Wednesday, July 27, 2005

The coming IPO frenzy

There are about 15 IPOs due to hit the UAE in the coming months. Shuaa has some interesting commentary:

Shuaa Capital Insight, July 2005

Pulling Liquidity

The two most active markets in terms of capital raising in the Gulf region today, are
by no coincidence the two best performing and most liquid; Saudi Arabia and the UAE. The latter market in particular is slated to see no less than 10 capital raising exercises over the next three months through rights issues and IPOs. The total amount of liquidity that will be raised will amount to nearly USD 9 billion. This liquidity will be directly sourced from the same pool that has been fueling the UAE market to record gains of over 100% in 2005 to-date alone. This amount represents around 6% of the market's total market capitalization, or more importantly 12% of the market's approximate free-float market capitalization, which is by most estimates already burdened by relatively high degree of leverage. It corresponds to around 22 days of average trading levels on the exchanges. It also corresponds to around 13% of
total bank deposits and 14% of money supply in the country as at the end of 2004. It is a substantial amount that will probably have an immediate and profound effect on the liquidity available to the market. It may even be the elusive trigger we have been anticipating for a market-wide correction, which from a valuations perspective is overdue. On the other hand, oil prices have reached a new record high recently, exceeding the USD 60 per barrel barrier. Trying to determine the net effect of these two contradicting factors on the liquidity in the market is difficult. The effect of higher oil prices has a more long term impact on liquidity, as it typically takes six months to a year to filter through to markets, with its short-term impact on the market limited to a boost in general sentiment and expectations. The anticipated capital draw will have a more immediate impact, and coupled with regular increases in interest rates, may result in a correction in the short to medium term, in which we expect the market to give up around 20% of its value at the peak. The long-term direction of the market will be determined by the rate at which this liquidity is replenished.

I'm very curious about whether Shuaa – whose straight-talking, pithy analysis has made them my favourite investment bank of the moment – has taken into consideration the overvaluation of the property market in the UAE.

A stock market correction of about 20% would be painful, but if it cascaded into a property market crash it could be excruciating.

Monday, July 25, 2005

Rents, democracy, aid - lit review

Is Aid Oil? An analysis of whether Africa can absorb more aid.
Paul Collier
June 16th, 2005

Nutshell précis: aid is not equivalent to rent because donors impose parameters on aid, either by imposing conditionality or by ringfencing aid for specific projects. Essentially, aid money is subject to scrutiny. Making aid like rent - through, for example, debt relief - isn't that good an idea.

Democracy and Resource Rents
Paul Collier and Anke Hoeffler
April 26, 2005

Nutshell: Resource rents pervert democracy, reducing it to a competition for control of rents and patronage rather than a competition for the provision of public goods.

In the absence of resource rents democracies outperform autocracies, in the presence of large resource rents autocracies outperform democracies.
We found that the antidote to these adverse effects of democracy was intensified checks and balances, including specifically, the freedom of the press.

Again, scrutiny appears to be the crucial factor - and given that rents make control of the political apparatus that much more lucrative, rentier states need particularly intense scrutiny.

Saturday, July 23, 2005

New old news - Egypt/Israeli gas deal

July 21 - Eastern Mediterranean Gas will supply Israel Electric Corporation with natural gas under a $2.5 billion, 15-year contract.

This gas deal was actually drawn up in the first peace process, but it faltered after the assassination of Yitzhak Rabin. Anyway, there were two crucial players in the deal, both former spooks: Hussein Salem for the Egyptians, and Yossi Maiman for the Israelis. Salem has an investment vehicle called Masaka Group, and Maiman has one called Merhav.

The Midor Refinery in Egypt was part of the same package as this gas deal, and although it was eventually built, the Egyptian government had to bail it out a couple of times because the investment dried up after Rabin’s death.

Then when they finished it they found that they couldn’t actually buy any Arab oil while there was still Israeli money in the project, despite Oil Minister Fahmy going on tour round the Gulf to beg for the stuff, so they had to buy Merhav out of Midor.

Salem is CEO and Chairman of Midor. Current oil Minister Sameh Fahmy was once a vice chairman.

The major reason that the US has always been so keen on the deal is because of the classical liberal idea that economic interdependence makes war less likely. Hence the high-level interest in the deal and the role of the spooks.

There has been pressure to revive the gas project since this new peace process started picking up steam last summer, and the Israeli Electric Co signed an agreement in principle with East Mediterrannean Gas to buy the gas in May 2004.

Hussein Salem is chairman of EMG, Maiman is vice-chairman and has a significant stake in the company. Sameh Fahmy used to be chairman of EMG.

