Economic Stability and Instability in the New Middle East Part II
CSIS_______________________________ Center for Strategic and International Studies 1800 K Street N.W. Washington, DC 20006 (202) 775-3270
Economic Stability and Instability in the New Middle East Part II
Anthony H. Cordesman Co-Director, Middle East Program Center for Strategic and International Studies April 4, 1999
Copyright Anthony H. Cordesman, all rights reserved.
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Table of Contents DEBT PERFORMANCE IS MIXED .................................................................................................................. 1 THE DEBT BURDEN TRENDS IN THE MIDDLE EAST WERE RELATIVELY STATIC BEFORE THE “OIL CRASH”: 1980-1995.......................................................................................................................................................... 2 TOTAL MENA DEBT ROSE AFTER 1990, BUT THE COST OF PRINCIPAL REPAYMENTS WENT DOWN: 19701996................................................................................................................................................................... 3 HOWEVER, MIDDLE EASTERN DEBT PERFORMANCE BY COUNTRY IS MIXED.............................................. 4 COUNTRIES DIFFER RADICALLY IN TOTAL EXTERNAL DEBT ........................................................................ 5 THE MIDDLE EAST FAILED TO COMPETE IN PRODUCTIVITY ............................................................ 6 PRODUCTIVITY DROPPED WHILE RISING IN OTHER REGIONS: AVERAGE ANNUAL CHANGE IN TOTAL FACTOR PRODUCTIVITY: 1960-1990 ................................................................................................................ 7 THE MIDDLE EAST LAGGED IN REGIONAL OUTPUT GROWTH, DURING 1985-1993 ...................................... 8 THE MIDDLE EAST LAGGED IN VALUE ADDED TO MANUFACTURING .......................................................... 9 RELATIVE PERCENTAGE INCREASE IN VALUE ADDED TO MANUFACTURING: 1980-1994 .......................... 10 THE ECONOMICS OF THE “OIL SHOCK” ................................................................................................. 11 CEA ESTIMATE OF HISTORICAL TRENDS IN MIDDLE EASTERN OIL PRODUCTION: 1970-1997................... 12 HISTORICAL TRENDS IN MIDDLE EASTERN OIL REVENUES: 1970-1997....................................................... 13 POLITICS AND THE TRENDS IN THE PRICE OF SAUDI ARABIA LIGHT CRUDE: 1970-1999............................ 14 PROJECTED MIDDLE EASTERN, NON-MIDDLE EAST, AND WORLD OIL PRODUCTION: IEA VERSUS EIA .. 15 JUST HOW UNCERTAIN IS FUTURE MIDDLE EASTERN PRODUCTION? IEA VERSUS EIA VERSUS CORDESMAN GUESSTIMATE: 1995 VS. 2010 VS. 2020 .................................................................................. 16 COMPARATIVE EIA AND ARAB ESTIMATES OF MIDDLE EASTERN OIL PRODUCTION CAPACITY BY COUNTRY........................................................................................................................................................ 17 THE “OIL SHOCK IN REVERSE:” SHIFTS IN TOTAL OPEC EARNINGS ........................................................... 18 THE “OIL SHOCK IN REVERSE:” SHIFTS IN OPEC EARNINGS BY MAJOR COUNTRY: 1972-1998................. 19 THE BOOM IN 1980 VERSUS THE MID-1980S AND 1990S: SHIFTS IN MIDDLE EASTERN OIL EXPORT EARNINGS BY COUNTRY................................................................................................................................ 20 THE DECLINE IN REAL PER CAPITA INCOME IN THE MIDDLE EAST, NORTH AFRICA, OPEC AND SAUDI ARABIA: 1980-1995......................................................................................................................................... 21 THE “OIL SHOCK IN REVERSE:” SHIFTS IN GULF EXPORT EARNINGS 1970-1996 ........................................ 22 THE GDP GROWTH OF MENA FUEL EXPORTERS LAGGED BEHIND THAT OF DIVERSIFIED EXPORTERS AND WAS FAR MORE VULNERABLE TO OIL PRICES ..................................................................................... 23 THE PER CAPITA INCOME GROWTH OF MENA FUEL EXPORTERS LAGGED BEHIND THAT OF DIVERSIFIED EXPORTERS AND WAS FAR MORE VULNERABLE TO OIL PRICES................................................................. 24 THE FISCAL BALANCES OF MENA FUEL EXPORTERS DETERIORATED RELATIVE TO THOSE OF DIVERSIFIED EXPORTERS............................................................................................................................... 25 THE TERMS OF TRADE OF MENA FUEL EXPORTERS DETERIORATED RELATIVE TO THOSE OF DIVERSIFIED EXPORTERS............................................................................................................................... 26 ECONOMIES FAILED TO DIVERSIFY AND REMAINED OVER-DEPENDENT ON OIL: OIL AND PETROLEUM EXPORTS AS A SHARE OF GULF AND MIDDLE EASTERN ECONOMIES ......................................................... 27 MIDDLE EASTERN AND NORTH AFRICAN OIL REVENUES BY COUNTRY: 1996-1998: THE IMPACT OF OIL PRICES ON REVENUES .................................................................................................................................... 28 PRESSURES ON THE SAUDI BUDGET: THE PROBLEM OF PREDICTING THE FUTURE OF A ONE COMMODITY, STATE-DRIVEN ECONOMY ............................................................................................................................. 29 PRESSURES ON THE SAUDI BUDGET: THE ENTITLEMENTS PROBLEM ......................................................... 30 PRESSURES ON THE KUWAITI BUDGET ......................................................................................................... 31 PRESSURES ON THE QATARI BUDGET ........................................................................................................... 32 MIDDLE EASTERN AND NORTH AFRICAN OIL REVENUES BY COUNTRY: 1996-1998: THE IMPACT OF OIL PRICES ON REVENUES .................................................................................................................................... 33 Copyright Anthony H. Cordesman, all rights reserved.
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PRESSURES ON THE OMANI BUDGET ............................................................................................................ 34 KEY TRENDS IN THE OMANI BUDGET ........................................................................................................... 35 THE EIA REFERENCE CASE ESTIMATE OF MIDDLE EASTERN PRODUCTION BY COUNTRY: 1990-2020..... 36 PETROLEUM FINANCE INSTITUTE ESTIMATE OF MIDDLE EASTERN AND NORTH AFRICAN OIL REVENUES BY COUNTRY: THE RANGE OF FUTURE OIL REVENUES IN : 1998-2020 ....................................................... 37 REGIONAL TRENDS IN MILITARY EFFORT: “THE MOST MILITARIZED AREA IN THE WORLD” ............................................................................................................................................................................ 38 THE TREND IN MIDDLE EASTERN MILITARY EXPENDITURES AND ARMS TRANSFERS SINCE THE OCTOBER WAR ................................................................................................................................................................ 39 “THE MOST MILITARIZED REGION IN THE WORLD” ..................................................................................... 40 THE DECLINING TREND IN MIDDLE EASTERN MILITARY EXPENDITURES AND ARMS TRANSFERS IN CONSTANT DOLLARS ..................................................................................................................................... 41 THE BURDEN OF MILITARY SPENDING IS SHRINKING .................................................................................. 42 MILITARY EXPENDITURES PLACE A LOWER BURDEN ON GOVERNMENT SPENDING ................................. 43 MIDDLE EASTERN MILITARY EFFORTS HAVE ALSO DROPPED SHARPLY AS A PERCENT OF GNP, GOVERNMENT EXPENDITURES, TOTAL POPULATION, AND ARMS IMPORTS: 1984-1996 ........................... 44 MIDDLE EASTERN MILITARY EXPENDITURES AND ARMS IMPORTS DROPPED SHARPLY RELATIVE TO ECONOMIC GROWTH AND GOVERNMENT SPENDING DURING 1984-1994 .................................................. 45 THE DE-RADICALIZATION OF MIDDLE EAST ARMS TRANSFERS..................................................... 46 THE CONTINUING IMPORTANCE OF THE MIDDLE EAST ARMS IMPORTS AS A SHARE OF THE WORLD DEFENSE MARKET ......................................................................................................................................... 47 THE TOTAL VALUE OF THE MENA MARKET FOR ARMS IMPORTS : 1986-1996 .......................................... 48 NEW ARMS AGREEMENTS ARE DROPPING EVEN FASTER THAN DELIVERIES BUT THE NEAR EAST AGAIN PLAYS A CRITICAL ROLE ................................................................................................................................ 49 KEY STATES AFFECTING THE REGIONAL BALANCE ..................................................................................... 50 THE CUMULATIVE IMPACT OF THE ARAB-ISRAELI PEACE ACCORDS, SANCTIONING OF LIBYA, END OF THE IRAN-IRAQ WAR, END OF THE COLD WAR, GULF WAR, AND ECONOMIC RECESSION ........................ 51 THE IMPACT OF THE END OF THE COLD WAR AND THE GULF WAR ON NEW ARMS SALES TO SELECTED MAJOR BUYERS .............................................................................................................................................. 52 THE IMPACT OF THE END OF THE COLD WAR AND THE GULF WAR ON NEW ARMS DELIVERIES TO SELECTED MAJOR BUYERS ............................................................................................................................ 53 NEW ARMS PURCHASES BY MAJOR BUYERS IN THE MIDDLE EAST AND NORTH AFRICA BEFORE THE END OF THE COLD WAR: 1987-1990 ...................................................................................................................... 54 SHIFTS IN ARMS BUYS OF MAJOR BUYERS IN THE MIDDLE EAST AND NORTH AFRICA AFTER THE COLD WAR: 1994-1997 ............................................................................................................................................. 55 THE CUMULATIVE DECLINE IN MILITARY SPENDING BY SELECTED MAJOR BUYERS IN CONSTANT DOLLARS: 1984-1996...................................................................................................................................... 56 THE DECLINE IN SPENDING BY SELECTED MAJOR BUYERS: 1984-1996 ...................................................... 57
Copyright Anthony H. Cordesman, all rights reserved.
Debt Performance is Mixed • Total debt has risen, but has been controlled. • At the same time, the control of public debt has often come at the expense of polices that discourage investment in the MENA region. • Several countries also have serious debt problems.
Copyright Anthony H. Cordesman, all rights reserved.
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The Debt Burden Trends in the Middle East were Relatively Static Before the “Oil Crash”: 1980-1995 180
160
140
120
100
80
60
40
20
0 Ratio of Total External
80
88
89
90
91
92
93
94
95
36.8
155.7
140.7
109.8
129.2
126.1
134.5
148.5
136.9
18.6
41.6
42.5
38.3
40.7
39.9
43.1
41.7
40.2
2.8
6.8
6.8
5.2
5.5
5.6
6
6.2
6.5
Debt Relative to Exports of Goods and Services Ratio of Total External Debt to Gross National Product Ratio of Total Interest Payments Relative to Exports of Goods and Services
Adapted by Anthony H. Cordesman from World Bank, World Debt Tables, 1995.
Copyright Anthony H. Cordesman, all rights reserved.
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Total MENA Debt Rose After 1990, but the Cost of Principal Repayments Went Down: 1970-1996 (In $Current Billions) 180
160
140
120
100
80
60
40
20
0 1970
1980
1990
1995
1996
Total Outstanding Debt
4.2
Principal Repayments
0.4
61.7
137
165.1
167.8
4.8
15.3
14.1
10.1
Adapted by Anthony H. Cordesman from World Bank, Global Development Performance, 1997, p. 199.
Copyright Anthony H. Cordesman, all rights reserved.
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However, Middle Eastern Debt Performance by Country is Mixed Country
Relative Wealth
Debt Status
Algeria
middle income
severely indebted
Bahrain
middle income
less indebted
Egypt
low income
moderately indebted
Iran
middle income
severely indebted
Iraq
middle income
severely indebted
Jordan
middle income
severely indebted
Kuwait
---
---
Lebanon
middle income
less indebted
Libya
middle income
less indebted
Morocco
middle income
moderately indebted
Oman
middle income
less indebted
Qatar
---
---
Saudi Arabia
middle income
less indebted
Sudan
low income
severely indebted
Syria
middle income
severely indebted
Tunisia
middle income
moderately indebted
Turkey
middle income
moderately indebted
UAE
---
---
Yemen
low income
severely indebted
Note: Low income = $725 annually or less; lower-middle = $725-2,895; upper middle = $2,896-8,955. Kuwait, Qatar, and the UAE are high income countries with $8,956 or more. The ranking for indebtedness is determined by the present value of debt services relative to exports of goods and services or relative to GNP. Source: World Bank, World Debt Tables, 1998, pp. 43-44.
Copyright Anthony H. Cordesman, all rights reserved.
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Countries Differ Radically in Total External Debt (In $US Current Billions in 1996) 33.26
Algeria Bahrain 31.41
Egypt Gaza 21.18
Iran Iraq Israel 8.12
Jordan Kuwait 4
Lebanon Libya 2.36
Mauritania Morocco
21.77 3.41
Oman Qatar Saudi Arabia Syria
0.71
Sudan
17
Tunisia
9.89
UAE West Bank West Sahara Yemen
6.36
0
5
10
15
20
25
30
35
Adapted by Anthony H. Cordesman from World Bank, World Bank Atlas, 1998, Washington, World Bank, 1998, pp. 41-43. Copyright Anthony H. Cordesman, all rights reserved.
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The Middle East Failed to Compete in Productivity • The Middle East was the only region in the world to exhibit a net drop in productivity from 1960-1990. • Middle East productivity dropped by around 6%, East Asian productivity rose by 54%. • The situation has improved in the last decade, but the Middle East still have only about 20% of the growth of East Asia and lags far behind South Asia. • Several factors have been critical: • The failure to create a strong competitive private sector. • Lack of productivity gain from women in the work force. • Impractical, unfocused education. • Hiring in large government and state industry sector. • Problems in regulation, commercial code, rule of law. • War and military build up • Over-dependence on oil sector, lack of diversification. • Rentier states; use of foreign labor
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Productivity Dropped While Rising in Other Regions: Average Annual Change in Total Factor Productivity: 1960-1990 2
1.8 East Asia 1.65
1.5 OECD
Latin America 1
Middle East and North Africa
0.5
0.45
0
-0.2
-0.5
Source: Adapted by Anthony H. Cordesman from World Bank, Claiming the Future, p. 15
Copyright Anthony H. Cordesman, all rights reserved.
