Created: 4/24/1987

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Near East and South Asia Renew


Refaklag the CoUn


Economic problems haw: complicated bet not halted PcSideni Assad's campaign lo attain strategic parity with lsrs_el._For the foreseeable future, Syria's ability to retake the Golan Height* will depend on attaining strategic surprise enabling it tooncerted attack before Israeli reserves sum arriving in force!





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A^bal Pradesh,cs,mportant becau* |U

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such significance thaimplicatiom are worth considering even in ihe absence of clearIn tbc volatile poiUical climate'W the Middle East.

' able events art of lea the role rather

Anb League Secretary Ceneral Klibfsonferencepril asserting an Arab comcniui in' 'if'* favor of Egypt's return to League

hough il represented atmospherics rather than"action nevertheless highlights in iraponaot) -cvoluiion in ihc political climate of the Arab world.tformil reintegration Is already well along, capped by President Mabarsks sacctufal performance at thc Islamic Conference summit

lag In Kuwait Lail Jsnusry. High-level visits and pkdees of aid followed, eaC mow notably. Saudi cfipcts toormal Arab League summit mccliag thai' will reinstate Egypt's membership were resumed.

A formal process of reacceptsnce will requite many more compromises sod painful trade-offs. Moreover, tow theccomplished will affect the final outcome.rend is evident that could

ultimatelyide range of US interests in the

Middle East.

I IS- Bilateral Hdittoes Iflucceeds In obtaiaiaj substantial economic assistance from tbe Calfa dependence on the United Stales for economic support could be reduced.

ire has

already received appro>irtntely It billion in aidGalf Arabs since lasi summer, withai much aspromised over thc ncil year. Arabalso boost Egypt's military lies to the WestCairo lo pay for advanced USand West European systems neededi'11'


Egyptian readmrisMfl into (he Arab League would funber boost Mubarak's siaiure as an iadcpcpdcni Arab leader and quiet domestic critics who have harped on their cour-try's bobiion from other Arab sum and ovtrdcpindcnce oa Ihc United States. Il would end an eraelation for Egypt that made both Sadat and Mubarak targets of Kasiriti end Other left-leaning political copeacau of which many remain in the Egyptian bureaucracy and elitewell as Muslim fundamentalists, who represent the regime's mostmass-based opposition eJMf (jg

Arab-Israeli Caefuct

Egypt's rcadmission to lhe Arab fold on its oweits commltmeni to Camp David In fullstrengthen the moderate Arab consensus ia favor of peace negotiations. The Arab-Israeli conflict appearsave receded In significance for the Gulf Arabs, paling In Ihc face of threats from Iran, whose brand of revolutionary fund* men ischallcngcs (he legitimacy of all (he Galf monarchies. Moreover. Egypt has demonstrated thai peace with Israel can work for both

Egyptian support for Jordan's King Hussein, lhe only Arab leader who has been willing to risk preparing lhe groundwork for peace negotiationsnd. aad Mubarak's effortsromote reconciliation between the PLO and Jordanositive contribution to building aa Arab consensus for peace, Egypt also brings with it unique aaeerieacc ia peacemaking with Israel thai could prove useful In working out lhe modalities of peaec-iahts. aaaV

ArabJ Gu'f Hates seek reassurances that Egypt will asabt themilitary crisis and hopeniied moderate

.Arab group cania tueuil supporting Iran.nified Arab rwriiuia againM Iran nu> not change Tehran'* wartighiieg stratcgt crjnuncjlii.ilrcaaotv an unporisai ricrueaiina'l urobilin lo caruoil and justify ihr *ar. Ii 'mi|ht alio discourage Iranian, meddling in Lebanon.

ItaelacaJ-MeeVal* Basaece* la Ike Mkkttr EeW

Eiypt'i reiurn lo Ihe Arab foM could signif* anil) diminlih (he radical Arab states' influence on regional baud. Syria hat beca able lo captoit Egypt'i absence from the Arab League quite aueceasfally. plarinf ap its stand as thc leading conlroruanonmajor claimrestige in lhe Arabcipioltlng iu ability to intimidate Ihe wealthier, bat weaker Golf Slates. Because Arab League decisionmaking has an informal requirement for consensus. Syria, together with frequent allies Libya. South Yemen, and sometime ally Algeria, hu been aUe ioeio on every son of important resolution.

proicciioa for lhe Gulf Mate* would be ugniftvani in light of Itt sire and its hiMurital roleati p. "luteal aad cultural Icidcnhip enaase


The realisation of lha iccnarto would require tunic tught> improtubte eventi lo occur, bettKe Middle East, dramatic skills are not rate. In this case. Syria and Saudi Arabia would haw to play key roles. I

it is conceivable that Syrian President HaBr al-Assad might go along with the moderate Arabs and tolerate Egypt's rctera to ihc Arab League if:He calculates that Syria's economico

desperate thai it threatens thc survival of his


He is satolicd ihat Mubarak will not embarrass him by playing ap Egypt's Camp David lies.

He becomes fed up with Iranian Interference in Lebanon and fearful that Iran Is close to victory over Iraq. fjpaaw ^

Syrian acceptance ii the most problematic factor because ll would run counter to Assad's previous hard line. Moreover, Syria has benefited aujaea. from ft| Egypt's absence from the Arab League aad has wielded disproportionate influence, enhanced by Iraq's preoccupation wiih Iran. Egypt, Iraq, and Syria hare traditionally been thc leading Arab powers.

