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Chapter 2

Framing the Region: Imperialism and the Middle East

The contemporary Middle East is shaped by two important and interlinked dynamics. First, since the mid-twentieth century, the region has represented a vital zone within the wider global economy. Its vast supplies of hydrocarbons, coupled with the prodigious financial surpluses that accompany them, mean that control of the Middle East is a source of enormous strategic power and thus a long-standing flashpoint of global conflict. Second, however, the dynamics of the Middle East’s own social formation, and the struggles that are inevitably bound up with them, form a crucial counterpoint to the rivalries and collusion of foreign powers. For this reason, the region is much more than simply an object of external domination—the histories and struggles of the region are supremely relevant, existing alongside and within the story of foreign rule. The purpose of this chapter is to consider the interaction of these two dynamics and their implications for contemporary patterns of class and state formation. Subsequent chapters will discuss in detail the character of the region’s social relations under the impact of neoliberalism. The aim here is to set the scene for that discussion by providing an overarching account of how the trajectory of imperial domination since World War II has shaped the specificities of the neoliberal era, the means through which this domination has been extended and enhanced, and the ways this has been articulated with—and altered by—particular forms of resistance.

The chapter begins by tracing the extension of US power through the region in the postwar period and detailing its conflict with popular struggles seeking independence and greater sovereignty. US strategy initially relied upon the cultivation of various regional allies, settling in the late 1960s on a strategic partnership with Israel, Iran, and Saudi Arabia as a means to confront the growing strength of Arab nationalist movements. As military defeat pushed back struggles in Egypt and elsewhere, the United States also employed food aid and other forms of assistance to lock development patterns into a dependency on Western imports and financial inflows. In the specific conjuncture of global crisis that racked the world economy in the 1970s, this relationship paved the way for mounting fiscal problems that culminated in the debt crises of the 1970s and 1980s, finally opening the path to the neoliberal reforms that will be explored in later chapters.

This early history confirms that imperialism is not simply a question of military conquest; central to the heightened control of Western powers has been the region’s unequal and uneven integration into global capitalism. The second part of the chapter explores this integration in greater detail, examining the trajectory of US and European relationships with the region through the 1990s and 2000s, as well as the rise of new actors such as China and Russia. The various bilateral trade and financial agreements promoted over these decades have profoundly reworked the nature of capitalism in the Middle East. By reconfiguring the patterns of production and consumption, they have acted to subordinate the region to the circuits of accumulation in the advanced capitalist countries. Understanding these varied paths of integration of the Middle East region into the world economy will be an essential element to discussions of the neoliberal era in later chapters.

The Transition to US Power

World War II signaled a major shift in both the nature of capitalist production and the structure of the world market. Most significantly, the end of the war witnessed a qualitative leap in the internationalization of capital. Capitalist firms, led by those headquartered in the United States, expanded overseas and oriented their production toward international exports. Between 1959 and 1964, US companies set up international subsidiaries at the rate of more than three hundred per year, more than ten times the prewar rate.1 New industrial sectors also emerged at this time, notably the petrochemical industry, led by US multinationals such as Dow, Union Carbide, and Standard Oil. These companies manufactured substitutes for naturally occurring materials—plastics, synthetic fibers, pesticides, fertilizers, and detergents—vastly increasing the scale and scope of commodity production.2 Internationalization brought with it a fundamental reconfiguration of the transport sector. Central to this was, of course, mass automobile production, which expanded as factories were built throughout Europe under US-backed reconstruction plans. Large-scale commercial land and air transit also grew rapidly in the immediate postwar period as the first “global” markets began to take shape.

All these trends were underpinned by a growing demand for inputs of energy and raw materials. Internationalization—because it was premised upon globally oriented production circuits—demanded large increases in energy use. And here, too, there was a shift—away from the centuries-old use of coal—toward oil, and later natural gas, as the principal sources of energy. Oil had become, in the words of Simon Bromley, a “strategic commodity.”3 Its greater energy density and portability (relative to coal) made it ideal for powering automobiles, airplanes, and modern militaries.4 Not only did these hydrocarbons supply the necessary energy for industrial production and transportation, they also formed the basic feedstock for the vast array of products generated in the new petrochemical industries.

Through the first few decades of the twentieth century, the bulk of the world’s oil production had been located in Europe and the United States. But following a wave of discoveries during the 1920s and 1930s, it became clear that the Gulf region of the Middle East—Saudi Arabia, Kuwait, Iraq, Iran, and the smaller Gulf states—held the world’s largest supplies of cheap and easily accessible hydrocarbons. This brought with it profound geopolitical consequences, conferring on the region a potentially decisive role in determining the fortunes of capitalism at the global scale—“a stupendous source of strategic power,” as a US Department of State memo described Saudi Arabia in 1945.5

But concurrent with this transformation in the nature of capitalist production were sweeping changes to the Middle East state system. The existing nation-state borders were largely a result of British and French machinations, which had divided the region into various colonies and assorted protectorates in the early twentieth century alongside the collapse of the Ottoman Empire. World War II, however, had significantly disrupted these old colonial structures. A deep-seated yearning for independence had been percolating for decades and—with the weakening of British and French hegemony during and after the war—a resurgence of anticolonial struggles shook the established patterns of rule. Squeezed by mounting financial and political crises at home, the former colonial powers were faced with burgeoning movements demanding control over their natural resources and strategic transport routes, and the right to freely determine relations with other countries. The increasing intensity of these struggles raised the specter of popular sovereignty and national independence over what had arguably become the most important zone in the world market. These challenges to British and French rule took place in the context of the new global order that had consolidated in the ashes of war. The United States had emerged as the preeminent capitalist power, its military and economic leadership vastly superseding the older colonial rivals of Europe.6 At the same time, however, the Soviet Union had won great prestige through its resistance to Nazi Germany and was also seeking to extend its global reach. As a result, many of the Arab leftist and anticolonial movements that had emerged in the postwar period looked toward alliances with the Soviet government as a means to carve out space against their colonial masters.

It was in recognition of these dynamics that shortly after World War II, US president Harry Truman declared, in a famous speech to Congress, that the United States would actively intervene around the world in support of its interests and those of the “free world.” Although the Truman Doctrine, as it became known, was framed largely as a response to a growing Soviet influence in Turkey, Greece, and elsewhere, at the root of US foreign policy concerns were the various independence and left-wing movements that had emerged in the wake of Europe’s destruction. Truman’s speech did not directly reference the Middle East, yet its supreme significance was undoubtedly foremost in the minds of the speechwriters—an earlier draft confirmed the importance of the region’s “great natural resources.”7

In light of the potentially enormous ramifications of any realignment of sovereignty in the Middle East—and clearly cognizant of the importance that the region held for its own position atop global hierarchies—the United States took the lead in attempting to recast the nature of political rule during the postcolonial period. The strategy initially pursued by the United States, in close alliance with Britain and France, was to negotiate the handover of power to leaders who were viewed as amenable to continued foreign domination, albeit in the framework of formal independence. Britain had earlier shown some success with this approach, replacing direct rule in Egypt (in 1922) and Iraq (in 1932) with new governments, led by pro-British rulers who allowed a continued presence of foreign troops and largely acquiesced to orders from London. It was with this logic in mind that Lebanon and Syria were constituted as two separate states with the end of French Mandate in 1943, and the Emirate of Transjordan (later called Jordan) was granted independence from the British Mandate in 1946. In 1951, the UN bestowed upon Libya its independence, under the control of the country’s monarch, King Idris.

