Future of the OIL RICH Middle East???

When one thinks about Middle East they often think about oil, the relation is a reasonable one, as this region is the largest oil producer and holds enormous reserves, around 65% of the world’s reserves.

For decades, the Middle East has been trading in oil. Much of the economic development and wealth of Middle Eastern countries is due to its generous income coming from oil selling and trading.

Middle East produces 31% of total oil of the world, valued at $325 billion and though most of the oil producing companies are state owned but there are significant numbers of companies producing oil through joint venture programs. Countries such as Saudi Arabia, Iran, Iraq, United Arab Emirates (UAE), Kuwait, Qatar, Oman, Yemen and Syria are major producer of oil in the world.

  • Saudi Arabia produces around 12 million barrels oil per day which is 15% of the total oil output in the world, making Saudi the 2nd largest oil producer in the world. Saudi Arabia maintains its position on top among oil producing countries in Middle East. With a population of 34 million, the country is heavily dependent upon oil as, petroleum sector contributes around 90% of Saudi’s revenue & 45% of its GDP depends upon it.
  • Iraq- By producing 4.5 million barrels oil per day, Iraq is the 4th largest oil producer in the world. The population of the country is 39 million, 90% of Govt revenue is oil based. 65% of its GDP is dependent upon Oil & 94% of its total export is petroleum.

Political instability, mass killings & destruction of several important cities & oil fields by ISIS, lack of infrastructure these are the key factors restricted the potential of oil producing in the country.

  • Iran- Having a population of 8.2 million people, Iran is the 5th largest oil producing country in the world. It produces around 5 million barrels of oil per day. Due to its nuclear programs, U.S. imposed international economic sanctions & other restrictions on Iran which is hampering its true potential of oil production.
  • UAE- Having a small but diverse population of 9.68 lakh, United Arab Emirates (UAE), where oil covers 30% of the GDP of the country., 45% of its total export is oil based. UAE is federation of 7 Emirates (7 political territory).
  • Kuwait- With a small population of 440K & almost producing 3 million barrels of oil per day, Kuwait fits itself in the top 10 oil producer country in the world. With 6% of the world’s oil reserve, 90% of Govt income & 92% of export is oil & half of its GDP depends upon oil which makes him a small but wealthy oil-based economy.

During & after the World War-1, it was obvious that oil (especially petroleum products) is going to be very crucial in the world politics. By 1922 rumors were widespread about the possible oil reserves present in the Middle East. Ibn Saud the Head of Saudi regime at the time, contacted American companies & engineers to find the possible oil reserves in Saudi Arabia.

By 1938 American Engineers found the largest source of crude oil in the world in the Arabian Peninsula, which changed the Middle East especially Saudi Arabia’s economy forever. Soon other Middle Eastern countries followed the footsteps of Saudi Arabia.

Despite having vast oil & natural gas reserves, the Middle Eastern countries have their own problems as well.  After World War-II, oil became a key factor in world politics & Middle East was the major oil producer which they have maintained till date.

There are two major denominations in the Muslim world i.e. Shia & Sunni. Approximately 85% Saudi Arabia, Egypt, Turkey, Syria, Yemen etc. are the Sunni majority countries and 15% Iran, Iraq, Bahrain etc. are Shia majority countries in the Muslim world. There have always been conflicts between these two sects of Muslims for political dominance & oil based economic competition & intention to rule over the other has further widened this conflict.

By 1979, US backed Imperial state of Iran was overthrown by Iranian revolutionaries & it became an Islamic Republic. Iran being a Shia majority state raised an alarm for other Middle Eastern Sunni majority countries most of which were monarchies with a significant number of Shia population.

To counter this situation, Sunni countries lead by Saudi Arabia started uniting all the Sunni majority countries to spread Islam, to foster Islamic solidarity under the leadership of Saudi crown. Saudi also created the organization known as Organization of Islamic Cooperation aka O.I.C.

Saudi hence officially accepted the ultraconservative doctrine of Wahhabism (an Islamic ultraconservative movement based on the ideology of Abdul Wahab, mainly followed & practiced by the Sunni sects of Muslims across the world) to continue as Worlds Muslim leader. This ideology is very rigid and believes in ways of life and practice of religion which is almost 1400 years old, and it does not allow people to recalibrate theirs way of life and beliefs with the modern times like other regions and faiths have the flexibility to do the same.

This power race divided the Middle East into 2 blocks, one was the Sunni majority countries led by Saudi Arabia & other was the Shia majority countries led by Iran, which further forced them to enter a kind of Cold War between them hence creating instability and badly impacting the peace process in the region which in turn made the entire Middle-East volatile.

