9/11/23, 2:14 AM ‘Bridges with everyone’: how Saudi Arabia and UAE are positioning themselves for power

emselves for power | Financial Times

The rise of the middle powers

The Big Read Middle Eastern politics & society

‘Bridges with everyone’: how Saudi Arabia and UAE are positioning
themselves for power

Confident oil-rich Gulf states are forging new alliances in Asia and redefining their longstanding relationship
with the US

Andrew England in Abu Dhabi AUGUST 23 2023

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By the time dozens of top security officials from across the globe touched down in
Saudi Arabia to attend a conference on Ukraine this month, Crown Prince
Mohammed bin Salman’s main task was complete.

At a similar but smaller gathering in Copenhagen in June, France had asked Riyadh to
help pull together a follow-up in the belief that some nations from the so-called global
south, including China, would be more comfortable attending if it was organised
outside of Europe.

Prince Mohammed duly delivered —

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personally intervening to help convince
Beijing to send a representative, according to
diplomats. In all, officials from 42 states,
including many that have resisted western
pressure to take sides on Russia’s war in
Ukraine, attended the gathering in Jeddah.

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By the talks’ end, there were few discernible developments beyond China hinting that
it may be willing to take part in future discussions. But for Prince Mohammed the
two-day gathering was an undoubted success. It gave the young Saudi royal the
perfect stage to project his worldview — one that envisages the kingdom as a rising
power whose influence stretches from east to west.

It is a mindset that reflects the lofty ambitions and soaring confidence of oil-rich Gulf
states — buoyed by petrodollar windfalls after last year’s surge in energy prices — that
are determined to chart their own courses in an era of polarising, shifting global
dynamics.

At the forefront are the Gulf’s two

The rise of the middle powerhouses: Saudi Arabia, the world’s top
powers oil exporter, and the United Arab Emirates,
the region’s dominant trade hub, both of
whose focus has been increasingly turning
eastwards.

Where others view the shifting global

This is the third in a series on
how the stand-off between
America and China has ushered
in a new era of opportunity for
countries around the world
Part 1: The à la carte world: our
new geopolitical era
Part 2: China’s blueprint for an
alternative world order
Part 3: UAE and Saudi Arabia —
the Gulf powerhouses
Part 4: The fight to dethrone the
dollar as the world’s currency
quick to deploy hundreds of billions of dollars in pursuit of grandiose plans to develop
his nation, and wants it to be recognised as a top G20 power, economically and
diplomatically.
currents through the lens of risk, Riyadh and
Abu Dhabi see opportunities as they leverage
their financial muscle and abundant oil
resources to strategically hedge against their
traditional relations with the west.
The common theme in both Gulf states is one
of self-assured, assertive leaders who are no
longer willing to accept binary “with us or
against us” US demands.
The UAE’s leader Sheikh Mohammed bin
Zayed al-Nahyan has for years deployed his
small state’s military prowess and financial
firepower to ensure it punches above its
weight. Equally, Prince Mohammed has been

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US oil imports from the Gulf form a smaller share — of a lower

total

Total US petroleum imports (mn

barrels per day) Share from the Gulf (%)

20
10
15
5 10
5
0 0
2000 2010 2020 2000 2010 2020

Source: EIA

Allies, but also increasingly economic competitors, both Riyadh and Abu Dhabi are
bent on projecting their standing on the international stage through broader networks
as so-called friends with all, and pursuing their own self-interest.

Partly driven by shifting trade patterns but also the result of geopolitics, it is
manifesting itself in the diversification of ties with the US — long the dominant
foreign power in the Gulf — and deepening relationships with Asian powers,
particularly China and India.

“Saudi Arabia and the UAE see more opportunities than risks in this changing world
order, and they think they have the policies and instruments to become poles of the
emerging multipolar world,” says Emile Hokayem, director of regional security at the
International Institute for Strategic Studies. “They have a very opportunistic, flexible
and transactional approach. The time when one could expect full alignment from
them is over.”

