The paper will show that solutions can be found in ‘problemsheds’ when they cannot be found in ‘watersheds’. This concept is relevant with respect to short-term drought as well as to long-term water stress. The volumes of water transferred across the world via trade, embedded in water intensive commodities such as grain, are massive in terms of the occasional and accumulating water deficits experienced in water stressed regions.

Miraculously, and above all silently, Middle East governments have been able to avoid the apparently inevitable consequences of their inherited water deficits, despite the fact that this is a life-and-death economic issue for them and their peoples. How these countries can continue to avoid such conflicts while fulfilling their needs is an important issue for the region.

Analysis based on watersheds has led to the misleading conclusion that water deficits will be the cause of major armed conflict in the Middle East. Yet water has not been even a minor element in a regional conflict scenario for over a quarter of a century.

The purpose of this study is to show how water resource allocation and management
policies evolve in contentious arenas. It will situate the integrated water management
approach in a water policy narrative. The agents who operate in these policy arenas
reflect special interests and concerns.

The purpose of this contribution is first, to respond to the request for clarification of the term virtual water by Stephen Merrett. Second, it provides a narrative for those who might not be aware of the origin and development of the concept. Third, the discussion will draw attention to the problems encountered in gaining entry for the idea into those water policy discourses where the it was most relevant.

The paper addressees the issue – why has there been no war over water when many economies in arid regions have only half the water they need and many leading figures, King Hussein, Boutros Boutros Gali, have warned that there would be a water war? It will show that the Middle East region has been able to access water in the global system via trade. Economic systems, not the evidently inadequate hydrological systems, have solved the water supply problem for the region. Water in the global trading system is know a ‘virtual water’.