The United Arab Emirates was formed in 1971. In its short life it has become an international powerhouse not only as a supplier of oil and gas but also as one of the world's biggest investors. This essay explains why. The article was published in AQ magazine vol 82. issue 1 January-March 2010.
The small New South Wales country town of Bundanoon was big news in Abu Dhabi’s daily newspaper The National. I was reading this English language newspaper in the quiet comfort of my air conditioned Abu Dhabi hotel looking out at the heat haze where the August temperature was 50c plus. Through the mist I could see the towers of the city centre and off to the left a large street portrait of Sheikh Zayed bin Sultan Al Nahyan, the man who was mostly responsible for changing Abu Dhabi from a small Bedouin desert village into a modern metropolis.
It was Ramadan and over at the Marina Mall all the restaurants and coffee shops were closed. Outside the Sheikh Zayed Mosque, the world’s third largest mosque, marquees were being erected to feed the faithful once they broke their fast after sunset. The hotel had provided its guests with an attractively presented leaflet that invited its guests ‘to share the warmth of Ramadan’ at any of the hotels three well furnished restaurants. Westerners who needed to eat during the day could be accommodated at these same restaurants. But it would be difficult to find a place to eat outside.
Ramadan had become a lifestyle choice. In the Abu Dhabi tourist magazine Concierge there was a stylish full page coloured advertisement that read:’ Ramadan at the Intercontinental Al Ain Resort. Well worth the wait.’
That evening when I went to eat at one of the Intercontinental restaurants, men and women in traditional Arab dress, the men in white full length dishdashas, the women in black full length kandouras discreetly displaying their gold jewellery, chatted in a lively fashion and seemed to be sharing an almost festive occasion, the iftar the breaking of the fast with traditional and international dishes.
I had watched the guests arriving for their evening meal. They all arrived in late model European cars. A far cry from the time, less than 50 years ago, when there was nothing but dirt roads in Abu Dhabi and the most common means of transport was camels.
But before I go any further. What about Bundanoon? The National editors were intrigued with the story about Bundanoon’s ban of bottled water. In a sub-heading they wrote: ‘Australian ban on plastic bottles unlikely to be repeated here.’ In the United Arab Emirates bottled water was big business and likely to remain so, worth about $US 350 million a year. Bottled water was seen as something of a status symbol and as all the local Abu Dhabi people were wealthy, unlike the ex-pat workers who slaved in the midday sun, buying expensive bottled water was not a problem. The National went on to say that there was a stigma attached to drinking tap water. The locals were not sure about the quality of the desalinated water which was used generously to water the public parks.
It was within the living memory of some Abu Dhabi people who could recall when access to tap water was considered to be a great prize. This was when the small pearl fishing village had to rely on local wells with brackish water, heavily salted.
Mohammed Al-Fahim recalled those days in his fascinating book From Rags to Riches a story of Abu Dhabi1. Mohammed was one of the first of his countrymen to write Abu Dhabi’s history. Prior to the publication of Mohammed’s book much of Abu Dhabi’s written history had come from non-Arabic sources, especially the British.
Abu Dhabi, the name in English means Father of the Gazelle, sits on one of the world’s largest known oil deposits. The Abu Dhabi National Oil Company (ADNOC), the chief source of the government’s revenues, works within the guidelines as agreed by OPEC. Its level of production is determined by the OPEC guidelines which turns the oil tap on and off depending on world oil prices. In October 2009 ADNOC announced that it would increase oil exports, good news for all Abu Dhabi people who receive royalty cheques from the day they are born until the day they die. Abu Dhabi was likely to oppose any further cuts in its oil production.2
This was also good news for Abu Dhabi’s flashy neighbour Dubai. Dubai had no oil and had run into credit difficulties.
The London Times reported:
‘England is deserted, Australia and New Zealand have merged, and the man who bought Ireland has killed himself.
