This study compares Pahlavi era Iran and Suharto’s Indonesia to explain the divergent developmental outcomes observed in rentier states. The central question is why two governments reliant on oil revenues, and pursuing similarly centralized development strategies, ended up with markedly different results. The theoretical framework combines rentier state theory with historical institutionalism and employs a historical–comparative method alongside process tracing. The findings indicate that the key difference lies not in the presence of rents themselves, but in the organization of intermediary institutions, bureaucratic capacity, state–business relations, and the formation of power coalitions. In Iran, the concentration of power in the Shah’s hands and the close linkage between the state and military–economic elites produced a centralized but institutionally thin model of development, heightening regime vulnerability. In Indonesia, Suharto’s reliance on technocrats and his maintenance of a balance between the military and commercial actors enabled the construction of more effective institutional foundations for guided development. The study thus demonstrates that the effects of oil rents on development and political stability depend less on resource abundance per se than on the quality of institution building and the state’s historical trajectory.