I Am Not Moving

"Hypocrisy has its own elegant symmetry."

After Egypt, Who's Next?

Two weeks ago, I had posted on my Facebook wall a link to Dr. James Hamilton's blog post, Geopolitical Unrest and World Oil Markets. In that post Dr. Hamilton (of the University of California, San Diego) showed that there is a possible inverse relationship between a country's oil production and that country's political instability. Meaning, those countries with low levels of oil production were among the first to revolt, whereas countries with high oil production have shown greater stability. The implication is that the lack of petrodollars had not provided enough of a political safety net for the governments to cover their weak economies.

Hamilton's brief analysis covers (in the order of increasing oil production as a percentage of the world total) Lebanon (0.0%), Tunisia (0.1%), Yemen (0.3%), Sudan (0.6%), Egypt (0.8%), Libya (2.1%), Algeria (2.5%), Iraq (2.7%), Iran (4.9%), and Saudi Arabia (11.7%).

Now, if Hamilton's thesis is correct, then Egypt appears to be the last of the "low-hanging fruit" to have undergone political unrest. Theoretically, then, Libya and/or Algeria should be the next to revolt.

The potential problem with this analysis is that it doesn't explain all of the recent events in the Middle East and North Africa or the lack thereof. For example, Lebanon and Sudan have had long-standing government instability; that they should be undergoing problems now (such as the collapse of the government in Lebanon or the recent referendum in Sudan to split the country into two) are not terribly surprising given these countries' histories.

Likewise, I suspect that some countries that should have gone into turmoil may have had their chance but won't either because their societies are too stable (Morocco? Oman?) or because the state's security apparatus is too strong (Syria?).

What the professor also didn't mention was that Iran, which is second only to Saudi Arabia in oil production, already had its instability in the Green Movement protests of June 2009 that were quashed. I'm not expecting another major uprising in Iran (a la Tahrir Square) anytime soon.

What I think the protests really point out is that standards of living matter. Even more so than a lack of democracy, the economic corruption that pervades certain countries' economies is ultimately the straw that breaks the camel's back, so to speak. I say this with not only the Arab revolts currently going on in mind, but also the dissolution of the Communist bloc in Eastern Europe in 1989, which underwent similar revolutions for similar reasons. Republicans in the United States, who seem hell bent on trying to lower American standards of living, should take note of the potential consequences for their actions.

Response to George

Would reducing or eliminating America's dependence on foreign oil undercut the economic basis of Islamophobia?

It might to a degree, but not nearly to the extent that it might have if this was the mid 70s. Although I was only a teenager at the time, the mid 70s seemed to be the main era when Islamophobia was based largely on economics. The trigger event was the oil crisis of '73-'74, which awakened the Western public to both their oil dependence and the fact that Middle Eastern society (in particular) was being built upon petrodollars. This awakening brought about a number of articles that I remember reading which tended to be anti-Arab, anti-Islam. One cartoon I remember from that era showed an Arab sheikh in his thobe and kaffiyah standing on the rim of the Grand Canyon and being told by a man in a business suit behind him that "It's not for sale." (This reminds me of the late 80s, when Japanese businesses began buying up a lot of American businesses and properties, with a resultant backlash against the Japanese at that time; Michael Crichton cashed in on that xenophobia with his book (and movie), Rising Sun.)

But since the mid 70s I'd say that the economic basis for Islamophobia has dwindled fairly dramatically. American Islamophobia today tends to be rooted in a lot of other, non-economic factors (e.g., terrorist acts committed by Muslims, American military misadventures in the Middle East (Lebanon, Iraq) and Central Asia (Pakistan, Afghanistan), the Iranian hostage crisis and the dysfunctional diplomatic relationship between the US and Iran ever since, America's blind support for Israel, and the rise of a more visible, more active Muslim community, both in the U.S. and worldwide, that scares American non-Muslims both politically and religiously).

As for foreign oil, as of two years ago (June 2008, when I last wrote about this), five of the top ten countries the U.S. imported oil from were non-Muslim: Canada (who was the #1 seller of crude oil to the US at the time), Mexico, Venezuela, Angola and Ecuador). The first three of those countries provided over 44% of all the U.S.'s imported crude oil. So the U.S. is not quite as dependent upon oil from Muslim countries as perhaps they were in the past.

Personally, I don't think that, even if the U.S. didn't buy a single drop of crude oil from a Muslim country, that would stop all the Islamophobia in the U.S. Many Americans simply can't live without having someone else to hate. Some Muslims haven't helped the American (and worldwide) Muslim community with their actions, but Muslims aren't the only group currently being vilified in the U.S. at the moment. The Hispanics can attest to that.

International Politics Links (8 June 2009)

My series of links posts, which went on a brief hiatus last week, resumes tonight with two major changes. The first is that I've decided to go with a revolving format; for example, international politics will be every Monday, insha'allah. My tentative schedule for the remainder of the week is: Tuesdays - Business/Economics, Wednesdays - Islam/Muslim Blogs, Thursdays - Miscellaneous (e.g., science, science fiction, photos, etc.), and Fridays - Open. Of course, all of this is subject to change without notice.

The other big change is that I've decided not to do links for American politics, for two reasons: one, it's such a fast-moving and huge topic that to do it justice would mean a daily commitment, one which I'm not sure I want to make; and two, most of the political blogs I read follow the philosophy of "know thy enemy," which, in this case is the Republican party. The sheer stupidity and evil of many Republicans really disgust me. I've decided I'd rather not comment on those matters for the most part, although I may occasionally link to posts about American politics in so far as it deals with international politics and economics.

With regard to international politics, I've separated links into geographical areas (continents) for the most part. For example, in today's post, links are for Europe, the Middle East and Asia, with "Miscellaneous" being for other parts of the world or multiple countries discussed in the post. Within each geographical area, I've tried to alphabetize the countries mentioned. So, once more, for example, with respect to the Middle East the countries are Egypt, Iraq, Israel, Lebanon, Pakistan, and Syria.

And, of course, if my readers have legitimate suggestions for links, please add them in the comments.


Europe:
Majid: Dangerous Purities (An interesting guest op-ed essay on the 400th anniversary of the expulsion of the Moriscos from Spain. The Moriscos were Spaniards of Muslim descent, either themselves or their parents/grandparents, who had converted from Islam to Christianity. But even their conversion was not enough to satisfy the Catholics, so roughly 300,000 Moriscos, or five percent of the Spanish population, was forced to flee their own country, with most of them dying in the process.)

Biased Election Reporting (On the German results for the European Parliament election.)

Russian Warns Against Relying on Dollar


Middle East:
Obama in the Middle East

Reactions to Obama's Speech

Obama's Speech in Cairo (Juan Cole)

Obama's Speech In Cairo (Moon of Alabama)

Iraqi Prime Minister Warned Obama About Photos: 'Baghdad Will Burn'

It's Only Make-Believe: Bush Policy on Israeli Settlement Freeze Was An 'Understanding'

Obama and Resolving the Israeli-Palestinian Conflict

OSC: Israeli Press on Obama's Cairo Address

Netanyahu's Problem

UN: Israeli Buffer Zone Eats Up 30 Percent of Gaza's Arable Land

Jewish Settlers Rampage in West Bank

March 14 Faction Wins in Lebanon

OSC: Pakistani Editorialists Respond to Obama

Thousands Flee Mingora in Panic; Army advances toward Kalam; 9 Soldiers Killed, 27 militants

Mysterious 'Chip' is CIA's Latest Weapon Against al-Qaida Targets Hiding in Pakistan's Tribal Belt ("Don't like your neighbor? Drop a chip in his house and the CIA will bomb him.")

