Relationship building will be vital for GCC in 2019

18 December 2018
GCC unity is a new year’s wish that will help the whole Middle East

Despite its divisions, the GCC may regain its relevance in 2019 as Saudi Arabia’s regional policies return to where they were before King Salman succeeded to the kingdom’s throne four years ago.

News emerged on 14 December that oil production will resume in the divided zone between Kuwait and Saudi Arabia. Before they were shut in the spring of 2015, the zone’s fields produced almost 600,000 barrels a day (b/d) shared equally between the two countries.

The freeze was attributed to a dispute about licensing and environmental standards. But it was also caused by unresolved claims about the zone, created in 1922 as a temporary expedient, plus Kuwait’s reluctance to follow Saudi Arabia’s lead in countering political Islam and isolating Iran. The result has been $30bn in lost oil export income.

This was the second sign of pragmatism in the kingdom’s Arabian policies in the final weeks of 2018. The previous day, the Yemeni government, supported by a coalition led by Saudi Arabia and the UAE, agreed a deal with Houthi rebels to stop fighting in Hudaydah and withdraw from the city.

The shift in Saudi policy towards its neighbours, which is being encouraged by the US, has raised hopes that GCC rivalries will soon end. It is too soon to say for certain, but there is hope that the worst is now over.

GCC trade relations

Arab economies have deficiencies, but none is more lamentable than the small amount of trade among Middle East nations. Even GCC states deliver less than 10 per cent of their total goods and services exports to other members of the organisation. This is despite the fact they constitute a third of Middle East GDP and are one of the largest markets for goods and services outside the Organisation for Economic Cooperation & Development.

An IMF report published in December argues that GCC exports are significantly below their potential. It is a lost opportunity that is depressing growth and employment. And it is one repeated across the Middle East.

Higher intra-regional trade is one way to counter growing uncertainties about trends in the global hydrocarbons markets upon which Arabia depends. But it will not just happen; government action is critical.

The 39th GCC summit was held in Riyadh on 9 December. Developments since then suggest that the atmosphere among its member states may begin to improve next year. If that happens, forecasts of the demise of the GCC will be shown to be premature.

This is by no means certain. Let’s call it a new year’s wish.

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