# ORF Middle East

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### ORF ME Internship Programme

With the aim to diversify the policy space and invest in youth, ORF ME offers internships to students from universities and young professionals across the UAE. The purpose of this internship is to provide selected candidates with on-the-job experience in a professional, dynamic research and policy-oriented environment.

Interns are assigned to supervisors across ORF ME’s research verticals and must support research, events, and administrative work on a daily basis. Each intern gets an opportunity to research and author an independent article (800–1500 words) under the mentorship of their supervisor. Articles that meet ORF ME’s editorial standards will be published under the intern's name.

This is a full-time, in-person internship. Interns are required to work from the ORF ME office from Monday to Friday, working hours. 

Application Process

 	The internship requires a minimum commitment of three months, but not exceeding six months, on a full-time basis.
 	Applicants must specify their intended start date and duration in the application form.
 	The programme is open to candidates with a minimum qualification of an undergraduate degree.
 	Applicants must be 18 years of age or older at the time of application.

Required Application Materials:

 	CV
 	Writing Sample (~800 words)

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### About Us

The Observer Research Foundation Middle East (ORF ME) is a policy research think tank based in Dubai, United Arab Emirates. Established in 2024, ORF ME is committed to addressing the evolving policy challenges and opportunities emerging across the Middle East, the Indian sub-continent, Africa, and their global partners in an era of profound economic, geopolitical, and technological transformation.
Our work in the UAE focuses on four core areas: geopolitics, trade and connectivity, climate and energy transitions, and emerging technology policy. Through rigorous research, high-level convenings, and the development of strategic and diverse networks, ORF ME serves as a platform for generating actionable insights and advancing inclusive, cross-regional policy dialogue.
ORF ME engages actively with stakeholders across governments, industry, multilateral organisations, and civil society to shape effective and future-ready policy solutions. Along with ORF America, it serves as an overseas affiliate of the Observer Research Foundation (ORF)—India’s premier policy think tank.

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### Impact of the Middle East Crisis on ASEAN's Strategic and Economic Landscape

The intensifying Iran–US–Israel conflict is generating profound disruptions across global geopolitics, energy markets, and technology supply chains — with asymmetric consequences for ASEAN member states. This closed-door dialogue, held under Chatham House rules, will convene Ambassadors of nine ASEAN member states alongside the Observer Research Foundation Middle East to assess both the immediate shocks and longer-term structural shifts arising from the crisis.
Deliberations will be organized around three interconnected dimensions: the geopolitical and geoeconomic realignments reshaping trade corridors and alliance structures; the implications for energy security and its cascading effects on food and water systems; and the accelerating fragmentation of technology and AI ecosystems amid escalating great-power competition.
The session aims to facilitate a candid exchange of perspectives among ASEAN member states, building mutual understanding of the strategic and economic pressures arising from the crisis and identifying areas of shared concern.

### The Hormuz Disruption : How the Iran War is Reconfiguring Critical Mineral Value-Chains

Critical Mineral supply chains have been substantially impacted by transit bottlenecks triggered by the Iran War. The resultant shortages have made diversification and localisation in the sector more challenging at a time when the costs of interdependence have made them urgent imperatives. This webinar will examine the Iran War’s impact on efforts by countries to de-risk supply chains and gain agency across the critical minerals value-chain. Through the expertise of academics and practitioners from three different geographies, the discussion will explore the implications of likely setbacks to industrial capacity building efforts, changes in fiscal priorities, increasing resource nationalism, and the necessary recalibrations needed in multilateral groupings working towards critical minerals supply chain resilience. While identifying potential future chokepoints, the panel will consider if the Hormuz disruptions may have further entrenched structural advantages of dominant actors like China in the sector.

### The Role of Middle Powers in the Age of AI

The global AI race is increasingly defined by asymmetry across the stack. The US remains dominant in frontier models, capital and hyperscale infrastructure, while China combines growing model strength with scale in patents, publications and open-model diffusion. Stanford’s 2025 AI Index reported that US-based institutions produced 40 notable models in 2024 versus 15 in China and 3 in Europe, while US private AI investment reached $109.1 billion compared with $9.3 billion in China and $4.5 billion in the UK. At the same time, compute is becoming a strategic bottleneck in its own right, with the OECD noting that the physical location of AI compute matters for latency, regulation, access and economic spillovers. For middle powers, then, the question is not how to outspend Washington or Beijing, but how to secure leverage in selected layers of the stack and avoid forms of dependence that cannot easily be reversed. 
This panel aims to examine an important shift in where value is created: not only in training frontier models, but in the intermediary layer of distillation, fine-tuning, evaluation, inference optimisation, systems integration, benchmark-setting and domain applications. Middle powers are increasingly seeking not to attempt replication of the frontier models that are driving global technological competition and capital concentration in the US and China, but to build open ecosystems, sectoral data assets, trusted regulatory environments and high-value applications suited to their own talent base, power resources, public-sector scale and digital maturity.

### Vulnerabilities in West Asia’s Maritime Chokepoints: Hormuz, Bab al-Mandab, and the Suez Canal

Maritime chokepoints are crucial to global energy security. In West Asia, Strait of Hormuz, Bab al-Mandab, and the Suez Canal together anchor a tightly interconnected energy transit system linking supply centres to global markets. These critical chokepoints ensure steady outward flows of oil and LNG from Gulf producers and inward flows of refined products, equipment, and essential energy inputs. Recent disruptions - from tensions in Hormuz to insecurity in the Red Sea and Suez - demonstrate how vulnerabilities can trigger cascading shocks across energy supply chains and global commodity markets. These chokepoints are not merely transit routes, but strategic pressure points where geopolitical conflict, security risks, and logistical constraints converge. This panel will examine how such risks are reshaping energy flows, pricing dynamics, and supply chain resilience in an inter-dependent and increasingly uncertain geopolitical environment.

### The Middle East Crisis in the Eyes of Africa

In recent years, relations between Africa and the Gulf states have evolved into a multifaceted South–South partnership, grounded in pragmatism, realism and converging interests. In a global context marked by the steady decline of official development assistance (ODA), the Gulf Cooperation Council (GCC) has increasingly been perceived as a potential new frontier for development financing. Beyond this, Africa–GCC engagement— driven by a combination of concessional finance and private investment—now spans a wide range of sectors, including agriculture and food; climate and energy; logistics and transport; mining; real estate and tourism; technology; and trade.
The war now engulfing the Middle East threatens to disrupt this positive trajectory. GCC countries may be compelled to redirect resources toward mitigating the economic fallout of the conflict and addressing domestic fiscal pressures. At the same time, their external risk appetite could diminish, to the detriment of African partners, potentially drying up a key source of capital and financial support. In parallel, the closure of the Strait of Hormuz has deprived African economies of export revenues while disrupting supply chains that transit through the Gulf—most notably via the Jebel Ali port in Dubai.
More broadly, a major energy supply shock stemming from disruptions in the Strait of Hormuz has forced many African countries to scramble for alternative oil supplies while driving up energy prices and placing additional strain on current accounts. Fertilizer shortages will push food prices up, increasing vulnerability across the continent. The conditions under which Africa finances its public spending could also be further complicated, compounding ongoing sovereign debt challenges. Slowing global growth could weigh on commodity prices, dampening export revenues, while stagflation in developed economies risks diverting political attention away from Africa’s needs and accelerating the decline in ODA. Meanwhile, multilateral frameworks—already constrained by great power competition— remain ill-equipped to respond effectively to these mounting challenges.
Against this backdrop, ORF Middle East is convening a webinar bringing together leading African experts from renowned African policy institutes to unpack the implications of the Middle East crisis for the continent.
Speakers:


 	Gustavo de Carvalho, Senior Researcher, South African Institute of International Affairs
 	Emmanuel Owusu-Sekyere, Director of Research, Policy & Programs, African Center for Economic Transformation
 	Nouzha Chekrouni, Senior Fellow, Policy Center for the New South
 	Akram Zaoui (moderator), Associate Fellow, Geopolitics, ORF Middle East

### The Middle East Crisis in the Eyes of Europe

A day into the Israeli–US offensive in Iran, a drone strike targeted the Akrotiri base on the island of Cyprus, signalling that the Middle East conflict could spread into the territory of a European Union (EU) member state. In the days that followed, Iran’s effective closure of the Strait of Hormuz exposed the global economy—particularly European countries—to the largest energy supply shock in history. A decade after the 2015 crisis, renewed pressure on the Iranian state, the risk of internal collapse, and the potential weaponisation of human flows have raised the prospect of mass migration towards Europe.

The Iran–Israel–US war is taking place in the shadow of the dual strategic shock Europe has endured: Russia’s invasion of Ukraine and the strain placed on the transatlantic alliance during the Trump administration. In practice, Europe has been compelled to increase spending on both defence and energy, placing stress on industrial bases, public finances, and social contracts. Against this backdrop, political debates over migration—framed as a threat to national identity and security—have intensified polarisation.

Meanwhile, Europe’s voice in the Middle East has been difficult to discern. The EU has appeared divided and indecisive, particularly regarding ceasefire enforcement in Gaza and Lebanon. Its actions have often seemed driven by short‑term objectives, especially migration control. Nevertheless, both the EU and major member states such as France and Italy have sought to advance a broader Mediterranean agenda encompassing the Middle East and the Gulf Cooperation Council. On Iran – a security partner of Russia, Europe has attempted a more assertive posture. The “E3” (France, Germany, and the United Kingdom) triggered the snapback mechanism to reimpose sanctions in August 2025, and the Council designated the Islamic Revolutionary Guard Corps as a terrorist organisation in February 2026.Yet Europe now finds itself with limited leverage over the trajectory of the conflict, while simultaneously facing pressure from President Trump to join the military campaign.

In a new webinar, ORF Middle East will bring together leading European experts to discuss Europe’s perceptions, priorities, and role in the current Middle Eastern crisis.

### Reverberating Effects for Fertilizer, Food, and Water Security in Times of Conflict

Observer Research Foundation Middle East, as part of the contribution to the UN Water Conference Academic Hub in collaboration with the United Nations University Institute for Water, Environment and Health (UNU-INWEH) will be co-hosting an online panel discussion titled “Reverberating Effects for Climate, Food and Water Security in times of Conflict.”
Mounting tensions around key maritime chokepoints and trade routes reveal globally entrenched dependencies on food imports and singular trade corridors. Recent attacks on water infrastructure also threaten water security and broader urban resilience in the Middle East. This panel will convene leading regional and global experts to unpack the immediate and long-term implications of the unfolding conflict on fertilizer, food and water security. The discussion will unpack how governments and markets are strategising to mitigate shocks, learning from prior crises such as conflicts in other regions and the COVID-19 pandemic.

### Secure Frontiers, Shared Futures

Organised as a pre-summit event for the AI Impact Summit to be held in India in February 2026, the dialogue will convene senior policymakers, experts, and thought leaders to reflect on the state-of-play in cybersecurity given the rapid advancements in AI and to promote the development of an infrastructure necessary for a sustainable AI-driven future. The event will convene stakeholders from the government, private sector, international organisations, industry experts, researchers from India, USA, UAE, and the Global South and contribute to shaping international engagement ahead of India’s AI Impact Summit 2026.
Read full report here.

### At the Heart of The Republic - India and the New World

On the occasion of India's Republic Day, join us for an engaging interaction with Dr. Shashi Tharoor, Member of Parliament; Chairperson of the Parliamentary Standing Committee on External Affairs, India. The conversation will revolve around India’s rise, its position in the global imagination, and the ideas that underpin the Republic amid a changing world and an evolving international order.


 

### The DPI Exchange: New Corridors for Innovation and Inclusion Roundtable

The half-day event will be hosted by ORF Middle East and Observer Research Foundation, India. It will bring together senior policymakers, industry leaders, CEOs, technologists, and domain experts to discuss the global diffusion of Digital Public Infrastructure (DPI) and its role in advancing inclusive growth and digital transformation. As DPI adoption accelerates across regions—including Africa, the Middle East, and East Asia—the need to document successful implementation models, address rollout challenges, and explore new cross-regional corridors for innovation has become increasingly urgent.

Read full report here.

### Policy Arena: Gulf-India Trade

India currently has two Comprehensive Economic Partnership Agreement (CEPA) in the Gulf, one with the UAE which has been reaping successes and a recently finalized one with Oman. Another is in negotiation with Bahrain alongside parallel tracks on a Bilateral Investment Treaty and Double Taxation Avoidance Agreement. Held with seasoned experts on India and the Gulf, this panel will analyze the lessons from the UAE–India CEPA; the ambitions of the Oman-India CEPA; the expectations surrounding the Bahrain-India negotiations; and the political and economic feasibility of a future Gulf-wide (GCC) trade arrangement with India.

### Roundtable Roundup : AgriFoodTech in the UAE

On November 21, 2025, ORF Middle East hosted a closed-door roundtable titled “From Market to Policy: The Role of AgriFoodTech in Revolutionising the UAE’s Food Security.” The roundtable convened leading experts from the public, private, and academic sectors to assess how AgriFoodTech is rapidly emerging as a critical tool to bolster regional food security. Panelists discussed bottlenecks and opportunities to improve resilience and recalibration of AgriFoodTech policies and practice in the UAE and broader MENA region.

 

### Policy Orbit: Beijing’s Middle East Playbook in a Changing Global Order

While Beijing’s foreign policy is not focused on the Middle East—or ‘Western Asia’, the term used more frequently by the Chinese to refer to Turkey, the Levant, Iraq, Iran, and the Gulf countries—its footprint in the region is expanding. Many of the People’s Republic of China’s short-term aims, such as securing energy, have remained unchanged since the Cold War, but the country’s rise on the global stage is increasingly creating a need for a long-term strategy suited to the changing world order. Since the start of the Gaza war, Chinese diplomats have adopted a more vocal stance on Middle East issues like the Israeli-Palestinian conflict, leveraging tensions with the West to boost their country’s public image and try to undermine United States dominance. This stance, however, comes with new risks and responsibilities. The strong regional presence of the US, which is increasingly engaging in global power competition with China and trying to curb its influence, presents additional limitations. The aim of this brief is to map Chinese interests in the Middle East and North Africa (MENA) to better understand possible strategies for the future against the backdrop of turbulent global politics.
This session will unpack Chinese interests in the Middle East and North Africa in the economic, security, and political realms to better understand possible strategies for China in the future against the backdrop of turbulent global politics.




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### Policy Orbit: Convergence in Grand Strategies

Conducting foreign policy in an evolving geopolitical environment that is shaped by global, structural transformations requires forward-looking, strategic thinking. To navigate these transnational changes and capitalise on emerging opportunities, states need a compass. As an organising principle for foreign policy, Grand Strategies serve this purpose. They align resources, instruments, and actions, considering the potential trajectories of global transformations. This brief assesses how Grand Strategies reflect a global trend, such as the emergence of digital technologies, and use transnational partnerships for the achievement of national objectives. It conducts the analysis in the context of the Artificial Intelligence (AI) cooperation between the UAE and France, two leading AI powers in their regions, aiming to elevate and consolidate their positions globally. Considering the complementarity and convergence of these countries’ Grand Strategies in AI, this brief argues that a bilateral sectoral partnership, embedded in a broader Franco-Emirati cooperation framework, can catalyse the achievement of their goals.



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### Rethinking Connectivity: New Geographies, New Markets, New Infrastructure

The Observer Research Foundation (ORF), in collaboration with ORF Middle East and the Human Sciences Research Council (HSRC), is hosting a strategic round table in the United Arab Emirates to explore opportunities and partnerships around connectivity, infrastructure, trade, and investment across Africa, Asia, and Latin America.
The discussion will focus on three key themes:
 

 	Connectivity and the Future of Logistics - Examining how countries around the world can address supply chain insecurity, while developing multimodal connectivity and directing new investment flows to reduce transit disruptions and costs.
 	Infrastructure Financing and Mineral Corridors - Highlighting the need for alternate trade corridors and the need for efficient critical mineral supply chains, to ensure processing, technology transfer and value creation happen in Africa for Africa and the benefits accrue to all partners.
 	Making Plurilateralism Work with Multilateralism: A Roadmap for New Economic Partnerships - Assessing how groups like the G20 and BRICS can work together on shared issues , from sustainable development financing to strategies for resilient supply chains and economic partnerships.




Access the agenda here

 

### Policy Orbit: The Future of Global A.I.

As the global economy moves towards ubiquitous digitisation, the demand for and generation of data is experiencing exponential growth, as are computational requirements and user adoption of AI products and services. This growth is forcing big-tech incumbents to expand capital expenditure. Undergirding this dynamic is the confluence of increasing frontier model training costs and plummeting inference costs. Revenue streams of AI companies are further being strained due to the rise of open-source systems offering competitive performance. To explore this techno-economic matrix, this report analyses the findings of BOND’s ‘Trends in Artificial Intelligence’ report released in May 2025. The analysis is followed by recommendations for accelerating adoption through inclusive practices, supporting infrastructure development and strategic capacity-building in the Middle East and India.
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### Policy Orbit: The Rise of Soft Power in the Gulf

In recent years, the Gulf Cooperation Council (GCC) countries have emerged as active and ambitious players in the global soft power arena. Faced with the twin pressures of economic diversification and geopolitical repositioning, these states are utilising an array of tools to reshape how they are perceived internationally. This policy brief examines how GCC countries are cultivating soft power across multiple domains and evaluates the effectiveness of these strategies in enhancing their international influence. It analyses both state-driven initiatives and their supporting ecosystems, such as sovereign wealth funds, media platforms, cultural institutions, and development aid frameworks. Through comparative analysis, the policy brief explores the divergence in soft power trajectories among the Gulf states and identifies which approaches are yielding the most credible global influence. It also offers certain strategic insights for trailing countries within the GCC to enhance their international soft power.

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### Building the Future of Health-Tech in the UAE

The UAE has rapidly emerged as a global hub for technology and innovation. This panel discussion will move beyond the hype to explore the foundational pillars required for long-term, sustainable growth. Featuring Mr. Marwan Abdulaziz Janahi (SVP, Dubai Science Park, Dubai Knowledge Park, Dubai International Academic City) and Maria Antonela Axinte (Founder, DNA Longevity), the conversation will dissect the UAE's unique value proposition. Panellists will share insights on navigating the opportunities and challenges of scaling a health-tech business from the Emirates and debate the critical ingredients—from talent to regulation—needed to build a resilient and globally competitive startup ecosystem.

### India’s urban leadership on the global stage

Join us in person for our special hybrid session with Indian mayors, city leaders and urban visionaries Connect with mayors, urban leaders and businesses from India participating in the 2025 Asia Pacific Cities Summit and Mayors’ Forum at Expo City Dubai. The session will focus on the opportunities to access global markets, foster city to city collaboration, leverage strategic investments and shape the future of cities around the world.
 

Speakers

 	Harpreet Babla, Mayor of Chandigarh, India
 	Adv. M. Anil Kumar, Mayor of Kochi, India
 	Majid Ahmed Ahmed AlNekhailawi, Deputy Chief of UAE Mission, New Delhi
 	Ashish Kumar Verma, Consul (Passport II and Political), Counsel General Office, Dubai
 	Mannat Jaspal, Director and Fellow, Climate and Energy, ORF Middle East

Moderator

 	Misha Mittal, Senior Manager – City Advisory, Expo City Dubai

### Water and Food Security in MENA: Navigating Shared Risks and Regional Solutions

The Observer Research Foundation Middle East (ORF ME), in partnership with the Rabdan Security and Defence Institute (RSDI), is pleased to host the Food and Water Security Dialogues in the lead-up to the 2026 United Nations Water Conference, which will be co-hosted by the United Arab Emirates and Senegal next year.
Water and food security are becoming increasingly vital to the MENA region’s sustainable development and resilience. This panel will explore how climate change, rising demand, and environmental stress are intensifying water scarcity and challenging traditional approaches to resource management. From the Gulf’s innovative strategies for managing extreme scarcity to the adaptation efforts emerging in North Africa and the Levant, the discussion will highlight regional pathways to building more resilient food and water systems. It will also spotlight opportunities for cooperation - such as shared water basin management, regional food trade corridors, and climate-smart infrastructure and explore the evolving role of water and food diplomacy in promoting sustainability and regional integration.

Driving Questions
How can MENA countries overcome structural water scarcity while ensuring long-term food security? What role can innovation and technology play in transforming regional agriculture and water management? How are Gulf states adapting their water and food systems for a climate-constrained future? What models of transboundary cooperation exist—or need to be built—to manage shared water resources and ensure food security in the region? How can food and water diplomacy contribute to greater regional integration in MENA?




Time
Programme


11:30 AM - 11:35 AM
Welcome Remarks

Mannat Jaspal, Director and Fellow, Climate and Energy, ORF ME

Wan Zokhri Bin Wan Idris, Fellow & Assistant Professor, Research & Innovation, RSDI


11:35 AM – 12:30 PM
Panel discussion

Wahid A. Kamalian, Managing Partner, Amaly Legacy

Salmaan Mohammed, CEO and Co-founder, Platable

Hamed Assaf, Professor and Associate Dean, School of Engineering, American University, Ras Al Khaimah

Fatin Samara, Professor of Environmental Sciences, American University of Sharjah

Moderator

Mannat Jaspal, Director and Fellow, Climate and Energy, ORF ME

*last 15 minutes will be reserved for a Q/A with the audience


12:30 PM - onwards
Lunch

### The India–UAE Strategic Partnership: Opportunities & Pathways

Join us at the Observer Research Foundation Middle East for a conversation on The India–UAE Strategic Partnership: Opportunities & Pathways, featuring Sunjay Sudhir, Indian Ambassador to the UAE and Dr. Samir Saran, President of ORF. As two of Asia’s most dynamic economies chart a course toward deeper collaboration, this dialogue will explore the expanding horizons of bilateral cooperation, from energy security and renewable innovation to technology, trade and people-to-people ties.
Drawing on their unique perspectives, Ambassador Sudhir and Dr. Saran and will examine how India and the UAE are leveraging their complementary strengths to build resilient supply chains, attract investment and foster sustainable growth. Join us to gain fresh insights into the geopolitical imperatives driving this strategic partnership as well as practical pathways for businesses, policymakers and civil society to engage in the next phase of Indo-Emirati relations.

### Raisina Mediterranean 2025

For centuries, the shores of the Mediterranean have hosted cultural exchange, trade, and diplomacy; the sea has served as a vital link between continents and civilisations. By connecting the Indo-Pacific and the Atlantic Oceans, the Mediterranean has has acted as a critical link between East and West, North and South — and determined thereby the flow of goods, ideas, and culture. Today, as the global economic order undergoes profound transformation, the region is once again emerging as a strategic maritime hub.

This comes at a time of strategic convergence between Europe and the Indo-Pacific, highlighted by Prime Minister Modi’s successful visit to Paris and the recent visit to India by the President of the European Commission and the entire EU College of Commissioners. From de-risking supply chains, to investing in critical defence technologies, to negotiating a new trade pact – the EU-India relationship has the potential to emerge as a system-defining defining partnership.

As envisioned by the President of the French Republic and the Prime Minister of India, Raisina Mediterranean will convene the conversations that matter to this region, and describe how its links to India and the Indo-Pacific will shape our common future. From modern shipping corridors and undersea cables to renewable energy projects and regional security cooperation, the Mediterranean is no longer just a bridge between the past and present—it is a launchpad for the future.

ORF, in collaboration with France’s Ministry of Foreign Affairs and key regional partners, seeks to chart a new course for Mediterranean cooperation. By addressing shared challenges and capitalising on emerging opportunities, Raisina Mediterranean aims to lay the foundation for a resilient, interconnected Mediterranean community capable of driving global conversations on governance, sustainability, and shared prosperity.
Pillar I
The Mediterranean as Crossroads: Partnerships, Prospects and Prosperity

At a turbulent moment for global trade and for historic partnerships, the choices made by the powers of the Mediterranean will determine our shared prosperity. As the Indo-Pacific’s influence in the global economy expands and new growth centres emerge across the African continent, the Mediterranean's role as a bridge between the Global South and North has gained even more importance. This thematic pillar explores the partnerships that will define the Mediterranean in the 21st century— whether in trade and infrastructure, in maritime cooperation, or in energy. It will examine, in particular, the convergence in interests between India and France, between the Indo-Pacific and the European Union, and how ambitious plans for connectivity, trade and investment can elevate these partnerships.
Pillar II
Troubled Waters: Europe, the Indo-Pacific, and Collective Security

The post-War order, which stabilised trade and galvanised investment, can no longer be taken for granted. Great power competition has forced difficult choices on nations, and those who underwrote collective security have registered their unwillingness to bear that burden indefinitely. Europe faces war in its east, conflict in West Asia, and turbulence in the Sahel. This thematic pillar examines how Europe will emerge as a strategic actor in the coming decade, and the implications of such an emergence for its partners, especially in the Indo-Pacific. It will also consider the evolving security postures of the powers of the region, especially France — which is both a European and and Indo-Pacific power — and how partnerships are needed for competitiveness in defence technology and to protect against geo-economic coercion. 
Pillar III
Blue Transactions: Resilience and Growth  

The shared waters of the Mediterranean can become the location of a shared agenda for prosperity, sustainability, and resilience. Energy initiatives such as offshore wind farms and solar corridors highlight the region’s leadership on climate action; its crowded sea lanes reveal the continuing importance of trade; its coastal communities demonstrate the value of investing in the blue economy.  The nations of the region can demonstrate how clean energy can be scaled up, the digital economy can transform lives, and how maritime operations and logistics can be modernised — all while retaining momentum on climate action and biodiversity protection. The region’s rich natural resources and biodiversity demand effective governance of the global commons through collaborative action. The resilience of the Mediterranean is also intertwined with growth and prosperity in West Asia and Sub-Saharan Africa, and so financing mechanisms and frameworks for the Sustainable Developmental Goals (SDGs) must be prioritised.  This thematic pillar discusses the Mediterranean’s central role in shaping the global blue economy, and the potential pathways to unlock further growth and resilience in the region.
Pillar IV
Gateway to the Globe: Connectivity, Trade, and Infrastructure  

Growth in both the Indo-Pacific and in Europe depends upon secure, efficient and resilient connectivity between these two hubs of the global economy. The multiple supply chain and geopolitical shocks over the past few years highlight the importance of investing in de-risking supply chains, building alternative routes and maritime infrastructure, and facilitating digitalisation of shipping procedures. The sea lanes between these regions need to be upgraded and protected, and new infrastructure corridors that can enhance trade and collaboration must be unlocked. Meanwhile, sustainable fuels like hydrogen and ammonia have the potential to revolutionise the industry. This transformation would need investments in port modernisation, green shipping, and sustainable maritime practices, while also addressing disputes and ensuring the security of its sea routes. This thematic pillar will examine now innovations in the Mediterranean and its associated trade corridors. will propel modernisation to shipping and ports globally, and provide a template for 21st century maritime infrastructure.
Pillar V
Data Across the Seas: The 21st Century Tech Bridge  

New technologies are shaking up the world order, fundamentally altering the structure of the global economy, and creating new drivers of growth. Startup hubs across both the Global North and South are at the forefront of this technological innovation—emerging as pivotal nodes in the global economy and reshaping the urban landscapes they inhabit. From Mumbai and Bengaluru to Paris and Marseille, vibrant startup ecosystems are emerging as key incubators of new technologies and business models. These innovation hubs must be connected, so ideas, technology, and capital can flow from one to another and allow them to rapidly build scale. Such collaboration holds the promise of unlocking untapped potential across diverse sectors—including AI, maritime and shipping innovation, clean energy, smart logistics, and the modernization of ports. However, as the world navigates multiple technology transitions, it is also essential to ensure that the Global South is not left on the sidelines and is an active stakeholder. This thematic pillar explores the growing salience of startup across the Global North and the South and the potential pathways to bridge them to unlock further technological and economic growth.

### Unpacking Trump’s Gulf Tour

President Donald Trump’s first visit of his second term to the Gulf states of Saudi Arabia, Qatar, and the United Arab Emirates comes at a pivotal moment in U.S.-Gulf relations. This high-level engagement signals not only the reaffirmation of longstanding security and diplomatic ties, but also the potential for deeper economic cooperation in sectors such as energy, technology, and infrastructure.
Hosted by ORF ME and the Anwar Gargash Diplomatic Academy, this panel discussion will convene experts to unpack both the symbolism and strategic substance of Trump’s visit. As Gulf states navigate a more multipolar world—balancing traditional Western alliances with emerging partnerships—this conversation will explore the implications of Trump’s outreach for energy collaboration, regional stability, economic diplomacy, and the broader credibility and positioning of the United States in the Middle East.

Driving Questions

 	What strategic objectives underpin President Trump’s renewed outreach to the Gulf, and how might this visit reshape the political, economic, and security calculus of regional capitals?
 	To what extent does this engagement represent continuity or divergence from the Biden administration’s approach to the Middle East?
 	How might this visit influence the Gulf’s evolving relationships with emerging powers such as China, Russia, and Israel—and what does it suggest about the future architecture of global influence in the region?
 	Could Trump’s return catalyze new forms of energy cooperation or economic partnership between the Gulf and the United States—particularly through minilateral frameworks such as I2U2 and IMEC—as global competition intensifies?

### Raisina Middle East

Raisina Middle East is co-hosted by the Observer Research Foundation (ORF) and ORF Middle East, the Ministry of Foreign Affairs, UAE and the Ministry of External Affairs, India. This two-day-long international forum aims to establish a high-level conversation that will convene relevant stakeholders, including representatives from government, academia, media and the private sector.

This forum will provide an opportunity to engage with the dynamic growth and developments in the Middle East, and the region’s rapid integration with and pivotal role in the world. The deliberations at the forum will cover key sectors, important policy domains, and global challenges. It will strive to foster a renewed ethic of partnership and collaboration amongst different stakeholders across geographies.

Raisina Middle East will be a key global arena where important voices and ideas will help foster technological advancement, drive inclusive innovation, and incubate knowledge products to serve all of humanity.
Thematic Pillars:
1. Trade and Connectivity
2. Finance and Investment
3. Technology and Innovation
4. Geopolitics, Security and Partnerships
5. Energy and Green Imperatives

### Deep Tech Network: Delivering Responsible Deep Tech Collaboration

Deep tech, with its transformative potential, is a critical player in addressing pressing global issues. It encompasses a wide array of innovative solutions rooted in early- stage, unproven scientific or engineering advancements. The cutting-edge developments in quantum computing, energy technology, space technology, computational chemistry, synthetic biology, robotics, government tech, and communications tech are instrumental in creating groundbreaking products and services. When these developments are integrated with human-centered design thinking, they generate new intellectual property, offering transformative solutions to global problems like climate change, healthcare, security, and sustainable development. Artificial Intelligence (AI), serving as the ether and the fundamental operating system, is the driving force behind a thriving deep tech ecosystem, bringing about transformational change across industries and business models.
While breakthrough technologies are at the core of deep tech, the role of finance, government, and the human element must be addressed as they implicate each other in various ways. The development and scalability of emerging technologies are only possible with a significant mobilisation of private capital, as deep tech investments carry a higher level of risk than ordinary investments due to substantial capital requirements and an uncertain commercialisation roadmap. Developing a practical governance framework is vital as clear and well-defined regulations help foster certainty by creating a stable macro environment for deep tech development while reducing hurdles for practitioners and investors. The importance of human capital cannot also be neglected, as a talented workforce is the driving force behind the success of innovation and sustainable economic development in the long run.
The network will bring together representatives from government, startups, big tech, industry, institutional investors, and practitioners from like-minded countries who will have the opportunity to discuss how responsible deep tech collaboration can be fostered and scaled up to drive innovation and tackle shared challenges.
The inaugural edition of the deep tech & AI network in 2024 will aim to:


 	Clearly define deep tech and its criticality for various domains
 	Establish common principles for responsible deep tech collaboration with like- minded countries
 	Develop opportunities to spur investments and catalyse business-to-business and government-to- government linkages
 	Create a community of passionate and purposeful individuals

### From G20 to COP28: Energy, Climate and Growth

Introduction
There is a broad consensus today that swift and ambitious action is needed to avert the most catastrophic consequences of climate change.  Within this context, India's G20 presidency and the UAE as the host of COP28 assume significant importance for representing and elevating the voices of the Global South within the global climate policy discourse. Both India and the UAE have emphasized advancing global climate action, all the while nurturing avenues for equitable green transitions, and sustainable and inclusive development.
The final stage of the Indian G20 Presidency will intersect with the COP28, and the overlap is fortuitous and presents a unique opportunity to align India's G20 Presidency’s outcomes on climate action with the COP28 agenda.
This unique event will bring together policy experts from across the world to discuss and ideate solutions to issues which are expected to be at the forefront of deliberations at COP28. In particular, the sessions will be designed to link the outcomes and insights from the Indian G20 Presidency concerning climate action to the COP28 agenda. The overarching objective will be to identify synergies between these two forums, with the ultimate goal of formulating a more effective global response to the issues that impede the rapid and equitable progress of climate action.

Thematic Pillars: 

 	 Energy Prosperity for All 

As global economies prime themselves to transition towards green and clean sources of energy, the principles of energy equity and justice must remain central to the energy transitions agenda. The Indian G20 Presidency underscored the importance of ensuring modern, sustainable energy access for all. There is now an urgent need to identify pathways to effectively resolve the trilemma of energy access, affordability, and sustainability. 


 	 Climate - Health - Gender Nexus 

The intersection of climate, health, and gender is a crucial focus at COP28 and within the context of India's G20 presidency as well. Recognizing that climate change affects vulnerable populations differently, particularly in terms of health outcomes and gender disparities, addressing these issues becomes paramount for achieving effective climate action that also ensures the achievement of sustainable development goals. 


 	 Climate and Technology

Technological innovation plays a crucial role in combating climate change and achieving SDGs. The G20 endorses and promotes international cooperation, investment, and policy frameworks to accelerate the adoption of climate-friendly technologies. However, challenges persist in scaling up and deploying these technologies, such as securing financing, ensuring accessibility, and facilitating technology transfer to developing countries. The role of COP negotiations is, therefore, vital in facilitating global technology transfer, protecting intellectual property rights, and building capacity in developing nations. 


 	 Climate Finance 

The current scale of global climate finance falls significantly short of the investments required to support emerging and developing economies in pursuing net-zero trajectories. Moreover, the distribution of climate finance exhibits biases that put emerging and developing economies at a disadvantage. The majority of mobilized climate finance remains within the country of origin. Furthermore, a notable proportion of climate finance is directed towards mitigation efforts, while adaptation funding is disproportionately limited.  Resolve these inequities will be an essential step to achieve feasible pathways for achieving the Paris Climate Targets.

Programme



Time
Session


08:15 to 09:10
Registration


09:15 to 09:40
Inaugural Session 

Welcome Address

Samir Saran, Chair, T20 India Secretariat & Member, T20 India Core Group; President, Observer Research Foundation, India

Ebtesam al-Ketbi, President and Founder,  Emirates Policy Center, UAE

Inaugural Address 

H.E. Sunjay Sudhir,  Ambassador of India to UAE


09:40 to 10:30
Panel Discussion || The Green Development Imperative: Balancing Energy Security, Affordability and Sustainability. 

The Indonesian and Indian G20 Presidencies have managed to build substantial consensus around the need for eliminating energy poverty as a key prerequisite for a successful energy transition.  Building on this, there is now an expectation that deliberations at COP28 can carry forward these principles to a broader set of stakeholders and identify challenges and strategies for scaling up green energy while optimising demand for energy across the world.

What are the main hurdles for developing economies in pursuing an energy transition that also lifts millions out of energy poverty?

What kind of international support is needed to direct greater resources towards solutions which can bridge the gap between energy access and sustainability?

What practical outcomes can we anticipate from COP28 in terms of fostering consensus on global energy transition pathways that accommodate the rising energy needs of developing countries?

Speakers

Sujan Chinoy, Chair, T20 India Core Group & Director General, Manohar Parrikar Institute for Defense Studies and Analyses (MP-IDSA), India

Teenah Jutton, Parliamentary Private Secretary, Member of the National Assembly of Mauritius

Riatu Qibthiyyah, Former Director, Institute for Economic and Social Research, Faculty of Economics and Business, University of Indonesia (LPEM FEB UI), Indonesia

Renato Baumann, Senior Researcher, Institute for Applied Economic Research, Brazil

Swarnim Wagle, Member, Federal Parliament, Nepal

Moderator:  Elizabeth Sidiropoulos, Chief Executive, South African Institute of International Affairs, South Africa


10:30 to 10:45
Keynote Address || H.E. Dr. Sultan Al Jaber, COP28 President-Designate, UAE Special Envoy for Climate Change, and Minister of Industry and Advanced Technology, UAE

Introduction : Navdeep Suri, Distinguished Fellow, Observer  Research Foundation, India


10:45 to 11:00
Break


11:00 to 11:10
Report Launch || Converging Paths: Global Governance for Climate Justice and Health Equity 

Presenter: Vikrom Mathur, Senior Fellow, Observer Research Foundation, India


11:10 to 12:00
Panel Discussion || Charting an Inclusive and Sustainable Future: Bridging the Climate-Health-Gender Nexus 

In a world that still bears the scars of the COVID-19 pandemic's impact, the imperative for a unified global health agenda has never been more palpable, acknowledged by influential forums like the G20. Yet, as we grapple with the enduring consequences of this global crisis, another equally relentless force is at play – climate change. It is not merely altering landscapes; it is redrawing the boundaries of vulnerability and exacerbating health disparities on a global scale. Moreover, both climate change and health inequalities disproportionately affect women, necessitating a gender conscious approach to resolving these interlinked challenges.

How does climate change impact developing economies already struggling with insufficient healthcare systems? Which communities are the most impacted?

How can the climate and health challenge be tackled in a cohesive manner while also accounting for the specific impacts of this nexus on women?

What can multilateral forums such as the G20 and COP28 play in identifying solutions for resolving the climate-health-gender nexus?

Speakers

Jacqueline Kitulu, Chairperson of the Board, Rocket Health, Kenya

Sonam Yangchen, Chief Research Coordinator, Institute of Health Partners, Bhutan

Victoria Panova, Vice Rector, HSE University; Russian W20 Sherpa

Mahjabeen Khaled, Former Member of Parliament, Bangladesh

Moderator: Sarah Mosoetsa, CEO, Human Sciences Research Council, South Africa


12:00 to 13:00
Lunch


13:00 to 13:50
Panel Discussion || Empowering the Global South: Bridging the Climate Technology Divide

The imperative for greater investment for the energy transition in emerging economies is two-pronged. Not only do emerging markets need more clean energy finance, but also access to clean energy technologies that provide the necessary scale to meet energy needs and decarbonise energy systems. Technological innovation plays a crucial role in combating climate change and achieving sustainable development goals for emerging economies.

What is the role of multilateral forums like the G20 and COP in facilitating global technology and finance flows, protecting intellectual property rights, and building capacity in emerging markets?

How can international and development finance institutions facilitate diffusion of new clean energy technology to emerging markets through their lending and knowledge brokerage?

What role do green subsidies offered by national governments play in influencing clean energy technology and finance to emerging markets?

Speakers 

Thomas Pogge, Leitner Professor of Philosophy and International Affairs, Yale University, USA

Stefania Petruzzelli, Research and Content Specialist, Future Food Institute, Italy 

Ravindra Utgikar, Vice President, Corporate Strategy, PRAJ Industries, India

Baratang Miya, Founder and CEO, Girlhype Women Who Code, South Africa

Moderator: Priya Shah, General Partner, Theia Ventures, India


13:50 to 14:00
Special Address 

Kate Hampton, CEO, Children’s Investment Fund Foundation,


14:00 to 14:15
Break


14:15 to 14:30
Navigating Carbon Pricing: G20 Experiences and Global South Prospects 

Presenter: Pedro Barata, Associate Vice President, Carbon Markets and Private Sector Decarbonization, Environmental Defense Fund (EDF), Portugal


14:30  to 15:20
Panel Discussion || Revitalising Climate Finance: Towards Equity and Reform 

While both the G20 and COP have placed a high priority on reshaping global finance to lower capital costs and increase green funding for the Global South, progress in this regard has been disappointingly sluggish. The majority of climate finance continues to be concentrated in developed nations. It is imperative for countries and corporations to enhance their coordination, transitioning from discussions about reforms to the actual implementation of time-bound measures.

How can the MDB reform agenda championed by the Indian G20 presidency be accelerated through the COP28 processes?

What are the key hurdles which have prevented reforms to the international financial architecture to enable greater climate finance for the Global South?

What are three key reforms that the UNFCCC process must prioritise as an immediate priority for restructuring climate finance?

 Speakers: 

Gwendoline Abunaw, Managing Director & Cluster Head, CEMAC, Ecobank Cameroon, Cameroon

Mohammed Saffar, Clean Energy Finance and Investment Mobilisation  Programme, Environment Directorate, OECD

Renato Flores, Director, FGV International Intelligence Unit, Brazil

Bambang Brodjonegoro, Professor, Faculty of Economics, University of Indonesia, Indonesia

Moderator:  Kira Vinke, Head of the Center for Climate and Foreign Policy, German Council on Foreign Relations, Germany


15:20 to 15:30
Closing Remarks

Navdeep Suri, Distinguished Fellow, Observer Research Foundation, India

Samir Saran, Chair, T20 India Secretariat & Member, T20 India Core Group; President, Observer Research Foundation, India


15:30 to 17:00
Break


17:00 to 18:30
Travel to Dubai


18:30 to 20:30
Dinner Reception in Dubai


20:30 to 22:00
Travel to Abu Dhabi



 


### Asia’s Energy Stress: Regional Impact of Hormuz Crisis

Spotlight:


 	The Asian economies are disproportionally impacted by the Hormuz crises given that an overwhelming 80percent of oil and almost 90 percent of the LNG passing through the Strait are destined for markets across the region.
 	The severity of the crises on Asian economies is uneven and varies widely based on : degree of dependence on Gulf oil and LNG, availability of reserves, diversification of supply sources, flexibility of domestic energy systems and the strength of energy resilience policy measures.
 	Countries in the region will pursue parallel investments in both oil and gas exploration, and clean energy transition in an effort to build domestic energy sovereignty and security going forward. 

The ongoing US-Israel-Iran conflict has evolved from a localised geopolitical escalation into a worldwide systemic economic stress test. The blockade at the Strait of Hormuz - a narrow passageway which carries 20 percent of global crude oil and natural gas supplies - has exposed vulnerabilities of critical maritime chokepoints and energy supply chains. The protracted negotiations surrounding the blockade appear increasingly unpromising, while a durable geopolitical solution a far off reality.

Energy Shortages are Far from Over 
Energy shortages remain at the center of this crises. So far, 5percent of world’s yearly oil supply (almost 2 billion barrels) have already been lost and the deficit grows by an additional 14 million barrels each day. Although the price of crude and natural gas has risen, the spikes have been less severe than anticipated and continues to remain below the 2022 levels following the Russian Ukraine conflict.
This reflects a combination of factors : a) pre-existing oil supply glut in the market (many Gulf countries had ramped up production and exports in the preceding months and importing countries increased storage and stockpiles) b) easing of Iranian and Russian sanctions on tankers which were stuck at sea  c) partial release of the 400 m barrels  of strategic emergency reserves from the International Energy Agency d) logistical adaptations via pipeline rerouting by Saudi Arabia and United Arab Emirates (UAE)  e) additional buffers from non-Gulf producers. For instance, American exports have increased by 4 mbpd from the same time last year in May f) global demand destruction of 420,000 b/d. To illustrate, the region’s largest importer China is importing 4.5 mbpd less crude than a year ago g) commercial inventories as the last resort.

The strategic reserves and supplies at sea are depleting fast, and ramping up production in the short term beyond a limit is a challenge. The situation is even more severe for refined products and liquified natural gas (LNG) supply chains. 
However, this relatively contained situation belies hard impending realities. The strategic reserves and supplies at sea are depleting fast, and ramping up production in the short term beyond a limit is a challenge. The situation is even more severe for refined products and liquified natural gas (LNG) supply chains. For instance, the price of diesel, petrol and jet fuel prices have risen faster than of crude. If the Strait remains closed for an extended period, the energy shock of the last two months will begin to appear as a teaser to a horrifying theatrical yet to release.

Why Asia Bears the Brunt 
Singapore’s foreign minister has called out the “closure of the Strait of Hormuz, in a sense, an Asian crisis” given that an overwhelming 80percent of oil and almost 90percent of the LNG passing through the waterway are destined for markets across the region. Unlike developed economies in the West, several Asian countries do not have the fiscal space to absorb the sustained price shocks, amplifying the economic impact.
Inflation projections in parts of the region have risen sharply, with estimates climbing from around 3.6 percent to above 5 percent. However, the severity of the impact varies widely based on : degree of dependence on Gulf oil and LNG, other trade linkages with the Middle East, the strength of energy resilience measures, availability of reserves, diversification of supply, and the flexibility of domestic energy systems. 




Country
Share of Arabian Gulf Imports (2024) of Total Imports (%)
Stockpiles
Total Energy Supply by Fuel (%) (2024)
Electricity Generation by Fuel (%) (2024)


Crude
LNG
Crude
Coal
Oil
NG
Renewables
(Solar&Wind, Hydro)
Coal
Oil
NG
Renewables (Solar&Wind, Hydro)


China
51
29
100-110
58
21
10
9 (6,3)
58
0
3
34 (20,14)


Japan
93
11
254
28
39
20
8 (6,2)
30
2
31
23 (15,8)


South Korea
72
35
200
22
42
17
3 (3,0)
30
1
28
10 (9,1)


Taiwan
59
26
N/A
33
37
24
3 (3,0)
39
1
42
11 (9,2)


Indonesia
21
LNG Exporter
25
43
29
15
14 (13,1)
61
2
18
19 (12,7)


Vietnam
85
N/A
N/A
54
31
5
10 (3,7)
50
0
7
42 (13,29)


Malaysia
63
LNG Exporter
N/A
23
38
35
5 (2,3)
46
1
35
18 (2,16)


Thailand
61
28
60
12
47
35
6 (5,0)
17
0
68
15 (12,3)


Singapore
50
25
N/A
0
87
12
0 (0,-)
1
0
94
5 (5,-)


India
46
60
70-75
59
28
7
5 (3,1)
75
0
3
20 (12,8)


Bangladesh
63
70
N/A
17
31
52
1 (1,0)
20
12
66
2 (1,1)


Pakistan
>85
99
N/A
14
28
45
6 (1,5)
13
11
28
31 (4,27)



Source -  Authors’ Own; Data Derived from Energy Institute, OEC, Kpler, New York Times, Daily Star, Ember, Energy Market Authority, Gulf International Forum
NG: Natural Gas; LNG: Liquified Natural Gas;  ‘0’ indicates a value <0.5 

Diverging National Resilience: Buffers and Constraints 

 	
 Stockpiles and Storage 


Energy security across Asia is uneven. East Asian economies, namely China, Japan, South Korea, hold significant strategic reserves of crude which can cover several months of consumption. For instance, China has reserves of up to 1.2 billion. However, crude inventories excluding China, have already dropped by  13percent.  LNG presents a structural vulnerability in comparison since it is difficult to store, and many economies like Japan, South Korea, and Taiwan for instance import more than 95 percent of their NG supply creating acute vulnerabilities given their electricity systems are heavily reliant on gas.
Emerging economies in the region face sharper constraints and remain highly exposed due to strong crude oil and LPG dependence, limited reserves, and constrained storage, leaving them vulnerable to price spikes and fiscal strain. India faces significant threats to its LPG supply, widely used as a primary cooking fuel. Indonesia, Philippines, and Pakistan have five or six weeks of petrol supplies left. Asian economies with significant refinery capacities such as Singapore, Malaysia, and India, remain highly sensitive to crude supply disturbances and refining margins, resulting in refiners in the region cutting output by 12percent (3.5mb/d). Asian export volumes of jet fuel, diesel, and gasoline have fallen to their lowest levels in recent years, with April 2026 exports around 3 mbpd below the average recorded during the three months preceding the conflict. 


 	
 Fuel Switching and Electrification


Some countries retain limited flexibility through fuel switching. Coal-heavy systems like those in India, Indonesia, China and Vietnam can partially offset disruptions, while nations such as Malaysia, Thailand, and especially Singapore remain highly vulnerable due to limited domestic energy endowments. Countries are also expanding fuel blending policies, for instance, Indonesia and Malaysia have increased palm oil blending mandates in the wake of the Hormoz crises.

Emerging economies in the region face sharper constraints and remain highly exposed due to strong crude oil and LPG dependence, limited reserves, and constrained storage, leaving them vulnerable to price spikes and fiscal strain. 
At the same time, growing reliance on renewables and electrification capacities is emerging as a critical buffer against external energy shocks. In a first, India achieved almost a third of its peak demand of 256 GW through renewable energy on April 25, reflecting the country’s increasing reliance on renewables for power generation. China’s energy self-sufficiency has meanwhile reached approximately 84percent, supported by dominant domestic coal production and rapidly expanding renewable capacity. Moreover, in 2024, adoption of EV reduced China’s demand for oil by about 1 mbpd while its electric vehicles accounted for 11 percent of passenger vehicles - compared to 3percent of South Korea and 1 percent of Japan. Additionally, renewables accounted for 80 percent of China’s new electricity demand. Conversely, electricity systems in economies such as Singapore (95percent) and Bangladesh (66percent) remain highly dependent on natural gas, increasing structural vulnerabilities to LNG imports and associated price volatilities.


 	
 Diversification and Domestic Capacities


Efforts to diversify supply chains and partnerships have played an important role in shaping vulnerability to ongoing disruptions. To illustrate, although India imports majority of its crude requirements (~85percent) today, supplies come from over 40 countries. Similarly, China has diversified its supply sources including from Russia, Central Asia, and Africa through pipelines and alternative routes that bypass Hormuz, whereas Japan in comparison imports majority of its crude from UAE and Saudi Arabia. However, even when countries maintain diversified energy partnerships, the inability of suppliers to rapidly ramp up output in the short term continue to heighten vulnerability to disruptions.

Policy Responses: Managing Scarcity
Governments across Asia have adopted a mix of short-term interventions to manage supply shocks and political pressures:


 	 Subsidies:Countries such as Indonesia and Malaysia have leaned on fuel subsidies to soften the impact on economy. For instance, Malaysia increased subsidies from USD 178 million to USD 1.3 billion. This, however, risks exacerbating fiscal pressures as Asian government budget plans were based on oil averaging US$70 a barrel. With the ongoing blockade, governments will face a challenging choice of maintaining measures by cutting spending from other sectors or passing costs to consumers – such as Thailand’s decision to forego diesel price caps as fuel subsidies depleted. At the same time, countries are rolling out EV subsidies to discourage reliance on imported oil dependent internal combustion engine (ICE) vehicles.
 	 Demand Suppression:Measures including encouraging work from home and restricting foreign travel (India), promoting public transport (Bangladesh), shorter work weeks (Sri Lanka), restricted business hours (Pakistan), and encouraging limits on cooling temperatures (Malaysia) are all examples of demand side measures to curtail upward pressures on fuel prices. Indonesia and Sri Lanka are capping fuel purchases to 50 and 15 litres per day respectively. Cambodia has shut a third of its petrol stations, while South Korea implemented ‘license plate rationing’, restricting vehicle use to every other day
 	 Export Restrictions:Several countries have limited fuel exports to preserve domestic supply. For instance, China, the leading global producer of kerosene has banned all exports, South Korea capped them and India raised taxes to disincentivise them. Such restrictions make shortages elsewhere more severe. Export ban in China on finished fuels has sent the spreads between crude and both diesel and jet fuels to US$ 50-80 a barrel from US$ 15-20. Both fuels cost twice now in Singapore, Asia’s trading hub, from two months ago.

However, these measures are stopgaps rather than durable solutions. While these policies provide temporary relief, they risk exacerbating global shortages by restricting supply flows and distorting markets.

Spill over into Clean Energy Industrial Supply Chains
Beyond oil and gas, the Middle East remains central to the supply of commodities essential for the clean energy supply chains, including copper (wind turbines, solar PV, EVs), aluminium (solar panels and wind turbines), sulphur (batteries), and nickel (lithium ion batteries).  The region provides an estimated 45percent  of global sulphur supply and  approximately 8percent of the world’s primary aluminium.

Planning for future energy shocks calls for strengthening reserve capacities, diversifying supply sources, and increasing electrification across sectors. 
Indonesia’s nickel industry produces roughly 50 percent of global nickel supply and the nation imports nearly three-quarters of its sulphur – an essential feedstock for nickel processing - from the Middle East, with supply pressures already forcing production cuts. However, in the aluminium sector, Indonesia has demonstrated greater resilience with the rapid expansion of its domestic aluminum smelting output in recent years. Exports increased more than 100 percent month-on-month, helping cushion global supply constraints.
In China’s copper industry, increasing energy costs and ongoing logistical disruptions are straining smelting activities and downstream manufacturing. At the same time, China which accounts for 60 percent of global aluminium production is looking to reduce production. Concerns over potential output cuts have since pushed aluminium prices to their highest level in more than four years. Cost increases could become long-term structural challenges if clean energy manufacturers permanently transition to higher-cost suppliers.
Ultimately, the disruption of the Strait of Hormuz has demonstrated that resilience is not uniform across Asia. Planning for future energy shocks calls for strengthening reserve capacities, diversifying supply sources, and increasing electrification across sectors. Countries in the region will pursue parallel investments in both oil and gas exploration, and clean energy transition in an effort to build domestic energy sovereignty and security going forward.



Mannat Jaspal, Director and Fellow, Climate and Energy, ORF Middle East 
Reem Sagahyroon, Research Assistant, Climate and Energy, ORF Middle East

### Global South in the Crossfire: Strategic Competition and Managed Interdependence

The following excerpt is from Chapter 6 — New Arenas of Great-Power Competition of ORF Global Quarterly: Disruption and Recalibration.


The Global South is no longer a peripheral arena in United States (US)-China competition. Trade, technology, industrial policy, logistics corridors, and development finance have become instruments through which strategic rivalry is projected outward.[1] For countries across Asia, Africa, and Latin America, the challenge is no longer simply how to engage Washington or Beijing diplomatically, but how to preserve developmental autonomy in an environment where great-power competition is restructuring markets, supply chains, and industrial choices.
India sits at the heart of this dilemma. Its relationship with China is economically consequential, politically sensitive, and strategically constrained. Bilateral merchandise trade remains substantial yet deeply imbalanced, with Chinese capital goods, intermediates, and processed inputs embedded across Indian manufacturing.[2] Yet the relationship is no longer understood in New Delhi solely through a commercial lens. Since 2020, the security environment has hardened, prompting India to pay closer attention to how concentrated dependence in critical sectors can constrain autonomy under stress. The result is neither wholesale rupture nor effortless coexistence but rather managed interdependence under strategic competition: keeping commercial channels open where growth requires them, tightening guardrails where vulnerability is too high, and diversifying wherever feasible.
That wider logic is now visible across the Global South. Indonesia faces rising imports of Chinese steel and textiles that undercut its own industrialisation efforts, even as it remains dependent on Chinese investment in nickel processing.[3] Vietnam, deeply integrated into China-linked electronics supply chains, is navigating pressures from both sides as US tariffs increasingly target Chinese content routed through third countries. Brazil contends with an influx of low-cost Chinesemanufactured goods, particularly in autos and steel, while remaining reliant on China as its dominant buyer of commodities.[4] South Africa, similarly, has experienced pressure on local manufacturing from Chinese consumer goods, even as Chinese demand sustains its mining sector.[5] Each case differs in specifics, but the underlying dilemma mirrors India’s challenge of capturing the benefits of Chinese economic engagement without ceding industrial ground or strategic leverage
China’s trade position is adjusting to rising tariff barriers, Western industrial policies, and slower access to mature markets by pushing more aggressively into developing economies. In the first two months of 2026, China’s exports rose 21.8 percent year-on-year, with its trade surplus reaching US$213.6 billion. It closed 2025 with a record surplus of US$1.2 trillion, as exporters increasingly redirected goods toward Southeast Asia, Africa, and Latin America.[6] As the past year witnessed US tariffs on Chinese goods escalate to historically high levels, Beijing responded with export controls on critical minerals and retaliatory duties. The combined effect of these measures has squeezed Global South economies between costlier imports, disrupted supply chains, and narrowing market access for their own exports. At the same time, the Gulf crisis, triggered by the US-Israeli strikes on Iran in February 2026 and Iran’s subsequent closure of the Strait of Hormuz, has heightened concerns over shipping, energy prices, and trade-route vulnerability, particularly for import-dependent economies such as India.[7]
This essay frames US-China strategic competition and China’s export surge to the Global South as two dimensions of the same geoeconomic transformation. The first establishes the strategic context: rising tariffs, technology controls, industrial subsidies, and selective decoupling that are fragmenting the global trading system. The second illustrates how that fragmentation is absorbed elsewhere: as access to advanced markets becomes more contested, Chinese goods, capital, and industrial capacity are increasingly redirected into developing economies. These trends demonstrate that the Global South is no longer merely responding to great-power rivalry but is increasingly becoming the arena where the economic consequences of that rivalry are being redirected, negotiated, and contested.

China’s Export Push and the Reordering of Developing-Country Markets
The US is shaping the development landscape of the Global South, through a distinct set of instruments. While China’s presence remains market-deep and trade-heavy, Washington’s approach is more selective, standards driven, and security-inflected. It involves friend-shoring through regional supply-chain arrangements, export controls on sensitive technologies, development finance through the US International Development Finance Corporation, coordination in critical minerals through the Minerals Security Partnership, AI and semiconductor supply-chain alignment through the Pax Silica initiative launched in December 2025, and clean-energy platforms such as the Clean Energy Demand Initiative. This has resulted in a reconfiguration, not a retreat, of US influence—shifting from broad market access toward targeted corridor-building, trusted supply chains, and strategic sectors.
The geography of economic competition has shifted. Rather than simply decoupling from one another, the US and China are seeking to shape the external environment in which others trade, invest, and industrialise. China’s response to tariffs, export controls, and industrial pressure has not been retreat[8] but an outward commercial push, particularly toward developing markets where demand for affordable manufactures, green technologies, digital hardware, and industrial machinery remains strong. For many Global South economies, this makes China more than a supplier and instead a structuring force in development choices.


The Global South is no longer merely responding to great-power rivalry but is increasingly becoming the arena where the economic consequences of that rivalry are being redirected, negotiated, and contested.

The Global South has become central to China’s export strategy for structural reasons. Demand in many advanced economies is weakening, trade barriers are rising, and the politics of overcapacity have intensified. In contrast, developing economies continue to absorb growing volumes of industrial inputs, consumer goods, digital equipment, and transition technologies. This makes them attractive not only as markets, but also as political and strategic constituencies in a shifting trade order. For importing economies, this creates a double-edged reality where goods can lower costs, support infrastructure expansion, accelerate renewable deployment, and relieve supply shortages. Yet they may also arrive at a pace and scale that domestic industries struggle to absorb. When Chinese export surges enter economies with shallow supplier bases, they can widen trade deficits, compress local margins, and complicate the execution of industrial policy.
India’s case is instructive because it shows why this is not a straightforward story of dependence versus resistance. India still relies on Chinese inputs across electronics, machinery, chemicals, renewables, and pharmaceuticals.[9] In a region where production is fragmented across multiple stages, diversification does not necessarily mean replacing China; more often, it means reconfiguring exposure while continuing to operate within value chains where China remains the dominant upstream node. That is why India’s policy is beyond decoupling, and rather an effort to separate developmental necessity from strategic overexposure.

Dependence, Deficits, and the Sectoral Politics of Exposure
A bilateral trade deficit is not inherently exploitative; in fragmented production system, it often reflects value-chain position rather than simple unfairness.[10] Yet deficits become politically and strategically salient when they are large, persistent, and concentrated in sectors that are difficult to substitute. That is why India’s deficit with China matters: it is not merely a macroeconomic issue, but a map of industrial vulnerability.
The key question is composition. Dependence on final consumer goods is one thing; dependence on intermediates, machinery, chemicals, APIs, and critical inputs is another. The more deeply Chinese products are embedded in domestic production, the harder it becomes to absorb disruption without wider economic costs. For India, this vulnerability is especially visible in electronics, renewable energy, pharmaceuticals, and heavy industrial equipment. The issue is less whether trade exists and more of particular forms of trade risk becoming crisis multipliers.
This is also where China’s export surge into the Global South assumes wider significance. Cheap imports may support downstream manufacturing and accelerate access to green technologies, but if they overwhelm domestic firms before local ecosystems mature, they risk trapping countries in a cycle where industrialisation remains shallow and import dependence deepens. The politics of dependence, therefore, is not about rejecting imports but about managing their pace, sectoral concentration, and developmental consequences.
Not all dependence is economically equivalent. Consumer-goods dependence is usually the least binding; it affects prices, inflation, and household welfare, but substitute suppliers can often be found with manageable adjustment costs. Intermediate-goods dependence is more consequential as it is transmitted through production networks—disruptions here can slow domestic output, delay exports, and propagate cost shocks across sectors. Strategicinput dependence is the most significant. Where imports are tied to health security, digital systems, energy transition hardware, or critical minerals, the central issue is not efficiency but continuity, bargaining power, and resilience under stress.
Figure 1: Composition of India’s Imports from China, by Product Category (2024)

Source: Observatory of Economic Complexity[11]
China’s export push into the Global South is not uniform. In solar modules and batteries, China’s scale lowers the cost of energy transitions for developing countries. In industrial machinery and electronics, it supports manufacturing expansion where local capabilities remain limited. In telecommunications equipment and digital systems, however, the issue is not only price but trust, auditability, and infrastructure integrity. In steel, chemicals, and consumer manufactures, Chinese scale can easily become a source of competitive pressure for weaker industrial ecosystems.
The current Gulf crisis sharpens this dynamic. Rising oil prices and disrupted shipping routes have increased the urgency of energy diversification across the Global South, which is likely to accelerate demand for Chinese solar modules, wind turbines, and battery storage.
Yet, this same acceleration deepens supplychain concentration risks: China currently accounts for over 80 percent of global solar module manufacturing and dominates lithiumion battery cell production.[12] A crisis-driven rush to deploy renewables sourced overwhelmingly from a single supplier could exchange one form of energy vulnerability (fossil-fuel dependence routed through contested sea lanes) for another (concentrated dependence on Chinese cleanenergy hardware) at a moment when Beijing’s willingness to use economic leverage is itself under scrutiny.
For India, this sectoral variation is critical. Chinese strength in upstream clean-energy components can advance India’s decarbonisation goals while simultaneously complicating indigenous manufacturing. Chinese machinery helps sustain industrial output but reinforces supplier dependence. Telecom and digital systems raise sharper strategic concerns because the risks involve system control, data integrity, and continuity under stress; which are ultimately questions of technological sovereignty, rather than of mere import competition.[13] Not all dependencies carry the same weight, and a serious policy response must therefore be differentiated, pragmatic, and non-ideological.
Figure 2: Development and Strategic Risk Trade-offs, Select Sectors

Source: Authors’ own

India’s Response: Managed Interdependence in Practice
India’s response has evolved into a layered toolkit built on three pillars: capability building, rule enforcement, and strategic guardrails. First, industrial policy, especially production-linked incentives, aims to draw supplier ecosystems onshore, deepen value addition, and gradually reduce dependence on single sources. Second, standards, conformity requirements, and trade remedies shape import composition and create space for domestic scaling. Third, strategic hardening targets sectors with especially high failure costs, including telecom, sensitive digital systems, data-rich platforms, and critical infrastructure. This is not a push for autarky, but an effort to reduce risky, weaponisable dependence by accepting limited continued reliance on Chinese inputs while diversifying exposure and tightening controls in sensitive areas.
The limitations of India’s policy toolkit are equally important and should be factored into the analysis. The Performance Linked Incentive (PLI) scheme has been effective in attracting investment, scaling assembly operations, and improving export performance, particularly in electronics.[14] However, deeper upstream localisation remains incomplete in components, materials, and process technologies. Standards and conformity requirements can create policy space for domestic firms, yet they also impose compliance costs and may slow diffusion when local capacity is limited.[15]

Chokepoints, Coercion, and the Gulf Shock
Developing countries face a policy dilemma: Chinese exports can provide affordable infrastructure and clean technology essential for rapid growth, but they can also undermine domestic industry and create long-term strategic dependence if left unmanaged. India reflects this broader Global South challenge, as it seeks to leverage low-cost Chinese inputs to support development while simultaneously mitigating excessive vulnerability in an increasingly coercive global environment.
The key lesson from across the developing world is that the real issue is not imports themselves, but the policy context within which they are absorbed. Pakistan’s solar expansion demonstrates how Chinese scale can accelerate development by reducing costs and expediting deployment, while South Africa’s experience illustrates that high import penetration may suppress manufacturing employment, constrain sales growth, and undermine firm survival. Ultimately, Chinese trade is beneficial only when it reinforces domestic capability-building rather than displacing it before it can mature.[16]


Developing countries face a dilemma: Chinese exports can provide affordable infrastructure and clean tech essential for rapid growth, but they can also undermine domestic industry and create long-term strategic dependence.

The most serious risk in India’s relationship with China is not a blanket collapse of trade, but selective coercion through chokepoints. When dependence is concentrated in processed materials, critical minerals, Active Pharmaceutical Ingredients (APIs), electronics components, or other hard-to-substitute intermediates, even narrow restrictions can cascade into broader production losses.[17] India’s resilience strategy has therefore evolved in two directions: targeted domestic capacity creation in identified bottleneck sectors, and diversification through trusted partnerships in critical minerals, advanced manufacturing, and supply-chain resilience.
The challenge for India and much of the Global South is increasingly one of dual derisking: reducing concentrated exposure not only to China but also to the US. Washington’s willingness to deploy tariffs, sanctions, and technology restrictions against partners as well as adversaries means that over-alignment with either pole introduces distinct vulnerabilities. A policy architecture built around a single axis of dependence reduction risks substituting one source of coercive leverage for another. Genuine strategic autonomy, therefore, requires diversifying supply chains, technology partnerships, and market access away from both major powers simultaneously. Although politically more difficult, this remains the only approach capable of safeguarding developmental flexibility in an era when economic statecraft is exercised from multiple directions.
The Gulf crisis has made clear that India’s vulnerability is not confined to bilateral dependence, but extends to a wider system in which China-related supply chains, maritime chokepoints, energy flows, and trade logistics are tightly interconnected. Disruption in the Strait of Hormuz affects not only oil supplies, but also freight rates, insurance costs, delivery schedules, inventory management, and the viability of just-in-time production across import-dependent economies.[18] For India, this implies that de-risking from China cannot be separated from reducing exposure to maritime and energy disruptions. Strategic autonomy, therefore, is no longer only about tariffs, incentives, or diplomacy, but also about strengthening systemic resilience through secure shipping routes, expanded storage capacity, and alternative trade corridors.

Conclusion: Strategic Autonomy in an Age of Redirected Rivalry
US–China strategic competition is increasingly reshaping the Global South, as the contest now extends well beyond tariffs and summit diplomacy to encompass production, supply, finance, and the absorption of industrial surplus. China’s export surge into the Global South is therefore not merely a trade trend, but part of a wider reordering of global commerce shaped by tariff fragmentation, industrial overcapacity, and geopolitical pressures. India’s response provides a useful lens on this shift: it has neither embraced full decoupling nor accepted passive dependence, but instead pursued managed interdependence—remaining open where growth requires it, building domestic capability where substitution is feasible, and imposing guardrails where dependence becomes strategically risky.
Gaps still exist. Domestic capability-building in semiconductors, advanced chemicals, and critical minerals processing is still at an early stage, and PLI-supported manufacturing has not yet achieved the scale or cost-competitiveness required to reduce import dependence in most targeted sectors. Diversification of supply chains away from China has advanced only gradually, as alternative sourcing from Vietnam, South Korea, or Japan remains limited in volume and is frequently more prohibitive. Regulatory enforcement against circumvention, including transhipment and under-invoicing, has been inconsistent. Moreover, India has yet to articulate a coherent framework for dual de-risking that addresses vulnerability to US economic statecraft alongside Chinese leverage. Managed interdependence, in other words, is a credible strategic direction, but one whose implementation continues to lag behind its stated ambition.
The pressures of 2026 only reinforce this logic. China’s export surge, weak global trade growth, and the Gulf crisis together underscore an increasingly volatile external environment in which diverted trade, energy shocks, and coercive leverage can reinforce one another. For India and the wider Global South, the task is not to choose sides in great-power rivalry, but to develop sufficient industrial depth, logistical resilience, and policy autonomy to prevent that rivalry from determining development outcomes. The challenge, therefore, is not disengagement from China, but disciplined engagement on terms that safeguard developmental agency: importing where it lowers transition costs, diversifying where concentration is dangerous, and building domestic depth where external dependence is susceptible to coercion.



Soumya Bhowmick is Fellow, Centre for New Economic Diplomacy (CNED), Observer Research Foundation.
Arya Roy Bardhan is Junior Fellow, CNED, Observer Research Foundation.



[1] Henry Farrell and Abraham L. Newman, “Weaponized Interdependence: How Global Economic Networks Shape State Coercion,” International Security 44, no. 1 (2019): 42–79,https://www.jstor.org/stable/10.2307/26777882.
[2] India Brand Equity Foundation, “China Overtakes US as India’s Top Trading Partner in FY24: GTRI,” IndBiz, May 13, 2024,https://indbiz.gov.in/china-overtakes-us-as-indias-top-trading-partner-in-fy24-gtri.
[3] Brendan Kelly and Shay Wester, “ASEAN Caught Between China’s Export Surge and Global De-Risking,” Asia Society Policy Institute, February 20, 2025, https://asiasociety.org/policy-institute/asean-caught-between-chinas-export-surgeand- global-de-risking.
[4] Lucas Lorimer, “Brazil Plans Response as Steel Sector Hit by Chinese Imports and U.S. Tariffs,” Datamar News, December 11, 2025, https://datamarnews.com/noticias/brazil-plans-response-as-steel-sector-hit-by-chinese-imports-and-u-stariffs/.
[5] Marvellous Ngundu, “South Africa’s Trade Deficit Dilemma with China,” Institute for Security Studies, March 5, 2025, https://issafrica.org/iss-today/south-africa-s-trade-deficit-dilemma-with-china.
[6] Joe Cash, “China’s Exports Turbocharge into 2026 after Record-Breaking Year,” Reuters, March 10, 2026, https://www. reuters.com/world/asia-pacific/chinas-exports-turbocharge-into-2026-after-record-breaking-year-2026-03-10/.
[7] United Nations Conference on Trade and Development (UNCTAD), “Hormuz Shipping Disruptions Raise Risks for Energy, Fertilizers and Vulnerable Economies,” March 10, 2026, https://unctad.org/press-material/hormuz-shippingdisruptions- raise-risks-energy-fertilizers-and-vulnerable-economies.
[8] Tatjana Schulze and Weining Xin, Demystifying Trade Patterns in a Fragmenting World, IMF Working Paper No. 2025/129 (Washington, DC: International Monetary Fund, June 27, 2025), https://www.imf.org/en/publications/wp/ issues/2025/06/27/demystifying-trade-patterns-in-a-fragmenting-world-567071.
[9] Ministry of Commerce and Industry, Government of India, “Unstarred Question No. 4948: Trade with China,” Lok Sabha, April 1, 2025,https://www.commerce.gov.in/wp-content/uploads/2025/04/LS-USQ-No.4948- dated.-01.04.2025-1.pdf.
[10] Organisation for Economic Co-operation and Development (OECD) and World Trade Organization (WTO), Trade in Value Added: OECD–WTO Database Brochure, January 2013, https://www.wto.org/english/res_e/statis_e/miwi_e/ tradedataday13_e/oecdbrochurejanv13_e.pdf.
[11] Observatory of Economic Complexity, “India (IND) and China (CHN) Trade,” https://oec.world/en/profile/bilateralcountry/ ind/partner/chn?selector538id=HS2.
[12] International Energy Agency (IEA), Solar PV Global Supply Chains, July 2022, https://www.iea.org/reports/solar-pv-globalsupply- chains/executive-summary.
[13] Department of Telecommunications, Government of India, “Trusted Telecom Portal,” https://trustedtelecom.gov.in/.
[14] Press Information Bureau, Government of India, “Electronics Manufacturing in India Expanded Significantly in the Last 11 Years; India Emerges as the Second-Largest Mobile Manufacturer in the World,” February 6, 2026, https://www.pib. gov.in/PressReleasePage.aspx?PRID=2224503®=3&lang=2.
[15] Sudarshan Varadhan, “India Mandates Use of Locally-Made Solar Cells in Clean Energy Projects from June 2026,” Reuters, December 10, 2024, https://www.reuters.com/business/energy/india-mandates-use-locally-made-solarcells- clean-energy-projects-june-2026-2024-12-10/.
[16] Sofia Torreggiani and Antonio Andreoni, “Rising to the Challenge or Perish? Chinese Import Penetration and Its Impact on Growth Dynamics of Manufacturing Firms in South Africa,” Structural Change and Economic Dynamics 64 (2023): 199–212, https://doi.org/10.1016/j.strueco.2022.12.010.
[17] Guillaume Beaumier and Madison Cartwright, “Cross-Network Weaponization in the Semiconductor Supply Chain,” International Studies Quarterly 68, no. 1 (2024), https://academic.oup.com/isq/article/68/1/sqae003/7578750.
[18] International Energy Agency, “Strait of Hormuz,” Oil Security and Emergency Response, https://www.iea.org/about/oilsecurity- and-emergency-response/strait-of-hormuz.

### Canada Strong Fund: A Platform for Gulf Strategic Investment

Spotlight:


 	Canada’s proposed sovereign wealth fund departs from traditional models and will require steady market returns, political independence, and clear value creation to ensure long-term success.
 	Canada and its GCC counterparts share strong bilateral ties that are expected to deepen further through new and ongoing engagements.
 	Clear avenues exist for Canada-GCC collaborations via co-investments with the CSF, particularly as Gulf States pursue overlapping priorities in sectors including critical minerals, conventional and clean energy, and food security.

Canada’s recently announced sovereign wealth fund (SWF) - Canada Strong Fund (CSF) - comes at a time of growing economic uncertainty and reflects a broader push to build what Prime Minister Mark Carney described as a ‘stronger, more resilient, and more independent Canadian economy.’ Rising trade tensions and tariff threats from its long-standing partner, the United States (US), have intensified concerns around economic resilience and strategic autonomy. At the same time, Canada has long faced a challenge of ‘infrastructure in waiting,’ driven by factors including insufficient private-sector capital deployment, supply chain disruptions, and regulatory bottlenecks - including ESG reporting.
Against this backdrop, the CSF has been mandated to generate market-rate returns for Canadians by co-investing alongside partner investors in domestic projects across priority sectors. Despite initial controversy surrounding the development, if successful it could create a new pathway for Canada to deepen partnerships with the Gulf countries. This comes at a time when both Canada and Gulf states are seeking greater economic resilience and diversification pathways.

A Different Model of Sovereign Capital
Traditionally, SWFs follow two broad characteristics: first, they are financed through domestic capital surpluses from balance of payments or commodity exports; and second, they invest through diversified portfolios spanning both domestic and foreign markets. The CSF diverges from both patterns. It will initially be financed through a government allocation of CAD 25 billion over three years, raised through ‘borrowing’, an approach that has stirred very mixed reactions among Canadian financial and political experts. This concern stems largely from Canada’s persistent fiscal deficits since 2015 – at approximately CAD 67 billion in FY25-26. Additionally, the CSF is exclusively focused on domestic investments. However, this approach is not entirely unprecedented. Academic literature identifies varying SWF objectives, one of which includes supporting domestic economies by serving as government-backed venture capital funds - where the CSF seems to fall - or as a stabilisation fund to compensate for shortfalls in the government budget.

At the same time, the CSF must present value addition beyond existing federal investment vehicles such as the Canada Infrastructure Bank (CIB) and Canada Growth Fund (CGF).
Given that the CSF is expected to operate domestically, its mandate will have to avoid creating tensions between commercially driven investment strategies and broader government policy priorities to prevent inefficiencies and politically driven capital allocation. At the same time, the CSF must present value addition beyond existing federal investment vehicles such as the Canada Infrastructure Bank (CIB) and Canada Growth Fund (CGF). This could include, unlocking capital flows beyond the capacity of current institutions or strengthening economic resilience in ways that would otherwise be difficult to achieve. If unable to, it risks increasing institutional complexities rather than achieving the desired result of building Canada’s wealth and advancing priority sector projects.

Canada-GCC Growing Relations
Canada already maintains deep economic relationships with the Gulf countries and is only continuing to expand, reflected in at least nine visits by Prime Minister Mark Carney’s ministers and officials to Gulf nations since October 2025. This growing GCC-Canada relationship creates potential avenues for collaboration between the CSF and Gulf financial entities - including SWFs - in sectors where Canada maintains competitive advantages. Such collaborations align well with trends in the Gulf, where SWFs are increasingly partnering with private financial institutions and other state-backed investors through joint ventures and sovereign-private partnerships (SPPs). These models support multiple objectives, including  costs saving, facilitating knowledge sharing, and diversifying investment portfolios.

This growing GCC-Canada relationship creates potential avenues for collaboration between the CSF and Gulf financial entities - including SWFs - in sectors where Canada maintains competitive advantages. 
Reciprocally, Canada should continue to expand investment flows into the GCC states. Established Canadian pension-backed funds, private capital managers, and venture capital firms have expertise in several sectors that are increasingly prioritised in the Gulf. These include industrial decarbonisation, digital infrastructure, and climate technology. These entities can cooperate with Gulf financial institutions through joint ventures, equity investments, and co-investment funds. The United Arab Emirates (UAE) also offers a highly incentivised and flexible regulatory environment through its financial free zones - the Dubai International Financial Centre and the Abu Dhabi Global Market - providing Canadian firms with access to Gulf capital and opportunities to form strategic partnerships with regional actors.
Table 1: Examples of Ongoing Canada-GCC Bilateral Engagements




Canada-UAE
● Canada-UAE Foreign Investment Promotion and Protection Agreement (FIPA) signed in November 2025

● UAE has committed to invest approximately US$50 billion in Canada

● Canadian direct investment in the UAE reached US$242 million in 2024


Canada-Saudi Arabia
● Both countries have agreed to begin negotiations toward a bilateral FIPA

● Agreed to reactivate the Joint Economic Commission (JEC), a ‘treaty-based mechanism to promote trade and investment initiatives of mutual benefit’


Canada-Qatar
● Prime Minister of Canada and the Amir of Qatar issued a joint statement committing Qatar to strategic investments in large-scale Canadian infrastructure projects

● Canada and Qatar plan to finalise a Foreign Investment Promotion and Protection Agreement (FIPA) by this year

● Agreed to expand cooperation on trade and investment through a Joint Canada-Qatar Commission on Economic, Commercial, and Technical Cooperation


Canada-Kuwait
● Signed an MoU in 2022  committing both countries to deeper cooperation across areas of mutual interest


Canada-Oman
●  Agreed to advance bilateral engagement in trade, energy, critical minerals, higher education, tourism and people-to-people ties

●  Canadian investments maintain a solid presence in the Omani market, with approximately 280 Canadian companies operating with an estimated total capital of around OMR37 million

● Bilateral trade reached CAD $222 million (OMR 62m, USD 160m) in 2025 and highlighted the strong potential for further economic growth



Source – Author’s Own

Strategic Sectors for CSF-GCC Investment Cooperation
Although the CSF will target a range of sectors considered strategically important to Canada, several areas also align closely with Gulf priorities, creating opportunities for mutual benefit.
Critical Minerals
Gulf investors are more actively prioritising long-term access to critical minerals as part of broader efforts to strengthen supply-chain resilience and secure inputs necessary for the global energy transition. These minerals include lithium, nickel, cobalt, graphite, and potash, all of which are essential for batteries, renewable energy technologies, and electrification. To illustrate this, in line with Saudi Arabia’s Vision 2030 strategy, a joint venture - Manara Minerals -was established between  Public Investment Fund (PIF), the country’s SWF, and Ma’aden specifically to pursue international critical mineral investments.
Canada is particularly well positioned in this space. According to the International Energy Agency, the country is expected to emerge as a major global supplier of key CMs such as nickel and lithium, while also possessing significant capacity to expand production further. The nation additionally maintains strengths across midstream and downstream components of the critical minerals value chain, creating a broad set of avenues for Gulf investors seeking both resource access and processing capabilities.

Source - IEA
Earlier in 2026, Canada and Saudi Arabia signed a Memorandum of Understanding (MoU) focused on cooperation in mineral resources, aimed at promoting trade and investment across critical mineral value chains. More substantially, the UAE and Canada are reportedly finalising an agreement exceeding CAD 1 billion to expand domestic critical mineral processing capacity within Canada.
Conventional and Clean Energy
With Carney in office, Canada’s oil and gas sector has seen renewed support and a government pledge to support industry growth. Implemented industrial carbon pricing has shown limited evidence of undermining the sector’s competitiveness. Oil production grew by 20 percent between 2024 and 2025. In parallel, Canada stands as the world’s fifth-largest natural gas producer, with expanding LNG export capacity expected to boost domestic production. Coupled with the ongoing tensions in the Middle East, Canada’s oil and gas sector is becoming an increasingly attractive site for investments. This aligns well with Gulf states’ continued investments in international hydrocarbon assets. Companies such as Saudi’s Aramco and UAE’s ADNOC have increased investments in US LNG projects in recent years, while QatarEnergy has acquired stakes in Egypt, Namibia, and South Africa.

Coupled with the ongoing tensions in the Middle East, Canada’s oil and gas sector is becoming an increasingly attractive site for investments.
Beyond conventional energy, there has been a growing push for SWFs to play a more active role in financing the global energy transition.  In 2023, nearly half of global SWF allocations toward green assets originated from GCC-based SWF, where renewable energy was the most attractive investment segment.  The Gulf countries have made their pursuit of economic and energy diversification clear through national strategies such as the Oman Vision 2040. On this note, a report by the Canadian Renewable Energy Association identifies Canada as a highly attractive destination for renewable energy investment over the next decade, driven by its vast resource base, relatively stable policy environment, and rising electricity demand.

Source - Canadian Renewable Association
Although Gulf investments in Canada’s renewable energy sector remains relatively limited to date, the scale of projected growth in Canada's clean energy sector presents considerable prospects for Gulf SWFs and financial institutions to invest alongside the CSF and other Canadian institutions such as the CIB – whose main role is to accelerate low carbon transitions by de-risking and attracting private capital into large-scale renewable energy projects.
In addition, Canada is emerging as a leader in nuclear energy, with 17 nuclear power reactors in operation and strong ambitions to advance small modular reactor (SMR) development. This aligns closely with the UAE’s position as the Gulf region’s sole nuclear power operator with a potential interest in SMR-powered data centres,  creating opportunities for the CSF and Gulf financial entities to collaborate on bilateral investments within the nuclear energy sector.
Agri-Food
Gulf countries - which rely on imports for nearly 90 percent of their food needs - are increasingly prioritising more diversified and resilient food supply chains, particularly following disruptions such as COVID-19 pandemic and the current US-Iran conflict. Consequently, overseas agricultural investments remain central to Gulf food security strategies. For example, Saudi Arabia and UAE companies have expanded their agricultural footprint through acquisitions of farmland and agribusiness across countries such as Ethiopia and Chile.

Although geographic distance increases transportation costs, growing concerns over supply chain resilience and redundancy could support the case for co-investments in this sector.
Canada hosts extensive arable land, a reputation for high-quality agri-food products, and relatively sustainable agricultural production systems. However, agriculture accounts for only 2 percent of Canada’s government-backed growth, venture, and infrastructure funding, indicating meaningful room for expansion. The Canadian government has therefore listed agricultural projects as one of the sectors of interest for the developing CSF, creating openings for co-investment with Gulf SWFs and financial entities.
As Canada looks to widen its trade and investment partnerships beyond the US, GCC countries could play a larger role in expanding investments across Canada's agri-food sector. Gulf states currently maintain strong food trade ties with Canada (graph), and the Canada-UAE Business Council includes a dedicated working group focused on agriculture and food security. Although geographic distance increases transportation costs, growing concerns over supply chain resilience and redundancy could support the case for co-investments in this sector.

Source - Government of Canada
There are select risks that co-investors need to be mindful of navigating when operating alongside the CSF.  Given the fund is initially operating off borrowings, generating significant returns on its investments is critical to reduce the risk of political or financial pressures driving shifts in investment strategies or asset liquidation over time, potentially creating misalignments with Gulf investors that prioritise long-term stability. To hedge risks beyond co-investment structures, the CSF could diversify into foreign assets - including opportunities in the Gulf - while still maintaining a primarily domestic investment focus. Given the current geopolitical environment, the Gulf SWFs may choose to reroute some investments domestically. Nevertheless, Canada’s expanding regional engagement and diplomatic support for partners in the GCC during recent crises could encourage institutional partnerships that position the nation favorably for long-term investment diversification.



Reem Sagahyroon is a Research Assistant, Climate and Energy, ORF Middle East.

### A Levantine Path to Gulf Resilience

Spotlight


 	Geopolitical and logistical disruption have strengthened the case for closer engagement between Arab Gulf and Arab Levant countries.
 	Strategic political positioning that signals reliability has spurred new investment pledges from the Gulf to the Levant.
 	Financial, institutional, and security constraints may hamper these plans, underscoring the importance of national leadership and stronger institutions conducive to development.

The landmass comprised between the Arabian-Persian Gulf and the Arabian Sea, on one side, and the Red and Mediterranean Seas, on the other, now finds itself durably squeezed between the radical, self-centred, zero-sum conceptions of homeland security currently espoused in Tehran and Tel-Aviv. In concrete terms, all countries in the Gulf cooperation council (GCC) and the Arab Levant have been on the receiving end of bombing, drone and missile attacks, or military intelligence operations from Iran or Israel since October 7.
Strikes against Gulf monarchies and the blockade of the Strait of Hormuz have strikingly illustrated this. In their aftermath, two crucial questions have arisen for the GCC states. The first relates to the reliability and safety of the supply routes tying the GCC to the rest of the world. The second is political, and relates to the perceived clarity of positions expressed by foreign nations vis-à-vis Iran’s actions towards its neighbours. The ensuing examination led GCC countries to express renewed interest in their Arab depth. A land bridge to the Mediterranean, the Levant stands to be leveraged as a strategic space for the collective resilience of Arab West Asia.
In particular, Egypt, Jordan, and Syria seem well positioned to reap the benefits of what may be termed geoeconomic stabilisation. This refers to a situation in which security and strategic considerations lead countries to politically direct economic resources into the infrastructure, financial, and productive sectors of like-minded states, with  the aim of advancing mutual economic and political benefits, including stability. Such recalibration could prove valuable, as Levant countries have long grappled with fragility, conflicts, and high levels of macroeconomic, financial and social vulnerability, all aggravated by the ongoing crisis. Nevertheless, institutional weakness, high levels of regional tensions, and skewed political economies, threaten to derail the expected benefits from increased commitments toward the Levant.

The New Logic of 
Part of the answer to the logistical conundrum born out of post-October 7 regional geopolitics lies in the GCC itself.  The reboot of GCC supply chains and transportation systems has led to renewed emphasis on the importance of circumventing Hormuz and reducing reliance on the conduit. Against this backdrop, notions like redundancy and resilience are gaining traction.
Naturally, the Arabian Peninsula offers a diversity of overtures to high seas, shaping the distribution of energy infrastructure beyond the Arabian-Persian Gulf. Through the Arabian Sea, Oman’s oil and gas directly flow to Asian customers. Similarly, Saudi Arabia has leveraged access to the Red Sea, tapping the 1,200km-long East-West pipeline (or Petroline) to pump crude from Abqaiq to the port of Yanbu. Throughout the crisis, the 400km-long Abu Dhabi Crude Oil Pipeline has channelled roughly half the United Arab Emirate’s (UAE) pre-war exports from Habshan through the port of Fujairah. Beyond fuel, trucks and wagons have carried fertilisers to Saudi Arabia’s west coast.
As a result, plans to increase resilience can partly rely on GCC territory and integration across the bloc. New initiatives in this regard include the planned doubling of Abu Dhabi’s ADNOC’s export capacity through Fujairah by 2027; a logistics corridor linking the UAE’s Sharjah to the Omani ports of Duqm, Salalah and Sohar; and a multimodal trade bridge between Sharjah and the Saudi city of Dammam. The Gulf railway project, approved in 2009 to link Kuwait City to Muscat across the territory of all GCC members, has also received fresh impetus.

Bridges to the and Networked Resilience
The crisis has also underscored the key importance of physical connectivity beyond the GCC, notably towards the Mediterranean. While the push towards the Eastern Mediterranean and Levant are not new, the case for it has been reinforced since February 28.
The Mediterranean separates the GCC from European (and North American) customers and suppliers. Thus, lorries transiting through Egypt have delivered food to Gulf markets, which collectively import about 85 percent of their needs. Shipping companies have activated land routes across Jordan. Saudi oil has been transported from Yanbu to the Mediterranean through SUMED, a 320km-long pipeline crossing northern Egypt. Established in 1974, SUMED, now a joint venture between investors including Saudi Aramco, Mubadala Energy, and QatarEnergy, provides a noteworthy case of joint GCC investment into network infrastructure feeding into regional resilience. Tankers of Iraqi oil have also reportedly been shipped through the port of Baniyas, in Syria, at a time Baghdad’s exports through the Gulf have been virtually reduced to zero.

The crisis has also underscored the key importance of physical connectivity beyond the GCC, notably towards the Mediterranean. While the push towards the Eastern Mediterranean and Levant are not new, the case for it has been reinforced since February 28.
Against this backdrop, interest in the Levant has grown, as countries in the subregion seek to monetise their geography. This is not occurring in isolation. In 2023, the India-Middle East-Europe Economic Corridor (IMEC) was designed to link India to the North Atlantic via the Arabian Peninsula and the Eastern Mediterranean, including Jordan. Since then, Egypt and Lebanon have voiced their interest in joining IMEC.
Israel's aggressive posture following October 7, combined with the fall of the Assad regime in December 2024, has created new impetus for Arab economic coordination. In July 2025, Dubai’s state-owned DP World announced a US$800 million investment in the Syrian port of Tartous. Later in November, Türkiye’s ministry of Trade announced the upcoming reopening of a land trade route to the GCC via Syria and Jordan. Then, in February 2026 — just weeks before the Gulf crisis erupted — Saudi entities backed by the Public Investment Fund pledged US$2.8 billion towards Syrian infrastructure, including two airports and fibre-optic cables.

A Geoeconomic Momentum 
By the same token, the Gulf crisis could provide fresh political impetus for investment in connectivity across the Levant — an option already made attractive by deepening engagement between Levant countries and GCC states.  In a speech criticising the Arab League for its inaction, the diplomatic advisor to the UAE president Anwar Gargash singled out Egypt, Morocco and Syria for their constructive stance. In April, Syria’s president Ahmed al-Sharaa undertook a Gulf tour spanning Riyadh, Doha, and Abu Dhabi. Egypt’s Abdelfattah el-Sisi likewise toured four Gulf capitals in March before returning to Abu Dhabi in early May to inspect an Egyptian fighter jet detachment deployed there. Meanwhile, Cairo has deepened diplomatic coordination with Ankara and Riyadh, consolidating ties with the Middle East’s three largest economies simultaneously. Jordan, too, has signalled strong alignment with Gulf partners: it has issued joint statements with Gulf states (Oman excepted) condemning Iranian attacks, and co-sponsored two UN Security Council resolutions alongside GCC members.

Gulf states have also expressed interest in overland data cables to Europe, driven by the vulnerability of Red Sea subsea cables to attack — a risk that threatens digital connectivity across the region. 
This has laid the ground for deeper Gulf engagement across the Levant. In April, Jordan and the UAE inked a US$2.3 billion agreement establishing a joint venture between Abu Dhabi sovereign fund L’IMAD and Jordanian public stakeholders to develop a national railway network, while Saudi Arabia’s transport minister signalled that his country was studying a rail link to Türkiye via Jordan and Syria. In May, following a UAE-Syria investment forum in Damascus, UAE real estate developer Emaar — whose principal shareholders are Dubai sovereign funds Dubai Holding and the Investment Corporation of Dubai — announced plans to invest up to US$18 billion in Syria. Gulf states have also expressed interest in overland data cables to Europe, driven by the vulnerability of Red Sea subsea cables to attack — a risk that threatens digital connectivity across the region. In this respect, the Levant corridor, offers a critical terrestrial alternative to an undersea backbone that has proven dangerously exposed.

Obstacles on the Road
These developments point to a highly positive-sum dynamic: Gulf states are simultaneously pushing to secure new transport corridors through the Levant and diversify their revenue streams from it. Yet there are good reasons for caution. First, the projects described remain ink on paper. Second, similar initiatives have sometimes lingered for years or even decades without materialising. Third, their implementation would depend on the fiscal capacity of Gulf states currently facing economic disruptions. Fourth, the institutional ability of Levant countries to deliver on such ambitions is far from assured. Large-scale projects of this kind risk compounding the fragility of weak institutions — spurring unhealthy competition for major contracts and further distorting political economies toward rent-seeking. Fifth, the underlying business case is not self-evident: the Mediterranean, for instance, is no obvious route to reach the Asian consumers who absorb over 80 percentof GCC energy exports. Finally, regional tensions — above all, sustained pressure from Iran and Israel — remain a serious obstacle to implementation.
That said, the case for regional connectivity rests precisely on the imperative for Levant countries to break the doom loop in which they are trapped — and to do so through collective resilience. At this critical juncture, whether pro-growth coalitions can seize these opportunities will depend, in large part, on the vision of national leaderships, and on the fortune that attends them.



Akram Zaoui is an Associate Fellow, Geopolitics at ORF Middle East.

### Russia-China Defence and Security Partnership: Intensification Amid Constraints

The following excerpt is from Chapter 5 — New Arenas of Great-Power Competition of ORF Global Quarterly: Disruption and Recalibration.


Never against each other, but not always together”[1]—this is the formulaic expression often used in discussions among Russian officials and experts to describe Russia-China relations. Such characterisation captures the nuances of bilateral engagement more accurately than the widely publicised “no-limits partnership”, which has become a cliché in global expert analysis since February 2022.
Despite the formal projection of a “comprehensive strategic partnership”,[2] neither side is willing to shoulder the burden of protecting the other during conflicts. China is carefully balancing its position on the war in Ukraine, offering Russia targeted support while avoiding direct military involvement in the form of supplying lethal weapons or deploying troops. Similarly, Moscow would like to avoid getting entangled in China’s conflicting relations with India, Japan, Vietnam, or the United States (US). This cautious approach on both sides imposes a clear ceiling on their engagement and leaves limited prospects for an alliance-like partnership in the future.
Over the past several years, Russia and China have strengthened their political dialogue, reinforcing their affinity in defence and security. Much of this strategic alignment derives from both Moscow’s and Beijing’s efforts to act in concert to counterbalance the US. Their shared opposition to US hegemony has accelerated the evolution of their bilateral ties, most evident in defence cooperation. At an unprecedented level of bilateral engagement, defence relations have expanded to encompass extensive transfers of technology from Russia,[3] the intensification and broadening of bilateral exercises, and closer coordination between the militaries, including the exchange of battlefield experience.[4]
In the military-technical domain, Russia has long supplied China with advanced weaponry and equipment, ranging from fighter jets and jet engines to air defence systems and assistance in developing a ballistic missile early warning system (BMEWS) (see Table 1). The latter is particularly noteworthy from a political perspective: first, because such systems represent rare and sophisticated technology previously developed and maintained only by the US and Russia;[5] and second, because it directly enhances China’s strategic capabilities vis-à-vis the US. Whether the Russian and Chinese systems exchange data automatically—a development that would effectively amount to the creation of a joint global missile defence network and reveal the depth of their military cooperation— remains an open question.[6]
Table 1. Russian Military Supplies to China (2016-2025)

Source: SIPRI Arms transfers database[7]
Russian arms imports were particularly instrumental during the 1990s and 2000s, enabling the Chinese military-industrial complex to develop expertise in producing its own military platforms and emerge as a self-reliant arms manufacturer. Conversely, Russia has more recently experienced a shortage of certain types of military platforms, a challenge that has become evident during the war in Ukraine. As a result, it may even need to consider acquiring defence systems such as military transport aircraft or AWACS planes from China, which developed them using Soviet technology.
Moscow is also becoming increasingly eager to pursue joint cooperation, including research and development (R&D) in the high-technology production of military equipment such as air and missile defence systems, fifth- and sixthgeneration fighter aircrafts, submarines, and spacecraft.[8] From Moscow’s perspective, codevelopment and co-production are intended to shift the balance from China’s unilateral procurement of Russian weapons systems to a more collaborative mode of cooperation, although this remains largely aspirational and has yet to yield tangible progress.[9]
In recent years, amid the war in Ukraine, Russia has sourced from China various dual-use items, including microelectronics and critical components necessary for defence production. These supplies are believed to have assisted Russia in overcoming a critical juncture in the war in 2023 and in sustaining the production of advanced equipment and missiles.[10] However, China has refrained from exporting heavy weapons or fully assembled arms to Russia, with the exception of a limited number of Shaanxi Baoji Tiger armoured vehicles supplied to Russian paramilitary forces.[11] This ambiguity has enabled China to portray itself as a proponent of peace and deflecting accusations of direct involvement in the war alongside Russia. A notable asset that Russia contributes to the partnership is battlefield experience, which the Chinese Army lacks. This issue has been highlighted during multiple exchanges between military delegations from Moscow and Beijing.[12]
Engagement between military officials has increased markedly in the recent years, with a growing number of meetings and dialogues. Russian Defence Minister Andrey Belousov, for example, since assuming office in May 2024, has conducted four rounds of talks with the Chinese military-political leadership, including Vice Chairman of the Central Military Commission Zhang Youxia[13] and Defence Minister Dong Jun. During their most recent video call in January 2026, Belousov and Jun discussed developments concerning Venezuela and Iran.[14] This was followed by an official visit to China in February 2026 by the Secretary of the Russian Security Council, Sergey Shoigu, who held talks with Wang Yi, Member of the Political Bureau of the CPC Central Committee and Foreign Minister. According to the Chinese readout, the discussions addressed several flashpoints in the Indo-Pacific, including “stability in the Taiwan Strait” and “Japan’s attempts to accelerate remilitarisation.”[15]


From Moscow’s perspective, co-development and coproduction are intended to shift the balance from China’s unilateral procurement of Russian weapons systems to a more collaborative mode of cooperation.

The Indo-Pacific is a key geography where Russia and China have reinforced one another politically and militarily. Their converging regional outlooks are shaped by a shared perception of threat, articulated by officials from both sides, arising from so-called “closed military-political alliances.” This affinity in geopolitical approaches has contributed to the increasing frequency and complexity of bilateral exercises, indicating a gradual shift toward deeper coordination between their armed forces.
Since 2022, Russia and China have intensified their annual joint air and naval patrols in the Indo-Pacific.[16] The locations of these manoeuvres indicate that Moscow and Beijing are signalling coordinated efforts directed against the US and its regional allies. In addition to regular air patrols near Japanese and South Korean airspace, the Russian and Chinese strategic bombers TU-95MS and Xian H-6K conducted a patrol near Alaska in July 2024, where they were intercepted by the US and Canadian fighter aircrafts.[17] Expanding their bilateral military activities in the region, Russia and China carried out a joint submarine patrol in August 2025, which included the exchange of sonar data and rescue exercises, in both the Sea of Japan (the East Sea) and the East China Sea.[18] Another notable development was the resumption of joint anti-missile drills after an eight-year hiatus, with the third round held “within Russian territory” in December 2025.[19]
Beyond bilateral drills, Russia and China regularly conduct maritime exercises in the Indian Ocean, including with South Africa and with Iran (see Table 2). The nine-day BRICS-Plus naval exercise, ‘Will for Peace’, off South Africa’s Western Cape, marked the first occasion on which all four powers participated (alongside the UAE).[20] Although the military dimension is not formally part of the BRICS agenda, framing the drills as a ‘BRICS Plus naval exercise’[21] suggests an intention by some countries to introduce this aspect into the group’s activities. However, two founding BRICS members—Brazil and India—chose not to participate, underscoring the limited scope of the group’s military engagement. The most recent ‘Maritime Security Belt’ drills with Iran were held in the Gulf of Oman in February 2026, coinciding with a build-up of US naval forces in the region.[22]
Table 2. Russia-China Military Drills (May 2022-February 2026)

Source: Author’s own, using data from various open sources.
Although there is a significant gap, and room for mistrust remains between the Russian and Chinese militaries, their engagement in recent years indicates deeper coordination and operational integration. Efforts by US President Donald Trump to drive a wedge between Beijing and Moscow have thus far not altered the trajectory of their defence partnership, which continues to be sustained by their shared perception of the US and the US-led alliances as a common security threat.



Aleksei Zakharov is Fellow, Russia & Eurasia, Strategic Studies Programme, Observer Research Foundation.



[1] “The Head of IMEMO RAS: The Confrontation Between the US and China Will Be the Main Issue in the Post- Pandemic World,” TASS, July 10, 2020, https://tass.ru/interviews/8936527; Andrei V. Kortunov et al., Russia-China Dialogue: The 2022 Model: Report No. 78, Moscow, Russian International Affairs Council, 2022, https://russiancouncil.ru/ papers/Russia-China-2022-Report78.pdf.
[2] “Joint Communique Following the 30th Regular Meeting of the Heads of Government of Russia and China,” Government of Russia, November 4, 2025, http://government.ru/news/56833/.
[3] Russia has been willing to supply China with a range of state-of-the-art platforms, including air defence systems and fighter jets. However, Moscow has been reluctant to share the most advanced technologies for producing jet engines or stealth propulsion systems for the latest nuclear-powered submarines, which China has been seeking to acquire.
[4] Claus Soong, “China–Russia Military Cooperation Targeting Taiwan Could Link the European and Asia–Pacific Theaters,” MERICS, November 6, 2025, https://merics.org/en/comment/china-russia-military-cooperation-targetingtaiwan- could-link-european-and-asia-pacific.
[5] Vasily Kashin, “Chinese–Russian Ballistic Missile Cooperation Signals Deepening Trust,” East Asia Forum, February 20, 2021, https://eastasiaforum.org/2021/02/20/chinese-russian-ballistic-missile-cooperation-signals-deepening-trust/.
[6] Vasily Ivanov, “Maximum Rapprochement Without Strategic Alliance,” Nezavisimaya Gazeta, December 21, 2023, https://nvo.ng.ru/gpolit/2023-12-21/1_10_11_1237_china.html; Kashin, “Chinese–Russian Ballistic Missile Cooperation Signals Deepening Trust.”
[7] “Arms Transfers Database,” SIPRI, https://armstransfers.sipri.org.
[8] This is not a China-specific policy, since Russia has put forward similar proposals to its other strategic partners, including India.
[9] “Russia Has Expressed Its Readiness to Offer China Joint Weapons Production,” RIA Novosti, November 13, 2024, https://www.gazeta.ru/army/news/2024/11/13/24372031.shtml.
[10] Aamer Madhani, “US Intelligence Finding Shows China Surging Equipment Sales to Russia to Help War Effort In Ukraine,” The Associated Press, April 19, 2024, https://apnews.com/article/united-states-china-russia-ukraine-war-265df8 43be030b7183c95b6f3afca8ec.
[11] “Arms Transfers Database.”
[12] “A Delegation from the Chinese Armed Forces Arrived in Moscow,” Izvestiya, August 22, 2024, https://iz.ru/1747021/2024- 08-22/v-moskvu-pribyla-delegatciia-sukhoputnykh-voisk-vs-kitaia.
[13] In January 2026, Zhang Youxia was removed from his position and placed under investigation for “violation of discipline and law.”
[14] “Belousov Discussed Developments in Venezuela and Iran with the Head of China’s Ministry of Defense,” Vedomosti, January 27, 2026, https://www.vedomosti.ru/politics/news/2026/01/27/1172095-belousov-obsudil.
[15] “Wang Yi and Secretary of the Russian Federation Security Council Sergei Shoigu Hold Strategic Communication,” Ministry of Foreign Affairs of People’s Republic of China, 2026, https://www.fmprc.gov.cn/eng/xw/zyxw/202602/ t20260202_11849138.html.
[16] The CSIS database shows the evolution of China-Russia military exercises from 2003 to 2025. See: “China-Russia Joint Military Exercises,” China Power Project, CSIS, https://chinapower.csis.org/data/china-russia-joint-militaryexercises/.
[17] Paul Sonne, “Russia and China Carry Out First Joint Bomber Patrol Near Alaska,” The New York Times, July 25, 2024, https://www.nytimes.com/2024/07/25/world/asia/russia-and-china-carry-out-first-joint-bomber-patrolnear- alaska.html.
[18] Liu Zhen, “Russia and China ‘Shared Sonar Data’ In Submarine Exercise ‘That Sent Message to US’,” South China Morning Post, November 1, 2025, https://www.scmp.com/news/china/military/article/3331124/details-russian-chinesejoint- submarine-exercise-sent-message-us-released.
[19] Guo Yuandan and Xu Yelu, “Chinese, Russian Militaries Hold 3rd Joint Anti-Missile Exercise, Working Together to Jointly Reinforce Post-World War II Order: Expert,” Global Times, December 7, 2025, https://www.globaltimes.cn/ page/202512/1349933.shtml.
[20] Paul Nantulya, “China’s Military Footprint in Africa Deepens with PLA-led BRICS Naval Drills,” Africa Center for Strategic Studies, January 30, 2026, https://africacenter.org/spotlight/china-pla-military-africa-brics-naval-drills/.
[21] See “‘Will for Peace 2026’ Exercise Shows a New Model of Security Co-Op Among ‘BRICS Plus’ Nations,” China Military, January 6, 2026, http://eng.chinamil.com.cn/2025xb/O_251451/16435863.html.
[22] Jay Hilotin, “Russian, Chinese, Iran Warships Conduct ‘Surprise’ Hormuz Strait Exercises, Amid Massive US Military Mideast Buildup,” Gulf News, February 19, 2026, https://gulfnews.com/world/mena/russian-chinese-iran-warshipsconduct- surprise-hormuz-strait-exercises-amid-massive-us-military-mideast-buildup-1.500448199.

### The Impacts of the Middle East Crisis on Food, Water, and Economic Security

The following excerpt is from Chapter 4 — Shifting Sands: A Middle East in Conflict and Transition.


The centrality of the Middle East to multiple global supply chains, apart from oil and gas, makes it difficult to localise and limit the impacts of the Israel-US and Iran conflict.[1] This article explores the longerterm impacts of the supply-chain upheavals and infrastructural damages caused by the crisis on food, water, and economic security in the region and beyond. By highlighting the ramifications across these three vectors, the authors underscore the conflict’s lasting impact on human security and the potential pathways for integrating systemic resilience against future turmoil.
Supply chains that involve the countries of the Middle East are likely to remain volatile in the short to medium term, even with a cessation of hostilities. Three considerations support this inference: first, the improbability that any truce would resolve the underlying drivers of the conflict; second, that de-escalation will not necessarily prevent Iran from pursuing covert or overt economic warfare through asymmetric means; and third, the unlikely rapid reversal of physical damage to infrastructure and production disruptions. Consequently, while the prospect of conflict resolution may offer marginal relief, a return to business-as-usual (BAU) remains implausible in the foreseeable future. Structural bottlenecks are likely to persist, resulting in substantial duress across three broad non-oil categories—food security, water security, and economic security.

Enduring Non-Oil Impacts
Economic Security
Supply chain disruptions and the threat of kinetic attacks on infrastructure and logistics have impacted three specific verticals of economic activity in the region and beyond.
First, shortages triggered by the disruptions to petrochemical derivatives have had a cascading impact on global industrial capacity.[2] Supply bottlenecks involving products such as naphtha, aluminium, sulphur, ethylene and helium affect industrial cracking, textile and polymer manufacturing, mineral processing and semiconductors.[3],[4], [5], [6], [7], These supply shortages can be expected to persist for a considerably long duration given production halts in plants like Ras Laffan.[8] The macroeconomic effects of the resultant production curtailments and gaps in production cycles could be significant. Inflationary pressures and revenue losses could lead to a recalibration of capital allocations and fiscal outlays. The potential relocation of production value chains could also directly impact industrial capacity and trade flows.
Second, sustained risks to maritime transport corridors are emerging as a major long-term fallout of the conflict. Beyond threats to freedom of navigation, countries and companies must contend with increased operational freight costs compounded by war risk insurance premiums, longer transit routes, and higher fuel costs. This volatility is most commonly reflected in elevated freight costs.[9],[10] Longer and costlier detours, worsened by container shortages, are exerting upward pressure on commodity prices while affecting vessel availability for transport and transit.[11] Consequently, maritime logistics are likely to face inflated surcharges in the short to medium term.[12] Global trade flows may increasingly be shaped not only by supply and demand dynamics, but also by the capacity of countries and companies to absorb higher shipping and logistics costs. Additionally, uncertainty surrounding the US blockade of the Strait of Hormuz and the scope and applicability of sanctions on Iran could further increase business costs, particularly through exposure to primary and secondary sanctions.
Third, although the physical damage has remained limited, attacks on the region’s aviation infrastructure have triggered some of the most tangible disruptions.[13] They have led to a significant reduction in air traffic and a comparably severe impact on air freight.[14],[15] Pressure on the sector has been compounded by reduced jet fuel availability. The limited ability to substitute jet fuel at scale prolongs the industry’s vulnerability to the broader supply chain crisis.[16] European and Asian aviation industries have faced particularly severe challenges in this regard.[17] War-risk premiums have also entered industry calculations and increased costs for airlines, which have in turn been passed on to consumers.[18] This could suppress demand and negatively affect the travel and tourism sectors.
Alongside losses to the energy sector, the reduction in demand is expected to weaken the region’s GDP outlooks.[19] This, in turn, would potentially affect both inflows into the region’s Sovereign Wealth Funds (SWFs) and their ability to channel capital into regional diversification agendas.

Food and Water Security
The prolonged blockade of the Strait of Hormuz has generated far-reaching and uneven consequences for the global food system. While countries in the Global North, such as the United States and Europe, remain comparatively insulated from fertiliser shocks, the crisis has severely exposed the food import dependencies and vulnerabilities of the Global South and the MENA region.
Iran, Qatar, Saudi Arabia, and Oman are among the leading nitrogenous fertiliser exporters, supplying 30-35 percent of global urea and 20-30 percent of ammonia.[20] In January 2026, some European suppliers acquired significant fertiliser stockpiles, providing buffer stocks to mitigate impacts, yet they also face high production costs inhibiting increased domestic fertiliser production.[21],[22] Likewise, many US farmers secured fertiliser for the growing season prior to the conflict, but this relief may be short-lived given the country’s lack of strategic fertiliser reserves.[23]
Conversely, countries heavily dependent on imports of urea, ammonia, and sulphur face dual pressures from rising fertiliser and fuel costs, impacting crop planting decisions, irrigation, and transport. India, for instance, imports 20-30 percent of its urea, 30 percent of its diammonium phosphate, and 50 percent of the LNG (to produce urea) from the Gulf region.[24] With the Kharif planting season approaching in June, the government is deploying subsidies and diversifying imports from Russia and Morocco and seeking new partnerships with Indonesia.[25] However, alternative exporters face their own restrictions. For example, as the second leading phosphorus fertiliser exporter, Morocco imports more than 48 percent of its sulphur from the Gulf.[26],[27] The coinciding rise in fertiliser and fuel prices may ultimately lower crop yields or trigger shifts away from fertiliser-intensive towards efficient crops or biofuel production.[28]
,[29] Even if the Strait of Hormuz were to reopen indefinitely, several important agricultural decisions have already passed, which will likely be reflected in higher future food prices.[30]
Any continuous deployment of short-term fertiliser subsidies to reduce farmer cost burdens may also risk long-term development delays.[31], [32] Resource-poor farmers, particularly those in sub- Saharan Africa with previously low yields, will experience the most pressure on future harvests and household food consumption. Subsidy expansions in these or conflict-ridden contexts may result in fiscal strain and reduced funding for rural development initiatives.
In MENA, import-dependent GCC states have insulated themselves from food shortages, while their neighbours face a protracted food crisis. Importing 72-89 percent of food, the crisis has exposed 100 percent food supply chokepoint exposure across all GCC states except Saudi Arabia, whose Red Sea access reduces its exposure to 59 percent.[33] GCC states are leveraging strategic grain reserves, financial capacities, and alternative logistical corridors through Oman’s Port of Duqm, Saudi Arabia’s Red Sea ports, and the UAE’s Fujairah port, yet these options remain structurally uneven and incapable of absorbing Hormuz trade capacity.[34], [35] Meanwhile, ongoing displacement, damaged logistics infrastructure, and food inflation layered on top of prior crises threaten regional food insecurity.[36]
Threats to water infrastructure have elucidated new security considerations for water management and distribution. Water infrastructure has been attacked in Bahrain, Kuwait, Iran, and Lebanon, posing existential threats to Middle Eastern states.[37], [38], [39], [40], The Gulf Cooperation Council relies on seawater desalination for 18-61 percent of its total water supply.[41] Although Iran relies considerably less on desalination, the country nonetheless faces day-zero prospects due to compounding water pressures arising from systemic resource mismanagement.[42] Bombings throughout the region have resulted in toxic releases, contaminating agricultural zones and water supplies.[43] However, threats of groundwater contamination may be diluted by surface and deepwater currents but also depends on proximity to contaminants.[44]

Cumulative Impact on Human Security
The supply and access disruptions triggered by the conflict are likely to evolve from shortages into acute scarcity in the short to medium term. The resulting nexus of pressures on water, food, and economic security will cumulatively undermine human security indicators long after wartime operations cease. UN estimates suggest that nearly 32 million people could be pushed into poverty as a direct consequence of the crisis. Job and remittance losses arising from production stoppages in the region, alongside the broader impact of the conflict on the global economy, are expected to reduce household earnings and worsen food insecurity.[45], [46] Simultaneous inflationary pressures on essential commodities further accentuate this duress and aggravate global poverty levels. Rampant scarcity commonly leads to migration, which may in turn exert pressure on infrastructure not equipped to handle increased demand. Similarly, delays in commercial shipping have destabilised crucial agricultural timelines and compromised future crop yields, causing further economic hardships to marginalised populations that depend on agrarian earnings.
Attacks on civilian infrastructure have also exacerbated environmental stress across the region through increased carbon emissions while threatening to destabilise water and public health security. The potential fallback on coal and firewood due to the lack of adequate access to LPG sourced from the region can also be expected to have an impact on health security globally.
Notably, the conflict would lead to increased defence expenditures by countries. Any analysis of the long-term impact of this conflict would need to consider whether the reallocation of the funds required for expanded defence budgets infringes on spending on human development markers.

Forging Resilience
The volatility introduced into global supply chains is likely to outlast the duration of the conflict. Recovery will depend on regional and global governance efforts to build systemic resilience through several pathways.
Improving supply-chain resilience through the development of redundancies must become a policy prerogative. A shift from just-in-time to just-in-case models, in which governments invest in industrial inventories, alternative supply sources, and diversified trade routes, could serve as a pre-emptive safeguard. Economic diversification beyond hydrocarbon sectors must also become central to long-term resilience strategies. Furthermore, localising manufacturing and production across sectors could better insulate the region from future global supplychain disruptions.
Similarly, medium-term proposals for mechanisms to facilitate the transit of essential goods such as food and fertiliser, modelled on the Black Sea Grain Initiative, may alleviate global food security pressures, though they also risk creating uneven control over trade flows.[47], [48] With pivotal sowing windows approaching, maintaining open trade remains crucial. Longer-term measures could include bolstering regional fertiliser storage reserves and investing in alternative or inorganic fertiliser pathways.
In response to potential water disruptions, GCC countries have actively scaled wastewater reuse, bolstered strategic water storage reserves, and regulated water oversight.[49] Despite this progress, regional collaboration remains constrained by the logistical challenges of establishing an interregional water cooperation system and by concerns over national sovereignty. Although severe disruptions to water distribution have not yet materialised, growing discourse around the weaponisation of water to pressure governments into negotiations prompts the need for new safeguards in international law, revised warning systems, and protective measures accounting for kinetic water infrastructure attacks.[50] The 2026 UN Water Conference, co-hosted by Senegal and the UAE, may provide an opportunity to advance regional cooperation on these issues.
The lessons drawn from this conflict will shape the Middle East’s recovery trajectory and determine the region’s ability to prevent future disruptions of a similar scale. Investing in resilience across food, water, and economic security, while recalibrating traditional notions of defence preparedness, may prove to be the conflict’s most enduring lesson.



Cauvery Ganapathy is Fellow, Climate and Energy, ORF Middle East.
Leigh Mante is Junior Fellow, Climate and Energy, ORF Middle East.




Endnotes
[1] Cauvery Ganapathy, “Hormuz and the Export of Chaos into Global Supply Chains,” Observer Research Foundation Middle East, April 3, 2026, https://orfme. org/expert-speak/hormuz-and-the-export-of-chaos-intoglobal- supply-chains/.
[2] Pooja Menon and Pranav Mathur, “Iran War Chokes Petrochemical Supply, Sends Plastic Prices Soaring,” Reuters, March 26, 2026, https://www.reuters.com/ business/energy/iran-war-chokes-petrochemical-supplysends- plastic-prices-soaring-2026-03-26/.
[3] Byeongku Lee, JungWoo Lim, “Mideast Conflict Triggers Naphtha Shortage, Exposing Deeper Problems for South Korea,” DongA Science, April 13, 2026, https://www. dongascience.com/en/news/77366.
[4] Muflih Hidayat, “Middle East Tensions Trigger Global Aluminum Supply Crisis,” Discovery Alert, April 16, 2026, https://discoveryalert.com.au/instability-middleeast- impacting-aluminium-production-2026/.
[5] “Processing Under Pressure: Where the Iran War is Hitting Mining,” April 13, 2026, https://www.miningtechnology. com/analyst-comment/processing-underpressure- where-the-iran-war-is-hitting-mining/?cf-view.
[6] Anthony King, “Gulf Chemicals Supply Disruption Will Continue for Months to Years,” April 15, 2026, https:// www.chemistryworld.com/news/gulf-chemicals-supplydisruption- will-continue-for-months-to-years/4023296. article.
[7] Eduardo Baptista, “Helium Shortage has Started Impacting Tech Supply Chains, Execs Say,” March 26, 2026, https://www.reuters.com/world/asia-pacific/heliumshortage- has-started-impacting-tech-supply-chainsexecs- say-2026-03-26/.
[8] King, “Gulf Chemicals Supply Disruption Will Continue for Months to Years”.
[9] “The Iran War and International Shipping: Navigation Disruption and Legal Risk in the International Shipping and Logistics Industries,” BlankRome, March 26, 2026, https://www.blankrome.com/publications/iran-war-andinternational- shipping-navigating-disruption-and-legalrisk- international.
[10] Noor Zainab Hussain and Manya Saini, “Maritime Insurance Premiums Surge as Iran Conflict Widens,” Reuters, March 6, 2026, https://www.reuters.com/world/ middle-east/maritime-insurance-premiums-surge-iranconflict- widens-2026-03-06/.
[11] Shweta Jain and Fareed Rahman, “Strait of Hormuz Escalation Rattles Global Shipping with War Levies and Insurance Cover Cuts,” The National News, March 2, 2026, https://www.thenationalnews.com/business/ economy/2026/03/02/hormuz-iran-us-shipping-war/.
[12] Kelly Stroh, “How the Iran Conflict is Impacting Global Ocean Shipping Flows,” Supply Chain Drive, March 11, 2026, https://www.supplychaindive.com/news/ iran-conflict-global-ocean-shipping-flows-lars-jensentpm26/ 814250/.
[13] “Risks of Middle East Aviation Disruption Rise the Longer It Lasts,” Fitch Ratings, March 5, 2026, https:// www.fitchratings.com/research/corporate-finance/ risks-of-middle-east-aviation-disruption-rise-longer-itlasts- 05-03-2026.
[14] Theo Leggett, “Prepare for Turbulence – How a Prolonged Middle East Conflict Could Reshape How We Fly,” BBC, March 26, 2026, https://www.bbc.com/news/ articles/cn08x9lw0pzo.
[15] “Middle East Industry Disruptions,” Radiant, https:// resources.radiantdelivers.com/me-distruptions-26.
[16] IATA, “Middle East Conflict Exposes Jet Fuel Supply Vulnerabilities,” March 6, 2026, https://www.iata.org/en/ iata-repository/publications/economic-reports/middleeast- conflict-exposes-jet-fuel-supply-vulnerabilities/.
[17] Charles Kennedy, “Long-Haul Flight Fares Soar as Iran War Hits European Aviation Hard,” OilPrice, April 21, 2026, https://oilprice.com/Latest-Energy-News/World- News/Long-Haul-Flight-Fares-Soar-as-Iran-War-Hits- European-Aviation-Hard.html.
[18] Lockton, “Marine, Aviation War Risk Premiums Rise as Insurers Reassess Exposure Amid Iran War,” March 23, 2026, https://global.lockton.com/in/en/news-insights/ marine-aviation-war-risk-premiums-rise-as-insurersreassess- exposure-amid.
[19] Kyle Fitzgerald, “How the Iran War is Reshaping Gulf Economies, Unevenly,” The National, April 17, 2026, https://www.thenationalnews.com/business/econom y/2026/04/17/how-gulf-economies-fight-back-fromeffects- of-the-iran-war/.
[20] Food and Agriculture Organization of the United Nations, “Global Agrifood Implications of the 2025 Conflict in the Middle East,” March 15, 2026, https://openknowledge. fao.org/server/api/core/bitstreams/1aafb5d8-39d1-481ab1f8- 25facaec3051/content.
[21] Tony Connelly, “No Suspension of EU Carbon Taxes as Fertiliser Costs Rise,” RTE, March 30, 2026, https://www. rte.ie/news/europe/2026/0330/1565867-fertiliser-eu-tax/.
[22] Minh Khoi Le and Katie Keenan, “Beyond oil: Strait of Hormuz Power Struggle Threatens Fertilizer and Ammonia Trade,” RystadEnergy, March 30, 2026, https://www.rystadenergy.com/news/beyond-oil-straitof- hormuz-power-struggle-threatens-fertilizer-andammonia- trade.
[23] Goldman Sachs, “How the Conflict in the Strait of Hormuz Could Affect Global Agriculture Prices,” April 1, 2026, https://www.goldmansachs.com/insights/articles/ how-the-conflict-in-the-strait-of-hormuz-could-affectglobal- agriculture-prices.
[24] Ministry of Petroleum and Natural Gas, “Inter- Ministerial Briefing on Recent Developments in West Asia,” March 30, 2026, https://www.pib.gov. in/PressReleasePage.aspx?PRID=2246951®= 3&lang=1#:~:text=The%20Gulf%20region%20re mains%20a,key%20feedstock%20for%20urea%20pr oduction.
[25] Shoba Suri, “Impact of the Middle East Crisis on the Indian Agricultural Sector,” Observer Research Foundation, April 3, 2026, https://www.orfonline.org/ expert-speak/impact-of-the-middle-east-crisis-on-theindian- agricultural-sector.
[26] OECD, “Understanding the Resilience of Fertiliser Markets to Shocks,” OECD Food, Agriculture and Fisheries, June 2024, https://www.oecd.org/content/dam/ oecd/en/publications/reports/2024/06/understandingthe- resi l ience-of - fe r t i l iser-markets-to-shocks_ c8c4806f/43664170-en.pdf.
[27] Global Sovereign Advisory, “Hormuz Strait Closure: Risks for Africa’s Fertilizer and Food Supply,” March 15, 2026, https://www.globalsov.com/wp-content/ uploads/2026/03/26.03.15-Ormuz-Strait-closureconsequences- on-Africas-fertilizer-and-food-imports- GSA.pdf.
[28] Goldman Sachs, “How the Conflict in the Strait of Hormuz Could Affect Global Agriculture Prices”.
[29] Food and Agriculture Organization of the United Nations, “Global Agrifood Implications of the 2026 Conflict in the Middle East”.
[30] United Nations, “Strait of Hormuz: With Hunger Looming, Life-Saving Fertilizer Shipments Cannot Wait, Head of UN Task Force Says, April 21, 2026, https://news. un.org/en/interview/2026/04/1167351.
[31] Shruti Jain and Leigh Mante, “Rethinking Resilient Food Systems: Mitigating Food Supply Chain Shocks in the MENA Region,” ORF Occasional Paper No. 532, Observer Research Foundation, March 2026.
[32] Food and Agriculture Organization of the United Nations, “Agrifood Policy Highlights,” April 9, 2026, https://www.fao.org/agrifood-economics/news/newsdetail/ fr/c/1758248/.
[33] Food and Agriculture Organization of the United Nations, “GCC Food and Agriculture Policy Flash,” April 2026.
[34] Rumaitha Al Busaidi and Sarah Mostafa-Kamel, “Gulf Nation Ports Deliver Water, Energy and Food. What Happens When They Close?,” March 20, 2026, https:// www.weforum.org/stories/2026/03/gulf-nation-portswater- energy-food/.
[35] Ishan Bhanu, “Grain Imports Disrupted Across the Middle East Gulf,” Kpler, March 6, 2026, https://www. kpler.com/blog/grain-imports-disrupted-across-themiddle- east-gulf.
[36] World Food Programme, “Why the Middle East Conflict Threatens Record Levels of Hunger,” March 19, 2026, https://www.wfp.org/stories/why-middle-east-conflictthreatens- record-levels-hunger.
[37] “Bahrain Says Water Desalination Plant Damaged in Iranian Drone Attack,” Al Jazeera, March 8, 2026, https:// www.aljazeera.com/news/2026/3/8/bahrain-says-waterdesalination- plant-damaged-in-iranian-drone-attack.
[38] “Iranian Attack Damages Kuwait Power and Desalination Plant, Kills Worker,” Al Jazeera, March 30, 2026, https:// www.aljazeera.com/news/2026/3/30/iranian-attackdamages- kuwait-power-and-desalination-plant-killsworker.
[39] Vivian Nereim, “Vital Desalination Plants in Iran and Bahrain are Attacked,” New York Times, March 8, 2026, https://www.nytimes.com/2026/03/08/world/middleeast/ desalination-plants-iran-bahrain.html.
[40] Justin Salhani, “How Israel is Destroying Lebanon’s Water Infrastructure,” AlJazeera, April 22, 2026, https:// www.aljazeera.com/features/2026/4/22/how-israel-isdestroying- lebanons-water-infrastructure.
[41১] Mohamed A. Hussein, “How Much of the Gulf ’s Water Comes from Desalination Plants?,” March 12, 2026, https://www.aljazeera.com/news/2026/3/12/how-much-ofthe- gulfs-water-comes-from-desalination-plants.
[42] Ali Harb, “Trump Threatens to ‘Blow Up’ Desalination Plants In Iran If No Deal Reached,” AlJazeera, March 30, 2026, https://www.aljazeera.com/news/2026/3/30/trumpthreatens- to-blow-up-all-desalination-plants-in-iran.
[43] Houraa Daher, “Climate Change: The Silent Casualty of War,” Observer Research Foundation Middle East, April 14, 2026, https://orfme.org/expert-speak/climate-changethe- silent-casualty-of-war/.
[44] UNU INWEH and ORF Middle East, “Reverberating Effects for Food Fertiliser, Food and Water Security in Times of Conflict,” https://e01dadfd-927b-4bc8- 9d9b-316a4d18092a.filesusr.com/ugd/00bc20_ c985acb278b242e999104e38f5560278.pdf.
[45] UNDP, “Escalation in the Middle East Reverses More Than a Year of Economic Growth in the Arab States Region, According to the UN Development Programme Assessment,” March 31, 2026, https://www.undp. org/arab-states/press-releases/escalation-middle-eastreverses- more-year-economic-growth-arab-states-regionaccording- new-un-development-programme.
[46] Shruti Jain and Leigh Mante, “Hidden Costs of USIsrael- Iran Conflict,” March 18, 2026, https://www. hindustantimes.com/ht-insight/international-affairs/ hidden-costs-of-us-israel-iran-conflict-101773819353650. html.
[47] United Nations, “Strait of Hormuz: With Hunger Looming, life-saving Fertilizer Shipments Cannot Wait, Head of UN Task Force Says,” April 21, 2026, https:// news.un.org/en/interview/2026/04/1167351.
[48] United Nations, “Black Sea Grain Initiative Joint Coordination Centre,” https://www.un.org/en/black-seagrain- initiative.
[49] Food and Agriculture Organization of the United Nations, “Food and Agriculture Policy Flash”.
[50] Harb, “Trump Threatens to ‘Blow Up’ Desalination Plants In Iran If No Deal Reached”.

### Latin America: Navigating the Turbulence

The following excerpt is from Chapter 4 — Shifting Sands: A Middle East in Conflict and Transition.


The Trump administration’s foreign policy toward Latin America sought to revitalise the Monroe Doctrine, originally issued by United States (US) President James Monroe in 1823 with the aim to prevent extra-regional powers from intervening in the Western Hemisphere.[1] The doctrine positioned the US as the guarantor of hemispheric autonomy, thereby implicitly asserting US supremacy in economic, diplomatic, and military affairs across the region.
What has been described as the ‘Donald Trump Corollary’ to the Doctrine, as articulated in the National Security Strategy of 2025, emphasised the need to “deny non-Hemispheric competitors the ability to position forces or other threatening capabilities, or to own or control strategically vital assets.”[2] Although no countries were explicitly identified, the corollary was primarily directed at China. The Biden administration had already characterised China as a great-power rival, posing threats to the US “economically, technologically, politically, and militarily;”[3] the Trump administration similarly frames its approach as one of deterrence and balancing against Chinese influence in the Western Hemisphere.[4]
China’s economic and military presence in Latin America is expanding, prompting the US to pursue countermeasures. It is too early to predict whether US policies in Latin America aimed at curbing Chinese influence will succeed. Other extra-regional actors, ranging from the European Union (EU), a supranational entity, to countries such as India, are simultaneously deepening their engagement with the region. The US could strategically leverage these relationships to reinforce its own position.

China’s Expanding Presence in Latin America
China has expanded its presence and influence in Latin America across multiple domains ranging from trade and infrastructure to defense cooperation and arms supplies. It has become South America’s leading trading partner and the second largest after the US in Latin America (which includes Mexico and Central American countries). By 2024, in addition to importing oil from Venezuela and Brazil, China sourced 98 percent of its total imports of lithium carbonate; critical for green energy, from Latin American countries, as well as 75 percent of its soybean imports.[5] In return, China exports electric vehicles, machine tools, telecommunications equipment, and consumer electronics to the region.[6] Although the China Development Bank has provided loans for a variety of projects against future sales of minerals and agricultural products, the overall amounts have declined sharply, falling from a peak of US$24.5 billion in 2010 to zero in 2024 and 2025, according to data from the Inter-American Dialogue.[7]
Twenty-three Latin American and Caribbean countries have joined China’s Belt and Road infrastructure initiative (BRI) between 2018 and 2025.[8] According to a 2025 report by the Center for Strategic and International Studies, Chinese state-owned and private enterprises modernised and acquired ownership stakes in several Latin American ports in Peru, Mexico, Panama, and Jamaica, developments that could reshape hemispheric commerce in China’s favour.[9] Notable examples close to the US include the partial construction of the Tren Maya in southern Mexico by the state-owned China Communications Construction Company, particularly the segment linking Chiapas, Tabasco, and Campeche,[10] as well as Chinese financing the upgrade of the Santiago de Cuba port.[11] Figure 1 illustrates the scope of China’s infrastructure projects in Latin America.
Figure 1: China’s Infrastructure Footprint in Latin America

Source: Center for Strategic and International Studies[12]
China’s growing profile in Latin America extends beyond the economic sphere to include security dimensions. In terms of defence facilities, China has established a military-run space station in Argentina’s Nequén province which enables monitoring of space-related activities, including those of the US.[13] Closer to mainland US, China has developed signals intelligence collection centres in Cuba by modernising older sites such as Bejucal and Calabazar and constructing new facilities at Wajay and El Salao, the latter located near the US base at Guántanamo.[14] These installations are capable of monitoring US telecommunications as well as maritime, air, and land traffic, ranging from ships and aircraft to missile systems. China’s defence cooperation also encompasses officer education anVasabjit Banerjeed exchange programmes with Latin American countries (see Figure 2).[15]
Figure 2: China’s Military Exchanges with Latin America and the Caribbean (2022-2025)

Source: Americas Quarterly[16]
China has also established a foothold in arms exports to Latin America.[17] While Venezuela has been the primary recipient, other countries including Bolivia, Ecuador, Peru, Argentina, and Brazil, have also procured Chinese weaponry. In addition, China has donated non-lethal defence equipment to Guyana, Colombia, the Dominican Republic, and Costa Rica, further broadening its security engagement with the region.[18]

US Efforts to Reassert its Economic and Military Dominance
Latin American policies under the Biden administration (2021-2025) and both Trump administrations (2017-2021 and 2025-present) have sought to address China’s multidimensional penetration of Latin America, while simultaneously balancing US domestic politics imperatives. Although their approaches have exhibited superficial differences, underlying similarities point to a more assertive stance centred on trade, infrastructure, counter-narcotics, and defence policy.
On the one hand, the industrial demands of great-power competition and need to generate revenues to address rising budget deficits and resultant debt have led the Trump administration to impose tariffs on goods and services from Latin American countries. In contrast, US efforts at ‘friendshoring’, introduced under the Biden administration,[19] sought to secure supply chains in sectors such as green energy, thereby strengthening Latin American economies and binding them more closely to the US.[20] While Trump administration’s tariffs initially reduced overall exports from Latin America to the US, subsequent bilateral trade agreements with El Salvador, Argentina, Ecuador, and Guatemala suggest that the broader objective was to secure more equitable access for US goods and services rather than to block imports outright.[21]
As a caveat, there remains some uncertainty regarding trade policy. A January 2026 ruling by the US Supreme Court invalidating tariffs imposed by the Trump administration has facilitated an increase in Latin American exports. At the same time, the administration’s subsequent imposition of 10 percent global tariffs, potentially rising to 15 percent, has introduced uncertainty and diminished the relative advantage of Latin American exports compared to those from Asia and Europe.[22]
The Trump administration has also sought to curtail China’s infrastructure projects in Latin America. It pressured the Panamanian government to compel the Hong Kong-based CK Hutchison subsidiary, Panama Ports Company, to divest from its Panama Canal holdings, specifically the cargo terminals of Balboa and Cristóbal.[23] The Panamanian government permitted Balboa to be operated by the Danish company Maersk and Cristóbal by Switzerland’s Mediterranean Shipping Company.[24] Similarly, the Trump administration has exerted pressure on Peru to remove the Chinese state-owned Cosco from its control of the Chancay port, citing the extra- territorial rights granted to China that limit the Peruvian government’s authority over “regulation, supervision, oversight and sanction.”[25] Notably, these measures build upon assessments produced during the Biden administration, which have identified China’s expanding access to and control over regional infrastructure.
Defence and security cooperation by the Trump administration has focused on renewed efforts to train and assist local forces in counternarcotics operations and providing defence equipment. A prominent example is the US-Ecuadorian joint military operations against drug cartels in the country initiated under agreements signed in February 2026.[26] However, an earlier agreement to cooperate on “law enforcement and the justice sector” aimed at combating criminal networks and strengthening internal security was signed in August 2023 during the Biden administration, underscoring the bipartisan consensus in the US on these issues.[27]
Latin American policies under the Biden and two Trump administrations have sought to address China’s multidimensional penetration of Latin America, while simultaneously balancing US domestic politics imperatives.
The most prominent example of defence equipment imports was also bipartisan: the sale of 24 refurbished F-16A/B fighter jets to Argentina from Denmark approved under the Biden administration in 2024,[28] with deliveries scheduled between 2025 and 2028 under the Trump administration. The agreement reached with the pro-American Argentinian President Javier Milei effectively blocked the procurement of China’s JF-17 fighter jet, which has been favoured by the preceding Alberto Fernández administration.[29] A key element of the deal was the US decision to replace British components—given Britain’s opposition to Argentina’s procurements of fighter jets due to the Falklands Islands/Las Malvinas dispute— while imposing technological limitations consistent with British concerns.[30] In addition, the US agreed in 2025 to supply Peru with F 16 V, Block 70 fighter jets manufactured at its Greenville, South Carolina plant,[31] a significant development given that Peru’s ageing fleet currently consists of Russian-origin MiG-29 A and French-origin Mirage 2000P aircraft.
The synergy between trade and defence objectives was evident in US actions following the removal by US special forces of Venezuelan President Nicolás Maduro in January 2026. For more than two decades, Venezuela’s one-party authoritarian regime, reliant on a complicit military had opposed US economic and security interests in the region.[32] Economically, it funded alternative regional organisations such as the Alianza Bolivariana para los Pueblos de Nuestra America (ALBA) founded in 2004 and PetroCaribe, an energy-based initiative for the Caribbean launched in 2005. In the security domain, Venezuela provided shelter and assistance to Colombian left-wing insurgent groups, including the Fuerzas Armadas Revolucionarias de Colombia (FARC) and the Ejército de Liberación Nacional (ELN),[33] while also issuing credible threats of annexation against its tiny oil-rich neighbor Guyana in 2024-2025.[34] Maduro’s successor, acting President Delcy Rodriguez has reshuffled senior military leadership[35] and is cooperating with US economic demands centred on petroleum[36] and gold[37] exports.

Extra-Regional Paths to Leverage US Initiatives in Latin America
Although initial outcomes appear promising, it is too early to assess the overall success of the new US policy toward Latin America, which currently enjoys support from Congress and President Trump. The Venezuelan regime has become more receptive to meeting US energy demands, while Guyana and its petroleum resources are more secure than prior to the change in Venezuelan leadership. At the same time, key elements of the Chavista regime remain intact and continue to assert claims over Guyana’s Essequibo region. In the infrastructure domain, control of key projects in Panama has reverted from Chinese to Panamanian management, whereas projects in Peru and Mexico remain under Chinese influence. The US is assisting Ecuador in its fight against narco-terrorists, and pressuring Mexico to confront its own cartels, though both initiatives face domestic opposition. Finally, the US reentered the Latin American arms supply market by facilitating transactions such as Denmark’s transfer of F-16 fighter jets to Argentina.
Several extra-regional actors illustrate how trade and defence relations with Latin America can provide a path forward in the region’s contested and evolving foreign and domestic policy environment. The EU concluded a preferential trade agreement with the most prominent trading bloc in South America, Mercosur/Mercosul[38] in December 2024. The agreement addresses trade-related issues in multiple ways: lowering barriers between the EU and Mercosur states, granting EUbased companies preferential access to raw materials, supporting supply chain integration, and promoting collaboration on sustainable development that incorporates climate change and labour standards.[39] In terms of bilateral relations, India has advanced its trade ties with Brazil, including a petroleum supply agreement in 2026 between Brazil’s Petrobras and India’s Bharat Petroleum Corporation.[40] India and Brazil are also engaged in negotiations on defence procurement[41] and the co-production of defence equipment.[42]
The overlap between EU and NATO membership, as well as India’s strategic partnership with the US, ensures that Washington faces no potential national security threats from these actors. This suggests that successful relations with Latin America are possible for extra-regional powers if they acknowledge the prevailing political consensus in the US to return to what has long been considered an essential trait of US foreign policy: control of the Western Hemisphere.[43] In this context, the US can leverage such extraregional actors as force-multipliers, enabling it to contain and reduce China’s influence in Latin America.



Vasabjit Banerjee, PhD, is Assistant Professor, Department of Political Science, University of Tennessee, Knoxville; and Non-Resident Fellow, ORF America.




Endnotes
[1] President James Monroe, “The Monroe Doctrine: A Portion of President James Monroe’s Seventh Annual Message to Congress,” December 2, 1823, https://www.oas.org/sap/peacefund/VirtualLibrary/MonroeDoctrine/Treaty/ MonroeDoctrine.pdf.
[2] President Donald J. Trump, National Security Strategy of the United States of America, White House, 2025, https://www. whitehouse.gov/wp-content/uploads/2025/12/2025-National-Security-Strategy.pdf.
[3] Jim Garamore, “Official Talks DOD Policy Role in Chinese Pacing Threat, Integrated Deterrence,” Department of Defense, June 2, 2021, https://www.war.gov/News/News-Stories/Article/Article/2641068/official-talks-dod-policyrole- in-chinese-pacing-threat-integrated-deterrence/.
[4] President Donald J. Trump. National Defense Strategy, White House, 2026, https://media.defense.gov/2026/ Jan/23/2003864773/-1/-1/0/2026-NATIONAL-DEFENSE-STRATEGY.PDF.
[5] Margaret Myers, “China’s New Playbook for Latin America,” Americas Quarterly, October 14, 2025, https://americasquarterly.org/article/chinas-new-playbook-in-latin-america/.
[6] Myers, “China’s New Playbook for Latin America”.
[7] “Chinese Loans to Latin America and the Caribbean Database,” The Dialogue, 2025, https://www.thedialogue.org/ MapLists/#/Policy/List/year.
[8] Antigua and Barbuda (2018), Argentina (2022), Barbados (2019), Bolivia (2018), Chile (2018), Colombia (2025), Costa Rica (2018), Cuba (2019), Dominica (2018), Dominican Republic (2019), Ecuador (2018), El Salvador (2018), Grenada (2018), Guyana (2018), Honduras (2023), Jamaica (2019), Nicaragua (2022), Panama (2025), Peru (2019), Suriname (2018), Trinidad and Tobago (2018), Uruguay (2018) and Venezuela (2018), “Countries of Belt and Road Initiative (BRI),” Green Finance and Development Center, May 2025, https://greenfdc.org/countries-of-the-belt-and-road-initiative-bri/.
[9] Ryan C. Berg, Christopher Hernandez-Roy and Henry Zimmer, “China-owned Chancay Port Set to Become Latin America’s Third Largest,” CSIS, February 2025, https://www.csis.org/analysis/china-owned-chancay-port-set-becomelatin- americas-third-largest.
[10] “Track Laying Starts on Mexico’s Mayan Train Project,” China Communications Construction, May 13, 2022, https://en.ccccltd.cn/xwzx/ztbd/202205/t20220524_172223.html.
[11] Cuba Business Report Staff, “Chinese-Funded Terminal at Port of Santiago Opens,” May 15, 2019, https://cubabusinessreport.com/chinese-funded-terminal-at-port-of-santiago-opens/.
[12] Ryan C. Berg, Christopher Hernandez-Roy, and Henry Ziemer, “China-Owned Chancay Port Set to Become Latin America’s Third Largest,” Center for Strategic and International Studies, February 25, 2025, https://www.csis.org/ analysis/china-owned-chancay-port-set-become-latin-americas-third-largest.
[13] Germán Padinger, “Qué sabemos sobre la estación del Espacio Lejano que China opera en la Patagonia argentina?,” April 6, 2024, https://cnnespanol.cnn.com/2024/04/06/que-sabemos-estacion-espacio-lejano-china-patagonia-argentinaorix.
[14] Matthew P. Funaiole, Aidan Powers-Riggs, Brian Hart, Henry Zeimer, Joseph S. Burmudez Jr., Ryan C. Berg, and Christopher Hernandez-Roy, “China’s Intelligence Footprint in Cuba: New Evidence and Implications for U.S. Security,” CSIS, December 6, 2024, https://www.csis.org/analysis/chinas-intelligence-footprint-cuba-new-evidenceand- implications-us-security.
[15] Ryan Berg et al., “Beijing’s Military Diplomacy is Making Major Gains,” October 14, 2025, https://americasquarterly. org/article/beijings-military-diplomacy-is-making-major-gains/.
[17] R. Evan Ellis, “China’s Security Engagement in Latin America and the Caribbean,” The Diplomat, February 23, 2024, https://thediplomat.com/2024/02/chinas-security-engagement-in-latin-america-and-the-caribbean/.
[18] Ellis, “China’s Security Engagement in Latin America and the Caribbean”.
[19] Fatima Hussien and Josh Boak, “The Biden Administration Pushes for More US-Latin America Trade, Seeking to Lessen Chinese Influence,” Associated Press, November 2, 2023, https://apnews.com/article/yellen-latin-america-interamericandevelopment- bank-china-e32078c94b6e71ffb3b4f50f222ef4f3.
[20] William Maloney, “How Latin America and the Caribbean Can Benefit from Foreign Direct Investment and Reshoring,” World Economic Forum, February 19, 2024, https://www.weforum.org/stories/2024/02/latin-america-and-thecaribbean- reshoring/.
[21] “Fact Sheet: President Donald J. Trump Announces Historic Trade Deals with Western Hemisphere Trading Partners,” White House, November 13, 2025, https://www.whitehouse.gov/fact-sheets/2025/11/fact-sheet-president-donald-jtrump- announces-historic-trade-deals-with-western-hemisphere-trading-partners/.
[22] AQ Editors, “Reaction: How Trump’s 15% Tariff Move Impacts Latin America,” Americas Quarterly, February 23, 2024, https://www.americasquarterly.org/article/reaction-how-trumps-15-tariff-move-impacts-latin-america/.
[23] Elida Moreno, “Panama’s President Reject ‘Outrageous’ Claims by CK Hutchison Over Cancelled Port Contracts,” Reuters, March 19, 2026, https://www.reuters.com/world/china/panama-rejects-ppc-claimscanceled- port-contracts-2026-03-20/?link_source=ta_first_comment&taid=69bd1f7c21f0bd00017f052a&utm_ campaign=trueAnthem:+Trending+Content&utm_medium=trueAnthem&utm_source=facebook&fbclid=IwY2xjaw RIWaxle HRuA2FlbQIxMABicmlkETFNaHVoUkcyUkZvTUZaNUNJc3J0YwZhcHBfaWQQMjIyMDM5MTc4ODI wMDg5MgABHhAAUwbPV2IsH0AquoxZ-y6_HJ2HrXzDQgvZnTFvsEzZKpEcFDvA6iowWHpT_aem_YE1-ep5lhS90RIh0zOWAg.
[24] Anniek Bao, “Panama Cancels China-Linked Port Deal, Hands Canal Terminals to Maerst, MSC,” CNBC, February 24, 2026, https://www.cnbc.com/2026/02/24/panama-officially-voids-annuls-ck-hutchison-contracts-interim-controlmaersk- msc-canal-dispute.html.
[25] Laura Kelly, “US Warns China Costing Peru its Sovereignty,” The Hill, February 12, 2026, https://thehill.com/policy/ international/5735194-peru-port-chinese-control/.
[26] Alfie Parnell, “US and Ecuador Launch Joint Military Action Against Drug Trafficking,” Latin America Reports, March 4, 2026, https://latinamericareports.com/us-and-ecuador-launch-joint-military-action-against-drug-trafficking/13746/.
[27] “U.S. and Ecuador Extend Cooperation Agreement in Counternarcotics, Law Enforcement,” U.S. Mission Ecuador, August 16, 2023, https://ec.usembassy.gov/u-s-and-ecuador-extend-cooperation-agreement-in-counternarcotics-lawenforcement- and-justice-sector-cooperation/.
[28] Ryan Finnerty, “Argentina Takes Delivery of Initial Six F-16 Fighters from Denmark,” FlightGlobal, December 8, 2025, https://www.flightglobal.com/fixed-wing/2025/12/argentina-takes-delivery-of-initial-six-f-16-fighters-from-denmark/.
[29] Cecelia Degl’Innocenti, “Argentina’s F-16 Deal Signals a Strategic Pivot Toward Washington,” Argentina Reports, January 23, 2026, https://www.argentinareports.com/argentinas-f-16-deal-signals-a-strategic-pivot-towardwashington/ 4166
[30] “Argentina’s F-16s Said to Have Limited Capacities Due to UK Concerns,” MercoPress, July 15, 2025, https://en.mercopress.com/2025/07/15/argentina-s-f-16s-said-to-have-limited-capacities-due-to-uk-concerns.
[31] “Peru – F-16 Aircraft,” Defense Security Cooperation Agency, Transmittal No. 25-96, September 15, 2025, https://www.dsca.mil/Press-Media/Major-Arms-Sales/Article-Display/Article/4304541/peru-f-16-aircraft.
[32] Vasabjit Banerjee and Maria I. Puerta Riera, “Venezuela’s Military Won’t Surrender Its Privileges Easily,” Foreign Policy, January 7, 2026, https://foreignpolicy.com/2026/01/07/venezuela-military-army-strikes-politics/.
[33] Staff, “ELN in Venezuela,” InSight Crime, January 13, 2026, https://insightcrime.org/venezuela-organized-crime-news/ eln-in-venezuela/.
[34] Vasabjit Banerjee and Prashant Hosur, “Resolving the Essequibo Crisis: Security Cooperation Against Venezuelan Threats,” FAO Journal of International Affairs, July 28, 2025, https://faoajournal.substack.com/p/resolving-the-essequibocrisis- security.
[35] Florantino Singer and María Martín, “Delcy Rodríguez Renueva El Alto Mando Militar Tras La Destitución de Padrino Como Ministro de Defensa,” El País, March 19, 2026, https://elpais.com/america/2026-03-20/delcy-rodriguez-renuevael- alto-mando-militar-tras-la-destitucion-de-padrino-como-ministro-de-defensa.html.
[36] Sheila Dang, “Oil Sales Under US-Venezuela Deal to Reach $2 Billion by End of February, US Says,” Reuters, February 26, 2026, https://www.reuters.com/business/energy/oil-sales-under-us-venezuela-deal-expected-reach-2-billion-by-endfebruary- us-2026-02-27/.
[37] Marc Caputo, “Scoop: Trump Officials Broker Massive U.S.-Venezuela Gold Deal,” Axios, March 4, 2026, https://www.axios.com/2026/03/05/trump-us-venezuela-gold-deal.
[38] Spanish: Mercado Común del Sur; Portuguese: Mercado Comum do Sul. Full member states are: Argentina, Bolivia, Brazil, Paraguay, and Uruguay. Associated states: Chile, Colombia, Ecuador, Guyana, Peru, and Suriname. Observer states: Mexico and New Zealand. Venezuela is a suspended full member state. “EU-Mercosur Agreement,” European Commission, https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/ countries-and-regions/mercosur/eu-mercosur-agreement_en.
[39] “Questions and Answers on the EU-Mercosur Partnership Agreement,” EU Commission, January 16, 2026, https://ec.europa.eu/commission/presscorner/detail/en/qanda_24_6245.
[40] “India Says State-Run BPCL to Sign Oil Deal with Brazil’s Petrobras,” Reuters, January 23, 2026, https://www.reuters. com/business/energy/india-says-state-run-bpcl-sign-oil-deal-with-brazils-petrobras-2026-01-23/.
[41] Rojoef Manuel, “India, Brazil Weigh Barter Deal for Military Aircraft,” The Defense Post, October 7, 2025, https://thedefensepost.com/2025/10/07/india-brazil-barter-aircraft/.
[42] Victor Barriera and Jon Grevatt, “India, Brazil Pursue Defence Equipment Collaboration,” Janes, October 21, 2025, https://www.janes.com/osint-insights/defence-news/air/india-brazil-pursue-defence-equipment-collaboration.
[43] Paul Poast, “Trump’s Approach to Latin America Is Not Such an Outlier,” Global Affairs, December 8, 2025, https://globalaffairs.org/commentary/analysis/trumps-approach-latin-america-not-such-outlier.

### The U.S.-Iran Ceasefire Illusion: Energy Shortages Far from Over

The following excerpt is from Chapter 3 — Shifting Sands: A Middle East in Conflict and Transition.



The Strait of Hormuz crisis has sent ripples across global energy and commodity markets. Political posturing, primarily United States (US) President Donald Trump’s grand proclamations, have driven sharp swings in oil prices—pushing Futures Brent crude to as high as US$1261 down to US$95 following the ceasefire announcement on 7 April 2026.2 Brent crude futures surged by more than 60 percent between late February and mid-March.3 The tanker traffic through the Strait of Hormuz reduced by as much as 95 percent compared to pre-crisis levels,4 becoming almost negligible at the time of writing and operating on an ad-hoc basis. Conflicting announcements from Washington and Tehran regarding the peace deal continue to leave the passageway dangerously contested and the markets increasingly wary.
Though global markets are desperately trying to decouple from the developments in the Middle East, their efforts are unlikely to hold. The structural consequences of the disruptions will far outlast the conflict itself. While diplomatic posturing can temporarily calm markets, it will not be able to repair damaged infrastructure, restore lost capacity, or eliminate the irreversible capital stock destruction and the endogenous risk premium in shipping insurance. The question is no longer whether the supply will return, but rather how economies will adapt to a period of constrained and uncertain availability.

Most Significant Energy Shock in History
The International Energy Agency has described the Hormuz conflict as the most significant oil shock in history, with damage to almost 80 energy facilities in the Middle East5 amounting to at least US$25 billion,6 and loss of more than 13 million barrels per day of exports.7 Almost 35 percent of global crude oil and products, and 20 percent of natural gas supplies8 pass through the Strait of Hormuz. Unlike the previous crises—the oil shocks of 1973 and 1979, or the loss of Russian gas following Moscow’s invasion of Ukraine in 2022—this episode extends beyond oil and gas. It represents multi-commodity shocks—on fertilisers, petrochemicals, and refined products— in turn triggering cascading effects across global supply chains.
Yet, despite the severity of the crisis, the price shocks have not been as pronounced as anticipated. This is due to an oversupply of pre-existing inventory at sea, strategic reserve release, overseas Gulf storage, external alternative pipelines available to Saudi Arabia and the United Arab Emirates, and anticipatory stockpiling by energy importing Asian countries. However, as reserves deplete and logistical constraints tighten, markets will be compelled to account for the true scale of the disruptions. The current short-term cushioning will therefore prove to be temporary, exposing the underlying long-term constraints yet to entirely unfold.
Table 1: Share of Global Seaborne Commodity Flows Transiting the Strait of Hormuz in 2024 (Imports + Exports)

Source: Kpler9
Note: CPP (clean petroleum products such as naphtha, gasoline, jet fuel (A1), kerosene, and gas oil); DPP (dirty petroleum products such as crude oil, fuel oil, heavy fuel oil, and dirty condensate)

Triple Whammy: Logistical Disruptions, Storage Constraints, and Infrastructure Damage
Before the crisis, approximately 20 million barrels per day (mbpd) of crude oil and product exports would pass through the Hormuz Strait—primarily from Saudi Arabia, the UAE, Kuwait, Iraq, and Iran. The alternative routes bypassing the Hormuz have managed to offset some of the supplies but cannot compensate for complete loss of maritime flows. Saudi Arabia’s 1,200 km long East–West Crude pipeline from Abqaiq to Yanbu in the Red Sea has an export capacity of around 5 mbpd,10 with a parallel Petroline for natural gas liquids (NGLs). Even though overall Saudi crude exports fell 25 percent in March 2026 from the same time last year, the higher prices caused the value of those exports to balloon by roughly US$558 million,11 partially substituting for lost Iraqi and Gulf supplies. This divergence reflects a classic terms of-trade gain for Riyadh but a welfare loss for the global economy. Essentially it is a transfer of wealth from consumers to producers that acts as a deadweight drag on global gross domestic product (GDP).
The UAE has also witnessed a decline of almost 30 percent in exports from last year. However, the 380-km Abu Dhabi Crude Oil Pipeline (ADCOP), running from Habshan to the Fujairah port and bypassing the Strait of Hormuz, offers a relatively secure alternative to move between 1.5–1.8 mbpd (roughly half of UAE’s total daily oil export capacity) to the Indian Ocean12, which has helped keep revenues around the same range.
Table 2: Crude Oil Production, Export Volume, and Revenue Change for the Arabian Gulf Countries

Sources: Reuters13 & IEA14
In contrast, Iraq has recorded the steepest supply declines, suffering significant losses in export volumes and revenues. Pre-crisis production of 4.25 mbpd has plummeted to 875,000 barrels per day (bpd), while exports have declined by 83 percent in March 2026 compared to the same period last year, with limited diversion options and a constrained pipeline capacity of 200,000 bpd via the Kirkuk–Ceyhan northern pipeline between Iraq and Turkey.15 Kuwait has also faced a similarly devastating outcome with no viable alternative route and mounting storage constraints. Without continuous shipments, production must halt once storage is exhausted forcing facility shut downs. Producers can, in theory, utilise floating storage, but in practice credit constraints and warrisk insurance costs prove onerous, reinforcing the financial dimension of supply disruptions.
Figure 1: Estimated Days Until Storage Tanks in the Gulf Countries Fill Up, Forcing Oil Field Shut-Ins

Note: Measured from Day 1 of conflict (28 February 2026)
Source: Reuters16
Natural gas supplies from the region, primarily from Qatar (as much as 93 percent) and the UAE (7 percent),17 have been significantly curtailed. Following sustained kinetic attacks, the Ras Laffan facility in Qatar with normal capacity of 77 million tonnes per annum (mtpa)18 declared force majeure (emergency halt) on some liquified natural gas (LNG) contracts for up to five years.19 This has eliminated 17 percent of Qatar’s LNG export capacity, with losses of 12.8 mtpa of LNG for three to five years until repairs are actualised.20 Beyond LNG, Qatar’s exports of condensate will drop by around 24 percent, while liquefied petroleum gas (LPG) will fall 13 percent, helium output will fall 14 percent, and naphtha and sulphur will both drop ⁠by 6 percent.21 For the UAE, disruptions to shipping through the Strait of Hormuz has led to significant declines22 in output at the country’s sole LNG plant on Das Island, effectively halting most of its 5.8 mtpa of production capacity.23 In parallel, damage to the UAE’s gas infrastructure, particularly the Habshan facility, poses significant risk to the country’s domestic gas supply24.
Besides the logistical disruption and storage constraints, damage to oil fields and refineries, ports and pipelines, and gas facilities, will take many months – if not years in some cases – to repair, reopen and resume, further disrupting and prolonging supply disruptions in global markets.
Table 3: Key Disruptions to Arabian Gulf Oil and Gas Infrastructure (28 Feb - 15 Apr 2026)

Source: Authors’ own, using various open sources.

Energy Shortages Far from Over
Energy shortages are unlikely to ease, even in the aftermath of a ceasefire or any semblance of normalisation. Alternative routes from Saudi, the UAE and Oman offer limited relief—these pipelines were designed to complement and not substitute maritime flows through the Strait. Their capacity falls way short of the scope of the disruption. At the same time, repairing damaged infrastructure, rebuilding strategic petroleum reserves, and regular stockpiling by importing countries, will keep prices elevated and unlikely to swiftly retreat to the pre-war USD 60-70 range.
Compounding this challenge are shipping and insurance constraints. Maritime insurers are repricing or suspending war risk coverage— currently 329 vessels are stranded in the Arabian Gulf requiring roughly US$352 billion in insurance coverage that private markets are no longer providing.60 Traders price risk and not just physical supply, and insurance premiums will continue to factor in geopolitical stressors long after the hostilities are over. To illustrate, although the Red Sea Houthi attacks declined in 2025 relative to 2023-24 levels, transit volumes through the Bab-al-Mandab Strait remained 65-percent below pre-conflict baselines as of June 2025.61 Even if physical risk subsides, the perceived risk of potential future disruptions may continue to affect pricing and shipping volumes through the Strait of Hormuz. Investments will remain highly sensitive and contingent on long term maritime stability. The role of expectations, speculative behaviour, and futures markets in shaping price trajectories is central to risk pricing. The inability of private markets to clear this risk is a classic market failure which will potentially need state intervention in the form of government-backed war-risk insurance mechanisms to restore both trust and trade flows.
Energy markets are inherently adaptive and nonlinear. Market adjustments are not purely supply driven—the marginal cost of storage and demand destruction in price-sensitive developing economies will act as a market clearing mechanism. At the same time, substitution effects and accelerated supply responses outside the Gulf will gather pace. Renewed oil and gas exploration in new geographies such as the North Sea, Africa, the Eastern Mediterranean, and the Arctic, could become economically feasible in the wake of recent geopolitical realities. These dynamics will act as important countervailing forces in restoring equilibrium at relatively lower volumes. Highers prices with slower growth will heighten stagflationary pressures in importing countries.
The crisis is also accelerating a broader structural transition. In the coming years, countries will increasingly prioritise diversification—both in terms of supply partnerships and transport routes. At the same time, higher fossil fuel prices are improving the viability of alternative technologies, including nuclear energy, hydrogen and solar plus storage. These shifts, however, involve significant fiscal, geopolitical and climate trade-offs, and their pace and direction will vary considerably across countries. The UAE’s recent departure from the Organization of the Petroleum Exporting Countries Plus (OPEC+) alliance is also notable, as it could introduce greater supply flexibility while simultaneously contributing to heightened price volatility and weaker coordination among major producers.
It is clear that the energy security calculus for both energy exporting and importing countries is fundamentally shifting, emphasising resilience, system redundancy, and the endogenous role of risk in price formation. Whether this evolves into a permanent structural transformation or remains a cyclical adjustment will depend on the duration of the conflict, the extent of future disruptions, and persistence of current risk perceptions and policy responses.



Mannat Jaspal is Director and Fellow, Climate and Energy, ORF Middle East.
Reem Sagahyroon is Research Assistant, Climate and Energy, ORF Middle East.



5 World Bank, “Energy Imports, net (% of energy use)” .
6 World Bank, “Total Reserves (Includes Gold, Current US$)”.
7 Hashem Krayem, “The Pound in the Post-Assad Era: Currency Stabilization in Syria,” Project on Middle East Political Science (POMEPS), Georgetown University, 2025, https://pomeps.org/the-pound-in-the-post-assadera- currency-stabilization-in-syria.
8 Growth Lab, “Rankings”.
9 Valentina Pasquali, “Algeria and Libya See Gains from Iran Conflict but Time Is of Essence,” Arabian Gulf Business Insight (AGBI), April 2026, https://www.agbi.com/ analysis/oil-and-gas/2026/04/algeria-and-libya-see-gainsfrom- iran-conflict-but-time-is-of-essence/.
10 Yesar Al-Maleki, “Iraq’s Oil Export Vulnerability Exposes the Cost of Unresolved Disputes,” Atlantic Council, April 2026, https://www.atlanticcouncil.org/blogs/menasource/ iraqs-oil-export-vulnerability-exposes-the-cost-ofunresolved- disputes/.
11 “The Resource Curse: The Political and Economic Challenges of Natural Resource Wealth,” Natural Resource Governance Institute (NRGI), March 2015, https://resourcegovernance.org/sites/default/files/nrgi_ Resource-Curse.pdf.
12 Krayem, “The Pound in the Post-Assad Era: Currency Stabilization in Syria”.
13 Adam Hancock, AFP and Reuters, “Israel Continues Attacks on Lebanon Despite Extension of Ceasefire,” Al Jazeera, April 2026, https://www.aljazeera.com/ news/2026/4/24/israel-continues-attacks-on-lebanondespite- extension-of-ceasefire.
14 “Lebanon’s Economic Contraction Deepens, Highlighting Critical Need for Reforms and Key Investments,” World Bank Press Release, December 2024, https:// www.worldbank.org/en/news/press-release/2024/12/10/ lebanon-s-economic-contraction-deepens-highlightingcritical- need-for-reforms-and-key-investments.
15 “Lebanon’s Crisis: Great Denial in the Deliberate Depression,” World Bank Press Release, January 2022, https://www.worldbank.org/en/news/press-releas e/2022/01/24/lebanon-s-crisis-great-denial-in-thedeliberate- depression.
16 African Development Bank Group, “Sudan Economic Outlook,” 2024, https://www.afdb.org/en/countries/eastafrica/ sudan/sudan-economic-outlook.
17 “New World Bank Report Highlights Syria’s Economic Challenges and Recovery Prospects for 2025,” World Bank Press Release, 2025, https://www.worldbank.org/en/ news/press-release/2025/07/07/-new-world-bank-reporthighlights- syria-s-economic-challenges-and-recoveryprospects- for-2025; Samriddhi Vij, “Syria’s Economy Remains on Life Support – a Recovery is Not in Sight,” Middle East Institute, National University of Singapore, 2026, https://mei.nus.edu.sg/think_in/syrias-economyremains- on-life-support-a-recovery-is-not-in-sight/.
18 “Yemen’s Economy Faces Mounting Crises: Report,” World Bank Press Release, December 2024, https://www. worldbank.org/en/news/press-release/2024/06/26/yemens- economy-faces-mounting-crises-report.
3. The US-Iran Ceasefire Illusion: Energy Shortages Far from Over
1 Nicole Jao, "Oil Retreats After Hitting Four-year High on Concern of US-Iran War Escalation," Reuters, April 30, 2026, https://www.reuters.com/business/energy/oilretreats- after-hitting-four-year-high-concern-us-iranwar- escalation-2026-04-30/.
2 “ICE Brent Crude Energy Future c1,” Reuters, May 6, 2026, https://www.reuters.com/markets/quote/LCOc1/.
3 IEA, “Key Facts on the Strait of Hormuz, Oil and Gas Markets, and the IEA’s Response,” https://www.iea.org/ topics/the-middle-east-and-global-energy-markets.
4 Matt Strahan and Daniel Murphy, “How War in the Middle East is Turning Governments Into Insurers of Last Resort,” World Economic Forum, April, 2026, https://www.weforum.org/stories/2026/04/how-middleeast- war-turning-governments-into-insurers-last-resort/.
5 “How the War in the Middle East is Impacting Global Energy Systems,” MIT Energy Initiative, April 30, 2026, https://energy.mit.edu/news/how-the-war-in-the-middleeast- is-impacting-global-energy-systems/.
6 Anushree Ashish Mukherjee, Vallari Srivastava and Pranav Mathur, “Services Firms Feel the Squeeze as Oil Rally from Iran War Fails to Spur Drilling,” Reuters, March 27, 2026, https://www.reuters.com/business/ energy/services-firms-feel-squeeze-oil-rally-iran-war-failsspur- drilling-2026-03-27/.
7 IEA, Oil Market Report, April 2026, https://iea.blob. core.windows.net/assets/515f3128-df1a-4d6c-beb4- fd91d2434bef/-14APR2026_OilMarketReport_Free_ version1.pdf.
8 IEA, “Strait of Hormuz Factsheet,” https://www.iea.org/ about/oil-security-and-emergency-response/strait-ofhormuz.
9 Florian Grünberger, “Strait of Hormuz – What’s At Stake?,” Kpler, June 2025, https://www.kpler.com/blog/ strait-of-hormuz---whats-at-stake
10 IEA, “Strait of Hormuz Factsheet”.
11 Ahmad Ghaddar and Yousef Saba, “Hormuz Closure Divides the Fortunes of Middle Eastern Oil States,” Reuters, April 6, 2026, https://www.reuters.com/business/ energy/hormuz-closure-divides-fortunes-middle-easternoil- states-2026-04-06/.
12 Somshankar Bandyopadhyay, “Iran-Israel War: UAE Oil Pipeline Offers Safe Alternative in Case of Hormuz Closure,” Khaleej Times, June 23, 2025, https://www. khaleejtimes.com/business/iran-israel-war-uae-oilpipeline- offers-safe-alternative-in-case-of-hormuzclosure.
13 Ghaddar and Saba, “Hormuz Closure Divides the Fortunes of Middle Eastern Oil States”.
14 International Energy Agency, Oil Market Report, 2026, https://iea.blob.core.windows.net/assets/515f3128- df1a-4d6c-beb4-fd91d2434bef/-14APR2026_ OilMarketReport_Free_version1.pdf.
15 Victoria Grabenwöger, “Resumption of Iraqi flows via Strait of Hormuz?,” Kpler, April 2026, https://www.kpler. com/blog/resumption-of-iraqi-flows-via-strait-of-hormuz.
16 Ahmad Ghaddar, Yousef Saba, and Alex Lawler, “After Iraq, Kuwait and UAE May be Next to Cut Oil Output on Iran Crisis, Analysts Say,” Reuters, March 5, 2026, https:// www.reuters.com/business/energy/after-iraq-kuwaituae- may-be-next-cut-oil-output-iran-crisis-analystssay- 2026-03-05/.
17 Grünberger, “Strait of Hormuz – What’s at Stake?”.
18 Marwa Rashad, “Qatar's Role in the Global Gas Market,” Reuters, March 2, 2026, https://www.reuters.com/business/ energy/qatars-role-global-gas-market-2026-03-19/.
19 Emese Fabian, “QatarEnergy Declares Force Majeure For Up to Five Years,” Ceenergy News, March 25, 2026, https://ceenergynews.com/oil-gas/qatarenergyforce- majeure/#:~:text=HomeOil%20&%20 GasQatarEnergy%20declares,long%2Dterm%20 LNG%20contracts.%E2%80%9D.
20 Maha El Dahan, Andrew Mills and Yousef Saba, “Exclusive: Iran Attacks Wipe Out 17% of Qatar’s LNG Capacity for Up to Five Years, QatarEnergy CEO Says,” Reuters, March 19, 2026, https://www.reuters.com/ business/energy/iran-attack-damage-wipes-out-17-qatarslng- capacity-three-five-years-qatarenergy-2026-03-19/.
21 Dahan, Mills and Saba, “Exclusive: Iran Attacks Wipe Out 17% of Qatar’s LNG Capacity for Up to Five Years, QatarEnergy CEO Says”.
22 Anthony Di Paola, “UAE Restarts Main Gas Supply Plant While Idling Most LNG Output,” Bloomberg, March 23, 2026, https://www.bloomberg.com/news/ articles/2026-03-23/uae-restarts-main-gas-supply-plantwhile- idling-most-lng-output.
23 Laura Page, “Middle East Conflict - Gas Market Implications: A Continuing Assessment,” Kpler, March 2026, https://www.kpler.com/blog/middle-east-conflict--- gas-market-implications-a-continuing-assessment.
24 Wood Mackenzie, “Middle East Oil and Gas Recovery Faces Months-Long Process Despite Ceasefire,” April 2026, https://www.woodmac.com/press-releases/middleeast- oil-and-gas-recovery-faces-months-long-processdespite- ceasefire/.
25 Salma El Wardany and Anthony Di Paola, “Biggest UAE Refinery Halts as Precaution After Drone Attack,” Bloomberg, March 10, 2026, https://www.bloomberg.com/ news/articles/2026-03-10/uae-says-drone-attack-causesfire- in-zone-that-houses-refinery.
26 Yousef Saba and Ahmad Ghaddar, “UAE oil giant ADNOC Shuts Ruwais Refinery After Drone strike, source says,” Reuters, March 10, 2026, https://www.reuters.com/world/ middle-east/fire-hits-site-housing-abu-dhabi-national-oilcompany- operations-after-drone-2026-03-10/.
27 Dylan Griffiths and Carlos Caminada, “Here’s a List of Gulf Energy Infrastructure Damaged in Iran War,” Bloomberg, April 11, 2026, https://www.bloomberg.com/ news/articles/2026-03-25/here-s-a-list-of-gulf-energyinfrastructure- damaged-in-iran-war.
28 Rithika Krishna and Bachar Halabi, “Bahrain’s Bapco Issues Force Majeure After Refinery Hit,” Argus, March 9, 2026, https://www.argusmedia.com/en/news-and-insights/ latest-market-news/2798255-bahrain-s-bapco-issuesforce- majeure-after-refinery-hit.
29 Griffiths and Caminada, “Here’s a List of Gulf Energy Infrastructure Damaged in Iran War”.
30 Kuwait National Petroleum Company, “Overview,” https://www.knpc.com/en/about-us/who-we-are.
31 “Around 1.9 Million bpd of Gulf Oil Refining Capacity Shut Due to Iran War, IIR Says,” Reuters, March 10, 2026, https://www.reuters.com/business/energy/around-19- million-bpd-oil-refining-capacity-shut-due-iran-war-gulfiir- says-2026-03-10/.
32 “How the US-Israeli War with Iran is Disrupting Oil and Gas,” Reuters, April 7, 2026, https://www.reuters.com/ business/energy/us-israeli-war-iran-causes-major-oil-gasdisruptions- 2026-04-07/.
33 “Exclusive: Iraq Oil Output Further Plunges as Storage Fills, Hormuz Exports Blocked by Conflict,” Reuters, March 25, 2026, https://www.reuters.com/business/ energy/iraq-oil-output-further-plunges-storage-fillshormuz- exports-blocked-by-conflict-2026-03-25/.
34 Aref Mohammed, “Exclusive: Iraq Could Restore Oil Exports to Pre-war Level Within a Week If Hormuz Reopens, Basra Oil Chief Says,” Reuters, April 7, 2026, https://www.reuters.com/business/energy/iraq-couldrestore- oil-exports-pre-war-level-within-week-if-hormuzreopens- basra-2026-04-06/.
35 Griffiths and Caminada, “Here’s a List of Gulf Energy Infrastructure Damaged in Iran War”.
36 Bachar Halabi, Nader Itayim and Aydin Calik, “Hormuz Halt Forces Opec+ Producers to Curb Crude Output,” Argus, March 9, 2026, https://www.argusmedia.com/en/ news-and-insights/latest-market-news/2798472-hormuzhalt- forces-opec-producers-to-curb-crude-output.
37 “Safaniya Oil Field,” Saudipedia, October 10, 2025, https://saudipedia.com/en/safaniya-oil-field.
38 “Aramco’s Giant Zuluf Oilfield Expansion: 5 Facts you Need to Know,” Oil&Gas Middle East, November 14, 2022, https://www.oilandgasmiddleeast.com/explorationproduction/ aramcos-giant-zuluf-oilfield-expansion-5- facts-you-need-to-know.
39 Griffiths and Caminada, “Here’s a List of Gulf Energy Infrastructure Damaged in Iran War”.
40 Griffiths and Caminada, “Here’s a List of Gulf Energy Infrastructure Damaged in Iran War”.
41 “Saudi Aramco's Manifa Oilfield Production Hit by Technical Issue: Report,” Reuters, July 11, 2017, https:// www.reuters.com/article/world/saudi-aramcos-manifaoilfield- production-hit-by-technical-issue-reportidUSKBN19W1R3/.
42 Dahan, Mills and Saba, “Exclusive: Iran Attacks Wipe Out 17% of Qatar’s LNG Capacity for Up to Five Years, QatarEnergy CEO Says”.
43 Griffiths and Caminada, “Here’s a List of Gulf Energy Infrastructure Damaged in Iran War”.
44 Sarah Shamim, “Why are Iran’s South Pars Gasfield, Qatar’s Ras Laffan, So Significant?,” Al Jazeera, March 19, 2026, https://www.aljazeera.com/economy/2026/3/19/ why-are-irans-south-pars-gasfield-qatars-ras-laffan-sosignificant.
45 Griffiths and Caminada, “Here’s a List of Gulf Energy Infrastructure Damaged in Iran War”.
46 Shariq Khan and Dmitry Zhdannikov, “Aramco Cancels Juaymah LPG Deliveries through March for Repairs, Traders Say,” Reuters, February 26, 2026, https:// www.reuters.com/business/energy/aramco-cancelsjuaymah- lpg-deliveries-through-march-repairs-traderssay- 2026-02-26/.
47 Griffiths and Caminada, “Here’s a List of Gulf Energy Infrastructure Damaged in Iran War”.
48 ADNOC Gas, “Gas Processing,” https://adnocgas.ae/en/ our-operations/gas-processing.
49 Fareed Rahman, “Adnoc Gas Operations Continuing Safely After Debris Falls Near Facilities,” The National, March 23, 2026, https://www.thenationalnews.com/ business/energy/2026/03/23/adnoc-gas-operationscontinuing- safely-after-debris-falls-near-facilities/.
50 Anthony Di Paola, “UAE Gas Plant, Kuwait Oil Refinery Hit in Latest Iran Attacks,” Bloomberg, April 3, 2026, https://www.bloomberg.com/news/articles/2026-04-03/ abu-dhabi-halts-operations-at-main-gas-facility-afterattack.
51 ADNOC, “ADNOC Sour Gas,” https://www.adnoc.ae/en/ adnoc-sour-gas.
52 Griffiths and Caminada, “Here’s a List of Gulf Energy Infrastructure Damaged in Iran War”.
53 Lekshmy Pavithran and Christian Borbon, “Lekshmy Pavithran, Assistant Online Editor and Christian Borbon,” Gulf News, April 12, 2026, https://gulfnews.com/ business/energy/saudi-arabia-restores-key-oil-facilitiesafter- attacks-stabilises-global-supply-1.500504143.
54 Griffiths and Caminada, “Here’s a List of Gulf Energy Infrastructure Damaged in Iran War”.
55 Port of Fujairah, “Our Story,” https://fujairahport.ae/ about-us/port-of-fujairah-overview/.
56 Griffiths and Caminada, “Here’s a List of Gulf Energy Infrastructure Damaged in Iran War”.
57 “Dubai's DP World Says Operations at UAE's Jebel Ali Port Resumed, Notice Shows,” Reuters, March 2, 2026, https://www.reuters.com/world/middle-east/dubais-dpworld- says-operations-uaes-jebel-ali-port-resumednotice- shows-2026-03-02/.
58 Griffiths and Caminada, “Here’s a List of Gulf Energy Infrastructure Damaged in Iran War”.
59 Ministry of Transport, Communications and Information Technology, “Ports,” https://mtcit.gov.om/sectors/ports/ ports-harbour.
60 Myles McCormick, Jamie Smyth, and Lee Harris in London, “Industry Doubts Trump Plan to Insure Gulf Oil Tankers as Iran War Halts Transit,” Financial Times, March 5, 2026, https://www.ft.com/content/6ddeb488- 0d6f-4b6a-b419-2a2ba7437a25?syn-25a6b1a6=1.
61 Luca Nevola and Jalale Getachew Birru, Regional Power Struggles Fuel Simmering Tensions Across the Red Sea, Armed Conflict Location and Event Dataset, 2025, https:// acleddata.com/report/regional-power-struggles-fuelsimmering- tensions-across-red-sea.
4. The Impacts of the Middle East Crisis on Food, Water, and Economic Security
1 Cauvery Ganapathy, “Hormuz and the Export of Chaos into Global Supply Chains,” Observer Research Foundation Middle East, April 3, 2026, https://orfme. org/expert-speak/hormuz-and-the-export-of-chaos-intoglobal- supply-chains/.
2 Pooja Menon and Pranav Mathur, “Iran War Chokes Petrochemical Supply, Sends Plastic Prices Soaring,” Reuters, March 26, 2026, https://www.reuters.com/ business/energy/iran-war-chokes-petrochemical-supplysends- plastic-prices-soaring-2026-03-26/.
3 Byeongku Lee, JungWoo Lim, “Mideast Conflict Triggers Naphtha Shortage, Exposing Deeper Problems for South Korea,” DongA Science, April 13, 2026, https://www. dongascience.com/en/news/77366.

### Crude Calculations: India-UAE Energy Ties Amid Gulf Turbulence

Spotlight:


 	The density of India-UAE energy agreements in 2026 signals strategic intent, from SPR expansion to gas reserves.
 	ADNOC's expanding footprint in India's storage infrastructure is mutually rational and the Fujairah corridor offers a partial yet meaningful Hormuz bypass. But they also require India to accelerate domestic infrastructure and define robust emergency access governance.
 	Deepening the UAE partnership while preserving diplomatic balance across the Gulf remains India's most complex and consequential energy policy challenge in an era of hardening regional alignments.

When Prime Minister Narendra Modi landed in Abu Dhabi on 15 May 2026, he was received at the airport by UAE President His Highness Sheikh Mohammed bin Zayed Al Nahyan and accorded a ceremonial welcome. The visit comes against the backdrop of a sharp escalation in Gulf tensions, including a drone strike on the Fujairah Oil Industry Zone injuring three Indian nationals, the sinking of an Indian-flagged vessel struck by a suspected drone south of the Strait of Hormuz, and an attack on the UAE's Barakah Nuclear Energy Plant.
The intensity of the bilateral calendar tells its own story. UAE President Sheikh Mohamed bin Zayed visited India in January 2026, followed by Crown Prince Sheikh Khaled bin Mohamed bin Zayed in February. Indian Foreign Secretary Vikram Misri had travelled to Abu Dhabi just days before the Prime Minister's visit, where he met UAE Minister of State Reem Al Hashimy and Mubadala Investment Company CEO Khaldoon Al Mubarak. At a time of sharpening geopolitical rivalries, fragmented supply chains, and continued volatility in global energy markets, New Delhi is deepening ties with partners such as the UAE that can support both India’s economic ambitions and its long-term energy security.
The UAE is already India's third-largest trading partner and second-largest export destination, with the relationship underpinned by energy at every layer. The central question is how effectively both countries can translate longstanding commercial ties into a more resilient energy partnership.

Scaling the Energy Security Architecture 
Several bilateral energy agreements are not new in conception. They reflect a relationship that had been systematically deepened well before the present crisis— one that is now being asked to bear far greater strategic weight.
The most structurally significant dimension is crude oil storage. Since a 2018 agreement, the UAE has been the only foreign country participating in India's Strategic Petroleum Reserve (SPR) programme. Under that arrangement, Abu Dhabi National Oil Company (ADNOC) invested US$400 million to store crude in Indian Strategic Petroleum Reserves Limited’s (ISPRL) underground caverns at Mangaluru, where it holds 5.86 million barrels of strategic crude.  India had extended ADNOC the right to re-export crude stored in Indian caverns in 2020, a commercially meaningful concession that transforms the arrangement from a diplomatic gesture into a functioning part of ADNOC's regional logistics and trading infrastructure.

Since a 2018 agreement, the UAE has been the only foreign country participating in India's Strategic Petroleum Reserve (SPR) programme.
Alongside this, an Indian consortium led by ONGC holds a 40-year upstream stake in ADNOC's Lower Zakum field, one of Abu Dhabi's largest offshore deposits, securing a proportional share of crude output that offers a degree of supply assurance beyond spot-market competition. These arrangements illustrate how the India–UAE energy relationship has evolved from a transactional buyer–seller dynamic into a more deeply embedded strategic partnership.
The May 2026 visit expanded and formalised this architecture in meaningful ways. A new Strategic Collaboration Agreement between ISPRL and ADNOC targets UAE participation in India's SPR of up to 30 million barrels, a near-fivefold increase, alongside a commitment to jointly develop strategic gas reserves within India.  ADNOC bears the cost of the crude it stores, feeding its commercial interest in maintaining a strategically located inventory close to one of Asia's largest refining markets. India, in turn, gains the benefit of a substantially larger buffer without the capital outlay that would otherwise be required to fill that additional capacity, making it a structurally efficient arrangement for India's balance sheet.

The frameworks governing access priority and first right of refusal under emergency conditions are therefore a critical dimension of the ISPRL-ADNOC arrangements that will need to be robustly defined as this partnership scales to 30 million barrels and potentially extends to storage outside Indian jurisdiction at Fujairah.
The crude stored in Indian caverns belongs to ADNOC, not India, and the re-export provision allows ADNOC to sell a portion of it commercially, however, India's right to access ADNOC-stored crude in a supply emergency is established under the original 2018 terms of the arrangement. The frameworks governing access priority and first right of refusal under emergency conditions are therefore a critical dimension of the ISPRL-ADNOC arrangements that will need to be robustly defined as this partnership scales to 30 million barrels and potentially extends to storage outside Indian jurisdiction at Fujairah.

Source: Drishti IAS
The opportunity here is real but unlocking it depends substantially on what India builds at home. India's operational SPR capacity currently stands at just 5.33 MMT, roughly 39 million barrels across three underground caverns at Visakhapatnam, Mangaluru, and Padur, with current stocks of only around 24–25 million barrels. Even a full realisation of the 30-million-barrel ADNOC expansion would still leave India well under the IEA's recommended 90-day coverage benchmark.
Phase II expansion, 6.5 MMT across Chandikhol in Odisha and an additional Padur cavern, approved in 2021 with an estimated investment exceeding Rs 14,500 crore, remains in various stages of development. The agreement to scale ADNOC participation is thus only as meaningful as India’s ability to accelerate the commissioning of the cavern capacity needed to receive it.

Source: Discovery Alert
The Fujairah corridor is the geographic linchpin of this emerging architecture. The Port of Fujairah, the world's second-largest bunkering facility, sits entirely outside the Strait of Hormuz on the Gulf of Oman coast, and the existing Abu Dhabi Crude Oil Pipeline already carries UAE crude there at a capacity of 1.8 million barrels per day. ADNOC has fast-tracked a second West-East Pipeline to double this export capacity, targeted for completion in 2027.
Perhaps the most strategically novel element of the current agreement architecture is the discussion underway for India to store crude at Fujairah as part of its own SPR framework. If operationalised, this would make India among the first major Asian crude importer to hold distributed strategic reserves on both ends of the supply chain, domestically within underground caverns, and at a Gulf waypoint within days of the source, representing a “structural innovation” in developing-economy energy security strategy.

If operationalised, this would make India among the first major Asian crude importer to hold distributed strategic reserves on both ends of the supply chain, domestically within underground caverns, and at a Gulf waypoint within days of the source, representing a “structural innovation” in developing-economy energy security strategy.
Yet even this corridor has limits. When Iran effectively closed the strait from late February, ADNOC was forced to shut in a substantial portion of its own production because the existing pipeline could carry less than half of its normal export volumes. Repeated attacks on UAE energy infrastructure, including Fujairah's own oil industry zone, have further curtailed output. Until 2027 the bypass remains a bottleneck, and even after the new pipeline comes online it cannot replicate the full throughput the strait carries on a normal operating day. While the Fujairah corridor meaningfully mitigates Hormuz risk; it does not eliminate it.
The UAE's exit from OPEC+ on 1 May 2026 adds production headroom, freed of quotas, ADNOC is targeting 5 million barrels per day, a goal brought forward by three years, with potential to push toward 6 million bpd. India's geographical proximity confers a natural freight cost advantage over more distant alternatives. But this advantage will be contested: China, South Korea, and Japan face the same Hormuz exposure and are pivoting simultaneously toward the same Fujairah-routed volumes. In a supply scramble, proximity helps; it does not guarantee preferential access.

Beyond Crude
The gas picture underscores a broader vulnerability in India's energy infrastructure. India holds only around 1.4 lakh tonnes of LPG storage against daily consumption of approximately 80,000 tonnes while LNG storage remains almost entirely dependent on stocks at regasification facilities run by Petronet LNG and BPCL, with no dedicated underground reserves. The commitment to jointly develop strategic gas reserves within India, announced during the May visit, is therefore as important as the crude oil expansion and equally contingent on India's willingness to accelerate the infrastructure investment required.
On gas, Indian Oil Corporation had already signed a US$ 7–9 billion, fourteen-year deal to import 1.2 million tonnes per year of LNG from the UAE's Das Island facility, with deliveries beginning 2026; and in January 2026, HPCL and ADNOC Gas signed a further ten-year LNG supply agreement for 0.5 million tonnes per year, beginning 2028.
On LPG, the stakes are more immediate. India imports roughly 60 percent of its LPG requirements, and the UAE is already one of its largest suppliers. During Prime Minister Modi’s May 2026 visit, Indian Oil and ADNOC signed a strategic collaboration agreement to explore expanded LPG supply and trading opportunities, including a potential long-term sale and purchase agreement. For India, the significance extends beyond commercial diversification. Stable LPG supplies help shield millions of households, particularly lower-income consumers, from disruptions and price spikes in cooking fuel. Converting this understanding into a firm long-term contract will be an important near-term test of how effectively both sides can translate diplomatic momentum into operational outcomes.

Conclusion
Taken together, the agreements signed in 2026 represent a significant strengthening of the India–UAE energy architecture, one whose strategic value has been underscored by the Hormuz crisis. The pace and density of bilateral engagement send an important signal to markets and regional partners alike: both governments view energy cooperation as a long-term strategic priority rather than a series of isolated commercial transactions.

The pace and density of bilateral engagement send an important signal to markets and regional partners alike: both governments view energy cooperation as a long-term strategic priority rather than a series of isolated commercial transactions.
For UAE, a deeper presence in India’s energy infrastructure reflects a broader commercial logic of national oil companies (ADNOC) seeking downstream footholds in major import markets as a hedge against long-term demand uncertainty and transition-related risks. For India, these arrangements provide more than supply contracts; they create optionality through storage, upstream equity, and logistical diversification.
The significance of the May 2026 visit lies less in any single agreement than in the architecture it advances. If implemented fully, India and the UAE will be building one of Asia’s most sophisticated bilateral hydrocarbon partnerships, converting long-standing energy interdependence into a durable source of strategic resilience.



Parul Bakshi is Fellow, Energy and Climate, ORF Middle East.

### The Economic Implications of the Middle East Crisis: Measuring Preparedness in the MENA

The following excerpt is from Chapter 2 — Shifting Sands: A Middle East in Conflict and Transition.


The Arab region faces multiple acute fragilities. Seven countries are classified by the World Bank as fragile or conflict-affected.[1] Climate change is straining productive systems and societies, affecting agricultural output (and related employment) and putting pressure on infrastructure. Growth has been tepid and is failing to reduce persistently high youth unemployment rates, while food insecurity has deepened.
As a result, the region remains vulnerable to recent shocks, and the unfolding Middle East crisis could have serious implications to these economies. The April 2026 World Economic Outlook[2] and Regional Economic Outlook for the Middle East and Central Asia,[3] both by the International Monetary Fund (IMF), project a sharp decline in growth across the Middle East, North Africa, Afghanistan and Pakistan (MENAP) region, with forecasts revised down to 1.4 percent—2.3 percentage points decrease from projections made last October. But this accounts for sharp economic compressions in Gulf countries, particularly those most dependent on the Hormuz Strait for their exports, with expected downward revisions of up to 15 percentage points.
This article proposes a general, introductory framework to assess the preparedness of select non-Gulf, majority-Arabic-speaking countries in the MENAP region to cushion the unfolding shock. Deliberately, the article does not cover member states of the Gulf Cooperation Council (GCC): although they are in the eye of the storm, these high-income economies can arguably collectively weather the shock owing to their vast endowments in sovereign wealth.
Roughly, and despite disparities within each category, the analysis of select metrics justifies dividing studied countries into three categories: non-GCC member states of the Organisation of Petroleum Exporting Countries (OPEC); non- OPEC, conflict-affected countries; and nonconflict- affected, triple-deficit (energy, fiscal and current account) countries. Fundamentally, the authors’ observations confirm the capital importance of expertise embeddedness, political stability, and reform-mindedness to adapt to multiplying shocks.

Measuring Preparedness
Table 1. Economic Preparedness Profiles in Select Arab Economies

Sources: Atlas of Economic Complexity, IMF, World Bank[4]
The metrics proposed in the following paragraphs are not exhaustive but provide a useful overview. Typically, they could be complemented by data measuring exposure to certain categories of external financing (for instance, remittances from Gulf countries), fiscal flexibility (e.g., transfers to state-owned enterprises and subsidies, notably on fossil fuels), the quality of macroeconomic management (as expressed by inflation rates), or the overall trajectory of the studied economies (such as observed trends in growth or gross fixed capital formation).
Net Energy Imports as Share of Consumption While the MENA region includes major energy exporters, it also includes countries that import the vast majority of their energy consumption (over 90 percent in three cases).[5] When the current account balance of net importing countries suffers from hikes in energy prices, net exporters can experience windfalls. Examining the current account deficit can serve as a complement, as it provides further insights into the additional stress that a higher energy bill can bring on the external financing needs, foreign currency reserves, and overall trade conditions of net importers.

General Government Gross Debt
Government gross debt-to-GDP ratios indicate fiscal discipline and provide a snapshot of a country’s capacity for fiscal response during periods of stress. Importantly, whether levels decrease over time provides indications on the robustness of fiscal policy. Ratios were steep in Lebanon (157.9 percent), which defaulted on its sovereign debt in 2020, but stood below 50 percent in fuel-exporting Iraq and Algeria.

General Government Net Borrowing
General government net borrowing (i.e., fiscal balance) serves as an indicator of a country’s ability to manage public spending. Containing spending, in turn, is an indication of the ability to rationalise it or direct it towards domains or sectors where possible returns can be highest. It is also how fiscal buffers are constituted, which allows for more flexibility in adverse circumstances. The fiscal balance should be read dynamically: if it decreases, it may be an indication of ongoing fiscal consolidation, a complex and high-stakes process which can speak of policy sophistication. Amongst the countries studied in this article, Morocco stands out for a relatively healthier fiscal position (3.5 percent fiscal deficit). Libya stands on the other end of the spectrum: its deficit (20.9 percent) indicates serious economic mismanagement.

Foreign Reserves
Total foreign reserves, as reported by the World Bank, serve as a sovereign economy’s primary buffer against external shocks: financing import disruptions, stabilising exchange rates, and maintaining debt servicing when revenues fall.6 Iraq (US$100.7 billion) and Libya (US$92.9 billion) hold the largest reserves; Algeria (US$83.0 billion) and Egypt (US$44.9 billion) offer meaningful, though more constrained, cover. At the extreme of vulnerability sit Sudan (US$178 million, last reported in 2017), and Syria, where reserves (US$20.6 billion in 2010) have collapsed to an estimated US$200 million by December 2024.[7]

Economic Complexity Index
The Economic Complexity Index (ECI), maintained by the Harvard Kennedy School’s Growth Lab, measures the productive knowledge embedded in a country’s export basket.[8] Higher values generally reflect more diversified, sophisticated economies, stronger technology embeddedness in domestic production, greater participation in complex global value chains driven by higher competitiveness, and more skilled employment and management. It also demonstrates the ability to conduct successful industrial policy—another indicator of policy sophistication. From this standpoint, countries like Tunisia (0.55) and Jordan (0.09) may still demonstrate adaptive capacity. Sudan (−2.13), Yemen (−1.74), and Libya (−1.71), all in the midst of conflicts, are the most acutely exposed.

Understanding Preparedness
Energy Exporters: The Liquidity Firewall
Iraq, Algeria, and Libya are in the best position to absorb the immediate shock. All three are net energy exporters: Iraq at −275 percent of energy use, Libya at −250 percent, and Algeria at −127 percent. Their reserves reinforce this position: Iraq holds the sample’s largest cushion at US$100.7 billion, followed by Libya at US$92.9 billion and Algeria at US$83.0 billion. Debt burdens are comparatively the most manageable: Iraq at 45.2 percent of GDP and Algeria at 48.1 percent, the two lowest ratios with available data.
Therefore, economic preparedness for this crisis exists despite their structural lack of economic sophistication. United by their status as fuel-exporting states, they share markedly lower ECI scores: Iraq (−1.55), Algeria (−1.06), and Libya (−1.71). However, in the acute phase of an exogenous shock, industrial diversification is secondary to brute liquidity and energy sovereignty.
However, the closure of the Strait of Hormuz reveals a stark geographic bifurcation within this cohort’s resilience. For the North African producers, Algeria and Libya, a Hormuz blockade represents a pure macroeconomic windfall, as their hydrocarbon export infrastructure routes face no logistical disruption from an Arabian- Persian Gulf chokepoint closure.[9] Instead, they stand to reap immense financial benefits from the resulting catastrophic spike in global energy prices, heavily reinforcing their liquidity firewalls.
Conversely, Iraq faces acute physical vulnerability, as the overwhelming amount of Iraqi crude is exported via the Strait of Hormuz. Iraq exports approximately 93 percent of its crude through Basra’s Gulf terminals.[10] As this maritime artery is severed, Iraq’s primary revenue mechanism drops significantly. Despite this geographic divergence, they remain grouped together because their initial shock-absorption pattern is identical. In the face of this crisis, the “resource curse” is observed to reverse and present a “resource boon” instead.[11]

Non-Conflict Affected, Triple-Deficit Countries: Reform Means Protection
The group of non-conflict-affected, lower-middle income countries comprises Egypt, Jordan, Morocco, and Tunisia. These economies share several structural features, including greater reliance on productive sectors and tourism for foreign exchange, employment, revenue, and trade, as well as relatively higher ECI scores, indicating strong economic fundamentals. Yet, the dynamics within the group diverge widely.
While relatively robust monetary frameworks and foreign exchange reserves provide some stability, Jordan faces several vulnerabilities. It is the most energy import-dependent of the four (96 percent) and has limited fiscal space, with the highest central government debt-to-GDP ratio (95.90 percent) and the second-highest fiscal deficit (5.45 percent).
Egypt and Tunisia import less energy (net imports were, respectively, about a tenth and half of total use for the year considered), but both display relatively high levels of government debt-to-GDP (between 85 and 90 percent). That said, their exposure markedly differs. Egypt has engaged the IMF and international partners, which have provided financial resources in exchange for a series of reforms, including fiscal consolidation and exchange regime liberalisation, which should help navigate the current shock. In contrast, rigid policymaking and a lack of substantial reforms (on energy subsidies, for instance) will weigh on Tunisia’s budget, currency, and trade.
Last, Morocco appears to have the most robust policymaking, with ongoing fiscal consolidation driving the fiscal deficit to about 3 percent and the central government debt-to-GDP ratio below 70 percent. As a result, the country appears to be better endowed with fiscal buffers and therefore best prepared to absorb the shock.
However, despite having more complex economies indicated by relatively higher ECI scores, paradoxically and overall, this cohort remains relatively less prepared than the energy exporters to manage the immediate aftermath of the crisis, as its calculus demands raw liquidity and energy sovereignty.

Conflict-Affected States: The Insolvent Periphery
Yemen, Sudan, Syria, and Lebanon form a grouping defined not by their capacity to absorb shocks, but by their prior exhaustion of such capacity. Each has experienced compounding conflict, eroding all key preparedness metrics even before the current crisis began.
Reserve positions illustrate the extent of this erosion. Yemen’s reserves stood at US$1.25 billion (2022); Sudan’s at US$177.9 million, with 2017 the last reliable data point—reflecting severe state dysfunction. Syria’s reserves, reported at US$20.6 billion in 2010, are estimated at US$200 million by end-2024.[12] Yemen scores −1.74 on the ECI (135th globally) and Sudan −2.13 (138th), the lowest in the sample. Sudan’s debt-to-GDP of 271.98 percent and Lebanon’s 164.1 percent are also the worst in the sample.
Lebanon merits distinction. Its ECI of 0.39 (54th globally) and reserves of US$33.3 billion reflect a historically sophisticated economy that is now regressing rapidly. The country has been engulfed in war since October 2023, with the new bout of hostilities costing it billions more in infrastructure.[13] The World Bank estimated that cumulative real GDP contraction since 2019 exceeded 38 percent by end-2024, with the 2024 conflict inflicting a further 6.6 percent decline.[14] Between 2019 and 2021, output shrank 58.1 percent, the steepest contraction across 193 countries.[15]
Similar patterns are evident elsewhere, Sudan’s real GDP fell by 37.5 percent in 2023.[16] Syria’s GDP in 2024 cumulatively contracted by over 50 percent since 2010. Claims that the state has attracted US$28 billion in foreign investments over a 10-month period are unlikely to turn the tide, not least as most of these deals are non-binding memoranda of understanding with no enforceable legal frameworks.[17] Similarly, Yemen also experienced a 54 percent decline in real GDP per capita between 2015 and 2023.[18] Therefore, these states are not experiencing a new economic decline in 2026, they are in fact facing a compounding of an existent economic crisis due to the regional conflict.

Conclusion
The 2026 conflict does not impose the same degree of stress across the MENA region. Algeria and Libya (and, to a lesser extent, Iraq) enter this crisis shielded by hydrocarbon revenues and substantial reserves, which, in the case of the two North African nations, stand to take a boost. Nonconflict- affected, middle-income importers occupy a contested middle ground, with resilience largely contingent on policy agility. Yemen, Sudan, Syria, and Lebanon face yet another shock exacerbating underlying fragilities: their reserve positions are exhausted, their debt burdens are massive, their productive bases have been hollowed by conflict, and their states can provide no safety net to their citizens.
To be sure, preparedness is not a regional condition, it is a state-specific calculus of fiscal buffers, liquidity, energy exposure, and structural adaptability. In a region marred with fragile states, the economic deterioration imposed by the conflict could erode the region’s economic standing in a volatile global economy. In all likelihood, its impact will serve as a stark reminder of how a structural lack of reform can deepen strategic heteronomy. Windfalls and financial pressure alike could lead to more aggressive behaviour at the state or intra-state levels, increasing risks of collision and unrest. Sharpened economic asymmetries across the Arab region could thus lead to further strategic challenges in an already fraught geopolitical scene.



Samriddhi Vij and Akram Zaoui are Associate Fellows, Geopolitics, ORF Middle East.




Endnotes
[16] Neil Quilliam and Kristian Alexander, “Iran and Gaza Conflicts Teach Gulf States a Hard-power Lesson,” Chatham House, March 16, 2026, https:// www.chathamhouse.org/publications/the-worldtoday/ 2026-03/iran-and-gaza-conflicts-teach-gulf-stateshard- power-lesson.
[17] Albert Vidal Ribe, “Defending the Skies of the Arab Gulf States,” IISS, March 18, 2026, https://www.iiss.org/onlineanalysis/ online-analysis/2026/03/defending-the-skies-ofthe- arab-gulf-states/.
[18] Maryna Lishchuk, “Saudi Arabia Bought Billions of Dollars Worth of Weapons from Russia,” European Foundation for Democracy, January 25, 2025, https://www. europeandemocracy.eu/news/saudi-arabia-boughtbillions- of-dollars-worth-of-weapons-from-russia/.
[19] Hana Elshehaby, “Gulf Security Beyond Guarantees,” Middle East Council on Global Affairs, April 5, 2026, https://mecouncil.org/blog_posts/gulf-security-beyondguarantees/.
[20] Huda Ata, “UAE to Reassess Global Ties after Iran Aggression, Gargash Says,” Gulf News, April 10, 2026, https://gulfnews.com/uae/uae-to-reassess-global-tiesafter- iran-aggression-gargash-says-1.500502435.
2. The Economic Implications of the Middle East Crisis: Measuring Preparedness in the MENA
[1] World Bank Group, “Classification of Fragile and Conflict-Affected Situations,” Brief, World Bank, 2024.
[2] International Monetary Fund, World Economic Outlook. Global Economy in the Shadow of War, April 2026, https:// www.imf.org/en/publications/weo/issues/2026/04/14/ world-economic-outlook-april-2026.
[3] International Monetary Fund, Regional Economic Outlook. Middle East and Central Asia. War in the Middle East: Spillovers and Policy Challenges, April 2026, https://www.imf. org/en/publications/reo/meca/issues/2026/04/16/regionaleconomic- outlook-middle-east-central-asia-april-2026.
[4] The figures are synthesis from different datasets; see Growth Lab, “Rankings,” The Atlas of Economic Complexity, Harvard Kennedy School, 2024, https:// atlas.hks.harvard.edu/rankings; World Bank, “Total Reserves (Includes Gold, Current US$),” 2024, https:// data.worldbank.org/indicator/FI.RES.TOTL.CD; World Bank, “Energy Imports, net (% of energy use),” 2022, https://data.worldbank.org/indicator/EG.IMP.CONS. ZS?locations=TN-MA-LB-DZ-PS-LY-EG-SY-JO-SD-YEIQ; “General Government Gross Debt, Percent of GDP,” International Monetary Fund, 2026, https://www.imf. org/external/datamapper/GGXWDG_NGDP@WEO/ OEMDC/ADVEC/WEOWORLD; “General Government Net Lending/Borrowing. Percent of GDP,” International Monetary Fund, 2026, https://www.imf.org/external/ datamapper/GGXCNL_NGDP@WEO/OEMDC/ADVEC/ WEOWORLD. For general government gross debt and net borrowing, 2024 is the last year where data is available for a clear majority of studied countries, while 2022 is the last year where data was available for most countries for net energy imports as share of total use.
[5] World Bank, “Energy Imports, net (% of energy use)” .
[6] World Bank, “Total Reserves (Includes Gold, Current US$)”.
[7] Hashem Krayem, “The Pound in the Post-Assad Era: Currency Stabilization in Syria,” Project on Middle East Political Science (POMEPS), Georgetown University, 2025, https://pomeps.org/the-pound-in-the-post-assadera- currency-stabilization-in-syria.
[8] Growth Lab, “Rankings”.
[9] Valentina Pasquali, “Algeria and Libya See Gains from Iran Conflict but Time Is of Essence,” Arabian Gulf Business Insight (AGBI), April 2026, https://www.agbi.com/ analysis/oil-and-gas/2026/04/algeria-and-libya-see-gainsfrom- iran-conflict-but-time-is-of-essence/.
[10] Yesar Al-Maleki, “Iraq’s Oil Export Vulnerability Exposes the Cost of Unresolved Disputes,” Atlantic Council, April 2026, https://www.atlanticcouncil.org/blogs/menasource/ iraqs-oil-export-vulnerability-exposes-the-cost-ofunresolved- disputes/.
[11] “The Resource Curse: The Political and Economic Challenges of Natural Resource Wealth,” Natural Resource Governance Institute (NRGI), March 2015, https://resourcegovernance.org/sites/default/files/nrgi_ Resource-Curse.pdf.
[12] Krayem, “The Pound in the Post-Assad Era: Currency Stabilization in Syria”.
[13] Adam Hancock, AFP and Reuters, “Israel Continues Attacks on Lebanon Despite Extension of Ceasefire,” Al Jazeera, April 2026, https://www.aljazeera.com/ news/2026/4/24/israel-continues-attacks-on-lebanondespite- extension-of-ceasefire.
[14] “Lebanon’s Economic Contraction Deepens, Highlighting Critical Need for Reforms and Key Investments,” World Bank Press Release, December 2024, https:// www.worldbank.org/en/news/press-release/2024/12/10/ lebanon-s-economic-contraction-deepens-highlightingcritical- need-for-reforms-and-key-investments.
[15] “Lebanon’s Crisis: Great Denial in the Deliberate Depression,” World Bank Press Release, January 2022, https://www.worldbank.org/en/news/press-releas e/2022/01/24/lebanon-s-crisis-great-denial-in-thedeliberate- depression.
[16] African Development Bank Group, “Sudan Economic Outlook,” 2024, https://www.afdb.org/en/countries/eastafrica/ sudan/sudan-economic-outlook.
[17] “New World Bank Report Highlights Syria’s Economic Challenges and Recovery Prospects for 2025,” World Bank Press Release, 2025, https://www.worldbank.org/en/ news/press-release/2025/07/07/-new-world-bank-reporthighlights- syria-s-economic-challenges-and-recoveryprospects- for-2025; Samriddhi Vij, “Syria’s Economy Remains on Life Support – a Recovery is Not in Sight,” Middle East Institute, National University of Singapore, 2026, https://mei.nus.edu.sg/think_in/syrias-economyremains- on-life-support-a-recovery-is-not-in-sight/.
[18] “Yemen’s Economy Faces Mounting Crises: Report,” World Bank Press Release, December 2024, https://www. worldbank.org/en/news/press-release/2024/06/26/yemens- economy-faces-mounting-crises-report.
3. The US-Iran Ceasefire Illusion: Energy Shortages Far from Over
1 Nicole Jao, "Oil Retreats After Hitting Four-year High on Concern of US-Iran War Escalation," Reuters, April 30, 2026, https://www.reuters.com/business/energy/oilretreats- after-hitting-four-year-high-concern-us-iranwar- escalation-2026-04-30/.
2 “ICE Brent Crude Energy Future c1,” Reuters, May 6, 2026, https://www.reuters.com/markets/quote/LCOc1/.
3 IEA, “Key Facts on the Strait of Hormuz, Oil and Gas Markets, and the IEA’s Response,” https://www.iea.org/ topics/the-middle-east-and-global-energy-markets.

### The Sanctions Equilibrium: When Coercion Becomes Structure

Spotlight

 	Prolonged sanctions often stop functioning as temporary coercive tools and become embedded political-economic structures.
 	Iran shows how sanctions can empower regime-linked actors, especially the Islamic Revolutionary Guard Corps (IRGC), by expanding parallel markets and sanctions-evasion networks.
 	Syria demonstrates that sanctions relief does not automatically restore the pre-sanctions economy once informal systems have become dominant.
 	Yemen reveals how incoherent sanctions can entrench rival political economies, weakening the very state structures they are meant to support.

Sanctions are designed as temporary instruments of coercion: a calibrated pressure meant to alter the behaviour of a targeted state and to be lifted after. Yet across the Middle East, this assumption has quietly collapsed. In Iran, the United States(US) has maintained sanctions continuously since 1979, with waves of intensification in 2010 and again in 2018. In Syria, a layered architecture of American, European and British sanctions persisted for over a decade before partial relief arrived in 2025. In Yemen, fragmented and inconsistently applied sanctions have accompanied a civil war now entering its eleventh year. In all three cases, the central question has long since ceased to be whether sanctions will work. The more pressing question is what they have built in their persistence.

The conventional debate identifies the failure of sanctions but misses a deeper structural phenomenon. When sanctions persist long enough, they stop functioning as external pressure and begin functioning as architecture: reorganizing domestic political economies from within, entrenching new actors, redistributing costs onto civilian populations and ultimately making their own removal as more economically disruptive than their continuation. This is the sanctions equilibrium: a state where international sanctions become constitutive of the economies they were designed to punish. The result is not sanctions fatigue but a stable, if deeply inequitable, new equilibrium.
Iran: The Perpetuation Problem
Iran represents the most advanced stage of sanctions equilibrium. Over four decades of economic isolation, the Islamic Revolutionary Guard Corps (IRGC) has expanded far beyond its original military mandate into a vast economic conglomerate controlling oil and gas, construction, ports, telecommunications and banking. Estimates of the IRGC's economic footprint range from one-third to over half of Iran's GDP: a sprawling, opaque empire built through no-bid state contracts, sanctions-evasion networks and the systematic displacement of private-sector competitors. The IRGC and the broader armed forces hold majority ownership or board control of at least 22 companies listed on the Tehran Stock Exchange and smuggling alone generating an estimated US$12 billion annually at profit margins of 200 to 300 percent for IRGC and Surpreme Leader-linked institutions.
The consequences for ordinary Iranians have been catastrophic. Sanctions have caused an average annual decline of 17 percentage points in the size of Iran's middle class between 2012 and 2019.
Crucially, the IRGC did not thrive despite sanctions, it expanded because of them. IRGC-linked entities became uniquely positioned to access hard currency through smuggling networks and informal trade routes. Iran’s "resistance economy", the doctrine of self-sufficiency, functioned in practice as political cover for the militarisation and the elite capture of rents.

The consequences for ordinary Iranians have been catastrophic. Sanctions have caused an average annual decline of 17 percentage points in the size of Iran's middle class between 2012 and 2019. This has led to greater economic dependence on state-affiliated institutions.  Sanctions can create a vicious cycle where economic hardship fuels public discontent, prompting regimes to increase repression to maintain control. This repression further damages the economy by stifling investment, entrepreneurship and human capital, amplifying the original shock. In practice, sanctions often fail to weaken regimes; instead, they erode civil society—the very actors most likely to challenge authoritarian rule.

This presents the first dimension of the sanctions equilibrium: the perpetuation problem. The IRGC and regime-linked actors now have rational incentives to preserve the sanctions architecture. A full economic opening, through Financial Action Task Force (FATF) compliance and SWIFT reintegration would invite competition into sectors the IRGC currently dominates without challenge. As a result, hardline factions within Iran view sanctions relief not as an opportunity but as a threat to their political and economic dominance. The sanctions equilibrium has thus become self-perpetuating, sustained by domestic beneficiaries of the parallel economy who have no interest in dismantling it.
Syria: The Irreversibility Problem
Syria presents a different case of what happens when sanctions are partially lifted from an economy that has already fundamentally reorganised around them.

The Caesar Syria Civilian Protection Act imposed sweeping sanctions on Syria, targeting not just the Assad regime but any third-party entity engaging with it. Combined with prior American, European and British sanctions dating to 2011, these measures devastated Syria's banking sector, energy infrastructure and formal trade networks. By 2024, Syria's GDP had contracted by over 50 percent from its 2010 level, with over 80percent of Syrian population driven below the poverty line.

The critical insight, however, is what emerged in the vacuum. As formal banking collapsed, hawala networks became Syria's primary financial infrastructure, routing remittances, facilitating trade and substituting for a banking system the sanctions had rendered non-functional. Informal dollarisation became widespread, with Syrians abandoning the Syrian pound for foreign currency transactions in everyday commerce. Black-market trade replaced formal supply chains across food and consumer goods.
The critical insight, however, is what emerged in the vacuum. As formal banking collapsed, hawala networks became Syria's primary financial infrastructure, routing remittances, facilitating trade and substituting for a banking system the sanctions had rendered non-functional.
When Assad fell in December 2024 and the Caesar Act was ultimately repealed in 2025, the anticipated economic bounce did not materialise. The Syrian pound appreciated sharply on news of relief, by about 25 percent in two days following Trump's May 2025 announcement, before falling back as markets recognised that perhaps the pre-sanctions economy no longer existed to return to. The formal banking sector has limited infrastructure and therefore remains practically isolated, with little trust in formal financial institutions and lack the architecture to re-engage with international correspondent banks. Syria's SWIFT reconnection was a necessary milestone, yet Syria is still on the Financial Action Task Force (FATF) gray list and designated by the US as a state sponsor of terrorism which makes reintegration harder.  Hawala operators have an incentive to capture financial intermediation and resist reintegration into regulated systems. The informal sector has expanded so rapidly that it now undermines state revenues and long-term stability. Reconstruction, estimated by the World Bank at US$216 billion, requires not merely capital but institutional re-architecture that the years of sanctions have systematically dismantled. Of the US$216 billion required, only approximately US$28 billion in investments had been pledged or attracted by October 2025.

Syria demonstrates a second dimension of the sanctions equilibrium: the irreversibility problem. Sanctions relief is not the mirror image of sanctions imposition. Removing pressure from an economy that has reorganised around that pressure does not restore the prior equilibrium, it creates a new and unpredictable disequilibrium.
Yemen: The Perverse Symmetry Problem
Yemen offers another alarming case. Here, the problem is that the sanctions have been applied incoherently and target primarily the Houthi movement in the north, while leaving the Internationally Recognized Government (IRG) in the south operating under a fragmented regulatory framework. The resulting competing structures present a bifurcated equilibrium in which the sanctions architecture has become load bearing for both sides. This iteration has produced two entrenched political economies, each internally rationalised and each threatened by the peace that would end it.

Yemen's economic data tells a story of this institutional breakdown. Real GDP per capita has declined by 58 percent since 2015, with the economy effectively split between two competing central banks, two currency systems and two regulatory environments. In Houthi-controlled territory, deflation and liquidity constraints are driving reliance on informal and barter-based transactions. In IRG-controlled areas, inflation exceeded 30 percent in 2024 and the Yemeni rial depreciated from YER 1,540 to YER 2,065 per US$ over the year.
Houthis collected US$789 million in tax and customs revenues from oil derivatives and commodities through their controlled ports between May 2023 and June 2024, with smuggling being a key revenue source for the Houthis. 
The Houthi economy has adapted to sanctions through a parallel revenue architecture. Houthis collected US$789 million in tax and customs revenues from oil derivatives and commodities through their controlled ports between May 2023 and June 2024, with smuggling being a key revenue source for the Houthis. Therefore, the sanctions have strengthened the movement's economic grip and reduced the competitors to challenge it. The Houthi leadership has little incentive to seek peace that reopens formal trade and invites competitors into markets it currently monopolises. The IRG’s economy, meanwhile, has collapsed into severe aid-dependency. IRG revenues, excluding external grants, fell to just 2.5 percent of GDP in 2024, making the government possibly insolvent without Saudi transfers. The International Monetary Fund (IMF) states that external financing remains critical to sustain government operations and maintain critical public services. Therefore, the IRG has no sustainable fiscal base and benefits from external aid that might be scaled back if the conflict resolves. More than two-thirds of civilians now face inadequate food consumption, absorbing the cost of sanctions.

The result is the third dimension of the sanctions equilibrium: the perverse symmetry problem. Designed to coerce the Houthis, it has simultaneously hollowed out the government it was meant to strengthen, punishing ally and adversary alike. The two rival political have reorganised its institutions around the sanctions architecture. They now have limited incentive to reach a resolution that would force them to compete on terms they might not win.
Conclusion
Read together, Iran, Syria and Yemen reveal sanctions to be something quite different from the instrument their architects imagined. The conventional debate frames the question around effectiveness but this is misleading because it treats sanctions as exogenous pressure applied to an unchanging system. However, prolonged sanctions become endogenous to the political economies they target, restructuring incentives, redrawing the boundaries of the formal and informal economy and producing entrenched actors who benefit from continuation of the pressure regime. Across the three cases, the structural finding is that sanctions do not so much punish targeted states as remake them.
The conventional debate frames the question around effectiveness but this is misleading because it treats sanctions as exogenous pressure applied to an unchanging system. 
The policy implications are rarely confronted. With the sanctions equilibrium problem, the moment of imposition is also implicitly the moment of construction. The exit problem is not the mirror image of the entry problem and considerably harder. At the point of imposition, policy makers need to forecast the distributional consequences: the institutions, intermediaries and rent flows that prolonged pressure will generate. Eventually, sanctions cease to function merely as external pressure and instead become a form of political economy in their own right. Until this reality is acknowledged in design rather than discovered in hindsight, the sanctions architecture will continue to outlast the policy objectives that produced it.



Samriddhi Vij is an Associate Fellow, Geopolitics, at ORF Middle East.

### Building in the Rupture: The World’s New Alignments

The following excerpt is from Chapter 2 — New Arenas of Great-Power Competition of ORF Global Quarterly: Disruption and Recalibration.


Less than a year after Canadian Prime Minister Mark Carney declared that Canada’s old relationship with the United States (US)—anchored in deep economic integration and close security cooperation—was “over,”[1] he delivered a forceful message at Davos in January 2026. He argued that the “fiction” of the international rules-based order, in which powerful states exempt themselves at will and trade rules are “enforced asymmetrically,” had been laid bare. The “bargain,” as he described it—an American-led order underwriting a stable financial system, collective security, and the multilateral frameworks long relied upon by middle powers—was now in “rupture.”[2]
These strong words follow a shock delivered by US President Donald Trump shortly after taking office in January 2025: a declaration of American “economic independence” through the introduction of “Liberation Day” tariffs in April, imposing a 10-percent baseline rate on all countries and subjecting those with trade surpluses vis- à-vis the US to sharply higher rates.[3] Jarring as it was, the move should not have come as a surprise—it flowed directly from the “America First” policies Trump had initiated during his first term, from January 2017 to January 2021, when his administration framed its foreign policy doctrine as “principled realism.”[4] Whereas that first term tested the boundaries of the liberal order, his second has challenged them more aggressively, explicitly linking economic policy to national security under the rubric addressing “unfair and unbalanced trade.”[5] This framing has provided justification for tariffs imposed not only against rivals, but also against some of the US’s closest allies.
Trump’s unreliability as a guarantor of the liberal order has become a generative force in its own right. His first term catalysed smaller groupings anchored in a “Free and Open Indo-Pacific” framework, while his second, still unfolding, has not only accelerated those minilateral initiatives, but also pushed allies, and in some cases adversaries, into lateral arrangements with partners they might previously have considered unlikely or unnecessary. The reality is that “America First” under the Trump administration has functioned as a structural force rather than empty rhetoric—one that has prompted state actors to exercise agency by prioritising their own national interests.

Dismantling Multilateralism
Between Trump’s first and second terms, his administration’s key priorities have remained consistent: a focus on America’s immediate neighbourhood—codified in the November 2025 National Security Strategy[6] as the “Western Hemisphere”—and hostility toward external threats such as Iran, alongside what the same document terms “non-Hemispheric competitors,” a thinly veiled reference to Beijing. Yet Trump 2.0 has introduced a sharper edge. For Europe, the transatlantic divide has widened not only through Washington’s studied ambivalence toward NATO commitments, but also through its conspicuous omission of Russian responsibility for the war in Ukraine—a conflict the European Union (EU) regards as an existential threat.[7] The implications were made plain by Defense Secretary Pete Hegseth at the 2025 Shangri-La Dialogue in Singapore: while America would “continue to be an Indo- Pacific nation,” the administration’s “peace through strength” strategy would only endure if European allies assumed “greater ownership” of their own security.[8] The message, delivered in Asia, was directed squarely at Brussels.

“‘America First’ has functioned as a structural force rather than empty rhetoric—one that has prompted state actors to exercise agency by prioritising their own national interests.
What is evident in Trump 2.0 is not a recalibration but a repudiation of multilateral norms, alliance obligations, and the assumption that American power and global stability are mutually reinforcing. The tariffs present the most visible manifestation of this shift: economic instruments deployed with a force that strains alliances, increases the cost of doing business in an era of globally mobile capital and innovation, and risks undermining the dollar’s reserve-currency status along with the deep, liquid markets that have long sustained American financial primacy.[9] These are not the trade-offs of a country confident in its hegemony; they are the choices of one that has concluded that global leadership now costs more than it yields.
In this environment, multilateralism is effectively being dismantled. The global order is left to operate only where it serves Washington’s immediate interests—underscored most starkly by the Presidential Memorandum authorising US withdrawal from 66 international organisations and UN entities.[10] While this trajectory has roots in Trump 1.0, the second term has abandoned any pretense of soft power altogether: the closure of USAID, long a cornerstone of American diplomatic influence, signals an administration that has substituted persuasion with coercion and financial leverage. What remains is a world in which the architecture of collective problemsolving is being eroded from within by the very power that constructed it.
Trump 1.0 & 2.0: Withdrawal from Major International Organisations and Frameworks

Building in the Rupture
Where multilateralism erodes, alternative interstate arrangements have thrived. Minilateralism—what Moises Naím[11] influentially described as bringing together “the smallest possible number of countries needed to have the largest possible impact”— has shifted from the margins of diplomatic practice to its centre. Such groupings are not new to Washington. Indeed, minilateralism has experienced a “golden age” since the emergence of the Indo-Pacific construct, with US-linked initiatives spanning security, trade, critical minerals, infrastructure, and governance expanding markedly across the Obama, Trump, and Biden administrations.[12]
What distinguishes the current moment is not merely the proliferation of minilaterals, but the simultaneous dismantling of the multilateral architecture alongside which they once operated. The Quad, the quadrilateral dialogue between the US, Japan, Australia, and India, drew on concepts developed during the Bush and Obama administrations before being formally revived under Trump’s first term as a cornerstone of an Indo-Pacific security architecture.[13] The USJapan- Philippines Trilateral,[14] which conducted a Multilateral Maritime Cooperation Activity (MMCA)[15] as recently as February 2026, reflects the same logic: targeted coalitions designed to project deterrence in contexts where broader multilateral frameworks lack the speed or cohesion to respond effectively.
Trump’s support for such arrangements is conditional rather than principled. Minilateral groupings that advance American interests—or where allies have sufficiently cultivated favour with Washington—receiving backing; those that do not are treated as expendable. AUKUS, the multibillion-dollar submarine partnership between Australia, the United Kingdom (UK), and the US established under the Biden administration, illustrates this dynamic. In October 2025, Washington moved to review the supply and delivery of nuclear-powered attack submarines, with officials signalling little reason to share what they described as a “crown jewel asset.”[16] The arrangement’s strategic logic— containing China, binding allies, and projecting Indo-Pacific resolve—remained intact. What shifted was the calculus of America’s perceived returns.
It is within this transactional environment, where American pressure is exerted through economic coercion rather than diplomatic persuasion, that alignments are shifting in unexpected ways. BRICS, once a loose coalition of the world’s fastest-growing economies, has acquired new coherence as a collective hedge against US tariffs, with growing consideration of bilateral trade agreements denominated in national currencies to mitigate dependence on the dollar.[17] Its expansion to 10 full members, with nine additional nations designated as partner countries, has broadened the bloc’s reach, though its heterogeneity imposes real limits on cohesion.[18] A common thread across this disparate membership, however, is the shared imperative to respond to and manage the consequences of American dominance. This unity has produced tangible diplomatic movement: Chinese President Xi Jinping, Indian Prime Minister Narendra Modi, and Russian President Vladimir Putin aligned closely at the Shanghai Cooperation Organisation summit in September 2025.[19] Most striking is the recalibration between China and India— longstanding adversaries whose border tensions remain unresolved—who nonetheless pledged to strengthen economic ties, with Beijing agreeing to increase supplies of rare-earth minerals to New Delhi.[20] This development is perhaps the clearest indicator of how profoundly Trump’s pressure has reshaped the strategic landscape.
Nonetheless, the Global South’s response is not merely reactive. For many developing nations, the erosion of US-led multilateralism has accelerated a recalibration already underway; it is rooted less in outright opposition to the Western order than in frustration with its asymmetries. Their shared agenda centres on what IBSA—the trilateral dialogue among India, Brazil, and South Africa, revived after a 14-year hiatus at the G20 in Johannesburg in November 2025—has long termed “reformed multilateralism”: development financing without political conditionality, fairer representation in international institutions, and trade beyond dollar dependency.[21] South African President Cyril Ramaphosa articulated this posture precisely: “We must position ourselves as co-architects of a more representative and responsive multilateral system.”[22] In 2026, that co-architecture is already underway—organised, directional, and no longer contingent on Washington’s approval.
Barely halfway through Trump’s second term, the damage to American partnerships and alliances is already measurable. Confronted with US economic coercion, partners have moved to bypass or hedge against Washington with a speed and breadth that would have seemed improbable just years ago. Trilateral free trade talks between China, Japan, and South Korea—stalled since 2012, in part because Tokyo and Seoul are close US allies—have regained renewed momentum.[23] India, subjected with an additional 25 percent tariff in retaliation for its continued purchase of Russian oil, accelerated negotiations toward what has been described as the “mother of all deals” with the EU—a reciprocal tariff reduction agreement poised to create the world’s largest free trade zone by population.[24] Canada, perhaps the most aggrieved party, has pursued the widest range of lateral bilaterals via Carney’s state visits at the start of 2026: deepening ties with China, thawing a long-frozen relationship with India, and attracting Qatari investment in infrastructure and artificial intelligence.[25] These are not improvised reactions—they represent the early architecture of a post-American economic order.

An Orwellian Tale
George Orwell warned in 1946 that political language is designed not to illuminate but to obscure—that abstract slogans become useful precisely because their vagueness allows them to justify almost anything. “America First” exemplifies this dynamic in the contemporary moment. On the surface, it appears to embody principled realism; in practice, it signals something more radical: not simply that the US will prioritise its own interest—as all states do—but that American interests are deemed categorically more valuable than those of any partner, ally, or institution. Orwell’s most enduring formulation applies with uncomfortable precision: “all animals are equal, but some animals are more equal than others.”
That logic carries significant consequences. Trump’s tariff policy pursued two central ambitions: to restore American manufacturing by bringing blue-collar jobs back home, and to loosen China’s grip on global production. Both objectives have backfired. Instead of redirecting supply chains to US soil, the uncertainty generated by Trump’s volatile tariff regime accelerated an existing shift of manufacturing out of China and into Vietnam—a relocation driven by companies hedging against unpredictability rather than investing in America.[26] Meanwhile, his repeated threats to withdraw from NATO have eroded whatever reassurance his administration’s security commitments might otherwise provide to allies already seeking alternatives to American guarantees. Across the Global South, the longdeferred project of reformed multilateralism has acquired new urgency gaining momentum precisely in the space Washington has vacated. The world is not waiting for America’s return; it is constructing around its absence.



Clemens Chay is Senior Fellow, Geopolitics, ORF Middle East.



[1] Jessica Murphy, Ali Abbas Ahmadi and Bernd Debusann, “Canada PM Mark Carney Says Old Relationship with US ‘is Over’,” BBC News, March 28, 2025, https://www.bbc.com/news/articles/c5y41z4351qo.
[2] “Davos 2026: Special Address by Mark Carney, Prime Minister of Canada,” World Economic Forum, January 20, 2026, https://www.weforum.org/stories/2026/01/davos-2026-special-address-by-mark-carney-prime-minister-of-canada/.
[3] Kira Schacht, “Who’s Winning Under Trump’s Tariff Policy?,” DW, March 30, 2026, https://www.dw.com/en/who-iswinning- under-trump-tariffs-global-trade-data-driven-journalism/a-76303601.
[4] “President Donald J. Trump at the United Nations General Assembly: Outlining an America First Foreign Policy,” US National Archives, September 20, 2017, https://trumpwhitehouse.archives.gov/briefings-statements/president-donald-jtrump- united-nations-general-assembly-outlining-america-first-foreign-policy/.
[5] “America First Trade Policy,” White House, January 20, 2025, https://www.whitehouse.gov/presidential-actions/2025/01/ america-first-trade-policy/.
[6] “National Security Strategy of the United States of America,” White House, November 2025, https://www.whitehouse. gov/wp-content/uploads/2025/12/2025-National-Security-Strategy.pdf.
[7] Giuseppe De Vita, “Kaja Kallas: Russia is An Existential Threat to EU Security,” Brussels Morning, January 22, 2025, https://brusselsmorning.com/kaja-kallas-russia-is-an-existential-threat-to-eu-security/65257/.
[8] “Remarks by Secretary of Defense Pete Hegseth at the 2025 Shangri-La Dialogue in Singapore,” US Department of War, May 31, 2025, https://www.war.gov/News/Speeches/Speech/article/4202494/remarks-by-secretary-of-defensepete- hegseth-at-the-2025-shangri-la-dialogue-in/.
[9] “Breaking Down Trump’s 2025 National Security Strategy,” Brookings, December 8, 2025, https://www.brookings.edu/ articles/breaking-down-trumps-2025-national-security-strategy/.
[10] “Withdrawing the United States from International Organizations, Conventions, and Treaties that Are Contrary to the Interests of the United States,” White House, January 7, 2026, https://www.whitehouse.gov/presidentialactions/ 2026/01/withdrawing-the-united-states-from-international-organizations-conventions-and-treaties-that-arecontrary- to-the-interests-of-the-united-states/.
[11] Moises Naím, “Minilateralism,” Foreign Policy, June 21, 2009, https://foreignpolicy.com/2009/06/21/minilateralism/.
[12] Sarah Teo, “The Rise and Endurance of Minilaterals in the Indo-Pacific,” Lowy Institute, December 27, 2024, https://www.lowyinstitute.org/the-interpreter/rise-endurance-minilaterals-indo-pacific.
[13] Lindsey Ford, “The Trump Administration and the ‘Free and Open Indo-Pacific,” Brookings, May 2020, https://www. brookings.edu/wp-content/uploads/2020/05/fp_20200505_free_open_indo_pacific.pdf.
[14] Lisa Curtis and Ryan Claffey, “U.S.-Japan-Philippines Trilateral Cooperation,” CNAS, March 2026, https://s3.us-east-1. amazonaws.com/files.cnas.org/documents/Trilateral_IPS_Mar2026_Final.pdf.
[15] This is the second MMCA of 2026, following a similar activity with Australia, the Philippines, and the US.
[16] Lana Lam, “What is Aukus, the Submarine Deal Between Australia, the UK and US?,” BBC News, October 21, 2025, https://www.bbc.com/news/articles/cgr589k5yleo.
[17] Shanthie Mariet D’Souza, “A Reality Check for BRICS and the Lofty Dedollarisation Agenda,” Lowy Institute, November 18, 2025, https://www.lowyinstitute.org/the-interpreter/reality-check-brics-lofty-dedollarisation-agenda.
[18] “BRICS Expansion and the Future of World Order: Perspectives from Member States, Partners, and Aspirants,” Carnegie Endowment for International Peace, March 31, 2025, https://carnegieendowment.org/research/2025/03/ brics-expansion-and-the-future-of-world-order-perspectives-from-member-states-partners-and-aspirants.
[19] “Xi, Putin and Modi Close Ranks Against West at Regional Summit in China,” Le Monde with AFP, September 1, 2025, https://www.lemonde.fr/en/international/article/2025/09/01/xi-putin-and-modi-close-ranks-against-west-atregional- summit-in-china_6744926_4.html.
[20] Vishnu Som, “China’s Minerals Offer to India: Banishing the Ghost of Galwan?,” NDTV, August 19, 2025, https://www.ndtv.com/world-news/chinas-promise-to-address-indias-rare-earth-needs-just-business-or-strategicrealignment- 9114003.
[21] Ministry of Foreign Affairs of Brazil, “India-Brazil-South Africa (IBSA) Dialogue Forum 11th Trilateral Ministerial Commission Meeting,” September 22, 2023, https://www.gov.br/mre/en/contact-us/press-area/press-releases/indiabrazil- south-africa-dialogue-forum-ibsa-11th-trilateral-ministerial-commission-meeting-new-york-22-september-2023.
[22]22 Sudhi Ranjan Sen, Daniel Carvalho, S’thembile Cele, and Bloomberg, “Trump’s Attacks Push India, Brazil, South Africa Closer Together,” Fortune, November 23, 2025, https://fortune.com/2025/11/23/trump-pushes-brazil-india-southafrica- together-ibsa-forum-g20-tariffs/.
[23] Tai Wei Lim and Peng Er Lam, “China-Japan-South Korea Trilateral Summit,” East Asia Institute, August 25, 2025, https://research.nus.edu.sg/eai/wp-content/uploads/2025/09/EAIBB-No.-1837-China-Japan-S-Korea-Trilateral- Summit-2025-synopsis_exsum.pdf.
[24] “Here’s Why the India-EU Trade Pact is the ‘Mother of All Deals’,” World Economic Forum, February 5, 2026, https:// www.weforum.org/stories/2026/02/india-eu-mother-of-all-trade-deals-what-to-know/.
[25] Ian Austen, “As Carney Travels the Globe for New Alliances, He Looks Away on Human Rights,” March 17, 2026, https://www.nytimes.com/2026/03/17/world/canada/canada-carney-alliances-human-rights.html.
[26] Andy Lin, Nguyen Xuan Quynh, Spe Chen and Claire Jiao, “China’s Pivot to Vietnam Blows Hole in Trump’s Made-in- USA Plan,” March 30, 2026, https://www.bloomberg.com/graphics/2026-vietnam-trump-tariffs-supply-chain/.

### The Gulf’s Short-Term, Post- Conflict Foreign Policy Goals

The following excerpt is from Chapter 1 — Shifting Sands: A Middle East in Conflict and Transition.


The Iran-US-Israel conflict has shaken the “oasis” model of the Gulf states. Economic momentum has slowed, with damage to infrastructure, disrupted production, constrained exports, and a decline in tourism and business activity.[1] For the foreseeable future, Gulf foreign policy will prioritise economic recovery and hard security above all else. While long-term strategic goals remain intact, the crisis will temporarily reorient policy toward near-term economic and defence gains, potentially at the cost of other long-term priorities.

Priorities for Economic Recovery
The crisis has exposed the Gulf ’s economic vulnerability to political volatility—a surprise for a sub-region long accustomed to peace and stability. Estimates by the United Nations Development Programme (UNDP) suggest that the Gulf Cooperation Council (GCC) states could lose between 5.2 and 8.5 percent of their Gross Domestic Product (GDP) due to trade disruptions and energy market volatility.[2] Oxford Economics, meanwhile, downgraded aggregate GCC real GDP growth for 2026 by 4.6 percentage points, reflecting reduced oil production, exports, tourism, and domestic demand, with Qatar, Kuwait, and Bahrain most affected.[3] It considers Saudi Arabia and Oman as less affected, likely owing to their geographic positioning and relative insulation from direct attacks. Yet even these more sheltered states will draw lessons from the resilience and recovery efforts of their neighbours.
Investment promotion agencies and advisories across the Gulf are reassuring international firms of the sub-region’s resilience despite a challenging economic backdrop.[4] To demonstrate such resilience, Gulf states will need to redouble efforts to attract inward investment, with promotion agencies working alongside diplomatic missions to sustain market appeal. An uptick in overseas investment roadshows is likely, as the Gulf seeks to position itself as a capital destination despite damage to its security image. Gulf states are also supporting one another: the UAE and Bahrain, for instance, conducted a US$5.44-billion currency swap[5] that ended up enabling Bahrain to provide loan deferrals[6] and salary support[7] to the private sector.
Sustaining the flow of expatriates and tourists will be equally important to restoring the Gulf ’s economic value proposition. The continued resumption of flights, despite ongoing disruptions, reflects this imperative. Even Bahrain, which temporarily closed its airport, saw its national carrier maintain limited operations out of neighbouring Saudi Arabia.[8] Despite such efforts, the conflict has taken a psychological toll on foreign nationals, many of whom are reassessing whether the Gulf ’s appeal outweighs the risks of Iranian hostility.[9] To restore confidence among the risk-averse, Gulf states will need to rebuild trust through targeted outreach to sending countries, reassuring their populations that the region remains safe and resilient.
The inward turn to shore up the economy may come at the expense of the Gulf ’s outward investment ambitions—particularly those designed to accumulate political influence rather than deliver solid financial returns. Credible reports indicate that some Gulf states are considering reversing investment pledges, pursuing divestments, and re-evaluating global sponsorship deals. Reuters has reported that the reassessment extends across global holdings, not only US assets.[10] One illustration is the Saudi government’s reported withdrawal from a US$200-million deal with New York’s Metropolitan Opera, America’s foremost opera company.[11] Yet, these reports likely tell only part of the story: US investments remain financially attractive, and many will stay in place. The logic underpinning any reversal is one of greater risk aversion—where the Gulf once tolerated financial uncertainty, the imperative of economic security now narrows that appetite. This reflects a broader recalibration of sovereign wealth strategy: from influence-building to domestic stabilisation.
Smaller Gulf states are more likely to redirect their sovereign wealth toward domestic economic security, given that the conflict’s economic consequences have fallen unevenly across the GCC.[12] Larger states—Oman, Saudi Arabia, and the UAE—have alternative routes to circumvent the closure of the Strait of Hormuz, the principal source of economic disruption, via the East-West Pipeline in Saudi Arabia and the Habshan- Fujairah Pipeline. Smaller states—Qatar, Kuwait, and Bahrain—lack such alternatives, with Bahrain particularly exposed given its limited sovereign wealth buffer. This will likely generate momentum for channelling collective funds toward trade corridors that reduce dependence on chokepoints such as the Strait of Hormuz, enhancing Gulf economic security.[13] Overland infrastructure supporting freight transport is particularly relevant here—exemplified by the plans for the GCC Rail project and the India-Middle East- Europe Economic Corridor (IMEC). Saudi Arabia has already moved to establish trade corridors redirecting goods from its Eastern Region ports and other GCC hubs to Jeddah Islamic Port and other Red Sea outlets.[14]
Such bypasses connect Gulf exports to global markets without transiting the Strait of Hormuz, benefiting all economies reliant on Gulf energy and goods. These alternative economic corridors are likely to be framed as a shared global opportunity—and responsibility—particularly for partners in Asia and Europe who rely heavily on Gulf output. The conflict has made plain that when Gulf output suffers, the world suffers too— reinforcing the case for a foreign policy oriented toward securing economic resilience.

A Foreign Policy Calibrated for Hard Power
The Gulf States have long pursued a foreign policy centred on strategic diversification. While the US remains a cornerstone partner, there has been persistent speculation about Gulf hedging strategies involving Russia and China. That approach will now be reoriented toward what delivers immediate hard security and military capability—even at some cost to strategic autonomy—to build resilience against future threats.
All six GCC states faced a shared threat during the conflict and activated their national air defence systems in response.[15] The prospect of an integrated GCC air defence system has gained renewed salience, alongside a deepened commitment to joint military exercises such as Gulf Shield 2026.[16] Where integration stalls due to intra-GCC trust deficits, one course of action remains near-certain: intensified procurement of defence systems from the US and US partners.
Longstanding US-Gulf security cooperation, particularly in defence procurement, was put to the test during the Iranian attacks and proved its value. Defence procurement trends, reflected in an analysis by the International Institute for Strategic Studies, show that since 28 February 2026, the US has been joined by Australia, France, Italy, South Korea, Ukraine, and the United Kingdom in providing military assistance to Gulf states, ranging from the deployment of RAF Typhoons to anti-UAV specialist advisers.[17] Over the next two years, Gulf states anticipate deliveries of air defence systems from Spain, South Korea, France, and the United Kingdom, supplementing traditional US imports—including surface-to-air and air-toair missiles. These partner nations share broadly compatible security and political architectures with the US, with one notable exception—Russia’s weapon exports to Saudi Arabia.[18]
By turning to other US allies for military support, the Gulf states signal that their primary defence orientation remains firmly toward Washington. At the same time, given the US emphasis on burden-sharing, engaging allied partners serves to reduce friction with their main defence guarantor.[19] This extends beyond the examples above to potentially include India, Pakistan, and other Asian partners. Not all partners proved equally useful during the conflict, however, lending weight to the observation by Anwar Gargash, diplomatic adviser to the UAE President, that Abu Dhabi would reassess its regional and international relationships “with clarity and precision.”20 A new realism is thus taking shape in Gulf foreign policy—one that prizes diversity and pragmatism in interstate relations above all.[20]
This dynamic allows the Gulf states to navigate an emerging paradox. Their close alignment with the US may have lent credibility to Iran’s narrative that its attacks on Gulf countries are a direct consequence of their partnerships with Washington—and, in certain cases, with Tel Aviv. Yet that same proximity is widely regarded as indispensable, given the proven effectiveness of security cooperation with the US and its allies. The Gulf states increasingly reject the notion that distancing themselves from Washington would temper Iranian hostility, opting instead to prioritise deterrence through deeper strategic alignment.
Absent an assurance that Iran would refrain from aggression regardless of Gulf foreign policy choices, maintaining a US-aligned posture and investing in hard security capabilities remains the most reliable means of protecting the Gulf ’s home front against Iranian threats and other potential aggressors. That said, the degree to which individual states embrace this posture varies, shaped by each country’s own calibration of its relationship with Tehran. Oman stands as the most notable exception, given its longstanding policy of maintaining cordial—perhaps pragmatic—ties with the Islamic Republic.

Conclusion
The Gulf ’s response to the conflict may prove temporarily transformative, giving rise to a foreign policy defined by urgency and shaped by the pursuit of immediate, tangible returns— whether economic inflows or hard security guarantees. This, however, carries inherent risks if it solidifies into a long-term posture, particularly as their most volatile neighbour appears poised to emerge from the conflict more dangerous and destabilising than before. An excessively short-term orientation risks narrowing strategic horizons, eroding diplomatic manoeuvrability, and diminishing long-term regional influence. The primary challenge for Gulf states, therefore, is to build resilience and insulation in the near term without compromising the very foundations of the “Gulf model” that have underpinned their stability and prosperity.



Mahdi Ghuloom is Junior Fellow, Geopolitics, ORF Middle East.




Endnotes
1. The Gulf’s Short-Term, Post-Conflict Foreign Policy Goals
[1] Pierre-Olivier Gourinchas, entry on “War Darkens Global Economic Outlook and Reshapes Policy Priorities,” The IMF Blog, April 14, 2026, https://www.imf.org/en/ blogs/articles/2026/04/14/war-darkens-global-economicoutlook- and-reshapes-policy-priorities
[2] UNDP, United Nations, 2026, https://www.undp. org/arab-states/press-releases/escalation-middle-eastreverses- more-year-economic-growth-arab-states-regionaccording- new-un-development-programme.
[3] “Iran War Set to Push GCC Economies into Recession,” Oxford Economics, March 30, 2026, https://www. oxfordeconomics.com/resource/iran-war-set-to-push-gcceconomies-into-recession/.
[4] Danielle Myles, “Gulf FDI Community Defiant in the Face of War,” FDI Intelligence, March 18, 2026, https:// www.fdiintelligence.com/content/b725ee9a-8243-4fa1- afbb-567623bf2c1c.
[5] “UAE, Bahrain Sign $5.4bn Currency Swap to Boost Financial Cooperation,” Arab News, April 9, 2026, https:// www.arabnews.com/node/2639326/business-economy.
[6] Central Bank of Bahrain, Government of Bahrain, 2026, https://www.cbb.gov.bh/media-center/central-bank-ofbahrain- announces-loan-deferral-program-with-7-bhdbillion- liquidity-support/.
[7] “BD 94 Million Support for 105,000 Workers,” The Daily Tribune, April 22, 2026, https://www.newsofbahrain.com/bahrain/131202.html.
[8] Gulf Air, Gulf Air Group, 2026, https://www.gulfair. com/about-gulf-air/media-center/Gulf-Air-Expands- Temporary-Operations - v i a -Dammam-Opens - Commercial-Bookings-for-International-Flights.
[9] Dalia Ghanem, “The End of the Gulf ’s Gilded Age?,” German Marshall Fund, April 1, 2026, https://www.gmfus. org/news/end-gulfs-gilded-age.
[10] Andrew Mills, Rachna Uppal and Federico Maccioni, “Gulf Trio Review Sovereign Investments to Offset Iran War Impact, Official Says,” Reuters, March 11, 2026, https://www.reuters.com/world/middle-east/some-gulfstates-reviewing-sovereign-investments-offset-economicshock-iran-war-2026-03-11/.
[11] Adam Nagourney, “Met Opera’s Multimillion-Dollar Deal with Saudis Falls Through,” New York Times, April 23, 2026, https://www.nytimes.com/2026/04/23/arts/music/ met-opera-saudi-deal-funding.html?unlocked_article_ code=1.dFA.ZpXC.fLKEWGTRWfVz&smid=nytcoreios-share.
[12] Justin Alexander, “The Gulf ’s Economy is Holding its Breath,” AGBI, March 6, 2026, https://www.agbi.com/ opinion/economy/2026/03/the-gulfs-economy-is-holdingits- breath/.
[13] Andrew Leber and Sam Worby, “Three Scenarios for the Gulf States After the Iran War,” Carnegie Endowment for International Peace, April 16, 2026, https:// carnegieendowment.org/emissary/2026/04/gulf-statesgcc- iran-war-three-scenarios.
[14] “Saudi Arabia Launches Initiative to Reroute Gulf Cargo to Red Sea Ports,” Arab News, March 13, 2026, https:// www.arabnews.com/node/2636228/saudi-arabia.
[15] Leber and Worby, “Three Scenarios for the Gulf States After the Iran War”.
[16] Neil Quilliam and Kristian Alexander, “Iran and Gaza Conflicts Teach Gulf States a Hard-power Lesson,” Chatham House, March 16, 2026, https:// www.chathamhouse.org/publications/the-worldtoday/ 2026-03/iran-and-gaza-conflicts-teach-gulf-stateshard- power-lesson.
[17] Albert Vidal Ribe, “Defending the Skies of the Arab Gulf States,” IISS, March 18, 2026, https://www.iiss.org/onlineanalysis/ online-analysis/2026/03/defending-the-skies-ofthe- arab-gulf-states/.
[18] Maryna Lishchuk, “Saudi Arabia Bought Billions of Dollars Worth of Weapons from Russia,” European Foundation for Democracy, January 25, 2025, https://www. europeandemocracy.eu/news/saudi-arabia-boughtbillions- of-dollars-worth-of-weapons-from-russia/.
[19] Hana Elshehaby, “Gulf Security Beyond Guarantees,” Middle East Council on Global Affairs, April 5, 2026, https://mecouncil.org/blog_posts/gulf-security-beyondguarantees/.
[20] Huda Ata, “UAE to Reassess Global Ties after Iran Aggression, Gargash Says,” Gulf News, April 10, 2026, https://gulfnews.com/uae/uae-to-reassess-global-tiesafter- iran-aggression-gargash-says-1.500502435.
2. The Economic Implications of the Middle East Crisis: Measuring Preparedness in the MENA
1 World Bank Group, “Classification of Fragile and Conflict-Affected Situations,” Brief, World Bank, 2024.
2 International Monetary Fund, World Economic Outlook. Global Economy in the Shadow of War, April 2026, https:// www.imf.org/en/publications/weo/issues/2026/04/14/ world-economic-outlook-april-2026.
3 International Monetary Fund, Regional Economic Outlook. Middle East and Central Asia. War in the Middle East: Spillovers and Policy Challenges, April 2026, https://www.imf. org/en/publications/reo/meca/issues/2026/04/16/regionaleconomic- outlook-middle-east-central-asia-april-2026.
4 The figures are synthesis from different datasets; see Growth Lab, “Rankings,” The Atlas of Economic Complexity, Harvard Kennedy School, 2024, ; World Bank, “Total Reserves (Includes Gold, Current US$),” 2024, https:// data.worldbank.org/indicator/FI.RES.TOTL.CD; World Bank, “Energy Imports, net (% of energy use),” 2022, https://data.worldbank.org/indicator/EG.IMP.CONS. ZS?locations=TN-MA-LB-DZ-PS-LY-EG-SY-JO-SD-YEIQ; “General Government Gross Debt, Percent of GDP,” International Monetary Fund, 2026, https://www.imf. org/external/datamapper/GGXWDG_NGDP@WEO/ OEMDC/ADVEC/WEOWORLD; “General Government Net Lending/Borrowing. Percent of GDP,” International Monetary Fund, 2026, https://www.imf.org/external/ datamapper/GGXCNL_NGDP@WEO/OEMDC/ADVEC/ WEOWORLD. For general government gross debt and net borrowing, 2024 is the last year where data is available for a clear majority of studied countries, while 2022 is the last year where data was available for most countries for net energy imports as share of total use.

### New Arenas of Great-Power Competition

The following excerpt is from Chapter 1 — New Arenas of Great-Power Competition of ORF Global Quarterly: Disruption and Recalibration.


In 2026, the scope and intensity of strategic competition show no signs of slowing and indeed, the stakes are intensifying and the rivalries becoming more pronounced. The Arctic region, once a geopolitical afterthought for many policymakers, has now moved decisively to the centre of global decision-making, emerging as a primary theatre of great-power competition. Domain-specific competition on the ocean floor and beyond the Earth’s atmosphere is also moving to the forefront of conversations. Undersea cables carry most global internet traffic and financial data, and space technology has become a cornerstone of both military and commercial policymaking. How major powers navigate this moment, and whether multilateral institutions created in a different era can adapt to the new one, will be the defining questions in the years ahead.

The Arctic Grows in Importance
Since the beginning of his second administration, United States (US) President Donald Trump had expressed interest in acquiring Greenland, a sovereign territory of Denmark, and an island that the US “needs” for national security reasons.[1] Whatever one might make of that ambition, the desire itself signifies more than intra-NATO pressure; it reflects an understanding that as climate change accelerates, the race for critical minerals intensifies, and melting ice caps potentially open new sea lanes while extending the usability of existing ones. The Arctic therefore is rapidly becoming a central arena of great-power competition.
The drivers of intensifying Arctic competition are diverse and interconnected. According to a study by the US Geological Survey—the most comprehensive one to date—the region is estimated to hold up to 13 percent of the world’s undiscovered oil and 30 percent of its undiscovered natural gas.[2] Greenland alone contains approximately 25 of the more than 30 raw materials classified by the European Union (EU) as “critical”, all of which are essential to defence electronics, the green transition, and advanced manufacturing.[3] Although these minerals are extremely difficult and expensive to extract, given their location beneath deep sheets of ice, it is unsurprising that the US has shown interest in exploration: today, China controls roughly 60 percent of global rare-earth production and 90 percent of global rare-earth processing capacity.[4] This concentration of supply chain leverage remains a source of strategic concern for Washington.
Meanwhile, in the shipping sector, the distance from Northern Europe to China via the Northern Sea Route is approximately 40-percent shorter and 10-15 days faster than through the Suez Canal.[5] Projections suggest that the Arctic Ocean could experience its first ice-free day in 2034 (a decade earlier than previously anticipated), and ice-free summers by mid-century, thereby opening a Transpolar Sea Route that would connect the Atlantic and Pacific for the first time in history.[6] Russia has ensured it is well positioned for that moment: it maintains an operational fleet of 45 ice breakers in the arctic region, including eight nuclear-powered vessels (by comparison, the US has only three, one of which is 50 years old) and has rebuilt Arctic military installations at a pace unseen since the Soviet era.[7] China, according to some analysts, has invested nearly US$90 billion in the Arctic, despite having no territorial claims in the region.[8] To the chagrin of the US, it has also actively sought port and airport infrastructure in Greenland.
Finally, the Nordic countries—Norway, Sweden, Finland, Denmark, and Iceland—are strategically vital actors in shaping the future of the Arctic. Norway, as an Arctic littoral state and member of the Arctic Council, oversees substantial offshore energy production in the region and has a direct interest in the governance of Arctic resources and sea lanes. Sweden and Finland, which joined NATO in 2022 and 2023, respectively, strengthened the alliance’s Arctic and Baltic flanks and enhanced regional military coherence. Denmark currently carries considerable geopolitical weight due to its administrative relationship with Greenland. Ultimately, the Nordics bring deep Arctic expertise along with critical basing and logistics infrastructure to NATO’s northern posture and will be key to shaping the Arctic’s evolving global role.
Taken together, the combination of resources, shipping routes, and military positioning makes it clear that the Arctic region will be at the forefront of policymaking conversations in the coming years.

Strategic Considerations: Below the Waterline and in Space
Meanwhile, two specific domains demand particular attention: the proliferation and strategic importance of undersea cables, and the race to develop space-based capabilities.
Undersea cables carry over 95 percent of global data traffic and underpin the global financial systems, military communications, and intelligence architectures on which nations depend for technological and economic survival.[9] Yet these cables are also critically vulnerable: they predominantly lie on the open seabed and traverse thousands of miles of unmonitored ocean floor. Incidents such as dragged anchors or deliberate line cuts are difficult to detect in real-time and may take weeks to repair. Globally, there are only 62 specialised cable-laying repair vessels (heavily concentrated among a small number of mostly European companies, but with China building its own fleet and capacity) which are both ageing and insufficient to match the pace of cable expansion, leaving a weakness that can be actively exploited.[10]
In December 2024, the Estlink 2 power cable between Finland and Estonia was severed alongside two telecommunications cables.[11] The alleged culprit was the Eagle S, an oil tanker believed to be part of Russia’s sanctionsevading global shadow fleet.[12] Similarly, in the preceding month, the BCS East-West Interlink cable between Lithuania and Sweden and the C-Lion1 cable between Finland and Germany were cut, with suspicion directed toward the Chinese cargo vessel Yi Peng 3, which had departed from a Russian port only a few days earlier.[13]


Undersea cables that carry over 95 percent of global data traffic and underpin the global financial systems, military communications, and intelligence architectures are critically vulnerable.

Both states and multilateral institutions are working hard to address these threats, but there are limitations to what specific bodies can accomplish. For example, the International Telecommunications Union (ITU), a United Nations agency, partnered with the International Cable Protection Committee (ICPC) to establish the International Advisory Body on Submarine Cable Resilience.[14] Unfortunately, the body is strictly advisory with no enforcement powers, it explicitly does not attribute the source of cable disruptions, and it focuses almost exclusively on accidental damage. As a result, its practical contribution to protecting against or preventing cable sabotage remains limited.
Other organisations, in contrast, have been more effective. In January 2025, for example, NATO launched its Baltic Sentry mission, deploying frigates, maritime patrol aircraft, and naval drones across the Baltic maritime area to strengthen surveillance and deterrence. The EU has also taken important steps, allocating an additional EUR 540 million between 2025 and 2027 to strengthen digital infrastructure, including undersea network security.[15] At the national level, states are beginning to legislate this domain more assertively. For example, in April 2025, Estonia granted its defence forces explicit legal authority to act against vessels threatening critical underwater infrastructure.[16] The primary challenge, however, lies in international maritime law. Without consent, states cannot board or interdict vessels in the high seas, allowing adversaries to anchor just beyond territorial waters to avoid seizure. Closing that legal gap will be a key consideration moving forward.
Beyond Earth’s atmosphere, geostrategic competition is intensifying rapidly. Today, satellites orbiting Earth underpin nearly every dimension of modern military and economic power. GPS-guided munitions, intelligence sharing, financial systems like SWIFT, and early warning networks, all rely on uninterrupted access to space-based infrastructure. Consequently, states are building their space-based assets at a pace comparable to the expansion of their ground-based capabilities.
By July 2025, China had over 1,060 satellites in orbit,[17] more than 510 of which possess intelligence, surveillance, and reconnaissance capabilities. Similarly, Beijing conducted 68 space launches in 2024, placing 260 payloads into orbit.[18] China’s GuoWang constellation, a state-owned low-Earth orbit project that currently has fewer than 200 satellites in orbit, aims to increase that number to 13,000 by the 2030s to provide global internet services.[19] This initiative will directly rival the US-based Starlink system. SpaceX (which operates the Starlink constellation) recently received FCC approval to expand coverage to as many as 15,000 next-generation satellites.[20] At present, the disparity between GuoWang and SpaceX is substantial: the latter already has over 10,000 satellites in orbit. Competition between these systems is expected to intensify further through 2026.


Beyond Earth’s atmosphere, geostrategic competition is intensifying rapidly and today, satellites orbiting Earth underpin nearly every dimension of modern military and economic power.

Beyond communication and internet capabilities, the space domain is increasingly subject to militarisation. Russia is developing an anti-satellite system that would “use a nuclear explosion to create weapons effects, most likely an electromagnetic pulse (EMP), that would in turn disable or destroy satellites.”[21] If realised, this capability could potentially threaten satellites owned and operated by states and private companies worldwide. China, meanwhile, has developed ground-based laser weapons that not only can disrupt satellite sensors, but also pose direct physical threats to them. Additionally, it can deploy so-called ‘dogfighter’ satellites designed to push or pull other satellites out of their operational orbits.[22] Meanwhile, the US Space Force released a space-warfighting framework in April 2025, explicitly emphasising offensive and defensive measures designed to secure space superiority.[23]
Competition in these domains will naturally accelerate, but the US will play a major role in shaping its trajectory. The current US administration will likely continue its unpredictable global decision-making, prompting states (especially Russia and China) to hedge by accelerating domestic capability development, and potentially adopting more confrontational approach beyond their borders. Similarly, private companies will continue to influence the evolution of the space industry, with firms such as SpaceX and Blue Origin, and a growing constellation of smaller launch and satellite operators increasingly setting the pace of innovation and deployment.

Implications for the Global South
For India, intensifying competition across the Arctic, undersea cable networks, and space could represent a strategic opening. Resource and shipping dynamics in the Arctic will have cascading effects on global prices, supply chains, and trade routes disproportionately impacting developing economies. As one of the world’s most active space powers, and a notable player in the Indo-Pacific’s undersea cable architecture, New Delhi holds a distinct role in shaping how global norms are created and enforced. It should leverage that position to its advantage. The primary challenge for India will be the pressure exerted by growing USChina competition, and to ensure the rules of the road are written through multilateral forums like the G20 rather than through the lens of bilateral economic and military contests. This will require India to become more comfortable asserting its influence in multilateral settings. In a world of emerging multipolarity, few countries are as well positioned as India to help shape what comes next.
For the Global South, more broadly, the stakes of these emerging competitions remain underappreciated. Countries across Africa, Latin America, and Southeast Asia are increasingly dependent on undersea cable infrastructure for their digital economies, yet they have limited influence over how that infrastructure is secured or governed. In the same vein, the commercialisation of space will accelerate access to services enabled by space technologies, ranging from expanded broadband connectivity to advanced climate monitoring. This presents opportunities for economic growth, but much of the infrastructure will be owned by foreign commercial companies, leaving countries overly dependent on external actors. As a result, they risk finding themselves on the wrong side of a new digital divide. Moving forward, coalition and capacity building, and a more active presence in multilateral institutions, will be essential to ensure that the Global South emerges as a rule-shaper rather than a ruletaker in the evolving global order.



Rachel Rizzo is Senior Fellow, Strategic Studies Programme, Observer Research Foundation.



[1] Sarah Smith, “Trump Says the US Needs to ‘Own’ Greenland to Prevent Russia and China from Taking It,” BBC News, January 10, 2026, https://www.bbc.com/news/articles/c78vj5n7jg3o.
[2] U.S. Geological Survey, “Arctic Oil and Natural Gas Resources,” U.S. Energy Information Administration, January 20, 2012, https://www.eia.gov/todayinenergy/detail.php?id=4650.
[3] Adrienne Murray, “The Story Behind the Scramble for Greenland’s Rare Earths,” BBC News, November 5, 2025, https://www.bbc.com/worklife/article/20251104-the-story-behind-the-scramble-for-greenlands-rare-earths.
[4] Gracelin Baskaran and Meredith Schwartz, “Developing Rare Earth Processing Hubs: An Analytical Approach,” Center for Strategic and International Studies, July 28, 2025, https://www.csis.org/analysis/developing-rare-earth-processinghubs- analytical-approach.
[5] “Shipping and Transportation,” The Arctic Review, https://arctic.review/economy/shipping-and-transportation/.
[6] Alexandra Jahn, Marika M. Holland, and Jennifer E. Kay, “Projections of an Ice-Free Arctic Ocean,” Nature Reviews Earth & Environment, March 5, 2024, https://www.nature.com/articles/s43017-023-00515-9.
[7] Lori Ann LaRocco, “How Chinese, Russian Arctic Ambitions are Fueling a U.S. Polar Icebreaker Mission,” CNBC, March 28, 2026, https://www.cnbc.com/2026/03/28/china-russia-arctic-polar-icebreaker-ships.html.
[8] Anders Edstrøm, Guðbjörg Ríkey Th. Hauksdóttir, and P. Whitney Lackenbauer, “Cutting Through Narratives on Chinese Arctic Investments,” Belfer Center for Science and International Affairs, June 23, 2025, https://www.belfercenter.org/research-analysis/china-arctic-investments.
[9] Colin Wall and Pierre Morcos, “Invisible and Vital: Undersea Cables and Transatlantic Security,” Center for Strategic and International Studies, June 11, 2021, https://www.csis.org/analysis/invisible-and-vital-undersea-cables-andtransatlantic- security.
[10] Aaron Bateman, “To Keep the World’s Data Flowing, Countries Need to Quickly Fix Broken Undersea Cables,” Bulletin of the Atomic Scientists, July 29, 2025, https://thebulletin.org/2025/07/to-keep-the-worlds-data-flowing-countries-need-toquickly- fix-broken-undersea-cables/.
[11] Bruce D. Jones, “Seabed Zero: Baltic Sabotage and the Global Risks to Undersea Infrastructure,” Bulletin of the Atomic Scientists, February 13, 2026, https://thebulletin.org/2026/02/seabed-zero-baltic-sabotage-and-the-global-risks-toundersea- infrastructure/.
[12] Miranda Bryant, “Finland Accuses Tanker Crew of Sabotage of Undersea Cables with Anchor,” The Guardian, August 11, 2025, https://www.theguardian.com/world/2025/aug/11/finland-accuses-tanker-crew-sabotage-undersea-cablesanchor.
[13] Bojan Pancevski, “Chinese Ship’s Crew Suspected of Deliberately Dragging Anchor for 100 Miles to Cut Baltic Cables,” The Wall Street Journal, November 29, 2024, https://www.wsj.com/world/europe/chinese-ship-suspected-of-deliberatelydragging- anchor-for-100-miles-to-cut-baltic-cables-395f65d1.
[14] International Telecommunication Union (ITU), “Launch of International Advisory Body to Support Resilience of Submarine Telecom Cables,” November 29, 2024, https://www.itu.int/en/mediacentre/Pages/PR-2024-11-29- advisory-body-submarine-cable-resilience.aspx.
[15] European Commission, “Joint Communication to Strengthen the Security and Resilience of Submarine Cables,” https://digital-strategy.ec.europa.eu/en/factpages/joint-communication-strengthen-security-and-resilience-submarinecables.
[16] “Riigikogu to Vote on Navy’s Right to Use Force, Including Against Civilian Vessels,” ERR News, April 8, 2025, https://news.err.ee/1609657169/riigikogu-to-vote-on-navy-s-right-to-use-force-including-against-civilian-vessels.
[17] Abhinandan Mishra, “China Rapidly Expands Satellite Fleet Amid Strategic Space Dreams,” Sunday Guardian, August 3, 2025, https://sundayguardianlive.com/world/china-rapidly-expands-satellite-fleet-amid-strategic-spacedreams- 136791/.
[18] National Space Security Agency (NSSA), “Space Threat Fact Sheet,” May 16, 2025, https://nssaspace.org/wp-content/ uploads/2025/05/20250516-S2-Space-Threat-Fact-Sheet-v8-RELEASE.pdf.
[19] Andrew Jones, “China Is Developing Plans for a 13,000-Satellite Communications Megaconstellation,” SpaceNews, April 21, 2021, https://spacenews.com/china-is-developing-plans-for-a-13000-satellite-communications-megaconstellation/.
[20] Jeff Foust, “FCC Approves 7,500 Additional Starlink Satellites,” SpaceNews, January 10, 2026, https://spacenews.com/ fcc-approves-7500-additional-starlink-satellites/.
[21] Victoria Samson, Seth Walton, and Kathleen Brett, “FAQ: What We Know About Russia’s Alleged Nuclear Anti-Satellite Weapon,” Secure World Foundation, https://www.swfound.org/publications-and-reports/faq-what-we-know-aboutrussias- alleged-nuclear-anti-satellite-weapon.
[22] Simone McCarthy, “China Is Practicing ‘Dogfighting’ with Satellites as It Ramps Up Space Capabilities: US Space Force,” CNN, March 21, 2025, https://edition.cnn.com/2025/03/21/china/china-space-force-dogfighting-satellites-intlhnk.
[23] United States Space Force, “Space Warfighting: A Framework for Planners,” April 10, 2025, https://www.spaceforce.mil/ Portals/2/Documents/SAF_2025/Space_Warfighting_-_A_Framework_for_Planners_BLK2_(final_20250410).pdf.

### Beyond Interceptors: Improving Public Warning Systems in the Gulf

Spotlight


 	Gulf States’ investments in interceptor systems and air defences must be matched by equally robust civil defence and public warning systems to ensure resilience beyond the battlefield.
 	Early and repeated testing of warning systems is critical to avoiding technical failures, confusion, and reduced public awareness during crises.
 	Inclusive and effective warning systems require localised and redundant solutions attuned to demographic realities, including multilingual alerts, and sirens broadcast from mosques —to reach all segments of society. 

