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: 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. [ 7]
In addition, Kuwait and Saudi Arabia (and, outside the Middle East, Venezuela) have acquired refineries, marketing networks and other assets in the industrial markets. [ 8] Structurally tied even more tightly to Western economies, they are unlikely to adopt production and pricing policies that might hurt the industrial economies. Kuwaiti income derived from foreign investments has exceeded the country’s revenues from sales of crude oil and petroleum products in recent years. [ 9]
Saudi Arabia has played a key role since the mid-1960s in keeping prices down. Riyadh opened the spigot in 1980 and 1981 to make up for lost supplies in the wake of the Iranian revolution and after the outbreak of the Iran-Iraq war, to force fellow OPEC members to toe the line on pricing in 1986, and again following Iraq’s invasion of Kuwait to compensate for embargoed Iraqi and Kuwaiti crude. [