As the uncertainty over the US-Iran deal continues, the United Arab Emirates (UAE) is forging ahead with an ambitious plan to decouple its dependence on the Strait of Hormuz.

A new Bloomberg interview with the UAE’s Minister of Foreign Trade, Dr Thani Al Zeyoudi, indicates the UAE’s plans go much further than an already-announced second oil pipeline that will bypass the Strait of Hormuz and exit at Fujairah, on the UAE’s eastern coast.

‘Zero Hormuz dependency’

Dr Al Zeyoudi told Bloomberg the aim is for the UAE to have ‘zero Hormuz dependency’, irrespective of the outcome of the current conflict. The plan includes the expansion of no fewer than three ports on the UAE’s eastern coast - Dibba, Khor Fakkan and Fujairah. In addition, Dr Al Zeyoudi says the UAE is to build at least one additional harbour on the same coast.

If you have a moment, run a search on Google Maps for the place names above - and you’ll see the logic. The ports are roughly in a north-south line with each other. The middle of the three, Khor Fakkan, in the Emirate of Sharjah, is a natural deepwater harbour (a rarity in the region) and is already the UAE’s fifth-biggest port.

The port expansions will be matched by investments in new rail and road links, according to the interview with Dr Al Zeyoudi. That makes sense - the UAE’s exciting new Etihad Rail network, which already spans some 900 km, connects with Fujairah even now, although undoubtedly additional tracks and roads will be needed to cope with increased freight volumes.

Fundamentally, the challenge is this: the UAE’s main population centres are all on the western side of the country, while the new ports are located on the more sparsely-populated eastern flank that looks out over the Gulf of Oman. But there’s no denying that this geography gives the UAE options that other Gulf states such as Qatar and Kuwait simply do not have.

Will the new ports replace Jebel Ali?

The Jebel Ali port in Dubai is in many ways one of the crown jewels of the UAE - it’s the world’s ninth-busiest port and the largest man-made harbour. But Dubai is on the ‘wrong’ side of the Strait of Hormuz. Is the aim to replace it completely with the new ports?

Probably not, or at least not for a long time. Dr Al Zeyoudi says while there will be a major railway expansion to support the new ports, Jebel Ali and Abu Dhabi’s Khalifa Port will remain key redistribution sites. And it’s worth keeping in mind the sheer size of the existing ports - Jebel Ali alone has annual capacity of 19.4 million twenty-foot equivalent units (or TEUs).

Dr. Lijo John, a professor in logistics and supply chain management at Heriot-Watt University Dubai, told Mira Business FM that the three ports on the eastern coast would only have a combined capacity of around five million TEUs. That means completely moving away from the big ports on the other side of the Strait of Hormuz would be difficult in the immediate future, but as Dr John points out, the ‘UAE is very consistent that we diversify our opportunities’.

Exports vs. imports

Indeed, Dr John points to the very different needs of the UAE’s exports vs. imports. It may be possible that the UAE’s exports - which are concentrated in the oil and gas sector, but also include aluminium and other manufactured products - may move ahead of imports, assisted by new oil pipelines and transport facilities.

When we look at UAE as an importer, that's again a different case altogether. Let's take the example of food. About 80% of the entire food that UAE consumes comes from outside [the country]…so, that will require another whole lot of infrastructure setup that we need to prepare for the food that needs to be coming in, the cold storage, the supply chains, etc.

Essentially, Dr John believes there will be a three-stage, gradual shift to the new ports, with oil moving first, followed by other exports such as fertilisers and LNG supplies, with imports coming later.

Pipelines, pipelines

In the interview with Bloomberg, Dr Al Zeyoudi revealed the UAE is considering building a third new oil pipeline to Fujairah. This comes on top of the building of a second new pipeline, due to come online in 2027. I covered this here on Gulf States Insights when it was announced back in late May..

As I explained back in May, the drive to build new pipelines stems from the UAE’s desire to pump much greater quantities of oil now, because it believes the price of oil will only see a structural decline in the coming decades as the global energy transition to renewables continues. That’s why the UAE left OPEC last month - to be free of quota constraints.

Trust, but diversify

Ultimately, the UAE’s new plan to reduce its reliance on the Strait of Hormuz doesn’t mean that the UAE is giving up on the prospect of a diplomatic solution with Iran or relinquishing the right to freedom of navigation - far from it.

UAE political scientist Abulkhaleq Abdulla says the country has emerged with ‘important lessons’ from the crisis - one of which was the need to reduce dependency on the Strait of Hormuz.

Fundamentally, this new infrastructure plan is about development and accelerating what the UAE would have eventually done anyway, in upgrading facilities on its eastern coast. Perhaps a rough parallel is the United States’ own westward expansion in the early 19th century.

Above all, as with Covid-19 before it, the current crisis has shown the importance of resilience and having back-up options for a rainy day.

And Dr. Thani Al Zeyoudi’s plan will certainly give the UAE some new, exciting options.

The ceasefire agreement between the US and Iran was formally signed on Wednesday - and the text of the Memorandum of Understanding (MOU) has been officially released.

The official version largely confirms leaked drafts that have been circulating in the media over the last few days, with only a few small differences. It’s worth reading the 14-point agreement in full, such as here at CNN.

MOU favours Iran

In addition to Iran committing to ‘downblend’ its enriched uranium, the MOU includes provisions for the cessation of all hostilities (including in Lebanon), the lifting of the mutual blockades in the Strait of Hormuz, the removal of all US sanctions on Iran (including an interim waiver on Iran’s oil exports), the return of Iran’s $24 billion of frozen assets and a $300 billion economic reconstruction plan, to be undertaken ‘with regional partners’.

The deal seems highly favourable to Iran, particularly as Iran will receive immediate relief from many of the points, such as the release of the frozen assets. The harder aspects, especially relating to Iran’s nuclear programme, will be negotiated subsequently. Moreover, in the Strait of Hormuz, Iran has only agreed to the ‘safe passage of commercial vehicles, with no charge, for 60 days only’.

Gulf reaction

Gulf commentators have been among the voices who have been scathing of the deal. For example, Nadim Koteich, the former general manager and a high-profile commentator on flagship UAE news channel Sky News Arabia, posted:

Washington just handed Iran the keys, the title deed, and the cash from the safe before the Iran’s check has even cleared. That is the deal Trump signed, and I’d read it by its order of implementation not by its headline.

Koteich also points out that the fighting in Lebanon has only stopped because Washington and Tehran have ordered their allies (Israel and Hezbollah respectively) to lay down their arms. But with neither directly signed up to the deal, the risk is the war there could easily restart later.

He sums up the MOU as ‘Iran collects everything real on day one. America collects a promise to settle the hard parts later’ - an assessment that is not really inaccurate, given the sequencing of the undertakings outlined in the MOU.

Saudi foreign minister’s warning

The Gulf states are also not a direct party to the US-Iran peace deal, which creates similar potential issues. And in a conversation with the European Council on Foreign Relations (ECFR) in Vienna on Wednesday night, Saudi foreign minister Prince Faisal bin Farhan Al Saud indicated there is little trust at all between the Gulf and Iran. Given that GCC countries were being attacked by Iran as recently as last week, this is hardly surprising.

You can watch the full conversation with Prince Faisal with the ECFR’s Middle East and North Africa director Julien Barnes-Darcy on YouTube, or read a useful write-up in English from the Saudi Gazette.

In principle, Prince Faisal was positive about the agreement, saying: ‘I am hopeful, I am optimistic that there is real intent on both sides to give diplomacy a chance’. But on much of the detail, the Saudi foreign minister was sceptical. His message on the nuclear issue was that Iran’s commitments need to be backed up with hard proof:

The detail will matter. It will be most important to see the verification mechanisms that are in place beyond the actual commitments on enrichment, the actual commitment on removal or downblending of the nuclear materials. How we will have a long-term sustainable verification regime is what will matter the most and that is what will give the international community but also the regional countries the most confidence and the ability to look towards a better future.

The $300 billion fund

The proposed $300 billion reconstruction fund had already been telegraphed by US Vice-President JD Vance in a CBS television interview on Monday, and a Reuters report claimed commitments towards at least half of the amount had already been made.

Vance suggested to CBS that the Gulf states would be supplying the $300 billion, although the Reuters report cited sources that indicated private companies in South Korea, Singapore, Japan and other countries including the US itself had pledged support.

Qatar’s foreign ministry spokesperson Majed al-Ansari denied on Tuesday that Qatar had committed any money, according to Al Jazeera.

And on Wednesday, Saudi Arabia’s Prince Faisal was also cool towards the proposal:

First of all, I have no details on this fund. I have no information or insight into the concept behind it. So I can’t comment on it specifically, but what I will say is as you mentioned, as a result of this conflict, Iran attacked not just the Kingdom [of Saudi Arabia] but all of the countries of the GCC. That has created a significant gulf of trust, a significant loss of trust between all of us.

It’s quite a revealing statement. The remarks strongly suggest that Saudi Arabia has not been consulted or involved at all in drawing up the proposal, despite Vance’s comments earlier this week that the Gulf states were going to be funding the initiative.

On the subject of future economic relations with Iran, the Saudi foreign minister added ‘we’re going to have to have a conversation how we rebuild that trust, how we rebuild that relationship before any concept of economic cooperation, mutual investment or anything like that can rationally be addressed’.

Early days

Ultimately, it’s still very early days for the MOU. The Gulf needs this deal to succeed - and is open to working towards a positive outcome.

Diplomacy is much better than a restart of war - and perhaps the implementation will go more smoothly than we expect.

But reading between the lines, the Gulf states are deeply troubled by the lack of consultation and the terms of a deal that seem to heavily favour Iran.

The early reaction from the Gulf to the US-Iran peace deal is in - and it’s mixed.

The agreement between the US and Iran was reached in the early hours of Monday morning, Gulf time, which meant that initial responses emerged over the course of the day.

Formal responses from the Gulf foreign ministries generally conveyed a sense of relief at the deal, along with marked caution that tangible implementation of specific commitments must follow.

For example, the UAE said the deal highlighted the ‘importance of prioritizing dialogue and diplomacy’ and called for ‘full compliance with the provisions of the agreement’ - which it listed as the cessation of all hostilities, respect for sovereignty and upholding freedom of navigation.

Given the murkiness of what is exactly contained in the Memorandum of Understanding between the US and Iran, and the uncertainty of the subsequent next phase of negotiations, it’s understandable that the UAE and the other Gulf states might feel the need to spell out what they see as crucial elements.

‘Good neighbourliness’

Another of these components was ‘good neighbourliness’, an expectation that also featured in statements by Kuwait and Qatar and by a state news agency report that carried Bahrain’s official response. It’s a reference to Iran’s months of attacks against the Gulf states in retaliation for the US-Israeli attacks against it.

Overall, the statements were more clinical than exuberant. Several did not even mention Donald Trump by name. The ones that did tended to come from the Gulf states more aligned with the US position: Bahrain’s statement, for example, stated:

The Ministry affirmed Bahrain’s appreciation for the efforts undertaken by His Excellency Donald Trump, President of the United States of America, to support regional security and peace through coordination and consultation with the leaders of the region’s countries.

Still, even this acknowledgement was somewhat buried in the middle of the statement - and the expression of gratitude for ‘coordination and consultation with the leaders of the region’s countries’ might also be read as a call for more substantive involvement of the Gulf states in future, including in the forthcoming US-Iran negotiations.

Gulf involvement in the peace deal

While this is a bilateral deal between the US and Iran, several of the Gulf states have been closely involved in behind-the-scenes negotiations to bring about an agreement. Indeed, new reporting from the Financial Times indicates that Gulf involvement was more instrumental than previously understood. For example, Gulf leaders pressured Trump to call off proposed strikes against Iran in mid-May:

In a bid to keep the diplomacy on track, Qatari, Saudi and Emirati leaders called the US president, telling him the mediators were close to a deal and urging him to keep his finger off the trigger. Trump heeded their counsel. He posted that same day that he had suspended an attack on Iran scheduled for the following day as “serious negotiations were now” taking place with Tehran.

Apparently, this wasn’t the only time this strategy was employed - the FT report says the leaders of Qatar, Saudi Arabia and the UAE also had to talk Trump out of greater retaliation just last week, after Iran shot down a US Apache helicopter.

The FT report outlines how Qatari mediators played a key role, shuttling to and from Tehran for negotiations. The story shows how Qatar had to convince Iran to step back from its own threats of escalation at the last minute, after Israel struck Beirut on Sunday:

The Qataris, for their part, were attempting to convince the Iranians not to retaliate. They spent 17 hours in Tehran, at one point pausing to watch a football match at the World Cup in the US with their Iranian counterparts. At another point, the Qataris threatened to walk away after the Iranians continued to push for tweaks to the language. The Qataris warned that if a deal was not agreed before Trump went into the UFC event at the White House to celebrate his 80th birthday, they risked facing further American strikes the following day.

It is true that Qatar’s general role in the backchannel negotiations with Iran was already known - I covered it here on Gulf States Insights a few weeks ago. But it’s still fascinating to read details of the pivotal role played by Qatar, the UAE and Saudi Arabia, along with Pakistan.

More critical Gulf voices

With the deal agreed only just over 24 hours ago, it will take time for more informal assessments to filter through of the US-Iran peace deal and the impact on the Gulf.