Egyptedged player, Syria's ability' to'


economically hardalso have to be willing toubstantial financial price to Assad for dumping Iran.

iniimidatc the Gulf stales aad thc immediacy of lbc Saudi Arabia weuVJ hare to break wiih its traditional Iran,in threat could be visibly reduced. The Arab VS -low-key approach aad be willing.-io adopt higher League might become an institutionositive'isibility lhan ii has in recent years, most notably rote in facilitating united Arab positions, decre* sing ainee King Fahd'i frustrations In inter-Arab tens torus, tad coping with eilcmal ihiraU^'agreement3uch as the uaresolved Arab-Israeli conflict aad Iranian advent arisro ll might also be better equipped to influence the Iraqi paih of poaiwir dcvckiprncal lo' ensure continued moderation. ejajajt,

- "jtai

Egypt avigkt abo beto help lhe Galf stales with domestic security threats as well as step up its assistance to North Yemen, where ll has long had

iI -whet Ar.h- Kill ahojaffccif reinietraiioethat Egyptian rjradmitiance

prejudice .the Palestinian struggle to wring iultvllKVMy Ktlhctnrai from Israel The Pa lewould have to findwayccept Egyptiannd ratie Cairo's Camp lies. Theremainingagueuldewkh lhe

I annuel of Rcaeealuioe ee Egypt

Given Mubarak's insitlcnce thai lhe Arabs accept Egypt on its own terms, he is not likely to make orascrssjrBW in ret era for rciaauieaacM. He has always maintained ihai theed Egypt more lhan Egypt needs Ihc Arabs. For ihcir part, the moderate Arabs appear ready lo accept Egypt without troublesome strings. They want guarantees about Egyptian security assistance for thc Gulf and seem willing so accept Cairo's vague promises,s not clear how much they will be willing to pay.

Moderate Arabtates Arab lucecal In unifying in preparation for peace (alksovouldeavy onus on Washington and Ttl Aviv to be prepared to go forward. Relations with the United Stales might be endangered if lhe Arabs perceive thai Washington is not prepared to follow through on Its commit menu to facsMiaic progress toward peace ia'lhe Middle East aad support moderate elements in the region. They will regard US readiness to bring Israel into negotiations alongside Paksuniaa and Arab panidpaauest of US inic | ejajpji

Second. the absence of an active US effort toull-fledged peace process to include all affected parties would leave the field open to Moscow. Moscow would like to be regardedey player by virtue of rts statusuperpower allied with Syria

and the PLO and ils diplomatic support for Ihc Arabsrael, and it couldiler .olc if it

"raTn'n> indBdrf'

Ww ihat if the, aa jointly, they can contain am Soviet efforts al mischief ma king during peace negotiations tefjuaa

Also. US attitudes and actions regarding ihe Iran-Iraq war will be carefully watched, especially after ihc revelations about US military aid to Iran. The Gulf Arabs need thc promiseS security umbrella sad expect it to be there, if only because they perceive security for oil capon routes to be ia the Western Interest. They recognize that US strategic interests auy require contact with Tehran, but they fear the full impliestions cf an Iranian victory over Iraq are not appreciated sn Washington. Thc United Slates ran gain mucheassuring perfceaunce ia is SKI aaaaaaVwL

Egypt win abo be loosing lor US actions Ihat indicate that Egyptian and moderate Arab interests are being taken into account la Washington's policy deliberations. US statements and actioes caa make ii easy or difficult for Cairo to play the role of moderate balaacer In the Arab world. This dees not mean thai the moderate Arabs win aeocssarily judge Washington on how it lives up to Cairo's often unrealistic eipcctat* faced with similar eapectations. Rather, the Arabs win expect lhe United States tolear appreciation for the rilal role that regional factors play in ficiliuiing or obstructing fundamental Arabpeace and.economic development In the Middle Ess).



ilitary Cooperation and Commitment

Miliijr> coopceaKoaTunrsu and France has historical, cultural, and economic roou thai date tuck to tneh centur) when Tunisiarench peotccioraic. Dwriag (hn TS-)car period. Tunisians served la the French armed forces. fi|hiin( in both Worldnd II. and after Tunisian independence6 the French helped the Tunisians form their own armed forces. Since then. French military influence has continued primarily In the form of military assistance. The influence of years


o( French rnUJtsry tradition and assistance can be seen today in virtually all aspects of the Tunisian armed forces XWmW

Despite this loni militaryo formal defease pact or security agreement between (he two countries. Tunis depends oa French military astlitance and friendly relations to help it maintain credible deterrence agalast bothTniernal and external threats, shortull-icale invasion. Under Preaident Botirgtiiba; Tonui hasodest military establishment with limited combat effectiveness. Yet compared io the other North African militaries, particularly, Libya's, the Tunisian armed forces are both greatly om in umbered and undereciuipped. This military disadvantage has forced Tunii'to depend ultimaicly on several Western powers. Including Fraaee. lo guarantee Ha security during regime-threatening crises. Tunisia's requests for military support and assistance from France during past crises, such as the Libyan-backed raid on Gifsabe

cspuUion of Tunisian workers from Libya ia IttS.

and the threatibyan invasion following thc US

alrstrike on Libya last year. Illustrate ihis

depc ndency.

Tbe Frenchack Agreement Tunis traditionally has sought assurances from Paris that il would emend military support during crises that threatened Tunisian security. Paris usually has responded cautiously with public statements of support and limited military moves gfnjjaa>

Tunisia relied hearily on French support during tbc most serious external ihrcat the government has facedlhc Libian-oacked raid on GaftaO.

When Tunisti^iroM with Tripoli over Libya's expulsion of eapairiatc Tunisianhe summerunis again sought French assurances of miliiary support in response to possible Libyan military reactions'


ay reiterated its friendship and support andaval vessel off ihe Tunisian coast.

Following the US airstriTe on Libya in AprilPrime Minister Mtali met witharis"er in Tn nis tosupport in ijiccvemibyan

_ sirac publidy suted (hat1 France considered Tunisia an "ally" and would stand by it if it were the victimlear reference to Lli

Military Cooperation Since independenceaimed forcorelied on French militarylo help Ihem doctor andredible deterrence. Thi* hi>irjiaing b> French inuntcioo ja both Tunt.ii and France. joint military derate*. urchase* of Frewrhartns aad rqaipmcni and grant aid from Pam. More visible, bui less laaglbk type* of cooperation hive been high-level visiu and naval port calli. Although thc level of French military isslMince to Tuniila hat declined over the

Tba training of Tunisian miliury personnel by French instructors has been an important aspect of French military aubtai

training ranges from advanced courses War College to basic maintenance courses.

