Collaborative colonialism the political economy of oil

COLLABORATIVE COLONIALISM THE POLITICAL ECONOMY OF OIL – Book Sample

Preface – COLLABORATIVE COLONIALISM THE POLITICAL ECONOMY OF OIL

Over the years, Islam and oil have been the two principal forces shaping developments in the Persian Gulf and in the broader Middle East. While Islam has been the foundation and scaffolding for some 1,400 years, oil has been a relative newcomer in framing events in the region, with oil production initiated in Iran about 100 years ago, gaining global and regional significance after World War II and capturing global headlines beginning in 1973–1974.

Today oil and the Persian Gulf are by all accounts inseparable. It is tough to mention one without the other. Even other words that are commonly associated with the Middle East or the Persian Gulf are perceived as being inextricably linked to oil: cartels, boycotts, sanctions, terrorism, military expenditures, corruption, dictatorships, conflicts, wars, revolutions, foreign meddling, and, yes, even Islam.

How did the countries of the Persian Gulf become so associated with oil? How have the political, religious, and social structure of these societies affected the way oil has been exploited, and in turn, how has oil affected these societies—their human, political, and economic development, and their relations with the outside world? What does it all mean for the future?

We examine these questions and implications of oil for the Persian Gulf, or what one might loosely label the “political economy of oil in the Persian Gulf.” As we will see, over the last 75 or so years, most of the significant developments in the Middle East region are in some way related to oil—inefficient institutions, the absence of the rule of law, corruption, economic failure, wars and conflicts, foreign interference, foreign relations, and more.

In short, the Persian Gulf and the Middle East conjure up Islam and oil, as Islam and oil conjure up the Middle East and the Persian Gulf. The Middle East, Persian Gulf, Islam, and oil are words that have become almost inseparable to most of our minds.

Before the discovery of vast quantities of oil in the Persian Gulf, the countries (or in some cases sheikhdoms) were poor (especially those that had little non-oil natural resources, such as Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates), politically and socially backward, and looked to the West for direction. Today, a century later, the countries of the region are much the same, but with a façade of unimaginable wealth and ostentatious living on the part of rulers and their supporters—especially in the countries that have extraordinary per capita oil (and natural gas) wealth—more regional conflicts, and more foreign meddling than ever before in the affairs of the region.

While most former colonies have been cut loose, countries of the Persian Gulf, though technically not colonies, have been pulled in the opposite direction and arguably reined in. What has been the political and economic manifestation of oil—the political economy of oil—that has shaped the region in this way? Will the future necessarily be the same?

We hope to demonstrate that the production of oil and the promotion of weak institutions (because effective institutions undermine corrupt rule) in the Persian Gulf countries have harmed citizens politically, socially, and economically, possibly leaving some countries worse off than had oil never been discovered on their land. While a number of these countries may appear to have been transformed with high levels of per capita GDP today, their economies are fundamentally unsustainable (built upon the depletion of oil) and unstable (with an unjust foundation and little popular backing).

In support of this proposition, we make four essential claims: (i) effective institutions are at the foundation of political, social, and economic progress in this region just as they are in any other region, but their development has been undermined by unelected rulers who are motivated by the accumulation of wealth for themselves and their supporters; (ii) oil has not only hindered the development of good institutions but also skewed the interests of rulers and elites to such an extent that they actively prevent the creation of sound institutions; (iii) although all Persian Gulf countries were exploited by the governments of colonial and neocolonial powers in the past, today most of the rulers of these countries solicit the support of those same foreign governments, their current and former senior government officials, their multinational companies, and their influential lobbyists to exploit their own coun- tries for personal gains—what we will call “collaborative colonialism”; and (iv) with so much wealth at stake, foreigners have not given up control of these countries (though not technically colonies), as they more or less did with former colonies, nor have these countries freely developed with all the ups and downs that the process entails.

We believe that the discoveries of vast quantities of shale gas around the world and the increasing competitiveness of unconventional crudes (from shale and tar sands) and renewables have definitively changed the global energy outlook. As a result, the countries of the Persian Gulf have less time than they might have ever imagined to transition to “oil-less” economies. In the process, we will address and expunge a number of popular myths, including: the United States supports dictators to maintain stability and to guarantee the “flow” of oil at a “reasonable price” for the United States, its allies, and the world at large; and Islam impedes development and progress.

Our goal is to shed light on how oil has affected the region’s political, human, and economic development, its external relations, indeed its fabric, and why there is more urgency than ever before to adopt foundational political and economic reforms. In the first half of the book, we take a chronological look at how the political structure of these countries and their relations to the outside world affected the exploitation of oil, how the role of oil grew, and how oil extraction shaped political and economic developments in these countries over the past one hundred years.

 In the second half of the book, we explore the impact of oil on development and on conflicts in the region as well as on the region’s relations with the world at large. We examine how foreign interests in the region first exploited the region’s oil as colonialists and then supported rulers to exploit the region’s wealth as collaborative colonialists. We conclude by suggesting how the role of oil can be transformed into a positive force in the future as the region transitions to non–oil-based, or oil-less, economies.

We have endeavored to limit our use of tables, graphs, and data. Instead, we hope to present a narrative that is sufficiently clear to require little use of numbers. For the reader wanting more back- ground and explanation, we provide a little extra information in a number of short appendices.

