U.S.-GCC Security Relations, II: Growing Domestic Economic and Political Problems   [open pdf - 25KB]

The Arab monarchies of the Persian Gulf-- Kuwait, Saudi Arabia, Bahrain, Qatar, United Arab Emirates (UAE), and Oman--grouped in the Gulf Cooperation Council (GCC) face economic problems. Adjusted for inflation, their oil income is less today than 15 years ago, while their populations are 50 percent larger. During the oil boom years from 1973 through 1984, the false impression was created that the GCC countries were world-class economic powers. For the moment, they were important in world financial markets, when the oil revenues were flooding in faster than could be spent. The image of this period remains in the minds of many, even though the reality has long since changed. The only GCC state with significant foreign assets, above the normal needs of a central bank for smoothing out fluctuations, is Kuwait. And those assets are endangered by the large deficits in Kuwait's budget. Nor are the GCC countries fabulously wealthy any longer. At the height of the oil boom fifteen years ago, they were the world's richest countries: per capita income in the GCC states exceeded that in the United States then. The situation is entirely different now. In 1995, the six GCC states have a collective GDP of about $210 billion, and a total population of 24 million, giving them a GDP per capita of $8,700. That is one-third of the U.S. level and two-thirds of the Israeli level. To be sure, the GCC figures are distorted by the large numbers of low income foreign workers. Comparing the GDP to only the citizen population of 13 million, the GDP per citizen works out at $16,000, or two-thirds of the U.S. level and the same as for Israel's Jewish population. In other words, the GCC states are economically at the cusp between developing nations and industrial states -- they are not at the economic level of the major industrial powers.

Report Number:
Strategic Forum No. 40
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