The Role of Saudi Arabia in the Persian Gulf Region Term Paper

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Outline

The Persian Gulf region is perhaps unique in its homogeneity of religion and culture with some glaring dissonance as accentuated by the Shia Iran and the Sunni Arab States divide. Saudi Arabia with its advantage of having the largest known proven deposits of oil in the world and being the ‘keeper of the Islamic Faith’ has a significant influence on the development and policies of the Gulf region. This essay aims to examine the country’s role in the Persian Gulf region under the changed dynamics of trade and globalization.

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The essay first examines the geo-political overview to get an orientation of the region to better understand the issues being discussed. It then explains how the initial use of ‘oil as a weapon’ by Saudi Arabia and the OPEC is no longer possible in this age of globalization. The essay then examines the economic and legalistic effects of trade and globalization on the Persian Gulf region and argues that many traditional Islamic laws and mechanisms have had to be re-examined by the Gulf States to find ways and means to align them with international trade mechanisms. Coupled with economics is the social and cultural change which globalization brings in its wake and the essay examines this issue in detail laying out the positive and negative aspects of globalization. The author of this essay then offers a possible theoretical model for explaining the globalization paradigm in the Persian Gulf wherein the interplay with rate of globalization and the corrective action and policies taken could result in either maintenance of a ‘Dark Age’, a transitional shift, a descent into anarchy or a promised ‘Golden Age’.

Trade and Globalization: The Role of Saudi Arabia in the Persian Gulf Region

Since the discovery of oil in the desert wastelands of Saudi Arabia1, the country has wielded tremendous influence as the leader of the Muslim world with far reaching impact on the global geo-political and geo-strategic calculus. Till the early nineties, this influence followed the traditional duality of being the ‘keeper of Muslim faith’ and being the key swing producer of oil on account having the largest known proven deposits of the ‘black gold’ in the world. However, the advent of globalization and changing dynamics of international trade have brought in significant change in how Saudi Arabia conducts its business which includes maintaining a delicate balance with its Muslim constituency and being the interface and the ally of the West through its relations with the United States of America. The Persian Gulf region is witnessing far reaching changes being wrought by globalization and the internationalization of trade. Saudi Arabia being a key player has a significant role in the region and this essay aims to examine the country’s role in the Persian Gulf region under the changed dynamics of trade and globalization.

Geo-Political Overview

The Persian Gulf countries have some remarkable commonalities as well as differences. All countries bordering the Persian Gulf are Muslim countries. All countries are significantly dependant on their oil and gas resources, though some are trying to diversify their economies. None of the countries of the Persian Gulf are democracies. Most are institutional monarchies or Sheikhdoms that have used religion and/or western support to maintain their hold over their people. The main ideological difference between the East side and the West side of the Gulf has been the Shia-Sunni divide2. Iran, a Shia state considers itself to be the legitimate leader of the Muslim world and distrusts the Sunni Saudis. Saudi Arabia, on the other hand, occupies unquestioned primacy in the Sunni Muslim world stemming from the location of the two holy cities of Mecca and Medina associated with Prophet Mohammed in its lands. However, since all other Persian Gulf states (save Iraq whose present situation is complicated) are Sunnis, they ideologically and politically side with Saudi Arabia leaving Iran to chart its own course. Iran’s brand of ideological extremism and nuclear ambitions make it the most distrusted nation by the West as also the Persian Gulf States. An issue on which there is no Shia-Sunni divide is the Palestine-Israeli conflict. “Saudi Arabia just like the other Muslim States save for Egypt has never recognized Israel (UNAA Victoria Inc, 2006)” and thus holds a key geo-political card, which despite the globalization drive and the trade liberalization refuses to find a solution. Saudi Arabia, therefore, armed with oil and Allah, plays a central role in the evolution of the Muslim world and indeed the Persian Gulf region.

Globalization, Oil, and Geo-Politics

UNCTAD’s Review of Maritime Transport (2008) reports that “the world’s largest oil producer, Saudi Arabia, accounted for 12.8 per cent of total world production in 2007 and remained the main producer within OPEC, with a share of 29.3 per cent” (p. 12).

