The May 11 decision by Kuwaiti Emir Meshal al-Ahmed al-Jaber al-Sabah to dissolve Parliament could lead to a more streamlined decision-making process and the advancement of economic diversification plans and energy projects that have been stalled for years by political paralysis. In the last 18 months, Kuwait has held three parliamentary elections, the last one on April 4. In the last four years, there have been eight governments headed by three prime ministers as well as leadership changes following the death of two emirs – Sabah al-Ahmed al-Sabah in 2020 and Nawaf al-Ahmed al-Sabah in 2023.

On April 15, Meshal appointed Ahmed al-Abdullah al-Sabah prime minister, after incumbent Mohammed Sabah al-Salem al-Sabah declined to be reappointed. The decision to dissolve Parliament appears to have unlocked a key obstacle to formation of a new Cabinet under Ahmed. A May 12 emiri decree provided the names of those comprising the new government, which retained the key oil and finance portfolios from the previous Cabinet and introduced new faces.

Kuwait, which holds around 6% of global oil reserves, relies on oil exports for around 90% of government revenue and is very exposed to oil price volatility. While other Gulf Arab oil producing states have advanced diversification policies to ease reliance on petroleum revenue along with stepped up renewable energy investments, Kuwait has lagged behind.

Before the emir’s move to dissolve Parliament, Kuwait had drawn up a new strategy, to incorporate renewables into its energy mix. On March 7,  the minister of electricity, water and renewable energy at the time, Salem al-Hajraf, unveiled the 2030-50 renewable energy strategy, detailing plans to install 22 gigawatts of renewable energy by the end of the decade. In addition to large-scale projects, the strategy will allow Kuwaiti citizens to install rooftop solar panels and sell excess energy to the state, the minister explained, as quoted by Kuwait News Agency. Hajraf has been replaced in the new Cabinet by Mahmoud Bushehri.

It remains to be seen whether the new minister will make amendments to what is a very ambitious renewables target. Kuwait is in dire need of diversifying its energy sources to alleviate pressure on the national electricity grid, which is struggling to meet soaring demand, particularly during the peak summer season. This has forced Kuwait to become an importer of liquefied natural gas and electricity to avoid blackouts.

Hajraf told specialist publication MEES on the sidelines of the April 28 World Economic Forum Special Meeting in Riyadh that the first large-scale contract for 1.1 GW of a solar photovoltaic project would be awarded before the end of the year. It will be installed at Kuwait’s Shagaya Renewable Energy complex, which has pilot facilities with combined capacity of 70 MW for wind, solar photovoltaic, and concentrated solar power.

Kuwait’s plans to install 1.5 GW were put on hold in 2020 during the coronavirus pandemic, while other Gulf Arab states surged ahead with their diversification strategies. The United Arab Emirates now has installed renewable capacity of 5.9 GW, Saudi Arabia has 2.8 GW, Qatar 800 megawatts, and Oman 500 MW. All four also have sizeable new projects under development, with strong project pipelines in Saudi Arabia and the UAE. In Kuwait, renewables account for less than 1% of power generation.

The emir called early elections on April 4 in a bid to break the deadlock between the legislative and executive branches that has been a feature of Kuwaiti politics for over a decade. One of the emir’s reasons for dissolving Parliament was to eliminate obstacles that have held up major projects and reforms as well as to eliminate what he said was corruption and undue interference in the affairs of government and ministerial appointments, decisions that are the emir’s preserve. Some of Parliament’s powers have been devolved to the emir and the Cabinet, Meshal said in his announcement.

Lebanese journalist and commentator Khairallah Khairallah wrote in the Lebanese Arabic newspaper An-Nahar that the emir had opted for “the surgical option after sedatives failed to relieve the country’s ills.”

The energy sector has suffered from massive project delays due to political torpor. One of Kuwait’s weaknesses has been its recent reliance on imports of LNG for power generation even though it has significant natural gas resources that have not been developed adequately in time to meet rising domestic demand. A Kuwaiti insider said he believed the dissolution of Parliament would speed up project execution but noted that corruption would be difficult to root out without checks and balances.

While the country’s financial position is stable, the International Monetary Fund warned in a consultation visit from April 30 through May 7 that “progress with fiscal and structural reforms has been held back by political gridlock between the government and Parliament,” adding that “Continued delays in fiscal and structural reforms due to political gridlock could give rise to procyclical fiscal policy and undermine investor confidence, while hindering progress towards diversifying the economy and enhancing its competitiveness.”

