The strategic vision of Middle Eastern powers such as Saudi Arabia and the United Arab Emirates has long been defined by the effort to leave behind economic dependence on oil. With the War in Ukraine, however, this path gained a stone.
Western sanctions targeting the sector in Russia (which accounts for 11% of world production) could open a window to other producing countries, and analysts see Riyadh and Abu Dhabi as the main potential beneficiaries — even as Saudis and Emirati seek to diversify their production. economy and maintain diplomatic ties with Vladimir Putin’s country and disagreements with the United States.
Washington already announced, in early April, a ban on imports of oil, gas and coal from Moscow, but the move has not yet been implemented by the European Union, whose members, Germany and the Netherlands ahead, are the destination of almost half of the production. Russia, according to the Energy Information Administration (USA). Obviously, the effects on the population of an eventual interruption of the importation of Muscovite oil generate hesitation to punish Russia.
Thus, in recent weeks, both the US and European nations have started to look for alternatives to avoid a price hike and replace the faucet that shuts off. Venezuela and Iran, rivals of the Americans, became options, and diplomatic contacts were made to unblock sanctions against the dictatorship of Nicolás Maduro and, in the case of the Persian country, negotiations around the return of the 2015 nuclear deal.
At least for now, these possibilities have not been successful, and the path leads to the Middle East, as Saudi Arabia and the United Arab Emirates, holders of 12% and 4% of the world oil market, are seen as the only ones in a position to increase production with relative ease.
Joe Biden’s initial attempt to contact the leaders of both countries, however, failed, and the Democrat’s calls, according to a Wall Street Journal report, were not even answered.
The reasons are several: the American dialogue to revive the nuclear pact with Iran – an enemy of Saudis and Emirates -, the lack of support from Washington in the proxy war waged in Yemen – again against the Persian country – and the assassination case. by Jamal Khashoggi.
In February 2021, shortly after Biden assumed the presidency, the CIA released a report according to which Saudi Prince Mohammed Bin Salman approved the plan to kill the journalist critical of the regime.
During the election campaign, the Democrat even said that the intention was to turn the royal family into a pariah, a statement quite different from the way he behaved in office. In March of last year, he defended the decision not to punish MbS (as the prince is known) on the grounds that taking action against Saudi royalty would have negative implications for the US. But the damage was already done.
Other reasons, which include demands from the United Arab Emirates, are Russia’s presence in Opec Plus, the expanded version of the Organization of Petroleum Exporting Countries, in addition to the aforementioned need to diversify their economies, as fossil fuel has decades to run out.
In 2019, oil-related activities accounted for 24.2% and 16.1% of GDP in Saudi Arabia and the United Arab Emirates, respectively, according to the latest data available from the World Bank. The figures are well below the peaks of the late 1970s (87.3% and 60%), but they are still high. In the US, the world’s largest oil producer, this rate is 0.3%, and in Brazil, 2%.
Although they did not answer Biden’s call, the Emirates later lobbied OPEC members to increase production, in a move without coordination with the Saudis. At the World Government Summit, held in Dubai at the end of March, the UAE Energy Minister, Suhail Al Mazroui, highlighted the concern with the issue, with unnamed criticism of Washington.
“Due to geopolitical issues and because energy security is a priority now, some countries are forgetting about costs,” he said. “But we and our partners at Opec+ are trying to maintain order, bringing as much resources to the market as we can and paying what is reasonable for us. For that, in addition to investment, we need to decouple policy from energy costs.”
Even before the war, the energy issue was already an issue, as Covid hit Saudi oil exports hard, contributing to a drop of more than 6% of the country’s GDP in 2020. In addition to unforeseen monumental crises, another factor that accelerates the action of governments to avoid dependence on oil is the pressure to search for other sources of energy due to the climate crisis.
Jorge Camargo, adviser to the Brazilian Oil and Gas Institute and director of Petrobras’ international area between 2000 and 2003, believes that the Ukrainian War will not necessarily reduce the pace of exploration of new energy options and bets that Saudi Arabia will continue to invest in solar energy.
In a broader context, Camargo notes that the conflict will, in the short term, make Europe prioritize energy security over climate ambition, using all possible resources to cover the demand of its populations. In the medium and long term, however, the order will have to be reversed, he says, and European governments will need to “accelerate the initiatives to replace the use of oil and coal”, precisely to avoid snooker like the one that is happening now in reason for the war.
This wide range of factors makes Saudi Arabia and the United Arab Emirates look to broaden their economic horizons. In 2016, the Saudis announced the Vision 2030 program, which aims to increase the participation of the private sector in the country and attract foreign investment through the development of megaprojects — the case of the futuristic city called Neom, covering 25,500 square kilometers, that seeks to attract tourism and form a technology hub in the country. Sold as a mix of urban design and space for innovation, the project is expected to debut around 2025.
The announcements are accompanied by a mega-offensive of propaganda, to show that the country, which imposes serious limitations on human rights and freedom of expression, is modern and attractive to foreigners. At Expo 2020, based in Dubai, the Saudi stand was one of the most eye-catching, with a giant mirror at the entrance and projections that showed women in swimming pools following a car race.
Part of this movement is the authorization, in 2017, for women to direct and the release of cinemas and shows, changes that, on the one hand, mitigate criticism, do not cover other facts, such as the recent execution of 81 people in a single day by terrorism allegations – something that did not stop British Prime Minister Boris Johnson from visiting the country the next day to ask for more oil production.
Likewise, the UAE is betting on the combo of tourism, renewable energy, manufactured products and technology — the country launched a space probe to reach Mars in 2020 — to avoid dependence on oil. If Saudi Arabia created the Vision 2030 initiative six years ago, the emirate of Abu Dhabi, one of the seven that make up the nation, had already released its plan in 2008, with very similar goals.
Efforts to boost tourism in the country often come up against the same criticisms of the lack of freedom of expression, albeit to very different degrees from those seen in Saudi Arabia. When asked, Mohammed Jalal Al Rayssi, director of the WAM (Emirati News Agency), is quick to respond: “If you come here, you will see that there is freedom of the press, we can discuss every detail about human rights, women and children are living their lives normally and sometimes they have more opportunities than in other countries, including those in the West”.
