Gulf’s Mini States in The Spotlight
Iran conflict sparks strains between local players with moneybags
The British empire left behind many issues at the heart of world troubles today. Among the least recognized but a key to ongoing problems in the Middle East and the Gulf regions in particular is one represented by just four figures. Three Gulf statelets with a citizen population totaling about 2.5 million produce – or would be producing but for the closure of Hormuz, about seven million barrels a day of oil, more than 5 percent of the global total plus enormous quantities of gas. Abu Dhabi and Kuwait have the world’s sixth and seventh oil reserves as well as low production costs, Qatar, a nation of 300,000 citizens, has the world’s third largest gas reserves.
The three: Abu Dhabi, Kuwait, and Qatar have already accumulated approximately $3.7 trillion in their sovereign wealth funds. They also just happen to host US military bases as do their lesser oil-endowed but still prosperous neighbors, Bahrain and Dubai, the latter a thriving port as well as a favorite of tax-avoiding residents from the UK, India, and elsewhere. All are dynast-run autocracies.
The wealth of these mini-states on the western edge of the Gulf is relatively huge even compared with Saudi Arabia (citizen population about 19 million), let alone the 30 million plus of impoverished Yemenis, and immediate neighbors to the north and east, Iraq, 47 million, and Iran, 90 million.
The contrast is self-evidently a source of instability even now, let alone in any future re-shuffling of local interests and of any backpedaling by a US looking to rethink its regional role in the aftermath of the current Iran conflict. This conflict has already shown strains between the local players with moneybags Abu Dhabi clashing with Saudi Arabia on many issues. Nor are local strains new. Qatar was ostracized, with Saudi Arabia, the UAE, and Egypt cutting off diplomatic relations from 2017 to 2021 and attempting an economic blockade. Although it hosts the largest US base, Qatar has been an intermediary with Iran and often pursues its own course.
So how come these small and largely desert places populated mainly by foreigners sustain their existence despite being surrounded by vastly larger, poorer, and more populous states—Saudi Arabia, Iraq, and Iran? How come that Abu Dhabi, the head and moneybags of the United Arab Emirates (UAE), a statelet of about 300,000 citizens, can poke the Saudis in the eye by exiting OPEC at the same time as interfering in Yemen, Sudan, and elsewhere with agendas which seem variously made in countries ranging from Israel to Ethiopia and Washington?
The small Gulf states, originally built on pearl fishing and coastal trade, all owe their independence in large part to deals with the British in the 19th century by which family rulers had a free hand so long as rival interests, notably the Ottoman empire which controlled what is now Iraq, were kept at a distance, enabling the British to guard their route to India and suppress the piracy once endemic in the Gulf.
The three, plus the other emirates of the UAE, the Kingdom of Bahrain, and the Sultanate of Oman, had one thing in common. In the 19th century, Britain, to protect its trade and strategic links to its Indian empire, induced them to accept British oversight of their affairs and keep out Ottoman and other interference. There was nothing especially new about this. At various times, as small ports on the Gulf, they were under some imperial sway or other – Safavid, Portuguese, Ottoman, etc. Nor did British “protection” entirely shield them from local disputes, for example, between Qatar and Bahrain, or the ambition of the Saud family to extend its kingdom of Nejd throughout the peninsula.
But the British connection lasted long enough for oil to underwrite the independence achieved by Kuwait in 1961 and the emirates and Bahrain 10 years later. With oil came western commercial interests, particularly those of the US, and in turn the US bases meant to deter acquisitive neighbors, Iraq’s Saddam Hussein in 1990 and revolutionary Shiite Iran. The emirates’ interests are now also aligned with those of the Saudis.
The huge concentration of wealth in tiny countries with mostly imported, rights-less labor forces was especially beneficial to the US in another way. A wider spread of oil wealth to more populous countries would have benefited international trade at large, from which countries such as Japan, Germany, and later China would be the main beneficiaries. But concentration and accumulation of huge surpluses required that they be channeled into the deepest and most liquid markets – US dollars, Treasury securities, and US stocks. Vast incomes also enabled Gulf purchases of billions of dollars of US weaponry while the US itself invested heavily in local bases which assured the regional military dominance of the US-Israel alliance.
Oil wealth has enabled the building of impressive infrastructure and new industries using oil and gas. Stable currencies and minimal taxes have attracted the wealthy and the accompanying bankers and lawyers as well as the millions of mostly low-paid workers to run the show.
By any measure, it is a curious state of affairs of uncertain duration but, at least until the latest war, had enough beneficiaries – including the low-paid workers enabling transfer of at least a bit of the oil wealth to impoverished families in countries such as Egypt, Bangladesh, and the Philippines.
Five years on from the end of this war, any number of new scenarios are possible in the kaleidoscope formed by the Saudis, Iran, the US, oil prices, and the Gulf states. For the future, there is probably a bigger role for the region’s most broadly developed and permanent state, Turkey, and a Pakistan focusing more westward than before. Whatever happens, the era of the post-colonial dynastic mega-rich mini-states may be fading, and the (probably declining) spoils of oil re-distributed in ways yet to be determined.