…" Establishing Islamic Research Institutions"…Outside the Arab Islamic world there is a number of Islamic research institutes supported by the Kingdom; amongst these are the American University of Colorado, the American University in Washington, the Arab World Institute, Paris, France which receives considerable Saudi contribution to its annual budget, the Duke University, North Carolina, the Howard University, Washington, the Institute of the History of Arab and Islamic Science, Frankfurt, Germany which receives an annual financial support from the Kingdom worth 15 million German Marks, the John Hopkins University, Maryland, the Middle East Institute, in Washington, the Shaw University, in North Carolina, and the Syracuse University, in New York…" Establishing Islamic Organizations"In addition to financing Islamic academic institutions and Islamic centers and mosques around the world, the Kingdom of Saudi Arabia has always been a leading member of international Islamic organizations. Throughout King Fahd's reign, the Kingdom of Saudi Arabia has played an active role in all these organizations, using its influence to nurture and encourage unity in the Islamic world amongst which the Organization of the Islamic Conference and the World Assembly of Muslim Youth. In addition the Kingdom of Saudi Arabia has played a role in nurturing Islamic unity through the Muslim World League, based in the Holy City of Makkah Al Mukkaramah…[2] [1] Subtitles by MEMRI. [2] Ain Al-Yaqeen, March 1, 2002,

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March 26, 2002 Inquiry & Analysis Series No. 89

Iran's Armament - A Central Element in Establishing Itself as a Regional Superpower

