Economic Boundaries

Economic Boundaries • 1900-1949

Introduction: Discovering a Wealth of Resources

Economic environment in the Middle East of the early twentieth century remained relatively primitive. Due to its geographic location, the Ottoman Empire served as the crossroads of trade and culture between Europe and Asia. Despite this fact, however, the region failed to follow the model of industrialization that its western counterparts presented. Much of the search for natural resources in the early twentieth century was conducted by teams of explorers from foreign nations such as France and Great Britain. It was only after Middle Eastern nations began to recognize petroleum's wealth-producing potential that they began attempts to nationalize their own oil resources.

Our Timeline traces the discovery of oil in the Middle East and is perhaps one of the best resources for showing students the evolution of the industry. The readings below give a general background for economic resources in the area; the Economic Boundaries readings for the period 1950-2003 focus on the issues surrounding the oil industry at a greater depth. The Framing Questions will help guide analysis of the economic developments in this era.

Framing Questions:
• How much of the original drive to harness Middle Eastern natural resources came from within the region? How much was being driven by foreign nations?
• In addition to oil, what other types of economic resources did early Middle Eastern nations possess?
• As you look towards the later half of the twentieth century, pay attention to how the geographic location of oil resources contributed to border disputes among nations. What role did the uneven distribution of oil play in contributing to regional conflicts? Describe the relationship between oil-rich and oil-poor countries.

Economic Boundaries • 1900-1949

Readings

Energy Information Agency- Country Analysis Briefs

These country analysis briefs provide an overview of the energy resources and interests in each of the nations in the Middle East and Northern Africa. The information is helpful in mapping out the resources of each of the countries in the region. Because the guide questions focus on comparing these reports, these resources may be best accessed online.

Reading Guide Questions
• Using this site and the Timeline, trace the discovery of oil throughout the Middle East. Where was oil first discovered, and which nations were among the first to export oil?
• Choose two or three of the available nation profiles and summarize the energy resources in those countries. Which of the nations you chose has the most energy resources? Which of the nations you chose has the least energy resources?
• Choose one additional nation and determine what percentage of its national revenues is derived from oil production. What can you determine from this number?

Saudi ARAMCO Homepage
This site provides excellent multi-media resources for studying the evolution of the Saudi oil industry. The "Energy to the World" Flash presentation allows students to study a number of aspects of the oil industry, from the natural origins of petroleum to drilling, refining, and transportation of processed oil. The site discusses the many products in addition to gasoline produced from Middle Eastern oil resources. The site helps students understand the technical processes behind the Middle East's largest industry. It also illustrates the evolution of the oil refining process. This site is best accessed online.

Reading Guide Questions
• What are some of the historic uses for petroleum? The dependency on oil for automobiles and heating is a more recent phenomenon, but oil has been in use for many years. Explain some of these uses.
• There are also a number of current uses for petroleum. Name four current uses for petroleum, and try not to include automobiles in your list.
• The petroleum industry depends on adequate transportation resources for shipping petroleum exports. What types of resources did the Middle East have to develop before they were able to export oil? Why do you suppose these developments did not occur until later in the twentieth century?

Middle East Agriculture Resources

Despite the popular belief that oil rules the Middle Eastern Economy, agricultural production plays a prevailing role in the region as well. Though these figures are from the modern era, the agricultural history of the region traces back to the earliest civilizations of the fertile crescent. These pages provide helpful information on the agricultural industry in some Middle Eastern countries. The reading questions are directed for online use of this site.

Reading Guide Questions
• What are the main crops in Iran, Iraq, Syria, and Turkey? Choose one of these four countries and describe where each of that nation's crops is typically grown.
• According to the crop calendars of each nation, which months have the highest number of crops in harvest season? Which crop has the longest harvest season?

Economic Boundaries • 1950-Present

Introduction: Harnessing the Wealth of Resources

The formal creation of Aramco in 1948 and the nationalization of the Iranian oil industry in 1951 were among the first major advancements in the control of the oil industry. Though simple when compared to the later actions of OPEC in regulating oil prices, these early assertions of control over energy resources symbolized an advancement among the economies of Middle Eastern nations. Negotiations between the Middle East and Western countries over energy resources have been at the forefront of international relations over the past half-century. Oil prices have both influenced and reflected international crises, and the desire among Western and Middle Eastern nations to protect their own energy resources have even led some nations to enter into armed conflict. These readings trace some of the major developments in the international oil industry. By examining attempts to control the world's oil supply, as well as the possibility for alternative energy resources, students will come to understand the overlap between political and economic boundaries in this vital region. The Framing Questions help trace this overlap, while the Reading Guide Questions target a more detailed examination of specific developments in the Middle East economy.

Framing Questions
• Examine Saudi Arabia's increasing dominance of middle eastern oil resources.
• How have smaller nations such as Yemen harnessed their economic resources to bolster their international influence? What role have international non-government organizations played in shaping this influence?
• What role did economic incentives play in enhancing Western involvement in this region? How did international conflicts affect the price of oil throughout this time period?
• In what ways have economic incentives shaped political interaction between nations in this region?

Economic Boundaries • 1950-Present

Readings

Addicted to Oil- The Atlantic Monthly Online

This online article presents an interview with Robert Baer, a former CIA agent who discusses the perils of our dependence on Saudi Arabia and its precious oil supply. The advantages and disadvantages of the United States' dependence on Saudi oil has long been a point of contention among political and economic analysts. This interview focuses on Mr. Baer's analysis of the instability of the Saudi Arabian oil industry, and the dangers the nation may present in the coming decades. The interview is helpful for illustrating the intrinsic link between economics and politics in many of the oil-rich middle eastern nations. This article has a printer friendly format in addition to the original link.

