The accession to the throne of sultan Qaboos ibn Said inn 1970 marked the beginning of considerable
political and economic
changes in Oman. Realizing the importance of internal and local stability, the sultanate started coming out of its
political isolation, forming alliances in the Middle East and maintaining good diplomatic relations with the western powers. Overall, sultan Qaboos supported a non-aligned foreign policy, determined by what is of best interest to the country. Alongside, the regime gradually modernized the country in an effort to develop the economy and attract foreign
investment. Although infrastructural improvements, social changes, and economic reforms were progressively undertaken, the country still faces the challenges of its overdependence on oil and shortage of Omani labor force. As Omani oil reserves are depleting, the transition from rentier to a more diversified economy is imperative to the future economic growth of the sultanate. This paper explores the economy of Oman during the period of 1980-2004 and how it was affected by the regime's internal reforms, its involvement in the resolution of the local conflicts and its diplomatic ties with the U.S. Paper Outline: Introduction Oman and the Gulf Cooperation Council Gulf War: Consequences Iran-Iraq War and its Impact on Omani Economy and Political Stability Omani Economy: Problems and Challenges Social Reforms Foreign Investment U.S.- Omani Relations Military Expenditure Conclusion Bibliography