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Global Political Economy Analysis of Middle East

GLOBAL POLITICAL ECONOMY ANALYSIS OF MIDDLE EAST 16

Outline

The introduction will cover a brief introduction of the politicaleconomy of the Middle East. The introduction will highlight the mainissues which will be discussed in the entire research paper. It willpoint out to oil as one of the main factor, which contributes hugelyto the economy of the region.

Research question

What are the impacts of the oil wealth in the Middle East on thepolitical economy of the Middle East and the world?

Research methodology

  • The research will largely depend on online materials and information.

  • The research study will also make use of libraries, both public and private as a means of gathering information in regard to the topic.

  • Interviews will also be adopted of people with vast knowledge of the global political economy of the Middle East

  1. Historical background of the political economy of the Middle East.

This will cover how the region has been from history in terms of itspolitical economy and oil power.

  1. Political economy of the region versus the natural resources

The research will delve into the impact that oil has had in thepolitical economy of the region and its impact on the globe.

  1. Oil and democracy in the Middle East

This section will cover the effects of oil in the Middle East’sdemocracy and political structure.

  1. Impact of natural resources and oil in the Middle East to the global economy and international relations.

  2. Conflicts in the Middle East and their effects on the political economy of the region

  3. Effects of the declining oil deposits to the political economy of the Middle East.

  4. Possible ways to maintain the political economy of the Middle East due to the declining oil wealth.

  5. Conclusion

This highlight the main points in the research paper. It willsummarize what has been discussed in the paper, as well as anyfindings.

Research question

What are the impacts of the oil wealth in the Middle East on thepolitical economy of the Middle East and the world?

Introduction

The political economy of the Middle East encompasses a diverseregion and countries which include Iran, Iraq, Israel, Kuwait, SaudiArabia, Syria, Turkey, and United Arab Emirates among others. Theeconomy of the Middle East is largely known to be driven by theexport of hydrocarbons, mainly oil. It is imperative to note that theeconomy of the region experienced a boom in the 1960s to 1980s whenoil prices were extremely high as a result of the Israel, Arab war(Richards &amp Waterbury, 2009). Oil remains to be a critical exportproduct for the region and an enormous economy booster. However, itis imperative to note some of oil exporters in the region havestarted to diversify to other economic ventures due to the dwindlingoil reserves in the region. It is become apparently clear that oilcannot be a permanent economic activity in some countries within theregion.

The political economy of the Middle East is also fueled by othereconomic activities such as tourism and farming. Unite Arab Emirates’economy is largely dependent on tourism and external directinvestments. Oil production accounts for only 2% of the economy’sGDP. The region is also reliant on natural gas production as a sourceof national income (Springborg et al, n.d.). The politicaleconomy of the Middle East has put the region in the frontline interms of the global economy.

The oil reserves and wealth have had a tremendous impact on theglobal economy. The region has had numerous conflicts over the yearsdue to the wealth that the region holds. For instance, Iraq has beeninto war with Iran and the United States due to the politicalleadership in the region. The political, economic and socialstructure of the region has undergone a transition over the years.The region has been the epicenter of global power struggles fordecades. This paper seeks to analyze the political economic status ofthe region. The paper will also seek to identify the variousalternatives that the region is turning to as a result of thedwindling oil reserves in the region (Glassman et al, 2004).

Historical background of the political economy of the Middle East

The political economy of the Middle East has largely beeninfluenced by the oil wealth from time immemorial. The significanceof the region had been realized even before the interference by theUnited States and the United Kingdom. It is imperative to note thatthe region is strategically placed where it is bordered by thePersian Gulf, the Red Sea, the Mediterranean Sea, the Black Sea andthe Caspian Sea. It is clear therefore that the region isstrategically placed for trade with numerous countries. Therelationship between the Middle East and the United States, as wellas the United Kingdom started as a mutual benefit relationship. TheUnited States and the United Kingdom were in need of oil, while theMiddle East needed capital and technology from these trade partners(Richards &amp Waterbury, 2009). However, this mutual benefitrelationship was to sour and the source of conflict between thesestates and the Middle East.

Although the existence of oil in the Middle East was long known, itnever attracted or raised any interest until 1908. The world waslargely dependent on coal as a source of energy and it was readilyavailable. However, in 1908, the then prime minister of the UnitedKingdom, Winston Churchill made a decision to introduce battle shipsthat were to be fueled by oil rather than coal (Amineh, 2007). Thiswas a decision that was to change the political economy of the worldforever. Prior to this decision by the prime minister, oil did nothave any effect or influence on the political economy of the world oreven the Middle East region.

