After 49 years under Sultan Qaboos bin Said, Oman has a new ruler. The Arab world’s longest-serving leader died on January 10, ending nearly five decades of transformational rule during which he remade his war-torn nation into an oasis of stability and gained a reputation as a trusted mediator between rival powers. Qaboos had no children and therefore no heir apparent. But shortly after his death, Oman’s Royal Family and Defense Councils expedited the country’s formal succession process, inviting state television to broadcast the opening of a sealed envelope Qaboos had left behind naming his preferred successor: former Minister of Heritage and Culture Haitham bin Tariq al-Said.
Long floated as a potential successor, Haitham is a cousin of Qaboos. He is described by those who have met him as quiet, steady, and a good listener. The 65-year-old University of Oxford graduate spent more than a decade in the Foreign Ministry and worked on (largely unsuccessful) attempts to diversify Oman’s oil-dependent economy before his appointment as heritage and culture minister in 2002. In his first public remarks as sultan, Haitham pledged to “follow the same line as the late sultan, and the principles that he asserted for the foreign policy of our country, of peaceful coexistence among nations and people, and good neighborly behavior of non-interference in the affairs of others.”
That policy of neighborly non-interference allowed Qaboos to play a vital role mediating between the United States, Iran, Saudi Arabia, and other Middle Eastern countries, backchanneling between governments that do not maintain formal diplomatic relations, and even helping to lay the groundwork for the 2015 nuclear accord between Iran, the United States, and five world powers. But whether his successor can continue to serve as a regional pressure valve will partly depend on his ability to relieve pressures that have gradually mounted at home. At a time of soaring tensions between the United States and Iran, the new sultan faces dwindling oil reserves, a bleak fiscal outlook—and a short and unappealing list of places he can turn to for help.
BIG SHOES TO FILL
Qaboos won praise for modernizing his small coastal country and presiding over nearly five decades of peace and economic growth. When he overthrew his father in a bloodless, British-backed coup in 1970, Oman had just six miles of paved road and three schools. Today, Oman boasts some 18,000 miles of paved road and more than 1,500 schools. During the first decade of his reign, Qaboos enlisted support from the Iranian, Jordanian, and British governments to defeat an insurgency in the southern Dhofar region and deftly united the country by inviting senior rebels to join his government. But by anticipating and responding to public pressure, Qaboos helped Oman avoid the fate of some of its neighbors during the Arab Spring; by 2013, his government had largely quieted protests by expanding certain powers of the bicameral legislature, strengthening the office of the public prosecutor, and implementing a variety of reforms to address rising unemployment.
Under Qaboos, Oman also became a force for stability in a turbulent region. The country was one of just three Arab nations to maintain ties with Egypt after its government signed a peace agreement with Israel in 1979. And after the Iranian Revolution that year, Oman retained relations with the new regime in Tehran. Two years later, it joined Saudi Arabia and four other nations in the Gulf Cooperation Council (GCC). Muscat stayed neutral during the bloody Iran-Iraq War in the 1980s and maintained diplomatic ties with both Iraq and Kuwait even as it joined the multinational effort to liberate Kuwait from Saddam Hussein’s forces in 1990.
More recently, Oman’s government brokered the release in 2010 and 2011 of three American hikers detained in Iran. The sultanate subsequently hosted backchannel talks between the United States and Iran in the lead-up to the 2015 nuclear agreement, and its banks facilitated some of the financial relief included in that deal. The sultanate also helped secure the release of American and European hostages from Yemen in 2015, 2016, and 2018.
Over the last 14 months, Muscat has hosted individual visits by rival leaders who seldom see eye to eye: Israeli Prime Minister Benjamin Netanyahu and Palestinian Authority President Mahmoud Abbas; Saudi Vice Defense Minister Prince Khalid bin Salman and Iranian Foreign Minister Javad Zarif. At the same time, Oman has reportedly hosted and mediated talks between Saudi Arabia and the Houthi rebels aimed at ending Yemen’s devastating five-year war.
