ABSTRACT

As of 1986, the Arabian Gulf is facing one of the most difficult times it has seen in the twentieth century. The war between Iran and Iraq is exacerbating some of the internal social problems between religious sects. It is a drain on the resources of the nations as they finance part of the Iraqi war effort. It also indirectly contributes to the decline in oil prices. Indeed, if production by Iran and Iraq is much lower than before the war started, both countries are presently under great pressure to sell whatever they can produce at whatever price, just to raise cash. Deep discounting by Iran and Iraq affects the market as a whole and puts downward pressure on all producers. Ironically, peace, whenever it happens, will have the same effect, as production capacity of both countries will rise dramatically and their needs for rebuilding the economies will be staggering.