GCC Enjoys Unprecedented Boom; More So In '06, While Iran Faces Gloomy Prospects.

*** Israeli Defence Expert Says The US Can Put A Complete Stop To Iran's Nuke Programme By Military Means; But He Says It's Not Necessary To Destroy All The Targets In Iran In Order To Achieve This Outcome

*** But For USA The Issue Is Not Only Military; It Is Political As Well, In View Of The War In Iraq

*** He Believes That Tehran Must Be Persuaded To Accept Moscow's Proposal For Uranium To Be Enriched On Russian Soil

*** Can President Putin Deploy Those Diplomats Who Can Bring Tehran Around?

*** Who Will Attend A Tehran Seminar On 'Scientific' Evidence That The Holocaust Did Take Place?

DUBAI - The six Arab Gulf Co-operation Council (GCC) countries had an unprecedented economic boom in 2005, as they earned about US$300 billion from oil. Their oil income in 2006 is expected to be higher still. In Iran and Iraq, however, the situation is in reverse. The prospects for Iran in 2006 could be even worse in view of its nuclear standoff with the Western powers.

The Shi'ite theocracy in Tehran on Jan. 15 announced that it would sponsor a conference to examine the scientific evidence supporting the Jewish Holocaust, a fresh step in President Mahmoud Ahmadi-Nejad's campaign against Israel - a move the West says is likely to deepen Tehran's international isolation.

Saudi Arabia in 2005 saw its oil income rise 49% from 2004 to a record of $153.3 bn. Its oil income in 2006 is forecast to rise to $162 bn. The UAE comes next with its oil income having risen 44% from 2004 to $45.6 bn. This is expected to rise in 2006 to $53 bn.

Kuwait comes third, with its oil revenue in 2005 having risen 41% to $39 bn and in 2006 this will reach $44.1 bn. Qatar comes fourth with its oil income in 2005 having risen 28% to $19.1 bn. Qatar also had a huge income in 2005 from increased exports of LNG and gas liquids which will rise further in 2006, with this emirate to become the world's biggest exporter of LNG by 2012 or before.

Bahrain gained considerably from the boom, with investment flowing from Kuwait, Saudi Arabia and the other GCC states. High oil prices offset a steady decline in Oman's oil production capacity (a new survey of Oman is to be serialised from next week by the APS Review).

The rise in oil prices last year was due to continuing speculation in energy futures as well as to the market fundamentals of limited supply and rising demand. OPEC ran out of marketable spare capacity. Non-OPEC production was lower than expected, while global demand especially in the US, China and India continued to grow.

The GCC region's aggregate GDP rose 5.3% in 2005. GCC stock markets grew 79% and market capitalisation touched $1.1 trillion, up 110% over 2004. The aggregate GCC trade surplus stood at $253 bn in 2005, and imports of good and services rose 20%.

GCC governments are generally aiming to avoid over-dependence on oil through diversification, labour nationalisation and privatisation. One of the accompanying GCC feature in 2005 was a continuing political reform process, now firmly implanting itself in the region.

The year ended with UAE President Shaikh Khalifa bin Zayed saying half the parliament will be elected. Shaikh Maktoum bin Rashid al-Maktoum, the ruler of Dubai, died suddenly on Dec. 4 and was succeeded by his younger brother Shaikh Muhammad who on Dec. 5 became UAE vice president and prime minister (see fap1-4-DubaiDemoJan16-06).

The GCC defence budget in 2005 amounted to $34 bn, up $4 bn over 2004. The budget growth was caused by continuing threats from Islamic militants, chaos in Iraq and GCC concern about the dangers of Iran's nuclear ambitions.

Iraq continues to be unstable and a potentially dangerous place, despite - or perhaps because of - the US military presence there.

According to the Gulf Research Centre (GRC) in Dubai, world crude oil prices would stabilise in 2006 if the global economy remains strong. However, oil prices could fall sharply if the US descends into recession as a result of a decline in government spending, in view of a huge American deficit. This danger could loom in 2007 if the US economy continues to grow through 2006.

The EIA of the US Department of Energy says OPEC's 11 states in 2005 got $473.1 bn from oil, up 43% on 2004, and forecasts revenues in 2006 to rise to $521.9 bn. It expects OPEC oil revenues in 2007 at $495.2 bn. OPEC's basket of 11 crude oils in 2005 averaged about $51/b and is projected to remain as high as $55.25 2006 and $52.5 in 2007. The 2005 oil prices were more than triple their level in 1998, when prices collapsed below $10. The EIA says Saudi Arabia's oil revenues in 2007 will decline to $150.2 bn, from a record of $162 bn in 2006.

