The longstanding tension between Qatar and Bahrain, United Arab Emirates (UAE), Saudi Arabia has reached boiling point this week.
Too much has been written on the political and diplomatic dimensions of the crisis. Besides these, it is necessary to explain how these relatively small countries could occupy the world’s agenda that much. To answer this question and to comprehend what could happen next, it would be helpful to briefly look at the network that the Gulf countries established together and the place of this network within the world’s capitalist system.
HISTORY OF THE GULF AT A GLANCE
When it comes to the Gulf countries, the first things coming to minds are their abundant hydrocarbon resources and that they are the main oil producers/exporters in the world. Besides, the common thought that this natural wealth actually creates trouble for local communities seems to be true when the history of colonialism and imperialist invasions are considered.
In fact, the modern history of the Middle East and the Gulf are directly related to the trends in the world capitalist system and the richness in hydrocarbon resources reaches significance within this system.
For instance, the fact that Britain had colonised nearly the whole region was related to the opening of the gate to the Mediterranean and India; and the sheikhs in control of trade in the region had to collaborate with Britain for their own living. Britain had divided the Gulf area into pieces for its own hegemonic position and decided to govern as such. This period has a significant effect on today’s ongoing border disputes among the Gulf countries.
The same period had witnessed the emergence of the thought that the Gulf countries divided into small pieces and reigns of families could not survive without any foreign support. Britain had signed individual treaties with the emirates in the region; it had restrained them from establishing relationships with others; it had not allowed them to advance their own military capacity, and it offered protection against the “expansionist” House of Saud.
Qatar was used to be an insignificant region at the beginning of the modern history of the Gulf; its ruler and mercantile classes were weak. The Thani dynasty still ruling Qatar which was once considered as the “colony of Bahrain” seized power after the Al Khalifa dynasty, who rules Bahrain today, left Qatar.
Bahrain and Kuwait, on the other hand, have always been more privileged for the region because of their geographically advantageous location in terms of their shores, the pearl hunting and the pressure of trade coming from Iran. Another Gulf country, Oman, also attracted Britain’s interest due to its favoured location between Africa and the Indian Ocean. Although the country was not legally a colony, London had systematically weakened Oman in order to be able to control the Strait of Hormuz. It also banned the Arabs to do business with Oman and gave the control to the Indians and made the Baloch people move from Pakistan to Oman for the sake of “security”. It is not a coincidence, therefore, those anticolonial movements were initiated in countries like Oman and Bahrain.
POST WORLD WAR 2: THE GULF AND GLOBAL CAPITAL
A closer look at the capitalist system after the WW2 and the internationalisation of capital is essential to understand the well-known wealth of the Gulf. The internationalisation of capital posits overcoming the obstacles in front of capitalist accumulation processes, without eliminating the nation-state structure. “Neoliberalism” emerged in the 70s was a stronger fit to the capital’s tendency to internationalise than the welfare states of the “golden era” of capitalism. Financialization, expansion of the financial markets, the enormous increase in the household debt ratios and regionalization of the movement of labour in relation to the decrease in the cost of labour power have been among distinguishing features of this tendency.
The Gulf was not integrated into the capitalist system because of its rich hydrocarbon resources, but because of capital’s tendency to internationalise and financialized. Imperialist invasions and interventions were also based upon this structure. Saddam Hussain and Iraq, for instance, did not experience an imperialist intervention at first because of their rich oil reservoirs. Hussain’s problem was that he dared to use the oil prices as a tool for political negotiation. This will be elaborated on later.
In addition, the increase in the usage of oil in production and the expansion of production were also important for the Gulf in terms of adding new elements to its strategic position and paving the way to its integration into the world capitalist system. Internationalisation of capital, in this context, has become the key element for this integration and the only one who could deal with this was the United States.
The security agreement, in an exchange with oil, between the US and Saudi Arabia is well-known. However, what is less-known is that the US and Britain were united against communism after the WW2 on the one hand, and they had been in a constant hegemonic fight on the other. For example, post-war Britain was trying to put Iraq up against Egypt and Syria, home to Arab nationalism and the US was willing to give priority to Saudi Arabia by soothing Egypt. Is the tension between Britain and the House of Saud remembered today? Does anyone know about Abdullah Tariki, the Saudi “Red Sheikh”? It is a long forgotten history that the possession of oil resources in the Middle East had changed for the benefit of the US and to the detriment of Britain.
The world would have to wait until the 70s for the Gulf to be the Gulf today. These years would witness that the oil crisis, the crisis of capitalist accumulation and imperialist attacks had moved into a new dimension. The Nixon Doctrine declared in the beginning of the decade, was a reflection of the Vietnam “trauma” in the foreign policy of the US and allowed the proxies come to the forefront instead of a direct military intervention of Washington.
The tension that the oil resources in the Gulf had become a matter of negotiation between Saudi and the US related companies and that oil prices had increased and the Gulf took a key role in the fiscal convergence of petrodollars had escalated to top with the embargo in 1973 Arab-Israeli war. The increase in oil prices had facilitated the Gulf countries to stock petrodollars as well as strengthening their hands, especially against the European countries. The oil, in this context, had reached its peak as a political tool.