They were designed to make Dubai the envy of the world, a series of paradise islands inhabited by celebrities and the super-rich reclaimed from the azure waters of the Arabian Gulf and shaped like a map of the Earth. It was called The World.’3
The credit difficulties of Dubai’s The World was just one of Dubai’s spectacular property developments that went bust, largely as a result of the Global Financial Crisis. The Abu Dhabi central bank agreed to bail out Dubai to save Arab embarrassment and preserve the good name of the United Arab Emirates. (UAE)
The UAE is made up of seven emirates-Abu Dhabi, Dubai, Sharjah, Ras al Khamimah, Umm al Qaiwain, Fuhjairah and Ajman, occupying an area of about 77,700 square kilometres, similar to the size of Scotland. Mohammed Al-Fahim provides his readers with a useful little map of the UAE but it does not identify the borders, especially the international boundaries with Saudi Arabia and Oman, as these boundaries are still in dispute. About 1.7 million people live in the emirate of Abu Dhabi. The total population for all seven emirates is about 4.3 million.
Pearling was what originally brought all these people together. At the end of the 19th century Abu Dhabi had the largest pearling fleet, more than 400 boats. The British were the main colonial force at the time. They had created the Trucial States, made up of some of the present day emirates, and tried to control the pearling by limiting the size of the boats4
According to Mohammed Al-Fahim, the British ruled the Trucial States in an autocratic way, relying on inter-tribal rivalries to stop the Arab people working on a united front.
Mohammed traces the British presence in the Gulf back to 1622 when the East Indian Company fleet helped Shah Abbas of Persia (Iran) expel the Portuguese from Hormuz. Britain’s interests in India were the main stimulant for protecting its presence in the Gulf. A combined sea and land trading route from India to Britain through the Gulf via Basrah avoided the long and expensive route around Cape of Good Hope.5
The British became the main protectors of the Trucial States, separating the warring tribes and stopping wars. The Royal Navy was the most powerful force in the Gulf.
The Indian revolt of 1857 saw the end of the influence of the East India Company and the introduction of direct British rule in India. The flow of Indian goods into the Trucial States via Persia had an important influence on identifying British interests in the Gulf. However the British did not have it all their own way. The Persian Government entered into an alliance with Russia. Persian traders crossed the Gulf and settled in the Trucial States bringing with them their Sunni beliefs. Among these immigrants were Indians, some of whom were British subjects. It was these Indian traders who helped establish pearling on this part of the coast and arranged to have the pearls exported to European markets.
It was during Sheikh Zayed bin Khalifa’s 54 year-rule, in the late 19th century, when Abu Dhabi became the Gulf’s most successful pearling operation. Sheikh Zayed wanted to unify the Trucial States but the British stopped him.6
The British also stopped the sheikhs importing arms and ammunition. Finally the British had Sheikh Zayed bin Khalifa removed. Mohammed Al-Fahim comments:
‘When they [the British] sensed a ruler was not willing to cooperate or when they felt he was making too many demands, they worked behind the scenes using one pretext or another to replace him with a relative.’7
During the early part of the 20th century Abu Dhabi and other coastal towns remained small scattered communities relying exclusively on the seasonal fortunes of the pearling trade. Dubai was the exception to the economic rule. Sunni Arab businessmen and traders living on the Persian coast sought better prospects in Dubai, away from the rule of Tehran. At Dubai they profited from the growing sea trade with Europe.
According to Mohammed Al-Fahim the British contributed absolutely nothing to the growth of Abu Dhabi during the first half of the 20th century. He wrote:
‘The thirty-eight years of [Sheikh] Shakhbut’s rule, which ended in 1966, were characterised by the general stagnation of the economy in Abu Dhabi, intermittent declines caused by various other factors including the second world war, threats to the sheikhdom’s borders and continuing dispute with the British.”8
The pearling industry did not provide rich profits for the locals. It was mostly in the control of the Indians. Then in the 1930s the Japanese flooded the market with cultured pearls and that was the end of the Gulf pearling trade.