One aspect of French military assistance tohas declined steadily since the beginning ofhas been arms sales.bilityarms from the French has been limitedboth Tunis and Paris.major Tunisian purchase of French military ocrv"TO toilibe Three

CombatiantcEacectwere delivered In IMS. The only subsequent agreement came the following year and amounted to less than SI million Tg'gVaTageYafg'ggW^

important area of cooperation has been joint Tunis, however, is still interested inwhich provide valuable (raining experience equipment from France despite itsiheproble

Yd another ckrneul ofersch|mitilan cooperationhubeen faMyir, nuii ihai are primarllj symbolic eknsorb^raiions'af -political tospoQ- They alrnoR always increase'duringcrisis. Over lhe pail several years French vbitort have included thc Army and Navy ChielYofhc Oircctor ca* Uternal Intelligence, and Use Chief of Naval Operations. For their part, the Tanssiim often make return calb'

at aa opportunity to show tbe flat, French ship visits provide an opportunity for Joint naval exercises, and,risb. French ships haveolled thc Tunisian cwsi.^njjjjgsj* nbian ships have alio visited


cornerMone anda force for moderation in lhe Mediterranean basin -almost ceriainlj assureontinuation of cooperation, although economic constraint* on both sides will limit programs. Likewise. Tunisia's reliance on France during threats to its security and France's strong commitment to Tunbia's security also should coniinue. even in thc post-Bourguiba era. ic mi


Parh. aaswBsaaaas^wantsaintsln influencebyigh-level presence _


financial support sad be preparedakegestures, inch as naval deployments.Tunisia of France's commitment to itsto warn iu neighbors, particularly Libya, against wild

ecessary toeaceful, moderate transition in Tsnisla. including increasing its aid and tillury presence to demonstrate support for. legitimate govcrnmeal

Paris, however, would be reluctant lo meddle openly in thc Tunbisn political scene and open itself to charges of istoceionlalisra. If Tunisia called on France for defense against outside aggression. France probably would commit troops, bul only if tbe advent of an unfriend'; government seemedle "sdJJJJJJ(0

post-Bourgu Ibn government willro-West or at lean nonaligned orieniation and will continue to look to Parb and other Western powers for assbuoce anduarantee of its security. It is gcasibkew Tuwrsisa leadership weukd try to lessen bt dependence oa Fraaee by tarstinf to otbti fanuiua rations aad pouibly noaaligned ration, bat this ooukl not be done overnight. Tunisia's long relationship with the French miliury and government would make it dilTtculi and probably cosily to end the relationship.

Tunisia'! miliUry relationship withnlikely to change significantly in* the immediate future. Tunb's longstanding reliance on Parb for miliiary assistance and Tunisia's strategic importance to iheviews Tunisiatrategic



President Aasad would go to great lengths toopeningecond front against Israel, butof Egypt and Jordan from the, ranks ofstates probably would not deternueking Israel alone. The-ebsenee ofgive Damascus wide latitude in developingplan and probably would Increase thc oddasurprise.esult, Syria would avoidof alliance politics that hampered theand might enhance Its chances ofGolan Heighl "


According to ahaTatggkTaBr ^nis by;

military eipens, Syria planned toimited miliury victory over Israelhereas Egypt wanted toolitical victory by'crotslng the Suez Canal andimited amount of territory in the Israeli-held Sinai Peninsula. The process of reconciling conflicting strategics and coordinating moves led Damascus to nsodify ha plan of attack. In respottte to Egyptian pressure. Assad agreed to move Ihe atari of the assault from dawn untilcresting* of the canal bui reducing the daylight available fee his forces to press Iheir initial assault. Possibly because of growing distrust of Egypt and fear lhe offensive would fail. Syria decided io remove one of Its two armored divisions from the second echelon and kohl it as pan of its strategic reserve. Damascus aho elected to forgo

hclibornc awauli, lo bridge, over ihc Jordan River and prevent the Israeli* from reinforcing ihcn

Since thc Israeli invasion of Lebanonamascus has revised its strategy.

Iheir on-again, off-again talks with Prcsideni Cemnyel and other Lebanese leaders, lhe Syrians have sought an agreement that would legiiimizc Syrian direction of Lebanon'solicynd control of its armed forces. Damascus abo has sought to enhance lis control over radical Shia and Palenintan.


Although President Atud has nude great strides in buildingorces in ibe last le* years, he generally weighs risks and bencfiu carefully and almost certainly seta an stumps to recover the Golan Heightsold gamble. Assad would prefer to regain this territory peacefully, bat he almost certainly perceives the odda are slim that meaningfol talks will ewer occur. Despite Syria's economic woes. Assad probably tecs the use of militaryat least the threat oj militarybis only viable



aim. to be a

-rv.r- naie by supporting political^ and

materially aon-Israeli resistance in Smith Lebanon, bui Damascus'! long-termrobably reared moremodulating violence in the south than stabilizing or inflaming the security) sit lutlon along tbe Lebanese-1tracli froaiicr. Thepolitical reals of the various resistance groups have frequently pilled ihem against each other and .in scone instances against Syria. Despite iheir ostensible common goal to Oppose Israeli occupation. Da ma sees has sought lo eliminate or contain groups such as'thc PLO and Hizballah whose agendas dearly conflict wiih its own while actisely promoting allies and surrogates such as Amal aad the Lebanese leftist group*.LfjL

of lateral wiihremove

PLO fighters fromsmucus the option to asc direct miliiary force to - rafat supporters ihcre. Fatahlourished in the no man's land between Syrian and Israeli feces and ia perceived by both sides as perhaps the great est menace to their rapectivc security interests. Damascus willry to pass the mantle of Palestinian resistance to pro-Syrian Palestinian groups whose activities it can more easily control and whlchii can use against renegade Lebanese militias in lhe soulhaajgaMa* klmfjtL

