Ref: AD-2883
Summary: Oman utilises its decades-long policy of neutrality and discreet diplomacy to mediate major regional crises, including the Iran-US nuclear talks and the Yemen war, enhancing its international standing. Despite this crucial geopolitical role, the country faces internal financial constraints and external pressures from its powerful neighbours, the UAE and Saudi Arabia, alongside ongoing regional instability.
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I regularly find Helen Lackner’s analyses of the situation in Yemen valuable, but her piece today on Oman perhaps needs a challenge and a differing viewpoint.
While Sultan Haitham when he came to power in 2020 promised continuity with the policies of his successor, the new Sultan has quietly made significant changes to the country’s direction of travel. Given his struggle against cancer, Sultan Qaboos’ focus on a number of problems in his latter years could not be as acute as it needed to be, leaving his successor with a series of issues which needed to be confronted.
First and foremost, in 2020 the country faced imminent financial crisis. The government budget was deeply in deficit, and with oil and gas being finite in Oman, there were doubts that Oman would be able to raise debt on international markets to keep covering the budget deficit. Ratings agencies deemed Oman sovereign bonds to be of junk status. Haitham introduced radical reforms to resolve this situation. He improved the management of existing debt, to reduce interest payments. There were wholesale changes in the management of sovereign wealth funds, with Omanis with proven business acumen brought home from abroad to take charge. He curbed government expenditure by re-imposing financial discipline on ministries which had glibly over-spent, and began the process of increasing non-oil and gas revenues, to reduce dependency on what was then (but no longer) declining revenues from oil and gas. Sultan Haitham is not by nature a showman, but he is quietly and persistently effective in holding stakeholders to account. The turnaround has been remarkable. Whereas government debt was running out of control in 2020, the budget has returned a surplus each year since 2022, and the percentage of debt to GDP is now what it should be for investment purposes. Sovereign ratings are now investment status.
Turning the finances around was an immediate task. But prior to his accession, Haitham had headed up the team drafting the Oman Vision 2040 strategic plan, whose principal aim was to diversify the economy to cope with the expected decline in oil and gas reserves. Now on the throne, that plan is being implemented. The regulatory environment has been improved to successfully attract much greater foreign direct investment, SMEs have been encouraged, the monopolistic instincts of the merchant families have been curtailed, and there has been steady improvement to the non-oil and gas element of economic activity. Oman has also successfully launched a hugely ambitious green hydrogen drive, based on wind and solar power, a scheme in which sceptical global majors are the majority and lead investors.
In foreign affairs, the recent bilaterals with Turkey are the latest in a series of very deliberate initiatives to improve external relations, launched almost immediately in 2020. Significant improvements in relations with neighbours have resulted in projects such as the UAE to Sohar railway, the opening of a Saudi-Omani border crossing and Saudi investment in Duqm. Foreign land ownership is no longer an issue. Discreet mediation efforts have continued, to both regional but also wider international benefit, but successes are rarely advertised. Oman still has a hugely important stabilisation role to play in Iran, where transition is imminent.
Helen references repression. One of Haitham’s first acts was to invite home political exiles – the late Sultan Jamshid of Zanzibar gave up his residency in Portsmouth, the family of the last Imam of Nizwa were granted citizenship and came home from Saudi Arabia, and numerous political exiles living in the UK were invited home. Oman is still overly sensitive to media criticism, but this is a country which allows its principal cleric the Grand Mufti freedom to criticise the government’s keynote policy of tolerance, and to snipe at other religions – recently prompted by the appearance of the effigy of a cow at a Hindu celebration in Muscat. One might not approve, but the Free Speech Union would! Trade Unions flourish in Oman, and perusal of social media finds plenty of expression of what one might call dissident views.
But putting the governance detail to one side, visitors to Oman today invariably find it to be a happy and prosperous place, where Omanis are proud to be Omanis and are generally content. Perhaps Sultan Haitham’s greatest achievement has been to deliver change but in a way which not disturbed social stability – the fear of which has in the past been the greatest impediment to the change necessary to secure the country’s future.