10 December 2023

Oman: A Key Geopolitical Intermediary – Analysis

Matija Šerić

There is often an opinion among the public that small countries cannot be influential and powerful because they are unimportant. Proponents of such a position claim that small states, due to their small surface area and small population, must submit to the larger powers in the region. Such a point of view is unconvincing assessment that does not take into account either history or the current geopolitical picture.

In any case, such an attitude is wrong. In history, there are many relatively small countries that had a huge influence on world events. It is enough to mention ancient Carthage, Athens, medieval Venice, modern Portugal and the Netherlands – both countries had huge overseas colonial empires. In the 20th century, communist Cuba stood out for its great influence on geopolitical processes. One of the countries that currently has great importance in international relations is Oman. Due to its neutrality but great foreign political influence, some analysts called Oman the “Switzerland of the Middle East”.
Strategically important geographical position

Oman is located on the southwestern tip of the Arabian Peninsula, at the entrance to the Strait of Hormuz across from Iran. Oman also borders the Gulf of Oman, the Arabian Sea and the Indian Ocean. It is the country in the Persian Gulf with the smallest coastline – 1,700 kilometers of coastline and 1,414 kilometers of land borders (676 km with Saudi Arabia, 450 km with the UAE and 288 km with Yemen).

The tiny Omani enclave of Ruus al Jibal on the rocky Musandam Peninsula in the Strait of Hormuz is separated from the rest of Oman by the UAE territory. Madha is the second Omani enclave within the territory of the UAE located halfway between the Musandam Peninsula and the main part of Oman. In the main territory of the country, the Batina plain extends to Cape Ras al-Hadd, the southeastern tip of the Arabian Peninsula, on whose coast are located the important port of Sohar and the capital city of Muscat. The interior of Oman consists of a large desert area, part of the Rub al-Khali desert and the surrounding mountains. Some 1,200 kilometers south of Muscat lies the important region of Dhofar.

Sultanate of Oman

Sultanate of Oman is the only country on the Arabian Peninsula whose system of government is the sultanate – it follows the line of male descendants of Sultan Turki bin Said who was the Sultan of Muscat and Oman from 1871 to 1888. The Sultanate of Oman was founded in 1970 after a coup led by Sultan Qaboos, who overthrew his father Said bin Taimur. The territorial area of the Omani state is 309,500 square km. The country signed an agreement with Saudi Arabia in 1982 that ended territorial disputes, and the border with Yemen was defined in 1992.

The current ruler is Sultan Haitham bin Tariq Al Said, who ascended the throne in January 2020 when his cousin Qaboos died without issue. successor. The Sultanate of Oman is a hereditary monarchy, and the Sultan has the sole power to legislate through royal decrees. According to international non-governmental organizations that research the field of human rights, such as Freedom House, Oman is a non-democratic state where there are no political freedoms. Human rights are threatened since the authorities arrest and intimidate political opponents and journalists, there is censorship of the media and the rights of women and minorities are also poorly respected. Oman has a very high proportion of migrants: 2 million out of a total population of 4.6 million. In order to balance this ratio, efforts were made to make the workforce mostly Omani nationals, but the policy of Omanization was not very successful.
Economy dependent on energy sources

Oman is a high-income country. Estimates of nominal GDP for 2023 amount to USD 108 billion (66th place in the world), and according to estimates, GDP per capita is over USD 21 thousand (55th place in the world). Thanks to the income from energy sources, the Omani authorities have enabled their population to subsidize food and other necessities and high salaries in the public sector. Oman is not a member of the Organization of the Petroleum Exporting Countries (OPEC), but coordinates oil production within the wider OPEC+ framework.

Oman faces the challenges of maintaining a decades-old social contract under which oil brought prosperity to residents in exchange for accepting the sultan’s absolutist and authoritarian rule. Economically, Oman has the same problem as the other states of the Persian Gulf – excessive reliance on hydrocarbons. In 1991, the oil and gas industry accounted for 82% of government revenues. Oman enjoyed a period of economic growth until 2014 thanks to high oil prices. However, between 2015 and 2021, the balance was negative, and Oman faced a large public and external debt.

Last year, oil and gas accounted for 78% of state revenues, which is not a long-term solution. In 15 years, supplies could dry up. Oman’s sovereign wealth fund has total assets of $41.5 billion, which is far less than other Gulf states. In 2021, unemployed youth protested in several Omani cities demanding access to stable jobs. Sultan Haitham enacted austerity measures to curb public spending. Over the past three years, the government has consolidated state-owned enterprises and merged some bodies, while appointing younger technocrats and ministers to lead government agencies. To attract foreign investors, Oman offers lower tax incentives, expanded land use and increased access to capital in sectors such as manufacturing, logistics, tourism, mining and fisheries.
Developed mining sector and Oman Vision 2040

The mining sector has experienced strong growth in recent years. The Omani state produces and exports minerals through state-owned and private companies. Mineral resources are spread throughout the country, although they are concentrated in the Sohar and Dhofar regions and near Duqm. There are large reserves of metals (copper, chromite, chromium, aluminum, gold, ferrochrome, cobalt, iron and zinc) and minerals (clay, limestone, marble, quartz, salt, ceramic clay, dolomite, basalt and phosphate). It is necessary to diversify the economy. More than half of the active population is employed in the public sector, resulting in a large national debt, a reality that will have to change.

