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The energy-based political economies of the Persian Gulf are entering a period of profound change as the impact of four years of lower oil and gas prices intersects with the rise of a younger and more assertive leadership among strategic American partners such as Saudi Arabia and Qatar. Together with their counterparts in the United Arab Emirates (UAE) and Kuwait, officials in these states are moving toward adopting longer-term plans to diversify their economies, strengthen their private sectors, and create jobs for a growing workforce. Their aim is to prepare for a transition in which hydrocarbons assume a smaller—yet still crucial—role in Persian Gulf economies.
At the same time, more than seven years after the Arab Spring shook the political order in the Middle East and North Africa, much of the Arab world remains embroiled in conflict and political uncertainty. In the Persian Gulf region, this includes an escalation in tensions between the United States and Iran since 2017 and the impact of nearly four years of war in Yemen that has left the country on the brink of widespread famine and humanitarian catastrophe. Furthermore, issues such as climate action, new regional splits, and internal economic reforms all have the potential to further affect stability in a region that continues to be vital to U.S. strategic interests.
On October 3, 2018, seven experts gathered in Houston at Rice University’s Baker Institute for Public Policy for a conference on “Energy and Politics in the Persian Gulf” to consider how issues pertaining to the Gulf region impact both Houston and U.S. energy and security interests. The Center for the Middle East (CME) and the Center for Energy Studies (CES) at the Baker Institute co-hosted the half-day event.
The conference began with the director of the Baker Institute, Ambassador Edward P. Djerejian, introducing the Persian Gulf as one of the world’s most geopolitically sensitive regions. The states on both sides of the Persian Gulf face multiple challenges and security concerns in coming years that range from the impact of climate change and climate action to a reduction in oil and gas revenues, shifts in the demographic pyramid as large numbers of young people come of working age and enter the labor market, and the need to transition beyond oil-dominated economies. These domestic and foreign policy issues are of tremendous importance for U.S. policymakers and private sector leaders alike. The Baker Institute aims to provide a forum for nonpartisan and data-driven discussion on these topics, the ambassador said.
Jim Krane, the Wallace S. Wilson Fellow for Energy Studies at the Baker Institute reminded conference attendees that it has been 100 years since Winston Churchill’s decision in 1911 to use oil instead of coal to fuel British Navy ships. This historic decision conferred on oil a strategic value just as oil was discovered in vast quantities in Iran (in 1908) and, two decades later, in Iraq, Saudi Arabia, and the smaller Persian Gulf states. As a result, the producer countries of the Persian Gulf, though comparatively underdeveloped at the time, rapidly rose to become strategic linchpins of the global economy by the 1950s. The region became an arena for major energy-related events, including the 1973 oil embargo and the various nationalizations of oil company holdings in the 1970s; the 1979 Iranian Revolution and the hostage crisis that cast a long shadow over relations with the United States; and three major interstate wars in the Persian Gulf between 1980 and 2003. The period also witnessed the emergence of Dubai as a global center of ostentatious consumption, which was later matched by Qatar.
The goal of the conference, Krane observed, was to examine the post-Arab Spring Persian Gulf and to make sense of and delve into current rapid-fire changes and issues in the region. These include: 1) the resurgent conflict between the United States and several of the Persian Gulf monarchies and Iran; 2) the blockade of Qatar by three of its regional neighbors plus Egypt; 3) the grinding wars in Yemen and Syria; 4) the headstrong new leadership in core regional partners, including the generational transition in the Saudi royal family; 5) the clash between the rise in social freedoms and the decline in political freedoms in regional states; and last but not least 6) climate action and the threat it poses to oil-dependent states amid questions about the longevity of U.S. security commitments in and to the region.
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