Kuwait ponders a future after fossil fuels

Kuwait City skyline

Kuwait is an oil country, and Kuwait City glows with prosperity. Kuwaitis know, though, that they can't ride the oil train forever.

Earlier this month, I took part in a program of the Kuwait Bar Association (KBA) and International Association of Lawyers (UIA) in Kuwait on the mediation of energy disputes. (All photos RJ Peltz-Steele CC BY-NC-SA 4.0.)

Kuwait Bar Association (Society of Lawyers)

The program addressed both state and corporate actors, which often in the Middle East are functionally the same, as political royals are only formally differentiated from their investments. Iraq invaded Kuwait in 1990 largely in response to long-running disputes over access to oil reserves under the countries' desert border. So it's understandable that Kuwait, powered by a 70-year-old, $1tn sovereign wealth fund born almost entirely of oil revenue, is an eager evangelist for non-violent dispute resolution in extractive industries.

Kuwait Towers

I spent some additional time in Kuwait, besides the KBA-UIA program, to see the sights of Kuwait City. The first place I went was the iconic Kuwait Towers. Dating to 1979, the towers were designed to be monumental more than functional, architecturally distinct among Kuwait's historical water towers, a remaining few clusters of which dot the urban landscape. Repaired since they were trashed in the Iraq invasion, and refurbished in the 2010s, the Kuwait Towers are a patriotic reminder of a Kuwait that long imported fresh water for its survival, before oil wealth paid for expensive but effective desalinization. 

Dhow model at Marine Museum

On display at the Al Hashemi Marine Museum and the Maritime Museum are Kuwaiti dhows dating to the 19th century. Some were used for pearling, the dangerous prospect but potential big score of a once seafaring economy. Many of the dhows are specially fitted with large water tanks running along the keel.

Thus imported, water historically was famously expensive in Kuwait. There's still a popular maxim that water, the truly scarce resource of the desert, is more expensive than oil. Water still is expensive, or should be, because desalinization is expensive and largely fossil fueled. 

Other legacy water towers

Government subsidies, however, obscure the cost of water. A combined utility bill in Kuwait, including water, electricity, sewer, garbage, etc., might run US$40 or $50 a month, single family—a lot for some locals, especially ex-pat laborers. But even correcting to U.S. cost of living with a 250% multiplier, utilities including water are far cheaper than in the States. Environmentalists fret over the conceit that water is inexpensive. I thought that my hotels would caution about water consumption, as is common in desert countries, not to mention American desert states, but they did not.

In keeping with the maxim, petrol is cheap. I was worried when Europcar warned me that gas stations accept only cash—until I worked out the prices. I filled up my SUV rental's 13-gallon (about 50L) tank for less than US$10.

Evening recreation at Dasman Beach

There's much to see in Kuwait City, in terms of museums and historical sites. What struck me, though, is the prevalence of western influence and a near indifference to foreign tourism. Attractions are aimed at locals. Kuwait excels at affording its people diversions of all kinds, including the educational and recreational: museums, beaches, playing fields. But the focus is decidedly domestic, bringing the world to Kuwaitis, not the other way around.

Texas Roadhouse Beneid Al Gar, one of three Kuwait City locations

Limited opening hours and a ramshackle bus system make many attractions difficult to access for visitors. Ride-share app Careem works well, though drivers speak little English. Some places' websites are in Arabic only. Besides foods, souvenirs are sorely limited: the norm is an assortment of refrigerator magnets and ball caps with cheap, afterthought patches. Walking south from Kuwait Towers on the city's corniche, the extent of Kuwait's Americanization in particular is on full display. Behind the beaches, the chain restaurants line up: TGI Friday's, the Cheesecake Factory, Texas Roadhouse.