With this goal in mind, development plans were drawn up in 1991, and now the current Oman Vision 2040. It emphasizes urban development, with a focus on projects for two cities on the coast: a tourist and residential city in Yiti (Muscat) and a “smart city” Sultan Haitham in Seeb. The goal is to reduce carbon emissions and increase hydrogen production, but also to make the country a global production center and achieve 30 gigawatts of production by 2040. In the midst of the energy transition, Oman has minerals for the production of wind energy and photovoltaic energy (iron, copper, zinc, aluminum) and for construction of electric vehicles, storage devices and electrical networks. Oman also has minerals for the production and export of construction materials needed for new cities.
International maritime and commercial importance

Oman’s geographical position favors its international maritime importance. The Strait of Hormuz in the Persian Gulf is a key thoroughfare for global oil trade. It is estimated that approximately 20% of the world’s oil passes through the Strait of Hormuz, as does 25% of the world’s trade in liquefied natural gas (LNG). The strait connects the Persian Gulf with the Gulf of Oman and the Arabian Sea, thus connecting energy sources from the region with consumers around the world.

The Omani government plans to turn the country into a maritime trade and logistics hub in the Gulf region and, in line with its Vision 2040, has invested heavily in its port network in recent years. There are three important ports: Sohar, Salalah and Duqm. At the entrance to the Strait of Hormuz, the port of Sohar is vital for trade relations. The most important project related to this port took place in September 2022 when the Oman-Emirates Railway Company was created to connect the port of Sohar with the Emirates rail network. Oman does not have a railway network and this connection is an extremely important strategic objective, which allows avoiding the passage of certain types of goods through Hormuz. To the south is the main port of Salalah, ranked by the World Container Port Performance Index (CPPI) as the second most efficient in the world. In the southeast of the country is the port of Duqm, which has become the center of Chinese investments.
Ibadi Islam

In Oman, the influence of the Ibadi branch of Islam, which is separate from Sunnism and Shiism, prevails. Numerically, Sunnis are the strongest (47%), followed by Ibadis (35%) and Shiites (6%). Ibadia still exists in Algeria, Libya, Mozambique and Tanzania. It is one of the oldest factions of Islam, formed less than 50 years after the death of the Prophet Muhammad. It originated from the Kharijite faction of Islam. In Oman, the Ibadis settled inland due to the isolation of the mountainous areas.

By the 11th century, Oman had gained independence from the Abbasid Caliphate. From this isolated area, Ibadism was gradually introduced to the coast between 1650 and 1725 after the withdrawal of the Portuguese. Imams from the Yaruba family moved to Muscat, where they re-established the Ibadi Imamate on the banks of the Batina. The establishment of the Imamate in Muscat facilitated the adoption of Ibadism when the present-day Al Said dynasty settled in Muscat in 1784. Due to Oman’s maritime connections with the coast of Africa by the end of the 19th century, Ibadian Islam spread and still survives in Mozambique and the island of Zanzibar.

Ibadism gives the state internal cohesion and serves as a counterbalance to the power of the two major Islamic denominations. The Ibadis place emphasis on strengthening national identity and curbing other Islamic movements. Moreover, the Ibadi school is a source of prestige that attracts the attention of religious scholars from the rest of the world.
Military capabilities

Oman has limited military capabilities that are often insufficient to defend its territory including its maritime interests. Oman is therefore one of the world’s largest importers of weapons and military equipment. The ground forces are substantial (25,000 troops) and relatively well equipped with armored vehicles and modern weapons from the United Kingdom. Air defense systems are primitive.

Oman’s naval forces are undermanned. The three frigates purchased from Great Britain are relatively modern and have relevant capabilities, while the American corvettes and amphibious ships are quite outdated (over 25 years old). Oman cooperates most militarily with Great Britain and then with the USA. In recent years, Oman has been trying to modernize its military arsenal primarily by purchasing from the US. At the same time, ties were strengthened with China and India, with whom joint military exercises were conducted.
Strategic mediation in international conflicts

Omani culture, described by Fredrik Barth as an “ideology of politeness” and by Jeremy Jones as “quiet diplomacy”, has attracted a lot of attention. Oman is at the center of Middle East geopolitics. Although the principle of neutrality is not formally incorporated into Oman’s foreign policy, it is widely applied.

Unlike N. Arabia, Qatar and the Emirates who like to take sides, Omanis avoid it. Since Sultan Qaboos came to power in 1970, Oman has never severed diplomatic relations with any country or joined any bloc. Due to the ruling elite’s preference for neutrality in international relations, Muscat has become an important center for mediation in Middle Eastern conflicts. Through a neutral approach, Oman strengthens its international leadership in the field of peace building. Talks on reducing the rivalry between Iran and Saudi Arabia, the nuclear deal with Iran and the war in Yemen are just some of the recent talks that have taken place in this country.

