January 23 — January 29, 2017
▶▶Riyadh fails to check Iran’s regional influence
▶▶“It’s hard to describe this Saudi intervention as a success”
In Yemen, a country of about
27 million people, more than 10,000
have been killed or wounded since
the Saudis intervened, according
to the United Nations. The elevated
number of civilian casualties has
prompted some of Riyadh’s Western
allies to review or halt weapons sales
to the kingdom.
The Saudi government hasn’t disclosed
the price tag of its Yemen war
or the extent of support for opposition
fighters in Syria. But the conflicts have
been a burden at a time when slumping
oil prices have sapped the kingdom’s
coffers, forcing unaccustomed austerity
on the country. Cost-cutting, including
a 20 percent salary reduction for ministers
and the suspension of bonuses
for government employees, pushed
That Saudi Arabia has better weapons
than its enemies in Yemen is no
surprise.
That one of the richest Arab
countries is nonetheless struggling to
get its way in one of the poorest is.
“From the start of the war, the threat
changed and increased,” said Saudi
Colonel Massoud Ali al-Shwaf on Dec. 8,
adding that his border guards come
under regular attack while patrolling
the frontier along Saudi Arabia’s Najran
province, where mountain ravines and
desert expanses make it challenging at
the best of times to stop infiltration and
smuggling. “We have the casualties to
prove it,” he said.
Saudi Arabia’s youthful leadership
has vowed to translate the country’s
vast oil wealth into regional clout, but
there’s little evidence that strategy
is
succeeding. The Yemen war grinds
on; in Syria, Saudi-backed fighters
were driven out of their stronghold
in Aleppo; Egypt, kept afloat by
Saudi Arabia’s dollars, has sometimes
seemed reluctant to fall in line with
Riyadh’s foreign policy.
The Yemen conflict wasn’t supposed
to drag on. Saudi Arabia intervened in
March 2015, at the head of a Sunni-led
coalition that’s launched intensive airstrikes
and deployed a limited number
of ground troops. It’s trying to reinstate
the Yemeni government, which
enjoys international recognition yet has
lost control of the northern part of the
country, including the capital, Sana’a,
to Houthi rebels. The Saudis say the
rebels have ties with Shiite-ruled Iran,
the kingdom’s chief regional rival.
Global
Economics
A hospital in
Haradh, near the
northwestern
border, bombed
by the Saudi-led
coalition
The War in Yemen Tests 12
ASMAA WAGUIH/POLARIS (2)
Divorce, Theresa Maystyle
14
Move over, I want
to be president of
Brazil, too! 15
Quebec is having
a moment 16
Graves of Houthi
fighters in the
northern city
of Sa’ada
down economic growth to 1.4 percent
in 2016, according to the government,
the lowest since the recession in 2009.
The value of Saudi assets abroad has
declined $200 billion in the last two
years, central bank data show. Requests
for comment from the Saudi Foreign
Ministry weren’t answered.
“It’s hard to describe this Saudi intervention
as a success,” says Stephen
Seche, a former U.S. ambassador to
Yemen who’s executive vice president
of the Arab Gulf States Institute in
Washington. “The Saudi bombing campaign
has not managed to bring the
Houthis to their knees. It has inflicted
enormous damage on Yemen’s infrastructure
and enormous suffering on
the people of the country.”
The war began just as Prince
Mohammed bin Salman, the Saudi
deputy crown prince and architect of
an ambitious plan to wean the economy
from its dependence on energy exports,
was emerging as the most powerful
royal. Billboards in the capital depicted
fighter jets flying past portraits of the
31-year-old prince, and state TV broadcast
military maneuvers. Such propaganda
is rare now. Nevertheless,
“support for the Saudi intervention and
the war in general does remain high
among the Saudi public,” says Fahad
Nazer, a political consultant to the Saudi
Embassy in Washington, though he
doesn’t speak on its behalf.
Saudi Arabia says it’s fighting
to halt the spread of Iranian influence
in the region. Yet the rebels in
Yemen—whose connection with Iran
is disputed—still control much of the
country. In Syria, President Bashar al-
Assad, an Iranian ally, is recapturing
territory from Saudi-backed Islamist
groups. Even within OPEC, Saudi
Arabia’s U-turn in November, agreeing
to a deal to pare production, won’t be
followed by Iran—which is authorized
by the accord to boost its own output.
The Houthis are tough opponents:
They have a reputation as skilled
mountain fighters, often fueled by
khat, a mild narcotic, or amphetamines
and whiskey. The rebels aren’t
the only threat the Saudis face in
Yemen. In the south, which the Saudibacked
government and its allies still
control, Islamic State and al-Qaeda
pose a growing threat. An Islamic
State suicide bomber killed more than
50 soldiers in the southern city of
Aden on Dec. 18.
Saudi allies are expressing unease
about the conduct of the war. After
U.K. lawmakers urged a review of their
country’s weapons trade with the
Saudis, the kingdom announced on
Dec. 19 that it will stop using Britishmade
cluster bombs. The U.S. moved
last month to halt some arms sales.
Instead of providing Raytheonmanufactured
missile guidance
Tests Saudi Arabia’s Clout
13
systems, the Americans will focus
on helping the Saudi forces improve
their targeting. And in Canada, Prime
Minister Justin Trudeau is under
pressure
to cancel an $11 billion deal
to sell the Saudis combat vehicles.
Then-Secretary of State John Kerry,
who visited Riyadh in December, said
it’s urgent to bring the Yemen war
to a close. Yet there’s relatively
little
international effort in that direction,
in contrast with the multiple
though
largely unsuccessful
attempts at
peace in Syria. “I am certain many in
the Saudi leadership have sleepless
nights on Yemen,” says Paul Sullivan,
an adjunct professor of security
studies at Georgetown University
in Washington. “War is hell, and
Yemen is an especially bad hell.”
Glen Carey, with Nafeesa Syeed
The bottom line The war in Yemen is a costly
distraction for Saudi Arabia, whose economy is
feeling the pinch of austerity measures.
Brexit
May Spells Out Her
Ambitious Wish List
▶▶Tariff-free trade? Yes. Unlimited
immigration? No, no, no
▶▶Retaliation “would not be the act
of a friend”
In her much anticipated speech on
Jan. 17, U.K. Prime Minister Theresa
May laid out in detail her agenda
for Britain’s departure from the
European Union. Among her aims:
lock intariff-
free trade with the EU,
quit sending large sums of money to
Brussels, clamp down on immigration,
and restore lawmaking powers to
British politicians and British judges.
Instead of the EU membership
that evolved over four decades, May
told an audience of European diplomats
in London, she wants a “bold
and ambitious” trade deal with the
bloc. Her ideal accord would allow
tariff-free trade between Britain and
the EU, while she would secure the
freedom to strike new pacts with
other countries.
London-based banks
would still provide services across
the continent
without bureaucratic
movement of EU citizens across
the U.K.
On first impression, May’s speech
was a success. Having dropped in value
before her address, the pound enjoyed
its biggest gain against the dollar since
2008. Business leaders praised May for
giving the clarity they need to invest.
The Brexit blueprint puts to rest
recent suggestions that the prime
minister should be dubbed “Theresa
Maybe” for being too cautious. It also
appeased the pro-Brexit lobby of Tory
MPs that engineered the downfall of
her predecessor,
David Cameron.
The ultimate verdict on May’s strategy
could be years away. Only when
the final details of any U.K.-EU trade
agreement
are clear, after as many
as two years of discussions, will it be
possible to evaluate her approach.
Everything rides on how the EU reacts.
While the U.K. wants to be “
reliable
partners, willing allies, and close
friends,” it will also fight back if the
EU decides to punish it, May said.
Retaliation “would not be the act of a
friend. Britain would not—indeed we
could not—accept such an approach.”
The prime minister notably didn’t
spell out what she would be prepared
to do in the event a deal can’t be
reached. She did talk about cutting
business taxes radically and attracting
the best and biggest companies away
from Europe to the U.K.
She also implied that the current
collaboration on security, intelligence,
and the armed services could
be reduced, an outcome that May suspects
would hurt Europe more than
the U.K. She mentioned Britain’s highly
regarded intelligence services four
times in her speech—as often as she
said the words “customs union.”
A big question is whether May is
repeating the mistakes Cameron made
in last year’s referendum. Just as he
underestimated the willingness of
voters to risk economic prosperity in
exchange for gaining control over lawmaking
and immigration, May runs
the risk of failing to see the importance
to Europe of protecting the EU
as a political project whatever the
cost. Europeans in this camp want to
deny her the trade deal that she says
would be best for both parties. They
say Britain must be made to pay a price
for leaving, so other countries won’t
be tempted to follow it out of the bloc.
barriers and would get time to adjust
to the new order.
May would like to achieve her wish
list in the two years allocated for
divorce talks, a timetable that may
not be realistic given that any trade
pact would need the signoff of all 27
EU members. Failure to get what she
wants would mean her taking the U.K.
out of Europe with “no deal” at all,
she said.
This is bold talk. “One might
expect a successful negotiating strategy
to have ambitious objectives
and a credible
fallback position,”
says Malcolm Barr, an economist at
JPMorgan Chase. “May certainly has
the former, but we doubt the prime
minister has the latter.”
To those in Europe who think May
is asking for too much, she argued
that agreeing to her terms would be
“economically rational.”
Britain is “a
crucial—profitable—export market” for
their companies, she said. She warned
those who want to punish the U.K. for
its decision to leave that they would
be committing “an act of calamitous
self-harm.”
Such a tough approach carries risks.
It will almost certainly trigger a battle
between the prime minister and pro-
European members of Parliament
who are concerned that a hardline
approach to Brexit negotiations
could wreck the British economy.
She sought to deflect their attacks by
promising a parliamentary vote on the
final agreement—although her aides
said a vote against a particular deal
wouldn’t derail Brexit.
The shape of the final agreement
ultimately won’t be up to May. It will
be the views of the other member
states, molded by the hands of EU
chief negotiator Michel Barnier, that
will be decisive. The EU, in the end,
doesn’t have to offer the U.K. a new
free-trade pact.
EU officials welcomed May’s
statement
of specifics, while repeating
their long-held position that they
won’t enter negotiations before she
formally initiates the exit process
by invoking Article 50, which starts
the clock running on talks. The EU
leadership
also made clear that the
U.K. won’t be allowed to enjoy the
full advantages of membership in the
union without accepting the responsibilities—
most important, the free
14
Global Economics
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