ABSTRACT
This chapter discusses the internal pressures that have been building up in the oil-exporting countries of the Middle East due to rising population pressures, an economic monoculture and political rigidity. In the 1970s and early 1980s, huge oil revenues distorted economic development and caused political centralization within the state. The 1997–1998 oil price decline caused a severe economic predicament among the world’s oil exporters, not least in the Middle East. Iran’s economic predicament is due largely to the eight-year war against Iraq, but also to the attempt at imposing an administrative economy, which has led to distorted prices, inefficiencies, low capacity utilization and lack of investment. Experience indicates that for Iran, a possible decline in oil revenues would help provoke a more liberal and democratic trend in politics and strengthen the private sector over the rentier state. With rising security concerns, the Gulf states became more attentive to US oil interests.