 Though the inflow of petroleum dollar in term of revenues and profits is keeping a lid on this conflict as on date as money makes the system go merry go around.

The end product of this power struggle unfortunately has given birth to several terrorist organizations like ISIL or ISIS, Al-Qaeda, Hamas, Boko Haram or regional terrorist groups like Laskar-e-taiba, Hizbul Mujahideen, SIMI, Taliban etc. which are influenced by Wahhabi ideology. All these groups have done villainous crimes & are a great threat for the whole world.

Shia terrorist groups like  Hamas and Hezbolla are responsible for targeting Western countries especially the U.S & Israel, are also involved in series of bombing, killing innocent U.S. & Israeli citizens, kidnappings and assassinations of several western officials/diplomats.

On the other hand, worldwide Sunni terrorist groups like ISIS, Al-Qaeda, Hamas, Boko Haram who have taken thousands of innocent lives, made millions of families homeless, thousands of children’s orphans, raped thousands of women, have crossed all the limits of brutality.

Also, the territory specifies terrorist group like Hamas (which also belongs to the same block) have been responsible for targeting Israel’s important cities & killing thousands of Israeli citizens/political leaders through suicide bombings, rocket attacks and short-rang crude weapons etc. Israel a small but wealthy country known for its contributions in science, technology, advanced business hubs, great innovations & stable economy is not able to achieve its desired goal & is always under the threat of Hamas & its foot soldiers, who have created a chock-a block situation for the country.

Now with the COVID-19 coming in, a lot of things will change by which the whole world will be impacted & especially the Middle Eastern region. This worldwide outbreak has drastically slowdown the world economy including energy sector. The world is considering renewable energy as an alternative of oil because of its cheap cost.

The fact of the time is crude prices are at all time low, demand is all time low and a lot of major consumers like India and China have stocked up to brink. In fact there is a interesting scenario shaping the world crude economy, today we have NO warehouse, stockrooms, depots or any other options left to store crude, they are all super full already.

Due to the locked down in most of the countries, the use of oil reached its lowest demand ever, which may further worsen if the lockdown continues. Top of that, the biggest Oil importer countries like U.S. India, China etc. already have more than the required oil reserves. Also, the thing needs to accounted for is that Alaska & Canada are having huge oil reserves.  Canada has around 172 billion barrels of oil reserves & Alaska around 17 billion barrel reserves which will further increase the problem for Middle East, especially Saudi Arabia. Worth to mention these reserves are unexplored yet but are confirmed to exist. This is also an established fact that USA is an oil exporter now and no longer needs to import oil, which takes out the world’s biggest buyer off the block.

According to the reports of IMF, if the current situation continues, the richest Middle Eastern states could exhaust their net financial wealth by 2034 as the region becomes a net debtor. Within another decade, their total non-oil wealth would also be exhausted.

Considering all these facts & figures, the Middle East is the most volatile region in the world & it will not only impact the region itself but the whole world hence the world is deeply concerned about it.

Now if we do a RCA (root cause analysis) what we get is, Middle East especially Saudi Arabia always had the option of building Universities like MIT, Harvard, Oxford, Stanford, Caltech etc & Research institutes, R&D centers, E-Commerce industry and IT Hubs rather than wasting its time, money, resources on extremist forces & unnecessary foul power play. This is on record Saudis admitting to have spend 2 trillion USD for spread of Wahabbaism!!.

Though Crown prince Mohhamad Bin Salman Al Saud has denounced Wahhabism ideology from his office, but he has to fight a long battle to uproot the fundamental Wahhabi ideology from Middle East & especially from the soil of Saudi Arab which has now deep roots and has spread across the world. Needless to say this has created power centers and political equations in a lot of countries in the world and there is a huge ecosystem which thrives on this today. They are bound to offer stern resistance as they can be in existential crises.

Saudi Arabia being in the driver seat needs to find alternative means to Islam rather than using it as a tool of expansion & a dream of world dominance. One thing needs to be kept in mind is that Religion is good until it intends to harm other religion or cultures.  Regional cannot be misused as political tool to hold or gain more powers.

Saudi Arabia must rethink what did they gain after 5 decades of preaching such a religion, and having burnt trillions of dollars of money, which they could have used to build a better future for their people.

Karma is cyclic & it comes back. You reap what you sow.

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Story Conceived & written by

Sumit Peer, Founder Insourcing Multiplier


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