March 26, 2002 | By A. Savyon
Iran | Inquiry & Analysis Series No. 89
Background: Iran's Strategic Considerations Since the days of Muhammad Reza Shah, Iran has perceived itself as a regional superpower.[1] In accordance with this view, it aspires to arm itself with both conventional and non-conventional weapons (long-range ballistic missiles and nuclear weapons), even though publicly Iran disavows its intention to acquire nuclear weapons. Iran's strategic goals in its effort to become a regional superpower are: Firstly, to establish a superior regional position amongst states which neighbor it, such as Iraq, Saudi Arabia, as well as the Muslim republics of Central Asia; amongst regional neighbors such as Turkey, Egypt, and Israel; and finally, to establish an equal status with the other regional nuclear superpowers Pakistan and India. Secondly, to strengthen its position as an Asian-Islamic center of power recognized as such by the U.S. and Europe, and amongst the Non-Aligned Movement (NAM). In addition, Iran desires to compete with Turkey and Russia for influence in Afghanistan and Central Asian countries and to influence the agenda of the Muslim world. Lastly, Iran strives to influence Palestinian strategy and policy. Iranian – Russian Cooperation on Conventional ArmsSince the cutting off of American military supplies to Iran following the Islamic Revolution, and the sanctions posed by the U.S. on commerce with third party companies,[2] Iran began to rely primarily on Soviet and Russian made weaponry.[3] From the Russian point of view, its cooperation with Iran is helping rebuild the Russian military industry (including Research and Development of strategic weapons) which has faced financial difficulties emanating from the end of the Cold War. Russian President Vladimir Putin expressed public satisfaction regarding the cooperation between the two countries on this issue.[4] During their separate visits to Moscow, both Iran's President Muhammad Khatami, in March 2001, and Minister of Defense Ali Shamkhani, in October 2001, signed military cooperation agreements and arms deals with Russia valued at $7 billion dollars over the coming years.[5] Iran and Russia have arms contracts dating back to the 1990s, when Iran received over one hundred T-72 tanks from Russia and even began indigenous manufacturing of tanks upon obtaining Russian license. Iran was also equipped with artillery, anti-aircraft and air-defense systems, armored vehicles, Mi-17 helicopters and other military supplies.[6] In 2000, Iran made a strategic decision to modernize its military build-up in a twenty-five year program, relying on Russian technology and weaponry.[7] The program includes the following elements: The creation of an integrated anti-aircraft and anti-missile defense system, including the anti-aircraft missile system S-300, and aerial defense system of medium and short-range missiles (SA-11, and SA-15 respectively); the creation of an aerial defense system for the defense of nuclear and military facilities; the licensed production of weapons – artillery, airplanes, and warships; modernization of aircraft and aviation equipment, and modernization of three Kilo-type submarines purchased from Russia. The plan also calls for the establishment of training, repair, and service centers for Iran's land, sea, and air forces; a space program with the goal of launching six satellites; and the training of hundreds of military and technical experts in Russian training facilities.[8] A close examination of the program indicates that Iran aspires to establish a powerful industrial-military complex, which will also be used for manufacturing weapons for export.[9] Nuclear CooperationIn the mid 1990's, Iran signed an $800 million contract with Russia to build a water-cooled nuclear reactor in Bushehr.[10] The framework agreement between the two nations mentions the possible construction of four nuclear reactors, two of the VVER-1000 type, similar to the one currently under construction in Bushehr, and two additional VVER–440 types amounting all together to $3 billion.[11] Last November, Iran received the reactor's shell and other components of the first reactor. In February 2002, the Tehran-based Iran Daily reported that Russia's Ministry of Atomic Energy announced that the reactor would be inagurated in September 2002.[12] However, two high-ranking Russian officials stated that the date would be far later. Russian Deputy Minister of Atomic Energy Yevgeny Reshetnikov stated that the first unit of the power plant would be activated by the end of 2003,[13] and Russian Deputy Nuclear Energy Minister Valerii Lebedev said Russia plans to complete construction by late 2004 or early 2005.[14] In addition, recent media reports claimed that Russia would build another nuclear reactor in Iran.[15] In his visit to Moscow in March 2001, Khatami expressed concern with the mounting delays in the construction of the Bushehr nuclear power plant,[16] but Moscow recently announced that it fully intends to fulfill its side of the contract.[17] Member of the Majlis, Kazem Jalali, who belongs to the National Security and Foreign Policy Committee, said: "We [Iran] have nuclear cooperation with Russia and they have acted positively in this regard." He added that "the Russians want to work with us and we should encourage them."[18] Both Russia and Iran repeatedly claimed that their nuclear cooperation is for peaceful purposes.[19] Iran has emphasized that it arms itself only for self-defense and that its nuclear program is designed for peaceful purposes, such as "energy, agriculture, and environment,"[20] and therefore, it is legitimate. In statements and in editorials in the Iranian media, high-level Iranian officials stressed that Iran's nuclear facilities are subject to regular inspection and monitoring by the International Atomic Energy Agency safeguards.[21] The spokesmen further emphasized that Iran is a signatory to the various international arms control and disarmament conventions.[22] Cooperation on Ballistic MissilesIran is also developing medium and long-range missiles, which are perceived as strategic weapons. In 1985, former Iranian president Hashemi Rafsanjani signed an agreement with North Korea for the delivery of North Korean missiles at a value of $500 million. Iran is also engaged in indigenous development of engines and other components for the Shihab missile.[23] The Shihab missile is considered by Iran as a means of deterrence and defense primarily against Iraq. In an interview with the London Arabic Daily Al-Sharq Al-Awsat, Iranian Defense Minister Rear-Admiral Ali Shamkhani, underlined that Iran is working on development of its ballistic capabilities, especially the Shihab 3, with an 800 mile range: "We focus now on making this missile extremely accurate and extremely fast from a tactical perspective, [we also try to] shorten its pre-launching time, [as well as] its destructive and explosive capability in accordance with the internationally accepted standard for defense weapons."[24] According to reports from Russian scientists who worked in Iran, it seems that many of them were involved in assisting in the development of the Iranian ballistic missile deployment and the nuclear industry. Vadim Vorobei, a Russian missile scientist who worked in Iran for several years and helped in the build up of the Iranian missile deployment, admitted that the Iranians are "paranoid," and that "they wanted to receive information from us, but at the same time they were not willing to tell us everything they were doing. That made it difficult to help them."[25] Alexi Krasnov, Head of External Relations in the Russian Space Agency, disclosed in the PIR Institute's(The Center for Policy Studies in Russia) conference on security affairs, that several Russian companies (out of the 10 under U.S. sanctions) were "cover-up" companies, which were actually established to export sensitive technologies. He also called on the West to expand its cooperation with factories for missile production in Russia in order to distance the experts in these companies from "suspicious customers." He added, not allowing the Russian Space Industry legitimate cooperation abilities might lead to illegal contacts, which would be hard to monitor.[26] The German Foreign Minister Joschka Fischer later warned Russia not to sell Iran long-range ballistic missiles capable of carrying chemical and biological warheads.[27] Iran and International Conventions on Weapons of Mass Destruction (WMD)[28]The Secretary of the Iranian Supreme National Security Council, Hassan Ruwhani, a senior official who is also a confidant of the 'Supreme Leader,' Ali Khamenei, explained in a rare statement, Iran's position regarding international arms control and armament conventions: "The reason that Iran becomes signatory to international conventions is to pave the way for access to modern technology which developed countries have made commitments to provide." On the issue of technology transfer, Ruwhani complained to the Chairman of German Parliamentary Commission on Foreign Affairs Hans Ulrich Klose that, "it is not comprehensible that Iran makes unilateral commitments by signing the international conventions while the developed nations including Germany, do not observe their commitment to supply modern technology."[2]9 Iran is a party to the nuclear Non-Proliferation Treaty (NPT, 1970), the Geneva Protocol, which prohibits the use of chemical and biological weapons (1925), the Chemical Weapon Convention (CWC, 1993), the Biological Weapon Convention (BWC, 1975), and is a signatory to the Comprehensive Test Ban Treaty (CTBT), which prohibits nuclear testing, although Iran did not ratify it.[30] However, Iran did not accede to the 'Additional Protocol' (also known as '93+2') which was created following the Gulf War and constitutes additional safeguards for achieving the maximum degree of assurance of both the non-diversion of nuclear materials declared for peaceful purposes, and the absence of undeclared nuclear materials and activities.[31] There is no international convention relating to ballistic missiles. However, during the 1980s, due to an American initiative, the export control regime on missiles, MTCR (Missile Technology Control Regime) was established. This regime is enforced by 32 countries, including Russia and European countries, which accepted voluntarily limitations on the transfer of missiles technology and dual use components, for missiles with the range of over 170 miles and with 660 lbs. payload. Iran advocates a legalistic approach, namely it presents itself as adhering to international law by becoming a signatory to international conventions. It perceives missile development as a part of conventional arms development and therefore a legitimate act. Iran's Defense Ministry Spokesman Keivan Khosravi said, "Iran's missile plans are … its natural right and in line with developing Iran's capabilities in the aerospace field."[3]2 Iran generally objects to the 'Export Control Regimes' and in particular to the MTCR, claiming that these regimes discriminate developing countries and prevent them from acquiring relevant material and technology. Iran sees the 'Export Control Regimes' as an example of Western supremacy over developing countries, and is trying to advance a different approach: a UN resolution on missiles, which requests the UN Secretary General to establish a group of governmental experts.[33] Despite the fact that long-range ballistic missiles are advocated by Iran as vital for defense and deterrence against Iraq, the range of missiles produced by Iran exceeds the range of defense and deterrence against Iraq and, in fact, reaches Israel and Europe ('Shihab 3' range of 800 miles; 'Shihab 4' range of 1200 miles). Following consultations between President Khatami, Defense Minister Shamkhani, and Iran's military commanders, the London-based daily, Al-Sharq Al-Awsat, reported that Iran recently decided to stop the development of the 'Shihab 4' missile so that it is not charged with threatening Europe or the U.S. The development of the 'Shihab 3,' however, continues.[34] *Ayelet Savyon is Director of the Iranian Media Project. [1] With the British announcement in 1968 on its future withdrawal from the region in 1971, Iran demanded in return for conceding Bahrain, which was regarded by Iran as an Iranian territory, to be recognized by Britain as a regional superpower. [2] The Iran Libya Sanction Act (ILSA) was renewed by the Bush Administration August, 2001. [3] See Iranian and Russian statements regarding this issue: "In the last few years Russia has become Iran's primary arms supplier." Afarinsh, February 19, 2002; Norouz, February 20, 2001; Tehran Times, February 17, 2002. [4] IRNA, October 17, 2001. [5] IRNA, October 1 and 4, 2001; December 17, 2001. [6] Jane's Defense Weekly, November 28, 2001; Ze'ev Wolfson, "The 'Russian Factor' in the Middle East Military Balance," Ariel Center for Policy Research, no. 133, pp. 19-20. [7] The agreements signed in 2001 practically nullified "The Gore-Chernomyrdin Agreement' signed in 1995 between the U.S. and Russia aiming at limiting the sale of Russian conventional weapons to Iran. With the change of administrations in both the U.S. and Russia in November 2000, Moscow announced that it is no longer committed to this agreement. Shamkhani also said that the arms contracts, which were signed with Russia, are considered as "cancellation of the imposed Gore-Chernomyrdin pact" and "open a new chapter in the constant and long term cooperation between the two countries." IRNA, October 6, December 17, 2001. [8] See reports about visits of high-ranking military navy and air-forces delegations, IRNA, October 4, 2001; Shamkhani announced that Iran is building double-deck warships and torpedo boats in addition to the development of a marine missile industry, IRNA, February 13, 2002; Rasalat, January 14, 2002; Tehran Times, February 17, 2002; Ze'ev Wolfson, "The "Russian Factor" in the Middle East Military Balance," Ariel Center for Policy Research, no. 133, pp. 20-21. [9] Former Iranian president Hashemi Rafsanjani made conflicting statements in this regard: in the Tehran Times he said, "Iran today is one of the leading arms industry powers in the world," January 8, 2002, and in IRNA, he denied the fact that Iran "[sells] weapons and is not interested in arms sale," January 6, 2002. [10] The reactor was ordered in the beginning of 1994 after the German constructor, Siemens withdrew, due to American pressure. Tehran Times, November 18, 2001. [11] For more details see Brenda Shaffer, Partners in need: The Strategic Relationship of Russia and Iran, The Washington Institute for Near East Policy, no. 57, p. 73. [12] Iran Daily, February 17, 2002. [13] IRNA, March 4, 2002. [14] ITAR-TASS quotes RFL/RL, February 14, 2002. [15] Jane's Defense Weekly, November 28, 2001; Norouz, February 20, and February 28, 2002; Entekhab, March 5, 2002, IRNA, March 8, 2001. [16] Tehran Times, November 18, 2001. The Iranian Ambassador to Russia Gholam-Reza Shafei announced that the operation of the reactor will be delayed until late 2003 and that Iran is not happy about it. Norouz, February 28, 2002. [17] RFE/ RL, February 14, 2002. Russian Deputy Minister of Atomic Energy Yevgeny Reshetnikov stated that Russia is going ahead with completing the power plant. IRNA, March 4, 2002. [18] IRNA, February 19, 2002. Just before Iranian Foreign Minister Kharrazi took off for a visit to Moscow, Russia announced that the visit scheduled for February 19,2002 was postponed. A few days later the Persian paper Bonyan reported that "Russian experts are leaving the nuclear reactor in Bushehr back home," following Russia's Energy Minister's statement on a change in the policy of cooperation between Tehran and Moscow, Bonyan as quoted by IRNA, February 25, 2002. In reaction, Iran denied any change in the Russian policy towards it and claimed that the 180 Russians who left the Bushehr plant did it as a regular shifts exchange upon Tehran's request. IRNA, February 26, Norouz, February 28, IRNA, March 4, 2002. Further more, Russia also denied the report about Russian experts leaving Bushehr, IRNA, March 4, 2002. Managing Director of the Russian Institute for Nuclear Equipment Export Victor Kouzlov vowed Russia would not stop its nuclear cooperation with Iran. IRNA, March 8, 2002. [19] The Issue of Iran's armament, with an emphasis on nuclear weapons, made headlines especially following Rafsanjani's statement on "the elimination of the Israel problem with the use of one nuclear bomb": "If one day the Muslim world will be equipped with the weapons that Israel has now – that day, will bring the world's arrogance to a dead end. Since the use of one nuclear bomb against Israel will leave nothing on the face of the earth, however, to the Islamic world it will only inflict damage." Kayhan (Persian), Al-Wifak (Arabic); Iran News (English) December 15, 2001. [20] Tehran Times, January 17, 2002. [21] The Iranian Press dealt with this topic in detail following Rafsanjani's declaration on December 14, 2001. For instance: Tehran Times (affiliated with the Iranian Ministry of Foreign Affairs), December 11, 2001, January 8, 2002, and January 17, 2002. [22] This position enables Iran to attack the U.S. since the U.S. hasn't ratified the CTBT (Comprehensive Test Ban Treaty, which prohibits the use of nuclear testing) and since the U.S. applies a double standard with regard to Israel, allowing it to arm itself with WMD and not join different conventions. Tehran Times, January 8, February 6, 2002. In this connection, the Russian Defense Minister Sergey Ivanov implied that Iran might withdraw unilaterally from the NPT, and promote independently its nuclear and missile projects; Interfax, December 18, 2001, Nezavisimaya Gazeta (Russian), December 19, 2001. [23] Washington Post, January 13, 2002. "Shihab 3' missiles are manufactured according to the North Korean No Dong missile and are based on Soviet Scud technology. [24] Al-Sharq Al-Awsat, February 5, 2002. [25] Washington Post, January 13, 2002. [26] AP, February 15, 2002. [27] IRNA, February 20, 2002, quoting APF, February 19, 2002. The German Foreign Ministry's spokesperson later denied this report. IRNA, February 20, 2002. [28] Besides international conventions on WMD, Iran is not a signatory to the CCW (Certain Conventional Weapons) Convention, which relates to certain conventional weapons, which may be deemed to be excessively injurious or to have indiscriminate effects. Iran hasn't signed the Ottawa Convention on landmines. [29] IRNA, January 16, 2002. [30] There are two stages for being a state party to an international convention: the first – signing and thus becoming politically committed to its objectives, and the second - ratification, meaning accession to the convention and fully incorporating its provisions to the domestic law. It is important to note that, if a nation is determined to develop/ acquire WMD, it will do that regardless of its status vis-à-vis the international convention. Iraq, for example, is a state party to the NPT, the Geneva Protocol and the BWC and was reluctant to fulfill its obligations under these conventions. [31] United Nations Disarmament Yearbook, Vol. 25, 2000, pp. 51-54. [32] Tehran Times, July 10, 2001. [33] The Iranian initiative presented as UN General Assembly Resolution: A/RES/56/24, 68th plenary meeting, November 29, 2001. The group was in fact established in August 2001. [34] The "Shihab 4' and "Shihab 5' models (with the range of 5000 kilometers – 2000 miles) were under development, Al-Sharq Al-Awsat, February 22, 2002.

