Oil States on the Brink?

The dictatorships of Egypt and Tunisia contended with grave problems—high structural unemployment, poverty, and poor governance, among others—and depended on repressive institutions, inexpensive consumer staples, and high oil prices to survive. The combined production of non-energy rich states in the Middle East is roughly equal to the annual output of Finland. Thus, it is no surprise that many experts predict that Syria, Lebanon, Jordan, and Yemen are the most likely governments to fall next. However, as Libya has demonstrated, the region’s oil states are not immune to discontent.Libya is bucking the trend of oil states avoiding this year’s remarkable upheavals. Similar conditions that existed in Egypt are present in its neighbor, though the perceived difference was that Col. Muammar Qaddafi’s oil rich government could buy-off the population, or at least critical elements of it, in order to maintain its position. Apparently, that is not the case. What does Libya’s situation say about other Middle Eastern oil states?Qaddafi’s return from the political wilderness in the 2000s resulted in various policy changes, some serious—renouncing terrorism and weapons of mass destruction—and some half-baked—political and economic liberalization. While the West praised his real foreign policy reforms, the internal situation (30 percent unemployment amid public sector downsizing) deteriorated. The limited political opening of the 2000s was enough to allow discontent to simmer, based mainly on poverty, without solving any problems. Libya, Tunisia, and Egypt, in the midst of domestic turmoil, all let their people dabble in freer markets and greater educational opportunities but pulled back from surrendering any power to them. The results are two governments overthrown and one country in total chaos.Authoritarian state-led reforms, as have been seen in Tunisia, Egypt, and Libya, are clearly a recipe for failure when promulgated without the economic gains to mollify repression. Not even high oil prices and paying off powerful interests could ensure stability in Libya. Saudi Arabia, whose government recently announced a series of social programs in an apparent effort to stave off protest contagion, must deal with a mixture of religious extremists, a bored and underrepresented population, large immigrant underclass, and an aging, autocratic ruler. Although Saudi Arabia’s stability is not widely questioned at the moment, neither was Egypt’s last December.Saudi Arabian oil does not inoculate the country from discontent. Some estimates of unemployment go as high as 25 percent. Most of the labor force is non-national, as many Saudis consider menial work below them. Many educated Saudis studying abroad stay away as long as possible, knowing that domestic job opportunities are slim. The nation’s high per capita GDP, around $24,000, depends on the government sustaining the welfare state in the face of a growing population. The reforms instituted by King Abdullah, including greater political speech and increased education of all citizens, might just be Egypt revisited: education without opportunity and governance without participation potentially leading to social instability.Finally, in the midst of recovery, a disruption in oil supplies from Saudi Arabia would be devastating for the world economy. Nine of the last ten recessions have followed a steep rise in the price of oil. Consider Libya and its daily export of 1.2 million barrels of oil. Prices have jumped almost $13 per barrel in the last two weeks, though the ostensible reason behind this—losing around half of Libyan production—does not justify such an increase. If this is what happens when the fifteenth largest oil exporter is threatened, what would happen if the most significant share of production slowed or stopped?U.S. interests in Egypt—Israeli security, a functional Suez Canal, and fighting terrorism—pale in comparison to the importance of stability in oil-producing states. What could the United States do if uprisings touched the House of Saud? Direct involvement is neither likely nor effective. But do not expect the minimal (and occasionally disjointed) approach seen in Egypt. Given the history of extremism and the unrivaled economic importance of a friendly Saudi Arabia, the West would resist any movement to remove the monarchy.Arab Awakening, as some are calling the protest movements, might spread to a major producer like Saudi Arabia. Populations fed up with the lack of true political and economic reforms are less likely to be appeased as time goes on. Even if Saudi Arabia remains quiet over the next few months, the potential for an uprising that challenges the royalty’s absolute power will not diminish, and is likely to increase with a declining welfare state and increasingly educated population. What happens then, and what any outside power could even do about it, could be much scarier to U.S. and Western interests than the events thus far. This image is being used under Creative Commons licensing. The original source can be found here .