Syrian Newspapers on Obama's Arab Tour (OSC)


Asia:
Made in China Means Quality

American Journalists Sentenced In North Korea To 12 Years Labor Camp

Star War Fantasy Drill (Is North Korea a military threat to America? No, and a military hardware project called the "star war fantasy drill" from the US budget, to the howls of protest by some.)

Seoul Boosts Forces Against N Korea


Miscellaneous:
Fleischer criticizes Obama’s Cairo speech as being too ‘balanced.’

EU And Lebanon Elections

NYT Finally Runs ‘Editor’s Note’ Correction To Misleading Gitmo Detainee ‘Recidivism’ Story

The Daily Show: Looking for Comity in the Muslim World

The Daily Show on Barack Obama's recent speech in Cairo, and the typical stupid reaction by Faux News. BTW, if you're wondering what the word comity means...

The Daily Show With Jon Stewart	M - Th 11p / 10c
Looking for Comity in the Muslim World
thedailyshow.com
Daily Show Full Episodes Political Humor Economic Crisis

"Joe, You Ignorant Slut"

Former National Security Advisor Dr. Zbigniew Brzezinski had a brilliant put-down of Joe Scarborough on the latter's show yesterday, somewhat reminiscent of the Dan Ackroyd put-down on SNL's Weekend Update segments back in the late 70s, "Jane, you ignorant slut!" Here's the money quote:

You have such a stunningly superficial knowledge of what went on it's almost embarrassing to listen to you.

And it was all the more delicious to watch because Joe's co-host is Dr. Brzezinski's daughter, Mika. ;)

Of course Dr. Brzezinski was correct in knocking down the wingnuts' meme that Yasser Arafat was to blame for "walking away" from the peace accords. That's not true at all. In fact, even the Israelis acknowledge that then-Israeli Prime Minister Ehud Barak was to blame for the failure of the Taba Summit:

It was not Arafat who broke off the talks at this critical moment, when the light at the end of the tunnel was clearly visible to the negotiators, but Barak. He ordered his men to break off and return home.
-- Uri Avnery of Gush Shalom

Get a clue, Joe, you ignorant slut!


HT: TalkingPointsMemo

VoxEU: Quo Vadis Islamic Finance?

A good article on Islamic finance (if you're interested in the subject) at VoxEU, the European economics blog. The three authors, all of whom work for the International Monetary Fund (IMF), give a brief analysis of the state of the Islamic finance market, a listing of significant challenges facing the industry, and some concluding remarks. Below are some excerpts, primarily from the introduction and the conclusion; the section on challenges is significant and noteworthy, but I'll let my readers go to the original post to read it if they're interested.

BTW, in case you're unfamiliar with the Latin phrase, "Quo Vadis?", it means, "Where are you going?"

Since the summer of 2007, the global financial system has undergone a period of dramatic turbulence, which has caused a widespread reassessment of risk in both developed and emerging economies. The global financial turbulence appears to have had a limited impact on the Islamic finance industry, which has been in an expansionary phase in recent years (Economist, 2008; Financial Times, 2008). This rapid growth has been fueled not only by surging demand for Sharia’ah compliant products from Muslim financiers but also by investors around the world, rendering the expansion of Islamic finance a global phenomenon. In fact, there is currently over $800 billion worth of deposits and investments lodged in Islamic banks, mutual funds, insurance schemes (known as takaful), and Islamic branches of conventional banks.

...

...[P]erhaps the most striking has been the growth of sukuk, the most popular form of securitized credit finance within Islamic finance. sukuk commoditize capital gains from bilateral risk sharing between borrowers and lenders in shari’ah-compliant finance contracts into marketable securities without interest rate charges.

The sukuk market has held its own amid groundswell concern about the credit crunch and dysfunctional money markets. Although the current level of issuance remains a fraction of the global volumes of conventional bonds and ABS, the sukuk market had soared in response to growing demand for alternative investments before the first episode of severe market disruptions in 2007 showed first effects (Jobst et al, 2008). Gross issuance of sukuk has quadrupled over the past few years, rising from $7.2 billion in 2004 to close to $39 billion by the end of 2007, owing in large part to enabling capital market regulations, a favorable macroeconomic environment, and large infrastructure development plans in some Middle Eastern economies (see Figure 1).

By 2008, however, sukuk volumes dropped to $15.2 billion (about 50%) while the structured finance market dried up with just $387 billion issued (down by about 80%) during the same time. Factors contributing to this decline include the presentation of new rules on sukuk, the global financial crisis, and Gulf states’ currency risk. The slowdown in issuance was most pronounced in Malaysia, where fewer domestic transactions at smaller volume have balanced the market shares of Gulf Cooperation Council and Southeast Asian countries.

The rapid evolution of Islamic finance activities points to the available profit opportunities that beckon. This in turn has prompted a vetting process among a number of jurisdictions around the world to establish themselves as leading Islamic financial centres. In this regard, the case of London is perhaps the most remarkable insofar as it has managed to extend its leading position in world financial markets to become a center for Islamic finance. Similarly, Hong Kong, New York, and Singapore are also making important advances to accommodate Islamic finance within their jurisdictions and aspire to join the ranks of the more established Islamic centers such as Bahrain, Dubai, and Kuala Lumpur.

...

Islamic finance faces many challenges, including recent regulatory changes, illiquidity issues, liquidity risk management concerns, need for harmonized regulation, regulatory disparity amongst national supervisors, and a potentially unlevel playing field.

...

Despite the number of challenges outlined above, the long-term prospects look promising for Islamic finance. Financial institutions in countries such as Bahrain, the United Arab Emirates, and Malaysia have realized considerable demand for shari’ah-compliant assets and are gearing up for more shari’ah-compliant financial instruments and structured finance. In addition, financial innovation, driven by both domestic and foreign banks, will promote alternatives modes of intermediation and contribute to further development and refinement of shari’ah compliant derivative contracts.

As Islamic finance comes into its own, greater regulatory harmonization will be inevitable. Recent efforts have addressed legal uncertainty imposed by Islamic jurisprudence, discrepancies of national guidelines, and poorly developed uniformity of market practices. The Islamic Financial Services Board has moved ahead with its standardization efforts of the Islamic financial services industry that will foster the soundness and stability of the system. Globally accepted prudential standards have been adopted by the Islamic Financial Services Board that smoothly integrate Islamic finance with the conventional financial system.

Finally, despite the declining global sukuk issuance in 2008, emanating from both the Accounting and Auditing Organization of Islamic Financial Institutions decision and the impact of the financial crisis, the sukuk market will regain momentum, driven by demand from financial institutions, insurance companies, and pension funds across Islamic and non-Islamic countries. Many challenges still lie ahead, but the banks’ search for profitable opportunities and the ensuing financial innovation process in tandem with favorable regulatory developments at domestic and international levels will ensure that the Islamic finance industry will continue to develop at a steady pace in the long-run. The jury is still out how Islamic finance will be affected in the short-run by the repercussions of the global financial crisis.

HT: Economist's View

The Economist: Faith-Based Finance

This is the second of two articles in this week's (September 4th) Economist about Islamic finance. This article is much shorter, and also easier to digest (even for most Muslims ;) ) than the main article, being more of an introduction to the topic of Islamic financing.

The modern history of Islamic finance is often dated to the 1970s, with the launch of Islamic banks in Saudi Arabia and the United Arab Emirates. But its roots stretch back 14 centuries. Islamic finance rests on the application of Islamic law, or sharia, whose primary sources are the Qur'an and the sayings of the Prophet Muhammad. Sharia emphasizes justice and partnership. In the world of finance that translates into a ban on speculation (or gharar) and on the charging of interest (riba). The idea of a lender levying a straight interest charge, regardless of how the underlying assets fare in an uncertain world, offends against these principles—though some Muslims dispute this, arguing that the literature in sharia covering business practices is small and that terms such as “usury” and “speculation” are open to interpretation.

