Bridging the Shia-Sunni Divide With Free Trade

DUBAI – While Iran and the United States exchange aggressive statements, the Arab countries of the Gulf Cooperation Council (GCC) have been busy building trade relations with Tehran and charting an economic course with the potential of mending ties in a tough neighborhood.

Following an official proposal by Iran, the GCC – which groups Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates – is considering negotiations that may lead to the creation of a free-trade area.

"As long as there is a desire from the Iranian side, the GCC cannot but be positive in relation to such an issue," GCC Secretary-General Abdul-Rahman Al-Attiya said on Sept. 2, after receiving a letter from Iranian Foreign Minister Manouchehr Mottaki expressing Iran’s interest in trade talks.

Similar ideas have been floated in the past, including a 10-point plan proposed by Shi’ite Iran in April for establishing a security and cooperation organization in the Gulf region, but this is the first time that Iran has presented an official letter.

The call for economic engagement comes in the background of a flurry of reciprocal visits by Iranian and GCC leaders over the last year. The effort to bridge the Sunni-Shi’ite divide, especially with a view to stabilize Iraq, has led the Arab League to call for high-level dialogue between the Arabs and Iran.

The schism in the religion goes back to succession struggles following the death of Islam’s founder Prophet Mohammed in A.D. 632.

Today approximately 85 percent of all Muslims are Sunnis. But Iran is unique in the Islamic world for being overwhelmingly Shia and, in fact, has a constitution that is theocratically Shi’ite.

After the U.S. removed Saddam Hussein from power, Iraq became the first Arab country to become Shia-controlled. Historically, Iraq was Shia-dominated until 1533 when the Sunni Ottomans seized Baghdad.

But Sunni-Arab countries now see the need for a rapprochement with Iran and the Shi’ites. On Mar. 3, 2007 King Abdullah of Saudi Arabia invited Iranian President Mahmoud Ahmadinejad for a summit to discuss the issue and the two leaders declared that the divide only served the interests of foreign powers.

"Both Iran and Saudi Arabia are aware of the enemies’ conspiracies. We decided to take measures to confront such plots. Hopefully, this will strengthen Muslim countries against oppressive pressure by the imperialist front," Ahmadinejad said on his return to Tehran from the summit. An official Saudi note said that "the greatest danger presently threatening the Islamic nation is the attempt to fuel the fire of strife between Sunni and Shia Muslims."

And now the GCC countries have responded positively to the Iranian proposal by setting up a committee to tap the economic potential and advance political cooperation with their large neighbor.

Though born of security concerns in 1981, following the outbreak of the Iran-Iraq war, the GCC has over the years evolved into a political and economic bloc.

Says Eckart Woertz, an economist with the Gulf Research Center in Dubai: "Given the proximity of Iran and the GCC countries, a free-trade agreement makes sense, although trade relations are not very diversified so far. Iran is mainly exporting oil-related products, while it receives machinery, spare parts, and more sophisticated goods from the re-export hub, Dubai."

Mohammad Amerah, an Abu Dhabi-based economist, said that a free-trade agreement with Iran would be beneficial to all GCC countries. "I think they will go about it gradually. Eventually, tariff barriers would be reduced to the minimal and there would be smooth trade transactions between the countries exporting and importing among themselves," he told the UAE’s English-language daily Gulf News on Sept. 5.

At the political level, Qatar’s Minister of State for Foreign Affairs Ahmed bin Abdullah Al-Mahmoud asserted that relations with Iran are remarkable and that the two countries share many things in common besides bilateral ties.

In a statement to Qatar News Agency on Sept. 5, the minister said bilateral trade relations were good, especially since there is a joint commercial committee that meets regularly to discuss all avenues of cooperation. "The Iran-GCC geographic proximity is an advantageous factor that helps the setting up of a free-trade zone," he added.

Encouraged by high oil prices, developing and diversifying their economies have been high on the agenda of the GCC countries in recent years. The emphasis on economic integration led the bloc to establish a customs union in January 2003, with the transition period ending in December 2005. Further, the GCC countries also joined the Arab Free-Trade Zone in January 2005.

The bilateral trade volume among the GCC members rose from 6 percent before the initiation of customs union to 21 percent after that – from $18 billion in 2002 to over $31 billion in 2005.

Though there are few signs of progress on a plan to adopt a single currency by 2010, especially after Oman said last year that it would not be able to meet the deadline, the GCC is expected to create a common market by the end of this decade.

However, economic expansion has coincided with security concerns over Iran’s controversial nuclear program, the likelihood of a military confrontation. Between Iran and the U.S. and growing Shi’ite influence in Iraq and Lebanon.

Ahmadinejad claimed last week that his country has achieved a milestone and is now running 3,000 centrifuges to enrich uranium for its nuclear program.

The GCC countries have publicly stated that they would not allow their territories to be used as a launch pad for any military attack on Iran. But they have very little room for maneuver if the U.S. decides in favor of a military adventure because it is the chief security guarantor for the six-member bloc.

The GCC is also considering a peaceful atomic program of its own in partnership with the International Atomic Energy Agency and progress on these plans would be discussed at a conference in Qatar in November.

Even though the U.S. claims to be a proponent of free trade, it is unlikely to encourage the proposed GCC-Iran trade negotiations because it would boost the Iranian economy while giving GCC traders better access to Iran.

The Jebel Ali Free Zone in Dubai, one of the seven emirates in the UAE, is already the biggest source of commodities and consumer products to Iran.

On Sept. 1, the UAE issued a new law to control the export of military equipment or dual-use items, heeding to a U.S. warning that action would be taken if enough was not done to halt the flow of technology to Iran and Syria, especially which is used in improvised explosive devices.

As a follow-up the UAE also shut down on Sept. 9 about 40 international and local companies in a crackdown on money laundering and illegal dealing in dual-use equipment and materials banned under the Nuclear Nonproliferation Treaty.

"Serious political contradictions exist in the case of the Iranian nuclear standoff and the occupation of three UAE islands by Iran. The GCC countries perceive Iran increasingly as a threat and this could jeopardize any trade negotiations," economist Woertz told IPS.

"But on the other hand, political differences have not impeded thriving trade relations between the UAE and Iran so far," said Woertz, adding that there was a potential to scale it up to the GCC level.