Gulf Economic Diplomacy in a Fragmented World

This workshop examines how economic diplomacy and tools such as trade agreements, investment facilitation, standards cooperation, and strategic logistics can strengthen resilience and advance diversification across Gulf economies amid growing geoeconomic and geopolitical fragmentation. Recent shocks, including U.S. tariff measures, sanctions related to the Russia–Ukraine war, and disruptions to major trade routes stemming from the war on Gaza have compounded supply-chain vulnerabilities exposed by COVID-19, slowed technology diffusion and innovation, and complicated the clean-energy transition.

In this setting, the GCC countries are exploring ways to shelter themselves from geopolitical shocks and continue to diversify and grow their economies. Participants in this workshop are encouraged to explore how these countries are engaging with a diverse array of partners to increase resilience; positioning themselves strategically along new economic corridors to benefit from the redirection of trade and investments away from rival blocs; launching elaborate industrial policies to support further diversification; enhancing their domestic investment and business environment and creating special economic zones to attract more foreign direct investment (FDI); leveraging their sovereign wealth funds to promote climate- and technology-related economic objectives; considering the use of digital currencies; and using foreign aid to reduce conflicts and their impacts on neighbours and partners, among others.

The years since the COVID-19 pandemic have been qualified by a volatile, uncertain, complex and ambiguous (VUCA) geopolitical environment, in which the superpowers have launched themselves in a race of using more or less explicit coercive economic diplomacy practices. Those have included imposing sanctions, tariffs, non-tariff barriers, and using industrial policies. Multilateralism, in the framework of the World Trade Organisation, has been and still is struggling to produce meaningful solutions to this rise in protectionism. Yet, global economies remain deeply interconnected, giving rise to alternatives to the globalization movement in the form of regionalism, minilateralism, and plurilateralism.

In this context, the middle powers, and the GCC countries in particular, are opting for a different approach to the global economic order. They are focusing on employing positive economic diplomacy tools to grow their importance on the international geoeconomic arena. They aim to remain equidistant from the fighting superpowers and to maintain a certain neutrality, made possible to an extent by the fact that the superpowers need them as middlemen in the exchanges of goods, services and money that they can no longer conduct directly with each other. This is a complex exercise that might turn out to be temporary. The GCC countries also engage in closer collaborations with other emerging economies, namely in the framework of the enlarged BRICS, or through partnerships like the series of Comprehensive Economic Partnership Agreements (CEPAs) negotiated by the UAE. Those bilateral and minilateral arrangements diversify the GCC export markets and import sources, while also having the potential to open new avenues for increasing international investment flows and providing for the development of disruptive technologies and of new economic tools like central bank digital currencies.

In addition, the GCC countries share their wealth with those less fortunate by offering aid to countries in climate-induced crises and armed conflicts. This strengthens their soft power and over time increases their sphere of influence. Furthermore, the GCC economies use their well-endowed sovereign wealth funds (SWFs) to invest abroad and diversify their sources of revenues.

Those projects come with challenges. They can exacerbate the rivalries or even create conflicts among competitors, and sometimes among former partners. They can also be opposed by one or more superpowers feeling threatened or simply unsettled by such developments.

In order to address such challenges, the top priority of the workshop is to offer a comprehensive view of the fundamental role that economic diplomacy can play in the GCC states. It will explore the contributions of governments, diplomats, chambers of commerce, special economic zones, sovereign wealth funds, central banks, financial institutions, and private companies to the use of economic tools for achieving foreign policy objectives. In the wake of fundamental economic uncertainty plagues with wars and climate change threats, this workshop will explore how the GCC countries can advance to a more resilient and diversified economy.

Alongside the recent shifts observed in the international order, a set of practices has emerged that strategically harness financial and commercial dynamics to attain objectives beyond the economic realm. This has led to a growing trend toward the utilisation, politicisation and even weaponisation of international economic interactions not for purely economic aims. One of the objectives of this workshop would be to explore how GCC economies are participating in this trend and what are the effects and challenges of this participation.

On another front, despite their diversification efforts, some GCC countries remain heavily dependent on oil and gas exports and revenues. As global energy markets are highly volatile, this continues to have damaging effects on government spending, investment strategies, and economic resilience. This workshop will therefore also try to identify the role that economic diplomacy has played in the faster diversification of some GCC countries, and the one it can potentially play to help the others catch up.

The discussions during the workshop will attempt to answer some of the following questions:

• How has the role of economic diplomats and embassies evolved to advance the GCC nations’ economic interests abroad?
• What drives the move towards economic fragmentation, and how are the GCC economies positioning themselves in this context?
• How can the Gulf countries use economic diplomacy to successfully navigate the challenges of a fragmented global economy?
• As industrial policies reemerge, what policies have the potential to be the most effective if implemented in the GCC economies?
• How can the GCC countries position themselves strategically at the crossroads of existing and emerging economic corridors?
• What can GCC countries do to circumvent the obstacles of persisting political instability in the Middle East while advancing BRI, IMEC or the Development Road?
• Should GCC countries build their economic retaliatory capacity or should they invest more in becoming less vulnerable to economic coercion?
• How are SWFs’ foreign investments contributing to the GCC economic diversification efforts?
• How can middle powers like the GCCs countervail the effects of trade weaponisation by the superpowers?
• What incentives can GCC governments provide to businesses for smarter internationalisation to achieve economic diversification?
• How can economic diplomacy tools be better used to achieve economic security at times of major disruptions?
• How have geopolitical considerations shaped the GCC states’ bailout, development and humanitarian aid policies?
• How is the humanitarian aid disbursed by the GCC economies contributing to achieving peace and stability in conflict and crisis areas?
• What impact are the GCC states’ industrial policies having on their economic diplomacies? In what ways might the GCC states be configuring their foreign relations to ensure the success of their domestic economic policies in light of growing economic and technological protectionism worldwide?
• In what ways are the GCC states’ evolving economic interests prompting engagement with hitherto neglected regions and blocs including Central Asia, South America, etc.?
• In light of growing intra-GCC competition, to what extent have the GCC states been able to overcome longstanding policy disagreements (e.g., on bilateral FTAs or free zones) and reduce barriers to intra-GCC trade and investment (e.g., unifying rules of origin, national treatment for investors, etc.)?
• How are the GCC states responding to the Global Anti-Base Erosion (GloBE)’s emerging global minimum tax regime and what implications will this have on their attractiveness for foreign investors?
• What impact could the EU’s Carbon Border Adjustment Mechanism have on GCC export competitiveness and what options do the GCC states have for addressing the challenge? Could the Saudi-US Memorandum of Cooperation on Critical Minerals serve as a template for future partnerships centered on securing access to strategic resources?
• What roles do the GCC states see for themselves in global economic governance and how does their participation in international institutions and coalitions including the IMF, World Bank, BRICS and G20 serve those objectives?
• How effective have export promotion agencies (e.g., Abu Dhabi Exports Office, Dubai Exports, etc.) and FDI promotion agencies (Bahrain’s Economic Development Board, Invest Qatar, etc.) been in advancing the GCC states’ economic interests?
• To what extent have private consultants played a role in shaping the GCC states’ foreign economic policies?