Reading Guide Questions
• What does the introduction of this article explain about the history of the U.S.-Saudi oil relationship? What predictions might you be able to make about the danger of such a close relationship?
• Try to summarize the tensions at play within the U.S.- Saudi relationship. Make a list of the disagreements discussed in the interview.
• Challenge question- From reading the interview, what types of changes can you predict for the future of U.S. economic ties with Saudi Arabia? Give support for your answer.

OPEC- Organization of Petroleum Exporting Countries-
OPEC general information brochure

The OPEC website has lots of useful information for students to explore and learn about the Oil Export industry. The site has information on member countries, as well as news releases and reports on OPEC's meetings and actions. There is even a news-ticker with the most up-to-date information on the oil industry. The site could be used for an in-class web-exploration, or as a detailed resource for research.

If teachers would prefer hard-copies of the information on the site, the acrobat file provided is a 25 page guide book for OPEC, with general information on the organization and its member countries.

Reading Guide Questions
• What are OPEC's principle aims? What is the organization's goal in terms of maintaining economic stability?
• Look at the list of member nations. What do you notice about the locations of these nations? Are these all Middle Eastern countries? Which are not?
• Compare the Middle Eastern nations in OPEC. Are they alike in size and political strength? How might oil contribute to the strength of the smaller nations?

Oil Prices- an Historical Analysis

This article is a report of WRTG Economics, an organization that specializes in economic analysis and forecasting for energy producers and consumers. This specific analysis examines oil prices over the past fifty years. The site has extremely useful graphs that illustrate the relationship between oil prices and world political events. The graphs provide wonderful visual conceptualizations of the various factors that influence world oil prices, both in and outside of the Middle East. The site may be best accessed online to allow comparison between graphs.

Reading Guide Questions
• Examine the "Crude Oil Prices 1947-1998 (in 1996 dollars)" graph. What can you determine about the relationship between oil prices and international conflicts, according to this graph?
• Examine the "Middle East, OPEC, & Oil prices" graph. What do you notice about the price of oil in 1996 dollars as OPEC incorporates additional countries? Why do you think this might be the case?
• Compare oil prices between 1972-1982 to oil prices between 1981-1998. Which time period seems the least stable? Which year would be the best year to turn 16 years old in the United States and have to buy your first tank of gasoline? Which year would be the worst to have turned 16?
• Extension question- while the United States enjoys periods in which oil prices are relatively low, consider the impact of falling oil prices on the economies of Middle Eastern nations. Why might falling oil prices actually hurt citizens there?

Middle East Business Daily

This site has daily analyses of Middle Eastern economic developments and the repercussions of world economic events. The site presents economic developments through the lens of Middle Eastern nations, making it a valuable resource for comparing the economics of the region with students' native countries. The site also provides a good resource for up-to-date information on business and economic stories. The reading guide questions are directed towards online use of this resource.

Reading Guide Questions
• Web Activity- Compare the stories included on the site's homepage with the headlines on one of the following sources:
New York Times Business headlines-
The Economist: Finance & Economics headlines
BBC's World Edition Business Headlines

Do you find any of the same stories in the site you chose and the Middle East Business Daily site? Compare the two articles, if they are both available. How does the Middle East article differ, if at all, from the international source?
• The term "globalization" is often used to describe the spread of economic influence of one nation to other countries across the globe. Which headlines reflect the spread of global economic influence of leading Western nations into the Middle East?
• There is a common misconception that oil is the only economic resource in the Middle East. What other economic resources do the headlines discuss, if any? How important do these resources or industries appear to be to the Middle East economy?

The Power of Oil- Time Magazine for Kids Article

This student-accessible story provides details of some of the current debates surrounding the oil industry. From issues of pollution to the control of exports, this story attempts to give an overview of each of current oil developments, particularly U.S. dependence on oil. The story also discusses alternatives to fossil fuel energy sources.

Reading Guide Questions
• Which four nations are currently in possession of 70% of the world's oil reserves? What political power is included with such a control?
• What alternatives to fossil fuel energy are currently in use in the Unites States?
• Extension question: Make a prediction about the future of U.S. energy use. What do you think automobiles will use for power in 10 years? How about in 25 years? What other energy changes do you predict? Give reasonable support for your predictions.

Additional Links

Students should be encouraged to seek additional information on the Middle Eastern economy to help supplement their current understanding of these complex economic issues. These resources provide additional links for that purpose.

25th Anniversary of the 1973 Oil Embargo

This site examines 25 years of oil prices, as well as provides explanations of the 1973 oil crisis itself. A pivotal moment in the evolution of oil prices and energy policy, the 1973 embargo had numerous international implications. This site traces the impact on 30 different areas of U.S. energy policy. An Energy Information Administration project, this site illustrates how the United States has responded to the crisis over the past quarter century. The site can be accessed online, and also has downloadable word and powerpoint files for classroom use.

Arab Countries Trade Statistics

This site provides statistical data on the imports and exports of each of the Arab countries. It is helpful for demonstrating trade participation within the Arab world.

The Arab Monetary Fund (AMF)

An International Monetary Fund organization, the AMF provides seeks financial independence for Arab nations by assisting member nations in various aspects of financial stability and monetary policies. This brief description helps demonstrate the ways in which Arab nations work together to further the economic well-being of the region.

World Economic Sanctions on Oil-Producing Countries -

There have been a number of Economic sanctions imposed on oil-producing nations over the past half-century. This Energy Information Agency site gives a brief analysis of the sanctions still in place on nations such as Iran, Iraq, Sudan, Lybia, and Syria.

Country Profiles

The Country Profiles page of this unit provides links to additional information on each nation in the region from both the US State Department and the US Central Intelligence Agency.