Honors World Regional Blog Post #3 Posted on March 9, 2016 by saorsa2014 Middle East and North Africa…oil wealth… Share this:TwitterFacebookLike this:Like Loading... Related
12 thoughts on “Honors World Regional Blog Post #3”
There’s a saying I grew up with that goes something like “anything in excess is wrong.” This phrase comes to mind when contemplating the Middle East and North Africa (MENA)’s wealth due to oil. Billions upon billions of dollars are exchanged for oil, both crude and refined. Economically speaking, this obviously provides benefits for the consumers and the producers. Primary consumers such as the United States and China are able to receive enormous amounts of oil, and MENA producers (as well as other global producers) receive considerable income as a result. This income, while supporting the oil industry, also circulates to other parts of the economy in a trickle-down effect. Employees of the oil industry are paid, and go on to purchase everyday items in greater quantities, and thus other industries are supported by the oil industry’s net income. Furthermore, on the consumer side, countries requiring large amounts of oil are able to continue functioning adequately. It goes without saying that massive issues arise in the most oil-dependent nations whenever a shortage of oil appears on the horizon. Quite literally, it affects almost every citizen’s everyday life, both economically and physically. This system, however, is not entirely beneficial to both producers and consumers. As with seemingly everything in life, drawbacks are present. On the producer side, their economies are largely propped up by oil. This leaves many MENA countries vulnerable to their consumer’s wishes. Furthermore, if their oil industries were ever systematically compromised, they’d be essentially losing all their global power. Countering this however, is the fact that despite the globe’s massive consumption of oil on a daily basis, the world’s supply of fossil fuel isn’t projected to be depleted for some time. MENA countries, if forward thinking, should have time to prepare for when the fossil fuel supply inevitably runs short. Conversely, the consumers’ dependence on the regular arrival of oil and willingness to pay extraordinary amounts of money for it can create a similar effect. They can be left at the mercy of the producers, should they ever effectively coordinate on production; examples of this include the oil crises in America during the 1970’s. Furthermore, the consumers at times compromise their national values in an effort to improve relations with producing countries for the sake of possibly gaining an advantage in the purchase of oil. Going back to the producer’s side, issues include problems with the aforementioned trickle-down effect. Massive amounts of wealth enter the country due to the sale of oil, and yet many MENA countries don’t see the everyday citizens receiving the benefits of this national income. All too often, an elite or ruling class of citizens receives the primary benefits. Furthermore, MENA governments are able to use massive amounts of money for the purpose of grandiose luxury projects, such as the creation of massive islands. While no doubt impressive for what mankind can actually pull off, the citizens of those countries would benefit far more from investments in social welfare projects as well as other forms of industry, such as solar power. Thus, while oil production and consumption provides benefits to both sides, it is a dangerous balance that leaves problems to address.
In the 1960’s and 70’s, most of the oil in the Gulf states was discovered and the era of drilling began. Almost all of these countries invested huge amounts of money back into their country and began to develop their infrastructure at a nearly neurotic speed. But a many issues are posed, and very quickly so, such as: labor, waste, risk mitigation, environmental, and human rights, just to begin.
The population within the Gulf States has generally been very low. In many of the countries, arid and mountainous landscape takes up a lot of the land area, and villages, towns, and cities, are concentrated on the coast, or connected by sparse inland routes. To develop massive infrastructure projects with a limited supply of labor means that labor must be imported. Therefore, much of the Gulf States have imported their labor from South/SE Asia in order to work the many service jobs that the citizens of these countries are not. But, often times the importation of labor comes at a great cost, and this is not to the country itself (unless talking about HR reputation), but to the workers who travel to the Gulf looking for work. If they come for refinery work, they are hired, paid and sent back in a high turnover rate, causing some economic problems actually for the countries that these workers are coming from. Additionally, service workers like hotel maids or housekeepers may sign a contract, but then have their visa taken from them by their boss, and perhaps forced into a longer labor contract than agreed, with no voice to contest. Eliminating this voice also leads to a high amount of unreported sexual violence, rape, and sexual exploitation, giving rise to human trafficking issues and transporting some of these workers into the sex trade. This isn’t a common occurrence, but it is certainly common enough to mention. The housing units that these workers are placed in are often in the periphery of the city and have set curfews, with gates and guards to keep the workers inside. It is modern systematic segregation at its finest, as these workers often can’t leave the dorms except for work… causing them to seem as if they are not part of the society, when in all actuality, they completely are! (kind of like Fayetteville’s treatment of the homeless population)
Additionally, the creation of these new islands in UAE has led to some serious environmental problems for the sea life along the coasts as a result of massive dredging projects. But also worth mentioning is the lack of mitigation going into the development of new building projects, such as island housing and, of course, Kingdom Tower in Jeddah, where the geology is dodgy enough to question whether or not a kilometer tall building will hold its place… Also water use is a major problem, and as the wealth pours into the new infrastructure of the Gulf, more water will be needed to run into these buildings and be used for public spheres, not to mention a growing immigrant population. The water in nearly every Gulf country is coming from desalinization plants, or fossil aquifers… RED FLAG! And then what about the waste from the Burj Khalifa? It is being hauled off in trucks each day!
