French President Emmanuel Macron receives Saudi Crown Prince Mohammed bin Salman at Elysee palace in Paris on Friday. EPA
French President Emmanuel Macron receives Saudi Crown Prince Mohammed bin Salman at Elysee palace in Paris on Friday. EPA
French President Emmanuel Macron receives Saudi Crown Prince Mohammed bin Salman at Elysee palace in Paris on Friday. EPA
French President Emmanuel Macron receives Saudi Crown Prince Mohammed bin Salman at Elysee palace in Paris on Friday. EPA


The growing importance of the Arabian Gulf


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June 18, 2023

The Arab Gulf countries’ diplomatic heft has grown significantly, especially in the context of the West’s approach to Tehran. This has led to a transformation in the Iran nuclear standoff.

Not long ago, the Gulf countries had been excluded from the nuclear negotiations in Vienna involving the five permanent members of the UN Security Council (plus Germany), the rationale being that these talks focused solely on Tehran’s nuclear weapons programme – and did not include its activities in the region.

Today, the Biden administration has turned to Saudi Arabia for assistance on the nuclear issue, which has lost its place at the top of the West’s priority list due to the war in Ukraine. The Europeans, meanwhile, have come to acknowledge the mistake of having refused to incorporate the regional dimension into their talks with Iran. They are now even seeking support from key Gulf countries in resolving conflicts within Europe.

The Americans and Russians are preoccupied with their respective presidential elections next year. Despite a number of candidates entering the fray, it appears that the two key figures in this electoral contest will once again be Joe Biden, the current incumbent, and Donald Trump, his predecessor. In Russia, meanwhile, it will be interesting to see if there is a viable challenger against Vladimir Putin.

Nonetheless, both elections are likely to have a significant bearing on the world's future – particularly given the poor state of relations between the two powers.

Amid uncertainty over the future of the New Start Treaty between the two countries, it is noteworthy Russian Foreign Ministry spokesperson Maria Zakharova recently emphasised that Moscow will use nuclear weapons only in exceptional and defensive circumstances. Ms Zakharova made clear the Kremlin’s commitment to the principle of inadmissibility of nuclear war, saying: “There can be no winners in such a conflict, and it must never be unleashed.”

Promisingly, she refused to rule out the possibility of Russia reversing its decision to suspend the New Start Treaty altogether. However, she emphasised that this reversal would require Washington to ease tensions and create conditions for the resumption of the treaty’s functionality. In other words, these are reassurances, but they come with conditions.

US President Joe Biden and Russian President Vladimir Putin arrive for their summit in Geneva in June 2021. Reuters
US President Joe Biden and Russian President Vladimir Putin arrive for their summit in Geneva in June 2021. Reuters
There is now a demand for non-traditional actors who have assumed roles of utmost significance

The recent St Petersburg Forum encapsulated the Russian leadership’s long-term vision for the war in Ukraine. The conflict has endured for a considerable duration, leaving western leaders to ponder whether Moscow still maintains the belief that it can dismantle Ukraine as a sovereign nation – or whether it has reached a definitive stance on the boundaries that the Russian army might deem acceptable within Ukrainian territory.

This is important for US policymakers, not only due to Moscow’s pivotal role in military developments but also because of its impact in the context of presidential election campaigns. Who assumes power in the US and Russia next year will be important for the other country. Preparations are, therefore, under way for various scenarios and outcomes of the war.

Indeed, most powers are preparing worst case-scenarios across military, economic and financial spheres, due to the poor relations between Russia and the West. There is a conspicuous absence of a safety belt. And with the war not exclusively a bilateral issue between Washington and Moscow anymore, there arises a pressing need to rally countries that have the influence to undo this polarisation.

There is now a demand for non-traditional actors who have assumed roles of utmost significance. Among these players, Saudi Arabia stands out prominently, along with other Gulf countries such as the UAE and Qatar. They have become important to both the US and Europe, not solely due to their oil and gas resources, but because of their diplomatic influence in American, Chinese, Russian and European political considerations.

The Non-Aligned Movement, which played a crucial role in keeping things calm during the Cold War, has lost its significance. In its place, countries with emerging economies, scientific and technological developments, and institutional advancements – such as India, Brazil, South Africa and Turkey – have become powerhouses. Key Gulf countries have now entered this club.

A view of the flags of members of the Non-Aligned Movement countries in Belgrade, Serbia, in October 2021. AP Photo
A view of the flags of members of the Non-Aligned Movement countries in Belgrade, Serbia, in October 2021. AP Photo

Saudi Crown Prince Mohammed bin Salman’s recent visit to Paris underscores the Europeans’ recognition that Riyadh’s involvement extends beyond Middle Eastern affairs and encompasses even European matters. The visit also follows the US’s acknowledgment of the pivotal role the Saudi leadership plays, both regionally and globally.

In fact, Prince Mohammed’s visit went beyond discussing bilateral issues. Ukraine was high on the agenda, with France – most likely on behalf of other European countries – requesting Saudi assistance in ending the war.

This reflects the new approach adopted by the Gulf countries, as they co-ordinate their roles to assert their positions and influence on the global stage in terms of economy, development, vision, institutions and diplomacy. It’s also worth noting the pivotal role the Gulf Co-operation Council countries are playing to improve American and European relations with Iran.

Oman, for instance, has facilitated negotiations as attempts are made to revive the Iran nuclear agreement. Foreign Minister Sayyid Badr bin Hamad bin Hamoud Al Busaidi recently revealed that Washington and Tehran are approaching the final stages of an agreement regarding the release of American detainees in Iran. According to news reports, this is part of the talks to release frozen Iranian assets worth billions of dollars in South Korean banks due to US sanctions, with the funds intended for “humanitarian purposes”. The UAE and Qatar have also played a role in US-Iran interactions and, alongside Saudi Arabia, aim to persuade Tehran not to exceed the threshold of uranium enrichment.

In practice, the Gulf countries may have replaced Russia at the nuclear negotiating table, with the latter focused on the Ukraine conflict.

There is no doubt, then, that the Gulf countries have further reinforced their influence on the global stage, drawing the attention of both western and eastern nations. This marks the dawn of a new reality.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

The President's Cake

Director: Hasan Hadi

Starring: Baneen Ahmad Nayyef, Waheed Thabet Khreibat, Sajad Mohamad Qasem 

Rating: 4/5

Updated: June 21, 2023, 2:20 PM