I have just spent about a month in Saudi Arabia teaching at Princess Nourah Bint Abdulrahman University. This is the first women’s university in Riyadh, founded only 8 years ago. I cannot help thinking about the profound changes this society is going through. KSA (Kingdom of Saudi Arabia) is the world’s larger producer and exporter of oil, and while everyone would think that the dropping oil prices, along with the international market slump, would bring the country to the edge of collapse, perceptions here seem to be a little different. The fact that this big shift in oil prices will probably have important ramifications for the country is beyond any doubt, especially to a Westerner’s mind, but as a recent article from the Economist, “Who’s afraid of cheap oil” points out, oil-dependent economies like Saudi Arabia might actually benefit from the tremendous drop in oil prices (75% in 18 months).
Until recently the private sector in KSA has been largely dominated by expatriate workers and still is to a large extent. The “Saudization process” the government has put forward during the latest years, has really started gaining attention, and is expected according to my personal point of view, to provide positive outcomes, before this new reality related to the stocks of oil and gas resources and their markets, begins in earnest. The “Nitaqat” system, as it is called in Arabic, has taken effect since 2011 and includes a number of requirements Saudi companies need to follow for increasing the number of Saudi nationals in their workforce. Efforts for diversifying Saudi economy away from the lucrative but volatile oil sector have focused on other non-oil private sector services and productive activities. OECD together the International Labor Office in their policy briefings from G20’s 2011 Meeting of Labour and Employment Ministers in Paris have highlighted this diversification of the country’s economy and have recognized the effort being put in addressing the structural imbalances in the Saudi labor market. The Fossil Fuel Divestment movement that has taken on quite large dimensions around the world and among different sectors (educational institutions, local governments, NGOs etc), might hardly ever actually affect energy producers (and probably consumers as well) in the Middle East countries, even though: a) their potential for renewable energy is relatively large (especially if ones looks at the success of solar power projects in keeping costs of electricity down) and b) some recent market expectations indicating that the price of crude oil per barrel might not go more than $60 a barrel for the next decade.
A journey from the south to the north
For those of you who have been following my posts in https://mereconomics.com/ you might have realized that my research interest centers around the Arctic, but the stark differences between the two societal environments (Middle East and northern – Arctic) is what piques my interest the most, at least in terms of natural resources use and economic/societal implications and perceptions within society itself, for a series of reasons I am explaining further below.
The oil story for both the Middle East and the Arctic begins almost a century ago. The first Arctic oil deposits were discovered in early 1920s on Mackenzie River at Norman Wells, Northwest Territories (145 kilometers south of the Arctic Circle), and more than a decade afterwards (1938) Saudi Arabia struck oil for the first time in the Dammam Dome near the Arabian Gulf, in the Eastern Province (see Dhahran area). Needless to say that the Saudi oil bonanza of the coming years completely transformed the geophysical and human environment of the country, turning it from a nomadic inhospitable desert, hostile to permanent habitation (due to the limited available water sources), into a wealthy, strategically and globally politically significant new kingdom, that today possesses almost 25% of word’s oil reserves. Previously lacking readily exploitable resources, Saudi Arabia’s environment hampered travel inside the countrydiscouraged potential invaders, and kept people isolated in clusters. Limited agriculture and pilgrimage revenues were the only activities that held the economy together until the success with oil. Efforts for Arctic oil on the other hand have had more mixed success, especially recently, despite the scientific expectations and the large investments that have taken place there. Instead we could say that they are more associated in peoples’ minds with environmental disasters rather than economic boosts. Following late 50s/early 60s BP’s attempts in the North Slope region of Alaska, and Dome Petroleum’s attempts on Melville Island (Canadian Arctic), Russia in 1962 makes the first major discovery near Tazovskoye (west Siberia). Almost 2 decades after the announcement by the US for a large oil reserve in Prudhoe Bay (Alaska’s North Slope, 1968), the disaster of Exxon Valdez in Prince William Sound (1989) led to a black page in history of Arctic oil, still a grim reminder for most of us working in Arctic marine research fields. On top of that, 5 years later the world experienced the 6th largest oil spill from a pipeline leak and dike failure spill into the Kolva River in Russia. In recent years, scientists confirmed more confidently than ever the existence of oil in the Barents, Chukchi and Beaufort Sea, Big investments were made, and now we see big companies such as Shell abandoning large scale projects in the name of high risks and costs, and big Arctic players such as the US, cancelling oil leases. Yet the uncertainty remains and there are strong contradictory voices on whether the development and focus on underground resources can actually give a boost to local economies that really need it or whether it is more likely to imperil the fragile Arctic ecosystems and their natural services.
