Dubai: Tip of the iceberg, a sign of things to come! Or, Islamic oil producers, their contribution to the next phase of global economic meltdown.

28 Nov

Dubai’s failure to live up to its financial obligation is not a surprise; Islamic oil producing states continue to spend money from present and projected oil revenues, never a healthy situation to be in.

Dubai, as are the other UAE states, built a show-place to the world, but they have done so on credit based on future income; the situation seems to have caught up, and the city-state now must postpone or simply stop from meeting its financial obligations..

The “glitz,” and Western style skylines of the Gulf States is amazing, but it is, as the case is often with Arabs, great form with very little, if any substance.

Dubai, a nomad country in a desert, had nothing to build an economy on, but oil. When oil income started tp grow beyond anyone’s expectations, this city-state decided that it must become a world-class commercial center. With oil money they built beautiful buildings, an island, a world-class golf course, automobile racing circuit, and other impressive Western style facilities.

While building all these show places, the government of Dubai did not build an income producing infra-structure, and remained dependant on oil revenues. Even their oil revenues did not follow the logical path of selling as much value added with the oil, as one possibly can add.

Technological establishment within Dubai, and the other Islamic oil producing states, are not built and manned by the Arabs themselves, they are rather imported “turn-key” operations. More often than not, these operations include staff, equipment, and even supply required for day-to-day functioning. When contracting for a hospital, for example, these oil producers generally acquire the facility with full equipment, and the personnel to operate it. Little, or near no local developed technical, or operating personnel is trained.

By virtue of their small population, and oil richness, citizens of Dubai, the other UAE countries, and the Saudis, are wealthy people. The oil producers use Palestinians for manual labor, American and Europeans fort skilled work, and simply live a life of leisure.

As is now happening in Dubai, however, and as one can expect from most, if not all, the oil producing Arab states, their rate of expenditure overtook the level of income, and debt payments are either postponed, or terminated, leaving many global financial institutions in trouble.

This is the beginning. In the next year, or two, one should anticipate numerous forfeitures by Arab oil producing countries that will send shock-waves throughout the industrial world. President Obama overtures towards the Islamic world are likely to prove wasted effort coupled with lost opportunity.

The small economic gains made by the Obama Administration are about to be overturned by those Muslims that Obama was hoping would help him reduce the international oil crunch and reduce the global recession!

The crunch on the oil produces has a great deal to do with leverage. Since their rate of expenditure will not allow them to slow oil production, and the competitive market place is not conducive to price increases, which may simply force increased production, it will then cause price reduction, and another production increase, a vicious-circle.

There will likely be forfeitures by oil producing states that will amount to many billions, likely in the trillion dollars to Western financial institutions. Should such situation develop, as it is likely to, neither the United States, nor any of its allies will be in a position to bail out such institution, and a more severe economic meltdown should be expected.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: