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An Energy Crisis and Geopolitics Are Creating A New-Look Gulf
An Energy Crisis and Geopolitics Are Creating A New-Look Gulf
In eight weeks roughly 1m football fans will descend on Qatar for the World Cup, many of
them travelling via neighbouring cities such as Dubai and Abu Dhabi. They will find a
Gulf in the midst of a $3.5trn energy bonanza, courtesy of Vladimir Putin’s war in
Ukraine. Western politicians facing a cost-of-living crisis are once again paying homage
to the royalty of the fossil-fuel economy. Olaf Scholz, Germany’s chancellor, is due to
visit this week; in July President Joe Biden fist-bumped Muhammad bin Salman (mbs),
the de facto ruler of Saudi Arabia, a country he had branded a pariah for its human-
rights abuses.
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As we explain this week, the latest oil and gas boom is taking place alongside deeper
trends: a re-engineering of global energy flows in response to Western sanctions and
climate change, and the remaking of geopolitical alliances in the Middle East as it adapts
to a multipolar world in which America is no longer a reliable guarantor of security. The
result is a new-look Gulf that is destined to remain pivotal for decades to come. Whether
it will be a source of stability, though, is far from clear.
The Gulf states belong to a region that has had a dreadful two decades. Amid wars and
uprisings, a million people have died violently in the Middle East and its share of
world gdp has dropped from 4% in 2012 to 3%. America has cut its military presence
following the debacles in Iraq and Afghanistan, leaving old allies, including the Gulf
states, fearful of a security vacuum filled by Iran and its proxies. The three Gulf energy
powerhouses of Qatar, Saudi Arabia and the United Arab Emirates (uae) are autocracies
facing a long-run decline in world demand for fossil fuels, even as they suffer from
lower rainfall and higher temperatures because of climate change.
It is a daunting starting-point, but two new forces are in play. One is changes in energy
markets. At current prices, the six Gulf states—the others are Bahrain, Kuwait and
Oman—could earn $3.5trn over the next five years. Western sanctions on Russia are
redirecting how energy is traded around the world. As Russian output flows to the east,
the Gulf stands to become a bigger supplier to the West.
In response to tight energy markets, Saudi Arabia and the uae are ramping up capital
investment in oil with the long-run goal of being the last men standing in the industry,
enjoying the lowest costs and least-dirty extraction. Together, they aim to raise output
from 13m barrels per day last year to 16m in the medium term. Their market share will
rise as governments worldwide clamp down on emissions and global demand for oil
falls. As Qatar expands its North Field project in the next few years, it will become to
liquefied natural gas (lng) what Taiwan is to advanced semiconductors: its annual target
output is equivalent to 33% of all lng traded worldwide in 2021. From its point of view,
the timing, amid a global gas squeeze, could not be better.
Even as energy enriches the Gulf—and adds to the heavy burden of stabilising the
world’s climate—the second force at work is a new alignment of power in the Middle
East. Over the past decade Iran has established a sphere of influence across a northern
belt including Iraq, Lebanon and Syria. A reaction is in full swing as most Gulf states,
Egypt, Israel and others grow closer. This is reflected in the Abraham accords, signed by
Israel and two Arab states in 2020, which are helping normalise relations in the region.
This nascent bloc is partly about developing common defences against Iranian drones
and missiles, probably using Israeli technology. But it is also a bet that trade can make
these countries richer in a region with puny cross-border links. Already, Israelis have
made over half a million trips to the uae, while the Gulf states have invested $22bn in
Egypt this year. Saudi Arabia and Jordan may one day join the Abraham accords,
especially if Israel includes the Palestinians, creating a contiguous trading zone. This
bloc will also hope to increase its links with the rest of the world. In February
the uae signed a trade deal with India. As London and Hong Kong stall as financial
centres, Dubai is seeking to become the world’s last entrepot, where you can do
business with anyone.
An obvious implication is that the Gulf is likely to remain as important in world affairs
in the coming decades as it was in the 20th century, despite the hopes of some American
strategists that its significance would fade. In oil and gas its share of Europe’s imports
could rise from under 10% today to over 20%. The Gulf states’ economic heft within the
Middle East is at its highest since 1981, at 60% of regional gdp, and will rise more. In
finance the Gulf’s $3trn of reserve and sovereign assets will grow, leading to more
investments abroad, such as Qatar’s stake in Porsche’s offering next week. In diplomacy
expect it to flex its muscles more beyond its immediate region: the uae is already a force
in the Horn of Africa.
Yet the one thing the new era may not bring is stability, because the very forces behind
these opportunities also create volatility. The quest for a security arrangement that
relies less on America could backfire. Iran’s aggression could lead to a regional arms
race fuelled by energy rents, just as the oil booms of the 1970s saw military spending
explode. If Iran gains a nuclear weapon, countries such as Saudi Arabia and Turkey may
want a bomb of their own. The last chapter of the fossil-fuel age could yet draw China
and India deeper into the region.
However, the greatest potential source of instability lies at home. The Gulf states are
now trying to follow a mind-bending economic trajectory. They plan to expand fossil-
fuel production for 20 or so years and then slash it after 2045. It is possible to see how
this would work in theory: the huge rents would need to be quickly reinvested in a high-
tech economy based on renewable power, hydrogen and desalination systems, which
has enough dynamism to create millions of jobs for a bulge of young people. In practice
the task is monumental. Even if it worked, it would put the Paris-agreement climate
targets far beyond reach.
The Gulf’s autocrats believe they have the long-term perspective to manage this shift.
But they are prone to oppression, cronyism and vanity projects. A new Gulf is emerging,
but some things remain the same. It is still going to be volatile—and impossible for the
world to ignore.■
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This article appeared in the Leaders section of the print edition under the headline
"Boom time in the Gulf"
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deep dive)
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8) 페르시아 만이 세계의 업무가 처리되는 데서 향후 수십 년에 걸쳐 여전히 중요한
지위를 차지할 가능성이 높다는 것은 아주 명백하다. 사실 20 세기에도 그러했다. 미국의
일부 전략가가 중동의 중요성과 지위가 시들해지기를 바랐지만 말이다. 석유와
천연가스의 유럽 수입분에서 걸프 연안 국가가 차지하는 몫이 현재의 10 퍼센트
미만에서 20 퍼센트 이상으로 상승할 듯하다. 중동 지역에서 페르시아 만 국가들의
경제적 영향력이 1981 년 이래 최고조 상태이다. 역내 지디피의 60 퍼센트이니 말 다했다.
게다가 이 중량감이 더 확대될 듯하다. 금융 재정도 보면, 페르시아 만 국가들의 3 조
달러에 이르는 유보금과 국가 자산이 앞으로도 계속 증가할 테고, 이는 더 많은 해외
투자로 이어질 것이다. 다음 주에 있을 포르쉐의 공모에서 카타르가 보유한 지분이
대표적이다. 외교 분야라면, 페르시아 만 국가들이 역외로까지 영향력을 행사하는 게
예상된다. 아랍에미리츠연합이 아프리카의 뿔 지역에서 이미 주요 세력으로 자리를
잡았다.
glossary)
deep dive)
glossary)
deep dive)
glossary)
deep dive)
This article appeared in the Leaders section of the print edition under the headline “Boom time
in the Gulf”
glossary)
deep dive)
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