Black Gold: The Political and Economic Effects of Oil in the Middle East 

 

The early 20th century saw the Middle East transform into a major focal point for the world 
powers. During that time, the region gained importance as a major trade route to Asia and 
was under occupation by the colonial forces. Today the Middle East is far more important as 
it has within it a resource that is of supreme importance to the industrialized world. Oil has 
provided the Middle East with a tremendous amount of wealth, but at the same time has 
brought with it corruption, conflicts and an unsustainable lifestyle for the people of this 
region. Unfortunately, unlike the west, the Middle East has been unable to organize and 
project itself as a unified economic power like the EU or the G8 and take advantage of its 
massive oil reserves. The sheer importance of oil as a major source of revenue for Middle 
Eastern states as well as literally the fuel behind the growth of the massive western 
economies has given the region significant importance in the agenda of foreign policy makers. 
However, despite the wealth provided by oil, the leaders of the region remain embroiled in 
internal political disputes within their constituents as well as external conflicts with their 
neighbors. The countries in this region have been unable to make effective use of the oil 
revenues to substantially alleviate the economic hardship faced by its people and join the 
ranks of the industrialized nations. Despotic rulers run most of the Middle Eastern states 
where democracy has yet to take root. These leaders, who remain unaccountable to their 
people, are widely known to be corrupt and due to their suppressive policies and blessings 
from major western powers, are still in charge of running the affairs of their states. All of 
these factors beg the question as to whether oil has been a blessing or a curse for this ancient 
region, which has seen itself battered by various powers over the past century and continues 
to struggle in the modern era. 

 


The importance of the Middle East is primarily because it holds approximately 65%1 of the 
world untapped petroleum reserves and has the potential of having larger reserves if intensive 
exploration is carried out. During 2004, oil sales provided the region with $3382 billion in 
revenues, a colossal amount by any standard. The importance of oil for the industrialized 
world has attracted the attention of western and primarily American interest in the region, as 
there is a strong need to ensure that oil supplies remain uninterrupted. Saudi Arabia is by far 
the most important Middle Eastern oil producing state as it holds 25% of the world�s oil 
reserves1. A close second is Iraq, which not surprisingly for many was at the receiving end 
of two US led invasions and is now firmly under US control. Despite the wealth brought in 
by the oil, the Middle East has yet to develop its infrastructure. The uneven distribution of 
wealth in the Middle East has led to extreme disparity in the income per capita of the region 
and spilt the population categorically into the poverty-stricken and the excessively wealthy1. 
In fact, according to the Human Development Index, a standard of living index, the only 
countries in the Middle East that figure in the top 50of some 180 countries are Bahrain(40) 
Kuwait(44), Qatar(47) and the UAE(49)3. Clearly, the index does not present any exciting 
figures for the region. 

 

The fact that there is immense foreign interest in the region and that these powers have 
established bases all over the Middle East means that there is something clearly wrong with 
Middle Eastern policy makers. Although foreign intervention is not something new to the 
Middle East, the US military has taken up an almost hegemonic role in Middle Eastern 
politics. In fact, Middle Eastern states ally with the United States to seek protection from 
other hostile Arab regimes. In the past and currently, the small Arab Emirates, Saudi Arabia 
and Egypt have closely allied with the US and gained protection from threats to their 
sovereignty, which of course is ironic since they are not completely sovereign by doing so. 
Foreign powers are so engrossed in Middle Eastern affairs that they are prepared to intervene 


in any event that might destabilize the region. More recently, the US intervened after Kuwait 
was attacked by Iraq on the pretext that it was overproducing oil and hence conducting 
economic warfare against Iraq4. In fact, the instability of the region is such that it has 
witnessed over 20 wars ever since 19485. To add fuel to the fire, Middle Eastern rulers have 
created a sense of fear in the minds of their citizens and this has been a self-fulfilling 
prophecy resulting in the region falling victim to numerous wars. The leaders of these states 
have used the oil money to purchase sophisticated weaponry from western nations to further 
incense this insecurity and at some instances, the weapons purchased by these states are more 
modern than the ones used by the countries providing them1. In fact, Middle Eastern states 
have spent twice as much on average on military expenditure than on education and around 3 
times more than on health6. The priorities of the leaders in the region seem to suggest that 
they are bent on distracting their constituents from more pressing issues such as education 
and economic development. 