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Building new bridges

The shift in the Gulf has been driven most visibly by trade. China — the region’s
biggest trading partner — India and Japan have become the prime buyers of Gulf
crude, while US oil imports from the region have declined over the past 15 years
following the shale gas boom in North America.

Yet relationships with Asian powers have also developed far beyond oil, with the Gulf
states thirsty for new technologies across artificial intelligence, energy, logistics and
life sciences to support domestic development plans and diversify oil-dependent
economies.

“Our ties to established markets are unshakeable,” says a senior Emirati official. But
“at the same time, from a macro sense, where is new growth coming from if we look at
the next 10, 20 years? It’s coming from big markets in Asia, some in South America,
and potentially some African markets.”

Saudi Crown Prince Mohammed bin Salman welcomes China’s Xi Jinping in Riyadh last December. He said the gatherings were the
start of a ‘new historical era’ in relations with Beijing © Saudi Press Agency/Reuters

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Both the Gulf states have sealed “comprehensive strategic” partnerships with China.
When Prince Mohammed hosted Chinese president Xi Jinping in Jeddah for a series
of Arab summits in December, he said the gatherings launched a “new historical era”
in relations with Beijing, adding that the kingdom was working on “enhancing co-
operation to serve international stability”.

A Chinese official tells the FT that Beijing’s relations with the Gulf “are a model for the
developing world and for participants in the Belt and Road Initiative”. Describing
deepening co-operation on energy, infrastructure, finance, technology, the official
says the Gulf and China “can help to build a fairer multilateral order in the Middle
East that respects sovereign rights and resists the hegemony of certain powers.”

It is not just China that the Gulf nations are focusing on. The UAE, home to sovereign
investment funds that manage more than $1.3tn, has signed free trade agreements
with six nations, including India and Indonesia, in the past 18 months.

When Indian prime minister Narendra Modi visited the UAE in July — his fifth visit
to the Gulf state in eight years — it was announced that the $850bn Abu Dhabi
Investment Authority would establish a presence in Gujarat in the next “few months”.
The only overseas office for Adia is in Hong Kong.

The two Gulf states are also seeking to join Brics, the economies that include China,
India, Brazil, Russia and South Africa. Gulf officials say it is a logical move given
global trade patterns, but also one that grants them a voice in an important — and
welcoming — diplomatic network.

“Any country wants to be consequential, wants to have a seat at the table,” says Anwar
Gargash, an adviser to Sheikh Mohammed, speaking about the UAE’s wider
ambitions. “We want to build bridges with everyone.”

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UAE president Sheikh Mohamed bin Zayed al-Nahyan and India’s prime minister Narendra Modi meet in Abu Dhabi in July. It was
announced on the trip that the Abu Dhabi Investment Authority would establish a presence in Gujarat later this year © Hamad Al
Kaabi/UAE Presidential Court/Reuters

The trend has complicated US relations with traditional Arab allies, with divisions
becoming more visible in the wake of Russia’s invasion of Ukraine.

Like Turkey and Brazil, “they don’t want to have to choose between the United States
and China, they don’t want to have to choose a side in the Ukraine war,” says former
US diplomat Jeffrey Feltman. “They, in fact, have some benefits to not making a
choice, in the same way the United States liked having China and the Soviet Union to
be able to leverage one against the other during the cold war.”

At the Ukraine war’s outset, the UAE rattled the Biden administration by using its
temporary seat on the UN Security Council to join China and India in abstaining on a
US resolution condemning Moscow, in an extraordinary expression of frustration with
American policies.

Both Abu Dhabi and Riyadh have rebuffed western efforts to cajole them into
abandoning Vladimir Putin, with whom they co-operate on oil through Opec+ and
consider an important player — and potential spoiler — in the Middle East.

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A month before Modi’s visit to Abu Dhabi, Sheikh Mohammed was telling the Russian
president that he wished to build on the relationship with Moscow.

