Diplomacy in the Gulf follows the money

Recent diplomatic breakthroughs in the Gulf, specifically the normalization of ties with Israel and the lifting of the blockade of Qatar, have a common driver: the drying up of foreign direct investment across the region. The United Arab Emirates (UAE) and Bahrain normalized diplomatic relations with Israel as part of the Abraham Accords in September 2020, followed by Sudan and Morocco. Saudi Arabia orchestrated the easing of the long-standing rift with Qatar, along with Bahrain, the UAE and Egypt.

In the end, 2020 seems to have made a very powerful case for mending fences in the Gulf. Their revenue streams have been devastated by an oversupplied market, a global pandemic has stripped demand for oil, and there is a growing consensus that alternative energy is both a better investment and a political lightning rod. The only recourse is tighter fiscal policy, implementing new taxes and fees, borrowing, and attracting new investment.

For the UAE, Israel represents a sizable source of foreign investment, technology access, and a new set of tourists and property buyers. Fifty-thousand Israelis reportedly have visited the UAE since the signing of the Abraham Accords. Forgiving Qatar means that Saudi Arabia is eager for tourists and investors, especially if they can drive over a land border.

In April 2020, PwC estimated that 400,000 jobs in the tourism sector of the Gulf Cooperation Council (GCC) region could be lost to the pandemic; for the broader Middle East, the job losses in the tourism sector could reach over 3 million. Saudi Arabia's hosting of the GCC summit in al-Ula, the site of a Nabatean archaeological wonder and the literal poster of Saudi tourism aspirations, created a leadership moment for Crown Prince Mohammed bin Salman to call for unity, and to signal to his critics that he is focused on the economic challenges of the future, not the foreign policy adventurism of the last five years.