Maghreb countries who wish to stay neutral should note that their GCC neighbours are cleaning up in the war in Ukraine. When the dust settles, will they receive any crumbs from the table though?
There is agreement among analysts and researchers around the world that the Gulf region is the leading beneficiary of the Ukraine war. It had no role in the crisis that led Europe to war. That crisis was linked to a series of psychological syndromes that marked the history of the peoples of Europe.
Gulf leaders may not be just spectators to what is happening in Europe and the rest of the world. They realise, however, the importance of the windows of opportunity that the crisis provides them with in various fields.
Almost a year has passed since the region’s boom in oil and gas revenues began. The volatility in prices, especially in oil prices, has remained the high. The price of an oil barrel is hovering above the $80 mark. When it goes up to $120, it is good news. And if it remains in the range of $85-95 per barrel, it is fine as well. It might be even better if that happens, since it will not provoke the West, which is scrambling to find easy solutions that could compensate for the oil and gas supplies from Russia. Gas contracts between Gulf states and Europe, whether already signed or in the making, look like “eternal” contracts these days as they extend for decades.
With the exception of Qatar, which until recently continued to spend billions of dollars on the 2022 World Cup, other producing countries have been preparing for global volatility. It is difficult to describe government plans in Saudi Arabia and the UAE as austerity measures. The 2008 global financial crisis was an early warning of what would happen later, whether in terms of oil prices or investment returns. The UAE redirected its spending early, while Saudi Arabia caught up later after years of using accumulated funds to finance its spending and budget gaps. Then the two countries reconsidered their economic plans, taking into account their achievements in terms of infrastructure and investments, as well as their needs to expand oil industries and develop oil and gas fields. Big spending continues, but in a different direction aimed at reaping more revenues, and not just continuing prosperity-induced spending for the sake of prosperity, without trying to anticipate the future.
Kuwait on the other hand must solve its political problems before it secures a spot in the current oil and gas race.
The infrastructure projects that have been carried out in the Gulf over the past two decades are exceptional. They constitute an investment in themselves and should be viewed as such. Service infrastructures are investment opportunities that can carry dividends for governments. There has been an unprecedented need for political decisions in the Gulf region. Should countries continue to provide electricity, water and services almost for free, with the squandering and waste of resources that follows? Can there be compromise solutions that see these investments as a source of revenue? Deprive any citizen of a service which he sees as an acquired right and to which he has been accustomed and he will be naturally unhappy. But is there any other way to prepare for today’s volatile world?
Saudi Arabia is channeling much of its current financial bonanza into major domestic projects. There are innovative schemes, such as we see in NEOM. It is still too early to tell what such projects will provide in terms of Saudi GNP over the coming decades. However, Saudi Arabia is looking at its capital, Riyadh, in a different light, and insists on instilling it with a new social and economic dynamic. Even without the influx of additional imports, Riyadh wants, for example, to compete with Dubai. If Dubai has attracted many international companies with incentives and opportunities, Riyadh does not mind pressing companies to move their headquarters to the Saudi capital. This is legitimate competition, which it does not seem to create interest-based frictions. This competition coincided with an intense influx from all over the world to Dubai. As companies exit the UAE and move to Saudi Arabia they are quickly replaced by companies from Russia, China or other countries that lack stability.
The political scene in the Gulf today is dominated by silence. There is a focus on converting revenues into investments.
Not a day goes by without an announcement of Saudi, Emirati and Qatari investments in regional and global industries, services and banks. This is the third window of opportunity that has opened to the Gulf region thanks to oil and gas revenues. The first window accompanied state creation in the sixties and seventies. Then came the second phase after the Iraq war, at the beginning of the current millennium.
The first two phases contributed to the establishment of the nation-state, the construction of infrastructure and civil service, the launch of educational projects, and the consolidation of services.
The third stage is now one of transition to setting the basis for future revenues, especially from global investments.
Wealthy Gulf countries are engaged in unbridled investment drives these days. There is a lot of money, and there is no problem investing money even in politically-unstable regions, or in parts of the world, where relations used to be marked by hostility. Qatar invests in Egypt. Saudi Arabia and the UAE invest in Turkey and even support the Turkish Central Bank with deposits. Saudi Arabia does not hesitate to announce $10 billion investments in a politically-volatile country like Pakistan. Today, these Gulf countries are huge economic and financial powers that can take risks with little trepidation.
The Ukraine war brought in a process which made it possible to get rid of American pressure. For years, the United States has been jockeying to control OPEC’s oil production levels. With the rise of the OPEC+ alliance and the determination of Gulf countries to ignore the American complaints about oil output policies, production levels ceased to be subject to US pressure. With the new situation came more revenues, some of which used to be allocated to the purchase of Western technology and weapons, in a well-known barter process aimed at silencing US complaints. Proceeds now, like production, can go to anywhere in the world. The world is a market for Gulf oil and gas and the Gulf is no longer subject to the monopoly of technology and weapons coming from the West.
Months ago, Americans tried to exert pressure on Saudi Arabia and the UAE. Today, Washington is silent and all it cares about is finding oil at a reasonable price to pump into its depleted strategic reserves, before it loses these supplies to China and India. Washington is beginning to understand the limits of its power.
The West continues to create pressure, even if its pressures are riddled with contradictions. It agrees that the Emirates, an oil country should host the next climate conference “COP28”. However, it then launches a negative campaign when Abu Dhabi appoints the CEO of the oil company, ADNOC, as president of the conference. These propaganda and political dimensions are part of the West’s realisation that it faces rising powers that have money and are not without options.
Regardless of who ignited the Ukraine war, Russia or the West, this conflict, perhaps like any other major war, has contributed to a change in the balance of power in the world.
The Gulf region has not fired a shot in this war. But it will certainly end up being one of its main victors.
The author is executive director of Al Arab Publishing Group