In most countries, however, this reliance upon pro-Western monarchs and urban elites could not survive long into the 1950s and 1960s. The depth of the problem faced by the Western powers was confirmed in 1951, with the nationalization of the British-owned and -operated Anglo-Iranian Oil Company (AIOC) in Iran. Iran’s recently appointed prime minister, Mohammed Mossadegh, had been emboldened by mass mobilizations across the country to expel AIOC and place Iran’s oil in state hands.8 The nationalization of AIOC was followed a year later, in 1952, by a dramatic turn of events in Egypt, where the country’s monarch and a principal ally of colonialism in the region, King Farouk, was ousted by a military coup led by the popular officer Gamal Abdel Nasser.9 Nasser’s coming to power forced the withdrawal of British troops from Egypt in 1954 and led to the independence of the Sudan in 1956. Nasser confirmed the West’s worst fears when he turned to the Soviet Union for military support as well as technical and financial assistance for large-scale infrastructure projects such as the Aswan Dam. Egypt’s newfound sovereignty was crowned with the nationalization of the British/French-controlled Suez Canal in 1956—an action celebrated by millions of people across the entire Middle East. As Nasser took these steps, anticolonial struggles were also growing elsewhere in the region, most notably in Algeria, where a guerrilla war for independence was launched against the French occupation in 1954. Although French control did not end in Algeria until 1962, the Algerian revolt was a significant factor in propelling France to grant formal independence to Morocco and Tunisia in 1956.

In response to these challenges, the United States elaborated the so-called Eisenhower Doctrine, proclaimed on January 5, 1957, as part of a “Special Message to the Congress on the Situation in the Middle East.” Decrying the threat of “international communism,” Eisenhower guaranteed US readiness “to employ the armed forces of the United States to assist to defend the territorial integrity and the political independence of any nation in the area.”10 Although Eisenhower’s speech was framed, as Truman’s had been, by the supposed Soviet threat, much of his speech alluded to events in Egypt, particularly the nationalization of the Suez Canal. Eisenhower noted that the canal “enables the nations of Asia and Europe to carry on the commerce that is essential if these countries are to maintain well-rounded and prosperous economies,” and that the Middle East was a “gateway between Eurasia and Africa . . . [with] about two thirds of the presently known oil deposits of the world. . . . The nations of Europe are peculiarly dependent upon this supply, and this dependency relates to transportation as well as to production.”11

Eisenhower’s doctrine was first put to the test in 1957 in Jordan, where a pro-Nasser government, led by Suleiman al-Nabulsi, had come to power and sought to curb the powers of the Western-backed monarch, King Hussein.12 Building upon the anti-British sentiments that were running high following the nationalization of the Suez Canal, Nabulsi canceled a treaty between Jordan and Britain and called for closer relations with China, the Soviet Union, and Egypt. In response, Hussein dismissed the Nabulsi government, banned all political parties, and placed Jordan under martial law. After Hussein expressed tacit support of the Eisenhower Doctrine, the United States responded with financial and political aid, replacing Britain as the major Western supporter of Jordan.13

As this crisis unfolded in Jordan, the United States also moved to support pro-Western forces in Syria by backing conservative politicians and encouraging Turkish and Iraqi plots against the country.14 Here the attempts failed, serving only to further generate support for Communist and Arab nationalist forces. In 1958, Egypt and Syria formed the United Arab Republic (UAR), a short-lived attempt by Nasser to form a union based on Arab nationalism, which was embraced by Syrian elites in reaction to the strength of the Communist movement in Syria.15 Responding to the formation of the UAR, Jordan and Iraq formed the Arab Union, a federation of the two monarchies that was set up as a pro-Western counterpoint to Arab nationalism. The unity lasted only six months, however, ending with the assassination of Iraq’s King Faisal II in a military coup largely inspired by the overthrow of Egypt’s monarchy in 1952. As these Western allies teetered, British troops were dispatched to Jordan to support King Hussein (with the support of Israel and the United States), while US Marines landed in Lebanon to bolster the pro-Western government of president Camille Chamoun.16

By the mid-1960s, popular and underground movements claiming fidelity to Arab nationalism and left-wing ideologies were shaking all the pro-Western regimes in the region. A most important and often overlooked part of this history was the range of deep-rooted struggles taking place in the Gulf region, where strikes and worker movements threatened the stability of corrupt and decrepit monarchies. In Bahrain, for example, where the first political party in the Gulf had formed in 1954, militant labor struggles occurred through the 1960s that culminated in a three-month uprising in March 1965 following the sacking of hundreds of workers at the Bahrain Petroleum Company (BAPCO).17 These struggles were led by Communist and nationalist leaders who fused agitation against the ongoing British presence in the Gulf with demands around worker and social issues. The strikes drew support from wide layers of society, including high school students who walked out in solidarity with the workers.18 Worker actions and nationalist-inspired movements were also widespread in Saudi Arabia, Kuwait, and the smaller Gulf emirates. Elsewhere in the Arabian Peninsula, an armed struggle was launched in 1963 by the Front for the Liberation of Occupied South Yemen (FLOSY) and the National Liberation Front (NLF) against British control in Yemen.19 The mood of the time was encapsulated in the formation of the Popular Front for the Liberation of the Occupied Arabian Gulf (PFLOAG) in 1968, which viewed its base of operations as extending throughout all the Gulf states.20

The Character of Arab Nationalism

The landscape of Middle East politics from the vantage point of the mid-1960s was thus deeply marked by the chameleonic character of Arab nationalism, which assumed a variety of forms differing radically across time and place.21 While the Arab nationalist movement was represented most prominently by Nasserism in Egypt and the rival factions of Ba’athism in Syria and Iraq, its ideology and political practices resonated powerfully in every country in the region. At numerous points in its history, Arab nationalism, particularly in its Nasserist variant, would clash sharply with imperialist interests in the region. The overthrow of colonially backed monarchies, the nationalization of the Suez Canal, and the later confrontations around Israel (discussed below) are potent indications of this fact. All these points of resistance generated widespread sympathy and deep-seated feelings of pride among all layers of Arab society. Millions of people hold a genuine nostalgia for this era that remains indelibly inscribed in political and cultural practices to the present day.

Nevertheless, it is important not to fetishize the confrontations with imperialism and ignore the configurations of class power that marked the rise of Arab nationalist ideology. Too often the reasons behind the failures of the movement are attributed to the military and political defeats inflicted by external forces or the contingent actions of individual leaders during the 1960s and 1970s. While these are no doubt a critical part of the movement’s history, they can obfuscate the class dynamics that innervated the struggles of the time—most notably the fact that Arab nationalism rested on a contradictory ideology that, although focused on Arab unity, consciously downplayed the reality of class struggle.22 Indeed, many Arab nationalists, such as the Syrian intellectual Adib Nassur, condemned a focus on class as being divisive to the cause of Arab unity.23 Likewise, Michel Aflaq, one of the leading founders of Ba’athism, called on Arabs not to “lose their nationalism nor to confuse it with the felonious notion of class interests, so as not to endanger national unity.”24 In its dominant forms, this orientation actually ended up prioritizing the development of national capitalist classes, and was partly enabled by the presence of the Soviet Union. It was this (ultimately unsuccessful) negotiation of Cold War rivalries that generated the possibility for Arab nationalism to square the contradictions stemming from its pro-capital orientation and its apparent confrontations with imperialism.

The state-led fostering of national capital necessitated the elimination of institutional configurations—supported by earlier elites tied to colonialism—that blocked the development of new capitalist groups. Nasser captured this sentiment well in his Falsafat al-thawrah [Philisophy of the Revolution], in which he argued that the revolution was “a popular progressive struggle not class struggle” that brought together “peasants, workers, soldiers, intellectuals and national capital” as an alternative to “the alliance of exploitative capital and feudalism.”25 This struggle was an important, albeit partial, explanation of the character of the land reform that took place in the 1950s and 1960s (see chapter 4). In practice, it did not necessarily mean the destruction of those old social elites—in many cases they became an important component of the new capitalist classes—but was aimed rather at the institutional forms that represented those older social relations. The development of this local, state-supported bourgeoisie also helps to explain one driving force behind the confrontation with imperialism—an attempt to attain basic sovereignty over resources, state policies, financial systems, and so forth. All these measures explain the ubiquity of the “strong state” that typified Arab nationalist governments through the 1950s and 1960s, which provided the conditions for national accumulation through state-distributed contracts, financial linkages, and trading opportunities. Within this structure the military took a preeminent position as the only state institution with the internal cohesiveness and organizational discipline to direct this transformation.