Companies that operate in immoral industries, such as gambling or pornography, are also out of bounds, as are companies that have too much borrowing (typically defined as having debt totaling more than 33% of the firm’s stock market value). Such criteria mean that sharia-compliant investors steer clear of highly leveraged conventional banks, a wise choice in recent months.

Despite these prohibitions, Islamic financiers are confident that they can create their own versions of the important bits of conventional finance. The judgment of what is and is not allowed under sharia is made by boards of scholars, many of whom act as a kind of spiritual rating agency, working closely with lawyers and bankers to create instruments and structure transactions that meet the needs of the market without offending the requirements of their faith.

Non-Muslims may find the distinctions between conventional finance and Islamic finance a trifle contrived. An options contract to buy a security at a set price at a date three months hence is frowned upon as speculation. A contract to buy the same security at the same price, with 5% of the payment taken upfront and the balance taken in three months upon delivery, is sharia-compliant. Then again, winning over non-Muslims is not really the point.

There is no ultimate authority for sharia compliance. Some worry that this may hold the industry back. Malaysia has tackled this by creating a national sharia board. Some industry bodies, notably the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) in Bahrain, are working towards common standards. That a few scholars dominate the boards of the big international institutions also helps create consistency. But differences between national jurisdictions — between pious Saudi Arabia and more liberal Malaysia, say, are likely to remain.

Both of these countries feature in the top three markets for Islamic finance, measured by the quantity of sharia-compliant assets (see table). Top is Iran, although international sanctions keep its industry isolated. The Gulf states, awash with liquidity and with a roster of huge infrastructure projects to finance, are the most dynamic markets. Britain is the most developed Western center, although France, with a much larger Muslim population, wants to close the gap.

The Economist: Savings and Souls

The Economist has come out with two articles this week (September 4th) on Islamic finance. Below is the main article, Savings and Souls; I've posted the second article, Faith-Based Finance, separately.

The basic premise of this article is to give a primer about the state of Islamic finance in the world today, focusing on various problems and challenges facing the industry.

To see Islamic finance in action, visit the mutating coastline of the Gulf. Diggers claw sand out of the sea off Manama, Bahrain’s capital, for a series of waterfront developments that are part-funded by Islamic instruments. To the east, Nakheel, a developer that issued the world’s largest Islamic bond (or sukuk) in 2006, is using the money to reorganize the shoreline of Dubai into a mosaic of man-made islands.

Finance is undertaking some Islamic construction of its own. Islamic banks are opening their doors across the Gulf and a new platform for sharia-compliant hedge funds has attracted names such as BlackRock. Western law firms and banks, always quick to sniff out new business, are beefing up their Islamic-finance teams.

Governments are taking notice too. In July Indonesia, the most populous Muslim country, said it would issue the nation’s first sukuk. The British government, which covets a position as the West’s leading center for Islamic finance, is also edging towards issuing a short-term sovereign sukuk. France has begun its own charm offensive aimed at Islamic investors.

Set against ailing Western markets such vigor looks impressive. The oil-fueled liquidity that has pumped up Middle Eastern sovereign-wealth funds is also buoying demand for Islamic finance. Compared with the ethics of some American subprime lending, Islamic finance seems virtuous as well as vigorous. It frowns on speculation and applauds risk-sharing, even if some wonder whether the industry is really doing anything more than mimicking conventional finance and, more profoundly, if it is strictly necessary under Islam (see article).


Sukuks in the souk

As the buzz around the industry grows, so do expectations. The amount of Islamic assets under management stands at around $700 billion, according to the Islamic Financial Services Board, an industry body. Standard & Poor’s, a rating agency, thinks that the industry could control $4 trillion of assets. Others go further, pointing out that Muslims account for 20% of the world’s population, but Islamic finance for less than 1% of its financial instruments—that gap, they say, represents a big opportunity. With tongue partly in cheek, some say that Islamic finance should by rights displace conventional finance altogether. Western finance cannot service capital that wants to find a sharia-compliant home; but Islamic finance can satisfy everyone.

Confidence is one thing, hyperbole another. The industry remains minute on many measures: its total assets roughly match those of Lloyds TSB, Britain’s fifth-largest bank (though some firms that meet sharia-compliant criteria may attract Islamic investors without realizing it). The assets managed by Islamic rules are growing at 10-15% annually—not to be sniffed at, but underwhelming for an industry that attracts so much attention. Most of all, the industry’s expansion is tempered by its need to address the tensions between its two purposes: to serve God and to make as much money as it can.

That is a stiff test. A few devout Muslims, many of them in Saudi Arabia, will pay what Paul Homsy of Crescent Asset Management calls a “piety premium” to satisfy sharia. But research into the investment preferences of Muslims shows that most of them want products that benefit their savings, as well as their souls—rather as ethical investors in the West want funds that do no harm, but are also at least as profitable as other investments.

A combination of ingenuity and persistence has enabled Islamic finance to conquer some of the main obstacles. Take transaction costs which tend to be higher in complex Islamic instruments than in more straightforward conventional ones. Sharia-compliant mortgages are typically structured so that the lender itself buys the property and then leases it out to the borrower at a price that combines a rental charge and a capital payment. At the end of the mortgage term, when the price of the property has been fully repaid, the house is transferred to the borrower. That additional complexity does not just add to the direct costs of the transaction, but can also fall foul of legal hurdles. Since the property changes hands twice in the transaction, an Islamic mortgage is theoretically liable to double stamp duty. Britain ironed out this kink in 2003 but it remains one of the few countries to have done so.

However, just as in conventional finance, as more transactions take place the economies of scale mean that the cost of each one rapidly falls. Financiers can recycle documentation rather than drawing it up from scratch. The contracts they now use for sharia-compliant mortgages in America draw on templates originally drafted at great cost for aircraft leases.

Islamic financiers can also streamline their processes. When Barclays Capital and Shariah Capital, a consultancy, developed the new hedge-fund platform, they had to screen the funds’ portfolios to make sure that the shares they pick are sharia-compliant. That sounds as if it should be an additional cost, but prime brokers already screen hedge funds to make sure that risk concentrations do not build up. The checks they make for their Islamic hedge funds can piggyback on the checks they make for their conventional hedge funds.

Mohammed Amin of PricewaterhouseCoopers, a consulting firm, says the extra transaction costs for a commonly used Islamic financing instrument, called commodity murabaha, total about $50 for every $1m of business. That is small enough to be recouped through efficiencies in other areas, or to be absorbed in lenders’ profit margins. In addition, bankers privately admit that less competition helps keep margins higher than in conventional finance. “Conceptually, Islamic finance should cost more, as it involves more transactions,” says Mr Amin. “The actual cost is tiny and can be lost in the wash.”

The other area of substantive development has been in redefining sharia-compliance. New products require scholars to cast sharia in fresh, and occasionally uncomfortable, directions. Some investors express surprise at the very idea of Islamic hedge funds, for example, because of prohibitions in sharia on selling something that an investor does not actually own.

“You encounter a wall of skepticism whenever you do something new,” says Eric Meyer of Shariah Capital. “It is no different in Islamic finance.” He says that it took eight long years to bring his idea of an Islamic hedge-fund platform to fruition, applying a technique called arboon to ensure that investors, in effect, take an equity position in shares before they sell them short. Industry insiders describe an iterative process, in which scholars, lawyers and bankers work together to understand new instruments and adapt them to the requirements of sharia.

Differences in interpretation of sharia between countries can still hinder the economies of scale. Moreover, the scholars can sometimes push back. Earlier this year, the chairman of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), an industry body, excited controversy by criticizing a common form of sukuk issuance that guarantees the price at which the issuer will buy back the asset underpinning the transaction, thereby enabling investors’ capital to be repaid. Such behavior contravened an AAOIFI standard demanding that assets be bought back at market prices, in line with the sharia principle of risk-sharing. The sukuk market has enjoyed years of rapid growth (see chart), but early signs are that the AAOIFI judgment has dented demand.