For now. Damascus probably does not expect toermaneni military presence in the south, which Israel in any event opposes, bet Syria win attempt io maintain loose control over lhe militias that operate Ihcre. Limited Syrian control allows Damascus discretion in directing and controlling Lebanese retina not against thc security rent white lhe groups' seeming autonomy insulates Syrian forces from retaliation by Uriel Syria closely idealities itself poliiically with the res it la nee to garner prestige among its fdlew Arabs as the champion of frontline confrontation wiih Isrirlaai

vee le Syrian Eye* Syria believe* thai ii- strongth the Lcbanoc (distance legitimize* its claim that it stand* alone among the frontline slates in confronting Israel, albeit by proxy. Syria has taken an increasing role in orchestrating thc activities of resistance group*,militias in thc Lebanese National Resistance. As the Syrians rccsJaMbhcd iheir preeminence in LebanonJ-SJ. leaders of most leftist militias accepted the practicality of tubordinaiing their inlcrcsts to Syria. In exchange for their loyalty. Damascusecure source of arms, mining areas, reduced vulnerability to larger naflitiaa.reaier rokeconstituted

Syrian propaganda has capiulltedTTbamascusV

: . waWaWaWaWaWaweT^ Suicide liraeli and Armyofposiiions in reccni years haveby videotaped broadcasts bvin which tbey praise Assad's leadership

A substantial segment of resistance in lheperhaps theoutside Syrian control, however,hough DijQaicus formally endorses itshe Is rich -epiu rolled neurit) zone, its growthhaIlengeJoSyria's goats at Lebanon. Fatah forces loyal so Yaair Araftl and pro-Iranian Hiiballah mililias in South Lebanon maintain political agendas that conflict with Syria's and have publidy disassociaied their accomplishment! from

ttunrit Rciiuancrin the South

The Lebanese Notional Resitlance -atroup io emerge la2 with lhe purpose of undertaking resistance operations against occupying Israeli fortes. The Communist Action Organisation and lhe Lebanese Communist Parly were Ils founding organisations. later Joined by lhe SSNP and lhe Arab Socialist Action Party. Initially theie groups coordinated theirsmall-scale guerrilla attacks and carIn theears ihey have generally operated Independently.24 Amal elements participated with the Lebanese National Resistance In many operations, hfany groups In the Lebanese National Resistance have also coordinated operations with pro-Syrian Palestinian groupsabrngay-

The administration and operations of many groups In the Lebanese National Resistance have Increasingly come under the sway of Syria as It has reasserted Its

These groups have also sown discord

among some of Syria's tdociani Lebanese allies who"*'resent Damascus'i suzerainty,aa j|

Reordering lheH

Syria's Inability to project miliiary force intoto Israelicreatedof liabilities for

Fatah fighters evicted from the south andfter2 Israeli invasion have slowly rdnrtltrated these areas following (he Israeliithdrawal to the present security zone-esull of Ihc Assad-Arafat estrangement, these fighter'.

olitical and military obstacle to Syrian efforts to impose its security plans and political reforms in Lebanon. Thc PLO has also antagonized the Syrians by seeking alliances wsuh Lebanese groups thaihavf long chafed urnier Syrian domination. Syria's attempts ttrooit the PLO through iu main Lebanese ally Amal have been largely Ineffective, They have strainedelations with moderate Arabs and the Sovieu and damaged the credibility and prestige ol Amal among segments of its leadership and its Shia constituency.

n areasnd the Be

io| OM

provides feiiik

pruftferatidnjofmiliume HiibaUih.>Theeel* anseng Shia* in (he south.

advocating an Islamic republic ihai undernames "iSyrian" effort* loecular political order in ILebanon which it can more caul) control iajtlire. Amal hasopularity among the Shias of -y the (outb ia pan becausedeuiiocd so cscecty "i wkh*Syrian rniereau and abo became Hizballah hai been more militant in lu oppositionsraeli ocoupa lion ajjfnaajB

Rcdliac AgTceeaents LWihri, Syria's move Into West Beirut in7 and its partial craikdown on Hizballah and Palestinian dements have raised expectations thai Syrian forces will head south io chsllenge ih< PLO presence In

A more comprehensive, although much leuutcome of identifying red lines for (he purpose ofsatisfying the two countrics' mutual interestsearge-scate deployment of Syriao troopsresolve ihc dual problem of PLO infJuation aod_ llirbjllah growlh.1

Abaeaonlui the luuelikels

tf Syria belle e*e- idimity

rootvingprubkni* in thc south, it may cunudci ttolaiing the south and consolidating Hi gauw throughout ihe rest uf Lebanon.nise cuuld hate tbc fettering benefit

The Syrians could lbc south fruan lbc real of Lebanon in ihc hopeatbey of neglect will hare painful repcrcuuioes for Isradi security interests.ivorcing itsdf from responsibility for thc south. Syria may hope to Insulaie Itself from reUliilton for vsokoeejpilling over inio northcra Israd.f-

Syria can put distarsce-between itself and the turmoil in the souifa. while maintaining order throughout the rest of Lebanon, it will lend credibility lo its claims (hat itlabiliring influence in Lebanon. Moreover. Ihc Syrians may be able to trade cooperation on security in South Lebanon at any future peace Ulks with Israel for

. concessions elsewhere, specifically tbc Golan Heights.

