The New Middle East Oil Bonanza

Beyond the Dubai Ports deal: Where all those billions are going.

If the Burj Dubai development isn’t the biggest project in the world, it must be close. At night under floodlights thousands of mostly Asian workers in hard hats swarm over a 500-acre building site in the heart of Dubai, the Persian Gulf emirate that is tiny in size but limitless in ambition. Emaar Properties, a local company, is carving out of the desert a new $20 billion district with 30,000 homes, a Giorgio Armani-designed hotel, an ice rink, and a 30-acre man-made lake.

The centerpiece of the project, which employs more than a dozen American firms, is Burj Dubai, a $1 billion tower. It was designed by Chicago architects Skidmore Owings & Merrill LLP, and its construction is being managed by New York-based Turner Construction Co. “We are moving up one floor a week, and we are now on the 31st floor,” says Mohamed Ali Alabbar, Emaar’s chairman. The exact planned height is shrouded in secrecy to foil competitors, but Alabbar promises that the luxury residential complex, more than 2,500 feet high, will be “40% taller than anything else.”

The world’s tallest building? In Dubai? The city-state in the United Arab Emirates captured headlines in the U.S. recently when government-owned Dubai Ports World, through its purchase of Britain’s Peninsular & Oriental Steam Navigation Co. for $6.8 billion, agreed to take over management of several major ports, from New York to Miami. The deal has sparked an outcry among politicians worried that an Arab-owned company could be a vehicle for al Qaeda operatives. The uproar has forced the company to delay its plans in the U.S.

The Dubai Ports deal, though, is just one relatively small episode in the second great Mideast oil boom. The boom is characterized by hugely ambitious projects that are transforming the shores of the Persian Gulf into a Xanadu with some of the most fantastic and expensive structures on earth. The rush of petrodollars is creating enormous private and public wealth and reshaping Gulf business and society.

All this is happening when the other Mideast — of Iraq, radical Islam, and Palestinian-Israeli relations — is wracked by violence and strife. That turmoil could certainly threaten the Gulf’s prosperity. Just look at what happened in late February when al Qaeda fighters unsuccessfully attacked a key oil facility in Saudi Arabia. But for now the authoritarian regimes running the Gulf are seizing the opportunity to build new economies and satisfy their restive populations with a new level of affluence.

Business Week