Strings Attached? Experts Probe Jordan's $2.5 Billion Saudi Aid Package

Published June 21st, 2018 - 10:36 GMT
Saudi King Salman and Jordan's King Abdullah (r) attend Mecca Summit, June 11, 2018. (AFP/ Photo Yousef Allan
Saudi King Salman and Jordan's King Abdullah (r) attend Mecca Summit, June 11, 2018. (AFP/ Photo Yousef Allan

By Eleanor Beevor

Things are happening fast in Jordan.

Two weeks ago, the country saw its Prime Minister resign in the wake of tumultuous protests. These had been triggered by a planned tax increase and an end to a number of subsidies, regulations which were demanded by the International Monetary Fund in return for loans to reduce Jordan’s national debt.

Jordan’s economy has been troubled for a long time. The small nation has precious few natural resources or arable land to exploit, which has left it overwhelmingly dependent on aid.

Yet up until recently, a number of regional and international powers were happy to oblige, for Jordan had achieved something rather remarkable. It had maintained an island of stability amidst its warring neighbours, and had managed to retain if not always positive, then at least functional relations with every country in the region. 

When a larger power (especially the US) needed a reliable partner, it was Jordan they called, and it was a service that they were happy to pay for with aid contributions.

Likewise, Jordan’s Middle Eastern neighbours, particularly the wealthy members of the Gulf Cooperation Council (GCC) were grateful for Jordanian stability, and were prepared to help ease the Hashemite Kingdom’s economic burdens with large aid contributions of their own.

Yet since the stormy tenure of President Donald Trump, Jordan has seen the ground shift beneath its feet. Trump’s unapologetic aggression towards Iran during the campaign inspired Iran’s two most bitter rivals to seize their moment.

For Israel, Trump’s administration was a chance not only to push a hawkish policy toward Iran. It was also a bastion of unprecedented support in the Israeli-Palestinian conflict, of which Trump’s move of the U.S. Embassy to Jerusalem was living proof.

(From R) King Abdullah, King Salman and Kuwaiti Emir (Twitter)

Meanwhile for Saudi Arabia, now steered by the ambitious Crown Prince Mohammed Bin Salman, countering Iran is an end that justified any means. This includes a sharp reduction in the Kingdom’s historical support for Palestine. Though there is no official change in Saudi policy towards Israel, word and deed has repeatedly suggested that the two countries are shifting closer together.

This is especially evident in its tacit support for an eventual American-led peace process. And when the GCC failed to renew a five-year aid package to Jordan in 2018, which had been worth $3.6 billion, it was widely seen as a punishment for Amman’s protest of the recognition of Jerusalem as Israel’s capital.

Saudi Crown Prince, modern suit, different policies (Twitter)

Dollar Diplomacy

This is not out of step with Saudi Arabia’s past history or regional ambitions. Professor Mehran Kamrava, Director of the Center for International and Regional Studies at Georgetown University’s School of Foreign Service in Qatar, told Al Bawaba:

“Over the course of the last couple of years, we have witnessed repeated instances of Saudi Arabia resorting to what may be called dollar diplomacy to further its regional leadership ambitions, first in relation to Iran and then Qatar. Now we are seeing another example in relation to Jordan.

Riyadh sees Amman's position toward and role in the Palestinian issue as an irritant and an obstacle. Both Israel and Saudi Arabia have decided that their interests can be best served through an unspoken alliance that allows for no opposition to their mutually beneficial goals. If Jordan stands in the way of such goals, then the Saudis, aided by the Israelis and the Americans, will do what it takes to relegate the Hashemite Kingdom to an irrelevant, dependent actor.”

Whilst Jordan is certainly in need, gestures of friendship from Saudi Arabia and its allies at this time were bound to raise eyebrows. 

On the 11th of June, shortly after the protests in Jordan triggered Prime Minister Al-Mulki’s resignation, Saudi Arabia, Kuwait and the UAE jointly pledged a fresh $2.5 billion in aid. The details of the package were discussed at a summit in Mecca between the three countries, and with His Majesty King Abdullah of Jordan present.