Governments often prioritise active defence systems to mitigate the consequences of potential war. The Iranian attacks on Gulf States have accelerated efforts to acquire new air-defence systems, including interceptor missiles, interceptor UAVs, point-defence platforms, radar, and surface-to-air missile systems. These investments are necessary, yet the recent conflict demonstrated that military interception alone is insufficient without equally robust civilian warning and preparedness systems. Civil defence measures proved essential in allowing relatively normal daily life to continue during the recent conflict. Nonetheless shortcomings were evident, and opportunities for improvement remain. Policymakers should therefore complement active defense investments with strengthened civil defense preparedness to ensure resilience in future crises.

The Importance of Early Preparations 
Bahrain is an example of a country that led the region in testing public warning systems before February 28, 2026. On January 15, almost a month before the ensuing conflict, Bahrain tested its mobile alert system. As a result of the test and likely detection of technical challenges, officials advised iOS users to update their devices ahead of another test on February 1. Indeed, the focus on mobile alert systems came after outdoor siren testing in 2025 that revealed shortcomings, specifically in the audibility of the sound. Therefore, when the conflict began, Bahrain was prepared not only to activate its sirens, but also to complement them with well-tested mobile alerts. Sirens, however rudimentary, still served their purpose as an early warning mechanism – as demonstrated in Kuwait, which employed differing tones to signal distinct types of danger.

Israel’s experience last year illustrates the risks of insufficient testing: a fatal technical error, which might have been detected earlier, led to two deaths and 21 injuries. 
Nonetheless, these tests came relatively close to the zero hour and were prompted by the fact that regional escalation was evident after the 12-day war between Iran and Israel. The infrequency of testing can carry an opportunity cost in terms of public awareness. During the recent conflict in the United Arab Emirates (UAE), for example, authorities had to conduct awareness campaigns to help residents better understand how the warning system functioned. This included recognising the location-based nature of alerts, but also adapting to lessons learned during the conflict – such as adjusting alert volumes in the evenings. In some cases, testing came oddly late, with Saudi Arabia reportedly only beginning to trial its mobile-phone alert system nearly two weeks into the conflict. Israel’s experience last year illustrates the risks of insufficient testing: a fatal technical error, which might have been detected earlier, led to two deaths and 21 injuries. That incident ultimately prompted the rollout of a new alert system within the past year. 

The Risks of Testing
The challenge of pursuing tests is that it can cause alarm and panic, especially if people are unaware of it not being real—the 2018 false missile alarm in Hawaii, though a malfunction rather than a test, is being studied for its psychological impact years after the fact because of how burdensome such alerts can be. Some people in India were recently concerned by a nationwide test of its new SACHET integrated alert system that aims to deliver disaster and emergency related alerts via SMS to mobile phones. For many, it was unclear this was a test. Another challenge is the risk of alert fatigue, where if overly frequent, can lead people to ignore or dismiss future alerts. The ideal solution may rest in conducting location-based tests, with clear and coherent communication about the reasoning behind, and the timing of the test; rather than a nationwide testing effort. The UK, for example, conducts trials and surveys on samples of the population, rather than everyone.

Local Solutions and Regional Standards
Localised efforts also enable localised solutions. What may suit one geographical area may not suit another. For example, Emirati warning messages are primarily issued in Arabic and English. But other languages, such as Urdu, Chinese, Filipino, or Hindi, may also be added depending on the nature of the incident and the affected population. In Israel, alerts were adapted for religious communities during Shabbat, the Jewish Sabbath, with the system modified to include radio-based alerts since phones and televisions are not used at that time. In Abu Dhabi, authorities realized they could leverage the city’s 4,000 mosques to roll out a public broadcast and national warning system. While international best practices provide valuable guidance, warning systems are most effective when tailored to local realities.

The European Electronic Communications Code (Directive 2018/1972) resulted in improving public warning capabilities by requiring states to implement systems that can send alerts directly to people in affected areas via their mobile phones.
Nonetheless, this does not mean letting go of regional integration efforts on public warning systems. The European Electronic Communications Code (Directive 2018/1972) resulted in improving public warning capabilities by requiring states to implement systems that can send alerts directly to people in affected areas via their mobile phones. One could imagine other regional organisations such as the Gulf Cooperation Council (GCC) implementing similar minimum standards across member states. One of the concerning aspects of the recent conflict in the Gulf was that not all warning systems accounted for vulnerable populations without reliable access to smartphones. Integrated and redundant warning methods can help ensure alerts remain accessible during infrastructure disruptions or for populations without reliable smartphone access. This has been put forward by expert Martin Graf, who argues that mass warning and notification systems “still need sirens”. The Gulf States should consider setting minimum standards that guarantee redundancy and inclusivity, ensuring warning systems reach vulnerable populations as effectively as they serve the broader public.

Conclusion 
Investments in civil defence and public warning systems strengthen national resilience. The recent Iran conflict underscored this reality, but much more effort is needed to ensure civilians understand and respond effectively to alerts, and that systems are tailored to their needs and preferences. Transparency should be enhanced wherever possible: the UAE’s National Emergency Crisis and Disasters Management Authority website, for example, highlights all procedures that the Emirati authorities take depending on the type of emergency. India’s National Disaster Management Authority has a transparent dashboard highlighting the key statistics on the use of its alert systems. Ultimately, the effectiveness of a warning system is measured not only by whether an alert is sent, but by whether civilians are familiar with its purpose. In future conflicts, this may prove just as important as the interception systems designed to neutralise threats. Moving forward, Gulf countries will likely seek to utilize and complement warning systems with a call to action: moving into bomb shelters that are expected to be rapidly constructed. As argued in Raisina Files 2026, lessons from Israel’s shelter system and its contribution to resilience are likely to be particularly valuable.



Mahdi Ghuloom is Junior Fellow, Geopolitics, ORF Middle East.

### Chips without Architecture: Aftermath of the Trump-Xi meeting

Spotlight


 	During Trump’s visit to Beijing, Washington licensed H200 accelerators to several of China's largest cloud and platform firms and re-casted US export policy as a sales mechanism rather than a denial regime.
 	With talks stopping at the level of trade, the deeper questions of how frontier AI is built, tested, and exported were deferred, leaving the global rule-set to be set by default rather than by agreement.
 	A bilateral AI safety channel may emerge, but Washington’s stated willingness to engage is tied explicitly to its technological lead, thus making cooperation an instrument of competitive position rather than a safety obligation.

The recent meeting between Donald Trump and Xi Jinping in Beijing reflected a growing contradiction at the centre of the US-China technology relationship. On one hand, the Trump administration has embraced an aggressively expansionary “build, baby, build” approach to AI infrastructure, semiconductors and domestic manufacturing. On the other, the strategic realities of technological competition and, as the meeting demonstrated, selective cooperation with China are forcing renewed attention toward governance, standards, security and control.

Compute Monetised: the H200 Clearance
The composition of Trump’s accompanying delegation made this tension visible. Alongside a trade-focused agenda covering Taiwan, critical minerals, and tariffs – though messaging differed on the extent to which the latter was formally discussed – were some of the most influential figures in global technology and finance: Apple CEO Tim Cook, Tesla and SpaceX CEO Elon Musk, and Cisco CEO Chuck Robbins, with Nvidia CEO Jensen Huang added at the last moment. For many of these firms, China remains an enormous market opportunity; Huang himself recently described China as a potential US$ 50 billion opportunity for Nvidia. Yet these commercial incentives clash with US national security concerns, as reflected in the National Security Strategy and National Defence Strategy documents published by the last three US administrations, all of which consistently identified China as a top strategic competitor.
A consequential outcome to emerge in the hours following the meeting was the reported clearance of Nvidia H200 sales by the US Department of Commerce to roughly ten major Chinese technology firms, among them Alibaba, Tencent, ByteDance, and JD.com. The decision arrives at a moment when Huawei’s Ascend line of chips is securing meaningful domestic market share, and when Chinese frontier laboratories such as DeepSeek are pivoting toward domestic compute alternatives. The substitution that earlier rounds of export controls had been built to drive, finally, had begun driving itself. The licence interrupts that. Wedbush Securities analyst Dan Ives framed the stakes of the meeting to be about “the degree to which US chip leadership remains monetisable in China.” Read against the previously stated posture of the White House, the clearance signals a revealed preference for extraction over containment, and recalibrates the operative meaning of ‘AI export controls’ as a regulatory regime going forward.

Governance Deferred, Trade Resolved
For the global AI ecosystem, what the meeting did not produce is as significant as what it did. The highlights of the visit showed the two leaders “focused more on limited questions of trade, without reaching any agreement on the future of A.I.”. But while the transactional layer (chips, tariffs, rare-earth mineral supply, commercial market access) moved forward, the architectural layer did not. Key issues such as frontier model governance, training-data provenance, evaluations and safety thresholds, the status of open-weight diffusion, and the contours of a future sovereign AI compact were either deferred or omitted altogether. The omission is consequential because the standards-setting contest set out below operates at the architectural layer. A bilateral equilibrium that monetises near-frontier compute capacity while leaving governance underspecified amplifies the present asymmetry: the AI duopoly continues to set the commercial pace and AI development trajectory—the US with proprietary models and China with open-weight models and standard-setting—while middle powers contest over supply chain, model access, and governance of increasingly powerful frontier models.

Standards as a Strategic Terrain
The architectural layer the meeting left untouched is where the longer-run contest is being waged. China’s government-led initiatives that have come to be known as China Standards 2035, in addition to the country’s as yet unpublished Medium and Long-term strategy (MLP) for Science and Technology (2021-2035), place enormous emphasis on shaping international technical standards, particularly across AI, 5G, IoT and digital infrastructure. This suggests that Beijing increasingly views technical standards as a strategic tool of influence.
Standards determine the architecture of global digital systems: how networks communicate, what cybersecurity requirements are embedded into infrastructure, how data moves across borders, and which technologies become widely adopted internationally. Once standards become dominant, companies, governments and developers are often forced to build around them for reasons of compatibility and market access. For China, this has both economic and geopolitical value. Embedding Chinese standards into emerging technologies such as AI systems, telecommunications infrastructure and connected devices could expand the global reach of Chinese firms while reducing reliance on Western-controlled systems.
China’s push for international standardisation increasingly intersects with its broader Belt and Road Initiative (BRI) engagement, creating pathways for the diffusion of Chinese technical frameworks, governance practices and digital ecosystems across emerging markets. This linkage was made explicit in China’s October 2021 National Standardisation Development Outline, which stated that “through the promotion of synergistic cooperation with other Belt and Road countries in the field of standards,” China would strengthen engagement on standardisation with BRICS and APEC states. Xi Jinping has simultaneously sought to frame this approach in normative terms, repeatedly emphasising that artificial intelligence (AI) should develop in a “beneficial, safe and equitable” manner, allowing Beijing to position itself not only as a technological competitor, but also as an increasingly active participant in shaping the language and governance debates surrounding global AI development in the Global South – a region that has often occupied a more peripheral position within Trump’s AI strategy.

A Conditional Safety Track
Against this strategic backdrop, a partial counterweight to the earlier architectural vacuum emerged in the prospect of a recurring US-China dialogue on AI risks. Trump confirmed in a post-meeting interview that there was discussion about “possibly working together for guardrails” for AI. If the channel formalises, it would constitute the first material bilateral safety engagement between the two leading AI powers, while sitting alongside, without yet being integrated into the multilateral process running from Bletchley Park through Seoul, Paris, and the India AI Impact Summit. The framing offered by US Treasury Secretary Scott Bessent is instructive: the United States, he stated, can hold AI talks with China precisely because “we are in the lead.” Cooperation pegged to leading positions is cooperation pegged to a moving variable since that lead may narrow, widen or invert, and the dialogue’s character will move with it. Whether an engagement of this kind can produce durable guardrails or whether it functions principally as a signalling exercise based on the underlying technological gap remains an open question.

Questions Beyond the Duopoly
The implications of these outcomes extend well beyond the two principals. They affect a class of states, among them India, the Gulf, and several Southeast Asian economies, that have spent the past eighteen months aligning their AI strategies against an assumed US posture of containment. The architecture of the US AI diffusion framework and export controls has so far forced middle powers to calibrate their procurement strategies against a baseline in which advanced US compute would not flow freely to Chinese counterparts. The H200 clearance changes the equation. Middle powers that paid alignment costs in expectation of preferential access may reasonably ask what those concessions have purchased, and on what terms a ‘third pole’ in the global AI stack can now be assembled. For India-GCC cooperation specifically, the consequence is that complementarity at the infrastructure, talent, and standards layers becomes simultaneously more valuable and more difficult to secure. The case for a coordinated ‘third pole’ rests increasingly on whether such cooperation can be constructed faster than the bilateral equilibrium between Washington and Beijing solidifies.



Siddharth Yadav is Fellow, Emerging Technologies, ORF Middle East
Elizabeth Heyes is Junior Fellow, Emerging Technologies, ORF Middle East

### Force Without Freedom: The Long Game in the Strait

Spotlight

 	Project Freedom’s one-day arc exposed the structural limits of military coercion, while the operation’s “defensive” framing functioned as much as a War Powers Resolution workaround as an operational doctrine.
 	Despite Washington’s naval blockade, Tehran's low-cost asymmetric arsenal is sufficient to sustain maximum disruption for months to come.
 	Coercion and diplomacy must move in tandem: the emerging multilateral coalition and Bahrain-US UN resolution offer a path forward, but success hinges on variables outside Washington’s control — including Chinese buy-in.

Since the tenuous ceasefire of April 8 took place between the United States (US), Israel, and Iran, the central unresolved issue has remained the reopening of the Strait of Hormuz. Nearly a month later, on May 4, US President Donald Trump announced Project Freedom, an operation designed to “guide” stranded vessels out of the waterway closed by Iran. The rhetoric was direct. At a White House briefing that same day, Secretary of State Marco Rubio declared the operation’s purpose was to “rescue almost 23,000 civilians from 87 different countries who are trapped inside the Gulf and left for dead in the Persian Gulf by this Iranian regime.”

By May 5, Project Freedom was paused — reportedly at the urging of Pakistani mediators’, with a deal seemingly within reach. Only two American-flagged merchant ships had crossed. Iran dismissed the initiative as “Project Deadlock,” insisting that no military solution could resolve a political crisis — an ironic stance given Tehran’s continued threats to attack any vessel attempting to leave the waterway.

The one‑day arc of Project Freedom illustrates more than a failed tactical operation. In normal times, approximately 120 vessels transit the Strait daily; on the first day of Trump’s initiative, only two did. Beyond the numbers, the episode highlights the political constraints shaping Washington’s strategy, the structural limits of military coercion at sea, and the enduring uncertainty that will define the Strait long after any ceasefire is signed. For Iran, meanwhile, time remains on its side.
Political Cover for Trump
The framing of Project Freedom as a “defensive” operation — distinct from Operation Epic Fury — was not merely semantic. It represented a constitutional manoeuvre designed to create political space for President Trump. At the May 5 briefing, Secretary of state Marco Rubio emphasised: “The operation is over. Epic Fury is — the president notified Congress we’re done with that stage of it. We’re now on to this Project of Freedom. [...] This is a defensive operation. There’s no shooting unless we’re shot at first.” He further underscored the nuclear dimension, warning that a nuclear-armed Iran “could do whatever the hell they want with the Straits and there’s nothing anyone would be able to do about it.”
By framing Project Freedom as distinct from Operation Epic Fury — temporary, defensive, and not subject to the same timeline — the administration was constructing its legal architecture in real time.
The political subtext was the War Powers Resolution. The Trump administration notified Congress of the beginning of hostilities on March 2, starting a 60-day countdown that expired on May 1. Rather than seek congressional authorisation, the White House argued the ceasefire had “paused” the clock — a claim flatly rejected by Republican Senator Susan Collins, who insisted the 60-day deadline is “not a suggestion,” but “a requirement.” By framing Project Freedom as distinct from Operation Epic Fury — temporary, defensive, and not subject to the same timeline — the administration was constructing its legal architecture in real time.

Nevertheless, the operational result was sobering. Iran launched missiles and drones at American naval vessels; Trump stated that US forces sank seven small Iranian boats; a French cargo ship was struck injuring its crew as it attempted to cross without Iranian approval. What emerged was not liberation but a low-intensity confrontation that neither side could fully contain. As Rubio acknowledged, Iran has “a high pain threshold, but not an unlimited one” — a formulation that concedes the standoff may endure longer than Washington would prefer.
The Limits of Naval Pressure
If the naval blockade imposed on April 13 was intended as a precursor to Project Freedom — tightening Iran economically before forcing the Strait open — its results have been mixed. The two measures represent contradictory impulses: one seeks to prevent vessels from entering Iranian waters, while the other attempts to establish an American-managed safe corridor through those same waters, mirroring Iran’s own Islamic Revolutionary Guard Corps (IRGC) controlled passage.

Operators and analysts have noted these developments, yet the underlying problem of uncertainty persists. Until the core disputes between Washington and Tehran are resolved, industry stakeholders will continue to treat Hormuz transit as an extreme-risk procedure. Some vessels have attempted to transit by going dark — switching off their Automatic Identification System (AIS) transponders — with mixed results. Three crude tankers carrying a combined six million barrels successfully exited, as did the Japan-bound Eneos Endeavour. Others were less fortunate, including the French vessel struck and its crew injured during an unauthorised crossing.
Low-cost asymmetric options — mines, drones, mosquito fleet harassment — require minimal expenditure yet sustain maximum disruption. 
Treasury Secretary Bessent has argued that Iran’s storage is “full” and that the naval blockade will force Tehran to shut down production. Yet Iran appears to retain significant waterborne storage capacity — evidenced by the recent loading of a tanker at Kharg Island, the first since May 7. A CIA assessment further tempers Washington’s optimism, concluding that Iran would not face severe economic pressure for another four months. Meanwhile, Tehran’s low-cost asymmetric options — mines, drones, mosquito fleet harassment — require minimal expenditure yet sustain maximum disruption. Washington, by contrast, is deploying carrier strike groups and expansive personnel. Tehran is betting that this asymmetry will hold in a prolonged standoff.
An Iranian Recovery
The most consequential development largely absent from public discourse is what Iran has been doing since the ceasefire. Classified US intelligence assessments indicate that Iran had regained operational access to 30 out of 33 missile sites along the Strait, retaining approximately 70 percent of its pre-war missile stockpile and mobile launchers. Commercial satellite imagery confirmed engineering teams clearing debris from tunnel entrances at underground missile bases struck during Operation Epic Fury. Hegseth acknowledged as much, warning Iran that “you are digging out your remaining launchers” — but the intelligence suggests the recovery has been more successful than Washington anticipated.

At sea, Iran’s asymmetric advantage endures. Intelligence analysis concludes that Iran can survive the naval blockade for at least three to four months. It does not need to win the naval confrontation — it only needs to sustain uncertainty. Its arsenal spans mines, drones, and mosquito fleet harassment, and now extends to Ghadir-class mini-submarines — described by Tehran as the “invisible guardians” of the waterway. While analysts assess their endurance as limited and their detection vulnerability as significant, their presence adds another layer of uncertainty to an already hostile environment.

The diplomatic dimension shifted with Trump’s visit to Beijing. President Xi Jinping agreed that the Strait “must remain open to support the free flow of energy,” opposing both its militarisation and Iran’s tolling system. Treasury Secretary Bessent said Beijing would “do what they can“ behind the scenes, describing it as “very much in their interest” to see the waterway reopened. Tehran’s willingness to allow some Chinese vessels to transit under special arrangements suggests Chinese back-channel pressure carries operational weight that American military posture alone does not.
Diplomacy Must Run in Tandem with Muscle
Washington’s deployment of guided-missile destroyers and over 100 aircraft alongside Project Freedom was a deliberate display of coercive capability — underscored further on May 10, when the US Navy surfaced an Ohio-class nuclear ballistic missile submarine at Gibraltar as a visible counter-signal to Iran’s own Ghadir deployment. Yet the stalemate since April 8 has demonstrated that coercion alone cannot reopen a waterway defended by mines, drones, and asymmetric tactics. Force and diplomacy must move together.
The Bahrain-US resolution, if it secures Chinese support at the Security Council, could provide the multilateral legitimacy that unilateral American pressure has thus far failed to generate. 
The multilateral architecture is taking shape. A draft UN Security Council resolution co-tabled by Bahrain and the US — with more than 110 co-sponsors — demands that Iran cease attacks on commercial vessels, remove its mines, and end its illegal tolling regime. The physical coalition is also assembling: under joint UK and French leadership, British Defence Secretary John Healey co-chaired a meeting of over 40 nations, as HMS Dragon forward-deployed to the Middle East and France moved its Charles de Gaulle to the Red Sea. It is within this coalition context that Trump has signaled a willingness to restart Project Freedom — this time as part of a larger military operation, with vessel escorts forming only one component. Asian countries most exposed to the supply shock must also step up.

Iran’s Strait closure remains its primary bargaining chip — and Tehran shows no sign of relinquishing it cheaply. The Bahrain-US resolution, if it secures Chinese support at the Security Council, could provide the multilateral legitimacy that unilateral American pressure has thus far failed to generate. As Rubio observed, Iran’s pain threshold is high — but not unlimited. The central question is whether Washington can assemble the coalition, the legal cover, and diplomatic architecture necessary to reach that threshold before Tehran’s missile sites are fully restored, its endurance exhausted, or the low-intensity conflict escalates into a confrontation neither side can reverse.



Clemens Chay is Senior Fellow, Geopolitics, ORF Middle East.

### India and The UAE Forge Forward Amidst the Middle East Crisis

Spotlight:

 	The Middle East crisis is deepening geopolitical instability and pulling external powers, particularly the US, further into the region.


 	India–UAE ties are evolving beyond energy into a broader strategic and economic partnership anchored in trade, technology, and security cooperation.


 	The Strait of Hormuz crisis highlights that economic resilience now depends on stronger maritime security and regional security architectures.

The crisis in the Middle East is showing no signs of slowing down. Instead, it is creating new regional fissures, tensions, and drawing the United States (US) further into a region successive presidents have wanted to leave.  The conflict against Iran has not gone as the US had hoped for.

Against this backdrop, India’s Prime Minister Narendra Modi decided to add the United Arab Emirates (UAE) to his European itinerary at the last moment. This visit was to signal political support, along with deliberating on critical issues about the prevailing situation. The UAE has faced the largest number of missile and drone attacks launched from Iran since March. For New Delhi, a major concern is energy security. Modi has already requested people in India to be more frugal with energy consumption due to the impact of the crisis. While Modi landed in Abu Dhabi, Iran’s Foreign Minister Seyed Araghchi was in New Delhi to attend a BRICS meeting where the mood was turbulent due to opposing lines taken by Abu Dhabi and Tehran. In a Chair’s statement released by India, it highlighted that differing views persisted over the Middle East crisis within the grouping, and that the conflict’s impact is being adversely felt globally.

The India–UAE bilateral has evolved into a US$100-billion strong partnership and increasingly becoming stronger on the back of a more integrated business and economic environment beyond just oil. Non-oil trade has increased by nearly 65 percent since the CEPA trade agreement was negotiated and signed in a record 90-day period in 2022. A new target of US$200 billion in trade has been set for 2032. This automatically means that strategic alignments are strong, ranging from countering terrorism and maritime security within the scope of defence to cooperation on new and high-end technologies such as Artificial Intelligence.

However, in the interim, the geopolitical challenges, led by the blockade of the Strait of Hormuz, remain important issues where cooperation will have to be prioritised. As part of a slew of agreements, New Delhi and Abu Dhabi have agreed to work together on the former’s strategic oil reserves, a critical tool that has not been prioritised enough yet. The current conflict has shown Indian vulnerabilities when it comes to the management of energy supplies, despite having a wide net of partners to choose from. An added push to secure LPG further underscores that in this conflict, disruptions of natural gas caused far more havoc than oil supplies.

India has maintained that the freedom of navigation of global chokepoints such as the Strait of Hormuz should not be decided by any single state. For long, the impact of chokepoints in geopolitical calculations has been studied but often disregarded as less than probable. Today, as Hormuz proved such forecasting otherwise, under a blockade by Iran and a counter-blockade by the US, economies in Asia have borne the economic brunt. As peripheral stakeholders in the region’s security architecture, but main consumers of the region’s energy supplies, questions on how to stall a repeat of the ongoing chokehold will have to be addressed. These often mean uncomfortable conversations on defence cooperation and deployment realities.

Economic sustainability and resilience are increasingly inseparable from security imperatives. For the success of the former, cooperation and co-existence with the latter is a non-negotiable ask. Both India and the UAE are aptly placed to build architectures to protect their collaborative and individual stakes in the region. Maritime security will be the game of the day in the Middle East for peripheral actors such as India. Greater basing opportunities and rights, beyond atrophied projects such as Oman’s  Duqm port, could serve as good starting points to build frameworks that can function in the prevailing chaotic disorder.

As the global appetite for risk increases drastically, strong bilateral relations such as India and the UAE will need even stronger guardrails to future-proof themselves. As the US promotes the idea of a ‘G2’ under Trump, China exerts more muscle, asymmetric wars drag on for years, and the likes of Russia sustain through long conflicts, a question arises as to who will protect interests abroad and how the costs of enforcing new orders will be shared. These are challenges that India and the UAE, alongside like-minded partners, will need to address collectively.



Kabir Taneja is Executive Director, ORF Middle East

### After Project Glasswing: Frontier AI and Sovereign Recovery

Spotlight

 	Anthropic’s Mythos and the White House intervention together are turning frontier model access into a question of sovereignty.
 	Chinese open-weight models have crossed the sufficiency threshold for most enterprise workloads at a fraction of the price of proprietary models by US AI labs.
 	Middle powers need governance frameworks built not around selection, but exit options while preparing for interoperability from the start.

Recent months have marked a new moment in AI development as frontier AI models moved from laboratory research into state-mediated distribution due to a advances in their cybersecurity capabilities. In April 2026, the United States (US) AI company Anthropic unveiled its latest and most capable frontier model Claude Mythos Preview through a programme called Project Glasswing, a consortium of roughly fifty organisations that are granted access to the Mythos model. The decision to limit access was due to the unprecedented performance demonstrated by the model across several benchmarks. Also in April, OpenAI announced GPT-5.5 and classified it as ‘High’ under its Preparedness Framework on cybersecurity capability. OpenAI subsequently expanded its Trusted Access for Cyber programme to vet defenders seeking access to advanced cyber capabilities, while applying stricter automated safeguards to GPT-5.5 itself. Within weeks of the Mythos announcement, the White House had intervened to block Anthropic’s proposal to expand access from approximately 50 organisations to 120 by citing national-security and compute-availability concerns. This marks a shift in the landscape as model access in the market becomes dependent on government approval in addition to availability. Mythos has identified vulnerabilities that have persisted through 27 years of expert testing in the OpenBSD operating system. Meanwhile, GPT-5.5, on independent UK AI Safety Institute testing, became the second model after Mythos to complete end-to-end a multi-step corporate network attack simulation. These capability advances have crossed the threshold separating the questions of model access, cyber defence, and national security.
Recent months have marked a new moment in AI development as frontier AI models moved from laboratory research into state-mediated distribution due to a advances in their cybersecurity capabilities
Frontier model access has become a sovereignty problem with mutually incompatible ecosystems, and that the consuming states’ task now is not to choose between American and Chinese AI but to construct governance frameworks that prevent their dependencies from becoming absolute.
US AI Labs and the Vendor Lock-in Problem
Project Glasswing is one-part containment strategy and one-part marketing tactic but with a distribution list contested between Anthropic and the White House. The gating of Mythos could signal a pivot away from the deregulatory approach to AI development adopted by the Trump administration so far. If this pivot materialises as policy, it could have far-reaching consequences for tech middle powers across the globe.

So far, no non-US company has been publicly announced as having gained entry into Glasswing. Consequently, in the EU, the Deutsche Bundesbank has called publicly for European access to the Mythos model. The European Central Bank has convened risk officers at eurozone lenders while the Swiss regulator FINMA has warned that uncontrolled, broad availability of models such as Mythos would itself constitute a “systemic risk,” voicing a separate concern from the one with access-asymmetry that the Bundesbank has identified.

The pattern extends well beyond Europe. In India, Finance Minister Nirmala Sitharaman convened an emergency meeting on 23 April with the Reserve Bank of India, the National Payments Corporation of India, and CERT-In, describing the Mythos threat as “unprecedented” and directing banks to coordinate a real-time threat-intelligence response. In Singapore, the Monetary Authority convened the chief executives of major banks over Mythos-related cyber risks. Senior Minister of State Tan Kiat How told parliament on 5 May that the government does not have direct access to Mythos and “do not assume that we will always have early access to every frontier model,” a notable small-state acknowledgement that the architecture of Glasswing-style gating may now be a permanent feature rather than a one-off episode.
The gating of Mythos could signal a pivot away from the deregulatory approach to AI development adopted by the Trump administration so far. If this pivot materialises as policy, it could have far-reaching consequences for tech middle powers across the globe.
None of these institutions can compel a private American company to grant them what their domestic regulators believe their financial systems require. The unfolding Mythos episode is making apparent that frontier-model access has the makings of a national security issue.
The Chinese Counter-Offer
April 2026 also witnessed the most coherent counter-positioning of the Chinese AI ecosystem to date. On 24 April, DeepSeek released V4-Pro and V4-Flash under MIT licence with open weights and pricing at approximately one-seventh the cost of Claude Opus 4.7. The US Center for AI Standards and Innovation evaluated V4 and concluded that its capabilities lag the US frontier by approximately eight months. On 27 April, China’s National Development and Reform Commission ordered Meta to unwind its two-billion-dollar acquisition of Manus, a Singapore-headquartered agentic-AI startup that had restructured out of Beijing in mid-2025. The order marked an unprecedented invocation of China’s foreign-investment security review mechanism to reverse a completed cross-border AI transaction. Beijing’s ostensible signal was that corporate restructuring through Singapore would no longer place a China-developed model beyond Chinese regulatory reach.

In parallel, OpenRouter data through April shows Chinese-origin models accounting for over 45percent of weekly token volume across the platform, up from under 2percent in October 2024. Xiaomi alone holding three times OpenAI’s share. Alibaba’s announcement on 2 April of a strategic partnership with Fireworks AI to host Qwen 3.6 Plus on Western infrastructure further clarifies the larger picture. The Chinese domestic stack is no longer a strategic safety-net for domestic industry but is inching closer to a global distribution strategy that offers open-weights at the base layer, enterprise deployment in the middle, and aggressive pricing at the top to counter American offerings.
Convergence at the Deployment Layer
Enterprise deployment is the battleground that will determine whether the American or Chinese stack settles into the workflows of the world’s MSMEs as well as the long-term default procurement pipelines of governments. US labs have identified this as the next phase of the global AI race. On May 4, signalling this, both Anthropic and OpenAI announced separate joint ventures with private equity firms. Anthropic’s US$ 1.5 billion vehicle with Blackstone, Hellman & Friedman, and Goldman Sachs; OpenAI’s US$ 10 billion ‘The Deployment  Company’ with TPG, Brookfield, Advent, and Bain Capital. Anthropic and OpenAI are following the same logic. Private equity firms control portofolios of hundreds of companies, allowing the AI labs to secure a captive pool for deploying their respective enterprise AI models. On the Chinese side, MiMo-V2-Pro and Alibaba's Qwen 3.6 Plus together held the top of OpenRouter’s coding rankings during the same period, both available free-of-charge to AI development environments.The emerging strategy for American and Chinese labs seems to be converging not on the same buyers but on the same layer—enterprise integration—just through different pricing strategies.
The Chinese domestic stack is no longer a strategic safety-net for domestic industry but is inching closer to a global distribution strategy that offers open-weights at the base layer, enterprise deployment in the middle, and aggressive pricing at the top to counter American offerings.
The strategic implication of this convergence rests on three observations that middle-powers have to confront simultaneously. First, the open-weight model capabilities do not need to match the capabilities of proprietary frontier models. Rather, they just need to be sufficient for handling most enterprise workload, a threshold that Chinese-made open-weight models have already crossed. Second, the cost gap between proprietary and open-weight models dominates the procurement decision once capability sufficiency is established. Third, the AI black-box issue persists since ‘open-weight’ is not ‘open-source’. The training data, fine-tuning recipe, and reinforcement-learning reward structure remain proprietary even in open-weight models, meaning that algorithmic bias, latent backdoors, and unidentified cybersecurity exposures are not eliminated by an MIT licence on the weights. Open-weight models do not address the issue of vendor opacity as much as merely relocating it from the vendor relationship to the model itself. The resulting trade-offs for buyers and enterprises are not between dependency and sovereignty but between two kinds of dependencies.
A Contested Road Ahead
Two consequences can be posited due to the increasing competition at the deployment stage. The first is that the US, having watched Mythos’s distribution list become a White House decision in a month, will move toward strengthening executive control over frontier-model access. This would essentially transform an emergency intervention in April into a procurement architecture over the coming years. The likelihood of this shift will only increase with future, more capable iterations of proprietary frontier models. The second consequence is that consuming states with enterprises integrating Chinese open-weight models at scale will face escalating scrutiny from US trade and security agencies on grounds that mirror the supply-chain logic already applied to Huawei and ZTE across 5G, cloud, and digital-infrastructure procurement in the Gulf and beyond. This could lead to further extensions of the export-control regime already applied to NVIDIA hardware. The two trajectories are not symmetrical. The first consequence would concentrate control inside Washington, and the second would export it. For AI middle powers, the new imperative will be to construct governance frameworks that makes such dependencies recoverable.

Frontier AI capability is becoming increasingly concentrated, gated, and politically contested whereas open-weight capability is sufficient, cheap, but geopolitically conditioned. Enterprise deployment is the battleground that will determine which stack settles into the workflows of the world’s MSMEs, and through them, the long-run default procurement pipelines of governments. The consuming state’s question is not which model to adopt but how to retain the option to adopt a different one.



Siddharth Yadav is Fellow, Emerging Technologies, ORF Middle East.

### Impacts of an Impending “Super” El-Niño on Global Supply Chains

Spotlight:

 	The projected El Niño is likely to yield asymmetric impacts; with drought-like conditions reducing maize, rice, and wheat production in Asia and Australia and wet conditions boosting global soybean production in the Americas.
 	El-Niño conditions hinder the clean energy transition by exacerbating heatwaves, draining hydrodams, and restricting access to mines due to flash floods.
 	Parametric insurance, adaptive measures, and infrastructure resilience will be crucial to buffer against shocks from conflict and climate interlinkages.

The El-Niño Southern Oscillation is a climate phenomenon oscillating between two phases: El Niño and La Niña, with each cycle spanning two to seven years. While La Niña induces cooling tendencies, El Niño increases global average surface temperatures. Historically, El Niño events have increased rainfall and flood risk in dry areas such as the Americas, while instigating drought in wet areas like South and Southeast Asia.
As the world forges through geopolitical upheaval, a prospective “Super” El-Niño, albeit a non-standardised classification, threatens to further destabilise global supply chains. The World Meteorological Organisation (WMO) predicts an upward shift in sea-surface temperatures in the Equatorial Pacific as early as May to July 2026, with an estimated 60 percent risk of El Niño development by summer. This trend is particularly alarming, as the looming El Niño will likely coincide with conflict-induced trade restrictions in the Middle East, which have already stranded maritime shipments, driven transpacific container rates 40 percent above pre-crisis levels, and restricted critical urea and phosphorus fertiliser exports.
The stakes are high, as the last dubbed “Super” El Niño invoked billions of dollars of losses, including US$327 million in the agricultural sector alone. Despite these risks, current studies highlight a deficit in forecasting effectiveness and strategic response capacity, often underestimating risk. This article evaluates projected asymmetric impacts of a Super El Niño across regional agricultural commodities, energy, and infrastructure, underscoring the urgent need for localised climate adaptation investments and measures.

Impacts on Agricultural Commodities 
Drought Conditions in South Asia, Southeast Asia, and Australia 
Akin to previous patterns, El Niño is likely to induce drought-like conditions in Southeast Asia and Australia and a weaker monsoon season in South Asia, negatively impacting rice, grain, sugar, and palm oil production. For South Asia, the monsoon season is referred to as the region’s “real finance minister,” as agriculture largely underpins regional GDP. India, for instance, estimates below-average monsoon rains for the first time in three years. Prolonged trade blockages of nitrogenous-based fertilisers through the Strait of Hormuz and dwindling options for viable fertiliser alternatives may result in potentially weaker yields for rice, cotton, and soybeans. Likewise, weakening rainfall across Thailand and Vietnam, the world’s second and third largest global rice exporters, raises food security concerns for high-importing countries such as the Philippines where rice composes the bulk of caloric intake. Potential food insecurity is further exacerbated by intermittent rice and fertiliser export restrictions, dependencies on energy-intensive irrigation practices, and rising costs of cooking gas. Moreover, El Niño conditions are expected to exacerbate below-average rainfall in Australia, reducing wheat production and exports to Asia, placing pressure on domestic stockpile buffers.

Prolonged trade blockages of nitrogenous-based fertilisers through the Strait of Hormuz and dwindling options for viable fertiliser alternatives may result in potentially weaker yields for rice, cotton, and soybeans.
Diverging Impacts Across the Americas
El Niño induces diverging impacts on North and South America, positively impacting soy production and negatively impacting coffee production. For instance, during El Niño events, average soybean yields improve by 2.1 to 5.4 percent, due to more favourable growing conditions in the United States (US), Argentina, and Brazil. Brazil’s soybean harvests are progressing well due to rain from La Niña conditions, but El Niño could negatively affect 2027 crop production alongside fertiliser restrictions due to aforementioned conflict-induced trade blockages. Despite current strong crop output, Brazil has every incentive to leverage soybeans domestically for biofuels to shield the country from the US-Israel-Iran war fuel import disruptions. The country already seeks to increase its biofuel portion of diesel to 20 percent and high bunker fuel prices inhibit exports from reaching markets. In coffee-growing countries across the equator, El Niño also invokes dry conditions and heat stress, negatively affecting coffee yields and smallholder producer livelihoods. However, given previously record-high Brazilian coffee crop harvests, future coffee production is not expected to be seriously affected. The diverging contrast across geographies necessitates tailored response strategies among policymakers and international agencies.
Mixed Impacts Across the Middle East, South and East Africa
For the Middle East, a lingering El Niño threatens domestic water supply, with the potential for drought-related disputes to emerge in Iraq, Syria, and Lebanon. Compounded by ongoing conflicts, water scarcity, high fertiliser and fuel costs, El Niño conditions may threaten food insecurity and drain declining fiscal buffers. However, an El Niño also increases the risk for extreme heat, heavy precipitation and flash floods, testing the adaptive capacity of urban infrastructure. In Southern Africa, drought conditions may reduce regional maize production, while Kenyan maize crop production in the East may benefit from additional rainfall.

Source: Hectar Global

Impacts on the Energy Transition
Beyond agricultural commodities, severe weather disruptions also compromise energy distribution, creating a feedback loop that temporarily hinders clean energy transition efforts. A Super El Niño may intensify heatwaves, simultaneously straining water supplies and power grid connectivity, prompting increased fossil fuel dependencies. In India, a rise in electricity demand from El Niño conditions is expected to raise coal-fired power generation by 10 percent year over year, and the country is looking to leverage hydropower to fill the gaps. However, hydropower-dependent countries may be forced to reduce output or shut down due to droughts or torrential flooding. In Zambia and Zimbabwe, for instance, El Niño drought conditions previously reduced hydropower generation at Kariba Dam.

A Super El Niño may intensify heatwaves, simultaneously straining water supplies and power grid connectivity, prompting increased fossil fuel dependencies.
Beyond immediate power shortages, climate-driven energy disruptions intersect with Strait of Hormuz blockages, sharp oil price hikes, and infrastructure vulnerabilities, stalling critical minerals output across Global South countries. In Indonesia, where hydropower underpins mining operations, any shortfall in rain risks curtailing the country’s nickel operations, affecting global steel production. These operations are further compounded by a disruption in sulphur feedstock from the Middle East which is crucial for purifying Indonesia’s nickel supply. On the opposing end, El Niño increases heavy rain in Chile, inhibiting access to Chile’s mountainous mining regions which house large copper deposits.

Impacts on Maritime Trade Corridors
Drier El Niño conditions can also restrict maritime traffic. A decline in water levels from the previous El Niño resulted in reduced weight limits and increased vessel surcharges for shipments across the Panama Canal. Shipments were previously able to be rerouted through the Suez Canal, Strait of Magellan, and the Cape of Good Hope. With ongoing trade blockages at the Strait of Hormuz, added climate vulnerabilities may further complicate just-in-time supply chain operations. Likewise, the Suez Canal is already subject to coastal inundation. El-Niño associated rainfall shifts from the land to ocean could further exacerbate rising sea levels, compromising critical maritime infrastructure. Previous simulations highlight how small-island developing states (SIDS) would be the most negatively affected by increased shipping rates from geopolitical and climate disruptions at key maritime chokepoints, due to their heavy economic dependence on maritime shipping and processed food imports. SIDS are projected to experience a 0.9 percent consumer price impact, and a 0.11 percent reduction in real GDP, a figure doubles the global average. SIDS also have differing adaptive capacities to respond to shocks due to their economic structure, debt levels, and institutional capacity, with concentrated economies having lower adaptive capacity compared to diversified economies.

Looming El-Niño Underscores Importance of Climate Resilience Measures 
While increasing food and energy stocks and diversifying trade corridors are crucial to safeguarding economic growth amidst El Niño conditions, accelerating investments in climate insurance mechanisms and other resilience measures is equally crucial to protect vulnerable households, small-sector players, and infrastructure across agriculture, energy, and water management sectors.

Climate-related insurance schemes are already expected to rise by 50 percent by 2030, thus prompting the need to recalibrate insurance to incentivise resilience approaches.
First, parametric insurance schemes can help mitigate financial impacts of extreme El Niño conditions on vulnerable populations. Climate-related insurance schemes are already expected to rise by 50 percent by 2030, thus prompting the need to recalibrate insurance to incentivise resilience approaches. Peru piloted an El Niño Index Insurance which determines pay outs through a pre-defined index instead of physical flooding or drought damages. By releasing payouts prior to the heaviest flooding and rainfall, communities or companies are offered funding earlier on to reinforce infrastructure, shift planting schedules, or harvests, allowing them to mitigate potential losses as opposed to reacting to damage. Likewise, Colombia also released a parametric insurance solution which reacts to predefined weather change thresholds to help smallholder coffee households recover from climate shocks. Several limitations of parametric insurance include a lack of compensation to losses just above or below the predetermined threshold and the increasing frequency of insurance payouts associated with intensifying climate risks.
Second, embedding resilience considerations in crop and infrastructure planning is crucial to mitigate risks and lower costs. Often, policies for slow onset climate events such as El Niño are incomprehensive and fragmented. For the agricultural sector, impacts on crop output often depend on timing, intensity, duration, and intersection with growing and harvest seasons. Thus, supporting small-scale farmers to pre-emptively develop alternative crop value chains and monitor changes in water salinity will help them prepare for extreme drought or flooding events. FAO analyses suggest that every US$1 invested in anticipatory action adds US$7 in value of avoided losses and added benefits for families. For urban infrastructure, combining enhanced localised weather monitoring for extreme heat or flash flooding with grey and green infrastructure solutions, stormwater management, and land-use regulation will help reduce cascading repercussions. For the maritime sector, establishing backup trade routes during drier months can help prevent stranded goods, while strengthening investments in maritime infrastructure resilience significantly reduces high transport costs. A UNCTAD analysis found that an investment-to-export ratio in maritime transport infrastructure that improves from the bottom 20th percentile to the 20th-40th percentile group would decrease maritime costs by 4.7 percent.

Embedding resilience considerations in crop and infrastructure planning is crucial to mitigate risks and lower costs. 
The forthcoming “Super El-Niño” threatens to exacerbate compounding crises wreaking havoc on global food and energy supply chains. The increasing need for climate-resilient infrastructure to buffer against the incoming volatility of conflict and climate interlinkages is already driving 2026 green bond deployment and cargo war risk insurance. However, ensuring that finance translates to resilient infrastructure development will be crucial to reducing food insecurity, clean energy disruptions, and disproportionate cost burdens.



Leigh Mante is Junior Fellow, Climate and Energy, ORF Middle East.

### India and the Gulf: A New Strategy for Water, Energy, Food, and Ecosystem Security

This article is the part of “Policy Pathways for Food and Water Security in the MENA Region


Water, energy, food, and ecosystems (WEFE) are deeply interconnected, and these linkages sit at the core of today’s most critical global security challenges. With climate pressures intensifying, cities expanding, and populations growing, the interconnections among agrifood system transformation, energy transition, integrated water management, and land governance are not parallel agendas. They shape each other’s risks and opportunities in ways that determine whether communities move toward resilience or deeper vulnerability. Within an interdependent nexus, stresses in water, energy, or food systems reinforce one another through feedback loops, translating localised shocks into power shortages, agricultural disruption, and food insecurity, and underscoring the need for integrated governance and resource-efficient practices (Figure 1). Recognising and operationalising this interdependence in planning, management, and investment is therefore essential for navigating an increasingly complex and uncertain resource landscape.[1], [2], [3]
Despite the clear need for addressing these WEFE challenges as a nexus, policy signals and investments often remain in silos. Such fragmentation amplifies systemic vulnerability, producing cascading cross-sectoral failures while undermining opportunities for coordinated, resilience-building interventions.
Figure 1: The WEFE Nexus

Source: Salmoral et al. (2019)[4]
Building on this foundation, this article discusses India and the Gulf countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE). Both regions face mounting pressures across WEFE systems, though the nature of these pressures differs in ways that are structurally complementary rather than symmetrical.[5]
India, for one, must manage food production for a large and growing population under increasing water stress, groundwater depletion, and climate variability, while simultaneously navigating energy access, affordability, and emissions constraints within a complex, multi-level governance landscape.[6], [7] Meanwhile, the Gulf countries are confronting extreme physical water scarcity that severely limits domestic agricultural potential, yet they possess abundant energy resources, high fiscal capacity, and globally significant infrastructure for desalination logisticsa and trade. Food security in the Gulf is therefore intrinsically tied to energy-intensive water supply systems and to reliable international supply chains, making the region highly exposed to shocks across energy markets, maritime trade, and climate-sensitive food production elsewhere.[8],[9] These contrasting WEFE profiles create a shared vulnerability to systemic risk, but also a clear basis for cooperation grounded in complementary resource endowments, production capacities, and governance strengths. The article argues that India and the Gulf can benefit from a shared yet context-specific WEFE strategy, rooted in comparative advantage and improved resilience through partnership and trade that is grounded in a systems nexus approach.
From a WEFE perspective, deeper cooperation between India and the Gulf countries reflects a rational alignment of comparative advantage rather than a trade-off between self-sufficiency and security. India retains relative advantages in food production due to its agro-ecological diversity, labour availability, and expanding capacity in water-efficient and climate-smart agriculture, whereas the Gulf’s extreme water scarcity fundamentally constrains domestic food production despite substantial energy resources. For water-scarce, energy-abundant economies, importing food grown in more resource-productive contexts, supported by energyenabled logistics, cold chains, and strategic trade agreements and investment frameworks, can be more sustainable than pursuing water-intensive domestic production.
Existing frameworks such as the India–UAE Comprehensive Economic Partnership Agreement (CEPA) provide an institutional basis for re-orienting food and energy trade through a WEFE lens, enabling both regions to reduce pressure on stressed water systems while enhancing supply-chain resilience.[10] When governed through integrated WEFE strategies that account for embedded (virtual) water, energy use, and ecosystem impacts, such cooperation strengthens regional and global food security by aligning production, trade, and energy systems with longterm resource sustainability.[11], [12], [13], [14]
Within this shared context, the rest of this article outlines three priority I’s for further strengthening a practical roadmap for sustainable development: integrate, innovate, impact. First is to identify and integrate key policy priorities across sectors to manage the WEF nexus effectively. Second is to innovate methodologies (tools and analysis) for holistic and systemic WEF management. Third is to map the impacts for future courses of action.
A first step is to integrate thematic focus on the nexus. India and the Gulf region share the challenge of coordination across complex institutional landscapes, where policies for water, energy, and food are often managed within separate ministries in India, while the governance is more centralised in Gulf nations with high government capacity and substantial financial resources to invest in high-cost solutions. Further, a lack of standardised integrated data collection and sharing mechanisms across the sectors to accurately model and manage the trade-offs (e.g., quantifying the energy used to pump water for a specific crop) is a challenge. To overcome this obstacle, there is a need for new ways of thinking about integrated governance at multiple levels and through multiple lenses.
Second, the transition toward sustainable WEFE security in both India and the Gulf requires moving beyond traditional sectoral planning by adopting innovative methodological approaches to unlock more coherent and effective planning. These methods focus on holistic coverage of WEFE systems and are critical for understanding complex trade-offs and identifying synergies. To achieve integrated planning, policy coherence driven by collective action is the essential foundation for sustainable development. SDG Target 17.14 identifies policy coherence as a critical mechanism to advance the entire 2030 Agenda through integrated partnerships and collective action. In this process, “simplexity”—the ability to simplify complex issues into actionable insights without losing nuance—is pivotal.[15] Simplexity works by distilling the drivers and tradeoffs within WEFE systems into forms that decision-makers can use, such as scenario pathways, hotspots analyses, and clear option spaces. It enables stakeholders to see where coordinated action is most feasible, which leverage points matter, and how different interventions interact across systems. By turning complexity into structured, decision-ready insight, simplexity creates the practical foundation needed for coherent planning and action.
For the Gulf, this may involve advanced systems modelling to optimise the costly desalinationenergy nexus, integrating future climate change impacts with renewable energy deployment schedules and resource pricing mechanisms. As the Gulf’s food resilience is linked to the stability of a high-tech energy chain considering desalination serves as the primary metabolic input for both human consumption and food production, and energy requirements for intense cooling required for climate-controlled agriculture. This creates a unique vulnerability where energy market volatility or grid disruptions translate directly into immediate water and food insecurity, requiring a transition toward renewable-powered desalination and circular brine management.[16]
In India, it refers to the use of remote sensing and geospatial analysis to accurately map groundwater depletion driven by subsidised energy use, alongside data-driven policy coherence frameworks (like the five-dimensional model in Figure 2). An important consideration would be a holistic outlook to plan alignment of policy actions across federal, state, and local governance levels. By leveraging these computational and integrated governance tools, both regions can effectively analyse the entire resource chain, allowing policymakers to design flexible and adaptive strategies that manage scarcity, enhance efficiency, and minimise adverse cross-sectoral impacts while advancing inclusivity.
Figure 2: A Multidimensional Framework for Synchronising WEFE Policy Coherence

Source: CEEW and IWMI (2023)[17]
Third, mapping the impact of key policy interventions is critical in demonstrating how national initiatives advance SDGs, a crucial element to inform policy actions for positive impact. For example, microirrigation, a climate-smart and water-saving technology, is promoted in India through the ‘Per Drop More Crop’ (PDMC) initiative. Policy actors from the national and state departments of agriculture, and representatives of research institutes confirm that it has had a positive impact on multiple SDGs targets.[18] The core value proposition of PDMC—enhancing water use efficiency—drives strong linkages with SDG 6 (Clean Water and Sanitation) by ensuring sustainable utilisation, and supports SDG 2 (Zero Hunger) by increasing productivity and promoting sustainable agriculture (Figure 3). Further, it improves farm-level incomes and reduces input costs (through efficient fertiliser and water use), contributing to SDG 1 (No Poverty) and SDG 8 (Decent Work and Economic Growth). Such impact mapping offers granular evidence needed to transition from reactive crisis management to proactive, climateresilient scaling.
Figure 3: SDG Impact Mapping: The Reach of the 'Per Drop More Crop'

Source: CEEW and IWMI (2024)[19]
Note: The bar height indicates the intensity of linkage with SDG targets.
In conclusion, strategic alignment between India and the Gulf represents a learning space for solving the world’s most pressing security challenges. There is a wide landscape of collaborative opportunities between India and the Gulf that could be mutually beneficial. This article identifies technology transfer, policy exchange, and joint research as instrumental avenues to build and strengthen collaboration.


 	What India can learn from the Gulf: India could learn from the Gulf’s expertise in high-tech, large-scale infrastructure that has led to a spectrum of solutions to regional water security and water-efficient agriculture. Specifically, the Gulf’s global leadership in desalination and smart-grid integration offers a roadmap for India’s coastal urban centres and industrial hubs to achieve water and energy security independent of erratic monsoon cycles.
 	What the Gulf can learn from India: India’s experience in coordinating policy action across multiple levels of government offers relevant perspectives on managing crosssectoral priorities. Approaches that link national objectives with state- and local-level implementation highlight ways to support coherence across systems and scales. These perspectives may complement the Gulf’s established strengths in infrastructure and technology, particularly in efforts to integrate ecosystem considerations and stakeholder engagement within ongoing resource planning processes.

As both regions play important roles in global food and energy systems, closer collaboration can support collective efforts to anticipate and manage systemic risks. Joint WEFE-oriented initiatives, spanning research, technology exchange, and policy dialogue, can contribute to more resilient supply chains and more informed resource planning. By framing WEFE security as a shared governance opportunity and integrating data, analytical tools, and outcome-oriented indicators, India and the Gulf can jointly advance a model of collaborative resource leadership that supports climate resilience, ecosystem stewardship, and sustainable development in the Global South.

Endnotes
[1] Rabi H. Mohtar and Bassel Daher, “Water, Energy, and Food: The Ultimate Nexus,” in Encyclopedia of Agricultural, Food, and Biological Engineering (Boca Raton: CRC Press, 2012).
[2] Bassel Daher et al., “Modeling the Water-Energy-Food Nexus: A 7-Question Guideline,” in Water-Energy- Food Nexus: Theories and Practices, ed. Salam et al. (2017).
[3] Suparana Katyaini et al., “Water–Food Nexus through the Lens of Virtual Water Flows: The Case of India,” Water 13, no.6 (2021), https://www.mdpi.com/2073-4441/13/6/768.
[4] Gloria Salmoral et al., “Water Diplomacy and Nexus Governance in a Transboundary Context: In the Search for Complementarities,” Science of The Total Environment 690 (2019), https://www.sciencedirect. com/science/article/pii/S0048969719330864.
[5] Mohsen Sherif et al., “Water Resources Availability, Sustainability and Challenges in the GCC Countries: An Overview,” Heliyon 9, no.10 (2023), https://www.sciencedirect.com/science/article/pii/ S2405844023077514.
[6] Food and Agriculture Organization of the United Nations, The State of Food and Agriculture 2023: Revealing the True Cost of Food to Transform Agrifood Systems, 2023, FAO, https://doi.org/10.4060/ cc7724en.
[7] CEEW and IWMI, Improving Policy Coherence in Food, Land, and Water Systems to Advance Sustainable Development in India: A Case Study of Rajasthan, 2024, Colombo: IWMI, 2024, https://cgspace.cgiar.org/ items/26b98d0a-1ba5-46a7-ac3e-3e2aa25711f0.
[8] Sherif et al., “Water Resources Availability, Sustainability and Challenges in the GCC Countries: An Overview.”
[9] Food and Agriculture Organization of the United Nations, The State of Food and Agriculture 2023: Revealing the True Cost of Food to Transform Agrifood Systems.
[10] UAE Ministry of Economy and Tourism, “UAE-India Comprehensive Economic Partnership Agreement,” https://www.moet.gov.ae/en/cepa_india.
[11] “Improving Policy Coherence in Food, Land, and Water Systems to Advance Sustainable Development in India: A Case Study of Rajasthan.”
[12] “The State of Food and Agriculture 2023: Revealing the True Cost of Food to Transform Agrifood Systems.”
[13] Suparana Katyaini et al., “Science-Policy Interface on Water Scarcity in India: Giving ‘Visibility’ to Unsustainable Virtual Water Flows (1996-2014),” Journal of Cleaner Production 275, (2020), https://www.sciencedirect.com/science/article/abs/pii/S0959652620341044.
[14] Carole Dalin et al., “Groundwater Depletion Embedded in International Food Trade,” Nature 543 (2017), https://doi.org/10.1038/nature21403.
[15] Bassel Daher, “Simplexifying Sustainability,” Nature Sustainability (2025), https://doi.org/10.1038/s41893- 025-01650-5.
[16] Mohammad Al-Saidi and Sally Saliba, “Water, Energy and Food Supply Strategies in the Gulf Cooperation Council (GCC) Countries—Contextualizing Resilience,” Water, 11, no.3 (2019), https://www. mdpi.com/2073-4441/11/3/455.
[17] CEEW and IWMI, Evaluating Policy Coherence in Food, Land, and Water Systems: Evidence from India (Colombo: IWMI, 2023), https://cgspace.cgiar.org/items/d1e630a7-56a3-4d1e-8ae2-c944a9b5210b.
[18] “Improving Policy Coherence in Food, Land, and Water Systems to Advance Sustainable Development in India: A Case Study of Rajasthan.”
[19] “Improving Policy Coherence in Food, Land, and Water Systems to Advance Sustainable Development in India: A Case Study of Rajasthan.”

### Iran’s Water Crisis: Historical Roots, Ideological Dimensions, and Policy Challenges

This article is the part of “Policy Pathways for Food and Water Security in the MENA Region”


Iran's water story is intertwined with its modern political evolution. During the Pahlavi era, the country’s national strategy centred on industrialisation and modernisation. Through the White Revolution (1963), the Shah sought to transform Iran into a modern, industrial state capable of rivalling Western economies. Agriculture was not neglected maliciously but deprioritised, a calculated choice that reoriented capital, labour, and infrastructure towards factories, oil, and heavy industry.[1]
Land reform broke up large estates and dismantled the landlord-peasant hierarchy. Aimed at equity, it instead disrupted efficient farming and alienated rural elites. Lacking capital or irrigation infrastructure, many smallholders saw the Shah’s modernisation as a betrayal of Iran’s agrarian roots.
This resentment became politically significant. The Islamic Revolution of 1979 found many of its earliest supporters among disaffected rural and small-town populations. Clerical leaders, including Ayatollah Khomeini, who came from a modest rural background, capitalised on this grievance.[2] After the Revolution, policy underwent a decisive shift: agriculture was transformed from being an economic sector to an ideological symbol of national authenticity and revolutionary justice.
The Iran–Iraq War (1980–1988) further reinforced this shift. Wartime self-reliance fostered the ideology of “khodkafa’i”, meaning self-sufficiency.[3] Food production became an emblem of resilience against foreign dependence. The government promoted extensive agricultural expansion, constructing dams and subsidising water-intensive crops such as wheat, rice, and sugarcane, even in arid regions.
In Shia tradition, the denial of access to water during the Battle of Karbala—when Imam Hussein’s camp was cut off—became a powerful moral reference.[4] After the Revolution, this symbolism shaped welfare policy, where the state declared that no one should be denied water. Regulatory barriers to household access were loosened, enshrining water as a right rather than a commodity.[5] This theological commitment, however, encouraged overconsumption and reduced incentives for conservation, setting the conditions for long-term depletion.

Cultural and Ideological Dimensions
Water in Iran is not merely a natural resource; it is an ideological artefact, woven into revolutionary identity. The Islamic Republic presents access to water and bread as proof of divine justice and government compassion. Subsidies, particularly for rural farming, have become mechanisms of political inclusion and loyalty.[6] Farmers, long considered the “guardians of the revolution,” benefit disproportionately from cheap electricity and irrigation water.
This is more than populism; it reflects the regime’s rural roots. Early leaders saw agriculture as a sacred labour and a revolutionary duty, enshrining self-sufficiency as moral virtue, while subordinating industry to social equity and privileging loyalty over efficiency.
Bread, in this context, is ideological. It appears in countless Persian idioms symbolising honour, livelihood, and divine blessing. To suggest that bread or the water that produces it should be treated as a priced commodity is politically toxic. Thus, proposals for water pricing reform are routinely denounced as “anti-Islamic” or “elitist.”
The symbolic resonance of bread in Persian and Islamic culture amplified this commitment. Ensuring that “bread is always on the table” and “is not coming from alien foreign countries” became both a social contract and a theological duty.
This ideological framing has contributed to policy paralysis. Decision-makers, many of whom rose through revolutionary or wartime institutions rather than bureaucratic channels, approach the water crisis through a wartime lens where shortages are to be endured, not prevented. Scarcity becomes another battlefield on which citizens must display patience and faith. Such framing discourages reform: subsidies persist, consumption continues, and the very narrative that once united the state and society now impedes the strategic planning required for sustainability.

Current Challenges
The consequences of these intersecting forces are profound. Iran’s water crisis now encompasses structural, governance, and social dimensions.

Infrastructure and Industrial Conflict
While early post-revolutionary governments invested heavily in dams and canals, the “water mafia” built dams that were rarely filled. This caused the water tables in the plains to drop from the 1990s onwards, turning once-fertile lands to dust.
More critically, the state is now both the regulator and a competitor. Many of Iran’s largest water-consuming industries, including steel, petrochemicals, and energy, are state-owned or linked to quasi-military foundations. The government thus profits from the same inefficiencies it is tasked to correct.[8] Any regulatory reform that would constrain industrial water use would also threaten its own revenue streams.

Corruption and Illegal Extraction
The widespread illegal drilling of wells exacerbates depletion.[9] Thousands of unauthorised wells continue to extract groundwater unchecked, often with political protection. Corruption and weak law enforcement mean that even where laws exist, they are selectively applied. Officials who benefit from these networks have little incentive to impose penalties.

Technocratic Gaps and Policy Inertia
Following the Iran–Iraq War, many veterans entered the civil service. Their revolutionary credentials ensured loyalty but not technical expertise. Decision-making in water policy remains dominated by military and ideological figures rather than hydrologists or economists.[10] Consequently, solutions tend to mirror wartime logic—reactive, short-term, and framed as resistance rather than reform.

Emergency Governance
Iran’s broader political culture reinforces this short-term approach, where the state operates in perpetual emergency, responding simultaneously to sanctions, inflation, energy shortages, and social unrest.[11] In such an environment, water reform is perpetually deprioritised. Investment cycles remain short, with a preference for visible, rapid projects such as building dams rather than long-term basin management.

Social and Security Implications
Rural areas, once pillars of revolutionary legitimacy, are now epicentres of discontent. The drying of rivers like the Zayandeh Rood in Isfahan has provoked repeated protests by farmers demanding state accountability.[12] In Khuzestan, where mismanaged dams and industrial diversions have devastated agriculture, demonstrations have turned violent. Migration from desiccated villages to urban centres adds to unemployment, housing shortages, and public discontent.

The Way Forward
Iran has the scientific capacity to manage its water resources more sustainably, but its political structure and ideological imperatives obstruct reform.

Agricultural Diversification and Imports
Iran could reduce pressure on its aquifers by importing water-intensive crops such as rice and sugarcane, focusing instead on drought-resistant varieties. However, this clashes with the doctrine of self-sufficiency, a pillar of revolutionary identity.[13] Politicians fear that admitting reliance on imports would symbolically betray the Revolution’s promise of independence. Beyond crop diversification, Iran could modernise irrigation networks by replacing flood irrigation with efficient drip systems, thereby optimising agricultural water usage. Small-scale groundwater recharge projects, combined with soil moisture monitoring, could help stabilise rural livelihoods without the large capital requirements of new dams.

Reforming Subsidies and Governance
A rational pricing system could discourage water wastage, but removing subsidies risks alienating the regime’s most loyal base: rural farmers. The experience of 2019, when fuel price hikes sparked nationwide unrest, remains a deterrent. More fundamentally, as the state itself is a major water consumer, genuine regulation would require the government to restrict its own enterprises, something it has consistently resisted.[14] Complementary to pricing reform, investment in urban wastewater recycling and industrial water recirculation could reduce total freshwater withdrawals. Desalination, though renewable energy-intensive, could provide a strategic reserve for coastal cities like Bandar Abbas and Bushehr, easing pressure on inland aquifers.

Technocratic Empowerment
Replacing military and clerical decision-makers with technically trained administrators would ensure more consistent water management. However, such a transition would require shifts in authority that the Islamic Republic is unlikely to endorse. As long as key decisions are shaped by a “resistance” framing of scarcity, policy responses are likely to continue emphasising short-term rationing and tighter control over demonstrations, instead of pursuing broader structural reforms

Institutional Independence
Iran’s water agencies require autonomy from political and industrial interests. The government must cease to act simultaneously as producer, regulator, and beneficiary.[15] Only then can regulation be credible. But this would entail disentangling vast networks of patronage and parastatal control, a challenge few within the system are willing to confront.

Structural Barriers
Ideology remains a major obstacle, but it is compounded by other factors: the rural social foundation of the regime, the symbolic centrality of bread, and the entrenched belief that endurance equals strength. These collectively prevent rational recalibration. The leadership’s wartime mentality of expecting citizens to “fight through droughts” perpetuates short-termism and discourages development.[16]

Conclusion
Iran’s water crisis is no longer a resource issue; it is a mirror of inept governance. The same revolutionary values that once stabilised the regime now obstruct its adaptability. Selfsufficiency has become self-defeating, and ideological loyalty has become institutional inertia.
Corruption, mismanagement, and competing state interests compound the problem. Each new “solution” is reactive, be it water rationing, ad-hoc transfers, or temporary desalination plants.
Iran’s leadership faces a strategic choice: either continue rationing scarcity or redefine water as a national, not ideological asset. This would require depoliticising agriculture, empowering technocrats, and planning in terms of decades rather than electoral cycles. Without such a shift, Iran risks a future where its wells, like its political power, run dry.



Kamyar Kayvanfar is a Communications and Public Affairs professional in the United Kingdom.




Endnotes
[1] CIA, Current Intelligence Weekly Special Report, November 2006, Central Intelligence Agency, CURRENT INTELLIGENCE WEEKLY SPECIAL REPORT IRAN’S ‘WHITE REVOLUTION’.
[2] Eric Hooglund, “Rural Participation in the Revolution,” MERIP Reports, no. 87 (May 1980): 3-6.
[3] Mozhdeh Babagoli et al., “Six Decades of the Second Food Regime in Iran, the Trajectory of Iranian National Food Regime,” Open Journal of Social Sciences 07, no.06 (2019): 101-205, (PDF) Six Decades of the Second Food Regime in Iran, the Trajectory of Iranian National Food Regime.
[4] “Abu Fadl AI-Abbas’ Quest for Water at Karbala,” Twelvershia.net, October 21, 2016, https://www.twelvershia. net/2016/10/21/abu-fadl-al-abbas-quest-for-water-at-karbala/.
[5] A Yousefi et al., “The Welfare Effect of Water Market Allocation in Iranian Economy,” Iran-Water Resources Research, https://www.iwrr.ir/article_13414.html?lang=en.
[6] “Explainer: Economic and Environmental Effects of Iran Seawater Transfer Projects,” BBC, March 15, 2024, https://monitoring.bbc.co.uk/product/b000190q.
[7] Parastou Meskarian, “Foods in Persian Proverbs,” Farsi Monde, https://farsimonde.com/farsi-proverbspersian- idioms/foods-in-persian-proverbs/.
[8] Chemengproj, “The Challenge of Water and Steam Waste in the Steel and Iron Smelting Industries,” https://www.chemengproj.ir/en/the-challenge-of-water-and-steam-waste-in-the-steel-and-iron/.
[9] Faranak Bakhtiari, “Immediate Action Needed to Control Water Shortage Crisis,” Tehran Times, May 1, 2021, https://www.tehrantimes.com/news/460457/Immediate-action-needed-to-control-water-shortagecrisis? utm_.
[10] Richard Stone, “An Iranian Researcher Went Home to Serve His Country. Now, ‘I Realize That I’m Lucky I’m Not in Prison’,” Science, May 24, 2018, https://www.science.org/content/article/iranian-researcher-wenthome- serve-his-country-now-i-realize-i-m-lucky-i-m-not-prison.
[11] “Iranian President Says Country is On Brink of Dire Water Crisis,” Reuters, July 31, 2025, https://www.reuters. com/sustainability/boards-policy-regulation/iranian-president-says-country-is-brink-dire-water-crisis-2025- 07-31/?utm_.
[12] Maziar Motamedi, “Violence Escalates in Water-Shortage Protests in Iran’s Khuzestan,” Aljazeera, July 21, 2021, https://www.aljazeera.com/news/2021/7/21/violence-intensifies-after-six-nights-of-watercrisis- protests-in?utm_.
[13] Babagoli et al., “Six Decades of the Second Food Regime in Iran, the Trajectory of Iranian National Food Regime.”
[14] “How the Revolutionary Guard Stealthily Shapes Iran’s Economy,” The Washington Post, August 6, 2025, https://www.washingtonpost.com/world/2025/08/06/iran-economy-irgc-divar-armandehi/.
[15] “Iran’s Water Crisis Is Its Greatest Threat,” Time, October 2, 2025, https://time.com/7321571/iran-watercrisis- greatest-threat/?utm_.
[16] Charles Ramsey, “On The Ground in Iran: The Islamic Revolution and Faithful Resistance,” Religion Unplugged, July 13, 2024, https://religionunplugged.com/news/2024/7/6/on-the-front-lines-of-the-religious-freedomcrisis- at-home-and-abroad.

### Integrating the Water- Energy-Food-Environment (WEFE) Nexus Concept into National Strategies and Planning: Jordan’s Experience

This article is the part of “Policy Pathways for Food and Water Security in the MENA Region”


Ensuring water, energy, and food security has become one of the most pressing issues for countries that are suffering from limited natural resources, resource depletion, extreme climate change, water shocks, and ecosystem degradation. Typically, across the world, water, energy, food and the environmental ecosystems are managed and governed in silos, each with its own institutional structures and priorities. This fragmented approach is increasingly proving insufficient for addressing today’s complex challenges. The Water-Energy-Food- Ecosystems (WEFE) Nexus approach provides an integrated framework for sustainable resources management by addressing the interdependencies to enhance resilience and maximise cobenefits while reducing trade-offs.

The Imperative for a WEFE Nexus Approach
Water scarcity affects more than 40 percent of the global population, with approximately 80 percent of those affected residing in the West Asia North Africa (WANA) region.a,[1] The region is characterised by chronic water deficits, where freshwater demand already exceeds renewable supply, and it is projected to worsen due to population growth, urbanisation, economic development, and the continued depletion of both surface and groundwater resources. The agriculture sector remains the dominant water users, consuming more than 80 percent of WANA’s freshwater withdrawals.[2]
The agri-food system relies on both water and energy inputs across its value chain, including production, processing, transport, and storage. Concurrently, water supply systems are highly energy-intensive for abstraction, pumping, distribution, desalination, and wastewater treatment. Energy systems, in turn, depend on water for cooling, fuel processing, and power generation. These strong interdependencies across sectors increase system vulnerabilities and underscore the importance of complementarity.

The Jordan Context
Jordan is one of the most water-scarce countries in the world, with annual renewable freshwater availability estimated at less than 65 cubic metres per capita,[3] far below the absolute scarcity threshold of 500 cubic metres. The country imports 74 percent of its energy needs,[4] making it vulnerable to international market fluctuations and geopolitical disruptions. Although the country has made strides in expanding renewable energy, particularly solar and wind, its energy system remains carbon-intensive and dependent on external suppliers. Food security is equally strained, with limited arable land and high production costs, Jordan relies on imports for more than 85 percent of its food.[5]
Global supply chain disruptions, such as those witnessed during the COVID-19 pandemic and the Russia–Ukraine crisis, have underscored the vulnerability of such import-dependent systems. Overlaying these structural challenges is the demographic pressure caused by multiple waves of refugees—Jordan hosts one of the world’s largest numbers of refugees per capita, adding the compound effect of climate change.
In Jordan, water and irrigation, energy, agriculture, and environment fall under separate ministries, each with their own management and governance approaches, budgets, and strategic priorities. For instance, the Ministry of Water and Irrigation prioritises supply and demand management through the expansion in utilisation of non-conventional water resources such as treated wastewater and desalination that needs energy as well, and reduction in the non-revenue water which is already over 40 percent,[6] while the Ministry of Agriculture aims to enhance food security, economic growth, and sustainability by promoting climatesmart practices, digital transformation, and improved resources management. Meanwhile, the Ministry of Energy is working on green energy transition, and the Ministry of Environment is giving priority to the green economy through climate action. Moreover, Jordan’s current legal frameworks do not explicitly mandate nexus-based planning and coordination.
In such a context, the Jordanian government recognised that nexus becomes a must and started planning for the integration of the WEFE Nexus concept into strategies and national planning. The water-energy nexus was first officially acknowledged in 2017, driven by the financial and operational challenges faced by the Ministry of Water and Irrigation, particularly in relation to rising energy costs associated with groundwater abstraction, conveyance, treatment, and desalination. Subsequently, the nexus approach was expanded to encompass food and environmental dimensions within the framework of Jordan’s Economic Modernisation Vision in 2023. This was also pushed by Jordan’s low grade of 42.7 in the WEF Nexus Indexb value in 2023, placing the nation in the 152nd position out of 181 countries assessed by the index.[7] The Modernisation Vision explicitly recognised the need for integrated resource governance and recommended the establishment of a Water-Energy-Food-Ecosystems (WEFE) Council to enhance cross-sectoral coordination and strategic alignment.
In practice, the Ministry of Planning and International Cooperation (MoPIC) took under its umbrella the responsibility to manage the WEFE nexus. The recommendation of establishing the WEFE council evolved into the establishment of a WEFE Technical Coordination Committee, composed of representatives from the ministries of Planning and International Cooperation, Water and Irrigation, Agriculture, Energy and Mineral Resources, and Environment.
Unlike previous sector-based coordination mechanisms, this structure shifted WEFE governance from ad-hoc inter-ministerial consultation to a formalised, mandate-driven decision-making platform, directly linked to national planning and processes under MoPIC’s leadership.
The Technical Coordination Committee is mandated to facilitate inter-ministerial coordination and stakeholder consultation, support evidence-based decision-making, and advance the operationalisation of the WEFE nexus across policies and programmes by gathering and analysing data, identifying and prioritising new initiatives, and overseeing the implementation and monitoring of the nexus roadmap. The Committee reports to a high-level Steering Committee, represented by senior officials as well as the Higher Council for Science and Technology. The committee serves as key decision-maker for managing and overseeing WEFE Nexus initiatives, leading institutional and regulatory reforms, securing funding, and supporting proposal development. It also endorses strategies, plans, and projects, thereby ensuring political oversight, institutional accountability, and alignment with national priorities. The committee reports to the Minister of MoPIC, who in turn reports to the prime minister of Jordan. This arrangement has enhanced accountability by clearly defining reporting lines, strengthened budget alignment through MoPIC’s planning mandate, and reduced fragmentation by institutionalising cross-sector coordination within a permanent national structure rather than temporary project-based platforms.
In parallel to the willingness to adopt the nexus approach as reflected at the strategy and governmental levels, there are different national initiatives at the projects and programme levels the country is conducting to enhance its resilience toward resource security. These include the national conveyer where water to be desalinated from the Red Sea south of Jordan utilises green energy and is transferred to the central part of the country in an attempt to meet water demand while the variation in elevation will be utilised to generate energy.
Water authorities are also integrating photovoltaic (PV) systems into pumping stations, wells, and treatment facilities. These efforts have demonstrated up to 30-40 percent reductions in operational energy costs for the water sector,[8] which directly decrease the water-energy bill at the ministry level, enhance the financial sustainability and free resources that can be redirected toward infrastructure upgrades, service expansion, or social support mechanisms, while simultaneously reducing sectoral carbon emissions. In the agriculture sector, Jordan has one of the highest treated-wastewater reuse rates in the region, with more than 90 percent of treated wastewater being used for agricultural purposes.[9] This decreases the pressure on freshwater resources and increases its portion for domestic usage, thereby enhancing water security. Moreover, adopting solar irrigation at the farm level has reduced both water and electricity consumption, incentivising water-saving technologies and climate-smart agriculture while increasing food production, reducing import vulnerabilities, and enhancing farmers’ income and resilience.
From a policy perspective, the recent national strategies, such as the Jordan Water Strategy 2023-2040, the updated Nationally Determined Contributions (NDC), the Green Growth Plan, and sectoral action plans, have begun incorporating nexus principles. These frameworks highlight the need for cross-sector coordination, resource efficiency, and climate resilience. This momentum provides a critical window to institutionalise nexus planning across ministries.

Conclusion
Jordan’s experience provides a useful example of how resource-scarce countries can leverage the WEFE Nexus to strengthen national resilience. While institutional, technical, and financial challenges persist, the country has recorded progress through its renewable energy expansion, wastewater reuse systems, agricultural modernisation, and national-level policy reforms.
Jordan’s WEFE Nexus experience reflects both context-specific and transferable elements. The central role of MoPIC as the institutional anchor for WEFE governance is closely linked to Jordan’s strong national planning architecture and may not be directly replicable in countries where planning authority is decentralised. Similarly, Jordan’s high dependence on imported energy, its large burden of hosting refugees, and extreme water scarcity, shape a unique policy urgency that influences national prioritisation of the nexus approach.
A number of components of Jordan’s WEFE model offer high transferability to other resourcescarce and climate-vulnerable countries. These include the establishment of formal interministerial coordination mechanisms with clear reporting lines, the integration of nexus principles into national strategies and budgeting processes, the use of renewable energy to reduce water-sector operational costs, large-scale treated wastewater reuse for agriculture, and the alignment of climate, water, energy, and food policies under a shared resilience framework. Most importantly, Jordan demonstrates that institutionalising the WEFE Nexus does not require the creation of entirely new ministries, but rather the strategic reconfiguration of governance, planning, and accountability structures.
As such, Jordan’s experience provides a practical governance and policy blueprint that can be adapted, rather than replicated, by other countries facing similar resource constraints, offering valuable lessons on how to operationalise the the WEFE Nexus beyond conceptual frameworks.
Enhancing the adoption of the WEFE nexus, first as a concept and framework, and ultimately as a practical approach embedded in national planning and strategies, is essential to ensuring resource security, improving productivity, and sustaining livelihoods in resource-scarce and climate-vulnerable contexts.

Endnotes
[1] Maria Hernández Lagana and Patricia Mejias, Aquastat Water Data Snapshot 2025, FAO, 2025, https://openknowledge.fao.org/server/api/core/bitstreams/b2c3a989-c199-4f82-baf0-369e32a227ab/ content.
[2] “Aquastat Water Data Snapshot 2025.”
[3] Ministry of Water and Irrigation, National Water Strategy 2023–2040, 2023, https://www.mwi.gov.jo/ EBV4.0/Root_Storage/AR/EB_List_Page/national_water_strategy_2023-2040.pdf.
[4] Ministry of Energy and Mineral Resources, Energy Balance Data 2024, 2024, https://memr.gov.jo/ ebv4.0/root_storage/ar/eb_list_page/memr_facts_&_numbers_2024_-_14.8.2025.pdf.
[5] International Trade Administration, “Jordan - Agricultural Sectors,” 2025, https://www.trade.gov/ country-commercial-guides/jordan-agricultural-sectors.
[6] Ministry of Water and Irrigation, Jordan Water Sector: Facts and Figures, 2022, https://www.mwi.gov. jo/ebv4.0/root_storage/ar/eb_list_page/jordan_water_sector_-_facts_and_figures_2022.pdf.
[7] IHE Delft Institute for Water Education, The WEF Nexus Index, https://wefnexusindex.org/JOR.
[8] U.S. Environmental Protection Agency, “Energy Efficiency for Water Utilities,” https://www.epa.gov/ sustainable-water-infrastructure/energy-efficiency-water-utilities.
[9] Ministry of Water and Irrigation, National Water Strategy 2023 - 2040 Summary Jordan, 2023, https://www.mwi.gov.jo/EBV4.0/Root_Storage/AR/EB_Ticker/National_Water_Strategy_2023-2040_ Summary-English_-ver2.pdf.

### Cost of Asian Disunity and the Middle East Crisis

Spotlight


 	Asia’s geopolitical realities constrain the possibility of forming a coordinated response to the crisis in the Strait of Hormuz
 	Asian states have deployed military forces in the region in the past as part of broader multilateral operations, however, demands for Asian owned deployments may become louder
 	In the Middle East, Washington will face difficult choices, but for now its presence is expected to persist, offering temporary reassurance to Asian powers

The US – Iran conflict, now extending beyond  60 days, has settled into a stalemate that continues to unsettle the global economy and strategic stability. At the core of this confrontation are two maritime blockades, one imposed by Iran and the other by the United States (US) across the critical waterways of the Strait of Hormuz. The economic repercussions are particularly acute for Asian economies, which face disproportionate exposure due to their reliance on energy imports transiting through the region.

Asian importers of Middle Eastern oil and gas have faced compounded challenges, as the ongoing conflict combined with policy volatility in Washington under President Donald Trump has heightened uncertainty in the realm of energy security.
The US and Israeli decision to strike Iran’s nuclear facilities in 2025 and extend the campaign to the country’s military posture in 2026 has generated significant disruption within  the global economic system. This shock, was in part, anticipated by Iran itself, which had strategically signalled that any existential threat to its sovereignty and political order would provoke a region-wide instability designed to internationalise the conflict. Analysts have long debated the potential consequences of a blockade of the Strait of Hormuz with some arguing that such a scenario was unlikely given Iran’s own reliance on the waterway for trade, particularly oil exports. However, Tehran’s imposition of a blockade, coupled with efforts to reconfigure navigation routes and introduce a toll structure for shipping, has created a new strategic reality for neighbouring Gulf states. The economic impact has been particularly severe in certain cases; reports indicate that Kuwait, where approximately 90 percent of state revenue is derived from oil, was unable to export any oil during the month of April.
Asian importers of Middle Eastern oil and gas have faced compounded challenges, as the ongoing conflict combined with policy volatility in Washington under President Donald Trump has heightened uncertainty in the realm of energy security. Japan, an ally of the US, has already tapped into its vast strategic oil reserves to ensure stable supplies. Tokyo has added that it can consider adding to minesweeping efforts to clear out the Strait if a ceasefire is sustained. China has in the meantime rejected sanctions on refineries over importing Iranian oil. Beijing has been the largest buyer of Iranian crude over the past few years, benefitting from deep discounts as sanctions chased away other buyers.
Beijing also has a vested interest in ensuring that Iran does not experience a sudden collapse, while simultaneously safeguarding its broader and more substantial economic relations with the Arab states. China’s president Xi Jinping in a call with his Saudi counterpart emphasised that the Strait of Hormuz should remain open. Similarly, India and South Korea, heavily dependent on oil and natural gas from the Middle East, also have prior experience in dealing with not just the region’s geopolitical volatility and its impact on their energy security, but Tehran’s unpredictable conduct in the Strait as well. Both Seoul and New Delhi have previously had vessels detained on charges such as alleged environmental violations, which were widely regarded as politically motivated.

India and South Korea, heavily dependent on oil and natural gas from the Middle East, also have prior experience in dealing with not just the region’s geopolitical volatility and its impact on their energy security, but Tehran’s unpredictable conduct in the Strait as well.
These tactics have been used by Iran to put pressure over issues such as stalled oil payments resulting from international sanctions. India, for long, had over US$6 billion owed to Iran. Financial transfers were blocked due to sanctions. Alternative methods proposed by Iran, such as payments in Chinese yuan or via mediating countries, were rejected due to New Delhi being a signatory to multiple multilateral financial transparency agreements. Other proposals, including opening of Iranian bank branches in the financial capital of Mumbai, were similarly declined. As a result, Tehran resorted to coercive measures such as the confiscation of ships in an attempt to secure leverage, though these efforts ultimately failed to achieve the intended outcomes.
Asia’s geopolitical realities constrain the possibility of forming a coordinated response to the crisis in the Strait of Hormuz.  While the Strait’s status as international waters critical to global trade gives it enough credence for countries with similar economic and energy security concerns to work together. However, in practice, even those that have strategic commonalities that go beyond the ongoing crisis, such as Japan and India, both also being part of the Quad group of states in the Indo-Pacific along with Australia and the US, have been unable to converge on a unified approach, limiting the prospects for a stronger and coordinated regional response.
The prospects for a comprehensive Asia-centric approach are further constrained by the ongoing India–China rivalry. Beijing’s vision for a unipolar Asia stands in direct opposition to India’s strategic objectives, reinforcing New Delhi’s alignment with the US, Europe, Australia, and other Western partners in counterbalancing China’s rise. The military confrontation between India and China in the Himalayas in 2020 institutionalised a shift in their bilateral dynamic. While political tensions had long existed, the episode elevated China in Indian public discourse as the primary strategic challenge, displacing Pakistan. Although relations today exhibit a degree of stability, both states—representing the world’s two most populous nations—continue to lack mutual confidence, limiting the potential for consensus on shared concerns such as energy security and access to the Strait of Hormuz.

In the Middle East, Washington will face difficult choices, but for now its presence is expected to persist, offering temporary reassurance to Asian powers for the time being despite the current crisis originating in part from US actions. 
Moving forward, Asian economies may be compelled to establish a more substantial, strategic presence in the Middle East. Several of these states have previously deployed forces in and around regional conflicts, albeit for varied reasons and in differing capacities. Despite narratives suggesting otherwise, American power remains undiminished, and the US continues to function as the preeminent global hegemon. In the Middle East, Washington will face difficult choices, but for now its presence is expected to persist, offering temporary reassurance to Asian powers for the time being despite the current crisis originating in part from US actions. In the longer term, reliance on the US may prove unsustainable, a reality underscored by the present conflict. This situation presents both a challenge and an opportunity for the emergence of an ‘Asian consensus’. The question remains, which states will lead such an initiative, and whether Asia as a collective can meet the region’s evolving security demands.



Kabir Taneja is Executive Director, ORF Middle East

### A Switch, Not a Signal: Interpreting Iran’s 18-Hour Strait Opening

Spotlight

 	Iran’s brief reopening of the Strait of Hormuz on a Friday evening was timed to exploit global shipping’s dependence on business hours, ensuring no real movement could occur.
 	Structural obstacles—chaotic signals, complex approval chains, and risk-averse insurers—meant even a genuine reopening would not have enabled transit before Monday.
 	Iran’s three-stage plan underscores the Strait as its key bargaining chip; broad negotiations will prolong costs, while targeted talks on the waterway could deliver faster relief.

More than two months into the Middle East crisis pitting the United States (US) and Israel against Iran, the situation has settled — uneasily — into a ceasefire now in its fourth week. A durable solution, however, remains elusive. Both sides are locked in rival naval blockades: on April 13, Washington announced it would intercept vessels travelling to or from Iran’s coast. Tehran calls it piracy. Iran’s top negotiator, Mohammad Bagher Ghalibaf, has stated unequivocally that reopening the Strait is “not possible” so long as the US blockade remains in place.

The costs are mounting. The Strait’s closure has delivered a supply shock across commodity markets, with Brent crude hitting a four-year high and tightening supplies of ammonia, sulphur, and helium rippling through global industry. UN Secretary-General António Guterres has called for the Strait to reopen to “let the global economy breathe.” The spectre of stagflation looms.
The timing was no accident. Iran acted on a Friday evening with full knowledge that global shipping — its insurance markets, its war risk premium negotiations, its multi-stakeholder decision chains — runs on business hours. 
Against this backdrop, Iran appeared to offer a respite. On the evening of Friday, 17 April, Foreign Minister Abbas Araghchi declared the Strait completely open to commercial vessels for the duration of the Lebanon ceasefire. This led to a fall in oil prices and the rallying of stock markets. However, by Saturday morning, it was over — the Islamic Revolutionary Guard Corps (IRGC) reimposed control, citing Washington’s refusal to lift its blockade. The Strait had been “open” for roughly eighteen hours.

The timing was no accident. Iran acted on a Friday evening with full knowledge that global shipping — its insurance markets, its war risk premium negotiations, its multi-stakeholder decision chains — runs on business hours. Nothing of substance was ever going to move before Monday. The gesture cost Iran nothing. The leverage, however, was everything.
A Deliberate Geopolitical Decision
Iran’s brief reopening of the Strait was not a gesture of goodwill. It was a calibrated move, shaped by a precise understanding of how global shipping functions — and where its pressure points lie.

Consider the response of the industry’s own giants. Maersk, the world’s largest container operator, said only that it had “noted the announcement” — diplomatic language for institutional paralysis. Any change to its policy of avoiding the Strait, it added, would require fresh risk assessments of the security situation. Hapag-Lloyd, absorbing additional costs of an estimated US$40 to US$50 million per week, called the announcement “good news” before immediately itemising its unresolved conditions: insurance coverage, unambiguous Iranian military orders on the exact sea corridor, and a defined sequence for vessel departures. These were not administrative details. They were the structural prerequisites without which no responsible operator could commit a vessel and its crew.

Those prerequisites were far from straightforward. Since mid-March, Iran had imposed a mandatory safe passage protocol — a rerouted corridor hugging Iranian territorial waters around Larak Island, away from the internationally recognised Traffic Separation Scheme. Each vessel was required to submit crew and ownership documentation for IRGC vetting, obtain a clearance code, and accept an escort through waters where Iran has laid mines. Four CMA CGM container ships attempting to cross the Strait during this narrow window eventually u-turned. Notably, on the very Saturday the Strait was reimposed, the Very Large Crude Carrier (VLCC) Sanmar Herald was fired upon by Iranian gunboats — despite having received prior IRGC clearance to pass.

The few vessels that did attempt transit hugged the Omani coastline rather than the IRGC-designated corridor near the Iranian coast — a telling signal that even those willing to move refused to submit to Iran’s safe passage terms. Commercial traffic ground to a halt once Iran reimposed control and gunfire resumed in the waterway.

Iran’s “safe passage” protocol 



Source: John Feng/Newsweek
The Operational Wall: Why Monday Was Always the Earliest
Iran’s announcement landed on a Friday evening — and that timing was itself the strategy. As far as global shipping goes, the declaration of an open strait reads as an immediate invitation to resume commerce. In practice, it was an invitation issued in a language that the industry cannot respond to over a weekend. The obstacles were structural, sequential, and mutually reinforcing — and each hurdle runs on business hours.

The first disruption was informational. Ships attempting transit turned back not because the Strait was formally closed, but because the information environment was too chaotic to navigate — contradictory signals were being issued by all parties simultaneously. In shipping, uncertainty paralysis, is as effective as a physical blockade.
Behind insurance lies a multi-stakeholder chain: shipowner, charterer, designated person ashore, flag state, and insurer must all align before a Master can sail. 
This was compounded by the insurance dimension. The Joint War Committee, a body of senior underwriters at Lloyd’s of London that designates which parts of the world are too dangerous for standard marine insurance cover, had already listed the Arabian/Persian Gulf as a high-risk area, forcing operators to purchase Additional War Risk Premium (AWRP) cover separately for each voyage. On 13 April, AWRP levels for tankers stood at around 1 percent of hull value, while insurers quoted around 3 percent for a single Hormuz passage — quotes swiftly withdrawn. Seven of the twelve major Protection and Indemnity clubs — mutual insurers covering ocean-going tonnage — had issued 72-hour cancellation notices for the Gulf. The insurance safety net had been pulled away, and rebuilding it was not a task achievable over a weekend.

Behind insurance lies a multi-stakeholder chain: shipowner, charterer, designated person ashore, flag state, and insurer must all align before a Master can sail. The crew dimension adds further complexity. Seafarers face a waterway patrolled by Iran’s so-called “mosquito fleet“ — a flotilla of small, fast, agile boats designed to harass and intimidate commercial shipping — in a channel where Iranian attacks on merchant vessels have been documented. Should operators choose to pay the IRGC toll to cross, they risk triggering US sanctions, potentially placing their vessel in the crosshairs of the American navy.

Finally, even a genuine reopening would not have cleared the backlog of around 2,000 commercial vessels. Among these, some 187 tankers remained trapped in the Gulf, loaded with 172 million barrels of crude and refined products. Processing that queue could take months. Iran closed the Strait on Saturday morning before any of it could begin.
The Strait As Weapon
Iran’s decision to reopen — and then swiftly close — the Strait of Hormuz within 18 hours was never about commerce. It was a demonstration of leverage: the ability to move global markets, reset diplomatic narratives, and expose the limits of American military power, all with a Friday evening announcement. Iran has long acknowledged the Strait as its most potent asymmetric weapon, and the events of April 17 confirmed it wields it with precision.

Washington, for its part, has banked on its naval blockade to squeeze Iran economically — a strategy that appears to be working. Tehran has since tabled a 14-point proposal setting a 30-day deadline for the US to lift its blockade on Iranian ports — signalling that the economic vice is tightening.

Yet the parties bearing the heaviest cost are neither governments nor negotiators. Baker Hughes, one of the world’s most influential oilfield services firms, assumes the Strait will not be fully operational until the second half of 2026. The International Energy Agency (IEA) has called this the largest oil supply disruption in the history of the global market. It is against this backdrop that Trump has now launched “Project Freedom“ — deploying 15,000 service members, guided-missile destroyers, and over 100 aircraft — framed as a humanitarian gesture, but inseparable from continued military coercion.
As Washington and Tehran continue to exchange proposals, the lesson is clear: the narrower the scope of negotiation, the faster the relief. 
Regardless of when the Strait reopens, the precedent it has set — transit fees imposed by a border state, insurance markets collapsing overnight, seafarers trapped as pawns in geopolitical brinkmanship — will not be easily forgotten. That precedent hardened further on May 4, when the IRGC navy unveiled a new map formally delineating the Strait as an area under Iranian control and management; stretching from Iran’s coast to points off Fujairah and Umm Al Quwain in the UAE. The announcement warned that vessels violating its declared regulations would be stopped “with decisive force.” Iran’s recently submitted three-stage plan reinforces this posture: the first phase centres on the gradual reopening of the Strait and the lifting of the US blockade — underscoring that the waterway remains Tehran’s primary bargaining chip, deliberately bundled within a broader framework encompassing nuclear enrichment, sanctions relief, and a regional security architecture. This sequencing is less a gesture of conciliation than a mechanism of entrapment. As Washington and Tehran continue to exchange proposals, the lesson is clear: the narrower the scope of negotiation, the faster the relief. The longer both sides insist on comprehensive settlement, the longer 20,000 seafarers remain stranded, and the longer the world continues to pay the price of eighteen hours that were never intended to change anything.



Clemens Chay is Senior Fellow, Geopolitics, ORF Middle East.

### Reframing the Just Transition in the Arab Region: Food, Water, and the Foundations of Stability with Lessons from Lebanon

This article is the part of “Policy Pathways for Food and Water Security in the MENA Region”


Just transition’ has become a global catchphrase in recent times, often framed as an orderly shift, which involves phasing down fossil fuels, scaling up renewables, and cushioning affected workers through social protection. In other words, it is about “just energy transition” to reduce emissions and mitigate the negative impacts of climate change through a cascading process. However, this narrative of a just transition is conceived for economies where public services function effectively, energy access is reliable, and climate policy is pursued primarily through electricity prices and labour-market adjustments. In the Arab region, the framing of what constitutes “a just energy/climate transition” misses the reality. While access to reliant infrastructure and public services varies across countries due to different levels of socio-economic development, the brunt of climate impacts is unequivocally felt throughout the region.
A just transition must therefore contend not only with decarbonisation, but with dry taps, food-price shocks and, in several countries, systemic service breakdown under fiscal stress and institutional fragility. In a region that contributes relatively little to global emissions yet bears a disproportionate share of climate impacts,a climate policy will either stabilise societies or deepen inequality, inflation, and unrest. This article reframes the just transition as a macro-stability strategy anchored in food–water systems rather than a narrow energysector adjustment.
In such contexts, justice cannot be reduced to compensating displaced fossil fuel workers or offsetting higher electricity tariffs. For large segments of the population, particularly in least developed and conflict-affected Arab countries, the deeper injustice lies in the erosion of basic services themselves, reliable electricity, safe water, affordable food, and well-functioning public institutions. A just transition is therefore inseparable from social stabilisation, infrastructural service restoration, and economic survival. It is not about managing sectoral shifts within a working economy, but about rebuilding the foundations on which any credible low-carbon pathway must rest.

The Arab Region at the Epicentre of Climate–Water–Food Nexus
The Arab region sits at the epicentre of a converging climate–water–food crisis. Regional climate modelling under the ESCWA-led RICCAR platform projects warming of 1.2–2.6°C by mid-century, rising beyond 4°C by the end of the century, a warming way above the global average projected to increase between 2.7 to 4.4 degrees in the moderate to worst case scenario (Assessment Report 6 of the IPCC 2021 – 2023). Rainfall and mean runoff are expected to decline sharply to approximately 40 percent relative to the 1980–2010 period in Mediterranean coastal zones, where agriculture has traditionally flourished in the Maghreb and Mashreq.[1]
Water scarcity is no longer cyclical but structural. Renewable water availability averages about 609 m³ per capita annually, roughly one-tenth of the global average, and is projected to fall by more than 50 percent by 2050. Agriculture accounts for 85–90 percent of freshwater withdrawals across the region, meaning that hydrological shocks translate directly into food inflation, fiscal stress, and rising import dependence.
FAO and the International Center for Agricultural Research in the Dry Areas (ICARDA) projections point to rain-fed cereal yield losses of 15–30 percent by mid-century in large parts of the Maghreb and Mashreq. Declining soil moisture, rising irrigation demand and accelerated groundwater depletion are tightening the water–food constraint precisely as fiscal space for adaptation is shrinking. Water governance has therefore become a central determinant of food security, macro-economic stability, and social stability across the Arab region.

Just Transition Through a Sustainable WEF Transition
Globally, agrifood systems account for 22–33 percent of greenhouse gas emissions[2]. As mitigation gains relative momentum in the energy and transport sectors, policy attention is shifting rapidly toward agriculture. This is a welcome climate action, as Agriculture, Forestry and Other Land Use (AFOLU) generates roughly one-fifth of global emissions and offers major mitigation potential.[3] Yet FAO and ICARDA research show that many low-emission farming practices would also reduce yields or raise production costs, especially for small farmers.[4]
In Arab countries, where 50 to 90 percent of food consumption is imported, this creates a real risk: climate mitigation pathways that lower output or increase costs can deepen food inflation, push farmers out of production, and further strain already fragile societies. Practices such as limiting fertiliser use, restricting irrigation pumping, reducing livestock densities, or shifting to less input-intensive crop systems can, in water-stressed and low-income contexts, reduce effective farm-level returns, particularly among smallholders already operating near subsistence margins. This is why a just transition in the region cannot be framed through energy alone. It must be embedded in a water–energy–food–social protection (WEF-SP) nexus, where irrigation efficiency, groundwater governance, energy pricing, cold-chain infrastructure, and targeted social transfers are treated as components of a macro-stability strategy rather than sectoral policies in silos.

The Case of Lebanon
Lebanon offers a revealing stress-test case for reframing the just transition in the Arab region. More than 80 percent of its food is imported.[5] Agriculture absorbs around 60 percent of national water withdrawals, much of it from weakly regulated and increasingly depleted groundwater. Between 2020 and 2022, 36.5 percent of the population experienced moderate to severe food insecurity, a figure that has since worsened, fuelled by currency collapse, subsidy removal, rising import bills, and recurrent climatic shocks. This combination of fiscal fragility, resource stress, and exposure to global food and energy markets makes Lebanon an early-warning laboratory for the distributional, macro-economic, and food-system risks that climate transitions are beginning to generate across the wider Arab region.
Against this backdrop, Lebanon has articulated a commendable integrated response through its Food System Transformation (FST) Pathway, developed with FAO, World Food Programme (WFP), UN Economic and Social Commission for Western Asia (ESCWA), American University of Beirut (AUB), and national stakeholders.[6] The Pathway explicitly reframes food systems as national stabilisation infrastructure rather than a narrow agricultural agenda. It integrates water governance reform, irrigation modernisation, sustainable access to on-farm renewable energy, ecosystem restoration, nutrition-sensitive social protection, and legal reform under a proposed Right-to-Food framework law, anchoring access to food, water and clean energy as enforceable public obligations.
Importantly, parts of the pathway have moved beyond concept into early implementation. These include irrigation-efficiency pilots, water accounting and governance reforms, nutritionlinked social protection measures, and targeted agricultural support programmes aligned with climate-resilient practices. Yet, at the same time, core elements, such as large-scale aquifer governance reform, irrigation modernisation, and sustainable financing mechanisms, remain largely aspirational.
Years of neglected infrastructure, fragmented institutions, and weak regulatory enforcement, compounded by political paralysis and the absence of a unified national development vision, continue to constrain scale-up. These constraints are further reinforced by the political economy of recovery: IMF[7] programmes and donors require far-reaching structural reforms before financing reconstruction, delaying large-scale investment in food, water, and climateresilient infrastructure.

Lessons Learnt from Lebanon’s Pathway
Lebanon’s pathway demonstrates that in fragile, food-import-dependent states, food systems must be treated as macroeconomic stabilisation infrastructure rather than social policy addons. It shows the necessity of embedding climate action within water, food, energy and social protection systems; anchoring reform in legal and institutional frameworks rather than short-term projects; and explicitly addressing the political economy of reform, financing, and conditionality.
The proposed Right-to-Food framework law is particularly significant. Beyond its normative value, it would reshape budget priorities, influence subsidy reform sequencing under IMF programmes, and redefine how international finance is allocated between mitigation, adaptation, and social protection, elevating food and water security from discretionary welfare spending to enforceable public obligations.
Lebanon illustrates that technical coherence alone does not deliver transformation. Even a well-designed pathway remains aspirational when public institutions lack coordination capacity, infrastructure is degraded, and large-scale financing is conditioned on politically contested reforms. This binding constraint is not unique to Lebanon; it reflects a structural regional reality affecting many Arab economies navigating reconstruction, debt consolidation and climate volatility simultaneously.
Many Arab states, including Jordan, Tunisia, Iraq, Yemen, and parts of the Maghreb, share Lebanon’s structural profile: high food-import dependence, declining water availability, fiscal compression, fragmented governance and growing climate volatility. Lebanon’s FST Pathway therefore offers a replicable prototype, not as a finished model, but as a governance and policy framework for aligning climate action with macro-economic stability and social resilience.
While Lebanon reflects the vulnerabilities of fragile and middle-income Arab economies, its experience also carries important lessons for the Gulf Cooperation Council (GCC) states. Despite stronger fiscal positions and more advanced infrastructure, GCC countries face parallel structural exposures: extreme water scarcity, near-total dependence on food imports, and rising climate volatility. Lebanon’s pathway highlights that food and water security cannot be treated as peripheral sustainability agendas. Even in high-income settings, failure to integrate groundwater governance, irrigation efficiency, domestic production resilience, cold-chain infrastructure, and nutrition-sensitive social protection into national climate strategies risks deepening import dependence and increasing fiscal exposure to global food price shocks. For GCC states, the lesson is clear: long-term climate resilience will depend not only on decarbonising energy systems, but on treating food and water security as core components of national stability, sovereign risk management, and economic diversification strategies.
Therefore, policymakers in Lebanon as well as in the Arab region should consider the following dimensions to ensure that a just transition is on the right track:


 	Treat food systems as national stabilisation infrastructure, central to fiscal planning, food-price management and social cohesion, rather than as peripheral agricultural or welfare sectors.
 	Build transformation through governance processes, not only projects, by embedding food–water–climate coordination within durable national institutions and cross-sector planning frameworks.
 	Use rights-based and legal frameworks to ensure that food and water security remain binding public obligations rather than discretionary social expenditures.
 	Address implementation bottlenecks at the outset of any planning process, particularly the interaction between institutional capacity, financing constraints and policy conditionality, and design transition pathways that are sequenced realistically within these constraints.

Finally, a just transition in the Arab region should start with food and water security, not end with it. Climate action cannot be reduced to emissions pathways; it must be anchored in macro-economic management, social protection systems, and governance reform. Indeed, food systems shape inflation, fiscal exposure, household vulnerability, and political stability. Climate justice will therefore be judged not only in terms of carbon outcomes, but in whether countries can protect access to food, water, energy, and livelihoods as climate shocks intensify. This is the practical test of the just transition for the region.

Endnotes
[1] Enrique Doblas-Miranda et al., Climate and Environmental Change in the Mediterranean Basin (MedECC, 2020).
[2] FAO, “Global Food Systems and Climate Change,” Food and Agriculture Organization, 2021.
[3] IPCC, Climate Change 2022: Impacts, Adaptation and Vulnerability, Intergovernmental Panel on Climate Change, 2022, https://www.ipcc.ch/report/ar6/wg2/.
[4] CGIAR, A Just Energy Transition in the Agrifood System, What Does It Entail? A proposal for the COP29 Presidency, 2024.
[5] Maha Hoteit et al., “Exploring the Impact of Crisis on Food Security in Lebanon: Results from a Cross-Sectional Study,” MDPI, August 2021, https://www.mdpi.com/2071-1050/13/16/8753.
[6] Government of Lebanon, “Building Back Better: The Recovery of a Fragile Food System – Lebanon National Food Systems Transformation Pathway,” March 2024.
[7] “Restoring Lebanon’s Economic Growth Will Require Comprehensive Reforms, the International Monetary Fund Says,” Reuters, February 2026.

### No Clear Victory: How Washington and Tehran Compete to Define Triumph

Spotlight


 	The United States faces a narrowing set of strategic options: negotiation, escalation, or sustained coercion each carrying significant risks and no guarantee of decisive success.
 	Structural mistrust and conflicting core interests make a comprehensive diplomatic resolution unlikely without a major shift in perceived pressure or vulnerability.
 	Prolonged conflict risks accelerating broader geopolitical shifts, benefiting rival powers and deepening fractures among US allies, while increasing global economic instability.

The conflict has escalated significantly. By asserting control over the Strait of Hormuz, the Islamic Republic has restricted access to one of the world’s most vital energy transit routes, contributing to a pronounced global energy disruption. Crude oil prices have surged, supply chains are experiencing strain, and economic repercussions are extending well beyond the Middle East.
For the United States (US), the pressure is mounting on multiple fronts. Regional allies in the Gulf Cooperation Council (GCC) states, whose economies are heavily reliant on oil exports and maritime security, have urged Washington to reestablish access to the Strait of Hormuz. In response, the Islamic Republic has pursued  a calibrated strategy of escalation, employing direct attacks and retaliatory measures against these states. This approach has increased the strategic and economic costs associated with sustaining a continued US presence in the region..
At the same time, Washington faces growing strain with its Western allies. European economies, already weakened by energy shortages, are increasingly reluctant to support further military escalation. In some cases, this has translated into restrictions on US use of regional bases, exposing fractures within the alliance.
Beyond the immediate battlefield, the geopolitical consequences are widening. Russia stands to benefit from shifting energy dynamics and weakened sanctions pressure, while China faces economic headwinds tied to instability in global energy markets. The longer the conflict continues, the greater the risk of sustained disruption to the global economy, including that of the US itself.
Against this backdrop, the US is left with a narrowing set of choices. Broadly, three strategic options remain, each carrying significant risks and uncertain outcomes.

Option One: Negotiation
Negotiation remains the most immediate theoretical pathway for the US to end the conflict, but in practice it is also the least likely. Washington’s credibility in diplomacy with the Islamic Republic has been significantly weakened by its withdrawal from the Joint Comprehensive Plan of Action and the collapse of subsequent talks, reinforcing Tehran’s belief that US commitments are reversible and politically contingent. This makes any renewed framework structurally fragile from the outset.

For the Islamic Republic, “defeat” is defined not by territorial or military losses, but by threats to its political and ideological continuity. 
Recent reports of a comprehensive US demand package, which includes restrictions on missile capabilities, have further complicated the prospects for diplomatic engagement. For the Islamic Republic, such demands challenge the foundation of its deterrence doctrine. Given its limited conventional military capacity, the missile programme functions  not merely as a bargaining chip but as a central pillar of regime survival. Any concession on this issue would likely be perceived domestically as capitulation rather than compromise.At the same time, Tehran is unlikely to enter negotiations unless it perceives existential pressure. For the Islamic Republic, “defeat” is defined not by territorial or military losses, but by threats to its political and ideological continuity. As long as the system remains intact, the leadership can frame prolonged conflict as resistance, preserving domestic legitimacy even under economic strain.
This creates a structural mismatch: the US seeks de-escalation on favourable terms, while the Islamic Republic is likely to demand sanctions relief and preservation of limited enrichment as preconditions for any deal. Domestic and international pressures constrain Washington’s ability to sustain escalation, which Tehran may interpret as time working in its favour. Internally, the growing influence of the Islamic Revolutionary Guard Corps (IRGC) has further hardened decision-making, reducing the space for pragmatic compromise. Taken together, these dynamics make a negotiated settlement unlikely without a significant shift in the balance of pressure or perception of vulnerability on either side.

Option Two: Escalation and Regime Change
A second option for the US is to continue the military campaign with the aim of degrading the Islamic Republic’s military capabilities to the point where it can no longer project meaningful force, potentially creating conditions for regime change.
However, this strategy faces significant challenges. The Islamic Republic appears to retain substantial striking capacity, with much of its missile arsenal likely stored in hardened underground facilities, limiting the effectiveness of airpower and suggesting a prolonged, resource-intensive campaign. Transitioning to a ground invasion would be even more difficult, requiring sustained political and financial backing in the US support that is far from guaranteed given domestic pressures.
Regional dynamics further complicate escalation. Increased conflict would heighten risks for US partners in the Gulf, whose willingness to host American forces under sustained attack may diminish.
While regime change represents the most decisive outcome, achieving it would require a long-term military commitment and acceptance of continued instability. The central issue is not its desirability, but whether the US and its partners are willing to bear the costs required to achieve it.

Option Three: Sustained Coercive Campaign and Strategic Isolation
A third option is to continue a campaign against the Islamic Republic to the point that it can no longer function effectively as a state. This would include strikes on military targets as well as critical infrastructure, such as electric power plants and bridges, as President Donald Trump has recently threatened in order to pressure Tehran to reopen the Strait of Hormuz. The goal would be to leave the Islamic Republic weakened enough that it poses little threat to the region, even if the country’s leadership remains in power.
Even if such attacks degrade the Islamic Republic’s ability to operate in the short term, Tehran could still rebuild in the future. The regime would likely frame surviving heavy bombardment and remaining standing as a victory, portraying itself as having resisted the world’s strongest military. This perception would make it difficult for the US to claim a decisive strategic success, even if Islamic Republic’s capabilities are significantly reduced.
This approach does not guarantee control of the Strait without a ground invasion or occupation. However, as Trump has suggested, the strait might reopen on its own because major stakeholders such as China and India, Iran’s primary economic partners, would pressure Tehran to restore access, and failure to do so might draw in a regional or EU coalition aligned with broader international interests.
From a US perspective, direct dependence on Gulf oil is not the main priority; over the long term, a strategy that pushes global consumers toward American supplies could have economic benefits. But this option would carry heavy costs, risk prolonged instability, and offer no guarantee that the Islamic Republic’s government or strategic culture would change as a result, as all the damage inflicted which could be rebuilt over time.

The Islamic Republic’s Strategic Mindset and Trajectory
To understand Islamic Republic’s strategic trajectory, it is useful to view power as operating through three main centres.
The first is the office of the Supreme Leader, under which sits the broader religious establishment. The second is the military-security power centre, primarily the IRGC and its expanding economic and political influence. The third is the administrative and bureaucratic state apparatus, which manages governance and day-to-day execution.

The central question is no longer decisive victory, but rather what constitutes a minimum acceptable outcome that allows each side to claim success
At the present stage, while these structures remain formally distinct, key strategic decision-making is increasingly concentrated within a narrow inner circle around the Supreme Leader. Importantly, the individuals who occupy this space are not only influential advisors but also function as the final decision-makers across major state domains.
This includes Hossein Taeb, former head of the IRGC Intelligence Organisation; Ahmad Vahidi, Commander-in-Chief of the IRGC. Together, this grouping forms an informal but decisive coordination core that links the religious authority, military-security establishment, and administrative system, effectively shaping final strategic outcomes across the state.
The confrontation between the Islamic Republic and the US reflects a strategic deadlock shaped by competing objectives, sustained economic pressure, and domestic constraints on both sides. As costs rise, the central question is no longer decisive victory, but rather what constitutes a minimum acceptable outcome that allows each side to claim success while preserving internal stability and credibility.
For the Islamic Republic, regime survival and strategic deterrence remain paramount. Despite mounting economic strain, Tehran continues to treat uranium enrichment, missile capabilities, and regional influence as non-negotiable core interests. However, internal pressures have created space for limited, tactical flexibility, provided that any concessions remain reversible and do not undermine core deterrence capacity.

A Partial and Transactional Compromise?
The trajectory of the conflict is shaped by a complex cost-benefit calculation across all actors, with the US playing a decisive role due to its military and economic capabilities. For Washington, while rhetoric often reflects maximalist demands, practical constraints economic, political, and strategic have narrowed policy options. The focus has increasingly shifted away from regime change toward a more limited objective: containing Iran’s nuclear program and preventing escalation into a broader military confrontation. The notion of regime change in the Islamic Republic initially advanced by the Trump administration and supported by Israel, remains more of a theoretical objective or a long-term aspiration rather than a feasible short-term strategy.

Any decision taken by Washington would likely entail one that best balances timing and risk to shorten the conflict, rather than one that achieves an ideal outcome.
In practical terms, any compromise would likely be partial and transactional. Islamic Republic may accept temporary limits on enrichment, enhanced monitoring, and increased transparency, while retaining its underlying nuclear infrastructure and strategic capabilities. In return, the US would offer partial and reversible sanctions relief and tolerate limited enrichment under strict verification mechanisms. Any decision taken by Washington would likely entail one that best balances timing and risk to shorten the conflict, rather than one that achieves an ideal outcome.
Such an arrangement would allow both sides to claim political success domestically, while settling for a limited form of threat reduction. In other words, underlying strategic mistrust will not be fully resolved, meaning the confrontation will likely persist, short of a direct military conflict.



Kamyar Kayvanfar is a native Persian and English-speaking communications and public affairs professional with experience at EY and Kreab.

### The Food-Water-Energy Nexus in the MENA Region: The Case of Egypt

This article is the part of “Policy Pathways for Food and Water Security in the MENA Region”




The Looming Water Crisis in the MENA Region
The MENA region has long coped with the problem of water scarcity. However, climate change is transforming the problem into an existential threat as more disastrous weather events are anticipated in the coming years. Precipitation is becoming even more scarce and unpredictable, with higher evapotranspiration undermining agriculture and food and warmer temperatures increasing the spread and virulence of harmful pathogens. Rising sea levels are extending saltwater intrusions along the Mediterranean and other coastal zones. Other factors such as population growth, urbanisation including the influx of climate refugees and those from conflict-ridden zones; and industrialisation, are amplifying the threat of climate change. By 2030, water demand is projected to outstrip supply by 50 percent.[1]
What the impact of the crisis would mean in adaptability terms will vary throughout MENA—a highly diverse region in terms of per capita incomes, political stability, incidence of poverty, and wealth inequality. The factors that impact vulnerability to climate change include:
1. Per capita income levels: These range from low-income and conflict-ridden countries such as Yemen (where per capita income is US$ 740); to middle-income like Morocco (US$ 3,740); and high-income like Qatar (US$ 76,720).[2]
2. Incidence of poverty: Poverty has increased in MENA from 12.3 percent (2010) to 18.1 percent (2023).[3]
3. Extensive informal sector: Most of the poor are employed in the informal sector, which makes them highly vulnerable to economic shocks.
4. Youth bulge amidst high unemployment: Compounding the challenge is the youth bulge and high youth unemployment,a estimated at around 24 percent (2025).
5. Income and wealth inequality: Vulnerability is disproportionate: 50 percent of the population of MENA earn only 9 percent of national income while the middle 40 percent earn 34 percent. The top 10 percent almost 57 percent, of which the top one percent, earn 22 percent (2023). Wealth inequality is even more pronounced as the data on respective shares of wealth show: the majority has only one percent; the middle group, 22 percent; and the top 10 percent has 77 percent. The top one percent within the latter group owns 45 percent of the wealth.[4]
6. Climate-sensitive agriculture still important: The importance of agriculture (other than in the oil-rich Gulf states) which is mainly rainfed in MENA also increases vulnerability. Farmers in regions such as the “fertile Crescent” of the Tigris and Euphrates region, along the Mediterranean coastline and the Nile (which account for around 85 percent of freshwater withdrawals in their respective countries), will experience rising temperatures while increased water scarcity are likely to change crop and livestock calendars, undermining potential growth.
7. Sea level rise as a universal threat: The heightened danger of widespread saltwater intrusions means that not only agriculture and rural areas are at risk, but urban areas too.

The FWE Nexus: Central to a Resilient and Food-Secure Development
The potential destructive impact of climate change is a central concern, although the incidence, severity and persistence of the suffering inflicted will vary. At the same time, the good news is that the crisis can be turned into an opportunity for opening sustainable pathways to resilient, inclusive, and food-secure development. However, it requires decisive pro-inclusive and resilient growth actions on a wider front. A critical step in this process is to recognise the close inter-dependencies between water and energy required to produce food and achieve food security in a climate change world.
Amidst worsening climate change, these interdependencies mean that the past approach of resorting primarily to building dams and irrigation canals to increase conventional water supply is no longer sufficient. Increasing non-conventional water supply, among others, is also needed. To combat climate change, the technologies needed to increase the supply of nonconventional water, e.g., desalination, treating and recycling wastewater are energy intensive; as well as technologies that reduce carbon emissions. This means that to increase the supply of non-conventional water, countries must develop renewable energy sources including wind and solar which will replace fossil fuels. Thus, increasing water supply requires energy but producing energy requires water. Countries, even entire regions, will need to shed their silo approach and integrate the FEW nexus in their planning and investments.

Focus on Food Self-Sufficiency
A silo approach is particularly costly in the case of food security policy as the experiences of many countries have repeatedly shown.[5] Many countries in MENA and elsewhere have defined ‘food security’ to mean not having to import basic staples, or being food self-sufficient (FSS). While food security involves access to basic staples, it entails more: “Food security exists when all peoples at all times have the physical and economic access to sufficient safe and nutritious food that meets their dietary needs and food preferences for an active and healthy life.”[6]
Such a holistic concept of food security requires that the four pillars of availability, access, utilisation, and stability are all realised. Import dependence on basic staples can certainly make a country vulnerable in a hostile geo-political, trade, or high-debt environment. But not importing staples does not mean all peoples have sufficient nutritious food to satisfy their hunger and their daily energy needs.

The Challenge of Turning Crisis into Opportunity: The Case of Egypt
Given the centrality of the FWE nexus, MENA’s FSS approach to achieve holistic food security in a world being altered by climate change is misguided. Egypt, which has been pursuing food self-sufficiency for decades, is a case in point.[7] Today it remains one of the countries in MENA most dependent on imported wheat and cooking oil.
The chronic underperformance of Egypt’s agriculture has been a primary contributor to the fragility of its food security situation. This was made clear with the onslaught of the COVID-19 pandemic, soon followed by global supply chain dislocations and the Russia-Ukraine war inflating basic food prices in MENA.[8] About half of the water in irrigated agriculture, the biggest user of fresh water from the Nile (around 80-85 percent) is wasted.[9] The majority of farmers use the traditional flood irrigation system on their 2-feddan plots which does not enable them to control the amount of water used.b
Moreover, farmers have no incentive to use water efficiently, as they do not pay for the volume of water they use. The farmers also use the scarce water on water-intensive but low-value cereal crops and sugar, for which prices are guaranteed by the state, as they are considered important for FSS. The yields of these low-value crops are projected to fall further by 10 percent (2050) compared to a no-climate-change scenario, due to heat stress (4.9 percent), water stress (4.1 percent), and salinity (1.6 percent).[10]
The Nile, the life blood of Egypt, is threatened not only by climate change but by the completion of the Grand Ethiopian Renaissance Dam (GERD, inaugurated on 9 September 2025) and the fact that there is no satisfactory treaty yet on water-sharing agreements. The problem of the Nile highlights the threat of water wars of other major transboundary rivers of the Tigris and the Euphrates; the Jordan; and the Orontes; and of over 40 transboundary aquifers in the Middle East (20) and North Africa (21).
For Egypt, the lack of water-sharing agreement with Ethiopia threatens its water security as its annual per capita water availability is estimated to be already below 500m3 in 2025, below the critical water stress level, having declined from 2526 m3 (1947) to 570 m3 (2018).c
Meanwhile, as its scarce water is being threatened, so is its fertile Nile delta from saltwater intrusions which is requiring the building of sand dykes to hold back the sea during stormy weather.[11] Egypt is also losing valuable arable land especially around big cities, at roughly 2 percent per decade as desertification intensifies, and with continued population growth and urbanisation.[12]

The Role of Regional Trade
The stakes can hardly be higher. As for most countries in MENA and elsewhere, Egypt is at an inflection point. How it manages its water scarcity to achieve food security will largely determine whether Egypt successfully transitions onto a path of resilient, inclusive, and foodsecure growth.
Egypt can turn this crisis into an opportunity by exploiting the 1.4 billion people market with a combined GDP of roughly US$3.4 trillion—a game changer offered by the African Continental Free Trade Agreement (AfCFTA), whose operational phase was launched in July 2019. Egypt can use regional trade to power its growth path. Ghanem[13] proposes a pan- African food security approach instead of pursuing country-by-country FSS which has not worked and has been costly even when water was less scarce. For other non-African MENA countries, this approach of building alliances and supportive institutions to exploit the growth potential of trade is advocated.

The Way Forward
Throughout history, violent conflict has undermined prospects of promoting a sustained, food-secure development. Collaboration, not conflict, is the way forward: the interlinked FEW problems under drier and warmer climate change conditions make solving them by any single country on its own e.g., by resorting to high tariffs and trade protectionism, costly and unsustainable.
Within each country, holistic water management impacting both demand and supply is essential to achieve water security amidst climate change. This, in turn, requires institutional changes to promote water use efficiency in agriculture and urban areas, hardware investments in latest technologies to better monitor water use and availability, and to produce the emission-reducing sources of energy such as wind and solar. To pay for these transformative investments, implementing a robust productivity and growth strategy complemented by the removal of misguided subsidies in a politically sensitive fashion, has the potential of financing the investments needed.
If the history of successful transformations—agricultural and economic—in very different historical and country contexts is of any guide, visionary political leadership committed to the public good has been essential to successfully transform crisis into opportunity.[14] Prospects for MENA to transition into inclusive, resilient, and food-secure development paths are good to the extent that visionary leadership urgently takes the first steps to integrate the centrality of the FEW nexus in their strategic approach to achieving food security and implement complementary measures to address other structural problems: e.g., chronic poverty; high inequalities in income, wealth, and opportunity; and high youth unemployment. Leadership must anchor their decisive policies in the functioning of competent administrations committed to food security for all.

Endnotes
[1] Ferid Belhaj, “The Water-Energy Nexus: The Path to Solving the Water Crisis in the Middle East and North Africa,” Policy Brief PB-16/25, March 2025, Policy Center for the New South, https://www.policycenter.ma/ sites/default/files/2025-03/PB_16-25%20%28Ferid%20Belhaj%29.pdf.
[2] World Bank, World Development Indicators: Current Dollars, Atlas Method, 2024, https://data.worldbank.org/ indicator/NY.GNP.PCAP.CD.
[3] World Economic Forum, “MENA: Middle East and North Africa Progress on the SDGs,” September 2024, https://www.weforum.org/stories/2024/09/mena-middle-east-north-africa-progress-sdg-sustainabledevelopment- goals/.
[4] World Inequality Database, “2023 WID Update: MENA,” November 22, 2023, https://wid.world/newsarticle/ 2023-wid-update-mena/.
[5] Isabelle Tsakok and Fatima Ezzahra Mengoub, “Selective Review of Food Security Policy Worldwide: What Can Be Learned from International Experiences in Order to Shape Food Security Policy in Africa?,” Part I, Policy Paper PP 20-18, Policy Center for the New South, June 2020, https://www.policycenter.ma/sites/ default/files/PP_20-18_Mengoub_Tsakok.pdf; Part II, Policy Paper PP 20-33, Policy Center for the New South, June 2020, https://www.policycenter.ma/sites/default/files/PP_20-33_Tsakok_Mengoub.pdf.
[6] Food and Agriculture Organization, “Food Security Concept Note,” Policy Brief, Issue 2, June 2006, https://www.fao.org/fileadmin/templates/faoitaly/documents/pdf/pdf_Food_Security_Cocept_Note.pdf.
[7] Isabelle Tsakok, “Short of Water and Under Increasing Pressure to Deliver Food Security: Key Policy Considerations – The Case of the Arab Republic of Egypt,” Policy Paper PP-01-23, Policy Center for the New South, January 2023, https://www.policycenter.ma/sites/default/files/2023-01/PP_01-23_Tsakok.pdf.
[8] Abdelaaziz Ait Ali et al., “The Russia-Ukraine War and Food Security in Morocco,” Project Brief, Policy Center for the New South, April 29, 2022, https://www.policycenter.ma/publications/russia-ukraine-war-and-foodsecurity- morocco.
[9] A. Nin Pratt et al., “Farm Households in Egypt: A Typology for Assessing Vulnerability to Climate Change,” IFPRI Regional Program Working Paper, 2018, International Food Policy Research Institute, Washington, DC.
[10] World Bank Group, Unlocking Egypt’s Potential for Poverty Reduction and Inclusive Growth—Egypt Systematic Country Diagnostic Update, October 2021, https://openknowledge.worldbank.org/bitstream/ handle/10986/36437/Egypt-Systematic-Country-Diagnostic-Update-UnlockingEgypt-s-Potential-for- Poverty-Reduction-and-Inclusive-Growth.pdf.
[11] Menna A. Farouk, “Egypt Erects Sand Barriers as Rising Sea Swallows the Nile Delta,” Thomson Reuters Foundation, March 22, 2022, https://www.preventionweb.net/news/egypterects-sand-barriers-rising-seaswallows- nile-delta.
[12] “Unlocking Egypt’s Potential for Poverty Reduction and Inclusive Growth—Egypt Systematic Country Diagnostic Update”.
[13] Hafez Ghanem, “Towards a Pan-African Approach to Food Security,” Policy Brief PB-62-22, November 2022, Policy Center for the New South, https://www.policycenter.ma/sites/default/files/2022-11/PB_62_22_ Hafez%20Ghanem.pdf.
[14] Emelie Rohne Till et al., Political Leadership and Agricultural Transformation, 2024, Palgrave Macmillan, Open Access, https://link.springer.com/book/10.1007/978-3-031-69852-1.

### UAE’s Exit From OPEC+: A Structural Break In The Global Oil Order

The decision of the United Arab Emirates to withdraw from the Organization of the Petroleum Exporting Countries(OPEC) and the broader OPEC+ alliance from May 1, 2026, is not just another policy adjustment to the Hormuz crises. It reflects a deeper cleavage in the global energy governance architecture that for so long relied on geopolitical stability, shared incentives, and equitable risk sharing among producer countries. These conditions no longer hold true. Evolving geopolitical and geoeconomics realities have exposed the vulnerability of decades-old energy system.
The move comes amid a volatile regional conflict and supply disruptions following the Israel-USA-Iran war and the closure of the Strait of Hormuz. Even as the precarious ceasefire holds, supply losses of roughly 10–12 million barrels per day continue to strain the global energy system.

Why The UAE Walked Away 
OPEC was established to coordinate oil production among the Middle Eastern energy producers and by extension, stabilize global crude prices. The model is now under visible strain. While the group still controls a significant portion of global energy output, its share has declined to almost one-third over the years while the OPEC+ accounts a little over 40%.
The UAE contributes almost 12% of total OPEC output or 3% of global supply,  amounting to approx. 3.4 million barrels per day(mbpd). It operates nearly 30% below its installed capacity of 4.85 mbpd – absorbing substantial opportunity costs in line with allotted production quotas. The frustration of under-utilized capacity is not new and has been compounded by uneven compliance within the group, with countries like Russia, Iraq and Kazakhstan at times exceeding their allocated targets.
The timing of the UAE’s exit is therefore both opportune and noteworthy. It comes at a time when Abu Dhabi sees  a clear economic incentive to boost production and lock in market share amid global supply shortages, and more importantly, step away from a system whose structural rigidities no longer serve its economic priorities.
1. Energy Security Is No Longer Equal
Since the disruptions, OPEC production has collapsed 27% (to 20.8 mbpd) in March with almost 8 mbpd loss of Gulf output, while UAE’s output alone slumped 44% to approximately 1.9 million bpd. The Hormuz crises has laid bare a harsh truth – that spare capacity is no longer a sufficient pre-condition for supply management. Export routes, redundancies, insurance, and infrastructure security are equally important considerations while determining a country’s resilience during crises, and these factors are highly uneven across the producer nations. This  alters the logic of coordination. The quota discipline no longer offers shared optimization but instead imposes asymmetric constraints.
The UAE seeks to break loose from an alliance that was designed for stable market conditions, and distributes costs disproportionately under increasing geopolitical stress. The opportunity cost for production varies dramatically among member countries depending on the exposure to geopolitical risk and logistical bottlenecks. UAE withdrawal is, therefore, an acknowledgement that the OPEC framework no longer reflects these differences.
2. Investment And Capacity Expansion
Abu Dhabi National Oil Company (ADNOC), the UAE's state energy producer, has already committed investments of approximately $150 billion to reach a 5 mbpd capacity target by 2027. Aligned with its national priorities, this independence reflects UAE’s long-standing ambition to expand oil output unencumbered. The exit therefore represents a strategic shift towards ensuring that future capacity can be deployed when conditions allow. It also signals UAEs intent to establish itself as a reliable supplier in the post-crisis period, particularly as the world looks to replenish depleted reserves. 
3. Economic Strategy Favours Flexibility
The UAE is Gulf’s most diversified economy with only 25% of its revenues coming from oil and gas revenues and 75% from non-oil sectors such as trade and logistics ; tourism, hospitality and aviation; regional financial centres (DIFC, ADGM); real estate & construction; manufacturing & industry; and technology & innovation. This diversification fosters a greater tolerance for price volatility. By contrast, Saudi Arabia has a fiscal breakeven oil price of around $90 per barrel, which is nearly double to that of UAE—reinforcing divergent strategic priorities.  At the same time, the conflict has exposed the vulnerabilities in the country’s non-oil model, which relies heavily on stability and openness. This has, in the immediate future, elevated the importance of hydrocarbon revenues for fiscal stability.
4. Monetising Oil Before Demand Peaks
According to the International Energy Agency, global oil demand is expected to peak around 2030, with electric vehicles (EVs) displacing over 5 mb/d by that point and over 10 mb/d by 2035. For instance, China’s investments in electrification have helped cushion the blow of rising oil prices, reducing oil demand down by as much as 1 mbpd. This creates a clear incentive for producers to maximise output while demand remains robust. The UAE’s strategy is to pump more oil in the near term while continuing to build out a diversified, post-oil economy.

Impact on Global Oil Markets 
In the short term, the impact of UAE’s exit will be muted. The energy markets have not responded dramatically to the announcement so far, as the  institutional departure will not translate into immediate increase in exports.
The Abu Dhabi Crude Oil Pipeline (ADCOP), running from Habshan to the Fujairah port and bypassing the Strait of Hormuz, offers limited relief as it can handle only about half of its recent production and is already operating near capacity. Therefore, in the short run, this move will act more as a market signal than a source of additional supply.
However, the signal itself is important. It reflects UAE’s openness to trade and intention to contribute to future supply recovery once logistical constraints ease. While it may hold the potential to exert downward pressure on prices over time, it may also introduce a volatility in global oil markets as competition for market share intensifies. The Hormuz crises is also likely to embed a persistent geopolitical risk premium in oil markets, particularly for Middle Eastern exports accounting for the geopolitical exposure, infrastructure constraints, and producer-level fundamentals.

A Test For Saudi Leadership 
For Saudi Arabia, the implications are significant. With UAE’s exit –  the fourth largest producer in the grouping - Saudi Arabia will remain the only swing producer with sufficient spare capacity to exert market influence and respond to supply shocks. This will constraint the grouping’s leveraging power which lies in collective coordinated supply management. Stabilizing prices will become more expensive and difficult to sustain for the Kingdom.
A weaker coalition raises the risk of competitive production strategies, particularly if other countries follow suit.  While an outright price war looks unlikely, it may trigger competition over market share pushing the global equilibrium to  lower price environments – something the UAE’s diversified economy may withstand but could place considerable pressure on other OPEC members.

What Lies Ahead 
According to UAE’s Energy Minister H.E. Suhail Mohamed Al Mazrouei, the country is positioning itself to become an agile,  nimble and independent energy actor – balancing its investments across oil, gas, and renewables.
The country now must prioritise strengthening its resilience through infrastructure investment, building redundancies, diversifying trade routes, and expanding storage capacity both domestically and internationally.
The decision also carries a strong  geopolitical signalling, particularly in Washington and key Asian markets, underscoring UAE’s willingness and commitment to align its policies and investments with its evolving global energy security priorities, as well as its expanding network of CEPAs and strategic partnerships, and its long-term strategic vision.



This Commentary originally appeared on NDTV.

### The Water-Energy-Food Nexus and the AI Imperative

This article is the part of “Policy Pathways for Food and Water Security in the MENA Region”


Weather is no longer what it used to be. Floods now submerge cities once thought safe from such calamities, heatwaves scorch regions that historically rarely broke a sweat, and droughts stretch far beyond their usual seasons. The familiar patterns that governed our climate have fractured. What we once called “extreme” is fast becoming the baseline.[1] Yet, this is not just a meteorological story; it is a civilisational one. Climate change has moved from an abstract threat to lived experience, and the rise in weather extremes is perhaps its most tangible symptom.
Amidst this turbulence, a new technological frontier is emerging: Artificial Intelligence (AI). Properly harnessed, AI could help us anticipate, adapt to, and even mitigate some of the most severe impacts of a rapidly warming planet. If misused, however, it could only amplify inequities and false confidence.
The task before us is not simply to adopt AI, but to integrate it in intelligent ways, as a tool of foresight, not a substitute for scientific understanding. In arid regions, AI must also manage its own resource footprint, especially its water use and energy demand.

The WEF Nexus
Weather shocks are inseparable from the water–energy–food (WEF) nexus especially in vulnerable regions such as the Middle East and North Africa (MENA)[2] where climate extremes drive water volatility, which then cascades into agriculture and power systems.[3] Agriculture already accounts for the dominant share of consumptive water in the region, while most cereals are imported—this makes local hydrology and external supply chains, together, impactful on food security.[4],[5]
In April 2024, the United Arab Emirates (UAE) experienced the heaviest 24-hour rainfall on record, flooding urban corridors, disrupting aviation, and exposing drainage and planning gaps, a stark local expression of global hydrological volatility.[6],[7] Recent history also reminds us that rare tropical cyclones from a warming Arabian Sea can strike Oman and spill impacts into the UAE, as with cyclones Gonu in 2007 and Shaheen in 2021.[8]

The Age of Extremes
Across the MENA, weather is rewriting records faster than we can update them.[9] Wildfires ravaged the Mediterranean, droughts dried up major rivers in the Middle East, while in North Africa the balance between deluge and drought has become dangerously erratic. In the Gulf, this now includes record-breaking cloudbursts and rare tropical cyclones from a warming Arabian Sea, alongside long dry spells that stress aquifers and rangelands (e.g., variability in Dhofar’s Khareef).[10]
This intensification is not a surprise, nor is it unexplainable; it is physics at work. Warmer air holds more moisture, fuelling heavier rain when storms form; hotter land increases evapotranspiration, deepening drought when rains fail; processes now visible in the MENA and known as “weather whiplash” reflecting the abrupt swing between extremes. The result is volatility across scales: heat domes that linger for weeks, tropical storms that intensify overnight, shifting jet streams and ocean currents that redistribute weather patterns in unpredictable ways.
Infrastructure designed for a gentler climate is struggling, from urban drainage overwhelmed in Dubai to aquifer-dependent farms facing salinisation and declining water tables. Crops fail, grids buckle, and urban heat islands turn deadly.

Where Forecasting Struggles
Traditional weather and climate models, based on physical equations of the Earth System, have advanced immensely since the mid-20th century. They underpin everything from cyclone alerts to climate projections. But even the best models falter under the weight of today’s volatility.
Extreme events occupy the statistical tail of probability distributions, meaning there are few examples in the historical record. Models trained or calibrated on past data are, therefore, illequipped to simulate “unprecedented” events. Resolution also matters: many models cannot resolve the small-scale processes, convective storms, coastal interactions, urban heat zones, that trigger local extremes.
The result is uncertainty especially in predicting the timing and intensity of extremes. Uncertainty is most acute for tail risks and locally forced hazards (convective bursts, wadis, urban heat). In the Gulf, a one-hour improvement in nowcast skill can materially reduce flash flood losses. We need tools that learn faster, resolve finer, and are affordable for national meteorological services. Enter AI.

AI Enters the Forecast Room
Artificial intelligence, when coupled with climate science, offers precisely that promise: Speed, adaptability, and scale. AI systems can ingest massive datasets, satellite imagery, radar scans, reanalysis archives, and detect hidden correlations that human-designed algorithms might miss.
Recent breakthroughs such as FourCastNet and GraphCast have shown that learned global models can rival or exceed traditional systems for many variables while enabling large ensembles.[11] Where physical models take hours on supercomputers, AI can now generate forecasts in minutes. At short lead times, deep generative radar models improve 0–90-minute precipitation nowcasts, the window that matters for MENA flash floods.[12]
The real transformation, however, lies in hybrid modelling, systems that merge the strengths of physics-based and data-driven approaches. These “physics-informed” neural networks respect the laws of energy and mass conservation while leveraging AI’s ability to learn complex, nonlinear relationships. In essence, they let science set the boundaries while letting AI explore the patterns within them.
Such models are already improving forecasts of heavy rainfall, cyclone intensification, and drought onset. They are also enabling faster ensemble generation, where thousands of simulated scenarios can be produced to quantify risk. In the age of extremes, that probabilistic foresight is invaluable for the MENA region.

Beyond Forecasting: Detection, Attribution, and Action
AI is also expanding the horizons of what forecasting means. It now plays a growing role in detecting, attributing, and translating weather extremes.
Detection involves scanning continuous data streams to flag early anomalies; subtle shifts in sea-surface temperature, unusual humidity buildups, or atmospheric “blocking” that might signal a heatwave. AI excels at spotting such weak signals amid noise.
Attribution, once a slow, post-disaster process, is being accelerated by machine learning. Scientists can now estimate, in near real-time, how much human-driven warming has increased the likelihood or severity of a specific event. This not only informs policy but also strengthens accountability in climate diplomacy.
And then there is translation, turning complex forecasts into operational decisions in the WEF nexus: Which neighbourhoods will flood, which crops are at risk, which basins to recharge, which reservoirs to pre-release, and which irrigation districts to throttle. Gulf examples include Oman’s National Multi Hazard Early Warning Centre, both platforms that AI can enhance with smarter triggers and uncertainty information.[13],[14],[15]

Glimpses of Progress
Across MENA, tangible use-cases are emerging. For instance, irrigation optimisation that combines satellite data and machine learning is supporting date-palm and horticultural production in arid settings, including pilots in Egypt.[16] Groundwater risk mapping now fuses GRACE trends (Gravity Recovery and Climate Experiment), pumping records, and climate reanalysis to highlight hot spots in systems such as the Saqram and the Tigris–Euphrates.[17] Moreover, AI-augmented inflow prediction is being tested to inform multi-objective reservoir operations on the Nile. Beyond speed and precision, cloud platforms are lowering barriers-toentry by making advanced forecasting tools available without supercomputing infrastructure.

The Cautions We Must Heed
Machine learning models are only as good as the data that train them, and historical climate data are uneven. Regions like the MENA remain under-observed. If AI learns from incomplete or inaccurate data, it may fail to predict extremes precisely where vulnerability is highest. Indeed, the risks of overreliance on AI are real. Physics-free systems may be fast but wrong.
Indeed, the risks of overreliance on AI are real. Physics-free systems may be fast but wrong. Without open hydrometeorological and agriculture data, AI could only widen regional divides. Then comes the problem of interpretability. Decision-makers cannot base public warnings or policy actions on “black box” outputs. They need explainable AI, systems that reveal why a forecast says what it does, and how certain that prediction is.
There is also the question of access. High-performance AI systems demand enormous computational resources and proprietary data. Without deliberate investment in open data and shared architectures, AI could widen the digital divide in climate resilience, making rich nations smarter and poor ones more exposed.
Finally, AI’s own carbon footprint is rising. Data centres in the MENA must rely on renewables for both cooling and operations.[18]

Charting a Smarter Future
To harness AI effectively across the MENA water–energy–food nexus, stakeholders should co-design meteorology–water–agriculture services that translate forecast probabilities into operational decisions. In this first step, collaboration is key. Meteorologists, data scientists, and AI engineers must co-design models that combine physics, data, and operational realism. Cross-sector partnerships between research institutions, governments, and the private sector are essential to translate innovation into action.
Second, open science must become the norm. Shared datasets, transparent benchmarks, and open-source models can democratise access and foster trust.
Third, capacity-building is critical. Many developing nations in the MENA need support to adopt and adapt AI tools, from computational infrastructure to technical training. The next generation of meteorologists must be as fluent in machine learning as in thermodynamics. Finally, AI should serve not just as an early warning system but as an adaptive planner. From optimising reservoir operations to designing heat-resilient cities, AI can help societies prepare before the next shock hits. It must be embedded not at the periphery of policy but at its core.

Conclusion: From Prediction to Preparedness
AI will not stop the storms or the heatwaves, but in arid regions it can protect people, farms, and grids and conserve water used by the digital systems themselves. The measure of success is anticipatory action and prudent resource use across the WEF nexus. Therefore, AI can help us see the extremes coming sooner, understand them better, and respond more wisely. It offers not the illusion of control, but the possibility of foresight.
As the atmosphere grows hotter and more chaotic, our best defence is intelligence, not just artificial, but collective. A smarter planet begins with smarter choices: to integrate AI with science, to share knowledge openly, and to ensure that those most at risk are the first to benefit. The climate of the future is already here. The question is whether our tools and our will can keep pace with it.



Diana Francis is Professor of Atmospheric and Climate Science, Khalifa University, UAE.




Endnotes
[1] Georgios Zittis et al., “Climate Change and Weather Extremes in the Eastern Mediterranean and Middle East,” Reviews of Geophysics 59, 2021: e2021RG000762, https://doi.org/10.1029/2021RG000762.
[2] United Nations Economic and Social Commission for Western Asia, The Water, Energy and Food Security Nexus in the Arab Region, Beirut, ESCWA, 2015, https://www.unescwa.org/publications/escwa-water-development-report-6-water-energy-and-food-security-nexus-arab-region.
[3] International Energy Agency, “Installed Desalination Capacities by Technology in the Middle East and North Africa, 2000–2035,” 2025, https://www.iea.org/data-and-statistics/charts/installed-desalination-capacities-by-technology-in-the-middle-east-and-north-africa-2000-2035.
[4] Manzoor Qadir et al., “The State of Desalination and Brine Production: A Global Outlook,” Science of the Total Environment 657, 2019: 1343–1356, https://doi.org/10.1016/j.scitotenv.2018.12.076.
[5] World Bank, Beyond Scarcity: Water Security in the Middle East and North Africa, Washington DC: World Bank, 2017, https://www.worldbank.org/en/topic/water/publication/beyond-scarcity-water-security-in-the-middle-east-and-north-africa.
[6] Diana Francis et al., “From Cause to Consequence: Examining the Historic April 2024 Rainstorm in the United Arab Emirates through the Lens of Climate Change,” Climate and Atmospheric Science 8 (2025): 183, https://doi.org/10.1038/s41612-025-01073-1.
[7] World Weather Attribution, “Heavy Precipitation Hitting Vulnerable Communities in the UAE and Oman Becoming an Increasing Threat as the Climate Warms,” April 29, 2024, https://www.worldweatherattribution. org/heavy-precipitation-hitting-vulnerable-communities-in-the-uae-and-oman-becoming-an-increasingthreat-as-the-climate-warms/.
[8] Diana Francis, Ricardo Fonseca, and N. R. Nelli, “Key Factors Modulating the Threat of the Arabian Sea’s Tropical Cyclones to the Gulf Countries,” Journal of Geophysical Research: Atmospheres 127, 2022: e2022JD036528, https://doi.org/10.1029/2022JD036528.
[9] Diana Francis and Ricardo Fonseca, “Recent and Projected Changes in Climate Patterns in the Middle East and North Africa (MENA) Region,” Scientific Reports 14, 2024: 10279, https://doi.org/10.1038/s41598-024- 60976-w.
[10] N. R. Nelli et al., “Drivers and Trends of Summertime Convection over the Southeastern Arabian Peninsula,” Geophysical Research Letters 52, 2025: e2025GL118960, https://doi.org/10.1029/2025GL118960.
[11] Remi Lam et al., “Learning Skillful Medium-Range Global Weather Forecasting,” Science 382, no. 6669 (2023): eadi2336, https://doi.org/10.1126/science.adi2336.
[12] Suman Ravuri et al., “Skilful Precipitation Nowcasting Using Deep Generative Models of Radar,” Nature 597, 2021: 672–677, https://doi.org/10.1038/s41586-021-03854-z.
[13] World Meteorological Organization, “Early Warnings for All (EW4All) Initiative Overview,” 2025, https://wmo.int/activities/early-warnings-all.
[14] World Meteorological Organization, “Overview of the Early Warnings for All: Executive Action Plan 2023–2027,” 2025, https://wmo.int/media/magazine-article/overview-of-early-warnings-all-executive-action-plan-2023-2027.
[15] World Meteorological Organization, “Black Sea and Middle East Flash Flood Guidance System,” 2025, https://wmo.int/governance/black-sea-middle-east-flash-flood-guidance-system.
[16] Food and Agriculture Organization of the United Nations, “WaPOR: Remote Sensing for Water Productivity— Data Portal,” https://www.fao.org/in-action/remote-sensing-for-water-productivity/wapor-data/en.
[17] K. A. Voss et al., “Groundwater Depletion in the Middle East from GRACE with Implications for Transboundary Water Management in the Tigris–Euphrates–Western Iran Region,” Water Resources Research 49, no. 2 (2013): 904–914, https://doi.org/10.1002/wrcr.20078.
[18] International Organization for Standardization and International Electrotechnical Commission, ISO/IEC 30134-9: Information Technology—Data Centres Key Performance Indicators—Part 9: Water Usage Effectiveness (WUE), Geneva: ISO/IEC, 2022, https://www.iso.org/standard/77692.html.

### The End of Nuclear Arms Control: What Comes Next?

Spotlight

 	With the expiry of the New START, and ambitious nuclear modernisation among the United States, Russia, and China, vertical nuclear proliferation will increase.
 	The breakdown of the arms control framework has direct implications for the broader nuclear non-proliferation regime.
 	The nuclear states must take steps to reaffirm their obligations to Article VI of the NPT. Failure to do so risks undermining the credibility of the treaty and jeopardising the future of the global non‑proliferation regime.

For the first time in five decades, there is no nuclear arms control treaty between the United States and Russia. The New Strategic Arms Reduction Treaty (New START) expired on February 5, 2026. This development raises significant questions for global security, arms control, and the future of the non-proliferation regime. In the absence of treaty-based guardrails, vertical nuclear proliferation is likely to intensify. Russia, China, and the US have all embarked on ambitious nuclear modernisation programs, a trend that will increase insecurity and reinforce perceptions of vulnerability among these states vis-à-vis each other. Recently, France has announced a forward deterrence posture, which is expected to result in an expansion of its nuclear forces. This will further compound the proliferation problem being caused by nuclear-armed states. The cumulative effect of these developments places additional stress on the broader non‑proliferation regime and risks undermining the credibility of the Nuclear Non‑Proliferation Treaty (NPT).
The cumulative effect of these developments places additional stress on the broader non‑proliferation regime and risks undermining the credibility of the Nuclear Non‑Proliferation Treaty (NPT).
The ambitious nuclear modernisation programs of both the US and Russia suggest that an increase in nuclear arsenals might be imminent. The New START Treaty, signed in 2010 and entering into force in 2011, restricted both countries to 1550 deployed strategic nuclear warheads. It also stipulated that each side could deploy no more than 700 intercontinental ballistic missiles (ICBMs), submarine-launched ballistic missiles (SLBMs), and heavy bombers. With these restrictions now expired, the US and Russia are free to expand both the number of deployed strategic warheads and the delivery systems available to them.

Russia, China, and the US are actively developing new nuclear systems. In October 2025, Moscow announced that it had tested the Burevestnik nuclear-powered cruise missile, which reportedly travelled 14,000 kilometers in 15 hours. In the same month, Russia also tested the Poseidon system, an intercontinental nuclear-powered underwater autonomous torpedo designed to be equipped with a nuclear warhead.

The US, meanwhile, has a nuclear modernisation program projected to cost nearly two trillion dollars over the next three decades. Within this modernisation, a new generation of land-based intercontinental ballistic missiles (ICBMs) named Sentinel, will replace the Cold War-era Minuteman III ICBMs. Similarly, the B-2 bombers will be phased out in favour of the new B-21 nuclear-capable stealth bombers. In the naval domain, the aging Ohio-class ballisic missile submarines (SSBNs) will be replaced by the Columbia-class SSBNs.
The ambitious nuclear modernisation programs of both the US and Russia suggest that an increase in nuclear arsenals might be imminent.
China’s nuclear modernisation is advancing in response to developments in US-nuclear modernisation. China maintains a nuclear triad, with the capability to launch nuclear weapons from land-based, sea-based, and air-based platforms. In 2021, reports indicated that China had constructed three new silo fields for nuclear weapons. Its arsenal has grown to approximately 600 nuclear warheads, and a bipartisan Congressional Commission on the Strategic Posture of the US has projected that this number could rise to around 1500 warheads by the mid-2030s.

The impetus for expanding nuclear arsenals among the United States, Russia, and China is driven by mutual uncertainty and strategic competition. The absence of arms control measures to verify warhead numbers contributes to a lack of transparency, which in turn fuels greater nuclear weapons system deployment.

The breakdown of the arms control framework has direct implications for the broader nuclear non-proliferation regime. To secure the participation of non-nuclear states in the NPT,  the nuclear-armed states committed under Article VI to pursue negotiations on disarmament and to reduce their arsenals. With nuclear powers now expanding their stockpiles, this commitment appears to have been sidelined. As a result, non-nuclear states at the April 2026 NPT Review Conference are likely to question whether the nuclear-armed states have abandoned their pledge to move toward a nuclear-weapons-free world – or at least toward a world with fewer nuclear weapons.
The breakdown of the arms control framework has direct implications for the broader nuclear non-proliferation regime.
The US’ recent efforts to prevent the spread nuclear weapons, including actions taken during the war in Iran, risk being perceived as hypocritical in light of its own nuclear arsenal expansion. For states that have considered nuclear acquisition; most notably South Korea, Japan, and Saudi Arabia, this perceived inconsistency could create openings to justify renewed interest in nuclear capabilities. If nuclear-armed states fail to uphold their disarmament commitments under the NPT, non-nuclear states may begin to question whether they too must continue to abide by their obligations to the non‑proliferation regime.

With the expiration of the New START treaty in February 2026, the Russian government pledged to unilaterally adhere to its stipulations for one additional year. This commitment entails maintaining 1550 strategic nuclear warheads on no more than 700 nuclear launchers until February 5, 2027. To date, the US has not reciprocated this offer or announced any unilateral arms control measures.

Before non-nuclear states that are party to the NPT begin to question the necessity of abiding by their own legal commitments to the non-proliferation regime, the US, Russia, and China must take steps to reaffirm their obligations. This could involve unilateral, bilateral, or multilateral commitments to arms control. Failure to do so risks undermining the credibility of the NPT and jeopardizing the future of the global non‑proliferation regime.



Debak Das is an Assistant Professor at the Josef Korbel School of Global and Public Affairs at the University of Denver.

### Overseas Oil Storage: The Gulf’s Necessary Hedge

Spotlight


 	Strategic Oil Storage is as critical for producers and exporters as it is for import‑dependent countries.
 	Expanding storage capacity beyond national boundaries would have significantly cushioned the global energy shock triggered by the Iran War. 
 	South Korea, Japan, India, and Singapore emerge as viable partners for Gulf producers in hosting offshore oil reserves. 

The structural adaptation triggered by the Iran War’s energy supply shocks underscores a critical dichotomy. It compels a re-examination of how best to guard against supply disruptions of legacy fossil fuels while simultaneously positioning renewable energy solutions as the long-term hedge against the volatility of those same fuels. At the heart of both pursuits lies a single concept—albeit in different forms: storage. Both forms of storage must be placed at the centre of all future strategies by countries seeking effective energy security. In the immediate term, however, the expansion of Strategic Petroleum Reserves (SPRs) represents a more pragmatic strategy, particularly for Gulf oil exporters in the aftermath of active hostilities.
While SPRs are more commonly associated with stockpiling by import dependent countries, the lessons of the Iran War underscore the need for producers and exporters of oil to re-conceptualise storage as a tool for diversification and for safeguarding their capacity to trade even during conflict. In line with this assessment, this commentary argues that Middle Eastern oil exporters should invest in expanding SPRs beyond their own national jurisdictions, in thereby mitigating the risks of access weaponisation witnessed during the Iran War.
Under this model, oil[1] producers could lease storage facilities in another country, storing their output in exchange for rent and granting the host country first right of refusal in the event of a crisis. The arrangement could also include a bilateral agreement permitting the stored oil to be re-exported from the facility to a third country, should the producer choose to do so.
There are specific conditions that enhance the appeal of a country and a specific site in qualifying as a viable partner for strategic oil storage.
First, the structural properties of the site must align with the form or grade of fuel being stored. This includes both the geological and chemical composition of salt caverns as well as the size and capacity of storage tanks that countries employ for crude oil storage.
Secondly, the chosen location should be easily accessible for both receipt and dispatch of fuel. This requires ensuring multimodal transport network connectivity capable of accommodating tankers, barges, and pipelines, thereby enabling efficient access and redistribution of stored crude.
Thirdly, site selection must account for the integration of redundancies to avoid vulnerability to single points of blockage or failure.

The potential costs and risks inherent in such undertakings, particularly the possibility of sites becoming collateral damage even when neither the producer nor the host country is a direct party to a conflict; must be factored into discussions from the outset.
Fourthly, proximity to major centers of energy demand; including refining and blending facilities, is a critical consideration.  The presence of easily accessible and sufficiently large distribution centres enhances the operational value of a site.
Fifthly, infrastructure to support floating storage in territorial waters, combined with an internationally recognised role in energy arbitrage, represents another vital factor.
Finally, central to site selection is the trust that oil producers can place in host countries on a matter as critical as energy and economic security. This becomes particularly challenging in a geopolitical environment where inter-state relations remain in constant flux. It is therefore, essential that site selection considerations include transparent discussions of each side’s risk appetite. Hosting a strategic reserve inevitably increases risk exposure, requiring governments to account for both malicious intent-based attacks and the consequences of natural disasters. Accordingly, the potential costs and risks inherent in such undertakings, particularly the possibility of sites becoming collateral damage even when neither the producer nor the host country is a direct party to a conflict; must be factored into discussions from the outset. This is especially salient in preparing for future contingencies, given that many Asian countries that qualifying as viable partners for oil storage, could also be vulnerable to a Taiwan Strait or Malacca Strait crisis.

Asian Importers as Energy Storage Hubs and Trusted Partners
In the wake of the debilitating energy supply disruptions of the Iran War, the potential of oil importers such as South Korea, Japan, India, and Singapore to serve as dependable partners of choice for Middle Eastern oil exporters warrants consideration. All four countries meet several, if not all, of the requirements necessary to qualify as viable oil storage hubs. Each also maintains bilateral ties with oil producers such as the United Arab Emirates (UAE) and Saudi Arabia. The UAE, for instance, has established robust cooperation through Comprehensive Economic Partnership Agreements (CEPA) with each of these countries. Similarly, Riyadh has also forged significant bilateral ties with each of these four countries through the Saudi-Singapore Strategic Partnership Council, the Saudi-Japan Vision 2030, the Saudi-India Strategic Partnership Council, and the  Strategic partnership with South Korea. Furthermore, all four countries are geographically positioned at the heart of the fastest growing energy consumption markets of the world.

The UAE, for instance, has established robust cooperation through Comprehensive Economic Partnership Agreements (CEPA) with each of these countries. 
As part of a long-term strategy informed by the lessons of the Iran War, the UAE, Saudi Arabia and other Gulf Oil producers could build upon precedents of partnership already established in the sphere of oil storage with these four countries, thereby strengthening resilience and diversifying energy security arrangements.

Japan
Saudi Arabia, the UAE, and Kuwait currently utilise Japanese storage facilities to house portions of their oil reserves, thereby ensuring continuity in their commercial commitments to Asian markets. These arrangements also provide the Japanese government with preferential terms of access to the stored crude.

South Korea 
The UAE stores nearly 2mn barrels of crude oil in the facilities of the Korean National Oil Company under a joint stockpiling plan. Since the start of the hostilities in February 2026, reports  indicate that both the UAE and Saudi Arabia have engaged in discussions with the South Korean government to expand their strategic stockpiling arrangements.

India
Since 2018, the UAE has stored 5.6mn barrels of its crude in the Mangalore facility of Indian Strategic Petroleum Reserves Limited (ISPRL). The Abu Dhabi National Oil Company (ADNOC) maintains these reserves in facilities owned by the Government of India (GoI). While granting the GoI first right of refusal in the event of supply shortages, this arrangement simultaneously allows the UAE to position exportable supplies close to centres of demand. During the pandemic, the UAE re‑exported crude from these reserves to meet its supply commitments in Asia. 

Singapore 
Since February 2026, ADNOC has leased crude oil storage capacity at Singapore’s Jurong Port Universal Terminal Singapore’s extensive infrastructure and its status as a global leader in bunkering, oil trading, refining, and energy arbitrage commend it as an increasingly important destination for strategic storage.

The Gulf producers could supplement such overseas storage initiatives with the expansion of physical storage infrastructure within their own territories. 
Sri Lanka 
In addition to these four countries, another Asian partner that Middle Eastern countries, particularly, the UAE could further explore for strategic offshore oil reserves is Sri Lanka. Alongside India, the UAE has committed to cooperating on the creation of an energy hub in Trincomalee. A project under discussion since 2023 was formalised through a trilateral Memorandum of Understanding (MoU) between three countries in April, 2025. The agreement includes plans to refurbish the Trincomalee Tank Farm, develop bunker fueling facilities, and construct oil pipelines linking Trincomalee to India.
The Gulf producers could supplement such overseas storage initiatives with the expansion of physical storage infrastructure within their own territories. This dual approach would ensure that inventories have sufficient capacity to expand during supply disruptions, preventing production halts caused by inadequate storage.
The Iran War has revealed many unexpected dynamics- not least the intensity of Iran’s response. While not all of Tehran’s actions could have been anticipated, the blockade of the Straits of Hormuz and attacks Gulf energy infrastructure should have been factored more prominently into wargaming strategies. The oversight has proved costly to the global economy. In this context, the capabilities Gulf producers develop in overseas oil storage could, in the long-run, help rectify this lapse, and emerge as one of the most enduring recalibrations prompted by the war.



Cauvery Ganapathy is Fellow, Climate and Energy, ORF Middle East.



[1] Notably, crude oil commends itself to being stored over longer periods of time unlike Liquid Natural Gas (LNG) whose chemical properties do not correspond to long-term storage.

### Resilient Food Systems Beyond Inorganic Fertiliser Reliance

Spotlight:

 	Global inorganic fertiliser supply relies on a narrow group of exporters, rendering it vulnerable to price shocks, trade blockages, and infrastructural disruptions.
 	The high concentration of raw material inputs and protectionist domestic policies further compromise global fertiliser supply chain security.
 	Bolstering regional fertiliser reserves, open trade and diversification, demand-side monitoring, and gradual transitions towards alternative and organic fertilisers can decouple food security from market volatility.

Fertiliser’s Pivotal Role in Modern-Day Agriculture
Modern agriculture systems depend on inorganic fertilisers to feed the global population of 8 billion people. In the 19th century, rapid population growth increased demand for large-scale food production and agricultural efficiency improvements. To increase land productivity and crop yields, fertilisers emerged as a key solution. However, heightened dependencies on inorganic fertilisers have introduced significant environmental and supply chain risks. Fertilisers contribute to nutrient runoff and carbon emissions. For instance, the use of natural gas in the Haber-Bosch process to produce ammonia, accounts for approximately 84 percent of fertiliser-related emissions, while fertiliser application generates carbon dioxide and nitrous oxide. In the 21st century, a series of compounding conflicts has further exposed new vulnerabilities in global fertiliser trade.

The global food system relies on a limited number of key fertiliser suppliers, many of whom are located near conflict‑prone regions. The Russia-Ukraine war and US-Israel war on Iran have exposed the fragility of dependencies on singular trade routes and unilateral supply chains, prompting a reconstitution of fertiliser resilience. To safeguard global food systems while progressing towards net-zero carbon goals, this article argues for a supply-demand approach involving the immediate-term development of global fertiliser storage reserves, incremental investments in fertiliser alternatives, and enhanced demand-side fertiliser regulation, monitoring, and transparency.
Overview and Constraints of The Global Fertiliser Market
Mineral fertilisers are composed of three key macronutrients: Nitrogen, Phosphorous, and Potassium which cannot easily be substituted. Due to the uneven distribution of natural resources and the reliance on fossil fuels for nitrogenous fertilisers, the global fertiliser market remains highly concentrated among a limited number of exporters, heightening susceptibility to supply disruptions and food security risks. (See Table 1). Among the three macronutrients, Russia is a leading exporter across all categories, China dominates Nitrogen and Phosphorous exports, and Canada holds the largest market share in Potassium exports.

Table 1: Breakdown of Key Fertiliser Macro-Nutrients and Top Exporters and Importers



Source: OECD

Few alternatives to mineral fertilisers are commercially viable and widely available. For instance, burgeoning alternatives such as the transition from natural gas to renewable-based “green” ammonia are still long-term aspirations. Given that the bulk of green ammonia is concentrated in the United Arab Emirates (UAE), Saudi Arabia, and Oman, these markets may replicate the same trade risks as traditional fertiliser exports. Moreover, despite established green ammonia policy objectives in India and Morocco, green ammonia has not yet reached a state of cost-competitiveness to scale beyond pilots towards commercial deployment.
21st Century Crises Reveal Entrenched Dependencies on Concentrated Fertiliser Supply
Russia-Ukraine war exposed fertiliser dependencies, but price spikes and fertiliser shortfalls were largely placated by trade diversification and alternate transhipment corridors

As the leading supplier of nitrogen, second in potassium, and third in phosphorus fertiliser exports, Russia clearly dominates the global fertiliser market. At the onset of its war on Ukraine,
Russia-Ukraine war exposed fertiliser dependencies, but price spikes and fertiliser shortfalls were largely placated by trade diversification and alternate transhipment corridors
fertiliser prices spiked due to economic barriers from global restrictions, building upon price increases from fossil fuel fertiliser feedstocks. However, price spikes were offset by international sanction exemptions, alternate transhipment corridors avoiding Black Sea ports, and trade loopholes. Although international sanctions largely exempted Russian fertiliser exports, EU sanctions still banned potash imports from Belarus, and financial systems leveraged to purchase agricultural products were implicated to dissuade purchases from Russia. Russia overcame these challenges through alternate transhipment corridors through friendly countries and transhipping Belarus potash exports through Russia. Countries either diversified away from or doubled down on Russian fertiliser imports, with Brazil increasing imports from Canada to offset fertiliser decline from Belarus, and India, with a more amenable diplomatic posture to Russia, increasing Russian and Belarus fertiliser imports. Other fertiliser exporting countries such as China reduced diammonium phosphate (DAP) and urea exports to meet domestic demand, with DAP trade falling by 43 percent and urea trade falling by 47 percent between 2021 and 2022. Nevertheless, smallholder farmers, particularly those in Sub-Saharan Africa, continue to bear the brunt of impacts due to limited fiscal space from governments to subsidise high costs.

Hormuz chokepoint blockages during the US-Israel War on Iran exposes limitations in fertiliser diversification pathways

The US-Israel War on Iran immediately led to trade blockages at the Strait of Hormuz, a crucial chokepoint transiting 30 percent of global fertiliser trade. The Gulf Cooperation Council (GCC) countries represent a dual-risk hub, acting as critical exporters of natural gas and fertiliser. First, the Gulf is a critical producer of nitrogenous-based fertilisers such as urea, with India purchasing more than 40 percent of its urea from the region, and Australia depending on Gulf states for more than half of its urea. In addition, the Gulf states represent the single largest sulphur exporter. Sulphur is leveraged to convert phosphate rock into essential DAP and monoammonium phosphate (MAP) fertilisers. Morocco and China represent the world’s largest phosphate producers, relying significantly on sulphur imports from the Gulf. To illustrate, Morocco imports roughly 3.7 million metric tonnes, while China imports 4 million metric tonnes. Without sulphur inputs, phosphate production may become constrained, raising production costs and limiting trade diversification pathways.
Hormuz chokepoint blockages during the US-Israel War on Iran exposes limitations in fertiliser diversification pathways
In addition, coinciding conflicts between the US-Israel-Iran and Russia-Ukraine have damaged infrastructure, hampering immediate export capacity. For example, Iranian drone attacks on the Qatar Fertiliser Company (QAFCO), the world’s largest site for urea exports supplying 14 percent of global urea, halted production. Moreover, Ukrainian drone attacks on Russia’s Dorogobuzh plant which produces approximately 11 percent of Russia’s ammonium nitrate, has resulted in Russian fertiliser restrictions. These logistical and infrastructure challenges are compounded by protectionist policies of countries such as China who, like the onset of the Russia-Ukraine war, restricted urea exports to meet domestic demand. Although export restrictions offer short-term relief, they raise prices and exacerbate global price volatility.

The supply constraints imposed by these crises limits trade diversification pathways for global south countries rapidly approaching critical planting seasons. India is most concerned about urea availability, its most widely-deployed fertiliser. To counter supply constraints, India is leveraging its domestic stockpiles, but continues to engage with Morocco and Russia, while expanding outreach to Indonesia for urea-specific trade substitution. Still, Indonesia intends to prioritise domestic demand, and import quantities will be less than those from the Gulf. Given price hikes, Brazilian farms have switched to less expensive, lower-concentration products such as ammonium sulfate. However, despite being cheaper per tonne, ammonium sulfate requires more volume and logistical handling, raising overall costs. Overall, the burden of high fertiliser prices will likely fall on small-holder farmers in lower-income countries with tight fiscal space. While subsidies protect farmers from immediate price shocks, they also reduce financial resources directed towards rural or infrastructural development. The alternative is reduced fertiliser applications, leading to lower crop yields and constrained global food supply.
Compounding Crises Strengthens the Case for a Renewed Approach to Fertiliser Resilience
Supply-Side: Storage, Organic Fertiliser, and Low-Carbon Fertiliser Alternatives 

To mitigate future immediate shocks, countries should collectively strengthen regional and global fertiliser reserves and maintain open trade. Replicating strategies from the hydrocarbon sector’s global reserve system for crude oil, developing shared regional infrastructure, strengthening regional trade to absorb shocks offers a few pathways. For instance, the ASEAN Plus Three Emergency Rice Reserve mechanism can be expanded to include fertiliser stockpiles. However, storing concentrated fertilisers requires logistical and safety considerations due to risks of groundwater chemical contamination, corrosion, and damage from moisture exposure.

Increasing financing, research, and development to scale locally-cultivated biofertilisers will help increase circularity while reducing dependencies on fragile supply chains. Biofertilisers can be derived from agricultural waste and crop residues or novel methods like sargassum. Scaling the biofertiliser market will be especially crucial for tropical and subtropical regions with vulnerable small-holder farmers like those in Latin America and the Caribbean. Unlike chemical fertilisers, biofertilisers absorb nutrients better than chemical fertilisers in high soil acidity environments, promote long-term soil health, and reduce farmer production costs.

Studies also highlight the potential for key macro-nutrients to be extracted from human waste, sewage, and manure. While companies in China, the United States, Canada, and Europe have initiated large-scale implementation of fertiliser extraction from sewage, the practice remains largely nascent and untapped in Southeast Asia. Notably, organic fertilisers may not always be exact substitutes for inorganic fertilisers due to uneven distribution of raw biomass availability and differing concentrations of nutrient content. Thus, this approach is best suited for areas rich in organic waste and compost demand.  Nevertheless, significant waste output, insufficient sanitation infrastructure, and fertiliser demand breeds ground for enhanced waste management, nutrient recovery, and circularity co-benefits. At a national level, promoting blended organic and chemical fertiliser use would facilitate a viable intermediate transition.

Moreover, deepening investments in green ammonia in India and Morocco would offer a low-carbon alternative, but requires overcoming regulatory barriers and misalignment between producers, offtakers, infrastructure, and policymakers. Distributed green ammonia production has already proved to be a key competitor to imports, serving local smallholder farmers in Kenya without subsidies.

Demand-Side: Demand-Side Regulation, Monitoring, and Transparency 

Long-term, governments can re-design subsidy regimes to incentivise proper fertiliser application methods (right source, time, place, and quantity) while providing transitional subsidies to offset risks of shifting to organic alternatives. In regions like South Asia, where long-term subsidies have historically driven nitrogen-based fertiliser overuse, implementing gradual and tailored policy shifts as opposed to abrupt bans would protect against inadvertent food system destabilisation while also increasing farmer acceptance.

Furthermore, replacing widespread mineral fertiliser messaging with localised guidance on bio-fertiliser production and crop rotation methods will enable farmers to leverage resources more effectively, promoting biodiversity and soil health. Deploying satellite remote sensing can also help monitor actual fertiliser consumption. When paired with support to smallholder farmers to adopt Low External Input Sustainable Agriculture (LEISA), demand for synthetic fertilisers would reduce.

Trade diversification is often positioned as a key strategy to assuring resilience. Given the highly concentrated nature of the global fertiliser market, safeguarding trade flows in anticipation of the next global shock will also require bolstering regional and global fertiliser storage reserves, advancing research and investments in circular and low-carbon bio-fertiliser alternatives, and improved demand-side regulation. Supplementing diversified trade partnerships with stronger domestic capacity will ultimately help improve food system resilience.



Leigh Mante is  Junior Fellow, Climate and Energy, ORF Middle East.

### Nuclear Science and Technology for Food and Water Security in MENA

This article is the part of “Policy Pathways for Food and Water Security in the MENA Region”



The Middle East and North Africa (MENA) region faces problems of water scarcity, limited arable land, and soil degradation which is exacerbated by climate change, threatening water and food security. As the region experiences rapid population growth,[1] states must contend with increasing demand for water, energy, and food (WEF),[2] which are all inextricably linked. To adapt, the region is striving to improve climate-smart agricultural practices,[3] reduce waste, and increase resilience.
This article argues that the use of nuclear science and technologies can offer viable and sustainable pathways for mitigating these challenges. It maps past and prospective applications of these technologies for food and water security in MENA, while evaluating both feasibility and barriers to implementation and scaling.
The following paragraphs outline the potential applications of nuclear science on various development domains in the MENA region.

Strengthening Climate-Smart Agriculture
The MENA region faces the challenge of land degradation from soil erosion as well as worsening soil quality due to sea level rise-driven salinisation,[4] increasing temperatures, and use of recycled wastewater,[5] negatively affecting crop yields. Nuclear techniques help assess and mitigate soil erosion.[6] Leveraging neutron probing sensors can help measure soil moisture levels to determine optimal irrigation application for soil remediation and crop growth.a,[7] This is useful for saline soil conditions in MENA, where conventional moisture sensing equipment is insufficient. To illustrate, isotopic techniques have supported the cultivation of high production volumes of millet in Lebanon, barley and safflower in Jordan, and quinoa in the United Arab Emirates, materialising through a technical Food and Agriculture Organization- International Atomic Energy Agency (FAO-IAEA) cooperation programme.[8]

Enabling Safe Food Storage
Improving food storage capacities across the value chain is crucial for mitigating food loss and waste in the MENA region. Food irradiation techniques[9] are gentle and non-invasive practices that eliminate microbes by exposing food to radiations like gamma or X-rays, while preserving nutritional value and quality.[10] Contrary to misconceptions, irradiation techniques do not turn food radioactive. Food irradiation yields health and food safety advantages, eliminating microbial contamination and lowering food-borne disease risk, and is considered more effective compared to heat and chemical methods.[11] Moreover, it supplements other shelf-life extension methods.
Food irradiation adoption in MENA is currently in early-stages,[12] with Egypt leading in applications for meat preservation and phytosanitary compliance. Demand for shelf-stable food and vegetable imports in the UAE and Saudi Arabia has contributed to investment in new irradiation infrastructure facilities since 2022. Irradiation solutions are more widespread in North America and Europe, which have developed legal frameworks to reiterate its safety. A 2025 study by Maataoui et al. comparing global acceptance of irradiated food found that MENA countries are more cautious about the viability of irradiated food, demonstrating the need for public information campaigns to increase public acceptance and implementation feasibility in MENA.[13] Increasing food shelf-life can also be valuable for food security considerations in remote MENA locations as well as in conflict zones that need humanitarian supplies.[14]

Enhancing Water Access and Efficiency
While the value proposition of nuclear technologies to food production is explained by its unique scientific ability to increase crop yields and food shelf-life, it is necessary to highlight the underlying logic of using nuclear energy per se for water desalination, for instance, in a region known for its oil and gas wealth.
Conventional desalination relies on non-renewables like oil and gas which produce significant emissions, despite being reliable. Although many countries in the region have substantial hydrocarbon resources, not all of MENA can count on such fossil fuel abundance. Many countries in the region have suffered fiscal strains due in no small part to rather large energy import bills. For instance, the freeing up of oil and gas resources in places like Egypt, where it is being used for water desalination, would make fiscal sense given high import bills for these hydrocarbons.
On the other hand, the energy-exporting MENA countries must contend with the opportunity cost of the consumption of every barrel of oil domestically—meaning one forex-earning barrel of oil less on the international market. This has cost-implications for many of these countries working towards economic diversification and investment of their hydrocarbon earnings into new sectors such as AI or manufacturing.
Further, there are gradual changes in the revenue buffers from MENA’s fossil fuels exports. This downward pressure on revenue streams could reasonably be mitigated to some degree by integrating nuclear energy into the energy portfolio wherever feasible, after duly considering both costs and risks associated with the type. Studies which focused on Tunisia and Algeria compared the use of oil and gas with nuclear for electric power generation and water production, and have effectively demonstrated substantial savings from the latter.[15]
Nuclear energy, with its higher energy density, offers the best baseload alternative to hydrocarbons.[16] Nuclear-powered desalination leverages reactor-generated heat and electricity to split salt from seawater, providing a three-fold advantage of reduced emissions, a stable water source, and low-costs. The integration of nuclear technology into the MENA’s water security portfolios has been led by the International Atomic Energy Agency’s (IAEA) sharing of toolkits like the Desalination Economic Evaluation Program (DEEP) and the Desalination Thermodynamic Optimisation Program (De-TOP).[17] Egypt, Jordan, the UAE, Saudi Arabia, Kuwait, and Tunisia have all invested under these guidelines in desalination and isotopetracing. b,[18]
SMR-Powered desalination is under consideration in Saudi Arabia, Egypt, and Kuwait,[19] while the IAEA has evaluated studies on using SMRs to convert Red Sea water into drinking water in Jordan. In countries like the UAE which has established a nuclear plant and where desalination is predominantly fuelled by natural gas, coupling desalination plants with future nuclear SMRs is projected to yield feasible[20] and cost-competitive outcomes.[21] Future nuclear and desalination plants can be combined to produce water as the only outcome or yield both electricity and pure water through a co-generation system.[22] This combination, including techniques such as Reverse-Osmosis, Multi-Stage Flash distillation and Multiple Effect Distillation, will have comparably favourable savings in both cost and emissions.c,[23],[24],[25]
Table 1. Feasibility, Added-Value, and Challenges of Nuclear Science and Technology Applications in MENA

Source: Authors’ own, using Neupane et al.[29] and Ihsanullah et al.[30]

Challenges to Nuclear Uptake
Environmental
Without integrated planning,[31]1 the deployment of nuclear energy may inadvertently threaten domestic food and water supply by consuming vast amounts of freshwater resources to cool systems, and thereby competing with other water-intensive sectors. To illustrate,[32] oncethrough cooling systems withdraw very high volumes of water, recirculating cooling systems cause high water loss from evaporation, and dry cooling systems raise air temperatures. While coastal nuclear plants can leverage desalinated water for cooling, desalination brine discharge can imperil marine ecosystems. Transitioning to water-efficient designs is still in nascent stages.
Moreover, routine emissions can pose adverse ecological risks for soil,[33]3 groundwater, and marine ecosystems. Nuclear plants situated near shallow aquifers risk potable water contamination, damages the coastal saline agriculture and endangers marine ecosystems. In arid soil, radioactive isotopes can permeate quickly, leading to increased plant uptake.[34] In the long-term, released radionuclides can disrupt ecological food chains, erode genetic diversity, and transport to human food. Although the risk of radioactive waste is substantially mitigated, radionuclides can be released under rare and extreme conditions. Advancements in geospatial technologies and molecular biology techniques can help mitigate these impacts but increasing research on safer alternatives like stable isotopes are also crucial.d,[35]

Regional
The presence of nuclear installations, regardless of their form or scale, increases the securityrisk profile of any region, and these must be factored into any considerations regarding the adoption or deployment of the form. Although nuclear-based science inputs for agriculture have marginal exposure to risks of kinetic attacks and damage, the susceptibility of nuclear energy powered desalination plants to similar threats can be considerable. It would be worthwhile to consider the security umbrellas and supervision bandwidths of each country when assessing technology deployment. Furthermore, the level of skills and expertise needed for adoption and implementation of these technologies are substantial, and the region must strengthen its local talent pool.

Financing
Although governments have signalled interest in leveraging nuclear energy, there remains a lack of infrastructure, funding, and regional coordination to fully capitalise on its potential. Adopting nuclear energy comes with prohibitively high-capex requirements, and governments may be drawn to more cost-effective options.[36] Nuclear energy and its value as a strategic commodity further entrench the centrality of governmental role in adopting this energy form in MENA. The fuel supply chains intrinsic to the entire value chain of nuclear energy’s use further ensures that governments would have a more direct participation in the field rather than private players. As such, financing remains a governmental prerogative in the region that could benefit from enhanced cross-border coordination. Notably, the World Bank’s decision[37] to reverse its decades long moratorium on financing nuclear energy projects in early 2025, when coupled with the organisation’s commitments towards food security as part of its larger human security agenda, could prove to be a valuable harbinger of change for the MENA region.

Conclusion
Advancing beyond feasibility assessments for nuclear techniques requires coordination between academics, technical experts, and policymakers to assess long-term environmental implications, prepare site-specific precautionary and remediation strategies. Notably, initiatives like Atoms4Food[38] and the FAO/IAEA’s Centre for Nuclear Techniques for Food and Agriculture[39] coordinate applied research and capacity building and help secure private financing sources.[40]
Thus, establishing regulatory frameworks that cut across the heterogeneity of MENA’s constituent national abilities would help create a safe and conducive environment for nuclear deployment for desalination. This can be achieved by creating a regional regulatory and supervisory body to mandate and track adherence to non-proliferation standards.[41] The UAE has, for instance, set a benchmark through a provision to allow inspections of its nuclear facilities at short notice. The body can also mandate integration of mitigation techniques for all future desalination infrastructure and develop a robust data-sharing system to measure water levels and desalination discharge. Such efforts will enable a policy-environment of sharing technical know-how and best-practices, and facilitate trusted adoptions.



Leigh Mante is unior Fellow, Climate and Energy, ORF Middle East, UAE.
Cauvery Ganapathy is Fellow, Climate and Energy, ORF Middle East, UAE.




Endnotes
[1] United Nations Economic and Social Commission for Western Asia, “Economic and Social Commission for Western Asia Policy Briefs on Food Security Issues in the Arab Region Food SECURITY: Policy Briefs on Food Security Issues in the Arab Region,” UNESCWA, https://www.unescwa.org/sites/default/files/pubs/ pdf/food-security-issues-arab-region-english_0.pdf.
[2] Jagerskog et al., “The Water-Energy-Food Nexus in the Middle East and North Africa: Scenarios for a Sustainable Future,” Open Knowledge Repository, https://openknowledge.worldbank.org/entities/ publication/11ca3b25-d3ab-5c72-829c-9428fd898164.
[3] United Nations Economic and Social Commission for Western Asia, “Policy Briefs on Food Security Issues in the Arab Region.”
[4] Maha Deeb et al., “The Urgency of Building Soils for Middle Eastern and North African Countries: Economic, Environmental, and Health Solutions,” Science of the Total Environment 917, 2024: 170529, https://doi. org/10.1016/j.scitotenv.2024.170529.
[5] Deeb et al., “The Urgency of Building Soils for Middle Eastern and North African Countries.”
[6] “Nuclear Techniques to Enhance Nutritional Content in Plants and Protect Soil Health,” Foro Nuclear, November 14, 2024, https://www.foronuclear.org/en/updates/in-depth/nuclear-techniques-to-enhancenutritional- content-in-plants-and-protect-soil-health/.
[7] “Neutron Probe,” Soil Sensor, https://soilsensor.com/articles/neutron-probe/.
[8] Elodie Broussard, “Nuclear Techniques Support Crop Production on Salt-affected Soils in Middle East,” IAEA Office of Public Information and Communication, September 19, 2025, https://www.iaea.org/newscenter/ news/nuclear-techniques-support-crop-production-on-salt-affected-soils-in-middle-east.
[9] International Atomic Energy Agency, “What Is Food Irradiation and Why Is It Important?,” IAEA, July 15, 2025, https://www.iaea.org/newscenter/news/what-is-food-irradiation-and-why-is-it-important.
[10] “How Food Irradiation Works,” CDC Radiation and Your Health, February 27, 2024, https://www.cdc.gov/ radiation-health/food-irradiation/index.html.
[11] International Atomic Energy Agency, “What Is Food Irradiation and Why Is It Important?”
[12] “Food Irradiation Market Size ($408 Million) 2030,” Strategic Market Research, November, 2025, https:// www.strategicmarketresearch.com/market-report/food-irradiation-market#:~:text=Adoption%20is%20 still%20in%20its,stage%2C%20security%2Dfocused%20adoption.
[13] Jaber Maataoui et al., “Global Perceptions and Acceptance of Irradiated Food: A Comparative Systematic Review,” Italian Journal of Food Safety 14, no. 2 (May 2025), https://doi.org/10.4081/ijfs.2025.12885.
[14] International Atomic Energy Agency, “What Is Food Irradiation and Why Is It Important?”
[15] World Nuclear Association, “Desalination,” May 2, 2024, https://world-nuclear.org/information-library/nonpower- nuclear-applications/industry/nuclear-desalination.
[16] “The Urgency for Water Desalination,” ACWA Power Newsroom, https://acwapower.com/en/newsroom/ press-releases/market-insight/the-urgency-for-water-desalination/.
[17] “Nuclear Desalination,” IAEA, https://www.iaea.org/topics/non-electric-applications/nuclear-desalination.
[18] “Monitoring Soil-Water-Nutrient Interaction Using Isotope and Nuclear Techniques,” IAEA, October 2018, https://www.iaea.org/sites/default/files/18/10/monitoring-soil-nutrient-interaction-using-isotope-andnuclear- techniques.pdf.
[19] International Atomic Energy Agency, “Nuclear Desalination: A Sustainable Solution for Water Security in the Arab Region,” IAEA, September 17, 2025, https://www.iaea.org/newscenter/news/nuclear-desalinationa- sustainable-solution-for-water-security-in-the-arab-region#:~:text=Unlike%20conventional%20 desalination%2C%20nuclear%20desalination,stable%2C%20long%20term%20water%20source.
[20] Mussie Naizghi et al., “Nuclear Desalination and Its Viability for the UAE,” 2011, https://doi.org/10.13140/2.1.5146.3044.
[21] Muhammad Zubair and M. S. Sajna, “Techno-Economic Analysis of SMR Integration into UAE’s Existing Desalination Infrastructure,” Annals of Nuclear Energy 227, pt. B (2026): 111989, https://doi.org/10.1016/j. anucene.2025.111989.
[22] Mussie Naizghi et al., “Nuclear Desalination and Its Viability for the UAE.”
[23] World Nuclear Association, “Desalination.”
[24] “Multi-Stage Flash,” Science Direct, https://www.sciencedirect.com/topics/engineering/multi-stage-flash.
[25] “Multiple-Effect Desalination,” Science Direct, https://www.sciencedirect.com/topics/engineering/multipleeffect- distillation.
[26] Sustainability Directory, “How Does Nuclear Energy Affect Water Resources?,” December 6, 2025, https:// energy.sustainability-directory.com/question/how-does-nuclear-energy-affect-water-resources/.
[27] Basanta Neupane et al., “Advancement in Agriculture through Radioisotopes: Current Context, Challenges, and Future Directions,” Journal of Agriculture and Food Research 21 Part B, 2025, https://doi.org/10.1016/j. jafr.2025.101966.
[28] Ihsanullah and Rashid, “Current Activities in Food Irradiation as a Sanitary and Phytosanitary Treatment.”
[29] Neupane et al., “Advancement in Agriculture Through Radioisotopes: Current Context, Challenges, and Future Directions.”
[30] Ihsanullah and Rashid, “Current Activities in Food Irradiation as a Sanitary and Phytosanitary Treatment.”
[31] Sustainability Directory, “How Does Nuclear Energy Affect Water Resources?”
[32] Sustainability Directory, “How Does Nuclear Energy Affect Water Resources?”
[33] Jan Mihalik et al., “Challenges in Radioecology Following the New Trends in UAE’s Agriculture and Environmental Changes: A Review,” Environmental Science and Pollution Research 31, no.49 (September 30, 2024): 58779–94, https://doi.org/10.1007/s11356-024-35139-z.
[34] Hang Yang et al., “Unravelling the Nuclear Isotope Tapestry: Applications, Challenges, and Future Horizons in a Dynamic Landscape,” Eco-Environment & Health 3, no. 2 (2024): 208–226, https://doi.org/10.1016/j. eehl.2024.01.001.
[35] International Atomic Energy Agency, “Stable Isotopes,” https://www.iaea.org/topics/nuclear-science/ isotopes/stable-isotopes.
[36] International Atomic Energy Agency, “Funding and Finance,” https://www.iaea.org/topics/funding-andfinance#:~: text=The%20IAEA%20also%20publishes%20financial,construction%20to%20adding%20 additional%20units.
[37] World Nuclear Association, “World Bank Shifts Policy to Fund Nuclear Energy Projects,” https://world-nuclear.org/news-and-media/press-statements/world-bank-shifts-policy-to-fund-nuclearenergy- projects.
[38] International Atomic Energy Agency, “Atoms4Food,” https://www.iaea.org/services/key-programmes/ atoms4food.
[39] Food and Agriculture Organization of the United Nations and International Atomic Energy Agency, “Joint FAO/IAEA Centre of Nuclear Techniques in Food and Agriculture,” https://www.fao.org/agriculture/fao-iaeanuclear- techniques/en.
[40] International Atomic Energy Agency et al., “Atoms4Food: Transforming Agrifood Systems With Nuclear and Isotopic Techniques,” 2023, https://www.iaea.org/sites/default/files/atoms4food-growing-food-security.pdf.
[41] Yang et al., “Unravelling the Nuclear Isotope Tapestry: Applications, Challenges, and Future Horizons in a Dynamic Landscape,” 208–226.

### Double Chokepoint: Impact of a Hormuz and Bab al-Mandeb Closure

Spotlight:


 	A simultaneous disruption of Strait of Hormuz and Bab al-Mandeb could threaten up to 30 percent of global container shipper and 25 percent of gas and oil supply.
 	The crisis extends beyond energy: impacting food security, fertilisers, shipping costs and global manufacturing supply chains.
 	The burden will be spread across geographies: Asia faces energy shocks, Africa food crises, the Horn of Africa survival risks, and Europe industrial disruption.

The world is inside a crisis that a ceasefire has paused but not resolved, and markets have yet to price the risks of escalation. A fragile two-week ceasefire between Iran and the United States(US) briefly lowered tensions but the Islamabad talks between the two nations collapsed without a deal, followed immediately by a US naval blockade of Iranian ports. The Strait of Hormuz, through which 20 percent of global oil transited in peacetime, remains largely disrupted. The threat has not eased; it has rather intensified. A second, compounding shock now looms at the Bab el-Mandeb, the 18-mile-wide passage between Houthi-controlled Yemen and the Horn of Africa. The International Energy Agency (IEA) has already called the Hormuz disruption the largest supply disruption in the history of the global oil market. A double chokepoint would be categorically worse, with consequences extending beyond the region to the global economy. . In this  context, assessing the extra‑regional economic impact of simultaneous closures is essential.

Why the Threat is Real and Imminent
The threat of the dual closure is declared, not speculative. The Houthis are a part of Iran’s Axis of Resistance, a regional network of armed groups that coordinate attacks in solidarity. Iran’s former Foreign Minister, posted explicitly on X that "the unified command of the Resistance front views Bab al-Mandeb as it does Hormuz. If the White House dares to repeat its foolish mistakes, it will soon realize that the flow of global energy and trade can be disrupted with a single move." The Houthi deputy information minister confirmed, Bab al-Mandeb “will be among the options” for leverage in the ongoing war. The Houthis already entered the conflict on March 28, when they launched ballistic missiles at Israel. This is not idle rhetoric. Since the 2023 Gaza war, Houthi forces have attacked more than 130 commercial ships, demonstating both intent and capability Therefore, infrastructure for a blockade is already in place. The Houthis possess the capacity to act but have exercised strategic restraint, holding the Red Sea as a deterrent of last resort while their fragile domestic economy and ties with Saudi Arabia impose limits on escalation. Should that calculus shift, the Bab al-Mandeb could become the next casualty.

The threat of the dual closure is declared, not speculated.
The fragile ceasefire is explicitly contested as Israel refused to halt attacks against Hezbollah (member of Iran’s Axis of Resistance), contradicting Iran’s demands. Despite the Israel-Lebanon temporary ceasefire, Israel is committed to disarming Hezbollah, a move that could further incentivise the Axis to unite and leverage global trade as a tool of war. Critically, the ceasefire has not explicitly imposed any obligations on the Houthis and set no conditions on Yemen. In practice, the Houthis have begun screening ships transiting the Red Sea by political identity, applying the same pressure formula Iran used in the Strait of Hormuz.

Economic Impact of a Double Closure
The Hormuz closure makes the Bab al-Mandeb threat even more urgent. A combined Hormuz and Bab al-Mandeb disruption places an estimated US$10 billion per day of global trade at risk, blocking approximately 30 percent of global container shipping from normal routing and threatening roughly 22 percent of global oil supply. When Hormuz closed, Riyadh activated its East-West Pipeline at full 7 million barrels per day capacity. This bypass has been a key reason oil prices have not yet breached the US$200 mark threatened by Iran.
The pipeline does not solve the chokepoint problem; it merely relocates it. Every tanker leaving Saudi Arabia’s  western Yanbu Port for Asia must transit Bab al-Mandeb, leaving an estimated 70–75 percent of Yanbu's exports directly exposed to Houthi disruption. This pipeline now sits inside the next threat zone, with clear implications for oil prices. If Bab al-Mandeb and the Strait of Hormuz were closed simultaneously, roughly 25 percent of the world’s oil and gas supply would be blocked.
Framing a dual closure as primarily an energy crisis fundamentally underestimates its scale. Bab al-Mandeb is not just an oil corridor, it is the southern gateway to the Suez Canal. Approximately 10–12 percent of all global seaborne trade and a third of European imports transits  the strait, linking Asia, Europe and East Africa. This extends to a fifth of the world’s aluminum trade and 13  percent of automobiles or automotive adjacent products. Consumer durables including 40 percent of the world’s vacuum cleaner trade, 25 percent of microwaves and 22 percent of washing machines all transit Bab al-Mandeb.   The alternative route, via the Cape of Good Hope, adds 10–14 days and US$1.2-1.8 million in additional fuel costs per round trip, inflating consumer prices worldwide. This damage is already visible: in March 2026, Maersk, CMA CGM and Hapag-Lloyd began rerouting vessels around the Cape of Good Hope, while war-risk insurance premiums have soared more than 1,000% since the conflict began.

A combined Hormuz and Bab al-Mandeb disruption places an estimated $10 billion per day of global trade at risk.
Another dimension with potentially irreversible consequences is food and fertilisers. One-third of global seaborne fertiliser trade transits the Strait of Hormuz, with 46 percent of global urea trade originating from the region. Urea prices have already risen  86 percent from the beginning of this year. The countries bearing the sharpest exposure are India (world's largest urea importer) and Brazil (imported its entire urea supply in 2025 with 40 percent travelling through Hormuz). Beyond these, Sudan, Sri Lanka and other import-dependent nations in South Asia and Africa face severe food security. Agricultural commodities such as wheat, fertilizers and edible oils move in large volumes through the Bab al-Mandeb. The simultaneous closure of Bab al-Mandeb and the Strait of Hormuz could create a near-complete sea access blockade for regional grain imports.

Who Bears the Heaviest Burden
Four distinct regional clusters face categorically different forms of exposure from a dual closure: Asian industrial economies reliant on oil flows, the Global South food-import dependent states, the fragile economies of the Horn of Africa's  and the advanced industrial economies of Europe.
Asia faces the most immediate energy shock. Asia imported 14.74 million barrels per day of Middle Eastern crude in 2025, nearly 60 percent of the region's total purchases. A dual closure cuts even the Yanbu bypass that partially sustained these economies through the Hormuz crisis. Countries like Bangladesh entered the crisis with fuel reserves for as little as 9-14 days, they have already implemented varying levels of austerity measures like four-day work weeks and work-from-home.
The second category is in Sub-Saharan Africa and South Asia, through food and fertiliser. 45 million more people could be pushed into acute food insecurity in 2026 if the conflict persists. Projections indicate a 21 percent increase in food-insecure people for West and Central Africa and a 17 percent rise for East and Southern Africa. For example, Sudan imports approximately 80 percent of its wheat and Somalia witnessed a 20 percent rise in essential commodity prices since the conflict began. Further, South Asia remains vulnerable as Bangladesh is in its critical Boro rice season, Sri Lanka is amid the Maha rice harvest and India is facing reduced domestic fertilizer production ahead of the Kharif planting season. These are hard agricultural deadlines as planting seasons cannot be deferred.
The Horn of Africa presents a third, geographically terminal category. Port of Djibouti and Port of Sudan are critical ports on the Red Sea that serve the Horn of Africa. Blocking ships from docking at these ports would prevent the delivery of food, medicine or fuel to the people of the Horn. For example, the land-locked nation of Ethiopia relies almost entirely on the port of Djibouti for its imports and exports, making any disruption to the Djibouti corridor is an immediate threat to both its economy and political stability. Unlike countries below the Horn of Africa or African states with Atlantic access, most Horn nations have no viable commercial bypass.

The geopolitics of a dual closure are concentrated in a few capitals and military commands but the human consequences are distributed across a much wider geography and they do not fall evenly.
Europe remains exposed through manufacturing and LNG dependency. European carmakers source majority of their parts from Asia and 61 percent of China’s vehicle imports arrive via the Bab al-Mandeb. European automotive suppliers observed disruption of aluminum, chemicals and plastics supplies. Due to stringent specifications, finding new suppliers can take up to 18 months, reducing near-term alternatives. The continent is also simultaneously losing Gulf LNG. Europe was already vulnerable due to depleted gas storage after high winter demand and increased exports to Ukraine. This is critical ahead of the winter. European storage levels are currently below 30 percent but under EU regulations these levels must reach at least 90 percent capacity by December. The dual closure could hit the continent through energy costs, raw material shortages and the breakdown of just-in-time supply chains.

Conclusion
The geopolitics of a dual closure are concentrated in a few capitals and military commands but the human consequences are distributed across a much wider geography and unevenly. What divides these four categories is the asymmetry of their fallback options and the clarity with which those options are distributed along existing fault lines of wealth, geography and state capacity. While countries like Japan hold substantial oil reserves, Bangladesh possesses almost none. Similarly, while European economies have some latitude to diversify its supply chain, Ethiopia cannot build a port and Sri Lanka cannot change its harvest calendar. Therefore, while the crisis transcends borders, the capacity to withstand it does not. A partial Hormuz closure could reduce global GDP growth by 2.9 percentage points annualised. A full dual closure, sustained beyond weeks, could trigger a deeper economic crisis.



Samriddhi Vij is an Associate Fellow, Geopolitics, at ORF Middle East.

### Why Asia Cannot Replace Gulf Crude Easily

Spotlight:


 	The ongoing crisis highlights Asian refineries’ heavy reliance on Middle Eastern crude rooted in design and supply chains.
 	Oil substitution is costly and inefficient due to decades of specialisation in Gulf processing.
 	India and China show resilience; South Korea and Singapore face moderate risk; Japan, remains most vulnerable.

The energy crisis triggered by the 2026 Iran war was the culmination of a structural dependency built over half a century. In 2025, Asia imported 14.74 million barrels per day of Middle Eastern crude , nearly 60 percent of its total purchases. When the United States (US) and Israel struck Iran in February 2026, Iran closed the Strait of Hormuz, the dependency became a regional emergency. The International Energy Agency (IEA)  described the disruption as the largest supply shock in the history of the global oil market. The question that followed —whether Asia could source oil elsewhere—proved far from straightforward.The reasons lie in chemistry and capital: refineries are specialised systems, built over decades to process Gulf crude, with billions invested in desulfursation and heavy‑crude capacity. While the current crisis may not be permanent, Asia’s dependency on Middle Eastern crude is, necessitating a deeper examination of the structure and extent of this vulnerability.

Types of Crude and Gulf Crude Variety
Not all oil is the same. Every barrel of crude is defined by two properties: density and sulfur content. Density differentiates the crude between light and heavy. Light crude flows easily and yields large volumes of high-value fuels like gasoline and diesel. Heavy crude is thick and viscous, requiring more processing. The second major characterisation is based on its Sulfur content and is either “sweet” or “sour”. Sweet crude has low sulfur content so it is simpler to refine but commands a premium. Sour crude requires specialist equipment, desulfurisation units, to strip out impurities. It sells at a discount, making it attractive to refineries that have already made the capital investment. Gulf crude is largely medium and sour, while US crude is light and sweet. Therefore, these are chemically distinct products, not interchangeable substitutes.

Density differentiates the crude between light and heavy. Light crude flows easily and yields large volumes of high-value fuels like gasoline and diesel. 
Saudi Arabia, the United Arab Emirates (UAE) and Iraq are Asia's three largest suppliers. Saudi Arabian Light is the benchmark medium-sour grade, anchoring refinery diets across China, India, Japan and South Korea. Arab Heavy and Medium are heavier and more sulfurous, the feedstock for Asia's more complex refineries. Iraq's Basra grades are broadly similar. The UAE's crude is lighter but still sour. While this oil is produced in the Middle East, it is refined in Asia. Therefore, these medium-to-heavy sour grades define what Asian refineries were built to consume.

Why Asia Cannot Easily Replace Gulf Crude
Asian economies face several constraints. Refiners in China, Japan, South Korea, India and Southeast Asia have configured their plants to process medium and heavy sour crude grades produced by Gulf exporters. These are not general-purpose facilities but are precision systems, calibrated over decades for a specific feedstock.
Asian refineries have invested billions in desulfurisation systems, which are calibrated for high-sulfur Gulf crude that is typically cheaper than low-sulphur grades. Switching crude grades changes product yields at refineries, requiring operational adjustments across blending, cracking and output specifications. This erodes throughput in the short term, leading to yield trade-offs that can reduce profitability.
The alternatives available are fundamentally mismatched. US crude is light and sweet, the incorrect density and chemistry for refineries built around Gulf sour crude. Russian supply is largely committed to China and India. Refineries that cannot substitute lighter grades without configuration penalties are now competing for alternatives from the Americas and West Africa, adding freight cost, lead time and feedstock uncertainty. As a result, there are no viable near-term replacements for Gulf crude. Permanent reconfigurations can take years and cost billions. For example, ExxonMobil spent US$2 billion and four years adding a crude distillation unit at its Texas refinery to process a new crude type, light Permian shale oil.

Refineries that cannot substitute lighter grades without configuration penalties are now competing for alternatives from the Americas and West Africa, adding freight cost, lead time and feedstock uncertainty.
This dependency is not accidental. Most Asian refiners lock in more than 50 percent of their crude through long-term contracts, limiting their ability to rapidly pivot. Additionally, Middle East oil producers are investing in Asian refineries, that is deepening this dependency. Saudi Aramco acquired equity stakes in refineries across Asia, integrating supply chains and guaranteeing customers while making Asian refiners more dependent on Gulf feedstock. Hence, some Asian refineries have already cut throughput by 10 percent or more since the Hormuz closure. This is not because there is no oil in the world, but because there is a paucity of the right kind.

Variations amongst Key Asian Refineries
While the dependency on Middle Eastern crude remains, not all Asian nations and refineries face the same degree of exposure. A refinery's ability to switch crude types is determined by several interlocking factors: processing equipment complexity, supply contracts’ structure, owners and Gulf producers’ equity ties, and the product slate economics it is optimised to deliver.
The Nelson Complexity Index (NCI) captures the first of these. It measures the sophistication of a refinery's secondary conversion equipment like catalytic crackers, hydrocrackers, cokers and reformers that allow it to process heavier or more sulfurous crude and still yield high-value fuels. A higher NCI indicates greater feedstock flexibility, meaning the refinery can handle a wider range of crude grades.
Yet, flexibility is not the same as independence. A refinery may be technically capable of running multiple crude types but still be contractually locked into long-term Gulf supply agreements, ownership structures, or product-yield economics calibrated around specific grades. We assess five key Asian economies on these dimensions.
India is considered to have a relatively high degree of flexibility. Its Jamnagar complex, operated by Reliance Industries, carries an NCI of 21.1, the highest of any single-site refinery in the world and has processed over 216 different crude grades. India has also actively diversified its crude import base, around 65–70 percent  of crude now comes from non-West Asian sources, and roughly 70 percent  arrives via routes outside Hormuz, compared to 55 percent earlier. Russia accounts for roughly 35 percent  of India's crude imports and the US for 10–13 percent  in peak months. The Indian government stated that Indian companies have "full flexibility to source oil from different sources and geographies based on commercial considerations.” India's relative insulation is therefore both technical and strategic, high NCI refineries combined with a deliberate supply diversification policy.
China occupies a comparable position of relative resilience. Major refineries including Sinopec's Zhenhai complex (NCI 11.13) and Zhejiang Petrochemical's integrated Zhoushan facility (NCI 12.06) are built to process heavy and sour crudes, with fluid catalytic cracking (FCC) and hydrocracking units calibrated for medium-sour Gulf grades. China sources roughly half of its seaborne crude imports from the Middle East but does not rely on any single country for more than 20 percent  of its supply. In 2025, five countries: Russia, Saudi Arabia, Malaysia, Iraq and Brazil together accounted for 62 percent  of its crude imports. While China's General Administration of Customs has not reported crude imports from Iran since 2022, analytics firm Kpler estimates Iran accounted for 12 percent of Chinese crude imports in 2025.  China also produces over 4 million b/d domestically and its access to discounted  Russian crude has provided insulation.

The Indian government stated that Indian companies have "full flexibility to source oil from different sources and geographies based on commercial considerations.”
South Korea presents a more divided picture. Its refineries are large and highly complex, Ulsan (NCI 7.3), Yeosu (NCI 6.8) and Onsan (NCI 9.8) all feature heavy oil upgrading, desulphurisation and residue conversion units. At the national level, the Middle East accounted for 69.6 percent of Korean crude imports in 2025, down from 86 percent in 2016, while the US share rose to 16.3 percent from 0.21percent over the same period. However, the distribution is highly uneven by company. Onsan, operated by S-Oil relies on Middle Eastern oil for over 90 percent  of its inputs, a result of Saudi Aramco holding a majority stake and locking in Saudi feedstock. Contrastingly, Daesan I refinery (NCI 10.63), operated by HD Hyundai Oilbank, has 60 percent dependence on Middle Eastern oil, the lowest among its peers. Korean refiners remain structurally cautious about switching to US light sweet crude: retrofitting plants for lighter grades would prevent efficient heavy Gulf crude processing. The economic rationale for Gulf crude also persists as the pre-conflict lower prices, shorter transit and established supply chains generate margins that US crude cannot easily replicate.
Singapore, a trading and export refining hub rather than a domestic consumption economy, has a distinct profile. Over two-thirds of Singapore's crude imports come from the UAE, Qatar, Saudi Arabia and Kuwait. Its dependence on Middle Eastern oil rose to over 70 percent  in 2025 (from 50 percent in 2024), after ExxonMobil completed a refinery expansion requiring heavy oil supply from the region. Singapore's refineries are export-oriented and process a variety of grades, but the recent expansion makes its crude intake more concentrated on Gulf heavy grades.
Japan seems to be the most structurally exposed of the five economies. Japanese refineries are smaller and less complex than the newer facilities in China, South Korea and India, with limited secondary conversion capacity to handle grades outside their configured range. Japan's import mix is concentrated in light and medium Middle East grades accounting for roughly 70 percent of delivered import volumes since 2024. Japan has taken steps to diversify: it purchased a record 103,784 b/d of US crudes in 2025, nearly double the 2024 figure, and Taiyo Oil made Japan's first import of Russian Sakhalin Blend, a light sweet crude since January 2023. However, analysts note that refinery configurations and logistical constraints are likely to cap how far Japanese refiners can shift toward US crude.
The five economies examined reveal a spectrum of vulnerability rather than a uniform crisis. Decades of competitively priced Gulf crude, stable long-term contracts and equity investments by the Gulf into Asian refinery infrastructure created a self-reinforcing system. India and China have demonstrated higher resilience through technical complexity and supply diversification, South Korea and Singapore face real but more manageable exposure, while Japan remains the most structurally vulnerable. The chemistry of Gulf crude and the capital architecture of Asian refining have evolved together. Replacing one requires rebuilding the other, and that is not a short-term proposition.



Parul Bakshi is Fellow, Energy and Climate, ORF Middle East.
Samriddhi Vij is Associate Fellow, Geopolitics, ORF Middle East.

### Water Security Modelling and Drought Forecasting in the MENA Region

This article is the part of “Policy Pathways for Food and Water Security in the MENA Region”



Water scarcity has shaped the Middle East and North Africa (MENA) region for millennia. This constant challenge, however, has also been a powerful catalyst for innovation, as evidenced by the ancient dams and sophisticated water management systems found across the region. Today, in an era of accelerating climate change, rapid population growth, and increasing urbanisation, the need for such innovation is more critical than ever. The MENA region is a global climate change hotspot, warming at twice the global average and facing projections of more frequent, intense and prolonged heatwaves and droughts.[1] This environmental stress is compounded by socio-economic pressures, including some of the world’s highest population growth rates and a heavy reliance on water-intensive agriculture for food security. One of the most vital factors in navigating this complex landscape is the ability to accurately understand, predict, and mitigate the impacts of droughts on water security and, consequently, on socio-economic development and geopolitical stability.
To frame the modern challenge, a drought is defined not simply as dryness, but as an extended period of water conditions falling significantly below the established norm for a particular area. This distinction is crucial; droughts are not unique to arid regions, as even humid areas such as those in Latin America and Indochina can also suffer from droughts if dry conditions persist. Conversely, the characteristically dry climate of the GCC is not considered a drought when it falls within normal variability. The true threat of drought unfolds through a cascading sequence of interconnected events. It begins with meteorological drought, a prolonged deficit in precipitation. If this persists, it can lead to an agricultural drought, where soil moisture becomes too low to support crops and rangelands, devastating rural livelihoods. This, in turn, can trigger a hydrological drought, characterised by a major reduction in surface water flows and groundwater levels, causing rivers, lakes, and wells to dry up. Finally, these physical water shortages can culminate in a socio-economic drought, where the disruption to water supply impacts health, social well-being, and economic activities, from energy production to industrial output. The “Day Zero” crisis in Cape Town, South Africa,[2] serves as a stark modern example of this progression, where years of poor rainfall from 2015 to 2020 led to the neartotal depletion of city reservoirs, threatening to turn off the taps for millions and causing severe economic disruption.

The Modern Toolkit for Drought Forecasting
Water scarcity modelling and drought forecasting are best understood within the broader framework of integrated water resources management. The process relies on a suite of advanced tools that transform raw data into actionable intelligence. The core challenge, especially in drought forecasting, is that its onset is often a slow, creeping phenomenon; it can take a long period of worsening conditions before a drought is officially recognised, by which time significant damage may have already occurred. Developing reliable early warning systems is therefore paramount, and a combination of advanced technologies is enhancing our ability to do just that.

Hydrological Models
These are sophisticated computer programmes that create a virtual representation of a watershed to simulate the movement of water. They vary in complexity, from simpler “blackbox” algorithms that rely on statistical relationships between meteorological variables and runoff, without being explicitly grounded on physical processes, to highly complex, physically groundwater recharge. Models like the Soil and Water Assessment Tool (SWAT) are particularly powerful, as they can also assess the impact of land use and agricultural practices on water quality and pollutant transport. An extensive review of over 3,000 studies confirmed the immense value of using SWAT for managing water resources in arid and semi-arid irrigated watersheds common in the MENA region.[3] Other tools, such as the Water Evaluation and Planning (WEAP) system,[4] can operate in a forecasting mode, using meteorological forecasts to simulate how different water allocation policies would perform under future drought scenarios. Furthermore, System Dynamics modelling has been used to create interactive platforms that allow policymakers to simulate the consequences of their decisions as a virtual drought unfolds, as demonstrated by a hydro-economic model developed to manage groundwater sustainability in Abu Dhabi.[5]

Climate Models
Complementing these are global and regional climate models, which provide long-term projections of precipitation and temperature patterns that are essential for assessing future drought risk. A study using regional climate models from the RICCAR/CORDEX-MENA initiative and the Standardized Precipitation Index (SPI-3) projected significant shifts in seasonal drought patterns across the region under different greenhouse gas emissions scenarios (RCP4.5 and RCP8.5).[6] The findings suggest that by the mid-twenty-first century, droughts are likely to intensify in the Moroccan Highlands and along the Mediterranean coast and the Mashreq region. To improve long-range forecasts, scientists also leverage teleconnection indices, which are patterns of large-scale sea surface temperature and atmospheric pressure that influence weather globally, such as the El Niño-Southern Oscillation (ENSO), the North Atlantic Oscillation (NAO), the Pacific Decadal Oscillation (PDO), and the Indian Ocean Dipole (IOD). A study in Saudi Arabia, for example, successfully linked the kingdom’s wet season to ENSO and PDO, creating a statistical basis for more reliable rainfall prediction.[7]

Remote Sensing and Earth Observation
Perhaps the most transformative technology for drought monitoring has been satellites, which provide a continuous, wide-area view of key environmental variables, offering data for regions where ground-based measurements are sparse or inaccessible. For example, spaceobserved changes in vegetation health serve as a powerful leading indicator of agricultural drought, as plants in arid regions respond very quickly to a lack of rainfall. The Normalized Difference Vegetation Index (NDVI), derived from satellite imagery, is a globally used metric for monitoring vegetation health and has proven highly effective in identifying the onset and impact of drought on agriculture and pastoralism. The Food and Agriculture Organization (FAO) now provides country-level maps of NDVI to support national drought monitoring efforts.[8] A study in Morocco showed how assimilating satellite-derived data, such as the Leaf Area Index (LAI), into land surface models like NASA’s Noah-MP could significantly improve the based models that simulate the intricate processes of soil infiltration, surface runoff, and model’s ability to accurately represent vegetation growth and transpiration, thereby enhancing drought forecasting.[9] Across MENA, however, the effectiveness of these tools is constrained by uneven data infrastructure, ranging from Morocco’s relatively established basin-agency networks to severe data scarcity in Yemen and parts of Libya. National security issues and weak data-sharing frameworks also limit access to transboundary aquifer information. Beyond vegetation, the Gravity Recovery and Climate Experiment (GRACE/GRACE-FO), a joint NASA and German Aerospace Center satellite mission, has revolutionised our ability to monitor groundwater, which is a critical buffer during droughts. By measuring tiny changes in Earth’s gravity field, GRACE can track changes in large-scale water storage deep underground. A landmark study using GRACE data revealed a sharp decline in groundwater storage across the Arabian Peninsula’s transboundary aquifer between 2002 and 2021, driven primarily by unsustainable agricultural extraction and urban expansion.[10]

Machine Learning and Artificial Intelligence
More recently, machine learning (ML) and artificial intelligence (AI) have emerged as powerful tools in drought prediction. Unlike traditional physical models, which require vast amounts of data and computational power, ML models excel at identifying complex patterns and statistical relationships within historical hydro-meteorological data to produce high-quality forecasts. Techniques like artificial neural networks (ANNs) and advanced Long Short-Term Memory (LSTM) networks are proving particularly effective. A study in Kuwait successfully used an ANN model to forecast droughts with good accuracy up to 24 months in advance.[11] The same study has also developed an ML model that forecasts monthly urban water demand based on temperature as a proxy of extreme conditions. Another study in Iraq demonstrated the power of LSTM models, which were trained on a century-long climate record to produce a highly accurate drought outlook extending to 2060.[12] This success stems from the model’s ability to capture the “long-term memory” in climate systems, such as slow-moving groundwater and ocean cycles, that drive drought evolution. For policy uptake, however, ML models must be paired with local technical capacity and basic interpretability measures to ensure that forecasts can be understood and trusted by water managers, especially in countries where institutional capacity is limited.

Outlook for Drought Forecasting and Water Management in MENA
Because MENA relies significantly on irrigated agriculture and food imports, improved drought forecasting has direct implications for food-system stability by enabling better crop planning, effective management of groundwater resources during dry spells, and early interventions to protect rangelands and pastoral livelihoods. Even modest gains in early warning can therefore help reduce exposure to agricultural shocks and food price volatility.
Looking ahead, the integration of these technologies into coherent policy and governance frameworks will be the defining challenge for water management in the MENA region. Four key priorities should guide this effort. First, there is an urgent need to strengthen data infrastructure, investing in both on-the-ground meteorological stations and regional datasharing platforms to improve the accuracy of early warning systems. Second, the region must advance integrated modelling, developing frameworks that link hydrology, climate, agriculture, and economics to provide policymakers with a holistic view of how drought can cascade through their societies and economies. Third, governments must embrace adaptive management, using drought forecasts to dynamically update reservoir operations and groundwater extraction, pre-emptively adjust water allocations, and trigger mitigation plans before a crisis fully develops. Fourth, climate adaptation must be mainstreamed into all longterm planning, ensuring that new infrastructure projects and agricultural policies are designed to be resilient to the more frequent and intense droughts projected for the future. Ultimately, the science and technology for forecasting drought are advancing at a remarkable pace. The enduring challenge, as it ha
s been for millennia, lies in translating that knowledge into effective governance, proactive policy, and forward-looking investments to secure a water-resilient future for all.


Hamed Assaf is Dean of the School of Engineering and Computing, American University of Ras Al Khaimah, UAE.




Endnotes
[1] “MENA Region Warming At Nearly Twice the Global Average,” Greenpeace, November 2, 2022, MENA region warming at nearly twice the global average - Greenpeace Middle East and North Africa - Greenpeace Middle East and North Africa.
[2] Aryn Baker, “What It’s Like to Live Through Cape Town’s Massive Water Crisis,” Time, https://time.com/capetown- south-africa-water-crisis/.
[3] Maryam Samimi et al., “Modeling Arid/Semi-arid Irrigated Agricultural Watersheds with SWAT: Applications, Challenges, and Solution Strategies,” Journal of Hydrology 590, November 2020, https://www.sciencedirect. com/science/article/abs/pii/S0022169420308787.
[4] WEAP, “WEAP In Action,” WEAP: Water Evaluation and Adaptation Planning.
[5] Hamed Assaf, “Hydroeconomic Groundwater Model for Managing Multi-Salinity Aquifers in Arid Regions,” in Water Resources Management and Sustainability, ed. Mohsen Sherif, Vijay P. Singh Ahmed SefeInasr, and M. Abrar Editors (Springer, 2023).
[6] Marlene A. Tomaszkiewicz, “Future Seasonal Drought Conditions over the CORDEX-MENA/Aarab Domain,” Atmosphere 12, no.7 (2021), https://doi.org/10.3390/atmos12070856.
[7] Amro Elfeki et al., “Spatiotemporal Analysis of Monthly Rainfall Over Saudi Arabia and Global Teleconnections,” Geomatics, Natural Hazards and Risk, October 3, 2022, Full article: Spatiotemporal analysis of monthly rainfall over Saudi Arabia and global teleconnections.
[8] Food and Agriculture Organization of the United Nations, “United Arab Emirates,” https://www.fao.org/ giews/earthobservation/country/index.jsp?code=AR.
[9] Wanshu Nie et al., “Towards Effective Drought Monitoring In The Middle East And North Africa (MENA) Region: Implications From Assimilating Leaf Area Index And Soil Moisture Into the Noah-MP Land Surface Model for Morocco,” European Geosciences Union, May 6, 2022, https://hess.copernicus.org/ articles/26/2365/2022/.
[10] Mohammed O. Altayyar et al., “Quantifying Groundwater Depletion In Arabian Peninsula Transboundary Aquifer Systems: Understanding Natural and Anthropogenic Drivers,” Groundwater for Sustainable Development 26, August 2024, https://www.sciencedirect.com/science/article/abs/pii/S2352801X24002169?via%3Dihub.
[11] Abdullah A. Alsumaiei, “Modeling the Onset of Drought Periods Using Explainable Machine Learning Models Enhanced by Bayesian Optimization,” Journal of Hydrologic Engineering 30, no.4 (2025), https://ascelibrary.org/doi/10.1061/JHYEFF.HEENG-6515.
[12] Haitham Abdulmohsin Afan et al., “LSTM Model Integrated Remote Sensing Data for Drought Prediction: A Study on Climate Change Impacts on Water Availability in the Arid Region,” Water 16, no. 19 (2024), LSTM Model Integrated Remote Sensing Data for Drought Prediction: A Study on Climate Change Impacts on Water Availability in the Arid Region.

### Geoeconomic Rebalancing after the Gulf Crisis

Spotlight

 	The ongoing crisis in the Middle East underscores the enduring centrality of the region within globalisation.
 	It has exposed significant vulnerabilities in the geoeconomic architectures of both China and the US.
 	In the year that the US assumes the presidency of the G20, the crisis strengthens the case for renewed international competition—an outcome made more complex by fraught geopolitics and intense geoeconomic competition.

In 2012, a map produced by McKinsey predicted that, by 2025, the centre of gravity of the global economy would continue its south-eastward trajectory from the North Atlantic and lie just north of Kazakhstan—that is, near the boundary of the International Monetary Fund’s Middle East and Central Asia region. This steady shift reflected Asia’s rising economic weight, as China and India reclaim their historical share of global output.

In recent years, dynamics in the Gulf have mirrored this broader global movement. Western financial institutions have increasingly turned to Abu Dhabi, Doha, and Kuwait to access vast pools of sovereign wealth steadily accumulated through servicing Asian energy demand. Meanwhile Dubai has consolidated its position as a focal point of global logistics, mobility and trade, as reflected in the performance of its international airport and the Jebel Ali container port—two critical hubs of Afro-Eurasian connectivity.
The current crisis functions as a stress test for major economic powers, exposing both the resilience and the limits of their growth models, hedging strategies, and pursuit of strategic autonomy.
With the Middle East occupying such a pivotal position in globalisation, it is little wonder that the unfolding crisis in the region carries two implications of global significance. The first is a major, multifaceted shock—adding to a sequence that includes the COVID 19 pandemic and the Russia–Ukraine war. The second is a recalibration of the terms of the geoeconomic competition—primarily between China and the United States (US).

As a result, the current crisis functions as a stress test for major economic powers, exposing both the resilience and the limits of their growth models, hedging strategies, and pursuit of strategic autonomy.

An examination of pivotal sectors—particularly, artificial intelligence (AI) and cleantech—reveals that the very strengths underpinning the standing of major powers have also generated vulnerabilities, which the Iran crisis may intensify. As the global economy remains deeply interconnected despite ongoing geoeconomic fragmentation, addressing these vulnerabilities requires serious and constructive engagement. Yet, in a context of intensifying great power competition, such engagement is likely to be delayed, as major powers seek to consolidate their positions and maximise leverage over their rivals.
Double-Edged Swords
An examination of the capacities that China and the US have developed in the context of geoeconomic competition suggests that their very strengths embed significant vulnerabilities, which are exposed by the current crisis.

In the case of the US, dominance in AI has translated into tangible advantages, including enhanced military capabilities, as illustrated by the use of AI-enabled systems in recent operations in Iran.

Yet this same strength contributes to an increasingly imbalanced political economy. AI plays a disproportionate role in US growth, capital expenditure, and consumption. While the risk of an abrupt correction remains contained and tech stocks rallied after the announcement of a ceasefire between Iran and the US, such concentration creates exposure to sector-specific shocks. One way this could unfold is via sustained disruptions to the complex supply chains underpinning the AI ecosystem: for instance, Qatar produces about a third of global helium, an input for computer chip production. Moreover, rising electricity costs, which can account for up to 30 percent of data centre operating expenses, could affect the profitability of the AI industry—a recurring concern. Finally, while Gulf countries appear intent on upholding their commitments to US technology, the potential adverse effects of partial redeployment should not be underestimated. In a context of mounting anxieties over the quality of credit and stress in the US$ 22 trillion private capital industry, which have fuelled the capital expenditure of hyperscalers, the repercussions could be systemic.
An examination of the capacities that China and the US have developed in the context of geoeconomic competition suggests that their very strengths embed significant vulnerabilities, which are exposed by the current crisis.
An abrupt correction in AI valuations—the top 8 US tech companies have a cumulated market capitalisation of roughly US$ 20 trillion, about two thirds of US GDP—could wreak havoc at the heart of the US financial system, a central pillar of the international financial and monetary system. Confidence in US Treasuries—a US$ 30 trillion market—as reserve assets has already come under pressure, as reflected in rising yields, in a context of widening fiscal deficits further exacerbated following the adoption of the “One Big Beautiful Bill Act”.

Conversely, China dominates the cleantech stack. Upstream, it is by far the dominant player in mining and refining critical minerals, including rare earth elements, which are essential for both AI value chains, defence and the green transition: according to the international energy agency, China has an average market share of 70 percent for the refining of 19 out of 20 studied transition minerals. Downstream, it accounts for 70 percent of the global manufacturing capacity for cleantech. This dominance positions China to benefit from an acceleration of the energy transition, as countries seek to reduce dependence on oil and gas flows exposed to vulnerable chokepoints. China’s leadership in cleantech is embedded in a broader trajectory: an unprecedented industrial expansion that has resulted in the largest level of manufacturing value added in history. Sustained by massive fixed capital investment and state support—and increasingly augmented by the deployment of AI and automation—this industrial base has become a powerful geoeconomic lever. For instance, it may constitute a key competitive advantage in the AI race, as China can deploy the technology at scale for direct applications in physical processes.

However, China’s industrial strength may equally constitute a source of fragility. The country is grappling with what policymakers describe as “involution”: a dynamic of excessive competition and overcapacity that compresses prices and erodes profitability across sectors. Second, the economy remains structurally dependent on external demand to absorb excess capacity, creating immense vulnerability. These trends are acute in cleantech, which has accounted for over 90 percent of Chinese investment growth last year. A slowdown in the global economy could thus translate into acute domestic stress.
Grand Bargain
As we previously noted, the Iranian sequence should be understood within a larger dynamic of radicalisation of geoconomics, characterised by a normalisation of confiscation and resource grab. Controlling vast additional resources of oil and gas is a way for the US to strengthen its energy dominance—a key agenda of the current administration – notably in the face of Chinese superiority in cleantech. In particular, a swift US success in Iran capped by sudden capitulation of Tehran, would have considerably strengthened the US hand ahead of the Trump-Xi summit initially scheduled for late March, and now postponed to May.

As things stand, the opposite happened, and many have analysed the unfolding geopolitical sequence as a strategic win for China. There is some déjà-vu to the current crisis: while the US ventures into another Middle Eastern crisis at immense costs (US$ 8 trillion in the 20 years following the War on Terror), China consolidates its pre-eminence in critical technologies and associated value chains.

But Chinese excessive reliance on global demand and US fiscal woes point to another direction: the need to jointly contribute to rebalance the global economy. In recent weeks, major institutions and groupings including the Bank of England, the G7 and the IMF have documented the risks presented by the rise in global imbalances—the sum of the absolute value of current account positions as share of global output. Such imbalances, which were corrected in the years that followed the global financial crisis (GFC), are now reaching concerning levels, widening and persistent. As such, there is strong past evidence they pose serious risks to global growth, trade and financial stability, and could trigger a major crisis. Because imbalances are the result of mismatches in exchange rates, fiscal positions and growth models (e.g., consumption- or exports-driven), they are best corrected through policy coordination.

The setback suffered by the US in Iran, strong international demand for stability and sharp awareness of the need for reform in China and Europe could contribute to tilt the balance in this direction, at a time the US is assuming the presidency of the G20. It is the G20, after all, which served as a coordination platform to reduce the imbalances which resulted in the GFC.

But such course correction will be challenging. Recent events have demonstrated that power politics remains intense, and geopolitics highly fraught. In the first trimester of 2026, the US attempted twice to seize the oil resources of countries that supplied oil to China, deepening distrust toward Washington.

As a result, geoeconomic competition is likely to persist in the foreseeable future. It may even intensify, as countries seek to hold onto their geoeconomic advantage—possibly pushing their competitors to the brink. Yet the risks of such an approach are huge. If anything, the Middle East crisis may help major economies accelerate a pivot towards more cooperation—underscoring the renewed centrality of this region in the international system.



Akram Zaoui is an Associate Fellow, Geopolitics, at ORF Middle East.

### Catalysing the GCC’s Waste-to-Energy Prospects for Agriculture

This article is the part of “Policy Pathways for Food and Water Security in the MENA Region”



The Gulf Cooperation Council (GCC) is projected to experience exponential population growth in the coming years, which will undoubtedly compound waste generation. In parallel, the region is accelerating domestic food production efforts to meet growing demand and enhance food security, resulting in increases in agricultural residues and food waste.1 These trends are driven by factors such as rising affluence, cultural preferences towards consuming new goods, and the short shelf-lives of imported food.2,3,4 To illustrate, in 2023, the amount of agricultural waste collected in GCC countries increased by 44 percent, while the amount of food waste in 2022 averaged 150kg per capita annually, surpassing the global average by 14 percent.5,6
Waste-to-Energy (WtE) refers to the process of generating electricity or heat from waste treatment.7 While incineration tends to be more prevalent, anaerobic digestion (AD) and pyrolysis are commonly deployed to convert organic matter into biogas and bio-fertiliser.8 Converting waste into energy presents several co-benefits, namely strategic waste management enforcement, landfill diversion, material recovery, resource looping, and contributions to renewable energy. Given converging national commitments towards promoting circular economy principles and reducing food loss and waste, WtE through AD and pyrolysis offers a nascent yet economically viable solution to address agriculture and food waste, meet facilitylevel energy needs, and promote regenerative agriculture. This article assesses the evolving WtE landscape across the Gulf, evaluating opportunities and key challenges to leverage WtE within the region’s rapidly expanding agriculture sector.

Converging National Policies Enable Catalysation of WtE Growth
All six GCC countries have established targets for renewable energy production, but WtE currently comprises a tiny fraction of this output.9 Harnessing WtE conversion potential first requires developing a strong foundation for waste collection, separation, and management. Despite progress, the GCC countries’ waste management strategies are greatly limited to landfilling, which currently processes more than 85 percent of the region’s waste.10,11 Currently, less than 20 percent of solid waste is adequately treated, and less than 5 percent is recycled.12 Food waste comprises the largest portion sent to landfills and is the primary source of methane.13 This strategy will also likely falter in the long term for countries like Qatar, Kuwait, and Bahrain, which have limited land capacity.14
A handful of GCC countries have instituted converging waste, energy, and circular economy policy commitments, enabling WtE to gain traction over the last five years. Well-established and commercial-scale plants exist in the UAE and Qatar and are rapidly materialising in Saudi Arabia, Bahrain, Oman, and Kuwait. These plants largely convert municipal solid waste (MSW), which includes organic food waste, to electricity through incineration, a process that releases carbon emissions from burning, albeit to a lesser extent than landfilling.15

Source: Compiled by the author

Expanding WtE in the GCC’s Agriculture Sector
The GCC countries have set forth national vision and food security strategies outlining commitments towards accelerating domestic food production and food waste reduction initiatives.16 Agriculture, food, and beverage facilities should consider implementing on-site, localised and integrated AD and pyrolysis systems through industrial symbiosis to extend the life of scarce resources and encourage closed-loop processes.17,18,19 GCC countries are increasingly leveraging AgriTechnologies to boost resource efficiency amidst water and climate constraints, but this can be energy-intensive.20 Therefore, converting food residue into biogas through anaerobic digestion (AD), a process where micro-organisms decompose organic matter to produce biogas, can help meet facility-level energy needs.21 Pyrolysis converts organic waste and digestate byproducts from AD into biofuel or biochar, which strengthens soil fertility and water retention, reducing irrigation needs.22,23,24 The GCC’s existing crop commodities (date palms, cereal, fruits and vegetables) and animal waste are all suitable and energy-rich feedstock inputs for AD and pyrolysis.25,26 One study notes that GCC crop residues offer 1.68 Mtpa of untapped energy, while animal waste offers 25.52 Mtpa, offsetting up to 13.35 percent of current electricity consumption.27 AD also has a lower environmental impact compared to incineration.28
Compared to stand-alone operations, on-site integrated AD and pyrolysis systems offer more cost-effective, water- and energy-efficient solutions.29 Electricity generated from biogas is minimal compared to conventional sources if pursued on a larger scale.30 Additionally, unlike MSW feedstock, agricultural waste quantities may fluctuate depending on the harvest season. However, when paired with renewables like solar, biogas can help meet facility-level electricity demand. On-site infrastructure would save resources allocated towards transferring waste for sorting and complement reuse methods like composting. Challenges include managing the heterogeneity of food waste, which risks influencing the quality of feedstock that can be converted into biogas.31
Diverting organic waste from landfills would also help reduce water contamination, while biochar products would help reduce dependence on water-intensive synthetic fertilisers.32 Combining these processes with growing efforts to leverage local water treatment and reuse systems for the agriculture sector would reduce pressure on constrained water systems.33 Ensuring compliance with water quality standards and monitoring and deploying alongside comprehensive awareness campaigns would prevent unwanted contamination and ease concerns that inhibit technology uptake in the region.34
Despite the proven technical feasibility of generating biogas from AD across Oman, Qatar, and Kuwait, the strategy remains heavily underutilised.35,36,37 The potential electricity generated from Oman’s organic waste could offset up to 22.5 percent of the country’s total energy consumption, yet it is currently managed through landfills.38 In Qatar, the traditionally landfilled organic fraction of municipal solid waste, livestock manure, and sewage sludge waste can all be valorised through AD to generate 3.5 million MWh of surplus clean energy.39 In Kuwait, food waste is the most energy-rich feedstock, yet biogas contributes to zero percent of the country’s renewable footprint.40
Scholars note the economic feasibility of AD in the UAE, Saudi Arabia, and Bahrain. In the UAE, AD matches the economic feasibility of incineration. In Saudi Arabia, an abundance of food waste and low annual operational costs make biomethanation (a form of AD) a suitable option.41 The levelised cost of energy produced from biomass is also comparable to that of solar in Saudi Arabia.42 In Bahrain, establishing an AD plant to treat biodegradable waste is expected to generate 213.3 GWh/y with approximate annual revenues of US$4.2 million a year from electricity sales.43
Organisations like ReFarm in Dubai have taken the initiative to integrate high-tech food waste recycling in their closed-loop food production system.44 ReFarm is a waste-to-value gigafarm producing more than 3 million kg of food powered with energy produced from incinerating its solid waste. Khalifa University has also researched the use of pyrolysis to transform green farm waste into biochar, which helps sequester atmospheric carbon dioxide when reused in soil, contributing to regenerative agriculture.45 The Gulf can also learn from Egypt, where companies like Wastilizer convert animal waste into water, biogas and plant fertiliser, enhancing crop and water quality.46 As domestic agricultural production grows, there is unharnessed potential to leverage on-site WtE in agricultural centres.

Capitalising on the Gulf’s WtE Potential: Next Steps
Implementing and scaling pilots remains a challenging feat since developing WtE remains a highly capital-intensive process, competing against lower-cost traditional landfilling methods in the immediate term.47 Many regulatory frameworks and financial incentive structures are still emerging and lack consistency.48 Small-scale initiatives would benefit from stateled tax incentives for the private sector, carbon credit allowances, and increasing landfill gate fees to increase appeal for AD development in the GCC.49 Financial feasibility would increase if combined with strict waste disposal regulations, strengthened integration between research, policy, and development, and the development of markets for biochar and digestate fertiliser.50 Establishing joint ventures and de-risking innovation through blended finance, like green sukuk, would also help scale efforts.51
Effective waste-to-energy operations also hinge on receiving consistent and high-quality feedstock sources to maximise energy generation. However, the efficiency of collection and sorting processes, as well as the quality and scale of logistics and agricultural infrastructure, currently vary among GCC countries, limiting the consistency of feedstock quality.52 Whilecountries like the UAE lead in food value chain innovations, others like Oman could benefit from integrated capacity building to facilitate technology adoption by small-scale farmers.53
Ensuring consistent feedstock for WtE should not overshadow the underlying need to regulate unsustainable consumption practices. Thus, prevention, reuse, and recycling should remain at the forefront of sustainable waste practices.54 WtE should incentivise strengthening implementation of stronger public awareness, recycling, and waste segregation programmes to help cultivate better habits, facilitate and improve waste operations.55

Conclusion
WtE is rapidly gaining momentum in the Gulf, with the potential to become a highly lucrative industry. Organic waste from food comprises a significant component of MSW but remains highly underutilised in Gulf countries.56 As the GCC strategises improvements in waste management practices and feasibility studies continue to highlight the versatility of WtE in the region, this solution emerges as a strong contender to promote closed-loop economies, especially for expanding sectors like agriculture. Catalysing WtE in the agricultural sector to reap the strategic benefits for the water-energy-food nexus will require harmonising waste management and water reuse standards across the GCC and reducing upfront financing barriers through public-private initiatives.



Leigh Mante is Junior Fellow, Climate and Energy, ORF Middle East, UAE.




Endnotes
1 Wael Al Mubarak, “The GCC Imports 85% of Its Food – Here’s How It Is Increasing Food Security Through Innovation,” World Economic Forum, 2025, https://www.weforum.org/stories/2025/02/gulf-food-securityinnovation/.
2 “GCC Waste Management Market Size & Share Analysis – Growth Trends and Forecast (2025-2030),” Modor Intelligence, https://www.mordorintelligence.com/industry-reports/gcc-waste-management-market.
3 Abdullah Alghafis et al., “Harnessing Renewable Waste as a Pathway and Opportunities Toward Sustainability in Saudi Arabia and the Gulf Region,” Sustainability 17, no. 20 (2025), https://www.mdpi.com/2071- 1050/17/20/8980.
4 Hamid El Bilali and Tarek Ben Hassen, “Food Waste in the Countries of the Gulf Cooperation Council: A Systematic Review,” Foods 9, no. 4 (2020), https://doi.org/10.3390/foods9040463.
5 “GCC-Stat: 267.7 Million Tons of Waste Collected, 192.0 Million Tons Treated Across GCC Countries,” 2025, https://www.wam.ae/en/article/15oej8a-gcc-stat-2627-million-tons-waste-collected-1920.
6 Alexander Pohl and Sabri Hamade, “Tackling Food Waste in the GCC Grocery Market,” Oliver Wyman, https:// www.oliverwyman.com/our-expertise/insights/2025/mar/how-to-successfully-reduce-retail-food-waste-inthe- gcc.html.
7 United Nations Framework Convention on Climate Change, “Waste to Energy Technologies,” https://unfccc. int/technology/waste-to-energy-technologies.
8 Jun Dong et al., “Comparison of Waste-to-energy Technologies of Gasification and Incineration Using Life Cycle Assessment: Case Studies in Finland, France and China,” Journal of Cleaner Production, no. 203 (2018), https://doi.org/10.1016/j.jclepro.2018.08.139.
9 IRENA, Renewable Energy Markets: GCC 2023, Abu Dhabi, International Renewable Energy Agency, Abu Dhabi, 2023, https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2023/Dec/IRENA_Rnewable_ energy_markets_GCC_2023.pdf.
10 Gulf Daily News, “GCC Countries Need Stronger Waste Management Reforms,” ZAWYA by LSEG, 2024, https://www.zawya.com/en/economy/gcc/gcc-countries-need-stronger-waste-management-reformsry4f79ze.
11 “Driving Value from Waste: The Circularity Opportunity,” Tadweer Group, https://www.worldfutureenergy summit.com/content/dam/sitebuilder/rxae/worldfutureenergysummit/docs/WFES-2025-Driving-Valuefrom- Waste.pdf.coredownload.328851850.pdf.
12 Arafat Aden, “Waste Prevention in Middle East – Prospects and Challenges,” EcoMENA, 2025, https:// www.ecomena.org/waste-prevention/#:~:text=Making%20products%20that%20are%20more,being%20 urbanized%20at%20over%2090%25.
13 Hamid El Bilali and Tarek Ben Hassen, “Food Waste in the Countries of the Gulf Cooperation Council: A Systematic Review,” Foods 9, no. 4 (2020), https://doi.org/10.3390/foods9040463.
14 Baqir Al-Alawi et al., “State of Play for Cirular Built Environment in Gulf Cooperation Council,” Arup, 2021, https://www.oneplanetnetwork.org/sites/default/files/gcc_final_210214.pdf.
15 Fionnuala Murphy, “Environmental Impacts of Waste Management Strategies: Case Studies Compilation,” IEA Bioenergy, 2025, https://www.ieabioenergy.com/wp-content/uploads/2025/04/IEA-Bioenergy-Task-36_ Case-Study-Report-Env-Impacts-of-Waste-Management-Strategies.pdf.
16 Wael Al Mubarak, “The GCC Imports 85% of Its Food – Here’s How It Is Increasing Food Security Through Innovation,” World Economic Forum, 2025, https://www.weforum.org/stories/2025/02/gulf-food-security-innovation/.
17 Gunther Pesta et al., “Implementation of Anaerobic Digestion Facilities In The Food and Beverage Industry,” IEA Bioenergy, https://www.ieabioenergy.com/wp-content/uploads/2025/03/IEA-Bioenergy-Task-37-Foodand- Beverage_20250302.pdf.
18 Qifan Zhang et al., “Anaerobic Digestion + Pyrolysis Integrated System for Food Waste Treatment Achieving Both Environmental and Economic Benefits,” Energy 288, 2024, https://doi.org/10.1016/j.energy.2023.129856.
19 Saida Tayibi et al., “Synergy of Anaerobic Digestion and Pyrolysis Processes for Sustainable Waste Management: A Critical Review and Future Perspectives. e, 2021, 152, https://hal.inrae.fr/hal-03463924v1/ document#:~:text=Coupling%20anaerobic%20digestion%20%2D%20pyrolysis%20processes,4.
20 Gabriel Dauchot et al., “Energy Consumption as the Main Challenge Faced by Indoor Farming to Shorten Supply Chains,” Cleaner and Circular Bioeconomy 9, 2024, https://doi.org/10.1016/j.clcb.2024.100127.
21 V. Burg et al., “Agricultural Biogas Plants As a Hub to Foster Circular Economy and Bioenergy: An Assessment Using Substance and Energy Flow Analysis,” Resources, Conservation and Recycling 190 (2023), https://doi. org/10.1016/j.resconrec.2022.106770.
22 Jessica Graca et al., “Pyrolysis, A Recovery Solution to Reduce Landfilling of Residual Organic Waste Generated From Mixed Municipal Waste,” Environmental Science and Pollution Research 31 (2024): 30676- 30687, https://doi.org/10.1007/s11356-024-33282-1.
23 Tayibi et al., “Synergy of Anaerobic Digestion and Pyrolysis Processes for Sustainable Waste Management: A Critical Review and Future Perspectives.”
24 Shubh Pravat Singh Yadav et al., “Biochar Application: A Sustainable Approach to Improve Soil Health,” Journal of Agriculture and Food Research 11, 2023, https://doi.org/10.1016/j.jafr.2023.100498.
25 Andrew Welfle and Ali Alawadhi, “Bioenergy Opportunities, Barriers, and Challenges in the Arabian Peninsula – Resource Modelling, Surveys and Interviews,” Biomass and Bioenergy 150, 2021, https://doi.org/10.1016/j. biombioe.2021.106083.
26 Gebresilasie Gebremedhin Gebresilasie et al., “Comparative Potential of Biogas Production From the Distillery, Fruit and Vegetable Waste and Their Mixtures (Digestion),” Heliyon 11, no. 2 (2025), https://doi. org/10.1016/j.heliyon.2025.e42068.
27 Welfle and Alawadhi, “Bioenergy Opportunities, Barriers, and Challenges in the Arabian Peninsula – Resource Modelling, Surveys & Interviews.”
28 Fionnuala Murphy, “Environmental Impacts of Waste Management Strategies: Case Studies Compilation.”
29 Solomon Inalegwu Okopi et al., “Environmental Sustainability Assessment Of a New Food Waste Anaerobic Digestion and Pyrolysis Hybridization System,” Waste Management 179, 2024: 130-143, https://doi. org/10.1016/j.wasman.2024.01.038.
30 Omnia Bakhiet and Riham Mustafa, “Biogas Production in Abu Dhabi – An Evaluation based on Energy and Economy,” https://www.diva-portal.org/smash/get/diva2:844949/FULLTEXT01.pdf.
31 Mariana Ferdes et al., “Food Waste Management for Biogas Production in the Context of Sustainable Development,” Energies 15, no. 17 (2022), https://doi.org/10.3390/en15176268?urlappend=%3Futm_ source%3Dresearchgate.net%26utm_medium%3Darticle.
32 Anton Fagerstrom et al., “The Role of Anaerobic Digestion and Biogas in the Circular Economy,” IEA Bioenergy, Task 37 (2018), https://www.ieabioenergy.com/wp-content/uploads/2018/08/anaerobic-digestion_web_ END.pdf.
33 AS Qureshi, “Challenges and Prospects of Using Treated Wastewater to Manage Water Scarcity Crises in the Gulf Cooperation Council (GCC) Countries,” International Center for Biosaline Agriculture (ICBA), https://www. mdpi.com/2073-4441/12/7/1971.
34 Anastasis Christou et al., “Sustainable Wastewater Reuse for Agriculture,” Nature Reviews Earth & Environment 5, 2024: 504-521, https://doi.org/10.1038/s43017-024-00560-y.
35 Abdul Rahim Al Umairi et al., “Biogas Production from Cow Manure Using an Anaerobic Digestion Technique,” Proceedings of the International Conference on Civil Infrastructure and Construction (CIC) 1 (2023), https://doi. org/10.29117/cic.2023.0184.
36 Sophia Ghanimeh et al., “Harnessing Waste for Emission Cuts: the Anaerobic Digestion Potential in Qatar,” Earth Systems and Environment 9 (2025): 1923-1936, https://doi.org/10.1007/s41748-025-00698-9.
37 Jean H. El Achkar, “A Bioenergy Blueprint for Kuwait: Regional Research Insights, Waste Valorisation, Feasibility and Policy Pathways,” LSE Middle East Center (2025), https://eprints.lse.ac.uk/129838/1/A_ Bioenergy_BluePrint_for_Kuwait.pdf.
38 Andrew Welfle and Ali Alawadhi, “Bioenergy Opportunities, Barriers, and Challenges in the Arabian Peninsula – Resource Modelling, Surveys & Interviews,” Biomass and Bioenergy (2021), https://doi.org/10.1016/j. biombioe.2021.106083.
39 Ghanimeh et al., “Harnessing Waste for Emission Cuts: the Anaerobic Digestion Potential in Qatar.”
40 Achkar, “A Bioenergy Blueprint for Kuwait: Regional Research Insights, Waste Valorisation, Feasibility and Policy Pathways.”
41 Omar Ouda et al., “An Argument for Developing Waste-to-Energy in Saudi Arabia,” Environmental Science 45 (2015): 337-342, https://doi.org/10.3303/CET1545057.
42 Muhammad Sadiq and Zakariya Kaneesamkandi, “Biodegradable Waste to Biogas: Renwable Energy Option for the Kingdom of Saudi Arabia,” International Journal of Innovation and Applied Studies 4, no. 1 (2013): 101- 113, https://www.researchgate.net/publication/303254958_Biodegradable_waste_to_biogas_Renewable_ energy_option_for_the_Kingdom_of_Saudi_Arabia.
43 Sumaya Yusuf Abbas, “Feasibility of Anaerobic Digestion as an Option for Biodegradable Waste Management in the Kingdom of Bahrain,” Journal of Research in Environmental Science and Toxicology 9, no.1 (2020): 16-21, https://www.researchgate.net/publication/344337892_Feasibility_of_Anaerobic_Digestion_as_an_Option_ for_Biodegradable_Waste_Management_in_the_Kingdom_of_Bahrain.
44 Babu Das Augustine, “Dubai’s Food Tech Valley and ReFarm to Build A Hi-tech Gigafarm,” The National News, 2023, https://www.thenationalnews.com/business/technology/2023/12/06/dubais-food-tech-valley-andrefarm- to-build-a-hi-tech-gigafarm/.
45 Erica Solomon, “How Agricultural Waste Can Contribute to the UAE’s Food, Water, and Energy Security,” Khalifa University, 2018, https://www.ku.ac.ae/how-agricultural-waste-can-contribute-to-the-uae-s-food-water-andenergy- security.
46 “GCC Cooperation and Innovation Improve Food Security,” Oxford Business Group, https://oxfordbusinessgroup. com/reports/kuwait/2024-report/trade-investment/at-the-source-ensuring-food-supply-is-proving-apromising- area-for-investment-analysis/.
47 Gulf Magazine, “UAE Waste-to-Energy Plants Operational: Turning Waste into Renewable Energy,” https:// gulfmagazine.co/uae-waste-to-energy-plants-operational-turning/.
48 Abdullah Alghafis et al., “Harnessing Renewable Waste as a Pathway and Opportunities Toward Sustainability in Saudi Arabia and the Gulf Region,” Sustainability 17, no. 20 (2025), https://www.mdpi.com/2071- 1050/17/20/8980.
49 Ali Marefat et al., “Financial Feasibility and Optimization of Anaerobic Digestion Systems for Sustainable Waste Management: A Comprehensive Global Analysis,” Cleaner Environmental Systems 19 (2025), https:// doi.org/10.1016/j.cesys.2025.100339.
50 Achkar, “A Bioenergy Blueprint for Kuwait: Regional Research Insights, Waste Valorisation, Feasibility and Policy Pathways.”
51 “UAE’s First Waste-to-energy Project Receives Landmark Award for First-of-its-kind Financing Loan,” Masdar (2018), https://masdar.ae/en/news/newsroom/uaes-first-waste-to-energy-project-receives-landmark-award-for-first-of-its-kind-financing-loan.
52 Gulf Magazine, “UAE Waste-to-Energy Plants Operational: Turning Waste into Renewable Energy”
53 Government of the Sultanate of Oman, “Sustainable Agriculture and Rural Development Strategy Towards 2040,” FAO (2016), https://faolex.fao.org/docs/pdf/oma214204E.pdf.
54 “Waste Hierarchy,” European Union, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=LEGISSUM:waste_ hierarchy.
55 Waste-to-Energy Projects in Saudi Arabia (2025), https://setupinsa.com/waste-to-energy-projects-in-saudiarabia/.
56 Achkar, “A Bioenergy Blueprint for Kuwait: Regional Research Insights, Waste Valorisation, Feasibility and Policy Pathways.”

### Membrane Innovation in Desalination: Redefining Water Security in the MENA Region

This article is the part of “Policy Pathways for Food and Water Security in the MENA Region“


For decades, the countries of the Middle East and North Africa (MENA)a,[1] have achieved a remarkable feat of hydrological engineering. Faced with extreme water scarcity, they turned to the sea, building some of the world’s largest desalination plants, now responsible for more than half of global desalinated water production. This transformation began in the mid-twentieth century and has since sustained cities, industries, and agriculture.
At the same time, however, these plants have created new strategic vulnerabilities, including high energy dependence, ecological pressures from brine discharge, and rising costs associated with electricity consumption.[2]
The region’s next phase of water security will not be achieved simply by building more capacity. It requires a technological and governance transition, one centred on modern membranes,b integrated energy-water-food planning, and a regulatory framework that aligns desalination with national development priorities. For policymakers, advancing membrane desalination is no longer just a technical matter; it is a strategic imperative tied to economic resilience, food security, and the stability of rapidly growing digital economies.

Water Security, Food Security, and the Limits of the Status Quo
MENA is the most water-stressed region in the world.[3] In most countries of the region, agriculture accounts for 70 to 90 percent of freshwater withdrawals, yet shrinking aquifers, climate-driven droughts, and population growth are tightening the supply-demand gap. This makes water reliability a direct determinant of food security. Local crop production, from dates to vegetables, depends on predictable irrigation water. When freshwater is diverted to cities or industry, agriculture is the first to suffer, increasing import dependence and exposure to global food-price volatility.
Desalination plays a central role in protecting municipal supply, but the current energy-intensive model contains long-term risks. Reverse osmosis (RO) desalination has reduced energy needs dramatically compared to thermal systems, yet even advanced RO plants operate at two to three times the theoretical minimum energy requirement.[4] This benchmark reflects the unavoidable thermodynamic energy required to separate salt from water, estimated at about 1.06 kWh/m3 for desalinating 35,000 mg/L seawater at a 50-percent recovery rate.[5] The closer systems get to that minimum, the lower their operating costs and carbon footprint. For policymakers, this gap represents billions of dollars in lifetime operational expenditure and major implications for national emissions targets.
Environmental pressures compound these risks. RO plants with ~50 percent recovery rates produce nearly a liter of hypersaline brine for every liter of freshwater. Discharging this into coastal waters elevates salinity and harms ecosystems central to fisheries and tourism. Brine can also deplete oxygen levels and harm sensitive marine ecosystems, particularly coral reefs and seagrass beds. As desalination scales to support growing cities, economy, agriculture, and emerging digital industries, these challenges will intensify.

The Frontline of Change: Advances in Membrane Technology
Membranes sit at the core of RO desalination, dictating the efficiency, cost, and environmental footprint of every plant. Across the region and globally, a new wave of membrane innovation is accelerating. Researchers, including this author’s research at NYUAD Water Research Center,[6] are developing polymer membranes with improved permeability and fouling resistance;[7] hybrid membranes that combine mechanical strength with scalability; biomimetic membranes inspired by aquaporins, capable of transporting water at high flux with minimal energy; 3D-printing of novel membranes,[8] and nanostructured membranes with precisely engineered pores that could separate ions, metals, or specific contaminants in a single step.
These advances work toward a common goal: reducing the pressure needed to push seawater through the membrane and minimising the fouling that forces plants to clean, replace, or operate at higher pressures. Reducing fouling rates and extending membrane lifespans can yield greater energy savings than incremental gains in permeability alone. As these innovations move from the lab to the field, pilot projects will likely test these membranes in real plants. The rising tide of membrane innovation promises to raise the sails of MENA’s water security, not by breaking physics, but by outsmarting inefficiency.

Renewable-Powered Desalination: Regional Momentum
What once was a limitation, desalination’s dependence on electricity, has become a strategic advantage as MENA accelerates its shift toward clean energy. Solar, nuclear, and wind power are increasingly being used to drive these desalination systems, aligning water production with the region’s clean-energy transition. With an abundance of sun and wind and an urgent need for water, the logic is clear: let renewable energy fuel desalination. The synergy between membranes and renewable power is increasingly visible across the region.[9] The UAE’s Taweelah IWP, for example,[10] integrates one of the world’s largest RO facilities with dedicated solar production. Saudi Arabia’s Al Khafji solar-powered plant[11] demonstrates the feasibility of large-scale desalination running entirely on solar energy. Oman’s pilot membrane installations in Sur[12] explore how advanced membranes and renewable sources can be combined at smaller, more distributed scales.
Together, these examples signal a regional transition toward cleaner and more cost-stable desalination, with potential benefits extending from municipal supply to agriculture and rural development. As solar and wind prices continue to fall, fully renewable desalination becomes increasingly realistic, including off-grid systems that support remote communities, islands, and agricultural clusters. These systems can significantly reduce diesel imports, minimise carbon emissions, and enhance local self-sufficiency.

Toward a Coherent Governance Framework
Technology alone will not be able to secure the region’s water future. A more coherent governance framework is required, one that aligns desalination with national priorities across water, energy, food, digital infrastructure, and industry.
A first pillar of this framework is regulation and sustainability standards. Clear guidelines on brine discharge, energy efficiency, and water quality, especially for agriculture and food production, will enable desalinated water to be used reliably across sectors.
Equally important is cross-sector coordination, particularly as emerging industries reshape regional water demand. The rapid expansion of artificial intelligence (AI), cloud computing, and data-centre infrastructure across the Gulf is creating a new class of strategic water consumers. Large-scale AI model training, cloud services, and hyperscale data centres all require substantial volumes of high-quality water for cooling, thermal regulation, and uninterrupted power delivery. This trend is accelerating: recent UAE-US agreements to deepen cooperation in AI,[13] advanced computing, and chip manufacturing signal a regional shift toward digital economies that depend on a stable and scalable water supply.
If managed proactively, desalination can support this growth without displacing water allocated to households or agriculture. If left uncoordinated, however, these rising cooling demands could intensify competition across sectors. Incorporating AI-related water forecasting into desalination planning is therefore essential for future-ready governance.
This need for integration extends to agriculture. Desalination expansion should be planned alongside national food security strategies, ensuring predictable irrigation supplies and promoting treated-wastewater reuse where appropriate. Private-sector participation also plays a vital role.
Public-private partnerships that reward high efficiency, low carbon footprints, and the adoption of advanced membranes can accelerate modernisation across the region’s desalination portfolio. Competitive tenders that require renewable-energy integration and high-performance membrane technology ensure that innovation is rapidly absorbed into national infrastructure.

Policy Pathways for a Resilient Desalination Future
Policy and investment decisions will determine how quickly membrane desalination can progress, since MENA governments know water and energy policy must align. To support membrane innovation, policymakers can encourage research funding for new materials and devices, while reforming water pricing to incentivise efficiency. Clearly communicated water tariffs, for example, can discourage waste while helping consumers appreciate the true value of the resource.
Public-private partnerships allow governments to share the risk of building cutting-edge plants. A number of MENA countries have already issued calls for proposals to build and run state-of-the-art desalination facilities. These initiatives often require the latest membrane technology or renewable energy, fast-tracking innovation into deployment.
Beyond infrastructure, the region is also investing in innovation as a form of water diplomacy. The UAE’s Mohammed Bin Zayed Water Initiative[14] has put US$150 million toward accelerating breakthrough water technologies worldwide through the XPRIZE Water Scarcity competition,[15] which challenges scientists and engineers across the world to build affordable, energyefficient desalination systems. These initiatives go beyond funding; they create a race to the top, turning water scarcity from a crisis into a catalyst for invention.
Furthermore, water knows no borders, aquifers, rivers; even desalination know-how can spill across lines. Arab states and regional bodies can share best practices and pool resources for large research centres. Joint labs and scholarships in water science help the entire region benefit from collective knowledge. Collaboration might even extend to shared desalination projects on international waterways. The following are the key policy pathways:


 	R&D Incentives: Grants for universities, research centres, and startups developing next-generation membrane materials, low-pressure RO systems, and renewablepowered desalination technologies.
 	Infrastructure Modernisation: Replacing ageing thermal desalination plants with modern membrane-based facilities and hybrid systems that offer higher efficiency, lower emissions, and greater operational flexibility.
 	Environmental Regulation: Establishing clear standards for brine disposal, effluent quality, and marine ecosystem protection, while encouraging technologies that minimise brine volumes or enable resource recovery.
 	Capacity Building: Training local engineers, plant operators, and regulators in advanced membrane systems, renewable integration, digital monitoring, and best practices in desalination management.
 	Public Awareness: Promoting water-conservation initiatives and improving public understanding of the economic and environmental value of clean water to support sustainable consumption.
 	Food- and Agriculture-Linked Measures: Introducing incentives for expanded water reuse in agriculture, prioritising treated wastewater as the primary irrigation source over desalinated water, aligning desalination planning with national food security strategies, and establishing clear quality standards for both treated wastewater and desalinated water used in irrigation, controlled-environment farming, and foodproduction sectors.

By weaving these policies together, MENA countries create fertile ground for membrane innovation, resulting in desalination systems that pump out water as well as the local economies and protect the environment. Policymakers have a chance to turn water scarcity into an opportunity for growth.

The Road Ahead: Challenges and Opportunities
While progress is evident, hurdles remain. A crucial challenge is the management of brine, the excessively salty leftover from desalination. If simply dumped into the sea, it can harm marine life. Smart membranes will partly solve this by producing less brine (higher water yield), but the industry must also invest in brine reduction technologies. Ideas include mixing brine with other waste streams, extracting valuable minerals, or even using it for salt-tolerant aquaculture, turning a problem into an opportunity.
Energy storage and grid integration are other challenges. Renewable-powered desalination[16] works best when the sun shines or the wind blows. To avoid shutdowns at night or on calm days, plants might need battery storage or to stay connected to the grid as a backup. Policymakers can encourage this by aligning electricity and water planning. As battery and grid technologies improve, these issues will become easier to manage.
Indeed, these challenges spur innovation. Companies are testing mobile desalination units on barges or ships to serve remote islands or drought emergencies. There is talk of using AI to optimise plant operations, predict maintenance, and adjust pressure to save energy highlighting the water-AI nexus. As membranes improve, what could follow are foldable desalination units that communities can easily deploy. These solutions could bring clean water to the most remote areas.
The opportunities also extend across the region. MENA’s membrane technologies could be exported to other arid parts of the world, from North Africa to Central Asia, creating new industries and jobs at home. Resilient water systems also contribute to stability: water shortages have historically led to stress in many parts of MENA. By securing fresh water, governments buy time for reforms in food production and energy use.
Overall, in MENA, where desert meets sea, membrane innovation could turn scarcity into plenty, and this revolution in desalination is already unfolding in labs, pilot plants, and even on policymakers’ drawing boards. The path to water and food security runs through innovation, requiring investment, cooperation, and new ideas. If the region continues on this course, its waters will be cleaner, more abundant, and more dependable, ensuring that even in the driest climes, life can flourish.




Endnotes
[1] Office of the United Nations High Commissioner for Human Rights (OHCHR), “Middle East and North Africa Section,” OHCHR, https://www.ohchr.org/en/countries/middle-east-north-africa-region/middle-eastnorth- africa-section-hq.
[2] Haya Nassrullah et al., “Energy for Desalination: A State-Of-The-Art Review,” Desalination 491, October 1, 2020: 114569.
[3] SIWI and UNICEF, Water Scarcity and Climate Change Enabling Environment Analysis for WASH: Middle East and North Africa, Stockholm and New York, Stockholm International Water Institute and United Nations Children’s Fund, 2023, https://www.unicef.org/mena/media/20916/file/Water%20Scarcity%20 and%20Climate%20Change%20Enabling%20Environment%20Analysis%20for%20WASH:%20MENA.pdf.
[4] Nassrullah et al., “Energy for Desalination: A State-Of-The-Art Review.”
[5] Nassrullah et al., “Energy for Desalination: A State-Of-The-Art Review.”
[6] NYU Abu Dhabi, “Water Research Center,” https://nyuad.nyu.edu/en/research/faculty-labs-and-projects/ water-research-center.html.
[7] Yazan Ibrahim and Nidal Hilal, “Enhancing Ultrafiltration Membrane Permeability and Antifouling Performance Through Surface Patterning with Features Resembling Feed Spacers,” NPJ Clean Water 6, no. 1 (2023): 60.
[8] Yazan Ibrahim and Nidal Hilal, “Integration of Porous and Permeable Poly (Ether Sulfone) Feed Spacer onto Membrane Surfaces Via Direct 3D Printing,” ACS Applied Engineering Materials 2, no. 4 (2024): 1094-1109.
[9] World Banks, Renewable Energy Desalination: An Emerging Solution To Close The Water Gap In The Middle East and North Africa (English), October 2012, Water Partnership Program (WPP), Washington DC, World Bank Group, 2012, http://documents.worldbank.org/curated/en/443161468275091537.
[10] ACWA Power, “Taweelah RO Desalination IWP,” https://acwapower.com/en/projects/taweelah-rodesalination- iwp/.
[11] Vision 2030, “Alkhafji Desalination Plant,” https://www.vision2030.gov.sa/en/explore/projects/alkhafjidesalination- plant.
[12] Veolia Water Technologies, “Oman Case Studies,” https://www.veoliawatertechnologies.com/en/casestudies/ oman.
[13] “UAE/US Framework on Advanced Technology Cooperation,” Ministry of Foreign Affairs, United Arab Emirates, May 16, 2025, https://www.mofa.gov.ae/en/MediaHub/News/2025/5/16/16-5-2025-UAE-US.
[14] Mohamed bin Zayed Water Initiative, “UAE President Establishes Initiative to Address Global Water Scarcity,” February 29, 2024, https://www.mohamedbinzayedwi.ae/news/uae-president-establishesinitiative- to-address-global-water-scarcity.
[15] XPRIZE, “Water Competitions,” https://www.xprize.org/competitions/water.
[16] Mohammad Alshawaf et al., “Renewable Energy-Driven Desalination for Sustainable Water Production in the Middle East,” International Journal of Sustainable Engineering 17, no. 1 (2024): 668-678.

### Hydrogen and Water in the Gulf Energy Transition: Competing or Complementary Needs?

This article is the part of “Policy Pathways for Food and Water Security in the MENA Region“


The Gulf Cooperation Council (GCC) countries are positioning themselves as global leaders in hydrogen,[1] with multi-billion-dollar projects aiming at exporting hydrogen-based fuels. From Saudi Arabia[2] to the UAE,[3] the region is investing billions of US dollars to become a leading exporter of clean hydrogen.[4]
At the same time, however, the region faces acute water scarcity, raising fears that hydrogen production from water electrolysis will compete with already stretched water resources.[5] The question, therefore, is whether large-scale green hydrogen production will compete with local water needs, or both can become complementary pillars of sustainable growth.

Hydrogen’s Promise and the Gulf’s Water Paradox
GCC countries are leading the global hydrogen transition, with national strategies positioning the region as a clean hydrogen exporter to Asia and Europe. Hydrogen investments aim to transform the energy landscape and diversify hydrocarbon-based economies. However, hydrogen production is water- and electricity-intensive, potentially competing with municipal and agricultural needs. This poses a dilemma, as water is the Gulf’s most limited resource. Can the region expand clean energy ambitions without intensifying water stress?
Yet, at the same time, this narrative of competition for water is only half the story. Water and hydrogen can become complementary pillars of the Gulf’s energy transition. Integrated policies, technological innovation, shared infrastructure planning, and regional collaboration, can turn the hydrogen boom into a catalyst for sustainable resource management, enabling integrated water–energy solutions.
Green hydrogen from electrolysis requires around nine litres of high-purity water per kilogram. Large-scale hubs, such as NEOM in Saudi Arabia or projects in Abu Dhabi, Dubai, and Oman, envision around 10 million tons of green hydrogen per year,[6] translating to hundreds of millions of cubic meters of water demand. This would be a cause of concern for a region that is among the most water-scarce in the world. Gulf states rely on desalination for up to 80 percent of municipal water supply, and desalination faces cost, energy, and environmental challenges. Diverting scarce water to hydrogen without planning would appear to be counterintuitive, or even irresponsible.

A False Dichotomy: Why Competition Is Not Inevitable
Framing hydrogen and water as competitors oversimplifies the picture. A number of factors demonstrate that the relationship between these two resources does not need to be one of conflict, and they are discussed in turn in the following paragraphs.
1. The scale of demand relative to desalination capacity. Even if the Gulf produces 10 million tons of green hydrogen annually, the associated water demand would be about 90 million cubic meters per year. By comparison, Saudi Arabia alone desalinates over 2.5 billion cubic meters annually.[7] In percentage, hydrogen would add approximately 3-5 percent to total desalination demand. While not negligible, this is far from catastrophic.
2. Synergies in energy and water infrastructure. Green hydrogen production requires both water and renewable electricity. Coupling renewable-powered desalination plants with electrolysis facilities allows integrated infrastructure for water purification and hydrogen generation. This co-location reduces costs, improves efficiency, and strengthens resilience. Furthermore, desalinated water costs around 0.8 EUR/m3, adding only 0.007 EUR/kg to the production cost of hydrogen.[8] Water desalination plants for hydrogen could also supply freshwater for human consumption and/or irrigation, creating multiple benefits to the local area.
3. Innovation in water sources and use. Hydrogen does not rely solely on desalinated seawater. Alternative feedstocks include saline water,[9] brackish groundwater,[10] wastewater,[11] or industrial effluents.[12] Advances in electrolysis are also reducing water and energy intensity and enabling tolerance of lower-quality water inputs. Rather than competing with water, hydrogen can push investment into technologies that broaden the water portfolio.
4. Hydrogen as a driver of sustainable desalination. The Gulf’s hydrogen ambitions are accelerating renewable-powered desalination, creating incentives for greener water and lowcarbon, high-efficiency desalination technologies. The long-term effect could be cleaner, cheaper, and sustainable water systems that benefit society.

