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Scottish independence question has echoes of Ireland and the UAE

In Edinburgh, St. Patrick’s Day — the Irish national holiday celebrated around the world by the country’s huge diaspora — offered an opportunity to assess how a possible independent Scotland might work.

If Ireland’s example is anything to go by, the Scots would face a tough time, but they have advantages Ireland did not have when it left the union nearly 100 years ago.

They might just be persuaded that a shot at independence is worth it this time around, if they are given the chance in the proposed second referendum on independence.

Significance in the Arab world

From the perspective of the Arabian Gulf, this might all seem like a parochial row on the fringes of Europe. But a potential break-up of the UK tells the Gulf a lot about the nature of colonialist economics, to which some Gulf countries were subjected, as well as the vital role energy plays in the development of a national economy. The hundreds of thousands of expats from the UK and Ireland living in the Gulf are also watching developments closely.

The Scottish dilemma — to vote “yes” or “no” in a second referendum — will have crucial bearing on that other stressed union: The European project for economic and political integration. The future of the EU is of huge significance for the trading economies of the Arab world.

Politics and economics are inextricably linked here. Ireland’s exit from the UK came in the hardest possible way — through military action and economic hostility — and the country went through several decades of economic recession before the “Celtic tiger” began to roar in the 1990s, largely because of membership of the EU.

The Scottish situation has not yet reached the stage where physical force or economic conflict is near, but the tone of the debate is certainly becoming harsher in both London and Edinburgh.

Personal tensions

Many Scots are exasperated that their democratic demand for a vote on independence is being stymied by a London government pushing through its own plan for independence from Brussels.

Personal tensions are growing between Nicola Sturgeon — leader of a Scottish administration that carries an overwhelming popular mandate to pursue its goal of independence — and Theresa May, the unelected prime minister of the UK, thanks to her support in the nationalistic English heartlands.

A potential break-up of the UK tells the Gulf a lot about the nature of colonialist economics, to which some regional countries were subjected.

Frank Kane

There are lots of big “ifs” here, but in the event a second referendum was allowed, would Sturgeon be more successful than her predecessor in persuading the Scots that they should take the economic gamble of leaving the UK?

In 2014, Scots decided to vote with their wallets by a significant percentage. Most of them — 55 to 45 percent — were not prepared to take the risk of losing the English economic connection.

Oil economy

Three years on, the job of persuasion has not become any easier. The economic calculations back then were based on oil at more than $100 a barrel; now it is half that, with all the knock-on effects on public finances.

According to some experts, Scotland this year will run a budget deficit of 9 percent, three times that of the rest of the UK. It can survive in current circumstances with that level of public debt because London hands over a block grant to cover items like defense and social services.

If Edinburgh was in control of its own financial destiny, it would have to take over responsibility of covering that spending gap, with the possibility that current generous levels of social and public spending would have to be cut.

If it had its own currency it might give it some flexibility on how to cope with energy revenue fluctuations and the public deficit, via interest rate policy. But the currency issue in an independent Scotland is very far from being decided. Euro, pound, or a new Scottish currency — all are fraught with difficulties. So the financial prospects of an independent Scotland are problematic.

On the other hand, the country has some enviable economic advantages. It has traditional strength in the financial services industry and could, in the right circumstances, be a good European base for multi-national banks seeking to retain a presence in the EU.

It has agriculture, food and drink, leisure and tourism. It is seeking to be a global hub in technology and renewable energy. It could point to Norway, with a similar sized population and less diversified economy, as a model.

So, roughly speaking, an independent Scotland would find itself in a similar position as Ireland in 1921, but with oil; or the UAE in 1971, but with agriculture and a diversified economic infrastructure.

The economic prospects of an independent Scotland would be uncertain. But we have seen recently, not least in Brexit Britain, that economic wellbeing is not the only factor in citizens’ minds when they vote, especially when matters of sovereignty are involved.

• Frank Kane is an award-winning business journalist based in Dubai. He can be reached on Twitter @frankkanedubai