The hurricane that hit Libya on the night of Sept. 10, 2023, ruptured two dams in the northeast region of Libya, unleashing floods that destroyed Derna, a town of 90,000 residents on the Mediterranean coast.
More than 20,000 people died or went missing in the city, and as many as 40,000 residents fled the city. This is said to be the second most tragic dam disaster in history, after the dam failure in China’s Henan province in 1975.
The construction of the Derna dams began in 1973 by a former Yugoslavian company. The area had been plagued by the flooding of wadis (dry rivers) every time there was heavy rain, and the dams saved the town from trouble. But cracks requiring repair were found on the structures in 1998, and it was only in 2007 that the then Gaddafi regime finally asked a Turkish company to maintain the old dams and build a new one.
The regime collapsed in the “Arab Spring” protest movement of 2011 and the maintenance work was never completed as payments became overdue.
The Libyan government started to build large-scale dams in the 1970s because of the increase in oil revenue that was the main source of income for the country. Since his seizure of power in 1969, Colonel Gaddafi raised oil prices while nationalizing and increasing control over the oil industry. His move resulted in the implementation of the oil strategy by the Organization of the Arab Petroleum Exporting Countries (OAPEC) in 1973, throwing the world into an oil crisis.
Half a century ago, on Oct. 17, Arab oil producing countries announced an oil embargo on Israel’s backers and a 5% reduction in oil output to put pressure on Israel in the Fourth Arab-Israeli War that Arab countries launched two weeks earlier.
This increased oil prices by as much as 67% and caused panic among oil-consuming countries, including Japan. Due to its impact on the world economy, oil-consuming countries drastically changed their policies toward the Middle East, and Japan shifted to a pro-Arab stance out of consideration for the national interest of securing stable oil supplies.
The global impact of the oil crisis was not limited to the oil policies of developed countries. Professor Randall Hansen of the University of Toronto, who recently published a book titled “War, Work, and Want: How the OPEC Oil Crisis Cause Mass Migration and Revolution,” argues that the recent surge in migrants and refugees, the spread of terrorism, political instability in the Middle East, and the Iranian revolution of 1979 all have their origins in the oil crisis.
The oil crisis meant a surge in revenues for oil-producing countries and saved the financial woes of fragile regimes in the Middle East. It provided a stable source of income for nationalist regimes in countries such as Libya and Iraq and allowed them to survive their instabilities in the immediate aftermath of decolonization.
Oil wealth played an important role in providing social infrastructure to their peoples and thus gaining popular support for those revolutionary regimes with no experience in governing.
Supporting authoritarian regimes is not the only negative legacy of oil wealth. It was used as a boon to those fighting proxy wars within the Cold War structure. Pro-American oil producing countries, especially Saudi Arabia, made significant contributions to the U.S. Cold War strategy.
To counter the Soviet invasion of Afghanistan, the United States used Saudi mobilization of Muslims to fight against communism, and its financial power, as well as Pakistan’s military power, to help train Islamic volunteers against the Soviet Union. Professor Hansen estimates that between $350 million and $500 million flowed from Saudi Arabia annually. One result of the money flow was the birth of the international terrorist organization al-Qaida.
In the 1980s, Iraq was able to end the war against Iran undefeated thanks to significant financial support of more than $30 billion from pro-American oil producers such as Saudi Arabia and Kuwait. It also reflected the U.S. intention to contain the anti-American regime of the Islamic republic in Iran.
Al-Qaida and the Saddam Hussein regime in Iraq are the “devils” of oil wealth that troubled the United States most after the Cold War and destabilized the world. The 21st century has so far been a period in which a lot of blood and treasure were spilled to defeat these regimes.
Problems will not be solved once these devils disappear. We must consider the seriousness of the fact that the positive effects of the oil crisis on Middle Eastern society, such as infrastructure development, are ignored and not properly inherited with the eradication of authoritarian regimes in the region.
The authoritarian regime in Iraq was brought down by a war, while those in Libya and Tunisia were removed by the Arab Spring protest movement, and the infrastructure expanded under the socialist policies of those regimes was left to deteriorate over time. Successor governments that advocate “democracy” are surprisingly indifferent to the maintenance and succession of such social infrastructure.
Infrastructure related to human resource development also expanded for a period, benefitting from oil revenues. This is because many nationalist regimes focused on improving educational standards, partly for ideological purposes.
As a result, according to the World Bank, the elementary school enrollment rates in Iraq and Iran, which were less than 60% before the oil crisis, rose to about 80% in the 1980s. In Libya, too, it went from less than 80% in the early 1970s to almost 100% in 10 years.
A quarter of a century ago, Galal Amin, a leftist economist at the American University in Cairo in Egypt, once told me: “The poor in rural Egypt, attracted by the wealth of oil, have worked in the Gulf oil-producing countries, many as migrant laborers, and have improved their living standards. The oil crisis and the resulting market economy contributed to the relief of the poor that could not be realized by Nasser’s socialism.”
The literacy rates in the Arab world stagnated again in the 21st century, hovering around 60 to 70%. This would mean that after losing their resources, the authoritarian nationalist regimes were no longer able to appease their people.
The enormous middle class that was nurtured by the high economic growth of the 1970s and the government-led policies were lost, and society itself became polarized. It can be said that this led to the Arab Spring.
In the 1970s and 1980s, developed countries including Japan supported the social and industrial infrastructure of the Middle East by receiving the return of oil wealth. After the oil crisis, in the late 1970s, nearly half of the construction projects Japan received from abroad came from Middle Eastern countries.
Even in non-oil-producing countries, Japanese technology in the form of yen loans spread into the Middle East. Even half a century later, elder people in the Middle East still retain the memory of Japanese companies that supported their countries’ development and high growth after the oil crisis, while their states were unable to function, and infrastructure collapsed due to conflicts and disasters.
Half a century later, the oil crisis seems to have sown only negative seeds. In this context, one has to wonder how long Japan will remain etched in the positive history of large-scale development and high growth in the Middle East.