US Afghanistan withdrawal

The impact on MENA geopolitical risk

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US AFGHANISTAN WITHDRAWAL
THE IMPACT ON MENA GEOPOLITICAL RISK

Contents

Introduction2

No prospect of rapid withdrawal of US troops from the Middle East 3

China set to benefit most from declining US interest in the MENA region 3

US allies to push for self-sufficient security policies 5

Regional competition will exacerbate instability 6

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US Afghanistan withdrawal: the impact on

MENA geopolitical risk
The rapid US withdrawal from Afghanistan forms part of a broader strategy that seeks to reshape its
military and political engagement in Central Asia and the Middle East. Since the end of the Iraq War
and Arab Spring in 2011, successive US presidents have sought ways to disentangle from the regional
conflicts in the Middle East. However, a continued US presence in the region remains a key underlying
factor for political stability. This paper examines which countries in the region could be next to be
destabilised by the external competition to result from the US withdrawal. It also outlines which
countries could benefit economically from a growing relationship with China. The paper aims to help
investors in the region understand how geopolitical risk, and international tensions in particular, have
shifted with the US’s exit.

As well as providing analysis of the major risk themes to watch, the paper includes EIU’s Security,
Political Stability and International Tension Risk scores from our Risk Briefing product, which helps
investors to better understand relative risk across the region.

• The speed with which the Taliban retook Afghanistan emphasises the risks for traditional
US allies of over-reliance on US security guarantees, while also highlighting opportunities
for other Global powers to expand in the region.

• China’s neutrality in the Middle East and North Africa (MENA) and economic power make
it the best-positioned external power to benefit from long-term US withdrawal from the
region.

• Traditional US allies—mainly the UAE, Israel, Saudi Arabia and Egypt—will undergo some
modest diversification of their relations with other major powers and try to resolve some
regional conflicts without the US.

• However, those same US allies will also compete for influence with two other blocs with
different ideological visions for the region—one led by Iran and the other comprising
countries backing regional Islamist groups.

• This will lead to shifting diplomacy between blocs, as well as the emergence of new pockets
of instability—with Lebanon currently most at risk.

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No prospect of rapid withdrawal of US troops from the Middle East

The criticism that the US president, Joe Biden, has come under for the US withdrawal from Afghanistan
suggests that further sudden US troop withdrawals from conflict zones are unlikely for now. Remnants
of Islamic State in Iraq and Syria will probably mean that some US presence, albeit a reduced one, stays
there in the medium term. In addition, the US will continue to maintain its security alliances, ensuring
it remains the main foreign security presence in the region. However, it is clear that a key part of US
foreign policy is to avoid being drawn into lengthy and costly conflicts in the region—preventing Iranian
nuclear proliferation perhaps being the only exception. As a result, Turkey, Russia and China have more
scope to become regional powerbrokers.

No prospect of rapid withdrawal of US troops from the Middle East

800 2,500
Syria Iraq

13,000
3,000 Kuwait
Jordan
7,000
Bahrain

13,000
3,000 Qatar
Saudi Arabia

5,000
UAE

High risk of terrorist insurgency 606

Major US regional bases Oman

Note. Numbers denote number of US troops present in each country.

Sources: EIU; The Washington Post; The New York Times.

China set to benefit most from declining US interest in the MENA region
Of Russia, China and Turkey, the latter is in the weakest position to gain from US withdrawal. In recent
years Turkey has dramatically increased its hard power in the region, through actively interventionist
military policies, most prominently in Syria in 2016 and Libya in early 2020. However, complex internal
politics and the economic hit of the Covid‑19 pandemic make Turkey less likely to use financially costly
hard power in the near term. Furthermore, in terms of soft power, Turkey has become increasingly
isolated from most other Middle Eastern states, owing to its long-standing support for Islamist groups,
and particularly the Muslim Brotherhood—a movement whose regional influence has waned over the
past decade. With the US pursuing negotiations with Iran—a rival regional power—Turkey is looking

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to boost relations with other regional countries,

Investment from China in US-allied countries
dwarfed that from Russia in 2015-19 including the Gulf states, as a counterweight.
(inward foreign direct investment; US$ m) In addition, a key part of Turkey’s foreign policy
Chinese investment Russian investment revolves around securing access to gas reserves
8,000
in the Mediterranean, which will require some
7,000 dialogue with Egypt. As a result, Turkey’s
6,000 near-term policy in the region is likely to focus
5,000 partly on easing tensions with its main regional
4,000 opponents—Saudi Arabia, the UAE, Israel and
3,000 Egypt—rather than continuing its regional
2,000 expansionism.
1,000 In contrast, Russia is in a stronger position to
0 expand its reach in the region. It is allied to the
UAE Israel Saudi Arabia Egypt
regime of Bashar al‑Assad in Syria, alongside Iran.
Sources: China Global Investment Tracker; Central Bank of Russia.
This alliance has pitted it at various points against
Israel, Turkey and the Gulf states. However, Russia has also intervened in Libya on the same side as
Saudi Arabia, Egypt and the UAE against Turkish-backed forces, and has largely managed to avoid direct
escalation with Israel in Syria. This all highlights that Russia is an actor willing to work pragmatically
across geopolitical divides. Moreover, the contrast of the US’s chaotic withdrawal from Afghanistan
with Russia’s successful intervention and continued presence in Syria will allow Russia to emphasise its
reliability as a partner. The result is likely to be Russia playing a more active role in regional diplomacy,
as a means of increasing its global standing. In addition, a recent announcement by Saudi Arabia and
Russia also highlights that modest diversification away from dependence on the US could allow Russia
to gradually increase its arms sales in the region (although the US will remain the region’s largest source
of arms).

Above all, however, China is likely to benefit from the shifting geopolitical landscape. China has little
interest in competing with the US for regional security dominance. But there are economic incentives
for China to expand its presence—the Middle East provides key trade routes from Asia to Europe
and East Africa as part of its Belt and Road Initiative, and is the source of much of China’s oil supply.
A significant medium-term pick-up in Chinese economic activity in the region is likely for two further
reasons. First, China has thus far managed to maintain a neutral regional security stance (aside from its
rivalry with the US). As a result, it is an important partner for many rivals, including both Iran and Gulf
states such as Saudi Arabia and the UAE. In a region where political disputes often influence economic
decisions (the 2017 boycott of Qatar, for example), that neutrality is a considerable strength. Second,
following the economic damage wrought by the pandemic and the 2020 oil price crash, financing an
economic recovery and diversification away from dependence on oil are the most urgent priorities for
most states at present. China is willing and able to offer much larger economic incentives than Russia,
Turkey or the US to support those priorities.

Although US influence remains paramount for Israel, which may limit Chinese opportunities there,
most other countries will deepen their economic ties with China. Provided Iran secures US sanctions

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relief, Chinese infrastructure investment in Iran is likely to rise sharply in return for cut-price oil. At the
same, the Gulf economies will build closer relations with China, while still balancing their alliances with
the US, as a source of much-desired technology-sharing and external financing. Meanwhile, China’s
growing influence will also put it in a prime position to secure reconstruction contracts in conflict
zones like Libya and Syria. In the longer term, as its economic interests grow, geopolitical neutrality will
become more difficult. But in the short to medium term, China’s interests in the Middle East will remain
largely economic.

US allies to push for self-sufficient security policies

The second trend being driven by cooling US interest in the region is that traditional US allies
increasingly see the need to act independently and assertively to secure their own interests. While this
has been a driver of regional geopolitics for a number of years, the situation is now more urgent as the
previous US president, Donald Trump, was more openly supportive of most regional allies and was
hawkish on Iran. In contrast, under Mr Biden, US support now seems more conditional; US nuclear
negotiations with Iran could result in a freeing up of Iranian resources following sanctions relief, while
Mr Biden has actively shown his disapproval of the Saudi-led war in Yemen.

Although the four traditional US allies—the UAE, Israel, Saudi Arabia and Egypt—are not perfectly
aligned, and each country in the region partly pursues its own agenda, they do form a loose bloc
mainly owing to their shared adversaries. There are two other competing groups: an Iran-led bloc,
which includes the Assad regime and non-state Shia forces, such as the Lebanese group Hizbullah; and
the Islamist-supporting states, Qatar and Turkey. Each of these blocs is ideologically opposed in their

Regional competition driven by three competing blocs

TURKEY

TU NI S I A SY R IA
L EB A N ON IRAN
ISRA E L IRAQ

BAHRAIN
LIBYA
EGYPT
QA T A R
SAUDI
ARABIA UAE

Status quo US allies

Islamist-leaning bloc
YEMEN
Iran-led bloc
500 km
Source: EIU.

