The rise of oil economy in the Middle East and the economic development of oil producing countries I.

The Rise of oil producing countries and the uniqueness of oil revenue the Middle East is rich in oil and natural gas resources.

In 1901, Persia and British businessman Darcy signed the first oil leasing agreement in the Middle East.

In 1908, Darcy found commercial oil storage and established Yingbo oil company in 1909.

Persia, Iraq, Saudi Arabia and Bahrain began producing oil before World War II.

Time of oil production in other countries: Kuwait, 1946.

Qatar, 1949.

Abu Dhabi, 1962.

Oman, 1967.

Dubai, 1969.

In 1912, Britain, the Netherlands, Germany and Turkey jointly established the Turkish oil company to control Iraq’s oil resources.

The American company acquired nearly 14 shares of the company (renamed Iraqi oil company) in 1927, obtained oil exploitation rights in Bahrain in 1928 and Saudi Arabia in 1933, and then obtained oil leasing rights in Kuwait.

By 1972, five American oil companies controlled 51.

3% of the oil exploitation in the Middle East, 30.

8% of BP and Anglo Dutch Shell, and 4.

9% of petrofrance.

In addition, Japanese oil companies are also involved in oil development in the Gulf region.

There are three main ways for Western oil capital to control and plunder oil resources in the Middle East.

First, the oil leasing system.

In 1939, the total area of leased land sold by the eight countries in the Middle East was 3.

26 million square kilometers, accounting for 85.

3% of the total land area of the eight countries.

The lease term ranges from 60 to 92 years, and the oil producing countries receive only a small amount of mining royalties and oil taxes.

Second, monopolize oil prices.

In the 1960s, the price of one ton of Asian, African and Latin American crude oil was only $10-12.

Third, the oil production industry is developed unilaterally in oil producing countries, while western countries have a comprehensive monopoly on downstream businesses such as oil refining, transportation and sales.

As a result, Western companies made huge profits.

The rapid development of post-war oil production has fundamentally changed the face of oil producing countries.

In 1940, oil production in the Middle East accounted for only 4.

4% of the world’s total, and soared to 39.

4% in 1977.

In 1960, the Middle East accounted for 56.

1% of the world’s oil exports and 62.

7% in 1975.

The rapid growth of oil revenue has led to significant changes in the economic pattern of the Middle East.

Before the war, the developed region of the Middle East was the countries along the eastern Mediterranean.

However, with the development of oil production, the Gulf region, which has always been backward in economy, has risen rapidly and become a new economically developed region.

In 1958, Saudi Arabia’s GNP was only 36.

4% of that of Egypt.

In 1982, it jumped to 581.8%. In the same year, the per capita GNP reached US $18000, 23.

2 times that of Egypt.

In the economic development of the third world after the war, oil producing countries are a kind of extremely unique countries.

Together with some newly industrialized countries in Latin America and Southeast Asia, they are among the countries with the best economic performance in the third world.

However, there are great differences between oil producing countries and non oil producing countries in terms of the driving force, structure and effect of economic development.

As far as oil producing countries are concerned, the main characteristics are firstly the potential possibility of large-scale price increase of oil, and secondly the characteristics of oil income different from general national output value.

The production and export of oil and gas increased rapidly.

There are four reasons.

First, as energy, oil and natural gas are essential to all sectors of the national economy, national defense and people’s life.

Their demand is much greater than other raw materials, which are sometimes only needed by individual economic sectors.

Second, oil and natural gas have various advantages and are difficult to be replaced by other fuels.

The alternative energy of oil is difficult to promote for various reasons.

Third, although the chemical synthesis industry is a big nemesis of agricultural raw materials and non petroleum mining raw materials, it is an important market for oil and gas.

Fourth, the price elasticity of oil supply is low.

A large amount of capital investment and the difficulty of geological exploration make it difficult for oil production to improve rapidly in the world in the short term.

