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Columbia Energy Exchange

Gulf Arab States Expand Investments Abroad


Karen E. Young

Senior Research Scholar


Karen Young [00:00:03] So everyone’s been talking about the end of oil in the Gulf. I think as long as there’s been oil in the Gulf. It’s known that this can’t be arrived forever. And leadership in the Gulf, certainly they understand this. They talk about it quite openly. But yet we also know that there’s there’s still still a lifespan for this the sector, and that the cost of production in the Gulf is quite low. You know, Saudi Arabia often brags that will produce the last barrel of oil. But there is a preparation and it has been accelerated in terms of economic diversification policy really since the shale revolution.

Bill Loveless [00:00:38] The Gulf Arab states are looking to build economic bridges with countries in the Middle East and Africa. Last year, the International Monetary Fund said the major energy producers like Saudi Arabia and the United Arab Emirates will collect 1.3 trillion in profits from high oil prices over the next four years. This comes on the heels of Russia’s invasion of Ukraine and subsequent disruption of global energy markets. These profits are expected to fund Gulf Arab states investments abroad. This comes as they aim to diversify their own economies and invest in the energy transition, even as they anticipate oil demand to rise in the next few years. So what does the move toward economic cooperation in the Middle East and Africa mean for the global world order? What does it mean for relationships with the United States and China? And to what extent will the energy transition be a focus for investment? This is Columbia Energy Exchange, a weekly podcast from the Columbia University Center on Global Energy Policy. I’m Bill Loveless. Today on the show, Karen Young. Karen is an author and political economist focusing on the Gulf, the broader Middle East and North Africa region and the intersection of energy, finance and security. She was a senior fellow and founding director of the Program on Economics and Energy at the Middle East Institute. She is currently a senior research scholar at the Columbia University Center on Global Energy Policy. This year, Karen released her second book, The Economic Statecraft of Gulf Arab States. It explores the deployment of aid, investment and direct support from some of the wealthiest petro states of the world to their surrounding sphere of influence within the Middle East, Horn of Africa and West Asia. I spoke with Karen about the research in her book and how the rise of authoritarian or state capitalism in the region can impact the global energy transition. Here’s our conversation. Karen Young, welcome to Columbia Energy Exchange.

Karen Young [00:02:49] Thank you so much for having me.

Bill Loveless [00:02:51] Well, I look forward to talking about your book as well as some other things going on in that region. But, you know, first, let’s talk a little bit about you, especially your commitment to studying the Middle East. What prompted that fascination with this region, Karen, and what’s kept you engaged in it?

Karen Young [00:03:11] Well, I suppose my my study and focus on the Gulf states and the Middle East more broadly was somewhat by accident. But I’ve been asking the same sorts of questions how economies grow, what happens to resource rich economies in financial crisis, What are kind of models of economic development? I’ve been asking those questions my whole career. Actually started studying Latin America in graduate school, and then my dissertation was a cross-regional study of financial crisis, both currency and bank crises in Ecuador, in Latin America, and in socialist economies in Bulgaria. And then when the global financial crisis came to New York in 2008, I had an opportunity with my family to move to Dubai. And and that started my fascination with the GCC states and studying that first case of of why the global financial crisis was slow to hit the Gulf. Everything was fine in 2008. It was then 2009 when really the effects really showed. And then I started teaching there at a university, the American University of Sharjah, and doing research, which became my first book, which was about the political economy of the United Arab Emirates.

Bill Loveless [00:04:28] Yeah, Yeah. It’s an engagement that’s continued and grown only deeper over the years. You write that this book seems even more relevant now, given Russia’s invasion of Ukraine last year and mounting uncertainty over global energy supply and in the world’s economic order. Why is that so?

Karen Young [00:04:48] Well, you know, a lot of scholars and analysts are talking about a transition that we’re in besides the energy transition, which is one to a system of more multipolarity or a polarization between east and west. But basically, these points of tension in our global political economy about models of economic development, of how best to grow, of how best to organize state in economy, and a whole lot of tension, I think, about feelings of judgment. And this has certainly come up after the Russian invasion of Ukraine, but a sense from many developing countries that rules are not evenly applied and that this defense of the liberal order, which certainly motivates American and European policy, particularly in the in the aid of Ukraine, is not a widely held sentiment across the global south. And so these are this, you know, similar tensions that we hear in terms of needs of the global energy transition about, you know, who has a right to produce carbon based energy and and how to use it and who gets to make the rules.

