Around the world, they are known as the GCC, for Gulf Cooperation Council. But in the Middle East, a more apt acronym for these rich petro-states might be ATM. Since at least the 1970s, Saudi Arabia & Company have spread their wealth around the region, buying friends and influence, and putting out fires.
Oil wealth is such a given that Donald Trump’s Peace to Prosperity Plan unveiled last month, nonchalantly assumes that the Gulf Arab states will foot much of the $50 billion in aid to get the State of Palestine on a firm economic footing. Indeed, keeping the GCC’s wallets open is probably the main reason why the White House thwarted Netanyahu’s annexation plans.
Trump isn’t the only one counting on Gulf money. Hamas and Israel are relying on Qatar to deliver suitcase loads full of cash to keep Gaza one step removed from humanitarian disaster and all-out war with Israel. It was $23 billion in Gulf money that kept the Egyptian economy from collapsing in the wake of Abdel Fattah al-Sissi’s coup. Lebanon has long counted on Gulf aid and until recently hoped to get some bailout money to avoid default.
These are just a few examples of how oil wealth from the Gulf has become so critical to the Middle East. But, as the International Monetary Fund revealed last week, the Arab world’s giant ATM is running out of cash.
How to spend $2 trillion in 15 years
How quickly depends on the price of oil going forward. If prices stay at about their current levels, the estimated $2 trillion in financial wealth they have accumulated could be down to zero in 15 years. Even $100-a-barrel oil would only delay the inevitable until 2051; if oil falls to an average of $20, the day will arrive as soon as 2027.
What’s happening is that the fundamentals of the global oil market are changing rapidly. On the one hand, new technology has created new sources of fossil fuel, most notably from American shale; on the other, climate change is accelerating the transition away from fossil fuels to renewables. Meanwhile, economic growth hinges less on consuming more petroleum than in the past.