Special Focus: The Tigris and Euphrates River Basin ­ Potential Conflict Between Riparian Countries

In the previous issue of the Middle East Economic News Report ( No. 13 ) we referred to a looming water crisis in Iraq and, to a lesser extent in Syria, and the appeal made by these two countries to Turkey to reactivate the 1987 tripartite Joint Technical Committee on the Tigris and Euphrates rivers and to abide by international law. The issues involved in the sharing of the most scarce commodities in the world are compelling and the potential for conflict cannot be overlooked.

Background Data
The World Bank analysis shows that the Middle East and North Africa region is by far one of the driest and most water scarce regions in the world. This is increasingly affecting the economic and social development of most countries in the region which is the home for 5% of the world population and less than 1% of the available world's freshwater resources.
Average water availability in the region is about 1,200 cubic meters per year (world average is close to 7,000). The annual water availability in the region ranges from a high of about 1,800 cubic meters per person in Iran and Turkey to less than 200 cubic meters per person in Jordan, West Bank/Gaza and Yemen. By 2025, the regional average water availability is projected to be just over 500 cubic meters/person/year. To meet this increasing demand, groundwater, the main sources of water in many countries, is being extracted well beyond the renewal rate of the resources in parts of the region. In some cases, governments are tapping into the fossil groundwater resources and, where feasible, have initiated seawater desalination projects. Degrading water quality further reduces the availability of freshwater suitable for domestic and agriculture use and increases the cost of treatment and reuse of water. Increased water contamination due to inadequately treated wastewater is also affecting public health, particularly of children, in rural areas where access to clean water and sanitation is still lacking. The Humanitarian Coordinator for the U.N. Office of the Iraq Program, Tun Myat, pointed out that "The biggest killer of children [in Iraq] is not lack of food or medicine but of water and sanitation."
Source: www.countrywatch.com: "Country Review 2001-2002".

The water resource situation in the region is becoming progressively bleaker due to droughts of higher frequency and longer duration. Droughts have affected almost every country in the region over the past decade and have a serious impact on development in several countries.
Source: The World Bank, Sector Overview and Development Context, November 2001.

From a long-term strategic consideration, political aspects of water for Arab countries is equally daunting. Water deficits in Arab countries could reach 171 million cubic meters in 2030. Two-thirds of Arabs depend on water originating from non-Arab sources, except for about 50% of the Tigris river and the two small rivers of Jordan and Litany, and even the waters of these two rivers are used primarily by Israel. Most other sources of water originate from Turkey (Euphrates about 90%) and Tigris (about 52%) and the Nile (Uganda and Ethiopia). Paradoxically, the countries from which these three countries rise are friends of the U.S. and Israel.
Source: Al-Jazeera, December 2, 2001.

Water is the key to war or peace. Borders can be redrawn, refugees resettled, trade globalized barriers can be removed and agriculture reformed and made more efficient - but water will still be needed to meet basic human needs. Population growth and a shift toward urbanization will render these needs even greater in the future.

Potential Areas of Conflict
At the center of the Middle East's agenda on water are three far-flung river basins with names famous for millennia - the Nile, the Jordan, and the basin of the Tigris and Euphrates. The three rivers supply the Middle East with most of its fresh water. Each river basin varies considerably from the other. Their problems are distinct and therefore require different solutions and approaches.

The Nile Basin initiative, launched in February 1999, is a regional partnership within which countries of the Nile basin have agreed to pursue long-term development and management of Nile waters. With the exception of occasional flare-up between Egypt and other riparians over the use of the Nile waters the conflict has been largely under control. The Jordan River is inextricably linked to the Arab-Israeli conflict, and it is not on any one's immediate agenda. There remains, however, the issue of the Tigris-Euphrates basin that will be the subject of our analysis.