Although Islamic finance has done well to reduce its costs and broaden its product range, it has yet to clear plenty of other hurdles. Scholars are the industry’s central figures, but recognized ones are in short supply. A small cadre of 15-20 scholars repeatedly crops up on the boards of Islamic banks that do international business. That partly reflects the role, which demands a knowledge of Islamic law and Western finance, as well as fluency in Arabic and English. It also reflects the comfort that this handful of recognized names brings to investors and customers.

There are plenty of initiatives to nurture more scholars but for the moment, the stars are pressed for time. That can be a problem when banks are chasing their verdict on bespoke transactions. It takes a scholar about a day to wade through the documentation connected with a sukuk issue, for example. But scholars are not always immediately available. “You’ve got to have the scholar’s number programmed into your mobile phone and be able to get hold of them,” says a banker in the Gulf. “That is real competitive advantage.”

Assets are another bottleneck. The ban on speculation means that Islamic transactions must be based on tangible assets, such as commodities, buildings or land. Observers say that exotic derivatives in intangibles such as weather or terrorism risk could not have an Islamic equivalent. But in the Middle East, at least, the supply of assets is limited. “Lots of companies in the Gulf are young and don’t have assets such as buildings to use in transactions,” says Geert Bossuyt of Deutsche Bank. This limits the scope for securitization, a modern financing technique that is backed by assets and is thus seen by sharia scholars as authentically Islamic. There are not enough properties to bundle into securities.

Governments have more assets to play with. The Indonesians have approved the use of up to $2 billion of property owned by the finance ministry in their planned sukuk issuance later this year. But oil-rich governments in the Gulf have little need to issue debt when they are flush with cash. That is a problem. Sovereign debt would establish benchmarks off which other issues can be priced. It would also add to the depth of the market, which would help solve another difficulty: liquidity.

It may seem odd to worry about liquidity when lots of Muslim countries are flush with cash, but many in Islamic finance put liquidity at the top of their watchlist. The chief concern is the mismatch between the duration of banks’ liabilities and their assets. The banks struggle to raise long-term debt. In a youthful industry, their credit histories are often limited; they also lack the sort of inventory of assets that corporate sukuk issuers have.


Desert liquidity

As a result, Islamic banks depend on short-term deposit funding, which, as Western banks know all too well, can disappear very rapidly. “Lots of assets are generally of longer term than most deposits,” says Khairul Nizam of AAOIFI. “Banks have to manage this funding gap carefully.” If there were a liquidity freeze like the one that struck Western banks a year ago, insiders say that the damage among Islamic banks would be greater.

There are initiatives to develop a sharia-compliant repo market but for the time being the banks have only limited scope for getting hold of money fast. Loans and investments roll over slowly. The lack of sharia-compliant assets and a tendency for Islamic investors to buy and hold their investments have stunted the secondary market. The shortest-term money-management instruments available today are inflexible. Cash reserves are high, but inefficient. Western banks with Islamic finance units, or “windows”, are just as troubled by tight liquidity as purely Islamic institutions are: their sharia-compliant status requires them to hold assets and raise funds separately from their parent banks.

There are other sources of danger, too. Because Islamic banks face constraints on the availability and type of instruments they can invest in, their balance-sheets may concentrate risk more than those of conventional banks do. The industry’s ability to steer its way through stormy waters is largely untested, although Malaysian banks do have memories of the Asian financial crisis in the 1990s to draw on.

None of these tensions need derail the growth of Islamic finance just yet. There is plenty of demand, whether from oil-rich investors, the faithful Muslim minorities in Western countries or the emerging middle classes in Muslim ones. There is lots of supply, in the form of infrastructure projects that need to be financed, Western borrowers looking for capital and ambitious rulers eager to set up their own Islamic-finance hubs. The industry is innovative; new products keep expanding the range of sharia-compliant instruments. And as in conventional finance, the economics of the Islamic kind improve as it gains scale.

But further growth itself contains a threat. The AAOIFI ruling on sukuk earlier this year neatly captured the contradictory pressures on the industry. On the one hand, bankers are worried that the narrow enforcement of sharia standards is liable to stifle growth; on the other some observers fear that Islamic finance is becoming so keen to drum up business that its products, with all their ingenuity, are designed to evade strict sharia standards. This presents a dilemma. If the industry introduces too many new products, cynics will argue that sharia is being twisted for economic ends—the scholars are being paid for their services, after all. But if it fails to innovate, the industry may look too medieval to play a full part in modern finance.

Balancing these imperatives will become even harder as competition grows fiercer. Anouar Hassoune of Moody’s, a credit-rating agency, believes that unscrupulous newcomers could harm the reputation of the entire industry, “like the space shuttle undone by something the size of a 50 cent coin”. Islamic finance serves two masters: faith and economics. The success of the industry depends on satisfying both, even if the price of that is a bit more inefficiency and a bit less growth.

Jizya: Amounts Paid in the Treaties of Orihuela and Misr (Egypt)

One of the complaints about Islam by Islamophobes is the issue of jizya, the tax levied on non-Muslim citizens of an Islamic state. In return for the payment of the jizya, non-Muslims were permitted to practice their faith, to enjoy a measure of communal autonomy, to be entitled to Muslim protection from outside aggression, to be exempted from military service and taxes levied upon Muslim citizens. What has never been brought up in any argument I've read against the jizya is exactly how much was paid by the non-Muslims. In another of my posts about Hugh Kennedy's book, The Great Arab Conquests (yes, I am almost finished with the book ;) ), Kennedy addresses this issue in several passages. The first passage is with respect to the Treaty of Orihuela (pp. 315-16):

We are better informed about the conquest of the area around Murcia in south-east Spain. This was ruled by a Visigothic noble called Theodemir (Tudmīr). He negotiated a treaty with Abd al-Azīz, of which the text, dated April 713 [Rajab, 94 A.H.], is recorded in several Arabic sources.

In the name of God, the Merciful, the Compassionate. This text was written by Abd al-Azīz b. Mūsā b. Nusayr for Tudmīr b. Ghabdush, establishing a treaty of peace and the promise and protection of God and His Prophet (may God bless him and grant him His peace). We [Abd al-Azīz] will not set any special conditions for him or for any among his men, nor harass him, nor remove him from power. His followers will not be killed or taken prisoner, nor will they be separated from their women and children. They will not be coerced in matters of religion, their churches will not be burned, nor will sacred objects be taken from the realm as long as Theodemir remains sincere and fulfils the following conditions we have set for him:

He has reached a settlement concerning seven towns: Orihuela, Valentilla, Alicante, Mula, Bigastro, Ello and Lorca.

He will not give shelter to fugitives, nor to our enemies, nor encourage any protected person to fear us, nor conceal news of our enemies.

He and each of his men shall also pay one dinar every year, together with four measures of wheat, four measures of barley, four liquid measures of concentrated fruit juice, four liquid measures of vinegar, four of honey and four of olive oil. Slaves much [sic; must] each pay half of this.

Kennedy continues:

This treaty is a classic example of the sort of local agreements that were the reality of Arab "conquest" in many areas of the caliphate. It is clear that rather than embark on a difficult and costly campaign, the Muslims preferred to make an agreement that would grant them security from hostile activities and some tribute. It is a pattern we can observe in many areas of Iran and Transoxania. It is interesting to note that much of this tribute was taken in kind (wheat, barley, vinegar, oil, but of course no wine). In exchange for this, the local people were allowed almost complete autonomy. Theodemir was clearly expected to continue to rule his seven towns and the rural areas attached to them. There is no indication that any Muslim garrison was established, nor that any mosques were built. Theodemir and many of his followers may have imagined that the Muslim conquest would be fairly short lived and that it was worth paying up to preserve their possessions until such time as the Visigothic kingdom was restored. In fact it was to be five centuries before Christian powers re-established control over this area. We do not know how long the agreement was in force: Theodemir himself died, full of years and distinction, in 744. It is likely that it was never formally abolished but rather that as Muslim immigration and the conversion of local people to Islam increased in the late eighth and ninth centuries, its provisions became increasingly irrelevant.