It is this “pro-capital”/“pro-state” orientation of Arab nationalism that helps clarify a further feature of this history, which is often missed in the hagiography of Nasser and other nationalist leaders. The Arab states that emerged during the 1950s and 1960s were characterized by sharp confrontations with the Left, independent worker movements, and other struggles. These movements were tolerated at points, and their discourses were often absorbed into the language of ruling regimes (as can be seen in the frequent refrain of “Arab socialism”), but all Arab nationalist movements aimed at demobilizing and persecuting any left-wing forces that attempted to strengthen the autonomous mobilization of workers and other social forces.26 This strategy of demobilization could be seen in another innovation of Arab nationalism—the creation of state-led, corporatist unions and other federations that were billed as representatives of working classes but that, in reality, were frequently used to suppress struggles and prevent them from emerging outside of the state structures. These institutions were seamlessly taken over by the autocratic rulers that followed the first generation of Arab nationalist leaders (such as Mubarak and Ben Ali), and are important to understanding the contemporary form of struggles following the 2011 uprisings.

In short, despite their rhetoric, Arab nationalist regimes acted primarily to strengthen capitalism and an emerging, state-linked capitalist class—they had little to do with socialism, regardless of the nomenclature used to describe the various regimes of the time. This is not to deny the ways in which these regimes did carry out a range of measures that improved living standards and addressed many of the deprivations that populations had faced under colonialism—land reform, job security in the public sector, and, very importantly, provision of food and other subsidies to guarantee food access for the poorest layers of the population. These measures met real social needs, and were utilized by the Arab nationalist regimes—as with their anti-imperialist rhetoric—to bind mass support to governments in the context of sustained pressure from below. But their provision through the state, without any organs of real democratic participation or control (in fact, in a context where mass participation was actively prevented), meant that they were always secondary to the principal goal of capitalist development.

These contradictory dynamics help to explain the evolution of the Arab states in the 1970s and 1980s. By the end of these two decades, the proclaimed goals of the Arab nationalist movement lay in tatters—Egypt had become a key US ally, and virtually all Arab states were laying the groundwork for strict neoliberal economic programs that would be launched under the auspices of the IMF and World Bank. By the mid-1980s, most of the Arab states had reoriented from a confrontation with imperialism toward a protracted incorporation into US and European power structures in the region. Somewhat ironically, as later chapters will trace, this incorporation actually helped strengthen the development of the national capitalist classes sought by Arab governments for decades. This occurred, however, not through a break with imperialism but through the insertion of this emergent class into the circuits of accumulation developed by the advanced capitalist states over the region as a whole.

1970s and 1980s: The Mechanisms of Counterrevolution

Overcoming Arab nationalism and subsuming it into the structures of imperial rule took place through a combination of political, military, and economic means. The overriding characteristic of this process was the widening of hierarchies and the differentiating of power at both the regional and national scales. By magnifying the region’s uneven patterns of development while simultaneously tightening its interdependencies, foreign powers were able to lock certain social forces within the Middle East into a framework of shared interests opposed to those of the vast majority. In spite of significant opposition, the principal consequence of these changes was the tempering of any anti-imperialist features of Arab governments and the sustained rollback of the populist measures on which they rested.

On the political and military front, Western governments—led by the United States—initially pursued this strategy through strengthening alliances with three main regional pillars: Saudi Arabia, Iran, and Israel. Each of these countries was provided with large amounts of financial and military aid, and the specific socioeconomic and political characteristics of these three countries enabled them to emerge as the main articulation of US and European influence in the region. Their position within regional hierarchies was strengthened, and in return, they helped to confront the various radical movements that had developed during the 1950s and 1960s, whether nationalist or left-wing.

In the Gulf, the Saudi monarch, King Saud, had long been reliant on US aid and military support following the arrival of US oil companies to the country in the 1920s. But Saud’s anachronistic regime and close relationship with the United States faced the rise of revolutionary and nationalist movements during the 1950s and 1960s, which were severely repressed with the open support of US and British advisors. The influx of huge flows of petrodollars into the Gulf in the 1970s as a result of oil price rises (first in 1973–74 and again in 1979–82) underpinned the growth of a Saudi ruling class that was exposed to profound threats from below and from the wider region (see chapter 6). In this context, an alliance with the United States (and Britain) helped to strengthen the position of the Saudi monarchy and the social forces connected to it, laying the basis for a particular form of regional dominance that has persisted into the present.

In return for Western military and political support, the Saudi regime was all too willing to move to undercut Arab nationalism through the corrupting influence of petrodollars, which could be used to back pro-Western forces in the region without a direct link to Western funding.27 In line with this logic, Saudi Arabia was encouraged to employ Islam as a regional counterweight to nationalist and left-wing organizations, organizing “Islamic summits” that asserted Saudi influence and challenged Egypt’s role as the leading Arab state.28 A vitriolic propaganda war opened up between the Saudi and Egyptian governments, leading the US Senate to object to broadcasts from the Voice of Cairo radio station calling upon Saudi citizens to “overthrow these lackeys who have sold their honor and dignity and who cooperate with the arch enemies of the Arabs.”29 This proxy conflict with Egypt took its most vivid form during the eight-year North Yemen civil war, where Saudi Arabia was the main supporter of the royalist, pro-British forces that had been overthrown in 1962, while Egypt backed the republican movements arrayed against the ousted monarchy.

In the case of Iran, the United States (and Britain’s M16) had engineered a coup against Mossadegh in 1953, bringing to power a pro-Western government loyal to the Iranian monarchy, headed by Mohammad Reza Shah Pahlavi.30 The United States explicitly conceived of Iran as the principal base of control for the Gulf region, and military funding reached $1.7 billion under the first Nixon administration (1968–72), nearly three times the limit set by Nixon’s predecessor, Lyndon Johnson.31 A 1969 report by the RAND Corporation—a prominent think tank closely connected to Washington policy makers—noted that Iran was a critical feature of US power in the Gulf because it could “help achieve many of the goals we find desirable without the need to intervene in the region.”32 This role was convincingly demonstrated in 1973 with the dispatch of the Iranian military to Oman to assist British troops in the repression of the Dhofar rebellion—a powerful struggle that gave birth to the PFLOAG and was at the heart of left-wing movements in the Arabian Peninsula. The Iranian troops, supplied with US helicopters and other weaponry, succeeded in crushing the rebellion.33 US military support to Iran skyrocketed from 1973 onward, amounting to more than $6 billion annually from 1973 to 1975. In addition, Iran received the most sophisticated weaponry available from the US military arsenal.34 As the United States extended military support to Iran, it also helped the Shah build a domestic security apparatus (the SAVAK) that became renowned for its vicious repression of any internal dissent.

The other major pivot of US power in the broader region was the state of Israel. As a settler-colonial state, Israel had come into being in 1948 through the expulsion of around three-quarters of the original Palestinian population from their homes and lands.35 Due to this initial act of dispossession and its overarching goal of preserving itself as a self-defined “Jewish state,” Israel quickly emerged as a key partner of foreign powers in the region.36 Inextricably tied to external support for its continued viability in a hostile environment, Israel could be counted on as a much more reliable ally than any Arab state. During the 1950s, Israel’s main external support had come from Britain and France.37 But the June 1967 war saw the Israeli military destroy the Egyptian and Syrian air forces and occupy the West Bank, Gaza Strip, (Egyptian) Sinai Peninsula, and (Syrian) Golan Heights. Israel’s defeat of the Arab states encouraged the United States to cement itself as the country’s primary patron, supplying it annually with billions of dollars’ worth of military hardware and financial support.

Israel’s victory in 1967 signaled a decisive turning point in the evolution of Arab nationalism.38 While pro-Western regimes continued to be challenged from below by various radical movements, and new nationalist governments came to power in Southern Yemen (1967),39 Iraq (1968), and Libya (1969), Israel’s victory dealt a devastating blow to the notions of Arab unity and resistance that had crystallized most sharply in Nasser’s Egypt.40 The military defeat was symbolically reinforced by Nasser’s death in 1970 and the coming to power of Anwar Sadat, who subsequently moved to reverse many of Nasser’s more radical policies. The priority placed by the United States on its relationship with Israel was further highlighted in 1973, following another war between Israel and a coalition of Arab states led by Egypt and Syria. Despite initial Egyptian and Syrian advances in the opening salvos of the war, US airlifts of the latest military equipment led to Israel’s eventual victory. This was the framework in which the other front of imperialist strategy unfolded—the region’s economic subjugation.

The Economic Front

Alongside these political and military defeats, much of the Arab world was faced at the time with the realities of the global economic slump that had begun in the early 1970s. This downturn had two important ramifications for the Middle East. The first of these was the increase in oil prices in the early 1970s, which produced a sharp rise in the cost of oil for oil-importing countries in the region (while simultaneously feeding the prodigious growth in petrodollars for the Gulf, as noted above). The second impact of the world crisis was a drop in global demand, which hit export levels and created severe balance-of-payments problems for oil-importing countries. This was the context in which two interlinked elements emerged as central features of Western strategy in the region—aid and debt. Both mechanisms strongly reinforced the political and military defeats described above, compelling a reorientation and opening up of local economies to the world market—a move later consummated in the economic program of neoliberalism.41

The United States had first begun to employ food aid as a major element of its foreign policy in the early 1960s, under the Kennedy-era Food for Peace program. This was an attractive tool of successive US administrations because not only did it help dispose of US agricultural surpluses, it also locked Arab governments into a dependency on imports in a context where the guarantee of cheap food (particularly bread) was an important element of regime legitimacy.42 In 1961, for example, US food aid made up 77 percent of Egyptian wheat imports and 38 percent of total supply, increasing to 99 percent and 53 percent, respectively, by 1962.43 This aid was explicitly political in nature, with the US ambassador to Egypt noting that the intent was to establish a conscious association between Egyptian “policies and attitudes towards the United States and continuation of such [food] assistance in the future.”44 US diplomats openly linked the apparent “moderation” of Egyptian government delegates at a 1962 conference of the Non-Aligned Movement to this food aid dependency.45 Levels of US aid to Egypt dropped in the second half of the 1960s as the Egyptian government distanced itself from US interests through its support for the republican forces in Yemen and its various political and military alliances with the Soviet Union. But Egypt’s defeats in 1967 and 1973 provided an opening for the United States to resume this aid in an attempt to build a closer relationship with Nasser’s successor, Anwar Sadat. From 1973 to 1979, Egypt received around one-fifth of all US food aid globally, a powerful indication of US hopes for Sadat and his subsequent embrace of US foreign policy goals in the region. This aid was further supplemented by other policies to encourage the disposal of US agricultural surpluses to Egypt.

Food aid and cheap wheat sales deeply impacted the nature of agriculture and food production in the Middle East and laid the basis for the neoliberal transformation of agrarian relations, which will be explored in chapter 4. Local farmers were unable to compete with the large, cheaper quantities of grains coming from the United States and elsewhere, and as a consequence, agricultural systems were progressively undermined. Instead of relying on farmers to produce food for domestic consumption, countries across the region became increasingly reliant upon imported grain and other food. In 1960, Egypt had a self-sufficiency ratio (domestic production in relation to consumption) for wheat of around 70 percent. By 1980, the self-sufficiency ratio had fallen to 23 percent as imports rose to massive levels.46 The process was mirrored in Algeria, Morocco, and Tunisia—underpinned in those countries to a greater extent by subsidized grain imports from Europe rather than the United States.47

Food aid and grain imports not only signaled a much tighter integration with the world market (and hence exposure to fluctuating global prices), they also paved the way for growing levels of indebtedness as access to foreign currency became a key determinant of whether a country could meet its food needs. In the case of Egypt, these developments were an important part of Sadat’s decisive turn toward the United States through the 1970s. The 1973 war was estimated to have cost around $40 billion, and the general fiscal squeeze caused by rising food and energy imports led Sadat to seek loans from US and European lenders as well as regional zones of surplus capital such as the Gulf Arab states.48 The latter played a decisive role in bringing Egypt into the US orbit, with Saudi Arabia, Kuwait, the UAE, and Qatar forming the Gulf Organization for the Development of Egypt (GODE) in 1976 to provide aid to Egypt. The condition for Gulf financial aid was the abrogation of Soviet influence in Egypt (the Soviet-Egyptian Friendship Treaty was canceled in March 1976) and the strict control of the US Treasury, IMF, and World Bank over a series of economic reforms, including an end to subsidies and a deregulation of the Egyptian pound (which would raise the cost of imports).49 GODE was initially slow in providing funds, waiting for Sadat to agree to the conditions laid down by the World Bank and IMF, but as the Egyptian government moved to amend laws to allow repatriation of profits, free flows of capital, and tax-free holidays, and attempted to lift subsidies, the money was forthcoming.

Similarly, elsewhere across the region, the combination of global economic turmoil and the rising costs of food and energy imports meant countries were forced to borrow increasing amounts in order to stay afloat. These debt levels accelerated dramatically after the US government sharply raised interest rates beginning in 1979—a move called the “Volcker Shock,” after Paul Volcker, then chairman of the Board of Governors of the US Federal Reserve.50 Because most Arab debt was held in US dollars, the spike in interest rates hit countries in the Middle East very hard (particularly when coupled with the global recession of 1981–82). By the mid-1980s, Algeria, Egypt, Jordan, Morocco, and Tunisia were paying 30–65 percent of their entire export earnings just to service their debt (see table 2.1). At the same time, new loans had to be taken on in order to keep afloat, and so overall debt stock actually rose despite the continual outflows of debt service (see table 2.1). In other words, indebtedness increased each year in tandem with growing debt and interest repayments. Debt thus represented an ever-escalating drain of wealth from the Arab region to the richest financial institutions in the world.

Trapped in the cul-de-sac of debt and balance-of-payment crises, Arab countries attempted to renegotiate payment schedules with US and European banks through the 1980s. They quickly discovered, however, much like Egypt’s earlier experience with GODE loans, that further financial support would be made contingent upon consent from the IMF and World Bank. In order to receive this consent, countries had to agree to lift restrictions on trade, begin the privatization of state-owned enterprises, deregulate labor markets, and demonstrate that they would develop medium-term policy to drop barriers to capital flows (see chapters 3 and 4 for detailed discussions). It was in this context—tied to Western states through a dependency on foreign capital inflows, food imports, and military and economic aid—that Arab countries began to embrace a range of neoliberal restructuring programs in the late 1980s and early 1990s.

By the end of the 1980s, all these changes meant that a range of crucial Arab countries across North Africa and the Mediterranean—notably Egypt, Jordan, Morocco, and Tunisia—were well on the way to being integrated into a framework of US and European interests. Once again, the case of Egypt was particularly striking, as it had been transformed from the leading voice of Arab nationalism to one of the most important allies of the United States. Through the 1980s, Egypt was the second-largest recipient globally (after Israel) of US bilateral foreign assistance, with military aid reaching $1.3 billion a year from 1987 onward.51 These funds were estimated to cover up to 80 percent of the Egyptian Defense Ministry’s weapons procurement costs and one-third of Egypt’s overall defense budget each year.52 As subsequent chapters will examine in detail, the integration of states such as Egypt into the sphere of Western influence represented not just a political realignment, involving a shift in foreign policy alliances, but was above all indicative of a process of class formation—one through which a state-fostered bourgeoisie, strong military elites, and domestic private capital came together as partners sharing a joint interest in the new neoliberal order. In the words of a prominent Egyptian commentator and close confidant of Nasser, “Oil fields began to loom far larger in the public mind than battlefields; tharwa (riches), it was said, had begun to take over from thawra (revolution).”53

The 1990s and 2000s: Imperialism Consolidated

By the early 1990s, US power appeared triumphant. The collapse of the Soviet Union and its satellites from 1989 to 1992 made it much more difficult for those states and political movements that had relied upon Soviet support to pursue independent policies, and the United States utilized the new political context to further extend its influence in the region. The target chosen in this respect was Iraq, which, in the early 1990s, possessed extensive oil reserves (estimated as second only to Saudi Arabia) and the largest unexplored deposits of any country.54 Through the 1980s, Iraq had been locked in a bloody and self-destructive eight-year war with Iran, following the overthrow of the US-backed Shah in early 1979.55 The war had been largely funded by the United States and the Gulf monarchies, which saw Iraq as a useful counterweight to the threat of Iranian influence in the Gulf. By mid-1990, Iraq owed a debt of more than $42 billion, on which it was paying $3 billion annually.56 This was in the context of a major economic crisis—inflation was running at 40 percent annually, and the country’s cash reserves were equivalent to only three months’ worth of imports.57 In the face of this dire situation, Iraq’s president, Saddam Hussein, attempted to cajole the Gulf states into forgiving the debts Iraq had incurred during the war. Failing in this goal, he invaded Kuwait in August 1990, justifying the invasion with the claim that Kuwait was drilling for oil beneath the Iraqi border and colluding with other Gulf states to keep the price of oil low in order to damage Iraq’s parlous finances.58