But some in Israel didn’t want the gas deal to happen, notably Joseph Paritzky, then the Infrastructure Minister, who favoured an alternative deal proposed by BG using recently discovered Palestinian gas.

So Maiman released a tape that on which Paritzky could be heard planning a smear campaign against a political opponent within his party. The cassette, it transpired, had been recorded two years before by a trade union seeking to discredit Paritzky, and had come into the possession of a private investigator retained by Maiman. With Paritzky discredited, opposition to the deal with Egypt pretty much dried up.

There was no way in hell Egypt or Israel were going to let this deal fall apart.

Romantic Sheikhs

Pulp publishers apparently do a nice line in incredibly ill-informed, orientalist, romantic fantasies involving oil sheikhs.

Excerpt from 'The Sheikh's Reward', Lucy Gordon, Harlequin (parent company to Mills and Boon), 2000

Fran snatched away her veil and faced him. "If you have the nerve to think that "your humble servant" is going to bow to you--"

"But I don't," he said, laughing. "That's why I took the precaution of making sure we were alone first. If my servants had seen you greet me disrespectfully I should have had to cast you into a snakepit, which would rather have spoiled our evening."

Fran regarded him. "How dare you send for me as though you had only to snap your fingers and I must jump to attention?" she seethed.

"But I'm afraid that's exactly true," Ali said apologetically. "I appreciate that you are unfamiliar with this arrangement, but don't worry. You'll get used to it."

"Not in a million years!"

There's even a fansite.

How incredibly amusing.

Friday, July 22, 2005


William Pfaff writes in the IHT what I have been trying to find a way to articulate for a while now.

He argues that terrorism is the snarl of the traditional, bristling at the onslaught of godless, soulless, materialistic Western modernity.

But the West is trying to impose not only foreign ideas on everyone else, but ideas that contradict and would destroy the fundamental values and assumptions of non-Western societies.
It says: This is progress. Our progress is your destabilization, the destruction of your cultures, the creation of millions of culturally alienated, deracinated, displaced persons, ripped from their own past to become integrated into a radically materialistic ethic.
It should hardly be surprising that the reaction to this is nihilistic violence.

It is worth fully grasping the import of this. While our arrogance makes us look at the world beyond as different, as strange, as uncivilised and barbaric, it is in fact we who are alien. The vast majority of people on this planet live as they have done for countless generations: over the course of history, great civilisations would be built up around specific technologies of economic production, divisions labour, military organisation and advanced tools. These civilisations would sometimes fall under the weight of their own internal contradictions; other times they would come into contact with civilisations with stronger - or at least, more appropriate - technologies, and they would be conquered. Few lasted.

Our Western civilisation may yet succumb to its internal contradictions, but that has been prophesied for generations and shows little sign of coming to pass in the next. But the fact of the matter is that it is still an anomaly.

Wednesday, July 20, 2005

Egyptian ambassador alive? Sting in the tale...

Breaking news –

Naguib Sawiris, the head of Orascom Telecom (which runs the Iraqna network in Iraq), has told an Egyptian state-owned paper that he believes the Egyptian ambassador to Iraq, Ihab al-Sherif, is still alive.

From AP, July 20:

"We have information suggesting that the Egyptian ambassador is still alive and has not been killed," Sawiris told the pro-government al-Gomhouria newspaper, in remarks published Wednesday that were later confirmed by The Associated Press.

"I will not put his life at risk to give you news," said Sawiris in a telephone interview with The AP.

Ihab al-Sherif was abducted on July 2, and a video was released of him on July 7, wearing a blindfold. Al-Qa'eda in Mesopotamia claimed that it had killed the ambassador, though the video did not document this and no body has been produced.

The Egyptian government maintains that it has no reason to suspect that the claim is false, questioning why anyone would make such a statement falsely.

Why indeed?

I don't usually go in for conspiracy theories, but this is too big a deal to go uncommented. There are too many odd facts that seem to suggest something more complex afoot.

Egypt's official news agency, MENA, provides this snippet of information (courtesy of BBC Monitoring):

For unknown reasons, Al-Sharif refused during the day of abduction to be escorted by guards although he had six Egyptian well-trained guards and a number of Iraqi guards at his disposal, said [Egyptian Foreign Minister] Abu-al-Ghayt.

The video released on July 7, unlike other videos produced by Zarqawi's group, studiously avoids showing any background. Previous videos showed hooded men standing around the detainee, with a flag prominently displayed in the background: all this one shows is the head and upper torso of the ambassador as he speaks to the camera, and the voice of the questioner has been muted and replaced with captions.

