Business communities in the Gulf monarchies have a long history of political influence. Prior to the rise of oil as the dominant economic driver (which across the Arabian Peninsula took place gradually from the 1930s, first in Bahrain and Kuwait, to the 1970s in Oman), domestic stability was underwritten by an arrangement that linked rulers with a number of prominent tribal leaders and local merchant families. The latter in particular helped meet the rulers’ financial needs, and in return received political influence and protection for their economic interests. Thus, the merchants, who controlled the two main economic sectors (pearling and trade), enjoyed not only personal proximity to the rulers – including through marriage alliances – but also the protection this closeness brought them. For the ruling families, the business elites were indispensable to the maintenance of the political status quo: not only did they provide liquid assets for each ruler, in the form of loans, but the ruler was able to deduct from these same business interests the taxes and custom duties that represented the major sources of his revenue. This situation further increased the merchants’ political influence, their involvement in the day-to-day business of state (through the granting of decision-making positions), and, ultimately, their critical role in ensuring the ruler’s political survival. In the numerous instances of succession conflicts and quarrels within ruling families in the Gulf monarchies, both the ruler and any challengers to the throne were driven to forge alliances with business elites in order to assert their own authority within the ruling family, which in turn underpinned the influence of the business classes. This mutually beneficial alliance between merchants and rulers was disrupted by the sudden material self-sufficiency of the rulers after oil was discovered across the Peninsula and oil exports began. From this point, the state monopoly on managing expenditure and development allowed the creation of a welfare state which became the new cornerstone of the ruling families’ political legitimacy.
With the discovery and exploitation of oil reserves came the consolidation of the economic position the business elites occupied. The rulers assured them of privileged access to the oil windfall through public contracts in sectors dealing with infrastructure and urban planning (roads, public buildings, etc.), as well as by means of tough laws restricting the rights of foreign investors, so as to protect the national market. Through the kafil (sponsor) system, any foreign individual or company wishing to work in a GCC country has been obliged to associate with a local partner, who receives regular payment in return. As explained by Mohamed al-Rumaihi, in the case of Bahrain: ‘the granting of import licences and the setting up of agencies were rigidly controlled by the Government for the benefit of the big merchants. Any newcomer wishing to enter a particular field faced a monopoly situation which was almost impossible to break.’1 The effect was that wealth distributed to the population by the state in the form of salaries, social allowances or price subsidies was recouped by the long-serving allies of the rulers (the business elites in particular) through ownership of companies winning public contracts. This compromise – abdication of political influence in return for protection of business monopolistic positions – actually allowed the business elites to strengthen their economic and social pre-eminence by the conversion of trade dynasties to rent wealth.
There were variations in this general pattern from country to country. While in Kuwait and Oman the rulers promised to keep royal family members away from business activity, in Qatar – where the merchant community was weaker and smaller – the ruler allowed his relatives into the business elites’ economic territory. In the post-independence UAE, the ruling families of Abu Dhabi and Dubai were critically reliant on business expertise to build the new state. This favoured the commercial elites’ integration in political structures there, and further enhanced their proximity to the Al Nahyan and Al Maktoum dynasties – and thus their own stake in the preservation of the authoritarian order. In Bahrain and Saudi Arabia, the business elites kept a firm grip over the economy until the mid-1970s, meanwhile using their personal proximity to senior members of the ruling families to act as informal advisers and thus ensure their interests and priorities were taken into account.
1 Al-Rumaihi, M.G. (1976), Bahrain: Social and Political Change since the First World War, London: Bowker, pp. 150–51.