The Gulf Arab states and the new ‘East-East’ axis of world oil


First published at Transnational Institute.

In early 2023, the world's largest privately owned oil and gas companies began to release their financial results for 2022. ExxonMobil led the way, recording the largest profit in the company’s history at $55.7 billion. Shell, the UK-Dutch conglomerate, then followed, also achieving a historic milestone in its 115-year existence, with profits of nearly $44 billion, over twice the amount earned in 2021. All told, the five leading Western oil ‘supermajors’ – ExxonMobil, Shell, Chevron, BP, and TotalEnergies – reported a combined total of $200 billion in profits, an eyewatering $23 million for every hour of 2022. That same year, the ten largest climate-related disasters were estimated to have cost the world around $170 billion, including $30 billion in the devastating floods that killed over 1,700 people and displaced more than 7 million in Pakistan.[1] With around half of ExxonMobil’s 2022 profits easily able to cover the costs of Pakistan’s disaster, the real winners and losers of the climate emergency could not have been more starkly illustrated.

On 12 March 2023, however, these record-breaking profits were overshadowed by the release of another set of financial results: those of Saudi Arabia’s national oil company, Saudi Aramco. Coming in at just over $161 billion, Aramco’s 2022 profit not only exceeded the combined results of Shell, BP, ExxonMobil, and Chevron, it was the largest profit recorded by any company in the world, in any business, ever. Aramco’s results powerfully underscored a major shift that has taken place in the control of world oil over recent decades: the seemingly unstoppable rise of national oil companies (NOCs) run by governments in the Middle East, China, Russia and other large oil-producing states in the Global South. Collectively, these firms have now developed into huge, diversified corporations that have overtaken the Western supermajors in key metrics, including oil production, reserves, market capitalisation and export quantities. The big Western firms continue to be strongly represented in the US, Canada and Western Europe, but their overall global influence has been much diminished by the rise of the NOCs.

Given these new realities, my goal in this chapter is to examine the particular role and weight of the six Gulf Arab states (Saudi Arabia, Kuwait, United Arab Emirates, Qatar, Bahrain and Oman) in the world oil industry. Of course, as the location of some of the largest reserves in the world, the Gulf states have long been leading exporters of oil and natural gas. But for much of the twentieth century, the oil industry in the Gulf was mostly controlled by American and European oil firms, who paid royalties and other fees to the region’s ruling monarchs in return for access to oil. Following the nationalisation of oil throughout the 1970s and 1980s, Gulf governments assumed direct control of upstream production, with NOCs such as Saudi Aramco, the Abu Dhabi National Oil Company and the Kuwait Petroleum Corporation taking over the exploration, extraction and export of the Gulf’s oil supplies. Mirroring the earlier evolution of Western oil, these Gulf NOCs are now present in territories far beyond their national borders, with involvement in activities that stretch across the entire oil value chain. And as the COP27 and COP28 climate talks vividly demonstrate, accompanying this expansion of the Gulf’s oil industry is the region’s increasingly conspicuous place in international discussions around climate change.

In what follows, I argue that the rise of the Gulf needs to be understood through the significant changes that have taken place in global capitalism over the last two decades. Since the early 2000s, the emergence of China and wider Asia as the geographical centre of global commodity production has shifted how fossil fuels and their various products circulate through the world economy. Key to this is a new hydrocarbon axis linking the oil and gas reserves of the Middle East with the production networks of China and Asia.[2] This ‘East-East’ hydrocarbon axis has been associated with a sizeable rise in the levels of wealth amassing in the Gulf, with flows of these so-called ‘petrodollars’ having a major impact on political and economic structures in the Gulf and the wider Middle East. A range of interdependencies between business and state elites in the Gulf and Asia are also developing alongside this eastward shift in the oil industry – these are not restricted to the export of crude oil but extend to ‘downstream’ sectors, such as refining and petrochemicals. All told, this new axis of world oil serves to embed the Gulf at the core of contemporary ‘fossil capitalism’.[3]

Climate activists need to give much greater attention to these shifts in the world oil industry and the role of the Gulf states. Aramco’s extraordinary profits and the relative eclipse of Western supermajors mean that a major obstacle to ending the world’s dependence on fossil fuels is now located outside of core Western markets. The dangers of ignoring these trends are indicated in the Gulf states’ explicit plans to massively expand oil and gas production over the coming decade, through a series of what have been called ‘carbon bombs’,[4] while simultaneously seizing the market opportunities presented by the new ‘low-carbon’ technologies currently under development. Consequently, both in the Middle East and globally, the character of any ‘green transition’ will be significantly determined by the actions and policies of these states. Without understanding the changes to the control and structure of the oil industry – and strategising effectively around them – it will be impossible to build successful campaigns to halt and reverse the effects of anthropogenic climate change.

