Middle Eastern Studies - Term Paper Example

Middle Eastern Studies Oil has only surfaced as an important commodity for the Middle East during the ebbing decadesof the 19th Century and well into the 20th Century (Gelvin 248). This period is what economic historians refer to as the “second industrial revolution.” The second revolution is particularly significant as it marked the foundations for what are now (essentially) petroleum-based economies of the Middle East. Most of the Middle Eastern government policies inclined towards realization of economic and social development has been fuelled by revenues generated various natural resources within the region. The major source of these revenues is derived from the oil resources. Others include the nationalization of assets previously owned by foreigners or ‘enemies of state’ and foreign aid. Collectively, such revenue streams are economically referred to as “rent”; similarly, states that are primarily dependent on such revenue streams are referred to as “rentier states” (Gelvin 247). Infamously, such states are referred to “allocation states” coined from the fact that the states’ distribution of rent generated in the aforementioned manner favors particular clients or projects. Each state in the Middle East-more or less- relies on rent income. In the period between 1980 and 1988, a third of Egypt’s government revenue was derived from rent. Over the same period, it also benefited substantially from aid from the United States amounting to about $2 billion annually (Gelvin 247). The involvement of Western powers in the oil wealth of the Middle East has entrenched historical backgrounds. More specifically, their participation was ‘cemented’ through the establishment of agreements or concessions that saw the emergence of strong consortia that have firm hold-unto now-within the oil industry (Fawcett and Giacomo 15). Oil companies would come together to undertake large contracts which exceeded the capacity of any single firm. Such contracts –perhaps uncharacteristically so-extended between sixty and seventy-five years and granted these consortia exclusive rights to exploit, produce, refine, transport and market the oil. Over the past half century, the most dominant consortium in the oil industry has been that of the “seven sisters” consisting of Exxon, Mobil, Chevron, Gulf Texaco and British Petroleum (Gelvin 249). However, the blatant imbalance in the distribution of the benefits from oil exploitation as to the host nations propelled the formation of an association that would better represent the concerns of oil producers. Furthermore the threat of diminished returns arising from a fall in demand and subsequent slashing of prices by the consuming West-as was the case during the recession of the 1960s- had to be effectively dealt with. The formation of the Organization of Petroleum Exporting Countries (OPEC) in 1970 significantly increased this power and with it oil prices rose by 380 percent. Oil wealth therefore shifted from the industrialized and importing Western states to the producing Middle East (Gelvin 250). The Middle East has seen the staging of two major games. Firstly, and which has recently surfaced with revolutionary effects, that of citizens and governments; usually on opposing ends and rarely in cooperation (Richards and Waterbury 1). The recent revolutions in Middle Eastern states-dubbed the Arab Spring-such as Libya, Syria, Morocco, Algeria, Egypt and Greece have born evidence to this play. In this game, the motive and desire for the advancement of prosperity and national development has seen the ousting of long-serving governments. In Egypt, specifically, it has seen a transition in which the ousted government and long-serving officials additionally face criminal proceedings. The political space internally is highly uncertain with the much anticipated calls for free and fair elections pitted against the influence of the interim Egyptian military council. Secondly, another battle is underway intersecting the region’s [politics with those of the Western superpowers such as Britain and the United States. The contest for balance is particularly aggravated by the presence of large deposits of oil and natural gas within the region. The region holds at least two-thirds of the World’s known oil and natural gas deposits, in addition to having off-shore links to Asia and the Mediterranean (Richards and Waterbury 2). Consequently, a substantial influence over the formation of public policies for resource exploitation and distribution of benefits creates an enriched incentive for political actors both internally and externally. Now, more than historically before, the Middle East creates an extraordinary stage for high conflict; much of which is externally generated (Richards and Waterbury 2). Oil has been and seemingly remains, in equal measure, a blessing and a curse for the Middle Eastern countries (Noreng 36). However, Egypt lacks a capacity-compared to the other oil producing nations in the Middle East-to affect World economic growth due to its relatively small portion of production and export of oil (Voice of America). Despite this, it remains a critical player in the international oil export since key pipelines are laid across Egypt in addition to her control over the Suez Canal which overseas eight percent of the World’s shipping vessels-including transport of two million barrels of oil per day (Askari). These attributes make Egypt a strong geopolitical actor in both global and regional trade in the commodity market-including oil. The influx of oil revenue into Egypt has had significant, direct and important political and socio-economic effects as is in the entire Middle East. Oil rents have the impact of centralizing domestic or host politics (Richards and Waterbury 15-16). In Egypt, the politics predictably were to sustain the Military influence in domestic politics through the extended reign of Husni Mubarak, himself an ex-military. This centralization is also evident during the collapse of this regime where the military