Whenever, geopolitical tensions have increased in the Middle East, the Organization of Petroleum Exporting Countries (OPEC) has used oil as a weapon. Consequently, every conflict in the Middle East be it the Iranian revolution in 1979, First Gulf War 1990 or the beginning of the second Intifada3 in 2000 has lead to sharp increases in oil prices causing or contributing “ to U.S. and global recession in the last thirty years” (Roubini &Setser, 2004 p. 5). The cartel has however, understood that every political response also adversely affects their viability as it encourages non-OPEC petroleum countries to offset their control and gain profits. The OPEC countries have recognized that in an interconnected globalized world, the stability of the oil markets is in their own interest and this is reflected in their long term strategy plan which states that “OPEC will continue to expand its production capacity, both to meet the increased demand for its oil and to offer an adequate level of spare capacity” (OPEC, 2006 p. 25). Despite the laudable strategy, OPEC has resorted to opportunism such as not regulating the market when oil prices rose to over $140 a barrel recently. This opportunism is misplaced as Alan Greenspan (2007) observes that “if oil prices rise too high, consumption could be permanently lowered as major world consumers shift their emphasis to petroleum conservation”(p. 439). Therefore, globalization has forced Saudi Arabia, the leading light of the OPEC cartel to understand that oil politics is no longer a zero sum game and that everyone gets adversely affected in case of disruptions.

The Economic and Legalistic Effects of Trade and Globalization

Until the early nineties, Persian Gulf economies were predominantly based on exploitation of oil. Most of the production and export was to Western countries which required little incentive for the rulers to modernize their states as oil revenues kept their polity happy and the West provided the necessary security. However, globalization changed all that as it led to two major forces “technological change and the more liberal nature of trade and investment” (Al-Yousif, p. 2).

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Technology made it possible for the masses to be more aware of the freedoms in the wider world. Technology also brought with it better ways and means to trade. The tools and mechanisms of trade also improved and the Gulf countries realized that if they wished to prosper, certain amount of integration with the rest of the world would be required. The rise of the East Asian countries and growing demands from India and China meant that trade dynamics no longer remained dependant on the West but was more diffused. The mechanisms of doing international trade required a change of domestic rules and policies. Saudi Arabia with its strict interpretation of Shariah4 laws hinders its own ability to integrate with the global system and remains “one of the four largest economies still excluded from the (World Trade) organization” (Fox, Mourtada-Sabbah, & al-Mutawa, p. 173). The Saudi adherence to seventh century ideals of Islamic economic principles causes problems when reconciling with the modern international system. The levying of Zakat5 has no precedence in the wider world and Saudi Arabia is the only country to have made the Zakat and income tax compulsory. Another controversial principle is that “property is taxable if it is apparent (Zahir) but not if it is hidden (batin) (Marty, Appleby, & Appleby, 1991, p. 319)“. This would imply that bank deposits, equities and other financial assets are exempt from taxation. Realizing the disadvantage of being ‘out of the system’, Saudi Arabia has since 1993 endeavored to align the requirements of its religious interpretation of Islam and the needs of the International System. The effect has been dramatic. Riyadh, once a dusty bowl of mud houses has transformed into a modern metropolis. “The government is building huge new industrial cities….that is expected to bring more changes – in social and legal habits – as a price of admission to a global consumer economy” (Slackman, 2007). The influence of this approach was soon replicated and even exceeded by the other Persian Gulf States who understood the importance of joining the globalization trend. Some like Bahrain, and UAE had specific compulsions in doing so as their oil resources were limited and fast dwindling and they just did not have the ‘spare capacity’ of Saudi Arabia to ramp up oil production whenever required. However, this trend towards globalization had its concomitant social and cultural effects.

Social and Cultural Effects of Globalization

Chubin has succinctly observed that “globalization challenges the control of the state and its authority and autonomy. Through interdependence, it reduces its scope for independent activity” (p. 933). The vast influx of foreign workers and professionals from other countries bring with them their culture and ethos to the host countries. The Persian Gulf countries too have had experienced the effects of intermingling of different cultures. The monarchies realized that managing this new mix of cultures amidst the transparency offered by the media and the internet, relaxation of Islamic tenets and inclusion of democratic principles would be required. Thus most Persian Gulf countries have adopted a number of democratic measures and laws as a first step towards transition. “Saudi Arabia while making some constitutional reforms is still resisting the global movement towards democracy” (Fox, Mourtada-Sabbah, & al-Mutawa, 2006, p. 186). The Saudi monarchs realize the importance of the clergy in maintaining their hold over the country and do not want to cause an upset by liberalizing too fast lest they face the same fate as the Shah of Iran6. Consequently, Saudi Arabia maintains draconian control over the media. The Economist (2008) reports that “Saudi Arabia, like Iran, Syria and Tunisia, extensively monitors the internet, blocking tens of thousands of websites ostensibly to protect public morality” (p. 43). This move at best is a temporary reprieve as the engine of globalization has its own momentum and the present censorship is likely to fade away albeit, at a slow pace. Such measures have not helped the Saudi authorities in quelling dissent and have only served to drive some rebellious groups underground that may surface at a later date in a more serious form. Learning from the Saudi experience, other Gulf region states have relaxed and modified their censorship rules with UAE being the freest society. Dubai with its free market economy, liberalized rules for commerce, vibrant night life and no overt enforcement of the Hijab7 is a shining example of what globalization can do. Dubai port today is the main hub of international trade in the Persian Gulf and the Dubai airport, amongst the most modern and best in the world.

The Positive Aspects of Globalization

Despite the moral strictures, even a partial integration with the world economy has done wonders for Saudi Arabia. Today Saudi Arabia rates high on the UN Human Development Index at number 55 far ahead of Brazil (70), Russia (73), China (94) and India (132), the so-called BRIC countries (UNDP, 2008, pp. 24-26). Kuwait, UAE, Bahrain, Qatar, and Oman rank higher than Saudi Arabia on the same index on account of greater liberalization and integration with the world. Globalization has ensured the relevance and stability of the Saudi currency. “The peg between the riyal and the US Dollar and the riyal’s free convertibility were and continue to be major stabilizing factors for the Kingdom’s economy (Fox, Mourtada-Sabbah, & al-Mutawa, 2006, p. 166)”.

Globalization and trade is causing substantial cash flows not only to the developed world from the Gulf Co-operation Council (GCC) countries but also to poorer countries outside the Gulf. According to the Economist (2008), “over the past six years, some $700 billion in capital has gushed out of the monarchies that make up the GCC: Saudi Arabia (by far the weightiest), Bahrain, Kuwait, Qatar, Oman and UAE” (p. 53). Globalization thus is also helping poorer countries. Led by Saudi Arabia, the GCC countries have invested in iron mines in Mauritania, bought properties in Malaysia, built a refinery in Bangladesh, purchased telecom businesses in Singapore and Algeria and are buying real estate in Cairo, Damascus, Hyderabad, Istanbul and Karachi. Globalization has also helped increase awareness. The Persian Gulf countries have come to realize that their oil resources are not going to last forever and thus there was a need to explore other avenues for their energy security. As a result, “Saudi Arabia and other Gulf Arab States have begun research programmes to look into nuclear energy” (Sasson, 2007).

The Negative Aspects of Globalization

Globalization waits for none. The pace of change at times causes a spatial and temporal mismatch between the change being sought and the ability of a traditional society to absorb that change. This has been most evident in the Persian Gulf region with respect to the treatment meted out to migrant workers. Flush with petro-dollars and a booming industry sector, the Persian Gulf countries had to look elsewhere to sustain their developmental growth. According to the CIA World Fact Book (2009), Saudi Arabia has a GDP (PPP) of $ 600.4 billion (2008 est.) comprising of 3.1%agriculture, 61.6% industry and 35.4 % services (p. 1). As is evident, such a large industry and services sector with a limited indigenous population requires a large influx of migrant workers from the third world. This has led to rampant exploitation and abuse. According to the Human Rights Watch (2008), “Domestic workers comprise less than a quarter of the eight million foreign workers in Saudi Arabia, but embassies from the labor sending countries report that abuses8 against domestic workers account for the vast majority of the complaints they receive (p. 2)”. Similar reports though, in smaller numbers emanate from the other Persian Gulf countries too. The availability of easy money makes the temptation of playing religious based geo-politics too alluring. Saudi Arabia pumps millions of dollars in religious institutions, colleges, charities the world over, all not with benign intentions. Zakaria (2009), pithily observes that “fuelled by vast amounts of money, Wahhabi9 ideas found their way into almost all Muslim countries, shifting the tone of Islam everywhere and giving resources to radicalized young men” (p. 8). Saudi money finds its way into the countless Madrassas10 that dot South and SE Asia, some of which have known links to terrorist organizations such as the Al Qaeda, Lashkar E Toiba and Jemaat Islameyah. Not to be out done, Iran actively supports the Hamas and the Hezbollah against Israel and insurgent groups against the United States in Iraq. The 9/11 terrorists were predominantly Saudi nationals and had a globally distributed terrorist network which had been made possible because of globalization. Globalization has thus helped terrorist organizations to globalize and make the task of law abiding states much harder.

