The Resource Curse in the Gulf Working Group I

On October 9-10, 2016, the Center for International and Regional Studies (CIRS) held a working group under a research initiative on “The ‘Resource Curse’ in the Gulf.” During the course of two days, assembled participants identified key gaps in the literature on rentier states of the Persian Gulf, while leading discussions on a variety of related subtopics: rent distribution and development of institutions; political legitimacy; military establishments in the Persian Gulf; stability and instability; human rights in the Gulf Cooperation Council (GCC) states; gender equality; entrepreneurship; and education, occupation, and Khaleeji youth.

The working group discussions commenced with a session led by Matthew Gray on “Rentier Wealth: Curse or Cure for the Gulf.” During his session Gray provided a broad overview of existing theories of the resource curse, and identified a number of questions relating to its application in the Persian Gulf. After presenting the main arguments on the resource curse that have been made by scholars over the past decades, Gray provided a review of several questions that remain understudied or that have not been adequately addressed. Amongst other things, Gray suggested that the issue of state autonomy in rentier states is not as empirically established as theory suggests it is, and in fact remains highly debatable. It is important to provide greater empirical evidence of rentier-driven state autonomy (or a lack thereof), and studying this question within the GCC states would provide for an original case study. Gray also argued for a deeper understanding of Gulf state capitalism, and particularly the role of elites and resource rents. In rentier states institutions and corporations may serve as tools for forging patrimonial networks. These social dynamics in state institutions and corporations raise a question on the extent to which patrimonial networks are steered and maintained by resource rents. Gray suggested another important research gap exists in terms of labor policies in hydrocarbon-rich states studied from an interdisciplinary context. Insofar as foreign relations and history are concerned, Gray pointed out that there has been no comprehensive work on developing a theory of international relations in the Persian Gulf that is centered on rents and resources. Finally, there is a need for a comprehensive history of rents and rentierism in the Persian Gulf, from pre-oil rentierism to post-oil rentierism.

Desha Girod led a discussion session on the topic of “Rent Distribution and the Development of Institution in the Gulf.” Girod has carried out a comparative research project examining the challenges that faced institutional development in very different sorts of resource-based economies. She has studied the historical evolution of institutions in two African states, Equatorial Guinea and Gabon, against developments in two GCC oil states, Kuwait and Oman. Girod’s findings suggest that pre-oil discovery is important when considering the evolution of institutions in rentier states. Her examination of Equatorial Guinea and Gabon suggested that the extractive economies that were developed by colonial powers weakened state institutions and destroyed existing social pluralism. The colonial legacy led to a particular development of institutions in these two nations. Kuwait and Oman did not experience the same sort of pre-oil extractive economic conditions through colonial domination, and colonial powers were not interested in intervening in the domestic politics of either of these two states. Based on her ongoing research, Girod suggested that further study is important to assess how certain conditions (such as weak institutions) conventionally attributed to the resource curse may be in fact be an artifact of an earlier curse (such as the colonialism or institutions developed to assist the colonial project of exploiting natural resources) that shaped the development of certain key institutions. Further research is also needed so that we have a stronger explanation than the current one in the literature that suggests that “weak” versus “strong” institutions can determine whether the resource curse is suffered or avoided. It is also important to study how institutions in the GCC evolved over time, through a historical study of the sorts of institutions that existed in the Gulf during the time of hydrocarbon discovery, and how these subsequently shaped the ways in which rents were used by the modern states that came into being. Another area of research suggested by Girod is on the role of external actors in the GCC, their impact on institution building and the use of rents.

