2017 Forecast: Oman Threatened as Risks Multiply | GRI (2023)

2017 Forecast: Oman Threatened as Risks Multiply | GRI (1)


by Jeremy Luedi,January 7, 2017

Since the Arab Spring and subsequent regional unrest, Oman has been increasingly touted as an island of stability. Despite siding with Yemen in the civil war, Oman has tried to remain neutral, in line with its increased efforts to balance between neighboring Saudi Arabia and its longtime partner Iran. While Oman has so far weathered the storm of violence and instability that has gripped much of the Middle East, 2017 will present a series of challenges that threaten to undermine the country.

Increasingly complex security situation

2017 started with a big move from Oman, with Muscat acceptingget togetherthe Saudi Arabian-led coalition against terrorism. This is a major departure from Oman's largely hands-off stance, as well as an interesting shift in regional power dynamics. Given Oman's long-standing relationship with Iran, its joining a Saudi-led effort is key and a development to watch closely. Whether this is an indication of a longer-term geopolitical realignment, or rather a marriage of convenience given the instability on Oman's doorstep, remains to be seen.

Given Oman's security concerns, it is understandable that the government is taking a more proactive role in 2017. Oman has largely escaped the kind of refugee influx seen by countries like Jordan and Turkey, in part because the government has stepped up much border control. In addition, Oman has acted as a supply line for the Hadi government, sending aid, daily necessities and consumer goods across the border to bolster Yemen's efforts, rather than accepting refugees.

Oman also benefits from the fact that most of the fighting in Yemen is taking place in the west, with Oman bordering on more stable areas controlled by Hadi. Accordingly, Yemen is supporting Yemen's efforts in Al-Marah province,creating a buffer zoneinside Yemen.

Given Yemen's war economy, Oman's border regions are benefiting from increased trade and smuggling, with the Al-Mazyouna Free Trade Economic Zone playing a vital role. Oman's ports have become the Hadi government's main access to the rest of the world, as the border with Saudi Arabia remains closed and Yemen's ports remain under threat.

Yemen's main problem is demographic: the country's 4.4 million people are significantly outnumbered by Yemen's 25.4 million. Oman's small population means that if the country witnesses even a moderate influx of refugees, existing services and infrastructure will quickly be overwhelmed, especially as many parts of western Oman remain underdeveloped. Furthermore, Oman's explicit support for the Saudi coalition puts it on the list of potential targets. Although largely insulated from any Houthi threat, Oman will now be in the crosshairs of Ansar al-Sharia and Al-Qaeda in the Arabian Peninsula (AQAP).

These groups control the territory closest to Oman and therefore pose a greater threat to the country. Furthermore, the nature of groups like AQAP allows them to use sparsely populated eastern Yemen to launch attacks on western Oman, with the potential support of local tribal groups, a scenario that seriously worries Muscat. In addition, AQAP and company could incite Omanis or members of the large migrant worker population to carry out lone wolf attacks.

Economic slowdown hurts security spending

All this at a time when Oman is facing financial difficulties. Oman's army is smaller than the Houthi rebel forces, but given the nature of Oman's border security and its location in the east, this number is sufficient. So far, Yemen has not suffered any retaliation from the Houthis for helping the Hadi government, but taking an outspoken position against AQAP and others will require increased border security. The problem is that, in addition to the costs of joining the coalition, Oman's expenses will only continue to increase. This is a major problem, since military spending already represents 11.5% of GDP.

2017 Forecast: Oman Threatened as Risks Multiply | GRI (3)

Green: Houthi controlled, Red: Hadi controlled, White: Ansar-al Sharia and AQAP controlled

Oman faces rising security costs as the government announces aausterity budget. The $6.93 billion budget for 2017 is $10 million less than the 2016 budget, and while this may not seem like a huge reduction, the most important thing to consider is how the funds are allocated. The reason why the budget is not less is that the government has decided not to touch the construction budget, allowing existing projects to be completed. The problem is that this effectively drains funding for new projects, which promises a deadlock in the future.

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Furthermore, Oman is still recovering from the fall in oil prices. Although prices have risen from their 2015 lows, Oman's oil-dependent economy remains under threat. Omani observers believe that $70 a barrel of oil will significantly improve business confidence, but while that price target may be reached in 2017, it still puts the government at the mercy of the markets.

2017 Forecast: Oman Threatened as Risks Multiply | GRI (4)

Oman's exports dominated by oil

Could someone point out therecent dealbetween OPEC and non-OPEC members to cut production as a ray of hope for Oman. While this will help boost prices, Oman has also agreed to cut production by five to 10 percent, which will further reduce government revenue in the short term. As a minor producer, Oman's production cut was offset by Libya's increase to 683,000 bpd from its current production levels of 600,000 bpd.

Also, as oil prices rise. other large producers. Like Canada, it will increase production in response to domestic pressure and increased investment as the profitability of oil sands increases. This will further threaten Oman's market share, which is already hostage to OPEC's whims.

As a non-OPEC member, Oman is at the mercy of OPEC, which may decide to increase production at some point. Surrounded by OPEC members, Oman will lose out in this scenario. Finally, Donald Trump has been a strong advocate of 'Made in America' energy who is unlikely to accept cuts in international production. A further increase in US production will dilute OPEC's efforts to raise prices.

Oman faces a growing succession crisis

The final ingredient in Oman's woes in 2017 is the question of political stability and succession.Sultan QaboosHe has ruled the country since 1970 and, at 76, his health is increasingly fragile; indeed, he reportedly underwent cancer treatment in Germany in 2015. Although he is a popular ruler, Qaboos has no children or heirs, raising concerns of a succession crisis. . If Qaboos dies without naming an heir, the primogeniture laws will cause one of his late uncle's sons to ascend to the throne. Another possibility is that he reveals himself to be an heir after opening a sealed envelope after the sultan's death. The sultan may choose this method to avoid any conflict while he is alive, but either way, uncertainty surrounding Qaboos' succession is growing.

The last thing Oman faces during a war during an economic crisis is that its popular ruler dies, thus making way for a new ruler who would not only inherit the country's problems, but probably not enjoy the level of public admiration and reverence that Qaboos has. at the moment. enjoy Oman's large young population will be a determining factor in any succession crisis, but in the post-Arab Spring Middle East, hostility towards the establishment remains a key element among the region's youth.

An earlier version of this article incorrectly claimed that Oman had joined the anti-Houthi coalition led by Saudi Arabia. In fact, Oman has joined the anti-terrorist coalition led by Saudi Arabia.

Categories:Middle East/North Africa,Security

Label:Austerity,Hadi,houthi,Oman,Saudi Arabia,Sultan Qaboos bin Said Al-Said,Yemen

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About the Author

jeremy luedi

Jeremy Luedi is the editor of Asia by Africa, a publication that highlights stories told in Asia and Africa, as well as feature articles on how the two regions interact. His writings have been published in Business Insider, Huffington Post, Yahoo Finance, The Japan Times, FACTA Magazine, Nasdaq.com, and Seeking Alpha, among others.

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