During this period, there was an Anglo Persian Oil Company that hadbeen formed. It evident to note that that the battleships fueled byoil were considered to be extremely powerful and other countriesrendered their coal fueled battleships obsolete. This was a turningpoint of the world’s dependence on oil (Amineh, 2007). From thistime henceforth, oil became a crucial resource that was to be neededby all countries yet it was an external source. The relevance andsignificance of the newly formed Anglo Persian Oil Company wasguaranteed. Due to the huge importance that oil has in the politicaleconomy of the world and the Middle East, America has come todescribe the rare yet crucial resource as one of the greatestmaterial prizes in the world history. From this time henceforth, theMiddle East was to become one of the most coveted and valued regionsin the world (Springborg et al, n.d.). Oil started to become akey pillar in the political economy of the region. The oil wealth inthe region was now starting to be viewed as a source of strategicpower in the region and in the entire world. The world interest inthe oil industry became extremely significant in 1928 when extensiveoil fields were discovered in Iraq. It is apparent that there was anissue on how the oil would be distributed amongst the countries alongthe Persian Gulf, America and the United Kingdom (Glassman et al,2004).

The involvement of the United States in the affairs of Iranian oilbecame apparent in the 1940s when Britain’s share of the Iranianoil profits exceeded the profits that Iran got. As a consequence,America decided to intervene to remove the imbalance. It is alsoevident that America had sought more economic and military power inSaudi Arabia when it formed Arabian-American Oil Company (ARAMCO),which was a company co-owned by both the United States and SaudiArabia. It is critical to point that this 1933 relationship betweenthe two countries ensured that they shared profits by 50% (Richards &ampWaterbury, 2009). This created a mutual relationship between thesecountries, and America went ahead to establish a military base in thecountry.

Political economy of the region versus the natural resources

The Middle East is endowed with enormous natural resourcessuch as oil and natural gas. These natural resources have beeninstrumental in shaping the political economy of the region. It isalso critical to note that the natural resource have been a source ofconflict as countries and interested western countries fight for ashare of the natural resources wealth. The region providesapproximately 60% of the world’s oil reserves and over 50% of thenatural gas. This makes the region one of the richest regions in theworld (Richards &amp Waterbury, 2009).

The economy of a majority of the countries in the Middle East areentirely dependent on oil and natural gas. This has the meaning thatthese country’s income and GDP is dependent on the pricefluctuations in the international market. In addition, theireconomies are extremely affected by exchange rates in theinternational market especially the American dollar. Since thenatural resources are limited in the middle and are bound to exhaustat some point, there are various measures that are being put in placesuch as diversification to safeguard the economy of the region. Thenatural resources in the Middle East and in other parts of the worldare a source of power and income (Springborg et al, n.d.). Itis evidently clear that everything we use in this world is made fromnatural resources. However, the natural resources are not unlimitedthey are resources which must be used appropriately to ensure theycontinue to serve the coming generations.

The Middle East has been using its natural resources as a source ofpower and income for decades. However, the rate at which theresources re being used is alarming. Due to the regions dependency onnatural resources such as gas, oil and coal, these natural resourcesare being utilized at an extremely high rate and they seem to bereducing. The region has also experienced problems with waterresource and appropriate land for farming. An extensive part of theregion has been dug up for gas, oil and coal hence interfering withthe natural resources. The eminent reduction of natural resources inthe region has reduced the political and economic power that theregion has had in the world (Springborg et al, n.d.).

Due to the huge deposits of oil and gas in the Middle East region,the nations within this region have been the determinants of oilprices across the world. This oil and gas wealth has made thepolitical, economic and social relations between these Middle Eastcountries dynamic and unpredictable. By extension the political,economic and social relations between the Middle East countries andthe rest of the world has also changed drastically (Amineh, 2007).The natural resources have been the main sources of conflicts in theregion such as the conflict between Iran and Iraq. There has alsobeen conflicts involving external countries such as the United Statesinvading Iraq.

Parties in political power have been accused of dictatorship as theyseek to retain power and control the oil and gas wealth. This hasbrought political conflicts in the region for decades. The region’spolitical systems have been accused of being rigid and stagnant.Although the region has experienced exponential economic growth, thepolitical systems in the region offer little to be desired. Thepolitical systems in the region have largely been authoritarian andfull of corruption. A majority of the governments in the oil richcountries of the Middle East lack political accountability to thepublic (Amineh, 2007). Political analysts argue that the public inthe region have no moral authority to seek for accountability fromthe government since they are provided with almost all socialamenities such as hospitals, schools, impressive infrastructure andsubjected to minimum or no tax. As a consequence, the population inthe countries along the Persian Gulf lack the moral authority todemand political accountability of the oil and gas revenues fromtheir governments.

Oil and democracy in the Middle East

There has been a continuous debate over whether oil wealth inthe Middle East has any effect on the political systems in theregion. A majority of the regimes in the region are seen to beauthoritarian, dictatorial, lacking accountability and filled withcorruption. The truth is that the presence of oil in the Middle Easthas sparked political instabilities and has eroded democracy.Political regimes in the Middle East countries are eminent withpatronage and personal connections, corruption and are regarded asautocratic governments.