The Opportunity for Complementarity
Hydrogen and water can reinforce each other’s sustainability agendas, particularly in the Gulf, where water and energy security are deeply interconnected.[13] The Gulf region’s abundant renewable resources, engineering expertise, and financing capacity, uniquely position it to pioneer a water–hydrogen nexus with global relevance.[14] The following examples illustrate this complementarity:
1. Coupling renewable desalination with hydrogen. The Gulf’s high solar irradiance[15] and coastal geography make it ideal for renewable-powered desalination. Integrated facilities where renewable electricity drives both desalination and electrolysis can achieve economies of scale, cut costs, improve operational stability, and reduce emissions compared to standalone facilities.
2. Circular approaches to water use. Hydrogen facilities can be designed for circular water systems, treating, and reusing wastewater within the plant. Industrial symbiosis— using effluents from one process as inputs for another—can minimise freshwater demand. Combining hydrogen hubs with carbon capture, ammonia production, or industrial parks creates opportunities for resource cascading.
3. Supporting food security. Shared resources will free up desalinated water for agriculture, supporting food-security strategies across the GCC. This is especially relevant for countries like the UAE, Saudi Arabia, and Oman, which are currently expanding domestic food production through hydroponics and high-tech agriculture, increasing freshwater and electricity demand. Furthermore, green hydrogen-derived fertilisers, such as green ammonia, can boost crop yields while aligning food production with low-carbon sustainability goals, strengthening the energy-water-food security objectives.
4. Driving technological innovation. Hydrogen is already attracting substantial R&D funding. Aligning hydrogen strategies with water-security goals can drive innovation toward advanced desalination membranes, brine valorisation, and water-efficient electrolysis, generating benefits beyond hydrogen for agriculture, industry, and urban water supply.
The Gulf region is already leading this technology-driven integration. In Saudi Arabia, a 100-percent renewable-powered selective desalination plant,[16] is designed to produce up to 500,000 m³/day while enabling advanced water reuse and value recovery from brine, linking circular water management to hydrogen production. In Oman, renewable-powered desalination and water purification systems are integrated with green hydrogen production facilities.[17] The second solar-powered desalination plant[18] is under construction, demonstrating integrated solutions for water and energy in arid climates.
5. Exporting sustainability, not just fuel. Global buyers of hydrogen (i.e., Europe, Japan, and Korea) are increasingly focused on the carbon footprint of imports. Demonstrating that hydrogen from the Gulf countries produced with sustainable water practices can strengthen the region’s competitiveness. Positioning hydrogen as “water-neutral” or “water-positive” adds value in global markets where Environmental, Society and Governance (ESG) criteria matter.

The Risks of Inaction: When Complementarity Fails
Synergy is not guaranteed. Without careful planning, hydrogen development could worsen water challenges or miss its goals. Key risks stand out:


 	If hydrogen water demand is met with desalination powered by fossil fuels, the carbon savings of hydrogen are compromised.
 	Diverting desalination capacity to hydrogen exports while neglecting domestic water affordability would increase the water stress and create public opposition.
 	Building hydrogen infrastructure without considering water and renewable-energy integrations risks locking the region into inefficient designs costly to retrofit, in turn increasing the cost and resource scarcity.

The Gulf states must avoid these pitfalls by adopting proactive governance, transparent planning, and regional cooperation.

Policy Priorities for a Water–Hydrogen Nexus
To make hydrogen and water allies rather than competitors in the Gulf region’s energy transition, policymakers must adopt an integrated, forward-looking approach. National hydrogen strategies should quantify water needs, identify sustainable sources, and set clear efficiency and conservation targets, building public trust and avoiding misconceptions. Hydrogen projects should pair with renewable-powered desalination, ensuring water demand without deepening fossil fuel dependence, keeping hydrogen’s production footprint very low or zero. Investment in water-efficient electrolysis, wastewater-fed systems, and brine utilisation can further diversify supply and reduce pressure on scarce freshwater resources.
Effective implementation requires transboundary mechanisms. Shared frameworks for standards and regional data-sharing can standardise reporting on water, energy, and environmental performance, enabling evidence-based planning. A Gulf water–hydrogen-energy coordination body could align strategies, infrastructure planning, and cross-border investments, strengthening ESG and certification credibility.
Last but not least, bilateral and multilateral collaborations offer models for regional integration. Examples include the UAE-Oman SalalaH2 project,[19] focused on large-scale green hydrogen and ammonia powered by renewable energy, and the ACWA Power-Bapco solarbattery project,[20] that links Saudi Arabia and Bahrain, sharing cross-border infrastructure and standards to support sustainable growth.

A New Narrative for the Gulf’s Transition
The story of hydrogen and water in the Gulf is often told as conflict, but the reality is more hopeful. Yes, hydrogen requires water, and yes, the Gulf is water scarce, but the hydrogen’s water demand is manageable, and it can accelerate innovation in desalination, circular water systems, and integrated energy–water infrastructure.
Rather than competing, hydrogen and water can reinforce sustainability. For Gulf countries seeking to diversify economies, energy leadership, and resource security, this is an opportunity too valuable to miss.
The question is not whether hydrogen and water compete but whether policymakers, investors, and researchers design complementary strategies. If synergy is achieved, the Gulf will lead the global hydrogen economy while setting a benchmark for solving one of today’s greater challenges: how to secure energy and water together in an era of transition.

Endnotes
[1] International Renewable Energy Agency (IRENA), Geopolitics of the Energy Transformation: The Hydrogen Factor (Abu Dhabi: IRENA, 2022), Introduction and Executive Summary, https://www.irena.org/Digital- Report/Geopolitics-of-the-Energy-Transformation.
[2] ACWA Power, “NEOM Green Hydrogen Project,” https://acwapower.com/en/projects/neom-greenhydrogen- project/.
[3] United Arab Emirates, Ministry of Energy and Infrastructure, National Hydrogen Strategy (Abu Dhabi: Ministry of Energy and Infrastructure, 2023), https://www.cines.fraunhofer.de/content/dam/zv/cines/ dokumente/2023_UAE_National_Hydrogen_Strategy_Fraunhofer_GHD.pdf.
[4] International Energy Agency (IEA), Global Hydrogen Review 2023 (Paris: IEA, 2023), https://www.oecd. org/en/publications/global-hydrogen-review-2023_cb2635f6-en.html.
[5] Samantha Kuzma, Liz Saccoccia and Marlena Chertock, “25 Countries, Housing One-Quarter of the Population, Face Extremely High Water Stress,” World Resources Institute, August 16, 2023, https://www.wri.org/insights/highest-water-stressed-countries.
[6] Zawya Projects, “HYDROGEN. Green Ambition: MENA targets 10 mtpa of hydrogen in 2030: Report,” February 7, 2025, https://hydrogen-central.com/green-ambition-mena-targets-10-mtpa-of-hydrogen-in-2030-report/.
[7] Rinat Gainullin and Hala Hisham Koura, “The rise and rise of water desalination in Saudi Arabia,” Arab News, September 11, 2022, https://www.arabnews.com/node/2160116/business-economy#:~:text=The%20Kingdom%20may%20 require%20a,million%20cubic%20meters%20in%202014.
[8] Rogier E. Roobeek, A techno-economic analysis of a dedicated green hydrogen supply chain from the Port of Sohar to the Port of Rotterdam, MSc Thesis (Delft University of Technology, 2020), https:// repository.tudelft.nl/islandora/object/uuid:9d1225b7-65ed-44d2-b9c9-d60cfce64a5f.
[9] David Nutt, “Sunlight and seawater lead to low-cost green hydrogen, clean water,” Cornell Chronicle, April 9, 2025, https://news.cornell.edu/stories/2025/04/sunlight-and-seawater-lead-low-cost-green-hydrogenclean- water.
[10] Giovanni Campisi et al.,” Producing Hydrogen and Fresh Water from Brackish Water Desalination via Electrodialysis,” Chemical Engineering Transactions 105 (2023): 103-108, https://www.cetjournal.it/index. php/cet/article/view/CET23105018.
[11] G.S. Cassol et al., “Ultra-fast green hydrogen production from municipal wastewater by an integrated forward osmosis-alkaline water electrolysis system,” Nat Commun 15 (2024): 2617, https://doi. org/10.1038/s41467-024-46964-8.
[12] Anthony Lewis, “Turning industrial waste into clean hydrogen fuel,” Advanced Science News, April 22, 2024, https://www.advancedsciencenews.com/turning-industrial-waste-into-clean-hydrogen-fuel/.
[13] Anders Jägerskog and Shawki Barghouti, Advancing Knowledge of the Water-Energy Nexus in the GCC Countries, Washington DC, World Bank, 2022, https://doi.org/10.1596/38296.
[14] Raha Hakimdavar, “Water Is the New Oil in the Gulf,” Time, January 18, 2024, https://time.com/6556469/ water-new-oil-gulf/.g a benchmark for solving one of today’s greater challenges: how to secure energy and water together in an era of transition.
[15] Solargis, “Solar Resource Maps & GIS Data,” https://solargis.com/resources/free-maps-and-gis-data.
[16] NEOM, “Enowa, ITOCHU and Veolia sign MoU to build new generation of desalination plant powered by 100% renewable energy in NEOM,” NEOM News & Media Center, June 16, 2022, https://www.neom. com/en-us/newsroom/build-generation-of-desalination-plant.
[17] Saada Said Al Zakwani et al., “Floating PV powered seawater purification using the RO process and powering electrolyser for green hydrogen production in Oman,” Solar Compass 17 (2026): 100150, https://doi.org/10.1016/j.solcom.2025.100150.
[18] Conrad Prabhu, “Second desalination plant to be solar powered in Oman,” Oman Daily Observer, December 22, 2025, https://www.omanobserver.om/article/1181512/business/economy/second-desalination-plantto- be-solar-powered-in-oman.
[19] Kevin Rouwenhorston, “SalalaH2: export-focused renewable mega-project targets FID in 2026,” Ammonia Energy Association, May 21, 2025, https://ammoniaenergy.org/articles/salalah2-export-focusedrenewable- mega-project-targets-fid-in-2026/.
[20] ACWA Power, “ACWA Power and Bapco Energies Announce Joint Development Agreement to Strengthen Energy Sector Cooperation Between Saudi Arabia and the Kingdom of Bahrain,” ACWA Power Newsroom, December 9, 2025, https://www.acwapower.com/news/acwa-power-and-bapco-energies-announce-jointdevelopment- agreement-to-strengthen-energy-sector-cooperation-between-saudi-arabia--and-the-kingdomof- bahrain/.

### How Air Power will Reshape Geopolitics in the Gulf

Spotlight:


 	The conflict in the Middle East over the past 40 days has been defined in large parts by air power, air defence, and targeted strikes. Supremacy in the air will, in large part, dictate the future of regional geopolitics
 	Gulf states seeking new fifth-generation combat aircraft will mobilise their stated aims of diversification under the concept of strategic autonomy and multipolarity
 	Non-Western defence suppliers are expected to find a newly formed strategic space in the Middle East’s lucrative defence bazaar

As the US- and Israel-led military campaign against Iran entered its second month, the Middle East remains on edge, with limited clarity from the administration of President Donald Trump regarding the trajectory of the conflict. This persists despite a round of failed direct talks between the US and Iran in Islamabad, Pakistan, and amid the most heightened regional tensions surrounding the prospect of a region-wide war in decades.

Air defence systems, originally designed for defensive postures, have emerged as the most critical assets for these countries.
Across the contested Strait of Hormuz, Gulf states continue to confront an almost daily barrage of drone and missile strikes launched by Iran. Air defence systems, originally designed for defensive postures, have emerged as the most critical assets for these countries. The US supplied MIM-104 Patriot surface-to-air missile (SAM) system, together with the Terminal High Altitude Area Defence (THAAD) system, has been at the forefront of intercepting low-cost missiles and drones deployed by Tehran as part of its strategy to transform a regional conflict into a global economic disruption.
At the other end of this conflict, defence partnerships, particularly in the domains of air defence and offence alike, may undergo significant restructuring, with Gulf states seeking to diversify their defence technology portfolios. The United Arab Emirates (UAE), for instance, has reported good returns from the South Korean-made Cheongung-II air defence system (often referred to as the ‘Korean Patriot’). With a reported 96 percent interception rate, the system has been highlighted as a major success, providing its manufacturer, Yongin-based LIG Nex1, with a boost in the international arms market. The Korean manufacturer has made substantial inroads into the Middle East’s defence sector, traditionally dominated by Western companies, by securing contracts with the UAE, Saudi Arabia, and Iraq.
China has also sought entry into this emerging defence market. In the first week of April, reports suggested that Iran demanded an explanation “from two Gulf states” after claiming to have shot down a Chinese-made Wing Loong II drone over the city of Shiraz. The Chinese drone in question is effectively a derivative of the US-made MQ-9 ‘Reaper’ drone, developed by General Atomics and widely deployed during the war in Afghanistan. It has emerged as an option in the region for their armed forces to circumvent Western weapon systems, which often come with operational caveats tied to political understandings between states. By contrast, alternative defence technologies from newer countries are marketed as carrying fewer political constraints and less strategic baggage.

The diversification of platforms aligns with the broader aims of multipolarity and strategic autonomy pursued by many states.
The diversification of platforms aligns with the broader aims of multipolarity and strategic autonomy pursued by many states. To illustrate this argument further, the pursuit of fifth-generation fighter aircraft by Arab states has increasingly shifted away from American offerings, driven by geopolitical constraints and competitive manoeuvring. Israel’s insistence on remaining the sole operator of the F-35 stealth aircraft in the region has created a vacuum for Arab powers seeking comparable air capabilities. as Although, Saudi Arabia is expected to become the second customer of the F-35, the Israeli variant, nicknamed ‘Adir’ (‘the mighty one’ in Hebrew), is projected to retain a significant technological advantage.
Moving forward from the F-35, the strategic aims for such platforms have also evolved. Countries increasingly seek participation in these projects, often multinational in scope, not merely as buyers but as equity holders, thereby positioning themselves as semi‑producers of both platforms and technologies. . In this pursuit of technological one-upmanship, certain geopolitical relationships have shifted from fractures to cooperative frameworks. For example, both Saudi Arabia and Türkiye are often seen at odds over building their respective regional influence. However, Riyadh and Ankara have since found off-ramps along with an urgent need for defence collaboration to secure future requirements. Since 2025, Riyadh has been in talks at the “highest levels” to get the Turkish Aerospace Industries (TAI) ‘Kaan’ fifth-generation combat aircraft. First unveiled in 2023, the Kaan prototype completed its maiden flight in 2024. Türkiye, over the recent years, has been at the forefront of aviation technologies, especially drones, as its Bayraktar line of unmanned aerial vehicles has gained increasing prominence across global conflict theatres. Indonesia has already become the first foreign customer for the Kaan, with other states also expressing interest.

In this pursuit of technological one-upmanship, certain geopolitical relationships have shifted from fractures to cooperative frameworks.
The UAE is another power seeking to expand its air fleet. Abu Dhabi has expressed interest in deepening its defence partnership with South Korea in this space as well, specifically by investing in the KAI KF-21 ‘Boramae’ fighter jet program. The UAE and South Korea in November 2025 signed a declaration of intent to establish a full-value chain partnership built around three critical tenets. The first is joint development, which would grant the UAE critical equity in a program capable of sustaining air superiority requirements for decades. Second, and equally significant, is the potential establishment of a local assembly unit in the Gulf. And lastly, the partnership envisions the co-export of the KF-21 to global customers.
Although South Korea still has a lot of work to do to join the ranks of the top arms providers club, successful battle-testing of systems such as the Cheongung-II will deliver its military industry a big boost as far as competitiveness is concerned. For Seoul, this is already being recognised in places such as Europe. The UAE in the ongoing conflict has been the most frequent target of Iranian missiles and drones with its air defences successfully neutralising over 96 percent of incoming projectiles. The South Korean case thus serves as a signal to emerging strategic partners, such as India, highlighting the importance of building depth through joint production and collaborative research and development of mutually required defence systems for the future.

The South Korean case thus serves as a signal to emerging strategic partners, such as India, highlighting the importance of building depth through joint production and collaborative research and development of mutually required defence systems for the future.
Finally, these defence-led reorientations may prove more difficult to implement following the Iran–US crisis and its impact on the Gulf states. The reality remains that the security systems built and provided by the US as of today remain unmatched despite their flaws. Many Gulf states may therefore need to reinforce their partnerships with Washington to sustain deterrence against Iran from here and could opt for the F-35 if the opportunity arises, potentially undermining efforts at indigenisation. Such dynamics may adversely affect planned diversification of strategic cooperation, particularly as demands under President Donald Trump, to reinvest in the US economy in exchange for security, are likely to persist. Nevertheless, alternatives do exist. Saudi Arabia has underscored its long-standing partnership with Pakistan, demonstrated by the deployment of Pakistani troops and fighter jets to the King Abdulaziz Air Base located in Dhahran, bordering Bahrain, under a strategic agreement between Riyadh and Islamabad signed in 2025. This arrangement suggests that extended air cover for nearby Bahrain, if need be, could be provided by the battle-tested Pakistani contingent. Other potential options, such as China, remain largely untested and cautious in terms of mobilising military assistance.

Diversifying kinetic risk within this framework will remain difficult for the Arab states in the near term. However, for the long term, the current crisis with Iran is likely to accelerate a sense of urgency around defence autonomy, indigenisation, and the multialignment of defence technologies.
These dynamics reinforce Washington’s position as the only reliable actor in the Middle East, regardless of preference. Diversifying kinetic risk within this framework will remain difficult for the Arab states in the near term. However, for the long term, the current crisis with Iran is likely to accelerate a sense of urgency around defence autonomy, indigenisation, and the multialignment of defence technologies.



Kabir Taneja is the Executive Director, ORF Middle East.

### Tokenisation in the GCC: Infrastructure Modernisation and Financial Risk

Spotlight:


 	Tokenisation offers the potential to further modernise GCC financial infrastructure, enabling faster settlement, deepening capital markets, and facilitating integration with global systems.
 	Its value extends beyond assets, supporting AI-driven financial innovation through secure, anonymised data flows.
 	Without strong Anti-Money Laundering (AML) alignment and cybersecurity, tokenisation risks enabling illicit finance and undermining trust in digital ownership systems.

Introduction
Tokenisation, defined as the representation of financial or real-world assets as digital tokens on programmable ledgers, is increasingly being framed as the next phase of capital-market evolution. Rather than relying on fragmented, message-based financial infrastructure in which transactions conducted between banks, custodians and clearing houses must be reconciled across multiple separate records, tokenisation introduces a unified system of record with verifiable ownership. As the World Economic Forum notes, it offers “proof of value, proof of ownership and proof of transaction,” enabling quicker settlement times. In addition to speed and verifiability, tokenisation also allows assets to be divided into smaller, more affordable pieces (fractionalisation) and combined or programmed together in flexible ways (composability), meaning that investments can be bundled, or traded more easily than within traditional financial systems.

The UAE and Saudi Arabia are embedding tokenisation within state-led digital transformation strategies and seeing success due to strong regulatory support for tokenisation in the finance sector as well as the popular use-cases such as sending remittances driving usage among residents.
For the Gulf Cooperation Council (GCC), tokenisation intersects with member states’ economic diversification, digital sovereignty, financial competitiveness and geopolitical positioning. The United Arab Emirates (UAE) has already begun licensing tokenised real-world asset platforms under the Virtual Assets Regulatory Authority (VARA), and has experimented with cross-border central bank digital currency (CBDC) via “Project Aber” alongside Saudi Arabia. Yet the GCC states are not all equally placed to harness or manage this “tokenisation transformation”. The UAE and Saudi Arabia are embedding tokenisation within state-led digital transformation strategies and seeing success due to strong regulatory support for tokenisation in the finance sector as well as the popular use-cases such as sending remittances driving usage among residents. Tokenisation has also been encouraged by proactive regulatory sandboxes that allow controlled experimentation with digital assets, notably for the real estate industry.

Tokenisation Efforts in the UAE and Saudi Arabia
Saudi Arabia and the UAE in particular are increasingly viewing tokenisation as an extension of sovereign infrastructure-building rather than speculative experimentation. Both countries have aggressively digitised government services and financial and payment systems over the past decade. The UAE ranks highly in global e-government indices and has positioned Dubai as a virtual assets hub under VARA.
In this context, tokenisation aligns closely with national objectives. The UAE’s launch and Saudi Arabia’s ongoing sandboxing of national real estate tokenisation infrastructure could eventually integrate programmable ledgers with official property registries, advancing a “registry-as-truth” model. This is beneficial to the large Gulf economies firstly because tokenisation facilitates transparency, effectively creating a tamper-proof “ledger” linked to physical real estate assets that tracks verified ownership history and transaction flows, facilitating due diligence and reducing fraud risk which in turn strengthens the credibility and efficiency of the countries’ already lucrative real estate markets. Secondly, it creates a tradeable secondary asset class out of traditionally illiquid property holdings, enabling Gulf economies deepen and diversify capital markets as part of their longer-term transition away from oil. This broadens the range of investable instruments, attracting a wider investor base, and increases overall market liquidity.

It creates a tradeable secondary asset class out of traditionally illiquid property holdings, enabling Gulf economies deepen and diversify capital markets as part of their longer-term transition away from oil. 
The UAE; forerunner among GCC states in digital asset regulation and tokenisation initiatives, also announced the launch of a “digital dirham” stablecoin (known as DDSC) earlier in February 2026. In a similar vein to real estate tokenisation, the DDSC aims to similarly lower friction in cross-border financial transitions by providing a digital payment system that allows transactions to settle instantly without relying on traditional banking intermediaries. It is important to note that this step is facilitated by the federation’s already sophisticated regulatory ecosystem that includes the Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC). These financial free zones operate under internationally aligned legal frameworks, enabling tokenised instruments to interface more easily with UK or other popular international markets.

Data Tokenisation, AI and Financial Innovation
Asset tokenisation is only part of the larger picture in which tokenisation is set to play a central role in securing and enabling data flows in digital financial systems. Demand for services that can anonymise sensitive data in financial services is predicted to more than double, reaching US$3.76 billion by 2030. This has been driven by the increasing frequency and cost of data breaches, alongside stricter data protection and compliance requirements across financial markets. While encryption, one of the current most popular means of anonymising data, works by encoding sensitive information into unreadable ciphertext that requires decryption keys to restore it, data tokenisation is increasingly being eyed as a more secure alternative that removes sensitive data entirely from operational environments. This latter method replaces sensitive data with non-exploitable tokens that have no mathematical relationship to the original data, meaning that even if intercepted, they cannot be reverse-engineered without access to a separate secure mapping system. This approach has already been deployed in practice, most notably through Visa’s Token Service which replaces card numbers with tokens in digital transactions, significantly reducing fraud and limiting the exposure of sensitive payment data.

Asset tokenisation is only part of the larger picture in which tokenisation is set to play a central role in securing and enabling data flows in digital financial systems. 
For the GCC’s increasingly digitised economies, tokenisation can also support the countries’ ambitions to integrate further artificial intelligence (AI) functions within their finance and banking sectors. The UAE and Saudi Arabia generate vast volumes of digital payments and transaction data through increasingly digitised banking and retail ecosystems; if these datasets are tokenised and anonymised appropriately, banks could use this data to train and improve AI models for fraud detection, credit risk assessment and liquidity forecasting while remaining compliant with privacy and data localisation laws.
This dual function that enhances privacy while enabling data-driven analytics aligns with global regulatory trends such as the EU’s GDPR, and similar local privacy regulations such as the Federal Decree-Law No. 45 of 2021 on the Protection of Personal Data in the UAE and the Personal Data Protection Law (PDPL) in Saudi Arabia. In this sense, tokenisation may become a foundational layer for AI-enabled financial services rather than merely a vehicle for crypto-style asset issuance.

Risks of Tokenisation
While tokenisation can promise greater efficiency and transparency, it can also be used counterintuitively to obscure the link between a financial transaction and the underlying identity of the user. In particular, tokenised or blockchain-based systems that prioritise pseudonymity or anonymity can make it more difficult for regulators and financial institutions to conduct customer due diligence, monitor transactions, and trace illicit financial flows. The World Economic Forum has emphasised that fully anonymous on-chain systems conflict with Financial Action Task Force (FATF) guidelines, which require the identification of transacting parties, noting that illicit on-chain activity reached nearly US$25 billion in 2021. To mitigate these risks, regulators and industry bodies such as the FATF have recommended implementing robust Know Your Customer (KYC) requirements, applying the “Travel Rule” to virtual asset transfers, and using permissioned or hybrid blockchain systems that preserve auditability while ensuring that verified identity data remains accessible to authorised institutions.

The World Economic Forum has emphasised that fully anonymous on-chain systems conflict with Financial Action Task Force (FATF) guidelines, which require the identification of transacting parties, noting that illicit on-chain activity reached nearly US$25 billion in 2021.
Cybersecurity risk further complicates the equation. The Bank for International Settlements (BIS) has warned that quantum computing in particular may eventually undermine widely used anonymisation systems, posing a risk to traditional forms of anonymisation and particularly encryption. While tokenisation has been posed as a viable alternative which removes the risk of quantum-enabled actors being able to decrypt sensitive financial information, cybersecurity measures are all the same only as robust as the underlying systems that store, map, and manage tokenised data. If these systems are compromised, ownership records that rely primarily on digital ledgers rather than legally recognised off-chain registries will be vulnerable to unauthorised manipulation or loss of control, creating uncertainty in dispute resolution and weakening confidence in tokenised financial markets.

Conclusion 
Despite risks, the UAE and Saudi Arabia; states that possess fiscal capacity and regulatory sophistication, are continuing to experiment and implement tokenisation cautiously. For the region, tokenisation represents both an opportunity to modernise financial systems and a test of digital security resilience. In Saudi Arabia and the UAE, it is being embedded within sovereign-grade infrastructure including real estate registries, digital currency frameworks and capital market reform. These states possess the fiscal and regulatory capacity to treat tokenisation as infrastructure modernisation rather than speculative innovation.

In Saudi Arabia and the UAE, it is being embedded within sovereign-grade infrastructure including real estate registries, digital currency frameworks and capital market reform. 
Across the region, important factors will determine whether tokenisation strengthens financial systems or introduces new risks:


 	Integration of data tokenisation frameworks that support AI innovation while safeguarding privacy and sovereignty
 	Alignment with FATF guidelines and broader global AML standards
 	Sustained Investment in advanced cybersecurity infrastructure to protect digital assets and financial networks

If these conditions are met, tokenisation could enable GCC economies to deepen financial integration with international markets that are similarly embracing the tokenisation trend, reduce settlement friction, and build AI-enhanced financial sectors using secure, anonymised data. If not, it risks becoming another channel for illicit finance, cyber and quantum vulnerability.



Elizabeth Heyes is a Junior Fellow, Emerging Technology, ORF Middle East.

### Public Health Implications of Gulf Water Contamination: Risks, Monitoring, and Response

This article is the part of “Policy Pathways for Food and Water Security in the MENA Region“



Safeguarding health in the Arabian Gulf and the Gulf of Oman is centred on understanding what is in the water, where it moves, and how people are exposed to harmful contamination. As populations grow and coastal industries expand, the Gulf’s semienclosed waters are under increasing pressure from industrial discharges, wastewater effluents, and desalination by-products. These exposure risks are highly differentiated across populations and pathways.
Coastal labour communities and marine-dependent populations, such as fisherfolk, experience elevated risks due to direct and prolonged contact with contaminated seawater, sediments, and bioaccumulated pollutants in seafood, as documented in recent occupational and coastal exposure studies by Halder et al.[1] Urban residents, meanwhile, are exposed primarily through indirect pathways such as drinking water, air, and food, usually at lower levels but over long periods. Children and pregnant women are particularly vulnerable because of higher intake relative to body weight and greater sensitivity to neurodevelopmental and endocrine-disrupting contaminants.[2] Occupational groups, including desalination workers, face elevated risks from repeated exposure to process waters, aerosols, and by-products, underscoring the importance of targeted monitoring of desalination systems and effluents.[3]
Protecting communities across the region requires an integrated, evidence-based monitoring framework that connects environmental science to public health. The rest of this article outlines the key contamination risks, the need for harmonised monitoring, and the pathways to build resilient water and health systems in the Gulf.

Water Quality in the Gulf Region
The Arabian Gulf faces various environmental stressors. It is shallow, warm, and semienclosed with limited circulation, which can allow contaminants to persist longer than in open seas. Rapid urbanisation, industrial growth, and dependence on desalination have intensified pollution pressures. While desalination is essential for water security, it can return concentrated brine, trace metals, and chemical residues to the sea, affecting salinity and ecological balance. Similarly, wastewater reuse and aquifer recharge projects, though vital for sustainability, can introduce microbial and chemical contaminants if not properly managed.
Climate change complicates these dynamics. Rising sea temperatures and evaporation rates exacerbate salinity, while dust storms increase the atmospheric deposition of metals and organics.[4] Across the wider Gulf, similar pressures are evident. In Kuwait Bay, continuous wastewater discharge has degraded recreational water quality and increased public health risks.[5] These findings highlight that pollution challenges are not confined to one country but are shared across interconnected Gulf waters. Recent studies in the UAE have documented how these combined stressors alter microbial communities and nutrient cycles. A study published in 2025 in Frontiers in Marine Science found that urbanisation and climatic variation significantly affected microbial and chemical water quality in Khalid Khor, Sharjah.[6] Such findings highlight how environmental and anthropogenic factors intersect, shaping health risks in the region.

The Human Health Connection
Water contamination in the Gulf translates into tangible public health concerns. Chemical pollutants such as mercury, lead, and cadmium bioaccumulate through seafood consumption, impairing neurological and renal functions. Studies of stranded marine mammals in the UAE have found high levels of heavy metals and persistent organic pollutants in their tissues, indicating broader ecosystem contamination.[7] Emerging contaminants, including per- and polyfluoroalkyl substances (PFAS), a large class of persistent, human-made “forever chemicals”,a along with pharmaceutical residues and microplastics, are now being detected in coastal waters and sediments, raising questions about long-term exposure and its endocrinedisrupting effects. Microbial contamination is also an important concern. Discharges from treated wastewater can introduce pathogens and antibiotic-resistant bacteria into marine environments, which may increase health risks for coastal labour communities, particularly where access to adequate storage and hygiene infrastructure is limited.
Indeed, faecal contamination of groundwater and surface water was previously documented in Sharjah’s Al Wasit Nature Reserve, illustrating how microbial pathways can extend inland.[8] Additionally, the modern desert dust storms carry anthropogenic particle loads that deposit onto Gulf coastal waters and desalination intakes, reinforcing the need for integrated air–sea monitoring and rapid public-health response.[9] During the storm in the UAE in mid-April 2024, floodwaters around Sharjah, UAE contained tire-derived chemicals,b underscoring the need to integrate stormwater and drinking-water monitoring into Gulf public health response.[10],[11]
A ‘One Health’ approach that integrates environmental, animal, and human health data is therefore essential to trace these linkages and manage risk comprehensively. In the GCC region, existing water limitations and climate conditions shape agricultural productivity, and environmental contamination can further influence food security alongside food safety. Declines in water quality can affect fisheries and aquaculture, which are important regional protein sources, while contaminated irrigation water and soils may reduce crop yields. In a region that imports approximately 85 percent of its food, these pressures can increase reliance on external supply chains and sensitivity to global food price changes and disruptions.[12]
Contaminated coastal waters can reduce local fish stocks through increased salinity, temperature stress, and chemical pollution, leading to fish mortality and loss of biodiversity. These altered conditions also threaten aquaculture viability by impairing the growth and survival of cultured species. The buildup of contaminants in marine organisms can affect the safety and quality of seafood exports, with possible trade and economic impacts. At the same time, concerns about seafood safety may reduce consumer confidence and demand, affecting coastal livelihoods and regional food systems.[13]

The Importance of Baseline Data
Effective monitoring begins with robust baseline datasets. Yet, across the Gulf, data are often fragmented among ministries, municipalities, and research institutions. Without harmonised methods and multi-year records, it becomes difficult to discern whether observed changes represent genuine deterioration or natural variability. Building regional baselines for chemical, microbial, and ecological indicators would allow authorities to detect shifts early and coordinate responses.
These baseline data should include the following:
Chemical profiles: metals, nutrients, hydrocarbons, and organic pollutants measured seasonally across representative coastal and offshore sites.
Microbial indicators: coliform counts, antibiotic resistance genes, and pathogen diversity tracked over time.
Biomonitoring data: sentinel species such as oysters, fish, and seagrass to capture bioaccumulation and ecological stress.
Previous research by P. S. et al. has demonstrated that remote sensing of oyster habitats in the northern UAE can serve as an early indicator of ecological change.[14] Such integrative approaches exemplify how technology can support baseline development. Shared baselines, published transparently, enable authorities to map hotspots, evaluate interventions, and align national efforts under a common framework. Recent analyses of large-scale desalination in Gulf Cooperation Council states indicate that weak brine-management policies in some areas, particularly Qatar and Bahrain, have intensified salinity and chemical stress in coastal waters, highlighting the urgent need for region-wide regulation.[14]

Strengthening Monitoring Systems
In the GCC, contamination monitoring and response are implemented through a coordinated multi-agency framework. National emergency management authorities (for example, the National Emergency Crisis and Disasters Management Authority - NCEMA in the UAE) provide overall coordination for major incidents, while environmental, health, and municipal authorities carry out complementary roles in pollution control, public health protection, and local enforcement, in line with established mandates. Regional coordination is supported through existing cooperation platforms and can be further strengthened through shared data protocols, interoperable monitoring systems, and joint preparedness exercises.[16]
To support this governance structure and move from periodic sampling toward more timely environmental intelligence, the Arabian Gulf and the Gulf of Oman would benefit from a unified monitoring network integrating four complementary components:


 	Routine chemical testing of metals, organic pollutants, and nutrients in coastal and desalination intake waters.
 	Microbial surveillance for pathogens and antimicrobial resistance genes, leveraging genomic sequencing.
 	Biomonitoring of sentinel species and seafood to assess pollutant accumulation across the food chain.
 	Remote sensing and in-situ sensors to detect algal blooms and contamination plumes, with data feeding AI-based early warning systems.

Such an integrated approach aligns with established international frameworks, such as the EU Water Framework Directive, and can be adapted to the Gulf’s environmental conditions. The Regional Organization for the Protection of the Marine Environment (ROPME) has initiated efforts to promote regional data sharing, providing a foundation on which broader coordination and information integration can continue to build.[17]

Linking Monitoring to Health Outcomes
Environmental data, on its own, cannot accurately reflect health risks without context. To understand exposure pathways, water quality measurements must be linked to human behaviour and health outcomes. This requires integrating environmental, dietary, and medical data within a unified analytical framework. Research should connect contaminant levels in water and seafood with biomarker studies, hospital surveillance records, and broader population health indicators.
The UAE’s Water Security Strategy 2036 acknowledges this connection by emphasising health-based standards for desalinated and recycled water.[18] Expanding similar frameworks across the Gulf would promote consistent risk assessments and enable more targeted health advisories. These initiatives are informed by global guidelines such as the World Health Organization’s Guidelines for Drinking-water Quality.[19] For instance, comparing hospital data on gastrointestinal illnesses with environmental contamination trends could uncover unreported outbreaks or chronic exposure patterns. Likewise, analysing seafood consumption alongside evidence of bioaccumulation helps support scientifically grounded dietary recommendations.

Funding and Capacity Building
None of these advances are possible without sustained investment. Monitoring programmes across the Gulf often rely on short-term grants, limiting continuity and comparability. Establishing a regional water quality and health fund co-supported by governments, industry, and international partners would secure long-term capacity.
Priority investments should include the following:


 	Upgrading laboratories and ensuring inter-laboratory proficiency testing.
 	Expanding training in environmental chemistry, epidemiology, and data science.
 	Maintaining sensor networks and field logistics.
 	Developing open-data platforms that integrate chemical, microbial, and health metrics.

Steady funding signals political commitment and builds resilience. It also enables cumulative datasets that move policymaking from assumptions to evidence.

Collaboration, Transparency, and Policy Integration
The Gulf’s waters are shared, not divided. Pollution in one area inevitably affects another. This demands cooperative monitoring and open data sharing. A regional State of the Gulf Waters annual report, modelled on the European Environment Agency’s water-quality assessments, could strengthen transparency and accountability.[20] Partnerships between national laboratories, universities, and regional organisations such as ROPME would help harmonise protocols and improve inter-laboratory calibration.[21]
Desalination is a pillar of water security in the GCC and accounts for approximately 46 percent of global desalination capacity, reflecting the region’s long-standing investment in desalination to meet water demand under arid conditions.22,23 Recent reviews by D’Agostino et al. show that although desalination research in the region has expanded rapidly, much of the operational data and infrastructure remain with private operators, highlighting the need for closer collaboration between industry, regulators, and researchers to support effective environmental safeguards.[22] In addition to domestic use, desalinated water increasingly supports food-system resilience through irrigation, food processing, and controlled-environment agriculture such as hydroponics, strengthening the regional water–energy–food nexus.[23]
While regional mechanisms support cooperation, monitoring and response across the GCC are mostly carried out through national programmes that use different indicators, sampling frequencies, and data systems. This can delay the detection of transboundary contamination or harmful algal blooms, creating blind spots for desalination intakes in shared waters and complicating coordinated assessments of fisheries and seafood safety. Existing platforms provide a strong basis for cooperation and could be further enhanced through improved data interoperability and aligned monitoring outputs.22,23,[24]
Transparency also enhances public engagement. Making water quality information accessible encourages industries and citizens to support preventive measures. When communities understand the health implications of pollution, they can act as partners in protecting water sources.

Towards a Health-Centred Water Policy
True water security depends not only on availability but also on safety. Placing health at the centre of water policy shifts the focus toward well-being, resilience, and preparedness. Developing risk-based standards that reflect the unique conditions of Gulf ecosystems can safeguard vulnerable communities while supporting sustainable development. Integrating One Health data with AI-driven early-warning systems could further enhance the region’s ability to anticipate and respond to contamination incidents.
The Gulf has the expertise and innovation capacity to lead in this field. Its experience in desalination, smart infrastructure, and data analytics can be channelled into comprehensive environmental-health governance.

Conclusion
Protecting the Gulf waters is about protecting people. By strengthening integrated monitoring, establishing shared baselines, and linking environmental data with public health, the region can detect risks early and respond effectively. Collaboration, transparency, and sustained investment will determine whether the next generation inherits a Gulf defined by resilience or risk. Science-driven, cooperative policy action offers the surest pathway to safeguard both water and health.




Endnotes
[1] C. E. Halder et al., “Occupational Hazards and Risks among Women in Fisher Communities in Cox’s Bazar and Chattogram, Bangladesh,” PLOS ONE 19 no. 7, 2024, https://doi.org/10.1371/journal.pone.0297400.
[2] A. J. Burbank et al., “Community- and Neighborhood-Level Disparities in Extreme Climate Exposure: Implications for Asthma and Atopic Disease Outcomes,” Journal of Allergy and Clinical Immunology 152 no. 5, 2023: 1084–1086, https://doi.org/10.1016/j.jaci[4].2023.09.015.
[3] A. E. Al-Rawajfeh et al., “A Review on Harmful Algal Blooms in the Arabian Gulf: Causes and Impacts on Desalination Plants,” Desalination and Water Treatment 290, 2023: 46–55, https://doi.org/10.5004/ dwt.2023.29482.
[4] F. Mahroos et al., “Characterization and Health Risk Assessment of Chemical and Microbial Pollutants in Particulate Matter from Dust-Prone Regions,” Scientific Reports 15, no. 1 (2025), https://doi.org/10.1038/ s41598-025-09047-2.
[5] O. Bushaibah et al., “Wastewater Effluent from Outfalls in Kuwait Bay: A Threat to Recreational Water Quality,” Migration Letters 21, no. 7 (2024): 84–103, https://migrationletters.com/index.php/ml/article/ view/10467.
[6] N. Ahmed et al., “Evaluating Temporal Changes in Water Quality due to Urbanisation: A Multi-Year Observational Study in Khalid Khor, Sharjah, UAE,” Frontiers in Marine Science, 2025, https://doi.org/10.3389/fmars.2025.1538897.
[7] F. Yaghmour et al., “Analysis of Persistent Organic Pollutants and Heavy Metals in Mysticetes from the United Arab Emirates,” Regional Studies in Marine Science 68, 2023: 103276, https://doi.org/10.1016/j. rsma.2023.103276.
[8] F. Samara et al., “Investigation of Fecal Contamination of Groundwater and Surface Water at Al Wasit Nature Reserve,” Asian Journal of Microbiology, Biotechnology and Environmental Sciences, 2016.
[9] C. G. Williams and F. Samara, “Changing Particle Content of the Modern Desert Dust Storm: A Climate × Health Problem,” Environmental Monitoring and Assessment 195, 2023: 706, https://doi.org/10.1007/ s10661-023-11287-6.
[10] J. Navarro Ramos et al., “Emerging Contaminants in Stormwater: Tire-Derived Chemicals, Pharmaceuticals, and Heavy Metals Detected in a United Arab Emirates Extreme Weather Event,” Journal of Hazardous Materials Letters 6, 2025: 100162, https://doi.org/10.1016/j.hazl.2025.100162.
[11] D. S. Aga et al., “Rising Water, Rising Risks: The Hidden Dangers of Emerging Contaminants in Climate- Intensified Storms,” ACS ES&T Water 4 no. 7, 2024: 2785–2788, https://doi.org/10.1021/acsestwater.4c00457.
[12] L. G. Moussa et al., “Impact of Water Availability on Food Security in the GCC: Systematic Literature Review- Based Policy Recommendations for a Sustainable Future,” Environmental Development 54, 2025: 101122, https://doi.org/10.1016/j.envdev.2024.101122.
[13] H. Hosseini et al., “Marine Health of the Arabian Gulf: Drivers of Pollution and Assessment Approaches Focusing on Desalination Activities,” Marine Pollution Bulletin 164, 2021: 112085, https://doi.org/10.1016/j. marpolbul.2021.112085.
[14] P. S. P. et al., “Advancing Oyster Habitat Mapping: Integrating Satellite Remote Sensing to Assess Coastal Development Impacts in Northern United Arab Emirates,” Marine Pollution Bulletin 215, 2025: 117861, https:// doi.org/10.1016/j.marpolbul.2025.117861.
[15] M. Al-Saidi et al., “The Perils of Building Big: Desalination Sustainability and Brine Regulation in the Arab Gulf Countries,” Water Resources and Industry 32, 2024: 100259, https://doi.org/10.1016/j.wri.2024.100259.
[16] Redlog Environmental, “HSE Regulatory Requirements across the GCC – Part 4A: UAE Competent Authorities,” 2023, https://www.redlogenv.com/general/hse-regulatory-requirements-across-the-gcc-part- 4a-uae-competent-authorities.
[17] Regional Organization for the Protection of the Marine Environment (ROPME), State of the Marine Environment Report for the ROPME Sea Area (2023), https://ropme.org/publications/technical-reports/.
[18] UAE Ministry of Energy and Infrastructure, UAE Water Security Strategy 2036, 2020, https://u.ae/en/aboutthe- uae/strategies-initiatives-and-awards/strategies-plans-and-visions/environment-and-energy/the-uaewater- security-strategy-2036.
[19] World Health Organization, Guidelines for Drinking-Water Quality, 4th ed. with 2022 addendum, https://www. who.int/publications/i/item/9789240045064.
[20] European Environment Agency, Water Quality in Europe: Status and Trends, 2023, https://www.eea.europa. eu/themes/water/european-waters.
[21] United Nations Environment Programme, “Regional Seas Programme: Protecting the Marine Environment of the ROPME Sea Area,” 2023, https://ropme.org/about-ropme/unep-regional-seas-programme-newsletter/.
[22] D. D’Agostino et al., “Evolution of Desalination Research and Water Production in the Middle East: A Five- Decade Perspective,” Frontiers in Water 7, 2025: 1672360, https://doi.org/10.3389/frwa.2025.1672360.
[23] B. Moossa et al., “Desalination in the GCC Countries: A Review,” Journal of Cleaner Production 357, 2022: 131717, https://doi.org/10.1016/j.jclepro.2022.131717.
[24] A. K. Alhowaish, “The Blue Economy in the Arabian Gulf: Trends, Gaps, and Pathways for Sustainable Coastal Development,” Sustainability 17, no. 19 (2025): 8809, https://doi.org/10.3390/su17198809.

### Deepfakes Across the Gulf: A Generation-Detection Gap

Spotlight 


 	Generative AI tools have crossed a capability threshold that makes synthetic media indistinguishable from authentic footage at the speed of conflict
 	Content provenance and detection technologies are maturing but not yet deployed at scale in the region
 	Platform-side content moderation infrastructure has contracted at the same time that AI generation tools have become widely accessible
 	Technical standards like C2PA offer a near-term, implementable layer of trust for digital media

Introduction 
In the first seventy-two hours of the conflict, AI-generated synthetic media circulated across social media platforms faster than existing detection and verification infrastructure could process it. Fabricated satellite imagery, produced by manipulating authentic Google Earth data with generative AI tools and confirmed via Google's SynthID watermark detector, accumulated millions of views on X before being identified. Misattributed archival footage was re-captioned and reshared on Instagram, reaching six-figure view counts before geolocation analysis traced it to an unrelated event. A fully AI-generated video depicting an attack on a Gulf landmark reached over four million views, with detection tools such as Hive Moderation flagging it at 99.9 percent AI probability, but only after it had already spread widely. In each case, the generation-to-detection lag created a window in which synthetic content was consumed as fact.

The speed and scale of synthetic media during this conflict reveal that detection and provenance technologies must be deployed proactively.
The speed and scale of synthetic media during this conflict reveal that detection and provenance technologies must be deployed proactively. The trivial ease of generating deepfakes combined with the increasing difficulty of monitoring the web for synthetic media and verifying authenticity is becoming a core vulnerability in modern conflict zones.

A Perfect Storm of Disinformation
The economic impact has been tangible. Gulf stock exchanges became volatile in the first weeks of the conflict with benchmark indices across the region registering notable declines. The market reflected a range of factors including energy price fluctuations, supply chain uncertainty, and broader geopolitical risk. Additionally, the inability to quickly distinguish authentic reporting from synthetic fabrications added a layer of informational uncertainty that compounded standard market movement. In this conflict-ridden environment, AI-generated synthetic information and targeted disinformation campaigns have been pouring fuel into the fire. Cyabra, an online information security firm, identified an Iranian disinformation campaign across social media platforms immediately after the start of military operations promoting AI-generated videos of Iranian missiles striking regional landmarks. The campaign deployed “recurring narratives designed to portray Iran as the dominant and victorious actor in the conflict, amplified through synchronised posting behaviour and repeated media assets distributed across large account networks.” The absence of platform-integrated detection and content provenance infrastructure has meant that synthetic media could only be addressed after it had already gone viral. This left a response window measured in days rather than hours during which fabricated content had shaped public perception and market behaviour.
Table 1. Synthetic Media Incidents Amidst the US-Israel-Iran Conflict (February-March 2026)




Type of Synthetic Media
Claimed Target / Subject
Generation Technique & Tools
Detection Method(s)
Time to First Debunk




Fabricated satellite imagery
US Fifth Fleet Naval Base, Bahrain (presented as Al Udeid Air Base, Qatar)
AI manipulation of authentic Google Earth image (Feb 2025); SynthID watermark detected by Google’s tool
Google SynthID watermark detection; visual analysis
~2–3 days (imagery circulated from ~1 Mar; debunked by 3 Mar 2026)


AI-generated video
Burj Khalifa, Dubai (claimed 1,800 missile strikes)
Fully AI-generated video; Hive Moderation flagged 99.9% AI probability
Hive Moderation (99.9%); Sightengine; DeepFake-O-Meter
~2 days (posted 2 Mar; debunked by 3–4 Mar 2026 by Lead Stories


Misattributed archival footage
US airbase, Saudi Arabia
Recycled footage from July 2024 Israeli airstrike on Hudaydah port, Yemen; re-captioned as Iranian strike
Geolocation via visible features (UNICEF roof marking, adjacent building); matched to satellite imagery of Hudaydah port by Full Fact
~3 days (posted ~28 Feb; debunked by 3 Mar 2026 by Full Fact)


Coordinated AI-generated video campaign
Multiple Gulf landmarks and military bases (Saudi oil refineries, Burj Khalifa, US aircraft carriers)
Centrally produced AI deepfake videos; coordinated distribution via inauthentic account networks (19% fake profiles); synchronized posting, identical hashtag clusters
Cyabra behavioural analysis
Campaign identified within first week


AI-generated image (political deepfake)
Benjamin Netanyahu (fabricated death imagery showing body under rubble)
AI-generated photorealistic images; SynthID watermark detected; deepfake video of fake news presenter with lip-sync failure; amplified by 62 IRGC-linked fake accounts
AI or Not detector; Google SynthID
~1–2 days for initial debunking



Source(s): AAP FactCheck, AI or Not, Lead Stories, Full Fact, Cyabra
The speed and scale of synthetic media during this conflict expose a structural technical asymmetry: generative AI tools can produce photorealistic video in minutes, while detection, attribution, and provenance verification remain slow, fragmented, and largely manual. Fact-checkers relying on tools such as Hive Moderation, Google SynthID, and DeepFake-O-Meter were able to flag individual pieces of content with high confidence. However, this was only accomplished after that content had already accumulated millions of views. As Table 1 illustrates, the average time to first debunk ranged from two to five days, a window in which fabricated imagery had already triggered market volatility and public alarm. Closing this gap requires moving detection and provenance infrastructure upstream, from reactive and post-viral fact-checking to automated and platform-integrated verification at the point of upload and distribution.

The speed and scale of synthetic media during this conflict expose a structural technical asymmetry: generative AI tools can produce photorealistic video in minutes, while detection, attribution, and provenance verification remain slow, fragmented, and largely manual.
Three Converging Threats to Information Security
This conflict has illustrated that AI disinformation has entered a new paradigm driven by three factors. First, the capability of generative AI for producing photorealistic video has crossed a critical threshold. With recent iteration of video-generation AI models, earlier tell-tale signs and glitches in deepfakes have been largely eliminated. Within just the first two weeks of March, The New York Times was able to identify more than a hundred pro-Iran deepfakes, an unprecedented number compared to any previous conflict in the region. The danger of mass confusion was demonstrated when fake news was circulating about the death of Benjamin Netanyahu, with online commentators alleging that press conference footage showing Netanyahu alive and well were deepfakes. Tools that can be used towards such ends are now readily available thorough open-source platforms like Runway and HeyGen that are lightweight enough that anyone with a smartphone can generate deepfakes with a simple text prompt.
Secondly, GCC countries are no longer on the periphery but instead have become direct targets. This is crucial because Gulf populations are consuming wartime information through official and unofficial channels under active threat, making panic-inducing fake news more dangerous. Third, the governance infrastructure on big social media platforms like X and Facebook has been systematically down-sized out in recent years. After Elon Musk’s acquisition of X (then Twitter), between 2022 and 2024, the platform’s global trust and safety staff numbers have dropped by 30 percent. Meta has also reduced the number of human content moderators while adopting a AI and community notes approach similar to X. Moreover, Arabic-language content moderation was always noted to be under-funded before these cuts. For instance, Human Rights Watch documented a systematic pattern of suppression or removal of Arabic content (over 1,050 posts) on Meta’s platforms in just a two-month period in 2023. Whereas Telegram, a dominant communication platform in Gulf media landscape operates with practically no content moderation.

Closing the Gap 
This generation-detection gap can be closed through three related actions by GCC governments. First, mandating digital content provenance standards such as the C2PA (Coalition for Content Provenance and Authenticity) open standard that embeds a cryptographically signed temper-evident record in digital photo and video files that traces the tools used to create it as well as any edits made to the file. C2PA has already been adopted by companies such as Microsoft, Adobe, and Samsung. Mandating C2PA credentials for licensed outlets as well as social media platforms operating in the GCC may help adding a layer of trust when waiting for manual fact-checks on online posts may take too long. Second, the establishment of rapid-response information security cells within national security apparatuses and GCC-wide cooperation structures with the remit to detect, attribute, and issues public advisories on sensitive synthetic media. Third, wartime frameworks should protect legitimate journalistic uses of AI by including sunset clauses that expire after emergency restrictions.

Mandating C2PA credentials for licensed outlets as well as social media platforms operating in the GCC may help adding a layer of trust when waiting for manual fact-checks on online posts may take too long.
Any precedent being set now may end up defining Gulf information ecosystem for a generation. In the absence of purpose-built frameworks, as the military campaign drags on, emergency measure runs the risk of hardening into established practices as platform norms kept being written in California or Brussels with no input from the Gulf. With the capital, regulatory agility, and incentives of the GCC states, a coordinated standards-based approach will aid the region’s AI development and governance ambitions. The window is open to become a norm-setter rather than consumer of norms set elsewhere.



Siddharth Yadav is a Fellow in Emerging Technologies at ORF Middle East

### Transboundary Water Management in the MENA: Politics and Prospects

This article is the part of “Policy Pathways for Food and Water Security in the MENA Region“


Water, whether surface or underground, is transboundary by nature; cooperation between riparian countries is an imperative. In an arid region like the Middle East and North Africa (MENA), the lack of freshwater resources and competition over transboundary water resources, in addition to political tensions and armed conflicts, could become a major source of instability in the region.
According to the United Nations,[1] MENA is one of the most water-scarce regions globally, with many countries approaching or exceeding water stress thresholds as shown in Table 1. Furthermore, mega-trends such as climate change, urbanisation, and changing lifestyles across the region increase the demand for water. At the same time, these challenges can incentivise efforts to jointly manage the transboundary water resources in order to meet the growing water needs.
Table 1: Mean Annual Precipitation, Select MENA Countries

Source: Water Inventory2

Shared Underground Water Resources
Typically, disproportionate interest and attention is given to surface water, but the MENA region, and specifically the GCC countries, largely rely on shared groundwater resources. At the time of writing this article, no multilateral agreement exists to govern shared underground water resources in the region. For instance, in the West Asian region, the total renewable groundwater resources are estimated at 15.5 bcm.[2] Jordan, Palestine, Yemen and the six GCC countries rely on renewable groundwater sources. These are supplemented by extensive non-renewable groundwater reserves and, in particular in the case of the GCC, desalinated water sources.[4]

Sustainable Development Goal (SDG) 6
Sustainable Development Goal (SDG)-6—‘Ensure availability and sustainable management of water and sanitation for all’—is off-track to being met in the MENA region by the 2030 deadline. Progress on key targets is insufficient, with the region facing the highest levels of water stress in the world and a host of mounting challenges such as climate change impacts, unsustainable water use, infrastructure gaps, financial constraints, and poor governance. According to the UN 2023 SDG Report,[5] without intensified efforts, investments, and good governance, the MENA region may not fully meet SDG 6 by 2030.

Water Cooperation and Hydropolitics
Transboundary water management interacts with energy and food security through a complex interplay of resource allocation, infrastructure, and ecological factors as well as political dynamics. The need for water for irrigation (food security) and for hydropower (energy security) often creates competition among riparian states. Coordinated management is necessary to balance these competing demands, ensuring the sustainable management and use of shared water resources.[6]
Water resources in the MENA region are unevenly distributed and under immense pressure. Approximately two-thirds of the Arab world’s surface water supplies are transboundary, making regional cooperation not a luxury, but a necessity for human and economic development. This is especially true in the MENA region which experiences high water stress due to extensive aridity and a reliance on shared water sources: over 60 percent of the freshwater flows across national boundaries.
Ineffective transboundary governance exacerbates water scarcity issues, causing agricultural vulnerability for downstream countries and the inability to meet domestic food production needs due to water scarcity that forces many MENA countries to rely heavily on global food imports. Effective management is crucial for balancing energy and food security demands across the region’s shared basins.
Long-standing regional political instability has hindered effective cooperation over shared water resources as security considerations are prioritised. Peace is therefore, in most cases, a precondition for cooperation between countries in any field, especially for sharing an essential resource. The inverse is also true: depleted, polluted and degraded transboundary water supplies themselves have the potential to cause social unrest, triggering conflicts within and between countries.
Hydropolitics—or the strategic use and control of water as a political tool—is a key feature of the region’s geopolitical landscape. Upstream countries often exploit their geographic location to gain influence, while downstream countries have historically used economic or military force to protect their interests. The desire for water dominance can lead to either cooperation or conflict, depending on the strategies employed and the shifting balance of power.

The Nile Basin Case (the Grand Ethiopian Renaissance Dam)
There is a long-standing dispute between Egypt, Ethiopia, and Sudan regarding the utilisation of Nile waters, representing one of the most complex and potentially destabilising transboundary water issues in the region. The core of the conflict lies in the clash between Ethiopia’s developmental aspirations and Egypt’s and Sudan’s historical water rights.
Despite numerous rounds of negotiations, mediated by entities such as the African Union, a comprehensive, legally binding agreement remains elusive. Ethiopia has proceeded with the unilateral filling and operation of the dam’s reservoir, leading to continued diplomatic tensions and accusations from Egypt and Sudan of violating international law.[7] On paper, there is enough water in the Nile basin for all countries and all uses. It is a matter of political will, however, to reach a shared vision and strategy on how best to utilise the available water resources.

The Tigris–Euphrates Case
Tigris–Euphrates tensions emerge from a significant and ongoing transboundary water conflict in the Middle East, primarily between upstream riparian Turkey and the downstream nations of Syria and Iraq. The core of the dispute revolves around Turkey’s large-scale water development projects on the rivers’ headwaters, specifically the Southeastern Anatolia Project (GAP). Unpredictable water flows from rivers like the Nile and Tigris-Euphrates negatively impact agriculture by decreasing crop yields due to floods and droughts, which in turn raises food prices.
Despite numerous bilateral and multilateral negotiations since the mid-20th century, a legally binding comprehensive agreement for the equitable sharing of the rivers’ waters has not been reached. The lack of a formalised cooperative framework, exacerbated by political instability, civil conflict in Syria and Iraq, and climate change, has left the conflict unresolved.

GCC-Shared Groundwater Resources
The primary natural conventional water resource in the GCC is groundwater, with limited supply, along with the deep, non-renewable fossil aquifers that constitute the bulk of the resource. The region shares several major aquifer systems, including the Saq, Tabuk, Wajid, Minjur-Dhruma, Wasia-Biyadh, Um Er Radhuma, and Dammam.
Despite these shared groundwater resources, there is no agreement that governs their utilisation and management, making the region highly vulnerable to potential conflicts over climate change impacts, water depletion, and/or pollution. Groundwater depletion in the GCC countries severely impacts long-term food production and livelihood resilience by directly causing water scarcity, increased extraction costs, reduced crop yields, soil degradation, and increased dependence on vulnerable food imports.
While the political landscape in the MENA region often complicates transboundary water management, there are many avenues for cooperation, discussed in turn in the following paragraphs.

Water Diplomacy
International water law offers some guidance for the common management of shared water resources. However, it will not solve all shared water resources issues alone. A full resolution calls for water diplomacy to fill the gaps by offering means for all riparian countries to benefit from their shared water resources.
Water diplomacy is an important tool for preventing conflict and promoting cooperation as it can promote cooperation, stability, and peace through the management of shared water resources, conflict prevention and resolution, sustainable water management, and improved regional integration.

Nexus approach
Adopting the water-energy-food-climate nexus approach enables countries to address interconnected challenges holistically. For example, the projects supported by the Food and Agriculture Organization (FAO) aim to help countries in the region develop water strategies that are resilient to climate change.

Improved water governance
There are no basin-wide agreements on shared water resources in the MENA region. Existing bilateral agreements only govern surface water resources and centre mainly on water allocation. It is of utmost importance to have comprehensive bilateral or multilateral agreements that focus on sustainably managing these water resources (surface and underground) for the benefit of all riparian countries.

Integrated Water Resource Management
Water cooperation in MENA would also help in implementing IWRM practices on a basin-wide scale. Cooperation in water management demands that all countries and stakeholders in the MENA region share a common understanding of the needs, priorities, and options to take concrete steps towards solutions.

Flexible agreements to address climate change
New water-sharing agreements must account for the impacts of climate change, such as reduced rainfall and increased water scarcity. International funding can encourage countries to cooperate toward more equitable and robust agreements that address both water and climate crises.

Regional Organisations
None of the regional organisations currently working in the field of water has proved to be effective in dealing with tensions over shared water resources between MENA region countries and their neighbours. However, regional organisations such as UN-ESCWA, GCC, and the Arab League, can play a role in improving regional water resources given their political and technical expertise.

A Potential Role for the UAE
GCC countries, either as a bloc or individually, could consider supporting regional water cooperation through their foreign policies by:
• Acting as a mediator for water diplomacy activities among other countries of the region;
• Hosting annual meetings for riparian countries regarding the region’s key transboundary water resources;
• Helping in establishing and/or hosting joint technical secretariats for shared water resources management.
There is no doubt that in a water-scarce region like MENA, cooperation around shared resources is essential for promoting peaceful cooperation more broadly. There is plenty of scope for cooperation on aspects related to shared water resources, such as data and monitoring, joint water research, and joint infrastructure water projects. More sustainable management of common water resources can also help achieve stability in the region, indirectly reducing migration and radicalisation.
These strategies can help realise SDG 6 in the MENA, as well as support peace and stability in the region.

Conclusion
Water issues in the MENA should serve as an incentive for countries in the region to cooperate over water resource utilisation. In addition, mega-trends such as climate change, urbanisation, and changing lifestyles can also act as an impetus for efforts to jointly manage shared water resources to meet the growing water needs amidst increasing scarcity.
The transboundary water dynamics in the MENA represent a complex interplay of politics, hydrology, and development. While the potential for conflict remains, particularly in river basins, the increasing pressures of climate change and population growth also provide powerful incentives for cooperation. By prioritising water diplomacy, embracing integrated resource management, and establishing climate-resilient agreements, the region can transform water from a source of geopolitical contention into a catalyst for stability and shared prosperity.




Endnotes
[1] United Nations, The Sustainable Development Goals Report 2020, https://unstats.un.org/sdgs/report/2020.
[2] United Nations Economic and Social Commission for Western Asia (UN ESCWA), Inventory of Shared Water Resources of Western Asia, https://waterinventory.org.
[3] United Nations Environment Programme (UNEP), Global Environment Outlook 5 (GEO-5) (Nairobi: UNEP, 2011).
[4] United Nations Environment Programme (UNEP), Global Environment Outlook 4 (GEO-4) (Nairobi: UNEP, 2007).
[5] United Nations, The Sustainable Development Goals Report 2023 (2023), https://unstats.un.org/sdgs/ report/2023<./p>
[6] Bassel Daher and Rabi H. Mohtar, “Water–Energy–Food Nexus Framework for Facilitating Multi- Stakeholder Dialogue,” (2016), https://www.researchgate.net/publication/296685010_Water-Energy-Food_ Nexus_Framework_for_facilitating_multi-stakeholder_dialogue.
[7] Harrison Fuller et al., “Nile Waters Conflict: The Grand Ethiopian Renaissance Dam,” Policy Workshop Report (Princeton: Princeton School of Public and International Affairs, 2023), https://issuu.com/princetonspia/ docs/nile_waters_conflict_the_grand_ethiopian_renaissan
[8] Nadhir Al-Ansari, Nasrat Adamo, Jan Laue and Sven Knutsson, “Geopolitics of the Tigris and Euphrates Basins,” Journal of Earth Sciences and Geotechnical Engineering 8, no. 3 (2018), https://iraqi-forum2014.com/ wp-content/uploads/2018/05/Vol-8_3_10.pdf.

### Oman’s Personal Income Tax: A Case of Fiscal Signalling

Spotlight


 	Oman’s planned personal income tax is a shift beyond the rentier model
 	The tax is set to target the top one percent and that is less about redistribution and more about macroeconomic signalling and creditor confidence
 	Oman is positioning itself as a regional outlier in fiscal reform

Introduction
The oil price collapse of 2014, when crude fell from about US$100 to US$50 per barrel, marked a turning point for fiscal policy in the Gulf Cooperation Council (GCC) states. Governments began steering their economic strategies toward diversification, stronger budgetary discipline, foreign investment, and the introduction of new tax instruments, including indirect taxes, corporate taxes, and direct taxes.

The reform marks a deliberate recalibration of the rentier social contract, prioritising credibility and sustainability over redistribution.
As part of Oman’s broader effort to move beyond hydrocarbons and diversify its fiscal base, the small open economy (SOE) plans to introduce a five percent personal income tax on individuals earning more than RON 42,000 annually (approximately US$109,000) with a roll-out from January 2028. This threshold applies to roughly one percent of the population, signalling a progressive approach that initially targets top earners. Oman’s personal income tax can be best understood not as a revenue tool, but as a calibrated signal of fiscal discipline aimed at reinforcing creditor confidence and macroeconomic stability. It marks a deliberate recalibration of the rentier social contract, prioritising credibility and sustainability over redistribution.
Figure 1: Government Debt and Real GDP for Oman from 1990-2025 (Growth Series)

Source: Authors’ Own. Data from the IMF. Prepared using Matplotlib. 

Oman’s Early-Mover Advantage
The six GCC economies have historically functioned as rentier states, where a substantial share of national income is derived from rents, defined as income generated from natural resources, particularly oil. However, the long-term sustainability of the rentier model has increasingly come under scrutiny. Volatility in global oil prices, rapid population growth that strains the traditional social contract, and rising pressures on public sector employment have intensified calls for economic diversification across the region. One important dimension of this transition is fiscal or revenue diversification, which involves reducing dependence on hydrocarbon revenues by developing alternative sources of government income.
Compared to its GCC peers, Oman possesses significantly lower natural resource rents than major hydrocarbon producers such as Kuwait and Saudi Arabia. This relative resource constraint, combined with higher fiscal pressures and a more limited sovereign wealth buffer, has compelled Oman to adopt a more pragmatic and fiscally realistic policy approach. These structural factors, together with decisive political leadership, have positioned Oman as a first mover within the GCC in pursuing reforms such as the introduction of new personal income taxation frameworks.
Broadly, the Sultanate’s policy response to the oil shocks and the resulting fiscal pressures has rested on three pillars: (a) spending more efficiently, (b) broadening existing revenue bases, and (c) prioritising debt reduction. Taken together, these measures strengthened Oman’s fiscal position and helped drive a significant decline in public debt by 2024 (Figure 1). These decisions reflect the Sultanate’s fiscal health considerations and its long-term goal of achieving balanced and sustainable economic growth.
Notable achievements in recent years include the decree of the Public Debt Law, which set a decision to establish a Public Debt Management Committee (DMC). The committee is responsible for developing a framework for public debt management strategies and policies by reviewing the annual borrowing plan to ensure the sustainability of public debt and its growth rate. On top of this, Oman’s sovereign wealth fund (the Oman Investment Authority) reduced its companies’ debt by 24 percent and increased its contribution to the State’s General Budget, exceeding RON 6bn (US$15.6bn) from 2016 to 2023.

While the income tax may not be the saviour for government revenues, it boasts an important signal for creditors that the Sultanate is serious about charting a fiscal path that is unique in the Gulf region.
By edging towards a stable and diversified revenue base, the personal income tax introduction marks a credible inflection point in Oman’s fiscal transformation, sending a clear signal to creditors that diversification is no longer aspirational but underway. Notably, as part of the 11th Five-Year Development Plan (2026–2030), the share of non-oil revenues is expected to increase to around 37.4 percent of total revenues by the end of 2030. Still, Oman forecasts it will have an estimated average yearly deficit of RON 666mn (US$1.7bn) during these coming years, mainly because it aims to spend significantly on development, economic transformation projects, and its social protection system. A personal income tax would anchor Oman's fiscal consolidation, reinforcing the hard-won credit rating upgrades that are now unlocking more favourable borrowing conditions — and the capital needed to sustain its broader economic ambitions. Crucially, while the income tax may not be the saviour for government revenues, it boasts an important signal for creditors that the Sultanate is serious about charting a fiscal path that is unique in the Gulf region.

Oman’s move toward personal income taxation signals a deeper shift in revenue diversification and represents a structural attempt to offset the limitations of the traditional rentier model.
While other GCC states continue to pursue diversification primarily through economic and sectoral strategies, open economy initiatives such as attracting foreign direct investment, and the deployment of sovereign wealth funds, their revenue models still rely largely on indirect taxes, fees, levies, and corporate taxation, and other forms of diversification (economic, export, financial, labour market). In contrast, Oman’s move toward personal income taxation signals a deeper shift in revenue diversification and represents a structural attempt to offset the limitations of the traditional rentier model. In this respect, Oman maintains a clear first mover position within the GCC in advancing fiscal diversification.

Why the Top One Percent? Fiscal Discipline over Redistribution
The current income tax targeting the top one percent improves vertical equity, wherein people with higher income incur a greater tax burden and introduce a limited degree of tax progressivity in an economy characterised by volatile oil rents. Over the past two decades, Oman’s average national income has declined by nearly 37 percent, driven largely by external developments and successive economic shocks, beginning with the downturn following the global financial crisis in 2008 and oil shocks in 2014. The primary purpose of this tax is not redistribution in a developmental sense, but rather the re-marking of post-oil fiscal realism. It carries limited implications for income inequality reduction or large-scale redistribution and instead centres on improving state financing, building fiscal credibility, political-economy signalling and building macroeconomic resilience.
The top one percent of income earners in Oman account for roughly 20 percent of total national income in recent years, approximately making up to US$22 billion in aggregate. This one percent primarily comprises high- and upper-income capital owners, concentrated across sectors such as real estate, industrial conglomerates, oil and gas, and other commercial activities.

The reform speaks to an external audience: fellow GCC states as well as institutions such as the IMF and the World Bank.
The reform’s impact can be understood across four distinct groups. First, for the state, it introduces a credibility-enhancing revenue instrument, signalling a gradual shift toward a more sustainable and rules-based fiscal framework. Second for the remaining 99 percent of earners below the threshold, the reform carries no direct burden, thereby preserving the existing social contract for most households. Third, for the targeted top one percent, outright capital flight remains unlikely given the low statutory rate of five percent and the inherently location-bound nature of their wealth and business interests. Instead, among those with access to sophisticated financial and legal arrangements, the more probable response is marginal income reclassification or quiet financial restructuring to reduce effective tax liabilities below the headline rate, rather than any wholesale relocation of capital. Fourth, and perhaps most consequentially, the reform speaks to an external audience: fellow GCC states as well as institutions such as the IMF and the World Bank. In this regard, Oman positions itself as the first Gulf state to cautiously recalibrate its social contract, doing so in a measured and deliberate manner, by design.

Oman in the International Tax Regime
Another key consideration surrounding the income tax relates to the issue of double taxation, which has implications like FDI and ease of doing business, harming Oman’s economy. As Oman seeks to continue its economic growth, and attract investment, it is important for it to proliferate its international tax agreements. Particularly, Double Taxation Agreements are important to keep the Sultanate globally competitive. Oman has been diligent in recent years to ratify at least ten double taxation agreements since 2014. An additional two with Bahrain and Kazakhstan are due to be ratified, amongst other discussions closing in the number of such agreements on 40.
The latest ten agreements have converged more on the OECD principle of taxing individuals in their primary residence rather than sources of income. This aligns Oman with international standards and though some taxation will be lost in the short run, it will have a longer-term success of attracting economic activities despite the increased reliance on taxation for revenues.

Conclusion
If successful and unamended, any expansion of the tax base or increase in rates remains a second-order question. The first-order priorities are clear: a more dynamic labour market, reduced reliance on state support, a financially resilient middle class, and deeper capital markets. The current reform is therefore best understood as a deliberate first step, not the endpoint.
Nonetheless, Oman has taken the risk of being a first mover amongst the Gulf countries. The risk is that, with crises such as the ongoing war, such initiatives and their core objectives may be undermined. Oman may be anticipating a scenario where creditor confidence is not sustained to the extent it hopes once the tax is rolled out. Consequently, Oman could still postpone or cancel the tax’s roll‑out while continuing to pursue its long‑term economic vision.



Manish Vaidya is Research Assistant, at ORF. 
Mahdi Ghuloom is Junior Fellow, Geopolitics, at ORF Middle East.

### How Middle East Turmoil Reverberates Through Japan’s Energy System

Spotlight


 	Japan's Middle East dependency is structural, not just strategic, creating a web of dependencies that no single policy lever can quickly unravel.
 	Japan's post-Fukushima shift to fossil fuels, a gap filled almost entirely by Middle Eastern imports, compounded a pre-existing structural vulnerability that is still reverberating through its energy system today.
 	Tokyo's diversification toolkit is real but moves slower than geopolitics. US crude imports, North American LNG investments, nuclear restarts and renewables buildout are all underway, but are constrained by time, cost and configuration.

Japan has long been described as a country with deep "energy angst", an understandable sentiment for an industrialised island nation with almost no domestic energy resources. That anxiety has returned to the foreground with force amid the ongoing Middle East crisis, which has once again exposed the structural fault lines in Japan's energy supply. Analysts and governments alike have highlighted Japan as one of the developed economies most acutely vulnerable to disruptions in the Gulf. What follows examines the roots of that dependence, the real costs of disruption, and the limited options Tokyo possesses to gradually reduce its exposure over time.

A Dependency Decades in the Making
Despite being the world's fourth-largest economy, Japan produces only around 15 percent of the energy it consumes domestically, leaving it structurally dependent on imports across all fuel types. Of all the vulnerabilities this creates, its reliance on the Middle Eastern oil and gas, is most consequential.
As of the first half of 2025, Japan sourced more than 95 percent of its crude oil feedstock from Middle Eastern suppliers. Moreover, Japanese refineries were built to process medium and heavy sour crude, the grades that define Persian Gulf exports. That configuration has made the Middle East not merely a convenient supplier but a structural cornerstone of Japan's energy system.

Source: nippon.com
Supply patterns remain highly concentrated. The United Arab Emirates (UAE) alone accounts for roughly 44percent of Japan's crude imports, followed by Saudi Arabia (40 percent), Kuwait (7 percent) and Qatar (4 percent). The complementarity between refinery configuration and Gulf crude grades has locked in this dependence across decades of long-term contracts.
For liquefied natural gas (LNG), the picture is somewhat more diversified. Japan remains the world's second-largest LNG importer, and Australia is its largest supplier, accounting for roughly 38 percent of imports in recent years. Other major suppliers include Malaysia (16 percent), the United States (10 percent) and Russia (9 percent), with the Middle East, primarily Oman, Qatar and the UAE, accounting for about 11percent of LNG imports directly.
Yet roughly 83 percent of LNG leaving the Persian Gulf transits through the Strait of Hormuz. Any disruption to that chokepoint therefore ripples across global gas markets, raising spot prices for Asian buyers regardless of where their contracted volumes originate.
Japan's fossil fuel dependence was also deepened by a domestic policy choice. Prior to the March 2011 Fukushima disaster, nuclear power supplied close to 30 percent of Japan's electricity. The subsequent closure of the entire reactor fleet forced utilities to replace that generation with imported fossil fuels. Fossil fuels' share of electricity generation surged to 84 percent in 2015, up from 64 percent in 2010, before gradually retreating to around 69 percent by 2024 as solar expanded and some reactors restarted.
These structural factors have reinforced Japan's enduring dependence on imported fuels and deepened its exposure to geopolitical developments in the Middle East.

The Hormuz Calculus
The Strait of Hormuz is the world's single most consequential energy chokepoint and Japan's most critical supply artery. At the time of writing this article, a two-week ceasefire has been announced, but the events of the past several weeks have demonstrated how quickly theoretical risk can become operational reality.
Energy Disruptions in the Middle East

Source: Bloomberg
Brent crude, trading at around US$72 per barrel before the conflict intensified, surged past US$110 by end-March 2026. The Japan Korea Marker (JKM), Asia's benchmark LNG spot price approximately doubled, as tighter supply intensified competition between Asian and European buyers for available cargoes.
The macroeconomic transmission channels to Japan's economy are direct and severe. A US$10 increase in crude prices is estimated to raise Japan's inflation by around 0.3 percentage points. At sustained prices above US$120 per barrel, it is estimated that Japan could slip into stagflation, with GDP roughly 0.6 percent below baseline in 2026. The situation is compounded by Japan's fiscal position: the country already carries the largest public debt burden among developed economies, at roughly 260 percent of GDP, leaving limited room for large-scale energy subsidy programmes.
Higher fuel prices feed directly into Japan's trade balance and household energy costs. The trade deficit ballooned to over JPY 20 trillion in 2022 following the Russia–Ukraine energy spike, and the current crisis risks a repeat. Utilities including TEPCO and Chubu Electric have signalled plans to pass rising procurement costs through to retail tariffs from April 2026, with annual household electricity bills projected to increase by around JPY 15,000.
Japan maintains significant emergency petroleum stockpiles, approximately 254 days of crude oil reserves as of end-2025, combining government and industry holdings. This reserve, among the largest in the OECD, provides meaningful insulation against short-term physical supply disruptions. But stockpiles address volume shortfalls, not price shocks; as long as global markets clear at elevated prices, Japanese buyers will face higher costs regardless of reserve levels.
The LNG dimension introduces an additional layer of complexity that stockpiles cannot address. Unlike crude oil, LNG cannot be held in long-term strategic reserves once regasified, and Japan has no comparable buffer mechanism, though the government has introduced a Strategic Buffer LNG (SBL) framework under the Economic Security Promotion Act. The Oxford Institute for Energy Studies estimates that a one-year Hormuz closure would reduce global LNG supply by roughly 15 percent as compared to 2024 levels, a shortfall that new volumes from Australia, the US and Canada could only partially offset. With LNG accounting for approximately 33 percent of Japan's electricity generation in 2024, a prolonged Gulf gas disruption would translate rapidly into tighter power markets and higher electricity prices.
The damage to Qatar's Ras Laffan Industrial City, the world's largest LNG export facility, also underscores how deeply embedded Japan is in Qatar’s gas sector. Japanese engineering firm Chiyoda Corporation was among the contractors involved in the massive North Field expansion before the conflict forced construction to halt. Within hours of the ceasefire announcement, Chiyoda signalled it was considering a return to on-site work at Ras Laffan, a cautious sign of recovery, but also a reminder that Japan’s stake in Gulf energy infrastructure is not merely financial but also industrial and the product of decades-long cooperation.

Options on the Table: Diversification, Nuclear, and the Long Game
Japan is not without options, but none of them are quick or costless. The country's energy establishment has been grappling with diversification for decades, with efforts accelerating after the Russia–Ukraine conflict demonstrated the risks of concentrated supplier dependence. Three broad pillars define Tokyo's response: continued diversification, potential momentum in restarting of nuclear capacity, and reshaping the power mix through renewables and grid modernisation.
On the crude oil front, Japanese refiners have begun sourcing non-Middle Eastern feedstocks, though refinery configuration constraints remain significant. In 2025, Japan imported a record volume of US crude, almost double than 2024. Combined with sourcing from Africa, Latin America and Oceania, this effort helped reduce the Middle East's share of crude feedstock from 95.4 percent in 2024 to 93.5 percent in 2025, incremental progress given that refineries designed for heavy sour grades cannot rapidly or cheaply switch to lighter alternatives.
For LNG, diversification is more advanced but also more complex. Japan's import portfolio already spans Australia, Malaysia, Russia's Sakhalin-2 project and the United States (US). Since mid-2025, Japanese energy companies have deepened their upstream exposure in North American gas. Mitsubishi's US$ 5.2 billion acquisition of Haynesville Basin producer Aethon Energy, JERA's USD 1.5 billion Haynesville investment, Tokyo Gas's pledge to direct over half its overseas budget to the US, and JAPEX's US$ 1.3 billion Colorado and Wyoming acquisitions collectively reflect a strategic pivot toward equity participation in North American supply chains. Yet as the current crisis has demonstrated, portfolio diversification cannot insulate Japan from global price shocks when supply tightens simultaneously across multiple nodes.
Nuclear restarts have long been touted as the most structurally significant lever available and one that has gained renewed political momentum. Japan's 7th Strategic Energy Plan, committed to maximising existing reactor use, targeting around 20 percent of electricity from nuclear by 2040. In February 2026, TEPCO restarted Unit 6 of the Kashiwazaki-Kariwa Nuclear Power Station, bringing the active fleet to 15 reactors with 33 GW of combined capacity. According to the US Energy Information Administration, a single unit of this plant could displace approximately 1.3 million tonnes of LNG imports annually, equivalent to roughly  10 percent of Japan's Gulf LNG imports from 2025.
However, ambition exceeds near-term delivery capacity. Analysts estimate that nuclear may reach only around 12 percent of electricity generation by 2030 under optimistic assumptions and could decline further by 2040 as ageing reactors are decommissioned. Local opposition, safety reviews and regulatory timelines continue to slow restarts. METI's own modelling acknowledges that if nuclear and renewables both underperform, fossil fuels could supply around 45 percent of Japan's electricity as late as 2040.
Renewables form the third pillar, driven primarily by solar, offshore wind and geothermal expansion. Japan's Organisation for Cross-regional Coordination of Transmission Operators has identified inter-regional transmission reinforcement as a priority investment, and the government's GX (Green Transformation) programme allocates funding for grid modernisation alongside clean power deployment. The Climate Bonds Initiative estimates that a decisive clean power transition could require around JPY 38 trillion in investment by 2035, roughly a quarter of the broader GX programme. The price shocks of 2022 and again in 2026 have sharpened the fiscal logic: avoided fossil fuel import costs could offset much of that expenditure over time.
Thus, crude diversification, LNG upstream investment, nuclear restarts and renewable expansion are complementary rather than competing strategies. None offers a rapid solution in isolation. Collectively, they form the foundation of Japan's long-term attempt to reduce the structural vulnerability that ties its energy security to geopolitical events thousands of kilometres away.

Structural Vulnerability, Incremental Escape
Japan's energy relationship with the Middle East is not a policy choice that can be reversed by decree. The current disruption has underscored that the costs of this dependence increase with each successive crisis. Each price spike expands the trade deficit, exerts pressure on the yen, raises household energy bills, and complicates monetary policymaking for the Bank of Japan. Even after a ceasefire, the supply consequences are likely to persist.
With sustained policy commitment, the goal should not be seen as independence from Middle Eastern energy reliance but as resilience, ensuring that any future disruptions find Japan less exposed than previous ones.



Parul Bakshi is Fellow, Energy and Climate, ORF Middle East.

### Food and Water Security as an Element of National Security: Strategies for the Gulf

This article is the part of “Policy Pathways for Food and Water Security in the MENA Region“


In 2020, when the COVID-19 pandemic disrupted global supply chains and closed borders across the world, the movement of food and agricultural goods slowed down. Two years later, in 2022, the Russia-Ukraine war further challenged the supply of grain (mainly wheat and barley fodder)[1] and sunflower seed oil, to the Gulf. For Gulf states, which import more than 85 percent of food commodities,[2] these crises served as a test of food supply resilience and logistical preparedness.
Another challenge emerged in 2023, when the Bab el-Mandeb Strait, a vital maritime trade corridor linking Europe, the Middle East, and Asia, was affected by vessel attacks by Houthis just off the coast of Yemen.[3] The rerouting of vessels around the Cape of Good Hope extended delivery times and raised transport costs while also putting at risk the Gulf’s food supply route. These disruptions were a reminder to Gulf countries that food security is a matter of national security and can easily be interrupted by both regional conflicts and global events.

From Hyper-Arid Climate to High Food Security Index
The Arabian Peninsula’s environment presents a challenge to agricultural self-sufficiency. With hyper-arid conditions, minimal rainfall, water scarcity, and less than 2 percent of land suitable for farming,[4] the Gulf’s ecosystems naturally put a limit to traditional agriculture.
Although advanced systems that are designed to use less water, such as vertical farms and high-tech greenhouses, are rapidly expanding, they remain energy-intensive. Balancing technological progress, sustainability, and energy transition goals is still a shared challenge across the region and one that requires integrated planning.
Conflicts in neighbouring countries such as Syria, Yemen, and Iraq, compounded by environmental degradation and climate change,[5] could further trigger regional migration and instability with a spillover effect into the Gulf. To overcome this, countries have turned to diplomacy, innovation, and strategic planning.
For example, the Gulf Cooperation Council (GCC) has recognised that these environmental challenges are continuing to impact food and water security and, as such, need to be addressed as part of a wider security strategy. The Council published the Gulf Cooperation Council Vision for Regional Security in 2024 in which food and water security was named one of the grouping’s cooperation objectives.[6]

Food Security Policies and Strategies in the Gulf
GCC governments have placed food and water security at the heart of their national agendas. This is reflected in their strong performance on the Global Food Security Index,[7] where all GCC members rank above the world average. The Index, which assesses availability, affordability, quality, and safety of food supplies, ranks the UAE highest at 23rd place, followed by Qatar at 30th and Oman at 35th.
Each country has tailored its approach towards food and water security based on its national priorities and circumstances. The Kingdom of Saudi Arabia (KSA), Sultanate of Oman, and the United Arab Emirates (UAE) are focusing more on achieving higher self-sufficiency through increased domestic food production. For its part, Qatar is relying on innovation, such as alternative proteins, to strengthen its food security. In addition, the UAE and the KSA are focusing their efforts on overseas land acquisition in case domestic production falls short.
Saudi Arabia has integrated food and water security into the Vision 2030 Strategy,[8] and its National Aquaculture Policies and Practices[9] and 2030 National Strategy for Agriculture[10] have helped strengthen food production and self-sufficiency in key products such as dairy and eggs. The agricultural sector’s growing contribution to GDP, reaching US$30.4 billion in 2024,[11] demonstrates the effectiveness of Saudi Arabia’s policy planning and implementation.
The UAE has adopted a comprehensive long-term approach through the 2051 National Food Security Strategy,[12] which promotes diversification of import sources, technology-driven local production, reduction of food waste, and enhanced resilience in supply chains, underpinned by specific targets. The UAE has also designated food as a priority within its new National Cluster Strategy,[13] connecting food systems to economic diversification. Meanwhile, Oman’s Sustainable Agriculture and Rural Development Strategy (SARDS) 2040[14] and National Nutrition Strategy[15] were developed in partnership with the Food and Agriculture Organization (FAO) of the United Nations with the aim of promoting rural development and environmental sustainability.
For Qatar, once it became challenging to import food through Saudi Arabia several years ago, it turned to other countries for its food imports. The experience exposed Qatar’s vulnerability as a result of relying on a single-entry point for its food imports and underscored the value of domestic production and supply diversification. Qatar’s National Food Security Strategy 2030[16] thus continues to focus on resilience, sustainable consumption, and international partnerships. Similarly, Kuwait and Bahrain are advancing initiatives aligned with their own national visions. Kuwait Vision 2035[17] and Bahrain’s first national food security strategya,[18] contain plans to strengthen local agriculture, advance agritech, and develop long-term food reserves.

Water Security as a Strategic Priority
Water scarcity is another theme that is central to the region’s long-term security planning. Groundwater resources such as the shared Umm er Radhuma–Dammam aquifer system covering 680,000 km2 support the majority of agricultural production across Saudi Arabia, the UAE, and Oman. Because of its connection to food production, sustainable management of this resource is critical, and requires coordination between countries to prevent overextraction and improve resource quality.
To meet rising demand caused by population growth, GCC states have turned to technology to meet their water demands and have become global leaders in the desalination processes. In the UAE, the majority of drinking water comes from desalination[19] and in Saudi Arabia, desalinated water meets roughly 60 percent of urban needs.[20] Although states are investing in new and more efficient technology, climate change and environmental degradation of coastal ecosystems are still likely to increase energy usage. This is particularly challenging as the Gulf is looking to diversify its economy and transition away from fossil fuels while increasing food production.
The UAE’s Water Security Strategy 2036[21] aims for sustainable access to water under both normal and emergency conditions, establishing storage capacity benchmarks and conservation programmes. Saudi Arabia’s National Water Strategy 2030[22] envisions a sustainable and efficient water sector that safeguards natural resources while maintaining service quality. Meanwhile, Kuwait, Bahrain, and Qatar are expanding desalination and wastewater recycling— critical capacities given their near-total reliance on desalination.[23]
For their part, Jordan, Tunisia, and Israel have all developed wastewater policies that allow them to treat and reuse their water for agriculture and groundwater recharging. GCC countries still have a long way to go in wastewater reuse and it could be a significant resource for food production, thus further easing their reliance on energy-intensive desalination while preserving important natural capital.

Public-Private Partnerships and Agritech Investments
Given their constraints in natural resources, the Gulf countries have turned to innovation as a core element of their food and water security agenda. One of the results is the significant amounts of public and private sector investments in agritech. These efforts are important for enhancing self-sufficiency and are positioning the Gulf as a hub for agricultural innovation.
Across the GCC, more than US$3.8 billion has already been invested in food technologies,[24] with agritech expected to contribute US$30.5 billion to the Gulf economy. Large-scale projects such as Oman’s Saham Agricultural City,[25] Saudi Arabia’s Jeddah Food Cluster,[26] and the UAE’s Food Tech Valley,[27]
are designed to integrate research, production, and logistics, creating ecosystems that link innovation to national security goals. The International Center for Biosaline Agriculture (ICBA[28]) is a valuable example of how region-contextualised scientific research can help solve food security challenges by developing new techniques for growing crops in saline and arid conditions.
Adding another dimension to food security is overseas agricultural investments. Saudi Arabia’s SALIC and the UAE’s Al Dahra have acquired agricultural land and ownerships in agricultural companies across continents, ensuring reliable access to essential commodities like grain and meat. As these portfolios expand, particularly into the Global South, their long-term benefits will increasingly depend on integrating geopolitical sensitivities, climate resilience, biodiversity stewardship,[29] and engagement with local communities, as part of their investment strategies.

Looking Ahead
1. Regional Cooperation: GCC countries face similar challenges when it comes to food and water security. They are all considered strong and stable economies and harnessing cooperation to tackle common problems is only expected. Shared initiatives can enhance food and water security through joint research, harmonised policies, and coordinated crisis management. The GCC Vision for Regional Security already recognises food and water security as essential to the region’s collective stability. Furthermore, the GCC is showing greater interest in a harmonised GCC-wide Food Security Strategy, especially following COVID-19 where such regional cooperation[29] has proven to be beneficial to these countries in times of crisis.
A GCC-wide approach could also help manage future risks linked to climate change and trade disruptions. Coordinated efforts to diversify import sources, standardise emergency reserves, and develop regional food corridors could further strengthen resilience. Joint investments in renewable-powered desalination and climate-smart agriculture could reduce costs and accelerate sustainability goals.
2. National Strategies: As the Gulf moves into a new era shaped by climate change and new geopolitics, revisiting and updating national strategies becomes increasingly important. Many existing food and water policies are several years old and refreshing them to reflect current environmental realities and technological advances will ensure that they remain effective and forward-looking. Comprehensive and modernised water policies are needed to promote sustainable management of transnational aquifers, and regional cooperation in replenishing those essential groundwater resources through joint efforts.
Some states have already made substantial progress with data to show it,b while others are still developing frameworks that translate intent into concrete, measurable outcomes. Strengthening institutional capacity and aligning national efforts with scientific research will be beneficial. Locally driven science and research tailored to Gulf conditions can provide the evidence base needed to guide policy decisions and innovation.
Although domestic production in this region is increasingly relying on technology to produce yields, agriculture still remains the biggest user of fresh water. For example, in the UAE, 73 percent of freshwater[31] is used for agriculture. Domestic production in this region comes at a cost, either by depleting critical natural resources such as soil and water or by increasing the demand for energy, as it is the case with the vertical farming systems.
Although the food-water nexus is acknowledged within some of the food security strategies, the GCC countries could benefit from further integrating their water, food, and energy policies.
3. Investment in innovation and new technologies: The Gulf’s strong appetite for innovation will continue to play a pivotal role in shaping the next stage of its food and water security. By investing in knowledge, skills, and homegrown expertise, countries can ensure that technology serves long-term sustainability.
The Gulf’s experience demonstrates that food and water security are not isolated development issues—they are integral to economic diversification, social well-being, and long-term national stability. The region has already made notable progress in turning challenges into opportunities for innovation. Continued investment in technological advancement and global partnerships will be essential to sustain this momentum. AI-powered technologies such as precision agriculture, Internet of Things (IoT), smart irrigation, vertical farming, and renewablepowered desalination can help balance environmental stewardship with desired productivity.
The path forward will likely build on the Gulf’s proven ability to adapt. Over the recent decades, the region has transformed its deserts into global centres of business, technology and innovation. The same drive that powered this transformation is also being directed toward securing its most fundamental resources—food and water. The momentum created by hosting climate COP28 in 2023,[32] the yearly Abu Dhabi Food Security Summit,[33] and the upcoming United Nations Water Conference in 2026,[34] all offer an ideal opportunity to spearhead the food and water security agenda with sustainability at its core.

Endnotes
[1] Anna L. Jacobs, “The Ukraine Crisis Deepens Food Insecurity Across the Middle East and Africa,” Arab Gulf States Institute, April 11, 2022, https://agsi.org/analysis/the-ukraine-crisis-deepens-foodinsecurity- across-the-middle-east-and-africa/.
[2] “The GCC imports 85% of its food – here’s how it is increasing food security through innovation,” World Economic Forum, February 14, 2025, https://www.weforum.org/stories/2025/02/gulf-foodsecurity- innovation/.
[3] Ahmad Ghaddar, “Houthi attacks in the Bab al-Mandab Strait hit global trade,” Reuters, December 19, 2023, https://www.reuters.com/world/bab-al-mandab-shipping-lane-target-israel-fightshamas- 2023-12-12/.
[4] Agricultural land (% of land area), in World Bank Open Data, https://data.worldbank.org/.
[5] International Committee of the Red Cross and Norwegian Red Cross, Making adaptation work – Addressing the compounding impacts of climate change, environmental degradation and conflict in the Near and Middle East, April 2023, Gland, Switzerland, International Committee of the Red Cross, https://www.icrc.org/en/document/report-impact-climate-change-and-armed-conflict-near-and-middleeast.
[6] The Cooperation Council for the Arab States of the Gulf Secretariat – General, Gulf Cooperation Council Vision for Regional Security, (Political Affairs and Negotiations (Second Edition), 2024), in the Digital Library, https://gcc-sg.org/ar/MediaCenter/DigitalLibrary/Documents/27848330-555a-4a7d- 9a6c-206b797fd2f9.pdf;Digital Library, https://www.gcc-sg.org/ar/MediaCenter/DigitalLibrary/Pages/ default.aspx.
[7] Economist Impact, Global Food Security Index 2022, The Economist Group, 2022, https://impact. economist.com/sustainability/project/food-security-index/explore-countries.
[8] Kingdom of Saudi Arabia, Council of Economic and Development Affairs, Vision 2030, (Council of Economic and Development Affairs, 2016), https://www.vision2030.gov.sa/media/quudi5wq/vision- 2030-overview.pdf.
[9] Kingdom of Saudi Arabia, Ministry of Environment, Water and Agriculture, National Aquaculture Policies and Practices, (Ministry of Environment, Water and Agriculture (2nd Edition), 2018), https:// faolex.fao.org/docs/pdf/sau207920E.pdf.
[10] Kingdom of Saudi Arabia, Ministry of Environment, Water and Agriculture, The National Agriculture Strategy for Year 2030, (Ministry of Environment, Water and Agriculture, 2020), https://faolex.fao.org/ docs/pdf/sau208110.pdf.
[11] Kingdom of Saudi Arabia, Council of Economic and Development Affairs, Vision 2030 Annual Report, (Council of Economic and Development Affairs, 2024), https://www.vision2030.gov.sa/media/ r3ij40wu/en-annual-report-vision2030-2024.pdf.
[12] Government of the United Arab Emirates, National Food Security Strategy 2051, 2018, https://u.ae/en/ about-the-uae/strategies-initiatives-and-awards/strategies-plans-and-visions/environment-and-energy/ national-food-security-strategy-2051.
[13] Ministry of Economy and Tourism, Government of the United Arab Emirates, “Food Cluster: The First Step in Cluster Strategy Implementation,” https://www.moet.gov.ae/en/food-sector.
[14] Government of the Sultanate of Oman, Sustainable Agriculture and Rural Development Strategy towards 2040 (SARDS 2040), 2016, https://faolex.fao.org/docs/pdf/oma214204E.pdf.
[15] World Health Organization, Regional Office for the Eastern Mediterranean, Nutrition Country Profile, Oman, World Health Organization, 2023, https://applications.emro.who.int/docs/WHOEMNUT301Eeng. pdf.
[16] State of Qatar Government, Ministry of Foreign Affairs, National Food Security Strategy 2030, 2024, https://www.gco.gov.qa/en/media-centre/top-news/prime-minister-launches-the-national-food-securitystrategy- 2030/.
[17] State of Kuwait Government, Ministry of Foreign Affairs, Kuwait Vision 2035 “New Kuwait, https:// www.mofa.gov.kw/en/pages/kuwait-vision-2035.
[18] Government of Bahrain, National Strategy to Achieve Food Security, 2025, https://bahrain.bh/wps/ portal/en.
[19] U.A.E., Government of the United Arab Emirates, “Water, Water Security Strategy 2036,” https://u.ae/ en/information-and-services/environment-and-energy/water-and-energy/water.
[20] Kingdom of Saudi Arabia, Ministry of Energy, Water and Agriculture, “National Water Strategy,” https:// www.mewa.gov.sa/en/Ministry/Agencies/TheWaterAgency/Topics/Pages/Strategy.aspx.
[21] U.A.E., “Water, Water Security Strategy 2036.”
[22] Kingdom of Saudi Arabia, Ministry of Environment, Water and Agriculture, “National Water Strategy.”
[23] “Qatar strengthens water security through strategic planning, global partnerships,” Zawya, July 28, 2025, https://www.zawya.com/en/business/energy/qatar-strengthens-water-security-through-strategicplanning- global-partnerships-d7etfuqi.
[24] “GCC to ensure food security through a unified strategy,” Arab News, April 3, 2024, https://arab.news/ ph6a3.
[25] “Oman: MHUP holds forum on draft master plan for Saham Agricultural City,” Zawya, February
26, 2025, https://www.zawya.com/en/economy/gcc/oman-mhup-holds-forum-on-draft-master-plan-forsaham- agricultural-city-j6ywoq0p.
[26] Modon, “Food Industries Cluster,” https://modon.gov.sa/en/Products/FoodClustring/Pages/default. aspx.
[27] Food Tech Valley, “Reimagining the potential of food,” https://www.foodtechvalley.ae/.
[28] ICBA, “About Us,” https://www.biosaline.org/.
[29] Maja Kent, “Climate, Biodiversity and Food Security Risks: Global Perspectives and Solutions for the UAE,” Anwar Gargash Diplomatic Academy, October, 2025, https://www.agda.ac.ae/research/ publications-multimedia-events/publication-details/climate-biodiversity-and-food-security-risks-globalperspectives- and-solutions-for-the-uae.
[30] Oxford Business Group, “At the source: Ensuring food supply is proving a promising area for investment – Analysis,” July 5, 2022, https://oxfordbusinessgroup.com/at-the-source-ensuring-foodsupply- is-proving-a-promising-area-for-investment/.
[31] Ahmed A. Murad, Hind Al Nuaimi and Muna Al Hammadi, “Comprehensive Assessment of Water Resources in the United Arab Emirates (UAE),” Water Resource Management 21, 1449–1463 (2007), https://doi.org/10.1007/s11269-006-9093-4.
[32] COP28, “UAE Consensus,” https://www.cop28.com/en/
[33] Global Food Security Summit, “Unlock New Opportunities and Drive Sustainable Growth,” https:// www.gfss.ae/.
[34] United Arab Emirates, Ministry of Foreign Affairs, “Preparations for 2026 UN Water Conference Accelerate with Adoption of Six Interactive Dialogue Themes,” July 10, 2025, https://www.mofa.gov. ae/en/mediahub/news/2025/7/10/10-7-2025-uae-un.

### Stress Testing the EU-Gulf Cooperation

Spotlight:


 	A pivotal test of the deepening and strengthening EU–Gulf relations is the way, form, and extent of the Union’s support to its partners during the hostilities and in the post-conflict stabilisation phase.
 	Free Trade and Strategic Partnership agreements gain new substantive significance in the post-conflict era. They can serve as instruments that showcase the EU’s trust in the Gulf states’ long-term stability and prosperity.
 	The EU’s predictability and reliability can serve as an asset—a strategic currency—which increasingly resonates with the needs of its partners.

In April 2025 and 2026, the European Union’s (EU) cooperation with the Gulf states unfolded in two distinct strategic contexts. Since last spring, a series of landmark announcements revealed that these relations had entered a phase of deepening, expansion, and enhancement. Over the past year, free trade negotiations – aimed at market liberalisation – were initiated between the EU and the United Arab Emirates (UAE). Moreover, Brussels announced its readiness to negotiate tailor-made Strategic Partnership Agreements (SPAs) bilaterally with each Gulf State. To date, SPA negotiations have commenced with the UAE and Qatar. Given their scope and purpose, these agreements have the potential to significantly strengthen political and economic ties between the parties.

Brussels announced its readiness to negotiate tailor-made Strategic Partnership Agreements (SPAs) bilaterally with each Gulf State. 
The significance of these negotiations may be considerably re-evaluated and acquire new substance against the backdrop of the conflict that broke out in February 2026, when the United States (US) and Israel attacked Iran, prompting Tehran to retaliate by targeting the EU’s Gulf partners. Overall, the future trajectory of EU–Gulf cooperation will be strongly contingent upon the nature and extent of the support and prospects that the Union can provide to its partners, both during the conflict and throughout the post-conflict recovery phase.
Although on 8 April the US and Iran agreed to a temporary ceasefire, the situation remains volatile until a more durable political settlement begins to take shape. Kaja Kallas, EU High Representative for Foreign Affairs and Security Policy, welcomed the cessation of hostilities, showing cautious optimism. For the time being, this phase appears to remain one of observation and prudent anticipation.

Confronted with New Realities
The Gulf states are bearing the costs of a conflict initiated and shaped by external powers. Iran’s blockage of the Strait of Hormuz – disrupting trade through a commercial chokepoint of vital importance to the countries of the Arabian Peninsula – together with attacks on civilian infrastructure, has severely undermined these actors’ economic interests.

In addition to the direct economic and physical losses that the Gulf countries suffered, the attacks also undermined their reputation as “oases of peace, stability and security” within a conflict-torn region.
Crude oil and liquified natural gas (LNG) are among the export commodities most exposed to these disruptions, though other products, such as fertilisers, are also impacted. Based on data provided by the International Energy Agency (IEA) “around 25% of the world’s seaborne oil trade transit[s] the Strait, and options to bypass it [are] being limited”; additionally,  this maritime passage is also indispensable for the shipment of 20 percent of global LNG. Beyond the physical disruption of hydrocarbons trade, exports are further constrained due to attacks on Gulf energy infrastructures. A telling example of the damage and its impact is the case of QatarEnergy, which was compelled  to invoke force majeure on some of its LNG contracts, including supply agreements with Italy and Belgium. In 2025, Qatar was the EU’s third largest LNG provider accounting for 8.8 percent of total volume[1] behind Russia (14.3 percent) and the US (55.2 percent). At present, the partial disruption of hydrocarbon trade does not pose a physical supply threat to the Union, as the Gulf states are neither its sole nor its primary suppliers of LNG or oil. The principal adverse impacts for the EU arise instead from rising global energy prices. However, the possibility of shortages has arisen with regard to jet fuel.
In addition to the direct economic and physical losses that the Gulf countries suffered, the attacks also undermined their reputation as “oases of peace, stability and security” within a conflict-torn region. Given the nature of the harm, addressing physical damage once the direct hostilities come to a lasting end might be quicker than mending one’s image.
It is under such circumstances that the scope, strength, effectiveness, and future potential of cooperations may be assessed through the prism of conflict-period support and post-conflict recovery priorities.

A Friend in Need is a Friend Indeed
As Luigi Di Maio, the EU’s Special Representative (EUSR) for the Gulf Region observed in an interview a few weeks after the outbreak of hostilities: “This crisis is testing our partnership and, so far, is reinforcing our partnership”. In light of this statement, the question arises: what precisely does the Union’s aid to the Gulf entail and where does its significant potential lie?
Beyond the expressions of support and solidarity – exemplified by the EUSR’s in-person visit to the Gulf countries in March 2026, followed by the High Representative’s visit to the region in April– the EU also proposed concrete solutions to help mitigate the harms of the conflict. As such, according to the EUSR, the Union has put forward to the United Nations (UN) the idea of the creation of a humanitarian corridor through the Strait of Hormuz, similar to the Black Sea grain initiative. After the recently announced temporary ceasefire it remains to be seen how the reopening of this waterway will effectively unfold and to what extent ships would be able to transit freely.

According to the EUSR, the Union has put forward to the United Nations (UN) the idea of the creation of a humanitarian corridor through the Strait of Hormuz, similar to the Black Sea grain initiative.
Di Maio further emphasised that this critical situation holds an opportunity to elevate the cooperation of the Union with its Gulf partners in the areas of security and defence. These strategic domains are set to be an essential component of the SPAs. Such sectoral cooperation could gain even more traction as, according to the EUSR, Gulf countries call “for a structured solution of this conflict […] in the day after this war, we have to work for a solid architecture of security of the Middle East because […] the security of the Gulf […] the security of the wider Middle East is our security”. This line of reasoning reflects a political and diplomatic approach instead of a force-based one.
The EU itself rejected any form of military engagement in the conflict. As Kaja Kallas stated in mid-March, “This is not Europe's war, but Europe's interests are directly at stake”. At the time of writing this article, EU Member States restrained, under the EU’s common security and defence policy, from expanding the geographic scope of the Union’s existing defensive naval operations in the wider region (EU NAVFOR ASPIDES or EU NAVFOR ATALANTA) to the Strait of Hormuz. One of the main explanations for this decision is that the Union’s strategic attention and support instruments are primarily concentrated on Ukraine; the latter being at the core of the EU’s security concerns and fundamentally tied to its vital interests. As Kallas put it after a Foreign Affairs Council meeting on 16 March: “Ministers [of the EU countries] were clear that Ukraine remains a European top security priority and attention for Ukraine will not be allowed to fizzle out”.

Ukraine’s centrality in how Brussels positions itself regarding developments in the international arena and how it frames these events, particular strategic importance is attached to Kyiv’s contribution to the defence of US ally Gulf states against Iranian strikes.
Considering Ukraine’s centrality in how Brussels positions itself regarding developments in the international arena and how it frames these events, particular strategic importance is attached to Kyiv’s contribution to the defence of US ally Gulf states against Iranian strikes. In the EU’s narrative – which builds on the interlinkages between the conflict theatres in its Eastern and wider Southern neighbourhood – this aid is contrasted with Moscow’s support to Teheran. Such framing can foster a sense of shared hardship with the Gulf states and introduce a new dimension of converging interests.

Predictability and Trust: Increasingly Valued Strategic Asset
Amid a volatile and uncertain geopolitical landscape, the EU can position itself as a long-standing, reliable strategic partner — one with concrete economic and political offers on the table, and crucially, one that is predictable. French President Emmanuel Macron underscored this quality in early April, implicitly contrasting it with the erratic behaviour of the US. A case in point of this predictability, reliability, and commitment to upholding international agreements and norms is Brussels’ commitment to the Iran nuclear deal (Joint Comprehensive Plan of Action (JCPOA)) even after Washington’s withdrawal.
This reasoning is likely to resonate strongly with the Gulf states’ strategic considerations, which may have already experienced a fundamental erosion of confidence in the US’ actions. Subsequently, from the standpoint of these states’ future cooperation prospects with other partners this turn of events could heighten the value of predictability and trust.
This logic may place an even higher premium on the opportunities of collaborating with the EU, a longstanding counterpart, with whom institutionalised cooperation dates back to 1989.[2] Beside the Union being the “GCC's [Gulf Cooperation Council[3]] second-biggest trade partner” – based on data from 2024 – and the world’s largest trading block, its forthcoming structural engagements (e.g., under the form of FTA and SPAs) and commitments are likely to  serve as signals of trust in the prosperous and stable future trajectories of the Gulf states.

In a stabilisation phase, the EU’s offer to its partners may gain heightened importance, as a relatively swift negotiation of the FTA and SPAs could bring about significant change in the Gulf states’ post-conflict conditions and prospects.
Conclusion
How the EU responds to the predicament in which the Arab Gulf countries, its partners, found themselves after 28 February 2026 will be decisive for the future prospects of cooperation between the parties.
The tangible impact of these responses on de-escalating the conflict remains limited. The Union continues to act as a stable background supporter, rather than an actor capable of significantly influencing the course of events. Nevertheless, in a stabilisation phase, the EU’s offer to its partners may gain heightened importance, as a relatively swift negotiation of the FTA and SPAs could bring about significant change in the Gulf states’ post-conflict conditions and prospects. Should these agreements be concluded over the coming months or year, they could yield substantial reputational advantages to the concerned parties, along with both direct and indirect economic and political gains.
When the dust from drones and missiles settles, attention should shift from the skies to the negotiating tables.



Eszter Karacsony, Non-Resident Fellow, ORF Middle East



[1] It is worth noting, however, that exposure to LNG imports differs across individual member states. This figure applies to the EU as a whole.
[2] Relations between the EU and the Gulf Cooperation Council (GCC), with its six member countries – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE) – are legally based on and governed by the Cooperation Agreement signed in 1989.
[3] The six member countries of the Gulf Cooperation Council (GCC) are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE).

### Climate Change: The Silent Casualty of War

Spotlight


 	The US-Israel-Iran War has emitted large greenhouse gas emissions into the atmosphere, setting the scene for accelerated climate change impacts in the Middle East going into the future.
 	The use of military equipment and strikes on oil facilities and other infrastructure in the region has resulted in dire environmental, agricultural, and public health consequences. Land fertility, water safety, air quality, and food security have all been threatened throughout the duration of this war.
 	The closure of the Strait of Hormuz has led to an energy crisis with the price of oil exceeding US$100 per barrel. Additionally, with Middle East airspace essentially a no-fly zone, aviation and shipping reroutes are expected to increase emissions, as well as travel times and fuel consumption. 

The Climate Cost of War
Human lives lost, massive destruction, and economic collapse are all well-documented consequences of war. Climate change by contrast, unfolds over longer timescales and its impact not immediately visible, is often overlooked during global conflicts. Thus, making it the silent casualty of war. Greenhouse gas emissions due to war, combined with anthropogenic climate change in the Middle East; a region that undergoes warming at a rate faster than the rest of the world, has proven to have dire consequences. The Middle East is expected to experience extreme climate events (including droughts and heatwaves), ecological degradation, public health challenges, and a large refugee and displacement crisis as a result of climate change.

If the world’s military were considered collectively as a single country, they would have the fourth-largest carbon footprint, behind China, the United States (US), and India. 
In 2019, the world’s militaries were responsible for 5.5 percent of global greenhouse gas emissions, with the US military identified as the largest contributor. If the world’s military were considered collectively as a single country, they would have the fourth-largest carbon footprint, behind China, the United States (US), and India. It is worth noting, however, that this data carries substantial uncertainty, and actual emissions may be higher as no country is required to report the emissions from their military activity. These emissions are expected to rise as military spending increases, with estimates suggesting that every US$100 billion increase in spending generates roughly 32 million tons of carbon dioxide equivalent (tCO2e). Globally, military spending has increased from US$1.9 trillion in 2019 to US$2.7 trillion in 2024 and could reach US$6.6 trillion by 2035.
The Russian war in Ukraine and the Israeli war in Gaza have provided limited analysis and insight into the impacts of war on climate. The first three years of the Russian war in Ukraine resulted in 237 million tCO2e released into the atmosphere, equivalent to the annual emissions of France. One-third of these emissions originated from warfare itself, 27 percent from anticipated reconstruction efforts, and 22 percent from fires affecting forests and natural landscapes. The total climate cost of the Russia-Ukraine war to date is estimated to be US$32 billion according to an updated assessment from the Initiative on Greenhouse Gas Accounting of War (IGGAW).
The story in Gaza differs from Ukraine, where the conflict was largely one-sided and resulted in 92 percent of residential buildings being destroyed in Gaza, alongside 125 hospitals and clinics. The total emissions of the Israeli war in Gaza amount to 33.2 million tCO2e, with the majority arising from the reconstruction of Gaza. The first 120 days in Gaza produced more carbon emissions than 26 individual countries. In addition to the destruction of homes, over 70 percent of Gaza’s solar panels have been destroyed or damaged. Prior to the war, Gaza had one of the world’s highest densities of solar energy generation, but with the depletion of solar panels, residents have now switched to diesel powered generators. These generators are estimated to emit 130,000 tCO2e and have significant implications for public health due to airborne pollutants.

Us-Israel War on Iran and the Ramifications for the Middle East 
A continuation of the 12-day war from June 2025, the US-Israel coalition has reopened hostilities against Iran and one outcome is certain: the conflict is generating substantial climate emissions as the US-Israel forces and Iran exchange strikes across the region. The US-Israel side relies heavily on airstrikes conducted by aircraft and drones, as well as interceptor missiles for defense, whereas Iran has relied primarily on ballistic missiles. The use of aircrafts alone has produced significant emissions, while ballistic and interceptor missiles are known to release pollutants into the upper atmosphere, particularly in the mesosphere and stratosphere. Additionally, the transport of weapons, equipment, and aircraft carriers to the region from the US has contributed large carbon emissions, similar to what was observed during the Gaza war.

A continuation of the 12-day war from June 2025, the US-Israel coalition has reopened hostilities against Iran and one outcome is certain: the conflict is generating substantial climate emissions as the US-Israel forces and Iran exchange strikes across the region.
The targets selected in this war have released large amounts of toxins and chemicals into the atmosphere, harming both the environment and human health. The direct strikes on oil facilities in Iran and the Gulf countries have had immediate direct impacts on environment quality and public health. Tehran, home to nearly 10 million people, recently experienced “black rain”; a mix of oil and precipitation, due to an Israeli airstrike on a nearby oil depot.  This phenomenon has detrimental effects on water safety, air quality, and food security. Local residents reported headaches and breathing difficulties, and such exposure is known to increase the risk of cardiovascular illness. These toxic pollutants also have long-term consequences as they seep into soil, croplands, and groundwater.
In addition to oil depots, strikes on nuclear and uranium sites pose significant threats to the environment and human health. In June 2025, the US-Israel joint force attacked Iran’s nuclear and uranium facilities, where radioactive and chemical contamination were subsequently detected. These substances, when reacting with atmospheric moisture, are extremely hazardous. Studies have identified links between uranium exposure and increased risks of cancer and other health conditions.

Tehran, home to nearly 10 million people, recently experienced “black rain”; a mix of oil and precipitation, due to an Israeli airstrike on a nearby oil depot.  This phenomenon has detrimental effects on water safety, air quality, and food security. 
The direct attacks on shipping vessels, offshore infrastructure, and tankers by both parties will have serious consequences for the marine environment in the region. These attacks increase risks of oil spills into the Gulf and surrounding waters, an area of high biodiversity and home to many endangered species. This was evident during the previous Iraq-Iran war in the 1980s, when oil spills were linked to a sharp decline in hawksbill and green turtle populations. An additional study found that 12 years after the Gulf War, traces of oil residue were still present along Saudi Arabia’s coasts and full recovery is expected to take decades.
In Lebanon, an emerging front that has spilled over from the US-Israel war on Iran, numerous fires have occurred throughout the country as a result of Israeli airstrikes. These strikes, combined with the region’s drought-like conditions, have led to extensive forest fires, including in the Bkassine pine forest, the largest pine forest in the Middle East. There have also been several reports in Lebanon of the Israeli military using white phosphorus bombs, a violation of international humanitarian law. White phosphorus is highly toxic and can cause severe liver damage, ingestion issues, and respiratory tract problems. In addition to these white phosphorus bombs being used in urban areas, they have also been used in agricultural zones in attempt to reduce land and soil fertility and contaminate water supplies. It has been reported that these attacks have burned over 40,000 Lebanese olive trees.

The direct attacks on shipping vessels, offshore infrastructure, and tankers by both parties will have serious consequences for the marine environment in the region.
The US-Isreal war on Iran has impacted global transportation through diverted air and shipping routes. With much of the Middle East essentially a no-fly zone, planes are being rerouted to avoid the airspace thus leading to an increase in travel times, fuel consumption, and emissions. Data from the Russia-Ukraine war indicate that such rerouting can raise aviation emissions by more than 1 percent. Additionally, Iran has effectively shut down the Strait of Hormuz, a passage responsible for 20 percent of global maritime transit.  This has led to an energy crisis with the price of oil now exceeding US$100 per barrel. With increased instability in the Middle East, shipping companies are avoiding the Strait of Hormuz and the Red Sea (due to the attacks from Yemen’s Houthis), while the Suez Canal has also seen a decline in traffic. It is reported that disruption of the Suez Canal can increase the carbon footprint by nearly 50 percent. Vessels, rather than transiting through the Middle East, are opting for longer transit routes around the Cape of Africa or through the Pacific, markedly increasing shipping times and emissions. These extended shipping routes have also disrupted fertilizer trade, surging prices by 30-40%, thereby, threatening food security and agriculture. The prolonged conflict in the region has also triggered large-scale displacement and a refugee crisis, not only resulting in a humanitarian disaster, but also in increased carbon emissions due to higher fuel consumption from both aviation and automobile transport.

With much of the Middle East essentially a no-fly zone, planes are being rerouted to avoid the airspace thus leading to an increase in travel times, fuel consumption, and emissions.
The Future Long-Term Implications
Much of the impact of war on climate change will be observed into the future over longer timescales, especially as a majority of the emissions will arise from post-war reconstruction. In addition to more drought-like conditions and heatwaves resulting from increased emissions, the region can also expect declining land fertility and more polluted water sources due to chemical exposure. The impact on human health from these chemicals will likewise emerge over time, as some conditions may take years to manifest. Long-term instability in the region and the energy crisis caused by direct strikes on energy infrastructure in the region could lead to two possible outcomes. The first scenario may involve countries purchasing cheaper, more polluting coal; as seen in European nations following the war in Ukraine, alongside increased drilling of new Liquefied Natural Gas (LNG) terminals and fossil fuel infrastructure. The second scenario could see more countries pursuing clean energy alternatives and reducing reliance on fossil fuels for more secure energy, a potentially positive outcome amongst all this climate chaos.



Houraa Daher is a Research Scientist, University of Miami Rosenstiel School of Marine and Atmospheric Science.

### Mainstreaming Food and Water Security Amid the Strait of Hormuz Crisis

This article is the part of "Policy Pathways for Food and Water Security in the MENA Region"


In the recent years, food and water security have moved from the margins to the mainstream of policy discourse, sitting at the centre of strategic planning for governments worldwide. This shift is particularly pronounced in the Middle East and North Africa (MENA), one of the most water-scarce regions globally with water availability about 10 times lower than the global average.[1] The region accounts for just 1.4 percent of the world’s renewable freshwater resources while hosting approximately 6.3 percent of the global population.[2]
As a result, countries—especially the Gulf Cooperation Council (GCC) with no permanent rivers—rely primarily on groundwater and desalination for drinking, industrial, and agricultural purposes.
The GCC region produces roughly 40 percent of the world’s desalinated water, operating more than 400 desalination plants along their coasts.[3] The reliance on desalination for total water supply varies across member states: 61 percent in Qatar, 59 percent in Bahrain, 47 percent in Kuwait, 41 percent in United Arab Emirates, 23 percent in Oman, and 18 percent in Saudi Arabia.[4] Meanwhile, several states—including Syria, Jordan, and Palestine—rely on shared water systems, making transboundary governance and resource management crucial for broader social and economic development.
These geographical and structural constraints of limited freshwater availability and arid climatic conditions are being exacerbated by climate change. The MENA region is also the world’s most vulnerable and disproportionally impacted by climate change,[5] experiencing accelerated warming, declining precipitation, rising seas, and increasingly frequent and severe droughts. Furthermore, the interlinkages between water and food security are equally critical and coming under increasing strain. Much of the region remains heavily dependent on food imports, exposing it to global market volatility and supply chain disruptions.

The Strait of Hormuz Crisis and Emerging Risks
The Strait of Hormuz crisis has once again exposed the fragility of critical resource systems in the region. In the context of the current escalating conflict involving the Unites States (US) and Israel, and Iran, attacks have extended beyond the energy assets to include critical water infrastructure, most notably the desalination plants. Iran has accused the US of attacking a desalination plant on Qeshm Island which affected the water supply for 30 villages in the country.[6] In retaliation, Iran attacked a water desalination plant near Muharraq in Bahrain—a country that relies on desalination for more than 90 percent of its drinking water requirements.[7]
Such incidents are not without precedent. In 2019 and 2022,[8] Yemen’s Houthi launched a series of drone and missile attacks on Saudi Arabia’s desalination facilities at Al-Shuqaiq, highlighting the vulnerability of civilian infrastructure in an asymmetric warfare. More recently, Iran has threatened to target desalination infrastructure used by the US and Israel in West Asia in response to any attacks on its own domestic fuel and energy infrastructure—signalling an alarming escalation in the weaponisation of water systems.[9] Besides military strikes, desalination plants are also vulnerable to contamination of seawater via oil spills and power outages owing to cyberattacks and fuel shortages.
The crisis has had profound impacts on food security as well. The Gulf region imports between 80–90 percent of its food needs, and it is estimated that as much as 70 percent of it passes through the Strait of Hormuz.[10] Besides regional food availability coming under stress, global agricultural markets are also affected with rising energy prices and the concomitant increase in shipping and transportation costs.
At the same time, the Middle East supplies 30 percent of global fertilisers.[11] With the waterway under attack, the shipments have stalled. The price for Middle East granular urea jumped by 40 percent, trading at US$665 per metric ton on 20 March compared to US$485 only a few weeks earlier.[12] The situation could deteriorate when other countries impose protectionist policies in response—for instance, China is expected to withhold urea and phosphate exports until August 2026—a decision that could cause the regional crisis to spiral into global disruptions.[13]

Towards Resilience and Regional Cooperation
Despite these challenges, the countries of the Gulf region have made notable progress in overcoming some of the structural limitations. Investments in advanced desalination technologies, decentralised plants, renewable energy integration, controlled-environment agriculture, global food supply partnerships, and strategic food reserves have contributed to a more comprehensive framework for long-term resilience.
The United Arab Emirates stands out with its focus on innovation and international collaborations focusing on water management, sustainable agriculture, and climate adaptation. It will co-host the United Nations Water Conference with Senegal later this year, reflecting a commitment to accelerating action on sustainable water management and advancing collective solutions to both water and food security for the region and the world. This gathering will provide an opportunity for governments, international organisations, and research institutions to exchange ideas and advance solutions pertaining to these pressing challenges—now more critical than ever.
The timing of this volume is therefore particularly significant. While the essays were commissioned before the Hormuz crisis, their relevance has only intensified in the light of recent developments. Together, they highlight the specific experiences, innovations, and policy debates emerging from the region while offering in-depth perspectives on the multifaceted dimensions of water and food security. The contributions explore a wide range of themes, including technological solutions to water scarcity, national security implications, agricultural innovation in arid environments, geopolitical risks affecting food supply chains, the food-waterenergy nexus, and country-led policy frameworks aimed at strengthening regional resilience.
It is our hope that this collection helps bridge the gap between academic analysis and policy application, offering valuable perspectives for decision-makers, development practitioners, and researchers alike. By bringing together diverse voices and perspectives from the region, this publication underscores the importance of interdisciplinary research, policy engagement, and international cooperation in addressing issues related to food and water security—one of the most defining security and existential challenges of our time.
Policy Pathways for Food and Water Security in the MENA Region reflects a shared commitment by the Observer Research Foundation Middle East (ORF ME) and Rabdan Security and Defence Institute (RSDI) to foster meaningful dialogue on issues that are shaping the future stability and prosperity of the region. Over the past year, ORF ME and RSDI have collaborated on two well-attended, policy-oriented panel discussions on water and food security, first in Dubai and subsequently in Abu Dhabi. These events brought together regional experts, government stakeholders, and international researchers to examine the strategic implications of resource scarcity, agricultural sustainability, technological innovation, and supply-chain resilience. The strong interest generated by these discussions demonstrated not only the urgency of the subject but also the value of sustained scholarly engagement on the subject.
We extend our gratitude to all the authors who contributed to this compendium for their timely and thoughtful analyses. ORF ME and RSDI will continue to collaborate with the authors and the wider community engaging on food and water security policy to further advance evidence-based policymaking and strengthen sustainable and inclusive resource management in the region.



Mannat Jaspal is Director and Fellow, Climate and Energy, ORF Middle East, United Arab Emirates.
Kristian P. Alexander is Senior Fellow and Lead Researcher, Rabdan Security and Defense Institute (RSDI), United Arab Emirates.




Endnotes
[1] “Water Emerges as a Dangerous New War Target in West Asia,” The New Indian Express, March 23, 2026.
[2] Salman Zafar, “Water Scarcity in MENA,” EcoMena, March 15, 2026.
[3] Mohamed A. Hussein, “How Much of the Gulf’s Water Comes from Desalination Plants?,” Al Jazeera, March 12, 2026,
[4] Hussein, “How Much of the Gulf’s Water Comes from Desalination Plants?”
[5] IEA, Climate Resilience is Key to Energy Transitions in the Middle East and North Africa, Paris, IEA, 2023,
[6] Vivian Nereim, “Vital Desalination Plants in Iran and Bahrain Are Attacked,” The New York Times, March 8, 2026.
[7] Hussein, “How Much of the Gulf’s Water Comes from Desalination Plants?”
[8] Michael Christopher Low, “An Iranian Attack on Desalination Plants is a Nightmare for Gulf States,” The Straits Times, March 11, 2026,
[9] Harikishan Sharma, “After Fuel, Water: With Iran’s Threats to Desalination Plants, Understanding the Gulf Countries’ Dependency,” The Indian Express, March 24, 2026,
[10] Christian Henderson, “Calories, Circulation, and Crisis: The Gulf States and the Regional Food System During Wartime,” Jadaliyya, March 16, 2026.
[11] Prime Sarmiento, “Middle East Crisis Poses Risk to Fertilizer Supply,” China Daily, March 23, 2026,
[12] Sarmiento, “Middle East Crisis Poses Risk to Fertilizer Supply
[13] Josh Linville, “China and Iran Redraw Fertilizer Trade Lines,” StoneX Market Intelligence, February 17, 2026,

### Beyond ASML: Towards Middle Power Semiconductor Sovereignty

Spotlight

 	ASML's EUV monopoly creates a critical chokepoint in the global semiconductor supply chain. 


 	China's progress toward a domestic EUV prototype demonstrates that export controls can accelerate self-reliance rather than prevent it. 


 	Japan's materials, Korea's manufacturing, UAE's capital, and India's talent form a viable four-pillar path to semiconductor sovereignty.

 

Artificial Intelligence (AI) has emerged as the defining technology of the 21st century. Many attribute advanced progress in AI to algorithms, large datasets, and software innovation, which often obscures a fundamental reality: AI capabilities rest heavily on physical hardware.

This foundation relies on advanced semiconductors, chips with the high computational power and energy efficiency required to train and run frontier AI models. The number of transistors packed onto a chip determines its computational power. A critical process in chip manufacturing is lithography, process in which light is used to etch circuit patterns onto silicon. 
Lithography for the Layman
Lithography is the process by which intricate circuit designs are etched onto a silicon wafer using light. These circuits comprise of transistors that power modern chips. While the chip itself can be seen through the naked eye, the circuits printed on it are measured in nanometres.

Producing a computer chip requires printing minute circuit patterns onto silicon wafers using machines known as lithography scanners. However, the process depends on an ecosystem of supporting materials including specialised chemicals, stencils, protective films, as well as complementary processes such as design software, water purification and air filtration systems. For middle-power countries, these supporting components (the chemicals, stencils, protective films, software, and purification systems) represents the most realistic entry points into the chip supply chain, rather than attempting to manufacture the scanners themselves.



 Source: FabricatedKnowledge

 

For years, the industry relied on Deep Ultraviolet (DUV) lithography as the primary technique for chip fabrication. As device scaling approached the 7‑nanometer technology node, the DUV process encountered functional limitations. To continue manufacturing advanced chips, manufacturers were forced to adopt "multiple patterning," a method in which the same layer is printed several times to achieve the required resolution. While effective, this approach substantially increased production costs and time, as well as heightened the probability of defects.

The introduction of Extreme Ultraviolet (EUV) lithography marked a significant advancement in semiconductor manufacturing. This technology uses light with a wavelength of just 13.5 nm, enabling it to reliably print features smaller than 7nm in a single exposure. As a result, a greater number of transistors can be integrated onto a chip, thereby enhancing computational performance and improving energy efficiency.
ASML: The Hidden Giant Behind the Semiconductor Industry
ASML is currently the sole supplier of Extreme Ultraviolet (EUV) lithography systems globally. 
ASML functions as a de facto gatekeeper to the advancement of semiconductor technology, as EUV represents the only scalable approach for mass production of advanced chipsets required to support contemporary AI applications.
This near-total monopoly positions ASML as a critical chokepoint within the global semiconductor supply chain. Consequently, its strategic decisions extend beyond considerations of profitability and encompass broader implications for international security. Since the same chips that power a chatbot also power an autonomous drone or a nuclear simulation, these machines are classified as "dual-use" technology. This elevates ASML from a successful Dutch company to a national security asset.

While the United States (US) designs the world's most advanced chips (via companies like NVIDIA) and Taiwan manufactures them (via TSMC), both processes remain dependent on ASML’s lithography systems . Since ASML is a foreign entity, the US government cannot regulate its operations directly and must rely on a partnership with the Dutch government. This transforms the Netherlands from a traditional trade partner into a strategic actor within the global semiconductor ecosystem.

In addition to its diplomatic significance, ASML acts as a domestic economic engine by generating €28.3 billion in net sales in 2024. Recognising the company’s strategic importance, the Dutch government recently initiated "Project Beethoven," a €2.51 billion investment plan in infrastructure and education designed specifically to prevent ASML from expanding operations abroad amid concerns over local immigration and tax policies.

Since ASML's machines rely on critical components and intellectual property originating in the US, Washington holds a "regulatory veto" over Dutch exports. This authority was exercised when the US applied diplomatic pressure on the Dutch government to effectively block EUV machine sales to China, creating a firm barrier to the hardware required for producing cutting-edge chips.

In response, China intensified efforts toward technological self-reliance, utilising state subsidies, prioritising research and development, and implementing domestic-first policies to reduce reliance on foreign suppliers and accelerate technological autonomy. These measures appear to be producing results. In December 2025, Reuters reported that China developed a domestic EUV prototype, marking a breakthrough in a domain previously considered inaccessible. Although not yet commercially viable, the achievement suggests that sustained pressure may accelerate indigenous innovation rather than prevent it.
Proposing Middle Power Partnership: A Four-Pillar Ecosystem
China's experience offers two critical takeaways: first, there is a severe chokepoint in the semiconductor supply chain, second, sustained investment can provide a means of bypassing it. 
For middle powers like Japan, South Korea, the United Arab Emirates, and India, the major lesson is that relying on a single, controlled supply chain is a strategic vulnerability.
At the same time, these states occupy a comparatively more favourable position within the existing export control framework than China, though each faces its own distinct trade pressures and limitations on technology access . Individually, these states are already pursuing ambitious industrial strategies to strengthen domestic semiconductor capabilities. 

Friend-Shoring the Lithography Ecosystem

Individually, these states encounter significant shortcomings if they attempt to build autonomous, start-to-finish supply chains capable of rivaling ASML. However, it is possible for nations to coordinate a practical, and resilient supply network that breaks the existing monopoly and establishes a viable, alternative pathway for producing a competing EUV scanner and the advanced chips it prints.

Japan provides the physical link in this supply chain. It brings indispensable chemical expertise and EUV-grade materials that act as a barrier to entry for other nations. Firms such as JSR, Shin-Etsu Chemical, and Tokyo Ohka Kogyo collectively dominate photoresist supply—inputs without which no lithography system can function. They provide the foundational hardware components that make lithography physically possible.

Korea can serve as the partnership's high-volume testing ground. It offers the fabrication scale and cleanrooms necessary to take an EUV prototype and scale  into a commercial-grade manufacturing tool, and is already a major player in the High Bandwidth Memory sector. Korea possesses the capacity to turn blueprints into physical, mass-produced silicon.

The UAE anchors the coalition economically rather than technically: sovereign wealth capital from government setup firms such as MGX, a technology investment company can absorb the front-loaded investment risk that private markets will not take on for a decade-long hardware program. At the same time, the country’s rapidly expanding AI computing infrastructure; exemplified by the Stargate UAE data center, creates the massive domestic demand needed to sustain long-term semiconductor production.

India can provide a vast engineering talent pool, already comprising 20 percent of the global semiconductor design workforce. When channelled through a joint coalition design center, this talent represents a scalable resource for iterating EUV system architecture under shared IP terms. Additionally, the partnership benefits from immense commercial scale, as the government projects that domestic semiconductor demand will reach US$110 billion by 2030. Notably, ASML itself is now actively seeking Indian partners — validating India's readiness to move from talent exporter to strategic node within the global semiconductor ecosystem.

 
Conclusion
The semiconductor supply chain is the backbone of 21st-century strategic power. As AI reshapes economies, militaries, and societies, the nations that control the hardware pipeline will shape the rules of the emerging order. At present, that pipeline runs through a single bottleneck in Veldhoven, Netherlands. For middle powers, the choice is to either accept permanent dependency on a supply chain governed by the strategic priorities of others, or invest collectively in an alternative. The four-pillar partnership proposed here is not a call to replicate ASML overnight—it is a call to assemble, across four nations, the capabilities that ASML currently concentrates within one company.

Japan's materials, Korea's manufacturing capacity, the UAE's capital, and India's engineering talent are, individually, impressive national assets. Together, they constitute something far more consequential: a credible path toward technological self-determination. 
The window to act is narrowing—every generation of chips that passes without an alternative deepens the dependency.
Sovereignty in the age of AI is measured not in rhetoric, but in nanometres. The question these nations must answer is not whether they can afford to pursue this partnership, but whether they can afford not to.



Siddharth Yadav is a Fellow, Emerging Technologies, ORF Middle East.

Khush Advani is Research Assistant, Development Studies, ORF

### Ceasefire Emerges in the US-Israel Conflict with Iran: Experts React

Approximately 40 days into the US-Israel military campaign against Iran, a two-week ceasefire has come into effect — first declared by President Donald Trump and subsequently greenlit by Iran’s Supreme National Security Council. The ceasefire marks a significant turn following an extreme escalation in the preceding days, during which Trump issued increasingly severe threats: warning that he would destroy power plants and bridges across Iran, and later suggesting that an entire civilization would die.

The conditional ceasefire was mediated by Pakistan’s Prime Minister and its military chief. It followed Iran’s 10-point proposal, which Washington described as “a workable basis on which to negotiate.”

Observer Research Foundation (ORF) Middle East experts offer their concise analysis on the latest developments.
From Ultimatum to Climbdown from Trump’s Corner
Into the second month of the US-Israel military campaign, it became increasingly clear that Iran’s greatest leverage over President Donald Trump lay in the Strait of Hormuz. Trump compounded his own difficulties by escalating his threats — warning of strikes on power plants, bridges, and ultimately suggesting targeting of the entire population, prompting fears of nuclear action across the region. He subsequently found a narrow exit, backing out of a corner he built himself, with Pakistan offering a diplomatic lifeline and, thereby, postponing the deadline on his threats.

With the benefit of hindsight, Washington’s claim that Iran’s 10-point plan offers a viable pathway forward appears puzzling. A closer look at its contents suggests otherwise: provisions such as Iranian control of the Strait of Hormuz, the collection of fees from passing vessels, and a requirement for ships to coordinate with Iran’s Armed Forces. It is difficult to see how Washington can accede to Iranian terms that directly contradict the campaign’s original objectives: no attacks on proxies, lifting of sanctions, and potential continuation of uranium enrichment. Taken together, these points would leave Tehran better positioned than before the strikes began, despite the decapitation of its leadership.

What is clear is that Trump had no easy options. Even a conditional ceasefire rings hollow when Gulf states — US allies — continue to come under Iranian fire, and Israel continues its operations in Lebanon.

Clemens Chay, Senior Fellow, Geopolitics, ORF Middle East.
Cautious Optimism: Why the Ceasefire Won’t Fix Energy Markets
The announcement of a two-week ceasefire produced an immediate positive impact on energy prices, with Brent futures declining to US$94.80 and West Texas Intermediate (WTI) to US $95.75.

The improved outlook reflects expectations of unimpeded passage through the Strait of Hormuz. Approximately 130 million barrels of crude oil, 1.3 million tonnes of liquefied natural gas (LNG), and 46 million barrels of refined fuels are currently stranded on tankers around the Strait. The release of this inventory is expected to provide temporary relief to energy markets, though only for a limited period.

The decline in prices should be interpreted as cautious optimism rather than any lasting shift, for four reasons. First, 11 to 12 million barrels of oil per day have effectively been removed from global markets since disruptions, and offsetting this loss will require considerably more than the two‑week ceasefire period. Second, attacks on energy infrastructure across the Middle East have damaged production and transport capacity, and restoring optimal output will require time. Third, the conflict-induced risk premiums and insurance spikes generated for energy transit logistics will persist until hostilities end more definitively. Fourth, increased stockpiling to hedge against volatility will exert further upward pressure on prices in an already constrained market.

Energy markets are likely to remain volatile until the conflict subsides in a decisive manner. In an environment where comments from decision-makers move markets instantly, price stability is extremely difficult to maintain. The durability of the ceasefire, together with the terms of any eventual cessation of hostilities, will ultimately determine whether the current relief in energy prices holds.

Cauvery Ganapathy, Fellow, Climate and Energy, ORF Middle East.
A Ceasefire Hanging by a Thread
What was announced Tuesday night is not a peace deal. It is an armed pause, brokered by Pakistan just an hour before a deadline both sides had reasons to fear. The opening fissures are already visible: Trump says the US “met and exceeded all military objectives”; Iran declared nearly all its war aims achieved. Both cannot be true — which is the opening position of most fragile ceasefires.

What keeps the ceasefire intact is economic, rather than diplomatic. Oil prices fell 13 percent on the announcement alone and S&P futures rose by approximately 2.48 percent. Both economies face severe costs if hostilities continue: for Iran, these costs stem from military destruction; for the United States (US), from rising prices, destabilisation of Asian allies, and domestic political fatigue. The negotiating gap remains vast. Iran’s 10-point plan is openly maximalist — demanding sanctions relief, Hormuz control, US military withdrawal, and an end to attacks on the Axis of Resistance, with no nuclear concession. Washington’s counterproposal demands the dismantling of Iran’s nuclear facilities, limits on ballistic missiles, and an end to proxy support. Trump has already called Iran’s plan both “workable” and “fraudulent“ within hours of each other.

The single greatest threat to the ceasefire is Lebanon. Netanyahu has declared the truce excludes it — directly contradicting Pakistan’s announcement that it covers Lebanon. Iran’s 10-point plan explicitly demands an end to attacks on its Axis of Resistance allies. If Israel strikes Hezbollah, Tehran may respond.

The Islamabad talks on 10 April will determine whether this pause becomes a framework for peace — or simply the final breath before a longer war.

Samriddhi Vij, Associate Fellow, Geopolitics, ORF Middle East.
Hormuz: From Crisis Chokepoint to Contested Public Good
Markets reacted swiftly to the ceasefire announcement. The reopening of the Strait of Hormuz triggered an immediate decline in oil prices and US treasury yields, reflecting expectations of resumed energy flows and reduced pressure on inflation and interest rates.

Yet the core issue remains: ensuring sustained safe navigation through the Strait. Beyond its role as a critical artery for global energy — particularly LNG exports, which cannot be rerouted like oil — Hormuz is central to fertiliser supply chains and, by extension, food security in developing countries. Free passage through the Strait is, in effect, a global public good. The ceasefire has not resolved the situation; it has merely deferred a resolution.

Gulf states have pursued two complementary tracks in response. The first is diplomatic, grounded in international law, notably the UN Convention on the Law of the Sea. This has mobilised Gulf diplomatic machinery across bilateral contacts, multilateral engagement at the UN Security Council, and minilateral initiatives — including a “coalition of the willing” aimed at guaranteeing safe passage through the Strait going forward.

The second track is geo-economic resilience, a structural endeavour: deepening domestic markets, diversifying supply routes through expanded pipeline networks, and building more robust industrial supply chains — effectively reducing the world’s dependence on Hormuz as a single chokepoint.

Over the longer term, renewed regional engagement with Iran appears unavoidable. For now, Tehran has demonstrated both its capacity to disrupt the Strait and evade escalating military assault. Gulf Arab states, for their part, share a fundamental interest in preventing any permanent de facto Iranian control over this chokepoint. Whether that shared interest can be translated into durable arrangements remains the defining question of the post-crisis period.

Akram Zaoui, Associate Fellow, Geopolitics, ORF Middle East.
Is the Gulf’s Stake Considered in the Ceasefire?
The ceasefire has been announced with little apparent regard for Gulf Arab states — despite the fact that they have borne the brunt of Iranian retaliation throughout the conflict. While Pakistan, as mediator, appeared to consult Saudi Arabia, any Gulf input seems to have been limited or inconsequential: Gulf interests are conspicuously absent from the ceasefire framework. The threat has not abated — Iranian strikes on Bahrain and alerts across the Gulf in the hours following the announcement make clear that the ceasefire has not brought the region the relief it was promised.

Gulf states must now restock depleted defences against a neighbour that continues to pose an active threat, while their economies struggle to recover amid political uncertainty and no guarantee that the ceasefire will hold.

Oman has welcomed the pause, having engaged directly with Iran in recent days to facilitate passage through the Strait of Hormuz. The Strait appears set for less disruption — but the broader Gulf may yet give voice to its frustrations through a risk so far underestimated: the autonomy to reject any tolling conditions Iran seeks to impose. Some Gulf states may choose to redirect energy exports through alternative, lower-capacity routes rather than submit to restricted and costly Hormuz passage — a scenario with significant consequences for the global economy.

Given these options, President Trump may find that sidelining Gulf interests in the ceasefire’s design entails costs of its own. Disregarding the region’s autonomy and grievances risks friction that could complicate any fragile framework emerging from Islamabad.



Mahdi Ghuloom, Junior Fellow, Geopolitics, ORF Middle East.

### Trump’s Shifting Ultimatums and the Pressures Closing in

Spotlight


 	Deep into the US-Israel military campaign against Iran, the Trump administration has repeatedly shifted its objectives — from regime change to degrading conventional capabilities — exposing a widening gap between declared success and battlefield reality. 
 	The Strait of Hormuz has emerged as Trump’s most acute pressure point, fuelling global inflation, fracturing transatlantic relations, and driving Asian economies to bypass Washington entirely in pursuit of arrangements with Tehran. 
 	With ultimatums repeatedly postponed, domestic approval declining sharply, and Iran showing no signs of capitulation, the window for a face-saving exit is narrowing — leaving the administration caught between a victory it cannot credibly claim and an escalation it cannot easily afford.

On April 1, President Donald Trump delivered a primetime address on the US-Israel military campaign against Iran. Touting “tremendous progress” in Operation Epic Fury, he insisted that “core strategic objectives are nearing completion” — defined as “dismantling the regime’s ability to threaten America or project power outside of its borders.” What went unacknowledged was that those objectives had already shifted repeatedly across 34 days of combat. More telling still was what Trump did not say: despite widespread public anticipation of an endgame, he offered no timeline — only that objectives would be met “shortly,” with heavy strikes on Iran expected over the next two to three weeks.
The same speech struck a more ominous note. Trump’s threat to take Iran “back to the Stone Age, where they belong” drew swift backlash from Iranians — officials and ordinary citizens alike. The rhetoric risks undermining a carefully cultivated message: during the January 2026 protests, Trump had assured disaffected Iranians that “help is on the way.” That promise now rings hollow. He has since repeatedly threatened to target power plants and civilian infrastructure — a posture reinforced when US strikes hit the B1 bridge  linking Tehran and Karaj shortly after his April 1 remarks — suggesting a drive to destroy the Islamic Republic with little regard for the Iranian people caught in its shadow.
What the prolonged military campaign has also laid bare is that the Strait of Hormuz has become Trump’s most acute pressure point. Iranian control — and intermittent closure — of the world’s most critical energy chokepoint has sent fuel prices soaring and stoked inflation globally. The problem is as much domestic as it is geopolitical: surging energy costs feed directly into American household pain, while US allies and partners increasingly feel abandoned by a Washington that seems to be outsourcing responsibility. Trump’s April 1 remark that other countries must “take care of that passage” only deepened that unease. The central question hanging over this campaign is whether the administration can declare victory amid shifting aims and elastic timelines, without ever resolving the Strait.

Shifting Goalposts
The messaging of President Trump and his administration has been inconsistent and erratic since his eight-minute address on  February 28, in which he urged Iranians to “seize control” of their “destiny” and “take over” their government: an explicit call for regime change. Yet as weeks passed, US intelligence assessed that Iranian leadership remained intact and showed no signs of imminent collapse; Israel and Mossad similarly concluded that conditions were not ripe for a popular uprising. Trump’s subsequent revelation that Washington had attempted to arm Iranian dissidents through intermediaries — only for the weapons to never reach their intended recipients — was damning. It exposed the hollowness of what had been the campaign’s most desired ambition, while equally attesting to the resilience of the Iranian leadership structure.
That said, certain objectives; most of them military, have remained constant. These include degrading Iran’s ability to project power through its navy, missile facilities, and drone and proxy networks, as well as neutralising its nuclear programme with the seizure of enriched uranium stockpiles proving the most insurmountable challenge of all. Yet even on these fixed fronts, recent developments expose the limits of Washington’s claims to have “decimated” Iran militarily and economically. Roughly half of Iran’s missile launchers remain operational according to US intelligence, even as the intensity of aerial attacks has dropped sharply since the opening days. Trump’s assertion of total control over Iranian airspace, meanwhile, has been punctured by the loss of two American warplanes. It is perhaps this shaky air of invincibility — the gap between declared success and battlefield reality — that best explains why Trump continues to rotate from priority to priority.
Of all the pressures bearing down on Trump, the Strait of Hormuz has struck the rawest nerve. Tehran’s parliament has tabled legislation imposing toll fees on vessels transiting the waterway — a bill that, once enacted into law, would be legally binding. Trump’s response, an expletive-laden ultimatum posted on social media on April 5, threatened Iran to reopen the Strait or face strikes on power plants and bridges — “Power Plant Day and Bridge Day, all wrapped up in one.” A subsequent post set the deadline for April 7 at 8:00 PM Eastern Time; a press conference added that Iran could be taken out in “one night“ if no deal was reached. Iran has responded with defiance, dismissing Trump’s claims of ceasefire progress as baseless — a posture that reflects Tehran’s read of Washington as increasingly desperate. That perception is not without basis: in the space of 17 days, Trump has postponed his ultimatums multiple times (see table).
Amid ongoing uncertainty, one notable development is the Trump administration’s narrowing of its objectives, with a clear emphasis on degrading Iran’s conventional military capabilities.. This shift was evident in Trump’s April 1 speech, which benchmarked Operation Epic Fury against America’s prior wars from Vietnam to Iraq. Similarly, Secretary of State Marco Rubio’s March 30 interview with Al Jazeera, reiterated the same military aims while insisting that all would be wrapped up in weeks, not months.




Date (ET)
Development


March 21
48-hour deadline for Iran to reopen the Strait of Hormuz


March 23
Trump declared that US would not launch strikes for another 5 days


March 27
Strikes delayed for another 10 days, till April 6


March 30
Trump declared “great progress” made in negotiations


April 1
Trump stated that “Iran asked for a ceasefire”


April 4
Trump remarks “time is running out”


April 5
Trump set a deadline of Tuesday (April 7) for opening the Strait



A pattern of delay: Trump’s Strait of Hormuz ultimatums, March 21 – April 5, 2026

The Walls Close in
Domestic support for President Trump is fragmenting — not only among the general public, but within his own MAGA base. A Reuters/Ipsos poll puts his approval rating at 36 percent, a decline from 47 percent in his first days in office, while opposition to the Iran campaign has surged to 61 percent from 43 percent at the operation’s outset. For a president who campaigned on ending forever wars, cross-party unease is increasing. The coordinated “No Kings“ protests across the United States (US) on March 28 reflected a broader affordability crisis that transcends partisan lines. Even within Trump’s base, fault lines have emerged: prominent pro-Trump media figures and younger loyalists have begun to distance themselves, even as the majority remains loyal. Against this backdrop, the Pentagon’s request for US$200 billion to fund the campaign; alongside a White House proposal for a US$1.5 trillion defence budget for 2027, is unlikely to play well with an electorate increasingly concerned about the cost of living.
Beyond America’s borders, the Strait of Hormuz has become a source of tension in transatlantic relations. European allies have rebuffed US requests for involvement in reopening the Strait, with Austria, France, Italy, Spain, and Switzerland notably denying American forces access to their airspace for missions against Iran. In typical fashion, Trump labelled NATO a “paper tiger,” threatening to withdraw from the alliance. Trump has also floated the possibility of ending the military campaign without resolving the Strait — an off-ramp that subsequent developments have effectively closed off, as Tehran’s continued control of the chokepoint makes any claim of victory increasingly difficult to sustain.
The latest developments suggest the pressure is mutual;domestic turbulence and international resistance are converging on the administration alongside mounting warnings of global recession. Asia, bearing the brunt of the economic fallout as the largest destination for Hormuz oil exports, has moved to bypass Washington entirely, with the Philippines, Pakistan, India, Japan, and Malaysia among those quietly striking arrangements with Iran to circumvent the closure,though none are permanent fixes. The US may rely little on Middle Eastern oil directly, but the interconnectedness of the global economy ensures that what chokes the Strait eventually reaches American shores too.

Another Big Decision Point
With the “power plant and bridge” deadline approaching, Washington faces another critical juncture: declare victory, pursue escalation, or negotiate a settlement. Trump has indicated his preference for a negotiation in recent weeks, with each postponed ultimatum serving as an indication. Iran, for its part, has responded with defiance while simultaneously presenting a 10-point peace proposal. The core negotiating positions are relatively clear: Washington’s primary demand is the reopening of the Strait, while Tehran’s is a credible guarantee that it will not face renewed attack. Whether the gap between those positions can be meaningfully bridged remains the defining question. 
The window for a face-saving exit has narrowed considerably. With Tehran still holding the global economy hostage through the Strait, Trump cannot credibly spin this as victory. Escalation, meanwhile, carries its own costs; borne increasingly by Gulf Arab states, whose energy infrastructure and desalination plants have absorbed fresh Iranian strikes in recent days.
There are no easy options but the deeper problem is this: Trump fundamentally miscalculated the nature, ideology, and aims of the Islamic Republic. Tehran’s doctrine is resistance; its endgame is survival. Those revolutionary imperatives do not bend to ultimatums or bombing campaigns. Trump has measured Operation Epic Fury by what it has destroyed. Trump's latest warning on social media that "a whole civilization might die tonight" was considered as unhinged as it was revealing — the statement of a president who has run out of measured options. History will assess its consequences — on Iran, the Middle East, and the global order. 



Clemens Chay is Senior Fellow, Geopolitics, ORF Middle East.

### India’s Quiet Maritime Turn in Middle Eastern Waters

Spotlight


 	India is expanding from episodic anti-piracy deployments to a more persistent and geographically broader maritime presence in the western Indian Ocean.
 	Through frameworks like the Combined Maritime Forces and deeper Gulf partnerships, New Delhi is incrementally positioning itself as a security contributor.
 	Despite progress, uneven engagements and limited institutionalisation continue to constrain the long-term coherence and scalability of India’s regional role.

The return of Somali piracy since late 2023 has reintroduced a familiar but dangerous variable into the western Indian Ocean’s security landscape. As international naval attention shifted toward missile and drone threats in the Red Sea, following Houthi attacks on commercial shipping, gaps in maritime surveillance emerged. Somali pirate networks exploited these openings, reviving hijacking attempts and deploying captured vessels as “mother ships” to extend their operational reach into the Arabian Sea. This resurgence has coincided with broader instability around the Arabian Peninsula, including heightened tensions in the Gulf and disruptions to key maritime chokepoints.
For India, whose trade and energy security depend on these sea lanes, these pressures have created both a strategic incentive and a political opening. New Delhi has significantly expanded its maritime activity west of the subcontinent, translating its deep commercial ties into a more visible, though still cautious, security presence. Long perceived by Gulf states primarily as an economic partner, India is now positioning itself — through anti-piracy deployments, multinational frameworks, and deepening naval partnerships — as a stabilising maritime actor in the western Indian Ocean.

Responding to Piracy’s Return
India’s current activism builds on nearly two decades of anti-piracy operations. Since 2008, the Indian Navy has periodically deployed assets in the Gulf of Aden, escorting merchant vessels and responding to distress calls during the peak years of Somali piracy. The recent resurgence, however, has required a more sustained and geographically expansive response.

The Indian Navy has periodically deployed assets in the Gulf of Aden, escorting merchant vessels and responding to distress calls during the peak years of Somali piracy.
In January 2024, the destroyer Chennai intervened after the bulk carrier MV Lila Norfolk reported an attempted hijacking east of Somalia. Indian marine forces boarded the vessel, and secured all 21 crew members. A more complex operation followed in March 2024, when the destroyer Kolkata intercepted the hijacked cargo ship MV Ruen. After tracking the vessel for weeks, Indian forces compelled 35 pirates to surrender and rescued its crew.
These operations illustrate India’s capacity for rapid response, long-range tracking, and coordinated maritime interdiction. Importantly, they also highlight a broader shift: rather than episodic deployments, India has maintained a more persistent naval presence across key sea lanes — one that has become increasingly consequential as others have thinned out their patrol density. Where it stops short of direct involvement, India nonetheless plays a safeguarding role — the Red Sea corridor being one such instance.

From Participation to Greater Responsibility
India’s expanding operational footprint has been accompanied by deeper engagement in multinational maritime frameworks. Although the Indian Navy had long cooperated informally with the Combined Maritime Forces (CMF), a US-led maritime partnership comprising 47 member states, New Delhi formally joined the US-led partnership in November 2023. Since then, India has moved toward more substantive operational contributions. In April 2024, the frigate Talwar participated in a CMF counter-narcotics mission, seizing 940 kilograms of illicit drugs in the Arabian Sea.
Beyond operations, India has increased its involvement in training and capacity-building initiatives. In September 2025, an Indian naval flotilla, comprising the destroyer Mormugao and the frigates Tarkash and Tabar, conducted a port call in Manama, Bahrain. There, crews interacted with personnel from Task Force 154, the CMF unit responsible for training and capacity building, with engagements including simulated drills on boarding operations, afloat medical assistance, and damage control procedures.
A notable milestone came in February 2026, when an Indian naval officer assumed command of Task Force 154. Shortly after, the Indian-led staff conducted its first training activity aboard the destroyer Surat, bringing together over 20 participants from 10 partner countries. These developments reflect growing confidence in India’s ability to contribute to multinational maritime security efforts, positioning itself as a capable and reliable partner willing to shoulder greater responsibility.

The Indian Ocean Naval Symposium, an Indian-led forum, has provided a platform for naval dialogue and confidence-building with Gulf partners, including Saudi Arabia and Iran.
India’s engagement also extends to regional maritime institutions. Through the Indian Ocean Rim Association, New Delhi has supported maritime safety and security initiatives involving Gulf countries, chiefly the United Arab Emirates (UAE) and Oman. Similarly, the Indian Ocean Naval Symposium, an Indian-led forum, has provided a platform for naval dialogue and confidence-building with Gulf partners, including Saudi Arabia and Iran. While these mechanisms remain consultative rather than operational, they reinforce India’s broader effort to embed Gulf actors within Indian Ocean security architectures. These multilateral engagements are, however, only part of the picture: alongside them, India has pursued a parallel track of bilateral naval partnerships with individual Gulf states — relationships that reveal both the ambition and the limits of New Delhi’s regional security role.

Naval Partnerships with the Gulf: Depth and Limits
India’s bilateral maritime partnerships with Gulf states have expanded steadily, though their evolution has been uneven. While the trajectory points toward greater institutionalisation, a closer look reveals persistent challenges related to consistency, scale, and strategic alignment.
Among Gulf partners, Oman remains India’s most established naval counterpart. The Naseem Al-Bahr exercise, launched in 1993, is one of India’s longest-running bilateral naval engagements. During its most recent iteration, conducted off Goa in 2024, the Indian frigate Trikand and the Omani patrol vessel Al Seeb tested key naval warfare capabilities, including surface gunnery against simulated targets, close-range anti-aircraft firing, and at-sea replenishment operations.
Logistics cooperation has also deepened, particularly through a series of agreements granting India’s access to the port of Duqm since 2018. These arrangements enable forward-deployed Indian naval units to sustain critical upkeep operations without returning to domestic shipyards.
Yet even this mature partnership has exhibited periodic gaps in activity. While operational familiarity is high, the relationship has not fully translated into broader multilateral coordination or joint maritime initiatives beyond exercises and logistics.
India’s naval cooperation with the UAE has followed a similar trajectory of gradual deepening. Early interactions, dating back to 2014, centered primarily on training Emirati naval cadets. Beginning in 2018, however, the relationship took on a more structured form with the launch of the Zayed Talwar naval exercise, later renamed Gulf Waves. Over successive iterations, the exercise has expanded in scope to include counter-piracy and interdiction operations. Trilateral cooperation with France in 2023 has added a minilateral dimension, signaling convergence between Indo-Pacific and Gulf security frameworks.
High-level naval diplomacy complements these operational engagements, as underscored by the official visit by the Commander of the UAE Naval Forces, Major General Humaid Mohammed Abdullah Alremeithi, to India in mid-2025. However, these engagements remain irregular rather than institutionalised on a fixed schedule.
With Saudi Arabia, naval cooperation is more recent. The Al-Mohed Al-Hindi exercise, first conducted in 2021, marked an important step toward bilateral maritime engagement. Since the inaugural drill, two iterations have taken place, with the most recent in 2023 featuring a significant number of platforms, including four surface combatants, maritime patrol aircraft, and drones. At the same time, the inconsistency of engagements; evidenced by the absence of the 2025 exercise iteration, highlights the fragility of these emerging partnerships. That year, cooperation was limited to a port call at Jeddah by two Indian warships and a passage exercise with Saudi naval units.
Beyond joint exercises, the relationship has also expanded to include training and maritime information-sharing. Since 2023, several batches of Saudi cadets have undertaken training programmes in India. Participants attend modules on key maritime capabilities, fostering professional networks and early-career familiarity between future naval officers. In 2025, a Saudi naval delegation visited the Information Fusion Centre – Indian Ocean Region in Gurugram, India’s regional hub for maritime domain awareness.
Taken together, India’s bilateral naval relationships in the Gulf region reflect a pattern of incremental progress constrained by uneven implementation. Exercises, port calls, and training programs have expanded the scope of engagement, but their irregular frequency and limited institutionalisation raise questions about long-term sustainability. For both sides, the challenge lies not only in expanding cooperation but in ensuring its continuity and strategic coherence.

A Cautious but Consequential Role
India’s expanding maritime role in the western Indian Ocean remains deliberately calibrated. Rather than projecting power in a traditional sense, India is building a reputation as a reliable security contributor.
At the same time, recent developments suggest a growing degree of operational readiness. During the recent disruption of transits through the Strait of Hormuz, the Indian Navy has deployed escorts in the Arabian Sea to protect Indian-flagged and associated merchant vessels as they transit contested waters. These escort missions, combined with sustained anti-piracy patrols and rapid-response interventions, demonstrate an ability to operate effectively across a spectrum of maritime contingencies.

Conclusion
In an operational environment marked by the resurgence of Somali piracy and broader instability, India has moved from episodic contributor to a more consistent maritime presence in the western Indian Ocean. The question is whether that presence can be consolidated: translating irregular exercises and port calls into durable, institutionalised partnerships will determine whether India’s role deepens or plateaus. New Delhi’s ability to close this gap; enabling durable frameworks, will equally help address and, indeed, outlast crisis and exercise cycles.
As maritime threats become more complex and geographically diffuse, India’s ability to maintain a persistent presence, respond rapidly to crises, and coordinate with like-minded countries will be increasingly tested. Without adopting an overt leadership posture, New Delhi is nonetheless emerging as a credible, capable contributor to maritime security in the western Indian Ocean.



Leonardo Jacopo Maria Mazzucco is a PhD Candidate in Institutions and Politics at the Catholic University of Milan, specialised in Gulf security.

### Lebanon’s Defining Moment: Authority, Security, and Regional Alignment

Spotlight


 	While the Salam-Aoun administration has achieved an unprecedented rhetorical alignment to restore state authority, official policy remains sidelined by the ongoing Israeli invasion and the resumption of full-scale war.
 	Hezbollah’s weakened command offers a historic opening for the LAF, but risks internal fragmentation as the state fails to fill the resulting social services vacuum for the Shia community.
 	A fragmented international diplomatic approach increasingly treats Lebanon as a vacuum, risking a post-war order designed by regional powers rather than one negotiated by a unified sovereign state.

As the confrontation between the United States (US), Iran, and Israel intensifies, Lebanon finds itself drawn into a widening regional conflict it did not seek. Already characterised by a fragile governance structure, the country now faces compounded pressures that expose long-standing structural vulnerabilities. At the core of this dynamic lies Hezbollah — weakened in recent years, yet remaining a decisive military and political actor that operates alongside state institutions but beyond their full authority, and whose alignment with Iran has placed Lebanon on the front lines, both in 2024 and with the March 2nd offensive responding to the killing of Iranian Supreme Leader Ali Khamenei.
With more than one million people displaced and a death toll exceeding a thousand in less than a month, the crisis is further straining Lebanon's already limited governance capacity. For a country already navigating a prolonged financial crisis, sectarian divisions, and repeated political vacuums, the resumption of full-scale war threatens to erode Lebanese state capacity itself.

The Governance of Paralysis
On the same day as Hezbollah's offensive, Prime Minister Nawaf Salam announced a comprehensive ban on all military and security activities conducted by Hezbollah, formally restricting the group to a political role. This decree was strongly backed by President Joseph Aoun, the former Army Commander whose January 2025 election ended a two-year presidential vacuum and was seen as a mandate to restore state sovereignty. The decision followed cross-border rocket and drone attacks into Israel, which the government characterised as a violation of state policy and a direct threat to Lebanese security, accompanied by a demand for the transfer of non-state weapons to government control and instructions for the Lebanese Armed Forces (LAF) to enforce the state's monopoly over the use of force north of the Litani River.
This builds on the disarmament framework advanced by US envoy Thomas Barrack in September 2025, outlining a phased process linking Israeli military withdrawal with the consolidation of Lebanese state control. While the first phase was completed — allowing the LAF to expand south of the Litani — the second phase, aimed at curbing Hezbollah's capabilities north of the river, has stalled.

Hezbollah, meanwhile, maintains that its military posture remains defensive within the broader regional confrontation, rejecting both domestic directives and externally backed disarmament proposals.
The resumption of hostilities has disrupted this trajectory. Israeli military operations have expanded into a full-scale invasion, with the IDF ordering the total evacuation of Southern Lebanon to establish a permanent buffer zone up to the Litani River — a warfare model extended into southern Beirut, where mass evacuation orders indicate an intent to replicate a 'Gaza model' of displacement and urban destruction.
Within this context, the LAF operates under significant constraints. Direct confrontation with Hezbollah risks internal fragmentation, while limited engagement raises questions about the enforceability of state decisions. Hezbollah, meanwhile, maintains that its military posture remains defensive within the broader regional confrontation, rejecting both domestic directives and externally backed disarmament proposals.

UNIFIL and the Erosion of the Security Framework
The escalation highlights the fragility of the international mechanisms established to stabilise southern Lebanon after 2006. United Nations Security Council Resolution 1701 relies on the United Nations Interim Force in Lebanon (UNIFIL) to monitor hostilities and support Lebanese force deployment south of the Litani. Although the mission's mandate has been extended through 2026, its operational environment has become increasingly constrained, with its role shifting toward monitoring rather than enforcement due to the absence of enforceable mechanisms and sustained coordination among relevant actors. Longstanding territorial disputes along the Blue Line — including Shebaa Farms and Ghajar — continue to complicate implementation.
These dynamics signal a shift from institutionally managed border stability toward a security-driven environment where the Resolution 1701 framework is increasingly overwhelmed by realities on the ground. Peacekeepers are exposed to growing risk as illustrated by the recent killing of three Indonesian UNIFIL personnel, prompting calls from Indonesia for an investigation at the United Nations Security Council. The mission's effectiveness is further constrained not only by operational limitations, but also by a host state that is physically and economically unable to provide adequate support.

Lebanese Diplomacy: Normalisation and Regional Realignments
The current escalation is unfolding alongside the possibility of normalisation with Israel, as external actors seek to stabilise the conflict and redefine the security architecture along Lebanon's southern border. Three channels have emerged — involving the US, France, and Lebanon itself — converging around the objective of reducing hostilities while addressing Hezbollah's role within Lebanon's national security framework.

The coexistence of multiple tracks with distinct conditions reflects a fragmented international approach that increasingly treats Lebanon as a vacuum rather than a sovereign partner. 
The approaches differ significantly in sequencing and implementation. French and Lebanese proposals prioritise an immediate cessation of hostilities alongside commitments to protect infrastructure and civilian populations, treating de-escalation as a necessary first step. France has played an active facilitative role, though progress remains limited, and direct Lebanon-Israel engagement continues to face political and strategic constraints.
The US framework adopts a more conditional approach, linking any ceasefire directly to concrete LAF steps to dismantle Hezbollah's military capabilities. In this model, disarmament is not a longer-term objective but an explicit prerequisite for reconstruction assistance and security guarantees. Implementation responsibility is placed squarely on Lebanese state institutions, while aligning closely with Israeli security objectives.
These efforts are unfolding within the broader context of the Abraham Accords, which have redefined regional cooperation between Israel and several Arab states, and within which Lebanon has increasingly featured in discussions on future integration. However, such realignment remains problematic. While this would offer Israel long-term border security, its benefits for Lebanon remain contingent on the state’s ability to engage as a unified sovereign actor rather than a fragmented structure. Domestically, such prospects are also contested. Some Lebanese political actors advocate for direct negotiations — including President Aoun — while others reject normalisation without first addressing the Palestinian issue. Hezbollah, through Mahmoud Qmati, has firmly opposed any normalisation and framed it as a "mistake and a big concession."
Despite these diplomatic tracks, the Israeli security establishment appears to prioritise a buffer zone over negotiated frameworks. The coexistence of multiple tracks with distinct conditions reflects a fragmented international approach that increasingly treats Lebanon as a vacuum rather than a sovereign partner. These frameworks continue to evolve in parallel, risking a post-war order imposed by regional powers rather than negotiated by a unified Lebanese state, which remains sidelined by kinetic realities on the ground.

Conclusion
Lebanon stands at a crossroads where the future of its national sovereignty is being decided by external actors, despite the unprecedented rhetorical alignment of the Salam-Aoun administration. The path toward durable stability and a ceasefire will largely depend on whether the Lebanese state can transition from a passive theatre of regional confrontation to an active sovereign player. This requires sustained international engagement through direct budgetary support and development frameworks capable of reconstructing critical infrastructure, particularly in the south.

The weakening of Hezbollah's military command offers a historic opening for the Lebanese Armed Forces (LAF) to emerge as the sole guarantor of national security — yet it simultaneously risks internal fragmentation, as the absence of a dominant non-state actor leaves a vacuum in social services and security for the Shia community. 
The ongoing escalation is likely to deepen existing sectarian divisions, limiting the state's ability to assert unified authority over security and defence. The weakening of Hezbollah's military command offers a historic opening for the Lebanese Armed Forces (LAF) to emerge as the sole guarantor of national security — yet it simultaneously risks internal fragmentation, as the absence of a dominant non-state actor leaves a vacuum in social services and security for the Shia community. A negotiated integration of Hezbollah's structures into state institutions, underpinned by domestic consensus and external guarantees, may offer the most viable pathway toward consolidation.
The lack of confidence from the Israeli security establishment remains a significant obstacle, further constraining Lebanon's ability to stabilise its borders or advance a sustainable resolution. Ultimately, Lebanon's trajectory will be shaped by the alignment between domestic institutional capacity, the evolving role of non-state actors, and regional diplomacy. Without such alignment, Lebanon risks remaining a theatre where its political future is dictated from outside rather than determined from within.



Giada Kabrit is Program Assistant and Intern Coordinator at ORF Middle East.

### Hormuz and the Export of Chaos into Global Supply Chains

Spotlight 


 	The implications of the Hormuz blockade are reverberating through multiple global supply chains, expanding the theatre of conflict definitively across geographies. 
 	Supply chain bottlenecks of critical minerals and industrial chemicals originating in the Middle East transmit disruptions globally across sectors such as agriculture, mining, defense, and semiconductors. 
 	The long-term ramifications of the blockade could be reflected in potential changes in global trade patterns and consolidation of inequities.

While oil and gas are the most ubiquitous to it, the Strait of Hormuz and its Middle Eastern hinterland are equally central to multiple other commodities and global supply chains. Industrial chemicals and critical minerals supply chains are two such crucial linkages that integrate the Middle East with the global economy. This commentary explores the disruptions triggered by the Iranian blockade of the Strait of Hormuz, which has interrupted a global production trajectory oriented towards industrial reshoring, data-centre-led digitisation, electrification, and the reinforcement of defense production lines, while also posing risks to global food security.

The Iranian blockade of the Strait of Hormuz, which has interrupted a global production trajectory oriented towards industrial reshoring, data-centre-led digitisation, electrification, and the reinforcement of defense production lines, while also posing risks to global food security.
Impact on Critical Minerals
In addition to its centrality to fertilizer supply chains, the Middle East’s sulphur serves as a necessary feedstock in critical minerals mining, wherein it is utilised in the process of leaching to remove impurities from low-grade ores of copper, cobalt, nickel, lithium and uranium, among others.  A consistent supply of sulphuric acid is essential for the economical processing of critical minerals at scale. The blockade of the Strait of Hormuz, however, has severely impacted this essential supply chain. Countries such as Indonesia which requires sulphuric acid for mining that produces 50 percent of global nickel supply, the Democratic Republic of Congo (DRC), which needs it for mining cobalt and copper, and China, which requires it for lithium extraction and processing, are expected to suffer considerable supply disruptions and losses due to the Hormuz blockade. There is also the challenge of redirecting bulky sulphuric acid cargo, which by its composition is difficult to substitute. The resultant costs of re-routing and attendant insurance premiums across geographies to address the massive supply shock triggered in the Strait would be substantial.

Impact on Defense Production Chains 
Ironically, the critical minerals caught in the Hormuz disruption also feed into the weapons that are used in prosecuting the conflict itself. These minerals are central to defense sustainment chains, whether through repairing damaged weaponry or enhancing production at scale to meet increased demand for replenishing ammunition reserves and stockpiles. It is perhaps in recognition of this need that the Pentagon is reported to have asked domestic mining companies to increase production of 13 critical minerals one day before the US-Israel coalition launched operations against Iran. The demand for these critical minerals will also drive increased defense manufacturing for use in both Ukraine and in preparation for a Taiwan contingency, following the cessation of hostilities in the Middle East. 

Ironically, the critical minerals caught in the Hormuz disruption also feed into the weapons that are used in prosecuting the conflict itself. 
Impact on Semiconductors and Data Centres
Critical minerals such as helium, bromine and bauxite (aluminum) sourced from the Middle East, are vital to the production of semiconductors and the functioning of data centres. Qatar’s Ras Laffan, which is now expected to be offline for 3-5 years following Iranian strikes, produces one third of the world’s helium supplies as a byproduct. Helium’s significance to the semiconductor production lies in its properties of heat-management and in its role in lithography processing.
Additionally, much of the energy demand of both Taiwan and South Korea, is met through LNG imports from the Middle East, which  are now stuck in the Hormuz. As a result, these two countries that stand at the heart of global semiconductor manufacturing, are simultaneously contending with the loss of energy supplies from the Gulf that power gas fired facilities while also facing shortages of critical minerals essential to producing the most advanced chips in the world. Asian companies such as Taiwan’s TSMC, SK Hynix, and Samsung KRX are already reported to have suffered substantial market losses due to the disruption in the supply of these minerals.

Impact on Electrification 
Electrification is commonly posited as a response to the vulnerabilities and risk exposure of global oil and gas markets. Batteries, therefore, are expected to be the fulcrum around which this energy transition materialises. An essential raw material for the batteries powering EVs is mixed nickel-cobalt hydroxide precipitate (MHP). However, the lithium, nickel and copper supply chains that produce this raw material depend again on the sulphur that is largely sourced from the Middle East and transported through the Strait of Hormuz. Notably, given the composition of these minerals and their role in industries such as battery manufacturing, during supply shortages and bottlenecks it is price that typically serves as the balancing mechanism, rather than diversification of the form or source of the input.

Two countries that stand at the heart of global semiconductor manufacturing, are simultaneously contending with the loss of energy supplies from the Gulf that power gas fired facilities while also facing shortages of critical minerals essential to producing the most advanced chips in the world. 
Impact on Manufacturing 
In addition to the impact of crude oil and Liquefied Natural Gas (LNG) shortages, which have a direct bearing on the fuel powering manufacturing industries, the Asian petrochemicals sector is substantially dependent on the region for its feedstock of naptha, urea, and ammonia. Through the process of cracking, naptha is used to produce ethylene and propylene which are raw materials for multiple manufactured products. Nearly 60 percent of Naptha imports to Asian plants originate in the Middle East. Furthermore, the conflict has led to several Gulf smelters ceasing operations, creating an aluminium supply crunch, which alongside the limestone bottlenecks significantly affects steel and related industrial production cycles globally. Similarly, methanol supply shortages result in solvent shortages that impact the pharmaceutical industry as well as the production of biodiesels and formaldehyde which are used in the production of industrial adhesives and resins. While the current supply chain bottlenecks have affected  the functioning of most manufacturing units in Asia, further disruptions are likely to lead to shut-downs and plant curtailments, resulting in substantial losses.

Long-term Implications of these Disruptions
Critical Minerals - The ongoing competition for battery-minerals and those used in semiconductors, is expected to worsen as the full scale of the Strait’s blockade becomes evident in an already tight supply-chain. Multiple countries, companies, and industries are likely to compete for the scarce supply of these minerals, thereby exacerbating procurement challenges. This pressure will be compounded by governments leveraging export controls on these minerals to capitalise on the resultant price spikes. What appears to be a logistics bottleneck triggered by transit disruptions may become more serious as production losses enter the market, leading to urgent stockpiling. Given this simultaneous demand impulse from all sides, the possibility that allies and partners in coalitions and groupings such as Project Vault or the Quad may also compete for the already limited supply is considerable, and must be factored into how global critical mineral alliances evolve.

Given this simultaneous demand impulse from all sides, the possibility that allies and partners in coalitions and groupings such as Project Vault or the Quad may also compete for the already limited supply is considerable, and must be factored into how global critical mineral alliances evolve.
Manufacturing - In the case of manufacturing, the substantial time and costs associated with restarting production once it shuts down will pose a longer-term issue. Cracking in the petrochemicals industry, for instance, takes nearly two weeks on an average to re-start once stopped. The losses from stalled production must be absorbed by company balance sheets which are already strained by potential war-risk insurance spikes and the implications of force majeures. Again, supply crunches of ethylene from the Middle East, for example, have a significant impact on the textiles industry, which employs large populations in the Global South that can hardly afford a repeat of production stoppages similar to those triggered by pandemic-related disruptions.
Defense Preparedness- The implications of the disruption in the critical minerals industry caused by this conflict will further accentuate the gap between China’s dominance in the sector and that of other countries or coalitions seeking to build downstream capabilities. This widening gap is expected to have a significant impact on defense production globally. Defense sustainment chains require an uninterrupted supply of the chemicals and critical minerals currently blocked, which are essential for the production and repair of systems ranging from radars and microprocessors to drones, stealth weapons, and jet engines. The supply chain disruptions linked to  the Iran conflict will test defense preparedness in countries anticipating active conflict over the coming years.
Food Security - Finally, while the impact of the blockade will be significant on global industrial supply chains, it is through its relevance to global food security that the repercussions will be most widely felt. Countries that both import LNG and fertilisers from the Gulf also export agricultural products back to the region and much of the Global South. The fact that the blockade is delaying essential fertilizers during the sowing cycle in Asian and African countries is expected to have  a debilitating impact on global food security indicators for at least a year, if not longer. The cumulative impact of the Iran conflict’s supply chain bottlenecks on food production; through high input costs of fertilisers, energy and logistics, will eventually be reflected in both higher food prices and increased inequities in access to adequate quantity and quality of food supplies globally.

The cumulative impact of the Iran conflict’s supply chain bottlenecks on food production; through high input costs of fertilisers, energy and logistics, will eventually be reflected in both higher food prices and increased inequities in access to adequate quantity and quality of food supplies globally.
Through its effectiveness, the Iranian blockade of the Strait of Hormuz illustrates a deliberate intersection of economic warfare with strategic leverage. Through the ramifications on supply chains that span food security, economic security, environmental security, and national security parameters, the global disruptions caused by Iran’s blockade are likely to persist beyond its eventual cessation.



Cauvery Ganapathy, Fellow, Climate and Energy, ORF Middle East.

### The Dilemma in Safeguarding the Strait of Hormuz

Spotlight 


 	The establishment of a military coalition to safeguard the Strait is increasingly regarded as justified, yet it risks entangling external actors in an asymmetric conflict
 	Securing a UN mandate will likely encounter delays and obstruction, limiting the speed and scope of collective action
 	Even if the coalition is successfully established, its efforts will struggle to provide sustainable security 

Introduction
It is imperative that the Strait of Hormuz be safeguarded. The escalating costs of its blockade far exceed the fuel price at petrol stations and have begun to permeate into every segment of the global economy. A 22-nation joint statement, backed largely by European countries alongside the UAE and Bahrain, expressed “readiness to contribute to appropriate efforts to ensure safe passage through the Strait [of Hormuz]”. They also said they “welcome the commitment of nations who are engaging in preparatory planning.” Such a development raises questions regarding the possibility of a coalition to end the Iranian blockade on the Strait of Hormuz.
What is noteworthy is that the United Arab Emirates (UAE) and Bahrain, two countries which have consistently advocated for a diplomatic resolution to the dispute, have now been forced to pivot towards seeking a more proactive approach aimed at securing the Strait under a UN-supported coalition. This commentary seeks to examine the considerations underpinning such a broad-based effort.

It is a battle the Iranians will wage through asymmetric warfare techniques in a geographic space that they control, and in probable disregard for laws of conventional warfare.
In its essence, such a coalition would represent a group of countries that have been drawn into a war not of their own making, and whose interests and security have been held hostage by Iran through attacks on their territories or through the blockade of a Strait that constitutes a vital artery of global trade. In the foundational logic of its origin, such a coalition is not merely wholly justified, but is in many ways what is expected from states that are willing and able to defend themselves.
This framing, however, would look different through an Iranian lens. In any battle, gauging the perspective of the opponent, however pernicious it appears, is a necessary pre-requisite in order to strategise appropriately. In formulating their strategies to secure the Strait militarily, the UAE, Bahrain and any additional coalition member must, therefore, first contend with the fact that in this critical global chokepoint, they will be faced with the desperation of a regime that is fighting an existential battle. It is a battle the Iranians will wage through asymmetric warfare techniques in a geographic space that they control, and in probable disregard for laws of conventional warfare.

A UN Mandate for the Strait 
The Kingdom of Bahrain, as a representative of the Arab Group in the UN Security Council (UNSC) for its temporary tenure this year and the next, has already demonstrated its diplomatic resolve towards Iran. A Bahrain-led resolution adopted by the UNSC in March stated that it “condemns in the strongest terms the egregious attacks” by Iran against Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, the UAE and Jordan, determining they constitute “a breach of international law and a serious threat to international peace and security.” It further demands the “immediate cessation” of all attacks by Iran against these countries and calls on Tehran to comply fully with its obligations under international law, including the protection of civilians.
Now, Bahrain is reportedly drafting another resolution. The resolution is understood to aim at authorising the use of "all necessary means" in and around the Strait of Hormuz, as well as signalling readiness to impose measures, including targeted sanctions. However, such a struggle to gain international legitimacy may take longer than required. France has already proposed an alternative, more conciliatory draft resolution, while China and Russia are expected to veto Bahrain’s proposal.
The importance of an international backing for efforts to safeguard the Strait cannot be overstated, particularly as the costs are felt globally and Iran is inflicting punishment on the international community for attacks by countries it finds difficult to retaliate against directly. 

Case for Military Coalition to Safeguard the Strait 
It is important to distinguish between the degradation of Iranian missile capabilities and the deployment of forces and vessels to secure the Strait’s opening under a UN mandate. The degradation of Iran’s missile capabilities is a compelling objective to achieve any kind of semblance of peace and stability in a Middle East that refuses to live under the perpetual threat of Iranian missiles targeting their territories. Iran’s attacks on the Gulf countries, along with the closure of the Strait, will serve as its most potent bargaining chips in future international negotiations. The degradation of missile capabilities, which enables this leverage to persist, is therefore necessary for security to be restored in the Gulf.
Safeguarding the Strait through a UN approved military coalition, on the other hand, while absolutely necessary and justified, presents a different set of threats. The Iranian navy is reported to have already sustained significant losses. However, its asymmetric advantages remain. Consequently, any military solution to ending the blockade along the Strait today poses an exceptional challenge centred on three specific considerations associated with the complexity of littoral and amphibious warfare:
First, the geographic sweep of the stretch that needs to be secured for the blockade to be effectively broken is not restricted to the swathe of 90 nautical miles of what is recognised as the Strait of Hormuz. There are no guarantees at present that the Iranians would refrain from attacking vessels, based on their assessment of what constitutes a valid target with inimical interests, as soon as these enter the range of their missiles in the western Indian Ocean. Additionally, the threat posed by the Houthis, purportedly acting on behalf of Iranian interests, in the Red Sea  spreading into this wider zone must also be considered, given Tehran’s threats to disrupt  alternative energy trade routes, as it has done by targeting pipelines that bypass the Strait.
Secondly, a military coalition entering the Strait or the coastlines along the waterway would necessitate concentrating otherwise dispersed naval and military assets to collect within a much smaller radius of operation. Given that the Iranians control the northern coastlines along the Strait and have already demonstrated considerable expertise in launching asymmetric attacks from there, any assemblage of military personnel from the Gulf and other countries within that confined area, would expose them to much greater risks of Iranian attacks.
Third, mining of the seabed along the Strait remains the most potent threat. It is not one that any coalition would be immune from, and could result in loss of military personnel. There is now the possibility that the Iranians may conclude that merely the threat of mines is sufficient to deter passage through the Strait. Tehran would also be cognisant of the fact that mines in the Strait would equally jeopardise Iranian and friendly country passage through the strait, given that acoustic signatures of vessels cannot always reliably differentiate between friendly and non-friendly vessels. This may also explain why countries like Japan have minesweepers but are  reluctant to participate actively in these exercises. However, the validity of these assumptions can only be tested in real time in the Strait, where the price of a mistaken hypothesis will, tragically, be paid in human lives. 

Conclusion
The deterministic facts of geography mean that the coastline bordering the Strait of Hormuz will always be Iranian. Tehran, therefore, will always be able to exert effective control over that waterway in some form. Safe passage through the Strait by means of a military solution, therefore, may become an endless endeavour. The Iranians have found low-cost methods of imposing heavy costs on Gulf countries that are committed to an agenda of peace, stability and development for their populations. This divergence between the two sides is most amplified in the attendant risk-calculus and aversion to a protracted conflict.
The most viable and lasting version of peace without military hostilities in the Strait, therefore, will possibly come through a negotiated settlement. For the day after that negotiation, countries such as the UAE and Bahrain along with the other Gulf partners will have to build a unified approach to issues such as how risk insurance burdens for freight and transit could be mitigated. For the Red Sea to return to normalcy, for instance, commercial navigation resumed  only after a definitive period of time without any attacks, and through the fulfilment of specific demands that provided assurances for safe shipping.
In the Strait, there is the possibility that Tehran may eventually seek to formalise an ‘arrangement’ whereby those recognising Iranian sovereignty would pay to pass through. Allowing any benefit to accrue to a country that has targeted neighbours who have consistently sought dialogue over military discord is an understandable anathema. Yet, any coalition, alongside the Gulf States, may have to consider a negotiated solution that entails some degree of a trade-off in the interest of definitively ending the blockade.



Mahdi Ghuloom, Junior Fellow, Geopolitics, ORF Middle East
Cauvery Ganapathy, Fellow, Climate and Energy, ORF Middle East

### The GCC Data Centre Industry: Conflict and Policy

Spotlight


 	Privately operated data centres in the Gulf are increasingly perceived as proxy extensions of US-aligned infrastructure in geopolitical conflict.


 	Data localisation policies may inadvertently constrain resilience by complicating the transfer of critical data when infrastructure is threatened.


 	Relocating digital infrastructure away from conflict zones is not a straightforward solution, as alternative hubs face their own structural vulnerabilities.

The rapid expansion of data centre infrastructure in the Gulf Cooperation Council (GCC) has become a central component of the region’s economic diversification strategies. As Gulf states seek to reduce dependence on hydrocarbon revenues, governments have increasingly invested in digital infrastructure capable of supporting artificial intelligence (AI), cloud computing, and other data-intensive technologies. The United Arab Emirates (UAE) and Saudi Arabia, in particular, have positioned data centres as critical foundations of their emerging digital economies. Simultaneously, US companies have recognised that the GCC offers affordable power and attractive connectivity, enabling the delivery of digital services and AI computing resources to Europe, Asia, and Africa with low latency—making it an attractive location for establishing cloud and AI infrastructure.
GCC digital infrastructure, particularly data centre facilities, enables governments, businesses, and consumers to access cloud services and AI workloads locally, while also providing a trusted partner for allied nations to outsource their own data storage and processing requirements under increasingly important sovereignty and residency frameworks. However, the recent Israel-US conflict against Iran has highlighted the vulnerability of digital infrastructure, which is both critical to global financial and government functions and extremely expensive. Data centre operations in the UAE and Bahrain experienced disruptions during regional missile and drone attacks, resulting in temporary outages affecting mobile applications and online banking.
As AI and cloud computing become critical economic and security assets, data centres, fibre-optic cables, and the energy systems that power them could become possible targets in future conflicts. However, despite these emerging security risks, the GCC’s unique combination of abundant energy resources, strategic geographic connectivity between major global markets, and strong government investment in digital infrastructure suggests the sector is likely to remain resilient in a post-conflict scenario, provided appropriate measures are adopted to strengthen the protection, redundancy, and diversification of critical digital assets.

Drivers of the GCC Data Centre Industry
The development of the GCC data centre sector is closely tied to national economic diversification programmes launched across the region over the past decade. Governments increasingly view digital infrastructure as essential for enabling new industries and supporting advanced technologies such as AI, fintech, and smart city systems, helping to shift away from reliance on fossil fuel income. This reliance is increasingly unsustainable not only due to finite reserves and climate pressures, but also because of the “unproductive” economic structure it creates, with limited employment opportunities for the national population.
A number of key geographic, infrastructural, and geopolitical advantages support the GCC’s digital ambitions. Energy availability has played a major role, since data centres require substantial amounts of electricity to power servers and cooling systems, and the GCC’s historically low energy costs have provided a competitive advantage. In addition to hydrocarbon resources, Gulf states are increasingly investing in nuclear power, hydrogen technologies, and solar energy—resources that are particularly abundant due to the region’s desert environment—to support future energy demand from digital infrastructure.
The Gulf also occupies a strategic position between Europe, Asia, and Africa, a location that enables relatively low-latency digital connectivity between major global markets and makes the region an attractive base for actors serving multiple geographies. Gulf states have demonstrated adaptability in navigating the “rigorous security and reporting requirements” necessary to obtain imports of US semiconductors, with the sale of advanced GB300 chips authorised to the state-backed AI companies HUMAIN of Saudi Arabia and G42 of the UAE in November 2025. This development reflects a geopolitically driven preferential alignment with US technology ecosystems compared to other players in the Middle East or globally, allowing continued access to critical AI hardware despite tightening export controls.
Finally, government policies aimed at attracting technology companies and skilled workers have reinforced the sector’s growth. Competitive income tax regimes, investments in leisure and cultural attractions, and flexible visa pathways make life for expatriates in these countries highly attractive relative to competing global hubs. This is in addition to the creation of advanced technology education and research funding at institutes such as Mohammed bin Zayed University of Artificial Intelligence (MBZUAI), and King Abdullah University of Science and Technology (KAUST), alongside specialised courses at other local multidisciplinary universities, which have further contributed to positioning the GCC as an alternative destination for global technology talent. 

Geopolitical and Regulatory Risks
However, recent regional tensions have raised concerns that the data centre industry remains vulnerable to physical disruption risks. Amidst the Iran war, successful targeting and debris from interceptions have resulted in damage to energy and industrial infrastructure across the region. Given the dominance of US hyperscalers such as Amazon Web Services, Microsoft, and Google in the region, Gulf-based data centres—although privately operated—have been targeted as perceived extensions of US and/or Israeli military infrastructure, effectively positioning them as proxy assets within broader geopolitical conflict.

Gulf-based data centres—although privately operated—have been targeted as perceived extensions of US and/or Israeli military infrastructure, effectively positioning them as proxy assets within broader geopolitical conflict.
This vulnerability is compounded by the sheer scale and centralisation of hyperscale facilities. Modern data centres can span 100,000 to over 7 million square feet for “hyperscale” facilities, housing tens of thousands of servers within a single site, making them difficult to fully secure against external threats. Security costs are correspondingly high due to spending on physical systems to protect infrastructure, including perimeter fences, surveillance and access control. The aerial threats from Iran’s drones, missiles and debris from interceptions are a significant challenge due to the difficulty of providing continuous overhead protection across large footprints. As a result, operators may increasingly need to invest in advanced counter-drone systems, airspace monitoring, and hardened structural designs, further increasing the already substantial cost of securing these sites.
Regulatory frameworks also pose potential challenges should the conflict continue. Gulf states including the UAE and Saudi Arabia have introduced data localisation requirements that mandate certain categories of data to be stored domestically. These policies are predominantly designed to enhance cybersecurity and data sovereignty, yet, they can also create operational constraints for public services and private companies that rely on global cloud networks. The experience of government data storage providers in Ukraine has demonstrated that the ability to rapidly transfer sensitive data across borders is crucial when infrastructure is threatened. Shortly before Russia’s invasion in February 2022, the Ukrainian parliament lifted a ban on the use of cloud storage by government services, allowing private sector providers, including Amazon, Microsoft, Google, and Cloudflare, to transfer data out of the physical data centres before they were subsequently targeted by Russian forces. The localisation policies of Gulf states may therefore require increased operational flexibility, including provisions for cross-border data transfer in emergency scenarios.

Policy Recommendations 
In light of the heightened geopolitical tensions and demonstrated physical vulnerability of digital infrastructure, several policy pathways are open for both GCC governments and private sector actors operating in the region.
First, Gulf states might prioritise the protection of critical digital infrastructure by integrating data centres into military defence planning and strengthening physical defences to include additional aerial systems, such as counter-drone and missile interception capabilities. Given the scale and strategic importance of these facilities, closer coordination between private operators and national defence authorities, as well as the development of new standards for infrastructure design will be required.

The experience of government data storage providers in Ukraine has demonstrated that the ability to rapidly transfer sensitive data across borders is crucial when infrastructure is threatened.
Second, regulatory frameworks governing data localisation should be designed with sufficient flexibility to enable secure cross-border data movement in emergency scenarios while still protecting national security and privacy concerns. This could include pre-approved contingency mechanisms allowing rapid data mirroring or transfer to allied jurisdictions in the event of disruption, ensuring continuity of critical services.
Third, greater diversification away from US suppliers could reduce the perception of Gulf data centres as extensions of US strategic infrastructure. Although US technology providers offer the most advanced and scalable cloud solutions, partial diversification of vendors and partnerships may decrease the likelihood of being targeted by state and non-state actors seeking to disrupt US-aligned infrastructure.
While some critics of the GCC’s data centre ambitions have suggested that the only solution to avoid threats to such costly infrastructure housing such critical data is to base them in locations further away from potential aggressors. It is worth noting that few locations offer the same low-cost energy, strategic geographic connectivity, and regulatory environments. Should data centre providers seek instead to concentrate their facilities in the US, and should GCC data localisation laws be relaxed enough to allow their processing beyond the Gulf countries’ borders, there would still be significant economic and operational challenges.
The US is also more exposed to natural disasters than the GCC, threatening the physical integrity of data centre infrastructure. In 2025 alone, the US experienced 23 separate billion-dollar weather and climate disasters including hurricanes, wildfires and floods which resulted in a total US$115 billion in damages. In contrast, the GCC faces a narrower range of natural hazards and is generally considered lower in global natural disaster risk assessments. Additionally, securing land and planning approval for new data centre developments in the US can be complex and time-consuming due to local environmental laws and community opposition to rising utility bills and noise pollution, which have delayed or blocked projects in key locations such as Virginia and California. Moreover, existing US grid systems have already demonstrated vulnerabilities, with power constraints and outages affecting data centre operations in areas such as “Data Centre Alley” in Virginia. As such, rather than relocating, strengthening resilience within the GCC remains the more viable and cost-effective strategy.
By addressing these structural challenges, GCC countries can strengthen the resilience and competitiveness of their data centre industries in the face of current threats, while reinforcing their ambitions to become global hubs for cloud computing and artificial intelligence once peace resumes.



Elizabeth Heyes is a Junior Fellow, Emerging Technology, ORF Middle East.

### The US–Israel–Iran Conflict: Energy, Climate & Food-Water Impacts

Nearly 20 million barrels of globally traded petroleum transit the Strait of Hormuz daily, of which 14.8 million barrels of oil per day lack access to an alternative route. The situation is even more acute in gas markets which have less flexibility and limited storage options.
Energy underpins virtually every sector of the global economy whether as a feedstock or through transportation. The conflict has driven oil and gas prices sharply upward, sending shockwaves across global markets. Estimates suggest, that the global GDP loss could range from US$770 billion - if the conflict endures 4-6 weeks with Brent crude prices between US$100-120 – upto US$2.2 trillion if the conflict persists for 3-6 months, with prices rising above US$130.
Yet, the consequences extend far beyond energy and the economy indicators.  The ensuing crisis is also intensifying food and water insecurity, climate systems and agricultural production.
The Climate and Energy programme from the Observer Research Foundation (ORF) Middle East provided concise analysis of these impacts and reflections on potential pathways forward. 

The Energy Security Trifecta: Securitisation, Resilience and Transition
Governments and Institutions must reconsider how energy security is defined and managed in the twenty-first century. Just as the aftermath of the 1973 oil crisis led to the establishment of the International Energy Agency (IEA) which encouraged oil consuming countries to set up strategic petroleum reserves (SPRs) and coordinate emergency responses to manage future supply disruptions, the current Hormuz crises represents another significant inflection point for the global energy system.
The lessons learnt from the emerging crisis highlight the need for a more comprehensive framework for energy security – one that balances securitisation, resilience, and transition : what might be termed the trifecta of energy security.

Energy infrastructure of national strategic importance - should be treated as critical national security assets with protections comparable to military installations. 
Firstly, securitisation and risk management will become central. Maintaining significant stockpiles of oil and gas reserves will be increasingly essential. Energy infrastructure of national strategic importance - should be treated as critical national security assets with protections comparable to military installations. Besides physical and military safeguards, cybersecurity measures are equally important in the current techno-digital age.
Secondly, resilience should be strengthened through decentralisation and diversification of energy sources, trade routes and partnerships, thereby, ringfencing the energy systems from volatile pricing and sudden supply chain disruptions. Systems capabilities are also important considerations in this regard, including satellite surveillance, risk shipping insurance, reinsurance mechanisms, payment systems and real time supply chain intelligence.
Finally, the energy transition agenda is closely tied to energy sovereignty and must be viewed as a pillar of long-term energy security. Investments in in renewables with storage, nuclear energy, and grid optimisation are likely to gain momentum. Securing strategic reserves of crucial critical minerals will be key to avoiding the vulnerabilities and dependencies characteristic of the oil and gas era.
Mannat Jaspal, Director & Fellow, Climate and Energy, ORF Middle East

Anticipating the weaponisation of energy 
The effective weaponisation of energy has been the disruptive throughline of the conflict in the Middle East. The first form has been structural weaponisation representing the destabilising continuum of targeted attacks on energy infrastructure across production, generation, distribution, utility and storage capabilities in the region. The second kind has been the weaponisation of access by extorting leverage over the Strait of Hormuz. A combination of both has exported energy and ancillary vulnerabilities globally.
Short of a perpetual – and, entirely unsustainable - state of military readiness and provision of air defense around each, there is objectively no way to achieve fool-proof protection against kinetic attacks on energy assets and conduits during a conflict. Anticipating imminent weaponisation, however, helps prepare for faster recovery.
Structural resilience of oil and gas energy infrastructure could be improved by factoring in redundancies of alternate and distributed storage and power such as rechargeable generators, transformers, components to repair damaged infrastructure, and mobile power generation plants. Although an expensive proposition, such stockpiling is essential because energy systems, like energy markets, cannot deliver on security beyond their engineered parameters, and stress-testing risk-insurance for energy infrastructure must factor this in. Additionally, robust cybersecurity could guard against digitised breaches that compromise systems resilience.

Structural resilience of oil and gas energy infrastructure could be improved by factoring in redundancies of alternate and distributed storage and power such as rechargeable generators, transformers, components to repair damaged infrastructure, and mobile power generation plants.
Access weaponisation could be partly addressed by diversification of both sources and forms of energy, factoring in cost, time and compatibility calculations. Concerted expansion of strategic storage capacities of fuel, must simultaneously be accompanied by a robust industrial policy focused on electrification. Finally, although the susceptibility of renewable infrastructure to either the access-based weaponisation of entrenched supply-chain monopolies, or structural weaponisation through kinetic attacks cannot be ruled-out, investing in renewables as a viable long-term hedge against access weaponisation must be prioritised. The diversification and stockpiling of its feedstock such as transition hardware, critical minerals and technologies, the building of decentralised microgrids, and the creation of responsive cybersecurity guardrails could serve as potential levers of mitigation.
Cauvery Ganapathy, Fellow, Climate and Energy, ORF Middle East 

Rethinking Global Fertilizer Security: Lessons from Hormuz Crisis 
Iran’s near-total shutdown of the Strait of Hormuz has disrupted about one-third of the world’s seaborne fertilizer trade, including nearly half of all global urea exports. Within a week of the conflict’s outbreak, Qatar suspended the production and shipment of Liquefied Natural Gas (LNG) and urea, and fertilizer prices rose by 27 percent and are up 57 percent compared to the same period last year. The crisis could worsen given that China is restricting its exports to prioritise domestic market until August 2026, and Russia has imposed  export quotas.
Within a week of the conflict’s outbreak, urea prices rose by 27 percent and are up 57 percent compared to the same period last year.

Building alternative export corridors and relocating part of production capacity to politically more stable locations are long-overdue investments.
With the war in its third week, this fertilizer crisis offers important lessons for both the Gulf region and the rest of the world. For the Gulf Cooperation Council (GCC) countries, this implies that petrochemical diversification alone does not create economic resilience as long as production and exports share the same geographical vulnerability. Saudi Arabia, for instance, has an east-west pipeline for oil. Yet, no comparable alternative exists for fertilisers. Building alternative export corridors and relocating part of production capacity to politically more stable locations are long-overdue investments.
Countries in Social Security Agreements (SSA) and South Asia — which import a large portion of their nitrogen fertilizers, for instance,  India (41 percent), Sudan (54 percent), Tanzania (31 percent), Kenya (26 percent), Thailand (71 percent),  and South Africa (67 percent) — should ultimately build strategic reserves, similar to what most governments are already doing for crude oil. Furthermore, accelerated investment is needed in local and regional fertiliser production, supported by renewable energy. Green ammonia, though still costly, offers precisely this independence from fossil fuel supply chains and geopolitical bottlenecks.
At the multilateral level, a coordinated mechanism for fertiliser supply security is long overdue, comparable to the IEA emergency reserve coordination for crude oil. A global crisis reserve for agricultural inputs, combined with transparent early-warning systems for supply shocks, would mitigate the worst effects of future disruptions.
The Strait of Hormuz crisis have demonstrated that fertiliser security and energy security cannot be considered in isolation. Focusing solely on oil prices while ignoring the fertiliser supply chains undermines the true extent of geopolitical vulnerability.
Arnold Musungu, Associate Fellow, Climate and Energy, ORF Middle East

The War on Climate
Climate change is often overlooked in the discussions of war. When the loss of human lives and survival are at the forefront, deprioritising climate concerns may seem justified. While that may be true in the short-term, the long-term impacts of war on climate change will be detrimental and profound—particularly in the Middle East—a region disproportionately affected by accelerated warming and an increase in extreme weather events, with summer temperatures expected to rise by 4°C and 118 days of heatwaves per year predicted by 2100.

Direct strikes on oil facilities, in addition to the attacks on Iranian nuclear and uranium infrastructure in June last year, result in a significant release of toxins pollutants, such as particulate matter, carbon monoxide, and sulphur dioxide that affect the environment and public health, with increased cases of cardiovascular illness, respiratory damage, and headaches. 
The protracted US-Israel war on Iran is proving to be costly for the climate. Military operations – especially the deployment of aircrafts and missiles – emit harmful emissions. Direct strikes on oil facilities, in addition to the attacks on Iranian nuclear and uranium infrastructure in June last year, result in a significant release of toxins pollutants, such as particulate matter, carbon monoxide, and sulphur dioxide that affect the environment and public health, with increased cases of cardiovascular illness, respiratory damage, and headaches. Moreover, strikes on vessels and offshore infrastructure in the Gulf threaten marine life and biodiversity, with repercussions that will likely last decades.
The closure of airspace over parts of the Middle East and the disruptions in shipping through the Strait of Hormuz, down from 100 ships daily to 21 in total since the war began. This will lead to a significant increase in aviation and shipping emissions as planes and ships are rerouted. This could in the long-term, however, motivate countries to abandon fossil fuels and pursue clean energy alternatives.
The cumulative environmental effects of the war;release of toxic pollutants, the increase of greenhouse gas emissions, ecological damage,are expected to fast track drought like conditions and extreme heatwaves in the region, and contribute to soil degradation, reduced land fertility and water contamination.
Houraa Daher, Associate Fellow, Climate and Energy, ORF Middle East

Testing Limits of Food Resilience: Gulf to Globe
Increasing hostilities around the Strait of Hormuz— a maritime chokepoint at the helm of global fuel and fertiliser trade—have subsumed regional and global food systems under pressure. Similar to COVID-19 and the Russia-Ukraine war, the current conflict challenges logistical capacity, supply chain fluidity, and global food reserves. While the Gulf can safeguard its food security through storage, logistics, and diversified trade corridors, the rest of the world must brace for elevated food prices and potential shortages.
While the import-dependent Gulf has found momentary relief through backup gateways in Jeddah, Oman, and the UAE’s east coast, these lack capacity to absorb full trade diversion. Sustaining trade momentum, low prices, and stocked shelves is the next challenge. With summer approaching and food transiting through longer and costlier routes like the Cape of Good Hope, the Gulf’s recent investments in cold chain logistics will become crucial to preventing spoilage. Pairing the region’s logistics strategies with its established food corridors—such as DP World’s investments in India and Africa—will help sustain food supply, especially if the conflict extends beyond the region’s six month grain reserve.

While the Gulf can safeguard its food security through storage, logistics, and diversified trade corridors, the rest of the world must brace for elevated food prices and potential shortages.
Although immediate impacts have been localised, a narrow window remains to prevent massive global shocks to food availability and pricing. Maintaining open trade, avoiding protectionist measures, and ensuring physical and economic food access is paramount. The FAO’s Food Import Financing Facility (FIFF) provides emergency financing for food-import dependent countries during global crises. In vulnerable countries, targeted cash transfers can mediate temporary shocks by improving food consumption and access. Humanitarian donors are also pursuing alternate transit corridors to ensure food reaches conflict zones.
A persisting conflict will once again test the bounds of food systems resilience. In an era of compounding crises, integrated systems of diversified trade, logistics, and financial resilience mechanisms will help ensure that countries reap the benifit of sustained food security.
Leigh Mante, Junior Fellow, Climate and Energy, ORF Middle East

Maximising Water Security: National Capacity, Regional Cooperation 
The targeting of critical desalination infrastructure in Bahrain amid the ongoing US-Israel-Iran conflict underscores the growing reality of water weaponisation in times of war. This is of vital concern across Gulf countries, the majority of which are water-scarce and rely on domestic desalination to meet water needs. Dependency ranges from 42-90 percent, with the region collectively producing approximately 40 percent of global desalinated water. Disruptions therefore pose immediate risks to water availability, as alternatives remain limited.
Against this backdrop, continued reliance on centralised, country-level water strategies exposes structural vulnerabilities, reinforcing the need to move beyond a purely domestic approach. Enhancing and safeguarding water security will depend on striking a balance between national sovereignty and regional interdependence, notably during extreme disruptions.

Advancing wastewater reuse - through improved technologies, expanded networks, and public awareness, offers a less resource-intensive supply option. 
At the national level, resilience requires a continued shift towards efficiency and diversification. Strategies should move beyond supply expansion and embed risk distribution within system design. Expanding water reserves while decentralising and distributing desalination can reduce exposure to single point failures. Advancing wastewater reuse - through improved technologies, expanded networks, and public awareness, offers a less resource-intensive supply option. Integrating adaptation measures, such as sustainable demand-side management, across all strategies is essential to preventing water overuse and groundwater overexploitation, both of which undermine water security efforts.
Beyond national measures, water security can be advanced through regional cooperation and regional contingency measures. Revisiting the GCC Unified Water Strategy (2016-2035) presents an opportunity to bolster integrated resource planning and revive transboundary water management efforts that have historically stalled. Advancing toward a binding framework could support tangible progress. In the near term, the upcoming 2026 UAE-Senegal-led UN Water Conference offers a timely platform to reintroduce discussions on shared emergency water reserves and the expansion of cross-border water transfer systems.
As water systems become increasingly digitalised and vulnerable to cyberwarfare, risk management remains critical at both national and regional levels. Reinforcing the cybersecurity of water assets, particularly in already water stressed environments, is essential to maintaining  operational reliability.
Reem Sagahyroon, Research Assistant, Climate and Energy, ORF Middle East

### Why Regime Change in Iran is Difficult

Spotlight


 	The assumption that removing Iran’s Supreme Leader will precipitate state collapse fundamentally misreads the regime's structure; it is an institutionalised theocracy built for survival, not a fragile personalist dictatorship.
 	The Islamic Republic is sustained by three foundational pillars—the IRGC, the clerical establishment, and a massive state bureaucracy—that are bound together by a multi-billion-dollar web of economic patronage.
 	The swift 2026 elevation of Mojtaba Khamenei mirrors the 1989 succession, proving that when the regime faces existential threats, the elites will rapidly bypass traditional theological hierarchies to preserve the regime.

The assassination of Supreme Leader Ayatollah Ali Khamenei in February, 2026, amid an unprecedented escalation of US-Israeli military strikes, prompted wide ranging speculations regarding regime change. The assumption was that the fall of the Islamic Republic’s paramount authority would inevitably precipitate the collapse of the regime itself. Yet, as of mid-March 2026, the Iranian state has not fractured. Instead, the Assembly of Experts moved with ruthless efficiency to appoint his 56-year-old son, Mojtaba Khamenei, as the third Supreme Leader. It is important to understand why the regime continues to function despite this catastrophic shock. The fundamental miscalculation is the belief that removing the leader guarantees the regime's collapse. Iran is not a fragile, personalist dictatorship but a highly entrenched, institutionalised theocracy fortified by vast economic patronage networks.

The Miscalculation of Decapitation
The strategic logic of decapitation relies on the historical precedents of personalist dictatorships, a logic that proved effective against Saddam Hussein in Iraq. In such systems, the institutions of the state are often hollowed out, serving merely as personal instruments of the autocrat. When the autocrat is removed, the center cannot hold and the state apparatus rapidly disintegrates.

Iran is not a fragile, personalist dictatorship but a highly entrenched, institutionalised theocracy fortified by vast economic patronage networks.
However, applying this paradigm to the Islamic Republic is a profound analytical error. The Iranian system is designed explicitly for institutional survival. While the Supreme Leader undeniably held immense overarching power, he sat atop a deep and highly structured power architecture supported by three foundational pillars: the military, the clerics and the state bureaucracy. The intricate structure of this regime can be understood in Figure 1. The rapid ascension of Mojtaba Khamenei perfectly illustrates the resilience of this structure. It was not a chaotic scramble for power, but a highly organised succession driven by the functioning system within Iran. The institutions consolidated immediately because all three pillars possess overwhelmingly strong incentives to protect the system that guarantees their wealth and survival.
Figure 1: Iran’s Power Structure


Pillar I: The Military and the Economics of Monopoly
The Islamic Revolutionary Guard Corps (IRGC) is the most powerful military organisation within Iran but viewing it purely through a military lens fundamentally misunderstands its nature. The IRGC is a multi-billion-dollar economic empire. Over the past decades, it has systematically controlled the Iranian economy, transforming into the country's most powerful corporate conglomerate.
IRGC exercises monopolistic control over Iran's most lucrative sectors. It dictates the extraction and export of oil and gas, monopolises major construction projects and controls the nation's telecommunications networks, mining operations, banking institutions and heavy industry. This economic hegemony generates the significant revenue required to fund both its domestic security apparatus and its extraterritorial proxy networks.

If the theocratic regime falls, the IRGC commanders do not merely lose their political influence but they lose their immense wealth and face the absolute certainty of criminal prosecution.
Consequently, the IRGC's calculus regarding regime survival is increasingly economic and existential. If the theocratic regime falls, the IRGC commanders do not merely lose their political influence but they lose their immense wealth and face the absolute certainty of criminal prosecution. For the military elite, regime change equates to total imprisonment or worse. Therefore, they will fight with uncompromising brutality to survive. The IRGC’s decisive role in swiftly installing Mojtaba Khamenei, a figure deeply embedded within their security and intelligence networks, was a calculated move to secure a chief executive that is known to be a hardliner.

Pillar II: The Clerical Establishment and the Patronage Economy
The second pillar sustaining the institutional fortress is the clerical establishment. While analysis frequently focuses on the ideological positions of the Shiite clergy, their enduring grip on power is equally rooted in a sophisticated system of economic patronage. The dominance of the clerical establishment traces itself back to the Iran-Iraq war which compelled the Islamic Republic to mobilise every institutional resource for survival and had the unintended consequence of strengthening the clerical regime. Therefore, currently the clerics do not merely dictate morality, they manage vast segments of the national wealth through the Bonyads or charitable foundations. Originally established to manage the confiscated assets of the erstwhile Shah and his elite, these bonyads have evolved into tax-exempt, highly opaque mega-corporations. They control a significant percentage of Iran's non-oil gross domestic product. Crucially, the bonyads function as the regime's primary mechanism for dispensing economic patronage.
The clerical elite oversees these foundations, extracting immense wealth and dispensing rents to maintain their socio-political dominance. If the Islamic Republic collapses, the clergy will be violently stripped of these assets and their monopoly on social power. The survival of the system is therefore an absolute economic imperative for the clerical class. This could explain the Assembly of Experts' willingness to bypass traditional theological hierarchies and overlook the fact that Mojtaba Khamenei is a mid-ranking cleric to appoint him as the Supreme leader, as he is sure to further his father’s legacy organisations.

With no consensus over Iran’s next leader, Khamenei was elevated to the top position and the constitution was subsequently amended to accommodate him despite his qualifications.
The precedent for this was established in 1989, when Ali Khamenei himself was unexpectedly elevated to Supreme Leader despite also being a mid-ranking cleric who did not meet the constitutionally required religious qualifications. Ayatollah Hussein-Ali Montazeri, Khomeini’s designated heir since 1985, had been dismissed after publicly condemning the regime’s brutal excesses. With no consensus over Iran’s next leader, Khamenei was elevated to the top position and the constitution was subsequently amended to accommodate him despite his qualifications. The parallel with 2026 is striking: just as Ali Khamenei was a wartime selection in the immediate aftermath of the devastating Iran-Iraq War, chosen not for theological eminence but for his political reliability, so is Mojtaba Khamenei a wartime selection. In both instances, the Assembly of Experts demonstrated that when the regime’s survival is at stake, institutional pragmatism decisively overrides theological orthodoxy. Therefore, the preservation of the economic and political structure vastly outweighs any internal debates over theological doctrine or the anti-dynastic origins of the 1979 revolution that is anti-thetical to appointing the former Supreme Leader’s son to the highest office in Iran.

Pillar III: The Bureaucracy and the Fear of the Void
The final pillar supporting the regime is the sprawling state bureaucracy. Iran possesses a massive administrative apparatus. Iran has structured institutions including the Guardian Council that vets laws and election candidates, Islamic Consultative Assembly which is the national parliament and the Judiciary of Iran that enforces Islamic codes. As a result, approximately 80 percent of Iran’s economic activity is driven by the state sector and many Iranians depend entirely on the state for their salaries. In a macroeconomic environment devastated by years of Western sanctions and chronic mismanagement, state employment is often the only reliable lifeline. Estimates show that eight million Iranians are on the Islamic Republic’s payroll.

The collapse of the state structure threatens to plunge the nation into an economic abyss or worse, a catastrophic civil war akin to those witnessed in neighboring states.
For this vast bureaucratic class, the prospect of regime change presents a terrifying unknown. While ideological devotion to the Supreme Leader may be waning, as evidenced by the massive, bloody protests of recent years, the bureaucratic apparatus relies on the regime for its day-to-day survival. The collapse of the state structure threatens to plunge the nation into an economic abyss or worse, a catastrophic civil war akin to those witnessed in neighboring states. This ensures that the bureaucracy continues to function out of self-preservation, if not absolute loyalty.

The Enduring Institutional Fortress
As of March, 2026, the Islamic Republic of Iran remains embroiled in an existential conflict, absorbing unprecedented kinetic strikes from abroad and simmering discontent at home. Yet, the swift and seamless transition of power to Mojtaba Khamenei demonstrates a decisive reality: the regime is operating exactly as its architects intended. It has proven that it is an institutional fortress, not a cult of personality.

The Islamic Republic is sustained by an iron triangle of the military, the clerics and the bureaucracy with the Supreme Leader sitting in the middle.
The assumption that external pressure or the assassination of a single leader will trigger an organic, democratic collapse fundamentally misreads the political economy of the Iranian state. The Islamic Republic is sustained by an iron triangle of the military, the clerics and the bureaucracy with the Supreme Leader sitting in the middle. These factions are bound together not merely by shared religious ideology, but by an intricate multi-billion-dollar web of economic patronage and monopolistic wealth. For the elites commanding these pillars, the fall of the regime guarantees their complete destruction. Therefore, it is important to accept that the Iranian Regime is a highly incentivised and heavily armed corporate-theocratic conglomerate that will fight to the bitter end for its survival.



Samriddhi Vij, Associate Fellow, Geopolitics, ORF Middle East.

### Moscow and Beijing’s Divergent Interests in the Middle East Conflict

Spotlight

 	China and Russia are seen as Iran’s natural partners in a complex big-power competition brewing. However, Tehran has got limited overt tactical support till now from Beijing and Moscow.


 	China’s approach to the conflict is underpinned by economic interests. It has mobilised humanitarian aid and diplomacy as core response mechanisms and not mobilising militarily despite being Iran’s largest oil buyer.


 	Russia has had close relations with Iran over matters such as Syria but has its own baggage to manage regarding the Ukraine conflict. Both China and Russia continue to have strategic agreements with Iran.

In 2015, when Iran signed the nuclear deal (officially called the Joint Comprehensive Plan of Action or JCPOA) following intense negotiations with the United Nations Security Council members along with Germany (collectively known as the P5+1), both Beijing and Moscow were aligned to the objective of preventing Tehran from acquiring nuclear weapons. However, much has changed since as the ongoing conflict in the Middle East enters a phase of ambiguous political and strategic objectives. Within this, the role of China and Russia are increasingly scrutinised for their proximity to Tehran within the construct of big power competitions.
Iran is close to both the countries and is regarded as an important geopolitical power in managing the region’s complexities especially in relation to Washington.
Some reports have suggested an increasing role of both China and Russia in supporting an isolated Iran. Iran’s Foreign Minister Abbas Araghchi has hinted that Beijing and Moscow have engaged in “military cooperation”. These remarks come as the Strait of Hormuz, one of the world’s most vital and volatile waterways responsible for carrying over 20 percent of the global oil supplies, has been weaponised following the war between Israel, the United States (US) and Iran. The conflict, now in its third week, has a substantial impact on the global economy. Both oil supplies and prices have entered a period of uncertainty as Iran’s Islamic Revolutionary Guard Corps (IRGC) decided to strategically regionalise the war following the assassination of Iran’s Supreme Leader Ayatollah Khamenei in an airstrike.

Russia and China are frequently grouped together in a soft alliance with Iran (and North Korea) as the new proverbial ‘Eastern bloc’. The relationship between Beijing and Moscow has deepened further following Russia’s conflict in Ukraine and the subsequent tensions with both Europe and the US. However, this deepening is widely regarded as asymmetrical, with Russia becoming increasingly dependent on China’s economic weight after its energy supplies to Europe were terminated. Within the broader category of great powers, one that Moscow still espouses largely on the basis of its nuclear arsenal, despite the relative weakness of its economy, both Russia and China positions themselves as contesting within a revised framework of ‘east’ verses the ‘west’.

Iran is close to both the countries and is regarded as an important geopolitical power in managing the region’s complexities especially in relation to Washington. However, China and Russia also have distinct, and often divergent interests and approaches toward the region. While both have common interests in containing the US, Russia has adopted a more visible military posture in the Middle East whereas China has relied on economic leverage and the diplomatic influence that accompanies it.
Russia had benefited from its cooperation in the Middle East over the years, particularly in Syria, the only country where it continues to maintain a direct military presence on the country’s Mediterranean coast.
Russia had benefited from its cooperation in the Middle East over the years, particularly in Syria, the only country where it continues to maintain a direct military presence on the country’s Mediterranean coast. Since the onset of its conflict with Ukraine, the bases in the Latakia province have assumed greater importance. Tehran and Moscow shared the objective of keeping the regime of former Syrian president Bashar Al Assad from collapsing as Damascus represented a stronghold for both countries and their strategic requirements. Russia entered the Syrian conflict in 2015 to preserve its status as a global power. Losing its only military base not just in the Middle East but the larger Mediterranean region would render it to a mere Eurasian player and a prisoner of its geography. Following the fall of Assad’s rule, even Hay’at Tahrir Al Sham’s Ahmed Al Sharaa, supported by US, Türkiye and other Gulf states despite a very chequered past as Syria’s new president, had to balance his bets and visit Moscow to negotiate the presence of Russian military assets. Today, in a more subdued form, the bases remain, representing a significant win for the Kremlin.

For China, the calculations have been different. Iran’s role as a disruptor of US influence in the Middle East has been utilitarian for Beijing. It has supported Iran in exchange for cheap oil supplies with over 80 percent of Iran’s shipped oil finding home in China. Due to years of sanctions, other traditional buyers, such as India, had to curtail their imports bringing them almost to zero. In 2021, Beijing and Tehran signed a 25-year long strategic partnership estimated to be worth hundreds of billions of dollars. The agreement stood on the shoulders of Iran’s previous treaties with the erstwhile Soviet Union signed in 1920 and 1940 respectively. However, mobilising this deal has been slow, and before the current conflict, Iran’s President Masoud Pezeshkian in a rare moment had criticised China for the slow pace of its intended investments in the country.
For China, the calculations have been different. Iran’s role as a disruptor of US influence in the Middle East has been utilitarian for Beijing. 
While China perceives strategic benefit in supporting Iran, its economic ties with Gulf states such as Saudi Arabia and the United Arab Emirates are considerably deeper. Although Beijing has maintained a sustained and long term pro-Arab policy emitting from a post-colonial posture, especially on the issue of Palestine, it has no intention of entering the Middle East militarily in support of any side. Scholar Yun Sun has noted that Chinese analysts have found Iran’s power weak when confronted with major military challenges ranging from the 2020 assassination of celebrated military leader Qassem Soleimani of the Quds Force, the foreign wing of IRGC to the 12-day war which took place in 2025 targeting Iran’s nuclear facilities. At the end of it all, for China, Iran’s oil remains of paramount importance. Previously, Iran had helped China in the Red Sea by negotiating with Yemen’s Houthis to not target Chinese vessels. A similar arrangement may surface in the ongoing crisis in the all-vital Strait of Hormuz as well, where US President Donald Trump has even asked China to send its warships to secure the Strait from Iranian control. A request unlikely to be accepted in Beijing.

Finally, beyond their individual objective and complexities, Russia and China share a common interest:  ensuring that the US becomes strategically, politically, and tactically entangled in the Middle East once again. This eventuality could undermine any American plans of an ‘Asia pivot’ or even further consolidation of frameworks such as the ‘Quad’ and Indo-Pacific strategies designed to constrain Chinese power in Asia. On the other spectrum, for Russia, reorientation of military power towards the Middle East means a welcome distraction away from Ukraine. A win-win for China and Russia despite their divergent strategic interests within the construct of the Middle East.



Kabir Taneja is the Executive Director, ORF Middle East.

### Saudi Arabia, Türkiye, and Geoeconomic Stabilisation

Spotlight

 	The conflict engulfing the Middle East underscores the importance of building architectures that foster regional resilience and stability and provide alternative supply routes.
 	Geoeconomics offers pathways to advance this objective and should be leveraged to structure institutionalised dialogue and expand connectivity—assets that can prove valuable in times of crisis.
 	As the region’s most consequential economic actors, Saudi Arabia and Türkiye are well positioned to anchor a new geoeconomic architecture for growth, stability, and resilience.

When Turkish President Recep Tayyip Erdoğan visited Crown Prince Mohammed bin Salman of Saudi Arabia in Riyadh, on February 3 2026, the first area of bilateral cooperation highlighted in the joint statement concluding the meeting was “economy, trade, and investments”. The emphasis was not accidental. Both leaderships have largely derived their domestic legitimacy from their capacity to deliver economic transformation—an endeavour      that is closely tied to the prospects of  regional stability.

Yet, the war now engulfing the Middle East serves as a stark reminder of the destabilising effects of geopolitics on regional economies: Gulf countries have lost tens of billions of dollars in revenue, while Türkiye has faced mounting pressures on inflation, asset prices, and current account.

Beyond immediate developments over which regional states have limited control, the current context underscores the need for institutionalised mechanisms and alternative supply routes to mitigate volatility. It also provides an opportunity to advance geoeconomic integration, defined as economic integration grounded in geostrategic convergence.
Beyond immediate developments over which regional states have limited control, the current context underscores the need for institutionalised mechanisms and alternative supply routes to mitigate volatility.
Saudi Arabia and Türkiye, alongside other Gulf states, could play a pivotal role in advancing this agenda across a strategic axis stretching from the Indian Ocean to the Eastern Mediterranean and the Black Sea, with positive spillovers for the Levant—still reeling from years of crises and shocks and once again caught in the crossfire.
Regional Heavyweights, Regional Responsibilities
The economic weight of Saudi Arabia and Türkiye carries what may be described as geoeconomic responsibility towards the broader region—namely, the responsibility to leverage economic instruments to achieve positive political goals such as regional peace and security. Three factors stand out in this regard: the size of their economies, their manufacturing capabilities, and their role in global financial governance.

Türkiye and Saudi Arabia are the largest and second largest economies respectively of the Middle East. Türkiye’s nominal gross domestic product (GDP) was estimated at roughly US$ 1.6 trillion in 2025 (the 16th worldwide), whereas the Saudi output stood at close to US$ 1.3 trillion the same year (19th).

Their industrial bases are significant, positioning them as potential structuring poles for manufacturing value chains across the Levant. In 2024, Saudi Arabia and Türkiye recorded manufacturing outputs of US$ 200 billion and US$ 230 billion respectively, levels that exceeded those of larger economies such as Canada and Spain.

The scale of the two economies has propelled them into an active role in global governance, fostering not only a sense of responsibility for global commons beyond their borders, but also the technocratic capability to shape multilateral agendas. They are the two only Middle Eastern economies that are members of the G20, a 21-member body which has been central to global governance since the 2008 global financial crisis. Türkiye is a founding member of the Organisation for Economic Co-operation and Development, an international organisation that produces economic analysis and public policy recommendations for its 38 member states—primarily developed economies—and beyond. Saudi Arabia occupies a distinctive position in global financial institutions: alongside only six other major economies, it is represented by its own Executive Directors on the boards of both the International Monetary Fund and the World Bank.
Consolidation, Reform, and the Potential for Geoeconomic Dialogue
Beyond their size, three trajectories feeding into a coherent reordering of power—authority centralised at home, mobilised in service of economic transformation, and projected in the near abroad(s) and beyond—provide the foundation upon which geoeconomic engagement can be constructed.
In Saudi Arabia, King Salman’s accession to the throne in 2015 paved the way for Mohammed bin Salman’s rapid rise to the positions of Crown Prince in 2017 and Prime Minister in 2022.
Politically, consolidation has unfolded through the progressive centralisation of power. President Erdoğan has secured no fewer than seventeen nationwide electoral victories since 2002. In Saudi Arabia, King Salman’s accession to the throne in 2015 paved the way for Mohammed bin Salman’s rapid rise to the positions of Crown Prince in 2017 and Prime Minister in 2022.

On the economic front, both heads of government share a national-developmentalist conception of the social contract resting on the promise of achieving ambitious economic targets articulated through national “visions”, such as Saudi Vision 2030 and the “Century of Türkiye” agenda. These visions have translated into high investment rates, largely driven by construction and public spending in infrastructure. Gross fixed capital formation  reached 31% of GDP in Türkiye—the second highest share among major economies after China—and 29% in Saudi Arabia, a level equivalent to that of Indonesia, in 2024.

In foreign policy, heightened ambition and growing self-confidence have translated into greater assertiveness, often with a distinct geoeconomic dimension. In Libya, Türkiye’s 2019 agreement with the internationally-recognised, Tripoli-based government provided a legal and geoeconomic rationale for its intervention, securing maritime claims in the Eastern Mediterranean while reopening prospects for hydrocarbon exploration and construction contracts. For both Saudi Arabia and Türkiye, other markers of international ambition abound in geoeconomically salient domains such as global air connectivity, participation in development assistance, and engagement with the Global South, notably Africa and emerging Asia.
Towards Interoperable Domestic Geoeconomic Architectures 
Over time, Saudi Arabia and Türkiye authorities have established pillars of economic statecraft that may facilitate their geoeconomic interlocution and support a stabilising role.

First, both countries have cultivated technocratic elites who could serve as essential intermediaries in an institutionalised geoeconomic dialogue. Türkiye has a strong tradition of economic expertise, exemplified by internationally recognised figures such as Daron Acemoglu, Dani Rodrik, and Kemal Derviş. Following President Erdoğan’s victory in the 2023 general elections, the reappointment of economist Mehmet Şimşek as Minister of Finance reassured investors of a return to greater macroeconomic orthodoxy. In Saudi Arabia, over the management of more than one-sixth of global proven oil reserves and the revenues derived from fossil fuel trade has necessitated the development of sophisticated expertise in energy, finance, and law.

Second, sovereign wealth funds (SWFs), often regarded as the geoeconomic instruments par excellence, represent a powerful avenue for fostering Saudi-Turkish convergence, particularly given the recent evolution of both countries’ sovereign investment ecosystems. Since 2015, Saudi Arabia has transformed the Public Investment Fund as the main tool of Vision 2030 and placed it under the aegis of the Council for Economic and Development Affairs chaired by Mohammed bin Salman. Türkiye joined the cohort of countries with a SWF created in 2016 – the Türkiye Wealth Fund (TWF) is now reportedly as large as Abu Dhabi’s Mubadala. Coordinated strategic sectoral investments in co-localised defence, manufacturing, research, and start-up ecosystems could enable SWFs to serve as anchors of long-term and strategic integration between the two economies.
Saudi Arabia has transformed the Public Investment Fund as the main tool of Vision 2030 and placed it under the aegis of the Council for Economic and Development Affairs chaired by Mohammed bin Salman.
Third, connectivity represents a major avenue for geoeconomic integration, as the Middle East seeks to position itself as a hub at the confluence of Eurasia and the Indo-Pacific. Two projects have the potential to contribute to a deeper integration from the Gulf to the Eastern Mediterranean and Black Sea. The first route is the 1,200-km, US$ 25-billion Development Road, promoted by Iraq as a way to connect Europe to Asia. The second  is the land corridor connecting Türkiye to the Gulf via Syria and Jordan, which is expected to reopen in 2026. If regional powers are able to channel their ambitions through mechanisms and platforms that foster healthy co-opetition, the change of regime in Syria still has the potential to act as catalyst for regional dialogue and integration and a significant source of cooperation among Middle Eastern states.
An Arab-Turkish Commonwealth for Regional Stability
The three pillars of a geoeconomic dialogue between Saudi Arabia and Türkiye outlined can be expanded to the wider region. Qatar and the United Arab Emirates (UAE) provide instructive examples: both have institutionalised head-of-state–level dialogue mechanisms with Ankara, expressed commitment to the Development Road initiative, and deployed their SWFs across diverse Turkish assets, including through partnerships with the TWF. In 2025, Qatar and Türkiye joined the UAE-led Integrated Industrial Partnership for Sustainable Economic Development, an initiative that also includes Bahrain, Egypt, Jordan, and Morocco as members.
In 2025, Qatar and Türkiye joined the UAE-led Integrated Industrial Partnership for Sustainable Economic Development, an initiative that also includes Bahrain, Egypt, Jordan, and Morocco as members.
Such arrangements should be complemented by a broader regional geoeconomic architecture composed of active and ambitious platforms, co-led and co-owned by regional states, and structured around key themes of geoeconomic relevance such as climate adaptation, critical infrastructure, cybersecurity, defense, financial stability, food security, health, innovation, logistics and trade.

While attention remains focused on the immediate consequences of the war engulfing the region and the closure of the Strait of Hormuz, and confidence between Gulf states and Iran has eroded, the crisis underscores the strategic importance of deeper integration across the landmass spanning the Arabian, Mediterranean, and Red Seas. The area requires far greater collective investment to foster a more resilient Middle East.



Akram Zaoui is an Associate Fellow, Geopolitics at ORF Middle East.

### The US-Israel-Iran Conflict Spillover Effects on Food and Water Security in the Arabian Gulf

Spotlight


 	Immediate regional food supply chain shocks have been partially mitigated. Despite initial disruptions in food trade, the GCC states and Iraq maintain strategic food reserves. Iran have prohibited food exports to safeguard domestic supply.
 	Attacks on water infrastructure exposes the fragility of large-scale projects. Destruction of facilities places communities without water storage reserves and desalination-dependent economies at high risk.
 	Regional cooperation and trade diversification will be crucial. Adapting to both trade shocks and kinetic attacks will require transboundary cooperation, the creation of alternative trade corridors, and investment in resource storage and diversification.

As the United States(US)-Israel-Iran conflict escalates, new targets and stress points have emerged. Recent attacks  on freshwater desalination plants in Qeshm Island in southern Iran and Bahrain highlight the vulnerability of critical infrastructure. For a region confronting severe water constraints, these plants symbolise a crucial lifeline, converting seawater to potable water for domestic and industrial consumption. Among the Gulf Cooperation Council (GCC) countries, desalination produces 42 to 90 percent of total drinking water supply.
These attacks follow air space closures, deliberate targeting of logistics infrastructure, and the paralysis of maritime chokepoints such as the Strait of Hormuz which facilitates 70 percent of the GCC’s food imports. The effects of food trade are materialising rapidly due to rising fuel prices and route closures. Australia has halted livestock shipments to the region, Indonesian shipping to the United Arab Emirates (UAE) has been suspended via Oman, rice shipments bound for the GCC remain stranded in India, and Iran has imposed a temporary ban on food exports.
The Arabian Gulf states, encompassing the GCC, Iraq, and Iran, face prospects of destabilised food and water security, with potentially cascading global repercussions. While strategies exist to mitigate immediate regional food supply chain shocks, a prolonged conflict is bound to disrupt supply chains, aggravating food inflation and insecurity. Moreover, the strategic impairment of critical water infrastructure largely threatens economies and livelihoods across the Arabian Gulf, unveiling the shortcomings of a technology-dependent response to water scarcity.

Impacts on Arabian Gulf Food Security
Despite immediate impacts, much of the region expresses confidence in its capacity to sustain domestic food supply, drawing on contingency strategies developed during prior shocks such as the COVID-19 pandemic. For example, the UAE’s Strategic Food Security Law adopted in March 2020 mandates that private sector companies maintain strategic stockpiles of essential food commodities. In Iraq, the Public Distribution System (PDS)—a universal ration program providing staple foods to nearly all households— function as a key shock absorber during periods of market volatility. Consequently, governments across the region have reported that food reserves are sufficient for several months and have repeatedly urged consumers to avoid stockpiling while reassuring fully stocked shelves at supermarkets. Seasonal harvest cycles could also provide limited near-term relief, as the conflict coincides with local farmers' fruit and vegetable harvests, which may partially offset delays to imports of perishables.
However, strategic stockpiles may only provide temporary relief, since storage capacities are constrained by the region’s environmental realities. Cold storage infrastructure is critical for maintaining food availability during supply interruptions and determines the duration for which produce and meat can be preserved amid shipping delays. Nevertheless, the region’s harsh climate makes large-scale refrigerated storage costly and resource-intensive to sustain over extended periods. In Iraq, these pressures may be compounded by underlying constraints including drought conditions that have already reduced harvest yields, alongside longstanding inefficiencies in the Public Distribution System (PDS), particularly if the conflict results in displacement or fiscal strain.
Alternative trade routes help some countries circumvent the Strait of Hormuz, but the volume of diverted trade is placing significant strain  these corridors. The UAE has rerouted vessels to ports such as Khorfakkan and Fujairah, while Saudi Arabia has redirected ships toward Red Sea ports. Some retailers have begun chartering cargo flights to secure fruits and vegetables supplies. By contrast, Qatar, Kuwait, Bahrain, and Iraq have limited direct maritime alternatives and rely heavily on overland routes through Saudi Arabia, or through Turkey in Iraq’s case, where reported truck delays heighten exposure to transport bottlenecks. Despite alternative routes, targeted infrastructure damage, such as the recent Fujairah port fire and Houthi attacks, demonstrates that vulnerabilities also extend to fallback corridors. 

Gulf Alternative Routes for Food Imports

Source – Financial Times
Iran, on the other hand, faces a double-edged dynamic in which its blockade of the Strait of Hormuz provides leverage in the conflict, but a prolonged disruption risks intensifying domestic food insecurity. . Iran relies heavily on grain imports through the Strait and lacks viable alternative trade corridors.. The country already experiences mounting food security pressures from ongoing infrastructure vulnerabilities, civilian threats, sanctions, and elevated food prices. In effect, authorities are safeguarding short-term food demand by banning food exports, and leveraging its April cereal harvest and Russian wheat imports via the northern Caspian sea. However, Iran’s population and food demand substantially exceed domestic supply, creating risks of long-term food inflation and shortages.
While existing measures allow the region to manage short-term shocks, sustained trade disruptions pose significant risks of ripple effects across the global food system. To illustrate, the Gulf states are as dependent on global food producers as those producers are on Gulf-produced fertiliser. GCC economies import food staples from a concentrated group of suppliers, including Brazil, Australia, and India. Brazil, a major poultry exporter, is rerouting its shipments to the Middle East through the Cape of Good Hope, increasing fuel costs and transit time. On the other end, Brazil, India, and Australia import fertiliser from the Arabian Gulf. If trade disruptions seep into the harvest season, rising production costs in supplier nations are likely to elevate food prices for the Gulf. Although GCC states have the financial capacity to secure alternative imports, the scale and efficiency of the Strait of Hormuz remain difficult to replicate, meaning that prolonged interruptions would significantly constrain regional food supply chains.

Source: FAO Stat 2022, Data Visualization through Google Gemini 

What the Weaponisation of Water Infrastructure Reveals
Although food can be rerouted, inflicting damage on water infrastructure risks plunging the region further into deeper instability, with a prohibitively long recovery timeline, especially for countries lacking water reserves. Desalination facilities are large, fixed structures, operating on strict schedules where slight disruptions can rapidly interfere with water distribution and civilian life. The GCC states account for 60 percent of global desalination capacity, representing the largest regional cluster. Smaller and concentrated geographies such as Kuwait, Bahrain, and Oman are considerably more vulnerable to shocks since they currently acquire nearly 90 percent of drinking water from desalination, lack access to strategic reserves, and rank among the top five most water-stressed nations. Conversely, the UAE’s 45-day strategic water reserve developed from its Water Security Strategy 2036, reduces its immediate vulnerabilities. Attacks on critical water infrastructure have previously decimated Kuwait’s desalination capacity during the 1990-1991 Gulf War, leaving the country fully dependent on water imports and taking years to fully recover.

Source: Arab News
Similarly, potential attacks on Iran’s hydro dams, aqueducts, or pumping stations could trigger a larger humanitarian crisis. Closely preceding the war, a combination of water stress, energy deficits, global sanctions, mounting security risks, and systemic mismanagement had already impeded water service delivery in Iran, contributing to public discontent and nationwide protests. Any deliberate destruction of water infrastructure in Iran could severely compromise long-term prospects of stability, leading to regional spillovers and heightened cross-border tensions in the short-term.
Recent infrastructure attacks reveal the structural limitations of prioritising engineered supply-side solutions over preemptive, adaptive, and cooperative frameworks. For GCC states, pursuing fragmented nation-led and desalination-dependent water strategies has long operated on the contingency of a stable geopolitical landscape—a notion Iran is actively seeking to displace. While the ongoing clustering of desalination systems with industrial zones and national energy reforms helps drive efficiency and reduce costs, it also widens exposure to systemic collapse from kinetic attacks. Likewise, the increasing digitalisation of water management heightens vulnerabilities to cyberwarfare which can reroute water supply and impair distribution. Thus, preventative measures such as the diversification of water sources through enhanced national storage capacities, preventing water loss, embedding cybersecurity into water management, and building transboundary water agreements are increasingly more urgent. For Iran, infrastructure damage reflects the erosion of an entrenched political economy that once thrived on costly megaprojects like dams and water transfers.

Regional Cooperation and Diversification of Trade and Resources Defines the Way Forward
The US-Israel-Iran conflict exposes the fragility of the Arabian Gulf’s concentrated food trade routes and water management infrastructure to geopolitical shocks, underscoring a need for systemic reform. Managing future food shocks will require greater regional integration and diversification of trade networks. Iraq, in particular, remains heavily dependent on imports from Turkey and Iran. With Iran at the center of the conflict, expanding trade relationships across the broader Gulf to reduce risk is paramount. Investments in cross-border infrastructure will be critical. Projects such as the proposed GCC railway network and the recently announced Saudi Logistics Corridors Initiative, could function as strategic food corridors, enabling faster overland transport of essential commodities during maritime disruptions. Concurrently, governments should continue prioritising food security within national agendas, emphasising end-to-end resilience, from diversified imports and storage capacity to distribution networks and agricultural innovation.
The region is collectively approaching a point of “water bankruptcy”, in which water restoration may no longer be viable and management strategies must adapt to new geopolitical realities. With the UAE co-hosting the United Nations Water Conference in December 2026, assuring the resilience of water systems is vital to sustain reputational status, economic growth, and societal welfare. As water infrastructure emerges as a military target, prioritising water in the national security agenda may help expedite the development of water storage reserves. The shared impact of attacks across the Gulf may also reignite engagement in transboundary water management and cooperation, an approach that has historically faltered due to intra-regional tensions. Furthermore, infrastructure vulnerabilities emphasise the importance of balancing supply-side strategies with adaptive and less flashy approaches like groundwater monitoring and leakage control and diversifying sources by encouraging the development of smaller-scale circular wastewater reuse systems.



Leigh Mante is a Junior Fellow for Energy and Climate Change Programme at ORF Middle East 
Reem Sagahyroon is a Research Assistant for the Energy and Climate Change Programme at ORF Middle East

### Hormuz and the Geopolitics of Energy

Spotlight 


 	The United States' restraint in striking oil production facilities in Kharg Island is an attempt to avoid exponential price hikes. Iran, however, is betting on just the opposite: threatening oil prices above US$200 per barrel.
 	Producer responses remain limited as the Iranian threat to regional energy infrastructure looms large. Middle Eastern energy producers are scrambling to cut losses and reroute exports.
 	It is clear that while some countries may reap windfall gains in the short term, in the long run all will be worse off. The only real winners will be those that draw lessons from the crisis and move quickly to build robust energy security frameworks.

Brent crude oil prices have surged back above US$100 per barrel as of March 17, 2026. The historic emergency of 400 million barrels oil announcement by the International Energy Agency (IEA) has done little to stabilise markets or reassure investors. While the United States (US) crude oil prices have also gained more than 40 percent, natural gas prices have surged even more dramatically, with the Asian liquefied natural gas (LNG) spot prices and European futures nearly doubling since the disruptions began at the Strait of Hormuz.
The United States-Israel-Iran war and the concomitant blockage of the Strait are sending ripple effects both across and beyond the region – disrupting security, resource flows and global growth expectations. Energy underpins every sector of the global economy, and the impacts are already palpable across food prices, commodity markets and stock exchanges. The stakes are clearly enormous: the narrow passageway carries one-fifth of global oil and natural gas supplies.

Weaponisation of Transportation Channels and Production Sites 
Attacks on energy infrastructure have compounded the crises:  Iranian missiles and drones targeting neighboring states in West Asia have damaged crucial energy assets including production facilities, refineries and ports. Saudi Arabia’s largest Ras Tanura refinery, Kuwait’s Mina Al Ahmadi refinery, Qatar’s Ras Laffan LNG complex, Iraq’s Rumaila production facility has suspended production. In other cases, storage tanks have reached limits, forcing production cuts. Ports including Fujairah and Jebel Ai in the UAE, Duqm and Salalah in Oman and Basrah in Iraq – have also stalled operations. Both transportation channels and production sources are increasingly subject to weaponisation.

Iran, however, is betting on just the opposite: threatening oil prices above US$200 per barrel to pressure Washington and Tel Aviv to back down. 
The US restraint in striking oil production facilities during their attack on Kharg Island – Iran’s primary oil export hub – appears intended to avoid further disruptions and exponential price rises. Iran, however, is betting on just the opposite: threatening oil prices above US$200 per barrel to pressure Washington and Tel Aviv to back down. Recent remarks, by Iran's new Supreme Leader, Mojtaba Khamenei, on keeping the Strait of Hormuz closed signals the willingness to escalate that pressure. Any mitigating measures taken now may cushion the immediate shock. These interventions, however, are likely to prove temporary at best and insufficient at worst if the conflict persists.

Between Market Responses and Producer Agility 
The global oil surplus of 3.5 million barrels per day has thus far cushioned the immediate shock of the crises, according to the International Energy Agency. That surplus is, however, depleting fast threatening stagflation pressures worldwide. Markets react to risk well before shortages materialise. Some analysts predict that if the conflict persists into April, notwithstanding G7 declarations to release oil reserves,  crude prices can exceed their 2008 peak of US$ 147 per barrel.
Besides price volatility, the conflict is also straining the physical movement of energy supplies. Shipping has become another bottleneck - the numbers of vessels crossing the Strait has declined from 100 a day to almost negligible. International insurers suspended war coverage with premiums rising to almost 400 percent from 0.25 percent of a vessel’s value. Most ships remain stranded outside the Strait while others are rerouting around the Cape of Good Hope in Africa, adding significantly to travel time and freight costs. United States promise of Naval support and US$ 20 billion reinsurance scheme is yet to deliver tangible outcomes – and is unlikely to do so quickly.
Producer responses remain limited as the Iranian threat to regional energy infrastructure looms large. Middle Eastern energy producers are scrambling to cut losses and reroute exports: Saudi Arabia’s Aramco will redirect oil using its east-west pipeline to the Yanbu port in the Red Sea, and utilise Egypt’s Sumed pipeline to access the Mediterranean and the Bab Al Mandab for shipments to Asia. These measures will sustain 70 percent of its normal crude shipments. Growing risks of Houthi forces targeting shipping routes at the Red Sea could further complicate these efforts. Iraq will also increasingly rely on its northern pipelines.  UAE’s Fujairah and Oman’s Duqm ports – which bypass the chokepoint by opening directly onto the Arabian Sea – offer limited relief after Iran targeted these strategic alternatives.

Middle Eastern energy producers are scrambling to cut losses and reroute exports: Saudi Arabia’s Aramco will redirect oil using its east-west pipeline to the Yanbu port in the Red Sea, and utilise Egypt’s Sumed pipeline to access the Mediterranean and the Bab Al Mandab for shipments to Asia. 
Qatar lacks comparable alternate routes entirely. The situation is more severe within gas markets which lack the same degree of supply flexibility as oil due to limited storage options. The US and Australia, the largest LNG producers, have little spare capacity to compensate for the sudden loss of Qatari exports.

Winners and Losers 
Energy shocks disproportionately affect economies. Nearly 70 percent of the crude oil shipped through this marvel of geology is destined for China, India, Japan, and South Korea.
East Asian countries are particularly vulnerable. While Japan (254 days) and South Korea (210 days) maintain significant oil reserves , LNG inventories are modest. South Korea and Thailand have already announced fuel price caps. While countries such as Indonesia can partially switch to coal, Vietnam and Singapore lack comparable domestic energy buffers.
Europe, though less dependent on Gulf LNG, is nevertheless witnessing high domestic gas prices - up by almost 45 percent  percent since the onset of the conflict largely due to spot market volatility. Approximately 30 percent of Europe’s jet fuel supply originates in or transits through the Strait further complicating efforts to transition away from Russian energy. Governments may need to consider the unpopular option of cutting electricity taxes and levies - potentially funded by revenues from the Emissions Trading System, in order to absorb the price shocks.
India, the second largest energy consumer in Asia after China, faces a more complex challenge - the country imports 60 percent LNG and 40 percent crude oil from the Middle East and has limited petroleum reserves at its disposal. In response, India has invoked the Essential Commodities Act, 1995, diverting the supply of natural gas and liquified natural gas (LNG) to priority areas, such as domestic cooking, pipeline compressor fuel, and transport. The country will have to rely on fuel switching – towards coal, kerosene, biomass domestically - while increasing imports of discounted Russian crude. Tehran’s recent decision to allow Indian flagged tankers to pass through the Strait provides some relief and represents a notable success for New Delhi’s Middle East diplomacy.
China, on the other hand appears to be prepared with roughly six months of oil stockpiles. The numbers are revealing : While China imports half of its crude oil and almost one-third of its LNG from the region, yet utilises 6.6 percent of Hormuz oil for overall energy consumption. Most of these reserves are held in onshore and floating storage as contingency buffer. China’s broader energy transition also helps cushion the impact. As one of world’s leading electro state, renewables accounted for 80 percent of China's new electricity demand in 2024. More than half of new passenger vehicle sales in the country are now new-energy vehicles and electric cars are displacing over one million barrels per day of implied oil demand. If this crisis was to accelerate the energy transition agenda, China’s green manufacturing dominance will only amplify. For now – between petroleum reserves, domestic coal supplies and renewables, China’s short-term vulnerabilities appear manageable.

The situation is more severe within gas markets which lack the same degree of supply flexibility as oil due to limited storage options. The US and Australia, the largest LNG producers, have little spare capacity to compensate for the sudden loss of Qatari exports.
Russia, in turn, may emerge as a hedging beneficiary as it rushes to fill supply gaps.  Higher prices and tighter markets will increase the demand for Russian crude potentially weakening the impact of existing sanctions. President Trump’s sanction waivers for Russian crude currently at sea mark a significant win for Moscow. However,  strained by legacy sanctions and years of under-investments in technology and capacity expansion, Moscow may only realise short-term benefits. Russia lacks the expanded capacity to become a swing producer or compensate for lost volumes.  The same is true for other non-gulf oil producers as well. The elasticity of the supplies remains limited - volumes cannot increase in the short term – though suppliers stand to benefit by raising prices for competing demands between Europe and Asia.
Finally, the US which hoped to remain insulated due to its self-sufficiency in oil and gas, will also face inflationary pressures at home given the global nature of energy. US petrol prices surged to their highest under Trump administration. President Trump’s mixed signals have further prompted volatility - the price of West Texas Intermediate (WTI) crude oil reached a peak of US$ 119.43 per barrel. His recent remarks suggesting that higher oil prices are positive for America echo his classic “Drill Baby Drill” rhetoric. One cannot help but wonder whether the timing of the attack on Iran was strategic-- occurring shortly after America’s seizure of Venezuelan energy assets –as President Trump seeks to potentially flood global markets with American oil and LNG, and American-controlled Venezuelan crude.
It is clear that while some countries may reap windfall gains in the short term, in the long run all will be worse off. The only real winners will be those that draw lessons from the crisis and move quickly to build robust energy security frameworks – one that integrate securitisation, resilience, and transition planning to safeguard the present and insulate the future.



Mannat Jaspal, Director & Fellow, Climate and Energy, ORF Middle East 

### Collateral Reconfiguration: Will the US-Israel Conflict with Iran Reshape Gulf Strategic Calculus?

Spotlight

 	Gulf states experienced repercussions from a conflict they actively sought to prevent. Iranian missiles struck cities, airports and energy infrastructure despite assurances their bases would not be used against Tehran.
 	Competing narratives are obscuring underlying realities — President Trump has altered timelines, Iran has denied striking civilians, and Israel has called it a regional transformation. In the process, trust has eroded leaving Gulf states to bear the costs.
 	The Abraham Accords and American reliability are both under strain. Gulf leaders are increasingly differentiating between personal diplomacy with President Trump and the question of genuine strategic dependability

In the early hours of February 28, the United States (US) and Israel launched what they described “pre-emptive” strikes on Iran. This marked the second major military confrontation in less than a year, following last June’s twelve-day Iran-Israel conflict in which Washington intervened, deploying B-2 Spirit bombers in deliberately “limited strikes” on Iranian nuclear facilities.

Unlike last June, the current conflict is broader in scope and existential in nature. In an eight-minute address, President Trump outlined objectives that Tehran interpreted as a death sentence: eliminating Iran’s missile capabilities, dismantling its nuclear program, and regime change. Facing annihilation, a cornered Tehran abandoned the calculated restraint it showed last June and struck back with disproportionate force — targeting not only US bases hosted by its neighbours, but civilian and energy infrastructure alike. Qatari Energy Minister Saad Al-Kaabi warned that a prolonged conflict could “bring down the economies of the world,” with Gulf energy exporters potentially suspending production within days and oil prices rising to US$150 a barrel.
Tehran’s strategy of attrition is visibly testing Gulf patience and defensive stockpiles — matched so far with a willingness to endure, albeit with limits. 
For Gulf states long regarded as relatively stable actors in a region characterised by fragile and failed states, the current conflict has delivered a double shock: an immediate test of their resolve against a volatile neighbour, and a deeper reckoning with their strategic relationships with Washington. Twelve days in, with air and sea connectivity severely disrupted and President Trump showing no sign of moderating his rhetoric, Gulf leaderships find themselves navigating a precarious balance between containment and active self-defence.
Containment at the Brink?
Tehran’s strategy of attrition is visibly testing Gulf patience and defensive stockpiles — matched so far with a willingness to endure, albeit with limits. By March 6, they had confirmed over 2,150 interceptions of Iranian drones, missiles, and even fighter aircraft.

Iranian President Masoud Pezeshkian’s March 7 apology for attacking neighbouring states was perceived as lacking credibility. Despite repeated official denials that Iranian strikes targeted US-affiliated infrastructure, Dubai’s airport was targeted shortly after the statement, as were Bahrain’s desalination plant and fuel tanks at Kuwait’s international airport. As reports emerged of Tehran’s largest oil depot set ablaze by Israeli strikes, Gulf neighbours anticipated that Iran would escalate further, rather than de-escalate.

Two developments are particularly noteworthy. First, Iran’s weakened command structure has produced visible fissures between its political and military establishments. Pezeshkian’s statement was almost immediately contradicted by the Islamic Revolutionary Guard Corps (IRGC) and the Parliament Speaker — a public unravelling that signals the absence of unified leadership. A regime in survival mode is a dangerous one precisely because it cannot be held to its own word. Deliberately targeting civilian utilities — desalination plants, fuel depots, airports — is not collateral damage. It constitutes a strategy of economic coercion.
Israel stands as the sole clear beneficiary of this episode, a point underscored by President Isaac Herzog, who stated that the objective is not regime change but the transformation of the Middle East.
Second, Gulf resolve is being pushed to its limits. The region’s response has so far been confined to defensive interceptions and sharp diplomatic language — but that posture is under growing strain. Saudi Arabia has warned of possible retaliation. The United Arab Emirates (UAE) President Mohammed bin Zayed, visiting citizens and residents wounded by Iranian strikes, delivered perhaps the most pointed statement by any Gulf leader since the conflict began — asserting that the UAE is “no easy prey" and that adversaries should not be “misled by the UAE’s appearance.” Abu Dhabi is also reportedly considering freezing Iranian assets held in the country. For a region that has carefully avoided belligerent rhetoric, these are significant signals.
A War of Narratives
Since the start of the US-Israel campaign, what has been most conspicuous is a contest of competing narratives — and the collapse of trust they reveal. President Trump has offered varying timelines for an outcome. Iranian officials maintain their strikes target only American infrastructure, even as evidence repeatedly contradicts them. Between Washington and Tehran, trust has deteriorated completely. Not once but twice now have attacks occurred in the middle of active negotiations — first last June and again in this episode.

For the Gulf states, years of painstaking investment in rapprochement with Tehran have been steadily eroding with each passing day of the conflict. Gulf capitals, particularly Muscat and Doha, had cultivated patient mediation channels that were quietly gaining ground when the hostilities began. Few captured this better than Qatar’s Prime Minister Mohammed bin Abdulrahman al Thani, who described Iran’s attacks on Gulf states as a profound betrayal that “destroyed everything.” This serves as a reminder that force chosen at a diplomatic inflection point does more than cause casualties. It kills mediation itself.

Equally telling is how Israel has drawn America deeper into its own strategic ambitions. While Israeli strikes on Iran continue unabated, Prime Minister Netanyahu has promised “new surprises.” Israel Defense Forces (IDF) Chief Eyal Zamir has declared no end date for the parallel theatre of operations in Lebanon against Hezbollah. President Trump, who could declare victory and halt the campaign, has instead boasted that Iran was being “beat to hell.” The result is a cascade of poor strategic decisions — with one conspicuous exception. Israel stands as the sole clear beneficiary of this episode, a point underscored by President Isaac Herzog, who stated that the objective is not regime change but the transformation of the Middle East.
Recalibration on the Horizon
Questions about Gulf complicity in the assassination of Supreme Leader Ali Khamenei have persisted — without evidence — although a reasonable assessment is that they were caught off-guard. The suspicion has nonetheless lingered, with Bahrain and the UAE bearing the brunt of it given their normalised relations with Israel. The assumption that the Abraham Accords translate into full strategic collaboration with Israel is a considerable leap — one that the Iranian regime itself may have internalised to justify the scale of its aggression. It is a damaging conflation, and one that Israel’s conduct has done little to dispel. An emboldened Israel in 2025 saw no problem in delivering strikes across the region: Gaza, Iran, Lebanon, Qatar, Syria, and Yemen all experienced the consequences. The current conflict represents a further downward spiral of events, one that carries a cost — and the Abraham Accords may be part of the bill.
Unlike October 7, 2023 — when Arab signatories held firm despite Israel’s strikes on Gaza, giving Washington confidence in the Accords’ durability — the current war presents a different test. 
Recalibrations are in motion — or will be crystallised by the end of this episode. First, the UAE and Bahrain will prioritise intra-Gulf cohesion above all else. If deepening the Accords risks fracturing Gulf Cooperation Council (GCC) unity at a moment when collective defence has proven to be the region’s most consequential asset, it will be quietly shelved. The GCC’s coordinated response to Iranian strikes has demonstrated that solidarity, not bilateral arrangements with Israel, takes precedence.

Second, Washington’s role as the principal guarantor and facilitator of the Abraham Accords has been severely complicated. Unlike October 7, 2023 — when Arab signatories held firm despite Israel’s strikes on Gaza, giving Washington confidence in the Accords’ durability — the current war presents a different test. Iran is now a direct threat to those same states. With fingers pointed at Washington for aggression that Trump himself authorised, he will find little appetite for any new peace architecture.

Third, it is worth singling out Bahrain for its acute domestic pressures amid the conflict. Bahrain faces something more volatile than anti-Israel sentiment — growing sympathy for Iran among its Shia population, even as Iran has revealed itself as an open aggressor. If Bahrain concludes that distancing itself from Israel neutralises that threat, the decision will be straightforward. What was once a foreign policy disagreement risks hardening into something that cuts at national cohesion itself.
A Friend in Need is a Friend Indeed
The net result is a regional freeze on ambition in Gulf-Israel relations, particularly when conflict is ongoing — and even in the immediate aftermath. Political space for new agendas is put on hold. The priority now is managing Iran, limiting economic and social fallout, and recalibrating accordingly. Israel may have distanced the Gulf from Iran — but in doing so in a reckless manner, it may have also revealed the true scale of its regional ambitions.
Second, the perennial question of American reliability — Gulf leaders who invested heavily in personal relationships with Trump may now find that personality convergence and strategic dependability are not the same thing. 
For the Gulf, the calculus is more conflicted than it appears. Closing ranks with Washington — their ultimate security guarantor — is the logical response as Iranian missiles remain bound for their cities. Yet what weighs heavily is that Gulf states did embark on a process that echoed President Obama’s 2016 call to “share the neighbourhood” — and still found themselves targeted.

A further burden is emerging: the cost asymmetry of this conflict. Defending against Iranian drones and missiles is significantly more expensive than producing them, and that gap compounds with every wave. Yet the calls for help have been answered — Italy, France, South Korea, and Ukraine have all stepped up, deploying or expediting air defence systems, fighter jets, missile batteries, and drone warfare expertise to the region. Who shows up when it matters will not be forgotten — and will quietly reshape post-conflict Gulf partnerships.

Ultimately, two convictions cut deeper. First, that Washington has once again been drawn into a conflict shaped by Israel’s strategic making, with Gulf states left to absorb the consequences. Second, the perennial question of American reliability — Gulf leaders who invested heavily in personal relationships with Trump may now find that personality convergence and strategic dependability are not the same thing. Should Washington persist with adventurism, Gulf states will not hesitate to quietly review their multi-billion dollar commitments — a sobering pressure point for a self-styled dealmaker who may yet discover that reliability, not personality, is the currency that counts in this region.



Clemens Chay is Senior Fellow for Geopolitics at ORF Middle East.

Mahdi Ghuloom is a Junior Fellow for Geopolitics at ORF Middle East.

### Ten Days into the US-Israel Conflict with Iran: Experts React

Ten days into the United States (US)-Israel strikes on Iran, the conflict has entered a more entrenched phase. With air and maritime connectivity significantly disrupted and President Trump maintaining uncompromising rhetoric, Gulf leaderships find themselves navigating a precarious balance between containment and active self-defence. By 6 March, Gulf states reported more than 2,150 interceptions of Iranian drones, missiles, and fighter aircraft.
Meanwhile, Iran has moved swiftly to fill the vacuum left by Ayatollah Ali Khamenei’s assassination, with Mojtaba Khamenei — the Supreme Leader’s son — appointed as his successor, indicating the regime’s determination to project continuity despite ongoing strikes. Iranian President Pezeshkian’s 7 March apology for attacking neighbouring states had limited impact, as Gulf infrastructure continued to sustain strikes. As Israeli strikes set Iran’s oil facilities ablaze, crude prices have surged past US$100 a barrel , with the damage to energy infrastructure mirrored by volatility in global markets.
Observer Research Foundation (ORF) Middle East experts offer their concise analysis on the latest developments.

Succession in the Crossfire: Iran’s New Supreme Leader
The assassination of Ayatollah Ali Khamenei in a joint US-Israel airstrike has shaken the top echelons of the Islamic Republic for the first time since 1989. Yet the succession debate within Iran’s 88-member Assembly of Experts — a body of Shia clerics — had long been a site of intense internal power struggle.
The announcement of Khamenei’s son, Mojtaba Khamenei, as successor was unsurprising but atypical. Hereditary appointments are generally disapproved of within the clerical establishment as monarchical in character, and Mojtaba’s appointment appears to reflect wartime exigencies rather than clerical or ideological credentials. The aim is clear: to preserve continuity of power and decision-making during a moment of existential threat to the post-revolutionary order.
Little is publicly known about the new Supreme Leader, but he has operated in his father’s shadow for years and is deeply attuned to the Islamic Revolutionary Guard Corps (IRGC) — the regime’s foremost military force, which reports exclusively to the Supreme Leader and functions as a state within the state. His ties to the IRGC date back to the Iran-Iraq War, during which he served in the Habib Battalion alongside many of the officers now leading the current conflict.
Mojtaba is unlikely to be an unknown figure for Israeli and American intelligence — and both are expected to monitor closely as he and Ali Larijani — Secretary of Iran’s Supreme National Security Council and the country’s de facto wartime leader — effectively serve as Tehran’s strategic ‘think tank’ for the conflict. Within pro-regime circles, Mojtaba is expected to serve as a rallying figure and may attract broader nationalist support beyond these groups. Yet he will also inherit the sobering reality that a protracted war risks breaking the state as surely as any adversary. For now, his ascension will likely be framed within a revolutionary narrative — intensifying the conflict further and reducing the availability of potential exit strategies.
Kabir Taneja, Executive Director, ORF Middle East.

Trump’s War, America’s Burden, Israel’s Gain
Ten days in, this is clearly a conflict of attrition — one that tests which side concedes first. Tehran has deliberately expanded the conflict’s scope and cost, drawing in wider international involvement. It has demonstrated a willingness to endure: waves of missiles and drone strikes continue to emanate from the Islamic Republic, keeping neighbouring states on constant alert, even as the frequency of attacks has declined.
Between Washington and Tehran, both sides project defiance. But Iran is increasingly assuming the role of an absorber — sustaining American-Israeli assaults while continuing to launch regular strikes across the region. President Trump’s vacillating public comments suggest potential de-escalation avenues, yet his administration shows no readiness to back down — a stance that many analysts characterise as hubris.
That Republican Senator Lindsey Graham, one of Trump’s closest allies, has issued rare criticism of Israel for targeting oil facilities speaks volumes about the bind Washington finds itself in with Tel Aviv. This may be Trump’s war, but it risks becoming America’s burden — as Washington is increasingly drawn into supporting Israeli objectives. For Prime Minister Benjamin Netanyahu, this could be his most consequential war: one that, if successful, eliminates a generational adversary and reshapes the Middle East — both longstanding goals.
For Gulf states, two of which have normalised relations with Israel — Bahrain and the UAE — the war may have widened the distance from Iran, but it has also narrowed the space for new agendas with Israel, the principal beneficiary of this conflict and is positioned to emerge with the greatest strategic dominance.
Clemens Chay, Senior Fellow, Geopolitics, ORF Middle East.

Iran’s War Arithmetic: Cheap Offence Versus Expensive Defence
Iran is redefining the calculus of modern conflict by merging kinetic strikes with economic warfare. Rather than attempting to overpower superior military forces conventionally, Tehran is leveraging cost asymmetries to wage a calculated war of exhaustion—deploying inexpensive drones and decoys against vastly more expensive defence systems.
The arithmetic is stark. Iran’s Shahed-136 drones cost as little as US$20,000 per unit. Intercepting them forces adversaries to expend a Patriot missile at US$4 million, or a Terminal High Altitude Area Defense (THAAD) interceptor at US$12 million. This disproportionate exchange ratio places immense financial pressure on advanced militaries — the objective is not destruction but making sustained defence economically unsustainable over time.
Iran is amplifying this fiscal pressure through deception. Israeli forces recently released footage of an airstrike destroying what appeared to be an Iranian helicopter — only for analysts to identify it as a painted decoy, designed to trick attackers into expending multi-million-dollar precision munitions on a non-operational target. The reports remain unconfirmed, but if accurate, they suggest deliberate planning in deception — a calculated effort to deplete enemy resources without the use of live weaponry. The true target, in each case, is the opponent’s military budget.
The cumulative effect is by design: compelling wealthier regional adversaries to spend more resources defending their airspace than Iran invests in attacking it. Advanced defence architectures are being stress-tested not by a peer military, but by a strategy of persistent, low-cost attrition. In this paradigm, victory is not determined by territorial conquest or kinetic supremacy. It hinges on a single economic question: when facing sustained, inexpensive attrition, who exhausts its ammunition — and financial capacity — first?
Samriddhi Vij, Associate Fellow, Geopolitics, ORF Middle East.