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March 25, 2002 No. 28

Regional Economic News

March 25, 2002 | By Dr. Nimrod Raphaeli
No. 28
A Notice to Our Readers:The Economic Report will be on vacation for the next two weeks. It will resume publication on April 15. The Economic Consequences of Peace between Israel and its Neighbors: An Arab View It has always been the Israeli side which underscored the economic benefits of peace between Israel and the Arab neighbors. It was therefore interesting to read an article on the subject in Al-Quds Al-Arabi, bylined in Amman, Jordan. The article's key premise is that peace with Israel cannot guarantee a long-term prosperity unless Egypt, Lebanon, Syria and Jordan carry out major reforms to avoid losing the benefits that analysts anticipate if the bloodshed is stopped. The article quotes critics who maintain that state intervention in the economy, annoying bureaucracy and corruption are so rooted in the Arab countries that the political will for peace must be transformed into reality if it were to be felt. One anonymous banker said that the absence of genuine reforms stems from a failure to overcome vested interests throughout the Arab world. This banker expressed the concern that, paradoxically, the increase of revenues from tourism and foreign aid which is likely subsequent to peace would give governments an excuse to delay reforms. Reforms may also be delayed if some countries were to receive large amounts of money in reparations for Palestinian refugees staying within their borders. On the other hand, other analysts argue that peace will remove the impediments to foreign direct investments because fears of war discourage capitalists from investing in the area. A spokesman for the Lebanese Government said he could not estimate the value of lost opportunities for investment because of the conflict. The persistent conflict has also meant lost opportunities to improve the lot of the Arab populations. Using data from the World Bank the article says that per capita income in Egypt, Lebanon, Jordan and the West Bank has risen very little in recent years while in Syria it has declined between 1996 and 2000. By contrast, many other regions in the world have benefited from the American economic expansion. Peace would accomplish two things: first, it would increase the re-flow of expatriated capital as well as national talent currently abroad; and second, it would allow the divergence of money from weapons into basic needs; e.g., health and education. The fall of the Berlin Wall in 1989 was cited as a case in point. [1] FAO Warns of Food Shortage in the Middle East In a statement to the regional meeting of the U.N. Food and Agriculture Organization (FAO) held in Tehran March 12-13, the Director General of FAO, Jacques Diouf, said the region will be further away from its food targets in 2015 than it is today. He attributed the decline of food production to two primary causes: insufficient rains and man-made factors such as civil disturbances and wars. As a result, food deficits have grown, resulting in larger imports of grains, milk products, sugar and vegetable oils. In the Near East area which includes 20 Arab countries in addition to Turkey, Cyprus, Afghanistan, Malta, Pakistan, Kyrgyz Republic, Tajikistan and Turkmenistan, the import of grains and floor must satisfy 50% of these countries' needs. As a result, the import of grains has increased from 6.5 million tons in 1960 to 55 million tons in 1999. The value of agricultural imports is $30 b. which is three times the value of agricultural exports from these countries. Diouf said the region is also one of the world's poorest regions in water. The region comprises 6.2% of world population and 8.6% of arable land, but only 1.5% sources of renewable water.[2] Al-Azhar Imam Supports Family Planning The Imam of Al-Azhar, Muhammad Sayyid Tantawi, said family planning is permitted "subject to social circumstances" and subject to "the agreement of the couples" or for medical reasons. Tantawi said that "population growth could have negative results in terms of the absence of a suitable environment for raising children." According to figures issued by the Egyptian statistical office a few days earlier, a baby is born in Egypt every 23.6 seconds whose population has reached 67.8 million. Some commentators argue that the rapid population growth in Egypt is due to the improvements in health services which reduce mortality among the new born. The former Egyptian Minister of Health and Population, Isma'il Salam, said President Mubarak has refused in the past to sign a decree limiting couples to 2 children because he felt education and public awareness will convince Egyptians to limit the number of children.[3] Tantawi's views were rejected by two scholars at the Al-Azhar University. Dr. Abd Al-Azeem Al-Mat'ani characterized family planning "as one of the first means used by colonialism to fight the [human] sources of strength in the Muslim world." Dr. Fu'ad Mukhaimar said population planning is "strictly forbidden [haram] religiously." He said Allah is the provider and he will not reduce the sources of livelihood to parents having more children. [4] Islamic Banks Ready to Receive Billions of Expatriated Dollars Participants in a conference of Islamic financial institutions held in Beirut last week said there were no reasons for concern that Islamist organizations would use the Islamic financial institutions to finance their terrorist activities. Islamic banks have registered a 10% growth annually since their coming into being in the mid- 1970s. However, they lack primary and secondary markets for Islamic financial instruments; therefore, they are forced to maintain a high rate of liquidity with low rate or no return at all. These financial institutions have been subjected to strong criticism by the International Monetary Fund which urged the governments in the region to impose greater and more transparent restrictions on them. The Islamic banks operate in 40 countries and have deposits of $250 billion. They expect a large repatriation of Islamic capital from overseas following 9/11 but they have no records on the volume of such repatriation. Lebanese banks have attracted $800 million from Gulf countries [these deposits came primarily in support of the Lebanese Lira and may have little to do with 9/11.] [5] The Kuwaiti Minister of Finance, Dr. Yousef Ibrahim, said that the American delegation under Treasury Secretary Paul O'Neil, which visited the Gulf region recently, was "amazed" by the excellent system of control over the Islamic banks in the area.[6] OPEC Exceeds Its Production Quotas OPEC exceeded its production ceilings by 779,000 b/d in February. Excluding Iraq which is subject to international sanctions and hence is not included in the quota system, the other 9 members of OPEC produced 22.5 million b/d instead of the approved ceiling of 21.7 million b/d.[7] The culprits were not identified. With prices inching upward, the temptation to "cheat" remains high. In the meantime, Dr. Muhammad Al-Saban, Adviser to the Saudi Minister of Oil, has reconfirmed that Saudi Arabia with excess capacity of 2-3 million b/d will meet consumer needs "for whatever reason." He said the events of 9/11 have demonstrated that oil flow will not be affected by political events. [8] Federation of Arab Economists Calls for Support of Palestinian Economy The Federation of Arab Economists held its meeting in Baghdad, March 7-10. In its concluding statement the federation called on restoring the Palestinian economy within the framework of Arab economic complementarities. It also called for making preparations for the use of "Arab heavy economic tools," including the use of the oil weapon. Finally, the federation urged that all efforts should be taken to prevent "the normalization with the alien Zionist regime."[9] Kuwaiti Loan to Egypt for a Gas Pipeline The Kuwaiti Fund for Economic Development will lend Egypt 31 million Kuwaiti dinars ($101 million) to finance a natural gas pipeline from Egypt to Jordan. The pipeline will carry natural gas from El-Arish in the Sinai Peninsula to the Jordanian Port of Aqaba, on the Red Sea. The pipeline which will be 250 km (156 miles) long will connect between El-Arish and Sheikh Zweid in northern Sinai, then to Taba and across a body of water to Aqaba. The total cost of the project is $260 million and is due for completion in 2003. [10] Kuwait, U.S. and Turkey Largest Beneficiaries of Iraqi Oil Since the introduction of the "Oil for Food" program in December 1996, Iraq exported oil worth $52 billion but received only $18 billion (35%) because of the sanctions. Iraq is the second largest Gulf exporter of oil to the U.S., after Saudi Arabia. Kuwait has so far received $10 billion in compensation for the invasion of its territory. Turkey has received $961 million in the form of transit tax on Iraqi oil.[11] New Rules for Ships Passing Through Red Sea and Gulf of Eden The riparian countries on the Red Sea and the Gulf of Eden are seeking a new regional agreement to allow any one of them to board and inspect ships in its harbors to determine whether the ship meets international standards in terms of its safety and maintenance and whether it discharges waste into the water that could harm the coral reef in the area. The countries involved are: Jordan, Djibouti, Sudan, Somalia, Egypt, Yemen and Saudi Arabia.[12] II. Country Economic News Decline in Domestic Sales by Egyptian Companies "The business barometer" issued by the Egyptian Center for Economic Studies shows that sales by most Egypt companies have declined more in the domestic than in the international markets. This is attributed to the devaluation of the Egyptian currency which renders Egyptian goods more attractive to the external than to the local buyers. The Center calls for urgent steps "to revive economic growth, achieve stability, and renew confidence." That means an expansionary monetary policy together with a conservative fiscal policy (no new taxes) and that foreign exchange should not be made to carry the entire burden of achieving external trade balance. [13] Egypt to Introduce Genetically-Modified Agricultural Products Egypt is cooperation with specialized American companies to introduce a new technology for genetically modified agricultural products such as cotton, corn, wheat, tomatoes and potatoes on an experimental basis. Such technology is especially attractive in Egypt because of its limited arable land and the shortage of water. In addition, the technology increases productivity as well as resistance to pestilence, draught and salinity. [14] Egypt-- One of Best Countries in terms of Income Distribution A study by Lyn Squire, director of Global Growth Company and formerly a senior economist at the World Bank shows that Egypt is among the best countries in the world in terms of income distribution among 100 countries covered by the study over a period of 30 years. One of the most important findings of the study, however, is that contrary to Kuznets's theory that inverse relationship between income distribution and rapid rate of growth is prerequisite for rapid economic growth during the early phases of development, the study argues that it is possible to achieve equity in income distribution as well as reasonable economic growth rates simultaneously. [15] U.S. to Expedite Transfer of Another $300 million to Egypt David Walsh, American Ambassador in Cairo, said the U.S. government is seeking to overcome legal and administrative difficulties for the transfer of another $300 million to Egypt, as part of an aid package of $1 billion agreed upon after 9/11. An earlier transfer of $500 million has been completed. [16] Egypt: Israel Will Not Participate in Cairo International Fair Egypt's annual international fair opens its doors in Cairo on March 24 with 76 countries and 3500 companies taking part. For the first time, Israel has not asked to participate after the past 6 prior attempts to participate were turned down because of threats by Arab countries that they would withdraw if Israel participated. The paper speculates that "Israel's reluctance to participate may have to do with the organizing committee's decision to allocate to the Palestinian Authority the space previously occupied by Israel."[17] Saudi Arabia to Address its Debt Problem Saudi Arabia was expected to launch a new program to liquidate its domestic debt within 10 years. Current domestic debt stands at SR630 b. ($168 b.) and would increase to SR660 b. ($176 b.) in 2002, or approximately 120% of GDP. The program will consist of privatizing public companies, to be followed by selling the government's shares in commercial banks to the Social Security Agency. Dr. Omar Salem Baq'ar, professor of economics at King Abd Al-Aziz University, said the problem with the domestic debt was started when the government has begun borrowing secretly since 1986 until the situation has run out of hand. Moreover, he estimates the value of government assets in public companies at market price at no more than $6.4 b. but may fetch $9.6 b., if publicly auctioned. However, the sale of these assets will deprive the government of an annual income of $1.5 b.[18] Saudi Arabia: Conflict Intensifies About Investments in Large Gas Projects The negotiation between Saudi Arabia and major American companies-- Exxon-Mobil in partnership with Occidental and Marathon-- to invest in large Saudi natural gas projects has run into a snag. These companies are not convinced about the validity of the privatization policy of Saudi Arabia in the energy sector, given their experience in the last 25 years. Any new agreement is not likely to be reached before the end of the year. [19] Iraqi Minister of Oil Visits Moscow The Iraqi Minister of Oil, 'Amer Rashid, was in Moscow recently to discuss the economic relations between the two countries "in the event economic sanctions on Iraq are lifted." Russian news agency, Itar Tass, quoted Rashid saying: "In the light of the strategic nature of relations between Russia and Iraq, our fundamental objectives is to strengthen certain sectors." Iraq has an outstanding debt to Russia estimated at $6 billion. Russian oil companies have signed "huge agreements for the explorations of Iraqi oil and its eventual sale as soon as the United Nations lifts the sanctions on Baghdad."[20] In a press conference a day later, Rashid called on the Russian oil companies to enhance their explorations for Iraqi oil by digging 2000 wells. He said there were73 oil fields in Iraq but only 24 were exploited. He said Iraq's short-term plan is to reach a production of 4 million b/d and a longer-term plan to reach a production of 7 million b/d. [21] The largest volume of Iraqi oil is sold to Russian companies which, in turn, sell it to American companies, earning in the process a hefty commission. Iraq Signs Economic Cooperation Agreement with Viet Nam Iraq and Viet Nam signed an economic cooperation agreement to enhance their trade relations and the execution of joint projects. Iraqi imports $600 million annually from Viet Nam within the framework of "Oil for Food" program. According to the Iraqi newspaper Babil, Viet Nam, which was "subjected to a heavy American bombardment in 1964/73, has called for the lifting of embargo on Iraq."[22] No information was provided on the nature of Iraqi imports from Viet Nam. Iraqi Fair for Reconstruction of Infrastructure Opens A fair, offering equipment and material for the reconstruction of Iraq, opened in Baghdad last week. Two hundred twenty companies and 600 businessmen from 26 countries are taking part. Despite last minute cancellations, countries participating in the fair include France, Italy, Germany, Austria and Cyprus. Absent from the fair are the U.K., Japan (surprised the Iraqis) and, of course, the U.S. [23] Syrian Oil Exports The Syrian offer of oil for delivery in April suggests a larger illegal flow of Iraqi oil to Syria than either Syria or Iraq was willing to admit. The Syrian Minister of Oil, Ibrahim Haddad, said the Iraqi-Syrian pipeline is "tested periodically" and, given its poor state of repair, it is not capable of carrying more than 100,000 b/d. Still, Syrian exports have risen from 300,000 b/d to 450,000 b/d. The minister said Syria produces 550,000 b/d and that it consumes 250,000-300,000 b/d, leaving a surplus for exports of 250,000 to 300,000 b/d. [24][The minister was somewhat disingenuous because previous records show that Syria consumes approximately 400,000 b/d. This figure suggest a daily flow of Iraqi oil of at least 150,000 b/d. But even a periodical flow is a violation of the Security Council resolution which is particularly embarrassing to Syria because of its membership on the Council.] Syria: Reform of the Banking Sector In a lecture delivered at the "Tuesday Evening Forum" in Damascus, Syrian economist Nabil Sukkar [formerly with the World Bank] called for reforms in the banking sector. The reform is necessary to improve the financial intermediation role of the banks between savers and investors and to strengthen the performance of the national economy which must grow by 7.8% annually if it is to solve the unemployment problem. [Real economic growth in Syria in recent years was close to zero or worse.] Dr. Sukkar highlighted the current shortcomings of the banking sector in Syria: Expansion of money supply in the market but little savings [people keep their surplus cash at hand rather than save it in a bank] Absence of monetary policy Interest rates are fixed administratively and often frozen for a long time Focus of commercial banks on lending to the public sector Loans to trade sector are short-term Shortage in bank capitals and the proliferation of non-performing loans The advantages of reform will be to increase the banks' ability to attract domestic savings as well as capital from abroad, increase their capacity to use and distribute capital throughout the national economy and increase the share of the banking sector in the GDP.[25] In the meantime, President Assad issued last week a new law which will expedite the opening of private banks in Syria. It is estimated that at least 50 Arab and foreign banks are waiting to be licensed. [26][This is one of the conditions for a future membership in the World Trade Organization.] Syria Seeks to Raise Tourism Revenues The Syrian Minister of Tourism, Sa'ad Allah Agha Al-Qal'a, said tourism has become a major economic component like agricultural, industry and trade. Efforts are under way to raise the contribution rate of tourism to the GDP from the current 7% to 20%. In a press conference in Paris, the minister detected a big improvement in Syria's image "in view of the effectiveness of Syrian policy performance."[The minister did not say whether he was referring to domestic or foreign policy performance, or both.] Following a 60% decline in tourism after 9/11, bookings are now 85% of the pre-9/11 events. [27] European Investment Bank (EIB) Offers to Finance Expansion of Oil Refineries in Syria The Syrian Ministry of Oil and Mineral Wealth has been discussing with the European Investment Bank (EIB) a financial package to develop and expand the two refineries in Hums and Banias.The bank has tentatively offered a loan of $100 million. [28] IMF Supports Reduction of Jordanian Debt A senior official of the International Monetary Fund (IMF) said that the performance of the Jordanian economy in recent years would justify reducing its foreign debt of $7 billion.[29] [It should be noted that the IMF's endorsement carries considerable weight with the Paris Club whose members could decide on forgiving or rescheduling debts on concessionary terms of debtor countries.] Israel: Unemployment at 10.1% The Israeli Central Bureau of Statistics issued figures showing unemployment in Israel has reached 10.1% in January. This is the highest rate of unemployment since 1993 when Israel was in the process of absorbing 1 million new Russian immigrants. The tourism and High Tech sectors have suffered the most. [30] In the meantime, Dr. David Klein, the Government of Bank of Israel (central bank) accused the government for its failure to deal with unemployment and economic growth. He said the "the deficit in 2001 caused the long-term interest rate to rise which has continued in 2002. This policy impacts negatively on unemployment." Klein also said that the government has not done enough to reduce the rate of unemployment and increase employment in the private sector."[31] Israel will Buy Turkish Water Israel will commence buying 50-100 million cu. meters of Turkish water because of water shortage in the country due to insufficient seasonal rains. Israel has also decided to double the amount of desalinated water from 200 to 400 million cu. meters annually. [32] $700 Million Arab Contributions to the Intifada and Al-Aqsa Funds According to the final report of a follow-up committee appointed by the heads of Arab states following their summit meeting in Cairo in 2000, total Arab actual contributions to the Intifada and Al-Aqsa funds have reached $693 million which fell short of the $1 billion target. Total transfer to the Palestinian Authority through the end of 2001 was $405 million. Another $125 million was transferred to the Authority in the first 3 months of 2002. In a completely non-squitor part of the report, Arab countries were called upon to put pressure on Israel to sign the convention against the proliferation of nuclear weapons.[33] Palestinian Authority Accuses Israel of Disrupting Testing of New Turbine D. Abd Al-Rahman Hamad, head of the Palestinian power authority, accused the occupation forces of obstructing the work of Swedish engineers who were in Gaza to test the first of two new turbines in Gaza's power plant. As a result, the engineers returned to their country and the brown outs in Gaza will continue. [34] [1] Al-Quds Al-Arabi, March 19, 2002. [2] Al-Quds Al-Arabi, March 17, 2002. [3] (March 14, 2002.) [4] Al-Hayat, March 14, 2002. [5] Al-Quds Al-Arabi, March 13, 2002. [6] Al-Qabas, March 15, 2002. [7] Al-Bayan, March 21, 2002. [8] Al-Hayat, March 20, 2002. [9] Al-Hayat Al-Jadeeda, March 18, 2002. [10] March 17, 2002. [11] Al-Quds Al-Arabi, March 22, 2002. [12] Al-Sharq Al-Awsat, March 20, 2002. [13] Akhbar Al-Yom, March 18, 2002. [14] Al-Quds Al-Arabi, March 19, 2002. [15] Al-Ahram, March 21, 2002. [16] Al-Ahram, March 21, 2002. [17] Akhbar Al-Yom, March 18, 2002. [18] Al-Hayat, March 18, 2002. [19] Al-Sharq Al-Awsat, March 20, 2002. [20] Babil, and Al-Sharq Al-Awsat, March 17, 2002. [21] Babil, March 20, 2002. [22] Babil, March 17, 2002. [23] Al-Quds Al-Arabi, March 21, 2002. [24] Al-Quds Al-Arabi, March 22, 2002. [25] Teshreen, March 17, 2002. [26] Al-Sharq Al-Awsat, march 20, 2002. [27] Al-Hayat, March 16, 2002. [28] Al-Thawra (Damascus), March 12, 2002. [29] March 17, 2002. [30] Al-Sharq Al-Awsat, March 18, 2002. [31] Ma’ariv, March 19, 2002. [32] March 20, 2002. [33] Al-Hayat, March 15, 2002. [34] Al-Hayat Al-Jadeeda, March 20, 2002. *Dr. Nimrod Raphaeli is Senior Analyst of MEMRI's Middle East Economic Studies Program.