Another remarkable output from the enormous increase in petrodollars was that the Gulf-based banks had gained great opportunities to make a rapid entry into the financial system of Europe and to give debts. This period not only provided the integration of the Gulf into the financial structure of the world capitalist system but also put the Gulf in a key position within that structure. The same period, with a secret agreement between the US and Saudi Arabia, the Saudis agreed to invest their petrodollars in the US. Funds held in US dollars in OPEC had exceeded 90 percent so that the financial future of the Gulf and of the US had been interlinked. As it can be predicted, the continuation and assurance of the US dominance in the world were an indispensable element for the Gulf, and it is still so.
At this point, it should be reminded that the Gulf Cooperation Council (GCC) is also very important. Beyond being a regional political bloc, UAE and Saudi dominance, especially in the construction sector, is easily seen in other countries, as the capital of the GCC countries flows easily into each other. In the petrochemical sector, which is one of the critical sectors, the Saudi and UAE dominance has flowed out of the Gulf. Especially Egypt's economic dependence on the Gulf is crucial to understand the position of the Sisi government within the international system.
THE CAPITAL THAT DOES NOT KNOW WHERE TO GO AND THE 2000s
The oil prices that had started to increase since 2001 ($20/barrel in 2001, $80 in 2005 and $140 in 2008) were about to trigger an "over-accumulation crisis" for the Gulf states. The accumulation was tremendous. The income from oil for all the GCC countries had exceeded 1.5 trillion dollars. The solution that the Gulf countries found to this problem was to transfer the increasing capital to a channel like "dismantling and rearranging the pavement": Megaprojects, huge constructions...
The most typical example of this was Bahrain. As a small island, Bahrain began investing infrastructure specifically to 'surround' the sea in the northern parts of the island and to invest new land there (2.5 million tonnes of sand were discharged into the sea) to solve the crisis of over-accumulation. The fact that the Gulf is a key factor in international capital conversions and that the majority of investments are located in foreign Wealth Funds do not diminish the importance of intra-Gulf investments. In 2015, the construction sector accounted for 7 percent of Bahrain's Gross Domestic Product (33 per cent of the banking loans was in this sector in 2007). More importantly, the construction sector in Bahrain was mostly owned by UAE-based companies. This suggests that the Gulf's own internal consolidation is not just a "common enemy" against Iran: The solution to a possible economic crisis seems to depend on the investments of the Gulf countries in the Gulf, and that the Gulf capital can move freely within the Gulf.
QATAR'S POSITION AND THE PREVIOUS CRISES
The hydrocarbon issue of Qatar is not specifically about oil. Qatar's main position in the world energy markets comes from its leadership in the production of liquefied natural gas (LNG).
However, the crisis between Qatar and the other Gulf countries also reminds other tensions previously occurred. Apart from the border disputes with Bahrain and Saudi Arabia, the gas pipeline project between Kuwait and Qatar was the most important thriller. According to the treaty signed between the two countries in 2000, Kuwait would receive gas from Qatar, and the pipeline would pass through the territorial waters of Saudi. Riyadh initially approved the project, but in 2006 it withdrew its approval.
The same year, a pipeline from Qatar to UAE and Oman, which continues to operate as the Dolphin pipeline today, would be protested by Riyadh. What is interesting is that despite the great impact of the current crisis, the flow of gas from Dolphin continues.
The monopolies of Qatar in steel and petrochemical industries are controlled by a group of families, as well as the Thani dynasty. The banking and finance sectors, and "agencies" of large capitalist companies are also in the hands of a group of families.
In spite of these, Qatar seems to be economically weaker and more dependent than any other among the greatest number of states in the GCC. For example, Qatar, who is actually able to compete with the Saudis, Kuwaitis and UAEs in terms of holding foreign resources, makes these investments mostly through private individuals.
Qatar's share in the total GDP of GCC is increasing every year. This ratio, which was 5.74 percent in 2003, rose to 8.55 percent in 2007. It is important to remind that UAE increased its share in the same years but that the share of Saudi Arabia decreased (from 52 percent to 45).
These figures could partly explain the causes of tensions in the Gulf. Aside from Qatar's "political awkwardness", for example, in Yemen, it would be beneficial to read the Saudi Arabia-UAE tension from this perspective. And also, the interesting relations that UAE has with Russia... The close ties that the Gulf states have established with Asia-Pacific and Southeast Asia indicate a possible change in both financial architecture and the geographical flow of petrodollars. This route also marks the opening of the Gulf to Eurasia and the Pacific.
However, the perception of Qatar that its own energy resources provide itself with a political freedom concerns not only Qatar but also its big brothers UAE and Saudi Arabia. The Saudis, who are skilled enough in this business, have been tamed by the US many times. Now, the clever prince Muhammad bin Selman's privatisation projects in the country and his plans for a new initiative based on "diluting Wahhabism" mean that the last pseudo-welfare state in the Middle East will be integrated into the market of Saudi Arabia. Cutting subsidies was among the first signs of this. Riyadh, once again as the monkey of the American imperialism, is preparing with Israel to flatten the region.
