AIJAZ ZAKA SYED ARABNEWS.COM
Published — Friday 26 December 2014
Is it finally the end of El Dorado? After surging and serenading above $100 a barrel for years, the much prized oil suddenly finds itself cheap and in diminished global esteem. Oil prices hit a new five-year low this past week, sending shock waves across oil producing nations and oil-dependent economies in the Gulf and around the world.
Richard Quest of CNN and others of his tribe cannot hide their glee as they gloat about the sudden, unexpected glut in oil markets and how it has thrown oil-driven economies into a tizzy.
The inexpensive oil has been playing havoc with the Russian economy, with the ruble fast shedding its weight in gold. Since oil prices started their slide, the Russian currency has lost 25 percent of its worth despite interventions and pumping in of $5 billion by Moscow. Things are so bad that President Putin in a special appeal has had to urge the Russian diaspora to ‘help Mother Russia’ with their wealth parked overseas. You wouldn’t be asked about the nature or origins of your earnings, reassured the embattled Russian leader.
The other leading members of OPEC aren’t any less concerned. Remarkably though, Saudi Arabia, the world’s largest oil producer and the market leader, and other OPEC heavyweights have so far maintained their equilibrium firmly rejecting calls to cut crude production to stabilize the prices.
Given the strength of the Saudi economy and other Gulf states coupled with their massive oil reserves, they can presumably weather a storm or two of this nature —and they repeatedly and successfully have in the past many decades.
Yet there is a palpable nervousness in the region, especially among investors about the long-term implications of the continuing low oil prices. For over a week now, the Dubai financial index has steadily been bleeding with major players like Emaar shedding some of their weight. The Gulf economies may be looking at considerably diminished revenues in months ahead.
This rough phase, largely driven by a struggling global economy coupled with a fall in demand, is transitory though. The global demand for the liquid gold is here to stay for a long time to come no matter what anyone thinks or wishes about the Gulf oil. However, the Arabs would do themselves no service if they failed to draw the right lessons from the current crisis. In fact, this should be the proverbial wake-up call for everyone concerned.
All good things eventually come to an end. The liquid gold, or at least the strategic role the Middle East oil has historically played in global markets, cannot continue forever. The emergence of other major oil producers like Russia and the recent arrival of the United States — one of the world’s biggest energy consumers — with its shale oil has already altered the global energy scene. We could see further significant changes on this front in times to come. Which in effect sets a challenge to the Middle East’s primacy as the global hub of energy and by extension, its oil-driven prosperity, powerful sovereign funds and high standards of living.
This is a scenario that economic pundits and energy experts have long fantasized about. And now it seems we are slowly getting there. Are the Arabs ready for the change though? For years, the Middle East leaders and economists have been calling for economic diversification and reducing the region’s critical dependence on oil revenues. Countries like Saudi Arabia, UAE, Oman and Iran have taken major steps toward diversifying their economy and generating alternative sources of revenue. But the region has a long way to go before it can really feel reassured on this front.
Author and academic, Dr. Mahboob A Khawaja, who taught in the region for years, sees oil as a ‘curse’ for the Middle East. He argues that the easy and transitory prosperity spawned by oil has destroyed ancient Arab and Islamic cultures and civilization.
Pointing out that for almost 800 years the Arabs and Muslims produced an advanced civilization morally, intellectually and scientifically unparalleled in modern history, Prof Khawaja laments that the oil wealth has made the Arabs complacent and indifferent to their future and place in the world.
Of course, one couldn’t entirely agree with Khawaja’s argument. Like much of God’s bounty and like any other natural resource, this is a gift and trust. Blessing or curse, in the end, it is up to us how we use and benefit from it. Energy, if abused, can wipe out entire cities as it did in Hiroshima and Nagasaki. It can also help build the world and save hundreds of millions of lives.
Today, more than ever, energy drives our world — in every sphere of human activity. Where would we be without it? Lost. Totally and utterly.
Oil is the lifeblood of the world economy. It has economically transformed the whole of the Middle East and lifted hundreds of millions out of desperate poverty.
Truth be told, the Arabs have sold this precious resource and the awesome power and clout that comes with it rather cheap. Despite holding reins to this awesome source of power, they have largely watched the world from the sidelines, even when their own future and interests have been at stake.
However, now that the world appears perched on the verge of change and the Middle East oil is apparently losing its sheen, Arabs can no longer afford to be complacent about their resources as well as their own place in a fast evolving world.
They must judiciously and wisely invest their wealth and resources in building institutions, knowledge infrastructure and human resources. Ritzy malls, swanky hotels and boulevards are all very nice to attract tourists but they do not exactly secure the region’s future.
The most precious resource of the region, or for that matter of any region, is its people. Governments need to invest in them by arming them with the best of education and skills for challenges of the future. The Arab and Muslim world needs to invest in creating world-class universities, scientific research institutions, think tanks and media. Isn’t it strange that today not a single university or college from 57 Muslim countries makes it to the top 100 in the world? It’s all the more absurd considering the world’s first modern university, Al-Qarawiyyin, was founded in the Middle East in 859CE, in Morocco, by a woman named Fatima al-Fihri. And who could claim ignorance of the seminal contribution the region has made to science, philosophy, medicine and the Western civilization itself?
In the words of Prof Robert Briffault, author of The Making of Humanity, “It was under the influence of Arabian and Moorish revival of culture and not in the 15th century, that the real Renaissance took place. It is highly probable that but for the Arabs modern European civilization would never have arisen at all!”
But that was their past. What are the Arabs doing to build and define their future? One thing is for sure. They will have to make this journey on their own. They certainly cannot do it with the help of those who have historically exploited the region, dividing its people and abusing its resources. World powers are, as Erdogan warns, only interested in Arab money.
To reiterate Dr Khawaja’s advice, the new and thinking generations of Arabs must make a navigational change to free themselves from the oil-fed false sense of comfort and consequent dependence on the West. The social and economic-political reconstruction of Arab societies is otherwise impossible. The Middle East must act to take charge of its destiny before it’s too late ere the so-called economic bubble indeed bursts.