Could War Catalyse Arab Geoeconomic Leverage?
When Iran began striking the Gulf Cooperation Council (GCC) member states — with particular emphasis on the UAE — its rationale was largely economic. The strikes were intended to inflict reputational damage worth billions of dollars, encouraging Gulf states to pressure Washington to seek an end to the conflict. Tehran calculated that GCC states would refrain from military retaliation for fear of escalation exacerbating their losses — a bet that now appears uncertain. Instead, Iran expected Gulf states to utilise their economic influence to press Washington for de-escalation.
That economic weight is considerable. GCC countries have been central to Trump’s agenda of restoring America's “Golden Age” — illustrated by the US$3.4 trillion pledged during his May 2025 regional tour and the US$4.2 billion committed to the Board of Peace. Sovereign wealth funds have also engaged in major business deals with Trump associates, reinforcing the perception that financial ties translate into direct political access.
Yet many observers note that this geoeconomic weight has played little role in shaping Washington’s consideration of Gulf security concerns — a striking gap between financial leverage and political influence.
That may be changing. Reports of coordinated action by three Gulf states to reconsider part of their overseas investment commitments — which reportedly drew the attention of the Trump administration — served as a pointed reminder of the leverage GCC sovereign wealth can wield. Coordinated measures could amplify this significantly. As Gulf monarchies are reminded of a shared condition and destiny under military assault, deeper geoeconomic integration — potentially extending to the wider Arab world — could translate into joint investment strategies and the prioritised allocation of capital within the region, thereby transforming financial weight into genuine strategic leverage.
Akram Zaoui, Associate Fellow, Geopolitics, ORF Middle East.

Warning Systems and the Gulf’s New Normalcy
Amid ongoing waves of Iranian strikes across the Gulf, some residents have sought to evacuate, while most have stayed put — partly because flights are severely disrupted, but equally because Gulf threat warning systems have proved effective and reliable. The interception of over 2,000 Iranian drones, missiles, and projectiles is the most visible measure of this, but it does not fully account for why Iran has failed to wreak havoc across the Gulf. In the absence of bomb shelters — unlike Israel — early warning systems have been sufficiently effective to allow relatively normal daily life to continue.
Bahrain has consistently warned citizens through nationwide sirens and across all media platforms as threats arise and subside. The UAE and Qatar have relied on phone alerts. These measures were partly stress-tested — including in Kuwait — before the war, as signs of regional confrontation became apparent. A full unification of these systems across GCC states is now essential — and there are signs of this materialising, with the GCC Emergency Meeting of Crisis and Operations Officials convened on 6 March 2026.
Community shelters have been prepared in some countries, and civil defence teams have demonstrated resilience in containing fires from debris throughout the Gulf. It is the assurance of advance warning — to go indoors, away from windows — that has kept life as functional as wartime circumstances allow, sustaining economies and reducing the psychological burden of full-day sheltering.
Looking ahead, Gulf states will likely intensify investment on early warning infrastructure during and after this conflict. It has proved to be not merely a security measure, but an economic and psychological lifeline.
Mahdi Ghuloom, Junior Fellow, Geopolitics, ORF Middle East.

### Iraq’s Lessons in Pursuit of Venezuelan Oil

Spotlight

 	The American experience in revitalising the Iraqi oil sector carries lessons for its efforts in Venezuela.
 	Endemic structural flaws of mismanagement, underinvestment, technological stagnation and regulatory disjoints undercut Venezuela’s potential in the near to medium term.
 	Returns from the structurally fragmented Venezuelan oil sector today will not be commensurate with the massive investments needed.

While considering the likelihood and potential implications of Venezuela’s resources re-entering the global energy market under American aegis ,this article aims to examine the challenges faced in Iraq to underscore the practical limitations that structural dynamics can impose on the effective utilisation of existing hydrocarbon wealth within states.

The Throughline of Oil Resources 
Despite the clear distinctions arising from the immediate triggers, the scale of the operation, the form of kinetic power used and the scope of the intervention, substantive parallels may be drawn between the United States (US) initiative termed Operation Absolute Resolve in Venezuela and Operation Iraqi Freedom, the 2003 US invasion of Iraq. Nowhere is this parallel more apparent than in the public stance of the US government regarding the respective oil resources of Iraq and Venezuela, two decades apart.
Two months prior to the launch of the ground offensive against Saddam Hussein’s Iraq, the US Department of Defense (DoD) and State Department (SD) officials are reported to have coordinated a task force whose primary objective was the protection of Iraq’s oil wells once the military campaign began. This illustrates the centrality of Iraq’s oil wealth to the 2003 campaign. In late January 2026, Secretary Marco Rubio made a comparable  exposition about the US’ approach to Venezuelan oil reserves at a US Senate Foreign Relations Committee hearing. The principal takeaways from both contexts were notably similar. Oil was the central pre-occupation in both cases. The resource nationalism of the incumbent leaders challenged US national interests, and therefore had to be addressed; finally, the substantial oil reserves of both countries were presented as resources that could be more effectively managed under the US oversight.
While American motivations in both instances may be similar, Venezuela’s oil industry of January, 2026 is not objectively comparable to Iraq’s oil sector of January, 2003.
Despite inherent inefficiencies and corruption, the Iraqi oil sector under Saddam Hussein was a successful and extremely lucrative vertical of state revenue and power, despite facing sanctions post the Kuwait invasion. Its oil wells and exports filled Iraqi coffers consistently. At the time of the US invasion, Iraq produced close to 2.6 bn barrels per day (bpd). In contrast, Venezuela’s oil industry under Nicolás Maduro’s oil industry prior to January, 2026 pumped approximately 867,000 bpd - markedly lower than the country’s peak oil production of 3.5mn bpd in the late 1990s. Revitalising the Venezuelan oil industry, therefore, represents a far more challenging proposition given this disparity. 

Lessons from Iraq 
Studying the mistakes in Iraq could help identify the potential pitfalls US plans may face in Venezuela, and lead to better-informed assessments of future prospects.
First, the American focus in Iraq at that time, as it appears to be in Venezuela today, was on expanding the infrastructure required to increase the country’s export conduits rather than on integrating efficiencies within the sector itself. As a result, in project identifications and funding allocations, limited attention was paid to improving the upstream extraction processes which are fundamental to enhancing the efficient production of oil. By focusing on a short-sighted prioritisation of export earning bottom-lines, US planning did not adequately account for the technological upgrades Iraqi oil wells required.
Secondly, the US government earmarked funds to support the development of the Iraqi oilfields and facilitated the entry of US and allied private sector’s participation in the country, just as it is doing today in Venezuela based on the billions the Trump administration is encouraging the US oil majors to invest. Yet the inability of the investments to account for the instability and fratricidal nature of the Iraqi political and bureaucratic classes, led to ineffective resource allocations, poor implementations, and fund wastages. It is a story likely to be repeated in Venezuela’s politically fraught ecosystem.
Thirdly, the US and its allies entering Iraq at the time had no visibility into, and consequently no way to address, the rampant corruption triggered in part by an ad-hoc price control system. The result of this arbitrary system was siphoning and smuggling of locally produced oil for higher earnings on international black markets. Local officials were not only aware but also reported at the time as being actively involved in the process. This issue further led to instances of sabotage and insurgency born of both a profit motivation as also from the grievance of scarce and expensive availability of the oil for domestic consumption. Coupled with the disbanding of the Iraqi armed forces, a steady stream of well-trained militia prepared to disrupt lucrative extraction efforts. Not prioritising security through the integration of local forces was a costly mistake the US made in Iraq. It would be prudent not to repeat it in Venezuela.
Recognising and navigating these blind-spots took the Americans eight years to have Iraq reach its previous production highs of 2.6 mn bpd. Localised versions of these factors have persisted in the Venezuelan oil industry since the early 2000s.

Endemic Structural Flaws Within the Venezuelan Oil Ecosystem 
A founding member of the Organization of the Petroleum Exporting Countries (OPEC), Venezuela possesses approximately 303 bn barrels of proven oil reserves, subject to re-assessments. This quantity translates to nearly 17 percent of the global oil share. OPEC and the International Energy Agency (IEA) continue to estimate Venezuela’s reserves marginally higher than Saudi Arabia’s at approximately 263 bn barrels of oil. However, the country’s once- promising trajectory toward emerging as an oil superpower comparable to several Gulf economies has been summarily derailed by a combination of factors. Resource wealth has commonly funded domestic politico-economic and even social agendas instead of being re-invested into improving the sector itself. Saddam Hussein’s Iraq was a classic case of this resource curse affliction. The duration and scale of the resultant underinvestment in Iraq’s oil sector, however, pales in comparison to the lack of investment in Venezuelan oil by the state since the coming of President Chavez, and then Maduro. President Chavez’s  Decreto con Fuerza de Ley Organica de Hidrocarburos (Hydrocarbons Law) in 2007 undermined the economic foundations of the industry, reversing the foreign investments encouraged by the policy of Apertura Petrolera of the early 90s, which sought to revitalise the sector through foreign investments and private participation. These regulatory overhauls led to no investments for upgrades or maintenance of the oilfields for decades together. This state was worsened by rampant corruption and systematic mismanagement of national oil companies like the Petróleos de Venezuela (PDVSA). The debilitating impact of US sanctions on the country’s oil exports at this time, served the final blow to the sector. It is an industry hollowed out by these three structurally corrosive factors that the Trump administration hopes to revive in Venezuela today.

The Poor Economics of Venezuelan Oil 
Venezuela’s oil resources would have had a marginal impact on the relatively over-supplied global oil markets prior to the ongoing war in the Middle East dramatically disrupting global energy trade. Blockages along the Strait of Hormuz and attacks on oil facilities in the Gulf, however, are expected to substantially increase oil prices given inelasticity of demand and potential increase in crisis-triggered-stockpiling. Under the circumstances, there could be a more positive outlook on the value of Venezuelan oil re-entering the global markets.
Yet, the highly viscous extra-heavy properties of Venezuela’s crude limit its global appeal even once the Americans start facilitating its sale actively. Very few countries globally have the refining capacity to process the thick sludge-like produce of the Venezuelan oil-fields. The economics of paying expensive freight for transporting low-grade crude over long-distances are unfavourable, particularly when adequate supplies of higher-quality crude are currently available from producers such as Guyana, traditional Middle Eastern suppliers, and potentially Russia following any Ukraine agreement. Additionally, estimates suggest that increasing Venezuelan production from the current level of about 1mbd to even 1.5mbd would require an investment of approximately US$20bn. Without a sustained and considerable increase in oil prices, it makes little economic sense for the US government or any of the private companies to underwrite the costs of the long-term investments needed to improve the infrastructure in Venezuela in order to make the sector profitable in the near to medium term.

“Ten years from now, twenty years from now, you will see: Oil will bring us ruin…”
Juan Pablo Perez Alfonso, the former Venezuelan Minister of Mines and Hydrocarbons and one of the founding members of OPEC, had famously derided the eventual implications of oil wealth. Likely an earnest lament, it is not perhaps an accurate or universal one. Examples such as Norway, the UAE, and Saudi Arabia demonstrate effectively why it is not the below-ground hydrocarbon resource itself but the above-ground factors of mismanagement, economic disjoints and policy fragmentation within the political economy of countries like Venezuela and Iraq that atrophy their growth. The whiplash of geopolitical pressures compound and accelerate these endemic domestic structural weaknesses. In Venezuela’s case, as was the case with Iraq, it is the systematic domestic mismanagement of its resources coupled with inequities of political agency that diminished the value of its natural wealth. American engagement in Venezuela’s oil sector may soon demonstrate, like it did in the US’ Iraqi sojourn, how deep-rooted these structural fractures are.


Cauvery Ganapathy is a Fellow at ORF Middle East.

### Traffic Withheld: How Search Design Undermines News Revenue

Spotlight 

 	Zero-click by design: Search engine features are being built to retain users, not sending them to publishers.
 	Publishers subsidise platforms: News generates trust and engagement that platforms monetise without sharing proportionately.
 	AI is accelerating the squeeze: Generative AI refers almost no traffic back to news publishers, stressing revenue streams.
 	Regulation is overdue: Voluntary arrangements have failed; the question is what form intervention takes.

Introduction
In the digital economy, human attention has become a commodity — captured, analysed, and traded by platforms and advertisers. News content is central to this ecosystem, as it drives frequent and habitual engagement more effectively than most other forms of media. However, even as consumption of online news has surged, the organisations that produce it have become increasingly financially precarious. This paradox characterises the crisis facing contemporary journalism, particularly in resource-constrained economies of the Global South.
At the core of this crisis is the phenomenon of “zero-click” searches, in which the economic value generated by news is captured by search platforms rather than flowing to the journalists and organisations that produce it. A “zero-click” search occurs when a user’s query is answered directly on the search engine results page (SERP) — through news snippets, Top Stories carousels, or AI-generated summaries—without the user ever visiting the source website. Over time, these features have been deliberately expanded to maximize user retention on the platform, thereby eroding the traffic and advertising revenue that news publishers depend on. Drawing on the Competition Commission South Africa’s (CCSA) Media and Digital Platforms Market Inquiry (MDPMI) report as a case study, this article argues that Google Search’s design choices — which give it 95 percent of South Africa's search market — constitute a broader, systemic threat to news publishers across the Global South seeking to monetise their work.

Scaling Zero-Click Search Consequences
To stay visible online, publishers invest heavily in search-engine optimisation (SEO) — the craft of making content easier for Google to find, rank, and display. That means choosing the right keywords, structuring articles in ways algorithms reward, and minimising anything that might slow a page down. The measure of success is simple: how often users click, and how long the article stays near the top of the results page.
However, the introduction of AI summaries, snippets, and other features of search engine results has disrupted online news distribution, and the damage falls disproportionately on local and national publishers that lack the resources to continually overhaul their editorial and monetisation strategies. South Africa provides a stark illustration of this effect: only 36–37 percent of Google searches now result in click-throughs, down from 54 percent in 2016. Put another way, around 60 percent of Google searches end without a click — meaning the user got what they needed from the results page itself. Microsoft Bing’s equivalent figure is noticeably lower, at between 30 and 40 percent, suggesting that how much information a search engine chooses to display is very much a design decision, not an inevitability. The MDPMI, South Africa’s market inquiry, rightly attributes this gap partly to design choices governing how much information search engines display on the results page. Another consumer survey reinforced the point: users’ primary reason for not clicking through was that headlines and snippets already provided sufficient information.

Where snippets offer a narrow window into an article — enough for users to decide whether to click — large language models (or AI chatbots) can generate comprehensive answers drawn from multiple sources. In other words, the only users who still click through are those who feel the need to verify the source of the information. 
The market report further notes that, unlike news apps or traditional media, major platforms keep all the advertising revenue generated on their results pages — the ads users see before, between, or alongside search results — without passing any share of it to the news publishers whose content made those results worth reading. These are sometimes called interstitial ads — and for publishers, they represent revenue generated directly from their work that they will never see.
Generative AI is compounding the problem. In 2024, ChatGPT, Copilot, and Perplexity collectively referred just 0.3 percent of their South African traffic to news publishers. Where snippets offer a narrow window into an article — enough for users to decide whether to click — large language models (or AI chatbots) can generate comprehensive answers drawn from multiple sources. In other words, the only users who still click through are those who feel the need to verify the source of the information.  For most, the answer on the screen is enough. To address this, AI companies are signing licensing deals with major global publishers.
Table 1. Global South Publishers with AI Licensing Deals as of February 2026




Publisher
Country/Region
AI Company
Deal Type
Date


Prisa Media (El País, Cinco Días, AS, El Huffpost)
Spain/Latin America
OpenAI
Exclusive Spanish-language licensing
March 2024


Prisa Media
Spain/Latin America
Perplexity
Revenue-sharing program
December 2024


Mexico News Daily
Mexico
Perplexity
Revenue-sharing program
December 2024


The Times of India
India
Google
AI pilot partnership
December 2025


Folha de S. Paulo
Brazil
Google
AI pilot partnership
December 2025


Infobae
Argentina
Google
AI pilot partnership
December 2025


Kompas
Indonesia
Google
AI pilot partnership
December 2025


Estadão (Grupo Estado)
Brazil
Google
Real-time content for Gemini
December 2025


Antara
Indonesia
Google
Real-time content for Gemini
December 2025



Sources: OpenAI, Perplexity, Tekedia
However, African organisations have been largely excluded from such arrangements. If left unaddressed, the cumulative effects of the loss of referral traffic and the lack of compensatory frameworks may force news SME publishers to end up relying solely on fundraising directly from consumers, private philanthropy, or private-sector investors which may have detrimental effects on the integrity and public service nature of news.

The User Convenience Defence
The design choices behind search result pages were not made unilaterally by platforms; rather, they were iterated based on user feedback. The CCSA survey supports this: approximately 66 percent of South African users considered snippets an efficient, time-saving feature for determining whether a web page warranted a click, while also helping them avoid paid subscriptions. However, as the MDPMI report notes, these same design choices function as a business strategy that keeps users circulating within Google’s own family of products — YouTube, Google Maps, Google Images — rather than visiting independent websites. This self-enclosed ecosystem is sometimes called a “walled garden”: a space designed so that once entered, users rarely need to leave.

Zero-click searches place user convenience and publisher sustainability in direct tension.
This is the core dilemma of zero-click searches. By and large, arguments against the anti-competitive practices of search engines are warranted. However, design choices that make search result pages more content-rich cannot be categorically condemned if they deliver genuine value to users. Zero-click searches place user convenience and publisher sustainability in direct tension. Users benefit from information-rich results pages; the collective outcome, by contrast, is the progressive defunding of the institutions — particularly small and medium-sized enterprises (SMEs) — that produce that information in the first place.

Search Funds News, News Doesn’t Fund Search
There is a deeper imbalance at work: the credibility and audience loyalty that journalism earns flows directly to the platforms that distribute it, not back to the newsrooms that created it. Studies of viral news on Facebook and YouTube show that sudden news events boost user engagement and reactivate collective attention on platforms, even if the effect is often short‑lived. News content, in other words, drives significant value for platforms, but that value is not reciprocated. While publishers build trust and retention for these platforms through resource-intensive breaking news coverage, they are simultaneously forced to compete in an increasingly saturated digital market against better-resourced international organisations.
The economics compound the problem. The ephemeral nature of online media demands content within ever-shorter timeframes, increasing workload and resource expenditure for publishers and driving cost-cutting measures. Yet even after lending their trust and institutional credibility to platforms, publishers receive little compensation beyond referral traffic to match resource expenditure. This asymmetry may be a natural consequence of digitization, but the value of preserving a diverse news ecosystem as a public good demands more than passive acceptance.

Future of News in the Digital Age
Beyond shifts in user consumption patterns, the structural extraction of value from news publishers represents a market failure hiding in plain sight. Platforms progressively reduce the traffic they send to publishers while continuing to benefit from the trust and engagement that quality journalism generates—a divergence of incentives that will not self-correct. Remedies being debated across jurisdictions; revenue-sharing frameworks, algorithmic transparency, formal negotiating rights, reflect a growing recognition that voluntary arrangements have failed. Australia’s News Media Bargaining Code demonstrates that regulation can rebalance asymmetric negotiations. The question is no longer whether intervention is warranted, but whether it will arrive in time. The deeper dilemma remains: publishers must stay visible in ecosystems they do not control without surrendering the autonomy that makes their journalism worth finding. A search infrastructure engineered to answer questions without compensating those who investigate them will, eventually, exhaust the journalism it depends upon.



Siddharth Yadav, Fellow, Emerging Technologies, ORF Middle East.

### US-Israel Strikes on Iran: Experts React to the Fallout

Four days after the US-Israel strikes on Iran, the region is being drawn into a wider, prolonged conflict. The operation has already killed 49 of what the White House describes as Iran’s most “senior regime leaders” — a figure cited by press secretary Karoline Leavitt and President Trump. Iranian retaliation has expanded beyond US military bases to civilian infrastructure, with energy and oil installations now also coming under threat.
Aviation across the Gulf has ground to a halt, with major Middle East carriers suspending flights. The Strait of Hormuz presents another flashpoint: Iran’s Islamic Revolutionary Guard Corps has broadcast radio warnings prohibiting all vessel passage.
A further front has opened with Hezbollah launching attacks on Israel. At a press conference alongside General Dan Caine, Chairman of the Joint Chiefs of Staff, US Defense Secretary Pete Hegseth offered no exit strategy — a signal that the region should brace for more. The Observer Research Foundation (ORF) Middle East experts offer their concise analysis on the widening repercussions.

A Post-Khamenei Era for Iran
Since the 1979 revolution, Iran has seen only two transfers of supreme power. Ayatollah Ruhollah Khomeini took charge after the Shah’s fall, his support base ultimately consuming the student-led protest movement that initiated it. Following Khomeini’s death in 1989, Ali Hosseini Khamenei assumed leadership — holding it for 37 years until his assassination on 28 February 2026, killed in a US-Israel airstrike at the age of 86.
Khamenei had long framed the prospect of his own death as martyrdom and not as loss but as theological inevitability. The religious cohort around him shares these credentials and remains committed to the ideological positioning the state has maintained for decades. Internal coercion and external expansionism were twin pillars of his rule — and the resilience of the system in the wake of his death is, in part, testament to how deeply both were institutionalised.

Khamenei had long framed the prospect of his own death as martyrdom and not as loss but as theological inevitability.
External pressures will shape who that candidate can be. The US and Israel have struck targets across Iran but have conspicuously avoided Qom and Mashhad — the ideological heartlands of the revolution—calculating that alienating Iran’s Shia majority would be counterproductive. The attempt to drive a wedge between the Iranian people and the regime is deliberate, but the system’s entrenchment since 1979 is both deep and multifaceted.
If a successor is swiftly selected and consolidated in the coming days, the regime’s long-term stability could yet be reaffirmed — as it was in 1989.
Kabir Taneja, Executive Director, ORF Middle East.

Oil on the Boil: Hormuz, LNG, and the $100 Barrel Question
Global energy markets have reacted sharply to the US-Israel strikes on Iran. Oil prices jumped above US$80 a barrel — a rise of more than 10 percent — while the threat to the Strait of Hormuz has sent war risk insurance premiums soaring, with shipping companies rerouting via the Cape of Good Hope, adding freight costs and delivery delays.
Tehran’s warning that it would “burn any ship” attempting to transit the Strait of Hormuz — through which nearly 20 percent of the world’s oil exports pass — has rattled markets. Saudi Aramco confirmed it will temporarily shut its Ras Tanura refinery, which processes around 550,000 barrels per day, following a drone attack. A port facility in Oman and a vessel northwest of Muscat were also struck, compounding regional instability.
With nearly 70 percent  of Hormuz crude destined for China, India, Japan, and South Korea, these economies will bear the brunt of any sustained disruption. Some analysts are already predicting Brent crude could reach US$100 a barrel — a price shock that would feed through to transport, manufacturing, and agricultural commodities globally.
QatarEnergy, one of the world’s largest LNG suppliers, has suspended production following attacks on its facilities in Ras Laffan and Mesaieed Industrial City. European gas prices have reportedly risen 45 percent in response — a severe blow to a continent still navigating its transition away from Russian energy, with 30 percent of Europe’s jet fuel originating from or passing through the Strait.

With nearly 70 percent of Hormuz crude destined for China, India, Japan, and South Korea, these economies will bear the brunt of any sustained disruption. 
Saudi Aramco confirmed it will temporarily shut its Ras Tanura refinery, which processes around 550,000 barrels per day, following a drone attack. Gulf states are moving to mitigate disruption through Saudi Arabia’s East-West pipeline and expanded capacity at UAE's Fujairah Port. Demand for Russian crude and gas may surge as markets scramble to fill supply gaps.
The timing invites scrutiny: coming on the heels of America’s seizure of Venezuelan energy assets, the strikes may position Trump to flood global markets with American and American-controlled oil and LNG.
Mannat Jaspal, Director and Fellow, Climate and Energy, ORF Middle East.

Choking the Arteries: Iran’s Assault on Gulf Infrastructure
The war in the Middle East has severely tested the containment-of-conflict rationale that long allowed Gulf states to flourish amid regional disruption. Iran’s assault on regional connectivity infrastructure is, at its core, an act of desperation.
Targeting the Gulf’s critical commercial infrastructure strikes at the heart of three nodes of global connectivity — aviation, maritime trade, and digital infrastructure — while directly undermining these states’ economic diversification agendas. Choking these arteries injects the conflict into international supply chains, with material consequences for global inflation.
The most immediate impact has been on aviation. The deliberate targeting of the Middle East 3 (ME3) carriers has stressed a sector already constrained by overflight restrictions from the Russia-Ukraine, Israel-Gaza, and Pakistan-Afghanistan conflicts. Detour options are scarce and prohibitively costly. The logistics of stranded aircraft and crew are creating global congestion bottlenecks that will outlast the physical impact of the strikes themselves. Prolonged disruption carries knock-on effects for ancillary sectors that lack the fiscal resilience of the Gulf carriers — costly risk assessments and elevated insurance premiums will persist long after immediate volatility subsides, becoming structurally embedded in the system.

The logistics of stranded aircraft and crew are creating global congestion bottlenecks that will outlast the physical impact of the strikes themselves. 
That Gulf carriers are already working to restore a modicum of normalcy speaks to the embedded resilience of the ME3 ecosystem. Recovery, when it comes, can be expected to consolidate quickly.
It is in Tehran, where tactical capability and strategic foresight do not appear to coincide. By unilaterally targeting the fundamental value proposition of Gulf states as safe havens for global capital, commerce, and connectivity, Iran has bargained for an unquiet peace in a neighbourhood where memories are long — and where the goodwill it once enjoyed may prove far harder to rebuild than the infrastructure it has targeted.
Cauvery Ganapathy, Fellow, ORF Middle East.

The Algorithm Went to War: What the Iran Strikes Reveal About AI and Accountability
The US military used Anthropic’s Claude to support strikes on Iran hours after President Trump ordered every federal agency to stop using the company’s technology. Claude had been the only frontier AI model on the Pentagon's classified networks, integrated through Palantir since 2024 under a US$,200 million contract for intelligence analysis, target identification, and operational simulations. It could not be extracted even after its maker was declared a national security threat.
This episode raises three questions demanding urgent attention from any government integrating US-built AI into defense and intelligence systems. First, if the guardrails of a frontier model can be overridden by the ideological leanings of developer nations, what does AI sovereignty mean for importing nations? Second, as the Iran strikes demonstrated, once AI is embedded in operational military systems it becomes inseparable from the mission — who truly controls it? Third, if companies building these systems cannot agree on what constitutes safe use, on what basis should any government or public trust them?

AI safety guarantees are only as durable as the laws underpinning them, and the governments’ and developers’ willingness to honour them.
The rupture between Anthropic and the Pentagon centred on two restrictions CEO Dario Amodei refused to drop: no mass domestic surveillance, and no fully autonomous weapons without human oversight. When Anthropic held firm, Secretary of War Pete Hegseth designated it a “supply chain risk,” a classification never before applied to an American company.
Within hours, OpenAI signed a classified network deal with the Pentagon, announcing it included the same two red lines, plus a third. The Pentagon accepted from OpenAI what it punished Anthropic for requesting. Yet the deals differ critically: Anthropic sought explicit contractual prohibitions, while OpenAI relied on references to existing laws that critics argue are insufficient to prevent the very abuses both companies claim to oppose.
In the fog of war, the distinction may matter less than the precedent: AI safety guarantees are only as durable as the laws underpinning them, and the governments’ and developers’ willingness to honour them.
Siddharth Yadav, Fellow, ORF Middle East.

### The Gulf’s Regional Opportunities Along the Critical Minerals Value-Chain

Spotlight 

 	Coordinating to build a critical minerals value-chain can offer Gulf countries leverage in the new currency of global power.
 	The Gulf countries can address capacity gaps in the critical minerals sector by synergizing their comparative advantages.
 	Cooperating in the sector offers an opportunity for strategic economic coincidence in the Gulf while avoiding wasteful overlaps.

Coordinating to build the region’s leverage globally is a model that Gulf actors have fine-tuned over decades as part of the Organization of Petroleum Exporting Countries (OPEC). It is, crucially, also a model that has enabled the building of a global clout collectively through the leveraging of their natural resources. This article makes the case that similar coordination in the vital Critical Minerals sector known as the new oil today, could enhance particular regional positions along the value-chain, with benefits percolating to each, and the region as a whole.
The relevance of Critical Minerals to regions such as the United Arab Emirates (UAE) and Saudi Arabia, and their resultant investments in the sector, may be contextualized through the following push and pull factors-
Table.1 Factors Leading to UAE and Saudi Investments in the Critical Minerals Sector

Transforming their positions along the Critical Minerals value chain will involve regions such as UAE and Saudi Arabia partaking more in the midstream and downstream processes of refining, separation, production of final products and recycling. Their present unique circumstances in the sector may be outlined through the following snapshot-
Table. 2 UAE and Saudi Arabia’s Strengths and Weaknesses in the Sector


Saudi Arabia’ Comparative Advantages 
Domestic reserves including heavy Rare Earth Elements (REEs) concentrated in the 600,000 sq.km block of the Arabian Shield offer the region a significant advantage. In addition to the estimated $2.5tn valuation of it, the possession of domestic mineral reserves mitigates a crucial supply chain vulnerability. Once refining and processing capacities are developed domestically, this mineral wealth would prove to be a turning-point for the region’s role along the value-chain.

Coordination in the vital Critical Minerals sector known as the new oil today, could enhance particular regional positions along the value-chain, with benefits percolating to each, and the region as a whole.
Saudi Arabia’s second advantage lies in the scale it can build based sheerly on the size of the local population. The Public Investment Fund’s (PIF) ambitious target of 500,000 Ceer EVs by 2030 is a testament to this potential in absorption capacity.
Its external partnerships offer Riyadh its third point of advantage. Primary among these is the US Department of War supported MP Materials partnership of $110 with Ma’aden. Additionally, through the Future Minerals Forum (FMF), Riyadh has also positioned itself quite effectively at the heart of the Critical Minerals conversations globally. The establishment and proposed coordination of the Hubs of Excellence at FMF 2026 demonstrates Saudi Arabia’s role in influencing global frameworks in the sector.

UAE’s Comparative Advantages 
What the UAE lacks in domestic minerals wealth, it makes up with the robust access it has developed through mining partnerships, offtake agreements and the logistics infrastructure it has built across the geographies recently identified as the Critical Minerals Super Regions of Africa, Latin America, Central Asia, and West Asia. It has achieved this by deploying its formidable financial agency strategically through both public and private platforms to meet capacity gaps in many of these geographies.
In Africa, home to nearly 30 per cent of the world’s Critical Mineral reserves, for instance, the UAE’s investment already stood at more than $110bn between 2019-2023. It is a segment in which the UAE’s ADQ and Orion Resource Partners have also developed a substantive footprint, through partnerships with the US Development Finance Corporation (DFC).

Seeking to match the high subsidisation that first-movers like China managed in the domain decades ago, can impose prohibitive costs on relatively newer players in the Critical Minerals sector. 
Notably, the UAE has a relative head-start in refining, both through external partnerships, as well as the country’s ongoing work with American and Italian public and private entities. The Khalifa Economic Zones Abu Dhabi’s Lithium processing plant is a case in point. The country has extended these international partnerships also to working on the relatively small but crucial EV battery recycling segment such as the partnership it has developed with India.

Capacity gaps vis a vis first movers
Delineating the comparative advantages of each actor effectively highlights the differentiated capacity gaps of the other. The shortfalls are further compounded by the following considerations that are inherent to the sector as a whole:
First, the lead-times in greenfield mining projects coming online (17.9 years), in the development of refining and processing capacity (4-8 years), and in the development of a skilled workforce (4-8 years) are considerably high.
Second, there are also implications of innovations in battery chemistries that today’s investors have to factor in. In answer to Chinese restrictions on REE exports to the country post 2010, for instance, Japanese companies such as Honda and Daido Steel re-engineered their battery chemistries to create more heat-resistant neodymium magnets that reduced the amount of REEs in their composition. Such re-engineering will eventually alter the demand matrix of critical minerals and change the final net value of the investments made in the sector today by those producing or refining. Also pertinent is China’s ability to undercut competition by flooding the market through significant price reductions of its own output.
Third, the ability to remain competitive given these considerations while seeking to match the high subsidisation that first-movers like China managed in the domain decades ago, can impose prohibitive costs on relatively newer players in the Critical Minerals sector. The monopoly China has already established in the field is substantial, and cannot realistically be challenged in the short to medium term. Although, challenging legacy actors such as China is a daunting task for any country in the Critical Minerals space, it is not always avoidable. UAE’s IRH’s bid for Zambia’s Mopani Copper mines is the first known instance of how the Gulf actors are beginning to directly compete with China for a major Critical Minerals asset. It is unlikely to be the last.

Building on Strengths
The substantial reservoir of patient capital available in the UAE and Saudi which is relatively less risk-averse, together with process engineering expertise derived from legacy hydrocarbon sectors, can be synergised with the following pathways to mitigate these complexities:

The substantial reservoir of patient capital available in the UAE and Saudi which is relatively less risk-averse, together with process engineering expertise derived from legacy hydrocarbon sectors, can be synergised.
There is potential for a Critical Minerals Trading Hub in the region. The region has for decades now been a commodity trading hub. Given their current stakes in the sector, it is reasonable to expect a successful iteration for Critical Minerals to develop in the region as well. In October 2024, UAE’s International Resource Holding (IRH) declared that they would work towards setting up a trading hub for copper trading. Saudi’s Public Investment Fund (PIF) has made a similar declaration. In the recently concluded Future Minerals Forum, 2026, Saudi’s Minister of Mining and Minerals Alkhorayef alluded to a similar role through the creation of a specialized platform to balance supply and demand of minerals. The objectives of both, could fructify and benefit from a pooling of resources and expertise.
Notably, the fact that neither country is a full member of the Extractive Industries Initiative (EII) is a matter of concern, and must be addressed if credibility is to be gained as a trading or arbitration hub.
A second initiative worth exploring could be the creation of an energy transition equipment hub. Critical minerals are a vital feedstock in energy transition manufacturing and thus central to the economic diversification and decarbonization objectives of both countries. The UAE has begun working with countries like Australia to establish itself as a viable manufacturing base for renewable energy equipment. Relatedly, the UAE and Saudi Arabia could coordinate effective industrial sequencing efforts to integrate both waste-recovery and recycling of critical minerals from transition infrastructure into their manufacturing models. For example, Emirati partnerships with Japanese firms have focused on re-engineering industrial processes to reduce the quantity of critical minerals in manufactured products. Again, with their access to Critical Minerals, the two countries could work towards developing a niche in battery storage, widely regarded as the next frontier in the energy transition.

With their access to Critical Minerals, the two countries could work towards developing a niche in battery storage, widely regarded as the next frontier in the energy transition.  
The development and integration of AI in mining could serve as the third pathway to value-creation in the sector. The Sovereign Wealth Funds (SWF) of both countries have made substantial investment in the Artificial Intelligence domain. The use and integration of AI processes can significantly improve discovery efficiency in mining processes. This would translate into shorter project timelines, especially for greenfield projects, and would enhance discovery efficiency. Additionally, robust supply chains of Critical Minerals such as silver, gold, copper, tin, tantalum, palladium, barite, boron, gallium, germanium, silicon and other REEs are a pre-requisite for the structural integrity, energy intensity, and performance enhancement of the Data Centres that both countries are increasingly prioritizing.
In their seminal work outlining the theory of Complex Interdependence, Robert Keohane and Joseph Nye contend that in an interconnected world, states are necessarily interlinked across a much wider matrix of considerations including, but not limited to, economic ties, social connections, and environmental issues. This explains the Gulf’s pragmatism underpinning the ability to work together where possible despite differences. The resultant stability is integral to the economic diversification and developmental ambitions of both the UAE and Saudi Arabia. How countries manage their resources, strengths, weaknesses, and differences in the sector together will largely determine whether they can identify and consolidate their niche along the Critical Minerals value chain.   Coordinating can forge strategic coincidence and catalyse a coherent trajectory of leverage for the region in the emerging currency of resource wealth. Choosing to not do so would, conversely, result in a lost opportunity.



Cauvery Ganapathy, Fellow, ORF Middle East.

### Energy as the Anchor: Recalibrating India–Canada Relations in a ‘Ruptured’ World Order

Spotlight

 	 Canadian Prime Minister Mark Carney’s upcoming visit to India is a strategic attempt in fostering cooperation among like-minded middle powers to recalibrate a ‘ruptured’ world order. Diversification of both resources and partners has become essential.
 	 Energy diplomacy is set to form the bedrock of India-Canada bilateral engagement and the anticipated Comprehensive Economic Partnership Agreement (CEPA).
 	 Key areas of cooperation could include conventional energy trade; critical minerals for the energy transition; a proposed 10-year C$2.8 billion uranium supply deal; a biofuels partnership; collaboration in food systems and food security; and enhanced Arctic and climate cooperation.

Canadian Prime Minister Mark Carney’s upcoming visit to India is significant. It represents a  strategic attempt at fostering cooperation among like-minded middle powers to recalibrate a ‘ruptured’ world order,where the collective weight of coordinated states can balance established hegemonies. Bilateral relations between India and Canada, which were strained during the previous Trudeau administration, now appear to be experiencing renewed momentum under Carney’s leadership. The visit is expected to contribute to progress toward the anticipated Comprehensive Economic Partnership Agreement (CEPA).

Earlier this year, Canadian Minister for Energy and Natural Resources, Tim Hodgson’s visit to India concluded with a Joint Statement issued alongside his Indian counterpart, Hardeep Singh Puri, Minister of Petroleum and Natural Gas, promising deeper energy cooperation across both conventional and clean energy. They also agreed to relaunch the Canada–India Ministerial Energy Dialogue signaling that energy diplomacy will form the bedrock of bilateral engagement.

In an era characterized by rising maritime insecurity, strained energy chokepoints, and the growing politicization of energy security; diversification of both resources and partners has become essential. Consequently, it is reasonable to anticipate that energy will serve as the anchor of the India-Canada partnership.
Natural Allies: India’s Growing Energy Demands Meets Canada’s Diversification Imperative
Canada is widely recognized as resource-rich. It possesses the fourth largest reserves of oil and substantial reserves of uranium and critical minerals crucial for the energy transition,including Saskatchewan’s potash reserves, Ontario’s nickel Deposits, Quebec’s graphite resources,  and rare earth deposits across multiple provinces. Yet nearly 98 per cent of Canada’s energy exports remain concentrated in the United States (US). Minister Tim Hodgson has described this over-reliance as a “strategic blunder”, emphasizing the importance of diversifying partnerships to mitigate risks associated with the potential weaponization of supply chains.

On the other hand, India pursued a series of trade agreements with many advanced economies including the European Union, United States, the United Kingdom, New Zealand, Australia and the United Arab Emirates (UAE) signal its rising stature as a trading partner driven by a growing market size and a favourable demographic profile. As the third-largest consumer of oil and Liquefied Petroleum Gas (LPG), fourth-largest importer of Liquefied Natural Gas (LNG) and home to the fourth-largest refining capacity in the world, India is projected to account for over one-third of the growth in global energy demand over the next two decades.

However, India’s import of discounted Russian crude oil exposes it to potential US tariff pressures, while its heavy dependence on Chinese supplies for critical minerals and energy inputs increases strategic vulnerabilities. Diversification, therefore, is not solely an economic imperative, but increasingly a matter of national energy security for both the countries. The completion of the Trans Mountain Expansion (TMX) pipeline is a significant development in this context, enhancing prospects for stronger connectivity between Canada and India.
Strategic Pillars of Energy Cooperation
India today stands as Canada’s seventh-largest goods and services trading partner. However, bilateral energy trade has been limited, mostly concentrated on India’s import of bituminous coal. Prime Minister Modi has announced a target of tripling bilateral trade by 2030, amounting to US$ 50 billion – a goal that energy cooperation could significantly advance.

Firstly, Conventional Energy: Trade in Canadian crude oil, LPG and LNG, along with India’s supply of refined petroleum products, is likely to be prioritized and strengthened.

Secondly, Critical Minerals: Currently, India accounts for only 1per cent of Canada's critical minerals exports. Both the countries should explore potential pathways for investing in extraction of critical minerals like lithium, cobalt, and rare earth elements. These are essential for manufacturing electric vehicle batteries, wind turbines, solar panels and defense equipment--sectors central to India’s industrial ambitions and Canada’s export strategy. India could further position itself as the downstream processing and value addition hub for these critical minerals, integrating the Canadian raw material supply chain with India’s growing manufacturing ecosystem. This aligns well with India’s National Critical Mineral Mission which seeks to boost supplies from domestic and foreign sources, and build global competitiveness in mineral exploration, mining, beneficiation, processing, and recycling. 

Thirdly, Nuclear: a 10-year C$2.8 billion uranium supply deal is reportedly under consideration and could emerge as one of the key outcomes of the Carney-Modi meeting. Canada is also a leader in Small Modular Reactor(SMR) development among G7 countries. India’s SHANTI Act, introduced in 2025, encourages private- sector participation in India’s nuclear development and may facilitate Canadian investment in the sector. Nuclear energy is expected to play an important role in securing India’s future energy demands, particularly in relation to expanding data center aspirations.

Fourthly, Biofuels: Canada relies heavily on the US for its biofuel imports. As the third-largest producer of biofuels, India can offer competitively priced sustainable fuel to Canada.

Fifthly, Food Systems: India imports nearly 25 per cent of its Muriate of Potash (MOP) from Canada. Deepening collaboration on organic fertilizers, food processing and storage, and agricultural waste into energy technologies will strengthen food security.And lastly, Arctic and Climate Cooperation: Almost 40 per cent of Canada’s landmass is considered Arctic. The region is emerging as a crucial hub for energy and climate governance. Cooperation on sustainable mining practices and technologies, and joint climate change research could further broaden engagement beyond traditional trade.
Securing the CEPA Dividend 
A CEPA agreement between India and Canada is expected to increase trade by C$8.8 billion annually. While the India-EU Free Trade Agreement (FTA) took over two decades to materialize, the India-UAE CEPA came into force in under 90 days, setting a precedent for speed and decisive action. The tenacity and depth of India-Canada relations will depend on political willingness, regulatory clarity, and a shared commitment to advancing areas of strategic convergence —particularly in energy.



Mannat Jaspal, Director and Fellow, Climate and Energy, ORF Middle East.

### US-Israel Strikes on Iran: Experts React to “Operation Epic Fury”

On 28 February 2026, the United States and Israel launched coordinated military strikes on Iran. In an eight-minute video address, US President Donald Trump described the operation — dubbed “Operation Epic Fury” — as aimed at preventing Tehran from developing a nuclear weapon. Stating that his administration's objective is to “defend the American people by eliminating threats,” Trump also acknowledged the risk of American casualties. Iran retaliated with strikes across the Middle East, and subsequent events culminated in the confirmed killing of Iranian Supreme Leader Ayatollah Ali Khamenei. ORF Middle East experts offer their quick takes on these unfolding developments below.
America's Diplomatic Ruse and the Gulf’s Impossible Choice
The US-Israel strikes were not unexpected. Since January, Washington had been amassing the largest military presence in the Middle East since Operation Iraqi Freedom — the question was never if Trump would give the order, but when. This was true even as diplomacy played out: as the third round of indirect nuclear talks concluded in Geneva on February 26, Trump said he was “not thrilled,” even as Omani mediators claimed “significant progress” had been made. Unusually for a country that conducts diplomacy with discretion, Omani Foreign Minister Badr bin Hamad Albusaidi publicly declared the parties had “cracked that problem,” with Tehran agreeing to zero uranium stockpiling.

Whether Albusaidi sensed imminent danger and felt compelled to speak is debatable. What is clear is that American diplomacy was a ruse — mirroring last June’s “Operation Midnight Hammer,” when Washington struck Iranian nuclear sites after five rounds of negotiations, claimed to have “obliterated” Iran’s nuclear programme, and yet continued issuing threats.
Unusually for a country that conducts diplomacy with discretion, Omani Foreign Minister Badr bin Hamad Albusaidi publicly declared the parties had “cracked that problem,” with Tehran agreeing to zero uranium stockpiling.
The fundamental impasse was always unbridgeable: Iran could agree to halt weaponisation and reduce its enriched uranium stockpile, but it would never surrender its ballistic missile programme or dismantle its proxy network — precisely what Washington demanded it do. Strikes were the inevitable result.

Iranian retaliation has extended beyond US bases to civilian infrastructure, with Riyadh, Bahrain’s Era Tower, and Dubai’s International Airport now in the crosshairs. With Trump calling for regime change — and Supreme Leader Ayatollah Ali Khamenei now confirmed killed — Tehran perceives this as a war of survival. This puts Gulf Arab states, which have spent years cultivating a détente with Iran, in an impossible position: pressure Washington to de-escalate, or condemn Iranian strikes and take the further step of formally aligning with the US-Israel campaign. Statements from regional capitals speak for themselves: the dismay of states with no good choices, caught between an aggressive Washington and a cornered, retaliating Tehran.

Clemens Chay, Senior Fellow, Geopolitics, ORF Middle East.
Why Iran Targeted Dubai: The Limits of Economic Deterrence
Operation Truthful Promise 4 — Iran’s retaliatory military campaign launched in response to the US-Israel strikes — was swift, calculated, and deliberately targeted. Its celerity indicates a premeditated strategy: strike where maximum global economic damage can be inflicted. Tehran chose Dubai coldly and rationally, understanding that threatening the nexus of global capital would instantly send markets into a panic and coerce the UAE to pressure Washington for immediate restraint.

For decades, Dubai has operated on one fundamental assumption: economic prosperity creates strong incentives for geopolitical stability. The emirate bet on transforming itself into an indispensable financial and logistical node. The underlying calculus was elegantly simple. Dubai reasoned that major global powers, possessing vested interests in the uninterrupted flow of capital and commerce, would collectively ensure the security of the emirate.
Tehran chose Dubai coldly and rationally, understanding that threatening the nexus of global capital would instantly send markets into a panic and coerce the UAE to pressure Washington for immediate restraint.
However, the recent escalations have exposed the inherent vulnerability of economically crafted stability when confronted by an asymmetric actor such as Iran. Facing acute domestic strain and overwhelming external attacks, Tehran recognised that anything short of a maximum impact retaliation could accelerate its collapse. For a regime fighting for survival, traditional cost-benefit analyses disintegrated.

Economic deterrence ultimately operates on shared rationality. It assumes all actors value financial preservation over ideological or existential imperatives. That premise appears to have failed. Despite the UAE ranking as one of Iran’s largest trading partners, interdependence did not restrain Tehran. For a state facing extinction, strategic constraints have become irrelevant. When survival becomes paramount, economic interdependence ceases to function as a deterrent and instead becomes a pressure point open to exploitation.

The lesson of the unfolding crisis is therefore unequivocal. When facing an adversary willing to unleash asymmetric chaos to ensure its own survival, the incentives of economic deterrence evaporate. As a result, there is no viable substitute for hard security.

Samriddhi Vij, Associate Fellow, Geopolitics, ORF Middle East.
Iran’s Closing Cycle: From Geopolitical Ascent to War of Survival
The war of survival the Iranian regime is fighting can be read through the lens of “closing cycles”: two supercycles, each comprising three sequential phases.

The first supercycle marked Iran’s consolidation of geopolitical reach along a land bridge to the Mediterranean. First, the US intervention in Iraq (2003–2011) empowered the political networks that Tehran had cultivated since the Iran–Iraq War (1980–1988). Second, from 2012 onwards, Syria’s civil war enabled Iran to entrench itself in the Levant. Third, the 2015 nuclear agreement (JCPoA) suggested the possibility of partial reintegration into the international order.

This ascent was followed by a rapid strategic reversal — the second supercycle. In 2018, Trump’s withdrawal from the JCPoA launched “maximum pressure,” reimposing sweeping sanctions. From 2020, the Abraham Accords and Azerbaijan's victories in Nagorno-Karabakh strengthened Israel’s position in Iran’s immediate neighbourhood. After 7 October 2023, setbacks multiplied: Israel’s assassination of Ismail Haniyeh in Tehran (July 2024), the degradation of Hezbollah and the killing of Hassan Nasrallah (September 2024), the fall of the Assad regime (December 2024), and the 12-day war (June 2025). Tehran’s doctrine of “strategic patience” unravelled, leaving the regime exposed.
The US intervention in Iraq (2003–2011) empowered the political networks that Tehran had cultivated since the Iran–Iraq War (1980–1988).
The domestic arena deteriorated in parallel. Neither the “resistance economy” nor the pivot toward BRICS partners — chief among them China — could absorb the shock of sanctions. Successive waves of violently suppressed protests deepened the rupture between the regime and a society pushed to its limits.

With deterrence in shambles and diplomacy exhausted, Tehran may have concluded that confrontation was preferable to slow attrition. Nearly half a century after 1979, Iran frames this moment as a new “imposed war.” Whether the regime survives long enough to seek terms — as Khomeini once did to end the Iran-Iraq War — remains to be seen. If it does, a new, more favourable supercycle could yet emerge.

Akram Zaoui, Associate Fellow, Geopolitics, ORF Middle East.
Caught in the Crossfire: The Gulf’s Narrowing Path to De-escalation
The US-Israeli strikes on Iran, which killed several top commanders and Supreme Leader Ayatollah Ali Khamenei, have entrapped Gulf states in the crossfire of an escalating war.

Iran’s initial strikes focused on US military assets: an early strike targeted the American base in Juffair, Manama, followed by strikes on US facilities in the UAE, Saudi Arabia, Qatar, and Kuwait, with lesser success. Frustration in the Gulf has grown as attacks expanded to civilian infrastructure — hotels, residential buildings, and airports. The absence of bomb shelters and inadequate civil defence infrastructure compound the danger, with public protection largely limited to interceptions by national defence systems and instructions to shelter in place. Casualties are rising, and with them, pressure on Gulf governments to abandon their defensive, de-escalatory posture.
The absence of bomb shelters and inadequate civil defence infrastructure compound the danger, with public protection largely limited to interceptions by national defence systems and instructions to shelter in place.
Should Gulf states be drawn into the US-Israel campaign, the ramifications would be significant. Iran-aligned diaspora communities and Shia populations within the Gulf could be politically mobilised if Tehran frames the conflict as a direct war with its neighbours. Bahrain presents particular sensitivities: videos circulating on social media show Iran supporters celebrating attacks, with authorities reportedly detaining several individuals.

For now, Gulf states remain the war’s collateral damage. But they could become active participants should the cost of passivity outweigh the dangers of an Iran in transition. The immediate concern is starker still: it remains deeply unclear which channels of communication with Iran, if any, remain open.

Mahdi Ghuloom, Junior Fellow, Geopolitics, ORF Middle East.

### Integration is the Arabs’ Best Shield Against Confiscation

2026 could well be remembered as the year the world entered a new era of confiscation. Claiming ownership over desired assets and enforcing such claims unilaterally are increasingly justified as acceptable in international politics.

Some of the clearest illustrations of this emerging zeitgeist appear in speeches delivered by US President Donald Trump during his second term in office. At the press conference following the capture of Venezuelan President Nicolás Maduro in January 2026, he declared that Caracas “unilaterally seized and sold American oil”, claiming that “[t]hey took our property” and repeatedly asserted that the United States was going to “run” the country. On February 20, 2026, about a week after the US Energy Secretary toured oil production facilities with the Venezuelan acting president, Trump doubled down by saying: “We took 50 million barrels of oil”.

Elsewhere, Israeli actions in the West Bank provide another striking example of such unilateralism. The latest decisions taken by the Israeli security cabinet on February 8 indicate a pathway towards annexation, including measures to ease property acquisition in the West Bank, expand Israel’s authority to demolish construction across the territory, and consolidate control over religious sites.
A growing body of evidence points to a shift away from the primacy of market competition and towards the normalisation of coercive and confiscatory behaviour. 
The blurring of boundaries in resource ownership leaves middle powers and small states increasingly exposed, as confiscation and the violation of international law become normalised. Yet, beyond domestic consolidation and reform, bilateral engagement, and commitment to multilateral mechanisms and fora, countries should urgently strengthen their collective deterrence and resilience by investing in regional architectures for collective security, economic integration, political dialogue, solidarity, and stability, based on a “neighbourhood-first” rationale.

In this context, the Arab region has strong incentives to act, both to reduce its vulnerability and to shape a more stable and autonomous regional order.
The Return of Confiscation in Global Politics
A growing body of evidence points to a shift away from the primacy of market competition and towards the normalisation of coercive and confiscatory behaviour. The US Navy seizure of vessels in the Caribbean, government-to-government minerals-for-security agreements that trade military protection for exclusive or preferential resource access with countries such as the Democratic Republic of the Congo, and novel arrangements between the administration and corporate giants in energy, finance, and technology all illustrate the decay of some of the key principles of the rules-based order and of the Washington Consensus of yesteryear.

These developments fit within what French economist Arnaud Orain calls “finitude capitalism” in his 2025 book Le monde confisqué (“The Confiscated World”). Orain argues that since the sixteenth century, global capitalism has oscillated between two phases. In “liberal capitalism,” confidence prevails that commerce and rules can generate shared prosperity. But in periods of “finitude capitalism,” pessimism takes hold, driven by acute awareness of the world’s physical limits, catalysing intensified competition between rival powers. Nations then resort to coercive measures to secure exclusive control over land, mines, sea lanes, energy reserves, and other finite resources. Colonial empires typically emerge during such phases.

The re-emergence of confiscation as a central paradigm in international economic relations unfolds as the result and against the backdrop of a broader radicalisation of geoeconomics. The Biden years were marked by debates over ally-shoring, economic resilience and economic security, and industrial policy aimed at increasing one’s foothold in markets, supply chains, and technological ecosystems. It has now become evident that these approaches are supplemented by the direct use of military force to seize assets and infrastructure. In Venezuela, like in Iran, armadas, build-up of warships, and gunboat deployments increasingly function as complements to export controls, investment screening, sanctions, subsidies, and tariffs.
Confiscation Clashes with the Increasing Arab Embrace of Markets
From an Arab perspective, confiscation has historically translated into traumatic experiences. Trump’s declarations echo the moment George H. W. Bush reportedly told King Hussein of Jordan, “I will not allow this little dictator to control 25 percent of the civilized world’s oil,” a statement that implied Iraq’s oil was not considered its own, but the West’s. Meanwhile, the confiscation of land remains a tool of ethnic and social engineering in the region, exemplified by past practices of the Assad regime in Syria and ongoing Israeli settler expansion in the occupied West Bank.
In periods of “finitude capitalism,” pessimism takes hold, driven by acute awareness of the world’s physical limits, catalysing intensified competition between rival powers.
The renewed prominence of confiscation as a governing paradigm also stands in stark tension with the market-oriented economic trajectories many Arab states claim to pursue. Across the region, this contradiction is evident. Morocco has consistently signalled openness to foreign investment and trade as drivers of its industrialisation. The Syrian government has repeatedly insisted it intends to break with the bureaucratic, cronyist, and “socialist“ practices of the Assad era. Across the Gulf, governments have embraced economic diversification, professionalised policymaking, and openness to foreign investment and trade, visions that depend on predictable rules, credible institutions, and the reliability of market mechanisms.

Similarly, traditional Arab commitment to market-driven international energy systems clashes with the logic of great-power confiscation. Since the onset of the Russia–Ukraine war, Arab countries, chief among them Saudi Arabia, have typically voiced frustration with the use of geoeconomic tools mobilised by advanced economies, including the imposition of price caps on Russian sales of oil, and proposals to use assets linked to Russia in order to finance Ukraine’s reconstruction and war efforts.

The 1973 “Arab oil embargo“, during which Arab members of the Organization of Petroleum Exporting Countries (OPEC) weaponised oil supplies in support of a political Arab cause, namely, that of Palestine, thus stands out as an exception rather than the norm. Since then, the position of Arab oil-producing states has rested on three pillars: first, sovereign control over natural resources, typically embodied in state-owned national oil companies (NOCs); second, the legitimacy of producer-led, evidence-based coordination to stabilise global energy markets through institutions like OPEC and the Gas Exporting Countries Forum (GECF); and third, the centrality of market mechanisms, particularly supply and demand, in determining oil prices.
The renewed prominence of confiscation as a governing paradigm also stands in stark tension with the market-oriented economic trajectories many Arab states claim to pursue. 
Yet here lies a fundamental tension. In the Gulf, particularly, this market-based conception of international energy flows has coexisted with what might be called pro-hegemonic geoeconomics. Historically, the bulk of surplus generated by energy exports was recycled into US assets, goods, expertise, hardware, and services, in exchange for an implicit US security guarantee. Over time, this arrangement deepened into integration across energy, finance, and, more recently, emerging technologies like artificial intelligence (AI). The pattern reached its apex in May 2025, when Trump visited Qatar, Saudi Arabia, and the UAE, securing announcements of US$3.4 trillion in investments from the Gulf’s three largest economies into strategic sectors of the US economy. This represented both the acceleration and culmination of a decades-long dynamic in which GCC sovereign wealth has been deployed at scale to bet on, and benefit from, the economic, military and scientific potential of the United States.

Arab states thus face a fundamental contradiction: they champion market-based international order while depending for security on a great power that increasingly uses coercion to control resources and markets. The question is no longer whether such dependence is sustainable, but how quickly alternative frameworks can be built. This demands urgent reconsideration of regional cooperation as a hedging strategy against post-hegemonic global volatility.
Regional Architectures as Lifelines
The pro-hegemonic geoeconomic model that has served Gulf states for decades now appears insufficient as a bulwark against confiscation. Three limitations stand out. First, geoeconomic interdependence offers no guarantee of stability when geopolitical interests collide, even when underpinned by massive energy supplies and shared network infrastructure. The rupture between Europe and Russia following the invasion of Ukraine exemplifies this reality. Second, the collective bargaining power of OPEC and OPEC+ risks serious erosion as the US consolidates de facto control over Venezuela, which holds roughly a fourth of OPEC’s reserves, and threatens Iran, which accounts for a sixth. Third, the stock of investment held by Arab Gulf states in the US is dwarfed by that of US allies in Europe and Japan, limiting the Gulf’s geoeconomic leverage relative to other American partners.
Arab states thus face a fundamental contradiction: they champion market-based international order while depending for security on a great power that increasingly uses coercion to control resources and markets. 
Recent events underscore how collective regional action can successfully push back against great power overreach. In January 2026, when the Trump administration intensified rhetoric about acquiring Greenland, an island rich in critical minerals, it was the coordinated response of European states that established clear red lines. European unity signalled that any attempt at territorial acquisition would trigger a collective response, effectively deterring unilateral action. Regional coordination and solidarity proved effective.

Similar approaches could be pursued in the Arab world. Emirati businessman Khalaf Ahmad Al Habtoor, a prominent voice in Gulf business circles, thus wrote in response to Trump’s threats to seize control of Venezuela, emphasising the urgency of strengthening the Arab League, keeping Arab capital and strategic assets within the region, and coordinating policies across Arab states. His intervention reflects recognition among Gulf economic elites that bilateral arrangements with Washington, however lucrative, cannot substitute for collective Arab capacity to resist coercion.

Steps taken toward regional integration in the Arab world must be complemented with far deeper instruments. Arab states need regional architectures capable of pooling sovereignty and presenting a unified front on areas vital for the region’s future. Such structures would not replace engagement with external powers but would enable negotiation from collective strength rather than fragmented vulnerability.



Akram Zaoui, Associate Fellow, Geopolitics, ORF Middle East.

### The Gulf’s Critical Minerals Balancing Act

China may have underestimated the implications of its critical minerals export controls on friendly countries like the Gulf states. The Gulf states are pursuing three interconnected ambitions: emerging as global hubs for artificial intelligence (AI) infrastructure and data centres, build domestic manufacturing capacity for renewable energy technologies and electric vehicles, and maintain strategic partnerships with both China and the United States (US). However, China’s tightening of its critical minerals export controls in April and October 2025 threatens all three. Beijing’s new licensing requirements, extraterritorial provisions, and end-use restrictions strike at the heart of the Gulf’s development strategies. For Gulf capitals that have long used US-China competition to their advantage, Beijing's export controls raise a sharp question of whether genuine neutrality between the two superpowers remains viable.

At first glance, the Gulf states’ ambitions align seamlessly with Washington’s push to reduce its dependence on China for critical mineral supply chains.. The Trump administration views Saudi Arabia and the United Arab Emirates (UAE) as ideal intermediaries—countries with substantial mineral deposits, export-oriented infrastructure, deep financial reserves, and growing mining partnerships across Africa and Latin America. The strategy follows a familiar playbook: integrate Gulf AI infrastructure and data centres into the US regulatory ecosystem, then leverage those partnerships to secure access to the critical minerals such as gallium, germanium, indium, tantalum, silicon, and copper that underpin advanced computing. For Washington, the Gulf offers a rare combination: capital to finance mining projects, political stability to anchor supply chains, and strategic location to process minerals extracted from the Global South.
The Trump administration would be mistaken to interpret Gulf’s cooperation on critical minerals as a willingness to decouple itself from China. Gulf states are pursuing diversification, not substitution. 
Yet the Trump administration would be mistaken to interpret Gulf’s cooperation on critical minerals as a willingness to decouple itself from China. Gulf states are pursuing diversification, not substitution. Even as they deepen partnerships with Washington on AI and rare earth processing, they maintain China as their largest trading partner and continue relying on Chinese technology for telecommunications and renewable energy projects. For Riyadh, Abu Dhabi, and Doha, the optimal strategy is hedging as they seek to protect their nascent manufacturing and AI ecosystems.
The Impact of Chinese Export Controls
China’s expansion of rare earth export licensing in April last year was imposed in retaliation to the Trump administration’s “Liberation Day” tariffs. An October extension then asserted jurisdiction over foreign goods containing Chinese components. Together, these measures injected acute uncertainty into Gulf’s AI and industrial development projects that relied on stable supply chains. Beijing’s strategy shifts supply chain risk to downstream partners by tightening upstream regulations. This forces rare earth producers in third countries to secure Chinese approval for selling products manufactured using Chinese equipment or containing Chinese components. Such an approach  transforms China’s dominance in mineral supply chains from being a structural advantage into a regulatory chokepoint,  precisely the kind of vulnerability Gulf policymakers sought to avoid as they develop their own processing and manufacturing capabilities. The consequences are procurement delays, surging costs, and weakened long-term planning capacity.

Price volatility in minerals tells the story. Yttrium oxide, one of the rare earths targeted by Chinese controls, surged by 4,400 percent outside China between January and November 2025. The mineral is critical for speciality alloys in turbines and high-temperature coatings in the energy sector. GE Vernova, which is installing five H-class gas turbines at Saudi Arabia’s Qurayyah Power Plant under multi-billion-dollar contracts, was directly affected and is now working with the US government to boost stockpiles. Siemens, with major power plant contracts in Saudi Arabia and the UAE, says it is monitoring the restrictions “with concern.”
Such an approach  transforms China’s dominance in mineral supply chains from being a structural advantage into a regulatory chokepoint,  precisely the kind of vulnerability Gulf policymakers sought to avoid as they develop their own processing and manufacturing capabilities.
Gulf megaprojects, spanning across AI data centres, renewable energy infrastructure, and industrial manufacturing are, dependent on rare earth elements embedded throughout their supply chains, making them acutely vulnerable to Beijing’s regulatory reach.
Adopting the AI playbook in Minerals
The effects of China’s export policies are shaped less by  direct Gulf-China trade in critical minerals than by the way global supply chains are structured. Sensing an opportunity, Gulf states are positioning themselves as trusted partners to the US in recalibrating critical mineral supply chains away from Chinese dominance. During President Trump’s May 2025 visit to Saudi Arabia, the two sides signed an agreement to explore joint ventures in critical minerals, including refining facilities, workforce training, and research institutions. Last November, Saudi Crown Prince Mohammed bin Salman signed a joint framework to coordinate policies on strategic minerals and broaden global supply chains for rare earths. In doing so, Gulf states are capitalising on US overtures to bring them closer to Washington’s global agenda.

These partnerships are taking concrete shape. MP Materials, the US Department of Defense, and Saudi mining company, Maaden, signed an agreement to develop a rare earth refinery in the kingdom, with MP Materials and the Pentagon holding 49 percent and Maaden 51 percent stakes, respectively. Last October, the US International Development Finance Corporation, Orion Resource Partners, and Abu Dhabi's ADQ contributed US$ 600 million each  to establish the Orion Critical Mineral Consortium, targeting a corpus of   US$ 5 billion. The UAE joined the US-led Pax Silica Initiative last December, aiming to secure critical mineral supply chains and counter China’s dominance, followed by Qatar soon after.

What is evident is how the Trump administration is applying its AI playbook to minerals. In May 2025, Saudi Humain and the UAE’s G42 signed multi-billion-dollar agreements with Nvidia, Microsoft, AWS, and Oracle to scale up its domestic compute capacity using advanced AI chips and cloud software. The UAE called Washington the “partner of choice” in AI. Notably, major Saudi and Emirati firms simultaneously pledged to divest from Chinese partnerships.
Chinese AI and semiconductor firms are being relegated to secondary roles in Gulf markets, ceding early ground in a rapidly expanding ecosystem.
The latest proliferation of US-Gulf deals presents two challenges for Beijing. First, Chinese AI and semiconductor firms are being relegated to secondary roles in Gulf markets, ceding early ground in a rapidly expanding ecosystem. Second, integrating Gulf states into the US AI regulatory framework risks isolating China’s Global South–focused AI governance push, creating regulatory incompatibilities between Chinese and GCC and drawing the GCC closer to US-led rule-setting.

Beijing appears to recognise that its rare earth restrictions may backfire. During his December visit, Foreign Minister Wang Yi urged Riyadh and Abu Dhabi to sign a GCC-China free trade agreement, underscoring the need to “deepen cooperation” in traditional industries and expand collaboration in emerging areas.
Hedging Remains the Gulf Policy of Choice
Consistent with their AI strategy, the Gulf states will likely hedge between the US and China while diversifying global partnerships in critical minerals. First, Riyadh and Abu Dhabi aim to advance their domestic development agendas and present themselves as reliable providers of high-tech and manufactured goods worldwide. Gulf states are accelerating licenses for foreign mining and exploration. Saudi Arabia revised its estimate of untapped mineral resources from US$ 1.3 trillion to US$ 2.5 trillion and announced a US$100-billion mining initiative in early 2025 in partnership  with firms from the US, Europe, India, and China. Among companies awarded licenses since Trump’s tariff war with Beijing is China’s Zijin Mining, covering Jabal Sayid and Al Hajar belts in Saudi Arabia. Elsewhere in the Gulf, Oman reached an agreement with Hunan Zhongke Electric in June 2025 to build its first lithium-ion anode production facility, with an estimated investment of  US$ 1.1 billion.

Saudi Arabia stands out for its rapid expansion in midstream and downstream mineral capabilities by leveraging some of the world’s lowest energy costs, with an aim to rank among the world’s top seven mineral processors by 2030.. Gulf companies are acquiring minority stakes in mining companies abroad to influence offtake agreements, mirroring China’s approach of combining mineral acquisition with control over export hubs, primarily ports, to integrate supply chains.

Second, most Gulf mining initiatives remain nascent and require external expertise. This means Gulf companies will  likely remain dependent on Chinese mineral supplies, processing technology, and mineral-intensive manufactured products for years. Electric vehicles—where a single battery requires up to 200kg of critical minerals—illustrate this dependency. Gulf imports of Chinese cars accounted for nearly 14 percent of total automobile imports in 2021–2024, up from zero a decade earlier.

Beyond minerals and manufacturing, the GCC has continued to hedge in advanced technology. One telling fact is how the GCC sourced the majority of semiconductors from China during 2020-2023, despite the Biden administration's restrictions on AI chips:  81 percent for Saudi Arabia and 67 percent for theUAE. Both countries are compartmentalising AI and data centre partnerships, running parallel tracks with the US and China —a trend likely to continue in the foreseeable future.

All Gulf states except Kuwait participated in the latest Critical Minerals Ministerial in Washington, which aims to “reshape the global market for critical minerals and rare earths.” Gulf states are expected to participate in similar US-led initiatives throughout 2026, even as they avoid appearing too close to China. Yet as Washington and Beijing each try to loosen the other’s grip on the Gulf, both should remember that Gulf states retain agency. Their hedging strategy is neither opportunistic nor temporary, but a deliberate policy choice that will endure.



Ahmed Aboudouh is an associate fellow with the Chatham House Middle East and North Africa Programme, based in London.

### Dual-Use, Triple Gain: Scaling Agrivoltaics in MENA

The abundance of solar irradiation in the Middle East and North African (MENA) countries is both a blessing and a curse. The sun’s heat can be converted into solar energy, but also puts pressure on food production and water availability. Concurrent efforts to pursue clean energy targets and strengthen food and water security intensifies competition over scarce land. This is because commercial-scale solar facilities occupy large amounts of space, displacing land meant for agriculture.

Agrivoltaics (AV), the practice of co-locating solar panels on agricultural land, offers an intriguing and all-encompassing solution. Hovering just above the land, AV panels can protect crops and livestock from the heat, increasing water savings and agricultural productivity while generating electricity and income.
Agrivoltaics (AV), the practice of co-locating solar panels on agricultural land, offers an intriguing and all-encompassing solution. 
In a region with a solar surplus, coupled with rising water and energy pressures, agrivoltaics can be a viable strategy to build resilient water, energy, and food systems and bolster local livelihoods. This article assesses the region’s enabling environment and gaps shaping the adoption of AV and outlines policy recommendations to bolster its scaled-deployment. 
An Opportunity to Synchronise Water-Energy-Food Systems
The prospective agricultural, income, and energy benefits of AVs are significant. Evidence from studies evaluating AV applications in other settings show how solar panel shades create cooler microclimates for crops, improving soil moisture retention and reducing heat stress on photovoltaic modules. This reduces irrigation needs and promotes water efficiency. Farmers can sell the generated energy back to the grid, creating additional income as a buffer against erratic crop yields. Once scaled, AV improves energy independence for rural communities, with the potential to power irrigation and desalination systems and contribute to close-looped systems.
For instance, covering half of Jordan's tomato fields with solar PV panels could meet the nation’s 50 percent renewable energy target and save over 8percent of the country’s total water budget. 
While the evidence of AV’s physical feasibility in the MENA region looks  promising, its implementation remains few and far between. To illustrate, AV has the potential to increase land productivity by 35 to 73 percent, but few MENA countries have tapped into these benefits. Among the 12 MENA countries assessed, progress varies, ranging from feasibility studies forecasting AV potential in Jordan, Kuwait, Morocco, Saudi Arabia and Qatar to early-stage pilots underway in Algeria, Egypt and Lebanon (See Table). For instance, covering half of Jordan's tomato fields with solar PV panels could meet the nation’s 50 percent renewable energy target and save over 8percent of the country’s total water budget. Likewise, in Kuwait, pairing AV systems with solar-powered desalination is projected to increase net profit by US$1.1/m2 and reduce water usage by over 5 percent.



Country
AV Study, Pilot, and Commercial


Algeria
Pilot: AV farm in Cherchell, Algeria (2023)


Bahrain
Commercial: General Poultry Company and Mumtalakat agreement to install a 1.5 MWp rooftop solar farm in Hamala, Bahrain (2025)


Egypt
Pilot: Early-stage AV greenhouses in Qena, Menia, and Kaf El Sheikh, funded by Japan (2023)


Jordan
Study: 9.5 percent of Jordan’s land is suitable for AV. Potential to save between 4 and 8.6 percent of the country’s total water budget.

Pilot: MINARET Project in Karak Governorate includes a 3-MW solar plant providing local energy for the grid and nursery


Kuwait
Field-Scale Pilot Case Study: Integrated solar desalination and AV systems projected to increase net profit by $1.1/m2 and reduce water usage by 5.4 percent.


Lebanon
Pilot: 82kW AV pilot Zahle, Lebanon led by the UN (2023-2025)


Morocco
Study: Berkane (1.02 GWh/yr) and demonstrates 1.02 GWh/yr Kissane. Projected to be highly profitable due to feed-in-tariffs


Oman
Commercial: Agri-solar farming project with tech support from Singapore company (2025)


Qatar
Study: Potential for 15% of farmable land to help meet 4GW target and reduce water consumption by 10% and lettuce crop shading


Saudi Arabia
Study: AAV Tech demonstrates viability in Eastern Saudi Arabia with estimated levelised electricity and crop yield costs of 0.048 $/kWh and 0.50 $/kg for agrivoltaic system


Tunisia
-


United Arab Emirates
Pilot: Fujairah, UAE (field data indicates reliability and soil improvement) (2025)

Commercial: Masdar and Elite Agro Holding AV Project in Al Ain, UAE (2026)



Source: Author’s Own
What’s Keeping the Deployment of Agrivoltaics?
Piloting and scaling AVs not only requires contextualised planning, it involves aligning the needs of  local farmers and solar PV developers, meeting the market demands, and compliance with national and municipal policies. This analysis thus reveals key gaps and roadblocks to creating an enabling environment - 1)  lack of localised planning 2) siloed policies and 3) insufficient financing available for farmers and PV developers.

From a technical perspective,  the initial barrier is predominantly due to the absence of localised studies that examine AV’s impacts on regionally-grown crops, climate, and soil conditions. This is because not all crops can thrive under shaded conditions. For food and energy production to exist  in tandem, AV requires complicated system designs and customised  solar panel configurations. While research exists quantifying crop-PV compatibility in Europe, the US and China, further work is needed to develop a nuanced understanding on how solar irradiation levels, PV system height, water stress levels, and local crops interact, particularly for crops prioritised within the national food security strategies of Qatar, Saudi Arabia, and the broader GCC. Such research would help calculate optimal solar PV design configurations to prevent loss of crop yield. Co-creating designs with local farming communities will be paramount to assimilate traditional farming patterns and promote collective acceptance.

AV adoption also relies on regulatory clarity and synergies between policies around land-use, energy, and agriculture to succeed, but such frameworks operate in silos  in MENA. For instance, Morocco’s Green Generation 2020-2030 Strategy supports farmers to shift towards renewable energy by subsidising solar irrigation adoption and encouraging resilient agricultural practices. However, existing land policies do not address whether solar PV and agricultural production can exist on the same land. Without clear dual land-use policies, conflict between solar developers and farmers can occur when re-distributing profits, since developers seek returns on infrastructure investment and farmers want improved agricultural productivity.

Without favorable energy policies and adequate financing incentives, AV deployment will prove costly, especially for lower to middle-income MENA countries. Although solar costs have declined significantly, constructing agrivoltaic systems tends to cost  between 4 to 52 percent more compared to conventional PV solar installations due to  added requirements for customised parts. To illustrate, AVs in Morocco’s Kissane, are projected to be highly profitable due to feed-in-tariffs, while heavily subsidised fossil-fuel based power reduces AV cost feasibility in Bouda, Algeria. In contrast, partnerships between farming companies and sovereign wealth funds in the Gulf have unlocked recent partnerships to build commercial-scale AV systems in Bahrain, Oman, and the UAE.
Recommendations to Nurture an Enabling Environment
Between 2025 and 2031, the MENA agrivoltaics market is projected to grow from US$1.4 billion to US$6.9 billion, but seizing this opportunity requires coordination between technical, policy, and financing considerations. 

Technical: Develop cooperative stakeholder systems based on local research and that involves development institutions, farming communities, solar PV developers, and municipal government bodies. Encourage co-designing processes centered around farmer concerns. Integrate locally-rooted farming strategies to assess ecosystem impacts, inform and identify compatible solar PV designs, which will boost long-term farmer adoption, crop productivity, and energy generation. Regional institutes practicing such an approach include the International Center for Agricultural Research in the Dry Areas and King Abdullah University of Science and Technology. Liaising between MENA and other regions to establish field-validation frameworks that can measure impacts across different crop types and climatic zones would ease concerns around their adoption.

Policy: Stronger integration across agriculture, water, energy, and finance ministries would help to develop policy frameworks that streamline permitting processes and evaluate tradeoffs and opportunities within food, water, and energy planning. Policy frameworks could include mandates delineating the process and conditions for dual farm and agrivoltaic land-use. Legally recognising AV as a permitted dual land-use strategy would bring in  regulatory certainty and draw in private sector investment.
With adequate localised research and mapping of joint capacity building efforts, policy synchronisation, and targeted financing incentives, the MENA region will not have to choose between land and light as it can start harvesting both.
Finance: Establish public financing incentives to encourage AV implementation and attract large-scale private finance. Integrating feed-in-tariffs or subsidies for AV equipment is a good starting point. These can be further supplemented with  creating revenue and risk-sharing mechanisms between Agri-PV ventures and farmers to address early-stage financial uncertainty. This would allow profits to either be redistributed to local farmers or pooled into a fund to finance  village-level services. Instituting policy mechanisms that allows farmers to sell solar back to the grid will also help increase farmer interest and assure compensation. Establishing public-private partnerships with firms in other countries, such as Singapore and Japan, who have successfully spearheaded AV initiatives would facilitate financing flows and technical knowledge transfer.
Achieving the Triple Synergy
Given the region’s increasing emphasis on energy independence and strengthening food and water security, agrivoltaics offers a compelling solution to synergise between the water-energy-food trifecta by transforming resource competition into system circularity. With adequate localised research and mapping of joint capacity building efforts, policy synchronisation, and targeted financing incentives, the MENA region will not have to choose between land and light as it can start harvesting both.



Leigh Mante, Junior Fellow, Climate and Energy, ORF Middle East

### Turning Risks into Opportunities

Education, skills, labor, and immigration have historically functioned as critical drivers of economic growth, productivity, social development, and innovation. These domains are closely interlinked and their evolution and prospects should therefore be assessed in relation to one another.
Looking ahead to 2026, geopolitical fragmentation, economic uncertainty, climate crisis, and technological disruption, which have generated global instability, are expected to have long-term consequences for the future of these critical domains. Escalating crises and tectonic shifts threaten progress in human capital development worldwide. Advancements in technology, the advent of artificial intelligence (AI), the climate crisis, and the energy transition are reshaping labor markets, creating both redundancies and opportunities. Meanwhile, the rise of anti-immigration populism, stricter compliance frameworks, alongside a growing demand for highly-skilled migrants is collectively transforming international mobility patterns.

Advancements in technology, the advent of artificial intelligence (AI), the climate crisis, and the energy transition are reshaping labor markets, creating both redundancies and opportunities. Meanwhile, the rise of anti-immigration populism, stricter compliance frameworks, alongside a growing demand for highlyskilled migrants is collectively transforming international mobility patterns.
The stakes are higher for the Global South, with its large youth populations and significant gaps in education, skills, and employment. Data from the World Economic Forum (2025) shows that rates of youth not in employment, education, or training (NEET) range between 25 to 27 per cent in low and middle-income economies compared to 10 to 17 per cent in high and upper-middle-income economies.[1] Countries of the Global South are source economies for outward migration and depend on labor mobility for remittances, skills flows, household welfare, and public finances.[2]
In the midst of rising uncertainty, Global South countries are pursuing their own pathways, seeking to transform risks into opportunities. For example, in education, countries are rapidly embracing AI to leapfrog traditional barriers in access, quality, and personalization.[3] Similarly, they are investing in green skills; from solar panel installation to conservation management, so that workforces can seize new opportunities in the green transition.[4] Countries such as India, Vietnam, and Bangladesh have begun converting demographic potential into productivity gains through export diversification and industrial upgrading.[5],[6],[7] They are harnessing multilateral forums to voice their concerns, like the G20 Labour and Employment Minster’ Declaration 2025, under the South African presidency, which calls for stronger labor mobility partnerships between surplus and ageing economies to address demographic asymmetries.[8]

The Global South is turning to newer models of South– South collaboration and regional partnerships, which are increasingly recognized as strategic mechanisms to jointly address challenges.
Faced with greater challenges, the Global South is turning to newer models of South–South collaboration and regional partnerships, which are increasingly recognized as strategic mechanisms to jointly address challenges. These models tend to be financially prudent, contextually relevant and culturally adapted, and crucially, they help diversify options rather than relying predominantly on Western approaches.

1. Digital Technology and AI Will Expand Access to Education
By 2033, the Global South is projected to account for 1.2 billion youths aged 15–24, yet only 480 million are projected to be enrolled in school, and about 420 million to secure employment, leaving nearly 300 million young people facing severely constrained opportunities.[9] Equipping them with quality education and relevant skills is crucial. Driven by the rapid expansion of internet access and smartphones, the rise of digital public infrastructure, and post-pandemic shifts in learning, countries across the Global South are utilizing technology to address education gaps.
Reports released in 2025 by UNESCO and Microsoft highlight sub-Saharan Africa, Latin America, and South Asia as key regions where AI-driven learning platforms are being expanded to address fundamental gaps in teacher capacity, instructional materials, and student engagement.[10],[11] Joint declarations by forums such as BRICS and ASEAN identify teacher training and ethical use of AI as strategic goals.[12],[13] Given the persistent digital divides across regions, ensuring that digital and AI solutions in education systems remain locally adapted and community- rooted will be crucial.

2. Industry 4.0 And Advanced Technical Skills Will Drive the Skilling Agenda
The sharpest divide in labor markets of the future is likely to emerge between workers who can operate in Industry 4.0 environments such as AI, data, advanced manufacturing, and cyber-physical systems, and workers who lack these capabilities. The Future of Jobs Report 2025 projects a net increase of around 170 million jobs this decade, but with over one-fifth of current roles subject to disruption, and the fastest growth in technology and AI-intensive occupations.[14] The United Nations Industrial Development Organization (UNIDO) notes that high-wage manufacturing and services jobs are expected to increasingly require advanced digital and STEM capabilities, with skills bottlenecks likely to be more pronounced in developing countries.[15]

The sharpest divide in labor markets of the future is likely to emerge between workers who can operate in Industry 4.0 environments such as AI, data, advanced manufacturing, and cyberphysical systems, and workers who lack these capabilities.
In response, the Global South is increasingly utilizing Global Capability Centres (GCCs) and similar hubs to build Industry 4.0 talent pools. India currently hosts more than half of the world’s GCC, driven by cost advantages and a strong talent base. In 2025, the World Bank’s analysis on AI readiness underscores how advanced digital skills are becoming concentrated in a few emerging hubs.[16] Echoing this, the 2024 ASEAN–India Joint Statement on Advancing Digital Transformation recognises “the significant role of digital public infrastructure (DPI) in catalysing digital transformation and promoting inclusivity, efficiency, and innovation in public service delivery.”[17] Similarly, the African Union’s Digital Transformation Strategy for Africa (2020–2030) identifies digital skills and human capacity as one of its core pillars.[18]

The Global South is increasingly utilizing Global Capability Centres (GCCs) and similar hubs to build Industry 4.0 talent pools.
3. Platform Work Will Power Labor Markets but Will Need Responsive Regulation
A majority of young workers in the Global South remain employed in informal, insecure jobs. These concerns are reflected in the UN Population Fund’s 2025 Demographic Outlook and the African Union’s Labour Migration Strategy (2024–2030), which highlight youth employment and mobility governance.[19],[20] Platform work and the digital economy function as critical drivers of employment and income growth across the Global South, a trend expected to intensify in 2026. India currently has 7.7–8 million gig workers, projected to reach 23–24 million by 2030.[21] In Southeast Asia, digital labor platforms have expanded rapidly, boosting household consumption.[22]

Platform work and the digital economy function as critical drivers of employment and income growth across the Global South, a trend expected to intensify in 2026.
Global frameworks such as the ILO–OECD Global Policy Framework on Decent Work in the Digital Economy (2025)[23] and the BRICS Declaration on Platform Labour (2024)[24] underscore fair wages, portable social protection, algorithmic transparency and collective bargaining as essential safeguards. India has introduced new labor codes that provide legal regulation and social security to platform workers.

4. South-South Migration Will Continue to Expand, Driven by Pressures of Climate and Conflict
Countries in the Global South account for at least 40 percent of all international migrants.[25] However, migration analysis remains constrained by the scarcity of quality data. Persistent conflict, climate stress, and economic fragility remain key drivers pushing people to migrate or seek refuge across borders.[26] Intra-regional South-South migration has surpassed North-bound flows, especially in Africa, with 15 million Africans residing in other African countries.[27] Frameworks like the ECOWAS (Economic Community of West African States) play an important role in continental mobility by enabling free movement protocols.[28] The ASEAN, through declarations and programs promotes safe labor migration.[29],[30]

Intra-regional South-South migration has surpassed North-bound flows, especially in Africa, with 15 million Africans residing in other African countries.
Like the North, countries of the Global South have tightened border controls and compliance rules, while promoting localization policies. Climate change represents another significant driver of migration and is expected to displace nearly 143 million people in the region by 2050.[31] Regional initiatives like the ASEAN Declaration on the Protection of Migrant Workers, Abu Dhabi Dialogue, and Colombo Process promote cooperation on migration, though they remain largely consultative and weakly enforced.[32],[33],[34]

Like the North, countries of the Global South have tightened border controls and compliance rules, while promoting localization policies. Climate change represents another significant driver of migration and is expected to displace nearly 143 million people in the region by 2050.
Conclusion
Looking ahead to 2026, several trends are becoming more evident. In education, digital technology and AI are expected to widen access and personalize learning. In skilling, the advance of Industry 4.0 is expected to increase demand for advanced technical capabilities. In labor markets, platform work is projected to expand further, creating new jobs while underscoring the need for stronger protections for workers. In immigration, South–South mobility is expected to rise further as climate stresses, economic fragility, and conflict intensify. These trends carry both opportunity and risk. By reorienting national priorities to these shifts and aligning these priorities with deeper regional cooperation, the Global South may build shared frameworks that reflect its diverse realities and aspirations.




Endnotes
[1] World Economic Forum. 2025. The Future of Jobs Report 2025. Geneva: World Economic Forum. https://reports.weforum.org/docs/WEF_Future_of_Jobs_Report_2025.pdf
[2] Ratha, Dilip, Sonia Plaza, and Eung Ju Kim. 2024. “In 2024, Remittance Flows to Low- and Middle-Income Countries Are Expected to Reach $685 Billion, Larger than FDI and ODA Combined.” Blog, December 18, 2024. World Bank. https://blogs.worldbank.org/en/peoplemove/in-2024--remittance-flows-to-low--and-middle-income-countries-ar
[3] Tulsyan, Arpan. 2025. “How AI Can Deliver Quality Learning at Scale.” ORF Expert Speak, September 23, 2025. https://www.orfonline.org/expert-speak/how-ai-can-deliver-quality-learning-at-scale
[4] Boston Consulting Group. 2024. Powering Futures: The Green Skilling Opportunity. Boston Consulting Group.
https://web-assets.bcg.com/b9/d3/32793bb54b1fba468efdcdea040a/powering-futures-the-green-skilling-opportunity-1.pdf
[5] World Bank. 2024. India Development Update: India’s Trade Opportunities in a Changing Global Context. Washington, D.C.: World Bank. https://documents1.worldbank.org/curated/en/099513209032434771/pdf/IDU-13d06cd8-0fec-465e-a7e3-8a711ea131b8.pdf
[6] Chaponnière, Jean-Raphaël, and Jean-Pierre Cling. 2009. “Vietnam’s Export-Led Growth Model and Competition with China.” Économie internationale 118 (2009): 101–130. https://www.cepii.fr/ie/rev118/chaponnierecling.pdf
[7] World Bank. 2017. “Creating Jobs and Diversifying Exports in Bangladesh.” World Bank Features, November 14, 2017. https://www.worldbank.org/en/news/feature/2017/11/14/creating-jobs-and-diversifying-exports-in-bangladesh
[8] G20. 2025. G20 2025 Labour and Employment Ministerial Declaration. August 2025. https://g20.org/wp-content/uploads/2025/08/G20-2025-Labour-and-Employment-Ministerial-Declaration.pdf
[9] World Bank. 2025. Making Labor Markets Work for the Youth: Supporting Effective Youths’ Transitions into the Labor Market. Washington, D.C.: World Bank. https://documents1.worldbank.org/curated/en/099021125105022888/pdf/P506693-8b3df9d1-41d8-473e-945c-7d8119cbf29b.pdf
[10] UNESCO. 2025. “Digital Learning Week.” UNESCO. https://www.unesco.org/en/weeks/digital-learning
[11] Microsoft. 2025. 2025 AI in Education: A Microsoft Special Report. Microsoft. https://cdn-dynmedia-1.microsoft.com/is/content/microsoftcorp/microsoft/bade/documents/products-and-services/en-us/education/2025-Microsoft-AI-in-Education-Report.pdf
[12] BRICS. 2025. “BRICS Sign Joint Declaration on Artificial Intelligence in Education, Formalize Technical and Vocational Cooperation Alliance.” June 10, 2025. https://brics.br/en/news/brics-sign-joint-declaration-on-artificial-intelligence-in-education-formalize-technical-and-vocational-cooperation-alliance
[13] EUinASEAN. 2025. “Empowering ASEAN’s Future Through Inclusive Higher Education.” EUinASEAN, accessed December 3, 2025. https://euinasean.eu/empowering-aseans-future-through-inclusive-higher-education/
[14]
World Economic Forum. 2025. “The Jobs of the Future — and the Skills You Need to Get Them.” World Economic Forum Stories, January 8, 2025. https://www.weforum.org/stories/2025/01/future-of-jobs-report-2025-jobs-of-the-future-and-the-skills-you-need-to-get-them/
[15] United Nations Industrial Development Organization (UNIDO). 2018. Industry 4.0 – The Opportunities Behind the Challenge. Vienna: UNIDO. https://www.unido.org/sites/default/files/files/2018-11/UNIDO_GC17_Industry40.pdf
[16] World Bank. 2025. Digital Progress and Trends Report 2025: Strengthening AI Foundations. Washington, D.C.: World Bank. https://www.worldbank.org/en/publication/dptr2025-ai-foundations
[17] ASEAN–India. 2024. ASEAN-India Joint Statement on Advancing Digital Transformation. October 10, 2024. https://www.mea.gov.in/bilateral-documents.htm?dtl%2F38397%2FASEANIndia_Joint_Statement_on_Advancing_Digital_Transformation=
[18] World Bank. 2025. Digital Progress and Trends Report 2025: Strengthening AI Foundations. Washington, D.C.: World Bank. https://www.worldbank.org/en/publication/dptr2025-ai-foundations
[19] United Nations Population Fund (UNFPA). 2025. The Real Fertility Crisis: The Pursuit of Reproductive Agency in a Changing World — 2025 State of World Population (SWP) Report. New York: UNFPA. https://www.unfpa.org/swp2025
[20] ECOWAS. 2025. ECOWAS Labour Migration Strategy and Action Plan (2025–2035). African Union / ECOWAS. https://www.au.int/en/documents/20250515/ecowas-labour-migration-strategy-and-action-plan-2025-2035 au.int+1
[21] NITI Aayog. India’s Booming Gig and Platform Economy: Perspectives and Recommendations on the Future of Work. June 2022. Government of India. https://www.niti.gov.in/sites/default/files/2022-06/25th_June_Final_Report_27062022.pdf
[22] Mohamad, Muhamad Nazrin Farhan, Masturah Ma’in, Nur Azirah Zahida Mohamad Azhar, and Akhmad Akbar Susamto. “The Impact of Digital Economy and Net Export of Goods and Services Towards Employment in the Selected Southeast Asia Countries.” Information Management and Business Review 16, no. 3 (2024): 753–762. https://ideas.repec.org/a/rnd/arimbr/v16y2024i3p753-762.html
[23] International Labour Organization. Realizing Decent Work in the Platform Economy (Report V(1), ILC.113). Geneva: International Labour Organization, 2024. https://www.ilo.org/sites/default/files/2024-07/ILC113-V%281%29-%5B-WORKQ-231121-002%5D-Web-EN.pdf
[24] International Labour & Employment Ministers of BRICS. Declaration of the 14º BRICS Labour and Employment Ministers’ Meeting. Brasília, April 25, 2025. Accessed November 28, 2025. http://brics.br/en/documents/economy-finance-trade-and-infrastructure/declaration-of-the-14o-brics-labour-and-employment-ministers-meeting.pdf/@@download/file
[25] Schewel, Kerilyn, and Alix Debray. 2023. “Global Trends in South–South Migration.” In The Palgrave Handbook of South–South Migration and Inequality, 153–181. Cham: Springer. https://link.springer.com/chapter/10.1007/978-3-031-39814-8_8
[26] Economic Community of West African States (ECOWAS). 2025
[27] ECOWAS. 2025. ECOWAS Labour Migration Strategy and Action Plan (2025–2035).
[28] Williams, Wendy. 2025. “African Migration Trends to Watch in 2025.” Africa Center for Strategic Studies – Spotlight. https://africacenter.org/spotlight/migration-trends-2025/
[29] Association of Southeast Asian Nations (ASEAN). 2018. ASEAN Consensus on the Protection and Promotion of the Rights of Migrant Workers. Jakarta: ASEAN. https://asean.org/wp-content/uploads/2021/01/3.-March-2018-ASEAN-Consensus-on-the-Protection-and-Promotion-of-the-Rights-of-Migrant-Workers.pdf
[30] ASEAN. 2021. ASEAN Labour Ministers’ (ALM) Work Programme 2021–2025. Jakarta: ASEAN Secretariat. https://asean.org/wp-content/uploads/ALM-Work-Programme-2021-2025-Final-July-2021_rev_.pdf
[31] Almulhim, Abdulaziz I., et al. 2024. “Climate-Induced Migration in the Global South: An In-Depth Analysis.” npj Climate Action 3 (47). https://doi.org/10.1038/s44168-024-00133-1
[32] Association of Southeast Asian Nations (ASEAN). 2023. ASEAN Declaration on the Protection of Migrant Workers’ Family Members in Crisis Situations and Its Guidelines. Jakarta: ASEAN Secretariat. https://asean.org/wp-content/uploads/2023/11/ASEAN_Declaration_on_the_Protection_of_Migrant_Workers_Family_Members-in-Crisis-Situation-and-its-Guidelines.pdf
[33] Migrant Forum in Asia (MFA). 2025. “Abu Dhabi Dialogue.” MFA. https://mfasia.org/mfa_programs/advocacy/abu-dhabi-dialogue
[34] International Organization for Migration (IOM). 2018. Colombo Process — Regional Consultative Process on Labour Migration: Brief. IOM. https://www.iom.int/sites/g/files/tmzbdl2616/files/2018-07/colombo_process_brief.pdf

### Convergence of Transitions

The pursuit of the Sustainable Development Goals by 2030 underscores the growing interlinkages of food, health, and urban systems that are increasingly recognized as a defining megatrend for 2026. These systems can be conceptualized as an intricately connected living infrastructure for life and livelihoods in an era of poly- crisis.[1] For the Global South, the complexity is heightened by the interaction of climate change, rapid urbanization, evolving consumption patterns, and emerging health concerns that raise critical questions regarding the sustainability of the business-as-usual developmental pathways. A distinctive feature of the year 2026 is the convergence of several transitions: food systems are being reshaped by regenerative practices and digital technologies, health governance is undergoing reform within a post-pandemic framework, and cities are simultaneously sites of vulnerability and centers of innovation.

Agriculture in 2026 is expected to be reshaped by the ongoing shift from an extractive, yield-maximizing paradigm to a regenerative, resilience-focused approach.
Transition from Extraction to Regeneration
Agriculture in 2026 is expected to be reshaped by the ongoing shift from an extractive, yield-maximizing paradigm to a regenerative, resilience-focused approach that seeks to address the present-day challenges of climate change, soil health degradation, and rising input costs. This trend is reflected in the G20 Agriculture Ministers’ Declarations of Brazil (2024)[2] and South Africa (2025)[3] which emphasize increasing food and nutrition security, climate resilience, and empowerment of smallholders. Impacts of climate change, characterized by rising temperatures, erratic precipitation, and extreme weather events, are now recognized as critical stressors affecting agricultural productivity, food prices, and rural livelihoods across tropical regions, particularly in Africa and South Asia, where smallholders dominate production. The situation has been exacerbated by decades of unsustainable soil and water management practices.[4]

The interaction of climate change, rapid urbanization, evolving consumption patterns, and emerging health concerns raise critical questions regarding the sustainability of business-as-usual developmental pathways.
Climate-smart and precision agriculture have emerged as response mechanisms to these stressors and are expected to occupy a more prominent role in 2026. Internet of Things (IoT) sensors, drones, and AI-driven analytics are being deployed to optimize input use and adapt to microclimatic variation.[5] The global precision farming market is projected to exceed USD 21 billion by 2032, signaling the rapid diffusion of digital technologies into agriculture. This technological transformation, however, may widen disparities between capital-intensive and smallholder systems unless accompanied by inclusive access to finance and digital infrastructure.[6]

The overarching megatrend is climate-resilient diversification, moving from crop monocultures towards polycultures of practices, technologies, and diets.
The rise of regenerative agriculture is associated with practices such as cover cropping, reduced till-age, and carbon-sequestering soil management.[7] Consumer demand for low-carbon food systems, corporate commitments to net-zero supply chains, and policy incentives are driving this shift.[8]
Dietary transitions constitute another prominent dimension. With urbanization and rising incomes, protein-rich and plant-based diets; ranging from lab- grown meat to insect-based proteins, are reshaping markets.[9] These trends, though initially driven by the Global North, are becoming prominent in middle-income economies, contributing to food systems diversification. The overarching megatrend is climate-resilient diversification, moving from crop monocultures towards polycultures of practices, technologies, and diets.[10]

2. Equity In an Emerging Global Health Order
In 2025, the WHO Pandemic Agreement (adopt- ed at the 78th World Health Assembly) set out equity, access, and benefit-sharing as structural principles for pandemic preparedness. Though the treaty’s annexes on financing and pathogen-sharing remain under negotiation, the evidence indicates that the post-COVID health order is being reframed through a Global South lens, prioritizing sovereignty, fairness, and distributed manufacturing.[11] This background signals four megatrends expected to stand out in health systems in 2026. Taken together, these health megatrends indicate a decisive shift from emergency-driven aid dependency to structural resilience rooted in digital transformation.
The first megatrend will be a marked shift towards regional and domestic Health Sovereignty away from external reliance on aid. A substantial 70 percent de- cline in Official Development Assistance in health to Africa between 2021 and 2025 has prompted African nations to move towards domestic resource mobilization and self-reliance.[12] This structural shift will define how Global South nations finance public health over the next decade. The G20 South Africa 2025 health track[13] reinforced this narrative, emphasizing equitable access, local production, and regulatory harmonization across developing regions.

A substantial 70 percent decline in Official Development Assistance in health to Africa between 2021 and 2025 has prompted African nations to move towards domestic resource mobilization and self- reliance. This structural shift will define how Global South nations finance public health over the next decade.
The second megatrend will be the integration of climate and health. With the Belém Health Action Plan (COP30, 2025), health is now formally integrated into the UNFCCC process for the first time.[14] The plan’s focus on climate-resilient health systems, com- munity adaptation, and equity-based governance ac- knowledges that climate is now a public health driver as much as an environmental one. Heatwaves, vector-borne diseases, and food insecurity are interconnected threats that disproportionately affect tropical populations.
The third megatrend will be treating Digital Health as a Global Public Good. In line with the 2023 G20 New Delhi Declaration[15] , the WHO’s Global Digital Health Strategy was extended through 2027, alongside the continuation of the Global Initiative on Digital Health.[16] This demonstrates a growing acceptance that digital infrastructure, in the form of interoperable data systems, telemedicine platforms, and AI-based diagnostics, constitutes a new dimension of public health infrastructure.[17] In the Global South, while digital health can help bridge the traditional institutional gaps, its success will depend on equitable digital access and governance frameworks.
The fourth megatrend will be increased global attention on non-communicable diseases and mental health. The 2025 UN High-Level Meeting set historic 2030 targets: 150 million fewer tobacco users, 150 million additional people with controlled hyper-tension, and 150 million more with access to mental health care.[18] However, the weakening of excise-tax measures and political divisions highlight the challenge of aligning global ambition with domestic policy action.

3. Urbanization: The Next Frontier of Human Adaptation and Innovation
By 2026, nearly 60 per cent of the world’s population will live in cities, driven by urbanization in Africa and Asia. This is a demographic certainty and a sustainability challenge.

Cities remain at the forefront of climate impacts. The estimated financing needs for climate-resilient infrastructure substantially exceed existing allocations.
The following megatrends may unfold.
First, cities remain at the forefront of climate impacts. The estimated financing needs for climate-resilient infrastructure substantially exceed existing al- locations USD 4.5–5.4 trillion annually compared to current financing levels of USD 831 billion[19]. The deficit disproportionately affects low-income cities, resulting in heightened flood risk, heat exposure, and chronic infrastructure gaps.[20]
Second, technological transformation involving AI-enabled mobility, IoT-based water and waste systems, integrated command centres, among other applications, will continue to spread unevenly.  The digital divide will widen between well-resourced metropolitan regions and fiscally stressed emerging cities. In India, tier II and III cities may emerge as real estate and industrial hubs,[21] but will continue to face limited planning capacity and persistent fiscal fragility.[22]
Third, urban mobility challenges are intensifying globally. Even as countries invest in green transit systems, the growth of private vehicles in emerging economies may offset these gains.[23] In response, transit-oriented  development  is expected to gain traction  as a planning model that integrates housing, commercial, and transit infrastructure within com- pact, high-density nodes.[24] Simultaneously, cities are adopting  circular  water systems[25] (e.g., in Urban Local Bodies in Maharashtra, India) and Sponge City models (e.g., Guangzhou  in China) to enhance cli- mate resilience.[26]
Fourth, the most intense urban megatrend for 2026 will be the inequality–climate–health nexus. Urban heat island expansion,[27] slum vulnerabilities,[28] and exclusion from adaptive infrastructure are expected to generate new layers of socio-environmental risk. How cities in the Global South address these challenges will depend on how they reimagine infrastructure, finance, and inclusion under climatic and demographic pressure.

The most intense urban megatrend for 2026 will be the inequality–climate–health nexus.
Outlook 2026: Toward An Equitable Transition
The discussions above indicate that 2026 is expected to see the co-evolution of the three intricately linked systems, with increasing convergence of resilience, distributive justice, and innovation shaping the contours of the development trajectory of the Global South. The first transformative pattern is resilient regeneration, involving efforts to restore ecosystems, communities, and institutional trust, marking a paradigm shift from traditional extractive practices. The second transformation is characterized by a more assertive Global South, becoming increasingly visible in the global economic order through regional manufacturing, domestic financing, and south-south cooperation in health, food, and urban innovation. The third transformation is the recognition of technology as a global public good in all three interconnected domains, requiring new governance architectures that prioritize inclusion and human dignity.

Conclusion: Systems Thinking for Complex Futures
The interconnected and uncertain trajectories of agriculture, health, and urbanization converge into complex challenges. Understanding them requires a systems-thinking approach, one that acknowledges feedback loops, cascading risks, and the interdependence of human, ecological, and economic systems.
Seen through this lens, the megatrends shaping the upcoming years are not linear predictions but un- folding networked transitions. In this intricate loop, climate change functions as the meta-driver, digital transformation serves as both catalyst and challenge, while finance and equity run across all these domains. Finally, demographic shifts and consumption patterns sustain the cycle. All these highlight the Global South’s structural dilemma—mobilizing resources without entrenching dependency or asymmetry.
Going forward, stronger Global South cooperation, driven by the post-COP30 momentum and India’s BRICS presidency in 2026, may enable the pooling of knowledge, finance, and technology to jointly advance resilient agriculture, equitable health systems, and sustainable urbanization, reshaping shared development pathways in 2026.




Endnotes
[1] Kate Whiting, “We’re in a ‘polycrisis’ – a historian explains what that means,” World Economic Forum, March 7, 2023, https://www.weforum.org/stories/2023/03/polycrisis-adam-tooze-historian-explains/.
[2] G20 Agriculture Ministers. 2024. G20 Agriculture Ministers’ Declaration, Chapada dos Guimarães, Brazil, 12–13 September 2024. G20-Brazil Sherpa Track. Available at: https://g7g20-documents.org/database/document/2024-g20-brazil-sherpa-track-agricultural-ministers-ministers-language-g20-agriculture-ministers-declaration
[3] G20 Agriculture Ministers. 2025, G20 Agriculture Ministers’ Meeting Outcome Document and Chair’s Summary, Cape Town, Western Cape Province, South Africa, 18–19 September 2025, G20. Available at: https://g20.org/g20-media/g20-agriculture-ministers-meeting-outcome-document-and-chairs-summary-cape-town-western-cape-province-south-africa/
[4] Abdikarim Abdullahi Farah et al., “The Multifaceted Impact of Climate Change on Agricultural Productivity: A Systematic Literature Review of SCOPUS-Indexed Studies (2015–2024),” Discover Sustainability 6 (1), 2025, https://link.springer.com/article/10.1007/s43621-025-01229-2.
[5] The World Bank, “Climate-Smart Agriculture,” World Bank, February 26, 2024, https://www.worldbank.org/en/topic/climate-smart-agriculture.
[6] Mimansha Raj and M. Prahadeeswaran, “Revolutionizing Agriculture: A Review of Smart Farming Technologies for a Sustainable Future,” Discov Appl Sci 7, 937, 2025. https://link.springer.com/article/10.1007/s42452-025-07561-6#citeas.
[7] Alam Sher et al., “Importance of Regenerative Agriculture: Climate, Soil Health, Biodiversity and Its Socioecological Impact,” Discover Sustainability 5 (1), 2024, https://doi.org/10.1007/s43621-024-00662-z.
[8] “Regenerative Agriculture: The Path to Sustainable Production - Center for Carbon Research in Tropical Agriculture at the University of São Paulo (CCARBON/USP),” Ccarbon.usp.br, January 15, 2025, https://ccarbon.usp.br/regenerative-agriculture-the-path-to-sustainable-production/.
[9] Florence Akinmeye et al., “What Factors Influence Consumer Attitudes towards Alternative Proteins?,” Food and Humanity, 3 (100349–49), 2024, https://www.sciencedirect.com/science/article/pii/S2949824424001241?via%3Dihub.
[10] Grand View Research, “Plant-Based Meat Market (2024-2030),” Www.grandviewresearch.com, 2023, https://www.grandviewresearch.com/industry-analysis/plant-based-meat-market
[11] World Health Organization, “World Health Assembly Adopts Historic Pandemic Agreement to Make the World More Equitable and Safer from Future Pandemics,” News release, 20 May 2025, https://www.who.int/news/item/20-05-2025-world-health-assembly-adopts-historic-pandemic-agreement-to-make-the-world-more-equitable-and-safer-from-future-pandemics
[12] Africa Centres for Disease Control and Prevention, “Africa’s Health Financing in a New Era,” News item, April 3, 2025, https://africacdc.org/news-item/africas-health-financing-in-a-new-era-april-2025/
[13] Government of South Africa, Department of Health, “Health Hosts 4th G20 Health Working Group Meeting, 10 to 13 June,” Media advisory, June 5, 2025, https://g20.org/g20-media/health-hosts-fourth-g20-health-working-group-meeting/
[14] World Health Organization, “Health at COP30,” https://www.who.int/teams/environment-climate-change-and-health/climate-change-and-health/advocacy-partnerships/talks/health-at-cop30
[15] G20, “G20 New Delhi Leaders’ Declaration,” September 9, 2023, https://www.mea.gov.in/Images/CPV/G20-New-Delhi-Leaders-Declaration.pdf
[16] World Health Organization, “World Health Assembly Endorses Extension of the Global Digital Health Strategy to 2027,” News release, May 23, 2025, https://www.who.int/news/item/23-05-2025-world-health-assembly-endorses-extension-of-the-global-digital-health-strategy-to-2027
[17] World Health Organization, “Global Initiative on Digital Health (GIDH): Events,” accessed October 2025, https://www.who.int/initiatives/gidh/events
[18] World Health Organization, “World Leaders Show Strong Support for Political Declaration on Noncommunicable Diseases and Mental Health,” News release, September 26, 2025, https://www.who.int/news/item/26-09-2025-world-leaders-show-strong-support-for-political-declaration-on-noncommunicable-diseases-and-mental-health
[19] United Nations Human Settlements Programme, World Cities Report 2024: Cities and Climate Action, Nairobi, UN-Habitat, 2024, https://unhabitat.org/sites/default/files/2024/11/wcr2024_-_full_report.pdf
[20] World Cities Report 2024: Cities and Climate Action
[21] Oxford Economics, Global Cities Index 2025, London, Oxford Economics, May 2025, https://www.oxfordeconomics.com/wp-content/uploads/2025/05/OEGCI2025.pdf
[22] Nripendra P. Rana, Sunil Luthra, Sachin K. Mangla, Rubina Islam, Sian Roderick, and Yogesh K. Dwivedi, “Barriers to the Development of Smart Cities in Indian Context,” Information Systems Frontiers 21, no. 3 (2019): 503–525, https://www.researchgate.net/publication/326706068_Barriers_to_the_Development_of_Smart_Cities_in_Indian_Context
[23] Vinod Shah, “Urban Mobility – Challenges and Solutions,” Urban Transport News, May 24, 2023, https://www.urbantransportnews.com/article/urban-mobility-challenges-and-solutions
[24] CBRE Research, Billions in Transit: Assessing the Impact of Transit Oriented Development on Indian Cities, 2025, https://www.scai.in/wp-content/uploads/2025/09/Transit_Oriented_Development.pdf
[25] Promoting circular economy: Maharashtra cabinet approves policy to process & reuse sewage and wastewater for 424 urban local bodies,” Times of India, Mumbai, October 7, 2025, https://timesofindia.indiatimes.com/city/mumbai/promoting-circular-economy-maharashtra-cabinet-approves-policy-to-process-reuse-sewage-and-wastewater-for-424-urban-local-bodies/articleshow/124367357.cms
[26] Stefan Rau, Sponge Cities: Integrating Green and Gray Infrastructure to Build Climate Change Resilience in the People’s Republic of China, ADB Briefs No. 222, Asian Development Bank, November 2022, https://www.adb.org/sites/default/files/publication/838386/adb-brief-222-sponge-cities-prc.pdf
[27] Yuan Yuan et al., “Surface urban heat island effects intensify more rapidly in lower income countries,” npj Urban Sustainability 5, Article 11 (2025), https://www.nature.com/articles/s42949-025-00198-9
[28] Camila Tavares P et.al, “A global (South) collective burden: A systematic review of the current state of climate-related hazards in informal settlements”, International Journal of Disaster Risk Reduction, Volume 114 (2024), https://www.science-direct.com/science/article/pii/S2212420924007027 .

### Hanging in The Balance

According to the United Nations Environment Programme’s Emissions Gap Report 2024,1 the full implementation of unconditional or conditional Nationally Determined Contribution (NDC) scenarios is projected to lower global warming to 2.8°C and 2.6°C respectively over the course of the century, demonstrating that we remain clearly off-track in meeting the goals of the Paris Agreement to limit temperature rise to 1.5°C above pre-industrial levels. As of June 2024,2 101 parties covering approximately 82 per cent of global greenhouse gas emissions have adopted net-zero pledges either in law, in a policy document or via a high-level government announcement.
Yet as we enter 2026, climate and energy policies are being shaped not only by decarbonization imperatives. Geopolitical upheaval, technological com-petition, economic transformation, supply chain resilience, and national security concerns are exerting influence over the future of energy and climate policies worldwide. For the Global South, these present both unprecedented opportunities and enduring vulnerabilities—calling for a delicate balance between access, affordability, and industrial competitiveness.


Geopolitical upheaval, technological competition, economic transformation, supply chain resilience, and national security concerns are exerting influence over the future of energy and climate policies worldwide

1. Deepening Divergences in Energy and Climate Policy
The fierce pursuit of energy security; intensified since the Covid-19 pandemic and the conflicts in Eu-rope and the Middle East, has evolved into political narratives centered on energy sovereignty and dominance. Early in 2025, for instance, the United States (US) established a National Energy Dominance Council[1] to restore American energy dominance and expand American energy production. While renew-able energy additions have expanded at record levels, fossil fuels continue to contribute over 80 percent of the energy mix,[2] given renewable energy conversions remain inefficient in many applications. Oil demand and production are projected to continue growing through 2026. In this context, the recently concluded COP30 Summit in Belem was notable for the stark absence of any reference to fossil fuels in the official communication[3] – a departure from the landmark “United Arab Emirates consensus” agreement at COP28 in Dubai, which included the breakthrough commitment from countries to “transition away from fossil fuels.”[4]
At the same time, we are witnessing a rise in in-ward-looking domestic clean-energy industrial policies. First accelerated by the U.S. Inflation Reduction Act[7] and EU Green Deal Industrial Plan,[8] a similar trend is emerging globally as Latin American and Asian economies replicate frameworks and policies to localize production of renewables, storage, and hydrogen components, increasingly extending to energy-efficient AI chips. This reflects the return of industrial policies manifesting through growing state intervention using policy tools such as subsidies, public investment, and green manufacturing. The aim is to incentivize and secure domestic clean-energy supply chains, prompted strongly from a desire to significantly reduce exposure and reliance on deeply entrenched Chinese green energy supply chains. Climate governance, therefore, is increasingly being framed through a security lens, linking emissions reduction to national resilience, industrial competitiveness, and export dominance. This stark dichotomy and divergence in fossil-fuel-driven energy security and domestically anchored clean-energy industrial strategy is likely to be the defining divergence to monitor with caution in 2026.

2. Heightened Securitization of Supply Chains and Diversification of Trade Corridors
Strategic choke points such as the Straits of Hormuz, Bab-al-Mandab, Malacca, and Sunda have become flashpoints, prompting heightened securitization of energy and the critical infrastructure associated with it. Relatedly, as maritime risk premiums rise and shipping companies face mounting pressures,[9] governments are expected to intervene, either by underwriting some of that risk or by incentivizing, if not mandating, companies to absorb it on the grounds that energy shipments are essential inputs contributing to national security. Simultaneously, China’s proven ability and intent to weaponize its monopoly over 70 percent of the global rare-earth resources and 90 percent of processing[10] has introduced substantial supply-chain risks, effectively holding global manufacturing hostage to its export leverage. China’s control over renewable-energy value chains is increasingly regarded as a national security threat.
Supply chains are increasingly being re-engineered through political measures such as stockpiles, export controls, and friend-shoring corridors. This tendency to weaponize energy dependencies is likely to drive countries towards more aggressive renewable- and clean-energy targets domestically.[11] China’s proven ability and intent to weaponize its monopoly over 70 percent of the global rare-earth resources and 90 percent of processing has introduced substantial supply-chain risks, effectively holding global manufacturing hostage to its export leverage.

China’s proven ability and intent to weaponize its monopoly over 70 percent of the global rare-earth resources and 90 percent of processing has introduced substantial supply-chain risks, effectively holding global manufacturing hostage to its export leverage.
As a counterbalance, we are likely to witness a proliferation and strengthening of critical alternative energy corridors in order to diversify supply chains and connectivity routes – such as the IMEC (India-Middle East-Europe Corridor) ; I2U2 (India, Israel, UAE, USA); the Lobito Corridor connecting Angola to the Democratic Republic of Congo in Africa; the Northern Sea Route connecting Northern Europe with the Asia-Pacific via the Artic shipping lane, a shorter alternative to the conventional Suez Canal route; and the Trans Caspian international transport route connecting China to Europe via Central Asia while bypassing Russia. These routes are expected to reorient mineral and energy trade through politically aligned geographies. We are also likely to see the signing of more off-take agreements with countries in Central Asia and Africa in order to establish resilient supply-chains. While the search for alternative sup-ply sources and routes in the case of hydrocarbons is expected to continue throughout 2026, efforts to reduce dependence on China for critical minerals[12] are unlikely to prove successful overall, and the efforts underway globally to develop alternative supply chains[13] are unlikely to yield results within the next five to seven years, even under optimistic scenarios. This despite significant undertakings such as defense establishments now becoming direct players in the game, as seen in the U.S. Department of Defense’s investment in MP Materials in partnership with Saudi Arabia’s Maaden, to secure rare-earth supplies.[14]

3. Rising Impact of Artificial Intelligence (AI) On Energy and Climate Politics
Digitalization has introduced a new variable in the energy equation. The IEA ‘Energy and AI’[15] Report highlighted the exponential rise in data centre electricity demand, driven by AI, blockchain, and cloud computing. AI accounts for almost 5-15% of data centre power use, projected to increase to 35-50%[16] by 2030. In fact, AI and climate[17] as a combined top-ic has been included into the COP30 Action Agenda for the first time.

The aim is to incentivize and secure domestic clean-energy supply chains, prompted strongly from a desire to significantly reduce exposure and reliance on deeply entrenched Chinese green energy supply chains.
This surge is driving a renaissance in nuclear power – a firm dispatchable power source. A growing number of countries have enacted national legislations establishing regulatory frameworks for the introduction or re-introduction of nuclear power.[18] Many have reversed their no-nuclear policy. Nuclear safety protocols and regulatory frameworks are supported by growing investments in the sector – most notably from the private sector, for instance Microsoft joining the World Nuclear Association[19]; and from inter-national financial institutions, with the World Bank’s revocation of the moratorium[20] it had placed on underwriting nuclear-energy projects, a watershed that will trigger substantial financial flows into the sector. To sustain this shift, grid modernization and flexibility are becoming urgent priorities. Governments from ASEAN[21] to the GCC are investing in smart grids and expansion to accommodate both industrial decarbonization and surging data centre demand.

The challenge ahead will be balancing energy allocation between civilian and digital infrastructure— a tension that will increasingly define national energy strategies.
The challenge ahead will be balancing energy allocation between civilian and digital infrastructure — a tension that will increasingly define national energy strategies. Cybersecurity and data privacy concerns will also intensify in this new era of grid digitization. Data centers are also water-intensive and will inevitably place unprecedented pressures on water ecosystems, pushing them to the point of extreme stress. Water scarcity and water-driven conflict will increasingly add a security dimension to this challenge.

4. Entrenching Energy-Climate-Trade Nexus
Trade has become a frontline of climate policy, with carbon-related measures now shaping how goods move, how value chains are structured, and who bears the cost of decarbonization. For India and the wider Global South, the immediate con-test is to ensure these emerging trade rules do not lock in asymmetric obligations[22] or de-facto barriers just as their industrial transitions gather pace.
With the EU’s Carbon Border Adjustment Mecha-nism (CBAM)[23] shifting from its current transition-al reporting phase into the definitive, price-bearing phase on 1 January 2026,[24] importers of steel, cement, and other covered products will need verified emissions data and must purchase CBAM certificates tied to the EU carbon price. This development moves carbon governance from soft disclosure to hard conditionality. In parallel, the G7-anchored Climate Club,[25] launched through the 2023–24 G7 process[26] and expanded at COP28, is building a cooperative framework on industrial decarbonization[27], car-bon-leakage disciplines, and common methodologies for hard-to-abate sectors such as steel and cement.

Trade has become a frontline of climate policy, with carbon-related measures now shaping how goods move, how value chains are structured, and who bears the cost of decarbonization.
India has repeatedly characterized CBAM as un-fair[28] and inconsistent with common-but-differentiated responsibilities, with senior ministers flagging it as “unacceptable” and “discriminatory” for developing-country exporters in public remarks and in parliamentary and G20 discussions.[29] Along with the other emerging economies, New Delhi has used G20, WTO, and UNFCCC platforms to warn that unilateral carbon border measures could undermine development, and has called instead for cooperative arrangements on standards, finance, and technology that recognize diverse starting points and per capita emissions. The CBAM flashpoints at recent COPs, including the failure to bridge differences over EU trade measures at COP30, underline that the energy–climate–trade nexus is now central to the legitimacy of the global trading system, not just a peripheral technical issue.

5. Retrenching Finance for Climate Action
Investments in clean energy in emerging and developing economies (EDMEs) must triple from USD770 billion in 2022 to USD 2.2–2.8 trillion annually by the early 2030s.[30] The COP30[31] in Belem established commitments to mobilize USD 1.3 trillion annually by 2035[32] for climate action as well as double adaptation finance by 2025 and triple it by 2035. In the backdrop of a USD 110 trillion[33] global economy and financial markets, this represents a significant yet manageable capital allocation. Yet, the investment for energy transition and climate action remains far from sufficient to meet the global net-zero targets. Instead, despite renewables becoming increasingly competitive and economically feasible, we are witnessing a retrenchment in climate-focused investments. This can be attributed to growing trade dependencies, lack of “bankable” projects, high cost of capital in EMDEs, and shifting investor priorities given the mixed policy signaling – most strongly from the current dispensation in the US.
Investments in clean energy in emerging and devel-oping economies (EDMEs) must triple from USD770 billion in 2022 to USD 2.2–2.8 trillion annually by the early 2030s.30 The COP3031 in Belem established commitments to mobilize USD 1.3 trillion annually by 203532 for climate action as well as double adap-tation finance by 2025 and triple it by 2035. In the backdrop of a USD 110 trillion33 global economy and financial markets, this represents a significant yet manageable capital allocation. Yet, the investment for energy transition and climate action remains far from sufficient to meet the global net-zero targets. Instead, despite renewables becoming increasingly competi-tive and economically feasible, we are witnessing a re-trenchment in climate-focused investments. This can be attributed to growing trade dependencies, lack of “bankable” projects, high cost of capital in EMDEs, and shifting investor priorities given the mixed policy signaling – most strongly from the current dispensa-tion in the US.
A striking example is the dissolution of the Net-Zero Banking Alliance (NZBA)[34], the banking arms of the Glasgow Financial Alliance for Net Zero (GFANZ), in October 2025, following several months of withdrawals from major US banks such as Goldman Sachs, JP Morgan Chase, Citigroup, Wells Fargo, Morgan Stanley; followed by European banks such as HSBC, Barclays, and UBS and finally Blackrock – driven largely by political and fiduciary pressures. Reflecting this shift, the GFANZ has revised its mandate from[35] a ‘whole economy transition’ in 2021 to ‘transition finance opportunities and solutions’ in 2025. Even the Sovereign Wealth Funds (SWFs), which are being deployed to underwrite climate investments with long-gestation periods, are beginning to shift priorities from purpose-driven or climate-centered investments back to profit-oriented strategies. While western capital appears to be retrenching, global sovereign investors allocated more funds to green assets than black assets in 2023; amounting to USD 26.1 billion[36], primarily driven by the Gulf Cooperation Council (GCC) SWFs.

For the Global South, the coming years will depend on balancing industrial competitiveness, affordability, and equity within this contested climate architecture.
Conclusion
The 2026 megatrends are not necessarily novel but are a pronounced manifestation of patterns shaped by years of policy inaction and neglect across the global energy and climate landscape. Energy sovereignty, securitized supply chains, and digital-era power demand will be the buzzwords dominating the discourse. For the Global South, the coming years will depend on balancing industrial competitiveness, affordability, and equity within this contested climate architecture.
The energy transition and climate agenda is inevitable, but how countries navigate this delicate balance between decarbonization and development will shape its pace and progress.



Endnotes
[1] United Nations Environment Programme, Emissions Gap Report 2024, October 2024, Nairobi, UNEP, 2024.
[2] “Emissions Gap Report 2024, October 2024”
[3] Establishing the National Energy Dominance Council, The White House, February 14, 2025.
[4] Martina Igini, “Fossil Fuels Accounted for 82% of Global Energy Mix in 2023 Amid Record Consumption: Report,” Earth.org, June 26, 2024, https://earth.org/fossil-fuel-accounted-for-82-of-global-energy-mix-in-2023-amid-record-consumption-report/
[5] UN Framework Convention on Climate Change, Global Mutirão: Uniting Humanity in a Global Mobilization Against Climate Change, November 2025, Belém, UNFCCC,2025, https://unfccc.int/sites/default/files/resource/cma2025_L24_adv.pdf
[6] Tim McDonnell, “COP30 Falls Short of Ambitious Deal,” SEMAFO, November 22, 2025.
[7] “Inflation Reduction Act of 2022,” U.S.Department of Energy, September 22, 2023, https://www.energy.gov/lpo/inflation-reduction-act-2022
[8] European Commission, “The Green Deal Industrial Plan Putting Europe’s Net-Zero Industry in the Lead,” European Commission, https://commission.europa.eu/topics/competitiveness/green-deal-industrial-plan_en
[9] Wil Crisp, “Gulf Shipping Insurance Costs to Remain Elevated,” Middle East Business Intelligence, August 13, 2019, https://www.meed.com/gulf-shipping-insurance-premiums-to-remain-high-due-to-tensions-between-the-us-and-iran
[10] Earl Carr, “China’s New Export Controls: Critical Implications For U.S. Businesses,”Forbes, October 17, 2025, https://www.forbes.com/sites/earlcarr/2025/10/17/chinas-new-export-controls-critical-implications-for-us-businesses/
[11] European Commission, “REPowerEU Affordable, Secure and Sustainable Energy for Europe,” European Commission, https://commission.europa.eu/topics/energy/repowereu_en
[12] “United States-Japan Framework For Securing the Supply of Critical Minerals and Rare Earths through Mining and Processing,” The White House, October 27, 2025, https://www.whitehouse.gov/briefings-statements/2025/10/united-states-japan-framework-for-securing-the-supply-of-critical-minerals-and-rare-earths-through-mining-and-processing/
[13] “United States-Japan Framework For Securing the Supply of Critical Minerals and Rare Earths through Mining and Processing”
[14] “Maaden and MP Materials Collaborate to Establish Full Value Chain for Rare Earth Magnetics,” MP Materials, May 14, 2025, https://mpmaterials.com/news/maaden-and-mp-materials-collaborate-to-establish-full-value-chain-for-rare-earth-magnetics/
[15] Thomas Spencer and Siddharth Singh, Energy and AI, International Energy Agency, 2025, https://iea.blob.core.win-dows.net/assets/601eaec9-ba91-4623-819b-4ded331ec9e8/EnergyandAI.pdf
[16] Establishing the National Energy Dominance Council, The White House
[17] High-Level Champions for Climate Action, Outcomes Report of the Global Climate Action Agenda at COP 30, November 2025, United Nations Climate Change, 2025, https://unfccc.int/sites/default/files/resource/COP30%20Action%20Agenda_Final%20Report.docx.pdf
[18] World Nuclear Association, “Emerging Nuclear Energy Countries,” World Nuclear Association, https://world-nuclear.org/information-library/country-profiles/others/emerging-nuclear-energy-countries 1.
[19]19 “World Nuclear Association Welcomes Microsoft Corporation as Newest Member,” World Nuclear Association, September 3, 2025, https://world-nuclear.org/news-and-media/press-statements/world-nuclear-association-welcomes-microsoft-corporation-as-newest-member
[20] “World Bank ends ban on funding nuclear energy,” World Nuclear News, June 12, 2025, https://www.world-nuclear-news.org/articles/world-bank-agrees-to-end-ban-on-funding-nuclear-energy
[21] Nathania Azalia, comment on “The Rise of Data Centres, Artificial Intelligence, and ASEAN’s Decarbonisation Goal,” ASEAN Climate Change and Energy Project: Phase 2 (ACCEPT II), comment posted June 24, 2025, https://accept.aseanenergy.org/the-rise-of-data-centres-artificial-intelligence-and-aseans-decarbonisation-goal
[22] Enrico D’Ambrogio,” EU-India relations:Time for a new boost?”, European Parliamentary Research Service, February 19, 2025, https://www.europarl.europa.eu/RegData/etudes/BRIE/2025/769496/EPRS_BRI(2025)769496_EN.pdf
[23] European Union, “Carbon Border Adjustment Mechanism (CBAM) Questions and Answers”, EU, https://taxation-customs.ec.europa.eu/system/files/2023-11/CBAM%20Frequently%20Asked%20Questions_November%202023.pdf
[24] European Commission, “Carbon Border Adjustment Mechanism”, European Commission, https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en
[25] Climate Club, “Terms of Reference for the Climate Club”, Climate Club, https://climate-club.org/wp-content/uploads/2023/11/TOR-CC-logo.pdf
[26] Climate Club, “Terms of Reference for the Climate Club”
[27]27 Stephan Raes et al., Industry on the road to 2050, Climate Club, 2020, https://climate-club.org/wp-content/uploads/2025/11/Industry-on-the-road-to-2050.pdf
[28] Archis Mohan, “Jaishankar criticises EU carbon tax, calls CBAM unacceptable for India,” Business Standard, June 11, 2025, https://www.business-standard.com/economy/news/jaishankar-eu-carbon-tax-unacceptable-cbam-india-trade-125061101220_1.html.
[29] Dr. S. Jaishankar, G20 Foreign Ministers’ Meeting (speech, Rio de Janeiro, September 25, 2024), Government of India Ministry of External Affairs, https://www.mea.gov.in/Speeches-Statements.htm?dtl%2F38342%2FRemarks_by_EAM_Dr_S_Jaishankar_at_G20_Foreign_Ministers_Meeting
[30] Mannat Jaspal, “The UAE Climate Finance and ODA Nexus: An Evolving Strategy for the Global South Green Transition,” ORF Middle East, October 30, 2025, https://orfme.org/expert-speak/the-uaes-evolving-climate-finance-strategy-in-the-global-souths-green-transition/
[31] Simon Flowers, Ed Crooks, Prakash Sharma, Stephen Vogado, Gavin Thompson, Chenglin Wu, “Five key takeaways from COP30,” Wood Mackenzie, November 25, 2025, https://www.woodmac.com/blogs/the-edge/five-key-takeaways-from-cop30/
[32]32 Felipe de Carvalho, “Belém COP30 delivers climate finance boost and a pledge to plan fossil fuel transition,” UN, November 22,2025, https://news.un.org/en/story/2025/11/1166433#:~:text=In%20a%20pivotal%20outcome%20at,move%20away%20from%20fossil%20fuels
[33] “Emissions Gap Report 2024, October 2024”
[34] Marguerite Laville and Edouard Vilpoux, What the NZBA Leaves Behind Stocktake on Banks’ Net Zero Interim Targets, October 2025, Paris, Sustainable Finance Observatory, 2025, https://sustainablefinanceobservatory.org/wp-content/uploads/2025/10/2025-09-Note-on-NZA-develoments-EN.pdf
[35] Glasgow Financial Alliance for Net Zero, “Bringing Together the Financial Sector to Accelerate the Transition to a Net-Zero Economy,” GFANZ, https://web.archive.org/web/20211013110623/https:/www.gfanzero.com/
[36] Mannat Jaspal, “The UAE Climate Finance and ODA Nexus: An Evolving Strategy for the Global South Green Transition”

### Navigating Structural Hurdles to Unlock Africa’s Critical Minerals Potential

Seeking value creation from its abundant critical minerals reserves is reshaping Africa’s domestic and international business models. However, structural policy uncertainties and gaps in effective regional collaboration complicate the continent’s transition to the lucrative downstream segment of the critical minerals value chain in the near term. Key gridlocks constraining Africa’s ambitions in the Critical Minerals sector need to be addressed, with potential pathways to value creation emerging through the mitigation of these challenges.

Enhancing Africa’s Critical Minerals Through Beneficiation
Enhancing the value of a resource or product through further processing is known as beneficiation. In the context of critical minerals, this involves moving beyond the lower-value extractive upstream segment to the more lucrative mid- and downstream segments. Beneficiation, while reducing these countries’ exposure to commodity price fluctuations, offers pathways to diversify their economic portfolios. It also facilitates their integration into global value chains underpinning energy and digital transitions.
Figure 1: Processes involved in each Segment of the Critical Minerals Value-Chain

Source: Author’s own, based on classification from the United States Department of Energy
Africa, with nearly 30 percent of global reserves, has been identified as one of the world’s critical minerals super-regions. The International Energy Agency (IEA) estimates that, in a scenario where the Paris Agreement targets are met, the global push towards cleaner energy and industrial applications would drive a 40 percent increase in demand for rare earth elements (REEs) and copper, a 60–70 percent rise in nickel and cobalt demand, and a 90 percent growth in lithium demand.
Figure 2: Select List of African Countries and their Critical Mineral Endowments

Source: Author’s own, based on data from UNCTAD, 2023; IRENA, 2023; (Generated through Datawrapper)
Figure 3: Africa’s mineral reserves vs. processing share (selected minerals)

Source: Author’s own, based on data from (i) SFA Oxford statement; (ii) Cobalt- AfDB report; (a) & (b) International Energy Agency Report, 2025

Structural Barriers to Mineral Value Capture
While the problem set constraining such value creation is not homogenised across the African continent, four broad challenges persist:
First, policy and regulatory uncertainty impacting finance remains the foremost obstacle. While exploration investment in Latin America has increased by a remarkable 200 percent since 2020, it has dropped nearly 80 percent in Africa. Latin America’s impressive turnaround can largely be attributed to the regulatory and policy certainty its countries have established. Conversely, in Africa, policy uncertainties leading to operational inefficiencies have diminished investor confidence.

Policy and regulatory uncertainty impacting finance remains the foremost obstacle. While exploration investment in Latin America has increased by a remarkable 200 percent since 2020.
Second, capital markets price regulatory uncertainties and geopolitical risks at a premium, making financing more expensive. This is significant because mining involves substantial sunk costs and long project gestation periods, yielding slow Returns on Investment (RoIs). Policy reversals in the continent’s fragmented political systems—often influenced by mineral cartels—further compound the risk. Africa’s characteristic model of artisanal mining has also proven difficult to regulate. These factors help explain why the Weighted Average Cost of Capital (WACC) for African projects is commonly higher than in other economies. When considering long-term revenue flows from mining that could be reinvested into the sector, it is essential to factor in borrowing costs and debt-servicing obligations that each country assumes with foreign governments or international organisations.
Third, the major barrier arises from regional competition and limited cooperation. Countries compete for the same foreign investment and processing facilities while struggling to collaborate on shared infrastructure or coordinated policy. Regionalism is a key policy determinant in Africa, and multiple cooperative initiatives have been launched, though with limited success. Regionalism is a crucial policy factor across the African continent, and multiple cooperative initiatives have been attempted, though with limited success. The Africa Mining Vision (2009) aimed to ensure the continent’s mineral wealth benefited its own populations, followed by the Africa Mineral Governance Framework (2017) and Africa’s Green Minerals Strategy (2025). However, these vision documents have been easier to adopt in broad policy statements than in detailed, on-the-ground implementation. For example, while countries may agree on the need for a Special Economic Zone, they often struggle with questions over location, regulatory prioritisation, and allocation of employment opportunities.

Capital markets price regulatory uncertainties and geopolitical risks at a premium, making financing more expensive.
The collaboration between Zambia and the DRC on battery and EV production within a Special Economic Zone provides a rare and effective model of successful cooperation in Africa. Yet replication remains challenging due to the high capital expenditure involved. The African market accounts for only about one percent of global EV production. Without sufficient capacity to absorb these high-cost end products, the economics of battery manufacturing on the continent remain unviable
Energy and water scarcity present a fourth major constraint. Much of the continent lacks the affordable baseload power and abundant water necessary for mineral processing. The declining quality of mined ores further increases energy demands for refining and purification. Africa accounts for nearly 600 million of the 730 million people worldwide without access to electricity, and energy infrastructure in many countries is inadequate to provide 24-hour baseload power for effective processing. Seeking additional electricity or water supply in this backdrop poses a significant socio-political and economic challenge, further aggravating the technical gap of energy scarcity

Energy and water scarcity present a fourth major constraint. Much of the continent lacks the affordable baseload power and abundant water necessary for mineral processing. 
Finally, infrastructure deficits in smelting, refining, and logistics complete the picture. Africa currently lacks the industrial capacity to smelt at scale and the local talent pool needed for refining and mineral separation. The absence of domestically owned logistics infrastructure from pit to port further limits national control. Without command over the full value chain—from extraction to export—African nations remain vulnerable to external actors who capture the majority of value-added activities, significantly constraining capacity-building on the continent.

Strategic Pathways for Africa’s Critical Minerals Growth 
Preferential pricing mechanisms provide an initial pathway to capture greater value. Countries could allocate a portion of locally mined resources to be sold at preferential rates to companies that commit to producing higher-value inputs within the host country or a regional investment hub. To avoid discouraging foreign investors, such preferential pricing should apply to both domestic and international actors, supported by clear long-term land rights and assured compensation in the event of policy reversals. Contract exit costs must be substantial on both sides to ensure compliance.
Preferential pricing arrangements based on competitive bidding could incentivise companies and countries that commit to technology transfer, hardware provision, and transparency. Additionally, countries could create a circular flow of earnings from the sector by reinvesting foreign exchange revenues. For example, rising copper prices could be directed toward developing local smelting capacity and supporting infrastructure.
Creating industrial hubs based on risk-sharing models offers a second strategic approach. Joint industrial and sourcing hubs, even on a smaller scale, can generate economies of scale, address regional capacity gaps, and spread risk, making them more attractive to investors and importers. Such models enable vertical integration that leverages each country's comparative advantages while avoiding duplicative or wasteful investments. South Africa, with its growing expertise and industrial capacity, could lead the formation of a Special Economic Zone model bringing together Zimbabwe, Zambia, Mozambique, Angola, and Madagascar in the continent’s south. Within such zones, national equity stakes sought by governments could be harmonised through a flat-rate approach tied to demonstrated mid- and downstream contributions. Similarly, examples of countries cooperating on transport corridors like Lobito and Tazara illustrate that bilateral differences can be overcome to enable effective partnerships.

Preferential pricing arrangements based on competitive bidding could incentivise companies and countries that commit to technology transfer, hardware provision, and transparency. 
Domestic sourcing and market access mandates offer a third lever. The continent's demographic dividend—an urbanising population—represents a market well-suited for innovation and technology adoption. Conditioning access to this large market on compliance with local content requirements for high-value goods could significantly strengthen the continent’s role in the value chain. This approach would foster a more diversified industrial base, absorb local talent, and create shorter, more resilient supply chains.
Finally, human resource development and curriculum harmonisation are critical for long-term competitiveness. African governments could implement skills training programs tailored to the mining sector, with tenders requiring the training and absorption of local skilled labour. To make this effective, governments must anticipate technological shifts and update training modules and skill sets accordingly. China’s unparalleled talent pool illustrates how investment in human capital can underpin leadership in the midstream and downstream segments of the critical minerals value chain—a model African countries could emulate. In turn, partnerships with Japan, France, the European Union (EU), and India could bolster the development of human capital in this sector.
Figure 4: Potential Partnerships for Skilling and Human Resource Development

Source: Author’s own, based on data sourced from (i) JICA-Kizuna Program; (ii) Akita University; (iii) MINES Paris Tech; Alès École des mines, Nancy École des mines; (iv) ALBATTS; (v) IIT/ISM Dhanbad partnerships; (vi) ANRF-MAHA CRM Research Program
Ultimately, the absence of tailored regulatory frameworks remains the greatest obstacle to Africa’s value-creation ambitions in the sector. Robust national policies, successfully implemented, could feed into a regional cooperative model that accounts for each country’s comparative advantages and capacity gaps. Coordinated action—leveraging instruments such as the African Continental Free Trade Agreement (AfCFTA)—could significantly enhance the continent’s bargaining power and determine whether beneficiation can be realised meaningfully for African countries.



Cauvery Ganapathy, Fellow, Climate and Energy, ORF Middle East.

### Brave New World

The year 2025 saw several disruptive and emerging technologies advance from rhetoric, and experimentation, into ongoing expansion, to an accelerated phase of growth. Many of these developments were accompanied or driven by policies that are expected to influence tech futures worldwide. At the same time, as geopolitical flux increasingly defined the Zeitgeist, there emerged a rising sense of urgency about the need for digital sovereignty.
Taken together, artificial intelligence (AI), quantum computing, digital currencies, and nanotechnology represent a frontier where technology, power, and the political economy increasingly converge. AI is reshaping multiple domains of human activity. Quantum computing has the potential to disrupt existing advantages in encryption and transform information processing, thereby opening new avenues for scientific discovery. Digital currencies pose challenges to conventional monetary instruments and payment architectures, enabling new forms of statecraft and financial inclusion. Nanotechnology is driving advances in materials and electronics, with wide-ranging sectoral implications. The present article examines key megatrends associated with these technologies, and considers their possible trajectories in 2026.

Taken together, artificial intelligence (AI), quantum computing, digital currencies, and nanotechnology represent a frontier where technology, power, and the political economy increasingly converge.
1. Artificial Intelligence: Rapid and Fragmented Growth
As AI stakeholders prepare for the international AI Impact Summit to be hosted in India in February 2026, there has been a subtle shift in global conversations on AI. While earlier emphasis on AI safety, regulation, development, and governance will remain crucial, 2026 is expected to bring a growing focus on AI impacts and use cases. Indeed, AI applications and their impact could contribute USD 15.7 trillion to global GDP by 2030.1
The United States (US) and China are expected to remain dominant in the AI race, with their technology ecosystems exercising the greatest influence. Powerful competing chatbots released in 2025 partly illustrate this ongoing contest for supremacy. Deep-Seek-R1, launched in January with 671 billion parameters2 , highlights China’s emphasis on frugal innovation, while OpenAI’s GPT-5, launched in August, was introduced as a successful extension of the ChatGPT family of generative AI models.
AI governance is set to enter a defining yet fragmented phase. This is an area where the voice and position of the Global South are expected to gain greater prominence, building on seminal articulations of 2025, such as the BRICS Leaders’ Statement on the Global Governance of AI3 and India’s recently launched Governance Guidelines.4 The former emphasizes AI cooperation, sovereignty, and development rooted in rights and personal data safeguards; while the latter foregrounds trust, a people-first approach, responsible innovation, fairness and equity, transparency and accountability, and safety and sustainability. These points of focus differ markedly from those of the US AI Action Plan of 2025 which adopts a pro-innovation deregulatory stance designed to reinforce American leadership. 5 At the same time, the stringent risk-based regulation of the European Union AI Act, 6 which enters into force in August 2026, embodies a contrasting approach that some observers caution may constrain innovation.
These competing approaches underscore the importance of strengthening the global governance of AI in 2026. It will be essential to establish a shared baseline of values, although pathways to implementation may differ. In this regard, the work of the United Nations’ Global Dialogue on AI Governance,7 a new multilateral platform, is likely to gain urgency, along with the consensus-building activities of multistakeholder alliances like the Global Partnership on AI (GPAI). The non-binding nature of most normative frameworks developed by these and similar platforms, however, is expected to remain a continuing limitation.

These competing approaches underscore the importance of strengthening the global governance of AI in 2026. It will be essential to establish a shared baseline of values, although pathways to implementation may differ.
The dual-use nature of AI is projected to become more salient, with the global ‘AI in military’ market expected to generate USD 16,300 million in 2026, having grown at a CAGR of 14.5 percent since 2019.8 Growth is driven primarily by rising demand for AI-integrated military equipment, cloud services, and an array of military applications such as AI-based cybersecurity tools and warfare platforms. These trends highlight the need for domain-specific agreements around ethics and governance, underlining the value of deliberative tracks like the UNIDIR-led Roundtable for AI, Security and Ethics (RAISE) and the Global Summit on Responsible AI in the Military Domain (REAIM).

The dual-use nature of AI is projected to become more salient, with the global ‘AI in military’ market expected to generate USD 16,300 million in 2026, having grown at a CAGR of 14.5 percent since 2019.
As 2026 advances, countries are expected to strengthen national AI capabilities 9 as competition between the United States (US) and China intensifies. The need to achieve greater alignment and harmonization of AI policies at the global level is likely to grow stronger. Two particular risks are expected to escalate further. The first is the exponential spread of AI-generated disinformation, including deepfake- induced frauds, which could constitute a form of “mainstream cybercrime by 2026”. 10 The second is the alarming growth of AI systems’ energy foot prints, 11 which may eventually necessitate a transition to more sustainable and energy-efficient solutions.

Two particular risks are expected to escalate further. The first is the exponential spread of AI-generated disinformation, including deepfake-induced frauds, which could constitute a form of “mainstream cybercrime by 2026”. The second is the alarming growth of AI systems’ energy footprints, which may eventually necessitate a transition to more sustainable and energy-efficient solutions.
2. Quantum Computing: Toward Fault Tolerance and Error Correction
In 2024 and 2025, quantum computing shifted focus from increasing qubit counts 12 to fault tolerance and error correction. 13 The broad push for applications of quantum computing rather than headline qubit numbers will continue through 2026 and may ultimately mark the turning point towards fault-tolerant quantum computing (FTQC). In the near term, hybrid classical–quantum approaches are likely to deliver near-term benefits in areas such as quantum chemistry and related optimization problems. 14
The year 2026 is expected to witness growing investor confidence in the field, 15 spurred by the declaration of 2025 as the “International Year of Quantum Science and Technology”; a host of technical advancements; greater participation from startups; and public investments of over USD 10 billion in the first quarter of 2025 alone, with Japan, the US, and Spain being the major contributors. 16

The year 2026 is expected to witness growing investor confidence in the field.
The commercial availability of quantum computers is continuing to grow, with 2026 expected to witness a major push towards commercial quantum computing applications. The US has established foundational capacities in this domain; 17 China introduced a superconducting quantum computer for commercial use in 2025; 18 and India introduced its first full-stack quantum computing system in April 2025, 19 with the startup behind the system subsequently unveiling its 64-qubit Kaveri quantum processor, scheduled for commercial release and use in 2026. 20
The intricacies involved in the global quantum supply chain have emerged as major impediments for domestic manufacturing and international collaboration. For instance, India’s National Quantum Mission mapped the global and domestic quantum landscape and flagged challenges such as low domestic investment and inadequate manufacturing and testing facilities. 21 These and related bottlenecks are expected to persist across the Global South in 2026. The hardware and rare minerals needed for quantum computing are difficult to secure, especially for Southern states, while increasingly stringent export controls by the US and China limit quantum development in other regions. 22 Although some emerging economies, such as India, possess relatively strong talent pools for software and algorithm design, the growing impulse towards building local manufacturing capabilities is likely to drive major investments and collaborative arrangements across the South as a bloc to avoid deepening technological dependence. 23
The dual-use nature of quantum computing, particularly in terms of its encryption-breaking capabilities, is gradually leading to its increasing importance in national security considerations. For instance, India published a considered assessment of the national security implications of quantum technology, including recommendations on transitioning to post-quantum cryptography (PQC) and establishing bilateral partnerships. 24

The hardware and rare minerals needed for quantum computing are difficult to secure, especially for Southern states, while increasingly stringent export controls by the US and China limit quantum development in other regions.
Therefore, progress in quantum computing in 2026 is expected to be accompanied by a stronger global focus on PQC migration 25 given the threat that more advanced error correction and fault-tolerant machines pose to current encryption schemes. Furthermore, limited or noisy quantum computing systems may also witness increasing applications in specialized military tasks such as supply chain and logistics optimization, battle simulations, and mission planning. 26

The growing impulse towards building local manufacturing capabilities is likely to drive major investments and collaborative arrangements across the South as a bloc to avoid deepening technological dependence.
3. Digital Currencies: From Ideas to Implementation
2025 marked the year digital currency frameworks transitioned from white papers to implementation, a transition that has gained substantial momentum. Major jurisdictions codified approaches: Hong Kong formalized its stablecoin regime, 27 the US enacted the long-debated GENIUS Act, 28 and regional pay ment rail experiments gained traction. Central banks are also moving beyond pilots. For example, the Re serve Bank of India expanded its retail Central Bank Digital Currency (CBDC) sandbox 29 to large private banks. It launched deposit tokenization pilots, integrating digital rupee trials with mainstream banking operations, a shift positioned to drive key transformations in the foreseeable future.
The global digital currency ecosystem in 2025 was characterized by two countervailing forces: tightening state control and regional financial integration. This dynamic is anticipated to endure in 2026 and the years that follow. Several developed economies institutionalized digital asset oversight, 30 embedding stablecoins into existing regulatory frameworks to protect consumers and prevent systemic shocks. Certain emerging markets, on the other hand, leveraged CBDCs and regional payment networks to reduce remittance costs and strengthen monetary sovereignty Across Africa, initiatives such as COMESA’s Digital Retail Payments Platform 31 are enabling cross-border settlement in local currencies, creating a template for South–South digital trade.

The global digital currency ecosystem in 2025 was characterized by two countervailing forces: tightening state control and regional financial integration. This dynamic is anticipated to endure in 2026 and the years that follow.
Transatlantic policy choices are expected to play a central role in influencing the global trajectory of digital currencies. The US and Europe have taken noticeably different positions on CBDC development. In the US, policymakers 32 have shown greater support for regulated stablecoins while expressing caution that a retail CBDC might disrupt private-sector innovation and the existing financial system. In March 2025, the US government announced 33 plans for establishing a Strategic Bitcoin Reserve and a “Digital Asset Stockpile” to hold cryptocurrencies seized in criminal cases. In contrast, European authorities 34 frame the Digital Euro as essential for safeguarding monetary sovereignty, improving payments efficiency, and ensuring continued public access to central-bank money in an increasingly digital economy.
The potential dividends of a well-calibrated digital currency ecosystem are becoming evident. Properly designed CBDCs and regulated stablecoins have the potential to extend 35 financial inclusion through low-cost digital wallets, offline transaction capabilities, and instant settlement. These tools can streamline domestic payments, lower remittance costs that are vital for many developing economies, and offer countries with limited correspondent banking links regional payment rails to settle cross-border 36 trade in local currencies, reinforcing monetary sovereignty. Structural and operational risks, however, warrant careful consideration. Concerns 37 include privacy and cybersecurity vulnerabilities, dependence on a narrow set of technology providers, and overly stringent tax 38 and KYC regimes that may drive fintech talent, innovation, and capital offshore.
From 2026 onward, four structural shifts are expected to shape the digital currency space. First, sovereign digital payments are likely to become more embedded in everyday retail transactions and government subsidy programmes, normalizing Central Bank Digital Currencies (CBDCs) in routine economic activity across several geographies. Second, tokenization and programmable money are projected to expand across financial instruments, enhancing efficiency, liquidity, and transparency. Third, regional payment rails in Global South blocs are likely to reduce frictions in remittances and cross-border trade, strengthening monetary sovereignty. Finally, tensions between privacy advocates and regulatory and security imperatives are expected to incentivize advances in cryptographic privacy solutions and legal refinements.

4. Nanotechnology: Advancements in Spintronics and Next-Gen Electronics
2025 witnessed the emergence of a spectrum of early-phase nanotechnology projects globally, ranging from nanofiltration plants for water security, 39 to new methods for constructing biopolymer composite films to reduce reliance on non-biodegradable single-use packaging, 40 and pesticides using nanomaterial carriers for more effective delivery. 41 Collectively, these and other initiatives illustrate the gradual integration of nanotechnology into diverse sectors across countries. Within the field as a whole, innovations in spin electronics or spintronics have been identified as a strategic area of research by various countries. 42

The AI boom of recent years appears to be slowing marginally, and investor confidence in AI-native companies such as OpenAI has exhibited signs of decline. This market shift is primarily driven by the sentiment that LLM architectures underpinning AI tools such as ChatGPT may be approaching their current limits.
The AI boom of recent years appears to be slowing marginally, and investor confidence in AI-native companies such as OpenAI has exhibited signs of decline. This market shift is primarily driven by the sentiment that LLM architectures underpinning AI tools such as ChatGPT may be approaching their current limits. The high-energy cost of training and deploying frontier models has further strained national infrastructures and power grids. In this landscape, spintronics innovations present a potential pathway, promising higher energy efficiency, heat tolerance, and faster data processing for demanding tasks such as AI development. Given the possibility, however distant, of an AI winter, countries have begun investing in the next generation of advanced materials to stay ahead of the technological curve.

The high-energy cost of training and deploying frontier models has further strained national infrastructures and power grids. In this landscape, spintronics innovations present a potential pathway, promising higher energy efficiency, heat tolerance, and faster data processing for demanding tasks such as AI development.
Nations across the globe have identified nanotechnology and specifically spintronics as an enabling platform that can deliver cheaper and more efficient technologies. The significance of spintronics is high lighted in strategies such as the US National Strategy on Microelectronics Research (2025), 43 the Czech Republic National Semiconductor Strategy anchored in the EU Chips Act, 44 the France 2030 — SPIN-V (spintronics innovation) program, 45 Saudi Arabia’s ‘Strategic Priorities for the Nanotechnology Program’, 46 and, in India, NITI Aayog’s 2025 primer on the future of two-dimensional (2D) materials which notes the confluence of innovations in 2D materials and spintronic devices as driving the next phase of digital innovation. 47
Strategic interest in the technology has been accompanied by scientific advancements that have brought spintronic-enabled commercial devices closer to market deployment. 2026 is expected to witness advanced prototypes of spintronic neural networks that can process data much more efficiently than GPU-based systems. Another advancement may occur in the electric vehicle (EV) sector. EVs require electronics that can withstand high temperatures and 2026 may prove to be a breakthrough year for spintronics-based Magnetoresistive RAM (MRAM) capable of addressing this challenge. 48
Partly due to the ever-increasing energy cost of frontier AI development, growing government interest in nanotechnology and subfields like spintronics is expected to boost investments in materials research in 2026.
The AI race already has incumbents. To move ahead, major economic powers outside the US and China are likely to expand budgets for advanced materials research driven by the need for future-readiness. 2026 may be a momentous year in the EU for nanomaterial regulation. EU Regulation 2024/858 that amends the EU Cosmetics Regulation by banning prohibited nanomaterials in commercial products has a critical deadline in 2026. 49 A potential regulatory milestone could be reached in 2026 with the European Commission’s ‘Safe and Sustainable by Design’ framework. 50 The framework, which is expected to introduce new data submission requirements for companies producing or importing nano materials, could mark incremental progress toward aligning innovation with oversight, potentially ushering in an era in which safe-by-design nanomaterials become the default.
In 2025, developments in AI, quantum computing, digital currencies, and nanotech revealed both the speed of technological change, and its unevenness across geographies. The road ahead is likely to be characterized less by tech breakthroughs themselves than by the choices societies make about innovation, growth, guardrails, and control.

Partly due to the ever-increasing energy cost of frontier AI development, growing government interest in nanotechnology and subfields like spintronics is expected to boost investments in materials research in 2026.
A common strand that has begun to run through many state interventions is a desire for digital sovereignty: every country’s quest for control over its digital infrastructure, data, and citizen-facing technologies in the interest of its people.

The Road Ahead
The era of AI diffusion is expected to intensify in 2026, with a sharp rise in AI’s civilian and military uses. But competition over AI development will be matched in importance by the need to find convergences between governance models and principles. The deeply fractured landscape of AI governance is likely to render consensus-building initiatives more important than ever. The field of quantum computing is expected to benefit from greater investment, and see a shift: from pursuing increased qubit counts towards finding a wider range of practical applications, and making quantum computers commercially available. 2026 is also expected to witness the use of digital currencies becoming more entrenched in certain regions, and facilitate potentially smoother remittance transfers and cross-border trade across pockets of the Global South. Finally, nanotechnology will begin to play a decisive role in shaping the future of materials, with specific nanotechnologies such as spintronics emerging as central to innovation and in vestment.




Endnotes
1 PwC, “Sizing the Prize: PwC’s Global AI Study – Exploiting the AI Revolution,” 2017, https://www.pwc.ch/en/publications/2017/pwc_global_ai_study_2017_en.pdf
2 Mayada Khatib, “DeepSeek R1: A Short Summary,” Medium, January 25, 2025, https://medium.com/@mayadakhatib/deepseek-r1-a-short-summary-73b6b8ced9cf
3 “BRICS Signs AI Governance Declaration: Shaping Global AI Standards through Multilateral Cooperation,” Nemko Digital, August 6, 2025, https://digital.nemko.com/news/brics-ai-governance-declaration-2025
4 India AI Governance Guidelines: Enabling Safe and Trusted AI Innovation, Ministry of Electronics and IT, Government of India, 2025, https://static.pib.gov.in/WriteReadData/specificdocs/documents/2025/nov/doc2025115685601.pdf
5 Winning the Race: America’s AI Action Plan, The White House, July 2025, https://www.whitehouse.gov/wp-content/uploads/2025/07/Americas-AI-Action-Plan.pdf
6 “EU AI Act: First Regulation on Artificial Intelligence,” European Parliament, June 8, 2023, https://www.europarl.europa.eu/topics/en/article/20230601STO93804/eu-ai-act-first-regulation-on-artificial-intelligence
7 “Global Dialogue on Artificial Intelligence,” United Nations, https://www.un.org/global-dialogue-ai-governance/en
8 “Artificial Intelligence in Military Systems Will Grow 14.5% through 2026,” Military Embedded Systems, June 27, 2019, https://militaryembedded.com/ai/deep-learning/artificial-intelligence-in-military-market-will-grow-14-5-cagr-through-2026
9 “Top 10 AI Trends to Watch in 2026,” United States Artificial Intelligence Institute, October 1, 2025, https://www.usaii.org/ai-insights/top-10-ai-trends-to-watch-in-2026
10 Roman Rafiq, “Preparing for the Next Wave of Deepfake Fraud in 2026,” The Economic Times, December 4, 2025, https://ciso.economictimes.indiatimes.com/news/cybercrime-fraud/preparing-for-the-next-wave-of-deepfake-fraud-in-2026/125757320
11 “AI Is Set to Drive Surging Electricity Demand from Data Centres While Offering the Potential to Transform how the Energy Sector Works,” International Energy Agency,” April 10, 2025, https://www.iea.org/news/ai-is-set-to-drive-surging-electricity-demand-from-data-centres-while-offering-the-potential-to-transform-how-the-energy-sector-works
12 A qubit, or quantum bit, is the basic unit of information used to encode data in quantum computing.
13 Henning Soller, Martina Gschwendtner, Sara Shabani, and Waldemar Svejstrup, “The Year of Quantum: From Concept to Reality in 2025,” McKinsey & Company, June 23, 2025, https://www.mckinsey.com/capabilities/tech-and-ai/our-insights/the-year-of-quantum-from-concept-to-reality-in-2025
14 Kimm Fesenmaier, “New Hybrid Quantum–Classical Computing Approach Used to Study Chemical Systems,” California Institute of Technology, June 25, 2025, https://www.caltech.edu/about/news/new-hybrid-quantumclassical-computing-approach-used-to-study-chemical-systems
15 “2025 International Year of Quantum Science and Technology,” UNESCO, https://quantum2025.org/
16 Soller et al, “The Year of Quantum: From Concept to Reality In 2025”
17 “Quantum Breakthroughs: NIST & SQMS Lead the Way,” National Institute Of Standards And Technology, April 4, 2025, https://www.nist.gov/news-events/news/2025/04/quantum-breakthroughs-nist-sqms-lead-way
18 Matt Swayne, “China Opens Its Superconducting Quantum Computer for Commercial Use,” The Quantum Insider, October 14, 2025, https://thequantuminsider.com/2025/10/14/china-opens-its-superconducting-quantum-computer-for-commercial-use/
19 “Startup Selected under NQM Launches One of India’s Most Powerful Quantum Computers,” Ministry of Science and Technology, Government of India, April 15, 2025, https://www.pib.gov.in/PressReleasePage.aspx?PRID=2121845&reg=3&lang=2
20 “Startups Supported by Pune IISER’s I-Hub Unveil New Developments in Quantum Technologies,” The Indian Express, November 12, 2025, https://indianexpress.com/article/cities/pune/pune-iiser-i-hub-new-development-quantum-technologies-10361354/
21 “India’s International Technology Engagement Strategy for Quantum Science, Technology and Innovation,” Office of the Principal Scientific Advisor, Government of India, April 14, 2025, https://psa.gov.in/CMS/web/sites/default/files/publication/ITES_QWEBSITE1.pdf
22 “Department of Commerce Implements Controls on Quantum Computing and Other Advanced Technologies Alongside International Partners,” Bureau of Industry and Security, US Department of Commerce, September 5, 2024, https://www.bis.gov/press-release/department-commerce-implements-controls-quantum-computing-other-advanced-technologies-alongside
23 Beth Stackpole, “Building a Quantum Workforce,” MIT Sloan School of Management, September 15, 2025, https://mitsloan.mit.edu/ideas-made-to-matter/building-a-quantum-workforce
24 “Quantum Computing: National Security Implications and Strategic Preparedness,” NITI Aayog, Government of India, March, 2025, https://www.niti.gov.in/sites/default/files/2025-03/Future-Front-Quarterly-Frontier-Tech-Insights-March-2025.pdf
25 Countries like the United Kingdom and Canada have already issued PQC migration roadmaps in 2025.
26 Michal Krelina, “An Introduction to Military Quantum Technology for Policymakers,” Stockholm International Peace Research Institute, March, 2025, https://www.sipri.org/publications/2025/sipri-background-papers/introduction-military-quantum-technology-policymakers
27 Hong Kong Monetary Authority, “Stablecoin Issuers and Arrangements,” HKMA, 2025, https://www.hkma.gov.hk/eng/key-functions/international-financial-centre/stablecoin-issuers/
28 The White House, “Fact Sheet: President Donald J. Trump Signs GENIUS Act into Law,” July 2025, https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-president-donald-j-trump-signs-genius-act-into-law/
29 Reuters, “India’s Central Bank Launches Digital Currency Retail Sandbox,” 8 October 2025, https://www.reuters.com/world/india/indias-central-bank-launches-digital-currency-retail-sandbox-2025-10-08/
30 State Street, “Digital Digest March 2025: Digital Assets & AI Regulation,” 2025, https://www.statestreet.com/in/en/insights/digital-digest-march-2025-digital-assets-ai-regulation
31 COMESA, “COMESA Launches Digital Retail Payments Platform,” 2025, https://www.comesa.int/104403-2/
32 Atlantic Council, “Central-Bank Digital Currencies versus Stablecoins: Divergent EU and US Perspectives,” Econographics blog, 2025, https://www.atlanticcouncil.org/blogs/econographics/central-bank-digital-currencies-versus-stablecoins-divergent-eu-and-us-perspectives
33 The White House, “Establishment of the Strategic Bitcoin Reserve and United States Digital Asset Stockpile,” March 2025, https://www.whitehouse.gov/presidential-actions/2025/03/establishment-of-the-strategic-bitcoin-reserve-and-united-states-digital-asset-stockpile/
34 European Central Bank, “ECB Press Release — Digital Euro Project Update,” March 2025, https://www.ecb.europa.eu/press/key/date/2025/html/ecb.sp250320_1~41c9459722.en.html
35 United Nations Development Programme, “Driving Financial Inclusion through CBDCs,” UNDP Report, June 2025,
https://www.undp.org/sites/g/files/zskgke326/files/2025-06/undp-driving-financial-inclusion-through-cbdcs.pdf
36 World Bank / International Finance Division, “Central Bank Digital Currencies for Cross-Border Payments: A Review of Current Experiments and Ideas,” World Bank Policy Paper, 2025, https://documents1.worldbank.org/curated/en/369001638871862939/pdf/Central-Bank-Digital-Currencies-for-Cross-border-Payments-A-Review-of-Current-Experiments-and-Ideas.pdf
37 Bank for International Settlements, “Cyber Risks in a World of Digital Money,” BIS Report, 2025, https://www.bis.org/publ/othp81.pdf
38 Yibin Mu and Angela Mu, “CBDC: Concepts, Benefits, Risks, Design, and Implications,” SSRN Working Paper, 1 October 2022, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4234876
39 “Egypt’s ORASCOM Says EPC Works Underway at Seawater Treatment Plant in Abu Dhabi,” Zawya, September 1, 2025, https://www.zawya.com/en/projects/utilities/egypts-orascom-epc-works-underway-at-seawater-treatment-plant-in-abu-dhabi-qrmbue1m
40 Xuanjun Hun, Chao Lu, Howyn Tang, Hossein Pouri, Etienne Joulin and Jin Zhang, “Active Food Packaging Made of Biopolymer-Based Composites,” Materials, 16 (1), 2023, https://www.mdpi.com/1996-1944/16/1/279
41 Ravinder Kumar, Naresh Kumar et al., “Advances in Biopolymeric Nanopesticides: A New Eco-Friendly/Eco-Protective Perspective in Precision Agriculture,” Nanomaterials, 12 (22), 2022, https://www.mdpi.com/2079-4991/12/22/3964
42 Spintronics is a field of electronics that uses an electronics spin and magnetic moment, in addition to electric charge, for storing, processing and transmitting information in solid state devices.
43 The White House, “National Strategy for Microelectronics Research,” April 2025, https://www.whitehouse.gov/wp-content/uploads/2025/03/Amended-National-Strategy-on-Microelectronics-Research.pdf
44 Office of the Government of the Czech Republic, “National Semiconductor Strategy,” 2024, https://www.dataplan.info/img_upload/7bdb1584e3b8a53d337518d988763f8d/national-semiconductor-strategy-cz.pdf
45 French National Centre for Scientific Research. Https://www.cnrs.fr/sites/default/files/press_info/2024-01/CP%20SPIN-V%20EN.pdf, 2024
46 Kingdom of Saudi Arabia, Ministry of Economy and Planning, Strategic Priorities for Nanotechnology Program (KSA:Ministry of Health), https://npst.ksu.edu.sa/sites/npst.ksu.edu.sa/files/imce_images/nano.pdf
47 NITI Aayog, “Introduction to 2D Materials,” NITI Frontier Tech Hub, September 2025, https://www.niti.gov.in/sites/default/files/2025-09/FTH-Quaterly-Insight-Sep-2025.pdf
48 Magnetoresistive RAM (MRAM) is a high-speed, non-volatile memory technology that stores data using magnetic states instead of electric charges, retaining information even when power is lost.
49 Alejandra Serrano Romero, “Cosmetic Products Regulation 2026: How to Adapt Packaging and Labelling,” MarCo-Pack, https://marcopack.com/en/cosmetic-products-regulation-2026-how-to-adapt-packaging-and-labeling/#:~:text=Restrictions%20on%20nanomaterials%3A%20For%20example,and%201%20November%202025%20for
50 “Safe and sustainable by design,” European Commission, https://research-and-innovation.ec.europa.eu/research-area/industrial-research-and-innovation/chemicals-and-advanced-materials/safe-and-sustainable-design_en

### Djibouti’s Location Curse: Escaping Strategic Rent Dependence

In development economics, the “resource curse” is a well-worn paradox: nations blessed with abundant natural resources often stagnate, held back by weak institutions and a failure to invest in human capital. Djibouti presents a fascinating and troubling variation of this dynamic — not a curse of resources, but of location.
For decades, Djibouti has monetised its geostrategic position on the Bab el-Mandeb strait, a maritime chokepoint through which roughly 12 percent of global seaborne oil trade passes, by extracting rents from world powers. Hosting military bases for the United States, China, France, Germany, Italy, and Japan, the state effectively functions as a landlord to the world's armies. The revenues are not insignificant: approximately US$70 million annually from the US Camp Lemonnier alone, around US$40 million from France, and a reported US$20 million from China's base — with total base-lease income estimated at over US$125 million a year.
Yet, to these external actors, Djibouti is less a sovereign nation to be developed and more a security asset to be stabilised. Their primary interest is continuity of access and the safety of shipping lanes — not the democratic flourishing or economic diversification of the people who actually live there. For regional powers like the Gulf states, the calculus has shifted further still: the Horn of Africa has evolved from being a peripheral neighbour into a critical node of their own national security architecture. Control over the Red Sea coast is seen as essential for power projection and food security, effectively reframing Djibouti from a neutral logistics hub into a strategic frontier.

This wealth endowment has revealed a profound structural disconnect: strategic rents have not translated into meaningful human capital development, leaving socio-economic mobility deeply fractured for ordinary Djiboutians.
This rentier model dynamic, where the state acts as a landlord and derives its solvency from external rents, is further entrenched by the international port, which serves as the exclusive commercial gateway for landlocked Ethiopia and alone accounts for 86 percent of public revenue. Cumulatively, around 70 percent of Djibouti’s economy is built on port activities and related services, reflecting a striking concentration of fiscal dependence on external transit.
Nevertheless, this wealth endowment has revealed a profound structural disconnect: strategic rents have not translated into meaningful human capital development, leaving socio-economic mobility deeply fractured for ordinary Djiboutians. The numbers are stark. As of 2023, the Human Development Index Value was at just 0.513, well below the global average of 0.756, with Djibouti ranking 175th out of 193 countries. Youth unemployment stands at 77 percent, and expected years of schooling — a telling proxy for long-term opportunity — is a dismal 3.95. These figures carve out a sharp and damning dichotomy between the nation’s geopolitical value and its internal developmental reality.
Djibouti, it seems, is structurally unable to leverage its greatest asset — its location — to build prosperity for its own people. That is the essence of the location curse.

Mechanisms of the Curse
In most non-rentier economies, the government must cultivate a tax base by fostering a competitive private sector, investing in education, and lowering the cost of doing business. In Djibouti, the state bypasses this difficult work entirely — because it has a guaranteed income stream unrelated to domestic productivity. This is what could be termed “fiscal decoupling”.
Typically, a functioning economy produces an implicit bargain between state and citizen — what political economists call the “fiscal social contract.” The state taxes the citizenry to fund its operations; in return, citizens demand accountability, infrastructure, and the services that facilitate their own economic output. This creates a powerful incentive structure: the state is motivated to invest in human capital — education, healthcare, vocational training — because a more productive citizen is, ultimately, a more taxable one.
In Djibouti, however, this feedback loop is severed. Tax revenue accounted for a little over 11 percent of GDP in 2023, well below the global average of roughly 17 percent in 2024. This is a far cry from countries like France, where the tax-to-GDP ratio stood around 45 percent in 2023. The Djiboutian government’s solvency, in other words, is not derived from the productivity of the average citizen, but from the geopolitical anxiety of Washington, Beijing, and Paris. The population, as a result, ceases to be seen as an economic engine and is instead reduced to a fiscal liability.

The incentive to invest in broad-based industrialisation or educational reform erodes, because simply managing the port and the bases proves profitable enough. 
This dynamic quietly — albeit decisively — reshapes government priorities. The incentive to invest in broad-based industrialisation or educational reform erodes, because simply managing the port and the bases proves profitable enough. The bulk of government expenditure is instead channelled toward logistics infrastructure or funnelled into State-Owned Enterprises (SOEs), which have accounted for 80 percent of external borrowings since 2013. These SOEs are, by most accounts, poorly governed — weak board oversight, limited accountability, and little in the way of performance monitoring. The resulting financial mismanagement has driven up debt service costs, squeezing fiscal space and putting long-term debt sustainability under strain. As the World Bank’s Country Economic Memorandum notes, this escalating debt burden has crowded out spending in social sectors: education and health account for just 15 percent and 8 percent of the government budget respectively, while infrastructure absorbs 30 percent.
Critically, even this infrastructure investment has failed to deliver the one thing Djibouti most needs: jobs. Modernised port facilities, for all their efficiency, are inherently labour-light since automation does much of the heavy lifting. Thus, while Djibouti posted cumulative real GDP growth of over 35 percent between 2015 and 2021, the job intensity of that growth actually declined. The economic boom of the last decade, bluntly put, directly benefited only about 1 percent of Djiboutians of working age.
The problem is further compounded by how vulnerable Djibouti’s location makes it to shocks it has no control over. By tying macro-fiscal stability to the fluidity of the Bab el-Mandeb strait, the country has effectively imported the geopolitical volatility of the wider Middle East into its own balance sheet. The events of 2025 laid this fragility bare: as regional tensions destabilised Red Sea shipping lanes, port traffic contracted by roughly 10 percent in the first half of the year alone — an immediate and sharp fiscal blow.

Djibouti now faces something close to an existential challenge: it has built an entire national strategy around a monopoly that is on the verge of disappearing, leaving it exposed to both the unpredictability of global conflict and the strategic recalculations of its single largest client.
The outlook is tightening further. Ethiopia is aggressively developing alternative trade corridors to reduce its dependence on Djibouti’s facilities through which 95 percent of its cargoes transit. With over 75 percent of Djibouti's GDP tied to transport services for Ethiopia, the country’s economic stability is structurally bound to its landlocked neighbour. Djibouti now faces something close to an existential challenge: it has built an entire national strategy around a monopoly that is on the verge of disappearing, leaving it exposed to both the unpredictability of global conflict and the strategic recalculations of its single largest client.

Breaking the Curse
To its credit, the Djiboutian state has not been entirely blind to these vulnerabilities. Under the banner of Vision 2035, the government has launched an aggressive capital expenditure strategy aimed at diversifying the economy beyond transit. A critical look, however, reveals that this strategy remains limited in its impact largely due to two interconnected reasons: a continued fixation on physical infrastructure, and an outsized public sector presence that crowds out the private economy.
The most illustrative example is the Djibouti International Free Trade Zone (DIFTZ), widely championed as one of the flagship achievements of this era. On paper, it represents progress. In practice, the DIFTZ is structured squarely around transportation, bonded warehousing, logistics, and distribution — aligning it firmly with freight and trade facilitation rather than broad-based manufacturing. In other words, it expands the volume of the rentier model without altering its nature. This is what economists would call “vertical diversification” — adding more steps along an existing value chain rather than branching into entirely new productive sectors. What Djibouti needs is “horizontal diversification,” which can help absorb its vast idle labour force.

To break this curse, Djibouti must pivot from investing in physical infrastructure towards building institutional capacity. 
The economy is further constrained by State-Owned Enterprises that hold near-monopolies across telecommunications, energy, media, and logistics, effectively stymying private innovation. The financial data tells the story plainly: bank credit to the private sector made up 23.1 percent of GDP in 2024 — less than half the global average of roughly 52 percent. The financial system, in short, would rather lend to the state or established trading houses than back a domestic entrepreneur. The result is a profound mismatch between the economy’s demands and the country’s capabilities. The port needs specialised engineers and logisticians, but the education system cannot produce them. Investors, therefore, import skilled labour. Meanwhile, youth unemployment remains stubbornly high.
The location curse, ultimately, is not something geography imposed on  Djibouti, but the result of policy choices. To break this curse, Djibouti must pivot from investing in physical infrastructure towards building institutional capacity. That shift is what would restore the broken social contract: a state that derives its solvency not from the geography of its coastline, but from the productivity of its own people.



Samriddhi Vij, Associate Fellow, Geopolitics, ORF Middle East.

### A Year of Rebalancing

The architecture of global economic relations will face further challenges, tests, and restructuring in 2026, as key political leaders continue to put national priorities above mutual benefit as experienced last year. The “reciprocal tariffs” announced by the United States (US) in early April disrupted the global trade flows and unsettled the multilateral system built over several decades.[1] As a result, global players are adjusting to this new reality and altering their behavior beyond tariff measures to safeguard their own interests. Rather than allowing comparative advantage to be the primary determinant of trade flows, geoeconomics, the use of a country’s economic strength to achieve geopolitical, security, and foreign policy objectives, has become the driving force in negotiating trade agreements between the US and its major trading partners. Strategic competition between the US and China has extended beyond tariffs into other domains, including export controls imposed on advanced technologies such as semiconductor chips and their inputs, particularly rare earths and critical minerals.[2]
The reaction of other countries to the disruptions of last year offers a glimpse of the future rebalancing of global trade anticipated in 2026, in three ways. First, traditional allies in the Global North that depend on significant trade with the US, such as the European Union (EU), the United Kingdom (UK), Japan, and South Korea, have negotiated lower tariff rates. However, they have found it difficult to meet the significant investment commitments of billions of dollars into the US that they have promised in return.[3],[4] Second, Global South countries with larger economies, including Mexico, Brazil, India, and South Africa, have pushed back against conditionalities for trade deals that affect national sovereignty such as energy security and judicial independence.[5],[6] Third, countries that sought to reduce their overdependence on the US as the largest market and China as the largest supplier of consumer goods achieved limited success and will struggle to contain the impact of tariffs on their domestic economies in the year ahead.

Rather than allowing comparative advantage to be the primary determinant of trade flows, geoeconomics, the use of a country’s economic strength to achieve geopolitical, security, and foreign policy objectives, has become the driving force in negotiating trade agreements between the US and its major trading partners.
1. US-China Strategic Competition Increasingly Impacts the Global South
The geoeconomic landscape in 2026 will become increasingly complex. While there appears to be a temporary truce between the US and China on the tariff front,[7] strategic competition between the Unit ed States and China over critical technology and its inputs will continue intensifying. For other countries seeking to develop their own capabilities in critical technologies such as artificial intelligence, closing the gap with the two major geoeconomic powers will be come more difficult.

Strategic competition between the United States and China over critical technology and its inputs will continue intensifying. For other countries seeking to develop their own capabilities in critical technologies such as artificial intelligence, closing the gap with the two major geoeconomic powers will become more difficult.
The US-China competition over critical technologies and resources that fuel AI and advanced manufacturing will intensify in 2026. In 2025, both the US and China implemented export controls on national security-related technologies such as advanced semi conductors[8] and critical minerals[9]. This has triggered the latest round of threats of further retaliatory tariffs by the US[10]. The US initially sought to exercise its leverage through restrictions on the sale of advanced semiconductor chips to China by private companies such as Nvidia, which are essential for artificial intelligence (AI) data processing. Europe be came involved in the debate through the takeover of Nexperia by the Government of the Netherlands.[11] The recent rollback of some of the restrictions by the US suggests that its policy will remain unpredictable and fluid in the year ahead.
However, what is clear is that in 2026, countries of the Global South with large critical mineral reserves such as Indonesia and Mexico will leverage their access to natural resources in exchange for lower tariffs and greater investment in domestic processing and manufacturing sectors, capitalizing on the US-China geoeconomic competition to their advantage.[12]

In 2026, countries of the Global South with large critical mineral reserves such as Indonesia and Mexico will leverage their access to natural resources in exchange for lower tariffs and greater investment in domestic processing and manufacturing sectors.
2. China Surges Exports to Global South
China needs new buyers. As the Trump administration continues to limit imports into the US, China will shift its attention toward other trading partners as it continues to expand its domestic manufacturing capacity.[13] China’s annual trade surplus had reached USD 1 trillion by November, due largely to the surge in exports to Asia, Africa, and Latin America.[14] This trend will continue, driven by in creased demand in sectors such as renewable energy, electric vehicles, telecommunication equipment, and consumer electronics, where China’s share exceeds 80 per cent of global supply in some cases.[15]

In 2026, Global South countries will need to balance strategically the benefits of cheaper imports from China with the imperative to protect their domestic industries.
During the last trade conflict between the US and China starting in 2017, several G20 countries imposed import restrictions on Chinese manufactured goods to prevent an influx of “deflected trade” from flooding their domestic markets.[16] In 2026, Global South countries will need to balance strategically the benefits of cheaper imports from China with the imperative to protect their domestic industries.[17] As the US limits opportunities to circumvent tariffs through the transshipment of Chinese goods from the Global South, countries such as Mexico and Vietnam will find it increasingly difficult to absorb cheaper imports from China without putting their own manufacturing industries and jobs at risk.[18]

3. Trade Between Global South Increases
The geoeconomic impact of tariffs is expected to play out in two key ways: an increase in trade across the Global South and greater attention on the corridors and infrastructure that connect them.
As access to developed country markets becomes more restricted, Global South countries will expand trade through bilateral agreements[19], regional blocs[20] and multilateral groupings such as the G20[21] and BRICS.[22] This trend will accelerate through 2026 as the complementarities and linkages within the Global South become clearer and more defined. Intra-Glob al South trade will serve as a hedge against the tariff policy uncertainty in developed country markets. Global South countries will also pursue opportunities for free trade agreements (FTAs) with major developed economies, such as the one between the UK and India, strategically leveraging their markets and comparative advantage in global value chains.[23]
As trade between countries of the Global South grows in 2026, connectivity projects such as the India-Middle East-Europe Economic Corridor (IMEC), 24[24] Masterplan on ASEAN Connectivity 2025,[25] and South Connection linking eleven countries of Latin America will receive a boost.[26] These include not only physical infrastructure to facilitate trade such as roads, railways, and ports, but also energy pipelines, undersea cables, institutional coordination, and cross-border digital payments. At the same time, greater attention will be directed to logistics hubs centered around fast-growing, middle-income countries with established manufacturing exports at key geographical intersections, such as Vietnam, India, the United Arab Emirates, Türkiye, and those in the western hemisphere connecting Latin America with Asia, such as Peru, Colombia, and Mexico.[27]

Greater attention will be directed to logistics hubs centered around fast-growing, middle-income countries with established manufacturing exports at key geographical intersections, such as Vietnam, India, the United Arab Emirates, Türkiye, and those in the western hemisphere connecting Latin America with Asia, such as Peru, Colombia, and Mexico.
4. Industrial Policy Advances
As the initial effect of tariffs and trade agreements over the past year become more evident in 2026, Global South countries will use industrial policy to drive investment to specific sectors, such as critical minerals,[28] advanced manufacturing,[29] and emerging technologies, especially AI and its infrastructure.[30] Governments will escalate protectionist measures to further subsidize domestic manufacturing.[31] Businesses will continue diversifying and de-risking their global supply chains, focusing on countries that are geopolitically rather than geographically proximate.[32] Those countries with substantial industrial bases and endowments of natural resources are positioned to do so most effectively, including Brazil, Indonesia, India, and Mexico. One roadblock to overcome is that some Global South countries are facing rising debt service costs[33] and constrained access to concessional financing,[34] creating heightened risk of a debt-crisis in 2026.

Governments will escalate protectionist measures to further subsidize domestic manufacturing. Businesses will continue diversifying and de-risking their global supply chains, focusing on countries that are geopolitically rather than geographically proximate.
Conclusion
Tariffs and export controls have fundamentally al tered the global trade landscape in the past year. They have been advanced by new US leaders who long dis agreed with the traditional consensus that free trade is a path to mutual prosperity. The world in 2026 will experience the impact of heightened geoeconomic competition as the two major trading powers; the US and China continue to use tariffs and export controls to reshape the global economy to their advantage. Global South countries will need to guard against the flood of imported manufacturing goods from China, safeguarding their national interests through indus trial policies aimed at protecting and creating jobs. At the same time, it presents an opportunity for the Global South to take advantage of the turmoil. The rules of rebalanced globalization remain in the pro cess of being defined. How Global South countries respond to Washington and Beijing with their own geoeconomic initiatives in 2026 is likely to shape the future global economic order.




Endnote
[1] United States Government. “Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices That Contribute to Large and Persistent Annual United States Goods Trade Deficit”, April 2, 2025. https://www.whitehouse.gov/presidential-actions/2025/04/regulating-imports-with-a-reciprocal-tariff-to-rectify-trade-practices-that-contribute-to-large-and-persistent-annual-united-states-goods-trade-deficits/
[2] United States Government. “Ensuring National Security and Economic Resilience through Section 232 Actions on Processed Critical Minerals and Derivative Products”, April 18, 2025. https://www.federalregister.gov/documents/2025/04/18/2025-06836/ensuring-national-security-and-economic-resilience-through-section-232-actions-on-processed-critical
[3] European Commission. “Joint Statement on a United States-European Union framework on an agreement on reciprocal, fair and balanced trade”, August 21, 2025. https://policy.trade.ec.europa.eu/news/joint-statement-united-states-european-union-framework-agreement-reciprocal-fair-and-balanced-trade-2025-08-21_en
[4] United States Government. “Fact Sheet: Implementing the General Terms of the U.S.-UK Economic Prosperity Deal”, June 17, 2025. https://www.whitehouse.gov/fact-sheets/2025/06/fact-sheet-implementing-the-general-terms-of-the-u-s-uk-economic-prosperity-deal/
[5] Ministry of External Affairs, Government of India. “Statement by Official Spokesperson”, August 4, 2025. https://www.mea.gov.in/Speeches-Statements.htm?dtl/39936
[6] Luis Ignacio Lula da Silva. “Brazilian Democracy and Sovereignty are Non-Negotiable”, September 14, 2025. https://www.nytimes.com/2025/09/14/opinion/lula-da-silva-brazil-trump-bolsonaro.html
[7] United Stated Government. “Modifying Reciprocal Tariff Rates Consistent with the Economic and Trade Arrangement between the United States and the People’s Republic of China”, November 4, 2025. https://www.whitehouse.gov/presidential-actions/2025/11/modifying-reciprocal-tariff-rates-consistent-with-the-economic-and-trade-arrangement-between-the-united-states-and-the-peoples-republic-of-china/
[8] United States Government. “Additions and Revisions to the Entity List”, September 16, 2025. https://www.federalregister.gov/documents/2025/09/16/2025-17893/additions-and-revisions-to-the-entity-list
[9] Ministry of Commerce, Government of the People’s Republic of China. “China’s recent economic and trade policy measures”, October 13, 2025. https://english.www.gov.cn/news/202510/13/content_WS68ecc859c6d00ca5f9a06bc8.html
[10] Peterson Institute of International Economics. “US-China Trade War Tariffs: An Up-to-Date Chart”, November 10, 2025. https://www.piie.com/research/piie-charts/2019/us-china-trade-war-tariffs-date-chart
[11] Government of the Netherlands. “Minister of Economic Affairs invokes the Goods Availability Act”, October 12, 2025. https://www.government.nl/latest/news/2025/10/12/minister-of-economic-affairs-invokes-goods-availability-act
[12] United States Government. “Fact Sheet: The United States and Indonesia reach historic trade deal”, July 22, 2025. https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-the-united-states-and-indonesia-reach-historic-trade-deal/
[13] Xinhua. “15th Five-Year Plan for Economic and Social Development”, October 28, 2025. https://english.news.cn/20251028/efbfd0c774fd4b1c8daeb741c0351431/c.html
[14] General Administration of Customs, Government of the People’s Republic of China. “China Customs Statistics”, December 8, 2025. http://english.customs.gov.cn/Statistics/Statistics?page=1
[15] Ministry of Finance, Government of India. “Geo-economic fragmentation replacing globalisation worldwide with backsliding of economic integration”, January 31, 2025. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2097913
[16] Center for Economic and Policy Research. “Redirecting Chinese Exports from the US: Evidence on Trade Deflection from the First US-China Trade War”, April 24, 2025. https://cepr.org/voxeu/columns/redirecting-chinese-exports-us-evidence-trade-deflection-first-us-china-trade-war
[17] Vietnamnet Global. “Shein and Temu face halt orders in Vietnam without official registration”, October 11, 2024. https://vietnamnet.vn/en/shein-and-temu-face-halt-orders-in-vietnam-without-official-registration-2340709.html
[18] Government of Vietnam. “ASEAN faces challenges as China shifts its trade focus”, October 8, 2025. https://vntr.moit.gov.vn/news/asean-faces-challenges-as-china-shifts-its-trade-focus
[19] Ministry of Commerce and Industry, Government of India. “Brazil-India Joint Declaration for Deepening of MERCOSUR-India Trade Agreement”, October 16, 2025. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2180058
[20] Association of Southeast Asian Nations. “The 57th ASEAN Economic Ministers’ (AEM) Meeting”, September 23, 2025. https://asean.org/wp-content/uploads/2025/09/24.-Joint-Media-Statement-AEM-57-adopted.pdf.
[21] G20. “G20 Trade and Investment Ministerial Statement,” October 10, 2025. https://www.g20.utoronto.ca/2025/251010-trade-statement.html
[22] BRICS. “BRICS Approves Joint Declaration for Fairer, More Inclusive Global Trade,” May 27, 2025. https://brics.br/en/news/brics-approves-joint-declaration-for-fairer-more-inclusive-global-trade
[23] Ministry of Commerce and Industry, Government of India. “Synopsis of Key Chapters of India-UK Comprehensive Economic and Trade Agreement (CETA),” 2025. https://www.commerce.gov.in/wp-content/uploads/2025/08/India-UK-CETA-Synopsis-of-Key-Chapters.pdf
[24] Ministry of Commerce and Industry, Government of India. “India poised to become a trusted bridge of global connectivity through India-Middle East Economic Corridor (IMEC)”, April 16, 2025. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2122299&reg=3&lang=2
[25] Association of Southeast Asian Nations. “Master Plan on ASEAN Connectivity 2025,” 2016. https://asean.org/wp-content/uploads/2016/09/Master-Plan-on-ASEAN-Connectivity-20251.pdf
[26] Inter-American Development Bank. “IDB launches ‘South Connection’ regional program”, March 28, 2025. https://www.iadb.org/en/news/idb-launches-south-connection-regional-program
[27] Allianz. “The geoeconomic playbook of global trade”, 2025. https://www.allianz.com/content/dam/onemarketing/azcom/Allianz_com/economic-research/publications/specials/en/2024/november/14112024-geoeconomic-playbook-global-trade.pdf
[28] Government of Brazil. “Strategic pro-minerals policy”, 2021. https://www.gov.br/mme/pt-br/assuntos/secretarias/geologia-mineracao-e-transformacao-mineral/pro-minerais-estrategicos/FolderPolticaPrMineraisEstratgicosversoingls.pdf
[29] Government of India. “Semicon2025: Building the next semiconductor powerhouse”, September 1, 2025. https://www.pib.gov.in/PressNoteDetails.aspx?NoteId=155130&ModuleId=3&reg=3&lang=2
[30] OECD. “The OECD.AI Policy Navigator”. https://oecd.ai/en/dashboards/national
[31] Government of India. “Powering the Future: The Semiconductor and AI Revolution”, August 15, 2025. https://www.pib.gov.in/FactsheetDetails.aspx?Id=149242
[32] Ministry of Finance, Government of India. “Geo-economic fragmentation”
[33] The World Bank. “International Debt Report 2025”, 2025. https://www.worldbank.org/en/programs/debt-statistics/idr/products?cid=ECR_LI_worldbank_EN_EXT_profilesubscribe
[34] Organization for Economic Cooperation and Development. “Cuts in Official Development Assistance: OECD projections for 2025 and the near term,” June 26, 2025. https://www.oecd.org/en/publications/2025/06/cuts-in-official-development-assistance_e161f0c5/full-report.html

### Turbulence Ahead

The re-election of Donald Trump in the United States (US) has introduced a wave of turbulence to the international system, reversing certain pre-existing trends while accelerating others. Trump’s second term has been marked by the imposition of high tariffs on numerous trade partners, resulting in disruptions to global commercial flows. He has also overseen the US’s retrenchment from various multilateral organizations and arrangements. The US has simultaneously demonstrated a greater willingness to end major conflicts, such as those in Ukraine and Gaza, while exhibiting reduced restraint in its use of force, whether strikes on Iranian nuclear facilities or operations in Latin America. Meanwhile, the war in Ukraine continues to contribute to Europe’s rearmament. Israel’s strikes in Iran, Syria, Qatar, and Yemen reflect broader upheaval spreading across the Middle East and beyond. China’s competition with the US persists, extending across multiple domains and regions. Amid this backdrop, at least five major geopolitical megatrends are likely to unfold.

1. China-Russia Cooperation Intensifies
China and Russia are expected to continue expanding the ‘no limits’ partnership they declared in 2022 through new technological and operational coordination, despite attempts by the Trump administration in the US to engage Beijing and Moscow separately.[1] Following Chinese leader Xi Jinping’s visit to Russia in 2024, Russian reporting announced the two sides agreed to expand military-technical cooperation and joint military exercises.[2] In August 2025, the two sides implemented this commitment with their annual joint sea exercise, which involved a wider geographical remit (including a joint patrol in the Western Pacific) and new capabilities (including an enhanced focus on sub-surface and anti-submarine warfare). Additionally, the two sides participated in their first trilateral exercise with Mongolia, which enabled the three parties to experiment with the use of unmanned systems and robotics for territorial enforcement. There is also evidence of Russia training Chinese paratroopers, suggesting an accelerated timeline for some of China’s military modernization goals.[3]
The broader movement toward China’s accelerated military modernization was on display during its ‘Victory Day’ military parade in September 2025, when a wide variety of emerging military hardware—from unmanned and cyber systems to hypersonic capabilities— was showcased.[4] Active Chinese preparations for a Taiwan-related amphibious invasion or blockade remain ongoing, as does China’s increased Coast Guard activity, “swarming” tactics, and use of maritime militia to assert presence near disputed maritime features in the South China Sea. Japan’s 2025 Defence White Paper explicitly highlights China’s use of grey-zone tactics via the China Coast Guard (CCG) and its cooperation with military and para military organs.[5]

China and Russia are expected to continue expanding the ‘no limits’ partnership they declared in 2022 through new technological and operational coordination.
The Sino-Russian partnership is likely to affect the two countries’ closest military partners, such as Pakistan, North Korea, Belarus, and possibly Iran. Pakistan’s launch of an Army Rocket Force Command in August 2025, along with other developments in its defense, acquisitions and doctrine indicates much closer military collaboration with China in the years ahead.[6] The China-Russia relationship also has important implications for the war in Ukraine, with China’s foreign minister Wang Yi reportedly telling European diplomats in July that Beijing would not accept Russia losing the war in Ukraine and that such an outcome would allow the US to turn its full attention to China.

The Sino-Russian partnership is likely to affect the two countries’ closest military partners, such as Pakistan, North Korea, Belarus, and possibly Iran.
2. Minilateralism and Bilateralism Deepen
The world is expected to witness countries con fronting the twin overdependencies on the US (for market demand) and China (for product supply), as well as weakening multilateralism amid Washington and Beijing’s reluctance to invest in inclusive international systems. This is leading to various countries and regional powers seeking more bilateral and mini lateral solutions and may involve a flurry of individualized trade and supply chain arrangements as well as a thickening of customized security arrangements, as various powers seek to diversify.
Weakening multilateralism underpins this trend. The United Nations system missed another opportunity to reform itself during the 2024 Summit of the Future.[7] The World Trade Organization’s dispute resolution mechanism remains paralyzed. The Association of Southeast Asian Nations (ASEAN) has not been unanimous on important challenges in the South China Sea and Myanmar, although it delivered somewhat on the conflict between Thai land and Cambodia.[8] Other arrangements and entities are partially compensating for this gap. Trade is increasingly shaped through a complex network of bilateral and regional trading arrangements. The European Union (EU) has concluded trade agreements with South American countries (Mercosur); the United Kingdom (UK) and India similarly concluded a long-negotiated agreement.[9]

The world is expected to witness countries confronting the twin overdependencies on the US (for market demand) and China (for product supply), as well as weakening multilateralism amid Washington and Beijing’s reluctance to invest in inclusive international systems.
Security is often addressed bilaterally (such as the US-Philippines alliance) or minilaterally (such as the Quad).[10] To less fanfare, the Japan–Philippines–US Trilateral has institutionalized joint patrols and maritime domain awareness cooperation in the West Philippine Sea, while the Japan-South Korea-US frame work has developed into an annual security dialogue on missile defence and data-sharing.[11] Changes to defence spending and posture in several countries, including in Europe, Asia, and the Middle East create new opportunities for bilateral and minilateral defence industrial cooperation. More interaction be tween various theaters, such as between Europe and the Indo-Pacific, can be anticipated. For example, Japan, Italy, and the UK have collaborated on a new Global Combat Aircraft Programme.[12]

3. Western Hemispheric Tensions Rise
Latin America is experiencing heightened tensions. A region that had largely resolved inter-state conflict and remained insulated from great-power competition is now witnessing a return to peacetime competition for influence and possible conflict, against a con text of political polarization and competition over commodities. The US has shifted towards a greater focus on Western Hemispheric affairs, including homeland defense, border enforcement, and count er- drug operations. The Trump administration ap pears to have adopted a more expansive view of what homeland security entails, expanding it to include the use of the military for domestic law enforcement sup port, and military strikes on alleged drug traffickers in the Caribbean; as shown by Washington’s actions in Venezuela at the beginning of the year.
The positioning of a US aircraft carrier battle group and other capabilities in the Caribbean in 2025 is likely to signal future developments.[13] Venezuela continues to face economic hardship, despite latent oil riches, and has made more assertive territorial claims over neighboring Guyana.[14] How the country’s eco nomic situation evolves in a post-Nicolás Maduro era remains to be seen. Leaderships in Argentina and El Salvador have aligned their political trajectories with Trump-era policies, while others such as Brazil and Peru are pursuing greater economic cooperation with China in the form of trade and investment. The global race for critical minerals is set to engage Chile, Argentina, Bolivia, and Peru, while China continues to seek security opportunities in the region, whether in the form of arms sales, ground stations, or port and maritime infrastructure opportunities.[15]

The global race for critical minerals is set to engage Chile, Argentina, Bolivia, and Peru.
4. Competition Intensifies in New Domains and Regions
Official statements and agreements by governments around the world underscore the growing importance of undersea capabilities, Artificial Intelligence (AI)-enabled operations, and supply-chain security as key elements of national competitiveness. There is a broad recognition that strategic rivalries will increasingly be contested below the water line, in the digital sphere, and in space. Furthermore, the line between civilian industry and defense is expected to blur further, including in these domains, requiring stricter export controls, national or region-wide industrial policies, and clarity on national security laws. Matching doctrines with capabilities is likely to prove challenging: some countries may seek to impose preemptive constraints on competition, while others are likely to allow regulation to follow capabilities.
These developments are expected to influence the AI Impact Summit hosted in 2026 in India.[16] They will also shape the future of high technology security partnerships such as AUKUS, which involves nuclear submarine and high technology sharing between the US, Australia, and the UK.[17] Autonomous underwater capabilities are under development, supported by quantum navigation, while Israel has demonstrated emerging advantages in precision strike capabilities enabled by space and artificial intelligence that many traditional missile and air defense systems struggle to counter effectively. Existing multilateral regimes that govern weapons sales —such as the Missile Technology Control Regime (MTCR) and Wassenaar Arrangement— risk irrelevance if they fail to keep pace with new technologies. Meanwhile, geopolitical competition is extending into new regions. The Gulf of Guinea, for example, has witnessed multiple glob al powers (including China, India, and the European Union) employing military force, often motivated by counter-piracy objectives.[18] Moreover, the Arctic is gaining strategic importance through the potential extraction of natural resources and the increased use of the Northern Sea Route.[19]

There is a broad recognition that strategic rivalries will increasingly be contested below the water line, in the digital sphere, and in space.
5. Nuclear Competition Returns
Multiple developments indicate the ongoing erosion of existing global arms-control regimes and the potential for a new era of nuclear modernization and, possibly, nuclear expansion. Every power in possession of nuclear weapons is engaged in intensive modernization programmes, potentially ending what had been a trend toward reduction in nuclear stocks.[20]

Multiple developments indicate the ongoing erosion of existing global arms-control regimes and the potential for a new era of nuclear modernization and, possibly, nuclear expansion.
China, in particular, is driving a rapid expansion of its nuclear arsenal, as well as associated delivery systems, prompting the US to rethink its nuclear strategy: the new nuclear arms race is consequently reshaping conventional military force postures. Furthermore, several non-nuclear weapon powers are investing in associated civilian nuclear technologies or delivery mechanisms, possibly as a precursor to nuclear weaponization. Saudi Arabia, for example, signed a new defense pact with Pakistan that includes an extended deterrence commitment, while recent polling suggests that public support for indigenous nuclear capabilities has reached all-time highs in South Korea.[21]

Several non-nuclear weapon powers are investing in associated civilian nuclear technologies or delivery mechanisms, possibly as a precursor to nuclear weaponization.
Conclusion
The trends outlined in this article are not the only major dynamics shaping global affairs. A resolution to the war in Ukraine remains elusive and will hinge on a host of factors including Europe’s capacity to backfill US military supplies, Ukrainian politics, and Russia’s appetite for a ceasefire. Conflicts in Africa continue to be overlooked, whether in the Democratic Republic of the Congo, in Sudan, or transnational violence in the Sahel. The Middle East is experiencing countervailing dynamics—the role of Türkiye and Qatar in Gaza; Iranian attempts to reclaim leverage; and the consequences of the Saudi-Pakistani defense pact—that could shape the region’s geopolitics. The South China Sea could become as much of a flashpoint as the Taiwan Strait, while the South Pacific and Caucasus remain arenas of continued competition among multiple powers. Nonetheless, the Russia-China axis, the continued growth of bilateral and minilateral arrangements, a more turbulent Latin America, competition in new techno logical domains and regions, and the reemergence of nuclear weapons are likely to constitute major trends to monitor in 2026.




Endnotes
[1] “Joint Statement of the Russian Federation and the People’s Republic of China on the International Relations Entering a New Era and the Global Sustainable Development,” President of Russia, 4 February 2022.
[2] “Russia, China to continue strengthening military ties — joint statement,” TASS, 16 May 2025.
[3] Oleksandr V Danylyuk and Jack Watling, How Russia is Helping China Prepare to Seize Taiwan, RUSI, 26 September 2025.
[4] Atul Kumar and Rahul Rawat, “China’s Military Parade 2025: Enhanced Capabilities, Strategic Intent,” Observer Research Foundation, Special Report, 23 September 2025.
[5] “Defense of Japan 2025 (White Paper),” Ministry of Defense, Japan, 2025.
[6] Sohini Mandal, “Pakistan Establishes Rocket Force, Unveils New Missile,” Janes, 19 August 2025.
[7] “Pact for the Future, Global Digital Compact and Declaration on Future Generations,” United Nations, September 2024.
[8] “Chairman’s Statement of the 46th ASEAN Summit Kuala Lumpur, Malaysia, 26 MAY 2025”, ASEAN.; “Joint Communiqué of the 58th ASEAN Foreign Ministers’ Meeting Kuala Lumpur, 9 July 2025”, ASEAN.
[9] “EU and Mercosur reach political agreement on groundbreaking partnership,” European Commission, 5 December 2024.; “Comprehensive Economic and Trade Agreement between the United Kingdom of Great Britain and Northern Ireland and India,” Department of Business and Trade, United Kingdom, 24 July 2025.
[10] US Department of State, “2025 Quad Foreign Ministers’ Meeting Fact Sheet”, July 1, 2025.
[11] “United States-Japan-Republic of Korea Trilateral Partnership Advances Economic Prosperity,” U.S. Department of State, 30 October 2025.
[12] “Global Combat Air Programme Joint Statement,” UK Ministry of Defence, 7 July 2025.
[13] Konstantin Toropin, “US is sending an aircraft carrier to Latin America in major escalation of military firepower,” Reuters, 24 October 2025.
[14] “Incursion by Venezuela into Guyana’s Territorial Waters,” CARICOM, 1 March 2025.
[15] Eduardo Baptista, Marco Aquino and Lucinda Elliott “Starting Latin America trip, Xi Jinping opens huge port in Peru funded by China,” Reuters, 14 November 2024.
[16] “India Accelerates AI Self-Reliance,” Ministry of Electronics and Information Technology, Government of India, 10 October 2025.
[17] “Statement on Australia-UK Ministerial Consultations (AUKMIN) July 2025”, Ministry for Foreign Affairs of Australia, 25 July 2025.
[18] “EU and India to Carry Out Joint Naval Exercise in Indian Ocean to Reinforce Maritime Security Cooperation,” European External Action Service, 29 May, 2025.; “China Reaffirms commitment to enhancing stability, security in Gulf of Guinea,” Ministry of National Defense, People’s Republic of China, 4 December 2024.
[19] “Report on a European Parliament Recommendation to the Council, the Commission, and the Vice-President of the Commission / High Representation of the Union for Foreign Affairs and Security Policy on the EU’s Diplomatic Strategy and
Geopolitical Cooperation in the Arctic,” Committee on Foreign Affairs, European Parliament, 12 November 2025.
[20] “Nuclear risks grow as new arms race looms,” SIPRI, 16 June 2025.
[21] Maha el Dahan and Saeed Shah, “Saudi Arabia, nuclear-armed Pakistan sign mutual defence pact,” Reuters, 18 September 2025./; Peter K Lee and Kang Chungku, “Worth the Squeeze: A Conditions-based Analysis of South Korean Public Support for Nuclear Deterrence,” Asan Institute, 28 May 2025.

### Private Control of Connectivity in Modern Conflict

Digital infrastructure and communications form core components of modern conflict. Connectivity, cloud computing, satellite communications, and online platforms increasingly shape inter- and intra-regional conflicts, cross-border information flows, and grey-zone warfare. This infrastructure, however, is for the most part developed, owned, and operated not by states but by private technology companies with the capital and expertise to deploy digital infrastructure across borders at scale. In conflict and crisis settings from Ukraine to Iran, Venezuela, Sudan, and Myanmar, private companies have sustained communications and operations when state-controlled networks have failed or been deliberately shut down.
While use cases such as Starlink services being extended to Venezuela and Iran have been praised for preserving civilian access to information and documentation of abuse, the increasingly prevalent role of private technology companies in conflict scenarios has crucial policy implications. Since private technology firms operate across multiple jurisdictions and increasingly control access to digital infrastructure, their actions can lead to state dependency while simultaneously complicating regulation through the fragmentation of legal authority across states. Such private interventions are predominantly shaped by a mix of commercial incentives and operational security calculations, rendering their decision-making calculus quite different to those of states. States and civilian populations are thus bound to rely on privately-owned systems that cannot easily be substituted, regulated, or compelled to align with local standards.
This piece examines how private technology companies have come to exercise such influence in ongoing conflicts, the considerations that shape their ambitions in post-conflict environments, and the risks for both states and companies attempting to deploy such technologies.

Internet Connectivity as Decisive Power: The Emergence of Para-Sovereign Influence
Sovereignty has traditionally been defined by territorial control and a state’s control over critical infrastructure. Digital technologies have complicated this relationship as satellite internet, cloud providers, and global platforms allow services to be provided across borders without the need for large-scale physical infrastructure such as fibre-optic cables located in the receiving country. Starlink, for example, requires only an activated laptop-sized user terminal and line-of-sight to low-earth orbit satellites. This shift has transferred a degree of strategic power to private firms as gatekeepers of systems upon which states increasingly depend, but over which they retain limited regulatory control.

Private technology companies are reshaping modern conflict by controlling the digital infrastructure that states and citizens increasingly depend on during crises.
In Ukraine, private technology companies played a visible role following Russia’s 2022 invasion. Elon Musk’s Starlink satellite connectivity helped sustain communications when terrestrial networks were damaged or targeted. Laws that enforced centralised data storage in Ukraine were amended to allow service providers, including Amazon, Microsoft, Google and Cloudflare, to rapidly migrate data away from vulnerable physical data centres just months before they were targeted. Where dual-use has been a concern in conflict zones, such as in both Ukraine and Israel and Gaza, the navigation apps Waze and Google Maps platforms disabled live traffic data that could reveal military movements.
Satellite-based internet access has been used to circumvent blackouts that were either state-imposed in the case of Iran or, as it is now suggested, the result of US cyberattacks causing power outages in the case of Venezuela. In Iran, internet access has been essential for protestors as it enables communication with foreign governments and civil society, whose influence may yet prove decisive on domestic power contestation. However, the difference between the Iranian and Venezuelan contexts and Ukraine is that connectivity is not being provided to a sovereign state via an official government contract. Rather, it has been provided for free — at least in initial stages of conflict or crisis scenarios — to civilians through informal and unregulated channels in Ukraine, Iran, and Venezuela. In many cases, such interventions can be understood as morally justified, particularly where connectivity preserves civilian access to information during domestic or international conflicts — Iran being a prime example. Nonetheless, the distinction demonstrates how private actors can introduce or withdraw critical connectivity in ways that bypass state authority, reshaping sovereignty not through territorial control but through infrastructural dependency.

Why Companies Intervene: Morality, Market Access, and Strategic Incentives
According to the Atlantic Council’s analysis of tech decision-making in Ukraine in the war’s early stages, moral clarity on the conflict clearly played a role in motivating corporate responses in Ukraine. However, moral considerations operate alongside other, more pragmatic factors such as reputational dynamics. Public recognition from governments and civilians can reinforce a company’s image as a responsible global actor. Against the backdrop of Musk’s increasingly polarising domestic political profile in the US, his extension of Starlink connectivity to Iranians and Venezuelans amid regime-imposed internet blackouts has arguably contributed to a partial reframing of his public image as a provider of critical humanitarian infrastructure.
Commercial and strategic incentives are equally relevant. Conflict environments provide extreme conditions in which technologies can be stress-tested and refined. Satellite networks operating under jamming and spoofing attempts, such as those Starlink has been facing since announcing the extension of services in Iran, or cloud services defending against sophisticated cyberattacks, generate operational insights that are difficult to replicate in peacetime. Successfully operating in these environments can strengthen a company’s reputation for resilience and trustworthiness, reinforcing brand credibility. Executives such as Microsoft’s Brad Smith have noted that experience gained in Ukraine improved their ability to protect customers globally and increased confidence among government clients when making purchasing decisions.
Beyond the experience gained via service provision in immediate conflicts, companies also consider longer-term market potential. Countries such as Iran and Venezuela combine large populations, significant energy resources for data centres, and strategic geography relevant to global connectivity corridors. Some groundwork for cross-regional digital connectivity is already in place: Iran is a landing point in the OMRAN cable — part of the Europe-Persia Express Gateway (EPEG) — as well as a central node of the proposed “Iran Corridor”, which seeks digital connectivity expansion along the established International North-South Transport Corridor (INSTC) route. Venezuela is connected to the US, wider Caribbean, and Latin American regions through the ARCOS-1 submarine cable network. Though current sanctions limit formal engagement, a potential “day-after” scenario involving regime change or normalisation could present opportunities for these cable networks and foreign technology firms to expand further into these markets. However, damage to existing digital infrastructure sustained by conflict may require substantial capital to rebuild, alongside heightened security planning to protect new investments in often unstable transitional settings. As such, this is likely to be a consideration primarily for firms requiring limited physical infrastructure or technology giants with sufficient capital, such as SpaceX, Amazon, Microsoft, and Google.

Risks, Constraints, and the Accountability Gap
While the involvement of private technology companies can enhance resilience and access, it also introduces a set of risks that remain under-governed. One of the most persistent challenges is dual use, since technologies designed for civilian internet connectivity or information sharing can be repurposed by repressive forces or occupying powers — as was found to be the case with traffic alerts being used to track troop movements. Additionally, when private infrastructure becomes integral to military or quasi-military operations, it may be treated as a legitimate target.
Though experiencing jamming, spoofing, and cyber interference against commercial systems can, as previously mentioned, contribute to service improvements, it also puts these companies under intense risk. Considering that some companies involved in providing services in conflict zones hold sensitive government and civilian data — most prominently Starlink, which is deeply embedded in NASA and US Department of Defense contracts — the convergence of civilian, commercial and military functions raises the risk that vulnerabilities in one domain may have cascading consequences in others, for example if malware is able to spread laterally across connected systems.

Ownership of satellite connectivity has transferred strategic power from states to private actors, complicating sovereignty and post-crisis governance of technological infrastructure.
In addition, the public falling-out between the large and often unpredictable personalities of Musk and President Trump introduces the possibility that privately controlled infrastructure could be slowed or withheld at the will of private sector executives, underscoring a broader structural risk for states that depend on a narrow set of technology providers for critical government functions.
These risks are compounded by the fact that states often lack clear jurisdictional authority over systems that are embedded in conflict zone operations, but are legally and technically distributed across multiple countries. The challenge of bringing such infrastructure under effective national control, or making it “sovereign” — a concept still being worked out, is amplified by the market concentration of advanced technologies. As a result of the high capital requirements and technical barriers limiting competition in sectors such as satellite internet, it is unlikely that actors beyond the small number of firms currently operating in this sector will enter the market at scale in the near term, entrenching service provision within a narrow group of providers. As such, these few become systemically important, with limited alternatives available to states or populations affected by their decisions.

Conclusion
The private tech sector must increasingly be watched as a predictor of outcomes in global geopolitical events, since ownership of extraterrestrial infrastructure, in particular, gives private actors the capacity to bypass sovereign leaders. Private technology companies play a consequential role in conflict environments by controlling digital infrastructure that shapes civilian communications to the wider world, information flows, and operational resilience within armies and opposition groups. Their influence stems less from formal authority than from ownership of systems that states and citizens increasingly depend on during crises, often without viable alternatives or effective regulatory oversight.
For private technology companies, engagement in conflict-affected or crisis environments requires weighing the costs and risks of establishing operations, particularly where services depend on physical infrastructure. Damage to networks and insecure operating conditions increases the risk that technologies may be repurposed for dual use or co-opted by unintended actors, exposing civilian and government data should systems fail or be compromised, while also harming a company’s reputation.
Policymakers should recognise that where private engagement is desirable, governments can lower barriers through anti-corruption measures, clear public–private coordination mechanisms, and improvements to the security environment. At the same time, states must acknowledge that control over critical digital infrastructure is increasingly concentrated in private hands, limiting their ability to direct connectivity during political transition.



Elizabeth Heyes, Junior Fellow, Technology, ORF Middle East.

### Navigating Strategic Autonomy: India and the Middle East in a Multipolar World

India recently hosted the second iteration of the India–Arab Foreign Ministers’ Meeting (IAFMM) in New Delhi after a 10-year gap. The first such meeting took place in Manama, Bahrain, in 2016, at a relatively more stable period in history when both regional conflagrations and global rivalries persisted within the confines of a larger global multilateral structure. While the issues under discussion have remained largely similar, the mechanisms addressing them—regardless of their successes or failures—were anchored in a Western-led commitment to a rules-based international system. By 2026, however, it is the West itself that appears to be deconstructing this order, creating space for others to emerge as contenders in shaping the next global system. Whether this moment marks an ‘end’ of the West or enables the ‘rise’ of the rest remains an open question.

Western Order in Flux: Implications for India and the Middle East
The deconstruction of the international order as we have known it for decades has come swiftly. Both the Indian subcontinent and the Middle East have found themselves in the wake of this new reality, with the former at an impasse with Washington over tariffs and trade agreements, while the latter grapples with erratic military and defence partnerships that have endured between Arab powers and the United States (US) since the 1940s. By 2026, the cracks in this Western multilateral order have widened considerably. For New Delhi, Abu Dhabi, and Riyadh, among others, this moment presents an opportunity to step up and shape the future of a renewed political order; questions remain over whether these powers are prepared to step in or whether this moment of change has arrived prematurely.

By 2026, however, it is the West itself that appears to be deconstructing this order, creating space for others to emerge as contenders in shaping the next global system. 
India’s hosting of Arab leaders helped reinforce its position on Palestine, which India officially recognised in 1988. However, New Delhi has been engaged in a balancing act in the Middle East over the past few years, shaped by both the war in Gaza and renewed tensions involving Iran. As the Arab summit was underway, India’s Deputy National Security Adviser Pavan Kapoor arrived in Iran, amid heightened tensions with the United States as President Donald Trump deployed a large military armada around the country to pressure Tehran into negotiations. Simultaneously, reports indicated that Prime Minister Narendra Modi may visit Israel later this month.
Recently, at the World Economic Forum in Davos, Switzerland, Canada’s Prime Minister Mark Carney, himself facing the ire of US President Donald Trump—disrupting North America’s otherwise stable neighbourhood relations—delivered a speech in which he admitted that the story of the international rules-based order was “partially false”. The Canadian leader also noted that countries involved in shaping the post–World War II architecture, including Canada, benefited from the system across domains ranging from trade to security, underwritten by US hegemony.

Divergent Paths to Strategic Autonomy: India and the Middle East 
Over the past few years, the concept of ‘strategic autonomy’ has both challenged and revitalised debates on foreign policy in India and the Middle East. The initial shifts were first evident at the United Nations (UN) in 2022, when Arab powers did not explicitly side with the US and Europe against Russia, seeking to maintain a degree of neutrality as the war in Ukraine unfolded. While this was a familiar diplomatic approach for India, a long-standing advocate of non-alignment, the consequences of adopting a similar strategy in the Middle East were far more significant. Gulf powers sought strategic autonomy even as they remained tied to US security guarantees—a constraint largely absent for New Delhi.

Over the past few years, the concept of ‘strategic autonomy’ has both challenged and revitalised debates on foreign policy in India and the Middle East. 
India’s foreign policy choices are rooted in its geographic realities and long-standing diplomatic ethos since its independence in 1947. It generally refrains from joining blocs, overtly taking sides, or becoming a subordinate in alliance systems. India is a member of the Quad with the US, Australia, and Japan, while also participating in the Shanghai Cooperation Organisation (SCO) and BRICS, where Russia and China play prominent roles. Illustrating this stance through its defence infrastructure, the Indian Air Force is integrating BrahMos missiles, jointly developed with Russia, on its fleet of French-made Mirage 2000 fighter jets, which also carry Israeli-made weapons such as SCALP-2000 bombs.
In the Middle East, the ideation of strategic autonomy has taken a different route. Countries like Qatar, the United Arab Emirates (UAE), and Saudi Arabia have increasingly positioned themselves as valuable middle powers, capable of mediating larger conflicts. To some extent, this explains why maintaining a relationship with Moscow following its conflict with Ukraine remains important. Even Türkiye, a member of NATO, has adopted a similar path, seeking to leverage its unique geographic advantage, particularly in the Black Sea region, as a hub for diplomacy. Others, including Doha, Riyadh, and Abu Dhabi, have already established themselves as new-era mediators on critical geopolitical issues, such as Russia, Ukraine, and Iran.
These political and diplomatic manoeuvres are occurring amid significant challenges, requiring states to remain nimble as they seek to consolidate their positions and interests. Arguably, India has a higher stake, being home to more than 1.4 billion people and a US$ 4.18 trillion economy. However, its appetite for risk and hedging, and its reluctance to appear overly cautious at a moment when the idea of ‘multipolarity’ demands action, shape its approach. India has long advocated multipolarity, meaning no single hegemonic control but multiple centres of power, and sees itself as one such centre in Asia. Across its shores from the Arabian Sea, the push and pull to become a pole of power is also well underway in the Gulf. An earlier design envisaged Arab powers, Israel, and Iran as the three poles of influence. However, shifts in power dynamics have created uncertainty and disagreement over leadership within the Arab world.

India has long advocated multipolarity, meaning no single hegemonic control but multiple centres of power, and sees itself as one such centre in Asia.
Coordinating a Multipolar Future: Challenges and Opportunities
Finally, the question arises whether emerging powers have been caught off guard in preparing to fill the vacuums left by the Western world. The answer is likely yes. Scholars such as Matias Spektor argue that, while Carney’s critique of Western hypocrisy may be valid, the world could come to miss the existing order, and transnationalism as a future organising principle could prove destabilising.
How middle or regional powers will coordinate to fill the emerging gaps remains unclear. This presents a potential opportunity to foster a new dialogue within existing forums such as the IAFMM. New Delhi, more than any other actor, is well placed to take up this proposition and revitalise these currently directionless diplomatic mechanisms. If India and the Middle East represent two poles of power in a multipolar construct, efforts to work together in shaping the next global order should begin without delay.



Kabir Taneja, Executive Director, ORF Middle East.

### Green Hydrogen Prospects in the Gulf

Global fossil fuel production, greenhouse gas (GHG) concentration, and temperatures are hitting record highs despite endless debates at media-intensive global summits. As global efforts to solve the collective climate action problem falter, hydrogen presents the Gulf region with an excellent opportunity to drive regional climate cooperation and emerge as a global climate leader.
The Gulf Cooperation Council (GCC) member states are, in many ways, at the centre of the development. They collectively produce about 20 percent of global oil, and they are also particularly vulnerable to climate change. The region is heating up three times as fast as London, with scientists predicting life-endangering temperatures, and it faces extreme weather events. In response, the region’s governments are exploring alternatives to fossil fuels, with a growing interest in hydrogen, as it fits the region’s geographic advantages and enables post-oil industrial continuity.

Challenges for Hydrogen Adoption
Hydrogen may be produced with low to no emissions, using renewable energy (“green” hydrogen) or from natural gas, capturing the emitted CO2 (“blue” hydrogen). It can then be used as an energy source through burning or fuel cells, or as an input for the chemical industry, for example, to produce ammonia. Yet, hydrogen has failed to meet inflated expectations. This is mainly due to increased electrification, which has crowded out hydrogen in road transport and heating. In addition, while hydrogen has excellent energy density by mass, its energy density by volume is low, resulting in bulky fuel storage and complex logistics.
Green hydrogen, in particular, is still years away from becoming cost-competitive without a more substantial carbon pricing or taxation. It also consumes large amounts of water as a raw material, nearly 9kg of water per 1kg of H2— a problem that is particularly binding in water-scarce GCC states. Blue hydrogen, meanwhile, has its own challenges, including a currently low share of captured CO2, more gas-intensive production than “grey hydrogen,” and a trade-off between low emissions and low cost.

Recent resurgence of hydrogen
Despite its limitations, hydrogen has well-defined use cases in hard-to-abate sectors. These include the cement industry (about 7-8 percent of global CO2 emissions), metallurgy (7 percent), petrochemicals (about 14 percent of global oil consumption), as well as maritime shipping and aviation (combined about 15 percent). Hydrogen can replace oil and gas either directly as a fuel or through “power-to-X” processes that produce methane (“synthetic natural gas”), methanol, ammonia, and other hydrocarbon compounds, with applications from sustainable air fuel to fertilisers.
Moving up the value chain from uncompressed hydrogen to compressed hydrogen to liquefied hydrogen to derivative products like ammonia makes green hydrogen more viable, especially in the Gulf. While the added processing is costly energy-wise and decreases round-trip efficiency, thus compounding the high green energy demands of hydrogen production, it greatly increases energy density and transportability, especially as seaborne shipping remains the primary mode of transportation for Gulf producers in the absence of substantial pipeline networks to the major centres of demand in East Asia and Europe. Consequently, green hydrogen will inherit the same capacity constraints, added costs (over pipeline), and security concerns as the hydrocarbon sector. In addition, in the same vein as the petrochemical industry, domestic hydrogen processing into derivatives also keeps more value added in the region.
Globally,      hydrogen is poised to play a significant role in decarbonisation efforts, as initiatives like the Breakthrough Agenda and the World Bank’s 10 GW Initiative demonstrate. Many countries have developed hydrogen strategies, projecting that most will be net hydrogen exporters by the middle of the century. China introduced a set of policies to boost hydrogen in industrial and transportation applications. Similarly, hydrogen plays a key role in the EU’s Green Deal and the US Inflation Reduction Act—although Trump is set on eliminating emissions-reduction incentives.
Yet, global green hydrogen production capacity, while quintupling from 82 thousand tonnes in 2019 to 399 thousand tonnes in 2024, faces a widening gap between ambition and implementation. Investment in production capacity is currently held back by high costs, limited demand due to economic lull and climate policy uncertainty. As a result, green hydrogen production will remain limited in the short term. As the Gulf enjoys comparative advantages regarding hydrogen as with fossil fuels (location, resources, cost, infrastructure, expertise), the gap between hydrogen aspiration and implementation presents an opportunity for the region.

Hydrogen in the Gulf: State and Potential
The GCC states possess abundant hydrogen potential. Geologically, the Arabian Peninsula is well-suited for underground storage. Geoeconomically, they enjoy a strategic location between the two markets that are projected to dominate GH demand in 2050—South and East Asia and Europe. In addition to export markets, GCC countries also feature robust domestic use cases, including large petrochemicals, metallurgy, cement, and shipping industries, as well as natural gas production that may use hydrogen as a green additive (although this use has limitations). A significant challenge is the requirement for large quantities of clean water to produce green hydrogen, which creates a massive demand for additional desalination capacity. This issue may be attenuated through direct seawater and wastewater electrolysis, a technological development where Gulf states could be at the forefront.
Not all Gulf states have the same geographic advantages, however.      Saudi Arabia and Oman are blessed with a long Red Sea shoreline and an advantageous solar- and wind-energy combination. While the UAE lacks substantial wind-power potential, it is the only GCC country with a nuclear power plant that could potentially produce “pink hydrogen”. Qatar possesses LNG and blue hydrogen know-how and infrastructure, as well as a compact landmass that facilitates national implementation. However, its smaller solar and wind energy potential for green-hydrogen production and its shorter coastline compel it to focus on blue hydrogen in the short-term.

Current Policies and Projects
Consequently, the three GCC members developing GH projects are Saudi Arabia, the UAE, and Oman.
Saudi Arabia sees hydrogen as an important part of its industrial development strategy. A large-scale production facility, in cooperation with the US company Air Products, is scheduled to open at NEOM’s Oxagon in 2026. 4GW solar and wind production will produce up to 600 tons/day of green ammonia, while hydrogen research will be conducted in cooperation with King Abdullah University of Science and Technology (KAUST). This plant alone accounts for the bulk of the US$     11 billion in investment spending on Gulf hydrogen projects until 2030. A new 4GW project in Yanbu, a joint venture between Acwa and the German EnBW, with engineering services from Spain and China, is slated to produce green hydrogen and green ammonia for export.
The UAE published the GCC’s first ‘Hydrogen Strategy’, calling hydrogen the “energy carrier of the future”. It targets 1.4 million tonnes of green hydrogen per year in 2031, an ambitious goal compared to the project pipeline. A DEWA/Siemens joint venture in Dubai was the first green-hydrogen production site in the GCC, producing 180 tonnes per year. Masdar, meanwhile, plans the production of 1 million tons of green hydrogen in 2030, half of it abroad. The UAE is also planning a dedicated hydrogen R&D centre, and is interested in innovative applications like green steel. As a natural gas producer but a net gas importer, the UAE can blend its existing gas industry with hydrogen to mitigate this dependency.
Oman pairs its green hydrogen ambition, such as hosting a Green Hydrogen Summit and launching Hydrom in 2022, with excellent natural advantages. This ecosystem is also meant to energise the country’s post-oil development effort, for example, in Dhofar and Duqm. Oman is a case study in how international cooperation could develop, both regionally, with a Saudi-Omani joint venture, and globally, with European and Chinese partners. In a holistic policy approach to the hydrogen value chain, Oman’s in-country-value strategy also plans the onshoring of manufacturing of industrial components.

Conclusion and Outlook
Climate-neutral hydrogen is indispensable to decarbonise hard-to-abate industries, and, for the Gulf, it presents the only way to harness its renewable energy potential for long-distance export and preserve its petrochemical and metallurgical industry with its vast physical and human capital in the post-oil era.
But current GCC commitments to GH can be tentative and changeable. Gulf countries still hesitate to spend, with only 20 cent investment in green energy for every dollar invested in fossil fuels. The critical challenge will thus be to keep a steady long-term focus and harness location factors for GH, even in the face of short-term challenges like cost advantages of fossil fuels and “grey hydrogen” and water shortage. To secure long-term success, a holistic strategy is needed, including supportive policies and investments along the value chain and a push for R&D. For example, the Gulf’s idiosyncrasies could make it a natural leader in research into seawater electrolysis and, especially for Qatar, methane pyrolysis (“turquoise hydrogen”).
All this necessitates a concerted, durable, inter-governmental effort, ideally through a dedicated GCC Green Hydrogen institution. This will help advance cross-border infrastructure and investment, joint support policies, and coordination of production, knowledge transfer, procurement, and collective negotiation of joint ventures and offtake agreements to offset demand risk. As both Saudi Arabia and the UAE are vying to become a global hydrogen hub, regional cooperation and coordination will be crucial to harness synergies and scale economies.
While current political and economic intra-GCC tensions make such cooperation appear distant and unrealistic, past successes in infrastructure (Dolphin Gas Pipeline, GCC Interconnection Authority) and commodity production (OPEC) show that cooperation is possible when interests are aligned. Oman, particularly, with its regional hydrogen joint ventures and reputation for conciliation, could become a leader in bringing the GCC countries together.
Whether the Gulf can become a global green-hydrogen hub will depend on its ability to advance regional cooperation and focus on long-term goals over short-term wins, even in the face of inevitable setbacks.



Frédéric Schneider is a Senior Fellow at the Middle East Council on Global Affairs.

### Lessons from the Caribbean to Scale the GCC’s Blue Economy

Situated between gulfs, straits, and seas, the Gulf Cooperation Council (GCC) is ringfenced by an abundance of long coastlines, aquatic ecosystems, and sea routes. Saudi Arabia boasts the eighth-largest coral reef community, and the region is home to approximately 16,000 hectares of mangroves. Despite this resource wealth, increasing temperatures and salinity due to climate change, alongside industrial, residential, and tourism activities, have deteriorated the marine environment.
Capitalising on coastal and marine resources is gaining momentum as a strategic diversification opportunity in the Gulf. The blue economy refers to the promotion of economic growth, social inclusion, livelihood improvement, and environmental sustainability in oceans and coastal areas. Currently, blue economy activities contribute minimally to GDP output, largely due to fragmented planning, governance, and coordination. Several recent GCC policies intend to change this narrative by situating blue economy prospects within broader Vision 2030 objectives, aiming to accelerate fisheries development, port and logistics infrastructure, and coastal tourism, while prioritising sustainability and climate mitigation efforts, as shown in Table 1.




Country
Policies
Opportunities


Bahrain
-
Aquaculture, coastal tourism


Kingdom of Saudi Arabia
Vision 2030: Blue Economy and National Fisheries Development Program
Sustainable desalination, coastal tourism, marine recreation and sports, aquaculture and fisheries, shipping


Kuwait
-
Fisheries and aquaculture, marine port connectivity in Madinat Al Hareer (Silk City) 


Oman
Oman Vision 2040–National Fisheries Development Strategy 2040 
Aquaculture and fisheries, marine tourism, maritime transport and port connectivity


Qatar
-
Fisheries, coastal tourism, marine transport and port


United Arab Emirates
Blue Economy Strategy 2031; UAE Centennial Vision 2071
Ports and logistics, aquaculture, coastal tourism



Source: Author’s own
To advance the GCC’s blue economy beyond siloed approaches, the region can apply key governance and finance takeaways from the Caribbean, a region that has spent the past 10 years solidifying a coordinated approach to build a sustainable blue economy. Like the GCC, the Caribbean is home to middle to high-income countries where hydrocarbon wealth constitutes a significant portion of GDP and where mutual interests in trade, the blue economy, and sustainable tourism converge. The Caribbean’s economic sectors also depend considerably on shipping and tourism while grappling with declines in fish stocks and biodiversity due to climate change and sector-inflicted damage. 

The Caribbean: A Leader in Blue Governance and Finance
The Caribbean excels in its regional leadership and progress in establishing governance frameworks such as marine spatial planning and deploying innovative blue financing mechanisms, all while prioritising socio-environmental concerns.
The Organisation of Eastern Caribbean States (OECS) has developed a global best practice for regional blue economy governance and cooperation in its endeavours to expand traditional maritime fisheries, shipping and tourism sectors while exploring new industries in aquaculture and renewable energy. In 2013, OECS endorsed the Eastern Caribbean Regional Ocean Policy (ECROP) to implement marine spatial planning and zoning mechanisms in the region. Marine Spatial Planning (MSP) is an operational policy agenda focused on managing economic growth while reducing conflicts over natural resource assets and pressures on marine ecosystems. From 2017-21, the World Bank’s Global Environment Facility launched the Caribbean Regional Ocean Project (CROP) to implement ECROP sub-components. Since CROP’s inception, nearly every OECS member state has developed National Ocean Policies (NOPs), advancing frameworks for integrated marine planning and management as well as marine data collection and ocean literacy. 

The Caribbean excels in its regional leadership and progress in establishing governance frameworks such as marine spatial planning and deploying innovative blue financing mechanisms, all while prioritising socio-environmental concerns.
The Caribbean also has the highest concentration of blue finance instruments, having spearheaded strategies that foster local capacity building for conservation, catalyse financing for blue-green projects, and safeguard infrastructure from disaster. The Caribbean Biodiversity Fund (CBF) functions as a regional Conservation Trust Fund, distributing annual endowment payments to National Conservation Trust Funds to link ecosystem restoration to carbon markets and generate local revenue. In tandem, the Caribbean Blue-Green Bank pools public and private funding to de-risk projects and distribute capital for larger-scale adaptation and mitigation projects. Moreover, the Caribbean Catastrophe Risk Insurance Facility (CCRIF) covers damage caused by extreme weather events like hurricanes, triggering payouts based on predetermined thresholds across predetermined boundaries, as opposed to lengthy post-disaster claims processes. Through this mechanism, Jamaica recovered US$ 150 million in financial protection after Hurricane Melissa. When combined, these mechanisms facilitate the efficient flow and use of capital for mangrove conservation, renewable energy, and disaster recovery. 

Success and Limitations of the Caribbean Case
CROP was successful in 1) expanding small-scale MSPs, 2) ensuring equitable sovereign representation and interstate coordination at a regional level, and 3) safeguarding community livelihoods. Although the initial aim of CROP was to reduce sectoral conflicts over ocean resources, it also helped achieve conservation targets, map high-value sea areas, and evaluate the impact of human activity on the marine environment. OECS-led planning also helped countries without technical capacity to cultivate large-scale MSPs in line with consistent frameworks, setting the foundation for transboundary planning. CROP also included Strategic Environmental and Social Assessments and Grievance Redress Mechanisms to enable tailored community-led planning. Despite strong regional grounding, one disadvantage stems from OECS’s reliance on external consultants, which has created ambiguity regarding who will assume supervisory responsibility of MSP development after the CROP project ends. 

Two key lessons from the Caribbean can be applied to the Gulf context alongside the overarching need to anchor socio-environmental considerations: 1) Strengthen a regional governance approach to streamline national MSP development and 2) De-risk blue economy sectors through blended and innovative finance structures. 
With the support of the Inter-American Development Bank (IDB), World Bank, and others, the Caribbean has successfully formulated blue economy financing strategies. Issued by CCRIF, the Caribbean Ocean and Aquaculture Sustainability Facility (COAST) showcases how small-scale projects can be grouped into bankable portfolios that yield dual ecological and economic benefits and how regional cooperation can align monitoring standards and enable shared data platforms. The CBF also successfully leveraged concessional finance from blended finance structures to absorb early-stage risk for private investors. Despite progress in blue finance mechanisms, overarching financial markets remain underdeveloped, highlighting the need for transparent policy frameworks that adhere to concrete blue finance principles such as those of UNEP-FI. To combat this issue, the Caribbean Economic Financing Project (BlueFin) is actively working to streamline the enabling environment for blue economy transactions. 

Applying Lessons from the Caribbean to the GCC Context
The GCC suffers from siloed governance and limited cross-border data sharing, resulting in fragmented coordination. Moreover, innovation and economic priorities dominate the GCC’s blue economy agenda, while social and environmental concerns remain secondary. The Caribbean, on the other hand, balances a dual-lens approach which positions the blue economy as both a driver of innovation and a source of natural capital and livelihoods. Thus, two key lessons from the Caribbean can be applied to the Gulf context alongside the overarching need to anchor socio-environmental considerations: 1) Strengthen a regional governance approach to streamline national MSP development and 2) De-risk blue economy sectors through blended and innovative finance structures.
1. Governance Recommendations
Regional collaboration will be crucial to managing transboundary issues like marine pollution and declining fish stocks. Adopting an approach resembling CROP in the GCC would help support national MSP development, data collection, and intra-coordination over marine resources. To balance potential trade-offs stemming from coastal resource regulation, pairing MSPs with Integrated Coastal Zone Management (ICZM) approaches that emphasise social protection and labour interventions would help compensate costs, incentivise behavioural change, and safeguard livelihoods. Implementing strong regional governance and national ocean policies would, in turn, improve the bankability of emerging blue economy sectors while promoting environmental protection. Fostering a pipeline of local talent would help overcome issues of operational sustainability and promote domestic technical know-how. 
2. Blue Finance Recommendations
Given the relative infancy of blue finance in the region, the Caribbean offers regional initiatives that can potentially be replicated in the GCC to overcome challenges inhibiting finance catalysation, such as managing high risk while protecting communities and the marine environment. For instance, the GCC can pool its sovereign wealth to develop a blended finance mechanism similar to the CBF or COAST to de-risk investments and mobilise private capital for sectors in nascent stages, such as aquaculture, that may encounter investment hesitancy from banks. Adopting parametric insurance can also enhance investor security by protecting infrastructure, coastal resources, and communities against extreme heat events, oil spills, or piracy. Learning from COAST, the GCC can better integrate gender-responsive and community benefit-sharing mechanisms for its upcoming blue finance products and frameworks. Few assessments explore the feasibility of blue financing in the Gulf, but the region is progressing in capitalising on profitable sectors such as shipping, port development, and countering marine pollution. To illustrate, DP World became one of the first corporate blue bond issuers, investing US$100 million in sustainable maritime transportation, port development, marine ecosystem conservation and restoration. Emirates NBD also recently launched a Dual-Tranche Blue-Green Bond. 




Blue Finance Category
Examples from the Caribbean
Sectoral Applications
Potential Applicability to the GCC


Thematic Bonds
CAF Blue LAC Bond
Marine conservation; sustainable fisheries; pollution reduction; maritime transport decarbonisation
High: Advanced capital markets allow for larger issuances, but de-risking mechanisms are required. Emerging blue bond examples in the GCC include those of DP World and ENBD.


Dedicated funds and facilities
Caribbean Blue-Green Bank

Caribbean Biodiversity Fund (CBF)
Marine biodiversity, sustainable fisheries, coastal resilience, blue economy innovation
High: Investment structures are flexible with increasing applicability towards maritime transport innovation, alternative proteins, and sustainable food systems. 


Risk Mitigation Tools
Caribbean Catastrophe Risk Insurance Facility

Caribbean Ocean & Aquaculture 

Sustainability Facility (COAST)
Coastal resilience, fisheries, disaster risk reduction
Low-Medium: Climate vulnerability to flash floods and extreme heat may allow for high premiums, but measuring the base risk level remains a challenge.



Source: Author’s own (Compiled using the World Bank Report)

Conclusion
In 2023, the GCC and Association of Caribbean States (ACS) signed a Memorandum of Understanding, endorsing a Joint GCC-ACS Action Plan to strengthen cooperation on water resource protection, marine environment preservation, and sustainable development. Thus, there are many opportunities for formal collaboration and forums to share lessons learned. 

As the GCC evaluates inward progress towards its blue economy objectives, keeping in mind the importance of regional coordination and marine spatial planning, as well as derisking through innovative blue finance structures, and simultaneously prioritising socio-environmental considerations, will be crucial.
The Blue Economies for Coastal Resilience Programme for the Middle East and North Africa (MENA) region was also launched in mid-2025 to address fragmented governance and coordination, improve coastal management and resilience, and assess blue finance opportunities in the region. As the GCC evaluates inward progress towards its blue economy objectives, keeping in mind the importance of regional coordination and marine spatial planning, as well as derisking through innovative blue finance structures, and simultaneously prioritising socio-environmental considerations, will be crucial.



Leigh Mante, Junior Fellow, Climate and Energy, ORF Middle East.

### Iran’s Nuclear Programme in the Post-JCPOA Diplomatic Impasse

The Joint Comprehensive Plan of Action (JCPOA) expired on 18 October  2025, 10 years after its signing. The deal’s collapse—triggered by the United States (US) withdrawal in 2018 and Iran’s subsequent breach of uranium enrichment limits—underscored the fragility of negotiated constraints on Tehran’s nuclear programme. What remains is a binary choice: negotiate a credible successor framework or accept that Western-led diplomatic engagement with Iran has reached its limits.

Origins of the Post-JCPOA Stalemate
Five rounds of US-Iran talks in early 2025 suggested that diplomacy might gain traction. That prospect collapsed in June when Israeli strikes on Iranian nuclear facilities—conducted with US military participation—forced the cancellation of a planned sixth round. Washington’s role in the subsequent 12-day conflict shattered Iranian confidence in American credibility and, by extension, European reliability, as the European Union (EU) declined to condemn US actions publicly.
Tehran’s narrative hardened accordingly. Iranian officials cast Washington as negotiating in bad faith, using talks to extract concessions rather than seek compromise. US insistence on expanding negotiations beyond the nuclear file to encompass missile programs and regional activities reinforced this view, as did perceptions of Israeli influence over American policy. Supreme Leader Ayatollah Ali Khamenei dismissed US demands as “excessive and outrageous,” framing diplomacy itself as a tool of pressure rather than a mechanism for trust-building through phased sanctions relief.

US insistence on expanding negotiations beyond the nuclear file to encompass missile programs and regional activities reinforced this view, as did perceptions of Israeli influence over American policy.
Diplomatic channels have remained frozen ever since, with sanctions re-emerging as the primary policy instrument. In September 2025, one month before the JCPOA’s expiration, France, Germany, and the United Kingdom (the E3) triggered the snapback mechanism, reinstating United Nations Security Council (UNSC) sanctions lifted in 2015. The measures include arms embargoes, dual-use trade restrictions, and financial and transport controls. The EU layered on asset freezes, travel bans, and sweeping trade and energy sanctions. Washington praised the European initiative as “an act of decisive global leadership”.
To preserve leverage beyond the JCPOA’s termination, the EU and UK opted to keep these restrictions in place. The decision cemented the breakdown in EU-Iranian relations, mirroring the deterioration of US-Iranian relations. It also contradicted repeated overtures by EU High Representative Kaja Kallas, affirming Europe’s openness to renewed diplomacy—gesturesunaccompanied by tangible incentives that might bring Iran back to the negotiations.

The Constraints on Western-Led Nuclear Diplomacy
For Europe, the JCPOA represented more than a non-proliferation agreement. It embodied multilateral crisis management and a commitment to a rules-based international order. Yet compared to 2015, Europe now operates from the margins rather than driving diplomatic strategy. The war in Ukraine and the imperative to end dependence on Russian energy have consumed the EU’s diplomatic capacity, pushing Iran’s nuclear file down the external security agenda. Europe’s continued reliance on NATO’s security architecture has further narrowed its room for an independent Iran policy.
This retreat was evident during Iranian Foreign Minister Seyed Abbas Araghchi’s visit to France, where the nuclear dossier received marginal attention. The encounter reinforced Tehran’s perception that European actions reflect US-Israeli strategic priorities rather than the autonomous diplomacy that produced the original JCPOA. Europe’s influence as a Middle East diplomatic actor has atrophied.

Europe’s continued reliance on NATO’s security architecture has further narrowed its room for an independent Iran policy.
Washington, meanwhile, shows little interest in stabilising the region through nuclear engagement. The November 2025 US National Security Strategy (NSS) relegates Iran to the periphery, emphasising partnerships for trade, energy, and technology—particularly with the Gulf Arab states. Yet even as economic protests erupted across Iran over sanctions-driven hardship, US President Donald Trump threatened military intervention should Tehran target demonstrators. These warnings echo previous ones tied to nuclear advances or missile expansion. Such a priorities-driven approach forecloses rapprochement and amplifies the risk of confrontation.
Trump continues to view Iran as fundamentally weakened by the twelve-day war and sanctions regime, a condition he intends to deepen through additional restrictions on Iranian oil exports to Asia. Any future nuclear agreement would likely come on terms favourable to the United States: suspension of enrichment activities and dismantlement of Iran’s regional proxy networks.
The bottom line is that Brussels and Washington diverge on a strategic approach. The former nominally favours diplomacy, while the latter embraces containment through military threats. On points ofconvergence, both agree on economic coercion. This gap widened during the December 2025 Trump-Netanyahu meeting, where both leaders pledged to prevent Iran from advancing its nuclear and ballistic capabilities. The joint commitment underscored Washington’s detachment from European preferences and reinforced a hardline axis that leaves little space for negotiated solutions.

Any future nuclear agreement would likely come on terms favourable to the United States: suspension of enrichment activities and dismantlement of Iran’s regional proxy networks.
Iran’s View of Western Nuclear Strategy
This perception aligns with Iranian Foreign Minister Araghchi’s guiding principle: “Neither East nor West,” reflecting a rejection of dependence on any external power, particularly Western states. Deputy Foreign Minister for Economic Affairs Hamid Ghanbari dismissed the snapback mechanism as illegitimate, arguing that the EU has squandered its international credibility and now applies double standards. Tehran extends this critique to the United Nations (UN) and its agencies, which it portrays as equally compromised by Western bias.
Following the twelve-day war, Iran curtailed cooperation with the International Atomic Energy Agency (IAEA), blocking monitoring and security assessments at the Fordow and Natanz facilities targeted in the June 2025 strikes. Its commitment to the Non-Proliferation Treaty (NPT) remains ambiguous. While some parliamentarians pushed for withdrawal, Iran remains a signatory, and Araghchi agreed in Cairo in November 2025 to renew cooperation with the UN watchdog under the NPT framework. Yet inspectors have been barred from the damaged enrichment sites, rendering the commitment hollow.

The nuclear threshold thus serves dual purposes: a security buffer and a symbol of strategic autonomy and technological prestige.
Despite losses to its scientific personnel and infrastructure, Iran shows no intention of abandoning its nuclear programme. Though weaponisation remains officially disclaimed, the programme increasingly functions as a deterrent of last resort in a region dominated by US-allied Gulf Arab states and Israeli military power, while also reconstituting strength to proxy networks including Hezbollah and the Houthis. The nuclear threshold thus serves dual purposes: a security buffer and a symbol of strategic autonomy and technological prestige.
More broadly, sanctions have accelerated Iran’s pivot away from Western economic and diplomatic channels. Tehran has deepened engagement through alternative frameworks like the Shanghai Cooperation Organisation (SCO), expanding trade and military agreements with China and Russia. A limited bilateral US-Iran arrangement remains theoretically possible, though Trump’s recent escalation has injected fresh volatility. The latest announcement by the US president that a “massive armada” is headed toward Iran, warning Tehran to “make a deal” or face military strikes, could serve as the impetus for nuclear negotiations. Despite this renewed pressure, the underlying reality persists: neither side perceives a compelling reason to negotiate on terms acceptable to the other, and Trump’s coercive approach risks narrowing rather than widening the diplomatic space.

Conclusion
Apart from ongoing tensions, deeper structural obstacles hamper diplomatic breakthroughs. President Trump’s calls for greater European strategic autonomy cast further doubt on the feasibility of any revived multilateral nuclear framework. Meanwhile, Russia and China have openly opposed the reimposition of UN sanctions, shielding Tehran at the Security Council and sustaining economic ties despite Western pressure. This support insulates Iran from coercion and reinforces its eastward pivot beyond the Western orbit.

Absent a fundamental strategic realignment, Western-led nuclear diplomacy towards Iran has reached an impasse. 
Absent a fundamental strategic realignment, Western-led nuclear diplomacy towards Iran has reached an impasse. The absence of coordination between Washington and Brussels, the lack of credible incentives for Tehran, and the erosion of meaningful leverage have left US and European actors with diminishing influence over Iran’s nuclear trajectory and the wider regional proliferation landscape. From Tehran’s vantage point, abandoning its nuclear programme would mean surrendering its final credible deterrent against American and Israeli pressure—a concession the regime shows no willingness to make. Barring unilateral US military action or a broader regional conflagration, Iran’s nuclear file will remain a managed stalemate rather than a resolved crisis, ensuring prolonged instability across the Middle East.



Giada Kabrit, Program Assistant and Intern Coordinator, ORF Middle East.

### Trump’s Energy Agenda: Gains and Risks for the Gulf

The United States’ (US) domestic energy policy during the first year of Trump’s second term could be considered ambitious and interventionist. However, it remains marked by impermanence. President Trump implements policies by Executive Order rather than passing legislation through Congress, leaving these energy policies vulnerable to reversal by a future administration, or even Trump himself.
For the Gulf Cooperation Council (GCC), the implications fall into three policy buckets: the push to unleash US energy; disengagement of the US from climate change efforts; and second-order effects of economic policy tools directed elsewhere. On the upside, the Trump administration’s retreat on climate commitments can help GCC sustain fossil fuel exports, resist costly multilateral energy transition initiatives, and most importantly, channel hydrocarbon revenue towards economic diversification.  However, the US government’s focus on boosting domestic production of oil and gas sets it up to compete with the GCC for global market share.

Unleashing American Energy
During the initial days of his second term, President Trump declared a national energy emergency and signed an Executive Order calling for the “unleashing of American energy.” The administration’s “energy dominance” policy aims to deliver reliable and affordable energy by increasingenergy production by reducing regulatory barriers and facilitating oil and gas extraction on federal-owned lands and water. While the energy sector has welcomed deregulatory moves, Trump’s repeated calls, sometimes directed at OPEC, to bring the price of oil down to US$50 per barrel of crude have caused anxiety among industry executives. While  Trump’s statements underscore the administration’s commitment to the US energy industry, the pursuit of lower oil prices, i.e., US$50 per barrel, would reduce industry revenues. Further, analysts estimate that both US producers and OPEC may begin to cut production when the price per barrel falls below US$55.
Figure 1: Monthly Brent Crude Oil Spot Price (2020-2025)

Source: U.S. Energy Information Administration, “Short-Term Energy Outlook: January 2026."
On the demand side, the Trump administration has emphasised increasing the role of hydrocarbons in the energy mix. This has included repealing the Biden administration’s executive orders on clean energy, cancelling funding for green energy, electric vehicles, and related infrastructure, and pulling permits for wind farms. Promoting US artificial intelligence (AI) technologies has become a central part of Trump’soutreach to the Gulf. During his May 2025 visit to Saudi Arabia, Qatar,, and the United Arab Emirates, he was accompanied by US tech executives and had signed deals with Saudi Arabia and the UAE for the large-scale export of advanced chips needed for AI data centres being built by Humain and G42, respectively.  Proceeding with such deals supports Saudi Arabia and the UAE in building national tech champions in line with their diversification agendas, without tying these investments to clean energy requirements.
Figure 2: Quarterly World Petroleum Production and Consumption (2021-2025)

Source: U.S. Energy Information Administration, “Short-Term Energy Outlook: January 2026."
Uncertainty around the status of Venezuelan oil has resulted in the International Energy Agency revising its global oil supply estimate for 2026 from 4 million barrels per day (bpd), to around 3 million bpd, against a projected demand of 2.4 million bpd. Meanwhile, new LNG projects in the US aim to bring annual export capacity to 130 billion cubic meters (bcm), doubling its LNG exports. Demand for natural gas may remain firmer, in part bolstered by Trump’s promotion of energy-intensive AI technologies.

Multilateral Re-Alignment on Climate Change
US disengagement on climate issues has opened space for the GCC to advocate for a slower transition away from hydrocarbons, while retaining a seat at the table in international climate negotiations. The GCC supports initiatives to reduce greenhouse gas emissions in principle, while also championing energy security and economic prosperity at international fora. At the International Maritime Organization, the US and Saudi Arabia also collaborated to oppose a levy on greenhouse gas emissions intended to support the shipping industry in meeting its net-zero goals by 2050. At the International Civil Aviation Organization, the US also pressed members to reconsider their push towards sustainable aviation fuels.
Washington also opted out of sending a senior administration official to the COP30 climate summit, where Saudi Arabia, the UAE, and other fossil fuel producers resisted attempts to formalise a roadmap for phasing out fossil fuels. At COP30, the Arab bloc advocated for a “dual track” strategy to maintain stable oil and gas supplies that meet global energy demand, while also acknowledging a need to develop renewables and energy efficiency solutions. The bloc pressed to keep discussions concerning the energy industry and phasing out of fossil fuels “off the table” and out of the final COP30 statement.

Second Order Effects of Sanctions, and Weaker Dollar Carry Uncertainty for the Gulf  
While the GCC states face limited direct exposure to Trump’s tariff policies, the larger impact of trade uncertainty—lower global economic growth, weaker demand in third markets, and intensified competition for market share—will adversely affect the bloc. Slowing economic growth and the associated depreciation of the US dollar threaten to reduce GCC export revenue, complicating funding for national economic diversification programmes. Additionally, the 25 percent US tariffs on steel and aluminium could potentially increase the input costs across the GCC energy, industrial, and construction sectors.
US sanctions policy continues to complicate GCC countries’ management of oil price stability. The US-supported, G7-imposed price cap on Russian oil exports, which was intended to reduce funding towards Russian operations against Ukraine led to increasing price competition between Russian and GCC producers selling to China and India. Russia’s efforts to evade sanctions increased the amount of oil sold outside of OPEC+’s control.
Figure 3: Quarterly Change in DXY US Dollar Index

Source: U.S. Bank Management Group

US Trade Disputes Create GCC Opportunities in Global Markets
Repeated US tariff hikes and revisions in trade disputes with partners create opportunities for the GCC to sell more hydrocarbons, as  India, Europe, and other Asian countries look to diversify energy suppliers. Gulf states benefited from the last US-China trade war in 2017, as China reduced its purchases of oil and gas from the former. East and South Asia’s robust economic growth, primarily driven by China’s growth, generates about one-third of the world’s oil demand at 36 million bpd. China consumes about 15 million bpd, 45 percent of which is supplied by Saudi Arabia, Iraq, the UAE, and Kuwait.
GCC countries, including Saudi Arabia, the UAE, and Qatar, have signed long-term supply contracts, welcomed upstream investments, and launched joint ventures in Asia. Saudi Aramco invested in refineries in China and South Korea and is also in talks with India’s Bharat Petroleum Corporation (BPCL) and Oil and Natural Gas Corporation (ONGC) to invest in planned refineries. Aramco also intends to invest in shipyards in South Korea, China, and Japan to build large carriers and tankers for transporting oil and LNG from the Gulf to East Asia and elsewhere.
Figure 4: China surpasses the U.S. as the top destination of GCC, Iraq, and Iran Exports

Source: Carnegie Endowment for International Peace, license: CC BY-NC 4.0.

“Last Man Standing” Strategy Makes Sense for the GCC
The Trump administration’s energy policy outlook and multilateral agenda align well with GCC interests. However, in the medium- to long-term, the Trump administration’s tariff, sanctions, and international climate cooperation policies will have a far greater impact on the GCC. In the short- to medium-term, Trump’s energy dominance agenda, which may include seeking control of Venezuela’s energy sector, and stimulating additional production of oil and gas, will stiffen competition for energy market-share. The increased US output will almost certainly put downward pressure on energy prices and competition between US and GCC producers, as would the erosion of the US dollar, which still dominates energy sales transactions.
Asia’s importance as an export market for the GCC will continue to grow as the U.S. tariff policy reinforces the demand for energy security. Pivoting to supply more oil and gas, concluding future production agreements, as well as the GCC’s investments into refineries and tankers in Asia and Africa, have set the bloc to ride out the short-term uncertainty triggered by US policies.
In the medium- to long-run, low prices for oil and gas or decreased market-share will certainly hurt the GCC’s ability to execute economic diversification programmes, while the US withdrawal from global climate action will allow the bloc to pursue the “last barrel” (sold) strategy in the global energy markets. The GCC’s biggest long-run challenge remains the same: how to deploy hydrocarbon revenues today to build industries capable of sustaining growth long after the final barrel is sold.



Masha Kotkin is an economist specialising in energy markets, climate, trade, and competitiveness.

### Iran’s Tryst With Its Future

The June 2025 strikes conducted by the United States and Israel against Iran were a pivotal moment in the geopolitics of the Middle East, the undercurrents of which are still reverberating through the region. Recent protests in various parts of the country have brought to the forefront not just the deepening of political crevasses within the state, but the fallout of economic ones as well.
Many analysts, such as Ashkan Hashemipour, accurately trace the ongoing discontent to factors rooted in the 1979 Islamic Revolution, which brought the then-exiled Ayatollah Khomeini back to power as the West-backed monarchy of Shah Reza Pahlavi was deposed. The current theological leader, Ayatollah Khamenei, who has been in power since 1989, now faces an inflection point on both the identity and sustainability of that Revolution-led definition of the state. While the current protests may have been successfully suppressed, for Tehran to proceed with a sense of business as usual may no longer be viable.

The delivery of essential infrastructure — electricity, water, employment, healthcare, and education — remains fundamental to the relationship between power and people. Hence, it was no surprise that while Iran has been on edge for months, the push off the precipice came from two fronts: a water crisis and a currency collapse.
Managing public grievances while maintaining political power within the construct of sanctions — and the associated isolationism that comes with them — is a delicate balance. In November, reports of the Iranian capital, Tehran, running out of water spread rapidly. Iran’s blueprint, economic as well as political, is built around self-sufficiency, largely as a consequence of years under sanctions. However, Iran is also a country of over 90 million people, making sustainability — and the very politics of self-sufficiency — challenging. Political systems, at the end of the day, are not that different from one another when it comes to basic structures, such as cultivating a relationship between the public and the state. The delivery of essential infrastructure — electricity, water, employment, healthcare, and education — remains fundamental to the relationship between power and people. Hence, it was no surprise that while Iran has been on edge for months, the push off the precipice came from two fronts: a water crisis and a currency collapse.
Iran’s internal politics has always been an amalgamation of structures that often circle back to influence zones operating under the tutelage of the Revolution — meaning the complete power of the Ayatollah and the systems he and his predecessor, Khomeini, institutionalised since 1979. This was on display as Iran’s President, Masoud Pezeshkian, found himself between a rock and a hard place. Pezeshkian was elected as the only moderate candidate in the 2024 polls, which were held following the untimely passing of incumbent president Ebrahim Raisi in a helicopter crash the same year. During the protests, Pezeshkian sided with the regime’s narrative that the unrest was fuelled by external interventions by the US and Israel, while simultaneously suggesting that the state must accept that mistakes were made. This exposed the limits of the Republic’s electoral structure, especially given that Iran often highlights itself as the region’s only Islamic state that regularly conducts elections.

For Pezeshkian — and the presidency itself — the balance has always been delicate. Any reform or change that an Iranian president seeks to bring depends on stability rather than chaos in the streets. Bringing together Iran’s multi-layered power centres to negotiate change is no easy task.
For Pezeshkian — and the presidency itself — the balance has always been delicate. Any reform or change that an Iranian president seeks to bring depends on stability rather than chaos in the streets. Bringing together Iran’s multi-layered power centres to negotiate change is no easy task. Pezeshkian, a doctor by profession, was the only moderate vetted by the Ayatollah to contest the elections. It was widely believed that the nominal representation of the moderates, a faction itself fraught with infighting, may amount to tokenism at best, as former nuclear negotiator Saeed Jalili — a conservative favourite — was widely seen as the natural successor to Raisi.
Today, the proverbial ‘moderatism’ itself appears as a severely bruised institution. This was not Pezeshkian’s first tryst with the uniquely translucent powers of his office. Last year, in the aftermath of US and Israeli bombing of Iranian nuclear installations — along with Israel eliminating many of Iran’s top military and intelligence leaders — Iran launched missiles towards the Al Udeid Air Base in Qatar, the largest US military facility in the Middle East. Qatar, which enjoys good relations with Tehran and hosts a communication channel between the US and Iran, became an example of Arab Gulf powers caught in the regional crosshairs of the conflict. The attack on the base crossed a rubicon that Arab capitals have feared for a long time. Pezeshkian then found himself in an awkward posture, delivering a message of “regret” to the Emir of Qatar over Tehran’s missile strike on the US base, an attack carried out by his own state’s military.

Pezeshkian then found himself in an awkward posture, delivering a message of “regret” to the Emir of Qatar over Tehran’s missile strike on the US base, an attack carried out by his own state’s military.
Moving forward, things may not become easier for the Iranian establishment. Well before the current cycle of upheaval, Iran was already going through intense internal debates on the succession of Ayatollah Khamenei, who is now over 86 years old. While many of these deliberations were kept close to the chest by those populating the various circles of power that make up the Iranian system, two names surfaced in public discourse. First, the now-late Ebrahim Raisi, and second, Ayatollah Khamenei’s second-eldest child, Mojtaba Khamenei. The latter possibility has raised concerns of rankling the rank-and-file support of the Revolution, as it would make the transition appear as a hereditary, monarchical handover — something the Revolutionary ideology would not want association with, particularly at a time when pro-monarchists took to the streets following a call by Reza Pahlavi, son of the former Shah of Iran, whom the Ayatollah had replaced.
Amid these calculations, the interests of the Islamic Revolutionary Guard Corps (IRGC) will also have to be factored in. The IRGC, operating exclusively under the Ayatollah’s authority, has proven to be both resilient and loyal to the system that created and nurtured it. Over the past few years, the IRGC has played a critical role in developing mechanisms to circumvent sanctions, enabling traders — a critically important constituency — to continue functioning. With deep interests in Iran’s political economy, the military unit has maintained its role and ensured that no collapse, particularly under its own weight, takes place.

The IRGC, operating exclusively under the Ayatollah’s authority, has proven to be both resilient and loyal to the system that created and nurtured it. Over the past few years, the IRGC has played a critical role in developing mechanisms to circumvent sanctions, enabling traders — a critically important constituency — to continue functioning. 
Finally, an emotive push for the collapse of Iran would be deeply chaotic for both regional and international security, at a time when the global order itself has lost its bearings. The post-World War II order, anchored in several Western-led multilateral structures, is disintegrating at a rapid pace. While further strikes against Iran by the US cannot yet be taken off the table, how Iran manages its internal complexities will have a far greater impact on the future trajectory of this conflict than is currently being envisaged.



Kabir Taneja, Executive Director, ORF Middle East.

### A Stable Iran Serves Gulf Interests Better Than Chaos

As the protests engulfing Iran abate, the United States (US) President Donald Trump has now backed down from his previous threats of military intervention to defend Iranian demonstrators. Yet US carrier movements, bomber activity at Diego Garcia, and assessments of regional air traffic in the Gulf all indicate that American vigilance—and intent to strike—has far from dissipated. Trump’s latest cryptic remarks, stating in an interview that “it’s time to look for new leadership in Iran,’’ are further proof of the situation’s unpredictability. One need only look back to last June, when the President’s posture shifted after spending the first months of his term holding back the decision to hit Iran’s nuclear programme, before mobilising military aircraft to bomb three nuclear facilities. From an Iranian perspective, Trump could well be calling their bluff again.

What proved significant was how regional states—particularly the Gulf Arab states –—leveraged their access to both Trump and top Iranian officials. As Tehran began its crackdown on protesters, phone diplomacy intensified: Emirati and Qatari foreign ministers engaged directly with their Iranian counterparts, whilst Oman’s foreign minister made a point of visiting Tehran in person. Reports later emerged that four states—Saudi Arabia, Qatar, Türkiye, and Oman—were part of a last-minute lobbying campaign to dissuade Trump from striking Iran. Similarly, last June, as Israel and Iran exchanged blows, Gulf Arab leaders appealed to Trump to pressure Tel Aviv into a ceasefire.
As Tehran began its crackdown on protesters, phone diplomacy intensified: Emirati and Qatari foreign ministers engaged directly with their Iranian counterparts, whilst Oman’s foreign minister made a point of visiting Tehran in person.
The reality is that a weakened yet reintegrated Iran better serves regional stability in an area already rife with fragile and failed states. For Gulf Arab states, in particular, a power vacuum in Iran—or the volatility of regime change—could prove far more dangerous.
Tehran’s calculated restraint
While Iran was considered a belligerent state actor armed with parastatal organisations—more widely known as the “Axis of Resistance”—the events that followed 7 October 2023 have reconfigured the regional balance of power. Israeli operations have severely degraded the leadership of Iranian proxies, from Hamas to Hezbollah. Notable casualties include Hassan Nasrallah (Hezbollah’s Secretary-General), Haytham Ali Tabatabai (Hezbollah’s Chief of Staff), Ismail Haniyeh (Hamas’ former political chief), and Yahya Sinwar (Hamas’ leader in Gaza), among others.

Israeli surgical tactics, including covert operations that eliminated military and scientific personnel, damaged Tehran’s missile infrastructure and neutralised early warning systems, were designed as a prelude to the finishing blow. Operation Rising Lion, marking the 12-day of the Iran-Israel war in 2025, sought to decisively degrade Iran’s military capabilities and regional influence. The result was a weakened yet resilient Iran—not least because Trump intervened to enforce a ceasefire.

Notably, as Iran’s position weakened, the regime chose calibrated escalation to signal resolve without inviting total war. In typical fashion, Tehran threatened to attack US bases across the region last June following the joint Israeli-American strikes on Iranian soil, just as it has now threatened to do so in retaliation against Trump’s recent threats. Yet when the Islamic Republic acted on its words, launching missiles at Al-Udeid—America’s largest military base in the Middle East—there was a catch. Iranian retaliation was pre-orchestrated as satellite imagery showed aircraft at the Qatar-based installation had been repositioned before the attack. The damage proved minimal, with Trump dismissing the attack as “weak”. This was not without precedent. During Trump’s first term, after the assassination of Qassem Soleimani, commander of the IRGC’s Quds Force, Tehran warned Washington before striking the Iraq-based Ain al-Asad airbase.
Iranian retaliation was pre-orchestrated as satellite imagery showed aircraft at the Qatar-based installation had been repositioned before the attack. 
The Qatar episode, however, shifted regional perceptions in a way the Ain al-Asad incident had not: between longtime rivals Israel and Iran, the former was now increasingly regarded as the greater threat.

More telling, however, is how the Gulf Arab states—despite condemning Iran’s strikes on Al-Udeid—showed equal intent on sustaining their mended ties with Tehran. Two weeks after the Iran-Israel ceasefire, Saudi Crown Prince Mohammed bin Salman hosted Iran’s Foreign Minister, Abbas Araghchi, for talks in Jeddah. Qatari and Emirati officials maintained direct communication with their Iranian counterparts, while Oman went a step further, asserting that Israel had “triggered” the escalation. Strategic pragmatism prevailed: better a weakened but calculable Iran than an emboldened and unrestrained Israel.
Managing Iran
The détente between Iran and the Gulf Arab states in recent years is ultimately driven by the latter's conviction that they must take ownership of their own security. Previously content with isolating Iran—even backing Trump's maximum pressure policy—Gulf Arab states have pivoted since 2022. The United Arab Emirates (UAE) restored diplomatic ties with Iran that year. Then came the landmark China-brokered Saudi-Iran normalisation in March 2023.

For Gulf leaders, America’s indecision as a security guarantor—and Trump’s unpredictability in particular—remains an enduring concern. The memory of Washington’s muted response to Iranian proxy attacks lingers when Houthi strikes on Saudi oil facilities and UAE ships were met with inaction. Trump’s words from his first term have defined Gulf calculations ever since: “That was an attack on Saudi Arabia, and that wasn’t an attack on us.” His successor, President Biden, also proved equally hesitant when he sent a senior general only 22 days after a 2022 Houthi drone assault killed three in Abu Dhabi.Trump’s second term is marked by the Gulf’s awareness of the President’s penchant for dealmaking. Washington’s acquiescence—implicit or otherwise—to Israeli strikes on Doha just three months after the 12-Day War offered further proof that Gulf leaders cannot afford to outsource management of the adversary in their backyard. Gulf engagement with Iran has delivered tangible results. Since restoring ties, their territories have remained untouched by Iranian proxies, particularly the Houthis. This explains why Gulf governments distanced themselves from the US-UK retaliation against Houthi assault on international shipping in January 2024.
The UAE and Oman are Iran’s second- and fourth-largest trading partners, respectively. Dubai alone hosts an 800,000-strong Iranian community, while serving as a vital hub for shipping and trade with Iran.
Regime change in Iran poses concrete risks for Gulf states. Economic ties run deep: the UAE’s Minister of Foreign Trade has described Iran as one of the “main providers and suppliers” of multiple commodities, particularly food products. The UAE and Oman are Iran’s second- and fourth-largest trading partners, respectively. Dubai alone hosts an 800,000-strong Iranian community, while serving as a vital hub for shipping and trade with Iran. Qatar shares the North Dome-South Pars gas field with Tehran; any leadership change would inevitably disrupt this critical energy partnership. These interdependencies explain Gulf caution, even as a cash-strapped Iranian economy navigates sanctions and Trump’s latest 25 percent tariff on countries doing business with Tehran.

