Issue Two

IN THIS ISSUE
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In the first quarter of 2017, West Asian and North African (WANA) countries were largely at a political standstill – ceasefires by and large held, while resolutions for other conflicts remained paralysed. No grand overtures were made by regional or global powers. The game on the ground is being marked in inches, seen in the door-to-door fighting by Iraqi forces in Mosul and through the olive branches being extended to old foes and new friends.

Trends

Across WANA this last quarter, regional powers attempted to strengthen their positions while global powers sought to cement their influence. After its influential victory in Aleppo at the start of the year, the Syrian government and its Russian patrons looked to solidify their control and focus on the next move. And, as the new US administration draws up its regional strategy, it is Moscow that is guaranteeing the Syrian peace talks and pivoting to influence events in Libya. While Iran and Turkey squabble over the future of Syria, Saudi Arabia continues its realpolitik approach to regional alliances, with Riyadh moving to mend ties with Baghdad.

The push to diversify oil economies continues, and the GCC is now on the same page with regards to the long-awaited introduction of VAT. In Algeria, an ongoing oil slump continues to cause pain, with cuts being made across the board. Elsewhere, in Egypt, last quarter’s currency devaluation has allowed for the return of foreign investment and a slow uptick in the country’s economic projection. However, on the streets, the pain of skyrocketing inflation and the slashing of subsidies has led to protests.

On the security front, the fight against Daesh in Iraq and Syria remains a priority for the region. Important headways were made in pushing Daesh out of eastern Mosul, and a much thornier fight now awaits in the western half of the city, which, with its densely populated neighbourhoods and centuries-old architecture, will force the fight to take place on foot. Farther south, in its self-proclaimed capital Raqqa, Daesh has almost completely been encircled by the Syrian Democratic Forces. But while the Kurdish-led, US-backed troops spearhead the fight, they find themselves distracted by possible sideswipes from Turkish-backed rebels in the north. This may slow down the push into Raqqa.

Countries

While Algeria struggles to see beyond President Abdelaziz Bouteflika and the continuing pain of low oil prices, it has largely remained stable – anchored by a strong security apparatus and an opaque but powerful political procession.

In Turkey, all eyes are on the upcoming constitutional referendum, and with last summer’s coup still in view, President Recep Tayyip Erdogan is aggressively rallying his base. The consequence has been a spike in tensions across sociopolitical lines and neighbouring countries.

In Yemen, there is no end in sight for the conflict or humanitarian disaster that has followed. The last quarter was marked by an escalation in US engagement, a push by anti-Houthi forces along the Red Sea coastline, and internal tensions in Taiz and Aden.

Deep Dives

Iran’s struggle to attract foreign investment highlights the ongoing repercussions of (since partially removed) international sanctions, investor timidity, and ongoing domestic structural weakness. Even with Iranian leaders on the charm offensive, the country’s economic and political climate is nuanced.

In our 'black elephant' series, we look at cybersecurity in the GCC. While the council continues to focus on conventional threats from Iran, no threats have developed faster than those in the cyber domain. In that sense, the necessary scrutiny, investment, and capacity to counter Iranian cyber threats are matters of urgency that have yet to receive the attention they deserve.

Political Paralysis with Economic Momentum

Diverse agendas in a convoluted region

Iran and Turkey flexing over Syria
Today, Russia, Turkey, and Iran are the guarantors of the Syrian ceasefire. Moscow is leading the pack and taking great lengths to broker an agreement that Russian President Vladimir Putin can promote. The Russian-convened Astana talks focused on guaranteeing the ceasefire, while the UN-led parallel Geneva talks focused on a comprehensive solution.

Although they may have opened the door to more substantial proceedings in Geneva, the Astana talks were largely a failure. Rather than compromise, Syrian President Bashar Al Assad would rather ride the momentum of the government’s Aleppo win, infighting between rebel groups, and a lack of strategic direction from the opposition. He is also reluctant to give up now after the new recognition he has won regionally, from Jordan, Turkey, and Egypt, and internationally – particularly following comments made at the start of the year by UK Foreign Minister Boris Johnson.

UN Special Envoy for Syria Staffan de Mistura at a conference following Syria peace talks in Astana, Kazakhstan, January 24, 2017. Mukhtar Kholdorbekov/Reuters/phocal Media

Russia finds itself mediating between Turkey and Iran as much as with Syria’s various parties. Tensions peaked in February when Turkish President Recep Tayyip Erdogan and his foreign minister accused Iran of pursuing ‘Persian nationalism’ in Syria and Iraq. Iran, in return, issued a thinly veiled threat: “We are acting patiently, but there is a limit to that. If our Turkish friends repeat these type of remarks, we will have to respond.” Strained relations between the two nations place a sustainable agreement on Syria far from reach.

At the end of January, in an attempt to entice Turkey and appear neutral, Moscow chided Damascus for blaming terrorists for attacks it had carried out. Moscow also allowed two armed rebel groups, once labelled extremists, to participate in the Astana talks. However, this new Russian pragmatism has little to show in terms of results.

Russia, cementing a regional presence
Following the Syrian government’s resounding success in Aleppo, Russia is looking for ways to cement its own victories, bolster its allies, and spread its realm of influence. Emboldened by a lack of regional leadership, Russia has made clear its intentions. However, this is easier said than done.

Now, Moscow has begun to pivot towards Libya. The North African country is a strategically important nexus between Africa and Europe, and Russia is acutely aware of the bruising Europeans have taken since the overthrow of former ruler Muammar Qaddafi. For Putin, the Libyan crisis could be the low-hanging fruit in his wider geostrategic plan to counterbalance Western influence in WANA.


“Over the medium to long term, Russia will likely position itself to recover some of the billions of dollars lost in arms sales and construction contracts after the onset of the 2011 Libyan revolution.”

Over the medium to long term, Russia will likely position itself to recover some of the billions of dollars lost in arms sales and construction contracts after the onset of the 2011 Libyan revolution. The first signal of this shift came in late February when Russian oil company Rosneft signed a deal with the technocratic Libyan National Oil Corporation. Russia’s support for General Khalifa Haftar, military commander of Libya's eastern government, was well-publicised after one of its warships, en route from Syria, stopped in Libyan waters. Haftar was flown aboard and given a personal tour following a video conference with Russian Defence Minister Sergey Shoigu.

Meanwhile, in the Mediterranean, Russia is also vying for access to Egyptian, Libyan, and Algerian ports. With a strategic naval base in Tartus, Syria, Russia wants to ensure its ships can access ports across the Mediterranean arc, enabling a military presence from anywhere between Morocco and Syria. Rebuilding Moscow’s military presence in the Mediterranean is one of the country’s maritime goals.

