The Middle East and the International Economy

During the 1970s the Middle East has experienced a trade boom and has become the world’s fastest growing import market. The recent world recession, which was largely caused by the oil price rises of 1974, ironically only marginally affected the Middle East, which was the one region of the world where business was brisker than ever before. Of course, to a large extent it was in fact the rise in oil revenues that created the boom conditions, and this more than offset the reductions in the volume of oil output caused by the recession in demand in the industrialised world. Despite the tremendous increase in revenue, it is perhaps strange that trade has nevertheless grown so much, given the desire of most of the countries involved to become less dependent on economic links with the outside world and given the widespread encouragement of diversification through import substitution. This trade growth was not surprising, however, since, with the vast increase in oil revenues, the recipient countries were naturally keen to embark upon ambitious development plans. These inevitably entailed a huge increase in imports because domestic substitutes were not available.1 Most governments believed that this strategy would be preferable in the long term, because eventually, as domestic production capacity increased, dependence would lessen.