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The Middle East Lagged in Regional Output Growth During 1985-1993 (Average Annual Increase in Percent)
10
8 8 East Asia South Asia Developing Europe and Central Asia 6 Latin America and Carribean Sub-Saharan Africa
4.8
Middle East and North Africa 4
2.4 1.8
2
1.2
0
-2
-2.6
-4
Source: Adapted by Anthony H. Cordesman from World Bank, Global Economic Prospects and the Developing Countries, 1996, p. 16
Copyright Anthony H. Cordesman, all rights reserved.
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The Middle East Lagged in Value Added to Manufacturing (Value in $US billions of sum of gross output, less the value of intermediate goods consumed in production)
350
300
1980
1994
250
200
150
100
50
0 Eas t A s i a
Sout h A s i a
Dev el opi ng
Lat i n
Sub- Sahar an
M i ddl e Eas t
Eur ope and
A m er i c a and
A f r ica
and Nor t h
Cent r al A s i a
Car r i bean
A f r ica
Source: Adapted by Anthony H. Cordesman from World Bank, World Development Indicators, 1998, p. 178
Copyright Anthony H. Cordesman, all rights reserved.
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Relative Percentage Increase in Value Added to Manufacturing: 1980-1994 (Percentage Increase in $US billions of sum of gross output, less the value of intermediate goods consumed in production)
200
180
175
160
140
Middle East 116
120
100 90 82 80 68 62 60
40
20
13
0 East Asia
South Asia
Latin
Sub-
Middle East
High
America
Saharan
and North
Income
Africa
Africa
States
and
US
Carribean
Source: Adapted by Anthony H. Cordesman from World Bank, World Development Indicators, 1997, p. 152
Copyright Anthony H. Cordesman, all rights reserved.
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The Economics of the “Oil Shock” • The “Oil Shock” of 1997 to the present has not created an economic crisis, a structural crisis has been building up since 1986. • Oil economies have under-performed the rest of the Middle East – largely through: • A lack of diversification; • Welfare orientation; • Population growth; • Over-dependence on foreign labor • Growth of state employment, restrictions on private sector, lack of competitive pressure, and; • War and military build-ups. • Most oil-state budgets have serious structural deficits and open or concealed debt. • Oil-states talk reform under pressure and forget when revenues rise. • Today’s ultra-low prices may not last long, but few forecasts give oil-states enough revenue to escape the growing impact of structural problems. • The major change is that oil-states no longer can afford to develop their own oil and gas sectors, and many lack funds for other civil and military investment.
Copyright Anthony H. Cordesman, all rights reserved.
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CEA Estimate of Historical Trends in Middle Eastern Oil Production: 1970-1997 ($Current Billions) 25
20 Algeria
Libya 15 Iraq Iran
Kuwait Qatar 10
Saudi 5
UAE 0 1970
1975
1980
1985
1990
1991
1992
1993
1994
1995
1996
1997
Algeria
1.03
0.98
Libya
2.76
1.48
1.01
0.7
1.79
1.06
0.77
0.8
0.77
0.75
0.74
0.77
0.81
0.85
1.38
1.48
1.47
1.37
1.38
1.39
1.4
1.45
Iran
3.83
Iraq
1.55
5.35
1.66
2.26
2.51
2.25
3.09
3.33
3.43
3.65
3.59
3.59
3.65
3.62
1.43
2.04
0.3
0.43
0.47
0.52
0.055
0.58
Kuwait
2.99
2.08
1.66
1.2
1.02
1.18
0.19
1.06
1.87
2.03
2.04
2.06
2.07
Qatar
0.36
0.44
Saudi
3.8
7.08
0.47
0.3
0.41
0.39
0.4
0.42
0.41
0.43
0.48
0.61
9.9
3.39
6.41
8.18
8.4
8.15
8.1
8.19
8.22
8.56
UAE
0.78
1.66
1.7
1.13
2.07
2.39
2.28
2.19
2.18
2.19
2.2
2.24
Total ME OPEC
13/31
18/87
17/91
9/53
15/19
14.77
15.99
16.75
16.84
16.99
17.18
18.3o
Total ME
13.95
19.57
18.40
10.25
16.49
16.19
17.43
18.34
18.59
18.84
19.08
20.16
Adapted by Anthony H. Cordesman from Cambridge Energy Associates, World Oil Trends, 1998, Cambridge,, Mass., 1998, pp. 26-27.
Copyright Anthony H. Cordesman, all rights reserved.
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Historical Trends in Middle Eastern Oil Revenues: 1970-1997 ($Current Billions) 250
200
150
100 Algeria Libya Kuwait Iran Iraq
Qatar
50 Saudi
UAE 0 Algeria
1970
1975
1980
1985
1990
1991
1992
1993
1994
1995
1996
1997
0.68
4.3
13
9.7
9.6
8.5
7.9
6.9
6.3
6.9
9.2
8.7
Libya
2.4
6.8
21.9
12.1
10.7
10.2
9.3
7.7
7.2
7.8
9.5
8.9
Iran
2.4
19.6
11.7
13.7
17.9
15.8
16.8
14.3
14.8
14.9
17.7
16.5
Iraq
0.79
8.2
26.1
10.1
9.6
0.35
0.48
0.43
0.42
0.46
0.68
3.5
Kuwait
1.6
8.6
18.9
9.5
6.4
0.87
6.2
9.7
10.5
12.2
14.1
13.6
Qatar
0.23
1.8
5.4
3.1
3.3
2.8
2.9
2.8
2.6
3
3.8
4.7
Saudi
2.4
28.5
108.2
25.9
40.1
43.7
44.8
38.6
38.1
42.5
50
48.8
UAE
0.52
6.8
19.4
10.9
14.8
14.4
14.3
12.1
11.7
12.8
15
15.3
Total ME OPEC
7.9
74.5
189.7
73.2
92.1
77.9
85.4
77.9
78.2
85.9
101.3
102.5
Total MENA OPEC 11.0
84.7
224.7
95.0
112.4
96.2
102.5
92.2
93.7
100.6
120.0
120.1
Adapted by Anthony H. Cordesman from Cambridge Energy Associates, World Oil Trends, 1998, Cambridge,, Mass., 1998, pp. 26-27.
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Politics and the Trends in the Price of Saudi Arabia Light Crude: 1970-1999 ($US Current and $US 1997 Constant) 80 Iran-Iraq War
US Price
70
Decontrol Iranian OPEC
Revolution
Decision to
60
Regain Market Share Gulf 50
War
End of Iran-Iraq War 40
Oil Crash
Oil Embargo
30
20
10
0 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99
Total ME OPEC
13/31
18/87
17/91
9/53
15/19
14.77
15.99
16.75
16.84
16.99
17.18
18.3o
Total ME
13.95
19.57
18.40
10.25
16.49
16.19
17.43
18.34
18.59
18.84
19.08
20.16
Adapted by Anthony H. Cordesman from Cambridge Energy Associates, World Oil Trends, 1998, Cambridge,, Mass., 1998, pp. 26-27.
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Projected Middle Eastern, Non-Middle East, and World Oil Production: IEA versus EIA (In Millions of Barrels Per Day) 140
120
100
80
60
40
20
0 1996
2010
2020
EIA Middle East OPEC
18.5
27.2
47.3
IEA Middle East Conventional Oil
18.5
43.7
48.9
MIDDLE EAST OPEC
and NGL NON-MIDDLE EAST OPEC EIA Non Middle East OPEC
53.5
59
68.6
IEA Non-Middle East OPEC
50.8
46.5
38.5
EIA World
71.8
95.5
115.9
IEA World
72
94.8
111.5
TOTAL WORLD PRODUCTION
Adapted by Anthony H. Cordesman from DOE/EIA, International Energy Outlook, 1998, April, 1998, DOE/EIA-484(97), Reference Case, p. 51 and IEA, World Energy Outlook, 1998, pp. 101 and 119-21.
Copyright Anthony H. Cordesman, all rights reserved.
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Just How Uncertain is Future Middle Eastern Production? IEA Versus EIA Versus Cordesman Guesstimate: 1995 vs. 2010 vs. 2020 (In Millions of Barrels Per Day)
50
30
10
0 1996 27.2
IEA Estimate of EIA Estimate IEA Middle East Conventional Oil &
2020
18.5
48.9
20.9
49.8 26.1
OPEC
International Energy Outlook, 1998, April, 1998, DOE/EIAand IEA, World Energy Outlook, 1998
Copyright Anthony H. Cordesman, all rights reserved.
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Comparative EIA and Arab Estimates of Middle Eastern Oil Production Capacity by Country (In Millions of Barrels Per Day) 60
50
40
30
20
10
0 1996
EIA 2000
Lab 2000
Algeria
1.4
1.6
1.2
1.9
1
2.2
0.8
2.1
2
Libya
1.5
1.5
1.6
1.6
1.9
1.7
2.3
1.6
1.5
Egypt
0.9
-
0.9
-
0.7
-
0.6
-
-
Syria
0.6
-
0.6
-
0.6
-
0.5
-
-
Bahrain
0.2
-
-
-
-
-
-
-
-
Iran
3.9
4
-
4.3
-
4.5
-
5.7
6.8
Iraq
0.6
0.6
2.6
2.1
6.7
3.2
6.1
4.3
5.2
Kuwait
2.6
2.8
3
3.1
3.5
3.3
4.5
4.3
5.2
-
-
-
-
-
-
-
-
-
0.9
-
1
-
1
-
0.9
-
-
Neutral Zone Oman
EIA2005
Lab2005
EIA2010
Lab2010
EIA2015
EIA2020
Qatar
0.6
0.5
0.7
0.6
0.6
0.6
0.5
0.6
0.7
Saudi
10.6
10.9
10.5
11.2
11
13.5
12
17.2
23.8
UAE
2.6
2.8
2.8
3.1
3
3.5
3.5
4.7
5.5
Yemen
0.3
-
0.5
-
0.8
-
0.5
-
-
Adapted by Anthony H. Cordesman from DOE/EIA, International Energy Outlook, 1998, April, 1998, DOE/EIA-484(97), Reference Case, p. 51 and Dr. M. Mukhtar Al-Lababidi, Energy Resources in the Arab Countries, Kuwait, November 19-21, 1998.
Copyright Anthony H. Cordesman, all rights reserved.
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The “Oil Shock in Reverse:” Shifts in Total OPEC Earnings ($1990 Billions)
450 400 350 300 250 200 150 100 50 0 1972 Before Price Leap
Oil Export Earnings
1980 Peak 1986 Price
1972 Before Price Leap Oil Export Earnings
Collapse
1988 Estimated
1980 Peak
1986 Price Collapse
77
439
83
Adapted by Anthony H. Cordesman from date provide by DOE/EIA. November, 1998.
Copyright Anthony H. Cordesman, all rights reserved.
1988 Estimated 81
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The “Oil Shock in Reverse:” Shifts in OPEC Earnings by Major Country: 1972-1998 (in $US Current and 1990 Constant Billions) 500
450
400
350
300
250
200
150
100
50
0
-50 1972 Constant
1980 Constant
1986 Constant
Drop in 98
1998 Constant
Algeria
4.2
20.2
4.8
7.5
4.9
-35%
3.9
Indonesia
2.8
22.5
5.6
5.1
3.5
-31%
2.8
Iran
12.9
20.9
Iraq
4.5
43.6
6.7
15.7
10.2
-35%
8.1
8
4.2
6.1
45%
4.9
Kuwait
8.5
28.5
7.1
11.8
7.9
-33%
6.4
Libya
9.1
35.3
5.5
9
5.8
-36%
4.6
Nigeria
6.6
38.6
7.7
14.5
9.2
-36%
7.4
Qatar
1.4
8.5
1.6
4
3
-26%
2.4
14.5
162.7
21.4
45.5
29.4
-35%
23.6
UAE
3.3
29.9
6.8
13.7
9.3
-32%
7.5
Venuzuela
9.4
28.2
7.8
17.7
11.1
-37%
8.9
77.2
438.8
83.0
148.7
100.6
-32%
80.5
Saudi Arabia
Total
1997 Current
1998 Current
Source: Adapted by Anthony H. Cordesman from data provided by the EIA as of September 4, 1998.
Copyright Anthony H. Cordesman, all rights reserved.
Economic Stability and Instability in the New Middle East
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20
The Boom in 1980 versus the Mid-1980s and 1990s: Shifts in Middle Eastern Oil Export Earnings By Country ($Current Billions) 250000
200000
150000
100000
50000
0 1970
1975
1980
1985
1990
1991
1992
1993
1994
1995
1996
1997
681
4295
12971
9668
9588
8464
7885
6902
6335
6938
9164
8745
Libya
2379
6767
21906
12132
10715
10211
9326
7689
7170
7763
9543
8866
Iran
2358
19634
11693
13710
17906
15767
16802
14251
14801
14944
17660
16476
Iraq
788
8227
26096
10097
9594
351
482
425
421
461
680
3513
1582
8593
18935
9451
6385
874
6224
9708
10482
12217
14099
13646
Algeria
Kuwait Qatar
231
1754
5372
3068
3273
2828
2870
2811
2623
2987
3801
4743
Saudi
2418
29473
108175
25937
40130
43701
44754
38621
38139
42502
50046
48835
UAE
523
6806
19390
10896
14846
14356
14251
12118
11683
12822
14980
15286
Total ME OPEC
7900
74487
189661
73159
92134
77877
85383
77934
78149
85933
191266 192499
Adapted by Anthony H. Cordesman from Cambridge Energy Associates, World Oil Trends, 1998, Cambridge,, Mass., 1998, pp. 60-61.
Copyright Anthony H. Cordesman, all rights reserved.
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The Decline in Real Per Capita Income in the Middle East, North Africa, OPEC and Saudi Arabia: 1980-1995 ($US Constant 1995 Dollars) 25000
20000
15000
10000
5000
0 1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
North Africa
2836
2578
2321
2169
2008
1912
1781
1750
1653
1671
1755
1780
1746
1660
1710
1696
Middle East
5,163
4693
4228
3951
3659
3485
3053
3007
2933
2960
3002
2993
3077
3012
2863
2849
Saudi Arabia 23788 21624 17725 14067 11723
9769
7983
7464
7118
7077
8157
8561
8266
7398
6894
6815
1887
1711
1686
1659
1689
1753
1777
1827
1796
1735
1733
OPEC
2833
2575
2319
2168
2008
Adapted by Anthony H. Cordesman from Arms Control and Disarmament Agency (ACDA), World Military Expenditures and Arms Transfers, Washington, GPO, Table I, various editions..