Naval passages
Outside of the fight against Daesh in Iraq and Syria, Yemen is the most active conflict zone across WANA. While the Countries section of the second WANA Quarterly hones in on the specificities of the battle, the fight for control over regional water passages is best illustrated by the fight for control over Bab Al Mandeb Strait. By way of example, in early February, a Saudi frigate was hit by a remote-controlled boat filled with explosives. The attack, claimed by Iranian-backed Houthi forces, killed two crew members.


“Bab Al Mandeb Strait and the Red Sea are passageways to the Suez Canal, and for the oil and gas industry more broadly.”

Bab Al Mandeb Strait and the Red Sea are passageways to the Suez Canal, and for the oil and gas industry more broadly. These inflexion points are safeguarded by the US, which recently introduced three warships in and around the strait, including the navy destroyer USS Cole. The additional defence was not without cause: A few weeks prior, the USS Mahan launched warning shots at four Iranian fast-attack vessels near the Strait of Hormuz. In late February, in response to the increased US naval presence and intimidation by the new US administration, Iran launched extensive naval drills across the Strait of Hormuz, Bab Al Mandeb Strait, Gulf of Oman, and northern parts of the Indian Ocean. With tensions escalating in these geopolitical hotspots, naval passages around the Gulf are likely to become the arenas for further country-to-country intimidation, thereby requiring close monitoring.

Fig leaves and olive branches in the Gulf
After assuming the presidency in late 2016, Lebanon’s Michel Aoun spent much of the last quarter engaging with the Gulf, most notably, Saudi Arabia. Following his January visit to Riyadh, Saudi Arabia’s Minister of State for Gulf Affairs Thamer Al Sabhan headed to Beirut with a new Saudi ambassador in tow. However, Hizbollah’s alliance with Aoun will limit any depth in relations – after he backed Hizbollah following leader Hassan Nasrallah’s statements on Yemen and Bahrain.

Aoun’s vocal support for Hizbollah at the beginning of March poured cold water on big GCC-Lebanon dreams, with Saudi Arabia’s King Salman cancelling a trip to Beirut in response. However, in an effort to reduce tensions, Lebanese Prime Minister Saad Al Hariri accompanied Aoun to an Arab League summit in Aqaba, Jordan, in late March.

Saudi Arabia is also reaching out to Iraq. In late February, Foreign Minister Adel Al Jubeir met with Iraqi Prime Minister Haider Al Abadi and Foreign Minister Ibrahim Al Jaafari, marking the first visit to Iraq by a Saudi foreign minister since 1990. During the meeting, Al Jubeir also announced he would appoint an ambassador to Baghdad. For the Saudis, this is an important opportunity to counterbalance Iranian influence in Iraq as the fight against Daesh in Mosul continues. It is also an occasion to show leadership while the US develops a wider regional agenda.


“While it may be tempting to forecast what impact US President Donald Trump will have on the region, his administration is still in its early days.”

While it may be tempting to forecast what impact US President Donald Trump will have on the region, his administration is still in its early days. So far, there have been many more conflicting words and statements than actions on Iran, Israel-Palestine, and the fight against Daesh. With little to dissect or conclude, the erratic Trump administration remains a wildcard in a region already thick with actors and plans.

Close by, a fig leaf was extended to Iran via Kuwait and Oman. Kuwait, after hosting peace talks last summer between Yemen's warring parties, welcomed Iranian President Hassan Rouhani in February. Although the visit could have been viewed as Kuwait asserting its independence (it has a sizeable population with Iranian roots), statements released afterwards highlighted it was speaking on behalf of the GCC in “pushing for normalisation and the opening of dialogue”. 

Oil sticks; cuts and diversification are ongoing
With oil prices having jumped from less than $30 a barrel to more than $50 a barrel in the space of a year, regional producers have been handed a huge boon. Surprising analysts, the November 2016 OPEC deal has not only held, but has shown high levels of compliance, helping to shrink bloated oil inventories (especially in the US) that had until then kept a lid on prices. The International Energy Agency called it “one of the deepest cuts on record”, with an estimated 90% compliance rate after month one. While the UAE and Iraq were reported to be early laggards, Saudi Arabia has gone above and beyond. But, regardless of the deal’s success, the matter of diversified economies remains one of urgency for oil-exporting countries.

In Saudi Arabia, in line with Deputy Crown Prince Mohamed bin Salman’s Vision 2030 plan, cultural events are on the up. In Jeddah, the Saudi General Entertainment Authority (GEA) tacitly hosted the inaugural Comic Con exhibition as well as a public concert featuring Saudi singer Mohamed Abdu. When some of the kingdom’s highest religious authorities denounced the government for approving the concert and other mixed-gender cultural events, the GEA took a nuanced approach. Following Comic Con, the authority publicly expressed regret for “unspecified violations”. For the Saudi government, tact and acumen will be required to move forward on Vision 2030’s ambitious cultural objectives. Like Saudi Arabia, other countries in the region responded to the oil crisis by increasing financial support for cultural schemes. Some, however, went the other way: In January, Algeria announced spending for festivals was to be cut anywhere from 20% to 50%.

The advent of GCC taxation
The diversification of GCC government revenues continues to take shape; after a decade of discussions, GCC-wide VAT is now only a year away. On that front, the last quarter was an important litmus test for GCC countries to meet the January 1, 2018 deadline for a comprehensive rollout. In late January 2017, Saudi Arabia approved the introduction of VAT. The following month, Bahrain’s under-secretary for finance released more information to the press.


“All GCC countries are working together to build the legislative and bureaucratic framework needed for proper implementation of VAT.”

All GCC countries are working together to build the legislative and bureaucratic framework needed for proper implementation. The 5% tax is not expected to apply to the health and education sectors, or to products that could have a disproportionate impact on lower income brackets. The UAE alone is expected to yield Dh12bn [$3.2bn] in the first year of implementation and up to Dh20bn [$5.4bn] the following.

Oman, a country that felt the pinch of lower oil prices more than its Gulf neighbours, went one step further this last quarter, with Muscat amending tax legislation to include small businesses. Under the new tax code, all companies are now liable to pay a flexible tax rate depending on their profits.

A resilient but wary Egyptian economy
Months after Egypt made international headlines for allowing its currency to free float, the economy has begun to stabilise. This painful recovery is being led by several factors: A resurgence in foreign investment was highlighted by the pound gaining 14% against the US dollar in the first two weeks of February, and the sale of more than $1bn in Egyptian treasuries to foreign investors. The economy also received a boost following an increase in remittances and tourism, pointing to an estimated 10% drop in the government’s deficit and 1% drop in unemployment year-on-year.

But this positivity has not trickled down to the streets: The devaluation of the currency has made household goods and all imported products exponentially pricier for Egyptians, and a confident outlook on Egypt remains short-sighted. As inflation continues to rise (reaching more than 30% in February), the removal of bread subsidies has led to protests, with the potential for further social instability. Abdel Fatteh El Sisi’s government needs to prove it can transform painful reforms and short-term gains into a more substantial economic vision for sustainable growth.