On the other hand, isolaiing theifficult in practice and would have these liabilities:

(he south would undermine Syria's image as (he patron of Lebanese resistance to Israeli occupation.


and preventing thc infiltration of Hizballah into ottterTSlia areas of Lebanon would be Impossibleubstantialiy greater Syrian miliury presence. Hirballah and/or the PLOhe power vacuum in the south by eliminating pro-Syrian miliitat and possibly use the southtaging area against Ihe Syrians.


ic a* riant i


wteuateny for ibru> cwruwragc other

limiiir term* from lh( S> riant 'j'

Israeli and ASL frictions with UNIFIL soldiers strain) Td Aviv's relations with the United States, since jj member rations coniributlnj io UNIFIL are dose US i

a-hmi;[- ' yria wiU continueunxxi ihe esicrtMun of lhc UNIFIL mandate and probaW>oo ihai onreater dcicicni to Uracilhan io Lebanese


For now. Syria appears to be seeking thc middle -where II can use surrogates to fight lis lathe south whileecree of

gainst the i

supplying arms lo Ama| io carry out an assault on the' 'i PLO in Sidon. Amal lis also stepped up attacks against tbe security rone to reassert its credentialsajor player in Lebanon. .As Syrian pressure. .mounts in Beirut. Damascus will probably encourage' both Amal aad Hizballah to redirect their militant

Damascus wanls tu control events in the south to the casern thai il can direct violence against the securit) tone without It spilling over into S> run-controlled areas. Syria williiaia ihb control in part b> promoting its surrogate Lebanese and Palestinian militiasounteract lhe power of resistance renegades (Fatah and Hirbanahl. With such control. Syria would have Ibe optionraw Israel Into conflict In South Lebanon al any time of Assad's choiceerail peace efforts that Syria does noi

intascus probably hopes to simultaneously project an image as peacekeeper through its efforts to broker political reform among Lebanon's feuding fact iocs.oJQfl^

ctMurctctiou activity curtailed demand for Bahrain'* aluminum industryey source of job* and GJ)P. Dahraln's overall trade position ha* been made worse4 because Manama's cunewcy aad oil capons arc pegged io the US dollar, which has declinedercent againtl ihr currencies of major trade ranxn gsflkaaVBaaa f

The crisis in ihe oilis threatening Bahrain's important banking industry. Financial services have been encouraged by (he governmenthief engine of growth for (be future and as an alternative revenue source lo cornpeosaie for dwindling oil resources The stock market crash in Kuwait1 snd soft oil market condkiom since IvtO.eavy toll oa bank loan ponfoli

Bahrain: Using, Willi i

Bahrain* "fMii- "iirnivd cconorrt)limitedfor gro-lh in ihe near term because of lhc toniiitmag recession in the fVruan Gulf. Growth will prooabt) be inwfnevenlaintain living standard* among ihc island's underprivileged Shia majorii As Ihe disparity of wealth grows. Ihc Sunni elite will (ace increasing pressure in broaden economic and political opportunities. Failure lo accommodate growing discontent among youth, lhe economically disadvantaged, religious fundament attsts. or (he large foreign labor force will create (he potential for internal instability or eiiernal meddling over the long lerm Domestic instability could Ihr eaten US miliiary access to (he Island as well as other US interests ia thc



Governmeni erToris io stem ir tank crisis have been loo little, too late. Additional measures io redress toe bad debt problem probably will be slowed because substantial amounu of these loans are to wealthy and infjuemtal Bahratnts or Gulf in.


ic have had :

Changes In oil income have had animmcdiaic impact on governmenilong-term development planning. Despite expenditure cuts of up toercent annually since lyS2rManama has faced chronic budget problems. Cuts have come mostly in spending for manpower and capital developmentesult, government wages have been irimmed, and many projecis underevelopment plan have been postponed or canceled la December ibe governmeni began selling treasury bill* to help ease

Bahrain's economy is showing signs of stress as ilcithers Ihe third consecutive year of thc Gulf recession.mall oil producer byraductioe and processing account for I* pereent of capon receipts.ercent of government revenue, andercent,of gross domestic product. Soft oil market conditions helped to hall real GDP growth over the pasi three years in sharp contrast locTCeni average annual growth of tbc previous three-year period. The slowdownin economic activity, however, doused ih* raging Inflation of.

in lenses.

bl b3


Manama's trade position has mirrored oil market trends. Declining oil expert receipts;have wiped out Manama's substantial trade surplus. Even thc sharp improvement in net services resulting from the growth of investment receipts was barely sutneient io keep lhe curreni account in balance. Cuts imports, especially industrial goods, trimmed trade sex. but ihe corresponding decline in domestic

Bahrain; Cvici Account Balance -

( ,




oMcwrUrf llOJOOh/aii


Growing security concerns over the Iran-irao/con flic ,and the border dispute with Qatar threaten to (increase budget woes. I

' revenue shortfall. So far domestic financial -resources have been sufficient to fund the budgetegligible debt service burden and 'substantial foreign investments give tbe government some leeway to deal wiirTrevenue shortfallsrgent develotwnent priwiticsdjJtB

The overall price tag. which probably will be much higher than currently projected, is largeahrain'sillion GDP andillion in first net's I

of the spending oil revenues

are likely to remain depressed.esult. Manama will have to shave spending on domestic development and subsidies even more to keep budget deficit! at current lewis. Saudirobably will finance much of thc new arms package and provide additional aid. but Manama will be ttard pressed.over tbe neat several years to meet payment commitments ijj the United Slates for arms deliveries!



- IM

- r. ZJOf







Doetrstk Rtswrcussiom

The burden of austerity hat not been equallyetpairiale community has saffcred tbc mostand development spending cuts.that the site of ibe expatriate communityby about keifhh aboutworkers remaining in Bahrain.toariety of necessary servicesthe economy and fill positions cither unacceptableenfUUUe by domestic workers Althoughcommunity his been politically Quiescent,cause problems If faced with further jobdeUricxBting living standards. The problemacute in the military wherefor as much ssercent of (he rank '

Bahrain's Shiapcrceni of ihebears the burden of the country's ecoiratiic woes in ditproporiioo to ihcir numbers. The government specifically excludes Shias from miliury duly and sensitive public-sector jobs and sees to it that private industry docs the same.esult. Bahrain! Shias have the highest rate of unearvploymeni. The Shia communiiy remains divided andingle