For the above reasons, oil producing countries have unique advantages and can quickly raise oil prices in the short term without worrying about western resistance.

However, the situation was finally reversed by the two substantial increases in oil prices in the 1970s.

High oil prices stimulated the continuous development of oil exploration and production in non OPEC countries, and forced the west to vigorously develop energy-saving technology and oil alternative energy.

Coupled with the long-term stagnation of the western economy after 1973, the oil price finally fell in 1983.

The recession was replaced by the oil boom.

So, what is the particularity of the surging oil revenue? The author agrees with many scholars that it is a kind of land rent income.

Land rent is the income of land with relatively insufficient supply elasticity, and land belongs to natural resources.

Therefore, land rent is considered as “income given by God”.

Some western economists point out that land rent or rent is “income that exceeds the cost required to absorb factors of production into production activities”, that is, scarce rent.

There are two types of rents related to commercial resource reserves: ① differential resource rents, rents generated by mineral resources due to their different quality.

Middle East Petroleum has low production cost because of its shallow oil layer, high self injection rate of oil wells, many large oil fields and convenient transportation.

② Monopoly rent refers to the rent generated by multinational corporations monopolizing resources.

It is believed that land rent accounts for more than 85% of the oil revenue in the Middle East.

In fact, the economy of each country contains land rent factors, and this dependence of oil producing countries in the Middle East has reached a rare degree, so that people put forward the concept of “rent country” and “land rent economy”.

The factors that determine the land rent economy include: first, land rent plays a leading role in the economy.

In Kuwait’s GDP in 1980, the proportion of oil land rent reached 70%, while that of oil producing Norway was only 16%.

In addition, in 1979, Kuwait’s oil revenue accounted for 94% of its total export value and 93.

2% of government revenue.

In the same year, 88% of the gross domestic fixed capital formation came from the oil sector.

Mahmoud Abdel-Fadil,“The Macro-behaviour of Oil-Rentier States in the Arab Region.

” in Hazem Beblawi and Giacomo Luciani eds.

The Rentier State,pp.94-95. Second, the land rent economy relies heavily on external land rent.

Whether before or after nationalization, foreign companies have always had a great impact on oil production.

Therefore, oil production is not directly related to the economy of oil producing countries, and the latter does not need to develop a strong production sector.

Third, only a very small number of people participate in the creation of land rent.

Employed by the oil industry, Bahrain, Qatar and the United Arab Emirates were founded.

In Iraq, the Republic was established after the revolution in 1958.

In Saudi Arabia, Prince Faisal became king in 1964, ensuring the progress of modernization.

In Oman, said Sudan began the initial reform, and the succession of kabs in 1970 greatly promoted the modernization process of Oman.

The leadership with new ideas put forward an enlightened ideology conducive to modernization.

The revival socialism in Iraq, the “Islamic modernization” model in Saudi Arabia and the “white revolution” in Iran represent the three types of modernization of oil producing countries.

Other countries are between Saudi Arabia and Iran.

In short, modernization has become the common goal of all oil producing countries, and relevant ideas have become an important tool for these countries to unify national understanding and promote national unity and political legitimacy.

Second, carry out social and economic reform with nationalization and land reform as the main contents, and crack down on the traditional big bourgeoisie and big landlord class who are hostile to government policies.

After Iraq’s revolution in 1958, private capital withdrew a large amount of capital from industry and deliberately created a shortage of consumer goods.

After May 1964, businessmen began a new round of speculation, capital flight and commodity shortage.

The ARIF government announced in July that all banks, insurance, import and export companies and most industries would be nationalized, and private enterprises would be limited to small industries, retail and transportation.

After 1958, Iraq also began land reform.

The government has set a land ceiling of 1000 dunums of irrigated land or 2000 dunums of dry land.

At the same time, the government also requires farmers to establish cooperatives.

By 1971, farmers with land had accounted for 90% of the total number of farmers.

By 1974, there were 1386 cooperatives and 72 collective farms in China.

