Jul 25 2012
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Events across Jordan's borders are placing the regime there in an increasingly tough situation. On one hand the ongoing security situation in Egypt has put an end to cheap energy supplies and placed a growing financial burden on the Jordanian regime. On the other, the conflict in Syria threatens to spill across its border. Increasing dependence on Saudi Arabia for energy supplies also threatens to embroil Jordan in the Syrian uprising and wider Saudi-Iran conflict. MENA Fund Review spoke to Reva Bhalla, director of analysis at Stratfor, about the issues facing Jordan's regime and potential outcomes
THE Jordanian regime has found itself in an increasingly difficult position in recent months. On one side the Syrian conflict threatens to spill across its border, while on the other natural gas pipelines supplying the country have come under attack and the cost of bringing in crucial energy supplies threatens economic instability. Lacking its own natural resources, Jordan has long benefited from cheap energy supplied by its Arab neighbours because of its position as a buffer state with Israel. First Saddam Hussein's regime in Iraq supplied discounted crude oil and when it fell Egypt began to provide subsidized natural gas.
Since the fall of Mubarak the security situation in Egypt has worsened forcing the state's security apparatus to concentrate on maintaining order in urban areas. This has left something of a power vacuum in many rural areas, in which a host of players have begun to push their own agendas. Among those players are the Bedouin, a highly marginalized community who do not receive the same resources or privileges as other Egyptians.
According to Reva Bhalla, director of analysis at Stratfor: "They are warriors at heart, they live in the desert on very minimal provisions and so a Bedouin will take money from wherever they can get it essentially." Under Mubarak, the Egyptian intelligence agencies were adept at subduing the Bedouin through dialogue and pay offs. Post-Mubarak, the intelligence agencies grip on the rural regions and the Bedouin has loosened severely. Alongside the Bedouin the lack of military force or intelligence in these regions has opened up a strategic opportunity for Islamic groups like Hamas, according to Bhalla. Some factions within Hamas see Egypt, or more specifically the Egyptian military, as the largest obstacle to their political rise.
These militant groups are probably involved in the attacks on the pipelines supplying Jordan with energy. In addition to Hamas, Iranian-affiliated militants may also be responsible, as well as general criminal groups that are using the attacks as a means of putting pressure on the Egyptian regime in order to force it to give them increasingly large pay-offs. "Attacking the pipeline is a very effective way of not only capturing the Egyptian government's attention but also undermining the energy security between Egypt and its neighbours," says Bhalla. "And so that is a trend that I expect to continue and it's not only affecting Jordan, it is also affecting Israel because Israel was receiving a large amount of natural gas through an underwater pipeline from Egypt and that was really a symbol of the peace treaty that Israel and Egypt could have these sorts of energy ties."
Prior to the Sinai pipeline attacks which began in February last year Jordan relied on imported Egyptian natural gas for around 80 percent of its domestic electricity generation needs, importing about 6.8 million cubic meters (mcm) per day from Egypt with the remaining 20 percent generated by imported Saudi and Iraqi crude, according to Stratfor. Before the attacks, Jordan enjoyed a preferential price of about $113 per thousand cubic meters (tcm), far below the average of $282 per tcm Egypt usually receives for its natural gas on the spot market. The Egyptian government raised the price of Jordan's imports to around $200 per tcm due to diminishing export revenue and dwindling tourism income, but this still offered a significant discount.
"Jordan may have been able to tolerate higher prices, but a far more serious consequence of the attacks is the increasing unreliability of Egyptian exports," according to a Stratfor report into the issue. "After a supply cutoff lasting most of March and April 2012, Egypt began sending test deliveries of about 2.25 mcm per day in May, still well below the contracted amount of about 6.25 mcm per day," it says. "With internal demand increasing and Egypt unable to secure the natural gas pipelines, Jordan has begun to make energy plans that exclude Egyptian natural gas." This includes importing an extra 100,000 barrels per day of crude oil to help offset the undelivered natural gas, 90 percent of it from Saudi Arabia.
"In 2011 alone, the extra crude oil and refined petroleum imports cost the Jordanian government more than $1.8 billion, raising the budget deficit to nearly $5 billion in an economy with a gross domestic product of $29 billion. Estimates for 2012 place added costs to Jordan's state power bill at $4.5 billion-$5.6 billion," according to the Stratfor report. "Due to its limited domestic refining capabilities and increased regional oil consumption, Jordan signed a contract with BB Energy in Greece to import 500,000 barrels of heavy fuel oil from June to August at a $34 per barrel premium above what it would pay regional suppliers. This move underscores both the steep discounts Jordan receives from its neighbors and the heavy costs inflicted by its own internal infrastructure bottlenecks."
