Sunday, April 22, 2012

Formula 1 and the Breakdown of the Bahraini Business Model

For those wondering what a post-oil Gulf might look like, you're looking at it in Bahrain. Bahrain was both the first Gulf country to mine--and run out of--the black stuff. Production today (and for more than a decade now) has topped out at less than 50,000 barrels per day, or about one-half of one percent of the daily output of its giant neighbor to the west... and south.

And yet (until very recently, anyway), Bahrain's economy has managed not to implode. This is due, in the first place, to Saudi Arabia's continued subsidization of the Bahraini state budget. Not only do the Saudis continue to provide Bahrain one-half the output of the "shared" Abu Safaa oil field--equaling around 150,000 barrels/day--but they also supply a majority of the oil gas used in its aluminum refinery operations at ALBA. The Arabians of Saudi can thus be thanked directly or indirectly for the continued functioning of Bahrain's two largest "domestic" industries, and the mass employment that comes along with it.

So, apart from a disproportionately large political influence in Bahrain (which these days is admittedly useful), what does Saudi Arabia get in return? Enter the other half of Bahrain's business model, which is indeed where its comparative advantage truly may be found: namely, in being the place where Gulf residents--especially Gulf Arabs--can come to "have a good time," as they say. Indeed, Ask Men magazine once famously (among Bahrainis) ranked Manama at #8 on its list of the Top Ten "Sin Cities," introducing the country thus:
Welcome to the party oasis of the Middle East. Connected by a causeway to nearby Saudi Arabia, Manama is a popular spot for Saudis to kick back from their country’s restrictive laws. Here they can get hammered, go clubbing, mingle with the opposite sex, and if they’re really daring, they can pick up prostitutes -- a practice that’s illegal but widely available. While Manama is still largely a Muslim city, a third of its residents are foreigners, so it has led to a much more liberal culture that gave women the vote in 2001, and let them drive cars. For many Saudi males this proximity to an open culture is irresistible and many jam the causeway and fill flights to the city every weekend.

Do you want to see what happens when Saudis cut loose and leave the rules behind? You may need to get in line.
As one might expect, such a description earned the Ask Men website a prompt ban by Bahrain's Intertube authorities. But the picture is in any case an accurate one--and certainly not a new one. In conversation a few weeks ago, Bahrain guru 'Abd al-Hadi Khalaf mentioned that in the 1940s, a decision to ban places of prostitution in one notorious neighborhood of Manama (today's Exhibition Avenue) was quickly reversed when drunken men began knocking on the doors of random residents. It was the Bahrainis of al-Hurra and Ra'as Ruman themselves, he said, that demanded the return of the brothels, so as to at least concentrate the activity--seen as inevitable in any case--to a finite area.

Bahrain's role as the Macao of the Gulf thus allows its conservative neighbors--especially Saudi Arabia--to confine elsewhere its citizens' appetite for excess. Indeed, I once sat at Trader Rick's (at the Ritz Hotel) for several hours with a 65 year-old Saudi employee of Prince Nayf. When asked how often he comes to Bahrain, he said that the Interior Ministry itself organizes weekend trips for senior officials via flights on Saudi Arabian Airlines. Observing the Ritz patrons, one would certainly believe it.

Saudis and other Gulf Arabs are not the only beneficiaries of Bahrain's "relaxed" social atmosphere, however. It is no mystery why the three finance capitals of the Middle East--once Beirut, and now Bahrain and Dubai--are all located in cities where wealthy bankers and their families may spend their time doing the sorts of things that wealthy bankers and their families like to do. Having friends in the industry who have also visited me in Doha, the availability there of alcohol and (relatively-vibrant) nightlife is not a secondary consideration. The impact on Bahrain's banking sector of continued political unrest is not then simply a product of general uncertainly surrounding the future of the country, but it is influenced also by the ability of banks and other multinationals to attract and retain the sorts of employees necessary for their continued function.

Finally, compared to deployments elsewhere in the region, where American military bases are located far from city centers and movements are highly restricted (like, say, in Qatar), one imagines that U.S. servicemen stationed in Bahrain think themselves on an island paradise. Or, that is, DID think themselves. As military writer Geoff Ziezulewicz recently describes in an enlightening article at Foreign Policy, "Tear Gas at the Dairy Queen," no longer are U.S. navymen free to roam the streets of Juffair (and Bahrain generally) in search of girls and Papa John's pizza. Rather, soldiers and their families face increasing restrictions, and increasing unease over the sustained violence and, more recently, the emergence of anti-American sentiments over the U.S.'s role (or, depending on who you talk to, non-role) in the country.

If the connection with the Formula 1 is not clear at this point, it should be: the Formula 1--the attraction of foreign tourists perhaps intrigued by the Gulf or by the Middle East but still seeking the comforts of home in a Western, liberal environment--this is the Bahraini business model. Thus is the race's biggest sponsor--Crown Prince Salman--the one nominally (though it seems decreasingly) in charge of Bahrain's modernizing economic development policy. Whether or not the actual race is affected by protests or marred by violence, the Bahrain Grand Prix represents a severe setback for Bahrain. As Jane Kinninmont has pointed out in a different context, "tourism is unlikely to perform well--and if anything, the 'country branding' impact looks likely to be negative."

(A not-so-full house at Sakhir)

Yet, more generally, one might even go so far as to say that the country's very viability as a politically-autonomous nation (to the extent that it is one presently) is now at stake. With Saudi Arabia already contributing the lion's share of Bahrain's operating budget, if the latter is no longer to be useful as a playground for fun-seeking Saudis and other Gulf Arabs, to say nothing of Westerners, then why continue down the path of economic and (at least institutional) political liberalization? In short, if the impetus for reaching a political solution to Bahrain's now decade-old crisis is driven in large part by economic incentives, then the loss of Bahrain's reputation as a open and business-friendly destination may do as much political harm as economic.

