Rochelle Yeung

Eco 357L

 

“Revolution, Reform, or Regression? Arab Political Options in the 1990 Gulf Crisis”

by Yahya Sadowski

 

Overview:  Discusses the history of conflict within the countries of the Middle East, what led to the invasion of Kuwait, and the instability that many Arab countries face.

 

Background

            After years of turmoil, in 1967, King Feisal of Saudi Arabia and President Nasser of Egypt met to call a truce and set up a new Arab order.  They agreed that Saudi Arabia and other emirates would offer billions of dollars to help the poor Arab nationalist regimes.  For that, the Arab nationalist regimes would aid the Gulf monarchies in dealing with potential threats like Iran and Israel.  Although there was much criticism for this (hindered social change and was corruptive in nature), most Arabs liked this system since it provided them with peace and political stability.

            In the 1980s, though, it became apparent that this system was hard to maintain due to the growing population.  Jordan had the second fastest growing population, and Egypt’s population grew by 20 million in 20 years.  The standard of living was also rising during this period too.  In the early and mid 1980s, the price of oil dropped, and the Arab countries suffered heavily.  To compensate, they began borrowing heavily from foreign countries.  For example, Jordan massaed an 8 billion dollar foreign debt, and Iraq 80 billion

 

Kuwait: Getting Out

            In the 1970s, Kuwait, unlike other Gulf states, had set aside 100 billion dollars and put them in two reserve funds to finance projects in the future.  Many of the funds were investments in stocks abroad.  These investments proved far more lucrative than the money Kuwait was earning from exporting oil.  However, they wanted more cash for Western investments, so they reduced the amount of aid provided to their neighbors, and they wanted 10 billion dollars from Iraq that they lent during the war with Iran.  Kuwait and other Gulf states began backing out of the Arab state system, and began to rely on America for security

 

Jordan: Economic Austerity

            Each year Jordan needed 700 million dollars in hard currency to service its foreign debt , and on top of that another 800 million to help with the trade deficit.  IMF told them that they needed a massive budget cut and the currency had to be devalued.  In April 1989, Jordan increased the prices of cigarettes, gasoline, and bread among other items.  That week saw the worst riots in Jordanian history.  During the next election, the radical Islamists won.  Islamists are a major force in Arab countries.  They appeared during the bread riots in Morocco, and came into power in Sudan after the economic collapse.

 

Iraq: Rebuilding a Streamlined System

            Although Iraq had its oil reserves, it still needed economic help.  Saddam Hussein got together with leaders from Egypt, Jordan, and Yemen to lobby for more financial aid from the rich states.  The UAE (United Arab Emirates) ignored his pleas though, and continued expanding the amount of oil exported.  Therefore, Hussein invaded Kuwait.  The price of oil doubled because of this, but the negative consequence was that financial help from foreign countries suffered.  For example, Saudi Arabia can earn 25 billion dollars from the oil price increase, but in return they lose billions in foreign investment due to instability and the possibility of war.  Some in Saudi Arabia want the US to get more involved by having permanent bases set up, and buying weaponry.  Others, however, claim that a long term American presence in Saudi Arabia could have heavier repercussions than an Iraqi presence.  The royal family believed that Saudi Arabia could rely more on neighboring allies for support than American troops. 

 

Conclusion

            There is no short term solution for the instability in the Middle East.  Iraq is the most unstable country in the region, and because of Hussein’s decision for military mobilization, Iraq does not have the money to pay off debts.  On top of that, foreign investments will take a nose dive since firms are not interested in investing in a country on the brink of war.  In the past, the tension between Iraq and Iran has kept the whole region in a balance of power.  Now, the future is uncertain.  If Saddam comes into power, there is the question of whether he will attempt to lead the poor Arab states in a war against the rich Gulf monarchies.  Even if Iraq withdrew from Kuwait, there will still be turmoil in the region.  If Arabs go against each other, then there could be a revival of the Arab cold war.  If US troops are sent abroad to fight Iraq, the radical Islamists will rise to fight against Western influence in the region.  And if Iraq is overthrown, then Iran might become too powerful.