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March 24, 2002 Special Dispatch No. 359

Leader of 'Jihad Army' in Indonesia to 'Al-Hayat': We Plan to Target American Interests

March 24, 2002
Special Dispatch No. 359
The London Arabic-language daily Al-Hayat recently interviewed Ja'far Omar Taleb,[1] the leader of the Indonesian Lashkar Jihad (Jihad Army) organization.[2] Following are excerpts of the article: On Targeting American Interests Q: "In light of your [Lashkar Jihad's] enmity towards America, do you plan to target American interests in Indonesia?" Taleb: "America operates in Indonesia through non-governmental organizations. The former American ambassador to Jakarta declared that the most dangerous movement in Indonesia is the Lashkar Jihad, although we haven't even participated in demonstrations because we believe they are pointless. We are not hostile to the American people, but to American policy in our country and in Muslim countries. They think that we are dangerous because we confront the non-governmental organizations that are acting to corrupt Indonesia." Q: "Will you confront these organizations by combat or by preaching?" Taleb: "We will confront them with all means of combat and preaching." Bin Laden and Al-Qa'ida Q: "…What is your position on Osama bin Laden and his organization Al-Qa'ida?" Taleb: "We… do not agree with the ideas of Osama bin Laden and the members of his organization, because they accuse [others] of heresy. They are khawarij.[3] They accuse Muslim rulers and clerics of heresy. These are corrupt ideas." Q: "Osama bin Laden did not accuse the clerics of heresy; he accused some [Muslim] rulers." Taleb: "But he accused the clerics by implication, by saying that the clerics who accepted the rulers were heretics." Q: "And what about his fighting America? Do you have reservations about that?" Taleb: "Allah be praised, the Muslims continue their Jihad against America, and it is our obligation to support them as best we can." Q: "But those fighting America in Afghanistan are Al-Qa'ida members. Do you support them in their fight against America?" Taleb: "Of course, as they are Muslims and it is our duty to support Muslims and to wash our hands of the infidels. This is our principle. But at the same time we must publicly expose the errors of Osama bin Laden and his organization…" Q: "Singapore claims that the organization called Al-Jama'ah Al-Islamiya has a presence in Indonesia, led by Abu Bakr Ba'ashir. Do you believe these claims?" Taleb: "This is a fabrication. Singapore speaks according to America's dictates, so it can find a pretext to bring its forces into Indonesia. I do not think that Al-Jama'ah Al-Islamiya exists [in Indonesia], nor that it has plans to attack American embassies in the region…" Muslim-Christian Relations in Indonesia Q: "How was your organization established?" Taleb: "The organization was founded on April 6, 2000… We founded this movement in order to support Muslims in eastern Indonesia. They were slaughtered by the thousands in Molucca. The government did nothing to defend the Muslims… Subsequent governments did not defend them from Christian attacks. In light of this situation, we had no choice but to found the Lashkar Jihad organization…to protect our Muslim brothers in eastern Indonesia… The movement in all districts of Indonesia is now 10,000 strong…" Q: "What is your position on the peace agreement recently signed in Molucca to end three years of Christian-Muslim violence?" Taleb: "We think that this agreement is a political conspiracy, concocted by the government and the Christians against the Muslims…" Q: "Some newspapers quote Molucca residents, even Muslims, saying that they do not want foreigners, meaning the Lashkar Jihad. Have the residents asked you to leave their land and stop interfering in their affairs?" Taleb: "No. The Muslims here cling to us, and want us to remain with them. In some cases, we had projects far from the cities. When our [Lashkar Jihad] young people left the populated areas, [the local residents] would begin to weep out of fear that we were abandoning them. Some do not remain in their homes if the Lashkar Jihad youth leave these areas for a few days, until we return. They only feel safe near us, even when the [government] army is nearby." [1] Taleb studied Islamic law in Pakistan and fought in Afghanistan against the Soviets. The interview, conducted in Arabic, took place in Jakarta, Indonesia. [2]Al-Hayat (London), March 19, 2002. [3]A rebel movement against Islam in its early formative era (7th century) primarily in Mesopotamia (southern Iraq of today).

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March 22, 2002 Special Dispatch No. 358

The Egyptian Muslim Brotherhood Presents New Suicide Bombers Unit at Al-Azhar University

March 22, 2002
Syria, Egypt | Special Dispatch No. 358


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March 21, 2002 Special Dispatch No. 357

Editor of Saudi Government Daily Al-Riyadh: Statement on 'Purim' Blood Libel Articles

March 21, 2002
Saudi Arabia | Special Dispatch No. 357
Following MEMRI's recent reports on antisemitism in the Saudi government daily Al-Riyadh (See MEMRI Special Dispatch 354 and {{nodeurl-PR102}}) - The Voice of America broadcast an official U.S. editorial calling upon Saudi Arabia and the Arab nations to "…stop newspapers and radio and television stations… from inciting hatred and violence against Jews."[1] On the same day, the editor of Al-Riyadh issued a statement, which was also sent to MEMRI, regarding the articles. Following is the Al-Riyadh editor's statement on the 'Purim' articles: Al-Riyadh Editor-in-Chief Turki Al-Sudairi: 'News of Aggressive Incitement'"I was out of Saudi Arabia when my colleague Hani Wafa called me and told me that an international news agency had picked up a news item about an article by an American journalist in the National Review publication that proposed dropping nuclear bombs on the city of Mecca, sacred to Muslims. Wafa asked me whether this news item was fit for publication. I asked him whether other agencies had picked up the same item, or [expressed] similar opinions, and he answered no. I was amazed that the next day all the Arab papers published this item, with no clarification that this was a private opinion…" "I knew that publishing a hasty news item like this might lead to attacks on people, [although they] are not of the same opinion. Our role is not to distance others from us, but to reduce the distance from them - and arrive at mutual understanding, not shared hostility." "Later I was surprised to receive a call from the manager of the Al-Riyadh office in New York, my colleague Ahmad Al-Yami, who asked me who this Umayma Al-Jalahma was, and what she had written on March 10." "I said that I would give him an answer in a few hours, but what was the reason for all these questions? He said that some American authorities had called to verify whether Al-Riyadh had published an article stating that Jews drink human blood and mix it into their food on what Al-Jalahma called the holiday of 'Purim.'" "I checked the article and found it not fit for publication because it was not based on scientific or historical facts, and it even contradicted the rituals of all the known religions in the world, including Hinduism and Buddhism." "The information included in the article was no different from the nonsense always coming out in the 'yellow literature,' whose reliability is questionable." "The understanding of this serious mistake escaped Ms. Al-Jalahma, as did the understanding that Jews everywhere in the world are one thing, while Jews belonging to the Zionist movement that acts to annihilate the Palestinians are something else, and completely different." "In Israel itself there are moderate Jews such as Yisrael Shahak, who fought Zionist racism and exposed it in many of his studies. There are others like Shahak, and our dispute with phenomena such as Sharon must in no way cause us to generalize the emotions of hatred to all Jews." "Furthermore, in principle, an idiotic and false news item regarding the use of human blood in the food of other human beings, whoever they may be, should not be published, since this does not exist in the world at all…" [2] Another Article by Dr. Jalahma: 'The U.S. Should Expel The Jews'Earlier this month, Dr. Umayma Jalahma wrote another article that appeared in Al-Riyadh. Following are excerpts: "Perhaps my words will be presented as racist and antisemitic by some who forget that I myself am a Semite, a daughter of Arabia. Therefore, it would be prudent for me to intersperse in my column quotes from Westerners regarding our neighbor - a neighbor who settled next to us against our will, plundering our land, murdering our youth, deporting our children, and burning our homes." "I will quote men who have earned the esteem of their peoples, and indeed, the esteem of other peoples as well...:" "First, George Washington, 'The Father of the Nation,' as the Americans call him. He said the following about the Jews: 'The destructive influence of the Jews over our lives and future is greater than the danger of all our enemies' armies combined. Indeed, this [Jewish] danger is hundreds of times more serious and more destructive to our liberty and to the cause to which we are dedicated. What sorrows and pains [me] is that considerable time has passed, but our states, or at least each state on its own, have not attempted to fight and annihilate the Jews - even though [the Jews] have proven to be a group of lethal insects who [pose] the gravest of dangers to the U.S. and its security.'" "This is frank and candid testimony that is not open to [different] interpretations. It was delivered by the first president of the U.S. I do not believe there is a single person in America who doubts the integrity of this man." "Second, the statesman Benjamin Franklin [3]. What did Franklin have to say about the Jews? I submit to you some of the things he said during the 1789 [sic] convention for the declaration of the American constitution:" "'I fully support the positions of General Washington, whose aim is to protect this young nation from all the treacherous conspiracies being plotted against it by its only enemy - and I mean, gentlemen, the Jew. In every country in which the Jews have settled, moral values have completely deteriorated, and anarchy, irresponsibility, and deceit in commercial transactions have become widespread. The Jews have mocked the values of our Christian religion, upon which our country was founded, while ignoring our rules altogether. This way, they have succeeded in creating a country of their own within our country. They are notorious for employing all financial measures necessary to strangle a country in which the first signs of resistance [to the Jews] appear. If you do not expel them from our country, in 200 years our grandchildren will become slaves in their fields, while they, the Jews, will remain in their homes, gleefully rubbing their hands, awaiting their payment. I warn you, gentlemen, that if you do not make haste and expel the Jews from our country today and forever, your children will curse you in your graves. The Jews are a danger to this country, and I stress the need to deport them and prevent them from entering or staying, through an explicit clause in this constitution.'" [4] [1] AFP, March 19, 2002. [2]Al-Riyadh (Saudi Arabia), March 19, 2002, [3]For more information on this topic see MEMRI Special Dispatch 339. [4]Al-Riyadh (Saudi Arabia), March 2, 2002.