Governments in the oil rich countries of the Middle East such asKuwait, Iran, Iraq, Saudi Arabia and the United Arab Emirates subjectlittle or no taxes to its citizens. In addition, the wealth accruedby these Rentier states is divided amongst the population throughvarious social programs such as health facilities, infrastructure,schools and grants. The citizens of these countries do not in turnask for political accountability by the government. This has led tothe development autocratic forms of governments which have silencedthe populace and rule them with impunity (Amineh, 2007). There islack of democracy in the way the countries along the Persian Gulf aregoverned. For instance, Saudi Arabia operates under an absolutemonarch political system where the leader has power and control overthe people and the country. This is a hereditary form of leadership,which ensures that the political power is concentrated only on aparticular family lineage.

Another example is Iran where the supreme leader is elected by anassembly of experts who are also the only people who can remove him.The removal of a supreme leader who has unlimited powers has neverhappened. In this regard, the right of the people to vote for theirleader is diminished and their democracy is therefore limited. Suchsupreme leader have control over the oil wealth and the distributionof the wealth.

Besides the impacts of oil wealth on the democracy of the MiddleEast countries, religion has also been blamed. A vast majority of thepeople in the Middle East countries are Muslims who have objected tothe notion of a democratic country simply because it is an idea ofthe western countries such the United States. It is, however,imperative to note that it is not all the oil-rich countries in theMiddle East that have extremely authoritarian forms of politicalleadership (Springborg et al, n.d.). A few of them have triedto embrace democracy albeit with some limitations. Such countriesinclude Israel, Kuwait, Lebanon and Turkey. Saudi Arabia and Yemenare seen as extremely dictatorial and with no iota of democracy forits people.

Impact of natural resources and oil in the Middle East to theglobal economy and international relations

It clearly evident that the global economy is controlled andinfluenced by oil prices. With over 60% of world’s oil reservesbeing in the Middle East, there is no doubt that the region has atremendous effect on the global economy. The conflicts that are beingexperienced in the Middle East such as the Gaza conflict, has seenthe prices of oil rise tremendously (Amineh, 2007). This is anindication that the global economy is largely dependent on the oilproduction from the countries along the Persian Gulf. Theavailability of oil reserves and other natural resources in theMiddle East have also seen an establishment of both good and not sogood relations with the western countries such the United States andthe United Kingdom (Glasser, 2010).

The countries in the region that are rich in oil determine theglobal oil prices. For instance, the oil rich countries can chose towithhold oil until its prices rise. This has had tremendous effect onthe global economy. In 1980-1988 when there was war between ran andIraq, the prices of oil skyrocketed. This created a world crisis inthe oil sector and it led to an economic meltdown of the globaleconomy (Amineh, 2007). In addition, the decision by Saddam Husseinto invade Kuwait in 1990s had tremendous effects on the globaleconomy. Kuwait is one of the leading producers and exporters of oilin the world.

The oil rich countries have not had a very good internationalrelationships with countries such as the United States and the UnitedKingdom. Since time immemorial, these western countries have hadenormous interest in the oil wealth of the Middle East countries. Asa matter of fact, there is a time when Britain could accrues moreprofits from Iran’s oil revenues than Iran itself. Therefore, anyattempt by the western countries to interfere with the affairs of theoil producing countries is seen as a hidden agenda aimed atexploiting the oil wealth (Springborg et al, n.d.). Forinstance, Israel accepts any form of aid from the United States withcaution. In addition, the attack by the United States on Iraq wasseen as a move aimed, not at bringing political stability anddemocracy, but as a way of finding a means of exploiting its oilreserves.

The relation between the countries in the region has also been murkyat times. For instance, there has been a long time battle betweenIsrael and Palestine over the ownership and the control of Gaza(Glasser, 2010). The conflict between Iran and Iraq was also as aresult of oil wealth.

Conflicts in the Middle East and their effects on the politicaleconomy of the region

The continuous conflicts eminent in the Middle East have hadtremendous political and economic effects. The Iran-Iraq war, theIsrael-Palestine conflict over Gaza, US bombing of Iraq or the gulfwar, the Iraq uprising among others have had tremendous effects onthe political economy of the Middle East countries (Glasser, 2010).For instance, the gulf war has left Iraq’s population devastatedand the country’s infrastructure extremely destroyed. The countryis now largely dependent on aid from other countries in a bid torebuild its former picture. The economy of Iraq has also beenextremely destroyed.