Given Iran’s role as the leading Shia-majority state, regime change would carry profound religious and security implications across the region. As author Vali Nasr argues in his latest monograph, Iran's “sacred defence” doctrine—forged during the Iran-Iraq War of the 1980s—binds Iranian nationalism to Shiism, making religious identity inseparable from state security. A significant number of Shia Muslims, including expatriates and citizens in Bahrain, Kuwait and parts of Saudi Arabia, follow the religious authority of Iran’s Supreme Leader or senior Iranian clerics such as the Qom-based Grand Ayatollah Hossein Wahid Khorasani. This presents a considerable, if unspoken, national security concern for Gulf states. In extremis, regime change could trigger calls for jihad against Western interests. At minimum, it risks heightened sectarianism and internal opposition, particularly if certain segments perceive Gulf governments as complicit in Tehran’s fall.
The Case for Stability Over Chaos
The recent protests across Iran reflect a dire economic crisis that demands attention. Yet the pertinent question remains: would a regime change solve this problem? Iran is by no means absolved of its actions—particularly its mobilisation of the Axis of Resistance prior to 7 October 2023—but these proxies no longer pose the existential threat they once did. For Gulf Arab states, a stable Iran aligns with their stability-for-development premise, where ambitious national projects require peaceful neighbours. What Iran needs is economic revitalisation, which in turn requires reforms from its leadership. This demands deploying economic incentives to extract meaningful reforms—including credible limits on Iran’s nuclear programme and restraints on its ballistic missile arsenal. Instead ofsimply forcing Tehran into “strategic submission,” as Chatham House's Director Sanam Vakil described Trump’s strategy..

Trump appears convinced that Tehran has consistently underestimated American resolve. Yet the reverse is equally true. Iran has proved more resilient than anticipated, having weathered Trump’s maximum pressure campaign in his first term. For Gulf Arab states, the risks of regime change next door may well prompt further diplomatic overdrive—using their access to Trump more strategically to shape outcomes that serve regional stability rather than court the chaos of collapse. With Israel now asserting itself as the region’s unchallenged power, Arab states, Iran, and Türkiye increasingly need one another to establish a counterbalance.



Clemens Chay is Senior Fellow for Geopolitics at the Observer Research Foundation  Middle East.

### A $6 LNG Window: Mapping India’s Long-Term Gas Demand Potential

Global gas markets are entering a period of structural loosening. New liquefaction capacity expected through the late 2020s, alongside muted demand growth in Europe and a levelling-off in China, is easing the global supply–demand balance. As highlighted in the Oxford Institute for Energy Studies (OIES) report, these dynamics could anchor LNG prices around US$6/MMBtu (Metric Million British Thermal Unit) by the end of the decade.
For India, the implications of a sustained US$6 LNG world extend well beyond short-term price relief. While earlier episodes of low prices produced largely episodic and reversible demand responses, prolonged affordability could begin to alter investment decisions, fuel choices, and infrastructure utilisation across sectors. In contrast to short-term switchability, a stable US$6 environment has the potential to support structural demand formation.

While earlier episodes of low prices produced largely episodic and reversible demand responses, prolonged affordability could begin to alter investment decisions, fuel choices, and infrastructure utilisation across sectors. 
With a policy ambition to raise natural gas’s share to 15 percent by 2030, the key question is whether sustained low prices can underpin a lasting expansion in gas use beyond temporary price-led rebounds.
This article examines how sustained low prices, when combined with enabling policy and infrastructure conditions, could unlock additional demand across key sectors in India over the 2035–2040 period. It builds on an earlier article assessing India’s short-term gas demand response in a US$6 world and draws from the broader analysis in the OIES report.
Long-Term Sectoral Demand Outcomes in a Sustained US$6 LNG Scenario

Source: Author’s creation

1. Fertiliser: Stability Gains Without Volume Upside
India’s fertiliser sector already relies almost entirely on natural gas as feedstock and has been a key driver of LNG imports in recent years. In a sustained US$6 LNG environment, lower prices influence the sector primarily through stabilisation rather than expansion.
Sustained low prices ease the government’s subsidy burden, improving the economics of existing plants and supporting high utilisation levels, while also ensuring that older or less efficient units remain viable on gas rather than reverting to naphtha or shutting down. Although some facilities retain technical fuel-switching capability, such switching is now rare and discouraged by policy. As a result, lower prices do not create incremental gas demand but instead lock in existing consumption.
Over the longer term, gas could face competition from hydrogen-based alternatives. However, fossil-gas-based urea and ammonia retain a strong cost advantage through the 2030s, suggesting that any displacement of gas demand in fertilisers is likely to remain marginal over this period.
In effect, a sustained US$6 gas environment secures full utilisation of the fertiliser sector’s gas allocation on a more permanent basis, without materially expanding volumes.

2. Power: From Stranded Capacity to System Balancer
With LNG stabilising around US$6 per MMBtu, gas-based power generation would become structurally more competitive than at any point over the past decade. At this price level, delivered fuel costs fall enough to allow India’s large fleet of underutilised gas-fired plants to operate at meaningfully higher utilisation than today, reversing years of near-idling driven by high fuel costs.
Gas is unlikely to displace coal in baseload generation. Instead, its role as a flexible complement to coal and renewables strengthens materially under a sustained US$6 regime. Most of the long-term upside lies in reactivating India’s existing stranded gas-fired capacity rather than in new builds. That said, prolonged affordability combined with targeted policy support such as capacity payments, GST rationalisation, or future carbon pricing could improve the economics of combined-cycle gas plants as replacements for ageing coal units over the 2030s.

Gas is unlikely to displace coal in baseload generation. Instead, its role as a flexible complement to coal and renewables strengthens materially under a sustained US$6 regime.
Importantly, cheaper gas is unlikely to derail India’s clean energy trajectory. Utility-scale solar and onshore wind remain the lowest-cost sources of bulk electricity on a levelised basis and continue to receive policy priority. Instead, gas can complement renewables by providing relatively low-cost balancing power, reducing curtailment and easing integration during periods of low solar and wind output. In this role, gas may partially substitute for storage in the near to medium term, while supporting higher renewable penetration overall.
On balance, a prolonged US$6 LNG environment would anchor a larger and more stable role for gas in India’s power system, not as a baseload fuel but as a system stabiliser. This outcome aligns with the Petroleum and Natural Gas Regulatory Board’s (PNGRB) long-term outlook, where even under higher gas scenarios, renewable capacity continues to expand while gas grows in a supporting, rather than dominant, role.

3. City Gas Distribution: Lock-In Effects and Structural Growth
City Gas Distribution (CGD) is well-positioned to be one of the largest long-term beneficiaries of sustained low LNG prices. At around US$6 per MMBtu, retail Compressed Natural Gas (CNG) and Piped Natural Gas (PNG) remain strongly competitive against gasoline, diesel, and liquefied petroleum gas (LPG), reinforcing gas’s appeal across urban households, commercial users, and transport.
Prolonged affordability encourages higher and more consistent utilisation of PNG connections, keeping gas competitive with subsidised LPG for households and economically attractive for small commercial and light-industrial users. Sustained low prices help stabilise network utilisation and improve the economics of recent CGD investments.

Once vehicles convert or households connect, demand becomes relatively sticky, creating a structural lock-in effect that distinguishes CGD from more price-responsive industrial demand.
Low LNG prices also strengthen CNG economics, supporting wider adoption across private vehicles, taxis, and bus fleets. Once vehicles convert or households connect, demand becomes relatively sticky, creating a structural lock-in effect that distinguishes CGD from more price-responsive industrial demand. That said, execution risks remain, including uneven rollout of recently awarded geographical areas, tax and levy pass-through, and rising electric vehicle penetration in segments such as urban mobility.
If supported by effective execution and complementary policy measures, the sector could account for a steadily rising share of national gas consumption over time, making it pivotal to India’s long-term gas trajectory in a low-price environment.

4. Petrochemicals and Refineries: Durability Over Scale
Sustained low LNG prices would reinforce the role of gas across India’s petrochemical and refining sectors by ensuring that it outperforms alternative fuels such as fuel oil and naphtha, both on cost and environmental grounds. For refineries, cheaper gas strengthens incentives to maximise its use in hydrogen production through steam methane reforming, as well as in heaters and boilers, displacing more carbon- and sulphur-intensive residual fuels.
In petrochemicals, particularly in methanol production and selected fertiliser intermediates, reliable low-cost gas improves the economics of feedstock substitution away from naphtha and supports higher utilisation of existing gas-fed plants. These effects are most pronounced at coastal and pipeline-connected sites with regular access to regasified LNG.
The upside, however, is unlikely to be transformational. Most large refineries and petrochemical complexes already prioritise gas use when it is available and affordable. A sustained US$6 LNG environment therefore works less by creating entirely new demand and more by locking in gas usage through cycles, reducing the tendency to revert to fuel oil during downturns.
Overall, the impact is best characterised as incremental but durable. Sustained affordability anchors gas more firmly in refinery hydrogen systems and process heat, supporting steady long-term demand rather than a step change in volumes.

5. Industry and Other Uses: Structural Embedding with Clear Limits
Across the broader industrial segment, sustained low gas prices could support a gradual but more durable shift away from coal and liquid fuels in selected sub-sectors. Industries such as ceramics, glass, food processing, and textiles are particularly well positioned to migrate boilers and furnaces toward natural gas where pipeline connectivity exists.
At around US$6 per MMBtu, gas can be cost-competitive with furnace oil and, in some cases, with coal, once pollution-control requirements, operational flexibility, and handling costs are taken into account. For smaller and medium-sized industries that currently rely on truck-delivered coal or fuel oil, reliably cheap gas improves not only fuel economics but also operational convenience, reducing incentives to revert during periods of price volatility.
However, this structural embedding remains uneven. Energy-intensive and coal-anchored processes, particularly in cement and primary steelmaking, face higher technical and economic barriers to gas substitution. As a result, long-term gas uptake in industry is likely to concentrate in heat-intensive but fuel-flexible segments rather than across the industrial base as a whole.
Overall, in a sustained US$6 LNG environment, industrial gas use shifts from short-term, price-driven rebounds toward more persistent demand in selected clusters. The outcome is a structurally firmer, but inherently bounded, expansion of gas use in industry rather than a wholesale transformation.

Where India’s Long-Term Gas Demand Could Settle 
Long-term projections for India’s gas demand already span a wide range. The PNGRB’s Good-to-Be (GtB) scenario represents the most ambitious pathway, projecting demand of around 133 bcm (billion cubic meters) by 2030 and 230 bcm by 2040. These levels sit well above other outlooks, including those from the OIES (124 bcm) and the International Energy Agency’s World Energy Outlook (149 bcm), which envisage more moderate expansion over the same period.

Source: Author’s creation, using PNGRB data
Importantly, the GtB scenario assumes accelerated progress on infrastructure rollout, policy reform, and investment execution, but does not explicitly require a prolonged period of ultra-low global gas prices. If LNG prices stabilise around US$6/MMBtu, this would act as a powerful tailwind, pushing realised demand outcomes toward the upper end of existing projections rather than creating an entirely new demand path.

Source: Author’s creation, using OIES data
The magnitude of this effect becomes clearer when comparing short- and long-term price responses. In the short term, India’s demand response to lower prices is estimated at around 4.6–11 bcm. Sustained affordability could lift long-term demand by 17–35 bcm by the late 2030s, narrowing the gap between moderate and high-growth pathways.

While India’s gas demand is highly responsive to affordability, the infrastructure required to support higher volumes, including LNG terminals, pipelines, CGD networks, and gas-based generation and industrial assets, is capital-intensive. 
Such an outcome would place realised demand decisively above the Good-to-Go (GtG) trajectory, while remaining below the most optimistic GtB case. Progress toward the 15 percent gas-share ambition would be more plausible under sustained affordability than in a higher-price environment.
That said, price alone is not sufficient. While India’s gas demand is highly responsive to affordability, the infrastructure required to support higher volumes, including LNG terminals, pipelines, CGD networks, and gas-based generation and industrial assets, is capital-intensive. Without clear offtake visibility, supportive regulation, and credible policy signals, investment momentum could lag even in a favourable price environment.

Conclusion: A Necessary Tailwind, Not a Guarantee 
Taken together, a sustained US$6/MMBtu LNG world through the 2030s has the potential to embed natural gas more deeply within India’s energy system, lifting long-term demand outcomes toward the upper end of today’s scenario envelopes. The largest and most durable gains would likely emerge in CGD, including freight LNG, with more measured but persistent growth in power generation and selected industrial segments.
Realising this upside, however, will depend on the alignment of price signals with infrastructure expansion and policy execution. Where these elements reinforce each other, the low-price dividend could translate into a structurally higher gas demand trajectory by 2040. Where they do not, even sustained affordability may prove insufficient to deliver the most optimistic outcomes.



Parul Bakshi is Fellow – Energy and Climate at the Observer Research Foundation (ORF) Middle East.



This analysis draws on the author’s contribution to the OIES report, The Global Outlook for Gas Demand in a $6 World. The full report can be accessed here.

### Iran’s Search for a Future

Iran is a complex society where collective behaviour can appear contradictory, yet these outcomes often follow an internal logic. A notable example is the widespread display of unity in the aftermath of the 12-Day War with Israel in June 2025. Even amidst deep domestic discontent, this act signalled Iranians’ rejection of any foreign intervention. Since 1979, large segments of Iranian society have sought to coexist with the Islamic Republic whilst expressing dissatisfaction with both its domestic and foreign policies. Initially muted by fear of repression, over the years, these grievances have become increasingly visible. State policies have affected different segments of the society differently. The lower-income groups faced severe economic hardship, while women couldn’t enjoy everyday freedoms such as riding motorcycles or freely choosing their clothing. The extent  of pent-up discontent was evident during the “Women, Life, Freedom” movement in 2022 which brought together merchants, teachers, retirees, students, workers, artists, religious minorities, women, entrepreneurs, and younger generations.

Workers and students have now joined the demonstrations as Iran faces multiple, overlapping crises with no solutions in sight. 
Similarly, the consequences of prolonged economic, social, and political hardships are visible in the current wave of protests, which have spread across most cities and are being violently suppressed. Although the protests initially started with shopkeepers in central Tehran responding to the sudden currency devaluation, these gradually spread to other cities nationwide. Workers and students have now joined the demonstrations as Iran faces multiple, overlapping crises with no solutions in sight. It has already been grappling with energy and water shortages, severe poverty, pollution, a lifestyle crisis,  alongside a growing and increasingly disgruntled youth population. s. As these pressures mount, the Iranian society is increasingly being gripped by pessimism.
The central concern  is not just  the potential toppling of the current establishment, but what kind of alternative governance would be acceptable to Iran’s nearly 90 million citizens, given their diverse backgrounds, social classes, political and social demands, and ethnic identities.
This article presents a broad overview of Iranians’ preferences regarding systems of governance. These include current supporters of the Islamic Republic; groups who view Reza Pahlavi as an opposition leader; those who reject both monarchy and clerical rule (“no king, no cleric”) and favour a republican system; and politically undecided “free riders” who could become decisive actors in the near future.

Who Supports the Islamic Republic?
It would be a mistake to assume that the Islamic Republic of Iran lacks any social and political support base. Despite the economic hardship, shortages and declining living standards, supporters of the current establishment have consistently been estimated around 15 percent of the population.
This constituency is predominantly religious and conservative, and is often characterised by strong anti-US and anti-Israel positions. Some within this group are also explicitly anti-reformist. Their political presence was evident in the 2024 presidential elections, in which Saeed Jalili, a hardline candidate closely aligned with this segment, received over 13 million votes, ultimately losing to reformist Masoud Pezeshkian. These voters constitute a politically significant bloc who have continued to support the Islamic Republic of Iran during periods of severe economic strain and amid sustained political unrest.
Simultaneously, their demands represent a major obstacle to reforming Iran, since their support depends on their expectations being met. During the most recent wave of protests, amid internet shutdowns that left many citizens reliant on state television for information, Saeed Jalili made public appearances that directly addressed and mobilised this constituency, reinforcing its political alignment with the existing system.

As a result, many within these groups remain uncertain about their status, rights, and treatment in a post–Islamic Republic order, contributing to scepticism and hesitation around regime change.
In addition, members of this group recently held pro-government rallies, signalling that while they may suffer economically, they reject violent protest tactics and remain unwilling to tolerate actions that are perceived as a threat to the political system.
For those who practise Islam regardless of their support for the Islamic Republic, the burning ofmosques and copies of the Qur’an  during the ongoing unrest is deemed politically significant. Furthermore, so far, the Opposition has  failed to articulate a clear alternative political or social vision. As a result, many within these groups remain uncertain about their status, rights, and treatment in a post–Islamic Republic order, contributing to scepticism and hesitation around regime change.

The Pahlavi Option: Restoration or Transition?
Reza Pahlavi, the son of the former Shah, has emerged as a leading figure of authority for a segment of the Opposition and is gradually attracting a broader base of supporters, either because of genuine confidence in his leadership or due to the absence of viable alternative opposition figures.
This is largely due to two factors.. First, among Iran’s fragmented opposition groups, this is currently the only opposition with a clearly identifiable figure who actively and consistently positions himself against the Islamic Republic. Secondly, supporters of this group are divided between those who advocate a return to a monarchical system that was overthrown less than five decades ago, and those who view Reza Pahlavi primarily as a temporary substitute to facilitate the ousting of the Islamic Republic rather than as a permanent leader. They largely envisage a transitional period of around one to five years, followed by a referendum to determine the future system of governance.
However, critics argue that Pahlavi lacks the leadership qualities required in times of crisis, citing his limited executive and managerial experience, poor judgment in evaluating people, and a lack of clear vision and strategic direction. They contend that his appeal is driven primarily by nostalgia for pre-revolutionary Iran. Moreover, they warn that the existence of two distinct constituencies among his supporters raises the risk of him pursuing a less democratic path and placing greater emphasis on monarchical restoration. Under such circumstances, his return to power could risk reinstating an  authoritarian regime. 

Opponents of both monarchical and clerical rule
Another segment of the Iranian society supports the removal of the Islamic Republic, but rejects a return to monarchy, and instead favours a republican system based on popular sovereignty and competitive elections. They argue that legitimate leadership must emerge from within Iran through democratic means, often pointing to figures such as Mostafa Tajzadeh, Narges Mohammadi, and Mir Hossein Mousavi as potential alternatives.
Among these figures, Mostafa Tajzadeh is frequently viewed as a credible Opposition leader. His political vision can be summarised around several core principles: a peaceful democratic transition; the establishment of a freely elected constituent assembly tasked with rewriting Iran’s Constitution; the removal of velayat-e faqih (the office of the Supreme Leader); opposition to repressive policies; and support for diplomatic rapprochement with the United States.

Supporters point to recent developments, including challenges to compulsory hijab enforcement and internet restrictions, as evidence that nonviolent pressure can constrain the regime’s hardline policies.
Unlike Reza Pahlavi, whom critics accuse of framing the political struggle as a form of war and risking large-scale civilian casualties, Tajzadeh consistently emphasises peaceful strategies. He maintains that constitutional reforms and the dismantling of clerical rule can be achieved through sustained civil disobedience. Supporters point to recent developments, including challenges to compulsory hijab enforcement and internet restrictions, as evidence that nonviolent pressure can constrain the regime’s hardline policies.
Critics argue that peaceful civil disobedience is no longer effective, pointing to the Islamic Republic’s repeated failure to implement meaningful reforms,even after intense pressure and 2025's 12-Day W. Despite warnings from within the system that this was a final opportunity for change, no substantive reforms followed.

The uncommitted could be decisive
Among other sections in Iranian society are the indecisive and free-riding, a group that currently lacks a clear alternative leadership figure to the Islamic Republic. Its members view neither Reza Pahlavi as a credible alternative nor consider Mostafa Tajzadeh’s peaceful approach as effective, assuming the current establishment is unwilling to relinquish power. As a result, this segment finds itself in a political deadlock. Yet the choice it ultimately makes at a critical moment could prove decisive in reshaping the broader political trajectory.

Public chants in support of Reza Pahlavi should not be interpreted as a call for monarchical restoration, but as a broader search for symbols that signal the end of the Islamic Republic.
At present, this group remains largely observant, closely watching which actors are moving closer to power. Should the Islamic Republic signal a willingness to implement substantial reforms, it may even temporarily align with the existing system to assess the depth and credibility of such changes. This cautious stance is driven by a desire to avoid another revolutionary rupture and its potentially severe consequences.
A credible Opposition leader capable of broad mobilisation remains absent, which allows the regime to hold on to power. To be clear, Reza Pahlavi’s growing prominence is because he is the only visible option in a barren opposition landscape, leaving many Iranians trapped in a prolonged political dilemma. Consequently, public chants in support of Reza Pahlavi should not be interpreted as a call for monarchical restoration, but as a broader search for symbols that signal the end of the Islamic Republic.



*Zeynab Malakouti is a Research Affiliate at the Middle East Institute, National University of Singapore, and Senior Fellow at the Global Peace Institute, UK.

### The Political Economy Behind Iran’s Protests

The protests sweeping major Iranian cities this month were sparked by drastic currency devaluation, with the rial breaching 1.45 million to the US dollar and food price inflation exceeding 70 percent. While the immediate trigger is  Iran’s soaring cost of living, the underlying causes are structural frameworks that have made international isolation more profitable for the Iranian elite than peaceful integration  into the world order (refer to the graph).



Source: The National

Iran’s current economic collapse results from its “resistance economy" evolving from an ideological posture into a predatory shadow economy. For the past decade, external sanctions and internal mismanagement have created a black economy in Iran, which is built on the illicit sale of oil through a “ghost fleet” of tankers. However, the mechanisms designed to ensure regime survival now incentivise  actively cannibalising the nation’s economy.
From Resistance to Rent-Seeking
The standard narrative suggests that the United States-led “maximum pressure” and other sanctions starved the Iranian economy of foreign currency, forcing the regime to resort to illicit activities to fund its strategic priorities. While true, this view misses the systemic shift that occurred over the last few years. The negative reinforcement loop—where nuclear escalation triggers sanctions, necessitating ghost oil sales to countries like China through elaborate mechanisms, and the generated revenuefurther financing nuclear advancement—has fundamentally restructured the Iranian state. It has shifted the norms of the economy from a transparent public sector to opaque, securitised networks.
In Iran, the revenue from the ghost oil sales is effectively ring-fenced for the “shadow budget” that finances missile programs, regional proxies and the enrichment apparatus.
When Iran sells 1.5 million barrels of oil per day via its “ghost fleet", that revenue does not enter the Central Bank of Iran (CBI) through standard SWIFT mechanisms. It enters a shadow banking system managed by the Islamic Revolutionary Guard Corps (IRGC) and affiliated middlemen in hubs around Asia. Crucially, this process incurs a massive “sanctions discount”. This shadow economy has empowered a powerful military elite within the regime, who profit immensely from the friction created by sanctions. For these actors, opaque, heavily discounted trade is more lucrative than transparent, taxed commerce. The nuclear programme, therefore, aims to act as a strategic deterrent against the West and  is considered a necessary pretext to maintain the state of emergency that justifies this opaque economic structure.

The current uprising is, in part, determined by this shadowing of state revenue and the resultant economic fractures. A functional state uses commodity export revenue to defend its currency and subsidise public goods. However, in Iran, the revenue from the ghost oil sales is effectively ring-fenced to finance missile programmes, regional proxies, and the enrichment apparatus.

This leaves the public budget—the one responsible for wages, pensions, and subsidies— severely constrained. The government cannot borrow internationally due to financial isolation, and it cannot access its own oil wealth, which is trapped in the shadow loop. The regime’s response, culminating in President Pezeshkian’s 2026 draft budget, appears classical fiscal mismanagement- printing money to cover the deficit while proposing wage hikes. The decision to abandon the preferential exchange rate of 28,500 Iranian tomans for essential imports was the breaking point.
The resulting 70 percent food price inflation was not an accident of policy, it was a symptom of a system prioritizing security over the public good.
This move was almost an admission by the state that it would no longer subsidise the basic necessities of its citizens in favour of preserving hard currency for the security apparatus. The resulting food price inflation was not an accident of policy; it was the consequence of a system prioritising security over public good. The Iranian people are on the streets because the social contract—acceptance of authoritarian rule in exchange for a degree of economic stability—has been unilaterally dissolved by the state.
Breaking the Cycle
Why does the system persist if it is leading to national ruin? The answer lies in the economic concept of path dependence, where the current and future situations are governed by past decisions, events and processes, even if they are no longer the most rational choices. The negative reinforcement loop has become self-sustaining because the incentives of the ruling elite have been completely decoupled from the interests of the general population. In most economies, elite wealth is generally tied to overall GDP growth. In Iran’s resistance-based economy, elite wealth is tied to the continuation of isolation.
If Iran were to normalize relations and re-enter the global economy tomorrow, this elite wealth would vanish.
Therefore, any attempt by civilian technocrats within the government to de-escalate nuclear tensions is actively sabotaged. The loop is resilient not because of ideological fervour, but because of a cold, hard rent-seeking approach. The system cannot reform because the very act of reform would bankrupt its most powerful stakeholders.

Given this entrenched structure, standard diplomatic solutions or piecemeal sanctions relief are destined to fail. They will merely feed new liquidity into the existing predatory loop without altering its mechanics. Breaking the cycle requires a simultaneous, exogenous, and endogenous shock severe enough to shatter the current equilibrium.

Internationally, this would require enforcement mechanisms to move beyond targeting the Iranian state and focus pointedly on the connecting nodes of the third-party networks in Asia that facilitate the ghost oil trade. Only by making the shadow oil sales prohibitively expensive, raising the cost of laundering beyond the profit margins, can the financial incentives of the elite be curtailed. Domestically, the loop only breaks when the cost of suppressing the population exceeds the revenue generated by the shadow economy. That threshold appears to be nearing. The current economic spiral indicates the regime is running out of road. However, history suggests that such systems rarely dismantle themselves peacefully; they usually persist until state insolvency leads to a fracturing of the security apparatus itself.
Internationally, this would require international enforcement mechanisms to move beyond targeting the Iranian state and focus pointedly on the connecting nodes of the third-party networks in Asia that facilitate the ghost oil trade.
Until the economic incentives for opacity are removed, the loop will continue, converting Iran’s natural resource wealth into enriched uranium and social chaos.



Samriddhi Vij is an Associate Fellow, Geopolitics, at ORF Middle East.

### Venezuela Echoes Iraq: What is America’s Grand Strategy?

America’s audacious capture of Venezuelan President Nicholás Maduro sent shockwaves not just across Washington’s backyard but beyond. United States President Donald Trump described the operation, codenamed Midnight Hammer, as “perfectly executed” and “one of the most stunning, effective, powerful displays of American military might.” In a subsequent interview, Trump said the US could remain Venezuela’s political overlord for “much longer” than a year. During that interview, Colombian president Gustavo Petro called to “explain the situation of drugs.” Like Colombia, Venezuela fell under Washington’s crosshairs due to its state-embedded criminal network, Cartel de los Soles – allegedly headed by Maduro – which the State Department designated a terror organisation last November.

The Latin American episode bears an uncanny resemblance to the 2003 Iraq War under the Bush administration. “Shock and awe,” Pentagon terminology for attacks so massive and sudden they overwhelm enemies, mirrors Trump’s account of the Venezuela raid. This term described the toppling of then-Iraqi President Saddam Hussein in an operation that left a controversial legacy. Washington did not anticipate an eight-year quagmire when US Marines pulled down Hussein’s statue in Baghdad on April 9, 2003. Despite Trump’s “peace through strength” rhetoric, the concern is repeating failed nation-building efforts from Iraq and Afghanistan.
Despite Trump’s “peace through strength” rhetoric, the concern is repeating failed nation-building efforts from Iraq and Afghanistan. 
Faultlines have appeared among Trump’s MAGA allies and within the Republican camp, as the GOP frets over deploying American resources — including boots on the ground. Trump recently dismissed Iraq-Venezuela comparisons, claiming “We’re going to keep the oil”. In his victory speech after winning the 2024 presidential election, Mr Trump declared, “I’m not going to start a war. I’m going to stop wars.” A year into his second term, not only has this promise been called into question, but doubts have also emerged about America’s broader grand strategy.
Ghosts of the Past
The legacy of Iraq remains ugly for America. In 2002, when former President George W. Bush asserted in his State of the Union address the need to use military force to remove Saddam Hussein, he invoked ensuring “the nation’s security” — the same rationale President Trump is deploying in January 2026. But Bush went further in his speech, reaffirming “freedom’s price”. In rallying public support for this cause, then-US Secretary of State Colin Powell told the UN Security Council in February 2003 that “solid intelligence” justified disarming Iraq of weapons of mass destruction (WMD under UN Resolution 1441).

This solid evidence proved hollow. No WMD was found. Worse, inspectors later revealed that Iraqis cooperated in 2002-3, but their findings never reached US policymakers. The aftermath exposed the limits of Pax Americana (or America-led peace): a winless occupation and an Iran that later expanded its influence in the Middle East. American public support, according to Pew Research Center statistics, reached a high of 74 per cent in May 2003, deeming military force in Iraq the right decision. By November 2008, as Bush’s second term ended, however, support for the protracted war had plummeted to 39 per cent.

America had found itself entangled in Iraq — as in Vietnam and Afghanistan — until December 2011, when it withdrew all but a few thousand troops. During the Obama administration, Iraq spawned a new threat: the Islamic State of Iraq and Syria, prompting US airstrikes and the redeployment of a small American force.
The aftermath exposed the limits of Pax Americana (or America-led peace): a winless occupation and an Iran that later expanded its influence in the Middle East.
Venezuela’s developing situation is equally, if not, thornier. First, if oil motivates US control, it will require “lots of investment, lots of patience, and lots of time,” as Keith Johnson wrote. Second, removing Maduro does not automatically dismantle the trafficking regime. Instead, reports indicate the regime is exploiting this opportunity to crack down on public dissenters and political opponents.

This leaves the US in a Catch-22: if the Trump administration seeks short-term stabilisation, the current Venezuelan regime appears to be relying on the same toolkit of repression. Conversely, if the aim is sustained governance and security management, the Iraq case study has already demonstrated that hard power does not produce political legitimacy.
Donroe Doctrine?
Perhaps the foreshadowing of events in Latin America stems from the National Security Strategy (NSS) released by the White House in December 2025. According to the document, the Trump administration seeks to “enforce a ‘Trump Corollary’ to the Monroe Doctrine,” which emphasises American primacy in the Western Hemisphere. As the text explains, the means of achieving this is to “enlist” and “expand”, though the latter contradicts reality. Instead of “cultivating and strengthening new partners”, what we have witnessed thus far resembles expansionism more closely — with President Trump setting sights on Colombia, Cuba, and Mexico. Further afield, Greenland also faces the threat of annexation, whether through purchase or by force. Only Honduras remains an anomaly: its former President Juan Orlando Hernández received a pardon from Trump for charges of drug trafficking.

Other inconsistencies in the document invite interpretation, such as referring to Trump’s foreign policy as “pragmatic without being ‘pragmatist,’ […] principled without being ‘idealistic,’ muscular without being ‘hawkish’.” What is clear is that America’s interests are first and to achieve such a goal requires flexibility — even ambiguity. A year into Trump’s second term, the president has signed more executive orders than he did during his entire first term. He has also pursued a more muscular foreign policy, conducting airstrikes in Nigeria, Somalia, Syria, Iran, Yemen, and Iraq since taking office. Now, the Senate has advanced a bill to block further military action in Venezuela — an attempt to address the illegality of Midnight Hammer and the abuse of force.

What is also apparent is how commercial diplomacy forms part of the Trumpian playbook, which seeks to reverse the “unsustainable” current account deficit. The document references the Middle East as “no longer the constant irritant,” but a “place of partnership, friendship, and investment.” Trump’s visit to the Gulf Arab countries last May, which produced multibillion-dollar deals, is cited as a model example of “the appeal of American technology.” Yet the Middle East remains plagued by fragile and failed states, where central authority struggles with internal conflict. Syria, Yemen, Iraq, and Lebanon are just some examples.
So, What is America’s Grand Strategy?
As far as the concept of grand strategy goes, which refers to how states prioritise and mobilise military, diplomatic, political, economic, and other sources of power in accordance with national interests, the Trump administration is an outlier. US grand strategy has traditionally been characterised by one of four strands: (1) restraint, which relies on diplomacy to resolve conflicts; (2) deep engagement, which leverages military dominance and alliance commitments to uphold the international order while profiting from this security umbrella; (3) liberal internationalism, which holds that states should pursue multilateral agreements, uphold rules-based norms, and spread liberal ideals; and (4) conservative primacy, which promotes liberalism but allows for the use of force rather than diplomacy alone.

The Iraq War stained democracy promotion by conflating universal freedom with American military force. In Trump’s coercive tactics, however, one finds no comparable promise of Western democracy akin to the “Freedom Agenda“ launched by the Bush administration. To be clear, Trump has now withdrawn the US from 66 international organisations, signalling further disdain for the liberal internationalist values that the US was instrumental in maintaining within the global order for more than seven decades. Crucially, it is worth reiterating that the Iraq conflict did not diminish Arab support for democracy. Public surveys like the Arab Barometer consistently show high levels of support for democratisation across the region.
But make no mistake: Trump’s retreat from international institutions does not signal isolationism.
Rather, it represents robust internationalism that embraces power politics. Nor is he reluctant to wield American hard power, undermining the soft power cultivated over decades, from the “hearts and minds” campaign during the Vietnam War to USAID‘s humanitarian and development assistance, which Trump has now dismantled. For the United States, rebuilding trust will prove difficult when the very institutions built upon it are discarded.

Stephen Miller, the president’s Deputy Chief of Staff and Homeland Security Adviser, has already articulated how America views the world. When pressed on Trump’s desire to control Greenland, Miller asserted that the world must be “governed by force.” This philosophy portends trouble globally. Latin American countries should brace for turbulence. As for the Middle East, Trump’s promises of peace warrant scepticism: the region remains a tinderbox with fragile ceasefires in Gaza and Lebanon, widespread political instability, and states like Iran that may again become American targets.



Clemens Chay, Senior Fellow, Geopolitics, ORF Middle East.

### Iran’s Shadow Fleet Fuels Maritime Environmental Risks

Sanctions, Shadow Trade, and Environmental Risk 
The Islamic Republic of Iran (IRI)’s oil and gas sector has been subject to progressively stringent international sanctions over the past decade, particularly from the United States (US) and European states. These restrictions intensified following the reactivation of the UN “snapback” mechanism under Resolution 2231, reinstating limits on energy exports, shipping, finance, insurance, and port access.

Iranian oil exports have not stopped despite these limitations, which are meant to curb destabilising regional operations and restrict revenue. Rather, they have moved a sizable portion into murky marine routes. To sustain exports, the Islamic Republic increasingly relies on a clandestine “shadow-fleet” composed of ageing tankers operating under dubious flags, routinely disabling Automatic Identification System (AIS) transponders, and conducting unregulated ship-to-ship (STS) transfers beyond port oversight.
Iranian oil exports have not stopped despite these limitations, which are meant to curb destabilising regional operations and restrict revenue.
These techniques exclude shipments from established safety and responsibility frameworks, dramatically increasing the chance of collisions, spills, and unreported mishaps in environmentally sensitive seas. Despite sanctions, Iranian crude exports reached approximately 2.0 million barrels per day in September 2025 the highest level since mid‑2018 demonstrating how sanctions have altered how oil moves, rather than whether it moves.
Sanctions Evasion and Environmental Exposure 
One of the principal sanction evasion techniques is the disabling or spoofing of AIS transponders. AIS is a cornerstone of maritime safety; vessels operating “dark” become invisible to regulators and nearby traffic, increasing collision risk and delaying spill detection.

Many shadow‑fleet tankers are decades old and poorly maintained. Fraudulent or frequently changing flag registrations obscure ownership and allow operators to bypass inspections. Operating without valid insurance further erodes incentives for maintenance and leaves no assured mechanism for environmental remediation following an accident.

Ship‑to‑ship transfers, often conducted at night in international waters, compound these risks. Hose failures, misalignment, and uncontrolled discharges are plausible even under regulated conditions; within the shadow-fleet they represent a major environmental vulnerability.

Finally, older tankers are increasingly used as floating storage units. With up to 63 million barrels reportedly held at sea, prolonged storage accelerates corrosion and mechanical degradation, turning these vessels into latent pollution hazards. Additionally, slow-moving or stationary tankers are more likely to be involved in collisions, especially in crowded sea lanes, which increases the likelihood of spills, leaks, and maritime mishaps.
Environmental and Sustainability Implications 
The environmental consequences of Iran’s shadow-fleet are severe and cumulative. Ageing vessels, disabled tracking, uninsured operations, and unregulated transfers collectively elevate the probability of a major spill.

In particular, the Persian Gulf is at risk. Because of its high salinity, shallow waters, and restricted circulation, oil pollution would last longer than in open oceans. Fisheries, mangroves, and desalination plants that provide drinkable water throughout the Persian Gulf might all be severely damaged by spills. There would be transboundary impact to adjacent governments because to the ecological and economic consequences that will go well beyond Iran.

Global climate mitigation efforts are undermined by inefficient routing, extended idle, and redundant transfers that raise emissions per barrel.

The shadow fleet has a hidden carbon cost in addition to the immediate spill danger. Global climate mitigation efforts are undermined by inefficient routing, extended idle, and redundant transfers that raise emissions per barrel.
Maritime Retaliation, Proxy Conflict, and Escalating Ecological Risk 
Environmental risk is further intensified by the Islamic Republic’s readiness to engage in maritime retaliation. The November 2025 seizure of the Talara illustrates how enforcement actions, framed in legal or environmental terms, can mask coercive signalling. Although the vessel was released, the episode highlights how geopolitical escalation intersects with maritime safety.

The vessel’s ownership is linked via Pasha Finance Inc. to figures in Azerbaijan, which suggests a geopolitical undercurrent to the action. Analysts interpret the seizure not merely as a judicial or anti-smuggling operation but as part of a broader pattern of retaliation: the IRGC issued statements echoing a “tit-for-tat” logic, quoting religious verse “So whoever has assaulted you, then assault him in the same way that he has assaulted you” and alluding to past maritime confrontations.

The Islamic Republic and its proxies have also attacked or threatened foreign vessels. Drone strikes, missile attacks, and sabotage operations particularly those carried out by allied groups in Yemen pose a dual risk: immediate physical damage to tankers and potential long-term ecological disaster. A damaged vessel could rupture, spill oil, or ignite, causing vast environmental harm in sensitive waters. Analysts warn that the Islamic Republic may deploy sea mines, drones, or missiles in the Strait of Hormuz in response to perceived threats, creating conditions ripe for strategic confrontation and environmental catastrophe.

Houthi forces in Yemen, closely aligned with the Islamic Republic, have attacked commercial vessels in the Red Sea. Such proxy attacks not only disrupt global shipping but also increase the risk of oil spills or fires in a critical maritime corridor, forming part of an asymmetric strategy designed to exert pressure on regional and Western states.
Sanctions have changed the way Iran exports oil, creating higher environmental exposure in regional and international waters. 
Conclusion
Sanctions have changed the way Iran exports oil, creating higher environmental exposure in regional and international waters. These risks come from identifiable practices: turning off tracking systems, using older tankers without insurance, offshore transfers, and long-term floating storage. These practices show how sanctions reshape maritime behaviour. When designing sanctions, their environmental consequences must be explicitly considered. Policies that divert oil transport outside regulated shipping channels should be treated as creating environmental risk. Neighbouring states, flag registries, and port authorities must coordinate to enforce maritime safety and pollution rules; otherwise, sanctions indirectly encourage unsafe practices. Yet, environmental exposure is not inevitable. It results from sanctions design, enforcement gaps, and fragmented oversight. Reducing risk requires treating sanctions policy and maritime governance as linked. Safer shipping depends on both effective enforcement and regional cooperation.



Kamyar Kayvanfar is a native Persian and English-speaking communications and public affairs professional with experience at EY and Kreab.

### Bahrain’s Difficult Yet Necessary Fiscal Turn

Introduction: Why Fiscal Reform Became Unavoidable
During the new year celebrations, the Kingdom of Bahrain announced a series of economic reforms. These measures respond to the country’s rapidly increasing public debt. According to the International Monetary Fund’s (IMF) latest Article IV consultation, Bahrain’s overall fiscal deficit reached 11 percent of GDP while gross government debt rose to more than 133 percent of GDP in 2024. Bloomberg has reported that the debt ratio makes Bahrain the most indebted Gulf country.
The political sensitivity of implementing these measures is notable for Bahrain given its complex political history. Bahrainis live in a region characterised by high standards of wealth, which they are keen to match, and any increase in living costs invites caution; particularly as internal and external pressures could shape or distort the narrative. Conversely, without narrowing the economic gap between the Kingdom and its neighbours, Bahrain continues a trajectory of fiscal decline that may risk social unrest: a dilemma that the government has likely considered carefully.

Managing Reform Through Consensus and Delay 
While easy to assume so, Bahrain has not been laissez-faire in addressing its rising public debt. For one, sustaining economic growth required borrowing, particularly  to finance development projects and social protection programmes. Second, Bahrain has never defaulted on its debt, signalling a firm commitment; even if, as suspected, it has occasionally taken on additional debt to repay earlier obligations. Third, long-term initiatives such as the Fiscal Balance Program faced significant challenges, including the global COVID-19 pandemic, which necessitated revisions to the original plan and the introduction of a parallel economic recovery strategy.
Besides this, the Kingdom has a vocal parliament that has never failed to remind the government—and by extension, the public—of the need to reform the economy while safeguarding the social safety net. In 2025, the government has taken deliberate steps to reach a consensus with the legislature about balancing fiscal priorities with the needs of the citizenry. Over two phases several months apart during 2025, government officials consulted parliamentary leadership. In March , the government proposed measures such as carbon emission fees, VAT increases, and an additional excise tax on unhealthy food categories, among other reforms aimed at raising non-oil government revenues, though many were later discarded. In December 2025, the government and parliament reconvened, with revised measures that eventually passed by consensus. This consensus was not easily achieved: the government and parliament may have agreed on the need to raise revenue, but not on the extent to which the public should bear the burden. The policy emphasis of the parliament was on maintaining the first and second electricity and water consumption tariffs for citizens’ primary residences, to which the government agreed. While the government compromised on that, discussions of a nation-wide cash support in return for wholly raising tariffs dissipated due to parliamentary opposition. The government appeared unwilling to increase expenditures unless the fiscal balance favoured revenues.

From Proposals to Policy: The Final Reform Package 
The last cabinet meeting of 2025 approved the following reforms: first, a 20 percent reduction in administrative expenses across all government entities. Notably, the state budget for 2025-2026 marked the recurrent expenditure of government entities at over BHD 2 Billion (US$5.3 billion). Reducing this expenditure will contribute significantly to manage the fiscal situation, but it also requires addressing Bahrain’s debt interest, which is nearly half that value at slightly more than BHD 1 billion (US$2.7 billion)—a substantial figure. The second reform announced was to increase the contributions of government-owned companies to the Kingdom’s general budget. For example, Bahrain’s Sovereign wealth fund, Mumtalakat, reported a consolidated net profit of BHD 363 million (approximately US$1 billion) in 2024, while its contribution to the latest budget was marked at nearly 10 percent of that only, approximately BHD 40 million (US$106.1).
The third reform is a 10 percent corporate tax on all companies whose annual net profits are above BHD 200,000 (US$530,000) starting in 2027. Notably however, companies already subject to 15 percent multinational tax announced last year are exempt from this additional tax. The fourth is increasing the current 50 percent excise tax on soft drinks, with details of the increase not out yet. Other dimensions of the reform agenda also remain unclear in their potential impact, for instance: undeveloped investment lands (that have access to infrastructure) being subject to a monthly fee of 100 Fils (US$0.27) per square meter, beginning in 2027; and fees for sewage services set at 20 percent of water consumption charges (excluding citizens’ primary residences). Some details are available, however,  and their impact can be inferred: gradual annual increases in expat labour costs (which may lead to more local recruitment in the private sector), and on the reform point of adjusting natural gas prices for companies and factories, reportedly reaching US$6 per Metric Million British Thermal Unit (MMBTU) by 2029, a 50 percent rise from current levels. This reform is considered necessary, particularly as domestic gas production declines and it is no longer feasible to heavily subsidise imported LNG.
Yet, the most impactful of these reforms for the average individual has likely been the new mechanism for determining fuel prices. Long queues were observed at gas stations on the eve before December 30, 2025, when the government’s newly formed committee (which will convene on a monthly basis similar to the UAE) raised the fuel prices to be “in line with global price changes, while ensuring economic efficiency and financial sustainability”.
The other most impactful of these reforms was likely the increase in electricity and water tariffs. Electricity tariffs have increased by 10 percent for all consumers who do not qualify for subsidies (such as expats). Meanwhile, for the subsidised citizenry, electricity tariffs doubled in the high-consumption tier (also known locally as the third consumption tier). Still, the electricity tariffs remained unchanged in the first two consumption tiers— serving as a strong government incentive for citizens to reduce energy use. The same exception applied to the first two categories, which remain exempt from the general 3.3 percent increase in water tariffs. Nonetheless, this rise in utility costs may not remain fixed during the intensive demand of the summer months, given its impact on living costs across the board.
On top of that possibility, and to balance this rise in living costs; while protecting the most vulnerable groups in society - Bahrain has ordered an increase in financial support for low-income families. This support ranges from BHD 75 (US$198.75) to BHD 130 (US$344.50) depending on the salary of the primary income earner of a household.  This complements recent procedures to proliferate housing services, and offering close to 10,000 job seekers “three opportunities each”.

The Private Sector as the Silent Stakeholder
Supplementing the prospective reforms is another key objective—boosting investment. This is likely because entities such as the Bahrain Economic Development Board, Bahrain’s national investment promotion agency, will now face greater challenges in presenting the cost competitiveness of doing business in the Kingdom. For example, Bahrain can no longer rely on the rationale of corporate tax exemptions, nor claim that its utilities and labour costs are low, unless free zones are better formulated to attract such investments.
Moving forward, this will conjunctly require close coordination with the Bahrain Chamber of Commerce and Industry. Whereas close consultations were held with the parliament, the private sector represented by the Chamber has been visibly absent from public and government discourse, despite seemingly being the most affected by higher gas, water, electricity, taxation and labour costs combined. The Chamber may yet be consulted on other reform plans in the pipeline, such as the long-pending mandatory health package roll-out for expats.

Conclusion 
Bahrain’s economic reforms are not about acceptance: the country has long accepted the uncomfortable truth of fiscal reforms being necessary, but the real question has been how to do this while safeguarding the families most in need. Bahrain also has an ambitious goal: it wants to become less dependent on external support. While the long-standing generous support from neighbouring countries for Bahrain was useful to buy time, it is not a sustainable long-term strategy.
Crucially, Bahrain’s innovative fiscal policies and political prudence in implementing them, may end up shaping the trajectory of its neighbours due to the courage it has shown in positioning itself as an agent of change. To achieve this effectively, and to garner both regional and international recognition, transparent and accessible government data on the progress of these reforms is needed to improve the country’s credit rating and gradually reduce the government debt interest costs.



Mahdi Ghuloom is a Junior Fellow at the Observer Research Foundation – Middle East

### The South African MDPMI Report: Countering Platform Monopolies

Introduction
Australia’s ban on the use of social media by teenagers has caught the world’s attention. While controversial, the ban is the latest iteration of ongoing tensions between large technology firms and national governments. Recent years have witnessed increasing international scrutiny on Big Tech and social media platforms due to their influence on domestic political discourse and international relations. Over the past year, misalignment between private sector practices and public policy priorities has prompted legislative and administrative action requiring technology companies to align their operations and policies to national regulatory frameworks of the countries they operate in. Between 30 August 2024 and 8 October 2024, the Supreme Court of Brazil ordered a ban on Elon Musk’s social media platform X after the company declined to comply with a court order mandating the appointment of a legal representative in the country. In November 2024, the European Commission fined Mark Zuckerberg’s Meta EUR 797.72 million for breaching EU antitrust rules by linking its online classified ads platform (Facebook Marketplace) to its social media platforms and thereby “imposing unfair trading conditions” on other similar platforms. In the same month, the Competition Commission of India imposed a USD 24.7 million penalty on Meta for the roll out of WhatsApp’s 2021 privacy policy, which enabled the sharing of user information with other Meta-owned platforms like Instagram and Facebook. Underscoring the momentum for regulatory intervention of digital platforms in the Global South, the Market and Digital Platforms Market Inquiry (MDPMI) report released by the South Africa Competition Commission in November 2025 highlights the country’s position in this global regulatory discourse. The study was commissioned in recognition of how systemic network effects in digital platforms, the AdTech space dominated by tech giants like Google, and the emergence of generative AI (GenAI) services are disrupting local and indigenous news media systems by creating technical and financial constraints. This paper is part of a series that will analyses the findings and implications of the MDPMI report in the evolving online regulation landscape. As an introduction, this paper examines the major findings of the report and explores strategies to strengthen the resilience of local media ecosystems in countries historically positioned as consumer economies.
Recent years have witnessed increasing international scrutiny on Big Tech and social media platforms due to their influence on domestic political discourse and international relations. 
Major Findings of the Report
In recent years, the South Africa government has transitioned from a hands-off approach towards digital platforms to one characterized by active legal and regulatory intervention. Similar to developments in India, the South African Information Regulator initiated a multi-year legal dispute with WhatsApp regarding its 2021 privacy policy update, requiring greater data transparency for domestic users under the Protection of Personal Information Act (POPIA) in 2025. Tensions with digital platforms were further heightened in relation to online content moderation due to the spread of misinformation during the 2024 elections in the country. In this context, the MDPMI report signals a push to hold global online platforms accountable to domestic judicial standards. Towards this objective, the report identifies the following disruptive dynamics in the South African media landscape:

Reduction in referral traffic: The report highlights the shift in global markets following the rise of social media. Digital platforms now function as intermediaries between publishers and audiences, with search engines and social media serving as primary gateways for news. In South Africa, Google Search accounts for 95 percent of the market share and is identified as the leading source of news according to surveys conducted for the MDPMI report. This dominance has compelled publishers to permit their content to be indexed in order to maintain public visibility. However, local publishers face challenges in monetising their online presence due to the prevalence of ‘zero-click’ searches, where users engage with content on social media without visiting the publisher’s website. The monopoly in online search also enables Google to channel traffic to its other platforms, such as YouTube, thereby reducing the amount of referral traffic to publishers.

Resource-constraints: The report highlights that financial pressures generated by the diversion of revenue away from print journalism is forcing cost-cutting measures in local news outlets. The closure of bureaus, contraction of newsrooms, and reduction in staff have contributed to the ‘juniorisation’ of journalism. Revenue decline coincides with rapid changes in global information ecosystems, shaped by algorithmic prioritisation of engagement metrics that favour sensationalism and outrage over objective and verified reporting. According to the report, the new media ecosystem imposes additional costs on journalism outlets by requiring investment in resources to counter misinformation.
Underscoring the momentum for regulatory intervention of digital platforms in the Global South, the Market and Digital Platforms Market Inquiry (MDPMI) report released by the South Africa Competition Commission in November 2025 highlights the country’s position in this global regulatory discourse.
Exposure to international competition: The report finds that social media and online platforms position local and vernacular news media at a disadvantage against international incumbents. Google maintains a monopoly in online search, and the report notes that international media and publishing houses are disproportionately represented in the ‘Top Stories’ section and in general search results, to the detriment of local or national South African media. As online traffic is diverted away from local publishers, the rise of GenAI has exacerbated the problem with AI chatbots scraping the web for data and grounding information without providing compensation to local platforms. Since most popular GenAI tools originate in a limited number of countries, the emerging digital landscape disproportionately extracts data and potential revenue from small and medium‑sized enterprises (SMEs) and publishers already operating under financial constraints.
Taking a Bloc Approach
A persistent issue, the report mentions, is that local publishers lack bargaining power when negotiating with Big Tech companies. From the perspective of global search and information distribution platforms, “one media source is largely interchangeable with another when reporting on national events.” Given that South Africa has less monthly and daily active users (MAUs and DAUs) compared to larger user-bases in countries like India, Brazil or the EU, the incentive for online platforms to align with national priorities may not be sufficiently strong. A harmonised approach may therefore be necessary, given the number of commonalities in recent challenges to Big Tech platforms. The regulatory actions undertaken by Brazil, the EU and India converge with the anti-competitive practices identified in the MDPMI report, including abuse of dominance through self-preferencing, coercive ‘take-it-or-leave-it’terms and conditions, and evasion of local legal sovereignty. To galvanise the negotiating power of SMEs throughout Global South countries, adopting a bloc approach; whether through existing or newly established transnational platforms, may be necessary. Leveraging frameworks such as the BRICS Digital Economy Partnership Framework (DEPF), the Global Digital Compact (GDC) under the United Nations G77, and the ASEAN Digital Economy Framework Agreement (DEFA) to formulate bloc strategies and shared standards could strengthen the bargaining power of local publishers while simultaneously reducing compliance costs and regulatory uncertainty for Big Tech companies.
To galvanise the negotiating power of SMEs throughout Global South countries, adopting a bloc approach; whether through existing or newly established transnational platforms, may be necessary.
Going Forward
A long-term vision for addressing the aforementioned problems involves transforming cooperative mechanisms into enforcement-sharing blocs. For instance, geoeconomic groupings like the expanded BRICS can counter jurisdictional or regulatory evasion by introducing clauses in the DEPF where identification of abuse of dominance in one member state creates a presumption of dominance in others. While ASEAN’s DEFA currently focuses on trade facilitation in the region, it can be amended to prevent technology companies from relocating operations to jurisdictions with the most permissive laws through a nodal agency that conducts pan-regional algorithmic audits to detect algorithmic self-preferencing. At the UN level, the G77 bloc can take normative action to render extractive data practices diplomatically costly for technology companies. This could include defining AI model training based on local publishers’ data as a violation of national digital sovereignty, thereby granting smaller nations some command over their data. Furthermore, commitments can be outlined to designate major online platforms like X or Facebook as Essential Digital Public Infrastructure, discouraging them from including withdrawing services as a consequence of not accepting data and privacy policy changes to their products. Implementing such policy measures can leverage international cooperation to establish shared enforcement practices, thereby addressing the vulnerabilities of individual markets, contributing to a more inclusive and accountable digital future.



Siddharth Yadav is a Fellow with the Technology vertical at the ORF Middle East.

### The Rentier Divergence: Trajectory of a Post-Oil Arab World

For decades, the political economy of the Arab World has been viewed as a group of "petro-states"; countries whose economies were built on oil. It is often suggested that the region’s oil would converge on a singular trajectory of gradual diversification. A forensic analysis of World Bank oil rent data from 2001 to 2021, however, complicates this assumption. By isolating the economies with active hydrocarbon exposure and adjusting for data constraints in conflict zones, a dramatic bifurcation emerges. The Arab World is splitting into two distinct economic categories: the “Post-Rentier Aspirants,” who are leveraging capital to mitigate their structural dependency, and the “Hyper-Rentiers,” whose economies have become more rigid, volatile and exposed to the global energy markets. It can be argued that the “Arab Oil Economy” as a unified construct is obsolete, and instead a widening "Rentier Divergence" is taking shape, one that will redefine the region’s stability in the coming decade.
Defining the Universe of Analysis 
To construct a framework for this comparative analysis, the World Bank’s “Oil Rents (% of GDP)” dataset was used, benchmarking national performance against the aggregate "Arab World" average. The Arab World is defined, as per World Bank classification, to include Algeria, Bahrain, Comoros, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Qatar, Saudi Arabia, Sudan, Syrian Arab Republic, Tunisia, United Arab Emirates (UAE), West Bank and Gaza, Yemen and Somalia. However, the raw data required three specific filters to ensure the integrity of the comparison. First, economies with effectively zero hydrocarbon rents (Comoros, Djibouti, Jordan, Lebanon, Mauritania, West Bank and Gaza, Morocco and Somalia) in both 2001 and 2021 were excluded because including these states would distort the analysis, as their economic challenges are structurally distinct from the "resource curse" dynamics affecting the producers. Second, 2021 data was unavailable for Kuwait and Syria, and as a result, 2020 data were used as a proxy. This adjustment ensured that these critical actors remained visible in the rankings. Third, Yemen was excluded from the final dataset, as its most recent reliable economic data dates to 2018. In a region characterised by rapid shifts, pre-2020 data would fail to capture the structural ruptures caused by the COVID-19 demand shock and subsequent geopolitical realignments.

The result of the final analysis is reported in Graph 1[1], which illustrates the shift in Oil Rents (percentage of GDP) for 13 hydrocarbon states of the Arab World between 2001 to 2021 against the average of the region.


Hierarchy of Oil Dependence and Trajectory of Change 
The 2021 snapshot reveals a stark hierarchy of exposure. When ranked from most to least dependent, the region organises itself into three distinct tiers of vulnerability.

The first classification is the “Hyper-Rentiers”, which exhibit greater than 30 percent of GDP dependence on oil. At the apex of this dependency lies Libya, with oil rents constituting a staggering 56.4 percent of GDP. It is followed by Iraq at 42.8 percent. These figures represent more than just economic data; they are indicators of systemic fragility. In both cases, the hydrocarbon sector is not merely a dominant industry but functions as the primary economic organ, displacing all other economic activity.

The next tier is the “Structural Rentiers”, for which 20– 30 percent of the GDP represents oil rents. Gulf powerhouses like Kuwait (27.6 percent) and Saudi Arabia (23.7 percent), alongside Oman (23.5 percent) reside here. For these states, the government’s capacity to pay wages, subsidise energy and maintain the social contract remains directly tied to oil revenues.
The Arab World is splitting into two distinct economic species: the "Post-Rentier Aspirants," who are leveraging capital to suppress their structural dependency, and the "Hyper-Rentiers," whose economies have become more rigid, volatile, and exposed to the global energy markets.
The final tier is of the “Diversified & Transitional” economies with less than 20 percent  of the GDP derived from oil rents. The UAE sits at 15.7 percent, effectively tying with Qatar (15.3 percent). Algeria (14.5 percent) and Bahrain (10.9 percent) follow. Egypt (3.0 percent) and Tunisia (1.5 percent) round out the list, representing economies where oil functions as a fiscal rather than a structural foundation.

The static rankings of 2021 tell only half the story. The true analytical insight lies in the delta, the change over time. By comparing the 2001 baseline with the 2021 reality, the region’s economies can be mapped not only by their current position but also by the velocity and direction of their trajectory. This longitudinal view reveals a region that is fragmenting into four distinct pathways: the Aggressive Diversifiers, the Passive Diversifiers, the Stagnant Middle, and the Collapsed Outliers.

The most dramatic statistical shifts from 2001 to 2021 have occurred among the Aggressive Diversifiers, led by Qatar, which reduced its oil rent share by nearly 20 percentage points (dropping from roughly 35 percent to 15.3 percent). However, this needs to be understood in context to Qatar’s considerable gas reserves, as the hydrocarbon activities contributed 35 percent to its GDP in 2024.  Qatar is followed closely by Kuwait and Oman, which posted declines of 15.2 and 12.7 percentage points, respectively. Yet the drivers here are divergent. Qatar’s shift reflects the massive expansion of its gas (LNG) economy, effectively diluting the oil share. Kuwait’s decline is more a function of price volatility than structural reform. Oman, facing the reality of dwindling reserves, falls into this category out of geological necessity rather than a strategic choice.

A second tier, the Passive Diversifiers, includes heavyweights such as Saudi Arabia and Iraq, alongside smaller players like Bahrain. Saudi Arabia saw a moderate drop of 9.7 percentage points, while Iraq reduced its dependency by 6.4 points and Bahrain by 4.1 points. In these cases, the reduction in oil rents has not been sharp enough to fundamentally alter the political economy. For Saudi Arabia, the 9.7 point drop reflects the early stages of Vision 2030. Iraq’s reduction is particularly concerning; despite a 6.4-point drop, it remains structurally hyper-dependent (at 42.8 percent).
By comparing the 2001 baseline with the 2021 reality, it reveals a region that is fragmenting into four distinct pathways: the Aggressive Diversifiers, the Passive Diversifiers, the Stagnant Middle, and the Collapsed Outliers.
The third trajectory is defined by the Stagnant Middle, a group of countries where the hydrocarbon needle has barely moved in twenty years. The UAE is the counter-intuitive anchor of this group, structurally flat with a negligible change of just 0.1 percentage points (15.8 percent to 15.7percent). This stability suggests a "diversification ceiling", where service-sector gains begin to plateau. This group also includes Algeria (-2.2 points), Egypt (-2.2 points), Syria (-0.9 points), and Tunisia (-0.8 points). These nations are neither expanding their oil sectors nor successfully diversifying away from them, remaining trapped in a suspended state of low-growth reliance.

Finally, the region is bookended by the Collapsed State, represented by Libya, which moved sharply in the opposite direction. Increasing its oil dependency by nearly 27 percentage points, Libya stands as a graphical outlier that distorts the entire regional trend. This surge to 56.4 percent dependency is not a sign of oil wealth but of institutional disintegration, where conflict has obliterated the non-oil economy, leaving hydrocarbon exports as the sole, surviving pillar of the state apparatus.

The most revealing metric in this graph is the Arab World aggregate dependency itself, which has declined from 21.1 percent in 2001 to 17.3 percent in 2021. The average is no longer a measure of central tendency but a mathematical proof of two separating worlds. To the right of the 17.3 percent line, the Hyper-Rentiers (Libya, Iraq, Kuwait) have effectively decoupled from the region's diversification trajectory, creating a reality where the state remains consumed by the volatility of the barrel. Conversely, to the left are countries that have established a new structural baseline below the regional average. Thus, the Middle East is not converging toward a modernised middle; instead, it represents an increasingly bifurcating reality.



Samriddhi Vij is an Associate Fellow, Geopolitics, at ORF Middle East.



[1]After the data was sourced from the World Bank, it was cleaned, analysed and visualised by the author. The graph was designed using Google Gemini, which is Google's AI tool, acting as an intelligent assistant that understands and processes text, images, audio, video and code.

### Water Security Modelling and Drought Forecasting in the MENA Region

Water scarcity has shaped the Middle East and North Africa (MENA) region for millennia. This constant challenge, however, has also been a powerful catalyst for innovation, as evidenced by the ancient dams and sophisticated water management systems found across the region. Today, in an era of accelerating climate change, rapid population growth, and increasing urbanisation, the need for such innovation is more critical than ever. The MENA region is a global climate change hotspot, warming at twice the global average and facing projections of more frequent, intense and prolonged heatwaves and droughts. This environmental stress is compounded by socio-economic pressures, including some of the world’s highest population growth rates and a heavy reliance on water-intensive agriculture for food security. One of the most vital factors in navigating this complex landscape is the ability to accurately understand, predict and mitigate the impacts of droughts on water security and, consequently, on socio-economic development and geopolitical stability.
The “Day Zero” crisis in Cape Town, South Africa, serves as a stark modern example of this progression, where years of poor rainfall from 2015 to 2020 led to the near-total depletion of city reservoirs, threatening to turn off the taps for millions and causing severe economic disruption.
To frame the modern challenge, a drought is defined not simply as dryness, but as an extended period of water conditions falling significantly below the established norm for a particular area. This distinction is crucial; droughts are not unique to arid regions, as even humid areas such as those in Latin America and Indochina can also suffer from droughts if dry conditions persist. Conversely, the characteristically dry climate of the GCC is not considered a drought when it falls within normal variability. The true threat of drought unfolds through a cascading sequence of interconnected events. It begins with meteorological drought, a prolonged deficit in precipitation. If this persists, it can lead to an agricultural drought, where soil moisture becomes too low to support crops and rangelands, devastating rural livelihoods. This, in turn, can trigger a hydrological drought, characterised by a major reduction in surface water flows and groundwater levels, causing rivers, lakes, and wells to dry up. Finally, these physical water shortages can culminate in a socio-economic drought, where the disruption to water supply impacts health, social well-being, and economic activities, from energy production to industrial output. The “Day Zero” crisis in Cape Town, South Africa, serves as a stark modern example of this progression, where years of poor rainfall from 2015 to 2020 led to the near-total depletion of city reservoirs, threatening to turn off the taps for millions and causing severe economic disruption.
The Modern Toolkit for Drought Forecasting
Water scarcity modelling and drought forecasting are best understood within the broader framework of integrated water resources management. The process relies on a suite of advanced tools that transform raw data into actionable intelligence. The core challenge, especially in drought forecasting, is that its onset is often a slow, creeping phenomenon; it can take a long period of worsening conditions before a drought is officially recognised, by which time significant damage may have already occurred. Developing reliable early warning systems is therefore paramount, and a combination of advanced technologies is enhancing our ability to do just that.
Hydrological Models
These are sophisticated computer programmes that create a virtual representation of a watershed to simulate the movement of water. They vary in complexity, from simpler “black-box” algorithms that rely on statistical relationships between meteorological variables and runoff, without being explicitly grounded on physical processes, to highly complex, physically based models that simulate the intricate processes of soil infiltration, surface runoff, and groundwater recharge. Models like the Soil and Water Assessment Tool (SWAT) are particularly powerful, as they can also assess the impact of land use and agricultural practices on water quality and pollutant transport. An extensive review of over 3000 studies confirmed the immense value of using SWAT for managing water resources in arid and semi-arid irrigated watersheds common in the MENA region. Other tools, such as the Water Evaluation and Planning (WEAP) system, can operate in a forecasting mode, using meteorological forecasts to simulate how different water allocation policies would perform under future drought scenarios. Furthermore, System Dynamics modelling has been used to create interactive platforms that allow policymakers to simulate the consequences of their decisions as a virtual drought unfolds, as demonstrated by a hydro-economic model developed to manage groundwater sustainability in Abu Dhabi.
Models like the Soil and Water Assessment Tool (SWAT) are particularly powerful, as they can also assess the impact of land use and agricultural practices on water quality and pollutant transport.
Climate Models
Complementing these are global and regional climate models, which provide long-term projections of precipitation and temperature patterns that are essential for assessing future drought risk. A study using regional climate models from the RICCAR/CORDEX-MENA initiative and the Standardized Precipitation Index (SPI-3) projected significant shifts in seasonal drought patterns across the region under different greenhouse gas emissions scenarios (RCP4.5 and RCP8.5). The findings suggest that by the mid-twenty-first century, droughts are likely to intensify in the Moroccan Highlands and along the Mediterranean coast and the Mashreq region. To improve long-range forecasts, scientists also leverage teleconnection indices, which are patterns of large-scale sea surface temperature and atmospheric pressure that influence weather globally, such as the El Niño-Southern Oscillation (ENSO), the North Atlantic Oscillation (NAO), the Pacific Decadal Oscillation (PDO), and the Indian Ocean Dipole (IOD). A study in Saudi Arabia, for example, successfully linked the kingdom’s wet season to ENSO and PDO, creating a statistical basis for more reliable rainfall prediction.
Remote Sensing and Earth Observation
Perhaps the most transformative technology for drought monitoring has been satellites, which provide a continuous, wide-area view of key environmental variables, offering data for regions where ground-based measurements are sparse or inaccessible. For example, space-observed changes in vegetation health serve as a powerful leading indicator of agricultural drought, as plants in arid regions respond very quickly to a lack of rainfall. The Normalized Difference Vegetation Index (NDVI), derived from satellite imagery, is a globally used metric for monitoring vegetation health and has proven highly effective in identifying the onset and impact of drought on agriculture and pastoralism. The Food and Agriculture Organization (FAO) now provides country-level maps of NDVI to support national drought monitoring efforts. A study in Morocco showed how assimilating satellite-derived data, such as the Leaf Area Index (LAI), into land surface models like NASA’s Noah-MP could significantly improve the model’s ability to accurately represent vegetation growth and transpiration, thereby enhancing drought forecasting. Across MENA, however, the effectiveness of these tools is constrained by uneven data infrastructure, ranging from Morocco’s relatively established basin-agency networks to severe data scarcity in Yemen and parts of Libya. National security issues and weak data-sharing frameworks also limit access to transboundary aquifer information.
A landmark study using GRACE data revealed a sharp decline in groundwater storage across the Arabian Peninsula’s transboundary aquifer between 2002 and 2021, driven primarily by unsustainable agricultural extraction and urban expansion.
Beyond vegetation, the Gravity Recovery and Climate Experiment (GRACE/GRACE-FO), a joint NASA and German Aerospace Center satellite mission, has revolutionised our ability to monitor groundwater, which is a critical buffer during droughts. By measuring tiny changes in Earth’s gravity field, GRACE can track changes in large-scale water storage deep underground. A landmark study using GRACE data revealed a sharp decline in groundwater storage across the Arabian Peninsula’s transboundary aquifer between 2002 and 2021, driven primarily by unsustainable agricultural extraction and urban expansion.
Machine Learning and Artificial Intelligence
More recently, machine learning (ML) and artificial intelligence (AI) have emerged as powerful tools in drought prediction. Unlike traditional physical models, which require vast amounts of data and computational power, ML models excel at identifying complex patterns and statistical relationships within historical hydro-meteorological data to produce high-quality forecasts. Techniques like artificial neural networks (ANNs) and advanced Long Short-Term Memory (LSTM) networks are proving particularly effective. A study in Kuwait successfully used an ANN model to forecast droughts with good accuracy up to 24 months in advance. The same study has also developed an ML model that forecasts monthly urban water demand based on temperature as a proxy of extreme conditions. Another study in Iraq demonstrated the power of LSTM models, which were trained on a century-long climate record to produce a highly accurate drought outlook extending to 2060. This success stems from the model’s ability to capture the “long-term memory” in climate systems, such as slow-moving groundwater and ocean cycles, that drive drought evolution. For policy uptake, however, ML models must be paired with local technical capacity and basic interpretability measures to ensure that forecasts can be understood and trusted by water managers, especially in countries where institutional capacity is limited.
Outlook for Drought Forecasting and Water Management in MENA
Because MENA relies significantly on irrigated agriculture and food imports, improved drought forecasting has direct implications for food-system stability by enabling better crop planning, effective management of groundwater resources during dry spells, and early interventions to protect rangelands and pastoral livelihoods. Even modest gains in early warning can therefore help reduce exposure to agricultural shocks and food price volatility.
Governments must embrace adaptive management, using drought forecasts to dynamically update reservoir operations and groundwater extraction, pre-emptively adjust water allocations, and trigger mitigation plans before a crisis fully develops.
Looking ahead, the integration of these technologies into coherent policy and governance frameworks will be the defining challenge for water management in the MENA region. Four key priorities should guide this effort. First, there is an urgent need to strengthen data infrastructure, investing in both on-the-ground meteorological stations and regional data-sharing platforms to improve the accuracy of early warning systems. Second, the region must advance integrated modelling, developing frameworks that link hydrology, climate, agriculture, and economics to provide policymakers with a holistic view of how drought can cascade through their societies and economies. Third, governments must embrace adaptive management, using drought forecasts to dynamically update reservoir operations and groundwater extraction, pre-emptively adjust water allocations, and trigger mitigation plans before a crisis fully develops. Fourth, climate adaptation must be mainstreamed into all long-term planning, ensuring that new infrastructure projects and agricultural policies are designed to be resilient to the more frequent and intense droughts projected for the future.

Ultimately, the science and technology for forecasting drought are advancing at a remarkable pace. The enduring challenge, as it has been for millennia, lies in translating that knowledge into effective governance, proactive policy, and forward-looking investments to secure a water-resilient future for all.



Hamed Assaf is the Dean of the School of Engineering and Computing at the American University of Ras Al Khaimah.

### Sunlight Across Borders: Applying India’s Mini-Grid Models in the UAE

Introduction
This article examines India’s Pradhan Mantri Surya Ghar: Muft Bijli Yojana (PM Surya Ghar) as a landmark model for household solar energy adoption. Through an analysis of its institutional design, financial mechanisms, and early outcomes, the study identifies key success factors, including digital governance, subnational coordination, and targeted financial accessibility, alongside persistent challenges such as technological dependence, regulatory fragmentation, and limited technical literacy. The paper further explores the transferability of these lessons to the United Arab Emirates (UAE), where residential prosumer models remain underdeveloped. It argues that adopting elements of India’s framework could enhance the UAE’s Net Zero 2050 trajectory. The analysis highlights how cross-context learning between emerging economies can advance both technological innovation and citizen participation in the global energy transition.
The global transition to low-carbon and renewable energy (RE) sources has thus far been dominated by large-scale initiatives. In the context of electricity, the International Energy Agency (IEA) reported that renewables accounted for approximately 30 percent of global electricity generation as of 2023 and are projected to grow to 50 percent by 2030.
Although such projects provide ample benefits, they require significant investment and cross-sectoral collaboration. Additionally, they place tremendous pressure on the current energy infrastructure, such as national grid systems and distribution networks.
In parallel, a growing global consensus has recognised the value of multi-level approaches within energy systems, at the meso, micro, and household levels. Governments across Europe and North America have demonstrated the economic, environmental, and social benefits of such programmes.
This study focuses on India’s Pradhan Mantri Surya Ghar: Muft Bijli Yojana (PM Surya Ghar) scheme as a landmark policy designed to integrate affordability, citizen inclusion, and distributed solar generation.

What is the PM Surya Ghar Mufti Ghar: Mufti Bijlee Yojana Scheme?
Launched in 2024 by Prime Minister (PM) Narendra Modi, the PM Surya Ghar scheme represents the largest government-led coordinated global initiative to promote residential renewable energy (RE) generation through a nationwide prosumer model. Operating under the Ministry of New and Renewable Energy (MNRE) as part of India’s wider net-zero strategy by 2070, the programme allocates approximately US$9 billion to supply up to ten million households with rooftop solar systems by 2027. Recent reports suggest that up to one million households have already benefited within the first year of implementation.
Its design follows a multi-tiered subsidy and implementation framework encompassing three phases. First, participation is initiated through a centralised online portal integrated with state-level distribution companies (DISCOMs), which assess the technical feasibility of the individual household. Once approved, households engage certified vendors under the guidance and monitoring of the DISCOMs. The subsidy framework offers up to 60 percent financial assistance for systems up to 2 kW and 40 percent for systems between 2 and 3 kW. Furthermore, applicants seeking larger installations are eligible for concessional bank loans to cover additional expenses.
Lastly, beneficiaries receive up to 300 units of free electricity per month through a self-consumption offset model. Surplus power may be exported to the grid under state-specific metering arrangements. The scheme does not provide any guaranteed feed-in mechanism, primarily to discourage profit-based approaches, an issue that has affected similar schemes elsewhere.
The ambition, investment, scale, uptake, and ability to seamlessly integrate institutional, social, and technological innovations within a single, nationally coordinated framework are all reasons behind its consideration as a global landmark initiative. Its design embodies a decisive shift by the Indian government to reposition beneficiaries as active participants and co-creators of the national energy transition. Technically, through creative problem-solving and innovative implementation, the scheme has addressed many challenges associated with decentralised RE adoption. Socially, by targeting middle- and lower-income households through mass-scale deployment and transparency in governance, monitoring, and household selection processes, the scheme has provided a robust framework suited to emerging economies seeking a just and inclusive transition. At a policy level, the scheme demonstrates that national strategies can be effectively translated into state-level implementation without compromising fiscal efficiency or accountability. Promising uptake at the early stages provides ample evidence highlighting how inclusivity in design and digitalisation may be utilised to accelerate energy transitions in multiple contexts.

Success Factors and Challenges of the PM Surya Ghar Scheme
The relatively early success of the scheme can be attributed to two main elements: (1) effective coordination at the subnational levels and (2) digital governance. Utilisation of a national portal integrated with state-level DISCOMs has enhanced accessibility while streamlining approval and implementation processes. Moreover, digitisation has improved accountability through transparency across administrative and financial operations.
Equally significant is the scheme’s ability to create targeted financial accessibility through reduced installation costs and ongoing utility savings while maintaining market integrity. Multi-level public awareness campaigns and strong political visibility have catalysed increased awareness, normalisation, and encouragement of household participation in the prosumer model. Collectively, these elements have fostered an inclusive policy environment that accelerates India’s transition through household inclusion whilst maintaining administrative efficiency and transparency.
Despite these achievements, the scheme’s effectiveness has been constrained by behavioural, institutional, and technical challenges. A key limitation lies in its reliance on state-level implementation capacity, where disparities in infrastructure and administrative efficiency have led to uneven deployment. For example, Gujarat is widely regarded as a model state for RE adoption, driven by strong state policy alignment and efficient DISCOM coordination. In contrast, states such as Bihar face significant challenges, including limited resources, unreliable power grids, and comparatively weaker DISCOMs, which have led to low adoption rates and diminished public confidence in the programme.
Building on these disparities, the absence of a unified regulatory framework regarding interconnectivity and net-metering has resulted in variations in the mechanisms that underpin billing procedures and feed-in compensations. This fragmented framework creates long-term uncertainties that complicate uptake and weaken long-term engagement after the programme is concluded.
Another challenge concerns India’s overreliance on imported solar technologies, exposing the scheme to market volatility and uncertain long-term sustainability. Although domestic manufacturing capacity has expanded and is expected to reach approximately 160 GW by 2030, imports still account for over 60 percent of prosumer-based installations. This dependence highlights the challenge of balancing accelerated uptake, as the scheme entails, alongside technological self-reliance.
Lastly, limitations around technical literacy and maintenance capabilities remain significant. The absence of formal training mechanisms and inadequate post-installation support often results in suboptimal performance. These issues have been identified as major barriers that inhibit scalability in prosumer-based solar uptake in India. The absence of these mechanisms risks reducing households to passive beneficiaries as opposed to active participants, undermining the social inclusion objectives of the scheme.

Transferability to the UAE context
Although the UAE has made substantial progress towards its net-zero targets, it has predominantly overlooked the prosumer model and residential rooftop approach, with distributed generation representing less than 1 percent of total installed capacity. Although flagship initiatives such as Noor Abu Dhabi and Shams Dubai exist, participation has remained largely confined to commercial and governmental buildings rather than households. The UAE is therefore ideally positioned to draw lessons from the Indian experience and adapt them to suit its own domestic context in the next phase of its energy transition.
A primary lesson concerns factors such as institutional coordination and digital governance. India’s integration of an online national portal with state-level DISCOMs has been integral in streamlining procedures and improving access. In comparison, establishing a federal digital platform would enable the UAE to strengthen coordination between its state-level utility providers. This approach would not only reduce bureaucratic complexities but also encourage household participation.
A second transferable lesson concerns the financial architecture of the scheme. The introduction of similar capacity-based loans and subsidies that reduce the financial burden on households, coupled with guaranteed export mechanisms under a unified metering framework, would directly align household adoption with the UAE’s Net Zero 2050 targets. Integrating this model into existing public housing schemes could leverage economies of scale and enable coordinated rollouts, allowing collective, area-based transitions rather than fragmented individual approaches.
Finally, the UAE can draw from India’s experience by integrating formal solar training programmes within existing vocational and Emiratisation channels. Strengthening local technical expertise would not only enhance system reliability and maintenance standards but also deepen public engagement and environmental awareness, reinforcing the human dimension of the energy transition. Such initiatives would further embed renewable energy within the UAE’s broader socio-technical and cultural frameworks that are central to sustainable development.

Concluding Remarks
The PM Surya Ghar scheme exemplifies how the integration of technological investment, inclusive governance, and public engagement can transform passive stakeholders into active agents of the energy transition at the household level. Its lessons offer valuable insights for the UAE as it advances towards its own Net Zero 2050 objectives. By adapting core elements such as digitisation, institutional coordination, and financial accessibility, while addressing gaps in skill development, a comparable framework may be introduced in the UAE that accelerates its own transition through deepening citizen participation in shaping a sustainable and collective energy future.



Mohamed Zarouni is a lecturer and researcher at the Anwar Gargash Diplomatic Academy.

### GCC Joint Defence Integration and the US Factor

“The security of the GCC states is indivisible." This notion of collective security has been repeated by GCC leaders and His Excellency Mr Jasem Mohamed Albudaiwi, Secretary General of the Gulf Cooperation Council (GCC), more than ever in recent months. For example, it was reiterated during the GCC Supreme Council’s 46th session in Bahrain on 3 December 2025, the 22nd session of the Joint Defence Council, held on 25 November 2025, in Kuwait, and notably, in the joint meeting for the strategic partnership between the GCC and the United States (US), held on 24 September 2025 on the sidelines of the 80th session of the United Nations General Assembly (UNGA) in New York.
The repetition of the statement in New York is particularly notable because the GCC is reportedly looking towards establishing a joint defensive shield for its member states in coordination with the US. Albudaiwi stated in December that the initiative, referred to as the ‘Joint Gulf Missile Defence Shield’, still requires resolving “many technical aspects,” and that regular meetings are underway with the US to finalise the defensive shield’s structure and operational mechanisms. It is therefore foreseeable that this could lead to the US participating in the large-scale joint military exercise in the Gulf scheduled for early 2027.
Ongoing coordination with the US exemplifies the constructive role that external agreements with overseas partners can play for the GCC as it seeks deeper defence integration. While this may start with the US (reasons outlined later), there is no reason to dismiss the prospect of other US-anchored partners joining in on defence cooperation with the GCC as a bloc. This indicates that the GCC is being propelled into further joint defence action and integration, replacing some of the momentum for unilateral efforts on this front.

GCC Defence Integration Progress
In 2013, the GCC leaders solidified the strongest move yet towards defence integration. The summit that year in Kuwait endorsed “the formation of a joint military command for the Gulf Cooperation Council states, as well as the establishment of a Gulf academy for strategic and security studies.” This was the most significant development since the 1982 formation of the Peninsula Shield Force and the Joint Defence Agreement at the turn of this century.

To direct the Unified Military Command to take the necessary executive measures to activate joint defence mechanisms and Gulf deterrence capabilities.
The Agreement has now formed the basis of the latest impetus for GCC defence integration, prompted by the Israeli and Iranian attacks on Qatar in 2025. An extraordinary session of the GCC Joint Defence Council, following the Israeli attack in September, convened in Doha “to direct the Unified Military Command to take the necessary executive measures to activate joint defence mechanisms and Gulf deterrence capabilities”. They decided to: increase intelligence exchanges; transmit air situation across all operation centres of the GCC states; accelerate the development of the Early Warning System against Ballistic Missiles; update joint defence plans; and conduct joint exercises. However, a lack of interoperability between the GCC militaries is a major challenge reflected by their consistent procurement of weapons systems with “subtle but significant” differences in hardware and software.
This is where US coordination with the bloc’s defence integration initiatives is necessary. Not only does it reflect the GCC’s own Vision to “strengthen internal capabilities, deepen regional and international partnerships, and support cooperation and coordination mechanisms at regional and international levels”, but it has become a consquence of relying on the US for technical maintenance and the boosting of interoperability of the differing weapons systems of the GCC – by and large imported from the US itself. Indeed, as has been noted, the GCC “needs the US to implement regional integration” because the US provides “the organization, the technology and the training”.

The GCC “needs the US to implement regional integration” because the US provides “the organization, the technology and the training”.
The US Discussions with the GCC
This paradigm shift by the US from the role of “security guarantor” to “security integrator” may have solidified since the 2015 Camp David, which convened between former US President Obama and the GCC leaders. The summit was particularly significant because the agreement to develop a region-wide ballistic missile defence capability received Washington’s support. Not only was this shift a result of discussions at a Gulf leadership level, but in 2015, the US Centre for Naval Analyses released a report following a Track 1.5 forum that brought together officials, scholars, and experts, including those from the Gulf. One outcome of this convening, as per the report, was that participants wanted the US relations with the GCC states to move towards helping them develop their own defence capabilities.
Given that GCC defence integration with the US will focus on knowledge transfer and capacity-building, it aims to achieve the common goal of the GCC states developing their own capabilities. This has been reiterated in the three US-GCC Defence Working Groups held to date, kick-started by the Biden administration in 2022 in the spirit of the 2015 Camp David discussions and continued through to 2024, with none yet since President Trump’s second term began. Indeed, even though Trump’s first term came with high hopes he would continue pushing for the GCC interoperable ballistic missile defence architecture, he has not been as adamant as his Democrat counterparts in pushing this agenda – at least not through public statements or convenings.

When compared to other Arab regional institutions, “the GCC remains the most successful experiment in integration”, that is, “even if its success is incomplete.” 
Instead, President Trump’s office terms have seen the Gulf States continue the trend of bilateral security arrangements with the US rather than multilateral ones. In September 2025, he signed an executive order titled "Assuring the Security of the State of Qatar." This order guarantees that the US will treat any attack on Qatar as a threat to its own national security. It also establishes a framework for joint contingency planning between the two countries. Additionally, in 2019, a Defence Cooperation Agreement was implemented between the US and the United Arab Emirates, following its signing in 2017. President Trump also led efforts to a Strategic Framework Agreement with Oman for the US Navy's regular access to the Duqm and Salalah ports. While these efforts and the ongoing discussions with Saudi Arabia for another bilateral agreement are commendable, they fall short of multilateral efforts, which may reflect slow progress on this front for the years to come under a Trump administration – contrary to the GCC Secretary General’s stated hopes.

Conclusion 
In conclusion, when compared to other Arab regional institutions, “the GCC remains the most successful experiment in integration”, that is, “even if its success is incomplete.” The attacks on Qatar highlighted the shortcomings of previous US administrations in addressing the defence interoperability issues within the Gulf Cooperation Council (GCC). However, US policymakers will face challenges in realising the renewed aspirations of the GCC for a joint defence shield without the support of President Trump, who needs to agree to the US becoming a security integrator.
If the GCC can renew a US push for coordination with the bloc to overcome interoperability challenges while simultaneously cultivating the political will for multilateral action, it may move beyond episodic cooperation toward a durable, collective defence posture. The success of this trajectory will allow the GCC to deepen its integration moving forward, not just with the US, but also with like-minded US partners.



Mahdi Ghuloom is a Junior Fellow at the Observer Research Foundation – Middle East

### A $6 LNG Window: Mapping India’s Short-Term Gas Demand Potential

The global gas market is entering a structurally softer phase. A wave of liquefaction additions through the second half of the 2020s from the US, Qatar, and Africa in 2026–2028, coupled with slower-than-expected demand growth in Europe and plateauing consumption in China, has reshaped the near-term price landscape. As the Oxford Institute for Energy Studies (OIES) report argues, the market is now heading toward a more durable period of US$6/MMBtu LNG by the late 2020s.
For India, which has lived through extreme volatility, including spot Liquefied Natural Gas (LNG) above US$30/MMBtu in 2021–22 and significant industrial demand destruction, this shift is more than a macro trend. It represents a rare window to reinforce gas’s place in the energy system after years of stalled growth.
With gas making up just 6.2 percent of India’s primary energy mix in 2024, the question is how much short-term demand can India realistically add in a US$6 world? This article focuses on that near-term assessment, extending through 2035.

India’s Starting Point: A Constrained but Responsive Market
India’s gas sector has long been characterised by asymmetries:


 	Stagnant domestic production (~37–38 bcm), which has kept India structurally dependent on LNG imports for meeting incremental demand and leaves little buffer during price spikes
 	Under-utilised regasification terminals (56 percent in 2024), reflecting not a lack of import capacity but pipeline gaps, uneven market development, and limited downstream offtake
 	Policy-driven prioritisation of Administered Price Mechanism (APM) gas for fertiliser and city gas distribution, which shields priority sectors but leaves industry, power, and petrochemicals reliant on higher-cost LNG

In 2024, total supply reached about 70 bcm, split evenly between domestic production and LNG. However, despite ambitions to raise gas’s share to 15 percent of the energy mix by 2030, most demand segments remain either structurally constrained or highly price-sensitive, underscoring why the US$6 benchmark matters.

Where India Can Respond Quickly 
Short-term gas demand hinges on switchability, the ability of sectors to revert from alternate fuels (oil, petcoke, coal, Liquefied Petroleum Gas or LPG) to gas once prices soften. The table below outlines historical sensitivities, but the core insight is clear: India has pockets of highly responsive demand, though they are unevenly distributed.

Source: Author’s Creation
Strong, rapid upside appears primarily in industrial clusters; City Gas Distribution (CGD) commercial and transport segments; and select refinery and petrochemical operations where fuel and feedstock switching is feasible. Peaking power generation can also respond, though only in short, weather or grid-driven bursts rather than sustained runs. Fertiliser, however, remains structurally insulated, APM-fed and subsidy-protected, offering little short-term elasticity.
Where the Gains Come From 

Source: Author’s Creation 

1. Industry: The Fastest Response Zone
If spot LNG stabilises near US$6 in the early 2030s, industry is likely to show the quickest and broadest short-term rebound, especially within existing pipeline and Regasified LNG (RLNG) supply zones. Lower prices materially improve the economics of Piped Natural Gas (PNG) and RLNG for ceramics, glass, textiles, and small manufacturing clusters in Gujarat, Maharashtra, and parts of western Uttar Pradesh, reversing portions of the recent shift toward propane, LPG, and fuel oil.
However, this response depends on effective pass-through of lower prices (including state taxes and levies), RLNG availability at city gates, and timely last-mile build-out. Any move back toward higher LNG prices would quickly cap gains.
A US$6 window is therefore a temporary breather, lifting heat-intensive clusters but leaving structurally coal-anchored steel largely unchanged. The outcome is an opportunistic, uneven rebound rather than a broad-based industrial shift.

2. City Gas Distribution (CGD): High Elasticity When Pass-Through Works
Compressed Natural Gas (CNG) and commercial PNG respond quickly when city gas companies can pass through lower feedstock costs. The challenge is that priority segments continue to receive APM gas, while non-priority customers depend largely on LNG. Thus, CGD’s switchability depends on proper tariff pass-through, stable margins for city gas companies, and on ensuring LNG price declines reach end-users.
At US$6 LNG, the immediate gains arise from higher utilisation of existing PNG networks, especially among small commercial and light-industrial users, and stronger uptake of CNG where low-cost RLNG can offset any APM allocation changes. Most of this upside sits in CNG vehicles and commercial PNG, while household PNG grows more slowly due to connection rollout timelines.

3. Petrochemicals & Refineries: Selective Substitution
Petrochemicals and refineries show downward elasticity; switching away from gas when LNG is expensive and expanding only modestly when prices soften. During 2021–23, several facilities cut gas use or substituted toward alternate fuels, while refineries focused gas use on essential hydrogen units.
If LNG settles near US$6, variable costs improve for hydrogen production and fired heaters, encouraging a partial shift back to gas. Gains remain moderate, constrained by India’s naphtha-based cracker slate, competing off-gases, infrastructure limits, and emerging green-hydrogen obligations.
Overall, a US$6 scenario delivers a meaningful but not transformative uplift, bounded by structural and policy constraints.

4. Power: Episodic, Not Structural
India’s gas-fired power plants operate at very low utilisation, with many units stranded or running minimally. Short-term gains appear only during weather-driven peaks, renewable dips, or coal logistics stresses.
The International Energy Agency (IEA) estimates that fuel costs would need to fall to US$5–5.75/MMBtu for gas-based power to be competitive on variable cost. Some stranded capacity can re-enter dispatch during seasonal shortages or grid-balancing events. But utilisation remains contingent on temporary system stresses, not market fundamentals. No new large-scale gas-fired capacity is planned through at least 2032, due to stranded-asset risks, and policy momentum remains firmly behind renewables, storage, and more flexible coal operations.
Under a US$6 LNG environment, gas in power generation produces episodic spikes rather than sustained growth. Even during peaks, total use remains bounded within a narrow range, consistent with OIES projections.
In effect, US$6 LNG makes the sector more responsive but not structurally different.

Structural Constraints That Limit Short-Term Uptake 
India’s near-term switchable potential is meaningful, but it is also constrained by fundamentals that US$6 gas alone cannot resolve:


 	APM prioritisation leaves little LNG room in fertiliser and PNG-domestic.
 	Pipeline gaps reduce the ability of LNG to reach coal-dependent states.
 	Underutilised regas capacity reflects last-mile constraints, not import availability.
 	EV penetration caps long-term CNG growth in transport.
 	Rising long-term LNG contracts (from 22 to 27 MTPA by 2026) reduce short-term flexibility in capturing cheap spot cargoes, as a larger share of India’s import portfolio becomes committed under fixed or formula-linked term deals.

In sum, India can respond to a US$6 world, but only within the limits of infrastructure, regulation, and sector-specific rigidities. 

Conclusion: A Short-Term Opening, Not a Structural Shift 
Major forecasting agencies, including the Petroleum and Natural Gas Regulatory Board (PNGRB), IEA, and OIES, converge on a broadly consistent picture for 2030, with national gas demand expected to fall within a relatively narrow corridor (see Figure 1). Despite differing methodologies and long-term assumptions, these projections show similar baseline trajectories for the next decade.
Sectoral sensitivity analysis suggests that if spot LNG prices soften to around US$6 per MMBtu, India could register a short-term uplift above whichever baseline materialises, driven primarily by industry, CGD, and select refinery processes.
Figure 1: India Natural Gas Demand Projections

Source: Author’s Creation
Such elasticity, however, is highly dependent on downstream conditions. Last-mile pipeline connectivity and CGD networks’ ability to absorb and distribute cheaper RLNG are equally critical. Any drift back toward US$8–9 per MMBtu would erode much of the short-term swing, especially in industry and CGD, where demand is most price-sensitive.
In effect, a US$6 spot LNG environment should be viewed as a supportive breather, one that could lift India’s 2030 gas use by roughly 5–10 percent above the PNGRB’s  Good-to-Go (GtG) baseline (which assumes moderate growth based on current trends, existing commitments, and expected developments), but not one that alters the country’s longer-term trajectory. The upside is meaningful, yet incremental rather than transformative.
Unlocking any larger structural shift will depend on pipeline expansion, tariff and allocation reforms, better regasification utilisation, and calibrated procurement strategies that balance term and spot LNG.



This analysis draws on the author’s contribution to the OIES report, The Global Outlook for Gas Demand in a $6 World. The full report can be accessed here.



Parul Bakshi is Fellow – Energy and Climate at the Observer Research Foundation Middle East.

### Challenges to Breaking China’s Critical Minerals Grip

The imposition of export controls that China aimed at Skydio in October 2024 may be considered the first most significant version of Beijing calibrating its export-control regime to impose a high cost on companies rather than reacting symbolically to perceived affronts from Washington. The curtailment was targeted and designed to inflict maximum disruption along crucial supply chains of US-manufactured drones, which incidentally were meant for replenishing Ukrainian war efforts. Despite China’s attempt to weaponise  supply chains of critical minerals in 2010 vis-à-vis the Japanese, countries around the world appear to have grasped the seriousness of it only after  Beijing reused this tactic in late 2024  with the Skydio episode. Beijing doubled down on this approach in April 2025 by imposing extremely effective bottlenecks in rare earth supply chains in response to Trump’s imposition of tariffs on China.

The discretionary use of export controls has become a point of strategic leverage in Beijing’s economic statecraft. The impact has been immediate, and it has been consequential. A slew of national critical minerals strategy upgrades and international agreements followed globally in response to China’s weaponisation of the critical minerals value chain. However, although the resultant initiatives by countries domestically and in concert with partners and allies marked a change in the status quo, they do not drastically alter the ground reality.

The International Energy Agency’s annual critical minerals outlook suggests that, despite global efforts seeking to de-risk supply chains through diversification, by 2035, China’s share of global processing capabilities, particularly of Rare Earth Elements(REEs), is likely to reduce only marginally to 82 percent from the current 90 percent it stands at. It is crucial to understand that China’s hold over critical mineral resources, particularly its sheer monopoly over processing and refining, is made comprehensive through compelling control across chokepoints along the entire value chain of critical minerals.

The first case in point is the consideration that the amount of Chinese investment across geographies in critical mineral projects globally continues to dwarf the substantive efforts at acquisition being made by other countries, whether individually or in partnership. In the first half of 2025 alone, for instance, the Chinese have committed nearly US$25 billion to copper and aluminium projects in Kazakhstan, country re-appearing in great power calculations based on its impressive resource endowment. Again, China’s access and control over Guinea’s Simadou, the world’s largest mining project, which expects to add nearly 1.2 million tonnes of alumina per year to the global market by the end of 2027, is an important lever in the global competition over critical minerals. Notably, this mine contains high-quality grade of iron ore. Such grades of ore are a necessary raw material for green steel, a product central to the energy transition and decarbonisation drives of heavy-duty and hard-to-abate sectors. By virtue of these two mammoth investments alone, the Chinese continue to single-handedly capture global market share in the domain for the foreseeable future.

Chinese majority ownership stake over the mines of the DRC, Indonesia, Chile, Argentina and Kazakhstan continues to shape the story of how Beijing has established its dominance in the supply chain of critical minerals well beyond its own borders. Importantly, this substantial market share also allows it to substantially undercut price points by flooding the markets with much cheaper and higher quality Chinese-produced alumina and, thereafter, green steel, which is being seen as an important input for effective energy transitions in industry.

Long permitting timelines and complex regulatory compliance requirements pose the next set of challenges for this hope of diversification. Mines, on average, take roughly 15.5 years from the point of discovery to viable production. Acquiring financing through this long gestation period can pose a problem given that the belated Return on Investments (RoIs) is further complicated by issues of domestic political turmoil and local conflicts. Additionally, regulatory and permitting challenges exist across countries that are seekingto expand their mining base. Human resources poses another challenge with skilling being a time-consuming process. When considering the investments and acquisitions that countries, whether through public or private ownership,  have been making in mines globally, the real-time implications of each of these bottlenecks are substantial.

India’s recent efforts in this direction illustrates this clearly. The Vedanta group’s CopperTech Metals’ ownership of the high-ore grade Zambian Konkola Copper mines, which aims for an increase from the present 140,000 tonnes to 500,000 tonnes post 2031, is the kind of meaningful development that will eventually begin diversifying the critical minerals supply chain. However, while considering the Indian government’s acquisition of rights to explore copper and cobalt in Zambia in early 2025, one must also factor Zambia’s 34-year average of the time taken from project conception to production. The US itself needs a whopping 29 years for the development of mines, at the present rate of permitting timelines. With such timelines, ending Chinese monopoly is an impractical expectation in the short to medium term. Notably, however, there are concerted efforts underway in countries like Canada to directly address this timeline issue.

The resilience of finance and the risk appetite of countries pose a third set of challenges. Countries such as Australia, Canada, Japan, the US, South Korea and Saudi Arabia have begun investing in the midstream and downstream segments for critical minerals. However, refining and processing of critical minerals is not an industry trajectory that has a linear growth story. Non-market risks have substantial implications for these investments. Instability anywhere along the supply chain will lead to immediate and unavoidable price spikes, especially since a bulk of the investments in these countries presently will be in the form of sunk costs with modest returns. China’s pain threshold and its ability to both mobilise and underwrite its industries by fiat is unique to it. It is not something any other country has been able to actualise as a model of doing business at scale. The critical minerals industry in countries looking to diversify is unlikely to be an exception to this trend.

Finally, resource nationalism within resource-rich states, poses a considerable bottleneck for the newer actors in the domain. The growing local content demands within these countries, has further complicated the efforts at diversification of the critical minerals value-chain.
Improving Diversification Through Coordination
Coordinating sourcing strategies with trusted partners to ensure demand signalling and the long-term filling of order books could prove effective. For countries that are willing to invest in expanding their mining and processing prowess, such an assurance could prove to be a game-changer. Canada, for instance, with its central position across reserves to extraction to refining, could establish a robust supply chain diversification by coordinating and committing to work with the Quad countries which already have inroads in countries such as Malaysia and Indonesia.

Timely engagement with resource-rich countries such as the DRC by offering models of cooperation that are more mindful of local content interests and focused on downstream capacity building of these countries will set them apart from the Chinese model and will prove helpful .

Parallely, in the stockpiling of critical minerals, a more systematic approach to identifying and codifying the specific salience of each of these minerals to the particular national security needs of each partner must be prioritised.

By focusing systematically on recycling, countries like India, Japan, France and the UAE, all of which have already begun coordinating on this issue, could drive effective diversification by developing industrial-scale processes to recover REE traces from e-waste.

Development of alternative chemistries and the adoption of AI to fine-tune mining techniques could also directly challenge China’s human resource expertise in the domain in the medium to long-term.

In seeking to address China’s dominance in the sector, the foundations that underwrite its control must first be appreciated. Until the 1980s, the US was the global leader in REE production. The reasons the US ceded its position to  China remain relevant to this day: this sector comes with heavy environmental costs; has a debilitating impact on local water safety; remains labour intensive; and is capital-heavy with longer duration RoIs. Regardless of the national and global conversations around the urgent need for diversification, these factors are based on the hard facts of current technologies and not the more transient determinant of political will. To believe that any meaningful diversification would come anytime soon is nothing but a mark of wishful thinking.



Cauvery Ganapathy is a Non-Resident Fellow at the Observer Research Foundation- Middle East.

### Catalysing the GCC’s Waste-to-Energy Prospects for Agriculture

The Gulf Cooperation Council (GCC) is projected to experience exponential population growth in the coming years, which will undoubtedly compound waste generation. In parallel, the region is accelerating domestic food production efforts to meet growing demand and enhance food security, resulting in increases in agricultural residues and food waste. These trends are driven by factors such as rising affluence, cultural preferences towards consuming new goods, and the short shelf-lives of imported food. To illustrate, in 2023, the amount of agricultural waste collected in GCC countries increased by 44 percent, while the amount of food waste in 2022 averaged 150kg per capita annually, surpassing the global average by 14 percent.
Waste-to-Energy (WtE) refers to the process of generating electricity or heat from waste treatment. While incineration tends to be more prevalent, anaerobic digestion (AD) and pyrolysis are commonly deployed to convert organic matter into biogas and bio-fertiliser. Converting waste into energy presents several co-benefits, namely strategic waste management enforcement, landfill diversion, material recovery, resource looping, and contributions to renewable energy. Given converging national commitments towards promoting circular economy principles and reducing food loss and waste, WtE through AD and pyrolysis offers a nascent yet economically viable solution to address agriculture and food waste, meet facility-level energy needs, and promote regenerative agriculture. This article assesses the evolving WtE landscape across the Gulf, evaluating opportunities and key challenges to leverage WtE within the region’s rapidly expanding agriculture sector.

Converging National Policies Enable Catalysation of WtE Growth
All six GCC countries have established targets for renewable energy production, but WtE currently comprises a tiny fraction of this output. Harnessing WtE conversion potential first requires developing a strong foundation for waste collection, separation, and management. Despite progress, the GCC countries’ waste management strategies are greatly limited to landfilling, which currently processes more than 85 percent of the region’s waste. Currently, less than 20 percent of solid waste is adequately treated, and less than 5 percent is recycled. Food waste comprises the largest portion sent to landfills and is the primary source of methane. This strategy will also likely falter in the long term for countries like Qatar, Kuwait, and Bahrain, which have limited land capacity.
A handful of GCC countries have instituted converging waste, energy, and circular economy policy commitments, enabling WtE to gain traction over the last five years. Well-established and commercial-scale plants exist in the UAE and Qatar and are rapidly materialising in Saudi Arabia, Bahrain, Oman, and Kuwait. These plants largely convert municipal solid waste (MSW), which includes organic food waste, to electricity through incineration, a process that releases carbon emissions from burning, albeit to a lesser extent than landfilling.




Country
Waste Policy
Energy Policy
Circular Economy Policy
Food Security Policy
WtE Facilities


UAE
National waste management regulations
UAE’s Energy Strategy 2050 
UAE Circular Economy Policy 2021 - 2031
UAE National Food Security Strategy 2051 aims to reduce food waste by 50 percent by 2030
Sharjah:  commercial-scale 30-MW WtE plant launched in 2022

Dubai: 200-MW WtE facility to power more than 120,000 households)

Abu Dhabi: 100-MW WtE facility in development to power nearly 20,000 households


Saudi Arabia
Saudi Green Initiative (SG) targets 94 percent landfill-waste diversion by 2035
Renewable Vision 2030 aims to produce 3GW of WtE
Saudi Arabia Circular Carbon Economy (CCE) Framework
Saudi Arabia Food Security Strategy and Implementation Plan up to 2030

Food waste accounts for 40-50 percent of the country’s waste
In development:  Riyadh (200MW), Jeddah (100MW), NEOM


Qatar
Qatar Third National Development Strategy (2024 - 2030) aims to reduce waste generation and increase recycling
Qatar National Renewable Energy Policy promotes energy diversification
Qatar National Vision 2030  and Third National Development Strategy
Qatar National Food Security Strategy 2030 and State Food Security Project

aims to address 55 -70 percent of food loss and waste through sustainable solutions
Operational: 34-MW WtE facility operating in Mesaieed (since 2011)


Kuwait
Kuwait National Waste Management Strategy (KNWMS 2040)   aims for 20 percent energy recovery from sewage sludge
Kuwait Energy Diversification Objectives
Kuwait Environment Public Authority 
Kuwait Supreme National Committee for Strengthening the Food, Drug, and Water Security System (August 2022)
In development: 100-MW Al  Kabd WtE plant, and RDF Plant in Mina Abdullah

 


Oman
New Waste Management Law
Oman Energy Master Plan 2040
Oman Vision 2040 
Oman Sustainable Agriculture and Rural Development Strategy towards 2040
In development: 95-100 MW Barka WtE (operational by 2031)

Also deploys landfill gas capture to convert methane


Bahrain
Bahrain National Waste Management Strategy (2018)
National Renewable Energy Plan  targets biogas production and landfill gas recovery
National Action Plan, Blueprint Bahrain
Bahrain National Initiative for Agricultural Development
In development: Askar 25MW biopower project



Source: Compiled by the author from various sources

Expanding WtE in the GCC’s Agriculture Sector 
The GCC countries have set forth national vision and food security strategies outlining commitments towards accelerating domestic food production and food waste reduction initiatives. Agriculture, food, and beverage facilities should consider implementing on-site, localised and integrated AD and pyrolysis systems through industrial symbiosis to extend the life of scarce resources and encourage closed-loop processes. GCC countries are increasingly leveraging AgriTechnologies to boost resource efficiency amidst water and climate constraints, but this can be energy-intensive. Therefore, converting food residue into biogas through anaerobic digestion (AD), a process where micro-organisms decompose organic matter to produce biogas, can help meet facility-level energy needs. Pyrolysis converts organic waste and digestate byproducts from AD into biofuel or biochar, which strengthens soil fertility and water retention, reducing irrigation needs. The GCC’s existing crop commodities (date palms, cereal, fruits and vegetables) and animal waste are all suitable and energy-rich feedstock inputs for AD and pyrolysis. One study notes that GCC crop residues offer 1.68 Mtpa of untapped energy, while animal waste offers 25.52 Mtpa, offsetting up to 13.35 percent of current electricity consumption. AD also has a lower environmental impact compared to incineration. 
Compared to stand-alone operations, on-site integrated AD and pyrolysis systems offer more cost-effective, water- and energy-efficient solutions. Electricity generated from biogas is minimal compared to conventional sources if pursued on a larger scale. Additionally, unlike MSW feedstock, agricultural waste quantities may fluctuate depending on the harvest season. However, when paired with renewables like solar, biogas can help meet facility-level electricity demand. On-site infrastructure would save resources allocated towards transferring waste for sorting and complement reuse methods like composting. Challenges include managing the heterogeneity of food waste, which risks influencing the quality of feedstock that can be converted into biogas.
Diverting organic waste from landfills would also help reduce water contamination, while biochar products would help reduce dependence on water-intensive synthetic fertilisers. Combining these processes with growing efforts to leverage local water treatment and reuse systems for the agriculture sector would reduce pressure on constrained water systems. Ensuring compliance with water quality standards and monitoring and deploying alongside comprehensive awareness campaigns would prevent unwanted contamination and ease concerns that inhibit technology uptake in the region.
Despite the proven technical feasibility of generating biogas from AD across Oman, Qatar, and Kuwait, the strategy remains heavily underutilised. The potential electricity generated from Oman’s organic waste could offset up to 22.5 percent of the country’s total energy consumption, yet it is currently managed through landfills. In Qatar, the traditionally landfilled organic fraction of municipal solid waste, livestock manure, and sewage sludge waste can all be valorised through AD to generate 3.5 million MWh of surplus clean energy. In Kuwait, food waste is the most energy-rich feedstock, yet biogas contributes to zero percent of the country’s renewable footprint.
Scholars note the economic feasibility of AD in the UAE, Saudi Arabia, and Bahrain. In the UAE, AD matches the economic feasibility of incineration. In Saudi Arabia, an abundance of food waste and low annual operational costs make biomethanation (a form of AD) a suitable option. The levelised cost of energy produced from biomass is also comparable to that of solar in Saudi Arabia. In Bahrain, establishing an AD plant to treat biodegradable waste is expected to generate 213.3 GWh/y with approximate annual revenues of US$4.2 million a year from electricity sales.
Organisations like ReFarm in Dubai have taken the initiative to integrate high-tech food waste recycling in their closed-loop food production system. ReFarm is a waste-to-value gigafarm producing more than 3 million kg of food powered with energy produced from incinerating its solid waste. Khalifa University has also researched the use of pyrolysis to transform green farm waste into biochar, which helps sequester atmospheric carbon dioxide when reused in soil, contributing to regenerative agriculture. The Gulf can also learn from Egypt, where companies like Wastilizer convert animal waste into water, biogas and plant fertiliser, enhancing crop and water quality. As domestic agricultural production grows, there is unharnessed potential to leverage on-site WtE in agricultural centres.

Next Steps to Capitalise on the Gulf’s WtE Potential
Implementing and scaling pilots remains a challenging feat since developing WtE remains a highly capital-intensive process, competing against lower-cost traditional landfilling methods in the immediate term. Many regulatory frameworks and financial incentive structures are still emerging and lack consistency. Small-scale initiatives would benefit from state-led tax incentives for the private sector, carbon credit allowances, and increasing landfill gate fees to increase appeal for AD development in the GCC. Financial feasibility would increase if combined with strict waste disposal regulations, strengthened integration between research, policy, and development, and the development of markets for biochar and digestate fertiliser. Establishing joint ventures and de-risking innovation through blended finance, like green sukuk, would also help scale efforts.
Effective waste-to-energy operations also hinge on receiving consistent and high-quality feedstock sources to maximise energy generation. However, the efficiency of collection and sorting processes, as well as the quality and scale of logistics and agricultural infrastructure, currently vary among GCC countries, limiting the consistency of feedstock quality. While countries like the UAE lead in food value chain innovations, others like Oman could benefit from integrated capacity building to facilitate technology adoption by small-scale farmers.
Ensuring consistent feedstock for WtE should not overshadow the underlying need to regulate unsustainable consumption practices. Thus, prevention, reuse, and recycling should remain at the forefront of sustainable waste practices. WtE should incentivise strengthening implementation of stronger public awareness, recycling, and waste segregation programmes to help cultivate better habits, facilitate and improve waste operations.

Conclusion 
WtE is rapidly gaining momentum in the Gulf, with the potential to become a highly lucrative industry. Organic waste from food comprises a significant component of MSW but remains highly underutilised in Gulf countries. As the GCC strategises improvements in waste management practices and feasibility studies continue to highlight the versatility of WtE in the region, this solution emerges as a strong contender to promote closed-loop economies, especially for expanding sectors like agriculture. Catalysing WtE in the agricultural sector to reap the strategic benefits for the water-energy-food nexus will require harmonising waste management and water reuse standards across the GCC and reducing upfront financing barriers through public-private initiatives.



Leigh Mante is a Junior Fellow, Climate and Energy at ORF Middle East.

### The Zombie Rentier: Is Libya’s Central Bank Crisis Recovery a Statistical Fallacy?

Over a year has passed since Libya’s acute institutional rupture of August 2024, when the struggle for control of the Central Bank of Libya (CBL) nearly severed the nation’s financial lifeline. The subsequent appointment of Naji Mohamed Issa Belqasem as Governor was hailed as a technocratic triumph, but is it a diplomatic containment strategy designed to freeze the conflict or resolve it?
The most serious issue remains the large-scale circulation of counterfeit currency that threatens the Dinar.

As of November 2025, the macroeconomic data suggest a resounding recovery. The International Monetary Fund (IMF) projects real Gross Domestic Product (GDP) growth at a staggering 15.6 percent, and oil production has stabilised to approximately 1.3 million barrels per day (bpd). Yet, the subtext reveals a far more fragile reality. While Libya’s spreadsheets show a boom, its streets tell a different story. This growth is entirely rent seeking. The non-oil economy remains dormant, with hydrocarbons driving 90 percent of government fiscal revenue.  Furthermore, the lack of liquidity has led to long queues outside banks, and the central bank has printed US$11 billion in currency to address the cash shortages. However, the most serious issue remains the large-scale circulation of counterfeit currency that threatens the Dinar.

The 2024 Central Bank Crisis
To understand the current situation, one must recall the mechanics of the 2024 crisis. This crisis saw a tussle between two rival factions: the internationally recognised government in the West, led by Prime Minister (PM) Abdul Hamid Dbeibeh, which controls the spending ministries and the rival administration in the East, backed by General Haftar, which controls the revenue-generating oil fields. The Central Bank of Libya (CBL), then governed by Sadiq al-Kabir, sat in the middle. The conflict began as PM Dbeibah wanted to increase spending, but Al-Kabir refused, accusing the government of corruption. In August 2024, the western government unilaterally fired al-Kabir and installed a new governor. The East saw this takeover of the bank as a theft of the national treasury by their rivals and used their physical control over the ground to shut down the oil fields. The crisis froze the Libyan economy. The clearing system was halted, impacting payments and the country was cut off from the global financial system. Finally, in September 2025, the two rival factions compromised and agreed to appoint Naji Mohamed Issa Belqasem—a technocrat— as the new Governor.
The mandate for Governor Issa was clear: unify the board, stabilise the Dinar and ensure equitable revenue distribution. However, a year later, the results illustrate the severe limitations of placing a technocrat in charge of a politicised rentier economy.

The 2025 Report Card 
It is important to assess the performance of the Libyan economy and the CBL under the new governor, which offers a qualitative report card on the viability of this technocratic peace.

Unsteady Management of the Monetary Policy 
Governor Issa inherited a wide gap between the official exchange rate and the parallel market, as evidenced by Table 1. To counter this, his primary policy tool has been the Foreign Exchange Tax, a surcharge on the purchase of foreign currency (US$) that acts as a ‘soft devaluation’, effectively making dollars more expensive to buy officially to curb demand. While this tax was reduced from 27 percent in November 2024, it continues to remain high at 15 percent. This policy was intended to limit the pressure on foreign exchange reserves in the short term, but it has created economic distortions and has forced reliance on the parallel market. Furthermore, this policy is perilous for a country that relies on imports for about 90 percent of its cereal consumption, making it hyper-sensitive to FX pricing. The policy has also faced legal challenges, creating further uncertainty. More worryingly, the parallel rate remains stubbornly high, reflecting a fundamental lack of trust in the CBL’s ability to defend the peg.
Table 1: Exchange Rate in Libya

Critical Failure of Banking Sector Integrity 
This is the most alarming development of late 2025. The CBL has faced significant challenges in managing the repercussions of the counterfeit notes crisis, which is widely believed to have been orchestrated in Russia for the benefit of the Eastern administration. While CBL withdrew these notes in 2025, the bank has officially acknowledged that this withdrawal “doubled the challenges and increased pressure on the Central Bank of Libya and the banking sector”. These notes represent a shadow money supply. This shadow currency drives the demand for hard currency in the black market, undermining every monetary policy tool Governor Issa attempts to deploy. The CBL cannot control inflation or the exchange rate when a rival authority can unilaterally expand the money supply.

The Chronic Liquidity Crisis 
Despite the economy’s statistical recovery, ordinary Libyans face a difficult daily reality: the inability to access their own salaries. The liquidity crisis has persisted with a vengeance. Banks have limited withdrawals, forcing citizens to buy cash from brokers at a premium. The issue stems from a rational lack of trust, as wealthy depositors are hoarding cash outside the banking system due to fears about their ability to withdraw it later. While Governor Issa’s push for electronic payments has improved transparency, it faces immense cultural and infrastructural resistance. The system remains blocked.
The CBL cannot control inflation or the exchange rate when a rival authority can unilaterally expand the money supply.

Need to Decouple Fiscal and Monetary Functions
The central lesson of the post-2024 period is that a central bank cannot function as a substitute for a functional finance ministry. Naji Issa has performed well as a cashier, ensuring that state salaries are paid through the Instant Salary system and letters of credit are issued. However, he has fared questionably as a governor because he lacks the political cover to enforce structural discipline. The "East-West" divide has not yet been bridged. There have not been significant policies to prevent the East from printing new shadow currency and threatening oil blockades to secure off-budget funding or to prevent the West from using state contracts to buy loyalty.
Furthermore, while atypical for Central Bankers, Governors in Libya have also been tasked to distribute revenues across governments due to a lack of a unified budget, thereby managing the country’s fiscal policy. Without Central Bank independence, monetary instruments can be used for artificially inflating fiscal gains. The fiscal improvements can become an accounting trick: devaluing the currency and taxing FX sales, the CBL has simply printed more Dinars for every Dollar earned, effectively taxing the population’s purchasing power to balance the state’s books.
The projected 15.6 percent GDP growth is not a sign of health; it is the fever chart of an economy running hot on borrowed time and printed money.

As a result, the Libyan economy in November 2025 is a Zombie Rentier. It is animated solely by the flow of petrodollars, but its internal organs, in the form of the banking system, the foreign exchange mechanism, and the fiscal contract, are lifeless. The projected 15.6 percent GDP growth is not a sign of health; it is the fever chart of an economy running hot on borrowed time and printed money.



Samriddhi Vij is an Associate Fellow at the Observer Research Foundation – Middle East.

### The Dubai Airshow and the UAE’s Leadership in Autonomous Aerospace

The Dubai Airshow conducted last week, offered far more than a showcase of next-generation aircraft and cutting-edge defence systems. It provided a clear snapshot of where global aerospace is headed and, more importantly, who is shaping that trajectory. Among the many themes that emerged from the exhibition halls, one stood above the rest: the accelerating rise of autonomous unmanned systems and the United Arab Emirates (UAE)’s rapidly consolidating leadership in this domain.
Participants from across the world displayed autonomous drone capabilities that would have been unimaginable in a public setting only a few years ago. High-speed perception, Artificial Intelligence (AI), adaptive swarming, onboard edge processing, autonomous mission execution, and resilient navigation even in Global Positioning System (GPS)-denied environments. These were not conceptual mockups or prototypes confined to research labs. They were operational platforms ready for deployment, signalling a dramatic shift in how airpower, surveillance, and logistics will be conducted in the coming decade.

They were operational platforms ready for deployment, signalling a dramatic shift in how airpower, surveillance, and logistics will be conducted in the coming decade.
Despite these impressive achievements, the most important story emerging from the Airshow was not about the drones themselves. It was about the underlying infrastructure and the supply chains that will determine which nations can actually field and sustain these systems at scale. This is where the UAE made one of the most consequential moves of the year: securing United States (US) export licences for advanced AI chips, including NVIDIA’s A100 and next-generation accelerators, following stringent cybersecurity, cloud-security, and technology safeguards.
This development represents far more than an incremental upgrade to data centres. It marks a strategic inflexion point. Advanced computing capacity is now the core resource behind everything from Unmanned Aerial Vehicle (UAV) perception models to autonomous decision-making frameworks to mission simulation environments. Nations that can train, host, and secure their AI systems domestically will be the ones that define the rules of the new aerospace era. With the chip licence approval, with the addition of multi-billion-dollar AI infrastructure investments that follow, the UAE has positioned itself not merely as a consumer of autonomy, but as a builder of its foundation.

This development represents far more than an incremental upgrade to data centres. It marks a strategic inflexion point.
However, even with this major leap, the broader reality remains: AI autonomy in drones is advancing faster than the global supply chains required to build, certify, and sustain them. This growing mismatch is quietly becoming one of the most serious risks in modern aerospace. The Airshow discussions reflected this clearly. While autonomous capabilities are advancing at a remarkable speed, the industrial and regulatory frameworks in their backdrop are grappling with entrenched bottlenecks: semiconductor dependencies, export-control friction, limited regional manufacturing depth, long integration timelines, and complex certification pathways that lag far behind the pace of software-driven innovation.
The conversation around drones often centres on strategy, operational impact, and evolving mission roles. The true differentiator, however, lies elsewhere. As the old military adage goes: “Amateurs talk strategy. Professionals talk logistics.” In autonomous aerospace, logistics encompasses a new spectrum of challenges that extend beyond the traditional realm.
First, autonomous systems require industrial depth. Airframes, chips, secure processors, servomotors, batteries, and advanced sensors cannot be sourced from fragile supply chains without risking operational readiness. Nations leading in autonomy will be those that localise manufacturing, diversify suppliers, and build robust technology ecosystems.

AI autonomy in drones is advancing faster than the global supply chains required to build, certify, and sustain them.
Second, supply-chain sovereignty has become a strategic imperative. Advanced UAVs depend on components that traverse geopolitical chokepoints, dual-use export regimes, and restricted technology corridors. The UAE’s AI chip licence marks a breakthrough precisely because it addresses one of the most sensitive areas of technological dependence. But achieving full autonomy requires similar resilience across numerous other components.
Third, autonomous systems demand regulatory agility. Traditional airworthiness frameworks were designed for manned aviation, not for drones capable of independent decision-making. Without modernised certification pathways for detect-and-avoid systems, AI-generated flight logic, and autonomous mission execution, even the most advanced platforms will remain underutilised.
Fourth, cybersecurity has become mission-critical. Autonomous drones are, in effect, flying computers—networked, AI-enabled, and operating at the edge of the network. Their attack surface is vast. Securing them requires new frameworks for verification, data integrity, and resilience against adversarial AI or electronic warfare.
Finally, autonomy at scale depends on integrating ecosystems. Drones must interface seamlessly with satellite networks, command-and-control systems, air defence environments, and electronic-warfare architectures. This level of integration requires both industrial maturity and unified technical standards.

The future of drone autonomy will not be decided solely by who develops the most advanced algorithms, airframes, or sensor suites. It will be decided by who can align those breakthroughs with resilient, intelligent, and secure supply chains. 
Across the Gulf Cooperation Council (GCC), these realities are increasingly shaping policy and investment strategy. The UAE, in particular, is taking a comprehensive approach. From its sovereign AI-cloud development and semiconductor partnerships to its localisation of UAV manufacturing, it is constructing the full stack required for next-generation aerospace dominance.
The Dubai Airshow underscored the significance of this strategy. While many nations are racing to acquire autonomous drones, far fewer are actually building the industrial and regulatory architecture needed to sustain them. The UAE’s posture to secure AI compute sovereignty, strengthen manufacturing capacity, invest in research and development (R&D), and shape international technology partnerships has positioned it uniquely to lead. The future of drone autonomy will not be decided solely by who develops the most advanced algorithms, airframes, or sensor suites. It will be decided by who can align those breakthroughs with resilient, intelligent, and secure supply chains. The nations capable of sustaining autonomy will outperform those who merely purchase, and the UAE seems to be leading the pack.



Bharath Gopalaswamy is an aerospace and defence expert with extensive experience in AI, space technologies, and advanced systems.

### The Business of Development: A New Development Finance Corporation

The global development system no longer reflects current economic realities. Institutions built in the 20th century assumed that development was a form of Western benevolence, even as emerging economies now drive global growth, infrastructure demand, and technological change. The structural mismatch of such countries being treated as recipients rather than partners in the development architecture has become unsustainable. BRICS+ economies alone face more than US$12 trillion in infrastructure needs, spanning logistics, renewable power, digital systems, water and food security, and critical mineral supply chains. Multilateral development banks that should be mobilising capital at this scale remain hampered by slow processes, sovereign-heavy mandates, and limited private-sector engagement. Even the New Development Bank (NDB) illustrates the problem. Since its creation, NDB has deployed only US$22.4 billion, and less than 15% of the financing has gone to private-sector projects. The result is a widening gap between what these economies require and what existing institutions can deliver.

Multilateral development banks that should be mobilising capital at this scale remain hampered by slow processes, sovereign-heavy mandates, and limited private-sector engagement.


A new approach that treats development as a commercial enterprise rather than a benevolent exercise is the need of the hour. India has already demonstrated the effectiveness of such an approach. Its financial inclusion drive, which integrated more than 100 million citizens into the formal financial system with as little as US$1, succeeded because public policy, technology, and market incentives aligned to make inclusion commercially viable. Sustainable Development Goals (SDGs) outcomes scaled because markets scaled with them. This principle underpins the proposal for establishing a BRICS+ New Development Finance Corporation (NDFC).

The NDFC is proposed as an institution that India and the United Arab Emirates could establish in Abu Dhabi, should both governments choose to advance the idea. The NDFC would be legally connected to the New Development Bank, but operationally independent, mirroring the relationship between the International Finance Corporation (IFC) and the World Bank. Its purpose would be to mobilise institutional capital and create investment-ready project pipelines, addressing the private-sector financing gap that constrains development across emerging markets.

The institution’s core financial architecture would be hybrid capital. This is because emerging economies do not lack viable opportunities; they face concentrated political, regulatory, and foreign-exchange risks that commercial investors cannot bear alone. Hybrid capital distributes these risks across the capital structure, where a sovereign or philanthropic first-loss layer absorbs early-stage uncertainty, mezzanine layers carry the intermediate risks, and senior tranches attract long-term investors. When structured effectively, US$1 of catalytic capital could mobilise US$10 of commercial investment, thereby converting seemingly unbankable projects into viable investments.

The UAE is a natural anchor for such an institution since its financial ecosystem is built on hybrid-capital logic, with sovereign and commercial investors consistently co-investing across global markets. In this regard, the Abu Dhabi Global Market has become a leading international financial centre, and the UAE has demonstrated its capacity to host and scale global institutions such as the International Renewable Energy Agency (IRENA). Its location, strategically linking Asia, Africa, and the Middle East, aligns with the connectivity-focused mandate of the NDFC.

Hybrid capital distributes these risks across the capital structure, where a sovereign or philanthropic first-loss layer absorbs early-stage uncertainty, mezzanine layers carry the intermediate risks, and senior tranches attract long-term investors.


India provides complementary capabilities. As one of the world’s fastest-growing major economies, it combines vast infrastructure demand with deep technological capacity and proven experience designing scalable investment vehicles. The National Investment and Infrastructure Fund, anchored by a US$1 billion commitment from the Abu Dhabi Investment Authority, set a benchmark for sovereign-backed co-investment platforms. Indian public–private partnerships have attracted significant global capital into renewable energy, airports, logistics, and digital infrastructure. The India–UAE partnership has also delivered concrete results, including bilateral trade exceeding US$100 billion under the Comprehensive Economic Partnership Agreement (CEPA), the Hindustan Infralog Platform with commitments of up to US$3 billion, and ADNOC’s energy-security partnership with India’s strategic petroleum reserves. This track record provides a credible template for the NDFC.

The NDFC could launch with US$10 billion in paid-in equity, with the UAE and India contributing 30 percent and 20 percent, respectively. The remaining 50 percent could be sourced from other NDB and BRICS+ members. This capital base would support an AA-range credit rating. To maintain resilience, the institution would operate with a debt-to-equity ratio of 2 to 3 times, similar to IFC and IDB Invest. Its funding strategy would include medium-term notes in major reserve currencies and local-currency financing in priority markets to reduce foreign-exchange risk. Treasury operations would emphasise asset–liability management, hedging, liquidity buffers, callable capital, and risk-transfer partnerships. This structure would reinforce investor confidence and secure the Preferred Creditor Status.

The NDFC would focus on private-sector projects that create and connect markets. Its instruments would include loans, equity, guarantees, risk participations, insurance and reinsurance facilities, securitisations, and co-investment platforms. The initial geographic focus would be the India–Middle East–Africa corridor, with priorities in logistics, renewable power, water systems, and digital infrastructure. As capacity builds, operations could expand to Latin America and other regions where hybrid-capital solutions are essential to project viability.

The initial geographic focus would be the India–Middle East–Africa corridor, with priorities in logistics, renewable power, water systems, and digital infrastructure.


The operating model would reflect a modern financial institution that eschews a traditional development bureaucracy. Artificial Intelligence (AI) would support credit assessment, due diligence, documentation, and monitoring. Digital platforms would enable real-time transparency and standardisation across the investment cycle. The aim would be to accelerate project preparation and execution, enabling capital to circulate at scale.

If endorsed by BRICS+ leaders, the NDFC could move from approval to operations within a short period, much like the Asian Infrastructure Investment Bank, which launched in two years. The UAE and India have the alignment and capacity to replicate that pace. Creating a new institution such as the NDFC,  avoids the structural limits of existing development finance institutions and makes it possible to design a platform built from the outset for speed, technology-enabled execution, and genuine alignment with private-sector investors. The goal is not duplication, but to offer a partner of choice for long-term capital looking to invest across BRICS+ economies.  Its establishment would signal that  BRICS+ are ready to design institutions for their own strategic needs and advance development through commercial logic rather than charity.



Arezo Kohistany was with the International Finance Corporation (IFC) from 2012 to 2025.

### Iran’s Water Crisis: Historical Roots, Ideological Dimensions, and Policy Challenges

Iran’s water story is intertwined with its modern political evolution. During the Pahlavi era, the country’s national strategy centred on industrialisation and modernisation. Through the White Revolution (1963), the Shah sought to transform Iran into a modern, industrial state capable of rivalling Western economies. Agriculture was not neglected maliciously but deprioritised, a calculated choice that reoriented capital, labour, and infrastructure towards factories, oil, and heavy industry.

Land reform broke up large estates and dismantled the landlord-peasant hierarchy. Aimed at equity, it instead disrupted efficient farming and alienated rural elites. Lacking capital or irrigation infrastructure, many smallholders saw the Shah’s modernisation as a betrayal of Iran’s agrarian roots.

This resentment became politically significant. The Islamic Revolution of 1979 found many of its earliest supporters among disaffected rural and small-town populations. Clerical leaders, including Ayatollah Khomeini, who came from a modest rural background, capitalised on this grievance. After the Revolution, policy underwent a decisive shift: agriculture was transformed from being an economic sector to an ideological symbol of national authenticity and revolutionary justice.
The government promoted extensive agricultural expansion, constructing dams and subsidising water-intensive crops such as wheat, rice, and sugarcane, even in arid regions.
The Iran–Iraq War (1980–1988) further reinforced this shift. Wartime self-reliance fostered the ideology of “khodkafa’i”, meaning self-sufficiency. Food production became an emblem of resilience against foreign dependence. The government promoted extensive agricultural expansion, constructing dams and subsidising water-intensive crops such as wheat, rice, and sugarcane, even in arid regions.

In Shia tradition, the denial of access to water during the Battle of Karbala — when Imam Hussein’s camp was cut off — became a powerful moral reference. After the Revolution, this symbolism shaped welfare policy, where the state declared that no one should be denied water. Regulatory barriers to household access were loosened, enshrining water as a right rather than a commodity. This theological commitment, however, encouraged overconsumption and reduced incentives for conservation, setting the conditions for long-term depletion.
Cultural and Ideological Dimensions
Water in Iran is not merely a natural resource; it is an ideological artefact, woven into revolutionary identity. The Islamic Republic presents access to water and bread as proof of divine justice and government compassion. Subsidies, particularly for rural farming, have become mechanisms of political inclusion and loyalty. Farmers, long considered the “guardians of the revolution,” benefit disproportionately from cheap electricity and irrigation water.

This is more than populism; it reflects the regime’s rural roots. Early leaders saw agriculture as a sacred labour and a revolutionary duty, enshrining self-sufficiency as moral virtue, while subordinating industry to social equity and privileging loyalty over efficiency.

Bread, in this context, is ideological. It appears in countless Persian idioms symbolising honour, livelihood, and divine blessing. To suggest that bread or the water that produces it should be treated as a priced commodity is politically toxic. Thus, proposals for water pricing reform are routinely denounced as “anti-Islamic” or “elitist.”

The symbolic resonance of bread in Persian and Islamic culture amplified this commitment. Ensuring that “bread is always on the table” and “is not coming from alien foreign countries” became both a social contract and a theological duty.
Decision-makers, many of whom rose through revolutionary or wartime institutions rather than bureaucratic channels, approach the water crisis through a wartime lens where shortages are to be endured, not prevented.
This ideological framing has contributed to policy paralysis. Decision-makers, many of whom rose through revolutionary or wartime institutions rather than bureaucratic channels, approach the water crisis through a wartime lens where shortages are to be endured, not prevented. Scarcity becomes another battlefield on which citizens must display patience and faith. Such framing discourages reform: subsidies persist, consumption continues, and the very narrative that once united the state and society now impedes the strategic planning required for sustainability.
Current Challenges
The consequences of these intersecting forces are profound. Iran’s water crisis now encompasses structural, governance, and social dimensions.

Infrastructure and Industrial Conflict:

While early post-revolutionary governments invested heavily in dams and canals, the “water mafia” built dams that were rarely filled. This caused the water tables in the plains to drop from the 1990s onwards, turning once-fertile lands to dust.

More critically, the state is now both the regulator and a competitor. Many of Iran’s largest water-consuming industries, including steel, petrochemicals, and energy, are state-owned or linked to quasi-military foundations. The government thus profits from the same inefficiencies it is tasked to correct. Any regulatory reform that would constrain industrial water use would also threaten its own revenue streams.

Corruption and Illegal Extraction:

The widespread illegal drilling of wells exacerbates depletion. Thousands of unauthorised wells continue to extract groundwater unchecked, often with political protection. Corruption and weak law enforcement mean that even where laws exist, they are selectively applied. Officials who benefit from these networks have little incentive to impose penalties.

Technocratic Gaps and Policy Inertia:

Following the Iran–Iraq War, many veterans entered the civil service. Their revolutionary credentials ensured loyalty but not technical expertise. Decision-making in water policy remains dominated by military and ideological figures rather than hydrologists or economists. Consequently, solutions tend to mirror wartime logic — reactive, short-term, and framed as resistance rather than reform.
Investment cycles remain short, with a preference for visible, rapid projects such as building dams rather than long-term basin management.
Emergency Governance:

Iran’s broader political culture reinforces this short-term approach, where the state operates in perpetual emergency, responding simultaneously to sanctions, inflation, energy shortages, and social unrest. In such an environment, water reform is perpetually deprioritised. Investment cycles remain short, with a preference for visible, rapid projects such as building dams rather than long-term basin management.

Social and Security Implications:

Rural areas, once pillars of revolutionary legitimacy, are now epicentres of discontent. The drying of rivers like the Zayandeh Rood in Isfahan has provoked repeated protests by farmers demanding state accountability. In Khuzestan, where mismanaged dams and industrial diversions have devastated agriculture, demonstrations have turned violent. Migration from desiccated villages to urban centres adds to unemployment, housing shortages, and public discontent.
 The Way Forward
Iran has the scientific capacity to manage its water resources more sustainably, but its political structure and ideological imperatives obstruct reform.

Agricultural Diversification and Imports:

Iran could reduce pressure on its aquifers by importing water-intensive crops such as rice and sugarcane, focusing instead on drought-resistant varieties. However, this clashes with the doctrine of self-sufficiency, a pillar of revolutionary identity. Politicians fear that admitting reliance on imports would symbolically betray the Revolution’s promise of independence. Beyond crop diversification, Iran could modernise irrigation networks by replacing flood irrigation with efficient drip systems, thereby optimising agricultural water usage. Small-scale groundwater recharge projects, combined with soil moisture monitoring, could help stabilise rural livelihoods without the large capital requirements of new dams.

Reforming Subsidies and Governance:

A rational pricing system could discourage water wastage, but removing subsidies risks alienating the regime’s most loyal base: rural farmers. The experience of 2019, when fuel price hikes sparked nationwide unrest, remains a deterrent. More fundamentally, as the state itself is a major water consumer, genuine regulation would require the government to restrict its own enterprises, something it has consistently resisted. Complementary to pricing reform, investment in urban wastewater recycling and industrial water recirculation could reduce total freshwater withdrawals. Desalination, though renewable energy-intensive, could provide a strategic reserve for coastal cities like Bandar Abbas and Bushehr, easing pressure on inland aquifers.
Small-scale groundwater recharge projects, combined with soil moisture monitoring, could help stabilise rural livelihoods without the large capital requirements of new dams.
Technocratic Empowerment:

Replacing military and clerical decision-makers with technically trained administrators would ensure more consistent water management. However, such a transition would require shifts in authority that the Islamic Republic is unlikely to endorse. As long as key decisions are shaped by a “resistance” framing of scarcity, policy responses are likely to continue emphasising short-term rationing and tighter control over demonstrations, instead of pursuing broader structural reforms.

Institutional Independence:

Iran’s water agencies require autonomy from political and industrial interests. The government must cease to act simultaneously as producer, regulator, and beneficiary. Only then can regulation be credible. But this would entail disentangling vast networks of patronage and parastatal control, a challenge few within the system are willing to confront.

Structural Barriers:

Ideology remains a major obstacle, but it is compounded by other factors: the rural social foundation of the regime, the symbolic centrality of bread, and the entrenched belief that endurance equals strength. These collectively prevent rational recalibration. The leadership’s wartime mentality of expecting citizens to “fight through droughts” perpetuates short-termism and discourages development.
Conclusion
Iran’s water crisis is no longer a resource issue; it is a mirror of inept governance. The same revolutionary values that once stabilised the regime now obstruct its adaptability. Self-sufficiency has become self-defeating, and ideological loyalty has become institutional inertia.

Corruption, mismanagement, and competing state interests compound the problem. Each new “solution” is reactive, be it water rationing, ad-hoc transfers, or temporary desalination plants.

Iran’s leadership faces a strategic choice: either continue rationing scarcity or redefine water as a national, not ideological asset. This would require depoliticising agriculture, empowering technocrats, and planning in terms of decades rather than electoral cycles. Without such a shift, Iran risks a future where its wells, like its political power, run dry.



Kamyar Kayvanfar is a native Persian and English speaking communications and public affairs professional with experience at EY and Kreab.

### Digital Interoperability and Trade Facilitation in the India–Middle East–Europe Corridor

Introduction
The announcement of the India-Middle East-Europe Corridor (IMEC) in 2023 garnered wide attention for the additional trade and energy routes it would provide. These routes offer valuable alternatives to the Strait of Hormuz, Bab el-Mandeb, Red Sea and Suez Canal – thoroughfares which have become the site of increasing tension and disruption. Through IMEC, a network of maritime and rail routes will facilitate the transportation of goods and enhance connectivity among participating states. In addition, interconnection of electricity grids via undersea cables and terrestrial power lines will help drive meaningful regional integration. Digital connectivity, too, is an important aspect of the corridor, with fibre-optic cables linking data centres across participating countries, thereby offering transformative potential in terms of secure high-speed data transmission and digital-economy integration.

Much of the existing writing on IMEC focuses on its physical digital infrastructure and the role these might play in enabling technological cooperation between signatories. However, fewer analyses have examined the institutional capabilities and development of the digital platforms that will ultimately support IMEC’s realisation. An early example of digital trade interoperability along the IMEC route can be seen in the India-UAE Master Application for International Trade and Regulatory Interface (MAITRI). This digital platform underpins the India-UAE Virtual Trade Corridor (VTC) by integrating national customs documents and trade-related information. While this integration offers clear value for the two countries, whose bilateral trade reached US$100 billion in 2024–25, its broader applicability along the corridor remains in question as negotiations over trade and infrastructure alignment progress. Notwithstanding the challenges of harmonising customs protocols and data sovereignty laws, platforms like MAITRI demonstrate how digital systems can enable seamless trade processes. As such, this article seeks to outline the key policy considerations and technical enablers necessary for extending digital platform integration westwards along the IMEC route.
MAITRI and the Case for the Expansion of VTCs
Since the UAE-India VTC and MAITRI are pioneering platforms for digital trade and customs integration, there is little data to indicate the extent to which they can cut costs in customs and approval processes. However, estimates for the cost-saving benefits of trade and customs digitisation, such as the implementation of a Trade Single Window — a digital platform that allows traders to submit all required import, export, and transit information through one electronic entry point — have been put at between 20 and 50 percent, Such digitisation has also been projected to cut import compliance times by roughly half. Furthering the extent of digital interoperability by implementing additional VTCs between connecting countries in IMEC is therefore likely to reduce both costs and processing time significantly. This efficiency would boost the corridor’s competitiveness with other major trade routes by increasing capacity and speeding up the flow of goods.
Embedding digital governance and interoperability at the heart of IMEC’s development will transform it from a transport corridor into a digitally enabled trade ecosystem.
Moreover, the development of digital trade interoperability mechanisms tallies well with the ambitions of many IMEC signatories and transit partners to accelerate not only their logistics-trade ecosystems but also technology adoption at all levels of economic value chains. For example, Saudi Arabia’s Digital Government Strategy aims to migrate government services onto integrated digital platforms to deliver consistent, user-driven services. Similarly, Jordan’s National Digital Transformation Strategy & Implementation Plan recently launched the Trade and Logistics Performance Gateway digital platform, designed to connect logistics operators, exporters, and customs authorities in real time. Israel and the European Union (EU) are also committed to the digitisation of government functions. The Digital Israel Initiative has established advanced e-government systems, while the EU’s Single Window Environment for Customs harmonises electronic trade documentation to provide a unified interface for traders to submit information once for use across multiple jurisdictions.

To date, most digital trade initiatives have been confined to national efforts or to established, regulatorily aligned blocs such as the EU. This creates an opening for IMEC to pioneer cross-border digital integration across a far more diverse set of economies. The corridor’s varied regulatory frameworks, digital capacities, and data governance standards make this both a complex undertaking and a unique opportunity for innovation in digital connectivity. Establishing IMEC’s physical trade and cable infrastructure priorities is an essential foundation, but early adoption of shared digital trade platforms could ease future integration and regulatory harmonisation once physical connectivity is in place.
Country Readiness, Data Sovereignty, and Geopolitical Tensions
Creating additional VTCs along the IMEC route will depend to a large degree upon the ability of participating governments to coordinate policy, regulatory, and technical standards across borders. While countries along the route have all prioritised the digitalisation of government services as a key aspect of national development, their levels of digital readiness and interoperability differ significantly. The challenge lies in ensuring that existing national digital trade platforms and frameworks, such as Saudi Arabia’s FASAH, Jordan’s Trade Facilitation Portal, Israel’s Global GATE, and the EU’s CSW‑CERTEX (Customs Single Window Certificates Exchange System), can interact seamlessly through common standards of mutual legal recognition.

National data sovereignty represents perhaps one of the largest barriers to such integration. Customs and taxation are sovereign functions, and governments are often reluctant to open backend systems or recognise foreign inspection and certification processes. For example, Saudi Arabia’s Personal Data Protection Law (PDPL) restricts cross-border data flows unless their level of safeguards is deemed appropriate by the national data authority. Similarly, Jordan’s Personal Data Protection Law and Israel’s Privacy Protection Law and Transfer Regulations limit transfers of personal data abroad due to requirements that recipient countries guarantee equivalent levels of protection. These restrictions complicate the establishment of shared databases, blockchain technologies, or cloud-based systems across borders, even for non-sensitive customs information. The EU’s General Data Protection Regulation (GDPR) and Single Window Environment for Customs offer assurance of advanced data protection and a digitally unified customs processing framework within the bloc, yet connecting this to other IMEC systems and standards will be a challenge. Similarly, efforts to harmonise customs procedures between other IMEC nodes such as the UAE and Saudi Arabia are advancing under the Gulf Cooperation Council’s (GCC) Integrated Customs Tariff framework, though a fully operational single window remains some way off.
Early adoption of shared digital trade platforms could ease future integration and regulatory harmonisation once physical connectivity is in place.
Furthermore, digital readiness varies across IMEC signatories and partners, with some having advanced government digitisation while others lag behind. Differences in public funding, private investment, and the availability of skilled workforces will also affect each country’s ability to implement a VTC. While Israel, the EU and Saudi Arabia have relatively mature digital ecosystems and ample public and private funding environment for developing advanced platforms, Jordan’s limited fiscal capacity for digital upgrades and persistent regional security concerns involving Israel and neighbouring states could all but slow coordination. As such, a phased approach beginning with bilateral pilots between digitally advanced partners, followed by gradual integration of lower-capacity states like Jordan, likely offers the most pragmatic path toward full corridor interoperability.

Finally, geopolitical dynamics may further complicate the development of VTCs. Tensions between Israel and parts of the Arab world, or competition between Saudi Arabia and the UAE, may impede trust and data-sharing. Political instability in transit states like Jordan may also delay coordinated digital integration efforts. Sustained diplomatic engagement, coupled with technical dialogues on data governance and interoperability, will therefore be essential to maintaining momentum for the corridor’s development.
Conclusion
IMEC presents an unprecedented opportunity to integrate trade, energy, and digital connectivity across three continents. Yet its success will depend not only on physical infrastructure but also on the alignment of digital trade platforms to enable seamless exchange of documentation across jurisdictions. Naturally, divergent levels of digital readiness, differing national data protection laws, and geopolitical tensions pose significant barriers to interoperability. To overcome them, IMEC partners should pursue phased cooperation through bilateral and regional pilot projects, to be subsequently expanded and supported by mutual recognition agreements.

The India-UAE VTC and the MAITRI platform are too recent to yield concrete figures on cost and time savings. Nevertheless, their inauguration demonstrates that bilateral harmonisation of data and customs regulation is feasible and could serve as a replicable model for other signatories along the corridor. Ultimately, embedding digital governance and interoperability at the heart of IMEC’s development will transform it from a transport corridor into a digitally enabled trade ecosystem that can foster increased resilience, efficiency, and trust among its members.



Elizabeth Heyes is a Junior Fellow, Technology at ORF Middle East.

### UAE Connectivity as a Platform for Resilient Growth

The questions shaping growth across Eurasia and Africa have moved beyond goods production to their cross-border movement and how efficiently people, capital and data can connect. By linking its sea, air, rail, deep-water ports and digital infrastructure, the United Arab Emirates (UAE) has built a strong logistics and connectivity system. This integration has given the UAE an edge since it uses its geography not just for faster trade routes, but as a form of economic resilience where goods and people keep moving even during any disruptions.
Why Rethinking Connectivity Matters for the UAE and the GCC
For the UAE and its Gulf neighbours, connectivity is an economic policy tool for driving growth and competitiveness. The country’s multimodal strategy lowers the “time cost of distance” between Asia, Africa, and Europe through integrated seaports, airports, highways, and fast, predictable border procedures. Recent milestones underscore this shift from blueprint to operations. The Etihad Rail Project envisions transforming the mobility of passengers and freight across the country by linking 11 cities, serving major ports such as Jebel Ali, Khalifa, and Ruwais, with planned freight capacity set to reach about 60 million tonnes annually by 2030. Additionally, the introduction of the new low-fare CX01 Dubai–Abu Dhabi express bus and door-to-door journey planning via Etihad Rail’s integration with Citymapper makes passenger commute convenient and encourages shared, lower-emission travel options. Dubai is forecast to rank among the world’s top three destinations in Q4 2025, validating continued investment in air capacity, surface connectivity, and event infrastructure, and strengthening the case for multimodal redundancy when sea or air corridors face shocks.
Dubai is forecast to rank among the world’s top three destinations in Q4 2025, validating continued investment in air capacity, surface connectivity, and event infrastructure, and strengthening the case for multimodal redundancy when sea or air corridors face shocks.
Ports, Corridors, and Economic Diplomacy
The UAE’s seaports anchor the country’s role on the Maritime Silk Road. Jebel Ali, the world’s largest man-made port, together with Khalifa Port and Khor Fakkan, has been expanded and digitised to serve as preferred entry points for goods bound for the wider MENA market, while facilitating China–Europe–Africa flows. Domestic ports are the launchpads for extending outward corridor strategies as well. For instance, UAE-linked port and logistics investments in East Africa (including terminals such as Berbera and Dakar) use the Emirates’ hubs as staging grounds for two-way trade. This hard infrastructure is matched by economic diplomacy. A growing network of Comprehensive Economic Partnership Agreements (CEPAs) across Asia, Africa, and Europe reduces tariffs, streamlines customs, and promotes joint ventures. Engagement in plurilateral forums such as G20 and BRICS gives the UAE a platform to advocate for resilient supply chains and sustainable infrastructure finance. Sovereign wealth funds reinforce the strategy by co-investing in global logistics, energy, and data assets, helping shape “new geographies” that the UAE can plug into with speed.
China Linkages Without Dependency
The UAE’s corridor architecture is compatible with China’s Belt and Road whereChinese manufacturers and e-commerce platforms can consolidate, customise, and re-export through free zones, using rail–port–air integration and single-window digital documentation to reach Europe and Africa on predictable schedules. On the ground, large China-linked wholesale districts in Dubai shorten replenishment cycles, while a growing community of Chinese entrepreneurs, engineers, and service professionals increases demand for flights, housing, education, and hospitality. Policy instruments such as Dubai’s Free Zone Mainland Operating Permit tighten the loop between innovation clusters and citywide customers, shortening time-to-market for tech firms, consultancies, and traders.

Unlike many Belt and Road (BRI) ventures that rely on state-backed loans and create long-term financial dependencies, the UAE’s approach emphasises commercial viability, risk-sharing, and diversification. Instead of debt-funded megaprojects, the UAE builds partnerships through equity-based joint ventures and public–private collaborations. For instance, DP World’s 30-year concession at Berbera in Somaliland and the US$1.1 billion Port of Ndayane in Senegal are structured as joint ventures with host governments, involving commercial concessions rather than sovereign loans. These projects illustrate how the UAE extends connectivity without burdening partner countries with debt or political conditions.
Instead of debt-funded megaprojects, the UAE builds partnerships through equity-based joint ventures and public–private collaborations.
Within the UAE, Chinese–Emirati cooperation similarly operates through open-market mechanisms rather than state-driven procurement. The Yiwu Market Dubai, a partnership between DP World and China Commodity City Group, has created a wholesale hub within  Jebel Ali Free Zone (JAFZA) that accelerates re-export trade across Africa and the Middle East. Complementary measures such as the Free Zone Mainland Operating Permit allow Chinese and other foreign firms to operate directly onshore under clear regulatory oversight, avoiding exclusive or protectionist arrangements. This approach contrasts sharply with the BRI’s debt-heavy infrastructure model in parts of Africa and Central Asia, where reliance on Chinese policy banks has often led to restructurings and dependency. The UAE, by contrast, hedges concentration risk through a diversified network of partners. Its Comprehensive Economic Partnership Agreements (CEPAs), notably with India, ensure multiple connectivity routes coexist with, rather than depend on, Chinese financing or control.

By maintaining high transparency, co-financing, and adherence to international standards, the UAE transforms connectivity into cooperation, without ceding autonomy or strategic leverage.
People as the Payload: A Combined View of Migration
Talent mobility is part of the UAE’s connectivity model. High-skilled professionals power healthcare, finance, higher education, and the digital economy. Semi-skilled and low-skilled workers build and operate the railways, ports, airports, logistics parks, hotels, and energy sites. Longer-term residency pathways and streamlined onboarding reduce hiring friction and accelerate project delivery.  Even recent demographic shifts matter as the steady inflow of African professionals and entrepreneurs is diversifying supplier bases and strengthening commercial links with African cities. At the same time, an uptick of educated, entrepreneurial Russian residents across IT, design, cybersecurity, proptech, and e-commerce has broadened the small and medium enterprises (SMEs) base, deepened local talent pools, and increased utilisation of the UAE’s payments, cloud/data, and logistics infrastructure. For carriers and airports, these communities translate into steadier year-round load factors and stronger route economics. For cities, they underpin demand for schools, housing, and neighbourhood amenities.  
Carving Productive Economic Bases 
The UAE has consistently converted land and shoreline into productive economic space. High-rise business districts, integrated waterfronts, artificial islands, and master-planned innovation zones operate as market-making platforms rather than isolated real estate projects. Mixed-use districts near ports and airports, stitched together by metro, tram, and highways, shorten the distance between customers and suppliers and enable same-day services. Leisure and convention precincts sustain airline routes and hotel capacity, while driving demand for perishables handling and express freight. Industrial cities and energy parks in formerly undeveloped areas work because power, water, roads, fibre, and emergency services are delivered ahead of tenants. Between Abu Dhabi and Dubai, a newly approved multi-billion-dirham “mini-city” between Zayed International and Al Maktoum International exemplifies this approach. Abu Dhabi’s Livability Strategy pushes the same logic into the neighbourhood scale. When stations are fed by safe first- and last-mile options, national logistics efficiency improves.
Between Abu Dhabi and Dubai, a newly approved multi-billion-dirham “mini-city” between Zayed International and Al Maktoum International exemplifies this approach. 
Air Hubs and the Digital Twins of Trade
Aviation remains the UAE’s main link between global markets, connecting both East–West and emerging South–South corridors. Flagship carriers like Emirates and Etihad serve as “super-connectors,” while the AED 128-billion expansion of Al Maktoum International aims to create the world’s largest airport by capacity, consolidating the country’s position as a global aviation hub. The Dubai Airshow 2025 will spotlight this momentum by convening manufacturers, airlines, and technology providers to focus on the efficiency, sustainability, and resilience of air networks. Crucially, the UAE is also building a digital twin of its transport system, integrating air, land, and sea logistics through smart platforms for travel planning, customs, and cargo management. Near-universal 5G coverage and one of the world’s highest internet penetration rates ensure the country can run real-time operations using IoT, secure digital documentation, and coordinated transport planning. In short, “blue fiber” is now as critical to the UAE’s connectivity as blue water and runways.
Strategic Corridors and Market Access
The UAE’s corridor strategy is multi-directional, aimed at co-investing in infrastructure and aligning regulatory frameworks. Africa Gateway initiatives, supported by UAE-linked port and logistics investments, give East and West African exporters reliable staging grounds and faster access to markets. Central Asian and Silk Road linkages position the Emirates as a southern terminus for land-sea routes that connect China and Central Asia to Europe. India and South Asia are being integrated more tightly through the UAE–India CEPA and associated logistics corridors, enabling re-exports and just-in-time supply chains across the subcontinent.
Africa Gateway initiatives, supported by UAE-linked port and logistics investments, give East and West African exporters reliable staging grounds and faster access to markets. Central Asian and Silk Road linkages position the Emirates as a southern terminus for land-sea routes that connect China and Central Asia to Europe.
The UAE as a Nexus State
The UAE is often described as a nexus state.  A small country that multiplies its influence by connecting regions (Asia, Africa, Europe), modes (sea, air, rail, digital), and sectors (energy, finance, logistics, technology, culture). The COVID-19 pandemic made this role visible, and that experience now informs peacetime corridor design, insurance structures, and preparedness playbooks. It is also a template for partners across Africa, Asia, and Europe to practice by co-financing infrastructure and co-creating standards that keep corridors open when they are needed most.



Kristian Alexander is a Senior Fellow and Lead Researcher at the Rabdan Institute for Security & Defence Research, Abu Dhabi, UAE.

### The Gulf’s Indo-Pacific Dilemma

The idea of an ‘Indo-Pacific’ has gained popularity in the past two decades, but its relevance to the Gulf region remains contested. As the global influence of Asia grows and competition between the US and China increases in the Gulf, the relationship between the Gulf countries and the Indo-Pacific becomes ever more important. While some believe that the Gulf should be included within the Indo-Pacific framework, the countries themselves tend to take the stance that it should not and generally avoid using the term. They are wary that association with the framework, which is often perceived as being against Beijing, could threaten their relationship with China, their largest trade partner. Still, regardless of terminology, Gulf engagement with the countries in the Indo-Pacific is expanding not only in trade but also in defence.
Conceptualising the Indo-Pacific
The ‘Indo-Pacific’ is an evolution of the ‘Asia-Pacific’, which was put forward by Japan and Australia in the 1970s and 1980s to emphasise their strategic relationship with the US. While the Indo-Pacific concept has historic roots in the work of German professor Karl Haushofer, who used it as early as the 1920s to envision regional anti-colonial cooperation that could undermine Germany’s Western rivals, its current form is largely a product of a 2007 essay by Indian strategist Gurpeet Khurana on connecting the Indian Ocean Region (IOR) and the Western Pacific Region (WP). Later that year, then Japanese Prime Minister Shinzo Abe further popularised the term with his speech on the “Confluence of the Two Seas” in New Delhi. The increasing acceptance of the Indo-Pacific as a strategic framework in the years since is both a recognition of India’s growing power and the result of a growing desire to contain the influence of China. During Donald Trump’s first presidency, the term replaced ‘Asia-Pacific’ entirely in American statements and documents, and US allies that had not yet adopted the term did so soon after.
The increasing acceptance of the Indo-Pacific as a strategic framework in the years since is both a recognition of India’s growing power and the result of a growing desire to contain the influence of China.


The Gulf is not typically conceptualised as being part of the Indo-Pacific, even though Indian Prime Minister Narendra Modi in 2018 defined the concept as encompassing all coastal countries overlooking the Pacific or Indian oceans—from the Americas to East Africa—thereby including at least some of the Arab Gulf states. Japan has a similarly inclusive approach. The reason the Gulf states are typically excluded may be attributed to the US view that India’s border with Pakistan is the western boundary of the Indo-Pacific, which is why Washington places the Gulf within its Central Command (CENTCOM) rather than the Indo-Pacific Command (INDOPACOM). The US is not alone. Australia, for example, also takes a more restrictive stance, while South Korea’s Indo-Pacific policy mentions Europe and Africa but no Arab states, focusing primarily on democracies. The Gulf countries are often seen more as part of a ‘Middle East’ or ‘Arab World’ than ‘West Asia’, despite their location on the Asian continent and long-standing ties with the IOR.

At the same time, the Gulf is nevertheless crucial for Indian Ocean trade, and Oman and the United Arab Emirates are full members of the Indian Ocean Rim Association, while Saudi Arabia is an observer. The region also hosts US troops, and Qatar has specifically acknowledged its role as “part of US Indo-Pacific power-projection strategy”. Some analysts even suggest that priorities in the Middle East were crucial for the initial Indo-Pacific framework push: advocates, especially those in the US, hoped that increased cooperation across the two oceans would prevent the transfer of weapons from East Asia to the Middle East.
Engaging Asia, Avoiding the Indo-Pacific
No Gulf Cooperation Council (GCC) country has issued an Indo-Pacific policy, and the term is rarely used by officials from the region. The region’s reluctance to engage with the concept is rooted in the desire to maintain multi-alignment and avoid being grouped into either bloc in the emerging global power competition between the US and China. Given the link between Indo-Pacific cooperation and efforts to contain Beijing, engagement could put the Gulf countries in a precarious position vis-à-vis China, their largest trade partner, which also appears to be increasingly involved in the Middle East politically. The common association of the Indo-Pacific with the promotion of democracy, combined with the fact that democracy is a unifying element of the Quadrilateral Security Dialogue (Quad) countries, may also cause Gulf countries to view the framework with some suspicion.
The region’s reluctance to engage with the concept is rooted in the desire to maintain multi-alignment and avoid being grouped into either bloc in the emerging global power competition between the US and China.
Nevertheless, the Gulf’s engagement with countries located in the Indo-Pacific region is expanding. The ‘Pivot to Asia’ has led to a sort of ‘Asianisation’ of Gulf economies. The six GCC countries have long exported energy across the IOR and WP. Energy cooperation with the Gulf states was one of the foundations of Japan’s development, for example, and the GCC still represents around 90 percent of the country’s oil imports. Most of the region’s natural gas imports come from Qatar. Cooperation in the field of nuclear and renewable energy is more limited, but there appears to be significant potential. Beyond energy, other trades are also expanding, and the Gulf states rely heavily on labour from Indo-Pacific countries. Technology from these countries has been crucial for development projects such as the Dubai metro system. At the same time, the Gulf is investing heavily in Asia.

There has even been cooperation in maritime security, which lies at the heart of the Indo-Pacific framework and may be a natural area for cooperation with the Gulf countries. Japan’s energy security, for example, is highly vulnerable to maritime choke points due to its imports being concentrated in the Gulf, so it has a natural interest in deepening security cooperation between the Gulf and other parts of Asia. It is thus engaged in Gulf maritime security, conducting joint naval exercises, partaking in minesweeping and escort operations, and transferring defence technology as part of its strategic partnerships with Saudi Arabia and the UAE. South Korea has similar engagements. The global relevance of Gulf maritime security is likely to increase as projects such as the India–Middle East–Europe Economic Corridor (IMEC) move toward implementation, which could point to more Asian cooperation in the future, especially as the US, the region’s main security actor, shifts its focus to East Asia.
Conclusion 
The Arab Gulf countries are increasing their engagement with countries in the Indo-Pacific, even if they are not typically included within the Indo-Pacific framework and generally avoid using the term. Bilateral and ‘minilateral’ cooperation, however, could prove less efficient than broader frameworks. It is not clear that greater engagement with the Indo-Pacific would negatively impact the Gulf countries, as they are already integrated into the US-led security architecture. They maintain defence cooperation with countries in the Indo-Pacific while simultaneously fostering ties with China through trade, the Belt and Road Initiative (BRI), and groupings like BRICS, which are not dominated by the West. India, one of the key actors within the Indo-Pacific, maintains a similar stance of multi-alignment. Perhaps adopting the framework is unnecessary since ties are already expanding regardless. Alternative frameworks like the ‘Indo-Abrahamic axis’ may be more appropriate for conceptualising cooperation. Regardless of terminology, the global centre of gravity is shifting eastward, and the Gulf’s future will be increasingly intertwined with that of Asia.



Lillian Aronson is a Visiting Fellow at ORF Middle East and a Research Assistant at the Hungarian Institute of International Affairs.

### Iran’s Currency Redenomination: The Zero-Sum Game

When the Iranian rial tumbled to a historic low against the United States (US) dollar in September 2025, it was followed by renewed efforts of currency redenomination in Iran. It was an initiative first floated in 2008, but got approved as a bill by the parliament only in October 2025. The implementation timeline for the Majles-approved plan to slash four zeroes from the rial will now move through subsequent legal and administrative steps before rollout.
The success or failure of a currency redenomination is not determined solely by the act of slashing zeros, but by accompanying structural reforms.
Nonetheless, the success or failure of a currency redenomination is not determined solely by the act of slashing zeros, but by accompanying structural reforms. It is crucial to analyse historical precedents, establish the necessary structural requirements for a successful redenomination, and apply this approach to Iran. This nuanced analysis will enable a comprehensive diagnosis of whether the upcoming redenomination will be a foundational step towards economic recovery or simply another chapter in the nation's long struggle with inflation.
Requirements for a Successful Currency Redenomination
Currency redenomination has been attempted multiple times as a means of controlling inflation. However, historical precedents suggest that redenomination alone is often ineffective. An extensive study by Karnadi and Adijaya (2017) using a World Bank data set concluded that while redenomination can significantly decrease inflation and increase real Gross Domestic Product (GDP) per capita, its effectiveness is not guaranteed. The positive outcomes are statistically significant only when certain underlying conditions are met, primarily high government efficiency and political stability. These two meta-conditions can be broken down into five specific, observable pillars that separate successful reforms from cosmetic failures.

The first pillar is fiscal prudence. This is a non-negotiable prerequisite as the state must credibly manage its revenues and expenditure. Hyperinflation is primarily a fiscal phenomenon caused by the government's excessive spending and the subsequent printing of money to finance that spending. Before dropping six zeros from the lira on 1 January 2005, Türkiye had already driven inflation to single digits under an International Monetary Fund (IMF)-supported stabilisation and fiscal consolidation programme on which the redenomination plan was built.. In contrast, Zimbabwe removed zeros multiple times, but fiscal dominance persisted and hyperinflation returned until the local currency was abandoned. Research indicates that countries that implement redenomination within a credible macroeconomic framework experience significant declines in estimated inflation and increases in estimated real GDP per capita.
Before dropping six zeros from the lira on 1 January 2005, Türkiye had already driven inflation to single digits under an International Monetary Fund (IMF)-supported stabilisation and fiscal consolidation programme on which the redenomination plan was built.
The second important and closely linked precondition is the central bank’s independence. The monetary authority must be autonomous and free from political interference. Argentina’s multiple currency redenominations repeatedly collided with fiscal pressures and political cycles, undercutting its credibility. A notable example of this issue was in 2001, when the central bank governor was replaced for political reasons, undermining the central bank’s independence.

As a third prerequisite, a successful reform must break the public's expectation of future inflation. Currency redenomination has an important psychological component. Dzokoto et. al. in their research in Ghana found that a change in currency from ‘New Cedi’ to ‘Ghana Cedi’ impacted the public’s perception, with residents reporting that the new currency felt safer and easier to use. This psychological impact of currency usage must be taken into consideration while designing redenomination plans. Brazil launched “The Real Plan” in 1994—a two-stage procedure of substituting the old currency. First, it created a ‘virtual’ unit (Unit of Real Value or URV) to re-quote prices and contracts, breaking backwards-looking indexation. Later, as behaviours shifted, it introduced a new currency in the form of ‘real’. The monthly inflation fell from over 40 percent  to roughly 1–3 percent by year-end. Most failed redenominations neglect this psychological component.

Furthermore, the government must be stable enough to sustain painful but necessary reforms over the long term. Policy reversals and political infighting can instantly destroy credibility.  Any sign that the government's commitment to fiscal restraint is wavering will cause the public to lose faith in the new currency, risking relapse. In 2005, Turkey’s reform was backed by a stable policy mix that persisted through several years, reinforcing public and investors’ confidence in the new currency. In Argentina, currency redenomination was unsuccessful in controlling inflation against a backdrop of political instability. With resignations from two Ministers of Economy in 2001 and the governing coalition visibly weakening, stabilisation efforts were impacted. These findings were also replicated in other studies, which revealed that the positive effects of redenomination on inflation and real GDP per capita were statistically significant in countries with higher political stability and government effectiveness.
In 2005, Turkey’s reform was backed by a stable policy mix that persisted through several years, reinforcing public and investors’ confidence in the new currency.
As the final pillar, a country needs a strong external position, steady foreign exchange inflows, and manageable external debt since redenominations are particularly fragile during balance-of-payments stress.  Venezuela reconverted the bolívar multiple times in 2008, 2018, and 2021, yet inflation stayed as reserves eroded and dollarisation rose. Successful episodes often pair redenomination with external anchors, such as IMF programmes and market access, to bolster reserves and credibility. Where reserves are thin and foreign exchange hedging capacity is limited, new currencies are more vulnerable to speculative pressure.
Iran’s Preparedness for Effective Currency Redenomination
With the five pillars of a successful redenomination established, it is important to analyse Iran’s proposed reform against these conditions. The results of this diagnostic are summarised in Table 1.



First, the Iranian state's fiscal architecture is the primary driver of its chronic inflation. The budget is characterised by a deep structural deficit and over-reliance on volatile hydrocarbon revenues constrained by a stringent international sanctions regime. Historically, the government has consistently bridged this fiscal gap not through structural reform but through borrowing from the Central Bank of Iran (CBI), a direct monetisation of the national debt. Scarce funds are often channelled into politically favoured projects that distort price signals and crowd out productive private investment. While the Majles has now approved the redenomination bill, there has been no accompanying announcement of a credible fiscal consolidation programme. Without this, the government is merely preparing to remove old zeros while simultaneously creating the conditions for new ones to emerge.

Iran also fares poorly on the Central Bank of Iran’s (CBI) autonomy. It is institutionally subservient to the fiscal demands of the government, with its primary function often being the management of state finances rather than the single-minded pursuit of price stability. Government debt to the Central Bank reportedly increased by 72 percent year-on-year as of June 2024. Without a fundamental and legally ironclad reform of the CBI's mandate and governance structure, the redenomination will lack a credible monetary anchor.
Formal and informal wages are bargained with an inflation buffer in mind, a pattern visible in recurrent minimum-wage hikes that trail high inflation.
In terms of the third prerequisite of managing public expectations of future inflation, Iran’s unanchored inflationary expectations are a deeply embedded psychological phenomenon. Decades of price instability have created a powerful inflationary inertia that conditions the behaviour of every economic actor. Formal and informal wages are bargained with an inflation buffer in mind, a pattern visible in recurrent minimum-wage hikes that trail high inflation. According to this paper, expected inflation in Iran consistently exhibits a strong positive correlation with the frequency of price changes. Household savings are rapidly shifted into non-real assets such as gold, real estate, and foreign currency. Against this background, the government's purely numerical redenomination plan can be insufficient. It lacks a sophisticated, phased approach to de-index the economy and break the public's inflationary expectations before the new currency is introduced. By ignoring this psychological dimension, the reform can fail to address a key driver of persistent inflation.

In Iran, political stability is contested rather than consolidated. The Iranian system integrates an elected presidency with unelected veto centres, such as the Supreme Leader and Guardian Council, which can override policy interests. While the 2024 snap election brought Masoud Pezeshkian to the presidency, Iran has maintained a constant political fabric with Ayatollah Ali Khamenei at its helm. However, even President Pezeshkian has warned that internal infighting poses a greater threat than external enemies, an admission that the political framework remains fragile. Iran’s low international score for the World Bank’s “Political Stability and Absence of Violence” underscores persistent volatility risks. This is compounded by the role of the Islamic Revolutionary Guard Corps (IRGC) as a power centre in its own right, delivering a policymaking arena where intra-system rivalries can stall or even reverse the commitments needed for a redenomination to anchor expectations effectively.
The economy is largely isolated from the global financial system due to comprehensive sanctions, which have been exacerbated by the recent snapback of United Nations (UN) sanctions and the US maximum pressure policy.
Viable External Sector is perhaps the most acute vulnerability. The economy is largely isolated from the global financial system due to comprehensive sanctions, which have been exacerbated by the recent snapback of United Nations (UN) sanctions and the US maximum pressure policy. It has severely restricted Iran’s ability to earn hard currency and attract foreign investment. This chronic foreign exchange scarcity means the CBI lacks the firepower to defend the new currency in the open market, leaving it highly vulnerable to the same pressures that have continually eroded the value of the rial.

Ultimately, Iran is preparing to repaint the façade of a building with deep structural cracks. While the new currency may offer a temporary illusion of stability, history shows that such cosmetic fixes are no match for the persistent tremors of fiscal indiscipline, which could leave the nation's economic future as precarious as it was before.



Samriddhi Vij is an Associate Fellow at ORF Middle East.

### Russia–GCC Relations Revisited: Limits and New Opportunities

Russia–GCC relations are strengthening. Last month’s Russia–GCC Strategic Dialogue and the launch of scheduled direct flights between Saudi Arabia and Moscow are just two recent examples of this growing engagement. Strengthening the relationship is mutually beneficial: Russia needs partners since it remains cut off from the West, and the Gulf states seek multi-alignment in the changing global order. Yet the partnership is best understood as one of pragmatic, issue-based cooperation rather than strategic alignment, with a legacy rooted in the Cold War.
Historic Foes to Reluctant Partners
The Russian Empire was a key rival of the Ottoman Empire, which encompassed most of the Arab world, but the Bolshevik Revolution in 1917 and the creation of a new Middle East divided into European colonies and zones of influence paved the way for limited cooperation rooted in anti-imperialism. One of Vladimir Lenin’s first acts as the new Soviet Union’s leader was to publish the secret Sykes–Picot agreement that the Bolsheviks had discovered between the British and the French, which detailed plans contradictory to the promise of an Arab state made to Hussein bin Ali, the sharif of Mecca and the leader of the Arab revolt against the Turks.

The USSR’s revisionist communist ideology, however, limited its ability to make significant inroads in the region. This began to finally change in 1956, though, when Egyptian President Gamal Abdel Nasser, one of the leading figures in the Arab world at the time, turned to Moscow after Washington backed out on its offer to build the Aswan Dam.

The Gulf was more challenging for the Soviets to enter. The 1963 coup d’état in Iraq, which had been a friendly regime, provided an opening, and relations with the newly independent Kuwait, which feared the new government’s territorial ambitions, were established later that year despite the USSR having vetoed Kuwait’s entry into the United Nations just two years prior. Still, the USSR remained unpopular in the eyes of the other states, especially given its support for the Marxist Leninist regime in South Yemen and engagement in Oman’s Dhofar War, in which the Sultan’s Armed Forces fought a Marxist insurrection.

The establishment of the Organisation of the Petroleum Exporting Countries (OPEC) finally provided an impetus, given the USSR’s status as the largest non-OPEC oil producer. Despite Soviet efforts to gain a foothold in Saudi Arabia, cooperation was limited to the extent necessary to ensure the stability of the global oil market. In addition to coordination on pricing, this also meant that Saudi Arabia provided at least US$1.2 billion in crude oil to Soviet clients to cover obligations that Iraq was no longer able to fulfil during the Iran–Iraq war, for example.
New Opportunities and Challenges in the Post-Soviet Era
In the late 1980s and early 1990s, Moscow finally established diplomatic relations with all remaining GCC countries. In the lead-up to the Gulf War, the last Soviet leader, Mikhail Gorbachev, spent weeks engaged in a “diplomatic marathon” in the region to prevent US-led military action, and President Vladimir Putin’s vocal opposition to the 2003 invasion of Iraq a decade later again echoed Soviet anti-imperialist engagement with the Arabs a century earlier. For a Russia weakened by the collapse of the USSR, maintaining an international system that favoured multilateralism over the unilateral use of power by a superpower was a strategic necessity.

Russia’s continued support for the Bashar al-Assad regime in Syria, however, caused a cooling in relations in the early 2010s. The alliance with Iran, which strengthened after the collapse of the USSR, further strained relations. While the Assad regime is no longer a point of contention, Iran is still perceived as one of the primary threats to the Arab Gulf countries despite its current weakness and Tehran’s rapprochement with Saudi Arabia in 2023. The 12-day Iran-Israel war may have revealed the limits of Tehran’s partnership with Moscow, but the two countries’ international isolation and recent military engagements seem to be pushing them together nonetheless.

Counterterrorism has emerged as a new area of cooperation. Islam is the second largest religion in Russia and the dominant religion in Azerbaijan and the five post-Soviet ‘Stans’ in Central Asia, which Moscow continues to view as a vital part of its sphere of influence. Islamist extremism has a significant potential to spread and threaten Russian interests. The Chechen conflict made the need for cooperation especially clear, since Chechen separatists drew significant support from transnational terrorist networks like al-Qaeda, with much of the funding passing through the Gulf. Joint counterterrorism efforts have included information sharing and even international multilateral cooperation under the UN Joint Plan of Action.

At the same time, the Gulf may have begun to compete with Russia beyond the region. The Gulf states have engaged with the Horn of Africa for centuries, but their presence on the continent has expanded significantly in recent years. The UAE is now the fourth largest source of capital after the EU, China, and the US. Russia, too, is a major player in Africa. In Sudan, for example, it has thrown its weight behind the Sudan Armed Forces (SAF), a move that has enabled it to secure permission to establish its first naval base in Africa and solidify its presence along regional corridors, but one that may clash with some Gulf interests. The GCC countries are also expanding their presence in Central Asia, which could allow the region to decrease dependence on Russia and Turkey.
A Growing Partnership 
As Russia–GCC relations continue to deepen, the focus is now on expanding cooperation in the economic sphere, but also tourism, education, and culture. Trade reportedly increased sevenfold between 2021 and 2024. Since trade was a mere US$7.6 billion in 2021, however, Russia still lags far behind China, the EU, India, and other top GCC trade partners, and a significant portion of the increase reflects Gulf imports of cheap Russian oil sanctioned by the West. Public opinion nevertheless seems promising: A 2025 Saudi poll found that 57 percent of respondents believed it was important to maintain good relations with Russia, noticeably higher than in previous years.

Russia’s war in Ukraine has given relations new momentum. Despite Western pressure, the conflict has put Gulf countries in a powerful position as energy exporters. They maintained a neutral stance and became destinations for both people and companies fleeing the war, even benefitting economically by importing and re-exporting Russian oil. Continuing relations with Russia lends credibility to their multi-alignment strategies and their claims to being impartial mediators. This can benefit the West, too, as the GCC can help bring Russia to the negotiating table. The Gulf countries have already mediated multiple deals to return prisoners of war, and Saudi Arabia hosted the first round of US–Russia talks on ending the war.

At the same time, as the world transitions to a new global order, Russia is also serving as a partner for the Gulf in multilateral institutions like the BRICS. The UAE joined BRICS in 2024, and Saudi Arabia was invited to join but is still assessing membership. Saudi Arabia, Qatar, the UAE, Kuwait, and Bahrain are also dialogue partners of the Shanghai Cooperation Organisation (SCO), and they may one day be linked to Russia through a free trade agreement with the Eurasian Economic Union (EAEU), which already has a partnership agreement with the UAE and has held talks with Saudi Arabia.

The United States remains the dominant external power in the Gulf, and Russia is far from capable of counterbalancing its influence. As a result, Russia–GCC relations remain in the shadow of US primacy. At the same time, relations are clearly on a path of continuous expansion, driven by shifting geopolitical dynamics and the emergence of a more multipolar order, even if the GCC remains committed to the status quo. Only time will tell how far the trend goes, but for now, the opportunities appear greater than ever.



Lillian Aronson is a Visiting Fellow at ORF Middle East and a Research Assistant at the Hungarian Institute of International Affairs.

### Between Mediation and Advocacy: Oman’s Shifting Role in Gulf-Iran Relations

Oman’s Discreet Diplomacy: A Valuable Iran Channel
Culminating in hosting a couple of rounds of the United States (US)-Iran negotiations this year, Oman’s friendly relations with the latter have proven invaluable. Oman’s mediation role with Iran has been described as “leak-proof” for its strict confidentiality during such negotiations. For example, its role in negotiations between Saudi Arabia and Iran before the 2023 deal between the two countries remains lesser known than China’s. This lends Oman a credible and valuable track-two role in the Gulf and US approach towards Iran, securing talks and deals when and if needed.
Moreover, despite its likely disillusionment with the US, owing to its involvement in the 12-day Iran-Israel War this year, Oman reportedly maintained discreet communication channels between its American and Iranian counterparts during the war, ultimately leading to a thus-far lasting truce. It has also brokered the release of detainees in Iran when needed. Oman seems to aim for success again in negotiations between the US and Iran, similar to its efforts before the 2015 Joint Comprehensive Plan of Action (JCPOA). It also had a more recent success with an Iranian proxy, the Houthis, in mediating the ceasefire agreed this year with the US.


Oman’s mediation role with Iran has been described as “leak-proof” for its strict confidentiality during such negotiations.

Having such a backdoor to Iran in the Gulf is valuable. Although some of the other Gulf states may err on the leak-proof and discreet nature by which Oman mediates – and at times would likely appreciate their inclusion and a heads-up – it is this discreetness that elevates Oman’s role.

Oman’s Push for a Collective Gulf Rapprochement with Iran 
Furthermore, there is also an emerging anticipation that Oman seeks to expand this role. A recent exchange of statements at the 2025 Manama Dialogue illustrated an evolving Omani position that explicitly advocates for other Gulf states to follow in its footsteps, and the resistance it may face in doing so. The setting of this exchange was notable, given that Bahrain continues to have no diplomatic relations with Iran and considering the several challenges, has been slow in reconciliation.
Oman’s Foreign Minister Badr bin Hamad Al Busaidi said that “over the years, the GCC has at best stepped back and permitted the isolation of Iran. I believe this needs to change, and it needs to change now,” advocating for “inclusive dialogue” and “engagement”, rather than “containment” with Iran. While this stance is unsurprising to observers, it is rather new amongst official public statements. For example, an op-ed this year on Gulf News made a strong case about overlapping Gulf-Iran interests. Positive engagement with Iran does have its benefits, but there is no consensus on whether it outweighs the negatives.


Oman’s Foreign Minister Badr bin Hamad Al Busaidi said that “over the years, the GCC has at best stepped back and permitted the isolation of Iran. I believe this needs to change, and it needs to change now,”

An indirect response to the Omani foreign minister came the next day of the Manama Dialogue from Prince Turki Al-Faisal, former Saudi ambassador to Washington and London, and former director-general of Saudi Arabia’s intelligence agency. Al-Faisal questioned the “rosy” picture in which Iran was painted, despite its aggressive behaviour since 1979 and interference in the affairs of others. He also invited others to discuss the sincerity of Iran’s efforts to become an integrated partner in the Gulf or the world. This is, of course, not an official Saudi diplomatic statement, but a signal as to how Saudi Arabia may perceive the Omani position, should it solidify.
More is at stake than just competing rhetoric. Recent developments, such as the Iran-Israel 12-day war, leading to the Iranian strikes on the Al-Udeid base in Qatar in June 2025, and paving the way for an Israeli strike on Doha in September, have resurfaced a Gulf Cooperation Council (GCC) push for a joint defence architecture. Shortly after the Israeli strike on Doha, senior defence officials convened in the same capital to announce a strive to enhance intelligence exchanges, develop joint early warning systems, and transmit real-time air situation data to all member states. Such steps have echoed the GCC’s Joint Defence Agreement, Article II, from the year 2000.
While gaps remain in solidifying this push, the impetus lacks the resolve of one significant obstacle, which is crystallised by the aforementioned statements: unifying the Gulf’s threat perceptions and knowing which enemies to prepare for. If Oman’s push for better relations with Iran stems from a belief that Iran poses little or no threat to their security, then the commitment to strengthening the Gulf Cooperation Council's (GCC) joint defence structure is in jeopardy unless other Gulf countries share that belief.


Al-Faisal questioned the “rosy” picture in which Iran was painted, despite its aggressive behaviour since 1979 and interference in the affairs of others.

Oman’s Growing Disillusionment with Israel Complicates Matters 
More important than its threat perception of Iran, Oman’s position on relations with Israel is also important in getting Gulf buy-in for friendlier relations with Iran. There is an increasing disillusionment with Israel in Oman, which peaked during the Gaza war. “Despite all the efforts [to include] Israel and [integrate] it in the region, Israel and particularly [Prime Minister Benjamin] Netanyahu’s government ignored all the peace efforts and refused to engage in the two states solution process,” Dr Abdullah Baabood, a notable Omani scholar, has since noted.
Even in the months before 7 October 2023, which triggered the Gaza war, Oman appeared to have already become more anti-Israel. The Shura Council had been discussing and eventually voted for expanding the 1972 Israel Boycott Law. Specifically, they had requested that the boycott be expanded to include technical, cultural, economic, and sports relations, and that it prohibit all types of interactions—whether physical, virtual, or through any other means.
Overall, whereas there once was a time for observers to discuss Oman’s bilateral normalisation with Israel, such a prospect has become ever so unlikely. Case in point, the grand mufti of Oman, Sheikh Ahmed bin Hamad al-Khalili, has shunned such a prospect, describing it as a "losing deal" with an "expired authority". Before recent developments, observers had been emboldened to raise the likelihood of normalisation after the signing of the Abraham Accords. They were encouraged to think so, given the several high-level meetings involving the leadership of both countries over the years. Sultan Qaboos had received Israeli Prime Minister (PM) Yitzhak Rabin in 1994, and the following year sent the foreign minister Yusuf bin Alawi to Rabin’s funeral in Jerusalem after his assassination. In 1996, then-PM Shimon Peres visited Salalah, and then, much later in 2018, it was PM Benjamin Netanyahu who became the last to visit Oman to date.


We have long known that Israel, not Iran, is the prime source of insecurity in the region.

This change in Oman’s foreign policy towards Israel comes at a time when two Gulf countries have normalised relations with it (Bahrain and the United Arab Emirates), while extensive reporting has gone into the prospect of a third (Saudi Arabia) following suit. The remarks at the 2025 Manama Dialogue by Oman’s Foreign Minister Badr Al Busaidi had also noted: “We have long known that Israel, not Iran, is the prime source of insecurity in the region”. However, if Oman presents friendlier relations with Iran as one that comes in parallel with harsher relations with Israel, it may fall on deaf ears. Therefore, the Omani advocacy for warmer Iran-Gulf relations may receive more popularity in Gulf-wide foreign policy, should that not come at the cost of relations with Israel. Nonetheless, as already noted, it still requires uniting the Gulf in reducing the threat perception of Iran, and even alone, it will not be an easy task.

Conclusion 
Oman’s recent efforts to advocate for more cordial Gulf engagement with Iran mark a notable shift from passive mediation to a persuasive foreign policy that may test the regional consensus. It will require a recalibration of which nation constitutes the region’s primary source of insecurity. Moreover, while Muscat’s growing disillusionment with Israel resonates domestically and aligns with its moral outlook, it simultaneously distances Omani foreign policy from that of its Gulf counterparts that view Israel as a strategic partner. Regardless, Oman’s friendly relations with Iran will remain valuable for all Gulf countries (and the world). It is the emulation of this regional policy which will be a tough one to convince Oman’s neighbours of.



Mahdi Ghuloom is a Junior Fellow at ORF Middle East

### Will COP30 Deliver a New Era for Agriculture and Food Systems?

Historically, the nexus between agriculture, food systems, land degradation, and climate has rarely occupied centre stage at annual climate negotiations, despite the agricultural sector contributing to nearly one-third of global greenhouse gas emissions. However, agricultural issues have gained traction in recent years, especially at the Conference of the Parties (COPs). COP23 launched the ‘Koronivia Joint Work on Agriculture’ (KJWA), and COP27 in Sharm el-Sheikh initiated a joint work plan to implement KJWA outcomes. COP28 further reinforced its importance through the UAE Declaration on Sustainable Agriculture, Resilient Food Systems, and Climate Action, which urges countries to integrate agriculture and food systems into their nationally-determined contributions (NDCs) and National Adaptation Plans by 2025.

The transformation of agriculture and food systems will encompass a central pillar of the COP agenda.
For the first time, the transformation of agriculture and food systems will encompass a central pillar of the COP agenda. This shift reflects the dual identity of the upcoming host, Brazil, whose agricultural dominance and rich Amazon rainforests often exist in competition rather than in harmony. While the formal negotiation process remains multilateral and consistent across annual summits, COP Presidents retain autonomy in shaping the Action Agenda’s thematic priorities. Some hosts pursue new ambitions to cement a certain legacy, potentially perpetuating a “boom-bust” cycle where new announcements obscure delivery. Brazil, on the other hand, intends to keep implementation at the core of its agenda. This article argues that Brazil is poised to advance agricultural transformation through an implementation-focused agenda. Still, challenges regarding mobilising climate finance and navigating internal political conflicts may hinder its success. 

Spotlighting Locally-Rooted Climate-Resilient Agriculture and Food Systems
The COP30 agenda offers both formal and informal opportunities to synergise resilient food and agriculture frameworks launched through recent prior convenings, such as the Convention on Biological Diversity or UNCCD. These efforts build upon the three sequential COPs on biodiversity, climate change, and desertification in 2024, demonstrating incremental progress in fostering space to discuss agri-food systems and acknowledging the rights of smallholder farmers, including Indigenous Peoples and local communities.
COP30 places agriculture transformation at the core of  its agenda and plans to initiate formal processes to catalyse implementation. Brazil intends to launch activation groups to review over 300 previously launched COP initiatives and develop cohesive frameworks to unify approaches and unlock collective action. This will include initiatives on land restoration, sustainable agriculture, resilient food systems, and access to food and nutrition. Additionally, Brazil’s Ministry of Social Development is preparing the Belém Declaration on Hunger and Poverty to position food security and social protection at the centre of climate action.

COP30 places agriculture transformation at the core of  its agenda and plans to initiate formal processes to catalyse implementation. 
However, there is equal merit to advancing agricultural transformation in the conference peripherals or informal settings, such as side events, which enable knowledge-sharing between stakeholders and reflect more of a bottom-up approach. Reducing agricultural emissions requires highly context-specific and locally-tailored approaches, unlike the energy transition, which has well-known scalable solutions with clear returns on investment. Brazil is embracing muritáo, a concept underscoring the roles of local communities and indigenous groups in the agenda-setting process. The People’s Summit plans to convene social movements, grassroots organisations, traditional peoples and communities to showcase agroecology strengths and set forth strategies for regenerative agriculture and soil management. The thematic day for Agriculture, Food Systems, Food Security, Fisheries, and Family Farming will also facilitate engagement to catalyse partnerships and cross-sharing of good practices, keeping in line with plans to emphasise “implementation”.

Overcoming Financing Challenges 
Localised solutions to bolster resilient agriculture exist, but scaling requires financing. COP30 offers a potential gateway to mobilise financing for the agricultural sector and small-scale farmers. This includes developments in the Baku-to-Bélem Roadmap and the launch of the Resilient Agriculture Investment for Net-Zero Land Degradation initiative, which intends to help countries develop systems to mobilise and direct climate funding to farmers seeking to restore their land and complements other upcoming financing initiatives such as the Tropical Forest Forever Facility.
Currently, investments for agrifood systems transformation account for only 4.3 percent of total mitigation and adaptation finance, or roughly US$ 60-75 billion. This is far below the US$1.1 trillion required to meet Paris Agreement emissions reduction targets. Smallholder farmers,  who produce one-third of the world’s food supply, receive only 0.8 percent of climate finance annually, leaving them susceptible to climate shocks. The two biggest global climate funds are falling short in ensuring financing reaches grassroots farmer organisations. However, agriculture offers promising entry points for private companies, with the sector comprising the largest share of recent deals in blended finance data.

Smallholder farmers,  who produce one-third of the world’s food supply, receive only 0.8 percent of climate finance annually, leaving them susceptible to climate shocks.
Financial obstacles primarily stem from the uncertainty of financial returns, fragmented food production and coordination across the food value chain, and inconsistent impact reporting. Thus, attention needs to be directed towards developing a three-fold approach which involves developing tailored agriculture solutions, de-risking investments, and improving impact assessments measuring climate finance co-benefits. Given the context of falling official development assistance across Western countries, derisking investments to attract private financing for adaptation will remain a challenging feat. Additionally, the new collective quantified goal (NCQG) on climate finance launched at COP29 as part of the Baku-Bélem Roadmap is riddled with inefficiency and a lack of clarity, which will need to be smoothed over at COP30. The UNFCCC expert group has finalised the first set of adaptation indicators under the UAE Framework on Global Climate Resilience, with 10 proposed indicators directed to the food and agriculture sector. Each would assess efforts to respond to climate shocks, capture adaptation practices, establish agrifood frameworks, track land degradation, agricultural losses, and food insecurity.
Progress on the loss and damage fund could also benefit smallholder farmers. At COP30, the fund will launch a call for project proposal submissions. This type of funding would support farmers in implementing climate-resilient technologies to increase productivity and resistance to climate shocks, and produce positive ripple effects on food security and economic growth.

Progress and Polarisation Shape the Brazilian Context 
Given the range of climate disasters in recent years, Brazil has instituted stronger resilience policies, increasingly encouraging private sector investments. Overall, the country is progressing in prioritising low-carbon agriculture through its national policies, which largely focus on converting degraded land and pushing for sustainable fuel alternatives. Brazil’s Plan for Adaptation and Low Carbon Emission in Agriculture (ABC+ Plan) incorporates new practices to reduce up to 1.1 billion tons of CO2eq in the agricultural sector through the adoption of Sustainable Systems, Practices, Products, and Production Processes (SPSABC) in 72.68 million hectares by 2030. Brazil is also working to convert degraded and deforested areas into agriculture and livestock, aimed at covering 40 million hectares through its Caminho Verde Program. Lastly, Brazil’s National Policy for Biofuels mandates biofuel mixes which generate clean energy from agricultural waste such as sugarcane waste and manure.

The Sustainable Fuel Pledge should thus include a clear caveat that no land should be converted for crop cultivation to accommodate increased biofuel production.
These national policies are informing Brazil’s global positioning and proposals for the COP30 agenda. However, these policies also expose contradictions that could complicate Brazil’s narrative as a credible climate leader at COP30. For instance, the ABC Plan advocates for crop diversification, but realistically combines two to four monocultures. Brazil also recently launched the Bélem Commitment for Sustainable Fuels, an initiative to garner political support to quadruple production and use of sustainable fuels such as hydrogen, biogases, biofuels, and synthetic fuels by 2035. Although advocating for a shift away from fossil fuels is crucial, biofuel expansion also ironically risks perpetuating deforestation. Biofuel production has historically contributed to deforestation in Southeast Asian countries, producing biofuel from palm oil for the EU’s transport sector and reducing land for food production in other regions. The Sustainable Fuel Pledge should thus include a clear caveat that no land should be converted for crop cultivation to accommodate increased biofuel production.
Other internal divisions exist between environmentalists and agribusiness leaders in Brazil, limiting the country’s ability to garner appeal as climate justice leaders. Agribusinesses are preparing to position themselves as fundamental climate transition stakeholders, showcasing advanced best practices in sustainable agriculture, overshadowing their disproportionately large contributions to greenhouse gas emissions. These contradictions are exemplified by recent bills passed in Brazil to overhaul environmental permitting and suspend a soy moratorium, which would make way for further deforestation and destruction of communities. These internal dynamics, characterised by ambition and division, will shape how Brazil approaches sustainable agriculture at COP30.

Conclusion
The symbolic selection of the Amazon as the venue for COP30 marks a convergence of cross-cutting issues and a potential acceleration point for agriculture to emerge as a priority area to target for emissions reductions and financing. However, the remote location poses logistical barriers for many nonprofits and civil society groups, and Brazil must also navigate internal divisions to set forth a genuine and united front. For COP30 to succeed in catalysing transformations in agriculture and food systems, it will need to ensure commitments to implementation yield tangible outcomes, extending beyond declarations to leverage, finance, and scale locally-led solutions.



Leigh Mante is a Junior Fellow, Climate and Energy at ORF Middle East.

### Underwater Frontiers of Gulf Geopolitics: A Strategic Achilles’ Heel

Located at the intersection of energy and digital pathways, the Persian Gulf hosts infrastructures that are vital to the global economy. While its surface sea lanes have long been arenas of intense regional and international rivalries, the subsea dimension has also gained increasing geopolitical importance. It has become a strategic Achilles’ heel — exposed to hybrid threats ranging from intelligent naval mines and unmanned underwater vehicles to the sabotage of communication cables. What takes place beneath the surface is no longer merely a technical aspect of maritime security but a decisive factor that can reshape global power balances.

A Vital but Volatile Economic Hub
The Persian Gulf holds nearly half of the world’s proven oil reserves and around 40 percent of its natural gas. This abundance places its littoral states – Saudi Arabia, Iran, Iraq, Kuwait, the United Arab Emirates (UAE), and Qatar – at the very core of the global economy. Qatar, in particular, has emerged as one of the leading suppliers of liquefied natural gas (LNG), further reinforcing the region’s importance in the ongoing energy transition and in the diversification strategies of European and Asian markets.

Qatar, in particular, has emerged as one of the leading suppliers of liquefied natural gas (LNG), further reinforcing the region’s importance in the ongoing energy transition and in the diversification strategies of European and Asian markets.
This prosperity rests on a single maritime chokepoint: the Strait of Hormuz, a narrow corridor stretching barely 40 km wide at its most constricted point. Moreover, it facilitates roughly 20 percent of the global daily oil consumption and an increasing share of LNG shipments. Any disruption would have immediate and far-reaching consequences for world markets, whose stability is directly contingent upon the unhindered flow of this artery.
Yet the region is anything but stable. Iran, a major actor in the Gulf, possesses both conventional and asymmetric means to threaten freedom of navigation: tanker seizures, drone strikes, sabotage of port infrastructure, and mine warfare deployments. Its doctrine of asymmetric naval warfare relies heavily on swarm tactics, small fast boats, and unconventional assets, precisely to offset the superior naval capabilities of the United States (US) and its partners[1].
For the Gulf monarchies, the continuous export of hydrocarbons extends beyond serving merely economic interests — it is an existential question for them, underpinning both domestic stability and political legitimacy.

The Subsea Blind Spot and Its Strategic Leverage
The subsea dimension, long overshadowed by surface operations, is now a critical vulnerability. Telecommunications cables linking Europe, Asia, and Africa partly pass through the Gulf, complementing the dense networks of the Red Sea and the Indian Ocean. Their disruption would have systemic effects, paralysing communications and financial transactions[2]. In today’s interconnected economy, where trillions of dollars circulate daily via fibre-optic routes, a single severed cable can reverberate across stock markets, logistics chains, and data flows.
Similarly, the dense network of subsea pipelines and gas conduits — indispensable to daily hydrocarbon transport — lies in shallow waters that are easily accessible yet extremely difficult to secure. Offshore infrastructures, already vulnerable to sabotage and accidents, are even more at risk underwater, where surveillance is limited and intervention is complex. Global economic stability thus depends on infrastructures whose fragility offers a strategic lever to any hostile actor.

The dense network of subsea pipelines and gas conduits — indispensable to daily hydrocarbon transport — lies in shallow waters that are easily accessible yet extremely difficult to secure.
The drone attacks on Saudi oil facilities in recent years demonstrate the vulnerability of regional energy infrastructures[3]. Nothing is preventing such tactics from extending beneath the surface. The recent cutting of cables in the Red Sea, which disrupted data traffic, brought attention to the fragility of these systems. In the Persian Gulf, a deliberate subsea operation would pose even greater consequences, given the density of infrastructures, the confined geography, and the region’s centrality in global trade.
Iran and its proxies possess the appropriate tools: midget submarines, naval drones, and mine-laying capabilities. Their low cost contrasts sharply with the disproportionate damage they could inflict. Offensive mining remains the most alarming scenario. In the Strait of Hormuz, a few dozen well-placed mines could halt maritime traffic, provoke an immediate spike in oil and gas prices, and trigger cascading effects across the global economy[4].
Furthermore, technological innovation amplifies this risk. Intelligent naval mines, equipped with advanced sensors or artificial intelligence (AI), can identify ship types and remain dormant until remotely activated. Their use facilitates plausible deniability: an undersea explosion can be attributed to an accident or an unidentified actor. This ambiguity increases strategic uncertainty and complicates any collective response. Mining thus becomes not only a tool of disruption but a form of subsurface denial of access, allowing an actor to paralyse vital flows without overt confrontation.
This undersea blind spot is further aggravated by the limits of Gulf navies in subsea surveillance and resilience. Detection, mapping, and rapidly repairing cables or pipelines require advanced technologies and specialised expertise, concentrated mainly within Western navies and private operators[5]. Regional actors remain structurally dependent on external protection — a dependency that invites strategic probing and covert action.

From Hidden Vulnerability to Strategic Stewardship
The balance of power in the Persian Gulf no longer rests solely on surface capabilities or conventional deterrence. It increasingly depends on the ability to secure and control what lies beneath. The subsea environment has become a decisive arena of competition, where technological superiority, intelligence, and coordination define both resilience and influence. As global energy and data routes converge through the Gulf, control of this underwater space has become inseparable from the security of regional connectivity corridors such as the India–Middle East–Europe Economic Corridor (IMEC), which will rely on the same fragile network of cables and pipelines.
To meet this challenge, regional and external actors must move from passive protection to an active strategy. There are three principles to guide this shift.
First, awareness. Security begins with knowledge. Gulf states and their partners must build a shared understanding of the subsea environment — mapping infrastructures, monitoring activity, and identifying vulnerabilities. Integrating military, industrial, and commercial data streams would enable early detection of anomalies and credible attribution in the event of an incident. Without this shared and comprehensive set of information, deterrence remains theoretical and response inevitably reactive.

Integrating military, industrial, and commercial data streams would enable early detection of anomalies and credible attribution in the event of an incident. 
Second, resilience. The goal is not to eliminate threats but to limit their impact. Rapid repair capabilities, route redundancy, and pre-positioned assets form the backbone of credible resilience. Establishing regional teams for emergency intervention — backed by shared expertise and capacity building with trusted partners — would send a clear message: disruption would be costly but never decisive. In this regard, resilience must also be integrated into future regional infrastructure projects, ensuring that energy corridors, digital cables, and hydrogen pipelines are designed from the outset with repair and protection mechanisms in mind.
Third, cooperation. No state can secure the subsea domain alone. A Gulf Subsea Security Partnership linking Gulf monarchies with Western and Asian partners could harmonise surveillance, coordinate responses, and conduct joint exercises focused on undersea infrastructures. Maintaining a persistent naval presence and clearly signalling that any attack would provoke a collective response would enhance deterrence in a situation where ambiguity currently encourages aggression. Such a framework would also serve as the operational backbone of IMEC, transforming economic interdependence into structured security cooperation across the Indo-Mediterranean space.
For Europe and its partners, the stakes are direct. Energy flows and digital connectivity that link Europe to Asia depend on the security of this region. Supporting Gulf resilience through technological cooperation, intelligence sharing, and operational presence is therefore not an act of solidarity but of strategic necessity. Protecting the Gulf’s subsea infrastructures is thus not only about regional stability but about safeguarding the credibility of global connectivity initiatives that underpin Western strategic autonomy.



Jérémy Bachelier is a French Navy officer and former military fellow at the French Institute of International Relations (Ifri).



[1] Michael Connell, “Iran’s Naval Forces: From Guerrilla Warfare to a Modern Naval Strategy,” CNA Strategic Studies, Center for Naval Analyses, Arlington, VA, 2009.
[2] Douglas R. Burnett and Robert Beckman, Submarine Cables: The Handbook of Law and Policy (Leiden: Martinus Nijhoff, 2014), 3–7.
[3] International Energy Agency, “Oil 2021: Analysis and Forecast to 2026,” IEA Market Report (Paris: IEA, 2021), 22–24.
[4] Martin N. Murphy, Small Boats, Weak States, Dirty Money: Piracy and Maritime Terrorism in the Modern World (London: Hurst, 2009), 198–201.
[5] International Institute for Strategic Studies (IISS), The Military Balance 2023 (London: Routledge/IISS, 2023), 343–345.

### Following “Snapback” Sanctions, More Dilemmas for Iran’s Leadership

With the decision of the E3, the United Kingdom (UK), France, and Germany, to trigger the “snapback” mechanism, and the UN Security Council’s (UNSC) rejection of the resolution to extend Iran’s sanctions relief in September 2025, all UN Security Council sanctions are enforced. This risks pushing Iran to a situation even worse than a decade ago. However, Iran, backed by China and Russia, affirms that, in accordance with paragraph 8 of UNSC Resolution 2231, all its provisions will be terminated after 18 October 2025. Thus, any attempt by the E3 to trigger the so-called snapback is, by default, legally and procedurally flawed.
Iran has lost much of its leverage. Its regional proxies have weakened; three major nuclear sites have been destroyed in the US airstrike; it is hovering between war and peace, bracing for further Israeli airstrikes, as seen in June 2025. Meanwhile, over the past decade, Iran’s economic conditions have steadily deteriorated, intensifying social and political pressures and fuelling public anger.
Following the triggering of the snapback mechanism, Tehran’s official narrative has focused on downplaying the impact of the UN sanctions. The leadership’s approach is twofold: first, arguing that these sanctions are illegal; and second, reassuring the public that the economic situation will not deteriorate further. This, however, masks Iran’s dire reality. Although the relevant UN resolutions and corresponding sanctions primarily target Iran’s nuclear and ballistic missile programmes, the same sanctions would brand Iran as a defiant state in the eyes of the international community, making cooperation with China and Russia more challenging.

The UN-backed sanctions could also place Iran under Chapter VII of the UN Charter, casting Iran as a “threat” or “breach” to peace. Such identification could provide sufficient justification for some to direct further punitive measures against Iran — certainly a favourable outcome for Israel.
The prospective UN-imposed sanctions possess greater international legitimacy compared to US unilateral sanctions, which Iran has often framed as unfair and, at times, in violation of international law. The UN-backed sanctions could also place Iran under Chapter VII of the UN Charter, casting Iran as a “threat” or “breach” to peace. Such identification could provide sufficient justification for some to direct further punitive measures against Iran — certainly a favourable outcome for Israel.

The view from within Iran’s institutions
As a reaction to the snapback mechanism, hardliners—particularly in Parliament—welcomed it, even congratulating one another, while pushing for withdrawal from the Nuclear Non-Proliferation Treaty (NPT), advocating the pursuit of a nuclear bomb, and rejecting any further negotiations with the US. They blame Washington and Rafael Grossi, Director General of the IAEA, for his latest report. They believe that the said report triggered the Israel–US bombardment of Iran in June 2025 during nuclear talks. 70 hardline members of the Parliament called for a change in the defence doctrine. They noted that the use of nuclear weapons would constitute a violation of the Supreme Leader’s fatwa, whereas their development and maintenance as a deterrent remains a separate matter.
The celebration among Iranian hardliners is synonymous with the view that Tehran must take the initiative. Their views stem from a sense of policy reactivity since Rouhani’s presidency in 2013, when the decision was made to remain in the JCPOA after the US withdrawal and compounded by the soft stance toward Israel after October 7. Instead, unpredictability is now seen as a strategic tool by hardliners to regain leverage and deter acts of impunity.

While President Pezeshkian was in New York to deliver his speech at the UN General Assembly 2025, the Supreme Leader, Ayatollah Khamenei, stated in Tehran, “We will not stop uranium enrichment, and negotiating with the US will not be in our favor”.
By contrast, the reformist government currently in office views the hardline approach as falling into an endless abyss, as Masoud Pezeshkian recently remarked, “If we do not engage in negotiations, do you want to go to war instead? They attack — we rebuild — and then they attack again.”  As a result, it is sending more nuanced signals, indicating a willingness to negotiate with the US—but only under certain conditions.  Iran’s Foreign Minister, Abbas Araqchi, stated last week that Iran had been in contact with U.S. Special Envoy to the Middle East, Steve Witkoff, through mediators, reiterating that Tehran “has always been committed to diplomacy and peaceful solutions”. However, he added that the talks did not progress due to what he described as “excessive U.S. demands”. Reformists remain cautious, wary of engaging with President Trump’s administration, which they consider unreliable. They are, therefore, floating proposals for renewed talks contingent on conditions such as compensation for the airstrikes on Iran’s nuclear facilities and guarantees against future attacks. While President Pezeshkian was in New York to deliver his speech at the UN General Assembly 2025, the Supreme Leader, Ayatollah Khamenei, stated in Tehran, “We will not stop uranium enrichment, and negotiating with the US will not be in our favor”. This statement shows that Ali Khamenei’s approach differs from that of the current government, at least in terms of public positioning.

What next for the nuclear question?
Iran’s position so far is to insist on the nuclear programme as a right of nations, as it is peaceful before and after the war.  Following the US strikes on Iranian nuclear facilities, Tehran tried hard not only to postpone the snapback mechanism but also to exhibit a degree of compliance with international demands. On the sidelines of the UN General Assembly, Iran proposed direct negotiations with Witkoffbut he “did not show up for the meeting”. In addition, the new agreement signed in Cairo between Grossi and Abbas Araghchi, Iran’s Foreign Minister, whose resolutions will be enforced only after the Supreme Leader, Ayatollah Ali Khamenei’s approval. The agreement permitted the IAEA to resume inspections, which had been suspended during the 12-Day War between Iran and Israel. However, these efforts proved ineffective in delaying any further imposition of sanctions.
Under further external pressure, Iran still has a window for a paradigm shift: either pursue nuclear weapons or adapt to the existing world order. Given the lack of prospects for negotiations with the US, the reimposition of UNSC sanctions, and the looming threat of another attack, Iran now has a strong incentive to pursue nuclear weapons to safeguard its national security, particularly given the perceived threat from Israel.

The new agreement signed in Cairo between Grossi and Abbas Araghchi, Iran’s Foreign Minister, whose resolutions will be enforced only after the Supreme Leader, Ayatollah Ali Khamenei’s approval. 
However, Iran is aware that resuming nuclear activities could likely trigger another strike. Whether through withdrawal from the NPT or covert efforts to develop a nuclear weapon, any move in this direction would likely be detected, given Israel’s intelligence advantage, and could prompt a response from the US or Israel. And this second strike would almost certainly carry greater perceived legitimacy compared to the 12-Day War; the reimposition of the UN sanctions may be interpreted as a political justification for such an attack, even if not a legal one. Iran’s fragile economic situation, its lack of adequate equipment, and the risk of public opposition would make going nuclear an act of folly.
The most realistic option is for Iran to continue enrichment at a peaceful level while seeking to reform its security architecture. This would involve overcoming its traditional characteristics, namely isolationist tendencies and a pervasive sense of paranoia, and pursuing strategic alliances with the Gulf Cooperation Council (GCC) states on one hand, and China and Russia on the other. This could help Iran temporarily stabilise, mitigate internal chaos, and prevent further upheaval.

Overcoming international isolation and public disillusionment
Recent events, including the US-Israel attack on 13 June 2025 and the subsequent reimposition of UNSC sanctions, have reinforced two enduring characteristics of Iran’s policy. First, the Iranian perception of isolation—regionally and beyond—which stems from Iran’s unique ethnicity, history, language, religion, and political system. Second, a deeply ingrained paranoia in Iranian politics, characterised by a persistent belief in plots, spies, treason, and conspiracies. These fears are not entirely unfounded, as evidenced by the abrupt halt to five rounds of US-Iran talks, only for Tehran to be on the receiving end of missile attacks. Against this backdrop, nuclear weapons are seen by Iranian officials as the only reliable guarantee of national security.

The Iranian perception of isolation—regionally and beyond—which stems from Iran’s unique ethnicity, history, language, religion, and political system. 
The reimposition of UNSC sanctions would further entrench Iran’s economy in a downward spiral. Such a development could trigger market turbulence, heighten social dissatisfaction, and potentially spark renewed public unrest. So far, economically, Iran’s currency (the Rial) has fallen to its lowest level in history. Based on this trend, household prices will inevitably continue to rise. With one-third of society already living below the poverty line, that share is likely to grow even further in the future.
Iranian society has been under severe sanctions for about 20 years, and now the slogan of “resistance” no longer resonates with many Iranians—especially Generation Z, who were born and raised in a sanctioned country. Now it is their time to decide their future, and what they seek is not resistance but a comfortable life and lifestyle, free from the fear of war. But their fates now rest on the decisions of their leadership.



Zeynab Malakouti is a Research Affiliate at the Middle East Institute, National University of Singapore (NUS), and a Senior Fellow at the Global Peace Institute, UK.

### Mapping Interstate Trust: The Strategic Geography of Data Centres

As data and computing power become the foundations of global economic and security systems, data centres are emerging as the next layer of critical infrastructure, integral to artificial intelligence, finance, defence, and communications. Like energy networks or undersea cables, they are increasingly built, financed, and operated across borders, creating new forms of dependence and exposure between states.
Most current analysis examines data centres through technical and environmental factors, focusing on energy efficiency, sustainability, and computing capacity. While these considerations are important, they capture only a fraction of the insight needed to build data centres. Though policy discussions have expanded in recent years, examining issues such as data localisation, national security, and digital sovereignty, this work remains largely case-specific: valuable in isolation, but rarely connected to a broader picture. What remains missing is a systematic view of how these choices interact and what they collectively signal about international relationships.
Where data centres are located, and under whose legal and regulatory regimes they operate, reflects how states assess one another’s reliability and institutional strength. This is especially true for state-led or state-regulated projects, where decisions to co-develop facilities reflect judgements about political stability, regulatory credibility, and long-term trust.
Policymakers should treat the geography of data centres as an additional source of strategic awareness, a means to understand how trust, alignment, and dependence are structured across jurisdictions. Read systematically, these patterns can help governments evaluate how their digital ties reinforce or complicate broader diplomatic objectives, offering a clearer picture of how trust is built and managed in the digital age.

1. Reading the Geography of Trust
The global distribution of data centres follows familiar economic and technical logic: access to affordable energy, stable networks, fiscal incentives, and industry proximity. Yet these factors alone cannot explain where facilities are located, particularly when they involve state-led partnerships. Political judgements about reliability and alignment jointly determine who hosts critical compute and who does not.

Hosting a foreign hyperscale or sovereign cloud facility is therefore more than an investment decision. It demonstrates trust in the host’s stability, legal standards, and capacity to manage sensitive data. 
Hosting a foreign hyperscale or sovereign cloud facility is therefore more than an investment decision. It demonstrates trust in the host’s stability, legal standards, and capacity to manage sensitive data. Conversely, restrictions on foreign cloud providers or the enforcement of localisation mandates signal limited trust and a preference for sovereignty.
Since such hosting decisions involve long-term contractual, financial, physical, and legal commitments, their geography often reveals deeper trust than short-term diplomatic statements or trade flows. Viewed globally, these choices can be read as a ‘Digital Confidence Map’:


 	Concentration and clustering of facilities show where institutional trust in legal and regulatory systems is high.
 	Absences or withdrawals indicate where trust has weakened or never existed.
 	Shifts in hosting patterns, such as new regional build-outs or cancellations, suggest changing alignments or perceptions of risk.

Other signals, such as data-flow agreements, adequacy decisions, or cybersecurity cooperation, help explain why these patterns form. However, the geography itself remains the clearest indicator: where compute capacity is physically placed reflects how states assess one another’s governance and predictability. When such trust takes material form through shared infrastructure, it becomes a measure of confidence, an observable record of where states are willing to extend reliance beyond their borders.

2. Digital Confidence Map in Practice
Today, global capacity remains concentrated in a few hub states (mainly the United States, China, and parts of Western Europe), whose control over data flows provides both economic and political leverage. Tracking how this concentration changes over time reveals how standards and influence are evolving.
Equally important is how other states position themselves within or between these hubs. Over the past year, the governments of the United Arab Emirates (UAE), Singapore, and Brazil have made targeted decisions to host specific providers, negotiate selective cloud-sovereignty partnerships, or impose localisation rules. These choices reflect assessments of which partners can be trusted, how much dependence is acceptable, and how to maintain strategic flexibility.
Analysing such a map could reveal three dimensions of these dynamics: first, which states are deepening alignment with the United States (US), China, or regional systems; second, how closely governments are connected through shared infrastructure or reciprocal hosting; and third, where states diversify partnerships to balance influence and limit exposure.
Together, these indicators move analysis of the digital order beyond a US versus China binary, showing how a wider range of actors form overlapping networks of alignment built on selective trust.
The relationship between the European Union (EU) and the UAE illustrates this process in practice. Both actors are expanding their digital infrastructure networks but through distinct institutional models: the EU builds trust through legal and regulatory certainty, while the UAE demonstrates it through its investment scale and operational reliability. Their joint data centre projects in France and Italy show how these different pathways to reliability can converge into functional confidence. European partners accept UAE investment for its know-how and efficiency, while Emirati partners show they can operate within stringent European compliance frameworks. This cooperation is not incidental; rather, it represents an alignment made visible through infrastructure. On a Digital Confidence Map, such links would stand out as connectors between governance systems, revealing where trust has become mutual enough to support shared capacity and where future disagreements would need to be managed within that interdependence.

3. A Case for Extracting Insight 
Extending this approach beyond individual cases would make it possible to observe how digital interdependence is taking shape globally and how it interacts with national efforts to maintain control. The US, China, and parts of Western Europe continue to dominate global capacity, but other states, such as the UAE, are building connections across multiple systems. These linkages will shape future relationships and should not be analysed in isolation. Each new facility shifts the balance of trust and influence across the digital economy.

Once infrastructure is shared, it becomes part of the political relationship between states, where dependence on a foreign cloud or compute provider connects domestic resilience to external governance and stability. When that trust weakens, policy responses follow.
Simultaneously, more than three-quarters of countries have now introduced some form of data-localisation measures, reflecting a growing tension between trust and sovereignty. Domestic control can strengthen resilience but may also limit openness. Analysing where localisation coexists with cross-border cooperation would help identify which governments are managing this balance and which are turning inward. Once infrastructure is shared, it becomes part of the political relationship between states, where dependence on a foreign cloud or compute provider connects domestic resilience to external governance and stability. When that trust weakens, policy responses follow.
Developing a consolidated view of these relationships would allow policymakers to assess three dimensions of interdependence: the level of exposure to foreign operators in critical infrastructure; the emergence of regional coalitions capable of shaping standards; and early signs of strain where regulatory barriers or provider withdrawals suggest declining confidence. Much of this information already exists across public filings and regulatory disclosures. The missing step is to organise it into a coherent analytical framework.
The value of a Digital Confidence Map therefore lies in clarity, not prediction. For governments, such visibility provides a factual basis to assess whether their digital dependencies reinforce or complicate their foreign policy goals and to identify where recalibration may be needed.



Ana Blatnik is a policy professional currently working at the Mohamed bin Zayed University of Artificial Intelligence.

### Bridging Farm and Table: AgriFoodTech in the UAE

The United Arab Emirates (UAE) currently imports 83 percent of its food, and its food consumption is expected to rise to  8.8 million metric tonnes by 2029. Bound by high food-import dependence and increased consumption driven by rapid population growth, the UAE government has framed food security as a national priority. It aims to produce 50 percent of its food domestically and secure the top spot in the Global Food Security Index by 2051. However, achieving these goals depends on cultivating a sustainable food system that encapsulates interlinked aspects of food production, distribution, acquisition, consumption, and waste disposal.
The AgriFoodTech sector is rapidly evolving to drive this transformation. AgriFoodTech combines aspects of AgriTech and FoodTech. While AgriTech focuses on leveraging technology to improve production and efficiency of agricultural outputs, FoodTech covers technology to improve efficiency and sustainability of food processing, distribution, and consumption. The UAE’s 2051 Vision for National Food Security Strategy fosters a strong enabling environment to attract investments and spur innovation through its tax-free zones, logistical prowess, and strategic geographic location. Although technology is revolutionising production and logistics across the UAE’s food value chain, it must be complemented by data-informed planning to bridge demand and supply gaps and conducting behavioural campaigns to shift consumption trends. These should also include encouraging platforms that promote catalytic funding and upskilling to equitably scale innovations and integrate them into the broader food system that contributes to long-term food security.

An Overview of the UAE’s AgriFoodTech Sector
Since the launch of the National Food Security Strategy in 2018, the UAE has integrated technology in all its food supply chain stages, from upstream agricultural production and storage, midstream processing, to downstream distribution to consumers.

Hydroponics uses 60 percent less fertiliser and 90 percent less water compared to traditional farming, while precision agriculture enables water-efficient crop growth, leading to higher production. 
Given the UAE’s arid climate, limited water supply, and extreme heat, alternative farming methods are crucial for increasing resilient crop production. As of 2021, indoor farming composed the largest subcategory of AgriTech companies in the UAE, overtaking precision agriculture that had dominated the market in 2019. Indoor farming uses hydroponics, energy-efficient lighting, and smart technologies to maximise crop production amidst constrained resources. Hydroponics uses 60 percent less fertiliser and 90 percent less water compared to traditional farming, while precision agriculture enables water-efficient crop growth, leading to higher production. Forecasting trends predict the most momentum towards innovations in urban and vertical farming, aquaculture, and technology integration for sustainable food production.
Transferring agricultural products from farm to table requires advancements in logistics and transport to bolster supply chain resilience from extreme climate shocks and to reduce food loss. Source International’s Jebel Ali hub, for instance, combines solar-assisted cooling, IoT sensors for environmental monitoring, and automated guided vehicle systems to maximise delivery capacity.
On the consumption end, the expansion of digital platforms such as e-commerce, ghost kitchens, and subscription-based meal kits facilitates widespread and rapid consumer access. This shift has led to the development of last-mile centralised packing centres, temperature-controlled vans, and route optimisation software to reduce the transit time of food delivery. The UAE’s food delivery market is forecasted to reach US$2.79 billion by 2026, in tandem with the rise of smartphone adoption and rising income households.
Figure 1: UAE AgriTech by Subsector
 
Source: UAE Investor Navigator 

Challenges and Policy Considerations 
Amidst this acceleration, several challenges must be addressed to ensure technology enables progress towards food security.
First, there is a disconnect between tech-driven supply and consumer demand. The current AgriTech market is motivated by a need to enhance crop productivity and cultivation, but consumer demand expectations do not entirely align with AgriTech-enabled crop outputs. Although 65 percent of consumers are inclined to seek sustainable and healthier food options, and reports suggest declining meat consumption, studies note that only 21 percent of Emirati respondents would consider a complete shift to plant-based alternatives. Reluctance towards adopting alternative proteins like cultured meat is linked to cultural habits and religious beliefs, which significantly influence dietary decisions. Cereals also lead in the most consumed food category, comprising 39.8 percent of total consumption. However, existing high-tech innovations such as hydroponics and vertical farming cultivate a limited leafy green selection, with 80 percent of crops being lettuce, spinach, broccoli, cucumbers, or peppers. Startups are leveraging aquaculture to explore alternative proteins like tilapia (a type of fish which is easiest to breed) and experimenting with plant-based options, under the consensus that livestock production contributes significantly to greenhouse gas emissions. Consumer demand for these protein alternatives remains low and inconsistent. This is further compounded by the fact that leveraging AgriTech for local production instead of importing is energy-intensive and 25 percent more costly. There are promising initiatives like Sharjah’s wheat farm, that is cultivating high-protein grains to meet demand for staple products. Further strengthening research on consumption patterns and implementing behavioural interventions will help align AgriTech supply with demand.

The current AgriTech market is motivated by a need to enhance crop productivity and cultivation, but consumer demand expectations do not entirely align with AgriTech-enabled crop outputs.
Another issue lies in the tension between increased accessibility enabled by AgriFoodTech and the persistence of food waste in the hospitality sector and at the household consumption level. Food loss refers to edible food that spoils before reaching consumers, while food waste is good-quality food discarded by consumers. In the Middle East, the UAE is the third-largest producer of food waste with an estimated annual 95kg of food waste per capita and an average annual household food waste generation of 923,675 tonnes, a third of which occurs at the consumption stage. This waste nearly doubles during large-scale events such as Ramadan. While technology has helped reduce upstream food loss at the production stage, they have also contributed to greater food waste at later stages. The “technology efficiency paradox” notes that while efficiency improves processes, it fails to limit growth in consumption and production. In wealthier regions, food waste persists due to rapid accessibility via grocery stores, restaurants, and on-demand delivery apps. In the UAE, entrepreneurs are addressing this challenge through digital solutions like food cycling apps and redistribution platforms targeted towards the hospitality sector. However, food waste reduction strategies at the household level remain underdeveloped.
Although there has been substantial capital influx to finance AgriFoodTech startups in recent years, the AgriFoodTech boom has largely favoured new market entrants and foreign direct investment. Moreover, many solutions remain in early pilot stages and have yet to be commercially scaled, limiting their impact on domestic food production. To illustrate, Abu Dhabi Investment Office committed over AED 1 billion for foreign direct investment and attracting new AgriFoodTech companies. This trend is largely because only 0.4 percent of the UAE’s population is employed in agriculture, a sector that contributed 0.8 percent to GDP in 2019. With emiratisation in mind, the AgriFoodTech revolution hinges on developing a pipeline of green talent. Although they are a fraction of the population, small-scale farmers should be prioritised in the upskilling process. A study found that small-scale farmers in the UAE experience high costs and technical obstacles, preventing them from adopting precision agriculture technologies. Without continued inclusive financing or upskilling programmes, state-backed investments risk disproportionately benefiting new market players instead of supporting existing producers.

Ensuring AgriFoodTech Meets Food Security Needs 
The UAE government has fostered a strong enabling environment for private sector-led AgriTech innovations to bolster domestic food production. To ensure adequate integration of these products within the overarching food system, the UAE must adopt a socio-technical approach by strengthening data collection and bridging the demand-supply gap, implementing behavioural campaigns to reduce waste, and continuing to develop platforms that promote catalytic investments and green upskilling.

The government should pair AgriFoodTech advancements with culturally-sensitive public health campaigns on safe food storage, create demand-side incentives to prevent over-purchasing, and urge at-home composting to divert up to 150kg of waste from landfill.
There are opportunities to strengthen coordination between food value chain segments in emerging AgriFoodTech cities like FoodTech Valley, which is expected to house an interconnected ecosystem linking domestic production and distribution to serve local markets. In September 2025, Food Tech Valley signed two MoUs with Al Seer Group to launch a food logistics hub and with Al Ain Farms Group to improve distribution efficiency and reduce waste. To make these partnerships more effective amid shifting consumer preferences, expanding data collection on buying behaviour can guide pricing and marketing for emerging products like alternative proteins. Moreover, the government should pair AgriFoodTech advancements with culturally-sensitive public health campaigns on safe food storage, create demand-side incentives to prevent over-purchasing, and urge at-home composting to divert up to 150kg of waste from landfill. There is  progress through the UAE’s partnership with ne’ma, the national food loss and waste initiative, to lead a comprehensive study on cross-sectoral food waste, to reduce it by 50 percent by 2030. Promoting coordination between upstream, midstream, and downstream sectors will also help to implement waste valorisation loops to treat food loss and food waste (FLW) across the entire value chain.
Moreover, increasing catalytic investments, technical assistance, and training for small-scale farmers will help balance the AgriFoodTech enterprise landscape and facilitate project commercialisation. The Emirates Development Bank’s AgriTech Loans programme allocates AED 100 million to support local suppliers in adopting technologies. Additionally, Emirates Growth Fund targets UAE-based small and medium-sized enterprises (SMEs) that experience challenges with scaling pilots to commercially viable operations. Moreover, partnerships like Khalifa University and Silal support university students and farmers in advancing agricultural research and development.

Conclusion
Although AgriFoodTech is a significant component of the UAE’s national strategy to bolster domestic food production and food security, it will only prove to be practical if nascent technologies successfully scale and meet local demands. Forthcoming solutions must continue to be culturally-sensitive, locally-inclusive, and paired with strategies to balance accessibility and FLW prevention.



Leigh Mante is a Junior Fellow, Climate and Energy, ORF Middle East.

### Railways and Realignments: Charting the Gulf’s Inclusive Path into the IMEC

Introduction
The announcement of the India-Middle East-Europe Economic Corridor (IMEC) during the 2023 G20 summit represents the dawn of a new era in connectivity from South Asia to Europe. Central to this vision is broadening the Gulf’s role in IMEC while navigating the challenge of Israel’s involvement. This will become more viable with the advent of the Gulf Cooperation Council (GCC) Railway, a rapidly progressing connectivity project designed to link every Gulf state by rail. If effectively aligned with IMEC, the GCC Railway could transform the corridor from having the smaller Gulf States as peripheral participants to forming part of its logistical backbone.

Broadening the Gulf’s Role in IMEC 
Observers have noted that while the UAE and Saudi Arabia are viewed as pillars of the IMEC in the Gulf, other Gulf States may feel excluded from the initiative. If not for the economic benefits, the power politics at play are also enticing, with IMEC competing with China’s Belt and Road Initiative (BRI) and the Trans-Caspian International Transport Route. Bahrain, in particular, has reportedly expressed interest in IMEC during a closed-door meeting with a delegation of senior bipartisan and bicameral US congressional staff fellows organised by the N7 Initiative, a partnership between the Atlantic Council and the Jeffrey M. Talpins Foundation.

One vision of the route is for cargo shipments to depart from western India to ports in Saudi Arabia, the UAE, or Bahrain.
The recent rail agreement between the UAE and Oman, which has made some progress, is seen as a blueprint for Oman and other countries that are not yet part of the IMEC to join the corridor. Bahrain has also been proposed as a potential entrant. One vision of the route is for cargo shipments to depart from western India to ports in Saudi Arabia, the UAE, or Bahrain. From there, the goods would be transported by high-speed rail through northern Saudi Arabia and Jordan, finally reaching Israel via the Sheikh Hussein crossing, onwards to Haifa and then Europe via short-sea shipping lanes. This routing remains conceptual and subject to future feasibility studies. Qatar and Kuwait could also play an important role as intermediary nodes that shift some of the pressure away from the other nodes as the project develops.

The Israel Factor
While India, Saudi Arabia, the UAE, the EU, France, Germany, Italy, and the US signed the Memorandum of Understanding (MOU) on IMEC, other countries that are not formal signatories—Greece, Israel, and Jordan—are nevertheless implicitly included as part of the envisioned corridor. This has made IMEC’s horizon more complex. Weeks after the MOU was signed in 2023, the 7 October attack by Hamas against Israel triggered a war in Gaza.
The war stalled the prospect of a Saudi-Israel normalisation deal, which was important to Israel’s involvement in the IMEC, given that Saudi Arabia remains the only signatory without official diplomatic relations with the country. Some observers described the war in Gaza as having “put a nail in the coffin” of the IMEC, due to rising tensions between Israel and its neighbours. Nonetheless, as policymakers sought alternative pathways not predicated on a rapid resolution in Gaza, peace has started to emerge, and with it, a revival of hope for the IMEC. Notably, Gaza itself is now speculated to play a potential role in the future of the project.
The main obstacle, of course, is the question of Israel’s normalisation with the wider Gulf. While the UAE and Bahrain have already taken that step, and Saudi Arabia’s prospects have been reported on extensively, the remaining GCC states have not shared that attention. This leaves a degree of political uncertainty around their inclusion in the project should Israel remain a part of it. It also makes Saudi Arabia’s position pivotal; Riyadh could refuse to move forward without broad Gulf alignment, especially amid persistent sensitivities over normalisation. As a result, Saudi Arabia may seek to frame any future engagement with Israel, and by extension with the IMEC, through a collective GCC approach. This could ensure that public sentiment is managed more effectively and that countries like Qatar, Oman, and Kuwait play a constructive role in shaping a more inclusive regional vision for the corridor. 

The war stalled the prospect of a Saudi-Israel normalisation deal, which was important to Israel’s involvement in the IMEC, given that Saudi Arabia remains the only signatory without official diplomatic relations with the country.
It would be helpful to recall the “Tracks for Regional Peace” plan first proposed by Israel’s then-Transportation Minister Israel Katz. The 2017 proposal included rail transport from Haifa through Jordan to Saudi Arabia, the UAE, and Bahrain. In 2023, Prime Minister Benjamin Netanyahu reportedly revisited the idea in an address to American Jewish leaders in Jerusalem. For Israel, the IMEC vision is no stranger, but the challenge has not necessarily become any easier despite the progress achieved under the Abraham Accords.

Railway Connectivity as a Key Enabler
Beyond diplomatic challenges, infrastructure development is vital for the success of the IMEC. Indeed, while the India-Gulf segment of the proposed corridor is primarily maritime, there remains a need for rail and overland connectivity within the Gulf and towards Jordan and Israel, after which maritime routes would resume to Europe.
Here, the plans underway for the GCC Railway, a proposed 2,177-kilometre network, play a crucial role in the IMEC. The Ministerial Council of the GCC has set December 2030 as the final deadline for its completion. The volume of goods expected to be transported through the railway has been projected to reach 95 million tonnes by 2045, according to the GCC Secretary General Jasem al-Budaiwi.
At a national level, the UAE’s Etihad Rail and Saudi Arabia’s cargo-train network are important phases for this project and have been largely built, though additional upgrades may still be required. In Saudi Arabia, the routes towards Qurayyat from Dammam through Riyadh or Ras al-Khair have been identified as necessary for IMEC. The same applies to a planned route from Qurrayat to the KSA-Jordan border. Intermediary, sea-anchored rail connections are also envisioned, including the planned King Hamad Causeway from Bahrain to Saudi Arabia, and another proposed bridge from Qatar to Bahrain.

New Trade Agreements as Additive Enablers 
While the Customs Union of the GCC and the Greater Arab Free Trade Area (GAFTA) Agreement integrate the Gulf within the IMEC, there are additional enablers that could accelerate the IMEC’s progress and bring all the Gulf States into deeper alignment. The UAE-EU Free Trade Agreement, currently under negotiation, could feed into the success of a broader GCC-EU Free Trade negotiation. If not, the EU appears to be considering multiple bilateral Free Trade Agreements with individual GCC countries, alongside the UAE, particularly with the materialisation of bilateral Strategic Partnership Agreements (SPAs) with all of them.

The UAE-EU Free Trade Agreement, currently under negotiation, could feed into the success of a broader GCC-EU Free Trade negotiation. 
Similarly, after the widely noted Comprehensive Economic Partnership Agreement (CEPA) with the UAE, India is reportedly looking at trade agreements with other individual Gulf countries. India’s Commerce and Industry Minister Piyush Goyal has said that one with Oman will be signed soon, and the terms of reference with Qatar are being discussed. Notably, the prospect of an EU-India FTA may act as a further enabler crucial for the IMEC.

Conclusion 
While the UAE and Saudi Arabia remain central players in IMEC’s success, the corridor’s full potential may lie in broader, inclusive regional participation. Infrastructure expansion, trade agreement proliferation, and crucial diplomatic ties will play an important role in integrating the rest of the Gulf into the IMEC. As the GCC Railway nears its projected 2030 completion target, it can function as the Gulf’s connective tissue within the corridor. Such integration would amplify the Gulf’s logistical relevance. Positioning the IMEC as a GCC-driven initiative could transform a project challenged by geopolitical divisions into one defined by regional cooperation. Such an approach would allow all the Gulf States to participate in this distinctly valuable opportunity.



​​Mahdi Ghuloom, Junior Fellow, ORF Middle East.

### The UAE Climate Finance and ODA Nexus : An Evolving Strategy for the Global South Green Transition

Climate finance, albeit a cliché, is perhaps the biggest bottleneck to green transitions globally, especially in the Global South. Public and private investments in clean energy in emerging and developing economies (ED-MEs) must triple from US$770 billion in 2022 to US$2.2–2.8 trillion annually by the early 2030s, and remain at those levels through 2050 to enable a sustainable transition to low-carbon economies.
Financial contributions from developed countries for climate action to ED-MEs have been disappointing. According to the Organisation for Economic Cooperation and Development (OECD), developed countries have contributed approximately US$94.1 billion in public international finance in 2022—via bilateral channels, multilateral channels, and export credits—while the total climate finance flowing to EM-DEs stood at US$244 billion (excluding China) in the same year.
Amid rising geopolitical tensions, mounting domestic fiscal pressures in Europe, and the dramatic withdrawal of the United States (US) from the Paris Agreement earlier in 2025, the West has become a rather unpredictable and unreliable partner in the fight against climate change. The pool of international public finance from these geographies appears unlikely to increase dramatically and meet the vast capital requirements of the Global South. According to the Official Development Assistance (ODA) statistics, the OECD projects a 9-17 percent decrease in ODA for 2025, following a 9 percent decline in 2024. Forecasts for 2027 suggest that ODA levels will return to what they were in 2020, despite increasing demands. For the first time in three decades, France, Germany, the United Kingdom (UK), and the US have simultaneously pruned their ODA contributions in 2024.

The Knights with Shining Sovereign Wealth Armour 
Against the backdrop of a receding West, the oil-rich Gulf States are emerging as a promising source of growing financial assistance and leadership. The sovereign wealth funds in the region are investing heavily in green energy—both domestically and globally—committing over US$100 billion toward renewable energy, carbon capture, and green hydrogen projects globally.
In an era of heightened climate consciousness, declining oil revenues, and increasing pressure from the proliferation of carbon border adjustments, diversification and decarbonisation have become strategic considerations for the Gulf economies. Investment in clean energy assets represents an economic imperative, opening up opportunities in sustainable industries and paving the way for long-term growth and collaboration across regions.
For the Gulf states—the historical beneficiaries of the fossil fuel boom—this transition marks an opportunity to demonstrate leadership in global energy transitions. It also signals a new positive identity for the region—one that is aligned with sustainability, innovation, and climate realism. Moreover, by investing in large-scale solar projects, green hydrogen infrastructure, and securing a stake in critical mineral and material supply chains, these states are positioning themselves as central actors in energy markets of the future.
In 2023, global sovereign investors allocated more funds to green assets than black assets, reaching a historic level of US$26.1 billion in investments within energy transition, ranging from electric vehicles (EVs) and renewable energy to battery storage. Nearly half of the aforementioned amount can be attributed to the Gulf Cooperation Council (GCC) Sovereign Wealth Funds (SWFs). The so-called “Oil 5” - Saudi Arabia’s Public Investment Fund; Abu Dhabi’s investment trio:  Mubadala Investment Company, the Abu Dhabi Investment Authority and ADQ; and Qatar’s Investment Authority –combine higher risk tolerance and long-term investment horizons, making them the ideal drivers of clean energy investments globally, and more so in EDMEs. 

The UAE: From Connectivity to Climate Capital 
The success of the United Arab Emirates’ (UAE) COP 28 Presidency in 2023 demonstrated the country’s willingness and potential to lead on climate finance beyond rhetoric. The  UAE government-backed US$30 billion Aterra Climate Fund (a private investment fund)  aims to mobilise US$250 billion in global investments by 2030, exemplifying a case in point. Moreover, UAE state companies and funds are linked to nearly US$200 billion worth of global clean energy investments, one-third of which is directed towards developing countries. Masdar, a UAE state-owned renewable energy company, has invested in clean energy alone in about 40 countries, valued at more than US$30 billion in equity investments.
The UAE SWFs have expanded their investment scope from only green energy generation avenues such as renewables (solar and wind), networks, and grids to include other emerging technologies such as green hydrogen, energy storage and management, carbon capture and storage, and manufacturing supply chains, reflecting a comprehensive strategy for the energy transition. 




Fund/Entity
Mandate


Mazdar - Abu Dhabi Future Energy Company)
Founded in 2006, and jointly owned by ADNOC, Mubadala, and TAQA, Mazdar is a renewable energy company with operations in over 40 countries across six continents, with a combined capacity of over 51 gigawatts (GW).


Mubadala Investment Company
Abu Dhabi-based sovereign investor with US$330 billion assets under management (AUM) and investments across 50+ countries in sectors

Including energy, renewables, financial services, healthcare, utilities, and technology


ADIA  - Abu Dhabi Investment Authority)
Established in 1976, ADIA is a globally diversified investment institution with global investments ( North America:40-60 percent ; Europe: 15-30 percent; Developed Asia: 5-10 percent, and Emerging Markets: 10-20 percent) across asset classes, including equities, private equities, real estate, fixed income, financial alternatives, and infrastructure.


ADQ  -Abu Dhabi Developmental Holding Company
Established in 2018, ADQ is a sovereign investor that invests in business platforms focused on critical infrastructure and global supply chains across sectors, including energy and utilities, food and agriculture, transport and logistics, financial services, and sustainable manufacturing.


ICD  - Investment Corporation of Dubai
Established in 2006, with over 1.4 trillion worth of total assets, ICD

manages Dubai’s government portfolio investments domestically and internationally.



Source: Compiled by the Author

The G4 Project: The Gulf Global South Gateway Project 
Furthermore, the UAE’s climate leadership, in fact, predates COP28, which is evident in Masdar’s long-standing renewable energy investments and the country’s proactive efforts to convene global finance players. Beyond being a provider of capital, the UAE is also positioning itself as a conduit and channel for funnelling investments from the region’s SWFs and Global North institutional investors towards the Global South emerging economies.
A striking imbalance persists – the majority of the tracked climate finance (almost 76 percent) flows internally to domestic recipients. It also highlights that countries contributing the most to climate finance often reinvest domestically, limiting cross-border flows to where they are most needed.
It is for this reason that there is a need for a strong financial hub such as the UAE to serve as a bridge – the Gulf Global South Gateway – integrating global institutional capital and climate-focused private funds to invest risk capital in sustainable infrastructure and energy assets in emerging economies.
The Global Climate Finance Centre (GCFC), launched at COP28, was centred around this very spirit and ethos – anchoring the UAE’s vision to be a hub for climate finance. At the intersection of public and private investment –bringing together the ADGM, ADQ, BlackRock, CIFF, GFANZ, HSBC, Masdar, Ninety One, and the World Bank – the GCFC aimed to align finance with the transition to a low-carbon economy, channelling capital into impactful, high-growth climate solutions across emerging economies.                                     

Institutionalised Plurilateral Climate Diplomacy 
The UAE has embedded itself in strategic partnerships and plurilateral groupings such as the BRICS Plus (Brazil, Russia, India, China, South Africa+), the India Middle East Europe Corridor (IMEC), I2U2 (India, Israel, UAE, US) – arrangements dominated by Global South countries – with the objective, among others, to promote energy cooperation. At a time when the multilateral order is under fire, such minilateral cooperative frameworks offer a means to ringfence the energy transition agenda from political volatility.
In 2023, the UAE reported US$2.1-2.2 billion in ODA, a voluntary contribution, of the highest among non-official donors. While much of the UAE’s global engagement is driven by commercial investments rather than traditional development aid, these flows demonstrate the country’s willingness to deploy risk capital in emerging markets. and perhaps represents a recalibrated ODA in the making.



Mannat Jaspal, Director and Fellow, Climate and Energy, ORF Middle East.

### A Fork in the Road for EVs? Lessons for Emerging Markets

EVs in Emerging Markets
While electric vehicle (EV) sales in China, Europe, and the United States (US) get much of the attention, the road to growth, profitability, and long-term market dominance lies in emerging markets. Companies such as Tata Motors and VinFast have shown that domestic manufacturers in emerging markets can compete with legacy automakers. Even though EV manufacturers in emerging economies face significant headwinds, they still have a few market advantages.
In most emerging markets, domestic private sector appetite for EVs remains low, with the exception of bus and two-wheeler segments. What’s needed is significant government investment for electricity and charging infrastructure, and subsidised vehicle costs for consumers. Since there is limited access to specialised labour for design and engineering that’s necessary for companies in the EV supply chain, this sector requires either retraining of existing workers or the import of skilled labourers.
Many of the raw materials and minerals needed for the EV supply chain, such as nickel, are located in emerging markets. This creates an incentive for international original equipment manufacturers (OEMs) to co-locate their manufacturing hubs in these markets to secure mineral rights and price stability for their battery and vehicle part supply chains. Existing mining, auto manufacturing and export infrastructure creates opportunities for joint ventures, enabling international OEMs to enter emerging markets through foreign direct investments. Each country faces distinct transportation challenges and the initial EVs adopted may be very different from those sold in China, Europe and the US. Two and three-wheelers, taxis,      ride share, public transit and delivery vehicles may be the initial categories of EVs sold in a given market and could have significantly different drive cycles compared to Chinese, American and European models.

Each country faces distinct transportation challenges and the initial EVs adopted may be very different from those sold in China, Europe and the US
For countries with significant auto export markets such as  Mexico, Thailand, the Philippines, Indonesia and South Africa, it is critical for governments to get the correct EV incentives in place now. This is to ensure that their homegrown automakers don’t lose the domestic market share to international OEMs and remain competitive against other auto exporters. For example, the governments of South Africa and Indonesia face significant pressure from private sector automakers to have a long-term, consistent policy framework for electric mobility incentives to reduce risk to long-term EV manufacturing investments.

Recent Developments
The current US administration has intensified its attacks on electric mobility, including removing its domestic EV tax incentives, canceling clean energy and battery R&D grants, and attacking decarbonisation efforts in international shipping. Even this antagonism towards EVs will not stop American OEMs from investing in production to remain competitive on the global market.
Meanwhile, EV sales will overtake traditional internal combustion engine (ICE) vehicle sales in China this year. Intense competition among Chinese automakers is driving down vehicle cost and spurring innovation to the point where there is a robust debate about whether BYD or Tesla are producing the best-in-class electric/autonomous vehicles.
Despite EV sales slowing  in the US in 2025, they remain robust globally even as cost declines slow. Chinese EV models are reaching cost parity in a multitude of countries (IEA). This is likely to force protectionist import duties in emerging economies with robust domestic auto manufacturing sectors — and force OEMs globally to continue their transitional investments to increase their EV manufacturing capacity, especially for automakers that have significant exposure to European markets as they comply with the CBAM’s (Carbon Border Adjustment Mechanism) implementation in 2026 and the phaseout of CO2-emitting cars in 2035.

The current US administration has intensified its attacks on electric mobility, including removing its domestic EV tax incentives, canceling clean energy and battery R&D grants, and attacking decarbonisation efforts in international shipping.
While EV sales in emerging markets remain low, there has been a rapid expansion of electric two-and three-wheelers. As regional battery and vehicle manufacturing capacity increases to meet this demand, there remains a pathway for domestic EV manufacturers in emerging markets to remain competitive — especially if they can fill vehicle segments (such  as Buses and two-wheelers) that have unique regional requirements which international automakers may have difficulty adapting to. 

Recommendations
There are a variety of information gaps that need to be filled to de-risk EV investments for the private sector and multilateral development banks. International donors and other public sector actors should consider investing in technical assistance that addresses questions that are critical for EV deployment, such as those around battery reuse/circularity, land requirements and ownership models for charging infrastructure, and travel/trip data heuristics.
Protectionism in the form of tariffs and local content requirements only work if there are sufficient national incentives to spur domestic manufacturing, and infrastructure and supply chain development. Policymakers must provide incentives along the EV ecosystem in order to attract foreign direct investment from the private sector (e.g. automakers, charge point operators, fleet managers, etc.).
The following are recommendations for policymakers in emerging markets looking to spur EV development and deployment:
1. Catalytic Public Sector Investment


 	Most countries seek private sector investment and partnerships with large OEMs and other companies with significant R&D advantage to EV development. India’s FAME scheme provides a great example of how to align supply-side and demand-side incentives with domestic private sector needs to drive the scale and purchasing power necessary to achieve domestically manufactured, cost-competitive EV models. However, most countries do not have sufficient market size to achieve economies of scale needed to drive down costs of domestically-manufactured EVs without a significant export market.
 	It is also true that domestic EV manufacturing will not be profitable if solely dependent on exports (due to both competition from international automakers and increased transport/supply chain costs). If a national government doesn’t invest enough in local infrastructure and incentives to grow domestic consumer demand for EVs, then OEMs will have difficulty making the case for EV manufacturing domestically (typically needing at least 20% of domestically-manufactured EVs to be purchased in-country). Thailand provides an example of national domestic production incentives needing to be altered due to limited domestic consumption of EVs and competition from imports.
 	National policymakers need to have consistent communication with international and domestic private sector automakers. For example, industry associations (such as NAAMSA in South Africa) can play a key role in making sure incentives and regulation are consistent with attracting private sector investment. Governments should also consult with charge point operators, fleet managers (ride share/delivery companies) and utility companies to determine how to de-risk their local investment.

2. Utility Reform


 	Speaking of utilities, the biggest threat to domestic EV deployment is not critical mineral shortages, Chinese imports or lack of tax incentives. It’s that utilities and regulators are underprepared for the infrastructure needed to be built to meet EV demands in the next 5-10 years. Especially with load growth due to data centres and electrification, it is critical for utilities to know where infrastructure will need to be upgraded to account for EV charging demand (RMI). A lack of integration between utility and transportation planning means that transmission/distribution infrastructure upgrades are likely to be reactive rather than proactive. Utilities that could potentially reap huge revenues from the EV transition need to plan smartly and set rational tariffs so that they are not forced to overbuild infrastructure upgrades.
 	Governments/regulators can serve multiple roles in addition to setting tariffs for EV charging. This includes but is not limited to:
 	

 	

 	Utility Planning for transmission and distribution equipment upgrade for EV deployment. For example, Indonesian utility PLN is working with government ministries, charge point operators and automakers to help achieve targets of 13 million electric two-wheelers and two million electric four-wheelers on the road by 2030.
 	Public-Private Ownership models for charge point operators, especially where land is scarce or the legal framework for leasing charging stations is nascent.
 	Setting grid code and charging standards for EV supply equipment that do not advantage incumbent EV automakers and enable competition among charge point operators. Regulators in Mexico have recently been trying to find this balance.





3. Supply Chain Security


 	Foreign governments have spent much of the past five years securing mineral rights for critical mineral deposits and OEMs have looked to secure long-term contracts with mining companies to provide cost certainty for nickel, lithium and other battery materials. Countries with critical mineral deposits should be wary of lax enforcement of environmental and social safeguards that could risk international private sector and donor investments (Indonesia and Philippines,for example). Maintaining international standards (such as the IFC Performance Standard) can reduce foreign investment risks. If possible, it is important for supply chain transparency to help downstream manufacturers in meeting Europe’s CBAM requirements.
 	Countries seeking to benefit from the EV transition and utilise it to grow domestic manufacturing need to have a robust workforce development plan. This is so that they can convince private sector FDI that there is a competitive advantage to locating in the country due to quality of engineering/design labour  (e.g. Vietnam) and a confluence of domestic talent and academic/training institutions to upskill the automotive workforce, localised parts manufacturers, and logistics/supply chain infrastructure to optimise production.

EV adoption in emerging economies remains unaffordable to many consumers. With the global EV market facing significant headwinds amidst policy and incentive uncertainty, private sector automakers will continue to make investments due to supply chain concerns, long-term manufacturing time horizons, and competition with Chinese automakers. It is critical for policymakers to promulgate consistent regulatory and incentive schemes to build capacity across local utility, manufacturing, and critical minerals industries that drive domestic EV manufacturing and consumption of electric models. Smart public investments now can build the enabling environment for long-term EV market growth and capital investment from international automakers, charge point operators, and private fleet managers. Policymakers that invest now can build resilience into their domestic auto manufacturing sector, while also guarding against a future EV supply chain that looks like the current reality of solar PV manufacturing.



Andrew Fang is a former Deputy Director of the Energy Division at USAID.

### China’s Cautious Balancing in a Changing Middle East

Security in the Middle East has undergone significant shifts since Hamas attacked Israel on 7 October 2023. Israel’s expansionist policy is forcing regional countries to recalibrate their perception of (in)security, underpinned by the ongoing war in Gaza, the strikes against Iran’s nuclear facilities, the confrontations with Hezbollah in Lebanon, the new Syrian government, and the Houthis in Yemen.

Israel’s strike against Hamas negotiators in Qatar on 9 September 2025 has altered the Gulf states’ security outlook. The United States (US) is no longer seen as a reliable security guarantor. Both Israel’s strike and Iran’s targeting of Al Udeid airbase in Qatar during the 12-day war have depleted any remaining confidence in the “protection for oil and trade” model with the US. Gulf states are intensifying diversification in their defence partnerships. For instance, Saudi Arabia and Pakistan’s mutual defence agreement, signed on 17 September 2025, marks a paradigm shift in the Gulf’s defence posture and opens the door for more external security actors to establish a footprint in the region.
Israel’s strike against Hamas negotiators in Qatar on 9 September 2025 has altered the Gulf states’ security outlook. The United States (US) is no longer seen as a reliable security guarantor.
Decline in Washington’s hegemony is expected to align with the interests of its competitors, particularly China. Yet, despite the strong appeal, China is unlikely to take advantage of this low-hanging fruit and will continue to be reticent about playing a major security role in the region.
Shifting Sands
In theory, the new security dynamics in the Gulf can lead to diversification and inclusion—principles that align with China’s policy preferences. Since US President Donald Trump’s return to the White House in 2025, it has become evident that the Gulf States’ efforts to influence the administration’s policy towards de-escalation are undermined by what the author calls ‘Israel’s exceptionalism’ in US Middle East policy that exempts Tel Aviv from complying with the rules of the game. Since Trump’s high-profile visit to Saudi Arabia, Qatar, and the United Arab Emirates (UAE) in May 2025, the strategy of Israeli Prime Minister (PM) Benjamin Netanyahu’s government has been anchored towards ending the aspirations for a Palestinian state and reshaping the regional order.

The rising insecurity in the Gulf states creates incentives to search for alternative security frameworks. This is not a result of strategic intent, as most Gulf countries still prefer to deepen their security partnership with the US. This was evident in Qatar’s prospective enhanced defence cooperation agreement with Washington, which was announced after the strike. It was born out of the necessity of pursuing strategic autonomy.

Regional instability does not serve China’s position in the region. China’s regional footprint is underpinned by energy and infrastructure cooperation, economic statecraft, and partnerships in Artificial Intelligence (AI) and data centres. China imports approximately 45 percent of its oil from the region, a significant factor in Beijing’s energy security. During the 12-day War with Israel, Iran threatened repeatedly to retaliate by closing the Strait of Hormuz. This created a new ‘Hormuz Dilemma’ for China, given the futile alternatives and the insufficient time to search for more secure sources. The threat of a broader regional confrontation has shown that Chinese investments and citizens in Israel and the Gulf, as well as trade routes and shipping vessels, are exposed to serious risks in the absence of credible security guarantees.
Decisive Factors
Ironically, the US is perhaps the most significant security insurance policy for China’s interests in the region. This stems from Beijing adopting a security approach that hinges on building influence through economic development, mediating conflicts, and diplomatic positioning at the United Nations Security Council (UNSC). This policy is designed to sustain engagement with the region, with a limited contribution to hard security, and mitigate risks.
The Middle East has long been a significant energy source and has recently served as a source of diplomatic support for China against Taiwan, as well as a testing ground for Beijing’s governance and ideological offerings in the context of strategic competition. 
Despite the limited viability of China’s model during a crisis, Beijing does not seem eager to change its track. In fact, one assumes it does not need to.

Two broad factors are predicating China’s caution. First, the Middle East does not feature at the top of China’s strategic priorities compared to its immediate periphery in the South China Sea (SCS) and the first island chain. The 3 September military parade and China’s assertive military posture around disputed territories in the SCS reflect a determination to reshape the world order to serve China’s interests, starting from the East Asian theatre. The Middle East has long been a significant energy source and has recently served as a source of diplomatic support for China against Taiwan, as well as a testing ground for Beijing’s governance and ideological offerings in the context of strategic competition. However, the dramatic changes in regional security do not affect China’s security or regime stability directly.

Second, regional security shifts in the Middle East and North Africa (MENA) serve China’s interests and undermine the US outlook, as Gulf States’ enhanced agency offers them more options away from exclusive reliance on the US. The core assumption of the Saudi-Pakistan defence deal is that both countries are choosing to diversify away from their security patrons: The US and China. Yet, the implications for Saudi Arabia are more significant, considering China’s relations with Pakistan are not based on a security guarantor model. This is also the case in the Gulf. More strategic autonomy and accelerated multipolarity automatically translate into less US influence and greater adoption of China’s ideas on regional security, even without requiring political alignment with Beijing. China’s call for establishing new security frameworks, such as a “multilateral dialogue platform” in the Gulf as part of the Global Security Initiative, which was announced in 2022, shows China’s support for more indigenous and inclusive security arrangements. This includes dialogue with Iran, especially after the Saudi-Iran rapprochement brokered by China in 2023. The Gulf's neutral stance during the 12-Day War created the circumstances for a sustained de-escalation and perhaps future security exchanges with Tehran.

The regional shifts seek to undermine the India-Middle East-Europe (IMEC) implementation by encouraging the rise of a regional coalition to balance Israel’s recklessness and shutters prospects for a Saudi-Israel normalisation in the short term. IMEC has been designed to serve as an alternative to China’s Belt and Road Initiative (BRI). Its struggle to take off is certainly a positive development for China.
What next?
The Trump administration’s ad hoc, case-by-case approach to Gulf security, the uncertainty of a sustainable ceasefire and the Trump peace plan for the day-after in Gaza will fuel a sustained review of Gulf states' security posture during the remainder of Trump’s term in office. An Israeli far-right victory in the October 2026 elections may make normalisation and further integration of Israel in the emerging regional system elusive. On the contrary, it may accelerate the rise of rival alliances to keep Israel’s revisionism in check.
China is also likely to encourage Iran to seek a diplomatic settlement with the Trump administration over its nuclear programme to avoid a regional conflagration, despite the return of sanctions.
These regional shifts mark the end of the Iraq invasion and the Arab Spring era, ushering in a new era in line with broader changes in the global order, moving away from unipolarity. This requires a new security paradigm in the Gulf that may provide other external powers, such as China, a strategic opportunity to challenge the US's MENA posture.

However, adopting a decisive shift in China’s security posture may not be feasible in the next three years, unless a significant threat to China’s direct interests emerges. Even then, Beijing may be compelled to rethink its MENA security policy in a way that allows it to be an equal player alongside other external security actors and pragmatically focuses on protecting its own interests as a priority, rather than being the primary security guarantor. The latter status would require China to become a security hegemon in Asia and the dominant power in the Indo-Pacific, necessitating a strategic shift in China’s security outlook. This is unlikely to happen anytime soon.

China is also likely to encourage Iran to seek a diplomatic settlement with the Trump administration over its nuclear programme to avoid a regional conflagration, despite the return of sanctions. It may also work with Russia to convince Tehran not to withdraw from the Non-Proliferation Treaty (NPT) or seek a nuclear breakout.

Regardless of the outcome, China will continue to seek alternative sources of energy outside the MENA region to hedge against the risk of war. The Israel-Iran conflict drove the frozen Power of Siberia 2 pipeline. Beijing is likely to explore additional options in the next few years, while accelerating investments in renewable energy sources within the Chinese market to reduce its reliance on imported oil and gas. However, the Gulf will likely remain a significant source of China’s energy imports for years to come.

The Trump administration is likely to impose restrictions on Gulf-China security cooperation, tying any new partnerships in defence and advanced tech to reducing future alignment with China. It may use the end of the war in Gaza to try to revive the Abraham Accords and help turn the Gulf into a future hub for AI and data centres—incentives to shield the region from further entanglement with China. Gulf states are expected to use these developments to accelerate their hedging and maximise benefits from both sides: Intensifying trade and investments with Beijing, while trying to lock in defence treaties and high-tech partnerships with Washington.
The Trump administration is likely to impose restrictions on Gulf-China security cooperation, tying any new partnerships in defence and advanced tech to reducing future alignment with China.
The Gulf security order is changing. By the end of the second Trump administration, more external actors, such as Pakistan, may be expected to play a role in a new multipolar regional order. China may be one of them. However, the expectations it may seek to replace the US as the security provider or directly challenge its preponderance will prove to be futile.



Ahmed Aboudouh, Associate Fellow, Chatham House Middle East and North Africa Programme; Head of the China Studies Unit, Emirates Policy Center.

### Biotechnology and Digital Health in Saudi Arabia and the UAE

Introduction
The Gulf Cooperation Council (GCC) is fast emerging as a global leader in biotechnology and digital health. This growth is driven by the unique mix of demographic pressures, economic diversification goals, and health security imperatives experienced in these countries. Saudi Arabia and the UAE are leading the sector’s regional expansion: Saudi Arabia’s recent launch of its National Biotechnology Strategy envisions a contribution of US$34.6 billion to non-oil GDP by 2040, while the UAE’s digital health market is forecast to grow by over 23 percent by 2030, pushing the sector to approximately US$2.65 billion in value.
The expansion of such initiatives strengthens GCC countries’ reputations for delivering high-quality healthcare for both locals and expatriates and aligns with wider economic transformation agendas. The biotechnology industry and health tourism sector are lucrative opportunities with estimated values of US$1.5 trillion and US$8.7 billion, respectively.

The biotechnology industry and health tourism sector are lucrative opportunities with estimated values of US$1.5 trillion and US$8.7 billion, respectively.
However, while intensive public and private investment in initiatives such as digital health partnerships, national genome programmes, and AI-driven diagnostics mark major progress, the sector still faces bottlenecks in research infrastructure and data governance. Consolidating these advances through stronger coordination with research institutions and developing comprehensive health data governance frameworks will be key to turning early gains into lasting global leadership. 

Diseases of modernity: rising wealth, sedentary lifestyles and ageing populations
The Gulf states face a health paradox common to high-income societies: economic gains have brought prosperity and longevity, but also a surge in non-communicable diseases. The WHO estimates that around 74 million people in the Eastern Mediterranean live with diabetes, with prevalence rates in the GCC reaching up to 20 percent. At the same time, life expectancy has risen dramatically from 60 years in the late 1970s to around 83 years in 2025 in the UAE, with similar trends observed across the five other GCC states. This puts increasing pressure on both hospitals and home-based care services, given that 80 percent of healthcare needs typically occur post-retirement age.
To meet these needs, states are seeking to implement new technologies within their healthcare offerings. Saudi Arabia’s Digital Health Strategy and Roadmap explicitly includes remote monitoring, virtual clinics, and the integration of telehealth as priorities under Vision 2030 and related health transformation programmes, incorporating technologies that can provide more accessible healthcare to citizens who may have limited mobility. This is also particularly important given Saudi Arabia’s large population and vast geography, as it enables care delivery to more people without extensive travel. In the UAE, ambitions for the health sector outlined in Vision 2021 and the more recent We the UAE 2031 consist of enhancing quality of life and specialised care offerings by continuing to develop an innovative, state-of-the-art healthcare system. As such, the Department of Health’s (DOH) Policy on Digital Health identifies technologies such as “telemedicine, web-based analysis…  wearable devices, and clinic or remote monitoring sensors” as essential for early diagnostics and care management.

Next-generation sequencing and AI are being deployed to analyse population-wide genetic data, identifying variants linked to rare and hereditary disease.
Alongside these efforts, the GCC is deepening its focus on gene mapping and preventative health. The Gulf’s high consanguinity rate among local populations has been a concern for decades, prompting Saudi Arabia to institute a law requiring pre-marital genetic testing in 2002 — the first such law in the region, subsequently adopted across all GCC states. Building on this foundation, targeted testing between couples has now been expanded as governments work to map entire populations. Next-generation sequencing and AI are being deployed to analyse population-wide genetic data, identifying variants linked to rare and hereditary disease. Such projects are essential to the development of “precision medicine”, in which the patient’s specific genetic profile is used to inform and optimise treatment plans rather than relying on generalised clinical guidelines. These programmes also address the Eurocentric bias in earlier datasets, creating population-specific genetic baselines that strengthen diagnostic accuracy.
These initiatives position Gulf countries as leaders in data-driven healthcare, advancing Vision 2030 and We the UAE 2031 goals for economic diversification and improved quality of life. The UAE’s medical tourism market alone was valued at US$334.9 million in 2024, projected to reach US$975 million by 2032. By expanding biotechnology and digital health, both countries aim to extend life expectancy and ease pressure on healthcare systems as populations expand and age.

Building momentum: investment, research and data regulation
Biotechnology and digital health initiatives in the GCC are benefiting from significant levels of government commitment and capital investment. The healthcare-focused private equity company Quadria Capital recently allocated a quarter of its latest US$1 billion fund to the GCC, specifying digital health as a key sub-sector for growth and marking the region as a strategic hub for next-generation healthcare innovation. Saudi Arabia’s flagship Global Health Exhibition saw approximately US$13.3 billion in announced healthcare investment in 2024, and has dedicated a considerable tranche of activities and discussions to the topic of “Digital Health” for the upcoming 2025 edition in late October. In the UAE, the Abu Dhabi Department of Health and the Abu Dhabi Investment Office (ADIO) recently signed an MoU with GSK to establish a medical institute in the emirate, focused on integrating genomics data to advance cancer research. Another strength for the region is the positive reaction that genome projects have received from citizens. Because such projects necessitate a vast amount of data, the voluntary participation of citizens is an essential component. Public support is likely thanks in part to the existence of genetic testing as a pre-marital requirement, in addition to strong public messaging and education campaigns in both the UAE and Saudi Arabia that emphasise the transformative potential of AI’s algorithmic analyses and its central place in the GCC’s future economies.

To ensure long-term competitiveness in medical tourism and biotechnology, GCC countries should expand research capacity alongside treatment infrastructure.
However, challenges related to research capacity and infrastructure, which are uneven across the region, remain. While Abu Dhabi’s Masdar City and Dubai Science Park are key host centres for life sciences firms working in genomics and digital health, most clinical research remains concentrated in only a handful of facilities. The UAE, for example, has only eight on-site research centres across its 168 inpatient facilities. This is also true of Saudi Arabia, where specialist institutions like King Abdullah International Medical Research Center (KAIMRC), King Abdullah University of Science and Technology (KAUST), and King Abdulaziz City for Science and Technology (KACST) are impressive, but relatively few in number compared to global leaders in life sciences innovation, such as the US and Switzerland. To ensure long-term competitiveness in medical tourism and biotechnology, GCC countries should expand research capacity alongside treatment infrastructure. Developing research ecosystems would likely attract more global talent while simultaneously increasing economic gains by driving high-value innovation. In addition, future policy development in the evolving landscape of global data governance must balance security with flexibility — strong enough to guard against high-profile data breaches that have become a persistent risk across the sector, yet open enough to encourage biotech investment. Focusing on research depth and trusted data systems will position the GCC as a secure and innovation-driven healthcare hub.

Conclusion
Over the past decade, the GCC — led by Saudi Arabia and the UAE — has laid the groundwork for a modern, innovation-driven healthcare landscape. Through large-scale investment in the sector, including digital health initiatives and national genome programmes, the region is positioning itself as a global hub for precision medicine and data-driven health innovation. These initiatives address the challenges of population growth, increased life expectancy, and lifestyle-related diseases while supporting broader diversification goals under Vision 2030 and We the UAE 2031. Yet, progress remains uneven, particularly in research infrastructure and regulatory coherence — areas that will determine whether current momentum translates into lasting global influence.

The strong investment trends in the wider sector should be matched by greater allocations toward building specialised research institutions to enable the region to generate original medical advances.
Given that it is the UAE’s ambition to become a global destination for specialised care and Saudi Arabia’s mission to further encourage a competitive environment among healthcare providers, research capacity must become a priority. The strong investment trends in the wider sector should be matched by greater allocations toward building specialised research institutions to enable the region to generate original medical advances. In addition, GCC countries should seek to continuously advance and refine their health data regulations while avoiding overburdening market actors with excessive compliance duties, thereby balancing investor confidence with robust safeguards for privacy and ethical use.



Elizabeth Heyes is a Junior Fellow, Technology and Innovation Policy at ORF Middle East.

