Title: Oil and the Gulf War - MERIP
Headings: Oil and the Gulf War
Oil and the Gulf War
Loyal Producers
What Price Oil?
Structural Aspects
Endnotes

Content: This is a key reason for Washington’s intervention in the Kuwait crisis. In addition to the increasing dependence of major consuming countries on the oil deposits in the area, important ideological and practical affinities between the Gulf monarchies and the West make that reliance tolerable. Faced with rising oil import dependence, the Bush administration has made a strategic decision in favor of shoring up its Gulf allies militarily even while opposing policies at home that would constrain the American appetite for energy. [ 6]
These countries — Saudi Arabia, Kuwait and the United Arab Emirates — have by far the most extensive oil reserves in the world, rivaled only by Iraq and Iran, and the ability to expand production capacities to meet growing world demand. They have an interest in maintaining relatively low oil prices to secure long-term markets for their resources, whereas the more populous OPEC countries — Nigeria, Indonesia, Algeria, Iran and, to a degree, Iraq — are hard-pressed to finance an array of civilian and military needs and to payoff foreign debts. Higher revenues over a much shorter stretch of time are in their interest. Kuwait and Saudi Arabia both have invested a substantial part of their petrodollar surpluses in Western countries. Kuwaitis acquired controlling or minority holdings in a large number of companies, while Saudi Arabia primarily invested in bank deposits and government bonds and securities. Declining oil revenues have forced Saudi Arabia to draw down these deposits for much of the last decade. Today they are estimated at no more than $50-60 billion, compared with a peak of $150 billion at the beginning of the 1980s. [