The indications are clear and strong that the Gulf countries will likely remain as important in global affairs in the coming decades as they were in the 20th century, a report prepared by The Economist concluded on the global energy crisis and geopolitics.
The report also shed light on how the war in Ukraine reshaped the oil and gas market in the world so that the countries of the region will be the most prominent players in it and a new Gulf is emerging in the global scene.
New trends in the Gulf countries in conjunction with the oil and gas boom
The latest oil and gas boom goes hand in hand with deeper trends, such as the re-engineering of global energy flows, in response to reciprocal Western sanctions between Russia and the West, as well as climate change. In addition to reconfiguring geopolitical alliances in the Middle East, as they adapt to a multipolar world; America is no longer a reliable guarantor of security.
The result is a new Gulf appearance, destined to remain pivotal for decades to come. However, it is not clear whether it will be a source of lasting stability, says the American magazine.
The Gulf states belong to a region that has gone through two horrific decades. Amid wars and uprisings, one million people have been violently killed in the Middle East and its share of global GDP has fallen from 4 percent in 2012 to 3 percent.
America cut off its military presence in the wake of disasters in Iraq and Afghanistan, leaving old allies, including the Gulf states, frightened by the security vacuum that Iran and its proxies are filling.
The three Gulf energy powers – Qatar, Saudi Arabia and the United Arab Emirates – face a long-term decline in global demand for fossil fuels, even as they suffer from reduced rainfall and higher temperatures due to climate change.
New factors highlight the power and influence of the Gulf
But at the same time, two powerful new factors play an important role:
Changing trends in energy
The first factor is changes in energy markets. At current prices, Gulf countries can earn 3.5 trillion dollars over the next five years; Western sanctions on Russia are redirecting how energy is traded around the world. With Russian production flowing to the east, the Gulf is expected to become an even greater resource for the West.
In response to tight energy markets, Saudi Arabia and the United Arab Emirates (UAE) are ramping up capital investment in oil with the long-term goal of being the last in the industry, with the lowest costs and the lowest extractions.
Riyadh and Abu Dhabi together aim to increase production from 13 million barrels per day to 16 million in the medium term, as their market share will rise as governments around the world clamp down on emissions and lower global demand for oil.
As Qatar expands its North Field project in the next few years, Doha will become for LNG what Taiwan is for advanced semiconductors: its annual production target is equivalent to 33 percent of total LNG traded worldwide in 2021; So the timing is now in her favour, amidst global pressure for gas.
New alliances in the region
At a time when energy enriches the Gulf region, the second factor influencing here is the new alliance of powers in the Middle East.
Over the past decade, Iran has established a sphere of influence across the northern belt including Iraq, Lebanon and Syria. As a reaction to that, we began to witness some rapprochement between some Gulf countries, Egypt, Israel and other countries. This is reflected in the Abrahamic agreements signed by Israel and two Arab countries in 2020, which help normalize relations in the region.
According to The Economist, this “emerging bloc is partly related to the development of joint defences against Iranian drones and missiles, most likely using Israeli technology.” But it’s also a bet that trade can make these countries richer in a region with cross-border ties.
The Israelis have made more than half a million trips to the UAE, while the Gulf states have invested 22 billion dollars in Egypt this year. Saudi Arabia and Jordan may one day join the Abraham Accords, although this may remain a slim possibility due to Israel’s unwillingness to find a solution to the Palestinian issue.
Members of this emerging bloc hope to increase their economic ties with the rest of the world. In February, the UAE signed a huge trade agreement with India, and like London and Hong Kong, Dubai hopes to become another financial centre for the world’s entrepreneurs.
Gulf countries will remain an important player in global affairs for decades to come
The Gulf region is likely to continue to play an important role in world affairs in the coming decades as it was in the 20th century, although some US strategists believe its importance will diminish. In oil and gas, its share of Europe’s imports could rise from less than 10 percent today to more than 20 percent in the near future.
Another indication is that the economic weight of the Gulf states in the Middle East has reached its highest level since 1981, at 60 percent of regional GDP, and will rise further. In finance, the 3 trillion dollar Gulf sovereign and reserve assets will grow, leading to more investments abroad, such as Qatar’s stake in Porsche’s bid next week.
In the diplomatic realm, we expect the Gulf to flex its muscles more outside its immediate area: the UAE, for example, is already an influential player in the Horn of Africa.
However, the one thing the new era may not bring is stability, because the very factors behind these opportunities will also create volatility.
Pursuing a security arrangement that depends less on America could backfire. Iranian aggression could lead to a regional arms race fueled by energy revenues, just as the oil booms of the 1970s led to an explosion in military spending.
And if Iran gets a nuclear weapon, countries like Saudi Arabia and Turkey may want to get their own bomb. The final chapter of the fossil fuel era could also draw China and India deeper into the region.
