Bias/ authority disclaimer: I am a Sephardi Jew of an Israeli parent and passionately anti-zionist. Whilst at university this period of Jewish history was my specialty but only at an undergraduate level.

You are correct in suspecting propaganda here. While the quote does seem to be somewhat accurate it is being used anachronistically to obfuscate the nuance of jewish-arab relations, excuse European persecution or at least entrench a myth of freedom from European persecution through Zionism, and invalidate any possibility of coexistence or compromise with Arabs as equals.

From reading the quote in context I can infer a couple of things.

1. Maimon is using 'Arab' very generally here, he is referring to the entire 'Muslim world' which, at the time, could be described as 'Arab' as Arabic was the language of jurisprudence, therefore the legal language used to persecute Jews. This is also as said by /u/LordHussyPants possibly in relation to the Yemeni Jewish audience or the result of translation.

2. He is drawing between his own history and that of the biblical Jews and subsequent Jewish history. This is quite a bitter passage. He makes allusions to the power Jews achieved inside the Muslim world but also how it has been tainted - "If, therefore, we start trouble and claim power from them absurdly and preposterously we certainly give ourselves up to destruction." Maimon is commenting on his position within Muslim society but lamenting that it was always within servitude. Even the success of Jews under Muslim rule is humiliating because it breeds acceptance of their servitude where there is only concession. The acceptance of this situation means movements like the Almohads could decimate Jews quite easily. This is a passage of exile rebutting the optimism that existed among jewish intellectuals in the 'golden age' of Islam.

As for 'Never has there been a nation that hated, humiliated and loathed us as much as this one' he is quite right for his time. This is prior to the Crusades, to Inquisition, to the more centralised European authorities and codified antisemitic law (antisemitic is correct here rather than anti-jewish because it was law that applied to Jews and Muslims alike). Up until then all that existed was the Justinian code who's implications only truly took effect during the High Middle Ages. The idea that the 'Arab' kingdoms were the worst possible place to be and that the newly burgeoning Christian kingdoms where a preferable alternative was in fact quite a popular position. Many Jews migrated to the northern Iberian territories seeking refuge from the Almohads and there was arguably more tolerance for them at this stage as they were bringing with them valuable commodities and ideas from the Arab world. It was only well into the Reconquista when persecution intensified.

Finally you must realise the context of this quote in terms of power dynamics. Maimonides was unquestionably subordinate. The Jews today are, generously speaking, equals to Arabs not subordinate to the Arab world. In the state of Israel Jews are quite clearly of higher status. Therefore using this argument against granting Palestinian's autonomy or bargaining power is at best a false comparison.

Hope this helps.

What's your original source for the quote? I don't know the ins and outs of Arab identity and when the word arab came to describe that people, but I can think of two reasons for it being used: (1) there's a possibility that you've read a bad translation that has used 'Arab' as a simple descriptor rather than the word Maimonides actually used, or (2) they were called Arabs because they spoke Arabic.

The second one makes further sense when your second point is considered: the Almoravids who ruled in Spain were not Arab, but they were Muslims, as was the successor caliphate. Now generally speaking, Spain wasn't a terrible place to live for non-Muslims under the first caliphate. It was quite relaxed in comparison to Eastern countries under Muslim rule. But as you mention, he was forced to flee when the new caliphate appeared and changed the way the dhimmi were viewed in Spain.

The laws that Muslim conquerors implemented in the Christian and Jewish societies that they ruled were designed to safeguard the Muslim control of the region by suppressing local religion. Note that the goal was suppression, not elimination. Christians and Jews were forbidden to practice their faith in public, including the display of symbols(crosses for example). This meant that events such as funeral processions couldn't be carried out. There were also rules against repairing religious buildings, or building new ones. These mightn't seem like severe rules, but to a committed Jew in the twelfth century they would have some effect.

Knowing that, we can examine Maimonides' Letter to Yemen.