Haitham has already publicly committed to maintaining Oman’s role as an independent mediator, and most observers expect him to continue his predecessor’s tradition of quiet diplomacy, serving as a bridge between the United States, Iran, Saudi Arabia, and the Houthis. But autonomy in foreign policy has been predicated on Oman’s economic independence, and low oil prices and dwindling reserves have thrown that into doubt.
BOOM OR BUST
Ever since 2016, in the wake of a sharp decline in oil prices, the Omani government has run budget deficits of around $10 billion per year. These deficits pushed the country’s debt-to-GDP ratio from 5 percent in 2014 to around 50 percent in 2018. In March 2019, Moody’s joined most of the other major ratings agencies in downgrading Oman’s bonds to junk status. But repeated attempts to diversify Oman’s economy away from oil have been mostly unsuccessful. In 1995, Qaboos announced Vision 2020, an ambitious attempt to cut Oman’s oil dependence and boost innovation. But 2020 has now arrived, and the oil industry still accounts for around 70 percent of government revenues and almost half of GDP. Vision 2020 has since been renamed Vision 2040.
Perhaps the country’s most pressing economic concern is unemployment, especially among young Omanis: the unemployment rate reached 17 percent in 2017, but it is higher among young people, who make up half of the population. In 2011, during the Arab Spring, Oman witnessed its first serious protests in decades when thousands of demonstrators took to the streets to protest corruption and, above all, the lack of jobs. In response, Qaboos reshuffled his cabinet and pledged to create 50,000 new government jobs. Many of these public sector jobs were in the security sector, especially the Royal Oman Police; in many Omani towns, the grandest buildings are sprawling new police stations.
Although Oman is generally known for its tolerance of immigrants and its diversity—a legacy of Oman’s past as a seafaring empire—resentment has flared recently at expats’ dominance of the workforce. Expats make up more than 40 percent of the population and in some industries outnumber natives eight to one. In response, the government has undertaken “Omanization,” an attempt to force companies to hire more Omanis instead of foreigners. So far, the effort has had limited success. Companies complain about profitability, arguing that making space for Omani nationals requires creating unproductive and unnecessary roles; when expatriates leave the country, some companies eliminate their jobs instead of hiring Omanis to fill them.
NO GOOD OPTIONS
As Oman’s relatively small oil reserves decline—the country has just over five billion barrels left, enough for another 15 years or so—and investors begin to question whether the government will be able to repay its debts, the country will face some difficult choices. One option would be for Oman to follow Bahrain’s lead and accept a bailout from some of its wealthier GCC neighbors. But any such rescue package from the GCC would probably come at the cost of Oman’s independent foreign policy.
Another option would entail turning eastward to China. China is by far the largest purchaser of Omani oil, and it recently invested $10.7 billion in Duqm, a new port positioned halfway between the Strait of Hormuz and Bab el Mandeb, the two strategic chokepoints that flank the Arabian Peninsula. For now, China’s influence in Oman has posed no threat to Oman’s sovereignty. But just as a bailout from the GCC would likely restrict Oman’s independent foreign policy, so too would excessive reliance on Beijing.
The International Monetary Fund could be another source of external funding, but no Omani government will welcome the austerity measures likely to accompany an IMF bailout. Far better for Oman to make the necessary economic reforms in advance and on its own terms. Yet even that approach will not be risk-free. Oman has enjoyed remarkable political stability, but it’s unclear how Omanis will respond if the government raises taxes or cuts its generous fuel and electricity subsidies, especially with a new and relatively unknown sultan at the helm.
With sufficient political will, none of these economic challenges are insurmountable. And Oman would not be the only country to benefit if its finances—and with them, its independent foreign policy—are put on a sounder footing. Roughly 90 percent of Omanis have never lived under another leader, but the fact that Haitham was hand selected by the publicly revered Qaboos will endow him with a degree of domestic legitimacy. And the modest spike in oil prices following the U.S. killing of Iranian commander Qasem Suleimani will provide temporary fiscal relief. But as he confronts rising tensions in the region and an unfavorable economic forecast at home, the new sultan will have to work to maintain the domestic credibility and regional stature that his predecessor enjoyed.
This article was originally published on ForeignAffairs.com.
