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Event Summaries
November 21, 2016

Event Summary: ‘Gulf Foreign Aid and Military Intervention in a Time of Fiscal Austerity’

by
Henry Jackson Society

By Talia Jessener

On Thursday 17th November the Henry Jackson Society were delighted to welcome Dr Karen Young, a Senior Resident Scholar at the Arab Gulf States Institute, to talk about recent changes to the power dynamic of the Gulf Region.  While not always the focus of headlines, the Gulf region has recently been gaining traction in the news. The economic boom of the last decade has allowed a more robust foreign policy to flourish, and, with it, the risk that the delicate balance of the region may be nearing a tipping point. This is because while states gained both the capacity and the desire to become more militarily dominant in the region, the recent fall in oil prices has acted as a constraint on this newfound power. This in turn has caused foreign policy to become increasingly at odds with the economic and political interests of states who are refusing to come to terms with the sudden bursting of this period of prosperity.

Young began by first outlining the trends of the Gulf States’s Foreign policy. She noted an increased willingness to engage militarily in regional conflicts, a more focused interest in international diplomacy and the idea that aid and interventions should gain more bang for the buck in terms of their political returns, a line of thought particularly followed by Qatar and the UAE. She highlighted that both regional and international changes have enabled these trends to take place. The fallout of the Arab Spring, for example, allowed new leadership, and the boom decade from 2003 allowed integration into markets and international institutions. That these states have become more active in intervening can most clearly be seen from Saudi actions in Yemen, but is also apparent from UAE military engagement in Bahrain, Libya and Syria, and the number of loans that have been given to Egypt and Syria by their neighbours.

She then went on to frame the key concern of many academics: while this decade of growth has given the Gulf States the mind-sets of regional powers, their ambition is not matched by their economic capacity. The dramatic drop in oil prices in 2014, and the fact that they are expected to remain low in the near future, has meant that the Gulf States now face large fiscal deficits that must be righted to avoid destruction. Due to diversification, not all states face a problem of the same severity: Saudi Arabia, Bahrain and Oman have been the hardest hit due to the heavy spending of the former and the low credit rating of the two latter states. However due to their more frugal spending Kuwait has managed to avoid a crisis at the same level.

The states have tried to combat this rising debt through emergency measures. Examples of this are the reducing of high paid public sector employees, the limiting of public benefits, the introduction of VAT and water and electricity subsidy reductions, and most ambitiously, Saudi’s 2030 blueprint. However, these states face problems in the implementation of these plans, not least from a society used to recent prosperity. One particular hurdle they must overcome is the cultural barrier associated with women in work, or, rather, women out of work. Only in Kuwait do women make up a significant proportion of the labour force, a factor Young was quick to point out is probably linked to their welcome into the political environment and their right to vote, something other Gulf States lack. However, in order to reduce their fiscal deficit these states must improve their employment rates, and therefore must create more jobs for women, especially in the private sector.

Ultimately, while no-one can predict the global markets, the Gulf States must find a way to limit both their spending and their level of engagement to prevent a worsening of their fiscal deficits. However, the true crux of the issue, namely, whether they will be able to curb their foreign policy ambitions in the region, remains another matter entirely, and one that, unfortunately, remains to be seen.

To see a full transcript of this event click here