The first three months of 2020 have thrust the Gulf economies into dangerous waters. The deadly combination of a toxic pandemic and the equally toxic collapse of the OPEC+ alliance have provoked wild fluctuations in crude prices, the commodity on which all Gulf countries depend for their principal source of income.
Even at the year’s outset, most economists had projected that, even under normal crude price levels, most Gulf states would not be able to keep budgets in balance. However, any hope of ‘normal conditions’ collapsed when the Covid-19 virus escalated into a global pandemic, significantly reducing already low expectations for Far East oil demand. OPEC states had formed a working arrangement (OPEC+) with Russia to deal with the challenge of falling prices. This arrangement destabilized in March at the OPEC+ meeting in Vienna when Russia and Saudi Arabia failed to reach a production cut agreement. Saudi Arabia tried to force Russian cooperation by flooding the market with crude. Russia called the Kingdom’s bluff and doubled down on its own production. The ensuing race to the bottom tipped the market into oversupply and tanked oil prices globally. Plummeting oil prices threatened expensive state-funded diversification efforts and putting long-planned events such as Dubai’s World Expo 2020 in Dubai and Saudi Arabia’s NEOM City at risk. Although this further reemphasizes the need for the Gulf states to prioritize diversification away from reliance on hydrocarbon, Gulf States will have far less cash to continue to invest in the capabilities of youth by fostering education and to create an ecosystem that encourages innovation and entrepreneurship. How will recent fluctuations effect the Gulf 2020 economic outlook? Will Saudi Arabia and Russia be able to strike a deal palatable to the entirety of OPEC+? In the face of dramatically reduced revenues, how can Gulf states continue to diversification and other reforms.
Dr. Dania Thafer (moderator), Dr. Jasim Husain, Dr. Jean-François Seznec, Rachel Ziemba and Dr. Hani K. Findakly.