The market for natural resources is utterly fragile and unpredictable. Thus, depending solely on the exportation of oil was foundationally seen as unsustainable by the GCC leadership decades ago; especially due to a number of events that directly showcased the fragility of the market in the 1980s and the 1970s, where price slumps were of regular occurrence due to the hostile international and regional political environment. The latter happened to be the main source of income for the majority of the GCC states and thus the guarantor of their welfare system, and thus stability of the country — therefore the nature of the oil market directly affected and mirrored the domestic political and economic situation; as such, when the market is fragile, so is the locality.
The need of diversification is not purely related to the desire of income and wealth — one ought to take into consideration the political realities of the GCC states; and mainly factor in that the GCC is a triablist monarchical region. First of all, oil/wealth is a source of legitimacy of these rulers and it is a guarantee that they will remain in power and in stable control of their environment in terms of keeping the citizens satisfied in terms of financial well-being. This is related to the fact that tribalism and tribal mentality is still very prevalent in the Gulf; where the societies live in accordance with tradition and as such tradition goes, the monarch is responsible for the welfare of those that acknowledge and legitimize him as the ruler. Currently, without diversification, the Oil monarchs would not be able to keep up with the “economic bargain” between the state and the citizens. Natural reserves, additionally, are not just ruler legitimacy oriented; it is a guarantor of the legitimacy of the state as a whole and for its institutions to be able to fully operate in terms of self-survival. Oil itself was a political tool for the rulers to maintain authority, which they had historically struggled to do prior to the latter commodity increasing their wealth and sophisticating the domestic economy. Hence, it is very clear as to why the rulers need diversification. Oil profits have decreased over time and not to mention that the natural resources themselves are very limited; reserves are running out, and the global economic trend has been that becoming less dependent on fossil fuels is seen as a major threat to power by current GCC rulers and to the state.
The GCC states, in need of economic diversification, have tended to follow, or rather try to model their economies in accordance with what is known as the “Gulf Model” — a mixture of different economic policies and initiatives that heavily focus on moving-on from the economic dependence of the state on natural resources. In a sense, Gulf countries do not massively differ in terms of their diversification policies and plans — as such, all the GCC countries are engaging in massive infrastructural development projects to help facilitate the transition; not to mention they additionally are aiming to further integrate with the global economy. The general difference is mostly in success, and again, that is majorly related to the depth of the reserves in terms of natural resources and wealth. Dubai is the first “successful” post-oil type of an economy and was a pioneer in terms of creating an alternative sustainable economic model for a GCC state that was not based or driven by natural resources; even though the initial creation of that economy through the policies and developments, in terms of funding, came from the revenue gained from the export of the prior mentioned commodities.
The reformation in the GCC is definitely prevalent and is in direct connection with the promotion of diversification initiatives. The Gulf States do tend to sometimes follow each other in terms of trends, and reformation is one of them. As Saudi Arabia led by the crown prince announced social liberalization, there has been a prevalence of liberalized approach to political reform in the GCC as a whole; even though the states remain monarchical, the autocratic feel has been decreasing due to the addition of “modernities” in the traditional political structures such as tribalism and tribal councils. Economic diversification cannot be achieved without reformation of the political realities of the GCC states — and the leadership understands this.
Climate change is a major factor when it comes to discussing diversification in the Gulf. Foundationally, and taking the example of Saudi Arabia, the leadership is in “partial acceptance” of the fact that their main source of income is also the main contributor to climate change — the latter position hints at the fact that the “attachment” to oil in terms of it being the main source of income remains strong and is of vital importance for it to remain so. The Gulf states, in the present circumstances, are not able to afford to lose their main source of income as they are far away from a satisfactory level of economic diversification to sustain themselves; as such, agreement with the international organizations, in terms of condemning fossil fuels and oil as a source of energy, equates to vulnerability and instability both domestically and internationally — as seizing production automatically means a severe economic and socio-political crisis. Going back to the example of Saudi Arabia, the way that the leadership acts could be characterized as that of a public relations stunt to remain internationally, in terms of reputation, acceptable.
Using Dubai as an example, one ought to realize that diversification is possible through different means, however, it comes at a cost. One would also realize the difficulty in implementing diversification policies to begin with, taking the example of Saudi Arabia which has struggled to keep up with the desired goals in its policy and development plans for a future Saudi Arabia. Additionally, it could be concluded that diversification must be implemented in combination with political reformations, the latter which would encourage more involvement of the public into governance and would promote the new business opportunities and general entrepreneurship in the Gulf. Overall, the Gulf is heading towards liberalization and modernization in terms of both the society and the economy.
The views and opinions expressed in this article are those of the author.
The author is from Tbilisi, Georgia. He is studying international affairs at Georgetown University.