Despite the fact that Hussein had been a primary ally of the United States during the war with Iran, he was considered unreliable and his leadership rested partly on a claim to Arab nationalism.59 The United States, seizing the opportunity presented by the invasion of Kuwait, quickly mobilized to launch an attack against Iraq. In this endeavor, the political alliances that had developed during the 1980s played a chief role in garnering broader Arab support. Egypt organized an emergency Arab summit in 1990 that endorsed the invasion and also sent troops to take part in combat. Although the Iraqi government was not ousted by the US-led coalition, its military was severely weakened and the country was cut in three by the no-fly zones imposed by the United States and Britain after the war.60 US president George H. W. Bush utilized the occasion of the war to announce what he described as the “New World Order”—untrammeled US supremacy across the globe. The war was followed by a decade-long regime of sanctions that devastated Iraq’s industrial and social infrastructure, with the United States remaining focused on bringing to power a pliant government.61 At the end of the war, Egypt was rewarded for its efforts with a $15 billion write-off of its debt commitments, the largest cancellation in the history of the Middle East.62 Likewise, Morocco, which sent 1,200 troops to aid in the attack, received $5 billion in debt forgiveness from the United States and the Gulf states.63 In both cases, the relationships of debt bondage were undoubtedly a major factor in steering the foreign policy choices of the two Arab states.

Once again, however, the extension of US power through the 1990s and 2000s was not solely military in nature. As Iraq faced invasion and a punishing sanctions regime, the United States developed a series of highly significant trade and financial initiatives that radically transformed the relationships between the wider region and the advanced capitalist core. As subsequent chapters will show in detail, these initiatives—alongside similar ones from the European Union (EU)—have been a major force in structuring the context of national neoliberal reforms over the last two decades. But beyond the national scale, they have also acted to rework the nature of accumulation at the regional scale—shifting the pattern of financial and trade linkages with Western capital and consolidating a specific set of hierarchies within the region itself.

As had been the case since the 1970s, US power continued to be articulated through close military and political relationships with the Gulf, Israel, and client Arab states such as Jordan and Egypt. There was a shift, however, in the way these relationships were conceived. The basic approach was to draw these pillars of support together in a single economic zone under the domination of US capital. A critical pivot of this strategy was thus the normalization of economic and political relations between Israel and the Arab world. As a consequence of its long-privileged relationship with the United States—expressed most pointedly in the massive receipts of aid without the conditionalities characteristic of loans to other states—Israel’s economy had developed in a qualitatively different direction from those of its neighbors. Israel’s capitalist class had emerged with the support of the state apparatus around activities such as construction, agriculture, and finance. But through the 1990s, direct US financial support helped to enable the development of high value-added export industries connected to sectors such as information technology, pharmaceuticals, and security.64 Unlike its relationship with other states in the region, the United States had run a massive trade deficit with Israel since the signing of a US-Israel free trade agreement (FTA) in 1985. In this context, the push to normalization would inevitably strengthen the position of Israel (and thus the United States) within regional hierarchies.

The first step in this process was the 1993 Oslo Accords, signed between Israel and the Palestine Liberation Organization (PLO), which led to the establishment of the Palestinian Authority (PA), with limited self-rule over the Palestinian population in the West Bank and Gaza Strip. As chapter 5 will discuss in further detail, this agreement was a necessary prerequisite for other Arab states to embark on normalization with Israel. Throughout the 1990s, this self-rule evolved into a situation akin to the bantustans of apartheid-era South Africa: Israel retained full control of Palestinian movement, the entry and exit of goods, and economic development in isolated patchworks of territory, while a small layer of Palestinians mediated the occupation on behalf of the occupying power. At the same time, because this process occurred under the rubric of “peaceful negotiations” and the blessing of the United States and EU, Oslo and subsequent agreements helped to open the way for Israel’s normalization into the broader Middle East.

At a regional level, the trend toward normalization was confirmed in the MENA Economic Summits, a series of intergovernmental meetings held annually between 1994 and 1998. As the Jordanian Foreign Ministry noted, these summits were “intended to create economic interdependencies between Arab states and Israel, promote personal contacts between the two sides and foster trade, investment and development.”65 The first MENA summit was held in Casablanca, Morocco, in 1994 and, in addition to the Arab states, was attended by then Israeli prime minister Yitzhak Rabin, foreign minister Shimon Peres, and 130 Israeli businesspeople. The participants agreed to take measures to lift the regional economic boycott of Israel and also to establish a Middle East chamber of commerce—with then US secretary of state Warren Christopher effusing that “the Middle East is open for business . . . the conference could be the beginning of a beautiful friendship.”66 The second summit was held in Amman, Jordan, in October 1995, and aimed at facilitating “the expansion of private sector investment in the region, [and] to cement a public-private partnership which will ensure that end and to work to enhance regional cooperation and development.”67 As part of the Amman summit, it was decided to establish the Economic Summit Executive Secretariat, which would work to advance “the public-private partnership, promoting contacts, sharing data and fostering private sector investment in the region.”68 The neoliberal ethos guiding these gatherings was continued in the third MENA summit, held November 12–14, 1996, under the theme of “Building for the Future, Creating an Investor Friendly Environment” in Cairo. The final resolution of the Cairo conference noted, “The region’s economic, commercial and trade potential . . . is being greatly enhanced by important economic reform programs currently being undertaken by many states in the region. These reforms, which include privatisation, structural reform, and removing trade barriers, have provided for a more business-friendly economic climate throughout the region.”69

The MENA summits explicitly linked normalization to the consolidation of neo­liberal reform, with the integration of Israel into the region predicated upon the dropping of barriers to trade and investment flows under the auspices of US power. Perhaps the most revealing confirmation of these linkages was the establishment of the so-called Qualified Industrial Zones (QIZs) in Jordan and Egypt. The first of these zones came about as a result of economic agreements signed between the United States, Israel, and Jordan in 1997. Under the QIZ agreements, goods produced in the zones were given duty-free access to US markets, provided that a certain proportion of inputs were Israeli (8 percent in the case of Jordan, 11.7 percent in the case of Egypt). Soon after the first agreement was signed, an additional twelve QIZ sites were established in Jordan. These agreements were intended to weld together Israeli and Arab capital in the joint exploitation of cheap labor, with exports aimed at the US market. They have since come to dominate bilateral trade between the United States and Jordan (and, to a lesser extent, Egypt). By 2007, the US government was reporting that exports from the thirteen QIZs established in Jordan accounted for a massive 70 percent of total Jordanian exports to the United States.70 In 2004, Egypt also launched its first QIZ in an agreement with Israel and the United States. Six more QIZs were approved in subsequent years, and from 2005 to 2008 exports from these zones grew at an annual average rate of 58 percent, ten times that of total exports from Egypt to the United States.71 By 2008, close to one-third of Egypt’s total exports to the United States would be coming from QIZs.72

