DEPARTMENT OF FOREIGN AFFAIRS

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DEPARTMENT OF FOREIGN AFFAIRS The Middle East -
relations with Gulf States and Iraq Presentation
to the Parliamentary Portfolio Committee on
Foreign Affairs
18 October 2005
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• THE MIDDLE EAST
• Introduction Overview of the Region in a Global
  Context
• DFA defines the Middle East region as stretching
  from Israel, Lebanon and Syria on the Eastern
  Mediterranean coast to Iran on the Persian Gulf,
  thus excluding Afghanistan.
• Region consists of 14 countries, e.g. approx 1 in
  every 14 of the 191 UN member states in the
  world, with only 5 of world population.
• Its impact on the global scene however much
  larger for the following reasons
• It is the largest oil producing region in the
  world, accounting for 29 of total world
  production in 2004

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• THE MIDDLE EAST
• Introduction Overview of the Region in a Global
  Context
• It is the birthplace of 3 of the worlds
  principal religions which have played - and
  continue to play - a major role in shaping world
  history.
• The long-lasting Israeli-Palestinian conflict,
  which is the focus of ongoing world-wide
  attention.

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• THE MIDDLE EAST
• Introduction Overview (cont)
• SA objectives in the Region.
• In context of SA Governments current domestic
  and international priorities, the DFA remains
  focussed on two principal objectives in the
  Middle East, namely
• Political Assisting international efforts
  aimed at solving the major conflicts in the
  region and preventing the proliferation of WMD
  in the Middle East.
• Economic Promoting Trade, Investment and
  Tourism, as well as scientific and technology
  exchanges, with countries in the region, also in
  context of NEPAD and the promotion of South-South
  relations

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• THE MIDDLE EAST
• Economic Relations
• SA two-way trade with ME in 2004 amounted to
  R45,68bn (compared to approx R5,6bn in 1994), but
  with SA exports accounting for only some 20 of
  that figure, due to large oil imports from Saudi
  Arabia (approx 45 of total oil imports) and Iran
  (approx 33).
• During period Jan-June 2005, SA exports
  accounted for 21,4 of total two-way trade of
  R24,2bn.
• SA exports to region include coal, iron and
  steel, chemicals, machinery and agricultural
  products.

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• THE GULF REGION
• Economic Relations
• Focusing on the Gulf States sub-region, this
  comprises the following countries
• Bahrain, Iran, Kuwait, Oman, Qatar, Saudi
  Arabia and the United Arab Emirates (UAE),
  although DFA includes Yemen - which is situated
  not on the Persian Gulf but on the Red Sea - in
  the sub-region for practical reasons.
• Aside from Iraq, all the oil-producing
  countries of the Middle East are located in this
  sub-region.
• Gulf oil revenues expected to reach US 300bn
  in 2005, compared to US 61bn in 1998.
• Since 2001, stock markets of countries forming
  part of the Gulf Co-operation Council (GCC) -
  i.e. all the Gulf States excluding Iran and Yemen
  - up a collective 400, mostly due to high oil
  prices.

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• THE GULF REGION
• Economic Relations (cont)
• Against this background, closer economic ties
  with the Gulf States region are regarded as a
  high priority for SA and promoted by means of
• Residential diplomatic representation.
• Ministerial visits.
• The signing of appropriate agreements.
• The establishment of structural bi-lateral
  frameworks, I.e. Joint Commissions/Partnership
  Forums.
• Business seminars in SA provinces.
• South Africa has residential diplomatic
  representation in 6 of the 8 States in the Gulf
  sub-region - no such representation in Bahrain
  and Yemen.

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• THE GULF REGION
• Economic Relations (cont)
• Only Bahrain from the sub-region has no
  diplomatic representation in SA.
• DTI only represented at SA Consulates-General
  in Dubai and Jeddah.
• Ministerial visits from SA to Gulf region
  Recent bi-lateral visits include those of Foreign
  Affairs Minister Zuma to Kuwait, Oman and the
  UAE a visit by Trade and Industry Minister
  Mpahlwa to Bahrain, Kuwait, UAE and Yemen and
  visits by Defence Minister Lekota to Saudi
  Arabia.
• Incoming Ministerial visits from the region
  The Omani Foreign Minister visited SA during Sept
  2005, while the Iranian Deputy Foreign Minister
  visited in July 2005 and the UAE Health Minister
  earlier this year.
• Economic related agreements signed with the
  Gulf region These include
• Air Services (with Iran, Qatar, UAE and Yemen)