For now, it’s worth highlighting quite an interesting and critical thread on X from the influential Gulf Research Center (GRC), which was founded in 2000 by Saudi businessman Dr. Abdulaziz Sager and is based in Jeddah.

The thread was posted just before the deal was reached, but at a stage when the broad outlines of the agreement had been circulated in the media:

Although the final outcome of the U.S.-Israeli-Iranian confrontation has yet to emerge and the conflict remains unresolved, its results thus far appear disappointing from a Gulf strategic perspective. In several respects, the consequences of this confrontation run counter to the national security interests of the Gulf states and, more broadly, the Arab world. The campaign against Iran was launched without consultation with Gulf countries, without adequate consideration of its immediate and long-term repercussions for them, and largely contrary to their stated and implied preferences. It was designed to achieve a range of declared and undeclared objectives, most of which primarily served U.S. and Israeli interests. Yet the coalition failed to achieve its key objectives, from the highest ambitions, such as regime change in Iran, to more limited goals, including compelling Iran to abandon its nuclear program.

Overall, the theme of the criticism expressed in the thread is that the interests of Gulf states have been inadequately considered by the US, despite the Gulf being on the frontlines and suffering heavily from Iran’s retaliatory attacks.

Moreover, the war has been without a clear winner: the GRC thread seems to suggest that if the US was going to start a war against Iran, it should have delivered a crushing below. Instead, according to another post in the thread, Iran has ‘maintained offensive capabilities that enabled it to threaten Gulf states’.

After months of war and turmoil in the Middle East, the US-Iran peace deal is good news. But if the various early responses are anything to go by, the Gulf view is that it’s far from a perfect deal.

As some readers will know, I wrote my PhD thesis on New Zealand’s relations with the Gulf states in the 21st century - so I like to keep my eye on what’s going on with bilateral developments. I think the relationship also holds valuable lessons for those interested in UAE foreign policy more generally.

One of the surprising findings from my research was on the sheer number of high-level visits between New Zealand the six Gulf states. I identified at least 63 visits by New Zealand ministers (including associate ministers and undersecretaries) to the Gulf over my research period from 2001-24, while there were at least 31 visits by Gulf ministers to New Zealand. For two regions so distant from each other, it’s an impressive figure. And even these totals are likely to undercount overall visit numbers, especially in more sensitive areas such as defence.

When looking at the individual country level, my research showed that the leading Gulf state for bilateral visits with New Zealand was the United Arab Emirates (UAE). Indeed, the pace of engagement between Wellington and Abu Dhabi has only accelerated since New Zealand concluded a Comprehensive Economic Partnership Agreement (CEPA) with the UAE in 2024, which came into force last year.

Another high-profile visit this week

On that note, there’s another high-profile visitor from the UAE to New Zealand this week. His Excellency Saeed Bin Mubarak Al Hajeri, a Minister of State in the UAE’s foreign ministry, is making a three-day trip to the country. The Minister of State has been given particular responsibility for bilateral relations with countries in the Asia-Pacific, according to a profile on the UAE foreign ministry’s website.

It’s a measure of how seriously both New Zealand and the UAE see the bilateral relationship that meetings have been planned with no fewer than five New Zealand ministers - including Prime Minister Christopher Luxon, as well as the foreign, trade, police and climate change ministers.

There will be plenty of opportunity to discuss crucial trade and investment issues.

For the UAE, New Zealand is a key partner for food security, a priority which is only being accentuated by the recent war-related disruptions to shipping. Meanwhile, the current New Zealand coalition Government is keen to welcome higher levels of foreign direct investment, particularly in infrastructure projects.

The timing of this week’s visit to Auckland could not be better, as it will also allow the UAE Minister of State to make a side trip to the annual Fieldays event in nearby Hamilton - the largest agricultural exhibition in the Southern Hemisphere.

At the Prime Ministerial and foreign minister levels, the current situation in the Middle East and the fallout from the Iran war is likely to be a major focus. Luxon has held several phone calls with UAE President Sheikh Mohamed bin Zayed since the war began, while foreign minister Winston Peters has also spoken with his UAE counterpart Sheikh Abdullah bin Zayed. New Zealand’s solidarity with the UAE has no doubt been appreciated over the last challenging few months.

A post on X today from Winston Peters on his meeting with His Excellency Saeed Bin Mubarak Al Hajeri described the UAE as an ‘important partner for NZ in the Middle East region’. The post added that the UAE Minister of State ‘shared the UAE’s perspectives on efforts to deescalate conflict in the Middle East’, while Peters ‘reiterated NZ’s condemnation of Iran’s recent unprovoked attacks against civilian infrastructure in the UAE’.

Going beyond trade

One particularly interesting aspect of the NZ-UAE relationship is how the partnership has been expanding beyond trade. For example, last year a Memorandum of Arrangement was signed between Antarctica New Zealand and the UAE’s Khalifa University, with the aim of promoting cooperation on scientific research and academic exchanges. Peters’ post on X today specifically mentioned Antarctic cooperation as a way of deepening the overall bilateral relationship.

Meanwhile, this week’s meeting between His Excellency Saeed Bin Mubarak Al Hajeri and New Zealand climate change minister Simon Watts may lead to expanded cooperation between New Zealand and the UAE on sustainability and the Pacific. A joint statement issued when Christopher Luxon visited the UAE in January 2025 highlighted cooperation in the Pacific region:

They reaffirmed their commitment to the long-standing Renewable Energy Partnership Arrangement between their countries, and commended their ongoing joint efforts to support energy infrastructure in the Pacific. Highlighted among these initiatives is the UAE-New Zealand funded “LAKARO Phase 2” Solar Energy Project in Fiji, implemented by Abu Dhabi Future Energy Company PJSC – Masdar, under the framework of the UAE-Pacific Partnership Fund. This USD 50 million initiative has facilitated grant-funded renewable energy projects in 11 Pacific Island nations.

It’s worth noting that the Lakaro cooperation has been a long-term project - the initial phase began back in 2015. A new trilateral partnership arrangement between New Zealand, Fiji and the UAE for a second phase of the project was signed in 2023, when the UAE hosted the United Nations Climate Change Conference (COP28) in Dubai.

Police cooperation

It’s also interesting to hear a meeting is planned with New Zealand police minister Mark Mitchell, which will expand bilateral cooperation into yet another area. The meeting coincides with a trip this week by New Zealand Police Commissioner Richard Chambers to the UAE, where he met with Lieutenant General Sheikh Saif bin Zayed Al Nahyan, the Deputy Prime Minister and Minister of Interior.

An Arabic report from the Al Khaleej newspaper gives us some clues into what the partnership is all about, with a focus unsurprisingly being put on combating organised crime that often transcends borders. Cooperation will be made easier with the establishment of a New Zealand police liaison officer position in Abu Dhabi:

The meeting discussed ways to enhance bilateral cooperation in the security and police fields, and the prospects for the development of the partnership in the fight against organized crime, in addition to discussing opportunities for cooperation in the fields of digital transformation and benefiting from modern technologies and artificial intelligence in the development of policing. The meeting also witnessed the announcement of the establishment of a New Zealand Police Communication Officer role in Abu Dhabi, in a positive step that enhances institutional cooperation and supports direct coordination channels and information exchange between the competent authorities.

Projecting the UAE as a global power

This week’s visit to New Zealand by His Excellency Saeed Bin Mubarak Al Hajeri is significant at a bilateral level because of its ambitious nature.

It’s a measure of how far the NZ-UAE relationship has come that relations now cover so many different areas. But the interest in New Zealand also speaks to the UAE’s ambitions and aspirations to be viewed as a truly global power that holds influence well beyond the Middle East.

With the cooperation with New Zealand now encompassing everything from Antarctica to policing and seemingly everything in between, it’s a very powerful demonstration and statement of Abu Dhabi’s intentions.

And there is sure to be more to come.

After weeks of rumours, hints and hopes that a US-Iran peace deal was just around the corner, it’s been a rather depressing 36 hours. Iran and Israel have engaged in direct open conflict since the ceasefire came into force on April 8.

At least at the time of writing, both sides have decided to suspend their reciprocal strikes, although how long for is anyone’s guess. Israel may have been influenced by Donald Trump’s public displays of disapproval, but these may also be part of a calculated deception strategy.

The compensation plan

Any optimism about the pause in the renewed fighting needs to be tempered by the fact that the new escalation has made a peace deal even harder to achieve. And even before the new round of strikes, Donald Trump’s negotiating tactics appeared to be hardening. On Monday, the Financial Times reported on a new idea from Washington: using Iran’s frozen assets to compensate the Gulf states for damage sustained in the war.

The FT quoted an anonymous Trump administration official, who said US Treasury secretary Scott Bessent had asked his staff to estimate costs of damages to the Gulf states. According to the FT, the senior official added: “Treasury will utilise all tools available to allow Iranian assets to be made available to our Gulf allies to support rebuilding and repairs for any future damage caused by Iran”.

Iran’s frozen assets and the Qatar connection

How much money are we talking about?

In total, up to $100-$120 billion of Iranian funds are frozen in bank accounts around the world, although in practice the figure under direct consideration in the current US-Iran negotiations is around $24 billion.

A good chunk of this, up to $12 billion, is located in Qatar. This includes $6 billion that originated from Iranian sales of oil to South Korea. The funds were transferred to Qatar in 2023 preparation for release to Iran under a deal agreed to by the Joe Biden administration, but were frozen again after the October 7 Hamas attacks on Israel.

The Iraq precedent

There is a precedent for the payment of reparations in the region - Iraq paid out some $52 billion in compensation to Kuwait over a 30 year period from 1991, funded out of taxes on its oil revenues.

However, this compensation was authorised by UN Security Council resolution 692, which established the UN Compensation Commission (UNCC) in May 1991. The UNCC was closed in 2022 after the final payments were made.

The immediate confiscation by the US of Iran’s frozen assets for a direct handover to the Gulf would be a vastly different approach.

What Gulf voices are saying about the proposal

Despite the potential for a very useful payday to repair the very real damage caused by Iran’s retaliatory strikes, prominent Gulf commentators do not appear to be overly enthusiastic about the proposal.

From Qatar, Liqaa Maqi, a senior researcher at the Al Jazeera Centre for Studies, suggested the idea was probably ‘merely a threat without actual use’ and that Trump was probably ‘waving this card to force concessions from Tehran’.

Over in Bahrain, opinion writer Hind Karam’s article in Al-Ayam newspaper illustrated the Gulf view that while the Gulf states deserved compensation from Iran, it was even more important to secure a peace deal and the proposal was unhelpful in that regard:

The Gulf approach is characterized by realism and extreme caution; while the proposal represents an explicit American recognition of the rights of the Gulf countries affected by the Iranian aggression and the need to hold the culprit accountable, the Gulf capitals fear that moving forward with this action will lead to the explosion of the remaining bridges of diplomacy, and push the region towards a round of violence on land, sea and air, hostile and uncalculated results!

Meanwhile, influential UAE voice Ebtesam Al-Ketbi from the Emirates Policy Center, also saw the idea as a hardball negotiating tactic from Washington, noting that it might also backfire and result in a less compromising stance from Tehran:

It seems that Washington is trying to flip the equation; instead of the frozen assets being an American concession to Iran, they become a bargaining chip of threat that continued escalation will transform this money into compensation for Gulf countries. This is a calculated escalatory step, as Washington is not only saying we will not release the money, but we may use it against you. And this pressures Iran to accelerate an agreement or reduce the attacks, but it may also push Tehran to harden its stance because it will see it as a confiscation or a sovereignty insult.

Iran’s position

Unsurprisingly, Iran has hit back strongly against the proposal. Deputy foreign minister Kazem Gharibabadi called the idea ‘fresh impudence from America’, adding that ‘Iran's assets are neither war spoils for Washington nor a payment fund for its allies. Any seizure, transfer, or allocation of Iran's property without the consent of the Iranian government is itself a new internationally wrongful act’.

The damage in the Gulf from the war has undoubtedly been immense and the cost of repairs will undoubtedly be in the billions. But ultimately, all sides can probably recognise Trump’s frozen assets idea for what it is - a hardball negotiating tactic.

And with the war restarting, at least temporarily, it seems that we’re moving further away from a deal.

Saudi Arabia’s ambitious new airline is about to take to the skies.

Riyadh Air, owned by Saudi Arabia’s massive Public Investment Fund (PIF), has just taken delivery of its first two custom-built 787 Dreamliners and is preparing to start full commercial operations on July 1. More aircraft are on the way: an order for up to 72 Boeing 787-9 planes was placed in March 2023, when the airline was officially launched.

Officially, Riyadh Air has already been operating flights since October 2025, to and from London’s Heathrow Airport. However, this has been with a single second-hand aircraft that previously flew for Oman Air. Moreover, the flights have mostly not been available for general public sale. Rather, the service has been offered to keep a valuable, ‘use it or lose it’ landing slot at Heathrow, with seats typically taken by staff working for the PIF.

Timing is everything

It might seem like a challenging time to launch a new airline in the Gulf, given how the Iran war has affected the operation of flights in the region.

Riyadh Air CEO Tony Douglas took an understandably pragmatic view of the matter when asked in an interview on Bloomberg last week about the timing:

In my line of business, I guess it's never been easy. There have always been challenges, be it pandemics, volcanic ash clouds, whether it's been geopolitical situations. So I guess in some ways, it's a tough business. And this is a complex undertaking. That said, all the fundamentals for us remain exactly the same as they were when just over three and a half years ago, when we signed this contract with Boeing. We've got 22 cities we want to connect to in the next nine months.