The moves toward normalization appeared to stumble following the onset of a Palestinian uprising against Israeli rule in 2000 (see chapter 5) and a second US-led invasion of Iraq in 2003.73 But the link between normalization and neoliberal reform continued to drive US strategy in the region despite renewed military conflict. In mid-2003, these goals were encapsulated in the George W. Bush administration’s announcement that it sought a Middle East Free Trade Area (MEFTA), spanning North Africa to the Gulf, by 2013. In June 2003, then US trade representative Robert Zoellick (later to become World Bank president) gave a speech to the World Economic Forum in Jordan in which he outlined the basis of the MEFTA plan. Zoellick’s speech blamed poverty, unemployment, and terrorism on Arab “autarky” and “failed socialist” models. He described the war on Iraq as “an opportunity for change—an opening for the people of the Arab world to ask why their region, once a nucleus of trade, has been largely excluded from the gains of this modern era of globalization.”74 In a bizarre teleological reading of history that traced an alleged pro-business “spirit of the Levant,” stretching from the time of the Quran through eighteenth-century Arab merchants to the supposed commercial zeal of Arabs living in the contemporary United States, Zoellick argued that if the Middle East liberalized and opened to foreign capital within a regional trading bloc, then the problems stemming from “closed national borders, centralized economic controls, the heavy hand of government, and nationalized industry” would be solved. The goal of US policy was “to assist nations that are ready to embrace economic liberty and the rule of law, integrate into the global trading system, and bring their economies into the modern era.”75

The US strategy was to negotiate individually with “friendly” countries in the region using a graduated six-step process and eventually leading to a full-fledged FTA between the United States and the country in question. These FTAs were designed so that countries could “moor” with neighboring states, thereby expanding agreements into sub-regional agreements that could be linked over time, until the entire Middle East came under US influence.76 Importantly, these FTAs were also used to reinforce the notion of normalization with Israel, with each agreement containing a clause committing the signatory to normalization with Israel and forbidding any boycott of trade relations.

US government representatives openly conceived MEFTA and these bilateral FTAs as a counterpoint to other rivals in the region. Zoellick noted, for example, in a 2003 editorial for the Wall Street Journal: “The Bush administration’s reinvigoration of America’s drive for free trade—globally, regionally, and with individual countries—has created a momentum that strengthens US influence . . . [they] level the playing field for US businesses because others—especially the EU—negotiated a host of agreements in the ’90s while the US stood on the sidelines.”77 A month later, a widely referenced article from the Washington-based Cato Institute made essentially the same point, stressing the market for services as a particularly important prize for US capital: “The major potential benefit of the Bush administration’s proposed Middle East free-trade area is the market opening in the Muslim world that it would entail—and the impetus to broader economic reforms in the region that it would provide. . . . The biggest prize in FTA negotiations—the hardest to attain, but offering the richest rewards—is liberalization of trade in services.”78

Immediately after announcing the MEFTA initiative, US representatives began a rapid succession of FTA negotiations with countries across the Middle East. Talks had begun with Morocco in early 2003 (prior to the war on Iraq) and concluded successfully following a year of discussions. The agreement was approved by the US Congress in July 2004 and the Moroccan parliament in January 2005, coming into force at the beginning of 2006. The FTA severely reduced Morocco’s ability to restrict US goods from entering the country by eliminating tariffs on 95 percent of all bilateral trade, with all tariffs to be eliminated within ten years.79 Prior to the agreement, the average tariff on US exports to Morocco had been more than 28 percent. The tariff reduction was particularly beneficial to US agribusiness as the main provider of Moroccan grain imports. It immediately eliminated, for example, tariffs on US sorghum and phased out duties on US corn over five years and, as a result, reinforced the earlier trends of food import dependency.80 For this reason the FTA was strongly supported by US agribusiness interests, such as the US Grain Council, which noted that they had been “striving to build demand for U.S. feed grains in Morocco for many years . . . promoting U.S. feed grains to ensure our producers and agri-businesses will reap maximum benefit from this agreement.”81 The agreement also enabled US capital to benefit from Morocco’s agreement with the EU (see below), with tariff reductions applying to US goods produced in Morocco and then exported to Europe.

The US-Moroccan FTA took place concurrently with negotiations with individual Gulf Arab states. An FTA was signed with Bahrain on September 14, 2004, and legislation to approve and implement the agreement was passed by Congress in January 2006. This agreement was also aimed at increasing market share for US corporations. Additional rules within the US-Bahrain FTA meant that government procurement of goods and services had to be opened to US companies on the same basis as a local company, and the state could not restrict the number, type, or residency conditions of US companies.82 Similar conditions declared virtually all goods from the United States duty-free, opening the route for US commodities to enter the Bahraini market. In services, the FTA forced Bahrain to allow private US medical, educational, legal, and other corporations to enter the marketplace. The market-opening goal of the FTA was explicitly applauded by the Advisory Committee for Trade Policy and Negotiations (ACTPN), a peak body of large US companies and industry representatives, which noted that its provisions “meet or exceed the best that have been negotiated in any other US trade agreement and . . . is a truly impressive achievement.”83

These trade and financial agreements have helped underpin a shift in the US economic relationship with the Middle East.84 As appendix 1 details, through the 2000s exports to the United States from Israel, the Gulf Arab states, and Jordan overtook, in value terms, those to the EU. Israel should be highlighted in particular here—from 2000 to 2010, Israel’s trade surplus with the United States ranged between $5 billion and $7 billion annually—a remarkable contrast to all other non-oil-producing states, which were running large deficits through the same period.85 Moreover, while European exports have remained dominant throughout the Middle East (see below), the gap between the US and EU market share has narrowed significantly in the cases of Morocco and Egypt following the various FTA and QIZ agreements. Appendix 2 demonstrates the pattern of the region’s trade with the United States, which consists largely of technology, aircraft, and other high value-added machinery imports in exchange for low-wage textiles and garments (in the case of Egypt, Jordan, Morocco, and Tunisia) or hydrocarbons (in the case of the Gulf states and Algeria). The proportion of cereals, soybean, and corn products in US exports to the region, however, is also marked. In the case of Morocco, Tunisia, and Egypt, for example, US agricultural products have constituted between 30 and 50 percent of all US exports through the 2000s—indicating that the North African dependency on the food imports noted above has changed little.

These same patterns are also reflected in the sphere of capital flows. Although foreign direct investment (FDI) originating from the United States is generally much lower in the Middle East than that from European or Gulf countries (see chapter 6), the United States has developed a dominant financial relationship with the two central poles of the regional economy—Saudi Arabia and Israel. In the case of Saudi Arabia, the United States has long been the largest source of FDI, holding 13.7 percent of FDI stock in the country in 2010, significantly more than the other countries in the top five (Kuwait holds 9.9 percent, France 9.0 percent, Japan 8.5 percent, and the UAE 7.4 percent).86 This is particularly important because Saudi Arabia became the largest host economy for FDI in the MENA region during the 2000s.87 Most FDI in Saudi Arabia is targeted at the petroleum refining, petrochemical, contracting, and real estate sectors. In the case of Israel, US companies were responsible for a remarkable 82 percent of all FDI in Israel from 2003 to 2008, equivalent to €23 billion.88 Reflecting the unique characteristics of the Israeli economy, most of this investment was aimed at sectors such as software, electronics, biotechnology, and advanced research and development.

The European Union: Imperial Rivalries and Consensus

As these American initiatives progressed through the 1990s and 2000s, the European Union also sought to strengthen its trade and financial influence in the Middle East, moving to draw the region—particularly the countries surrounding the Mediterranean—closer to European production and trade networks. The EU’s orientation to the region demonstrated the dualities of rivalry and shared interests vis-à-vis the United States—both zones looked to extend their penetration of the region while participating in the further consolidation of the Middle East’s neoliberal trajectory through the common mechanisms of debt, aid, and the promise of increased market access. The EU’s goals were initially codified in the Euro-Mediterranean Partnership (EMP), also known as the Barcelona Process, launched at a meeting in Barcelona in November 1995 between the EU and foreign ministers from Algeria, Cyprus, Egypt, Jordan, Israel, Lebanon, Malta, Morocco, the PA, Syria, Tunisia, and Turkey. The final communiqué of the Barcelona meeting was quite open about its intentions, highlighting “the promotion and development of the private sector . . . [and] the establishment of an appropriate institutional and regulatory framework for a market economy” as a principal aim of the new partnership. The EU admitted its longer-term objectives frankly, noting that its overall purpose was “to create open economies by the opening-up of markets . . . [and] the elimination of trade barriers.” This would require the acceleration of “Fiscal, administrative and legal reforms as well as deregulation of public services . . . in order to raise the level of foreign direct investment in the southern Mediterranean economies.”89

In line with these objectives, two major themes dominated the ongoing Euro-Mediterranean negotiations. The first of these was an attempt to establish a free trade area through a stepping-stone of individual FTAs between Mediterranean countries and the EU, with 2010 set as the target date for concluding a final region-wide agreement. The second theme was “the progressive elimination of obstacles to [EU] investment”90 through the passage of new laws aimed at privatizing state-owned firms in industry, agriculture, and banking.91 Over the next decade, these twin themes of free trade and foreign investment were consolidated in individual bilateral treaties, called Association Agreements, signed between the EU and the EMP countries.92 Association Agreements committed countries to restructuring their policy environments in return for financial incentives and promised access to EU markets. Arab partners had little room to maneuver in negotiating these agreements, given their high levels of indebtedness and the fact that the EU was the largest trading partner for most countries in the region.

