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$Title{Saudi Arabia
Appendix C.   Gulf Cooperation Council}
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$Author{Eugene K. Keefe}
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$Date{1984}
$Log{}
Country:     Saudi Arabia
Book:        Saudi Arabia, A Country Study
Author:      Eugene K. Keefe
Affiliation: HQ, Department of the Army
Date:        1984

Appendix C.   Gulf Cooperation Council

     In January 1981, shortly after a summit meeting of the Organization of
the Islamic Conference in Saudi Arabia, the Saudi leadership officially
announced the formation of the Gulf Cooperation Council (GCC), an enterprise
initiated by Saudi Arabia and long in the planning stage. The GCC includes the
six states of the Arabian Peninsula that have similar political institutions,
social conditions, and economic resources: Saudi Arabia, Kuwait, Qatar, the
United Arab Emirates (UAE), Bahrain, and Oman. The aim of the GCC is to
coordinate and unify economic, industrial, and defense policies. On May 24,
1981, the founding of the GCC was announced at the first meeting of the six
heads of state, which was held in Abu Dhabi, capital of the UAE (see fig. 1).

     The GCC states have a combined population of 12 to 15 million, a land
area of about 2,653,000 square kilometers, and a combined annual gross
domestic product (GDP) of about US$210 billion. Rich in economic resources and
land, they are generally poor in trained manpower and also are beset by
problems endemic to nations with (in some cases) only a decade of independence
behind them. Most of the GCC population originates from the same region, Najd
in central Arabia, whence tribal migrations propelled many of them to the
Persian Gulf coast during the eighteenth century. The GCC states must still
contend with rivalries from that period as well as new conflicts and
competitiveness that have developed since the creation of their modern states.
Because the similarities and common interests far outweigh the differences,
the notion of a comprehensive, cooperative effort appeared a natural one.

Organization and Structure

     The organization and structure of the GCC closely model the political
systems and hierarchies of the member states. Essentially, the combined
ministers of any single portfolio may function as a council. The Supreme
Council, composed of the six heads of state, is the principal policymaking
body of the GCC. The presidency of the group changes from year to year in
alphabetical order. The Supreme Council is enjoined to meet every six months,
but extraordinary meetings may be called by any of the six heads of state.
Biannual meetings are commonly referred to as summit meetings.

     The Supreme Council is responsible for overall planning, policy, and
setting of priorities. The council reviews and must approve the deliberations
or recommendations of any secondary body or committee within the GCC. The six
foreign ministers, together called the Ministerial Council, meet bimonthly but
may also choose to meet for extraordinary sessions.

     In addition to a secretary general, who has overall suzerainty, there are
two deputy secretary generals-one to concentrate on economic matters and the
other on political matters. At the council's inauguration in Abu Dhabi in May
1981, Abdullah Yakub Bisharah was announced as the GCC's first secretary
general, the head of the secretariat to be based in Riyadh. The unanimous
choice of the articulate Bishara was a felicitous one. A Kuwaiti, he had
represented Kuwait for more than a decade at the United Nations (UN). He is
known as a thorough but conciliatory negotiator who has always espoused a
supranational approach to problem solving. Because of his advocacy of Arab
causes, particularly the Palestinian issue, it was hoped that his appointment
would blunt criticism from the left. Although he is aware, as any Gulf
statesman must be, of the inherent rivalries within the GCC, he has preferred
to concentrate on the similarities. At the GCC summit in Bahrain in November
1982, Bishara noted that "the GCC is a modern articulation of an old
legitimacy for future unification.... The concept of national borders and
customs barriers are alien imports from the West."

     Initially, reaction to the formation of the GCC was largely negative. As
expected, Iran castigated its formation. President Saddam Husayn of Iraq, who
had previously sought to form a similar grouping with Iraq as the preeminent
member, was undoubtedly displeased. In view of the enormous financial
subventions from the GCC states, however, Iraq was now in an embarrassingly
dependent financial position, and any displeasure was muted.