The plan is for Riyadh Air to fly to over 100 destinations by 2030. Of course, that 2030 date isn’t an accident - it aligns with Vision 2030, the ambitious transformation plan led by Crown Prince Mohammed bin Salman. Riyadh Air is seen as a cornerstone of Vision 2030 and the drive to build tourism and business in Saudi Arabia.

What about Riyadh Air’s rivals?

At its core, the aim of Riyadh Air is to create a Saudi equivalent to the ‘big three’ Gulf airlines of Emirates, Etihad (both based in the UAE) and Qatar Airways. This won’t happen overnight - the 72 Dreamliners on order will take years to arrive in full. Even then, Riyadh Air will be significantly smaller than the existing Gulf carriers, which have had decades-long head starts.

Emirates began operations in 1985 and has nearly 300 aircraft. Qatar Airways was founded in 1993 and has a similar fleet size to Emirates (albeit with more aircraft types that include narrowbodies). Even Etihad, the most recent of the ‘Gulf three’, has been flying since 2003. Despite being the smallest of the three existing players, even Etihad has more than 100 aircraft.

Still, if there were a time to start a new airline in the Gulf, now might actually better than you might think. The Saudi capital experienced far fewer drone and missile attacks than the coastal Gulf states of Bahrain, Kuwait, Qatar and the UAE. This is partly about politics, but also relates to geography - Riyadh is significantly further away and harder for Tehran to target.

As Saudi news channel Asharq Business pointed out in a detailed backgrounder on its website to mark the launch of Riyadh Air, the current big three Gulf carriers have been following different approaches. Emirates, the biggest Gulf airline, has cut 1106 flights that were scheduled for June 2026, affecting 47 destinations in its network and reducing capacity by about 17%.

For its part, Qatar Airways has reduced its capacity this month by about 19%. Interestingly, Abu Dhabi-based carrier Etihad has actually increased its capacity, by 8% year-on-year.

All in all, despite the uncertainty, the shake-up in the Gulf and the current enormous interest in the region means it’s perhaps not such a bad time for Riyadh Air to make a ‘big splash’ with its full commercial launch.

What happens to Saudia?

Saudi Arabia already has an existing flag carrier, Saudia, but its market positioning has been very different.

After Riyadh Air launches, the plan is for both carriers to co-exist. Riyadh Air will focus on serving premium long-haul and business traffic to and from the Saudi capital (as the airline name suggests). Meanwhile, Saudia will concentrate on the volume market, especially religious tourism for the Hajj/Umrah in Mecca and Medina. Much of this traffic is served via Jeddah’s main airport - linked by the Haramain high-speed rail network with the two holy cities.

Ultimately, Riyadh Air is far more than just a new airline.

It’s a long-term project aimed at powering Vision 2030.

A drone attack by Iran on Kuwait’s international airport on Wednesday killed one person and injured more than 60 others. It’s one of the most serious violations of the US-Iran ceasefire since it came into force on April 8.

Across the Gulf, the general tone of official reaction and views from state-aligned commentators has reflected anger towards Iran and solidarity with Kuwait - with surprisingly similar calls for collective action.

Kuwait’s response

In response to the attack, Kuwait immediately summoned Hamed Hamid Yaqoubi Far, the Chargé d'Affaires at the Iranian Embassy in Kuwait City. The Iranian diplomat was handed a formal letter of protest at the ‘ongoing Iranian aggressions’, while Kuwait also declared two members of the Iranian delegation to be personae non gratae, expelling them with orders to leave within 24 hours. The Kuwaiti foreign ministry issued the statement with a photo of the glum-faced Far alongside Kuwait deputy foreign minister Hamad Sulaiman Al-Masha’an:

It’s worth noting that Kuwait had only just reopened the Terminal 1 building 48 hours prior to the attack, after repairing it from damage caused by Iranian strikes during the war that began on February 28.

Why was Kuwait specifically targeted? Kuwaiti academic Bader al-Saif linked the attack to Kuwait’s capture of four Islamic Revolutionary Guard Corps (IRGC) members last month, telling Bloomberg: ‘we have the unique chance to use the four operatives as leverage for Kuwait’s own direct deal with Iran’.

A hardline tone across the Gulf

Various Gulf analysts and advisors reflected anger across the region at the attack. For example, prominent Saudi political analyst Salman Al-Ansari posted video of the attack from Riyadh-based news channel Al-Arabiya and called Iran a ‘rogue state’.

Al-Arabiya’s decision to broadcast footage of the attack may be a strategy shift. During the main conflict period in March and April, Gulf outlets generally shied away from showing video footage of pictures of damage to structures in their own countries - probably to avoid panic and minimise any apparent weaknesses in their defences.

What the GCC Secretary-General is saying

The Secretary-General of the Gulf Cooperation Council (GCC), Jasem Mohamed Albudaiwi, issued a very strongly-worded statement, expressing the ‘strongest condemnation and denunciation of the ongoing Iranian aggression against the Kingdom of Bahrain and the State of Kuwait’. Albudaiwi added:

These cowardly attacks on civilian objects, infrastructure, headquarters and diplomatic missions constitute a dangerous and unprecedented escalation, and reflect the Iranian regime’s insistence on pursuing rejected hostile policies targeting the security, stability and sovereignty of the GCC states.

Gulf voices argue for collective defence

One of the most interesting aspects of the response to Iran’s attacks on Kuwait (and attempted strikes against Bahrain) has been a call for even greater collective defence and solidarity between the GCC members.

From Qatar, Khalid Al-Jaber, the Executive Director of the Middle East Council on Global Affairs, wrote that ‘any attempt to target a particular Gulf state is often a prelude to targeting the rest of the countries in one way or another’. He called Gulf security a ‘red line’ in an opinion piece for Al Jazeera’s Arabic website:

Ultimately, Kuwait’s security cannot be separated from Bahrain’s security, nor Bahrain’s security from that of Saudi Arabia, the UAE, Qatar, or Oman. Gulf security is one system, and any imbalance in one of its pillars is reflected in the rest of the pillars. That is why the message that should come out of the Gulf capitals today must be clear and decisive: the security of the Gulf is not a negotiating card, not an area for political bargaining, not an open arena for settling regional scores.

Meanwhile, Hamad bin Jassim bin Jaber Al Thani, the former Qatari Prime Minister and foreign minister often referred to as ‘HBJ’, posted on X in Arabic a similar call for collective action:

This is a situation that requires a collective Gulf stance so that Iran learns that the unjustified acts it carries out will not weaken us, nor will they make us relinquish our rights. Some Gulf states, and my country in particular, have been and remain in favor of establishing positive relations with Iran, our closest neighbour, but it must always know that those relations will not be established through blackmail, nor at the expense of our sovereignty. Moreover, Iran must realize that it is not easy to continue retaliating against our countries or some of them in response to targeting it or its allies.

The view from the UAE

From the UAE, there was a similar call for a unified Gulf response - this time from Dr Anwar Gargash, an influential former Minister of State for Foreign Affairs and now a senior diplomatic advisor to UAE President Sheikh Mohamed bin Zayed. Gargash wrote in Arabic on X:

In light of the repeated Iranian aggression against the sisterly State of Kuwait and Kingdom of Bahrain, there must be a firm, unified, and cohesive Gulf stance. For no Gulf state should be left to face targeting alone, as the security of the Arab Gulf states is interconnected, their interests are shared and their fate is one. This aggression does not target a specific state, but rather all of us.

A ceasefire in name only?

Finally, it’s worth noting a rhetorical call by Bahraini academic Mahdi Jasim Ghuloom, who asked ‘when do we stop calling the current arrangement a ceasefire?’

It’s certainly been a hallmark of the recent conflicts in the Middle East that nominal ceasefires officially remain in place despite any breaches - whether it’s Gaza, Lebanon or now the Gulf.

On that topic, a new piece from the Associated Press is well worth reading - ‘There are supposed to be ceasefires across the Middle East, but the fighting is worsening’. The story observes the ceasefire term is ‘rapidly losing its meaning’.

As the airport attack on Kuwait shows, the ceasefire in the Gulf is certainly on shaky ground.

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Israel has cancelled its plans to attack the outer suburbs of Beirut - and Qatar is claiming the credit.

Here’s how Qatar’s Al Jazeera broke the news on its Arabic channel on Monday night, during its hour-long primetime panel discussion programme:

A Qatari diplomatic source told Al Jazeera that Washington informed the Qatari side after Trump's call that Netanyahu's cancellation of the strikes on the southern suburbs of Beirut means that the strikes were already underway, and this effort stopped them. The Qatari diplomatic source told Al Jazeera that Washington informed the Qatari side that Qatar renewed contacts today in light of the Israeli warnings to bomb the southern suburbs, with the aim of stopping the strike.

What’s in the deal?

The deal is only a partial ceasefire, but it’s still a major achievement. According to Reuters, the agreement involves Hezbollah agreeing to suspend attacks on Israel in exchange for the cancellation of planned Israeli attacks on Beirut’s southern suburbs, known in Arabic as Dahieh.

However, the arrangement will not stop fighting in the southern part of Lebanon.

Axios reported details of a fiery phone call between Donald Trump and Benjamin Netanyahu over the situation in Lebanon, during which the US President repeatedly used expletives and called the Israeli PM ‘crazy’.

Trump is clearly desperate to keep the peace talks between the US and Iran alive, after Tehran threatened to walk away from the negotiations.

What’s interesting about the Qatari involvement

Perhaps the most interesting aspect about this news is not the fact Qatar has been involved - you would expect it to be. After all, Qatar has played significant mediation roles in Lebanon for years. Here’s a Reuters report from May 2008:

Where the Arab League, the United Nations, France and many other go-betweens had failed, the tiny Gulf state of Qatar succeeded in cajoling Lebanese leaders into a political agreement to avert the risk of a new civil war.

This week’s Doha deal was the biggest achievement so far in a bid by Qatari ruler Sheikh Hamad bin Khalifa al-Thani to prove his country can punch above its weight in regional diplomacy.

Fast-forward to 2026, and Qatar is also not the only country that has contributed to stopping the Lebanon conflict spiralling out of control and derailing the wider US-Iran talks. Reports suggest Pakistan, Egypt, Saudi Arabia and others have all played intermediary roles.

But in the context of the current crisis, what’s significant here is that Qatar is openly claiming the credit for its success, rather than keeping a low profile as with its backchannel role in the broader US-Iran negotiations - which I covered in an earlier edition of Gulf States Insights.

Why the difference? Well, one theory is that Qatar does not want to be seen as giving any support to Iran in the main theatre through its mediation efforts, given the outrage in the Gulf states over Tehran’s attacks against them. That’s why Qatar’s efforts there are intentionally under the radar. However, Lebanon is separate enough that Doha feels it can claim the deserved credit.

What else is being said about Qatar’s role?

Beyond Al Jazeera, US political reporter Robert Sherman was one of a number of correspondents to report accounts with details of Qatar’s involvement. The common thread to the accounts is that Qatar undertook intense diplomacy over the weekend with both sides to try and deescalate the tensions in Lebanon. Sherman casts this as an ‘outsized role’.

Al Jazeera correspondent Ali Hashem also highlighted the ‘active Qatari mediation’, as well as the involvement of Lebanese Parliament’s Speaker, Nabih Berri, whose key aide is now in Doha to progress negotiations further.

It’s not clear exactly who exactly Qatari officials talked to in order to bring about the agreement. But on the public record is a phone call between Qatari PM and foreign minister Sheikh Mohammed bin Abdulrahman Al-Thani and his Iranian counterpart Abbas Araghchi.

The Lebanon crisis isn’t over yet.

But Qatar’s de-escalation efforts have probably stopped it from getting worse.

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Another week, another fascinating Wall Street Journal report on Gulf involvement in the Iran war. The new report, out on Friday, claims the UAE conducted ‘dozens of airstrikes’, from near the very start of the war until the day after a ceasefire was declared in early April. Here’s the key claim from the article:

The attacks were conducted in coordination with the U.S. and Israel, both of which provided intelligence, the people said. They included targets on Qeshm and Abu Musa islands in the Strait of Hormuz; Bandar Abbas; the oil refinery on Lavan Island in the Persian Gulf; and the Asaluyeh petrochemical complex, some of the people said.

The report adds that some of the UAE strikes targeted energy facilities, such as Asalyueh, in retaliation for Iran’s attacks on the UAE’s own energy infrastructure.

The report follows up on another WSJ article from earlier in May, which was vaguer on the extent of UAE involvement and identified only the Lavan Island refinery incident in early April as a specific example of alleged Emirati strikes.

Alleged Saudi view of the UAE’s position

The new WSJ report claims that Saudi Arabia took a dim view of the UAE’s strikes, particularly near the end of the war:

The scale of the U.A.E.’s hawkish response exacerbated divisions within the Gulf. In early April, Saudi Arabia complained to the U.S. that U.A.E. attacks were raising the risk that regional energy facilities could come under fire from Iran, something that could spike oil prices and rock global markets, some of the people said. The Saudis wanted the U.S. to pressure the U.A.E. to stop the retaliatory attacks and join diplomatic efforts by regional countries, they said.