Bill Loveless [00:06:03] You know, you talk of the global order. You know, fundamentally, your book is is about this shift in politics and finance of development from one centered in the West and the impact of its post-World War two economic institutions to the emergence of the South-South economic ties. You know, looking back, you’re talking about a shift from what we know as the Bretton Woods system, something I had to go back and textbook and remind myself again exactly what that is. But for for the sake of the discussion here, what is the Bretton Woods system and what sort of order did it provide or does it provide?

Karen Young [00:06:40] So, you know, these were international institutions created after World War Two to provide monetary policy stability, support for balance of payments. Crises. That’s what the IMF was set up to do. And then the World Bank to provide loans for development assistance, mostly in infrastructure, mostly in providing the things that we think of as providing better quality of life, clean water, roads, transport systems, even health care, electricity generation. And so, you know, that was certainly a very different moment in terms of a post-colonial or emerging post-colonial moment for for, you know, countries in Asia and Africa and Latin America. But it was it was also. You know, certainly a different. Moment of the concentration of capital. And and so we’re not there anymore. And, you know, these are institutions which have certainly reformed the IMF and the World Bank in particular. But there are other options now. There’s certainly other state sources of capital. There are also different options in terms of development, finance institutions. And and so it’s a it’s a very different playing field. So it’s not just about the ideas about how best to grow, but also who is positioned to provide the capital to do so.

Bill Loveless [00:08:05] Yeah. And then when you look at this entire look at it in its entirety, you talk about the the emergence of these new and powerful economic actors in the broader, broader Middle East. Who are these actors and what makes them powerful?

Karen Young [00:08:20] One of the the findings or the arguments in the book is really about this this parallel role of the city states. A few of them, not all of them. The Gulf Cooperation Council states and China as important development actors and sources of capital. And really, we’re talking about Saudi Arabia, the United Arab Emirates and Qatar. Kuwait, to a degree. Kuwait has been a development actor and an important source of humanitarian assistance for many, many years through the Kuwait Fund for Development. But it’s really the rise of sovereign wealth funds and, you know, funds that are meant for, you know, both domestic development but also can be deployed abroad. And so that’s what we also mean by the term of economic statecraft. So using economic resources and tools to achieve political ends outside of the country.

Bill Loveless [00:09:13] Yeah. And you talk today of what you see as a quote unquote gulf moment. You write about that in the book. What does that mean? What does a Gulf moment mean?

Karen Young [00:09:26] Right. Well, that’s a term that was actually coined by a Gulf scholar, Abdullah Abdullah, who’s a political scientist from the United Arab Emirates. And he wrote about this, you know, many years ago. And really, I guess that the last decade has become a long moment. The emergence of the Gulf states as both political and economic actors within their own sphere of influence in the Middle East. But now going quite beyond that, the Horn of Africa being an important point of interest for these states. And and so it’s, you know, I think tied to what I call the magic decade, a period of tremendous oil wealth generation between 23 and 2014, which has really enabled these states and given them the resources to to not just focus on domestic transformation and infrastructure growth and building new societies, but also thinking about how they want to reorganize the neighborhood.

Bill Loveless [00:10:21] Yeah. And tell us, I mean, what’s what have they been doing? Countries such as Saudi Arabia, the Qatar, UAE? What are they doing in the neighborhood and by neighborhood? I take it to mean not only the the the Gulf region that they’re in, but also North Africa.

Karen Young [00:10:40] That’s right. So, yes, by neighborhood in the book, the cases that I examined include cases in the Horn of Africa, Egypt, but as far east as Pakistan, This geography of interest continues to expand. By the way, we see now more and more Gulf investment into Central Asia, into Eastern Europe and into West Africa as well. But the the expansion is is really, you know, part of this, I guess, a trend line We can date back to the Arab Spring from 2011, and that was certainly a focal point for the Gulf states wanting to keep their own model of economic development. And what I use the term in the book, authoritarian capitalism. And there are other ways to say it, but basically, you know, a very open economic system, but a close political one. And so defending that system. Against democratic movements within the region, and particularly for the United Arab Emirates, pushing against models of political Islam, which we saw, of course, in the transition in Egypt in 2011, which was then reversed two years later.

