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Political Crises, Economic Competition, and Promising Dialogues Offer a Mixed Bag

DR. ROBERT MOGIELNICKI

DR. ROBERT MOGIELNICKI

Dr. Robert Mogielnicki is a Senior Resident Scholar at the Arab Gulf States Institute in Washington and an Adjunct Assistant Professor at Georgetown University’s Walsh School of Foreign Service.

Even before the Omicron variant emerged on the global scene, 2022 promised to be a mixed bag for mobility trends in the Middle East and North Africa (MENA) region. The economic trajectories of and regional relations between MENA countries stand at a precipice. Some will improve significantly compared with recent years, while others are set to deteriorate precipitously.

Gulf states in the foreground for wide-ranging reasons

Gulf countries are poised to be at the center of regional developments in the broader MENA region throughout 2022. In early December 2021, American and Iranian negotiators resumed talks in Vienna after a five-month hiatus. While new rounds of talks are likely in 2022, a return to the Iran nuclear deal appears increasingly elusive.

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Major international exhibitions and sporting events are taking place in the Middle East for the first time. The delayed Dubai Expo 2020 opened its doors in October 2021 and will run to March 2022. More than 5.6 million people had reportedly visited the expo between 1 October 1 and 6 December 2021. Meanwhile, Qatar will host the FIFA World Cup in November and December this year.

Higher oil and gas prices have significantly reduced the fiscal pressure on the oil- and gas-producing states of the region. The US Energy Information Administration forecast the average price of Brent crude in 2021 to be USD 70.60, up from USD 41.69 in 2020 and anticipates that it will hover around the same price this year. Even the Gulf countries with weaker fiscal balance sheets — Bahrain and Oman — have weathered the Covid-19-related crises and emerged in decent economic shape.

Saudi Arabia and UAE’s development trajectories overlap

Improving economic conditions in the Gulf region have created the perception of rising economic competition between Saudi Arabia and the UAE — the Arab Gulf region’s two largest economies. In late October 2021, just weeks after Dubai, the commercial hub of the UAE, opened its delayed Expo 2020, Saudi Arabia announced that it had submitted an official request to host Expo 2030.

Throughout 2021, both Saudi Arabia and the UAE announced major legal reforms intended to help attract foreign talent and businesses alongside efforts to ensure that the countries remain attractive destinations for highly-skilled expatriates. In early 2021, the UAE created an official pathway to citizenship for nominated expatriates, while Saudi Arabia began granting citizenship to narrow groups of talented expatriates in November 2021. Additional reforms that enhance the social and economic environments of both countries are expected over the coming months.

The UAE, which couples a small local population with substantial sovereign wealth holdings, is better positioned to stay several steps ahead of regional competitors in the race to become a global business hub. In December 2021, the UAE announced a 4.5-day work week for state employees and switched the country’s weekend to Saturday and Sunday. Tit-for-tat social and economic policy announcements associated with the overlapping development trajectories of Saudi Arabia and the UAE will continue well beyond 2022.

Other Gulf countries strengthen ties to stay in the regional race

In November 2021, Oman and Qatar signed six cooperation agreements to enhance collaboration across a range of activities, including tourism and investment. Oman–Qatar ties were previously strengthened in 2017, when a Saudi-led boycott of Qatar reconfigured flows of people and goods through Omani transit hubs. Oman–Saudi relations improved in late 2021 when they signed 13 memorandums of understanding worth approximately USD 10 billion. Commercial deals and connectivity initiatives between the two countries are set to accelerate in 2022.

Newly charged ties and promising dialogues abound

Israel’s newly formalized ties with Bahrain and the UAE continue to develop. While some of the initial fanfare behind normalization has faded, genuine economic linkages involving governments and private-sector actors are materializing. In November 2021, Israel, Jordan, and the UAE agreed to build renewable energy and desalination plants. Israelis and Emiratis started traveling between their countries visa-free on 10 October 2021. It is just a matter of time before closer ties are forged between Israel and additional Middle Eastern countries, but there are no clear timetables for new normalizations.

Ongoing dialogue between regional rivals is another promising development. Saudi Arabia has completed multiple rounds of talks with Iran, while the UAE’s national security advisor visited Tehran to meet with Iranian President Ebrahim Raisi in early December 2021. These steps signal a greater willingness by regional actors to play an active, visible role in strengthening the area’s security architecture, especially following America’s withdrawal from Afghanistan. The US Department of State’s US-Gulf Cooperation Council Iran Working Group released a document affirming that deeper regional economic ties after the lifting of sanctions is in the interests of all parties, but the likelihood of reaching a durable agreement between the USA and Iran remains low.

Turkey also appears committed to improving its relations with Gulf monarchies. The sliding value of the country’s currency, owing largely to government influence over the central bank, provides a convenient backdrop for shoring up Ankara’s regional relations. Following Abu Dhabi Crown Prince Mohammed bin Zayed’s visit to Ankara in late November 2021, the UAE announced a USD 10 billion fund to support investments in Turkey, reflecting a vote of confidence in the Turkish economy.

Yemen, Afghanistan, Lebanon – remote chances for crisis resolution and lingering challenges

Prospects for a durable resolution to the war in Yemen are especially dim. Yemen’s Iran-aligned Houthi movement seized energy-rich territories across the country in October and November 2021, strengthening their future bargaining power. The Saudi-led coalition withdrew from various locations in southern and western Yemen, suggesting that the coalition is searching for an exit strategy that may unfold throughout 2022.

Likewise, the economic outlook for both Afghanistan and Lebanon is bleak. Afghanistan’s economy, which faced formidable challenges before the August 2021 takeover by the Taliban, is nearing collapse. Approximately 10 million Afghans are at risk of falling into poverty according to the World Bank. The UN estimates that 55% of Afghans will face a food crisis or experience emergency levels of food insecurity between November 2021 and March 2022.

Saudi Arabia and the other Gulf states of Bahrain, Kuwait, and the UAE withdrew their ambassadors to Lebanon and expelled Lebanese diplomats following critical comments made by the Lebanese information minister who later resigned in a bid to ease the unprecedented tension. Saudi Arabia and its regional allies are concerned about the influence of the Iran-backed Hezbollah group in Lebanon. The Gulf states are unlikely to provide economic support to Lebanon and appear increasingly willing to isolate Lebanon. On 4 December 2021, French President Emmanuel Macron announced a Saudi–French initiative to resolve the diplomatic rift between Lebanon and the Gulf states.

Regional states are slowly re-engaging with Syria and seeking a mechanism to readmit Damascus to the Arab League. Saudi and Syrian intelligence chiefs met at the Arab Intelligence Forum in Cairo in late 2021, signaling greater prospects for renewed ties. Despite general concern over the continuance of Bashar al-Assad in power, a strong sense of conflict fatigue prevails across the region.

Much of the region’s conflict has moved from the battlefield to the political arena. The final results of the October 2021 elections in Iraq, which has long been considered an Iranian sphere of influence, confirmed that pro-Iran factions lost around two-thirds of their parliamentary seats. Libya, Sudan, and Tunisia are muddling through various constitutional predicaments, political crises, and contested elections that will hamper economic growth and stability for the foreseeable future. Egypt is currently an island of relative stability within a precarious geopolitical neighborhood, but the country’s growing population — estimated to reach 190 million people by 2052 — poses major developmental challenges in the years ahead.

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