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March 18, 2002

Press Release on Article in Saudi Government Daily:Jews Use Teenagers' Blood for 'Purim' Pastries

March 18, 2002
Saudi Arabia |
Following the publication of a two-part "Purim" blood libel in the Saudi government daily Al-Riyadh (Saudi Government Daily: Jews Use Teenagers' Blood for 'Purim' Pastries), MEMRI has received several emails from readers who could not locate the articles on Al-Riyadh's Web site. The following URL addresses link directly to the articles Purim blood libel part 1: Purim blood libel part 2: In the event that Al-Riyadh removes the articles from its Web site, MEMRI will provide a printed hard copy to any interested party. Additionally, some readers forwarded MEMRI their correspondence with the Saudi embassy in the U.S. In its response to those who contacted the embassy regarding the articles, the Saudi embassy did not deny the appearance of the articles in Al-Riyadh, nor did it denounce their content. Rather, the embassy stated that Al-Riyadh "is not a Saudi government newspaper any more than The National Enquirer is a U.S. government newspaper," and that "Al-Riyadh is a small private newspaper." In contrast to the Saudi embassy's response, some Muslim readers have contacted MEMRI to express their indignation at the content of the Al-Riyadh articles. One American Muslim published his denunciation on the Al-Riyadh Web site. Al-Riyadh has been presented as a government-controlled or government-sponsored newspaper by leading international media outlets such as the BBC and AFP. In addition, some comments regarding the newspaper are warranted: Firstly, the editor-in-chief of Al-Riyadh, Turki Al-Sudairi, is a member of the Al-Sudairi clan of the Saudi royal family. Secondly, Al-Riyadh is a leading newspaper in Saudi Arabia. It is not a tabloid like the The National Enquirer. Thirdly, the Web site of the Saudi monarch King Fahd includes a section in English ( entitled "Role of Ministry of Information," which reads: "The Ministry of Information is responsible for all information services, including radio, television and publications." The "publications" link leads to a list of selected Saudi newspapers, including Al-Riyadh. A similar link may be found on the "links" section of the Web site of the Saudi embassy to the U.S. ( Although blood libels do not appear often in the Arabic press, they have occasionally been published in leading newspapers throughout the Arab and Muslim world. As examples, see the Egyptian government dailies Al-Ahram (October 28, 2000) and Al-Akhbar (October 20, 2000 and March 25, 2001), in MEMRI's Special Dispatches Leading Egyptian Newspaper Raises Blood Libel and The Blood Libel Again in Egypt's Government Press.

