Al-Ahram Weekly Online   1 - 7 April 2010
Issue No. 992
Published in Cairo by AL-AHRAM established in 1875

Oil has poisoned the well

Mohamed Hafez looks at the southern secessionist drive in Yemen from an economic perspective and finds the southerners have a good cause

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THE RISE AND DEVELOPMENT OF THE MOVEMENT: Land and property seizures, monopolisation of wealth, worsening poverty, exclusion from high office, political and economic marginalisation and human rights violations have been among the long-standing grievances levelled by southerners against northerners in Yemen since the victory of the north in the civil war in 1994. Nevertheless, while these long unaddressed issues may have fed the recent southern protest movement, the direct causes may be pinned down to several specific factors.

First, central authorities refused to respond to the demands lodged by the southerners in the form of a series of letters to the Office of the President from the Association of Retired Military Personnel, which includes among its members several officers who had been removed from their posts. Some of the demands were job- related, covering such matters as promotions and compensation covering the years of forced retirement. Others pertained to the material rights normally accorded to army and security officers, such as the right to a pension, to a car and subsidised fuel, and to a housing allowance. Yet another category of demands pertains to the rights of those officers and soldiers who had purchased property through their housing association but whose property was seized by northerners following the civil war.

The second factor is economic decline and the deterioration in standards of living, which contributed to aggravating popular discontent in the south against the ruling regime and helped shape the climate for the eruption of the southern protest movement in the early months of 2007.

The third was the heavily charged political climate in Yemen which is struggling to contend with an onrush of a panoply of crises ranging from the Houthi rebellion in the north, Al-Qaeda insurgents and terrorism, and confrontation between the government and the opposition parties to piracy in the Red Sea off the coast of Yemen, as well as the financial crisis and the drop in oil prices.

Besides the preceding factors, a number of concrete events contributed to triggering the southern movement. Foremost among them was the heated presidential campaign in September 2006, during which the ruling General People's Congress faced stiff official competition from the Joint Meeting Parties opposition coalition, as well as the ongoing Houthi rebellion which had erupted in the north in 2004. The government was unable to quash the rebellion and ultimately had to enter into negotiations with the insurgents via local and regional intermediaries. The effect of such developments was to weaken the regime and diminish its prestige.

Against this backdrop, the reaction of the central authorities to the initial wave of protests was almost certain to backfire. The use of excess force on the part of security and military forces and the propaganda that branded the southern officers and their supporters as traitors not only failed to silence them but broadened the scope of their appeal. Their activities have since expanded domestically and internationally, as what was initially an ad hoc protest movement burgeoned into a fully-fledged organised secessionist drive.

As it evolved, its active membership and support rapidly increased, with some demonstrations registering turnouts of thousands of participants, such as the 14 October rally in Aden. In tandem, it developed leadership bodies and refined the organisational mechanisms to steer its activities and to coordinate action across all the southern and eastern governorates.

As it gained momentum and became more ideologically focussed, it began to link standard- of-living demands with political demands and to recruit historic figures, such as Ali Salem Al-Beidh who had served as leader in the brief secession of the Democratic Republic of Yemen (DRY) in the early 1990s, Ali Nasser Mohamed who had served as president of South Yemen in the early 1980s, and Haidar Al-Attas who had served as prime minister of south Yemen before unification in the 1990s and then briefly as prime minister after unification. It also rallied to its ranks prominent tribal leaders, such as Sheikh Nasser Al-Fadhli, and soon forged a powerful southern opposition front, some quarters of which began to call for the return to the situation as it stood in Yemen prior to unification. The appeal was made explicit by former DRY president Al-Beidh who issued a statement from his place of residence in Austria describing the south as under occupation by the north and calling for independence and the restoration of the southern state.

If the southern protest actions evolved into a secessionist drive, they nevertheless derived their moral inspiration from the constitutional principles of equal citizenship and rule of law and from the desire to right the perceived injustices against the people of the southern governorates. As such, the movement was thoroughly homebred, and not engineered from abroad as its opponents claim. It emerged as one of the manifestations of the crisis of a regime that failed to apply constitutional provisions and to guarantee the rights of certain segments of the population. Only later, as confrontations with the central government intensified and the situation escalated did the movement attract southern leaders living in exile who have openly called for equal citizenship rights, the rule of law and a formula for sharing power and wealth between the north and south, and as its maximum objective disassociation from the north and the restoration of an independent state in the south.

OIL AND CIVIL STRIFE: Oil not only fuels electricity generators, cars and other machines; it also fuels political movements and social unrest, especially in those areas where the wells proliferate. Far from being a reliable guarantee for stability, oil has a black international record for igniting wars, not least of which were the Iran-Iraq war, the Gulf War and the invasion of Iraq. In Yemen, oil has also been a powerful inciter of discord and separatist drives, as has been the case in Angola, Columbia, Sudan, Iraq, Bolivia, Indonesia, Chad, Algeria, Nigeria, Russia, Central Europe and other areas where civil strife has taken millions of lives.