From the Seven Sisters to OPEC

Oil did not definitively displace coal as the world’s primary fossil fuel until the 1950s, but the early decades of the twentieth century were crucial in shaping the industry’s later structure.[5] Stretching across the roughly 70-year period between 1870 and the eve of the Second World War, a handful of large oil companies emerged in the US and Western Europe. More than in any other comparable industry, these firms were marked by an extreme degree of vertical integration, through which crude oil was transferred internally within the same company to be refined and sold. Vertical integration enabled the largest firms to exert pressure on competitors and shift profit-making activities down the value chain, depending on price fluctuations and market demand.[6] Rapidly expanding beyond their domestic markets, these vertically integrated firms came to control a densely interlocked network of oil fields and circulatory infrastructure stretching across the globe. By the mid-twentieth century, just seven of these firms dominated virtually all the world’s production and trade in oil.[7] They were dubbed the ‘Seven Sisters’ by their industry rivals in the 1950s, and the leading oil firms that today remain at the centre of global debates around energy use and the climate transition – ExxonMobil, Chevron, BP, Royal Dutch Shell and so forth – are their direct descendants.[8]

These seven Western firms remained the controlling force in world oil well into the 1970s, but they were not themselves equally balanced. Despite the considerable international presence of major European players, such as Royal Dutch Shell (UK/Dutch) and BP (UK), the industry steadily gravitated towards a more American-centric landscape in the first half of the twentieth century. One reason for this was the presence of large oil reserves inside the US itself, which established the country as the core hub of global crude production and consumption for much of the century.[9] American oil firms also held a dominant position in the big Latin American oil-producing states, such as Venezuela. The global strength of these American oil giants was reflective of the broader consolidation of US power during this period, as an oil-fuelled global capitalism became increasingly synonymous with an American-centred one.

Following the Second World War, US oil companies finally broke into the main oil-rich areas of the Middle East, ending the previous stranglehold of European firms. Nonetheless, burgeoning anti-colonial and radical nationalist movements in the main oil-producing states in the Middle East and Latin America began to upset the control Western oil firms held over oil production, refining, pipelines and pricing.[10] These movements eventually culminated in the formation of the Organization of Petroleum Exporting Countries (OPEC) in 1960, initially made up of Saudi Arabia, Venezuela, Iraq, Iran and Kuwait. At that time, the five countries constituting OPEC produced around 37 percent of world crude and most oil outside of the US. Over the following decade, the organisation’s membership continued to expand. Today, most leading oil producers (with the significant exceptions of the US, Russia and Canada) are OPEC members.

With the establishment of OPEC, governments across the Middle East and Latin America gradually nationalised oil resources and state-owned oil companies took over much of the exploration and production of crude outside of the US. The largest Western firms retained their dominance in downstream refining and marketing of oil but increasingly had to contend with powerful non-Western NOCs in the upstream sectors across the main oil-producing states. Crucially, Western firms gradually lost their ability to set the price of oil, which increased dramatically in 1973–74 and again in 1978–1980. Rising oil prices, coupled with the changes in the structure of ownership in the oil industry, massively increased the financial surpluses (subsequently dubbed ‘petrodollars’) flowing to oil-producing states, especially those located in the Gulf.[11] By the end of the 1970s, Western firms owned less than a third of the crude oil located outside of the US.

Reflecting the pressures of OPEC competition and a decline in oil prices from the mid-1980s, a major wave of corporate consolidation began to take place among Western oil firms. The most important example of this was the merger of the two US oil giants Exxon and Mobil in 1999 – creating ExxonMobil, the biggest private company in the world.[12] At the time, this was the largest industrial merger in history, surpassing an earlier oil sector deal – BP’s acquisition of the American firm Amoco in 1998 – which had previously held that record. Other significant corporate consolidation at this time included Chevron’s takeover of Texaco in 2001, and the merger of Conoco Inc. and Phillips Petroleum Company to create ConocoPhillips in 2002. Outside of the US, the large French oil firm Total merged with Petrofina in 1999, and then later took over Elf Aquitaine to create Total SA (now known as TotalEnergies). The net result of these mergers was a reconfiguration of the Western oil industry around a handful of firms that are dominant today: ExxonMobil (US), BP (British), Royal Dutch Shell (British/Dutch), Chevron (US), Eni (Italy), TotalEnergies (France), and ConocoPhillips (US).

This wave of industrial consolidation was accompanied by other important changes in how Western oil companies functioned. As the largest privately owned firms in the world, the oil supermajors were deeply implicated in the wider turn to financialised capitalism that took place through the 1980s and 1990s, particularly in US financial markets. Of particular note was their increasing emphasis on share buybacks and the prioritisation of dividend payments to shareholders – a feature of Western oil firms that has continued through to the current day.[13] With reduced access to conventional onshore oil fields (now controlled by the largest non-Western NOCs), Western oil majors moved towards environmentally risky, technologically intensive oil production in areas where oil was difficult to extract (e.g. deepwater drilling and fracking for shale resources) and continued to emphasise downstream activities, especially the production of petrochemicals. Several of the Western supermajors also sought to project themselves as ‘energy companies’, and even began distancing themselves (misleadingly) from oil in their corporate branding.[14]