Oil—Islam, Ownership, and Institutions*

In this chapter, we ask what Islam has to say about the ownership and management of natural resources, especially those that are depletable such as oil and natural gas, and their beneficiaries. First some background.

Islam is a rules-based religion. Rules are spelled out and Muslims are required to be rule compliant. Islam’s teachings on human and economic development are expounded in the Quran and were operationalized by the traditions of the Prophet Mohammad. The Quran provides the framework and specifies rules (institutions) that are, to a degree, abstract; the traditions of the Prophet articulate the operational form of these rules and provide the foundational structure of a society centered on the Oneness of God.

During the 13 years the Prophet spent in Medina, he detailed and practiced all the following rules regarding: governance, accountability, and transparency; prop- erty ownership and protection; the formation and the structure of the market; the role of the state vis-à-vis the market; behavior by market participants; distribution and redistribution; education, tech- nological progress, and society’s infrastructure; and, finally, govern- ment income and expenditure. Most relevant for us here, the Quran and the traditions of the Prophet provide clear guidelines on owner- ship of natural resources and on how depletable resources should be managed in a Muslim society. In this chapter, we outline what Islam preaches about ownership, possession, and management of natural resources, in particular resources that are depletable, in our case oil and natural gas.

The central framework of all rules in Islam is justice. The Prophet preached the importance of justice and all of its ramifications for human behavior. He particularly emphasized the equality of individu- als before the law, and that all rules that are incumbent on individuals and their collectivity must be more strictly observed by those in posi- tions of authority.

“Authority may survive disbelief but not injustice.” Insistence on justice in all facets of human existence on this earth became the hallmark of the institutional scaffolding of governance, a structure with full transparency and accountability.

During his life in Medina, the Prophet clarified rules of property rights over natural resources—land, water, the content of mines, all depletable resources under the ground, and all that Allah had given humankind. Humans, in their collectivity, are entrusted with the responsibility as “agent-trustees” of Allah to manage His gifted resources. As trustees, humans are expected to remove economic obstacles created on the path-to-perfection of individual humans, who otherwise face the scarcity of these resources.

The first and most important principle of property rights acknowl- edged the permanent, constant, and invariant ownership of all prop- erty by Allah. In Islam there is a difference between ownership and possession, and humankind does not have absolute ownership. Allah is the absolute Owner of everything. The second principle acknowl- edges the transfer by Allah of the right of possession to all human- kind. Allah has made humankind the trustees of His creation on this earth. Humankind, not the state or a particular select group of humans, is entrusted with this trusteeship. Trusteeship entails owner- ship rights as well as responsibilities, with the understanding that the more fortunate must share with the less fortunate.

The third principle mandates equal opportunity of access by all to the natural resources provided by the Creator, to be combined with their labor to produce goods and services. The fourth rule recognizes only two ways in which individuals gain legitimate property rights: (1) through their creative labor, and/or (2) through transfers—exchange, contracts, grants, or inheritance—from others who have gained the property rights title to an asset through their own labor. Thus work is the basis of the acquisition of right to property. The fifth rule forbids gaining instantaneous property rights without working to earn them. The exception is lawful transfer. This rule also prohibits property rights gained through gambling, theft, earning interest on money lent, bribery, or, generally, from sources considered unlawful. Just as work is a right and an obligation of all humans, access to and use of natural-physical resources provided by the Creator for producing goods and services are also every human’s right and obligation.

 All humans are ordained to apply their creative labor to these resources to produce what society needs. If an individual, for whatever reason, lacks the ability to work, this does not deprive him of his original right to resources granted to every human by their Creator.

The rule of the “immutability of property rights” constitutes the sixth rule of property relations. This rule sanctifies the duty of shar- ing. Before any work is performed on natural-physical resources, all humans have an equal right and opportunity to access these resources. When individuals apply their creative labor to resources, they gain a right to priority in the possession, use, and exchange of the result- ing product without nullifying the original property rights of the Creator or the rights He granted to all humans in the final product or the proceeds from its sale. The duty of sharing the product or the income and wealth proceeding from its sale constitutes the seventh rule of property relations, which relates to property ownership rights as a trust.

This rule is operationalized through the ordained duties imposed on income and wealth, which must be paid to cleanse income and wealth from the rights of others. This is perhaps the rea- son why the Quran refers to these duties as “zakat,” from the root word meaning cleansing and purification. In a society in which there is poverty amidst plenty, the roots of inequality must be traced to distortions in the pattern of resource endowments, in the workings of the exchange and/or distribution mechanisms and/or in the redistributive framework.

The eighth rule of property relations imposes limitations on the right of disposing of property—a right that is absolute in the Western concept of property rights. In Islam, individuals have an obligation not to waste, squander, or destroy, or to use property for opulence or unlawful purposes. Once the specified property obligations are appropriately discharged, including that of sharing in the prescribed amount and manner, property rights on the remaining part of income, wealth, and assets are held sacred and inviolate, and no one can force their appropriation or expropriation.

To ensure the property rights of all members of society, property rights over natural resources (such as mineral deposits, land, and water resources) were placed in trust of either the state, to be used for the benefit of all, or in the hands of society at large as com- mons (for example, surface water and underground water aquifers). A clear distinction was made between the right of ownership and the right of possession, particularly in the case of land. Any individual could combine labor, capital, and available land to produce a commodity over which the person would have full property rights. The land would remain in the person’s possession as long as the land