Is all of this true? Possibly, possibly not, possibly not exactly as written - the reports rely on leaks which have probably come from security sources inside the Donald Trump administration. These have their own interest in maintaining pressure on Iran, especially as a US-Iran agreement seems to be close.

Claims of Saudi strikes on Iran

It’s also worth recalling that there have been other reports reliant on leaks that have made claims of Saudi involvement in the war. For example, a Reuters report from early May asserted that Saudi Arabia conducted strikes on Iran multiple times in March:

Saudi Arabia launched numerous, unpublicized strikes on Iran in retaliation for attacks carried out in the kingdom during the Middle East war, two Western officials briefed on the matter and two Iranian officials said.

The Saudi attacks, not previously reported, mark the first time that the ​kingdom is known to have directly carried out military action on Iranian soil and show it is becoming much bolder in defending itself against its main regional rival.

The Reuters report claimed the Saudi strikes were carried out in March as reciprocal retaliation for Iranian strikes on Saudi infrastructure and were telegraphed to Iran in advance. Intense diplomatic de-escalation efforts reportedly then followed.

Cui bono - who benefits?

It would not be surprising if the UAE and Saudi Arabia were involved in strikes against Iran, given that the Gulf states suffered from intense waves of Iranian attacks throughout March and early April. In fact, collectively the reports suggest significant commonality between both Riyadh and Abu Dhabi - even if the extent of the involvement differs.

My own view is that Gulf solidarity has been boosted by the Iran war - with constant phone calls between GCC leaders and foreign ministers pledging solidarity after Iranian attacks being just one example. Here’s another example: a call between the UAE and Kuwaiti foreign ministers. The readout was published on the same day as the WSJ report:

However, the sources for the new WSJ report appear to go to some lengths to put daylight between Saudi Arabia and the UAE and emphasise intra-GCC division, rather than unity. As well as hawks in the Trump administration, Israeli security or intelligence sources could well have an interest in pushing or at least exaggerating this narrative.

What UAE voices are saying

Abdulkhaleq Abdulla, a prominent UAE political scientist and former advisor to President Sheikh Mohamed bin Zayed, posted the latest Wall Street Journal article on X. Just beforehand, he posted this message in Arabic, which seemed to be indirect approval of the paper’s claims of UAE involvement:

The UAE has confronted a brutal Iranian aggression with dignity and was the only Gulf state to respond to the aggression with confidence and courage, and it is now actively arranging a truce, and if peace is achieved, it will deal with it wisely in accordance with its national interests, especially since Iran is exhausted and in need of the UAE, and if it inclines toward peace, it will be met with better than that, for there is no permanent enemy in the UAE's lexicon.

Nadim Koteich, another prominent UAE-aligned voice and talkshow host on Abu Dhabi-based news channel Sky News Arabia, also posted on the story. In response to a post from an Iranian embassy account that quoted Abdulkahleq Abdullah’s summary of the WSJ article with the question ‘now do you understand why the UAE was being targeted by Iran?’, Koteich commented:

It is interesting though, that your government, unlike your tweet, has never acknowledged targeting the UAE. They’ve always maintained the lie that they’re targeting American bases and interests in the UAE!

The reports are interesting - but don’t believe everything you read

All in all, the constant leaks to the Wall Street Journal, Reuters and other outlets are fascinating.

But the leakers have their own agenda and own interests - so without hard evidence, it’s worth treating the reports with a high degree of caution and scepticism.

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On Wednesday, the US president said when discussing the need for freedom of navigation in the Strait of Hormuz: ‘Oman will behave just like everybody else, or we'll have to blow them up. They understand that. They'll be fine.’

Gregg Carlstrom, Middle East correspondent for The Economist, asked rhetorically on X whether Trump ‘just confused Oman with Iran or is indeed threatening to bomb Oman’.

But the context of Trump’s statement - and the fact that the State Department felt the need to clip out the comment and post it on social media - shows that the US President very much meant what he said.

More than just the usual bullying

Oman is one of Washington’s oldest friends - a bilateral Treaty of Amity and Commerce was signed back in 1833, the first such agreement with a Gulf state. And Oman was the first Arab country to send an ambassador to the United States in 1840.

Still, being a close ally of the United States hardly gives immunity against bullying behaviour by Trump. At various times, Canada, the United Kingdom and Denmark and plenty of others have all found themselves subject to Trump’s sharp tongue.

Trump’s vulnerability - freedom of navigation

Why is Trump suddenly lashing out at Oman?

Well, while there have been positive signals and rumours of progress throughout this week, plenty of balls remain in the air in the US-Iran negotiations. And Trump is especially vulnerable when it comes to the issue of freedom of navigation in the Strait of Hormuz.

That’s because the opening of the Strait of Hormuz is essentially a binary issue. The Strait was fully open before the war - now it’s not. Any compromise that gives Iran a say over which ships transit the Strait and at what price could easily make Trump look like a loser.

It’s very different to the nuclear issue, where the complexities mean there are all kinds of ways for Trump to spin a positive outcome. The enrichment level, moratorium duration and fate of the existing uranium stockpile are all up for negotiation. Whatever agreement is eventually made, it’s a fair bet that Trump will make the claim that ‘his’ deal is better than the original Joint Comprehensive Plan of Action (JCPOA) deal from 2015.

Is Oman trying to do a deal with Iran?

Trump’s threats against Oman essentially go back to reports that emerged a week ago which claimed that Tehran and Muscat are negotiating over a jointly-administered tolls system for the Strait of Hormuz, which I covered earlier this week on Gulf States Insights. Iran’s deputy foreign minister travelled to Oman for talks last weekend.

Iran has talked up the idea of tolls - or at least a version which sees fees imposed. Here’s the Iranian foreign ministry spokesperson Esmail Baghaei described the discussions on Tuesday:

It's only natural that the services we provide, like navigation and the preservation of the ecosystem of the Strait, the Persian Gulf and the Sea of Oman will have costs. These should not be considered tolls. Iran and Oman are being responsible in our efforts and I hope we will reach a conclusion soon.

It’s important to emphasise here that these reports of discussions over tolls are very much Iran’s characterisation. Oman, by contrast, has emphasised ‘freedom of navigation through the Strait of Hormuz in accordance with the rules of international law’.

Rather than working out a side deal with Iran, it seems more likely that Oman is following its usual quiet diplomacy strategy and is trying to convince Iran that freedom of navigation through the Strait of Hormuz is in Tehran’s own best interests.

The Gulf perspective on Trump’s threats against Oman

So far, the only official Omani reaction has come through private comments from Oman’s ambassador to the United States, as conveyed by US Treasury Secretary Scott Bessent:

I had a call with the Omani ambassador this morning, and he assured me that there were no plans for tolling the strait, as he said, our countries have had 200 years of good relations.

On social media, Omani voices have been vocal in their opposition to Trump’s threats. Omani international relations academic Dr Abdullah Baabood posted ‘One of the signs that the unipolar moment is ending is when its leader can no longer distinguish between friends and foes’. He also called it a ‘serious strategic mistake’.

Baabood supported comments from Adel Abdel Ghafar, an academic until recently with the Middle East Council on Global Affairs thinktank in Doha. Ghafar said ‘if you wanted to damage American credibility in the Gulf in a single sentence, ‘we’’ have to blow them up’ would be hard to beat’.

Elsewhere, the founder of Omani news site Alsahwa.om, Abdullah Adawi, posted comments in Arabic that were emblematic of outrage in Oman that saw Trump’s threats as questioning Oman’s sovereignty and right to make its own decisions.

Oman has never been anyone's tail, nor a state whose decisions are managed from Washington or elsewhere, for it possesses an independent sovereign will shaped through a long history of wisdom, balance, and national dignity. What disturbs some great powers is that Oman does not operate on the logic of subservience, because Washington is accustomed to dictation and imposing its will on states weak in decision-making and sovereignty, whereas this approach finds no path to a state that knows its own weight well and understands that respect for international relations does not mean abandoning an independent stance. Thus, Oman, with its deep history, cannot accept being exploited or pushed to serve as a tool in others' conflicts

With a US-Iran deal on the horizon, it’s likely the Trump vs. Oman spat will soon be smoothed over.

But it won’t be forgotten.

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My first post for Gulf States Insights (‘From Hormuz to Hejaz: the Gulf’s rail revival’) was on how new rail networks are transforming the region. I find it fascinating how these new logistics pathways are helping to connect the six Gulf states, while also opening up new opportunities with third countries, as political circumstances allow.

These networks haven’t emerged overnight, but there’s no doubt that the Iran war is driving a new wave of innovation when it comes to logistics. Last week, Dr Sultan Al Jaber, the Managing Director and Group CEO of ADNOC (the catchy acronym for the Abu Dhabi National Oil Company), announced that the UAE’s second new oil pipeline is already 50% complete and is expected to be completed by 2027.

The new ‘West-East’ pipeline will supplement the existing Habshan–Fujairah oil pipeline, which has a capacity cap of 1.8 million barrels a day. From the current geopolitical perspective, the significance of Fujairah is that it lies outside the Strait of Hormuz, but the more easterly location is also a way of bringing oil to Asian markets faster, particularly in India.

The India connection

There’s no doubt that the UAE is forging close ties with India at the moment - Prime Minister Narendra Modi made an official visit to the UAE earlier this month, signing a strategic defence partnership that will see bilateral cooperation on ‘defence industrial collaboration and cooperation on innovation and advanced technology, training, exercises, maritime security, cyber defence, secure communications and information exchange’.

There was also an energy agreement as part of the trip. Since 2018, the UAE has maintained a Strategic Petroleum Reserve (or SPR) of nearly 6 million barrels of oil in storage facilities located in India - and since 2020, ADNOC has even been allowed to re-export oil directly from there.

You just need to look at the current crisis to see why that option might be valuable.

Anyway, the deal between India and the UAE earlier this month adds to this existing SPR arrangement by boosting the amounts stored in India up to 30 million barrels, and also allowing India to store its own SPR at Fujairah in the UAE. Here’s how Parul Bakshi from India’s Observer Research Foundation (ORF) thinktank puts it in a very interesting analysis piece:

Perhaps the most strategically novel element of the current agreement architecture is the discussion underway for India to store crude at Fujairah as part of its own SPR framework. If operationalised, this would make India among the first major Asian crude importer to hold distributed strategic reserves on both ends of the supply chain, domestically within underground caverns, and at a Gulf waypoint within days of the source, representing a “structural innovation” in developing-economy energy security strategy.

Why the UAE wants to pump more oil now

Fundamentally, the UAE’s goal is to aggressively produce more oil in the coming years, while prices remain at relatively high levels (not at the current war premium, but in historical terms). It was producing around 3.4 million barrels just before the war began, in line with its then assigned OPEC quota. But it already has significantly greater production capacity, at about 4.8 million barrels a day, and it wants to raise this even further to at least 5 million barrels by 2027 - and probably even higher.

What’s the thinking here? Well, quite reasonably, given the global transition to renewable energy supplies, the UAE thinks the price of oil will only decline over the medium and long-term. In its view, pumping as much oil now is the way to maximise returns, rather than drawing this out over a longer period.

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More about that pipeline

Going back to the pipeline itself, there are clearly many advantages for the UAE - which left OPEC at the start of the month, freeing itself from production quotas. Still, a new pipeline won’t solve all of the current problems. The current ‘Abu Dhabi Crude Oil Pipeline’ that exits at Fujairah was targeted repeatedly during the war in March and April, for example, and there’s no reason to expect this wouldn’t happen with the new ‘West-East Pipeline’ too.

Still, it’s not just about resilience - it’s also about simply pumping more oil and facilitating the transport of the oil to Asian markets. It might also spur a new wave of expansion in port infrastructure and other developments at Fujairah. The UAE’s Al Ain News website quoted Dr. Mostafa Al Bazergan, the Director of the Energy Information and Studies Centre in London, who suggested we could see in due course ‘the development of ports and facilities dedicated to the export of crude oil and liquefied natural gas to global markets, supporting the UAE’s position as a regional and international energy trade centre’. He sees Southeast Asia as another importing region that would benefit.

What are other Gulf states doing on logistics?

Quite a lot - and they deserve separate posts. For now, here’s just a couple of recent developments:

• Saudi port operator Mawani has been launching new shipping routes to destinations both in the Middle East and Asia - see ‘Mawani Launches CMA CGM Ocean Rise Express Service at Jeddah Islamic Port’ and ‘Saudi Arabia now ships more via Red Sea as trade steers away from Hormuz’

• From Qatar, which has less favourable geography than the UAE, there’s an interesting opinion piece proposing an intra-GCC swapping system for oil and gas deliveries: ‘The GCC should insure itself against the next Strait of Hormuz crisis’:

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Reports continue to go back and forth about a potential end to the Iran war. After more optimistic signals earlier in the weekend, Donald Trump now says he has told officials ‘not to rush into a deal’.

It’s interesting to consider the various Gulf perspectives as news emerged of a potential agreement. Overall, views seem remarkably restrained and devoid of any celebratory tone. The wariness (and weariness) is despite Trump going to great lengths to acknowledge and implicitly give credit to Gulf leaders on a ‘very good call’ on Saturday, when he claimed that a deal had been ‘largely negotiated, subject to finalization’.

Given that an actual agreement has yet to materialise and the overall contradictory messaging from the White House over the course of this war, this has probably been a smart strategy.