China, world oil, and the Gulf’s political economy

Beginning in the late 1990s, these structural features of the world oil industry were deeply shaken by China’s opening to the world economy and subsequent positioning at the centre of global manufacturing. Fed by foreign capital flows seeking to take advantage of the country’s enormous pools of cheap labour, the emergence of China as the ‘workshop of the world’ created a boom in the global demand for energy, with the world’s annual oil consumption increasing by around 30 percent between 2000 and 2019.[15] In 2000, China accounted for just 6 percent of world oil demand; by 2019, the country was consuming around 14 percent of the world’s oil, more than anywhere else except the US. With China’s manufacturing zones sitting at the core of a wider regional production network, the demand for oil and other raw materials increased significantly across Asia as a whole. By 2019, Asian oil consumption stood at close to one-third of the world’s total, more than that of Europe, Russia, Africa, and Central and South America combined.[16]

Despite being one of the world’s largest oil producers – ranking fifth in the world in 2010 – China’s sizeable reserves were insufficient to meet the country’s soaring demand. As a result, China’s rise not only drove an increase in global oil consumption but also had a considerable impact on the volume and direction of the world oil trade. Fully dependent on oil supplied from elsewhere to supplement domestic reserves, China’s new position in the global economy pulled the export of oil away from the West and towards the East. By 2019, around 45 percent of all the world’s oil exports were flowing to Asia – with more than half of these destined for China alone.[17] Most of these oil supplies originated in the Middle East, with the Gulf states and Iraq collectively providing almost half of China’s oil imports by 2020 (up from around one-third in 2001).[18] Once again, this demand for Middle East oil was a pan-Asian trend – around 70 percent of all crude oil exports from the Middle East (primarily from the Gulf) are currently destined for Asia.

The large increase in China’s oil consumption, and the oil consumption of Asia more widely, played a substantial role in driving a surge in global oil prices during the first two decades of the new millennium (although this was not the only reason for this price spike).[19] From an average monthly price of around $25/barrel in January 2000, global oil prices rose steadily over subsequent years, eventually peaking at just under $150/barrel by mid-2008. A short sharp downturn followed the global economic crash of 2008, but oil prices resumed their upward trend from January 2009, fluctuating around $100/barrel for most of the period between 2011 and mid-2014.[20] Importantly, over this period, oil sat at the centre of a broader boom in global commodity prices, including the price of metals, food and fertilisers. And much like the experience of the oil shocks of the 1970s, for poorer countries that are dependent on food and energy imports, these rising prices had profoundly negative implications.

For oil-producing states, however, this almost 14-year stretch of ever-increasing exports and rising prices was an immense boon.[21] For the Gulf states in particular, the surge in prices brought trillions of dollars of surplus capital into the region: a petrodollar bonanza that transformed the Gulf into one of the world’s ‘new powerbrokers’, according to the global consultancy firm McKinsey.[22] But these pools of surplus capital did not remain solely in the hands of the governments of the Gulf states. As has been the case historically, much of this newfound wealth was redirected towards the Gulf’s private sector, helping support the accumulation of the large capitalist conglomerates that dominate the region’s political economy.[23] This occurred through various mechanisms, including awarding lucrative state contracts for construction and real estate development, fostering joint ventures and partnerships between private and state firms, and state-owned banks providing generous loans to big private firms. Additionally, Gulf stock markets became an important route for domestic capital accumulation, with shares of large state-owned companies partially listed on these markets, thereby allowing wealthy citizens access to a portion of the revenues earned by these firms. The most notable example of the latter was the landmark listing of 1.5 percent of Saudi Aramco on the Riyadh stock exchange in 2019. First mooted by Saudi Crown Prince Mohammed bin Salman in 2016, this was the largest share offering in history. With the value of the company priced at just under $2 trillion, Aramco overtook Apple to become the most valuable company in the world.

Gulf petrodollars also found their way into international markets. In years past, the Gulf’s surplus capital had been primarily invested in North America and Western Europe, playing a pivotal role in the development of the global financial architecture. During the oil boom of the new millennium, Western states remained an important destination of Gulf investments, but a growing portion of the Gulf’s private and public wealth also targeted neighbouring Arab countries, attracted by the investment opportunities that sprung up following the adoption of structural adjustment packages by many governments in the region from the early 2000s.[24] This internationalisation of Gulf capital afforded state and private conglomerates based in the Gulf a dominant position in key economic sectors throughout the Middle East, including real estate and construction, logistics, banking and finance, agribusiness, retail, and infrastructure.[25]

In all of these ways, Asia’s voracious appetite for energy was intimately linked to the emergence of a regional economy in the Middle East centred around the tempo of capital accumulation in the Gulf.

