Gulf Shores: Gulf Shores : Addicted to Oil

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Gulf Shores : Addicted to Oil

America is addicted to oil” – George W. Bush

In today’s corporate culture, the consumer’s voice resonates deeply. If a company engages in immoral or illegal behavior, the consumer can choose not to buy the company’s products, and stage a boycott as a show of protest. This is not a new phenomenon; it occurred in Colonial America after the British government monopolized tea, and it is currently being used against Coca-Cola for it’s immoral practices, including poisoning drinking water, murdering union members, and racial discrimination. Consumer responsibility entails the following: purchasing products from a company like Coca-Cola signifies condoning and indeed supporting their actions; boycotting a company’s products sends a message to them that their practices must stop and attempts to hurt their sales enough that change becomes necessary.

What is the difference between tea, Coca-Cola, and petroleum as consumer products? The difference is that the world economy is addicted to petroleum. In President Bush’s state-of-the-union speech, he proclaimed, “America is addicted to oil”. He further stated that he wants replace more than 75% of America’s Middle Eastern oil imports by the year 2025. Currently, the plausibility of such a goal seems doubtful. As of March 2006, the United States’ third-largest source of crude oil was Saudi Arabia. Our dependence on Saudi oil is deplorable; the credentials of the Saudi Arabian government are horrendous: it has a theocratic and despotic government, oppresses women and perpetrates human rights’ violations, and created terrorists and extremists. Doing business and maintaining a strong alliance with the Saudi Royal Family greatly hurts America’s reputation for pursuing justice and democracy, particularly in the Middle East. In this sense, America fails as a responsible consumer.

When examining consumer responsibility in dealing with oil, it is necessary to see what is done with the unbelievable profits these countries receive as a result of recent skyrocketing oil prices. Some of this money is used to economically develop these petrol states (as in Dubai). But in many cases, this money is used to fund terrorism (Iran), prop-up oppressive regimes (Saudi Arabia), and spread anti-American rhetoric (Venezuela). In this essay, three countries from the Persian Gulf will be examined: Bahrain, Dubai, and Saudi Arabia. Why the Persian Gulf? The Gulf is said to possess 2/3 of the world’s oil reserves, and an arguably great share of undemocratic and oppressive governments. I will examine the political and social atmosphere of these states and conclude that we must not support their policies by ending our dependence on oil in order to achieve American foreign policy goals of democracy and freedom.

The Rentier State Effect

“Look where the most creative innovation is happening in the Arab-Muslim world today. It is in the places with little or no oil.” – Thomas Friedman

Before examining each nation and the effects of its oil revenues, it is essential to understand the implications of oil on petrol states through the Rentier State Theory.

Why should we not buy oil from a tyrannical government? What effect does our purchase have upon a citizen’s wellbeing? According to the theory, a rentier state does not rely on taxation for running the state, but rather relies on a commodity, such as oil. This becomes problematic under the principal of “no taxation without representation,” for if a government does not tax its people, it does not need to represent its people, and will remain despotic. A rentier state is also able to use its wealth to provide social services to the people, thereby making the citizens dependent and thankful to the government. These social services also disallow the development of separate social groups that may demand political rights from the state and be a source of democratic reform.

According to this theory, buying oil from a tyrannical rentier state (such as Saudi Arabia), supports an unrepresentative and undemocratic regime that does not need to act in accordance with the rights and wishes of its people. Professor Michael Ross of UCLA tested this theory empirically and proved that given many other factors, including culture and history, resource richness was the greatest factor in determining whether a non-developed state would be democratic or authoritarian.


“…some degree of trauma us needed to bring about dramatic change”. –The Economist

A cited example of the decreased dependence on oil revenue and the Rentier Effect is Bahrain. According to Thomas Friedman, “Bahrain was the first Arab Gulf State to run out of oil…[and it] is the first to hold a free and fair election, in which women could both run and vote.” Unlike its neighbor Saudi Arabia, not only can Bahraini women drive and be unveiled, but they can also vote. According to Friedman’s hypothesis and the Rentier State Theory, Bahrain had to break its reliance on oil revenues, as its abundance began to grow thin, and that meant an increasing reliance on its population for its economic growth; this decrease in reliance has lead to the liberalization of politics on the small island.