Iraq and Syria Underscore the Problem
Mostly Iraq, and Syria to a lesser extent, has had a serious problem of drought for the last four years with major consequences for agriculture and drinking water. As a result, Iraq's Minister of Irrigation, Rasool Al-Sawadi, met with his Syrian counterpart, Taha Al-Atrash, in Damascus on November 26 to coordinate their efforts vis-à-vis Turkey, the third party in a tripartite Technical Commission for Water Resources, which has been absent since 1987. The two ministers called on Turkey to reactivate the tripartite commission by agreeing to attend its meetings. Turkey has remained silent.
Source: Babil (Baghdad) and Teshreen (Damascus), November 26, 2001.

The Source of Grievance
The two Arab countries, Syria and Iraq, have complained about Turkey's ambitious Southeastern Anatolia Development Project (GAP in Turkish). It is one of the most ambitious and costly development projects in the world. It is estimated to cost $32 billion upon completion and plans to utilize the waters of the Euphrates and the Tigris rivers with the construction of 22 dams and 19 hydroelectric power plants. It also plans to divert the waters of the basin, with immense tunnels into the Harran field, where 1.7 million hectares of land will be irrigated. The GAP was created to develop Southeastern Turkey, a region long ignored by the Turkish government. The Turkish government, as the upper riparian, wants to utilize the waters of the basin, which would in return contribute to alleviating Turkey's electricity and agricultural needs. When it is completed, the GAP project will help Turkey to utilize the basin with mega dams like Atarurk, Karakaya and Keban. The project creates a great deal of resentment from Syria and Iraq, the other riparians of the basin. The two countries invoke the provisions of the United Nations 1997 "Watercourse Convention and the Euphrates and Tigris Rivers." Article 7 thereof states that;

Watercourse States shall, in utilizing an international watercourse in their Territories, take all appropriate measures to prevent the causing of Significant Harm to other watercourse states.

Syria and Iraq allege that (a) Turkey had failed to inform them in advance about its plans; (b) Turkey's hydro-power projects reduce the amount of water flowing into their countries; and (c) Turkey is releasing polluted water across the frontier.

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Turkey denies these charges. It argues that Syria wants 32% of the Euphrates and 5.4% of the Tigris. Iraqis wants 65% of the water potential of the Euphrates and 92.5% of the Tigris (each riparian country has its own mathematical formula). Turkey plans to use about 52% of the Euphrates - to which it contributes 89%- and 14.1% of the Tigris to which it contributes 52%. The combined demands of the riparian countries thus amount to 148% of the total flow capacity of the Euphrates and 111% of the Tigris. "These expectations," states an official Turkish document, "are obviously unrealistic. The demands of Iraq and Syria tacitly assume that Turkey releases all the flow of the river without utilizing any of it."
Source: Turkey, Ministry of Foreign Affairs, Water: A source of conflict or cooperation in the Middle East?" (no date but likely late 1990s).

Turkey takes Syria to task with regard to its use of the Orontes River, which is neither fair nor equitable. Where the Orontes is concerned, Syria is the "upstream" country and Turkey the "downstream" one. Turkey maintains that "Syria's record in sharing the waters of the Orontes contrasts dramatically with what it claims should be happening to the waters of the Euphrates." Turkey's position was aptly stated by its former President, Suleyman Demirel. He is quoted as saying: "Neither Syria or Iraq can lay claim to Turkey's rivers any more than Ankara could claim their oil. This is a matter of sovereignty. We have a right to do anything we like. The water resources are Turkey's, the oil resources are theirs. We don't say we share their oil resources and they cannot say they share our water resources."
Sources: loc cit.; John Bulloch and Adel Darwish, Water Wars: Coming Conflicts in the Middle East. London: Victor Gollancz, 1993, p. 74.

The Israeli Dimension
Long before the appeal was made to Turkey by Iraq and Syria to convene the Tripartite Joint Technical Committee on Water, Turkey had signed a memorandum of understanding to sell Israel 50 million cubic meters of water annually which will meet 2.5% of Israel's water needs. While this amount of water is relatively small, indeed it represents the equivalent of 28 minutes of water flow from Turkey to Syria (about 500 cubit meters per second), its symbolic gesture was not lost on Turkey's riparian partners. This gesture, coupled with naval maneuvers by Turkey and Israel a few miles outside its territorial waters is a source of discomfort to Syria.
Source: Al-Jazeera-net/economics, January 27, 2001.

