Ukraine: A balancing act for the Middle East

Emad Mekay, IBA Middle East Correspondent, CairoMonday 28 March 2022

As the Ukraine conflict continues into its second month, with no immediate resolution in sight, several Middle Eastern countries increasingly find themselves having to take sides and choosing among security, business agreements and, in some cases, keeping food staples on the table for many families.

As the Russian troops rolled into Ukraine on 24 February, most countries of the region initially saw the war as a distant conflict focused on unrelated security issues involving mainly NATO and Russia.

‘While the situation concerns the entire world, in the Middle East this is viewed by many as a conflict between Russia and Ukraine about NATO’s expansion to include the latter, which creates security concerns for Russia, a major trade partner for many countries in the region,’ says Nesrine Roudane, a Morocco-based officer of the IBA Arab Regional Forum.

Hasan Alhasan is a Research Fellow for Middle East Policy at the International Institute for Strategic Studies (IISS), based in Bahrain. He says the conflict lacks a direct fallout particularly for the oil-rich Gulf region. ‘Technically, as far as Gulf relations with NATO or EU partners go, this is a third-party conflict. (With) no direct bearing on bilateral relations,’ Alhasan said. ‘Seen from the Gulf, this is a regional conflict in Eastern Europe. If we were to see direct NATO involvement or real nuclear escalation, however, I suspect the Gulf states' diplomatic response may change. We haven't yet.’

But as the US and Europe were quick to impose crippling sanctions, limiting Russia’s ability to do business internationally, Western powers began to rally the world against Russia. Countries in the Middle East, who have financial and trade ties with both Ukraine or Russia, balked but many now realise they will not be spared the global fall-out and will soon have to take a side.

Food security

Collectively, countries of the Middle East rely on Russia for 50 per cent of their wheat imports. Grain prices leapt after the invasion and coupled with unstable oil prices will likely add more inflationary pressures in the region. For countries that do not enjoy major energy resources, such as Egypt, Tunisia, Lebanon, Jordan and Syria, there was hesitancy to jump on the Western sanctions bandwagon mainly for fear their already restless populations will be further impacted leading to more instability.

Egypt, the largest Arab country in terms of population, is reeling from a 10 per cent inflation rate, and is bracing for higher food, bread and energy prices as a result of the crisis all to a backdrop of public discontent. Cairo, the world’s largest wheat buyer, imports 30 per cent of its wheat from Ukraine and nearly 50 per cent from Russia. The country’s tourism industry is likely to take another hit on top of the long-running effects of Covid-19. Around 30 per cent of tourists to the country’s warm Red Sea resorts come from Ukraine and Russia.

While most Arab countries were reserved in their position mainly for economic reasons, Bashar al-Assad of Syria, who owes his survival to Iranian and Russian direct military intervention against a public uprising, was quick to express support for President Vladimir Putin. Reportedly, Russia is using Assad troops in Ukraine.

Other countries have expressed concern over the crisis but were likely to be affected in different ways. Algeria says its state-owned oil company can supply Europe with additional gas while Morocco says a pipeline for gas exports from Nigeria running through the country to Europe is well underway and may ease spiraling energy prices.

Energy security

But no country faces as much of a dilemma as the oil exporting countries. The six members of the Gulf Cooperation Council may be better insulated from trade disruptions but they have to balance special security relations with Washington on one hand and energy and financial commitments with Russia, another major energy powerhouse, on the other.

The US and Europe are already exerting pressure on Saudi Arabia and the United Arab Emirates (UAE), two main oil producers who have the capacity to ramp up oil production to tame prices at short notice. However, the two countries showed reluctance to embrace the full suite of sanctions on Russia or publicly censure Moscow and instead chose to publicly call for restraint. There are several reasons for this balancing act.

At a certain point each of us, including the Middle East countries, will need to consider affecting trade relationships and earning a bit less in an attempt to avoid World War III

Slawomir Uss
Officer, IBA European Regional Forum

For one, the two countries are genuinely worried about global economic uncertainty. They rely almost entirely on oil sales to balance their budgets and offer welfare services to their citizens. The Saudis were quick to announce they will honour their deals with Russia to stabilise oil prices. In 2017 and 2020, Saudi Arabia got a taste of what it’s like to get into a price war with Russia and live in budget deficits. The Saudi-led Organisation of the Petroleum Exporting Countries (OPEC) later reached a deal with Russia, one of the world’s largest producers, to prevent such a slide in oil prices again.