But can the democraticization of Bahrain be solely attributed to the decrease in oil? Mr. Friedman claims that Bahrain’s decreased reliance on oil is the cause of the island nation’s liberalization; but the situation is a bit more complex. The movement can also be attributed to the recent turbulent history of Bahrain. The island state was wrought with violence in the 1990s as the Shiite majority resented the Sunni emirs who ruled Bahrain. The Shiites demanded more representation and reform to dilute the power of the Sunni ruling class who were repressing them. While Thomas Friedman states that it was the decrease in oil reserves that caused democratization in Bahrain, the reason that the Shiite majority protested when they did was because of a changing social structure and the large importation of foreign labor. It can be said that the change was not the result of a decrease in oil reserves and revenues, as the Shiites did not historically benefit from Bahrain’s oil boom, so a change in oil revenues had little impact on their wellbeing. But the oil boom led to a great deal of economic diversification and to the development of the island. While the Rentier State Theory suggests that decreases in oil will lead to political liberalization, as the state will need to rely on the people, during its diversification period, Bahrain built its economy to rely on business, tourism, and foreign labor, and not its people. Furthermore, the diversification and Westernization that occurred during the oil boom was economically successful, but the social changes, including Western ideologies that accompanied it were contrary to Islamic doctrine and isolated and angered the Shiite population. While there was a decline in oil production, it was other forces, such as the example of Iran’s 1979 Shiite-inspired Revolution and the extensive unemployment among Shiites caused by the importation of foreign labor that were pivotal to their demand for representation. In 1999, after the violence had subsided, the charismatic and progressive King Hamad came to power. He has since been the source of much praise for liberalizing Bahrain, and proves political leadership to be yet another major non-oil source of political liberalization.

It can be argued that oil indirectly caused the political change in Bahrain, as Bahrain’s drive for diversification caused by the fear of dwindling oil reserves led to Shiite dissent. But we can conclude that bigger forces, such as sectarian divide, social change, and political leadership were major sources of reform in Bahrain. Therefore, claiming Bahrain as an example for other Arab petrol states and as a support for the Rentier State Theory is a premature and spurious claim.


“Yet the future that he is building in Dubai -- to the applause of billionaires and transnational corporations everywhere -- looks like nothing so much as a nightmare of the past: Walt Disney meets Albert Speer on the shores of Araby.” – Mother Jones

Dubai, one of the seven states of the United Arab Emirates, has recently become the Gulf’s economic success story. It has been using staggering oil profits to become the Middle East’s (and possibly the world’s) financial hub, even though oil only accounts for 7% of its GDP. This multiethnic and dynamic state has also become a tourist hot spot, a transportation center, a booming real estate market, and a destination for corporations to establish a foothold in the Middle East or to build a bridge between Europe and East Asia. Here will be a brief examination of what oil money has done for the economic, political, and social climate of Dubai.

Economically, Dubai is proving that it is the dominant financial and tourist hub of the Persian Gulf, and even the Middle East. Yet, Dubai is much less reliant than other Gulf States on oil. As stated previously, only 7% of its GDP is from oil, whereas oil accounts for 45% of Saudi Arabia’s GDP. Dubai’s economy is diversifying as the city-state is trying to establish itself in the world economy. A great deal of Dubai’s breakneck growth is caused by the construction that is demanded from its burgeoning real estate market and its desire to become a corporate capital. While the World Bank estimates that it will cost $53 billion to rebuild Iraq, Dubai is spending $100 billion on its current construction projects. Reportedly, one-fifth of the world’s cranes are in Dubai, and 250,000 men are at work building this fantasyland. In this sprawling city, an artificial island in the shape of a palm tree has been made as a housing development, the first of many projects. It doesn’t stop there: the world’s tallest building, the biggest shopping mall, an underwater hotel, and an indoor ski resort are all in the works. Even before the completion of these impressive projects, Dubai receives 5 million tourists each year, a number that is suggested to double shortly.