In regards to trade, the Association Agreements demanded significant reductions by EMP countries in customs duties, tariffs, and taxes on imports. Regulatory change went well beyond trade in goods to affect services as well—compelling countries to open up sectors such as finance, telecommunications, transport, energy, and more to foreign companies and ownership. These reforms required dramatic revisions of government laws. To facilitate this process, two financial programs, MEDA I and MEDA II,93 were set up, with close to €5 billion earmarked for distribution between 1995 and 1999. The amount of funding that countries received was explicitly linked to how much they agreed to change their domestic laws—with the EU noting that the basic principle of the MEDA program was that it “makes economic transition and free trade the central issue of EU financial cooperation with the Mediterranean region.”94 MEDA grants were supplemented by additional loans from the European Investment Bank (EIB), with all these funding mechanisms designed to provide “incentives for economic transition and the development of open, competitive markets” and to foster “political and social reforms in the Mediterranean partners . . . as a catalyst to macroeconomic structural adjustment.”95

In the first round of MEDA funding (1995–1999), €3.435 billion in grants was distributed with another €4.808 billion provided in loans from the EIB. Around 45 percent of the MEDA funds were directly linked to structural adjustment programs, including more than €500 million in direct grants to national budgets so that countries could carry out neoliberal reforms in partnership with the IMF and World Bank, and another €1.035 billion aimed at policies to help “the creation of an environment favourable to the development of the private sector.”96 To a great extent these grants resembled little more than a bribe, with the EU noting that “national budgets of the Mediterranean partners receive a cash injection in return for the implementation of structural reforms.”97 Projects backed by MEDA in this initial round included trade liberalization (Algeria, Jordan, Tunisia), privatization of state-owned companies (Algeria, Jordan, Tunisia), and financial sector opening (Morocco and Tunisia).98 By 2003, the EU assessed that funding had achieved “significant progress . . . towards the liberalisation and the regulating of the economy, in particular in the banking system where progress towards competition has been achieved. Progress was done [sic] towards the restoration of the balance between the public and private sectors [i.e., privatization], though unequally. Evaluators noted that the liberalisation of the capital market went further than the labour market.”99

In 2003, the European Commission outlined an updated vision of the relationship with the EMP countries, which became known as the European Neighbourhood Policy (ENP). The ENP also applied to non-Mediterranean neighbors of the EU such as Armenia, Azerbaijan, Belarus, Georgia, Moldova, and Ukraine, and was intended to complement the Barcelona Process. It set up a framework for intensifying negotiations with EMP countries through a series of three-to-five-year action plans drafted by the EU, which laid out what steps countries would need to take in return for continuing European aid. The ENP differed from the EMP in that it involved a much more explicit focus on integrating Mediterranean countries into European markets, although, importantly, it ruled out the possibility of accession to EU membership.100 Moreover, it placed heavy emphasis on the goal of closer economic integration between the countries of the Mediterranean.101 The justification for this was unambiguously framed in the interests of European capital, with the EU commissioner for external relations, Chris Patten, noting that South-South integration “will create larger markets, which will serve as a strong incentive to make the region more attractive for foreign direct investment.”102 One of the mechanisms by which this was encouraged was a decision to establish so-called “rules of cumulative origin”—meaning that goods made up of a variety of inputs from different Euro-Med countries could be treated as having the same origin, provided the producing countries held trade agreements between one another.103 In this manner, the EU hoped to encourage countries in the region also to sign FTAs between one another. “Cumulative origin” would, in the words of Patten, encourage “economic operators from different countries to get together and perform the different stages of their production in the country where it produces greatest profit. It would have a significant effect on encouraging joint ventures in the region, and it would enable all to take advantage of the specific economic structure of each partner.”104

Around 2007, differences emerged within the EU regarding the best way to advance the ENP process. These differences were reflected in a proposal put forward by Nicolas Sarkozy during the French presidential campaign of 2007, in which he suggested the establishment of a Mediterranean Union (MU), modeled on the EU. Sarkozy’s proposal envisaged the MU as consisting of countries surrounding the Mediterranean, and thus excluded EU member countries such as Germany. The European Commission and German chancellor Angela Merkel came out against the MU for this reason, as did proposed members, such as Turkey, who feared the MU would be used as an alternative to full membership in the EU itself. Other EU member states such as Italy, Spain, and Greece gave their support to the suggestion. At the beginning of 2008, Sarkozy modified his suggestion to include all EU member states, not just those bordering the Mediterranean. It subsequently became part of the Barcelona Process, and was presented as a new phase of the EMP at a conference in Paris in July 2008.

By the end of the decade, the consequences of these agreements for the Middle East region were clear. Most importantly, European control over export markets was consolidated (see appendix 1). The EU was consistently the largest exporter to every Euro-Med partner country through the 2000s—for Algeria, Morocco, Tunisia, Libya, and Lebanon, the EU was supplying around half of all imports; for other EMP states, the EU share was consistently over 25 percent. These EU-produced goods were generally high value-added, technically advanced items—machinery and equipment, vehicles, and aircraft (see appendix 2). Concurrently, the various regional agreements acted to tie the productive activities of EMP countries to European markets as exporters of low-wage manufactured goods, agricultural products, and natural resources. These trade patterns were particularly stark in the case of Morocco and Tunisia, where around 75–80 percent of all exports were going to the EU through the decade—mostly textiles/garments and agricultural goods (appendixes 1 and 2). Textile and garment exports were also significant for Jordan and Egypt, although a larger proportion of these tended to go to the United States as a consequence of the various bilateral agreements noted above. The defining characteristic of this trade for many ENP countries—the exchange of technologically advanced goods produced in the EU for labor-intensive clothing and agricultural goods manufactured in the Middle East—is indicative of one mechanism of the transfer of value from the Middle East to European capitalism.105 This has been reflected in persistent and widening trade deficits with Europe.

Moreover, this orientation of trade developed concurrently with policies of privatization and the opening up of ownership to foreign investment. From 2003 to 2008, French, Spanish, and Italian investors were particularly prominent in the region—buying up newly privatized assets in the utilities, real estate, banking, and industrial sectors.106 North African countries—notably Morocco, Tunisia, and Egypt—were a major target of these investment flows. Through these investments, industrial and agricultural activities in EMP countries were frequently incorporated in early production stages of vertically integrated conglomerates that straddled the Mediterranean itself—again, particularly in textiles/garments and the food industry (see chapters 3 and 4). For this reason, any growth in exports that might have accompanied increased access to European markets actually ended up flowing to firms that were linked to European conglomerates through joint ventures or, in some cases, direct ownership.

Rising Powers?

While the European Union and the United States continue to dominate the political economy of the Middle East, rising powers have increasingly built separate and competing alliances with states in the region.107 This has been reflected in a partial reorientation of the region’s trade and financial flows. With the exceptions of Morocco and Bahrain, all countries in the Arab world have seen a declining share of their imports coming from the EU or United States over the last decade. For Egypt, Jordan, Syria, and the Gulf states, this proportion has fallen below 50 percent (see appendix 1). In place of these traditional exporters to the region, an increasing proportion of goods are coming from countries such as China, Russia, Turkey, South Korea, and India. In 2010, China was one of the top three sources of exports to the region for twelve out of seventeen countries (see appendix 1). In regards to exports from the Middle East, India, East Asia, Brazil, and Turkey rank as significant markets for goods produced in the region.

