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May 22 2008

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Middle East politics: Bridging the Gulf

Among the typically vague and aspirational pledges of closer co-operation emanating from the eighth session of the Qatari-Bahraini Joint Co-operation Committee earlier this month stood out a crucial agreement: the respective crown princes signed a contract with a consortium led by France’s Vinci for the design and construction of the long-mooted causeway linking the two states. Assuming the project proceeds as planned, the link—cutting the road journey time from about five hours to 30 minutes—will be of significant economic benefit to both sides, but mainly to less wealthy and hydrocarbons-poor Bahrain. And the scheme will finally allow both states to realise the promised economic boon of a territorial dispute settled back in 2001.

The International Court of Justice ruling, which awarded Bahrain control over the Hawar Islands off its southern coast while affirming Qatar’s sovereignty over the mainland Zubarah Strip, was initially heralded by both sides as the start of a new dawn in economic relations—with the causeway, also known as the "Friendship Bridge", the flagship project, both symbolically and practically. It would be the world’s longest, at some 40 km, running from Ras Ashairij in Qatar to Askar in Bahrain.

Who pays?

However, many false dawns followed, clouded by political and financial wrangling: Denmark’s COWI was appointed to carry out preliminary designs back in 2001 and completed them in 2005; in the same year, approval was reported between the two governments for construction to proceed, while the following June, agreement was reached on formation of a project company. In September 2007, officials from both sides reiterated their determination to go ahead, with only the final governmental nod for appointment of a contractor pending: “A lot of things need to be decided—the financing, the cross-country border issues, systems that have to be put in place and other political issues,” Bahraini point-man for the project, assistant undersecretary for roads at the public works ministry, Essam Khalaf, said at the time.

Evidently such thorny issues have finally been resolved. A consortium led by Vinci, including local developer Qatari Diar Real Estate Investment Company , Germany’s Hochtief and Athens-based Consolidated Contractors International Company (CCC), along with Qatar’s Middle East Dredging Company , is due to conduct nine months of studies before embarking on a 51-month construction phase, putting completion somewhere in late 2013. No official information has been provided regarding the project’s value, but the figure most frequently used is around US$3bn, to be shared equally between the two governments—resolving one of the debates surrounding the scheme, with Qatar far richer, but Bahrain reaping greater benefits.

Short hop

The causeway will provide an enormous fillip to tourism through the greater ease and speed of travel between the two countries. Bahrain is set to be the biggest beneficiary, with the effect mirroring on a smaller scale that of the King Fahd causeway to Saudi Arabia—which draws thousands of Saudis across the bridge at weekends and holidays to enjoy a more culturally liberal atmosphere than that found at home. A spate of leisure projects is expected to ensue in the underdeveloped south of the main island while the Durrat al-Bahrain resort—under construction off the southern coast by a 50:50 joint venture between the government and Kuwait Finance House — is set to see demand for its residential and tourist accommodation soar.

Trade relations between the two states should also be enhanced: about 5% of Bahraini non-oil exports currently flow to Qatar, worth about US$133m, although the kingdom imported only US$40m-worth of goods from its neighbour in 2006, the most recent year for which figures are available.

The bridge has been more speculatively billed as potentially easing Bahrain’s growing and politically dangerous unemployment problem, offering young Bahrainis the option to commute to booming Qatar: whether the job opportunities in Qatar will suit the skills and willingness of jobless Bahrainis is highly debateable.

Dry wells

For Bahrain, the concrete progress with the causeway—albeit at a heavy financial cost for such a small economy—is especially welcome owing to the so far disappointing windfall from the 2001 settlement. The waters surrounding the Hawar Islands were thought at the time to have strong hydrocarbons potential, and with control claims having been internationally recognised, Bahrain granted exploration rights to US giant Chevron and Malaysia’s Petronas in late 2002—only for the two to relinquish the three blocks having failed to strike oil. A gas supply agreement with Qatar has also long been mooted, and is desperately needed by the kingdom to meet rapidly rising power generation needs and industrial development ambitions.

A spur to Bahrain was initially to be part of the project to build a pipeline to transport Qatari gas to Kuwait, before the latter project had to be shelved due to Saudi objections. In mid-2005, the Qatar-Bahrain link was declared to have been agreed separately, to supply 500m-1bn cu ft per day of gas through a pipeline to be built in conjunction with the causeway and to take some two and a half years to complete. However, no mention of the plan was made following the latest meeting and such a deal appears doubtful given Qatar’s current moratorium until 2010 at the earliest on new gas development projects in the North Field.

Travel, rather than work, appears destined to be the main channel for the economic benefits of renewed physical and political closeness between the two countries.

SOURCE: ViewsWire