Mosul: Critical fight and humanitarian situation
Security wise, regional fighting is focused on Daesh in and around Mosul. Though Raqqa is also gaining in importance, the move into the Syrian city has been slow; riddled with political and security obstacles (see Countries for more). Across the border, Iraqi Security Forces (ISF) have pushed Daesh out of east Mosul and are moving north from the airport towards the Old City, the historical centre.


The Battle for Western Mosul
Source: The Delma Institute, 2017


With the support of foreign troops that have grown increasingly active in the battle, Iraqi forces will need to internalise lessons from the first phase of fighting, learning how to limit casualties and damage to equipment. Mosul International Airport and the adjacent military base will serve as the springboard for operations into west Mosul.

This next phase of fighting is expected to be particularly difficult for many reasons, namely, that there are far more residential neighbourhoods west than east. Given the narrow streets and high population density, especially in and around the Old City, a significant amount of infrastructure is expected to be destroyed. More importantly, civilians are at great risk of becoming collateral damage – with several airstrikes having already caused mass civilian casualties.

There are an estimated 750,000 residents in the western half of the city, of whom the ISF have requested remain at home rather than flee neighbourhoods where fighting is taking place. Despite the ISF’s pleas, the UN Office for the Co-ordination of Humanitarian Affairs (OCHA) expects as many as 250,000 people to head off in search of a safer environment.

More than 350,000 people have been displaced since the Mosul offensive began, a number that was nevertheless managed by UN and Iraqi agencies whose well-established camps beyond the city limits were prepared for new arrivals. A prolonged fight in west Mosul would be far more difficult to manage: Bridges destroyed to block Daesh fighters from escaping into east Mosul have inadvertently trapped civilians, making escape to the south a perilous journey. In addition, OCHA estimates the camps can only accommodate a further 60,000 displaced people, far below the expected number of arrivals, while the UN says “available food and fuel supplies continue to dwindle, with residents resorting to burning furniture and rubbish to keep warm”.

Encircling Daesh in Iraq and Syria

Source: The Delma Institute, 2017

Inching into Raqqa
From the north, squeezing Daesh out has proved to be a more convoluted affair. As they inch closer to Raqqa, Kurdish-led Syrian Democratic Forces (SDF) have seized the majority of Daesh-held territory in the province’s countryside. The SDF are now approximately 5 km north-east of the city and working to encircle it. But while they are best positioned to lead the move into Raqqa, competition with Turkey is fierce. While the SDF remain the principal ally for US forces in the fight against Daesh in Syria, Turkey could cause a major headache.

To sweeten its demands that the US cease all support to the Kurds, Turkey has proposed two options for seizing Raqqa without the SDF. Both are impossible without the involvement of Ahrar Al Sham, an extremist organisation by all counts and one that cannot be counted on by the Americans, Russians, or Syrian government. The US will need to engage its allies to ensure fighting is focused on Daesh and that a post-Daesh governance plan is bought by all potential spoilers. US reinforcement of the SDF serves to remind Turkey where US loyalty lies.

This section focuses on developments in Algeria, Turkey, and Yemen. Algeria, with strong nationalist institutions, remains largely stable despite an impending leadership vacuum. Turkey is lit from multiple directions; between the upcoming historical constitutional referendum and hawkish engagement in northern Syria, Erdogan is making his presence felt. In Yemen, as a resolution to the conflict remains at a standstill, the anti-Houthi coalition is inching along the country’s western coastline.

Algeria

Prioritising stability amid uncertainty

Despite feeling the effects of the conflict in Libya, a slump in oil prices, and ongoing geopolitical uncertainty in the Sahel, Algeria remains largely stable – despite all predictions pointing towards an imminent crisis.

Mystery surrounds the health of President Abdelaziz Bouteflika, his plan for succession, and the government’s vision for diversifying the economy. Meanwhile, state structures and institutions such as the army remain resilient. This has enabled authorities to slowly carry on with reforms and piecemeal political offerings. Nevertheless, there is a growing chorus of concerns by opposition parties that the government’s intention is merely to sustain the status quo rather than lay out conditions for real economic and political change.

A stable country in a volatile region
For years, Algeria’s somewhat isolated geographic positioning was perceived as advantageous. That changed with the deadly attack on In Amenas gas plant in 2013. Security and military officials recognised that the country’s long – and largely unmanned – land borders could also be its Achilles’ heel.

“Algeria's borders, primarily with Mali, Niger, and Libya, and once representative of the country's strategic depth in Africa, are now closed military zones.”

These borders, primarily with Mali, Niger, and Libya, and once representative of Algeria’s strategic depth in Africa, are now closed military zones protected by some 35,000 soldiers since 2012. As a result, the country’s 2016 military budget was $10.9bn – which, at 6% of GDP, was one of the largest military budgets among Arab and African countries. This investment has had an effect, unlike those in other WANA countries: Daesh and Al Qaeda spin-offs have failed to gain any foothold in Algeria. By way of example, on February 17, the army killed 14 Daesh militants and seized arms and ammunition in Bouira, 100 km east of Algiers. However, beyond Algeria’s borders, in Mali and the wider Sahel region, the growing capabilities and resurgence of Al Qaeda in the Islamic Maghreb have been amplified after it was announced that Ansar Dine, Al Mourabitoun, and Katibat Macina were to merge with the group, thereby increasing security threats against Algeria’s oil and gas facilities.

Algeria’s neutral approach and non-interventionist doctrine has led neighbouring countries to empower its role in regional mediation and diplomacy efforts. Nowhere is this more evident than in Libya where, over the last quarter, Algeria has positioned itself as the primary mediator for all Libyan parties. While there has been little progress on this front, Algeria is unique in that it has welcomed the heads of all fighting parties to the table.


Algeria’s Military Budget, 2014-17 ($bn)

Source : Tout Sur L’Algerie, 2016

Political situation: Business as usual
As it mitigates potential spillover from unstable neighbouring countries, the government is pursuing a difficult mission: Preserving its core power structure. The pouvoir, as it is known colloquially, has resisted attempts at reform since Algeria gained independence and has largely failed to address concern over weak governance such as corruption and the breakdown of public services. Elsewhere, the last-minute call to cancel German Chancellor Angela Merkel’s visit in February 2017 due to Bouteflika’s “temporary unavailability” exacerbated concerns among Algerians. Under Bouteflika, the presidency remains the centre of power. His successor, and how power will be transferred, remains a black box.


A man removes Algerian and German flags from the streets of Algiers after German Chancellor Angela Merkel postponed a visit to the city. February 20, 2017. Ramzi Boudina/Reuters/phocal Media

The government continues to implement its own agenda, and in early February introduced a package of constitutional reforms aimed at strengthening the country’s democracy. As a good-faith gesture to the opposition – and in fear of a potential boycott of the elections by the opposition – the reforms included the establishment of the Independent Higher Commission for Elections Monitoring. The body consists of 410 members, half of whom are magistrates chosen by the High Council of Judiciary. Bouteflika, to appease the opposition, appointed Abdelwahab Derbal, a jurist, former minister, and moderate Islamist, as commission chairman.

