Gulf States Under Pressure

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Protests in Bahrain in 2011
Protests in Bahrain in 2011. Photo: Al Jazeera English/Flickr.

Since independence, relations between citizens and their states in the Gulf have been shaped in part by the oil and gas wealth that these countries enjoy. Control over oil and gas revenues allows the governments to offer extensive benefits to citizens, while hardly needing to extract any taxes. This system, often described as a rentier state, means that while the state is absolved from the usual need to obtain income from its citizens, they in turn have less of a stake in demanding transparency, accountability and so on, or so the argument goes. Meanwhile, others in the Gulf see their state benefits as evidence of the magnanimity of paternalistic rulers.

The arguments between those who see dissidents as mere ingrates, and those who see conservatives as regime stooges, have been growing more polarized. The resulting political tensions are visible above all in Bahrain, where renewed protests are being met with an intensive crackdown today; and in the UAE, over the recent sentencing of opposition activists, and to some extent also in Kuwait. But either way, the fact remains that this economic model is not sustainable in the long term.

Divergent paths

The urgency of reform varies from country to country; Saudi Arabia has 63 years of oil at current output, while Oman has 16. Much will also depend on the international price of oil and gas: Citigroup has dramatically forecast that Qatar could have a budget deficit as early as 2015, but others are sceptical. The US shale gas revolution is watched with unease by many in the Gulf. People there have not forgotten the Japanese invention of the cultured pearl back in the 1930s, which led to a collapse in the pearling income that once enriched Bahrain, Kuwait and Oman. And while these longer term challenges are rarely prioritized by Western governments, preoccupied with today’s political crises in Egypt and Syria, they are certainly on the minds of the younger-generation in the Gulf.

Divergences in energy endowments raise the question of whether each Gulf country will follow a different economic and political development path, or whether the Gulf monarchies will opt for more political and economic integration. In 2011, the richer four promised US$ 10bn in aid to protest-hit Bahrain and Oman over the next ten years, suggesting there would be greater fiscal redistribution to offset regional political risk. But the aid has been slow to materialize, and the smaller Gulf states have often been wary of the political costs of greater reliance on the richest.

As well as affecting intra-Gulf relations, changing economic structures are bound to have a significant impact on the domestic politics of the Gulf countries and on the relations that citizens have with their governments. Economics won’t be the only factor: Bahrain and Oman, the least resource-rich, faced the largest uprisings in 2011 but their political paths have diverged since then, both because of different political cultures and because their leaders have chosen different policy options. In a Gulf region that has been undergoing dramatic growth in its populations, economies, and in education, and with information now more available, further political and social changes look inevitable. The key questions revolve around how the governments and societies will seek to manage those changes.

Long-term visions versus short-term imperatives

Most Gulf countries have published economic ‘vision’ documents – such as Oman’s Vision 2020, Bahrain’s Vision 2030 and Abu Dhabi’s Vision 2030 – to lay out a roadmap for reducing their long term reliance on oil and the state. Instead they propose more knowledge-based economies where education is paramount and job creation is driven by the private sector. There are no equivalent plans for political development, except for vague  promises of reform in the indefinitely long term supposedly when society is more mature and people better educated.

Meanwhile, on the economic front, the broad trend since the Arab uprisings has been in the opposite direction to the promises of the long term visions: spending more money, increasing salaries and creating new government jobs – all too often in the ‘monitoring their own citizens’ sector. However, they face a serious problem of inflated expectations especially among the under-30s who make up most of the citizenry and who have grown up during an almost unprecedented oil boom. Even rich Qatar can’t follow 2011’s 60% public-sector pay rise every few years.

Another trend has been to increase protections for Gulf nationals in the local labour market. Private sector employers generally prefer to employ expatriates, either because they are cheaper or because they’re seen as having more relevant skills. While Gulf nationals benefit economically from low cost foreign labour, record rates of population growth and immigration have caused some resentment. Since the 1970s the Gulf countries have pursued policies designed to promote the employment of nationals, but these policies have been ineffective and the proportion of non-nationals in the private sector has continued to rise.

At a recent Chatham House workshop young economists and researchers from the Gulf questioned why foreign consultants’ advice is avidly sought out and paid a premium for, when the national debate – especially in the constantly self-censoring press, with Kuwait being a rare exception – is tightly limited even on economic issues. A new generation of better-educated Gulf nationals are asking why the academic theories and narratives about their region tend to be produced outside it, mainly in the West. They are interested in having more of a say in how their own countries might develop in their lifetimes, suggesting that the Gulf’s investment in education may have some unintended political consequences*.

*An ongoing Chatham House project on Future Trends in the Gulf is engaging with some of these voices.

This is a cross-post from Chatham House.

Jane Kinninmont is Senior Research Fellow, Middle East and North Africa Programme at Chatham House.

For additional reading on this topic please see:

Europe’s Gulf Dilemma

Poor Gulf: Growing Inequality, No Data

Bahrain Country Overview

For more information on issues and events that shape our world please visit the ISN’s Weekly Dossiers and Security Watch.

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