ABSTRACT
This chapter demonstrates the relationship between diversification and financialization. Watson's delineation of the literature on financialization into microfoundations and macrofoundations accurately captures the breadth of research that draws on the financialization framework. The policies pursued by the Gulf Arab oil producing countries were primarily aimed at correcting global structural imbalances. Circulation of these revenues happened primarily through bank-based instruments, thus commercial banks became the primary intermediary for petrodollars. Historically, in periods of oil booms, intermediaries such as international financial centers (IFCs) played a large role in circulating oil revenues. Local banking and financial institutions have been primary beneficiaries of the oil boom. The commitment to banking and financial services expansion is further reflected in projects to establish IFCs in the Gulf Cooperation Council (GCC).
