April 22, 2016
US-GCC Ties Need to Expand Beyond Oil
By Jean-François Seznec
The Gulf states are attempting to diversify their economies, a fact often obfuscated by their vast income from oil, which exceeded $500 billion in 2014 and above $200 billion, despite the fall in crude prices, in 2015. Saudi Arabia is a major producer of chemicals, a large producer of fertilizers, and one of the lowest-cost aluminum producers in the world. The fact that Saudi Arabia can access over $800 billion between its own reserves and is able to borrow locally, and that the United Arab Emirates has close to $600 billion in its worldwide investments has allowed the two countries to offer the United States strong commercial ties as well as basic security cooperation. The United States’ Gulf partners buy tens of billions of dollars' worth of American arms and military technology. Nevertheless, a sentiment often expressed in the Gulf is that the United States undervalues its relationship with its Gulf partners and its failure to attack Iranian proxies in Syria reveals a misguided US administration that is lacking in leadership. Gulf leaders’ attempts to link the benefits of a US-Gulf oil trade relationship to US military intervention in the Middle East are flawed for a number of reasons.
First, the Islamic State of Iraq and al-Sham (ISIS) and al Qaeda are home-grown problems for the Gulf, borne out of the madrassas established by fundamentalist groups in Saudi Arabia. Fighting the root causes of extremism should be a priority for the Gulf states as this is an area where the United States can only, at best, play a supporting role.
Furthermore, the Gulf states need to recognize that the United States does not always link commerce to security. This is especially true as the United States becomes increasingly energy independent. So the thinking that the United States should lead the fight against Iran, Syria, and ISIS for the sake of preserving oil routes or trade links is not tied to reality. The Obama administration has made it clear to the Gulf countries that they must fight their own battles, with US support, rather than the other way around.
US President Barack Obama’s participation in the GCC summit in Riyadh on April 21—the first by a US President—sends an important signal. A White House statement following the summit expressed US intentions to continue working with its Gulf partners to secure its core interests in the region. The United States also wants the GCC member states—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—to play a larger role in addressing regional challenges. Obama seems to have stood firm by telling the Gulf states to take greater responsibility in solving these challenges.
Putting little emphasis on solving the extremist, anti-Shia ideology often openly promoted in Saudi Arabia, and continuing to support policies that deny freedom of religion and expression is not helping the Saudi leadership gain traction with the US public. Furthermore, the United States’ decreasing reliance on Gulf oil has lessened the incentive for US leaders to work hard to overcome public opinion.
It is in the Gulf states’ interests to try and resolve their own security challenges. Continuing stale proxy wars will achieve nothing. It will only guarantee that oil prices remain low—after all, no agreement on capping oil production can be negotiated between Iran, Russia, and Saudi Arabia when they are busy driving each other (and themselves) into massive, long-term deficits.
Even though US energy dependence on the Gulf has substantially declined, many opportunities exist for commercial exchanges that can benefit both sides. In the long-run, declining US energy dependence and expanding non-oil economic interests could be a blessing in disguise for both sides.
Jean-François Seznec is a Nonresident Senior Fellow in the Atlantic Council’s Global Energy Center.