Israel-Iran War A Wake-Up Call For Kuwait's Oil-Dependent Economy

Arab Times

5 days ago

KUWAIT CITY, June 24: The United States of America has entered the Israeli-Iranian war, raising tensions in the region, creating a state of ambiguity, and opening the door wide to new challenges for the global economy in general and the Kuwaiti economy in particular. Kuwaiti economists have stressed the need to learn economic lessons from the current war and work hard to diversify sources of income; so that the Kuwaiti economy does not remain vulnerable to the risks of geopolitical tensions, which could pose a challenge to an economy dependent on a single commodity -- oil -- taking into consideration the growing fear of seaports closure. In separate interviews with the newspaper, they warned that the continuation of the war for more than a month would negatively impact the economies of Kuwait and neighboring countries, primarily due to the decline in interregional trade and maritime shipping.
They underscored the importance of expanding agriculture, livestock, and the food industry, as well as increasing storage of goods that could last for many years in preparation for any emergency. Economic expert and former Minister of State for Housing Affairs Yahya Al-Sumait asserted that the escalation of the war between Israel and Iran and the entry of the United States as a party to the confl ict will affect the national economy, especially since the country relies on imports and exports, not only of oil but of all other products. At the same time, he expects the situation to calm down by the beginning of next month, as the free world will not accept the continuation of the war and its disastrous repercussions for people and the global economy.
Economic expert and head of the Accounting Department at Kuwait University Dr. Sadiq Al-Bassam pointed out that the only benefit to the national economy from the Iran-Israel war is the rise in the price of oil, which leads to increased State revenues. 'However, the negative repercussions affect many other areas, foremost of which is the possibility of higher commodity prices if the war is prolonged or the Strait of Hormuz is closed,' he disclosed. Al-Bassam emphasized the need to learn lessons from current events to diversify the country's resources, while expanding the strategic reserve for non-perishable goods to five years. He thinks six months is insufficient, especially since Kuwait is in a highly sensitive region. He also stressed the importance of expanding livestock, agriculture, and the food industry to prevent any crisis should the war continue.
Abdullah Al-Gharib, advisor for international organizations affairs at the Kuwait Journalists Association, stated that the continuation of the war has negative repercussions for the national economy, including the suspension of Kuwaiti oil exports if vital ports through which tankers pass are closed. This is especially true given that Iran, amid this war, is still threatening to close the Strait of Hormuz, he added. He warned that the closure of vital ports will affect the buying and selling of food products, because the continuation of the war for more than a month will affect food supplies, prompting food traders to raise prices. He said the situation could lead to a halt in flights, which will lead to numerous economic disasters, especially since commercial aviation tranIsrael-Iran War A Wake-Up Call For Kuwait's Oil-Dependent Economysports many daily food products to Kuwait.
Economic expert Ahmed Al- Khashnam reiterated that the current war has negative and positive repercussions for the national economy. He explained that the continuation of the war will inevitably lead to an increase in oil prices to more than $100, which will naturally benefit the country's oil resources more than expected. 'However, the war could also negatively affect the economy if the Strait of Hormuz and other seaports are closed. This will be a greater disaster, as the Kuwaiti economy relies primarily on oil resources,' he asserted. He believes that the situation requires the formation of a crisis management entity to resolve all problems which arise suddenly, such as this war, and might continue for long periods and potentially exhaust the economies of the Gulf states. He said the current war is affecting the global economy as a whole, not just the oil-rich Gulf states; indicating that its negative effects include a decline in all types of investments, which will lead to a decline in the profits of commercial companies that rely primarily on imports and exports. 'Furthermore, the war will lead to the flight of foreign capital or a reduction in its income. The situation is not limited to the warring countries alone, as it extends to neighboring countries, leading to a decline in trade exchange and the volume of intra-trade. This will result in a decline in commercial activity, which will raise wheat prices, as it happened in the Russia-Ukraine war. I hope the Israeli- Iranian war will stop soon,' he added.