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In this article, the author assesses the success rate of how oil-rich countries in the Arabian peninsula and beyond have tackled the challenge of increased oil revenues and how they have handled their newly established wealth. For many, oil has been a curse in disguise, with mismanagement of oil revenues, unequal distribution of wealth and the Machiavellian power of the rentier state – which in the case of Libya proved to be fatal.

By Matthias Pauwels, 26 Oct, 2011

Roughly a century ago, nobody would have imagined that a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds would become the most contested, sought-after commodity in the world. Oil-rich countries in the Middle East have been the scene of epic battlegrounds to gain control over the black gold. As a crafty tool to conduct psychological warfare, petrodiplomacy has become an important diplomatic weapon to the Arab nations against the West and, in particular, Israel. When crude oil found its way to the international market during World War II, the world became increasingly dependent on Arab oil. For over half a century, the oil industry of the world outside North America and the Soviet Union had been dominated by seven great international oil companies, exercising control over output and off-take prices. However, the tide was turning. By the 1960s-1970s control over Middle Eastern oil was rapidly passing into the hands of governments in the area and out of the hands of the heretofore dominant Western companies. International oil companies, once the beneficiaries of lucrative concessions and tax arrangements, slowly lost the control they traditionally exercised over Middle East oil production and pricing and had to accept policies determined unilaterally by the producing nations.

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