As the May 4 parliamentary elections approach, the previously unified opposition has separated over differences on how to oppose the government’s political agenda, with some parties choosing to participate in elections and others choosing to boycott them. Former Prime Minister Ali Benflis, head of the Talaie El Hurriyet party, is boycotting the process, calling the elections “secondary, derisory, and far away from the priorities of the moment”. Opposition Islamist parties, on the other hand, have unified their ranks in an attempt to reverse defeat in the 2012 elections.


Post-Bouteflika Players
Source: The Delma Institute, 2017


A new economic growth model

This time around, elections will be held during a period of economic stress. Having benefitted from a decade of oil wealth that allowed for significant progress in human development and infrastructure, the collapse of prices over the last two years has exposed the country’s deep-rooted economic vulnerabilities. Algeria remains overly dependent on oil and gas, which account for 60% of the state budget and 95% of export revenues. Inflation increased from 4.8% in 2015 to 6.4% in 2016 and, by January 2017, stood at 8.1%. In 2017, in an effort to reduce the nation’s debt to 8% of GDP, the government’s budget revealed proposals to introduce VAT and cut state expenditure by 14%. Protests ensued.

Like other oil-rich countries, Algeria relies heavily on public spending to maintain social stability. Nevertheless, in today’s world, the government views cuts in this area as necessary, Bouteflika says:

“Today, there is a clear awareness that commodities can no longer be the base of our socio-economic development. Even if oil prices rise in the future, they will not cover all our needs, so it is important to react and employ the necessary strategies to ensure a brighter future.”

To diversify, the government recently adopted an economic model that aims to generate additional tax revenues over the next four years by increasing investments in high value-added sectors as well as through private sector contribution.

To demonstrate its seriousness, the government approved construction of a $3.3bn deep-water port project by China State Construction Engineering Corporation and China Harbour Engineering Company in El Hamdania, west of Algiers. The port, which will serve as a hub for regional trade, will link the Mediterranean to the Trans-Sahara Highway (the latter of which, upon completion, will connect Algiers and Lagos).

Nevertheless, doing business in Algeria remains complicated and littered with regulatory and bureaucratic hurdles: In the World Bank’s 2017 ‘Doing Business’ report, the country ranked 156th globally. Until holistic bureaucratic and commercial reforms target Algeria’s widespread corruption and web of regulatory requirements, the country will have trouble spurring local and foreign investors to help diversify the economy.

Social situation
Despite Algeria’s efforts to avoid cuts in education, housing, and health, citizens felt the effects of austerity measures in the form of rising food prices. On January 2, protests held in Bejaia and Bouira turned violent, leading Prime Minister Abdelmalek Sellal to label them “an attempt to destabilise the country”. 


“Since 2011, the government has raised funds for the National Agency for the Support of Youth Employment, which aims to facilitate young people’s access to micro-credit and financially support small business.”

Since 2011, the government has raised funds for the National Agency for the Support of Youth Employment (ANSEJ), which aims to facilitate young people’s access to micro-credit and financially support small business. Despite such efforts to tackle youth unemployment, almost 30% of Algerians aged 16 to 24 are unemployed – nearly three times the national average of 9.9%. The government's reassurances that ANSEJ was spared from budget cuts were contradicted by reports that in 2016 the number of projects financed by the agency fell considerably. As structural economic challenges remain, the government’s attempts to integrate youth into the workforce have had limited success.

Turkey

A war of words, ballots, and alliances

Turkish citizens have lived under a state of emergency since an attempted coup on July 15, 2016. As society works to recover, a massive state crackdown continues to gather pace, with thousands of civil servants and officers removed from public service each month and hundreds of people awaiting sentencing on terror-related charges.

Hostile rhetoric pitting “traitors” against patriots has been the defining characteristic of a political environment gearing up for a critical April referendum on constitutional reforms that would, in an unprecedented shift, expand Erdogan’s otherwise ceremonial powers. Domestic uncertainty has also been accompanied by a series of diplomatic incidents in Europe: The government had aimed to campaign among Turkish diaspora communities before meeting political resistance that has since escalated into a war of words and diplomatic summons with several states including traditional EU allies.

“As Turkish constituents prepare to vote, they must also deal with a contracting economy and twofold military operation taking place along their southeastern border.”

As Turkish constituents prepare to vote, they must also deal with a contracting economy and twofold military operation taking place along their south-eastern border. While Turkey continues to launch airstrikes on the Kurdistan Workers’ Party (PKK), it has, most notably, engaged in far-reaching policy in northern Syria geared towards the same end: To prevent the establishment of an autonomous Kurdish corridor by the Syrian Kurdish People’s Protection Units (YPG). Referred to as Operation Euphrates Shield, though it includes anti-Daesh offensives, its ultimate aim is to eliminate the militant Kurdish presence west of the Euphrates. The recent capture of Al Bab, at the crossroads of the Kurdish Afrin and Kobani cantons, has become the strategic pretext for more expansive Turkish intervention in the region.

Al Bab, the Turkish door into Kurdish Syria
As Turkey steps up to its role as the guarantor of the Syrian peace process, questions remain as to how its counter-terrorism manoeuvres in northern Syria will play out. January saw the implicit reversal of its long-standing policy calling for Al Assad’s removal, as well as the start of counter-terrorism efforts with former adversary Russia. Al Bab, once unfamiliar to most Turkish citizens, became headline news in December 2016 after Turkish soldiers entered the town in a new offensive against Daesh. Turkish fatalities drew attention to domestic political calculations on the fate of military operations post-Al Bab, raising public concerns about the longevity of Turkey’s aims.

Turkey's Role in the Fight to Retake Raqqa

Source: The Delma Institute, 2017

The country has planned for post-conflict reconstruction in areas where Daesh no longer has a presence, most notably in Jarabulus, where local police have been trained by their Turkish counterparts. Its bigger strategy, to prevent the unification of Kurdish-controlled areas in northern Syria, continues as the country’s leaders turn their sights to Manbij, where negotiations between the Syrian government and a US-backed, Kurdish-led local council have seemingly left Turkey at a standstill.

Turkey has engaged in talks with the US over potential contribution to the anti-Daesh coalition offensive in Raqqa and has advocated for the US to bypass the Kurdish-inclusive SDF and support its Arab- and Turkmen-heavy Free Syrian Army contingent. With the road from Al Bab blocked by Syrian government forces, and Manbij presenting a complicated front, Turkey’s route to Raqqa rests on a southern march from its border through YPG territory in Tel Abyad. Facing an extensive endeavour that largely depends on US decision-making mechanisms, Turkey will have to weigh the risks at a time of growing political uncertainty.

