Elections weigh on US-Gulf economic relations
The monetary stability of the Gulf Cooperation Council countries is also closely correlated to the United States’ economic strength. Indeed, except in the emirate of Kuwait, currencies in the region have been all pegged at fixed rates to the US dollar since the mid-1980s.
Emerging industries in Saudi Arabia
Ahead of a significant energy transition, Gulf countries look to forge in-depth economic partnerships with US entities to help in reforming their fossil fuel-dependent economies. But for Issam Al Tawari, founder and managing partner of the Kuwait-based economic advisory firm Newbury, the flow of funds goes in one direction only. “I do not really see much of US companies venturing into the region,” he told Al-Monitor.
Earlier this month, former US Ambassador to Oman Marc Sievers told Al-Monitor that Gulf countries should “inform American investors about what the opportunities are.”
In Saudi Arabia, Crown Prince Mohammed bin Salman‘s reform plan — known as Vision 2030 — strives to attract billions of dollars worth of foreign direct investments to slash the kingdom’s reliance on oil revenues and shape a thriving local economy. “American investors should look at sectors that are emerging in Saudi Arabia, for example, entertainment, tourism, the home mortgage industry and the housing sector,” Suwayed said.
An additional vehicle to enhance US-Gulf economic ties could be Islamic finance, said Jamshaid Anwar Chattha, a former assistant secretary-general at the Islamic Financial Services Board and an Islamic finance expert at the Central Bank of Kuwait.
He told Al-Monitor the Gulf’s Islamic banks could find a “perfect market” in the United States and offer halal investment opportunities in the Gulf to American Muslims. “The top American administration has to look into Islamic finance more positively,” he said, expecting a Biden administration to be “kind of more flexible” in this regard.
Much warmer or much colder
Gulf countries are bracing for the possible consequences of a Joe Biden win in the Nov. 3 election. The Democratic presidential nominee declared he would reenter the Iran nuclear deal, end US support for a Saudi Arabia-led war in Yemen and said the Saudi government should “pay the price” for its abysmal human rights record.
On Oct. 2, 2018, a “hit squad” flew to Istanbul from Saudi Arabia killed and dismembered Washington Post Saudi journalist Jamal Khashoggi in the kingdom’s consulate. The crown prince faced a torrent of international condemnations, including from Republican leaders in the US Congress who called for bipartisan support to formally condemn the crown prince.
President Donald Trump, however, refused to hold the crown prince accountable for the killing, and according to American journalist Bob Woodward’s new book said in 2018, “I saved his ass” as well as “I was able to get Congress to leave him alone. I was able to get them to stop.”
The prospect of deteriorating US-Gulf relations under a Biden administration could “raise the risk premia that investors demand to hold Gulf debt,” warned James Swanston, Capital Economics’ Middle East chief economist. Since 2015, Gulf states have repeatedly tapped global debt markets to finance large budget deficits. The credit rating agency SP Global Ratings expects Gulf Cooperation Council government debt to increase by $100 billion in 2020 alone.
But despite Biden’s promise to “reassess” Washington’s relations with Riyadh, Gulf countries continue to cling to US security commitments to the region. Sources interviewed by Reuters said a Biden win “would not upend decades-long alliances.” Tawari added, “We will always continue to have strong ties with the Americans regardless of who is in the White House; it is just that the relationship can become much warmer or much colder.”