King Abdullah of Jordan 311.
(photo credit: REUTERS)
The approximately three billion euros ($4 billion) in aid to Jordan promised by Catherine Ashton, the European Union foreign affairs chief, over the next three years couldn’t come at a better time for the kingdom, whose political turbulence is being compounded by a sagging economy.
But it is also an investment for the West in an ally whose role is growing increasingly important as the Arab Spring and other regional developments loosen ties with other partners like Egypt and Iraq. Jordan and its economy are tiny, but it stands at strategic crossroads between Israel, Syria, Iraq and Saudi Arabia and its ruler, King Abdallah II, is reliably pro-Western.
“Given that there is so much volatility in the region, you don’t want to add another element to it. Extending the aid package is certainly transmitting a signal of stability there and not allowing things to deteriorate,” Christian Koch, director of the international studies research program at the Gulf Research Center, told The Media Line.
Abdallah’s reign doesn’t face any immediate threat, but protests inspired by the Arab Spring calling for an end to corruption and greater democracy have erupted over the past year and demands have grown more militant. The king’s ability to cool tensions with more government handouts is severely constrained by a sagging economy.
Unrest in Syria has cut the country off from a major trade partner while supplies of natural gas from Egypt have been cut by repeated attacks on the pipeline, raising food and fuel prices. Last year, tourism receipts dropped 16 percent, while remittances from Jordanians working abroad fell 3% and foreign direct investment declined by almost a third, according to the World Bank.
Jordanian gross domestic product will grow just 1.7% this year, less than a third of its average over the past decade. It faces a gaping current account and budget deficits that will have to be financed externally.
Ashton unveiled the wide-ranging aid package Wednesday at a news conference on the shores of the Dead Sea with Jordanian Prime Minister Awn Khasawneh. The biggest component is 1.2 billion euros of assistance from EU member states, but it also includes nearly 300 million euros of direct EU aid, up 70 million euros previous.
She said the EU and Jordan agreed to start negotiations on a “deep and comprehensive“ free trade agreement in the coming weeks.
The largesse doesn’t end there. The EU-controlled European Investment Bank plans to more than double its lending to Jordan to as much as 400 million euros in the next two years. Another EU institution, the European Bank for Reconstruction and Development (EBRD), will begin working in Jordan with the aim of scaling up to activities of as much as 300 million euros annually.
Meanwhile, the World Bank is offering financial support of around 460 million euros for the government and another 250 million euros for local businesses, over the next three years.
The US has also pledged to step up assistance. It provided some $840 million to the kingdom last year and when Abdallah visited Washington last month US President Barack Obama promised hundreds of millions of dollars would be allocated to help Jordan.
Saudi Arabia, a fellow kingdom that has emerged as a leading force in preserving the Middle East’s status quo, gave Jordan some $1.4 billion in assistance last year and invited it to join the Gulf Cooperation Council, which could ease the way to more aid and economic ties.
Western leaders are meanwhile exploring debt-relief for Jordan and other friendly countries feeling the pinch of the Arab Spring on their economies. EU and governmental sources told Agence France-Presse on Thursday that European governments are weighing a radical plan for Middle Eastern countries, including Algeria, Egypt, Gaza and the West Bank, Israel, Jordan, Lebanon, Morocco, Syria and Tunisia.
Jordan has an external debt of $18 billion, equal to more than 65% of gross domestic product. The World Bank estimate repayments could eat up 4% of GDP this year.
But, in contrast to the traditional way of shoring up strategically important regimes with military aid or aid paid to the government, the Western powers are emphasizing the role of their cash in promoting economic and political reform. Stung by the failure of aid to keep friendly leaders like Egypt’s Hosni Mubarak in power and the difficulty of keeping revolutions on the road to stability and prosperity, Western leaders are now looking for ways to finesse gradual change under veteran leaders.
“There’s this realization that the political transition process we are witnessing will not be easy. We will not simply move from the overthrow of a government to a stable political situation; there is a long-term process involved that will be quite messy,” said Koch.
At the same time, the US and Europe have to be careful that pushing too hard for reform doesn’t backfire. In Egypt, US and European human rights activists are facing criminal charges for interfering in domestic politics while polls show the majority of Egyptians oppose American aid.
Ashton’s remarks on Wednesday reflected the delicate balance the US and Europe are trying to achieve.
“We are fully committed to accompanying this country on its journey towards an inclusive and democratic society of social justice and economic prosperity,” she said. “But I say to you: this is your country, these are your reforms. The job of the European Union… is to help and support.”