Bill Loveless [00:11:52] Yeah. And the discussion in your book of Egypt I found rather interesting, too, because the investments went came both before and after. I mean, both when the the the initial revolution occurred and Egypt and thereafter when the government changed, it was an overthrow and, and all that mean the the support went for both sides of those governments. What was going on there.

Karen Young [00:12:16] So this is, you know, a period of time that also caused tension inside the Gulf. So not everyone had the same politics or the same views towards democratization or the rise of political Islam within the region. It was never accepted at home inside the Gulf, but but outside. And so Qatar was, of course, supportive of the Morsi government in Egypt initially. And there was more of a commonality between Turkey and Qatar in terms of support for Islamist movements. That has all changed. Of course, we had a very serious and detrimental rift in the Gulf where we had diplomatic ties severed. Diplomats were or embassies were staff withdrawn in 2014, but then more formally between 2017 and 2021. And so that’s when we had the blockade of Qatar by three of the Gulf states and Egypt.

Bill Loveless [00:13:16] What other sorts of investments have we seen in recent years during this there in this Gulf moment?

Karen Young [00:13:22] So, you know, one of one of the things that’s interesting about thinking about how you transfer models of economic development is is, you know, which sectors are prioritized, what kind of expertise is is is used to, you know, to deploy investments abroad. And so what’s worked in the Gulf has often been a model of investment in in construction and real estate in building things right there. The Gulf has been very, very successful in a short period of time. We’re talking about countries that really have been built in the last 60 years and trying to do that in other places. So real estate investment was quite popular in Egypt as it was in Ethiopia. There’s, of course, a large interest in in the energy sector, in ports and logistics. These are things that the Gulf states do very, very well. And so that was sort of the first wave certainly in in Egypt in the period between, say, 2014 to 2021. We’re in a new period of Gulf financial intervention in Egypt where there’s some lesson learned and learned and things are changing a bit.

Bill Loveless [00:14:33] Yeah. What about in. Among other African nations, Sudan. Others where there has been some investment in recent years? Yeah.

Karen Young [00:14:42] The Sudanese case is interesting because there’s a kind of long standing ties with Sudan in the Gulf, across the Red Sea, mostly traditionally on agriculture. So Sudan has really been an important trade partner in the Gulf, and there isn’t a whole lot of domestic agricultural, of course, across the Arabian Peninsula because of the climate. And so those ties have been in place for a while with Ethiopia as well. We have seen, you know, in in some cases more interest in in the bank sector and Islamic bank sector, for example, or Islamic finance sector. And there’s interest in, of course, ports. So the Red Sea corridor being a very important conduit for Gulf exports of petroleum products. And so that is a security interest and an economic one.

Bill Loveless [00:15:36] You know, it all falls back on the and this wealth from oil production, particularly in this in the century. You know, Gulf states have enjoyed oil booms in the 1970s and the 1980s. And again, as you noted in the early 2000. But attitudes towards energy consumption are changing, suggesting that such cycles may no longer be plausible. Are Gulf states prepared for that?

Karen Young [00:16:02] So everyone’s been talking about the end of oil in the Gulf. I think as long as there’s been oil in the Gulf. It’s it’s known that this can’t be arrived forever. And leadership in the Gulf, certainly they understand this. They talk about it quite openly. But yet we also know that there’s there’s still still a lifespan for this the sector, and that the cost of production in the Gulf is quite low and that, you know, Saudi Arabia often brags that will produce the last barrel of oil in that very middle way. Very well may be true, but there is a preparation and it has been accelerated in terms of economic diversification policy really since the shale revolution. So I would say, you know, the end of 2014 kind of put a put a bit of a hurry into a lot of these policies. There’s also a new broadly a new generation of leadership in Saudi Arabia. This comes on about 2016 with Crown Prince Mohammed bin Salman, who became crown prince in 2017, and new leadership, Mohammed bin Zayed in the UAE. And a new crown prince, now ruler of Qatar, Sheikh Tamim. And so, you know, this new generation sees the importance of preparing the population and, you know, not just the built environment, building infrastructure, but also preparing people for for a post-oil future. It won’t be a post energy future, though. I think that’s an important point, is that these are states that intend to be in this broader business forever. And so the expansion of expertise, not just about oil and gas, but but through, you know, perhaps in hydrogen, perhaps certainly into solar, but also understanding that the byproducts of oil, petrochemicals and the, you know, the things that go into the plastics that we use. Right. There’s going to be demand for that for a while. So understanding to how to be in that business across energy businesses and understanding where growing markets are. So they’re quite good at that. But the wave of reforms after 2014 really started with thinking about domestic labor markets. So pushing people out of public sector jobs, which have become quite inefficient. And, you know, the public sector wage bill really weighs heavily on on kind of fiscal spending.