The IMF said a 2.2% fall in real economic activity in 2023 was due to a 4.3% contraction in the oil sector due to OPEC+ production cuts that came into effect in May 2023 and negligible growth in the non-oil sector due to “subdued domestic demand growth.” It projected that the economy would contract “by a further 1.4 percent in 2024, with oil production falling by another 4.3 percent due to the OPEC+ quota cut in January.” However, while the non-oil sector is expected to expand by 2%, the rate of growth is lower than the Gulf Cooperation Council average of 3.6%.

The IMF said in an August 2023 consultation visit that the political situation in Kuwait was delaying “progress towards diversifying the economy, making it more vulnerable to climate transition risks.”

Kuwait has had long-term plans to raise its oil production capacity to 4 million barrels per day, now targeted for 2035, with 3.65 mb/d coming from its main upstream entity Kuwait Oil Company and the remaining 350,000 b/d from Kuwait’s half of the Partitioned Neutral Zone it shares with Saudi Arabia. Long delayed plans to develop the offshore Dorra gas field shared between the two countries are also progressing with first gas from Dorra expected in 2029.

In the meantime, Kuwait has become dependent on LNG imports and is seeking 500 MW of electricity imports this summer via the Gulf Cooperation Council Interconnection Authority interconnector. Officials have warned of repeated annual power crises if major capacity projects remain stalled.

In the summer of 2023, Kuwait experienced several blackouts amid record power demand, and the situation is likely to be more severe this year. With temperatures already hitting 38 degrees Celsius (over 100 degrees Fahrenheit) in late April, Kuwait will need to finalize agreements soon if it is to avoid a repeat of last year, when plans to spend 30 million Kuwaiti dinars ($97 million) on 600 MW of emergency supplies via the interconnector were derailed by bureaucratic red tape.

The power sector is suffering the consequences of years of stifling bureaucracy as Kuwait’s politics have prevented efforts to reform lengthy government contracting procedures. There have been no sizeable installed capacity additions since 2020, and the aging fleet is becoming expensive to maintain.

Having stagnated at 20.25 GW in recent years, installed capacity has fallen to 20.18 GW this year as some older generation units are still running and require maintenance.

Kuwait can’t afford to lose capacity given that peak load continues to set new monthly records. Peak load hit 11.22 GW April 20 as temperatures soared ahead of the summer season. In 2023 experts warned that the country was likely to face summer power shortages in 2024 and 2025, a crisis that might extend to 2027.

Most of Kuwait’s gas is associated with crude oil production and tends to fluctuate with changing OPEC+ quotas. Kuwait has oil production capacity of around 3 mb/d, but output is lower because Kuwait was among eight OPEC+ producers to agree to voluntary production cuts, which cap its oil production at 2.4 mb/d until at least the end of the second quarter of the year. Production capacity has fallen in recent years and stands at around 2.9 mb/d, largely because of declines from the giant Burgan field, so new upstream investment is needed if it is to reach its target.

While it may be a modest exporter of crude compared with Saudi Arabia, Kuwait is an important supplier of oil products to the world, especially since the Russia-Ukraine war changed the dynamics of the global refined products market. Kuwait’s expanded refining capacity came in time to make up for the loss of Russian product due to sanctions.

A $30 billion investment in the refining sector, including upgrades to the Mina Al Ahmadi and Mina Abdullah refineries, has shielded Kuwait from oil price volatility by allowing it to export more high value refined products. As high value refined products export surged in 2023, export revenue rose to a record $25.5 billion, according to MEES calculations. And after it was delayed for nearly a decade, Kuwait’s 615,000 b/d Al-Zour refinery became fully operational in February, lifting Kuwait’s overall refining capacity to 1.4 mb/d.

Refined product exports have averaged around 850,000 b/d so far this year, putting Kuwait on track to break the 2012 record of 805,000 b/d. This has allowed Kuwait to export the bulk of its fuel oil to Asia, while Europe has been buying larger volumes of middle distillates, including diesel, gas oil, and jet fuel, from Kuwait to make up for sanctioned Russian supplies.

Oil exports from the Middle East to Europe have had to face a new geopolitical obstacle in recent months because of the attacks by Yemen’s Houthis on Red Sea shipping vessels. Since February, almost all tankers carrying Kuwaiti products have been diverted to the Cape of Good Hope. However, the disruption has not impacted export volumes: In April, Kuwait exported an average 340,000 b/d of high value refined products to the European market, the highest since June 2023.

Al-Zour is proving to be the jewel in Kuwait’s crown, but that alone is not enough to guarantee resilience of an economy that for too long has relied on hydrocarbons to sustain it. One manifestation of this reliance is the country’s high per capita carbon dioxide emissions in an environment that is very susceptible to climate change.

Correction: This piece originally stated Mahmoud Bushehri, Kuwait’s minister of electricity, water and renewable energy, held the same position in the past. This is Bushehri’s first time serving in that position.