The Gulf crisis and the collapse of Soviet Block was responsible, to a certain extent for the economic crisis of 1991. Discuss.
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The Gulf crisis and the collapse of Soviet Block was definitely responsible, to a certain extent, for the economic crisis of 1991, as is explained below:
- Gulf crisis US declared war with Iraq in early 1991 because of Saddam Hussein's attempt to take over Kuwait. Iraq and Kuwait were our big suppliers of oil. With an ongoing war, ships found it hard to reach the Persian Gulf. Also, many oil wells were burnt. This led to rise in oil prices (doubling in a few months).
- Collapse of soviet block Since 1960, Soviet Union was our biggest export destination. By 1991, it split into 15 nations (Russia, Ukraine, etc). This significantly affected our exports. With import bill rising (Gulf crisis) and exports falling (collapse of Soviet Union), our foreign exchange position got worsened.
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