Building on Girod’s discussion, Mehran Kamrava led a discussion on “Political Legitimacy and Scaling Back during an Oil Bust in the Gulf.” Kamrava claimed that there are differences among GCC states in terms of patterns of state building, social cohesion, rent-driven policies, relationship between ruling families and tribes, and bureaucracies. These differences are stimulated by implicit understandings between ruling families and other stakeholders, such as the merchants, pre and post-oil discovery. Stakeholders’ corporatism and marital bonds between ruling families and stakeholders contributed to the resilience and adaptability of the social contracts between ruling families and stakeholders; and thus to the establishment of enduring ruling bargains. Kamrava also argued that Persian Gulf states have reacted differently to fluctuations in oil prices. The variance in reactions raises a question: what are the conditions that shape states’ responses to changes in oil prices? Kamrava added that in countries where the State establishes strong clientelistic relationships with the merchant class through offering contracts, the merchant class becomes more dependent on the State, especially during times of downturn. How did entrepreneurial classes and States react in three different oil bust cycles? What was the relationship between state and business in previous oil cycles? And what does this tell us about institutional evolution between the three oil boom and bust cycles? Kamrava also claimed that States have responded to economic downturns by promoting nationalization of the labor force, which has decreased the efficiency of state institutions. Finally, Kamrava argued that identity politics captures public imagination rather than issues such as transparency and accountability. This questions how governments use salient concerns, during times of economic downturns, to influence social cohesion in the society.

Mohammad Reza Farzanegan focused his discussion on “Oil Rents and the Military in the Gulf.” Farzanegan raised seven original research questions that address critical gaps in the literature on the impact of oil revenues in rentier economies on military establishments. First, he claimed that a systematic analysis of the correlation between GCC military spending and oil prices is missing. Thus, what is the impact of positive and negative oil price shocks on military spending? Second, Farzanegan claimed that the effect of oil revenues on military spending depends on the level of corruption. This raises the question: how does the quality of political and economic institutions matter? Third, he argued that increasing military spending may increase political stability at higher levels of oil rent; while at lower levels of oil revenues, increasing military spending may require cutting social spending such as subsidies and other transfers, leading to reduction of life satisfaction of locals and higher political instability. Thus, it is critical to examine how do fluctuations in oil revenues matter insofar as the effect of military spending on political stability is concerned. Fourth, since Middle Eastern countries have one of the highest levels of military spending burden around the world, how does economic growth impact military spending? Fifth, is there a military spending threshold pegged to oil rents and growth? Sixth, Farzanegan discussed the youth bulge in the GCC, and how this can be a burden on governments if oil rents decrease. He asked if there is any moderating role of oil rents and military in the stability-youth nexus. Finally, Farzanegan highlighted the effect of oil rents on corruption, which questions how the involvement of military establishments in politics can impact corruption insofar as military spending is concerned.

Jessie Moritz led a discussion session on the topic of “Resource Rents and Stability/Instability in Gulf Societies.” Moritz argued that there is a difference between “resource abundance” and “resource dependence.” She stated that resource abundance promotes regime stability, but resource dependence promotes violent conflict or instability. In examining this issue, Moritz raised a series of questions, among which: what makes an individual, or a group of people, challenge the State? And how do states co-opt public dissatisfaction? Moritz also emphasized the importance of studying exceptions to rentier logic, rather than just focusing on commonalities between rentier economies. She claimed that studying these exceptions lead to another series of questions, such as: how effective has state co-optation been, especially on the subnational level? What causes subnational groups to move away from the royal court’s side, to the opposition’s side? Is political loyalty determined by rent distribution? What has happened to reformist groups, especially when oil prices are at a low? How effective will broader societal movements be? Will they be able to influence state policies? And will they side with particular factions of the regime against others?

Zahra Babar led a session on “Hydrocarbons and Human Rights in the GCC.” Babar suggested that the “universality” of human rights remains highly contested, with polarization between which rights are meant to be prioritized in different contexts. Within the GCC there continue to be limitations on political and civil rights for individuals, while rentier resources may have led to the evolution of greater protections for economic and social rights of citizens. Most of the studies of the Gulf states are from the perspective of human rights in authoritarian and non-democratic contexts, and have not applied the lens of rentierism and human rights. Babar identified a number of research gaps in relation to the evolution of human rights issues in rentier-based political economies of the region. Among other things, Babar raised the need to study the question of the impact of falling or rising oil prices and how they increase or limit political freedoms and human rights in the GCC. A second research gap raised by Babar was on the role of international actors and external patrons, and the advancement of human rights in Gulf oil monarchies. Human rights regimes have found greater means of imposing disciplinary mechanisms (such as sanctions or isolation) on “pariah states” that somehow are presented as being outside the norms of international relations. How do human rights actors interact with more complex cases such as the GCC states that have been considered to be “security partners” or “economic partners” and critical to the global energy economy? A third set of research questions center on the narrative of citizenship and its sets of rights across a spectrum of GCC distributive states which vary in the degrees of capacity to distribute. Post 2011 increasingly the GCC states have been conflating their goal of “protecting economic rights” of citizens with increasing measures to securitize citizenship – how is this impacting the regional human rights narrative? Finally Babar raised a number of areas of research in relation to the Gulf oil sector and human rights. Clashes and confrontations between the global oil industry and international and transnational networks of human rights have been increasingly commonplace from Sudan to Ecuador, how come we have not seen the GCC as a locus of this exchange?