Gaging the social and environmental vulnerabilities and concerns related to exhaustible resource extraction in a country like KSA sounds much more challenging (to me and I believe to most of us) than those of the northern communities of Canada or Alaska. The political, cultural and religious environment in the former seems to be intensively hindering free flow of information and data as well as freedom of expression. To the best of my knowledge, environmental concerns related to oil extraction in the Middle East are limited to few voices speaking about coastal pollution from oil spills (mainly from offshore oil rigs), wastewater from oil production dumped into the Gulf and some few atmospheric pollution concerns. The lack of regulatory bodies for enforcing sound environmental regulations and the existing economic development patterns coupled with the fact that KSA’s economy is heavily dependent on oil extraction portrays the Gulf as a place where environmental concerns are hard to hear, especially from local communities, even though they might exist.
And at this point I’d like to pose the question: Would you possibly expect a starkly different perception of oil extraction-environmental related concerns from residents around the Arctic? I personally would, but it took me by great surprise to find out, while recently reading an Arctic Public Opinion Survey, that only 1 in 10 Alaskan residents brought up the issue of oil and gas exploitation, among the most pressing issues of the Arctic region and only 3% of northern Canadian residents, which is much lower than I expected, taking into account the scale of the pasts’ environmental disasters and the risks associated to exploration activities in the Arctic that are nowadays widely recognised. On the other side of the Atlantic, the Greenlandic prospect of oil and gas exploration has taken much larger dimensions in public discourse, since the self-government of Greenland, mainly representing interests of indigenous populations, has been trying to build up a positive stature towards both oil and mineral extraction as a means of achieving economic independence from Denmark. As A. Østhagen successfully point outs in his article on Greenlandic dimensions on oil and gas, the self-government probably perceives resource development to constitute the fastest way to economic independence. That makes me ponder on what the trajectory of Arctic economic development might look like in few years from now as well as whether the nascent geopolitical transformation of the Arctic can confer advantages or disadvantages to its people and the rest of the world. Having had the chance in 2015 to participate in a number of Arctic conferences around the world and having been fortunate to meet with plenty of senior Arctic researchers as well as northern residents, I have to admit I often came across the “Arctic belonging to its people” motto (meaning the Inuit/indigenous populations), but since managing Arctic resources feels more of a shared responsibility to me, I’d rather go for “What happens in the Arctic doesn’t stay in the Arctic”.
Image credits: Melina Kourantidou (desert and Svalbard) and rigjobsonline.com (oil rig)
Some interesting observations here, especially about the perceived differences between the North and the South, and how they are perhaps less than we thought. My first hunch why they are not so different is that Arctic communities are as much dependent on exhaustable resources as the Saoudis are, albeit perhaps a bit broader than just oil. As far as I understand there are quite a few large mining sites for among others gold and diamonds in Alaska, Canada and Greenland. Apart from subsistence hunting and tourism, it seems to me that these resources remain the largest source of income, either directly or indirectly because of the required infrastructure. You don’t want to bite the hand that feeds you.
Just as a question: why do you think the “Saoudization” of the economy in KSA is beneficial? I do not mean the diversification, which I think is fine (after all I come from the country that has the dubious honour of being the origin of the name “Dutch disease”), but why the quotum of Saoudis? Would it not be better to hire the best (wo)man for the job, independent of whether that person is Saoudi? I would personally expect more from policies of better education and perhaps freedom of business (the latter would presumably let the expats spend more of their dollars in the KSA, rather than abroad).
Indeed the Arctic region is believed to contain a considerable wealth of various resources (besides oil, gas, gold and diamonds) such as nickel, copper coal, iron, uranium, tungsten, molybdenum, silver, phosphate and zinc, with major mining projects of that kind taking place in the Russian Arctic, which I haven’t referred to in this article. Despite the fact that it often feels hard to reach safe conclusions about how locals perceive development in remote (in the north) and politically restricted environments (in the east and the south), it seems to me that at least in the first case the deficits and the relatively high unemployment rates are creating hopes and stimulating people to put more effort in boosting up those oil and mining industries. Despite the high upfront capital costs of those projects and the risks they include for the environment, non-Arctic states are lining up for investing in such projects and thus ensuring their future share of the pie. Let me note at this point that being an expat myself in DK, I feel that labor migration that has lately been growing rapidly, has significantly benefited host countries and thus I can only see benefits in relaxing immigration restrictions and allowing free movement for workers across countries. Let me also note though that in places like Greenland where Greenlandic workforce is being prioritized (see for example Mineral Resources Act of 2010), allowing inflow of foreign workers has generated quite some public debate, since it is being seen as a threat for societal security, at times where Arctic scientists within the social sciences have established definitive links between unemployment rates and suicide rates in Greenland. No doubt of course that Greenland lacks skilled mining workforce, but the concerns in both KSA and Greenland lie in the fact that foreign workers tend to take unpopular jobs, often enough at a relatively high cost. The Saudisation process has given the signal of striving towards providing “upskilling” for Saudis, taking into account the unemployment rates that have been a thorny issue there. Among the worries that the loss of expatriate expertise might hurt the economy, I can see more opportunities opening up for female and young labor force together with new and better educational opportunities being offered to locals, other than the oil sector, that may eventually lead to political vigilance and awareness, which is something very much needed in the rapidly changing Saudi society, according to my personal point of view and my short experience there.
Reblogged this on mkour.