In another passage, with respect to the Treaty of Misr (Egypt), Kennedy writes (pp. 153-54):

It was probably at this time that the document known as the Treaty of Misr (Egypt) between the Muslims and the Byzantine authorities was drawn up, though the exact context of this document remains unclear. It is in many ways similar to the treaty Umar had made with Jerusalem and was presumably modeled on it. It begins with a general clause safeguarding the people their religion (millat), their property, their crucifixes, their lands and their waterways. They would be obliged to pay the jizya (tribute) every year when the rise of the Nile (ziyādat nahrihim) was over. If the river failed to rise properly, payment would be reduced in proportion. If anyone did not agree to it, he would not pay the tribute but he would not receive protection. Romans and Nubians who wanted to enjoy the same terms might do so and those who did not were free to leave.

...

In many of them [different written accounts about the treaty] the tax to be paid was assessed at 2 dinars per adult male except for the poor. Some also said that the Egyptians should provide the Muslims with supplies. Each landowner (dhī ard) was to provide 210 kilos of wheat, 4 liters of oil, 4 liters of honey and 4 liters of vinegar (but, of course, no wine). They were also to get clothing: each Muslim was to be given a woolen jubba, a burnūs or turban, a pair of trousers (sarāwīl) and a pair of shoes. It may be that many of these south Arabians had arrived very ill prepared for the coolness of an Egyptian winter.

In other words, the jizya paid per person in terms of currency was a very nominal amount. It would be like asking for a tax of one or two dollars per person; the poor, any slaves, presumably women and children would either pay a lower amount or be exempted altogether. The in-kind payments of food and clothing would cost more, but these were no doubt requested by the Arab armies because their soldiers needed the supplies. As Kennedy points out (p. 334), Arab soldiers were expected to provide their own equipment and pay for their own food. Once the payment was made, life went on as before. Muslim armies charged less in terms of the jizya if the town submitted peacefully instead of battling with the army (probably what the slave had told the people at Junday-Shapur, who quickly realized how much cheaper it would be for them to pay the tribute than to fight the Muslims; in fact, Kennedy tells of a number of cities that came to the same decision).

Jizya, then, was not the crushing tax burden one finds in ancient Greek and Roman histories. It was a relatively small amount paid by the non-Muslims; as more and more people became Muslim, the amount paid for jizya actually shrank over time. Of course, we Muslims have our own taxes (e.g., zakat).

Update: As promised earlier, here is one more passage from the book that suggests that the jizya was not terribly oppressive, at least at first. From page 373:

Although we cannot be clear about this, it is possible that the Arabs were, initially at least, less demanding of the resources and services of the ordinary people than their Byzantine and Sasanian predecessors, and the taxes they imposed may actually have been lower. It is not until the end of the seventh century that we get complaints about oppressive tax gathering.

Photo credit: A street in Lorca, Spain, by Howzey

The Meeting between Umar and Hurmuzān

Another story from Hugh Kennedy's book, The Great Arab Conquests (pp. 130-31). As the Arab army swept through Khūzestān (in what is now southwestern Iran), the Persian general Hurmuzān (Hormozan) fled to the city of Tustar (now Shushtar), where he and his forces were besieged by the army of Abu Musa Al-Ash'ari for at least eighteen months (some records say two years). Shustar finally fell when one or two of the city residents befriended the Arab soldiers and agreed to help them in exchange for a third of the spoils. The Arabs then tunneled under the city walls, and the city was eventually taken. However, the decision was made to send Hurmuzān to the Caliph Umar, who would decide his fate:

After his surrender at Tustar, he was brought to Medina to be presented to the caliph. Before he and his escort entered the city, they arrayed him in all his finery, his brocade and cloth-of-gold robes and a crown studded with rubies. Then they led him through the streets so that everyone could see him. When they reached Umar's house, however, they found that he was not there, so they went to look for him in the mosque but could not find him there either. Finally they passed a group of boys playing in the street, who told them that the caliph was asleep in a corner of the mosque with his cloak folded under his head for a pillow.

When they returned to the mosque they found him as the boys had said. He had just received a delegation of visitors from Kūfa and, when they had left, he had simply put his head down for a nap. Apart from him there was no one in the mosque. They sat down a little way from him. Hurmuzān enquired where his guards and attendants were but was told he had none. "Then he must be a prophet," the Persian said. "No," his escort replied, "but he does the things prophets do." Meanwhile more people gathered round and the noise woke Umar up. He sat up and saw the Persian and the escort asked him to talk to the "king of Ahvaz." Umar refused as long as he was wearing all his finery, and only when the prisoner had been stripped as far as decency allowed and reclad in a coarse robe did the interrogation begin.

Umar asked Hurmuzān what he thought about the recent turn of events, to which the Persian replied that in the old days God was not on the side of the Persians or the Arabs and the Persians were in the ascendancy, but now God was favoring the Arabs and they had won. Umar replied that the real reason was that the Persians had previously been united while the Arabs had not. Umar was inclined to execute him in revenge for the Muslims he had slain. Hurmuzān asked for some water, and when it was given to him he said he was afraid he would be killed while he was drinking. The caliph replied that he would not be killed before he had drunk the water, whereupon Hurmuzān allowed his hands to tremble and the water was spilled. When Umar again threatened to kill him, the Persian said that he had already been given immunity; after all, he had not drunk the water. Umar was furious, but the assembled company agreed that Hurmuzān was right. In the end, he was converted to Islam, allowed to live in Medina and given a substantial pension.

Kennedy continues:

The story of Hurmuzān's trick is probably a folk motif grafted on to historical events, but it serves its purpose to illustrate the contrast between Persian pride and luxury and Muslim simplicity; the honesty of the Muslims and the integration of elements of the Persian elite into the Muslim hierarchy.

In E.J. Brill's First Encyclopaedia of Islam, 1913-1936, al-Hurzumān, described as the King of Susiana,

"...succeeded as saving his life by his cunning but only on condition that he adopted Islām. He was able to be useful to the Caliph in various ways on account of his knowledge of Persian affairs. But when 'Omar was murdered in 23 = 644 by a Persian Christian, al-Hurmuzān, probably without reason, was suspected of being an accomplice and killed by 'Ubaid Allāh, son of the Caliph." (p. 338)

Photo credit: Panoramio/shushtari

The Conquest of Junday-Shapur

Another story from Hugh Kennedy's book, The Great Arab Conquests (p. 128), this time dealing with the "conquest" of Junday-Shapur (also known as Jondisapur (p. 206) or Gundishapur), an ancient city that lies in the modern Iranian province of Khūzestān, between the cities of Dezful and Shustar.

According to this story, the city resisted vigorously until one day, to the great surprise of the Muslims, the gates were flung open and the city was opened up. The Muslims asked the defenders what had come over them, to which they replied, "You have shot us an arrow with a message that safety would be granted to us. We have accepted this and set aside the tribute payments." The Muslims replied that they had done no such thing, but after extensive enquiries they found a slave, originally from Junday-shapur, who admitted that he had indeed written such a message. The Muslim commanders explained that this was the work of a slave with no authority to make such an offer, to which the inhabitants replied that they had no means of knowing that and finished by saying that they were going to keep their side of the bargain, even if the Muslims chose to act treacherously. The Muslims referred the matter to [the Caliph] Umar, who responded that the promise was in fact binding, for "God holds the keeping of promises in the highest esteem." The moral is clear: even the promise of a slave must be respected.

