The Sunni-Shi'ite Propaganda War.

King 'Abdullah ibn 'Abdul-'Aziz of Saudi Arabia, which is earning over $1 bn per day, had a successful inter-faith conference in Madrid on July 16-18 which, apart from having over-shadowed the struggle of Sudan's "Islamic dictatorship" against the International Criminal Court (ICC)'s arrest warrant for Bashir, marked yet another coup in the cold war between the Sunnis and Shi'ites of the Muslim world (see news4-SudanBashirFacesICCtrialJuly21-08).

In June 2008, Darul 'Uloom Deoband in northern India issued a fatwa declaring terrorism and unjust violence as un-Islamic. King 'Abdullah's Madrid gathering had a similar purpose - demonstrating that the centre of Wahhabism is turning a new leaf. The events like Madrid's show that Saudi Arabia has turned against extremists.

After al-Qaeda's attacks of Sept. 11, 2001 (9/11) against the US, there was Western pressure on King Fahd, 'Abdullah's late predecessor and half-brother, to democratise and forswear fundamentalism. During the Cold War between the West and the Soviet Union, Riyadh outsourced Salafi militancy, letting Saudi volunteers to fight Soviet occupation in Afghanistan; but after US and other Western forces moved to Saudi Arabia to liberate Kuwait from occupation by Saddam's Iraqi forces in early 1999, these militants turned against the Saudi royal regime.

With huge funds from the oil-fuelled boom of the mid-1970s, Wahhabi scholars had set off from Saudi Arabia to various parts of the world where they built mosques, financed Salafi madrassas and trained local imams; they seeded clandestine militant movements. The deep reverence and awe in which Wahhabi generosity was held in Sunni communities from Morocco to Indonesia gave easy access for missionaries to penetrate the farthest corners. Gradually, a Saudi empire of jihadis (holy warriors - such as the Neo-Salafi suicide bombers of al-Qaeda) was built with predictable fall-outs for the kingdom.

US experts after 9/11 stressed that, for the word "Islam" to have acquired negative connotations in many regions, Saudi Arabia had to bear the blame. Now these experts say the Madrid conference is not enough expiation unless King 'Abdullah does what one US-based scholar says: "walks the talk and distances his regime and its oil oligarchs from the schools and havens of Islamist extremism". But the more such US critics attack the Saudi regime, the more generous King 'Abdullah government gets in funding his march for inter-faith dialogue and sectarian tolerance.

The geo-political problem for Riyadh now is competition from Iran, whose funding of radical Islamist causes has risen steadily. Apart from heavily funding and arming its Shi'ite offshoot in Lebanon, Hizbullah, and its allies which are backed by Syria's 'Alawite/Ba'thist regime, the theocracy of Iran has broken a huge barrier by financing Palestine's Sunni jihadis like Hamas and Islamic Jihad. The latter feat is an extremely worrisome sight for the Saudis, as it implies loss of traction over its former turf. Iran is spending heavily on Iraq's and Bahrain's Shi'ite majorities, as well as the Shi'ite minorities in Saudi Arabia, other GCC states, and the rest of the Muslim world.

Riyadh has not managed to reach out to Shi'ites in Arab/Muslim areas with the same revolutionary flexibility as Tehran. Iran is consolidating its influences in all Shi'ite communities in the Sunni regions - through the Sunnis account for about 90% of the 1.5 bn-strong Muslim world. This spending is done at the expense of Iran's economy and population in which the young and poor constitute an overwhelming majority. It is estimated that about 70% of Iran's 70m-strong population are below 30 years of age and many of them are un-employed or grossly under-paid.

During the July/August 2006 Israel-Hizbullah war, Riyadh displayed frustration over its marginalisation and blamed "[Hizbullah] elements inside Lebanon and those behind them [Iran & Syria]" for not "consulting and co-ordinating with the [Sunni] Arab states". Since then, Hizbullah has become much stronger and its arsenal includes 40,000 missiles trained against Israel. At the same time, however, while Riyadh is seeking to calm things down and avert Sunni-Shi'ite hostilities, Tehran is doing the opposite - helping Hizbullah humiliate Lebanon's Sunnis, for example, while a Syrian-Saudi conflict keeps worsening.

Tehran nuclear programme has been a major drain on Iran's finances. The combination of its nuclear and regional ambitions has caused the drain to multiply in view of biting US and UNSC sanctions, together with punitive actions taken by the EU. The resultant isolation of Iran is a major blow to the theocracy's international standing.

Iran Has OPEC's 10th Per Capita Oil Income: Data from the US Energy Information Administration (EIA) show that Iran ranks 10th among OPEC's 13 states in per capita oil income. Iran had the third largest oil income in the first half of 2008, behind Saudi Arabia and the UAE. Iran's per capita oil income in the first half of 2008 was $816, about one third of the average per capita oil income of $2,172 among OPEC members.

Qatar, with a per capita oil income of $28,136, is at the top of the OPEC member list followed by Kuwait ($20,807) and the UAE ($13,208). The per capita oil incomes of the other OPEC members in the first half of 2008 were: Saudi Arabia, $6,847; Libya, 6,007; Angola, $3,726; Venezuela, $1,553; Algeria, $1,383; Iraq, $1,382; Iran, $816; Ecuador, $515; Nigeria, $333; and Indonesia, $169.

The total oil income of Iran in the first half of 2008 was $54 bn, only $3 bn shy for its oil income in the whole of 2007. Total oil incomes were $192 bn in Saudi Arabia and $61 bn in the UAE.

The IMF on July 18 urged Iran to raise interest rates and take other measures to curb inflation which rose to 24.2% in April and was expected to remain at about 25% in the near term. It said Iran's GDP growth was expected to slow in 2008/09 to 5.7% from 6.6% in 2007/08. Iran's inflation was rising largely due to "expansionary policy stance and also, in part, to higher import prices".

Iran's Bank Markazi (central bank) has proposed raising rates to 3% above inflation to curb prices, while a committee setting rates has proposed 14% or less. The IMF said introducing more flexibility in the exchange rate - by allowing market forces to play a bigger role in determining the rial's value - would help lower inflation. In the longer run, restraining government spending would be needed to reduce inflationary pressures.

The IMF said money supply growth in Iran was relatively high amid lower bank rates, pressures on commercial banks to expand credit and "unsterilized" purchases of foreign exchange by Markazi. The IMF said Iran's external current account surplus would remain broadly unchanged at 9-10% of GDP if oil prices remained high. Its non-oil primary fiscal deficit was to increase to 18.5% of GDP in 2008/09, from 17% in 2007/08. The IMF welcomed Tehran steps to release more information to the public on the operations of Iran's Oil Stabilisation Fund (OSF).