Dear brothers, because of our many sins Hashem has cast us among this nation, the Arabs, who are treating us badly. They pass laws designed to cause us distress and make us despised. ... Never has there been a nation that hated, humiliated and loathed us as much as this one.

His claim that they pass laws to distress and make them despised is undoubtedly true, although the reasons for passing the laws are as seen from a Jewish perspective - not a Muslim one.

His address - "Dear brothers" - is an important factor in interpreting this letter too. He is writing to Jews in Yemen, people on the other side of the medieval world. What is his goal? I would hazard an educated guess that it is to garner sympathy, or to encourage some sort of solidarity amongst the Jewish diaspora in the face of a Muslim religion that controlled vast swathes of territory between the two locations(Yemen and Spain). If that was the case, then his claim that this was the worst nation the Jews had lived under could be true. It could equally be true that he was exaggerating to encourage that solidarity I mentioned. The worse the experience, the more it tugs the heartstrings. This is a fact through history, and exaggeration has been used often in letter of these kind. This is partly because they were letters that would be read out loud to groups of people, and the extra flair that comes from dramatic writing appeals to listeners more than something mundane like "We've had an inconvenient time over here because they won't let us repair the synagogue or say our prayer at the door of the temple."

I did see something while reading on this about Maimonides' writings being criticised by people in Spain, but I don't know if those critics were Muslim or Jewish. Will update if I find out more.

tl;dr - the accuracy would depend upon the source material and the translator. But assuming the quote is accurate, there are reasons Maimonides may have used the term 'arab' and used quite inflammatory language in his letter.

The quotation is legitimate, although it's not the standard translation, but it is taken out of context.

It's from his 1170s Epistle to Yemen, a letter of advice and consolation sent to the Yemeni Jewish community upon request--Maimonides had quite the reputation in the medieval Jewish world.

The 12th century gets a lot of press as the age of intellectual renaissance and cultural exchange, but at the same time, we see signs of hardening religious lines. The first anti-Jewish pogroms in Latin Europe occur at the very very end of C11; a Greek Christian mob slaughters the Latin population of Constantinople in 1182; and Muslim rulers from the Almohad dynasty in Iberia to the messy interdynasty situation in Yemen launched "conversion or death" (the phrase used in Arabic sources) campaigns against native Christian and Jewish populations

The Almohads in Iberia were brutal--against Muslims perceived as insufficiently devout as well as resident Jews. (The Almohads were perfectly willing to pay outside Christian and Jewish mercenaries to serve in their army, naturally.) Converts were still forced to wear distinctive, humiliating clothing to mark them as different, and if you didn't convert, well, there were several massacres in both al-Andalus and Almohad-controlled North Africa. Indeed, the Jewish population basically fled north to Christian Iberia or south and east across North Africa.

But that's not what Maimonides is writing about here. He's writing to the Jews in Yemen.

Yemen was kind of a political mess in the third quarter of the 12th century, and it was a mess that was very bad for the Jewish community. Forced conversion campaigns were common--and successful. Apostasy is one of the topics Maimonides deals with in this letter as well as some of his other contemporary writings (and there is a long-running historiographical debate on whether he himself ever converted to Islam for safety for a period of time).

But in this specific moment of this quotation, the topic is different.

Someone had arise in the Yeminite Jewish community claiming to be the messiah--and he was attracting some popular attention from Jews who were desperate and looking for a solution, any solution, to the attack they perceived themselves under. Maimonides anxiously, desperately wants the leaders of the community to SHUT THIS GUY UP. He's trying to impress upon them the urgency of dealing with the false messiah before Muslim rulers get word of him. You know, he says, that this man is simply insane. Get him declared so, make a big deal of it, get him off the streets. If you don't, the Muslims are going to use it as an excuse to treat you even more brutally, seeing it as a sign of political insurrection.

His words are a rhetorically-heightened warning to a specific Jewish community as a call to a very specific action, not a condemnation of Muslims in general.

You can find the Epistle to Yemen on Wikisource. It's been published as well.