Erdogan’s constitutional reforms on the line
The constitutional referendum on April 16, which gives Turkish citizens the option to usher in an empowered presidential system, has dominated politics as a divisive campaign for votes sweeps across the country. The ruling Justice and Development Party (AKP) has pushed aggressively for the changes, arguing that only a strong leader without bureaucratic constraints can mobilise resources against external threats to Turkey’s sovereignty. With Erdogan at the forefront, the “yes” bloc has appealed to a population increasingly wary of Western intervention and fearful of internal conspirators.


Turkish President Recep Tayyip Erdogan gives a speech during a Women's Day rally in Istanbul, Turkey, March 5, 2017. Murray Sezer/Reuters/phocal Media

Though the AKP found support in the Nationalist Movement Party (MHP), political bargaining has come at a cost. The right-wing partnership has divided MHP, from which a small, yet influential, splinter group has formed to challenge party leadership – a move that has the capacity to swing conservative votes.

The “no” bloc, comprising the main opposition Republican People’s Party and Peoples’ Democratic Party (HDP), has criticised the amendments as a smokescreen, arguing they will pave the way for an autocracy. With “no” constituents largely voting along party lines, the fate of the referendum falls on undecided conservatives as well as the political mobility of a Kurdish population that has often been on the receiving end of “us vs them” rhetoric. For HDP, the campaign has resulted in an unprecedented government crackdown targeting members on charges of alleged ties with the PKK: Both HDP co-chairs are now in jail and face a long sentencing process.


“The targeting of HDP politicians is part of a larger effort, following the attempted coup, to purge the country of suspected members of terrorist and crime networks.”

The targeting of HDP politicians is part of a larger effort, following the attempted coup, to purge the country of suspected members of terrorist and crime networks. January’s Peaceful Turkey-2, one of the largest military operations since the state of emergency was invoked, saw 9,000 police units search and question almost 272,000 individuals. In addition to the dismissal of thousands of civil servants and police officers with alleged 'Gulenist' ties, co-ordinated nationwide raids have targeted Daesh and PKK members and sympathisers. Following the New Year’s Eve nightclub shooting in Istanbul, increased police presence and targeting of terror cells in urban areas has kept further Daesh attacks at bay.

Military offensives against the PKK continue as airstrikes target militant positions in cross-border operations, particularly along Iraq’s Qandil mountains. While the Kurdistan Freedom Hawks claimed responsibility for a car bomb and attempted shooting at an Izmir courthouse on January 5, the PKK carried out similar attacks against security forces across Turkey’s south-eastern provinces, most notably Sanliurfa.

Social repression mixes with economic contraction
Alongside their disproportionate effect on Turkish Kurdish civilians, post-coup legalities have greatly impacted Turkey’s educational and social framework, with professors, deans, and journalists finding themselves subject to emergency decrees. February saw the dismissal of 330 academics accused of retaining links to the Gulen movement. Several hundred internet users have also been detained on charges of sharing terror propaganda, but social media platforms, especially Twitter, remain popular tools for political expression in spite of the country’s selective broadcast ban.

Policy decisions including revisions to the national curriculum and the removal of a headscarf ban for army officers have showcased the AKP’s commitment to its ideological base. Yet, domestic reactions reveal a country that remains deeply polarised along sociopolitical lines. Other bones of contention – Turkey’s refugee policy and reports that select Syrian and Iraqi refugees are to be offered citizenship – have strained both domestic tolerance and resources, with total expenditure on refugees rising to more than $500m per month.


“The pressure on public services comes at a time of economic contraction for Turkey, with unemployment at its highest since 2009.”

The pressure on public services comes at a time of economic contraction for Turkey, with unemployment at its highest since 2009. In addition, the central government ran an eight-year record budget deficit in February, and capital inflows have suffered due to perceived political risks. This sentiment has been shared by Standard & Poor’s, which lowered its ratings outlook for Turkey from “stable” to “poor”, citing the inability of policy-makers to contain inflation after it climbed to an 11-month high of 9.2% in January. Fitch Ratings followed suit, downgrading the country’s sovereign debt to “junk” amid investor concern over the ability of financial institutions to remain independent.

Timeline of Developments and Turkish Lira/$ Fluctuations, July 2016-March 2017

Source: The Delma Institute, 2017

Erdogan has been a vocal critic of the Central Bank’s interest rate corridor policy, favouring a single rate in order to stimulate consumption and keep credit cheap. The Central Bank introduced liquidity measures to prop up the lira, which has stabilised at about 3.6 after depreciating to a record 3.9 against the dollar. But investors remain wary of divisions among Turkey’s monetary policy-makers. Despite stagnant growth and a chronic current account deficit, the government transferred public assets worth billions of dollars to a sovereign wealth fund created last year to finance large-scale infrastructure projects. The assets were used as collateral to attract foreign investment, a move seen by some analysts as an attempt to bypass regulatory channels and assert political control over the country’s largest companies.

Yemen

Political inertia with military progress

Yemenis continue to bear the brunt of fighting as conflict across the country shows little sign of abating. With UN-led diplomatic efforts having failed to pave the way for a new round of peace talks, the military situation remains unchanged, with the exception of progress made by coalition-backed forces on the Red Sea coast.

Yemen: An early target for Trump
This quarter saw the US further engage itself in Yemen, launching its largest aerial campaign yet as well as a controversial ground assault in Yakla village, Al Bayda.

In less than a week, the US carried out more than 40 aerial strikes on suspected Al Qaeda in the Arabian Peninsula (AQAP) enclaves in Abyan, Al Bayda, and Shabwa, far surpassing its previous record of 41 – carried out over the course of 2012. The country’s unprecedented counter-terrorism operations in Abyan, Al Bayda, and Shabwa, and designation of all three provinces as “areas of active hostility”, are reflective of a shift in US policy on Yemen.

Political paralysis
Despite the efforts of UN Special Envoy for Yemen Ismail Ould Cheikh Ahmed and his team, peace talks between the country’s internationally recognised government and the Houthi-Saleh alliance remain moribund. Rounds of shuttle diplomacy by (now former) US Secretary of State John Kerry to kickstart negotiations yielded next to nothing, and Trump’s administration has yet to formulate a Yemen policy – effectively placing the process on hold. For their part, the various Yemeni factions involved have done little to help; the government continues to hold tightly to its international recognition while the Houthis and their allies, confident in their ability to maintain control of key areas, dismiss the former’s ability to exert control over allied militias on the ground. For his part, new UN Secretary General Antonio Guterres has been keen to provide more focus on Yemen. However, it remains unclear if this will amount to anything more than just words.