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• THE GULF REGION
• Economic Relations (cont)
• Double taxation and fiscal evasion (with Iran,
  Kuwait and Oman)
• Health (with Iran)
• Promotion and reciprocal protection of
  investments (with Iran, Kuwait Qatar and Yemen)
• Trade (with Iran, Kuwait, Saudi Arabia, UAE
  and Yemen
• Structured bi-lateral frameworks
• Joint Commissions are in existence with Iran
  and Saudi Arabia, with meetings normally held
  annually - alternatively in each country. Next
  sessions likely to take place in Jan 2006 with
  Saudi Arabia and in May 2006 with Iran -
  co-chaired by respectively T I Min Mpahlwa FA
  Min Zuma.
• Partnership Forums Negotiations under way to
  establish such a forum with Yemen, co-chaired at
  senior official level - also engaging other Gulf
  States on this issue.

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• THE GULF REGION
• Economic relations (cont)
• Business seminars in SA provinces To create
  greater awareness in SA provinces of business
  opportunities in the Middle East and Asia, DFA in
  process of holding business promotion seminars in
  each SA province in co-operation with local
  Chambers of Business.
• Such seminars already held in Western Cape (Feb
  2005) and KwaZulu-Natal (May 2005) - well
  attended by local business people and addressed
  by, inter alia, local ME diplomatic
  representatives at request of DFA.
• Air links and tourism SAA does not fly to the
  Gulf region at present but has a code-sharing
  agreement with Emirates Air (UAE), which has 14
  flights a week to SA.
• Other Gulf airlines flying to SA
• Qatar Airways (4 flights a week)
• Saudi Arabian Airlines (2 flights a week)

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• THE GULF REGION
• Economic relations (cont)
• Yemenia (2 flights a week).
• Gulf Air is expected to operate 3 flights per
  week from Bahrain and Ittihad Airlines, 2 flights
  a week from Abu Dhabi, as from December 2005.
• Tourism SA Tourism has no representation in
  the Gulf region, but the promotion of tourism
  from the region to SA a major objective for all
  SA diplomatic Missions based there.
• Last year some 8 100 tourists visited SA from
  the Gulf region, with Saudi Arabia, UAE and Iran
  the most important sources of tourism from the
  region. Figure however somewhat distorted due to
  exclusion of many foreign nationals from other
  countries working in the region.
• Current state of economic ties
• Many SA companies involved in projects in
  region, some valued at hundreds of millions US
  dollars.

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• THE GULF REGION
• Economic relations (cont)
• Prominent SA involvement in the construction
  industry (e.g. in the UAE) - also in the hotel
  restaurant business, as well as in the medical
  field.
• SA investments in Gulf region
• These include major petrochemical projects by
  Sasol in Iran and Qatar, retailers (Woolworths,
  Truworths) in the UAE and companies in the food
  industry (Nandos) in Oman, Qatar and UAE.
• Gulf investments in SA
• These involve Kharafi Holdings of Kuwait
  (Pretoria Sherator Hotel Towers, the Oubaai
  Golf Estate outside George), International
  Financial Advisors of Kuwait (Zimbali Coastal
  Resort), Saudi Oger (Cell C) and Al-Baraka Bank
  of Saudi Arabia.
• SA exports to Gulf region UAE, Saudi Arabia,
  Iran Oman most important markets during 2004,
  followed by Kuwait and Yemen.

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• THE GULF REGION
• Economic relations (cont)
• SA imports from region Saudi Arabia, Iran,
  UAE, Qatar Yemen most important sources from
  region during 2004.
• Economic skills enhancement for SA diplomats in
  region At request of DFA, authorities of the
  UAE arranged a trade and investment promotion
  training course in their country for SA Heads of
  Mission in the Middle East during Sept 2005.
• Valuable insight was obtained during the
  training seminar as to the reasons why the UAE
  was able to establish itself as the economic hub
  of the region.
• Regional co-operation A concerted effort is
  being made to increase active co-operation
  between SADC and the GCC (Gulf Co-operation
  Council).
• In this context, Executive Secretary of SADC
  and SG of the GCC agreed on regional co-operation
  with initial economic focus and on conclusion of
  MOU, during a meeting in Riyadh in June 2005.

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• THE GULF REGION
• Political relations
• SA maintains good political relations with all
  the countries of the Gulf region, as exemplified
  by the recent Ministerial visits to and from the
  region already mentioned.
• There are no major conflicts in the Gulf
  region, aside from sporadic terror attacks in
  Saudi Arabia. DFA continues to monitor the
  situation closely, through its diplomatic and
  consular Missions in Riyadh and Jeddah.
• Principal international issue of concern in the
  region relates to the ongoing dispute between
  IAEA and Iran pertaining to that countrys
  nuclear programme.
• SA supports Irans right to develop nuclear
  energy for peaceful purposes, but continues with
  high-level efforts to achieve a solution
  satisfactory to both sides.

