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Big Gulf Arab oil states are using the newfound riches they’ve reaped as a result of the Ukraine war to build economic bridges with their poorer neighbors, some of whom they once considered adversaries.
The monarchies are now doubling down on economic cooperation. At the heart of this diplomatic initiative are sovereign wealth funds, which are working to secure regional stability through billions of dollars’ worth of investments.
Saudi Arabia and the United Arab Emirates – both of which are generating massive returns from this year’s oil price hikes – are taking the lead with such investments, entrenching themselves in countries that have faced unrest in part because of economic distress.
Middle Eastern energy exporters, including Gulf countries, are expected to see a windfall of around $1 trillion dollars over the next four years on the back of this year’s oil boom, said the International Monetary Fund (IMF) last week.
“Money talks,” Michael Maduell, president of the Sovereign Wealth Fund Institute in Las Vegas, told CNN. “Sovereign wealth funds can be used as foreign policy tools, a sort of soft power.”
After almost a decade of a combative regional policy, Saudi Arabia and the UAE are moving towards a less confrontational approach. Both have mended ties with regional foes Turkey and Qatar, and both have reached out to Iran. They have also significantly reduced their military activity in Yemen, where they went to war seven years ago.
Analysts say this is a new approach to ensure regional stability, mainly by bolstering key economies across the Middle East through investments that are closely tied to their funders.
“The current structure is certainly an evolution from days where hard power was viewed as more productive,” said Ayham Kamel, head of Eurasia Group’s Middle East and North Africa research team.
Saudi Arabia’s de facto ruler, Crown Prince Mohammed bin Salman, last week announced that the nation’s wealth fund, the Public Investment Fund (PIF), is establishing five regional companies worth $24 billion across the Middle East.
From infrastructure and real estate development to telecoms and technology, PIF’s new investments target Bahrain, Iraq, Oman, Jordan, Sudan and Egypt.
Some of these countries experienced political upheaval when the 2011 Arab Spring uprisings rocked the region more than a decade ago. Others are still wedged in the economic and political chaos left behind.