Photo credit: Wikipedia/Zereshk - The interior of Masjid Jameh (Congregational Mosque) in Dezful, Iran.

Update: How Much Oil Does America Import?

Currently, my most popular blog post by far is How Much Oil Does America Import?, written back in May 2006, two years ago. I thought it was time to update the figures and see how the U.S. is doing since I first wrote that post.

The U.S. gets its oil from two sources: either it pumps its own oil, called "Field Production" by the Department of Energy, or it imports oil from other countries around the world. In 2000, American commercial field production made up 38.69% of the total supply of crude oil, while imports made up 60.28%. In 2005, when I wrote the last post, those same percentages were 33.67% and 65.84%, respectively. (These numbers are different from what I wrote back in 2006 as adjustments have been made to the official statistics; these types of revisions are normal for economic statistics.) In 2007 (the most recent year), the percentages were 33.72% and 66.19%, respectively. While there has been an extremely slight increase in the amount of oil pumped domestically (0.05%), imports have also increased as well. (The reason why both numbers can increase is because a third number, "supply adjustments," fell.)

In 2007, the U.S. imported a total of 3,656,170 thousand barrels. Of those 3.66 billion barrles, the U.S. imported from a total of 46 different countries. The top 5 importing countries were: Canada (18.61%), Saudi Arabia (14.50%), Mexico (14.07%), Venezuela (11.48%), and Nigeria (10.80%), for a total of 69.47% of all American imports. In contrast, imports from countries six through ten (Angola, Iraq, Algeria, Ecuador, and Kuwait) made up only 17.95% of the total; countries 11 through 46 made up the remaining 12.58%.

Looking at petroleum imports in two other ways...

In 2007, imports from OPEC countries* made up 53.85% of all U.S. imports, compared to the 46.15% from non-OPEC countries. However, this is the exception rather than the rule. Since 1993, when the Energy Information Agency (EIA) started breaking out the statistics, non-OPEC countries have been the dominant exporters ten years out of the past fifteen. The year 2007 was the first time since 2001 that OPEC countries had sold more petroleum to the U.S. than non-OPEC countries.

With respect to the Persian Gulf, those countries** only made up 21.19% of the total imports. This is down slightly, one-half percent, from my 2006 analysis. Note that the U.S. imports no oil from Iran.

Conclusions/Predictions:
Two years ago, I made four points as to how I thought things would go with respect to American oil imports and consumption. We'll look at how good or bad those predictions were:

1. American field production will probably go below 25% of its total annual supply within the next five years.

I think we can write this prediction off; I don't foresee this happening within the next three years (or perhaps even the next ten).

2. In that same time frame, imports will probably be in the high 50s percentage (perhaps 58-59%).

On the other hand, I think this prediction is very much a lock at this time. In fact, I wouldn't be surprised if this number goes back up again, remaining in the 60-65% range.

3. America will continue to seek the majority of its oil from non-OPEC countries, such as Canada and Mexico, if only to avoid being as dependent on OPEC countries as they have been in the past. However, this will probably turn out to be a pipe dream in the long run unless Canadian oil reserve estimates turn out to be near the high end. (Estimates for Canada's proven oil reserves ranges from 4.7 billion barrels (World Oil) to 14.803 billion barrels (BP Statistical Review) to 178.792 billion barrels (Oil & Gas Journal). Obviously, this extremely wide range of guesses shows that no one truly knows how much oil Canada has.)

Since I wrote this, I've gotten a better understanding with respect to Canada's oil reserves. The problem with the Canadian oil sands is that it is made up of a very dense and viscous type of petroleum called bitumen. Bitumen is like molasses at room temperature, and needs heating just to flow. (The tar that we pave roads with is bitumen.) Oil refineries are set up to process certain types of crude oils, and bitumen is normally not one of them. So, while Canada has a lot of proved oil reserves, most of it is not in the form the refineries need to produce products like gasoline. In this respect, the lower reserve amount mentioned above is probably closer to the amount of crude oil Canada actually has. In time, more refineries may convert to take advantage of the Canadian oil sands, but that will probably be a gradual process.

4. Persian Gulf oil, which has ranged between 19.81% and 28.56% of all U.S. imports since 1996, will probably continue to hover in the high teens-low 20s, despite President Bush's goal to cut American consumption of Middle Eastern oil by 75% by 2025, per the latest State of the Union address.

I don't see this forecast changing at all. What President Bush said in 2006 about cutting the amount of Middle Eastern oil America consumes was complete and utter bullshit (and shame on you if you believed him). BTW, shame on you again if you believe either McCain or Cheney that drilling for oil offshore or up in Alaska will make a significant difference. Two reasons: "drop in the bucket" and "long-term projects," neither of which will lower your gas prices. I may post on this in the near future, insha'allah, but in the meantime I recommend that you read John McCain's Oil Scam over at Informed Comment (Juan Cole), and Drilling Our Way to... by Menzie Chinn over at Econbrowser.


References:
US Crude Oil Supply and Disposition (DoE)
US Crude Oil Imports by Country of Origin (DoE)

Notes:
* OPEC countries include Algeria, Angola, Ecuador, Indonesia, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the UAE, and Venezuela.
** Persian Gulf countries include Bahrain, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates. However, Iran and Qatar export no oil to the U.S.

Movie Sunday: Lawrence of Arabia

This is another of my favorite movies (and one in which Milady finds something else to do while I watch it ;) ). And yet, as is frequently the case with respect to "historical" films, sifting the "Hollywood" away from the history can be a daunting task, especially for a film like Lawrence of Arabia in which there are serious debates not only about the accuracy of the historical events portrayed, but also about the man himself. Regardless, the movie has long been recognized for its excellence, and has frequently been listed among a number of "Top 10" lists of all-time movies. We also have this film to thank for inspiring a certain contemporary film director to go into film-making for his career.

Interesting facts about Lawrence of Arabia:

No woman has a speaking role in the entire movie.

While the movie was originally planned to be filmed entirely in Jordan, many scenes were filmed in either Morocco (desert scenes and the Tafas massacre, where the Morrocan army was used to play the Ottoman army) and Spain (the attack on Aqaba, the train attacks, the city scenes of Cairo and Jerusalem, and all the interior scenes).

Henry Oscar, who has a small role in the film and recites an English translation from the Qur'an, received permission from Jordanian authorities to do so only on condition that an imam be present to ensure that there were no misquotes.

During the filming of the movie, King Hussein of Jordan met and later married an English secretary working on the set, Antoinette "Toni" Gardiner (now Princess Muna al-Hussein). Her first-born son from this marriage is King Abdullah II of Jordan.

Well, I'll tell you. It's a little clash of temperament that's going on in there. Inevitably, one of them's half-mad - and the other, wholly unscrupulous.

Young men make wars, and the virtues of war are the virtues of young men: courage, and hope for the future. Then old men make the peace, and the vices of peace are the vices of old men: mistrust and caution.

The Economist: Gender Gulf

The April 10th edition of The Economist has an article about the problems Muslim women in the Middle East and the banking/financial services industries have in meeting each other. Much of this problem is due to gender segregation, but another problem is that many of these companies haven't thought about the benefits of targeting their marketing toward women and the practical ramifications of being able to market directly to these women; for example, hiring women who are able to meet clients and customers without needing a husband or other male relative to chaperone. I also like how the one company mentioned in the article, Forsa, avoid the "pink-ribboning." Unfortunately, this type of cosmetic change to a company's marketing scheme is all too common and is very superficial. "Oh, look! My credit card has a picture of a rose on it. I'll bank with you." Yeah, right.