A Houthi militant stands guard on the roof of a building overlooking a rally attended by pro-Houthi supporters in Sanaa, Yemen, March 3, 2017. Khaled Abdulla/Reuters/phocal Media

The Red Sea offensive
The one exception has been the progress made along the country’s Red Sea coast. Since January 2017, coalition-backed forces have made significant gains in coastal areas of Taiz. Largely carried out by fighters affiliated with the Southern Resistance – who tend to fight under the flag of the People’s Democratic Republic of Yemen, or South Yemen, which did not include Taiz – the offensive has succeeded in inching its way north of the key port city of Mokha. However, its aim of reaching Hudayda – the most significant port still under Houthi control – remains far from reach. Pro-Houthi forces responded to advances made in western Taiz by firing rockets and missiles towards Mokha and allegedly planting naval mines off the coast. Unidentified assailants also attacked a Saudi warship on January 31.

On other contested front lines, such as Taiz city and western Marib, fighting has largely been stalemated. While both sides have frequently claimed victories, the war has largely resembled one of attrition. That being said, internal tensions have continued to escalate.


Operation Golden Spear on Yemen’s Red Sea

Source: The Delma Institute, 2017

Internal tensions in Taiz and Aden
In the first quarter of 2017, in separate incidents, long-simmering tensions between Yemeni elements of the anti-Houthi coalitions in Taiz and Aden came to a head. In Taiz, tension between Islah and Salafi members has led to a rise of tit-for-tat assassinations and failed attacks. Alongside this, Taizis of all political stripes have bemoaned the uptick in criminal gangs operating in the city.


“In Aden, tensions between secessionist fighters and allies of President Abdrabbu Mansour Hadi boiled over into a firefight that shut the city’s airport and threatened to spill into the city.”

In Aden, tensions between secessionist fighters and allies of President Abdrabbu Mansour Hadi boiled over into a firefight that shut the city’s airport and threatened to spill into the city. While frequently contained after Gulf or government mediation, these conflicts threaten to erupt into larger battles within the country’s civil war. These come in addition to conflicts with AQAP and other jihadist groups, which hold enough operational space to launch attacks on both the Houthis and coalition-backed forces. Simultaneously, tensions within the Houthi-Saleh alliance continue to manifest themselves as both sides remain in disagreement over a successor for Ali Al Jaifi, the head of the Republican Guard who was killed in an airstrike in October.

Moribund economy, humanitarian disaster
Two and a half years after the Houthis’ takeover of Sanaa – and two years after the launch of Operation Decisive Storm – Yemen’s already weak economy has been pushed to the brink of collapse. World Bank data puts the country’s GDP growth rate at -28.1%; unemployment has reached an all-time high, imports and exports have all but dried up, and most of the country’s educated classes, including its mercantile elite, have fled. All the above has exacerbated the effects of the ongoing conflict, which has destroyed much of the country’s health, electricity, and transport infrastructure.

On top of this, shipping companies are deeply reluctant to co-operate with Yemeni traders: Cranes are being bombed at Hudaydah Port, shipments are being heavily inspected for arms, insurance premiums have spiked, and there is little confidence in the financial sector, a sentiment somewhat spurred by the controversial relocation of the Central Bank from Sanaa to Aden.

Fighting has intensified along the coast, placing key ports offline, and the humanitarian situation has worsened as a result of the country’s dependence on food and fuel imports. Delivery of key staples like wheat and rice has ground almost to a halt, leading to inflation that has exacerbated the already deepening food crisis.


The Humanitarian Emergency in Yemen

Source: World Food Programme, 2017

The numbers speak for themselves: Nearly 2.2m Yemeni children are acutely malnourished, while 462,000 suffer from severe acute malnutrition. In total, nearly 19m people – roughly 70% of the population – are in need of humanitarian assistance. Aid workers warn that as the situation shows few signs of improving, famine appears all but inevitable in the absence of a viable political solution and lack of humanitarian assistance.

This section explores the remaining international sanctions against Iran and how the country’s domestic structural weaknesses could be blamed for the slow return of foreign investment. In our ‘black elephant’ series, we explore how cybersecurity in the GCC requires more scrutiny and investment from regional policy-makers.

Iran and the Removal of International Sanctions

Structural weaknesses drive investors' timidity

On February 4, 2017, Iran extended the deadline for bids on a series of projects designed to modernise and develop its oil and gas industry. National Iranian Oil Company head Ali Kardor justified the decision by saying some of the applications received had been lacking important information. Later, after revealing Iran had moved the deadline back because it wanted to “see more companies on the list”, Kardor urged BP to join the other companies that had put themselves forward.

The extension highlights Iran’s struggle to attract foreign investments – despite the P5+1 nuclear agreement and subsequent lifting of international sanctions more than a year ago. The complexity of the issue, a certain opacity, and the prevalence of specific sanctions only partially explain investors’ timidity.

In actuality, Iran’s slow economic recovery could have more to do with domestic structural weaknesses.

Delegates including Iranian Foreign Minister Mohamed Javad Zarif pose for a picture following the signing of the Joint Comprehensive Plan of Action at the UN’s headquarters in Vienna, July 14, 2015. Carlos Barria/Reuters/phocal Media

The nuclear deal: “The start of a safer world”
The 2015 P5+1 nuclear deal – otherwise known by its official monicker, the Joint Comprehensive Plan of Action (JCPOA) – came about to stop Iran from developing a nuclear weapon and to reassure the international community about the peaceful nature of the country’s nuclear programme. For many, including former US Secretary of State John Kerry, the agreement marked the start of a safer world.

On January 16, 2016, after it was agreed Iran had fulfilled its part of the deal, JCPOA was implemented, triggering the removal of international sanctions and giving the country access to an estimated $50bn of previously frozen assets.


“The implementation of JCPOA raised hope in Iran and the international business community that rapid economic recovery lay ahead.”

The implementation of the JCPOA raised hope in Iran and the international business community that rapid economic recovery lay ahead. The deal transcended Iran’s traditional lines of fracture, and many hardliners – clerics and members of the Islamic Revolution Guards Corps (IRGC) – supported it. However, the intense media coverage failed to convey one important point: The lifting of sanctions was only partial.

Ongoing active sanctions
The UN has condemned Iran’s role in the proliferation of conventional weapons in WANA, especially with regards to supplying materiel to Hizbollah. It also prohibits Iran from importing offensive military equipment including arms, ammunition, vehicles, equipment, and spare parts. Iran is, however, authorised to purchase defensive weapons, which explains the recent acquisition of Russian S-300 surface-to-air anti-missile platforms. The UN also bans the export of any technology or equipment related to Iran’s missile programme.

These sanctions will gradually lift if Iran continues to respect its engagements. The next stage of the JCPOA will see the removal of the international embargo on conventional weapons – in 2020. This will be followed by ‘transition day’, in 2023, which will trigger the lifting of sanctions related to Iran’s ballistic missile programme, and ‘termination day’, in 2025, when the remaining measures targeting individuals including members of the IRGC will be lifted.


