The Gulf States Are Not Transitioning Away From Oil — They Are Purchasing Time With Oil دول الخليج لا تتحوّل عن النفط — بل تشتري الوقت بالنفط

There is a version of the Gulf economic transformation story that is genuinely impressive. NEOM is under construction. Riyadh is becoming a regional hub. Dubai has diversified so successfully that oil now accounts for less than 1% of its GDP. The entertainment sector is booming. Young Saudis are going to concerts, movies and mixed-gender gyms in numbers that would have been unimaginable a decade ago.

And there is another version that is less comfortable to tell. Oil still accounts for roughly 70% of Saudi government revenues, despite a decade of Vision 2030. The private sector, outside of real estate and retail, remains thin. Most of the “diversification” is still being funded by oil money — NEOM is a PIF project, and the PIF is capitalised by Aramco dividends. The transition is real, but it is slower and more oil-dependent than the official narrative suggests.

This is not a criticism of the reform programme per se. Transforming a petro-state is genuinely hard. But the framing of “diversification” obscures what is actually happening: the Gulf states are not transitioning away from oil. They are using oil revenues to purchase the time they need to build the economic structures that might eventually allow them to do so.

Whether that time is being well spent is the central question. The evidence is mixed. The investments in renewable energy are real and impressive. The social reforms have permanently altered the texture of Gulf societies. The sovereign wealth funds have built genuinely diversified global portfolios. Against this, the megaprojects absorb enormous capital for uncertain returns, the labour market reforms have not yet produced the private-sector dynamism they were designed to generate, and the fiscal break-even prices for most Gulf states remain uncomfortably high.