He was one of the few global leaders to attend the St Petersburg International
Economic Forum which his adviser Gargash describes as a “calculated risk”. The UAE,
like Saudi Arabia, offers itself as a mediator between Moscow and the west. “A lot of
people would criticise him [for making] the trip,” he adds. “But Sheikh Mohammed
was saying ‘I’m here to help in whatever way.’”

The US and them

For decades, the Gulf was firmly in the US’s orbit with relationships founded on the
unwritten compact that Washington would be their security guarantor while Arab oil
producers ensured stable global energy supplies. Saudi Arabia, once a staunch
opponent of communism, only recognised China in 1990.

The UAE in particular actively carved out a role as arguably Washington’s closest Arab
ally, taking part in every US-led military coalition since the 1991 Gulf war, bar the
2003 invasion of Iraq. Both Saudi Arabia and the UAE spent tens of billions of dollars
on American military hardware, while investing much of their petrodollar surpluses in
US assets.

Yet relations grew increasingly fractious after then President Barack Obama was
perceived to have ignored Saudi and Emirati interests in the wake of the 2011 Arab
uprisings. Ties were further strained by Obama’s decision to sign the 2015 nuclear
agreement with their rival, Iran.

The mood improved after Donald Trump

entered the White House and pursued
There’s no going back. transactional relationships, paid zero
Saudi Arabia will not attention to rights abuses in the autocratic
give up the bridges it Gulf and abandoned the nuclear deal.
has built with the global
But Arab officials became wary of his
south, with Russia or
unpredictability, frustrated by what they
China, because those
considered to be limp responses to attacks on
are integral to the tankers in the Gulf and Saudi oil
functioning of its infrastructure that were blamed on Iran.
economy

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His successor Joe Biden’s decision to shun Prince Mohammed and condemn abuses in
the kingdom, particularly the 2018 murder of Jamal Khashoggi by Saudi agents, then
pushed relations with Riyadh to new lows.

Last year, Washington’s sluggish response to missile and drone attacks on Abu Dhabi
by Iranian-aligned Yemeni rebels infuriated Sheikh Mohammed, who has not visited
the US since 2017, and exposed the absence of personal relationships that were
traditionally core to US-Gulf alliances.

Tensions have since eased, but there remain points of friction. In May, the UAE pulled
out of a US-led maritime task force over frustrations about its rules of engagement
after Iranian forces seized two tankers in the Gulf.

Yet for all the testiness, all sides acknowledge they need each other. The Biden
administration set aside its repugnance for Saudi Arabia’s human rights record to
engage Riyadh on issues ranging from energy stability, regional policies and the
Ukraine war, culminating in a frosty trip by the president to Jeddah last year.
Washington has reassured Abu Dhabi of its commitment to the region’s security after
the UAE suspended its participation in the naval task force and dispatched additional
warships and fighter jets to the Gulf.

Saudi and Emirati officials also have no illusions about their dependence on the US
for their main defence needs. Indeed, their demand is more not less: both Riyadh and
Abu Dhabi are pushing Washington to agree to more institutionalised security
partnerships.

The discussions with the UAE picked up after last year’s attacks on Abu Dhabi. US
talks with Saudi Arabia are part of efforts to cajole the kingdom into normalising
relations with Israel and, if successful, could be used by Washington to try and curb
elements of Riyadh’s relationship with Beijing, such as military co-operation and
technology transfers.

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A Ukrainian stand at the World Defense Show in Riyadh in March last year. The war in Ukraine has underscored to the Gulf what the
US is capable of when committed to a cause © Ahmed Yosri/Reuters

But Ali Shihabi, a Saudi commentator close to the royal court, says that while there
could be “adjustments” if the US agrees to a security alliance with the kingdom,
Riyadh would resist pressure to dilute ties with China.

“There’s no going back. Saudi Arabia will not give up the bridges it has built with the
global south, with Russia or China, because those are integral to the functioning of the
Saudi economy and to the kingdom’s long term market needs,” he says. “The Saudi
leadership is much more independently minded; 10 years ago there was a whole
generation that was just instinctively more deferential to American requests.”