Refining and petrochemicals

When thinking about these geographical shifts in world oil trade, it is essential to recognise that crude oil is a commodity that has little practical use prior to its transformation into various kinds of liquid fuels or raw materials. For this reason, when mapping the emerging patterns of control in oil, it is critical to consider the ‘downstream’ segment of the oil industry, particularly the all-important stage of refining. For most of the twentieth century, the downstream segments of the world oil industry were almost completely run by the largest Western oil firms – indeed, it was through their control over refining and the marketing of oil that these firms managed to maintain their global dominance following OPEC’s nationalisation of crude oil reserves in the 1970s. Ownership of the world’s refineries was thus concentrated in the hands of a very small number of firms, led by the Western supermajors. In 1999, for instance, just 15 companies held around 40 percent of all the world’s refining capacity, with Royal Dutch Shell, Exxon, and BP Amoco occupying three out of the top four positions.[26] Today, this longstanding Western domination of refining has been eroded substantially. Around half of the top 15 companies in the world are now NOCs, with the first, second and fourth spots taken by Chinese and Saudi companies (Sinopec, Chinese National Petroleum Corporation, and Saudi Aramco). Only ExxonMobil remains within the top four global refiners. The geographical concentration of refining has also shifted, reflecting the eastward orientation of crude exports. In the early 1990s, nearly half of the world’s refining capacity was located in North America and Europe – this has now fallen to around one-third. In contrast, Asian refining capacity tripled between 1992 and 2020, with the absolute number of oil refineries in the region growing more than 2.5 times. By 2020, Asia’s share of global refining capacity stood at 37 percent – more than North America and Europe combined.

The only other region of the world that has seen growth in its share of world refining capacity is the Middle East, where absolute capacity more than doubled between 1992 and 2020, and which now holds a 10 percent share of the world’s total refining capacity. Quite remarkably, two-thirds of all oil refineries that have been built over the past five years, and over 80 percent of those currently under construction, are in the Middle East and Asia.[27] As with exports of crude oil, the growth of Middle East and Asian refining is closely tied to production networks in China and the wider Asia region. Crude oil is either extracted in the Middle East and exported to China or another Asian country for refining, or it is extracted and refined in the Middle East and then exported to Asia. In this manner, the refined fuels and chemicals produced from Middle East oil enter into Asian production chains, where they are transformed into commodities that are consumed globally. Within this axis, the refining process is dominated by large NOCs headquartered in the Middle East, China, and the wider Asia region, with Western firms holding a relatively marginal position.

A crucial part of these Asian production networks are petrochemicals, which form the basic input into plastics and other synthetic materials.[28] With the growth of China’s manufacturing dominance, the country’s consumption of petrochemicals has skyrocketed, and much of this demand is met by petrochemical plants located in the Gulf. Most significant here is ethylene, often described as ‘the world’s most important chemical’, which is essential to the manufacture of packaging, construction materials and automobile parts.[29] Between 2008 and 2017, the Gulf’s share of ethylene production capacity grew from 11.5 percent to 19 percent. In this period, the Gulf rose from being the world’s fourth-ranked producer of ethylene to being in second place, just behind North America (whose global share of ethylene production capacity fell from 27 percent to 21 percent).[30] This vital chemical is manufactured in massive integrated refineries and petrochemical complexes across Saudi Arabia, the United Arab Emirates (UAE) and other Gulf states, and then exported eastwards – indeed, just under half of all China’s ethylene imports now come from the Middle East. China’s emergence as the ‘workshop of the world’ would not have been possible without these flows of refined chemical products from the Middle East to Asia.

These trends have elevated Gulf-based firms to the centre of the world petrochemical industry. Most important here is the Saudi Basic Industries Corporation (SABIC), which now ranks as the fourth largest chemical company in the world by sales (up from 29th in 2000).[31] SABIC was established by Saudi Royal Decree in 1976, with the goal of utilising the country’s crude oil and gas to manufacture basic chemicals for a range of industries, including automobiles, agriculture, construction, and packaging. In the early 2000s, the company began to grow internationally through investments in Europe and the US. A major milestone was the acquisition of the plastics division of the US firm General Electric in 2007, which enabled the company to take substantial steps into advanced petrochemical production. Since that time, SABIC has expanded still further, and it now has activities in more than 50 countries across the world.

For most of its history, SABIC was 70 percent owned by the Saudi state, with the remaining 30 percent listed on the Saudi stock exchange. In 2020, however, the state’s share of SABIC was taken over by Aramco, in a notable restructuring of the Saudi oil industry that illustrated the strong push towards vertical integration in the Gulf. Similarly, the leading petrochemical firms in the UAE, Kuwait, Qatar and Oman are all subsidiaries of state-controlled NOCs. These state-run petrochemical firms are closely connected to privately owned Gulf conglomerates through joint ventures and strategic partnerships, as well as the partial listing of companies such as SABIC on Gulf stock markets.[32] In this manner, the petrochemicals sector serves as another important conduit for private wealth accumulation in the Gulf.

