Have Gulf countries squandered their oil wealth?

A report by the IMF suggesting that Arab monarchies in the Persian Gulf may run out of money before they run out of oil makes for sober reading. 

The Gulf has been endowed with some of the cheapest and most easily recoverable oil in the world; many in the Gulf and across the Middle East will be wondering what so much wealth was spent on that within 15 years many of the Gulf states could return to their pre-oil boom existence. 

The report cites falling oil demand as consumer countries seek to diversify away from carbon-emitting fuel to more sustainable variants. 

The six members of the Gulf Cooperation Council, accounting for more than 25 percent of global crude production would face a deep and sustained economic hit because their economies are so deeply connected to oil. 

Gulf countries moreover have also squandered significant levels of wealth on a menagerie of pet projects, weapons deals, meddling in the affairs of other states and often poor economic planning. 

Over the last 30 years, the US and several other countries in the West have sold hundreds of billions of dollars worth of weapons to Gulf countries.

The Saudi military, for instance, has struggled to contain the Houthis in Yemen even as they have spent billions on high-tech weapons. US President Donald Trump has suggested that Saudis don’t “know how to use the weapons” they have been sold. 

For decades, Saudi Arabia, instead of investing in Yemen and ensuring that a stable and prosperous neighbour is preferable to a poor one has instead chosen to spend billions ensuring that a poor country becomes even more unlivable. Ultimately spending far more money than it would have had it decided on development aid.  

A foresighted vision would have seen Gulf states invest in a region starved of investment but with high levels of human capital. Such a bold move would have also ensured that the economies of Gulf monarchies would become far more diversified.

Investment in Egyptian agriculture, infrastructure and tourism by Gulf countries would have created jobs, stabilised the political situation and provided returns on investment — arguably a win-win situation.  

Instead, the Gulf monarchies such as the UAE and Saudi Arabia have ploughed billions in ensuring unsustainable governance in countries like Egypt — when it fostered and funded the overthrow of Egypt’s first democratically elected president in 2013. 

In Tunisia, the “Egyptian model” — a coup for aid — has been pursued by Saudi and the UAE. Yet the model in Egypt has not only profoundly fractured Egyptian society but also made it more fragile — the country lives on the brink of bankruptcy. Meanwhile, the cost of propping up these failing states is only set to increase.

In Libya, Saudi Arabia and the UAE have followed a similar plan of action where they have funded renegade warlord Khalifa Haftar rather than mediate political reconciliation and unlock political stability in the region. 

Last year reports emerged that Saudi Arabia was willing to subsidise Israeli theft of Palestinian land if they accepted Trump’s peace plan. 

Saudi Crown Prince Mohammed bin Salman offered Palestinian Authority President Mahmoud Abbas $10 billion over 10 years — a drop in the ocean compared to what Israel has taken. 

 The Saudi state has for decades been a lukewarm supporter of Palestinians and an even less generous donor with its money. 

There have been cases where Saudi authorities have shown altruism, for instance, they have taken more than 190,000 Rohingya refugees, and while this is commendable, it is far from the norm.

The Gulf states risk not only losing their wealth but also their moral standing if they use their money to spread discord or plough it into weapons sales. 

The IMF report urges decisive economic reforms if the wealthiest Middle Eastern states are to have any chance of succeeding and not becoming highly indebted countries needing potentially foreign aid. 

However, in addition to the economic reform, one might add political and social reappraisal of the region they inhabit. 

An economic and political vision that spends money on creating jobs, investing in infrastructure projects rather than political upheaval is likely a more sustainable vision for the region and the Gulf monarchies.