The Egyptian government was unusually prescient in its comments on the death of the ambassador. Egyptian newspaper Nahdat Misr reported July 19 that, in a report sent by Foreign Minister Ahmad Abu-al-Ghayt to the Majlis (parliament), the government said:

It was not feasible that the kidnappers would announce the execution of a person if they indeed did not kill him unless they wanted to measure the reaction and its effects.

Indeed, it would seem odd.

In the week to July 15, US and Iraqi forces detained 30 suspected al-Qa'eda suspects in Iraq, amongst them Khamis Abdul-Fahdawi, believed to be behind the attacks on the Bahraini and Pakistani ambassadors as well as the possible murder of Ihab al-Sherif. Another man - Abdullah Ibrahim al-Shadad, or Abu Abdul Aziz – was also detained. He has variously described as operations officer and the top operative in Baghdad for al-Qa'eda in Iraq. Zarqawi's group has downplayed the arrests, but in any case it looks like there has been a fairly substantial operation going on.

Okay, here is where I go into complete paranoid speculation. Bear with me.

Back in January 2005, it hit the press that the Pentagon had been considering a 'Salvador Option' – what the media interpreted to mean 'death squads' killing civilians at will with no respect for the law. I don't want to comment on El Salvador, not knowing enough about the civil war there to comment meaningfully.

But I did recently read a just-published piece of military scholarship on 'Pseudo Operations and Counterinsurgency' published by the Army War College and written by Lawrence E Cline, an intelligence professor and consultant who

is a retired U.S. Army Military Intelligence officer, and was trained as a Middle Eastern Foreign Area officer. He served as a United Nations (UN) Military Observer in Egypt and in Lebanon during its civil war; a staff officer with 7th Special Forces Group; advisor in El Salvador during its civil war;
senior intelligence analyst with Central Command during Operation DESERT STORM; and as intelligence production chief for United Task Force (UNITAF) in
Somalia. His final assignment was as Chief, Middle East Intelligence Branch, J-2, Joint Chiefs of Staff.

It is an erudite work of scholarship – Cline knows counterinsurgency inside out.

These 'pseudo operations' are what the media jumped all over in January. Basically they involve 'turning' captured guerrillas and using them against the insurgency, primarily for intelligence gathering though in some cases for combat operations. Generally they have had quite a good success rate, if used properly, Cline concludes. But a major problem is working out how far they can go in trying to act like insurgents (which they need to do to establish their cover) – perhaps an allusion to mistakes made in El Salvador.

One interesting section reads thusly:

The insistence of both the British in Kenya and the Rhodesians in using white officers led to practical difficulties. Reid-Daly notes the problems in "blackening-up."63 In most cases involving contacts with the insurgents, the white officers had to hide outside of the village or camp in which their African team members were meeting the guerrillas. In at least one case, however, a team used a white member as a "prisoner" to gain access to a group of guerrillas.

Okay, here's my theory.

The US has been operating 'pseudo gangs' in Iraq since at least January in an attempt to gather intelligence and to identify key figures in the insurgency and kill or capture them. Given that most kidnapping operations have carried out by gangs of 'guns for hire' – petty criminals and low-level former mukhabarat or military – who then sell their captives to political groups, it can't have been too difficult to establish a cover.

Cline notes that the British found, when they were using the Mau Mau in Kenya, that the best candidates for 'pseudo gangs' were the ones driven by a sense of adventure rather than by ideology – which fits these 'guns for hire' perfectly.

So intelligence emerges that there is a plan to hit ambassadors to Iraq, to try to scare countries off having diplomatic contact with the elected government. Maybe the gig was offered straight to the 'pseudo gang'.

Bear in mind that most of the attempts failed, because the security around the ambassadors was fairly tight. Except for the Egyptian ambassador, who went out without his security detail.

So my suspicion is that the Egyptian ambassador agreed to go as a 'prisoner' with the 'pseudo gang' in a hope that such a tantalising prize would be enough to draw out the senior leadership of al-Qa'eda in Iraq. That's why Sawiris (who has had to go to the Iraqi underworld to buy the release of kidnapped Orascom employees) thinks that he's alive – he's heard the plan on the grapevine. And they managed to nab Zarqawi's man in Baghdad as a result of what looks to have been a very high-risk sting operation.

That's if he is alive. If it turns out he is dead, then my sincerest apologies for indulging in this speculation.