However, due to the lack of administrative and technical personnel, bureaucratic inefficiency, lack of roads, dams and storage facilities, and landlords’ control over cooperatives and water sources, the effectiveness of land reform is not obvious.

The six Gulf countries did not carry out land reform, but provided some state-owned wasteland to farmers and herdsmen.

From 1968 to 1979, Saudi Arabia allocated a total of 425000 hectares of land.

By 1969-1970, 39 cooperatives had been established nationwide, with more than 17000 participants.

From 1966 to 1973, Oman, Kuwait, Saudi Arabia and Qatar also began to implement development plans.

However, the peninsula countries still attach importance to infrastructure, which accounts for 50.

3% and 14% respectively in the first five year plan of Saudi Arabia and Abu Dhabi.

The obvious expansion of investment scale is another feature of the development plan at this stage.

The total investment of Iraq’s development plan from 1951-1952 to 1960-1961 was 960 million Iraqi dinars, while it increased to 1521.

7 million Iraqi dinars from 1959-1960 to 1969-1970.

While recovering resource sovereignty, countries also strive to establish their own oil industry.

Saudi Arabia established the General Administration of petroleum and mining in 1962, which is responsible for the production, storage, transportation, sales, processing and power generation of oil and non oil minerals.

During this period, oil production in various countries increased significantly.

Saudi Arabia, Kuwait and Iran have the highest output and grow rapidly.

The United Arab Emirates and Qatar are also fast, while Iraq and Oman are slow.

The reason is related to the policies of Western oil companies or governments in the host countries.

After stable growth in the early stage, Bahrain has reduced production since the 1970s because of limited reserves.

The average annual growth is 12.4%. The development of peninsula countries focuses on basic industries such as electric power, oil refining and imported alternative food, cement and chemical industries.

In Saudi Arabia, national industrial protection regulations and foreign capital investment regulations were promulgated in 1962 and 1964 respectively.

Kuwait established the petrochemical industry company in 1964, while Bahrain’s oil refining industry, which is short of oil resources, can process some crude oil from Saudi Arabia in addition to its own crude oil.

In agriculture, after 1958, despite the land reform and the continuous improvement of agricultural technical equipment, the sown area and yield of crops did not increase.

The sluggish agriculture has contributed to the influx of a large number of rural people into cities.

Saudi Arabia provided agricultural funds through the agricultural development bank founded in 1965, vigorously built water conservancy, set up demonstration farms, community development centers and cooperatives, and taught farmers modern technology.

The infrastructure of various countries has made considerable progress.

From 1970 to 1971, the total length of asphalt roads in Saudi Arabia increased to 8759 kilometers.

The total number of domestic cars soared to 174869 in 1969-1970.

By 1968, Saudi Arabia had 3 international airports and 19 domestic airports.

Education in oil producing countries has also made great progress.

In Saudi Arabia, from 1960-1961 to 1970-1971, the number of primary school students soared from 104203 to 369803, and the number of junior middle school students increased from 7875 to 62253.

Economic development has gradually increased the number of foreign workers in oil producing countries, and Omani overseas Chinese began to return.

In the early 1970s, the foreign population accounted for 17.

5% (1971) of the total population of Bahrain and 60% (1970) of the total population of Qatar.

The third stage is the period of large-scale economic construction and promoting social and economic development (1973-1982).

At this stage, marked by the rise of oil prices, the main characteristics of development are as follows: first, take the October war as an opportunity to fully recover the sovereignty of oil resources.

On October 6, 1973, the October war broke out.

On the 17th, the organization of Arab Petroleum Exporting Countries decided to implement four measures: production reduction, embargo, price increase and nationalization.

After that, the Arab oil producing countries reduced their production by 10% or more respectively, and imposed embargoes on the United States and the Netherlands.

Earlier, on October 16, the Gulf States unilaterally announced a 70% increase in the bid price.