In addition, the military invasion on Iraq by the United States onthe ground that the country was producing weapons of mass destructionleft the country devastated. The country was ranked fifth on thefailed states index in 2008 and sixth in 2009 (Glassman et al,2004). This means that the country was completely destroyed in termsof political systems and economic systems.

The Gaza conflict between Israel and Palestine has had numerouspolitic and economic effects on these countries. Despite causingsuffering on residents of Gaza who now live s refugees in abjectpoverty and detrimental social welfare, the conflict has also stalledoil and other natural resources production. This has severelyaffected the economies of these two countries. The Gaza conflictdestabilized the political system of Palestine and had over 1000causalities from the Gaza side (Springborg et al, n.d.).

Effects of the declining oil deposits to the political economyof the Middle East.

There is growing concern over the declining natural resources suchas oil, coal and natural gas in the Middle East countries. It isforeseen that the strategic power that the countries have had in theMiddle East is nearing an end. Whereas a majority of the Middle Eastcountries rich in oil are said to have improved, a majority of themare still being regarded as third world countries. This indicatesthat the economic progress they have made is short lived andtemporary.

The decline in the oil deposits comes amidst an exponentiallyincreasing population. The population of the Middle East has doubledin the last century. This is a phenomena, which would take thousandsof years to occur in early ancient times. However, due to increasedmedical facilities, modern medicine and sanitation, the population ofthe region is expected to double in the next 25 years.

Saudi Arabia and Kuwait have been investing and storing their oilwealth in western countries in terms of bank deposits and governmentbonds. Saudi Arabia had approximately $150 billion in bank depositsin the 1990s, however, due to the reducing oil reserves and theeffects of OPEC countries, these deposits have reduced toapproximately %50 billion in the recent times (Amineh, 2007).

The declining oil deposits in the Middle East has also forced thesecountries in the region to diversify their trade. It is evident thatthe countries rich in oil have long enough been dependent on entirelyoil for fueling their economies. This has seen these countriesabandoning other crucial sectors such as production. It is also vitalto point out that these countries have had an extremely high rate ofunemployment as a result of its overdependence on oil exports. Thishas resulted in the countries opting for alternative ways of income.It is evident and clear that oil is non-renewable and limited(Amineh, 2007). This has the implication that the economies of theMiddle East must look for alternative ways of sustaining theireconomies in the long term.

Possible ways to maintain the political economy of the MiddleEast due to the declining oil wealth.

Various countries in the Middle East have started to invest heavilyon the production industry due to the realization of the fact thatoil reserves decline day in day out. The countries in this region arelargely dependent on imports and have invested little in theproduction industry. It is also apparent to these countries that theoil export business cannot sustain the exponentially growingpopulation (Richards &amp Waterbury, 2009). Other countries such asSaudi Arabia has invested heavily on the tourism sector in order tohave a permanent and sustainable economic development.

It is also evident that the countries in the Middle East haveinvested largely in the education sector. This is a clear indicationthat they want to produce citizens who are self-sufficient and seekemployment even abroad. Foreign direct investment has also been analternative form of sustaining their economies (Glasser, 2010).Policies have been put in place where little taxes are levied onforeign investors who are critical in employment creation andeconomic sustainability.

Conclusion

The Middle East has been an oil strategic power region for decades.The region has had control over oil prices and gas prices in theworld for a long time. However, this trend is fast changing with theconflicts in the region and the declining oil reserves. Countries inthe region have since turned to other economic activities such as theproduction industries to sustain their economies. Although the regionhad little significance prior to the 19th century, therealization that oil was a crucial yet rare resource was a gamchanger. This was accelerated by the discovery of huge oil reservesin Iraq in 1928 (Amineh, 2007).

The region attracted international interest due to the huge oilreserves and wealth. The economies of countries rich in oil in theregion were blossoming and their growth was exponential. There wasincreased infrastructural development, construction of schools,hospitals, universities and influx of foreign expertise. However, thepolitical regimes of a majority of the countries in the region havelargely been dictatorial and autocratic. Corruption and politicalpatronage have been eminent in the region over the years. Thedominance of the region in the global political economy still remainsinfluential with the region still having over 60% of the world’soil reserves.

References

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Amineh, M. P. (2007). The Greater Middle East in global politics:Social science perspectives on the changing geography of the worldpolitics. Leiden: Brill.

Glasser, B. L. (2010). Economic development and political reform:The impact of external capital on the Middle East. Cheltenham:Edward Elgar.

Glassman, R. M., Swatos, W. H., &amp Denison, B. J. (2004). Socialproblems in global perspective. Lanham, Md.: Univ. Press ofAmerica.

Richards, A., &amp Waterbury, J. (2009). A Political Economy ofthe Middle East: Third Edition. New York: Westview Press.

Springborg, Robert, &amp Henry, M. (n.d.). Globalization and thePolitics of Development in the Middle East. Cambridge UniversityPress.

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