Saudi-UAE competition threatens to upend the GCC

The abandonment this week of attempts by Opec and its partners to increase global oil supply was the result of the United Arab Emirates blocking a deal put together by Saudi Arabia, the world’s largest crude exporter, and Russia.

It was the latest episode in the growing clash of interests between the two Gulf allies, bonded by the close relationship between Mohammed bin Zayed al-Nahyan, crown prince of Abu Dhabi and de facto ruler of the UAE, who was mentor to his counterpart Mohammed bin Salman al-Saud, the young crown prince and day-to-day ruler of Saudi Arabia.

The rivalry of these two princes is now threatening the future of the Gulf Cooperation Council — with ramifications across the wider Middle East.

The GCC, 40 years old this year, was set up after the Iranian revolution to present a common Gulf front to the Islamic Republic’s attempts to export its Shia Islamist ideology. In 2011 the council’s Saudi-led military arm entered Bahrain to save its Sunni minority monarchy from the Shia majority and the turmoil of the “Arab Spring”. In 2017, the Saudis, Emiratis and Bahrain, along with Egypt, blockaded the gas-rich emirate of Qatar over its links with Iran and support for the Pan-Islamic Muslim Brotherhood.

Over the past two decades the GCC has also created a common market of the six members — Saudi Arabia, the UAE, Bahrain, Kuwait, Qatar and Oman — with a common external tariff that boosted intra-Gulf trade in goods. The increase is statistically modest compared to the vast oil trade that integrates the GCC globally rather than regionally.

EU-style ambitions to create a single market and even a common currency never left the GCC drawing board. These are not complementary economies and they will obviously compete more fiercely the more they strive to diversify away from oil. Mohammed bin Salman, before his reputation was stained after a Saudi hit squad murdered dissident journalist Jamal Khashoggi in Istanbul in 2018, was best known for his vaulting Vision 2030 blueprint to transform the kingdom’s economy and wean it away from oil. UAE ministers say they are withdrawing from regional conflicts in Libya and Yemen to concentrate on economic development.

Saudis and Emiratis were almost on opposite sides in these two conflicts: the kingdom made overtures to Turkey, whose forces are ranged against the UAE’s in Libya; and Emirati-backed southern separatists in Yemen were facing off against the Saudi-backed government (while Iran-backed Houthi rebels control much of the habitable country). When Riyadh lifted the Qatar embargo this January, moreover, Abu Dhabi visibly dragged its feet.

In February, the Saudis decided that from 2024 any corporation bidding for state contracts would have to have its regional base inside the kingdom — a move aimed at the UAE and its brash commercial hub Dubai, bristling with multinationals operating in the wider Gulf. Some Saudi analysts say the UAE is eating their lunch.

This week, Riyadh has taken aim at the GCC common external tariff — and the UAE. It has decreed tighter rules on local content, labour and added value to qualify for the low tariff, treating free trade zones (and any local investors from Israel, after the UAE opened diplomatic relations with it last year) as foreign suppliers. This hits Dubai, a global trans-shipment hub, and bustling UAE free zones such as Jebel Ali, which annually turns over roughly the total amount of intra-GCC goods trade.

Gulf states, mainstays of many a western marketing company, are even competing in arenas from lucrative sporting events to (long overdue) social liberalisation.

There are many different ways this competition could go, but two are suggestive.

The GCC could opt to upgrade the customs union to a more integrated trade and investment deal, including services — which would create a bigger market attractive to foreign investors and enable it to strike better deals with more trading partners.

Alternatively, intra-Gulf competition could lead to increased ties with GCC neighbours — including Iran and its wobbly alliance of failed states. Iran-backed Iraq, Syria and Lebanon, let alone Yemen or Iran itself, could use access to things the Gulf has, especially as it diversifies away from oil. These include capital and technology (from renewable energy to water solutions). Gulf states have construction expertise in a region with reconstruction and unmet investment needs running into trillions of dollars.

Kuwait, Oman and Qatar (which shares the world’s largest offshore gasfield with Iran) have lines open to Tehran. Now Saudi Arabia and the UAE do too, taking their sharpening competition across the water to talk separately to their supposedly sworn enemy. Ostensibly rational solutions are easily betrayed by different logics. But it is definitely game on in the Gulf.

Source link

Good Ads

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button

Adblock Detected

Please Disable AdBlock