Bahrain! claim ro ihe barrenby the Br,ink political residento.Manama and Doha have hlstoricelhe Island*llleither stajc^rionut rAWr stroirgieQatar'i nest coast, preliminary oil explorationBahrain Petroleum Com/tonyof exploitable oil rrsrrves.Islands lie directly north of Qatar's fouifld. /railing

commercial quantities of hidrocarbons exist. If Qatar per,set lis claim to the Islands, heightened tensions could /loreilitary eorolln ihat would ihr cairn both Kates' vilfacilities ond Calf Cooperation Council unlit

leader figure, although continuing economic deprivation and discrimination could Intensify resentment against tbe government and the Sunni aaaaority and increase prospects for eaicrnal tneddling. especially from Irtfh- Domestic security forces monitor Shia activities and are capable of quelling local disturbances, but ihey probably could not contain large-scale Shia demonstrations oroordinated acts of violi


Prospects for Bahrain's ccoeomy win remain constrained fur ihc foreseeable faiure. Bahrain's oil icfining ariangcntesst with Saudi Arabia, elnch provides over SI billion in revenue annually, has become unprofitable. Tbe deal allowed Bahrain lo refine aboulf Saudi oilet back arrangement tut year. Riyadh decided to halt oil product ion for lhe Abu Saafa offshore field that ishired by Bahrain and Saudi Arabia. aaajaaaaaaaattaauh

favorably priced sole refinery loses Up to So per barrel of oil it processes at the official selling price and may be forced io close. The refinery providesloaccountsignificant percent of GDP. Manama haa begun selling its oil directly lo customers for thc first time,robably wjll continue to suffer sniil demand for medium-grade Saudi oil improves and Riyadh renews its peocesaiae agreement wahaVat fog

More imporunt. Bahrain's small proved oil reserves are not expected to last more thin IS years st current production levels. Although growth in several no noil sectors probably will help sustain overall positive growth ia GDP. the increases wiU be small and insufficient lo boost Irving standards above current severs Development will suffer ia thc constrained revenue cevirc-nmcnt. and the government probably will have so draw increasingly on foreign reserves and invesimenu to cover expenditures Coupled with heightened security concerns, the gvvtiiwnicnt wiU be forced to make Increasingly difficult tradeoffs between spending ontiaS,

Pros peels for ihc Amir and tbc ruling family will be linked to economic conditaocs unless greater attention is given to broadening economic and political opportunitiesand underemployment among Bahraini Shias vrill become

IK at |hc reCCWUtOtd

wcalih di<ramk> biwme more apparent Al Ihe tame lime ih*"rebeincrune lo tOtsre availableat rrow. Ne* thaiI ihe terrlces tcciun probably will be largely beyond the thills of moil Bahrain's and will bred) (all to expatriate* Sofl oil market condition* will continueh>ai Bahrain's ciToru lo ihc *et-tiec* ccaier of Ihc Persian

Implicaliom frx (be United Stales .

Bahrain* economic and related political problems over ihc neat several years may threaten vilal miliiary and political interest* of Washington in the. Persian Golf. The Middle East Forces Command/the naval otnwponeM of Ihe US Central Command; fe-.r.

hciuVju-iricrcd iaThe iiland .erte*s factucenter tor CI.NTCOM military >upplicv Moreover. Bahrainhe lustGulf itatceceive CSF-Maircraft, which may tovu* the' attention of Oppoutton groups oa Manama" dote (let to (he United Sta(ci and heighten border icntlon* with Qatar. Saudi Arabia and the Gulf Cooperaikon Coundlill hdp Finance Manama's miliiary moderniiailon oron ram hui

however, j* noi certain and could be adversely affected by Saudi mediation of the Ha-ar Island dwuic or increased Shta influence on the bland



Bo. Holy War: Arab Fundamentalist Support


RfKV anMtf1 ^

Arab Sunn) fundamcntaliMi have been active for some Kmc in support of lhc Afghan rcsl*tnnee. Thc three mow active group* are the Saudi-based Wahhabu. ihc Muilimadith. an orgaaiiatton originally founded to combat Hindu influence* on Indian Mu'limt. Although member* of these group* fight with Ihc refinance, run school* and clinics, and makeonetary contributions lo Ihe Afghan insurgents, theirsnauaanauat* worsened relations txlwcea the resistance parties. The group* generally support only those parties and leader* ihey believe willingurther thc funds mental ill putftyrrn rather than those who have (he broadest support or best fig Mini capabilities. Afghan fundamental isi leaders Abdul Rasul Sayyaf. Gulbuddin Hckmaiyar. and Burdd in Rabbani receive Ihc roost Arab support, while moderate Itlamic lea do* such as

Ahmad Gailsni and Slbghatullah More deliberately ondetmlr

The Arabt groups actively oppose Western influences in (he Afghsn resistance. Therjr.'ir ir, gretif Mirontier cs (Doctor* Withoutcntpcirarily withdrew from Afghaaisun afterfundamentalist campaign claiming Western volunteer* in Afghanistan and Ihc refugee camps were* aad Christian missionaries in disguise. FundsmeatUkitt demands that Afghan recipients echo iheir anti-West position have addedactional tensions within several resistance pat

Ties to (be

Many Afghan resistance leaders have longstanding (ics to Arab fundsmcnulistthe Muslimout of iheir iiudies in the Arab world. Burhannudin Rabbani. Sibghatullah Mojadcdi. and Abdul Rasul Sayyaf all siudicd athar University in Cairo and established ties to lhe Egyptian Muslim Brother hood during thai period.