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views of how they want the region to look. As US leadership gradually fades, competition between
combinations of these three blocs will become the key to regional stability, as they jostle for influence
and as actions are driven by the shifting balance of power. Concerns over the regional power balance
will, however, also foster some dialogue. For example, recent détente between Turkey and the UAE,
Saudi Arabia and Egypt is partly owing to Turkish concern about the potential expansion of Iranian
power in the wake of US sanctions relief. Likewise, the lifting of the regional boycott of Qatar by the
Arab quartet (Saudi Arabia, the UAE, Bahrain and Egypt) was partly driven by evaporating US support
for it. These shifts highlight that fading US interest, particularly under the less hawkish Mr Biden, is
likely to lead to attempts to find local solutions, as conflict is now potentially much more costly for US
allies. Talks between Iran and Saudi Arabia are an example of this and are likely to continue in the near
term, with a view to ending the war in Yemen.

Regional competition will exacerbate instability

However, although regional dialogue may lower tensions surrounding ongoing conflicts in Libya, Syria
and Yemen, competition between the three blocs in various combinations will also drive instability.
First, because of the ideological differences between the blocs, any détente is by definition pragmatic
and solutions based. Should dialogue fail to produce results, tensions are likely to return. In Yemen, for
example, Iranian-Saudi diplomacy could lead to a ceasefire, but the prospects of an absolute end to the
war remain dim, indicating any rapprochement between Iran and Saudi Arabia is unlikely to be sustained.

Second, whenever the threat of a new conflict in a country arises, competing states will attempt
to shape the outcome. External competition and interference will thus exacerbate and extend bouts
of instability, likely fuelling new pockets of regional conflict. The most prominent example of where
this type of activity might next occur is Lebanon, where government dysfunction, economic crisis and
widespread public anger have greatly increased the risks of conflict breaking out, and where Hizbullah
is a key actor. All three blocs also have allies in Iraq, a country at considerable risk of breaking apart,
while a recent power grab by Tunisia’s president, Kaïs Saïed, has been supported by Saudi Arabia and
the UAE, and has sidelined the moderate Islamist party Hizb al‑Nahda, possibly providing a further
arena for regional competition.

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MENA Risk Tracker Scores for Political Stability and Security Risk;
Yemen is ranked most risky for both Political Stability and Security Risk. Within the region, Qatar is ranked least risky for
both Political Stability and Security Risk.
Security risk Political stability risk
Yemen 97 95
Iran 53 85
Iraq 97 85
Lebanon 81 85
Libya 91 85
Syria 94 80
Bahrain 41 70
Algeria 50 65
Jordan 38 65
Oman 22 65
Tunisia 50 65
Kuwait 25 60
Morocco 44 60
Saudi Arabia 31 60
Egypt 38 55
UAE 19 45
Israel 34 40
Qatar 16 35
Category scores are an aggregate of underlying indicators, weighted to generate scores in a range from 0 to 100. Underlying indicator scores
range from 0 to 4. Higher numbers indicate more risk.
The Security Risk score assesses whether the physical environment is sufficiently secure? The Political Stability score assesses the degree to
which political institutions are sufficiently stable to support the needs of businesses and investors.
Full Methodology can be found at EIU.com

Risk Tracker - International Tensions -

Scores for the MENA region
Security risk
Yemen 4
Iran 4
Iraq 4
Lebanon 4
Libya 4
Syria 4
Bahrain 3
Algeria 2
Jordan 3
Oman 3
Tunisia 3
Kuwait 2
Morocco 2
Saudi Arabia 3
Egypt 2
UAE 3
Israel 4
Qatar 1
International tensions are a sub-set of the EIU’s Political Stability
score. These underlying indicators are scored from 0 to 4, with a
higher score indicating a higher risk level.

7 © The Economist Intelligence Unit Limited 2021

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