New ‘East-East’ interdependencies

These patterns confirm the strong interdependencies that are emerging between the Middle East (especially the Gulf region) and Asia (especially China) in the oil sector. But this encompasses much more than the simple export of Middle East crude to Asia – rather, it is a process involving a considerable increase in cross-regional investments between the two regions. These investments come from both the large Gulf and Asian NOCs, as well as major privately owned conglomerates located in both areas. Through these flows of capital, there is an extensive intermeshing of all steps in the oil value chain: refining, petrochemical production, and the onward circulation of oil products to the consumer. As such, Gulf hydrocarbon interests are embedded inside Asian production networks, and vice versa. At the political level, these linkages have also been accompanied by the development of much closer ties between the two regions, represented in a raft of recent bilateral agreements, high-level governmental visits, and various other diplomatic initiatives.

To get a clearer picture of these capital flows and their implications, it is essential to look at all aspects of the hydrocarbon circuit – upstream, downstream, and activities such as transportation, drilling, storage, and the laying of pipelines. Across these oil-related activities, China made more than $76 billion in outward investments globally between 2012 and 2021.[33] The first phase of these Chinese investments (2012–2016) followed the announcement of the Belt and Road Initiative (BRI), and focused mainly on North America, Western Europe and Russia/Central Asia. Following 2016, however, there was a substantial reorientation in Chinese overseas oil investment. Between 2017 and 2021, more than 30 percent of Chinese investments in oil-related activities went to the Middle East region, greater than any other world region and a five-fold increase in the Middle East’s relative share compared to the 2012–2016 period.

This investment has given Chinese firms a prominent role in oil-related industries across the Middle East. In the UAE, for example, Chinese firms are leading partners of the state-owned Abu Dhabi National Oil Company (ADNOC), and hold major stakes in onshore and offshore oil fields. In Iraq, a privately owned Chinese firm now operates one of the largest oil fields in the world, the ‘supergiant’ Majnoon oil field. And in Kuwait, a subsidiary of the Chinese oil firm Sinopec has become the largest oil drilling contractor, controlling 45 percent of drilling contracts in the country. The largest deal involving China’s participation in the Middle East oil sector was finalised in 2021: this concerns Chinese participation in a multinational joint venture (JV) that owns a 49 percent equity stake in Aramco Oil Pipelines Co., a company that will have rights to 25 years of tariff payments for oil transported through Aramco’s crude pipeline network in Saudi Arabia.

At the same time as this influx of Chinese investment into the Middle East is taking place, the Gulf states have become the primary foreign presence in the Chinese oil sector, through numerous JVs with Chinese entities. These projects aim to secure market share for the Gulf’s crude exports and include refineries, petrochemical plants, transport infrastructure, and fuel marketing networks. An important example of this is the Sino-Kuwait Integrated Refinery and Petrochemical Complex, a 50:50 JV between Sinopec and Kuwait Petroleum Corporation that is the biggest refinery JV in China, incorporating within it the country’s largest petrochemical port (completed in May 2020). Both the refinery and port are viewed as an integral component of China’s BRI, enabling China to import crude oil from the Gulf to manufacture fuels and other basic chemicals that are then exported to neighbouring Asian countries. For its part, Saudi Arabia’s significant presence in China is evident through several large JVs between Saudi Aramco and Chinese firms in the refining and petrochemical sector, as well as a network of over 1,000 service stations in Fujian province, which was the first province-level fuel retail JV in the country. These partnerships involve both Chinese NOCs, such as Sinopec, as well as leading privately owned refining companies in China (which control around 30 percent of China’s crude refining volumes). Qatar is also a prominent Gulf investor in China’s energy sector, focusing particularly on securing markets for its liquefied natural gas (LNG) exports.

This expansion of the Gulf’s hydrocarbon industry into China is part of a broader involvement by the Gulf states in the oil-related sectors of other Asian countries. Indeed, between 2012 and 2021, nearly half of all foreign investments from outside of Asia (by value) into Asian oil-related assets came from the Gulf, including the four largest deals during this period.[34] Through these investments, Gulf firms have sought to expand their production of refined oil products and basic chemicals within Asia itself (utilising crude feedstocks imported from the Gulf), which are then circulated within Asia by the trading arms of Gulf firms. Key regional targets for this downstream diversification of Gulf oil firms are South Korea, Singapore, Malaysia and Japan. Across these four countries – which each possess established industrial capacity that is often closely linked to the accumulation of domestic capitalist groups – Gulf firms have fully or partially acquired leading companies, and have also undertaken other kinds of partnerships, such as JVs.