Copyright Anthony H. Cordesman, all rights reserved.
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The “Oil Shock in Reverse:” Shifts in Gulf Export Earnings 19701996 ($Current Billions) 200 Oi l Rev enues Ot her Ex por t Rev enues 180
160
140
120
100
80
60
40
20
0 1970
1980
1993
1995
1996
Adapted by Anthony H. Cordesman from data provided by Hubert des Longchamps of Elf Aquitaine and The Economist, December 21, 1996, p. 54.
Copyright Anthony H. Cordesman, all rights reserved.
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The GDP Growth of MENA Fuel Exporters Lagged Behind That of Diversified Exporters and Was Far More Vulnerable to Oil Prices (Percent of GDP Growth) 10
8
6
4
2
0 81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
-2
D i v e r s i f i e d Ex p o r t e r -4
Fu e l Ex p o r t e r
-6
-8
Diversified exporter = Egypt, Israel, Jordan, Morocco, Syria, and Tunisia. Fuel exporter = Algeria, Bahrain, Iran, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, Washington, IMF, May, 1996, pp. 98105.
Copyright Anthony H. Cordesman, all rights reserved.
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The Per Capita Income Growth of MENA Fuel Exporters Lagged Behind That of Diversified Exporters and Was Far More Vulnerable to Oil Prices (Percent of Change in Per Capita Income; 1985 = 100) 120
100
80
60
40 D i v e r s i f i e d Ex p o r t e r
F u e l Ex p o r t e r 20
0 81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
Diversified exporter = Egypt, Israel, Jordan, Morocco, Syria, and Tunisia. Fuel exporter = Algeria, Bahrain, Iran, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, Washington, IMF, May, 1996, pp. 98105.
Copyright Anthony H. Cordesman, all rights reserved.
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The Fiscal Balances of MENA Fuel Exporters Deteriorated Relative to Those of Diversified Exporters (Budget Deficits as a Percent of GNP) 10
D i v e r s i f i e d Ex p o r t e r
5 F u e l Ex p o r t e r
0 81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
-5
-10
-15
-20
Diversified exporter = Egypt, Israel, Jordan, Morocco, Syria, and Tunisia. Fuel exporter = Algeria, Bahrain, Iran, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, Washington, IMF, May, 1996, pp. 98105.
Copyright Anthony H. Cordesman, all rights reserved.
25
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The Terms of Trade of MENA Fuel Exporters Deteriorated Relative to Those of Diversified Exporters (1985=100) 120
100
80
60
D i v e r s i f i e d Ex p o r t e r
40
F u e l Ex p o r t e r 20
0 81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
Diversified exporter = Egypt, Israel, Jordan, Morocco, Syria, and Tunisia. Fuel exporter = Algeria, Bahrain, Iran, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, Washington, IMF, May, 1996, pp. 98105.
Copyright Anthony H. Cordesman, all rights reserved.
26
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Economies Failed to Diversify and Remained Over-Dependent on Oil: Oil and Petroleum Exports as a Share of Gulf and Middle Eastern Economies
MENA
% of Total Exports
Syria
% of GDP
Iraq
Iran
Egypt
Algeria
GCC
UAE
Saudi
Oman
Kuwait
Bahrain
0
20 Bahrain Kuwait
40
60
80
100
120
Oman
Saudi
UAE
GCC
Algeria
Egypt
Iran
Iraq
Syria
MENA
% of Total Exports
90
80
95
99
95
95
85
45
90
35
42
90
% of GDP
67
40
30
33
40
35
20
7
15
2
14
30
Source: Adapted by Anthony H. Cordesman from World Bank, Claiming the Future, pp. 16-18.
Copyright Anthony H. Cordesman, all rights reserved.
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Middle Eastern and North African Oil Revenues by Country: 19961998: The Impact of Oil Prices on Revenues (in US $Current Billions)
Qatar
Algeria
Libya
Kuwait
UAE
Iran
Saudi Arabia
0
5
10
15
20
25
30
35
40
45
50
Saudi Arabia
Iran
UAE
Kuwait
Libya
Algeria
Qatar
1998
29.2
12.8
9.5
9.1
7.1
5.7
3.4
1997
42.9
16.3
13.5
12.4
10.2
7.5
4.3
1996
45.7
18.7
14.5
13.5
11.1
7.9
3.3
Source: Adapted by Anthony H. Cordesman from projections by the Petroleum Finance Corporation.
Copyright Anthony H. Cordesman, all rights reserved.
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Pressures on the Saudi Budget: The Problem of Predicting the Future of a One Commodity, State-Driven Economy (in billions of Saudi Rials) 250
Spending suddenly slashed 16% in early 1998 210 204 196
194
200
189 181
177
178 165
164 150 143
150 132
121
100
50
0 1996 Budgeted -18
1996 Actual -17
1997 Budgeted -17
-50
1997 Actual -6
1998
1998 Actual
1999
12/97 -18 Estimate
-46
-100
Source: Adapted by Anthony H. Cordesman from US-Saudi Business Brief, Winter, 1998, p. 1, and Reuters, December 28, 1998, 1728.
Copyright Anthony H. Cordesman, all rights reserved.
-44
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Pressures on the Saudi Budget: The Entitlements Problem (in billions of Saudi Rials) 120
100
DOMESTIC INVESTMENT 80
WELFARE & 60
ENTITLEMENTS
40
20
0
-20 1998
1999
% Change
6.4
5
-22%
Indust., Elec. & Infra
10.7
8.5
-20%
Trans & Commo
11.8
5.2
-55.90%
7.6
6.6
-12.70%
Health & Community Dev.
19.7
18.7
-5%
Education
45.6
42.9
-6%
5
4.8
-4.90%
Spec. Deve Funds
Munin Services & Water
Aid to Social Activities
Source: Adapted by Anthony H. Cordesman from US-Saudi Business Brief, Winter, 1998, p. 1, and Reuters, December 28, 1998, 1728.
Copyright Anthony H. Cordesman, all rights reserved.
30
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31
Pressures on the Kuwaiti Budget (in millions of Kuwaiti Dinars)
5000 4391
4409
4378
4362
39263889
4000
3127
3105 3000
2577
2555
1894
2000
1000 502
0
-1000 -1273
-1282
-2000
-1919 -2163
-3000 96/97 Actual
97/98 Budget
98/99 Initial
98/99 10/98
Total Revenues
4391
3105
3127
Oil Revenues
3926
2555
2577
1894
Expenditures
3889
4378
4409
4362
502
-1273
-1282
-1919
Deficit Gross Deficit
-
-
Source: Adapted by Anthony H. Cordesman from data provided by the Kuwait National Bank.
Copyright Anthony H. Cordesman, all rights reserved.
-
-
-2163
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Pressures on the Qatari Budget (in millions of Qatari Rials)
20000
15652 15000 13750 12750 12012
10000
5000
0
-1957
-1960 -2950 -3530
-3640
-5000 94/95 Actual
95/96 Actual
96/97 Actual
97/98 Budget
12012
Total Revenues Expenditures Deficit
98/99 draft
-1957
-1960
13750
12750
15652
-2950
-3530
-3640
Source: Adapted by Anthony H. Cordesman from data provided by the Kuwait National Bank.
Copyright Anthony H. Cordesman, all rights reserved.
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Middle Eastern and North African Oil Revenues by Country: 19961998: The Impact of Oil Prices on Revenues (in US $Current Billions)
Qatar
Indonesia
Algeria
Libya
Kuwait
UAE
Venezuela
Iran
Nigeria
Saudi Arabia
0
5
Saudi Arabia
10
15
Nigeria
Iran
20
Venezuel a
25
30
35
40
45
50
UAE
Kuwait
Libya
Algeria
Indonesia
Qatar
1998
29.2
13.2
12.8
12.7
9.5
9.1
7.1
5.7
4.8
3.4
1997
42.9
17.8
16.3
17.5
13.5
12.4
10.2
7.5
8.1
4.3
1996
45.7
17.5
18.7
17.1
14.5
13.5
11.1
7.9
7.9
3.3
Total oil exports = 2,734 thousand barrels per day. Source: Adapted by Anthony H. Cordesman from projections by the Petroleum Finance Corporation.
Copyright Anthony H. Cordesman, all rights reserved.
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Pressures on the Omani Budget (in millions of Omani Rials)
2500 2266
2307
2288
2270
2156 2012
1934
2000
1905
1868
1825 1749
1502
1525
1497
1500
910
1000
482 500
398
383
69
69
57
0
-263
-263
-295
-500 -631 -1000 1997 Budget
1997 Actual
1998 Budget
1999 Budget
Total Revenues
1934
2270
2012
1525
Oil Revenues
1502
1749
1497
910
69
57
69
2266
2288
2307
398
383
482
1868
1905
1825
-263
-263
-295
Gas Revenues . Budget Investment Current/Other
2156
. Deficit
-631
Source: Adapted by Anthony H. Cordesman from data provided by the Central Bank of Oman and Middle East Economic Digest, November 20, 1998, p. 26, and January 15, 1999, pp. 2-3.
Copyright Anthony H. Cordesman, all rights reserved.
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Key Trends in the Omani Budget (in millions of Omani Rials)
2500 2331 2252.9
2307
2266
2253.7
2156 2000
1990.2
2003
2012
1473
1502
1497
1851.6 1757.4
1500
1525
1372.7
1311.5
1000 902 779.3
500
776.1
458.9
736.8
655
613
482
456.9
160.1
698
160.2
403.6
398
178.4
187
200
-263.5
-263
-295
393 180
0
-500
-479.4
-495.5
-631
-1000 1994
1995
1996
Total Revenues
1757.4
1851.6
1990.2
Oil Revenues
1311.5
1372.7
1473
Total Expenditure
2252.9
2331
2253.7
Defense Expenditures
779.3
776.1
Investment Expenditure
458.9
Energy Investment
160.1 -495.5
Current Deficit
1997
1998
1999
2003
2012
1525
1502
1497
902
2266
2307
2156
736.8
698
655
613
456.9
403.6
398
482
393
160.2
178.4
187
200
180
-479.4
-263.5
-263
-295
-631
Source: Adapted by Anthony H. Cordesman from data provided by the Omani Times and Middle East Economic Survey, January 18, 1999, pp. B-2.
Copyright Anthony H. Cordesman, all rights reserved.
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The EIA Reference Case Estimate of Middle Eastern Production by Country: 1990-2020 (EIA Reference Case in MMBD)
60
50
40
30 Algeria Libya
20
Saudi
Iraq 10
Iran Kuwait
1990
1996
2000
UAE Qatar 2005
Algeria
1.3
1.4
1.6
Libya
1.5
1.5
1.5
Saudi
8.6
10.6
Iraq
2.2
Iran
3.2
Kuwait
0
2010
2015
1.9
2.2
2.1
2
1.6
1.7
1.6
1.5
10.9
11.2
13.5
17.2
23.8
0.6
0.6
2.1
3.2
5.9
7.8
3.9
4
4.3
4.5
5.7
6.8
1.7
2.6
2.8
3.1
3.3
4.3
5.2
UAE
2.5
2.6
2.8
3.1
3.5
4.7
5.5
Qatar
0.5
0.6
0.5
0.6
0.6
0.6
0.7
24.4 27.9
28.6 32.5
38.4 42.1
Total Gulf OPEC 18.7 Total MENA OPEC 21.5
20.9 23.8
21.6 24.7
2020
49.8 53.3
Source: Adapted by Anthony H. Cordesman from EIA, International Energy Outlook, 1998, DOE/EIA-0484 (97), April 1998, pp. 175, and EIA, Monthly Energy Review, April, 1997, pp. 130-131.
Copyright Anthony H. Cordesman, all rights reserved.
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Petroleum Finance Institute Estimate of Middle Eastern and North African Oil Revenues by Country: The Range of Future Oil Revenues in: 1998-2020 (in US $Constant Billions)
Qatar
Algeria
Libya
Kuwait
UAE
Iran
Saudi Arabia
0
20
40
60
80
100
120
Saudi Arabia
Iran
UAE
Kuwait
Libya
Algeria
Qatar
2020 High
97
28
28.4
24.8
13.5
9.5
3.8
2020 Low
51
16
12.4
11.8
8.5
6.3
2.9
2010 High
56
26
21
18.5
12.2
8.7
4.2
2010 Low
41
15.8
11.4
11.2
7.7
6.1
3
2000 High
46
19
15
14
11.5
8
4
30
13.4
9.8
9.3
7.3
6
3.1
29.2
12.8
9.5
9.1
7.1
5.7
3.4
2000 Low 1998
Total oil exports = 2,734 thousand barrels per day. Source: Adapted by Anthony H. Cordesman from projections by the Petroleum Finance Corporation. Copyright Anthony H. Cordesman, all rights reserved.
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Regional Trends in Military Effort: “The Most Militarized Area in the World” • The Middle East Remains the Most Militarized Region in the World by Virtually Every Measure of Effort. • This statement, however, disguises important downward trends in regional military spending and the burden of military expenditures and arms efforts. • Military expenditures only place about half the burden on the GNP they did during the Cold War-Gulf War era. • Military expenditures have steadily dropped as a percent of total government expenditures since the Gulf War. • Arms imports are way down as a percent of total imports. • Trends, however, are cyclical. Wars lead to major increases and then decreases. Major acquisitions often lead to short-term increases in arms orders followed by cuts as nations pay for previous orders. • A steady drop has taken place in the percent of the total population under arms. • “Statism”: Government domination of regional economies and the massive mismanagement of civil spending is the key problem.
Copyright Anthony H. Cordesman, all rights reserved.
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The Trend in Middle Eastern Military Expenditures and Arms Transfers Since the October War (1967-1995 in $Current Billions)
90 80 70 60 50 40 30 20 10 0 Military Expenditures Arms Imports
Adapted by Anthony H. Cordesman from ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt.
Copyright Anthony H. Cordesman, all rights reserved.
