Over the past 25 years, literature on the rentier state has gone through several iterations and the explanatory power of the framework has been called into question on more than one occasion. This paper notes that in studies of the rentier state, explicit attention to one the most critical variables for the determination of (political) outcomes – the decisions of leaders – has been rare. Hence, it sets out to “bring leadership back in” to the study of politics in oil-exporting states. It aims, as well, to resurrect and advance the debate about the relationship between structure and agency, this time with a focus on oil-exporting states of the Middle East. The paper explores the variation in leadership responses to the 1986 oil shock, when the price of oil plummeted and the domestic political economies of major oil-exporters were, as a result, considerably strained. The paper considers both the variation in leadership decisions at this critical juncture, as well as the variation in their effects in three countries: Algeria, Iraq, and Saudi Arabia. Through across case comparative analysis, the paper makes a two-pronged argument: first, the variation in political outcomes in the 1990s – an Islamist insurgency and civil war in Algeria, inter-state war and domestic unrest in Iraq, relative stability in Saudi Arabia – reflects the variation in leadership decisions in the late-1980s; second, the degree of stability enjoyed by oil-exporting states when economic resources are in woefully short supply is a function of the capacity of leaders to extend political resources to social forces. Thus, with regard to the relationship between structure and agency, the paper demonstrates that while structural factors (oil price downturn) may indeed strain the domestic political economy, those strains are either mitigated or exacerbated by actors (i.e., political leaders). It advances, as well, the suggestion that ‘investing’ in participatory political structures may be a useful strategy for leaders (of oil-exporting states) to adopt when they are faced with domestic challenges on the heels of economic shocks. The research for this paper draws from the author’s book, currently in press, about the relationship between oil wealth and political instability, and derives from several years of research, including extended interviews in Algeria and Saudi Arabia, and perusal of government documents and policy statements.

Iran’s oil revenue per capita is far lower than that of any other Persian Gulf country, and it is considerably lower than that of Libya, Venezuela, and even Algeria. Thus while Iran is often described as a rentier state, its economy and politics are affected much less by oil revenue than these other countries. However, like all oil-producing countries, Iran’s oil revenue has fluctuated tremendously, experiencing four major “boom and bust” cycles since 1970. Consequently, while Iran is not a prominent example of a rentier state, there have been four periods in recent decades when its oil revenue has been quite high and rentier effects presumably have been fairly strong, followed by periods in which Iran’s oil revenue and rentier effects have been much weaker. Thus we can speak of Iran as a “cyclical rentier state” – one in which rentier effects on its economy and politics have been transitory, though recurrent. This paper will examine how these cyclical fluctuations in Iran’s oil revenue have affected its economy and politics. It will focus on three sets of factors. First, it will examine how Iran’s macroeconomic and fiscal responses to these four cycles of boom and bust were shaped by the very different leaders who held power during these periods, ranging from an aloof, autocratic monarch in the 1970s to populist radical Islamists in the 1980s, pragmatic centrist Islamists in the 1990s, and populist “neoconservative” Islamists after early 2004. Second, it will examine whether Iran’s macroeconomic and fiscal policy during the last three of these periods showed evidence that Iran’s leaders had “learned” from earlier experiences – especially from the catastrophic political consequences of the first oil boom, in the mid-1970s. Third, it will examine how idiosyncratic factors affected Iran’s macroeconomic and fiscal responses to cycles of oil boom and bust, including the magnitude of each cycle, the 1980-1988 Iran-Iraq war, and other contextual conditions. Taken together, these three sets of factors provide a good first cut at understanding the political-economy dynamics of Iran’s cyclical rentier state.

Scholars of rentier states have theorized that oil revenues allow ruling regimes to build extensive patronage networks, thus fending off pressures for political voice. When oil revenues fall, regimes are likely to experience severe crisis, as populations mobilize against the regimes. The Gulf states do not fit the model. Their regimes were able to survive the oil price downturns of the mid-1980’s and the late 1990’s. Moreover, the internal logic of this thesis cannot explain the periods of increased political activism in Kuwait. If high oil revenues placate domestic constituencies, then we should see heightened domestic political activism when oil prices are lower. That is not the case in Kuwait. Domestic organizing to pressure the government to re-establish the parliament began in the late 1980’s, as oil prices were increasing, not in 1986 when they had plummeted. Oil prices held steady in the post-invasion period of the early 1990’s, when political life resumed with vigor. The oil price downturn of the late 1990’s did not witness any particular increase in Kuwaiti political activity. The wave of activism which led to the 2007 parliamentary elections came at a time of very high oil prices. I hypothesize that the Kuwaiti state was able to develop a number of administrative instruments – both coercive and cooptive – that allowed it to ride out periods of low oil revenues. I will explore the hypothesis that greater political activism is spurred by regime crises rather than fiscal crises: that Kuwaitis increase their political activism at times when the ruling regime has either sought to increase its powers unilaterally or has been weakened by external shocks or internal divisions.

The development of rentier state theory as well as resource curse arguments focused little on explaining violent conflict. In recent years, economists working with large data sets have made something of a connection by arguing that resource dependent countries are more prone to civil war. They argue that the presence of lucrative commodities, like oil, make a powerful incentive for antagonists to use violent means to profit. This is a version of rentier state theory only in this case, instead of authoritarian durability, civil violence is argued to endure because of economic reasons. However, the quantitative analyses fail to generate knowledge about how such war economies actually evolve. Case study approaches are also limited in so far as systematic consideration of Arab cases has yet to appear. This paper seeks to critique rentier civil war arguments by examining the political economies of civil violence in Iraq. Iraq has a fully functioning war economy in which militias and sub-state actors, not central political authorities, control whole sectors of the domestic economy, oil smuggling, and import supply chains. What are the political and institutional antecedents to Iraq’s war economy? To what extent is Iraq’s rentier state legacy a factor? By way of comparison, the paper draws on scholarship analyzing similar political economies of violence in rentier Algeria (1992-1997) and non-rentier Lebanon (1975-1989). The argument is that more than oil resources are at play. First, previous decades of political struggle to preserve Baathist control effectively dismantled the rentier state and decentralized economic activity to the provincial level. Second, Iraq’s external trade linkages and road networks tied the country to regional actors in ways that profoundly shaped the post-2003 violence. Finally, occupation policies and the chaos of violence have allowed the rise of new socio-political actors and expelled others. The current attempt by Baghdad’s new regime to rebuild the Iraqi rentier state is constructed on these political foundations. In addition to utilizing the secondary literature on Algeria and Lebanon, the paper relies on new field research and on trade data before and after 2003. This includes original interview research with Iraqi and Jordanian traders, businessmen, and regional economists, as well as collection of trade data from Iraq’s primary trading partners: Jordan, Turkey, and the Gulf states (Iran and the UAE principally).