Bill Loveless [00:18:26] So you do see them using, you know, despite these fluctuations in oil prices, they are using their windfall to to diversify their economies away from their dependance on oil riches to some extent.

Karen Young [00:18:44] Yes. And I think this is also a period since 2015 where we see great variation between the states in terms of policy, choice and performance. So it’s become a more competitive space and not everybody’s doing such a good job at it. Right. So we see Kuwait really lagging in terms of social and and economic reforms. We see some governments with less of a hurry in terms of diversification. Qatar, for example, gas will have a longer span than oil. They have a very small population, less pressure to create jobs in the private sector than, say, a country like Saudi Arabia, which has a much bigger population, lots of young people, less money to go around on a per capita basis. And then there are the states that simply don’t have the natural resource wealth, like Bahrain. Tiny country, small population, but really hit their kind of growth curve quite early in the extraction of of oil, have less of it now. More of what they do have is offshore and shale and more expensive to get to. And so, you know, not everybody is is working from the same resource base.

Bill Loveless [00:19:57] Yeah. Interesting. Well, you know, speaking of oil prices, as as we speak this week, there was some news with the OPEC, Saudi Arabia and other OPEC plus producers announcing further oil output cuts of some 1.2 million barrels per day. It was seemed to be a surprising move that analysts said would cause an immediate rise in prices. And in the U.S. called inadvisable. We did see a bump up in prices a day after. And just before you and I began to talk, I looked at my my Akamai news accounts and it seems like the price was dipping today. But what what do you make of the announcement and of its timing?

Karen Young [00:20:39] Well, it was the Sunday surprise and this is, I think, characteristic of a lot of particularly Saudi policy right now. We see Saudi foreign and economic policy, a lot of different files being juggled and managed simultaneously, which are challenging the status quo, whether it’s, you know, the relationship and willing to talk to Iran, a close earning relationship to China, and certainly a willingness to push back on on the advice of the United States. And and so this is, again, an example of that kind of Saudi first mentality. Saudi Arabia, of course, really doing the lion’s share of the work in this production cut, agreeing to cut or suggesting that they will cut half a million barrels a day. The other members who are committed to these surprise cuts are in much smaller amounts. UAE, Kuwait, around 120 844,000 barrels a day. Other members much, much smaller. And so this was obviously a, you know, a kind of Saudi led initiative. And one could argue that it’s it’s helpful to Russia and the Saudi Russia partnership within Opec+ continues. But there could be other explanations as well. There’s certainly a lot of insecurity and unknowns about, you know, the direction of global growth, inflationary pressures, what have. And then a Chinese recovery. Things that we don’t know. But I think the broader trend line is that there are expectations of of more demand and supply in the next 6 to 12 months. And so is this a reason, then, that Saudi Arabia says, well, we need to get prices a little bit higher now and keep them high for as long as we can? And there certainly is fiscal consideration within Saudi Arabia. There’s a lot of projects now that are coming online as part of Vision 2030, this grand economic development plan. And a lot of those projects are rolling into the construction phase at the end of this year and into next. And so there’s quite a lot of demands for for local spending.

Bill Loveless [00:22:53] You mentioned the U.S. and and you write in your book that the this Gulf Arab emergence is associated with a sense that the U.S. is disengaging from the Middle East. Explain what that means, it seems. What we’re reminded again this week with this announcement by opec+ of the observations of many that there is this sort of disengagement by the U.S. from this region.