One arm of Souq Al-Mubarakiya

Besides the beach, a favorite evening destination for locals is one of the city's many shopping malls, from the central 1,250-square-foot Assima Mall, with its gourmet Monoprix grocery, to the sprawling 334-acre (1.35m-square-meter) Avenues, with more than 1,100 retailers. Notwithstanding the scale and upscale nature of these operations, they are loaded with the sort of western retailers found on main street anywhere. There's plenty to buy, eat, and drink—besides alcohol; Kuwait is a dry country—but very little that is specially Arabian. A more touristically gratifying destination is the city's Mubarakiya Souq, though its modernized storefronts also cater mostly to local needs. The people-watching is better than the shopping.

Camels, highwayside

To see more than just the city, and also to get a closer look at both rural life and Kuwaiti infrastructure, I drove out both to the Iraq border in the north and to the Saudi border in the south. The highway network is impressive, if a work in progress, strong on asphalt, weak on road marking. Polished bridges here and there are designed for the exclusive use of crossing camels.

In both the north and the south, the desert is dotted with green patches of farms, fed, remarkably, by well water. Visiting these farms for markets of fresh produce, petting zoos, and other children's amusements is a seasonal family pastime.

Starbucks Wafra

Near the Saudi border, the town of Wafra is the center of an equine economy. Riding centers, breeding operations, and a market for export speak to the enduring importance of horses in Arabia. On Wafra's dusty outskirts, I was surprised to find a cluster of modern buildings, including a multistory veterinary center and, no kidding, the farthest flung Starbucks I've ever seen. A sign at Starbucks cautioned that horses are not permitted in the drive-thru.

Electric towers in the desert

Strung across the desert landscape is a mind-boggling network of electric towers, stretching lines into the distance from any vantage point. Kuwait imports electricity from Gulf partners such as Qatar and Oman, and even then struggles to meet demand in sweltering summers (e.g., N.Y. Times). Meeting electrical needs is simultaneously an incentive and an obstacle to Kuwait energy transition away from fossil-fuel dependence.

Change through energy transition and emission reduction was a recurring theme at the mediation program, besides the benefits and skills of mediation itself. I did not expect to hear, and am not accustomed to hearing, harsh criticism of fossil-fuel dependence in the Middle East. Yet in a session titled "The Climate Crisis and the Transition Imperative," speakers were adamant opponents of the status quo.

Panelists: Yousef Al-Abdullah; Elena Athwal, Qatar,
founder and CEO of consulting firm Icelis Global; and Sara Akbar

Moderator Sara Akbar, a chemical petroleum engineer, current CEO of Oilserv Kuwait, and a renowned figure in the modern history of Kuwaiti oil development, condemned the "New World Disorder" of Trumpian climate-change denial and on-again-off-again Paris participation. She argued passionately that the global costs of unchecked climate change, including devastated coastal cities and lost lives, will vastly outpace the costs of energy transition to renewables. According to Akbar, even the Kuwait oil industry understands that the era of fossil-fuel dominance in the Kuwait economy must end.

Akbar cited an interesting and alarming local statistic: Kuwait has long monitored the maximum temperature of the Persian Gulf at the sea floor, which reliably marked 95 or 96 degrees Fahrenheit. Now, she said, it routinely exceeds 100 degrees, evidencing the evaporation that is fueling catastrophic rainstorms from Dubai to Bangladesh.

Yousef Al-Abdullah, research scientist at the Kuwait Institute for Scientific Research, discussed the energy transition and emission reduction commitments of Gulf states. In contrast with the U.S. re-withdrawal from the Paris Agreement and Trump Administration promise to double-down on drilling, Gulf states have articulated ambitious aims.

A leader in goal-setting is the United Arab Emirates (UAE). The UAE aims for 47% reduction in greenhouse gas (GHG) emissions by 2030. In energy transition, the UAE aims for 15% renewables in its energy mix; has adopted a net-zero target, green hydrogen strategy, independent energy regulator, and national climate law; plans a massive expansion of solar capacity; and is investing more than $14 billion in transition this fiscal year.