Oil became the new all-important source of income. Production and export of oil began in Bahrain in1932. The industry was slow to get started. In 1935 the Trucial States sheikhs signed oil exploration agreements with the British which furthered British interests in the region but did not serve the local people very well.
The people of Abu Dhabi did not have a decent water supply system; they did not even have a school, let alone a hospital.
In 1935 the Trucial States sheikhs, including the Sheikh Shakhbut of Abu Dhabi signed their first oil exploration options with the British. With income from the new treaty Sheikh Shakhbut built Abu Dhabi’s first palace which provided work for the community up till the start of World War 11. Mohammed Al-Fahim’s father and other members of his family were employed on this project.
The British put pressure on all the sheikhs to sign new oil concession agreements. But Sheikh Shakhbut, knowing the terms of the oil agreement between Saudi Arabia and the Americans, held out for a better offer. He got it and signed a new agreement with the British in 1939 but relations between Sheikh Shakhbut and the British were strained.
After World War 11 the territorial disputes between neighbouring sheikhs continued. In the late 1950s British geological survey parties were confident that a large pool of oil was about to be found under Abu Dhabi. The people of Abu Dhabi looked forward to an imminent improvement of their living conditions. But relations between Sheikh Shakhbut and the British had not improved. He saw the local British Political Agent as an officer of a Machiavellian government intent on profiting at the local people’s expense. He was so distrustful that he was not prepared to spend the new treaty money on the town in case it was needed for an emergency.
On the 5th of July 1962 the tanker British Signal left the Gulf for Europe with the first consignment of oil ever to be shipped from Abu Dhabi. This important milestone in the community’s development, carefully noted in the British Political Agent’s report to his masters in London, went almost unnoticed in Abu Dhabi itself. The British did not tell the local people but continued to pressure Sheikh Shakhbut to produce a development plan for the town. Sheikh Shakhbut was not prepared to accept the British suggestion but he did provide for some basic improvements including the town’s first post office, school and hotel.
The pace of change altered rapidly after Sheikh Zayed became ruler of Abu Dhabi on the 6 August 1966. Almost overnight there was a new spirit abroad, a spirit of enterprise lead by Sheikh Zayed with his plans for new development. The British welcomed this new mood. Indeed Mohammed Al Fahim suggests that the resident British Political Agent might have had a hand in the election of the new ruler. But Sheikh was no pushover for the British. There was a lot of common ground between them. Both sides wanted to see Abu Dhabi provide the necessary services and facilities for the growing oil industry. But Sheikh Zayed had a different order of priorities. While the British wanted better roads, sewer and water systems and airports. The Sheikh was more interesting in housing, schools and hospitals. Sheikh Shakhbut left for Bahrain and eventually settled in Lebanon where he lived in comfort for the rest of his life.9
When the British, in January 1968, announced their historic retreat from all territories east of Suez, Abu Dhabi, along with the other sheikhdoms saw a chance of banding together. Sheikh Zayed seized the initiative but it was not until 2 December 1971 that the federation was formally formed and the United Arab Emirates was born.
Years after the federation was formed the UAE struggled to get recognition not only from the West but also from its Arab neighbours. There was no shortage of money. The skyrocketing oil prices in the late seventies, a direct result of the Arab oil boycott, brought a rich reward for Abu Dhabi’s coffers.
During the Iran-Iraq war in the 1980s the UAE was seen by both sides as a neutral power. Abu Dhabi merchants were able turn a nice profit supplying goods and services to both sides. But the 1990 Iraq invasion of Kuwait sent a shock wave through the UAE business community. Sheikh Zayed believed that the UAE could be one of Saddam Hussein’s targets. The UAE welcomed the American and British intervention of the First Gulf War. Of course such support did not exist for the Second Gulf War.
Sheikh Zayed bin Sultan Al Nahyan ruled Abu Dhabi from 1966 to his death in November 2004. He was elected the first president of the UAE and was re-elected to this post five times. Sheikh Zayed was succeeded by one of his sons Sheikh Khalifa bin Zayed Al Nahyan who is the current ruler.
