The resumption of Kurdish oil exports hinges on achieving consensus between Baghdad and Ankara, but a lasting solution can only be cemented through a trilateral agreement that includes Erbil.
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April 20 marked the end of the first oil workers’ strike in Kuwait since 1996. Some 7,000 workers (out of a workforce of around 13,000) walked off their jobs in Ahmadi, home of Kuwait Oil Company (KOC) – a subsidiary of the Kuwait Petroleum Corporation – to contest proposed amendments to public sector wages and partial privatization of the oil sector. The new payroll scheme for Kuwait’s public employees would affect the oil sector’s 20,000 workers and would reduce incentives, benefits, and wages. The union is also opposed to plans for privatizing portions of the oil sector. After meeting with the Oil Ministry last week, boycotting negotiations with the Social Affairs and Labor Ministry on Thursday, and rejecting Oil Minister Anas al-Saleh’s request to cancel the strike in exchange for guaranteed maintenance of current salaries or benefits on Saturday, the union took large-scale action. The three-day strike is part of a wider debate in Kuwait about the economic effects of privatization and public sector reforms emerging in a period of low oil prices.
Demands of the Strike
The union clearly listed eight demands including the reinstatement of any reduced workers rights; a guaranteed salary increase every three years, as well as a stipend for overseas medical treatments; application of the 1984 agreement with the union and of the union’s decision about company allocation of tickets for official and educational trips abroad; maintenance of workers’ per diem on trips overseas, as well as financial support for their club memberships; preservation of workers’ rights generally; consideration of the special nature of the oil business as well as contracts between workers and the KOC; the retention of bonuses for workers; and the implementation of court rulings in favor of employees.
Though it seems a lengthy list, Farhan al-Ajmi, who heads KIPCO (Kuwait Projects Company) employees’ syndicate, insisted that the union’s requests involve retaining the status quo: “Our strike is to protect our rights and not to get more.” Salah al-Marzouq, who heads the KOC employees’ syndicate, went on to proclaim the union’s support for the government’s rationalization plans yet stressed its unwillingness to accept the government reducing benefits accorded to it by Private Labor Law 6/2010 and Oil Sector Law 28/69.
The Government’s Response
The government dubbed the strike an “illegitimate act and a violation of the law” because of “its serious impact on the public interest.” It therefore threatened legal action against those involved in disrupting oil production, though at the culmination of the strike, it seemed unlikely that the government would follow through on this threat. While strikes are legally permitted in Kuwait, Law 11 of 1996 limits the right to strike if it affects public interest. Kuwait’s Cabinet determined that the oil workers’ strike does so, and therefore deemed it illegal. It is not the act of striking, however, that is problematic, but rather that it is taking place within the oil sector.
In a difficult economic climate brought about by low oil prices, the Cabinet has highlighted the need for all Kuwaiti citizens to make sacrifices and prioritize the state’s interests above their own. It added that Article 103 of Law 6 of 2010, which applies to the oil sector, requires all employers and unions to respect the state’s laws and settle feuds through negotiations, rather than collective action, further reinforcing the government response.
The chairman of the Parliament’s Priorities Committee, Yousef al-Zalzalah, also confirmed workers’ right to strike, provided that such demonstrations are held within the legal limits. He explained that “Oil is Kuwait’s lifeblood and only source of national income, and its production cannot be halted, delayed or used as a threat.” As a result, he said that striking in the oil sector is punishable by law.
In the past, the government has tended to acquiesce to strikers’ demands. In 2014, staff at the Public Institution for Social Security staged one of the longest ongoing strikes in Kuwaiti history, lasting over a month, protesting the government’s failure to grant staff the agreed upon salaries and benefits. The large-scale work stoppage led to the head of the Union of Petrol and Petrochemical Workers to call for similar action among oil workers, though it never materialized, with the government threatening to replace workers who chose to participate. In the end, salaries were increased in a compromise agreement, and in August 2015, the Kuwaiti government also approved an additional $1 billion in public sector wage increases. This pecuniary response is less viable today, as Kuwait, along with its neighbors throughout the Gulf Cooperation Council, strives to cut costs in the face of low oil prices. Interestingly, Finance Minister Anas al-Saleh, who currently serves as deputy prime minister and acting oil minister, was blamed by many strikers in 2014 for refusing to meet with them. It seems as though his intransigence has softened in the face of the oil workers’ strike, and he has committed to meet with the striking employees now that the industrial action has ended.
The response within Parliament, which is largely composed of ruling family loyalists, has thus far been muted. Indeed, opposition ranging from Islamist to left-leaning secular blocs boycotted the July 2013 polls to protest changes made to the electoral law in 2012. As a result, the current Parliament is dominated by a blend of liberal and tribal blocs, with independents, including “service” or pro-government MPs, holding 30 of the 50 seats.
Nonetheless, 10 MPs filed a motion asking for a special session on April 21 to discuss consequences of the strike, which they feel could cause major harm to the country. MP Abdullah al-Turaiji, also called for the appointment of a full-time oil minister from within the oil sector as well as the dismissal of Kuwait Petroleum Corporation’s board of directors for neglecting the workers’ legitimate demands.
What Now for Global Oil Markets?
The strike, which began just a day after a dozen of the world’s leading oil producers gathered in Doha and failed to draft an agreement on freezing output, did in fact make progress toward rebalancing the market by driving down supply and thus stabilizing prices. The price of Brent crude futures increased on April 19 by 40 cents above the previous day’s close, after it had fallen as much as $3 or 7 percent following the unsuccessful Doha meeting. Because the disruption did not prove to be long lasting, however, oversupply and potential oil price collapse will have to be addressed in a more sustainable way. Attention will likely turn to the June OPEC meeting for a solution, which may involve a higher surplus to keep up price pressure on competitors like Iran, North America, and Russia.
The Kuwait Petroleum Corporation has also taken proactive steps to diminish effects of the strike, putting in place an emergency plan with three refineries still in operation at 55 percent capacity. Further, retirees from the oil sector and expatriate contractors have been called in to help staff such refineries. The strike caused about a 60 percent reduction in Kuwait’s production, typically around 2.8 million barrels per day, to 1.1 million barrels per day. However, supply rebounded on Tuesday to 1.5 million barrels per day and normal production is expected to resume now that the strike has ended.
Changes in the Social Contract?
That large-scale collective action is being undertaken in Kuwait, one of the Gulf’s wealthiest rentier states, is surprising, but reflects a trend since the Arab Spring toward an increasingly outspoken labor sector, which has staged strikes in 2011, 2012, and 2014. The current period of low oil prices complicates resolution of such work stoppages, which have traditionally been handled through government acquiescence to workers’ financial demands. The strike, though it did not affect global oil markets in the long run, demonstrates something of a shift in the social contract within Kuwait: While the government seeks economic reforms to diversify its economy, citizens unaccustomed to such changes are increasingly willing to voice their opposition. That strikers ultimately chose to resume work on April 20 “out of respect for the country’s emir,” however, demonstrates the degree to which the ruling family still remains the most prominent and well-respected political player in Kuwait. Any changes that take place in the existing social contract thus will likely remain inside the framework of the monarchical Al-Sabah rule.
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