KUWAIT CITY—Thirty-five years ago, the oil fields of this desert sheikhdom the size of New Jersey went up in flames when Iraq’s Saddam Hussein invaded and pulled the United States into the first Gulf War.
Today the flow of crude oil in Kuwait has stopped again. The rigs are still standing, while oil-loading berths along the Persian Gulf are empty. With the closure of the Strait of Hormuz, Kuwait has stopped exporting about 2 million barrels per day, depriving the world of about 2% of its daily needs, and also cutting off the country’s main source of income.
The Iran conflict has harmed countries up and down the Gulf – but not nearly as much as Kuwait. Practically everything its 5 million inhabitants eat and drink must be brought in a truck from neighboring Saudi Arabia.
Meanwhile, hundreds of Iranian drones and missiles have badly damaged Kuwait’s oil infrastructure, damaged US military bases and forced US diplomats and thousands of troops stationed in the country to pack up.
Airports only recently reopened, long after others, and remote learning remains in place, even as neighboring states have returned to in-person schooling.
For the public sector, which employs the majority of the workforce, workplace attendance is limited to 50%. The return of public gatherings has been slow.
Although only a few people were killed, Kuwait City’s seaside skyline remains scarred with the scars of war. This includes the upper floors of the state oil company’s headquarters, which was attacked with cruise missiles on April 5, causing a fire and sending smoke into the night sky.
Last month, S&P Global’s Purchasing Managers’ Index indicated that confidence in Kuwait was at its lowest level since the COVID-19 pandemic began six years ago.
Sheikh Nawaf S., vice chairman and chief executive of state-owned Kuwait Petroleum Company. “I don’t think anyone imagined that the safe and free transit route through the Strait of Hormuz would be closed for so long,” al-Sabah said.
With a sovereign-wealth fund worth more than $1 trillion, Kuwait could theoretically go for more than a decade without earning money and still pay for cradle-to-grave welfare benefits for about 1.5 million citizens, in a population that also includes more than 3 million foreign residents.
But this situation risks reinforcing trends that have already turned Kuwait – which flourished in the 1960s and 1970s – into something of a fledgling region, after struggling to recover from the Iraq invasion of the 1990s. This presents a cautionary tale for remaining bay What can happen when uncertainty and instability pervade countries whose selling points are wealth and peace?
“We can’t stay the way we are for very long,” said top businessman Faisal al-Mutawa, whose family has imported consumer goods for generations and wants less government control over the economy.
He said Kuwait had long talked about building a rail line to bypass the gulf, but never did so. Now they have to bring goods by truck, the cost of which is six times more than by ship. Margins are shrinking due to price restrictions imposed by the government.
“We need someone to transform the economy here in Kuwait,” Al-Mutawa said, “as Saudi Arabia and others have done with visionary projects.”
Current and former officials praised the government’s steady approach, saying Kuwait was not trying to emulate others and had learned from the 1990s war that caution is a virtue.
Minister of State for Economic Affairs and Investment Abdulaziz Almarzooq said Kuwait’s reserves This can be maintained for a long time. The suspension of oil exports “may be an insurance premium that we pay, but historically, it’s still a matter of time,” he said.
“We’re trying to assess now and just focus on being flexible, not necessarily always efficient.”
sensitive spot
Roughly shaped like a triangle, Kuwait is surrounded by Iraq, Saudi Arabia and the Gulf. This places it on the wrong side of the Strait of Hormuz, the closure of which leaves Kuwait essentially landlocked.
Before the airport reopened, there was only one way of entry: by land from Saudi Arabia. A recent trip involved a several-hour drive on a dark desert highway, where grazing camels far outnumbered people. Some gas flames could be seen flickering from the road, but the country’s energy facilities were essentially out of order.
Officials are concerned about further instability. Kuwait recently summoned the Iranian ambassador to protest what it called an incursion by Iranian paramilitary forces who clashed with Kuwaiti forces, leaving one person injured. Iran denied the allegations.
Kuwait is also concerned about Iraq, where small-scale attacks against oil operations were launched even before the Iran war began. Officials estimate that at least half of the drone strikes in the current conflict have come from Shiite militias there, which are backed by Tehran. Kuwait’s military said on 10 May that it had intercepted several more drones.
In Abdali, an agricultural region bordering Iraq, a lone herder was tending dozens of camels on a recent afternoon. His father used to go across the border to graze animals but has not returned for 35 years. Now they enter Saudi Arabia only by wandering south, he said.
left behind
Kuwait City was once seen as the economic center of the Gulf, much like today’s Dubai or Doha. A fishing and pearl-growing village before the discovery of oil, it opened the region’s first stock exchange and modern university, and gained a reputation as a vibrant cultural center with a more visible role for women in society.
The country created a welfare state that provided universal health care and education to citizens. It built infrastructure at home and invested in real estate and financial markets abroad through the world’s first modern sovereign-wealth fund.
Saddam Hussein’s invasion disrupted all that. Retreating Iraqi troops set fire to oil wells after the US-led coalition liberated the country, sparking a fire that took nearly a year to extinguish.
Remnants of that era still exist: the charred remains of Iraqi tanks and anti-aircraft guns litter Failaka Island off the coast of Kuwait City. Inhabited since the time of Alexander the Great, it now has little civilian presence left.
Elsewhere, Kuwait took years and billions to rebuild, and invited US troops to stay. But he struggled to get rid of the feeling of weakness. Investors became more cautious. Although run by hereditary royals, the country’s fractious parliament blocked new policies. The prevalence of oil diminished any urgency to diversify the economy.
“The country seems to have stabilized somewhat after independence,” said Edward “Skip” Gainham Jr., who was the U.S. ambassador when the invasion was repulsed and continues to visit. “Nothing happened.”
Today, Kuwait boasts the world’s second-largest shopping mall and many luxury outlets, but it lacks Dubai’s sense of the future. Motorists complain that potholes and loose gravel on old roads lead to accidents or burst tyres. Some areas have not been fully rebuilt in decades.
According to official data, while Dubai attracted more than $14 billion in foreign direct investment in 2024, Kuwait brought in only $725 million in the same period. Dubai’s airport handled more than 95 million passengers last year, while Kuwait’s airport handled less than 15 million, officials said.
playing it safe
Kuwaiti officials are confident the country will bounce back.
Sheikh Nawaf, boss of Kuwait Petroleum Company, said, “This is not our first crisis, and from every crisis we have learned a lot and have adapted well to the next crisis.”
“The oil company headquarters suffered extensive damage, but it is still standing,” he said in an interview in makeshift offices in a modest corporate park. “We are using it as a symbol of the oil field and Kuwait,” he said. “We are both defiant and resilient.”
Kuwaiti officials say the shutdown of oil infrastructure allows overdue maintenance. Otherwise, they prefer to wait and see how the war goes before launching new initiatives. Meanwhile, the United Arab Emirates—where Dubai is located—is accelerating construction of a second pipeline to double export capacity by next year.
Many consider Kuwait to be so cautious that it will never again be able to compete with cities like Dubai.
They point to the airport, which faces almost daily drone attacks, destroying several fuel tanks and a radar system. While other countries reopened after the ceasefire, Kuwait remained closed for two more weeks and still operates a fraction of normal flights.
The extended closure was widely seen as a reflection of the authorities’ extreme aversion to risk, with no one willing to take responsibility if something bad happened.
Write to Stephen Kalin stephen.kalin@wsj.com