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March 18, 2002 No. 27

Introduction to Saudi Economy: Perception and Reality

March 18, 2002 | By Dr. Nimrod Raphaeli
No. 27
I. Introduction to Saudi Economy: Perception and RealityContrary to common perceptions, Saudis, on average, have grown poorer rather than richer, over the last two decades. Let's examine some basic figures. Nominal GDP has grown from SR415 b. ($110.6 b.) in 1982 to SR649 b. ($173 b.) in 2000, an increase of 56.3%.[1] At the same time, population has grown from 14.1 million to 20.7 million in 2000, or an increase of 46.8%. However, if an inflation rate of 2% compounded over 18 years is factored into the GDP, or 42.8%, one concludes that the Saudi GDP has declined by as much as 33.3%, or by one third, in real terms over this period of time. Two other indicators are equally instructive: the per capita oil export revenues have declined from a record of $23,820 in 1980 to $2,563 in 2001 (in inflation adjusted dollars). In 1989 the GDP per capita was $10,330; in 1999 it was $6900, in nominal value. The IMF's review of the Saudi economy indicates that with the exception of 2000, in which the overall central government budget registered a sharp turnaround to a surplus of 3.5% of GDP, due largely to a sharp rise in oil prices, "in every other year, the budget has run a deficit and the debt stock has run up to $170 b., which is equal to the size of the GDP." The annual deficits seem to confound Crown Prince Abdallah's statement that "overspending is a bottomless abyss." One could argue, however, that the overspending would appear so overwhelming only because the revenues in the non-oil sector have been constrained by inadequate tax regime. Oil revenues make up around 90-95% of total Saudi export earning, 70-80% of state revenues, and around 40% of the country's GDP. Non-oil government revenues are constrained by a largely non-competitive market place where monopolies and "exclusive dealerships" dominated by members of the royal family and their cohorts, do not generate revenues in the form of, say, sales tax or income tax. While some of these monopolies and single-dealerships control as much 30-40% of various segments of the market, they are protected by the Shari'a (Islamic law) from paying taxes on their vast earnings. Rather, as will be discussed below, they are required to make a voluntary contribution of 2.5% in the form of zakat (religious charity) to organizations and groups of individuals of their choice. This religious protection to the rich and powerful renders the Saudi tax system one of the most regressive in the world. It is hardly surprising that some Saudi capital, estimated in the hundreds of billions, has found its way outside the country. It is even less surprising that so many Saudis have channeled their frustrations into international terrorism. According to the Energy Information Administration, which is an agency of the U.S. Energy Department, "Saudi Arabia's weakened economy is particularly bad considering that the country needs strong economic growth in order to keep up with a rapidly increasing (and young --50% under age 18) population, and also, in order to face the challenge of finding good jobs for its people (outside of the public sector, which is overstaffed and a drain on the country budget)." Given this state of affairs, one wonders about the Saudi bullish optimism regarding economic stability enunciated by the Saudi Arabian Monetary Authority (the country's central bank), "By the grace of Allah and then the wise policy of the Government of the Custodian of the two Holy Mosques [Mecca and Medina], these difficult international circumstances, which were sometimes accompanied by sudden fluctuations in oil prices, did not affect the general situation of the economy." Of course Saudi Arabia can feel content sitting on the largest oil reserves in the world (169 billion barrels). Oil is an enormous national wealth, albeit a finite wealth. Still oil plays an important role in international economic relations. Many countries whether producers, exporters, refiners, owners of oil tankers, providers of transit rights, or consumers of oil or its derivatives, benefit from it at different levels. The price of oil impacts the cost of production of many goods and services. Theoretically, oil could be a potent political weapon, as it was used as such after the 1973 war. However, Saudi Arabia, and other OPEC producing countries, is becoming increasingly aware, and has said so often, that oil may have become at best a dull weapon, for the following reasons: the proliferation of the sources of oil supply; Russia, for example, has become a supplier to be reckoned with; most oil producers, and in particular Saudi Arabia, are mired in deficits and debt and can ill afford a sustained period of oil embargo; engineered oil shortage (reduced quotas for production or even a partial embargo) may be potent in the short run, but can only encourage industrialized countries to seek alternative sources of energy and a new means of energy saving; and the creation of the International Energy Agency (headquartered in Paris), representing the major consumers, has become a countervailing force opposite OPEC by showing the way to its members to manipulate the price of oil by alternating between storage of oil when the price goes down and the release of stored reserves when the price goes up. In short, the potential of wealth is Saudi Arabia is enormous but, absent good governance and sound fiscal policies, political turmoil and economic dislocations are not necessarily remote possibilities. Reform of the Tax SystemThe Secretary-General of the Saudi Supreme Economic Council (SEC), Abdul Rahman Al-Tuwaijri, said his country had "moved boldly" to implement economic reforms by introducing a new foreign investment law, reducing the tax rate on foreign investors, allowing non-Saudis to own real estate and slashing customs tariffs from 12% to 5%. SEC is also providing greater legal protection against expropriation of investment. He emphasized that Saudi Arabia is not planning to impose income tax on individual incomes. While foreign companies are taxed at a rate of 45%, Saudi businesses and individuals pay a flat rate of 2.5% in the form of "zakat"or religious charity, in accordance with the shari'a, or the Islamic law. [This payment is voluntary and could be made to non-government organizations or even to terrorist organizations.] The International Monetary Fund has recommended for some time to Saudi authorities to introduce indirect tax and other forms of local taxation to diversity the sources of revenues and reduce the chronic budget deficits.[2] [Vested interests, including many members of the extended royal family, remain adamantly opposed to the introduction of an income tax and prefer to hide behind the less binding "zakat" system. Budget Deficits Add Additional Burdens on Public DebtAccording to a report issued by the Saudi-British Bank under the title: "Limelight on the Saudi Budget for 2002," the government has taken measures to tighten its belt. Some cuts are felt in the social sector. For example, the allocation for health projects has been reduced by SR10 b. which is the equivalent of $2.6 b. However, the report points out those high recurrent expenditures on salaries and wages, servicing of national debt and maintenance costs restrict government budgetary flexibility. The report points out that national debt was rising even as oil prices were going up. The debt of the public sector to the private banks has increased from SR76.6 b. ($20.4 b.) in 1995 to SR133 b. ($35.5 b.) in 2001. The budget deficit for 2002 is estimated at SR45 b. (or $12 b.)[3] The Problem of UnemploymentNothing raises as much concern in Saudi Arabia as unemployment and the methods of addressing it. While 100,000 enter the employment market every year only 30,000 jobs are created. Since government agencies are already overstaffed the private sector offers the only strategic solution. As a result of this situation, new employment agencies are establishing themselves as intermediaries between job seekers and potential employers. This is a new and difficult domain because, traditionally, job interviews in Saudi Arabia are generated by personal or family contacts unless the job seeker is from a foreign country. Women represent only 10% of job seekers because women in Saudi Arabia are "child bearers" averaging between 4 and 6 children which, according to a Saudi employment expert, "is a job in itself. [4]. It was also reported that 300 Saudi pilots are looking for jobs after completing their training in the U.S. One unemployed pilot pointed out that that flight school graduates find difficulties in employment in private companies because the latter require at least 5000 hours of flying time which would cost $750,000, few pilots can afford. [5] 7 Million Foreign Workers in Saudi ArabiaThe Saudi Minister of Labor, 'Ali al-Namla, said that there were 7 million foreign workers in his country, 5 million employed in the labor market and another 2 million doing domestic work. Arabs represent 40% of foreign workers and the remaining 60% are primarily citizens of Pakistan, Bangladesh and the Philippines. While unemployment is in the neighborhood of 15-20% the minister said it was difficult to Saudize (sa’awada) the labor market. 100%.[6] Comparing the two entries of unemployment and the number of foreign workers in Saudi Arabia would suggest that there are many jobs that the Saudis have grown to consider beneath them to perform. Saudi Arabia Seeks to Attract Foreign InvestmentsThe Governor of the General Authority for Investments, Prince Abdallah Faisal bin Turki, estimates the size of foreign investments that may be attracted to his country stands at $20 b. annually. While he noticed reluctance on behalf of foreign companies to invest in the region after 9/11 the Prince believes that his country can create the environment that would attract foreign investors.[7] Elsewhere, however, Prince Abdallah admitted that the 9/11 events have put a break on direct foreign investments in the Arab world and, particularly, in Saudi Arabia.[8] Saudi Arabia to Announce its First Tourism PlanThe Saudi Supreme Tourism Authority will publish the first comprehensive national tourism plan next April. The plan is part of an attempt to diversify the Saudi sources of revenues. Saudi Arabia has identified 10,000 sites with tourism, historical and environmental interest. The tourism sector contributes $10 b. to the GDP in terms of sales, income and value added.[9] Halliburton will Develop Oil and Gas Field in Eastern Saudi ArabiaHalliburton Oil Company, whose previous Chief Executive Dick Cheney became Vice President of the United States, has won a $140 million contract from Saudi Arabia to develop the oil and gas Al-Qatif field in the eastern part of the kingdom. [10] Saudi Official Criticizes "Oil for Food" ProgramAbd Al-Rahman Al-Zamel, head of the Saudi Center for the Promotion of Exports said Saudi exports to Iraq declined last year to $360 million [he did not say what was the volume of exports during the previous year(s).] He attributed the loss of exports to "big powers" which control the "Oil for Food" program for preferring their own exporters over exporters from developing countries. During the current phase of the program, Saudis signed contracts for a total of $15.5 million. He also criticized the United Nations for delaying the opening of a corridor, because of "unconvincing technical reasons" between Saudi Arabia and Iraq to facilitate the flow of trade. The spokesman implicitly admitted that there might be two other significant reasons for the decline of trade between the two countries: first, are the free trade agreement between Iraq, and Syria and Egypt; and, second, are the difficulties facing Iraqi importers to enter Saudi Arabia.[11] Water Loss in the Gulf CountriesAbdallah Al-Hussein, the Governor of the Public Agency for the Desalination of Water in Saudi Arabia estimated the loss of water through leakage to more than 2 million cubic meters daily, at a direct cost of $3 million, including the cost of desalination, transport and distribution. There is also indirect cost caused by water leakage under highways and buildings. Similar leakage, estimated at 20% of supply, characterizes water supply in most Gulf states. [12] Saudi Industrial Enterprises to be Excluded from Anti-Monopoly MeasuresCrown Prince Abdallah has given Saudi industrial enterprises his assurances that the new anti-monopoly measures will not apply to them. In addition to their anti-monopoly aspects the new measures will terminate "exclusive dealerships" (similar measures were recently introduced in Lebanon) and encourage competitiveness. Some Saudi enterprises have control over an overwhelming share of the market and the new measures will set a ceiling of 30-35% of the market for any enterprise. It is not surprising that businessmen strongly oppose the new measures [as mentioned elsewhere in this report, this is hardly surprising given the fact that Saudi enterprises pay voluntarily 2.5% of the profits in the form of charity. Income tax on Saudi nationals or enterprises does not exist. More importantly, most of these monopolies and exclusive dealerships are controlled by members of the Saudi royal family.][13] The Campaign about Public EducationSome Saudi newspapers have initiated a campaign against rented schools. Some boys’ schools lack the most basic safety measures, have no emergency exits and their kitchens are used as classrooms. Some girls’ schools "are not suitable to be animal pens". The campaign was triggered by a fire in a girls’ school in Mecca last week, which cost lives of 14 students and a teacher.