     Both the Yemen Arab Republic (Yemen [Sanaa]) and the People's Democratic
Republic of Yemen (Yemen [Aden]) vociferously protested the formation. Each
cited the fact that only the two states of the Yemen were excluded among the
states of the Arabian Peninsula. They accused the GCC of essentially forming a
rich clique that would gang up on the two impoverished Yemeni states. Yemen
(Sanaa) was particularly disgruntled in view of its long and close
relationship with Saudi Arabia. The Palestine Liberation Organization (PLO)
excoriated the group's formation as a right-wing alliance of antiquated
political entities.

     Diligent activity characterized the GCC's first year. The Ministerial
Council met in Oman in March 1981, in the UAE in May, and in Saudi Arabia in
August. At the initial meetings, the council commissioned Oman to draw up a
study of regional security and Kuwait to prepare a paper on regional economic
issues.

     As of early 1984 there had been nine meetings of the Ministerial Council
and four GCC summits (meetings of the Supreme Council). The summit conferences
were held in May 1981 in Abu Dhabi, November 1981 in Riyadh, November 1982 in
Manama, Bahrain, and November 1983 in Doha, Qatar. The November 1983 summit
was preceded by a meeting of the Ministerial Council in which members approved
a working budget of US$25 million for the year. In addition to its hierarchy,
the GCC by that time had 238 full-time employees at its headquarters in
Riyadh.

     In the decade before its founding, there had been several attempts to
form a group composed in part of the states that would ultimately compose the
GCC. The shah of Iran and Saddam Husayn of Iraq had individually and together
proposed such an alliance at various times. In each case, the smaller Gulf
states presumed that the overture was a thinly disguised attempt at Gulf
hegemony, and they were wary of certifying, or even appearing to acquiesce to,
the pretensions of hegemony of Iraq or Iran. The proposals were usually coolly
received, although some desultory discussions did take place.

     The outbreak of war between Iraq and Iran in September 1980 provided
precisely the catalyst needed for the GCC states to create their own group.
The war itself reinforced the GCC cognizance of its own vulnerability.
Pan-Arab fellowship aside, in the opening days of the war the GCC states were
as concerned with the prospect of a victorious and possibly adventuristic Iraq
as they were with revolutionary Iran. Preceding Iraq's attack on Iran, Iraq
had been vociferous in its verbal forays against the GCC states. Sultan Qaboos
of Oman was particularly singled out and castigated for his relations with
Britain and the United States.

     As the war alternately intensified and stalemated (with no clear victory
in sight for Iraq), GCC fears of aggressive Iraqi ambitions faded, to be
replaced by a pragmatic decision to opt for the lesser of two evils. Because
of increasing GCC vocal support for Iraq and concomitant indispensable funding
for the Iraqi war effort, a considerably humbled Saddam Husayn made an
about-face, even going to far as to congratulate Oman publicly for its tough
domestic policy on resident foreign workers.

     Once committed to open support of Iraq in both cash and arms supplies,
the GCC states had no recourse but to continue their subventions, despite the
fact that overt Iranian threats against them intensified. They had, however,
purchased at least tacit acceptance from Saddam Husayn to form an alliance
that excluded Iraq.

     Mounting internal pressures, as well as such alarming regional
developments as the Iran-Iraq War, prompted Saudi Arabia to institute
discussions among those states with which it had a natural political affinity.
Saudi Arabia urged them to shelve their petty rivalries in the major interest
of mutual survival. Although the nature of the internal threats to each of the
states differed, all, to a greater or lesser extent, faced the same external
threats. Nearest to home, Yemen (Aden) was actively engaged in the training of
terrorists and was viewed as a Soviet proxy, particularly by Saudi Arabia and
Oman. All the GCC states were concerned about the level of leftist activity in
Yemen (Aden) and presumed that at least some of the terrorist trainees were
destined to undertake subversion and terrorist acts in the Gulf states. The
high level of Soviet military activities in and around Yemen
(Aden)-particularly in the wake of the Soviet loss of Berbera, Somalia, as a
major naval logistics support base-increased Saudi apprehensiveness despite
concurrent Soviet diplomatic overtures to the Gulf Arabs.

     The Soviet Union was also increasing its presence in Yemen (Sanaa), which
by the early 1980s had purchased large amounts of Soviet arms and had more
than 300 Soviet advisers in the country. The Soviets were actively encouraging
the two Yemens once again to consider unification. Rhetoric on the subject
from both Sanaa and Aden filled their newspapers and dominated political
statements. Despite the unlikelihood of actual unification, the Saudis viewed
with alarm even the possibility of such a union.

