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Introduction

Purpose of this paper is to answer the questions in the research protocol in the context of the petroleum sector in the Gulf Cooperation Council countries (GCC). However, for reasons to be developed, the history of this sector was unique. In particular, the traditional view of resource curse is not entirely appropriate. It is difficult to argue that the windfall revenues generated by the sector damaged the rest of the economy. Before the sector developed, ‘the rest of the economy’ was only subsistence, pearl fishing or some trading. A more productive analytical approach is to ask, given the enormous wealth created by the sector, why did the economies not perform better? The answer is simply that the governments and the international oil companies (IOCs) for the most part failed to optimize the linkages that existed between the sector and the rest of the economy. These linkages involved fiscal, forward and backward linkages although where the blame lies for this failure as will be seen is debatable.

The paper begins by explaining why the GCC makes for a good case study. This is followed by a history of relations between the governments and IOCs with emphasis on their attitudes to the linkages and how they changed over time. This history is then used to address the specific questions in the ‘research protocol’. Finally, based on the history and the answers, the main lessons are drawn that might guide future FDI.