Strength in unity is the way forward for the GCC

Strength in unity is the way forward for the GCC

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An organization that is entering its fifth decade has, much like a person, a lot of experience to work from but also a great deal to plan for.

In 1981, the Gulf’s emirs and sheikhs set aside centuries of rivalries and enmities to club together to contain post-revolutionary Iran. Sheikh Zayed ordered the building of the InterContinental in Abu Dhabi in record time, especially to provide a suitable venue for the auspicious gathering of the new Gulf Cooperation Council.

With the passing of time however, this club has had limited success in achieving what the original unified economic agreement between the countries set out to do. For this part of the world, which produces half of the world’s crude, the post-oil era poses as existential a challenge as revolutionary Iran once did. A political, economic and defense union is critical as the monarchies of the six member states seek to navigate the storms of the 21st century.

Saudi Crown Prince Mohammed bin Salman’s whistlestop tour of the Gulf capitals this month reinvigorated thetradition of personally inviting leaders to a GCC summit. The gesture, which has in recent years been relegated to the organization’s secretary general, suggested a willingness to reinvest in Gulf unity.

The organization has experienced a period of considerable tumult, with Iran playing hardball during nuclear negotiations in Vienna. Last week’s meeting of the club was also its first since the AlUla agreement that brought Qatar in from the cold. Former Emirati foreign minister Anwar Gargash, who once led the charge against Qatar, stated last week that “there are areas that will need some time, but I mean practical, functional (Gulf) cooperation is back on track.”

Where a deep rift once existed, it would seem that there is renewed regional interest in clubbing together. Based in Riyadh, the GCC has always suffered from the differing ambitions of its member states, some of whom question even the location of its headquarters.

Having hedged upon a Trump re-election, the Gulf states are now faced with growing uncertainty about the US role in the region. The political issues that have divided member states are to be addressed with “a higher level of coordination, to collectively deal with political issues.”

Though Western rapprochement with Iran might seem to be the inferred political issue that has influenced the renewed spirit of unity, the tendency for fraternal disputes within the bloc is what will have concerned the representatives last week as they plan to work together in future.

Considering the governmental structures of the member states, the pooling of decision making has been considered risky. This has underpinned the characteristic lack of political will that has hampered the GCC’s path to integration. A special representative to the GCC stated: “The Secretariat hasn’t been able to implement the programs of the GCC; there is no follow up to agreements.”

Though their political opinions might diverge, all of the GCC states are experiencing a depletion of their assets, both financial and strategic. Last week they emphasized the importance of enhancing joint action to achieve digital transformation, and boosting of cooperation alongside achieving a common market and a customs union.

Where a deep rift once existed, it would seem that there is renewed regional interest in clubbing together.

Zaid M. Belbagi

However, despite the absence of cultural and linguistic barriers to trade, the Gulf states remain remarkably economically disconnected. They do share similar production patterns and cycles by virtue of the fact that their economies are based on hydrocarbons and their currencies are all pegged to the US dollar. However, trade within the area is a small fraction of total GCC trade.

A lack of political will to pool sovereignty remains the most significant barrier to a single currency. Monetary union requires a single monetary policy and a single exchange-rate policy. This requires a division of labor between a supranational institution (a GCC central bank in Riyadh) and national monetary agencies and central banks to monitor policy making and implementation. This requires a degree of transfer of sovereignty to the central bank.

Full monetary integration can only be achieved in a system where the central bank has the ultimate say in the formulation of policy. Political consensus will be required in making the decisions to reach these goals. The small number of monetary agencies and central banks in the GCC would facilitate this process; cooperation between six monetary agencies and central banks could be implemented relatively easily.

Separately, GCC states would have to agree on a common set of monetary-policy instruments and procedures, which together would form the operational framework of the GCC monetary institution. The central bank would need a clear mandate and be assured of having the independence to be able to achieve this — without it, Gulf economic unity will remain limited to transfers of aid to less wealthier members and small-scale infrastructural cooperation.

From a security perspective, the Gulf states had valued their role as reliable interlocutors for the West. With security priorities shifting elsewhere, however, the US commitment to the region is waning. It is, for example, almost unfathomable that the US would now intervene on the scale of Operation Desert Storm, as it did 30 years ago to liberate Kuwait.

In 1991, the Gulf states were central to the global economy. Increasingly, and in line with sustainability goals, hydrocarbons are losing their significance — it was only the excess they brought that allowed Saudi Arabia to financially support the US liberation effort.

Moving forward, the Gulf states will need to agree on their engagement with Iran and Turkey, to make economic partners from military rivals. Such efforts supported European peace and reconstruction after the Second World War, and the Gulf states will need to integrate themselves through trade to increase their security. Gulf defense can no longer be seen through the prism of individual member states courting US power; rather, a new approach must be adopted to consider collective security.

Where a previous generation of GCC leaders met the low points of regional stability with the hope that hydrocarbon prices would recover and challenges would pass, today’s younger generation of Gulf leaders must seek a more long-term solution.

The smaller states of the union were made viable through hydrocarbon rents; looking ahead they will need to work together to mitigate the challenges they face. Saudi Arabia, which accounts for 65 percent of the combined economy and more than 80 percent of GCC territory, will need to take the lead while still considering divergence of opinion to avoid disunity.

  • Zaid M. Belbagi is a political commentator and an adviser to private clients between London and the Gulf Cooperation Council. Twitter: @Moulay_Zaid
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