Caution, relief, but no celebration

From the UAE point of view, one useful viewpoint came from Dr Ebtesam Al-Ketbi, the head of the Emirates Policy Center in Abu Dhabi, who suggested that a deal would be welcomed, but was not optimistic about the longevity of any agreement. As such, Dr Al-Ketbi indicated that the Gulf states would continue to invest in resilience measures that assumed conflict could resume at any time:

For the Gulf states, any potential agreement will likely be viewed through a dual lens. On one hand, there is an understandable sense of relief at any reduction in tensions affecting Hormuz, energy flows, and markets. On the other hand, there is growing recognition that agreements which merely postpone the sources of tension—rather than resolve them—may produce fragile stability rather than lasting peace. As a result, Gulf states are likely to continue investing in maritime, air, and missile defense capabilities, while accelerating efforts to develop strategic alternatives that reduce dependence on Hormuz. At the same time, they will seek to ensure that the post-war regional order is not shaped solely through bilateral understandings between Washington and Tehran.

In the end, the region does not appear to be heading toward comprehensive peace or all-out war, but rather toward an intermediate phase defined by the management of tension rather than its resolution.

Only delaying further conflict?

From the Qatari perspective, Dr Khalid Al-Jaber, the Executive Director of the Middle East Council on Global Affairs, provided in an Arabic-language opinion piece an even more sober perspective of the potential deal. The proposal would see a 60-day extension to the ceasefire and the opening of the Strait of Hormuz, but would not resolve the underlying differences between the United States and Iran over Tehran’s nuclear programme:

The recent US-Iranian agreement is presented as a step toward de-escalation and the opening of a new chapter in diplomacy, but this portrayal seems more wishful thinking than an accurate assessment of the nature of the conflict. The situation does not suggest the emergence of a stable settlement, but rather a recycling of the same crisis in a quieter and less contentious form. The question here is not only: What has actually changed? But also: Have the underlying causes of the tension disappeared, or has the next explosion simply been postponed?

Oman’s view

Meanwhile, Muscat is continuing its traditionally independent foreign policy strategy. Iran’s deputy foreign minister Kazem Gharibabadi visited Muscat on Sunday for talks with Omani officials, including Omani foreign minister Badr Albusaidi and Undersecretary Sheikh Khalifa bin Ali Al Harthy.

Albusaidi - who received a message from his Iranian counterpart Abbas Araghchi during the meeting - said in a social media post afterwards that Oman emphasised the ‘importance of diplomatic engagement on all fronts’. Oman’s foreign policy traditionally focuses on quiet movement behind the scenes and upholding dialogue even (and especially) in times of crisis.

Strait of Hormuz question

On the substance, the Omani account of the bilateral talks reported ‘an expanded session was held between the Omani and Iranian delegations to discuss a set of principles governing freedom of navigation through the Strait of Hormuz in accordance with the rules of international law’.

It remains to be seen what comes out of the Omani-Iranian talks, but the reference to freedom of navigation and international law may be an indirect response to comments sourced to Iranian officials reported earlier by the New York Times. The remarks attempted to put Iran and Oman on the same page when it came to a proposed toll in the Strait of Hormuz:

Two people familiar with the discussions over management of the waterway said that Iran was not planning a toll system, which would charge simply for transit. Instead, the talks with Oman have explored a proposal to charge vessels fees for services.

Oman had initially rejected a joint partnership with Iran on the strait but is now in discussion over a share of the revenues, according to two Iranian officials familiar with the talks but not authorized to speak publicly. The officials said Oman told the Iranians that it was willing to use its influence with neighbors in the Gulf, including Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates, and with the United States to push the plan, having realized the potential economic benefits of a fee system.

A Kuwaiti analyst’s view

An interesting view on what could happen with the Strait of Hormuz issue came from Kuwaiti analyst Dr Ayed Al-Mannaa during a panel discussion on Saudi news channel Al Arabiya:

The strait is divided into two sections: one Omani and one Iranian, each with a certain number of miles (apparently 12 miles per country). The remaining portion is international waterway, and Iran has no right to impose its will on it, just like any other waterway in the world.

In keeping with the theme from various analysts of cautious hope that a resolution is in sight, but without premature celebration, Dr Al-Mannaa added ‘we're talking about the beginnings of a breakthrough, but not a solution yet’.

A Saudi analyst’s perspective

Finally, Saudi journalist and researcher Hassan Al-Mustafa reminded viewers of the same Al Arabiya panel discussion that the agreement under consideration would simply be the first step:

What's happening in this framework agreement or memorandum of understanding is an attempt to build a foundation upon which political understanding can be built in its later stages. This foundation was and still is nonexistent due to a lack of trust and the inability of each party to demonstrate good faith.

Across the Gulf, one sentiment seems to be shared - there is a long way to go yet.

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The Gulf is stepping up its free trade efforts - and this week’s deal with the United Kingdom is unlikely to be the last.

Negotiations on a free trade agreement (FTA) with the UK were concluded this week. It’s the GCC’s first such deal with a G7 country. The UK estimates the FTA will boost its GDP by £3.7 billion ($5 billion) annually. Within a decade, £580 million in tariffs will be eliminated, with tariff-free access for 93% of British exports to the Gulf.

What’s in it for the UK?

It’s hard to see any downsides for the UK from the agreement. It’s some welcome economic good news for Prime Minister Sir Keir Starmer, who is billing the GCC FTA as ‘our fifth trade deal in less than two years’.

The headline focus has fallen on cheese, chocolate and cars, which are all big British exports to the Gulf and will benefit from the tariff reductions. The British Government’s official press release quoted UK Food & Drink Federation Chief Executive Karen Betts:

Prior to the war in Iran, our exports to the region were worth over £800m a year and growing at twice the rate of EU exports, reflecting the high demand in GCC countries for high quality, delicious and trusted British brands. While we expect trade to continue to be disrupted in the short-term, the removal of tariffs from day one on iconic British products like oats, breakfast cereals and biscuits will help food manufacturers build export momentum in the years ahead.

Also set to benefit are military exports - Saudi Arabia is the UK’s largest market in the sector, with major companies such as BAE Systems. The current conflict with Iran will almost certainly boost this further.

What’s in the deal for the Gulf?

The British equation is pretty clear - but what’s in it for the Gulf? After all, the Gulf states’ main oil and gas exports are already typically tariff-free.

The need for economic diversification and investment opportunities are two main drivers of the FTA, along with a good degree of healthy competition between some of the individual Gulf states. The UK is a major focus for Gulf sovereign wealth fund investments, particularly property (with Harrods, the Shard and Heathrow Airport being only some high-profile examples).

Jasem Mohamed Albudaiwi, Secretary General of the Gulf Cooperation Council (GCC), concluded the negotiations on Wednesday with Chris Bryant, the UK’s Minister of State for Trade. The GCC Secretariat reported the arrangement as a ‘qualitative leap in relations between both sides’.

Economic diversification - geographically and from oil/gas

The truth is that this agreement is less about a specific deal with the UK and more about a general push by the Gulf for greater economic diversification, as highlighted in a report by consultancy PwC at the start of the year. It talked about the need for ‘broader and more diverse trade bridges’ amidst the ongoing trade feud between the United States and China, and Donald Trump’s willingness to impose hefty tariffs.

To this end, Saudi economist Eid Bineid highlighted this week on Saudi news channel Asharq the diverse range of agreements recently signed by the Gulf with a ‘group of economic powers’ including the EU, China and others.

Qatar’s Middle East Council on Global Affairs also picked up on this theme in an interesting report by non-resident senior fellow Dr Frédéric Schneider, issued in January 2026, which argued ‘trade policy in the GCC has been shaped by the desire not only to diversify Gulf industries away from hydrocarbon dependence, but to diversify trade relations too, through regional and global trade integration’.

Technology transfers

It’s very true that all of the Gulf states have ambitious economic diversification plans, from Vision 2030 in Saudi Arabia to Vision 2040 in Oman. There is general consensus in the Gulf that there is an urgent need to move beyond oil and gas exports in favour of more diverse economies that expand the role played by areas such as tourism, manufacturing, education and technology, including AI.

On Asharq, Eid Bineid said ‘the primary objective has always been technology transfer, whether in industries in general or specifically in the military sector’, adding that he saw ‘technology transfer from Britain to the Gulf states’ and increased investment flows as some of the main benefits for the GCC. Specifically, he saw the FTA as facilitating much-needed growth in Saudi Arabia’s manufacturing sector, which is one of the key pillars of Vision 2030:

I believe the Kingdom [of Saudi Arabia] now has a very large economic diversification project, and one of the most important of these projects is the manufacturing project, through which the Kingdom truly seeks to make industry contribute more than 25% to the Saudi economy. We are currently talking about 16-17%, and it is expected that within the period from now until 20-30 we will reach 22%, perhaps even 25% within the period from 20-35. This, of course, requires significant investments in the industrial sector.

More to come

The GCC-UK FTA should not be underestimated. It’s a big deal - and there is more to come. The GCC’s six-country membership means that agreements take time to reach, and require willingness to compromise on both sides. As GCC Secretary General Jasem Mohamed Albudaiwi said this week:

This moment was not born of chance, but rather is the culmination of eight years of tireless effort, unwavering political will, and steadfast belief shared by the six member states of the Cooperation Council and the United Kingdom alike, that deepening economic integration between our peoples and economies is indispensable.

As Albudaiwi noted, it’s the ‘the beginning of a new phase’ - this is only the conclusion of negotiations, and the deal still needs to be ratified. That will take time.

But the benefits can be expected to be considerable - and they will go above and beyond the direct benefits in liberalisation for goods exports between the GCC and UK. That’s because simply having a deal in place will reinforce the UK as a ‘preferred partner’ for Gulf companies who will feel they have their governments’ blessing to expand business ties.

The bigger picture

After previously being quite conservative, the Gulf states are now expanding their free trade ambitions at a breakneck pace. The developments are almost too numerous to list, because they encompass deals done both at the GCC and individual country bilateral levels. But this infographic from the International Institute for Strategic Studies (IISS) from September 2025 does a pretty good job of summing up progress - even though there is now so much going on that it’s already out of date!

As the graphic shows on the right, the elephant in the room comes with the sizeable number of bilateral agreements - the Comprehensive Economic Partnership Agreements, or CEPAS - being racked up by the UAE. The IISS’s Dr Hasan Alhasan notes in the accompanying article:

Securing preferential trading agreements, including FTAs and CEPAs, is a core component of the GCC states’ strategy. Such agreements help ensure stable and predictable market access even as much of the rest of the world erects higher barriers to trade for protectionist or national-security purposes, providing the GCC with an advantage. The UAE network of CEPA partners has grown the most rapidly among all the GCC members since its launch in 2021, with negotiations typically concluding within six months.

These UAE bilateral agreements have all been concluded since 2021, and they have propelled the GCC into taking action of its own. New Zealand, a trade minnow compared with the UK but a useful small test case for the Gulf, has been a big beneficiary - with negotiations on both a CEPA and GCC FTA concluded back in 2024.

The New Zealand-UAE CEPA is already in force, but the NZ-GCC FTA is awaiting ratification. Interestingly, the NZ-GCC FTA resurfaced just this week in a readout from a call between New Zealand foreign minister Winston Peters and his Saudi counterpart Prince Faisal bin Farhan Al Saud, which said Peters 'expressed New Zealand’s desire to deepen NZ’s economic relationship with Saudi Arabia by the early entry into force of the Gulf Cooperation Council - NZ Free Trade Agreement’.

Turning crisis into opportunity

What is clear in GCC trade dynamics is that momentum is shifting eastwards to Asia - here’s another interesting snippet from the Middle East Council on Global Affairs report above:

China, India, Japan, and Korea are the top partners of Saudi Arabia and Qatar, while the UAE favors India, China, Japan, and Iran. The only Western country featuring as a major export destination is the U.S., ranking sixth for Saudi Arabia and third and fourth for Bahrain and Oman, respectively.

In every crisis there is opportunity, and just as the recovery from the Covid-19 pandemic inspired the UAE’s CEPAs, it could well be that renewed solidarity between the GCC amidst the Iran war propels a new wave of enthusiasm for progressing or finalising some of the FTA negotiations that are underway.

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The Gulf states are becoming a more powerful voice.

That seems to be the takeaway from Donald Trump’s decision to hold off on a renewed attack on Iran at the last minute after calls with the leaders of Qatar, Saudi Arabia and the UAE.

Of the Gulf leaders, Trump posted: “in their opinion, as Great Leaders and Allies, a Deal will be made, which will be very acceptable to the United States of America, as well as all Countries in the Middle East, and beyond”.

As always, it’s worth taking Trump’s claims with some scepticism, especially as The Wall Street Journal reported: ‘several Gulf officials from some of the countries Trump mentioned said they were not aware of the imminent plan to attack Iran he described’. And as the New York Times pointed out, this could all be another exercise in deception:

Some U.S. officials cautioned that Mr. Trump’s public pronouncement could be a form of misdirection and that he could still move ahead with strikes. The officials noted that in February, American and Iranian officials planned a round of negotiations just days before the United States and Israel started the war.

A big contrast

Trump has made so many contradictory statements about the war that it’s hard to keep track of what page we’re currently on. But even if Trump is exaggerating his contact with the three Gulf leaders - Qatari Emir Sheikh Tamim bin Hamad Al Thani, Saudi Crown Prince Mohammed bin Salman and UAE President Sheikh Mohamed bin Zayed - the mere fact that Trump is now citing them directly as part of his strategy shows how they have gained in stature over the course of the war.