At the end of December, OPEC decided to raise the bid price by 120% again from January 1, 1974, and the Arab light oil reached US $11.

651 per barrel.

The history of western countries monopolizing oil prices is over.

The oil struggle after the October war mainly has two aspects.

First, the campaign to recover sovereignty in an all-round way.

From 1975 to 1977, the oil industries in Iraq, Kuwait, Qatar and Dubai were all nationalized.

Saudi Arabia signed an agreement to take over all shares of Aramco, and Abu Dhabi signed an agreement to increase its shares to 60%.

Second, the struggle to safeguard oil prices.

OPEC decided to raise the mining area use rate and oil tax rate to 16.

7% and 65.

66% respectively in 1974.

By April 1979, the price of a barrel of standard crude oil had reached US $14.546. The Iranian revolution in 1978 and the subsequent outbreak of the Iran Iraq war caused a serious shortage of world oil supply.

OPEC immediately raised prices sharply in a row.

By January 1981, the price of a barrel of oil was as high as $36-40Yuan, which is called “the second energy crisis” in the West.

Second, on the basis of huge oil revenue, carry out large-scale economic construction unprecedented in history.

In terms of the scale and mode of economic development, oil producing countries can be divided into three categories.

(1) Iran and Iraq.

The expenditure on its development plan has increased rapidly.

The expenditure of Iraq’s development plan in 1970-1974 was 1.

932 billion dinars, while the development plan in 1975-1980 reached 16.269.6 billion dinars.

Countries have also built a number of modern airports and ports, as well as large-scale desalination and power generation facilities.

Among them, Kuwait has the world’s largest desalination plant.

In agriculture, governments continue to develop water conservancy facilities and expand the area of cultivated land.

By 1979, 33 dams had been built in Saudi Arabia.

From 1971 to 1976, Saudi Arabia’s cultivated land increased by 30%.

By the late 1970s, Saudi Arabia had built 16 dairy farms, 158 broiler farms and 118 egg farms, and its wheat export reached 1.

7 million tons in 1987.

However, due to various reasons, many agricultural products of the six countries are still unable to be self-sufficient.

Only milk, meat, poultry eggs and vegetables have a high self-sufficiency rate, and some countries even export.

The rapid development of service industry is also an important feature of Gulf economic development, especially the financial industry.

Gulf countries have deposited their surplus oil funds (i.e. petrodollars) in the banks of developed countries, and later changed to direct investment in the economies of developed countries.

In 1977, Saudi Arabia’s overseas assets reached US $68 billion, IRAN US $22 billion, Iraq US $7 billion, Kuwait US $31 billion, the United Arab Emirates US $16 billion and Qatar US $5 billion.

As a result, the Gulf countries have become international financial powers.

In the late 1970s, Bahrain abolished foreign exchange control, attracted a large number of foreign banks and rapidly developed into a financial center in the Persian Gulf.

In Kuwait, overseas investment income has become the second largest income after oil.

In addition, oil producing countries also provide large amounts of foreign aid and investment to Arab countries and Muslim countries.

Transit trade also occupies a place in the service industry of the Gulf region, especially in Dubai, the United Arab Emirates, which has developed into the largest transit trade port in the Gulf.

The total amount of transit trade exceeded US $1 billion in 1983.

The number of foreign workers is growing rapidly.

In 1975, the total number of foreign workers in the six countries reached 1719700.

They accounted for 43.

0% of the employment in Saudi Arabia, 39.

6% in Bahrain, 69.

4% in Kuwait, 81.

1% in Qatar, 84.

8% in the United Arab Emirates and 34.

0% in Oman, with a total average of 48.7%. These immigrants are mainly from Arab countries, 17.

6% from Asian countries and 2.

1% from western countries.

In order to change this situation, Gulf countries have made a lot of investment in education, and education has developed rapidly.

After the Second World War, the economic development of the Gulf countries was astonishing.

From 1960 to 1975, the average annual GDP growth rate of Iran reached 12.

