The Gulf’s Golden Age

From pro soccer to hostage negotiations to renewable energy, Gulf nations have seized a significant role in many aspects of the world’s daily life.

In the early twentieth century, Dubai was known mainly for its pearl export industry. Maktoum bin Hasher Al Maktoum had established Dubai as a free port in 1901. The oil business eventually got underway in 1966, culminating in theUAE now being OPEC’s third largest producer. Dubai’s population exploded from 183,000 in 1975 to 3.58 million in 2022.

In March 1938, an American-owned oil drilling platform in Dhahran, Saudi Arabia found oil…and then more oil. As the oil recovery industry exploded in the 1950s, Saudi rulers embarked on an ambitious infrastructure-building program. The House of Saud built a modern desert kingdom and the once fledgling Arabian American Oil Company was officially bought out by Saudi Arabia, thus becoming Saudi Aramco in 1988.

Neighboring Qatar, slightly smaller in size than Connecticut, was a British protectorate in the mid-20th century, gaining independence only in 1971. Qatar has leveraged its rank as the world’s first (sometimes second) largest liquified natural gas (LNG) exporter to create one of the most developed and richest locales on the entire planet.

Similar success and development stories can be found in fellow Gulf Cooperation Council (GCC) members Kuwait, Bahrain and Oman. The 1973 oil embargo against the U.S. and other nations turbocharged the Gulf’s relevance as well as government coffers.

As impressive as the Gulf’s past rapid development was, it is the present and future that indicate a startlingly powerful global position for several GCC nations across a broad spectrum of global issues, influential industries and public spheres.

The past decade has shown the Gulf’s ability to increasingly drive macro-level policy narratives on key global security issues.

Former President Donald Trump’s first foreign trip on becoming president in 2017 was to Saudi Arabia, a unique precedent for a new president. Chinese leader Xi Jinping was honored at the first China-Arab States summit in Saudi Arabia in late 2022. Saudi-Sino relations will only deepen as Gulf oil exports shift east to Asia. In September, QatarEnergy signed an agreement with China State Shipbuilding Corporation to buy six advanced LNG carriers, the world’s largest of their type. UAE-China economic and security agreements are now a regular occurrence.

Additionally, Gulf nations now play an important role in global efforts to contain CO2 emissions. A then-record number of delegates attended last year’s UN climate summit (COP28) in Dubai, a conference that included a significant presence by fossil fuel companies showcasing their renewable energy and environmental initiatives. COP28 was chaired by Sultan Ahmed Al Jaber, CEO of the Abu Dhabi National Oil Company (ADNOC). It represented the first time a corporate CEO had presided over the UN’s yearly climate conference.

Beyond oil

The global reach of Gulf business and investment acumen is staggering and has moved beyond fossil fuels and petrochemicals.

Qatar Holdings is now a majority owner in The City of London’s largest property owner, Canary Wharf Group Investment Holdings. Saudi Arabia’s sovereign wealth fund (PIF) has assets valued at more than $800 billion and is now the majority owner of Premier League club Newcastle United. The team’s chairman, Yasir Al-Rumayyan, is also the governor (director) of PIF. In August, PIF signed a sponsorship deal with Concacaf, the umbrella association of North American and Central American soccer federations. Qatar Sports Investments is the majority owner of Paris Saint-Germain soccer club.

Gulf-based investment and business success is not new. In 1997, Saudi businessman Al Waleed bin Talal Al Saud (the “Arabian Warren Buffett”) purchased a five percent stake in Apple Incorporated as the company restructured and began its long era of global commercial success. In 2016, Uber raised $3.5 billion from Saudi Arabia’s PIF, one of the largest investments then into a privately held start-up.

The 2023 UN climate conference (COP28) was hosted by Dubai even as criticism arose concerning the emirate’s role in fossil fuel export industries. The criticism faded, and months later Lunate, a newly created investment fund created by the Abu Dhabi ruling family, announced a $30 billion climate fund (Altérra) with participation from prominent global asset managers. Part of the fund will support renewable energy initiatives in the developing world, an effort assisted by the fact that the UAE is the fourth-largest investor in Africa, after China, Europe and the U.S.

In April, Microsoft announced that it will invest $1.5 billion in G42, a United Arab Emirates artificial intelligence firm that is all the rage in late 2024. Additionally, Silicon Valley firm Cerebras and G42 announced late last year a joint project to create supercomputers for AI training and modeling.

Gulf investments in Western companies, though, will rise and fall with domestic priorities. Saudi PIF holdings in U.S.-traded stocks were cut in half in 2024, to about $18 billion. That number is still impressive as the kingdom deals with extended flat oil prices and the continued financing needs of its domestic crown jewel, Neom. The futuristic 10,000 square mile multimodal city is planned to bring extensive revenue from the northwestern corner of the kingdom.