Following Babar’s discussion, Gail Buttorff led a session on “Hydrocarbon Wealth and Gender Equality in the Gulf.” Buttorff started off her session by highlighting the major differences between GCC states in terms of level of rentierism, political economy, and social cohesion. She then listed three original research topics. First, she discussed the various nationalization policies that have been employed across the GCC, and how their impact on female participation in the labor forces remains understudied. Buttorff also claimed that the impact of fluctuations in oil prices on government efforts to boost female labor force participation is also understudied. Finally, Buttorff discussed the link between female labor force participation and political empowerment. She raised a question: does female participation in higher levels of government reflect improvements in women suffrage in the GCC?

Hanadi Al Mubaraki shifted the working group discussions to examine “Oil Wealth and Entrepreneurship in the Gulf.” Hanadi started her discussion with highlighting GCC governments’ efforts to encourage and support entrepreneurship and innovation. Yet, she claimed that there has not been any literature on the success or failure of projects supported by GCC governments. Al Mubaraki highlighted the importance of studying entrepreneurship policies in the GCC in comparison to policies employed in other developed regions. Al Mubaraki also raised attention to the challenges and opportunities in establishing Technology Commercialization programs in GCC universities, which have impacted the evolution and internationalization of GCC based entrepreneurship. Finally, Al Mubaraki questioned the outcomes of business development programs—such as business incubation programs, innovation programs, accelerator programs, and small and medium-size enterprises—on entrepreneurship in the GCC.

Crystal Ennis concluded the working group discussions with a session on “Education, Occupation, and Khaleeji Youth Success.” Ennis claimed that there is a mismatch between Khaleeji youth’s education and job market demands. Yet, this is not the only challenge Khaleeji youth face. She claimed that class, rural divide, gender, and family status factor in education and job options among youth in the GCC; this is a topic that deserves further study. Another issue is the limited production base in the GCC that impacts the analysis of Khaleeji youth labor, and our understanding of youth contribution to global production. Ennis also argued that there is a critical need to investigate the impact of neo-liberal ideologies on the social construction of youth in the hyper-modernity of the GCC, and the factors that shape economic citizenship among youth in the GCC, especially when it comes to the private sector. Ennis also discussed the impact of expats’ expertise on the learning development of Khaleeji youth in the private sector. The impacts of neo-liberal ideologies and expats’ expertise raise a question on Khaleeji youth’s perception of their belonging to the labor market.

Mehran Kamrava, Director of CIRS, concluded the working group with emphasis on the contribution of the working group discussions to literature on the resource curse in the Persian Gulf, which will be published in a special issue by CIRS in the near future.

• See the working group agenda here
• Read the participants’ biographies here
• Read more about this research initiative

Participants and Discussants:

• Hanadi Mubarak Al-Mubaraki, Kuwait University
• Zahra Babar, CIRS – Georgetown University in Qatar
• Gail Buttorff, University of Kansas
• Crystal Ennis, Leiden University
• Mohammad Reza Farzanegan, Philipps-Universität Marburg
• Desha Girod, Georgetown University
• Matthew Gray, Waseda University, Japan
• Islam Hassan, CIRS – Georgetown University in Qatar
• Mehran Kamrava, CIRS – Georgetown University in Qatar
• Suzi Mirgani, CIRS – Georgetown University in Qatar
• Jessie Moritz, Australian National University
• Moamer Qazafi, Georgetown University in Qatar
• Elizabeth Wanucha, CIRS – Georgetown University in Qatar

Article by Islam Hassan, Research Analyst at CIRS