Where does all this money come from? According to The Economist, most of the funding for the stunning projects in Dubai comes from the government (namely the wealthy al-Maktoum family). Although only 7% of Dubai’s GDP is derived from oil, with oil prices increasing, Dubai is a sufficiently wealthy oil exporter. Much like Bahrain, Dubai’s oil is said to deplete soon, with estimates given at reserves ending in 2010. Dubai, also like Bahrain, is trying to become economically self-sufficient by relying on business, tourism, and expatriate labor (which will be later examined) for its economic survival after the depletion of petroleum reserves. Yet, Dubai’s most promising future source of income and investment is from abroad. Dubai’s leaders have worked hard to make it the city-state an attractive investment opportunity and a financial hub. The Jebel Ali Free Zone provides a site outside Dubai City, but within the state of Dubai, that has zero taxation and allows for 100% foreign ownership. Furthermore, after the 9/11 attacks, much of the money that Arab oil states had previously invested in America, as well as future investments, began being moved to Dubai, upon worries of an anti-Arab backlash in the US. In 2004 alone, the Saudis are said to have invested $7 billion in Dubai. While Dubai’s own oil supplies may not seem impressive, the great deal of oil money from abroad that is being invested there shows that oil is still a necessity for the growth of the burgeoning city, particularly after the city-state’s reserves run out.

Politically, Dubai is not democratic. On the Economist’s 1-10 scale of democracy, with 1 being a dismal democracy, and 10 being a perfect democracy, the United Arab Emirates (the federation Dubai is a part of) was given a rating of 1. While it had the highest ranking of economic openness in the Arab world, its political freedom was given a 1, and its press freedom a 3. One of the suspected reasons for this lack of political freedom is the lack of taxation (following the principle of no taxation without representation). As one Saudi once said, “I would love to pay tax, if only so I wouldn’t have to pretend to be grateful all the time.” But the status of taxation is not likely to change, as Dubai seems poised to be able to rely on investments, tourism, and expatriate labor to fuel its economy in the future.

Socially, religiously, and culturally Dubai is fairly open. A writer from The Guardian notes that “[Dubai] is not a Saudi Arabia. Brokeback Mountain is soon to open in Dubai cinemas, which it never could in Saudi Arabia”. But the biggest and most common problem with Dubai’s social structure is the treatment of its expatriate labor force. Human Rights Watch stated that Dubai is sustaining its growth on “forced labor”. When workers come from abroad, mainly from India and Pakistan, their visas and passports are confiscated to ensure against escape. These workers are then crowded into rooms with up to twelve people, work in unsafe environments that have led to unnecessary deaths, and are not always paid on time or even at all, in many cases. And there is nothing that these laborers can do: labor unions are strictly outlawed in Dubai. Treatment of construction workers aside, prostitution and child slavery are also posing problems for the city-state. HBO Real Sports reported that Dubai’s jockeys, "some as young as three -- are kidnapped or sold into slavery, starved, beaten and raped".

As an economic model, Dubai holds little competition, and is arguably the most economically developed Gulf state. It serves as an example of how oil wealth should be used. Although Dubai has made leaps-and-bounds over other Gulf States economically, its lack of democracy, as well as its practices for achieving its economic growth and prestige are shameful and must not be condoned.

Saudi Arabia

“I would love to pay tax, if only so I wouldn’t have to pretend to be grateful all the time.” –A would-be Saudi democrat

Saudi Arabia has the largest oil reserves and the highest production of oil in the world. It is also the third largest source of crude oil imports to the United States. Saudi oil is pivotal to the world market; if its production slows, world oil prices will rise, even affecting the price of domestic oil; if its production increases, oil prices fall and the world economy breathes a collective sigh of relief. While the world is dependent on Saudi oil, the Saudi Arabian government is likewise dependent on its oil revenues. Petroleum accounts for 75% of Saudi Arabia’s budget revenues, 45% of GDP, and 90% of export earnings.

With Saudi oil being so abundant and so important, it is no mystery why the United States and Saudi Arabia are such close allies. But aside from petrol politics, what do the United States and Saudi Arabia have in common? Very little, I would argue.

Two big discrepancies between Saudi Arabian and American policy lie in the Saudi form of government and Saudi Arabia’s legal system. First, the despotic Saudi royal family runs the government. On The Economist’s scale of democracy, Saudi Arabia was given a 0 overall and a 0 in Political Freedom. Furthermore, the article details that “[Saudi Arabia] is the Gulf’s political laggard, with no representative institutions of any kind, a heavily restricted press, and fearsome security services”. While United States policy pushes for democracy in the Middle East, even going so far as to engage in war and occupation in Iraq to achieve this goal, its close relations with Saudi Arabia as a chief regional ally and business partner are hypocritical. The United States must rethink its relations with Saudi Arabia if it wishes democracy in the Middle East.