But there remain a lot of unanswered questions around this aid package. So far, it has been reported that it will include a one-off payment that will go directly into Jordan’s central bank, of between $500 million and $1 billion. How the remaining money will be distributed, and when, remains to be seen. But this lack of clarity should worry Amman, for it is in ambiguity that strings can be attached.

Dr Courtney Freer, an expert in Gulf political economy at the London School of Economics, told Al Bawaba:

“I wonder to what extent these aid packages include concrete aid or commitments to providing that aid. The description is that the aid package includes a central bank deposit, direct budget support, World Bank loan guarantees, and projects financing, yet does not specify the amounts allocated to each. If most of the aid is actually promised, it would be easier for conditionality to be applied, particularly when it comes to Saudi involvement in a US-directed Israeli-Palestinian peace plan.”

And it is not only in Israel-Palestine where we can expect to see Jordan’s hand being swayed by Saudi influence. On June 16th, five days after the aid package was confirmed, Jordan recalled its Ambassador to Iran, and made clear that it will not be naming a new one. This was first reported by Saudi-owned news outlet Al Arabiya, which quoted a “senior Jordanian source”.

The source said: “We reject (Iran's policies) that interfere in the internal affairs of brotherly Arab countries”, and that Iranian actions were leading to “instability” in the Middle East. Al Arabiya also quoted the Jordanian Foreign Minister Ayman Safadi saying that “Jordan’s position is consistent with the rejection of Iranian interference in the affairs of the countries in the region”. He added that Saudi security was critical to Jordan.

Given the timing of the announcement, and the way that the story broke, it is hard not to see Saudi influence at work. Jordan had previously been doing all it could to stay out of the Saudi-Iranian struggle, and it had no desire to upset Iran if it could help it. And after the Saudis tried to push Jordan into accepting the Jerusalem decision, Jordan retaliated through rebellious displays of friendliness with Saudi rivals.

He jointly condemned the Jerusalem move with Turkey’s Erdogan, and made waves by shaking hands with Iranian President Hassan Rouhani at a special summit of the Organization for Islamic Cooperation. Thus this rapid turnaround towards Iran is a clear acquiescence to Saudi wishes, and it suggests that we may see much more “dollar diplomacy” at work in Jordan.

Iranian President Rohani meets King Abdullah at OIC Summit in Istanbul, 20 May 2018 (Press TV)

Some nuance must be injected into discussion of the donors’ motives. Analysts have wondered about the fact that this GCC aid package represents a significantly lower amount than the previous one. From 2012 to 2017, the GCC gave Jordan $3.6 billion in aid. By contrast, this five-year package is $2.5 billion, which will amount to little more than $150 million to $300 million per year, once the $500 million to $1 billion initial payment is complete. Some have interpreted the aid reduction as a form of punishment for Amman’s diversion from the Saudi line. However, there may be simpler reasons.

Oil - a simpler reason

Dr Bessma Momani, an expert in Gulf economic policy at the University of Waterloo told Al Bawaba:

“This commitment is far less than previous ones because the fiscal position of the Gulf has certainly worsened. Since 2008, oil prices have dropped and never rebounded to pre-2008 levels. This means GCC reserves are depleting and there's less fiscal space for the kind of spending they had managed in the past. Moreover, the GCC have legitimate concerns that the funds be put to good use and promote the kinds of structural reforms needed and clamping down on corruption.”

There is also a straightforward desire in the GCC to see Jordan stabilized. Given its long shared border with Saudi Arabia, Riyadh is determined not to allow economic upset in Jordan to become a Saudi security issue. But whilst it has the advantage, the Saudi-aligned powers in the GCC will use it for all they can get.

Bruce Reidel, a Senior Fellow in Middle East Policy at the Brookings Institution, told Al Bawaba:

“For the Saudis, the new Mecca aid package is both a means to stabilize Jordan and to leverage it. Jordanians expect a Saudi price, and King Abdullah needs to be careful about what he concedes. Meanwhile, the Saudis need to avoid overreaching.”

Jordan must walk an ever-tighter tightrope to balance its interests. Given its own vast Palestinian population, and the Hashemite royal family’s guardianship role of the Holy Sites in Jerusalem, Amman would face untenable domestic backlash if it is pushed into abandoning the Palestinian cause.

On the other hand, given the economic dire straits it finds itself in, it may not be able to afford to say no.

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