_iUulbuddintrict party organisation aad ceO Structure arc modeled on lhc Egyptian Mu*ltm Brotherhood" 'tcevcl

Wahhabl Mlssic-narin

Wahhabism. the etflicial Iilamk sect of Saudi Arabia, teaches unci Koran ic interpretation and strongly rcjocts the Afghan practices| local pin tsaintsl and subordinating Koranic teachings lo tribal

Wahlubi missionaries ha-Pakistan and Afghanistan, financing religious schoolselyiiiing among Paihtun and Tajikut have hiitoeically woo few Afghanince ihe SovietlBBgawat the group has increased hs activities both in thc Afghan refugee camp* In Pakistan and within Afghanistan Itself.




if Cham Itl am

AfftWimulely jv'ivnl if theMuilim. -lift rAr remainder modeIn "ir central tlazarrhlut. Intimitis rmimel, andgriaipsihriu.

adhere tu thefoith. prayer.


suppirmenl Koranic tearr Jstamlc customs; Pi'< isminlsl. and ta,of MuhmmmmJi hate spetiml Italia, iChtvmifram tkrfr rtmibi ate believed laiproiiel from the.eMI 'err ami Sextet Luttett. whiteo/ fcv*/earnear ofnmmmmdk

, rrtfco/especially the 'pmshtmawatrof lhctrlbei. often confllcii "iih Koranic teachingsIslamic law. According to Islamic lav. adultery cannot be punished unless It Is observed by fourWitnesses. For the pashtunwall. rumor Iiybecause honor Is at stoke. Women cannoijtthetlt In ihr Fashtun tribes, allhough lhe Koran glues women lhe right to Inherit half thef men. Dlroree. easy for men according lo Koranic law. It next ro tmpcasibir In the Afghan tribes because of the Insult

i Ventramr. mhieh hlami, tan

limits. Is timiidrmtight in thc tribal

Orthimlut Itlam is ueakly represemrd inural Afgftams contort with rsiabli iked religion is usually limitedhe xiltate mullah, who II usually barely tiieroie and loandrred of no higher social standing than the rittage barberi and artisans. Better educated religious leaders trained outside Afghanistan hate usually staled In the larger cities where they hare had tittle Influence.


Despite the variations from orthodoxy, most Afghans are ftrmeni believers In their own brand of islam and are deeply offended by suggestions that their swoetlcrs are Incorrect. Hrrattlmmt leader Ismail Khan had fro Saudi visitors tied to trees and beaten after ihey called an Ins or gem fantral un-Illamtle. Other Arab donors have similarly alienated aid rrrlpiemts. Homy Afghans Interpret any criticism of their faithirect attack am their holy war against the Soviet, and on their right to live In their own land without outildr Interferenee.maaajaf

Major Arab Fundamentalist Groupsn Afghanistan


coromatsders within

Afghanisun nuy be the of growing Wahhabi impatience with ihe parties- PeshawaraWfMKBjm


adith was founded before the partition of India to combat Hindu influences on/the Indian Muslim ecmmun


oiftiched [jUm and expects insurgents to accept Brotherhood leadership in return for financial support. Thc Muslim Brothers often esc

pthe young Arabs fighting

inside Afghanistan are connected with thc Muslim Brotherhood, although volunteers often denywith any organ lied fundan^ulist^roup. Such youths closely echo^fleatherhood teachings and are generally referred to by their Afghan hostsuslim Brothers.'

"aiio's concern over theundamentalist group al-Jihad's invotvcmeniulbuddin's Hizbi-lslam

If rl

Afghan Response Although Afghan resistance groups usually weluome Ihc material support Arab fundamenlatisis provide nd believe ll to be alhMuslim nations' duty to aid Ihcir struggle, flsssuauBuVrnost arc angered by attempu to change their version of (slam. Many Wabhabiamd Muslim BrotlKrbood visitors have conducted themselvescavyhanded and boorish

There hasnuill backlash against Arab criticism of Western influence on thc Afghan resistance. Mohammad Nabiead of theia truet-ami. has publicly favorably compared the support given by thc United Stales favorably to thai provided by 'certain Arab groups' anded ihe way Arabs tried to Interfere In Afghans' everyday lives. Member* of lhe resistance alliance Educational Curriculum ommittee approached theevcsopmeni Center for Afghan Education la Peshawar for help after Wahhabi missionaries tried lo force the committee lo accepttrong "ahhabl slant, '

OMlook -

Arab missionaries* activities have damaged relations between resistance groups. Fundamentalist donors have encouraged aid recipients to increase their opposition to moderate Islamic groups such as Ahmad Gallani's National Islamic Fn



Pradesh, which he rfaj

sun indi.Thc new stale is important because itsa uvijor source of contention between IndiaAssoc from thc border dispute, theIs of marginal economic importance to Indiamainlyaven foe tribal insurgentsrugsmu tt lers

Arunachaliallytate onIts chief mlnblcr is Gcgongpublic works minister for the territory.appointed R. D. rVadhawas tbc first

compcteni administrator and has successfully held high-level positions ht tbc Mabarasbtra state government and lha nalional government. Pradhan will have rnore privileges the* most stale governors because of Arunachal Pradesh's sensitive location. In particular, he will have special police powers to handle civ'I disturbances aad security asatvers.-Although this has caused some concern oa tbc pert of members of Ihc state aucmUy and tribal leaders. New Delhi has nroeoisrd ihat i'< customary laws and practicesiD be protect

Delhi had two main reasons for conferring statehood on Arunachal Pradesh, both linked to India's border dispute with China. Ia future Wgotlaisoes with Beijing, New Delhi can more' reject Chinese claims to territory in Arunachal jj Pradesh because, aader thc ladiaa Constitution, thc government cannottate's borders vritbout the state's apcirovaL Meeting the demand of Ihc people of Arsstiackal Pradesh for statehood abo should make them more loyal lo New Delhi, since they will have more control over iheir own affairs.a important consideration for New Delhi because tbc area is susceptible lo drug smugglers, guerrilla movements, and Chinese meddling ejpjfajaW

Drag TraffickingJhroegh Arunachal "'Je-slj

_rafficking has recently begunacak in Ihc region. Bordereas itringcni la Arunachal Pradesh because of lu mountainous terrain, which makes ll more difficult to trackuccessful attempt by traffickers in6eroute Burmese heroin ihrough tbc area from longstanding routes through Thailand illustrates the state's potential toajor transit area for drug dealers.