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“The Most Militarized Region in the World” (Military Expenditures and Arms Imports as an Economic Burden in the Middle East Relative to Other Regions)
M i d d l e Ea s t No r t h A f r i c a
Military Expenditures as a Percent of GNP
Ea s t A s i a Dev e l o pi n g NA T O
1985
W or l d
1995 0
2
4
6
8
10
12
14
16
18
M i d d l e Ea s t No r t h A f r i c a Military Expenditures as a Percent of Central Government Expenditures
Ea s t A s i a Dev e l o pi n g NA T O
1995
W or l d
1995 0
5
10
15
20
25
30
35
Middle East North Africa Arms Imports as a Percent of Total Imports
East Asia Developing NATO
1985 World
1995 0
5
10
15
20
25
Source: Adapted by Anthony H. Cordesman from ACDA, World Military Expenditures and Arms Transfers, Washington, GPO, various editions
Copyright Anthony H. Cordesman, all rights reserved.
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The Declining Trend in Middle Eastern Military Expenditures and Arms Transfers in Constant Dollars (1967-1995 in $1995 Billions)
100 90 80 70 60 50 40 30 20 10
Military Expenditures
0 85
86
87
Arms Imports Military Expenditures
Arms Imports 88
89
90
91
92
93
94
95
85
86
87
88
89
91
92
93
94
95
27.95
25.96
30.9
24.5
19.2
14.5
13.5
13.8
10.2
13.8
93
88.7
80.6
74.8
66.9
98.7
87.4
55
49.7
48.6
Adapted by Anthony H. Cordesman from ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt.
Copyright Anthony H. Cordesman, all rights reserved.
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The Burden of Military Spending is Shrinking (Military Expenditures as an Economic Burden in the Middle East Relative to Other Regions - Military Expenditures as a % of GNP)
Middle East
North Africa
East Asia 1995
Developing 1993
1991
NATO
1985 World
0
2
4
6
8
Developing
10
12
East Asia
14
North Africa
16
18
World
NATO
1995
2.8
3
2.8
1.8
4.1
Middle East 7.9
1993
3.3
3.5
3
1.8
3.9
8.9
1991
3.9
3.7
4.3
1.8
4.1
17
1985
5.2
4.7
5.5
2.3
7.7
16.6
Source: Adapted by Anthony H. Cordesman from ACDA, World Military Expenditures and Arms Transfers, 1996, Washington, GPO, 1997
Copyright Anthony H. Cordesman, all rights reserved.
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Military Expenditures Place a Lower Burden on Government Spending (Military Expenditures Relative to Central Government Expenditures: 1985-1995: Military Expenditures as a % of CGE)
Middle East
North Africa
East Asia 1995
Developing
1993
1991
NATO
1985 World
0
10
20
30 Developing
40 East Asia
50 North Africa
60
World
NATO
1995
9.9
9.4
13
8.6
11
Middle East 23.6
1993
10.9
10.6
11.7
8.7
10.3
25.4
1991
14.1
11.5
19.7
8.9
12.6
51
1985
18.1
14.4
19
12.5
19.5
32.4
Source: Adapted by Anthony H. Cordesman from ACDA, World Military Expenditures and Arms Transfers, 1996, Washington, GPO, 1997
Copyright Anthony H. Cordesman, all rights reserved.
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Middle Eastern Military Efforts Have Also Dropped Sharply as a Percent of GNP, Government Expenditures, Total Population, and Arms Imports: 1984-1996 60
50
40
30
20
10
0 Military Spending as a
84
85
86
87
88
89
91
92
93
94
95
17.9
16.6
17.4
15.6
14.4
12.4
17
14.2
8.9
8.3
7.9
34.6
32.4
38.8
41.8
37.6
34.6
51
40.8
25.4
23.1
23.6
22.7
21.9
23
27.5
21.3
17.2
12.9
10.8
11.4
10.1
11
16.3
15.8
15
15.7
18.2
17.5
13.2
12.3
11.9
11.4
10.7
96
Percent of GNP Military Spending as a Percent of Central Government Expenditures Arms Imports as a Percent
10.5
of Total Imports Active Military Manpower per 1,000 People Adapted by Anthony H. Cordesman form ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt.
Copyright Anthony H. Cordesman, all rights reserved.
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Middle Eastern Military Expenditures and Arms Imports Dropped Sharply Relative to Economic Growth and Government Spending During 1984-1994 (1984=100, and all following years are percentages of 1984 as base year. All expenditure totals are measured in constant 1984 US dollars.) 120
100
80
60
40
20
0 84
85
86
87
88
89
90
91
92
93
94
Gross National Product
100
96
87
84
90
93
98
99
105
106
104
Military Expenditures
100
93
87
78
73
66
91
98
85
54
45
Arms Imports
100
74
72
78
65
50
54
38
37
34
25
Central Government
100
98
77
65
66
65
64
65
71
71
72
Expenditures
Adapted by Anthony H. Cordesman form ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt. Copyright Anthony H. Cordesman, all rights reserved.
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The De-Radicalization of Middle East Arms Transfers • The Arab-Israeli peace process, end of the Iran-Iraq War, end of the Cold War, and Gulf War have reduced the threat far more than orders of battle would indicate. • Mismanagement of the economy, lower oil prices, and regional recession have also affected sales. • New agreements states with recent conflicts, or which are outside the peace process, are down to token share of past levels. • States committed to peace have signed 93% of all recent new arms import agreements versus 67% before Gulf War. • Southern Gulf states have recently signed 96% of all new arms import agreements versus 53% before Gulf War. • The most dangerous single threat country -- Iraq -- has had only token imports since 1990. • Iran did not choose to renew the arms race after its defeat in 1988, and made major further cuts in 1992, after the Coalition weakened Iraq. • Syria has no sponsor. • Libya faces economic problems and is sanctioned. • Warning: Data Do Not Take Proliferation Into Account
Copyright Anthony H. Cordesman, all rights reserved.
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The Continuing Importance of the Middle East Arms Imports as a Share of the World Defense Market (Value of Arms Deliveries during 1986-1996 in $1996 Billions)
90 80 70 60 50 40 30
Total World
20
Developing World
10 Middle East 0 86
87
88
89
North Africa 90
91
92
93
94
95
96
86
87
88
89
90
91
92
93
94
95
96
North Africa
2.7
2.3
2.6
2.3
1.1
0.7
0.23
0.13
0.37
0.35
0.25
Middle East
27.4
31.6
26.1
20.8
21.3
17.3
16.2
15.8
13.4
15.9
16.2
Developing World
53.1
58.3
52.7
44.1
40.5
27.4
23
21.2
20.3
24.9
23.7
Total World
75.9
84.4
80.6
67.8
63.4
52.5
45.7
42.1
38.5
40.6
42.6
Adapted by Anthony H. Cordesman from ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt.
Copyright Anthony H. Cordesman, all rights reserved.
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The Total Value of the MENA Market for Arms Imports: 1986-1996 (Value of Arms Deliveries During 1986-1996 in $US 1996 Billions)
35
30
25
20
15
10
5
0 86
87
88
89
90
91
92
93
94
95
96
86
87
88
89
90
91
92
93
94
95
96
Middle East
27.4
31.6
26.1
20.8
21.3
17.3
16.2
15.8
13.4
15.9
16.2
North Africa
2.7
2.3
2.6
2.3
1.1
0.7
0.23
0.13
0.37
0.35
0.25
Adapted by Anthony H. Cordesman from ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt.
Copyright Anthony H. Cordesman, all rights reserved.
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New Arms Agreements Are Dropping Even Faster than Deliveries But the Near East Again Plays a Critical Role (Arms Agreements and Deliveries to the Developing World vs. Total Sales to the Middle East: 1987-1997 in $Current Millions) 180000
160000
140000
120000
100000
80000
60000
40000
20000
0 Agreements: 87-90
Agreements: 91-94
Agreements: 94-97
158877
102103
92696
58112
Developing Nations
-
Near East
-
Developing Nations Near East
Deliveries: 87-90
Deliveries: 91-94
Deliveries: 94-97
72497
-
-
-
55849
-
-
-
-
-
146659
71718
88953
-
-
78118
47270
51283
.
Includes Gulf states, Arab-Israeli states, North Africa, and Yemen . Source: Richard F. Grimmett, Conventional Arms Transfers to the Developing Nations, Congressional Research Service, various editions. 0 = less than $50 million or nil, and all data rounded to the nearest $100 million
Copyright Anthony H. Cordesman, all rights reserved.
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Key States Affecting the Regional Balance • Iraq: More than enough arms for self-defense, aggressor state, proliferator • Iran: Regime moderating, but still possible threat to lower Gulf, still a revolutionary state, proliferator • Libya: Radical and unstable regime, already world’s largest military parking lot, sometime aggressor and sponsor of terrorism, proliferator. • Syria: Uncertain commitment to peace process, occupier of Lebanon, threat to Israel and Turkey, proliferator
Copyright Anthony H. Cordesman, all rights reserved.
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The Cumulative Impact of the Arab-Israeli Peace Accords, Sanctioning of Libya, End of the Iran-Iraq War, End of the Cold War, Gulf War, and Economic Recession (Arms Deliveries in Constant $95 Billions) 45
POST INVASION OF LEBANON
THE END OF THE
40
IRAN-IRAQ WAR
35
THE END OF THE COLD WAR
30
UN SANCTIONS ON IRAQ 25
20
15
Middle East 10
5
North Africa 0 84
85
86
84
85
87
86
88
87
89
88
90
89
91
90
92
91
93
92
94
93
95
94
95
Oceania
0.99
1.39
1.021
1.236
1.623
1.33
1.034
0.845
0.409
0.771
0.431
0.96
South America
3.2
1.398
1.295
1.534
1.592
1.354
0.724
0.851
0.559
0.467
0.472
1.295
North Africa
4.3
3.467
2.669
2.278
2.559
2.247
1.08
0.696
0.21
0.115
0.318
0.32
Central America
2.8
4.002
3.27
3.275
3.19
2.085
1.862
0.801
0.237
0.189
0.072
0.045
Sub-Saharan Africa 6.4
3.981
3.917
6.511
5.331
3.301
1.931
0.696
0.575
0.592
1.04
0.27
South Asia
3.8
5.229
6.567
6.265
7.803
8.962
7.223
3.519
1.232
0.917
0.697
1.13
East Asia
7.9
6.14
6.02
7.635
7.31
6.59
5.42
5.265
4.9
4.125
5.34
Developed World
20.2
20.76
19.82
25.4
23.86
22.46
16.98
15
12.2
14.35
10.96
10.55
Middle East
36.5
27.95
25.96
30.88
24.5
19.15
19.53
14.52
13.53
13.79
10.23
13.8
Adapted by Anthony H. Cordesman from ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt.
Copyright Anthony H. Cordesman, all rights reserved.
6.425
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The Impact of the End of the Cold War and the Gulf War on New Arms Sales to Selected Major Buyers (New Agreements in $Current Millions) 12000
10500 10200 10000
8000
6000
5600
4000 3500
2700
2000 1300 900 200 0
0
300 100
0 Iran
Iraq
Libya
Syria
87-90
10200
10500
3500
5600
91-94
2700
0
200
900
93-96
1300
0
100
300
Source: Richard F. Grimmett, Conventional Arms Transfers to the Developing Nations, Congressional Research Service, various editions.
Copyright Anthony H. Cordesman, all rights reserved.
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The Impact of the End of the Cold War and the Gulf War on New Arms Deliveries to Selected Major Buyers (New Agreements in $Current Millions) 18000 16600 16000
14000
12000
10000
7800
8000
6000 5200
3900
4000
2900 1900
2000
1400 500 0
0
300 0
0 Iran
Iraq
Libya
Syria
87-90
7800
16600
2900
5200
91-94
3900
0
500
1400
93-96
1900
0
0
300
Source: Richard F. Grimmett, Conventional Arms Transfers to the Developing Nations, Congressional Research Service, various editions.
Copyright Anthony H. Cordesman, all rights reserved.
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New Arms Purchases by Major Buyers in the Middle East and North Africa before the End of the Cold War: 1987-1990 (New Agreements in $Current Millions)
Iran 11%
Other 68%
Iraq 11%
Libya 4% Syria 6%
Source: Richard F. Grimmett, Conventional Arms Transfers to the Developing Nations, Congressional Research Service, various editions.
Copyright Anthony H. Cordesman, all rights reserved.
54
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Shifts in Arms Buys of Major Buyers in the Middle East and North Africa after the Cold War: 1994-1997 (New Agreements in $Current Millions)
Libya 0%
Iran 4% Iraq 0% Syria 1%
Other 95%
Source: Richard F. Grimmett, Conventional Arms Transfers to the Developing Nations, Congressional Research Service, various editions.
Copyright Anthony H. Cordesman, all rights reserved.
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The Cumulative Decline in Military Spending by Selected Major Buyers in Constant Dollars: 1984-1996 ($96 Constant Millions)
25000
20000
15000
Iran
10000
Iraq 5000
Libya
Syria 0 84
85
86
87
88
89
90
91
92
93
Iran
3837
2741
3125
2240
3304
2196
2222
1800
931
1174
Iraq
1387
6716
8288
7774
7117
3050
3508
200
180
160
Libya
2350
2193
1630
791
1207
1342
433
461
88
3
Syria
2300
2056
1495
2635
1652
1342
1111
900
427
288
94
95
96
406
306
350
120
100
100
10
2
10
52
112
90
Source: Adapted by Anthony H. Cordesman from US Arms Control and Disarmament Agency, World Military Expenditures and Arms Transfers, , GPO, Washington, various editions.
Copyright Anthony H. Cordesman, all rights reserved.
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The Decline in Spending by Selected Major Buyers: 1984-1996 ($96 Constant Millions)
16000
14000
12000
10000
8000
6000
4000
2000
0 84
85
86
87
88
89
90
91
92
93
94
95
96
Syria
2300
2056
1495
2635
1652
1342
1111
900
427
288
52
112
90
Libya
2350
2193
1630
791
1207
1342
433
461
88
3
10
2
10
Iraq
1387
6716
8288
7774
7117
3050
3508
200
180
160
120
100
100
Iran
3837
2741
3125
2240
3304
2196
2222
1800
931
1174
406
306
350
Source: Adapted by Anthony H. Cordesman from US Arms Control and Disarmament Agency, World Military Expenditures and Arms Transfers, , GPO, Washington, various editions.
Copyright Anthony H. Cordesman, all rights reserved.
