Gulf nations benefit from splintering geopolitics

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This article was published 30/04/2025 (330 days ago), so information in it may no longer be current.

The Arabian Peninsula has long been synonymous with one-dimensional petrostates. Not anymore. Gulf monarchies, enabled by global upheaval and good fortune, are busy diversifying their sources of wealth and power.

The world reanimating post-pandemic and Russia’s full invasion of Ukraine in 2022 combined to send energy prices skyrocketing. Trillions of dollars in surplus income soon flowed in — mainly to Saudia Arabia, Qatar and the United Arab Emirates (UAE).

This “fossil fuel bonanza,” wrote The Economist in late 2023, was then funnelled into everything from “homegrown artificial intelligence models and shiny new cities in the desert, to filling the coffers of giant sovereign wealth funds that roam the world’s capital markets looking for deals.”

At the same time, wealthy Gulf nations have also honed their ability to navigate both sides of the U.S.-China rivalry.

All told, they appear to be the early winners of today’s new, uncertain international order.

Saudi Arabia has arguably benefited the most from Donald Trump’s return to office. The president has strong ties with Saudi Crown Prince Mohammed bin Salman (MBS) dating back to Trump’s first term. And now, Riyadh faces bare minimum tariff rates and was picked to host Washington’s recent peace talks between Ukraine and Russia.

The kingdom may also inadvertently benefit from Donald Trump’s multifront trade war. Any drop in global energy prices will hasten Saudi Arabia’s Vision 2030 agenda — a series of initiatives to reduce the government’s dependence on oil revenue.

Limitless solar potential, abundant land and regulation-by-decree all favour the country’s growing manufacturing sector. Indeed, the ongoing push by MBS to modernize Saudi Arabia was recently described by one diplomat as akin to “China on steroids.”

Sport has played a large role too. So much so, that critics say investments double as a form of soft power meant to obscure Riyadh’s other, more repressive policies.

The LIV Golf league — founded in 2021 to surpass the PGA Tour — is bankrolled by the Saudi government’s US$930 billion Public Investment Fund (PIF). The fund has likewise backed the purchase of English Premier League soccer club Newcastle United and sponsors an annual Formula One race in Jeddah.

In the UAE, Dubai has become the de facto cosmopolitan centre of the world, especially among elites. It’s a rare place for Russian oligarchs, Chinese business leaders, Indian tycoons, American bankers, European socialites, African scions and global tech leaders to all mingle.

The Emirates are thus positioning themselves as pioneers cutting-edge industries, such as artificial intelligence (AI). A minister for AI was already appointed as far back as 2017. And the government recently announced it will soon use the technology to craft new laws.

Domestic tech investment firms backed by Abu Dhabi’s sovereign wealth fund meanwhile possess a unique competitive advantage — a trifecta of bottomless money, cheap energy and access to U.S. semiconductors.

The UAE has also extended its influence abroad by buying up ports around the world. And by getting involved in foreign wars. United Nations experts accuse the UAE of supplying weapons to rogue paramilitaries in Sudan’s civil war, which has caused the world’s worst humanitarian crisis.

Qatar has made gains too. For one, it has emerged as a key diplomatic interlocutor among all sides in the Israel-Hamas war. The conflict has also drawn record viewership to Qatari state-owned broadcaster Al Jazeera, given it’s the only global news network with a presence in Gaza.

The tiny nation nestled along the Persian Gulf has also been a lynchpin for Europe in its energy pivot away from Russia. Unlike Ottawa, Doha moved quickly and now supplies between 12 to 14 per cent of the continent’s total demand for liquefied natural gas. New deals with European energy firms are locked in for the next quarter century.

What’s more, the restoration of diplomatic ties in 2023 between bitter rivals Saudi Arabia and Iran has alleviated a major source of regional tension.

However, that’s not to say all is well.

Yemen’s Houthi rebels remain defiant, diverting international shipping routes away from Gulf ports. Any Israeli attacks meant to derail Iran’s nuclear enrichment capacity could trigger regional catastrophe. Syria may be a source of instability for years to come.

The opulent neighbourhoods and futuristic skyscrapers of the Gulf’s dazzling metropolises are also made possible only through the exploitation of millions of migrant workers. And climate change is destined to render large parts of the region unhabitable.

Gulf states have received a boost from the emerging multipolar order. But in a world where rules and market orthodoxies have been torn up, even their prosperity won’t be safe.

Kyle Hiebert is a Winnipeg-based political risk analyst and former deputy editor of the Africa Conflict Monitor.