The Emiratis too feel they could be exposed not only in the energy sector but also because Dubai, one of the seven sheikhdoms that make up the UAE, is a major financial and commercial hub for Russian businesses. This doesn’t mean the UAE or Saudi Arabia will allow run-away prices. Their oil sale strategy is hinged upon prices designed to avoid discouraging demand. If prices were to continue to shoot up, they are likely to intervene and pump more oil to keep the price not much higher than a breakeven target of $65 a barrel.

But observers of the initial Gulf foot-dragging to back the sanctions say that the Middle East needs to look beyond sheer economic interests especially in such a major crisis that carries worldwide implications for global security. ‘Looking solely from the business perspective - though I do not believe one should do this - I think the Middle East could only benefit from supporting the rules-based world', said Slawomir Uss, an IBA European Regional Forum officer. 'There is no "must" in international politics. At a certain point each of us, including the Middle East countries, will need to consider affecting trade relationships and earning a bit less in an attempt to avoid World War III.'

Yemen and Iran

The Gulf area has its own security woes. The Ukraine conflict has so far proven to be an opportunity for both Saudi Arabian Crown Prince Mohammed bin Salman Al Saud (MBS) and the Crown Prince of the UAE, Mohammed bin Zayed Al Nahyan to press ahead with such grievances. The two regional allies have a litany of complaints against Washington.

The UAE complains that Washington didn’t give enough military support to help prevent the Iranian-backed Houthi fighters in Yemen from targeting the country, which has long worked to build a dearly-guarded image of stability. In January, the Houthis tried to shatter that perception through a surprise attack against a key oil facility in Abu Dhabi that killed three people.

The Saudis and the Emiratis are further dismayed because the Biden administration attached conditions to US arms sales and to their use in Yemen. MBS was reportedly personally offended after US President Joe Biden avoided dealing with him directly due to his suspected involvement in the gruesome murder of Saudi journalist Jamal Khashoggi in 2018 and, unlike his predecessor, Donald Trump, lifted an embargo on an intelligence report that implicated the Crown Prince.

The Saudis are also worried that talks reviving the Iran nuclear deal may unlock Iranian oil for export. This will not only push prices down, affecting Saudi Arabia's ability to pad profits, but also further empowering Tehran, Saudi Arabia's arch-foe in the region.

After the eruption of the Ukraine war, the Wall Street Journal reported, in early March, that both Arab leaders declined taking calls from the US President after he announced a ban on Russian oil imports intended to enlist them in the effort to ease energy prices. ‘The subliminal message: this isn't our war,’ says Alhasan. ‘A very similar message, by the way, to the one consistently sent by the US to the Gulf states on Yemen, Iran over the past several years.’

The energy producing countries however are unlikely to continue to resist Western pressure for long given their near total reliance on the US for security particularly if the White House, as it is widely expected, threatens repercussions. ‘The US response is a decisive factor,’ said Alhasan. ‘If the US applies substantial pressure on Gulf states to align against Russia, they may cave. But long-term, it’ll vindicate calls for greater strategic autonomy in the Gulf and less dependence on Western partners. Delicate balance.’

Roudane, however, says the region overall would prefer to see a diplomatic solution to the crisis rather than see a lingering war that complicates foreign relations. ‘As with the rest of the world, a de-escalation and the peaceful settlement of the conflict between Russia and Ukraine is certainly a priority for all countries in the region,’ she says.

Uss of the IBA European Regional Forum says a position in line with the West would actually benefit countries in the Middle East long-term and the region will have to stop the balancing act and make a decision. ‘Supporting the Western measures to impair Russia and the Russian economy would in the end benefit the Middle East. I do not believe one can remain neutral in such circumstances – you either support the aggressor or stand united against.’

Image: Building of the Organisation of the Petroleum Exporting Countries (OPEC). Vienna, Austria, July 2022. Sodel Vladyslav/Shutterstock.com

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