Karen Young [00:23:21] Yeah, it’s a difficult topic, and I think it is it is misunderstood. The the military presence of the U.S. is still quite strong across the Middle East in terms of troop numbers. But, you know, politically, we are distancing from the Middle East. And this has been coming for some time through both Republican and Democratic administrations in the United States, from President Obama’s pivot to Asia to Trump’s. You know, we only care if an American is is hurt or killed in the U.S. That’s when we respond. And the 2019 Iranian attacks on the Abqaiq facility and in Saudi Arabia, I think certainly was a turning point in terms of the the Gulf states and the Saudis feeling very much that the U.S. commitment was not as reliable or is not a response that they would have wanted. This happened again. There were, you know, drone and missile attacks on Abu Dhabi just last year. And even though the U.S. was helpful in response, it wasn’t enough. Right. That the public projection of support for the Gulf states and and I think empathy for what they were facing, the threats that they were facing, was not perceived as sufficient from the U.S. side.

Bill Loveless [00:24:39] Yeah. And I guess Saudi Arabia looks for other options, as do other countries in that region. Just recently, we saw an example of a Gulf Arab Chinese engagement with the Beijing brokered agreement by Saudi Arabia and Iran to reestablish diplomatic relations. And even more recently, I read where Saudi Arabia had joined the Shanghai Cooperation Organization, which I understand is an economic and security bloc that includes China, India, Iran and a number of other countries. What do you make of that?

Karen Young [00:25:12] Well, I think in both of these cases, the headlines in the United States are a little bit overblown. We have to keep in mind, we are hypersensitive to tension with China right now, rightly so, in our domestic politics. But that colors how we read, how our friends and allies in the Middle East and other parts of the world engage with China. And so the the the Chinese sponsored talks between Iran and Saudi Arabia were interesting and certainly a breakthrough and in a an invigorated role of Chinese diplomacy in the region. But those talks had begun in Iraq and had been through more than five rounds of negotiations. And so it wasn’t that the Chinese, you know, had been kind of nurturing a diplomatic breakthrough. They they were kind of there at the end at the finish line. And it’s it’s not either, I would say a real it’s not a peace deal. Right. This is the resumption of diplomatic ties. There was the assassination or the the execution, rather, of of a Shia cleric in Saudi Arabia, Nimr al-Nimr, which created a whole lot of backlash in Iran. And the Saudi embassy in Tehran was stormed. And that’s what led to this, the withdrawal of of of Saudi representation in Iran several years ago. And so, you know, this coming back is is is really just channels of communication and I think reflects more of a sensitivity and anxiety of potential conflict in the region. So it’s not the detente that everyone describes. It’s more of a nervousness because of that sense of, you know, what would the U.S. do to help that we just talked about, but also because of a sense of, you know, well, we’ve got to create some. Avenues of communication ourselves. So that’s that’s what happened with the the the diplomatic agreement brokered in China. The the SCO is a little bit different as well. It sounds like, oh, my gosh, there’s this big partnership now between Saudi Arabia and China. Also, those negotiations had been underway for a long, long time. It’s quite a tedious process to join the organization. There are different levels of membership. And so this was something that was, you know, underway for quite some time. And the announcement just happened on the back of the the meeting between Iran and Saudi Arabia that happened in Beijing. And so, you know, from our outward media, look, oh, it looks like things are really heating up in the China Saudi relationship. But I would I would have a measured approach to that.

Bill Loveless [00:27:58] Well, that’s that’s the importance of having these conversations, I have to tell you, because often we do see the headlines. Right. And the headlines suggest something that may not be the case or just may not put it. Let me put it this way. Don’t put it into the proper perspective. I mean, it may be accurate reporting, but necessarily not necessarily giving us the perspective we need. And that is just such a complicated region of the world. I think for us to understand, especially because of our fixation on oil and oil prices and that sort of thing.

Karen Young [00:28:28] Yes, I agree.

Bill Loveless [00:28:30] Are the Gulf states better able to engage in their own region than China.

Karen Young [00:28:35] As that investor or as a security operator?

Bill Loveless [00:28:38] Well, I guess as both.