Unsurprisingly, the chief Gulf firm in this respect has been Saudi Aramco, which now has a notable presence in key Asian states. In 2015, for example, Saudi Aramco acquired control over the South Korean firm S-Oil, which is the third largest refining company in the country (with about 25 percent market share) and which operates the sixth largest refinery in the world (located in Ulsan, South Korea). This acquisition enabled S-Oil to expand its petrochemical capacity in Korea, and the firm is now a top producer of various refined fuels and basic chemicals that Saudi Aramco’s regional trading arm (Aramco Trading Singapore) then exports to other Asian countries. Also in South Korea, Saudi Aramco became the second largest shareholder of Hyundai Oilbank in 2019, following the purchase of 17 percent of the company’s shares. Hyundai Oilbank is the fourth largest refining company in Korea, and is majority owned by the Hyundai industrial conglomerate. In Malaysia, Saudi Aramco is currently building a refinery and petrochemical plant that is projected to be the largest downstream petrochemical plant in Asia upon completion; the project is a 50:50 JV with the Malaysian NOC Petronas. And in Japan, Saudi Aramco became the second largest shareholder in Idemitsu Kosan in 2019 – the firm is the number two refiner in Japan, controlling roughly one-third of the domestic oil products market through six refineries and a network of 6,400 retail service stations.

Confronting the climate emergency: taking the Middle East seriously

With Gulf NOCs and other capitalist firms increasingly located directly inside Asian production networks – and not simply acting as suppliers of crude – we need to rethink how we approach the geographies of the global fossil fuels industry. It is not enough to focus solely on reducing the direct consumption of fossil fuels or carbon emissions in traditional Western centres. Global commodity production– including much of what ends up being actually consumed in North America and Western Europe – remains grounded in an axis of fossil capitalism that connects the oil fields, refineries and factories of the Middle East and Asia. The profound interdependencies established across this axis are a significant component of capital accumulation in both regions and help support the power of state and business elites. From an ecological perspective, these ‘East-East’ interdependencies serve to re-embed fossil fuels at the core of global production chains, constituting a sizeable barrier to any successful green transition.

Such global shifts explain why the Gulf states have no intention of reducing their production of fossil fuels any time soon. Rather, as capitalist states, their strategic interests lie in the continuation of an oil-fuelled world for as long as possible. The Saudi energy minister, Prince Abdulaziz bin Salman, put this perspective bluntly in 2021, pledging that ‘every molecule of hydrocarbon will come out’, amidst plans to increase the Kingdom’s oil production capacity by more than 8 percent by 2027, reaching 13 million barrels per day.[35] With this objective in mind, Saudi Aramco has invested more in oil field expansion in 2022 than any other company in the world. Such moves have led the Financial Times to note that Aramco ‘is doubling down’ on oil, aiming to be ‘the last oil major standing’ and ‘betting that it can continue to do what it does best: pump oil for decades to come and gain even more market power as other producers cut back’ (2023).[36] All the hydrocarbon-rich states in the Gulf have signalled their intention to follow the same course.

This does not mean, however, that the Gulf monarchies deny the reality of climate change or stand apart from the global rush towards the new ‘green’ technologies. Indeed, precisely the opposite is the case. All the leading Gulf NOCs have expressed support for the Paris Agreement goals and have endorsed their countries’ net zero pledges.[37] They are also investing massively in hydrogen, carbon capture, and solar, with the explicit goal of becoming world leaders in these technologies (see Christian Henderson’s chapter in this book). Most visibly, the Gulf states have taken a prominent position in regional and international fora, such as COP27 and COP28. At the COP27 meeting in Egypt in 2022, for instance, the largest national pavilion was that of Saudi Arabia – followed by those of the UAE, Qatar and Bahrain. Measuring 1,008 square metres, the Saudi pavilion was exactly double the size of the pavilion housing the entire continent of Africa – a part of the world that is most directly under threat from the effects of climate change. COP28 will take place in the UAE.

All of this shows that the Gulf states see no contradiction between an embrace of ‘low-carbon solutions’ and pursuing the path of accelerating fossil fuel production. Importantly, however, this is not just a rhetorical exercise in greenwashing: to a significant degree, the expansion of the renewable sector is a necessary step towards enabling the Gulf states to sell more oil and gas. With very high levels of energy consumption at home, the domestic substitution of oil and gas with alternative energy sources means that more fossil fuels can be made available for export. Indeed, such reasoning is explicitly behind Saudi Arabia’s plan to generate half of the country’s electricity from renewables by 2030 (which would be faster than most other parts of the world, including the European Union). As Prince Abdulaziz bin Salman put it, such a shift to renewables is envisioned as a ‘triple-win situation’: greater oil exports, cheaper energy bills at home, and the prestige of meeting emissions targets.[38]

The technologies and energy infrastructure associated with the green transition are also providing lucrative opportunities for Gulf-based firms, including NOCs such as Saudi Aramco. In December 2022, Saudi Arabia became the first country in the world to commercially ship a cargo of ‘blue hydrogen’ – the shipment was destined for South Korea, raising the prospect that the East-East axis of world oil will soon take a renewables turn.[39] The UAE, Bahrain, Oman and Kuwait are all planning huge hydrogen sites on their territories, which will make the region one of the largest producers of hydrogen in the world.[40] Similarly, carbon capture and solar energy are receiving major investments from Gulf governments (again, often channelled through NOCs). All the Middle East’s leading renewable energy companies – such as Masdar (UAE), ACWA Power (Saudi Arabia) and Nebras Power (Qatar) – are Gulf-based. Through these companies and their dominance of the emerging renewables markets, the Gulf will take a commanding role in steering the form of any ‘green’ transition in the region.

