Violent politics in oil-exporting countries of the Middle East have recently drawn attention to the dangerous confronting that region. Revolution in Iran, fanaticism in Mecca, invasion in Afghanistan, and hostilities between Iraq and Iran caught the oil consumers unprepared; yet, after a brief flurry of concern, everyone returned to business as usual. No one thinks much about the prospects for real trouble in these vital countries, despite their extreme importance for the West.
Middle East oil-exporting countries face two principal dangers, Soviet control and internal collapse. The Soviet threat needs little elaboration; were the Russians to get control of the roughly seventeen million barrels of oil which leave the Middle East each day, they would have the means to enrich themselves and to dictate political and financial terms to the industrial democracies. We could expect Western Europe and Japan lo become neutral, the effective disappearance of NATO, and the increasing isolation of the United States in an ever more hostile world.
This much is well realized, even if we worry too little about it. The other danger, internal collapse, tends to be ignored or forgotten – except for the surprisingly wide-spread concern about a coup d'état in Saudi Arabia. Businessmen with interests in the Middle East are mum about the region's problems, not wanting to rock the boat. Many journalists, academics and government officials similarly avoid the topic, often because they do not want to jeopardize good relations with the barons of OPEC (who have vast patronage).
Apologists for the stability of the existing order have, indeed, many achievements to point to in the Middle East oil countries. Dusty desert regions now sprout tall buildings, the sons of primitive Bedouin travel the world with ease and sophistication, women participate in society with ever more skills and assurance, literacy has quickly spread, armies grow more impressive with each year.
Yet these are surface phenomena, the calm patina on top of turbulent and vulnerable societies. Below these cheery developments one finds countries wracked with tensions and desperation. The richer the country, the worse its problems; the greater its apparent accomplishments, the less stability. In all, their dangers are so acute that I expect collapse in many of OPEC's richest nations, including Saudi Arabia, Kuwait, the United Arab Emirates and Libya. I know neither the timing nor the manner of their collapse, but I can see that they are rapidly heading toward a dismal fate.
Oil wealth creates two major problems for its recipients, disruption and dependence. Disruption follows from the fact that the richest OPEC nations were among the world's poorest and most isolated countries just a few decades ago. The bounty from oil has overturned their simple economies, their social relations and their cultures, leaving hardly anything as it used to be; life now takes place in a wildly fast and novel context.
Dependence results from the inadequacy of local resources (and so is also related to the fact that these countries recently lived at subsistence levels). Citizens of the nations most profiting by oil exports are too few and too unskilled to support the complex mechanisms of modern life that came along with oil wealth. They must depend on foreign laborers to staff everything from surgery rooms and air control towers to restaurants and brothels. Not just labor comes from outside; so too does nearly all the wealth they enjoy and the goods they consume. Saudis, Kuwaitis, Libyans and the others do or make very little on their own; their dependence on foreigners for everything makes them especially vulnerable even to the slightest disturbances; if foreigners leave or ships fail to turn up, Abu Dhabi will shut down. Unable to cope on their own, the nationals in the oil exporting countries depend on a fragile balance to keep the present system unchanged.
Together, disruption and dependence threaten to close down the OPEC good life in Arabia and Libya. This might happen in a variety of ways, ecological, economic, social, military or cultural.
(1) Ecological. By a fluke of geology, the richest oil – exporting nations are all arid. Until the oil boom, local inhabitants lived off the small amounts of water they found in underground sources. Then, with oil, water consumption soared, as construction projects, agriculture and modern styles of life all called for vastly more water usage. Desalination plants (which make sea water sweet) have answered this need, but they are expensive, complex, delicate machines whose operations are easily interrupted. A decline in revenues could mean insufficient money to keep them functioning; an embargo could lead to a breakdown due to a lack of spare parts; in war the plants could be bombed; industrial unrest could cause sabotage; civil war could cause foreign technicians to flee; sedition could mean the plants would fall into rebel hands. Any of these problems would seriously reduce or end water production, leading to farms and cities drying up, possibly followed by havoc, emigration and violence.
(2) Economic. Old skills become worthless in the new society; who needs nomadic traders anymore? Entirely different skills have taken their place, emphasizing knowledge of European language and engineering. Also, ties to the court and high government officials has taken on new financial importance, as nearly all income from oil sales passes through the government. The effects of these dislocations cannot be overstressed; as the bases for financial reward changed radically in the space of a few years, some became very rich and many others relatively poorer.
