Addressing business leaders in the United Arab Emirates on Tuesday, Clinton said Gulf governments should resist the urge to spend mainly on itself in a new period of high oil prices which analysts say is set to continue for the foreseeable future.

"This is a magic moment for this part of the world. I think you should think about ... what you should do today so that (your grandchildren) will think 50 years from now that it was a magic moment because of the gifts you left behind," he said.

"Many people will look back and say you had all these riches and you built some beautiful buildings, you had a very good time - but you also thought about me and how the world would work."

Petrodollar power

Analysts estimate that Gulf Arabs will plough $360 billion into foreign assets in 2005-2006, although some of the money is being invested in other Middle Eastern countries. In past oil booms Gulf states mostly parked petrodollars in the West.

"If I were a benevolent dictator of all the Middle East, I'd turn it not into the oil centre of the world but the energy centre"

Bill Clinton,
Former US president

Construction in Gulf countries is racing ahead as regional economies boom. Saudi Arabia, Kuwait and the UAE are among the world's top oil producers, but their reserves are generally seen as lasting for no more than several more decades.

"If I were a benevolent dictator of all the Middle East, I'd turn it not into the oil centre of the world but the energy centre," Clinton said, listing solar and wind energy.

"I'd take some of the cash reserves and invest money in all the poor countries around here ... I would educate them and manufacture massive amounts of alternative energy technologies."

Clinton said such a regional redistribution of wealth would help reduce Islamic extremism, which would also require an end to the Israeli-Palestinian conflict.