Oil Is Hindering Development In the Middle East Region - Essay Example

Oil is hindering Development in the Middle East Region Introduction Oil or “black gold” is one of the natural resources enjoying magnanimous level of treasure by the entire global community. Oil literally translates to into wealth immediately on discovery and exploration. The great value of oil in the global economy relates to it being the largest source of energy for driving industrial, transport and economic processes. Actually, fluctuations in supply and prices of oil in the global market work to shake economies of all world countries. Great world powers like USA, Britain, China and Russia have involved in endless struggles and cold warfare intended to achieve control over oil rich areas to enable significant grip in the world political, social and economic affairs. Though needless to say, USA has proved greatest hunger for oil considering its earlier strategized influence and dominance of the Middle East oil reserves and elsewhere perceived to have substantial reserve of crude oil (Askari & Taghavi 2006, p. 89). Due to great value of oil in the world economy, it is valid for one to assume that countries producing and exporting billions of gallons of crude oil are economically rich and enjoy significant internal development. Unfortunately, many countries known to produce oil especially in the Middle Eastern suffer from sluggish if any significant development. Despite its great value, oil has vehemently hindered development in the Middle East. Analysis and Evaluation Over a long time since the discovery of oil, politics has assumed central place in the exploration, drilling and trade in oil products. This has been due to great economic significance of oil and its being the most depended source of energy. The focus on oil has been immense and concentrated to the extent that deaths and destruction of properties result. This has been to the struggles witnessed between groups of personalities or organizations to exercise exclusive rights of over oil (Ahmed 2013). Efforts by politicians, autocrats and scientists to explore and find other sources of energy with specific intention of decentralize focus and dependence on oil has proved futile. Oil is too important and sweet to ignore in favour of other sources of energy. Cordesman (2004, p. 15) elucidates that the national significance and importance of oil in oil exporting countries of the Middle East is only possible under relatively democratic governance structure. In fact, countries like Qatar and Saudi Arabia that exercises relatively democratic governance with proper regulations for distribution of revenue from oil enjoy significant development. Unfortunately, majority of countries in the Middle East experience leadership that are opposite those of Qatar and Saudi Arabia. Consequently, bad oil politics drain and prevent revenues from oil from reaching all citizens. The entire effect is increased poverty, widening gap between rich and poor, increased criminality and rebellion, and retarded development. One reason that Middle Eastern countries succumb to the negative development in spite of the richness in oil relates to the overdependence in oil that results to a phenomenon economists refer to as “resource curse.” This economic phenomenon refers to the inverse association between the abundance of natural resource and growth (Haddad 2011, p. 7). A close and analytical look at many Middle Eastern countries can lead to the conclusion that despite the huge oil potential, the countries experience negative growth and development. Many Middle East countries greatly depend on the oil industry and have failed to explore alternative revenue generating activities. Even though the dependency on oil might be due to the dry climatic conditions of the region, it has been economical unviable for the countries to focus on oil alone. It is due to dependency on oil that the countries suffer great impacts every time global prices for crude oil drop. Such slumps in global oil prices increase the rate of borrowing by most of the Middle East countries due to strategies by region’s powers to reduce international supply to cause shortage and subsequently increase oil prices (Cordesman 2004, p. 17). As the strategy implementation take course, the poor countries that also have lower quota in the OPEC use debts to support basic economic activities and ignore expensive developments. It is worth of mention that the majority if not all countries of Middle East subscribe to Islamic as the central religious culture. Islam has other divisions some of which teach hard stance as Jihadist that seem to believe in war to resolve contentious issues (Yamaguchi 2003, p. 57). These kinds of teaching have led to the outbursts of outlawed and life threatening groups like Al Qaeda, ISIS and Taliban among others. To survive and conduct their usually terrorist activities, the groups have tended to enter the oil industry, where they smuggle oil at cheaper prices to raise revenues. This has worked to enable the groups advance fights and terrorist activities against governments of some Middle East states. The general consequences of the wars have been the destruction of properties, lives and escalating insecurity that frighten potential investors. Another reason for dwindled development in the Middle East relate to the concept of the rentier state. Rent in the terms of Adams Smith refers to the unrealized profits that usually reaped by those who have direct input to production the process of resources. Economic laymen can refer to rents as monopolistically generated profits (Ross 2012, p. 9). Rentier states are countries that exclusive depend on profits from oil rather than on surplus produced by its population. Ross (2012, p. 12) elaborate that rentier states have political and economical powers concentrated in the hands of a few individuals who usually constitute authoritarian governments. Rent seekers succeed in forming authoritarian system that support their cause by weakening public institutions and suppress efforts to diversify the economy to create opportunities for poor populations that cannot directly access oil revenues. Renting enables the widening of public sector and encourages spending with little savings (Okogu 2003, p. 63). It also supports existence and expansion of ineffective institutions and policies used as tools by political class to enrich from oil. For better understanding of how oil has hindered development in Middle East countries, it is imperative to carry case studies of specific states including Iraq, Syria, Yemen and Bahrain. The Case of Yemen Yemen is one of the Middle East countries that though do not produce large quantities of crude oil anywhere near to compare to Saudi Arabia. Similar to other countries in the Middle East region, Yemen for a long time depended on oil for its economic progress (Schmitz 2012). It is just recently that the country begun to diversify its economy, but faces