     The GCC states could not rely on revolutionary Iran as the "Gulf
policeman," and they remained at odds with Egypt because it had signed a peace
treaty with Israel. The only major power they could rely on was the United
States, but this option was also fraught with problems. Even potentially close
relations with the United States added fuel to Iran's enmity against GCC
members (providing ammunition for barrages by Iranian propagandists against
"Satanic" alliances) and generated internal pressures. Many Islamic
fundamentalists perceived the United States in an unfavorable light because of
the question of suzerainty of Jerusalem. More secular elements within each
Gulf society continued to be adamantly opposed to close relations with the
United States because of its perceived open-ended support of Israel. Thus, it
was obvious to the governments of the Gulf states that a highly visible
alliance with the United States could create a lightning rod of internal
discontent on virtually the only issue capable of uniting both right and left.

     Further, many within the GCC states questioned the altruism of United
States intentions. As analyst Joseph Malone observes: "the Arabs of the Gulf,
whose memories are long, have a propensity for comparing British policy in the
Gulf during World War II to the United States concept of a Rapid Deployment
Force (RDF) in the 1980s. . . . Despite avowals of support for conservative,
anticommunist regimes, the United States-and therefore the RDF-arouses
suspicions based upon hidden agendas and side letters."

     Another perceived threat was Israel, acting either on its own or as a
surrogate, because of "secret protocols" with the United States. When
knowledge of Israeli sales (primarily of spare parts for warplanes) to
revolutionary Iran became public, several newspapers within the GCC states
opined that an Iranian-Israeli alliance was in the offing and would be
directed primarily against them.

     Among the plethora of perceived threats, none ranked as high as the
Iranian threat, and none was more realistic. Ayatollah Ruhollah Khomeini made
no secret of his loathing for the GCC states and of his determination and
mission to export his revolution to them. The large concentration of Shia in
the critical oil-producing Eastern Province (Ash Sharqiyah) of Saudi Arabia,
as well as the majority Shia population in Bahrain, felt particularly
vulnerable. In December 1981 an Iranian-sponsored coup attempt was staged in
Bahrain. The attempt was thwarted, but the fact that the Shia elements who
staged the attempt had the confidence even to try it caused consternation
among the Gulf governments. This, when coupled with sporadic agitation among
the Saudi Shia after the Iranian revolution, starkly pointed out the need for
immediate cooperative action among the Gulf states to ensure their survival.

     Many observers agree that the major triumph of the GCC, as of early 1984
was in foreign policy. An agreement between Oman and Yemen (Aden) was signed
October 27, 1982, under GCC aegis. This rapprochement signaled, at least
theoretically, an end to the hostile relations that had characterized their
bilateral association since 1967 when the British quit Aden and Yemen (Aden)
gained independence under a leftist banner. Yemen (Aden) had sponsored the
Dhofar Rebellion in Oman and continued a campaign of subversion and propaganda
for more than a decade. Even before the formal inauguration of the GCC, both
Kuwait and the UAE had attempted to effect a reconciliation between these two
states. Also, Saudi Arabia occasionally dangled the carrot of financial
subvention before Yemen (Aden) in an attempt to defuse the situation and cool
the rhetoric. None of these efforts met with success. Insofar as the incumbent
Yemen (Aden) premier, Ali Nasir Muhammad al Hasani, was most probably the
first Yemeni head of state amenable to such an accord, it was unlikely that it
could have been accomplished outside of the GCC aegis. As part of this accord,
Oman and Yemen (Aden) agreed to establish normal relations based on
nonintervention, resolve their border disputes through peaceful means, end
propaganda campaigns, renounce ambitions against the other's territories, and
prohibit foreign troops from mounting aggressions against the other from their
territories.

Economic Cooperation

     A feature of economic development in the 1970s was the redundancy of much
of the very expensive infrastructure of the Gulf states. Within the UAE, for
example, two contiguous states, Dubai and Sharjah, built international
airports within a few kilometers of each other. Both Bahrain and Dubai have
major dry-docking facilities, although one would be sufficient to service Gulf
shipping interests. The flush of independence, the enormity of the task of
nationbuilding, and the sudden and seemingly unlimited funds to accomplish it
prompted lavish undertakings.

