Oman: In a difficult position

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FEW leaders are as ubiquitous as Sultan Qaboos of Oman. His ageless portrait hangs as per regulation from every shop wall. Every six months or so, between bouts of cancer treatment, he also appears on television. At his last appearance in May, his fist seemed clenched in pain. He wore a similar white-cut tunic to the one his father used to wear before his son intervened to unseat him, stave off bankruptcy and pack him into exile in Delhi.

Forty-seven years on, Oman is again in need of a strong leader to mend its finances. Lavish welfare keep an oft-rebellious people, now numbering 4m, quiescent.

The Sultan calmed protests during the Arab Spring of 2011 by hiking public expenditure by 70% over the three years that followed. But since the oil price crashed in 2014 he can no longer afford that. To make matters worse, Oman’s Arab neighbours are withholding aid; they are vexed by its friendship with Iran, neutrality in Yemen and now its closeness to Qatar.

The Sultan ran a budget deficit of 15% of GDP in 2015 and 21% in 2016. But spending goes on rising regardless. In 2016 he doubled the unaccounted part of the budget, which includes his own allowance, promised state employees another salary rise, and took delivery of a fresh batch of British-made Typhoon warplanes. As the cost of servicing Oman’s debt rises, doubts grow about whether it will repay it. In May S&P, a ratings agency, cut Oman’s bonds to junk status.

Oman’s tame media calm anxieties by predicting an imminent oil-price hike from $50 to $80 per barrel, which is the level Oman needs to break even. Last autumn the authorities jailed editors and journalists for running a Reuters report about corruption, along with a dissenting judge.

When he was younger, the sultan was transformative. After overthrowing his father’s medieval rule in 1970, he proclaimed “a renaissance”. He abolished slavery, increased the number of schools three-hundred-fold (from three), and added 30,000km (19,000 miles) to Oman’s 15km of paved roads. The 2020 Vision he unveiled in 1995 aimed to wean the economy off oil dependence, unleash the private sector and create a broad industrial base. But last year, he renamed the vision 2040. Oil exports were only supposed to supply 40% of government revenues by now, down from 66% in 1995. Instead, that share has grown to over 80%. In addition to being sultan, Qaboos is also prime, foreign, defence, and finance minister, and chairman of the Central Bank.

As Oman’s coffers empty, completion of Muscat’s new airport has been delayed by another year. Private firms are too squeezed to absorb the tens of thousands of graduates entering the workforce every year.

Might Qatar’s escalating spat with its bigger brothers have a silver lining for Oman? As tensions mount inside the GCC, and between the GCC and Iran, Oman’s position beyond the mouth of the Gulf’s choppy waters looks ever more enviable. Under blockade, Qatar is routing air-traffic via Muscat. This week it unveiled a new route to Oman’s industrial town of Sohar. Oman is also planning to entice traffic away from Dubai’s giant port of Jebel Ali. The Sultan is letting Chinese managers expand Duqm, his new Indian Ocean port, in exchange for $10bn of investment earmarked for Chinese companies.

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