But many women still avoid face-to-face meetings with unrelated men. That makes the male-dominated world of banking particularly hard to penetrate.

There are ways of getting round the problem. Saudi retail banks have set up segregated branches that only women can enter. “Ladies' banks” are also cropping up in the UAE. Segregation is a controversial issue, but the facilities at least allow women to manage their finances independently of prying fathers, brothers or husbands. Rising divorce rates give added motivation for women to hide away some money, skeptical of the help they will get from mostly male judges.

Increasingly, wealth managers are also realizing that women in the Gulf region are sitting on fortunes in cash, land and even jewelery. According to Amanda McCrystal of Bramdiva, a London-based wealth-consultation service for women, a few years ago there was a boom in online share-trading by women in the Gulf, since they could do it from the privacy of home. Many were singed by a regional crash in 2006. Some will not return; many of those who do may seek professional advice.

Sandy Shaw, who heads Middle Eastern operations at Coutts, a private bank based in London, says about a quarter of her clients are female, and are keen to keep control of their affairs, especially to ensure that their estates will pass to their children when they die. Aware of this, a small number of Western female bankers now travel regularly to the Gulf to hold meetings with female clients. Again, one of the attractions is privacy; they can visit a Saudi woman at home without her husband present, which a male banker normally could not do. Women may require different products from men, too. In Saudi Arabia and Qatar, for example, they have more of an appetite for lower-risk, capital-protected investments. But this is likely to change as they become more experienced investors, says Ms Shaw.

In the UAE, Dubai World, a government holding company, has set up Forsa, an investment company run by women for women. Its staff scorn what they call “pink-ribboning”: superficial changes to market products to women, like making a credit card pink. Across the region, more such firms would be helpful. This is not only because women need opportunities to work. The finance industry needs them, too: it is growing so fast that it is struggling to recruit and retain staff.

The message has sunk in in Bahrain, where a third of finance-sector employees are female, and in Kuwait, where, including property, the figure rises to 40%. Some employers there say they find female bankers work harder than men. Yet in Saudi Arabia, official statistics indicate that just 5% of Saudis working in finance and property are female. And across the region, it remains hard for female businesswomen to get loans, especially if they are not from prominent families. Even in Bahrain, where nearly one-third of businesses are registered by women, “sometimes women can only get a business license in their husband's name, especially if they have less capital,” says Aamina Awan, who is researching female entrepreneurship in the region.

Cross-posted at J2TM.

Who Controls the Middle East?

Juan Cole has an interesting blog post today featuring an animated map of the Middle East. The map shows who has controlled the Middle East since 3000 BCE. As Juan wrote:

I'd have added a couple of phases at the end, including the Cold War divisions of states by their alliances with the US and the Soviet Union, and then the new US empire in Iraq and Afghanistan, plus bases in some of the Stans of Central Asia and Qatar and Kuwait.

Update: Ijtema has highlighted this post on their blog (thanks, iMuslim!), and she made a really good observation by comparing this video to the following Qur'anic ayah:

Do they not travel through the earth and see what was the End of those before them? They were more numerous than these and superior in strength and in the traces (they have left) in the land: Yet all that they accomplished was of no profit to them. (40:82)

So true!

Stupid Sara

Sometimes non-Muslims are so blinded by their hatred for Islam that they blame Islam for things our religion has nothing to do with. Consider the post Islam's War on Women by one Sara Coslett. Sara had noticed some demographic statistics for certain Middle Eastern countries that show a sex ratio favoring men:

I wonder how is it [sic] that in the United Arab Emirates and Qatar the ratio of men to women is greater than 2/1, in Kuwait 1.5/1, Bahrain 1.34/1, Oman 1.26/1, and Saudi Arabia 1.22/1.

These particular ratios are for the population as a whole but, Sara, taking them at face value, doesn't dig deep enough. Instead, she comes up with two pathetic reasons for the skewed sex ratios:

Two possibilities come to mind. First, Muslim countries are notorious for practicing female infanticide.

Except, this isn't true. If Sara had said India or China are notorious for practicing female infanticide, I'd have quickly agreed with her. The problem is, the countries Sara highlighted don't have very high abortion rates to begin with. According to Johnston's Archive, which tracks historical abortion statistics, we find that the abortion percentage for all residents, in and out of the country, were extremely low for the six countries in question. While not all countries have a full listing for their statistics, the abortion percentage for Qatar was 1.3% in 2004, 0.05% for Kuwait in 2001, and 0.07% for Bahrain in 2004. The abortion ratio wasn't available for either the UAE or Saudi Arabia; however, the total number of abortions in 2006 for both countries among residents was 63 and 5, respectively. Note that all of those abortions were obtained overseas, meaning no abortions were performed among residents at all inside those countries. (No statistics are available for Oman.) With numbers so low, there's no reason to believe abortion is a cause for the skewed sex ratio.

In fact, it is not. If we next look at the CIA's World Factbook, we can look at the sex ratio at birth. Here, we find that for Bahrain, there were 1.03 boys born for every girl (2007 est.), 1.04 boys for every girl in Kuwait (2007 est.), and 1.05 boys for every girl in Oman, Qatar, Saudi Arabia and the UAE (2007 est.). Compare this to India (1.12 boys per girl; 2007 est.) and China (1.11 boys per girl, 2007 est.), and you see that Sara's argument with regard to female infanticide holds no water.

Sara's other argument is even more absurd:

The other possible reason for such a disparity between males and females is that census counters do not include females when polling the population. We know that Muslims regard women as property, so like a slave, they would not be considered a human and thus not counted.

Even if one were to accept Sara's argument at face value, the fact of the matter is that other sources, such as the World Factbook would provide fairly realistic estimates for the male-female population (see the "Age Structure" statistic).

Of course, there's one possibility that Sara hadn't considered, and that's immigration. Looking at NationMaster statistics, we see that immigrants make up the following percentages of the national population: Bahrain - 40.66%, Kuwait - 65.83%, Oman - 24.45%, Qatar - 78.34%, Saudi Arabia - 27.51%, and the UAE - 70.85%. And, as any expat will tell you, the vast majority of all expats are men. It's not surprising, then, that the sex ratio in the six Middle Eastern countries Sara highlighted should favor men: they're the ones who moved to these countries in search of work.

But Sara would rather blame Islam; that way she doesn't have to think too deeply about why things are the way they are:

It is obvious to me Islam has declared war on its female population.

Stupid Sara.

Update: Since writing this post last night, Sara has re-written her original post, plus written another. The problem is, while Sara realized that she made a mistake after reading my post, she compounded the original error by falling on another bogus claim:

Clearly something tragic is happening to females after age 15. Therefore, instead of two possibilities I realized there was a third - honor killings.

Most of the remainder of the re-written first post is merely a rehash of her original post. The second post, Erratum: Islam's War on Women is a strange mish-mash of retractions, corrections, and old allegations. On the one hand, she admits to forgetting about the impact of immigrants into the six countries she originally highlighted. She also admits that she was wrong "...in my assumptions that the Muslim practice of honor killings and a disregard for women as people..." However, she also makes some odd statements, such as:

Surprisingly I noticed Mr. JDsg did not refute or even mention anything about honor killings.

What Sara disregarded was the fact that she had not written anything about honor killings in her original post. What was there to refute or mention? Even so, honor killings is not going to be a high enough number to explain the skewed sex ratios. Honor killings do, of course, happen, but the number of killings committed is not going to be that high. This is merely Sara grasping at another straw.

Sara concluded her new post by writing:

While population data is a poor example for Islam’s War on Women, the war does continue.

That's it, Sara, keep beating your dead horse. You've been wrong in just about all your other "reasonings." Show us how more wrong you can be.