It’s a stark contrast to the beginning of the conflict, when the Gulf states seemed to be treated as an afterthought. The eve of the war saw Badr Albusaidi, the Omani foreign minister, making a futile trip to Washington to try and talk US officials out of the attack. Albusaidi even took the extraordinary step of going on US television to spell out the contours of a genuinely impressive potential agreement with Iran, saying ‘a peace deal is within our reach’. As we know, Albusaidi was subsequently ignored - and it seemed that at the time Trump was only willing to listen to Israeli Prime Minister Benjamin Netanyahu.

This point was well made by Mohammed Saleh Sedghian in a panel discussion on Al Jazeera Arabic on Tuesday:

Let me point out that at the beginning of the war, when he wanted to launch a war on Iran, he didn't consult the Gulf Cooperation Council countries either. He only consulted Netanyahu, and they were coordinating with Netanyahu, but he didn't coordinate with any country in the region, neither the Gulf countries nor the Arab countries.

FT: Saudi-Iran non-aggression pact?

Nearly three months on, there remains a deep sense of anger in the Gulf about Iran’s attacks against them. But there is also serious thinking going on about long-term strategy for the future of relations with Tehran.

The debate has accelerated over the past week or so, after the Financial Times reported last Thursday on a potential long-term truce with Iran:

Saudi Arabia has discussed the idea of a non-aggression pact between Middle East states and Iran as part of talks with allies on how to manage regional tensions once the US-Israeli war with the Islamic republic ends, diplomats said. Riyadh is eyeing as a potential model the 1970s Helsinki Process that eased tensions in Europe during the cold war, said two western diplomats, as the region anticipates a postwar Iran that is weakened but still poses a threat to its neighbours. They added that the non-aggression pact was among various ideas being considered.

This passage has three points worth drawing out a little. First, the sources are Western, rather than Gulf diplomats. Second, it seems to be a Saudi proposal. And third, it’s only one of a number of ideas being considered. Still, given Trump’s announcement, it’s certainly possible that some kind of grand bargain is in the works.

UAE-Saudi differences

More broadly, the big narrative over the past few months (or even longer) has been of a strategic rift between Saudi Arabia and the UAE. The theory goes that Riyadh is lining up a partnership with Pakistan, Turkey and Egypt, while the UAE is doubling down on its partnerships with India and Israel.

Middle East specialist site Al-Monitor’s Francesco Schiavi chronicled the latest instalment in this evolving story. Schiavi first cites Reuters reporting on an apparent upgrade to the Pakistan-Saudi Arabia defence pact that has seen more Pakistani troops deployed to the Kingdom:

The deployment includes around 16 JF-17 fighters — jointly produced by Pakistan and China — alongside 8,000 Pakistani troops, adding to those already stationed in the kingdom under earlier agreements. Reportedly, the pact could eventually allow for up to 80,000 Pakistani troops to support Saudi border security if required.

Al-Monitor then juxtaposes this development with India-UAE ties that are flourishing:

At the same time, the UAE appears to be pursuing a different strategic trajectory. As Adam Lucente reports for Al-Monitor, during Indian Prime Minister Narendra Modi’s visit to Abu Dhabi last week, the UAE and India agreed on a new strategic defense partnership framework covering maritime security, cyber defense, secure communications, interoperability, joint training and defense-industrial cooperation.

The agreements were accompanied by $5 billion in Emirati investments into India, new energy cooperation deals and discussions on Hormuz security and maritime stability. In January, New Delhi and Abu Dhabi had already signed a $3 billion LNG agreement.

Intra-GCC solidarity

These divergences are real, although we also need to be wary of over-simplification and zero-sum narratives. To this end, it’s worth noting that the Saudi/Qatar/UAE triumvirate’s joint call to Trump also shows that intra-GCC solidarity has grown as a result of the war. The wider alliance moves should not be underplayed, but nor should they be overstated.

To this end, Kuwaiti political analyst Dr. Ayed Al-Mannaa noted in a discussion on Al Arabiya how Gulf solidarity had grown as a result of the war:

The truth is, the GCC countries— Saudi Arabia, Qatar, and the UAE— have proven, perhaps for the thousandth time, that they are working for peace, security, and stability in this region, and that they do not exclude Iran from this. On the contrary, they are now trying to save Iran from this predicament it is suffering from. No one doubts that the United States and Israel attacked, but also, no one should doubt that Iran struck the GCC countries, from Kuwait in the north to Oman in the south, with at least five times the force with which Israel struck. Yet, we find these countries, with their values, morals, and humanity, taking the initiative to ask their American friend not to launch a war and to give a chance for a final opportunity.

A new ‘quadrilateral’ - Saudi Arabia, Egypt, Pakistan and Türkiye

Still, there’s a lot of useful commentary coming out about the new groupings with third countries outside the Gulf region, from both Gulf and Western analysts. For example, earlier this month, Dr. Hasan Alhasan - a former senior analyst for the Crown Prince of Bahrain - wrote a very interesting piece for the International Institute for Strategic Studies (IISS) titled ‘A new Middle Eastern quadrilateral is taking shape’, focusing on the new grouping binding Saudi Arabia with Egypt, Pakistan and Türkiye.

Despite the headline, the article is very measured, spelling out the potential risks and rewards of the new arrangement:

From the perspective of these four regional powers, the new quadrilateral is better positioned to fill the void, serving as a rapid-reaction regional steering committee composed of the four states to coordinate responses to regional crises. As US allies or partners, the four countries could also work together to sway President Donald Trump’s second administration over key policy issues, including, most pressingly, to agree to a ceasefire deal with Iran. They have already shown an ability to exercise a degree of influence over Trump by encouraging him to put a stop to Israel’s military campaign in Gaza in late 2025 and to revoke sanctions on Syria.

A new order in the Gulf?

And finally, Gulf expert David Roberts from King’s College in London this week wrote a muscular piece in the influential Foreign Affairs called ‘A New Order for the Gulf: The Region Must Build Its Own Security, Not Buy It’. Roberts puts the case for the Gulf states to take charge of their own fortunes and cut a grand bargain with Iran. The full article is worth reading, but here’s the Roberts’ key point - the Gulf needs to stop relying on outside protection from the US and build its own sovereign capabilities:

The way out requires abandoning the assumption that has governed Gulf security for a century: that security is a commodity to be brokered rather than a capability to be built. This requires the Gulf states to deal with Iran themselves rather than wait for Washington to do it for them. A settlement between the Gulf monarchies and Iran should take the form of a treaty in which a phased U.S. military withdrawal from its Gulf bases serves as the cornerstone of a comprehensive regional bargain. The U.S. withdrawal would not be a retreat compelled by Iranian aggression but a calculated move. Iran has wanted the United States to leave the Gulf for decades. To achieve this, along with phased relief from international sanctions, Tehran would offer wide-ranging concessions: constraints on its nuclear and missile programs, a halt to its belligerence, and moves toward diplomatic normalization with its neighbors. Such a systemic reset of intra-Gulf relations would mark the start of a new regional order—the Gulf’s Westphalian moment.

There’s a lot to digest from all of these pieces, and I’m still thinking through the implications. But what is clear is that the Iran war has precipitated or accelerated a strategic rethink in the Gulf.

That said, nothing is settled yet - and I think we need to be very careful of over-simplistic interpretations.

There is far more that unites the Gulf than divides it.

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The UAE responded angrily to a drone attack on its Barakah nuclear power plant on Sunday, which reportedly hit an electrical generator outside the facility and led to the plant relying on backup diesel generators. The Barakah plant came online in 2020 and generates up to 25% of the UAE’s energy needs. It was built by a South Korean company, as I coincidentally covered on Gulf States Insights on Friday.

Dr. Anwar Gargash, the UAE’s former Minister of State for Foreign Affairs and now a key diplomatic advisor who has been particularly prominent during the current war, hit back quickly and strongly on X. Gargash’s condemnation made it clear that the Abu Dhabi believed either Iran or its proxies were behind the attack:

The terrorist targeting of the Barakah civilian nuclear power plant, whether carried out by the principal perpetrator or through one of its agents, represents a dangerous escalation and a dark scene that violates all international laws and norms, in criminal disregard for the lives of civilians in the UAE and its surroundings.

Dr. Gargash avoided pointing to a specific perpetrator - I’ll come to the significance of this a bit later on.

Official condemnation

By the end of the day, the condemnation from the UAE had been reinforced by official statements from across the Gulf and the wider Arab world, including fellow Gulf Cooperation Council (GCC) members Bahrain, Kuwait, Qatar and Saudi Arabia , along with Egypt, Jordan and Syria. The attack was also condemned by the Secretary-General of the Arab League, Ahmed Aboul Gheit, and GCC Secretary-General H.E. Jasem Mohamed AlBudaiwi.

Some of the strongest solidarity came from Saudi Arabia. The Saudi Press Agency reported the Saudi foreign ministry’s ‘condemnation in the strongest terms’ and ‘categorical rejection of these blatant attacks’. Saudi Arabia’s state-aligned Arab News even headlined the response as ‘Saudi Arabia leads Arab condemnation of drone attack near Abu Dhabi nuclear power plant’.

Saudi Arabia itself said it ‘intercepted and destroyed’ three incoming drones on Sunday, which it said came from Iraq. In turn, the UAE expressed its ‘full solidarity’ with Saudi Arabia, condemning the drone intrusions as ‘violation of the sovereignty of the brotherly Kingdom of Saudi Arabia and a threat to its security and stability’.

Iran, Yemen or Iraq?

At this stage, it seems unlikely that the drone attacks against the Barakah nuclear power plant came directly from Iran, given Barakah’s location in the UAE’s far-west. Voice of Emirates pointed to the location of the significance of the plant’s location, near the UAE’s border with Saudi Arabia.

The Barakah Nuclear Energy Plant is located in the Al Dhafra region of Abu Dhabi and overlooks the Arabian Gulf. It lies west of the capital and is considered one of the country’s most sensitive civilian facilities.

Its location is important for understanding the route. Barakah is not in central UAE or on the eastern coast. It is in western Abu Dhabi, close to the Saudi border and to long desert routes extending toward Yemen and Iraq.

Voice of Emirates noted that the Barakah plant had appeared in ‘Houthi threat messaging’ as early as 2017. The vulnerability was vividly demonstrated in January 2022, when a drone attack from Yemen hit the Mussaffah industrial area and the areas near Abu Dhabi International Airport - an incident which was keenly felt in the UAE and was one of the biggest security threats that had been faced by Abu Dhabi until the current conflict with Iran.

However, Voice of Emirates also notes that Iraq-based groups had emerged as a source of threats to the UAE at around the same time, with the difference that the drones had been intercepted:

On February 2, 2022, the UAE announced the interception of three drones that entered the country’s airspace, while an Iraqi group known as “Alwiyat al-Waad al-Haq” claimed responsibility, saying it had launched drones toward vital facilities in Abu Dhabi.

Ultimately, the most likely origin for Sunday’s drones is Iraq, and not just because of Saudi Arabia’s separate interception of drones from there. Reuters last week reported that the Saudi military bombed Shi’ite militia groups in Iraq in early April, with similar retailiation also coming from Kuwaiti territory. The same report also said ‘hundreds of the drones that targeted the Gulf emanated from Iraq’, according to multiple sources.

What Gulf analysts are saying

It’s been interesting to watch how Gulf TV outlets have reported on the attack against the nuclear power plant.

From the UAE itself, Sky News Arabia quickly put Abdulaziz Al Shehhi from Abu Dhabi thinktank Trends on the air, who sounded quite an ominous warning:

The UAE possesses the capability and reserves the right to respond. It has the capacity for deterrence, protection, and the ability to continue the functioning of its essential institutions. But there must be international action commensurate with the disregard and contempt for international law shown by Iran and its proxies in the region.

The UAE has been the most hawkish of the Gulf states in the war to date, and this view very much aligns with this official position. Still, Al Shehhi also put across the idea that the attack represented a certain level of desperation and isolation from the Iranian side amidst increased international solidarity. Al Shehhi pointed to a planned visit to China this week by Vladimir Putin, as well as to a recent phone call between UAE President Sheikh Mohamed bin Zayed and the Russian President.

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The view from Qatar

Meanwhile, Qatari outlet Al Araby (not to be confused with Al Arabiya, a Saudi outlet now fully based in Riyadh) broadcast interesting early comment from Mohammed Al Samadi, a retired Jordanian major general who is now a military analyst for the channel.

Al-Samadi said ‘the message behind this event is more dangerous than the damage itself’, adding that ‘this is a message that leads to taking many precautions. It's as if this message is telling the UAE and the United States that in the event of any escalation, there will be a corresponding escalation, because there were threats to target bridges and power stations by the United States and Israel’.

The interview with Al-Samadi video already has nearly 500,000 views on YouTube, which goes to show how influential these Arabic news channels can be in influencing public opinion. Al-Samadi put the view that the attack showed Iran retained significant capabilities:

Yes, it has suffered destruction: 13,000 targets were attacked by the United States, and 10,800 targets were attacked by Israel, which dropped 18,000 bombs. But we are talking about a large geographical area and the widespread deployment of Iranian missiles, whether ballistic, cruise, or sonar, in addition to the Shahed-136 drones. The American narrative that these capabilities have been neutralized and destroyed cannot be trusted. In my opinion, Iran is capable of threatening neighboring countries.