     Once the basics of their infrastructures were in place, the
decisionmaking elites could observe the superfluity and the unevenness of much
of their development. It became clear that economic cooperation among the six
not only would be cost-effective but also would ensure more rational and
orderly development, which in turn would promote social stability. Comparing
the GCC with the post-World War II situation in Europe, Malone notes that "if
the GCC hardly requires a Marshall Plan, it is significant that it has in its
actions supported the European view that comprehensive economic cooperation is
the necessary preliminary to political stability."

     When the GCC signed its Unified Economic Agreement in June 1981, economic
cooperation appeared desirable but did not have the urgency it would acquire
by the spring of 1983, when even the most obtuse officials accepted the fact
that a staggering oil glut was inundating world markets. There were already
joint-venture projects in place in the peninsula, most notably in Bahrain and
Oman. The richer peninsular states viewed such joint ventures as sound
investments, as well as a way to shore up stability in those states that
possessed significantly fewer economic resources.

     The financial and social success of these ventures encouraged planners
to magnify the concept of cooperative planning. Because oil revenues had been
significantly reduced, the necessity of unifying development strategies became
obvious. The hopes and, some experts say, the fantasies, of Gulf economic
planners are contained in the GCC's Unified Economic Agreement. The 28
articles of the agreement include provisions for the elimination of customs
duties between GCC states where goods have 40 percent of their value added in
the exporting GCC country (Articles 2 and 3); establishment of a common
minimum external tariff set at 4 percent and rising to 20 percent (Article 4);
coordination of import and export policies and regulations and the creation of
a "collective negotiating force" to strengthen the GCC's position in dealing
with foreign suppliers; free movement of labor and capital (Article 9);
coordination of oil policies (Article II); coordination of industrial
activities and standardization of industrial laws; efforts to allocate
industries to states according to "relative advantages" (Article 12);
coordination of technology, training, and labor policies (Articles 14-17); a
coordinated approach to sea, land, and air transport policies (Articles
18-20); and the development of a unified investment strategy to coordinate
monetary, banking, and financial policies, including the possibility of a
common currency (Articles 21-23).

     The vehicle for developing a unified investment strategy is the Gulf
Investment Corporation (GIC), which is based in Kuwait. The GIC's purpose is
to finance joint-venture projects in all sectors of the economy. The GIC is
also directed to seek investment opportunities worldwide. Working capital,
which will ultimately total in excess of US$2 billion, will be derived from
individual contributions of US$350 million-to be paid into the GIC in five
increments-from each of the six member states. On November 15, 1983, the first
incremental payment date was honored by all the states. GIC assets will be one
of the largest investment funds in the area. According to reports, Kuwait was
chosen as the venue for the GIC as a sign of faith from other members after
the near disastrous collapse of the unofficial Kuwaiti stock market (the Souk
al Manakh) in August 1982. Despite the collapse of that market,
Kuwait remained the GCC state having the greatest investment expertise. For
several years returns from Kuwaiti investments, worldwide and domestic, had
exceeded its oil revenues.

     Article 11 of the economic agreement, which aims to coordinate oil and
gas strategies, is one of the most problematic but potentially rewarding of
the articles. GCC members own about two-fifths of the world's proven oil
reserves. Because of the divisiveness within the Organization of Petroleum
Exporting Countries (OPEC), a smaller, tighter, and better disciplined
association that dovetailed production with development needs could be useful
to member states. However, because of the buyers' market that was expected to
prevail through the 1980s, some experts opined that the short-term effect on
the world's oil markets would be negligible.

