Strains within the GCC and shifting external alliances will make for an unsettled year
The Gulf Cooperation Council began 2017 looking at the new US administration with hope, albeit—as in other parts of the world—with varying expectations. Obama's approach to the GCC and broader region was seen by GCC countries as misaligned with its interests. The Gulf states looked at Obama's support for Arab Spring protests; his engagement with Iran over its nuclear programme; and his administration's lack of action in Libya, Syria and Yemen as symptoms of America's dwindling interest and engagement in the region, and, at times, of policies perceived as opposed to some of the GCC states' interests.
The incoming Trump administration attempted a reset by recasting American priorities in the region to focus on countering two threats: Islamist extremism and Iran. Saudi Arabia, the UAE and Bahrain encouraged and welcomed this shift. But as 2017 comes to an end, Trump's reset has been more rhetoric than action—his foreign policy is restrained by domestic and international resistance. Yes, Iran has been put on notice by the US, with additional sanctions and more efforts to counter Iran's allies and interests in the region. But the difference in policy from Obama's time is subtle rather than seismic; Iran will start 2018 the most diplomatically and economically engaged it has been for a decade.
The GCC begins the new year looking at the Trump administration with hope rather than expectation. The UAE, Saudi Arabia and Bahrain probably feel let down by the US, as Trump's initial social media-led endorsement of their approach to Qatar turned into a more neutral, mediatory role.
The GCC's changed relationship with Qatar has since become the new normal as measures are taken to segregate their economies. The aims and interests of Saudi Arabia, the UAE and Bahrain are likely to remain too far from what Qatar is willing to concede, and so the "dispute" is best understood as a longer-term "policy". The GCC is built on freedom of movement of people and goods, and a shared defence policy, that Qatar will not be part of in 2018, regardless of its official status in the union. Even if Qatar were to cede ground, relationships in the GCC and its aforementioned role will be negatively affected for years.
More broadly, GCC countries' foreign policies will be transactional and issue-specific in the Middle East and with external partners, rather than being based on strategic alliances built around shared ideologies and world views. The characterisation of the region in two camps in the post-World War 2 and Cold War periods has not applied for some time. The alliances that exist are smaller in scale: the UAE and Saudi Arabia; Qatar and Turkey; and Iran and its various proxies are three clusters in and around the GCC that have more durable alignments of interests that will hold throughout 2018.
This multipolarity in the GCC and the broader region mirrors a similar trend in global politics. China, the EU, Russia, India, Japan and others will present themselves as alternatives to the US as partners on defence and economics, particularly as uncertainties about US alignment with and interest in the GCC continue under Trump. External powers will see opportunities, while countries in the region will see the necessity and value of more diversified relationships.
The multipolarity inside and outside the region will cause surprises in 2018. Governments from the region and those looking at the Gulf will be more willing to take unprecedented economic and political measures than in the past. The upstream oil and gas sector is likely to be centre stage, with privatisations, restructuring, regulatory reforms and attempts to diversify trade and investment partners likely across the GCC. This doesn't mean that the GCC's established, strategic ties in defence and economics with external powers will collapse; rather it means that companies and governments from a broader range of countries see more opportunities for themselves in the region.
Finally, the GCC countries will also need to compete more with each other and with states outside the region to maintain and grow investors' interests. Regulations between GCC countries are likely to become less harmonised, creating room for competition to attract investment and trade, while other cities, ports and countries are likely to catch up with the standards that the GCC has set.
Henry Smith is Middle East Director at Control Risks
This article is part of Outlook 2018, our annual book looking at energy market trends for the year ahead. To purchase a copy, click here