Oil and the political economy in the Middle East

Post-2014 adjustment policies of the Arab Gulf and beyond

Martin Beck, Thomas Richter, Martin Beck, Thomas Richter

• Publisher: Manchester University Press
• Year: 2021
• Print ISBN: 9781526149091
• eBook ISBN: 9781526149084
• Topic: Economics
• Subtopic: Political Economy
• Index: Economics

The downhill slide in the global price of crude oil, which started mid-2014, had major repercussions across the Middle East for net oil exporters, as well as importers closely connected to the oil-producing countries from the Gulf. Following the Arab uprisings of 2010 and 2011, the oil price decline represented a second major shock for the region in the early twenty-first century – one that has continued to impose constraints, but also provided opportunities. Offering the first comprehensive analysis of the Middle Eastern political economy in response to the 2014 oil price decline, this book connects oil market dynamics with an understanding of socio-political changes.Inspired by rentierism, the contributors present original studies on Bahrain, Egypt, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. The studies reveal a large diversity of country-specific policy adjustment strategies: from the migrant workers in the Arab Gulf, who lost out in the post-2014 period but were incapable of repelling burdensome adjustment policies, to Egypt, Jordan, and Lebanon, who have never been able to fulfil the expectation that they could benefit from the 2014 oil price decline.With timely contributions on the COVID-19-induced oil price crash in 2020, this collection signifies that rentierism still prevails with regard to both empirical dynamics in the Middle East and academic discussions on its political economy.

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Pressured by the decreased price of oil: Post-2014 adjustment policies in the Arab Gulf and beyond

Martin Beck and Thomas Richter

Introduction

The downhill slide in the global price of crude oil, which started mid-2014, has had major repercussions within all the countries of the Middle East, not only for the net oil exporters but also the net oil importers, like Egypt, Jordan, and Lebanon, which are more or less closely connected with the oil-producing countries from the Gulf. After the Arab uprisings of 2010 and 2011, the oil price decline represents a second major shock for the region in the early twenty-first century – one that has imposed constraints, but also constituted opportunities and will do so in the future.

Since the beginning of the latest oil price peak in the mid-2000s, major constraints have arisen due to the generally high share of oil income within state budgets – which is especially true for the Arab monarchies in the Gulf. State spending, which increased heavily after 2010, almost exclusively depends on earnings from the hydrocarbon sector. The decline in the price of oil and its subsequent oscillation on a much lower level have significantly contributed to a relative lack of financial resources (oil rents), which has consequently restricted states’ room for manoeuvre with regard to both domestic (e.g. welfare state and economic diversification) and foreign policies (e.g. petrodollar diplomacy). These effects are relevant for Middle Eastern countries beyond the Gulf, too. One reason for this is that some of the non-Gulf Cooperation Council (non-GCC) countries, such as Egypt, also produce oil. Yet, even more important is that smaller oil producers and non-oil producers of the Middle East, in particular Lebanon and Jordan, are structurally dependent on payments from the Arab Gulf – such as loans, direct budget support, investment, and, not least, labour remittances.

At the same time, during periods of declining oil revenues and increasing budget deficits, opportunities emerge: lower government income results in less lavish spending schemes and can potentially strengthen reform-oriented segments within the regime. These groups might eventually start reforming government bureaucracies, seriously tackle the issue of corruption, and even initiate the promotion of job-generating industries with the aim of overcoming prevailing distorted socio-economic structures, institutional deficits, and non-meritocratic habits.

Periods of fiscal crisis are especially exciting for students of comparative political economies. They not only ‘provide excellent opportunities to see what really matters in a country's politics’ (Moore, 2004: 10), but also condition ‘policy outcomes in unexpected ways’ (Chaudhry, 1989: 104). In the words of Gourevitch,

hard times expose strengths and weaknesses to scrutiny, allowing observers to see relationships that are often blurred in prosperous periods, when good times slake the propensity to contest and challenge. (Gourevitch, 1986: 9)

In this chapter we discuss both the empirical importance of policy adjustments after the 2014 oil price decline and academic approaches of political economy apt to analyse these responses. First, we explore the oil price decline of 2014 as a potential game changer for the political economy in the Middle East. We claim that structural changes in the global energy market make it unlikely that oil prices will climb above USD 100 per barrel again in the foreseeable future. We highlight some of the fiscal and budgetary consequences of this for the nine Middle Eastern cases that are investigated in this volume. Second, we outline the most prominent concept for analysing the political economy of the Middle East: rentierism. Third, we scrutinise two major repercussions of decreased oil prices for the political economy in the Middle East. We argue that the predominant context in which policy adjustments take place is, for the six Gulf countries, the change from oil-rent abundance to scarcity and, for the three net oil importers, the significantly reduced energy b...

Table of contents

• Cover
• Half-title page
• Title page
• Copyright page
• Dedication
• Contents
• Figures
• Tables
• Contributors
• Preface
• Acknowledgements
• Note on transliteration
• Abbreviations
• 1 Pressured by the decreased price of oil: Post-2014 adjustment policies in the Arab Gulf and beyond
• 2 Upgrading towards neoclassical rentier governance: Bahrain's post-2014 oil price decline adjustment
• 3 Stalled reform: The resilience of rentierism in Kuwait
• 4 Oil price collapse and the political economy of the post-2014 economic adjustment in the Sultanate of Oman
• 5 Qatar: Leadership transition, regional crisis, and the imperatives for reform
• 6 The nexus between state-led economic reform programmes, security, and reputation damage in the Kingdom of Saudi Arabia
• 7 Federal benefits: How federalism encourages economic diversification in the United Arab Emirates
• 8 Egypt's twisted hydrocarbon dependency: A case of persistent semi-rentierism
• 9 Oil and turmoil: Jordan's adjustment challenges amid local and regional change
• 10 Lower oil prices since 2014: Good news or bad news for the Lebanese economy?
• 11 Oil and the political economy in the Middle East: Overcoming rentierism?
• Index