Today Abu Dhabi is the capital of the UAE. Dubai might appear to be more glitzy but it is Abu Dhabi which is the cultural heart of the UAE with its great mosque, Heritage Village and Cultural Foundation.
The new owners of one of England’s famous football teams Manchester City, Abu Dhabi suddenly became a prominent dateline on many European newspaper sports pages. In 2009 the London Guardian sent its sports reporter, David Conn, to Abu Dhabi to find out what made the town tick.
Conn reported that oil still accounted for 64 per cent of Abu Dhabi’s wealth. That after Kuwait, Abu Dhabi’s ‘sovereign wealth fund’ was the second largest investment fund in the West. But now, according to Conn, Abu Dhabi was more interested in finding investments within its own borders. There were plans to diversify the economy and introduce manufacturing in aviation and other means of transport.10 Of course Abu Dhabi had a long history in boat building. Arab dhows from Abu Dhabi had been trading in this part of the world for centuries.
Sheikh Mansour, one of the late Sheikh Zayed’s 19 sons, is chairman of Abu Dhabi’s Ministry for Presidential Affairs. The Sheikh had a lot to do with the introduction of soccer to Abu Dhabi and is hoping to reach a world audience to enhance Abu Dhabi’s reputation for excellent sporting venues and support services and facilities.
Mansour owns an Abu Dhabi club and spent millions on buying players of world standing.
But the real business of Abu Dhabi is oil and gas. Australia is seen as a likely competitor. The National in its well informed business pages carried the following headline Australia heading for gas boom. The story was about the Gorgon project in Western Australia. The story suggested that Australia may yet be challenging Qatar as the world’s biggest exporter of natural gas. It claimed that Australia could become ‘the Middle East of gas.’ A league table accompanied the story which showed that the biggest annual LNG exporters were: Qatar with 29.4 million tonnes, Malaysia 21.8 million tonnes, Indonesia 19.9 million tonnes, Algeria 16.2 million tonnes, Nigeria 15.2 million tonnes, and Australia 15.0.11
Society is changing in Abu Dhabi. When I was there the local paper carried a story about the rise in the cost of food caused by Ramadan. A television cartoon character called Um Saeed had become a big hit on TV. The locally produced animated series was about a local neighbourhood with ‘four kooky grandmothers’ coping with the crises of family life. During Ramadan people watch a lot of TV usually while eating sweets after iftar. A former Al Jazeera journalist, Lalla el Haddad, had started her own blog. A one-time resident of Gaza, she is currently stuck in the United States. Her blogging is political and clearly states that women have a right to be heard.
Blogging is a popular pastime in the UAE. However most of the blogs are not political but there are questions being raised about the UAE’s 30-year development plan and why isn’t there a motor car industry in the UAE? Many of these blogs are in English to reach a global audience.
Most of the local people are wealthy in their own right, the result of regular oil royalty cheques and most of the manual work is done by imported labour.
An Egyptian from Alexandria drove me around town in his air conditioned limo. He had not seen his family in two years. He was thinking of leaving Abu Dhabi. He did not like the weather and he did not like the local Abu Dhabi attitude towards ex-pat workers. He found it patronising and self-serving.
It was unlikely, back home in Alexandria that this driver could earn anything like the money he was making in Abu Dhabi but apparently he saw the loss of income was more than compensated by what Alexandria had to offer, even if Alexandria lacked many of the amenities that were available in the UAE.
Indoor skiing and skydiving is apparently not everyone’s idea of a good time.
There was an impression, almost as vague as the heat haze that gripped the city, that Abu
Dhabi was too much of a show place, disconnected from real life. For a people who in a generation had moved from desert dwellers to occupants of high rise flats, the changes were bound to come at a cost. When the oil runs out, in about 100 years time, how many Abu Dhabi people will be ready to take their place on the factory floors and produce real goods? Only time will tell.