China and Russia have been the leading actors in this entry of emerging powers into the region. Not surprisingly, these two countries have looked at forming linkages in the region through those states that remained largely outside of the orbit of Western power over the last two decades—notably Iran and Syria. By the end of the 2000s, China had become Iran’s biggest trading partner and the largest purchaser of Iranian oil.108 Russia’s links with Iran were focused on the sale of military hardware, although these came under pressure due to sanctions imposed on Iran as of the mid-2000s. The closer links among Russia, China, and Iran were confirmed in 2005, when Iran was granted observer status at the Shanghai Cooperation Organization (SCO), a regional security grouping of Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan founded in 2001. Iran applied for full membership in the SCO in 2008, although this has not been granted due to the ongoing UN sanctions. Some observers have suggested that the potential consolidation of the SCO into a tighter military and political alliance could form a possible counterweight to NATO influence in the Middle East/Central Asia region.

Russia and China have also formed strong relationships with Syria. In 2008, Syria’s president, Bashar al-Assad, agreed to allow Russia to convert a naval port located at the Syrian town of Tartous into a permanent military base for Russian warships. It would be Russia’s only such base in the region. The agreement signified that Syria had become Russia’s most important ally in the Middle East, a fact reflected in Russian arms exports to Syria, which accounted for about 10 percent of Russia’s total weapons sales during the 2000s.109 China is likewise tightly linked to Syria as the largest exporter to the country and its biggest source of FDI. The latter investments have been concentrated in Syria’s Al Furat Petroleum Company—Syria’s main oil producer, which was partially privatized over the 2000s—as well as in construction and utility projects.

The close Chinese relationship with Syria reflects the importance of the Middle East to the balance of global power. Nearly half of China’s crude oil imports were coming from the Middle East by 2006, with Saudi Arabia the largest source of imports (around 16 percent) and Oman and the UAE also significant sources; this was despite the fact that China itself was the sixth-largest oil producer in the world that same year.110 These levels continued to increase, and in early 2010 a spokesperson for Saudi Arabia’s oil producing company, Aramco, revealed that Saudi oil exports to China had surpassed those to the United States—a profound shift that marked a new era in the patterns of Middle East oil trade.111 The eastward shift of Gulf trade was not restricted to crude oil and gas; it was also reflected in petrochemical exports that provide a critical feedstock for Asian factories. In 2004, China imported about 42 percent of globally traded polyethylene, 44 percent of polypropylene, 45 percent of polyvinyl chloride (PVC), and 48 percent of polystyrene.112 Much of these basic petrochemical products were sourced from the Gulf region; the Saudi Basic Industries Corporation (SABIC), the most important petrochemical firm in the Middle East, was sending half its exports to Asia by the end of 2009.

China’s dependence on Middle East oil presages a deepening rivalry with the United States—not only over oil supplies per se, but due to the fact that US hegemony in the Middle East provides it with an important source of leverage over China, a fact amply demonstrated in regards to the conflicts over Iran. Any long-term contestation of a US-centered world order presupposes a shift in the form of external domination of the Middle East, which, as the history of the last five decades decisively confirms, will necessarily be accompanied by a range of political, military, and economic initiatives that attempt to draw the region away from US domination. Nonetheless, while both China’s and Russia’s increasing involvements in the region undoubtedly present a challenge to US and broader Western hegemony, some care needs to be taken in interpreting the nature of these rivalries. Precisely because of the highly internationalized structure of the world market, all major states—including China and Russia—are deeply enmeshed in mutual trade and capital flows, sharing a common interest in the stability of global capitalism. This means they have little interest in seeing a qualitative break with the patterns of uneven development in the Middle East, or with the region’s embrace of neoliberal reforms. Indeed, the entry of China and Russia into Middle East markets—much as with Europe and the United States—has been predicated upon the intensification of neoliberalism in places such as Iran and Syria. For these reasons, it is mistaken to see these countries as any sort of progressive force for liberation (chapter 7 provides further discussion of this issue).

Conclusion

The protracted domination of the Middle East by Western states has developed through a variety of different means, but the underlying themes have been consistent: deepen the uneven and combined development of the region, widen the hierarchies of states and their interdependencies, and utilize the resulting differentials of power to consolidate control. The forms and patterns of these arrangements have shifted over the last five decades, but their result has been the same. This strategy has not only acted to realign the specific relationships between different zones in the region and the major capitalist powers, but—most significantly for the analysis throughout this book—has also generated a specific set of relationships internal to the region itself. There are six core characteristics to this realignment that can be initially sketched here and will be further developed in subsequent chapters:

1. The European Union has brought closer to itself the key Euro-Med countries, most notably those of North Africa. The productive and commercial activities of these countries have been tightly linked to the Eurozone as neoliberal reforms have proceeded apace. This has meant a reorientation of North African economies toward the needs of European capital—fixing the Mediterranean as a subordinated and dependent adjunct of its larger neighbor through trade and foreign direct investment flows.

2. The integration of Mediterranean productive sectors with European capitalism has acted to deepen social differentiation both within individual nation-states as well as between the region as a whole and Europe. In other words, the relationship with the EU has helped to shape the trajectory of class formation (again, most notably in North Africa), by simultaneously enriching (and drawing closer to the European project) a tiny layer of the region’s elites. As subsequent chapters will confirm in detail, the intertwining of trade and investment through the EMP has played an important role in reinforcing the concentration and centralization of capital in the hands of large domestic and foreign capital through key sectors such as textiles/garments and agriculture.113

3. Simultaneously, the United States has constructed privileged relationships with two core pillars of its power in the region—Israel and the GCC (specifically Saudi Arabia). These two pillars are distinct from other countries in the region in that they form the apex of hierarchies in the regional space. Their relationships with the imperialist core differ from the rest of the region in that they are both able to retain a greater share of the value generated in the region (Israel through its advanced industrial exports and the GCC through its control of hydrocarbon supplies). The United States reinforces these regional hierarchies through aid (military and financial) and political support to these two poles, while also being deeply enmeshed in their economies through flows of FDI and other financial relationships.

4. The United States has also attempted to use these two poles as the axis for its drawing together of the wider region under its hegemony. Jordan and Egypt have played a specific and highly important role in this process through the QIZs and other agreements with Israel. The European Union has also emphasized this point through the framework of the Euro-Med negotiations. This means that the question of normalization with Israel has a specific centrality to resisting imperialist influence in the region, as does the wider Palestinian movement against ongoing dispossession. This also helps to explain the specificity of class formation in the Palestinian territories (see chapter 5).

5. The deepening of neoliberal reforms, which has been the necessary corollary of both the EU and US restructuring of the region, has also acted to widen the hierarchical relationships within the region as a whole. Most notably, this has meant the strengthening of the position of the Gulf Arab states within the Middle East and North Africa. This has been most sharply expressed through the internationalization of Gulf capital and the enmeshing of Gulf conglomerates with domestic capitalist classes in the region (see chapter 6).

6. These realignments also need to be placed in the context of potential challenges to US/ European hegemony at the global scale. While the EU and the United States continue to dominate the political economy of the region, rising powers—notably China and Russia—have increasingly built separate and competing alliances with states in the region. This has been reflected in a partial reorientation of trade and financial flows across the region, but its most important feature has been the alliance of Russia and China with those states that remained largely outside of Western hegemony through the 2000s (notably Iran and Syria).

These six features of the regional scale confirm the deep interconnection of imperialism with the political economy of neoliberalism in the Middle East. Imperialism is not principally a military project—despite the significance of force to the way it operates—and to conceive of it in this way is to mistake the outward appearances of Western intervention for its essence. Rather, imperialism is primarily about ensuring the ongoing subordination of the region’s political economy to the forms of accumulation in the core capitalist states of the world market. Seen in this light, neoliberalism is much more than simply a menu of “free market” economic policies; it represents a radical restructuring of class relations that acts to facilitate and reinforce the region’s domination by external powers. In so doing, it generates a set of social forces that are internal to the region itself, and that have an objective stake in supporting the new status quo. This restructuring has not just involved the transformation of class and state within individual nation-states but has also produced a new set of hierarchies and intermeshing of social relations across the regional space as a whole. These observations form the basic analytical lens through which to approach the different aspects of the region’s political economy, as explored in the following chapters.