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Book review: When power grows out of the oil barrel

Can the Gulf’s ruling families survive the post-oil era?

The brutal military crackdowns launched as the Arab Spring spread across Tunisia, Egypt, Libya, Bahrain and Yemen in 2011 contrasts sharply with the response most Gulf countries' leaderships took to the uprisings. Instead of soldiers, civil servants were more quietly deployed, armed with generous counter-revolutionary doles in the shape of cash and energy subsidies.

Sweeping subsidies and targeted financial inducements—in some cases to the tune of as much as 4pc of GDP—quickly and bloodlessly placated populaces. But, as Jim Krane argues in Energy Kingdoms, the unspoken social contract on which this relies might not last forever.

Having spent years in the region as a journalist, he crafts insightful histories of how each Gulf state has been transformed into a modern kingdom.

A photograph a colleague once showed me of the Doha Sheraton's construction from 1978 illustrated the speed of the change. In it, the hotel's unique pyramid design rises starkly out of the sands like a lonely oasis of developmenta far cry from today's artificial snow slopes and waterparks.

Krane likens it to a second "golden age" for the regionthe first covering four centuries in the medieval period, when Arabs led the Western world in philosophy, science, medicine and poetry-evoking the spectre of imperial decline for the current "age of oil".

"In one generation we went from riding camels to riding Cadillacs. The way we are wasting money, I fear the next generation will be riding camels again", Saudi King Faisal once confessed.

At the root of the rapid growth was oil, vast hydrocarbons stores first glimpsed in 1932 at Bahrain's Oil Well Number One, located on a salt dome hill called Jebel Dukhan.

In the transformational period that followed, the nascent nature of autocratic governance systems proved crucial in hastening extraction. US oilmen dealt directly with rulers in their diwans, with no need to secure land claims. The region's geological bounty was matched by its strategic location between the vast markets of Europe, North America and Asia.

But the rampant resource extraction eventually spurred nationalism, culminating in the 1973-74 oil embargo. Its effectiveness in unleashing global and economic havoc assured the Gulf states' rulers of their global clout.

This freed the monarchies to focus on internal power consolidation, using an ancient and trusted means of securing loyalty: bribery. Prominent families were the most richly rewarded, but bountiful social benefits were given to all.

"The welfare states of the Gulf became the envy of the developing world. People whose ancestors had scraped by through the millennia found their lifespans extended by decades. Who wouldn't support rulers who brought about such positive change?" writes Krane.

High on your own supply

In the author's eye, at this stage the "rags-to-riches" tale takes a dark turn.

Drawing on extensive research of regional energy trends, he outlines how rampant consumption has essentially led to Gulf countries consuming themselves. The projected timeline is stark: for instance, if Saudi Arabia continued its domestic oil demand growth trajectory as of 2016, it would consume its vast oil production by 2035.

For Krane, the key recommendation for survival is curbing internal demand, and, in this respect, he positions Saudi Arabia's nemesis Iran as an unlikely saviour. He details how cuts president Mahmoud Ahmadinejad made to oil subsidies in the early 2010s have rippled throughout the region. Gulf states have slashed subsidies and imposed painful price rises, particularly on electricity and water.

The civil servants might have held their breath after launching the reforms, but no one poured into the streetsand demand is gradually creeping out of the red zone.

Krane is not completely assured that this new arrangement is enough. Internal stability and prosperity are still too dependent on oil and the "security of demand" is being eroded by the demand-side threats caused by climate change.

Ultimately, the clarity of the book's central arguments and its well-researched economic analysis make it unmissable for anyone interested in the Gulf's political and economic future. However, the dire warnings and prescriptions suffer from a touch of classically American value projection.

The decline of the Islamic Golden Age was caused by conditions that are unlikely to be repeated in today's globalised and digitalised society. Embracing democracy may be a step too far for Gulf monarchies, but they can at least embrace innovation and connectivity.

Energy Kingdoms: Oil and Political Survival in the Persian Gulf, Columbia University Press by Jim Krane, Ph.D., the Wallace S. Wilson Fellow for Energy Studies at Rice University’s Baker Institute.

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