MEED 1979-1989 infographic

MEED 1979-1989 infographic

MEED 1979-1989 infographic

Flush with oil revenues, the region seemed set for a golden period as the 1980s dawned. But the conflicts that would define the decade were soon evident.

In the final week of 1979, the USSR invaded Afghanistan. The malaise spread as the revolutionary government in Iran struggled to consolidate its authority. In early 1980, violent clashes started with Iraq.

Reviled following the seizure of the US embassy in 1979, Iran looked vulnerable. On 22 September, Iraq’s President Saddam Hussein ordered an invasion of the Iranian oil province of Khuzestan. It quickly became clear the war would be a long and damaging affair.

Drawn together by the Iran challenge, the six states of the Arabian Peninsula formed the GCC in 1981.

Oil prices reached record levels in the winter of 1980 despite Saudi Arabia pushing its production to capacity. This saw a huge rise in export earnings.

10 April 1963

Egypt, Syria and Iraq agree to form United Arab Republic

30 April 1976

UAE’s first oil refinery opened by President Sheikh Zayed

9 April 1988

Hijacked Kuwait plane lands in Mashhad with three members of Kuwait’s ruling family on board

10 April 1998

Abu Dhabi receives bids for Taweelah A2, the UAE’s first independent water and power project

9 April 1999

Investors await approval of new law creating UAE stock exchange

9 April 2003

US troops symbolically topple giant statue of Iraq’s deposed president Saddam Hussein in Baghdad

The region faced a new blow in 1982, when Israel invaded Lebanon. Beirut was occupied, the Palestine Liberation Organization (PLO) was expelled and Lebanon disintegrated.

Nevertheless, economic development across the region reached a crescendo. New industries founded in the 1970s entered production. Defence spending started to quicken.

Once it became clear Opec’s aggressive price policy was resulting in a loss of market share, output was cut to support prices, leaving exporters with huge fiscal deficits.

In the summer of 1985, Saudi Arabia, by then producing less oil than the UK, was facing a current account deficit of more than $20bn. In 1985, Opec abandoned its price defence strategy to chase market share and by mid-1986, oil prices had fallen to below $10 a barrel.

Political events compounded the region’s economic problems. South Yemen erupted into conflict in early 1986. The same year, Iran captured the Fao Peninsula. US bombers attacked Tripoli. Kuwait’s assembly was suspended and militias battled for control of Lebanon.

In 1988, the Soviets announced they would withdraw from Afghanistan; Iran accepted a UN-sponsored ceasefire; the PLO declared it was ready to come to terms with Israel; and peace in Lebanon was heralded by the 1989 Taif agreement.

But this was a false dawn. By late 1989, it was evident Iraq was seeking drastic solutions to its economic problems.