Ihr Slao-ladiam Border Dispmtr ia ikr Leu

The Briilth *ere ikrjiru in modern timet to attempt loorder between India and (kino. At the Simla Conlerenee4 attended by Britmim. Tiber, and Cklmm. ike Brlrisk-drowm Ue'Umhdm time Im ibe eastern letter of tbepee it med ml ike mew boundary Great Britain enJ Tibet at'eed oa ike demarcation but ike Chinese delegate only Initialed lhet fag' tetked OMth^ty to cemtndt China. China:repudiated the agreement and deniedhe authority, to make an agreemem

f >

silll disagree over the border, he true bordrr encompasses Pradesh. SinceStho-nese havelme of south of ihe Indian version ofhe major area where Indian and Chineie claims dlBcr lies Innj*here ihe Chinesep <i" ow-vjt /jjf


am^^gg^faaaaaMmas^^rurtschilopular hideaway for Naga iasurgeats.iribal (roup fighting far aa independent Nagaland la caw cm India. The National Sociatbi Council offNSCNk an allegedly Burma-based and Chinese-(rained radicalperating In the Tirap frontier dbtrict of Arunachal Pradesh.

ormedO. the NSCNaction of the Nega National Council, an underground group from neighboring Nagaland.

bcu-equipped rebel group and theooo inin llK nonhcauanaaanaV


- esponsible for smugglingvia Arunachal Pradesh to Naga rebels In Nat aland! The Nagas are' also "invol red In recruiting youths in the border area of Arunachal Pradesh, training them In Burma, and returning them to fight Indian border troops In Nagaland, The new recruits were responsible for numerous attacks against Indian security forces late last tear, prompting New Delhi to increase security along the border, according to press

ChUesehird major problem for thehe border dispute with China. Inhinese troops set up camp In the Wangdung Ridge area. This movetalemate in thcbilateral ncgoiiations to settle tbe border banc. For the first lime both aldeiopi in the area through thc


We believe thai Beijtnr. "ill continue

indirectly ba Arunachal Pradesh by supporting the Naga insurgents. Although we do not believe that the Nagas will cause major problcmi for the Indian Oovernrncnt. their activity could aggravate local ethnic unrest. We also bcliiyeahuidrug smuggling through Arunachal Pradesh will steadily increase with thc crackdown an thc Burmese border, and the state could eventuallyignificant iranili point for drugs to Ihe Wesi.i

A*nt*ttf tfrnfi



Near Ease

South Asia RoieY^


The recent spate of Iranian nival attacks on tankers in the lower Pet nanlhe firsta Saudi ship since las)hasresponse frontcrks of Iranian missile anadts onfrocn Saudi Arabia thai began in rmd-Match fueled concern withinmaritimewas cs wa^JBBauuaSlBBT

The knowledge thai Iran wai preparing to deploytta hip "missiles near the Strait of Hormur only highlighted'he growing vulnembiUty of Saudi shipping In ihe lower Gulf.aaagfa

la our view. Riyadh's low-key reaction itemsesireirect military confrontat'ori with Iraneliefolitical response would be more effective in lessening tensions. Moreover, neither Riyadh nor Tehran seem willingllow the incidents to undercut progress towardolitical dialogue. Even so. the attacks were probably intended to signalotes sure over Riyadh's continuing financial and material support Tor Iraq, including lhe Saudi decision tail month to allow Baghdad to increase lhe Row of Iraojl oil through the Iraqi-Saudi pipelinearrels per

MlastalUb TU* to Egyptian

iit nope ior


Relation* between Ihe Lebanese radical Sate Hizballah aad Egyptian Sunni funds menu list* are increasing and reflect the pro-Iranian lliiballah'i inlcresl In bobieriag iu ties to other Islamic militant group* far beyond Lebanon'scries of articles and interviews appeared recently in Alby Shaykh Umxr Abd al-Rahmea. Egypt's most militant Sanni clericlose associate of the Egyptian Jihad organization Abd al-Rahman was implicated in ihe attaxtination of Egyptian President Sadat, and his silicments oflcr little hope for peaceful coexistence with ihe Mubarak government gaagnauj


at-Rahman* mIciiU-ckjI appeal lo Hi'tullih stems (root hit ads oca cs of an Mamie naima andlu ihc Lgsptian Gotctnmcni. (srad. and the

I ivthe enermc. ol Islam r>

appealingirbauab. Abd al-Rshmau bates hb line of ihialinf on the Kotan and lbc Hadiih. Ihc uerds and deeds of lhe Pranbet Makanvnud. He Mala ihai universal if uths can only be understooduslim prism. Muslimshc ri(hi to rebel ataiRtt unjust and ckipetsc rubra, and terrorise) loet toe from being inflicted openestified Violence forake aroot, bill political violence against un-Islam*anctioned tt God. accordingbd al-Rihmjn Holding hostages against an increasingly hostile Westerfectly legitimate was of ciprcsaing grievances, bui hostages ma; not be harmed during Iheir captivity.Rahman opposes the Camp David accords and Is vehemeniK opposed to normalizing relations vrith Israel. He believe* Israel can only be foughl when Ihe lilt mkby an Islamic Egyptianunified.4


Abd al-Rahman't Soani affiliation and his bdicf thai Egypt, not Iran, should kad the future Islamic aaisou almost certainly "ill detract from future coot* rat loo between HiibaHah and lhe Egyptian fundamentalists Although logistical ties probably arc rairemdy limiled and arc likely to remain so. for Hitbaliah and its Iriniaa patron closer public ties and appareni cooperation with radical Sunni groupsaluable propaganda success underscoring their commito Islamic unity.|

Exports Diversify and Grow Rapid!

is rapidly diversifying its caportM Thc value of non energy exports In the first two months7 wis up aboulercentear ago. The goal for the yearpcrccnt increase. Clothing and accessories increased almost SO percent In value sod moved ihc finished goods trade balance from deficit to surplus. Food export values increased aboulercent Traditional exports did not fare so wdl. Energy exportncreased aboulercent, and phosphate export values probably fellwwflMHHiMMeVflewVa devaluationtructural readjustmentpurred much of the gain. In addition, increasedprompted by ihc devaluation andincrease enough to sustain groauttvof ihc external sector. In the'short run. capon growth will help alleviate bakncc-of-tride problems. In ihc long run dircnittcation will broaden lhe base of thc economy and facilitate adjustment id lhe post-oil I

Original document.

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