Tuesday, July 19, 2005

The Egyptian Suspect

Issandr el-Amrani (the editor of Cairo Magazine) is saying that he thinks the Egyptian (bio)chemist Magdy Al Nashar may have had nothing to do with the bombings in London. He's also got a very good backgrounder on the guy in the magazine, which does tend to support the idea that al-Nashar had far more to lose than he had to gain by assisting in the attack.

But then there's a flipside. When the communiqué was released just after the bombings, Juan Cole (Prof. of History at Michigan Uni) said that it struck him as the writing of an Egyptian in the Ikhwan or al-Jihad al-Islami mould rather than a Salafi in the al-Q mould.

Juan Cole quotes al-Hayat as saying that the guy is now confessing helping Hasib Hussein (the bus bomber) get an apartment - the one currently being searched by UK police. There are some reports swirliing suggesting that Nashar may even have had links to Islamic Jihad, but some of these have been pulled so they don't look very robust at present.

The Egyptian Interior Ministry, for its part, is reiterating that al-Nashar is claiming to be innocent, and is emphasising that they believe that he has nothing to do with al-Qa'eda in any way, shape or form.

This is at odds with British claims that a 'clear al Qa'eda link' is likely.

I wonder why the Egyptian government is saying what it's saying, then.

It could tie into the country's general downplaying of anything resembling organised militant activity - vid. the reaction to the small spate of terrorist attacks in Cairo in April, which the government attributed to a small, badly organised group of radicals.

For one, the government has long suggested that after Omar Suleiman's crackdown, organised militancy is no more in Egypt, so the claims fit that pattern. For another, it may have something to do with the internal politics of the NDP - after all, the argument of the old guard has long been that democratisation would open up a Pandora's Box of Islamic radicalism and violence, and that the only way to maintain stability is to maintain the state of emergency and military control.

Mubarak the elder has made an explicit decision to side with the reformist wing of the NDP, leaving the old guard looking very confused and rather disorganised. Any hint of organised militancy could play into their hands, though, as it would translate into political capital readily cashed with the military.

That said, I don't think this guy is the mastermind - more likely some peripheral character who was leant on to help find a flat and later to provide materials smuggled out of the lab.

Saturday, July 09, 2005

London bombs

Oxford Analytica has quite a good analysis of the London bomb attacks. Juan Cole points out that the statement released by the Al-Qaeda in Europe group, if authentic, sounds less like Salafi rhetoric and more like pan-Arabist rhetoric.

Everyone I know in London seems to be fine, which is reassuring.

Single mums = Criminals in UAE

I'm more than slightly taken aback by this report of a stewardess being convicted of being pregant out of wedlock:

The Singaporean stewardess - who works for an international airline and lives in Dubai - fainted on-board a plane heading to England. It was found out later that she was pregnant out of wedlock.

A court has sentenced her to one month in jail. However, the ruling has been suspended and the case has been referred to the Sharia Court after the suspect said that she is married.

It leaves a bit of a sour taste, doesn't it?

Wednesday, July 06, 2005

Janan Harb

Ha! I was right - she *is* a Scientologist! See here


In a change from the Middle East, I'm going to comment on an interesting - if controversial - article that I just read on Spiegel Online.

Here's the beginning of the interview:

SPIEGEL: Mr. Shikwati, the G8 summit at Gleneagles is about to beef up the development aid for Africa...

Shikwati: ... for God's sake, please just stop.

SPIEGEL: Stop? The industrialized nations of the West want to eliminate hunger and poverty.

Shikwati: Such intentions have been damaging our continent for the past 40 years. If the industrial nations really want to help the Africans, they should finally terminate this awful aid. The countries that have collected the most development aid are also the ones that are in the worst shape. Despite the billions that have poured in to Africa, the continent remains poor.

SPIEGEL: Do you have an explanation for this paradox?

Shikwati: Huge bureaucracies are financed (with the aid money), corruption and complacency are promoted, Africans are taught to be beggars and not to be independent. In addition, development aid weakens the local markets everywhere and dampens the spirit of entrepreneurship that we so desperately need. As absurd as it may sound: Development aid is one of the reasons for Africa's problems. If the West were to cancel these payments, normal Africans wouldn't even notice. Only the functionaries would be hard hit. Which is why they maintain that the world would stop turning without this development aid.

In essence, our good will is perpetuating a system of rentier states in Africa based on aid money. The principle is the same - getting money for no productive work - and the result is the same: a huge, overweaning and corrupt bureaucracy that is the main distributive channel of the rents and the main locus of political power.

I'm reminded of Marx's observation that capitalism was a necessary waypoint towards communism. It does seem that the disaggregated decision-making and the diffusion of political and economic power that are characteristic of free market economies are the greatest bulwarks against the centralisation of power in an elite class.