Conclusion
Water will remain one of the most volatile issues in the Middle East and the source of potentially serious conflicts. The oil rich countries have resolved their water shortage through desalination. Israel is moving in that direction as well. Countries with more restricted financial resources such as Syria, Jordan, Morocco and Yemen are constrained from going the desalination path. Rapidly growing populations and a trend toward urbanization will heighten water shortages and exacerbate political conflicts.

Egypt: Economic Crisis
"Forecasting the storm," was the title of an economic analysis in Al-Ahram Weekly. The article divided the forecasters between the optimists (mainly government officials) and the pessimists, comprising of economists and the Institute of National Planning. Both camps, the paper said, "concur that four areas of the economy will be affected most: tourism, air and maritime transport, exports and investments."
Source: Al-Ahram Weekly Online, November 1-7, 2001.

Egypt: Losses of $2.5 Billion Since September 11
The Egyptian Government has announced that its national economy sustained losses totaling $2.5 billion. The losses are distributed among a number of sectors, including $1.63 billion in tourism, $432 million in air and sea transportation, $184 million in the form of declines in Suez Canal revenues and $180 of net loss in foreign investments. Exports have also declined by 20% particularly in the area of apparel.
In response to Egyptian requests for relief, the United States Government has agreed to expedite the disbursement of its economic aid to Egypt and the reclassifying and rescheduling of some of the aid items. Robert Zoellick, the U.S. Trade Negotiator, will visit Cairo on December 19 to discuss the details.
In a related story, the Egyptian apparel market is flooded with smuggled goods, primarily from China. Most of these goods carry Egyptian tags and only 5% of these are confiscated and auctioned off by the government. They are retailed again at the local market, an act that undermines the efforts by the customs authorities to control the smuggling. The smuggling in Egypt has two serious problems. The first problem is that textile and apparel factories are working at 40-50% capacity. As a result, exports of textiles and related materials have reached $233 million as against imports of $205 million. By contrast, Tunisia's exports of textiles have reached $5 billion. A second problem is the rapid decline in the value of the Egyptian pound as a result of mounting needs of smugglers for foreign currency that can only be obtained in the black market that has become very active in recent weeks.
Sources: Al-Hayat, November 3, 2001; Al-Ahram, December 1, 2001; Al-Ahram, December 2, 2001; Al-Ahram, December 5, 2001.

Fears of a Rising Prices in Egyptian Markets
Egyptian economic sources have warned that Egyptian markets will soon be subject to rising prices and rising costs as a result of the increase in the value of the dollar vis-à-vis the Egyptian pound to a new record.
The Egyptian economy is in a deep recession. The rising cost of living coupled with a serious problem of unemployment with no social safety nets, could be a source of serious political risks for the regime; hence, the urgent appeal to the U.S. for relief.
Source: Al-Sharq Al-Awsat, December 3, 2001.

Egypt: Pharmaceutical Industry in Dire Economic Situation
Most pharmaceutical factories in Egypt are on the verge of bankruptcy because of the steep rise of the dollar that the local industry needs to import chemical compounds. Moreover, the industry is in decline because of the absence of any investments in research and development. As a consequence, many pharmaceutical firms are unable to compete with a flood of foreign imports.
Source: Al-Hayat, December 3, 2001.

Egypt Postpones Privatization of Telecommunications Company
The Egyptian Government has postponed indefinitely the public offering of shares in the government telecommunications company after a number of postponements going back to January 2000 when the company was due to be privatized. Except for the most recent postponement that was attributed to the unfavorable market conditions following September 11 all previous postponements were due to disagreements within the government on the privatization of the telecommunications and other public utilities companies. Similarly the government has postponed the privatization of the water and the petrol distribution stations. The postponements may have meant to avert measures by potentially private owners that would cause the termination of many employees who may be either superfluous or not highly productive.
Source: Al-Hayat, December 2, 2001.