The war in Ukraine has underscored to the Gulf what the US is capable of when
committed to a cause. But the question at the core of Emirati and Saudi concerns is
the extent of Washington’s commitment to their objectives.

“I don’t think that American economic, military or political power is less formidable
today, or will be in the next 10 years, than it was in the last 10 years,” says Gargash.
“What I’m trying to understand is what is the commitment to the region and the
UAE.”

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‘A delicate game’
It is not just American military hardware that binds the Gulf to the US.

The Gulf states peg their currencies to the dollar and continue to view the US as a key
investment market. More than 40 per cent of Abu Dhabi’s investment fund wealth is
deployed in the US. Many of Saudi Arabia’s $650bn Public Investment Fund’s high-
profile investments have been in American assets, including stakes in Uber and
electronic vehicle maker, Lucid.

Officials point out that Gulf’s state funds find it much easier to invest in the US than
less liberalised Asian markets, particularly at the scale required to meet their
ambitions. There is also acknowledgment that much of the kind of state-of-art tech
the Gulf wants to tap into is being developed by American companies.

Yet Gulf trade with Asia is only heading in one direction, and sovereign funds across
the region are ramping up their exposure to Asian markets.

In 2021, Saudi Arabia’s $81.7bn total trade with China briefly exceeded Riyadh’s with
the US, the UK and the euro area combined, according to a report by London-based
Asia House.

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The report, released last year, added that it expected the UAE to follow a similar
pattern, with the difference between Gulf’s state trade with China and with the US, the
UK and the eurozone narrowing to a few billion dollars compared to $28bn in 2010.

And as the world transitions away from fossil fuels, the Gulf states know it is likely to
be China and India that buy their last barrels of oil.

China has not sought to challenge or displace the US’s security role in the Middle
East, but there are hints that it wants to move beyond traditional commercial
partnerships. Its success in brokering an agreement in March for arch rivals Saudi
Arabia and Iran to restore relations was interpreted by many as a sign of Beijing’s
willingness to adopt a more political role in the region.

However, Gulf officials also recognise the dangers of getting caught in the crossfire of
US-China rivalry, as the two global powers aim to “decouple” their economies.

“This risk is in all this decoupling conversation [in Washington] because suddenly if
we are looking at two competing technologies, the world is turning into VHS and
Betamax,” a UAE official says, a reference to home video format war in the 1980s.

A large oil tanker loaded with diluted bitumen is docked at Yantai Port in Yantai, Shandong Province, China, early this month. China,
India and Japan have become the prime buyers of Gulf crude © CFOTO/NurPhoto/Reuters

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Still, the Gulf states are willing to rankle Washington by deepening ties with Beijing
and tapping into Chinese technology, such as 5G telecommunications networks. Two
years ago, the UAE was forced to address US suspicions that China was building a
military base at an Abu Dhabi port.

The UAE is this month conducting its first joint air exercise with China, according to
Chinese state media. It was also reported that Saudi Arabia bought $4bn of weapons
from China after the Zhuhai Air Show in November, which would make it far larger
than previous Saudi-Chinese arms deals.

The message to the US from Riyadh and Abu Dhabi is, “We will come to you first, but
if you don’t deliver we will go elsewhere,” analysts say, be it weapons or technology.
They add that the Gulf states are not averse to playing one country off against another.
But it is a fine balance.

“The fundamental strategic dilemma for them remains that their security is in the
west, their energy politics is with Russia and their prosperity is increasingly with
China and the rest of Asia,” Hokayem says.

“It requires careful footwork and constant engagement to manage these complex
relationships. They have to massively invest in all those capitals, in political, economic
and geoeconomic terms. It’s a delicate game.”

Additional reporting by Sarah White in Paris and James Kynge in London

Data visualisation by Keith Fray

Copyright The Financial Times Limited 2023. All rights reserved.

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