In the Arab world, separatist movements have been around for a long time. They arose with the rise of the modern state in Iraq (Kurdistan), Sudan (the South) and Saudi Arabia (where in the 1920s opponents to the kingdom's founder attempted to found a Republic of the Hijaz with its capital in Jeddah). And they proliferated well after the establishment of the state as the consequence of accumulating grievances, constant social and political convulsions, social injustice, the lack of a programme to assimilate all inhabitants into a civic state and, of course, oil which proved highly instrumental in aborting processes of democratic transition and entrenching despotism, corruption and oppression.

Indeed, the political repercussions of oil wealth can be worse even than its detrimental economic effects. Without the proper checks, oil wealth can feed corruption, help tyrants tighten their grip on power and undermine new democracies. The more oil revenues that flow into the coffers of the governments of Iran, Russia and Venezuela, the less their legitimacy needs to rest on the people and the easier it is for them to silence opposition and buy support. As one observer put it, as the price of oil soared from $10 per barrel in 1990 to $100 a barrel in 2008 corruption and tyranny multiplied too.

Oil offers a powerful incentive for separatist movements, especially when this incentive outweighs whatever advantages might be had by remaining in a unified state. It has been observed that the chances of separatist revolts are twice as high in oil producing states as in non-oil producing states. If, for example, oil and gas are produced in the south of a country but its revenues are absorbed by the central government in the north without a fair payoff in terms of job opportunities and higher standards of living for the producers in the south who instead suffer deprivation, environmental pollution and the erosion in their power of self-determination, these people may reach a point where they will demand autonomy or independence.

In the Third Word, such movements range from limited separatist drives, such as that in the Niger Delta and South Thailand, to full or partial civil war, as is the case in Algeria, Columbia, Sudan and Iraq and maybe soon Yemen. Obviously, this does not mean that oil is an inevitable cause of violence. Half the countries that began to produce oil after 1970 have not experienced such forms of strife. Oil, on its own, cannot spark a conflict, although it can certainly aggravate latent tensions and it can furnish governments and opposition militias with the financial wherewithal to sustain a fight. Governments that curb corruption and use their oil wealth wisely rarely encounter social upheaval and instability.

OIL AND THE YEMENI ECONOMY: Yemen still has a traditional economy. The majority of the labour force is engaged in agriculture, although the contribution of this sector to the GDP does not reflect its weight in the social structure. The economy is much more heavily dependent on oil, which contributes the largest share of the GDP. However, economic performance as a whole is not strong. In 2007, for example, Yemen registered a 2.3 per cent increase in its actual GDP growth rate over the previous year. But when calculated in terms of current prices, the GDP growth rate declined from 8.2 in 2006 to 3.2 in 2007, primarily due to the decline in the GDP growth rate in the oil sector.

Public revenues have dropped as well, again, due to the decline in oil revenues which fell from 1,060 billion riyals in 2006 to 948 billion riyals in 2007. The drop in oil revenues stemmed from the decline in the value of oil exports due to the drop in production.

Although oil was first discovered in Yemen in 1928, it was not until 1986 that serious exploration and production activities began. The oil sector has been divided into 87 "blocks" of which 12 produce oil and 26 are devoted to exploration. The sector as a whole engages at present some 27 oil companies. Given its vital importance as a source of energy and of revenues, the government has made it the primary pillar of the national economy. Since the development of an export capacity, the government has pumped income from oil into major economic and social development projects while expanding into various fields of petroleum-related industries. Yemen's general oil reserve is estimated at 718.9 billion barrels. Natural gas production is a much more recent development. Yemen only began exports of liquified natural gas in November last year from the plant in Belhaf. The Yemeni Liquified Natural Gas Project, which has garnered an investment of $4.5 billion, is one of the 20 largest natural gas projects in the world.

OIL AND AN AMBIGUOUS SITUATION: Oil accounts for 90 per cent of export revenues, 75 per cent of government income, 35 per cent of the GDP and 70 per cent of the national budget. All the other sectors of the economy, from fishing and tourism to various manufacturing industries, produce only 10 per cent of the country's exports. However, oil production in Yemen has reached its peak and is expected to decline, from 460,000 barrels per day in 2002 to 268,000 barrels per day in 2010. While oil exports brought in $6.6 million in 2008, in view of the rise in global oil prices, experts foresee a gradual decline in oil revenues. Indeed the World Bank has predicted that Yemen's returns from the sale of oil will return to zero by 2017.