Economic Stability and Instability in the New Middle East Part II
Anthony H. Cordesman Co-Director, Middle East Program Center for Strategic and International Studies April 4, 1999
Copyright Anthony H. Cordesman, all rights reserved.
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Table of Contents DEBT PERFORMANCE IS MIXED .................................................................................................................. 1 THE DEBT BURDEN TRENDS IN THE MIDDLE EAST WERE RELATIVELY STATIC BEFORE THE “OIL CRASH”: 1980-1995.......................................................................................................................................................... 2 TOTAL MENA DEBT ROSE AFTER 1990, BUT THE COST OF PRINCIPAL REPAYMENTS WENT DOWN: 19701996................................................................................................................................................................... 3 HOWEVER, MIDDLE EASTERN DEBT PERFORMANCE BY COUNTRY IS MIXED.............................................. 4 COUNTRIES DIFFER RADICALLY IN TOTAL EXTERNAL DEBT ........................................................................ 5 THE MIDDLE EAST FAILED TO COMPETE IN PRODUCTIVITY ............................................................ 6 PRODUCTIVITY DROPPED WHILE RISING IN OTHER REGIONS: AVERAGE ANNUAL CHANGE IN TOTAL FACTOR PRODUCTIVITY: 1960-1990 ................................................................................................................ 7 THE MIDDLE EAST LAGGED IN REGIONAL OUTPUT GROWTH, DURING 1985-1993 ...................................... 8 THE MIDDLE EAST LAGGED IN VALUE ADDED TO MANUFACTURING .......................................................... 9 RELATIVE PERCENTAGE INCREASE IN VALUE ADDED TO MANUFACTURING: 1980-1994 .......................... 10 THE ECONOMICS OF THE “OIL SHOCK” ................................................................................................. 11 CEA ESTIMATE OF HISTORICAL TRENDS IN MIDDLE EASTERN OIL PRODUCTION: 1970-1997................... 12 HISTORICAL TRENDS IN MIDDLE EASTERN OIL REVENUES: 1970-1997....................................................... 13 POLITICS AND THE TRENDS IN THE PRICE OF SAUDI ARABIA LIGHT CRUDE: 1970-1999............................ 14 PROJECTED MIDDLE EASTERN, NON-MIDDLE EAST, AND WORLD OIL PRODUCTION: IEA VERSUS EIA .. 15 JUST HOW UNCERTAIN IS FUTURE MIDDLE EASTERN PRODUCTION? IEA VERSUS EIA VERSUS CORDESMAN GUESSTIMATE: 1995 VS. 2010 VS. 2020 .................................................................................. 16 COMPARATIVE EIA AND ARAB ESTIMATES OF MIDDLE EASTERN OIL PRODUCTION CAPACITY BY COUNTRY........................................................................................................................................................ 17 THE “OIL SHOCK IN REVERSE:” SHIFTS IN TOTAL OPEC EARNINGS ........................................................... 18 THE “OIL SHOCK IN REVERSE:” SHIFTS IN OPEC EARNINGS BY MAJOR COUNTRY: 1972-1998................. 19 THE BOOM IN 1980 VERSUS THE MID-1980S AND 1990S: SHIFTS IN MIDDLE EASTERN OIL EXPORT EARNINGS BY COUNTRY................................................................................................................................ 20 THE DECLINE IN REAL PER CAPITA INCOME IN THE MIDDLE EAST, NORTH AFRICA, OPEC AND SAUDI ARABIA: 1980-1995......................................................................................................................................... 21 THE “OIL SHOCK IN REVERSE:” SHIFTS IN GULF EXPORT EARNINGS 1970-1996 ........................................ 22 THE GDP GROWTH OF MENA FUEL EXPORTERS LAGGED BEHIND THAT OF DIVERSIFIED EXPORTERS AND WAS FAR MORE VULNERABLE TO OIL PRICES ..................................................................................... 23 THE PER CAPITA INCOME GROWTH OF MENA FUEL EXPORTERS LAGGED BEHIND THAT OF DIVERSIFIED EXPORTERS AND WAS FAR MORE VULNERABLE TO OIL PRICES................................................................. 24 THE FISCAL BALANCES OF MENA FUEL EXPORTERS DETERIORATED RELATIVE TO THOSE OF DIVERSIFIED EXPORTERS............................................................................................................................... 25 THE TERMS OF TRADE OF MENA FUEL EXPORTERS DETERIORATED RELATIVE TO THOSE OF DIVERSIFIED EXPORTERS............................................................................................................................... 26 ECONOMIES FAILED TO DIVERSIFY AND REMAINED OVER-DEPENDENT ON OIL: OIL AND PETROLEUM EXPORTS AS A SHARE OF GULF AND MIDDLE EASTERN ECONOMIES ......................................................... 27 MIDDLE EASTERN AND NORTH AFRICAN OIL REVENUES BY COUNTRY: 1996-1998: THE IMPACT OF OIL PRICES ON REVENUES .................................................................................................................................... 28 PRESSURES ON THE SAUDI BUDGET: THE PROBLEM OF PREDICTING THE FUTURE OF A ONE COMMODITY, STATE-DRIVEN ECONOMY ............................................................................................................................. 29 PRESSURES ON THE SAUDI BUDGET: THE ENTITLEMENTS PROBLEM ......................................................... 30 PRESSURES ON THE KUWAITI BUDGET ......................................................................................................... 31 PRESSURES ON THE QATARI BUDGET ........................................................................................................... 32 MIDDLE EASTERN AND NORTH AFRICAN OIL REVENUES BY COUNTRY: 1996-1998: THE IMPACT OF OIL PRICES ON REVENUES .................................................................................................................................... 33 Copyright Anthony H. Cordesman, all rights reserved.
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PRESSURES ON THE OMANI BUDGET ............................................................................................................ 34 KEY TRENDS IN THE OMANI BUDGET ........................................................................................................... 35 THE EIA REFERENCE CASE ESTIMATE OF MIDDLE EASTERN PRODUCTION BY COUNTRY: 1990-2020..... 36 PETROLEUM FINANCE INSTITUTE ESTIMATE OF MIDDLE EASTERN AND NORTH AFRICAN OIL REVENUES BY COUNTRY: THE RANGE OF FUTURE OIL REVENUES IN : 1998-2020 ....................................................... 37 REGIONAL TRENDS IN MILITARY EFFORT: “THE MOST MILITARIZED AREA IN THE WORLD” ............................................................................................................................................................................ 38 THE TREND IN MIDDLE EASTERN MILITARY EXPENDITURES AND ARMS TRANSFERS SINCE THE OCTOBER WAR ................................................................................................................................................................ 39 “THE MOST MILITARIZED REGION IN THE WORLD” ..................................................................................... 40 THE DECLINING TREND IN MIDDLE EASTERN MILITARY EXPENDITURES AND ARMS TRANSFERS IN CONSTANT DOLLARS ..................................................................................................................................... 41 THE BURDEN OF MILITARY SPENDING IS SHRINKING .................................................................................. 42 MILITARY EXPENDITURES PLACE A LOWER BURDEN ON GOVERNMENT SPENDING ................................. 43 MIDDLE EASTERN MILITARY EFFORTS HAVE ALSO DROPPED SHARPLY AS A PERCENT OF GNP, GOVERNMENT EXPENDITURES, TOTAL POPULATION, AND ARMS IMPORTS: 1984-1996 ........................... 44 MIDDLE EASTERN MILITARY EXPENDITURES AND ARMS IMPORTS DROPPED SHARPLY RELATIVE TO ECONOMIC GROWTH AND GOVERNMENT SPENDING DURING 1984-1994 .................................................. 45 THE DE-RADICALIZATION OF MIDDLE EAST ARMS TRANSFERS..................................................... 46 THE CONTINUING IMPORTANCE OF THE MIDDLE EAST ARMS IMPORTS AS A SHARE OF THE WORLD DEFENSE MARKET ......................................................................................................................................... 47 THE TOTAL VALUE OF THE MENA MARKET FOR ARMS IMPORTS : 1986-1996 .......................................... 48 NEW ARMS AGREEMENTS ARE DROPPING EVEN FASTER THAN DELIVERIES BUT THE NEAR EAST AGAIN PLAYS A CRITICAL ROLE ................................................................................................................................ 49 KEY STATES AFFECTING THE REGIONAL BALANCE ..................................................................................... 50 THE CUMULATIVE IMPACT OF THE ARAB-ISRAELI PEACE ACCORDS, SANCTIONING OF LIBYA, END OF THE IRAN-IRAQ WAR, END OF THE COLD WAR, GULF WAR, AND ECONOMIC RECESSION ........................ 51 THE IMPACT OF THE END OF THE COLD WAR AND THE GULF WAR ON NEW ARMS SALES TO SELECTED MAJOR BUYERS .............................................................................................................................................. 52 THE IMPACT OF THE END OF THE COLD WAR AND THE GULF WAR ON NEW ARMS DELIVERIES TO SELECTED MAJOR BUYERS ............................................................................................................................ 53 NEW ARMS PURCHASES BY MAJOR BUYERS IN THE MIDDLE EAST AND NORTH AFRICA BEFORE THE END OF THE COLD WAR: 1987-1990 ...................................................................................................................... 54 SHIFTS IN ARMS BUYS OF MAJOR BUYERS IN THE MIDDLE EAST AND NORTH AFRICA AFTER THE COLD WAR: 1994-1997 ............................................................................................................................................. 55 THE CUMULATIVE DECLINE IN MILITARY SPENDING BY SELECTED MAJOR BUYERS IN CONSTANT DOLLARS: 1984-1996...................................................................................................................................... 56 THE DECLINE IN SPENDING BY SELECTED MAJOR BUYERS: 1984-1996 ...................................................... 57
Copyright Anthony H. Cordesman, all rights reserved.
Debt Performance is Mixed • Total debt has risen, but has been controlled. • At the same time, the control of public debt has often come at the expense of polices that discourage investment in the MENA region. • Several countries also have serious debt problems.
Copyright Anthony H. Cordesman, all rights reserved.
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The Debt Burden Trends in the Middle East were Relatively Static Before the “Oil Crash”: 1980-1995 180
160
140
120
100
80
60
40
20
0 Ratio of Total External
80
88
89
90
91
92
93
94
95
36.8
155.7
140.7
109.8
129.2
126.1
134.5
148.5
136.9
18.6
41.6
42.5
38.3
40.7
39.9
43.1
41.7
40.2
2.8
6.8
6.8
5.2
5.5
5.6
6
6.2
6.5
Debt Relative to Exports of Goods and Services Ratio of Total External Debt to Gross National Product Ratio of Total Interest Payments Relative to Exports of Goods and Services
Adapted by Anthony H. Cordesman from World Bank, World Debt Tables, 1995.
Copyright Anthony H. Cordesman, all rights reserved.
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Total MENA Debt Rose After 1990, but the Cost of Principal Repayments Went Down: 1970-1996 (In $Current Billions) 180
160
140
120
100
80
60
40
20
0 1970
1980
1990
1995
1996
Total Outstanding Debt
4.2
Principal Repayments
0.4
61.7
137
165.1
167.8
4.8
15.3
14.1
10.1
Adapted by Anthony H. Cordesman from World Bank, Global Development Performance, 1997, p. 199.
Copyright Anthony H. Cordesman, all rights reserved.
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However, Middle Eastern Debt Performance by Country is Mixed Country
Relative Wealth
Debt Status
Algeria
middle income
severely indebted
Bahrain
middle income
less indebted
Egypt
low income
moderately indebted
Iran
middle income
severely indebted
Iraq
middle income
severely indebted
Jordan
middle income
severely indebted
Kuwait
---
---
Lebanon
middle income
less indebted
Libya
middle income
less indebted
Morocco
middle income
moderately indebted
Oman
middle income
less indebted
Qatar
---
---
Saudi Arabia
middle income
less indebted
Sudan
low income
severely indebted
Syria
middle income
severely indebted
Tunisia
middle income
moderately indebted
Turkey
middle income
moderately indebted
UAE
---
---
Yemen
low income
severely indebted
Note: Low income = $725 annually or less; lower-middle = $725-2,895; upper middle = $2,896-8,955. Kuwait, Qatar, and the UAE are high income countries with $8,956 or more. The ranking for indebtedness is determined by the present value of debt services relative to exports of goods and services or relative to GNP. Source: World Bank, World Debt Tables, 1998, pp. 43-44.
Copyright Anthony H. Cordesman, all rights reserved.
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Countries Differ Radically in Total External Debt (In $US Current Billions in 1996) 33.26
Algeria Bahrain 31.41
Egypt Gaza 21.18
Iran Iraq Israel 8.12
Jordan Kuwait 4
Lebanon Libya 2.36
Mauritania Morocco
21.77 3.41
Oman Qatar Saudi Arabia Syria
0.71
Sudan
17
Tunisia
9.89
UAE West Bank West Sahara Yemen
6.36
0
5
10
15
20
25
30
35
Adapted by Anthony H. Cordesman from World Bank, World Bank Atlas, 1998, Washington, World Bank, 1998, pp. 41-43. Copyright Anthony H. Cordesman, all rights reserved.
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6
The Middle East Failed to Compete in Productivity • The Middle East was the only region in the world to exhibit a net drop in productivity from 1960-1990. • Middle East productivity dropped by around 6%, East Asian productivity rose by 54%. • The situation has improved in the last decade, but the Middle East still have only about 20% of the growth of East Asia and lags far behind South Asia. • Several factors have been critical: • The failure to create a strong competitive private sector. • Lack of productivity gain from women in the work force. • Impractical, unfocused education. • Hiring in large government and state industry sector. • Problems in regulation, commercial code, rule of law. • War and military build up • Over-dependence on oil sector, lack of diversification. • Rentier states; use of foreign labor
Copyright Anthony H. Cordesman, all rights reserved.
Economic Stability and Instability in the New Middle East
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Productivity Dropped While Rising in Other Regions: Average Annual Change in Total Factor Productivity: 1960-1990 2
1.8 East Asia 1.65
1.5 OECD
Latin America 1
Middle East and North Africa
0.5
0.45
0
-0.2
-0.5
Source: Adapted by Anthony H. Cordesman from World Bank, Claiming the Future, p. 15
Copyright Anthony H. Cordesman, all rights reserved.
