Why is uber-wealthy Brunei at risk of crisis?

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This is the script for my video posted on July 10, 2026. Watch it on TikTok.

Brunei is a tiny absolute monarchy split into two halves on the island of Borneo, bordered on land entirely by Malaysia with its only open frontier facing the South China Sea. It’s the surviving piece of a once vast maritime empire, but today it is approaching a serious economic and political crisis. So why did Brunei shrink to a fraction of its former self, and what is putting its remaining future at risk?

In the 14th century, the Java-based Majapahit Empire claimed tribute from polities across much of the archipelago, including a small trading kingdom on Borneo that the Chinese called Po-ni, the ancestor of Brunei. A Javanese chronicle from 1365 lists Brunei among Majapahit's tributaries, though historians debate how real that control over distant Borneo actually was.

By tradition, Brunei became a sultanate in the 14th century when its first ruler, Awang Alak Betatar, converted to Islam, took the name Sultan Muhammad Shah, and married a Muslim princess. The kingdom shifted from a Hindu-Buddhist orbit to an Islamic state as Islam spread through Southeast Asia.

And as Majapahit declined through the 15th century, Brunei emerged as an independent power and grew into a full thalassocracy, a sea empire. After Malacca fell to the Portuguese in 1511, Brunei’s influence expanded until it covered about 200k square kilometers of land, and a vast amount of ocean. Portuguese traders described the capital as being ringed by a stone wall.

A war with Spain in 1578 shook the empire, and by the late 17th century, internal succession strife, piracy, and relentless European colonial expansion had cost Brunei many of its trade routes. This persisted until the mid-19th century when a British adventurer named James Brooke arrived.

Brooke managed to suppress a rebellion against the empire, and he was made Rajah of Sarawak in return. He and his relatives used this position to progressively pressure Brunei into ceding territory, not to Britain, but to Sarawak, the Brookes' own private kingdom. Britain itself had already taken Labuan, an island just off Brunei's coast, back in 1846, and a chartered British company was absorbing North Borneo to the east.

Watching his realm dissolve piece by piece, the sultan feared total annexation, and in 1888 he signed a treaty making Brunei a British protectorate. Britain took charge of foreign relations while the sultan kept internal sovereignty. But the treaty failed its first real test. Just two years later, in 1890, James Brooke's nephew Charles annexed the district of Limbang despite the sultan's opposition, and Britain did nothing.

The seizure of Limbang split the country into two halves: the main western districts, and the eastern Temburong district. Nearly all of Brunei's lost territory eventually became part of Malaysia. Limbang stayed a sore point for over a century, until Brunei and Malaysia settled their boundaries in 2009, though Brunei has never publicly said it dropped the claim.

Around that period, as oil became a global commodity, Brunei discovered it had a lot of it. The discovery of oil at Seria in 1929 began transforming the country from a near-bankrupt state into one of the wealthiest places on Earth per capita, with the biggest windfalls coming later from offshore fields and LNG exports, and this is arguably what has allowed it to persist through everything since.

The country was occupied during WWII by Japan, who largely wanted their oil. In 1959, Brunei gained full internal self-government and sweeping authority for the sultan.

But in 1962, the left-wing Brunei People's Party, or PRB, swept the elections feeding into the legislative council, winning 54 of 55 contested seats. But appointed members held the council's majority, and the sultan simply declined to convene it, blocking the PRB from power. The PRB’s military wing, the North Kalimantan National Army, or TNKU, launched coordinated attacks on oil facilities, police stations, the power station, and the residences of the chief minister and the sultan, with the aim to capture the sultan and form a new state.

The TNKU had been trained and armed with Indonesian help, though how much Indonesia was behind the December revolt is still debated. Britain airlifted Gurkha forces from Singapore, secured the sultan, who was never actually captured, and broke the revolt within days. The sultan proclaimed a state of emergency that has never been lifted, meaning the sultanate continues to rule today under emergency powers.

In 1963, Brunei was offered a place in the Malaysian federation, and though they considered it, the sultan ultimately chose to remain separate to maintain control over its oil revenue and the sultan’s absolute authority. In 1979, Brunei and Britain finally signed a treaty of friendship and independence, and the country gained full sovereignty in 1984.

Brunei has been ruled by Sultan Hassanal Bolkiah since 1967, making him the longest reigning living monarch in the world. He is an absolute monarch who also serves as prime minister, minister of defense, and the minister of finance and economy, though in June 2026 he handed the foreign affairs portfolio to his son Prince Abdul Mateen, part of a reshuffle widely read as giving the next generation governing experience. The actual heir remains the crown prince.

The sultan has an estimated net worth of about 30b USD, though the royal finances are so opaque that some estimates range much higher. He famously has the world’s largest residential palace at 1788 rooms and the world’s largest private car collection of about 7000 vehicles.

The state draws about three quarters of its revenue from oil and gas, much of it through Brunei Shell Petroleum, a 50/50 venture between the government and Shell. It collects no personal income tax and provides effectively free healthcare, education, and subsidized housing. And the famously secretive sovereign wealth fund managing Brunei's external reserves held an estimated 73 billion dollars as of 2023.

But Brunei faces some serious problems in the near term. Hydrocarbons and their derivatives account for over 90% of exports and 50-60% of GDP, but these are projected to run out around the year 2050. The country is trying to diversify as a result, targeting a highly educated populace, high quality of life, and a dynamic economy to ensure continued prosperity. But in the meantime, youth unemployment is 18.5%, and the country is also highly exposed to climate change impacts like coastal flooding.

In 2013, the country also announced a national penal code under Islamic sharia law, rolled out in phases. The first phase took effect in 2014, introducing fines and imprisonment for offenses like indecency and skipping Friday prayers. After an international outcry, later phases were delayed, but in 2019 they introduced amputation as a penalty for theft, and death by stoning for adultery and perceived LGBT indecencies. This triggered global condemnation and boycotts, and though the sultan announced a de facto moratorium on the death penalty, everything else remains in place.

Meanwhile, Brunei’s 200-nm exclusive economic zone, or EEZ, overlaps with China’s nine-dash line, meaning that it claims sovereignty over reefs that China is actively pursuing control over. Still, Brunei’s relationship with China has actually grown in recent years, with new agreements on commercial cooperation for maritime oil and gas exploitation without prejudice to legal positions in the South China Sea. Brunei is also a Belt and Road Initiative participant.

But Brunei also hosts the only remaining permanent British military base in the region, a Gurkha battalion that doubles as the British Army’s jungle warfare school. Brunei regularly trains with Singapore, the US, the UK, Australia, and other partners.

Nonetheless, Brunei’s durability relies on oil revenues, Islamic law, and the legitimacy of the monarchy, all of which are impacted by one another and all of which are at risk.

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