The first permanent settlers in the region came from Bani Khalid tribe of Nejd and established the state of Kuwait. In 1756, the people elected Sabah I bin Jaber as the first Amir of Kuwait. The current ruling family of Kuwait, al-Sabah, are descendants of Sabah I. During the rule of the Al-Sabah, Kuwait progressively became a center of trade and commerce. It now served as a hub of trade between India, the horn of Africa, the Nejd, Mesopotamia and the Levant. Up until the advent of Japanese pearl farming, Kuwait had one of the largest sea fleets in the Persian Gulf region and a flourishing pearling industry. Trade consisted mainly of pearls, wood, spices, dates and horses.
By the late 19th century, much of the Arabian Peninsula came under the influence of the Ottoman Empire. The Ottomans acknowledged the autonomy of al-Sabah dynasty but still claimed sovereignty over Kuwait.
In 1899, Kuwait entered into a treaty with the United Kingdom that gave the British extensive control over the foreign policy of Kuwait in exchange for protection and annual subsidy. This treaty was primarily prompted by fears that the proposed Berlin-Baghdad Railway would lead to an expansion of German influence in the Persian Gulf. After the signing of the Anglo-Ottoman Convention of 1913, then Amir of Kuwait, Mubarak Al-Sabah, was diplomatically recognized by both the Ottomans and British as the ruler of the autonomous caza of the city of Kuwait and the hinterlands. However, soon after the start of World War I, the British invalidated the convention and declared Kuwait an independent principality under the protection of the British Empire. The 1922 Treaty of Uqair set Kuwait's border with Saudi Arabia and also established the Saudi-Kuwaiti neutral zone, an area of about 5,180 km² adjoining Kuwait's southern border.
On 19 June 1961, Kuwait became fully independent following an exchange of notes between the United Kingdom and the then Amir of Kuwait, Abdullah III Al-Salim Al-Sabah. ReserThe Gulf rupee, issued by the reserve Bank of India, was replaced by the Kuwaiti dinar. The discovery of large oil fields, especially the Burgan field, triggered a large influx of foreign investments into Kuwait. The massive growth of the petroleum industry transformed Kuwait from a poor pearl farming community into one of the richest countries in the Arabian Peninsula and by 1952, the country became the largest exporter of oil in the Persian Gulf region. This massive growth attracted many foreign workers, especially from Egypt and India.
Kuwait settled its boundary disputes with Saudi Arabia and agreed on sharing equally the neutral zone's petroleum reserves, onshore and offshore. After a brief stand-off over boundary issues, Iraq formally recognized Kuwait's independence and its borders in October 1963. During the 1970s, the Kuwaiti government nationalized the Kuwait Oil Company, ending its partnership with Gulf Oil and British Petroleum.
In 1982, Kuwait experienced a major economic crisis after the Souk Al-Manakh stock market crash and decrease in oil price. However, the crisis was short-lived as Kuwait's oil production increased steadily to fill the gap caused by decrease in Iraq's and Iran's oil production levels following the events of the Iran–Iraq War. In 1983, a series of six bomb explosions took place in Kuwait killing five people. The attack was carried out by Shiite Dawa Party to retaliate Kuwait's financial support to Iraq during its war with Iran.
USAF aircraft (F-16, F-15C and F-15E) fly over Kuwaiti oil fires, set by the retreating Iraqi army during Operation Desert Storm in 1991.Kuwait had heavily funded Iraq's eight year-long war with Iran. After the war ended, Kuwait declined an Iraqi request to forgive its US$65 billion debt. An economic warfare between the two countries followed after Kuwait increased its oil production by 40 percent. Tensions between the two countries increased further after Iraq alleged that Kuwait was slant drilling oil from its share of the Rumaila field.
On 2 August 1990, Iraqi forces invaded and annexed Kuwait. Saddam Hussein, then President of Iraq, deposed the Amir of Kuwait, Jaber Al-Sabah, and installed Ali Hassan al-Majid as the new governor of Kuwait. During the Iraqi occupation, about 1,000 Kuwaiti civilians were killed and more than 300,000 residents fled the country. After a series of failed diplomatic negotiations, the United States-led coalition of thirty-four nations fought the Persian Gulf War to remove the Iraqi forces from Kuwait. On 26 February 1991, the coalition succeeded in driving out the Iraqi forces, restoring the Kuwaiti Amir to power. Kuwait paid the coalition forces US$17 billion for their war efforts
During their retreat from the coalition, the Iraqi armed forces carried out a scorched earth policy by damaging 737 oil wells in Kuwait, of which approximately 600 were set on fire. It was estimated that by the time Kuwait was liberated from Iraqi occupation, about 5 to 6 million barrels (950,000 m3) of oil was being burned in a single day because of these fires.
Oil and soot accumulation had affected the entire Persian Gulf region and large oil lakes were created holding approximately 25 to 50 million barrels (7,900,000 m3) of oiland covering 5% of Kuwait's land area.[ In total, about 11 million barrels (1,700,000 m3) of oil was released into the Persian Gulf[ and an additional 2% of Kuwait's 96 billion barrels (1.53×1010 m3) of crude oil reserves were burned by the time the oil fires were brought under control. The fires took more than nine months to extinguish fully and it took Kuwait more than 2 years and US$50 billion in infrastructure reconstruction to reach pre-invasion oil output. Kuwait has since largely recovered from the socio-economic, environmental, and public health effects of the Persian Gulf War.
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