Saudi Arabia Sues Tobacco Companies, Accusing them of Terrorism
The Supreme Shari'a Court in Saudi Arabia will soon consider 5 suits filed by King Faisal Hospital against 10 American and British tobacco companies and their agents in Saudi Arabia. The suits seek damages for 10 billion rials ($2.6 billion equivalent) to cover the cost of treatment in the last 25 years of cancer and heart diseases caused by smoking. The tobacco companies being sued include giant multinational companies like Philip Morris, American Tobacco Company and B.A.T. (British-American Tobacco). Lawyers for the claimants asserted they would take their case to American and British courts if the Saudi courts rule against them.
By virtue of the harm caused by the tobacco industry the tobacco companies should be considered as "entities that support and finance terrorism." Spokesman for the hospital characterized the suit as "a noble battle and legitimate Jihad."
Source: Al-Sharq Al-Awsat, December 3, 2001.

Lebanon: New Statistics on Lebanese Emigrants
A recent demographic study by Dr. Anis Abi-Farah shows that the number of Lebanese emigrants between 1975 and 2001 has reached 938,000. The study reveals some interesting data:

• The number of single Lebanese females has increased to 8.4%. Conservative families are allowing their daughters to emigrate in search of economic opportunities and husbands.
• In terms of religious distribution, 23% each are Sunnis and Roman Orthodox, 20% each are Shi'ites and Maronites and 4% are Druze.
• The number of emigrants with academic degrees was 273,694, or 29.2 % of total emigrants ($30 billion cost of education to the state, or an average of $100,000 per student.)
• Countries of destination, starting with the largest percentages of emigrants, are Australia, United States, Canada and France. Some emigrants go to Saudi Arabia, Syria and U.A.E. Emigrants with academic degrees prefer Western countries. where they plan to stay permanently. Those who go to other Arab countries is for work only, and normally they return to Lebanon.

Arab Bonds Offer High Yields
Six Arab countries-Egypt, Lebanon, Oman, Tunisia, Qatar and Morocco, are seeking to tap the international financial markets by offering sovereign debt. So far, these countries have issued bonds for a total of $11 billion almost half of it was issued by Lebanon. Lebanon is also the only country that issued bonds denominated in yen (Samorai market). Local banks are the largest subscribers to these bonds.
In view of the high risks of bonds issued by developing countries and the recurrent resorting by many of them to rescheduling of debt or even defaulting, sovereign debt of developing countries, including those from the Middle East, carry a high risk and correspondingly a high rate of return, often as much as 500 basis point (5%) over the benchmark rate for U.S. Treasury debt.
Source: Al-Hayat, December 3, 2001.

Damascus: Gulf Investors Will Establish Islamic Bank in Syria
Saudi and Syrian businessmen, in collaboration with three Gulf financial institutions, plan to open the first Islamic bank in Syria. The investors will take advantage of a new Syrian banking law that authorizes the opening of private banks with a minimum subscribed capital of $30 million.
Islamic banks are bound by the shari'a, or Islamic law, which prohibits them from offering interest on savings or charging interest on loans. Rather, they use special formula of profit sharing.
Source: Al-Hayat, December 3, 2001. Syria: Dripping System Reduces the Use of Water The introduction of the dripping system of irrigating for wheat has meant a saving of 43% of the water used in Syria. On a national level the saving in water use could amount to 1.647 billion cubic meters which are quite significant given the shortage of water in the region.
Source: Al-Thawra (Damascus), December 3, 2001.