The business of commercial aviation is notoriously cyclical, but the Gulf region has again proven durable. When Airbus built 251 double-deck A380 long-range aircraft, Emirates bought nearly half of the planes for its fleet, based on a commitment to make Dubai International Airport a global aviation hub. The plan worked as Dubai (DXB) is now one of the top three busiest airports in the world handling 87 million passengers in 2023.

Oddly enough, it may be found in the world of golf that the reach of Gulf’s ambition is demonstrated most stunningly. In 2021, a new international golf circuit was unveiled—LIV Golf. The enterprise would represent a rival to the long-established Professional Golfers’ Association (PGA) Tour. PIF funds and Saudi investors gave the LIV instant credibility.

The PGA Tour reacted by suspending PGA players who participated in rival LIV Golf tour events. Antitrust litigation between the two followed. There are now whispers of a possible billion dollar-plus deal and settlement between the two entities. PGA superstars Tiger Woods and Rory McIlroy have apparently played key roles in talks with, among others, PIF’s Yasir Al-Rumayyan. A stunning tale of Gulf ambition no matter the outcome.

Leadership matters

In ways big and small, Sheikh Mohamed bin Zayed (63) of the UAE, Crown Prince Mohammad bin Salman (39) of Saudi Arabia and Sheikh Tamim bin Hamad Al Thani (44) of Qatar embody the confidence of a region that is at the center of daily headlines.

Despite widespread skepticism over its ability to host the 2022 FIFA World Cup, Qatar invested around $200 billion in stadiums and infrastructure. It delivered a bravura tournament heavy in Gulf imagery, culminating in Sheik Al Thani himself adorning Argentina star Leo Messi in a traditional Saudi “bisht” as Messi and his teammates celebrated victory.

The Gulf region’s diplomatic heft comes in more subtle forms, too. Oman’s central role in mitigating regional tensions involving Sunni Saudi Arabia and Shia Iran sprung from the leadership of the late Sultan Qaboos bin Said, the longest-serving leader in the Middle East/Arab world at the time of his death in 2020.

Oman’s now famous behind-the-scenes, soft-touch diplomacy is rooted in foreign policy principles of “respect for international law, and adherence to a non-aligned policy,” according to a 1995 RAND report. Thirty years ago, Yitzhak Rabin became the first Israeli head of state to visit an Arab Gulf nation—Oman.

As major buyers of Western arms, Gulf nations have earned the respect and attention of global powers in need of urgent help. In October, Russia and Ukraine exchanged 190 prisoners of war in a deal brokered again by the UAE. Late last year, Qatar helped broker a temporary cease-fire between Israel and Hamas in Gaza, including the release of more than a hundred Israeli and foreign hostages as well as hundreds of Palestinians held in Israel. In 2023, Qatar mediated a deal between the U.S. and Iran that resulted in the release of five prisoners in each country.

What next?

Despite the new-found level of diplomatic prowess among Gulf nations and the ascent of China as a genuine global power with important interests (and allies) in the Gulf region, some level of a constrained “Pax Americana” still exists in the realms of deployable military power, cultural soft power and applied technological innovation—important assets to Gulf leaders.

UAE leader Sheikh Mohamed bin Zayed visited the U.S. in September. His long-time diplomatic advisor told UAE daily news outlet The National that the U.S. visit would focus on new priorities: “We are in less of a geostrategic phase, we are more in a geoeconomic phase. So, a lot of the things that the UAE is doing today is with the perspective that economy first, prosperity first.” Sound familiar?

Following the September 2019 drone/missile attack on Saudi oil installations, frustration swelled concerning American commitment to the security of the Gulf region. The episode highlighted the new diplomatic swagger and confidence, both real and imagined, that can be seen in the region today.

Alongside the confidence, though, old security habits endure. Negotiations are continuing between the U.S. and Saudi Arabia on a comprehensive defense and security agreement that may include a civilian nuclear energy component. With Iran’s uncertain political and military trajectory, America hasn’t left the region yet.

Internal issues will matter, too. What steps will the Gulf take to remedy its high dependence on food imports as the region turns hotter? How will civil society and citizen rights evolve in the region, from family succession and inheritance to artistic freedoms.

And then there is the price of oil, still the foundation for GCC government finances. Seventy-five percent of Saudi and about sixty percent of UAE fiscal revenues come from oil product revenue.

The road to economic diversification is underway but the near-term outlook is worrisome: a flat oil demand outlook, potential trade tariffs, the shift to renewable energy sources, and only modest Chinese oil demand projected in 2025. One oil market analyst quoted on CNBC last week put it succinctly: “There is more fear about 2025′s oil prices than there has been since years — any year I can remember, since the Arab Spring.”

2025 will test the depth and quality of Gulf nations’ social durability, economic diversity and diplomatic savvy. In the span of just two generations, the region has transformed itself from a mystifying but isolated land to a leading global destination for investment and human talent. Today the region gives meaning to American investment titan Warren Buffett’s wisdom: “Big opportunities come infrequently. When it’s raining gold, reach for a bucket, not a thimble.”