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• THE GULF REGION
• Political relations (cont)
• These efforts include ongoing engagement with
  the Iranian authorities on confidence building
  measures which will effectively allay
  international fears regarding an Iranian nuclear
  weapons programme.

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• SA RELATIONS WITH IRAQ
• Background
• Although having a small coast line on the
  Persian Gulf, Iraq is regarded by DFA as forming
  part of the Levant sub-region, which also
  includes Israel, Jordan, Lebanon, Palestine and
  Syria.
• Iraqs economy is dominated by the oil sector,
  with the country having the second largest oil
  reserves in the world. The sector has
  traditionally provided approx 95 of the
  countrys foreign exchange earnings.
• Iraq continues to receive close attention from
  the international news media in the light of the
  ongoing violence in the country.
• Violence generally takes the form of suicide
  and other bomb attacks on the US-led coalition
  forces present in the country and against the
  newly established Iraqi authorities, notably its
  police force.

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• IRAQ
• Background (cont)
• Principal sources of violence appear to be
  foreign Islamic militants - notably Al-Qaeda
  supporters - opposed to the US-led occupation of
  Iraq, as well as disgruntled former members of
  the Saddam Hussein regime.
• The latter group are seemingly bent on
  regaining power through violence.
• Major issue of international concern is the
  apparent lack of political reconciliation between
  the minority Sunni and majority Shia communities,
  with calls for attacks by Sunni religious leaders
  on the Shias.
• Shia community mainly established in the south
  of the country, with the Sunni community in the
  center and a third important community, the
  Kurds, located in the north.
• This has led to fears concerning a possible
  future disintegration of Iraq into three separate
  entities, in the event of unsuccessful national
  reconciliation.

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• IRAQ
• Background (cont)
• The current Transitional Government of Iraq
  established after legislative elections in
  January 2005.
• This government replaced the Interim Government
  put in place under UN auspices in June 2004,
  following the overthrow of the Saddam Hussein
  regime by the US-led invasion of the country in
  March 2003.
• Principal task of transitional government was
  to negotiate a new constitution acceptable to a
  clear majority of all three communities in Iraq.
• Main concern was Sunni rejection of the
  constitution, possibly resulting in ongoing lack
  of national reconciliation and continued
  violence.
• National referendum on draft constitution
  scheduled for, and held on, 15 October 2005.
  Initial indications are that voter participation
  exceeding 60, with more Sunnis and less Kurds
  voting than expected. Results are only expected
  later this week.

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• IRAQ
• SA relations with Iraq
• At present SA has no diplomatic representation
  in Iraq, but developments in country are
  monitored and reported on by the SA diplomatic
  Missions in neighboring Jordan and Kuwait.
• Given the importance of the country, SA would
  like to establish a diplomatic Mission in Baghdad
  as soon as circumstances permit. Ongoing
  violence and lack of security are however
  principal obstacles.
• Iraq does have residential diplomatic
  representation in SA, with a new Iraqi Ambassador
  having presented credentials to President Mbeki
  during June 2005.
• High-level interaction with the current Iraqi
  government ensued through the recent visit to SA
  of the Iraqi Deputy Minister of Foreign Affairs,
  Dr Albayati, who had substantial discussions with
  his South African counterpart, Mr Aziz Pahad.

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• IRAQ
• SA relations with Iraq (cont)
• During these discussions, Dep Min Pahad
  indicated that the SA Government would start the
  process aimed at opening a SA diplomatic Mission
  in Baghdad.
• This would be done by sending an advance team
  as soon as the security situation permitted it.
• At meeting with Dep Min Pahad, the Iraqi Deputy
  Minister asked for SA assistance in supporting
  international efforts aimed at finding a peaceful
  resolution to the ongoing conflict in his
  country.
• In addition, SA assistance was asked on
  practical issues, such as in the training of
  Iraqi diplomats. Dep Min Pahad indicated that SA
  would look at the possibilities of providing such
  assistance.
• Economic ties During 2004 SA goods to the
  value of R105,6 million were exported to Iraq,
  according to SA Revenue Service.