Joint Comprehensive Plan of Action Timeline, 2015-40

Source: AFP, Channel NewsAsia, 2016

External sanctions
Moreover, the international community continues to impose sanctions not included in the P5+1 deal:

  • The EU, critical of Iran’s human rights record, treatment of political opposition, and excessive use of the death penalty, with 1,000 executions in 2015, placed sanctions on the country for its "grave human rights violations". The bloc froze Iran’s foreign assets and banned one entity as well as 82 Iranians from entering any of its member states. It also barred the export of equipment into Iran which could be used for internal repression and monitoring of telecommunications. Even after signing the P5+1 deal in 2016, the EU confirmed it would continue to impose its own sanctions.
  • The US and EU continue to sanction a number of Iranian individuals and entities for their involvement in terrorist activities, despite Tehran’s denial. The US stance against Iran goes far back, after it designated the country a state-sponsor of terrorism in 1984. It also subjects Iran to comprehensive trade and financial sanctions under the International Emergency Economic Powers Act.

Despite their symbolic nature, these sanctions, specifically those against human rights violations, have not hindered the development of trade relations with Iran. The reasons why foreign direct investment has not flooded into the country might have more to do with internal structural weaknesses and exogenous facts.

Iran’s internal structural weaknesses
  • Iran’s revolutionary rhetoric, ongoing regional tensions with some Gulf states, and repeated calls for the destruction of Israel have created an environment undesirable for companies looking to invest.
  • Companies are also conscious of the consequences of any undesired association with Iranian hardliners. ‘Know your customer’ and due diligence processes are essential to mitigating any guilt by association, but would be difficult to manage in Iran due to its high level of opacity.
  • This opacity is compounded by a bureaucratic system where the central government is omnipresent and omnipotent. This high level of regulation hampers the facilitation of business and feeds fraud and corruption – somewhat explaining why Iran ranked 130th out of 168 countries in Transparency International's Corruption Perceptions Index 2015. 

Other external factors
  • The fear of new sanctions and ongoing re-evaluation of the P5+1 deal by Trump’s administration have exacerbated nationwide feelings of uncertainty, thereby preventing companies from developing a long-term Iran strategy.
  • Companies have adopted a wait-and-see policy and are delaying long-term investments in Iran, relying on the possible risks related to the recent US – and forthcoming Iranian – presidential elections to justify their timidity.
  • Iran also considers US Treasury Department rules restricting dollar-denominated contracts as ‘de facto’ international sanctions. Despite a recent decision to loosen these restrictions, Iran continues to promote euro- or Iranian rial-denominated contracts to facilitate their adoption and protect against possible new sanctions.
  • Iran’s slow recovery could well be explained by low oil prices and the ensuing global economic slump that continues to limit the investment capabilities of companies.

But Iran, in extending the deadline for bids for oil and gas projects, cannot hide the fact that applications have already been received from Russia’s Gazprom and Lukoil, France’s Total, Anglo-Dutch giant Shell, Italy’s Eni, China’s Sinopec and China National Petroleum Corporation, and Japan’s Mitsubishi and Japan Petroleum Exploration.

In 2016, Iran went on the charm offensive, making its international comeback. Iranian banks reconnected to the SWIFT banking system, and the country signed symbolic contracts that included the purchase of about 200 commercial airplanes from Airbus, Boeing, and ATR, and the construction of plants with European car manufacturers Renault PSA and Volkswagen.


Foreign Direct Investment into Iran, 1970-2017 ($bn)

Source: Site Selection, 2016

Iran’s recovery has been noticeably slower than expected, but with its market now open, the country’s 80m citizens are pressing on the government to increase its global connections: While many US politicians were unsupportive of the nuclear deal, they are resigned to the fact it is likely to remain in place. Said Republican House Speaker Paul Ryan in a  recent interview: “I thought it was a huge mistake, but the multilateral sanctions are done. A lot of that toothpaste is already out of the tube.”

Cybersecurity and the GCC

Protection from unattributable and asymmetric weapons

On January 23, Saudi Arabia raised an alert after the computer virus Shamoon resurfaced, infecting networks in at least 22 organisations. Believed to be the work of an Iranian state-sponsored cyber actor, the successful return of Shamoon to the kingdom – almost five years after it was used to attack Saudi Aramco and Qatar RasGas – is a reminder of WANA’s vulnerability to cyberattacks.

Given current tensions between Saudi Arabia and Iran, the attacks highlight both the increase in Iranian-sponsored cyber activity and the lack of an effective cyber defence or response strategy from the GCC. But despite the bloc’s focus on conventional threats from Iran, such as ballistic missiles, no threats have developed faster than those in the cyber domain. In that sense, devoting the necessary scrutiny, investment, and capacity to counter Iranian cyber threats is a 'black elephant' for the GCC: An issue with significant ramifications receiving insufficient attention.

Timeline of Attacks against Known GCC Targets

Source: The Delma Institute, 2017

The cybersecurity challenge
At its core, cybersecurity is the process of protecting computer networks and systems from cyberattacks, a process complicated by the fact the internet is foundationally insecure. Beyond this, the other challenges in protecting against – and responding to – cyberattacks primarily stem from the unconventional, intangible, and anonymous nature of the domain.

Such challenges prevent entities from effectively mitigating cyberattacks. Unlike conventional domains (land, sea, air, and space) where the impact of a kinetic attack is tangible – say, by comparing one state’s military power against another, or analysing the payload of a specific weapon – the potential consequences of a cyberattack are far ranging. Furthermore, states face threats from a wider range of actors, given conventional limiters such as physical location, manpower, and financial resources have little influence in cyberspace.


“Policy-makers struggle to define the scope of cyber events and face a seemingly insurmountable challenge in planning and budgeting for them.”

Consequently, policy-makers struggle to define the scope of cyber events and face a seemingly insurmountable challenge in planning and budgeting for them. Indeed, whereas the international community became immediately aware of the danger posed by nuclear weapons following the bombings of Hiroshima and Nagasaki in 1945, there is no similar precedent in the cyber domain.

Additionally, response and mitigation efforts are further hindered by the veil of anonymity and security the internet offers; in turn a boon for attackers who can hide or falsify their identities. Were a government to provide technical evidence of who carried out a cyberattack, opposing states would nevertheless retain a high degree of plausible deniability, partly due to how poorly understood the cyber domain is, and partly due to the lack of precedent in handling such attacks. By way of example, the Russian government continues to refute claims by the US government over its alleged interference in the 2016 US presidential election.

These challenges create an environment where no mechanisms exist to deter potential attackers, thereby prompting state and non-state actors to strike against adversaries with little fear of retribution from either the target or international court of public opinion. As such, for malicious actors, cyberattacks present a high-incentive, low-cost, and low-risk method of inflicting significant damage.