Israeli Economy From a Syrian Perspective
Under the title: "Is the Israeli Economic Crisis a Turning Point Toward a Major Development in the Arab-Zionist Conflict," Michael Awadh, in the Syrian newspaper "Teshreen" highlights Israel's recent economic difficulties. Drawing on Israeli newspaper and other media sources, the author provides data on the tourism industry, the decline in GDP, the problems of the high tech industry, rising unemployment, decline in exports and investments, and rising government deficits. From these data the author lists five facts and draws a far-reaching conclusion. What are the facts?
First, the Intifada has denied the Israeli economy its "security," the cheap labor force, the markets in the West Bank and Gaza and through them to the Arab markets. It has also imposed a heavy burden on the defense budget.
Second, the Israeli economy that made big strides riding on high tech has suffered billions of dollars of losses as a result of the collapse of that market.
Third, is the collapse of the tourism industry as a result of the Intifada, further worsened by the impact of September 11 on air transport. Having been rapidly globalized, the Israeli economy was open to shocks as a result of the big crises in the American and European economies.
Fourth, the economic crisis will be long and persistent because the Israeli economy, which has been "nourished by the European and American oxygen and by intravenous feeding," must now contend with the absence of both because of the serious economic recession in the U.S., the most serious since the 1929 depression.
Fifth, the economic crisis is "persistent and chronic because of the nature of the crisis, the nature of the state and the nature of the global, Arab and regional circumstances." The width and depth of the current crisis cannot be treated though economic and monetary prescriptions particularly given the nature of the limited local market and given that the international market is gripped by crisis. The author concludes by posing the following question: Will the Israeli economic crisis impact on, and interacts with, other crises to create an internal situation with changing political forces that would permit the establishment of a political solution on new and different foundations? Or "will the crises push the Zionist entity to increased extremism and racism [that] would thrust it toward more war in order to export internal crises?" The author offers this answer to his question:

"Created by extortion and stealth, the state drew its strength from external support and was also given a colonialist role, it is beginning to lose some of its strength and immunity and hence it is difficult to speculate the paths it will follow under the burden of stormy crises hitting it from all directions and the force of geo-strategic changes in the regional and global environment."

Iraq Defends Russian Position on Oil Production
In an editorial titled "America, Oil Prices, and Russia" the Iraqi daily newspaper, Babil, published by Udai Saddam Hussein, criticizes OPEC for linking the reduction in the production of its oil with a commensurate reduction in the production of oil by non-OPEC members, particularly the Russian Federation. The editorial says OPEC produces 25 million b/d, including 8 million b/d by Saudi Arabia. The Russian Federation, the paper says, cannot adhere to OPEC's demands because of a payment of $1 billion due to the European Union that the Federation wishes to pay on time. "American agents in OPEC," the paper says, "are not ashamed for betraying their peoples by loosing billions of dollar to flood the market with oil[at lower cost] under orders from the United States…Once more, evidence highlights the importance of keeping the Iraqi oil with its enormous reserves outside American domination and for the benefit of a multi-polar balanced world."
Source: Babil, December 1, 2001.

Iraq Issues Food Rations 13 Years Running
The Ministry of Trade has invited all the citizens to receive their food rations coupons for the 13th year running. The coupons allow Iraqis to buy subsidized food rations comprising flour, rice, tea, sugar and cooking oil.

The regime has used this method of food rationing to penalize suspected political opponents by denying them the food coupons. On the other hand, the favorite few can buy all the luxury items they need on the open market.
Source: Babil, December 3, 2001.

Oman: No Liquefied Gas for Israel
The Government of Oman has denied the existence of any plans to supply liquefied gas to Israel. It said all trade relations with Israel have been suspended because of the Israeli "measures against the Palestinians."
Source: Al-Hayat, December 2, 2001.

PA: USAID Finances Small-Scale Enterprises United States Agency for International Development announced on December 4 that it would expand its financing of small-scale enterprises in the West Bank and Gaza. It would allocate $3.2 million to make micro loans in support of contracting and women's sectors. This program is a second phase of an earlier program started in 1996 intended to support women seeking to establish their own small businesses. As a result of that initiative 1000 Palestinian women have built their own small enterprises or businesses.
Source: Al-Hayat Al-Jadeeda, December 5, 2001.

PA: $12 Million Cost of Arafat's Helicopters
An official in the Civil Aviation Authority in the Palestinian Authority estimates the cost of Arafat's 3 helicopters destroyed by Israel at $4 million a piece. The helicopters, model MI17, accommodate 24 passengers, and were used by Yasser Arafat to shuttle between Gaza and the West Bank and occasionally to Egypt.
Source: Al-Hayat Al-Jadeeda, December 5, 2001.