As Palestinians seek the UN's backing for statehood, business ties with Gulf states show signs of deepening
Amid Palestine's bold bid for recognition of at the United Nations, the Middle East's oldest conflict is back firmly centre stage in the international political arena. Turkey's bout of foreign policy activism and Egypt's domestic and public conflicts over its relationship with Israel, have poured further fuel over an already combustible situation.
The apparent inevitability of a US veto of Palestinian independence at the UN Security Council could inject new momentum into the dispute, at a time when the fate of the Occupied Territories has lost international attention due to the upheavals breaking out elsewhere in the region.
A revitalisation of the Palestine issue will precipitate shifts well beyond its immediate neighbours. Though analysts see the Arab-Israeli conflict as a sideshow to much of the protests across the region, the dispute still resonates strongly for Arab governments, some of whose legitimacy is inextricably linked to the Palestine issue.
Gulf states have until now broadly refrained from pushing the Palestinian case strongly. Only Qatar has thrust itself into the diplomatic arena, deploying its ties to the Israeli government to insert itself as an active participant in finding a solution.
The Qatari authorities kept the Israel delegation's offices in Doha open even after Operation Cast Lead in December 2008, when Israel launched its much-criticised military incursion into the Gaza strip. However, in a sign of worsening ties with Qatar, the Israelis unilaterally shut down their representation in the Gulf state in March this year.
Qatar's strategy has come in for sharp criticism lately in Tel Aviv. Israeli officials charge that the Qatari leadership has been helping to co-ordinate Palestine's statehood bid at the UN.
In August, Israel's government expressed its anger with Qatar over the emirate's growing ties with Gaza's Hamas leadership. "We are angry with Qatar because it supports Hamas," foreign ministry spokesman Yigal Palmor told AFP on 5 September.
As Syria's security situation unraveled earlier this year, the Damascus-based Hamas leadership in exile was reported to be ready to move its headquarters to Doha, where Emir Shaikh Hamad bin Khalifa al Thani has afforded a welcome for the Islamist movement.
Tel Aviv's increasingly frosty relationship with Qatar risks closing off the Jewish state's last remaining diplomatic avenue with the Arab world just as its formerly close relationship with Turkey plumbs new depths, and Egypt's interim government attempts to chart a new course in its attitude towards Israel - amid rising anger at home at Israel's killing of four Egyptian security personnel in Sinai in late August.
This marks a break with recent years, when much of the region remained more exercised by Iran's nuclear ambitions than it was by Israeli actions. An uneasy coincidence of interests between Israel and the Sunni Arab states - chief among them Jordan, Egypt and Saudi Arabia - ensured that little direct attention was paid to the Palestine conflict.
That could change, particularly if protests in the West Bank and Gaza linked to the UN statehood bid imbue the issue with greater resonance.
Business ties with the Gulf could also deepen. Palestinian businesses have sought to build closer relations to the Gulf states in recent years, as the Israeli stranglehold on the West Bank eased and the Quartet group actively solicited Gulf investment in the Occupied Palestinian Territories to help drive an improvement in living standards for ordinary Palestinians.
Senior Palestinian investors have tapped their relationships in Gulf states to spearhead investments in key development projects. Bashar Masri, the Palestinian chairman of Massar International, joined with Qatari Diar Real Estate Investment Company three years ago to create Rawabi, the first Palestinian planned city that is located near Ramallah.
Saudi investors are meanwhile backing the Palestine Investment Fund's (PIF's) first commercial real estate project, the Ersal Centre, a $400 million residential development near Ramallah. The PIF is the Palestinian Authority's (PA) primary vehicle for attracting foreign investment and is the anchor partner with the kingdom's Land Holding Company in Arduna Real Estate Development Company.
Gulf asset managers have also focused on the latent potential of Palestine's economy. Kuwait's Global Investment House runs its own Palestine Dedicated Fund, an open-ended mutual fund that invests in Palestinian listed securities.
In May 2011, Dubai's Rasmala Investment Bank launched the Rasmala Palestine Equity Fund, giving investors the chance to invest in a frontier market with robust growth potential. The fund will access stocks and companies anticipated to undergo an IPO on the Palestinian Stock Exchange (PSE).
The Rasmala fund is expected to reach $100 million in investments within the next three years, targeting banks, savings funds, pension funds, and Gulf investors, as well as other investors with a taste for emerging markets.
The PIF has also partnered with Wataniya Mobile, majority owned by Qatar Telecom, to establish Palestine's second mobile operator, Wataniya Telecom Palestine. Now up and running in the West Bank, next year, the mobile operator plans to launch mobile services in Gaza.
The other main mobile operator, Palestine Telecommunications Company (PalTel) - the largest stock traded on the PSE - was among the first Palestinian firms to seek out Gulf investors, though with mixed results. In 2005, the telecoms group became the first Palestinian company to offer its equity on a foreign exchange, listing 30 per cent of its shares on the Abu Dhabi Securities Market with the aim of tapping Gulf interest in one of Palestine's fastest growing sectors.
Five year later, PalTel suspended trading on the Abu Dhabi bourse due to low trading volumes. As PalTel chief executive Ammar Aker tells The Gulf, this was not due to lack of appetite among Abu Dhabi investors for Palestinian equities, but a disinclination to trade it on the local bourse.
"Our stock is very active - but people in the Gulf want to buy our stock directly, by going to the Palestine market, rather than through Abu Dhabi," he says.
Aker says that more than 50 per cent of PalTel's shareholders live outside Palestine, suggesting that foreign interest in the PSE market remains strong.
Gulf investor appetite for Palestine risk is not always matched by government-level financial commitments.
Under US pressure, Gulf states have been urged to boost donor financial support to Palestine. In October 2010, Palestinian Authority president Mahmoud Abbas met with Saudi Arabia's King Abdullah bin Abdulaziz, eliciting a promise to provide $100 million in aid.
Saudi Arabia already pays $7.7 million a month via the Saudi Fund for Development towards PA salaries, and last month pledged a further $200 million. Yet Saudi financial support for the authority pales in comparison to its munificence for other Arab states that are facing domestic political upheaval.
Riyadh extended to Jordan $1.4 billion in direct budget support earlier this year. Its level of support to the Palestinian Authority is in contrast a relatively lowly $30 million - and a contributory factor, critics say, to the PA's fiscal crisis which forced it in the summer to halve salary payments to civil servants.
With Turkey's and Egypt's relationships with Israel under renewed strain, and Jordan absorbed by domestic challenges, there will be increased scope for the Gulf states to leverage diplomatic and financial clout on the Palestine issue.
The investment opportunities will continue to bring Palestine within the radar of the Gulf's business fraternity; but as yet - Qatar apart - there appears little political appetite to take a lead on the Palestine issue in the GCC.
© The Gulf 2011
