Middle East Economics

Israel’s Economic System mixed economy that is technologically advanced Controlled by Israeli government and private Israeli companies No natural resources imports grain, oil, and military technologies

Produces high-tech equipment, some crops, and cut diamonds. The service industry accounts for much of Israel’s economy, such as insurance, banking, retail, and tourism relies heavily on U.S. economic and military aid Israel’s Economic System

Saudi Arabia’s Economic System mixed economy Government largely controls the economy Main export is oil The oil industry has made the Saudi royal family quite wealthy.

members of the royal family are among the wealthiest people in the world. Oil accounts for well over half of the country’s economy – funds the country’s education, defense, transportation, health and housing Saudi Arabia’s Economic System

Turkey’s Economic System Government controls the economy not entirely a command economy A large part of the economy is based on farming The government has argued with other countries over its use of natural resources, such as the Euphrates River

Clothing and textiles are the country’s major industries The service industry makes up about half of Turkey’s economy The entrepreneur Aydin Dogan controls the largest oil and gas company in Turkey Turkey’s Economic System

Economic Growth difficult to achieve for many Middle Eastern countries War is a major threat to the region’s economies In Israel, war and a large immigrant population have strained its economy The Israeli government has taken control of economic activities in order to address these problems.

The Israeli government controls most activities related to agriculture helps the nation’s economy because the country’s natural resources are so limited Saudi Arabia has begun encouraging the development of industries other than oil in order to make its economy stronger Economic Growth

In 1976, the Saudi government created the Saudi Basic Industries Corporation. The Saudi Basic Industries Corporation invests in capital goods. These capital goods have made the country a steady producer of steel, industrial gases, plastics, and petrochemicals. Wars can also influence a country’s economy by influencing what the country decides to produce. Economic Growth

Iran’s war with Iraq led Iran to put more money into its military industries. The number of people without jobs in Iran is high The country provides less protection for its human capital than other countries do. For example, Iran does not have private labor unions to protect workers. Economic Growth

Natural Resources Natural resources of a country can affect economic growth. Middle East economies were once based on farming. When oil was discovered, it became the main source of money for many countries in the region Governments with large oil reserves stopped investing in other parts of their economies

Countries in the Middle East that do not have oil are often poorer than countries that do. The region has many deserts and mountains and few rivers. This physical makeup causes it to be more difficult to produce and transport goods. Countries often spend money made from exporting oil on imports of items that are not available in the region. Natural Resources

Voluntary Trade Before 1950s, the Middle East had a very strong agricultural industry. Now it depends on voluntary trade. Must import much of its food and other products for daily life. Over half of the food eaten is produced elsewhere. The region doesn’t have many highly developed industries besides oil

Without trade countries in the Middle East would suffer. Some countries are trying to trade more with other nations in order to improve their economies. For example, 12 countries including Israel, the Palestinian Authority, and Syria signed a trade agreement with the European Union in purpose is to end taxes on trade in the Mediterranean region by Voluntary Trade

Trade Barriers Middle East countries face both physical and political trade barriers. The lack of rivers is a major physical trade barrier for many countries in the region. Deserts also make trade extremely difficult in some countries. Mountains are also physical trade barriers in such countries as Afghanistan.

Countries in the region control about 65% of the world’s supply of oil. Oil from the Persian Gulf countries is exported to other countries throughout the world. This is how gulf countries make the majority of their money. The Persian Gulf is a huge asset to trade in the region. It provides an easily accessible route for transporting goods. Trade Barriers

OPEC The central organization of the world oil trade is OPEC. OPEC is an international organization that has 12 members. OPEC’s purpose is to help its members develop policies on oil production and trade that will benefit each other. The organization raises and lowers the price of oil according to market demand, availability, and other factors.

1973 Oil Crisis Some trade barriers are political governments limit trade with other countries when they disagree with the actions or policies of those countries. This is a trade barrier designed to purposefully hurt the economy of another country. The 1973 oil crisis is an example a trade barrier.

began when OPEC announced that its member nations would no longer ship oil to countries that had aided Israel in its recent war with Egypt OPEC raised the price of oil 70% As a result, the price of gasoline in the U.S. quadrupled over several months These actions had a large impact on industrialized nations because of their growing dependency on oil and gas Oil Crisis

At the time, the U.S. was using about one third of the world’s energy. The crisis caused the value of the American dollar to drop It also had a widespread negative impact on the world economy OPEC started shipping oil to Western nations again in 1974 Western economies began to get stronger again 1973 Oil Crisis

Wars are another type of political trade barrier Since the 2003 invasion of Iraq, Iraqi oil production has been hampered by violence. In addition, OPEC nations have raised the price of oil Trade Barriers

What is currency? Middle Eastern countries have different forms of money or currency. The currency in Israel is the Israeli shekel Saudi Arabian currency is the riyal Jordan uses the dinar

Exchange Rates Countries must have an exchange rate in order to trade with one another The exchange rate determines how much money a currency is worth in another currency. Some currencies have higher exchange rates than others. For example, one U.S. dollar is worth 4.5 shekels