Update #2: Looked at Sara's blog once more, just to see if she had followed up on the comments I had made there the other day. No, she hasn't responded, and she's shut off her comments once again to only those who have "registered" (the usual cowardly BS tactic used by right-wing blogs who don't want to hear that the emperor wears no clothes.)

Antonio Rappa on Oil

I've been reading off and on a book by Antonio L. Rappa entitled Globalization: An Asian Perspective on Modernity and Politics in America (published 2004). Rappa is an Assistant Professor of Political Science at the National University of Singapore (NUS). Much of what Rappa writes on oil in this passage ties in with what Kevin Phillips wrote in his book, American Theocracy.

I really can't understand why some people earnestly believe that the US is interested in the Middle East for altruistic reasons such as human rights, non-oil trade, or Mediterranean tourism. American troops were not trying to keep the peace in the Sudan, the Republic of Congo, East Timor, or Kashmir. The reason is because these places do not produce sufficient quantities of oil for export to make them sufficiently attractive and worth the trouble of establishing diplomatic relations, economic, social and cultural exchanges, and military assistance. Inasmuch as the US is interested in preventing war from breaking out between China and Taiwan because of the gross amount of investments that it has in both countries, there is a similar reason why the Middle East peace process appears to be a never-ending story. American foreign policy is always dictated by its national interest. And the national interest of the MNCs and Military Industrial Complex that control much of American life is "oil." ... [T]he only reason why the US is so interested in the Middle East is oil. Oil sustains American neoliberal globalization. Let's not pretend it is because of democracy, to protect Israel, to ensure the safety of Americans, or to promote free-trade or world peace. These are only secondary objectives. The US State Department knows full well that without oil, the entire US economy will collapse, and the American Dream will implode. This is a fact. The two Gulf Wars were ostensibly about removing dictators like Saddam Hussein. The Shah of Iran and his troops committed similar atrocities when they were in power (similar to the Russians before glasnost and perestroika; and now that the "Russian mafia" seems to be in charge of many areas, rather than state or the KGB). The real reasons are the oil fields beneath Basra in Southern Iraq. There are three types of crude oil [Basra Regular, Basra Medium, and Basra Heavy] that Saddam and his henchmen hid under the desert. Some analysts say it is between 5-7 per cent of total world production per day. Others say the figures are much higher, perhaps high enough to solve American oil problems for the next quarter of a century. There are also sufficient oil and natural gas reserves in that region to make anyone want to invest in a stable and democratic-loving Iraq.

...

An American national interest in the Middle East or in the Straits of Malacca or in China and Taiwan is really about protecting America and Americans. These and many other places serve as important and strategic locations for ensuring the smooth flow of American goods and services. Let's call a spade a spade. The main reason why America seems to be here, there and everywhere is because it is safeguarding the American way of life, perhaps the American Dream, and certainly not merely for human rights assistance or aid for natural disasters.
- pp. 109-10

How Much Oil Does America Import?

Ever since I wrote Oil: America's Smack back in February, I've had a fairly steady stream of visitors asking the same question: how much oil does America import? I touched on this answer in my Smack post, but the question is worth looking into once more.

Every year, the United States pumps up some of its own oil (called "Field Production" according to the DoE) and imports the rest. Not surprisingly, American field production has been dropping over time. In the year 2000, American commercial field production made up 33.51% of its total supply of crude oil, while imports made up 52.21%. In 2005, those same percentages were 28.44% and 55.85%, respectively. And, of course, there's no reason to expect either of these trends not to continue going down and up, respectively, in the near future.

The United States has been importing oil since at least 1910 (according to DoE statistics), when a mere 557 thousand barrels of oil were brought into the country. Last year, the U.S. imported 3,670,403 thousand barrels of oil. Of those 3.67 billion barrels of oil, the U.S. imported from a total of 42 different countries. The top 5 importing countries were Canada (16.34%), Mexico (15.42%), Saudi Arabia (14.30%), Venezuela (12.24%), and Nigeria (10.54%), for a total of 68.84% of all American imports. In contrast, imports from countries 6 through 10 (Iraq, Angola, Ecuador, Algeria and the United Kingdom) make up only 16.84% of the total, with countries 11 through 42 making up the remaining 14.33%.

Looked at another way, only 21.69% of America's oil imports come from the Persian Gulf region. Per the DoE, the Persian Gulf includes Bahrain, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates; however, Iran and Qatar export no oil to the United States. If we compare imports from OPEC countries vs. non-OPEC countries, we find that non-OPEC countries are now in the majority, 52.64% vs. 47.36%. And, with the exception of one year, 2001, non-OPEC countries have been in the ascendancy since 1994.

Conclusions/Predictions:
1. American field production will probably go below 25% of its total annual supply within the next five years.
2. In that same time frame, imports will probably be in the high 50s percentage (perhaps 58-59%).
3. America will continue to seek the majority of its oil from non-OPEC countries, such as Canada and Mexico, if only to avoid being as dependent on OPEC countries as they have been in the past. However, this will probably turn out to be a pipe dream in the long run unless Canadian oil reserve estimates turn out to be near the high end. (Estimates for Canada's proven oil reserves ranges from 4.7 billion barrels (World Oil) to 14.803 billion barrels (BP Statistical Review) to 178.792 billion barrels (Oil & Gas Journal). Obviously, this extremely wide range of guesses shows that no one truly knows how much oil Canada has.)
4. Persian Gulf oil, which has ranged between 19.81% and 28.56% of all U.S. imports since 1996, will probably continue to hover in the high teens-low 20s, despite President Bush's goal to cut American consumption of Middle Eastern oil by 75% by 2025, per the latest State of the Union address.

References:
US Crude Oil Supply and Disposition (DoE)
US Crude Oil Imports by Country of Origin (DoE)
World Proved Reserves of Oil and Natural Gas, Most Recent Estimates

Update: I've written an updated post to this; please see Update: How Much Oil Does America Import.

Note: Despite the age of this article, it remains extremely popular, currently getting over 20% of all my hits on a daily basis. Since I wrote this post, I've written a number of other articles on oil. You might want to check out the following (so far to date; the most recent are at the top):

Update: How Much Oil Does America Import?

Crude Oil Prices, Dollars vs. Euros: Is There a Difference?

Petroleum and Natural Gas Proven Reserves, 2008, Top 10

U.S. Primary Energy Consumption by Source and Sector, 2006

Antonio Rappa on Oil

American Theocracy

Juan Cole on Global Warming, Oil and American Politics/Militarism

World Oil Reserves

Oil: America's Smack

And over at one of my other blogs:

Southeast Asian Petroleum Consumption Forecasts, 2007-2012

I hope to have a number of other posts like the one above at the new blog, J2TM, in the near future.

First Repercussion from Ports Fiasco?

[I originally posted this over at Daily Kos.]


While visiting one of my customers today, we fell into a discussion that touched on the recent ports management fiasco, where UAE-based Dubai Ports World had tried to purchase London-based Peninsular & Oriental, until the U.S. pulled a xenophobic histrionic fit.

The customer suggested that the ports fiasco had really opened the eyes of the Muslim world to Western attitudes toward Arabs and Muslims, and that a recent state visit to Singapore by Crown Prince Sultan of Saudi Arabia was a repercussion of that fiasco.  He believes that the Middle East will look increasingly toward eastern Asia for trade, investment, and military cooperation and, indeed, all of these issues were discussed in the Sultan's state visit (which included trips to Japan and Pakistan).

Now state visits between national leaders are quite common, and the Singapore government (through MM Lee Kuan Yew) had made the initial visit.  However, the fact that this was the first visit ever to Singapore by a Saudi official lends a little weight, I think, to my customer's argument.  Even if this state visit was not motivated in any part by the ports fiasco, I do think that the relationship between the Middle East and east Asia will continue to grow stronger (to the detriment of the US and Europe) because of the anti-Muslim/Arab attitudes of Western nations.