The making of the modern Middle East

30 June 2007

From the Suez Crisis to the US invasion of Iraq, the region has had its share of political traumas, but the past 50 years have also seen record economic growth and independence.

The Middle East Economic Digest (MEED) was born in troubled times. Its first issue appeared as the region was recovering from the 1956 war in Egypt. The Suez Canal was still unnavigable and there were fears of oil shortages in Europe. Yet hope was in sight. Setting its editorial tone for the next 50 years, MEED argued that common business interests would trump political ill-will between the Arab world and the West.

“With oil fl owing more freely, with the end of the Suez blockade in sight, the signs all point to an upsurge of development programmes throughout the Middle East, allowing for mutually beneficial trading relations between all countries,” wrote its founder, Elizabeth Collard.

Certainly, there were causes for optimism. The brand of Arab nationalism championed by President Nasser of Egypt gave a new sense of purpose to countries such as Tunisia, Morocco and Sudan as they enjoyed the first flush of independence in 1957. Algeria, the Gulf states and the British colony of Aden would soon follow. Many countries began to enjoy strong economic growth for the first time, driven by steadily rising oil export income and vigorous industrial programmes. Basic infrastructure such as roads, airports and the first desalination plants began to appear in the Gulf. The formation of Opec in September 1960 confirmed the new economic status of the region.

But political unrest was ever present. New ideologies and power play between the US and the USSR - as well as declining colonial powers such as the UK - did not augur well for stability. The bloody Iraqi revolution of 1958, and the republican rebellion and counterrevolution in Yemen in 1962, were traumatic events that would haunt those countries for many years.

Nationalist policies were also storing up problems. In the early 1960s, the Shah of Iran launched the White Revolution, a brave but ill-considered reform programme that pitched his government against the country’s Shia Muslim leadership. The rise of secular, nationalist regimes in the Arab world was mirrored by the rise of political Islam. Many of these new groups would become the unofficial opposition to regional governments in the decades that followed.

But pan-Arab nationalism received its hardest blow from Israel’s decisive victory in the June war of 1967, when the Jewish state seized the Sinai, the West Bank and the Golan Heights. The conflict created thousands of Palestinian refugees. It was also a decisive blow to the martial pride of the Arab states and swayed popular feeling in the Arab world in favour of radical groups such as Yasser Arafat’s Palestine Liberation Organisation.

Nasser, broken by the defeat of 1967, died in September 1970 as Palestinians and the Jordanian army fought for control of Amman. Power transferred smoothly to Anwar Sadat, but elsewhere the pattern of military coups seemed ingrained. The Baath party took control of Iraq in 1968, with a young Saddam Hussein as a leading light. The following year, a group of officers led by Colonel Gaddafi seized power in Libya. Asad became president of Syria in 1970 and Sultan Qaboos of Oman displaced his father in the same year.

Tough politics was accompanied by economic action, however. Oil independence became a regional priority. Libya bargained a higher price for its crude and Baghdad nationalised its oil industry in 1972. Tehran launched a campaign for higher prices. By the summer of 1973, pressure was mounting for a significant oil price hike to help finance development programmes across the region.

The issue came to a head in the October war with Israel, a military stalemate for Egypt but a notional victory for the Arab world. Regional producers imposed an oil embargo on the West and Opec ratcheted up the pressure with an oil price hike. The Arab states had finally found global influence. Buoyed by their new income, Gulf states began to nationalise in earnest. Massive infrastructure projects such as the twin Saudi cities of Jubail and Yanbu sprang up across the region.

There was one brief glimmer of hope for Middle East peace. In 1977, President Sadat made a bold visit to Israel, violating the Arab embargo to discuss a possible lasting, regional settlement. Hope quickly turned to disillusionment. Cairo signed a peace treaty the following year and was promptly ostracised by the Arab world. Disillusionment turned to despair as Israel, now free from the threat of Egyptian intervention, invaded southern Lebanon.

On the other side of the region, it was becoming clear that the Shah of Iran was in trouble, too. Vast street protests and domestic unrest culminated in the ruler’s departure into exile and the arrival in Tehran of Ayatollah Khomeini in 1979. On 11 February, Iran became an Islamic republic.

Other events that year would cast a long shadow over the decade that followed. In July 1979, Saddam Hussein became president of the Iraqi republic and within months ordered an invasion of the Iranian oilrich province of Khuzestan. Late in December, the Soviet Union invaded Afghanistan. Millions of soldiers and civilians would die in the two long wars that ensued.

By the middle of the decade, economic problems began to compound the political turmoil in the region. Despite an initial surge in oil revenues, Opec’s aggressive pricing policy was losing it a share of the global market. Gulf states were regularly racking up sizeable budget deficits. Eventually, in 1985, Opec abandoned its strategy. Oil prices promptly fell below $10 a barrel, triggering a regional recession. The end of the decade brought some respite. In 1988, the Soviets announced their withdrawal from Afghanistan and Iran accepted a UN-sponsored ceasefire plan.

Yet one figure would buck the trend. On the night of 1 August 1990, Iraqi tanks crossed the Kuwaiti border. It was the culmination of a year of bluster and violent threats from Saddam Hussein. The US-led liberation that followed was brief and contained. But after the 1991 Gulf war, it became clear that the Middle East had undergone a profound personality change. Communism was dead and Arab nationalism was in decline. Many states were looking for a new direction.

By now the Gulf states were focusing on economic reform, squeezed by a decade of low oil prices. Many countries in the region adopted IMF prescriptions and more closely tailored reform programmes. The growing sense of political security helped build investor confidence in the GCC - confidence that would be repaid when oil prices started to lift again in 1998.

Perhaps the biggest missed opportunity of the 1990s was the Israel-Palestine peace process. A summit in Madrid in October 1991 bore fruit two years later when Israel and the PLO signed a joint declaration of principles. In 1994, Jordan signed a peace treaty with Israel and hopes were high that Lebanon and Syria might follow suit. But it soon became clear that neither Israel nor the Palestinians were prepared to make the compromises embodied in the Oslo accords. Washington grew disinterested and the peace process eventually broke down. The second, Al-Aqsa intifada began in 2000.

Despair at the plight of the Palestinians, the stagnation of once-powerful economies such as Egypt and the growing threat from Islamist movements cast a malaise over the region at the start of the new century, even as oil prices began to lift and a more pragmatic-looking US administration took up the reins of office. The events of 11 September 2001 only gave this grim atmosphere focus. The region watched with resignation, then disbelief, and then mounting anger as the US declared a war on terror and invaded first Afghanistan and then, in May 2003, Iraq. Four years later, some unexpected consequences are apparent. Relieved of its two main enemies, Iran has emerged once again as the US’ favourite bogeyman. Sectarian tensions between Sunni and Shia are no longer dormant.

On its 50th anniversary, MEED is reporting on a region that resembles the Middle East of 1956 in many ways. Conflict still rages on the borders and foreign powers still meddle with impunity. Oil is still a boon and a curse for producer states. And governments are still trying to cope with the demands of growing populations and limited natural resources.

But there are many encouraging differences, too. The rise of the Gulf states, aided by a second oil boom, is the greatest economic story the region has had to tell the outside world in the past 50 years. And the impact of these emerging economies on their neighbours is proof that stability, too, can be exported. Provided Middle East governments learn the lessons of the past five decades and concentrate on sustainable growth, there will continue to be hope in the years to come.

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications