Best of Times for Gulf States: Oil Prices Up, Diplomatic Success and an Image Reset
6 min readJun 10, 2022
An Arab proverb says winds do not blow as the ships wish. The 2017 diplomatic blockade of Qatar by four regional neighbors is a fast-fading memory and perhaps a testament to that proverb. The Gulf Cooperation Council (GCC) alliance is acting as a unified regional organization again — perhaps not yet synchronized but moving in the same general direction.
Diplomatic and economic competition among GCC members is real and it is revealed across a broad spectrum of issues from oil production/prices to support for renewable energy resource development to diplomatic outreach to Iran to relations with the United States — even skyscraper height within the region. The Arab Gulf nations began genuine fence-mending efforts at their summit in Al-Ula, Saudi Arabia in January 2021. Events of the past four months have accelerated the rapprochement.
Here are five things related to GCC stability and cooperation in 2022.
- Death of UAE Emir Khalifa bin Zayed on May 13.
The passing of the widely respected president of the United Arab Emirates seems to serve as another motivation for current harmonious intra-Gulf relations. Khalifa, 73, represented an era of Gulf harmony and the optimism that accompanied UAE independence (Qatar’s, too) in 1971. Along with being the president of the UAE, Sheikh Khalifa bin Zayed bin Sultan was the ruler of Abu Dhabi, one of the seven federated emirate kingdoms that compose the UAE. Following Khalifa’s death, Adu Dahbi Crown Prince Mohamed bin Zayed (known informally as MbZ), 61, was elected president of the UAE to succeed Khalifa on May 14. US Vice President Harris traveled to the UAE as part of the US delegation to pay respects to Sheikh Khalifa. - United States relations — still enduring.
The perception of chilly relations between the current US administration and several key GCC allies is a transitory phenomenon, a mix of a new US administration along with shifting economic and security priorities in the Gulf. President Biden is expected to visit Saudi Arabia in July and will likely meet with Crown Prince Mohammad bin Salman; the presidential trip will also include a stop in Israel and possibly other MENA nations. A revised JPCOA with Iran over its nuclear program and ballistic missile program is unpopular in the UAE and Saudi Arabia but GCC members themselves are holding regular mid-level talks with Iran over security issues, cross-border travel and Haj pilgrimage access issues. Iran, with a population of 86 million, is a genuine regional security challenge on several issues but it is also a GCC neighbor with investment potential once a higher level of trust in the region can be restored. The opportunity now exists for a homegrown GCC diplomatic de-escalation in the Persian Gulf. The important historical security role of the United States will remain even as GCC members pivot toward Asia on a range of issues. China, for instance, is the top export destination for Saudi oil in early 2022. Additionally, a two-month truce between Houthi rebels and the Yemen government in the destructive civil war has been extended; a lasting Yemen peace — now seen as the top priority for all the region’s leaders — will most likely be found by continuing GCC-Iran reconciliation efforts. Progress may be slow on a host of issues but it will also be genuine as Vision 2030 continues in Saudi Arabia, the World Cup arrives in Qatar in November and the international climate conference (COP28) lands in Dubai in 2023. - War in Ukraine.
The conflict has led to tough decisions about the level of diplomatic and economic sanctions that should be leveled at Russia for its invasion of Ukraine. Russia is a key member of the OPEC+ production regime that has been successful over the past 18 months in keeping oil production stable and avoiding ultra-low oil prices. Several Gulf states may seek greater strategic autonomy in foreign affairs but core interests with the United States will remain. Russian and Ukrainian wheat/corn/cooking oil exports that are at-risk due to the war (and a Russian sea blockade of Black Sea exports by Ukraine) will lead some MENA nations to look for new grain exporters. The generally poor performance, too, of most Russian forces in Ukraine will motivate Gulf nations to reconsider the ability of Russia to effectively project power and influence in the region. The important role of relatively inexpensive drones and portable missiles/artillery in the conflict may also cause a rethink in the region about defense spending priorities. - Big oil revenues.
The Ukraine conflict has caused nations to reconsider the purchase of Russian oil and gas. Some petroleum shippers won’t carry Russian oil. Several factors, some predating the invasion of Ukraine, have put upward steady pressure on oil prices globally. Record oil revenues allow for a invigorated push for GCC member priorities — both diplomatic and domestic. Saudi oil revenues, for example, rose by 82 percent in the first quarter to $39 billion this year compared to 2021. Saudi Arabia’s plan for a massive futuristic city on the Red Sea coast, Neom, has gained renewed momentum in 2022. Oil revenue will also allow the kingdom to make investments in non-oil sector assets. The Saudi sovereign wealth fund (P.I.F.) just took a five percent stake in Japanese gaming company Nintendo. The UAE and Israel signed a multi-billion dollar free trade agreement in late May. A UAE firm (GAAC) signed a new 18-month contract to manage ground operations at three Afghan airports: Kabul, Kandahar and Herat. Qatar is expanding LNG production capacity at its North Field in order to become an even more influential LNG exporter. Oman and Iran recently signed an agreement to jointly develop an oil/gas field in the Persian Gulf. Given the acrimony of 2017 and 2018 within the Gulf, there is now a healthy competition concerning the future of the Gulf. - Qatar, the survivor.
At 4,400 square miles, Qatar is the slightly smaller than the state of Connecticut. It has had an impressive run diplomatically over the past 18 months; Emir Tamim bin Hamad al-Thani has traveled to Washington and Berlin in 2022 to discuss energy and security issues. Qatar left OPEC in 2018 to concentrate on liquified natural gas (LNG). Along with the United States and Australia, Qatar is a top-tier exporter of LNG: about 7.5 million metric tons yearly. It served as intermediary between the US and Taliban leadership during the evacuation of US and allied forces in August 2021. Additionally, Qatar will host the 2022 FIFA World Cup in November/December, an opportunity for a large global audience — perhaps 1.5 million visitors — to experience the wider Gulf region. Qatar was designated a major non-NATO ally by President Biden in March and recently strengthened energy and investment cooperation with the United Kingdom. The expectations for GCC stability are now widespread.
