Kuwait economy stable, urged to diversify amid threats of war

KUWAIT CITY, March 23: Experts are grappling with major questions about the ongoing war and its economic impact on Kuwait and the entire Gulf region. They are contemplating on the economic repercussions for Kuwait should the conflict last until April. If the war continues for several months, the focus shifts to the available options for Kuwait and the surrounding nations. The main point of inquiry is on which Gulf countries will most likely be affected by the crisis. Economist Mohammad Ramadan told the newspaper that the Kuwaiti economy will not witness a sharp decline if the current war between America and Israel against Iran continues until April, especially since high oil prices will persist for a long period, thus, the need to compensate the country for its losses from the halt in oil exports.

He was quick to point out that if Iranian threat to the Strait of Hormuz continues once the war ends, this could delay the economic recovery of Kuwait and other countries in the region. About the possible scenarios if the war continues for two months, he stressed the need to address the issue by transporting Kuwaiti oil via tankers that are not subject to Iranian threats while passing through the Strait of Hormuz, such as Chinese, Russian and Pakistani tankers. He cited another possible scenario -- that Iran might impose a commission on oil tankers passing through the Strait of Hormuz. “In this case, we might accept such option,” he asserted.

He added that the Gulf Cooperation Council (GCC) countries, particularly Kuwait and Qatar -- the most affected by the closure of the Strait of Hormuz --should partner with Saudi Arabia on a pipeline to transport Kuwaiti oil or Qatari gas to the Red Sea. He said Saudi Arabia could also partner with Oman on another pipeline to the Arabian Sea, thus, reducing the need for the Strait of Hormuz. He warned that the longer the project to link Gulf oil with a shared pipeline is delayed, the more vulnerable the regional economy will be to instability arising from political tensions in the region. He said these steps require urgent decisions by the GCC countries, especially since the implementation could take several years. He emphasized that expediting implementation is beneficial for the economies of the Gulf states, which are most severely affected by the closure of the Strait of Hormuz.

About the impact of the war on the global economy, he stated that the extent of the impact varies from country to country. He revealed that countries with diversified economies differ from those whose economies rely on primary sources, such as the Gulf states, including Kuwait. He underscored the need for Kuwait to continue the diversification of its sources of income in order to reduce dependence on oil revenues, hence, preventing the State budget from being affected by geopolitical or financial crises or decline in oil prices. He said the countries with diversified economies will not be entirely affected by global crises, citing the diversified economy of the United States of America, which was minimally impacted during the 2008 global financial crisis and the COVID-19 pandemic.

He urged Kuwait and other countries in the region to capitalize on the current crisis to further diversify their economies. He added that Saudi Arabia and the United Arab Emirates (UAE) are among the least affected Gulf countries, as they have export routes for oil quantities that bypass the Strait of Hormuz. He stated that the coming period may witness the postponement of some non-urgent projects included in the government’s plan, especially since the focus will be on major priority projects that cannot be delayed. He thinks the Kuwaiti government might resort to borrowing to meet all needs if the war continues for a long period

By Najeh Bilal Al-Seyassah/Arab Times Staff