council took temporary administration of the state as they await and prepare for fresh democratic elections. Secondly, they encourage the state’s avoidance of hard development alternatives. Egypt and other countries whose rent from oil was neither large enough nor stable suffered from this effect early on during the 1980s (Richards and Waterbury 17-18). During this period its oil receipts amounted to about $ 2.8billion annually alongside substantial expatriate remittances of approximately $ 3billion. The country at this point in time was better poised to reform the high distortions in domestic commodity prices as well as balancing and restructuring the labor market. Why was this foresight particularly significant to the policy makers? Was it glaringly apparent? Such questions would manifest themselves through actions several decades later. The export of labor has developed a political angle within the Middle East (Richards and Waterbury). Labor-importing states have in the recent past acted on their threats to expel foreign workers from their mine fields and general industries. Prior to the Gulf War, over a million Egyptian migrant workers as Egypt was part of the Gulf War coalition led by the United States. The transmission effect was felt even after the end of the war when Kuwait expelled over seventy thousand Palestinians accusing them of being anti-Iraqi. Not wanting to be left out or undermined in this regard, the Saudis expelled over a million Yemeni workers in protest of Yemen’s support for Iraq. In this regard, labor migration has increased the grip of labor-importers in the balance of power within the Middle East (Richards and Waterbury 254-255). Failure by the Egyptian administrators to adhere to the aforementioned insights manifested itself in early 2010/2011 when the country radically changed from being an oil exporter to an oil importer (Gail the Actuary). The country was experiencing a radical decline in oil production that was disproportionate to the rising demand both by industries and households. Additionally, this energy challenge was further compounded by the problem of decreasing food sustainability for the growing population. The connection between oil production and exports and food security is seen in several ways. Firstly, the access to oil rent had consistently been the dependable source of revenue for the Egyptian government. Additionally, Egypt alongside Jordan and Syria were beneficiaries of grants by rentier states of the Middle East through the international redistribution of oil rent. However, the fallout of Egypt in the wake of Pan-Arabism saw the varnishing of this Arab aid (Richards and Waterbury 98). Egypt shunned the OPEC and opted instead for a treaty with Israel. She embraced an open approach to international trade in a bid to source international investment and boost economic reforms. Considering that oil earnings were used to subsidize food and energy locally, the drop in subsidy saw inflation in food commodities making it highly expensive for its citizenry to access basic food items. Secondly, rents have inhibited the increase in production of agricultural produce locally. The Middle East is the most food-insufficient region in the World. The demand for food has grown consistently from the 1970s rate of 4-5% annually propelled by an increase in income per capita and rising population (Richards and Waterbury 17). However, the political economy of the region primarily oil-based and the inherent nature therein coupled by the scarcity of water and the poor land-tenure system provided an unequal and sluggish response to supplying the food demand (Herb 299-307). As a result of these challenges, food and agricultural produce imports accounted for a third of the total imports for Algeria, Egypt and Yemen from 1993-1999 (Richards and Waterbury 17-19). The oil rent and the overly reliance on it as a source of revenue, employment and development agenda has been faulted for most of the challenges presently facing Egypt. The oil presence has contributed to the insecurity to the region as a whole (West). Whilst such instability may be associated with historical forces that are external to the region, it is clear however than little has been done by subsequent administrations in the manner of increasing accountability to the citizenry and strengthening political institutions-beyond military influence and dependence-tackling corruption and encouraging as well as safeguarding fundamental human and civil liberties (Ross 345-349). It is therefore unsurprising that with the fall of Egypt’s Mubarak regime-as is the case with other states in the Middle East that have fallen under the Arab Spring-a myriad of criminal proceedings s have followed those ousted from political positions as well as leaving fragile institutions to oversee the transition to democracy. Works Cited Askari, Hossein. Middle East Oil Exporters: What Happened to Economic Development? Edward Elgar Pub, 2007. Print. Fawcett, Louise. International Relations of the Middle East. Oxford University Press, 2009. Print. Fawcett, Louisse and Luciani Giacomo. International Relations of the Middle East. Oxford University Press, 2004. Print. Gail the Actuary. What's Behind Egypt's Problems? 29 January 2011. Web. 25 May 2012 . Gelvin, James L. The Modern Middle East: A History. Oxford University Press, 2004. Print. Herb, Michael. "No Representation without Taxation? Rents, Development, and Democracy." Comparative Politics 37(3) (2005): 297-316. Print. Lowi. Oil Wealth and the Poverty of Politics. Cambridge University Press, 2010. Print. Noreng, Oystein. Crude Power: Politics and the Oil Market. I. B. Tauris, 2006. Print. Richards, Alan and John Waterbury. A Political Economy of the Middle East. Westview Press, 2007. Print. Ross, Michael Lewin. "Does Oil Hinder Democracy?" World Politics 53(3) (2001): 325-361. Voice of America. Egypt Not Alone in Its Economic Problems . 25 May 2012. 25 May 2012 . West, Ben. Has oil wealth been a blessing or a curse for the Middle East? 27 October 2010. 25 May 2012 . Read More