Overall, the analysis from Al-Samadi by no means underplayed the severity of the attack on the Barakah nuclear power plant - if anything, it emphasised it. But by doing so, Al-Samadi also reflected Qatar’s mediation role in the current conflict that is seeking restraint and diplomacy, rather than further escalation, along the lines of ‘be careful what you wish for’.

And we also need to consider the wider context: the new strikes on the Gulf came against the backdrop of a new threat from Donald Trump, who posted ‘For Iran, the Clock is Ticking, and they better get moving, FAST, or there won’t be anything left of them’.

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Another day, another Comprehensive Economic Partnership Agreement (CEPA).

A new trade deal between the United Arab Emirates and South Korea came into force last week - making it the 17th such agreement to take effect. The ‘CEPA’ complements a wider free trade agreement between South Korea and the six-country Gulf Cooperation Council (GCC) that was concluded back in December 2023.

This particular CEPA is especially interesting in light of the Iran war - let’s take a look at what it’s all about.

Energy and space co-operation

A recent article in Emirati Arabic-language newspaper Al Bayan provides some useful specific context for the UAE’s relations with South Korea. Non-oil trade between the two countries is booming, up 11% year-on-year and more than 40% since 2021. But more broadly, there are four focus areas for bilateral co-operation, listed as ‘energy, investment, defence and nuclear energy’.

Even long before the CEPA, the energy component in Abu Dhabi’s relations with Seoul had clearly proven its worth: the Korea Electric Power Corporation (KEPCO) was awarded a $US20 billion contract to lead a consortium to build the UAE’s first nuclear power plant back in 2009. Space is now also very much on the agenda, with Korean company behind the building of UAE radar satellite ‘Etihad-SAT’ in 2025.

Defence, dear boy, defence

But beyond energy, it’s clear that a big part of the UAE-South Korea relationship is now defence-related. Just before the war began, Abu Dhabi and Seoul signed a memorandum of understanding (MOU) aimed at furthering defence cooperation that was said to be worth up to $US35 billion.

And just last week, Gulf News reported on the signing of another defence-related MOU, this time between the UAE’s Tawazun Council for Defence Enablement and South Korea’s LIG Defence and Aerospace (LIG D&A), with the aim being to establish a defence manufacturing hub in the UAE focused on ‘research and development, manufacturing, maintenance support and supply chain integration’.

Crucial wartime partnership

This isn’t just a theoretical exercise.

The current conflict with Iran has impressively demonstrated the value of South Korea to the UAE’s defence. In January 2022, the UAE ordered 10 Cheongung-II air defence systems from LIG at a cost of $US3.5 billion. Two batteries had since entered into service, which reportedly had a 96% interception success rate in the current conflict with Iran.

Indeed, the performance was apparently so impressive that a third battery was rushed to the UAE during the conflict in March, along with 30 interceptor missiles from South Korea’s domestic stocks. The Cheongung-II systems from South Korea were successfully used in conjunction with the more well-known Patriot and THAAD systems from US suppliers Raytheon and Lockheed Martin, as explained in a March briefing by the International Institute for Strategic Studies. One of the big advantages of the Cheongung-II system is cost: the interceptor missiles used are far cheaper than Patriot technology.

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Defence and the CEPA

But is this economic co-operation, or a security partnership? Well, it’s actually both. As the CEPA acronym suggests, the idea behind the CEPA format is to take a broader view of economic co-operation. CEPAs are about investment as much as bilateral trade, with the aim of ensuring a win-win deal for both sides. And it’s clear that the UAE views the defence partnership with South Korea through both an economic and security lens, as explained by the Al Bayan article:

In 2023, the UAE announced the commitment of its sovereign investment bodies to invest $30 billion in strategic sectors in the Republic of Korea, and during the eighth session of their Joint Economic Committee, the two countries agreed to expand and diversify the umbrella of economic cooperation in 11 strategic sectors, stimulate mutual investments in them, and continue to expand future-oriented cooperation in all fields of defence through the Joint Supreme Military Committee, which is the regular advisory body at the ministerial level. and to participate more closely on key issues in this regard, including through consultations between the Ministries of Foreign Affairs and Defence (2+2).

A pivot to Asia?

More broadly, since 2021, the UAE has been racking up bilateral CEPAs with countries around the world - and particularly in the Indo-Pacific. Earlier this year, a CEPA with Vietnam also came into force, while deals have also been concluded or are already in force with Australia, Cambodia, India, Indonesia, Malaysia, New Zealand and the Philippines.

What’s behind it all? One explanation is that it’s part of a strategy by the UAE to diversify its international partnerships and ‘look East’.

I’ll explore this angle in more detail in a future post.

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Saudi Aramco, the world’s biggest oil company, had good news and bad news this week.

At least for shareholders, the good news came on Sunday, when profits of $33.6 billion were announced for the first quarter, a remarkable 26% year-on-year increase that surpassed analysts’ expectations by a whopping 22%. That’s an impressive achievement, given that a war was raging in the Gulf for the entire month of March. Aramco’s stock price reacted accordingly, rising to $27.82 on Tuesday, near its 12-month high.

Crucial East-West pipeline

Aramco’s success came despite the closure of the Strait of Hormuz leading to a cumulative supply loss of more than 1.4 billion barrels from late February to mid-May. A graphic in Aramco’s Q1 results package shows Saudi Arabia’s 1200 kilometre-long, East-West pipeline has been crucial to Aramco’s resilience.

The pipeline has served as a logistics lifeline, allowing Aramco to transport up to 7 million barrels of oil per day from Saudi Arabia’s main oil producing region in Eastern Province to relatively safe ports on the Red Sea coast via the Yanbu terminal. From there, there are various shipping options, including the Sumed pipeline that crosses Egypt from the Gulf of Suez to the Mediterranean.

Lower volumes, higher prices

None of this is perfect or ideal for Saudi Arabia’s main Asian markets, but the alternative infrastructure has proven to be a blessing nonetheless. Aramco has clearly benefited from higher oil prices and distorted demand patterns, which offset lower volumes able to be pumped in the last month of Q1.

According to Bloomberg calculations, Aramco was pumping around 10 million barrels before the war, but only 7.4 million barrels a day during March and April. Around 2 million of these went to Aramco refineries on the Red Sea coast to be turned into diesel and jet fuel that could then be sold with even higher margins.

This left roughly 5 million barrels of raw crude oil each day for export - but still at premium prices. The Financial Times reported that Aramco commanded a stunning $19.50 premium over Brent pricing for each barrel of Arab Light crude delivered to Asian buyers in May. For context, since at least the year 2000, this premium had never previously been above the $10 mark. European buyers faced an even higher surcharge, of $24-$30 - a reflection of the additional transport costs and Saudi Arabia’s pricing power.

The Saudi perspective

One prominent Saudi analyst, the former vice president of the economy and energy committee of the Shura Council, Dr. Fahd bin Jumaa was surprisingly outspoken on the situation in an Arabic-language TV interview on Al Arabiya Business. He argued the US was winning out of the situation, while Gulf states were suffering the consequences:

The United States is not significantly affected by what happens in the Strait of Hormuz. American production continues…The US is experiencing profits it hasn't seen in years, so the primary victims are the Gulf states, which can't export their oil through the Strait of Hormuz. This damage then extends to global markets and the global economy.

Still, as Dr. Jumaa noted ‘thankfully, the Kingdom [of Saudi Arabia] is able to export oil and invest more’ - signalling that what lies ahead is the building of more pipelines with greater capacities, given the tremendous success of the East-West pipeline over recent months.

However, while Saudi Arabia undoubtedly has the financial wherewithal to invest in new backup options, Dr. Jumaa was clear that building this infrastructure to ward off geopolitical vulnerability will take time: ‘increasing production capacity through pipelines within days is not possible. This takes a long time, many months, and requires significant investment’.

Aramco CEO sounds the alarm

Although Aramco’s financial success and resilience during the conflict has been remarkable, a day after the results were published, Aramco CEO Amin Nasser decided to sound the alarm bell in unusually stark terms.

At a press conference, Nasser said the world could soon face ‘critically low levels’ of oil stocks and had been relying on oil inventories to artificially cushion prices. He warned ‘the longer the supply disruptions continue, even for another few more weeks, it is going to take much longer for oil market to rebalance and stabilise’.

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Have oil reserve stocks fed complacency?

Dr. Fahd bin Jumaa, the former senior Saudi official, struck a similar tone in his Al Arabiya Business TV interview. Like Nasser, he pointed to the selling-down of strategic reserves as cushioning the impact of the crisis over recent months - noting that Saudi Arabia itself had been selling off stocks located in China and elsewhere: ‘there are Saudi oil reserves in China and other countries. These reserves can be exploited and sold to generate high profits during this period of supply disruption’.

Asked what the ‘worst-case scenario’ would be, Dr. Jumaa said that it would be the crisis continuing for one or two more months. In that case, he predicted Brent oil prices could reach ‘$120, $130, $140…it might even exceed that depending on the damage, the extent of the shutdown, and its duration. In any case, this year oil prices will be very high and will not return to the $70 price point some banks mention by the end of the year’.

Why Saudi Arabia’s warning needs to be listened to

The comments from both the Aramco CEO and a well-respected former senior Saudi government figure are significant because they reflect the views of the world’s biggest oil exporting country - Saudi Arabia.

It’s a bleak, but blunt warning - find a lasting political solution, or the world will have to face the consequences. And while Saudi Aramco showed surprising financial resilience in the first quarter of 2026, the limited capacity of the East-West pipeline (which itself remains vulnerable to attack, after being struck during the war) will also put a ceiling on Aramco’s future revenues, despite any temporary benefits from higher prices.

A global economic slowdown as a result of the higher oil prices is also likely to result - and the difficulty of paying a premium for the Kingdom’s high-quality oil is already showing up in lower volumes of Saudi crude being shipped to China and Europe. Moreover, while the conflict continues, Saudi Arabia’s non-oil economy, including its landmark Vision 2030 projects, are also likely to suffer.

Ultimately, notwithstanding the potential for new pipelines to be built in the future, the only sustainable solution is a political solution to the war - and the reopening of the Strait of Hormuz.

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The big news over the weekend was that Qatari Prime Minister and Foreign MinisterSheikh Mohammed bin Abdulrahman Al Thani has been involved in backchannel talks with Iran, according to sources cited by Axios reporter Barak Ravid. The story was later confirmed by an official statement from Qatar’s foreign ministry, which reported:

‘They also discussed the latest developments in the region, as well as the Pakistani mediation aimed at reducing escalation that contributes to enhancing security and stability in the region. HE Prime Minister and Minister of Foreign Affairs expressed the need for all parties to respond to the ongoing mediation efforts, which would open the way for addressing the root causes of the crisis through peaceful means and dialogue, and lead to reaching a comprehensive agreement that achieves sustainable peace in the region.’

Axios reported Sheikh Mohammed flew to Florida on Saturday to meet Secretary of State Marco Rubio and Trump’s special envoy Steve Witkoff, after a stop in Washington DC to meet Vice President J.D. Vance on Friday. After that meeting with Vance, Ravid reported that Qatar has been involved in mediation efforts for at least ‘several weeks’ and is one of at least three countries involved in backchannel efforts, alongside Pakistan, which is functioning as the public-facing mediator.

From my perspective, the big questions are why Qatar is getting involved now, how serious are the efforts and what the other Gulf states make of it.

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Qatar’s initial reluctance

According to another report from the Times of Israel citing Ravid (who is also Washington correspondent for Israel’s Channel 12), Qatar was ‘reluctant to get involved, but eventually acceded after weeks of pressure’ from the United States.

Why reluctant? Of course, Qatar has considerable experience in mediation efforts, including for the Israel-Hamas war in Gaza and the June 2025 ‘12 Day War’ between Israel, the US and Iran. But during the current conflict, Qatar has been subjected to massive attacks by Iran, including the strike on the Ras Laffan liquefied natural gas (LNG) production facility on 18 March that reportedly took out 17% of Qatar’s LNG export capacity for up to five years, causing $US20 billion in annual revenue losses.

It would be entirely understandable if Doha were feeling more than a little bruised and not keen at all on leading talks with Iran right now.

Saudi-Pakistan ties

However, Qatar - and particularly the UAE - may be wary of leaving mediation up to Pakistan, which entered into a defence alliance with Saudi Arabia in September 2025. I’ll cover this more in another post, but this pact seems to be going from strength to strength. Indeed, the Pakistani Chief of Defence forces who has also been leading the US-Iran mediation efforts - Field Marshal Syed Asim Munir - described the Saudi-Pakistani alliance as a ‘major milestone’ over the weekend. Relations between Pakistan and the UAE appear to have deteriorated somewhat since the Saudi-Pakistan deal was signed, and particularly during the war.

Nothing ‘about the Gulf, without the Gulf’

Moreover, if a deal is going to be done anyway, why not help to shape it? From Doha’s perspective, leaving mediation up to third countries outside the region such as Pakistan could risk a deal being done that is less favourable to Qatari or GCC interests. For example, US bases and troop numbers are known negotiation targets for Tehran. While the US bases in the Gulf were major targets during hostilities in March and early April, the Gulf states would not be keen for compromises that could see consolidation or drawdowns. That’s just one reason why Doha might be willing to be involved. And the longer a ceasefire is in place, albeit without a sustainable peace deal, the more space there probably is for diplomatic engagement.