Globalization Paradigm in the Persian Gulf

The author of this essay theorizes a globalization paradigm matrix to explain the dynamics of trade and globalization in the Persian Gulf led by the overwhelming influence of Saudi Arabia. The matrix formulated below applies in equal measure to all Persian Gulf countries.

The Globalization Paradigm in the Persian Gulf

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The matrix explains that considering the integration of a State with the increasing rate of globalization (as depicted along the Y axis) and the quantum of corrective actions and policies taken by the Persian Gulf states to align with the rate of globalization, four end states are possible.

If the integration with the globalization rate remains low and the countries take no or few corrective actions, then the Persian Gulf region is doomed to remain in the ‘Dark Ages’ with its consequent effects on socio-economic development, conservatism and persistence of Monarchic structures.

If the integration with the rate of globalization is lower than the corrective action initiated, but the corrective actions and policies are followed with some vigor, then the conditions become well as the states are trying to transform, which would lead to greater self sufficiency, better socio-economic development and a possible change from monarchies adopting more democratic principles. This would signal an ‘age of transition’ wherein the perseverance of the States would possibly lead to better life: i.e. transit to the top right Golden Age quadrant.

If the integration with the rate of globalization is high but there are no or few corrective actions and change in policies, then it would be worst possible outcome. The reason is that globalization would increase the expectations and aspirations of the polity, which because of lack of opportunities would most probably turn against the State. Dissatisfied and disenchanted youth may take to radicalism ultimately in such an ‘age of dissonance’; anarchism may become the possible outcome. It may also lead to Super-empowered terrorism wherein parts of the official government machinery collude with the non state actors leading to a transition to the definition of a ‘Failed State’.

The last and final quadrant perhaps augurs the best combination for the Gulf region – that of high integration with the rate of globalization and proactive corrective action and policies going hand in hand. Under such conditions, the Persian Gulf region would experience a ‘Golden Age’ wherein all States experience high socio-economic development, advent of liberalism and a shift to democratic forms of governance.

Conclusion

The Persian Gulf region is perhaps unique in its homogeneity of religion and culture with some glaring dissonance as accentuated by the Shia Iran and the Sunni Arab States divide. Saudi Arabia with its advantage of having the largest known proven deposits of oil in the world and being the ‘keeper of the Islamic faith’ has a significant influence on the developmental policies of the Gulf region. The inevitable march of globalization challenges the traditionally held notions of national sovereignty and impinges more profoundly in the Persian Gulf where all states are constitutional monarchies/ sheikdoms or are governed by the clergy. Saudi Arabia’s lead in resolving the numerous geo-political issues plaguing the region in tandem with the West led by the United States will define the possible future outcome for the region. A possible theorization wherein the interplay with rate of globalization and the corrective action and policies taken could result in either maintenance of a ‘Dark Age’, a transitional shift , a descent into anarchy or a promised ‘Golden Age’. However, change is inevitable, and the Gulf countries would do well to take into consideration the all encompassing embrace of globalization and learn to adapt and integrate for the greater good of its peoples and the region.

References

Al-Yousif, Y. K. (n.d.). Web.

Chubin, S. (n.d.). The Persian Gulf: Security, Politics, and Order. Web.

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CIA. (2009). Saudi Arabia. Web.

Fox, J. W., Mourtada-Sabbah, N., & al-Mutawa, M. e. (2006). Globalization and the Gulf. NY: Routledge.

