Kuwait is a country in Western Asia. With six percent of total global oil reserves— the seventh-largest in the world—this state has a powerful economy. This paper studies the country’s economy and the conditions that shaped it, and assesses the shifts Kuwait has undergone. In particular, the reasons for its instability in the last two years will be examined. The country’s economy is built around oil, with nearly half of its gross domestic product and over 90 percent of government income and export revenues derived from petroleum (“Kuwait Economy: Risk Analyses” par. 1). Kuwait’s oil reserves were discovered in 1938, and the subsequent influx of money led to a period of large-scale modernization, which lasted until the 1980s and was cut short, first by the economic crisis, and then by an invasion by the neighboring country of Iraq. The invasion ended in 1991, due to U.S. military intervention. Since that time, there have been extensive internal and external efforts to rebuild and rejuvenate the state’s economy; however, too many vital companies and foreign organizations had already moved their business to Dubai and Bahrain during the years of crisis. As a result, the country suffers from a poor business climate, preventing it from developing the private sector and diversifying the economy. The economic situation is further strained by a competitive relationship between the government and the National Assembly parliament, which has stunted the introduction of any new reforms (“The World Factbook – Kuwait”). Despite this situation, the country’s economy has remained strong due to the petroleum industry. The local currency, the Kuwaiti Dinar, enjoys the highest value on the global currency market, and the country itself is the fourth richest country per capita according to the World Bank, and the fifth according to the International Monetary Fund. The country has also developed a banking industry, with the National Band of Kuwait being one of the largest banks in the Arab world. The state maintained a surplus budget of 30-50 billion dollars for 15 years, until 2008, which saw a rapid drop. In 2015-2016, another significant drop was observed. As a consequence, Kuwait suffers a budget deficit of 15 million dollars (“Kuwait Government Budget” par.1). In many ways, this is the result of poor business decisions. Prior to 2008, the massive financial surpluses were not injected into the economy to stimulate further development but were rather invested into foreign assets, which provided additional income. In the same vein, the country has not involved itself with any significantly profitable economic project since the Iraq invasion. Instead, Kuwait has been becoming more and more dependent on profits from oil, especially compared to the 1990s. While these decisions had temporary financial benefits, they made the country vulnerable to the effects of the global financial crisis. This resulted in a massive budget hit, once the country found itself unable to use these surpluses to cushion the hit (Ramadhan, Hussain & Al-Hajji 1). This set the stage for problems in 2016, which are projected to continue into the following year. As already mentioned, Kuwait’s financial success is heavily dependent on supply and demand for oil, and this is the deciding factor of