The decline of the Arabian Peninsula. Time for a party?

The Middle East is going up in flames but the Arabian Peninsula has for years been the prosperous exception. This is now changing. The countries of the GCC are experiencing decreasing demand for oil which is putting pressure on prices worldwide. Oil economies that stop selling oil will at some moment collapse. Its a scenario that the international community has to prepare for. The question that remains is if we should fear this development, or celebrate it.

There are many reasons why the demand for oil is decreasing. The main one is the lower-than-expected growth of industrialized economies. Especially the disappointing growth in Asia has negatively impacted the demand for oil and gas. But also other factors have played a role. The United States for example, although recovering from a financial crisis, has increased domestic oil production to become more self-supporting. The oil producing countries of the GCC however, had prepared for better times. They are now stuck with a surplus in oil and in no strategical position to increase their prices.
Countries as Russia and Iran are not willing to make price agreements and the GCC cannot afford to lose its market share. It is doubtful if somewhere in the next ten years the demand for Arab oil can reach the same levels as a few years ago.

The oil problems should not be underestimated. The Gulf States have to reform to make sure they won’t collapse any time soon. Tax paradises such as The United Arab Emirates are looking for tax experts. The country even announced the forming of a new Federal Tax Authority which will oversee new tax measures. Next to the new VAT law that will be introduced in 2018, it is rumored that the UAE might start implementing a personal income tax. Account holders have been warned. Also Saudi-Arabia has been affected by low oil prices. Earlier this year the Arabian Kingdom was said to be bankrupt by the end of 2017 if maintaining its current spending spree. What was unthinkable a few years ago is happening right now. Companies with ties to the government have been forbidden to authorize any unnecessary expense (only in Saudi-Arabia approximately 100 billion dollar is ‘thrown away’ each year), taxes are increasing or introduced, and the GCC governments are looking for new sources of income. Diversification is the magic word. From tourism till taxes, everything is considered as long as big social reforms and budget cuts can be prevented. It is seen as an ambitious strategy by most experts, certainly when you consider that most of these oil economies are without their black gold nothing more than desert economies. A problem especially hitting young Arabs. Countless of well-educated young Saudi’s are already unemployed or have to accept jobs far beneath their skills. A problem characterizing the whole region where around 65% are beneath the age of 30.

But what does this mean for the future of the region and the rest of the world? Money means influence which leads to power. Many in the West will therefore celebrate a chain of events wherein the oil economies are facing difficult times to maintain their spending spree. The Gulf states are known for buying influence and blackmailing oil dependent countries. Their power is symbolized among others by using millions of Asian people to do slave work, buying European football clubs, and financing fighting parties in Syria and Yemen. Furthermore, the money of Saudi-Arabia has for years spread a very conservative interpretation of Islam over the world. Other oil states such as Qatar and Bahrain actively support this strategy. It changed a global Islamic community. The Middle East and North Africa were not that long ago known for their liberal and moderate views in terms of religion. Arabic, tribal, and ideological emotions were just as strong, or even stronger, than religious identities. Nowadays it is just Islam. Oil money does not only keep countries in its grip, but also millions of Muslims world wide.

The decline of the Gulf countries shall therefore be seen as a cheerful consequence of low oil prices. However, the above mentioned facts are at the same time an argument against celebrating these developments. The influence of oil money has grown so much that a power vacuum is not unlikely if the stream of money suddenly stops coming. This threatens both the Middle East and the rest of the world. Saudi-Arabia for example experiences violence at almost all its borders and its army is directly involved in Yemen’s civil war. But also within its borders the situation is far from calm. Terror attacks happen regularly and terrorist organizations are actively looking for Jihadists and resources in the Kingdom. The countless of young people in Saudi-Arabia but also in the rest of the region face a difficult future. The troublesome economic challenges in a very conservative environment can easily lead to fundamentalism when they are not able to protect and financially maintain their families. Furthermore, the Sunni organizations fighting the region’s wars and being financed by the Gulf countries cannot be controlled in such circumstances. Shi’ite and other groups will smell blood. Iran, involved in basically all conflicts around the region, has already been growing in power thanks to the international community lifting the sanctions placed upon the Persian country. But also Hezbollah and Assad are looking for revenge.

Additionally, the international community should be extremely worried what could happen if the religious hierarchy falls away. Millions of Muslims have been educated with a strict and ultra-conservative interpretation of Islam financed by oil money. Imams in European Mosques are trained in the Gulf States or in Religious education centers financed by them. Annoying, you could say, but this structure also leads to a specific hierarchy controlling the same Muslims it wants to influence. They form a Sunni front protecting the interests of the Gulf States which is foremost the consolidation of its power. This is certainly not the best scenario but its alternative is even more grim. Brussels and Paris are examples what could happen when that hierarchy falls away. Countless of young Muslims, worldwide, who look for structure and meaning but end up in the hands of radicalized street preachers far away from any governmental control. The strict interpretations that have influenced these people for years will only legitimatize radical positions. Any control will be difficult and escalations will threaten stability in countries all over the world.

What will the international community do against the fall of the Arab oil economies? What is left for the international community to do? Redrawing borders? Advocating democratic principles? Educating Europeans Imams? The low oil prices threaten to make an unstable region even more unstable. It is very doubtful if we can prevent this chain of events from happening. And if that really is the case, we are facing a problem that won’t just hurt the Middle East, but millions of Muslims all over the world, including Europe. Oil money has rarely been so dark.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s