The fact that OPEC and its partners abandoned OPEC and its partners’ attempts to increase global oil supplies this week was the result of the blockade of an agreement by the United Arab Emirates, that of Saudi Arabia, the world’s largest crude oil exporter, and Russia has been closed.
It was the latest episode of the growing conflict of interest between the two Gulf allies, linked by the close relationship between Mohammed bin Zayed al-Nahyan, Crown Prince of Abu Dhabi and de facto ruler of the United Arab Emirates, the mentor of his counterpart Mohammed. was bin Salman al-Saud, the young crown prince and day ruler of Saudi Arabia.
The rivalry between these two princes now threatens the future of the Gulf Cooperation Council – with repercussions for the entire Middle East.
The GCC, 40 years old this year, was created after the Iranian Revolution to present a common golf front to attempts by the Islamic Republic to export its Shiite Islamist ideology. In 2011, the Saudi Arabia-led military arm of the council invaded Bahrain to save its Sunni minority monarchy from the Shiite majority and the turmoil of the “Arab Spring”. In 2017, the Saudis, Emirates and Bahrain, along with Egypt, blocked the gas-rich emirate of Qatar because of its ties to 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 United Arab Emirates, Bahrain, Kuwait, Qatar and Oman – with a common external tariff that boosted trade in goods within the Gulf. The increase is statistically modest compared to the huge oil trade that integrates the GCC globally rather than regionally.
EU-style ambitions to create a single market and even a common currency have never left the GCC drawing board. These are not complementary economies and they will obviously compete tougher the more they try to diversify away from oil. Mohammed bin Salman, before his reputation was tarnished after a Saudi killer squad murdered dissident journalist Jamal Khashoggi in Istanbul in 2018, was best known for drafting the 2030 Vision to transform the kingdom’s economy and wean it off oil. UAE ministers say they are pulling out of the regional conflicts in Libya and Yemen to focus on economic development.
Saudis and Emiratis were almost on opposite sides in these two conflicts: the kingdom made overtures to Turkey, whose armed forces against the UAE are set up in Libya; and the Emirates-backed southern separatists in Yemen faced the Saudi-backed government (while the Iran-backed Houthi rebels control much of the habitable land). When Riyadh lifted the Qatar embargo in January of this year, Abu Dhabi also hesitated visibly.
In February, the Saudis decided that by 2024, any company competing for government contracts must have its regional base within the Kingdom – a move that targets the UAE and its saucy commercial hub, Dubai, teeming with multinationals operating in the operate another golf. Some Saudi analysts say the UAE is eating its lunch.
This week, Riyadh has set its sights on the GCC’s common external tariff – and the UAE. It has introduced stricter rules on local content, labor, and value to qualify for the low tariff, and treats free zones (and all local investors from Israel after the UAE established diplomatic relations last year) as overseas suppliers. This affects Dubai, a global hub, and busy UAE free trade zones such as Jebel Ali, which handle roughly the total amount of intra-GCC goods traded annually.
Gulf states, pillars of many Western marketing companies, even compete in arenas ranging from lucrative sporting events to (long overdue) social liberalization.
There are many different ways this competition could go, but two are suggestive.
The GCC could choose to upgrade the customs union to a more integrated trade and investment agreement, including services – which would create a larger market that would be attractive to foreign investors and would allow it to enter into better deals with more trading partners.
Alternatively, competition within the Gulf could lead to enhanced ties with GCC neighbors – including Iran and its shaky alliance of failed states. Iran-backed Iraq, Syria and Lebanon, let alone Yemen or Iran itself, could take advantage of access to the things the Gulf has, especially as it diversifies away from oil. This includes capital and technology (from renewables to water solutions). The Gulf States have construction expertise in a region with trillion dollar reconstruction and unmet investment needs.
Kuwait, Oman and Qatar (which share the world’s largest offshore gas field with Iran) have connections to Tehran. Now Saudi Arabia and the United Arab Emirates are doing it too, carrying their increased competition across the water to speak separately to their allegedly sworn enemy. Apparently rational solutions can easily be betrayed by different logics. But golf is definitely going on.