Gulf Cooperation Council Countries
Six Rich Countries That Own the World's Oil
The Gulf Cooperation Council is an organization of six oil-exporting countries. In 1981, the members created the council to foster economic, scientific, and business cooperation. The GCC's headquarters is in Riyadh, the capital of Saudi Arabia, its largest member.
These Middle East countries share the common faith of Islam and an Arabian culture. They also share an economic interest distinct from their OPEC membership.
These countries seek to diversify their growing economies away from oil.
List of GCC Countries
The GCC consists of six members.
- The Kingdom of Bahrain - Its 1.2 million people enjoy a GDP per capita of $50,700. Its economy grew 3.0 percent in 2016.
- Kuwait - Its 2.8 million residents enjoy the 11th highest standard of living in the world ($71,900 per person). The country holds 6 percent of the world's oil reserves.
- The Sultanate of Oman - Its dwindling oil reserves means it must rely on tourism more to improve the lifestyle of its 3.4 million residents. Its GDP per capita is $46,100.
- Qatar - The second richest country in the world, with a GDP per capita of $125,100 for each of its 2.3 million residents. It has 25 billion barrels of proven oil reserves and 13% of the world's natural gas reserves.
- The Kingdom of Saudi Arabia - The largest of the GCC countries (28.5 million people) has 16 percent of the world's proven oil reserves. Its GDP per capita is $55,300.
- The United Arab Emirates - Its 6 million people enjoy a per capita GDP of $68,100. That's thanks to a diversifying economy that includes Dubai and the world's tallest building, the Burj Dubai Khalifa. Dubai is the second-largest of the seven city-states in the United Arab Emirates. Abu Dhabi is the largest, with proven oil reserves of 92 billion barrels. Dubai only has oil reserves of 4 billion barrels. As a result, it developing itself as a major world financial center and tourism destination. Until the recession, all went well. In 2004, the Dubai government began building Burj Khalifa. It is the world's tallest building. It also backed Dubai World, famous for its real estate developments: human-made islands constructed to look like the world map and a palm tree. On March 23, 2011, Dubai World negotiated restructuring on $25 billion in debt with its 80 creditors. Dubai World stunned the world on November 25, 2009, when it asked its creditors to delay interest payments on $60 billion in debt. Most of Dubai's business investments is in hard-to-sell real estate. The global recession made these assets difficult to lease, thus putting Dubai World in a cash-flow crunch.
GCC Countries Must Educate Their People to Diversify Away from Oil
The World Economic Forum did a study on the future of the GCC members. It recommended diversification away from oil. It encouraged the GCC countries to do a better job of educating their people. That would support more investment in business research and development. Currently, these countries must import foreign workers to fill this need.
Family-based sultanates rule these countries. Their leaders realize that further education could be risky. A more worldly population may want to change the way their country is governed. The GCC leaders want to modernize their economies without creating more uprisings like the Arab Spring. For example, Bahrain had some riots in 2013. Military reprisals and negotiations with the dissidents kept the rulers in power.
Impact on GCC of U.S. Attack on Iran
The report highlights the danger of a United States attack on Iranian nuclear facilities. The possible retaliation by Iran against military bases in the Middle East could spark an all-out regional war. A global recession could follow preventing the GCC leaders from modernizing their countries..
The report also highlights a “best case” scenario.
GCC countries could continue to broker peace in the Middle East while also developing their economies. Good examples are Dubai, UAE, and Qatar.
What Happens if GCC Members Drop the Dollar Peg
The peg fixes the exchange rate of each countries currency to the dollar. When the dollar fell 40 percent between 2002 and 2014, it created an inflation rate of 10 percent in these countries. It forced the price of oil and other commodities to increase. If they removed the peg to the dollar, they would not need to buy so many Treasurys to stabilize their exchange rate. That would cause the dollar to decline further, causing inflation in the United States.
But it would also mean that oil is no longer priced in dollars. That could result in lower oil prices. But nothing will happen quickly as potential implications need to be well-studied.