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• IRAQ
• SA relations with Iraq (cont)
• Exports mainly consisted of machinery, transport
  equipment, base metals, textiles, plastic
  products, chemical and mineral products and
  prepared foodstuffs.
• Given the prevailing security situation in Iraq,
  SA business visits to that country cannot be
  encouraged by DFA at present, but possibility of
  Iraqi business visits to SA discussed during
  visit of Dep Min Albayati to SA.
• The latter also extended invitation to SA to
  invest in the oil, gas and mineral sectors in
  Iraq.
• Business contacts between two countries further
  promoted and encouraged during a business seminar
  organised in Amman, Jordan, during May 2005,
  through the involvement of the SA Embassy in that
  country.

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• IRAQ
• SA relations with Iraq (cont)
• Considerable number of SA citizens reportedly
  present in Iraq, said to be involved in the
  provision of physical security to some foreign
  companies and other entities, resulting from the
  current worrying security situation in the
  country.
• While the possibility exists that these persons
  are engaged in activities in contravention of the
  Foreign Military Assistance Act, it is difficult
  to obtain accurate information in this regard,
  given absence of SA Mission in country.

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• CONCLUSION
• Challenges facing SA diplomacy in Gulf region and
  Iraq
• In oil-rich Gulf States, recent unprecedented
  high oil prices have resulted in a substantial
  increase in financial revenues in these
  countries.
• Challenge for SA is to attract a sizable
  percentage of these funds invested abroad for FDI
  in our country, as well as on the rest of the
  African continent, in the context of the NEPAD.
• A similar challenge exists in attracting
  substantial tourism from the region, given the
  obvious impact which increasing oil revenues have
  on the disposable income of inhabitants in these
  countries.
• Diplomatic activities focused on attracting
  tourism need to include medical tourism, i.e.
  ensuring that Gulf States inhabitants regard
  South Africa as a credible and attractive
  destination for first-class medical treatment.

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• CONCLUSION
• Challenges facing SA diplomacy in Gulf region and
  Iraq (cont)
• Both as regards investment and tourism, SA
  should endeavour to capitalise on anti-ME
  sentiments perceived in some Western countries
  following the 9/11 attacks in the United States,
  resulting in ME citizens allegedly feeling less
  welcome in these countries.
• Practical consequences hereof demonstrated by
  substantial withdrawal of Arab funds from US
  after 9/11, with annual new investments from Arab
  countries in US amounting to US1,3bn between
  2001 and 2003, compared to US25bn before 9/11.
• In violence-stricken Iraq, the challenge for SA
  is to effectively assist the process of national
  reconciliation in the country in the (hopefully
  temporary) absence of a residential diplomatic
  Mission in Baghdad.

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• CONCLUSION
• Challenges facing SA diplomacy in Gulf region and
  Iraq (cont)
• In this context, even visits by official SA
  delegations are very problematical at this stage,
  given the high-level of physical risk involved.
• In view of the countrys enormous oil wealth
  and large reconstruction needs, it would clearly
  be to SAs benefit to developed extensive
  economic ties with Iraq.
• The challenge here would however be striking a
  balance between encouraging and facilitating
  increasing SA business sector involvement in Iraq
  with a need to avoid exposing our business people
  to any unnecessary physical danger.
• One solution is perhaps to encourage an
  increasing number of visits to SA by the Iraqi
  business community.
• This will however not obviate the need for SA
  business people to be physically present in Iraq
  if their purpose is active involvement in the
  rebuilding of that countrys physical and
  services infrastructure.

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• CONCLUSION
• Challenges facing SA diplomacy in Gulf region and
  Iraq (cont)
• Much will therefore depend on a successful
  process of national reconciliation in Iraq and
  the ability of its authorities to bring about a
  sharp decline - and eventual elimination - of
  sectarian and fundamentalist violence.

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• CONCLUSION
• Reasons for SA involvement in the Middle East
• Finally, it is evident that it is very much in
  SAs interest to remain actively engaged in the
  ME region.
• This is necessary, firstly, in the context of
  ensuring that this engagement makes a substantial
  contribution to the economic development of our
  country and the African continent as a whole.
• This would be done if such engagement results
  in job creation, as well as transfer of
  appropriate technology and skills, both in SA and
  elsewhere on the African continent.
• Secondly, SA engagement is essential in the
  context of making an effective contribution to
  world peace and security.

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• CONCLUSION
• Reasons for SA involvement in the Middle East
• This should be done by actively assisting
  international efforts to bring about an end to
  the serious conflicts which have plagued the ME
  region and have been perceived by some as
  contributing to a so-called clash of
  civilisations.
• DFA remains eager to play a significant role in
  this regard.
• Thank you for your attention.