The wealth is great in these regions, but mindless spending without taking care and maintaining old projects while having an active concern and care for new project is kind of like a Tower of Babel in itself. Just some thoughts.
Very good discussion of consequences of spending.
When I began studying MENA, my personal conception of the Middle East was basically the same as these photos-one that reflected massive spending on luxuries and shows of wealth. As I began to study more I became more aware of how dangerous this spending is, especially in light of its dependence on a volatile commodity like oil. Of course I also became aware of the places in the Middle East & North Africa who do not have oil as a commodity, and the pictures for those countries would look drastically different.
Jarrod touched on what I was going to mention-the interaction of oil and the general public in many of these countries, but especially Saudi Arabia. Oil has not only influenced day-to-day activities in these countries, it influences domestic and foreign policy. While consumers become dependent on oil, the producers, typically state-owned companies, become just as dependent. Considering that in Gulf countries, the producer is also the state, oil dependence has negative implications for its economic policies. Domestic policy-wise, oil plays a huge role. For instance, in Saudi Arabia, Saudi Aramco (or just Aramco), the state-owned oil company, is controlled by the government of Saudi Arabic (read: members of the Saudi Royal family). Most of the company’s profits land in the pockets of the Al-Saud family, who then spends it as they deem necessary on both personal and government expenditures like limited social services. There’s a social contract of sorts in Saudi Arabia between the ruling family and Saudi citizens that makes the economic dependence on oil rather problematic. While elections occur for local governing bodies and control bodies, they do not occur on a national scale, meaning that the people do not have elected, but rather appointed, representation on national policies. The ‘social contract’ basically entails that as long as the Saudi family does not tax the citizens of Saudi Arabia (because they get their funding from oil profits, rather than tax revenues), the Saudi royal family can do what they want within reason. Whenever those services become strained due to smaller oil revenues (as we basically saw in 2011 around the Arab Spring and have seen several other times in the history of their country’s oil production), there is more dissent among the general population in Saudi Arabia. This same pattern holds true for most of the countries, excluding Bahrain who 1) has diversified its economy outside of oil and petroleum products, and 2) has a Sunni minority ruling a Shia majority, a completely different matter.
As oil prices continue to fluctuate, we can predict that this pattern will become even more volatile, further legitimizing the claim that Saudi Arabic needs a directly-elected national governing body that represents the people. If this were to take place, tax structures would also change, and considering that most Saudi citizens receive their salaries from an oil-related job, there would be further implications from Saudi’s one commodity-driven economy.
That is only touching on a few of the economy/policy problems that occur in these oil-rich states. There are increasing problems with immigration, exploitation of workers, violence, and environmental problems. Not to mention the ever-impending problem of what happens when 1) the oil runs out, or 2) oil is no longer a top commodity due to energy diversification (okay, this one’s probably a bit further away). For countries that have diversified their economies like Bahrain, this might not be as large of a problem (although, as I mentioned earlier, they have other problems they’ll have to face as well), but for those who haven’t diversified their economic interests away from oil and petroleum, these are questions that they need to start answering.
Over the years the Middle East has become one of the most important regions of the world, due to the world’s industrialized economies dependence on oil. This has led to an unprecedented growth for the MENA region’s economies, which has led to different outcomes depending on the nation. The Gulf States have used their wealth to buy lavish and fancy projects, in a show of wealth to the rest of the world. The Burj Khalifa, man-made islands, underwater hotels, etc. are many of the different projects undertaken by the Gulf States, which have enjoyed of political stability, mixed with a high income due to their massive riches and their relatively small populations. Yet this show of wealth is but a façade of what is really going on in the countries, as their governments keeping wasting unnecessary amounts of money on massive projects that often don’t see a return of their investment. The Burj Khalifa is a monument to this, as Gulf States thought that the world finance was going to positon it’s headquarters there, yet as of today most of the building remains empty. If the government of the gulf states keep waiting money on such lavish projects, while depending on such a volatile commodity as oil, it could lead to the collapse of the gulf states, if their oil were to ever run out, and their money isn’t wisely invested; or if the gulf states bankrupt themselves on massive debt.
In contrast larger countries in the MENA region like Saudi Arabia, Syria or Iraq have faced political instability and conflicts due to their wealth in oil. The importance of oil to every major world power, has led to said world powers to be extremely concerned with the political outcomes of the region, which has led to several conflicts, political interventions and embargoes with the major countries in the MENA. The 1950’s coup d’état in Iran, the 1990’s gulf war and the continuous backing of the Saudi government by Western Nations are examples of the intervention in MENA regions in order to control the flow of oil, to keep their economies safe. Yet the political instability of the larger countries of MENA has made keeping the flow of oil safe, an extremely challenging task. The hostility among the different religions in the region, is widely believed to be the reason behind the political instability of the region. While small countries have heterogeneous populations, who practice the same religion; larger countries like Iraq, Iran or Syria have to deal with several minorities that are highly hostile to one another, leading to internal turmoil, and external conflicts across the region. Due to the all the conflicts and chaos facing the region, the world has been in a constant state of panic that an even larger conflict might erupt in the region cutting the supply of oil from the rest of the world, thus collapsing the global economy. Therefore leading to constant interventions by NATO members in order to exterminate any leader who might endanger the balance of the region, while also leading to the unfortunate support of brutal dictatorship’s like Saddam Hussein’s in the 80’s, and the current Saudi government in order to obtain the same objective of keeping the region under control.