[14] Saudi-American Businessman in the Halal Meat BusinessA Saudi-American businessman has decided to open a slaughter house and processing plant in North Dakota for the production and processing of halal meat (Muslim equivalent to Kosher meat). The animals will be given natural feed (no pork components) and the slaughter will be conducted strictly in accordance with Islamic laws. The businessman estimates the size of the market in the U.S. and the Middle East at $6 billion annually.[15] II. Regional Economic News Natural Gas Steals the ShowOil exporting countries in the Middle East and elsewhere are encouraged by the growing demand for natural gas. Natural gas was one of the fastest growing sources of energy in 2000, rising at 4.6% p.a. compared with an increase of 1% p.a. in the demand for oil. Driven by environmental concerns, the demand for gas is likely to grow faster than the demand for oil, particularly in East Asia. On the other hand, the shipment of gas is far more expensive than the shipment of oil and the large oil companies earn more money selling oil than selling natural gas. One expert compared the development of natural gas projects to the construction of a new super highway—the benefits are long-term as cities begin to be built along it. Saudi Arabia which has the fourth largest reservoir of gas in the world, after Russia, Iran and Qatar, is beginning to develop this natural resource as a major source of new revenues. It is negotiating with major oil companies for natural gas exploration agreements. [16] Elsewhere, it was announced that the second largest power entity in Spain has entered into a contract with the Algerian gas company, Sonatrac, to buy 1 billion cu. meters of Algerian liquefied gas annually, beginning with the third quarter of this calendar year.[17] OPEC Sources: $300 b. Gift to the WorldA senior source in OPEC said the world should be grateful to OPEC for keeping prices down and thereby helping the world economy to recover. He estimated the value of OPEC's "favor" to the world at $300b. He said lifting the ceiling on oil production would be tied to the utilization by the industrialized countries of their oil reserves. OPEC is striving, through variable production quotas, to maintain a price range of $22 to $28 per barrel. The threat of military action against Iraq, and the concern about oil supply interruptions from the Middle East that would ensue, has given oil prices a boost in recent days. [18] EU to Establish New Regional BankThe European Union is due to announce at the end of this month the establishment of a Euro-Mediterranean Bank for Development to finance development projects in 27 countries in the Middle East, North Africa and the Balkans. The EU has earmarked E10 billion ($8.64) through the end of 2004 for this purpose. The EU is seeking to expand its relations with the countries in the region given that a number of Eastern and Central European countries are due to join the EU in the near future. The establishment of such a bank, which will be a subsidiary of the European Investment Bank, must be approved first by the European Council and subsequently by the European Parliament.[19] Arab Trade with the U.S.Arab trade with the U.S. in 2001 reached $65 b. The U.S. Assistant Secretary of Trade, William Lash, said one of the most serious problems of American investments in the Middle East is the lack of transparency. He called on the Arab countries to open their markets and reduce tariffs on all agricultural commodities. [20] Arab Airlines Suffer $400 Million LossesDr. Abd Al-Wahab Tuffaha, Secretary General of Arab Air Transport Association estimates the losses of Arab air carriers in 2001 at about $400 million. He identified 3 causes for the losses: Economic slowdown worldwide Events of 9/11 Israeli-Palestinian conflict which spilled over into the tourism sector in the immediate as well as in the surrounding areas. He said the decline in the price of petrol was helpful but not sufficient to redress the entire losses.He also said that tourist facilities are designed for the Western tourism and that attracting inter-Arab tourism will require changes in these facilities. [21] Turkish Businessmen Sign $300 Million with IraqA delegation of Turkish businessmen, who visited Baghdad last week, signed $300 million worth of new contracts for the sale of Turkish goods and services to Iraq. The signing of the new contracts comes at a time when Turkey is trying to strengthen its trade relations with its southern neighbor despite political tensions arising from Turkish support of American policies. [22] Turkish Company Signs Telecom Contract with SyriaA Turkish company, Itakablo, won a bid worth $67 million to provide telephone cables for the Syrian telephone network. The new service will cover 1.65 million subscribers. It is the first time that a Turkish company operating in the Middle East obtained such a large contract. The winning bid by a Turkish company coincides with the strengthening of the relations between Syria and Turkey. [23] Syria and Jordan Seek New Bids for a DamSyria and Jordan have agreed to invite new bids for the construction of the 'Unity Dam" on the Yarmuk River at a lower capacity and cost than agreed upon earlier. The two sides have agreed that the new dam will have a storage capacity of 125 million cubic meters annually to be divided equally between the two countries. The dam will be completed in 3 years at an estimated cost of $120 million. Bids were earlier invited for the construction of a dam with a storage capacity of 225 million cubic meters and an estimated cost of $250 million. Jordan is considered one of the world 10 poorest countries in terms of water resources. The water needs of the country are estimated at 1 billion cubic meters annually but Jordan has had to make do with 850 million cubic meters. [24] Jordan Sold its Share in Cement Company to PAAs part of its privatization program, Jordan confirmed the sale of its remaining 14.2% in the Jordanian Cement Company to the Palestinian National Authority for $45 million to be made in 4 equal payments. It was not clear who represented the Authority in this deal although there was a speculation that it was one of Arafat's senior aides or advisers. The Palestinian market is the largest consumer of the Jordanian cement. Under the Paris Economic Accord between Israel and the Authority the import of cement by the Authority was exempted from tariffs. [25] Palestinian Authority Seeks Interconnection with Egyptian and Jordanian Grids Yahya Shamiyya, the Director General of the Palestinian Ministry of Energy, was recently in Egypt to discuss the interconnection of the Palestinian power grids with those of Egypt and Jordan, after independence. At this time, Arab countries are not interested in such interconnection because of the linkage between the Palestinian and the Israeli power supply systems. Shamiyya said Israel supplies the Gaza Strip with 105 megawatts while the needs are more like 150 megawatts daily. He complained that the electric power in Israel is expensive compared with neighboring countries [where power is subsidized]. In addition, many transformers and transmission lines were destroyed by Israel as a result of the Intifidah.[26] III. Country Economic News Egypt: Rise in Consumer PricesThe recent devaluation of the Egyptian pound has resulted in sharp rises in the prices of food commodities. Under the headline "Price fiesta" Al-Ahram Weekly refers to price increases by as much as 40% on some commodities. With imports exceeding exports by $12 billion ($16 billion vs. $4.5 billion) most food commodities have foreign components priced in dollar. As the Egyptian pound depreciates vis-à-vis the US dollar, prices of commodities are likely to continue to increase. Some low-income Egyptians will have to resort to lower quality commodities with potentially harmful health effects. [27] Egypt: Disagreements with FOREX Agencies PersistThe foreign exchange (FOREX) companies have decided to send an urgent memorandum to President Mubarak regarding the closure of 65 of 120 such agencies on the ground that they were engaged in speculation on the exchange rate of the Egyptian Pound. With the abolition of the ministry of the economy in a recent government reshuffle in Egypt the agencies argue that they have lost a contact point in the government. They maintain that the agencies are an important instrument in the FOREX market, not an "axis of evil" and some would argue.[28] Subsequently, 30 more agencies have closed down voluntarily because of fear of criminal prosecution and for the absence of business transactions. The agencies are required to trade in foreign currencies, primarily the dollar, in accordance with the exchange rates established by the Central Bank of Egypt which are below the going rates in the black market. In the absence of sellers at the official rate, and with the drying up of new supplies by the Central Bank of Egypt, the FOREX agencies have been squeezed out of business.[29] U.S. Exempts Egyptian Steel from New TariffsThe United States has excluded Egyptian steel from the new tariffs it has recently imposed on imported steel from a number of countries. The new tariffs range from 8 to 30%. This exemption will allow Egypt to increase the value of its steel exports to the U.S. from $70 million to $250 million by the end of 2002.[30] Iranian Tourism to Cyprus CollapsesA once flourishing Iranian tourism to Cyprus has declined by 90% following Cypriot authorities' demand that Iranian tourists must obtain visas prior to their entry to Cyprus. Iran Air is due to cancel its two scheduled flights between Tehran and Larnaka because of loss of business. [31] Syrian Economy Registers GrowthSyria announced that it GDP has grown by 5.9% in 2001. The announcement did not mention the rate of inflation to determine the real growth rate of the GDP. The Syrian economy relies heavily on oil and agriculture. Agriculture had a good year in 2001 because of a good amount of rainfall. [32] Lebanese Lira under Continued PressureThe Lebanese Lira continues to come under heavy pressure as Lebanese savers and businessmen seek safety in the U.S. dollars. Although the lira is pegged to the dollar, as was the case in Argentina, savers suspect that the declining reserves in the Central Bank of Lebanon and the unwieldy debt will eventually force the government to let the lira float at a much lower rate. These reserves have declined to $4.9 billion, most of it represents deposits by the Gulf countries in support the Lebanese lira. Some observes attribute the pressure on the Lira to Christian merchants who object to recent government’s decision to eliminate "single dealerships" in such areas as pharmaceuticals and oil which were controlled by the Christians. [33] In answer to a question at a press conference held in London, Thomas Dawson, Director of the External Relations Department of the IMF, said that the devaluation of the Lebanese Lira alone would not resolve the debt problem of Lebanon, unless such devaluation is accompanied by major structural adjustments in the economy. [34] Urgent Aid to PalestiniansLibya has decided to extend urgent aid to the Palestinian people [not the Palestinian Authority] and establish an aerial bridge to the closest possible station near the border for carrying foods and medical supplies.[35] The Islamic Bank for Development (in Jeddah) has also announced that it has decided to provide $50 million in support of the Palestinian ministry of finance. It has already transferred $10 million to the Palestinian Authority and another $40 million will be transferred shortly. [36] [1] All figures and background material for this introduction is drawn from the following sources:Saudi Arabian Monetary Agency, "Achievements of Economic Development During the Reign of the Custodian of the Two Holy Mosques'Government" (, no date.U.S. Government, Energy Information Administration, Country Profile, Saudi Arabia, January 2002,International Monetary Fund, Article IV Consultation with Saudi Arabia, November 7, 2001; United Nations Development Programme, Human Development Report, 1992, and 2002. [2] Al-Quds Al-Arabi, March 4, 2002. [3] Al-Hayat, March 4, 2002. [4] Al-Hayat, March 4, 2002. [5], March 6-8, 2002. [6] Al-Watan (Saudi Arabia), March 6, 2002. [7] Al-Hayat, March 6, 2002. [8] Al-Hayat, March 14, 2002. [9] Al-Hayat, February 28, 2002. [10] Al-Qabas, March 15, 2002. [11] Babil, March 11, 2002. [12] Al-Watan (Saudi Arabia), March 10, 2002. [13] Al-Hayat, March 8, 2002. [14] Al-Hayat, March 14, 2002. [15] Al-Hayat, March 10, 2002. [16] March 10, 2002. [17] Al-Hayat, March 11, 2002. [18] Al-Sharq Al-Awsat, March 15, 2002. [19] Al-Hayat, March 10, 2002. [20] Al-Hayat, March 9, 2002. [21] Al-Sharq Al-Awsat, March 7, 2002. [22] Al-Hayat, March 9, 2002, Dunya (Turkey), March 7, 2002. [23] March 9, 2002. [24] Al-Sharq Al-Awsat, March 11, 2002. [25] Al-Sharq Al-Awsat, March 11, 2002. [26] Al-Hayat, March 10, 2002. [27] Al-Ahram Weekly On-Line, March 7-13, 2002. [28] Al-Hayat, March 7, 2002. [29] Al-Watan (Kuwait), March 10, 2002. [30] Al-Hayat, March 8, 2002. [31] Babil, March 11, 2002. [32] Al-Hayat, March 9, 2002. [33] Al-Quds Al-Arabi, March 9, 2002. [34] Al-Sharq Al-Awsat, March 15, 2002. [35] Al-Sharq Al-Awsat, March 10, 2002. [36] March 7, 2002. *Dr. Nimrod Raphaeli is Senior Analyst of MEMRI's Middle East Economic Studies Program.

