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The Al Arabiya satellite TV channel, based in Media City, Dubai, was established in March 2003 with an investment of $300 million by Middle East News, a Dubai-based production company that also runs the Middle East Broadcasting Center (MBC). From the start, Al Arabiya has billed itself as the less provocative alternative to Al Jazeera.

The company is owned by the brother-in-law of Saudi Arabia's King Fahd, Lebanon's Hariri Group, and other investors from Saudi Arabia, Kuwait, and the Gulf. Unconfirmed reports suggest that the Kuwaiti funding for Al Arabiya has been withdrawn. Before the establishment of the Qatari-based Al Jazeera satellite channel in 1996, Saudi businessmen owned almost all of the major pan-Arab media, ensuring that Saudi rulers were rarely scrutinized by the Arab media. Qatar's prince did not interfere in the station's editorial decisions, thus allowing Al Jazeera reporters to take on the Saudis as well as other governments in the Middle East. Saudi Arabia's response to Al Jazeera came in 2003 with Al Arabiya TV, established just in time for the Iraq war.

The choice of Salah Qallab, a former Jordanian information minister who was also a columnist for a Saudi-funded newspaper in London, as the first director-general of Al Arabiya ensured that the station would not challenge Arab regimes the way Al Jazeera has. Noted Qallab, “We are not going to make problems for Arab countries. We'll stick with the truth, but there's no sensationalism” (Urbina 2003). Most of Al Arabiya's programs are prerecorded, allowing the station to avoid on-air call-ins venting against Arab leaders, Israel, or the United States. Because Al Arabiya competes with Al Jazeera for the same audiences, however, it initially tried to scoop its rival. In August 2003, Al Arabiya broadcast a clip of masked men threatening to kill members of the U.S.-appointed Iraqi governing council, leading a spokesperson for the U.S. State Department to call the station's action “irresponsible in the extreme.” In September 2003, the Governing Council of Iraq restricted the operations of Al Arabiya and Al Jazeera for two weeks after the channels showed more footage of masked men calling for attacks against U.S.-led forces. Al Arabiya broadcast audio tapes by the then-fugitive Saddam Hussein exhorting Iraqis to rise up against the United States on November 16, 2003, leading Iraq's interim government to ban it from reporting from Iraq for two months.

According to Andrew Hammond in 2007, Al Arabiya's agenda took some months to unfold after

the Iraq war when it ran documentaries about mass graves and other human rights abuses in pre-invasion Iraq in what may have been taken by viewers as an effort to create a balanced debate about tyranny, democracy, and nationalism in the Arab world. “To others, the programs appeared aimed at undermining the Iraqi insurgency which had wide support among public opinion throughout the Arab world.” Islamist websites began to refer to Al Arabiya dis-missively as Al ‘Ibriya or “the Hebrew Channel” because it granted considerable space to American officials and their allies in Iraq and elsewhere to explain their policies. Like Al Jazeera, Al Arabiya designed powerful montages of Israeli soldiers putting down the Palestinian Intifada (Uprising), but it also discredited the activities of the Islamist insurgency movement in Saudi Arabia.

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