In 2014, Oman joined the US-led coalition against the Islamic State, but has not participated in coalition airstrikes or ground operations. Oman opposed the Saudi move to isolate Qatar in June 2017 over political differences.
Relations with the USA

Since the United States and Oman opened embassies in their respective capitals in the early 1970s, both countries have maintained cordial relations. Oman was the first Gulf state to sign a formal agreement allowing the US military to use Omani military facilities (1980) as part of a strategic partnership.

On March 24, 2019, Oman and the US signed a “Strategic Framework Agreement” allowing US forces to use the ports of Duqm and Salalah, which are large enough to accommodate US aircraft carriers. US Secretary of State Anthony Blinken highlighted the key role Oman plays as an American partner, especially in efforts to end the war in Yemen. In 2021, the United States exported $1.4 billion in goods to Oman and imported $1.86 billion in goods.
Relations with China

In addition to close ties with the Gulf states and the US, Oman also nurtures ties with China. Oman exports 85% of its oil to China. China is Oman’s first export and second largest import partner. The Chinese government financed the industrial zone at the port of Duqm and loaned the Omanis $3.6 billion in 2017 for its development.

China is the fifth largest foreign investor in Oman, and the Chinese have taken a 49% stake in the Omani electricity transmission company. Oman has contributed to Beijing’s efforts to reconcile Riyadh and Tehran.
Relations with Iran

Omani leaders have consistently argued that good relations with Iran are a better solution than potential conflicts. In explaining positive relations with Iran, they often point to the Shah of Iran’s support for Sultan Qaboos, who took over from his father in 1970, and Iran’s troop deployment that helped Oman put down a leftist insurgency in Dhofar province during 1962-1975. 700 Iranian soldiers died in that conflict.

At the same time, Oman, through its partnership with America, supports Washington’s efforts to strategically counter Iran’s influence. President Ebrahim Raisi visited Oman in late May 2022 to discuss regional issues and sign a number of agreements to expand bilateral trade including the development of the Hengham oil field in the Persian Gulf. The volume of trade between Iran and Oman is marginal as Oman seeks to comply with US sanctions. Oman helps in the dialogue between Tehran and Washington.
Yemen war

In an effort to help end Yemen’s bloody war, the Omani government has hosted talks between US diplomats and Houthi representatives. Oman facilitated negotiations aimed at extending a UN-brokered ceasefire between the government of the Republic of Yemen and the Houthis that expired in October 2022 but has since been respected.

In January 2023, UN Special Envoy for Yemen Hans Grundberg visited Muscat, where he met with senior Omani officials. Oman is widely praised for its peace efforts.
A constructive attitude towards the Israeli-Palestinian conflict

Since the 1990s, Oman has sought a way to end the Israeli-Palestinian conflict. During the height of the Israeli-Palestinian peace process in the 1990s, Oman became the first Gulf state to officially host a visit by an Israeli prime minister (Yitzhak Rabin in 1994), and hosted Prime Minister Shimon Peres in April 1996. Since 1997, Oman has been a center of the Middle East Desalination Research Center (MEDRC), which brings together scientists from Israel, the West Bank, Gaza, Jordan and Qatar to discuss desalination and collaborate on water purification in the region.

Some experts assumed that Oman would follow the path of the Emirates and Bahrain in normalizing relations with Israel (Abraham Accords), but Omani officials did not show that they were seriously considering it. After years of trying, in February 2023, Oman opened its airports to Israeli commercial flights. Israeli Foreign Minister Eli Cohen thanked the Omani government, noting that it was “a historic decision that will shorten the journey to Asia, reduce costs for Israelis and help Israeli companies be more competitive.”
Diplomatic attitude towards the war in Ukraine

Neutrality in many geopolitical issues helps Oman maintain good relations with Russia. Oman condemned the Russian invasion of Ukraine, but did not impose sanctions and did not single out the Russians as aggressors. In May 2022, Russian Foreign Minister Sergey Lavrov visited Oman to hold a dialogue with Sultan Haitham bin Tariq. Sultan Haitham and Lavrov discussed the Ukrainian war, during which the Russian foreign minister praised Oman’s ideology of decency, noting “Omani’s wisdom in dealing with various regional and international issues.”

Moscow and Muscat share several key geopolitical interests. Among them is Syria. Oman is the only country among the Gulf Cooperation Council (GCC) states that has not provided support to the Syrian opposition, and Moscow values Oman’s diplomatic relations with Bashar al-Assad’s regime. The import of Russian grain is important to Omanis. Omani diplomats called for a diplomatic solution to the Ukrainian war.

An overall observation of Oman’s foreign policy reveals the country’s extremely significant role in resolving international conflicts. By establishing neutrality and avoiding joining any bloc, Oman has become a key hub for talks and negotiations in the Middle East region. The ability to maintain cordial relations with various players on the international scene, including the US, China, Iran and Russia, is a testament to this country’s diplomatic skill and strategy. Ultimately, Oman positions itself as a key player in international relations, combining pragmatism, wisdom and constructiveness to contribute to peace and stability globally. A good indication of how influential small countries can be.

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