More impressive is the UAE's GDP, which at current prices grew 17% to 443 bn dirhams in 2005 mainly due to record oil prices. The growth compares with the average global growth rate of 4.3% forecast by the IMF. Official figures show the GDP of the UAE was AED378.7 bn in 2004. With the increase in 2005, the UAE retains its position as the second biggest Arab economy after Saudi Arabia, according to a study by the Emirates Industrial Bank (EIB).

The study said the non-oil sector and oil sector had contributed to the growth in the UAE, and oil revenues helped streamline all non-oil sectors. The oil sector's contribution to the GDP rose to AED176 bn in 2005 compared with AED123.2 bn in 2004 and represented 39.7% of the GDP in 2005 compared with 32.1% in 2004. The input of the non-oil sectors dropped from 67.5% to 60.3% although their contribution rose from AED255.5 bn in 2004 to AED267 bn in 2005. The industrial sector grew 9.1% and its contribution amounted to AED54 bn compared with AED49.5 bn in 2004. The banking and financial sector achieved record growth rates in 2005, fuelled by financial and monetary surpluses resulting from the rise in oil income on one hand and the double investment value of the securities market on the other. Construction and real estate contributed strongly, with AED100 bn worth of projects, mainly in Abu Dhabi and Dubai. Projects in 2004-05 involved investments worth AED350 bn.

The EIA put Iraq's 2005 oil revenues at $23.4 bn, up 31% on 2004, and forecast this to rise to $24.9 bn in 2006 but fall to $23.7 bn in 2007. It put Iran's oil income in 2005 at $46.6 bn, up 45% on 2004, and forecast this to rise to $50.1 bn in 2006 and fall to $46.5 bn in 2007.

Tehran Moves Assets From Europe To Asia: Anticipating a UN Security Council resolution, despite Tehran's huge diplomatic efforts, the Supreme National Security Council (SNSC) on Jan. 20 ordered Bank Markazi to transfer all Iranian hard-currency assets from European to Asian banks including those in Lebanon. And, while Tehran has dismissed the threat of UN sanctions, its President Mahmoud Ahmadi-Nejad on Jan. 19-20 was in Syria on an official visit in return for President Bashar al-Assad's trip to Iran in August 2005. Iran's oil minister was visiting India and other Iranian officials were already in Egypt, Libya and South Africa, all members of the UN nuclear watchdog's board of governors of the International Atomic Energy Agency (IAEA).

Iran's attempts to resume negotiations on its nuclear programme met rejection from Europe and the US as European powers began circulating a draft resolution which asks the IAEA to report Iran to the Security Council. Iranian Foreign Minister Manouchehr Mottaki said the likelihood of Iran being put before the Security Council was "weak". On Jan. 19 he told the state's radio: "During the past 10 days we have tried to relay our message to all relevant parties, including the Europeans, about Iran's readiness to negotiate on the production of nuclear fuel". Mottaki said European powers should "avoid taking steps that could only worsen the current situation" - an apparent reference to the talk of sanctions.

Reacting to Tehran's Jan. 17 request for a resumption of talks, France insisted Iran must first suspend its newly resumed uranium enrichment activities before any talks can be held. US Secretary of State Condoleezza Rice and the EU foreign policy chief, Javier Solana, rejected any return to talks, which Europe called off after Iran ended its freeze on enrichment research (see news3-Iran-Jan16-06). "There's not much to talk about", Rice said during a photo session at the State Department with Solana on Jan. 18. Solana agreed that "there is not much point" in resuming talks if there was "nothing new on the table".

Ahmadi-Nejad accused the West of trying to deprive Iran of peaceful technology, saying: "We are asking they step down from their ivory towers and act with a little logic. Who are you to deprive us from fulfilling our goals? You think you are the lord of the world and everybody should follow you. But that idea is wrong". Ahmadi-Nejad's frequent display of arrogance and repeated threats to wipe Israel off the world map is part of a deliberate plan through which the Shi'ite theocracy could end up becoming a nuclear power (see rim1Iraq-HakimSadr-Jan23-06).