So far the forecasts are proving true. According to official statistics oil revenues fell by a record six per cent during the first quarter of this year as a result of the global drop in oil prices. Crude oil exports plunged dramatically during the first seven months of 2009 and returns plunged to $4.3 billion, or by more than $3 billion from returns over the same period in 2008. A recent Yemeni Central Bank report attributed the fall-off to a reduction in the government's share of total exports, from over 27 million barrels during the seven month period in 2008 to only 15 million barrels during the same period a year later. The report also noted that domestic oil consumption almost tripled over the past year, registering 60.2 million barrels during the first seven months of 2009 as opposed to 20.1 million during the same period the previous year.

According to the Central Bank's report on fiscal and banking developments, revenues fell from $9 billion during that period in 2008 to $8.3 billion for the same period in 2009. This coincided with the drop-off in the government's share of total exports from 10.4 million barrels to 9.5 million barrels, or a decline of 3.4 per cent. The report attributes the decline in revenues to the decline in the government's share of oil export, a drop in oil production, and the reduction in the prices of oil in the international market.

Naturally, the decline in oil production and in revenues has struck an already ailing economy at a difficult time. If indeed there is a possibility that Yemen's oil reserves will be completely depleted by 2017 unless new wells are discovered, the government had better take urgent precautions. Above all, it should systematically reduce its dependency on oil revenues by between 10 and 12 per cent a year and it must simultaneously work to develop and diversify the other productive sectors with the aim of achieving at least a ten per cent annual average growth in them.

OIL AND THE SOUTHERN MOVEMENT: Had the Yemeni government had the wisdom to listen to the modest demands of an association of retired army officers several years ago, perhaps the situation in the south would not have spiralled to what we see today: on the one hand conflicting statements and reports regarding drops in oil production and an eventual depletion in oil; on the other, a steadily growing protest movement in the South demanding at the very least a respect for their rights and better living standards and, at most, a return to two Yemens, as was the case before 1990.

As the bulk of Yemen's oil reserves is located in the South, it is not surprising that the southern movement has seized upon this matter and accused the ruling regime of plundering the south's oil wealth during the past two decades. Moreover, southern leaders have questioned the accuracy and veracity of government reports, statistics and statements, and therefore commissioned dozens of studies on the location and sizes of oil reserves, the quantities of oil produced, and the companies operating in the field. Notable among the studies, are the papers produced by Hussein Muthna Al-Aql and others that argue that the rates of oil production are actually climbing, that the reserves are not facing immanent depletion and that 80 per cent of them are located in the southern provinces.

Given this as a premise, the southerners have naturally linked their demands to oil. One is for the north to ensure that a certain quota of oil revenues is pumped back into the oil-producing governments for investment in development projects. Mohsen Basra, representative of the Reform Party from Hadhramaut, has suggested a total of 25 per cent, of which 15 per cent would be allocated to development projects and 10 per cent would represent compensation for the pollution caused by the oil industry. He added that not only should the oil-producing governorates be entitled to such a quota of the revenues but also that their inhabitants should be given priority in employment in the oil companies operating in these governorates.

In pressing for the demand of a quota of the oil revenues for the oil-producing regions, southerners argue that such a system is applied in other oil producing countries, such as Sudan and Iraq. They cite Sudan and Iraq in particular. In the former, a major section of the peace agreement between Khartoum and the SPLA is dedicated to the "sharing of wealth and power" between the North and the South. Similarly, the new Iraqi constitution includes a provision entitling oil-producing provinces to a portion of the revenues from the oil extracted from their land.

Clearly then, there is a connection of sorts between the political disturbances in the southern Yemeni governorates and the fact that three-fourths of the country's oil reserves happens to be located in the South, especially in Shabwah and Hadhramaut. This fact comes in very handy, alongside the grievances of retired southern army officers, the unemployed and those who have had their property confiscated following the civil war, in mobilising the masses behind a secessionist drive. Southern leaders merely have to point out that separation is the way to plenty, for 20 per cent of the population of Yemen lives in the six southern provinces, which cover two-thirds of the country's total land area and contain 80 per cent of its natural resources.

Yet how does one explain that the secessionist obsession and the social unrest is stronger in the southern provinces of Lahj, Al-Dalie and Abyan, which do not possess significant oil reserves, than in Shabwah and Hadhramaut, which do?

The greater tendency to violence in the non oil- producing southern governorates may be connected with the prevalence of a tribal mode of social organisation and a tradition of tribal warfare. However, there is little doubt that the much lower per capita income levels play an important role, as does the fact that most of the members of the southern army before unity were drawn from Lahj, Al-Dalie and Abyan. One can only draw the conclusion that oil definitely figures strongly behind the southern rights drive, but it is only one of many other powerful motivating factors.

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