By appearing to transform themselves into key actors in the fight against a warming climate, the Gulf states obscure their ongoing centrality to a globalised fossil capitalism. This is the real goal behind their leadership in the deliberations at both COP27 and COP28 – it is a means of shaping the world’s response to climate change and of resisting any move away from an oil-centred global order. But these realities also firmly tie political struggles in the Middle East to our planetary future. With the Gulf monarchies sitting atop the region’s extreme inequalities in wealth and power, popular movements aimed at challenging these regimes and winning social and economic justice across the region need to be understood as crucial allies of global ecological struggles. A perspective on the climate crisis that ignores the Gulf and the politics of the wider region – concentrating its fire solely on Western governments and the Western oil industry – is not only out of step with the realities of world oil, but inadequate to the enormous challenges at hand.

Adam Hanieh is a Professor of Political Economy and Global Development at IAIS, University of Exeter, and Joint Chair at the Institute of International and Area Studies (IIAS) at Tsinghua University, Beijing, China. He published four books that explore different aspects of the Middle East region. His most recent book, Money, Markets, and Monarchies: The Gulf Cooperation Council and the Political Economy of the Contemporary Middle East, was published by Cambridge University Press in 2018, and was awarded the 2019 British International Studies Association International Political Economy Group Book Prize and the 2019 Political Economy Book Prize of the Arab Studies Institute. Parts of this text draw upon Adam Hanieh, “World oil: Contemporary transformations in ownership and control,” in Greg Albo, Nicole Aschoff, and Alfredo Saad-Filho (eds.) Socialist Register 2023 Volume 59, (Merlin Press, 2022).

Notes and sources

[1] Christian Aid, Counting the cost 2022: A year of climate breakdown,

[2] Unless otherwise noted, ‘Asia’ is used throughout this chapter in reference to the major oil consuming countries of East and South-East Asia, i.e. China (inc. Hong Kong), Japan, South Korea, Taiwan, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam.

[3] Andreas Malm, Fossil Capital: The Rise of Steam Power and the Roots of Global Warming (Brooklyn: Verso, 2016).

[4] Damian Carrington and Matthew Taylor, “Revealed: The “carbon bombs” set to trigger catastrophic climate breakdown,” The Guardian, May 11, 2022.

[5] Many illuminating accounts of this history are available, see especially, Timothy Mitchell, Carbon Democracy (New York: Verso, 2011); Matthew T. Huber, Lifeblood (Minneapolis: University of Minnesota Press, 2013); Giuliano Garavini, The Rise and Fall of OPEC in the Twentieth Century (London: Oxford University Press, 2019).

[6] An early and brilliant analysis of the Western oil industry is presented in John Malcolm Blair, The Control of Oil (New York: Pantheon Books, 1976).

[7] In 1949, around two-thirds of the world’s known crude reserves, and more than half of the world’s crude production and refining, were controlled by these companies. Outside of the US, these companies held more than 82 percent of all known crude reserves, 86 percent of crude production, 77 percent of refining capacity, and 85 percent of cracking plants (used in the manufacture of petrochemicals). Between them, it was estimated that they owned at least half of the world’s tanker fleet in 1949, and around two-thirds of privately controlled tankers (see Federal Trade Commission, United States Congress, Senate Select Committee on Small Business, Subcommittee on Monopoly (1975) The International Petroleum Cartel (Washington: US Government).

[8] The original ‘Seven Sisters’ were the Anglo-Iranian Oil Company (first called Anglo-Persian, now BP), Royal Dutch Shell, the Standard Oil Company of California (now merged into Chevron), Gulf Oil (now merged into Chevron), Texaco (now merged into Chevron), the Standard Oil Company of New Jersey (Esso, later Exxon, now part of ExxonMobil), and the Standard Oil Company of New York (Socony, later Mobil, now part of ExxonMobil).

[9] See: Huber, Lifeblood; Blair, Control of Oil.

[10] Christopher R. W. Dietrich, Oil Revolution (Cambridge: Cambridge University Press, 2017); Garavini, The Rise and Fall of OPEC.

[11] Hanieh, Money, Markets, and Monarchies: The Gulf Cooperation Council and the Political Economy of the Contemporary Middle East (Cambridge University Press, 2018).

[12] United States Congress, House Committee on Commerce, Subcommittee on Energy and Power (1999) The Exxon-Mobil Merger: Hearings before the Subcommittee on Energy and Power of the Committee on Commerce, House of Representatives, One Hundred Sixth Congress, first session, 10 and 11 March (Washington: US GPO), p. 4.