Qatar is serious

While Sheikh Mohammed’s visit to Florida was initially reported only by Axios, the official confirmation by Qatar means it’s now a matter of public record. What’s more, the Qatari foreign ministry has also published details of a string of phone calls by the PM since his US visit. These include two conversations with the Saudi foreign minister Prince Faisal bin Farhan Al Saud (Axios says the first call even took place while Sheikh Mohammed was in Florida), Pakistani Prime Minister Shehbaz Sharif and Egyptian foreign minister Dr. Badr Abdelatty.

And on Sunday, the Qatari PM spoke to Iran’s foreign minister Abbas Araghchi, with Qatar’s read-out including the following summary of Doha’s position:

HE Prime Minister and Minister of Foreign Affairs affirmed the State of Qatar's full support for mediation efforts aimed at resolving the crisis through peaceful means, stressing the need for all parties to respond to these efforts in a way that contributes to creating the appropriate conditions for progress in negotiations and limits the possibilities of renewed escalation.

What do other Gulf states think?

It’s probably still too early to know what all the different Gulf states think in detail about Qatar’s role, but we do have an early indication of the UAE’s position, thanks to a post in Arabic on X by Dr. Ebtesam Al Ketbi, the influential President of the Emirates Policy Center whose views can be seen as an informal reflection of Emirati foreign policy. She wrote:

Qatar has a long history in regional and international mediation, and has accumulated genuine expertise over the past years in dealing with complex and intertwined dossiers. For this reason, Doha appears to be the most capable party to manage this dossier with wisdom and flexibility, particularly given its possession of effective communication channels and negotiation expertise that has proven successful in more than one crisis. For mediation is not merely a political presence, but rather expertise, trust, and the ability to bridge distances between adversaries—elements that Qatar has clearly established over the past years.

This bodes well for the UAE’s formal blessing of Qatar’s involvement. Meanwhile, the two calls between Qatar’s Sheikh Mohammed and the Saudi foreign minister show that things are being lined up nicely on that front as well, despite the ties between Riyadh and Islamabad.

This is a complex war and there is certainly room for multiple countries to be involved in diplomatic efforts. Let’s see how Qatar’s role unfolds.

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If you thought the Saudi Public Investment Fund (PIF) was retrenching - think again.

The PIF, Saudi Arabia’s massive sovereign wealth fund now worth around US$1 trillion, is opening a new office in Shanghai, according to a report from Bloomberg this week.

According to the story, the aim of the new office in China’s main commercial hub is two-fold. For one, it will allow the PIF to find new investment opportunities in China, but the aim will also be to facilitate Chinese investments in Saudi Arabia.

Here’s a relevant snippet from the Bloomberg report (which is based on informed sources rather than an official PIF statement):

The Shanghai office was set up to enhance the PIF’s ability to do outbound deals in China, according to one of the people familiar with the matter. While the fund will continue to scout for local opportunities, officials are now keen to also draw investments from Chinese companies into Saudi Arabia, the person said.

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Reconfiguration rather than retrenchment

At first glance, this expansion in Asia might seem surprising. The recent PIF exit from its $US5 billion investment in LIV golf, combined with earlier stories on changes to The Line project - and the impact from the ongoing conflict in the Middle East - may have created the perception that the PIF was in retrenchment mode and was becoming a more conservative, domestic-focused vehicle.

Moreover, under the PIF’s new 2026-2030 strategy, announced last month, the PIF said it would reduce its international investments to around 20 per cent of its portfolio, down from the previous 30 per cent level.

However, there was more to this headline figure, as explained by Yasir Al-Rumayyan, the Governor of the PIF, in an interview with Al Arabiya Business, who pointed out that while the weightings may change ‘this does not mean that we reduce the absolute value of investments’.

Overall, I think what is changing is more the types of investments made by the PIF, rather than its overall willingness to invest abroad (and seek inbound investment in Saudi Arabia).

Under the new 2026-30 strategy, the PIF plans to focus on six ‘ecosystems’, which a statement listed as ‘Tourism, Travel & Entertainment; Urban Development & Livability; Advanced Manufacturing & Innovation; Industrials & Logistics; Clean Energy, Water & Renewables Infrastructure; and NEOM’.

While ‘Advanced Manufacturing & Innovation’ is buried in the middle here, it’s probably one of the most significant categories, because this is really all about AI.

The AI dimension

Indeed, Al-Rumayyan himself pointed out in the interview with Al Arabiya that this is more about a pivot when it comes to the types of investments made by the PIF, taking into account the new opportunities available with AI:

When we made the strategy from 21 to 25 there was no such thing as artificial intelligence in the way we see it today, so we moved some priorities and repositioned the investment objectives to invest more in artificial intelligence infrastructure and in artificial intelligence companies, whether a company like Humain inside the Kingdom or foreign investments in artificial intelligence everywhere in the world, from America to France and Europe to Asia. So we must always, according to the new priorities that arise, reposition the investment and the investment objectives.

Humain is a new Saudi company focused on AI that was launched by the PIF in 2025 which aims to build data centres across Saudi Arabia. Tareq Amin, the CEO, told CNBC last year that ‘Our ambition is very clear. We want to be the third-largest AI provider in the world, behind the United States and China’.

It remains to be seen exactly how AI shapes the nature of the PIF’s Chinese operations, but it seems like a safe bet to make that it will be a significant component of the strategy.

The bigger picture - Gulf investment in Asia

Gulf investment has traditionally focused on Europe and the United States, but it’s clear that the GCC states are now increasingly looking east and are interested in diversification across all areas, whether this involves trade, investment or even security. I certainly noticed this trend during my own recent PhD research on New Zealand’s relations with the Gulf states.

What’s more, the interest from the Gulf comes as Western entities have become more shy of investing in Asia, as geopolitical tensions have increased. A Deloitte report from October 2025 reported that ‘North American and European principal investors are scaling back operations in Asia and are becoming more opportunistic when it comes to investment’, with China ‘hit the hardest’.

Deloitte’s figures showed that even Asian sovereign wealth funds (SWFs) were reducing their investments at home, in favour of greater investment in Western interests. Filling the gap were Middle East investors - with their share of dealmaking by value increasing from 17% in 2019 to 39% in 2024.

Here’s a particularly relevant segment from the Deloitte report:

The number and value of Middle Eastern principal investors' direct private investments in Asia, based on Deloitte's analysis, have more than doubled, from 16 deals worth US$5.8 billion in 2019 to 43 deals worth US$18.6 billion in 2024. This shows that Middle Eastern principal investors are decisively increasing their activities in Asia, perhaps capitalizing on others' retreat from the region.

What about the UAE?

It’s not just Saudi Arabia that’s becoming more interested in Asia. The United Arab Emirates (UAE) has pursued a series of Comprehensive Economic Partnership Agreements (or CEPAs), since 2021. The latest CEPA, with South Korea, came into effect just this week - the 17th such bilateral deal.

Non-oil trade between the UAE and China went past the $US100 billion mark for the first time in 2025. And in 2024, one of the UAE’s biggest sovereign wealth funds, Mubadala, pledged to double its Asia investments to about 25% by 2030. A report last year suggested the UAE was considering combining its SWF efforts in China by L’imad Holding Co and Mubadala into a single, united vehicle, to avoid direct competition between UAE entities.

Hello Shanghai

The PIF’s expansion in China shows how the fund’s international strategy is evolving. The new Shanghai office will certainly usefully complement the existing PIF presence in Beijing, which is closer to the Chinese government.

As the Bloomberg report suggests, the aim of the new Shanghai office is as much about bringing Chinese investment in Saudi Arabia as boosting Saudi investment in China itself.

Watch this space.

Necessity is the mother of invention, so it’s not surprising to see increased interest in greater integration of Gulf transport networks during the Iran conflict – with plenty of ideas being put forward to bypass the Strait of Hormuz chokepoint.

Another sign of this came during last week’s Gulf Cooperation Council (GCC) 19^th consultative meeting in Jeddah. The summit’s media statement declared the ‘need to expedite the completion of the requirements necessary to realise all joint GCC projects, including transport and logistics services, while accelerating the implementation of the GCC railway project’.

GCC rail – more progress than you think

The GCC rail project was originally announced in 2009, with a completion date of 2018. That target has obviously come and gone, and the new goal is 2030. So you might argue that the statement is just more talk – but in fact, there has been significant progress on rail networks across the Gulf over the past decade or so.

This has mostly been at the domestic level, but the GCC rail project was always going to be about connecting various national projects.

For example, in Saudi Arabia, a new 2,750 km north-south freight line runs between Riyadh and the Hazm al-Jalamid phosphate mine, with a similar passenger route also operating to Al Haditha near the Jordanian border. These connect with other lines as far as Dammam, in the east. There is also the 450-km high-speed Haramain line connecting Mecca, Jeddah (including the crucial airport) and Medina that opened in 2018. This week, seat capacity of more than 2.2 million for the upcoming Hajj season was announced by Saudi Arabia Railways.

In the neighbouring UAE, the 900 km-long Etihad Rail project is already largely complete. Freight services have operated since 2016 and were extended across the UAE in 2023, while passenger services are scheduled to begin later this year. The first passenger station on the network has just opened in Fujairah this week, in a ceremony overseen by H.H. Sheikh Hamad bin Mohammed Al Sharqi, Supreme Council Member and Ruler of Fujairah and H.H. Sheikh Mohammed bin Hamad bin Mohammed Al Sharqi, Crown Prince of Fujairah, according to the Emirates News Agency.

These are all impressive, real projects, either operating very successfully, or starting very soon.

Reviving the Hejaz railway

The war has also helped to accelerate plans to revive the old Hejaz railway, built between 1900-1908. As explained by Burak Elmalı in the Daily Sabah, the new plan would link Syria, Jordan and Saudi Arabia, echoing the original Hejaz railway from Ottoman times that ran from Damascus to Medina over some 1300 kilometres. A memorandum of understanding was signed in September last year, which will see Türkiye taking a leading role to assist Syria to build a missing 30-kilometre section of track, with Jordan overseeing engine operations and maintenance.

For the Gulf, the exciting part is the new connectivity the Hejaz service could provide. In late April, the Saudi Minister of Transport Saleh al-Jasser told Al Arabiya Business that a feasibility study on a connection between Saudi Arabia and Türkiye (via Jordan and Syria) will be completed by the end of 2026.

While these proposals might have gone ahead even without the war, the logistics challenges created by the current war provide enormous incentives for the Gulf to take the proposals further. The new political landscape in Syria provides additional opportunities – UAE port operator DP World recently secured operating rights at Syria’s Latakia and Tartus ports.

Suddenly, you have a potential new rail link connecting directly to the Mediterranean. Moreover, unlike the India-Middle East Economic Corridor (IMEC) which entails a link through Haifa in Israel, this link via Syria would be uncontroversial and would have the support of both Saudi Arabia and the UAE.

On the Syria aspect, it’s also worth noting that the announcement by al-Jasser coincided with a visit to the Gulf by President Ahmed al-Sharaa, who is seeking Gulf investment to provide desperately needed economic growth inside Syria. A direct rail connection with Saudi Arabia would be an enormous boost.

Cross-border services

So far, the missing link has been cross-border, intra-GCC train services, but the summit announcement last week shows this is just a matter of time. And there was progress on this front even before the outbreak of the Iran war – a Saudi-Qatar line was announced in February that will span the 785 kilometres between Riyadh and Doha. Between the UAE and Oman, there is also the 300-kilometre long Hafeet rail network that will link Abu Dhabi with the port city of Sohar on Oman’s northern coast.

The key section still missing is between Saudi Arabia and the UAE, which will also require the building of an additional domestic Saudi link to connect with existing lines. However, at a technical level, this would not be particularly difficult once political agreement has been reached.

Corridors – not ports

Of course, these railway connections will not directly provide a substitute for oil and gas transports which require pipelines, but they can still be used for carrying petrochemicals, fertiliser and other derivative products. As Saudi newsmagazine Al Majalla reported, ‘many of the projects politically referred to as “alternatives to Hormuz” are, in reality, supplementary or partial, not complete export alternatives’.

Moreover, the plans are focused on westward connections to Türkiye and onwards to Europe, rather than to the growth markets in Asia that are constrained by the immediate Strait of Hormuz closure.

Indeed, shipping companies have had to be creative during the current conflict. With the Strait of Hormuz closed, imports to the Gulf have been entering via the King Abdullah and Islamic ports near Jeddah on the Red Sea coast of Saudi Arabia, or alternatively via Omani ports, and then trucked to their final destination.

As Mohamed Ali Ibrahim, a professor of transport economics, told Asharq Business, doing so is far more expensive than the sea routes. For example, a new service from shipping company MSC will see 16,000 containers arrive at the Red Sea ports. Many of these containers will then need to be trucked (with only partial segments possible on rail) to Dammam on the east coast of Saudi Arabia, before being transshipped to ports such as Jebel Ali and Abu Dhabi.

Still, if we go back to rail, the Saudi Landbridge project to link up Jeddah and Riyadh that is currently under construction would undoubtedly make this endeavour much easier in the future.

And fundamentally, this is what all of the current plans are all about. There is no single logistics silver bullet to the problems in the Strait of Hormuz, only potential new corridors and options.