The construction of the Burj Khalifa skyscraper in Dubai, which opened last year and is now the world’s tallest building, emblematizes the United Arab Emirates’ efforts to diversify its economy beyond oil. But even before construction was completed, the global financial crisis cast Dubai's six-year building spree in a new light.
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Dubai was the ambitious but oil-poor state among the seven that make up the UAE federation. It relied heavily on credit and foreign investment in its drive to turn itself into a cosmopolitan center. But the global financial crisis hit it hard, causing its stock market to plummet, jobs to be lost, and foreigners to flee. The capital of Abu Dhabi, the state with 95 percent of the nation's oil reserves, is seen as having weathered the storm better because it remained more conservative in development.
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The nation’s government is authoritarian, and the ruler, Sheikh Khalifa bin Zayed, succeeded his father, who died in 2004 after 33 years at the nation’s helm. But religious tolerance and equality for women have been hallmarks of the nation’s culture under the family’s reign. The stability engendered by those values, as well as low unemployment and high per-capita income, have meant that the UAE has stayed quiet during the unrest that has swept the region--even while protests have turned bloody just over the border in Oman.
The strife appears to be too close for comfort, because the UAE, along with other wealthy oil countries—Saudi Arabia, Qatar, and Kuwait—are reported to be discussing a plan to aid conflict-ridden neighbors Oman and Bahrain. The economic package would be aimed at improving living conditions and employment opportunities in those poorer nations in an effort to head off further unrest.
Klare, the Hampshire College professor, argues that even if oil-state governments survive rebellion, the end result may well be less oil on the market. Instead of spending the hundreds of billions of dollars in new investment that would be needed to maintain and expand oil production, the nations will be putting money and natural resources to work domestically. Building energy-intensive industries like aluminum or petrochemicals could create work, and would mean less oil and gas to send abroad.
"My sense is that no matter what happens in these places, there's not going to be the same abundance in the future as we have had in the past," he says. "They have to generate jobs and the only mechanism they have is their oil."