Karen Young [00:28:41] The Gulf states do as much work, sometimes more than China as an investor, an economic actor and aid actor very, very frequently. And so I think that’s also underappreciated. And and China’s presence in the region as an economic force is also a bit spotty. There is a sense that China is, you know, the most important investor and and a source of support in the Middle East. And that’s not really true. So China is active in becoming more active, certainly in the Gulf and investor in a winner of many contracting awards to build things in Saudi Arabia, in the UAE, of course, an important trade partner in terms of things going from the Gulf to China, oil and then the Gulf states buying a lot of finished products from China and in many cases re exporting them. Right. So the ports of Abu Dhabi, of Dubai in particular, and a growing port network, which we expect in Saudi Arabia, will do just that. But in other places, it’s not quite so vibrant. So Egypt is one place where there is no significant Chinese trade relationship and investment. But the Gulf states are more important in Egypt. They create more jobs in Egypt than China does. And one of the things that I go through in the book is sort of looking at greenfield foreign direct investment where there are, you know, new manufacturing facilities built or new, you know, a real new physical presence of of of enterprise activity. And the Gulf states really outshine China in most of the cases. And so I think, again, this matters because you know, how you how you transfer or deploy a model of development. What sectors are important to you as an investor makes a difference in the recipient country? And when I say you, I mean, this is the other difference, of course, and maybe a commonality between China and the Gulf. We’re talking about state actors, state economic actors. And that is something that that these two, the Gulf and China, do have in common.

Bill Loveless [00:31:00] I mean, they have in common some aspect of their views on on political authority. Right. And state government control.

Karen Young [00:31:07] That’s right. Yeah, absolutely. And and something that’s come up, you know, in the context of the Russian invasion of Ukraine is this relate ability of among countries that are not free. Right. And so the sense that the states should be making decisions about the direction of the domestic economy and that the outward deployment of its resources can be used for political ends is is something that’s very much shared.

Bill Loveless [00:31:41] Hmm. You know, when you travel that region as you do, you must have discussions about the war in Ukraine. I mean, what sorts of feedback do you get from people that you’re talking to there? And I realize it may differ from country to country, from company to company and that sort of thing.

Karen Young [00:31:57] Yeah, I, I remember I flew into Dubai just a few days after the Russian invasion last year and. Was had lots of conversations with with with friends and colleagues and and there was a whole lot of pushback and shock of of the sense that that Russia had been threatened, that it was you know, it was the West that had made the the Russian behavior necessary. And, you know, we have to also keep in mind that the media landscape is very different in the Gulf. And so state media was not necessarily very supportive of a of a Ukrainian kind of sympathy. There is much more sympathy for a Russian point of view. There is more Russian media quite, you know, visible and present. And and, you know, there’s there’s also, I think, a growing concern and this is from more recent conversations that the reaction of of the West in terms of sanctions is a little bit scary because the price cap from an oil producer perspective, this could be applied to someone else. Right. And so that makes producers in the region a little bit nervous. Another point of of critique, which I heard last year and continue to hear this year is the use of individual sanctions, of seizing assets of wealthy people and people connected to government also makes people in the Gulf a little bit uncomfortable. And that, again, is seen as the kind of unevenness of this liberal order, right. That the rules can change, that people can be targeted and that are associated with government. And and it you know, I think for Gulf States feels like they might be in the crosshairs of that at some point.

Bill Loveless [00:34:01] Yeah. So the perceptions are very different than those that we may see here or talk about in Europe or the United States. Certainly very different circumstances. Well, later this year, there will be a climate meeting in Dubai at the U.N. climate meeting. This year, COP meeting will be in Dubai. And the top oil company, CEO, Sultan Al-jaber, the CEO of Abu Dhabi National Oil, lead the talks there. He also chairs Masdar, a renewable energy company. He will have influence over how how much pressure is brought to bear on countries and companies that produce and burn coal, oil and gas and for some of the environmental community. You know, his appointment is worrisome. What what do you think we should make of this important role that he will play there?

Karen Young [00:34:54] Well, first, I think it’s it’s actually really positive that the last cop meeting in Egypt and the one upcoming in the UAE are being held in the Middle East. The Middle East is the most affected or one of the most affected regions by climate change. It’s an important source of a lot of the carbon energy produced in the world. And so, you know, this is where it matters. And you’re going to hear these really divergent views from producers, states from developing countries of what they think should be happening in their ability to make money from these products and also their concerns about what comes next and how they’re supposed to continue a future growth trajectory. So I think it in many ways is correct for this important meeting to be held in a place where we get our oil and gas right. I understand that some people will be put off by the head of a very important national oil company hosting these negotiations and talks. But I think, you know, in terms of the individual, this is someone who also has been committed to renewable energy for most of his career. And the Masdar experiment is not necessarily a super successful one, but it’s one that was tried and continues to be tried. So Masdar Masdar City is a zero carbon city meant to be built right outside of Abu Dhabi. It never really turned out as large as as it hoped to be or to be completely 100% carbon free either. But I think, you know, like I said before, the Gulf states have been talking about and very cognizant of what the energy transmits transition means for them for quite a long time. Right. So this is not new. And so they’re invested in it. It matters. I mean, it’s literally their survival. And so they also want to be part of solutions and to continue to make money in the energy business. So, I mean, that’s about as simpatico as you can get towards. A willingness to invest in clean energy, to be a source of finance for other countries and their energy needs, particularly in generating electricity from renewable sources. So the UAE, Saudi Arabia, they’re in these businesses and, you know, we can choose to partner with them and find solutions, particularly in places where people need clean, affordable energy. Or we can say, no, no, we’re not going to talk to you. And I don’t think that’s very productive.