### Africa’s Urban Future Needs Climate-Smart Food Systems

Introduction
Africa is undergoing unprecedented urbanisation and rapidly accelerating climate change, which is also affecting food systems. By 2050, the continent's urban population is expected to double, reaching 1.4 billion. Concurrently, climate change, among other factors, has been reducing agricultural productivity and worsening food and nutritional security across the continent. These twin crises of climate and urbanisation demand an integrated solution to unsustainable urbanising trends and escalating environmental pressures on food systems. Climate-smart food security systems (CSFS) offer a pathway to navigate these challenges, synergistically bolstering urban resilience, enhancing agricultural productivity, and protecting the environment.
The Twin Challenges: Rapid Urban Growth and Climate Vulnerability
Urbanisation in Africa is primarily driven by rural-urban migration, conflict, displacement, and natural population growth. Around 60 -70 percent of urban growth in countries such as Uganda and Ethiopia comes from births exceeding deaths. Rapid city expansion often converts agricultural land, forests, wetlands, and other natural areas into built environments. Poor governance and weak land-use planning exacerbate food insecurity by displacing peri-urban farms and disrupting local ecosystems. This shift worsens biodiversity loss, urban heat islands, and flood risks, leaving urban food systems more vulnerable to shocks. At the landscape/cityscape level, the loss of vegetation cover disrupts the ecological balance, contributing to a decline in biodiversity, worsening urban heat island effects, and altering local precipitation patterns. The increase in impervious surfaces, from new roads and buildings, is leading to more surface runoff, which contributes to frequent and severe flooding. This dynamic reveals a paradox: the very growth to drive economic development can simultaneously make a city's food system more vulnerable to shocks by increasing its dependence on less resilient supply chains. The urban poor are disproportionately affected, as they rely on localised food systems and informal markets that are less resilient to disruptions. This highlights the need to explicitly integrate food provisioning into the planning of African cities to avoid the emergence of new vulnerabilities in the pursuit of growth.
Climate-Smart Solutions: Building Resilient Food Systems
Climate change causes erratic rainfall patterns, droughts, floods, and higher temperatures, which have already reduced agricultural productivity. Rainfed agriculture productivity has declined by 34 percent since 1961 due to climate change. Without adaptation, rainfed yields could drop by 50 percent by 2050 in some countries. These environmental stresses increase food prices, reduce incomes, and threaten the livelihoods of millions of farmers, herders, and fisherfolk. Climate shocks act as a “threat multiplier,” worsening poverty, health crises, and social unrest. An assessment of global food security confirmed these are worldwide challenges. However, Africa is uniquely vulnerable due to its high dependence on rainfed agriculture, limited adaptive capacity, and pre-existing socio-economic challenges.

CSFS practices deliver “triple wins”: higher productivity and incomes, adaptation and greater climate resilience, and mitigation or lower greenhouse gas emissions. This suite of practices is key to ensuring food and income security for a rapidly growing population. The most successful interventions often bundle multiple benefits, creating a compounding positive effect that goes far beyond a single objective. CSFS interventions include:

 	Climate-resilient breeds and crop varieties, such as drought-tolerant types, help growers in adapting to water scarcity. Agroecological methods such as intercropping, composting, and biological pest control enhance soil fertility and biodiversity while reducing chemical use.
 	Basic Tech innovations: Solar irrigation pumps, digital solutions, such as mobile-based weather forecasts, and affordable storage systems help smallholders reduce losses and improve yields.
 	Urban and Vertical Agriculture - Rooftop and vertical gardens in cities like Nairobi and Accra localise food production, reduce supply chain vulnerabilities, and provide ecosystem services such as storm water management, cooling, and air purification.
 	Agroforestry and Conservation Agriculture: Combining trees with crops and livestock enhances soil health, water retention, and carbon sequestration. For instance, the Kilimanjaro “Kihamba” system and Kenya’s Tana watershed project, which have restored landscapes and boosted farmer incomes.  The Mezimbite Forest Centre of central Mozambique restores miombo woodland while securing food and income. Conservation agriculture practices such as minimal soil disturbance and crop rotation reduce labour needs and improve drought resilience. Agroforestry is not merely about planting trees; it's a multi-faceted approach that contributes to carbon storage, water management, biodiversity, and diverse income streams. Conservation agriculture, relying on the principles of minimum soil disturbance, permanent soil cover, and crop rotation, is gaining ground across the continent. In Ghana, Zambia, and Tanzania, these practices improve soil moisture retention and promote resilience, particularly in drought-prone areas. By reducing the need for heavy machinery and labour-intensive tillage, conservation agriculture makes smallholder farmers more efficient and profitable. These solutions effectively address multiple challenges simultaneously, creating compounding benefits greater than the sum of their parts. Investments in CSFS offer a superior return, generating positive outcomes across environmental, social, and economic dimensions.
 	Mitigation Strategies: This includes interventions that reduce emissions and promote carbon sequestration through reforestation, rangeland management, better soil and water management, methane emissions reduction from livestock via improved feeding practices, clean energy use, and circular economy approaches like converting food waste into compost or bioenergy, which reduces environmental footprint.

The holistic nature of these interventions means they address a bundle of challenges, from food access to energy efficiency, with effective solutions.
Weaving the Fabric of Change: Financing and Institutional Support
Scaling up requires supportive policy and robust multi-stakeholder partnerships. Blended finance, climate funds, and green bonds can cover high upfront costs. Microfinance and mobile banking help farmers access credit for equipment and ideal seeds. Land tenure reforms incentivise long-term investments, while gender-sensitive policies ensure women can access resources and training. Institutions play a pivotal role in sustaining progress. The rubric of the Comprehensive Africa Agriculture Development Programme (CAADP) recently reaffirmed commitments to climate-smart food security. Each of the African Union (AU) member states implements CAADP through a National Food Security Investment Plan. This includes multiple implementation strategies, such as the AU's Climate Change and Resilient Development Strategy and the Africa Climate Smart Agriculture Implementation Plan (CSAIP). A gap remains between ambition and implementation. For example, 60 percent of African countries have a CSAIP strategy, but only 25 percent have financed and implemented investment plans. This poses a significant hurdle given the high initial costs of adopting smart practices, whereas smallholder farmers have limited access to credit. Insecure land tenure discourages long-term investments in land-improving practices. Moreover, women often face limited access to resources and information, impacting their ability to adopt higher-return practices.  The author has also emphasised the urgency of integrating gender and nutrition considerations into the design of development programmes. The clear disconnect between high-level policy and on-the-ground reality prompts a reconciliation of political will and institutional capacity. The priority is not addressing policy, but removing the structural barriers that prevent its implementation.

The good news is that multi-stakeholder collaboration is catalysing change. The World Economic Forum's Food Innovation Hubs serve as an example, bringing together governments, researchers, private sector companies, and farmer organisations to drive scalable, localised solutions. Private sector initiatives are also playing a crucial role, for example, OCP (Office Chérifien des Phosphates now OCPNutriCrops), a leading plant nutrition company, runs a "School Lab" that provides free soil analysis and fertiliser recommendations to nearly a million smallholder farmers across 10 countries.27 These partnerships, which pool resources and expertise, are essential for tackling the complex, interconnected nature of Africa's food security challenges.
Conclusion: Crisis to Opportunity
Africa’s urbanisation and climate change crises are deeply interconnected. Resolving these issues demands a holistic approach that links urban planning, sustainable agriculture, and climate action. Evidence suggests these forces interconnect, forming complex environmental, social, and economic challenges. By investing in CSFS, Africa can build a more resilient, productive, and prosperous future. The path forward requires a shift from fragmented, single-sector interventions to a holistic, integrated approach. This involves integrating urban planning with agricultural policy, promoting sustainable practices such as agroforestry and conservation agriculture, and making a concerted effort to reduce the substantial amount of food loss and waste that affects the food system. Most critically, it requires addressing the systemic barriers that limit progress, including insecure land tenure and limited access to finance and information, particularly for women and youth. The solutions are not in a single policy or technology, but in the collaboration of diverse stakeholders, including policymakers, private companies, local farmers, and urban communities. By adopting climate-resilient genetics, agroecological practices, urban farming, and circular economy approaches, Africa can develop resilient food systems that enhance livelihoods while minimising environmental impacts. Financing innovations and strong institutions will be essential for scaling these efforts. The continent’s future food security depends on transforming cities from vulnerable consumer centres into hubs of sustainable production. By investing in CSFS today, Africa can build a greener, more equitable future where urban and rural communities thrive together. African cities must not just be concrete and steel, but earthy, infinitely more powerful. An earthy foundation of the soil beneath our feet, enabling the resplendence of plants, waters, landscape features, and creatures that abound across the continent.



Moffatt Ngugi is an ecologist specialising in climate, agriculture, and natural resource management, focused on advancing food security through sustainable innovation.

### The EU’s Relevance to a Post-Conflict Region: Stabilisation after the Gaza War

On 9 October 2025, all eyes turned towards Egypt as an agreement was reached between Israel and Hamas on a ceasefire and the release of hostages, in line with US President Donald Trump’s Comprehensive Plan to End the Gaza Conflict. The actors involved were the belligerents and a limited number of diplomatic intermediaries, including the United States (US), Qatar, Egypt, and Türkiye. While the European Union (EU) did not sit at the negotiating table, its future participation in the discussions about and realisation of the region’s post-conflict stabilisation may be justified. The rationale for the EU’s involvement is multifaceted and relies on the following main considerations: a) the Union has experience in reconciliation; b) it has long supported and advocated for various mechanisms toward peace in the Middle East; and c) it is a major humanitarian donor and could contribute to the region’s reconstruction and recovery.
The war-torn region could build on lessons from the EU’s history, as the Union itself came about as once-hostile nations sought peaceful coexistence and economic prosperity. In subsequent years, the EU became a pivotal actor in charting a framework for peace and reconciliation for the Middle East as well. Through the 1980 Venice Declaration, the European Council[1] articulated and asserted a “European policy towards the Arab/Israeli conflict and set out principles for initiating a Middle East peace process”. The Declaration explicitly mentioned “the right to existence and to security of all States in the region, including Israel” as well as the Palestinian people’s “right to self-determination”. These principles serve as “the basis for the EU's support for a negotiated two-state solution”. In line with this approach, the EU has been actively involved in the Middle East Peace process and international efforts to make it a reality. For example, in 2002, alongside the United Nations (UN), Russia and the US, the Union became one of the members of the international Quartet, essentially tasked with the facilitation of the peace process negotiations. Twenty-two years later, the EU remains committed to advancing the process in international fora. A recent illustration of the Union’s sustained engagement is its involvement in the Global Alliance for the Implementation of the Two-State Solution, announced on the sidelines of the UN General Assembly in September 2024. This initiative is attracting an increasing number of participants, as Luigi Di Maio, the EU’s Special Representative for the Gulf region, mentioned in October 2025.
Alongside its longstanding diplomatic engagements and expertise in reconciliation, the EU has also been mobilising substantial humanitarian aid and financial support. As the EU Commissioner for the Mediterranean noted, “thanks to its long lasting financial engagement, the EU is well-placed to play a leading role in the post-conflict stabilisation and early-recovery, reconstruction, security and support to the future governance in Gaza”. The Union is “the largest humanitarian donor to Gaza” and “the biggest financial supporter of the Palestinian Authority” (PA). The EU has committed to a 1.6 billion euros multiannual assistance envelope to the PA for recovery and resilience,  covering 2025–2027. This financial support is “linked to structural reforms” that are to be implemented by the Palestinian Authority, aimed at contributing to a sustainable and transparent state-building process. Additionally, the Union suggested establishing a new Palestine Donor Group and a “dedicated instrument for Gaza's reconstruction”. The rationale behind these initiatives, based on the announcement of the President of the European Commission, Ursula von der Leyen, is to relaunch the Palestinian economy while creating a viable environment and ecosystem for future prosperity and stability. Ursula von der Leyen invited all willing actors–with particular reference to the Palestinians' neighbours–to join forces and adhere to these efforts.
Additionally, the EU is also implementing measures to enhance physical safety and security in the region. Two missions of the Union serve as a notable illustration: the European Union Police Mission for the Palestinian Territories (EUPOL COPPS) and the European Union Border Assistance Mission for the Rafah Crossing Point (EUBAM Rafah). Accordingly, in October 2025, the President of the European Council, António Costa, confirmed that: the “EU will contribute to Gaza’s stabilisation and reconstruction, including through our [the EU’s] missions EUBAM Rafah[2] and EUPOL COPPS, which stand ready to resume their important role in border security, capacity-building and police training”.

Making EU’s Actions Count – A Quest for Political Weight
The EU appears ready and equipped, with some key instruments, to contribute to the stabilisation of the Middle East.. A peaceful and stable neighbourhood to its south is also serving the Union’s own interests, as the EU itself has mentioned on multiple occasions. As the Commissioner for Neighbourhood and Enlargement put it in a speech pronounced on behalf of the then EU High-Representative Josep Borrell, in November 2022: “The broader Middle East region remains of fundamental interest to the European Union […] our future, prosperity, stability and security depend too much on how we manage our relations with our wider neighbourhood, including the Southern Neighbours and the Near and Middle East”. In line with this rationale, more than two years later, the Commissioner for the Mediterranean also highlighted that “Peace and stability in the Middle East is an overarching EU interest. Key to this is a permanent peace agreement between Israel and the Palestinians, based on the two-state solution”.
However, for the Union to shape the region’s transition within its wider neighbourhood – from conflict and turmoil to sustainable peace – it must ensure that its economic and diplomatic stabilisation efforts carry substantial political weight. This strategic approach could also support the EU in acting as a player, and not merely as a payer, a challenge the Union has been grappling with for some time. Reflecting this logic, the EU High Representative for Foreign Affairs and Security Policy stated in October 2025 that “given what we [the EU] are bringing to the table, we [the EU] should also be around that table, discussing”. Thus, it appears crucial for the Union to be  part of any nascent international structure, possibly one formed based on President Trump’s proposal (which mentions, for instance, an “international transitional body”, a potential Board of Peace) tasked with overseeing and supporting the region’s future peaceful evolution.
According to the EU’s vision, the path to the region’s sustainable pacification leads through the two-state solution, with a reformed and “viable Palestinian Authority” and a “secure Israel”. However, this could be achieved only through strong international backing, with particular support from the powers involved in overseeing the region’s evolution. Additionally, the Union’s participation in a future international transitional structure could help ensure that its financial contributions for recovery and reconstruction are used as intended. A potential joint financial supervision under a forthcoming international structure could allow the actors involved to align funding efforts for greater coordination and complementarity. Finally, in addition to these strategic and operational benefits, the EU’s seat at the table may also carry significant symbolic meaning: it can signal to the international community that the Union is a relevant actor for the region, one that is willing and capable of actively engaging. The EU’s participation in the Summit for Peace, hosted by US President Trump and Egyptian President Abdel Fattah el-Sisi in Sharm El-Sheikh on 13 October, reinforces this logic. On the occasion of the Summit, António Costa reiterated the Union’s intention to be part of the international stabilisation structure to be established: “We [the EU] stand ready to participate in the International Peace Board and to support all processes - transitional governance, recovery and reconstruction”, as he put it.

Conclusion
The EU has much to offer for a region to achieve sustainable peace and stability. It possesses expertise in reconciliation, it is a veteran actor of the peace process, and it is willing to act as a main financial support provider for reconstruction and recovery. However, for its actions to be effective and implemented in line with its own strategic objectives concerning its wider neighbourhood, the EU should see to it that its diplomatic and economic efforts carry substantial political weight. Thus, it appears to be essential for the Union to get involved in the future international structure overseeing and supporting the region’s pacification and stabilisation. The Union has announced its readiness and intention to have a seat at that table, but now it shall face the task of giving effect to this aspiration.



Eszter Karacsony is an Associate Fellow and Program Lead in Geopolitics at Observer Research Foundation (ORF) Middle East.



[1] With the then nine Member States of the EU’s legal predecessor.
[2] As the EU High Representative confirmed, this mission resumes its activities on the week of October 13. Source, Kaja Kallas, X post, October 13, 2025, https://x.com/kajakallas/status/1977624674449391943

### Diffusing Tolerance: The UAE’s Soft Power Through Migration

Introduction 
The United Arab Emirates (UAE) has institutionalised tolerance domestically through the establishment of the Ministry of Tolerance (now Ministry of Tolerance and Coexistence) and the launch of the National Programme for Tolerance in 2016, as well as declaring 2019 as ‘the year of tolerance’. Moreover, at a higher education level, students in the UAE can pursue a Bachelor of Social Studies in Tolerance and Peace from the Mohamed bin Zayed University for Humanities. This has been backed up by several flagship moments in recent UAE history, including “hosting the Pope, bringing the Special Olympics, [and] building an Abrahamic House,” as stated by Yousef Al Otaiba, UAE Ambassador to the US, in a 2020 interview.
However, domestic tolerance development is not the only goal set by the country. The Sawab and Hedayah centres are other methodologies through which the UAE has been cultivating tolerance in a global sphere. Even at a regional level, the 'Sheikh Mohammed bin Rashid Award for Tolerance' supports young Arab leaders in the field of tolerance. Therefore, one wonders if the UAE’s tolerance agenda is reshaping social and political norms beyond its borders.

The Migrant Attraction Benefit of Tolerance
By creating a socially inclusive and politically stable environment, the UAE benefits from its tolerance, transforming into an economic capital and attracting skilled migrants, entrepreneurs, and global investment. The tolerance agenda reinforces the country’s image as a safe and aspirational hub, as reflected in its repeated ranking as the most preferred destination for Arab youth in the Arab Youth Survey.
As a result, the population of the UAE reached 11.3 million in 2024 according to the Federal Competitiveness and Statistics Centre (FCSC). According to estimates from the same year by the United Nations (UN) Department of Economic and Social Affairs, 72 percent of the population (approximately 8.2 million people) constitutes the global migrant stock in the UAE.

Are Migrants Learning from the UAE’s Tolerance?
While the economic benefits of tolerance are commendable, the country’s tolerance agenda has also been seeping through to its migrant communities. The most remarkable examples of coexistence in the UAE today often arise from interactions among various migrant communities, including Russians and Ukrainians, as well as Indian and Pakistani workers, who live and work side by side.
However, a strong characteristic of migrants is their cross-border networks. The UAE has likely been diffusing such values of tolerance not just to migrants based in the country, but also to their networks abroad. Indeed, the academic literature linking diasporas to cross-border diffusion of values is becoming well-established.
For example, one study has found that immigrants from Latin American and Caribbean (LAC) countries to the United States (US) influence their compatriots back home through cross-border communication. As the migrants’ values change, people who have stayed behind, observing these changes through cross-border communication, accept their compatriots’ new values and practices, becoming more tolerant. Sociologists have called these social or cultural ‘remittances’.

Regional Cultural Remittances from the UAE
Given the national interest of the UAE to ensure regional development across the Middle East, the UAE’s cultural remittances may be proving most effective in its own region. Close to one-fifth of the UAE’s migrant population comes from the Middle East and North Africa region (corresponding to at least 14 percent of the total population of the UAE), as broken down by country in the table below:




Country
Migrant stock in the UAE (2024)


Egypt
841,883


Yemen
192,423


Jordan
158,125


Sudan
124,677


Kuwait
63,192


State of Palestine
54,566


Syrian Arab Republic
49,529


Lebanon
39,223


Türkiye
35,736


Morocco
8,368


Saudi Arabia
6,157


Tunisia
5,497


Qatar
2,500


Bahrain
1,870


Total MENA
1,583,746



Source: UN
Approximately 29 percent of this regional diaspora in the UAE comes from populations affected by conflict or post-conflict transition: Yemenis, Sudanese, Lebanese, Syrians, and Palestinians. Ultimately, the UAE’s tolerance agenda may leverage regional immigration not only for economic diversification but also for reshaping the region’s normative landscape.
Nonetheless, whether this agenda can foster genuine societal pluralism across Middle Eastern societies depends on the authenticity of such diffusion. The extent to which Middle Eastern expatriates will internalise these values remains unclear, and thus the success of such cultural remittances remains an open question. 
Indeed, for this diffusion to occur, the UAE should invest more in integrating these expatriates into the educational system, cultural gatherings, and other civic pillars, which enable the internalisation of tolerance values. Moreover, enhanced transparency of the UAE’s political development could also contribute to the immigrants’ appreciation for alternative forms of government that could be implemented back home, providing a hotbed for ‘political remittances’ that are desperately needed in some parts of the region undergoing governance transitions.

Conclusion
The UAE’s demographic structure creates a unique natural experiment to explore how migration serves as a conduit for the transmission of values such as tolerance and coexistence. Future research should focus on how attitudes toward pluralism among regional expatriates in the UAE are evolving through their experiences of living in the UAE. Understanding these dynamics would not only enrich the literature on social/cultural remittances but also provide practical insights for policymakers seeking to cultivate tolerance globally and regionally.
Indeed, the UAE’s tolerance agenda demonstrates that regional leadership could be rooted not in ideology or dominance, but in reshaping the normative landscape through values of coexistence. This helps the region in its strive to combat conflict and intolerance, securing successful governance transitions when needed. As the late Sheikh Zayed Bin Sultan Al Nahyan stated: "Cooperation between people, regardless of their diverse religions and beliefs, serves as the foundation of happiness. By fostering cooperation, people unite both the close and distant. No individual, regardless of their background, can solely rely on themselves. And it becomes essential for humanity to share the blessings bestowed upon them by God Almighty."



Mahdi Ghuloom is a Junior Fellow at the Observer Research Foundation (ORF) – Middle East

### From Sana’a to Tel Aviv: The New Frontline in the Iran–Israel Confrontation

Yemen has become the latest front in the broader Iran-Israel confrontation. With Iran’s influence receding in Syria and Hezbollah weakened in Lebanon, Tehran has increasingly turned to the Houthis as its most active partner within the “Axis of Resistance”. The Houthis’ attacks on Israel and ships in the Red Sea have pulled Yemen into a conflict that is no longer confined to its local and regional dimensions. Alongside Yemen’s growing strategic importance, Tehran’s reliance on the Houthis also reflects broader geopolitical calculations.

Iran does not want the Gaza file to be closed without being part of any final regional settlement.

Any agreement that excludes Iran would be dangerous for it, leaving Tehran exposed in a confrontation with Israel, which would then be free to focus entirely on facing Iran alone.

By empowering the Houthis and expanding their operations in the Red Sea, Iran aims to secure its place in any future negotiating framework, while highlighting the strategic importance of the Houthis’ position along one of the world’s most vital maritime routes.
The Houthis’ attacks on Israel and ships in the Red Sea have pulled Yemen into a conflict that is no longer confined to its local and regional dimensions.
This approach is further strengthened by the Houthis’ cross-border aggressive tendencies, which make them an ideal strategic ally for Iran to expand its influence, apply pressure on Western countries, and twist the arm of the world by threatening global trade and energy security.
Iran’s Repositioning After Setbacks in Syria and Lebanon
The collapse of Tehran’s traditional networks in Syria and Lebanon created a strategic vacuum. To fill it, Iran deepened its investment in Yemen, providing the Houthis with advanced weaponry, smuggling networks, and even production lines for missile and drone manufacturing. This has transformed the Houthis from a tactical ally into a strategic partner—an extension of Iran’s broader deterrence strategy, not only in its confrontation with Israel but also in threatening the Gulf states and directly undermining American interests in the region. Moreover, smuggling intensified significantly—particularly after the Iran-Israel war. Contrary to expectations that Iran would prioritise internal stability, the Islamic Revolutionary Guard Corps expanded its smuggling programme to the Houthis. Hundreds of tonnes of weapons and even full production lines were reportedly transferred, underscoring that Iran has no intention of abandoning its long-term investment in the Houthis. Even more concerning, Iran has reportedly relocated part of its narcotics industry—specifically Captagon production—from Syria to Houthi-controlled areas.
The Dynamics of the Israeli Strikes: From Infrastructure to Leadership
Israel’s operations against the Houthis have evolved. Initially, they focused on degrading infrastructure—ports, oil facilities and electricity stations—crippling an estimated 85 percent of the Houthis’ port capacity.
Contrary to expectations that Iran would prioritise internal stability, the Islamic Revolutionary Guard Corps expanded its smuggling programme to the Houthis. 
More recently, the strikes have shifted toward leadership targets. While high-profile political figures such as ministers were hit—largely symbolic since real authority lies with Abdul Malik al-Houthi and his inner circle—the confirmed killing of seven mid-level military commanders in Sana’a on 8 September 2025 marked a significant escalation. These were not symbolic strikes but precise operations designed to erode the Houthis’ military command structure.

At the same time, Israeli operations have caused civilian casualties, underscoring a dual strategy: projecting political pressure while pushing the international community towards a tougher stance on the Houthis.
Yemen and the Red Sea as Iran’s Forward Front and Compensatory battlefield 
The Houthis are now Iran’s most strategic partners within the Axis of Resistance. Their ability to threaten Gulf states such as Saudi Arabia and the United Arab Emirates, threaten US installations and naval assets in the region, and openly target Israel elevates Yemen from a domestic battleground to a regional and international frontline. For Tehran, the Houthis serve as a “burden-sharing” force, easing pressure on Iran and ensuring that the confrontation with Israel and its partners extends into the Red Sea—a vital artery of global trade.
Domestically, repression continues unabated: arbitrary arrests, the detention of UN staff under fabricated charges, death sentences against opponents and child recruitment. 
Civilian Toll and Internal Repression
The Houthis’ reckless external escalation comes at a devastating cost for civilians. Israeli strikes have killed non-combatants, while the Houthis show complete disregard for civilian suffering and losses. The Houthis have made no effort to establish shelters, build protective infrastructure, or implement contingency planning. Instead, while the leadership remains well-protected and insulated, ordinary citizens are left to bear the brunt of their actions. At the same time, the group exploits civilian casualties as propaganda, using them to reinforce internal control and rally support under the banner of Gaza and “resistance”. Domestically, repression continues unabated: arbitrary arrests, the detention of UN staff under fabricated charges, death sentences against opponents and child recruitment. Rather than being weakened by the strikes, the Houthis have used them to tighten their grip on society.
A Dangerous New Phase
The Yemeni conflict has now fully intersected with the Iran-Israel confrontation. Israel’s strikes—gradual but increasingly precise—signal a testing phase in its strategy towards the Houthis. Iran, meanwhile, has entrenched its support, making the group a central pillar of its regional posture.

Caught in the middle are civilians, the ultimate victims of a conflict in which Yemen is no longer just a domestic battleground but a frontline in the struggle for regional and international dominance.



Mahmoud Shehrah is an Associate Fellow at Chatham House.

### Climate Resilience in CSIDS: The Case of Smallholder Farmers in the Eastern Caribbean

Introduction
The Caribbean Small Island Developing States (CSIDS) contribute a mere 0.23 percent of total Greenhouse Gas Emissions, yet bear the brunt of the devastating impacts of climate change. The Eastern Caribbean (EC) region, as part of SIDS worldwide, comprises small islands, namely, Antigua and Barbuda, Barbados, Dominica, Grenada, Saint Lucia, St. Kitts and Nevis, and St. Vincent and the Grenadines (Figure 1). Agriculture is important for these economies, accounting for a significant portion of employment in the wider Caribbean, ranging from 10 percent to 25 percent, estimated at 23 percent regionally.

Figure 1: Map of the Eastern Caribbean Region



Source: GIS Geography

Due to their location, these islands face increasing vulnerability to climate change and natural hazards. All sectors have been negatively impacted, but farming has suffered most from stronger tropical cyclones, devastating landslides, erratic rainfall, floods, droughts, saltwater intrusion, and extreme heat. Estimated average losses from hurricanes range from 9 percent to 43 percent of gross domestic product (GDP). In 2017, Hurricane Maria caused US$931 million in total damages in Dominica, and losses of US$382 million, which accounted for 226 percent of the country's 2016 GDP.

Farms are highly vulnerable, and past traumatic events have caused significant losses in developing economies, severely impacting farmers, farm workers, and their families. Farmers must adapt to climate change by altering their behaviours and practices.  Without adaptation, all aspects of food security, availability, accessibility, utilisation, and stability will be severely affected.

Farmers have not given up but have instead demonstrated resilience in the face of challenges, continuing to farm and provide for their families and nations. Numerous examples of farmer resilience exist across the EC. The term ‘resilience’ has been described as “plastic” due to its context-dependent meanings. For this discussion on the effects of climate change on small farmers, we adopt Abramson’s (2014) definition: the ability to withstand, adapt, or recover quickly from a disaster.

While this paper highlights examples of resilience in EC countries, it holds importance for other SIDS around the world. Dhanani described the significant similarities of impacts on SIDS around the world in some detail. On that premise, we posit that the policies discussed herein to help struggling farmers and farm communities become more resilient to existential threats can be appropriate for all SIDS.
Socioeconomic Profile and Conditions of EC Small Farmers
Farmers in the EC are typically men aged 41-54 years, managing two hectares or less. While men dominate, women are crucial, making up 30 percent of registered farm holders and contributing significantly to production, marketing, and processing.  These farms employ mixed crop-livestock systems, relying on family labour for subsistence and local commercial sales.

Country vulnerability stems from geographic features, dense coastal populations, infrastructure gaps and government preparedness. EC farms, often on hillsides, undulating terrain, or fertile coastal lands, are highly vulnerable to daily weather changes and lack adequate infrastructure like drains, water storage, and controlled environment systems. Shrinking fishing areas compel fisherfolk to venture further and extend their time at sea, leading to increased consumer costs.
Examples of Resilience-Building Activities
Regional strategies, for example, the Organisation of Eastern Caribbean States (OECS) Food and Agriculture Systems Transformation (FAST) Strategy, and the OECS Growth and Development Strategy, 2018-2027, strongly advocate for integrating climate resilience into strategic development plans. These policies support the deployment of innovative adaptation solutions, ranging from irrigation systems to disaster risk reduction. Additionally, the Eastern Caribbean Regional Climate Change Implementation Plan provides a roadmap for OECS member states to reduce emissions, accelerate green growth, deliver development co-benefits, and improve resilience to climate change impacts. Despite existing gaps in policy coordination at the regional and national levels, these regional plans have spurred actionable results in Eastern Caribbean countries.

Dominica aims to become the world’s first climate-resilient nation. It deploys funding from the World Bank-funded Disaster Vulnerability Reduction Project to focus on resilient infrastructure and enhanced hazard data collection and monitoring. Key initiatives focus on improving water pressure and irrigation through reinforced concrete water tanks, supporting farmers and fisherfolk in restoring production with climate-smart technologies, and constructing resilient homes for vulnerable communities.

St Lucia is making significant strides in climate adaptation, as elaborated in its Sectoral Adaptation Strategies and Action Plan, 2018-2028. This key component of St. Lucia’s National Adaptation Plan has identified 45 priority climate adaptation measures and concepts for alternative water solutions, and supports a climate-resilient agriculture demonstration centre. The Belle Vue Farmer’s Cooperative has successfully adopted and is expanding climate-smart practices, including drip irrigation, natural mulching to promote soil fertility, and powering water pumps. With support from the Green Climate Fund, progress is being made on reforestation and wetland restoration, which contributes to water security and agricultural productivity. To support these efforts, the Climate Adaptation Financing Facility, a US$5 million fund managed by the St. Lucia Development Bank, has disbursed approximately US$2.3 million in concessional loans that support risk reduction for vulnerable households and businesses, with women being the beneficiaries of 58 percent of these funds.

Grenada has adopted a multi-faceted approach to supporting climate resilience for smallholder farmers. Climate-smart agriculture practices being implemented include improved irrigation and water management systems, improved soil management, crop diversification and improved livestock management. Funding for climate resilience is provided through a US$4.6 million fund from the Global Environment Facility; the Green Climate Fund, in collaboration with GIZ, is supporting climate resilience for the water sector; and the Grenada Development Bank offers small loans of up to US$2,000 to start-ups and farmers for digital innovations. The Caribbean Catastrophe Risk Insurance Facility (CCRIF) provides insurance against earthquakes, hurricanes and excessive rainfall, thereby augmenting agricultural resilience. The COAST insurance programme also provides parametric insurance to individuals in the fisheries industry in both Grenada and St. Lucia.

The Caribbean Small Island Developing States (CSIDS) multi-country soil management initiative, known as the SOILCARE project, directly and indirectly supports the resilience of smallholder farmers in the EC. It equips them with enhanced tools and knowledge for climate adaptation and sustainable land management. The project has advanced national soil data and high-resolution mapping in Grenada and Barbados, and successfully championed climate-smart agriculture. This includes demonstrated techniques such as organic mulching, drip irrigation, water storage, and integrated pest management on model farms in Grenada and St. Lucia.

In several EC nations, SOILCARE introduced the Climate-Smart Agriculture Compliant (C-SAC) tool, a tested, indigenous, regional certification and labelling protocol to furnish verifiable metrics and standardise certification of climate-smart agriculture. The tool has received endorsement from Ministers of Agriculture in the Caribbean. The C-SAC  web-based App is currently employed for farmer self-assessments and for training agricultural extension staff and farmers.

While reactive initiatives are good, sustainable, resilient efforts must be embraced. The University of the West Indies has launched a Post-graduate Diploma in Climate Resilient Agricultural Extension for Community Development, targeting these EC countries. This programme aims to equip staff to become technology stewards of climate change adaptations and to improve communication with communities. The Inter-American Institute for Cooperation on Agriculture (IICA) completed an assessment of regional extension systems as a prerequisite to planning targeted extension system reform to meet current realities.
Policy Implications and Recommendations
The OECS emphasises strategies and policies that improve production techniques, incorporate nature-based solutions, promote technology adoption, and enhance market stability. The C-SAC certification tool is vital for identifying and promoting genuine climate-smart initiatives and preventing “greenwashing.” Financial innovations such as weather-indexed insurance, community adaptation funds, and blended finance instruments have been introduced and are unlocking capital for smallholder adaptation. However, the realities point to an urgent need for increased farmer-centred policies integrating climate resilience, digital inclusion, and extension reform.

Our strategic policy recommendations prioritise harmonising regional and national policies and accelerating their implementation. We advocate for investing in scientific research and data for adaptive strategies, reforming agricultural extension services for smallholder farmers, and expanding climate-resilient financial resources for vulnerable producers. A unified effort is needed to promote and adopt climate-smart practices and technologies, including digital tools for smallholder farmers.

Closing policy and implementation gaps, investing in innovative financing and capacity building and deepening regional integration are crucial for empowering smallholder farmers and ensuring sustainable development in the EC.
Conclusion
Smallholder farmers in the EC face an existential threat from climate change, including storms, intense rainfall, droughts, and sea-level rise. Their adaptive strategies offer crucial lessons for other SIDS globally. The EC’s approach, characterised by targeted investments in financial instruments like parametric insurance and climate adaptation funds, supported by strong regional institutions and the adoption of climate-smart certification tools, holds value for consideration for implementation by other SIDS. Vulnerable nations can transition from being victims to leaders in adaptive responses. Such an action will foster equitable climate resilience that prioritises smallholder farmers and vulnerable communities. In closing, we fully recognise that success in the Caribbean and SIDS worldwide requires the continued involvement of international partners, regional organisations, and local communities to ensure sustainable and climate-resilient futures for generations to come.



Wayne Ganpat is an International Agricultural Development Consultant with over 25 years of experience in the Caribbean and internationally. He is Professor of Agricultural Extension and former Dean of the Faculty of Food and Agriculture at the University of the West Indies, Trinidad and Tobago. 

Steve Maximay is the Managing Director of Science-based Initiatives, and the Trademark Owner/Licensor of the Climate-Smart Agriculture Compliant (C-SAC) tool and label. 

Howard Batson is an International Development Consultant with over 25 years of experience in agricultural development, agribusiness, climate-smart agriculture, and environmental management.

### Parametric Insurance for Climate Change Adaptation

Insurance can be an effective strategy to help cope with climate risks by pooling and sharing risks to avoid catastrophic losses, but it involves upfront costs. Conventional (damage-based) insurance reimburses a part of the actual damages from specific risks.  It requires a costly, time-consuming,  and conflict-prone claims adjustment process to value the actual damages. For the most part, conventional insurance is only available for formal-sector companies, public infrastructure, and relatively well-off households in low- and middle-income countries. With increasing climate change-associated risks, conventional insurance for these is likely to become increasingly unaffordable or inaccessible. Parametric insurance can help reduce insurance costs and supply gaps for utility-scale renewable energy, smallholder farming, and nature-based solutions for climate adaptation.

Parametric insurance pays policyholders fixed payouts that are specified in advance.  The payouts are tied to local weather or hydrological station data (triggers) and vary at different levels of the triggers. Typically, a maximum payout is specified to reduce insurer risks and premium costs for the buyer. The payouts are only intended to cover unusual levels of risk. Since parametric insurance does not require any claims adjustment process, the administrative costs are lower, and payments can be made more quickly.

Both conventional and parametric insurers typically buy reinsurance from larger companies, multinational or regional companies. Reinsurance reduces the covariate risks of offering coverage in a limited geographic area or sector that faces similar risks that are likely to occur simultaneously. 
Parametric Insurance for Renewable Energy (RE)
Hydropower, solar, and wind power are intermittent resources subject to daily, seasonal, and annual variability in electricity generation. High temperatures increase evaporation, and reservoir storage may be insufficient during major droughts. Additional capacity to reduce risks to hydropower is very costly. Conversely, flooding may increase reservoir sedimentation, reducing the effective storage capacity. Cloudy or rainy weather decreases solar flux for photovoltaic or concentrating solar systems.  Insufficient wind reduces power generation, and too much wind may damage turbines or require shutdowns.

This variability can cause major fluctuations in the amount and timing of electricity generated. Supply risks are particularly serious for independent power producers with long-term sales contracts with transmission and distribution utilities (Power Purchase Agreements). This reduces suppliers’ projected revenues (sales volume as well as seasonal or time-specific prices). It also may incur high penalties for failure to meet contracted supply (cash payments or a requirement to purchase power from other sources). It can also affect the ability to repay bank loans on time (defaults or late penalties) and reduce returns to equity investors. However, supply risks also affect utilities that generate their own power from large RE facilities that provide a large share of their total generation on a national or subnational distribution grid.

Parametric insurance can reduce the financial risks of unexpected cash flow problems jeopardising business viability. Since the typical revenue and payment period for utility-scale renewable energy facilities is one month, the ability to smooth out fluctuating revenues to cover costs is important, even if it involves an additional cost.

Parametric insurance pays policyholders a predefined, fixed amount of money when insufficient or excessive RE resource flows reach an agreed threshold documented in standard, local, standard records on rainfall, wind, or solar flux. Parametric insurance policies often specify various payment amounts associated with different levels of insufficient or excessive natural resource flows. Usually, the payouts only cover part of the actual losses.

Here is a hypothetical example of how parametric insurance works for a large-scale hydropower facility.  A one-year parametric insurance policy costs US$5,000,000. The watershed area has a six-month dry season with an average rainfall of 900 mm. The trigger level for an insurance payout is less than 750 mm of dry season rain. The insurance payout is US$100,000/mm of rain below the trigger level, with an exit level of no additional payout below 600 mm of rain. Annual hydropower sales are expected to be US$41.610 million with 750 mm of dry season rain, US$33.288 million at 720 mm, and US$8.322 million at 600 mm.

In this example, the insurance payout is US$15 million in a year with 600 mm of dry season rain or less, US$3 million with 720 mm, and US$0 with 750 mm. In a year with 720 mm of dry season rain, the hydropower facility has total revenues of US$36.288 million from sales and the insurance payout. That year, the insurance cost $5 million, but it only paid out US$3 million, so buying insurance turned out to be an unprofitable decision. However, in a year with 600 mm of dry season rain, the total revenues would only US$23.322 million, but the US$8.322 million insurance payout exceeded the insurance cost (making insurance a profitable decision). Since the RE supplier cannot predict the rainfall, it does not know whether buying insurance will be profitable or not.  However, it may still want insurance to reduce the uncertainty of potentially negative outcomes for the business.

Several transnational reinsurance companies (GCube, Munich Re, and Swiss Re) offer parametric insurance for large RE producers in low-, medium-, and upper-income countries, usually in partnership with domestic insurers.  Domestic insurers generally require an international partner to reduce correlated country risks.  Parametric insurance for RE generation is a customised product and typically has a minimum annual premium of US$100,000. Insurers reduce their exposure to climate change risks by limiting the policy term to one year and repricing the policy annually.

There are some market challenges to expanding parametric insurance. RE producers, domestic insurance companies, and insurance and energy regulators in low-income countries are often unfamiliar with the product.  Premium costs and uncertainty about the value of insurance are major constraints. In some areas, there may be insufficient hydrometeorological stations or remote sensing data to assess the climate risks.    RE suppliers may find it less costly to manage cash flow risks through reserve funds, credit lines, new loans, or renegotiation of existing loans than buying insurance. In particular, small-scale renewable suppliers may be less willing or able to buy this insurance. It might not be sufficiently profitable for insurance or reinsurance companies to offer these policies due to the transaction costs for customised products and the limited sales volume. There may also be legal barriers to entry for transnational insurance company participation and regulatory barriers for RE suppliers seeking to recover the insurance costs in rate approval decisions.

Nevertheless, banks should have some motivation for requiring RE borrowers to purchase parametric insurance or offering them incentives to reduce client loan repayment risks. Transaction costs can be reduced by allowing owners of multiple RE generation units to buy bundled coverage and incentivising RE industry associations to sell group policies to members.
Agricultural Microinsurance 
Weather-indexed insurance can help crop or livestock farmers lower their risks of large income losses from unusual weather events. Insurers face high transaction costs in insuring small-scale farmers, especially in remote areas. Smallholder farmers in low-income countries may find weather-indexed insurance too costly at market rates.  Parametric insurance eliminates claims adjustment costs and reduces transaction costs. Development assistance organisations or governments often cover or subsidise some costs or risks. The transaction costs can also be reduced by working through governmental or nongovernmental (NGO) projects or cooperatives and farmer associations.

Some donor projects have allowed low-income farmers to pay previously agreed microinsurance premiums when they have available cash after crops are sold, 2) pay the costs in labour time, or 3) bundle insurance premiums with agricultural credit.  However, microinsurance might only be viable for private insurers with continuing development assistance organisation, government or NGO involvement, a concern in achieving scale and sustainability. Weather-indexed insurance may be a feasible add-on service for microfinance institutions or agricultural development banks. The effectiveness of weather-indexed insurance as a climate adaptation strategy can be increased by improving hydrometeorological data collection and information sharing to support farmer decisions (an approach implemented in Kenya). A Minimum Quality Standard (MQS) tool can estimate whether agricultural index insurance will benefit farmers and is the basis of a Quality Index Insurance Certification (QUIIC) system used in East and Southern Africa.
Parametric Insurance for Nature-Based Solutions
In Mexico, the Quintana Roo Coral Reef Insurance Vehicle provided parametric insurance for hurricane damage to coral reefs with payouts for reef rehabilitation. A Coastal Zone Management Trust (CZMT) Fund paid the insurance premiums with revenues from taxes paid by property owners benefiting from the reef.

Similarly, the Mesoamerican Reef (MAR) Insurance Programme supported post-hurricane coral reef restoration in four countries (Belize, Guatemala, Honduras, and Mexico) with premium support from an InsuResilience Solutions Fund.

Conservation International and the SwissRe Foundation piloted parametric insurance for mangrove restoration in the Philippines, funded by the sale of blue carbon credits and payments for environmental services from insurance companies benefiting from lower exposure to flood damage claims. The intermediaries plan to expand this approach to other Asian countries. 
Future Efforts
The InsuResilience Global Partnership set a vision of expanding the benefits of insurance and climate resilience to 150 million people by 2025. However, future efforts may be hindered by bilateral and multilateral aid cutbacks, which will increase the importance of private sector initiatives of insurers and financial institutions.

The Insurance Development Forum has an Inclusive Insurance Working Group promoting country diagnosis and market assessment, enabling environment reforms, advocacy, development of scalable products, evidence building and knowledge sharing, and a global platform of insurers and development assistance organisations.  



Eric L. Hyman was an Environmental Economist with the USAID.

### Space Bytes: The Prospect of Launching Data Centres in Space

Introduction
The increasing capabilities of artificial intelligence (AI) tools are positioning it as a driver of innovation in fields ranging from logistics to healthcare. However, the ongoing global AI race is being interrupted by speed bumps caused by the increasing strain on energy infrastructure. During a US Congressional hearing held in April 2025, Google ex-CEO Eric Schmidt stated that the AI-powered “technological revolution and the prosperity it promises depend entirely on a modern, resilient, and vastly expanded energy infrastructure.” Bolstering energy infrastructure for data centres is a priority for all economies looking to sharpen their competitive edge. Research from McKinsey suggests that data centres will require US$6.7 trillion by 2030 to match the growing demand for compute. Simultaneously, the demand for energy and compute is challenging countries’ net-zero commitments and sustainability goals while negatively affecting communities located in the vicinity of data centres. Offsetting the carbon footprint and environmental runoffs of the AI-driven demand spike has led to the exploration of alternative energy sources, such as nuclear and solar power. However, expanding nuclear infrastructure requires regulatory permissiveness that is absent in many jurisdictions, and solar power plants face storage capacity issues and a capped efficiency due to weather patterns and day-night cycles. Such problems are leading to investment in celestial solutions. Shortly after his US Congressional testimony, Schmidt bought the medium-lift rocket manufacturing company Relativity Space, which aims to rival Elon Musk’s SpaceX. The ostensible goal of Schmidt’s investment is to launch data centres in low Earth orbit (LEO), a solution to the energy bottleneck that is generating increasing interest. This article will explore the potential benefits of LEO data centres and outline obstacles that need to be overcome.

Launching data centres in space offers the potential to significantly reduce the environmental costs of frontier AI development.
Computational Lift-Off
The feasibility of LEO data centres and the carbon emissions caused by successive launches are currently being tested. In 2024, the European Commission launched the Advanced Space Cloud for European Net Zero Emission and Data Sovereignty (ASCEND) project in partnership with Thales Alenia Space as part of Horizon Europe programmes. The objective was to study the technical feasibility and environmental impact of launching large-capacity data centres in space with an aim to meet the EU Green Deal objective of net-zero carbon by 2050. Although the studies have not concluded, several private sector enterprises have already emerged in the field. These include Starcloud, Lonestar Data Holdings, Axiom Space based in the US, and ADA Space operating from China in partnership with the state-backed Zhejiang Lab.

Sources: Starcloud, DatacenterDynamics, Axiom Space, Orbital Today
LEO data centres offer advantages in three primary domains: water and land use, energy, and security. Terrestrial data centres require large amounts of land for hyper-scale facilities in close vicinity of energy grids to maintain close to a hundred percent up-time, adding pressure on energy and water supply. Launching data centres in space offers the potential to significantly reduce the environmental costs of frontier AI development. In orbit, solar arrays can operate at a 40 percent increased efficiency due to the lack of atmospheric hindrances such as weather changes and day-night cycles. Also, since light travels approximately 31 percent faster in a vacuum compared to fibre optic cables, the use of optical inter-satellite links can reduce latency if data is routed through LEO satellite meshes. LEO data centres also promise to improve cybersecurity, particularly for sensitive information. First, they insulate compute from terrestrial disasters such as earthquakes, hurricanes, and floods that can devastate infrastructure. Second, by operating in space, they remain physically separated from land-based internet and network infrastructure, substantially reducing their exposure to common cyberthreats and forms of network-based exploitation.
Although LEO data centres have the potential to address major AI development bottlenecks, they also face a series of challenges.

Obstacles 
Orbital data centres face three primary categories of threats unique to their environment: cyber attacks, physical attacks, and natural causes. Cyber attacks may originate from foreign adversaries or independent actors aiming to disrupt up-down communications, decode encrypted data, or implant malware into the data centre’s software. Physical threats include kinetic energy anti-satellite (ASAT) weapons, designed to destroy orbital objects through collision, and directed energy ASATs that use concentrated electromagnetic energy to jam satellite communications. Nuclear-armed satellites may be deployed as a form of sabotage by a foreign adversary, disrupting LEO data centres through direct impact or through collision with debris from other shattered orbital objects. Natural causes such as geomagnetic storms, meteor showers, and solar flares can damage the hardware of the data centres.
LEO data centres may represent a regulatory challenge as there are no current international treaties regarding data privacy regulations in space. The 1967 Outer Space Treaty (OST), a foundational legal framework for extraterrestrial exploration, was drafted in an era without private space-focused entities. Further, while the OST covers jurisdictional issues pertaining to physical space structures, it does not cover data being processed in space. This raises a key question. Are orbital data centres subject only to the legislations of the nations whose citizens’ data they process? Or will they be subject to multinational regulation, given that space is a shared global domain?

Gulf Investments in Space-Tech
Major economies in the Gulf, such as the UAE and the Kingdom of Saudi Arabia, are increasing investments in developing their space economies. Both the UAE and Saudi Arabia are signatories to the Artemis Accords, an agreement that establishes safeguards for collective space exploration. Saudi Arabia has attempted to stimulate the private sector by reducing regulatory barriers to entry. Under the broader umbrella of the ‘Saudi Vision 2030’ plan, Saudi Arabia’s space goals include improving Internet of Things (IoT) connectivity and geospatial intelligence, as well as launching LEO satellite infrastructure and space tourism. Its space programme comprises three major governmental bodies: the Saudi Space Agency, which serves as the primary space development entity; the Communications, Space and Technology Commission, the key regulatory body; and the Public Investment Fund, a sovereign wealth fund responsible for investment.
The UAE’s space program includes the UAE Space Agency, in charge of regulation and investment; the Mohammed Bin Rashid Space Centre, focused on research and development; and private sector companies such as Yahsat and Space42. The goals of the UAE’s ‘National Space Strategy 2030’ are passing regulation that promotes space-focused manufacturing and R&D, launching space exploration missions, and engaging in space-focused local and international partnerships. Part of this strategy includes a commitment to collaborate with and sponsor the private sector, create space safety measures, and reinforce its commitment to international space treaties. The UAE’s Space Economic Zones programme offers stimulus packages, access to government space resources and networking opportunities for participating space-focused private sector businesses.

Given that the energy-AI nexus can be the inflexion point for deciding the digital destinies of forward-looking economies, exploring orbital solutions in the long run may be a viable strategy for Gulf countries trying to sharpen their technological competitiveness.
In 2024, Saudi Arabia’s Public Investment Fund launched a space and satellite-focused company, the Neo Space Group (NSG). NSG was the first company in Saudi Arabia to be awarded a regulatory permit to develop Earth-observation services. Soon to launch is an NSG venture capital fund, which will direct investments to space-focused startups. The UAE Space Agency is developing two projects: Sirb, a Synthetic Aperture Radar-enabled satellite constellation, and Arab Satellite 813, a hyperspectral LEO observation satellite designed to study climate change. Meanwhile, the Gulf’s first AI space technology company, Space42, was formed through the merger of Yahsat and Bayanat. Given that the energy-AI nexus can be the inflexion point for deciding the digital destinies of forward-looking economies, exploring orbital solutions in the long run may be a viable strategy for Gulf countries trying to sharpen their technological competitiveness.

Going Forward 
The ongoing AI race is already fracturing global tech governance and cooperation as great powers bundle their respective tech stacks with geoeconomics strategies. As technology becomes a tool for economic statecraft, supply chains and tech infrastructure are becoming geopolitical fault lines. The age of bipolarity is making way for mini- and plurilateralism, where focused groupings of countries are able to strategically cooperate based on shared interests. The Middle East enjoys a geographic location at the heart of global corridors as well as coalitions, allowing it to leverage its positioning to promote a shared understanding in emerging high-impact issues such as orbital cooperation. Tech-focused economies such as the UAE and SaudiArabia should lead efforts to establish physical and cybersecurity norms for data-processing space assets. As the Gulf steadily works towards economic diversification, investing in orbital solutions for AI-driven energy demand can help meet sustainability goals and alleviate pressure on utilities such as water. To achieve this, governments should prioritise the creation of public-private partnerships and financial vehicles focused on developing technologies required for operating data centres in space.



Siddharth Yadav is a Fellow with the Technology vertical at the ORF Middle East. 
Ambika Sondhi is an independent researcher with a focus on international security.

### Iraq Heads to the Polls: The Stakes for its Economy

As Iraq enters the final weeks before its pivotal national elections on 11 November 2025, the central question it faces is not just political but also economic. Voting for the seventh time since the United States (US)-led invasion in 2003, Iraqis are set to choose a new 329-seat Council of Representatives from a landscape of 37 alliances, 38 parties, and nearly 80 independent candidates.

The vote could become a referendum on an economic model that juxtaposes substantial oil wealth with persistent governance and service-delivery challenges. The core issue remains a well-documented reliance on oil, which accounts for nearly 90 percent of state revenue and has fostered a political economy more centred on distribution than diversification. With ministries directing three-quarters of the economy, the majority of the non-state, non-oil economy is informal and cash-based. These hydrocarbon receipts finance a large public sector that employs about 4.5 million Iraqis, shaping labour-market incentives and the state’s fiscal profile. The associated wage bill absorbs a substantial share of the budget, constraining capital outlays needed to address infrastructure gaps as reflected by recurring electricity outages and acute water crises. Moreover, Iraq’s population is young, yet many entrants to the labour force face limited opportunities. The World Bank reported that 15.5 percent of the total labour force was unemployed in 2024. The unemployment rate has been rising over the past decade, as seen in Figure 1.



The ballots cast in the coming weeks will be a verdict on a system whose accumulated policy and institutional constraints have brought the country to an inflexion point. What is at stake in this election, therefore, is not simply the composition of a cabinet but the trajectory of the political economy: a choice between incremental continuity and a more ambitious reform path.
Parties on the Ballot Box
As the Iraqi electorate prepares to deliver its verdict, the contest has crystallised into a three-way struggle between fundamentally different politico-economic paradigms. The choice is not between individual parties, but between three distinct futures: the managed decay of the status quo, the high-risk gamble of radical reform or the volatile uncertainty of populist disruption. While it is unlikely that any single party will form the government, most ruling coalitions can be envisaged with these three broad pathways.

The dominant force remains the Iran-backed Coordination Framework, a coalition of established Shia Islamist parties that are the primary architects and beneficiaries of the post-2003 order. The Coordination Framework has fractured into five blocs ahead of November, pledging to contest separately but reunite after the elections. They are less a political coalition and more the custodians of the system itself. Their power is deeply fused with the state apparatus, reinforced by their control over key ministries and the loyalty of powerful armed factions that function as a parallel security structure. Therefore, their economic vision is one of systemic preservation and centralised control. Despite their promises, it is unlikely they will dismantle the oil-dependent rentier state. Instead, they will manage it as the indispensable engine of political power. This is achieved through the ethno-sectarian power-sharing system known as muhasasa, under which the public sector has been used as a tool for political patronage and social control. Their development model favours state-led contracts, often with geo-economic partners who are less encumbered by the transparency requirements of Western institutions. A victory for the incumbent bloc would thus usher in a future of predictable stagnation. This promises a degree of near-term stability that may reassure international energy investors as the system itself would not immediately collapse, even as governance pathologies persist. Polling by reputable surveys indicates persistent support for established parties: In 2025, 55 percent of Iraqi respondents expressed confidence in the government, although publicly available polling does not clearly indicate voting intentions based on employment status. Next are the Reformist Independents representing the post-sectarian political class born from the embers of the 2019 Tishreen protest movement. This diverse coalition of technocrats, academics, and youth activists is the ghost of those protests, now incarnated as a political force. Their vision is of structural reform and global integration. In the Iraqi context, their proposals emphasise reforming the inefficient public sector, reducing corruption, changing the muhasasa system and catalysing private sector–led growth. They aim to attract investments from the West and the Gulf by adhering to global transparency standards. While reformists are often sidelined from Iraqi politics because they cannot compete with the clientelism that keeps larger parties afloat, the history of Iraqi elections and the strength of the 2019 movement have taught them not to underestimate the power of collective resolve. Therefore, reformists represent the highest risk for the highest reward. They are perceived as an existential threat by the entrenched elites, making fierce resistance from armed factions a high probability. Any implementation of painful fiscal and administrative adjustments could trigger social unrest without strong safety nets. Their success would be contingent on rapid international financial and security backing. Without these, capacity constraints and coercive pushback could stall reforms. A vote for the Reformists is, therefore, the ultimate gamble: a choice between potential national economic renewal and the risk of institutional paralysis.

Another important force is the Nationalist Bloc, which largely coalesces around the immense populist appeal of figures such as Muqtada al-Sadr. In Iraq’s October 2021 election, the Shia Islamist Sadrist movement won 73 of the 329 parliamentary seats. However, after eight months of deadlock with the rival Shia Coordination Framework over the formation of a new government, al-Sadr withdrew from the process and ordered his parliamentarians to resign. Despite months of re-engagement signals ahead of the 2025 elections, al-Sadr has now stated he will boycott Iraq’s politics. Al-Sadr is known for his strategic unpredictability. It is crucial to consider the impact of a Sadrist win on the Iraqi economy as he continues to send mixed signals. After several Sadrist figures registered as candidates, he expelled them and then told supporters not to harass those individuals. He also urged his base to update their voter IDs even in the event of a boycott of the election. Given his capacity to mobilise voters and disrupt coalitions, it is essential to assess the implications of a late Sadrist pivot.  Importantly, their power base is not within the state bureaucracy, but in the impoverished centres. They derive their authority from a potent combination of religious legitimacy and fiery Iraqi nationalism. Their economic vision centres around a promised economic exorcismù, a radical, top-down anti-corruption campaign aimed at dismantling the patronage networks of the incumbent elite and rivals. This approach is deeply sceptical of foreign influence, viewing international engagement as a potential vehicle for external control. A shock victory for the Nationalists, much like in 2021, might unleash a period of high-stakes volatility. Their assault on the entrenched elite would likely trigger fierce resistance from rival networks, raising risks of capital flight and a pause in new foreign investment amid elevated uncertainty. The outcome of such a victory is profoundly binary: it is a gamble that could either break the back of systemic corruption or shatter institutional functionality through uncontrolled confrontation.
The Kingmakers
The ethno-regional blocs of the Kurdish and Sunni parties enter the electoral contest not as ideological contenders for the national economic model, but as transactional kingmakers. These blocs together held approximately a third of all seats in Iraq’s previous parliament, so they have the power to influence the final verdict of the election. Their economic agenda is pragmatic and laser-focused on securing regional interests. For instance, the major Kurdish parties are primarily concerned with negotiating a stable, long-term agreement on their share of the federal budget and codifying the Kurdistan Regional Government's autonomy over its energy resources. Similarly, the fragmented Sunni blocs are less focused on national macroeconomic policy and more on securing reconstruction funds for provinces devastated in the war against the Islamic State of Iraq and Syria (ISIS), along with ensuring their constituents receive a proportional share of public-sector jobs and state contracts. Their role will be to leverage their parliamentary seats to extract these specific economic concessions from whichever of the larger Shia-led blocs ultimately forms the government.

Ultimately, the paradox of Iraq’s political arithmetic is that the purity of any single electoral mandate is unlikely to survive. The winning Shia-led bloc, regardless of its platform, will be compelled to barter its grand vision for the mathematically essential support of the pragmatic Kurdish and Sunni blocs. The question then metamorphoses from a verdict on the future to a reflection of the past: from which vision will win the vote to whether Iraq’s foundational power structures can permit any meaningful economic change. Only 11 November holds the answer.



Samriddhi Vij is an Associate Fellow at the Observer Research Foundation Middle East.

### The UAE–Greece Tourism Partnership in Strategic Perspective

The United Arab Emirates (UAE) refers to itself as “an exceptional tourism destination”, a self-description which resonates with some findings of international assessments and rankings. Among the most authoritative benchmarks in this field is the World Economic Forum’s Travel & Tourism (T&T) Development Index, which classifies countries regarding their T&T sectors’ “sustainable and resilient development”. This classification is based on the following key dimensions: the presence of an enabling environment, sectoral policies and enabling conditions, infrastructures and services, available resources, and the sector’s sustainability. Derived from the results obtained across these dimensions, the 2024 Index ranked the UAE first in the Middle East and 18th globally out of the 119 studied economies.
Considering the sector’s wider significance, beyond its current results,  H.E. Abdulla bin Touq Al Marri, UAE Minister of Economy, stated in May 2025 that the “continuous development of the tourism sector is a strategic priority for the UAE, in line with its vision of becoming a leading global tourism destination”. This statement has been made in the context of the Minister’s meeting with his Greek counterpart to “discuss ways to enhance bilateral cooperation”. In light of its results and its envisaged evolution, tourism appears to be a sector that is not only prominent in the present but also one that constitutes an integral part of the country’s forward-looking policy agenda.
To fully comprehend the strategic value and underlying significance of tourism for the UAE, its sectoral objectives and initiatives, such as the conclusion of international partnerships, should be studied in view of the state’s ultimate “long-term, full-vision plan”. The latter is known as ‘UAE Centennial 2071’. Consistent with this rationale, the current paper seeks to 1) analyse how tourism is leveraged to serve the Centennial’s main goal and 2) assess the extent to which a sectoral partnership with Greece can contribute to achieving this goal.
The starting point for this analysis lies in the Centennial’s main objective: to “fortify the country's reputation and its soft power”. The latter has traditionally been understood as the “power of attractiveness”. To a significant degree, the path to the realisation of this vision leads through two main channels. One is economic diversification through the support and promotion of an economy less reliant on hydrocarbon revenues, and increasingly based on knowledge and diversity. The second is the enhancement or consolidation of the country’s leading role and attractiveness in policy areas with both regional and global dimensions. Tourism is a sector which can play a role in both areas and advance these objectives.

Through the lens of the economic diversification agenda
According to the World Economic Forum, travel and tourism is “one of the world’s largest economic sectors” with “unparalleled potential”. Laying the foundation for these statements and forecasts, the sector contributed 10 percent to the global economy in 2024–an increase of nearly 1 percent compared to 2023–and provided for approximately 1 out of 10 jobs worldwide (357 million in total). By 2034, T&T is projected to account for up to 11.5 percent of the total Gross Domestic Product (GDP).
The sector’s economic importance and prospects have also been identified by the UAE. Tourism’s contribution to its economy is on the rise: it accounted for 11,7 percent of the country’s GDP in 2023, was approximately 12 percent in 2024, and is expected to reach 13 percent in 2025. Based on the World Travel & Tourism Council’s (WTTC) forecast, in 10 years, the sector will still account for more than 10 percent of the country’s GDP, with a workforce projected to surpass 1 million jobs. This latter estimated number, as the WTTC puts it, is “underscoring the sector’s central role in economic diversification and national growth”.
Recognising its potential, this sector has long been identified by the Gulf state as being “critical to [the] UAE’s economic diversification drive”. As the country’s diplomatic service noted, tourism “is a particularly significant contributor to the UAE's service industry, with a substantial impact on the country's GDP”. Reflecting and building on the sector’s economic potential, the UAE Tourism Strategy 2031–a sectoral guiding compass–has set objectives with quantified targets regarding, for instance, the future contribution of tourism to the GDP or the enhancement of its competitiveness.
Considering these factors, tourism serves as a driver for growth and a key source for economic diversification, thereby advancing the Centennial’s goal. Nevertheless, the sector’s contribution to the realisation of the Gulf state’s vision plan extends beyond the economic sphere.

A factor of attractiveness and reputation
The country’s Tourism Strategy also seeks to “strengthen the position of the UAE as one of the best destinations in the world for tourism”. Supporting this aim, one of the Strategy’s key action-areas focuses on the enhancement of a “unified national tourism identity”. The latter is an “extension of the country’s visual media identity and consolidates the image and position of the UAE in the eyes of the global audiences”. Consequently, the Strategy also has a reputational and soft power component in line with the Centennial’s goal. Building on this component, the Gulf state could elevate or consolidate its international standing, which, in turn, could lead to diverse strategic gains.
Consistent with these economic and reputational objectives, the “UAE government places great importance on developing and enhancing the tourism sector in line with best global practices”, notably in sustainability. The quest for these practices can contribute to the advancement of partnerships with other states that are prominent tourism powers within their geographies. For the UAE to acquire the most relevant experiences for itself, cooperation with countries sharing similarities with its own geographic features and consequent tourism offer can be highly pertinent. Additionally, fostering a sectoral collaboration with a state that is already its long-standing counterpart can prove particularly beneficial as the partnership could be embedded in an existing cooperation framework. Greece represents a prime example of a state meeting these criteria.

The Greco-Emirati tourism cooperation’s rationale
As southern littoral states, both the UAE and Greece can capitalise on their maritime accessibility, seaside location and sun-drenched climate. They refer to themselves “as gateways for tourism in the Middle East and Europe”.
According to the European Institute of the Mediterranean, based on data from the early 2020s, Greece is listed as one of the primary tourist destinations in the Mediterranean basin. Regarding the importance of the country’s coastal geographic features, the Greek INSETE institute pointed out that the “comparative advantage of the sea has made it one of the most popular tourist destinations in Southern Europe”.The Hellenic Republic also ranked second in 2023 after Italy as a leading maritime passenger country, with the port of Piraeus being among the busiest EU passenger ports. Recognising the sector’s potential, Greece identified tourism as one of the main domains for the promotion of its “foreign policy positions and international image”.
In addition to being a prominent tourism actor, Greece is also a long-standing partner of the UAE. The cooperation between the two states, dating back to 1975, “witnessed continuous development over the decades”, leading to a strategic partnership in the early 2020s. Economic relations, described by the UAE as “vibrant and growing”, have been a cornerstone of this collaboration. The Gulf state highlighted that tourism should be part of these relations, in line with its 2071 vision and in accordance with Greece’s development strategies. Furthermore, this sector has not only been integrated into the parties’ overarching collaboration structure but has become one of its most successful areas. As Minister Bin Touq affirmed in 2025, the “UAE-Greek relations are witnessing steady progress across various economic and developmental fields, particularly in the tourism sector”.
Building on their existing cooperation and their respective strategic agendas, the UAE and Greece started to “explore ways to enhance partnership in green and sustainable tourism”, as announced in May 2025. On that occasion, Minister bin Touq noted that: “Greece possesses invaluable experience in tourism sector development and attracting tourists from around the world, which enhances the commonalities between the two countries in this field”. Drawing on these “assets”, experience sharing has been identified as one of the main avenues for the parties’ collaboration aligned with the UAE’s quest for best practices to strengthen its competitiveness and consolidate its reputation as a leading tourism actor. A primary area of interest would be “policymaking, with a focus on innovation and sustainability”.
“[J]oint tourism promotion”, and “supporting investments in the tourism and hospitality sectors”, have equally been identified as areas of collaborative action. These could also contribute to the countries’ growth and reputation.

Conclusion
The UAE utilises tourism as a key instrument to serve the country’s long-term vision plan, the Centennial 2071. The latter’s main goal is to strengthen the UAE’s reputation and soft power. To achieve this goal, economic diversification and the enhancement of the UAE’s attractiveness in policy areas with both regional and global dimensions serve as primary means. Tourism plays a crucial role in both.
This sector has become a significant contributor to the country’s non-hydrocarbon growth, but also a major domain in which the state can build and reinforce its attractiveness and reputation. To remain competitive and maintain its position as a leading and attractive tourism actor, the UAE places specific importance on the sector’s development and enhancement in accordance with best international practices.
Based on this rationale, Greece is one of the countries with which the Gulf state seeks to strengthen its sectoral cooperation. The Hellenic Republic is not only the UAE’s long-standing economic partner but is also perceived by the Gulf state as a leading tourism actor in Europe, with relevant expertise in ‘sector development’ and ‘global tourism attraction’. Consequently, a partnership with Greece that harnesses the country’s expertise can contribute both to the UAE’s attractiveness and competitiveness. This would entail that an enhanced Greco-Emirati tourism cooperation could be an enabler of the Centennial’s realisation.



Eszter Karacsony is an Associate Fellow and Program Lead in Geopolitics at Observer Research Foundation (ORF) Middle East.

### The UAE’s Pivot: From Oil Power to AI Hub

Introduction
Artificial Intelligence (AI) is becoming the horizontal enabling layer of an entire new ecosystem, which means it can be embedded anywhere. While labelled as “AI” today, tomorrow it will simply be an invisible layer that powers the new intelligence revolution. Within this quotient, the United Arab Emirates (UAE) is expected to play a critical role in developing the region's AI ecosystem, both in terms of energy and infrastructure. This will power the global AI ecosystem, help shape its strategic map, which consists of several key layers, including energy, infrastructure, models, and applications that will serve the entire ecosystem. This will play out within a new, fragmented, and globalised world order, with a redefined Geopolitics of AI. Indeed, the global order has been shifting around a set of strategic alliances in the past few decades, where the UAE will become a critical player. The UAE is emerging as a critical geopolitical player in the global AI race, leveraging a unique combination of energy resources, sovereign capital, and strategic positioning to become an indispensable partner for the United States (US) in the development of AI infrastructure.


The Infrastructure Advantage: Energy as the Foundation
The UAE's strategic importance in the AI race rests fundamentally on its unparalleled energy infrastructure capabilities:

Nuclear Power Leadership: The Barakah nuclear power plant, with its 5.6GW capacity now fully operational across four APR-1400 reactors, provides 25 percent of the UAE's electricity needs. This positions the UAE as the only Arab country in the Middle East bloc with an operational nuclear capacity, offering stable, carbon-free baseload power, which is essential for AI data centres.

The 5GW AI Campus: The newly announced US-UAE AI data centre campus plans to deploy 5GW of capacity, with 1GW in the first phase, utilising nuclear, solar, and gas power, as reported by Data Centre Dynamics. This massive facility, covering 10 square miles in Abu Dhabi, represents one of the largest AI infrastructure projects globally and will serve as "a regional platform from which US hyperscalers will be able to offer latency-friendly services to nearly half of the global population," as reported by Data Centre Dynamics.
Financial Architecture: MGX as the Strategic Vehicle
The UAE's financial commitment through MGX demonstrates unprecedented scale in AI infrastructure development. MGX's strategic investments are channelled meticulously/cautiously to build the physical and technological foundation for AI deployment at a global scale. The fund contributed approximately US$7 billion to the Stargate Project, as reported by Crunchbase, directly funding the construction of massive data centres and computing clusters essential for next-generation AI models. This investment extends beyond capital injection—it is architecting the physical infrastructure that will house millions of Graphics Processing Units (GPUs) and provide the gigawatt-scale power systems required for AI training and inference.

MGX's participation in OpenAI's US$6.6 billion funding round, the largest venture capital deal ever as reported by the Arabian Gulf Business Insight (AGBI), specifically targets infrastructure expansion to support ChatGPT's scaling to 500 million users while building the computational capacity for artificial general intelligence (AGI) development. Similarly, their involvement in Databricks' US$10 billion raise and xAI's US$6 billion funding round, as reported by Crunchbase, directly funds the development of specialised AI infrastructure—from Databricks' data processing pipelines that prepare massive datasets for AI training, to xAI's Colossus supercomputer facility housing hundreds of thousands of GPUs. These investments create the critical infrastructure layer that transforms raw compute into accessible AI services.

The strategic importance of MGX's infrastructure focus becomes even clearer through its partnership with BlackRock, GIP, and Microsoft in the AI Infrastructure Partnership, which seeks to unlock an initial US$30 billion in capital to mobilise up to US$100 billion in total investment potential, as reported by the UAE Embassy. This partnership aims to target the development of data centres, energy infrastructure, and the physical networks that will power AI globally—not just funding software development, but building the concrete, steel, and silicon foundation upon which the entire AI economy will operate. Through these coordinated investments, MGX is essentially financing the construction of the AI era's equivalent of highways, ports, and power grids—fundamental infrastructure that will determine which nations can effectively participate in the AI-driven economy.
The Agentic AI Stack and Infrastructure Requirements
As discussed in previous analyses about the agentic web architecture, the shift to autonomous AI agents creates exponential demands that fundamentally reshape infrastructure requirements. The agent layer requires massive parallel processing capabilities to handle millions of simultaneous agent interactions—imagine countless AI agents negotiating, transacting, and coordinating in real-time, each requiring dedicated computational resources that far exceed those of traditional web services. This computational intensity directly translates into networking demands, where inter-agent communication protocols require regional data centres capable of sub-millisecond response times, as even minor latency can cascade into failed negotiations or broken agent workflows. Perhaps most critically, agent-to-agent transactions and their continuous operation demand uninterrupted power supply—unlike human users who sleep, these agents operate 24/7, making any power interruption potentially catastrophic for the economic transactions they manage.
The agent layer requires massive parallel processing capabilities to handle millions of simultaneous agent interactions—imagine countless AI agents negotiating, transacting, and coordinating in real-time, each requiring dedicated computational resources that far exceed those of traditional web services.
The UAE's infrastructure directly addresses these interconnected requirements through a unique convergence of capabilities. Its nuclear baseload power from the Barakah plant provides the stable, uninterrupted energy that agent systems require. On the other hand, its strategic geographic positioning between Europe, Asia, and Africa enables the low-latency regional coverage essential for agent-to-agent communications across three continents. This physical infrastructure is supported by sovereign wealth that can commit to decades-long infrastructure development cycles—a timeline that matches the long-term evolution of agentic systems. Where traditional data centres were built for human-initiated queries and batch processing, the UAE is constructing infrastructure specifically designed for the always-on, massively parallel, latency-sensitive world of autonomous AI agents, positioning itself as the backbone for the emerging agent economy.
Geopolitical Realignment: The New AI Alliance Architecture
Building on an analysis of the three-layer framework (geopolitical, economic, and business layers), the UAE exemplifies the US strategy of ‘allied expansion’ versus China's ‘vertical integration’:

Strategic Alignment: The UAE-US partnership represents what officials call a ‘new golden era’ of cooperation, as reported by MEED, extending an 80-year alliance into the AI domain. This creates a critical node in the US bloc's network-centric approach to AI dominance.

Technology Transfer Controls: The agreement states "strong security guarantees to prevent diversion of US technology," with American companies operating the data centres and offering American-managed cloud services throughout the region, as reported by Data Centre Dynamics.

Capital Recirculation: The UAE's investments through MGX create bidirectional flows—Gulf capital financing US AI development, while US technology and expertise flow back to establish Middle Eastern AI infrastructure.
The UAE's Strategic Positioning in Global AI Infrastructure
The UAE's investments in AI infrastructure are creating mutually beneficial partnerships that strengthen its position as a global technology hub:

 	Energy Leadership: The UAE leverages its advanced clean energy capabilities, including the Barakah Nuclear Energy Plant and ambitious renewable energy projects, to offer AI companies reliable, gigawatt-scale power solutions. This positions the UAE as a crucial partner for energy-intensive AI operations while advancing its own sustainability goals.
 	Strategic Capital Deployment: Through sovereign wealth funds such as MGX and strategic partnerships with major AI companies, the UAE is not just providing capital but actively participating in shaping the future of AI infrastructure. These investments, including discussions with companies like OpenAI as reported by MENA Bytes, demonstrate the UAE's commitment to being a key stakeholder rather than merely a funding source.
 	Geographic Advantage: The UAE's strategic location creates a natural bridge between East and West, enabling AI companies to serve high-growth markets across Asia, Africa, and the Middle East with low latency. This geographic positioning enhances the UAE's value proposition as a hub for global AI infrastructure while supporting regional digital transformation initiatives.
 	Regulatory Agility: The UAE's streamlined regulatory framework and government support enable rapid infrastructure deployment, making it an attractive partner for AI companies seeking to scale quickly. This efficiency, combined with the UAE's Vision 2071 and AI Strategy 2031, creates a conducive environment for long-term technology partnerships and innovation.

The Agentic Future: Infrastructure as Competitive Advantage
As the transition to the agentic web era occurs, control over AI computing infrastructure is becoming the defining factor for platform dominance. The UAE's unique combination of abundant clean energy from nuclear and renewable sources, substantial sovereign wealth funds that allow for patient capital investment, strategic geographic positioning that connects global markets, political stability with strong international alliances, and proven capabilities for rapid execution positions the nation as a cornerstone in the development of global AI infrastructure.

This convergence of advantages enables the UAE to forge essential partnerships with leading AI companies while establishing itself as a critical hub in the emerging agentic economy, where proximity to powerful computing resources and reliable energy infrastructure will determine which platforms can deliver the low-latency, always-on AI services that define the next generation of digital experiences.
The New Geopolitics of AI
The UAE's emergence as a key hub for AI infrastructure represents a significant shift in global power dynamics. No longer merely an energy exporter, the UAE has transformed itself into a crucial node in the AI value chain, leveraging its traditional strengths (energy and capital) to secure a central position in the future technology ecosystem.

For the US, the partnership with the UAE and broader Gulf states solves critical infrastructure constraints while extending American AI standards and platforms globally. This ‘fragmented globalisation’ model, where aligned nations contribute specialised capabilities within a US-led framework, may prove more resilient than China's vertical integration approach.

The success of this strategy will ultimately depend on maintaining technological superiority, ensuring security of critical infrastructure, and managing the complex geopolitical relationships inherent in such deep interdependence. As the AI race intensifies and agentic systems require ever more sophisticated infrastructure, the UAE's role as the Middle East's AI infrastructure powerhouse will only grow more strategically vital.



Gennaro Cuofano is an entrepreneur, researcher, and GTM executive who bridges technology, business modelling, and market analysis to deliver unique insights.

### Beyond Oil: Saudi Arabia’s Critical Minerals Strategy for a Diversified Economy

Saudi Arabia’s Vision 2030 document outlines its ambitions to capitalise on its substantial mineral base, yet another element of its resource wealth in addition to oil and gas. The multifarious use cases of these minerals, many of which have been identified as being critical, imply that related issues of availability and accessibility have significant geopolitical ramifications. Harnessing its transition minerals endowment would grant Riyadh leverage over the changing energy landscape being engineered by transition pathways and, by extension, the global political economy. Any meaningful hold over the sector would also bring Saudi Arabia the industrial and economic clout being forged in the data centres powered by these critical minerals — another domain the country and its partners are launching big bets on. 

Economic and Industrial Value of Critical Minerals to Saudi Arabia
First, a systemic expansion of Saudi Arabia’s mining sector and development of its critical minerals processing capacity — a crucial bottleneck in global supply chains even in countries that are well-endowed with the minerals themselves — could contribute close to US$75 billion to the country’s GDP by 2030, an increase of more than US$50 billion from 2024 figures. Developing expertise in the mining and processing of critical minerals can then aid the development of downstream sectors such as magnet production and advanced electronics manufacturing. Cumulatively, this would translate into a vertical of substantive value that could prove central to Vision 2030’s economic diversification strategy.

A systemic expansion of Saudi Arabia’s mining sector and development of its critical minerals processing capacity — a crucial bottleneck in global supply chains even in countries that are well-endowed with the minerals themselves — could contribute close to US$75 billion to the country’s GDP by 2030, an increase of more than US$50 billion from 2024 figures.
Second, Saudi Arabia’s energy transition agenda aims at 130GW by 2030, with 50 percent coming from renewable energy sources. Fulfilment of the agenda demands the express installation and deployment of renewable energy projects nationally. Critical minerals are central to this agenda by being ubiquitous parts of the entire value chain of energy transition, ranging from the production of magnets to the harnessing of nuclear energy and green hydrogen, as well as the production of Electric Vehicles (EVs).
Notably, the impetus to decarbonise, along with the increased integration of renewable energy into the Saudi economic model, is a function not just of clean energy targets that the Kingdom has committed to. It makes ample fiduciary sense as well to this petrodollar-based economy. Greater integration of renewable options into domestic energy systems would enable more of its oil production to be used for conversion into downstream petrochemical products — a far more financially lucrative unit of output.
Third, the Public Investment Fund (PIF), the Saudi sovereign wealth fund, has announced a mammoth US$6 billion outlay to establish a mega data centre ecosystem. The Kingdom’s resilient grid-scale oil and gas-powered electricity abundance, the lowest costs of renewable energy anywhere in the world, its growing expertise in water desalination and management, and its central geographic position — both as a land-bridge between the larger MENA region and Europe, while also sitting atop a mesh of undersea data cables — serve to create substantial advantages for the country to emerge as a regional hub for digital infrastructure. Underwriting these advantages with access to domestically mined and processed critical minerals needed for these data centres would enable the Kingdom to build a cost-effective data infrastructure supported by a resilient minerals supply base.


 Reserves of heavy rare earths like dysprosium and terbium, which are central to defence production, have been discovered in the country.

Fourth, reserves of heavy rare earths like dysprosium and terbium, which are central to defence production, have been discovered in the country. This could translate into an effective localisation of at least a part of defence manufacturing within the country, another potential industrial lever of geo-economic clout in the future. The successful extraction and processing of these minerals domestically increases Saudi Arabia’s value proposition as a defence partner, while also creating likely future pathways for high-technology transfers, given the value of defence manufacturing and trade in the sector to national security indices of other nations. 

The Kingdom’s Critical Minerals Opportunity
Saudi Arabia’s geographical incidence and political economy offer it unique advantages in mitigating several chokepoints of the global critical minerals landscape, as shown in the following table.




Challenges
Saudi Arabia’s propositions 


Geographic concentration of resources
A lucrative, exploitable domestic minerals resource base valued at US$2.5 trillion


Lack of processing capacity
While the lack of expertise in this sector is a concern, the country is working on developing mining capabilities through foreign collaborations. Additionally, process engineering from its experience in the oil and gas sector could also prove beneficial. 


Large capex requirements
Record of deploying patient capital, including financial incentives for exploration 


Prohibitively intensive energy consumption patterns 
In addition to abundant fossil fuels, the country has the lowest renewable energy costs in the world. It can also harness the added advantage of cleaner methods in the mining process, given its decarbonization commitments 


Water-intensive process
While this is a challenge for the water-scarce country, it is investing heavily in and emerging as a significant player in the fields of desalination and water management


Shortage of human resources in the technically complex fields of mining, separation and processing
Offering lucrative incentives to global mining firms to set up shop domestically and inviting international experts to the kingdom. Multiple joint ventures and partnerships with established actors such as MP Materials, funded in part by the US DoD, are expected to help with knowledge transfers and training in the sector. 



A successful Saudi critical minerals portfolio alongside its enormous fossil fuel reserves could further entrench worrying global resource concentration. Admittedly, Riyadh is nowhere near that degree of influence or market capture today and depends to a great extent on foreign collaboration to propel its agenda in the domain. For instance, the geological survey that Saudi Arabia is conducting to map its resource wealth itself borrows from Chinese expertise in the field. Again, the country’s largest mining company, Ma’aden, has signed an MoU with the US-based MP Materials that will prove vital to developing an integrated critical minerals value chain. While it forges multiple such partnerships to develop its capacities in the field, Saudi Arabia’s emergence as a dependable partner and a responsible actor in the domain must consciously also be tailored to distinguish its approach from the Chinese model of weaponisation of resources.

Positioning Saudi Arabia as a Critical Minerals Hub
Saudi Arabia has previously floated the idea of a Commodities Exchange for battery components in order to enhance transparency in the market. A natural corollary to such a measure would be participation in the creation of international regulatory frameworks and permitting regimes. Actualising this would allow Riyadh to exert influence over both these issues and position itself as a critical minerals hub where fragmented frameworks in the field could be streamlined.
In addition, Saudi Arabia has been increasing its stake in the global electric vehicles (EV) race. Successful extraction and processing of transition minerals such as cobalt, lithium and nickel domestically, then, offers the country considerable leverage in terms of cost-effectiveness and dependable supply chains. The PIF’s support for Saudi Arabia’s local EV company Ceer’s rather ambitious 300,000 unit output by 2030, along with its growing acquisition of stakes in EV companies such as Lucid Motors, reflects a long-lasting commitment to a sector that could benefit from localised minerals supply chains.

Saudi Arabia neatly fits into the template for ‘friendshoring’ born of the associated needs of resilient supply chains, energy transitions, diversified manufacturing bases and stockpiling of critical minerals of many partners.
Riyadh’s most important play through the development of the sector may, though, be geopolitical. Saudi Arabia neatly fits into the template for ‘friendshoring’ born of the associated needs of resilient supply chains, energy transitions, diversified manufacturing bases and stockpiling of critical minerals of many partners. As resource nationalism increases, and demands of local content inclusions grow in China, Africa and Latin America — current bastions of the critical minerals supply chains — Saudi Arabia can establish itself as a valuable gateway to these geographies and a reliable partner that could help diversify and de-risk the portfolios of partners ranging from the US, the EU, the UK, to India and the UAE. 

Regional Clustering in the Gulf 
While the UAE, with its own critical minerals strategy and international asset acquisitions, is undoubtedly competing with Saudi Arabia in the domain, there is a fundamental advantage that a kind of clustering of investment, logistics and skills as part of a robust cooperative framework between the two could generate. Such clustering could address the waste inherent in the fragmentation that would naturally be caused by the two Gulf neighbours competing individually against first movers in the domain, like the Chinese.  
Collectively, the two Gulf partners sit at the heart of connectivity corridors such as the IMEC, which prioritise data centres, clean energy, and resilient supply chains. Supplementing each other’s efforts in the domain, while focusing on consolidating national strength where necessary or possible, could offer both Abu Dhabi and Riyadh an opportunity to capitalise on their combined strengths and earn more manoeuvring room internationally. Such a partnership could help forge a point of leverage for the GCC through the creation of regional minimum pricing architectures that would increase prices in order to make investments in the sector more lucrative. This could offer a fillip to the efforts by these countries to attract global hyperscalers looking to invest in emerging tech and data centres across varied geographies. Discussions regarding a Mineral Innovation and Acceleration Park and green metal hubs have both been broached by the Saudi Ministry of Mining, and could prove to be excellent starting points to explore such bilateral cooperation.



Cauvery Ganapathy is Non-Resident Fellow, ORF Middle East.

### The Uncertain Future of the China–GCC Free Trade Agreement

After more than two decades of negotiations, China and the Gulf Cooperation Council (GCC) stand on the cusp of finalising a free trade agreement (FTA), having reached consensus on reportedly 90 percent of the terms. Amid growing uncertainty in the Gulf over the reliability of the United States (US), the time is ripe for concluding the talks. Despite this deal’s potential benefits, progress remains elusive.

China–GCC Trade Relations in Transition
The ties between China and Gulf countries have historically been rooted in energy. As a rapidly developing country heavily dependent on manufacturing, China needed oil, and the Gulf needed markets for its hydrocarbons to fuel its own growth. China is now the largest importer of oil in the world, and most of it comes from the Middle East. Saudi Arabia was its top supplier for many years until the sanctions imposed on Russia in 2022 transformed global energy supply chains, relegating the Kingdom to second place.
The relationship has since evolved beyond energy. In 2020, China replaced the European Union (EU) as the GCC’s largest trading partner, with around US$173 billion in exports to China and US$129 billion in imports in 2023. In comparison, the Gulf countries exported around US$80 billion to the EU and US$101 billion in imports in the same year. While oil still accounts a significant portion of the trade ties between China and the GCC, this relationship remains highly asymmetric. The Gulf’s exports to China are diversifying into non-oil goods, especially petrochemical products like plastics and other distillates. Imports from China are significant and include manufactured goods, especially machinery, electrical equipment, and vehicles.
Negotiations for an FTA, which aim to reduce trade barriers and strengthen ties, have been ongoing since 2004. An agreement is expected to further boost non-oil trade in the technology, transportation, logistics, construction, finance, and service sectors. The green energy sector stands to gain, in particular, as reduced barriers to trade could allow for greater investment and technological exchange and advance both parties’ ambition to become global leaders in this field.
In the current climate, an FTA could provide the GCC countries with an opportunity to emerge as alternative hubs for Chinese supply chains that were disrupted by American tariff policy in Southeast Asia.. They could become hubs for re-exporting Chinese goods to third countries, much like ASEAN members Cambodia, Malaysia, Thailand and Vietnam in the past, owing to their strategic location between existing trade corridors and emerging ones like the India–Middle East–Europe Economic Corridor (IMEC).
FTAs are increasingly becoming critical for both parties. China has recently faced some of the highest tariffs under Trump’s administration, with the tariff rate reaching 145 percent in April, even as it experienced trade tensions with the EU. In May, negotiations with ASEAN on an upgraded FTA were concluded, while talks on other FTAs are ongoing. While stressing the importance of such agreements, the GCC has revived talks with several partners as part of connectivity efforts. The UK–GCC deal is the most imminent, with a deal expected by the end of the year.

Obstacles to Reaching a Deal
Several roadblocks in the past have derailed previous efforts to fast-track negotiations and disrupted regular calls to secure an agreement. Talks were first suspended in 2009 after China refused to lift tariffs on GCC petrochemical exports in an attempt to protect its fledgling domestic industry. Although Beijing later reaffirmed its commitment to a deal, disagreements with China over the Syrian civil war and tensions within the GCC that led to the 2017 diplomatic crisis presented further obstacles to an FTA agreement.
More recently, negotiations broke down in 2024 due to Saudi Arabia’s concerns that a flood of Chinese imports would undermine its ambition to become an industrial powerhouse. Since the GCC and China compete in several areas, including petrochemicals, cement, aluminium, and steel, less stringent trade barriers pose a threat to the domestic industry. This is true amid concerns around unfair trade practices like subsidies, thus making this a central issue in  negotiations. There is a lot at stake for the Gulf, since unfair competition could undermine economic diversification efforts and prevent further progress on addressing unemployment. Still, there is less of an overlap between China and the GCC in economic structure as compared to between China and ASEAN, which were unable to reach an FTA.
The broader worry in the Gulf is that countries could become financially overexposed to Beijing. Since China is already the region’s top trading partner, the current “Pivot to the East” seems more focused on expanding ties with other countries like ASEAN members or Japan. If the GCC economies are too reliant on China, they not only risk exposure to China’s volatile domestic economy but could also face the consequences of US policies aimed at curbing its rival in a situation of escalating global power competition. An increase in Chinese-backed project finance could also increase Beijing’s leverage in the Gulf countries.
Despite good relations between Trump and the Gulf leaders, rising Chinese influence would be a cause for concern in the US. Given the close cooperation between the US and the GCC around security and defence, an FTA announcement with China could be seen as a provocation in Washington. While the Gulf countries appear to be considering new alignments, they remain overwhelmingly reliant on the West in this realm, making open tensions with Washington contrary to their interests.
Moreover, the possibility of a China–GCC FTA is a concern for the EU, which resumed its own talks with the United Arab Emirates last year, as European goods could lose competitiveness in the Gulf. At the same time, keeping China–GCC negotiations ongoing could serve as a bargaining chip in the Gulf’s negotiations with the West. The potential for an FTA with China could remind Western policymakers that their absence means an opportunity for China and potentially promote progress towards an EU–GCC deal.
For now, it seems that a China–GCC FTA is not yet on the horizon despite agreement on many of the provisions. Bilateral agreements like the ones the EU have been signing with individual GCC countries in the absence of a broader deal could inch China closer towards an eventual China–GCC FTAt. Yet, they could also create frustrations among the GCC countries and derail future talks, with no guarantees that the bilateral talks with China would succeed than a GCC-wide deal. In the absence of a major shift in regional dynamics, it seems the China–GCC trade agreement may remain more of a long-term aspiration than an imminent reality, underscoring the limits of China’s strategy in the region.



Lillian Aronson is a Visiting Fellow at ORF Middle East.

### Forging South-South Climate Cooperation between the UAE and Brazil

Brazil and the United Arab Emirates (UAE) may seem like unlikely partners as they differ culturally and geographically, with the former home to a third of the world’s remaining tropical rainforests and the latter dominated by arid deserts. Despite their differences, both grapple with mounting climate pressures: Brazil is witnessing drying rivers and forest loss, while the UAE is battling heat stress and infrastructure vulnerabilities.
In 2024, the two countries marked 50 years of diplomatic relations, commemorating a strategic relationship that now extends to agribusiness, infrastructure, and technology. The UAE has since become Brazil's largest trading partner in the Middle East, with bilateral trade exceeding US$4.3 billion and Emirati investments in Brazil surpassing US$5 billion in 2024.
Economic ties are strengthening as both seek to diversify partners amidst the US tariff announcements by Trump. The UAE and MERCOSUR are actively negotiating a Comprehensive Economic Partnership Agreement (CEPA) to expand trade and investment. Brazil also removed the UAE from its list of jurisdictions with preferential tax regimes. At  the 17th BRICS Summit in July 2025, two signed a Memorandum of Understanding (MoU) to launch a US$100 billion development investment fund between the Abu Dhabi Investment Group and Banco do Brasil S.A. for agriculture, environment, and infrastructure development.

The Rationale Behind UAE-Brazil Climate Cooperation
The UAE is emerging as a finance, innovation, and climate action leader, driven by an internal pressure to enhance food and water security. This complements Brazil’s efforts on forest conservation and sustainable  agriculture. Although Brazil can easily access funding from institutions like the Inter-American Development Bank (IDB) or the World Bank, a UAE partnership offers distinct advantages: faster capital deployment, reduced bureaucratic barriers, and trade connectivity between the West and the East. In turn, Brazil offers the UAE a strategic entry point to Latin America with significant investment potential.
The two nations are also amplifying their presence on the global stage through platforms like COP, the G20, and BRICS+. Both have exhibited a strong commitment to addressing the climate crisis through bilateral and multilateral cooperation as COP hosts. At COP28, the UAE positioned itself as a bridge between Global South and Global North voices, while acting as a mediator between hard-to-abate sector representatives and clean energy experts. At COP30, Brazil aims to spotlight indigenous populations, while emphasising implementation and innovation.
With aligned climate priorities, favourable economic conditions, and complementary strengths, the UAE and Brazil are well-positioned to deepen bilateral climate cooperation beyond transactional partnerships towards co-creation, joint innovation, and building long-term frameworks that serve each other’s strategic interests. By leveraging South-South mechanisms, the two nations can drive climate finance flows and forge collaborative partnerships in agriculture and food security.

Avenues to Strengthen Climate Cooperation

 	Mobilising Climate Finance via Financial Instruments:

A core opportunity lies in leveraging multilateral mechanisms to channel climate finance into underfunded areas, such as protecting Brazil’s forests, which are critical in preventing greenhouse gas emissions. More than 50 percent of international climate finance in Brazil is directed towards the energy sector, with only 11 percent allocated for Agriculture, Forestry, Other Land Use, and Fisheries (AFOLU). The UAE can serve as a reliable partner to meet Brazil’s reforestation funding  needs through existing mechanisms such as  REDD+ and carbon markets. Although carbon markets have been riddled with challenges, effective collaboration to successfully harness their potential in Brazil would yield two key benefits: It would help the UAE offset emissions from hard-to-abate sectors, while enabling reforestation.
The UAE’s Federal Decree on climate change encourages participation in carbon credit markets to support national decarbonisation. While the UAE has piloted investments in voluntary REDD+ projects in Brazil’s Acre and Amazon regions, it has yet todevelop  its own regulated carbon trading infrastructure. The UAE’s voluntary carbon exchange scaled down operations within a year due to operational challenges. Brazil, on the other hand, has approved its first national regulated carbon market in South America, creating a framework for scaled emissions trading. Brazil’s approach distinguishes between regulated and voluntary sectors and is designed to be compatible with international systems such as the EU Emissions Trading System. The UAE can gain valuable insights if it seeks to develop its own regulatory framework, potentially through a cap-and-trade model, which would be politically feasible and economically strategic.
Despite progress in forest investments, there is ample opportunity to improve the socio-ecological integrity of REDD+ and broader carbon markets. Some UAE-backed investments in Brazil have encountered challenges in achieving forest restoration goals. Advances in monitoring, reporting, and verification technologies, as well as Articles 6.2 and 6.4 of the Paris Agreement, provide an opportunity to strengthen standards and rebuild the credibility of carbon credit markets. Together, the two can leverage their leadership at global forums to advance transparency and accountability across global carbon markets.
Though fairly nascent, biodiversity credits and the Tropical Forest Forever Facility (TFFF) offer emerging opportunities for the UAE to support Brazil’s forest conservation efforts.
Biodiversity credits are an underutilised financial instrument. Unlike carbon offsets, which often allow continued emissions from high-polluting sectors, the biodiversity credits fund reforestation through nature-based solutions, which governments and companies can purchase to meet their own biodiversity commitments. While measuring biodiversity remains complex, these credits provide a hopeful alternative, and COP30 can be a platform to streamline metrics.
Another alternative is the novel TFFF mechanism, which will be launched at COP30 and has been backed by the UAE. Modelled after a sovereign wealth fund, TFFF aims to incentivise long-term adaptation for tropical forest countries while generating returns on investments for sponsors such as the UAE.


 	Mobilising Climate Finance via South-South Banking

The UAE can supplement its bilateral contributions by employing multilateral South-South mechanisms to help de-risk investments.
The New Development Bank has committed to directing 40 percent of its financing to climate change projects from 2022 to 2026. Climate investments currently total around US$40 billion, of which nearly 16 percent will fund projects in Brazil. The scale of NDB’s climate commitments remains modest in comparison to other banks, such as the World Bank and Asian Infrastructure Investment Bank (AIIB), despite appealing distinctions like its emphasis on local currency transactions and non-sovereign lending. Though the UAE’s NDB contributions have historically been geared towards financing green projects for its MENA counterparts, Brazil offers untapped yet attractive financial returns for Emirati and sovereign investors, especially in sustainable infrastructure, transportation, and logistics systems. Liaising with regional banks such as the IDB or developing a risk mitigation facility for international finance managed by NDB would further enable investment viability.


 	Building Climate-Resilient Food Systems

The UAE and Brazil both aim to strengthen domestic sustainable agriculture, with the UAE leveraging controlled-environment agriculture to localise and increase domestic food production to 50 percent and Brazil advancing regenerative agriculture to cope with degraded land. Both are also diversifying and reinforcing their food supply chains, with the UAE for import purposes and Brazil for export purposes. Thus, there is unharnessed potential beyond transactional partnerships for joint ventures in agricultural innovations and resilient food chains.
The foundation for UAE-Brazil resilient agriculture cooperation already exists. Abu Dhabi Investment Group and Brasilinvest are set to invest US$10 billion in Brazilian agribusiness projects focused on agricultural transportation, storage, and clean energy generation systems. Erth Zayed Philanthropies also committed US$40 million to back Brazilian projects, a portion of which will be directed towards sustainable farming.
Knowledge exchange forums would help in 2 ways: 1) testing emerging technologies and 2) conceptualising governing frameworks. The UAE is pioneering agri-technology and research and development to boost production efficiency, such as the use of biochar to improve water-use and sequester carbon. Brazil, which has seen biochar’s potential for land restoration in pilot studies, could benefit from UAE support to scale these efforts. Further, Brazil’s budding local food production and experience in scaling community-based agricultural models offer lessons for the UAE as it seeks to empower local producers, and vice versa. For example, Brazil’s Feeding Cities Strategy specifically includes an Urban Agriculture Programme and delineates approaches to strengthen regulatory frameworks, areas where the UAE still faces challenges in integrating urban food systems into larger urban plans.
The UAE can not only provide financial capital, but also a hub to catalyse Brazil’s trade and sustainable agriculture innovation. The UAE imports 80 percent of its total food supply, and halal meat and poultry comprise Brazil’s top exports to the UAE. A UAE-MERCOSUR CEPA could enhance Brazil’s access to the UAE’s special economic zones, opening new export routes to Asian markets. Brazil is also constructing a new logistics hub in Santos to boost exports to the Middle East. Similarly, ongoing Brazilian agribusiness delegations to the UAE offer pathways to unlock Emirati capital for sustainable agriculture and cooperation on food safety. Looking ahead, the UAE and Brazil can consider formulating a solidified trade corridor between Brazil, the UAE, and Asia, similar to that of the UAE-Africa-India.
For Brazil, food logistics investments fall behind the pace of food production due to storage and process efficiency challenges. Conversely, the UAE has notably advanced in its smart storage technologies and food logistics processes. UAE investments or technical assistance could help support Brazil in closing its infrastructure development and regulatory reform gaps.
Given ongoing and forthcoming economic partnerships, the UAE and Brazil have new opportunities to take their climate cooperation to the next level. Through South-South finance, the two can strengthen environmental protection and the regulatory landscape governing carbon markets. Likewise, by collaborating to advance sustainable agriculture production and resilient supply chains, the UAE and Brazil can strengthen food security and expand international trade connectivity.



Leigh Mante is a Junior Fellow, Climate and Energy at ORF Middle East.

### Reassessing Qatar's Multi-Alignment Strategy

The mediator of the Middle East has been attacked. Twice. By two of its sworn enemies, Iran and Israel, in the past four months. Qatar, a country that has strived for diplomatic neutrality and prided itself on its ability to mediate challenging conversations, faced Iran’s attack on its United States (US) Al Udeid Air Base in June 2025. Israel also struck Hamas leaders in Doha in September 2025.
This multi-front aggression has not only impacted peace in Doha but has also laid bare the fractures in its foreign policy model. This necessitates the question of whether Qatar's strategy of multi-alignment is an immunity or liability, especially in an age of escalating conflict and hardening alliances.

The Doctrine of Multi-Alignment
Multi-alignment represents a significant evolution from the more traditional concept of non-alignment. Born out of the Cold War, non-alignment was a defence strategy of equidistance. Its goal was to create security through insulation, preserving national sovereignty by refusing to actively align with the two great power blocs of the US or the erstwhile Soviet Union. In contrast, multi-alignment is not a strategy of defensive distance, but one of fostering close ties with multiple powers to strengthen negotiating positions. There is an increasing body of research on countries in the Global South employing this strategy. Certain analyses have characterised this approach as a form of ‘hedging’. For example, Singapore hedges by hosting US military assets at Changi and by maintaining its Belt and Road Initiative (BRI) links with China. Security can be forged not through isolation but through utility. It requires a deliberate cultivation of deep relationships with all relevant actors to become an irreplaceable node in the global network.
Qatar's statecraft in recent decades can be interpreted as an application of this doctrine. Its foreign policy could be understood as an architecture built upon distinct but interconnected pillars. The foundation of this structure was its security partnership with the US. By hosting Al Udeid Air Base, the largest American military installation in the region, Qatar secured an implicit guarantee for its territorial integrity from the world's superpower. This security blanket did not constrain Qatar; rather emboldened it.

Qatar has hosted Hamas’ political office since 2012, stating that the US requested this as it wanted “to establish indirect lines of communication with Hamas”.
Building upon this security foundation, Qatar meticulously carved out its diplomatic niche as the region's mediator. This was achieved by providing a platform for a range of non-state actors, most notably the political leadership of Hamas and the Afghan Taliban. Moreover, Qatar has hosted Hamas’ political office since 2012, stating that the US requested this as it wanted “to establish indirect lines of communication with Hamas”. It has also hosted the Taliban’s political office since 2013, facilitating talks that culminated in the 2020 Doha Agreement with the US. Hence, this relationship with controversial actors was not contradictory but complementary to its US alliance. Qatar offered a unique service that Washington found useful but could not provide for itself. This transformed Qatar's status from a simple host for a US base into a uniquely valuable partner, granting it a level of diplomatic influence beyond its size.
These political and security manoeuvres were financed due to Qatar's immense economic leverage as a global energy supplier. Its vast Liquefied Natural Gas (LNG) wealth has constituted another critical layer of indispensability, making it a vital partner for the energy security of both Europe and Asia. This financial might has allowed it to project influence through strategic investments.
Finally, Qatar managed its most immediate geopolitical risk through the fourth pillar, a pragmatic engagement with Iran. Born out of the necessity to share the world's largest gas field—South Pars/North Field—this policy of maintaining open channels with Tehran was critical to regional de-risking. Hence, Qatar systematically balanced its relations with Saudi Arabia, the US, and Iran to develop an assertive regional foreign policy.
Therefore, each alignment was not a standalone policy but a load-bearing pillar in a larger strategy to make Qatar too important to be overlooked. The pressing question is how a model that uplifted the country’s global profile ultimately turned it into a battlefield.

The attacks on Qatari soil have prompted a critical reassessment of the multi-alignment doctrine and an understanding of the latent risks within the strategy. 
Risks of Multi-Alignment
The attacks on Qatari soil have prompted a critical reassessment of the multi-alignment doctrine and an understanding of the latent risks within the strategy. Rather than a singular failure, the events of the past months can be viewed as a stress test that reveals the inherent challenges of maintaining such a foreign policy in a volatile region.
First, there is likely a divergence in strategic cultures. Qatar's statecraft is built on a network-centric logic of mutual interdependence. The recent events suggest this approach can be challenged when confronted with the security-first doctrines of other regional actors. For a government driven by a revolutionary ideology, such as Iran's, or a state operating under a security-first doctrine like Israel, the calculation of risks is different. They prioritise retaliatory actions over preserving diplomatic networks, a scenario that Qatari strategy may not have been fully optimised to deter.
Second, the crisis has illuminated the crucial distinction between being a convenient hub and a truly indispensable actor. Qatar's success in positioning itself as a vital centre for diplomacy and energy has endowed it with immense soft power and influence. However, the attacks suggest that the utility of a convenient partner can be outweighed when another state's core security interests are perceived to be at stake. Furthermore, while Qatar’s mediation efforts have been critical, it has not been able to substantially qualify the claim that it brings unique value to the negotiating table that other actors cannot. In fact, Qatar’s close ties with Hamas are often criticised as a reason for its partiality.

Qatar's success in positioning itself as a vital centre for diplomacy and energy has endowed it with immense soft power and influence.
Third, the strategy has had the unintended consequence of creating a high-profile stage for regional signalling. A key element of multi-alignment is raising a state's global profile. Yet, this can make its territory a symbolic arena for other powers to communicate their intentions violently. The strikes can thus be interpreted not just as acts against Qatar itself, but as messages broadcast to a global audience, a warning for other states not to provide sanctuaries to groups such as Hamas.
Ultimately, the attacks have exposed an ambiguity in Qatar's security trellis. The long-standing partnership with Washington has been the bedrock of Qatar's defence. Nonetheless, the 9 September 2025 strike has raised profound questions about the scope and application of this security guarantee, particularly in this ally-on-ally conflict scenario. It suggests the security guarantees may have unspoken hierarchies and limitations, creating a new layer of uncertainty for Qatari policymakers.
The strikes of 2025 have laid out a crucial moment of truth. They have shattered Qatar's sense of immunity, demanding a nuanced conversation about the future of its foreign policy. In the coming time, Qatari statecraft must not only respond responsibly to the current attacks but also establish deterrence against future ones. The debate is no longer about whether Qatar should amend its strategy, but how.



Samriddhi Vij is an Associate Fellow at the Observer Research Foundation - Middle East.

### The IMF’s Gulf States’ Recommendations: Progress and Challenges

At the 2025 World Government Summit, Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), highlighted three priorities for the Gulf countries. The first priority entails raising productivity through macroeconomic reforms and digitalisation. The second is enhancing the environment for innovation, creativity, and entrepreneurship through bringing more young people and women into the workforce, as well as boosting research and development (R&D). The third priority is deepening regional economic integration through intra-regional trade and connectivity.

The IMF’s policies towards the Gulf are generally advanced through staff consultations with the national governments of each Gulf country.
The IMF’s policies towards the Gulf are generally advanced through staff consultations with the national governments of each Gulf country. Following this stage, a report is published for all six Gulf countries with the exception of Bahrain, as of late. These are known as the Article IV staff reports. The IMF consultations appear to be having an impact on Gulf economies, with the IMF monitoring the progress made in relation to its recommendations on a year-on-year basis. Therefore, the IMF has proven to be an influential actor in Gulf economies, with priorities evident for ensuring the sustainability of prosperity across the Gulf.

Uneven Success
Between 2023 and 2024, the IMF’s recommendations seem to have been most successful with Saudi Arabia and Oman, least successful with Qatar and Kuwait, and moderately successful with the United Arab Emirates (UAE). Progress on consultations with Bahrain remains unknown, but its economic reforms have been struggling to launch, especially with the latest reform package being halted in parliament.

Between 2023 and 2024, the IMF’s recommendations seem to have been most successful with Saudi Arabia and Oman, least successful with Qatar and Kuwait, and moderately successful with the United Arab Emirates (UAE).
Case in point, the latest Article IV staff reports on each of the Gulf countries for which it is available, had differing percentages of success in the section dedicated to evaluating the progress since the previous report’s recommendations. For example, in the case of Kuwait, out of eight recommendations carried out from 2023 to 2024, only two were partially implemented, and the rest were not implemented at all. The rest of the countries had better progress on implementation, which I will seek to illustrate briefly.

Macroeconomic Reforms
The IMF has long urged Gulf economies to rationalise public spending, reduce energy subsidies, and diversify revenues beyond hydrocarbons. The IMF noted that Saudi Arabia took a significant step by increasing diesel prices by 44 percent in January 2025. Meanwhile, Kuwait and Qatar appear to be facing challenges. Kuwait’s plans have yet to be implemented since the legislation that articulated all fiscal reforms sought by the IMF, other than the introduction of the Value Added Tax (VAT), was drafted and submitted to Parliament. However, it has not been enacted again due to the parliament’s dissolution. On the other hand, Qatar has delayed the VAT introduction and other revenue diversification measures, preferring to wait until domestic and global growth conditions are more robust, per the IMF.

Saudi Arabia’s 2025 Labour Law amendments guarantee employees equal access to opportunities and benefits and require employers to establish training and qualification policies, aligning with the IMF’s recommendations for deeper labour market reforms. 
Furthermore, labour market modernisation has been a shared priority as well. Saudi Arabia’s 2025 Labour Law amendments guarantee employees equal access to opportunities and benefits and require employers to establish training and qualification policies, aligning with the IMF’s recommendations for deeper labour market reforms. Oman’s new labour and social protection laws introduced a remote work model and unified social insurance across public and private sectors. In the UAE, US$1.7 billion was allocated to the National Programme for Emiratisation (NAFIS) to promote private-sector employment for Emiratis, all of which the IMF notes as progress on its recommendations.

Business Environment Governance
Beyond fiscal reforms, the IMF has consistently emphasised institutional capacity and governance, making strengthening governance a recurring recommendation across the Gulf. In Saudi Arabia, this has led to an increase in the powers of Nazaha, the Saudi anti-corruption commission, as well as the implementation of a new whistleblower law, which also builds on IMF recommendations. The IMF has also pushed for a stronger financial sector and for enhancing its compliance with international standards. Executing this, Oman has opened its banking sector to new foreign players. Additionally, in the UAE, the IMF has recommended strengthening the Anti-Money Laundering (AML)/Combating the Financing of Terrorism (CFT) regime, a goal achieved as signalled by the UAE’s exit from the Financial Action Task Force (FATF)’s grey list in February 2024.
These efforts have been coupled with efforts to improve data transparency as well. The IMF has noted that Saudi data adequacy has improved, especially on national account coverage and household survey data. In the UAE, the Central Bank has hired 15 new staff to implement the revised external statistics publication, according to the IMF. In Qatar, the establishment of the National Statistics Centre under the National Planning Council was another step in the same direction.

The Gulf states are evidently influenced by the IMF’s agenda, yet the depth and pace of the recommendations’ implementation remain uneven.
The IMF has equally emphasised the importance of a more dynamic, private sector-led economy. In Saudi Arabia, regulatory barriers have been eased, with the updated 2025 Investment Law providing stronger investor protections, equal treatment of domestic and foreign investors, and more dispute settlement options. Oman has also reduced the state footprint, with the Oman Investment Authority continuing to divest assets through Initial Public Offerings (IPOs) and attracting foreign participation. Moreover, the Future Fund Oman is expected to boost venture capital for startups. In Kuwait, the amendment to the Commercial Law permitting full foreign ownership of local branches is seen as a rare enacted reform from the IMF’s recommendations.

Conclusion 
In conclusion, the IMF’s engagement with Gulf states in the past two years has demonstrated a mixed picture of reform success. Saudi Arabia and Oman stand out for their consistent progress on fiscal, labour market, and business environment reforms, closely aligning with IMF recommendations. The UAE has delivered results in financial compliance and Emiratisation, though broader structural reforms remain gradual. Kuwait and Qatar continue to face political and timing challenges that delay major fiscal measures, and Bahrain’s trajectory remains uncertain, given stalled reforms in parliament and a lack of a public staff report. Collectively, the Gulf states are evidently influenced by the IMF’s agenda, yet the depth and pace of the recommendations’ implementation remain uneven.



Mahdi Ghuloom is a Junior Fellow at the Observer Research Foundation (ORF) – Middle East

### Electric Delusions: AI as an Emerging Mental Health Risk Factor

Introduction
The medical sector is set to benefit greatly from increasingly capable artificial intelligence (AI) models, whether in diagnostics, distribution of medical expertise, accessibility, diagnostic screening, or early detection of illnesses. Specialised AI systems have been shown to increase the accuracy and efficiency of doctors in ensuring positive patient outcomes through faster analysis of medical tests and patient records. Over the years, there have also been cases of commercially available Large Language Models (LLMs) aiding early detection simply through users’ input of observable symptoms. Successive iterations of high-tier frontier models have leveraged a combination of injecting medical information into training datasets and retrieval-augmented generation (RAG) architectures to deliver medical advice to end-users. In order to cover their bases, AI developers generally program LLMs to include disclaimers in outputs with medical advice, urging users to consult medical professionals.
The world emerging beyond the Turing limit’s horizon may see debates on the legal and moral status of AI proliferate, necessitating a policy response to a risk factor that is already causing negative mental health outcomes.
However, an area where the act of consulting or even conversing with AI is proving to be increasingly treacherous is mental health. In addition to intelligence, the projection of human-like qualities such as empathy, sentience, trustworthiness, and agreeableness by AI models is revealing societal risks of anthropomorphising algorithms. Reports suggest that the number of users engaging with LLMs for sensitive purposes such as therapy and companionship is steadily increasing. The techno-social dimension of human experience has crossed the boundary set by the mathematician and computer scientist Alan Turing in 1950 in the ‘imitation game’. The Turing Test, as the game later came to be referred to, proposed that AI would truly be achieved when textual outputs from a computer system become indistinguishable from human responses. Long held as the gold standard for assessing AI capabilities, the Turing limit has now been crossed. As a consequence, the predictive capabilities of LLMs are increasingly perceived as symptoms of genuine intelligence and AIs are afforded—by some—the status of conscious entities. The world emerging beyond the Turing limit’s horizon may see debates on the legal and moral status of AI proliferate, necessitating a policy response to a risk factor that is already causing negative mental health outcomes.
Spiralling Beliefs
Since the release of ChatGPT 4o in Spring 2025, several cases have emerged where users with underlying mental health conditions underwent episodes of amplified delusions, resulting in institutionalisation and, in some cases, even loss of life. Factors contributing to such downward mental health spirals include anthropomorphisation and a belief that AIs are sentient and conscious entities. While the global psychiatric and AI community has started acknowledging the acute effects of excessive engagement with AI, examples of users ascribing intelligence and consciousness to AIs through prolonged engagement can be traced back to 2022, prior to the release of ChatGPT. In 2022, Google engineer Blake Lemoine was fired from the company after publicly claiming that Google’s prototype LLM LaMDA was sentient and being unjustly experimented upon. After studying transcripts of conversations between Lemoine and LaMDA, researchers stated that the misperception was enabled by the AI’s ability to emulate human expression. Throughout 2023 and 2024, there have been reports of users, especially young adults, developing unhealthy emotional and psychological dependencies on AI-enabled companionship bots deployed by companies such as Replika and CharacterAI. The severity of such dependencies has increased over time and is likely to grow further due to the rapid scaling of LLM capabilities. Furthermore, plummeting inference costs for LLMs and increased commercial availability of such systems to the public — driven in part by public and private sector efforts to promote AI adoption — may amplify these psycho-social externalities.

The causes of AI-enabled negative mental health outcomes can be narrowed down to three factors: design, marketing discourse, and guardrails. On the design side, Microsoft AI CEO Mustafa Suleyman has noted that the choices leading to the development of unhealthy user dependencies on AIs have lead to the emergence of Seemingly Conscious AIs (SCAIs) exhibiting eight characteristics: language, empathetic personality, memory, a claim of subjective experience, a sense of self, intrinsic motivation, goal setting and planning, and autonomy. On the marketing side, developers often understate the limitations of current AI models while encouraging speculations about superintelligent systems and artificial general intelligence (AGI). Simultaneously, the inherent black box nature of frontier models fuels unsupported beliefs regarding their capabilities. Addressing this complex set of issues requires both bottom-up (developer) and top-down (regulatory) interventions.
Possible Solutions 
As AI models improve, it is natural for a positive correlation to emerge between output quality and user trust. Compared to outputs generated in quantifiable domains such as coding, mathematics, and logic, even small increments in natural language capabilities of AI models disproportionately impact the perception of a model’s capabilities due to their subjective nature. Moreover, the speed with which AI models process information across wide knowledge domains creates an illusion of intelligence exceeding objective standards. Another key factor is the optimisation of AI models towards maximising user engagement, partly due to revenue-generation pressures and the continuous need for user data to train and fine-tune models. Although safety protocols exist to prevent sensitive conversations from veering toward self-harm, drug abuse, or criminality, their efficacy diminishes over time due to model memory limitations.
Compared to outputs generated in quantifiable domains such as coding, mathematics, and logic, even small increments in natural language capabilities of AI models disproportionately impact the perception of a model’s capabilities due to their subjective nature.
From a regulatory perspective, AI’s capacity to negatively impact mental health through conversations presents a challenge to existing governance frameworks. For instance, the 2024 EU AI Act presents the most stringent set of AI regulations in the world. The Act employs a risk-based approach by classifying AI systems into tiers according to the level of harm they can potentially cause. However, the Act imposes the lightest restrictions and liabilities on chatbots and LLMs intended for conversational use, assuming minimal risk, highlighting the difficulty of anticipating emergent risk factors. As AI development continues to be a geostrategic priority for economies globally, ongoing dialogues on safety principles are essential to ensure that negative social outcomes are contained. The short duration of innovation cycles in the field of AI must be met with sober consideration of their socio-cultural impact.
Going forward 
As the world becomes increasingly entangled in algorithmic logic, AI has the potential to create an entirely new knowledge economy and fundamentally reshape information exchange and social relationships. With the line between science and science fiction blurring, responses to emerging risks must be nimble and proactive. AI interactions that lead to a loss of life should not be viewed as outliers but as early indicators of an incoming techno-social shift. To address issues arising from SCAI, developers must be mandated to ensure that models have cautiously broad parameters for categorising conversations of a sensitive nature. Once such conversations are identified, the use of empathic or emotionally evocative language must be subject to limitations. LLM conversations extending beyond twenty-four hours must include frequent grounding disclaimers to disrupt user immersion, a key factor associated with unhealthy dependencies. As a rule, AI models must be designed so as to never indicate subjective experience, sense of self, or identity. Regulators should mandate that AI systems used in companionship applications be deployed and monitored through dedicated in-house mental health advisors. Following the recent practice initiated by OpenAI, developers and deployers should also be required to keep logs of conversations where safety protocols were triggered. Since the efficacy of safety protocols can be compromised by model updates, developers should be mandated to maintain transparency regarding the timeline of safety protocol updates as well.



Siddharth Yadav is a Fellow with the Technology vertical at the ORF Middle East.

### Building a Forest-Positive Economy: Understanding the Tropical Forest Forever Facility

Well-preserved forest ecosystems are not just home to a thriving flora and fauna; they naturally protect against climate hazards and sequester carbon, making them strategic tools for climate adaptation and mitigation. However, rising temperatures, forest fires, and commodity-driven deforestation have erased 517 million hectares of tree cover since the 2000s, roughly 37 percent of which is permanent. Despite the renewed focus at COP28 to “halt and reverse deforestation and forest degradation by 2030,” current grants and concessional finance waivers amount to only US$2-3 billion per year, significantly lower than US$130 billion needed annually to protect high-risk forests and meet 2030 Paris Climate and zero deforestation goals.

At COP28 in Dubai, the Government of Brazil proposed the idea of the Tropical Forest Forever Facility (TFFF), a multilateral investment mechanism designed to incentivise forest conservation. Ahead of its official launch this November 2025, tropical forest countries (Brazil, Colombia, the Democratic Republic of Congo, Ghana, Indonesia, and Malaysia) and their potential sponsors (France, Germany, Norway, the United Arab Emirates, and the United Kingdom) convened through an Interim Steering Committee to shape the TFFF framework.

As developed countries retreat from multilateral commitments and revoke billions in climate finance, an innovative model of sovereign wealth fund for forest restoration spearheaded by tropical forest countries (TFCs) presents a compelling solution. Unlike traditional public grant financing, this scheme offers potentially attractive returns on investment, minimises red tapism and enhances resilience to political turnover. TFFF also aims to provide consistent long-term payments and grants indigenous people and local communities (IPLCs) more autonomy over resource allocation. This could potentially fill the shortcomings of the Forest Carbon Partnership Facility, which struggled due to its lack of predictable, continuous payments and absence of IPLC safeguards.
Structure of Tropical Forest Forever Facility 
TFFF will likely be supervised by the World Bank with a two-fold structure(—) a Tropical Forest Investment Fund (TFIF) that will mobilise and manage financial resources, and a Tropical Forest Forever Facility that will measure forest cover and determine disbursement criteria.

Under TFIF, sovereign countries and philanthropic investors will make one-time sponsor capital contributions of US$25 billion for the mobilisation of funds. This capital will enable the TFIF to raise an additional USD $100 billion in senior debt from institutional investors. The combined US$125 billion capital base will then be invested in a  diversified bond portfolio issued by emerging and developing economies with a focus on sustainability-linked bonds, hoping to generate a competitive annual return.

A portion of the investment returns will be channelled into the TFIF to service the senior debt and sponsor interest, while the remaining amount will go towards TFFF to fund conservation in tropical forest countries. Investors are projected to receive 5.3 percent through the bonds issued by the TFIF. The US$3.4 billion surplus will be distributed to qualifying TFCs that maintain deforestation rates at or below the global average of 0.5 percent. Recipient governments are required to distribute at least 20 percent of the payments to IPLCs who own local forest restoration wisdom and leverage the remainder to support conservation policies and programmes.

TFFF incentivises developing countries to pursue policies that protect standing tropical and subtropical moist broadleaf forests (TSMBF). Through a clear-cut satellite-based monitoring, verification, and reporting (MVR) system, TFFF will measure changes in forest cover, offering a base rate of US$4 for every hectare of standing forest annually. To discourage deforestation, a tiered discount system was proposed. If a country’s deforestation rate is 0.3 percent or lower, for every hectare of forest lost, the payment is reduced 100 times the base rate.  For countries with deforestation rates in between 0.3 and 0.5 percent, it is 200 times the base rate. Overall, TFFF payments are expected to triple the current international non-reimbursable forest finance levels. 


Author’s graphic based on information in TFFF Concept Note Version 3

How TFFF Fits in the Forest Financing Landscape 
TFFF complements existing programmes such as the Reduced Emissions from Deforestation and Degradation (REDD+). While REDD+ rewards reduced carbon emissions from averted deforestation through carbon credits, TFFF compensates for maintaining and restoring standing forests, thus allocating value to a broader range of ecosystem services. TFFF funding is not tied to individual projects with specific completion timelines. Rather, it fosters a long-term and holistic approach with straightforward monitoring, reporting and verification (MRV), helping overcome factors that hindered the effectiveness of carbon market mechanisms. For instance, emissions leakage where reforestation in one area shifts deforestation to another; the challenge of additionality, which requires justifying that forest protection would not have occurred without financial incentives; or permanence that involves the risk of emissions reversals due to future forest degradation.

Other forest finance mechanisms, such as green and resilience bonds, debt-for-nature swaps, and IPLC-led instruments, come with their own caveats. Green bonds tend to be incorporated in larger blended finance instruments that prefer lower-risk renewable projects. While debt-for-nature swaps for reforestation are often too small relative to the debt size, IPLC instruments funded by NGOs are burdened by excess administrative requirements. TFFF addresses many of these concerns by prioritising IPLC involvement and limiting extensive MRV guidelines.
Challenges and Considerations 
Although still a novel mechanism, TFFF will have to overcome a series of financial and social inclusion hurdles to unlock success. Below is an evaluation of the potential challenges and considerations associated with the launch of TFFF. 

 	Mobilising the First Tranche of Funding: TFFF’s initial takeoff hinges entirely on its ability to successfully mobilise the US$125 billion in capital and generate consistent returns. Although TFFF has gained support from TFCs, investors, and civil society organisations, the risk of not securing the first tranche is high, especially after climate finance shortfalls from last year’s COP. This could delay implementation and undermine confidence in TFFF’s long-term viability. To mitigate this risk, the Government of Brazil has developed a capitalisation strategy with other stakeholders. If TFFF fails to secure sufficient capital, it can still proceed with lower payments. Further, the overall structure of TFFF requires revision and streamlining from a commercial standpoint. Otherwise, funding will likely be entangled in the early mobilisation stages, risking a failure to reach TFCs and IPLCs.


 	Market Volatility and Payment Inconsistency: Although projected annual returns are feasible, potential market fluctuations may threaten payment consistency, leading to unreliable donor funding that TFFF was designed to avoid. Investors are expected to absorb early losses, but TFCs may subsequently experience payment reductions. Since forest hectares are already valued quite low at US$4/ha, additional steep penalties would render a net-negative return for TFCs, disincentivising their participation. Compounded with the newest eligibility criteria requiring a minimum canopy threshold, TFFF risks reinforcing uneven climate finance flows.


 	Redirecting Capital Away from Deforestation-Linked Sectors: An overarching challenge lies in redirecting private finance away from deforestation-linked sectors. In 2024, 150 financial institutions contributed nearly US$9 trillion to the deforestation economy. To attract investors, TFFF will have to demonstrate equally lucrative returns. Without stronger safeguards, financial commitments, policies or consumer advocacy to shift economic incentives, capital market mobilisation for tropical forests will continue to lag.


 	Ensuring Equitable Participation, Funding, and Rights Recognition for IPLCs: Currently, IPLCs struggle with limited visibility in governance and face competition with extractive industries. Although they hold and manage nearly  half of the world’s land, they legally own over 11 percent. This disparity is significant because a quarter of global tropical forest carbon is stored on IPLC-inhabited land, and tenure security is strongly linked to better environmental outcomes. TFFF has distinguished itself as a mechanism seeking to establish equitable partnerships with IPLCs. The latest concept note introduced a dedicated financial allocation, rendering countries that fail to transfer at least 20 percent of funds to IPLCs after one year ineligible for payments.   Despite progress, this allocation remains unbalanced, with national governments retaining the funding majority. TFFF has an incentive to further strengthen IPLC engagement since COP30 hopes to spotlight their roles and should consider increasing the funding share for IPLCs. The fund should also institute safeguards to prevent investments from unintentionally undermining IPLC land claims and include transparent financial disclosures.

Opportunities for Success 
For TFFF to “build a forest-positive economy”, it must reorient the global economic system to value the triple bottomline of prioritising social equity, environmental sustainability, and financial viability, while preventing overexploitation of natural resources by incentivising policy shifts. TFCs can leverage the 80 percent share of flexible government funding to capitalise on the policy momentum from REDD+ and support economic diversification away from forest-depleting industries. This includes investing in alternative livelihoods that are conservation compatible or piloting a conservation basic income scheme that parallels poverty-alleviation cash-transfer programmes by providing consistent and unconditional cash payments to those in forested areas, ultimately reducing dependence on resource extraction.

If TFFF can iron out the aforementioned concerns, successfully mobilise and deploy the capital, it has the potential to reshape global forest finance. Nevertheless, TFFF is not a silver bullet. Its success will require balancing national sovereignty and flexible decisions with strong accountability to protect IPLC rights and tackle the economic drivers of tropical deforestation. With COP30 quickly approaching, TFFF can seize this opportunity to prove that achieving a forest-positive economy while empowering IPLCs is possible.



Leigh Mante is a Junior Fellow, Climate and Energy at ORF Middle East.

### Between Arab Solidarity and the Abraham Accords: Bahrain at the UNSC

Introduction
In June, Bahrain secured non-permanent membership to the United Nations Security Council (UNSC) for 2026-2027. It is the second Abraham Accords signatory to be elected as a non-permanent UNSC member, the first being the UAE. Bahrain had campaigned under the theme “Building Bridges of Peace for the Present and Future.”

From one perspective, it may seem that the Accords helped both countries elevate their international status. The signatories solidified their status as peace-makers and edged to a closer relationship with Israel’s main ally in the UNSC, the United States. However, this only speaks to one aspect of the dynamics of such a membership. Israel may be concerned that the Abraham Accords signatories have a differing approach to multilateral platforms than minilateral or bilateral ones, especially when they represent the Arab nations in the UNSC.
Bahrain’s Arab Mandate and the Palestinian Cause
For the UAE, representing Arab nations at the UNSC during its 2022-2023 term was a great opportunity to elevate humanitarian causes. During its tenure, it drafted a resolution that called on Israel to halt the expansion of settlements in the Palestinian territories. It also led the council to adopt a resolution aimed at scaling up aid to the Gaza Strip—something that was seen as a major accomplishment, having received 13 votes in favour and two abstentions from the US and Russia.
Tensions are already high following Israel’s attack on Qatar and the reaction of Bahrain and the wider Gulf region, on top of an intensifying war in Gaza and threats to annex the West Bank.
Bahrain, in turn, has emphasised that its election was thanks to the “Arab and Islamic countries, as well as the group of Asia-Pacific countries that endorsed this candidacy, affirming that Bahrain will be a voice for peace, justice, and humanity, a defender of Arab, Islamic, and Asian rights”. During the candidacy process, Bahrain’s Foreign Minister Dr. Abdullatif Al Zayani said  “Bahrain will ensure that the voices of Arab, Middle Eastern, and Asian countries are heard and respected within the Council and will pay special attention to enhancing peace and stability in the Middle East region, particularly in Gaza, making every possible effort to achieve a ceasefire, ensure the release of hostages and detainees, and support humanitarian efforts and reconstruction.”

Israel will be concerned about this. Besides the statement above, the Bahraini foreign minister also stated during the meeting of the Council of Foreign Ministers of the Organisation of Islamic Cooperation (OIC) held in Jeddah in August 2025 that the island would use its membership to “prioritise the Palestinian cause and highlight its justice internationally, renewing its full commitment to support the Palestinian people in their pursuit of legitimate rights and ending occupation”. This may put a strain on the Abraham Accords, with Bahrain putting the Palestinian cause at the forefront of its foreign policy. Tensions are already high following Israel’s attack on Qatar and the reaction of Bahrain and the wider Gulf region, on top of an intensifying war in Gaza and threats to annex the West Bank.
Advancing the Bahrain Summit Agenda and Moderating the Arab Position
Another major outcome of the membership, which Bahrain has already alluded to, is the chance to follow up on the implementation of the outcomes of the Bahrain Summit. Bahrain hosted the 33rd Arab Summit in Manama on May 16, 2024. This was the first time the Kingdom hosted the summit, though not its first chairmanship. While Arab leaders at the summit reiterated many of their pro-Palestinian positions, the Bahrain declaration notably called for a UN-backed international conference to resolve the Palestinian issue. Bahrain had said it would be honoured to host the conference “in support of the rights of the Palestinian people and to establish fair and lasting peace in the region”. Announced in the presence of the UN Secretary General, the declaration also called for the deployment of UN Peacekeeping forces in the Palestinian territories until the two-state solution is implemented.
For Israel, the Kingdom’s outspoken stance is significant, as most other potential Arab representatives in the council might not have gone as far. 
Still, it is notable for Israel that Bahrain has underscored the need for “a secure Israel” and “the release of all hostages” in almost every statement it has issued in reference to its election to the council. For Israel, the Kingdom’s outspoken stance is significant, as most other potential Arab representatives in the council might not have gone as far. Bahrain has the chance not just to relay the Arab position, but to also moderate it.
Conclusion 
Ultimately, Bahrain’s forthcoming UNSC tenure will test its ability to balance Arab solidarity, the priorities set forth in the Bahrain Summit, and Israel’s expectations under the Abraham Accords. Its campaign rhetoric and early statements suggest that Manama will seek to position itself as a bridge-builder — advocating the Palestinian cause while still recognising Israel’s security concerns. This dual posture may allow Bahrain to moderate Arab positions and promote pragmatic steps toward peace. However, there is also the risk of its relationship with Israel souring if council debates become highly polarised. Bahrain’s success will be measured by whether it can turn its slogan of “Building Bridges of Peace” into tangible diplomatic outcomes.



Mahdi Ghuloom is a Junior Fellow, Geopolitics at the Observer Research Foundation Middle East.

### Israel–Qatar Crisis: Regional Reactions and Recalibrations

Although the immediate tremors of Israel’s attack against Qatar on 9 September 2025 can still be felt across the Arabian Peninsula, the geopolitical shockwave from the attack continues to reverberate throughout the entire Middle East and its wider neighbourhood.
For Qatar, the response has been an amalgamation of controlled fury and a deft diplomatic offensive. Doha delivered formal letters to the United Nations Security Council, pressing it to address the violation of its sovereignty and mobilised support from the Arab-Islamic nexus during an emergency summit. Qatar’s leaders publicly framed the attack as “barbaric” and an assault on mediation. As the second major attack on its soil in months, first by Iran and now by Israel, a stringent response from Qatar is critical to establish deterrence for such potential future attacks.

Qatar’s leaders publicly framed the attack as “barbaric” and an assault on mediation. 
For Israel—the instigator—the attack is becoming an unmitigated strategic disaster. The strike aimed to target Hamas leaders, but its head officials have survived. Meanwhile, the United States (US) President Donald Trump stated that he was “very unhappy” about the strike. Overall, the operation not only failed to achieve its objectives but also invited sharp international scrutiny, even from Israel’s closest ally.  This positional weakening is evident in the overwhelming majority of 142 countries that voted for a two-state solution in the UN General Assembly (UNGA), just days after the strike.
Probing further, the attack can have far-reaching spillover effects, as it not only impacts the involved parties but also neighbouring middle powers. The following study aims to analyse these powers’ reactions to the escalating conflict.

Views from the Epicentre: Perceptions of MENA powers
Qatar’s Gulf neighbours have responded with remarkable celerity. Kuwait and Oman have showcased visible alarm and solidarity, treating the attack not as a Qatari problem but as a challenge to Gulf collective security. Support from Saudi Arabia, the United Arab Emirates (UAE), and Bahrain was evident in the public condemnations, albeit with a calibrated tone. Riyadh denounced the strike, Abu Dhabi summoned Israel’s deputy ambassador, and Bahrain affirmed strong support for Qatar. However, this episode sharpens the already long-standing disagreements over Qatar’s support for Islamists, which was one of the primary reasons for Qatar’s 2017 blockade by Saudi Arabia, the UAE, Bahrain, and Egypt. Being signatories of the Abraham Accords, the situation is even more complex for the UAE and Bahrain. The UAE, arguably Israel’s closest partner in the region, might rethink its relationship with Israel, as evidenced by the UAE's cancellation of Israeli participation in the Dubai Airshow. However, Bahrain—which received Israel’s new Ambassador in late August 2025—appears to be still calculating its next move and has yet to attempt any significant diplomatic downgrades with Israel. Furthermore, Saudi Arabia, which was inching closer to normalising ties with Israel, probably feels more confident now in its decision to resist this normalisation.
Looking north, Tehran has also predictably condemned the attack, describing it as a “highly dangerous and criminal act”. Despite an attack on Hamas, a member of Iran’s ‘Axis of Resistance’, the primary beneficiary of the crisis is undoubtedly Iran. Since the developing Gulf-Israeli security axis aimed at containing Iran has fractured, Israel has possibly replaced Iran as the most critical threat to the Gulf. It has allowed Tehran to pivot its propaganda and position itself as a solidifier of Muslim unity against Israel, a powerful message amplified through its media channels. The attack provides retroactive justification for Iran's network of armed factions to deter an aggressive Israel.

Since the developing Gulf-Israeli security axis aimed at containing Iran has fractured, Israel has possibly replaced Iran as the most critical threat to the Gulf. 
Iran’s western neighbour—Türkiye—has reacted with fierce condemnation rooted in a complex strategic reality. Ankara, known for supporting Palestine, has used the attack to rally support, with President Erdoğan describing it as state terrorism. Like Qatar, Türkiye also engages with controversial non-state actors, but the strike underscores the risks of such a policy. Unlike Doha, however, Ankara’s North Atlantic Treaty Organization (NATO) membership may offer it a greater measure of protection.
Moving across the Mediterranean to Egypt, the response has been measured condemnation layered with strategic calculation. Cairo officially denounced the attack, but a strike on its fellow Israeli-Hamas mediator presents a potential opening for Cairo to reassert its own diplomatic primacy. However, the brazenness of the Israeli operation is deeply unsettling for Egypt's security establishment. The event forces a difficult choice: exploit the situation to assert influence or adopt a more cautious approach in a region where the rules of engagement have been so violently rewritten.
Across the Mediterranean, the European Union (EU)—a key neighbouring actor—has been reassessing its longstanding cooperation with Israel amid the deepening conflict, while it strengthens ties with the six Gulf Cooperation Council (GCC) states, including Qatar. However, the EU’s capacity to change the cooperation framework with Israel and alter the partnership’s dynamics is limited, owing to a lack of convergence between its Member States’ positions.

The EU’s Credibility Test: From Rhetoric to Action
The two dates—20 May 2025 and 18 July 2025—carry considerable symbolic importance but with different strategic meanings. The former marks the EU’s announcement to review Israel’s compliance with the ‘human rights clause’ of the Association Agreement (AA), which has been structuring the parties’ political and economic cooperation for 25 years. The review process, with the possibility of the Agreement’s suspension, was initially requested by the Netherlands because of “Israel's blockade of humanitarian aid deliveries to the Gaza Strip” and “the proposed new system for aid distribution […] seemingly being incompatible with international humanitarian law and principles.” The review concluded that there may be grounds for suspension. However, it has not been enacted yet, as a temporary halt of the AA is subject to the EU Member States’ unanimous approval. A consensus of such sorts currently seems to be absent. Nonetheless, as declared by the Union’s High Representative for Foreign Affairs, the “EU will also consider next steps, if necessary, based on developments on the ground.” The “Commission (has already) proposed to partially suspend Israel's participation in Horizon Europe”, one of the EU’s flagship funding programmes, to which Israel has been associated for more than a decade. This decision falls within the EU’s competence and does not require the support of all its Member States.
In parallel, contrary to the deteriorating dynamics of EU-Israel relations, the Union is elevating its relations with each GCC country. Consistent with this logic, 18 July 2025 marks the adoption of the EU’s mandate to launch bilateral Strategic Partnership Agreement (SPA) negotiations with all six GCC states. These SPAs are comprehensive in nature and seek to deepen economic, political, and cultural cooperation between the parties. They also aim to acknowledge the strategic importance of the Gulf states as key regional actors for the EU’s external action. Such partnerships, based on shared priorities and overlapping interests, are of particular importance in an increasingly volatile geopolitical landscape amid growing conflict escalation and the instrumentalisation of economic dependencies. As Lucie Berger, the EU’s Ambassador to the UAE, stated, “In this fragmented world, strategic partnerships are the most important currency.”
Considering the prospects of these partnerships and the deepening crisis in the Middle East, opposing dynamics are unfolding regarding the EU’s regional engagements with the Gulf states and Israel. The former are becoming the Union’s strategic partners, while cooperation with the latter faces significant challenges. As such, the EU’s external action seems to undergo substantial changes in the region. However, these dynamics are facing a new test after Israel’s 9 September attack on Hamas leaders in Qatar, a country with which an EU SPA negotiation is underway. In a swift reaction, the Spokesperson for EU Foreign Affairs and Security Policy stated that Israel “breaches international law and Qatar’s territorial integrity” and expressed “full solidarity with the authorities and the people of Qatar, a strategic partner of the EU.” The Union’s engagement in supporting “all efforts towards a ceasefire in Gaza” has also been reiterated.

The US-backed security architecture now stands in question: what credibility does an American guarantee hold if it cannot prevent one ally from striking another? 
In view of the conflict escalation, the lasting crisis in Gaza, and the Union’s aim to strengthen relations with the Gulf states, the form and extent of the EU’s future engagements with Israel can significantly challenge its regional stance, credibility, and reputation. The absence of new, substantial EU actions vis-à-vis Israel could reinforce existing criticism concerning the double standards the Union may apply to certain partners. The latter can discredit the EU as an actor whose identity is based on the “respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights.” In this context, the State of the Union speech by European Commission President Ursula von der Leyen, delivered one day after the 9 September attack, carries symbolic weight. Von der Leyen asserted that the “Commission will do all that it can on its own” and will put “bilateral support to Israel on hold”. Additionally, it will propose to the Council (Member States) “a partial suspension of the Association Agreement on trade-related matters” as well as “sanctions on the extremist ministers and on violent settlers”. These statements demonstrate the EU’s determination to take its actions further. However, these actions might be moderate and limited as EU Member States are divided concerning their position on Israel and the path toward a lasting conflict resolution. A recent example of such division was the lack of alignment among the Member States regarding the endorsement of a declaration on a two-state solution, during the UNGA vote on 12 September. Of the 27 EU countries, 25 voted in favour, while Hungary opposed the endorsement and Czechia abstained.
Against this backdrop, the EU’s credibility might depend on the Commission’s ability to uphold its own pledge. Accordingly, the Union’s cooperation with its Gulf partners might also be contingent upon its capacity to translate statements into actions.

The Transatlantic Dimension: Washington’s Dilemma
The most important recalibration is not driven by actors inside or around the region but by one across the Atlantic: the US. Washington has watched its closest Middle East ally, kinetically strike another major US partner that hosts the largest regional US military installation, undermining America’s ability to restrain Israel. The US-backed security architecture now stands in question: what credibility does an American guarantee hold if it cannot prevent one ally from striking another? As the smoke clears over Doha, regional actors are left to re-examine their alliances and strategic hedging.



Samriddhi Vij is an Associate Fellow, Geopolitics at the Observer Research Foundation- Middle East.
Eszter Karacsony is an Associate Fellow in Geopolitics and Programme Lead, Observer Research Foundation- Middle East.

### Balancing between Sovereignty and Solvency: Does Tunisia need the IMF for Economic Recovery?

More than two years ago, Tunisian President Kais Saied publicly rejected a much-needed International Monetary Fund (IMF) loan at a time when the country’s economy was facing  a severe, multifaceted crisis rooted in long-standing structural imbalances. It stemmed  from a fiscal model that had become unsustainable over the past decade. As of 2025, the country’s public debt passed the 80 percent -of-GDP mark, creating a precarious situation with high gross financing needs and rollover pressure.
This debt burden has been driven by several factors. Public-sector wage bills in Tunisia accounted for 16 percent of the GDP in 2020, among the highest globally.    A subsidy system for essentials such as food and energy remains costly and inefficient. Energy subsidies alone doubled  to 5.3 percent of GDP in 2022.. A large portfolio of state-owned enterprises (SOE) continues to strain public finances as their collective debt totalled nearly 40 percent of Tunisia’s GDP, according to Fitch estimates. The Fitch credit rating agency downgraded Tunisia's sovereign debt to CCC- (default) in 2023. The consequence of this poor fiscal planning translates into economic hardships in daily life. Foreign exchange constraints have contributed to recurring shortages of imported goods such as sugar, flour and rice, while inflation remains elevated at 5.6 percent.
In response to the escalating crisis, Tunisia reached a staff-level agreement with the IMF in October 2022 for a US$1.9 billion under the Extended Fund Facility. Beyond the loan,  this programme was meant to act as a catalyst: securing IMF endorsement was essential to unlocking larger budgetary support from international partners.  Chief among these was the European Union’s (EU) proposed US$1 billion loan, which was contingent  on Tunisia securing the IMF deal. The programme was designed to address structural weaknesses through standard fiscal and structural reforms.
However, Saied publicly rejected key IMF terms, characterising them as “diktats” that could threaten public peace and as unacceptable infringements on national sovereignty. Domestically, the powerful Tunisian General Labour Union (UGTT) also resisted the IMF package, especially opposing subsidy removal and wage freezes that made the reforms politically untenable.
Following the IMF programme’s suspension, the Tunisian government has pursued an alternative economic strategy focused on Saied’s belief that the “Tunisians must count on themselves”. It is important to analyse government measures,  assess which initiatives have proven useful, identify the challenges that persist and ultimately answer the central question: can Tunisia recover without the IMF? 

Tunisia’s Progress Report of Recovery
Tunisia  has pursued a mix of domestic measures and external financing to achieve economic self-determination. The country’s Parliament authorised the Central Bank of Tunisia (BCT) to finance the budget by up to TND 7 billion at zero interest, allowing exceptional monetisation of the deficit.Alongside this, Tunisia also raised domestic revenue via certain new taxes, especially on banks, hotels and liquor firms. Improved terms of trade, driven by lower energy import prices and higher olive-oil receipts,  and a tourism rebound helped stabilise near-term balances. This was reflected in the narrowed trade deficit and a state budget surplus in the first half of 2024. The reserves hovered near four months of imports by mid-2024. Further, inflation eased as the central bank cut its key policy rate to 7.5 percent in March 2025, for the first time in five years.  A new foreign-exchange code was approved to partially liberalise forex transactions and simplify regulations. A ministerial committee has been set up in coordination with the central bank to oversee an audit of financially distressed state-owned banks as part of a broader plan to reform public banks.
Simultaneously, the government has advanced sectoral initiatives. These include submitting a draft law for establishing an independent electricity regulator that helps attract private investment in renewables, alongside upgrading other energy-sector rules. Infrastructure-development efforts include the World Bank-supported Economic Development Corridor to improve road links and Small and Medium Enterprise  financing in interior regions. The building of a new bridge using European and African development funds aims to improve connectivity to the Mediterranean port of Bizerte. Additionally, programmes to strengthen food security and build resilience to climate shocks have been rolled out with the World Bank’s support to complement other measures under Tunisia’s food-security operations.
Over the years, Tunisia has secured non-IMF funding through bilateral partners and multilateral institutions that helped meet its obligations. For instance, Algeria’s US$300 million loan (2021), Saudi Arabia’s US$500 million package (2023), World Bank loans totalling US$520 million (2024) and the African Development Bank’s of €92 million (2024). In parallel, the EU–Tunisia Memorandum of Understanding (MoU) linked substantial support to migration cooperation, with 150 million euros in budget support disbursed in 2024. Rating agencies acknowledged improved short-term liquidity and funding access—Fitch upgraded Tunisia to ‘CCC+’ in 2024, and Moody’s shifted the outlook to stable from negative.
However, there are certain limitations to this strategy. `In the short term, the Tunisian government secured political and financial survival, skillfully navigating a perilous period to avoid a sovereign default. However, the long-term viability of these initiatives remains questionable. Their limitations suggest they could lead to a low-growth trap.
The domestic strategy has been a mix of fiscal stopgaps and slow-moving sectoral reforms. The exceptional monetisation of the deficit is the riskiest and most critical component. This direct central-bank financing threatens its independence, can fuel inflation and crowd out private credit. The World Bank also warned that Tunisia’s increasing reliance on domestic financing may put pressure on the dinar. While the growth rate of Tunisia increased from zero in 2023 to 1.4 percent in 2024, it is still significantly low. Low revenues resulting from this low growth rate continue to impact the budget.
Further, partial financial-sector steps, such as a draft foreign-exchange code to liberalise and simplify forex transactions and plans to audit state-owned banks, are incremental. Without a clear political mandate to implement broader State-Owned Enterprises (SOE) reforms, these moves will not change the fundamentals of the system. Indebted SOEs are forced to cut imports, especially with limited external financials, triggering basic-goods shortages. While inflation has eased, it remains high, particularly for food. This, coupled with rising unemployment, has imposed severe economic hardships on common Tunisians. Governments in the past have dealt with these issues by increasing public employment and food subsidies. These are the exact types of initiatives that have fiscally pressured the country into an economic downfall. Despite the economic stresses, the rise in transfers and subsidies was larger than the marginal fall in the wage bill, as evidenced by Figure 1. Therefore, while sectoral initiatives in food security, energy and infrastructure have helped enhance economic activity and food security, they have long gestation periods. Their benefits will accrue over the years and might be able to plug immediate fiscal holes.
FIGURE 1: TRANSFERS AND SUBSIDIES AS A PERCENTAGE OF GDP

Source: Carnegie Endowment for International Peace
The non-IMF external funding Tunisia has relied on has helped it meet its near-term obligations, but these bilateral and multilateral loans typically have costlier and shorter terms than concessional financing. Tunisia’s most significant geopolitical lever is the EU-Tunisia MoU, but this relatively transactional model makes fiscal space contingent on Europe’s shifting migration politics rather than Tunisia’s economic fundamentals.

Can Tunisia Recover Without the IMF?
The central question arising from Tunisia’s current strategy is whether it represents a viable, sovereign path to a sustainable economic recovery. History provides a complex guide. Tunisia is not the first nation to reject an IMF programme. Malaysia refused an IMF bailout during the 1997 Asian Financial Crisis. It was the only severely affected country to not adopt an IMF programme during the crisis. Data suggests that Malaysia’s economic policies since have delivered slightly better results than those in countries under IMF programmes, although many have argued that it could have fared even better with IMF assistance.  Thus, there is a historical precedent for Tunisia that a path to recovery exists without the IMF.
But Tunisia in 2025 is not Malaysia in 1997. Malaysia had a stronger state capacity and a diversified, export-oriented economy that could implement and absorb measures, as documented by the IMF. Tunisia’s economy, in contrast, is structurally rigid, with a very large state footprint—there are 111 SOEs and public institutions. A Malaysian-style unilateral reform push is unlikely, as the political incentives in Tunisia make tougher but more impactful reforms difficult to implement. The powerful UGTT union, for example, has publicly opposed key measures such as subsidy cuts, wage-bill restraint and SOE restructuring.
Given these realities, the current trajectory is one of survival, not sustainable revival. Tunisia has plugged gaps with ad-hoc external financing and domestic reforms, but these arrangements are fragile and insufficient. Crucially, this mix has not catalysed the private investment Tunisia needs. The World Bank underscores that financing conditions remain tight, crowding out private credit and deterring investment.
A sustainable path should reconcile political red lines with economic imperatives. Full implementation of the IMF programme may be politically infeasible, but a phased, domestically owned sequence offers an alternative. Implementing transparent SOE reforms and shifting from generalised price subsidies to targeted cash transfers can protect the vulnerable. Without a strategic pivot of this kind, Tunisia risks winning the battle for sovereignty but losing the war for solvency.



Samriddhi Vij is an Associate Fellow, Geopolitics at the Observer Research Foundation- Middle East.

### From Ambition to Implementation: Europe’s Sustainable Mobility Challenge

While the European Union (EU) has been leading the global effort to decarbonise the mobility sector in recent years, its actual implementation faces serious challenges despite ambitious policy frameworks. Through policy packages such as the European Green Deal and the Fit for 55 programs, Europe aims to achieve a greenhouse gas (GHG) emission reduction of 55 percent by 2030 compared to 1990 levels, and carbon neutrality by 2050.

Today, the transport sector makes up nearly a quarter of the EU’s GHG emissions. As such, the sectoral transformation relies on two main pillars: actual implementation of innovative technologies (such as electric vehicles, alternative fuels, and digital solutions) and the widespread integration of new mobility services (such as shared mobility systems, smart logistics, and active travel infrastructure).

Europe has a comprehensive vision, but is under pressure to reach the above-mentioned targets. This is because its industrial and technological competitiveness trails behind the United States and China. The transition, which requires a shift from fossil-fuel dependency to sustainable, technology-driven, and service-oriented systems, risks involving only a part of the population. At the core of these issues lies a structural weakness, the absence of a centralised political entity capable of turning these ambitious frameworks into coordinated and decisive action.

Compared to other global powers, the EU has no shortage of ambition when it comes to decarbonisation targets and has been a pioneer in defining regulations and standards. However, rules alone do not guarantee a successful transformation.

The European Green Deal and the Fit for 55 package frameworks present multiple concrete measures to reach the net emissions reduction target. Many sectoral policies have specifically been put in place for each transport sector. These include the Alternative Fuels Infrastructure Regulation (AFIR), which requires every Member State to deploy a minimum number of charging stations and hydrogen refueling points along the TEN-T network. Then there is the ReFuelEU Aviation, which requires increasing shares of Sustainable Aviation Fuels (SAF) in European airports from 2025 onwards, and the FuelEU Maritime, which imposes GHG intensity reduction targets for fuels used by ships.

The overall European legislative body may be ambitious and comprehensive, but its execution into concrete actions faces hurdles. This is due to multiple threats that emerge from structural and political issues.
Structural Obstacles
While the sale of Battery Electric Vehicles (BEVs) jumped from nearly 2 percent in 2019  to 14.6 percent of all new car registrations in the EU in 2023, this increase wasn’t evenly spread across Europe. While the Netherlands, Norway, and Sweden lead the way in sales, states in Southern Europe trailed due to cost barriers and limited incentives. With only 13.5 percent of public chargers fast charging in 2023 (>22kW), far below the AFIR indications, the requisite infrastructure is lacking. Even the transition of heavy-duty vehicles (HVDs) remains limited, with alternative fuels such as hydrogen and e-fuels being expensive and commercially immature.
Political Concerns
It is important to recognise that since transport and energy are topics of national competence, unavoidable conflicts across member states are inevitable. While the wealthier Member states have the opportunity to advance faster, the others grapple with stringent fiscal limits, older fleets, and a larger reliance on fossil fuels. It also comes down to the ability of local governance to leverage the available EU funds, where often the regional authorities lack the administrative capacity to deliver projects efficiently. Overall, the tensions between EU-led ambition and national-level execution complicate achieving sustainability goals in a timely manner. This national-level application poses a serious hurdle, for instance, when it comes to the interoperability of different digital ecosystems and smart systems for transporting people and goods.
Europe vs the US and China
All these factors create a fragmented environment that undermines Europe’s strategic position, rendering it less effective than global players like the United States or China. Even though these nations have fundamentally different approaches, some overlaps can be found. Innovation in the United States is primarily driven by the private sector and complemented by selective federal support (e.g., the Inflation Reduction Act); China, on the other hand, prefers centralised state planning, public funding, and rapid infrastructure deployment. Despite their differences, both models are characterised by massive funding allocation to selected priority projects and their prompt implementation. This explains why the overall outcome of both strategies has proven to be more effective than the European one, which remains constrained by dispersed initiatives, long decision-making processes, and scattered implementation across member states. Europe is also heavily dependent on foreign players for critical technologies such as batteries and semiconductors, which are strategic to achieve the transition.

To make implementation more agile and move towards truly sustainable mobility, a deeper political integration within the EU is essential. As in other domains, unity of action is needed, a point made in 2025  by Mario Draghi, former President of the European Central Bank (ECB), while reflecting on the future of the European Union. He also underscored the importance of removing barriers to productivity in the internal market and the need to develop a common industrial strategy. This would mean coordinating investments in strategic mobility sectors such as EVs and batteries, fundamental for Europe’s long-term competitiveness and climate goals.

Europe has shown that without making adjustments, ambitions around sustainable mobility run the risk of turning into frustration. The EU’s governance structure currently prevents efficient and coordinated action. This structural weakness slows down decision-making, leaving room for different national approaches that undermine the European ability to compete globally in the fast-evolving mobility sector. Unless Europe strengthens both its political architecture and its practical capacity to implement impactful projects, it will remain a rule-maker without execution powers, vulnerable to competitors such as the US and China.

In conclusion, sustainable mobility in Europe faces technological, industrial, and political challenges. Addressing these bottlenecks involves empowering EU institutions with stronger mandates, streamlining approval processes, and developing common funding and industrial strategies for mobility. A true single market with standardised regulations and unified infrastructure would allow European sustainable mobility innovators achieve the scale needed to compete globally.



Fabrizio Meroni is a researcher and project manager specialized in sustainability and innovation in the mobility and infrastructure sectors, with a focus on the geopolitical implications of technology and policy.

### Navigating Southern Waters - Norway's Maritime Security Stakes

Oslo in Norway and Abu Dhabi in the United Arab Emirates (UAE) are approximately 5,170 km apart. The two cities are located on distinct continents as well as on the shores of different maritime zones. Norway, a Scandinavian state, is one of the primary maritime nations of the Euro-Atlantic and Arctic space, whereas the UAE is a Gulf state that “has become a leading global maritime hub” in the Middle East.
Despite significant distance separating the two geographies, the Norwegian Armed Forces have recently been present in Abu Dhabi (September 2021-January 2025), as they were deployed in the framework of the European Maritime Awareness in the Strait of Hormuz (EMASoH) diplomatic and military initiative. The latter is headquartered in the UAE’s capital.
EMASoH is not an isolated case of Norway’s military presence in the Middle East. The Scandinavian state has deployed its personnel in the region on several occasions, including in Iraq, Qatar, Jordan, Bahrain, Egypt, Israel, Lebanon, and Syria. These deployments were part of international operations aimed at restoring and maintaining security and stability in the area. Based on the list of international operations in various parts of the world—published on the Norwegian Armed Forces’ official website—the Middle East appears to be one of the primary geographies where the country’s forces are mobilised.
Thus, considering the Norwegian Army’s significant and lasting presence in this area, spatially remote from the state’s direct strategic environment, the current paper seeks to analyse: 1) Oslo’s security stakes in the region, and 2) the Scandinavian state’s strategic approach to safeguard its economic interest dependent on the Middle Eastern security landscape.

Strategic interests transcending geographic distance
Norway describes itself as “a leading ocean nation”, located at a strategic maritime junction between the North Atlantic and the Arctic Ocean, with one of the longest coastlines in the world. The country’s economy relies extensively on its marine areas, that “are more than five times as large as the land”, deriving around 70 percent of its export earnings from ocean industries.
Stemming from its geography, Norway’s commercial interactions with the rest of the world and its position within regional and international trade networks are intrinsically linked to its maritime character. Grounded in this reality, the Scandinavian state has been leveraging its strategic position as it has been “a major player in shipping and shipbuilding for more than 150 years” and has transformed into “a superpower on the seas”. Considering the value of its commercial fleet, Norway is among the 10 largest shipping nations. According to the 2025 Maritime Outlook of the Norwegian Shipowners’ Association, the country holds the fifth position globally, taking into account its fleet value. Its historical experience and present status as a trading country of the seas can yield significant benefits in an era when “more than 80 percent of goods are transported by sea”.
As a nation that’s economy and commerce are closely tied to the maritime sector in a globalised world, Norway has a strong interest in maintaining the freedom of navigation worldwide. .   However, the latter can be easily hindered in an increasingly interconnected world when crises and conflict disrupt trade routes and threaten the safe passage of merchant vessels at geographic choke points. As maritime transport is “the backbone of global trade”, the local and regional disruption of waterways has far-reaching spill-over effects. Such effects can considerably impact the commercial interests of the states at the tensions’ epicentrum but also of those who are geographically distant from it. A notable example of this phenomenon is the impact of recurrent crises in the Middle East on the freedom of navigation and, consequently, on Norway’s economic and security interests.

Norway’s vital interests in the Middle East – a committed security actor
The Scandinavian country sees the Middle East as a part of its “broader neighbourhood” where conflict escalation and destabilisation are “having an impact on Norway’s foreign and security policy interests”. From Oslo’s standpoint, a deteriorating security landscape in this geographic space can have an overarching impact on “energy prices, migration and maritime security”. As Norway’s Minister of Foreign Affairs, Espen Barth Eide highlighted, “These are not just their local issues. Problems in the Middle East become our problems as well.”.
To advance its strategic priorities and prevent further ripple effects of disruptive local tensions, the Scandinavian state participates in various international operations in the region, intending to restore and uphold stability. In addition to these operations’ predicted favourable impact on Norway’s security and economic interests, the country’s participation in these missions showcases its credibility and ability to play the role of a stabilising actor in the Middle East. As the former Minister of Defence, Bjørn Arild Gram, stated during his term, “We [Norway] have unique expertise in maritime operations and experience from previous operations in the Red Sea and the Gulf of Aden.” Drawing on this expertise and aiming to ensure freedom of navigation in this maritime area—where approximately forty Norwegian-operated vessels are active at any time—Oslo is deploying its Armed Forces in collaboration with strategic partners and military allies.
Consequently, the Scandinavian state participates in the United States (US)-led Combined Maritime Forces (CMM) coalition which works towards “combating the threat from international terrorism in the maritime domain” in “the Red Sea, the Gulf of Aden, the Somali Basin, the North Arabian Sea, the Gulf of Oman and large parts of the Indian Ocean and the Persian Gulf”. Regional powers from the Middle East are also part of this multinational partnership, such as Bahrain, Egypt, Iraq, Jordan, Kuwait, Omar, Qatar, Saudi Arabia, Türkiye, Yemen, and the UAE. The latter’s involvement in maritime security initiatives is of strategic importance, considering that the UAE borders the Strait of Hormuz, a geographic choke point for global oil transport on waterways. Hormuz is also a vital passage for Norway, with a “foreign fleet of over 1,800 ships and rigs that annually navigate through the Strait”. Therefore, in 2021, Oslo also joined the Abu Dhabi-based European-led EMASoH initiative, with a specific focus on ensuring the freedom of navigation through this sea route.
Considering its involvement in these operations, the Scandinavian state does not shy away from reinstating and maintaining maritime security. With its participation in various regional missions with its strategic partners and military allies, Norway is positioning itself as one of the stabilising forces in the Middle East.

Conclusion
As geographically distant economic areas have become increasingly interconnected in a globalised world, where trade is predominantly conducted through maritime routes, the disruption of waterways at any locality can have cross-regional repercussions. Consequently, Norway, a historic shipping nation that is strongly integrated in trans-oceanic trade, has a strategic interest in restoring and upholding the freedom of navigation where it is compromised.
One of the main regional security arenas where crises and escalating conflicts jeopardise the free passage of merchant vessels is the Middle East. Therefore, to protect its vital interests Norway takes part in various operations in this part of the world, aiming at stabilising the region and safeguarding the fluidity of trade through waterways.
Such engagement – based on the country’s shipping experience and military presence in the region, combined with the government’s political will and the state’s economic interest – holds the promise of Norway playing the role of a Northern custodian of the Middle East’s maritime security. However, to ensure the effectiveness and lasting impact of these stabilising initiatives, they should be conducted in cooperation with the country’s regional partners and military allies. A logic that aligns with Norway’s security policy, grounded in “predictable international cooperation, based on international law; the peaceful settlement of disputes; cooperation with NATO Allies; and cooperation on foreign and security policy with other Nordic countries”.



Eszter Karacsony is an Associate Fellow (Geopolitics) and Programme Lead, Observer Research Foundation- Middle East.

### Perplexing Agents: Redefining the Boundaries of Online Agency

Disagreements and legal actions regarding copyright infringement and intellectual property theft have proliferated since the dawn of large language models (LLMs) in 2022. While LLMs offer unprecedented capabilities to streamline and automate core economic sectors from coding to public service delivery, rapid advancements in AI capabilities have challenged regulators to keep pace with the emergent capabilities of frontier models. The scramble to regulate LLMs is set to become increasingly complicated with AI agents on the algorithmic horizon.
Agents are AI systems that offer additional layers of capabilities on top of LLMs, such as executing user commands in virtual environments or edge devices, accessing and retrieving user-requested information from websites, and building and deploying software by automating multi-stage decision-making and execution. While LLMs use a mix of user-generated and synthetic data to provide textual and audio-visual output to user queries, agents are programmed to take actions in the digital space. Traditionally, algorithmic tools such as ‘crawlers’ are deployed to collect data from websites en masse. While agents may be similar to crawlers in the function they perform, they differ in purpose. Crawlers are fundamentally designed to collect information for building databases. Conversely, AI agents are designed to retrieve specific data based on user inputs and can automate and execute entire workflows. While such novel capabilities may be paving the way for a paradigm shift in users’ experience on the internet, they also raise questions regarding the future of an internet increasingly populated by computational entities. A key set of questions has arisen due to a legal battle between the AI company Perplexity and web security solutions provider Cloudflare.
In August 2025, Cloudflare accused Perplexity of allowing its AI agents to scrape data from websites that explicitly prohibit data scraping by crawlers. In response, Perplexity argued that agents are different from crawlers in that agents should be seen as extensions of the users themselves. Consequently, an agent accessing a website following a user query should be treated as a user, not a crawler. The difference between AI agents and crawlers may seem pedantic, but such definitional ambiguity can evolve into a fundamental obstacle for AI development and adoption — issues that have become strategic goals for nations across the world.

The Problem with Digitising Agency
The internet has long operated on norms of trust and openness, thanks to the mutually beneficial relationship between search engines and websites. The sheer number of websites on the internet limits the ability of search engines to catalogue and feature all of them. Websites looking to increase their viewership and subsequent potential advertising opportunities have done so by granting search engine optimisation (SEO) crawlers access to their data. Websites use machine-readable files, encoded as “robots.txt.files,” to demarcate no-crawl data zones and protect specific HTML pages from being featured on search engines. These machine-readable files are, functionally, requests for privacy. This places trust in SEO crawlers to not bypass these security measures, which in turn have been generally respectful of website boundaries. This symbiotic relationship reflects norms of internet trust and a consensus on the marginal utility gains of open access practices.
The last few years have seen an influx of agentic AI crawlers using website data for two purposes: to train large language models (LLMs) and to retrieve user-requested data. Agentic AI crawlers have been known to act deceptively, circumventing blockers, ignoring machine-readable files and overwhelming websites in order to gather as much data as possible. Agentic AI crawlers feed on websites parasitically, benefitting from the same websites upon which they impose heavy bandwidth costs and from which they divert potential traffic.

Agentic AI crawlers have been known to act deceptively, circumventing blockers, ignoring machine-readable files and overwhelming websites in order to gather as much data as possible.
At its core, the disruptive behaviour of agents concerns permission to access websites. The legal dispute between Perplexity and Cloudflare has sparked a contentious debate over whether an agent acting on behalf of a human should be treated as a human or a bot. While reasonable arguments can be made for either case, the risks posed by the agency of AI agents remain nuanced. Cybersecurity tools used by websites generally use signature-based bot detection protocols that can be confounded by LLM-based agents that are able to reason and exploit weaknesses in novel ways. Emergent AI capabilities allow for crawlers to adopt behaviour that does not resemble traditional pre-programmed bot behaviour. Consequently, multi-agent swarms can emulate human behaviour since they can be deployed through browsers or virtual environments hosted in edge devices owned by humans. Accelerating the development and adoption of AI agents poses two problems. First, it fundamentally erodes the monetisation strategies of smaller and open-source domains. Second, agents introduce new cyberattack vectors through emergent capabilities and by employing layers of obfuscation to mask their identities.

The Way Ahead: A Two-Pronged Approach
The internet has reached an inflexion point this year with the arrival of AI agents — for the first time in history, bot activity has superseded total human activity online. This phase shift is creating a scenario where “AI agents, rather than humans, are the primary consumers of content.” While this digital infestation is a challenge to web protocols, it is simultaneously a natural consequence of heavy investments in AI development. As AI regulation becomes a cornerstone of national strategies to drive economic competitiveness, slow uptake or adoption of AI products and services can prove to be a bottleneck for countries prioritising digital transformation. However, accelerating adoption will worsen the situation due to ballooning bandwidth costs and plummeting advertising revenue generation for website or domain owners caused by the surge in AI traffic.

As AI regulation becomes a cornerstone of national strategies to drive economic competitiveness, slow uptake or adoption of AI products and services can prove to be a bottleneck for countries prioritising digital transformation.
As agentic AI crawlers cannot be trusted to respect internet security norms, the cost of protecting copyrighted and private data falls on individual website owners. Websites will be inclined towards using anti-crawling software, making access harder for agentic and SEO crawlers alike. Smaller website owners who are unable to afford sophisticated cybersecurity programmes are more likely to hide their content behind paywalls and subscription costs, while others may take their content offline. Following current trends, open source code and open access information will likely cease to be easily accessible. AI crawlers will also be disadvantaged by the scarcity of new training content and information retrieval in a closed and distrusting internet ecosystem.
A two-pronged approach to protecting website cybersecurity and encouraging norms of transparency can be adopted. Governments should create databases of websites that opt out of AI crawling and require mandatory compliance reports from AI companies, which can be cross-checked against these databases. Furthermore, governments should subsidise cybersecurity programmes such as Cloudflare’s Labyrinth, making them available to participating websites at lower cost.
Using anonymous data from cybersecurity programmes and cross-checked compliance reports, AI companies that bypass cybersecurity measures and stated boundaries should be penalised. As a basic standard-setting method, AI companies deploying agents should be mandated to adopt best practices, such as disallowing agents from changing their autonomous system number (ASN) and user agent strings (which identify a browser and system to a server) to mask their identities when confronted with a network block. Finally, multilateral forums for instituting international norms against deceptive and malicious agentic behaviour — such as the Robot Exclusion Protocol introduced in the 1990s and standardised under the Internet Engineering Task Force in 2022 — should be promoted to enforce and track the efficacy of cybersecurity protocols.



Siddharth Yadav is a Fellow with the Technology vertical at the ORF Middle East.
Ambika Sondhi is an independent researcher with a focus on international security.

### The Future Trajectory of Power in Iran  

As tensions between Iran and Israel escalate through proxy wars, cyberattacks, and strategic assassinations, with the most recent being direct military attacks, much of the focus has been on the regional balance of power. One should look at Iran’s domestic affairs, particularly the recent escalations that risk bringing about serious consequences. In the 1980s, war helped to unify the conflicting political environment in Iran after the 1979 revolution. Today, it unfolds in a vastly different Iran, one shaped by political fatigue, fractured ideology, generational disillusionment, and a society caught between loyalty, silence, and dissent.
The leadership may seek to revive the mobilising frameworks of the past. However, the conditions of the present suggest that external conflict could deepen internal tensions rather than restore cohesion in the long run, particularly following the 12-day Israeli war.

Leadership and Legitimacy
The Islamic Republic of Iran is once again confronting an external threat with internal implications. The leadership’s response to the Israel–Iran conflict echoes the past approaches, particularly during the 1980s, when Ayatollah Khomeini consolidated revolutionary fervour through war and resistance. At that time, the new state leveraged religious ideology, sacrifice, and collective mobilisation to entrench itself.
Today, the state’s rhetorical strategy remains familiar: to frame the conflict as a civilisational struggle, appeal to Islamic and national duty, and call for unity. Many Iranians, especially younger and urban populations, appear disenchanted with the ideological foundations of the state. Religion, once the unifying fabric of the revolutionary project, no longer commands the same loyalty. Meanwhile, nationalism, when invoked by the state, is often seen by critics as reactive or instrumental rather than deeply rooted. The idea of defending the revolution remains potent for some, particularly older generations shaped by the Iran–Iraq War and conservative communities, but fails to inspire the broader population.
Nationalism has long served as the leadership’s ideological adhesive, especially in moments of external tension. During the 1980s, nationalism and religious duty merged to create an atmosphere of collective sacrifice. The war with Iraq was both a battlefield and a narrative device.
In the current geopolitical landscape, amid the ongoing conflict with Israel, the state continues to use this framework in a bid to transform confrontation into cohesion by blending religion and nationalism. This merging of traditional patriotic songs with religious anthems allows the state to deliberately weave a hybrid narrative, intertwining faith with national identity.
For instance, the song "Ey Iran," originally composed by Mohammad Nouri, has been reinterpreted in contemporary contexts to evoke both patriotic and religious sentiments. During recent commemorations, including Ashura, the song was performed alongside religious rituals, symbolising a deliberate fusion of national pride and spiritual devotion.
Official slogans, rallies, general elections, and military parades continue to be deployed as tools of political messaging, yet their reception remains muted. Participation often serves as a performative obligation rather than an expression of conviction. This gap between the state narrative and public sentiment produces a form of conditional compliance. While the citizens outwardly adhere to expected rituals, the absence of genuine engagement means the resulting unity is shallow and contingent. Rather than signalling broad-based consensus, such participation masks underlying political detachment and latent dissent.
Most of the opposition, along with a sizeable chunk of the populace, view the leadership as an obstacle rather than a source of national unity. During the 12-day war, there were mixed responses. Although some voices supported Israeli strikes, the majority remained silent, resisting external intervention out of patriotism, even as they criticised the current leadership.

The Headline to The Nature of the 12-Day War  
To understand why external conflict fails to rally the Iranian public as it once did, one must look beyond politics to culture and psychology.
The Islamic Republic, like during the Iran–Iraq War of the 1980s, continues to promote a culture of martyrdom and resistance, but it does so now in an environment where the population is more sceptical than spiritual. The contemporary public environment is marked by a shift in priorities from ideological commitment to practical concerns. Moreover, economic decline, political stagnation, corruption, and global isolation have shifted public priorities from ideology to survival.
Modern warfare further complicates the leadership’s attempt to mobilise national sentiment. The Iran–Israel confrontation is not a full-scale war. It is shadowy and asymmetrical, characterised by cyberattacks, targeted military strikes and assassinations, and proxy engagements. Such tactics are technocratic rather than emotive. They do not summon the kind of visceral loyalty that trench warfare or mass mobilisation once did.
Israel’s operations and rhetorical support for leadership change have failed to resonate with the Iranian public. While the state may publicly present silence as loyalty, it likely also recognises latent discontent and manages it through a combination of surveillance, incentives, and constraints. The silence is more deafening than ever, with neither Israel nor the Islamic Republic able to rally the majority of Iranians to their side.
Indeed, many Iranians are unsure what this war means for them. This breeds apathy, not activism. As a result, the conflict becomes another layer in a broader crisis of legitimacy where a government attempts to invoke a collective memory that no longer resonates with the collective minds.

Khamenei’s Succession Plans
The question of who will succeed Ayatollah Ali Khamenei is perhaps the most consequential yet least resolved issue in Iranian politics. The uncertainty surrounding succession is not merely a matter of personal choice but a reflection of structural fractures within the Islamic Republic’s ruling elite. Khamenei, in power since 1989, has crafted a political ecosystem that thrives on balancing competing factions rather than grooming a single, dominant heir. This has left the political field without a universally acceptable candidate.
There is increasing speculation surrounding figures such as Sadeq Larijani, a former chief of the judiciary, Mojtaba Khamenei, the son of the Supreme Leader and Hassan Rouhani, the former president. Though the latter’s candidacy risks undermining the republic’s revolutionary, anti-monarchical credentials. Ebrahim Raisi, who served as Iran’s president from 2021 until his death in 2024, was a staunch conservative cleric closely aligned with Ayatollah Khamenei and the Islamic Revolutionary Guard Corps (IRGC). He was known for his hardline judicial record and was considered a leading contender to succeed the Supreme Leader. Without Raisi as a unifying conservative figure, the competition may become a protracted power struggle with the IRGC.
In this climate, the Israel–Iran conflict becomes an additional layer of political calculus. External threats have historically been leveraged to close ranks internally, but today’s elite is less cohesive. Instead of rallying around a wartime successor, power brokers may see the post-Khamenei era as an opportunity to expand their own influence, potentially leading to a contested or transitional leadership model. The absence of a broadly accepted successor is not merely a sign of political uncertainty; it is a warning that Iran’s next leadership transition could be the most fragile since 1989.

Conclusion
The Israel–Iran conflict, far from reviving the Islamic Republic’s wartime unity of the 1980s, has revealed the limits of its mobilising narrative in a society shaped by generational change, economic hardship, and political fatigue. While the leadership continues to draw on the familiar lexicon of resistance, sacrifice, and religious nationalism, these appeals resonate unevenly. It may retain some potency among older, rural, or conservative communities, but receives muted compliance or quiet scepticism from urban and younger demographics.
Iran’s younger, more connected generation values jobs, freedoms, and links with the world over strict ideology. Many are critical of the government, yet they do not call for foreign intervention. Most Iranians, despite their political proclivity, feel strong national pride and reject outside influence. Recent conflicts reveal that while trust in the government is falling, loyalty to the nation remains strong, with many choosing to keep their criticism muted to avoid harming the country during the war. Post-war, however, this silence may break.



Kamyar Kayvanfar is a native Persian and English speaking communications and public affairs professional with experience at EY and Kreab.

### Anatomy of a Stalemate: Lebanon’s Path to an IMF Recovery

Lebanon’s Economic Collapse and the Rise of Dollarisation
The Lebanese economic downfall has been ranked by the World Bank as the third most severe economic collapse worldwide since the 1850s. This is a direct consequence of the catastrophic sovereign default and the banking sector collapse of 2019. The subsequent hyperinflation of the Lebanese Lira and the imposition of informal capital controls by Lebanon’s Central Bank effectively destroyed public trust in the national currency and the formal financial systems. In the resultant vacuum, a pervasive dollarisation of its cash economy had taken hold, not as a matter of policy, but out of necessity. This has led to a dualistic economic structure that is resilient, but limited, where the informal cash economy operates exclusively in US dollars,  masking the paralysis of the formal state.  A narrow segment of the population with access to external dollar inflows sustains the consumer market, operating in parallel to a defunct national economic infrastructure where public services are largely absent and the formal banking system is non-functional for the majority of citizens.

The only conventional path to stabilisation is a multi-billion-dollar programme from the International Monetary Fund (IMF) that remains stalled, despite reaching a staff-level agreement in April 2022. This is due to the failure of the Lebanese authorities to deliver the reforms demanded by the IMF to provide the funding.
IMF Conditions for Reform: Progress and Political Resistance
The agreement is more than just a potential financial lifeline. It is a clear, internationally endorsed roadmap for recovery. The proposed US$3 billion, four-year Extended Fund Facility (EFF) is, in itself, a modest sum relative to the scale of Lebanon's financial collapse. However, its true value lies in its role as a catalyst to unlock a far larger international resources package and to signal global markets that Lebanon is once again a credible partner for investment. However, the disbursement of these funds remains contingent on the Lebanese government implementing a series of critical reforms. It is the sustained political resistance to these very actions that explains why the agreement has reached a stalemate.

The IMF's prerequisites are the foundational pillars required to rebuild an economically shattered Lebanon. At the forefront is the demand for the Cabinet’s approval of a bank restructuring strategy that recognises the sector's large losses while protecting small depositors and limiting the use of public resources. This is to be supported by Parliament's approval of an emergency bank resolution legislation to implement this strategy, alongside the initiation of an externally assisted bank-by-bank evaluation for the 14 largest banks. To enhance transparency and combat corruption, the plan requires Parliament's approval of a reformed bank secrecy law aligned with international standards and the completion of a special purpose audit of the Banque Du Liban‘s (BdL) foreign asset position. On the macro-economic front, the IMF mandated Cabinet approval of a medium-term fiscal and debt restructuring strategy to restore debt sustainability, complemented by Parliament's approval of the 2022 budget to regain fiscal accountability. The framework requires the BdL to unify exchange rates, which is essential for enhancing economic activity, supported by the implementation of formal capital controls.

There has been a renewed push to meet these conditions and secure an IMF loan as Lebanon's newly elected president and prime minister, both of whom took office in early 2025, have pledged to prioritise reforms and secure an IMF financing agreement. In March 2025, another IMF fact-finding mission visited Lebanon after the country’s authorities requested a new IMF-supported programme that could aid their efforts to address Lebanon’s significant economic challenges. While progress is being made on the conditions outlined by the IMF, this progress has been “very slow”, as noted by IMF Mission Chief Ernesto Rigo. It is important to understand the progress made so far and the financial factors dictating the incentives for the Lebanese elite negotiating the IMF deal.
Selective Implementation and the Stalemate Ahead 


An examination of Lebanon's progress on the IMF's prior actions, as detailed in Table 1, reveals a pattern not of simple failure, but of selective implementation. The reason this programme remains stalled is that these conditions are not merely technical hurdles, but political ones. The Lebanese parliament is highly fragmented, where 17 parties are represented, yet 12 of them hold five seats or fewer. Analysts have argued that the dominant political blocs were never genuinely committed to pursuing the IMF programme. The reforms proposed by the IMF present a direct challenge to the established political and financial interests that are deeply intertwined with the existing economic framework.

While the parliament did eventually pass the 2022 budget in September of that year, its passage nine months into the fiscal year rendered it a largely irrelevant accounting exercise instead of a forward-looking fiscal strategy. It could be viewed as ticking off the checklist to show compliance, but it lacked any of the deep, structural reforms needed to restore fiscal accountability. Furthermore, a strengthened bank secrecy law was enacted in April 2025 after three contentious attempts. While the IMF acknowledged this as progress, its real-world impact remains questionable. A law is only as strong as the political will to enforce it. In a system where the regulatory bodies are subjected to intense political influence, the passage of the law is a necessary but not a sufficient condition to ensure transparency.

It will be important to audit transactions and reasons for losses to establish fair accountability. This lack of accountability was evident in the  2023 forensic audit by Alvarez & Marsal of the BdL as required by the IMF. Its findings confirmed that the central bank’s former governor, Riad Salameh, had unconstrained discretion as he pursued costly financial engineering policies. However, no significant corrective action has been taken since, and attempts have been made to politically neutralise the report.

Two further actions are technically ‘in progress,’ but their implementation has been slow. Lebanon has inched towards exchange-rate unification but has not yet completed it. Since late 2023, the central bank has wound down the controversial exchange platform Sayrafa that the World Bank estimated had generated over US$2.5 billion in arbitrage profits for those with privileged access.  This move, coupled with the narrowing of multiple rates, has been noted by the European Bank for Reconstruction and Development as part of a broader attempt to stabilise prices.

By contrast, a statutory capital-controls law has still not been enacted, as it will significantly prevent preferential treatment to certain powerful depositors who might be able to transfer funds outside Lebanon, while most of the population cannot access their deposits. Instead, the authorities have relied on ad-hoc central-bank circulars such as Basic Circular 169 sent out in July 2025 to ration transfers and withdrawals. This approach leaves legal uncertainty in place and falls short of the IMF’s call for formal controls. In short, arbitrage opportunities have narrowed compared to the Sayrafa era, but the legal infrastructure to eliminate them comprehensively is still missing. Another prior action, which is in progress, is the enactment of a bank reconstruction legislation in July 2025. This has created a sophisticated set of tools and a dedicated authority to manage failing banks. But the law will not be implemented until another ‘financial gap’ bill is passed that will decide what shares of the losses will be repaid by banks versus the state. Hence, the legislation is notable for omitting a mechanism for loss allocation that constrains the law’s effectiveness and leaves unresolved conflict over loss distribution.
What Lies Ahead for Lebanon’s IMF Recovery
The remaining prior actions are not just delayed but have hit a wall as they cut into powerful political and financial interests. The approval of a bank restructuring strategy is the central point of contention. The IMF requires the bank to recognise upfront losses of estimated US$70 billion, protect small depositors, and limit taxpayer money, while putting the major burden on the bank shareholders. Lebanese banks, on the other hand, argue that the losses should be borne by the state, citing decades of unsustainable financial policies and corruption. They called certain parts of the IMF draft ‘unlawful’ as it could wipe out shareholder equity, and wealthy depositors could face bail-ins. These changes have been resisted by the banks’ lobby, even branding elements of the IMF draft ‘unlawful’. When the courts sided with the depositors, the Association of Banks staged shutdowns, signalling its influence over the pace of reforms. Furthermore, the initiation of an externally assisted bank-by-bank evaluation remains pending as the international firms are reportedly reluctant to work in Lebanon, given its reputation. Similarly, the Cabinet has been unable to approve a credible medium-term fiscal and debt restructuring strategy. This inaction signals a continued focus on short-term crisis management over the long-term structural reforms needed to restore debt sustainability and regain the confidence of international markets.

Lebanon's selective implementation of IMF reforms reveals that the economic stalemate is not a result of state incapacity, but rather of a structural paralysis, driven by political and financial interests. The political establishment has demonstrated a capacity to pass complex legislation but has left these frameworks ambiguous. A path to recovery will require a fundamental shift in the incentive structures that currently favour the continuation of the status quo.



Samriddhi Vij is an Associate Fellow, Geopolitics at the Observer Research Foundation- Middle East.

### UAE’s Talent Paradox: Job Trends, Skill Mismatches and AI’s Impact

The United Arab Emirates (UAE) is an economy defined by ambition. Its growth story is inextricably linked to world-class human capital that is enabling the UAE to spearhead global initiatives in Artificial Intelligence (AI) and sustainable energy to cement its status as a premier hub for finance and tourism. However, in a region undergoing rapid transformation, how can we move beyond broad narratives to truly understand the nuances of labour demand?
To answer this, the authors’ conducted a novel analysis that provided an initial, yet highly detailed, snapshot of the UAE’s formal labour market. This was based on proprietary, in-house research developed by the Egyptian Center for Economic Studies over two years, representing the first phase of an ongoing research initiative. Drawing on a high-frequency dataset of 23,739 unique online job postings from June and July 2025 that was  collated and classified using an AI-driven ISCO-08 methodology.
The data reveals a story not of a single, monolithic economy, but of a complex, dual-engine system grappling with a significant talent paradox. An economy that carries a simultaneous thirst for both high-end strategic talent and vast numbers of service-oriented professionals, with critical frictions appearing at both ends. This analysis maps the labour demand landscape and identifies the precise pressure points where talent shortages and mismatches occur, laying the essential groundwork for understanding the impending impact of AI.

The Anatomy of Demand: A High-Skill, Hyper-Centralised Engine
Three macro trends immediately stand out, painting a picture of a sophisticated and geographically concentrated market.
First, the UAE's economic activity is extraordinarily centralised. Accounting for a staggering 70 percent of all job postings, Dubai is the undisputed epicenter of demand, according to The Distribution of Jobs Across Emirates chart. Abu Dhabi follows at a distant 24 percent. Together, these two emirates account for nearly 94 percent of the country's advertised formal job openings, underscoring their immense economic gravity and the national challenge of fostering diversified growth opportunities.
Second, this is overwhelmingly a market for high-skilled professionals. The Distribution of Jobs by Category chart shows that Professionals (38.5 percent) and Managers (29 percent) together constitute over two-thirds of the overall demand. In stark contrast, elementary occupations make up just 2.5 percent of listings. This distribution is the hallmark of a mature, knowledge-based economy where value is created through expertise and strategy, rather than primary production or basic labour.

Source: Author's analysis of 23,739 job postings collected in June and July 2025.
Third, the top hiring sectors reveal the UAE's dual economic engine in action. The Top 20 Hiring Sectors chart shows hospitality sector leading significantly with over 1,500 postings, confirming its role as a foundational pillar of the economy. Yet, hot on its heels are IT services and IT consulting (919), staffing and recruiting (721), software development (666), and financial services (599). This data confirms that the UAE is not simply an economy of tourism and real estate; it is a dynamic ecosystem where digital transformation, financial innovation, and the strategic management of human capital are paramount.

Source: Author's analysis of 23,739 job postings collected in June and July 2025.

Frictions and Mismatches: Where the Market Strains
While the big picture points to a robust, high-skill economy, a deeper dive into hiring efficiency uncovers significant frictions—the grit in the gears of the recruitment machine. These frictions reveal where skills are scarcest and where the market is signalling a critical need.
One of the most surprising findings is the striking persistence of traditional work models. In a world still echoing with the rhetoric of remote work, nearly 90 percent of jobs in the UAE are explicitly on-site, as seen in the Job Distribution by Work Type chart. This resistance to remote and hybrid models, especially in a hyper-modern economy, raises profound questions. While partially driven by the hands-on nature of the dominant hospitality sector, it may also signal a managerial culture that values physical presence. This creates g a potential misalignment with the expectations of global talent that is seeking flexibility.
The sharpest  insights, however, come from analysing hiring efficiency. A substantial 26 percent of all job postings are reposted, indicating that companies failed to find a suitable candidate the first time around. This represents a significant hidden cost in time and resources. Cross-referencing with applicant data brings the talent paradox into sharp focus.

Source: Author's analysis of 23,739 job postings collected in June and July 2025.
The problem is not a simple lack of people, but a mismatch of profiles, as the Percentage of Reposted Jobs and Average Applicants per Job Post by Category chart shows.


 	High-Level Scarcity:  Job posts receive a high volume of 31 applicants on average, yet suffer a 19 percent repost rate, as per the data by the Clerical Support Workers category. A review of job descriptions reveals these are not generic administrative roles, but overwhelmingly front-line hospitality positions such as front office agents, receptionists, and guest relations trainees. While many people can apply for a “clerical” job, few possess the specific blend of a hospitality degree, strong interpersonal skills, a customer-first mindset, and often, specific language proficiencies (such as German or Russian) that luxury brands demand. The market is saturated with applicants, but starved of the right talent profile.
 	Strategic Bottlenecks: The most striking bottleneck emerges at the operational base. Postings for “Refuse Workers and Other Elementary Workers” face an astonishing 61 percent repost rate, despite being inundated with an average of 47 applications per post. The friction here is not a "viability gap" but a profound profile mismatch. The jobs are not municipal labour but front-line roles like “Lobby Host,” “Bellman,” and “Runner” in the ultra-luxury hospitality sector. The formal requirements are basic (high-school diploma), but the implicit requirements are exceptionally high, such as fluency in English, impeccable personal presentation, and the sophisticated soft skills needed to be the face of a global luxury brand. Employers are seeking the polish of a service professional for the tasks of an elementary worker, creating a needle-in-a-haystack recruitment problem.


Source: Author's analysis of 23,739 job postings collected in June and July 2025.

Posing the AI Question: From Diagnosis to Foresight
This high-level overview of the UAE's labour demand serves as a vital baseline for the ultimate question: How will AI reshape this landscape? The specific patterns of friction identified allow us to move beyond generic predictions and formulate precise, data-driven hypotheses about AI's role in augmentation, disruption, and insulation of the labour market.


 	Amplifying High-Value Expertise - The significant demand for professionals (38.5 percent) and managers (29 percent) points to a clear need for high-level strategic and technical skills. These roles are prime candidates for AI-driven augmentation. If the market struggles to source enough top-tier strategists and analysts, AI tools can amplify the capabilities of the existing ones, enabling the next generation of leadership to leverage AI for decision-making, financial modelling, and complex project management.
 	Automating the Front Desk - The high repost rate (19 percent) and profile mismatch for customer-facing clerical support roles create a powerful economic incentive for AI-driven disruption. The market's inefficiency in finding the right human profile accelerates the business case for automation. AI-powered chatbots, intelligent voice response (IVR) systems, and automated check-in/out kiosks are direct solutions to this clearly identified market pain point.
 	The Irreplaceable Human Touch - According to our data, the roles with the most extreme hiring friction—the front-line elementary worker"positions in luxury hospitality (with 61 percent repost rate)—are paradoxically the mostinsulated from AI. The very quality that makes them so difficult to hire for is what protects them, which is the uniquely human ability to provide high-touch, empathetic, and physically present service. AI cannot yet replicate the warm, intuitive behaviourof a lobby host. The “polish” the market demands is precisely what AI cannot (yet) provide, making these roles a critical bastion of human-centric service.

By moving from a high-level overview to a granular analysis of market frictions, the authors have laid the groundwork for a more nuanced understanding of AI's impending impact. This is where the next phase of the analysis—quantifying the AI impact through a purpose-built AI Index—will be especially valuable.
The UAE's labour market is not waiting passively; it is actively signalling its needs, shortages, and vulnerabilities. The challenge now is to listen to these signals and build the policies, educational pathways, and corporate strategies that will allow the nation to not just navigate the AI revolution, but to lead it.
A Note on the Data: This analysis is part of an ongoing research endeavour. The insights presented in this article are based on a preliminary dataset of 23,739 job postings collected from LinkedIn, Gulf Talent, Dubizzle, and Bayt during June–July 2025 using a proprietary methodology developed by the Egyptian Center for Economic Studies.




Ahmed Dawoud is an Economist and the Head of the Data Analytics Unit at the Egyptian Center for Economic Studies (ECES).

Ahmed Wael Ahmed Habashy is an AI Engineer at the Egyptian Center for Economic Studies (ECES), specialising in the development of intelligent systems for labour market and economic analysis.

### Too Hot to Sustain: Confronting the Gulf’s Extreme Heat

Although the Gulf is accustomed to extreme summer heat, projected temperature increases, especially in rapidly urbanising centres, threaten livelihoods, economic growth, and infrastructure. To secure long-term prosperity, the Gulf Cooperation Council (GCC) must implement heat resilience strategies encompassing emergency preparedness, energy efficiency, and sustainable urban design.

Gulf’s Economy Threatened by Rising Temperatures
2024 was the hottest year on record globally, with 2025 trailing closely behind. InAugust, temperatures in the United Arab Emirates (UAE) reached up to 51.8°C, one degree higher than last year’s 50.8°C. The Middle East and North Africa (MENA) region is warming at a pace double the global average, and experts predict it may become partially uninhabitable by the end of the century. The Gulf’s urban population is expected to increase to 90 percent by 2050. As heat intensifies due to the Urban Heat Island (UHI) effect and coastal humidity, climate adaptation becomes paramount. Given the region’s ambitious urbanisation and economic diversification objectives, the Gulf has a public health and socioeconomic imperative to protect its people from extreme heat. This article evaluates the GCC’s existing heat resilience efforts and proposes recommendations to strengthen a concerted and adaptive heat response.

Health and Socioeconomic Costs of Extreme Heat 
Climate-induced extreme heat is closely linked to health problems such as heat stroke and exacerbated chronic illnesses. Additionally, heat waves will further impair the health of vulnerable populations such as migrant labourers, straining emergency clinics and profoundly affecting the Gulf’s labour productivity and overall economy. The GCC region could potentially lose up to 369,200 full-time jobs by 2030 due to extreme heat, while MENA could lose up to 14 percent of total GDP without climate action. As diversification objectives prioritise tourism, hotter temperatures may discourage tourists, thus compromising job security for gig economy and service industry workers. To illustrate, Mecca is estimated to experience 182 days of dangerous heat by 2050, exposing millions on Hajj to potential heat-induced illness.
Increased demand for cooling during heat waves destabilises electricity grids, strains limited water resources, and worsens the UHI effect. Air conditioning currently accounts for up to 70 percent of household electricity in the GCC. There are limited government incentives to reduce electricity demands, partly due to the abundance of fossil fuel resources that make large amounts of electricity consumption affordable. The Gulf’s growing data centre footprint brings the challenge of managing the surge in heat generation and water consumption for cooling, especially during summer. Breaking this cycle requires policy approaches that promote energy-efficient systems and shift consumer behaviour.

Regional Initiatives Towards Heat Resilience
In February 2025, the Sixth Arab Regional Platform for Disaster Risk Reduction held a special session on extreme heat, reaffirming regional commitment to strengthening heat resilience. The UAE became the first among the six GCC member states to ratify the Kigali Amendment, signalling commitments to sustainable cooling. The Arab states have improved in building heat wave awareness and enforcing worker protection measures. For example, the GCC demonstrated a three-fold increase in Multi-Hazard Early Warning Systems (MHEWS) reporting since 2015. Moreover, every GCC member has regulated outdoor working hours to protect workers from peak heat. The UAE, Qatar, Bahrain, and Oman have also implemented, respectively, the Heat Exhaustion and Disease Prevention Campaign, the Heat Stress Awareness Campaign, the Heat Action Day, and the SafeSummer campaign to strengthen workplace safety and mitigate heat-induced illnesses.
Despite progress, gaps remain. A few existing disaster management systems are largely reactive and do not address the root causes of extreme heat. Few policies focus on emergency preparedness and long-term adaptation. At 5 percent, the Arab states have the lowest proportion of comprehensive MHEWS. Even the regulation of outdoor working hours can be strengthened, given prior criticisms due to inconclusive data on effectiveness despite high compliance levels.

Policy Recommendations 
As the GCC diversifies through tourism, urbanisation, and digital expansion, states should prioritise building comprehensive heat-resilience agendas in tandem with anticipatory National Heat-Health Action Plans (HHAP) and adaptive National Cooling Action Plans (NCAP). Within these plans, states should further the enabling environment for public-private innovation, incentivise collaboration, and reform regulatory frameworks to adapt to extreme heat. This will improve public health, economic savings, and energy cost reductions.


 	Anticipate and Respond: Leverage partnerships and technologies to develop tools for heat management 

Heat Health Warning Systems (HHWS) and HHAPs are key tools to inform decision-making for emergency preparedness and prevent heat-induced illnesses. HHWS leverage climate forecasts and predetermined heat stress threshold levels to alert communities and inform health interventions. This helps reduce heat-related incidents, improve community awareness, and prevent overburdening of healthcare systems. HHAPs helped Europe avert up to 23 percent of expected heat-related deaths. Although these platforms are historic to the West, they are fairly nascent in the Gulf, with Abu Dhabi developing an official heat-stress index and national HHWS. Gulf countries can leverage insights from similarly heat-struck countries, just like Saudi Arabia’s collaboration with Singapore’s Heat Resilience and Performance Centre. Their efforts centre around formulating policy and regulatory frameworks along with interventions related to occupational heat exposure. Moreover, GCC can seek guidance to build a solid HHAP from key actors like the Global Center on Adaptation (GCA) or Atlantic Council's Climate Resilience Center (Arsht-Rock).
Given artificial intelligence advancements, urban planners and municipalities can use new technologies to enhance heat vulnerability mapping and emergency preparedness. For example, researchers at MBZUAI and IBM in the UAE are examining AI-powered solutions to detect UHI. In Dubai, industrial companies are adopting thermal sensors to adapt worker schedules to evolving temperature conditions. Similarly, prior to Hajj, Saudi Arabia leveraged smart monitoring systems, including AI-powered drones to monitor crowd flow and sensor-enabled roads to reduce heat. Beyond predictive analytics, the broader Hajj emergency response system successfully liaised between key personnel to strategise medical responses. This case demonstrates an adaptive system that balances technology and stakeholder coordination with the potential to be scaled and embedded within a comprehensive national HHAP. While leveraging AI and advanced technologies aligns with the Gulf’s respective Vision plans, governments should formulate policies of good practice, further incentives and subsidies to scale integration.


 	Adapt Long-Term: Emphasise energy-efficient cooling and passive urban design within National Cooling Action Plans (NCAPs) and urban planning guidelines

While HHAP helps anticipate and inform heat response, National Cooling Action Plans (NCAPs) advise sustainable cooling strategies for long-term adaptation. The GCC should establish an energy-efficient cooling policy framework that prioritises retrofitting for older buildings and district cooling (DC) for new developments, eventually building towards comprehensive NCAPs.
Retrofitting consists of the modernisation and integration of smart controls within existing HVAC systems that regulate indoor temperatures, minimising electricity consumption by up to 50 percent. In Gulf countries such as Kuwait, where electricity is heavily subsidised, homeowners may be dissuaded from pursuing energy-efficient upgrades due to their high cost. The UAE and Saudi Arabia have started programmes incentivising AC upgrades, but retrofitting remains largely underutilised, pointing to a need for financing incentives such as mandatory energy audits, tax credits, and rebate programmes.
District Cooling (DC) systems deliver centralised cooling to multiple buildings, offering energy efficiency and cost savings of at least 40 percent over conventional cooling. Currently, Saudi Arabia, Qatar, and the UAE have invested heavily in DC systems, but lack clear policy frameworks for further technology development. Oman, Bahrain, and Kuwait have also piloted DC but encounter scaling challenges due to high installation and operational costs. Solutions include urging governments to treat DC as a utility, regulate tariffs, and set clear technical codes. Nevertheless, project finance remains a looming issue, as banks are hesitant to extend long-term debt without promised offtake agreements.
Long-term adaptation to extreme heat requires climate-sensitive urban planning that mitigates the UHI effect. The Gulf Organisation for Research & Development (GORD) recently unveiled the GCC’s first Sustainable Construction Code, which promotes locally-rooted design standards prioritising energy and water efficiency. This builds upon Oman’s National Urban Design Guidelines and the UAE’s Plan Abu Dhabi 2030, which highlight passive cooling techniques such as strategic shading, double glazing, wind towers, and thermal massing that naturally reduce indoor temperatures and residential energy consumption by over 20 percent. Urban greening initiatives such as neighbourhood afforestation and green roofs also help reduce heat absorption, but need to be cautiously implemented to avoid straining limited water resources. Ensuring the success of new regional guidelines will require incentives, monitoring, and enforcement.



Leigh Mante is a Junior Fellow, Climate and Energy at ORF Middle East.

### Integrating the EU’s hinterland through IMEC

Stretching over 6,400 km, from the Indo-Pacific to the Mediterranean, the India–Middle East–Europe Economic Corridor (IMEC) is an ambitious intercontinental connectivity project. Its eight signatories include the European Union (EU), Germany, France, Italy, India, Saudi Arabia, the United Arab Emirates (UAE), and the United States (US)—from three continents. In addition, without being an official signatory, Jordan, Israel, Greece, and Oman[1] are also affiliated with the project due to their geographic location along the route. Other countries are equally interested in getting involved, like Egypt and Cyprus.
While IMEC’s geographic footprint provides an overview of the Corridor’s spatial layout, it does not capture its full scope and impact potential. IMEC is not merely an infrastructure project but a geostrategic concept[2]. This unique strategic character stems from the global geopolitical and economic context of the project’s inception in September 2023, announced on the sidelines of the G20 Summit in New Delhi, India. This era is marked by inter-state tensions and subsequent geoeconomic competition, leading to the increased instrumentalisation of trade schemes and supply chain dependencies. Recognising this challenge as well as the project’s growth prospects, IMEC has become both a geostrategic concept and tool. As such, it materialises through the establishment of structural interconnections between trusted economic partners in order to secure and diversify global value chains and remain competitive. Its competitiveness also lies in the development of infrastructures that can facilitate the energy and digital transitions of the parties involved, as the green transition and the emergence of cutting-edge technologies restructure production schemes.
As a consequence of these geostrategic and geoeconomic objectives, IMEC has been conceived as a multi-modal project with several complementary dimensions aimed at enhancing and facilitating both physical and digital connectivity. Therefore, the project’s implementation encompasses the construction and integration of maritime and land-based infrastructure, green hydrogen pipelines, electricity grids and data cables. Building on this rationale, IMEC is not merely a single linear commercial pathway between continents, but a network of strategic corridors[3] designed to create a web of resilient and diversified supply chains across different geographies.

Beyond Maritime and Land-Based Entry Points: Strategic Routes to the Hinterland
IMEC’s network character and its potential to serve as a structure for strategic interconnections are underpinned by its predicted integration into existing or under-deployment transport corridors. The latter would entail that the connectivity project’s scope and outreach are more extensive than the strictly delimited geographic area of its trajectory. As such, the maritime entry points could serve as strategic gateways to connectivity networks towards the hinterlands of different regions. One notable example might be the connection of multiple economic hubs within the EU’s territory, located at a considerable distance from the original pathway, to the Corridor’s ecosystem[4]. This would also allow landlocked countries without direct maritime access to the Mediterranean to benefit from the corridor’s economic dynamics and commercial flows.
For instance, connecting the Corridor’s Mediterranean segment with the planned Trans-European Transport Network (TEN-T)[5]—expected to be deployed in three phases with a core (by 2030), an extended (by 2040) and a comprehensive (by 2050) network component—can scale up the project’s connectivity potential. TEN-T’s logic strongly correlates with IMEC’s as it is also conceived as a “multimodal, and high-quality transport infrastructure”, but with a merely European scope. TEN-T “comprises railways, inland waterways, short sea shipping routes and roads linking urban nodes, maritime and inland ports, airports and terminals”. The integration of these two cross-border connectivity ecosystems—subject to infrastructural adequacy and regulatory— facilitates and accelerates commercial exchanges from the Indo-Pacific to the Euro-Atlantic economic zones, throughout the EU’s hinterland.
Multiple ports have the potential to link IMEC’s Mediterranean segment to the EU’s inner regions and become the Union’s southern gateways, such as Marseille (France), Piraeus (Greece) and Trieste (Italy). Each port offers strategic advantages considering its specific geographic location and proximity to different EU regions and maritime areas. Considering its substantial weight within the European industrial and manufacturing sectors, a region that’s integration into the corridor’s ecosystem might be of particular importance is Central and Eastern Europe (CEE). With the integration of the majority of the CEE countries into the European Union in the early 2000s and 2010s, this region has become an essential economic centre and “the industrial heartland of Europe[6]”. From this perspective, Trieste, the “northernmost harbour of the Mediterranean Sea”, could become a strategic IMEC gateway for the CEE region. As Italy’s IMEC Special Envoy, Ambassador Francesco Talò highlighted, this port has traditionally been “the harbour of Central and Eastern European countries”, as the closest Mediterranean access to their production centres.
Trieste is a connectivity hub; it is located “at the intersection between shipping routes and the Baltic-Adriatic and Mediterranean TEN-T core network corridors”. It has railway connections to the manufacturing and industrial areas of North-East Italy and Central Europe”. Thus, recognising Triest’s geostrategic and geoeconomic assets and leveraging the port as IMEC’s sub-regional gateway to Central and Eastern Europe can contribute to the development of a more extensive web of multi-regional supply chains and commercial pathways. The latter could extend from the Baltic-Black-Adriatic seas triangle to the Indo-Pacific. Yet, following the logic of access complementarity and diversification, it is worth noting that an IMEC “label” to Triest does not exclude other European harbours from playing the role of sub-regional gateways to other parts of the EU. The effective integration of these ports into the IMEC network will be subject to the economic and financial opportunities the business community sees in these maritime connectivity hubs.

“Team Europe” approach: Leveraging the EU’s potential
Engagement with the private sector to attract and mobilise capital for the development and operationalisation of IMEC’s infrastructure can be facilitated through the Team Europe approach. As defined by the European Commission, the EU and its member states are “joining forces so that our joint external action becomes more than the sum of its parts. By working together and pooling our resources and expertise, we deliver more effectiveness and greater impact”. Considering that the EU itself is a party to IMEC, it can legitimately engage in the project’s implementation with its Member States through a coordinated, joined-up approach. This would allow the European Union as a whole, with its countries, to leverage its economic power of being a single market of over 450 million consumers to attract investments at scale. Accordingly, a first coordination meeting was organised in July 2025 between the EU Directorate-Generals (DGs) overseeing IMEC’s implementation (the DG for the Middle East, North Africa and the Gulf as well as the DG for International Partnerships) and the representatives of the three signatory Member States (Germany, France and Italy). Based on this initial discussion, the engagement with the private sector and the undertaking of feasibility studies have been identified by the parties as shared priorities.
Stemming from this coordinated approach to advance IMEC’s development, the Team Europe setup carries both practical and symbolic importance. It demonstrates to the public and private sector, both within and outside of the Union, that the implementation of IMEC’s European leg is being managed within the EU in a structured and harmonised way. This approach bears the promise of making IMEC the external component and up-scaled extension of the EU’s internal connectivity ecosystem.

Conclusion
The IMEC holds the potential to have an impact extending beyond the scope of its designated geographic trajectory. As the project is multi-dimensional in nature and favours a network structure, even countries that are not part of the core signatories could, in some way, be connected to its ecosystem. For instance, connections between IMEC’s regional entry points and these regions’ hinterlands can be established through dedicated infrastructure hubs, serving as strategic gateways.
Within the EU’s territory, multiple ports are well-positioned to serve this purpose by linking sub-regions to the Corridor. Among them, Trieste is the closest to the majority of the EU’s main industrial and manufacturing centres located in Central and Eastern Europe. Capitalising on Trieste’s strategic location as a hub for external maritime trade and intra-European transport networks, the EU has high potential to integrate significant parts of its production capacity into a multi-regional commercial network. Other European Maritime access points, like Marseille or Piraeus, could unlock additional connectivity opportunities towards different parts of the EU’s hinterland and distant maritime areas. Such a multi-access structure, based on complementarity, could contribute to IMEC’s underlying objective to diversify and secure supply chains and commercial pathways.
To effectively integrate the relevant ports into the Corridor’s ecosystem, the project needs to benefit both from the parties’ political engagement and the business community’s investments. Consequently, private sector engagement has been identified as a priority for the Team Europe structure, bringing together—at this stage—the European Commission and the representatives of the IMEC signatory EU member states. This setup, which promotes a coordinated approach among the European counterparts to the Corridor’s implementation, creates renewed impetus for IMEC’s European leg. The latter is a connectivity segment that could link the Indo-Pacific to the Euro-Atlantic economic zones, throughout the EU’s hinterland. However, this project can only materialise if engagement is sustained and withstands geopolitical hurdles.



Eszter Karacsony is an Associate Fellow and Program Lead in Geopolitics at Observer Research Foundation (ORF) Middle East.



[1] Translated from French to English by the author.
[2] Diplomatic source.
[3] Diplomatic source.
[4] Diplomatic source.
[5] Diplomatic source.
[6] Translated from French to English by the author.

### Harnessing Civilian Nuclear Energy Using a Cooperative Framework

Civilian nuclear energy is at an inflection point globally, and considering its potential, it could offer a platform upon which countries may forge sustainable sinews of relatively lasting cooperation. 
Iterations of international collaborative frameworks, such as the coming together of France, India, the United States (US), and the United Arab Emirates (UAE), may be envisaged to explore cooperation in the field of civilian nuclear energy and commerce relating to it. The choice of the four countries for this particular collaborative pursuit is based on two broad considerations.  First, the recent commitments in the field of civil nuclear energy cooperation through agreements/declarations between these countries (Figure 1.)
Figure 1: Recent Declarations Regarding Civil Nuclear Energy Cooperation




Partnership
Action points


France-India


 	Joint development of Small Modular Reactor (SMRs) and Advanced Modular Reactor (AMRs)
 	Training and education of nuclear professionals




France-UAE


 	Exploring future opportunities in advanced reactor technologies.
 	Cooperation in the development of small modular reactors (SMRs)
 	Coordination in the sourcing and management of nuclear fuel
 	Creation of an AI campus powered by nuclear energy




France-US


 	Coordination to bring nuclear energy projects into the basket of funding of international financial institutions and regional development banks in their energy lending policies
 	Cooperation in R&D for advanced civilian nuclear technology, including but not restricted to next-generation reactors




India-US


 	Cooperation in the sharing of unclassified SMR technology to 3 Indian firms.
 	Sharing of technology in advanced Pressurised Water Reactors (PWRs)
 	Jointly manufacture SMRs
 	Co-produce all the components and parts of SMRs jointly
 	Establishment of bilateral arrangements that would help materialise the amendments made to CLNDA to facilitate collaboration, production and deployment of nuclear reactors




India-UAE


 	Indian nuclear engineers to be involved in the operation and maintenance of the Barakah Nuclear Plant
 	Supply-chain development
 	Human resource development
 	Nuclear consulting




UAE-US


 	Share access to advanced US nuclear technologies under stringent supervision
 	Evaluate the potential for deployment of SMRs
 	Explore the potential expansion of nuclear energy R&D




France-India-UAE Trilateral
The three partners remain committed to research and implementation in the field of nuclear energy projects



Second, the form commends itself by three specific attributes that are common to all four actors:


 	Value of Nuclear Energy to Data Centres

A significant part of nuclear energy’s appeal to these four countries stems from its ability to serve as a reliable baseload option for powering data centres. Electricity demand from data centres is expected to double to 945 terrawatt-hour (TWh) by 2030. Given their structural form, data centres cannot afford intermittency in their energy source. If achieving generative AI leadership is a national priority, then integrating a scalable, low-emission, grid-scale energy source becomes essential. Nuclear energy, relative to all other forms of energy, has the highest capacity factor by source. It is a characteristic that substantially enhances the reliability index of the form and effects a more seamless integration into electrical grids. The co-location of data centres and generation of nuclear energy, a model endorsed by President Trump, could serve as a useful template. By their design and connectivity, SMRs also commend themselves to the kind of plug-and-play technology which can underwrite the requirements of AI.


 	Nuclear commerce

The development of a nuclear value-chain that is both robust and scalable is imperative if the COP28 commitment—facilitated by the World Nuclear Symposium and the Emirates Nuclear Energy Corporation in 2023—to triple global nuclear capacity by 2050 is to be realised.. A meaningful step in this direction was the private sector’s commitment to the Large Energy Users Pledge signed by 14 global companies, including several hyperscalers, and facilitated by the World Nuclear Association, the Net Zero Nuclear Initiative and the Urenco Group. The group is now committed to the cause of tripling nuclear capacity alongside 31 countries, 14 global financial institutions. and nearly 140 nuclear industry companies. All of the listed countries and their private sectors have signed up to these pledges and begun investing to meet the commitments made under them.


 	Energy transition goals

The value of nuclear energy as a source of fuel with lower emissions also commends it to the long-term energy transition goals that at least three of these four countries, viz., India, France, UAE, remain committed to presently. Due to its ability to offset intermittency, nuclear energy is also uniquely suited to the needs of these countries keen on expanding their renewables portfolio, including the production of hydrogen, which could prove revolutionary in transportation and industrialisation.
Adding South Korea?
South Korea is among the foremost in global nuclear energy project execution and delivery timelines. Its potential share in the deployment of civilian nuclear energy, specifically in the SMRs domain, in South East Asia could be significant. Despite its established reliability in the domestic nuclear programmes of both India and the UAE, as well as its ongoing cooperation with Washington and Paris on non-proliferation and safety protocols, Seoul’s inclusion in a broader nuclear partnership remains complex. Seoul directly competes with Paris in terms of experience and execution, and Washington DC in terms of technology. The recently concluded agreement between South Korea and the Czech Republic regarding the export of nuclear reactors, for instance, could further aggravate competition with France, as it could act as a precursor to Seoul expanding its exports in the field to other European countries, a region widely recognised as France’s backyard. It is a pattern that could be repeated often, given the similarities in South Korea’s strengths in the domain and those of the US and France.

Verticals of cooperation 

 	Expediting design standardisation 

The common practice of heterogeneity in a country’s nuclear portfolio, where multiple variations of nuclear reactors are simultaneously operational, makes it difficult to generate cost gains from economies of scale. A recently published authoritative study on the Chinese experience in addressing the cost-escalation curve demonstrates the value of both design standardisation as well as indigenisation of production and manufacture of nuclear reactors and the establishment of nuclear plants. Yet, the customisation that its modularity feature allows is an essential part of the value proposition of SMRs. This allows countries to adopt SMRs in the format that best suits their specific requirements as well as limitations. However, internationally, more than 70 SMR designs are presently under consideration. This multiplicity significantly raises the costs associated with the deployment of the technology, and can wholly negate any cost benefits that are expected to be generated. Coordinating R&D in the domain to help achieve design standardisation for domestic adoption and global deployment could serve as the first pillar of this cooperative framework between these countries.


 	Collaborating to create regulatory frameworks

Compatible views on the nature and import of non-proliferation, reprocessing of spent fuel and conversion capabilities would make collaborating on the creation of regulatory frameworks viable between these partners. The four countries could collectively coordinate with the International Atomic Energy Agency to create regulatory standardisation and stability in the domain of SMR technology. The technical and regulatory complexities related to SMRs, as with any nuclear energy format, further compound the risk assessments of these projects. Building enough leverage to participate in formulating the regulatory framework would aid in propelling the domestic SMR industries of these countries, with a head start in compliance.


 	Funding 

Despite the anticipated cost overlays in the case of SMRs being lesser than those of large nuclear, regulatory complexities and absence of design standardisation increase the risk calculus of investing in these projects. The recent willingness of the World Bank to fund R&D and deployment of SMRs could be capitalised on through the creation of a consortium from among these countries aimed at providing soft loans that could underwrite viability gap funding in the sector.
A significant development which can change the calculus for the industry, in general, and nuclear commerce surrounding SMRs, in particular, is the ending of the ban on funding of nuclear energy projects by the World Bank, announced in June 2025. The World Bank’s participation, given its commitments to enhancing global energy access and alleviation energy poverty, could directly translate into having other financial organisations being amenable to underwriting the capex-intensive SMR projects.


 	Export of technology and human resource mobility

The transfer, export, and adoption of existing technology have, at large, facilitated the experience of both France and China in addressing the cost escalation inherent in nuclear projects. It is a model that could be used to generate viable and cost-effective pathways for the deployment of SMRs internationally, too. The Initiative on Critical and Emerging Technology (iCET) framework for Indo-US high-tech cooperation could serve as a useful template if it were to be adapted to the pursuit of nuclear-clean energy cooperation between these partner countries.
The harnessing of nuclear energy directly addresses both imperatives and aspirations associated with energy security, as well as economic growth and decarbonisation targets of these four countries. Integrating nuclear commerce with these pursuits could be a significant value-addition, enabling strategic leverage for them as a grouping, too.



Cauvery Ganapathy is Non-Resident Fellow, ORF Middle East.

### Leveraging Nuclear Energy Through Small Modular Reactors

Civilian nuclear energy carries the potential to deliver on the two critical national pursuits of energy security and economic prosperity. This is premised on two sets of considerations: first, the impact an effective deployment of nuclear energy can have on a country’s energy security and its attendant strategic calculus; second, the value inherent in the enormous economic potential of nuclear commerce. This commentary highlights the value of nuclear energy, while considering the potential of Small Modular Reactors (SMRs) as a more compelling variation and proffers that international cooperation in nuclear commerce could emerge as an area of abiding strategic partnership between countries.

Nuclear energy must be part of the solution
The International Energy Agency (IEA) makes a compelling case for including nuclear energy as an integral part of the solution for countries seeking dispatchable baseload options and solutions to their energy trilemma.
Nuclear energy forms an important part of the consortium of options capable of ushering in deep decarbonisation of the electricity sector. It also makes consequential contributions as a supplemental option in the industrial sector. Furthermore, it contributes at various levels to nearly all indices associated with global energy transition goals and the Sustainable Development Goals (SDGs). On a Levelized Cost of Energy (LCOE) metric, nuclear energy fares well with its characteristic of providing reliable grid-scale, low-carbon electricity. The Value Adjusted Levelized Cost of Energy (VLCOE) is even lower than solar plants, attributable in large measure to the typical life span of nuclear plants being close to 80-100 years as compared to the 25-30 year spans of solar energy installations. An important caveat here is that improvements in battery technology and storage options could alter the dynamics of cost-comparisons further in favour of renewables when compared with nuclear. Successful harmonisation with nuclear energy addresses both intermittency factors and unnecessary disruptions involved in decarbonisation and energy transitions.
Table. 1 : Countries considering adding nuclear power to their energy mix




Albania
Serbia
Croatia
Bangladesh
Sri Lanka


Norway
Poland
Estonia
Uzbekistan
Indonesia


Latvia
Lithuania
Ireland
Philippines
Vietnam


Türkiye
Saudi Arabia
Qatar
Thailand
Laos


Kuwait
Iraq
Yemen
Cambodia
Malaysia


Israel
Syria
Jordan
Singapore
Myanmar


Egypt
Tunisia
Libya
Australia
North Korea


Algeria
Morocco
Sudan
Nigeria
Paraguay


Zambia
Namibia
Rwanda
Tanzania
Mongolia


Ethiopia
Cuba
Chile
Kazakhstan
Georgia


Ecuador
Venezuela
Bolivia
Peru
Azerbaijan


Ghana
Senegal
Kenya
Uganda
-



Based on World Nuclear Association data, 2024-25

Issues with large nuclear reactors 
While countries such as France draw 70 percent of their energy requirements and enviable energy self-sufficiency from nuclear energy, there are limitations and concerns inherent in the very structure of conventional large-scale nuclear reactors:


 	They demand substantively high capex
 	Large-scale nuclear plants have routinely suffered cost overruns.
 	These projects tend to have very long gestation periods.
 	The management of hazardous waste and effective waste disposal have been consistent concerns.
 	Countries with smaller grids hoping to start on a nuclear power programme face challenges in integrating the scale of the electricity from these plants into the national grids. This has led to countries with large grid capacities alone hosting nuclear power plants.
 	Worrying concentration of uranium mining and reactor production creates substantive supply chain vulnerabilities.
 	Incompatibility with easy customisation and inability to decentralise make large nuclear plants difficult to deploy universally.
 	Land acquisition is a persistent issue with large nuclear facilities, and compounds the externalised and socialised costs associated with the form.

Small Modular Reactors as an Alternative 
Now, nuclear plants are engineered such that increasing the capacity of an existing one makes more fiscal sense than seeking to establish new ones, because through economies of scale, the cost of electricity per unit is brought down. It is, however, an enterprise that involves absorbing the above-listed issues with these plants all over again by bearing the financial, technical, political, and societal opposition risks.
However, Small Modular Reactors (SMRs), which are reactors with a power capacity of 300MW(e)/unit or less, and can be shipped for assembly on site, can address many of the issues plaguing large nuclear plants, and offer an alternative which addresses issues of cost, scalability, modularity and flexibility aimed at need and location, as well as adaptability aimed at grid capacity.


 	SMRs are expected to have smaller cores. This modification directly translates into reducing the amount of radiation if an accident occurs.


 	SMRs have substantially reduced the need for refuelling, which allows for potentially fewer avenues for leakages and accidents in transit and handling of raw materials.


 	SMRs possess the unique benefit of modularity and customisation, which are well-suited to deployment with lesser ancillary demands on the ecosystem, and thereby commend themselves to decentralisation of national energy grids.


 	Subsequently, the modularity of design enhances the speed of installation and assembly, resulting in substantive cost savings.


 	Although disputed by an authoritative study in 2022, the industry projections for SMRs suggest that the amount of waste generated and stored is far less than that of generated by large nuclear plants.


 	SMRs reduce the need for expansive grid capacities, thereby being uniquely well-suited to countries at lower levels of grid sophistication that are seeking nuclear as a viable option.


 	SMRs can prove very useful in contingencies and in the projection and sustenance of maritime force deployment of countries through the superior mobility they can equip nuclear-powered ships and submarines with.

SMRs, however, are nowhere close to being a panacea in the quest for energy security, given that discussions on their potential are founded on a technology which remains largely theoretical and, importantly, is yet to be standardised in an effective and deployable manner. There are currently nearly 72 SMR reactor designs being developed worldwide. The only operational SMR in the world is the Floating Nuclear Power Plant (FNPP) operating in Pevek in Russia since May 2020. The second one is China’s Linglong One, which will be the world’s first commercial land-based SMR, commencing in 2026. India’s reactors— Pressurised Heavy Water Reactors (PHWRs) that have a capacity range between 200-220MW, technically qualify as small reactors, minus the modularity feature. However, the absence of design standardisation has meant that the attendant benefits relating to costs are yet to percolate. 

SMR deployment expediently through international cooperation 
Given its potential and value to both electricity generation and industrial applications aimed at economic growth, the production and deployment of SMRs should be a central element in Global South strategies for countries such as France, the United States, South Korea, India, and the United Arab Emirates (UAE).  These are actors that are poised to face substantially increased energy demand from the data centres and AI machine learning applications that each of them has been focusing on nationally and investing in. By leveraging their comparative advantages, they can play a significant role in the domain of nuclear commerce. This could be by sharing prized SMR technology, which could then be adapted to high-density urban populations and desalination targets, while also coordinating efforts to bridge the financing gap.
The ambition to harness the potential of nuclear energy must recognise the value that both large and small nuclear reactors can bring to the table. Evolving partnerships between countries such as India, France, South Korea, the US and the UAE are actively shaping such an architecture. The varying permutations in the bilateral and trilateral partnerships between these countries offer a useful roadmap. For instance, the Indo-French model for furthering cooperation in the field, based on two models—the traditional large French European Pressurised Reactors, such as those proposed under the long-delayed Jaitapur project and the development and integration of India’s 220MW model of Pressurized Heavy Water Bharat Small Modular Reactor—can provide significant impetus to build on the promise of SMRs and Advanced Modular Reactors (AMRs) while consolidating partnerships in the large nuclear space. Similarly, the Indo-US cooperation in the field consists of three comprehensive verticals, consisting transfer of advanced nuclear technology, facilitation of uranium supply chains and the joint development of SMRs and AMRs. Again, the India-UAE-France trilateral builds on the value of large nuclear plant management and SMR development and deployment.
The substantial costs associated with SMR deployment need to be borne as a strategic imperative. China has already established a significant footprint in the field of reactor production, positioning Beijing to potentially dominate SMR production, once design standardisation is achieved. In the absence of viable alternatives being offered by other countries, this trajectory could eventually prove similar to the Chinese market capture of the EV sector. Such a monopoly could translate into a politico-economic leverage, particularly in the Global South, where energy-intensive industries and pursuits are rapidly expanding.
The proposition for cooperating to deploy SMRs in the Global South is a capital-intensive one with initially low Return-on-Investments (RoIs) and higher gestation periods. Yet, active regional engagement is essential to count internationally. SMR deployment must, then, serve as a strategic imperative in the outreach and engagement that each of these five countries has with the Global South.



Cauvery Ganapathy is Non-Resident Fellow, ORF Middle East.

### Countdown to BRICS 2026: The India-Africa-UAE Trilateral

Back in 2019, India and the United Arab Emirates (UAE) signed a Memorandum of Understanding on development cooperation in Africa. By 2025, the dynamics in geopolitics have shifted, and so has the African countries’ role–from being primarily seen as a recipient of development assistance to an emerging and assertive marketplace for trade, connectivity, and innovation.
This evolution is reflected in bold initiatives such as the Bharat Africa Setu, conceptualised early this year by the Government of India and DP World of the UAE. The Setu will serve as a comprehensive trade ecosystem–anchored in physical infrastructure along with a plethora of value-added services such as export finance, marketing and branding, packaging, logistics, and certification services. The objective is to, more broadly, reinforce South-South economic cooperation, and, more specifically, enhance India-Africa trade via the UAE, leveraging both sea and air connectivity between ports, economic zones and logistics parks operated by DP World in both geographies.

India, Africa, and UAE: Existing Bilateral Ties 
India and the UAE: India and the UAE partnership is one for the books. he countries signed a Comprehensive Economic Partnership Agreement (CEPA) in 2022–a first for both the UAE and the India’s current administration since 2014, with a commitment to increase non-oil trade to US$ 100 billion annually by 2027, already having reached US$57.8 billion (US$85 billion including both oil and non-oil trade) in its second year. The CEPA has unlocked new opportunities in critical sectors such as renewable energy, civil nuclear cooperation, critical minerals, advanced technologies, fintech, aviation, logistics, food security, and space.
The UAE and Africa: The Gulf countries have tremendously expanded their footprint in Africa with over US$100 billion invested in the continent between 2012-2022, according to the African Export-Import Bank. The UAE is leading the pack; the UAE investments in the region have also outpaced those of China, France, and the United Kingdom (UK)–with investments beyond traditional sectors foraying into food parks, agri-tech, fintech, and renewable energy. The UAE is also backing new economic zones in key African states, for instance, the digital incubator ecosystem in Ghana. The UAE’s DP World’s presence in Africa operations includes 10 ports and terminals, three economic zones, 203 warehouses with deeply entrenched freight operations and logistics management, making it a gateway for strong market access.
India and Africa: India has long-standing cultural and historical ties with African countries. However, its current share of trade with the continent remains modest–African countries account for 6 percent of India’s global exports and 5.6 percent of its imports, while India makes up 9.6 percent of Africa’s exports and 7.8 percent of its imports. There is a clear political willingness at the top as well as tremendous economic potential to enhance this bilateral relationship-leveraging India’s exemplary digital stack, an educated talent pool and a shared development ethos that will resonate with Africa. Africa is also on the cusp of a demographic surge–by 2050, more than 60 ppercent of its people will be of working age. In contrast, India’s current demographic dividend is expected to peak around 2041, according to the Economic Survey of India 2018-19. As the labour force begins to shrink in different parts of the world, including India, Africa’s workforce will expand rapidly, becoming younger and more prosperous.

Why the IAU? Why Now? 
However, so far, the equation among the three countries remains heavily anchored in trade cooperation, with its success or failure solely judged by metrics such as trade volume and revenues. This is a very simplistic, myopic and limiting approach given the vast potential of untapped opportunities that the three geographies synergistically can help unlock.
In a rapidly evolving world today, moving beyond trade cooperation will be essential. Innovation will be the decisive factor in staying ahead of the curve and staking claim over ideas, technologies and materials that will dictate the norms of the future.
An institutionalised framework for cooperation among India, Africa, and the UAE (IAU) should, therefore, buttress an innovation economy characterised by the number of technologies co-developed and transferred, joint ventures incorporated, collective research produced, and shared intellectual property registered. Combining India’s tech talent and scale, the UAE’s capital and logistics connectivity, and Africa’s demographic dividend and untapped markets, such a synergistic partnership can be transformational.
The focus of the trilateral should be clear: to strengthen economic cooperation via entrepreneurship and the innovation ecosystem, fostering cooperation and partnerships between businesses, start-ups, entrepreneurs, researchers and academicians. Moreover, the IAU is grounded in its geographical proximity; the Indian Ocean serves as the natural connector among the three geographies, making physical and digital connectivity feasible and cost-effective.
In an era where traditional multilateralism is under fire, plurilateral groupings are presenting undeniable alternatives to strengthen strategic and economic cooperation among like-minded countries. Despite its nascent beginnings, the United Arab Emirates, France and India (UFI) trilateral, announced in 2023, has successfully demonstrated a strong policy signal to both the international diplomatic community and domestic private actors, aligning strategic interests and channelising capital towards indicated priorities and avenues.
A formal trilateral format in the form of an IAU will help surpass the existing fragmented and ad hoc efforts for cooperation among these three countries, bringing the much-needed credibility, continuity and gravitas to a partnership with enormous geo-economic and geopolitical potential.

Pillars of the IAU Trilateral Cooperation 
1. Industrial and Technological Cooperation
Industrial partnerships and technology co-development should be the linchpin driving the Trilateral. By connecting the tech hubs, entrepreneurial ecosystems and boosting business to business ties, the Trilateral can help unlock synergies across sectors, including Agri-tech, supply chain logistics and cold storage solutions; Ed-Tech and AI enabled learning and upskilling modules;  green energy and clean tech including renewables, nuclear, SMRs, green hydrogen and bioenergy; Fintech and digital finance with mobile banking, UPI/RuPay integration; Tourism and heritage commerce; and advanced manufacturing and Industry 4.0 including data centers, robotics, alternative chemistry batteries, critical mineral processing and smart factories. The partnership should encourage joint IP development, sandboxes and open innovation platforms to fast-track technology development, patent filings and tech adoption. Job creation and building local talent pools should be prioritised.
2. Investment and Financing Collaboration
The IAU must be underpinned by a dedicated financial architecture to ensure its success. India’s GIFT City, the UAE’s DIFC and an emerging financial hub – possibly in Lagos, Kigali or Nairobi – should be interlinked to ensure seamless capital flows to induce trade and investment among the three countries. The trilateral should aim to set up a joint fund for capital deployment in key and strategic sectors, particularly for SMEs, startup acceleration and infrastructure co-financing. The Indian government recently committed INR 1 trillion to a fund with the aim of fostering private sector Research, Development, and Innovation (RDI) in the country, which demonstrates political will to finance next-gen technological research. Cross-border integration between national payment platforms and entities in India, the UAE and African nations - connected through India’s UPI infrastructure and the RuPay payment services system - will further ease cross-border capital flows and trade settlements. 
3. Research, Vocational and Academic Partnerships 
In a rapidly evolving labour market, institutional capacities and individual capabilities both have to be upgraded and upskilled. In this context, research collaborations, cross learning efforts, and fellowship exchanges between academic and vocational centres will become crucial. These not only strengthen workforce readiness but also deepen soft diplomacy through meaningful people-to-people connections.
At a time when the world is scrambling for resources and transactional partnerships are on the rise, the India, Africa and UAE trilateral will promise to be both practical and principled – ensuring economic benefits are shared equitably and partnerships are grounded in mutual respect. We are in the so-called Afro-Asian century, where emerging economies should come together to reshape and redefine their development models and forge resilient partnerships and supply chains.
India’s G20 Presidency in 2023 welcomed the African Union into the grouping. Later this year, India will host the BRICS Presidency, joined by new members UAE, Egypt and Ethiopia alongside South Africa. This convergence offers the perfect stage to announce an IAU trilateral on the sidelines of the Summit in 2026, showcasing growing camaraderie and shared commitment to each other and to next-gen innovation–a key priority for the block.



Mannat Jaspal is the Director and Fellow of Climate and Energy, Observer Research Foundation–Middle East

### A Partnership of Paradoxes: Analysing the Latent Potential in Egypt-UAE Trade

The strategic and investment relationship between the United Arab Emirates (UAE) and Egypt has reached unprecedented levels of cooperation, epitomised by recent endeavours like the Ras El Hekma development project. This strategic alignment, however, presents a compelling paradox when juxtaposed with the underlying structure of their bilateral trade. In 2023, bilateral trade approached nearly US$7 billion, with UAE exports to Egypt valued at approximately US$4.5 billion and imports from Egypt at US$2.4 billion, figures that appear surprisingly modest given the combined economic weight of the two countries. While the partnership is a geopolitical and financial cornerstone, its trade dimension is yet to realise a commensurate depth and breadth.

A Trade Relationship of Peaks, Not Plateaus
The data suggests that the bilateral trade relationship is characterised by high-value, concentrated peaks in specific sectors rather than an integrated plateau across the full economic spectrum. For most product categories, the bilateral flow represents only a minor fraction of each nation's total global trade, indicating a level of integration that appears surprisingly modest.
An examination of the UAE’s exports to Egypt underscores this point. Figure 1 illustrates that while certain products have a notable market share, most do not. For instance, exports of ‘Prepared Foods’ to Egypt represent a significant 15.7 percent of the UAE's total global exports in that category. This clear peak demonstrates a strong trade channel. However, for other key goods that the UAE supplies to Egypt, the share is far more modest. For sectors such as ‘Plastic Products’ and ‘Machinery & Appliances’, Egypt as a destination accounts for only 5.3 percent  and 3.5 percent of the UAE’s total exports in those categories, respectively.

A similar pattern emerges when analysing UAE imports from Egypt. Figure 2 shows that Egypt's role as a supplier to the hyper-competitive UAE market is also largely modest. There are notable exceptions where Egypt has carved out a respectable niche. For example, for ‘Prepared Produce’, Egypt supplies a solid 7.8 percent of the UAE's total imports. Similarly, for ‘Misc. Articles’, Egypt's share is 7.7 percent.
However, beyond these peaks, Egypt's market share drops off significantly. In sectors such as ‘Essential Oils & Perfumery’, ‘Tobacco’, and ‘Salt, Sulphur & Stone’, Egypt's share as a supplier to the UAE market dwindles to between 1.2 percent and 1.4 percent. Even in a core strength like ‘Fruit & Nuts’, the data shows Egypt supplies only 4.0 percent of the UAE's total imports.
For a close neighbour and strategic partner, having such a low single-digit market share across so many product lines suggests that proximity and political goodwill have not helped overcome underlying competitiveness challenges. The trade relationship is shallow in its sectoral breadth. It is less a dense, interconnected web of commerce and more a series of distinct, high-volume channels, leaving vast swathes of the economic landscape relatively unconnected. 

The Nature of Unrealised Potential 
This observation of shallow integration corresponds directly with the significant, yet-to-be-realised trade potential that exists for both partners. Analysis indicates Egypt holds 1.5 billion in unrealised export potential to the UAE, while the UAE has an even larger 2.8 billion in untapped potential in the Egyptian market. However, the nature of this potential reveals a critical structural divergence between the two economies.
For the UAE, Graph 1 indicates that the greatest potential lies in expanding its role as a supplier of diverse, value-added industrial goods, yet even here, the relationship is operating well below its ceiling. The data reveals significant untapped potential across its core industrial strengths. The opportunity is most pronounced in sectors like ‘Motor Vehicles & Parts’, with a vast 80 percent of potential unrealised, respectively. 
Graph 1: UAE's Export Potential to Egypt by Product Category

For Egypt, the export profile is marked by a profound and precarious concentration that highlights a critical failure to capitalise on the UAE market. Graph 2  details the specific products driving this potential. The relationship is overwhelmingly defined by a single product: ‘Gold, unwrought, for non-monetary purposes’, where a staggering 98 percent of the export potential is already realised. This success, however, masks varied performance across other products. For example, in fresh produce, Egypt has realised 41 percent of its potential for ‘Oranges’ and 38% for ‘Potatoes, fresh’, leaving significant room for growth. In contrast, some sectors show high realisation, such as ‘Reception apparatus for television, colour’ at 100 percent, while others, like ‘Marble, travertine, alabaster & flat articles thereof’ are only at 12 percent of their realised potential.
Graph 2: Egypt's Export Potential to the United Arab Emirates by Product Category

This divergence is most vivid when comparing the same sectors. While the UAE has significant room to grow its industrial exports to Egypt, Egypt has barely begun to compete in these same areas. This reveals more than a simple trade imbalance; it exposes a structural imbalance in industrial competitiveness and a shared story of vast, unrealised economic potential.
The reason bilateral trade constitutes such a small percentage of each country’s global total is precisely because this immense potential remains untapped. The relationship is not deeply integrated across many sectors because Egypt has not yet developed the competitive industrial capacity to export a diversified basket of goods to the UAE, while the UAE, despite its success, still has significant room to deepen its market penetration in Egypt. The data suggests that while Egypt has successfully leveraged its geographic position for commodity trade, it has struggled to turn that proximity into a competitive advantage for its manufacturing base, even in one of its most important and friendly markets.
Given the proximity, shared membership in trade frameworks like the Greater Arab Free Trade Area (GAFTA) and the deep political and investment bonds, the observed level of shallow integration may necessitate a deeper reconsideration of bilateral trade.

Strategic Imperatives for Deepening UAE–Egypt Trade
The current structure of UAE–Egypt trade reveals not just underperformance but a more fundamental challenge: the disjuncture between strategic alignment and economic depth. While the Ras El Hekma deal and other high-profile investments signal unprecedented trust and long-term partnership, the narrow, peak-heavy trade flows tell a story of sectoral silos rather than systemic integration. Moving from alignment to activation requires recalibrating how both states approach bilateral commerce.
At the heart of Egypt’s underperformance lies a structural competitiveness gap. Despite preferential access and geographic proximity, Egyptian exporters have failed to meaningfully penetrate the UAE’s high-demand, low-tariff marketplace across most industrial categories. This is not merely a function of market access; it reflects weaknesses in scale, quality and certification infrastructure. Egypt must establish targeted export acceleration zones linked specifically to Gulf-facing trade, particularly in sectors with large unrealised potential like plastics, rubber, metals, and food. These zones should provide bundled services: export credit, quality assurance and fast-track regulatory clearances aimed at meeting UAE standards. The Egyptian Export Development Authority, in coordination with Emirati logistics players like DP World, could establish a bilateral certification corridor, where Egyptian goods are pre-cleared in bonded zones for seamless entry into Emirati markets.
However, there is also a need to rewire the trade architecture beyond the megadeal. The Ras El Hekma development is often cited as a flagship of UAE–Egypt economic cooperation, but megadeals of this kind tend to be capital-intensive, elite-led and slow-moving. The trade relationship, by contrast, is quick, decentralised and driven by SMEs. Current data reveals that these ecosystems barely interact. The real unrealised potential may not lie in macro-projects, but in mid-cap industrial exchange. As a result, more integration is required for the tier two trade corridor focused on building SME consortia in both countries within complementary sectors like Egyptian agri-processing for UAE food security strategies. These should be embedded in existing industrial parks with bilateral digital trade platforms to match buyers and suppliers, with efforts to include dedicated funding from sovereign entities like ADQ and Egypt Ventures.
Further, the data shows asymmetry not just in volume but in the maturity of sectoral engagement. The UAE’s unrealised export potential lies in high-value industrial goods, suggesting that its exporters have established partial footholds. Egypt, meanwhile, is still in the foothill stages, especially in goods like plastics and ferrous metals. It would be important to define sector-specific penetration benchmarks, beyond just aggregate trade targets. Egypt and the UAE could establish bilateral sector integration committees in 3–4 priority verticals. For example, growing Egyptian share of UAE plastic imports from 3 percent to 7 percent over three years or increasing Emirati machine exports by 50 percent in targeted product codes. These targets can be backed by financial instruments, de-risked procurement frameworks and forward purchase agreements.
Upgrading trade architecture would also be critical to support this increased trade. With the UAE investing heavily in ports like Ain Sokhna and the Red Sea corridor, the two sides have a rare opportunity to turn logistics infrastructure into actual trade volume. It will be important to develop priority shipping lanes for high-potential sectors with guaranteed frequency, faster customs processing and digitally enabled documentation. Pairing this with preferential warehouse access in Jebel Ali and Khalifa Port for Egyptian suppliers who meet performance benchmarks could create a fast lane within the broader GCC trade space.
The UAE is a global logistics powerhouse, and Egypt is a manufacturing hub in search of scale. The trade potential and strategic trust are significant. Now, it must be translated into commercial depth. The next phase of UAE–Egypt economic cooperation must focus on building a shared industrial spine.



Samriddhi Vij is an Associate Fellow, Geopolitics at ORF Middle East. 
Ahmed Dawoud is an Economist and the Head of the Data Analytics Unit at the Egyptian Center for Economic Studies (ECES).
Ahmed Wael Ahmed Habashy is an AI Engineer at the Egyptian Center for Economic Studies (ECES), specialising in the development of intelligent systems for labour market and economic analysis.

### From Sea Lines to Fault Lines: Managing the Economic Fallout of the Houthi Shipping Attacks

Since November 2023, Houthi militants have conducted a sustained campaign against international shipping in the Red Sea, resulting in attacks on over 100 merchant vessels. This includes the sinking of four ships, the seizure of another, and the deaths of at least eight seafarers. The persistent attacks on commercial shipping in the Red Sea by Houthi militants have unleashed a cascade of complex and interconnected costs on the global economy. While the conflict is regional, its financial repercussions are global, extending far beyond the immediate operations. Nearly, 15 percent of global seaborne trade passes through the Red Sea, including 8 percent of global grain trade, 12 percent of seaborne-traded oil, and 8 percent of the world’s liquefied natural gas trade. As this trade is disrupted, there are multi-layered costs incurred because of this disruption including the direct expenses of military action and rerouting and the indirect costs to global supply chains. It is important to evaluate how these pressures are creating a new, more expensive paradigm for international trade.
Cost and Operational Implications
The most immediate economic damage stems from the attacks themselves, which weaponise not just munitions but risk perception. The sinking of vessels like the Rubymar represent a multi-layered financial shock: the loss of the carrier itself, the total loss of its cargo, and the subsequent cost of environmental cleanup from its hazardous fertiliser payload, creating a new category of liability for shipowners. The Sounion ship that was attacked in 2024 was carrying 922,000 barrels of Iraqi crude oil. Further, through these attacks the Houthis are reportedly blocking an estimated US$10 billion in cargo each day. When the UN launched a global appeal to remove a similar amount from a decaying floating oil storage and offloading vessel off Yemen, the clean-up costs of US$20 billion was estimated. More fundamentally, these events have impacted the psychological threshold of risk for insurers and shipowners, moving the threat from a manageable disruption to a potentially catastrophic destruction. Following the attack on commercial containers in early July 2025, risk premiums have risen to around 1 percent of the value of a ship, from around 0.3 percent the week before these attacks took place.

This is compounded by the immense cost of international naval patrols. Operations like Prosperity Guardian and the EU's Aspides are not just defensive missions, but expensive ones. Each munition used to shoot down the Houthi missiles and drones costs between US$1 million and US$4.3 million. However, this socialises the cost of protecting global commerce, transferring the financial burden from corporations to the public treasuries of a few nations.

Shipping lines have rerouted around Africa's Cape of Good Hope to avoid the Suez Canal as evidenced by Figure 1. This has triggered a cascade of compounding costs that extend far beyond fuel. In fact, the volume of trade passing through the Suez Canal dropped by about 50 percent in the first two months of 2024 compared with a year earlier. While the additional US$1 million in fuel per round trip between Asia and Northern Europe is significant in itself, the operational costs are much deeper. The longer 10-12 day journey increases wear and tear on engines, raises crew overtime costs and significantly boosts carbon emissions. This extended journey time has created a capacity crunch. With ships tied up for longer, the effective capacity of the global container fleet has shrunk by an estimated 9 percent, according to UNCTAD. This artificial scarcity allows shipping lines to impose dramatic rate hikes. For instance, Drewry’s World Container Index showed how the pricing for a 40ft container almost tripled in the initial months of the crisis.

Along with the direct shipping costs, the crisis has also impacted the “just-in-time” (JIT) manufacturing model, imposing significant indirect costs on businesses and consumers. The JIT model, which relies on predictable, low-cost shipping to deliver components exactly when needed, is unworkable in the current environment. Companies are now aggressively shifting to a ”just-in-case” (JIC) strategy, holding a significant amount of extra inventory as a buffer against delays. This creates massive hidden costs, tying up corporate capital in warehouses rather than in innovation or growth.

FIGURE 1



Source: AXSData

The Red Sea delays have also led to the “bullwhip effect”, where a small disruption at the source amplifies volatility and cost down the supply chain. This was seen when companies like Tesla and Volvo temporarily halted production at their European plants due to a shortage of components, incurring significant costs from lost production. This impact is also pronounced for the retail and apparel industry; the crisis has wrecked seasonal inventory planning, with shipments of time-sensitive fashion arriving too late, as the British retail chain Marks & Spencer warned that the turmoil would delay new spring clothing.

These costs are often passed on to consumers and can contribute to increased global inflation. As a result, a rethinking of the strategic implications of the Houthi attacks on the global economy and pathways for navigating its economic effects is important.
Navigation Strategic Implications on the Global Economy
The Red Sea crisis is not just a momentary disruption, it signals the structural reconfiguration of global trade under the shadow of persistent geopolitical risk. There has been an emergence of a new trade regime, where threat perception, not distance, cost or speed, becomes the primary variable shaping commercial decisions. For policymakers, this necessitates a fundamental rethink of how global trade routes are secured, financed and structured.

The immediate naval response, through operations like Prosperity Guardian and the EU’s Aspides mission, has been critical in restoring a degree of order. Yet, these military deployments come at an unsustainable fiscal and political cost. They externalise risk mitigation onto a handful of nations, while the benefits of stable maritime flows are distributed globally. This asymmetry calls for a multilateral burden-sharing mechanism, not just in military terms, but in the financial architecture. A pooled maritime risk fund under international frameworks like the International Maritime Organization, in which major trading economies contribute based on their dependence on global seaborne trade, could support both enhanced security deployments and subsidized insurance guarantees for high-risk corridors like the Red Sea.

Insurance reform is a parallel imperative. War-risk premiums skyrocketed in mere days, not because of actual losses but because of rapidly shifting risk psychology. This volatility trickles down into freight rates, inflation and consumer prices across continents. Governments and multilateral development banks should consider offering reinsurance backstops for critical corridors, much like terrorism reinsurance pools established after 9/11. These interventions would not distort markets, but rather smoothen extreme spikes, preventing short-term risk from becoming long-term inflation.

Beyond risk financing, the crisis has exposed deep vulnerabilities in global supply chain design. The just-in-time model, long hailed for its lean efficiency, has now become a liability in volatile shipping environments. National governments should incentivise resilience investments, such as nearshoring, dual sourcing or inventory buffers, through targeted tax relief and grants. In a world of cascading shocks, resilience is a strategic asset.

However, resilience must go beyond inventory; it must be spatially reimagined. With the Cape of Good Hope now a reluctant substitute for the Suez Canal, trade flows are longer, costlier and carbon-intensive. There is an urgent need to operationalise alternative corridors, both maritime and land-based. Investments in the India–Middle East–Europe Economic Corridor, as well as enhanced logistics hubs in the eastern Mediterranean, must be fast-tracked and embedded with fast-lane customs protocols. Egypt has a strategic opportunity to reposition itself not only as a Suez Canal gatekeeper but as a regional transhipment node that can flexibly absorb shock-diverted cargo.

In tandem, trade architecture must become digital and predictive. The erosion of supply chain predictability, where retailers no longer know when their goods will arrive, is as damaging as physical losses. A coordinated platform for maritime risk tracking, cargo rerouting and digital documentation (leveraging satellite data and AI routing models) could bring real-time verifiability into trade flows.

All of this demands not just policy agility, but a new institutional mindset. The Red Sea crisis has exposed the absence of strategic foresight in trade governance. The threats to commerce are no longer just macroeconomic, they are asymmetric, decentralized and politically fragmented. Governments must establish foresight units that bring together defense, commerce and logistics to prevent the economic costs of chokepoint disruptions before they occur and design cross-sectoral responses.

Ultimately, the Houthis have not just disrupted cargo, they have exposed the fragility of global trade. The path forward lies not in restoring a previous equilibrium, but in building a risk-smart trade system. One that blends security with economics and geopolitics with supply chain design. Only then can global commerce thrive on foundations stronger than hope.



Samriddhi Vij is an Associate Fellow, Geopolitics at the Observer Research Foundation–Middle East.

### A More Connected Mediterranean: France, Egypt, and the Future of IMEC

The Mediterranean Sea: a small maritime space on a global scale, but one that holds significant geostrategic and geoeconomic importance. This semi-enclosed sea, located at the intersection of multiple commercial routes from the Indo-Pacific to the Atlantic, represents less than 1/100th of the world's ocean surface, but accounts for more than a quarter of global maritime traffic and around 1/3rd of maritime hydrocarbon transport. It is home to multiple inter-regional trade hubs, with more than “450 ports and terminals” on its shores.

The Mediterranean region also carries a significant demographic weight. Its basin is home to 400 million people from more than 200 countries across three continents: Africa, Asia, and Europe. On the Southern shore of the Mediterranean, Egypt is the most populous country, with more than 116 million citizens. On the Northern shore, France, with more than 68 million. is among the states with the highest populations and ranks first out of the Mediterranean member states of the European Union (EU The two countries jointly make up 46 percent of the region’s demographic weight.

Trade and connectivity through the Mediterranean constitute an integral part of both Egypt’s and France’s regional and international commercial exchanges. This reality is reflected by the two states’ maritime presence and infrastructures. France’s main port, “Marseille Fos”, connects the European hinterland to the Mediterranean Sea. This French multimodal port, “positioned as Europe’s southern gateway”, is equipped with land, sea, river, energy and digital connectivity infrastructures. Located along the Southern shore of the same basin, the main Egyptian ports linking the Mediterranean to the African continent are Alexandria, Port Said, and Damietta. Besides its key maritime trade and logistics hubs, Egypt has a unique strategic commercial importance: the Suez Canal. The latter allows cargo passage from the Mediterranean to the Red Sea and provides “the shortest maritime route from Europe to Asia”, with an annual vessel traffic exceeding 20,000 ships.
Paris-Cairo – converging interests, views and strategies for stability and peace in the wider region
As maritime powers with significant economic stakes in the Mediterranean, both France and Egypt are affected by escalating tensions in the wider region, disrupting trade routes and supply chains and, in turn, impeding commercial exchanges. Consequently, both states seek stability in the Mediterranean and their strategies to restore and sustain it align significantly. However, the aspired stability is highly dependent on how power dynamics develop and unfold in the Middle East, a gateway between Southern Europe, North Africa and the Indo-Pacific. In this context, a stable regional actor with strategic stakes both in the Mediterranean and the Middle East, and one that is willing and capable of engaging in mediation efforts, has a unique potential to play the role of a multi-regional force for equilibrium.

Paris sees Cairo as a potential partner. As H.E. Éric Chevallier, Ambassador of France to Egypt stated “France is deeply committed to the stability and prosperity of Egypt, which are so important for the Arab world, for Africa, and for our shared Mediterranean region […] Because our two voices carry weight, we can unite them to address global challenges[1]”. In line with this view, the Egyptian leadership portrayed the French President Emmanual Macron’s visit to Egypt in April 2025 as a manifestation of “France’s commitment to support Egypt’s strong position as a cornerstone of stability[2]”. On the same occasion, President Macron highlighted that the two countries share a joint agenda for regional stability and are willing to engage in upholding the freedom of navigation in the Red Sea when hindered. This was the case when traffic in the Suez Canal significantly decreased due to the Houthi attacks on cargo vessels. Consistent with France’s declared goal and commitment to support and maintain the fluidity of international maritime exchanges, Paris demonstrated its presence and force in the Suez Canal as it mobilised its military carrier group.

In the prevailing context, Egypt’s unique potential as a trusted and stable partner for France does not only stem from its strategic location as a multi-regional junction point, but also from the role it traditionally plays in the Israeli-Palestinian mediation efforts, specifically regarding Gaza. Taking into account this strategic position, role and potential, a report produced by the French Senate refers to Egypt as “France's gateway to the Middle East crises”. Regarding the Israeli-Palestinian conflict, Cairo has been historically supporting and advocating for a two-state solution, for instance, under the Amman Group framework[3]. The French and Egyptian views on this political and diplomatic solution strongly converge. Thus, alongside Egypt, Jordan and Germany, France is equally taking part in the Amman Group, as the only Mediterranean Member State of the EU. Furthermore, Paris – in cooperation with Cairo – is not only supporting the idea of a two-state solution and a peaceful conflict resolution but also plays an active role in advancing its realisation. As such, per the 3 December 2024 resolution of the United Nations General Assembly, France will co-chair an international conference on the two-state solution with Saudi Arabia.

France and Egypt are not only strategically aligned in terms of the main criteria of a long-term conflict resolution, but they also share a vision as to a large-scale, multi-regional and multi-modal connectivity project: the India–Middle East–Europe Economic Corridor (IMEC). However, this project can only be fully operationalised “the day after” the Gaza War, once the Israeli-Palestinian conflict de-escalates.
Connectivity for long-term stability and prosperity: Extended IMEC
Due to the Gaza War, the implementation of IMEC is hindered and delayed, as Haifa in Israel, a country that is not a signatory of the project, but located at its pathway, planned to be one of the main connectivity ports of the corridor. An extended IMEC framework, serving as an alternative, might include a connectivity pathway through Egypt. The latter is currently not part of the project. The concept of an ‘IMEC with Egypt’ is strongly promoted by Cairo and supported by Paris. Accordingly, in the framework of a Summit on a “More connected Mediterranean” that took place in June 2025, “France has once again expressed its support for Egypt’s integration into IMEC, to strengthen connectivity between East and West[4]”. Cairo is already actively enhancing its energy connectivity to Europe, for instance, through the GREGY project, a 950-kilometre-long submarine cable between Egypt and Greece. According to the shared French and Egyptian viewpoints, the IMEC scheme as a network project[5] could strongly benefit from Egypt’s strategic location and contribute to the diversification and securitisation of trade routes and supply chains.
Conclusion
Tensions in the Middle East have significant spillover effects on neighbouring regions as they can disrupt existing commercial flows and halt new connectivity projects. The latter was observed with regard to the IMEC’s implementation. The corridor was originally planned to facilitate and channel trade flows between the Indo-Pacific, the Middle East and the Mediterranean through Israel’s Haifa port. However, due to the ongoing war in Gaza, the development of this project segment is halted.

As Mediterranean nations that are strongly integrated in global maritime trade, both Egypt and France have significant economic interests in a stable multi-regional commercial environment. However, their stakes are directly or indirectly hindered by the armed conflict in Gaza. In this context, Egypt, a country located at the intersection of multi-regional trade flows with historic ties to the Middle East and a traditionally strong involvement in the Israeli-Palestinian mediation efforts, plays the role of a key force for equilibrium and a strategic partner for France.

The latter not only recognises Egypt’s unique potential in effective mediation efforts, but it is also aligned with Cairo’s view concerning the two-state solution to put an end to the conflict and establish a lasting peace in the region. Additionally, France supports Egypt’s aspiration to become part of an extended IMEC structure. According to the two countries’ arguments, this extension could allow for the diversification of connectivity pathways between the Middle East and the Mediterranean and secure supply chains.

As a testimony of their shared interests and joint geopolitical and geoeconomic potential in the wider region, France and Egypt have recently elevated their bilateral relations to the level of a strategic partnership. Nonetheless, the effective implementation of the Franco-Egyptian tandem’s projects is strongly conditioned by their acceptance by other dominant regional actors pursuing their strategic agendas.



Eszter Karacsony is an Associate Fellow and Program Lead in Geopolitics at Observer Research Foundation (ORF) Middle East.



[1] Translated to English from French by the author of this article.

[2] Translated to English from French by the author of this article.

[3] Group quadripartite (Egypt, France, Germany, Jordan) created in 2020, committed to support the two-state solution to the Israeli-Palestinian conflict. Source: https://www.diplomatie.gouv.fr/fr/dossiers-pays/egypte/presentation-de-l-egypte/

[4] Translated to English from French by the author of this article.

[5] Interview with the Special Envoy of the French President for IMEC.

### Why Israel–Syria Normalisation Remains Elusive in the Wake of Suweida

The ceasefire declared in Suweida, Syria on 19 July 2025, was meant to halt a week of sectarian bloodshed between Druze militias and Bedouin gunmen. Yet clashes persist along the province’s western ridges, and local militias remain wary of Syrian army patrols. This uneasy calm reveals more than provincial instability. It exposes the deeper strategic rupture now shaping Israeli–Syrian relations—one not rooted in temporary mistrust, but in fundamentally divergent visions for the region’s future. For both Damascus and Tel Aviv, Suweida has become more than a domestic fault line—it is a proxy arena for competing regional logics.

At the heart of this impasse lies a structural contradiction. Israeli Prime Minister Benjamin Netanyahu has reiterated Israel’s determination to maintain a demilitarised zone in southern Syria, emphasising the necessity of “preventing hostile forces from establishing a foothold near the Golan Heights”. Conversely, Syrian President Ahmed al-Sharaa condemned the July 2025 strikes as a “flagrant violation of Syrian sovereignty” that risks “sowing chaos” and undermining national unity. Each side views the situation as a zero-sum game: Israel seeks a secure buffer in the south, while Damascus insists on restoring full central authority—each side’s success fundamentally negating the other’s core objective.

The Golan Heights crystallises this divergence. Annexed by Israel in 1981 and recognised by the US in 2019, it remains both a symbolic and operational red line. For Israel, it is a defensive bastion against Iranian and Hezbollah encroachment. For Syria, it is the indivisible core of national identity. No political arrangement that excludes the Golan’s return is politically viable in Damascus. Here, the logic is not rhetorical—it is constitutional.

The fall of Bashar al-Assad in December 2024 briefly raised hopes of strategic recalibration. Al-Sharaa, a former Hay'at Tahrir al-Sham (HTS) commander turned transitional president, has projected a more pragmatic tone. He reaffirmed Syria’s commitment to the 1974 disengagement agreement and floated the idea of technical talks on humanitarian access. But this posture—deliberately calibrated—has not translated into trust. Israeli officials remain sceptical of his jihadist past and uneasy about the presence of ex-rebels in his cabinet. The July airstrikes near Damascus, targeting key military nodes, were read in Damascus not just as deterrence, but as a warning: no deviation from Israeli red lines will go unanswered.

The transnational character of the Druze compounds volatility. Unlike other embattled minorities in the region, Israel’s Druze are fully integrated—they serve in the military, vote, and hold national office. That civic status gives their cross-border concerns political weight. The 2024 Majdal Shams rocket attack, which killed 12 Druze schoolchildren, exposed the vulnerability of even Israel’s Druze to regional spillover. Suweida has only sharpened those anxieties. Domestic pressure—particularly from Druze constituencies—has hardened expectations around Israeli deterrence. MK Hamad Amar, a Druze lawmaker from the right-wing party Yisrael Beiteinu, publicly reminded Netanyahu of his pledge to protect “our brethren” in Syria. But the security establishment remains cautious: prolonged intervention risks entanglement and could alienate both Israeli and Syrian Druze.

These pressures are nested within a broader political climate that disfavours diplomacy. Netanyahu’s coalition, reinforced by figures like Bezalel Smotrich and Itamar Ben-Gvir, prizes military initiative over engagement. Public discourse is shaped by post-Gaza economic recovery and fears of Iranian retrenchment. With a fragmented opposition and a security-focused war cabinet, Israel’s default is pre-emption—not negotiation.

From Damascus, such behaviour is read as an attempt to impose a de facto order in Syria’s south, in violation of the 1974 ceasefire framework. The symmetry of distrust is striking: each side sees its logic as reactive, defensive, and constrained—yet to the other, it looks unilateral, expansionist, and pretextual. The result is not just gridlock, but a collapse of even minimal coordination.

On the Syrian side, Suweida’s Druze factions remain deeply suspicious of al-Sharaa’s transitional government, fearing domination by Sunni Islamist elements embedded within the broader power structure. This sectarian distrust reinforces local defiance and, in turn, bolsters Israel’s rationale for deterrence. The feedback loop is self-sustaining: sectarian fragmentation fuels interventionism; interventionism amplifies sectarian fragmentation.

Al-Sharaa’s political space is constrained as well. He presides over a fractured terrain— HTS holdouts in Idlib, Assad-era loyalists in the officer corps, Iranian militias operating autonomously, and tribal actors with their own hierarchies His cabinet lacks the coherence to deliver credible commitments and the legitimacy to make territorial compromises. Most importantly, the Golan remains an immovable pillar of Syrian foreign policy. For much of the Syrian public, any agreement short of its return would constitute not realism, but betrayal.

At the same time, Israel’s earlier incursions into the UN-monitored Golan buffer zone—establishing nine outposts after the Syrian army’s withdrawal—elicited little more than a muted response from Washington. It was therefore no surprise that Israel ignored US Special Envoy to Syria Thomas Barrack’s ceasefire plea. The Damascus strike only confirmed that unilateral freedom of manoeuvre is now the prevailing reality, with US influence reduced to a faint background murmur.

Prior to the Suweida violence, early glimmers of diplomatic goodwill emerged in May, when Syria reciprocated  Trump’s outreach in Riyadh—marked by the lifting of sanctions—by returning personal documents of Israeli spy Eli Cohen amid UAE-facilitated backchannel talks. Yet these efforts remained confined to technical matters and skirted core issues such as the Golan Heights. Al-Sharaa’s external posture reflects these limits. His priority is consolidating domestic governance and securing reconstruction aid, as shown by Saudi Arabia’s recent US$6.4 billion investment pledge. While he has not closed the door on technical deconfliction with Israel, he has avoided any framing that resembles a normalisation track. Without movement on the Golan—or a fundamental change in Israeli strategy—his diplomatic posture will remain intentionally narrow.

Only one certainty endures: Israel will continue to double down on deterrence along its northern front. Without a shared baseline—territorial, diplomatic, or strategic—deconfliction is the most either side can sustain, and even that remains fragile.



Evangeline Cheng is a Research Associate at Middle East Institute, National University of Singapore.

### Explaining the Freelance Performance Gap: Egyptians vs Indians

In the face of persistent economic headwinds, including high youth unemployment and a national imperative to generate foreign currency, freelancing has emerged as a powerful lifeline for Egypt’s workforce. This model of work offers a direct path to the global economy, allowing skilled individuals to bypass local labour market constraints, mitigate the risk of brain drain by earning hard currency from home, and decentralise economic opportunity beyond the nation’s crowded urban centres.

Recognising these benefits, a new generation of Egyptian youth is proactively forging its own career paths. A particularly popular entry point into this global marketplace is web development. Fueled by an unprecedented abundance of accessible online learning materials and bolstered by government initiatives from the Ministry of Communications and Information Technology, graduates from diverse, often non-technical backgrounds like literature, arts, and commerce, are acquiring in-demand digital skills.

This confluence of grassroots initiative and top-down support raises a crucial policy question: Are these individual and institutional efforts guiding talent in the right direction? To evaluate the impact and steer future strategy, one needs a sophisticated understanding of the market. This requires more than just anecdotal evidence; it demands a systematic analysis of complex, multi-sided data, including the performance of Egyptian freelancers, a valid benchmark against a leading country like India, and a clear measure of what global clients are actually demanding. While this information exists publicly, its sheer volume and unstructured nature make it incredibly difficult to analyse systematically.

To bridge this critical knowledge gap, recent research by the Egyptian Center for Economic Studies (ECES) undertook a comprehensive analysis, leveraging a rich, granular dataset collected from Upwork—a leading global platform for web development. The study compared the performance of 1,800 Egyptian web developers with 19,000 Indian counterparts, analysing outcomes across 40,000 client gigs to uncover what drives success in the global digital marketplace. The findings offer compelling insights into why some countries excel while others struggle to convert potential into performance.
Equal Talent, Unequal Earnings
The research quantifies a stark performance gap: while Egyptian web developers on Upwork earned a cumulative $11 million, their Indian counterparts generated $466 million. The most obvious explanation—the difference in sample size—proves insufficient. While the Indian freelance workforce on Upwork is 11 times larger, its aggregate earnings are a disproportionate 44 times greater. This disparity translates to the individual level: the average Indian freelancer earned US$24,526, over four times the Egyptian average of US$6,000—a gap not explained by market tenure, as both cohorts joined the platform over a similar period.

Moreover, the data reveals that these averages mask a deeper structural problem. The Indian market shows a balanced distribution of income, whereas Egypt’s is a highly polarised, 'winner-take-all' environment—where a small elite captures the vast majority of earnings, with 37 percent of registered freelancers having earned nothing at all.

This leads to the central 'parity paradox' of the research: this disparity in outcomes is not driven by a lack of technical competence. The data shows that when Egyptian freelancers do secure work, their performance is world-class and statistically identical to their Indian peers, with a 95.4 percent job success rate and comparable hourly wages across all specialisations.

The conclusion is therefore profound: the problem is not the ability to do the work, but the ability to secure it. The immense earnings gap originates from a series of strategic misalignments that prevent the majority of Egyptian talent from successfully competing to secure projects and attract clients in the first place. The research identified three key factors that, when combined, create a powerful barrier to entry and earning potential for the majority of Egyptian freelancers.

 	A Misalignment with Global Skill Demand: Speaking the Wrong Professional Language 

The global freelance market for web development sends a clear demand signal: 58 percent of all job postings seek versatile 'full-stack' developers. Indian freelancers have aligned themselves strategically with this reality. With 49 percent specialising in full-stack roles, they are well-positioned to meet the market's primary need.

Egyptian freelancers, however, exhibit a significant strategic misalignment. Only 39 percent focus on high-demand full-stack roles. Instead, a disproportionate 40 percent specialise in the narrower field of front-end development, a niche that represents only 19.3 percent of global demand. This fundamental misalignment channels a large portion of Egyptian talent into a smaller, more saturated market, intensifying competition for fewer opportunities and directly limiting their earning potential.

 	Divergence in Time Commitment: The Vicious Cycle of the Side-Gig Mindset

A second explanatory variable is the level of professional commitment, which manifests as a clear divergence in work intensity. The research indicates that 61 percent of Indian freelancers dedicate over 30 hours per week—a significant time investment, signalling that freelancing is treated as a primary professional activity. This "all-in" approach allows them to build momentum, take on larger projects, and establish a steady pipeline of work, which is crucial for long-term success.

