34: The Highway Built by Oil Markets and Political Intrigue

Tracy Alloway (0:07)

Welcome to Odd Lots, I'm Tracy Alloway, executive editor of Bloomberg Markets.

Joe Weisenthal (0:11)

And I'm Joe Weisenthal, managing editor of Bloomberg Markets.

Tracy Alloway (0:15)

So, Joe, I have a special treat for you today. We are going to be doing an entire episode, essentially, on my commute to work.

Joe Weisenthal (0:25)

Oh, and you are not based here in New York, and you're in Abu Dhabi, so this is like a very Tracy-centric episode, right?

Tracy Alloway (0:35)

Well, hopefully not.

But I am in Abu Dhabi, and at least once a week, I drive over to Dubai. It's about an hour, hour and a half, sometimes two hours, depending on how bad the traffic is. And it goes along this one road called the E-11 Highway, and it's kind of a famous road over here.

Joe Weisenthal (0:56)

Why is it famous? Is it just because it connects the two cities, I'm guessing?

Tracy Alloway (1:00)

It connects the two biggest cities in the UAE. It's also the UAE's longest road, and it kind of stretches and weaves through a bunch of other Gulf states.

And what we're going to be talking about today is the history of how that road came to be. And I promise you, there is actually a market's angle in this.

Joe Weisenthal (1:22)

Awesome. Well, I'm looking forward to it. Who are we talking to? All right.

Tracy Alloway (1:25)

So Joe, we have joining us today, Matthew McLean. He is a Ph.D. candidate at New York University and a specialist in Middle Eastern studies.

So the perfect person, really, to walk us through the history of this road.

Joe Weisenthal (1:41)

Great. Let's get to it.

Tracy Alloway (1:42)

Thanks for joining us, Matthew. Why don't you set the scene for us? You know, the road starts to get built, I think it was sometime in the 1960s.

What did this area, the United Arab Emirates, actually look like at the time?

Matthew MacLean (1:58)

Well, at the time, first of all, it wasn't yet the United Arab Emirates. It was still known as the Trucial States from the truces that the various shtetms had signed with the British Empire in the 1800s. First, a truce on sea to prevent piracy or what was called piracy and what some might call legitimate commercial competition for the British. And then there was a second truce that was signed later that century to avoid fighting on land, which wasn't always observed. But the point is that this is where the area of the truceal states got its name from. It was peripheral to the world economy. It was even the periphery of the periphery in some ways. It was governed from British India. The only reason the British were really there was to protect the maritime and land approaches to India. So it was pretty much ignored by the British. But nevertheless, it had an important role, which was to produce pearls. And pearling in the Gulf area was the mainstay of the economy, at least through the 1920s. And then the pearling economy collapsed.

And in the 30s and 40s, because of the Great Depression and World War II, the area was fairly isolated in some regards. At least it's perceived that way compared to what it is today. Of course, there were many still maritime connections to India, to East Africa.

There was overland trade as well. Of course, people made the hajj to Mecca, but it was very much a part of the Indian Ocean world. There were no paved roads until Dubai City started building some in the late 50s, and one of the oil companies built a road for its own equipment in the western region of Abu Dhabi around the same time.

So most transportation was by camel, by donkey, by foot, and of course by sea.

Tracy Alloway (3:46)

So you mentioned oil just then. So something did happen in the area in the 1950s, early 1960s that eventually ended up changing the landscape and was the catalyst for the construction of this road that I now shuttle back and forth on every day, right?

Matthew MacLean (4:04)

Yes. Oil, of course, had already been discovered in the region in Iran in, I think, 1908, and then later in Bahrain and Kuwait and Saudi Arabia and so on. But the Trucial States were latecomers to the game. The oil in the Emirates is pretty deep underground relative to other areas in the Gulf, so it was harder to get to.

But oil requires a number of things that were at the time new in the Trucial States. Oil concessions, which were signed with individual sheikdoms, required, for example, knowing where the borders of a sheikdom were, and no one had ever drawn formal land boundaries on a map before because it simply wasn't necessary.