The energy pressure being placed on Jordan has multiple implications. On one hand Jordanian citizens are suffering as a result and this is putting increasing pressure on the Jordanian regime. "The more Jordan has to import oil from countries like Saudi Arabia, the more their budget deficit is ballooning and they don't have the funds to cover these costs, so that hardship is being felt by your normal Jordanian citizen," says Bhalla. Jordan's demographic make-up adds to the tension created by these increasingly tough economic conditions. It is ruled over by a Hashemite monarchy, who have always faced a question of legitimacy, ruling over a largely Palestinian population. The monarchy has been very adept at holding on to power over the years, but is now being forced to make extensive political changes to subdue its opposition. "They are making changes now to the parliament to allow more direct representation, moves that you just would never have expected from Jordan before, but you can see that they are trying to move cautiously forward as best as they can to contain the opposition," says Bhalla.
"The opposition itself is an interesting mix because the way the Hashimites have consolidated their power over the past decade is to rely heavily on tribal support, and what happened is you've had this sort of evolution over the past several years where they've lost a lot of this tribal support," she adds. A number of recent protests against the monarchy have included tribal representatives mixed in with the Jordanian Muslim Brotherhood. Both groups are taking advantage of the increasingly harsh economic climate and general social unrest across the Arab region to push their demands. Jordan, unlike Saudi Arabia, does not have the resources to pay off the opposition, according to Bhalla.
"They are completely dependent on their neighbours and that just makes Jordan all the more vulnerable," she says. While Jordan's monarchy is under pressure, the likelihood of any kind of Arab Spring uprising is small. Pressure on the monarchy is growing, but far from being enough to topple it. Having said that, the problems for Jordan are mounting. It faces a real threat of the Syrian situation spilling across its border, especially if the regime there topples. With that comes a risk of jihadist militancy and the potential for the militarization of its Palestinian community. "I think there is a lot of trouble that lies ahead for this regime but its probably going to operate on a much slower timetable than anything you're seeing in places like Syria and Libya," according to Bhalla.
Jordan does not face the same religious divides as Lebanon, with its myriad minorities, or Egypt, with its large Coptic Christian community. It is by far majority Sunni Muslim, but there is an ethnic divide that could spark confrontation. The Hashemite monarchy has done a good job of building a patronage network among Palestinian business people and forging other links with the Palestine community. Queen Rania is of Palestinian origin and that has helped to build some legitimacy for the regime among Palestinians. However, even the business networks are at risk of fracturing because of the harsh economic climate in Jordan, according to Bhalla. "The business networks have helped," she says. "They can be very powerful, but only as long as you can keep the money flowing. So the more Jordan experiences economic hardship the more difficult it is going to be to maintain those patronage networks and that is where I think we could see some more trouble."
Jordan's geography makes it extremely vulnerable to whatever happens in Syria in the coming months and years. Its border with Syria covers the Al Jazirah desert region with families and religious groups on both sides that transcend the border. The beginnings of the Syrian uprising were also close to this border region and rebel activity there remains high. "Jordan makes a pretty good staging ground for rebel operations and there have been plenty of allegations that arms and supplies and all sorts of other materials have been flowing from Jordan through that southwestern Al Jazirah corridor," says Bhalla. "I don't doubt those reports but Jordan is also very reticent to get too heavily involved. That is because Jordan is in an increasingly vulnerable position and having regime collapse next door in Syria is only going to increase the problems that the Hashemite monarchy has to contend with, so they are not in a rush to see this regime collapse.
"They are not facing the same kinds of pressure that Saudi Arabia for example is experiencing in this overall campaign to undermine Iran's influence. It is not as important to Jordan to topple the Syrian regime towards that goal as it is to some of these other players like Turkey, Saudi Arabia and Qatar." However, Jordan's increasing reliance on Saudi Arabia for energy supplies could force it to become more involved in the Syrian conflict and by association with the overall fight against Iranian power in the region. The overall aim of Saudi Arabia and its GCC allies is to undermine Iranian power, but the most immediate goal in the struggle is to undermine the Syrian regime. The main strategy to achieve this is the fortification of the Syrian rebellion and because of its geography Jordan is naturally a piece of that strategy.
The more dependent Jordan becomes on Saudi Arabia, the more pressure it will be put under to allow free flowing supplies across its border to the Syrian rebel groups. Saudi Arabia may also place increasing calls on Jordan to use its security apparatus, which is US trained and among the best in the MENA region, against the Syrian regime. The big risk in this for Jordan is that by becoming involved it could bring the conflict onto its own doorstep both in the form of reprisals by Syria and Iran, and the form of Jihadists.
Jordan has had brushes with jihadists in the past. Abu Musab al-Zarqawi, at one time leader of Al Qaeda in Iraq, was from Jordan and expressed a desire to take Jihad back to his country of birth. The increasing presence of jihadists in Syria and Saudi Arabia's selective backing of them, will raise fears of a backlash in Jordan. Syria and Iran have already hinted at action against their enemies in the region through militant proxies. Should Jordan become too involved in the conflict, it too would certainly be a target for this.
© MENA Fund Review 2012
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