Persian Gulf coastline from Kuwait Towers

Kuwait looks weak on the same benchmarks. But that's not the whole story, Al-Abdullah said. Kuwait believes that some neighbors have announced goals they can't realistically meet, such as the Saudi aim to cut 278m tons of annual GHG emissions by 2030, and Kuwait wants to be realistic. Notwithstanding articulated commitments on the international stage, Kuwait has announced targets domestically, Al-Abdullah said, such as net-zero in the oil sector by 2050, and in other sectors by 2060.

Oil production is down over 10 years, Al-Abdullah said, and that's problematic for environmental strategy. The economy remains dependent on fossil fuels, to the tune of 90% of revenues, and a strong economy is needed to transition away from fossil fuels. Production is down for many reasons, including OPEC restrictions; increased competition from other sources, such as Uruguay, Paraguay, Guyana, Mauritania, and Uganda; and rising production costs.

Here my observation on Kuwait's underdeveloped tourism economy is salient, at least in small part. Because Al-Abdullah said that key to Kuwait's future is diversification of the economy, reducing the dominant position of fossil fuels, especially relative to a newly developed service sector. 

In domestic policy, a national plan called "Kuwait Vision 2035" contemplates an economy centered on logistics, leveraging Kuwait's world-crossroads location by, for example, expanding airport and seaport capacity. Vision 2035 imagines a Kuwait that is more livable for residents and hospitable to visitors, expanding highways and building a rail and metro system.

Besides infrastructure, transformation of Kuwait's workforce is required, too. Kuwait suffers an affliction known to other oil-rich states, which is a comfortable, but under-skilled national workforce. Kuwait's education system must rise to meet the challenge of preparing Kuwaitis to participate in the new economy, while the social and economic fabric must expand the job market and incentivize people to enter it.

Like other Middle Eastern states, Kuwait has a worrisome dependence on foreign workers. Ex-pats, whom I mentioned above, constitute some 70% of the resident population and have no pathway to citizenship. Blue-collar workers hale especially from the Asian subcontinent and Pacific rim. Qatar's plight in this regard was highlighted and made controversial by the location of the 2022 FIFA World Cup there; whether reforms were meaningful or sufficient is debatable.

The existing service economy, including legal, financial, and engineering services, depends heavily on ex-pat white-collar workers, too, who make up a fair chunk of that 70%. At the KBA-UIA program, I met lawyers from other Arabic-speaking countries who have worked for years, even decades, in Kuwait. They are generously permitted to practice, more than an out-of-jurisdiction lawyer may in the States, on matters related to their home jurisdictions. But there's no pathway to bar admission, such as might expose the domestic market to competition.

Legal and regulatory reforms will have to complement the development of a service sector and trade center, Al-Abdullah said. I don't think Kuwaitis alone will be able to make that change. Rather, Kuwait will have to open itself up with a more robust immigration framework, affording ex-pats the likes of property and other rights, if not naturalization, to foster a justified sense of ownership in the new economy.

KOC Oil and Gas Exhibition Hall

Apropos of energy transition, one of the most interesting tourist attractions in Kuwait is the Kuwait Oil Company (KOC) Oil and Gas Exhibition. The exhibition—reservations required for guided tours only—offers an artfully constructed tour of the history of Kuwait, from its desert and seafaring cultural history, to British protectorate and the discovery of oil, rise to global energy power, and Iraq invasion, destruction, and recovery.

Exhibit dramatizing Kuwait oil extraction: every second, every day

The exhibition is decidedly a paean to oil. But it is not wholly environmentally tone-deaf. One dramatic exhibit shows, with a massive gush of black liquid, the astonishing amount of oil that Kuwait pumps from the earth every second of every day, averaged out. The exhibits don't say it plainly, but there is an undeniable implication that this business model is not indefinitely sustainable.

The next chapter of Kuwait energy policy is ready to be written.

Tchotchkes for sale at the KOC Oil and Gas Exhibition gift shop

Kuwait sign on the corniche