The Resource Curse

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Oil is an immensely important resource in the modern world. It is a primary source of energy and, in many ways, is used to power our planet. ‘Black gold’ has become a highly sought after commodity and its role in shaping our lives is inescapable. It is hard to think about oil for long before arriving at the Middle East, which accounts for almost 65 per cent of the world’s proven oil reserves [1]. Obviously, oil has a hold over the Middle East and it has proved key in determining the fate of the region. There is plenty of evidence that points to the advantages of having an abundance of oil, and the Middle East has certainly reaped some of these benefits. However, it is all too easily forgotten that, as the name ‘black gold’ suggests, oil has a dark side. This is no more apparent than in the Middle East, where countries have been burdened with serious woes stemming from their connection with oil.

Needless to say, there are plenty of good things that can come from possessing large quantities of oil. The most obvious merit is money. You only have to look at the skyscrapers of Abu Dhabi to see that oil has brought tremendous prosperity to the Middle East. It has sparked huge capital inflows and created revenues that have been used to develop nations. This can be seen clearly in an analysis of the GDP of some of the most oil-rich Middle Eastern states. Iran, Iraq, Kuwait and Saudi Arabia have all seen their GDP increase by a factor of 50 or more in the last 50 years [2]. Plus, GDP per capita has also risen, which suggests the standard of living has improved [3]. This development is, without a doubt, the biggest benefit of oil. The money it raises opens doors for countries that would have previously been closed. Thus, we see that oil certainly holds benefits, in particular the abundance of economic wealth it brings to a territory.

However, this wealth comes at a cost. When looking at some of the indirect effects of oil in the Middle East, the story does not read so well.

Some of the most chilling repercussions have been social ones. Inequality is rising in the Middle East, which shows that the material benefits of oil are being concentrated within a small proportion of the population. Furthermore, trading oil has exposed the Middle East to western influences, which some commentators argue has triggered a surge of extremism [4]. There have also been negative political impacts. The existence of oil is undoubtedly linked to the prevalence of authoritarian regimes in the Middle East. As one critic notes, “oil revenues can be used to build up domestic political support via the collection of few or no taxes and the provision of subsidies and hand-outs in such a way as to discourage demands for representation” [5]. Moreover, the presence of such extreme wealth has proved a fertile breeding ground for corruption. On a larger scale, economies have become over dependent on oil, a finite resource, and have thus been subject to severe fluctuations. Thus, where development has been achieved it has been lop-sided and unsustainable.

Bad as these indirect effects may seem, some of the most worrying troubles associated with oil exist in the international sphere, and it is these that are most deserving of our attention. Both regionally and internationally, oil has played a prominent role in creating conflicts. Being such an important resource throughout the world oil’s potential to create such enormous wealth means that it is naturally accompanied by power. This power has, in turn, made oil a dangerous and toxic resource.

Providing such a large share of the world’s oil means that the Middle East has the power to hold the world to ransom. This power is only increased by the fact that it is home to certain ‘chokepoints’ – key strategic oil transit trade routes including the Strait of Hormuz, Bab el Mandeb, the Suez Canal and the Bosporus [6]. Such levels of control mean that the Middle East has a bargaining tool with which to threaten the rest of the world. The most glaring example of this is the Suez Crisis. There is also evidence of Iran using oil and oil trade routes as a deterrent against hostile action, particularly from the US.

Being so desirable means that oil has caused regional fractures and induced a process of polarisation. In this sense, oil-rich states and oil-poor states clash over ownership of oil and become distanced due to shifts in power and wealth. Certain states in the Middle East without oil believe that they are still entitled to a share of the wealth it creates, which naturally creates tension. On numerous occasions, these tensions regarding oil in the Middle East have escalated into conflict. For example, Iraq invaded Kuwait in 1990 after it was accused of stealing oil through slant drilling. Another illustration of the tensions oil creates within the Middle East is the First Persian Gulf War, where territorial disputes over an oil-rich province contributed to the Iraqi invasion of Iran.

Oil has also caused disputes beyond the Middle East. The obvious case here is the recent invasion of Iraq. Although the exact motivation behind the US military intervention in Iraq remains unclear, oil was certainly a factor. This was made explicit by the Vice President at the time, Dick Cheney, who warned of “Saddam Hussein dominating the entire Middle East and taking control of a great proportion of the world’s energy supplies” [7].

By this point, the link between oil and violence should be perfectly clear. Due to its importance as a resource and its vital position in modern society, it has become the subject and cause of many disputes. Typically, the colour black has ominous connotations, and this is certainly true of ‘black gold’. Oil is shrouded with illusions of wealth and prosperity, but underneath this mirage there are hidden perils. The most disturbing of these is its tendency to be plagued by conflict. What is worrying is that oil is currently in abundance – there is a healthy supply chain. However, we are constantly warned that it will one day run out. As oil becomes scarcer in the future, the potential for conflict will heighten. This is a sobering thought and one that makes for a bleak outlook.

Article by Joe Austin. Edited by Simon Renwick.

Notes

[1] Luciani, G. (2009) ‘Oil and Political Economy in the International Relations of the Middle East’, in: Fawcett, L. (ed.) International Relations of the Middle East, Oxford: Oxford University Press.

[2] Google Public Data: www.google.co.uk/publicdata/directory

[3] Index Mundi Country Profiles: www.indexmundi.com

[4] Nosotro, R. (2010) ‘The Impact of Oil on the Islamic Middle East’, available at: www.history.net/apwh/essays/cot/t1w33islamicoil.htm

[5] Owen, R. (2008) ‘One Hundred Years of Middle Eastern Oil’, Middle East Brief No. 24.

[6] US Energy Information Administration (2011) ‘Maritime Chokepoints Critical to Petroleum Markets’, available at: www.eia.gov/todayinenergy/detail.cfm?id=330

[7] Reynolds, P. (2004) ‘Oil and Conflict – A Natural Mix’, BBC [online], 20 April, available at: www.news.bbc.co.uk/1/hi/3625207.stm