To overcome Russian and Chinese resistance, the Europeans have put forward the draft resolution for the IAEA board to pass which stops short of asking for sanctions. Instead, it would ask the council to press Tehran "to extend full and prompt cooperation to the agency" in its investigation of suspect nuclear activities. Washington and the EU want the IAEA to take the step during a Feb. 2-3 emergency meeting of its Board of Governors.

Iran is lobbying developing nations on the IAEA board. It contacted the Arab League and its head Amr Moussa, who said Tehran was "ready to deal with complete transparency and place all its nuclear reactors under supervision by the IAEA". Moussa said Iran expressed its backing for Arab initiatives to have "the Middle East declared a nuclear weapons-free zone" - implying Israel must get rid of its nuclear weapons; the Jewish state is alleged to have up to 200 nuclear warheads.

An Iranian delegation arrived in Egypt after a similar trip to Libya. But cabinet spokesman Magdy Rady said the Iranians had come only to invite the Speaker of the Egyptian Parliament, Fathi Sorour, to a conference in Iran on Palestine. The team led by Vice-President for Legal and Majlis Affairs Ahmad Mousavi met with Egyptian PM Ahmad Nazif. Rady said: "We were surprised the Iranian vice-president did not talk about this matter". Later they flew to Morocco.

The South African Foreign Ministry said after talks between Deputy Foreign Minister Aziz Pahad and his Iranian counterpart Mehdi Mostafavi: "We appeal to all parties to refrain from any action that could further increase tension and confrontation".

South Africa says Iran has the right to use nuclear technology for peaceful purposes. Mostafavi earlier briefed Pahad and other South African officials on Tehran's nuclear plans.

US Undersecretary of State Nicholas Burns visited London to co-ordinate with Britain, China, France, Germany and Russia on dealing with Iran.

President Ahmadi-Nejad on Jan. 19 arrived in Damascus on his first bilateral foreign trip, cementing ties with the other Middle Eastern state facing intense Western pressure. Ahmadi-Nejad on Jan. 18 stressed the two countries' "close views" on regional and international issues, saying: "We are against any kind of bullying, intervention and interference from alien powers".

Syria, meanwhile, is embroiled in a UN investigation over the killing of Rafiq Hariri, Lebanon's former prime minister in a huge bomb blast in central Beirut on Feb. 14, 2005. UN investigators are seeking to question Bashar al-Assad, Ahmadi-Nejad's host. Damascus denies involvement in the Hariri killing.

Tehran and Damascus have been allies since the 1980-88 Iran-Iraq war, when Syria was the only Arab state to take Iran's side. Both support militant Palestinian groups condemned by the US and Israel as "terrorist", and both back Hizbollah, the Lebanese Shi'ite guerrilla group whose disarmament is required by UN Resolution 1559, which prompted Syria's military withdrawal from Lebanon in late April 2005 after military occupation since April 1976. Since becoming president in early August 2005, Ahmadi-Nejad has championed international Islamic causes, including the plight of the Palestinians. On his trips to the UN in New York in September and to Saudi Arabia for December's Islamic summit he has alarmed Western and Arab officials because of his excessively radical pronouncements against Israel and European Jews.

At the UN he accused the West of spreading "terrorism and weapons of mass destruction" and in Saudi Arabia he argued the state of Israel should be moved to Europe if Europeans wished to atone for any guilt over the Jewish holocaust. He is planning a Tehran conference on the holocaust (see news3-Iran-Jan16-06).

Insiders in Tehran say Ahmadi-Nejad has been reined in by Supreme Leader Ayatollah Ali Khamenei, and that security, foreign and nuclear policy is decided by Iran's collective leadership rather than the president. But they do not rule out more radical pronouncements from Ahmadi-Nejad, especially on causes popular in the Islamic world. Visiting the southern province of Hormozgan, Ahmadi-Nejad recently said the Shi'ite theocracy "cannot remain silent against crimes happening in Palestine and the existence of atomic arsenals in some countries".

Hizbollah Wants To Keep Lebanon Front Open: Lebanon is the only Arab country where, through Syria, Iran has succeeded in exporting its Shi'ite Islamist revolution. That occurred in late 1982 when, after an Israeli invasion of Lebanon, Iran's then powerful Ambassador to Syria Ali Akbar Mohtashemi founded Hizbollah so that it resists the Jewish state. At the time, Syria was ruled by the Ba'th Party's military dictator Hafez al-Assad. Unlike his son Bashar who since taking over in mid-2000 has been leaping from one blunder to another, Hafez was a prime tactician among Arab rulers. He took advantage of Israel's occupation of Lebanon and opened a proxy war front in southern Lebanon, while on Syria's Golan Heights the front had been quiet since a 1974 military disengagement was brokered by then US Secretary of State Henry Kissinger.