5% and that of Saudi Arabia was 10.2%. In 1979, the per capita GNP of Gulf countries was: Iraq US $1602 (1977), IRAN US $2344, Oman US $2520, Saudi Arabia US $4980, Bahrain US $3790, Qatar US $11670, Kuwait US $12700 and UAE US $14420.

The fourth stage is the period of economic adjustment (since 1982).

In the early 1980s, oil prices fell sharply, putting great pressure on oil producing countries in the Middle East.

Compared with 1981, Saudi Arabia’s oil revenue decreased by 65% in 1985.

After the mid-1990s, oil prices continued to be low.

Many countries had to use their foreign exchange reserves, and their economic development projects were affected.

From the 1980s to 1990s, their economic growth was lower than that of oil producing countries in the Middle East and Africa.

The governments of oil producing countries have taken the following adjustment measures: first, adjust the budget scale according to the increase or decrease of oil revenue.

For example, Saudi Arabia’s total investment in the fourth five year plan (1986-1990) was 277 billion US dollars, a decrease of 23 billion US dollars compared with the third five year plan.

In the budget, administrative, national defense, subsidies, welfare expenditure and infrastructure investment have been significantly reduced.

However, after the recovery of oil prices, many oil producing countries have increased their budget expenditure to maintain the economic growth rate.

The investment in Saudi Arabia’s “Fifth Five Year Plan” (1990-1995) is as high as US $1 trillion.

Second, vigorously develop manufacturing, agriculture, trade and finance, and strengthen economic diversification.

By the end of the 1990s, Saudi Arabia’s non oil manufacturing industry accounted for 9.

4% of GNP and the UAE’s 11.2%. At the same time, countries have also invested heavily in the downstream oil industry.

By the end of 1996, the annual crude oil processing capacity of the six Gulf countries had increased to 234 million tons.

However, the six countries have also invested heavily in oil production, natural gas exploitation and liquefaction.

In agriculture, Saudi Arabia shifted from grain import to export, and exported 1.

7 million tons of wheat in 1987.

The UAE mainly develops trade and transit trade.

In 1996, its non oil exports and re exports exceeded 25.

9% of oil exports.

At the same time, Dubai has developed into the entrepot center of the Gulf and has trade relations with more than 120 countries in the world.

Kuwait and Bahrain became the financial centers of the Gulf region.

Before the Gulf War, Kuwait’s per capita overseas investment and deposits ranked second in the world.

In addition, the tourism industry in the Gulf has become the fastest growing region in the world.

Third, encourage private investment and actively introduce foreign capital.

In 1997, the state-owned share of the state-owned Saudi Basic Industries Corporation fell to 49%.

By 1996, the share of private enterprises in Saudi Arabia’s GDP had reached 35%.

Iraq also sold a number of light industrial enterprises, tourism facilities and large industrial and mining enterprises to private enterprises.

In the late 1980s, the output value of private enterprises accounted for more than 13% of GNP.

In terms of utilizing foreign capital, Iran has stipulated in recent years that the share of foreign capital in joint venture projects can exceed that of domestic capital, and can even own 99% shares in some industries.

Fourth, promote economic openness and international operation.

Except Abu Dhabi, most goods of other emirates in the UAE can be imported freely.

Before 1993, the tariff was only 1%. 3%. In terms of industrial development, countries are actively committed to establishing free zones and industrial zones.

For example, the UAE has 11 industrial zones.

Oman has established five industrial zones.

Meanwhile, Kuwait, the United Arab Emirates and Qatar have joined the world trade organization.

In terms of internationalization, Saudi Arabia has reopened its oil exploration and development to foreign countries, and invested in oil refining, storage and marketing overseas.

Fifth, reform the welfare system.

Countries will gradually reduce government financial subsidies for hydropower, housing, medical treatment and gasoline, introduce market mechanism into the social security system and establish a diversified social security system.

Sixth, reform the financial system.

National Silver.