Second, Saudi Arabia’s legal system is based on Sharia law. This legal code, coupled with Saudi Arabia’s Wahabi branch of Sunni Islam that is imposed on the population, has been the source of the mistreatment of Saudi women and the oppression of minorities. In Saudi Arabia, women are not allowed to drive, go to the music or video section of a store, or mingle with men outside of their family. Its theocratic government bans all religions but Islam, thereby oppressing religious minorities. The Economist declared that Saudi Arabia has the worst rankings of women’s rights and religious freedom in the Arab World.

This environment of theocratic law and despotism has produced extremism and terrorism. Fifteen of the nineteen hijackers in the September 11, 2001 attacks on the United States were Saudi nationals. Wahabist schools, theocratic schools funded by Saudi oil money, serve as a breeding ground for terrorist recruitment and the spread of extremist ideologies responsible for such horrific attacks. Furthermore, the extremist views that are perpetuated in Saudi Arabia have led to a recent increase in anti-American sentiment in the country.

The ideologies that the Saudi government purports are completely contrary to American policy and ideology. The treatment of women in Saudi Arabia is horrendous and contrary to American ideologies of equality and freedom to all. Moreover, the intolerance of religion is incompatible with the principles established by the United States’ founding fathers of the separation of church and state and the freedom of religion.

While diplomatic pressure from abroad has resulted in some change in Saudi Arabia, effective and substantial reforms are absent and much needed. Decreasing our reliance on Saudi oil, and oil in general, will end our support of extremism and the theocratic and despotic government that has created terrorism by lowering oil prices and thereby lowering Saudi revenue. According to the 9/11 Commission Report, the Saudi-American relationship must be a “relationship about more than oil. It should include a commitment to political and economic reform…It should include a shared interest in greater tolerance and cultural respect”.

The Case for Less Oil

“Thinking about how to alter our energy consumption patters to bring down the price of oil is no longer a simple hobby for high-minded environmentalists or some personal virtue. It is now a national security imperative”. –Thomas Friedman

It can be said that being a responsible consumer must not stop at the purchase of soft drinks, but it must extend to every company or state whose products we purchase. While Dubai used oil money to develop, its undemocratic practices and inhumane actions and must not be condoned. Likewise, we must stop our support for Saudi Arabia’s government; a government which breeds terrorism, oppresses its women and minorities, and fosters autocratic and theocratic rule.

Although a decrease in oil revenue did not directly change Bahrain politically, in Dubai, oil money seemed to be positively used for economic development. But development came at the cost of democracy, slave-like labor conditions, and a legacy of prostitution and child slavery. Saudi Arabia’s theocratic and autocratic government proves to be a troubling example of a powerful state with a tradition of repression and intolerance. Our support of the inhumane and undemocratic policies of these states must end through a decrease in the reliance on oil imports.

The Rentier State Theory makes the case for the end of autocratic petrol states through the decreased dependency on “the resource curse.” As Thomas Friedman stated, “Although we cannot affect the supply of oil in any country, we can affect the global price of oil by altering the amounts and types of energy we consume”. While Saudi Arabia and many other tyrannical and oil-rich states may have petroleum reserves that will last for decades, the world, especially the American people, can instate change by relying less on oil, thereby decreasing its price. This will lead to petrol states relying less on natural resources and looking more to their people for support, thereby encouraging representation and a government that answers to its people. But one must also note that the example of Bahrain and Dubai showed that waning oil supplies did not lead to political liberalization, but rather it led to economic diversification. These states began relying on other sources of revenue, such as business, tourism, and foreign labor, not necessarily its people, thereby weakening the opportunity for a democratic movement to arise.

While Americans and the rest of the developed world may benefit from the conveniences of using oil to power our lifestyles, it is at the expense of the victims of the petrol states: their own oppressed citizens and even their customers, who are the victims of the terrorism created by the extremism of these states. As responsible consumers, we must be wary of where our products come from; oil is no exception. We must end our support of the undemocratic, hate-mongering, and oppressive petrol states. While we cannot be certain that the Rentier State Theory can be applied to Saudi Arabia, by using less oil, we end the support of its government and achieve a symbolic and strategic victory. Through an effective energy policy, including researching new technologies and conservation, achieving this victory can become a reality.

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