As part of the 1974 deal, Assad was made to understand that, in return for the Heights to remain under Israeli occupation, he had carte blanche in Lebanon. Already by 1974 he had secretly made a deal for Iranian Shi'ite religious followers of Ayatollah Ruhallah Khomeini to get military training and arms from Syria-backed Palestinian guerrilla groups in south Lebanon. These groups, with Syrian help, managed to infiltrate into southern Iraq in 1978 and from there into Iran later in the year. By early 1979, when the Pahlavi monarchy fell, Khomeini's religious militants had already launched their Islamic revolution. Thus Khomeini had a triumphant return to Tehran.

All along, the Palestinian guerrilla movement of Fatah led by Yasser Arafat had thought its alliance with Khomeini's Iran had been deep enough for the PLO to remain dominant in Lebanon and had not foreseen that Syria's alliance with the Khomeini movement had much deeper roots. Syria's was an alliance against the Sunni status quo in the Arab world. Even Israel had not detected that alliance - essentially between Syria's Alawite minority and Ja'fari Shi'ism of Lebanon, Iraq, Iran, etc. Lebanon's Shi'ites - known as the Shi'ites of Jabal Aamel, had been among the first to plant their roots in southern Iraq and Persia even before the Safavid Dynasty established the first Shi'ite Ja'fari theocracy in the 16th century AD.

In an interview published on Jan. 18 in the pan-Arab al-Hayat newspaper, Hizbollah chief Hassan Nasrallah backed Saudi mediation to ease tensions between Lebanon and Syria, and called for efforts to resolve rifts among Lebanese leaders. Nasrallah said: "Intervention is a must and there can't be any Arab delay to do what is necessary. The situation in Lebanon is bad and it has dangerous repercussions".

Lebanon has been gripped by a political crisis since pro-Syria Shi'ite ministers of Amal and Hizbollah boycotted the cabinet five weeks earlier, paralysing a government dominated by anti-Syria officials of a Sunni-led parliamentary majority coalition. Saudi Foreign Minister Prince Saud al-Faisal presented Lebanon and Syria with a plan to defuse tensions between the two states. He told a British newspaper last that the kingdom had made proposals for an agreement, but was waiting for a response from Beirut and Damascus.

The crisis escalated with a war of words between Hizbollah and fierce anti-Syria Druze leader Walid Junblatt which evoked memories of the 1975-1990 civil war. The civil war ended after a 1989 agreement by Lebanese parliamentarians at a meeting in Ta'if, Saudi Arabia. Anti-Syria politicians in Beirut have sharply criticised Saudi-Egyptian efforts to mediate, with some even calling for the toppling of Syrian dictator Assad.

Nasrallah said: "We support any Arab initiative and denounce any effort to spoil any Arab initiative", warning that tensions among the Lebanese gave reason for alarm. He added: "I don't call on Saudi Arabia, Egypt or the Arab League to intervene between Lebanon and Syria only, but I also call them to intervene between the Lebanese. If the Lebanese are left to themselves, they would not be able to build their country with the current mentality".

Hizbollah is facing pressure to give up its arms under the September 2004 Security Council Resolution 1559. Lebanese Prime Minister Fou'ad Siniora on Jan. 18 said the proposed Saudi plan was based on Syrian ideas which fell short of Lebanese aspirations for full sovereignty and independence. The Saudi plan, made public last week, seeks to patch up Syrian-Lebanese differences since the killing of Hariri in which a UN probe has implicated the Syrian regime. But the plan calls for a joint Syrian-Lebanese committee to formulate a common foreign policy - yet another attempt by Assad to control Lebanon. More bombings and killing of Lebanese politicians and journalists have followed the Feb. 14 assassination.

Siniora told reporters: "This [Saudi] paper does not meet Lebanese ambitions. We see that there are steps which need to be stressed, beginning with the security situation and the need to stop the killing machine. To be precise on this subject, these are Syrian ideas which Prince Saud al-Faisal carried, there is no Arab initiative yet".