Bill Loveless [00:37:34] It’s going to be an interesting meeting, as was the the meeting last year in Egypt. Well, Karen, looking ahead, what’s on your watch list these days?

Karen Young [00:37:44] Mm hmm. Well, I think, you know, in terms of looking at the Middle East, I’m very, very concerned about inflationary pressure, particularly on food prices and debt sustainability. So, you know, I study wealthy countries in the Gulf, but what happens in the Gulf has huge effects on the rest of the Middle East region in remittance flows, but also in in, you know, provision of financial assistance. And they’re going to be a lot of governments which are going to need help. They’re going to have balance of payments issues. They’re not going to be able to defend their currencies. They’re not going to be able to service their debt and they’re not going to be able to provide basic assistance to large parts of their populations. Food is already food and energy are heavily subsidized in most of the Middle East. And and we’re getting to a point where governments probably very soon will have to choose between paying their debt or paying for food and getting it to to their their vulnerable people in their populations. And so that that makes me and I think a lot of other people who watch the region closely very concerned.

Bill Loveless [00:38:54] Well, Karen, thanks for joining us today. It’s again, I think it’s so important sometimes to get beyond to look beyond the headlines or look deeper beyond the headlines, to understand, you know, these issues, particularly in an area that’s as can be, as mysterious to many people as as is the Middle East. The book is The Economic Statecraft of the Gulf Arab States. Karen Young, again, thank you for joining us today on Columbia Energy Exchange.

Karen Young [00:39:23] Thank you both.

Bill Loveless [00:39:28] That’s it for this week’s episode of Columbia Energy Exchange. Thank you again, Karen Young, and thank you for listening. The show is brought to you by the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs. The show is hosted by Jason Bordoff and me Bill Loveless. The show is produced by Stephen Lacy and Aaron Hartig from Post-Script Media. Additional support from Daniel Prop, Natalie Volk and Kyu Lee. Roy Campanella is the sound engineer. For more information about the podcast for the Center on Global Energy Policy, visit us online at Energy Policy dot Colombia dot edu or follow us on social media at Columbia U. Energy and you can rater review the show on Apple on Spotify. You can also let us know what you think by tweeting at us. If you really liked this episode, share it with a friend or a colleague. It helps us reach more listeners like yourself. We’ll see you next week.

Gulf Arab states are looking to build economic bridges with countries in the Middle East and Africa.    

Last year, the International Monetary Fund announced that major energy producers – like Saudi Arabia and the United Arab Emirates – are expected to collect $1.3 trillion in profits from high oil prices over the next four years. These profits are expected to fund Gulf Arab states’ investments abroad. 

At home, they aim to diversify their economies and invest in the energy transition although they anticipate oil demand to rise in the next few years. 

What does the move toward economic cooperation in the Middle East and Africa mean for the global world order? What does it mean for relationships with the U.S. and China? And to what extent will the energy transition be a focus for investment?   

This week, host Bill Loveless talks with Karen Young about her book “The Economic Statecraft of the Gulf Arab States” which came out earlier this year. They discuss how the rise of authoritarian or state capitalism in the Middle East, the Horn of Africa, and West Asia could impact the global energy transition. 

Karen is an author and political economist focusing on the Gulf, the broader Middle East and North Africa region, and the intersection of energy, finance, and security. She was a senior fellow and founding director of the Program on Economics and Energy at the Middle East Institute. She is currently a senior research scholar at the Center on Global Energy Policy at Columbia University, SIPA.

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