So far, Bahrain's desire to maintain at least an outward fa├žade of stability has resulted in the BICI investigation; at least some (albeit very limited) movement in the direction of police reform; the civilian retrial of some of those prosecuted in military court, and so on. If this seems like perhaps very little, imagine what one might expect when a preponderance of the Bahraini ruling family (as well as their backers in Saudi Arabia) have given up trying altogether. The conspicuous failure of this year's Formula One may well help tip Bahrain's already-precarious political balance further in favor of the latter camp.

Update: For those questioning this article's characterization of (much of) Bahrain's tourism industry, have a look at some of the Google search terms that have led visitors to this page. My favorite: "where i can find prostitute ladies during f1 in bahrain":

Update 2: Not directly related but noteworthy anyway is the long-awaited release of Bahrain's counterpoint to the widely-viewed Al-Jazeera English documentary "Shouting in the Dark." Commissioned by the Bahraini government, the 30-minute film has recently been screened in Washington in meetings attended by ranking Bahraini officials. The Bahrain Embassy press release tells,
Last month, more than 50 D.C.-area diplomats and foreign policy experts joined Bahrain's Ambassador to the United States Houda Nonoo for a documentary screening and a discussion on recent developments and reforms in Bahrain. The reception at the embassy introduced the documentary "Turning Points: One Month that Changed a Nation," which presents a detailed account of last year's events in Bahrain from the perspective of government officials and opposition members. Produced by Camilla Storey and directed by Vincent DeSalvo, the film distinguishes the protests in Bahrain from those of other Arab Spring countries, and delves into the media's role and the road to reconciliation.

"This film presents a measured narrative of the true nature of events in Bahrain. Through speaking with government officials, Bahraini activists, independent bloggers and others, this film helps shed some light on what occurred in my country," Ambassador Nonoo said.
Behold, the true story of what happened in Bahrain!:

Turning Points - One Month That Changed A Nation from Cloud Media on Vimeo.


  1. Bahrain couldn't brand its way out of a paper bag right now

  2. 'one might even go so far as to say that the country's very viability as a politically-autonomous nation (to the extent that it is one presently) is now at stake.'

    Yes and that is what is so sad. It has always seemed to me that there are 2 alternatives; either Bahrain continues as it is with a step by step process of reform or it is swallowed up by Saudi Arabia. The latter alternative would be the least palatable to the opposition and yet they have rejected any invitation to participate in the reform process. The only conclusion that I can draw from this is that the unrest is not about Bahrain at all; it is just part of the stand off between Shia and Sunni nations in the aftermath of the invasion of Iraq.

    1. Only one conclusion you can draw? Only 2 alternatives? Your not limited in your thinking by any chance are you? Bahrainis are amongst the most educated, tolerant, outward looking people in the region - Im pretty sure we are capable of finding a few alternative models in our democratic autonomy.

    2. What you say about Bahraini people is true. That is why I think that taking the step by step path to reform is a real option. But it has to be gradual so as to be acceptable to all the different communities within Bahrain - and to the rest of the GCC on whom Bahrain is financially dependent.

  3. Trader Vick's surely? :)

    Anyways great piece... I love Bahrain... too bad things are unstable there.

  4. I am really proud to hear that our mothers, daughters and sisters are the whores to entertain the Saudis; and we are their pimps.

  5. I think you overestimate the effect the current troubles are having (or will have) on this "playground for fun-seeking Saudis and other Gulf Arabs." The unrest has no doubt put a huge dent in WESTERN tourism, but the Saudi patron is a very different breed, IMHO.

  6. @Ali: Yes, Vick's. Only been once, and it was in 2007.

    @1st Anon: Spare us the false indignation. First, what does this article have to do with Bahraini "mothers, daughters, and sisters?" Second, I lived close enough to various "hotels" and "massage parlors" to have had a first-hand account of the weekend scene in Bahrain. Why is it exactly that traffic grinds to a halt on Wednesday night, at the beginning of the Saudi weekend? Visit the Gulf Distribution Center on a Wednesday night, then stop by Hotel Sea Shell on Kuwait Street, and let me know how uninformed this article is.

    @2nd Anon: You may be right.

    1. Well there's plenty of family tourism as well - for people who live in Saudi, just going to the cinema is a treat. As for the sleaze, well again it's the expats who have to do the really dirty work.

    2. Sure, there are certainly counterexamples. My point is that Bahrain's liberal environment by Gulf standards makes it an appealing destination for a certain type of tourist, which accounts directly or indirectly for a disproportionate amount of its (non-resource-based) domestic economic activity.

  7. Mate I think a post-oil Gulf will look more like Yemen than Bahrain!

  8. Really? It will look like a largely mountainous country formerly divided between a communist south and north, with competing tribal confederations, very little oil to begin with, and 30+ million Shafi'i Sunni and Zaydi Shi'i citizens? Having spent some two years there, it's very difficult to generalize Yemeni politics.

  9. You are all wrong, it is "Trader Vic's" Such inaccuracies do not help your credibility but your site is a jolly good read and I look forward to more

    1. Yes, how damning that I would misspell the (somewhat odd) name of a restaurant attached to the Ritz Hotel that I visited once. How anyone could trust my analysis of Bahraini politics after this I do not know!

    2. Justin, you never cease to amuse me...

      A hello from the old Anon friend who started his posts with "Justin,(...)".

      Lol! I laughed out loud at work.


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