7
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The Middle East Lagged in Regional Output Growth During 1985-1993 (Average Annual Increase in Percent)
10
8 8 East Asia South Asia Developing Europe and Central Asia 6 Latin America and Carribean Sub-Saharan Africa
4.8
Middle East and North Africa 4
2.4 1.8
2
1.2
0
-2
-2.6
-4
Source: Adapted by Anthony H. Cordesman from World Bank, Global Economic Prospects and the Developing Countries, 1996, p. 16
Copyright Anthony H. Cordesman, all rights reserved.
8
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The Middle East Lagged in Value Added to Manufacturing (Value in $US billions of sum of gross output, less the value of intermediate goods consumed in production)
350
300
1980
1994
250
200
150
100
50
0 Eas t A s i a
Sout h A s i a
Dev el opi ng
Lat i n
Sub- Sahar an
M i ddl e Eas t
Eur ope and
A m er i c a and
A f r ica
and Nor t h
Cent r al A s i a
Car r i bean
A f r ica
Source: Adapted by Anthony H. Cordesman from World Bank, World Development Indicators, 1998, p. 178
Copyright Anthony H. Cordesman, all rights reserved.
9
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Relative Percentage Increase in Value Added to Manufacturing: 1980-1994 (Percentage Increase in $US billions of sum of gross output, less the value of intermediate goods consumed in production)
200
180
175
160
140
Middle East 116
120
100 90 82 80 68 62 60
40
20
13
0 East Asia
South Asia
Latin
Sub-
Middle East
High
America
Saharan
and North
Income
Africa
Africa
States
and
US
Carribean
Source: Adapted by Anthony H. Cordesman from World Bank, World Development Indicators, 1997, p. 152
Copyright Anthony H. Cordesman, all rights reserved.
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11
The Economics of the “Oil Shock” • The “Oil Shock” of 1997 to the present has not created an economic crisis, a structural crisis has been building up since 1986. • Oil economies have under-performed the rest of the Middle East – largely through: • A lack of diversification; • Welfare orientation; • Population growth; • Over-dependence on foreign labor • Growth of state employment, restrictions on private sector, lack of competitive pressure, and; • War and military build-ups. • Most oil-state budgets have serious structural deficits and open or concealed debt. • Oil-states talk reform under pressure and forget when revenues rise. • Today’s ultra-low prices may not last long, but few forecasts give oil-states enough revenue to escape the growing impact of structural problems. • The major change is that oil-states no longer can afford to develop their own oil and gas sectors, and many lack funds for other civil and military investment.
Copyright Anthony H. Cordesman, all rights reserved.
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12
CEA Estimate of Historical Trends in Middle Eastern Oil Production: 1970-1997 ($Current Billions) 25
20 Algeria
Libya 15 Iraq Iran
Kuwait Qatar 10
Saudi 5
UAE 0 1970
1975
1980
1985
1990
1991
1992
1993
1994
1995
1996
1997
Algeria
1.03
0.98
Libya
2.76
1.48
1.01
0.7
1.79
1.06
0.77
0.8
0.77
0.75
0.74
0.77
0.81
0.85
1.38
1.48
1.47
1.37
1.38
1.39
1.4
1.45
Iran
3.83
Iraq
1.55
5.35
1.66
2.26
2.51
2.25
3.09
3.33
3.43
3.65
3.59
3.59
3.65
3.62
1.43
2.04
0.3
0.43
0.47
0.52
0.055
0.58
Kuwait
2.99
2.08
1.66
1.2
1.02
1.18
0.19
1.06
1.87
2.03
2.04
2.06
2.07
Qatar
0.36
0.44
Saudi
3.8
7.08
0.47
0.3
0.41
0.39
0.4
0.42
0.41
0.43
0.48
0.61
9.9
3.39
6.41
8.18
8.4
8.15
8.1
8.19
8.22
8.56
UAE
0.78
1.66
1.7
1.13
2.07
2.39
2.28
2.19
2.18
2.19
2.2
2.24
Total ME OPEC
13/31
18/87
17/91
9/53
15/19
14.77
15.99
16.75
16.84
16.99
17.18
18.3o
Total ME
13.95
19.57
18.40
10.25
16.49
16.19
17.43
18.34
18.59
18.84
19.08
20.16
Adapted by Anthony H. Cordesman from Cambridge Energy Associates, World Oil Trends, 1998, Cambridge,, Mass., 1998, pp. 26-27.
Copyright Anthony H. Cordesman, all rights reserved.
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13
Historical Trends in Middle Eastern Oil Revenues: 1970-1997 ($Current Billions) 250
200
150
100 Algeria Libya Kuwait Iran Iraq
Qatar
50 Saudi
UAE 0 Algeria
1970
1975
1980
1985
1990
1991
1992
1993
1994
1995
1996
1997
0.68
4.3
13
9.7
9.6
8.5
7.9
6.9
6.3
6.9
9.2
8.7
Libya
2.4
6.8
21.9
12.1
10.7
10.2
9.3
7.7
7.2
7.8
9.5
8.9
Iran
2.4
19.6
11.7
13.7
17.9
15.8
16.8
14.3
14.8
14.9
17.7
16.5
Iraq
0.79
8.2
26.1
10.1
9.6
0.35
0.48
0.43
0.42
0.46
0.68
3.5
Kuwait
1.6
8.6
18.9
9.5
6.4
0.87
6.2
9.7
10.5
12.2
14.1
13.6
Qatar
0.23
1.8
5.4
3.1
3.3
2.8
2.9
2.8
2.6
3
3.8
4.7
Saudi
2.4
28.5
108.2
25.9
40.1
43.7
44.8
38.6
38.1
42.5
50
48.8
UAE
0.52
6.8
19.4
10.9
14.8
14.4
14.3
12.1
11.7
12.8
15
15.3
Total ME OPEC
7.9
74.5
189.7
73.2
92.1
77.9
85.4
77.9
78.2
85.9
101.3
102.5
Total MENA OPEC 11.0
84.7
224.7
95.0
112.4
96.2
102.5
92.2
93.7
100.6
120.0
120.1
Adapted by Anthony H. Cordesman from Cambridge Energy Associates, World Oil Trends, 1998, Cambridge,, Mass., 1998, pp. 26-27.
Copyright Anthony H. Cordesman, all rights reserved.
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14
Politics and the Trends in the Price of Saudi Arabia Light Crude: 1970-1999 ($US Current and $US 1997 Constant) 80 Iran-Iraq War
US Price
70
Decontrol Iranian OPEC
Revolution
Decision to
60
Regain Market Share Gulf 50
War
End of Iran-Iraq War 40
Oil Crash
Oil Embargo
30
20
10
0 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99
Total ME OPEC
13/31
18/87
17/91
9/53
15/19
14.77
15.99
16.75
16.84
16.99
17.18
18.3o
Total ME
13.95
19.57
18.40
10.25
16.49
16.19
17.43
18.34
18.59
18.84
19.08
20.16
Adapted by Anthony H. Cordesman from Cambridge Energy Associates, World Oil Trends, 1998, Cambridge,, Mass., 1998, pp. 26-27.
Copyright Anthony H. Cordesman, all rights reserved.
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Projected Middle Eastern, Non-Middle East, and World Oil Production: IEA versus EIA (In Millions of Barrels Per Day) 140
120
100
80
60
40
20
0 1996
2010
2020
EIA Middle East OPEC
18.5
27.2
47.3
IEA Middle East Conventional Oil
18.5
43.7
48.9
MIDDLE EAST OPEC
and NGL NON-MIDDLE EAST OPEC EIA Non Middle East OPEC
53.5
59
68.6
IEA Non-Middle East OPEC
50.8
46.5
38.5
EIA World
71.8
95.5
115.9
IEA World
72
94.8
111.5
TOTAL WORLD PRODUCTION
Adapted by Anthony H. Cordesman from DOE/EIA, International Energy Outlook, 1998, April, 1998, DOE/EIA-484(97), Reference Case, p. 51 and IEA, World Energy Outlook, 1998, pp. 101 and 119-21.
Copyright Anthony H. Cordesman, all rights reserved.
15
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Just How Uncertain is Future Middle Eastern Production? IEA Versus EIA Versus Cordesman Guesstimate: 1995 vs. 2010 vs. 2020 (In Millions of Barrels Per Day)
50
30
10
0 1996 27.2
IEA Estimate of EIA Estimate IEA Middle East Conventional Oil &
2020
18.5
48.9
20.9
49.8 26.1
OPEC
International Energy Outlook, 1998, April, 1998, DOE/EIAand IEA, World Energy Outlook, 1998
Copyright Anthony H. Cordesman, all rights reserved.
16
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17
Comparative EIA and Arab Estimates of Middle Eastern Oil Production Capacity by Country (In Millions of Barrels Per Day) 60
50
40
30
20
10
0 1996
EIA 2000
Lab 2000
Algeria
1.4
1.6
1.2
1.9
1
2.2
0.8
2.1
2
Libya
1.5
1.5
1.6
1.6
1.9
1.7
2.3
1.6
1.5
Egypt
0.9
-
0.9
-
0.7
-
0.6
-
-
Syria
0.6
-
0.6
-
0.6
-
0.5
-
-
Bahrain
0.2
-
-
-
-
-
-
-
-
Iran
3.9
4
-
4.3
-
4.5
-
5.7
6.8
Iraq
0.6
0.6
2.6
2.1
6.7
3.2
6.1
4.3
5.2
Kuwait
2.6
2.8
3
3.1
3.5
3.3
4.5
4.3
5.2
-
-
-
-
-
-
-
-
-
0.9
-
1
-
1
-
0.9
-
-
Neutral Zone Oman
EIA2005
Lab2005
EIA2010
Lab2010
EIA2015
EIA2020
Qatar
0.6
0.5
0.7
0.6
0.6
0.6
0.5
0.6
0.7
Saudi
10.6
10.9
10.5
11.2
11
13.5
12
17.2
23.8
UAE
2.6
2.8
2.8
3.1
3
3.5
3.5
4.7
5.5
Yemen
0.3
-
0.5
-
0.8
-
0.5
-
-
Adapted by Anthony H. Cordesman from DOE/EIA, International Energy Outlook, 1998, April, 1998, DOE/EIA-484(97), Reference Case, p. 51 and Dr. M. Mukhtar Al-Lababidi, Energy Resources in the Arab Countries, Kuwait, November 19-21, 1998.
Copyright Anthony H. Cordesman, all rights reserved.
Economic Stability and Instability in the New Middle East
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The “Oil Shock in Reverse:” Shifts in Total OPEC Earnings ($1990 Billions)
450 400 350 300 250 200 150 100 50 0 1972 Before Price Leap
Oil Export Earnings
1980 Peak 1986 Price
1972 Before Price Leap Oil Export Earnings
Collapse
1988 Estimated
1980 Peak
1986 Price Collapse
77
439
83
Adapted by Anthony H. Cordesman from date provide by DOE/EIA. November, 1998.
Copyright Anthony H. Cordesman, all rights reserved.
1988 Estimated 81
18
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19
The “Oil Shock in Reverse:” Shifts in OPEC Earnings by Major Country: 1972-1998 (in $US Current and 1990 Constant Billions) 500
450
400
350
300
250
200
150
100
50
0
-50 1972 Constant
1980 Constant
1986 Constant
Drop in 98
1998 Constant
Algeria
4.2
20.2
4.8
7.5
4.9
-35%
3.9
Indonesia
2.8
22.5
5.6
5.1
3.5
-31%
2.8
Iran
12.9
20.9
Iraq
4.5
43.6
6.7
15.7
10.2
-35%
8.1
8
4.2
6.1
45%
4.9
Kuwait
8.5
28.5
7.1
11.8
7.9
-33%
6.4
Libya
9.1
35.3
5.5
9
5.8
-36%
4.6
Nigeria
6.6
38.6
7.7
14.5
9.2
-36%
7.4
Qatar
1.4
8.5
1.6
4
3
-26%
2.4
14.5
162.7
21.4
45.5
29.4
-35%
23.6
UAE
3.3
29.9
6.8
13.7
9.3
-32%
7.5
Venuzuela
9.4
28.2
7.8
17.7
11.1
-37%
8.9
77.2
438.8
83.0
148.7
100.6
-32%
80.5
Saudi Arabia
Total
1997 Current
1998 Current
Source: Adapted by Anthony H. Cordesman from data provided by the EIA as of September 4, 1998.
Copyright Anthony H. Cordesman, all rights reserved.
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20
The Boom in 1980 versus the Mid-1980s and 1990s: Shifts in Middle Eastern Oil Export Earnings By Country ($Current Billions) 250000
200000
150000
100000
50000
0 1970
1975
1980
1985
1990
1991
1992
1993
1994
1995
1996
1997
681
4295
12971
9668
9588
8464
7885
6902
6335
6938
9164
8745
Libya
2379
6767
21906
12132
10715
10211
9326
7689
7170
7763
9543
8866
Iran
2358
19634
11693
13710
17906
15767
16802
14251
14801
14944
17660
16476
Iraq
788
8227
26096
10097
9594
351
482
425
421
461
680
3513
1582
8593
18935
9451
6385
874
6224
9708
10482
12217
14099
13646
Algeria
Kuwait Qatar
231
1754
5372
3068
3273
2828
2870
2811
2623
2987
3801
4743
Saudi
2418
29473
108175
25937
40130
43701
44754
38621
38139
42502
50046
48835
UAE
523
6806
19390
10896
14846
14356
14251
12118
11683
12822
14980
15286
Total ME OPEC
7900
74487
189661
73159
92134
77877
85383
77934
78149
85933
191266 192499
Adapted by Anthony H. Cordesman from Cambridge Energy Associates, World Oil Trends, 1998, Cambridge,, Mass., 1998, pp. 60-61.
Copyright Anthony H. Cordesman, all rights reserved.
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21
The Decline in Real Per Capita Income in the Middle East, North Africa, OPEC and Saudi Arabia: 1980-1995 ($US Constant 1995 Dollars) 25000
20000
15000
10000
5000
0 1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
North Africa
2836
2578
2321
2169
2008
1912
1781
1750
1653
1671
1755
1780
1746
1660
1710
1696
Middle East
5,163
4693
4228
3951
3659
3485
3053
3007
2933
2960
3002
2993
3077
3012
2863
2849
Saudi Arabia 23788 21624 17725 14067 11723
9769
7983
7464
7118
7077
8157
8561
8266
7398
6894
6815
1887
1711
1686
1659
1689
1753
1777
1827
1796
1735
1733
OPEC
2833
2575
2319
2168
2008
Adapted by Anthony H. Cordesman from Arms Control and Disarmament Agency (ACDA), World Military Expenditures and Arms Transfers, Washington, GPO, Table I, various editions..
