The Middle East in the New Geopolitical Context

Plenary session 18:

The Middle East in the New Geopolitical Context

Dr. Abdulaziz Sager Chairman, Gulf Research Center December 9 - 11, 2022

World Policy Conference 2022

Gulf Regional & International Environment - The Gulf region continues to be confronted by a highly fluid and volatile security situation.

While the focus has shifted toward de-escalating and promoting conflict management mechanisms, the threat and ongoing conflicts remain unchanged.

- For one, Iran and Iran-supported proxy forces remain directly threatened by the GCC states. Second, the war in Yemen remains unresolved, with tremendous economic and reputational costs for all involved.

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The Russian invasion of Ukraine in February 2022 has added an additional layer that has complicated matters further while raising questions on the impact of the international shift in the regional security environment.

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A common thread running through the above is the degree of uncertainty with which the region finds itself confronted – uncertainty about the near-term direction of the regional environment, about the role of the US, Russia and China, about the outcome of the impending energy transition, as well as uncertainty about the world of globalization and the economic order.

- The result is an ongoing search for a new balance in the broader Middle East characterized by GCC’s outreach to potential new allies and a great degree of hedging.

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The GCC countries have common interests in security, economy, and similar goals for global, regional, and local prosperity. The GCC Summit was restored at Al Ula as member states established a framework towards a unified policy on Gulf security and economic cooperation/future integration. The summit opened the door for renewed diplomatic relations between Qatar, Saudi Arabia, Bahrain, and the UAE. Moreover, it enhanced an approach toward regional challenges the GCC states face.

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Even as energy enriches the Gulf—and adds to the heavy burden of stabilizing the world’s climate—the second force at work is a new alignment of power in the Middle East. Over the past decade, Iran has established a sphere of influence across a northern belt, including Iraq, Lebanon, and Syria. A reaction is in full swing as most Gulf states, Egypt, Israel, and others grow closer. This is reflected in the Abraham Accords, signed by Israel and two Arab states in 2020, which are helping normalize relations in the region.

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The GCC states will continue to invest in strengthening their own capacities in order to be more self-reliant and autonomous as far as the pursuit and protection of their own national interests are concerned.

US-GCC Relations Moving Forward - At the core of the GCC’s concerns is the future relationship with the US, which has always played a central role as a security guarantor to the Gulf region. Recently, however, SaudiUS relations have undergone a recalibration from both sides, with individual national interests being pursued with greater emphasis.

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The US has cut its military presence following the debacles in Iraq and Afghanistan, leaving old allies, including the Gulf states, fearful of a security vacuum filled by Iran and its proxies.

The pandemic has stripped the US of its privileged influence in vital geopolitical hotspots and has highlighted its receding ability to simultaneously concentrate on dealing with domestic crises and fulfill its global responsibilities.

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More recently, the re-engineering of global geopolitical alliances in the Middle East is seen as it adapts to a multipolar world in which the U.S. is no longer a reliable guarantor of security. The result is a new-look Gulf destined to remain pivotal for decades.

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The Ukraine crisis has caused an added divergence of US-GCC policy in terms of energyy.

As a result, the Saudi and the UAE’s responses toward the US demand to increase oil production have been interpreted as being motivated by overall displeasure with the US policy toward the Gulf.

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US inaction in the recent past underscores the need for the GCC states to maintain a variety of relationships that can ensure their security in the face of several regional threats and challenges.

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One direct consequence of fraying GCC-US ties has been the GCC’s determination to extend their autonomy and increase self-reliance as far as international relations are concerned. Here, the dialogue with Iran is as much about resolving bilateral issues with Tehran as having direct lines outside of those overseen and controlled by Washington.

Energy Prospects - The three Gulf energy powerhouses of Qatar, Saudi Arabia and the UAE are autocracies facing a long-run decline in world demand for fossil fuels, even as they suffer from lower rainfall and higher temperatures because of climate change.

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Western sanctions on Russia are redirecting how energy is traded around the world. As Russian output flows to the east, the Gulf stands to become a more prominent supplier to the West.

Economic Prospects for GCC Countries - Commodity prices have surged, and the outlook is more favorable for GCC countries, with new challenges linked to Russia’s invasion of Ukraine and tighter global financial conditions expected to have a limited impact on GCC economies.

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While GCC countries have overall benefited from higher, albeit volatile, hydrocarbon prices, numerous risks still cloud the outlook—notably a slowdown in the global economy.

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In this context, the reform momentum established during the low oil price years should be maintained—irrespective of the level of hydrocarbon prices.

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The Gulf states’ economic heft within the Middle East is at its highest since 1981, at 60% of regional GDP, and will rise more. Moreover, in finance, the Gulf’s $3trn of reserve and sovereign assets will grow, leading to more investments abroad.

China and the Gulf: - With China’s rise on the world stage over the past decades, the relationship between the GCC and China has developed into a comprehensive energy partnership. This is primarily due to their mutual interest in policy initiatives, such as China’s Belt and Road Initiative and economic diversification plans in the GCC. - For example, through its Belt and Road Initiative, China has extended infrastructure developments throughout the GCC and the greater Middle East to establish logistics hubs and trade routes.

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For the last two decades, China has carefully calibrated its foreign policy to expand its political, economic, and military influence.

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President Xi’s determination to form an alternative international order is deepening fractures with some Western powers, even as he signals greater global engagement — tentatively planning to visit Saudi Arabia this month and cooperating with Washington’s technology curbs.

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Is growing Chinese assertiveness regarding economic cooperation with the region (specifically Saudi Arabia) a strategic push to advance its broader interests in the oil-rich region? And will China’s strategic ingress challenge US pre-eminence in the region?

Channels for Diplomacy - Despite the numerous challenges, there continues to be a conviction that communication channels are needed to introduce conflict management and de-escalation efforts to move the region out of its perennial cycle of instability.

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A key challenge in the coming years will be to improve governance systems in the broader Middle East to cope with the mounting challenges of economic and social development, food security, the energy transition, climate change, and building up health resilience. To be able to start on this road, the emphasis on de-escalation and greater stability must continue to be prioritized.

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