[13] In 1982, a rule change implemented by the Securities and Exchange Commission permitted companies to repurchase their own shares on the open market within certain limits, dependent on trading volumes (often financed through debt). The reduction in the number of shares led to an increase in companies’ stock prices, allowing senior executives to make millions through the exercise of their stock options. US oil companies were at the forefront of this practice; indeed, between 2003 and 2012, ExxonMobil was the largest stock repurchaser on US financial markets. See: William Lazonick, “Profits without prosperity,” Harvard Business Review, September 2014.

[14] Perhaps the most notorious example of this was British Petroleum’s rebranding of itself as BP in 2000, under a new tagline ‘Beyond Petroleum’ and with a new green sun-burst logo. At the time, BP remained the second largest oil company in the world and spent more on the corporate rebrand than it spent on renewable energy.

[15] Figures in this paragraph are drawn from ENI, World Energy Review, 2021,

[16] See footnote 2 for a definition of Asia. ENI, World Energy Review

[17] BP, Statistical Review of World Energy 2020, 2020, p. 30,

[18] Ibid.

[19] There is significant debate about this boom in oil prices, which was closely connected to the financialisation of oil and the role of financial markets in the determination of oil prices. See: Mazen Labban, “Oil in parallax: scarcity, markets, and the financialization of accumulation,” Geoforum 41, no. 4(2010): 541–552; and Hanieh, “The commodities fetish? Financialisation and finance capital in the US oil industry,” Historical Materialism 29, no. 4(2021): 70–113.

[20] Prices then fluctuated between $30 and $70 a barrel until the Covid-19 pandemic induced a massive demand shock through 2020. Since that time, prices have risen significantly with the lifting of pandemic restrictions and the war in Ukraine.

[21] High oil prices also had major implications for Western oil firms. Most importantly, they incentivised the production of so-called ‘non-conventional’ oil and gas supplies – reserves that are more difficult and significantly more expensive to extract than conventional fossil fuels. Of particular importance here was US shale, crude oil that is held in shale or sandstone of low permeability and which is typically extracted through fracturing the rock by applying pressurised liquid (hence the term ‘fracking’). In this context, the oil price spike between 2000 and 2014 helped to attract large investments into North American shale field development, with the production of US shale oil growing more than ten-fold between 2007 and 2014.

[22] McKinsey Global Institute, The New Power Brokers: How Oil, Asia, Hedge Funds, and Private Equity are Shaping Global Capital Markets, McKinsey & Company, 2007,

[23] Hanieh, Money, Markets, and Monarchies, Chapter 3.

[24] Commonly cited figures for the 2000s indicate that around 50–55 percent of all Gulf investments went to US markets, 20 percent to Europe, 10–15 percent to Asia and 10–15 percent to the Middle East and North Africa.

[25] Hanieh, Money, Markets, and Monarchies.

[26] See Hanieh, “World oil,” for a detailed analysis of these trends in refining and sources for the figures in this section.

[27] International Energy Agency, “World Energy Investment 2020,” p. 48, 2020,

[28] For a discussion of petrochemicals and their place in the study of oil, see Hanieh, A. (2021) ‘Petrochemical empire: The geo-politics of fossil-fuelled production’, New Left Review, 130, July–August: 25–51.

[29] Approximately 75 percent of the global demand for ethylene comes from these three manufacturing activities. Gulf Petrochemicals and Chemicals Association (2019) ‘Ethylene a litmus test for the chemical industry’, p. 2.

[30] Deloitte, “The future of petrochemicals: Growth surrounded by uncertainty,” Deloitte Development LLC, 2019, p. 4,

[31] C&EN, “C&EN’s Global Top 50 chemical firms for 2022,”

[32] Hanieh, Money, Markets, and Monarchies.

[33] The figures in this paragraph have been calculated by the author, drawing on Orbis Database, which is available at: They include investment in both upstream production as well as refining, petrochemical production, and oil and gas services (drilling, pipelines etc).

[34] Calculated by the author, drawing on Orbis Database. Asia is defined here as China (including Hong Kong), Taiwan, Korea, Malaysia, Indonesia, Japan, Thailand, Singapore and the Philippines.

[35] Javier Blas, J. “The Saudi prince of oil prices vows to drill ‘every last molecule’,” Bloomberg, July 22, 2021,

[36] Tom Wilson, “Saudi Aramco bets on being the last oil major standing,” Financial Times, January 23, 2023,

[37] With the exception of Qatar, all Gulf states now have net zero emissions target dates.

[38] Andrew England and Samer Al-Atrush, “Saudi Arabia’s green agenda: renewables at home, oil abroad,” Financial Times, November 22, 2022, 

[39] Blue hydrogen is a form of hydrogen production derived from natural gas. It is viewed by many in the environmental movement as a trojan horse of the fossil fuel industry because of the likelihood that it will significantly increase global demand for gas.

[40] Qatar’s strategy appears to be one of focusing on its plentiful LNG supplies, which will be exported abroad for the production of blue hydrogen.