Introduction:
The role of oil in the political economy of the MENA region is multifaceted, resulting in significant repercussions on economic development and stability of politics. Economic models such as the Resource Curse theory explain the intricate link between oil endowment and socio-political dynamics. Oil-producing countries of the MENA region significantly influence the global energy market, bringing about both positive and negative consequences for their systems within the economy and in society. This wealth of oil, which provides a vacuum for rapid economic growth, also promotes political instability and corruption. Thus, the challenges of governance persist. Even if the point of view is that oil can bring economic stability and strong government, an all-encompassing approach is needed to diverge all the negative consequences. This requires an economic policy mixture that will render oil dependency more profitable and less detrimental. Additionally, a review of regional economic coordination, similar to NAFTA, presents strategies for overcoming the difficulties posed by the oil industry in the MENA region. Given that oil holds such a powerful sway over the region’s political and social systems, a careful assessment of its position is necessary to develop effective policies.
Oil has played a crucial role in the economic development of MENA countries. Countries like Saudi Arabia and UAE have turned their oil revenues into something positive by funding substantial construction projects and the latest advancements. One example is Saudi Arabia’s Vision 2030 and the UAE’s Vision 2021, which emphasize oil revenues for diversifying the economies and reducing oil dependence(Ertimi et al., p. 25). Economic indicators show that a rise in oil prices causes a jump in GDP growth in these states, which underlines the immediate effect of oil on a country’s economic development. Nonetheless, they are exposed to the volatility of oil prices that can result in economic instability because of the drain of financial streams during the crash of oil prices.
Oil concentration has also contributed to severe political challenges in the MENA region. As ruling leaders manage oil revenues, power is centralized, dissent is suppressed, and democratic freedoms are restricted, which contributes to political unrest. For instance, oil riches have led to internal instability and power games in Libya and Iraq, contributing to political unrest (Alssadek & Benhin,p. 103741). According to the “resource curse” theory, countries with considerable natural resources tend to have lower economic growth and poorer development outcomes than countries with fewer natural resources. However, it is mainly due to governance problems.
Some MENA countries attempt to reduce oil dependency by diversifying their multifaceted economies. The UAE is a leading example nation with significant tourism, aviation, and real estate investments. This diversification strategy protects the economy and prevents it from being overly dependent on oil price fluctuations(Jolo et al.,p. 2797). Disconnection from oil income leads to sustainable growth, politics become more stable, and diversification efforts assist in that. Furthermore, economic diversification guarantees broader economic participation and resilience, the foundation for lasting economic and political stability in the MENA region. At the same time, dependence on oil revenue has been addressed.
Despite engineering economic growth, oil has had less beneficial social effects on the MENA region. The income disparity has been continued by the oil wealth, as substantial pockets of populations in oil-rich nations face unemployment and a lack of public services. This inequality further adds to social disturbance and instability, which, in turn, hinders the likely achievement of oil wealth. The lack of treatment of these social injustices extends the sources of tensions and increases the barriers to regional stability(Ertimi et al.,p. 25). This thus implies that although oil revenues have become the engine of wealth creation in the country, they have also underscored the need and urgency for social development policies that ensure the fair distribution of wealth and promote inclusive growth. Solving these social problems is essential for transforming oil wealth into a sustainable development and stability driver in the MENA region.
The political economics of oil in the MENA region is critically affected by international relations. Internal forces often depend on external powers that hold keys to the oil policies and political dynamics, embedding the area in a specific economic path. Although economic integration in the form of a regional bloc similar to the North American Free Trade Agreement (NAFTA) brings promising theoretical results in terms of promoting economic growth and stability by expanding trade and cooperation, in reality, the region is torn by numerous challenges that impede the realization of such vision in MENA(Sweidan & Elbargathi,p. 102469). This diversity of political regimes, which range from democracy to autocracy, different economic plans, and historical hostility constitute the most severe challenge to forming a united economic bloc. Considering the features of the country’s socio-political sphere, more complexities are needed to make economic integration easier. However, economic cooperation alone will only sustain the integration framework in the MENA region if tackling the core political issues and running inequalities first.
In summary, oil profoundly affects MENA, promoting economic development while simultaneously strengthening political disorder and social divisions. Despite economic solutions such as economic diversification and regional integration, governance issues are critical and should be addressed. It is essential to tackle the problems associated with oil fees to exploit the resources for the region sustainably.
Work Cited
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—. “The Policy Framework of Natural Resource Management in Oil-Dependence Countries.” Economies, vol. 9, no. 1, Feb. 2021, p. 25, https://doi.org/10.3390/economies9010025. It was accessed on 7 Jan. 2022.
—. “The Effect of Oil Rent on Economic Development in Saudi Arabia: Comparing the Role of Globalization and the International Geopolitical Risk.” Resources Policy, vol. 75, no. 1, Mar. 2022, p. 102469, https://doi.org/10.1016/j.resourpol.2021.102469.
—. “Natural Resource Curse: A Literature Survey and Comparative Assessment of Regional Groupings of Oil-Rich Countries.” Resources Policy, vol. 84, July 2023, p. 103741, https://doi.org/10.1016/j.resourpol.2023.103741.
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