Renegotiating the Ruling Bargain: Selling Fiscal Reform in the GCC

Abstract

Built upon depletable reservoirs of oil and natural gas, the petro-states of the Arab Gulf have, since their beginning, always had one eye fixated on the end: the exhaustion of their life-giving natural resources, and the radical economic and potentially political transformations that promise as a result. For decades, the steady countdown of this doomsday clock has both framed and impelled government efforts to guarantee a more ordered transition to the post-oil era, including via economic diversification, labor market reforms, spending on tertiary education, and investment through sovereign wealth funds. Now, however, depressed oil prices and a changing strategic environment are working to upend this long-term time horizon, and with it the basic economic-cum-political calculus underpinning the Gulf state model. No longer is the task of leaders to shepherd in a viable system for the days after oil, but to sustain the existing rentier system under new fiscal and geopolitical realities. And to that end Gulf rulers have begun to exercise once-unthinkable policy options that could fundamentally alter their relationships with each other, their citizens, and the imported labor upon which their economies depend.