Copyright Anthony H. Cordesman, all rights reserved.
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22
The “Oil Shock in Reverse:” Shifts in Gulf Export Earnings 19701996 ($Current Billions) 200 Oi l Rev enues Ot her Ex por t Rev enues 180
160
140
120
100
80
60
40
20
0 1970
1980
1993
1995
1996
Adapted by Anthony H. Cordesman from data provided by Hubert des Longchamps of Elf Aquitaine and The Economist, December 21, 1996, p. 54.
Copyright Anthony H. Cordesman, all rights reserved.
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23
The GDP Growth of MENA Fuel Exporters Lagged Behind That of Diversified Exporters and Was Far More Vulnerable to Oil Prices (Percent of GDP Growth) 10
8
6
4
2
0 81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
-2
D i v e r s i f i e d Ex p o r t e r -4
Fu e l Ex p o r t e r
-6
-8
Diversified exporter = Egypt, Israel, Jordan, Morocco, Syria, and Tunisia. Fuel exporter = Algeria, Bahrain, Iran, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, Washington, IMF, May, 1996, pp. 98105.
Copyright Anthony H. Cordesman, all rights reserved.
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24
The Per Capita Income Growth of MENA Fuel Exporters Lagged Behind That of Diversified Exporters and Was Far More Vulnerable to Oil Prices (Percent of Change in Per Capita Income; 1985 = 100) 120
100
80
60
40 D i v e r s i f i e d Ex p o r t e r
F u e l Ex p o r t e r 20
0 81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
Diversified exporter = Egypt, Israel, Jordan, Morocco, Syria, and Tunisia. Fuel exporter = Algeria, Bahrain, Iran, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, Washington, IMF, May, 1996, pp. 98105.
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The Fiscal Balances of MENA Fuel Exporters Deteriorated Relative to Those of Diversified Exporters (Budget Deficits as a Percent of GNP) 10
D i v e r s i f i e d Ex p o r t e r
5 F u e l Ex p o r t e r
0 81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
-5
-10
-15
-20
Diversified exporter = Egypt, Israel, Jordan, Morocco, Syria, and Tunisia. Fuel exporter = Algeria, Bahrain, Iran, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, Washington, IMF, May, 1996, pp. 98105.
Copyright Anthony H. Cordesman, all rights reserved.
25
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The Terms of Trade of MENA Fuel Exporters Deteriorated Relative to Those of Diversified Exporters (1985=100) 120
100
80
60
D i v e r s i f i e d Ex p o r t e r
40
F u e l Ex p o r t e r 20
0 81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
Diversified exporter = Egypt, Israel, Jordan, Morocco, Syria, and Tunisia. Fuel exporter = Algeria, Bahrain, Iran, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, Washington, IMF, May, 1996, pp. 98105.
Copyright Anthony H. Cordesman, all rights reserved.
26
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27
Economies Failed to Diversify and Remained Over-Dependent on Oil: Oil and Petroleum Exports as a Share of Gulf and Middle Eastern Economies
MENA
% of Total Exports
Syria
% of GDP
Iraq
Iran
Egypt
Algeria
GCC
UAE
Saudi
Oman
Kuwait
Bahrain
0
20 Bahrain Kuwait
40
60
80
100
120
Oman
Saudi
UAE
GCC
Algeria
Egypt
Iran
Iraq
Syria
MENA
% of Total Exports
90
80
95
99
95
95
85
45
90
35
42
90
% of GDP
67
40
30
33
40
35
20
7
15
2
14
30
Source: Adapted by Anthony H. Cordesman from World Bank, Claiming the Future, pp. 16-18.
Copyright Anthony H. Cordesman, all rights reserved.
Economic Stability and Instability in the New Middle East
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28
Middle Eastern and North African Oil Revenues by Country: 19961998: The Impact of Oil Prices on Revenues (in US $Current Billions)
Qatar
Algeria
Libya
Kuwait
UAE
Iran
Saudi Arabia
0
5
10
15
20
25
30
35
40
45
50
Saudi Arabia
Iran
UAE
Kuwait
Libya
Algeria
Qatar
1998
29.2
12.8
9.5
9.1
7.1
5.7
3.4
1997
42.9
16.3
13.5
12.4
10.2
7.5
4.3
1996
45.7
18.7
14.5
13.5
11.1
7.9
3.3
Source: Adapted by Anthony H. Cordesman from projections by the Petroleum Finance Corporation.
Copyright Anthony H. Cordesman, all rights reserved.
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Pressures on the Saudi Budget: The Problem of Predicting the Future of a One Commodity, State-Driven Economy (in billions of Saudi Rials) 250
Spending suddenly slashed 16% in early 1998 210 204 196
194
200
189 181
177
178 165
164 150 143
150 132
121
100
50
0 1996 Budgeted -18
1996 Actual -17
1997 Budgeted -17
-50
1997 Actual -6
1998
1998 Actual
1999
12/97 -18 Estimate
-46
-100
Source: Adapted by Anthony H. Cordesman from US-Saudi Business Brief, Winter, 1998, p. 1, and Reuters, December 28, 1998, 1728.
Copyright Anthony H. Cordesman, all rights reserved.
-44
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Pressures on the Saudi Budget: The Entitlements Problem (in billions of Saudi Rials) 120
100
DOMESTIC INVESTMENT 80
WELFARE & 60
ENTITLEMENTS
40
20
0
-20 1998
1999
% Change
6.4
5
-22%
Indust., Elec. & Infra
10.7
8.5
-20%
Trans & Commo
11.8
5.2
-55.90%
7.6
6.6
-12.70%
Health & Community Dev.
19.7
18.7
-5%
Education
45.6
42.9
-6%
5
4.8
-4.90%
Spec. Deve Funds
Munin Services & Water
Aid to Social Activities
Source: Adapted by Anthony H. Cordesman from US-Saudi Business Brief, Winter, 1998, p. 1, and Reuters, December 28, 1998, 1728.
Copyright Anthony H. Cordesman, all rights reserved.
30
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31
Pressures on the Kuwaiti Budget (in millions of Kuwaiti Dinars)
5000 4391
4409
4378
4362
39263889
4000
3127
3105 3000
2577
2555
1894
2000
1000 502
0
-1000 -1273
-1282
-2000
-1919 -2163
-3000 96/97 Actual
97/98 Budget
98/99 Initial
98/99 10/98
Total Revenues
4391
3105
3127
Oil Revenues
3926
2555
2577
1894
Expenditures
3889
4378
4409
4362
502
-1273
-1282
-1919
Deficit Gross Deficit
-
-
Source: Adapted by Anthony H. Cordesman from data provided by the Kuwait National Bank.
Copyright Anthony H. Cordesman, all rights reserved.
-
-
-2163
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32
Pressures on the Qatari Budget (in millions of Qatari Rials)
20000
15652 15000 13750 12750 12012
10000
5000
0
-1957
-1960 -2950 -3530
-3640
-5000 94/95 Actual
95/96 Actual
96/97 Actual
97/98 Budget
12012
Total Revenues Expenditures Deficit
98/99 draft
-1957
-1960
13750
12750
15652
-2950
-3530
-3640
Source: Adapted by Anthony H. Cordesman from data provided by the Kuwait National Bank.
Copyright Anthony H. Cordesman, all rights reserved.
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Middle Eastern and North African Oil Revenues by Country: 19961998: The Impact of Oil Prices on Revenues (in US $Current Billions)
Qatar
Indonesia
Algeria
Libya
Kuwait
UAE
Venezuela
Iran
Nigeria
Saudi Arabia
0
5
Saudi Arabia
10
15
Nigeria
Iran
20
Venezuel a
25
30
35
40
45
50
UAE
Kuwait
Libya
Algeria
Indonesia
Qatar
1998
29.2
13.2
12.8
12.7
9.5
9.1
7.1
5.7
4.8
3.4
1997
42.9
17.8
16.3
17.5
13.5
12.4
10.2
7.5
8.1
4.3
1996
45.7
17.5
18.7
17.1
14.5
13.5
11.1
7.9
7.9
3.3
Total oil exports = 2,734 thousand barrels per day. Source: Adapted by Anthony H. Cordesman from projections by the Petroleum Finance Corporation.
Copyright Anthony H. Cordesman, all rights reserved.
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Pressures on the Omani Budget (in millions of Omani Rials)
2500 2266
2307
2288
2270
2156 2012
1934
2000
1905
1868
1825 1749
1502
1525
1497
1500
910
1000
482 500
398
383
69
69
57
0
-263
-263
-295
-500 -631 -1000 1997 Budget
1997 Actual
1998 Budget
1999 Budget
Total Revenues
1934
2270
2012
1525
Oil Revenues
1502
1749
1497
910
69
57
69
2266
2288
2307
398
383
482
1868
1905
1825
-263
-263
-295
Gas Revenues . Budget Investment Current/Other
2156
. Deficit
-631
Source: Adapted by Anthony H. Cordesman from data provided by the Central Bank of Oman and Middle East Economic Digest, November 20, 1998, p. 26, and January 15, 1999, pp. 2-3.
Copyright Anthony H. Cordesman, all rights reserved.
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Key Trends in the Omani Budget (in millions of Omani Rials)
2500 2331 2252.9
2307
2266
2253.7
2156 2000
1990.2
2003
2012
1473
1502
1497
1851.6 1757.4
1500
1525
1372.7
1311.5
1000 902 779.3
500
776.1
458.9
736.8
655
613
482
456.9
160.1
698
160.2
403.6
398
178.4
187
200
-263.5
-263
-295
393 180
0
-500
-479.4
-495.5
-631
-1000 1994
1995
1996
Total Revenues
1757.4
1851.6
1990.2
Oil Revenues
1311.5
1372.7
1473
Total Expenditure
2252.9
2331
2253.7
Defense Expenditures
779.3
776.1
Investment Expenditure
458.9
Energy Investment
160.1 -495.5
Current Deficit
1997
1998
1999
2003
2012
1525
1502
1497
902
2266
2307
2156
736.8
698
655
613
456.9
403.6
398
482
393
160.2
178.4
187
200
180
-479.4
-263.5
-263
-295
-631
Source: Adapted by Anthony H. Cordesman from data provided by the Omani Times and Middle East Economic Survey, January 18, 1999, pp. B-2.
Copyright Anthony H. Cordesman, all rights reserved.
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The EIA Reference Case Estimate of Middle Eastern Production by Country: 1990-2020 (EIA Reference Case in MMBD)
60
50
40
30 Algeria Libya
20
Saudi
Iraq 10
Iran Kuwait
1990
1996
2000
UAE Qatar 2005
Algeria
1.3
1.4
1.6
Libya
1.5
1.5
1.5
Saudi
8.6
10.6
Iraq
2.2
Iran
3.2
Kuwait
0
2010
2015
1.9
2.2
2.1
2
1.6
1.7
1.6
1.5
10.9
11.2
13.5
17.2
23.8
0.6
0.6
2.1
3.2
5.9
7.8
3.9
4
4.3
4.5
5.7
6.8
1.7
2.6
2.8
3.1
3.3
4.3
5.2
UAE
2.5
2.6
2.8
3.1
3.5
4.7
5.5
Qatar
0.5
0.6
0.5
0.6
0.6
0.6
0.7
24.4 27.9
28.6 32.5
38.4 42.1
Total Gulf OPEC 18.7 Total MENA OPEC 21.5
20.9 23.8
21.6 24.7
2020
49.8 53.3
Source: Adapted by Anthony H. Cordesman from EIA, International Energy Outlook, 1998, DOE/EIA-0484 (97), April 1998, pp. 175, and EIA, Monthly Energy Review, April, 1997, pp. 130-131.
Copyright Anthony H. Cordesman, all rights reserved.
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Petroleum Finance Institute Estimate of Middle Eastern and North African Oil Revenues by Country: The Range of Future Oil Revenues in: 1998-2020 (in US $Constant Billions)
Qatar
Algeria
Libya
Kuwait
UAE
Iran
Saudi Arabia
0
20
40
60
80
100
120
Saudi Arabia
Iran
UAE
Kuwait
Libya
Algeria
Qatar
2020 High
97
28
28.4
24.8
13.5
9.5
3.8
2020 Low
51
16
12.4
11.8
8.5
6.3
2.9
2010 High
56
26
21
18.5
12.2
8.7
4.2
2010 Low
41
15.8
11.4
11.2
7.7
6.1
3
2000 High
46
19
15
14
11.5
8
4
30
13.4
9.8
9.3
7.3
6
3.1
29.2
12.8
9.5
9.1
7.1
5.7
3.4
2000 Low 1998
Total oil exports = 2,734 thousand barrels per day. Source: Adapted by Anthony H. Cordesman from projections by the Petroleum Finance Corporation. Copyright Anthony H. Cordesman, all rights reserved.
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Regional Trends in Military Effort: “The Most Militarized Area in the World” • The Middle East Remains the Most Militarized Region in the World by Virtually Every Measure of Effort. • This statement, however, disguises important downward trends in regional military spending and the burden of military expenditures and arms efforts. • Military expenditures only place about half the burden on the GNP they did during the Cold War-Gulf War era. • Military expenditures have steadily dropped as a percent of total government expenditures since the Gulf War. • Arms imports are way down as a percent of total imports. • Trends, however, are cyclical. Wars lead to major increases and then decreases. Major acquisitions often lead to short-term increases in arms orders followed by cuts as nations pay for previous orders. • A steady drop has taken place in the percent of the total population under arms. • “Statism”: Government domination of regional economies and the massive mismanagement of civil spending is the key problem.
Copyright Anthony H. Cordesman, all rights reserved.
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The Trend in Middle Eastern Military Expenditures and Arms Transfers Since the October War (1967-1995 in $Current Billions)
90 80 70 60 50 40 30 20 10 0 Military Expenditures Arms Imports
Adapted by Anthony H. Cordesman from ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt.
Copyright Anthony H. Cordesman, all rights reserved.