The discovery of oil in the 1960s in the Middle East and North African (MENA) countries has simultaneously led to outrageous wealth and political instability in these countries. While it would seem like the finding of oil would benefit heavy oil users such as the US, often times the opposite is true. The US, in particular, became too dependent on oil and had a crisis in the 1970s when countries came together and decided to hold out on the country.
This dependence on oil and the wealth it provides has led to massive instability across the MENA region. All countries who are reliant on oil now have a huge stake in the outcome of conflicts in the area. This is a direct reason for the wars between Iraq and Iran and eventually between US and Iraq. As the US realized how dependent they were on oil, they understood that they needed their side to win any conflicts. Sometimes, this even meant backing a side the country would normally oppose. Even today, conflicts in Syria and Saudi Arabia have direct ties back to their ties with oil production.
The wealth provided with oil is fascinating to see pictures of. As seen in the picture in the top left, the resource has allowed for outrageous planes that have full dinner areas inside. Artificial Islands (middle picture) such as the Palm Islands are magnificent to look out and are truly modern wonders of engineering. Although this wealth is beautiful, in many cases it is also damaging. The islands themselves are horrible for the environment and sea life around the area, and the planes are clearly not as efficient as they could be. The bottom left picture shows the type of industry that is occurring and can lead the viewer to wonder the effect it is having on the water around it.
Alongside the environmental concerns and political instability that accompanied the discovery of oil, the use of tradition over modern human rights has become a concern. Long standing families tied deeply to oil production have been allowed too much say in politics because of their wealth. As seen in our readings, the Wahhabi’s have massive political sway in part because of their tremendous wealth. They are able to continue their maltreatment and oppression of women because no one wants to oppose them.
On top of these problems, there have been worldwide instances where countries with oil have been able to bully their way to their goals. A notable example is the 2022 world cup bid which was given to Qatar. Qatar has almost no professional soccer experience, no stadiums to play in, no infrastructure for hosting the tourists, and routinely gets to around 110 degrees in summer. Even with these enormous problems, Qatar was given the bid over Australia, USA, and England. Anyone looking at the matter can clearly see the officials picking the tournament were bribed by the oil-rich country, but only as of last week did FIFA (who pick the hosts) formally announce corruption in the process. It took over 4 years for FIFA to announce that Qatar had cheated on its bid, showing the problem with these countries. Striking oil in the 1960s gave MENA countries a huge economic boost, but has simultaneously led to human rights violation, environmental concerns, and political instability.
Very nice consideration of the problems.
Oil equals money and money equals power. This is the premise one must remember when looking at the Middle East and North Africa. Oil, wealth and power are the driving forces behind conflict in MENA, and religion is the second layer that makes everything that much messier, but also that much more personal. Luxurious lifestyle is insanely lavish in MENA, the conference room on an airplane is fancier than many conference rooms on the ground. The United Arab Emirates has so much money that they are literally building their own islands in the shapes of palm trees and the global map. All this wealth is coming from an extremely productive oil industry which is relied on by almost the entire world. That reliance translates to power and influence. If you control a necessity such as oil, you can sway major decisions and actions of even the most powerful nations in the world. For example, Saudi Arabia’s citizens are giving money to Al Qaeda, and everyone knows it, but no one can say anything because Saudi Arabia could cut us off from their oil, and drive the price of our oil up. I think it is important to recognize that in Islam, wealth and influence plays a significant role. A majority of Muslims’ ideal state would be one of their respective religion and specifically, their interpretation of the Koran. In order for a group to achieve this they need wealth and influence. There is a connection here between religion, politics, and oil. This is the root of many conflicts in MENA, where various organizations of people deem their beliefs to be righteous, and want to practice their faith without restraint. In some cases, they even wish to force other people to follow their lead on Islam. There are several significant populations of different religions across MENA besides Islam, and they cause their share of conflict. However, even though it spans across the majority of MENA, Islam is not necessarily unified. There is a wide range of interpretations of the Koran, and a complex system (if it can be called that) of alliances, hatred, understanding, disagreement, majority power, minority power, theocracy and democracy. Struggle for power and wealth is not necessarily personal in it of itself, but religion makes every conflict personal. Disagreements about state borders in this land are deeply personal, and opinions of about policy and politics go right to the root of ones beliefs because each decision makes an impact on freedoms and rights. As is a cause of strife with any religion that has lasted for several hundreds of years, Islam began long ago in a time that was very different compared to now. It is hard to decide what customs can be outdated, and what ones are essential to faith. These decisions are the makings of great schisms in all religions. The wealth of oil now influences who gets heard, and whose voice is the loudest at the table.