Why the Gulf States are becoming global ATMs The EU and the US are launching a ‘historic’ ship and train project together with partners

After the gruesome murder of journalist Jamal Kashoggi, Saudi Arabia and especially its strongman, Crown Prince Mohammed bin Salman (MBS), were ostracized by the world. Top managers and high-ranking politicians stayed away from the annual economic meeting in Riyadh, the ‘Davos in the desert’.

Five years later they again make pilgrimages to the capital of Saudi Arabia. They are also happy to accept the $15,000 participation fee. Because the Gulf states have become, as the Wall Street Journal recently headlined, “the cash machine of the world.”

MBS has never been a man to hide his light under a bushel. He wants to be much more than a financier, and he also wants to do more than lure aging football stars like Ronaldo and Neymar to the Gulf. “I am convinced that the new Europe lies in the Middle East,” he said recently. “The next global renaissance will take place in the Middle East.”

There is more to these words than bragging. The Gulf States are again swimming in money. Thanks to an oil price of around $90 per barrel, Aramco, the Saudi state oil company, made a record profit of $161 billion last year. Meanwhile, the Saudi Arabian sovereign wealth fund has assets worth more than $3 trillion.

The future prospects are also bright: 36 percent of the world’s oil reserves are located under the desert of the Gulf States. Currently, almost every second barrel of oil exported comes from this area. 22 percent of natural gas is produced there. Liquefied gas exports amount to as much as 30 percent.

At the same time, the United Arab Emirates (UAE) is developing into a global financial center. 14 percent of all global IPOs took place in Abu Dhabi in the first quarter of this year. The Wall Street Journal points out that rising interest rates have suppressed lending in the West. That is why the luxury hotels in the Gulf region are filled with Western financiers. “Everyone wants to go to the Middle East,” the newspaper quoted financial advisor Peter Jädersten. “It’s like the US gold rush once was.”

In its current issue, The Economist even devotes its cover story to the Arab economic miracle. In it he lists the reasons that led to this:

First of all, there is such a thing as peace in the region. The two arch-enemies Saudi Arabia and Iran have buried the hatchet, at least for the time being. The civil wars in Syria and Yemen have subsided. Qatar has resolved its dispute with its neighbors. Weak trade relations develop between Israel and several Arab states. Even Bashar al-Assad, the butcher of Syria, no longer has to wait outside the Arab door and can return to the illustrious circle of MBS & Co.

There has also been a change of heart in domestic politics. Islamic fundamentalism hardly finds any followers anymore, just like Western democracy. The UAE is a role model for the vast majority of people in the Middle East. Although governed in an authoritarian manner, they are economically successful and politically stable. “When asked what is more important to them, democracy or stability, 82 percent of young Arabs choose stability,” says The Economist.

At the same time, these states also want to reduce their dependence on the US. According to the International Monetary Fund, exports to China and India have increased by 26 percent over the past thirty years. In the same period, exports to Europe and the US fell from 34 percent to 16 percent.

The balance has not only shifted economically. At their last meeting, the BRICS countries decided to invite Iran, Saudi Arabia, the UAE and Egypt as full members at their next meeting.

What could destroy MBS’s dream and its rebirth? The most important thing to mention is the enormous wealth inequality in this region. The super-rich Gulf states are confronted with the poor Egyptians, Syrians and Lebanese.

Egypt in particular is a social powder keg. The economy of the largest country in the region is an accident waiting to happen. As a result of excessive arms purchases, the national debt has risen to 93 percent of gross domestic product, about a third of which is in foreign currency. The non-oil producing economy has been shrinking for years, the currency has lost half its value in the past two years and inflation is at 38 percent.

How long the ceasefire between Saudi Arabia and Iran will last is also uncertain. The ayatollahs in Tehran are about to acquire an atomic bomb. How MBS will respond to this is uncertain. A new arms race could arise between Saudi Arabia and Iran.

After all, the wealth of the Gulf states is still based on fossil fuels. Even though the exact date has not yet been determined, an expiration date is looming given global warming. That is why we are feverishly looking at alternatives, such as solar energy from the desert or tourism.

It remains to be seen how successful these efforts will be, as the state is still primarily responsible for job creation. In Saudi Arabia, for example, more than half of the workforce is employed by the state and receives wages so high that private companies that want to keep up cannot compete internationally.

Seen in this light, it is anything but certain that the next renaissance will take place in the Middle East. Neither the oil billions will change that, nor Ronaldo or Neymar.