39
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“The Most Militarized Region in the World” (Military Expenditures and Arms Imports as an Economic Burden in the Middle East Relative to Other Regions)
M i d d l e Ea s t No r t h A f r i c a
Military Expenditures as a Percent of GNP
Ea s t A s i a Dev e l o pi n g NA T O
1985
W or l d
1995 0
2
4
6
8
10
12
14
16
18
M i d d l e Ea s t No r t h A f r i c a Military Expenditures as a Percent of Central Government Expenditures
Ea s t A s i a Dev e l o pi n g NA T O
1995
W or l d
1995 0
5
10
15
20
25
30
35
Middle East North Africa Arms Imports as a Percent of Total Imports
East Asia Developing NATO
1985 World
1995 0
5
10
15
20
25
Source: Adapted by Anthony H. Cordesman from ACDA, World Military Expenditures and Arms Transfers, Washington, GPO, various editions
Copyright Anthony H. Cordesman, all rights reserved.
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The Declining Trend in Middle Eastern Military Expenditures and Arms Transfers in Constant Dollars (1967-1995 in $1995 Billions)
100 90 80 70 60 50 40 30 20 10
Military Expenditures
0 85
86
87
Arms Imports Military Expenditures
Arms Imports 88
89
90
91
92
93
94
95
85
86
87
88
89
91
92
93
94
95
27.95
25.96
30.9
24.5
19.2
14.5
13.5
13.8
10.2
13.8
93
88.7
80.6
74.8
66.9
98.7
87.4
55
49.7
48.6
Adapted by Anthony H. Cordesman from ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt.
Copyright Anthony H. Cordesman, all rights reserved.
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The Burden of Military Spending is Shrinking (Military Expenditures as an Economic Burden in the Middle East Relative to Other Regions - Military Expenditures as a % of GNP)
Middle East
North Africa
East Asia 1995
Developing 1993
1991
NATO
1985 World
0
2
4
6
8
Developing
10
12
East Asia
14
North Africa
16
18
World
NATO
1995
2.8
3
2.8
1.8
4.1
Middle East 7.9
1993
3.3
3.5
3
1.8
3.9
8.9
1991
3.9
3.7
4.3
1.8
4.1
17
1985
5.2
4.7
5.5
2.3
7.7
16.6
Source: Adapted by Anthony H. Cordesman from ACDA, World Military Expenditures and Arms Transfers, 1996, Washington, GPO, 1997
Copyright Anthony H. Cordesman, all rights reserved.
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Military Expenditures Place a Lower Burden on Government Spending (Military Expenditures Relative to Central Government Expenditures: 1985-1995: Military Expenditures as a % of CGE)
Middle East
North Africa
East Asia 1995
Developing
1993
1991
NATO
1985 World
0
10
20
30 Developing
40 East Asia
50 North Africa
60
World
NATO
1995
9.9
9.4
13
8.6
11
Middle East 23.6
1993
10.9
10.6
11.7
8.7
10.3
25.4
1991
14.1
11.5
19.7
8.9
12.6
51
1985
18.1
14.4
19
12.5
19.5
32.4
Source: Adapted by Anthony H. Cordesman from ACDA, World Military Expenditures and Arms Transfers, 1996, Washington, GPO, 1997
Copyright Anthony H. Cordesman, all rights reserved.
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Middle Eastern Military Efforts Have Also Dropped Sharply as a Percent of GNP, Government Expenditures, Total Population, and Arms Imports: 1984-1996 60
50
40
30
20
10
0 Military Spending as a
84
85
86
87
88
89
91
92
93
94
95
17.9
16.6
17.4
15.6
14.4
12.4
17
14.2
8.9
8.3
7.9
34.6
32.4
38.8
41.8
37.6
34.6
51
40.8
25.4
23.1
23.6
22.7
21.9
23
27.5
21.3
17.2
12.9
10.8
11.4
10.1
11
16.3
15.8
15
15.7
18.2
17.5
13.2
12.3
11.9
11.4
10.7
96
Percent of GNP Military Spending as a Percent of Central Government Expenditures Arms Imports as a Percent
10.5
of Total Imports Active Military Manpower per 1,000 People Adapted by Anthony H. Cordesman form ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt.
Copyright Anthony H. Cordesman, all rights reserved.
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Middle Eastern Military Expenditures and Arms Imports Dropped Sharply Relative to Economic Growth and Government Spending During 1984-1994 (1984=100, and all following years are percentages of 1984 as base year. All expenditure totals are measured in constant 1984 US dollars.) 120
100
80
60
40
20
0 84
85
86
87
88
89
90
91
92
93
94
Gross National Product
100
96
87
84
90
93
98
99
105
106
104
Military Expenditures
100
93
87
78
73
66
91
98
85
54
45
Arms Imports
100
74
72
78
65
50
54
38
37
34
25
Central Government
100
98
77
65
66
65
64
65
71
71
72
Expenditures
Adapted by Anthony H. Cordesman form ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt. Copyright Anthony H. Cordesman, all rights reserved.
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The De-Radicalization of Middle East Arms Transfers • The Arab-Israeli peace process, end of the Iran-Iraq War, end of the Cold War, and Gulf War have reduced the threat far more than orders of battle would indicate. • Mismanagement of the economy, lower oil prices, and regional recession have also affected sales. • New agreements states with recent conflicts, or which are outside the peace process, are down to token share of past levels. • States committed to peace have signed 93% of all recent new arms import agreements versus 67% before Gulf War. • Southern Gulf states have recently signed 96% of all new arms import agreements versus 53% before Gulf War. • The most dangerous single threat country -- Iraq -- has had only token imports since 1990. • Iran did not choose to renew the arms race after its defeat in 1988, and made major further cuts in 1992, after the Coalition weakened Iraq. • Syria has no sponsor. • Libya faces economic problems and is sanctioned. • Warning: Data Do Not Take Proliferation Into Account
Copyright Anthony H. Cordesman, all rights reserved.
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The Continuing Importance of the Middle East Arms Imports as a Share of the World Defense Market (Value of Arms Deliveries during 1986-1996 in $1996 Billions)
90 80 70 60 50 40 30
Total World
20
Developing World
10 Middle East 0 86
87
88
89
North Africa 90
91
92
93
94
95
96
86
87
88
89
90
91
92
93
94
95
96
North Africa
2.7
2.3
2.6
2.3
1.1
0.7
0.23
0.13
0.37
0.35
0.25
Middle East
27.4
31.6
26.1
20.8
21.3
17.3
16.2
15.8
13.4
15.9
16.2
Developing World
53.1
58.3
52.7
44.1
40.5
27.4
23
21.2
20.3
24.9
23.7
Total World
75.9
84.4
80.6
67.8
63.4
52.5
45.7
42.1
38.5
40.6
42.6
Adapted by Anthony H. Cordesman from ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt.
Copyright Anthony H. Cordesman, all rights reserved.
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The Total Value of the MENA Market for Arms Imports: 1986-1996 (Value of Arms Deliveries During 1986-1996 in $US 1996 Billions)
35
30
25
20
15
10
5
0 86
87
88
89
90
91
92
93
94
95
96
86
87
88
89
90
91
92
93
94
95
96
Middle East
27.4
31.6
26.1
20.8
21.3
17.3
16.2
15.8
13.4
15.9
16.2
North Africa
2.7
2.3
2.6
2.3
1.1
0.7
0.23
0.13
0.37
0.35
0.25
Adapted by Anthony H. Cordesman from ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt.
Copyright Anthony H. Cordesman, all rights reserved.
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New Arms Agreements Are Dropping Even Faster than Deliveries But the Near East Again Plays a Critical Role (Arms Agreements and Deliveries to the Developing World vs. Total Sales to the Middle East: 1987-1997 in $Current Millions) 180000
160000
140000
120000
100000
80000
60000
40000
20000
0 Agreements: 87-90
Agreements: 91-94
Agreements: 94-97
158877
102103
92696
58112
Developing Nations
-
Near East
-
Developing Nations Near East
Deliveries: 87-90
Deliveries: 91-94
Deliveries: 94-97
72497
-
-
-
55849
-
-
-
-
-
146659
71718
88953
-
-
78118
47270
51283
.
Includes Gulf states, Arab-Israeli states, North Africa, and Yemen . Source: Richard F. Grimmett, Conventional Arms Transfers to the Developing Nations, Congressional Research Service, various editions. 0 = less than $50 million or nil, and all data rounded to the nearest $100 million
Copyright Anthony H. Cordesman, all rights reserved.
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Key States Affecting the Regional Balance • Iraq: More than enough arms for self-defense, aggressor state, proliferator • Iran: Regime moderating, but still possible threat to lower Gulf, still a revolutionary state, proliferator • Libya: Radical and unstable regime, already world’s largest military parking lot, sometime aggressor and sponsor of terrorism, proliferator. • Syria: Uncertain commitment to peace process, occupier of Lebanon, threat to Israel and Turkey, proliferator
Copyright Anthony H. Cordesman, all rights reserved.
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The Cumulative Impact of the Arab-Israeli Peace Accords, Sanctioning of Libya, End of the Iran-Iraq War, End of the Cold War, Gulf War, and Economic Recession (Arms Deliveries in Constant $95 Billions) 45
POST INVASION OF LEBANON
THE END OF THE
40
IRAN-IRAQ WAR
35
THE END OF THE COLD WAR
30
UN SANCTIONS ON IRAQ 25
20
15
Middle East 10
5
North Africa 0 84
85
86
84
85
87
86
88
87
89
88
90
89
91
90
92
91
93
92
94
93
95
94
95
Oceania
0.99
1.39
1.021
1.236
1.623
1.33
1.034
0.845
0.409
0.771
0.431
0.96
South America
3.2
1.398
1.295
1.534
1.592
1.354
0.724
0.851
0.559
0.467
0.472
1.295
North Africa
4.3
3.467
2.669
2.278
2.559
2.247
1.08
0.696
0.21
0.115
0.318
0.32
Central America
2.8
4.002
3.27
3.275
3.19
2.085
1.862
0.801
0.237
0.189
0.072
0.045
Sub-Saharan Africa 6.4
3.981
3.917
6.511
5.331
3.301
1.931
0.696
0.575
0.592
1.04
0.27
South Asia
3.8
5.229
6.567
6.265
7.803
8.962
7.223
3.519
1.232
0.917
0.697
1.13
East Asia
7.9
6.14
6.02
7.635
7.31
6.59
5.42
5.265
4.9
4.125
5.34
Developed World
20.2
20.76
19.82
25.4
23.86
22.46
16.98
15
12.2
14.35
10.96
10.55
Middle East
36.5
27.95
25.96
30.88
24.5
19.15
19.53
14.52
13.53
13.79
10.23
13.8
Adapted by Anthony H. Cordesman from ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt.
Copyright Anthony H. Cordesman, all rights reserved.
6.425
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The Impact of the End of the Cold War and the Gulf War on New Arms Sales to Selected Major Buyers (New Agreements in $Current Millions) 12000
10500 10200 10000
8000
6000
5600
4000 3500
2700
2000 1300 900 200 0
0
300 100
0 Iran
Iraq
Libya
Syria
87-90
10200
10500
3500
5600
91-94
2700
0
200
900
93-96
1300
0
100
300
Source: Richard F. Grimmett, Conventional Arms Transfers to the Developing Nations, Congressional Research Service, various editions.
Copyright Anthony H. Cordesman, all rights reserved.
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The Impact of the End of the Cold War and the Gulf War on New Arms Deliveries to Selected Major Buyers (New Agreements in $Current Millions) 18000 16600 16000
14000
12000
10000
7800
8000
6000 5200
3900
4000
2900 1900
2000
1400 500 0
0
300 0
0 Iran
Iraq
Libya
Syria
87-90
7800
16600
2900
5200
91-94
3900
0
500
1400
93-96
1900
0
0
300
Source: Richard F. Grimmett, Conventional Arms Transfers to the Developing Nations, Congressional Research Service, various editions.
Copyright Anthony H. Cordesman, all rights reserved.
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Page
New Arms Purchases by Major Buyers in the Middle East and North Africa before the End of the Cold War: 1987-1990 (New Agreements in $Current Millions)
Iran 11%
Other 68%
Iraq 11%
Libya 4% Syria 6%
Source: Richard F. Grimmett, Conventional Arms Transfers to the Developing Nations, Congressional Research Service, various editions.
Copyright Anthony H. Cordesman, all rights reserved.
54
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Shifts in Arms Buys of Major Buyers in the Middle East and North Africa after the Cold War: 1994-1997 (New Agreements in $Current Millions)
Libya 0%
Iran 4% Iraq 0% Syria 1%
Other 95%
Source: Richard F. Grimmett, Conventional Arms Transfers to the Developing Nations, Congressional Research Service, various editions.
Copyright Anthony H. Cordesman, all rights reserved.
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The Cumulative Decline in Military Spending by Selected Major Buyers in Constant Dollars: 1984-1996 ($96 Constant Millions)
25000
20000
15000
Iran
10000
Iraq 5000
Libya
Syria 0 84
85
86
87
88
89
90
91
92
93
Iran
3837
2741
3125
2240
3304
2196
2222
1800
931
1174
Iraq
1387
6716
8288
7774
7117
3050
3508
200
180
160
Libya
2350
2193
1630
791
1207
1342
433
461
88
3
Syria
2300
2056
1495
2635
1652
1342
1111
900
427
288
94
95
96
406
306
350
120
100
100
10
2
10
52
112
90
Source: Adapted by Anthony H. Cordesman from US Arms Control and Disarmament Agency, World Military Expenditures and Arms Transfers, , GPO, Washington, various editions.
Copyright Anthony H. Cordesman, all rights reserved.
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The Decline in Spending by Selected Major Buyers: 1984-1996 ($96 Constant Millions)
16000
14000
12000
10000
8000
6000
4000
2000
0 84
85
86
87
88
89
90
91
92
93
94
95
96
Syria
2300
2056
1495
2635
1652
1342
1111
900
427
288
52
112
90
Libya
2350
2193
1630
791
1207
1342
433
461
88
3
10
2
10
Iraq
1387
6716
8288
7774
7117
3050
3508
200
180
160
120
100
100
Iran
3837
2741
3125
2240
3304
2196
2222
1800
931
1174
406
306
350
Source: Adapted by Anthony H. Cordesman from US Arms Control and Disarmament Agency, World Military Expenditures and Arms Transfers, , GPO, Washington, various editions.
Copyright Anthony H. Cordesman, all rights reserved.