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March 15, 2002 Special Dispatch No. 356

Egyptian Government Daily Praises the Martyrdom Attack on Jerusalem Cafe: 'A Heroic Operation'

March 15, 2002
Egypt | Special Dispatch No. 356
A recent editorial in the Egyptian government-sponsored daily Al-Akhbar, titled "Advice to General Zinni on his New Mission," [1] read: "The heroic operation carried out by the military arm of the Hamas movement, the 'Izz Al-Din Al-Qassam Brigades, in West Jerusalem is an important turning point in Palestinian resistance activities." "This is because it was 50 meters away from the official residence of Israeli Prime Minister Ariel Sharon, in one of the most [heavily] defended areas in Israel. This means that the resistance movements have developed and are capable of striking painfully at Israel, even close to the homes of the leaders of the bloodthirsty Israeli regime." "Maybe this operation did not [cause] the most bloodshed, but the important point here is the site where it was carried out. The target was a well-known café near Sharon's residence. This was a direct message to the Israeli leadership: The Palestinians, who have nothing to lose, are capable of making horror, the Israelis' daily bread." "This message has two parts. The first part is that if Israel can get to Arafat and turn his Gaza headquarters to ruins, the resistance can reach the residence of the blood-shedder Sharon. The second part of the message is that there is no safe place left for Israelis…" "Despite this picture, Sharon still, in his stupidity, persists with a military solution, continuing to attack while disregarding all international counsel. Thus, the region has entered an equation with only two solutions: Either Sharon succeeds in setting off the powder keg in the Middle East, or influential international bodies, led by the U.S., the E.U., and Russia, intervene to stop the insane Israeli war…" "We hope that the Bush administration will translate [into practice] the positive declarations stating that Sharon's terrorist attacks on the Palestinian people will lead only to more bloodshed. Everyone understands that President Mubarak's efforts have made Bush aware of the failure of the [non-intervention] strategy he declared when he took office…" "But the dangerous state the conflict has reached proves the justice of President Mubarak's approach: He warned of the possibility that the conflict could get out of control and threaten not only the Middle East but also international security and peace." "We hope that Zinni…will keep this advice in mind." [1] Al-Akhbar (Egypt), March 12, 2002.

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