7. Iran and Dubai Lead the Way

D

own through the centuries, Gulf Arabs have taken numerous

cues from Persia: in poetry, architecture, music, carpet weav-

ing, and their common diet of grilled meats and herbed grains.

In energy as well, Iran blazed a trail that was followed by its Arab neigh-

bors. The first commercial oil in the Middle East flowed a hundred years

ago in southwestern Persia, after the 1908 strike at the Masjed- e- Soleyman

field demonstrated there were viable resources in the shadow of the

Zagros Mountains. Oil from Iran provided the bunker fuel behind the

British Royal Navy’s 1911 conversion from coal to oil and led to the cre-

ation of the international oil company now known as BP. The strategic

value of Iranian petroleum brought Western wildcatters to explore both

sides of the Persian Gulf.

Iran also led the region in nationalizing its industry and in develop-

ing an oil- based rentier state. The term itself was coined in 1970 by an

Iranian, Hossein Mahdavy, an economist who documented how oil pro-

vided Iran’s monarchy with the means to develop, while reducing the

urgency to pursue advancement, particularly in education.^1 Subsidies

weren’t enough to prevent the shah from being swept aside in the 1979

revolution. Even so, the revolutionary state led by Ayatollah Khomeini

retained parts of the shah’s rentier playbook, including low, fixed prices

on energy.