Kuwait's economy before and after gulf war Assignment

Kuwait's economy before and after gulf war - Assignment Example Most of its oil was exported to Europe and the United States (International Business Publications 2012). Reliance of oil as the sole source of income led to over production of oil in Kuwait. With large deposits, approximately 94,525 billion barrels, Kuwaiti suppressed the prices of oil in the international markets (CIA World Factbook). However, overproduction angered the neighboring oil producers, such as Iraq, which was desperate to pay the funds it had borrowed for was. The act of suppressing process was viewed as an act of economic sabotage. The government of Kuwaiti maintained a low value of foreign debt that was manageable. The debt owed by Kuwaiti prior to the gulf war was $8billion. Although the country is oil rich, it has a small portion of arable land, thus preventing the country from relying on agricultural activities. However, the country engaged in other economic activities such as construction, manufacturing, and financial services. The geopolitical importance of Kuwait was increasing die to instability in neighboring nations. It was the preferred trade route that linked the west and the east. The hostilities that arose due to suppressed oil prices made Iraq invade Kuwait in 1990. The war devastated the oil wells of the country. According to Murdico (2004), the Iraqi troops burned most of the oil wells in Kuwait. The act sabotaged oil production in Kuwait for a whole year. The per capita income fell from $8967 in 1990 to $ 5508 in 1991. The war also led to an increase in international prices to over $30 per barrel, up from $20 per barrel in the oil spot market. Although the war did not last long, the effects were visible. First, most of the people ran to neighboring countries, meaning, there was no immediate resumption of production after the war. Second, the oil wells were heavily destroyed and had to be renovated. Reconstruction of Kuwait after the war cost the country an approximated $40 billion. The