Regional roots
The 2010 discovery of Stuxnet, a malicious worm targeting programmable logic controllers at Iran’s nuclear enrichment facilities, arguably caused the same amount of damage as would have a kinetic attack. Two years later, an (almost certainly state-sponsored) Iranian hacking group, “Cutting Sword of Justice”, attacked Saudi Aramco using Shamoon. The politically motivated attack destroyed 35,000 of the oil company’s computers and partly shuttered operations for a week. Qatar’s RasGas, one of the world’s largest producers of liquefied natural gas, also came under attack. Following both events, policy-makers worldwide realised even a partial disruption to production facilities could have far-reaching ramifications on oil supplies, prices, and the global economy.

Regionally, the 2012 Shamoon attacks raised concern over Iran’s cyber capabilities for the first time.


“The military threat posed by Iran is often discussed in kinetic terms and less so in relation to its cyber capabilities.”

Iran: The elephant in the region
The military threat posed by Iran is often discussed in kinetic terms and less so in relation to its cyber capabilities. Several factors explain this focus. First, despite its developing potential, Iran is still not close to becoming a ‘tier one’ cyberpower like the US, Russia, or China, and lacks peer competitors at its own level, meaning its activities often fail to garner significant international attention. Second, and more importantly, it is easier to focus on tangible, measurable data points such as the range of a country’s ballistic missiles or the number of tanks it owns. Cyberpower, on the other hand, is invisible and non-quantifiable. As a result, asset measurement is not a relevant barometer for cyber capabilities.

Iran has dramatically outpaced GCC states in expanding its cyberpower, liberally employing its capabilities both to monitor domestic dissent and attack foreign adversaries. The country maintains a strong network of technical universities where software developers and hackers are recruited by the government regardless of their political views.


Structure of Iran’s Known Capabilities

Source: The Delma Institute, 2017

Since the 2012 Shamoon attacks, Iranian hackers have continued to develop both their technical capabilities and operating procedures, routinely breaking patterns of activity and sometimes going so far as to temporarily cease operations in the event security companies discover their plans. Several Iranian state-sponsored groups have employed this strategy, which challenges security companies’ persistent tracking efforts and complicates endeavours to gain a more thorough understanding of cyber actors’ tactics, techniques, and procedures.


“Iran has managed much of its cyberpower growth in spite of international sanctions that for years denied the country access to the latest technology and educational resources.”

Iran has managed much of its cyberpower growth in spite of international sanctions that for years denied the country access to the latest technology and educational resources. Today, with many of those sanctions removed, Iran is increasingly able to purchase sophisticated ICT equipment and bolster its human capital resources. Consequently, the country’s offensive cyber capabilities will likely keep growing. If past trends continue, it will not hesitate to continue employing its toolset as an asymmetric weapon with which to attack, damage, and degrade its opponents – from the Arabian Gulf to the rest of the world.

GCC issues and challenges
The question for GCC countries is how to protect digital assets and critical infrastructure in the face of potential cyberattacks from Iran and elsewhere. Although ICT expenditure and investment in cybersecurity is growing, GCC countries remain highly exposed to the multi-dimensional threat posed by cyberattacks. Even today, the main focus of their primary defence remains largely confined to conventional threats – namely, Iran and its ballistic missile programme.

This preoccupation is not without merit: Iran is a regional military power and, with international sanctions removed, has embarked on a significant military modernisation drive. Beyond this, its ballistic missile programme is well developed and GCC countries – especially the UAE, Qatar, and Bahrain – are within easy striking distance of even the shortest-range missiles. However, while the threat is real, the likelihood of something taking place is low.

Meanwhile, global cyberattacks of varying severity – from hacktivists engaging in cyber rioting to state-sponsored entities attacking critical infrastructure and government institutions – occur on a regular basis. Damage stemming from these campaigns ranges from economic and reputational loss to the theft of sensitive information that could facilitate conflict and destruction on par with that achievable by kinetic military strikes.


“The challenge for the region lies in treating cyber threats with the same urgency as long-standing conventional threats.”

The challenge for the region lies in treating cyber threats with the same urgency as long-standing conventional threats. This requires stepped-up expenditure on technical infrastructure and defensive capabilities in the same way GCC countries spend heavily on missile defence technology.

However, given that cybersecurity touches on nearly every aspect of modern-day life, spending money alone to counteract it is insufficient. The recent Shamoon campaign, like the vast majority of global breaches that preceded it, began with spear phishing – an important reminder of the role played by human error in facilitating cyberattacks, where all it takes is one click of a mouse to compromise an entire network. As such, the need for public cybersecurity awareness and educational programmes cannot be understated. Additionally, the creation of workforce strategies is essential in addressing the lack of a global cyber-skilled workforce.

Data-sharing efforts between public and private sector entities can also help combat the evolving nature of the cyber challenge, which is not limited to state-sponsored actors attacking state entities. Regional co-operation among local computer emergency response teams (CERTs) can help countries communicate experiences and share effective policies and frameworks. The establishment of the Organisation of Islamic Co-operation CERT is a good example of productive co-operation, as is the Joint US-Gulf Cyber Working Group.

Beyond defence, GCC governments need to develop proactive measures – likely offensive capabilities – to combat criminal and state-sponsored cyber activity. These could take a similar form to French plans to establish a unit specialised in cyber warfare that can help identify vulnerabilities in both domestic networks (for defensive purposes) and adversary networks (for exploitation).

Conclusion
The costs associated with cyberattacks will only continue to grow, and more effective Stuxnet- or Shamoon-style attacks could have devastating financial consequences for their targets. Beyond economics, the increasing use of cyberattacks as asymmetric weapons of war makes cybersecurity an essential component of regional stability. While change is happening across the region and cybersecurity issues are gaining the recognition they deserve, much more needs to be done to secure the GCC’s digital borders.

Postscript

In times of global uncertainty, tensions are often most visible in WANA countries, the region having long served as a conduit for international political tussles. Indeed, local skirmishes can be viewed through regional lenses and regional antagonism examined through global power plays. And so, the paradigm by which we examine these events is as important as the data points themselves.

Although the report covers quarterly events, the trends we analyse move across time. How will a re-empowered Erdogan presidency engage with the region? How will the same administration respond to a loss in the referendum? As Russia sits in the background cementing its influence, how will the new US administration respond: By projecting power or, conversely, withdrawing itself from certain arenas? Which countries will effectively defend themselves against cyberattacks and which will fall prey to unattributable warfare?

Complexity is the name of the game in the region: Domestic, regional, and global events and themes should be viewed in relation to each other. Consider the impact of the slump in oil prices on the ability of countries to perpetuate regional tensions; consider the long-term impact on education, arts and culture, or healthcare due to economic restructuring and diversification policies. Or, consider the impact of ongoing security operations in Iraq, Syria, Yemen, and Libya on the social wellbeing of future generations.

In a region where change is the norm, realpolitik, pragmatism, and nuance prevail.


Research for the report concluded on March 27, 2017.