Kuwait is a small, rich, relatively open economy with self-reported crude oil reserves of about 104 billion barrels - 10% of world reserves. Petroleum accounts for nearly half of GDP, 95% of export revenues, and 80% of government income. High oil prices in recent years have helped build Kuwait's budget and trade surpluses and foreign reserves. As a result of this positive fiscal situation, the need for economic reforms is less urgent and the government has not earnestly pushed through new initiatives. Despite its vast oil reserves, Kuwait experienced power outages during the summer months in 2006 and 2007 because demand exceeded power generating capacity. Power outages are likely to worsen, given its high population growth rates, unless the government can increase generating capacity. In May 2007 Kuwait changed its currency peg from the US dollar to a basket of currencies in order to curb inflation and to reduce its vulnerability to external shocks.

Although the most important social division in the country is between citizens and foreigners, the indigenous population is internally divided along a number of lines as well. The first is sectarian. The majority of Kuwaiti nationals are Sunnis Muslims; the minority are Shia. Figures have never been published on the number of Shia, but estimates in the 1980s ranged from 15 to 25 percent of the national population. Shia are a diverse group. Some are Arab, many the descendants of immigrants from Ash Sharqiyah (Eastern Province) in Saudi Arabia or from Bahrain. Others come from Arab families who moved from the Arabian side of the gulf to Iran, stayed awhile, and then returned. Others are of Iranian origin, who often speak Farsi as well as Arabic at home and sometimes maintain business or family ties with Iranians across the gulf. After the Iranian Revolution of 1979 and the subsequent Iran-Iraq War of 1980-88, this Shia community experienced a renewed sense of sectarian identification. The identification resulted from sympathy with their revolutionary coreligionists in Iran and from increasing government and social discrimination. During the 1980s, the tension between Sunnis and Shia, which had erupted occasionally in the past, became somewhat sharper.