     Problems existed in that the distribution of oil reserves among the six
states varied considerably. Neither Bahrain nor Oman possessed sufficient
reserves to warrant membership in OPEC. Bahrain was unique among GCC states
in that it exported no crude but depended on sales from refined products. The
degree of control exercised over total oil resources also varied considerably
from country to country. For example, only Kuwait had nationalized all levels
of the industry. The Kuwaiti program demonstrated to the other GCC states that
in the long run financial security may best be ensured by development that
would control oil from the wellhead to the point of export. Because of the
price slump of 1983 and 1984, it was also agreed among GCC members that
downstream petrochemical development constituted the best utilization of the
downstream resources; however, GCC states remained short of the refining and
processing capacity necessary to transform this consensus into action. To this
end, the GCC has approved the construction of a catalytic refinery in Oman,
the only GCC state with a refining capacity sufficient only for domestic
needs.

     Oman is also the only GCC state with free access to the Indian Ocean.
This access through a member state would relieve many of the anxieties of Gulf
governments, which are all too aware of the vulnerability of the Strait of
Hormuz to overt or covert interdiction and the resultant denial of world
markets to GCC oil exporters. The participants in the GCC summit in November
1983 approved funds for a full feasibility study of a pipeline from Kuwait to
Salalah in Oman.

     A feasibility study was also approved at the fourth summit for gas
distribution systems from Sharjah (UAE) and Qatar. It was estimated that GCC
natural gas reserves totaled more than 10.5 billion cubic meters, equal to
about 12 percent of the world's total reserves. Yet, in 1982 combined GCC
production was just over 1 percent of world demand. Another key area of GCC
interest in gas associated with crude oil production was its use to run the
many desalinization plants in the region. Closely related to gas distribution
was the possibility of a regional GCC electrical grid, a project under study
at the direction of the fourth summit.

     Other feasibility studies recommended by the Ministerial Council that
preceded the summit and subsequently endorsed by the Supreme Council included
a trans-GCC highway that would run from Kuwait to Salalah; a railroad from
Kuwait to Oman; and a strategic storage project. The storage project would
include the bulk buying of such staples as sugar and flour. In 1983 rice-a
major staple for GCC nationals-was bought in volume at a substantial saving.

     Elements of Article 12 relating to standardization were in the process of
implementation in early 1984. Saudi Arabia's University of Petroleum and
Minerals, which already had a standardization facility, was designated to
attempt to create industrial standards applicable to all GCC states. This
presented an enormous task in view of the numbers and varieties of foreign
vendors selling to GCC states. It is expected that the United States
ultimately will benefit because United States standards were the prototypes
used by the university.

Security and Defense

     By far the most pressing priority of the GCC remained that of the
physical security of its states from both internal extremism and external
interference. Concern for their security was neither irrational nor overplayed
but resulted from their relatively small indigenous populations, young
military establishments, and natural resources, which were coveted by many. An
important milestone in the direction of mutual and individual security was the
September 1981 meeting in Riyadh of the GCC military chiefs of staff-the first
instance of such a gathering. An Omani working paper on security issues
presented at the meeting was closely studied by the participants who,
according to one Western observer, agreed with most of the recommendations.
Little more than a year later, on the eve of the third GCC summit in Bahrain
in November 1982, GCC members were optimistic that a joint security pact would
emerge. Prince Sultan bin Abd al Aziz Al Saud, the Saudi minister of defense
and aviation, declared emphatically that the summit's main issue would be
"defense coordination in the Gulf for collective security." Nevertheless, the
Bahrain summit ended without a joint defense pact. Following the summit the
foreign minister of Bahrain, Shaykh Muhammad bin Mubarak Al Khalifa, told the
press, "We do not talk publicly about military aspects of our cooperation." He
conceded, however, that there had been disagreements on some issues. According
to press reports, a major stumbling block had been the possible role that the
United States might play in case of a regional emergency. The polarities of
this issue were represented by the stringently nonaligned Kuwait and the more
Western-oriented Oman, which had engaged in one joint military exercise with
United States forces and was preparing for another the month after the summit.
A related failure of the third summit was the rejection by Kuwait and the UAE
of a Saudi proposal to announce formally joint support of Iraq's war effort by
means of GCC collective contributions to this effort.

     In December 1982 Omani and United States armed forces carried out their
second joint exercise, "Bright Star," less than two months after the
Oman-Yemen (Aden) rapprochement. The Yemen (Aden) response to "Bright Star"
was much more diplomatic than was customary and focused on blaming the United
States. Radio Aden claimed that the exercise demonstrated the United States
desire to bring the region "back to the era of direct imperialism, hegemony
and imperialist control" of the resources of the region and warned that the
exercise "will undoubtedly harm the good results of the positive efforts
exerted during the negotiations" leading to the rapprochement.