Inflation is rampant, coming both from abroad (in the form of the goods and services the oil-rich countries purchase) and from the excessive demands placed on local facilities and manpower. Prices sometimes reach absurd levels; for example, a house which might rent for $600 a month in Chicago goes for about $50,000 a year in Abu Dhabi.
OPEC's richest realize that their oil revenues cannot continue indefinitely and they are making great efforts to reduce their dependence on oil by educating their citizens, investing abroad and broadening the economic base at home. Yet these moves are futile. For most citizens, education is a source of prestige and a ticket to a job, but not a means to acquire practical skills which would have value when oil income declines. Dividends from investments abroad provide a handsome income, but it is only a small proportion of current revenues and not enough to maintain today's way of life.
Local industries are not being built with much concern for economic viability. Steel mills, ammonia plants, petro-chemical factories and the like arise in the most unlikely places, bereft of the complex infrastructure which these industries require; think how much Gary, Indiana, has in addition to its factories. Skilled workers, repair facilities, transportation grids, communication infrastructure and sizeable local markets are all indispensable – and all lacking from these installations. To produce goods at competitive rates, they receive the hidden subsidy of cheap energy; this is fine for now, but what will happen when oil revenues decline and every dollar counts? Agriculture, with its water supplies massively subsidized, faces even worse prospects.
(3) Social. Ironically, social relations have deteriorated as funds multiplied. While each oil-exporting nation as a whole benefits from the new money, some persons gain far more than others, leading to increased antagonism. When some double their incomes annually, those gaining only 25% feel deprived. As expectations rise, dissatisfaction spreads. Also, the basis for distributing oil wealth creates unhappiness, for it depends far more on connections than on intelligence and effort. So long as the pie expands, disputes over distribution remain manageable, but alienation will become widespread when the pie stays constant or gets smaller.
(4) Military. A dismaying proportion of oil income has gone for military expenditures. In theory, this makes sense, for OPEC states now possess extremely valuable resources which require protection; in fact, their armed forces serve little military purpose, so ineffectual are they. The war between Iraq and Iran showed this; military analysis gasped when Iraq dug tanks in and used them as cannons and when the Iranians flew their F-14 fighters without the built-in computers. The war was conducted that poorly, the Israeli government reduced its defense spending in some areas!
Per capita the Middle East oil exporters spend far more on defense than any other countries including the super-powers. (The U.S. is spending about $800 per person on the military this year, about one-sixth of Saudi spending.) The Gulf countries and Libya buy such advanced weapon systems that they must bring in tens of thousands of foreigners to install, maintain, and operate these complex machines. Other foreigners serve as soldiers, for the small, pampered native populations in these countries show little inclination to defend themselves. Relying on foreigners in the armed forces raises, however, obvious dangers for the governments which sponsor them. As the armed forces grow in size, they increasingly threaten political institutions. Although no military coup has yet occurred in a super rich OPEC nation, the likelihood becomes greater as the soldiery steadily gains in size and prestige.
(5) Cultural. The entire apparatus of modern civilization fell on the Middle East oil exporters almost without warning. Persons who grew up in the simple, harsh environment of desert tribal life, molded by Islam and the fight for survival, now face a bewildering range of choices and pressures. Often, they can barely cope. Take for example, the place of women in society. The traditional culture created an order in which women had almost no role in public life; everyone knew this and hardly anyone challenged it. Now, with new opportunities for education, travel entertainment and consumption, women are willy-nilly drawn into public affairs, raising acute tensions both for them and for men.
Of course, many non-oil-exporting countries face cultural dilemmas similar to these, but rarely do changes come so abruptly. The richest oil countries, particularly primitive a few years back, have experienced extraordinary upheavals. It is entirely possible that, unable to cope with the complexities brought by oil wealth, other countries will follow Iran's example and tear down modern institutions in an effort to return to something simpler and more familiar. One must not ignore the capacity for destruction which lies below the relative calm prevailing today. If this happens, it will be supremely ironic and tragic; the oil boom will have then harmed its apparent beneficiaries even more than the consumers who have been funding the whole extravagance.
Daniel Pipes is a Research Associate in the Department of History, University of Chicago.