Greenspan, A. (2007). The Age of Turbulence: Adventures in a New World, The Penguin Press, New York.

Human Rights Watch. (2008). As if I am Not Human: Abuses against Asian Domestic Workers in Saudi Arabia. NY: Human Rights Watch.

Marty, M. E., Appleby, F., & Appleby, R. S. (1991). Fundamentailsm and The State. Chicago: University of Chicago Press.

Organisation of Petroleum Exporting Countries. (2006). OPEC Long-Term Strategy, OPEC Secretariat, Vienna.

Roubini, N and Setser, B. (2004). The Effects of the Recent Oil Price Shock on the U.S. and Global Economy. Web.

Sasson, A. (2007). Web.

Slackman, M. (2007). The (Not so) Eagerly Modern Saudi. Web.

The Economist. (2008). Cash is Going to the Poor, too. The Economist , p. 53.

The Economist. (2008). How Governments Handle the News. The Economist , pp. 42-43.

UNAA Victoria Inc. (2006). “Clash of Civilisations: Facts or Fiction?”. Web.

UNCTAD. Review of Maritime Transport 2008. Web.

UNDP. Human Development Indices: A statistical Update 2008. Web.

Zakaria, F. Writing The Rules For a New World. Newsweek, Special edition; Issues 2009 , pp. 8-11.

Notes

  1. Oil was discovered in the Saudi Arabian Deserts in 1938. Oil in Saudi Arabia was initially extracted by the Arabian American Oil Company known as the Aramco from1933 to 1988. In 1980 the Saudi government bought out 100 % assets and in 1988 changed the name to Saudi Aramco and is the largest oil corporation in the world.
  2. Sunnis are the conservative branch of Islam who believe that Mohammed was the only Prophet of God on Earth and no further leaders are possible. The Shia branch on the other hand believes that the teachings of the prophet have continuity through the 12 Imams who grace the Earth from time to time. The divide dates back to the martyrdom of Hussein a Shia Imam in the hands of the Sunnis.
  3. Intifada in Arabic literally means shaking off, a term used to describe the collective revolt of the Palestinian people in the occupied territories of West bank and Gaza Strip.
  4. Shariah or the law of Islamic jurisprudence have been unchanged in the days of Prophet Mohammed. Saudi Arabia particularly applies a strict version of those laws that govern all aspects of life.
  5. Zakat or the giving of alms by the rich for the benefit of the poor is an Islamic egalitarian principle. Saudi Arabia is the only country in the world which enforces Zakat as a compulsory tax in addition to income tax.
  6. The logic given by many authoritarian regimes to continue their hold over their polity has been of initiating slow change so that evolution takes place and not a revolution. One of the factors which led to the over throw of the Shah of Iran was that in addition to the corruption and excesses of his regime, the Shah had wished to westernize his people as fast as possible. In pursuance of his aim he had banned wearing of head scarves by women and encouraged western style dressing. He also encouraged western style singing and dancing in public places. These moves proved a useful tool for Ayatollah Khomeini who exploited the popular discontentment against the Shah’s brutal regime to infuse religious indignation to usher in the Iranian revolution.
  7. Hijab is a garment for Muslim woman which covers the entire body from head to toe except for the face, hand and feet.
  8. These abuses include non-payment of salaries, forced confinement, food deprivation, excessive workload, and instances of severe psychological, physical, and sexual abuse. For more detailed examination see chapter V,VI,VII & VIII of Human Rights Watch (2008). As if I am Not Human: Abuses against Asian Domestic Workers in Saudi Arabia. NY: Human Rights Watch.
  9. Wahhabism is the most conservative form of Sunni Islam preached in Saudi Arabia and has state sponsorship with considerable influence in the Islamic world.
  10. Madrassas are Muslim religious seminaries that predominantly teach Islamic works. Though Madrassas are supposed to provide cheap and affordable education to the poor and the needy Muslim youth, of late these institutions are being exploited by state and non-state actors to indoctrinate the young for carrying out a Jehad or the Holy war.
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IvyPanda. 2021. "The Role of Saudi Arabia in the Persian Gulf Region." December 3, 2021. https://ivypanda.com/essays/the-role-of-saudi-arabia-in-the-persian-gulf-region/.

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