     In view of the lack of an overarching agreement, the GCC chose to
concentrate on the practical aspects of military coordination and cooperation.
Proof of their determination to police and protect their own shores and
national interests was the participation, in October 1983, of troops from all
GCC states in joint military exercises in Abu Dhabi that were labeled the
Shield of the Peninsula (Dir al Jizara).

     The maneuvers involved approximately 6,500 troops, one-twentieth of the
GCC total military strength of about 130,000. According to reports, the Omanis
were the stars of the exercise. Undoubtedly, the fact that the Omanis had
already experienced two joint maneuvers with the United States gave them an
edge over the other GCC forces. Additionally, the Omani military command
initiated an award system for outstanding performance. One foreign observer
noted that the sense of solidarity was so strong that the UAE military
experienced no desertions, as had been expected. The UAE usually has no army
on Thursdays and Fridays-the Gulf weekend-when the many Omanis in the UAE's
armed forces return home. This was particularly noteworthy in that, because
of Shield of the Peninsula, the UAE forces had been on alert for 18
consecutive days.

     Future plans discussed during Dir al Jizira included two sets of joint
exercises scheduled for January 1984-Kuwaiti-Saudi maneuvers and Omani-UAE
exercises to test air defenses. At the conclusion of the Dir al Jizira
operations, Chief of Operations Brigadier Ahmad Salim confidently noted that
"the forces taking part in the exercises can participate in the defense of any
GCC country when it is the target of external aggression, without the need to
call for outside assistance."

     One month after these exercises, as the fourth summit took place in Doha,
Qatar, during November 1983, the aircraft carrier U.S.S. Ranger was positioned
in the Indian Ocean. Apparently this move was taken in response to the
escalation of Iranian threats against the GCC states during the summer and
fall. In addition, President Husni Mubarak of Egypt, in an apparent effort to
effect a reconciliation with the members of the GCC, suggested that Egypt's
armed forces should participate in an "Arab Army" to resist Iran if necessary.
A Jordanian force, reportedly sponsored by the United States, was also
proposed.

     Despite their awareness of a potential need for assistance, Gulf leaders
appeared irritated by such offers. Secretary General Bisharah responded by
observing that "gunboat diplomacy was unwanted and unneeded on the shores of
the Gulf" and that the Gulf did not need "uncharitable volunteers." He later
noted that "we appreciate Jordan's concerns over this, but it is not in line
with our policy."

     The fourth summit, which largely concentrated on economic matters,
failed-as had the third-to conclude an overarching defense agreement. A
petition to the UN Security Council did emerge, in which the GCC requested the
Security Council to secure an instant cease-fire in the Iran-Iraq War.
Presumably, the ongoing war was a major topic of discussion of the GCC defense
ministers in January 1984, but the ministerial conference ended without any
public pronouncement.

     Despite the failure to conclude a major defense agreement, the success of
the GCC military exercises and the amity that has characterized them bode well
for further developments. Above all, GCC activity relating to security and
defense in 1983 made clear, as Malone notes, that "leaders of the Arab states
of the Gulf region have begun to see the merit of Benjamin Franklin's
observation concerning the best strategy for confronting hegemonic power. His
advice was that it was better to hang together than to hang separately."

                                    * * *

     Written sources for the GCC as of late 1983 were limited to periodical
literature and press reports. Useful articles include Joseph J. Malone's
"Security: A Priority for Gulf Council" in the Journal of Defense and
Diplomacy. Two comprehensive studies are the October 28, 1983, edition of the
Middle East Economic Digest (London) and "The Gulf' 83" in the Far Eastern
Economic Review (Hong Kong). The single most useful overall study is John Duke
Anthony's "The Gulf Cooperation Council" in the Journal of South Asian and
Middle Eastern Studies, Summer 1982. Anthony's work is particularly useful
because he is the only Western observer to have attended all four summit
meetings. (For further information and complete citations, see bibliographies
for chapters 1, 4, and 5.)

January 1984