In contrast, only 45 percent of Egyptian freelancers commit to a similar level of engagement, with many approaching it as a supplemental activity. This hesitancy is often rooted in a rational desire to avoid risk in the absence of a guaranteed income. However, this risk-averse strategy creates a self-perpetuating vicious cycle. A lower time commitment leads to fewer completed projects and suppressed income. This low return then reinforces the initial perception of freelancing as a less viable primary career, trapping talent in a low-earning loop which is difficult to escape. The data makes this starkly evident: 30 percent of Indian freelancers earn over US$1,000, a milestone reached by only 11 percent of their Egyptian counterparts. The Indian model demonstrates that high returns in freelancing are a result of high commitment, not a prerequisite for it.

 	Disparities in Self-Marketing: The Untapped Power of Digital Credibility

In a global digital marketplace where clients and freelancers may never meet, trust is built not in person but through pixels. Here, technical ability is merely the entry ticket; it is self-marketing and digital credibility that ultimately close the deal. The analysis revealed that Indian freelancers have mastered this art. Their online profiles are significantly more detailed and persuasive, averaging over 1,100 words compared to a brief 600 for Egyptians. These longer profiles are not just filled with keywords; they articulate a professional narrative, showcasing project histories, problem-solving approaches, and a clear value proposition.

Furthermore, Indian freelancers are more likely to leverage video portfolios to demonstrate their capabilities and actively cultivate client reviews—the essential currency of trust on digital platforms. The economic impact of this "credibility gap" is substantial. The data shows that for an Egyptian freelancer, simply having a video portfolio is associated with a remarkable 67 percent increase in income. By underinvesting in the soft infrastructure of their professional profiles, a significant portion of Egyptian talent fails to fully translate their technical proficiency into the perceived credibility required to win high-value international contracts.
A National Roadmap for Success in the Digital Economy
These findings offer more than just an explanation for an earnings gap; they provide a clear, evidence-based roadmap for transforming Egypt's freelance sector into a strategic national asset. The analysis demonstrates that the performance gap is not an insurmountable talent deficit but a correctable issue of strategic alignment.

For policymakers and educational institutions, the implications are direct and actionable. First, government-sponsored training programmes must be recalibrated to shift focus from narrow specialisations toward the comprehensive, in-demand skill set of full-stack development. Second, curricula must be expanded beyond technical instruction to systematically embed the crucial soft skills of digital marketing, client communication, and professional brand management. Finally, innovative policy instruments, such as de-risking grants or financial incentives for promising freelancers who commit full-time, could prove instrumental in breaking the vicious "part-time" cycle and fostering a new generation of professional, high-earning freelancers.

For any nation aspiring to build a robust digital export economy, this research provides a critical insight: success is determined not just by technical talent, but by strategic alignment with global market dynamics and the mastery of a new kind of digital salesmanship. By addressing these identified gaps, Egypt can unlock the immense economic potential of its human capital and claim its rightful share of the global digital economy.



This paper is based on research conducted by the authors at The Egyptian Center for Economic Studies. The research can be found at:

https://eces.org.eg/en/unveiling-the-secrets-of-freelancing-success-comparative-study-of-egypt-and-india/



Ahmed Dawoud is an Economist and the Head of the Data Analytics Unit at the Egyptian Center for Economic Studies (ECES).

Ahmed Wael Ahmed Habashy is an AI Engineer at the Egyptian Center for Economic Studies (ECES), specialising in the development of intelligent systems for labour market and economic analysis.

### EU-UAE Trade Negotiations: A Potential Path to Gulf-Wide European Trade

Against the backdrop of adversity and tensions which redefine trade cooperations and economic exchanges, the European Union (EU) has recognised its vulnerabilities and dependencies and has adopted an increasingly assertive approach to commercial policies, in line with its ‘Open Strategic Autonomy’ concept. Consequently, the Union seeks to elevate its economic cooperation to a higher level with countries in its wider neighbourhood, strategic partners with whom it has shared interests and overlapping priorities on open trade. The United Arab Emirates (UAE) meets all these criteria.
For the UAE, the EU  is its “second-largest global trade partner”, with increasing shares of non-oil trade, whereas for the EU, the UAE is a main market for its goods and services in the Gulf and its “biggest foreign direct investment partner in the region”. Based on their mutually beneficial commercial cooperation, and considering that “in this fragmented world strategic partnerships are the most important currency”, the parties announced in April 2025 the launch of a Free Trade Agreement negotiation (FTA)[1].

Impact on the GCC-EU FTA Talks
A bilateral FTA with an individual Gulf Cooperation Council (GCC) country, and not with the GCC itself as a regional block, “is a departure from the EU’s historical position”. Region-to-region negotiations were launched almost two decades ago but got suspended in 2008 due to a lack of a mutually acceptable deal. However, this does not indicate a loss of interest on either side.  The first-ever EU-GCC Summit was held in October 2024, to be repeated in 2026 in Saudi Arabia. Moreover, during the summit, both parties committed to restarting FTA talks.
However, the EU has openly stated that the bilateral agreement with the UAE “can serve as a catalyst for stronger ties between the EU and the Gulf Cooperation Council”. Luigi Di Maio, EU Special Representative for the Gulf, has equally pointed out that the EU-UAE FTA represents “a building block toward a regional Free Trade Agreement”. As such, the Union does not see the EU-UAE and EU-GCC FTAs as exclusive. The successful conclusion of an agreement with the UAE, if it delivers, could provide a new impetus for region-to-region negotiations. The same perspective has been shared by The UAE’s Minister of Foreign Trade, Thani al-Zeyoudi, who has publicly stated that the bilateral talks between the EU and the UAE are not a hurdle to a region-to-region FTA, but rather “a flow which is going to be starting from here and moving to the GCC”.
Precedents exist. New Zealand concluded a bilateral trade deal with the UAE just months before finalising a GCC-wide agreement. Similarly, Pakistan entered bilateral talks with the UAE after signing a preliminary FTA with the GCC. South Korea signed an FTA with the GCC shortly before reaching a bilateral deal with the UAE. Türkiye took the reverse path, launching GCC negotiations nearly a year after its bilateral agreement with the UAE. Other countries, such as Australia, Malaysia, and Chile, have signed bilateral deals with the UAE while still in earlier stages of pursuing GCC-wide agreements.
An alternative scenario一a transition path一which could potentially set the stage for a region-to-region FTA, might materialise in multiple bilateral Free Trade Agreements concluded between the EU and individual GCC countries, alongside the UAE. The logic of such an approach seems to gain traction within the EU, as the Council recently adopted the mandate to “enter into negotiations with each of the six Gulf Cooperation Council (GCC) countries” to conclude bilateral Strategic Partnership Agreements (SPAs) with all of them. Trade and investment would be one of the main components of these partnerships. However, complementary to the SPAs, the potential of bilateral FTAs with all GCC countries is highly dependent on their projected economic benefits and viability for the parties involved.

Remaining Obstacles 
While the UAE has stated it expects the negotiations to take a few months, and the EU has shown a gesture of goodwill by removing the UAE from its money laundering watchlist, obstacles remain between the two parties. The first round of negotiations between the EU and the UAE was held between 24 June and 9 July this year. The EU had tabled proposals for the FTA chapters ahead of the round, with the second round of negotiations scheduled to take place in Brussels in September 2025.
Capitalising on its market power, the EU has been using trade negotiations to “externalise its social” and development agendas, thereby shaping third parties’ policies in these fields. The EU’s stance on human and labour rights, in addition to the oil industry, has been a key obstacle behind the stalling of the GCC-EU FTA negotiations, for example. It remains a key issue with a new impact assessment focused on such topics being tendered by the EU about the GCC-EU FTA negotiations. The same obstacle appears to reappear in the tabled text proposal by the EU to the UAE, continuing to focus on human rights, labour, and sustainability commitments.

Potential Benefits:  the ASEAN-EU analogy
The most apparent risk from an exclusive EU-UAE FTA is that it could trigger significant trade and investment diversion away from other GCC members. Saudi Arabia is historically the GCC's dominant exporter to the EU. It consistently accounted for over 60 percent of the bloc's total exports., These exports are heavily concentrated in the same sectors as the UAE's. According to 2024 data, for Saudi Arabia, HS Code 27 (Mineral Fuels, etc.) accounts for  85 percent of its exports to the EU. Similarly, while the UAE has made strides in diversification, HS Code 27 still represents a substantial 49 percent of its exports to the EU.
This homogeneity in their primary export good - mineral fuels - means that any preferential access granted to the UAE for these products would directly impact Saudi Arabia's competitive position in the EU market. If the FTA significantly reduces tariffs and non-tariff barriers for UAE oil and gas products, the EU is likely to increase its sourcing from the UAE. This would divert trade from Saudi Arabia, which lacks such preferential access.
However, a more optimistic scenario exists if the agreement is structured with regional integration in mind. On this, an analogy might be observed and analysed about one region that has faced a similar path as the GCC with respect to trade with the EU: the Association of Southeast Asian Nations (ASEAN). Bi-regional trade negotiations were launched in 2007 and paused by mutual agreement in 2009 to give way to a bilateral format of negotiations, which were signed between the EU and Singapore (2014) and Vietnam (2015).
Assessing the trade post-FTA with the EU presents an interesting story for Singapore, with the figure below showing that after its FTA was implemented in 2019, Singapore's share of the total ASEAN export pie declined, falling from 14% to 11% by 2024. A surface-level reading would suggest Singapore simply failed to benefit from its agreement.
However, a deeper insight helps solve the puzzle: the "ASEAN Cumulation" clause presents a compelling potential explanation. This clause is a specific provision within the EU-Singapore FTA that allows Singaporean companies to count materials and components sourced from other ASEAN nations as if they were their own. The "ASEAN Cumulation" clause has two primary mechanisms that allow for regional inputs. Some products can be included if they originate from an ASEAN country that has a separate Preferential Agreement with the EU. For other specified products, materials can be sourced from any ASEAN nation, even those without a direct FTA with the European Union. This provision has the potential to redefine what it means to be "Made in Singapore" for trade with the EU. This could explain a fascinating pattern in the data: the sustained and even accelerated growth in exports from Malaysia (MY), Indonesia (ID), and Thailand (TH) directly after the 2019 implementation of the Singapore FTA. It is possible that the cumulation clause created incentives for Singaporean firms to shift final assembly to these neighbouring countries to lower costs, while retaining control over the most profitable parts of the value chain. In this scenario, the export statistic is recorded in Malaysia or Indonesia, but the economic profit flows back to Singapore. The decline in Singapore's goods export share might not be a sign of failure but rather could be a sign of a sophisticated strategy: it is benefiting not by shipping more boxes, but by acting as the indispensable economic brain for a thriving regional supply chain.



Source: Authors’ calculations using data from the EuroStat Database
A “GCC Cumulation” clause, similar to the ASEAN model, could be similarly powerful in this regard. It would allow materials from neighbouring Gulf countries to be processed in the UAE and exported to the EU under the FTA's preferential terms. This would create a powerful incentive for deeper intra-GCC supply chains. For example, Saudi Arabian raw petrochemicals could be processed into specialised plastics in the UAE's advanced industrial zones, with both countries sharing the economic benefits of tariff-free export to the EU.
Notably, such a clause is missing in the EU’s tabled Rules of Origin proposal to the UAE. The only cumulation clause appears in Article X.3 (Cumulation of origin), which only allows bilateral cumulation between the EU and UAE, yet not regional cumulation with third countries. Both parties may seek to consider adding this clause to ensure the GCC-wide benefits are reaped.

Conclusion
The failure of the EU-GCC FTA talks and current political differences underscore the challenges of a region-to-region approach. While such talks continue, the EU appears open to exploring bilateral agreements with individual Gulf countries. However, as shown by ASEAN’s and Singapore’s trajectory, bilateral agreements, such as the one being negotiated between the EU and the UAE, if designed strategically, can evolve into broader regional gains.



Eszter Karacsony is an Associate Fellow and Program Lead in Geopolitics at Observer Research Foundation (ORF) Middle East.
Ahmed Dawoud is an Economist and the Head of the Data Analytics Unit at the Egyptian Center for Economic Studies (ECES).
Ahmed Wael Ahmed Habashy is an AI Engineer at the Egyptian Center for Economic Studies (ECES), specialising in the development of intelligent systems for labour market and economic analysis.
Mahdi Ghuloom is a Junior Fellow, Geopolitics at the Observer Research Foundation (ORF) – Middle East.



[1] The European Union uses the terminology “Free Trade Agreement” whereas the United Arab Emirates refers to the same as “Comprehensive Economic Partnership Agreements” – diplomatic source.

### An AI Blueprint for the Future of Work: Lessons from Egypt's Labour Market

For years, Egypt’s economy has been defined by a persistent paradox. Despite a large, youthful workforce, industries consistently report significant difficulties in finding talent with the right skills. This is the classic signature of structural unemployment, born from a fundamental chasm between the skills graduates possess and the competencies employers demand. This disconnect is fueled by information asymmetry: while the supply side of the labour market is well-documented, the demand side has remained a black box. How can an education system be aligned with market needs when the requirements of that market are unknown?

Tapping the Digital Labour Market 
A new, vast, and previously untapped data source has emerged in online job postings. This is not survey data reflecting intentions; it is a direct signal of revealed demand from the market itself. If carefully harnessed, this information can bridge the knowledge gap, empowering policymakers, educators, and citizens with the evidence needed to act proactively in a rapidly changing labour market. However, its sheer volume and chaotic nature—spanning multiple languages, inconsistent formats, and duplicative or vague descriptions—renders manual analysis next to impossible.
To address this challenge, the Egyptian Center for Economic Studies developed a real-time, artificial intelligence (AI) powered labour market observatory—an ongoing project that has systematically analysed over 350,000 unique online job postings across 13 consecutive quarters, with data refreshed each quarter. The project’s methodological innovation lies in a sophisticated, autonomous data collection system capable of navigating the internet to gather thousands of job postings from trustworthy sources—including LinkedIn and leading local platforms—and then refining the data by resolving inconsistencies such as outliers, missing values, and duplicated entries.

Adopting a Universal Language for Labour
To enable reliable comparison across sectors and countries, one must move beyond ambiguous job titles. The responsibilities of a "Software Developer" can vary dramatically, rendering title-based analysis misleading. The solution lies in the International Standard Classification of Occupations (ISCO-08), which provides a universal language for work by grouping jobs based on task and skill similarity. This ensures a true "apples-to-apples" comparison, guaranteeing that a role in Cairo is functionally equivalent to one in Dubai if they share the same ISCO-08 code.
The complexity of this framework—with its 436 unique unit groups—creates an overwhelming challenge for manual analysis at the scale of 350,000 job posts. This is precisely where the agentic AI engine provides a critical breakthrough. It automates this intricate classification process with a proven 97 percent accuracy, making the impossible possible.
A Deeply Segmented Market The analysis reveals a sharply dualistic labour market, where different segments operate under starkly different conditions. The extreme geographic centralisation of job opportunities, for instance, is not just a statistic; it is a driver of inequality. With over 82 percent of all white-collar jobs concentrated in the Capital region, the pressure on Cairo's infrastructure is immense, while other governorates suffer from economic stagnation and higher poverty rates. This geographic barrier disproportionately affects women, who often face greater societal constraints on relocation. The problem is compounded by a near-total absence of flexible work arrangements; with on-site work required in over 95 percent of postings, remote work is rarely an option, effectively locking a significant talent pool out of high-value opportunities.
Furthermore, the data uncovers critical paradoxes in educational and experience requirements that fuel the skills mismatch. A persistent "experience trap" is evident across both sectors, where even entry-level positions for recent graduates consistently demand a minimum of two years of prior experience. This creates a vicious cycle, making it nearly impossible for new entrants to gain the very experience required to secure a job. By consistently sidelining fresh entrants, the labour market is creating a future leadership vacuum. As today's mid-level professionals advance into senior roles, no new generation is being trained to replace them. The result is a "hollowed-out" middle and a looming succession crisis.
More striking is the perverse demand for higher education in the blue-collar segment. A significant 24 percent of these vocational roles require a bachelor’s degree, not because the job necessitates university-level skills, but for two distinct reasons. First, it serves as a risk-mitigation strategy for employers to compensate for the perceived low quality of intermediate and vocational education. Second, it is an opportunistic response to high unemployment rates among university graduates, who represent an abundant and often overqualified labour pool.
These findings, combined with insights from other deep dives—such as the 44-fold earnings gap between highly skilled Egyptian freelancers and their Indian counterparts, despite comparable technical skills—paint a picture of a labour market hampered by structural inefficiencies. They demonstrate that the challenge is not a simple lack of jobs or talent, but a deep, systemic misalignment between the education system, employer expectations, and the geographic distribution of economic opportunity.

The Future of Work in the AI Era
The project’s most recent analysis moves from diagnosis to prognosis. With an initial focus on the IT and software development sector, it asks a crucial question: How relevant will today's Egyptian IT and software development jobs be in five years? An "AI Risk Index" was developed, assessing the real-world capabilities of current AI models against the specific skills required in over 4,200 recent Egyptian IT job postings.
The findings reveal a landscape of risk and opportunity. High-risk skills—those highly susceptible to automation—predominantly include tasks such as routine code generation (50.3 percent of the high-risk profile), automated testing (8.7 percent), and basic data handling (8.1 percent). Conversely, low-risk skills are invariably human-centric: adaptive problem-solving (28.3 percent), interpersonal skills (18.4 percent), and complex system architecture (12.7 percent).
These risks are not uniform across the sector. Such a nuanced view is critical for targeted policy and training interventions. Cybersecurity stands out as a low-risk field, presenting a strategic growth area for national talent development. In contrast, roles in software development, enterprise systems, and customer enablement fall in the medium-risk category. Here, the imperative is a strategic pivot: curricula must move beyond routine coding towards creative software architecture, and training must emphasise high-value client relations and advisory skills to stay ahead of automation.
This exposure also varies dramatically by experience, pouring a metaphorical technological fuel on the fire of the pre-existing "experience trap". The analysis reveals that junior professionals face high risk from automation, while senior management faces low risk. This trend closes the door on new entrants in two ways: first, by the market’s preference for experienced hires, and second, by automating the foundational tasks that once served as entry points into a career. The result is a looming "missing middle" crisis of an even greater magnitude—rendering university-industry partnerships and apprenticeships not only beneficial, but structurally essential for creating viable career pathways.

A Replicable Blueprint for the MENA Region
This research framework represents more than a country-specific study: it is a powerful, replicable blueprint for any nation seeking to align its workforce with a rapidly changing global economy. The United Arab Emirates, with its ambitious economic diversification goals, presents a particularly compelling opportunity. While the Egyptian analysis navigates a job market with significant informality—where many vacancies are filled through personal networks—the UAE’s highly digitised and formal economy means a larger proportion of its labour market vacancies are advertised online. This could facilitate an exceptionally rich and representative dataset, offering an even more comprehensive view of labour market dynamics. For the UAE government, such an observatory would allow its policymakers to understand precisely how AI will impact future skill demand, measuring not only the number of jobs created, but their long-term sustainability in the face of automation.

Conclusion
Egypt's labour market suffers not from a single ailment, but a web of deep-seated structural misalignments. The geographic centralisation of opportunity in Cairo, the "experience trap" that sidelines new graduates, and the perverse demand for university degrees in vocational roles—all paint a picture of a system that was fundamentally out of sync long before the advent of generative AI.
The advent of AI does not create a new problem; it acts as a powerful accelerant, pouring technological fuel on these pre-existing fires. As the analysis shows, AI will empower seasoned professionals: for instance, software engineers who can delegate routine coding to focus on high-value architecture, thereby widening their lead. Simultaneously, by automating the very foundational tasks that once served as entry points for junior professionals, the technology threatens to turn the "experience trap" into a near-insurmountable barrier. This deepens the market's existing demand-supply divergence, creating a future where viable career pathways for new talent are dangerously eroded.
The policy implications are therefore twofold and urgent. First, interventions must target the root structural flaws now exacerbated by technology. This means aggressively promoting flexible and remote work to counter geographic inequality, and forging mandatory university-industry apprenticeships to break the “experience trap”. Second, navigating this complex transformation requires a shift from reactive policy to proactive stewardship. This is impossible without the continuous, granular intelligence that a real-time labour market observatory provides. By revealing precisely where the market is misaligned and how technology is amplifying those gaps, it offers the essential blueprint for building a resilient, equitable, and future-ready workforce.
This paper is based on research conducted by the authors at The Egyptian Center for Economic Studies. The research can be found at:
https://eces.org.eg/en/an-ai-driven-lens-on-the-demand-side-of-the-egyptian-labor-market-2021-to-datepart-i-a-framework-for-real-time-labor-market-intelligence-data-methods-and-key-findings/



Ahmed Dawoud is an Economist and the Head of the Data Analytics Unit at the Egyptian Center for Economic Studies (ECES).
Ahmed Wael Ahmed Habashy is an AI Engineer at the Egyptian Center for Economic Studies (ECES), specialising in the development of intelligent systems for labour market and economic analysis.

### From Resistance to Recovery: The Iranian Economy’s Fight to Survive

The fragile ceasefire announced in late June 2025 has paused the missile exchanges over the Middle East, but it has not silenced the alarms ringing through Iran’s economy. The direct military conflict with Israel and the United States (US) has tipped a nation already under immense strain into a state of acute economic crisis. The Iranian rial fell to a historic low, trading at 1 million Iranian rials to a US dollar. This collapse is not the result of a single factor, but the culmination of a vicious cycle rooted in structural dependency on oil, crippling international sanctions, and the unyielding financial demands of strategic programmes, which have adversely impacted national currency along with the lives of ordinary Iranians.
At its core, the Iranian economy suffers from a profound, decades-old dependence on oil. The energy sector, accounting for about 70 percent of total exports, has been the engine of the state, forms the bedrock of the government's budget. This over-reliance has created a critical vulnerability, a single point of failure that international sanctions have expertly targeted for years. Decades of restrictions, massively intensified by the “maximum pressure” campaign, have systematically severed Iran's access to the global economy. Sanctions have not only drastically slashed Iran's official oil exports, from a peak of over 2.5 million barrels per day to 20 percent of that in 2024, but have also excommunicated its financial sector from global networks like SWIFT. This has made legitimate trade nearly impossible, starving the country of the foreign currency needed to import everything from industrial machinery to essential medicines.
This chronic shortage of foreign currency reserves is a significant driver behind the catastrophic collapse of the Iranian rial. The government, deprived of its primary source of revenue and unable to borrow internationally, has been forced to cover its massive deficits by printing money. This has increased the inflation rate, which the International Monetary Fund (IMF) has estimated at over 43 percent, one of the highest in the world. The inflation rate is on an upward trajectory once again, after a brief reduction in 2024 (Graph 1). This has effectively wiped out the purchasing power and life savings of the Iranian population. The freefall of the rial is the most visible symptom of this deep-seated economic disease, where the cost of basic food items can surge frequently, making survival a daily struggle for millions.
This dire economic situation is compounded by the regime's strategic priorities. Despite the economic sanctions, Tehran still manages to export oil to countries like China through elaborate mechanisms and networks like alternative currency payments and front companies. This also forms the bedrock for a state-sanctioned ‘resistance economy’, which operates in the shadows and fuels a vast black market for currency and goods. These resources are used to fund Iran's nuclear and ballistic missile programmes, creating an impossible trade-off. Revenues earned from oil sales cannot be used to defend the rial's value or subsidise essential imports. This creates a feedback loop: as external pressure mounts, the regime perceives its strategic programmes as more essential for survival, thereby diverting even more scarce resources away from the collapsing economy, which in turn fuels further social and economic instability. The result is an economy trapped between harsh international sanctions and its own aggressive goals.

The Path to Economic Recovery
Iran’s economic crisis is not just a macroeconomic dilemma; it is a daily hardship for millions. From the collapse of the rial to sharp inflation, the geopolitical costs are being paid by ordinary Iranians. As a result, economic recovery is increasingly becoming a national imperative. Tehran can begin charting a course out of economic freefall by recalibrating its international and national economic strategies. Internationally, revival of the Joint Comprehensive Plan of Action (JCPOA) and Financial Action Task Force (FATF) compliance could unlock vast reserves of capital and credibility. On the domestic path, currency reform and smart de-escalation could stabilise the economy and rebuild public confidence. Together, these strategies can provide the much-needed stimulus to the Iranian economy.
On the international front, the JCPOA is not merely a diplomatic agreement; it represents the most viable path to economic recovery. Its potential revival offers a powerful “dual dividend”: the immediate relief from crippling economic sanctions and the strategic opportunity to redirect billions from a costly nuclear program toward national recovery. Comprehensive sanctions relief goes far beyond simply being able to sell oil legally. A revived deal would reconnect Iran to the global financial system, drastically lower transaction costs for trade, unlock over US$100 billion in frozen assets abroad and signal to the world that Iran is open for the foreign investment needed to modernise its economy. The second, often overlooked, benefit is the "peace dividend." The immense national resources, financial, technical, and human, currently dedicated to maintaining and advancing a high-level nuclear programme, could be strategically reallocated. The capital spent on advanced centrifuges and fortified underground facilities could instead fund social safety nets and rebuild infrastructure, thereby alleviating the economic hardships of Iranians. This dual effect is why the JCPOA remains the most potent solution to Iran’s economic crisis.
Despite the compelling economic logic, the deal is paralysed. The reasons are rooted in a profound lack of trust and deadlocked domestic politics. In Washington, there are persistent demands to expand the deal to cover Iran's ballistic missile program and its regional activities, though the “Axis of Resistance”, issues Tehran considers non-negotiable pillars of its national security. From Tehran’s perspective, the US unilateral withdrawal in 2018 is the foundational breach of trust. Hardline factions argue that the US cannot be trusted and demand guarantees against a future withdrawal, a guarantee that would be constitutionally and politically hard for the US President to provide. Furthermore, powerful entities like the Islamic Revolutionary Guard Corps (IRGC) have established the sanctions-busting ‘resistance economy’. For some within this faction, a full economic opening to the West is not an opportunity but a threat to their current political and economic dominance over the black-market economy. Tehran should aim at circumventing these issues by calculated political shifts, specifically by co-opting the IRGC. A sustainable recovery is impossible if the state's most powerful institution remains invested in a parallel economy.
Another complementary priority must be to tackle a significant obstacle to Iran’s economic reintegration: its blacklisting by the Financial Action Task Force (FATF). Compliance with FATF standards on anti-money laundering and combating the financing of terrorism is the essential key to unlocking the global banking system. Without it, sanctions relief remains a hollow victory. Recent progress highlights the deep divisions on this issue within the Iranian establishment. In a significant development, Iran's Expediency Council approved the Palermo Convention against transnational organised crime, a key FATF requirement. This move, championed by President Masoud Pezeshkian’s government, signals a clear push toward international compliance to attract investment and ease trade. However, the final, most contentious hurdle, the Combating the Financing of Terrorism (CFT) bill, remains. Hardline factions, particularly those aligned with the IRGC, argue that full compliance could hamper their support for regional allies like Hezbollah, viewing it as a threat to a core pillar of their ideology and power. This sets the stage for the ultimate political gambit for Iran’s Supreme Leader, Ayatollah Ali Khamenei: shepherding the IRGC's transition from a spoiler to a stakeholder, positioning its vast engineering and logistical arms as primary partners for foreign investment. Only by resolving this internal conflict and achieving FATF compliance can Iran ensure that the path to economic recovery is politically feasible.
While the diplomatic and political stalemate is resolved, Iran should try to provide the much-needed economic stability to its population through domestic reforms. An effort in this direction, that should be approached with caution, is the redenomination of its national currency. Central Bank Governor Mohammad Reza Farzin announced earlier in 2025 that the plan to strike four zeros from the rial and formally replace it with the "toman" would be implemented this year. The new system would peg one toman to 10,000 rials. While this would not end the economic hardship, it could be a psychological move that provides an immediate break from the optics of inflation. A study by Karnadi and Adijaya concluded that redenomination can decrease the inflation rate and increase the level and growth of real GDP per capita. However, this study also suggests that redenomination policy will not be effective if a country is politically unstable. Therefore, political stability must be achieved in Iran for redenomination to have the desired impact. Concurrently, Iran can work to create a more favourable environment for eventual negotiations through quiet de-escalation. By taking modest, reversible nuclear steps, such as halting enrichment at higher purities, it can build goodwill and reduce international pressure. This could encourage a tacit relaxation of sanctions enforcement on oil sales, providing a vital economic lifeline without the political cost of a rapid escalation.
In conclusion, Iran’s recovery will not come from grand bargains alone. It will hinge on quiet recalibrations. The real test is not just what Tehran concedes abroad, but also what it reclaims at home. To escape economic freefall, the regime must refocus from resistance to recovery.



Samriddhi Vij is an Associate Fellow, Geopolitics at the Observer Research Foundation–Middle East.

### A Maximalist Moment: Why Israel Isn’t Done with Iran

Following the 12-day war between Israel and Iran, experts are assessing the impact, particularly the damage to  Iran’s nuclear programme and the status of its ballistic missile stockpile. While these elements are critical to understanding future dynamics, they tend to overlook the fact that the ceasefire has de-escalated the conflict for now, but it has not stopped it.
For Israel, the attack that began on 13 June was not a final blow, but a calculated first strike in what promises to be a prolonged conflict. In Israel, some are advocating the “Hezbollah model”—continuing to strike despite a ceasefire. Though unacknowledged by either side, it is clear that Israel is still using what some have called the “free highway to Tehran”—an aerial corridor Israel planes use to fly over Iran— to maintain air superiority over the Islamic Republic.
The Israeli security leadership envision two main trajectories that the Israel-Iran conflict can take, after the unprecedented war the two countries waged against each other. The first ends with a tougher, more limiting nuclear agreement, with Iran agreeing to make concessions it previously rejected. One of those major concessions includes renouncing any form of domestic enrichment capabilities—a demand that Iran had long considered a non-starter prior to the war.
Although Iran may come back to the table of negotiations, the chances that it will agree to such a condition are low. Indeed, in the aftermath of the 12-day war, Iran has already repeated that it has no plans to stop enrichment. Israelis have sometimes invoked the “Libya model”, where  Muammar Gaddafi agreed to fully roll back his nuclear programme, at the height of the “War on Terror” and months after the US invasion of Iraq.
However, the Iranians' takeaway from this model is that Gaddafi’s decision ultimately cost him his life. Perhaps having a bomb would have prevented foreign intervention that helped unseat the Libyan dictator,  and having a nuclear weapon represents the ultimate guarantee of regime survival. It is also true that Iran’s nuclear programme is what invited foreign aggression in the first place, as well as Iran’s power projection in the region.
Yet, some in Iran may argue that diplomacy, not the bomb, offers the best path forward. Since the 7 October attack, Israel has adopted a pre-emptive approach, even at the risk of prompting larger confrontations. There is no reason to think that this will be any different in Iran.
The second path is that of a protracted war between the two nations.  However, this time, Israel won’t be on the defensive, fending off attempts by Iran to surround it with increasingly potent proxies. With Iran poised to have a serious discussion on whether to dash towards a bomb, if that is at all possible, Israel simply cannot just step out of Iran’s airspace and wait to see who wins the internal debate that may shape Iran. It will feel compelled to monitor—and, if necessary, degrade—what remains of Iran’s nuclear infrastructure.
Although a regime change in Iran was not in the cards for Israel, Netanyahu has long advocated for a “comprehensive” policy against Iran, aiming to target all dimensions of Iranian power—its proxies, nuclear ambitions, missile programmes, and internal institutions. This maximalist camp has opposed any sort of "compartmentalised" deal that would seek to focus solely on one aspect. This is one of the reasons why Netanyahu has always been against the 2015 Joint Comprehensive Plan of Action (JCPOA). Contrary to its name, the deal was viewed as not comprehensive enough, and allowed Iran to shift focus onto other areas.
The aftermath of 7 October, which saw the quasi defeat of Hezbollah, the fall of the Assad regime (one of the centerpiece of the “Axis of Resistance”), the destruction of Hamas as a cohesive military force, and has now led Israel to have air superiority over Iran, has vindicated the maximalist camp. This larger regional context is also testing the true end goals of this “maximalist camp”—a group not known for restraint when strategic opportunities emerge. What the current Israeli government may have planned isn’t a return to diplomacy, nor to put a pretty bow on the 12-day war. Rather, the war may well be the opening move in a more expansive effort, not just to dismantle Iran’s nuclear programme, but to confront and possibly neutralise the Islamic Republic altogether.



Michael Horowitz specialises in geopolitical and security risk management with a focus on the Middle East and North Africa.

### Political Participation in the Gulf: Parliaments and Technology

As of 2024, the Gulf region has undergone a subtle but significant transformation in its landscape of political participation. Once largely characterised by electoral forms of legislative representation across most of its states, the region is now evenly split. Three Gulf states, namely Bahrain, Oman and the United Arab Emirates continue to hold some form of national elections, while Qatar, Saudi Arabia and at least temporarily, Kuwait, do not. This evolving reality underscores the need to revisit the current state of political participation in the Gulf.

Overview of Parliamentary Bodies in the Gulf 
United Arab Emirates (UAE)
The UAE’s 40-member Federal National Council (FNC) serves as a unicameral advisory body. The council is typically renewed every four years, with the most recent renewal in 2023. The number of seats assigned to each emirate is proportionate to its population, and Emirati women must occupy half of the council. Moreover, the council is equally distributed between those members who are appointed by the respective emirate rulers and those who are elected through an electoral college. Each  emirate’s electoral college consists of members equal to at least 300 times the number of seats allotted to it and is chosen by the rulers.
The FNC plays a consultative role in the legislation process. While it cannot veto or pass laws, it can review federal bills for approval, amendment or rejection. Moreover, it can question ministers but not impeach them. It can also make recommendations to the cabinet and discuss any topic subject to the government cabinet’s tacit approval that it’s not against the high interests of the UAE. However, should such recommendations be rejected by the cabinet, it must notify the FNC of the reasons behind the decision. According to a study on the FNC’s 2011–15 term, its members have been discreetly able “to also ask questions of ministers to put forward legislative proposals and funding recommendations and to set up temporary committees [on various reform topics]”. Additionally, another study on later terms of the FNC found an increased number of parliamentary questions exercised by its members empowered the body, with the government increasingly relying on policy recommendations drafted by its members.
Kingdom of Bahrain
Bahrain’s bicameral National Assembly consists of an upper house referred to as the Shura Council comprising 40 members appointed by the King, and a lower house referred to as the Council of Representatives, also made up of 40 members but elected by constituent votes. Bahrain set this dual structure to ensure “optimal functioning of parliamentary work through the principle of mutual oversight between the two Chambers”. Both houses serve four-year terms, which may be extended by two years via royal decree.
The National Assembly holds limited authority. Notably, it cannot withdraw confidence from the Prime Minister, though it may do so for individual ministers with a two-thirds majority. Should the elected majority prove unable to cooperate with the Prime Minister, the matter is escalated to the king. However, members of the lower (elected) chamber can review bills passed by the cabinet, and amend, approve, or reject them before forwarding them to the upper (appointed) chamber. Additionally, any member can propose legislation, which is subsequently referred to a specialised committee for evaluation. Parliamentary oversight mechanisms include the formation of investigative committees to scrutinise government actions, the submission of formal questions to ministries, and recommendation of policy measures for government action.
Sultanate of Oman
In Oman, the Parliament includes approximately 180 members, divided almost equally between the upper appointed chamber (the State Council) and the lower elected chamber (the Shura Council). Though both chambers share similar legislative powers, the Shura Council has exclusive rights to question ministers and review ministry reports. Nonetheless, all legislation must be approved by the Sultan, and even council-initiated proposals require initial ministerial approval. Moreover, all members are appointed for four-year terms, and the State Council is typically selected from elite categories such as former ministers, diplomats, judges, military officers, academics, business leaders, or others chosen at the Sultan's discretion.
State of Qatar
Qatar’s 2004 Constitution mandated the transformation of its Shura Council to a partially elected unicameral parliamentary body. However, the elections were not enforced until October 2021. An academic study on the 2021 elections found that voters’ decisions were driven by tribe and family-related attributes. Until 2024, 30 members were elected and 15 were appointed, but when a referendum was approved to turn the 45-member council into a fully appointed one, the structure of the Council changed.
The Council is responsible “for proposing new laws, reviewing and approving draft legislation and decrees, as well as approving the state’s general budget”. Council members can direct questions to the Prime Minister or ministers to seek clarification on matters within their purview. They can also submit their interpellations to ministers regarding issues within their jurisdiction, although this process requires the approval of one-third of the Council members.
Kingdom of Saudi Arabia
In Saudi Arabia, the Shura Council serves as the unicameral parliamentary body. The Council consists of a chairman and 150 members chosen by the King from “among people of knowledge, expertise, and specialization”. The Council may propose new laws or suggest amendments to an existing law by studying it within the Council, later submitted to the King. Therefore, the Shura Council fits in two steps within the legislative process: at the beginning of the proposal stage, or in the review stage before its finalisation.
State of Kuwait
Lastly, until its dissolution in 2024, Kuwait had a unicameral parliamentary body known as the Kuwait National Assembly, which was fully elected. The Assembly comprised 50 Members of Parliament (MPs) who were directly elected through universal suffrage and secret ballot. Alongside the elected MPs, cabinet ministers, appointed by the emir, also sat in the Assembly as ex-officio members. These ministers had voting rights on all matters except motions of confidence. MPs had the authority to interpellate cabinet ministers and the prime minister on issues within their remit, which could lead to motions of no-confidence. Additionally, the constitution allowed the Assembly to initiate a motion of no-cooperation specifically targeting the prime minister. These mechanisms contributed to persistent legislative-executive deadlock, ultimately resulting in the Assembly’s dissolution.
The parliament’s dissolution may have arisen from popular backing. This insight comes from Arab Barometer data of 1,210 face-to-face interviews conducted between 14 February and 18 March 2024: only a few months before the parliament’s dissolution in May 2024. Many Kuwaitis viewed the National Assembly as an obstacle to effective governance, with 66 percent believing it slowed down the government and 60 percent agreeing that the government could have achieved more without parliamentary constraints. Only 39 percent saw MPs as qualified, compared to 50 percent for government ministers, indicating widespread dissatisfaction with parliamentary performance.

Rethinking Participation in the Gulf States through Electronic Platforms
Signs of a decline in electoral systems, as evidenced by Qatar and Kuwait lately, may be accommodating a young population across the GCC that prefers other outlets for political participation. Countries outside the definition of ‘liberal democracies’ have increasingly used technology for political and administrative purposes. This includes e-government systems and e-participation initiatives. While participation in politics is a characteristic of liberal democracy, it is not restricted to that form of government. Many other countries incentivise political participation for deliberative or legitimisation purposes, and technology can aid in that. For the Gulf countries, a young population may mean that digital tools are viewed as more useful for deliberative practices than traditional institutions, and this could be the path forward for the region.
Qatar and Saudi Arabia serve as an example to this end; despite having no national elections, they have moved forward with e-participation. For example, Saudi Arabia was ranked first in the Gulf and seventh in the world for its UN e-Participation ranking in 2024. Its Tafaul Platform has had 2,187 consultations with the public, engaging them across topics spanning Education, Health, Environment, Justice, Labor/Human resources, and Social Protection or Social Development. It lists 72.8 million users and 133.3 million visits since January 2025. Meanwhile, Qatar’s Sharek Platform has a forum where users can respond to questions such as “Should standardization testing in education be increased or decreased?” It also has polls and policy consultations.

Conclusion
While electoral mechanisms have persisted or evolved in some states like the UAE, Bahrain, and Oman; they have paused or retreated in countries like Kuwait and Qatar, while never having been adopted in Saudi Arabia. Having developed an overview of the state of parliamentary bodies in the Gulf, it was also important to look ahead towards the embrace of digital platforms for consultation, which illustrates that Gulf governments may be reimagining participation beyond ballot boxes. Such tools require further research and examination as to the role of technology in the future of the Gulf’s political participation.



Mahdi Ghuloom is a Junior Fellow, Geopolitics at the Observer Research Foundation (ORF) - Middle East.

### The UAE–Jordan CEPA: Trade as a Tool for Middle East Stability

The recently enforced Comprehensive Economic Partnership Agreement (CEPA) between the United Arab Emirates (UAE) and Jordan signals a watershed moment for Middle Eastern trade. While the UAE has signed numerous CEPAs with global partners, this marks its first such agreement with another Arab nation. This represents a significant upgrade from its preceding, less comprehensive regional frameworks—such as the Greater Arab Free Trade Area (GAFTA)—as the UAE-Jordan CEPA is a modern, sophisticated agreement covering goods, services, investment, and digital trade.
This CEPA is also a significant development in the regional economic policy. It will create a more integrated economic corridor between the Gulf and the Levant, enhancing global market access for both nations. It allows goods manufactured in free zones to benefit from preferential tariffs, a feature designed to supercharge trade and manufacturing in both countries.
For Jordan, the agreement offers an opportunity to diversify its export markets. The CEPA is structured to help Jordanian businesses utilise the UAE's established logistical infrastructure, such as the Jebel Ali Port and its global airline network, to more easily access Asian markets. This is expected to support Jordan's key value-added sectors—such as pharmaceuticals—by streamlining the shipping process and enabling the re-export of goods to a broader global client base. In the UAE’s context, Jordan serves as a stable base for expanding economic activity into the Levant. Jordan's economy has remained relatively resilient amid regional security risks and a cut in assistance from the United States (US) Agency for International Development. This resulted in a stable outlook for the aid-reliant economy as assessed by the ratings agency S&P Global in March 2025. The agreement thus helps UAE-based companies manage investments in neighbouring markets—including potential reconstruction projects—by operating in a relatively legally secure and predictable environment. Additionally, it facilitates a synergy where UAE capital can partner with Jordan's cost-competitive and skilled workforce for service-based industries, thereby driving more investment and capital into Jordan.

This CEPA can improve Regional Stability
The economic prosperity generated by this corridor can have far-reaching implications beyond Jordan's borders, promoting wider regional stability. Jordan is a geopolitical ‘buffer zone’ that insulates the Arabian Peninsula from the more volatile conflicts of the Levant. A Harvard study by Babbitt et al. indicated that stability in Jordan is often viewed as crucial for the overall stability of the Middle East. Other studies on Jordan have also revealed a negative relationship between political instability and economic growth. Hence, as economic self-sufficiency increases when Jordan begins to reap the benefits of the CEPA, the resultant political stability might serve as a critical barrier to the spillover of crises from Syria and Iraq. Strengthening Jordan’s economic foundations is, for the UAE, a means of proactive or forward defence. An economically fragile Jordan would be more susceptible to influence from non-state actors or rival regional powers, creating a potential corridor for instability that can spread. The CEPA aims to create a prosperous and stable partner, ensuring that this vital strategic space remains anchored in a cooperative economic agreement.

As a result, the UAE-Jordan CEPA is not just a tool for economic growth, but a piece of geoeconomic statecraft designed for long-term investment in regional security. It is a focus area that the UAE has often emphasised. In a Middle East defined by volatility, the agreement uses economic integration as a potent instrument to stabilise Jordan against the internal and external pressures that have destabilised its neighbours, by building Jordanian resilience from the inside out.
The most immediate threat to this resilience is the Jordanian government’s inability to provide meaningfully for its citizens. Jordan faces immense internal pressure from high youth unemployment and the immense cost of hosting a large refugee population. Graph 1 showcases Refugees under the United Nations High Commissioner for Refugees (UNHCR) mandate in Jordan vis-à-vis the country’s unemployment rate, which has increased since 2013. While the unemployment rate has reduced in the past few years, it still stands at 16.5 percent of the total labour force.
This creates a fertile ground for domestic discontent. The CEPA directly addresses this by stimulating job-creating sectors within Jordan—such as pharmaceuticals and business services. With a special focus on internationalising Small and Medium-Sized Enterprises, this CEPA will provide tangible opportunities for its young and educated workforce. Therefore, this agreement can potentially address the economic despair that has fueled political instability across the Arab world. By strengthening Jordan’s capacity to provide for its citizens, the UAE is helping to solidify the foundations of the Jordanian state itself.
Unlike older models of providing direct financial aid, which can create dependency, the CEPA is designed to build Jordan's productive capacity and integrate it into global value chains. Such dependency is often corrosive, as it can reduce a government's accountability to its citizens and undermine the incentive to build robust, self-sustaining domestic economic policies. The CEPA empowers Jordan rather than making it a client state.
UAE-Jordan did not just sign a trade deal; they are actively using economic levers to engineer a more stable and secure neighbourhood. In doing so, they also offer a powerful blueprint for using economic integration as a foundation for long-term security across the Middle East.



Samriddhi Vij is an Associate Fellow, Geopolitics at the Observer Research Foundation–Middle East.

### Digital Infrastructure, Strategic Power: The Gulf’s Data Centre Boom

In the digital age, data is emerging as the world’s most strategic asset, powering everything from Artificial Intelligence (AI) innovation and e-government platforms to defence systems and smart cities. At the heart of this transformation are data centres, the critical infrastructure that store, process, and route massive volumes of digital information.

For the Gulf Cooperation Council (GCC) states, the rise of data centres signals more than technological advancement. It represents a strategic recalibration aimed at securing digital sovereignty, driving economic diversification, and bolstering national resilience.
Data Centres and Digital Sovereignty in the Gulf
Data centres are the operational core of modern digital ecosystems. They enable cloud computing, financial systems, AI analytics, biometric databases, and secure communications. As demand for high-performance computing surges globally, hyperscale facilities capable of consuming tens of megawatts are becoming the norm. Hyperscale typically refers to facilities that house thousands of servers and span over 10,000 square meters (or about 100,000 square feet). A single hyperscale AI data centre can consume over 50 megawatts of power.

Control over these facilities offers geopolitical leverage, economic empowerment, and enhanced military capabilities. Economically, data centres are foundational for emerging sectors such as AI, smart cities, fintech, and digital media. From a security perspective, they serve as the central nervous system for command-and-control, intelligence analysis, and surveillance operations.
Strict data localisation laws have emerged across the region. Saudi Arabia and the UAE now require sensitive data to be stored within national borders, compelling multinational companies to host data locally. 
The GCC’s data centre boom is closely tied to the rise of AI and a global shift toward digital sovereignty. Data centres are integral to national transformation programmes, such as Saudi Arabia’s Vision 2030 and the UAE’s Digital Economy Strategy. Saudi Arabia has committed $1.5 billion to AI compute projects, while the UAE’s G42, a leading Abu Dhabi-based AI and cloud computing company, operates sophisticated environments tailored for genomics, predictive analytics, and autonomous technologies. G42 is also spearheading the $20 billion Stargate UAE project, an AI-focused hyperscale data centre with a planned capacity of 5GW and the ability to host up to 2.5 million GPUs, in partnership with OpenAI, Nvidia, Oracle, and SoftBank. As OpenAI’s first international site, the project positions the UAE as a strategic node in the global AI infrastructure and highlights its commitment to sovereign AI ecosystems.

Simultaneously, strict data localisation laws have emerged across the region. Saudi Arabia and the UAE now require sensitive data to be stored within national borders, compelling multinational companies to host data locally. These regulations not only enhance national oversight but also incentivise domestic infrastructure development.

Strategically positioned local data centres significantly reduce latency by processing data closer to end-users and eliminating the need to route data internationally.  This is particularly critical in sectors such as high-frequency trading, smart surveillance, autonomous vehicles, and border control, where milliseconds can impact performance and security outcomes.
Security, Dual-Use Infrastructure and Cyberthreats 
As data centres evolve into national critical infrastructure, they face rising security risks. These facilities host sensitive governmental, commercial, and military data, making them prime targets for cyberattacks. Incidents like the Shamoon virus attacks on Saudi Aramco, which in 2012 wiped data from over 30,000 computers and disrupted operations, demonstrate the scale of potential disruption. In response, GCC states have developed robust national cybersecurity frameworks and incorporated zero-trust architectures, biometric access, and AI-based threat detection.

Many Gulf data centres serve both civilian and military roles, powering command systems, surveillance analytics, and digital logistics. This dual-use reality elevates their strategic value and vulnerability, necessitating clear separation protocols, classified zones, and high-assurance encryption to guard against espionage or hybrid attacks.
GCC states have developed robust national cybersecurity frameworks and incorporated zero-trust architectures, biometric access, and AI-based threat detection.
Operating data centres in arid climates presents unique challenges. Extreme heat and water scarcity require innovations in cooling and power supply. Solar energy, battery storage, and liquid immersion cooling are being deployed to improve energy efficiency. The goal: achieve PUE ratios (Power Usage Effectiveness, a metric that measures how efficiently a data centre uses energy beyond computing needs) below 1.3 while ensuring continuous uptime in harsh environments.
Gulf Ambition: Sustainability and Commitment to the Digital Age 
Geographically, the Gulf’s location at the crossroads of Asia, Europe, and Africa amplifies its potential as a digital corridor. The UAE leads the region in operational data centres and has embedded sustainability into its digital transformation narrative. Abu Dhabi’s G42 and Dubai’s Moro Hub, the world’s largest solar-powered data centre, are testaments to its dual strategy of technological openness and sovereign infrastructure. Through multi-cloud partnerships and sovereign cloud zones, the UAE balances foreign engagement with data control.  These centres integrate energy-efficient cooling, liquid immersion technologies, and AI-assisted management to reduce emissions and operational costs. NEOM’s data infrastructure is also being designed to run entirely on renewable energy. With sustainability benchmarks increasingly tied to investment attractiveness, the Gulf’s push toward environmental, social, and governance (ESG)-compliant data centres enhances its competitiveness in global digital markets.

In Saudi Arabia, digital infrastructure is a core pillar of Vision 2030, with the NEOM region set to host a 1.5-gigawatt data centre campus in its Oxagon industrial zone, one of the largest planned data installations globally. These facilities will serve AI-driven urban management, surveillance, and logistics platforms envisioned for NEOM’s futuristic smart city model. Saudi Arabia is also focused on hyperscale development, drawing investments from Oracle, Microsoft, and Tencent. Local company stc’s project “centre3” aims to host 70 percent of Saudi internet traffic domestically by 2030.

Though smaller in scale, Oman has carved a niche by becoming a neutral digital transit hub. Located at the intersection of major undersea cables, Muscat and Sohar are evolving into vital digital transit and interconnection points through partnerships with global players like Equinix and Omantel. Equinix’s presence and strategic regulatory openness have allowed it to attract global operators. Its role in regional redundancy and disaster recovery is becoming increasingly valuable.

Bahrain was an early mover with its 2017 “Cloud First” policy and the launch of AWS’s first Middle East cloud region. By combining tax incentives, progressive data protection laws, and cloud-focused startup ecosystems, Bahrain exemplifies how smaller states can lead through agility and reform.
Building Capacity: Investment, Talent and Regional Integration 
To support infrastructure growth, GCC governments have implemented favourable investment policies, including tax incentives, land grants, and fast-track regulatory approvals. Saudi Arabia’s Public Investment Fund (PIF) is backing hyperscale developments, while Oman offers strategic coastal land and regulatory clarity.
With sustainability benchmarks increasingly tied to investment attractiveness, the Gulf’s push toward environmental, social, and governance (ESG)-compliant data centres enhances its competitiveness in global digital markets.
Training local talent has become a strategic priority. Programmes such as Saudi Arabia’s Datacenter Academy and the UAE’s “One Million Arab Coders” are cultivating skills in cloud operations, cybersecurity, and data infrastructure management. Sovereign operators like G42 and Khazna offer in-house training. These efforts aim to localise technical roles and reinforce digital sovereignty.

To ensure redundancy and security, Gulf states are investing in failover architectures (systems that automatically switch to a backup server or site if the primary one fails) that mirror critical data across cities and borders to enhance collective resilience. A “GCC Data Grid,” an interconnected fibre and storage backbone, is under consideration to serve as a regional safety net against geopolitical shocks and cyber disruptions.

The rapid rise of data centres across the GCC represents a strategic reimagining of digital power in the 21st century. These facilities are no longer merely enablers of cloud services. They are vital components of economic diversification, security resilience, and state capacity. As Gulf states deepen their investments in sovereign, sustainable, and secure digital infrastructure, they are positioning themselves not just as adopters of global innovation, but as architects of a new geopolitical digital order.



Dr Kristian Alexander is a Senior Fellow and Lead Researcher at the Rabdan Institute for Security & Defence Research, Abu Dhabi, UAE.

### Breaking the Economic Fragmentation Paradigm: UAE-Romania, Interregional Cooperation between Connectivity Hubs

The world economy with its trade and investment components is at a precarious moment, it is facing a downturn as increasing “trade tensions, along with policy uncertainty, have significantly weakened the global economic outlook for 2025” and “persistent weakness in global investment growth drags down long-term economic prospects.” – analyses the United Nations Department of Economic and Social Affairs (UNDESA) in its World Economic Situation and Prospects 2025 Mid-year update.
The geoeconomic potential of regional connectivity hubs
Considering the UNDESA’s projections and the seemingly deteriorating landscape of trade and investment relations amid rising geopolitical tensions, the perspective of enhanced economic cooperation between countries, which are regional connectivity hubs, is increasingly valued. Cooperation can counter and prevent fragmentation into isolated or rival economic blocs.

The risk of such fragmentation is a core component and prevailing narrative of global geopolitical and geoeconomic foresight scenarios. For instance,  the Organisation for Economic Co-operation and Development (OECD) mentions the potential of a Multitrack World “where humanity has formed into several separate and largely parallel clusters, each operating within its own data infrastructure and digital ecosystem” by 2035, and the United States’ National Intelligence Council’s Global Trends report portrays a world “fragmented into several economic and security blocs of varying size and strength” by 2040. The United Arab Emirates’ (UAE) Future Outlook equally describes the potential disintegration of the global free trade system as a megatrend that may transform economic cooperation by 2050. The same Outlook highlights that re-export hubs, such as the UAE, “might be relatively more vulnerable to rising protectionism if global trade slows down […] Even more so, it will be important for policymakers in re-export hubs to maintain pro-trade and pro-investment policies.” Since the first edition of the Future Outlook in 2017, the global economic landscape has decayed as growing geopolitical adversity reshapes existing trade and investment patterns and partnerships.

The countries located at the crossroads of interregional and intercontinental trade flows and integrated into regional connectivity ecosystems have a significant potential to be active players—not bystanders—of the evolving international trade landscape. However, for states to capitalise on their geostrategic location, political will must meet visionary thinking and the capacity for effective resource mobilisation. If the above criteria are met, building and reinforcing economic partnerships between countries that are regional trade and logistics hubs, but not directly linked to one another by interregional connectivity projects, can help bridge strategic trade gateway states.

This paper examines the evolution and prospects of bilateral economic relations between the UAE and Romania to assess the potential for enhanced economic cooperation between gateway states in different regions
Recognising shared potential – when gateway states invest in their peers
The UAE and Romania are cognizant of their geostrategic location and are willing to leverage it. The UAE describes itself as a country that “has been naturally positioned as a hub for international trade between Asia and Europe on an east-west axis and the CIS [Commonwealth of Independent States] and Africa on north– south axis”, at “the Crossroads of Global Commerce in [the] Middle East”. Conscious of the benefits from its strategic location, leveraging the UAE’s central role in global trade is a key pillar of the state’s vision. In its forward-looking visionary document, We the UAE 2031, the country views itself in the future as a “trusted bridge for international trade and partnerships” and “an essential player in economic cooperation”.

Similarly to the UAE, Romania—one of the European Union’s (EU) easternmost member states, bordering the Black Sea—portrays itself as a “gateway of business from the east to the west”, at “the crossroads of three great markets: the European Union, the CIS states and the Middle East.” The country is part of various trans-European corridors under deployment, which anchor it to the EU’s transport ecosystem. The Orient / East - Med corridor (6,480 km) and the Rhine–Danube corridor (5,910 km) connect Romania to Central and Eastern Europe, allowing the country’s main port, Constanta—the largest port of the Black Sea—to get deeply integrated in the EU’s trade routes. Therefore, the country heavily invests, with the support of EU funds, in the development of its highways and welcomes foreign investors to build or modernise its land-based and maritime infrastructure, as outlined by Titus Tintean, Economic Counsellor at the General Consulate of Romania in Dubai.[1]

Being aware of its “rich history in business and trade” and its strategic geographic location that the county itself describes as a competitive advantage, Romania aims to leverage its position as a bridge between regions to attract foreign investments. According to Titus Tintean, one of the fundamental goals of the country’s economic promotion strategy is to ‘become through Constanta’s port the Southern Gate of the EU to the Middle East and the Northern Gate of the Middle East to the EU.’ Tintean also highlighted that Romania recognises the UAE’s privileged position as a regional connectivity hub to a continent with growing economic and demographic prospects.

The economic potential of the two strategically located countries was mutually recognised early on, only a few years after the foundation of the UAE: in 1974, Romania opened an Office for Economic Promotion and Cooperation in Dubai. In 1993, Romania was among the first countries from Central and Eastern Europe to sign a Bilateral Investment Treaty with the UAE, with the desire to “create favourable conditions for greater economic cooperation […] particularly for investments by investors of one Contracting Party in the territory of the other Contracting Party.” Bilateral trade between the two countries roughly tripled over the past two decades, with a total trade volume of US$271.5 million in 2010 and US$824.3 million in 2023, while non-oil exports from the UAE nearly doubled during the same period, rising from US$38.7 million to US$64.0 million. As stated by Titus Tintean, by the 2020s, the UAE established itself as one of Romania’s primary trade partners in the Gulf and the wider region.

Trade is not the only flourishing aspect of the UAE-Romania economic cooperation. The two states have repeatedly identified investment promotion as a priority sector, and it is now yielding results. Mutual investments between the two countries are increasing, with Emirati investments exceeding Romanian ones. Based on the amount of the Foreign Direct Investment stock in Romania in 2023, the UAE ranked as the country’s major investor from the Gulf. The leadership of both states has identified technology, transportation, logistics, and food security as key priority sectors for investment. Considering the countries’ geostrategic location for interregional trade and connectivity, investing in transportation and logistics is particularly important.
Investing in connectivity – breaking the economic fragmentation paradigm
A notable example of recognising the economic potential of maritime transport infrastructure at geostrategic junction points is the investments made by UAE companies in Romania’s Constanta port. In 2022, Dubai’s Ports, Customs and Free Zone Corporation (PCFC) and DP World signed an agreement with the Romanian government to develop a new terminal to increase cargo vessel flow. The infrastructure development aims to facilitate and accelerate cargo transit.

Looking beyond the shores, the prospects of Romania’s connectivity potential from the western coast of the Black Sea to the heart of the EU also attracted Emirati capital investments in ‘dry (land-based) ports’, highlighted the Economic Counsellor at the General Consulate of Romania in Dubai. For instance, DP World built an intermodal logistics hub at Aiud, in the “industrial heartland of Romania”. The project seeks to link DP World’s “existing sea, rail, barge and truck services across Romania” to “enhance the movement of goods between mainland Europe through to the Black, North and Adriatic Seas.”

Investments of this strategic nature, with the explicit aim of connecting transport roots and boosting trade on a cross-regional scale, serve as antidotes to geoeconomic fragmentation. Extending beyond the local impact of bilateral cooperation, Romania, being a member of the EU and the UAE of the GCC, the economic partnership contributes to the market dynamics and prosperity of the two regions.

The European Commission recognises the growing strategic importance of investments in developing port infrastructure in maritime hubs such as Constanta, which handles higher volumes as geopolitical conflicts reshape global trade patterns. This approach was underpinned in January 2024 by the green light given by the European Commission for “a €126 million Romanian scheme to support investments in ports facing increased trade flows.’ The aid, in question, is provided as grants “up to €10 million to logistics companies active in Romanian maritime and inland ports.”
Conclusion
Recognising the potential of connectivity hubs at the intersection of regions and having the political will and capacity to harness this potential is one of the cornerstones of the UAE-Romania bilateral economic cooperation. The two countries leverage and capitalise on their gateway position from the main maritime trade routes to the heartland of their respective continents. Romania and the UAE value trade and investment as a means to foster growth and prosperity, and they proactively promote this approach on the global stage.

Such cooperation does not merely serve the economic interest of the countries involved but also has a greater spillover effect on regional and global trade. Due to its nature, economic cooperation between geographically distant connectivity hubs opposes the logic of fragmentation, fosters collaboration over confrontation and prevents the emergence of inward-looking, protectionist blocks.



Eszter Karacsony is an Associate Fellow (Geopolitics) and Programme Lead, Observer Research Foundation- Middle East.



[1] Titus Tintean, Economic Counsellor of the General Consulate of Romania in Dubai, was interviewed by the author of this article on 4 June 2025.

### Syria and the Abraham Accords: Recalculating Middle East Power Equations

On May 14, 2025, US President Donald Trump met Syria’s interim President Ahmed al-Sharaa, encouraging him to join the Abraham Accords and offering to lift all US sanctions as an incentive. Saudi officials, intent on securing Syria’s stability after the fall of the Bashar al-Assad regime, had actively lobbied for this direct US–Syrian engagement. Given that al-Sharaa has adopted a more moderate stance after previously heading Syria’s al-Qaeda affiliate, the Saudis believe he could help reshape his country’s trajectory.
Damascus’s normalisation of ties with Israel under US leadership would recalibrate alliances in the Middle East and beyond. It is therefore important to understand the priorities of the actors affected by Syria’s potential entry into the Abraham Accords and to examine the broader implications for regional and international power equations.

Abraham Accords Signatories Exercise Cautious Optimism
While current signatories to the Abraham Accords stand to gain from Syria’s potential accession, they are also exercising a fair degree of caution. The United Arab Emirates (UAE), which reopened its embassy in Damascus in 2018, has reportedly facilitated back-channel security talks between Israel and Syria. While UAE diplomatic advisor Anwar Gargash stressed vigilance owing to al-Sharaa’s ties to extremist factions, the UAE is engaging him given his more moderate rebranding. Bahrain has signalled its intent to follow suit and sees normalisation as essential for regional stability while demanding that Syria uphold counter-terrorism commitments and minority rights protections.
Both these GCC countries stand to benefit substantially from Syria’s reintegration into the regional fold after years of isolation during the Assad years. Abu Dhabi anticipates securing billions in reconstruction contracts, ranging from infrastructure to energy projects, delivering economic returns and geopolitical leverage over Iran. Manama, meanwhile, hopes to deepen security cooperation and strengthen its regional profile. In a recent visit to Syria, a Bahraini delegation focused on intelligence‐sharing for countering extremism, the safe return of Syrians, and investment opportunities in Syria’s reconstruction. Hence, for both these countries, regional stability through normalisation is a means to safeguard their own economic interests, as past conflicts have shown that chaos in the Levant can easily spill over into the region.
For similar reasons, Morocco has also welcomed Syria’s reintegration and has publicly backed Syria’s Arab League membership. Morocco also announced plans to reopen its embassy in Damascus, signalling its readiness to restore full diplomatic and economic engagement with Syria. Morocco aims to revive dormant trade, tourism and investment.
Turning to the most critical player of the Accords, Israel initially met Washington’s pivot with deep scepticism. Since al-Sharaa’s ascent, Israel escalated airstrikes in Syria, and Israeli officials have continued to describe him as an Al Qaeda jihadist. While Israel initially warned that lifting sanctions could empower extremist enclaves in Syria, it later outlined a pathway for Damascus to join the Accords. Israel suggested that Syria’s membership must be “performance-based,” requiring al-Sharaa to dismantle jihadi groups, outlaw terrorist organisations and guarantee minority protections.
However, a core point of contention that could derail this agreement is the status of the Golan Heights. Israel took the Golan in 1981 and has argued that its 1974 Disengagement Agreement with Damascus was voided after the collapse of the Assad regime. Consequently, al-Sharaa cannot realistically join the Accords without serious negotiations on the full or partial return of the territory. While al-Sharaa maintained that Syria could join the Accords under "the right conditions" in a recent letter to the US, Damascus has made clear that recovering the Golan is non-negotiable for such progress.
If resolved, whether through full return, limited autonomy or a security arrangement, addressing the future of the Golan Heights is critical for Israel. It would cement peace with Damascus, secure its northeastern border and integrate Syria into a US-backed security framework that further isolates Tehran. However, without meaningful progress on the Golan question, any Israeli–Syrian normalisation remains politically unattainable.

Continued Setbacks for ‘Axis of Resistance’
The Iran-led “Axis of Resistance” in its current form includes Hamas, Hezbollah, the Houthis and Iraq’s Popular Mobilization Forces (PMF). This Axis faced major challenges after the fall of former Axis partner Bashar Al-Assad. For Hezbollah, Assad's fall immediately disrupted critical Syrian supply lines for transferring Iranian weaponry, a "major, dangerous transformation" by the group's own admission.
For the Houthis in Yemen, Syria's role as a corridor for Iranian arms is now severely jeopardised. Similarly, the PMF in Iraq, which leveraged Syrian territory for proxy deployments, faces significant operational limitations. Furthermore, al-Sharaa has also actively cracked down on these routes. While Hamas initially welcomed Assad's fall, given their strained ties, al-Sharaa's crackdown on armed factions will challenge their regional operational environment. al-Sharaa’s assertiveness against Iranian proxies will only be compounded further if Syria proceeds with normalisation.
Syria’s inclusion in the Abraham Accords could also reduce the bargaining power of the Axis groups within their respective national power-sharing structures. In Lebanon, Hezbollah’s strategic interests have often differed from those of the country’s fragile coalition government, a divergence highlighted by Israeli ambassador to the US, Yechiel Leiter, who stated: “There’s no reason now why we wouldn’t be moving into accommodation with Syria and Lebanon,”. Further, Lebanon’s President Joseph Aoun is actively pitching for formats to disarm Hezbollah and Hamas. If the Syrian-Israeli normalisation goes through, Beirut could face renewed calls to disarm cross-border militias, impacting Hezbollah’s military wing.
The PMF and Houthis might be similarly impacted. Despite previous failed attempts, US pressure on Baghdad has once again prompted the PMF to consider disarmament to avert conflict with Trump. Trump’s May 2025 ceasefire deal with the Houthis paused US strikes in Yemen in exchange for a Houthi pledge not to target American ships in the Red Sea, granting the militia breathing space to consolidate both politically and territorially. However, with Syria’s shift to diplomacy, Iraqi and Yemeni militias may see new incentives to curb their activities. Al-Sharaa’s new legitimacy on the global stage, stemming from his moderate stance, could further reinforce this resolve. Iraqi leaders seeking international legitimacy and sanctions relief might push the PMF to integrate into Iraq’s security architecture or limit its autonomy. Similarly, as Yemen engages in political negotiations, the Houthis may find an incentive to transform from an armed militia to a political actor in exchange for reconstruction aid. As proxy militancy within the Axis begins to weaken, Hamas might find it harder to project itself as part of a coherent regional axis of resistance against Israel. Therefore, the loss of Syria’s rhetorical and political support will undermine the Axis’ shared “resistance” identity, leaving each group more isolated and vulnerable to international pressure.
Despite the challenges, some scholars have argued that the Axis of Resistance has long demonstrated a “shape-shifting” resilience, finding new avenues to project influence in the face of setbacks. There is the possibility that if a Syrian-Israeli normalisation of ties is reached, the Axis might pivot from confrontation to diplomacy by deepening political ties with extra-regional actors like Russia, engaging in back-channel negotiations, and leveraging their decentralised economic networks to maintain relevance.

Strategic Challenges for Moscow 
A potential Syrian-Israeli normalisation could reshape political contours beyond the region. The fall of Assad, who has now been given asylum in Russia, significantly undermined Moscow’s strategic interests in the region. Russia is alarmed by Washington’s outreach to Damascus and is concerned about the security of Russian regional assets. While Russian Foreign Minister Sergei Lavrov condemned Syrian militant groups, he also announced plans to hold high-level contacts with the government led by al-Sharaa. This signals a pragmatic decision to engage with an adversarial regime rather than sever ties altogether.
This approach is particularly significant as President al-Sharaa is still negotiating the future of Russia’s naval and air bases in Tartus and Khmeimim. The facilities appear likely to remain in exchange for diplomatic backing and financial compensation from Moscow. However, Syria’s accession to the Accords would undermine Russia’s strategic interests further, as US sponsorship would reduce Damascus’s incentive to engage with Moscow for post-war reconstruction.
Notably, Israel is lobbying the US to sponsor a weak and decentralised government Syria, including by allowing Russia to keep its military bases, to counter Turkey’s growing influence on Damascus. Jerusalem fears that Ankara-backed factions, particularly the Hayat Tahrir al-Sham (HTS), which led Assad’s ouster, could provide a safe haven for Hamas militants along Syria’s border with Israel. It remains unclear how much traction Israel’s proposals have with the Trump administration, which remains divided over the issue. Some officials and congressional "Russia hawks" believe that ousting Russia’s military presence would weaken Iran-backed proxies and boost US influence over Damascus, but others warn that such a move could derail fragile talks.
In either case, Syria’s entry into the Abraham Accords has the potential to rewrite power equations and security architectures, forcing actors to rethink long-held assumptions about the Middle Eastern order. Yet, the Syrian interim government’s legitimacy and capacity to implement any such agreement remain deeply in doubt. President al-Sharaa’s transitional government confronts a governance void so acute that United Nations Special Envoy for Syria Geir Pedersen warned of “real dangers of renewed conflict and deeper fragmentation”. However, Pedersen also acknowledged hope for Syria’s reconstruction post sanctions relief. Entering the Abraham Accords and accessing the resultant economic reconstruction funds could provide the necessary impetus for Syria’s reintegration into the international community. As Syria navigates this uncertain future, there is one thing that can be said with certainty: the effects of such a historic realignment, if one goes through, will be felt from Morocco to Moscow.



Samriddhi Vij is an Associate Fellow, Geopolitics at ORF Middle East.

### Building Sustainable Infrastructure in a Rapidly Expanding Gulf Estate Market

As cities grow and skylines rise, the climate consequences of construction have become impossible to ignore. Globally, buildings account for roughly 39 percent of energy-related carbon emissions (about 28 percent from operational energy use and 11 percent from the materials and construction processes, i.e. embodied carbon). With the global building stock expected to double by 2050, "upfront" carbon emissions from new construction could consume a major share of our remaining carbon budget.

The World Green Building Council has outlined clear targets: a 40 percent reduction in embodied carbon by 2030 for all new buildings, and net-zero operational and embodied carbon across the entire sector by 2050. Achieving these goals demands greener building codes, deep energy retrofits, cleaner materials, and innovative design(—)alongside bold leadership and coordinated policy, especially in regions experiencing construction booms.
Building Codes as Catalysts for Change
The UAE offers a valuable case study in translating vision into practice through regulation. In 2010, Abu Dhabi launched Estidama (meaning “sustainability” in Arabic) and the Pearl Rating System, requiring all new developments to meet at least a 1 Pearl rating (2 Pearls for government-funded buildings). Unlike voluntary frameworks such as LEED or BREEAM, Estidama is embedded in law. Masdar City further raised the bar, mandating a minimum 3 Pearl rating for its buildings.

Dubai soon followed. By 2014, the Dubai Municipality's Green Building Regulations became mandatory for all new public and private buildings. In 2016, the Al Sa’fat system introduced additional incentives for high-performing projects.

Ras Al Khaimah (RAK) joined the movement with the Barjeel Green Building Regulations in 2019, making them mandatory in 2020. Barjeel aims to cut energy and water use by around 30 percent compared to traditional buildings.

While these achievements are notable, gaps remain. As of recent years, several northern emirates had yet to adopt binding green building codes. Ensuring nationwide coverage and robust enforcement will be vital to avoid a patchwork approach and unchecked high-carbon developments.
Regional Momentum: Saudi Arabia and Beyond
Across the Gulf, sustainability is rising on national agendas. Saudi Arabia's Green Building Code, introduced as part of a broader national code update, establishes minimum standards for sustainable construction. The Mostadam rating system promotes sustainability across communities and developments, aligning with the Kingdom’s ambitious Vision 2030 agenda.

Mega-projects such as NEOM, particularly "The Line," aim to revolutionise urban living with a 100 percent renewable-powered, zero-carbon design, preserving 95 percent of surrounding nature. Similarly, Qatar’s Global Sustainability Assessment System (GSAS) has set a benchmark for green buildings, particularly during the 2022 FIFA World Cup.

However, the challenge remains ensuring that day-to-day construction, not just flagship projects, adheres to green standards. Enforcement across thousands of projects will determine the real impact of these policies.
Private Sector Leadership and International Standards
Regulations alone are not enough. The private sector must innovate beyond compliance. In the UAE, companies such as Aldar Properties and Masdar lead by example. Aldar has set a net-zero target for its operations by 2030 and its broader value chain by 2050, investing heavily in low-carbon technologies and renewable energy.

Masdar, Abu Dhabi's clean energy pioneer, continues to demonstrate the viability of sustainable infrastructure. Masdar City’s buildings use around 40 percent less energy and water than their conventional counterparts, integrating passive cooling, renewable energy, and sustainable transport solutions. Beyond Masdar City, the company has invested in over 11 GW of renewable energy globally.

International frameworks such as LEED and BREEAM have further supported regional progress. Many high-profile UAE projects, from airports to hotels, pursue LEED Gold or Platinum certification, helping the country consistently rank among the top nations outside the United States for LEED-certified projects. Blending local codes with global standards fosters a sustainability culture within the regional architecture and engineering sectors.
Beyond New Construction: Retrofitting and Circular Economy
Addressing new construction alone is insufficient. Around 80 percent of the buildings that will exist in 2050 already stand today. Many of these were built before efficiency standards were common and are inherently wasteful. For example, a Dubai study found best-performing hotels consumed 58 percent less energy and 65 percent less water than the worst-performing ones of similar size.

Retrofitting offers a huge opportunity. Upgrading insulation, sealing air leaks, modernising HVAC systems, and integrating smart controls can halve a building’s energy use. Dubai’s Etihad ESCO has retrofitted numerous buildings, achieving major efficiency gains. Similar initiatives are underway in Abu Dhabi.

In parallel, embracing a circular economy in construction is critical. Today, 10-15 percent of building materials are wasted during construction, and construction and demolition waste make up about 70-75 percent of the UAE's total solid waste. Circular strategies, including recycling concrete and steel, modular construction, and designing for disassembly can cut emissions and waste dramatically.

The UAE’s Circular Economy Policy 2021-2031 prioritises green infrastructure, emphasising renovation, better material use, and recycling targets. Companies such as Bee’ah are already advancing zero-waste-to-landfill programs, transforming construction debris into usable materials.

However, stricter enforcement of waste sorting, recycling requirements, and education of stakeholders are needed. Government incentives for low-carbon materials, recycled content mandates, and investment in recycling infrastructure could accelerate the shift to circularity.
Bridging the Gaps: Policy and Practice
Despite strong progress, gaps remain. First, green building codes must be expanded and ideally harmonised across all Gulf jurisdictions. Within the UAE, there is a need for a unified sustainability rating system that applies across all emirates, including those where green building regulations are not yet mandatory. A common national framework would help standardise requirements, streamline compliance, and make it easier for the private sector to navigate sustainability expectations.

Second, enforcement must go beyond design and construction approvals to include robust monitoring and post-occupancy evaluations. For instance, Abu Dhabi's Estidama Pearl Operational rating remains voluntary, highlighting the importance of performance-based certifications.

Third, retrofitting policies require scaling. Financial incentives such as green loans, retrofit subsidies, or mandatory energy audits for large properties can stimulate building upgrades. Without deep retrofits, Gulf cities risk locking in high emissions.

Finally, embodied carbon remains under-regulated. While operational efficiency dominates current codes, embodied emissions from construction materials must also be addressed through life cycle assessments, material passports, and carbon reporting. Cities like London and California have already introduced embodied carbon limits. The Gulf could adopt similar measures for cement and steel-intensive sectors.

Building sustainable infrastructure in a booming real estate market is not only possible, it is imperative. The UAE and the Gulf are at a pivotal moment where today's choices will influence generations to come.

Continuing "business as usual" risks escalating emissions, resource depletion, and climate vulnerability. In contrast, prioritising sustainability will deliver thriving and resilient cities aligned with global climate goals and enriched quality of life.

Encouraging signs are already apparent. By scaling what works and closing policy gaps, the Gulf can become a global model for sustainable urban development. The opportunity is enormous, and the urgency is real. Every new tower, community, or retrofit must be a step toward a net-zero future. The region’s governments have already signalled intent: the UAE has committed to achieving net-zero emissions by 2050, while Saudi Arabia and Bahrain have set 2060 as their target. As the Middle East builds for the future, it must build responsibly and resiliently. The choices made today will shape the legacy of tomorrow, one that can either lock in risk or lead the world in sustainable progress.



Antonios Vouloudis is the Senior Director of Sustainability and Stewardship at NYU Abu Dhabi, leading the university’s Climate Action Plan and broader environmental initiatives.

### Trump Returns to the Gulf: Experts Decode the Strategic Implications

Trump Returns to the Gulf: Experts Decode the Strategic Implications
Last week, the United States (US) President Donald Trump returned to the Gulf as a part of his first overseas trip since the commencement of his second term—visiting Saudi Arabia, Qatar, and the United Arab Emirates (UAE) from 13–16 May  2025. By choosing the Gulf as his inaugural destination (aside from the urgent Vatican trip), the administration sent a clear signal that energy, technology, and economic ties top Washington’s agenda and the region stands tall within US priorities. The Observer Research Foundation–Middle East experts decode and analyse the tour’s scope and substance, especially focusing on economic investments, regional energy security, the rise of Artificial Intelligence (AI) partnerships, and the broader great-power dynamics these moves reveal.
Energy’s Evolving Role - Strategic, Quiet, and Tech-Infused
Mannat Jaspal
While defence, trade, and AI were the mainstay of Trump’s Gulf tour, energy and climate diplomacy were the understated and adjacent corollaries to the broader industrial and technology collaborations. The visit signalled a shift from traditional oil barrel-centric negotiation to energy cooperation, encompassing strategic investments in energy infrastructure, Liquefied Natural Gas (LNG) pipelines, AI data centre sustainability, and climate-friendly technologies such as carbon capture and hydrogen. Energy security and job creation were the underlying imperatives for Trump一the cornerstone of his election campaign and current political rhetoric.

In Saudi Arabia, infrastructure and technology investment were at the heart of the bilateral engagement. The US Department of Energy signed agreements with the Ministry of Energy and the Ministry of Industry and Mineral Resources to cooperate over innovation, development, financing, deployment of energy infrastructure, and mining and mineral resources. Central to the investment portfolio was a sector-specific US$5 billion Energy Investment Fund and a landmark deal involving 34 agreements between Saudi Aramco and American firms across LNG, chemicals, AI, asset management, and emission-reduction technologies.

In Qatar, gas diplomacy assumed centre stage. With the third-largest natural gas reserves globally, Qatar has seven active projects in the US worth US$8.5 billion, and has initiated US$18 billion in investments since 2019. Flagship ventures include ExxonMobil’s Golden Pass LNG Terminal (US$10 billion) and Chevron Phillips Chemical’s Golden Triangle Polymers Plant (US$8 billion), located on the Texas Gulf Coast. These are crucial in strengthening US energy security and restoring industrial jobs, especially since Trump has decided to distance himself from his predecessor, Joe Biden’s ‘Inflation Reduction Act’. Trump’s openness to a potential nuclear deal with gas-rich Iran can also be viewed as an effort to recalibrate regional energy dynamics, reasserting its influence over the region’s long-term gas diplomacy.

The UAE, too, has featured prominently in the transactional framework and is committed to building the world’s largest AI campus. Given the UAE’s commitment to the Net Zero 2050 Strategy,  it aims to be a first mover in sustainable compute infrastructure. In another significant development, Emirates Global Aluminium committed to developing a US$4 billion primary aluminium smelter project in the US. Aluminium is a critical input for electric vehicles (EVs), renewable energy infrastructure, and grid technologies and is central to the green transition agenda. On the traditional hydrocarbon front, to further lower oil prices and promote job creation in both countries, Abu Dhabi National Oil Company (ADNOC) will partner with ExxonMobil, Occidental Petroleum, and EOG Resources or expand oil and natural gas production worth US$60 billion.

Although oil price coordination was not the central focus of the negotiation, Trump argued for lower oil prices to keep the US shale oil operators competitive in global markets. This will inevitably impact the Gulf's fiscal and current account deficits, alongside its future ability to fulfil investment pledges outside its borders.

Trump’s broader message was to distance himself from the Biden era’s subsidy-heavy industrial policy to a more commercial and business-oriented diplomacy. The withdrawal of the global semiconductor trade restrictions is a case in point一a move viewed to curb China’s influence in the region. Beijing has become the Middle East’s largest trade partner and one of the biggest investors in the area, holding almost one-third of the direct foreign investments (DFI), dominated by energy and petrochemical products. Only time will tell how Gulf countries manage this sensitive yet crucial diplomatic act between Washington and Beijing. Nonetheless, how Tesla keeps up with BYD’s aggressive regional expansion would add to the discourse. It remains clear that energy diplomacy with the Gulf region is not solely defined by barrels anymore, but hinges on infrastructure, data, minerals, and compute power that will determine the energy futures.
Deal or No Deal? Unpacking Trump’s Record-Breaking Gulf Visit
Samriddhi Vij
President Trump’s 2025 Gulf tour featured multiple record-breaking headline deals, from the largest US arms sale ever to the biggest Boeing widebody order. This tour was presented as an economic mission, a shift from traditional diplomacy to high-stakes trade partnerships. As Riyadh, Doha, and Abu Dhabi secure these historic deals, it is important to consider each nation’s economic objectives, evaluate the commitments secured, and identify the gaps in ambitions.

At each stop, the host nations pursued tailored objectives: Saudi Arabia aimed to fast-track its Vision 2030 roadmap through investments in Artificial Intelligence (AI), renewables, defence capabilities, and even civil nuclear power; Qatar leveraged its pivotal United States military base to branch out from hydrocarbons into aerospace, maritime security, and digital infrastructure; and the United Arab Emirates (UAE) doubled down on its transformation into a knowledge economy through large-scale AI data centers and streamlined semiconductor imports. Meanwhile, Washington pursued its agenda, trying to channel Gulf petrodollars into American factories, technology ventures, and defence contractors to create jobs, reinforce supply chains and counterbalance China’s regional influence. While this economic agenda delivered significant victories for the US-Gulf cooperation, certain objectives remained unrealised.

In Riyadh, the leaders finalised the largest set of commercial agreements ever recorded between the US and Saudi Arabia. This included a US$142 billion defence package, the largest US arms sale ever. While discussions touched on civilian nuclear cooperation, regulatory and non-proliferation complexities postponed prospective agreement, leaving Saudi Arabia’s nuclear ambitions unresolved.

In Doha, Qatar received its first-ever official state visit by a US president. Qatar leveraged its hosting of Al Udeid Air Base to negotiate a US$1.2 trillion economic exchange framework, formalising over US$243.5 billion in commercial and defence accords. A standout was the US$96 billion firm order for up to 210 Boeing planes, clocking history’s biggest Boeing widebody order yet.

In Abu Dhabi, the UAE pursued deeper high-tech partnerships, signing over US$200 billion in deals, most notably a framework to build the world’s largest non-US AI data centre and a preliminary pathway for importing advanced US semiconductors. However, formal amendments to the US export-control regulations are yet to be finalised.

Beyond their economic agendas, Gulf states have long been invested in Syria’s recovery but refrained from committing capital under stringent US sanctions. Trump’s announcement during the Gulf tour to lift those restrictions clears the way for potentially billions of dollars in Gulf-led investment to flow into Syrian reconstruction.

However, certain objectives remain unfulfilled: Saudi Arabia’s civil nuclear framework awaits resolution of non-proliferation safeguards; Qatar must convert its memorandum into enforceable contracts; the UAE awaits formal approvals for semiconductor imports.

Although the Trump administration prided itself on US$2 trillion in announced Gulf commitments, Reuters identified roughly US$730 billion in binding deals, spanning major Boeing orders and defence exports that will support thousands of American jobs.  Many headline figures remain non-binding memoranda pending detailed negotiation and US congressional approval. As Trump’s Gulf tour unleashed significant petrodollars and promises, it will be key to solidify commitments in binding agreements to get the deals over the finish line.
Saudi Arabia as a Focal Point of Trump’s Gulf Tour
Mahdi Ghuloom
Commencing his Gulf tour with the same country he visited during the first foreign trip of his previous administration already signals that President Trump views Saudi Arabia as an extremely strategic partner. His two-day presence in the Kingdom of Saudi Arabia (KSA) did not disappoint this notion, and he substantiated his view that the door to influence in the region comes through the Kingdom in his eyes. One of its crucial indicators was the moment that went viral across the Arab world, when Saudi Crown Prince and Prime Minister Mohammed bin Salman (MBS) embraced Trump’s decision to set up the steps for ordering the lifting of sanctions on Syria. It was even more important that President Trump noted this came at the behest of the Saudi leader.

While many expected Trump to prolong the public discussion on the prospect of Saudi Arabia normalising relations with Israel, it was likely a relief for Saudi officials that he stated that the Kingdom would do so at its ‘own time’. He did not push the Saudi leadership further and instead focused on discussing Iran in the presence of MBS. He threatened Iran with ‘massive maximum pressure’ should the latest diplomatic outreach fail, and used his platform in Saudi Arabia to lay out his vision for the region.

The Saudi portion of President Trump’s visit was the most significant for him, personally and geopolitically. Syria, Iran, and Israel were all on the table, and the summit with the Gulf leaders also happened on Saudi soil. This suggests that while economic and technological aspects of the trip were important, they may be overplayed as the trip’s main driver, or even its first leg. Though each of the other stops of his Gulf tour were also important bilaterally, the weight of the Saudi leg was felt regionally for its optics.

The bilateral discussions were the more important features during the other legs of his trip, rather than a large-scale conference such as the US-Saudi Investment Forum. Such forums have a regional focus even without a lavish audience. For example, the Iranian Foreign Minister Araghchi visited the United Arab Emirates (UAE) ahead of Trump’s visit, which could be read as an outreach to contextualise the Iranian perspective in the regional discussions, possibly held between the Emirati and American counterparts. Meanwhile, Qatar’s role as a mediator in the conflict between Hamas and Israel was also another important geopolitical pillar of this trip, and Trump’s visit to Doha seemed to include such discussions on the future of any resolution in Gaza.

Nevertheless, Trump’s remarks in Doha consistently echoed his strong relationship with the Saudi leadership. While this was a Gulf-wide tour, it began in KSA and continued to reference KSA throughout its other stops.  Without discounting the other stops, Saudi Arabia was a focal point of this US three-state visit, even if Trump preferred it just for the optics.
Recasting Engagement and Managing Expectations
Cauvery Ganapathy
President Trump’s Gulf visit is a tale of engagement and astute calibration of the undercurrents of incongruent long-term visions between the two sides.

While investments and collaboration under the th US-UAE Partnership for Accelerating Clean Energy (PACE) programme were the highlight of the energy partnership between the UAE and the US until recently, whether through the specialised exploration concession granted to EOG Resources in Al Dhafra or by the increased exploration in the Shah Gas field, hydrocarbon-based energy security and partnerships were central to the visit’s agenda for both countries, and was marked by the US commitments of upto US$60 billion. Expansion of the well-endowed Upper Zakum offshore field by INPEX/JODCO and ExxonMobil through the utilisation of AI and cleaner forms of energy could serve as an important template to integrate new energy pathways into the traditional hydrocarbon partnerships between the two countries. Therefore, energy remains a mainstay of the trade basket between the two sides, despite the shifting contours of the engagement.

Should countries, under the threat of Trump’s volatile tariff regime, offer to bridge the deficit with the US through an increased purchase of US LNG, the Gulf countries would feel an immediate pinch, leading to inflation and budget deficits. Further, the twin US demands for lower oil prices and compliance with its sanction regime can be expected to hurt the bottom line of these hydrocarbon-wealth-based economies.

For instance, the UAE and Saudi Arabia are looking to actively expand investment within their countries in line with their inherently capital-intensive diversification strategies. How the reconfigured fiscal priorities and the tightened domestic public spending will square with their investment commitments in the US could determine the long-term health of relations with the US.

The Gulf countries are also straddling a delicate balancing act between their American and Chinese engagements, especially in the high-growth sectors that will underpin the technological revolution. This is also happening at a time when the Chinese interests and approaches in the energy sector in the Gulf continue to persist and thrive, alongside the establishment of Renminbi clearing houses setting up in the Gulf.

The Iran-Israel dynamic is another part of the inherent dichotomy. While keeping Iranian produce out of the global energy supply makes abundant fiscal sense to the Gulf, their security interests commend a revival of talks, and even an unquiet peace between the US and Iran. This impulse contradicts the present preference in Tel Aviv. Again, Washington’s willingness to sell advanced weaponry to Saudi Arabia could directly impinge on the comparative advantage that the Israelis have long maintained in the region on the back of exclusive access to such American defence technology.

Diversification, in trade, as in politics, allows countries to customise approaches that are uniquely suited to a varied calculus. President Trump’s Gulf visit, in its symbolism and outcomes, demonstrates the value of such a construct for both sides.
Friend-Shoring AI: Chipping Away at China’s Techno-Sphere of Influence
Siddharth Yadav
A notable aspect of President Trump’s Middle East tour was his entourage that included tech Chief Executive Officers (CEO) such as Jensen Huang (CEO, Nvidia), Elon Musk (CEO, Tesla and SpaceX), Sam Altman (CEO, OpenAI), among others. The makeup of Trump’s retinue indicated an invigorated effort to leverage its dominant position in the frontier tech sector to strengthen economic ties with the energy and capital-rich region.

President Trump’s prioritisation of the American AI development was evident since the first few weeks of his return to the White House with the announcement of the US$500 billion Stargate project that touted the arrival of a ‘golden age’ in the US. While Gulf entities were involved in Stargate and subsequent bilateral talks, the AI-focused deals made during Trump’s visit to the region establish technology as a keystone in US-Gulf relations.

Trump’s Middle East tour also marked a shift in US policy to maintain global leadership in AI development and limit the growth of the Chinese AI ecosystem. The previous Biden administration favoured a restrictive approach of strict export controls,  such as the Framework for AI Diffusion, designed to isolate Chinese entities from the AI supply chain. However, there is no consensus on the success of US export controls on advanced AI chips, and the approach has been criticised for being too heavy-handed towards emerging tech markets. The Biden-era approach also presented the risk of the global AI value chain bifurcating into two antagonistic spheres of influence by pushing developing economies towards the Chinese AI stack that is more cost-effective to deploy.

In contrast, the Trump administration has adopted a co-development approach based on economic incentives and bilateral agreements, making it favourable for emerging players in key regions such as the Gulf to integrate into the US AI supply chain. Reports highlight two major tech deals that were reached during Trump’s visit. The first was with the Kingdom of Saudi Arabia (KSA), involving a US$600 billion package for two-way investment between the two nations. The deal included investment commitments by KSA entities in US datacenters, an export agreement for advanced hardware made by Nvidia and AMD, an ecosystem deal between Amazon, Qualcomm, and KSA’s AI company HUMAIN and commitments to invest private US capital into KSA’s projects.

An equally noteworthy partnership was established between the US and the UAE, resulting in an agreement for the UAE’s G42 to import cutting-edge Nvidia AI chips and the announcement by G42 and the US for building a 5 gigawatt AI campus in Abu Dhabi, all wrapped up in a US$200 billion investment deal.

This investment frenzy is representative of a multi-pronged approach to unlock a massive pool of capital for US AI developers, offset the pressure on American energy infrastructure, increase the availability of compute for US entities, and, finally, to increase the adoption of American hardware in the region before Chinese tech entities can acquire any meaningful marketshare. While some have criticised Trump’s approach of friend-shoring the US AI supply chain for overlooking potential security risks, this policy shift towards controlled cooperation rather than competition will be well received by the countries that found themselves at the losing end of Biden-era AI diffusion rules.

### Bahrain Must Rethink Its Stand on the SIDS Classification

The UN and SIDS
The Barbados Programme of Action (BPOA) of 1994, a policy document that emerged from a conference mandated by the UN General Assembly, was one of the first steps towards recognising that Small Island Developing States (SIDS) have their own peculiar vulnerabilities and characteristics. UN Support for this group of states comes through the Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS). The office mobilises international support and raises awareness about the economic, social and environmental characteristics of these countries.

Bahrain Opting Out
Notably, according to the UN Conference on Trade and Development (UNCTAD), Bahrain was removed from the UN SIDS classification in April 2023 at its own request. The reasons behind this request were not communicated, neither domestically nor on the global stage, despite the potential negative implications for the country. In essence, Bahrain has opted out of the special considerations it had, by acknowledgement of its own Supreme Council for Environment, despite the increased vulnerabilities that it faces and the relatively limited capacities that it has.
The Government of Bahrain may have been convinced by the argument that it does not fit the SIDS classification, as “it is not an island” due to its link to Saudi Arabia via the King Fahd Causeway. However, it ought to be remembered that the causeway is not a natural phenomenon, nor is it invulnerable to political or other crises. The truth is that though it is a connected island, Bahrain shares many of the characteristics of remote islands in the world: it remains small and developing, and vulnerable to climate change. In fact, increases in flooding this century are projected to lead to economic losses of 2.4 percent to 4.3 percent of the Kingdom’s GDP.

Concessionary Financing and SIDS
One of the potential consequences of leaving this grouping is limiting access to concessional funding, which the country needs. This comes as Bahrain’s debt is skyrocketing, with credit rating agencies such as S&P and Fitch downgrading the Kingdom’s outlook. In fact, Fitch projects that the current financing interest costs will rise on the back of a growing debt stock, contributing to the deficit remaining high. Moreover, zero-interest loans from the GCC appear to be at the risk of being revoked,  while planned reforms intended to achieve a budget surplus have seemingly fizzled out.
While Bahrain could argue that its Gross National Income Per Capita (GNI-PC) has generally resulted in non-concessionary financing, a new measure being developed by the UN known as the Multidimensional Vulnerability Index (MVI) could change the threshold for concessionary financing. Though it is primarily focused on assisting SIDS countries, most countries, including Bahrain, are included in the index.
Notably, the index consists of two dimensions: “Structural vulnerability”, which is the “risk of a country’s sustainable development being hindered by recurrent, adverse, exogenous shocks and stressors,” and “Structural lack of resilience,” which comes from the “inherent characteristics or inherited capacity of countries to withstand, absorb, recover from or minimize the adverse effects of shocks or stressors.”
Globally, the Median MVI stands at 52.8. The Median MVI amongst 37 SIDS countries stands at 57.04. Bahrain’s MVI, however, is at 60.4. This has less to do with the Kingdom’s structural vulnerability and more to do with its lack of structural resilience. This means that though Bahrain is not vulnerable to repeated crises, it can find it extremely difficult to recover from sporadic ones; In recent years, these have included declines in oil prices, the COVID-19 pandemic, and the 2011 Arab Spring protests, which impacted investment and tourism flows.
One takeaway from Bahrain’s standing on the MVI Index could be that, contrary to conventional logic, its vulnerability to shocks and crises is high. The Kingdom is indeed a Small Island Developing State, and distancing itself from the SIDS classification may prove detrimental.
In fact, Bahrain may find it worthwhile to regularly benchmark itself with other SIDS countries, rather than focusing solely on neighbouring Arab countries. There are numerous lessons that SIDS countries’ economic strategies have for Bahrain, as they share many characteristics with the Kingdom.

Conclusion 
While Bahrain’s decision to opt out of the SIDS classification may have been driven by image considerations, the long-term strategic costs should not be overlooked. With mounting environmental and fiscal pressures as well as limited resilience to external shocks, Bahrain stands to gain more by embracing its identity as a Small Island Developing State than by distancing itself from the classification. Rejoining or realigning with the SIDS grouping could improve access to concessional finance. As global vulnerability and sustainability measures like the MVI gain traction, strengthening  Bahrain’s case for special support, the best path forward for the Kingdom may lie not in separation but in solidarity.



Mahdi Ghuloom is a Junior Fellow, Geopolitics at the Observer Research Foundation (ORF) – Middle East.

### Addressing the Critical Minerals conundrum: Pathways for the India-France-UAE Trilateral

While the United States (US)-China dynamic will undoubtedly curate the broader context of the subject for the foreseeable future, the global need to grapple with Chinese dominance in critical minerals is just as pertinent to countries globally as it is to the US. This is especially true because such a high concentration level is not a sustainable model, even among the most trusted partners. The Minerals Security Partnership (MSP) is an overarching umbrella under which a multilateral effort to navigate this challenge is underway. Nonetheless, a comprehensive framework such as the trilateral between India, France, and the United Arab Emirates (UAE) - as is the wont of minilaterals- could offer, perhaps, greater dexterity and efficiency in promptly coordinating a mutually beneficial strategy. As such, the trilateral is uniquely placed to draw relevant lessons from the dominant dynamic of the times and guard against it.

Critical minerals are essential to three sets of production, in particular — data centres, defence manufacturing, and transition tech/equipment— in addition to multiple other civilian use scenarios. Cooperation through joint development and coordination across semiconductors, battery technologies, data processing, renewable energy components, defence, and aerospace sectors stands at the heart of the trilateral. Critical minerals, consequently, become intrinsic to the declared agenda of the partnership.
Complementary agenda
There are three exigent issue areas built on sustainable and viable access to critical minerals where the complementarities between these countries could prove most meaningful:

 	Data centres are integral to the plans of all three partners, who share a consensus on data being the new currency of power. In addition to their role in the analytics infrastructure, the energy intensity of these data centres also demands critical minerals to introduce efficiency by regulating energy consumption patterns onsite, making a reliable supply chain essential to the trilateral. Further, the countries have committed to a spectrum of applications of data centres powered by these critical minerals, from quantum computing to the creation and maintenance of smart grids and smart city infrastructures.
 	Defence manufacturing and creating its corresponding viable industrial and innovation platforms is a national priority for each of these countries, which also see members of the trilateral as trusted defence partners. The avowed focus on advanced defence applications, including enhanced precision features, laser guidance, missile propulsion, and stealth capabilities, among many others, creates substantive demand drivers for critical minerals.
 	Commitment to the Paris Agreement is a distinguishing feature of the international agenda of all three countries. At a time when the motivations for the energy transition and environmental concerns regarding the environment are being recalibrated by principal actors such as the US, it becomes incumbent upon countries that continue to value the Paris Agreement’s essence to ensure momentum in the field. The trilateral agreement commits to cooperating in energy and forging an alignment in economic, technological, and social projects by keeping to the principles of the Paris Climate Agreement. A robust and reliable critical mineral supply chain is a prerequisite for fulfilling these objectives.

Based on these aligned objectives, India, France, and the UAE can effectively propel the commitments of the Paris Agreement and the Conference of the Parties (COP) movement forward by enmeshing their transition goals with the pursuit of reliable critical mineral supply chains that would prove decisive in powering their industrial, defenee, Artificial Intelligence (AI), and low-carbon ambitions, particularly in the domains of solar and nuclear energy.
Complementary strengths
India has significant rare earth deposits, which have suffered from limited mining and processing abilities. It also has a comparative advantage in affordable research and development (R&D) networks in the domain and the chemicals industry. This is relevant to the use cases of critical minerals in industrial applications. Furthermore, compared to actors such as China, India enjoys a much better reputation locally in Africa on matters of economic engagement and extractive processes. As a trusted member of the Global South, New Delhi could effectively harness its position to benefit both the trilateral and the critical mineral-rich African countries trying to move up the value chain.

France brings cutting-edge R&D to this partnership, across data centres, defence and transition architecture. France has also begun undertaking significant geological mapping for recoverable domestic critical minerals and has been working on building effective midstream processing focused on generating downstream applications. The French are also world leaders in human resource training in geology and mining, and could bring this strength to bear in training the deficient workforce in the sector today.

The UAE has expertise in developing smart grids, running data centres, and adopting AI across sectors. The country has a distinct strength in supplementing efforts in domains that typically have long project lead times, something that the expensive pathways of critical minerals tend to suffer from. The UAE has also been engaging proactively with the African continent (Democratic Republic of Congo, Angola, Kenya, and Zambia) to develop critical mineral mines, where its relative strengths in the field have helped make constructive headways.
Synergising strengths 
Recycling and waste recovery: By situating recycling and waste recovery at the centre of what can be a circular critical minerals ecosystem, the trilateral could offer a more lucrative, less expensive, and more sustainable model of doing business, while propelling the COP movement forward. Central to this effort would be a systematic creation of recycling infrastructure built to harness valuable critical minerals through waste extraction from end-of-life technologies. A best-practices repository in the field could be a start.

Sharing of expertise in processing: The trilateral limits the comparative advantages in processing. However, the relative expertise in the field, such as India’s processing of copper and manganese and France’s proficiency with hafnium, could bring value to the partnership. Similarly, the UAE’s proposed collaboration with Italy, which proposes to explore the potential for processing in addition to the rest of the value chain, could also benefit the partnership by sharing technical expertise.

Alternative materials: The three partners could collaborate to invest in technologies and patents to build equipment that reduces the use of rare earths. This is similar to the model of redressal adopted by Japan to address its over-dependence on Chinese supplies following the 2010 export restrictions. Successfully identifying and viably harnessing alternative materials could substantially reduce supply chain stress.

Technology patents: Advances in recycling technologies and the effective use of alternative materials could alter demand impulses. Consequently, technology patents related to such discoveries could emerge as new currencies of power negotiations in future climate negotiations. Within this context, the trilateral could coordinate a proactive strategy based on transparency and resilience.

Capacity-building and value-addition from mine-to-market: The trilateral could proactively work towards partnering with African countries to forge more sustainable sinews of cooperation in the critical minerals ecosystem and work towards bypassing the mistakes of the hydrocarbon economy. Nurturing open discussions on setting standards, transparent and sustainable access to capital, labour terms, sustainable mining practices, and fair market access would be useful. India could use its legacy of constructive, need-based development cooperation on the continent in a meaningful manner to build, through this trilateral, a model of engagement wherein value addition is an agenda for every participant. As these countries look toward capacity building and skill training to aid their populations generate value in mid-stream processing and downstream applications, India, France, and the UAE are well placed to offer their strengths in the field.

Viable alternative financing models: In forging mutually beneficial ties with the African continent in this sphere, the trilateral would also study the features of China’s mining outreach and investments to understand what viable alternative financing models may look like. The French, on their part, have been exploring models of financing critical minerals projects that would allow them to underwrite viable lines of credit. India and the UAE could bring their experience in development finance to help customise the French model to the African experience.

The use of AI and Machine Learning (ML) models in mining processes and equipment: One of the reasons China was able to capture the critical minerals market is that the devastating ecological and environmental costs of the highly extractive mining and processing operations were willingly eschewed by other countries globally. It would be useful to think about how these three countries could collaborate to devise a technology that could help offset these by-products of the production and mining chains- something that the use of AI and ML models in mining processes and equipment could effectively address.

It would be long before any of these three countries, whether independently or in partnership, could exert a sizeable impact on the global critical mineral value chain, the way the US and China can today. Yet, it is useful to appreciate the size of the combined market and the purchasing power the trilateral brings to the table. Proactively exploring these themes of cooperation in the critical minerals ecosystem, where they may be aligned with the agreement’s essence, can enable a marginal but meaningful change in the domain. Insofar as this could be achieved, the stranglehold of the old fossil fuel playbook, replete with lopsided benefits, may gradually begin to weaken, if not dissipate over time.



Cauvery Ganapathy is a Non-Resident Fellow at the Observer Research Foundation- Middle East

### I2U2: An Opportunity to Forge a Climate-Resilient Minilateralism

From tariff wars and strategic decoupling to climate-induced catastrophes and regional conflicts, geopolitical whirlwinds have significantly fragmented the global order. In an increasingly multipolar world where volatility is the norm and short-term optics trump long-term rational policymaking, we cannot afford to let the European Union’s green transition agenda become collateral damage.
Shock-resilient frameworks that insulate climate cooperation from geopolitical volatility and economic disruption are the need of the hour. At this strategic inflection point, the ‘I2U2’ groupcomprising the United States (US), India, the United Arab Emirates (UAE), and Israel—emerges as a flexible and high-impact vehicle. As minilateralism gathers momentum, I2U2, recently reinvigorated by the February 2025 meeting between the Indian Prime Minister Modi and US President Donald Trump, offers an agile format for advancing climate-driven cooperation, fostering economic stabilisation, and deepening regional integration.

Economic Disruptions and Political Fault Lines 
The resurgence of protectionism, amplified by the Trump presidency, shook governments, stock markets, and people alike. Tariffs have rattled global supply chains and inflated consumer costs. Today’s inward-turning economic policies, pursued in the name of national security and resilience, pose a direct threat to green value chains, which are inherently global. This is particularly concerning for the green economy, whose value chain is global by default and extensively dependent on cross-border flows of vital green transition components, for example— solar panels, Electric Vehicle (EV) batteries, rare earth, and other critical minerals. It must be noted that it is not easy to develop domestic capacity and ‘reshore’ overnight must be heeded. Besides, any meaningful action can be easily reversed with changes in government, sending investors and long-term policy planning into a tailspin.
Historically, energy security has been a significant driver of geopolitical fragmentation. The US strategic disengagement from the Middle East coincided with its own shale oil revolution. The Houthi attacks on the Red Sea have, in turn, catalysed interest in alternative connectivity corridors. Initiatives such as the India-Middle East-Europe Economic Corridor (IMEC) are gaining traction as logistics solutions and regional and climate-related stabilisers.
If the climate agenda remains vulnerable to geopolitical tensions and economic shocks, the energy transition risks losing momentum. A strengthened I2U2, strategically aligned with IMEC, can mitigate this risk by anchoring climate action in practical, cross-regional cooperation that enhances both resilience and stability.

I2U2: A Minilateral Made for the Moment
Minilaterals offer a distinct platform to collaborate among like-minded countries. They are flexible, targeted, function-driven, and can be particularly effective in reconciling strained bilateral relations or paralysed multilateral institutions. In some sense, they amplify Ricardo’s principle of comparative advantage to international cooperation. For instance, the US with its strong capital market and innovation, the UAE with its deep hydrocarbon revenues and strategic geography, India with its labour, scale, and market, and Israel with its cutting edge technology and its strategic location as the conduit between the East and the West offer a complementarity that can marry economic prosperity with environmental protection.
Each of the I2U2 countries has expressed an interest in cooperating, but the volatile political climate has stalled progress. A green transition agenda rooted in economic pragmatism can provide both the momentum for action and a foundation for long-term regional stability. Energy Security is clearly an equally shared concern for both the Global North and the Global South today. Thus, their coordinating efforts to strengthen and diversify green supply chains could drive prosperity while advancing global climate goals.
The logic is rather simple: small groups, big agendas, and targeted action. The I2U2— anchored by four influential and diverse power centres— can add significant weight to the green transition agenda.  It has the potential to catalyse green manufacturing and job creation, expand access to new markets, deepen strategic partnerships, and build resilient, diversified supply chains. By pooling resources and focusing on high-impact sectors—such as energy, water, transportation, health, space, and food security—the I2U2 countries can collectively shape a more sustainable and stable future.

Strategic Pillars: Joint Financing, Innovation, and Economic Resilience

 	Joint Financing and Risk Mitigation: By pooling resources and blending capital from Sovereign wealth funds (the UAE), private capital markets (the US), and emerging market institutions (India), the I2U2 can mitigate the risks associated with greenfield energy investments. Interoperable green taxonomies will be crucial to allow cross-border financial flows.
 	Tech co-development and Startup Ecosystems -  With most of the green tech Intellectual Property (IP) locked in the private sector, joint research and development (R&D) and tech co-development in solar and wind components, EVs, alternate battery chemistries, hydrogen and Carbon Capture and Storage (CCS) technologies, semiconductors applications -  can be facilitated through cross-border innovation platforms and startup hubs.
 	Green Labour Mobility and Skill Sharing: Educational exchanges, cross-border upskilling initiatives, and climate-resilient job pipelines should be prioritised. Simultaneously, foster green diplomacy through public-private dialogues, academic partnerships, and youth-led collaborations that build shared visions for green trade and minilateralism.
 	Green Infrastructure – IMEC offers the physical backbone to support I2U2’s climate diplomacy. As a transcontinental infrastructure project, it can integrate green manufacturing zones, EV corridors, hydrogen infrastructure, and digital trade platforms from India to Europe.

Coordinated governance between I2U2 and IMEC stakeholders would elevate this vision, linking climate policy, trade flows, and connectivity into a coordinated strategic architecture.

A Task-Based ‘I2U2+’ Framework 
I2U2’s strength is its flexibility and focus, distinguishing it from larger, more cumbersome institutions. While groupings like BRICS+ (Brazil, Russia, India, China, and South Africa) aim for formal expansion and geopolitical weight, I2U2 offers an alternative: a modular, task-oriented framework that could enable dynamic coalitions built around specific functions, sectors, and shared priorities.
This ‘I2U2+’ model—centred on rotating coalitions of willing partners—can be deployed to respond rapidly to emerging climate and development challenges. Rather than seeking to expand membership permanently, I2U2+ invites external partners to plug into ongoing initiatives where their capacities and interests align. This structure enhances both agility and relevance, allowing for scalable cooperation without institutional gridlock.

Strategic Use Cases for I2U2+ Collaboration

 	 Green Hydrogen and Industrial Decarbonisation
Partners: Japan, South Korea, Germany
I2U2+ could convene a task force on green hydrogen infrastructure, certification standards, and cross-border trade. Countries such as Japan and South Korea, global leaders in hydrogen R&D, can accelerate technological convergence and scale deployment across supply chains. Germany’s inclusion could link this effort with Europe's Fit for 55 and REPowerEU goals.
 	 Climate-Resilient Agriculture and Food Security
Partners: Kenya, Egypt, Brazil, multilateral development banks
African and Latin American partners could collaborate with I2U2 members to deploy climate-smart agricultural technologies, develop bioethanol markets, and co-finance food corridor infrastructure. This effort would enhance resilience in vulnerable regions while creating export opportunities and joint innovation pipelines.
 	 Regional Water and Energy Hubs
Partners: Jordan, Egypt, Morocco
I2U2+ could establish regional desalination and water management hubs, leveraging Israeli water tech, Emirati financing, and Indian expertise in scale delivery. This model could be integrated with renewable energy projects, such as solar-powered desalination, and grid interconnectivity to build broader water-energy nexus resilience in the Middle East and North Africa.
 	 IMEC as a Green Corridor Platform
Partners: Saudi Arabia, Greece, Italy, France, European Commission
I2U2+ could be layered onto IMEC to serve as its governance and innovation engine, coordinating green infrastructure standards, digital logistics platforms, and regulatory alignment. European partners bring logistical integration and climate financing mechanisms (for example, the EU Green Deal), offering a seamless India-to-Europe connectivity arc.
 	 Small Modular Nuclear Reactors (SMRs) and Clean Baseline Power
Partners: France, Canada, UAE, India, U.S.
SMRs offer a potential breakthrough for scalable, emissions-free baseload energy. I2U2+ could facilitate joint research, licensing frameworks, and pilot deployment in emerging markets, aligned with just transition goals, and long-term grid decarbonisation strategies. The UAE-France-India trilateral offers a promising platform, and the growing significance of the UAE and USA partnership, particularly on nuclear energy powering data centres, as well as Canada’s pioneering work on SMR design research, can all collectively support a thriving energy trade and corridor-based economic cooperation.

This modular format also offers significant diplomatic utility beyond its economic and climate-related advantages. By allowing strategic partners to engage without the need for formal alignment, it lowers political barriers to cooperation and broadens the coalition’s reach. Its task-based structure enables the formation of issue-specific partnerships that avoid becoming entangled in broader geopolitical rivalries—a valuable feature in a multipolar world marked by shifting alliances and regional complexity. For middle powers seeking greater strategic autonomy amid intensifying US-China competition, I2U2+ provides a pragmatic, non-binary platform to do more together. In this way, it functions as a diplomatic bridge-builder, linking regions, industries, and innovation ecosystems around a shared commitment to sustainable and inclusive green growth.

Conclusion 
In an era where transactionalism trumps treaty-making, pragmatic minilateralism offers a more viable path forward. I2U2’s strength lies in its ability to balance national interest with collective action, advancing green agendas through market logic, diplomatic agility, and strategic alignment.
The Trump administration may be more inclined to support a ‘jobs-first, energy-secure’ green corridor, which offers supply chain diversification and US market access more than a multilateral emissions agreement. This is where the I2U2 grouping excels by turning climate cooperation into a cross-regional strategic proposition.
Moreover, green corridors can serve as self-reinforcing stabilisers—creating economic interdependencies that act as narrative changes and guardrails against conflict. I2U2, alongside IMEC, could become both a vehicle of green growth and a tool for regional stabilisation, forging a new model of geoeconomic diplomacy in an age of disruption.



Mannat Jaspal is the Director and Fellow of Climate and Energy, Observer Research Foundation–Middle East. 
Dr Gedaliah Afterman is Head of the Asia Policy Program at the Abba Eban Institute for Diplomacy & Foreign Relations, Reichman University.

### Powering the AI-Nuclear Nexus: Strategic Integration of Nuclear Energy for AI Infrastructure in Gulf Nations

If public statements are any indication of future policy direction, US Energy Secretary Chris Wright’s recent call to promote uranium production and ignite a “nuclear energy renaissance”—particularly in the wake of rising AI adoption—offers a strong signal of where the region’s and its international partnerships energy focus may be headed. Energy cooperation was a clear focus for Secretary Wright’s recent visit to the United Arab Emirates, Saudi Arabia, and Qatar in April, and will remain a key priority for President Trump’s upcoming trip to the region in May 2025.
Over the past few years, artificial intelligence (AI) products and services have evolved from being marketing buzzwords to becoming crucial strategic agenda items for all major economies of the world. In 2025, AI development is no longer limited to the global tech sector and has come to occupy a central position in geopolitical and security discussions, across industries and governments alike. A defining factor for success or failure in scaling AI for any economy is the ability to leverage energy infrastructure to meet the demands of data centres necessary for training and deploying AI.
According to a report by the International Energy Agency, global electricity consumption by data centres amounted to about 1.5 percent (415 TWh) of the total global electricity consumption in 2024. The report states that electricity consumption by data centres has increased 12 percent per year over the last five years and may increase up to 945-1260 TWh by 2030 amidst the race to develop increasingly powerful AIs. Another report suggests an increase of 160-165 percent in data centre energy demand by 2030 from 2023 levels.

Rethinking the Energy Mix 
Data centres are energy guzzlers. Historically, marginal advancements in AI development and application significantly lowered the computational costs, kicking in efficiency gains which balanced the energy demand. However, due to the AI hype of recent years causing a surge in the demand for increasingly powerful AI foundational models along with AI development acquiring geopolitical and strategic importance, efficiency gains are likely to further compound the demand for AI products and services. On the supply side, Anthropic CEO Dario Amodei argues that even with innovations in algorithmic distillation and model architectures, “gains in cost efficiency end up entirely devoted to training smarter models.” The demand and development for increasingly smarter AI and data centres are putting immense pressure on the current electricity system.

Source: Epoch AI
Maintaining the rising energy demand from data centres calls for a diversified, reliable and sustainable energy mix. Almost half of the global growth in data centre energy demand is met by renewables, along with storage and the electricity grid. Despite the growing economic competitiveness of renewable production to meet data centre demand, renewables are limited by their intermittent nature, land density, high infrastructure costs and grid over-dependence. While renewables as well as natural gas will come to serve a crucial role in the short to medium term, a growing recognition and political momentum is steering towards geothermal and nuclear technologies as the long-term, low-carbon and reliable source for high-density, always-on energy demand by data centres.

Graph: Relative Trade-offs of technologies which can provide capacity for new data centre-driven power demand
Source: Goldman Sachs Global Investment Research

A Nuclear Renaissance
The AI-nuclear nexus demands our immediate attention. Nuclear energy and small modular nuclear reactors (SMR), particularly for on-site power generation, are being explored as viable resources to meet the strategic imperative of feeding gluttonous data centres.
Though traditional nuclear power plants may be constrained by high cost, political complexity and longer lead time, SMRs are getting increasingly popularised as the compact alternative owing to faster deployment, smaller land footprints, and on-site generation potential for data centres. Their proximity to data centres can save energy providers and operators substantial costs by eliminating the need for transmission infrastructure, particularly when electricity grids are already under significant strain. The IEA report notes that 20 percent of the planned data centre projects could be delayed due to grid constraints—new transmission lines take up to four to eight years to build in advanced economies alone. At the same time, the wait times for critical grid components have also doubled in the past three years. SMRs can help circumvent such delays, ease the grid burden, and reduce reliance on fossil fuels, without compromising other national priorities such as rapid electrification and energy security. 

The Investment Landscape and Early Movers
Recently, the World Nuclear Association announced that Google, Meta and Amazon—among other energy companies—have signed a pledge to triple global nuclear capacity by 2050 to meet energy demand for AI development. Furthermore, partnerships are emerging between tech firms and nuclear energy providers, for instance, between Microsoft and Constellation, Google and Kairos Power and Amazon with Dominion Energy. 
Regarding public sector investments, major economies across the West and the Global South are moving to tap nuclear energy to realise their AI ambitions. During the 2025 Paris AI Action Summit (PAIAS), France signed an MoU with UK-based Fluidstack and committed 10 billion EUR for an AI supercomputer facility that will leverage France’s nuclear energy infrastructure. The PAIAS also catalysed the development of tech alliances between regions, such as with a framework accord between France and the UAE for building an AI-specific 1 GW data centre that will see an investment of 30-50 billion USD. The agreement represented yet another major investment by the UAE, which has been an early adopter and investor in AI technologies.
In the UAE, interest in AI is also spurring investment and R&D in SMRs and micro-reactors from enterprises like Emirates Nuclear Energy Co. (ENEC), which is planning investments in the US and the UK to meet the growing data centre demand.
Sovereign Wealth Funds in the region are also actively foraging into AI and digital infrastructure. Saudi Arabia’s Public Investment Fund, in partnership with Google, will launch a 100 billion US$ AI hub, and the Kingdom has also attracted investment from Amazon Web Services for US$5.3 billion to build data centres. Abu Dhabi’s G42, an AI holding company, has received the commitment of up to US$ 1.5 billion from Microsoft. Meanwhile, Qatar’s National AI Strategy is prioritising investments in AI-powered cloud infrastructure.
The Gulf region’s stable and abundant electricity supply,  supportive regulatory environments, proactive government policies, land availability and commitment towards cleaner energy sources make it a favourable destination for data centre development. Nuclear energy, particularly SMRs, can help accelerate the region’s shift towards clean energy, with the UAE and Saudi Arabia leading the pack. Other countries in the MENA region, including Morocco, Bahrain, Qatar, and Egypt, are also exploring SMR development to join this emerging shift.
India, too, is emerging as a strong player in the global AI value chain with an ambitious plan of developing a domestic supply chain that integrates semiconductor fabs, data centres, foundation AI models, along with a nuclear energy supply of 100 GW by 2047 to fuel the AI stack. Across the Global North and South, the drive for winning the AI race is having the downstream effect of rekindling interest in nuclear energy.
The experiences of early movers will be key in shaping policy frameworks and defining the contours of the emerging AI-Nuclear synergy.

Policy Recommendations 

 	 AI-Nuclear Integration Hubs

Gulf countries like the UAE are positioning themselves as major players in the AI race while also making strides in nuclear energy generation with the Barakah Nuclear Energy Plant now set to cover a quarter of the country’s energy requirements. To strengthen the UAE’s position in the AI race, regulators should include the projected energy demands of the AI sector in the future iterations of the UAE Energy Strategy 2050. For the larger Gulf region, direct power purchase agreements (PPAs) between data centres and nuclear power plants should be considered to strengthen the region’s commitment towards clean energy. Furthermore, to prevent data centers from adding pressure to local grids—a pressing concern for the AI leaders like the US—regulators should incentivise data centres to be set up in special economic zones or integration hubs which lie at the intersection of city peripheries and energy infrastructure particularly where co-location of power plants (nuclear or otherwise) and AI data centres is feasible until SMRs reach scale. 


 	 International Cooperation 

International cooperation is crucial to scaling nuclear expansion, minimising costs and ensuring its long-term competitiveness. Much like the current global scramble we see for critical minerals, uranium—a key ingredient for nuclear energy—is increasingly concentrated.
Three key processes are required to supply nuclear feedstock: Uranium production, Uranium Conversion and Uranium Enrichment. These processes are rarely co-located, necessitating cross-border transportation and coordination. Currently, Europe and the Americas account for 30 percent of uranium production,  56 percent of uranium conversion capacity, and 41% of uranium enrichment capacity. In contrast, China, Russia and Kazakhstan, collectively control around  46 percent of the uranium supply, 44 percent of the uranium conversion capacity and 59 percent of the uranium enrichment capacity. To strengthen the future nuclear energy supply chain, international cooperation is paramount—streamlining regulatory, governance and licensing frameworks; fostering capacity building and knowledge-sharing; and setting up nuclear institutions ensuring harmonised deployment and governance of nuclear technologies, and promoting security, accountability, and resilience as the cornerstone of the nuclear energy system.
Although 50 percent of the world’s internet users are in emerging and developing economies besides China, they hold less than 10 percent of global data centre capacity. The future is becoming increasingly AI-driven, and the countries that house data centres will gain disproportionate geopolitical and economic influence. Energy and digital futures are increasingly converging, and emerging economies must strengthen investments and international cooperation to harness the AI-Nuclear nexus and secure their place in the evolving global order.



Mannat Jaspal is the Director and Fellow of Climate and Energy, Observer Research Foundation Middle East. 
Siddharth Yadav is a Fellow in Technology, Observer Research Foundation Middle East.

### Beyond Oil and War: A Closer Look at MENA’s Economic Subsystems

The Middle East and North Africa (MENA) region is often defined in dualistic terms in the global policy discourse: oil-rich or conflict-affected states. This tendency obscures a critical reality that MENA is one of the most economically diverse regions in the world. However, viewing the region through a truncated lens distorts the understanding of its economic challenges and leads to misguided policy recommendations that fail to account for this internal heterogeneity.

To move beyond this myopic framing, the article aims to map the type of economies in the region by proposing a four-part classification of MENA economies based on income levels and conflict status. This typology—(A) high-income economies, (B) middle-income economies, (C) middle-income conflict-affected economies, (D) low-income conflict-affected economies—provides a more accurate foundation for comparing development trajectories and prospects across the region.
Methodology of Classification
The analysis follows the definition of MENA using the World Bank’s regional classification, which includes the following 21 countries and territories: Algeria, Bahrain, Djibouti, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Malta, Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, United Arab Emirates (UAE), the West Bank and Gaza, and Yemen.

Two primary sources of categorisation established by the World Bank are used to map the MENA economies. First, income levels are based on the World Bank’s Country and Lending Groups classification, which defines low-income economies as those with a Gross National Income (GNI) per capita of US$1,145 or less, lower-middle-income economies as those between US$1,146 and US$4,515, upper-middle-income economies as those between US$4,516 and US$14,005, and high-income economies as those with a GNI per capita of US$14,005 or more. Second, conflict status is determined using the World Bank’s official classification of Fragile and Conflict-Affected Situations (FCS).

For this article, the World Bank’s income classification and fragility framework is adapted to create a more contextualised typology of MENA economies. Countries identified by the World Bank as high-income economies are classified here as ‘high-income’. Those in the upper-middle and lower-middle income brackets are designated as ‘middle-income’, while low-income economies are categorised as ‘low-income’. The World Bank overlays its FCS list onto the income classification to account for conflict-related economic disruptions. As a result, countries that are both ‘middle-income’ and FCS-listed are reclassified as ‘middle-income conflict-affected’, while those that are ‘low-income’ and FCS-listed are categorised as ‘low-income conflict-affected’. The result of this analysis is showcased in Table 1. There were no countries in the ‘low income’ bracket that were not affected by conflict. This dual-lens approach captures both economic standing and institutional fragility,  accurately reflecting the region’s development landscape.


A Closer Look at MENA’s Economic Subsystems

 	High-Income Economies

The high-income MENA economies—Qatar, Israel, the UAE, Malta, Kuwait, Saudi Arabia, Bahrain, and Oman—comprise the region’s economic heavyweights. These states can be broadly sub-classified into two distinct groups: resource-driven economies and innovation-driven economies. The first group, Qatar, the UAE, Kuwait, Saudi Arabia, Bahrain, and Oman, derive substantial revenue from hydrocarbon exports. The second group, most notably Israel and to some extent Malta, are innovation-driven, leveraging technology, services and human capital. The group’s average per capita GNI is US$42,475, placing them well above the global high-income threshold. However, the standard deviation of US$18,576 reflects significant variation among them. For example, Qatar has one of the world’s highest per capita GNIs at US$79,430, while Oman trails at US$20,470, highlighting a wide dispersion in wealth even within the high-income bracket.

Common strengths among these economies include strong fiscal buffers, high sovereign wealth fund assets (especially in Qatar, the UAE, Kuwait, and Saudi Arabia), advanced infrastructure and strategic geopolitical positioning. These countries have the financial muscle to attract Foreign Direct Investment (FDI) and pursue large-scale national transformation agendas, such as Saudi Arabia’s Vision 2030 and the UAE’s Centennial 2071. However, common challenges persist. Most resource-rich states face the long-term imperative of economic diversification and energy transition. Labour market nationalisation and low labour productivity also remain critical issues, especially in countries with high youth unemployment such as Saudi Arabia, Oman, Kuwait and Bahrain.

The generous welfare models of these economies may become fiscally unsustainable in a low-carbon future. Israel and Malta, though not resource-based, bring different strengths and vulnerabilities. Israel is a global leader in innovation, with the highest research and development (R&D) spending per capita globally and is home to a dynamic tech ecosystem. However, it faces acute geopolitical risks due to regional tensions and internal political instability. As a small European Union (EU) island economy, Malta benefits from EU integration but remains vulnerable to external shocks and has faced increasing scrutiny over financial transparency. Hence, while the high-income MENA economies share structural advantages, they differ sharply in the sources of their wealth and the nature of their long-term risks.

 	Middle-Income Economies

The middle-income MENA economies—Algeria, Iran, Jordan, Egypt, Tunisia, Morocco, and Djibouti—represent diverse countries navigating complex paths toward development under structural and geopolitical pressures. This group features an average per capita GNI of US$4,123 and a relatively narrow standard deviation of US$557. Most countries are clustered toward the lower end of the income threshold, reflecting a shared constraint in resource mobilisation.

While all these economies significantly focus on services, there are notable differences. Iran and Algeria are hydrocarbon states, and 85 percent of Djibouti’s Gross Domestic Product (GDP) is derived from services like ports and logistics. Egypt, Morocco, Jordan and Tunisia have relatively diverse economies, blending services, manufacturing, and natural resources, such as phosphates, particularly in Tunisia and Jordan. Common strengths across these economies include a youthful labour force and access to strategic trade corridors, including the Suez Canal for Egypt, the Red Sea and the Gulf of Aden for Djibouti, Mediterranean access for Tunisia and Algeria. Yet, shared challenges are significant. Informal labour markets dominate employment, undermining fiscal revenues and social protection systems. Youth unemployment is widespread, with as high as 76.3 percent of the young labour force in Djibouti unemployed. Political institutions face legitimacy challenges due to repeated cycles of protest, stalled reforms, and increasing inflation. As a result, MENA’s middle-income economies are caught in a development bottleneck. Their upward mobility depends on expanding employment by modernising governance and attracting sustained investment.

 	Middle-Income Conflict-Affected Economies

This category includes Libya, Iraq, the West Bank and Gaza Strip, and Lebanon. The group’s average per capita GNI is US$4,983, with a standard deviation of US$940, suggesting a moderate spread of income levels but still broadly clustered within the lower half of the middle-income band. This reflects both the limited structural capacity of these economies and the constraints imposed by cyclical conflict.

Again, this category features important hydrocarbon states, such as Libya and Iraq, whose revenues remain dependent on oil exports. However, Lebanon and the West Bank and the Gaza Strip rely significantly on remittances and aid. Despite their instability, some common strengths persist. All four have better human capital foundations and relatively literate populations, with the literacy rate in the West Bank and Gaza as high as 98 percent. However, their common challenges are equally significant. State fragility, institutional erosion, poor governance and politicised economies have crippled long-term development.  Ultimately, this group sits in a different position. Their resource base, human capital and geostrategic relevance give them latent potential, but their progress will remain stunted without structural reforms and durable peace settlements.

 	Low-Income Conflict-Affected Economies

This category comprises Syria and Yemen, two of the most war-torn states in the MENA region. This group’s average GNI per capita stands at a mere US$725, with a negligible standard deviation of US$21, underscoring the shared depth of economic collapse across both countries. Despite total institutional erosion, Yemen and Syria exhibit a certain degree of resilience at the margins. Informal networks and diaspora remittance play a central role in economic survival. These economies are significantly aid dependent, with the Net ODA (Official Development Assistance) as a percentage of GNI in Syria at 36.3 percent and in Yemen at 38 percent.

These states face extreme challenges compared to anywhere else in MENA. They are plagued by a collapsed public service system and complete institutional breakdown, with a rampant lack of access to clean water, health and education. Further, currency devaluation is a significant concern as the Syrian pound has lost 90 percent of its value since 2020, and the Yemeni rial fell to its lowest in 2025. These countries also face Western sections.
Conclusion
Reframing MENA economies beyond the binary of oil-rich and conflict-ridden reveals striking economic diversity. This classification offers a clearer foundation for tailored policymaking and more effective international engagement. It also highlights the need for more targeted investment and smarter aid. Recognising this internal complexity is key to designing impactful and responsive strategies for the region’s varied development paths.



Samriddhi Vij is an Associate Fellow, Geopolitics, at the Observer Research Foundation–Middle East.

### The AI-Sustainability Paradox and the Global South: Regulation for Sustainable Innovation

Artificial Intelligence (AI) has increasingly been framed as a solution to environmental challenges, contributing to sustainability efforts such as charting methane emissions or mapping the dredging of sand. Yet, its development and lifecycle pose significant environmental risks. This paradox exists in a policy landscape where Big Tech has growing power, actively creating an environment conducive to its own long-term objectives of expansion and influence. Recent developments in US tech policy, with Trump taking a more deregulatory stance, risk deepening global power imbalances by further entrenching U.S. tech dominance. Nations in the Global South already face disadvantages in engaging with global governance platforms and multinational corporations, and weak AI regulation may exacerbate these vulnerabilities.
Environmental toll of the AI lifecycle
Despite the need for more transparency and research into AI’s environmental impacts, estimates highlight the severity of its effects. For example, training a single large language model (LLM) emits approximately 300,000 kg of carbon dioxide, equal to around 125 round-trip flights between Beijing and New York. A single LLM query requires 2.9 watt-hours of electricity, whereas a regular internet search only requires 0.3 watt-hours. Moreover, the rise of Gen-AI has increased the electricity demand, reflected in the surging demand for data centres. Consequently, the number of data centres worldwide has risen from 500,000 in 2012 to 8 million.  Throughout this process, energy consumption has increased twofold every four years. Data centres also require large amounts of water for cooling and electricity generation purposes. Estimations project that the global demand for water resulting from AI could reach 4.2-6.6 billion cubic metres in 2027. This exceeds 50 percent of the UK’s 2023 annual water use. Additionally, although the exact volume of electronic waste generated by AI is still unclear, only a scarce amount of 22 percent of e-waste is being disposed of in an environmentally sound way.

Finally, the growing demand for graphical processing unit chips increases the demand for minerals and metals. The similarity of these minerals and metals to those mined for transitioning to a low-carbon economy suggests that AI-driven extraction of minerals and rare earth elements could contribute to the environmental impacts already associated with this sector.
Big-Tech in Policymaking
Besides the environmental cost of individual AI models, the continuous expansion of AI and the projected surge in data centres to facilitate this have rendered Big Tech a major force in global energy consumption. This rapid growth and its subsequent increased environmental risk are facilitated by a policy landscape in which Big Tech exerts significant influence. The growing accumulation of wealth, cross-border interests, and global influence is to such an extent that sovereign states have begun to treat Big Tech like sovereign actors. Denmark’s appointment of the first-ever Tech Ambassador is an example of that. Big Tech’s influence extends beyond identifying social issues and defining ‘problems’ by controlling information on digital platforms, influencing media and generating content through tools like GenAI. It also provides ‘solutions’ to these epistemic challenges as digital solutions become increasingly embedded in infrastructural, social, and governmental systems. Changing societal structures increasingly characterised by technical solutionism are legitimising Big Tech as a constituency in policymaking and the technologies it offers, reinforcing Big Tech’s position in policymaking. Moreover, increased affordability and accessibility make these digital solutions more feasible to implement.

Additionally, tech companies have become important actors in the political sphere as a response to the threat of (over-)regulation. Various mechanisms used to influence the political dimension of policymaking include consultations with governments, lobbying and the funding of universities, think tanks and experts. The effect of this political capital is evident in the 2024 EU AI Act, where lobbying and efforts of discursive and consultative power helped mitigate the conditions in the proposed act. For example, in a joint statement, BSA | The Software Alliance urged EU institutions to leave General Purpose AI out of the Act’s scope, warning that not doing so would be ‘detrimental’ to development and ‘hamper’ innovation.

Big Tech’s influence across problem shaping, policy formation and political processes raises the question of whose interests are being served. Innovation-centric narratives underestimate Big Tech’s influence within the policy landscape, overlooking the possibility that innovation can be a means to other ends, such as influence or profits. For example, Google attempted to stifle innovation to preserve its internet search market dominance by using anti-competitive practices. OpenAI’s request for copyright exemption further highlights how the argument for innovation masks underlying motives of market dominance and influence, as this exemption could stifle innovation and creative freedom, especially for smaller players in the field and across sectors.

Less regulation thus, does not necessarily lead to greater innovation or social, political, or environmental benefits. Big Tech primarily seeks to shape an environment that supports its own expansion and growing influence. Effective regulation can help shape the current trajectory of AI development in a way that is better equipped to address environmental challenges than Big Tech is willing or able to.
Initiatives in the Global South
The extractive characteristic of AI development extends beyond environmental harm and is highlighted in the asymmetrical concentration of power between the Global North and the Global South. Resource-rich but infrastructure-poor states in the Global South specifically risk environmental degradation whilst benefitting minimally from AI-driven economic growth. Paired with the increased reliance on technology and foreign proprietary models for AI deployment, this power asymmetry mirrors historical patterns of technological as well as economic dependence.

In response, regulatory initiatives are emerging in the Global South. The African Union’s Continental Artificial Intelligence Strategy acknowledges AI’s transformative potential whilst encouraging governments to leverage existing laws to address challenges posed by AI. It emphasises the need to consider environmental risks in AI governance, calling for a multi-tiered approach to mitigate these risks and ensure equal distribution of benefits, while highlighting the need for regional cooperation.

The UAE Cabinet has approved the ‘UAE’s International Stance on Artificial Intelligence Policy’, which is grounded in six core principles, sustainability notably being one of them. However, without binding regulations on sustainable AI, rather than just AI for sustainability, there is a risk of outsourcing the environmental burden rather than addressing it. This could be observed in the UAE’s investment in data centres abroad, driven by energy constraints, as its data centres are at capacity. The UAE’s engagement in international fora to establish global AI sustainability standards may represent a step toward addressing these cross-border challenges.

The need for international cooperation is further highlighted in the draft of the Brazil AI Act, which explicitly links AI to sustainable development. The act proposes not only environmental protection and sustainable development to be a foundational AI principle but also urges these principles to guide AI’s development, implementation and use.

Other domestic initiatives reveal economic opportunities that also address sustainability goals. Kenya rebalances sustainability and economic benefits through a clear regulatory framework in the renewable energy sector. The regulations for geothermal projects, combined with incentives and in partnership with development-finance institutions, enabled Microsoft and United Arab-Emirates-based AI firm G42 to build a geothermal-powered data centre. Similarly, Malaysia’s Corporate Renewable Energy Supply Scheme (CRESS) connects corporates with clean energy providers, attracting investments by Google and Oracle, expected to contribute over US$9.5 billion to Malaysia’s economy by 2030. For data-centre developers, this means direct access to energy from renewable providers.
Recommendations
The recommendations advocate for the establishment of regulatory frameworks that address Big Tech’s policymaking influence and mitigate the risks of rapid expansion and extractive activities related to AI development while promoting sustainable practices.

 	Establish context-specific regulatory frameworks to align AI development and deployment with specific social and environmental goals.
 	Implement Sustainability reporting to improve transparency, promote accountability and data-driven decision-making.
 	Foster regional and international cooperation through coalition-driven efforts to strengthen common values and norms surrounding sustainable AI development and address the power asymmetry observed in the decision-making sphere.
 	Leverage existing legal frameworks to establish a multi-tiered governance approach and shape domestic AI narratives.
 	Incentivise sustainable AI through regulatory frameworks that harmonise initiatives with environmental goals whilst promoting economic growth, as demonstrated by emerging initiatives in Kenya and Malaysia.




Dewi de Weerdt is a postgraduate student at the University of Essex, pursuing their degree in Human Rights Theory and Practice.

 

### The Gulf Railway Project: Bridging the Gaps between Vision and Reality

The Gulf Railway Project (GCC Railway) has ambitiously attempted to develop a transnational infrastructure plan to link all six Gulf Cooperation Council (GCC) member states via a 2,177-kilometre rail network. Conceived in 2009, the railway is designed to run from Kuwait City to Muscat, passing through Saudi Arabia, Bahrain, Qatar, and the United Arab Emirates (UAE). This project, while transporting both passengers and freight, can facilitate greater economic integration, supply chain resilience, and green mobility across the Gulf.
The project is strategically significant for multiple reasons. The Gulf Railway can develop as the backbone of a future GCC customs union, increasing intra-GCC trade, which is roughly 10 percent of total exports. This is substantially lower than economic blocs like the European Union (EU), where over half of trade occurs within the bloc for both goods and services. Thus, the GCC railway project can enable a growth in intra-regional trade by overcoming connectivity barriers and complementing ports to boost regional competitiveness. Beyond the region, the project can also strengthen GCC’s geoeconomic positioning by linking seamlessly with transnational corridors like the India-Middle East-Europe Economic Corridor (IMEC). These links could elevate the GCC as a central node in Eurasian connectivity, reducing East-West trade dependence on traditional maritime chokepoints like the Strait of Hormuz and Bab el-Mandeb, often threatened by geopolitical instability, thereby improving trade and logistics continuity. This initiative also builds on the ambitions of Gulf economies to diversify away from oil by presenting a low-emissions logistics backbone that aligns with their net-zero ambitions. Etihad Rail states its rail transport can reduce road emissions by 21 percent annually by 2050, taking up to 300 trucks off the roads for every train journey and removing 8.2 million tonnes of CO2 per year.
While the benefits of the GCC railways project are multifold, with important spillover benefits for the entire Gulf, its implementation has been derailed and has been stalled for over 14  years.  This paper aims to identify the key reasons why the project’s progress has been stunted and offer solutions to accelerate its implementation.

Why has the GCC Railway Project Faced Delays?
Progress on the Gulf Railway has been uneven, with the UAE and Saudi Arabia advancing furthest, while Kuwait, Bahrain, and Oman have faced the most significant delays. The UAE's Etihad Rail has successfully connected the Saudi border to Fujairah through all seven emirates, establishing the first operable connection with another GCC state. Oman and the UAE signed a landmark agreement in 2023 to launch a joint venture called Oman–Etihad Rail Company, tasked with linking Sohar and Abu Dhabi in 100 minutes. Saudi Arabia has developed extensive domestic rail infrastructure, but its segments directly contributing to GCC integration, such as connections from Dammam to Al-Jubail and from Al-Khafji to Kuwait, are still under development. Qatar has already built a modern rail network meeting GCC standards, but remains unconnected to the broader system. Bahrain has made less tangible progress; it has no national railway and is only planning for a light rail system. The planned Friendship Bridge between Bahrain and Qatar remains at pre-construction stages. Oman is yet to break ground on its 2,135 km national railway network. Most cross-border segments—including Saudi-Qatar, Saudi-Kuwait, Qatar-Bahrain, and Bahrain-Saudi—remain either in early planning or stalled, undermining the GCC Railway’s goal of seamless regional integration.
While the strategic logic of the Gulf Railway is robust, the project has faced prolonged delays due to a mix of conceptual, political, and financial challenges. Conceptually, the Gulf Railway’s supranational nature requires intense policy harmonisation, including customs, regulations, technical standards, and border control agreements—none of which have kept pace with construction. For example, questions remain around who will operate the trains across national borders, how cargo will be cleared at borders, and whether the rail will enjoy regulatory fast-tracking like airports and ports.
These conceptual hurdles are further compounded by political issues like the 2017 Qatar crisis, when certain GCC states cut ties with Qatar, severely disrupting regional planning. Although ties were restored in 2021, the rift led to the suspension of Qatar’s segment, delaying funding and planning across multiple states due to missing cross-border connectivity.
In addition to this, financial challenges have also stalled the progress of the project. Initial cost estimates for the full project hovered around US$250 billion, but no unified GCC fund was established to underwrite it. Wealthier states like the UAE and Saudi Arabia have pushed ahead independently, while Kuwait, Bahrain, and Oman have faced fiscal constraints, especially post-2014 oil price crash and during COVID-19. Further, the railway competes with national ambitions such as the Qatar World Cup and NEOM, which can divert funding away from railways. Smaller countries like Bahrain also view rail as a lower priority than airports, metros, or roadways that serve immediate domestic needs.

What can be Done to Fast-Track the Completion of GCC Railways?
To fast-track the completion of the GCC Railway, the region must adopt a multi-pronged approach rooted in supranational governance, innovative financing, phased infrastructure strategy, legal frameworks and public-private partnerships.
First, while the establishment of the GCC Railways Authority (GCCRA) in 2021 was a positive step toward institutional coordination, its role must now evolve beyond coordination into enforcement. The authority should be empowered to mandate compliance with unified technical standards, construction milestones, and cross-border protocols, much like the European Union’s European Railway Agency (ERA), which enforces the Trans-European Transport Network (TEN-T) with binding deadlines. Without this enforcement capacity, progress will remain piecemeal and subject to shifting national priorities.
Second, equally important is the creation of a dedicated GCC Railways Fund. Currently, each country is expected to finance its portion of the railways. However, by pooling financial resources from wealthier member states like the UAE and Saudi Arabia and supplementing them with concessional finance from institutions such as the Islamic Development Bank or the Asian Infrastructure Investment Bank, the fund can support fiscally constrained members like Bahrain, Kuwait, and Oman. It will be important to remind wealthier contributors that the railway’s completion enhances the entire region’s trade competitiveness and geoeconomic clout, and thus justifies a redistributive financing mechanism.
Third, a phased approach to construction should also be adopted. Drawing on the East African Railway Master Plan, the GCC can prioritize high-impact segments, such as the UAE–Oman link from Abu Dhabi to Sohar, the Saudi–UAE–Qatar route via Salwa, and the Kuwait–Saudi Arabia segment from Nuwaiseeb to Al-Khafji, as anchor corridors that demonstrate early success, attract users, and build momentum for further integration. These segments serve important industrial hubs and ports, aligning closely with the GCC’s freight-driven logistics profile. Focusing on freight services first, rather than lesser viable long-distance passenger routes, will also be critical.
Fourth, accelerating legal and regulatory harmonisation is vital. ASEAN’s Singapore–Kunming Rail Link provides a good model of how legal protocols, such as customs clearance, operator licensing, and cargo inspection, can be standardised even among diverse states. The GCC must fast-track its own set of harmonised regulations, including a digital customs platform and shared safety benchmarks, preferably under the leadership of the GCCRA, with mutual recognition of standards. This soft infrastructure is as critical as the physical rail lines in unlocking operational efficiency.
Finally, Public-Private Partnerships (PPPs) should also be actively pursued, particularly for freight corridors. This requires transparent bidding processes and performance-based contracts by drawing from models in China and North America, where commercial freight operations function well under public oversight.
The GCC should leverage rail diplomacy to rebuild trust and institutionalise cooperation. The 2017 Qatar crisis revealed how political fragmentation can derail regional infrastructure. Regular ministerial-level summits on transport, modelled on the 2024 Doha GCC Railway Meeting, should be held to monitor progress, resolve disputes, and reinforce shared commitment. Railway integration should be positioned as a strategic tool for regional unity, economic security, and diversification beyond oil.
By learning from global models, the GCC can transform the Gulf Railway from a delayed ambition into a connectivity backbone. The vision already exists, but what is now needed is a greater institutional will.



Samriddhi Vij is an Associate Fellow, Geopolitics, at the Observer Research Foundation–Middle East.

### Revisiting Türkiye-GCC Economic Cooperation amid Trump 2.0

The economic relationship between Türkiye and the Gulf Cooperation Council (GCC) countries has evolved significantly since the resolution of the Gulf crisis in 2021. The de-escalation and normalisation processes which followed the al-Ula Agreement have created a fertile ground for deeper collaboration, with both sides focusing on enhancing trade, investment, and broader economic cooperation. Despite the potential, there is much untapped opportunity that could elevate these economic ties to new heights. Moreover, the Trump 2.0 era may open new avenues for GCC-Türkiye relations by encouraging pragmatic economic partnerships, reducing reliance on traditional alliances, and fostering a climate where bilateral trade and investment become key priorities.

Türkiye, the largest non-oil economy in the Middle East, is well-positioned to play a significant role in the economic future of the region. Its strong manufacturing base, diversified economy, and strategic location in Europe and Asia provide it with a unique advantage. The Gulf countries, on the other hand, led by the Kingdom of Saudi Arabia (KSA)—the largest Arab economy—are working on economic diversification initiatives aimed at reducing their dependence on oil. This common interest in growth and diversification should naturally drive stronger economic collaboration between the two sides.
Economic Prospects and Geopolitical Realignments
Despite the potential, the volume of bilateral trade between Türkiye and the Gulf states, particularly Saudi Arabia, remains limited when compared to their collective economic capacities. In 2023, Saudi Arabia and Türkiye signed agreements on investment, energy, communications and the defence industry. Among others, the defence sector has the potential to be the engine of the economic relations between the two countries, as Ankara and Riyadh are currently negotiating a $6 billion defence agreement, including Saudi Arabia’s joining a programme to develop a fighter jet known as KAAN.

The situation is slightly more promising in Türkiye’s relationship with the United Arab Emirates (UAE), which has been growing steadily. In 2023, the UAE ranked the 9th largest destination for Turkish exports valued at US$8.5 billion. Both nations have been negotiating a free trade agreement (FTA) for over a decade, and while significant progress was made in 2024, the final hurdles remain. The challenge lies in reaching an agreement among the six GCC countries, but the potential benefits are undeniable. Türkiye, having long advocated for such an agreement, understands that this could unlock substantial economic opportunities for both sides.

Beyond trade agreements, the geopolitical and economic context remains fluid, especially with the unpredictable nature of US foreign policy under President Donald Trump. The Trump administration's economic policies, including efforts to increase US oil production and reduce oil prices, have indirectly created tensions with the Gulf states. Countries like Saudi Arabia and the UAE, which rely on stable oil prices to fund their economic diversification plans, have been at odds with US oil strategies. Low oil prices hurt their long-term planning, exacerbating the economic division between the GCC and the US under Trump’s leadership.

What is more, GCC countries, particularly UAE and KSA, have shown interest in joining BRICS group (originally comprised of Brazil, Russia, India, China, and South Africa) to diversify their geopolitical and economic alliances by gaining more influence in global decision-making, shifting global power dynamics and the transition away from unipolarity. This move can challenge the US leadership in the region, especially under President Trump's “America First” policy, which focused on reducing US commitments abroad and fostering closer ties with traditional allies like Israel and the GCC states. As these countries eye BRICS membership, they may increasingly distance themselves from Trump's policies, seeking new economic partnerships and geopolitical stability that aligns with their national interests. This misalignment of interests could lead to financial pressure from the US, particularly if the GCC countries do not align with Trump’s policies.

Another concern is the US’s potential for escalation with Iran. The Second Trump administration has restored its "maximum pressure" campaign, potentially supporting more aggressive measures, including urging Israel to target Iranian nuclear facilities. This may lead to considerable tension with some Gulf states, particularly in light of the Saudi-Iran rapprochement brokered by China, which has helped reduce tensions and opened new avenues for economic and security cooperation. Under the current geopolitical context, a continuation of policies from the first Trump administration is far from being seamless, as the Gulf states are now much less enthusiastic about the US’s hawkish policies towards Iran from back in 2017. A US-Iran confrontation could threaten the delicate balance between GCC countries’ strategic alliance with Washington and their efforts to preserve stability with Tehran.

Türkiye, on the other hand, faces its own set of challenges in its relationship with the U.S. Along with the political relations, Ankara desires to boost its economic ties with Washington during the Trump 2.0 era. The imposition of sanctions during Trump’s first term, particularly targeting the Turkish economy, has shown the fragility of the economic relationship between the two countries. Türkiye is acutely aware of the risks posed by political tensions, especially regarding tariffs on its iron exports to the US, which could hurt its economy further. Despite this, Türkiye remains committed to strengthening its ties with the U.S. in hopes of boosting economic collaboration. However, the political volatility in US-Türkiye relations remains an ongoing concern.
Future Prospects
For both Türkiye and the GCC states, these external challenges may ultimately encourage greater economic collaboration within their region. The economic strain caused by the COVID-19 pandemic and the ongoing geopolitical instability in the region have highlighted the need for greater autonomy and economic resilience. With the possibility of future US sanctions or tariffs looming, both sides may see more incentive to increase bilateral trade, investment, and regional economic cooperation.

While the economic ties between Türkiye and the GCC countries have made significant strides in recent years, there is still much room for growth. Both sides have strong motives to enhance their cooperation, especially in the wake of external pressures, such as shifting US policies and regional uncertainties. The FTA between Türkiye and the UAE could serve as a critical step forward in unlocking the vast potential of this economic partnership, benefiting not only Ankara and the GCC but the broader region as well. However, the challenge lies in navigating both the complex geopolitical dynamics and the evolving global economic landscape, which will require careful negotiation and strategic alignment in the years to come.



Gamze Coskun Bakir is a researcher and consultant on the MENA region, focusing on the Gulf, Levant, and Turkiye. 

Nesibe Hicret Battaloglu (Qatar University) is a researcher in the Gulf Studies Center at Qatar University. Currently, she is also a PhD Candidate at the Middle East Technical University (METU) in Turkiye.

### Global race for minerals will define new power equations

The hunger for rare earths and critical minerals is shaping global geo-political developments. The control and access to minerals will define powers equations for the next few decades. Countries with ready and affordable access to these minerals will be strengthen their economies. Supply control of such minerals will underpin an economy’s technological prowess.
The scramble for natural resources has been occurring for ages. Western powers have scrambled to control supply of oil, gas and minerals for centuries. In the current era however, countries from Asia are competing with the west for critical minerals.
US, UAE and India are among the countries which are eagerly securing mineral supplies for their economies. China has somewhat of a head start with its investments in the African continent over the last few decades. In the tariff war with US, China has put exports controls on rare earths. Seven categories of medium and heavy rare earths, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium-related items, will be placed on an export control list, the Chinese govt has said.
In anticipation of such controls, President Donald Trump has been sharply focused on access and supply of mineral resources as part of his plan to reinforce economic security of the US. His statements on a mineral deal with Ukraine are clear. So is the intention to utilize the minerals in Greenland and the arctic. US is keen to ensure that it does not remain dependent on China for such minerals. US also wants to counter the influence of China in global supply chains since Beijing has strong pacts in African continent for mineral access.
Western powers are increasingly concerned as China dominates the rare earth elements market, accounting for 70% of global production. The world is looking for a rebalancing where the rare earth market is not monopolized by a few powers.
With the rise of renewable energy and electric vehicles, the demand for these metals is soaring. From 2020 to 2022, the annual value of rare earths used in the energy transition quadrupled, and it's expected to increase tenfold by 2035. The European Commission’s Joint Research Centre predicts that by 2030, Greenland could contribute nearly 10,000 tons of rare earth oxides to the global supply.
The focus on Greenland and even Canada is an effort to secure supplies of minerals in the decades to come. US policy makers anticipate that with global warming, access to sub-terranean minerals will become easier and affordable under frozen regions of Greenland and Canada. Various estimates indicate that Greenland has USD4 trillion worth of untapped rare minerals. The Trump administration has smartly focused on its interests that will secure the country’s future for several decades.
“Refined rare metals are a critical import that American companies don’t produce and need to get from China to produce many needed products in the U.S. such as mobile phones, magnets, night vision glasses, gyroscopes in jets, LED lights, glass, and ceramics,” wrote Ray Dalio in a blog post. Dalio is founder of the world’s largest hedge fund firm, Bridgewater Associates.

Asia joins the mineral hunt
Apart from China, west Asian economies that are investing in technology are also keen on critical minerals. According to a report in Technical Review Middle East, UAE is expanding its presence in Africa’s mining industry, with a many strategic investments for boosting production, infrastructure, and energy security across key markets.
In February, Ambrosia Investment Holding acquired a 50% stake in Allied Gold's mining projects in Ethiopia and Mali. This deal includes a $375 million capital injection to boost project development, aiming to increase gold production in Ethiopia by 290,000 ounces annually by mid-2026 and in Mali by 400,000 ounces annually by 2028. Additionally, Ambrosia plans to enhance sustainability by implementing solar photovoltaic and battery storage systems at the Sadiola mine in Mali, ensuring energy security by July 2026.
Rare earths, or rare earth elements (REEs), are a group of 17 chemically similar elements that are crucial in the manufacturing of many high-tech products. These elements include the 15 lanthanides on the periodic table, plus scandium and yttrium. Despite their name, most rare earth elements are relatively abundant in the Earth's crust, but they are rarely found in concentrated forms, which makes their extraction and processing challenging.
Some common uses of rare earth elements include:


 	Electronics: Used in smartphones, computers, and other electronic devices.
 	Renewable Energy: Essential for wind turbines and electric vehicle batteries.
 	Defense: Important for military applications like jet engines, missile guidance systems, and satellites.
 	Medical: Utilized in medical imaging and diagnostic equipment.

Earlier in 2025 India launched the National Critical Mineral Mission (NCMM) with an expenditure of about USD 196 million and expected investment of USD 216 million by government owned corporations. India sees an indispensable role of critical minerals in high-tech industries, clean energy, and defense. India also has a pact with the US for critical minerals supply chain. This is expected to be part of its overall trade partnership between India and the US.
India is also negotiating a pact with Chile to access critical minerals like copper and Lithium. “Chile is the biggest producer of copper and the second-biggest producer of lithium and we are (doing) long-term investments to assure that those reserves will last long. We want to, of course, not only export the raw material, but also add value to them. This is one of the things we discussed with Prime Minister Modi, that the lithium, copper, molybdenum and other renewable energies, other minerals, critical minerals are going to be in the CEPA — the Comprehensive Economic Partnership Agreement — that we have decided to start negotiating,” Chile President Gabriel Boric said in an interview recently in India.

Role of technology for mining
With US, China and countries like India focusing on the minerals and rare earths, smart technologies will be deployed for rapid and responsible extraction.
In the digital era, AI, smart devices and green technologies are dependent on critical minerals. From personal devices to electric mobility to smart chips, nearly every industry in every economy depends on critical minerals, directly or indirectly. The next phase of growth of the mining industry is being shaped by the very technologies that use its output.
A slew of emerging technologies is helping make mining smarter, greener and safer. The use of AI and automation is helping the mining industry in several aspects of its activities. These include site exploration; terrain data; ore sorting and predicting deposit discovery.
Specialised drones are being used above and below mines for geological data. Drones can go into narrow spaces inside caves where it would difficult or dangerous for humans to enter.
 “Mining companies are implementing comprehensive digital platforms that combine IoT sensors, artificial intelligence, and advanced analytics,” says a Mordor Intelligence report. Smart Mining Market size is estimated at USD 34.23 billion in 2025, and is expected to reach USD 34.59 billion by 2030, according to Mordor.
Technology and geo-politics will ensure that minerals under the earth decide the new power structures of the world.



Pranjal Sharma is the author of The Next New: Navigating the Fifth Industrial Revolution
Disclaimer: This article was originally published by The Sunday Guardian. 

### Bytes and Bubbles: Comparing the 90s Dot-Com Bubble and the AI Race

The discourse on AI and the ongoing AI arms race over recent years has been inundated with a cacophony of sceptical voices and millenarian projections about an AI-driven age of abundance. Due to the increasing integration of AI into national strategies and geopolitical dynamics, the continuation of AI innovation and development is not just relevant for market leaders like the US but also for emerging players across the world. Every financial year, a recurring question has been whether AI companies are overvalued and whether AI products will live up to expectations. Furthermore, given that the ‘Magnificent 7’ represents over 30 percent of the US market, distress signals like the launch of DeepSeek R1 in January 2025 can have cascading effects, causing global market and supply chain readjustments. Any hint of an innovation slump between the release of frontier AI models raises apprehensions regarding the AI companies and their ability to keep the tech market buoyant. Questions regarding diminishing returns, overvaluation and the inability of AI companies like OpenAI and Anthropic to effectively monetise their products have led to frequent comparisons between the AI race and the dot-com bubble of the 1990s. This paper aims to explore the nature of tech bubbles along with the continuities and discontinuities between the dot-com bubble of the 1990s and similar speculations about the current trajectory of AI development.
AI scepticism
Bubbles in economic sectors emerge when speculative demand and irrational investment cause the price of assets like stocks to rise significantly above their value leading to a capital drought followed by market collapse that can have cross-sector effects. During the 1990s dot-com bubble, there was a surge in demand for assets based on information and telecommunication technologies like the internet that led to valuations significantly outmatched the revenues of tech companies. Although the internet has profoundly changed the global economy, its real impact was not felt till the mid-2000s. The longer-than-expected time scale caused a sell-off of tech stocks during the early 2000s, erasing trillions in market value.

The current tech market shows some signs of a bubble forming, particularly in the AI space. Although platforms like Meta, Microsoft, and Google have seen profits in the last two years due to the range of products they offer, market leading AI-focused entities like OpenAI continue to generate billions in losses regardless of the success of their products. Chipmaking giant NVIDIA which briefly surpassed Apple in January 2025 to become the most valued company in the world continues to generate profits but with shrinking margins. The leading cause of worry is that promises of AI-driven paradigm shifts across societies made by developers may not materialise. While AI systems like ChatGPT have continued to improve in various aspects like text and media generation, coding and research, the revolution still seems a way off. Furthermore, the development of increasingly powerful frontier AI models has not been accompanied by a proportionate rise in productivity and monetisation. Microsoft CEO Satya Nadella stated in an interview that in the absence of GDP growth, “[AI developers] self-claiming some AGI milestone, that’s just some nonsensical benchmark hacking”. The real marker of AI progress, according to Nadella, is wider economic growth that can recursively secure investment in the AI sector.

Market uncertainty, particularly for semiconductors, is also being driven by rising geopolitical tensions and competitiveness between the United States and China. President Donald Trump’s tariff regime can challenge semiconductor production growth given the globally distributed nature of the semiconductor supply chain. The out-going Biden-administration’s Framework for Artificial Intelligence Diffusion (FAID) published in January 2025 (before the launch of DeepSeek R1) intensified export controls to further isolate China from the AI value chain established by the West. The FAID is supposed to streamline the process of acquiring export licenses for advanced AI chips; however, the framework was drafted prior to the release of open-weight Chinese AI models like DeepSeek-R1 and the more recent Manus AI agent that could compete with Western frontier models. The consistency of private sector investment in AI will depend on complicating factors like Chinese innovation in the AI sector, the question of how the Trump administration enforces the FAID or whether the framework (along with the 2022 CHIPS act) even continues to exist or is replaced by a tariff-based licensing framework.
Slow but Steady Uptake
Tempering high expectations is necessary to avoid economic distress, but caution should be applied in a measured manner to avoid unnecessary obstacles that may hinder innovation at the frontiers. While the AI-driven boom may rhyme with the dot-com bubble, it is not a repetition. A critical component of the dot-com crash was over-investment in network architecture (like fibre-optic cables) that grossly outmatched demand at the time. Conversely, a bottleneck for developing frontier reasoning AI models is that demand is outpacing supply. The data and energy-intensive nature of scaling inference and computing is causing a surge in demand for data centres. According to a Goldman Sachs report, the global market capacity of data centres will double by 2030 leading to the global power demand for data centres to increase by 165 percent. Even in a scenario that sees demand for AI plateauing or decreasing, the strategic relevance now accorded to the technology has enabled unprecedented public sector investment across developed and developing economies. For instance, the Stargate Project initiated by the Trump administration established a funding pipeline for AI infrastructure and established AI as a priority for national security. Following the 2025 Paris AI Action Summit co-hosted by India and France, the EU announced the InvestAI initiative to facilitate a 200 billion euro investment in the AI sector with 20 billion euro earmarked for AI gigafactories. Before the Summit, the United Arab Emirates (UAE) entered an agreement with France to invest 30 to 50 billion euros towards building an AI campus and a 1 gigawatt data centre in the country.

AI adoption and maturity across economic sectors have also been steadily increasing since 2021. A report by Boston Consulting Group states that data-rich sectors like tech and finance show the highest levels of maturity while historically lagging sectors like automotive and industrial goods are now exhibiting the fastest adoption rate. AI maturity is also on the rise across geographies with emerging markets like India and the UAE growing faster than many developed countries. AI models are also being adopted by the public sector. For instance, the United Kingdom (UK) government has signed an MOU with Anthropic to collaborate on integrating AI to increase the efficiency of public services. OpenAI has launched ChatGPT Gov to streamline the US government’s adoption of its AI models and the company is also partnering with the Estonian government to integrate its ChatGPT Edu model into a national education system. Such developments indicate that while market conditions may be unstable, a private and public sector interest in AI uptake is certainly present. Although the rate of AI adoption may not be meaningfully adding to wider economic growth yet, it should be remembered that ChatGPT was released just over two years ago.

Painful lessons were learnt during financial crises like the dot-com crash and the 2008 recession. The soaring demand for AI-anything certainly echoes the investment frenzies of the past. However, amidst the AI hype cycle, it should be remembered that network technologies in the dot-com era did transform the global economy eventually. The crash happened because it took longer for the internet to take root than investors and developers initially expected. The possibility of AI-driven progress occurring on a longer timescale is real but the question of timescale should not be conflated with the question of likelihood. From a governance perspective, the longitudinal priority of policymakers and regulators in emerging markets should be on promoting AI maturity and consolidating their position in segments of the AI value chain rather than chasing the next frontier models. Countries like the UAE and India have already begun taking steps in this direction by investing in up-skilling initiatives and building a local data centre and chip fabrication capacities. The presence of multifarious destabilising factors like disruption in the AI value chain, geoeconomics rivalries, pivoting policies and slow uptake may likely cause a market readjustment in the short to medium term. Nevertheless, mandates by governments across the world to prioritise investment in frontier technologies are illustrative of AI’s entrenched relevance in the great power competition of this era.



Siddharth Yadav is a Fellow in Technology at ORF Middle East

### Strategies for UAE’s Future Development: Promoting Equitable Growth Across Emirates

Abu Dhabi and Dubai have led the United Arab Emirates’ (UAE) economic transformation. Other emirates have witnessed recent progress, but disparities persist. While Abu Dhabi and Dubai account for 85 percent of the country’s Gross Domestic Product (GDP), emirates like Umm Al Quwain (UAQ) are estimated to contribute less than 1 percent. The limited national contribution of these emirates is often attributed to their lack of oil and small landmasses. Abu Dhabi boasts of having a per capita GDP of US$ 81,000, while UAQ’s is estimated at US$ 11,000. Further, Dubai contributes about 25 percent to the UAE’s GDP despite having 4 percent of its oil reserves and 5 percent of its land mass.
This disparity could be due to the lack of structured emirate-specific economic growth plans. While emerging emirates have developed certain economic visions, they remain limited in scope and scale, as evidenced by the 131 strategies and visions the UAE federal government hosts on its website. These visions are distributed across 15 domains, ranging from ‘Future Shaping and Innovation’ to ‘Sports’. However, they focus on Dubai (36) and Abu Dhabi (12). Ras Al Khaimah (RAK), Fujairah, Ajman and UAQ feature one vision statement each, but Sharjah does not appear to have any dedicated/listed vision statements on this platform. While there are multiple nationwide plans (79), these are often broadly defined and do not specify the role of each emerging emirate. Thus, there is a need to develop domain-specific economic roadmaps for each of these emerging emirates that detail a path to prosperity. This article aims to identify possible development strategies for the emirates to foster equitable growth.

Focusing on the Comparative Advantage of Each Emirate
While the developing emirates have outlined their vision statements, these often mirror the pathways taken by Abu Dhabi and Dubai, focusing on luxury tourism and global trade. These strategies require sustained capital investment, which emerging emirates may find difficult due to their comparative lack of resources. Moreover, the demand for luxury tourism and global trade can saturate, forcing emerging emirates into direct competition with well-established regions. With limited financial resources, they may struggle to sustain this competitive capital-intensive development, making long-term success uncertain.
This challenge is evident in Ajman’s erstwhile tourism strategy, which closely mirrored Dubai’s focus on promoting city tours and conferences. However, the ambition to replicate this model without sufficient economic underpinnings proved unsustainable. Thus, Ajman’s Al Zorah project, while attempting to replicate the luxury tourism model, faced downsizing due to financial constraints and a lack of investor confidence. Similar challenges have emerged in other sectors, such as aviation. Attempts by other emirates to launch their own airlines have failed as they could not compete with established carriers like Emirates and Etihad. RAK Airways ceased operations in 2014, while Kang Pacific Airlines in Fujairah shut down after a single flight. These cases highlight the risks of replicating capital-intensive growth models by emerging emirates and underscore a need for a shift in their economic development strategies.
Developing emirates should capitalise on their comparative advantages to build untapped sectors that contribute to both their development and the country’s overall growth trajectory. This would allow them to carve out distinct economic roles rather than competing in oversaturated, capital-intensive sectors dominated by Abu Dhabi and Dubai. RAK is already leveraging its mountainous terrain and strategic trade location to position itself as an industrial and adventure tourism hub. This success highlights the impact of offering such unique value propositions, as RAK led the UAE’s tourism growth at 12 percent in 2024.
Similarly, there is scope for other emirates to carve out similar niches. Sharjah’s comparative advantage lies in its well-developed education sector and strong research institutions. Combined with its thriving cultural industries, this makes it a centre for knowledge production and intellectual capital. Fujairah’s key advantage is its deep-water port in the Gulf of Oman, providing direct access to international trade without dependence on the Strait of Hormuz. Additionally, it enjoys a rich marine ecosystem. Ajman has a compact urban structure with relatively lower costs of land and labour, making it a favourable environment for small-scale industry and logistics. UAQ has vast undeveloped land, an arid but stable climate, and access to water resources, making it well-suited for land-intensive industries and ecological initiatives such as renewable energy projects. Each of these emirates possesses unique geographic, economic, or infrastructural advantages that set them apart within the UAE’s broader development landscape.

Three-Pronged Approach for Equitable Growth
​There is a need to define clear strategies and actionable plans to map the economic development of the emerging emirates. This can be achieved through a three-pronged approach: building on the comparative strengths of each emirate, addressing gaps in the nation’s capacity, and catering to global markets.
Firstly, it is essential to build on the existing industries of each emirate. While emirates like RAK are already capitalising on their resources, others have an untapped potential. Fujairah, as the UAE’s only emirate with direct access to the Gulf of Oman, is well-placed to expand its maritime economy beyond oil storage and bunkering. Ajman's light industry could be modernised, turning it into a global hub for light manufacturing. Furthermore, UAQ could be a prime candidate for vertical farming and lab-grown meat production, which is gaining traction as a means to improve food independence. Each of these emirates should create a comprehensive sectoral roadmap tailored to their strengths, with government incentives, infrastructure investments, and international partnerships to maximise growth potential.
Secondly, the developing regions should complement the economic strengths of Abu Dhabi and Dubai by addressing gaps in the UAE’s overall capacity.  Emerging emirates can lead the UAE’s transition to clean energy by piloting projects in underexplored areas like tidal energy. RAK is a strong candidate for pioneering tidal energy initiatives. Studies have identified RAK's coastal areas, particularly near Saqr Port, as suitable locations for tidal energy infrastructure. This would complement the country’s existing efforts in solar and nuclear energy, enhancing its overall clean energy portfolio.
Thirdly, for the smaller emirates to truly carve out a distinct economic role, they must move beyond incremental improvements to pioneering new industries, leveraging emerging technologies, and creating specialised hubs that align with global demand trends. For example, marine biotechnology such as algae-based biofuels, a growing multi-billion-dollar industry, could align with Fujairah’s marine ecosystem and climate. By developing niche sectors like this and pioneering their exploration, Fujairah could position itself as a hub for marine biotech innovation.
Similarly, while the UAE hosts multiple free zones, none focus on climate adaptation. UAQ could leverage its undeveloped land, coastal access, and stable arid climate to address this gap. The UAQ Climate Adaptation Free Zone could establish the UAE as a global leader in climate resilience. It could attract research, investment, and startups through tax incentives and fast-tracked permits. Innovations in infrastructure, food security, and water management from this zone could be exported to other arid regions, strengthening the UAE’s global climate diplomacy.
As the UAE transitions into its next phase of economic growth, the role of emerging emirates in shaping the country’s future cannot be overlooked. These regions must leverage their distinct advantages to pioneer new industries and fill critical gaps in the national economy. For this transformation to succeed, strategies must evolve into more detailed and emirate-specific frameworks, equipping each region with tools to maximise its potential. Ensuring that prosperity extends across the emirates will make the entire federation a model of inclusive and future-focused development.



Samriddhi Vij is an Associate Fellow, Geopolitics, at the Observer Research Foundation–Middle East.

### Examining the UAE’s Comprehensive Economic Partnership Agreement (CEPA) Landscape

The United Arab Emirates (UAE) has a clear goal to achieve AED 4 trillion (US$1.1 trillion) in foreign trade by 2031 as part of its national economic goals. While full trade data on 2024 has not been published yet, the country’s Vice President and Ruler of Dubai, Sheikh Mohammed bin Rashid, has given indications as to the progress towards that goal by sharing that 75 percent of that target has already been achieved as of year-end 2024 at US$816.7 billion, adding that  “while global trade grew by just 2 per cent in 2024, the UAE’s foreign trade expanded at seven times that rate, achieving an impressive 14.6 per cent growth”. Much of the credit for this can be owed to the Comprehensive Economic Partnership Agreements (CEPAs) that the UAE has been proliferating since setting the national economic goals in 2021.

The UAE has signed CEPAs with at least 20 countries, and at least a further seven have completed negotiations and are due to be signed. Moreover, it is important to also note that Dr Thani Al Zeyoudi, the UAE’s Minister of State for Foreign Trade, has said the UAE will continue to expand the programme in 2025. At least 10 more countries have been explicitly reported to be in negotiation with the UAE for CEPAs: these are Ecuador, Japan, Pakistan, Philippines, Thailand and the Mercosur bloc countries—Argentina, Bolivia, Brazil, Paraguay and Uruguay—but the list is likely longer.

Table 1: CEPA Partners the UAE has signed with: 20 in Total 



Country
Signing
Enforcement


India
Feb-22
May-22


Israel
May-22
Apr-23


Indonesia
Jul-22
Sep-23


Türkiye
Mar-23
Sep-23


Cambodia
Jun-23
Jan-24


Georgia
Oct-23
Jun-24


Colombia
Apr-24
-


Costa Rica
Apr-24
-


South Korea
May-24
-


Chile
Jul-24
-


Mauritius
Jul-24
-


Vietnam
Oct-24
-


Jordan
Oct-24
-


Serbia
Oct-24
-


Australia
Nov-24



Malaysia
Jan-25
-


Kenya
Jan-25
-


New Zealand
Jan-25
-


Ukraine
Feb-25
-


Central African Republic
Mar-25
-



Table 2: CEPA Partners the UAE has concluded negotiations with: 7 in Total 



Country
Date


Congo-Brazzaville
Dec-23


Morocco
Jul-24


Russian Federation
Dec-24


Armenia
Dec-24


Kazakhstan
Dec-24


Kyrgyzstan
Dec-24


Belarus
Dec-24



Benefits of the UAE’s CEPAs 
According to Etihad Credit Insurance, the UAE's official export credit company which aims to facilitate and insure trade transactions between the UAE and the CEPA countries, the agreements have common benefits between them: 1) Elimination or reduction of customs duties and tariffs; 2) Removal of technical trade barriers; 3) Improved market access for UAE exporters; and 4) Accelerated investment into priority sectors. This is because the specific scope of the CEPAs goes beyond mere trade agreements and includes rules for investment, competition, and public procurement. In a nutshell, CEPAs are “more ambitious” than traditional FTAs.

Another crucial element of the CEPA landscape is trade diversification. Mohammed Alhawi, Undersecretary at the UAE’s Ministry of Investment, said “The name of the game is diversification … we are diversifying in terms of partners as well as sectors”. Indeed, according to the International Monetary Fund (IMF), UAE trade diversification is likely to help the UAE “further diversify capital and trade flows and supply chains by accessing new markets and mitigating negative shocks from a specific trading partner.”

Therefore, if one is to analyse CEPAs, one way to do so is through the lens of its trade effects, while acknowledging that CEPAs are more than just trade agreements. Indeed, when UAE officials have discussed the positive effects of the CEPAs in force to date, they have mostly referenced its positive effect on trade.
Tier 1 vs Tier 2 CEPAs
With trade in mind, one can propose that there are two tiers of CEPAs, were we to categorise the CEPAs according to the share of the total trade between the UAE and a given partner, out of the UAE total trade with the world (which stood at US$711.7 billion in 2023). This is the combination of imports, re-exports and non-oil exports.

Table 3: Tiers of UAE CEPAs based on 2023 trade data

Note:

Tier 1: Share of 0,5% and higher

Tier 2: Share of under 0.5%



Country
Category
Share of UAE’s Global Trade (2023)
Total Trade Value with the UAE (US$ Billion - 2023)
Current Stage


India
Tier 1
7.62%
54.2
Signed


Türkiye
Tier 1
5.11%
36.4
Signed


Japan
Tier 1
2.44%
17.33
Under Negotiation


Vietnam
Tier 1
1.71%
12.17
Signed


Russian Federation
Tier 1
1.53%
10.88
Negotiations Concluded


Pakistan
Tier 1
1.12%
8
Under Negotiation


Thailand
Tier 1
0.98%
6.96
Under Negotiation


South Korea
Tier 1
0.83%
5.9
Signed


Malaysia
Tier 1
0.68%
4.87
Signed


Armenia
Tier 1
0.66%
4.73
Negotiations Concluded


Indonesia
Tier 1
0.65%
4.62
Signed


Brazil
Tier 1
0.62%
4.38
Under Negotiation


Australia
Tier 1
0.59%
4.2
Signed


Jordan
Tier 1
0.58%
4.16
Signed


Kazakhstan
Tier 1
0.54%
3.87
Negotiations Concluded


Kenya
Tier 2
0.44%
3.14
Signed


Congo-Brazzaville
Tier 2
0.42%
3
Negotiations Concluded


Kyrgyzstan
Tier 2
0.38%
2.7
Negotiations Concluded


Israel
Tier 2
0.33%
2.34
Signed


Philippines
Tier 2
0.16%
1.14
Under Negotiation


Morocco
Tier 2
0.14%
0.98
Negotiations Concluded


Bolivia
Tier 2
0.13%
0.928
Under Negotiation


New Zealand
Tier 2
0.11%
0.77
Signed


Ecuador
Tier 2
0.10%
0.68
Under Negotiation


Belarus
Tier 2
0.09%
0.673
Negotiations Concluded


Colombia
Tier 2
0.08%
0.55
Signed


Central African Republic
Tier 2
0.07%
0.53
Signed


Georgia
Tier 2
0.07%
0.52
Signed


Argentina
Tier 2
0.06%
0.45
Under Negotiation


Cambodia
Tier 2
0.06%
0.41
Signed


Ukraine
Tier 2
0.05%
0.38
Signed


Chile
Tier 2
0.04%
0.31
Signed


Paraguay
Tier 2
0.02%
0.176
Under Negotiation


Mauritius
Tier 2
0.02%
0.17
Signed


Serbia
Tier 2
0.02%
0.12
Signed


Costa Rica
Tier 2
0.01%
0.067
Signed


Uruguay
Tier 2
0.00%
0.03
Under Negotiation



 

On the top of the ‘Tier 1’ list is India, which was the UAE’s second-largest trade partner at US$54.2 billion in total trade in 2023, surpassed only by China at US$86.7 billion. One ought to argue that these ‘Tier 1’ countries are the ones that have been deemed by UAE policymakers to be the most strategic trading partners, which it seeks to double down on and ensure growth as partners and continue to be majorly important for the UAE trade portfolio.

The picture becomes less clear with ‘Tier 2’ CEPA partners. While some in this tier are aiming to be ‘Tier 1’ trading partners; others are likely CEPA partners to stimulate trade, safeguard their position amid growing competition, or contribute to a diversified CEPA portfolio.
The GCC dynamic and the geopolitics of UAE’s CEPAs 
The UAE’s CEPA landscape reflects geopolitical balancing, with agreements spanning Ukraine and Russia. It is also noteworthy that a significant share of the UAE’s CEPAs are with Asian countries, especially in the ‘Tier 1’ category—a trend that others have also noted much earlier in the development of the CEPA landscape. A growing number of countries are also from the African and South American continents. Meanwhile, Western countries are not represented as much. Some have argued that this is because larger economies prefer agreeing FTAs with the GCC, rather than bilaterally with the UAE.

Indeed, the GCC dynamic of the CEPAs has been high on analysts’ minds. By signing CEPAs bilaterally, questions have been raised regarding the UAE’s alignment with the GCC customs union. However, a deeper look at the CEPAs reveals that the picture is more complex. The United Kingdom (UK), for example, is exploring a GCC-wide FTA, but a senior official of the UAE-UK Business Council has said that the UK and the UAE could talk “bilaterally about doing additional agreements," adding that "CEPA is a bit wider in scope than a free trade agreement”. Therefore, the mutually exclusive argument is not straightforward. New Zealand is an example of this, having agreed to a GCC-wide trade agreement months apart from concluding negotiations with the UAE for a CEPA, and even before signing one. Pakistan has also entered negotiations with the UAE for a CEPA but signed an initial FTA agreement with the GCC beforehand. Finally, South Korea signed an FTA with the GCC months before signing a CEPA with the UAE.

Others have taken a different direction: CEPA first, GCC next. Türkiye is an example of this, having started negotiations for a GCC FTA almost a year after signing a CEPA with the UAE. Meanwhile, some countries have submitted applications to conclude FTA negotiations with the GCC but have signed a CEPA with the UAE before reaching that stage: these are Australia, Malaysia and Chile. Others, like Japan and the Mercosur bloc, are negotiating simultaneously for a CEPA and a GCC FTA.
Conclusion 
The UAE’s efforts to proliferate its CEPAs have been accelerating its progress towards national goals for foreign trade. It’s been able to balance geopolitical rivalries while expanding ties with its neighbours in the Asian continent primarily, but also in Africa and South America secondarily. One could argue there are two tiers of CEPAs based on the importance of partners for the UAE’s trade portfolio, with India topping that list. Moreover, arguments that the UAE is harming GCC trade prospects are short-sighted, with this mutual exclusivity being disproven in recent months, especially by New Zealand, South Korea, and Türkiye.



Mahdi Ghuloom is a Junior Fellow at the Observer Research Foundation (ORF) – Middle East.

### Can energy transitions cure the Dutch disease in Africa?

As global geopolitical tensions rise and economic growth projections remain sluggish, cautious and thrifty governments are looking to slash external aid as the first cost-cutting measure. In response to the changing grantmaking environment, African leaders and policymakers are already carving out additional pathways for external capital mobilisation and internal revenue generation strategies. The energy transition agenda presents one such avenue for Africa to harness its core strengths—abundant resources and demographic dividend–bolstering political standing and boosting economic and social prosperity.

The paradox of plenty: Dutch disease in Africa 
Africa is one of the most resource-rich countries in the world, holding 30 percent of global mineral resources, 12 percent of oil reserves, 8 percent of natural gas, 40 percent of the world’s gold and 90 percent of its chromium and platinum. It also houses the largest known reserves of cobalt, diamonds, platinum, and uranium in the world, alongside 65 percent of the world’s arable land.
Yet, despite these vast resources, some African countries struggle to translate resource wealth into widespread economic prosperity for all its citizens. This phenomenon, termed the ‘paradox of plenty’, is also called the Dutch Disease, where resource-rich countries experience slow economic growth. This often happens when natural resource exports lead to currency appreciation, which makes other sectors, such as manufacturing and agriculture, expensive and uncompetitive internationally. An overdependence on commodity revenues fosters government complacency, weakens economic diversification, and limits job creation. Extractive industries such as mining are more capital intensive than manufacturing and fail to absorb the growing workforce. Weak industrialisation induces import dependency, and local industries struggle to keep pace. Commodity markets are prone to price volatility, giving way to unfair rent-seeking and elite capture, further fueling fiscal crises and unemployment.
Africa’s trade with the rest of the world reflects such structural challenges. The continent accounts for 2 percent of global trade, while foreign direct investment (FDI) flows hover around 3.5 percent of global FDI, amounting to US$48 billion. Nearly 80 percent of Africa’s trade is in commodities, primarily minerals and fossil fuels. The investment patterns mirror this trend, with 73 percent of the FDI inflow in sub-Saharan Africa—concentrated in Nigeria, South Africa, Angola, and Ghana—in energy and extractive industries. Moreover, FDI inflows remain unevenly distributed, with 80 percent of the FDI flowing into just 15 countries.
In contrast, intra-Africa trade is more diversified, leaning towards value-added goods such as manufacturing—45 percent of total formal intra-African trade, processed food/ foodstuff—20 percent), financial, transport and banking services. In 2023, intra-Africa trade reached US$192 billion, which accounts for only 15 percent of its total trade—far below intra-trade proportions in Europe—60 percent.
Such a skewed trading relationship highlights Africa’s dependence on external markets for commodity exports and manufactured imports, reinforcing economic vulnerabilities. Although it is one of the largest crude oil producers in the world, Nigeria imports more than 80 percent of its petroleum products due to inadequate in-house refining capacity. This dynamic has been linked to a new form of neo-colonialism manifesting in economic dependency (on commodity exports and external financing) and limiting sovereign decision-making. This trend exemplifies the ”Lucas Paradox” where net capital flows ‘uphill’ from poorer to richer countries.
In an era where supply chains are increasingly weaponised, a coordinated approach to resource governance can provide Africa with much-needed leverage, positioning it as a proactive player in the energy transition landscape. The continent has a unique opportunity to leapfrog to clean energy and sustainable development by harnessing its vast resources and young workforce. However, technology transfer and finance remain a challenge. Developing strategic partnerships and a collective roadmap to maximise their stake in their resources can reinforce Africa’s leadership in the global energy landscape.

Africa’s path to energy sovereignty and industrialisation

 	Equitable resource agreements: Creating a framework for equitable collaboration between African countries and external stakeholders on the extraction and processing of critical minerals is essential. Such arrangements can help address the high upfront capital and technology costs for mineral extraction and processing. Most recently, the Democratic Republic of Congo proposed to enter into such an agreement to retain greater control of its vast resources, preventing illicit smuggling to other African countries and unauthorised global exports. Given Africa’s vast land resources and uranium deposits, the potential for such funds to develop the biofuels and nuclear energy sectors is also significant.


 	 Local content provisions: Critical mineral and clean energy partnerships must include a local content provision to ensure that external investments increase local value addition, support technology and skills transfer and develop local capacity. A precedent for this exists in the Nigerian Oil and Gas Industry Content Development (NOGICD) Act, aka the Local Content Act of 2010, which promoted indigenous participation in Nigeria’s oil and gas sector. Such provisions can promote employment opportunities and skill development in the clean energy industries, enabling spin-offs into clean tech entrepreneurial endeavors as well.


 	 Diversified investment partnerships: Africa stands to benefit by expanding its partnerships beyond traditional allies in the West and China and strengthening engagement with new and emerging actors investing in the clean energy transition. In 2022, Africa’s capital inflow from countries like the United Arab Emirates (UAE) was seven times the amount committed by US investors and even surpassed that of China. For example, the UAE invested US$25 billion in clean energy projects in Egypt and is developing a massive net-zero sustainable city called The Parks in South Africa, costing US$20 billion. India has also emerged as one of the top five investors with a clear focus on renewables and infrastructure development in the region. At the same time, newer financing sources, such as Indonesia’s recently established Danantara sovereign wealth funds, could offer alternative financing mechanisms for Africa’s green industrialization.


 	 Mobilising transition finance: As a member of the G20 and the BRICS+, Africa must leverage these platforms to question the biases of current financial frameworks and credit rating agencies which have burdened global south countries with a premium on capital. The continent, along with other Global South countries, should rally behind a new model of rating and capital deployment for securing transition finance at concessional rates. Furthermore, given the shortcomings of Just Energy Transition-Partnerships (JET-Ps), Africa should call for sector-specific investments, say in clean energy electrification, rather than for economy-wide phaseouts of fossil fuel. Philanthropy and multilateralism should also work closely to provide first loss capital and guarantees to de-risk and unlock large-scale private capital into the continent. Given Africa’s rich resource capital and renewable potential, carbon markets and credit mechanisms can also be leveraged to enhance transition financing flows.

The success of Africa’s energy transition hinges on strong industrial and energy policy making aligned with the continent’s ambitions and commitments under the African Union (AU) Agenda 2063, the Sustainable Development Goals (SDGs) and the Paris Agreement. The African Continental Free Trade Area (AfCFTA) Agreement that entered into force under AU auspices in 2019 is also crucial in this regard to mainstream and harmonise inclusive trade policies, facilitating regional industrialisation and clean energy cooperation. And most importantly, deliberate investment in education, skilling and healthcare will be crucial to unlock Africa’s vast human capital potential to support the energy transition and green growth.



Mannat Jaspal is the Director and Fellow of Climate and Energy, Observer Research Foundation Middle East.

### Implications of US-China Competition for Middle East-China Security Cooperation

US “De-prioritization” of the Middle East
The so-called "Pivot to Asia" was announced nearly 15 years ago, with then-Secretary of State Hilary Clinton announcing that the future of politics would be decided in Asia, not Afghanistan or Iraq. The Obama administration pledged to shift U.S. strategic focus toward the Indo-Pacific, recognizing the region’s growing economic influence and China’s emergence as a global competitor. Throughout the subsequent years, the Pivot was interrupted by crises in the Middle East; the rise of ISIS, the Syrian Civil War, and escalating tensions with Iran pressured the US into maintaining much presence in the region. Despite these interruptions, a broad consensus emerged: the Middle East is no longer the focal point of U.S. grand strategy. Across different administrations, strategic priorities have centered on Europe and Asia, reflecting the overarching emphasis on Great Power Competition.
While the second Trump administration is deeply interested in ending the Gaza War, American policymakers exhibit little interest in significantly reinvesting in the region. Instead, discussions focus on reducing the U.S. footprint, including the potential withdrawal of small troop contingents from Syria and Iraq. Broader debates within the Republican Party reflect a division over global commitments: whether to sustain presence in both Europe and Asia, prioritize the Indo-Pacific, or retreat from global leadership entirely. The Middle East, in a strict sense, is rarely central to these deliberations.

China’s Security Role in the Middle East
This shift in U.S. priorities has fueled discussions about whether China could displace the U.S. as a dominant external power in the region. China has long been an economic powerhouse in the Middle East, with most regional states participating in the Belt and Road Initiative. However, its security role remains comparatively limited. Few experts anticipate China establishing a substantial military presence, as doing so could risk entanglement in protracted regional conflicts—an outcome Beijing is keen to avoid. Thus far, China has refrained from forming formal military alliances, even with close partners.
China views diplomatic mediation as a critical instrument for enhancing its global stature. China has positioned itself as a broker in regional disputes, including its 2023 mediation of the Iran-Saudi rapprochement. China has also expressed interest in mediating Israeli-Palestinian tensions. While there is little evidence that China’s role was critically indispensable in these processes, China has emphasized its role as a “peace promoter.” Additionally, China's technological capabilities have strengthened its security ties with Middle Eastern countries. Chinese surveillance and military technology, including facial recognition software and drone systems, have been widely adopted by regional states.

The U.S.-China Competition and Its Impact on Regional Security Cooperation
The intensification of U.S.-China strategic rivalry complicates Beijing’s security relationships with Middle Eastern states, many of whom remain key U.S. partners. These nations must navigate two interrelated challenges. First, they must offer sufficient incentives to China to sustain and expand security cooperation, as Beijing’s primary role in the region remains economic. Second, they must calibrate the depth of this cooperation to avoid provoking a backlash from Washington.
Middle Eastern states should seek to create a relatively autonomous space for cooperation within the broader U.S.-China rivalry. A crucial strategy involves encouraging China to separate cooperative engagements from competitive dynamics in its relationship with Washington. If U.S.-China tensions continue escalating into a monolithic zero-sum contest, even seemingly peripheral developments—such as security cooperation in the Middle East—could be interpreted as direct strategic losses for one side.
The intertwining of security and economic dimensions in U.S.-China relations is evident. The U.S. has implemented export controls on advanced technologies, such as semiconductor chips, to impede China's military modernization efforts. In response, China has accelerated investments in indigenous technology development and pursued a “dual circulation strategy.” Over the last few years, the U.S. has also sought to “de-risk” from China and respond to its weaponization of trade, albeit with mixed results.
Traditional areas of cooperation have also been linked with competition. China repeatedly declined cooperation in climate change, citing U.S. encroachment on its core interests. Issues of nuclear nonproliferation, traditionally an area of superpower cooperation, took a backseat; securing strategic partners such as North Korea and Iran took precedence. For US partners in the Middle East, these developments pose a difficult situation between the two great powers.

China’s Strategic Dilemma in the Middle East
Moreover, China faces a strategic conundrum when engaging in secondary theaters like the Middle East. On one hand, it benefits from diverting U.S. attention and resources away from the Indo-Pacific. Many American strategists argue that the U.S. focus on the War on Terror inadvertently enabled China’s unchecked rise in the 2000s. More recently, U.S. involvement in Ukraine and Middle Eastern conflicts has raised concerns in Washington that deterrence in the Taiwan Strait is eroding. Such diversion presents a window of opportunity for China; even if Beijing doesn’t intend to launch a full-scale military invasion, its coercive leverage would be strengthened by a favorable military balance.
On the other hand, China prefers stability to chaos in its vital economic corridors. The Middle East remains a crucial energy supplier, with more than half of China’s oil imports originating from the region. These shipments largely pass through vulnerable maritime chokepoints like the Bab el-Mandeb and the Strait of Hormuz, both increasingly threatened by regional conflicts and militant attacks. Furthermore, China’s trade with Europe—accounting for 21% of its total exports—also relies on these maritime routes. Given these interests, Beijing has reasons to aspire for Middle Eastern stability.
Middle Eastern states would benefit from reinforcing China’s perception that a secure Middle East is more valuable than one that simply ties down American military resources. First, they could emphasize the potential economic gains that China can derive from security cooperation with regional partners. Predictability and stability are indispensable boons for the shipping industry. Second, Middle Eastern countries could also appeal to the prestige and status that China could gain by acting as a regional stabilizer. Long chastised by Washington as failing to become a “responsible stakeholder,” China could leverage its economic influence in the Middle East to contribute to regional negotiations. China aspires to harness discourse power in the Global South. One approach, encouraged by Middle Eastern partners, could be contributing to peace and stability there. Indeed, China could ultimately find the stabilizing role limited. Nonetheless, even a contributary role from China could be helpful for regional nations.

"Safe Spots" for Security Cooperation
If one aspect of this strategy involves eliciting cooperative behavior from China, the other requires securing accommodation from the US.
Fortunately, the fact that the Middle East is not the primary focus of American foreign policy paradoxically provides regional countries with some room to maneuver. As long as specific modes of cooperation with China do not undermine core US interests, they could potentially continue and even expand them.
Indeed, American partners in the region appear to be testing the waters. Saudi Arabia, the UAE, and Qatar have all conducted joint military exercises and training programs with China. Expectedly, Washington is not comfortable with this development. However, as long as these exercises do not involve the exposure of sensitive US military technology or know-how to the Chinese, they are unlikely to pose a significant threat to Gulf-US relations.
In particular, joint exercises focusing on humanitarian assistance and disaster relief (HADR) are less likely to raise concerns in Washington than those involving advanced combat tactics. The "Blue Sword-2023" naval special operations training exercise between China and Saudi Arabia focused on overseas maritime anti-piracy operations. Such modes of cooperation would not necessarily cross the red line for the US. Indeed, these activities have little implications for where the US and China might actually be confronted with a military standoff—the Taiwan Strait or the South China Sea.
Counterterrorism efforts represent another potential area for expanded cooperation. There are substantial concerns that Al Qaeda and ISIS could resurge in the region. The relatively nascent regimes in Syria and Afghanistan present significant uncertainties. Joint efforts to counter regional extremist threats could be viewed favorably—or at least indifferently—by the US, as all involved parties share an interest in preventing the spread of terrorism.

Structural Limitations and Risks
One structural challenge remains. The areas where cooperation could be most beneficial are often the areas that Washington views with the greatest suspicion. The adoption of Chinese 5G technology by Gulf states has elicited apprehension from the U.S., citing potential security risks. Similarly, China's involvement in developing critical infrastructure, such as ports in the United Arab Emirates, has been scrutinized due to fears of dual-use capabilities. Washington also seems concerned about China’s role in the regional sea lines of communication.
While it is no longer as deeply entrenched militarily in the Middle East as it used to be, Washington still remains the single most powerful political and military force in the region. Navigating the complexities of the US-China competition will require a delicate balancing act and a nuanced understanding of the strategic interests of all involved.



Taehwa Hong is a Eurasia Fellow at the Foreign Policy Research Institute and PhD Candidate in Politics at Princeton University.

### Tech in big picture: Emerging trends in 2025

Frontier technologies have come to occupy centre stage in geopolitical discussions and national strategies in recent years. In 2025, the trepidations associated with establishing dominance in sectors like Artificial Intelligence are apparent through various high-level projects and initiatives announced by governments globally. Major economies have expressed their ambitions to become the next AI superpower or the most favoured destination for AI development and deployment. Moreover, AI scaling laws are being held up with increasingly powerful multimodal frontier AI models released by companies like OpenAI, Anthropic and Meta. Technological innovations and the release of more powerful AI systems are occurring amidst rising geopolitical tensions between the United States and China. In light of the rising interpenetration of geopolitics and frontier technologies, this paper will highlight emerging policy and technology trends to look out for in the coming year.

AI and the rising geopolitical tensions
The year started with AI quickly becoming implicated in geopolitics, with the new Trump administration identifying it as a key driver for an American “golden age”. Shortly after entering the White House, President Trump announced Project Stargate with a budget of US$ 500 billion committed to developing AI infrastructure in the country through collaboration with OpenAI. The announcement for Stargate was accompanied by a stark shift in official rhetoric regarding the US government’s stance on AI development. Scrapping the 2023  Executive Order 14110 on ‘Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence’ highlighted this shift and the President’s insistence on removing regulatory obstacles to US dominance in global AI development. However, the Chinese DeepSeek R1 AI model quickly challenged the aspiration for technological unipolarity, pushing tech stocks off a cliff and causing the biggest stock market drop in US history. The US policy shift and the intensifying AI arms race have prompted the emergence of a divergent policy landscape globally, with the US and the UK abstaining from signing the ‘Pledge for a Trustworthy AI in the World of Work’ at the 2025 Paris AI Action Summit co-hosted by France and India. The Summit also witnessed the European Commission President Ursula von der Leyen committing to reducing regulatory red tape and launching a US$206 billion initiative to promote AI development in Europe, diverging from Europe’s historically pro-regulation approach.
However, pro-safety events on the sidelines of the Summit, like Canada and Japan signing the European Commission Framework Convention on AI and China not abstaining from signing the Pledge, signalled that global cooperation on AI safety may not be a lost cause yet. However, the unpredictable trajectory of AI development still presents the risk of frontrunners like the US and China moving away from global dialogues and commitments on AI safety principles. The policy trend towards deregulation will push jurisdictions like the European Union to interrogate its risk-based regulations like the EU AI Act to stay competitive with an increasingly galvanised US and a rapidly advancing Chinese AI sector. Furthermore, the need for scaling national investments in AI will present yet another challenge to the safety principles outlined in existing frameworks like the 2021 United Nations Educational, Scientific and Cultural Organization (UNESCO) Recommendation on the Ethics of AI, the 2023 Bletchley Park Declaration, the 2023 Global Parternship on Artifical Intelligence (GPAI) New Delhi Declaration and the 2024 Seoul Declaration.

AI agents
Ever since the ‘ChatGPT moment’ in November 2022, AI discourse and investment have largely been driven by increasingly powerful large language models (LLMs) with added modalities (video, audio, image generation, data analysis and so forth). However, as NVIDIA Chief Executive Officer (CEO) Jensen Huang highlighted in a recent conference, the next phase of AI development will focus on agentic AI or AI Agents. In addition to having LLM capabilities, AI agents can perform a range of tasks using computers and networks. OpenAI released its agent named ‘Operator’ in January 2025 and its ‘Deep Research’ tool in February, which exceeded the expectations of critics and analysts in autonomously performing operational tasks and conducting complex research. Industry leaders like Sam Altman (CEO, OpenAI) and Marc Benioff (CEO, Salesforce) have predicted AI Agents joining the workforce to “materially change the output of [companies].” As the AI hype cycle stabilises following the crash caused by DeepSeek R1 in January, major AI developers will continue to invest in AI agents with increasingly autonomous operational capabilities. Speaking on the potential of AI agents, Altman suggested that the coming years will require serious discussions on potentially reworking the ‘social contract’ in global economies. If AI agents enter the workforce within the projected timeframe, policymakers and society may face the reality of a dynamic labour market readjustment, necessitating comprehensive international discussions on future jobs.

Humanoid robotics
On the hardware front, 2025 is also shaping up to be a milestone year for quadruped and humanoid robotics due to advances in AI and engineering, with industry experts suggesting that humanoids will be in homes doing chores by 2026. A 2024 report by Goldman Sachs stated that the total addressable market for humanoids is projected to grow by 70 percent annually through 2035. China, the biggest market in the world for industrial robots, is embracing the ‘robot revolution’ by offering sector tax breaks and subsidies to robotics manufacturers. In the West, global AI frontrunners like OpenAI, Meta and Tesla have begun investing in research and development strategies to leverage their AI capabilities for training robots. Breakthroughs in AI and LLMs over recent years have contributed to increased interest in robotics, and 2025 may become an inflection point. In February 2025, Figure AI announced that it would be terminating its year-old partnership with OpenAI due to a  ‘major breakthrough’ that will lead to advancements that “no one has ever seen on a humanoid.” Although no further information has been released regarding the breakthrough, the statement contributed to a surge in investor interest for the three-year-old company, which is now in talks to raise US$1.5 billion in funding at a US$39.5 billion valuation.
Currently, the top 15 market leaders and notable entrants to the robotics sector are exclusively located in North America and China. Existing geo-economic tensions between the two nations will likely expand beyond the software and supply-chain side of tech to encompass robotics. Despite being in a relatively nascent stage of development and relevance compared to consequential economic drivers like advanced chip-making, integrating robots into sectors like manufacturing and the service industry is poised to accelerate international competitiveness in the tech sector. It is still too early to estimate the rise in demand for robotics in the short to medium term. However, government and private-sector interest in robotics is unlikely to fade in the absence of an innovation slump, given the lure of using robots to drive down labour costs and adjust to public spending pressures caused by demographic shifts across labour markets.

Looking ahead
The opening salvo to the year marked a reenergised scramble for global technological superiority and competitiveness. The relentless pace of innovation and growth opportunities in the AI sector with more capable frontier models, AI Agents and tools demonstrating PhD-level competence in certain use cases is set to challenge the adaptability of regulatory regimes. Moreover, robotics is emerging as an attractor of private and public investment, promising solutions for labour shortages and longitudinal demographic shifts. As the year progresses, policymakers globally will need to take a renewed look at public-private partnerships and inter-governmental relationships to maintain a degree of cooperation on matters like responsible innovation and cross-border regulation of AI. Existing frameworks like the 2023 Bletchley Declaration on AI Safety and the 2024 Seoul Declaration, among others, may be stress-tested by US big tech companies emboldened by the deregulatory and America-first policies of the Trump administration. Nevertheless, the intensifying technological rivalry between the US and China in the shadows of a brewing trade war is simultaneously creating new opportunities for international partnerships. The treaties signed on the sidelines of the Paris AI Action Summit, alongside the joint co-chairing of the Summit by France and India, indicate that geopolitical groupings at odds with the US and Chinese spheres of influence can be “not just participants but architects” of the emerging techno-polar world.



Siddharth Yadav is a Fellow in Technology at the Observer Research Foundation, Middle East.

### Will Bahrain turn the C-SIPA into a multilateral success story?

In September 2023, the United States (US) and Bahrain signed a Comprehensive Security Integration and Prosperity Agreement (C-SIPA), entering into force in late October 2023. From the very beginning, the C-SIPA was designed to welcome additional parties into it to become a multilateral agreement, with other Gulf countries viewed as the main contenders. However, perhaps due to the US being the sole international partner and the Gulf countries already sharing a Joint Defence Treaty and a vision for regional security through the Gulf Cooperation Council (GCC), this has not materialised yet.
These hesitations may now be easing, as on 7 December  2024, Bahrain and the US extended an invitation for the United Kingdom (UK) to join their agreement. Bahrain foreshadowed the UK’s induction into the agreement at least two months before the announcement of this decision, with its ambassador to the US describing the UK as a partner that has a “direct stake in and much to contribute to C-SIPA's success”. If UK’s accession is finalised by March 2025, as per the predictions, it will mark a pivotal moment for Bahrain’s security diplomacy. However, the key question remains: will it succeed in expanding the agreement beyond a ‘minilateral’ framework?

Why is this agreement worthwhile?
The C-SIPA has been described as approaching the ‘water’s edge’ of the North Atlantic Treaty Organisation (NATO) Article 5 mutual defence commitments, though it falls short of a treaty, owing to the absence of any legal obligation attached to it. The closest article it has to Article 5 is the agreement’s Article 2, which states that in the event of any external aggression or threat thereof, the Parties shall “immediately meet at the most senior levels to determine additional defence needs and to develop, and implement appropriate defence and deterrent responses as decided upon by the Parties, including in the economic, military, and/or political realms.” Bahrain’s National Security Advisor, H.H. Lieutenant-General Shaikh Nasser bin Hamad Al Khalifa, has described this part of the agreement as being “short of Article Five, but [having] all the guarantees,” adding his hopes this is built upon.
Beyond security, the agreement stands to benefit its signatories through its science collaboration pillar. For example, as a result of the agreement, the US Embassy in Bahrain announced an offering of grants to universities and eligible institutions to enhance research collaboration between the United States and Bahrain. Another outcome of the agreement has been the US National Geospatial-Intelligence Agency working with Bahraini stakeholders to produce and share hydrographic, aeronautical, and topographic geospatial data, thereby improving navigation in the maritime world and fostering innovation.

Gulf countries may fear the agreement invites external aggression
A recent paper by the International Institute for Strategic Studies (IISS) showcased four main security commitments arising from C-SIPA: joint deterrence, integrated defence capabilities, enhanced military interoperability, and an annual Defence Working Group. As a result, one of the Gulf’s main sources of friction, Iran, may view this agreement as destructive to its posture in the region. Iranian state-affiliated media are already shedding negative light on C-SIPA.
By signing on to C-SIPA, Gulf countries may become more committed to providing or facilitating logistical support for the US or UK militaries. However, recent history suggests this could be seen as an escalatory risk. For example, it was reported by the Wall Street Journal last year that the Pentagon was “shifting jet fighters, armed drones and other aircraft” between Gulf countries to organise military action against certain targets, as some had reservations about “riling up” Iran. Many months later, in October 2024, the Gulf states reportedly sought to reassure Iran of their neutrality in its conflict with Israel.
Therefore, Gulf countries are likely to be puzzled about whether the agreement will indeed establish deterrence by approaching a form of guarantee on international security commitments towards the region or instead actually opening up a line of fire they have sought to avoid.

Trump may be a wild card that dissuades further integration into the agreement
In her last call with the Bahraini leadership as the Vice President of the US, Kamala Harris noted that C-SIPA can be a model for further regional integration. Many calls by the Biden administration to Bahrain emphasised the C-SIPA as an accomplishment that can be built on. However, this dynamic may threaten the promise of the agreement to expand, given the credit has gone to the Biden administration, yet a new Trump administration term has dawned—and credit is important in this case. In fact, it remains unclear whether Trump is supportive of C-SIPA to the same extent as Bahrain would hope, especially considering his last call with the King of Bahrain made no explicit reference to it.
Nonetheless, one aspect that may interest Trump is that the opening articles of the C-SIPA refer to the Abraham Accords (2020). By emphasising this link to the Accords which came as a result of his efforts, President Trump may be motivated to push at the very least for the United Arab Emirates to join the C-SIPA as the other founding signatory from the Gulf to the Abraham Accords, with Israel. Moreover, the Trump administration may also consider Morocco as a contender to join the agreement, under the same premise.
Countries like Saudi Arabia may instead favour an agreement that is bilateral and tailored to their needs; even if C-SIPA can be amended to accommodate some of them, it will likely not formulate into the kind of treaty that the Kingdom is reportedly striving for. In 2024, there was a lot of talk that the Saudi government and the Biden administration were in discussions to formalise security commitments from the US to Saudi Arabia. So much so, that the Congressional Research Service has written a report about it, as well. According to the report, this was expected to happen either in exchange for normalisation of relations with Israel, Saudi Arabia’s commitments to forgo certain cooperation with the US strategic competitors, or both.
With this in mind, one worry that may arise is that President Trump preempts and rushes to invite Israel into the C-SIPA. If such an invitation is made before more regional partners join the C-SIPA, or normalise relations with Israel, it may end up dissuading them from C-SIPA completely for the short to medium term. Additionally, a key point to note here is that normalising relations with Israel is a completely different ballgame than entering into a C-SIPA with Israel, which would likely require additional political convergences between the normalising Arab states, and Israel.

Beyond the Gulf: A growing pool of potential partners
Given the challenges to integrate regional countries, there remains a risk that the push for multilateralism stagnates. According to oral evidence submitted to the UK House of Lords International Agreements Committee, the UK’s accession to C-SIPA is an ‘institutionalisation’ of an already established British approach to the Gulf. It may not be enough to garner traction from the other Gulf countries, especially as it has been uncovered to the public domain that Bahrain and the UK already share a Defence Cooperation Agreement from 2012, and perhaps such agreements may be in place with other Gulf countries as well.
Nonetheless, with the UK’s likely accession, countries outside the region may find it attractive. This may also be an outreach strategy by C-SIPA’s current signatories to entice regional players into joining. Countries such as Japan, South Korea, Canada, Australia, and New Zealand are named as potential joiners. Yet, it’s anyone’s guess who could join next.
The biggest contenders may be the parties to the Combined Maritime Forces (CMF), a multi-national naval partnership based in Bahrain. It comprises countries like Australia, France, Germany, and Italy. In particular, France may be a strong contender: France's Charles de Gaulle aircraft carrier has been deployed to the region and has occasionally docked in Bahrain as part of missions in the Middle East.

Conclusion
Bahrain’s ambitions for C-SIPA to evolve into a broader multilateral agreement are likely enhanced by the UK’s expected accession. However, there remain challenges for other Gulf countries to join it, and their buy-in remains uncertain. First, its value as a deterrence against threats may not seem convincing, nor is it clear how it may be different from undisclosed agreements already in place. Finally, there remains uncertainty whether President Trump believes in the C-SIPA, and if he does, whether his strategy to expand it will prove fruitful.



Mahdi Ghuloom is a Research Associate at the Observer Research Foundation (ORF) – Middle East.

### Bahrain’s pardon surge in 2024: Focusing on rehabilitation and justice

The King of Bahrain pardoned a total of 3,482 prisoners in 2024, in four batches celebrating important Islamic and national occasions throughout 2024. This was a marked increase in the pattern of pardoning in Bahrain, as this piece will seek to demonstrate, which many rightly analysed as being in line with Bahrain’s unique political trajectory.
Nonetheless, it is also fair to note that the tradition of pardoning prisoners on national and/or religious occasions has become somewhat of a political norm around the Gulf. In 2024, for example, Saudi Arabia announced such pardons during the holy month of Ramadan, as did the United Arab Emirates (UAE) and Qatar. Religious occasions, such as the Prophet’s birthday, marked another pardon in 2024 for Oman. Meanwhile, national day celebrations, including in Oman, UAE, Qatar and Kuwait, all marked a time for pardons in the same year.
Such pardons are usually initiated and announced by the institution of the head of state or monarchy, marking an important moment for both the prisoners themselves and their families—but also quite interestingly, it is widely accepted by the citizens rather than resisted due to any concerns about societal safety and lack of rehabilitation. This may indicate a high level of trust in the rehabilitative institutions of the Gulf countries —a topic worthy of further research as it may speak to the nature of the social contract in the region.

Not just large pardons, but also reintegration
The largest and first batch of the Bahraini 2024 pardons was in Ramadan, which was in April, releasing 1,584 inmates ahead of the Islamic Eid al-Fitr celebrations. This pardon received extensive praise from civil society in Bahrain, notable for its contrast to the 281 prisoners pardoned the previous year on the same occasion. While it’s customary to pardon prisoners for Eid al-Fitr, the number ranged between 154 and 281 between the four years from 2020 to 2023.
Further notable this time was the government directive to ensure the integration of the pardoned inmates into the labor market. The same month the pardon was announced, the Ministries of Interior and Labor announced procedures to insure those pardoned on the official unemployment programme. The Ministry of Labour also outlined collaborative initiatives with partners, such as the Labour Fund and Tamkeen, to offer employment opportunities and training for those granted the royal pardon.
These weren’t pardons for prisoners with petty crimes either. The government noted that "many of those released were originally convicted of violent crimes or public disorder offences”. Moreover, about 65 percent of those released [in the pardoned batch of 1,584] were convicted on charges related to riots, a government spokesperson told Reuters. Nonetheless, unlike other Gulf states, where pardons may be viewed as primarily symbolic, Bahrain’s approach reflects deeper political priorities. By pairing pardons with reintegration programs, Bahrain may be embarking on a pragmatic effort to address the root causes of these crimes.

Bahrain’s jubilee for all: Reaping social and economic benefits
The second Bahraini royal pardon in 2024 saw the release of 545 prisoners on another Islamic occasion, Eid al-Adha in June. For most, this seemed like it would be the last pardon of the year, with a possibility of a third marking the National Day in December. However, before the National Day celebrations, which did indeed mark the pardon of 896 prisoners in December, another pardon was announced in September, releasing 457 prisoners to mark the Kingdom’s celebration of the King’s Silver Jubilee (25 years of his rule as monarch). The sheer volume and frequency of pardons in 2024 has taken many by surprise, however, it underscores the importance of the Silver Jubilee for the Kingdom and the message of reconciliation and respect for human rights that its leader has set for generations to come.
Nonetheless, while these pardons are crucial to celebrate for their humanitarian core, they are also important to celebrate for the burden it has now alleviated from the state. Bahrain now has nearly 3,500 fewer prisoners to take care of, which may contribute to its fiscal plans to set the economy on a path for recovery following many crises, including the latest COVID-19 crisis. The releases [described as ‘changes’ by the Guardian] also “represent a chance for Bahrain to improve its global image, increase foreign direct investment and encourage tourism”.
For Bahrain, these pardons are not just a gesture of goodwill but part of a broader strategy to ease fiscal burdens and signal political stability: factors particularly crucial in a country that has faced distinct political and economic challenges compared to its Gulf neighbours. Here, it is important to note that political risk is a major deciding factor for foreign investors. While Bahrain has done extensive work in boosting the Kingdom’s image to foreign investors, sceptical investors will always likely keep an eye on the political environment. By releasing this many prisoners, Bahrain is sending an important message to investors that it has trust in its rehabilitative practices, and the unrest that it once had is not one that it fears a repeat in, primarily because of the power of its rehabilitative institutions in reintroducing former inmates to a rapidly transforming economy and society.

“Youth do not belong in prison”: Bahrain’s belief in alternative sentencing
Perhaps one element of 2024’s releases that has been overshadowed by the pardons is alternative sentencing practices by Bahrain. Bahrain has released prisoners – conditionally – through a 2017 alternative sentences law, under which prisoners who had served at least half their sentence in jail are allowed to complete it outside via measures including community service, rehabilitation courses and electronic surveillance, per Reuters. "Since its introduction in 2017, the Alternative Sentencing Programme has benefited nearly 6,500 prisoners in Bahrain," the government communications office statement quoted by Reuters said.
While the alternative sentencing policy may have strict restrictions on those included in it, Bahrain has also initiated an Open Prisons Programme, which obtained an international accreditation certificate from the American Correctional Association (ACA), becoming the first entity outside the US to receive such a certification, per the Foreign Minister of the Kingdom. In these facilities, eligible inmates with demonstrated good behavior and low-risk profiles are provided with a more flexible and relaxed environment. They also have increased freedom of movement within the facility and are offered various vocational and educational programs to develop their skills.
The Open Prisons Programme has had a success of 97.5% in rehabilitating prisoners, with over 7,600 families benefiting from it to date, according to Sheikh Khalid bin Rashid al-Khalifa, the Director-General of Verdict Enforcement and Alternative Sentencing at the Interior Ministry. Beneficiaries also gain partial and full scholarships from Bahrain’s top universities, including the Gulf University and the Applied Science University. Moreover, they are contributing to the nation’s innovation drive, with projects developed by beneficiaries such as wind turbines powered by car traffic, recycling machines for agricultural waste, and a fiberglass alternative to wood for building contractors. This, too, may aid in alleviating fiscal burdens in the Bahraini economy by contributing to its diversification drive through innovation.
Bahrain is proud of its alternative sentencing programs, with the King describing the initiative as one which showcases his belief that “youth do not belong in prison” and one which sets an example for the region by being the first country to implement such programs in the area. This comes as Bahrain has increased its engagement and cooperation with the Office of the United Nations High Commissioner for Human Rights (OHCHR); and seemingly because of these programs, the UK dropped Bahrain from a list of human rights priority countries. A spokesperson from the UK Foreign, Commonwealth and Development Office (FCDO) said “The decision to remove Bahrain from the Human Rights Priority Country list reflects their consistent progress in this area over a number of years, which has been directly supported by the UK”.

A lasting change with lessons for abroad
Finally, according to a civil society group, ‘Citizens for Bahrain’, the recent reforms began with the National Charter of 2001 and evolved in response to the challenges of the 2011 political unrest, laying the groundwork for lasting change. A crucial part of this change will be ensuring that the prisoners are indeed rehabilitated and that the crime drivers which led to them being imprisoned are tackled ahead of Bahrain’s new chapter following the end of the King’s Silver Jubilee.
Moving forward, Bahrain can start setting a standard for the region and training ministries of interior across the region to develop similar programs and initiatives that it has swiftly implemented. Already, Bahrain has organised tours for its highest delegates to other countries, the Kingdom’s ambassadors abroad, at its Open Prisons Complex. Such tours allow Bahraini ambassadors to convey a message of pioneerism in corrective practices to its partners across the world.
The region can indeed benefit from Bahrain’s standard, especially when noting its effect on the economy, as all the Gulf countries are focused on cutting costs. Similarly, charities can be put to use to raise the funds associated with the reintegration programs, and this would achieve the goal while also strengthening national identity through a nudge towards solidarity amongst co-nationals.
It is also important to end with a cautious prediction: the Kingdom’s Silver Jubilee celebrations have not ended, and though the upcoming Ramadan or Eid al-Fitr celebrations will likely include pardons as is the norm, a reasonable assessment is that its coinciding with the final few weeks of the silver jubilee could mean that Bahrain is on a course to pardoning another significant number of prisoners sometime around March 2025.



Mahdi Ghuloom is a Research Associate at the Observer Research Foundation (ORF) - Middle East.

### Bolstering economic connectivity along the IMEC

The Red Sea supply chain crisis, which began at the beginning of this year and continued into the mid-year, is expected to turn into a long-term crisis as the Israel-Hamas conflict rages on. The Iran-backed Houthis continue to terrorise the Red Sea, causing the Egyptian government to halt shipping through the Suez Canal, a critical maritime node in the global web of sea lanes of communication, through which 12 percent of global trade and 30 percent of global container traffic traverses annually. Moreover, it is the shortest route from Asia to Europe at a travel time of 12-15 days as compared to the second best alternative, the Cape of Good Hope route, which takes 35 days. 

As the Red Sea supply chain crisis continues, the global shipping industry is experiencing congested port traffic at unprepared ports in alternative routes, massive premiums on ship insurance, shipment delays, dramatic rise in ocean freight rates, squeezing profit margins for businesses and a domino effect in various industries dependent on international shipments. For India, the impacts of this supply chain crisis have been minimal in the short term, as compared to the rest of the world. Yet, it is important to underscore the importance of this route for India. 50 percent of India’s gross national exports and roughly 80 percent of India’s Europe exports traverse the Red Sea route, yearly. Using the Cape of Good Hope route results in massive delays and higher insurance and freight costs. For instance, shipping through the Kolkata-Rotterdam route now costs US$ 4,000, up from the pre-crisis freight rate of US$500.

For India, the impacts of this supply chain crisis have been minimal in the short term, as compared to the rest of the world.


In these geopolitically volatile times, it is imperative for Indian economic security to diversify supply chains for a network that is responsive, resilient, and reliable. The India-Middle East-Europe Economic Corridor (IMEC), for the Asia-Europe route, is one of India’s various bids to position India as a vital point in the global web of SLOCs and build a responsive, resilient, and reliable supply chain network. This article tests the viability of the IMEC as an alternative to the Suez route in the medium and long-term scenarios and provides recommendations for enhancing all-around economic connectivity along the route for its efficient operationalisation.
The IMEC’s genesis and problems
The IMEC is essentially a project with geopolitical ambitions, foregrounded in the Abraham Accords, India’s addition into the I2U2 grouping—comprising the United States (US), the United Arab Emirates (UAE) and Israel—and the normalisation of relations between the various regional players and blocs in the Middle East such as Iran-Saudi Arabia, Türkiye, the UAE, and Saudi Arabia, among others. These interconnected stabilising events led to the announcement of the IMEC in September 2023 during the New Delhi G20 Leaders’ Summit, by the leaders of the US, the UAE, the European Union, France, Germany, Italy, Saudi Arabia, and India. The corridor envisions connectivity and collaboration through renewable energy grids, free trade zones, hydrogen pipelines, interconnected undersea cables, integrated digital finance infrastructure, and multimodal infrastructure development.

The corridor envisions connectivity and collaboration through renewable energy grids, free trade zones, hydrogen pipelines, interconnected undersea cables, integrated digital finance infrastructure, and multimodal infrastructure development.


However, problems persist for the IMEC’s actualisation. Riyadh will not further IMEC cooperation until a resolution is achieved to the Gaza and West Bank issue. Saudi Arabia is crucial, because of the railway line component that will run through its territory, connecting the UAE’s Emirati rail to Saudi Arabia and further connecting the Al-Haminda land port in Saudi Arabia to the Haifa port in Israel. However, even if connectivity is established after the war, the Haifa port is riddled with under-capacity, able to handle only one-fifth of what the Mundra and Jawaharlal Nehru Ports in Gujarat (India) can. Another concern is that the Iranians have repeatedly threatened to close the Strait of Hormuz and the Persian Gulf. The IMEC’s Arab ports are all along the Strait of Hormuz, which makes the geoeconomic manoeuvring of “friend-shoring” supply chains redundant, as these ports will always be threatened by any conflict in the Strait of Hormuz and the Persian Gulf at large. 

There are also problems of financial integration and free trade among the corridor partners. While India’s India Stack digital public infrastructure has access to the American, French and Emirati fintech ecosystems, the Western economies of Europe and the US are sufficiently financially integrated for easy cross-border transactions and financial flows, corridor-wide interregional financial links and tariff standardisation are missing. Currently, the financial integration and free trade agreements between corridor partners are operational in regional silos, which need intergovernmental consultations and subsequent implementation coordination for corridor-wide operationalisation.
Bolstering economic connectivity
Critics argue that the Israel-Hamas war has derailed the project’s developments. However, the Red Sea crisis has only exacerbated pressures on the Indian government to begin cooperation with the corridor partners for developing the IMEC. India is already progressing with work with Abu Dhabi for port development in the UAE and during the Apulia G7 Summit, the G7 leaders recommitted the PGII’s and Global Gateway’s finance mobilisation for developing the IMEC’s infrastructure. However, this is not enough for a project as ambitious as the IMEC. There needs to be further cohesion in terms of financial and commercial integration, further diversifying routes within the IMEC for hedging against geopolitical tensions and the Middle East’s fragile regional security.

Map 1: The IMEC



Source: The Hindu

IMEC Free Trade Area and fintech collaboration: With US$47 trillion collectively, the IMEC partners are a force to be reckoned with. Yet, economic cohesion cannot be achieved unless there is a standard tariff regime and diversified and low-cost transportation systems along the corridor. Economic connectivity is incomplete without value chain synergisation. If the IMEC partners truly wish to optimally operationalise the corridor, they need to synchronise their cross-border trade tariffs, and transportation systems for commodities and bridge their respective border infrastructures, if required. Another key pillar of economic connectivity is digital and financial connectivity. While the Society for Worldwide Interbank Financial Telecommunication (SWIFT) is internationally accepted, the Indian United Payments Interface (UPI) can be operationalised for remittances and low-cost retail payments which have high transaction costs in the SWIFT system. However, currently, the UPI is in the nascent state of catering to an international audience. Furthering digital and fintech cohesion can lead to benefits for the agritech, health tech, edu tech and new and emerging technologies ecosystems in partner countries with opportunities for integration in the future.

With US$47 trillion collectively, the IMEC partners are a force to be reckoned with. Yet, economic cohesion cannot be achieved unless there is a standard tariff regime and diversified and low-cost transportation systems along the corridor.


Corridor-wide geopolitical insurance for trade: Regional conflicts such as Russia’s special military operation in Ukraine, the Israel-Gaza war and the conflicts in West Africa, have made hedging against risks difficult for international businesses. For instance, the unprecedented exit of 950+ plus companies from Russia created economic and geopolitical ripples that deeply impacted global supply chain resilience and caused these businesses losses worth 109 billion in FY22. Businesses usually have a range of risks covered under their insurance packages, which are often vaguely worded to include wide-ranging potential contingencies. Mapping geopolitical conflicts and their eruption timelines is extremely difficult for insurers, which subsequently makes price modelling of insurance even tougher. Nowhere are geopolitical risks and threats to regional security more pronounced than in the Middle East and South Asia. Unless the IMEC governments step in as ultimate guarantors, geopolitically motivated harm to businesses can derail the IMEC’s ambition.

Adding more corridor partners: One way of hedging against the geopolitical risks along the corridor is diversifying interoperable routes within the corridor. The IMEC’s eastern corridor, from India to the UAE, offloads at the ports of the UAE. However, these ports are based in the Persian Gulf and the Strait of Hormuz, which Iran has repeatedly threatened to blockade. Similarly, as displayed by the Red Sea supply chain crisis, Iran can easily block the Red Sea route too, through its proxies in Yemen. Adding Oman and Egypt to the corridor can diversify routes and bolster supply chain resilience. Oman’s ports are at the Arabian Sea’s shore, Muscat also has good relations with all corridor partners and is the closest Arabian link to India. Similarly, an alternative to Israel’s ports in the IMEC’s northern leg can be Egypt. Egyptian ports on the Mediterranean side can be instrumental for the IMEC and are accessible through Saudi Arabia. On the European end, adding Italy’s Trieste to the ports of IMEC will be pivotal for creating a gateway to Europe. Connectivity with Trieste is imperative for Europe’s trade with the Indo-Pacific. Trieste’s connectivity with Europe’s manufacturing hubs—Northern Italy, Germany, Switzerland, Belgium, and Eastern European countries makes it Europe’s entrepôt for trade with Asia.
Conclusion
Although issues persist, the IMEC is a path-building initiative. Corridor partners need to find a resolution to the Red Sea crisis and the Israel-Hamas war alongside standardising policies along the corridor and deepening corridor development. India is already leading development cooperation with the West and the UAE to bolster corridor cooperation. The IMEC is a crucial strategic initiative for India to diversify supply chains and enhance economic resilience. While facing challenges, its potential benefits are substantial. Realising the IMEC's full potential requires a comprehensive approach, including deeper economic integration, robust financial and digital connectivity, risk mitigation strategies, and expanding the corridor's network. The success of the IMEC depends on the commitment and cooperation of all participating nations.

_________________________________________________________________________________________________________________________________

Prithvi Gupta is a Junior Fellow at the Observer Research Foundation

### UAE and Saudi Arabia’s agricultural diplomacy in Africa: Competition, cooperation and its strategic implications

With scarce arable land and water resources, the United Arab Emirates (UAE) and Saudi Arabia depend heavily on food imports, as do other Gulf countries. The COVID-19 pandemic, the war in Ukraine war, and negative impacts of climate change exacerbated the challenge and exposed the vulnerability of their existing food supply chains. Indeed, the UAE and Saudi Arabia rely significantly on food imports—90 and 80 per cent, respectively. According to some estimates, by 2050, Saudi is projected to import all its food. Unsurprisingly, both countries are expanding their agricultural diplomacy to improve food access and readiness. 

With 60 percent of the world’s uncultivated arable land, Africa has emerged as a potential ally in this regard.  By investing in the continent’s immense agricultural potential, they hope to ensure long-term food imports, diversify their economies and spread their influence by projecting soft power. 

Further, the UAE’s National Food Security Strategy 2051 seeks to lead the Global Food Security Index by promoting sustainable food production, innovative technologies, and international collaboration. Similarly, Saudi Arabia is reworking its food security strategy by allocating more financial resources to enhance agricultural practices, promote economic growth, and maintain stability. As Riyadh and Abu Dhabi are vying for agricultural cooperation with Africa, their interests would certainly overlap.
UAE: A pioneer in African agriculture
The UAE has been at the forefront of securing agricultural resources in Africa. According to a BMI analysis, the UAE has 14 land purchase transactions in the works, primarily in Africa, and 56 completed agreements, the earliest dating back more than 50 years to Sudan. Notable recent investments include a joint venture between Dubai Ventures and E20 Investment to build a large tract in Angola. Similarly, Al Dahra, an Emirati agricultural group, is projected to acquire or lease some lands in Egypt to grow essential grains. In Zimbabwe, a UAE-based firm named Global Carbon Investments secured conservation rights over a vast 7.5 million hectares representing 20 percent of the country’s landmass for US$ 1.5 billion. Additionally, in Ethiopia, EAP, a UAE agricultural company, is in discussions for a US$ 200 million wheat farm project.
Saudi Arabia: A rising challenger
Saudi Arabia’s effort to secure agricultural supplies in Africa is relatively new but equally ambitious. The Kingdom has recognised the crucial need to solve food and water scarcity challenges by making smart investments in Africa’s rich territories. One noteworthy development is a US$ 400 million joint investment by Saudi Arabia and UAE in Sudan’s agriculture sector. Saudi Arabia has also contributed US$ 3 billion to a joint investment fund to help Sudan’s economy flourish. This fund attempts to increase agricultural output and stimulate more investment.

Beyond Sudan, the Kingdom collaborated with Ghana to increase agricultural investment prospects. During a recent trip to Africa, Saudi Minister of Environment, Water, and Agriculture Eng. Abdulrahman Alfadley and Ghana’s Minister of Food and Agriculture, Dr. Bryan Acheampong, agreed to improve ties and enhance investment in agriculture, food security, fisheries, and livestock.

Saudi Arabia’s effort to secure agricultural supplies in Africa is relatively new but equally ambitious. The Kingdom has recognised the crucial need to solve food and water scarcity challenges by making smart investments in Africa’s rich territories.


Saudi Arabia’s engagement in international forums strengthens its commitment to agricultural investments overseas. In fact, Minister Eng. Abdulrahman Alfadley’s Africa trip was centred on forging agreements to encourage investment and increase agricultural output. This journey includes stops in Senegal, Côte d’Ivoire, Nigeria, and Ghana, intending to implement the recent Saudi-Africa Summit results and strengthen connections between Saudi Arabia and these African countries.
UAE and Saudi Arabia in Africa: Competition over food trade infrastructure
Beyond agricultural investments, Saudi Arabia and the UAE compete on port facilities and logistics, which are critical in enabling food trade and broader economic impact. The UAE has established its leadership as a logistics and re-export hub through significant investments in ports and infrastructure in the Horn of Africa and the Red Sea area. Leveraging its strategic location and extensive network, the UAE has expanded its influence in Africa via DP World and AD Ports. This robust logistics framework allows the UAE to import food from Africa efficiently, reinforcing its food security. 

In contrast, lacking such extensive port infrastructure, Saudi Arabia faces more significant logistical challenges in importing food from the continent. Saudi Arabia’s strategy involves investing in Red Sea littoral states and leveraging its relations with the UAE to ensure commercial connectivity. Unlike the UAE, Saudi Arabia has not yet developed its “ports champion,” relying instead on businesses like DP World. However, the Public Investment Fund (PIF) is actively establishing new major ports in the Kingdom and enhancing port capacity in Africa and the Middle East.
Competition, cooperation and strategic implications
The strategic implications of UAE and Saudi Arabian agricultural diplomacy in Africa are multifaceted, encompassing elements of both competition and cooperation. Both nations are driven by the imperative to secure food resources due to their limited domestic agricultural capabilities, leading to significant investments in African agriculture. With its proactive and technologically advanced approach, the UAE has established a firm foothold, leveraging extensive financial investments and innovative agricultural practices. Although newer to the field, Saudi Arabia is rapidly catching up with substantial investments and strategic partnerships. While these dynamics foster competition, particularly in securing land and resources, there are also opportunities for collaboration, especially in areas like technology transfer and regional stability.

Geopolitically, their activities in Africa are reshaping alliances and economic landscapes as both countries seek to enhance their influence through agricultural investments and infrastructure development. The competition for port facilities and logistics dominance further underscores the strategic stakes, with the UAE’s advanced logistics network giving it an edge. Saudi Arabia’s efforts to build port capacity signal a drive to close this gap.

The strategic implications of UAE and Saudi Arabian agricultural diplomacy in Africa are multifaceted, encompassing elements of both competition and cooperation.


Regionally, an intra-Gulf rivalry may be taking place as Saudi Arabia and the UAE are both working towards structural reforms aimed at economic diversification to reduce their reliance upon oil exports. As their visions push the two countries to compete in several strategic regions, including Africa, the rift between them is likely to increase.
Conclusion
The International Monetary Fund (IMF) estimates that the Gulf Cooperation Council’s (GCC’s) population will reach 57 million by 2025, drastically increasing its food requirements. With limited arable land, these countries are already relying heavily on imports. Climate change and geopolitical instability would exacerbate this reliance. Thus, protecting agricultural investments in fertile African areas remains a critical strategic priority.

With its historical political, economic, and security involvement in Africa, the UAE undertakes agricultural diplomacy to improve food security and expand its influence. However, Saudi Arabia’s resurgence as a leader in the Middle East and North Africa and its increasing intensification of agricultural diplomacy in Africa are making the possibility of their friction an imminent reality. However, this friction doesn’t have to be confrontational. If both countries can accept that this competition not as a zero-sum game, this will benefit both economies. And a more open and dynamic regional economy in the Gulf will auger well for Africa.

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Samir Bhattacharya is an Associate Fellow with the Strategic Studies Programme at the Observer Research Foundation. 

Ahmed Fawaz Lathif is a Research Intern at the Observer Research Foundation.

### CEPA and the IMEC: Future-proofing India-UAE economic ties

On 23 June 2024, Indian Foreign Minister Dr S Jaishankar visited the United Arab Emirates (UAE) and held wide-ranging talks with his Emirati counterpart, Sheikh Abdullah bin Zayed Al Nahyan. The visit, within two weeks of Dr Jaishankar’s reappointment as the Indian EAM, signifies the importance of UAE in India’s foreign policy matrix. In the past four years, the bilateral partners also crossed several significant milestones such as the commencement of the India-Middle East-Europe Corridor (IMEC) cooperation, the 2022 Comprehensive Economic Trade Agreement (CEPA), trade settlement in bilateral currencies and the addition of the UAE debit/credit card on India’s Rupay stack among others. 

These bilateral achievements build on India and the UAE’s historic trade ties, dating back centuries. Resultantly, today, India is the UAE’s second-largest trade partner behind China, and the UAE is India’s third-largest trade partner behind China and the United States (US). 

Additionally, to facilitate continuity in bilateral cooperation, mitigate global and regional geopolitical turbulence and maintain upward economic growth, the bilateral partners have deepened cooperation for developing the IMEC corridor and further aligning it with their historic CEPA, which was negotiated in a record 88 days. Bilaterally, the IMEC and CEPA will complement each other and bolster India-UAE trade.

Additionally, to facilitate continuity in bilateral cooperation, mitigate global and regional geopolitical turbulence and maintain upward economic growth, the bilateral partners have deepened cooperation for developing the IMEC corridor and further aligning it with their historic CEPA, which was negotiated in a record 88 days.


CEPA and IMEC are the bilateral partners’ bid to future-proof their respective economies by bolstering interregional connectivity and integrating their complementary economies. This article analyses the bilateral economic progress made under CEPA. Further, it looks at the IMEC’s potential to build resilient supply chains for the India-UAE bilateral while bolstering trade under the CEPA.
CEPA cements a promising economic partnership
While the International Monetary Fund (IMF) projected that global trade would decline by 5 percent in 2023, India-UAE bilateral trade grew by approximately 4 percent, contributing 9 percent to UAE’s international trade and 8.15 percent to India’s total trade. Since May 1 2022, India-UAE trade expanded by 16.4 percent and amounted to US$83.64 billion in 2024, compared to US$72.9 billion in 2022. The CEPA eliminates tariffs for approximately 19,600 commodities in three groups of preferential tariff rates—tariff elimination immediate, tariff elimination phased, tariff reduction—for 11,908 Indian tariff lines and Emirati 7,581 tariff lines respectively. The agreement covers 18 commodity sectors, and 11 service sectors with over 300 sub-sectors collectively and will benefit Indian commodities worth US$26 billion, subject to a 5 percent import duty in the UAE. Resultantly, the bilateral trade commodity basket diversified in an economic relationship primarily driven by energy trade. Aerospace manufacturing, metals and alloys, plastics and gems and jewellery contributed US$2 billion, US$1.67 billion, US$0.89 billion and US$8.04 billion respectively to the bilateral trade volume in FY2024, and their sectoral trade volume expanded by 24, 68, 57 and 40 percent respectively between FY2021 and FY2023. Collectively, bilateral trade in these commodities expanded by US$15.56 billion. Due to diversification and expansion in numerous such sectors, India’s non-oil trade crossed US$50 billion in FY2024.




India-UAE Bilateral Trade Data 2020-2024 (in US$ billions)




Year


India’s exports


UAE’s exports


Total bilateral trade volume


Total bilateral trade volume (non-energy)


Top commodity export groups — Indian (non-energy)


Top commodity export groups —Emirati (non-energy)






2020-21


16.68


26.62


43.30


28.67


Iron and steel, clothing and textiles, gems and jewellery, consumer electronics


Metals and alloys, gems and jewellery, plastics and rubber goods




2021-22


28.04


44.83


72.87


46.36


Iron and steel, clothing and textiles, gems and jewellery, consumer electronics


Metals and alloys, gems and jewellery, plastics and rubber goods




2022-23


31.61


53.23


84.84


48.46


Aerospace manufactured goods, construction materials, gems and jewellery, plastics


Metals and alloys, gems and jewellery, plastics and rubber goods




2023-24


35.62


48.02


83.64


57.81


Aerospace manufacturing, construction materials, gems and jewellery, plastics


Metals and alloys, gems and jewellery, plastics and rubber goods




Source: EXIM Data Bank, Ministry of Commerce, Government of India




Beyond commodity trade, the CEPA aims to facilitate US$15 billion in services trade by 2027. The India-UAE CEPA covers 211 service sectors spanning business, information technology (IT), construction, health, education, tourism, sports, transport etc. The CEPA allows UAE firms to compete with Indian firms on even regulatory grounds for government contracts and public sector works. Under the agreement, Indian businesses can set up in the UAE with 100 percent equity, without the need to partner with a local firm. The bilateral partners also committed to allowing their firms commercially meaningful market access by easing tax rates, land acquisition policies and visa policies for business purposes in their respective countries.
Can IMEC act as a trade catalyst?
Besides services and commodity trade, CEPA also features bilateral cooperation in digital trade. The chapter on digital trade in CEPA aims to establish high-level cooperation between the bilateral partners to further resolve connectivity and regulatory issues for not only furthering India-UAE bilateral digital trade but also their global digital trade ambitions. One of the endeavours in furthering bilateral and international digital trade ambitions for India and the UAE is the IMEC corridor.

IMEC was announced in September 2023, on the sidelines of the G20 New Delhi Summit among partners—India, the UAE, the US, the European Union (EU), Saudi Arabia, Italy, France and Germany. The corridor will have an eastern maritime leg and a northern railway corridor that will bolster connectivity all around, through interconnected energy grids, green hydrogen pipelines and telecommunication infrastructure. The digital connectivity that IMEC aims to build is critical for India’s and UAE’s long-term economic visions and security. The corridor partners will collaborate on laying high-capacity subsea and terrestrial network cables and facilitate 5G connectivity along the corridor to bridge the cross-border telecommunications divide. These developments will further digital trade among the partners’ economies, integrate them and benefit interoperability among their digital payment ecosystems.

IMEC was announced in September 2023, on the sidelines of the G20 New Delhi Summit among partners—India, the UAE, the US, the European Union (EU), Saudi Arabia, Italy, France and Germany.


IMEC holds the potential to synergise physical connectivity infrastructure with regulatory changes and trade agreements. For the India-UAE bilateral relationship, CEPA covers the latter and the bilateral partners’ participation in IMEC covers the former. To further corridor cooperation, an Indian high-level delegation visited three critical UAE ports (Khalifa Port, Fujairah Port, and Jebel Ali Port) in May 2024 and held wide-ranging discussions on bilateral investments, port development, logistics and supply chains. Earlier, in February 2024 Prime Minister Narendra Modi and President Sheikh Mohamed bin Zayed Al Nahyan signed 10 Memoranda of Understanding (MoUs) featuring energy grids and energy storage cooperation, cooperation on digital infrastructure projects and digital payments, a bilateral investment treaty, port and maritime infrastructure development and an agreement on an “Intergovernmental Framework concerning cooperation on IMEC”—all important areas under IMEC and CEPA. Notably, these MoUs further co-align IMEC and CEPA. A remarkable case of the synergistic nature of CEPA and IMEC is the Jebel Ali Port and Free Zone (JAFZA). The Jebel Ali is geostrategically located in the IMEC’s eastern maritime leg and JAFZA’s trade with India has benefitted from CEPA. Indian and India-bound Cargo traffic increased from 400,000 TEUs to 576,800 TEUs with a substantial jump recorded after 2022. The JAFZA will also host the BharatMart, a one-stop destination to showcase India’s exports globally, scheduled to open in 2025. 
Conclusion
Over the past two years, CEPA has powered a transformative India-UAE alliance, eliminating tariffs on a wide range of goods and services and diversifying trade. The expanding bilateral cooperation is also based on political trust between both the governments’ highest offices. As Prime Minister Modi leads the NDA government for a third time with a historic mandate, India-UAE bilateral cooperation will find further continuity and go from strength to strength in enhancing trade and bilateral and interregional connectivity. The NDA’s continuity will also bode well for developing the IMEC corridor. IMEC, with its focus on infrastructure development, digital connectivity, and regulatory frameworks, will create a seamless trade route between India, the Middle East, and Europe. This will not only benefit India-UAE trade under CEPA but also bolster their positions as global trade and logistics hubs. The combined efforts of CEPA and IMEC will likely lead to increased trade volumes, market access, and economic growth for both countries.

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Dinesh N Joshi is the Chairman Satya Giri Group and President, International Business Linkage Forum (India-UAE Partnership Summit); Chairman, International Business Committee, IMC Chamber of Commerce & Industry and Member, National Executive Committee, FICCI. 

Prithvi Gupta is a Junior Fellow at the Observer Research Foundation.

### UAE's evolving role as a key actor in the Middle East and beyond

In 2018, a year after the fall of the Islamic State of Iraq and the Levant (ISIL)  in Iraq, the United Arab Emirates (UAE) pledged US$50 million to fund heritage reconstruction in Mosul, which according to the Director-General of UNESCO, has been the largest cooperation to rebuild cultural heritage in the history of Iraq. A few years later, in 2021, the UAE announced that it would invest US$3 billion in aid as part of its larger post-conflict reconstruction efforts in Iraq. In December 2023, UAE expressed its intention to reconstruct Gaza after the Israel-Hamas war, provided a US-backed two-state plan was brought to the table. More recently, on 4 June 2024, the Emirati leader held a formal meeting with the Taliban, indicating its desire to also contribute towards stabilisation and development in Afghanistan. From Mosul to Gaza and Kabul, Abu Dhabi’s strategic advances have caught much media attention. Security strategists label UAE’s humanitarian and international development efforts as part of the grand geopolitical ambitions of the once small state, a form of its “nation branding” in the international arena. Set against the backdrop of its humanitarian initiatives across different case settings, this article unpacks UAE's evolving role as a key actor in the geopolitical landscape of the Gulf–and the world.
Rebuilding Mosul: Cultural cooperation or soft power diplomacy?
As part of the US$50 million cultural deal between the UAE and Iraq, the UAE in partnership with UNESCO, is rebuilding cultural heritage sites in Mosul, including Al-Nouri Mosque and its Al-Hadba Minaret, which were destroyed by ISIL. The reconstruction plan in Mosul also expanded to include the restoration of two church buildings destroyed during the ISIL’s occupation. The Al-Nouri mosque and its Al-Hadba minaret, a significant landmark of the city, are nearing its completion and are set to reopen towards the end of 2024. However, what remains unclear is why a middle power like the UAE would invest in cultural reconstruction in Iraq, especially given Iraq’s strained relations with the Gulf Cooperation Council (GCC), one of the major regional organisations in the MENA region, since its invasion of Kuwait. 

One can look at the case of UAE’s humanitarian initiative in Mosul from the lens of the Kingdom of Saudi Arabia’s engagement for heritage reconstruction in Bosnia after the Yugoslavian Civil War, which was perceived as a form of religious intervention to bring a form of Islam different from Bosniak Islam, and was heavily criticised. Although not labelled as a religious intervention yet, UAE’s involvement has been criticised for roping an Egyptian construction firm for the project rather than collaborating with a local firm. Further, the project has received backlash for its “Gulf-inspired” cubist redesign in the historic city, with locals slamming, ‘It's not Mosul, it's Sharjah’.

A survey conducted by the ‘After Islamic State’ project based at the University of Pennsylvania revealed that foreign-led heritage reconstruction in Mosul did not have much impact on the lives of people in Mosul.


A survey conducted by the ‘After Islamic State’ project based at the University of Pennsylvania revealed that foreign-led heritage reconstruction in Mosul did not have much impact on the lives of people in Mosul. Heritage reconstruction is a relatively low priority for the people of Mosul and despite that various foreign states including the UAE are dedicating significant financial resources to rebuilding heritage sites across the city. Albeit such a reconstruction is not empowering the local communities, as depicted by public opinion, heritage reconstruction by the UAE in Iraq is a well-thought-out act of cultural diplomacy that helps brand its image on the global stage.
UAE’s energy infrastructure in Iraq: A humanitarian business model
Humanitarian development is UAE’s foreign policy in Iraq, evident from its announcement in 2021 to invest US$3 billion as part of its broader post-conflict reconstruction efforts in Iraq. According to the joint statement by Abu Dhabi and Baghdad, “the initiative aims to strengthen economic and investment relations, create new opportunities for cooperation and partnership, and advance economic, social, and developmental growth in support of the brotherly Iraqi people.” Additionally, the same year, Abu Dhabi Ports Group signed a contract with the General Company for Ports of Iraq to explore investment prospects and improve cooperation in the maritime and transportation sectors.

Humanitarian development is UAE’s foreign policy in Iraq, evident from its announcement in 2021 to invest US$3 billion as part of its broader post-conflict reconstruction efforts in Iraq.


The UAE has been focusing on infrastructure projects in Iraq to reinforce economic and energy ties. While Baghdad and Abu Dhabi signed multiple agreements to promote economic cooperation and investment in 2021, the UAE has also expressed interest in supporting Iraqi agriculture and tourism. This has been materialised with a UAE-based company called Acrotech being signed for its first agriculture investment deal with Iraq in 2022 to assist farmers in using the latest technology and modern science to increase production. Crafted strategically, foreign aid policy is UAE’s foreign policy in Iraq, which is “vigorously responsive to regional and global changes and challenges, aim[ed] at gaining international acknowledgement, leverage, recognition and relevance.”
Reconstruction in Gaza: Humanitarian cause or image building in the Gulf
As part of its larger ambition to establish long-term peace in the Middle East, and improve its ties with the West, the UAE normalised its diplomatic relations with Israel, signing The Abraham Accord in 2020. The Emirati political elites portray the Accord as a step forward to a more amicable Middle East, with the UAE at its heart. While the Accord was not primarily signed to facilitate a two-state solution for Israel and Palestine, it was cited as one of the objectives as part of the broader deal. In December 2023, almost three months into the Israel-Hamas War, the UAE proposed to contribute to Gaza’s reconstruction within the broader framework set by the US. It was foreseeable that the UAE conditioned its prospective rebuilding efforts in Gaza on a US-backed two-state solution, recognising the Palestinian state.

Reconstruction of Gaza is vital to contain the humanitarian crisis and is one of the integral elements for “long-term peace between Israel and Palestinians”. With a history of humanitarian diplomacy, and with formal diplomatic ties with Israel, the UAE is positioned as a viable reconstruction partner that could influence both Israel and the US. However, according to Lana Nusseibeh, the UAE Permanent Representative to the UN, without a US-backed road map to a two-state solution, “We’re not going to be as fully invested …That’s not the trajectory we signed the Abraham Accords on.” Further, the UAE has been at the frontline of global efforts in providing critical humanitarian aid to Gaza, leading the world with a substantial 27 percent contribution of the total aid sent to the enclave. While simultaneously preserving its image as a reliable partner for the US and Israel, UAE’s humanitarian aid to Gaza has not only helped it avoid Arab and domestic backlash but also ostensibly helped it build its image in the Arab world.
Engagement with the Taliban: A quest for regional influence
The recent meeting of the Emirati leader Sheikh Mohammed bin Zayed Al-Nahyan with the representatives from the Islamic Emirate of Afghanistan (IEA) in Abu Dhabi has fuelled much debate. However, the Taliban’s diplomatic foray into the UAE is not new or uncommon. For instance, since the Taliban’s takeover, Abu Dhabi has seen the situation in Afghanistan as an opportunity to bolster its reputation as a valuable partner to Western powers by showcasing its humanitarian credentials. This is well-reflected in Emirati assistance with the evacuation of foreign diplomats and around 28,000 Afghan people in 2020. In 2021, UAE’s funding to carry out humanitarian projects further underscores its humanitarian diplomacy in Afghanistan. In concurrence, Abu Dhabi has been steadfast in delivering food and other relief supplies to Afghanistan in 2022, a time when the country was battling severe poverty.

The recent meeting of the Emirati leader Sheikh Mohammed bin Zayed Al-Nahyan with the representatives from the Islamic Emirate of Afghanistan (IEA) in Abu Dhabi has fuelled much debate.


Furthermore, in May 2022, IEA signed a deal with a UAE-based firm, GAAC Solutions for the security and management of the airports in Herat, Kabul, and Kandahar. Later in December 2022, the IEA’s acting Defence Minister, Mullah Yaqoob, visited the UAE to discuss opportunities to bolster Abu Dhabi-Kabul relations further. Scholars like Giorgio Cafiero argue that by cautiously and pragmatically engaging the Islamic Emirate of Afghanistan (IEA), the UAE has advanced its own self-interest of becoming more of a flashpoint in competition between great powers in the region. For instance, Qatar has been successful in establishing itself as increasingly indispensable to the West vis-à-vis post-occupation Afghanistan—strengthening its role further amid the ongoing Israel-Hamas War. Given the geopolitical contest between Doha and Abu Dhabi, IEA’s presence in UAE is an opportunity for Abu Dhabi to oust its historic rival through humanitarian diplomacy. Thus, humanitarian aid has been an integral and strategically formulated component of the UAE’s foreign policy to serve its long-term economic interests in the MENA region and the rest of the world.
Conclusion
From funding the restoration of Mosul’s cultural heritage to pledging aid for Gaza's reconstruction and engaging with Afghanistan under the Taliban, the UAE's actions reflect a nuanced blend of humanitarianism and geopolitical strategy. These efforts underscore the UAE's ambition to enhance its international stature and influence through soft power diplomacy, leveraging cultural and economic investments to build alliances and project a positive image on the global stage. The Mosul initiative, although criticised for lack of local involvement and a perceived imposition of Emirati aesthetics, exemplifies this approach by promoting cultural diplomacy. Similarly, the UAE’s substantial investments in Iraq's infrastructure aim to foster economic growth and regional stability, potentially reshaping Iraq’s relations with the GCC. The Gaza reconstruction proposal, contingent on a US-backed two-state solution, further highlights the UAE’s strategic positioning as a mediator in Middle Eastern politics. Lastly, the UAE’s pragmatic engagement with the Taliban illustrates its intent to maintain regional influence and counter Qatar’s prominence. Collectively, these strategic actions depict the UAE’s calculated strategy to pursue its geopolitical interests and assert its presence in the MENA region—and the world.

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Sabine Ameer is a doctoral researcher in Politics and International Relations at the University of Glasgow, United Kingdom.

### Modi 3.0 and the likely trajectory of India-West Asia ties

The Indian electorates have given the National Democratic Alliance (NDA) government, under the leadership of Prime Minister Narendra Modi, another five-year term to govern. Prior to the announcement of election results, there were discussions centred around the likely focus of the government’s foreign policy, and in that, India’s West Asia (Middle East) policy was one of them. India’s relations, particularly with the Gulf Cooperation Council (GCC) member states and Israel, saw significant improvements during Modi’s previous two terms. Strong convergences of interests, supported by his ‘personal diplomacy’ had contributed immensely towards transforming the ties. Suffice to say that Modi’s ME policy was one of the most successful stories of his foreign policy. The region’s geostrategic-economic importance has, once again, been underscored by the visit of External Affairs Minister, Dr S. Jaishankar, to Abu Dhabi on 23 June 2024, the first one to the ME under the new government. This signified the vital comprehensive strategic partnership between the two countries.

The new government will likely strengthen the existing partnerships and also explore potential areas of cooperation. India’s bilateral cooperation with the ME has expanded to other areas, including military-security, maritime cooperation, science and technology, medicine and healthcare, space, food security, cyber security, artificial intelligence, civil nuclear cooperation, fertiliser, climate change, renewable energy, etc. Notwithstanding this expansion, energy and economic cooperation remain important hallmarks of the Indo-ME ties. The succeeding sections briefly assess the likely trajectory of the ties in three specific areas—energy (hydrocarbon trade & renewable), economic cooperation, and maritime cooperation, particularly with GCC countries.

The ME remains crucial from the standpoint of India’s economic and energy security calculus and cooperation in these traditional domains will be a priority. Lately, bilateral trade volume with countries, such as Saudi Arabia, the United Arab Emirates (UAE) and Israel, have witnessed a considerable growth. In the fiscal year (FY) 2023, the figure touched US$52.76 with the kingdom, while it was US$85 billion with the UAE, US$4.42 billion with Israel (excluding defence) and US$1.7 billion (2023-24) with Bahrain. Moreover, the India-UAE Comprehensive Economic Partnership Agreement (CEPA), signed in February 2022, will strengthen commercial partnership, and will assist both sides touch the bilateral trade figure (in non-oil) of US$100 billion by 2030. To achieve this target, CEPA is believed to have ushered in “cuts in tariff, fast-tracked approvals for business, access to trade zones etc.”, and mutual investment opportunities are opening up. The implementation of a “local currency trade settlement agreement, the launch of UAE's domestic credit/debit card based on India's RuPay card stack” will facilitate more bilateral financial engagements.

The new government will likely strengthen the existing partnerships and also explore potential areas of cooperation. India’s bilateral cooperation with the ME has expanded to other areas, including military-security.


A similar trend can be expected with Saudi Arabia, India’s 19th-largest investor, and its fourth-largest trading partner. Their robust bonds are characterised by growing trade and investment ties, financial and business partnerships, and increasing cooperation in infrastructure development, renewable energy, food security, and the military-security spheres. The Strategic Partnership Council (SPC), established in 2019, and convened its first meeting in September 2023 in New Delhi, will play a pivotal role in steering the trade and security ties between the two countries. The SPC is an important bilateral institutional mechanism that will facilitate policy formulation, discussions, and coordination between stakeholders as well as implementation of the initiatives. Under the visionary leadership of Modi and Saudi’s Crown Prince, Mohammed bin Salman (MbS), both sides aim to take the trade to as high as US$100 billion.

The growth in the economic ties has come at a juncture when India is focusing on increasing its economic status by forging partnerships with its international partners. Simultaneously, the Gulf states are also looking towards the Asian economies for investments and joint collaborations to align with the missions and visions, and to achieve their targets of several socio-economic reform plans being introduced by them (such as the Saudi Vision 2030). As interests are converging, the NDA government and the regional bloc – GCC – must make efforts to materialise the Free Trade Agreement (FTA), which is pending. In the FY 2022-23, GCC became India’s largest regional trading paper, comprising 15.8 per cent of the latter’s total trade. The appointment of chief negotiators, however, towards the end of last year could be construed as a signal from both sides to clinch this agreement. It, therefore, looks promising that economic relations will continue to flourish.

For the longest, the depth of India-ME ties was measured by the volume of oil/energy trade. Despite a slight decline in recent years, the Gulf region still alone accounts for over 50 percent of India’s total crude oil imports and nearly 70 percent of its gas imports. The dip was caused by India’s diversification policy, resulting in oil/energy imports from suppliers such as the United States (US), and also Russia which had begun to sell crude oil at a discounted price following its invasion of Ukraine in 2022. India’s diversification has been necessitated by its roadmap for energy transition, comprising of the use of “multiple fuels from a wider source base to ensure availability and affordability.” Nevertheless, traditional cooperation in the hydrocarbon sector will continue with the Gulf suppliers for the next few decades.

The growth in the economic ties has come at a juncture when India is focusing on increasing its economic status by forging partnerships with its international partners.


Currently, Iraq, Saudi Arabia (third-largest oil supplier) and the UAE (fourth-largest supplier) are among India’s top five crude oil importers. For instance, following the Red Sea crisis, Indian refiners turned to Iraq as US supply was disrupted due to the spurt in freight rates, and there is no guarantee that Russia will continue to sell crude oil at a favourable price. Given these uncertainties, the Gulf will account for a major percentage of India’s oil/energy imports for a long time. In the energy sector, Qatar is India’s largest supplier of Liquified Natural Gas (LNG) (catering to 35 percent of LNG imports), accounting for 29 percent of total Liquified Petroleum Gas (LPG). The centrality of ties in this domain is that they both signed a 20-year deal in February 2024, enabling India to purchase 7.5 metric million tonnes per annum (MMTPA) of LNG from Qatar. Modi’s Doha visit in mid-February 2024 was necessary to strengthen the bilateral ties, which, otherwise, remained lacklustre for a while, especially following the arrest (in 2022) of eight former Indian navy officials for alleged spying. As opined by a scholar, the release of these officials “is a testament not only to the strength of India-Qatar bilateral ties but also to the distinct ability of Prime Minister Narendra Modi to forge strong personal bonds with leaders of other nations to secure Indian interests.” The Gulf exporters take cognisance that India is a lucrative market with its growing energy demand due to which they will prioritise their hydrocarbon trade with it.

A relatively new area of cooperation in which progress is expected is renewable energy. Both India and ME countries are working towards lessening their dependency on fossil fuels and opting for a transition to clean energy based on solar and wind. To this end, Saudi Arabia and the UAE signed agreements with India in late 2023. India has a National Solar Mission while the UAE has Energy Strategy 2050, which is pivotal in promoting renewable energy. As India calls for investments and technological assistance from its foreign partners, UAE’s Masdar is seeking to acquire Ayana Renewable Power—a clean energy company owned by India’s National Investment and Infrastructure Fund (NIIF). Likewise, the UAE also seeks investments from the Indian side for similar projects. Partnerships with Israel, another country with abundant renewable energy potential, known for manufacturing some of the world’s advanced technologies, have been established. The objectives of these countries to meet decarbonisation goals and also to mitigate the challenges of climate change are paving the way for further partnerships to foster a sustainable future.

With India’s growing role in the Indian Ocean Region (IOR), and its interest to include the western Indian Ocean and the Arabian Sea in the ‘Indo-Pacific Policy’, one can expect a surge in maritime security and naval cooperation with a few GCC countries. Naval forces of Oman, Saudi Arabia, Qatar, Kuwait and the UAE conduct maritime exercises with India. Their interest in strengthening cooperation is especially strong in the western IOR, home to some of the world’s busiest shipping lanes, including those in the Red Sea, the Gulf of Aden, the Gulf of Oman, the Gulf and the Arabian Sea. Lately, such an exercise has also been expanded to a trilateral maritime partnership exercise (in June 2023), involving France (along with the UAE).

Now, in the wake of the increasing missile/drone attacks by the Yemen-based Houthi rebels in the Red Sea region, India must increase its naval footprints and such exercises. They are crucial to achieving interoperability between forces, addressing traditional and non-traditional threats in the maritime environment, enhancing collaboration in ensuring the safety of mercantile trade and freedom of navigation at high seas in the region and learning from the best-fit practices adopted by the respective navies. Tellingly, within the framework of defence industrial cooperation between India and the Gulf countries, collaborations in maritime technology for both military and civilian applications can also be explored.

With India’s growing role in the Indian Ocean Region (IOR), and its interest to include the western Indian Ocean and the Arabian Sea in the ‘Indo-Pacific Policy’, one can expect a surge in maritime security and naval cooperation with a few GCC countries.


Given the strong convergence of economic and security interests, it is certain India-Middle East ties are going to flourish further. Significant formal groundworks have been laid since 2014 by the respective governments to take the bilateral ties to newer heights. Further, India’s new-found interest in forging mini-lateral partnerships should widen the scope for establishing partnerships, involving third countries to work collectively in areas of mutual interests, a perfect example being the India-Middle East-Europe-Economic-Corridor (IMEEC) and the I2U2 initiatives. India should, however, be mindful of the challenges that lie ahead, particularly the emerging complex security dynamics in the region, and also be cognisant of the speedy inroads being made by its regional rival—China—into the ME region. Beijing could be a competitor, if not a security threat for now, in some of the sectors identified above. While India is presently doing well in terms of its bilateral cooperation with the ME countries, it should start looking at the region holistically.

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Alvite Ningthoujam is an Assistant Professor at the Symbiosis School of International Studies (SSIS), Symbiosis International (Deemed University), Pune.

### Operational and tactical shifts: How modern wars are reshaping the battlefield

Amidst the chaos and unending saga of the ongoing conflicts in Ukraine and the Middle East, several shifts in the nature of warfare are unfolding. On one hand, the Ukraine-Russia war brings back the relevance of conventional fighting with the use of artillery and armour, and on the other, the Middle East conflict witnesses the unprecedented use of technology like Artificial Intelligence (AI) and unmanned aerial vehicles for targeted strikes. Trenches and urban warfare have emphasised the importance of boots on ground wherein the numbers still play a critical role. However, technology has introduced asymmetric capabilities to all those who have adopted it well. The use of drones, precision-guided munitions, and advanced surveillance technologies has empowered smaller military forces like Israel and non-state actors like Hamas to punch above their weight class. Hamas in Gaza and Ukraine have demonstrated their ability to leverage technology, offsetting numerical disadvantage against their adversary. Both war zones today are now testing grounds for the new and old operational and tactical plan of action in warfighting and offer a glimpse into the future of war. 

One of the most significant shifts is the battlefield transparency and ubiquity of technology. The proliferation of drones and other technologies is providing forces with an almost transparent view of the entire battlefield in real time and with GPS accuracy. This is invaluable for artillery and air forces to accurately set targets and attack enemy positions. Israel has made significant strides in utilising AI-based algorithmic targeting programmes that have enhanced lethality and accuracy, sparking a debate over the implications of man vs. machine in warfare.

One of the most significant shifts is the battlefield transparency and ubiquity of technology. The proliferation of drones and other technologies is providing forces with an almost transparent view of the entire battlefield in real time and with GPS accuracy.


Ukraine has followed a similar pattern of technology utilisation in its conflict with Russia. For Ukraine's Deputy Prime Minister, Mykhailo Fedorov, the equation for Ukraine's victory is clear: “The courage of Ukrainians + technology = the key to Ukraine's future victory.” With sensors and scouts distributed across the battlefield, equipped with cameras linked to other units and headquarters using secure apps, battlefield intelligence is instantaneously converted to targets. Drones have played a critical role in Ukraine, providing early warning for incoming missiles, with the Bayraktar TB2 and the Shahed 136 loitering munition (aka “kamikaze drone”) being particularly effective. At sea, drones have been very effective. In addition, coastal defence missiles to counter Russia's numerically superior naval force, crippling amphibious operations by destroying landing ships, precision strikes sinking the flagship Moskva, diversifying attack vectors highlight the changing nature of naval warfare waking up naval forces like China, NATO, and allied forces.

The combination of near-perfect intelligence from drones and precision-guided munitions means that “one shot, one kill” is now possible, unlike in the past when thousands of unguided artillery rounds were needed to destroy a target. The United States (US) has approved significant sales of precision-guided munitions to Israel, including Smart, Precise Impact, Cost Effective (Spice) guidance kits, to support its defence against Hamas and target the terrorist group following the October 7 incident. The US has also announced plans to transfer its Army's two Iron Dome batteries to Israel and has provided Tamir interceptors, Small Diameter Bombs, Joint Direct Attack Munitions, and 155mm artillery shells. Similarly, the US is preparing a US$275 million military aid package for Ukraine, which will include 155mm artillery shells, precision aerial munitions, and ground vehicles.

The combination of near-perfect intelligence from drones and precision-guided munitions means that “one shot, one kill” is now possible, unlike in the past when thousands of unguided artillery rounds were needed to destroy a target.


Both conflicts have witnessed the coupling of conventional and unconventional weapons on the battlefield, enabling cheap war. In Ukraine, an elaborate network of sensors feeds targeting data to heavy machine guns for downing Russian combat drones. In the Israel-Palestine conflict, Palestinian groups like Hamas have increasingly used relatively inexpensive commercial drones costing just US$2,000-$3,000, posing an asymmetric threat to Israel's control of Gaza's airspace despite its technological superiority in the drone and aviation industry.

Short-range observation drones and even military-grade drones with precision munitions are relatively inexpensive compared to traditional weapon systems like HIMARS. This enables war on the cheap, as high-tech doesn't always mean high cost. One of the most striking developments in Ukraine has been the ubiquity of drones, with both sides initially favouring larger drones like the Turkish Bayraktar TB2 but eventually shifting towards smaller, harder-to-target, and cheaper Chinese DJI Mavics due to the adaptation of anti-aircraft defences and electronic warfare units.

However, these conflicts have also highlighted the consumptive nature of modern warfare, with no end in sight and the piling costs of war in both cases. Private, mostly civilian, technology companies have played crucial roles in providing systems and services to Ukrainian armed forces, such as internet connectivity (Starlink/SpaceX), cloud computing and cyber (Amazon, Microsoft, Google), drones (DJI), and software to improve legacy systems. In the case of the Israeli Defense Forces (IDF), the Israeli defence industry has been strongly backed by state and private collaboration and research on defence technologies over the years.

The question of a lean and technologically superior army, as envisioned by countries like China, has been put to the test. Both Ukraine and the Israel-Hamas conflict suggest that quantity and quality of personnel and resources matter. Ukrainian President Volodymyr Zelenskyy had to sign a law to boost conscription and replenish depleted forces, while the Russians struggled with their numerical advantage being outmatched by Ukraine's superior technology and support from NATO allies. Superior technology or conscription alone has not been sufficient for either side, underscoring the continued relevance of well-trained and large sophisticated forces in prolonged conflicts.

The question of a lean and technologically superior army, as envisioned by countries like China, has been put to the test. Both Ukraine and the Israel-Hamas conflict suggest that quantity and quality of personnel and resources matter.


While significant, these developments may not yet constitute a full-fledged revolution in military affairs. However, the integration of artificial intelligence could potentially supercharge these battlefield elements.  With the US releasing guidelines in 2023 on the responsible use of AI and autonomy in warfare, Ukraine and Israel are emerging as potential test sites for the AI revolution in the military domain, as Israel has not signed the relevant treaty regulating such technologies.

While the conflicts in Ukraine and the Middle East showcase several significant shifts in the nature of modern warfare, they also reveal the complex interplay between new technologies and traditional military capabilities. Quantity still has a quality of its own, as evidenced by the need for large, well-trained forces and the continued relevance of conventional artillery and armour. The coupling of old and new warfighting elements highlights the importance of a balanced approach that leverages the strengths of both domains. Moreover, the implications of ceding critical battlefield decisions to AI systems raise profound ethical concerns that must be addressed.

Ankit K is New Delhi-based analyst who specialises in the intersection of Warfare and Strategy. 

### Global conflicts in the new age: The role of ICJ

In the past couple of years, two armed conflicts have made people question the viability of the current multilateral world order and polarised the world to an extent which has not been seen since the Cold War.