 

There are many reasons behind the backwardness of the Middle Eastern countries. Many 
western scholars argue that Islam is a major factor behind lack of freedom and education in 
the region; however, examples of Muslim �Tiger� countries such as Malaysia and Indonesia 
prove otherwise. The western powers have had a huge role in playing out the politics in the 
region for the past century and aside from actually creating the map of the modern Middle 
East after World War II, these powers never really left this region any sovereignty when they 
left. According to the lecture by Professor O� Donnell, the US interest in the region is also to 
control oil prices, through which the US would be able to control the Chinese, Indian and 
Japanese economies, a useful tool to see that America�s competitors are kept in line. This 
lack of freedom from foreign powers is one important reason why the region has never really 
developed on its own until the rise in demand of oil and the subsequent inflow of �petro-
dollars� to the region. While the US has been pivotal in the wars for spread of democracy and 


freedom in Vietnam and Korea, it seems as though it does not care much the Middle East in 
terms of its political development and economic self-sufficiency. The reason behind this is 
that if democracy were to be rooted in the Middle East, the masses would have a clear say in 
the policies of their government. Obviously, previous experience with the colonial powers 
and the current western and especially American support of Israel would clearly factor in the 
supply of oil. For the US and other western powers, it has been a primary responsibly to 
ensure that the despotic rulers of the Middle East are kept in power to guarantee the secure 
and uninterrupted supply of oil. Along with this measure, it has never been a policy to 
promote education and social stability in this region. If the Middle Eastern states were to 
become self reliant on their own people, it would be of immense cost to the west. Oil 
revenues are used to purchase machinery, banking services, weaponry etc from the west7. If 
the Middle East becomes a major economic power, it would not need such services from the 
west and this would be huge economic loss for the countries providing these services. 
Foreign policy towards this region has aimed to keep the leaders of these states satisfied and 
in power, as there is little reason for the west to worry about what leaders then do for their 
people. However, as seen with Saddam Hussein, removing a leader is not very hard for the 
western powers. According to Professor O�Donnell, Iraq will play a central role in the US 
petroleum market in the next couple of decades and would require an elaborate and 
sophisticated infrastructure to provide the oil production needed at that time. Under the reign 
of Saddam Hussein, this process of modernization of the oil production facilities would be 
problematic and hence there was a need for a new Iraqi leader. 

 

Some states however need not worry about self-reliance as it is of up most importance to 
remain sovereign while modernizing. Such a state is Iran, which has large population of 
professionals such as technicians, engineers and doctors. Arab countries like Saudi Arabia, 
Kuwait and others are prime examples of states that have not used their oil revenues to build 


the infrastructure needed to sustain and develop a modern economy. While countries like 
Singapore built themselves on tourism and professional services without the revenues from 
any single economic resource, Arab states have failed to produce an elaborate plan for the 
future. The failure behind this problem lies in the leadership of these countries and the 
leaders who have continuously failed to recognize or even care about the long-term effects 
their policies on the region. For example, there are no world-renowned institutions of higher 
learning in the region, a key tool in developing a sustainable economy. However, this may 
ultimately be because more education will eventually lead to the freedom of ideas and 
eventually the downfall of the corrupt regimes. Whatever the case may be, oil revenues have 
been mismanaged in the Middle East and while there is immense potential for the region to 
develop into a economic powerhouse, there is little to imply that it is heading in that direction. 

 

To answer the question as to whether oil has been a blessing for the Middle East or a curse, it 
would make more sense now to assess whether oil still has the potential of being a blessing. 
Clearly, oil has brought in foreign powers and corrupt leaders, but while oil revenues last, the 
effects it has on the politics and economic life in Middle East is unmistakable. The misusage 
of oil revenues and the general mismanagement of the oil producing states is one reason why 
the Middle East is not an economic power today. No doubt the oil reserves in this region are 
a blessing for the states which have them as the oil brought them enormous wealth, but all 
that is needed now is accountability and proper utilization of the �petro-dollars�. Although 
this is not an easy task, it needs to be given prime importance especially before the revenues 
run out and the Middle East turns into desert wasteland rather than the oasis it ought to be. 

 

 

 

 


Bibliography: 

 

1 Klare, Michael "Oil Conflict in the Persian Gulf" in Resource Wars: The New 
Landscape of Global Conflict, New York: Metropolitan Books, 2001, pp. 51-80. 

 

2 OPEC oil revenues: http://www.eia.doe.gov/emeu/cabs/opecrev.html

 

3 Human Development Index: http://hdr.undp.org/reports/global/2004/pdf/hdr04_HDI.pdf

 

4 Timeline of the Middle East 

 http://www.pbs.org/wgbh/pages/frontline/teach/gulfguide/gwtimeline.html

 

 

5 List of wars in the Middle East: http://www.historyguy.com/War_list.html#warlist13a

 

6 Military and Social Expenditure index. 
http://www.sipri.org/contents/milap/milex/mex_burden.html

 

7A great deal of information has been used from the research project I undertook with 
Professor O�Donnell during winter 2004. Our research was about the geo-politics of the 
war in Iraq. 

 

http://www-personal.umich.edu/~twod/oil/

 

Content from the following web pages was helpful in providing information on the US-
Arab relations. 

 

http://www.saudi-us-relations.org/newsletter2004/saudi-relations-interest-07-13.html

 

http://www.intellectualconservative.com/article3111.html

 

http://www.markswatson.com/globalinstab.html