uncertainty due escalation in socio-political tension and strife. The dependence of Yemen in oil is currently ailing the country owing in fall in production and scarcity of natural resources such as water. Decline in oil production is threatening to lead to devaluation of Yemen Riyal, which will cause inflation and subsequently fan social tension and strife. Overdependence on oil compromised government from identifying other tax areas. The government used oil revenues top offer subsidies to the citizens, who would riot every time subsidies reduced. The decline in Yemen oil sector relates to rising violence and labour strives fostered by harsh economic conditions and imbalanced distribution of national revenues. The reason for the worsening economic conditions relate to the authoritarian structure of the Yemen leadership, which has decided to silence despite the rising public tension. The government of Ali Abdalla Saleh faces accusations for betraying the spirit of national unity established during the unification of South and Northern Yemen. The failure to decentralize power and resources to the south led to the development of the Southern Movement that later received the support of Al Qaeda that currently work to compromise development gains realized immediately after unification in 1994 (Scheumann 2008, p. 23). Since the leadership seems to benefit from the rents, there are little efforts to reshape the nature of the economy. The rents are also likely to be the reasons for the weak and inefficient institutions that only work to expand service industry while ignoring production sectors. The recent instabilities that are responsible for the decline in revenues have escalated poverty margins in Yemen. Currently, about 42% Yemenis consume below $1.25 daily, which is an increase from 37% in the previous years. Global powers also have a direct impact on the underdevelopment of Yemen despite having oil. Remarkable instance to stipulate the claim was in 1991 when Yemen supported Iraq in the war against USA. This move followed the review of USA and allies foreign policy that saw expulsion of about 800,000 Yemenis from the service industry in Saudi Arabia alone. USA also responded by cutting and withdrawing all aid remittances and agencies such as USAID from Yemen (Schmitz 2012). The Case of Iraq Iraq ranks fifth in the global list of countries with largest oil reserves and third largest oil producer in the Middle East. If not for the sake of oil turning to resource curse, Iraq would be one of the world’s richest economies. Unfortunately, oil curse has worked to hinder socioeconomic and political developments (Askari & Taghavi 2006, p. 82). Dependence on oil is one of the reasons for the dwindled development in Iraq. Over half of the country’s GDP accrue to oil production and exportation. The government of the country has been relying on oil to supply about 93% of the country’s revenue. This kind of blind overdependence in oil is the reason that Iraq has been facing tragic economic slumps every time global oil price decline. The economy is least diversified and there is no sector of economy that can cushion against impacts of negative global influence on oil. As discussed by Askari (2006, p. 17), authoritarian and greed are additional reasons for dwindled development of Iraq despite rich oil reservoirs. It is due authoritarian governance that led to the resignation of Prime Minister Nouri al-Maliki who is from the tribe of Shiite. This move led to feelings of political disempowerment of the Sunni Muslims who already complained about uneven distribution of oil revenues (Mcmurray & Ufheil-Somers 2013, p. 31). The consequence of the political turmoil was the insurgence of the world’s richest and most dangerous terrorist group called ISIS. The rise of ISIS has forced Iraqi government to urgently invest in security and provision of humanitarian aids to millions of refugees. This crisis of ISIS and predecessor terror groups diverts focus of the government from tangible development to security. Insecurity also lower levels of oil exploration and subsequently reducing revenues that would support development. Currently, ISIS prides for controlling oil fields in Northern Iraq, whose proceeds though low assist in recruitment of competent military men some coming resigning from Syrian and Iraqi army due to attraction by good pay. The Case of Syria Syria has been facing political and civil turmoil for over now four years. The main cause of the turmoil seems to relate to difference in political and development ideologies between President Assad’s Alawites tribe and the Sunni Muslim faction (Ahmed 2013). Historically, the leadership of Syria bases on authoritarian ideologies considering the tradition that ruling tribe controls every other resource in the country. This works to deny different groups the space to enjoy national resources, leading to rebellion of the Sunni. The current problem seemed to be in 2009 when Qatar proposed plan to establish a pipeline for natural gas via Syria and through Turkey into Europe. Instead, President Assad joined hands with Iran and Iraq in agreeing that the pipeline run across Shia-dominated regions to allow inhabitants easy access to European gas market while inhibiting access of Sunni Qatar and Saudi Arabia. Taylor (2014) explains that the authoritarian and selective political strategies chiefly based on benefits from oil, motivated outburst of Sunni rebellion against President Assad’s government that has seen Syria in war to date. The war has been serious and long to the extent that no development program can progress in Syria. Regional neighbours especially Saudi Arabia has contributed to the dwindled development of Syria by funding the Sunni rebels to fight Assad’s regime. Iran on the other hand pledges support for the government of President Assad as retaliation for support that Sunni group has for American policy towards Iran nuclear program. Conclusion The Middle East region has a great history of endowment with huge reserves of crude oil and natural gas. Oil is in its simple form a black gold that can make a country achieve quick and advanced development. Unfortunately, oil in Middle East equals resource curse that results to negative development despite plenty of natural resources with huge potential to raise big revenues. Various theories contribute to the dwindled development that most of the Middle East countries including Yemen, Syria and Iraq among others are facing. The theories include but not limited to authoritarianism, Islamism, rentier states, dependency, regional and global power politics on oil. References AHMED, N., 2013. Syria intervention plan fuelled by oil interests, not chemical weapon concern. Available from: http://www.theguardian.com/environment/earth-insight/2013/aug/30/syria-chemical-attack-war-intervention-oil-gas-energy-pipelines. (Accessed December 8, 2014). ASKARI, H. and TAGHAVI, R., 2006. 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