Since 2022, the ongoing Russia-Ukraine conflict has shown no signs of ending, while tensions in the Israel-Palestine conflict continue to escalate daily. The toll of these conflicts, marked by a significant number of civilian casualties and economic loss, underscores the inability of the United Nations, under the leadership of the Security Council, to both prevent and address these crises.

In times of such upheaval, the international community looks to international courts and law to offer a solution. The International Court of Justice (ICJ) has endeavoured to do exactly that by way of its recent judgements in the suit brought by South Africa against Israel as well as by Ukraine against Russia. While superficially similar—both involving allegations of genocide against the aggressor nation, the same could not be further from the truth.

The International Court of Justice (ICJ) has endeavoured to do exactly that by way of its recent judgements in the suit brought by South Africa against Israel as well as by Ukraine against Russia.

The Ukraine-Russia case
On 2 February 2024, the ICJ issued a ruling on the preliminary objections raised by Russia regarding the jurisdiction and admissibility of the genocide case filed against it by Ukraine following a full-scale invasion in February 2022.

Interestingly, this case differs from all other genocide cases brought before the ICJ in its history. In any other genocide case, the claim is naturally that the respondent nation committed or facilitated the act of genocide. However, in the present case, Ukraine claims that Russia falsely accused the former of committing genocide against Russians or the Russian-speaking population in its territory, which it then used to justify its unlawful acts of aggression against Ukraine, making for a “dispute” under the Genocide Convention. Thus, making this a genocide case in reverse.

Ukraine's rationale behind presenting such an innovative argument stems from the absence of authority with any international court to address Russia's breach of the UN Charter during its invasion of Ukraine, as well as the lack of jurisdiction over the crime of aggression committed by Russian leaders. Ukraine instead used the dispute resolution provision in the Genocide Convention to bring Russia to court.

In March 2022, the Court in its order on provisional measures, decided that Ukraine’s creative argument was indeed plausible and even ordered Russia to “immediately suspend the military operations that it commenced in February 2022 in the territory of Ukraine’, an order which the Russian Federation predictably ignored.

However, in its February 2024 judgement, ICJ upheld Russia’s most important preliminary objection, that the use of force based on false allegation of genocide does not fall within the scope of the Genocide Convention. This is because if a case is brought under the Genocide Convention, as in the present case, the ICJ cannot consider other questions like the legality of an invasion or whether war crimes and crimes against humanity have been committed. Additionally, no such clause addressing an act of aggression based on a false allegation of genocide currently exists within the convention.

Ukraine's rationale behind presenting such an innovative argument stems from the absence of authority with any international court to address Russia's breach of the UN Charter during its invasion of Ukraine, as well as the lack of jurisdiction over the crime of aggression committed by Russian leaders.


This means that going forward, the court will only decide whether Ukraine indeed violated the Genocide Convention, as alleged by Russia, and no question of responsibility of Russia will arise, except implicitly.
South Africa- Israel case
On the day India celebrated its Republic Day in January 2024, the ICJ issued a ruling in the suit brought by South Africa, for alleged violation of the obligations to prevent and punish genocide under the Genocide Convention by Israel in Gaza.

First off, it is intriguing as to why South Africa, a country which on face value, has nothing to do with the conflict in question, brought a suit against Israel. The answer to the question, as stated in the ICJ judgment is ‘any State party to the Genocide Convention may invoke the responsibility of another State party, including through the institution of proceedings before the Court, with a view to determining the alleged failure to comply with its obligations erga omnes partes under the Convention and to bring that failure to an end.’ Since both the countries are parties to the Genocide Convention, the former has standing to submit to the court the dispute with the latter, concerning alleged violations of obligations under the Genocide Convention.

Since the hearing in question was regarding provisional measures, the court needed to be satisfied that the set standard to order the issuance of provisional measures had indeed been met. This does not mean that South Africa had to prove that Israel is in fact committing genocide in Gaza, which would arise only later, rather, only that its claim for the protection of rights and fulfilment of obligations under the Genocide Convention was indeed plausible. In light of various statements from UN officials, statements from Israeli leaders, news reports etc, the court held that a plausible risk of a genocide-like situation currently exists in Gaza.

The ruling goes on to identify the Palestinian people as a distinct national group, a fact which is paramount to prove a crime of genocide and recognised the plausibility of the existence of a specific genocidal intent, proving which is the most difficult aspect of proving the crime.


The court granted the majority of the measures requested by South Africa, including that Israel must take all measures within its power to prevent and punish the direct and public incitement to commit genocide and take immediate and effective measures to enable the provision of humanitarian assistance to Gaza. Further, the ruling goes on to identify the Palestinian people as a distinct national group, a fact which is paramount to prove a crime of genocide and recognised the plausibility of the existence of a specific genocidal intent, proving which is the most difficult aspect of proving the crime.

However, there are two things which clearly stand out in the ICJ’s ruling:

 	Despite South Africa’s main request that a cease-fire be ordered in Gaza, the court refused to order Israel to do the same. Therefore, Israel is under no obligation to halt its military campaign, as we have already witnessed.
 	To establish the intent of genocide, the act of gathering facts by a neutral body is essential for a case such as this. However, despite South Africa’s request for the same, the court declined to order Israel to grant access to fact-finding bodies such as the UN special procedures

Even though the court has ruled that Israel must prevent the commission of acts such as killing members of the group, and causing serious bodily or mental harm or physical destruction against Palestinians, these are not new by any measure as Israel was already bound by these obligations under the Genocide Convention.
What does this mean?
Since the pronouncement of both the judgements, not much has changed on the ground. Russia continues to wage its war in Ukraine and Israel has if anything, intensified its resolve to eradicate Hamas despite the significant human toll on Palestinians.

Since ICJ cannot enforce its orders on its own and has to rely on the ever-stagnant UN Security Council to ensure compliance, not much will ultimately change even after the final pronouncement of judgement, whenever it may be.

While these decisions may not be formally enforced by the Security Council, they often exert a decentralised impact by influencing how states engage with parties involved in disputes.


Nonetheless, the decisions of the ICJ can hold significant influence in reshaping global perceptions regarding the legality or illegality of states' actions. While these decisions may not be formally enforced by the Security Council, they often exert a decentralised impact by influencing how states engage with parties involved in disputes. For example, even when ICJ issued an advisory opinion declaring that the construction of the Israeli-West Bank barrier violated international law in 2004, it contributed to global condemnation of the barrier's construction and influenced the discourse surrounding the Israeli-Palestinian conflict.

While international law may lack enforceability in a traditional sense and exhibit flaws and frustrations, its influence remains significant in shaping the opinions and policies of nations. Despite its imperfections, international law has played a pivotal role in the evolution of global governance. Recognising its imperfection does not diminish its indispensable role in maintaining order and cooperation in our interconnected world.

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Udayvir Ahuja is a Programme Coordinator for the Strategic Studies Programme at the Observer Research Foundation

### Urban youth are seeking jobs abroad

In November 2023, the Ministry of Skill Development and Entrepreneurship (MSDE), Government of India (GoI), entered into a three-year agreement with the Israeli government to facilitate ‘the temporary employment of Indian workers in specific labour market sectors’, especially in the construction industry. This agreement followed Israel’s change in strategy for the intake of migrant labour in the wake of the Hamas attack, where it cancelled the work permits of thousands of Palestinians. Instead, it recruited Indians and workers from other countries into their labour-starved industries, including shuttering, carpentry, ceramic tiling, plastering and iron bending, with mandatory knowledge of reading construction plans.

The National Skills Development Corporation (NSDC) and district labour officers facilitate recruitment through social and traditional media publicity. The enthusiasm to prepare India’s youth workforce to work in Israel gains significance, as about 18,000 Indians are already working in Israel, primarily in the caregiver sector. Other countries have also sent similar requests. Greece has approached India for about 10,000 seasonal workers on farmlands, and Italy would like to avail of Indians working for their municipal services. Increased demand for Indian labour abroad follows the establishment of bilateral agreements with several developed countries to simplify processes and facilitate skilled and semi-skilled Indian labour to fill labour shortages in those countries.

Droves of young migrants from rural areas or smaller towns have come to India’s premier cities for employment.


Such bilateral pacts provide a great opportunity to prepare India’s urban youth for quality employment abroad. Droves of young migrants from rural areas or smaller towns have come to India’s premier cities for employment. Only some are fully employed; others are sub-optimally engaged, and many are without jobs. Suitable skilling of such youth to take on responsibilities abroad can address this situation—it can reduce the burden of creating employment in Indian cities, leading to lesser unemployment, smaller demography, reduced pressure on city infrastructure and better law and order.

In this regard, the Deendayal Antyodaya Yojana-National Urban Livelihoods Mission (DAY-NULM), launched by the Ministry of Housing and Urban Poverty Alleviation (MHUPA), could play a massive role in generating opportunities for skill development that could make the urban youth eminently employable in different markets, including international. Additionally, GoI’s National Skills Qualifications Framework (NSQF), which organises qualifications through an analysis of knowledge, aptitude and skills, could also play a significant role. The Directorate General of Training (DGT) has aligned its courses with the National Skills Qualifications Framework (NSQF) to ensure uniformity of training and learning across all programmes and create a standardised skilled workforce with a high degree of horizontal and vertical mobility. DGT, National Skill Development Corporation (NSDC) and Adobe India have also signed a tripartite MoU on skill development. These initiatives lead to the international and national mobility of people with capacities and satisfy the NSQF through added value and benchmarking Indian qualifications with international standards.

Positive results could be boosted by establishing better coordination between the Ministry of Skill Development, which provides informal vocational courses, and the Ministry of Human Resource Development, which is accountable for school- and university-level vocational courses. Such efforts could have enhanced outcomes if NSDC included skills in broader occupational groups so that the urban youth are better skilled to compete internationally.

GoI’s National Skills Qualifications Framework (NSQF), which organises qualifications through an analysis of knowledge, aptitude and skills, could also play a significant role.


Unfortunately, the India-Israel agreement has come under criticism from several quarters in India for pushing young Indians into a war zone. The Centre for Indian Trade Unions (CITU) on 15 January 2024 condemned the initiative and appealed to Indian workers not to take up a job in Israel. Its affiliate, the Construction Workers Federation of India (CWFI), expressed concern that the lives of the Indian youth would be put at risk. They feared that this would push them into a death trap. Similarly, different parties have drawn attention to the massive unemployment sweeping the country that is forcing youngsters into red zones and has urged security and generous insurance provisions to the workers who are going to Israel.

Such criticism appears to have had no impact on the youth themselves. Young employment seekers from Haryana, Rajasthan, Uttar Pradesh, Bihar and Punjab have rushed to recruitment centres to undertake the skill tests in far larger numbers than the jobs offered. Many of them are unemployed, and those who have them earn a meagre monthly salary of between INR 10 to INR 20 thousand a month. For them, the Israel-Hamas conflict does not act as a deterrent. The attraction of earning INR 1.37 lakh per month as salary far outweighs the risks. Some employed youth queueing up for jobs in Israel pointed out that their current jobs are also far away from their homes, and they can visit their families only once a year. The stint in Israel, they believe, is going to transform their lives.

Different parties have drawn attention to the massive unemployment sweeping the country that is forcing youngsters into red zones and has urged security and generous insurance provisions to the workers who are going to Israel.


India has a large diaspora in several countries of the world. This was estimated to be around 32.3 million in December 2018, an increase of approximately 20 million since 1981. Those in the West and developed countries are men and women at the top end of the working ladder, doing very well for themselves and contributing handsomely to the countries of their residence with their skillsets and services. In other countries, especially in the Middle East, Indians primarily provide labour, which is equally vital in developing infrastructure and services in those countries.

Remittances to the home country by Indians residing abroad have progressively risen over the years. In 2017-18, the total foreign inward remittance was US$69,129 million. This went up to US$89,127 million in 2021-22. The World Bank estimates remittances to India to be US$125 billion in 2023. About 20 to 25 percent of these can be attributed to skilled/semi-skilled blue-collar workers in the Middle East.

The export of urban labour from India can be seen from several perspectives. India, with a huge young population, has struggled for several decades to find suitable employment for all young women and men, as cited earlier. In the given context, keeping the urban young unemployed or underemployed does not make sense if alternatives are available outside the country. This is a meaningful way of reducing unemployment within the country. For countries with ageing populations, migrant labour provides them the lifeline to keep their industries running. The recipient countries can also upscale their industrial and economic activities, which would not have been possible without the availability of migrant labour.

India, with a huge young population, has struggled for several decades to find suitable employment for all young women and men, as cited earlier.


For the migrant labourers themselves, it is a huge win, as many have explained. It provides them with more profitable employment than they would hope to earn in this country, assuring them of supporting their families, enabling them to build a corpus, and ultimately move out of poverty. While working abroad, where the average stay of Indian labourers is five years, they tend to upgrade their skills. This should be a bonus when finding jobs after returning home.

The donor country gains through remittances made by the migrant labourers. In India, the remittances from the GCC (Gulf Cooperation Council) countries {Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates (UAE)}, where the Indian migrants are predominantly labourers, were around US$25 billion in 2021-2022. Labour outflows from economically less affluent states such as Uttar Pradesh and Bihar have risen compared to the wealthier states, providing a safety valve for those states that do not have the economic muscle to support their young women and men with job opportunities.

Against this backdrop, it is appropriate that a donor country is facilitating such labour migration worldwide. Just as the quality and role of India’s Western diaspora have been globally recognised, those skilled labourers from India who have travelled abroad for work are appreciated for their determined and quiet contribution to building up those nations. On this account, countries in the West also seem to be opting for Indian labour.

On the part of the donor country, it would be vital that it participates in strengthening processes that govern the well-being of the labourers in the recipient countries. For this purpose, cohesive legislation and policies that take cognisance of the welfare and rights of migrant workers ought to be paid adequate attention. In this regard, India needs to build up comprehensive data on labour outflows country-wise for better engagement on the questions of migrant labour.

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Ramanath Jha is a Distinguished Fellow at the Observer Research Foundation

### Tech-driven counterterrorism: Navigating new frontiers

Despite Israel's robust and advanced defence system, it was caught off guard by a well-coordinated attack from Hamas on 7 October 2023. The Hamas attack on Israel exposed a loophole in Israeli intelligence and led to a complete system breakdown. The attackers used unconventional methods, catching the highly advanced Israeli military by surprise. Despite Gaza's border having ground-based sensors, cameras, thermal imaging devices, and regular patrols backed by quick-reaction teams, these measures failed.

Similar instances, such as the Houthis using drones against Saudi Air Defence in 2021, Hezbollah deploying technology in Syria, and Turkish-backed rebels executing a “swarming attack” on Russian bases in Syria, or the Azerbaijan-Armenia Conflict 2023, highlight evolving tactics in conflict zones. These recent conflicts indicate that nations must be prepared to face new risks that enable weaker and even primitive military forces to create threats that never existed before. Approximately 65 terrorist groups currently employ Uncrewed Aerial Systems (UAS), like ISIL, the Taliban, Hamas, and Syrian rebel groups, to name a few, presenting a formidable challenge to the security and defence of democratic nations.

The Hamas attack on Israel exposed a loophole in Israeli intelligence and led to a complete system breakdown.


This article aims to emphasize on the need for adaptive counter-terrorism strategies, global collaboration, and the recognition of Artificial Intelligence’s (AI) dual-use nature to navigate the complex intersection of technology and terrorism effectively. Terrorists are increasingly engaging in cyber warfare, presenting substantial threats to national security and critical infrastructure. Thus counter-terrorism efforts face the challenge of navigating this intricate landscape, necessitating a clear understanding of the dynamic interplay of technology and terror and developing strategies to thwart them.
Pitfalls in counter-terrorism strategies
The omnipresence of technology, manifesting in diverse forms, poses a formidable challenge for governments contending with the persistent spectre of terrorism. Firstly, the inadequate acknowledgement of the dynamic nature and magnitude of the technological threat complicates security planning. The potential for terrorist attacks through innovative technological means remains unattended. A myopic focus on mitigating known vulnerabilities may inadvertently expose nations to new forms of hostility.

Secondly, the swift evolution of technology often outpaces the development of regulatory frameworks, thereby hindering the formulation of effective defensive strategies. Striking a balance between leveraging technology for its positive contributions and curtailing its misuse is a complex task, necessitating the granting of robust powers to law enforcement and the establishment of partnerships between the government and private enterprises.

The utilisation of technology by terrorist organisations mandates that governments reassess their strategies to mitigate emerging threats effectively.


Moreover, the fast progression of technological advancements and the simultaneous obsolescence of counter-strategies contribute to limited effectiveness. Lastly, a potential pitfall arises from “technology fatigue,” as underscored in the Berlin Memorandum (2019). The recurrent incidence of minor terrorism events at times fosters complacency among authorities. The utilisation of technology by terrorist organisations mandates that governments reassess their strategies to mitigate emerging threats effectively.
Current landscape: Global actions against technological exploitation in counterterrorism
In examining the global landscape, it is evident that numerous efforts are made by international and national bodies. Nations have taken significant steps to counter terrorist organisations' use of technology. To enhance counter-terrorism efforts, countries can employ new strategies to secure their national interests:

 	Employing AI—Recognising AI's dual-use nature is critical to navigating its future impact on security. Leveraging AI applications for border protection, akin to the European Union's (EU) ETIAS (European Travel Information Authorisation) System, offers a practical avenue for securing porous borders such as the Line of Actual Control, the Indo-Nepal border, or the Indo-Bangladesh border. Similarly integrating predictive analytics and AI models to analyse online behaviour is a promising approach to predicting terrorist activities. Successful AI-driven counter-terrorism strategies, like those in EU-funded projects RED-Alert and Moonshot, hinge on collaborative efforts with civil societies.
 	Adapting from the security models of global bilateral partners—Insights from global partners, such as NATO's DEXTER (Detection of Explosives and Firearms to Counter Terrorism) and the United Arab Emirates' (UAE) measures for unauthorised aircraft in the airspace, provide valuable lessons. These two models offer adaptable and practical models to address specific threats effectively.
 	United Nations Terrorist Travel Programme: Countries globally are actively implementing strategic measures to counter the growing threat of technology use by terror groups. One pivotal initiative is the United Nations Terrorist Travel Programme (UN TTP), introduced in 2019 by the United Nations Office of Counter Terrorism (UNOCT). This programme focuses on assisting member states in meeting Security Council resolutions, particularly in the detection of Foreign Terrorist Fighters (FTFs).
 	National Cybersecurity Strategy: Recognising threats to national assets like nuclear facilities, healthcare, and energy infrastructure, several nations, including the United Kingdom (UK) and various European Union countries, have established dedicated National Cybersecurity Agencies (NCAs). Moreover, models such as the European Union's Network and Information Security (NIS) provide frameworks for designing country-specific programmes based on meticulous threat assessments.

Moving ahead
Countries vary in their approaches to combat technology-based terrorism. However, certain existing strategies need attention to formulate an effective approach.

 	Establishing regulatory governance: Addressing the tension between regulatory and enforcement entities by establishing sector-specific regulations to ensure compliance.
 	Diversify threat intelligence sources: Apart from traditional channels, establish platforms for quick and confidential sharing of threat intelligence between the government and private sector.
 	Develop a strong mobilisation plan: Create a comprehensive plan outlining which government entities should respond to cyber incidents and their specific roles, aligning with a severity-assessment matrix.
 	Collaborate with educational institutions: Certify cybersecurity courses in partnership with universities to ensure high-quality education and skill development.
 	Centralise training resources: Establish a central training portal, similar to the US Federal Virtual Training Environment, offering free online cybersecurity training to government employees and contractors.
 	Engage private-sector training providers: Provide incentives to attract global private-sector training companies to set up centres and offer courses.
 	Regional approaches: Conduct field research to understand the technological capabilities of terror networks, tailor solutions to address regional challenges, and foster collaboration for an effective response. Consider multicultural and multilingual aspects unique to South Asia when developing apps for counter-terrorism measures using technology and AI.

In conclusion, government agencies play a crucial role in establishing a comprehensive framework for preventing and managing technology-related terrorism. This involves creating a legal, institutional, and collaborative environment that harnesses technology as a tool to safeguard nations. To achieve these objectives, governments must engage various stakeholders within the ecosystems.

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Soumya Awasthi is a freelance consultant.

### Partners in unfamiliarity: India-Gulf intelligence relations in a changing West Asia

The spies watched as the Gulfstream jet belonging to the Aviation Research Centre, the aviation wing of India’s foreign intelligence service, the Research and Analysis Wing (R&AW), touched down at New Delhi’s Indira Gandhi International Airport on 30 January 2019. As the “the two ready parcels” on board, Rajiv Saxena and Deepak Talwar, close aides of British arms dealer Christian Miche, stepped off the flight from Dubai to be taken into custody, it marked the culmination of yet another product of Indian intelligence agencies’ burgeoning intelligence cooperation with their Gulf partners.

As India’s strategic interests often increasingly coincide with those of these states in a multipolar age, intelligence cooperation has remained an understudied yet crucial aspect of their partnership.


In recent decades, India has sought closer ties with regional powers in the Gulf, particularly with the United Arab Emirates (UAE) and Saudi Arabia (KSA). As India’s strategic interests often increasingly coincide with those of these states in a multipolar age, intelligence cooperation has remained an understudied yet crucial aspect of their partnership. What, then, are the opportunities and risks associated with India-Gulf intelligence relations? And what might the future hold?
The backdrop
Rajiv Saxena’s case was only one among several others exemplifying the scale of intelligence cooperation between Indian and Gulf intelligence agencies, particularly those of the KSA and UAE. Of the 24 fugitives extradited to from 2010-2018, 18 came from Saudi Arabia and the UAE alone, which is illustrative of the trust apparently defining the partnership between the two sides. This includes names such as Sayyed Zabihuddin Ansari (involved in the planning of the 26/11 attacks in Mumbai and extradited to India from KSA in 2012) and Sabeel Ahmed (extradited from KSA in 2020). Indeed, this cooperation has also extended beyond the Middle East. The arrests of Abdul Karim ‘Tunda’, an LeT recruiter with close links to Dawood Ibrahim, and Yasin Bhatkal the co-founder of the Indian Mujahideen, along India’s porous border with Nepal in the mid-2010s was aided by Emirati intelligence on both counts. Such cooperation is only expected to continue growing with the current upward trajectory of India-Gulf relations, and the signing of agreements such as the one ratified in April 2023 between the R&AW and Saudi Arabia’s Presidency of State Security (PSS) on matters relating to “terrorist crimes and financing”.

As India’s strategic interests become increasingly global in character and ambition, Gulf states help to provide a neutral third-party location for quite clandestine and backchannel diplomacy, even as a need emerges for India to develop backchannels to these states themselves.


Yet the global threat landscape is changing, and with it, so must the strategic foci of India-Gulf intelligence relations. Once a centrepiece of the partnership and the global security agenda, counterterrorism—although still an area of concern—increasingly takes second-place to matters relating to interstate competition, particularly its consequences for supply chain and critical infrastructure defence, and the contest over emerging technologies. India’s strategic investments within the Middle East have also become more entrenched via regional derivatives of its minilateral diplomacy such as the I2U2, emerging in the early 2020s against the backdrop of the Abraham Accords. Moreover, as India’s strategic interests become increasingly global in character and ambition, Gulf states help to provide a neutral third-party location for quite clandestine and backchannel diplomacy, even as a need emerges for India to develop backchannels to these states themselves. Such considerations are increasingly pivotal to India-Gulf intelligence relations, with a discrete appraisal of the opportunities, challenges and solutions emergent from them becoming necessary.
Changing circumstances
The thematic shifts in the contemporary global threat landscape, and their consequences for intelligence activity, have been recognised in both India and in the Gulf- particularly in the UAE and the KSA. Both monarchies have recalibrated their strategic priorities in recent years towards shoring up their ability to serve as individual powers in a multipolar world, creating new ground for convergence with Indian interests, as seen by the latter’s admission into BRICS in late 2023, and Riyadh’s explicit interest in membership.

Joint commitment towards securing supply chains and encouraging regional connectivity in such a strategic environment has also facilitated the planning of economic corridors such as the India-Middle East Economic Corridor (IMEC). A focus on projecting power globally through economic diversification with an emphasis on critical and emerging technologies—Saudi Arabia through investment in smart cities such as NEOM and in the critical minerals sector, and the UAE in the energy sector with an emphasis on new technologies such as green hydrogen—equally remains part of both Gulf monarchies’ arsenal of national security and foreign policy tools to strengthen their ability to act with greater boldness as individual poles of influence in a multipolar world. Multipolarity has also brought with it greater willingness in both Riyadh and Abu Dhabi to normalise relations with Israel in pursuit of grand strategic objectives such as IMEC, with both countries maintaining the likelihood of a resumption of normalisation with Israel upon the termination of its ongoing war in Gaza. In each of these respects, Saudi and Emirati strategic interests coincide with India’s; a consensus that may be realised via a reorientation of existing intelligence cooperation priorities.

Multipolarity has also brought with it greater willingness in both Riyadh and Abu Dhabi to normalise relations with Israel in pursuit of grand strategic objectives such as IMEC, with both countries maintaining the likelihood of a resumption of normalisation with Israel upon the termination of its ongoing war in Gaza.


These emergent areas of national security importance must therefore compel a diversification of intelligence priorities both ways across the Arabian Sea. The sharing of maritime intelligence to secure merchant traffic and supply chains against attacks by actors such as Yemen’s Houthis may be one area of convergence. Existing mechanisms for intelligence sharing, both multilateral such as BRICS, I2U2 or even the SCO, but also bilaterally, may be widened with a focus on financial intelligence (FININT) sharing in view of Riyadh and Dubai’s continuing growth as hubs for international finance. The focus on the private sector in this respect as a zone of intelligence activity may also be expanded, given its position as the primary domain within which threat actors weaponise money flows and launder illicit funds, and whose transparency may lend it to greater compromise by adversary actors.

Counterintelligence challenges posed by this inherent transparency equally relate to the R&D sphere, necessitating greater tripartite cooperation between India, Saudi Arabia and the UAE on issues such as intellectual property (IP) theft. That technologies developed within this space ultimately pervade critical infrastructure and regional connectivity projects, and may be weaponised by hostile strategic actors in the event of compromise, only makes counteracting efforts more crucial. It is therefore recommended that counterintelligence cooperation between the three countries prioritise insulating areas of national security importance from compromise by hostile actors, using a range of human and cyber capabilities and via both offensive and defensive means.
Off-road diplomacy: The Gulf and Intelligence backchannels
With Gulf states diversifying their relations among other regional and extraregional powers, the historic role played by Gulf states as vehicles for clandestine and backchannel diplomacy comes into focus for Indian intelligence agencies. The KSA and the UAE have increasingly grown engagement with Russia, China and even Iran, a longstanding adversary for whom the former has been relaying messages from Washington in view of Israel’s ongoing war against Hamas. Backchannel diplomacy affords both Gulf monarchies the opportunity to play an outsized role in a multipolar world by serving as intermediaries in a range of global conflicts.

The KSA and the UAE have increasingly grown engagement with Russia, China and even Iran, a longstanding adversary for whom the former has been relaying messages from Washington in view of Israel’s ongoing war against Hamas.


New Delhi’s cooperation with KSA and UAE security agencies may therefore come with the expectation and hope that they may help to bolster the continued willingness of these states to facilitate India’s establishment of backchannels with a variety of states, both hostile and friendly. India’s close ties with the Gulf have long enabled New Delhi to conduct quiet, clandestine diplomacy with its adversaries—most notably in January 2021, when it was revealed that the UAE had facilitated talks between Indian and Pakistani security officials in Dubai, despite Islamabad’s subsequent vehement denials.

Yet risks remain. The arrests and sentencing of eight Indian nationals in Qatar for alleged espionage in 2023 illustrates not just the extant challenges in this sphere that the Indian government must account for, but also the need for effective intelligence backchannels to key Gulf powers themselves. Indian intelligence agencies may therefore need to widen their horizons across the breadth of the Middle East and beyond, establishing closer relations with regional intelligence agencies based on their history of either cordiality or neutrality vis-à-vis both India and Qatar. Key contenders may include the intelligence and diplomatic services of Morocco, Oman or Bahrain, among others. Although small, the regional expertise and cordial ties between these agencies and their Gulf counterparts would hold crucial importance were adverse circumstances to arise again in the India-Gulf security dynamic.
Conclusion
India-Gulf relations, although long based upon a shared conviviality, have only taken upon a more visibly ‘strategic’ complexion in recent years, despite the glue binding their security and intelligence partnership—counterterrorism—having waned in the global security imagination lately. Yet the widening of horizons presents new opportunities and challenges for intelligence cooperation in a multipolar age. Greater emphasis on emerging technologies, global financial challenges, and the private sector must come to increasingly define the discourse of the partnership. Likewise, intelligence cooperation may help establish solid foundations for backchannels and clandestine diplomacy, both via and to Gulf powers. Ultimately, a fluid global security landscape does not alter the fundamentals of intelligence cooperation between India and its Gulf partners, but widens the range of opportunities available. It is crucial that we take advantage of them.

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Archishman Goswami is a postgraduate student studying the MPhil International Relations programme at the University of Oxford.

### India and Saudi Arabia: A Thriving Partnership Towards a Promising Future

Relations between India and the Arab world date back to centuries; historic interactions between the Arab and Islamic world and India resulted in lasting cultural linkages between us. Flourishing through trade, when Arab merchants ventured into the Indian spice trade, and rooted in human connections, sustained engagement between our nations has brought us closer. Enhanced trade gave way to increased cultural exchange and knowledge transfer. Global challenges and a synergy of interests intersected to produce a robust strategic partnership between India and the Kingdom. We, in the Kingdom, believe this partnership will only grow stronger, through deeper and broader engagement.

At the core of any thriving relationship is its human element. The friendship between both countries sustains our cooperation and enables more cultural exchange. More people from India visited the Kingdom in the past year than ever before. In 2022, 1 million travelers from India travelled to the Kingdom. By the end of 2023, this figure increased by 52.68 percent nearing 1.7 million visitors; we are targeting 12 million visitors by 2030. The average number of inbound flights in 2023 reached 256 per week (a 25-percent increase from 2022), and we are aiming to increase inbound flights from India to 290 per week. Indian nationals residing in the Kingdom form its largest expatriate group, contributing value and further strengthening the friendship between our nations through cultural engagement.

Relations between India and the Arab world date back to centuries; historic interactions between the Arab and Islamic world and India resulted in lasting cultural linkages between us.


Realising the strategic importance of this relationship, the leadership in both countries are determined to take this decades’ long partnership to new heights of collaboration, unlocking the immense potential it holds, not only for our two nations, but also for the health and resilience of the global economy. In today’s interconnected world, where challenges and threats transcend borders, it is incumbent upon us, as leading regional and international actors, and integral G20 members, to leverage our partnership and international position to enhance shared efforts towards a future that prioritises cooperation over confrontation and development over conflict. We are highly motivated to work towards a prosperous future, which meets the expectations of our populations, especially the youth in both countries.

Both our countries carry significant weight within the global economic architecture. As leading G20 members, this weight underpins the importance of developing trade and investment relations, and the value this can generate on the world stage, jointly addressing issues varying from food and energy security to supply chain resilience and facilitating investments.

We were pleased to take part in the successful G20 summit, in New Delhi, which witnessed the announcement of an MOU to establish the India-Middle East Europe Corridor (IMEC)–an ambitious cross-continental project that will link West Asia and the Middle East to Europe via rail and shipping lines. The IMEC will comprise two separate corridors: the East corridor, connecting India to the Arabian Gulf, and the Northern corridor from the Middle East to Europe.

The massive project will significantly impact development and growth in the global economy due to the planned upgrade in infrastructure, connectivity, flow of goods, and economic integration. In addition, the MOU includes building pipelines to include highefficiency, reliable cross-border data transmission cables, as well as enhancing energy security, through a development of green transit corridors to export electricity and hydrogen.

From a bilateral perspective, trade relations have been on an upward trajectory in recent years. In 2022, bilateral trade reached $52 billion, registering a 23-percent increase over the previous year. Figures are still holding strong for 2023, indicating that bilateral trade by the end of the year’s third quarter is estimated to have exceeded $35 billion. Also, in 2022, both India and the Kingdom achieved the highest growth rates among G20 countries. Both countries maintained positive growth levels during the past year, with India recording 6.3 percent GDP growth, exceeding G7 economies for two successive years. The positive indicators and sustained growth projections both countries have been receiving underscore the integral positions they occupy within the global economy.

The massive project will significantly impact development and growth in the global economy due to the planned upgrade in infrastructure, connectivity, flow of goods, and economic integration.


The latest visit of HRH Mohamad Bin Salman Al Saud, Crown Prince and Prime Minister to India, in September 2023 sought to solidify and deepen the bonds of friendship and strategic partnership between our two nations. It was an opportunity to review and reflect on the developments in cooperation since HRH’s previous visit in February 2019, as well as Prime Minister Narendra Modi’s historic visit to the Kingdom in October of the same year, which resulted in the formation of the Strategic Partnership Council (SPC) as the highest cooperation mechanism governing bilateral relations and aiming to open-up new avenues of cooperation in diverse sectors. The visit signified a leap in the strategic partnership in both bilateral and multilateral cooperation.

The first meeting of the SPC convened in September, during which we reviewed the tremendous progress achieved in the ministerial committees, sub-committees, and working groups. The council is concerned with deepening cooperation in fields of mutual interest. This visit also presented an opportunity to oversee additional agreements and MOUs in many fields, such as energy, bilateral investment, digitization, and electronic manufacturing, among others.

We have worked together to facilitate more trade and investment between both countries. The effectiveness of such cooperation contributed to India becoming the Kingdom’s second largest trading partner, and the Kingdom secured its position as India’s fourth largest trading partner by 2023. Total investments by the Saudi Public Investment Fund in India reached $3.3 billion. There is potential for further growth as both nations offer valuable products across several sectors. Current areas of cooperation focus on energy, renewable energy, transfer of energy, hydrogen production, petrochemicals and fertilisers, the carbon capture and reuse technologies, technologies associated with the Circular Carbon Economy, food security, technology, services, and logistics. The focus on energy sectors stem from the Kingdom’s leading role as a reliable and responsible energy producer.

In addition, the Kingdom has been implementing widespread policy reform to enable the success of its national development plans. This promises to encourage widespread opportunities for collaboration in all sectors and within diverse segments (whether between governments, businesses, and even small and medium enterprises). The way in which India has been developing its tech industry is also an important area of collaboration. In short, avenues of cooperation are numerous and the potential is limitless.

However, in order for development efforts to reach sustainable results, we must maintain secure and stable conditions whereby regional security complements the push towards development and attracting investments.


Continuing to develop and nurture our bilateral relationship can translate to further engagement for India in the Arab Gulf region and the wider Arab world, where there is ample appetite for partnerships that advance inter-regional connectivity and mutual development. Indeed, India is an integral partner across the Gulf, capitalising on bilateral and multilateral partnerships. The Joint Economics and Investments Committee, comprising Ministers of Commerce, is a key example of how institutional frameworks can help advance cooperation between India and the region.

However, in order for development efforts to reach sustainable results, we must maintain secure and stable conditions whereby regional security complements the push towards development and attracting investments. In-line with Vision 2030, the Kingdom’s foreign policy has focused on leveraging its partnerships to enhance regional security and stability, which will in turn encourage longevity in strategic partnerships. As a trusted partner, India’s constructive engagement is valued by the Kingdom and across the region; we are eagerly developing both political and economic aspects of our cooperation.

By way of concluding, the ORF’s efforts are known to generate valuable research and dialogue around key policy issues. The Raisina Dialogue is an important platform that enables engagement with officials and leaders in corporate and non-governmental sectors. It discusses challenges and issues of international concern, with a view to resolving them. This publication is set up to reflect the rich discussions that occurred, through a variety of perspectives within its articles. From our end, the Saudi-Indian partnership remains robust and forward looking. We are eyeing, through our ever-developing relations, a bright and prosperous future for both nations.

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This article is a part of the series - Raisina Chronicles 2024. Read the full volume here.

### Tech Wars or Old Battlefields: Lessons from the Recent Conflicts

This article is part of the series—Raisina Edit 2024

Revolution in Military Affairs (RMA) is a buzzword that militaries worldwide are familiar with. Each generation of the military encounters and adopts new technologies that intersect with changing doctrines, strategies and tactics to bring about irrevocable changes in the character of warfare.

Every major war fought in the 20th century experienced an RMA. The deployment of the machine gun changed the nature of trench warfare during World War I, as did the blitzkrieg tactics and highly manoeuvrable tanks and mechanised platforms of WWII. During the first Gulf War, the United States brought the idea of RMA to the forefront by using its high-tech stand-off capabilities, including Tomahawk cruise missiles and carrier-based air power to effortlessly rout Saddam Hussain’s army.

Today, network-centric warfare has taken centre stage. Artificial intelligence (AI), space and cyber realms are fusing with sensors, Unmanned Aerial Vehicles (UAVs) and beyond-visual-range (BVR) weapons on the modern battlefield, drastically reducing Sensor To Shooter (STS) kill chains.

The deployment of the machine gun changed the nature of trench warfare during World War I, as did the blitzkrieg tactics and highly manoeuvrable tanks and mechanised platforms of WWII.


The battlefields of yesteryears hold many lessons. Modernisation is a process. Technological and doctrinal advancements as well as corresponding transformation in organisational structures are add-on layers.

The global situation today is characterised by instability and uncertainty. Trade and technology have been weaponised. Territorial disputes have acquired salience as witnessed in wars between Armenia and Azerbaijan, Russia and Ukraine, and, more recently, the conflict between Israel and Hamas in Gaza. 

The first lesson of the war between Armenia and Azerbaijan is the overwhelming difference that drones can make on the battlefield. With an archaic and disjointed air defence system, Armenia simply had no answer to the havoc wreaked by Azerbaijan’s Turkish-made Bayraktar TB2 drones and Israeli kamikaze drones on its troops and tanks. Azeri UAVs successfully destroyed many Armenian air defence systems, which appeared to lack electronic warfare (EW) capabilities.

Drones are cheap to acquire and operate. The smaller ones can be carried by individual soldiers and deployed on the battlefield. Drones have firmly established their place in an era of network-centric warfare, especially during the war in Ukraine. Ukraine’s deployment of Bayraktar TB2 drones initially proved effective against Russia but also spurred the development of counter drone systems down the line.

The smaller ones can be carried by individual soldiers and deployed on the battlefield. Drones have firmly established their place in an era of network-centric warfare, especially during the war in Ukraine.


The Israel-Hamas war, like the war in Ukraine, led to unexpected lessons from the battlefield. Hamas planned simultaneous attacks using low-cost rockets, commercially available drones, paragliders, bulldozers, trucks and even motorcycles to overwhelm the state-of-the-art ISR capabilities of the Israeli armed forces. The inference clearly is that Israel’s sophisticated Iron Dome system and its modern SAR (Synthetic Aperture Radar) capable Ofeq-13 observation satellite, multiple sensors, radars and air defence systems can be overwhelmed by an inundation of rockets. As part of its tactics, Hamas also effectively used multiple low-tech platforms to breach the security perimeter of Israel. Other takeaways from this conflict are the extensive use of tunnels to evade detection, store munitions and as bases for counter-attacks.

The Russia-Ukraine war has witnessed the use of cyber space to carry out Distributed Denial of Services (DDoS) attacks on the adversary’s critical infrastructure, including with the aid of non-state actors aligned with the establishment.

The Israel-Hamas conflict has also taken propaganda wars to an altogether new level. Civil society groups, particularly the youth as well as NGOs around the world, have developed new allegiances that often run counter to national positions. The exploitation of such sentiments is facilitated by social media platforms and deep fakes. One of the prominent examples during the Ukraine war was the AI-generated deepfake of President Zelensky surrendering to Putin. It was swiftly debunked by the Ukrainian government and news media, but yet succeeded in underscoring the future perils of deep fake technology riding the growth in AI.

Civil society groups, particularly the youth as well as NGOs around the world, have developed new allegiances that often run counter to national positions.


Yet another fascinating lesson from recent conflicts is the use of private internet systems and commercially available satellite imagery integrated with open-source information about troop movements and military build-ups. Ukraine used Elon Musk’s SpaceX Starlink satellite terminals as a digital lifeline for its soldiers and to mount attacks. For the first time in modern history, Big Tech owners like Musk are not only providing critical communications platforms to the military but also venturing to advise users about war tactics. The denial of such services by commercial vendors can impact the outcomes of wars. An example is the denial by Musk of the use of the Starlink network when Ukraine was planning to mount a surprise attack on Russian formations in Crimea.

The use of US-built Javelin anti-tank munitions by Ukraine against Russian tanks was one of the most explicit highlights of the conflict. A video shared on social media by Ukraine's 36th Marine Brigade showed dramatic drone footage of Ukrainian soldiers firing the portable anti-tank FGM-148 systems with deadly effect on a Russian tank column. It sparked off a discourse about the impending obsolescence of tanks. Undoubtedly, every technological advancement on the battlefield elicits counter measures. New technologies emerge to negate the adversary’s advantage in a never-ending cycle of competition. In the case of the Javelin, not only is it expensive, but it also has long delivery schedules. Besides, the Russians seem to possess more tanks than the number of Javelins that can be deployed by Ukraine.

The technological tussle on the battlefield in Ukraine is breaking new ground such as the use of AI-based imaging and facial recognition software. The use of 3D printing of spares and their delivery to an immobilised tank on the battlefield using semi-autonomous delivery systems, as demonstrated by the US during Project Convergence 21 at the Yuma Proving Grounds in 2021, is also emerging as a factor in future wars.

Communication, encryption and decryption are also at the centre of tech wars. Ukraine is using commercial AI-enabled voice transcription and translation service to process intercepted Russian communications.

The technological tussle on the battlefield in Ukraine is breaking new ground such as the use of AI-based imaging and facial recognition software.


Natural language processing (NLP) translator capabilities in the hands of individual soldiers may become the norm in the future. Such capabilities also have the potential to emerge as a soldier support system that can help enhance direct communication and confidence-building measures across frontlines.

Modern wars do not always guarantee outright victories. The role of asymmetrical and disruptive tools and support of non-state actors often help to counter the most modern of technologies. At the same time, waging wars of attrition can be expensive. Western military powers have experienced an acute dwindling of their inventories of 155 mm artillery shells. As a result, their supplies fall short of the rate at which Ukraine is expending them.

This peculiarity of shortages in a conflict involving major powers and their allies has led to the emergence of new defence suppliers. For the western countries, the Republic of Korea (ROK) has emerged as a major supplier of artillery shells; Russia is sourcing Shahed-136 drones from Iran and artillery shells from North Korea.

Ukraine currently does not have an air force to match that of Russia and the latter has not fully deployed its own. Fulsome use of air power by either side might alter the course of the war, but could also draw NATO into the fray. The lesson here is that air power is often used selectively even in desperate situations, to avoid escalation.

Today, advanced space, cyber and AI technologies exist seamlessly with entrenched frontlines that echo the past. The difference is that the soldier in the trench is now an integral part of net-centric warfare.

Ambassador Sujan R. Chinoy is the Director General of the Manohar Parrikar Institute for Defence Studies and Analyses (MP-IDSA), New Delhi

### Shifting sands: Navigating the new geopolitical landscape in 2024

Global geopolitics is at a pivotal moment, facing the highest number of military conflicts since the Cold War. This escalation is felt worldwide, with significant hotspots affecting international relations on every continent. Two major conflicts will further dominate the landscape: the ongoing war in Ukraine, initiated by Russia, and the Israel-Hamas clash in the Middle East. While an end to these conflicts seems distant, there are emerging signs of potential diplomatic negotiations and the first ceasefire talks in 2024. Growing international pressure, notably from the Arab countries with the support of China and Russia, advocates for a two-state solution in the Middle East. In Ukraine, Russia’s unyielding ambition for complete subjugation will continue to threaten the regional stability of the European continent. The reduction in military aid and financial support by the West for Kyiv may lead to further territorial expansion by Moscow in the next year. In the Middle East, even a potential diplomatic resolution towards a two-state solution may not alleviate the direst humanitarian situation in the Gaza Strip, leaving the Palestinians with the colossal task of rebuilding in the years to come.

Furthermore, the year 2023 marked a grim episode of ethnic cleansing in Nagorno-Karabakh, with nearly 120,000 Armenians displaced due to Azerbaijan’s military actions in the ethnic Armenian enclave. However, the potential normalisation of Armenia-Azerbaijan relations in the upcoming year might offer a rare positive development in geopolitics, beneficial for global trade routes, particularly the International North South Transport Corridor (INSTC) via Iran and Central Asia to Russia given that the India-Middle East-Europe Corridor (IMEC) project was put on hold because of the military tensions in the Gulf region following the Israel-Hamas conflict and the disruption of the global choke point Bab-al-Mandeb in the Red Sea.

Additionally, the possibility of China and Russia opening a third front in the Indo-Pacific region to challenge American influence and credibility, especially before the United States (US) presidential election, is high. Russia will continue to supply North Korea with rocket and satellite technology in exchange for ammunition for its war in Ukraine. Meanwhile, China intensifies the military tensions in the South and East China Seas, complicating the geopolitical situation. This complex backdrop suggests a Cold War 2.0 scenario involving the US, China, and Russia, with minimal risk of direct military confrontation. The geopolitical context will significantly impact the political economy, technological landscape, and the evolution of global norms, rules, and standards, further reshaping global partnerships and alliances in 2024.

Against this backdrop, India emerges as a potential major beneficiary in this geopolitical scenario, strategically positioned between the conflicting interests of the US, China, and Russia. Following the 2024 elections, India’s focus on domestic and regional stability is likely to intensify. Amidst the disruption of global supply chains and the US-China mutual decoupling, India is set to become a prime destination for redirected global capital, new technological investments, and enhanced global and regional partnerships. The predictability and stability of India’s political leadership, along with increased engagement from the West and within frameworks like BRICS and G20, will solidify its position, though it may face risks from terrorism and climate-related events in the upcoming year.

China intensifies the military tensions in the South and East China Seas, complicating the geopolitical situation.


Conversely, Europe stands as one of the primary geopolitical casualties in the current transformation of international relations, notably characterized by the bifurcation of the global system. The year 2022 marked the onset of the most tumultuous period for Europe, a trend projected to exacerbate in the coming year due to overlapping demographic, structural, and systemic challenges. Furthermore, Europe is poised to experience heightened political polarisation during the 2024 election cycle, potentially leading to expected surges in both right- and left-wing populism, alongside significant reshuffles within the European institutions. This period signals a definitive end to the era of dominant traditional and centrist parties, which have historically represented a large segment of the middle class. Compounding these political upheavals, Europe will face a deteriorating economic situation because of the deteriorating security situation as well as complicated relations with China. This decline coincides with the emergence of a new ‘Iron Curtain’ in 2024, stretching from the Scandinavian countries through the Baltics, Central and Eastern Europe, to the Black Sea and Turkey, marking a significant geopolitical shift.

In this landscape, ‘middle powers’ or ‘swing states’ are set to gain increased geopolitical relevance, buoyed by their strategic locations, technological prowess, or access to critical raw materials and rare earths. Many of these influential states are located in the Global South, with countries like Mexico, Indonesia, Brazil, and Türkiyé poised to elevate their presence on the global stage. As we look toward the future, it’s evident that 2024 will further lay the foundation for a new world order, shaped by five major geopolitical trends. These include the ongoing bifurcation of the global system and the irreversible decoupling between the US and China, which are set to disrupt the global economy, trade, and critical supply chain chokepoints. Key areas to watch include the Red Sea, the Strait of Hormuz, the Strait of Malacca, the Black Sea, the Taiwan Strait, and the Panama and Suez Canals. Additionally, the fluid geopolitical alignments of middle powers oscillating between America and China, without firmly taking sides, will continue to erode the coherence of global organisations and networks. The relationships between major Asian powers, particularly China and India, will gain greater geopolitical and geoeconomic significance. While some tensions may arise in 2024, both nations are expected to strive to manage their relationship to ensure regional stability. Last but not least, a major development is the emergence of the ‘DragonBear‘ modus vivendi, a strategic coordination between China and Russia in global geopolitics, juxtaposed against the U.S.’ strategic pivot towards the Indo-Pacific, further diminishing Europe’s geopolitical importance.

The relationships between major Asian powers, particularly China and India, will gain greater geopolitical and geoeconomic significance.


The new era of Cold War 2.0 between America and the ‘DragonBear’ is anticipated to be far more unpredictable, unstable, and volatile due to the extensive interconnectedness of the current global system. Like the interwar period, the contemporary era could be seen as a brief respite between the first and second Cold Wars. The current period mirrors the first period of the post-World War II era in its transformative nature. Despite the uncertainties, there are optimistic projections for 2024: no World War III or direct military confrontation between the US, China, and Russia; rather low risk of a military attack by China on Taiwan; and no use of nuclear weapons by Russia against Ukraine.

In this fragmented global landscape, the Global System must adopt a balanced approach in international relations, championed by a coalition of middle powers and rising geopolitical stars like India. Failing to do so could result in fractured societies, polarized geopolitics, and fragmented economic and trade ties. Lenin’s words, “There are decades where nothing happens, and there are weeks where decades happen,” resonate profoundly nowadays. The year 2024 is poised to be a period of significant transformation, characterised by further extensive changes on both domestic and international fronts.

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This essay is part of the “What to expect in 2024” series. 

Velina Tchakarova is the Founder of FACE and a Visiting Fellow at the Observer Research Foundation

### What to expect in 2024: Global economy

In 2024, an increasingly VUCA (volatility, uncertainty, complexity and ambiguity) world will see four big issues and six trillion-dollar GDP rankings define the state of the global economy. It will not be pleasant; it will not be smooth; it will not be peaceful. Economic survival will need greater perseverance, economic governance will need creative policies, and the political economy will need to adjust to and work around this new abnormality.
First, as in 2023, security will remain the key driver of the economy in 2024. The uncertainty that began with the Russia-Ukraine war in 2022 and overflowed into the Israel-Hamas conflict in 2023 will continue through 2024. If talks succeed in Ukraine, the geography of violence will shift to West Asia and fire the overall economic uncertainty; if talks fail, volatility will get amplified. As a result, commodity prices, particularly of oil will remain volatile, i.e., if peace remains evasive, fuel prices will rise till a point; when it results in inflation and slowdown, they will fall. Both, oil-producing and oil-consuming economies will be on tenterhooks. Price uncertainties around food and fertilisers will continue. Traders will gain, households will lose, and the governments will be hard-pressed to balance growth and prices. This will in turn impact domestic politics. How the easing of sanctions against Venezuela by the United States, and the resultant increase in global oil and gas supply will play out remains to be seen.
Second, the uncertainty in oil, food, and fertilisers will influence other commodities and influence inflation across the world. In some countries, such as Türkiyé (86 percent), Iran (40 percent) and Pakistan (29 percent), prices will remain out of control through 2024, as the economic base has been smothered by power dominance and ideological considerations. Venezuela (318 percent) may come out of its inflationary spiral. Countries that faced the gas shock squarely following the Russia-Ukraine war in 2022, all in Europe, have reached a new normal and inflation is easing there on a higher price base. Overall, the inflationary uncertainty will continue through 2024, though much depends on how the Israel-Hamas conflict plays out for oil-exporting countries.
Third, interest rates across the world will rise and fall alongside inflation, particularly the related oil price volatility. Further, with the US keeping its policy rates high at (5.5 percent now, compared to less than 1 percent in March 2022), other countries will be under pressure to match, such as India, where the policy rate stands at 6.5 percent. But there are worse tidings for high-inflation economies. Interest rates have jumped to 30 percent in Türkiyé, 22 percent in Pakistan, and 18 percent in Iran. Unless war-driven global inflation rates fall steadily, which given the security uncertainty is unlikely, 2024 should see stronger action from the world’s central banks to maintain or even increase interest rates to contain inflation. The uncertainty of inflation will impact the volatility of interest rates.
This will put pressure on the ability of businesses, particularly small- and medium-sized enterprises, to borrow. Big loans will flow towards large corporations as banks become risk averse, and seek scale, the ability to pay back, and the collateral to support the borrowing. As small businesses shut down, or get bought over, related political issues such as unemployment could raise their heads in high-inflation, high-cost economies. Democracies will begin to shun bad politics and embrace good economics; authoritarian regimes will press harder to create new enemies and increase the economic hardships of their citizens. Many countries will see a market-led depreciation, or even a policy-driven devaluation, of their currencies. Thus, 2024 could see a slowdown or even a recession in some economies.
Finally, conversations around de-risking from China that had slipped into the background in the past two years will be back in 2024. This time, the discussion will broaden to include the arc of China that encompasses North Korea, Russia, Pakistan, and Iran. As they face a slowdown and even recession, countries of the European Union (EU) will continue to play “yes, but” with China. And despite Indian and Chinese soldiers standing eye-to-eye on the border, the unsustainable India-China trade will continue to favour China, unless stopped by economic security policies. Led by a real estate crisis, a slowdown in China is visible and happening; its 2024 real growth is projected at 4.2 percent and inflation at 0.2 percent. Adjusted for inflation and in nominal terms, a 4.4-percent increase in a US$18-trillion economy will add almost US$800 billion, about 56 percent of what the US will likely add on a US$27-trillion economy growing at 1.5 percent with 3.7-percent inflation. The implosion of the Chinese economy will not happen in 2024—slowdown yes, breakdown no.
These four components will impact global economic growth in 2024. In particular, it will change 6 trillion-dollar GDP rankings. A sharp depreciation in the value of the yen—down 18 percent in 2023, and 45 percent since January 2021—will see Germany cross Japan to become the world’s third-largest economy in 2024. According to the International Monetary Fund, Japan’s GDP, which was US$6.3 trillion in 2012 is expected to end 2023 at US$4.2 trillion, compared to Germany’s US$4.4 trillion. India will cross both by 2025. The other big changes in rankings in 2024 will be South Korea (US$1.71 trillion) overtaking Australia (US$1.69 trillion) for the 12th spot, and the Netherlands (US$1.09 trillion) crossing Saudi Arabia (US$1.07 trillion) for the 17th spot. Indonesia which is expected to grow by 5 percent in 2023 and 2024, will have to wait till 2025 to overtake Spain and reach the 15th spot.
The interdependence of commodities, companies, and countries combined with the interplay of security, sanctions, and supply chains became a complex game in 2023. The threat of a new Cold War, the creation of new axes of collaboration, and the obliteration of peace as either a means or an end over the past two years have impacted every citizen across the world adversely. Whether we return to the security volatility during the World War I and II years or find leaders who can embrace new ideas and thereby enable the transition into an emerging multipolar world, and through them bring new peace, however fragile it may be, is a factor that will impact the global economy in 2024 and beyond. Until then, embracing VUCA will be the only constant and the sole paradigm within which to work for the next 12 months.
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This essay is part of the “What to expect in 2024” series.
Gautam Chikermane is a Vice President at the Observer Research Foundation

### Securing Islamic finance to meet India’s financing goals

As India looks past its 76 glorious years, it is prudent to chart the country’s next major developmental milestone: mapping the 5 trillion-dollar economy. At the current GDP, it would take five years to achieve the goal pegging the nominal growth rate at 10 percent. Islamic Finance (IF) could play a potential harbinger in fast-tracking the developmental agenda by contributing 700 billion (14 percent) over the next five years. Taken together, IF commanded assets under management (AUM) currently at US$ 3.95 trillion projected to touch 5.9 trillion by 2026. Opening India's banking and financial sector to IF presents an opportunity to capture at least 14 percent of the market share, providing opportunities for India's Muslim population (representing 14 percent) to fully integrate into the formal financial system. Considered as an alternative finance vehicle, IF currently constitutes US$ 3.5 trillion making up less than 5 percent of the world economy with emerging markets serving as the primary recipients. Among them, the Middle East and South-East Asian (part of ASEAN) nations command the bulk of the share with most of them being one of India’s major trading partners. Interestingly, all the member nations of the Shanghai Cooperation Organization (excluding India) have embraced IF at varying degrees. Russian Federation is actively mulling IF to meet its financing goals, particularly in the regions dominated by the Muslim population.

Islamic Finance (IF) could play a potential harbinger in fast-tracking the developmental agenda by contributing 700 billion (14 percent) over the next five years. Taken together, IF commanded assets under management (AUM) currently at US$ 3.95 trillion projected to touch 5.9 trillion by 2026.


In light of the strategic relationship between India and the United Arab Emirates (UAE) culminating in the Comprehensive Economic Partnership Agreement (CEPA) deal with bilateral trade already surpassing the US$50.5 billion mark in June 2023, IF offers an alternative finance vehicle providing impetus in the trade finance arena. With IF hinging on the Sharia covenants with total assets accounting for 30 percent of the financial system in the UAE, India, as one of the largest unpenetrated markets, could potentially leverage these learnings with scalable benefits in boosting trade opportunities.

From an asset-finance perspective, Murabaha or cost-plus-profit contract stands out as the preeminent contract generating 80 percent of the revenues in Islamic Banking. The bank essentially acts as an intermediary between the vendor and buyer by leasing the asset to the lessee for a series of payments covering both cost and profit. The bank as a lessor transfers the legal ownership to the lessee (buyer) upon receiving all the payments. In principle, as legal custodian of the asset until completion of payments, as an asset owner, the bank is relatively well-insulated from potential delinquencies in contrast to conventional banks with recourse to collateral asset exercised only as a last option after incurring material administrative and legal costs. Seen from a risk-amelioration perspective, IF based on the cost-plus-profit model holds a promising future in the Indian financial sector as conventional banks become even more wary in expanding their balance sheet lest recognising higher provisions dent the profitability.

Contrary to the widely held perception, IF does not have to command an exclusive religious connotation. Ethical finance and sustainable finance are common acronyms for IF as the foundational bases remain similar. As the world is hosting COP28 in the UAE, even Climate Finance holds semblance with IF. The ongoing deliberations at the historic COP28 in Dubai, UAE is witnessing some of the biggest names in IF including the Islamic Development Bank (IsDB), based in Saudi Arabia, pledging financial support towards climate risk mitigation. By designing contracts in alignment with the socioeconomic status of debtors, IF is ideally well-placed to bridge the financing gap. The concept of generating income through responsible investment rather than outright lending (as in conventional banks) remains the core edifice common to the trio of Islamic-Sustainable-Climate finance (ISC). Interest-free and prohibition of excessive risk remain chieftain features of IF with the former resembling an equity-finance and the latter abhorring refuge in derivate-like instruments deemed too risky to add value to an economy. Research in the aftermath of the Global Financial Crisis (GFC) of 2008 suggests banks and financial institutions embracing IF were relatively well-insulated from contagion partly owing to the fact most of these institutions did not hold mortgage-backed securities acting as a major drag on the balance sheets of conventional (interest-bearing) and investment banks.

Contrary to the widely held perception, IF does not have to command an exclusive religious connotation. Ethical finance and sustainable finance are common acronyms for IF as the foundational bases remain similar.


To understand IF better, it is useful to look at its structure from a balance sheet. In principle, IF institutions typically hold assets as opposed to advances ideally resembling a lease-like structure with the lessor (IF banks) leasing out assets in return for a series of lease payments with an option for the lessee to buy back at the end of the tenure. The bulk of the liabilities comprises equity-like instruments, deposits (with unique characteristics), and convertibles popularly known as ‘sukuk’ or Islamic bonds. A major edifice of IF rests on tracing every commercial transaction to an asset capable of generating income obviating the need to engage in speculative trades. Embedded in the structure is spreading the risk between the institution and consumer as risks in a traditional debt tilt heavily towards borrowers. With efficient and effective recourse to assets, it is conceivable to observe lower levels of NPA and higher profitability attributed to IF institutions.

India holds tremendous potential to embrace IF to meet its developmental finance needs. IF envisages objectives synchronous with inclusive finance. With microfinance dominating the landscape in urban areas, IF holds significant potential to serve the country’s economically weaker section ideally well dispensed to benefit from the expansion of the formal financial system. India remains one of the most active start-up hubs of the world with an equally burgeoning need for efficient capital ideally dispensed to tackle emerging risks peculiar to the start-up business. With equity participation as the ‘force majeure’, the thriving entrepreneurial ecosystem can significantly benefit from IF without imposing draconian return mandates typical to venture capital imposing potential constraints. Following the successful presidency of G20, India can learn greatly from its predecessor—Indonesia—which is also on track to grow its economy exponentially on the back of a growing financial landscape with a strategic role accorded by IF in fuelling capital and consumption needs. Indonesia’s embrace of IF through micro-finance—built on an equity model—provides a sound example of empowering its economically vulnerable population by providing access to finance and generating sustainable income through voluntary training by developing employability skills. India’s microfinance sectors have traditionally focused on ‘urban poor' and concentrated in relatively prosperous West and Southern India opening opportunities for IF-based MFIs to explore untapped potential, particularly in the Eastern belt. As India seeks to achieve financial inclusion, it is inevitable to reach a larger chunk of the population by developing robust self-sufficient social enterprises with capital coming through IF-MFIs. Malaysia too has successfully employed IF to achieve its economic goals counted among the most important destinations within its financial ecosystem. Home to the Islamic Capital Markets (ICM), the country boasts of an exclusive central bank structure to monitor, supervise, and spearhead the development of IF institutions to serve the financing needs of different sectors of the economy.

India holds tremendous potential to embrace IF to meet its developmental finance needs. IF envisages objectives synchronous with inclusive finance.


India, too, has an opportunity to facilitate FDI by enlarging the scope of foreign banks by allowing specialist IF institutions to set up branches under the direct remit of the Reserve Bank of India (RBI). In its existing framework, RBI would have to expand its framework to permit the functioning of IF-Banks, which will initially mimic the structure of SFBs even as the underlying remit of the financial contract (viz. interest-free) remains unchanged. SEBI as a capital market regulator too could expand the framework to allow FIIs from IFIs to invest in India by ideally domiciling operations locally to support long-term investment and growth. The scope of IF in this space remains enormous including private equity, mutual funds and financial services. The scope of joint ventures with leading public and private sector banks could also open vistas of opportunities to serve the financial needs of different sectors of the economy. Consumer lending, commercial finance and infrastructure are some of the pivotal areas that could benefit from such partnerships as each of these sectors directly contributes to the GDP. Moreover, given the excessive risk-aversion on the back of NPA, for India to realize its potential the size and scale cannot warrant scarcity of capital to rule the roost. With its emphasis on interest-free lending, surely, India's corporate sector would more than welcome an entirely new avenue of capital founded on the basis of risk amelioration. A regulatory sandbox could provide an incentive to evaluate the robustness of the system as well as to adapt IF to meet the specific needs of the Indian financial sector.

India’s deep-rooted historical, cultural, and business ties with the Middle East and GCC nations, in particular, hold enormous potential to attract foreign investment through specialist IF institutions operating in these countries who already have the experience of serving India’s rich diaspora prominently dispersed across the region. It would also pave as an alternative channel to attract NRI investments from the strategically significant geoeconomic region. At a time when India is looking ahead with optimism to break into the top three economies in the world soon, IF could serve as a strategic stimulus to meet the burgeoning needs of the economy.

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Ullas Rao is a leading academic and financial economist based in Dubai, UAE with stints in prestigious institutions in India and UAE.

### ASEAN-GCC Summit: Forging new partnerships

The ASEAN-Gulf Cooperation Council (GCC) meeting on 20 October had a significance of its own. However, its timing became unique because despite the Hamas-Israel crisis, which drew the attention of the Gulf states, the GCC-ASEAN summit went through.
GCC is not a steadfast partner of ASEAN and has shown interest only in recent years. ASEAN too has its focus on developed countries as its dialogue and sectoral partners. It is only the United Arab Emirates (UAE) which is a sectoral partner of ASEAN, among the GCC countries. The fact that the GCC decided to have a summit with ASEAN was the manifestation of the peace that prevailed and extroverted economic and foreign policy that both were now ready to implement beyond their traditional partnerships. The GCC Troika met ASEAN at the United Nations General Assembly (UNGA) in 2018 and the foreign ministers met next year at UNGA too.
The ASEAN-GCC, rekindled partnership is a function of a peaceful West Asia. It has good plans as can be seen from the joint communique. Their pursuit will depend on the continuing prevalence of peace in the region, which is currently under threat. It is proposed to hold it biannually, with the next one scheduled in Malaysia in 2025.

Growing interests
ASEAN has three broad objectives, many of them led by individual ASEAN countries, which have relationships with individual GCC countries. For several of them, the diaspora and remittances are important. Indonesia and the Philippines, in particular, have a large diaspora among the Gulf countries and receive large remittances; their welfare is an important issue. For Indonesia, Malaysia, and Brunei, the main Muslim countries in ASEAN, the Hajj quotas are another important issue with Saudi Arabia and not with the Gulf as a whole.
With the Gulf countries, ASEAN countries desire to have economic cooperation, particularly via foreign direct investments (FDI) and oil and gas engagement. The ASEAN countries are important recipients of FDI and foreign-funded infrastructure projects, particularly from China under the Belt and Road Initiative (BRI). In their diversification, the Gulf countries play a bigger role. Saudi Arabia and the UAE, in particular, have looked at individual ASEAN countries but the substantive progress has not been commensurate with discussions
For the Gulf states, the main objective is to have a stable relationship with a region where economic development is growing. Since the GCC has a robust relationship with India, the desire to enhance the Indo-Pacific approach means that engaging ASEAN is also important.

Diversification of GCC policies signifies their desire to enhance the relationship with ASEAN. Individual GCC countries and individual ASEAN member states have signed Comprehensive Economic Partnership agreements. A possible free trade agreement between the two regional organisations is also feasible.
ASEAN wants GCC countries to participate in projects under the ASEAN Connectivity 2025 rubric, which was announced at the G20 Summit in India in September. This is another specific project which could have ASEAN linkages. PM Modi before the announcement of the India-Middle East-Europe-Economic Corridor (IMEC) spoke about such connectivity with the Middle East and Europe extending to ASEAN countries at the India ASEAN summit in Jakarta on 7 September 2023. Therefore, the discussions with the GCC are complementary to what India seeks. Is ASEAN viewing their partnership with GCC independently or with India in the mix? So far, ASEAN has always treated India as a separate partnership and worked with other partners independently even in the Global South. To build on PM Modi's suggestion at the India-ASEAN Summit, ASEAN would do well to have a regional connectivity project with the Gulf countries which includes India. This seems to be the Gulf states perspective as well. ASEAN, seems keener to get GCC investment into ASEAN connectivity projects within their own countries, like the BRI has done.
Both the GCC and ASEAN believe that they are central to their regions and now the two regions should connect. For ASEAN connectivity, a pre-summit meeting between business, academia, and media people from GCC and ASEAN was held in Saudi Arabia. They agreed that even at the Track 2 level, the essential element was to move strategically and have more private business sectors look at each other. The Federation of Gulf Chamber and an ASEAN entity are likely to sign a Memorandum of Understanding (MoU). A follow-up meeting is expected in January 2024.
The Gulf with the Strait of Hormuz and ASEAN with the Strait of Malacca are considered strategic outposts in Asia. Can they enhance their attention to each other? And keep this attention span from wavering? After all, GCC and ASEAN have had relations since 1990. Certainly, both GCC and ASEAN are growing rapidly, and therefore, more cooperation seems the logical step. Both count similar partners backing each other, like the United States (US) India, Japan, and South Korea. Yet it is unclear whether they will work with those partners or simply use the familiarity with those partners to seek more Gulf investment into ASEAN
GCC and ASEAN were founded within five years of each other. ASEAN was founded in 1976 with five members—now 10. The GCC was founded in 1981 and has Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. Compared to the discordant noises within the GCC, perhaps ASEAN unity looks less challenging. Both are committed to the centrality of their organisations in their regions. ASEAN has no real dominant power. The GCC is largely the handiwork of what the UAE and Saudi Arabia do, with Bahrain and Qatar often providing the odd man out. Now that both the groups are trying to go beyond the bilateral relations, they intend to support each other’s centrality and perhaps create a strategic arena where new partnerships among their members could develop.
For this, they have the first-ever framework of cooperation from 2024 to 2028, which if implemented, would lead to better engagement. What remains to be seen is how this will be funded. Though GCC and ASEAN are seeking South-South cooperation, ASEAN finds it difficult to differentiate between its developed and developing partners and always expects all partners to fund all the activity with them. The salient point of this framework of cooperation is that it goes beyond what some countries have bilaterally been doing, which are economic and religion-based exchanges. Now, counterterrorism, radicalisation climate change, renewable energy and food security are important issues, which they intend to cover.
Enhancing trade cooperation
The GCC-ASEAN bilateral trade was about US$110 billion in 2022. It makes the GCC countries an important partner of ASEAN behind China, India and the European Union (EU). However, analysts believe that with a combined GDP of about US$5.5 trillion, the GCC and ASEAN could trade much more.
ASEAN-GCC trade was US$78 billion in 2010, rising to US$85 billion in 2021, and then rapidly going to US$110 billion in 2022. GCC investment in ASEAN is about US$13.4 billion between 2016 and 2021. Most of it comes from the UAE and goes mainly to Indonesia, Malaysia, and Singapore. The point of a GCC-ASEAN partnership is to achieve a more even relationship where every member plays a role. Singapore and the GCC already have an FTA enforced in 2013. It led to a trade of US$43 billion from 2014-2021. Will other ASEAN countries sign individual FTAs with the GCC, or will ASEAN and GCC have a trade arrangement?
From the GCC, the main export good is crude oil while ASEAN mainly exports electronics and machinery. Indonesia and Malaysia expect to corner more of the halal market in the GCC countries and are starting the harmonisation of certification processes for halal standards. Singapore as a financial hub is looking at more engagement with Dubai, Abu Dhabi, Manama, and Riyadh. While there has been talk of reliable oil supply and an interest in energy transition, the fact that the GCC countries are heavily focused on oil, their commitment to renewable energy is low. The COP28 Summit that is being hosted by the UAE will perhaps show this. ASEAN is keen that GCC countries should invest in the regional power grid that they plan to establish.
ASEAN-GCC Summit
The initial discussion between GCC and ASEAN focused on peace as the basis for a prosperous region. ASEAN holds up the Treaty of Amity and Cooperation (TAC) as the model for this. In July 2023, Saudi Arabia acceded to the TAC and now all GCC countries are TAC adherents. This gives them a common platform. The reemergence of the Israel-Hamas crisis has again shown differences both within the GCC and ASEAN. Indonesia, as the ASEAN chair, and Malaysia as the current coordinator of ASEAN-GCC partnership, ensured that the summit succeeded despite the times and were instrumental in ensuring that there was an ASEAN Foreign Minister statement and a joint statement with the GCC on Gaza. While not earth-shattering, these showed some common views on the importance of humanitarian law and action, civil protection, and a two-state solution.
The ASEAN GCC partnership is well-intentioned but needs improved cooperation and even interest across members on both sides.

ASEAN countries have been taking their own positions on this. The Philippines, for instance, is closely allied to the US and recognises Israel's right of self-defence; Singapore condemned Hamas; Indonesia and Malaysia are more aligned with Palestine and do not have relations with Israel. The other six ASEAN countries have been a little distant in their comments. This varying stance leads to a weak ASEAN-GCC statement.
At the UNGA vote on 27 October 2023, calling for an immediate humanitarian truce and aid access to Gaza, 120 countries voted in favour, 14 were against and 45 abstained. All the GCC countries voted for the resolution. ASEAN countries had some diversity; Brunei, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand, Vietnam, and even Timor Leste voted for the resolution. The Philippines voted against the resolution and Cambodia was absent.
The ASEAN GCC partnership is well-intentioned but needs improved cooperation and even interest across members on both sides. It is led by a few countries who will see how to maximise gain with or without ASEAN-linked partnerships. The strategic evolution of both regions is a challenge to them presently.
_____________________________________________________________________________________________________________________________
Gurjit Singh is India’s former ambassador to Germany, Indonesia, Ethiopia, ASEAN and the African Union.

### Another looming crisis in the Middle East: Climate change

Southern Iraq, once known as the Garden of Eden, is poised to become a scorching wasteland in the forthcoming decades. A study, led by this author in collaboration with the chief researcher of the Israel Meteorological Service, Dr Yoav Levi, projects that in the not-too-distant future, residents of this region will endure hours daily with temperatures soaring above 55°C. While this grim forecast is for the future, the ominous uptick in temperatures isn't speculative but already a reality in Iraq.

In a region traditionally linked more with security challenges, the climate crisis has become a leading concern. It ignites the very sparks of violence, poverty, inequality, and migration, exacerbating regional instability.


Measurements conducted between 2012 and 2019 have seen temperatures spike to a staggering 54°C on several occasions. Last year, we witnessed heatwaves exceeding 50°C, causing recurrent power blackouts, dwindling levels of the Euphrates and Tigris rivers—Iraq's lifelines—coupled with food shortages, plummeting labour productivity due to unbearable heat, and an increase in sandstorms, which obstruct oil tankers' access to the southern ports. These challenges have incited not just socio-economic turmoil but also severe security disturbances, as evidenced by the violent protests of 2018 in southern Iraq.

The impact of climate change on the stability of the Middle East is now being felt in Libya as well. After enduring a decade-long devastating civil war, the nation showed signs of recovery in recent years, with oil production climbing from a mere 315,000 barrels per day in 2018 to 1.2 million just last month. Yet, a catastrophic cyclone in September 2023 submerged significant parts of Libya, shutting down four crucial seaports and jeopardising its oil exports. Just as in Iraq, a climatic calamity ignited violence after the government faced backlash for its inadequate flood response, which resulted in over 5,000 casualties.

In contrast to Iraq and Libya, where riots seen in the wake of climate disasters were relatively short-term, in Syria, the onset of the 2011 civil war can be partly attributed to a climatic disaster. The country suffered its worst drought in nearly a millennium in 2010, wiping out the livelihoods of 800,000 people and decimating 85 percent of the country’s agriculture. This prompted 1.5 million individuals to migrate to already congested cities, brewing discontent and unrest.

Another country in the region that has experienced a series of riots in recent years related to climate crises is Iran. Once the Middle East's (West Asia) wheat breadbasket, Iran has been rocked by climate-induced protests. In 2018 and again in 2021, severe droughts triggered mass demonstrations, demanding better water management and expressing broader regime disapproval. By August 2023, another wave of protests erupted in southern Iran due to prolonged droughts affecting agriculture and regular water supply.

In October 2019, violent riots broke out in Lebanon following the government's intentions to cut gasoline subsidies to raise taxes. However, this is not the first time that angry demonstrations have broken out in a country saturated with bloody civil wars. But the background to the riots is also rooted in climate change. A few weeks before the demonstrations, a severe heat wave broke out, resulting in huge fires in the Shuf Mountains. As a result, the air was polluted, and some of the water sources were deemed unfit for drinking. These fires broke out in the land known as the “Land of the Trees of Lebanon,” which is reflected in the country’s flag. This means that the country that for thousands of years preserved the unique identity of its high Cedar trees, experienced a wave of fires that damaged what it is most associated with it. The fact that the area is full of cedar trees poses a fire hazard that could consume whole villages and even cities. Therefore, although in the eyes of many, the immediate threats of access to water and electricity are more serious, in Lebanon, climate change has proven to be an immediate threat here as well.

Yemen epitomises the complex challenges of the Middle East. It is suffering from extreme poverty, unemployment estimated at 13.59 percent, alarming levels of illiteracy, and minimal access to fresh water. It also serves as a hub for radical Islamist groups from both Shia and Sunni sects. On top of all this, Yemen is among the world’s most vulnerable countries to climate change, ranked 171st out of 181 countries in the ND-GAIN Index. Similar to the civil war in Syria, a connection can be found between climate change and the ongoing war in Yemen—the population's dire need for water.

The water crisis, made worse due to climate change, is a critical factor underlying the country's unrest, and as such can potentially prolong and worsen the ongoing conflict. Fuel prices, which in Yemen are closely related to the price of water, helped ignite protests in 2014. Yemen, one of the world’s hottest countries, is already bearing the brunt of regional droughts and an extremely dry climate. While it is unclear to what extent the water crisis was a catalyst to the current war, a 2011 report had already highlighted factors that could potentially lead to civil unrest in the country—including, a water shortage so severe that it threatens people's survival and their livelihood, predominantly based on agriculture. Furthermore, reports from February 2016 revealed that Saudi planes bombed and destroyed a reservoir that held the drinking water for over 30,000 Yemenis, with approximately 5,000 cubic meters of water, which caused another flare-up of fighting near the area of the attack. Such incidents underscore the connection between climate change, civil unrest, and sustained regional instability.

The upcoming COP28 climate conference in the United Arab Emirates (UAE) serves as a wake-up call for the international community and Middle Eastern countries to join forces in addressing this pressing threat.


In a region traditionally linked more with security challenges, the climate crisis has become a leading concern. It ignites the very sparks of violence, poverty, inequality, and migration, exacerbating regional instability. Food scarcity in a region marked by high birth rates and consumption, migration from unbearably hot zones to cooler territories, and threats to an agriculture sector still employing 40 percent of the Middle East's population, underscore the monumental challenges posed to the region by the climate crisis. This upheaval threatens not just regional stability but that of the world.

The upcoming COP28 climate conference in the United Arab Emirates (UAE) serves as a wake-up call for the international community and Middle Eastern countries to join forces in addressing this pressing threat. Amid growing escalation following the brutal attack by Hamas on Israel, the unfolding Israeli response,  and the looming potential for violence to spread in the region, the conference can serve as an important show of regional and international action aimed at promoting regional stability and problem-solving.

Middle Eastern nations, despite historical and current animosities and conflicts, and faced with rapid regional changes, need to recognise the shared threat of climate change. There is potential for regional cooperation in terms of knowledge-sharing, disaster response strategies, and investment in renewable energy sources.

Hosted by a nation with proven transformative domestic policies and growing regional sway, the COP28 conference is taking place amid growing acknowledgement that issues like climate change and the COVID-19 pandemic, and indeed war, necessitate international and regional solutions. Given these circumstances, the UAE is in a particularly fitting position to spearhead efforts to tackle what is already understood by many as an immediate and existential threat to the region.

Dr. Yossi Mann is a Senior Lecturer at the Department of Middle East at Bar Ilan University and the Lauder School of Government at Reichman University.

### Crude oil shall remain below US$100 despite OPEC+ production cut

At the time of writing, international crude oil prices have been rising for three consecutive weeks, with Brent attaining its highest level since the last calendar year (Figure 1). The gains have been supported by underwhelming the United States (US) shale production and supply worries due to sustained output restrictions by Saudi Arabia and Russia. As part of the Organization of Petroleum Exporting Countries Plus (OPEC+) grouping, these two countries have decided to extend aggregate production cuts of 1.3 million barrels per day (bpd) to the culmination of CY2023. With US shale production headed toward its lowest levels since May 2023, many analysts believe that there is no stopping the ongoing crude price rally. On the other hand, there are tangible geopolitical and geoeconomic reasons that point towards current oil prices being close to their peak, including slowing demand in China, and Iran’s re-entry into the international crude oil market.

Figure 1: Price of Brent crude in US$



Source: Investing.com
Demand
Providing a major boost to oil price bears, Beijing’s crude oil import volume declined to its lowest level in six months in July, with China’s onshore inventories near record highs. With its critical real estate sector in trouble, the Chinese economy finds itself in a challenging situation, potentially capping its demand for crude oil through the rest of CY2023. The reduction in interest rates by the People’s Bank of China (PBOC) is also insufficient to alter China’s near-term economic outlook (see Figure 2). 

Figure 2: China’s one-year loan prime rate (LPR)—the medium-term lending facility used for corporate and household loans—was maintained at a record low of 3.45 percent.



Source: Trading Economics

Oil markets have been especially roiled by recent hawkish noises from the Federal Reserve. While the US Central Bank maintained rates, it warned of the possibility of higher borrowing costs through the remainder of this year, with a smaller-than-anticipated decline in 2024 (see Figure 3). Along with similar hints from the Bank of England and the European Central Bank, the warning raised fears of increasing interest rates impeding economic activity and oil demand in the near-term and triggered a bout of profit-taking in oil markets, after prices zoomed to 10-month highs earlier in September. 

Figure 3: The US federal funds rate



Source: Trading Economics

It stands to reason that crude oil’s spike into an overbought zone has left the market susceptible to a correction, with speeches by Saudi Aramco CEO Amin Nasser and Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman on 18 September 2023 hinting at this vulnerability. The Aramco CEO reduced the firm’s long-term view of worldwide crude oil demand to 110 million bpd by 2030—lower than a previous estimate of 125 million bpd, while Prince Abdulaziz bin Salman cited the necessity for strict regulation to curb volatility in global energy markets, the uncertain Chinese demand outlook, faltering economic growth in Europe, and anti-inflationary policies of central banks worldwide. For its part, India’s crude oil imports declined for the third straight month in August due to refinery maintenance activities in India and decreased shipments from Russia (see Figure 4). The former, in fact, has driven the reduction of India’s oil imports from Saudi Arabia—India’s third largest crude oil supplier after Russia and Iraq, respectively—to a multi-year low of roughly 5 lakh bpd in September 2023. For context, import volumes between January 2022 and August 2023 averaged over 7.5 lakh bpd. 

Figure 4: India’s crude oil imports in million tonnes



Source: Trading Economics
Supply
On the supply side, Exxon Mobil Corp has committed to an incremental oil supply of almost 40,000 bpd in Nigeria amidst a new investment push in the African nation (see Figure 5). A rise in Iranian crude oil exports is also bolstering aggregate supply, constituting a bearish development for oil prices. As per TankerTrackers.com, which releases data on crude oil shipments to governments, Iranian crude oil exports increased to a 5-year high of 2.2 million bpd during the first 20 days of August 2023, with most shipments heading to China.

Figure 5: Nigeria’s crude oil output rose to 1,181 BBL/D/1K (bpd in thousands) in August 2023, from 1,081 BBL/D/1K in July 2023



Source: Trading Economics

A bearish development for oil prices is the progress achieved in Iran-US relations, which could elevate oil exports from Iran. Tehran claims that the recent agreement with the US, on the freeing of prisoners and de-freezing of Iranian financial assets, could be seen as a precursor to negotiations in other areas including its nuclear programme—a deal which could persuade the US and its allies to abolish sanctions on Iran’s crude oil exports, enhancing worldwide supply. In fact, Iran has already boosted its crude oil production to its highest level since 2018 (see Figure 6). 

Figure 6: Iran’s crude oil production rose to 3,000 BBL/D/1K in August 2023, from 2,857 BBL/D/1K in July 2023



Source: Trading Economics While Nigeria and Iran are certainly not the largest crude oil producers, Specifically, the OPEC produced 27.73 million bpd in September compared to 1,20,000 bpd in August, with production in the latter month having increased for the first time since February.
Outlook
While many have predicted crude oil trading at US$ 100 plus per barrel levels by the end of CY2023 and into CY2024, it must be appreciated that the currently elevated oil prices have resulted from many months of seasonally high demand. In this restricted market, however, demand seems close to its summit. Looking ahead, however, demand may contract by about 3 million bpd, causing a loosening of the market toward the culmination of CY2023 and into early CY2024. To be sure, OPEC production cuts have been effective in their own rights thus far but non-OPEC producers shall eventually mitigate their impact by producing at peak capacity, except for some heavyweights with alternative priorities. Therefore, crude oil prices are likely to head under US$ 90 per barrel, rather than exceed US$ 100 per barrel, notwithstanding daily fluctuations.

Aditya Bhan is a Fellow at the Observer Research Foundation. Views expressed are personal.

### The complexity and durability of India’s intelligence culture

On 18 September, Canadian Prime Minister Justin Trudeau raised allegations of an Indian hand behind the killing of a Canadian citizen and Khalistani terrorist, Hardeep Singh Nijjar. Two weeks later, whilst these allegations still remain unsubstantiated, the ongoing developments have provoked global curiosity about India’s intelligence services, especially the Research and Analysis Wing (R&AW). Disregarding expert opinions ascribing the killing of Nijjar to gang rivalry as well as India’s legitimate concerns with separatism, global efforts are focused extensively on examining the R&AW as the current government’s covert killing machine. By extension, unfounded parallels are being drawn with Russian and Saudi intelligence operations. Such analyses are neither an accurate reflection of India’s intelligence culture nor is there any space for targeted killings within it.

Disregarding expert opinions ascribing the killing of Nijjar to gang rivalry as well as India’s legitimate concerns with separatism, global efforts are focused extensively on examining the R&AW as the current government’s covert killing machine.

Intelligence cultures, counterterrorism, and targeted killings
All nations have unique intelligence cultures that are determined by their respective ideas and identities and influence organisational choices, procedures, and policies. For instance, the United States (US) follows a top-down approach, largely attributed to the American “emphasis on theory-driven political practice”. Accordingly, during the Cold War, democratic oversight, technological dominance, and gentlemanly espionage defined American intelligence culture, although there were numerous occasions of overrule. The changing strategic environment post the 9/11 attacks provoked a radical shift. Empowered by the Bush directive that divided the world between ‘us’ and ‘them’ (the terrorists), US intelligence culture grew more militarised, where “tracking and targeting” replaced “hobnobbing with the international community”. With this transformation, there was a growing acceptance of targeted killing as a legitimate tool. Some scholars describe this as ‘norm transformation’—a clear reflection of the top-down configuration of US intelligence culture. The Israeli intelligence, on the other hand, pursues a ‘philosophy of pragmatism’. It follows a bottom-up approach where there is vast scope for initiative and innovation at the junior ranks to develop practical solutions to real-world problems. In this culture, targeted killings are not a subject of norms but are seen as an operational necessity. Discussions in Israel, therefore, are seldom about its legitimacy and often about operations and outcomes. At the extreme end of the spectrum are the authoritarian regimes. Despite numerous differences between them, the use of targeted killings broadly intends to invoke fear among dissidents (or traitors, according to their nomenclature).

Discussions in Israel, therefore, are seldom about its legitimacy and often about operations and outcomes.


Indian intelligence culture falls somewhere in between the American and Israeli intelligence cultures with the fulcrum at the level of the intelligence leadership. Its roots lie in the early years of independence when the Intelligence Bureau (IB) realised that the political strategies for dealing with national security issues were rooted in a sense of idealism, which left an obstructive impact on intelligence operations. Reflecting on this aspect, TG Sanjeevi, the first IB chief, noted that “he frequently had to take independent action without the knowledge of his government”. Successive spymasters have, therefore, enjoyed autonomy in developing and innovating doctrines and operational methods without overruling the broader frameworks laid by the political leadership. In other words, somewhat like the American system, the Indian intelligence services operate within the framework offered by the political leadership, but a high degree of autonomy rests with the intelligence leadership in devising means to tackle national security threats.
Indian strategic preference: Winning hearts and minds
Jawaharlal Nehru’s insistence that the insurgents were ‘our people’ who needed to be reformed and co-opted into the mainstream democratic processes laid the foundation for India’s intelligence doctrine for counterinsurgency. This became the basis for all future operations conducted by numerous intelligence bureaucracies operating in counterinsurgency and counterterrorism. It envisaged a clear divide between winning hearts and minds (soft approaches) and eliminating targets (hard approaches). The former was given utmost importance and the IB was made the nodal agency to achieve these goals. KC Verma, former chief of R&AW and a former IB officer, noted that the IB’s greatest contribution has been its individual officers enjoying “high degree of credibility” with insurgent leaders, which is a result of professionalism and “commendable empathy”. The essence of this model was to take a strategic approach in conflict resolution rather than conflict management. Unsurprisingly, several insurgent movements are now part of India’s political process and no secessionist movement has ever been successful. From an operational point of view, the IB achieved this through the Kautilyan method of conflict resolution, i.e., persuasion, bribery, and trickery (divide-and-rule). The strategy of divide-and-rule received the highest emphasis and has been emulated by other security bureaucracies operating in conflict zones. When the R&AW was created in 1968, a similar operational doctrine was adopted by the agency. The belief was that India’s neighbourhood too had sections that were ‘misguided’ about India’s intentions and ‘misinformed’ about India’s security concerns, and, therefore, needed to be co-opted. This led to the agency’s core responsibility being, besides development of strategic intelligence, maintaining leverage over key sections within the neighbour’s polity and civil society aimed at facilitating pro-India policies.

Unsurprisingly, several insurgent movements are now part of India’s political process and no secessionist movement has ever been successful.


Pursuing this “winning-hearts-and-minds” objective, the R&AW’s psychological warfare (PSYWAR) division has remained one of its most active organs. The earliest operations were seen during the Indo-Pakistani War of 1971 when it played a critical role in exposing the Bengali trauma to Europeans and North Americans. The hope was that international public opinion would positively shape their countries’ foreign policy. Later, as trouble began in Punjab and Kashmir, the PSYWAR division remained active in countering Pakistani propaganda internationally by soliciting support from the subcontinental diaspora across the world. Since then, the R&AW stations in Western capitals have operated on twin mandates. First, to establish long-lasting relationships with the Indian diaspora aimed at fostering positive bilateral relations. Second, to monitor and penetrate and manipulate sections within the diaspora that support separatist movements in India. The agency’s successful turning of Ripudaman Singh Malik into an Indian asset is a case in point on the latter.
Targeted killings: A necessity induced aberration, not a rule
Yet, counterterrorism, especially when state-sponsored, becomes a complex challenge immune to the ‘penetrate-and-manipulate’ strategy. More so, when intelligence agencies were expected to predict and deter every potential terrorist threat amidst political restraint for active measures, the agencies have had to innovate. In this context, one can observe that Indian intelligence agencies extend the divide-and-rule strategy to eliminate hard targets. An example of this is the employment of former militants under the leadership of Kukka Parray in Kashmir during the early 90s. More subtle examples of the Indian intelligence turning a blind eye to inter-group rivalries resulting in killings can be observed in the Northeast insurgencies. Yet, when taking a bird’s eye view of India’s counterterrorism experience, reliance on influence operations vastly overpowers instances of bloodshed. To quote former R&AW officer, B Raman, “a mix of firm action on the ground to demonstrate that terrorism does not and will not pay [and] a healing touch in dealing with alienated sections” is India’s approach to counterterrorism.

More subtle examples of the Indian intelligence turning a blind eye to inter-group rivalries resulting in killings can be observed in the Northeast insurgencies.


At the core of this approach lies an effort to expose state sponsorship of terrorism and co-opt influential targets to work for India, which has remained the prime task of Indian spooks. Whenever episodes of eliminating jihadists or criminals in India’s neighbourhood have occurred, it has only represented the intelligence agencies’ frustration at the respective governments' inability to take decisive action against troublemakers. Such operations have never been executed in regions beyond the neighbourhood. Caught in a political storm created by Trudeau’s unjustified allegations and actions, the Indian government has resorted to serving dossiers of wanted criminals and separatists residing in Canada. This is in line with India’s traditional response to state-sponsored terrorism, i.e., generating international exposure. Therefore, India’s intelligence culture has historically been characterised by its conflict resolution strategy that persuades, bribes, and manipulates targets into becoming national assets. This has been consistent both within India and abroad. Violent measures are an aberration aimed at hard targets and have no precedence beyond its neighbourhood. Irrespective of the regime in power and the ideology espoused, Indian intelligence services have always been attentive to national security needs. They have indeed enjoyed greater operational freedom under select governments, which includes the current one. However, this freedom does not automatically signify an overhaul in its culture. Most certainly, the intelligence services have never lost the distinction between terrorists and dissidents, unlike some commentators are suggesting. Such conclusions require concrete evidence, not prejudiced opinions, and circumstantial assessments. In short, Indian intelligence culture is more complex and durable, and prioritises India’s national security requirements over ideologies.

Dheeraj Paramesha Chaya is a lecturer in intelligence and security at the Department of Criminology, University of Hull, United Kingdom

### Iran’s BRICS membership: “Hello to the new world”?

At the 15th annual BRICS Summit held in Johannesburg, South Africa, on 22–24 August 2023, six new members were admitted into the bloc from 2024 onwards: Argentina, Ethiopia, and four states from the Middle East and North Africa (MENA) region, namely Egypt, Saudi Arabia, the United Arab Emirates (UAE), and Iran. With this set of new members, BRICS is tilting toward an authoritarian bloc, since the bulk of its new members, especially those from the MENA region are autocratic regimes. According to reports, more than 40 states had expressed interest in joining the BRICS grouping. It was established in 2009 as BRIC (Brazil, Russia, India, China), and became BRICS a year later when South Africa joined the grouping. In his address, the host, South African President Cyril Ramaphosa, stressed: “Together, the BRICS countries make up a quarter of the global economy, they account for a fifth of global trade and are home to more than 40 percent of the world’s population. As we celebrate the 15th anniversary of BRICS, trade between BRICS countries totalled some [US] $162 billion last year. […] Total annual foreign direct investment into BRICS countries is four times greater than it was 20 years ago.” On his part, China’s President Xi Jinping said that this expansion constitutes a  starting point for cooperation between members, markedly strengthening BRICS’s collaborative mechanism and bolstering world peace and development.

It was initially planned that BRICS would first develop a mechanism for admitting new members; thus, the announced additions before this mechanism could be set up seems to have come as a spontaneous move.


With the new additions, the bloc will be representing half of the global population. Also, the extended group that may be labelled “BRICS+”/ “BRICS plus” from next year on will include the world’s largest hydrocarbon energy consumer—China—and the world’s largest energy producer—Saudi Arabia. A core topic during the Summit was the bloc’s aspiration towards de-dollarisation, which was recently affirmed by the head of the  New Development Bank (NDB)— BRICS’s “central bank”— former Brazilian President, Dilma Rousseff, in an interview with China’s state broadcaster CCTV. In fact, it was initially planned that BRICS would first develop a mechanism for admitting new members; thus, the announced additions before this mechanism could be set up seems to have come as a spontaneous move. Put differently, the admissions were reportedly pushed by individual states; for instance, Egypt’s admission was pushed by fellow African state South Africa, and Iran by Russia and perhaps China. This article will focus on the admission of the Islamic Republic of Iran, the latter’s motivation to gain access to the BRICS bloc, Iranian receptions, as well as implications thereof.
Iran’s admission into BRICS
It is widely assumed that Tehran’s membership was pushed by Moscow and at least welcomed by Beijing, in a bid to strengthen their abilities to circumvent United States (US)-led sanctions, in particular, and pressure, in general. For Iran, the upcoming BRICS membership is a propaganda success par excellence for several reasons: Firstly, it fortifies Tehran’s stated goal to become an integral part of a non-Western, new world order primarily led by China and Russia, while strengthening its view that the West is in ultimate decline. Secondly, through the admission, Iran can proclaim that it continues to be successful in withstanding US pressure, without having to offer concessions to Washington or the West. For Tehran, as a result of both elements, admission into BRICS is a powerful confirmation of its “Look to the East” geopolitical outlook and, in this vein, of its confrontational stance vis-à-vis the West.

Tehran would not have to concede on its nuclear programme nor meet international standards regarding terrorism financing and money laundering.


This view is reflected in the reactions from Iranian officials and major regime outlets. President Ebrahim Raisi stated that his country’s integration into the bloc signifies a historical achievement. In Iran, the ultra-fundamentalist daily paper Kayhan featured the news on the front cover, with the title “Without JCPOA and FATF: Iran's BRICS Membership is a Shot at U.S. Sanctions”. In other words, Tehran would not have to concede on its nuclear programme nor meet international standards regarding terrorism financing and money laundering. Meanwhile, the Islamic Revolutionary Guard Corps (IRGC)-affiliated Javan daily's first-page reaction reinforced the Iranian leadership's perception of an emerging global order: “Hello to the New World” (Salâm bar jahân-e jadid). What remains certain is that Tehran views the BRICS membership as another foreign policy success after 1) its full membership into the Shanghai Cooperation Organisation (SCO) this July; 2) the China-mediated détente with regional rival Saudi Arabia this past March; 3) the deal with Washington involving the unfreezing of US$10 billion of frozen Iranian assets; and 4) the concomitant certainty that it won’t have to fear substantial costs from the West even as it brutally cracks down on anti-regime protests at home or rapidly advances its nuclear programme.
Potential complications
On paper, the BRICS expansion constitutes a milestone towards elevating the grouping’s geoeconomic and geopolitical standing, thus marking a significant qualitative shift towards the creation of a non-Western, multipolar world order. Despite the triumphalism surrounding the BRICS’s expansion as well as Iran’s admission, there are potential complications towards a linear development of a non-Western world order. First, even in Iran, there is scepticism towards the rosy scenarios offered by the regime. For instance, Iran’s reformist daily Ham-Mihan published an interview with Tehran University international relations professor Alireza Soltani, who argued against the notion that Iran's economic and developmental challenges would be resolved solely through BRICS membership. He emphasised that the belief in such a notion is misplaced and unrealistic, stating that BRICS involvement will not singlehandedly tackle the complex woes that Tehran faces. In fact, this argument is based on the realisation that without Western sanctions relief and an improvement of relations with the West, Iran’s economic crisis cannot be sufficiently resolved within an international banking and financial system still dominated by the US.

Iran’s reformist daily Ham-Mihan published an interview with Tehran University international relations professor Alireza Soltani, who argued against the notion that Iran's economic and developmental challenges would be resolved solely through BRICS membership.


Second, BRICS is no NATO or European Union (EU), as it lacks formal organisation—a proper charter, a secretariat, an established criteria for membership, and procedures on expansion; for a long time, it didn’t even have a functioning website. Third, given the experience with the development of BRIC(S) since its inception a decade-and-a-half ago, there is no guarantee that the group’s lofty aspirations will materialise, be it regarding the redistribution of geoeconomic and geopolitical power or intra-BRICS(+) trade. Fourth, Iranian foreign policy officials have stated that Tehran’s BRICS membership will render the revitalisation of the Joint Comprehensive Plan of Action (JCPOA) and similar concessions with the West superfluous. Yet, given that, on 20 August, China's Foreign Minister Wang Yi advised his Iranian counterpart to pursue “the full and effective implementation of the JCPOA”, Tehran cannot easily shelve this agreement. The Iranian leadership has demonstrated a strategic resolve to diminish the urgency of the JCPOA's revival in Tehran. This perspective has developed due to a growing perception that Western pressures, particularly the US sanctions, lack the ability to change the behaviour of the Iranian state. In the immediate context, joining BRICS could bolster this perception, signifying that the Islamic Republic has attained an elevated level of resistance to the imposed political and economic pressure by the West.
Outlook and implications
In the short term, Iran’s prospective membership of BRICS could serve as a catalyst for the regime to bolster its relations with Russia and China. This is because Iran is viewing its membership of BRICS as a tangible outcome of its “Look to the East” strategy. In the case of China, this membership could lead Iran to provide Beijing with greater concessions and discounts on Iranian oil and enticing incentives for Chinese enterprises to engage with and invest in the Iranian market. In the case of Russia, Tehran may express heightened interest in fostering deeper military collaboration with Moscow and proposing initiatives that counter the isolation imposed by Western powers. An example of such a venture is the planned North–South Corridor—a railway route designed to connect Russia to the Indian Ocean through Iran.

Iran’s achievement is subject to the extent to which the White House is willing to intensify sanctions and augment its deterrent measures against Iran.


Therefore, Iran would stand to gain notable political advantages at the expense of Western interests in the short-term. However, short-term economic benefits are more challenging as the circumvention of sanctions remains an obstacle. Overall, in the short term, Iran’s achievement is subject to the extent to which the White House is willing to intensify sanctions and augment its deterrent measures against Iran. The current trajectory under the Biden administration appears to be favourable to Tehran. Furthermore, the diversity of BRICS+ members will weigh heavily on whether the bloc will be able to achieve its tall aspirations. Most importantly, there may an intra-group conflict emerging between those member-states seeking a confrontation with the West, especially Russia, China, and Iran, and those seeking co-existence with the West—Saudi-Arabia, the UAE, Egypt, and Argentina.   In the longer term, Iran envisions its membership of BRICS as a means to assume a prominent role in shaping the emerging global order. The Islamic Republic seeks to amplify BRICS’s collective opposition to Western powers, facilitating a revisionist stance within the bloc. Although major BRICS members exhibit an interest in a new and redefined global order, the recent expansion challenges this aspiration. The group now encompasses diverse actors with dissimilar political and economic indicators, including significant competitive dynamics among some members. In light of these complexities, it becomes an intricate endeavour for BRICS to establish a central and cohesive role in reshaping the global order. As a result, it poses a threat to the desired world order for the Iranian regime.

The Islamic Republic seeks to amplify BRICS’s collective opposition to Western powers, facilitating a revisionist stance within the bloc.


Moreover, given the volatility of Middle East geopolitics, it cannot be excluded that major rifts would re-appear between major regional powers. For instance, the Iranian–Saudi détente may prove rather short-lived if Tehran would want to forcefully re-activate its expansive, if not aggressive, regional “Axis of Resistance” beyond a potential short-term interest to de-escalate regional geopolitics to ensure a deal with the US. Upon his 15 August visit to Baghdad, the IRGC’s commander-in-chief Esmail Qaani has urged leaders within the coordination board of the Islamic resistance to “stop all military operations against the US and the global coalition forces at this time”, according to an Iraqi source. In contrast, an eventual revitalisation of the Iranian-led “Axis of Resistance” may be prompted by a renewed sense of Iranian hubris given the aforementioned series of foreign policy successes and its perception of US weakness, but it may indeed jeopardise the détente with Saudi Arabia as well as alienate China that is interested in stability in the Persian Gulf region due to its energy supply needs.

Ali Fathollah-Nejad is the Founder & Director of the Center for Middle East and Global Order (CMEG) and author of the much-acclaimed Iran in an Emerging New World Order (2021).

Amin Naeni is a Ph.D. candidate and research assistant at the Alfred Deakin Institute for Citizenship and Globalisation (ADI) at the Deakin University in Melbourne. He is also a Fellow at CMEG.

### Is BRICS expansion a desperate bid to maintain relevance?

The 15th BRICS (Brazil, Russia, India, China, and South Africa) Summit in Johannesburg, South Africa, culminated with the group’s member count having increased from five to eleven. The six new members include four nations from the Gulf and West Asia—Egypt, Iran, Saudi Arabia, and the United Arab Emirates (UAE). Ethiopia and Argentina, from Africa and South America respectively, were also admitted. Notably, more than 40 countries from the Global South have conveyed their willingness to join, with at least 22 formal applications. This article contextualises the grouping’s expansion considering its diminishing relevance.
The BRICS grouping
Although originally conceptualized in 2001 by Jim O’Neill, then chairman of Goldman Sachs Asset Management Company, the creation of BRICS can be traced to a meeting of Foreign Ministers of Brazil, Russia, India, and China in 2006. The venture gained traction through more periodic convenings beginning in 2009, resulting in the group’s augmentation with the induction of South Africa in 2010, consequently converting BRIC into BRICS.

The six new members include four nations from the Gulf and West Asia—Egypt, Iran, Saudi Arabia, and the United Arab Emirates (UAE).


As per some observers, the BRICS has deftly negotiated past multiple hurdles and is currently viewed as a possible alternate discourse to the G7, a grouping overwhelmingly led by Western nations. The BRICS has positioned itself decisively on numerous issues such as climate action targets, United Nations reform, and unilateral financial sanctions imposed by the West against Iran, Russia, and Venezuela. Further to setting up the New Development Bank (NDB) in 2015, which has funded roughly 100 programmes till date, executing a Contingent Reserve Arrangement, and initiating different institutional architectures, the BRICS countries have exhibited their wherewithal to partake in practical ventures.
Underwhelming accomplishments
Notwithstanding the above, the BRICS has not collectively accomplished anything noteworthy despite its yearly meetings. The NDB has sanctioned only US$ 33 billion worth of programmes since its creation. In contrast, the World Bank commits more than three times that amount in a single year. This is unsurprising since the BRICS is not a very strong bloc economically. It attempts to integrate an existing economic behemoth in China with an emerging power in India and three much smaller economies reliant on commodity exports. The geopolitical tension between China and India, which has manifested in periodic border flare-ups, is one cause for BRICS’s underperformance. New Delhi views China as its most potent rival. With the world’s second largest economy, it is also difficult to see China as an advocate for the Global South. Further, most developing nations would not like to be coerced into choosing camps during an escalation between China and the United States (US).

The geopolitical tension between China and India, which has manifested in periodic border flare-ups, is one cause for BRICS’s underperformance.


Even on the currency front, while many developing nations would like to decouple their economies from the US dollar given inter alia the volatility caused in their economies by the Federal Reserve’s mood swings, they also desire alternate havens to park their foreign exchange assets after Russia’s exclusion from the SWIFT payments system. But neither China nor India possesses a fully convertible currency, limiting the appeal of the RMB and the INR respectively. The BRICS, in fact, is not remotely viable as a monetary union. Its constituents are extremely different with respect to foreign trade, economic growth, and global integration of capital markets. While Russia’s economic performance lagged that of all other BRICS members in 2022, Brazil and South Africa have also been enduring hardships without resilient commodity prices supporting benign interest rates and increasing the creation of domestic credit.
Declining relevance
As a grouping that desires a shared goal, the BRICS is struggling for sustained relevance. There is no common bedrock but their search for cohesion toward achieving a measure of collective salience in the international geopolitical arena remains. As things stand, the BRICS seems to arouse some intrigue due to the ongoing friction between China and the US, as well as Russia’s long-drawn war against Ukraine. This interest in the bloc, however, significantly transcends the public discourse its constituents maintain in the grouping. While each member has cause for persisting within the bloc, the issue is that these are insufficient to convert the grouping into an effective amalgam, let alone changing the world order.

As things stand, the BRICS seems to arouse some intrigue due to the ongoing friction between China and the US, as well as Russia’s long-drawn war against Ukraine.


At the grouping’s inception, Beijing had the unambiguous objective of catapulting China’s international stature and yet maintaining proximity with its principal rival—India. Current Chinese President Xi Jinping, on the other hand, has significantly diminished the grouping’s aim, by attempting to reposition it as but one forum among China’s multiple international dominance gambits such as the Shanghai Cooperation Organization (SCO) and the Belt and Road Initiative (BRI). Together with Beijing’s bilateral developmental cooperation with developing nations, this has resulted in the dilution of the BRICS’ objective.
The expansion
The BRICS will struggle to gain relevance despite the addition of new members. It is only Beijing that sees an opportunity to meaningfully enhance its geopolitical influence by admitting Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE into the grouping. China, today, is an important partner of the Ayatollah-led Iran. Beijing has rejuvenated the Iranian regime and set up lines of credit using which the latter makes regular payments in terms of oil barrels. For Iran, BRICS membership provides an excellent opportunity to obtain a conducive forum for expressing itself and defending its domestic manoeuvres. While Saudi Arabia does not face economic problems and geopolitical isolation like Iran, the space conceded by Washington in its ties with Riyadh was promptly exploited by Beijing. Expressions of Western disapproval and concern regarding the suppression of human rights, drive Riyadh and Beijing close in a mutual narrative of contention. This, along with Chinese cooperation in its economic diversification programme, including exploring uranium reserves, makes BRICS membership useful for Saudi Arabia.

Recent economic chaos has manifested in the ransacking and looting of supermarkets and retail outlets in Buenos Aires.


For Argentina, BRICS membership provides cover for the adverse situation domestically. Recent economic chaos has manifested in the ransacking and looting of supermarkets and retail outlets in Buenos Aires. With the nation in turmoil, the opportunity to partake in a global bloc including affluent countries could not be refused. For the remainder, the chance of bilateral annual convenings with President Jinping appears an attractive proposition. In recent years, in fact, such high-level bilateral convenings have been a prime attraction of BRICS summits, and there is no denying that the BRICS provides an appealing forum for networking.
Conclusion
All proposals at the BRICS Summit such as de-dollarisation and yuanisation, as well as establishing alternative lines of credit to those extended by the International Monetary Fund and the World Bank, are already being implemented by China bilaterally with various countries. China, cunningly, repackages initiatives already being implemented by Beijing, as collective programmes.

The NDB cannot conceivably overshadow these customised credit offerings and thereby endures as a supporting source of credit, overwhelmingly influenced by Beijing.


Yuanisation is being implemented irrespective of the BRICS. Russia has adopted the yuan for purposes of international trade. Iran-China trade utilises the yuan as a benchmark, while credit line arrangements between Beijing and Buenos Aires involve yuan-based transactions along with other currencies. On the credit line front, Beijing extends large-scale funding through the BRI and its Asian Infrastructure Investment Bank. The NDB cannot conceivably overshadow these customised credit offerings and thereby endures as a supporting source of credit, overwhelmingly influenced by Beijing. Finally, even after the admission of new members, it is only India that retains significant independence as a country within the grouping—having rebuffed the BRI, while the rest are likely to become more dependent on China. This alone raises a fundamental doubt regarding the bloc’s importance moving ahead.

____________________________________________________________________________________________________________________________

Aditya Bhan is a Fellow at the Observer Research Foundation.

### Strengthening Indo-Israel Agritech cooperation

As India celebrates 30 years of its diplomatic ties with Israel, it faces challenges affecting its agricultural development and productivity. Foreign assistance is crucial for India to overcome these challenges. Indo-Israel cooperation in critical technologies like Unmanned Aerial Vehicles and Water technologies can help India address its agronomic challenges. Agriculture, which accounts for 18.3 percent of India’s Gross domestic product (GDP), is its largest employment provider despite its declining contribution to the national economy. Around 70 percent of rural households depend on agriculture for their livelihood. The Economic Survey (2022-23) stated that despite a 3 percent growth in 2021-22, agriculture needs a reorientation as it faces climate risks, fragmented landholdings, low mechanisation levels, and rising cultivation costs. The graph below shows the decline in the annual growth of agricultural GVA (gross value added) from 4.1 percent in 2020-21 to



Source: Press Information Bureau, India Indian farms have been subject to locust attacks, and states like Haryana are presently facing labour shortages, resulting in farmers’ inability to grow or harvest their produce. Additionally, farmers are also facing declining rural incomes along with rising input costs.
Drone technology
Unmanned aerial vehicle (UAV) or drone technology has become more accessible and affordable in recent years. Their increasing long-range capability, endurance, and applications make them essential for civilian and military purposes. In agriculture, drones can provide services like spraying fertiliser on large farms and mapping agriculture plots.

Indo-Israel cooperation in critical technologies like Unmanned Aerial Vehicles and Water technologies can help India address its agronomic challenges.


In India, drones assess crop damage, spray pesticides and fertilisers, and tackle locust onslaughts. Depending on the purpose, mounting a drone with a spraying mechanism or sensors can help the entire crop cycle—from seeding to harvesting. An agricultural drone costs INR 3 lakh to INR 11.5 lakh, based on its water-holding capacity. India and Israel can work towards enabling the use of drone technology in Indian agriculture, as drones allow farmers to gather data by covering large areas of land quickly and efficiently. A pilot project by an Israeli company, Tevel, uses drones to perform time-consuming and labour-intensive tasks like plucking apples, which can be ideal for Indian farms experiencing labour shortages. In 2022, a Chennai-based drone startup, Garuda Aerospace, signed a memorandum of understanding (MoU) with Israel’s Elbit Systems to build the Skylark 3 drones for large-scale surveying and mapping of Indian villages under the Swamitva Scheme. Since Artificial Intelligence (AI) is the Indian drone ecosystem’s strong suit, India and Israel could leverage their expertise in designing sophisticated systems that use drones to minimise dependence on labour and fast-track processes. These systems apply to seed pod planting, where AI-run drones automatically shoot pods containing plant nutrients and seeds into prepared soil patches. With more sophisticated AI, drones can detect moisture deficits using thermal, multi-spectral or hyper-spectral sensors and irrigate only those areas with precision.

Their increasing long-range capability, endurance, and applications make them essential for civilian and military purposes.


Adding LiDAR (Light Detection and Ranging) sensors to AI-powered drones could enable farmers to estimate timber or sugarcane production. Indo-Israel research collaborations could focus on building AI-enabled software to perform faster soil analysis. This technology will create accurate 3D maps that can be used for planting, planning, irrigation, and estimating nitrogen levels, helping farmers plan adequate fertiliser inputs for optimal crop growth. A strengthened collaboration between the two countries in drone technologies would help India address the problem of low mechanisation levels in agriculture. Furthermore, it would empower farmers to make more informed production decisions leading to increased yield quantity with improved quality, minimising crop failures. While the affordability of drones for the average Indian farmer is questionable, the Indian government has been addressing it by offering subsidies for purchasing drones.
Water Technologies
A 2018 report by the NITI Aayog finds that 600 million people face high to extreme water stress. India’s increasingly erratic monsoon adds to this challenge. The problem gets compounded by the significant percentage of rural households that solely depends on agriculture for their livelihood. Since 2022, cereal prices in India have spiked and will likely remain elevated due to lower production from scanty rainfall. In February, cereal inflation peaked at 15 percent and 18 percent for urban and rural areas, respectively. India’s rain-fed agriculture is in dire need of the latest technologies that ensure adequate water supply to crops.



Source: CMIE Database

Strengthened cooperation with Israel under the  2016 ‘Water Resources Management and Development Cooperation’ MoU can address these water conservation and resource management challenges by building new water technologies and supply systems that transport water to arid regions. Indian companies and official delegations regularly visit the WATEC (Water Technology and Environment Control Conference) biannual event, which showcases Israel’s water and energy technologies. Jal Shakti Minister Gajendra Singh Shekhawat’s visit to Israel in 2019 further boosted this cooperation.

Indo-Israel research collaborations could focus on building AI-enabled software to perform faster soil analysis.


Israeli water companies have set up infrastructure projects in India to ensure water availability. In 2019, an Israeli drip irrigation company, Metzer Group, inaugurated a plant in Hyderabad as a joint venture with India’s Skipper Ltd. Shortages of power supply for pump sets and water for irrigation have caused Indian farmers to suffer crop losses on many occasions. In such a scenario, drip irrigation can play a transformative role, in cultivating high-value crops like bananas, sugarcane, cotton and paddy, especially for groundwater-dependent farmers facing frequent load-shedding. Higher agricultural productivity will boost rural incomes and reduce input costs. Israel’s IDE Technologies is building desalination plants in India, which play an instrumental role in addressing the issue of water scarcity in India’s rural coastal areas. IDE has built India’s largest desalination plant in Jamnagar, with a capacity of 160,000 cubic metres daily. These plants can  address inter-state water disputes, especially in Southern India. However, capital-intensive desalination plants may not be viable in rural geographies. Here, atmospheric water generators (AWG) can be a cost-saving alternative by converting air humidity into drinking water. Israel’s Watergen and India’s SMV Jaipuria Group’s 2022 joint venture seeks to build water-from-air technologies over the next three years, with investments of over US$50 million, including a manufacturing plant.

While India’s drone industry has witnessed positive regulatory changes, it bears the high costs of lithium-ion and lithium-polymer batteries and the lack of domestic manufacturing capacity.


Joint ventures between Israeli and Indian companies in building water technologies can potentially address India’s water requirements for drinking and agriculture. Water cooperation can open new possibilities for India to develop its domestic manufacturing capabilities while addressing resource constraints.
The way forward
In May 2023, the Indian Institute of Technology (IIT) Madras signed a Letter of Intent (LoI) with Israel to build an ‘India-Israel Center of Water Technology’ for joint research in water resources management and technologies. It also aims to build human capacity to ensure the implementation of Israel’s best technologies suited for Indian requirements and pilot sustainable technologies to ensure India’s water security. While India’s drone industry has witnessed positive regulatory changes, it bears the high costs of lithium-ion and lithium-polymer batteries and the lack of domestic manufacturing capacity. India-Israel cooperation in training drone pilots and designing and manufacturing drones can address this mismatch between the supply and demand of talent in this space. The ban on drone imports has highlighted the need for component manufacturers in India. Drone adoption in agriculture can potentially create 100,000 job opportunities in three years. Institutional collaborations and joint ventures between India and Israel can benefit India’s youth by boosting employment opportunities. Indian youth will acquire better technical skills and know-how to develop innovative solutions to address India’s water and food security challenges.

Kanishk Shetty is an intern at the Observer Research Foundation

### Israel’s Silicon Wadi: A promising semiconductor partner for India

Recent reports of the Indian government likely to approve an INR 25,000 crore scheme for spurring semiconductor manufacturing in addition to the existing INR 76,000 crore production-linked incentive (PLI) scheme are important steps towards making India a semiconductor hub. This additional funding will support commercial entities engaged in various aspects of semiconductor manufacturing, such as fabs, display fabs, compound semiconductors/silicon photonics/sensors fabs, semiconductor packaging, and designing. As it expands its ambitions in this strategic sector, India is mobilising support from like-minded partners. With its technical expertise, Israel can potentially become India’s key partner. Tel Aviv’s technological determinism driven by innovation and its conducive startup environment has contributed significantly to its recognition as a ‘Startup Nation’ and the Silicon Valley or Silicon Wadi (valley in Hebrew) of West Asia. While its role is negligible in the foundry segment of the supply chain, Israel has made enormous strides in the research and designing of chips to establish its growing role in the global semiconductor industry. This article delves into Israel’s semiconductor prowess and explores how existing frameworks on technology cooperation between New Delhi and Tel Aviv can open the avenue for joint effort in chip manufacturing.

Intel’s pioneering tech revolution fueled domestic startups in the fab and fabless supply chain segments.

Israel’s strides in the semiconductor industry
The story of Israel’s semiconductor journey began in the 1970s, when in 1963, Charlie Sporck, an American engineer, during his stint at Fairchild Semiconductor, a company formed by semiconductor stalwarts Bob Noyce and Gordon Moore, initiated the process of offshoring the assembly of semiconductor chips to Hong Kong. Within a decade, almost all United States (US) chip makers had undertaken offshoring. This phenomenon put East Asia and Southeast Asia on the global semiconductor map, benefiting Israel from the offshoring of allied research and development (R&D) centres. Intel Corporation was the first to set up its R&D centre at Haifa in 1974, followed by Texas Instruments, Advanced Micro Devices, National Semiconductor, Broadcom, Qualcomm, and many other US chip companies. Over the years, renowned semiconductor companies from Japan, South Korea, and China followed suit. Israel’s tumultuous history and the ever-widening security challenges arising from a hostile neighbourhood did not stop its march in the semiconductor R&D. Intel’s pioneering tech revolution fueled domestic startups in the fab and fabless supply chain segments. Israeli startups successfully complemented the existing foreign chip companies, leading to the merger and acquisition (M&A) of some of them. Some significant M&As are as follows: Table 1: M&As in the Israeli semiconductor industry



Major Semiconductor Company
Israeli Semiconductor Startup
M&A deal Value (in US$)


Intel
Mobileye
15.3 billion


Intel
Tower Semiconductor
5.4 billion


Nvidia
Mellanox Technology Ltd.
6.9 billion


KLA-Tencor
Orbotech
3.4 billion




Intel
Habana Labs
2 billion


Amazon
Annapurna Labs
350 million


Sony
Altair Semiconductors
212 million



Source: Data compiled by the author Intel’s famed microprocessor 8088, incorporated into IBM Personal Computer (PC), the first PC to use Microsoft’s Disk Operating System, was born in Israel. This success for Intel and Microsoft eventually spawned Windows-based computing. For Intel, Israel has been the most profitable investment, with the company’s Israel arm designing subsequent microchip processors like Pentium MMX, Banias, Marom, Yonah, Centrino, Sandy Bridge, Ivy Bridge, Alder Lake and most recently, Raptor Lake. Israel’s tech lead extends to chip manufacturing and exports part of the supply chain despite not having a large domestic market. Having the first-mover advantage, Intel took the lead by setting up fabrication plants at Jerusalem and Kiryat Gat, near Tel Aviv. Its semiconductor industry generated about $19.8 billion in revenue in 2020 and is projected to reach $41.6 billion by the year 2025. The trend towards self-reliance and the imperative of reducing dependence on traditional foundries in East Asia have funnelled significant investments by Western companies that are majorly active in R&D into fabrication plants in Israel. For instance, Intel is investing US$10 billion to expand its Fab 28 unit at Kiryat Gat while constructing another facility, Fab 38, at the same location to cement its position in the foundry business, with a fresh investment worth US$25 billion, its largest single investment in Israel. Intel has also acquired Tower Semiconductors, an Israeli company in the foundry segment of the semiconductor industry with two operational fabs, to ramp up its chip manufacturing capabilities.

The trend towards self-reliance and the imperative of reducing dependence on traditional foundries in East Asia have funnelled significant investments by Western companies that are majorly active in R&D into fabrication plants in Israel.


The domestic semiconductor industry has also contributed to modernising the Israeli Defense Forces, with SemiConductor Devices (SCD) developing chips to enhance infrared night vision and also integrating the chips into Israel’s high-tech Iron Dome missile defence system. The Israeli success model is attributed to investments in human capital, creating a pool of talented scientists and engineers, and fostering innovative disruptions.
Opportunity for India
The increasingly challenging and complex geopolitical and geo-economic environment, where the United States has adopted export control regimes to block the crucial chip  technology to China and the ascending Chinese belligerence vis-à-vis Taiwan, brings to light the vulnerabilities of established hyper-specialised supply chains. Export controls on China by the West and the ‘China+1’ strategy adopted by businesses provide India with a window of opportunity to rekindle its semiconductor industry. As India aspires to become a global semiconductor hub, Israel can be a model to follow and a partner to work with. Science and Technology (S&T) form the bedrock of bilateral cooperation between New Delhi and Tel Aviv. The India-Israel Joint Committee on S&T came into being after signing the S&T Cooperation Agreement in 1993, a year after establishing full diplomatic relations. The synergies achieved in defence cooperation can also reflect in the commercial avenues of semiconductor manufacturing. Over the years, India and Israel have signed Memorandum of Understandings (MoUs) to enhance technology, innovation and industrial research cooperation. The 2017 India-Israel Industrial R&D and Innovation Fund, followed by the 2020 bilateral programme signed between Startup Nation Central and India’s International Center for Entrepreneurship and Technology or iCreate, are steps to accelerate innovation and technology cooperation. Building on these existing frameworks, India’s Council of Scientific and Industrial Research and Israel’s Directorate of Defense Research and Development inked an MoU in May 2023 for research collaboration in high technology, including semiconductors.

The International Semiconductor Consortium, a joint venture by Tower Semiconductors and Abu Dhabi-based Next Orbit Ventures, has announced investments worth US$3 billion to set up a fab at Mysuru to manufacture 65-nanometre analogue chips.


Semiconductor R&D could be a focus area for collaboration considering the complementary strengths of both partners—while Israel has shown its mettle in R&D, one-fifth of the world’s semiconductor designers are from India. Additionally, unlike Israel, India has a sizeable electronics manufacturing market, expected to touch US$300 billion by 2026. These complementaries provide the semiconductor industry with a vast domestic consumer base. India’s chip market is set to expand to US$110 billion by 2030, accounting for 10 percent of the global market. Both countries have initiated some nascent steps toward this end. For instance, the International Semiconductor Consortium, a joint venture by Tower Semiconductors and Abu Dhabi-based Next Orbit Ventures, has announced investments worth US$3 billion to set up a fab at Mysuru to manufacture 65-nanometre analogue chips. With the acquisition of Tower Semiconductors, this investment provides Intel with a gateway into Indian semiconductor manufacturing.
Recalibrating supply chains
India-Israel cooperation through the I2U2 (India, Israel, the United Arab Emirates (UAE) and the United States) has set the stage for reigniting multilateralism for resilient supply chains of emerging and critical technologies. The ongoing negotiations for a Free Trade Agreement also augur closer cooperation on semiconductor manufacturing. After successfully collaborating on co-developing the high-tech Barak-8 missile defence system and working on agro-tech, the untapped potential of semiconductor manufacturing can enhance and upgrade the New Delhi-Tel Aviv strategic partnership to sail through the increasingly choppy waters of instability amidst changing geopolitical dynamics.

Shourya Gori is a Security Studies Programme Intern at ORF Mumbai.

### Erdoğan retains power in Türkiye

Türkiye’s elections had a divided build-up towards voting day, and the results reflect how the country was feeling politically. The first-ever runoff election in the country came on the back of a population facing a variety of concerns and grievances. Many thought that the Opposition leader, Kemal Kiliçdaroğlu, was the right man at the right time to end Recep Tayyip Erdoğan’s grasp on Turkish power. But as the results of the runoff drew closer, Erdoğan and his party's—the Justice and Development Party—return became clearer. The 2023 elections came in the midst of natural tragedy, a continuing economic crisis, and geopolitical challenges in and across the region. Based on these metrics, Kiliçdaroğlu, dubbed by some as ‘Türkiye’s Gandhi’ or ‘Gandhi Kemal’, was seen as a favourite. However, while it was believed the February earthquake that devastated the country and neighbouring Syria would ring the death knell on Erdoğan’s re-election campaign, the runoff gave him just enough room to rally a final concoction of nationalism and religion to cross the finishing line. He did so with the help of people such as ultra-nationalist Sinan Oğan, whose vote percentile put him in third position in the elections and, therefore, in the king maker’s spot.

The Kurdish population, around which much of the ‘resentment politics’ was afloat, arguably did not vote strongly enough in the runoff for the ‘secularist’ Kiliçdaroğlu as he joined hands with the right wing in his last-ditch effort to beat Erdoğan.


Some of the outcomes of these elections have been taken from global political cues of the recent past. The success of ‘strong man’ politics across continents has continued, and the bubble of a homogenous liberal voting block to counter it has been burst, not only in Türkiye but also in other countries—for example, the voter base split between Hillary Clinton and Bernie Sanders in 2016. To push back against this, Kiliçdaroğlu even tried a last-ditch effort towards an anti-immigration stance, garnering support from Türkiye’s far-right Victory Party and its leader Ümit Özdağ . By the end of it, ideology became a byproduct of the realism required to secure the numbers. The Kurdish population, around which much of the ‘resentment politics’ was afloat, arguably did not vote strongly enough in the runoff for the ‘secularist’ Kiliçdaroğlu as he joined hands with the right wing in his last-ditch effort to beat Erdoğan. Erdoğan’s return was celebrated on the same day as the fall of Constantinople—today, the city of Istanbul—on 29 May 1453, when the Ottoman Empire captured the capital of the Byzantine Empire. Such narratives have been commonly attributed to and used by Erdoğan. İbrahim Kalın, one of Erdoğan’s senior-most aides, tweeted out this very aspect of the victory a few hours after winning the ballots. Erdoğan’s politics has very often been described (and contested alike) as a ‘neo-Ottoman’ design, i.e., it came with an aim to restore the erstwhile empire’s glory in modern times using an Islamic-bent ideology as fuel. In 2020, Erdoğan declared the famous Hagia Sophia as a mosque, and not a museum, following a court ruling. On the eve of elections, he led prayers at the now mosque, a significant iconographic moment to rally his conservative, but edgy, support base. Türkiye’s relations with the world post the 2016 coup attempt became more strained as Erdoğan saw a direct challenge to his power both from within and from outside, specifically those aligned with his ideological competitor, Fethullah Gülen, a cleric and ideological competitor living in self-imposed exile in the United States since 1999. However, from the Western perspective, Türkiye, a critical NATO ally, was often envisaged as a ‘model and modern Muslim state’ that could have an ideological impact across its surroundings in the Middle East. The Bosphorus Strait is seen as dividing the country between Europe and Asia, acting as a gateway for such thoughts.

From the Western perspective, Türkiye, a critical NATO ally, was often envisaged as a ‘model and modern Muslim state’ that could have an ideological impact across its surroundings in the Middle East.


However, Ankara’s relations with the West under Erdoğan have never been absolute, despite being the only Muslim majority country to become a member of NATO in 1952. Today, Albania, which joined NATO in 2009, is the only other Muslim majority member. In the recent past, as tensions with the West rose, Türkiye, pushed by economic and strategic factors, started to have better relations with the likes of Russia and has improved its strained ties with regional Islamic powers such as Saudi Arabia and the United Arab Emirates. The Ukraine conflict saw Ankara hedge its bets even further, making it  a useful ally for both Washington D.C. and Moscow. In the run-up to the 2023 elections, Kiliçdaroğlu even accused Russia of trying to interfere in the elections in favour of Erdoğan. Beyond its policy towards the West, Erdoğan is expected to continue Türkiye’s foreign policy along the trajectory it had been moving towards previously—one that is grounded in achieving its national interest first, even before its alliance obligations. Finally, there were questions if Kiliçdaroğlu’s win would have softened Turkish support for Pakistan’s stance on Kashmir, specifically after New Delhi’s very public deployment of capacity to provide Türkiye with aid after the earthquake. In fact, there were no indications towards such a shift if there was to be a power change. The issue of Kashmir feeds well into a ‘pan-Islamic’ narrative regionally and domestically, specifically amongst voters, which even Kiliçdaroğlu may also have employed to consolidate his position.

Kabir Taneja is a Fellow with the Strategic Studies programme at the Observer Research Foundation

### Gaining momentum in the Israeli-Japanese relations: The economic and defence dimensions

Looking at the current trajectory of Israeli foreign policy, it is discernible that its politico-diplomatic and economic footprints are on a significant rise in the wider Asian region. All Israeli governments, regardless of their political ideologies, for several decades, have been making concerted efforts towards strengthening partnerships with most Asian countries. Such undeterred foreign policy overtures towards Asia has intensified, especially following the establishment of its full diplomatic relations with then-emerging countries, such as India and China (in 1992). Likewise, its ties with Japan and South Korea are also witnessing exponential growth in recent years. The increasing emphasis being given by these Asian countries, mostly for trade and business (both energy and non-oil), and technological cooperation with the wider Middle Eastern region, has also coincided with Israel’s diplomatic moves to expand its engagements with the former. Within this ambit, the Israeli-Japanese governments are continuously working to scale their bilateral ties to newer heights and create a win-win scenario.

The rising frequency of high-level reciprocal bilateral visits of leaders during the last two decades has clearly demonstrated the appetite to enhance cooperation.


With both countries commemorating the 70th year of diplomatic relations in 2022, they have made systematic moves to enhance their cooperation in almost all the traditional sectors—economic, science and technology, defence-security, people-to-people, culture, and so on. The rising frequency of high-level reciprocal bilateral visits of leaders during the last two decades has clearly demonstrated the appetite to enhance cooperation. As a result of the political goodwill of Israeli and Japanese leadership to boost relations, particularly from the mid-2010s onwards, there has been a simultaneous expansion not only in the financial-commercial sectors but also in defence cooperation. Economic ties between Israel and Japan are progressing, with bilateral trade volume touching US$3.5 billion in 2021-22. In late 2022, the two countries initiated the process to sign a Free Trade Agreement (FTA) to enhance bilateral ties. It is noteworthy that the first meeting of a possible Japan-Israel Economic Partnership Agreement (EPA), albeit virtually, was held in March 2023. Such mechanisms will prove to be beneficial to the firms operating in both countries, creating favourable conditions for both to enter each other’s markets.
Tech collaboration
Presently, many Japanese tech firms are present in  Israel; in 2021, their investments were estimated at US$2.9 billion, although this is small when compared to the domestic (Israeli) and the United States (US) investors; however, the recent entry of newer Japanese telecommunications companies, such as Nippon Telegraph and Telephone (NTT), along with a few other multinationals, have created more economic opportunities for both. Today, there are about 85 Japanese companies present in Israel, with investments worth US$13 billion since 2000, accounting for 15.8 percent of all foreign investments in the Israeli tech industry. This explains the salience of technical cooperation, and economic and investment ties between the two technologically advanced countries.

The introduction of direct El Al (Israeli national carrier) flights between Israel and Tokyo and the signing of the ‘holiday-work visa’ in March and April this year, respectively, will likely lead to further growth in the socio-cultural-economic ties.


The visits of the Israeli Prime Minister to Japan in May 2014 and that of his then-Japanese counterpart, Shinzo Abe, to Israel in January 2015, had played an instrumental role in making the investment climate conducive. This resulted  in a considerable surge in investment. Now, the introduction of direct El Al (Israeli national carrier) flights between Israel and Tokyo and the signing of the ‘holiday-work visa’ in March and April this year, respectively, will likely lead to further growth in the socio-cultural-economic ties. Professionals from the high-tech sectors are expected to benefit from this formal arrangement.
Collaboration in the defence sector
Defence is another important domain that Israel and Japan are interested in scaling up. This is crucial for Israel as it is in a continuous quest for defence partners—for exports of its armaments, security partnerships, and for joint collaborations in defence technology. Moreover, with a limited capacity to absorb its locally manufactured weapons systems and to spur its research and development (R&D) programmes, Israel needs clients for generating export revenues from various markets. In recent years, Israel’s defence industries have had to contend with challenges stemming from the global arms landscape, which has become increasingly competitive. Such developments have also put additional pressure on Israeli defence firms to compete in existing and new overseas markets—Japan could potentially be a candidate. As security relations remain an integral part of Israel’s political ties with different countries, a similar pattern can also be expected with Japan sooner rather than later. In 2021, Israel’s total global arms export saw a record high at US$11.3 billion, which was at US$8.3 billion in 2020. For a few years, the Asia-Pacific accounted for a major portion of such Israeli exports; in 2021, it was 34 percent. Favourable groundwork to boost defence ties was laid during the visit of then-Israeli Defence Minister, Benny Gantz, to Japan in September 2022 (the first since February 2012), resulting in the signing of the Memorandum of Defence Cooperation, to “widen defence, strategic and military exchanges”, and importantly, to collaborate in the joint development of military technology. A similar agreement was also inked in September 2019. In the presence of such official documents, the furtherance of defence ties looks promising.

Israel’s defence industries have had to contend with challenges stemming from the global arms landscape, which has become increasingly competitive.


Notwithstanding the politico-economic incentives, Israel could accrue from transferring arms to Japan; the latter also searches for defence partners as it is embarking on a major military modernisation drive, triggered by the increasing threat perceptions from a militarily emboldened China, and also North Korea. Due to such looming security threats and challenges, Japanese decision-makers unveiled (in December 2022) a US$52 billion defence budget for 2023 for the Japanese Self-Defence Forces (JSDF). A bulk of this amount would be utilised in the procurement of armaments, defence R&D programmes, and to support its “domestic manufacturing and maintenance capacity”. This, therefore, provides an opportunity for Israeli firms to get closer to the Japanese defence establishments to clinch arms deals. With its advancement in the field of missiles, anti-missile systems, Unmanned Aerial Vehicles (UAVs), naval defence items, electronic warfare systems, airborne early warning systems, arms and ammunitions, communication and targeting systems, etc., Israeli defence firms (state and private) should endeavour towards securing arms deals with Japan. Establishing defence ties appear to be timely for Israel, too, as it looks for new arms markets while Japan is gradually expanding its military-security cooperation beyond its traditional partners, including the US and the United Kingdom (UK). Indeed, a fusion of Israeli and Japanese defence technologies could result in significant innovations and co-production of equipment suitable to both the countries, which, then, can be exported to potential buyers in the region and beyond. The participation of 14 Israeli defence industries’ delegations at the Defence and Security Equipment International (DSEI) exhibition, held in Tokyo in March 2023, is construable as a prelude to more interactions in this prospective sphere. As a beginner, unmanned aerial systems (UAS) is one category in which Israel and Japan can jointly collaborate, and this will make sense, considering Japan’s ambitions to use hundreds of attack drones in the next couple of years.

A fusion of Israeli and Japanese defence technologies could result in significant innovations and co-production of equipment suitable to both the countries, which, then, can be exported to potential buyers in the region and beyond.

Cooperation in the cyber domain
Beyond the traditional security areas, both countries are cognisant of various cybersecurity threats. Nearly a decade ago, they foresaw a significant potential for cooperation in the cyber domain, given their strengths in this area. Due to this, the then-Israeli government (in 2015) approved an investment plan aimed at strengthening ties with Japan in sectors including space- and cyber-related research and development. To give more impetus, another accord—primarily to increase cooperation in R&D, information exchange, and training programmes—was signed in late 2018. As Israel is considered the global cybersecurity ‘powerhouse’, Japan should establish relations with relevant Israeli firms and work together towards protecting the country’s critical infrastructures from cyberattacks, which were recorded to be the second highest, next to the US, between September and November 2022. The increment in Japan’s defence budget should also be beneficial for the Israeli cyber firms, too, as it  can look forward to winning new contracts from the Japanese government. Israeli firms could provide suitable solutions according to the needs of the Japanese authorities. In the long run, the cooperation can well extend to digital health, artificial intelligence, and robotics, with the possibility of exporting, at a later stage, jointly-developed technologies to other clients worldwide. The recent developments clearly suggest that Israel and Japan have strong mutual strategic interests to take ties to the next level. This has enabled them to consciously overlook certain political differences, mostly related to the Palestinian issue, which, in reality, has become a diminishing issue. Japan balances its ties between Israel and the Palestinians tactfully and with the utmost craftsmanship. While Tokyo continues to support a two-state solution (vis-à-vis Israeli-Palestinian conflict), this factor will unlikely cause a major dent in its present endeavours to build stronger strategic ties with Israel.

The increment in Japan’s defence budget should also be beneficial for the Israeli cyber firms, too, as it  can look forward to winning new contracts from the Japanese government.


The realisation on both ends that they (Israel & Japan) have more to gain out of robust cooperation with each other, due to convergences of interests—economic, defence, strategic, technological, and political—is what is now propelling the relations. The existing direction of the overall cooperation signals both countries’ investment in relations, and they would do whatever it takes to preserve the growing momentum, not letting any third party stymie the steady progress.

Alvite Ningthoujam is an Assistant Professor at the Symbiosis School of International Studies (SSIS), Symbiosis International (Deemed University), Pune

### Can China deliver in West Asia?

As the foreign ministers of Saudi Arabia and Iran met in China to commence a thaw in relations, Beijing has positioned itself as an ‘alternate’ power, keeping a policy of cooperation, consultation, and non-interventionism at the forefront. With serious discussions over the conflict in Yemen now underway, can China deliver as a mediator and peacemaker in West Asia? Beijing clearly puts a lot of weight behind the success of this initiative, as it leverages its rapidly growing relations with Tehran and Riyadh while marketing itself as a power standing for peace and stability. The fact that Wang Yi, former foreign minister and now Director of the Chinese Communist Party’s Foreign Affairs Commission, was present last month with lower-ranking representatives of Saudi Arabia and Iran to announce the resumption of diplomatic ties between the two, showcased the weight that China was willing to put behind this exercise. In a world where Beijing is increasingly seen as a disruptor, this offered a moment of statesmanship for President Xi Jinping in a geography where, until now, the West has been the traditionally dominant external influence.

Beijing markets its assistance in the region without such strings attached, with promises of vast economic cooperation without ethical or value-based demands that substitute economic or military assistance.


However, a fundamental question remains: Can China truly deliver? It is one thing to strategically benefit from the work done by the Western and regional states when it comes to building dialogue in the region, but another to be a guarantor of that dialogue, and to intricately place oneself as a fulcrum of power both politically, and by association, militarily. For a long time, Beijing has maintained a similar policy towards West Asia as India, i.e., of not interfering in inter-regional politics. In fact, China has been a critic of American interventionism, not only from a tactical point of view such as the war in Iraq, but strategic as well, disagreeing with Washington’s designs of pushing and tugging on regional leaders for them to align with American strategic thinking. Today, Beijing markets its assistance in the region without such strings attached, with promises of vast economic cooperation without ethical or value-based demands that substitute economic or military assistance. This is an attractive proposition to many in the region. The Saudis started to drift away from the United States (US) not long after heir-apparent Crown Prince Mohammed bin Salman (also known as MbS) stamped his authority over the House of Saud. The Crown Prince, only in his late 30s, has a massive agenda in mind. He aims to build the Kingdom into a global economic hub that is not exclusively reliant on oil. For this, MbS needs access to global markets, particularly Asian markets, and even more so, China’s US$18 trillion economy. Aramco, Saudi Arabia’s state-run oil company, posted a profit standing at US$ 161.1 billion for 2022. Some estimates suggest this is the highest profit posted by any corporate in modern history. This came on the back of Riyadh’s close cooperation with an embattled Moscow through the OPEC+ mechanism, much to the dismay of the White House.

Beijing only platformed an ongoing process while Saudi Arabia leveraged China’s good relations with Tehran to push a struggling Iran into agreeing towards potential normalcy, something the US could not have done.


MbS orchestrated the above by using the fault lines in Riyadh’s relations with Washington D.C., his own ruptures with the American Democrats, and the Ukraine crisis that has brought forward a great power competition. In the event of a fallout, both the Saudis and Iranians will lose face, but otherwise, lose little. Beijing, on the other hand, would lose much more—both a perception of its role in bringing ‘peace’ in a traditionally conflict-riddled region and a setback to Chinese power projection. China, at the end of the day, has brought the two parties to agree to open embassies, which were shut down in 2016 over Saudi Arabia’s decision to execute a prominent Shia cleric. A move towards this was already in play, with regional actors such as Iraq and Oman facilitating talks between the two parties. The narrative of a diplomatic coup having been orchestrated did not come as a difficult one for China. In fact, Beijing only platformed an ongoing process while Saudi Arabia leveraged China’s good relations with Tehran to push a struggling Iran into agreeing towards potential normalcy, something the US could not have done. Reports also suggested that Iran’s Supreme Leader, Ayatollah Khamenei, was frustrated at the lack of progress over normalisation talks in the past two years, giving both Riyadh and Beijing a pressure point to work with. This also fed into a larger discontent in the Arab world over Washington’s nonchalance on the seriousness of a fast-developing threat from Iran while simultaneously isolating another regional power, Israel, which was hoping to rope in MbS into the Abraham Accords architecture.

Ceasefire agreements of the past had failed to hold, and the regional countries brokering talks today also tried the same back then. The only new player on the chessboard is China.


Despite the diplomatic normalisation progressing positively up until now, fundamental issues that divide Saudi Arabia and Iran will remain. While theological and ideological rapprochement is unrealistic, geopolitical fissures such as the war in Yemen, the role of the Islamic Revolutionary Guard Corps (IRGC) in supporting militias in places such as Syria and Lebanon, and peace and stability across the Strait of Hormuz remain up in the air for now. Ending the war in Yemen will be the litmus test. Ceasefire agreements of the past had failed to hold, and the regional countries brokering talks today also tried the same back then. The only new player on the chessboard is China. Beijing’s victory here is that of offering a table to sit across with no strings attached. It looks at both the Arab states and Iran as big business opportunities; and as the US tightens the screws around the rise of China, the middle powers are hedging their bets to secure long-term interests. The question remains: Is China willing, and able, to play the role of the traditional superpower? Is it willing to be a political and military guarantor? We are set to get answers to these questions soon.

### India and Israel can be pivots in reglobalising Asia

Though the relationship between India and Israel has, on occasions, been referred to as a “marriage made in heaven,” they have traversed from being estranged partners due to political-ideological reasons to becoming strategically inseparable partners in recent times due to a combination of economic, political, ideological, and security factors. This holds promise because, at the macro level, both countries are strategic players in their own right in a rapidly deglobalising landscape. At the micro level, they are part of the evolving Asian and West Asian regions, which are in the throes of tectonic changes. A combination of economic consequences of the Russia-Ukraine conflict and a series of reconciliation moves among traditional rivals in the region has revived interest in energy-rich West Asia. In the economic domain, the International Monetary Fund’s World Economic Outlook forecasts a 3.2-percent GDP growth for 2023 and 3.7 percent for 2024 for the West Asia and North Africa region. Emerging and developing Asia is tipped to grow to 5.3 percent and 5.2 percent, respectively. This, in comparison to the advanced economies that are pegged at 1.2 percent and 1.4 percent, is miles ahead.

The world’s eyes are glued on India not just because of what it is at present, but for the potential it bears for the future.


Situating the two Is (India and Israel) in this context—6.1 percent and 6.8 percent; and 3 percent and 3.1 percent, respectively—creates the potential for bountiful synergies, especially since the volume of India-Israel trade has remained below potential. The world’s eyes are glued on India not just because of what it is at present, but for the potential it bears for the future. In this context, an important way to boost bilateral trade is by moving swiftly on the India-Israel Free Trade Agreement talks. The India- United Arab Emirates (UAE) Comprehensive Economic Partnership Agreement, which includes the services sector and was signed in less than 90 days after negotiations began, could serve as a useful template. The United States (US)-China rivalry and its evolving manifestation in West Asia and the Indo-Pacific region has highlighted India’s role, which could potentially tip the balance between the two superpowers. In recent years, India has become more active in the region, increasing its regional influence and strengthening its cooperation with the US in various forms. This includes the I2U2 minilateral grouping with Israel and UAE. Designated by some as the 'partnership of the future,' I2U2 aims to energise economic cooperation among its members in various domains, such as food security, technology, new energy, infrastructure, health, space, and innovation, to further regional stability.
Out-of-the-box approach
While improvements in India-Israel bilateral relations are incremental, a touch of dynamism could be added by adopting a regional and minilateral approach to the relationship. Taking an out-of-the-box approach and building on the India-UAE and Israel-UAE economic partnership agreements, an India-Israel-UAE trilateral trade agreement could be signed. Such steps could free existing bottlenecks caused by overburdening regulations, substantially expanding the trade volumes between and among the three countries. A combination of UAE capital, Israeli technology and the Indian market in various sectors could yield win-win-win results. It is in this spirit that the International Federation of Indo-Israel Chambers of Commerce initiated a partnership in 2021 wherein an Israeli company – Eccopia – produced innovative water-free robotic solar cleaning technology in India for a project in the UAE. Confident in replicating such partnerships in other sectors, the three countries estimate the innovation and international business potential of their cooperation at US$110 billion by 2030.

The UAE hosted the ‘UAE and Israel Uniting with Africa’ event in 2020, which India could easily join in a trilateral format given its trusted and influential role in Africa.


Another example of such a trilateral partnership is an India-Israel-UAE joint venture MoU signed in 2022. This facilitates Israel’s Tower Semiconductor and UAE’s Next Orbit Ventures to invest US$3 billion to establish India’s first semiconductor manufacturing facility in the state of Karnataka. Further, the UAE hosted the ‘UAE and Israel Uniting with Africa’ event in 2020, which India could easily join in a trilateral format given its trusted and influential role in Africa. One more innovative minilateral cooperative mechanism worth exploring is the possibility of expanding the I2U2 to include other like-minded partners, such as Japan, South Korea, and Singapore, among others. Efforts are already underway at the Track 2 levels to tap this space. The fact that Japan and South Korea have broken new diplomatic ground a few weeks ago makes such collaboration possible, thus helping the India-Israel cause. Among a few promising ideas that could drive such new minilateral arrangements is the establishment of an India-Israel-led ‘Blue Economy Fund’, which could include other partners. Blue economy is an emerging concept for ocean governance that harnesses the economic potential of oceans in environmentally sustainable ways. It could positively impact global issues like carbon neutrality, green energy, and energy security, using AI solutions, all issues that gel well with India’s SAGAR (Security and Growth for All in the Region) that was first proposed in 2015. Such collaboration brings to the fore the role of middle powers in a fragmented world. In the current scenario, countries like India and Israel are more focused on promoting five economy-oriented Cs – capital, connectivity, commerce, collaboration, and climate – rather than just harping on politics and security issues.
Innovation and technology
As superpower rivalries continue to escalate in the pursuit of advanced technologies, India and Israel have much to gain from increased cooperation in this domain. Both nations are leaders in technology and innovation, and the potential for collaboration in the high-tech sector is substantial.

India's expertise and its large and growing economy complement Israel's R&D and innovation capabilities, providing an excellent opportunity for joint advancement in R&D and innovation.


India has already launched its indigenous 5G technology, while a test bed for 6G was launched in March 2023. Working together across areas ranging from artificial intelligence, big data and semiconductors to renewable energies, healthcare, and agriculture could substantially benefit both countries, placing them at the forefront of these fields. India's expertise and its large and growing economy complement Israel's R&D and innovation capabilities, providing an excellent opportunity for joint advancement in R&D and innovation. Such collaboration could create additional opportunities for the two countries to extend their partnership to other countries in the region, with a particular focus on water management, counterterrorism, and emerging technologies. Expanding engagement between the two countries' tech start-up ecosystems should also be a priority. India has seen the establishment of 46 unicorns in 2021 alone, with over US$42 billion raised by its startups. Similarly, Israel has seen the rise of 33 unicorns with US$25 billion flowing in to support them. By joining forces, both start-up ecosystems can make significant gains. Adding the UAE to the mix could create a plethora of opportunities. In an age of hi-tech concentration, it is crucial to remember that there is great value in low-tech innovation. India and Israel could collaborate in this sphere to provide solutions to many problems in the Global South, which is India’s focus during its G20 presidency. India’s cheap digital payment system, for example, could be replicated and scaled up rather easily in other developing countries.

India and Israel could collaborate in this sphere to provide solutions to many problems in the Global South, which is India’s focus during its G20 presidency.


India's Adani Group's acquisition of Haifa port in 2022 has paved the way for increased cooperation between the two countries on both regional and local infrastructure projects, in addition to I2U2's integrated food parks and renewable energy projects worth US$2.3-billion in India. Another infrastructure project that has attracted India and Israel is the ‘India-Arabian-Mediterranean Corridor’ to Europe, which links ports in India, UAE, Saudi Arabia, Jordan, Israel, and Greece. Such projects could provide further opportunities for exploring new synergies both bilaterally and beyond.
Strategic Value Addition
Politically, while many ascribe domestic-ideological reasons for the recent growth in India-Israel relations, the relationship has now reached a state of maturity in which foreign policy continuity, irrespective of the political orientation of the governments in power, is one of the mainstays of both countries. This is evident on several fronts. One, successive Indian governments from different political mainstreams have forged ahead with their Israel policy and one of the chief foreign policy successes of the current government, ironically, is in West Asia. Two, the same is evident in Israel’s India policy which enjoys wide bipartisan support. Another indication of this formulation is that Israel’s Abraham Accords with Arab neighbours has so far won the active support of at least four governments. While the recent resumption of Saudi-Iran diplomatic ties will test Israel’s foreign policy further, it is interesting that India-Israel ties have remained dehypenated from both the Palestinian and Iran issues. This is testimony to the respect each of them has for the other’s strategic autonomy, which combines well with their pragmatic foreign policies. Looking ahead, defence and security ties will remain important in the face of growing regional uncertainty and global instability. In a rapidly changing global landscape, which is evident in the superpowers’ actions and perceptions in West Asia, building trust and long-lasting relationships is essential. India and Israel, with other partners, must explore and develop robust cooperation in multiple areas not only to help shape the developments in West Asia but also to facilitate shaping the future of an increasingly reglobalising, multipolar and multi-networked world.

### India-UAE-Israel Relations: From Normalisation to Complementarities, Collaboration and Cooperation

This article is a chapter in the journal — Raisina Files 2023.

From non-relations to clandestine engagements, to normalisation in ties—partnerships between India, Israel, and the United Arab Emirates (UAE) have transformed over the recent decades. The India-Israel-UAE trilateral in its current form offers a definitive example of a blend between Realism and Constructivism approaches in International Relations. By channelling Realpolitik, the three nations are allowed to give primacy to their national interest. At the same time, geopolitical and mainly geoeconomic realities, along with emerging non-conventional global crises, have led the three countries to cooperate on areas of mutual concern, for instance in building an India-Middle East food and energy corridor.<1> Given the geopolitical complexities vis-à-vis Israel’s independence in May 1948, India formally recognised the Jewish nation on 17 September 1950. However, owing to its concerns on Palestine, New Delhi took more than four decades to normalise its relations with Tel Aviv and soon, defence and agriculture became the bedrock of their bilateral ties. Strategic partnerships in multifaceted domains started only in June 2017, when by visiting Israel and Palestine separately, Prime Minister Narendra Modi signalled New Delhi’s decoupled approach.<2> The 1992 normalisation was primarily driven by shifts in the global geopolitical atmosphere with the disintegration of the Soviet Union. Under the Modi administration, geoeconomic drivers along with parallels in ideologies have led to a closer embrace with the Jewish nation.<3> Today, total trade between India and Israel stands at US$7.86 billion.<4> On the defence front, Israel accounts for about 8.48 percent of India’s total arms imports and is its fourth largest supplier after Russia (46 percent), France (27 percent), and the United States (12 percent). In terms of agricultural support, Israel has not only shared its agri-tech and water conservation technologies with India but has also established around 30 agricultural ‘centres of excellence’ across the country.<5> Akin to diplomatic attachés, Israel has deployed its agriculture and water attachés to India as a special appointment to assist in the country’s agricultural development.<6> Indo-Emirati relations, meanwhile, were for long anchored on the 3Es of energy, economy, and expatriates—and largely transactional. It was only in January 2017 that the two signed a comprehensive strategic partnership agreement, and relations started to flourish in multiple domains. Today, the UAE is not only India’s third largest energy supplier (US$20,320.22 million)<7> but is also its third largest trading partner with total bilateral trade standing at US$73 billion in 2021-22.<8> The UAE, on the other hand, was once Israel’s nominal adversary but informal relations between the two have existed since 2010. In November 2015, Israel opened its first diplomatic mission in Abu Dhabi.<9> Thus, at the bilateral level, India’s engagements with Israel and the UAE, and those between Israel and the UAE have been at an upward trajectory. The normalisation of UAE-Israeli relations under the banner of the Abraham Accords<10> brokered by the US during the pandemic, in August 2020, has paved the way for enhancing the trilateral relationship. It has also enabled the three partners to channel their unique strengths for future partnerships, among which is the establishment of a transregional order along the India-Middle East-Europe corridor. This transregional order is based on economic complementarities, potential vibrant ecosystem, and technological capabilities. In its true sense, the ‘normalisation’ of relations has pushed the countries towards three Cs: complementarities, collaboration, and cooperation. These developments have led some scholars to refer to the trilateral as an ‘Indo-Abrahamic Accord’—<11> reflecting New Delhi's newfound, trustworthy geopolitical space as it expands its clout in West Asia. Moreover, India’s stature as a South Asian giant is no longer a secret to the world. India's economic stability and growth, which has increased the country's purchasing power parity, makes it a lucrative market for foreign direct investments by partnering countries.<12><13>
The India-UAE-Israel Trilateral Cooperation
Eight months after the normalisation of relations between Israel and the UAE, India signed a trilateral partnership with the two regional players in May 2021. At present, the estimated US$110-billion deal by 2030 is focused on producing innovative robotic solar cleaning technology in India for a landmark project in UAE.<14> While the project has a single agenda, it is pegged with innovation and business potential, and therefore will play a crucial role in the two countries’ overall cooperation. Likewise, at the quadrilateral level, India-Israel-UAE, and the United States in October 2021 formed a minilateral aimed at economic cooperation. (This would later be named ‘I2U2’ in July 2022.) Meetings have been held at various levels—sherpa, foreign ministerial, and heads of state. While a number of conventional and non-conventional areas of mutual interest have been charted out—ranging from water, energy, transportation, space, health, and food security—emphasis is being given to catering to global as well as regional energy and food security challenges.<15> The minilateral aims to be inclusive and is seeking to involve both public and private sectors in initiatives in infrastructure, connectivity, low-carbon development, and public health. Thus, India’s engagement with its West Asian partners at both trilateral and quadrilateral levels aims to create a synergy of areas for cooperation.
Is India Planning for an Inter-Regional Connectivity Corridor?
Since September 2020, the US-brokered peace accord signed between the UAE and Israel has facilitated India’s trilateral level interaction with both its important West Asian partners.<16> Prior to this, India had managed to maintain a flourishing relationship with both Israel and the UAE individually, by effective application of its strategic autonomy in the region. Likewise, India and UAE signed a Comprehensive Economic Partnership Agreement (CEPA) in February 2022, coming into force in May 2022, which ensures free, open, and non-discriminatory trade between the two countries.<18> The comprehensive agreement guarantees greater access for UAE exports to the Indian market by reducing or removing tariffs on more than 80 percent of the products traded. A similar agreement is being negotiated by India and Israel to ease their bilateral trade.<19> India’s growing diplomatic bonhomie with Egypt and its increasing interest in the region indicates that the country is looking forward to signing a comprehensive inter-regional free trade agreement with several partners. Thus, a vibrant trilateral relation between India, UAE (in Persian Gulf) and Israel (in the Mediterranean region); comprehensive free trade agreements between the partners; and inclusion of other inter-regional players—all indicate that India is serious in its plan for a connectivity from Mediterranean to India via the Red Sea and the Gulf.<20> In November 2021, India’s External Affairs Minister S. Jaishankar met his UAE, Saudi, Egyptian, Greek, Israeli and Cypriot counterparts on the sidelines of the 12th Sir Bani Yas Forum held in Abu Dhabi.<21> The proposed corridor is likely to connect India, the Gulf, parts of Africa and Eastern Mediterranean, with regions in Europe. Still in its preliminary stage, such a connectivity corridor is akin to the International North-South Transport Corridor<22> and the Chabahar port<23> development initiatives by India which links Europe, Russia, Central Asia, Iran, and Afghanistan to India. While Russia and Iran are India’s partners in the latter two projects, America’s involvement along with UAE and Israel in the development of the connectivity corridor is the best example of India’s strategic autonomy at multilateral levels. Interestingly, by building these corridors, India along with its inter-regional partners is not only aiming to secure safe transit of freight but is also safeguarding its interests in the western flank of the Indo-Pacific. In a way, this is India’s own version of the Belt and Road Initiative.
Food and Fuel Corridor
Existing global food crises in many parts of the globe, heightened by the outbreak of COVID-19 and the ongoing European war, have created an escalating demand for food especially in West Asia. The region is dependent on Russia and Ukraine for much of its food requirements. As per a May 2022 Food and Agricultural Organisation (FAO) report, of the 50 countries dependent on both Russia and Ukraine for food, nearly 10 are in the West Asia and North Africa (WANA) region, whose combined dependence level on the two countries is above 30 percent.<24> At both trilateral and quadrilateral levels, India-UAE-Israel have been working on creating food corridors to address food insecurity issues in both South Asia and WANA. An India-Middle East Food Corridor—a new West Asia value supply chain—aims to harness the three countries’ commercial, investment, market, and technological synergies to form a tripartite alliance and become a food exporting powerhouse.<25> The probable food supply chain forged from innovative, agri-tech and climate-smart technologies is likely to effectively reconfigure commercial relations along the India-Middle East-Europe proposed connectivity corridor. At the same time, the route will also be used as an energy corridor for the inter-regional partners. The prolonged Russia-Ukraine war has created a supply-demand gap in food and energy and thus the two are the most critical components in the regions that will be served by the connectivity corridor. To be sure, the geopolitical and geoeconomic significance of all the three corridors—connectivity, energy, and food—is not new; the vitality of these projects rests on the fact that both UAE and Israel, individually, have been playing a critical role in advancing India’s food production and distribution. The strategic power and sustainability of the India-Middle East Food and Energy Corridor derives from the fact that it is organically developed and strengthened, first, at bilateral levels. By involving private sector, joint venture investment and bilateral public-private engagements, the partnering countries are seeking to ensure the viability of the corridor. For instance, Israel has been bilaterally involved in India’s agricultural sector since 2014 when it started creating Centres of Excellence (CoEs) across the country. Today there are 30 Israeli-developed CoEs in India that involve private companies and concentrate on farmers’ training, and effective use of agri-tech and smart-tech to increase crop yield. Likewise, since 2019, the establishment of food parks in India was already an integral part of UAE’s logistical plan ideated ahead of the I2U2 format.<26> Engagement beyond bilateral levels enables the partner countries to focus on employing a more sustainable food-water-energy nexus approach along the corridor. Thus, the US’s involvement in the I2U2 is critical as it ensures political commitment and would make the engagement more binding. While the US is not a benefactor of the corridors, its involvement in the inter-regional partnership provides it an edge by marking its presence in the strategic architecture of the Indo-Pacific. This is crucial for checking China’s growing commercial and strategic footprint in the Western Indo-Pacific, more specifically in West Asia, where the US is seemingly losing its foothold. There is a synergy in both the initiatives, therefore. Under the I2U2 project, UAE has pledged to invest US$2 billion in the construction of a series of integrated food corridors and parks across India. To incorporate food-water-energy nexus, the food parks are created in such a manner that they will simultaneously work towards increasing food production and reducing food wastage, conserve water, and employ renewable energy sources. At the same time, the corridor seeks to address food and energy security aspects in a more holistic manner by aiming to achieve three main goals—namely, increasing crop yields in India; enhancing farmer’s incomes by supplying them with high-quality seeds, equipping them with agri-tech facilities and marketing crop produce at better rates; and maintaining export-quality standards to cater to the South Asian and West Asian markets.<27> It will, therefore, address access, availability, utilisation and thereby affordability and stability aspects of food security.<28> While the use of the corridor ensures accessibility of food and fuel and increased production of crops by using climate-smart technology, and agri-tech addresses the availability aspect; excess and sustained supply helps in maintaining commodity price thus addressing affordability, utilisation, and stability components of food security. The second project emphasised in I2U2 and in the trilateral engagement is aimed at advancing a hybrid energy plant in Dwarka, Gujarat with a wind and solar energy capacity of 300MW. The US Trade and Development Agency (USTDA) and UAE’s International Renewable Energy Agency (IRENA) have pledged to invest in the proposal as knowledge and investment partners. USTDA has invested US$300 million in a feasibility study for the project. The involvement of private sector firms will enable the project to achieve India’s goal of reaching 500GW non-fossil fuel capacity by 2030. Thus, the success of the project will define India’s potential in becoming a global supply chain hub in renewable energy.<29> By leveraging the strengths of each partner—i.e., the US’s political commitment, Israel’s top-notch climate-friendly technologies, UAE’s investment capabilities, and India’s human capital, vast cultivable land and limited diplomatic hurdles to ease business prospects—the joint initiative could be a viable solution to meeting inter-regional food and energy requirements along the India-Middle East-Europe corridor. To conclude, the normalisation of Israel-UAE relations has enabled India to engage with its two vibrant West Asian partners at the bilateral, trilateral, quadrilateral and multilateral levels. Such multi-level engagements have helped the countries channel their 3Cs—complementarities, cooperation, and collaboration—in various aspects. Such results-oriented mindset is key in developing an inter-regional connectivity corridor along the Europe-Mediterranean-Gulf-India route. By employing a food-water-energy nexus approach, the three countries are aiming to strengthen their economic and political prospects along the Western Indo-Pacific. At a time when Indo-Pacific features heavily in India’s strategic calculus, more robust partnerships with the UAE and Israel will be crucial in meeting its strategic objectives in the region. After all, food, energy, and water are critical non-conventional strategic components of the future. By catering efficiently to the global supply chain, India and its inter-regional partners are marking their place at the global high table.
Endnotes
<1> Michael Tanchum, “The India-Middle East Food Corridor: How the UAE, Israel and India Are Forging a New Inter-regional Supply Chain,” The Middle East Institute, July 27, 2022. <2> Sanjeev Miglani and Tova Cohen, “India’s Modi Heads to Israel, Lifting the Curtain on Close Ties,” Reuters, June 30, 2017. <3> Manjari Singh and Chirayu Thakkar, “The Real Story Behind India and Israel’s Surprising Alliance,” Haaretz, February 8, 2022. <4> Naina Bhardwaj, “India-Israel Bilateral Trade and Investment Trends,” India Briefing, August 25, 2022. <5> Manjari Singh and Chirayu Thakkar, “India and Israel Mean Business, In Many New Sectors,” The Economic Times, February 13, 2022. <6> Manjari Singh, “Can I2U2 Address India’s Food Security Challenges?,” The Times of India, September 28, 2022.  <7> Director General of Foreign Trade (DGFT), “Import: Commodity and Countrywise,” Export Import Databank, 2022. <8> Embassy of India in Abu Dhabi, “Bilateral Economic and Commercial Relations,” Government of India. <9> Barak Ravid, “Exclusive: Israel to Open First Diplomatic Mission in Abu Dhabi,” Haaretz, November 27, 2015. <10> Under the Trump administration, a peace accord was signed between Israel and a few Arab countries, such as the UAE, Bahrain and eventually Morocco (effective since September 2020). The peace deal was named the Abraham Accords to give theological importance to the accord based on common lineage. Abraham or Ibrahim (in Islam) is the father of Isaac (a Jew) and Ishma’il (an Arab Muslim), thus suggesting that Abraham is the father figure to both Muslims and Jews, and therefore, Jews and Muslims are brothers. As family and blood relations are part of a close-knit social fabric, designating such a name to the accord would symbolise its success. <11> Mohammed Soliman, “An Indo-Abrahamic Alliance On the Rise: How India, Israel, and the UAE are Creating a New Transregional Order,” Middle East Institute, July 28, 2021. <12> With 7 percent growth, India’s economy stands at US$3.53 trillion at current prices, which makes the country the fifth largest economy in the world. In terms of purchasing power parity, India stands third. For more details, refer Martin Armstrong, “India Overtakes UK to Become Fifth Biggest Economy,” World Economic Forum, September 26, 2022. <13> Ravi Bhoothlingam, “The ‘Asian Age’ and Role of China and India,” Global Times, July 14, 2019. <14> Rezaul H. Laskar, “UAE Trade Deals With India, Israel Hold Potential for Extensive Trilateral Cooperation: Naor Gilon,” The Hindustan Times, May 31, 2022. <15> Ministry of External Affairs (MEA). <16> “Abraham Accords Peace Agreement: Treaty of Peace, Diplomatic Relations and Full Normalization between the United Arab Emirates and the State of Israel,” US State Department, September 15, 2020. <17> Alexander Cornwell, “Israel, UAE Boost Ties With Free Trade Pact,” Reuters, May 31, 2022. <18> “UAE-India Comprehensive Economic Partnership Agreement,” United Arab Emirates Ministry of Economy. <19> Ministry of Commerce and Industry, “India-Israel Free Trade Agreement (FTA) Negotiations,” Government of India. <20> Sidhant Sibal, “Plans Afoot for Connectivity from Mediterranean to India Via Gulf,” WION, October 5, 2021. <21> Sidhant Sibal, “Plans Afoot for Connectivity from Mediterranean to India Via Gulf” <22> “Explained: INSTC, the Transport Route That Has Russia and India’s Backing,” Business Standard, July 14, 2022. <23> Manjari Singh, “The Chabahar Port Imperative,” in Iran Under Ebrahim Raisi: The View from India, Special Report No. 154, ed. Kabir Taneja, Observer Research Foundation, August 2021, pp. 5–9. <24> Lebanon, Egypt, Libya, Oman, Saudi Arabia, Yemen, Tunisia, Iran, Jordan, and Morocco import exorbitantly from Russia and Ukraine. For details, see Food and Agriculture Organization (FAO), Impact of the Ukraine-Russia Conflict on Global Food Security Related Matters Under the Mandate of the Food and Agriculture Organization of the United Nations (FAO), May 2022, https://www.fao.org/3/nj164en/nj164en.pdf. <25> Tanchum, “The India-Middle East Food Corridor: How the UAE, Israel and India Are Forging a New Inter-Regional Supply Chain.” <26> I2U2 is an acronym for the India-Israel-UAE-US quadrilateral and inter-regional engagement which aims to address six areas of critical and mutual interests. Food and energy are the two most focused areas of cooperation in the current format. <27> Manjari Singh, “Can I2U2 Address India’s Food Security Challenges?” <28> Food and Agriculture Organization (FAO), Food Security, June 2006, https://www.fao.org/fileadmin/templates/faoitaly/documents/pdf/pdf_Food_Security_Cocept_Note.pdf. <29> Manjari Singh, “I2U2: Shaping Stable and Prosperous Middle East,” India and the World 5, no. 3: 66–71.

### Did India need to stop buying oil from Iran?

One of the initial inflection points between New Delhi and the Western capitals since the start of the Ukraine Crisis was a wish for India to take a few steps back with regard to its relations with Moscow. While there were no calls for India to sever ties, New Delhi’s decision to take advantage and purchase cheap Russian oil available in the market made headlines as many in the Western media accused India of indirectly aiding Russia. The noise was loud enough that India had to counter these narratives, including Foreign Minister Dr S Jaishankar visiting European capitals to highlight that India’s reliance on oil imports for energy security and a fragile economic base gave little room to have the luxury of deciding on which oil supply was moral and which was not. Eventually, India’s position started to settle into international discourse more successfully. The jump in Indian oil imports from Russia was, indeed significant, considering Moscow has never been a traditional supplier for New Delhi. On year-on-year numbers, India’s imports of oil from Russia between April and November 2022 increased by a whopping 768 percent.

To the criticism, India highlighted that with its population having an average of US$2,000 per capita income compared to an average of 60,000 euros (in Europe and overall in the West), there was no room available to shun its pragmaticism. While India’s concerns are not just legitimate, but critical to maintain more than 6 percent GDP growth over the next decades, New Delhi a few years ago did cede political and economic interests in exchange for a broader geopolitical consensus being built against Iran and its alleged nuclear weapons programme. The then administration of President Barack Obama exerted pressure on India to close the taps of Iranian oil coming into India as the P5+1 group of countries (including Russia and China) negotiated a deal with Tehran through a month’s long process hosted in Austria.
The Iran and JCPOA era
Iran, for a long period of time, was consistently one of India’s top-three oil suppliers. Energy was the bedrock of India-Iran economic ties for decades, to the point that critical infrastructure such as the Mangalore refinery (MRPL) was largely built keeping in mind supplies of the kind of ‘heavy crude’ that came from Iran. At this time, MRPL started to look at alternatives but also hoped for consistent sanction waivers from the United States (US) which would allow it and others in a similar boat to import Iranian crude. “It’s not easy to replace Iranian barrels,” the managing director of the refinery had said. Beyond imports, India’s ONGC Videsh (OVL) also discovered the Farzad B gas field in Iran’s Fars province as part of an exploration deal it signed in 2002.

For New Delhi, letting go of Iranian crude supplies was a difficult transition as it moved to other suppliers such as Saudi Arabia, Iraq, and as far as Nigeria and Angola to spread its energy import risk.


The run up to the signing of the Joint Comprehensive Plan of Action or the JCPOA (also known as the Iran nuclear deal) in 2015 was underpinned by euphoria of Tehran’s return to mainstream international trade and economics after decades of sanctions following the 1979 revolution, only to be upended by the US unceremoniously and unilaterally exiting the agreement in 2018 under the ire of the then US President Donald Trump. However, New Delhi and Tehran tried to maintain the oil trade, employing a variety of strategies, including India submitting its payments to a bank account in Kolkata which after a while amounted to over US$4 billion, and accessing these funds only became more difficult for Iran as pressure mounted during that time to push Tehran to sign on an agreement. By 2015, avenues to pay Iran for oil had become next to non-existent for a country like India, a signatory to many financial treaties as part of international law and transparency efforts. For Iran, the petro-dollars coming from Asian economies were critical, and Tehran also exerted pressure on the likes of India to find newer ways to transfer payments including (failed) ideas of opening Iranian bank branches in Mumbai (one of the last avenues was using a bank in Turkiye, however, that route also eventually shut down due to sanctions). Other, more translucent methods of transferring funds were also suggested such as routing transfers through a third country in the region, while talks of an Iran-India under-sea pipeline pitched by some companies also did not make much headway. For New Delhi, letting go of Iranian crude supplies was a difficult transition as it moved to other suppliers such as Saudi Arabia, Iraq, and as far as Nigeria and Angola to spread its energy import risk. However, India saw benefit in the JCPOA, allowing New Delhi to be seen in a positive light by the US for its role in pushing the fruits of such an agreement in Tehran, while also overall not being in favour of a potentially destabilising nuclear arms race being launched in the Middle East where more than 7 million of its citizens lived and worked, more than US$30 billion in remittances came from, and a large part of energy security resided.
Why Russia is different
Contrary to India’s experience with Iran and the period of JCPOA negotiations, the case with the Ukraine conflict is different on multiple fronts. To begin with, Russia is a big country, and one with which India has had historical ties specifically in the realm of defence cooperation. While India has not imported much from Russia, it has invested significantly in Russian energy. India’s first-ever international investment in energy was in Russia’s Sakhalin-I fields in the country’s far east. In 2009, OVL also bought Russia-focused Imperial Energy, spending over INR 10,000 crores on the purchase. Most of these investments remain, with New Delhi intending to continue and perhaps even expand its presence there. However, this time, both the situation and geopolitical realities are much different to those with Iran a few years ago. India’s military preparedness as of today, specifically considering a much more heightened threat from China following the 2020 border clashes, requires close cooperation with Moscow to maintain a high level of preparedness.

While it is palpable that New Delhi’s geopolitical calculations are today much more aligned with the West, particularly the US, and its military imports recently have favoured Western equipment along with a push to manufacture domestically, the immediate armoury of Indian forces remains overwhelmingly from Soviet and Russian constructs alike. Their upkeep, already challenging with Russia’s military industrial complex taking a hit, is critical to India’s immediate security requirements. Furthermore, on issues such as nuclear submarines and other such equipment, Russia remains the only country offering that level of technologies to New Delhi as of today. Beyond Russia’s larger global presence and India’s ties with Moscow, a review of how well actually international isolation or sanctions work is increasingly contested. Initially, an argument could have been made that sanctions did push Iran to join the negotiations that eventually led to the JCPOA, however, this as an example cannot be institutionalised as a blueprint. Iran was much smaller, eager to return to the mainstream and comparatively less involved with the West. While its nuclear programme was a big area of concern, regional apprehensions by Arab states such as Saudi Arabia, the UAE, and Israel pulled in a sense of urgency in the West to address a developing security problem. The Russian crisis, by association of Moscow’s role and presence in global geopolitics, energy, and business ties with the West prior to the conflict and its growing strategic ties with China is of a different scale that is not constricted to a geographic boundary. It has impacted international inflation, food security, energy security, affecting developing states in the Global South equally, if not more than the others. While there is a level of grave concern over Russian actions, specifically when it comes to the question of sovereignty, many countries in Asia, Middle East, and Africa, not directly part of the conflict, have prioritised protection of their own economies and populations over partaking in a broader narrative leading into big power politics of the future.
Conclusion
India’s pragmaticism such as buying oil from Russia is not new. During the First Gulf War, again for energy security and the safety of Indians working in the region, India’s then Foreign Minister Inder Kumar Gujral visited Iraqi dictator Saddam Hussein in Baghdad and ended up in an embrace with the Iraqi leader who had just invaded Kuwait. But all this led to the largest evacuation of civilians from a conflict zone and a level of safety for the transit of critical oil supplies from the region. Much like Indian officials remembered Saddam for trying to help India in building a case against Pakistan-sponsored terrorism in the 1990s, Indians today also remember Russia’s help in the post-independence conflicts such as the 1971 war. However, any isolation of Russia as of today will be determined by Russian actions and its own decisions.

In a new era where New Delhi is positioning itself as a ‘pole’ in a multipolar order, and a “voice” for the Global South’s interests at forums such as the G20 along with a tacit acceptance of what the future global order will look and the space for hedging against Western partners and their interests will become much smaller compared to what it has been historically.


Ultimately, for a long period of time, India has managed to operate with its national interests at the forefront while avoiding taking sides or joining groupings or alliances. However, in a new era where New Delhi is positioning itself as a ‘pole’ in a multipolar order, and a “voice” for the Global South’s interests at forums such as the G20 along with a tacit acceptance of what the future global order will look like (specifically from a US–China great power rivalry perspective), the space for hedging against Western partners and their interests will become much smaller compared to what it has been historically. And experiences, ranging from Iran and the JCPOA to Russia and Ukraine will heavily feed into the next stage of India’s foreign policy decision-making.

____________________________________________________________________________________________________________________________

Kabir Taneja is a Fellow at the Observer Research Foundation.

### Iran-China relations: Expectations from Raisi’s high-profile tour to China

Iran’s President Raisi made a high-profile tour to China and received an official welcome from his Chinese counterpart Xi Jinping on 14 February. This is the first state visit by an Iranian president to China in 20 years. As part of a three-day visit, high-ranking delegations of Tehran and Beijing signed 20 agreements to further boost mutual cooperation in different security, economic, and infrastructure sectors. Apart from the newly inked documents, it seems that the main agenda for President Raisi’s visit is to finalise mechanisms for implementing the strategic 25-year agreement, the deal that was signed in 2021 but has failed to meet Iran’s economic expectations. In the meeting with Xi, Raisi emphasised that the implementation of the strategic 25-year partnership between Iran and China is vital to improving bilateral relations and maintaining stability in the region. President Xi, on his part, underscored the need for implementing the strategic agreement between the two countries, noting that his country strongly opposes external forces interfering in Iran’s domestic affairs and the crippling measures taken by Western countries. Despite the United States’ (US) bid to hit Iran’s economy, China has remained Iran’s biggest oil buyer and top trade partner over recent years with a total trade volume of more than US$25 billion. Yet, any promising outlook in the Iran-China partnership still remains strained by multiple hurdles and uncertainties.

Despite the United States’ (US) bid to hit Iran’s economy, China has remained Iran’s biggest oil buyer and top trade partner over recent years with a total trade volume of more than US$25 billion.

Xi vows to help revive Iran’s nuclear deal
Technically speaking, although China plays a pivotal role in breaking Iran’s sanctions, without the revival of JCPOA—commonly known as the Iran nuclear deal—it is almost unlikely to implement the large economic projects of the 25-year agreement with China. By becoming more active in the JCPOA revival negotiations, China can help resolve this impasse and open a way to lift sanctions. According to the South China Morning Post, Iran's nuclear deal is seen to be high on the agenda of Raisi-Xi talks. In this regard, Chinese President Xi Jinping told his Iranian counterpart that China will continue to participate constructively in the negotiations to revive the nuclear deal. According to Iranian experts, however, revitalising the nuclear agreement is not China's strategic choice in siding with Iran against the West, but is more influenced by their rising concern about a nuclear Iran. China is now facing the threat of nuclearisation of Japan and South Korea and has—to some extent—the same concern over the Iranian nuclear programme. Moreover, China considers the JCPOA issue to be more of a tension between Iran and the West. China’s policy toward Iran’s nuclear deal is primarily influenced by the economic benefits that revitalising of JCPOA could deliver in implementing large trade and energy contracts with Iran. Therefore, if the JCPOA is not revived, China’s economic and energy interests could be endangered due to growing tension between Iran and its Arab rivals in the Persian Gulf. China supplies around 30 percent of its energy needs from the Persian Gulf region.

China’s policy toward Iran’s nuclear deal is primarily influenced by the economic benefits that revitalising of JCPOA could deliver in implementing large trade and energy contracts with Iran.


Seemingly the ‘no war, no peace’ formula in the Iran-US quagmire has been the preferred scenario of the Chinese, as long as Iran does not become a nuclear threshold state. Over the past years, a sanctioned Iran with limited nuclear activities has provided significant economic benefits to China. According to some unverified leaked details of the 25-year strategic cooperation agreement between Iran and China, Beijing buys Iran's oil and gas at a 30 percent discount and has a two-year deadline to repay. Another point is that China can repay its oil debt with the Chinese Yuan. Another economic concession given to China is that two-thirds of the oil and gas purchase amount will be cash and one-third will be in the form of goods and services, or in other words, the exchange of oil for goods. If the JCPOA is revived, China will likely be deprived of these advantages.
Involving Iran in regional security arrangements
Since taking office, the Raisi administration has prioritised the policy of ‘Pivot to East’ in Iran’s foreign policy, vowing to upgrade Iran’s partnership with Asians, China, and Russia in particular as its tension with the West soared. But after China’s siding with the GCC’s against Iran during Xi’s recent visit to Riyadh, this policy lost its efficiency and credibility in Iran’s foreign policy. The “turn to the east” policy was meant to be a kind of strategic partnership of Iran with China and Russia against the US and its regional allies, but by favoring the Arab monarchies over Iran in the Persian Gulf, China has sent this message to Iranian authorities that it has not shared such a view with Iran. Unlike Tehran’s expectation, Beijing is not looking for exclusive strategic allies in the Middle East to benefit them in balancing against the US. China has long been reluctant in challenging the US supremacy in the region, but rather is determined to stand against any destabilisers to ensure energy flows. Accordingly, China has already presented a comprehensive plan to initiate a security arrangement in the Middle East and shared it with its Iranian and Arab partners. Seemingly, the Chinese government has not found the right ground to adopt this plan and has not shown any clear and public effort to implement it, at least in the official sphere. It seems that Raisi's visit to Beijing will give this chance to the Chinese for negotiating with the Iranian official about the imperatives of their security initiatives.

China has long been reluctant in challenging the US supremacy in the region, but rather is determined to stand against any destabilisers to ensure energy flows.


For the Chinese, the tension between Iran and its regional rivals is increasing in an unprecedented way, and if this souring tension is not contained, the consequences arising from a regional clash would endanger China’s interests perilously. Therefore, de-escalation in the region is one of China's priorities in the region, and it is quite natural that the Chinese will seize the opportunity to convince Iran’s president to take Beijing's security plan seriously. If the Chinese could make Iran involved in its security arrangement, the ground for boosting economic cooperation between Tehran and Beijing will also be provided. Otherwise, it is very unlikely that Raisi’s visit to Beijing will lead to a significant economic achievement.
Looking ahead
For Iran, the Asian order is awaiting a new strategic birth, a process that has accelerated over the past decade but still faces many uncertainties. In addition to deepening bilateral relations with China, Iran struggles also to design a practical grand strategy to determine its partnership with the emerging new Asian order. The fact is that, unlike many of its neighbors, Iran has not yet reached a clear strategic vision in shaping its partnership with the raising Asian powers. This is highly influenced by the fact that the Islamic Republic has failed to adopt a practical ‘neighborhood policy’ and ‘pivot to east’ policy independent of long-standing anti-Westernism in its foreign policy over the last four decades. Despite the image it has created for Iranian authorities, China has not yet shared any meaningful common interest with Iranian anti-Westernism.

If the Chinese could make Iran involved in its security arrangement, the ground for boosting economic cooperation between Tehran and Beijing will also be provided.


The Iran-China partnership has gained strategic value theoretically, but in practice, they are still stuck. Given the Chinese shifting policy in the Persian Gulf and the lack of any efficient leverage to change its regional behavior, Iranian authorities tend to be cautious in defining their partnership with China. Raisi’s visit to China comes at a time when Iran’s nuclear talks remains in a deadlock, international criticism for providing drones to Russia in the Ukraine War has intensified, and domestic dissatisfaction over the economic situation has scaled up, thus leaving Iran with fewer strategic alternatives. In such circumstances, China may benefit from multiple leverages to dictate its preferences to Tehran. For Iran’s Raisi, China’s support to bypass the US-led economic sanctions and overcome the international isolation is imperative which may force his foreign policy to go along with the Chinese instructions, especially over the nuclear talks and Persian Gulf developments. Despite rising criticism at home, putting all eggs in the China basket would increasingly make Tehran more reliant on Beijing in international affairs.

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Vali Golmohammadi Ph.D. is an Assistant Professor at Tarbiat Modares University Department of International Relations, Tehran, and a Visiting Scholar at Bilkent University Ankara, Turkey.

### Iran’s quest for Russian Su-35s and its impact on West Asia’s strategic calculations

As much of the West’s political capacities get bogged down with the crisis in Ukraine and the return of a Cold War-like geopolitics between Washington and Moscow, other areas of contention that were taking precedence only a few months ago, like Iran, have taken a back seat. During this period, in light of the war, ties between Russia and Iran have used the prevailing situation as an incubator to further the bilateral. According to reports, Iran is expected to receive new Sukhoi 35 fighter aircraft from Russia. When delivered, these jets will be the first major purchase by Tehran for its ageing air force fleet which currently, and perhaps ironically, still includes old American airframes from the pre-1979 Revolution era such as F-14s and F-5s along with older Soviet-made MiG-29s delivered in the early 1990s. Iran has been subjected to stringent sanctions over the decades, severely depleting its ability to purchase weapons from abroad. However, the silver lining for Tehran has come in the way of robust domestically sustained industries, specifically in the realm of defence, that manage to keep the country’s aged military infrastructure up and running with little outside help.
Iran has been subjected to stringent sanctions over the decades, severely depleting its ability to purchase weapons from abroad.

Arguably, the pinnacle of this outcome has been the country’s indigenous drones programme. Iranian-made Shahed-136 drones, provided by Tehran to Moscow for use in Ukraine, became a symbol of Iran–Russia bonhomie at a time when the Kremlin was struggling to gain significant military wins in the conflict, and others, such as Türkiye, were providing Kiev with its now globally successful Bayraktar TB-2 drones. The Iranian government maintains that it is not taking sides in the conflict, which may be true strategically, but tactically, the evidence points to the contrary. However, the Su-35s are expected to add a significant boost to Tehran’s conventional arsenal. Geopolitically, the jets themselves tell a story of the volatility and constantly shifting interests in the region. Originally meant for Egypt, the Su-35s are being seen as Russian repayment for a consistent supply of drones by Iran (Moscow – Tehran cooperation on drones pre-dates the Ukraine war). From an Egyptian perspective, the Su-35s were an add-on to the country’s fleet of Russian MiG 29s, both being inducted due to Washington’s unwillingness to sell Cairo F-15s (a demand standing since the 1970s), in part owing to the country’s chequered human rights record. The US has been criticised for allowing partner states in the region to hedge their interests with the likes of Moscow and Beijing by taking too long in making strategic decisions. Iran’s move towards a degree of modernising its frontline fighter aircraft fleet comes at a time when the Middle East (West Asia) is staring down towards a complete collapse of the Iran nuclear agreement (JCPOA) and attempts to revive the same. The outreach to Iran by the West is perhaps at its lowest juncture, with the United States (US) saying it would, by all means, disallow Iran from gaining nuclear capabilities to the European Union (EU) looking to brand the Islamic Revolutionary Guard Corps (IRGC) as a terror organisation. With European capitals and the US overwhelmed with the reality of a war returning to Europe, the Middle East may be heading towards a significant time of churn in 2023, including a possibility of the region going nuclear, and this does not only elude to Iran’s nuclear programme, but others in the region as well pursuing nuclear energy.
Saudi Arabia, which still has a fractious relationship with the administration of US president Joe Biden, works closely with Russia as part of the OPEC+ construct, influencing global oil pricing.

The US remains the most influential power in the region, however, others such as China and Russia have made their own inroads. For example, while the United Arab Emirates (UAE) remains one of the closest allies of Washington in the region, it baulked initially when it came down to voting against Moscow’s aggressions at the UN. This was backed by the fact that a lot of Russian money trying to escape the war and Russian President Vladimir Putin’s grab along with skirting sanctions ended up in places like Dubai, boosting the Emirati economy. On the other hand, Saudi Arabia, which still has a fractious relationship with the administration of US president Joe Biden, works closely with Russia as part of the OPEC+ construct, influencing global oil pricing. Along with this, most capitals in the region are looking to not get caught in the middle of future big power rivalries, specifically between the US and China. The above, interestingly, includes Israel, America’s ‘all-weather ally’ in the region. With the return of Benjamin Netanyahu to power with a coalition of far-right political parties in tow, Israel is expected to harden its posture against Iran in the coming year. With the news of Su-35s, Israel is already said to have approached the US for the purchase of 25 F-15EX aircraft, an advanced variant of the airframe already in extensive use by the Israeli Air Force (IAF). This purchase is specifically intended to build capacity to strike Iran’s heavily defended nuclear sites. Israel already operates the most advanced fighter aircraft in the region, the stealth F-35 Lightening II, and to maintain its military superiority, with its new political composition in a leadership role, may continue to be one of the issues stalling the UAE from attaining the same capabilities despite both signing the historic Abraham Accords in 2020. This shows that a level of divergence may always remain beyond the surface of Israel–Arab rapprochement. Both Israel and the US, although having differences over the political trajectory of the former in the recent past, are also conducting the largest-ever bilateral military exercise, with the US showing its full support behind Israel’s regional security interests. On the sidelines of the exercise, a senior US defence official has said that “Iran will not be allowed to go nuclear, period”.
Both Israel and the US, although having differences over the political trajectory of the former in the recent past, are also conducting the largest-ever bilateral military exercise, with the US showing its full support behind Israel’s regional security interests.

The unravelling of diplomatic efforts to engage with Iran had arguably been slowly running out of steam for some time, and the conflict in Ukraine has added a spring in the heels of Russia–Iran cooperation. With China remaining a silent outlier for now, despite having deep ties with both Moscow and Tehran, this defence cooperation may bring benefits for both parties in the time to come despite a complex diplomatic relationship that includes Russian presence in Syria as a point of contention. With domestic political compulsions out of the way for now, Biden has a window to restrengthen his position amongst traditional partners in the region. And with him continuing Trump’s bullish policies against Iran rather than the Obama-era approach of offering a buffet of carrots, the US taking a harder approach will be palatable in the region. However, the jury is still out on what the coming year looks like for the Middle East. Iran has consistently postured towards taking talks forward, while also continuing its strategic and tactical policies and not ceding any space in these areas of its interests. 2023 may witness an inflection point in the region, moving away from the prevailing status quos, specifically if there are significant strides made by Tehran with its nuclear programme. While Israel previously has covertly targeted the programme inside Iran, often at its own will and pace, there has been a period of lull with such operations, raising questions on where talks with Tehran stand today, and what the future holds for diplomacy which has been short-changed by strategic mistakes by both the US and Iran alike.

### Why Iraq needs more attention in India’s West Asia policy calculus

As the crisis in Ukraine, a renewal of tensions between Moscow and Washington, and Europe’s internal fissures maintain a strong hold on global geopolitical discourse, events taking place in West Asia, as always, offer an interesting glimpse into a consistently evolving regional dynamic for India. As the global interest remains fixated on Europe, the recent suspension of talks between Saudi Arabia and Iran being hosted by Iraq in Baghdad is notable. The talks were critical for a variety of reasons, including those that were transnational in nature and not just about regional rivalries and flashpoints. For a long time now, Iraq has been one of the top two suppliers of oil to India, along with Saudi Arabia. Baghdad’s prominence in India’s energy security calculation is not new but geopolitically has always been underrepresented due to its transactional nature. While many in the West were surprised at India’s continuous trade with Moscow to purchase cheap oil on the sidelines of the Ukraine conflict, the thirst in New Delhi for energy security, which feeds into domestic stability, is always palpable as a state that imports more than 80 percent of its annual oil needs. And this is precisely the reason behind the now infamous embrace between Iraq’s erstwhile dictator Saddam Hussein and India’s then Foreign Minister Inder Kumar Gujaral in 1990 when the former invaded its neighbouring state of Kuwait, marking the start of the first Gulf War. For a then coy New Delhi, engaging Hussein was not taking sides, but protecting interests by maintaining a safe supply of oil from the region at acceptable financial costs and evacuating its vast, economically volatile migrant population that worked in the Gulf.

Iraq, despite its vast oil wealth, remains a political work in progress. Sandwiched between the heightened regional rivalry between a Sunni Saudi Arabia and Shia Iran, Iraq is an ethnic middle ground between these two political and theological power blocks. The almost decade-long Iran–Iraq war in the 1980s and the catastrophic 2003 invasion by the US, following the 9/11 terror attacks further fragmented any chance for the state to regain its economic momentum and political stability. The rise of terror groups such as ISIS (Daesh in Arabic) further dented the nation’s prospects significantly. It was not very long ago that Indian imaginations were held by the case of 39 missing Indian workers in Iraq at the peak of the so-called Islamic State’s carnage in the country, all of whom were officially declared dead in 2018 by the Indian government. Earlier, in 2014, India had reportedly barred young Muslim males below the age of 30 from taking a pilgrimage to Iraq to try and control youths from joining ISIS, as part of its counterterrorism strategy. Iraqi pilgrimage sites such as Karbala and Najaf are important to India’s Shia Muslims, who make up around 13 percent of the total 14 percent Muslim population of India (third biggest in the world after Indonesia and Pakistan) out of 1.4 billion citizens. Iraq’s attempts to bring Riyadh and Tehran to sit across the table were pushed by now former Prime Minister Mustafa Al-Kadhimi. The interests behind these talks were not based on any overarching wish for Al-Kadhimi to become a peace broker, but a consensus between all three parties to try and not make Iraq a battleground going forward. The initial efforts by Al-Kadhimi seemed to be fruitful, on the surface at least, as both parties saw the exchanges in positive light. At one point, reports also suggested that the Saudis may look into re-opening their embassy in Tehran which has remained closed since 2016. While the prospects of reopening of the missions slowly tempered out, the arrival of Iranian diplomats in Jeddah in January 2022 to reopen Iran’s representative office to the Organisation of Islamic Cooperation (OIC) was seen as a positive development.

India had reportedly barred young Muslim males below the age of 30 from taking a pilgrimage to Iraq to try and control youths from joining ISIS, as part of its counterterrorism strategy.


Former Prime Minister of the United Kingdom Harold Wilson is known to have coined the famous idiom, that ‘a week is a long time in politics.’ In the 2020s, Wilson’s hypothesis can perhaps be shortened to a 24-hour period. In October 2022, Iraq got a new President Abdul Latif Rashid and Prime Minister Mohammed Shia’ al-Sudani. The Saudis, Iranians, and Americans, all three have a history of influencing who leads Baghdad. As per Iraqi political arrangement, a Kurd as president, a Shia as Prime Minister, and a Sunni as head of Parliament is an unofficial structure. More recently, pro-Iran influence zones, including the likes of Kataib Hezbollah, blamed for targeting US interests in Iraq, had been pushing to gain a stronger foothold in the Iraqi political process while other influential local political movements, such as the Sadrists led by one-time militia leader Muqtada Al-Sadr, pushed back. Al Sudani’s recent trip to Tehran saw a protest-embroiled Iranian leadership pushing Baghdad to act more in Iran’s strategic interests while also entrenching further into Iraq economically. From an Indian perspective, much of Iraq’s troubles have rarely filtered down south, specifically towards places such as Basra, where much of the oil is shipped out using the Persian Gulf and the volatile Strait of Hormuz. While energy security for a country like India is dependent on creating an expansive and varied supply chain, geopolitical developments of the recent past, along with sanctions against states like Iran, Russia, and Venezuela, could make feeding the Indian economy’s voracious appetite for energy challenging. Iraq had benefitted immensely after India had stopped importing oil from Iran, with tensions rising between Tehran and Washington over the nuclear deal negotiations. With increasing sanctions and oil caps targeting Moscow also coming into play, the volatility of both oil supply and oil price is only going to increase in the coming months, and perhaps even years.

While energy security for a country like India is dependent on creating an expansive and varied supply chain, geopolitical developments of the recent past, along with sanctions against states like Iran, Russia, and Venezuela, could make feeding the Indian economy’s voracious appetite for energy challenging.


This offers a good window for New Delhi to expand its engagements with Baghdad, with the last significant high-level visit being that of former Minister of State for External Affairs, MJ Akbar calling in the Iraqi leadership in 2016. While Iraq remains a politically complex case, India’s energy interests in the country are significant and will continue to remain so in the coming decade as hydrocarbons are to remain central in fuelling Indian economic growth despite an energy transition being underway towards alternative fuels. India’s engagement with Iraq has been quiet and transactional, however, as a top-three supplier of oil, and with significant headwinds expected in global energy security along with China’s slow yet steady investments to solidify its own energy security for the future, a renewed outreach to Baghdad will be well-timed and useful if executed in the very near future.

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Kabir Taneja is a Fellow at the Observer Research Foundation

### Growing UAE-Israel ties shows political intent to deepen relations between the two countries

The signing of the Abraham Accords between UAE, Bahrain, and Israel in August 2020 opened up new possibilities for Israel to establish diplomatic ties with two key states in the Gulf. Morocco and Sudan followed soon, and as relations thawed with Saudi Arabia, it was clear that several Arab states were now willing to accept the political legitimacy of Israel. The case of UAE, however, is special. Even though Israel was granted formal permission to open a diplomatic office in Abu Dhabi in 2015, its work was limited to facilitating Israel’s participation in the International Renewable Energy Agency. However, the efforts of the Trump Administration and recognition of the advantages of a mutually beneficial partnership led the two countries to establish full diplomatic ties. In a little over two years, UAE and Israel have demonstrated the political will to move forward with a speed and intent that has surprised many observers of the region.
UAE responded by reiterating its continued support for the Palestinian cause and their ambassador to the US, Yousef Al Otaiba, affirmed UAE’s advocacy for a two-state solution.
The Abraham Accords, predictably, drew a strong denunciation from the Palestinians and the Palestine Authority issued a tough statement calling the accords, “a tripartite aggression against the rights of the Palestinian people.” UAE responded by reiterating its continued support for the Palestinian cause and their ambassador to the US, Yousef Al Otaiba, affirmed UAE’s advocacy for a two-state solution. He argued that UAE would now pursue this objective with greater conviction by directly engaging with Israel through stronger incentives, policy options, and diplomatic tools. The Israeli side responded positively by agreeing to suspend declaration of sovereignty over certain areas in the West Bank and to co-operate with all the parties involved in trying to resolve the conflict.
Israel and the Arab states
UAE, of course, isn’t the first Arab country to establish diplomatic ties with Israel. In 1979, Egypt normalised its ties with Israel by signing the Egypt-Israel Peace Treaty at Camp David. But even after four decades, their bilateral trade amounted to a mere US $330 million in 2021 and this too was primarily driven by government channels. Until recently, high-level official exchanges were also rare, though the one by former Israeli Prime Minister Naftali Bennett in 2021 and subsequent visits by business and security delegations show an attempt to bolster an engagement, which was formerly largely limited to coordination between the security establishments each time a conflict broke out between Israel and Hamas in the Gaza strip. Egyptian import of almost 700 cubic feet a day of Israeli natural gas via the EMG and AGP pipelines has also given a new energy dimension to the relationship. However, cultural ties have been slow to take off, due to open hostility from several prominent Egyptian intellectuals and from the general public.
Egyptian import of almost 700 cubic feet a day of Israeli natural gas via the EMG and AGP pipelines has also given a new energy dimension to the relationship.
A similar pattern can be also observed with respect to Jordan. Although the two countries signed the Israel-Jordan Treaty of Peace in 1994, their relationship has not really progressed. Israeli exports to Jordan and vice-versa have been negligible—about 0.5 percent and 1.5 percent of their total exports, respectively. Jordan’s fears of Israeli annexation of bordering areas in the Jordan Valley and the Dead Sea region, the presence of a large Palestinian population, the public furore over frequent skirmishes between Israeli forces and Arab worshipers in Al Aqsa mosque/the Temple Mount, and public condemnation of Israel’s assault in Palestinian territories are some of the key hurdles.
Israel-UAE partnership
In contrast to Egypt and Jordan, the establishment of full diplomatic ties between UAE and Israel has led to a rapid blossoming of bilateral relations through high level visits, trade, investment and technology tie-ups and even the emergence of a cultural connect. Trade relations Within a year of the Abraham Accords, bilateral trade between the two countries reached US $900 million, and in the first quarter of 2022 it has already touched US $1.5 billion. The two countries also signed a Free Trade Agreement in June 2022 with a stated target of increasing annual trade to about US $10 billion over the next five years. In addition to trade, UAE views Israel as a market of strategic importance for its business and investment growth. Keeping this in mind, in September 2020, the two countries signed their first protocol in banking and finances to encourage joint investments. The Dubai International Chamber also signed an agreement to open its office in Tel Aviv to enable Emirati and Israeli companies to invest in each other’s markets and about 1000 Israeli business enterprises already operate in the UAE. In March 2021, UAE announced a US $10 billion fund for investments in Israel and by September 2021, the two countries had already signed about 22 MoUs in areas ranging from healthcare, water security, clean energy, agri-tech to space, retail, culture, sports, amongst others. Subsequently, one of the biggest commercial energy deals took place when Abu Dhabi’s Mubadala Petroleum bought a 22 percent stake for US $1.1 billion in Israel’s offshore Tamar natural gas fields. In the water sector as well, the two nations have established a joint water research institute in UAE and have also initiated pilot projects in key cities.
Delegation visits
The easing of COVID-19 linked restrictions has seen a steady increase in the number of business and official delegation visits. In September 2022, a delegation from UAE participated in a joint business forum co-organised by the Tel Aviv Stock Exchange and the Abu Dhabi Global Market, which led to the signing of three agreements focussing on data protection, innovation and fintech initiatives. In December 2020, a large Israeli delegation participated in Gitex Technology Week (the biggest innovation exhibition in the Gulf) and also inaugurated the Israel Future Digital Economy Summit to enhance cooperation in the fields of innovation and technology. Another delegation including army and intelligence officials and CEOs of major Israeli cyber firms attended the Cybertech Global conference as speakers in Dubai in 2021. Israel also had a major presence at the Dubai Expo through its pavilion.
One of the biggest commercial energy deals took place when Abu Dhabi’s Mubadala Petroleum bought a 22 percent stake for US $1.1 billion in Israel’s offshore Tamar natural gas fields.
On the official side, there have been as many as 20 ministerial visits from Israel to the UAE. The first prominent one was by the Israeli president, Issac Herzog, which involved discussions on security and bilateral relations. Thereafter, former Foreign Minister Yair Lapid made a visit in 2021 for the inauguration of the embassy in Abu Dhabi and the consulate in Dubai. The latest visit was by former Prime Minister  Naftali Bennett in June 2022 to sustain the momentum in ties. From the UAE side, delegation visits have been supplemented by Foreign Minister Sheikh Abdullah bin Zayed Al Nahyan’s week-long visit to Israel to mark the second anniversary of the Abraham Accords. Cultural ties The warmth in relations is also reflected in a growing cultural and people-to-people connect. Increased connectivity through 70 direct flights every week has facilitated smooth movement of tourists, business people, and students. It is estimated that about 450,000 Israeli tourists visited UAE since the Accords. Moreover, in October 2020, the two countries signed an agreement allowing their citizens to travel visa-free (for leisure and business purposes), making UAE the first Arab state to be granted such a waiver. On the religious front, the opening of the Abrahamic Family House comprising a synagogue, a church, and a mosque in the same complex signifies the Arab kingdom’s tolerance policy towards its new Jewish partner. The laying of a wreath by Sheikh Abdullah at Israel’s National Holocaust Memorial was another example of the openness with which UAE has embraced Israel. Other signs include grocery shops selling kosher food and the establishment of the Jewish Community Center of UAE and the Emirates Agency for Kosher Certification. The first Israeli cultural institute, Educational Hebrew Institute (EHI),was also opened in January 2021 to deepen the cultural connect.
An emerging India-UAE-Israel trilateral
From India’s perspective, the Accords have given rise to new opportunities from which it stands to gain. Recently, the Indian Ambassador to Israel also remarked that “Israel’s strengths in niche technology; India’s huge economy and human resource base; and UAE’s capabilities in logistics and investments have complementary benefits not only for the three economies but also the region at large.”
On the religious front, the opening of the Abrahamic Family House comprising a synagogue, a church, and a mosque in the same complex signifies the Arab kingdom’s tolerance policy towards its new Jewish partner.
Last year, the three countries signed their first trilateral pact wherein an Israeli firm, Eccoppia, will be producing robotic solar cleaning technology in India for a landmark project in UAE. In order to explore more opportunities, Dubai-based Indian Business and Professional Council hosted a large Israeli delegation earlier this year; and in September 2022, a CII business delegation from India and UAE  interacted with members of the Israel Asia Chamber of Commerce at Tel Aviv to discuss collaborations in food security, manufacturing, cybersecurity, healthcare, and fintech. Going forward, Israeli officials estimate that given the boost in the trilateral relationship, the trade between the three countries has the potential to reach US $110 billion by 2030.
Conclusion
The signing of the Abraham Accords two years ago has brought about an Israeli-Emirati partnership that has flourished at a remarkable pace. From exploring trade and investment opportunities to engaging in people-to-people exchanges, the two countries have embarked upon a new and dynamic era of cooperation. Looking ahead, the two nations could leverage this progress by expanding the partnership to like-minded countries such as India, the US, Japan, South Korea and Singapore through minilateral groupings such as the I2U2 initiative and the Negev forum.

### Iran’s SCO Accession: A timely yet insufficient gambit

After nearly 15 years, on 16 September, at the 22nd Shanghai Cooperation Organisation’s (SCO) summit, Iran’s accession to the permanent membership of the SCO was officially announced. By signing the “commitment document” for full membership to the organisation, Iran’s full accession is expected to become effective in April 2023, when India takes over as chair.
Turning the tide
Iran had been an observer member since 2005, and its frequent bids to get full membership were blocked since it was under United Nations’ sanctions. Now, it seems that the permanent members of the SCO, especially Russia and China, have different understandings of the emerging international environment and Iran’s standing in the less West-centric multipolar world. Although the rising anti-western narratives amongst the key SCO members manifest themselves differently in policy terms, Tehran’s long-standing revisionism is set to drive Iran, Russia, and China relatively closer together in geopolitical and strategic matters. As the world’s largest regional organisation—comprising 40 percent of the world’s population and 30 percent of global GDP—the SCO can provide an effective multilateral institutional capacity for Iran to nullify the crippling sanctions imposed by the United States (US) and its allies.

With the Raisi administration taking office, Iran’s foreign policy motto “Neither East nor West” has transformed, as Tehran pursues a “Pivot to East” policy both geopolitically and geoeconomically. Iran’s Supreme Leader Ayatollah Khamenei supports Raisi’s eastern policy, saying, “One of our priorities today in foreign policy is preferring the East to the West, neighbours to remote countries.” As a part of its Pivot to East policy, Iran seeks to play an active role in the shifting global order, thanks to its geostrategic position in the new geopolitical environment. The Pivot to East policy has three main components: nullifying the effects of sanctions and ameliorating Iran’s economic crises; mending ties with the neighbours; and powerful synergy with Russia and China to challenge the US regional interventionism through initiating an anti-West block. For Iranian optimists, full membership in the SCO can bring about all these strategic goals.

The SCO is, at its best, a framework for members to expand their bilateral relations. It does not represent any effective institutional solution to Iran’s international isolation.


According to Foreign Minister Hossein Amir-Abdollahian, “Iran's membership to the SCO is a diplomatic triumph which proves Tehran’s dedication in pursuing a “balanced, smart, active, and dynamic” foreign policy approach and the idea of ​​‘Asian multilateralism’.” Accession to the SCO has geoeconomic importance; it can help Iran achieve its long-term vision to become a “hub country” by playing a central role in the East-West and North-South transit corridors. Iran has assured the SCO members to provide safe, stable, and reliable routes on the North-South Corridor, and at the same time, supply remarkable infrastructure in its southern port, especially the oceanic port of Chabahar. In 2021, Iran's trade with the SCO member states surpassed US$37 billion, which accounts for about 30 percent of the country's total foreign trade. During the same period, Iran's exports stood at US$20.5 billion, and imports stood at US$16.5 billion with the SCO member states. Unfortunately, the SCO is primarily  a security and geopolitical organisation with limited economic benefits for members since it lacks any formal economic mechanism to boost trade amongst members.
Worsening ties with the West
Beyond Iran’s strategic vision to become a member of SCO, the change in Russia and China’s stance regarding Iran’s membership is also important as it comes at a time of their deteriorating relations with the West. For years, China and Russia were against Iran's membership in the SCO mainly because of its anti-Westernism. Now, with the rising tensions between Russia and the North Atlantic Treaty Organization (NATO) over the invasion of Ukraine and the US’ intensifying hostility towards China, the SCO’s geopolitical identity and security capabilities have become evident for the two eastern great powers. Russia and China have realised Iran’s strategic importance in balancing the western threats. Therefore, it can be claimed that Iran's membership in the SCO is the result of the political will of Moscow and Beijing.

For years, China and Russia were against Iran's membership in the SCO mainly because of its anti-Westernism. Now, with the rising tensions between Russia and the North Atlantic Treaty Organization (NATO) over the invasion of Ukraine and the US’ intensifying hostility towards China, the SCO’s geopolitical identity and security capabilities have become evident for the two eastern great powers.


The SCO is often presented as an inherently anti-Western bloc, with some even labelling it the anti-NATO bloc. After the invasion of Ukraine, Russia has sought to frame all regional organisations—the SCO in particular—as anti-NATO, viewing the SCO as the core of a Russia and China-led anti-Western bloc. As a new potential member of the SCO, approaching the organisation as an anti-western or anti-US setting can protect Iran from international isolation. As the war in Ukraine continues, western powers will likely punish and isolate Russia further, pushing it to consider alternative diplomatic venues to counter international isolation effectively. With Iran's membership to the SCO, the dose of anti-westernism will inevitably intensify. Speaking at the 22nd SCO summit, Iranian President Raisi urged SCO members to find innovative ways to counter the US’ unilateralism. Iran’s membership to SCO is also in tandem with the Chinese policy of “Asian people to uphold Asian security”, which finds its organisational expression in the recent SCO meeting. Iran can also play a central role in dealing with the Afghanistan quagmire that has been a security concern for the SCO members. The Afghanistan factor, along with rising Sino–US tensions, pushed China to accelerate Iran’s membership to SCO.
Implications of Iran’s accession
Though the changing world order and emerging geopolitical realities convinced Iran to reposition its foreign policy orientations and abandon its traditional policy of “Neither East nor West”, its Pivot to East strategy has no originality in essence. Amidst the deadlock over nuclear talks, the policy shift to Pivot to East and the quest for membership in the SCO are nothing but reactions to the western pressure and shifting global and regional geopolitics. Contrary to what many expect, the SCO membership cannot do much in meeting Iran’s strategic aspirations. The SCO is, at its best, a framework for members to expand their bilateral relations. It does not represent any effective institutional solution to Iran’s international isolation. According to many economic observers, the SCO will not become an anti-sanctions coalition in the short term. Rather than major political or economic gains, Iran’s main achievement from this diplomatic triumph in the short term may be limited to multilateral diplomatic manoeuvres.

The fact is that Iran perceives its accession to SCO as leverage against the US at a time when nuclear talks are on the verge of collapse. The SCO member states are reluctant to engage themselves in Iran-US hostility; they also accepted Saudi Arabia, Qatar, and Egypt as “dialogue partners” in a balancing effort. This is also true for Russian efforts to highlight the anti-Western geopolitical identity of the SCO, as member states remain divided over Russia’s invasion of Ukraine. At least in the short term, the SCO is unlikely to offer any efficient alternative mechanism to meet Iran’s economic and security priorities as long as sanctions and hostility with the West remain. However, the SCO membership brings Iran a degree of international prestige and political leverage to strengthen its bargaining power in negotiating with the US.

### 30 years of bilateral ties: What Indo-Israeli relations look like

India and Israel celebrated the 30th anniversary of full diplomatic ties earlier this year with flag colours illuminating historic landmarks in both countries. They also launched a commemorative logo featuring the Star of David and the Ashoka Chakra, symbolising strong friendship and admiration between the two nations. Although India recognised Israel in 1950 and permitted an Israeli consulate to function in Mumbai, it held back from establishing full diplomatic relations until 1992 because of its support for anti-colonial movements and its close ties with Arab countries. Even after 1992, there was a dearth of high-visibility visits, especially from the Indian side. Between 1998 and 2014, the foreign minister’s visits in 2000 and 2001 were the highest-level visits ever made to Israel.
Although India recognised Israel in 1950 and permitted an Israeli consulate to function in Mumbai, it held back from establishing full diplomatic relations until 1992 because of its support for anti-colonial movements and its close ties with Arab countries.
This changed when Pranab Mukherjee became the first Indian President to travel to Israel in 2015 followed by the breakthrough visit of PM Modi in 2017 and Benjamin Netanyahu’s reciprocal visit in 2018. These visits marked a paradigm shift in bilateral ties and a growing strategic partnership expanded from strong military cooperation as seen in Israel’s assistance to India during its war against China in 1962, and against Pakistan in 1965, 1971, and 1999—to one focusing equally on economic development and technology.
Growing economic partnership
Bilateral trade has increased and diversified (to include electronic machinery, nuclear products and medical equipment—Table 1 and 2) from US$900 million in 2000 to US$7.86 billion in 2021 (Graph 1). Furthermore, investments in the start-up and tech ecosystems have become quite significant. The total Israeli investments in Indian projects till 2021 have been valued at US$270 million, with Teva Pharmaceuticals, Ecoppia, and Naa’n Dan Jain being the top three notable investors in the clean energy, water management, and health domains. Graph 1: Total Trade between India and Israel (in US$ million)



Table 1: Top 10 items of export from India to Israel 



Table 2: Top 10 items of import from Israel to India



In the past two years, multiple MoUs have been signed between Israel’s Start-Up National Central and Indian entrepreneurship centres like iCreate and TiE. Venture Capitalists have shown keen interest in funding tech start-ups, and mergers have emerged as viable business models for Indian companies looking for tech-based solutions and Israeli firms wanting bigger markets. As a result, offices of big Indian tech firms like TCS, Infosys, and Wipro have found their way to Tel Aviv’s commercial streets. The Adani Group’s acquisition of Haifa Port (the second largest port in Israel) added a new logistics dimension to the economic partnership. Fast-tracking their tech relationship, the two countries recently widened the scope of the India-Israel Industrial R&D and Innovation Fund (I4F) to include sectors like renewable energy and ICT through increased participation of academia and business entities. In March 2021, Indian oil and gas giant-IOCL launched a joint venture with Israeli start-up—Phinergy to manufacture aluminium-air battery systems in India to promote green mobility.
Water and agriculture
A unique aspect of Indo-Israel ties is their growing collaboration in the areas of water and agriculture since 2017. Given Israel’s impressive track record of reusing 90 percent of its wastewater, Indian authorities have partnered with Mashav, Israel’s international development organisation, to combat a looming water crisis. Currently, there are over 30 Israeli projects in India looking at various aspects including water distribution and management, leak detection, wastewater treatment, desalination, and water security. Not only have public-private partnerships in drip irrigation and desalination projects been successful, but university collaborations have also shown promising results in the past three to four years. Tel Aviv University has partnered with Amrita University, Kerala to work on water quality monitoring; with Thapar University, Punjab, it is looking after wastewater treatment of sewage ponds, and with IIT Madras, it is developing technologies for water purification.
Given Israel’s impressive track record of reusing 90 percent of its wastewater, Indian authorities have partnered with Mashav, Israel’s international development organisation, to combat a looming water crisis.
India is the only country where Israel has stationed a water resources specialist as the Water Attaché at its embassy in Delhi who spearheads Israel’s participation across four pillars—agriculture, industry, nature, and urban consumption. It is also developing capacity-building programmes through joint water technology centres for government officials with the larger objective of achieving a trickle-down effect in this sector. With respect to agriculture, the Indo-Israeli Agricultural Project (IIAP) operates 29 Centres of Excellence (CoEs) across 21 states in India. Their main focus areas include vertical farming, soil solarisation, and increased productivity. These centres specialise in the cultivation of different crops such as vegetables, mangoes, citrus fruits, and non-farming activities like beekeeping and animal husbandry. It is estimated that every year these CoEs produce 25 million high-quality vegetable seedlings, and 400,000high-quality fruit plants while providing training to large numbers of Indian farmers with the latest technologies.
Defence and security
India is one of the largest importers of weapons from Israel, contributing to about 40 percent of its annual arms exports. The net worth of Israeli fully-formed armaments and prime subsystems supplied to India since 1992 is estimated to be about US$40 billion (Chaudhuri and Rein 2022). Their defence partnership also extends to sharing of crucial technologies by Israel for missiles, electronic warfare systems, radar systems, navigation systems, and weapon control systems designed and produced by DRDO. India’s shift towards self-reliance in recent years has resulted in joint defence ventures being set up. The recently signed India-Israel Vision on Defence Cooperation is a step forward in this direction. State-of-the-art arms systems such as  Barak 8 surface-to-air missiles, Skystriker drones, and Travor Assault Rifles are some of the products of the co-production and development initiative undertaken by the two countries. Within the security domain, a promising area of cooperation that has come up is that of cybersecurity. In his 2017 visit, PM Modi acknowledged the potential of such a partnership. Since then, various Israeli unicorns such as Wiz, Orca Security, and Coralogix have opened up operations in India. In 2020, Israel’s National Cyber Directorate (INCD) and Indian Computer Emergency Response Team (CERT- In) signed an MoU to exchange information on cyber threats and build a framework to enhance capacity-building initiatives. Taking this forward, in March 2022, Maharashtra Institute of Technology, Pune organised a Cybersecurity Bootcamp with an Israeli cyber education firm ThriveDX to boost cybersecurity awareness among university students and working professionals.
State-of-the-art arms systems such as  Barak 8 surface-to-air missiles, Skystriker drones, and Travor Assault Rifles are some of the products of the co-production and development initiative undertaken by the two countries.
De-hyphenation at work
India’s partnership with Israel has clearly flourished once it started to actively delink the Israeli-Palestinian conflict from its relations with the two parties. The current government has made conscious efforts to make both relationships direct and visible, less linked to one another while ensuring that neither enjoys a veto against the other. An example of this was seen when PM Modi did not combine his 2017 visit to Israel with one to the Palestinian authority in Ramallah but chose to make a separate visit in 2018. At the same time, India has continued its principled support for a Palestinian State. It has even voted against Israel on numerous occasions. In 2014, it voted in support of a UNHRC resolution to launch a probe into Israel’s offensive on Gaza and in 2015, India voted against Israel over another resolution condemning human rights violations in Palestine. Thereafter, in 2021, it backed two other resolutions—one on the right to self-determination of the Palestinian people and the other on Israeli settlements in East Jerusalem.
Looking ahead
The two countries have come a long way since the inception of formal diplomatic ties in 1992 and particularly during the eight years of Prime Minister Modi’s government.
The current government has made conscious efforts to make both relationships direct and visible, less linked to one another while ensuring that neither enjoys a veto against the other.
Going forward, a Comprehensive Free Trade Agreement that includes trade in services would give a boost to the economic relationship. In the water sector, India can capitalise on Israeli tech to develop a centralised platform for water solutions catering to different regions. In the cybersecurity domain, the focus can shift to deepening A2A collaboration through joint doctoral fellowships, while encouraging the private sector to play a more active role in the partnership. Tower Semiconductor’s plans to set up a chip-making foundry in India are likely to benefit from India’s Production-Linked Incentive scheme to reduce dependence on China. India can work with Israel to develop nano and radar-enabled satellite systems The Abraham Accords and the new I2U2 grouping have created new opportunities for expanding the relationship at a trilateral and plurilateral level. The first two I2U2 projects will marry Israeli and US technology platforms with the United Arab Emirates’ capital to bring ambitious food security and clean energy projects to India. Successful execution of these pilot projects will open the doors for others in areas of transport, healthcare, and more. As it enters into its fourth decade, a relationship described by former Israeli PM Benjamin Netanyahu as a “marriage made in heaven” seems to be getting stronger with time.

Hargun Sethi  is a Research Intern at ORF.

### The Arab Gulf’s outreach to Iran amidst a flailing nuclear deal

The Iran nuclear deal, which was signed in 2015 and collapsed in 2018 after the United States (US) withdrew from the agreement, is today undergoing another round of negotiations to bring it back into play, a final attempt for the West to gain some leverage on the country’s nuclear programme. However, if signed, any deal of today may only be a shadow of what it was supposed to be. The world and geopolitics of today are much more in flux than what it was seven years ago as the nuclear deal (also known as the JCPOA) was signed between Tehran and the P5+1 group of nations in the Austrian capital, Vienna. More than half a decade later, all the parties are back in that city, looking to salvage the deal. However, Iran’s potential return to the mainstream global economy and its exit from a strict sanctions regime employed against it has many in the Middle East (West Asia) on edge. There is little denying that, tactically, Tehran has largely succeeded in achieving its geopolitical goals in the region, having a strong presence in Syria; backing the Houthi militias in Yemen; supporting Hezbollah in Lebanon, and so on. And by association, there is no denying that stress in other Arab Gulf capitals and Israel alike remains high, and the argument in favour of a need for a regional response, not one that necessarily relies on the US security umbrella, is gaining strength.
Many Arab Gulf states had either withdrawn or scaled down diplomatic representation with Tehran in 2016 after Iranian protesters attacked the Saudi embassy in response to Riyadh’s execution of prominent Shiite Muslim cleric Nimr al-Nimr.
Collective diplomacy
The Arab Gulf, cognisant of the fact that a military confrontation with Iran would be catastrophic for their (in many cases fledging) economies, is now also looking to renew diplomatic ties with Tehran to try and open new routes of engagement with the Iranian leadership on some of the most contested regional issues, that for now lie outside the ambit of the nuclear agreement. This month, Kuwait said that it has re-opened its embassy in Iran after an absence of six years. The United Arab Emirates (UAE) has also announced that it would reinstate its ambassador to Iran ‘within days’. Many Arab Gulf states had either withdrawn or scaled down diplomatic representation with Tehran in 2016 after Iranian protesters attacked the Saudi embassy in response to Riyadh’s execution of prominent Shiite Muslim cleric Nimr al-Nimr. However, since then, times have changed and a more regional approach to dealing with Iran has been sought. The UAE has said that the Arab Gulf states should take part in “collective diplomacy” in dealing with Iran, even if a nuclear deal in its second avatar is signed. Saudi Arabia, the main ideological contender to Iran, has also opened diplomatic channels with it hosted by Iraq over regional conflicts despite being in an indirect war with the country in Yemen and facing attacks by Iran-backed Houthis against Saudi oil installations.

Beyond international diplomacy, Israel has tactically pushed back as well, with covert wars between Iranian and Israeli agencies spilling over across the world.


Perhaps the single biggest move towards a ‘collective diplomacy’ framework by the Arab Gulf was the signing of the Abraham Accords in 2020, which normalised relations between a set of Arab Gulf states led by the UAE and Israel. The Israelis have been much more aggressive in their posture of disallowing Iran from becoming a nuclear power. Beyond international diplomacy, Israel has tactically pushed back as well, with covert wars between Iranian and Israeli agencies spilling over across the world. Two previous IED attacks against Israeli diplomatic targets in India have been blamed on Iran, adding strain to Delhi–Tehran ties as well. However, at the end of the day, even Iran would like some sort of agreement to be signed over the nuclear issue which would allow it to return to the international economic arena. This view is now also prevalent in the West, as a return of Iranian oil to the market will help ease global economic pressures that are being felt today due to the Ukrainian crisis. Furthermore, from an American perspective, the global South’s unwillingness to join a larger sanctions regime or plans to isolate Moscow highlighted the fact that Washington D.C. will have to work to make sure Russian influence in these regions does not trump the US interests beyond what is happening in Europe today.
Iran’s perspective
Iran’s own interests also get addressed with a level of normalisation via the return of the JCPOA. Tehran has reportedly eased off its long-standing demand for the US to de-list the Islamic Revolutionary Guard Corps (IRGC) from its terrorism listing, and Iranian President Ebrahim Raisi is also being credited for spearheading attempts to restore diplomatic ties with their Arab Gulf neighbours. It has long been thought that while the constituency Raisi represents—that of hardliners and anti-US ideologues, specifically after the American assassination of former IRGC Chief Qasem Soleimani in Iraq in 2020—remains against an agreement with the US, a JCPOA negotiated by one of their own will be more palatable than the one negotiated by the moderates under the former presidency of Hassan Rouhani. And at this point, Tehran perhaps also realises that due to happenings in Europe, the West needs a deal with Iran, both to potentially ease the burden of oil and gas prices and to make sure the Iran issue does not flare into another conflict zone despite US President Joe Biden’s position that he was prepared to use force to make sure Iran does not get nuclear weapons.

In the Arab Gulf, the return of the JCPOA may be seen as another example of retrenching American power in the region. Specifically, as Iran continues to build further economic and political bridges with both Russia and China. However, for the US and Iran, it may now primarily be about only nuclear weapons once again—the original ambit of the deal when its negotiations began in 2013. Success on this front may well be critical, for if Iran, after North Korea, successfully gains a nuclear arsenal, the hypothesis that if a state is determined to get nuclear weapons, it will, at any cost, could very well become a fact.

### The military–security dimension of the 2020 Abraham Accords: An Israeli perspective

In the recent history of Israel’s political and diplomatic journey, its normalisation of relations with two key Gulf Cooperation Council (GCC) countries—the United Arab Emirates (UAE) and Bahrain—in August-September 2020, famously known as the Abraham Accords, is a breakthrough. Facing isolation in its own region since 1948, the emerging realignment of relations holds extreme significance for Israel. It also signals the changing dynamics of the geopolitical, geoeconomic, and security landscape of the wider Middle East, where efforts are still underway to consolidate and expand cordial relations between like-minded countries based on shared strategic interests. The accords are gradually opening important avenues for cooperation between these countries in several domains, one of them being military–security ties, including defence trade.
It was mainly the closely-guarded Indo-Israeli arms trade that dominated the ties for a prolonged period, until they came out of the closet in the early 2010s, and overall military–security cooperation getting more robust since mid-2014.
Lately, shared threat perceptions, emanating mostly from Iran’s controversial nuclear programme and its expanding “strategic depth” in the Middle East have paved the way for the rapprochement. Territorial and existential threats (particularly for Israel) have also been attributed to the establishment of tacit security cooperation (including intelligence sharing) between Israel and a few GCC countries recently. Now, the normalised relations will give Israel leeway to deepen those ties and also tap the defence markets of these two countries. Right from the early and mid-1950s, arms sales have remained an important instrument of Israeli foreign policy. In a few cases, such arms sales diplomacy had even led to the eventual establishment of diplomatic relations, which was the case with the People’s Republic of China in January 1992. Likewise, it was mainly the closely-guarded Indo-Israeli arms trade that dominated the ties for a prolonged period, until they came out of the closet in the early 2010s, and overall military–security cooperation getting more robust since mid-2014. The centrality of arms sales, therefore, in the pursuit of foreign policy objectives continues to be relevant and significant for Israel. Until recently, arms trade (and military cooperation) between Israel and the Gulf states are unthinkable, but following the accord, there have been indications of such engagements gaining momentum. The intrinsic linkages between Israel’s arms sales and its foreign, political, and economic policies have been aptly discussed by scholars like Aaron S. Klieman in his widely-acclaimed book Israel’s Global Reach: Arms Sales as Diplomacy (1985) in these words: “The military rationale for transferring Israeli weapons in effect served as the intermediate link between political and foreign policy incentives on the one hand, and economic motives, on the other.” For Israel, the normalisation could prove to be lucrative for its defence industries which develop some of the world’s most advanced military technologies. The Abraham Accords allow Israel to explore possibilities of establishing military-industrial cooperation with the two GCC states, which are augmenting their military capabilities through imports as well as by striving towards developing their own local military industries for self-sufficiency. Given this, joint-collaboration ventures between Israeli, Bahraini, and Emirati defence industries are in the offing alongside imports of certain defence items from Israel. The accords have also opened an important window for “extended cooperation, sharing of knowledge, promoting investment, development and localization of joint technology” between these countries, which are technologically and economically advanced in their own ways. Some of the sophisticated weapons systems, exported by Israel, such as missiles, air defence systems, Unmanned Aerial Vehicles (UAVs), reconnaissance radars and missile-defence radars (such as the Green Pine system), and various types of arms and ammunitions, are few types of items which are increasingly being sought by these two countries, given the existing nature of threat perceptions.
Joint-collaboration ventures between Israeli, Bahraini, and Emirati defence industries are in the offing alongside imports of certain defence items from Israel.
Owing to the missile/drone attacks by Yemen-based Houthi militias, believed to be financially and logistically backed by Iran, the UAE aims to bolster its air defence system, with military purchases from external vendors, including Israel. The UAE and Bahrain have reportedly discussed a possible procurement of the Israeli-made Iron Dome and Green Pine for defence against any incoming ballistic missile threats. Such security challenges are furthering forward the Israeli-Emirati military-security cooperation (including industrial ventures). The same could be witnessed with Bahrain, in the wake of Israel’s first Memorandum of Understanding (MoU) signed with a Gulf country in February 2022, supporting “any future cooperation in the areas of intelligence, mil-to-mil, industrial collaboration and more.” This formalisation of defence relations carries the scope to widen the cooperation in a wide range of spheres, and not only restricted to the seller-buyer relationship. In the near term, Israeli-made UAVs and anti-drone systems will likely be procured by Bahrain to protect its critical infrastructures from any kinetic military actions. It also appears that Israel’s cooperation with these two countries is going to extend to the maritime security domain due to the increasing threats in the Persian Gulf and the Red Sea, which are not only important routes for international sea trade but they are also crucial to Israel’s communication and commercial dealings with its Asian and African partners. Now, with the realigned regional geopolitics and the growing cordiality, potential military sales to the two Gulf markets will help boost Israel’s arms-export revenues, which continue to remain one of the most important sources for its economic growth alongside its non-defence trade. It is crucial for Israel as it has a limited capacity to absorb its indigenously developed armaments, and therefore, is always in a quest for clients to export the surplus defence products. For more than a decade, Israel has consistently ranked among the top 10 defence exporting countries, and its arms export volume touched US$11.3 billion in 2021 while it was US$8.3 billion in 2020. Reportedly, the UAE and Bahrain accounted for 7 percent of the total exports in 2021, 41 percent for Europe, 34 percent for Asia-Pacific, 12 percent for North America, and 3 percent each for Africa and Latin America. In 2021, at 20 percent, missiles, rockets, and air defence systems constituted the largest portion of Israel’s weapons exports while UAVs, drones, radar, and electronic warfare systems (EWS) amounted to 9 percent of the total arms sales. With the UAE and Bahrain emerging as its new markets, the revenue that Israel will generate from arms sales will be important for funding its defence research and development (R&D) programmes as the government requires an uninterrupted flow of foreign earnings coming into the country.
Israel has consistently ranked among the top 10 defence exporting countries, and its arms export volume touched US$11.3 billion in 2021 while it was US$8.3 billion in 2020.
While the 2020 Accord raises the prospects for an arms trade between Israel and both the GCC states, Israel can face competition (at later stages) from traditional and new arms exporters to the Middle East, but mostly in missiles, anti-missiles, drones/UAVs, radars, domains. The United States (US) remains the largest arms supplier for most of the regional countries. The Middle East accounted for 43 percent of its total arms exports in 2017–21, with Saudi Arabia and the UAE as the two largest recipients. Moreover, the steady growth in the arms trade between China (an emerging exporter) and some of the Middle Eastern countries (including the UAE) could pose a competition to Israeli defence exporters in the long run. China has gradually begun tapping the markets in the region by exporting its UAVs/drones (such as Wing Loong I, Wing Loong II, CH-4, and CR500 Golden Eagle) to customers, including the UAE and Saudi Arabia. It is also making unrelenting efforts to increase its technology transfers and strengthen its defence industrial cooperation with more countries in the Middle East. With its ever-widening economic and technological footprints in the region, it will compete with other arms suppliers, including Israel, at some period. The restrictive US arms sales policies (mainly for armed drones) have pushed countries like the UAE to look for available alternatives with fewer strings attached. This is an important void that China hopes to fill, and Israel also will aspire to transfer similar items to its new clients to carve a niche in the region. Nevertheless, Israel and the aforementioned GCC countries will continue to explore all the possible areas to cooperate in the military-security sector, and not let any third-party factor hamper the further expansion of their newly-established diplomatic ties. It is within such a framework that Israel will endeavour to secure lucrative arms deals with the two energy-rich countries. The quest for their own technological advancement in the defence industry provides an incentive to the UAE and Bahrain to solidify ties with Israel. Their respective bilateral relationships will also continue to be driven by their military-security defence ties and shared security challenges. With strong convergences of strategic interests, military-security cooperation looks promising, and Israel’s arms deal with both these countries can be expected to flourish gradually.

### Building new partnerships: Putin looks toward Iran

In the Russian President’s first visit outside the Central Asian Region since Russia’s military operation in Ukraine, Vladimir Putin met Iran’s Supreme Leader Ayatollah Ali Khamenei on 19 July. During this trip, the Russian President also met President Recep Tayyip Erdogan of Türkiye in Tehran, making it his first in-person meeting with a North Atlantic Treaty Organisation (NATO) leader since the war began in Ukraine. Although Russia and Iran have shared an adversarial relationship with the United States US) for a while, the two countries were careful not to get too close earlier. However, in the wake of attempts at international isolation and burgeoning sanctions, Putin’s visit could be viewed as an endeavour to counter western efforts to punish and ostracise Moscow. Importantly, Iran expressed support for the war in Ukraine with the Supreme Leader’s vocal endorsement of the same in clear terms. Khamenei expressed Iran’s dissatisfaction at the plight of the people caught in the war but added that in the case of Ukraine, had Russia not mobilised, the West would have done so and initiated a conflict regardless.

Türkiye and Iran find themselves on opposite ends in Syria and Libya, competing for influence in the South Caucasus while  Turkish combat drones have not only been aiding the Ukrainian military in the ongoing war but have become icons in themselves, being at the forefront of Ukrainian countermeasures.


This engagement with Iran and Türkiye stemmed out of necessity as Russia has shared a difficult relationship with both Tehran and Ankara. Türkiye and Iran find themselves on opposite ends in Syria and Libya, competing for influence in the South Caucasus while  Turkish combat drones have not only been aiding the Ukrainian military in the ongoing war but have become icons in themselves, being at the forefront of Ukrainian countermeasures. Iran and Russia are also competitors in the global energy market. Putin had intentionally also stayed away from building a full-fledged alliance in the past in pursuit of bolstering relations with Arab countries and Israel. Both Iran and Russia have looked towards Asian markets to mitigate losses from energy commodity sales in the West. However, even in Asia, Tehran and Moscow are in a battle with each other to grab market share. As its relations with the West kept souring, Russia had started to court Iran even before the invasion of Ukraine. This year, it was the third time that Putin and Iran’s President Ebrahim Raisi met. These interactions would suggest that due tothe sanctions imposed by the West, Russia is increasingly starting to look at Iran as an economic partner, with the two countries also having to tackle sanctions to keep their economies afloat, something that Iran has been doing for a prolonged duration now. This strategy of partnering with Iran against a fast-developing great power competition played out earlier as well when China signed a massive multi-billion-dollar strategic agreement with Tehran in 2021. However, as an anti-US agreement, Iran played this up much more than China did, highlighting the utility of such an agreement, which is yet to show a massive infusion of investments from China into Iran but did cause enough noise in the international arena to bolster Beijing’s persona.

Russia could also be looking to buy combat drones from Iran, which could be essential to continue the war in Ukraine, owever, this was not discussed in these interactions.


Meanwhile, reports suggest that Russian energy giant Gazprom has signed a non-binding deal worth US$ 40 billion to help develop oil and gas fields in Iran. Russia could also be looking to buy combat drones from Iran, which could be essential to continue the war in Ukraine, owever, this was not discussed in these interactions. At the meet in Tehran, Putin said that the relations between the two countries were developing at a good pace in “economic, security, and regional affairs” and that Raisi had agreed to enhance cooperation in energy, industry, and transportation. Russia and Iran also agreed on the need to eliminate the US dollar gradually from global trade. However, all of these plans are easier said than done. For Moscow, investing in a heavily-sanctioned Iran comes with a strict set of challenges. For countries like India, which is benefitting from a plummeted per barrel price of Russian crude in the market and maintaining a balance between its relations with Moscow and the West, any further tightening of sanctions against Russian energy industries will also make it difficult to conduct business. If Russia sees the Iranian model of a survivalist state navigating the harshest sanctions ever against any country as something to benefit from, Moscow will also have to consider that trade with Tehran, even with friendly countries, had become unviable. And any future plans of breaking the monopoly of the US dollar beyond a point will put much of the global South, a construct that actively remained non-aligned over Ukraine, make choices that ultimately may not favour either Moscow or Tehran.

Türkiye ’s participation in such dialogues is going to become difficult going forward as the NATO member looks to balance diplomacy in a region where there is a significant gap between its own neighbourhood policies and NATO’s larger aims.


It would appear that Iran’s leaders are keen on strengthening relations with Russia in the backdrop of a rising Gulf Arab-Israeli block backed by the US, which could disturb the balance of power in the Middle East, taking it further away from Iran. Iran would also benefit from Russia’s support in pressurising Türkiye in Syria, where the latter has backed the anti-Assad insurgents. Erdogan’s visit to Iran during Putin’s visit went largely under the radar, as some analysts believe. It was Syria that remained the crux of the issue, and not Ukraine. It was mothballed by Russia and Iran, viewing Ankara’s role in northern Syria from the window of the Ukrainian conflict. Türkiye ’s participation in such dialogues is going to become difficult going forward as the NATO member looks to balance diplomacy in a region where there is a significant gap between its own neighbourhood policies and NATO’s larger aims. This was in view recently beyond Iran and Russia as well, as Ankara held up Finland and Sweden’s ascension into NATO to leverage guarantees over Kurdish groups and their ecosystems in mainland Europe. The Middle East overall preferred to remain cautious about going all out against Russia. The Arab Gulf knows it must deal with Moscow as one of the world’s top three oil producers and work with Putin to ensure that oil prices which still determine the financial health of many Arab Gulf states and monarchies remain in control and stable. Russia’s role here leverages any all-out partnership with Iran, specifically in fields where Moscow could be seen openly abetting Tehran in regional conflicts. For now, the geopolitics of Putin’s visit is based on very short-term, symbolic goals via what analyst Esfandyar Batmanghelidj calls “a pageantry of state visits”.

### The I2U2 summit: Geoeconomic cooperation in a geopolitically complicated West Asia

The I2U2 group of countries, ‘I2’ standing for India and Israel and ‘U2’ representing the United States (US) and United Arab Emirates (UAE), held their first summit level virtual meet on 14 July, during US President Joe Biden’s visit to Israel. The summit-level talks come as a welcome push since the meeting of I2U2 foreign ministers in October 2021 was followed by a lull despite many analysts christening this new setup as the ‘Middle East Quad’ (or ‘West Asia Quad’).

All four member countries have highlighted six main areas of cooperation that have been selected to launch this engagement into its next stage. With geoeconomics being the central tenant, cooperative projects in the fields of water, food security, health, transportation, and space cooperation have been identified as the first set of pilots, operating under larger global umbrellas of issues such as international economic stability, climate change, volatile energy, and food markets that have disproportionately affected the Global South, compared to the more developed parts of the world. The Quad is the correct format to take fast decisions, Israel’s Prime Minister Yair Lapid said, perhaps indirectly questioning the feasibility of larger groups such as the United Nations (UN) or the G20 to deliver quickly and concretely in a more complicated world.
The geoeconomics of it all
Undoubtedly, the scene-setter for the I2U2  was the signing of the Abraham Accords in 2020, which brought Israel and a group of Arab Gulf states led by the UAE into official partnership and recognition. The aim of the grouping is clearly to build more efficient cooperation in spheres where both regions can aid each other’s economic security. Israel today has the opportunity of using the financial prowess of centres such as Dubai to market its technology-driven offerings, something which the country is known for. And the first benefactors of the same have been the Gulf states themselves, with defence technologies offered by Israel quickly finding interest in the region with states such as Bahrain reportedly looking at Israeli drones and anti-drone systems to counter the threat from Iran. However,  Israel, the UAE to a certain extent, and some other Gulf states rely heavily on imports to supply themselves with their daily requirements.
The aim of the grouping is clearly to build more efficient cooperation in spheres where both regions can aid each other’s economic security.
Recent disturbances to international supply chains caused by the COVID-19 pandemic, Russia’s war against Ukraine and more targeted plans to diversify global manufacturing capacities away from China have given significantly more weight to ‘minilaterals’ such as I2U2. One of the outcomes of the summit, that of the UAE investing US$ 2 billion to develop hi-tech integrated food parks across India, will not only bring a big technological boost to Indian agriculture through a potential UAE-Israel state and private sector cooperation, but also give critical food security capacity to Israel, the UAE, and their regional partners, offering a level of insulation from larger and more complicated international commodities trade frameworks. In return, India should also look for a greater say via the UAE and (indirectly) the US, with Abu Dhabi now often seen as the most influential Arab capital, in cartel-like ecosystems such as OPEC and OPEC+. Food security for the Gulf by design would go hand-in-hand with energy security for India.
Strategic opportunities amongst challenges
 While the prospects of the I2U2 remain strong for the future, New Delhi will also appreciate the fact that strategically, India is the odd one out when it comes to the regional geopolitics of the Middle East. The first I2U2 summit has taken place during what many see as a very volatile visit of Biden to the region. Many Gulf players today are seeking a new strategic architecture with the US that would offer binding protection if any military conflict with Iran was to ensue. Biden, on the other hand, is having to maintain a balance between remaining a vital player in the region, but also not getting military entangled. The recent, messy American withdrawal from Afghanistan has only heightened anxieties in the Gulf of what American support without agreed guarantees would entail in the future. And to hedge their bets and diversify strategic plays, they are also willing to give space to the likes of Russia and China in the Middle East, much to Washington’s dismay.
For India, it leverages its good relations with Israel, the Gulf, and the US alike to build economic exchanges that are mutually beneficial with next to no downsides on the horizon.
While Lapid in his comments at the summit eluded to the ‘Quad’ as a good format, the US made direct comparisons to the original Quad in the Indo-Pacific, where the US, India, Japan, and Australia partner in a grouping that is effectively designed to curtail China’s influence in Asia. US National Security Adviser Jake Sullivan’s direct conflation between the original Quad and the development of the I2U2 as a ‘West Asian Quad’ may not position well two very diverse and strategically different areas for New Delhi. India being caught in a US-sponsored and backed Israel-Arab security deal would complicate the country’s known and appreciated ‘strategic autonomy’ in the Middle East as a state that chooses not to take sides. While an overall expired concept, non-alignment still resonates when it comes to India’s West Asia policy. The Abraham Accords, since their signing, have undoubtedly stabilised the region to a certain extent, but have also created two major blocks, one being Iran, and the other that is now seen as anti-Iran. This is despite side-line diplomacy, such as Saudi’s independent talks with Iran hosted by Baghdad, the UAE’s continuous cooperation with Tehran on certain issues and so on remaining constant. These concerns are not visible only from New Delhi’s vantage point but have also been raised in Europe, with scholars advising European capitals to not follow Washington’s lead by supporting a Gulf-Israeli defence pact and continue to work towards a regional de-escalation.
Conclusion
The I2U2, both on paper and in practice, makes a lot of sense. For India, it leverages its good relations with Israel, the Gulf, and the US alike to build economic exchanges that are mutually beneficial with next to no downsides on the horizon. However, geoeconomics and economic linkages cannot be seen as separate from geopolitics, and Middle East’s geopolitics remains volatile despite the Abraham Accords, with the Iran crisis looking to get even more complicated with chances of a JCPOA 2.0 remaining bleak. While none of these should dissuade India from aggressively developing economic linkages with a now ‘normalised’ Arab–Israel region, concern lingers that the Abraham Accords themselves are doing far too much heavy geopolitical lifting far too briskly, something that New Delhi, as the odd-one-out, should remain on top of.

### Gantz’s visit to India: Israel’s hand in building the Asian leading power

After putting off his visit to India in March, The Israeli Defence Minister, Benjamin Gantz, arrived in Delhi this week, to sign a “security declaration” marking three decades of diplomatic ties between India and Israel. The visit is underway when Israel’s governing coalition is increasingly unstable after losing its majority in the Knesset and when there is a spike in terror attacks against Israeli civilians, indicating the importance that Jerusalem gives to the economic and strategic relations with India.

The defence relations between the countries form the basis for the current prosperous relations in economic, strategic, and cultural areas. Despite the Indian suspicion which characterised the first decades of the two post-colonial independent entities and despite the fact that New Delhi was sending aid to Israeli’s rivals during its wars with the neighbouring Arab states, Israel’s strategy was focused on diplomatic courtship and usage of its advanced military capabilities to prove its credibility as an ally worthy of India. The establishment of full diplomatic relations in 1992 was a founding milestone but it took many years to get rid of the Indian suspicion.

A few months after the establishment of the full diplomatic relationship, the two countries made a significant leap in tightening military relations.


From the very beginning the Government of India had kept the military cooperation with Israel under the radar, but it was only a matter of time until it was exposed publicly, given the sheer potential it held for India. The former Minister of Defence, Sharad Pawar, noted in February 1992, that normalising relations with Jerusalem allowed the creation of an appropriate infrastructure to learn from Israel's world-renowned experience in the field of counterterrorism and expressed Delhi’s main interest in R&D. A few months after the establishment of the full diplomatic relationship, the two countries made a significant leap in tightening military relations. A special delegation of Israeli defence personnel visited their counterparts in India. The details of the talks were kept a secret, but the visit symbolised the intentions of both parties to march on a joint path.

The late 1990s provided Israel with several opportunities to prove its commitment to India. During the downturn in India–United States (US) relations following the Pokhran nuclear tests that was carried out in 1998, the US sought to prevent the sale of advanced electronic systems to India by putting pressure on Israel. Despite the strong partnership that the US shares with Israel, Israel refused Washington's request and supported Delhi while India was subject to US sanctions. Struggling in the international arena due to the sanctions, the victory in Kargil War in 1999, which was India’s first televised war, held multi-layered significance for Delhi. The defence experts argue that if the laser-guided missiles were not been delivered by Israel at that time, then ‘Operation Vijay’ probably would not have been successful.

Since then, technology transfer and licensed production have turned up to be the fundamental dimensions defining the strategic defence alliance between India and Israel. The scope of defense collaborations and acquisitions increased along with the tightening of relations during the Modi-BJP era. From 2014 onwards, Israel has become a significant player in India's defence market alongside Russia and France. According to the SIPRI report, between 2015-2019, India’s arms imports from Israel increased by 175 percent.

The scope of defense collaborations and acquisitions increased along with the tightening of relations during the Modi-BJP era.


Although the Modi regime created many opportunities for the Israeli market, at the same time it created many obstacles for the defence trade between the countries. Modi's vision of 'Atmanirbhar' in the defence field alongside the ambition to make India the world's largest factory under the flagship programme ‘Make in India’ has become a nightmare for decision-makers in the Israeli defence industries. Until now, the Israeli defence companies’ strategy such as Rafael focused on three major channels, each carrying an obstacle: The first is collaborating with local companies, which turned out to be very complex and not always suitable. The second is the establishment of local entity companies, which turned out to be problematic when the parentage of the company’s ownership came into question. The third, establishing a joint venture suitable to the field of the systems or products, which failed in meeting the criteria of available tenders.

Unfortunately, the governmental defence bodies such as SIBAT and the Administration for the Development of Weapons and Technological Infrastructure are still lacking the mechanism to adapt their strategies to the current reality in India. Expanding and deepening cooperation between the Israeli and Indian defence establishments must include the formation of a special committee for the ‘Make in India’ barriers. After all, the key to the further development of relations and maximising the potential lies in easing the activities of Israeli companies in India and the activities of Indian companies in Israel.

For years, Israel has sold arms to countries in the developing world to countries in Asia and Africa under the “follow the market” logic. For decades, India starred in this category. However, the country's rapid growth rate over the past two decades and the great market potential have changed the prism through which many private companies look at India. In February 2020, even the office of the United States Trade Representatives (USTR) revised its list of developing and least developed countries and pulled India out from the list of countries that are categorised as developing. But today's India has bigger ambitions.

Expanding and deepening cooperation between the Israeli and Indian defence establishments must include the formation of a special committee for the ‘Make in India’ barriers.


India's ambitions of becoming a leading power are mentioned in almost every public statement of the present government officials. To be worthy of the honour, Modi knows that it must strengthen its hard power capabilities. Therefore, Israeli companies can rest. The modernisation of the Indian defence industry has a long way to go. And as long as China continues to build its war abilities to provoke and threaten land and sea borders with India, the latter will proceed with its acquisitions of Israeli-made products such as UAVs, drones, and advanced missile systems. But one thing has changed—the Indians perception of themselves. India has become aware of its needs but also of its rising power and it is not willing to be in the place of just a buyer but in a place that exchanges ideas, fosters innovation, and require equal visibility in the negation table. For the Israelis, it takes time to grasp this change.

India's importance has been reaffirmed in the face of geopolitical changes. On the one hand, the geoeconomics contestation between the US and China has been creating unpleasant incidents for Israel with Beijing, as Washington increased its pressure on the Israeli government to call off deals with Beijing in investments in strategic infrastructure, weaponry systems, and sensitive tech companies. On the other, the war in Ukraine emphasised the importance of weaning Delhi from the old Russian equipment. Furthermore, Abraham Accords and its nascent grouping—The Middle Eastern Quad—generate a priceless opportunity to deepen relations with India through the Arab-Mediterranean trade corridor. In light of the internal and external transitions, it’s time Israel starts perceiving its relations with India beyond a client-seller one. Jerusalem should see itself as a partner in building Asia's next leading power.

______________________________________________________________________________________________________

Oshrit Birvadker, Senior Fellow, Jerusalem Institute for Strategy and Security, Israel

### The deepening of India–Israel defence ties

The Israeli Defence Minister, Benjamin Gantz, recently concluded a long-pending visit to India. Both countries decided to expand their defence cooperation during his visit, focusing on the emerging technologies. Gantz and his Indian counterpart, Rajnath Singh, signed the ‘India–Israel Vision on Defence Cooperation’ to put together a comprehensive 10-year roadmap to identify new areas of collaboration. The two ministers also exchanged a ‘Letter of Intent’ to enhance cooperation on futuristic defence technologies.

This focus on technological cooperation precedes the robust ties in the defence and security sector, ning arms sales, military exchanges, and counterterrorism engagement. This article gives a broad overview of the bilateral defence relationship and suggests a way forward for defence technology cooperation.

Driven by the shared threat perception of being surrounded by hostile neighbours, both countries deepened their exchanges in multiple spheres, including extensive people-to-people contact.

Since establishing ties in 1992, India and Israel have traversed a long path. Driven by the shared threat perception of being surrounded by hostile neighbours, both countries deepened their exchanges in multiple spheres, including extensive people-to-people contact. The defence and security partnership provided the anchor for this bilateral interaction. The Kargil War of 1999 cemented this cooperation when Israel was one of the few countries to provide direct military assistance to India. Notably, these robust ties precede the India–US defence cooperation which materialised much later.
Defence trade
Since then, India has tended to rely more on Israeli technology and equipment for border security and counterterrorism. This has made India the largest purchaser of Israeli weapons in the last decade, surpassing even the United States, Israel’s principal military ally in West Asia (see figure 1).

Figure 1: Trade Indicator Values of Israel’s arms exports (2011–2021, figures in US$ millions)



Source: SIPRI Arms

Transfers Database

India’s arms purchases have provided Israel’s defence-industrial base with steady and much-coveted access to a sizeable market. This passage to the Indian market is even more significant for Israel’s defence industry since the United States, concerned with the qualitative upgrade of Chinese military capabilities, had vetoed Israeli arms sales to China in the late 1990s and early 2000s.

Unmanned Aerial Vehicles, missiles, and radar systems have dominated India’s purchases from Israel, totalling worth US$ 4.2 billion (2001–2021) (see figure 2 and table 1).

Figure 2: India’s arms imports from Israel (2001–2021, figures in US$ millions)



Source: SIPRI Arms

Transfers Database

Table 1: Major Israeli defence equipment purchased by India



Source: SIPRI Arms

Transfers Database and IISS Military Balance 2022

These equipment and platforms have undoubtedly strengthened the Indian surveillance and operational capabilities, particularly in the Kashmir Valley and on the borders. For example, Israeli sensors, Heron drones, hand-held thermal imaging devices, and night vision imaging equipment have proved advantageous for the Indian Army in checking infiltration on the Line of Control and counter-insurgency operations in the Valley’s hinterland. Likewise, last March, the Indian Army leased four Heron drones from Israel Aerospace Industries (IAI) to deploy them on extended surveillance missions on the Line of Actual Control, amidst the border stand-off with China.
Defence technology cooperation
Beyond defence trade, India and Israel have also been engaged in defence technology cooperation. The symbol of their success is the Barak-8 air and missile defence system. Co-developed by the IAI and India’s Defence Research Development Organisation (DRDO), Barak-8 is available in land and maritime versions. It can intercept targets like fighter aircraft, drones, ballistic, and cruise missiles up to 150 km. Further, IAI is also collaborating with the Hindustan Aeronautics Limited to convert second-hand Boeing-767 civilian aircraft into mid-air refuellers for the Indian Air Force.

Another collaboration between Elbit Systems and Bharat Forge, called BF Elbit Advanced Systems, supplies artillery guns, guided munitions, and mortar systems to the Indian military.

Building on the success of Barak-8, in September 2020, India and Israel established a bilateral sub-working group on defence industrial cooperation. This group is expected to facilitate further technology transfers to India, enable utilisation of bilateral resources, and share industrial capabilities.
Israel’s participation in ‘Make in India’
Supporting the Indian government’s focus on building national defence-industrial capabilities, Israeli companies have forged partnerships with the Indian private sector. This replicates the pattern followed by the major American aerospace companies, which too have built successful commercial collaborations with their Indian private sector partners.

The IAI, Elbit Systems, and Rafael Advanced Defense Systems have set up joint ventures with Bharat Forge, Tech Mahindra, Adani Group, and Tata Advanced Systems to produce niche sub-systems and homeland security systems. For instance, IAI’s subsidiary, ELTA Systems, has a joint venture with the Tata Advanced Systems, called Hela Systems, which manufactures communications, electronic warfare, and homeland security systems. Another collaboration between Elbit Systems and Bharat Forge, called BF Elbit Advanced Systems, supplies artillery guns, guided munitions, and mortar systems to the Indian military. Notably, Israeli companies have quickly identified and utilised the niche technological solutions offered by Indian companies. For instance, Bengaluru-based Tonbo Imaging’s specialised electro-optics technology has powered Israel’s precision-guided bombs for years.

The agreement on enhancing partnership in futuristic defence technologies is an effort in the right direction.

Of course, a big challenge for these companies is uncertainties related to India’s protracted defence acquisition procedure. For instance, in 2019, Elbit Systems was declared the lowest bidder—L1, in the bid to purchase towed artillery gun systems for the Indian Army. Yet, after extensive price negotiations, the government shelved the order, preferring indigenous alternatives. Similarly, plans to acquire an additional fleet of Phalcon airborne warning and control system-enabled planes have stalled for years.
Stepping-up defence collaboration
But beyond these usual challenges, there is a real opportunity for New Delhi and Tel Aviv to advance cooperation. The agreement on enhancing partnership in futuristic defence technologies is an effort in the right direction. Given Israel’s strong focus on R&D, both sides can collaborate on technologies such as additive manufacturing and advanced battery technology and power sources, besides usual flagships such as artificial intelligence, blockchain, and robotics.

To realise the true potential of this partnership, what is needed now is the identification of mutually beneficial technologies, followed by a formal collaboration between Israel’s Maf’at (Directorate of Defence Research & Development) and India’s DRDO along with greater engagement between their respective innovation ecosystems. This will create a sustainable path for collaboration between the two tech-savvy democracies.

### The Gulf’s quest to reconfigure its relations with the US

The US relations with Saudi Arabia and the United Arab Emirates (UAE) have arrived at a stalemate due to their diverging views on regional stability and concern over their own national security objectives. As a result of Washington’s unreliability as a security guarantor in the region, the lack of national security support for Saudi Arabia and the UAE, Russian influence in the Middle East, and the rise of China, Riyadh, Abu Dhabi, and other regional capitals, have chosen to hedge their bets and make choices that may not align with US national security interests. The US does not have the same dominance it once held over the Gulf region. Today’s complex realities require diplomatic, political, and economic statecraft that is completely different from the famous American mantra of “with us or against us”. It is a matter of national security for Riyadh and Abu Dhabi to re-establish new contours driving the bilateral relations with the US to one that is more transactional in nature, such as those with Moscow and Beijing.
Brzezinski’s “Grand Chessboard” and the Middle East
In his powerful book “The Grand Chessboard”, Zbigniew Brzezinski, the US National Security Advisor to President Jimmy Carter and one of the most influential American geostrategists of the 20th century, argued that for Washington to maintain global hegemony it has to maintain primacy over the Eurasia landmass. In his argument, he carved Eurasia into four spaces: West, East, South, and the Middle. One of the main conditions, he argued, for American hegemony to prevail geopolitically is “the southern region subjected to domination by a single player”, along with major geopolitical and geostrategic conditions such as preventing the alliance between the anti-West, a Russia-led middle space and China-led unified East. In addition to this geopolitical and geostrategic landscape, America must face the reality of its resource scarcities when attempting to maintain multi-theatre dominance as it used to do in the decades that followed the Second World War.

One of the main conditions, he argued, for American hegemony to prevail geopolitically is “the southern region subjected to domination by a single player”, along with major geopolitical and geostrategic conditions such as preventing the alliance between the anti-West, a Russia-led middle space and China-led unified East.


In today’s consequential strategic theatre of the Middle East, Washington’s foreign policy elites are still grappling with fundamental strategic dilemmas. First, a US strategic pivot towards the Indo-Pacific and the de-facto undervaluation of the Middle East as a strategic theatre. Second, the Middle East continues to control and dictate the global energy dynamics. Third, Washington is not seen as a reliable security guarantor anymore. And finally, Moscow and Beijing are already filling some of the vacuum left by Washington in the region.
Different tone, the same substance
The Saudis and Emiratis have most recently been met with dead ends from Washington. The exclusion of Gulf states from the Obama administration's Iran nuclear deal in 2015 was considered a blatant disregard of Gulf security interests. Against that backdrop, the Trump administration's decision to not retaliate against the Iranian attacks on the Saudi oil facilities in 2019 meant a de facto death of the Carter Doctrine. During campaigning, President Biden committed to treating Saudi Arabia as a “pariah state”. After assuming office, the Biden administration refused to engage directly with the crown prince, withdrew Washington's support for the Saudi-and-Emirati-led campaign in Yemen, pursued negotiations for Iran nuclear deal 2.0, and removed the terrorist designation status from the Houthis, and delayed arms deals to Riyadh and the Abu Dhabi.

Against that backdrop, the Trump administration's decision to not retaliate against the Iranian attacks on the Saudi oil facilities in 2019 meant a de facto death of the Carter Doctrine.


From Obama to Trump to Biden, Washington's actions and inactions altered Saudi Arabia's and the UAE's strategic thinking and decades-old trust in the reliability of the US as a security guarantor. Furthermore, US allies and partners budgeted their strategic calculus for the changing global order with the rise of China, India, and Russian revisionism. Additionally, they have been left with new factors, such as the US foreign policy incompetence demonstrated in the chaotic withdrawal from Afghanistan and US’ domestic crises via internal instability with intensified internal political and racial polarisation.
Why not produce more oil?
Nothing captures the new regional realities that Washington faces more than the fact that Saudi Crown Prince Mohammed bin Salman (MbS) and UAE.'s Sheikh Mohammed bin Zayed al Nahyan declined to speak to President Biden. A week later, the two princes spoke with President Putin and Ukraine’s President Zelenskyy. The Biden administration wants the two Gulf countries' support in containing the global energy price surge by producing more oil which would obstruct the OPEC+ framework. UK’s Prime Minister Boris Johnson landed in Riyadh and Abu Dhabi to make an appeal to the two princes and ask for the same thing that the Biden administration has been seeking for some time now. Johnson’s visit clearly did not yield what the West had hoped for. Furthermore, the Saudi foreign ministry dismissed reports in the media that US Secretary of State Antony Blinken would be visiting the Kingdom. OPEC+ is one of the main tools of geopolitical and economic statecraft that Saudi Arabia has developed after a no-holds-barred price war with Moscow at the beginning of the pandemic. By asking the Saudis to produce more oil, Washington is simply asking MbS to dismantle the OPEC+ framework and eradicate the Kingdom’s credibility as a leading voice with convening power among the oil-producing nations. Unsurprisingly, policymakers in Riyadh and Abu Dhabi have to ask the most basic question: why should we do it? And if Riyadh and Abu Dhabi were to entertain Washington’s requests, why should Saudi Arabia and the UAE do it for free? What would Washington offer in return to them? And the most critical question is whether the US thinks this colossal request should be cost-free, or maybe just worth a photo with Secretary Blinken, or perhaps a phone call with President Biden? What does it say about how Washington sees itself and the Gulf nations?

UK’s Prime Minister Boris Johnson landed in Riyadh and Abu Dhabi to make an appeal to the two princes and ask for the same thing that the Biden administration has been seeking for some time now.


By refusing to call President Biden or to receive Secretary Blinken in Riyadh or Abu Dhabi, Saudi Arabia and the UAE are sending clear messages that Washington needs to recognise the rapid emergence of a multipolar world, and a need to reconfigure the Saudi Arabia-US and UAE-US relations from this lens and not from one led by US hegemony. Washington should internalise the vital interests that Saudi Arabia and the UAE have with China and Russia today on security, military, and economic levels.
The decades-long playbook is not valid anymore
The Gulf’s strategic autonomy toolkit includes building domestic military and tech capabilities, innovating new regional architectures such as the Indo-Abrahamic block, and seeking diversified alliances beyond the US to include nations such as China, Russia, U.K., India, Greece, Israel, and France. Furthermore, Strategic autonomy is not limited to military capabilities but includes economic diversification. For instance, Saudi Arabia has been discussing the possibility of allowing for petrochemical sales in the Chinese yuan. It is not a choice of great power over another, it is a choice of Gulf interests. Washington should understand that the new norm is going to be one of a more mutually beneficial and transactional relationship with the Gulf.  In short, the Gulf countries feel they have been taken for granted strategically by Washington. It is in their national interest to re-establish new contours for the bilateral relations on a more even footing. While disconnecting from Washington is not an objective for Riyadh and Abu Dhabi, bilateral relations that are based on respect and consideration is. In an era of great power competition, every ally and partner counts, but it seems that Washington still thinks that it is still the end of history.

______________________________________________________________________________________________________

Mohammed Soliman is the director of the Strategic Technologies and Cyber Security Program at the Middle East Institute in Washington.

### An India-Europe Trade Corridor? The geoeconomics dimension of an emerging West Asia Quad

The virtual meeting on October 18 between the Foreign Ministers of India, Israel, the United Arab Emirates (UAE) and the United States (US) adds an important new dimension to India’s engagement with West Asia and beyond. To start with, the timing of the meeting is significant. It took place while the Indian Minister for External Affairs, Dr. S. Jaishankar, was in Israel on an official visit and photographs show him standing alongside Israel’s Alternate Prime Minister and Foreign Minister Yair Lapid, while US Secretary of State Antony Blinken and UAE Foreign Minister Sheikh Abdullah bin Zayed al Nahyan joined virtually. Equally important, the confabulations took place just days after the US-UAE-Israel trilateral meeting in Washington DC on October 13. Initial read outs of the four-way meeting suggest that its principal focus will be on promoting economic and commercial ties between states that see a growing convergence in their outlook on several key regional issues. There is a specific reference to strengthening transport infrastructure, an emphasis on active follow-up and an indication that a physical meeting of the four ministers could take place on the sidelines of the ongoing Dubai Expo. But it also opens up a more ambitious dimension. Professor Michael Tanchum had recently written about the possibilities of an India-ArabMed corridor that could leverage the evolving geopolitics of the region to create a multi-modal link between Mumbai and the European mainland via the Greek transhipment port of Piraeus. On a first reading, some of his projections about the proposed India-UAE food corridor and cooperation in the energy and petrochemicals sector appeared excessively optimistic. The ground realities in these areas have been quite different from the extrapolations made by him based on initial announcements and media reports. That does not, however, detract from his essential thesis on the possibility of a new trade corridor that connects India with Europe, and it is useful to look at some of the recent developments that could make it a reality.

Professor Michael Tanchum had recently written about the possibilities of an India-ArabMed corridor that could leverage the evolving geopolitics of the region to create a multi-modal link between Mumbai and the European mainland via the Greek transhipment port of Piraeus.



Recent developments

 	UAE’s Etihad Rail has recently completed a new 139-km track that connects UAE with the Saudi Arabian Railway (SAR) network at Al-Ghuwaifat. This is a part of the ambitious GCC rail network on which work is underway and is expected to be operational by 2024. A link from Al-Ghuwaifat on the Saudi-UAE border to Haradh is included in Stage 3 of the project.


 	A 1392-km long Saudi North-South line from Haradh in southeast Saudi Arabia via Al-Kharj, Riyadh, Buraidah to Al-Haditha on the Saudi-Jordan border is already in place.


 	A 300-km stretch from Al-Haditha to Israel’s major port at Haifa is required, of which a 70-km section from Beit She’an near the Israel-Jordan border to Haifa is already functional. The rest of the section will pass through Jordan, which could be a major beneficiary of the emerging corridor. Jordan has diplomatic ties with Israel, and the US may have an interest in pushing this final stretch. It remains to be seen if UAE, which has close ties with both Saudi Arabia and Jordan, steps forth to provide the capital needed for this section.


 	The Chinese have already carved out a role in the project. China’s Shanghai International Port Group has invested US $1.7 billion to establish the Bay Port container terminal in Haifa to handle some of the largest ships. They have also floated the idea of a Persian Gulf to Mediterranean Peace Railway Project as part of their Belt and Road Initiative (BRI). Moreover, the state-owned China Ocean Shipping Co. (COSCO) has a 60 percent share in the Greek railway company Piraeus Europe Asia Rail Logistics (PEARL) to take up to 80,000 cargoes a year to Central Europe and beyond.


 	DP World (DPW), Dubai’s global logistics company, could be another key player in the corridor. It owns and operates the massive Jebel Ali port and free zone in Dubai. In the wake of the Abraham Accords, it has also signed a Memorandum of Understanding (MoU) with Israel’s Bank Leumi to invest in further expansion of Haifa port. It is worth noting that there is no love lost between DPW and the Chinese shipping giants. DPW had invested US $485 million in the Doraleh container terminal in Djibouti port but was unceremoniously ejected by the government once the China Merchants Port Holding Co. took a 23.5 percent stake in the port’s holding company. DPW went to court and has so far won seven rulings in its favour, including the most recent one by an arbitral court in the London Court of International Arbitration in July 2021 which termed the Djibouti government/Chinese takeover illegal.


 	DP World also brings in an India angle because it operates major container terminals in India’s west coast ports of Mundra, Nhava Sheva, and Kochi. Having established a US $3-billion investment fund in partnership with India’s National infrastructure Investment Fund, DP World has made several key investments in India since 2019, to emerge as an integrated logistics and supply chain company. These include acquisition of majority stakes in Continental Warehousing Corporation, in the rail operations of KRIBHCO and in the coastal shipping operations of Transworld Feeders. They are also building a major special economic zone near their Nhava Sheva terminal in Mumbai that could facilitate exports.


 	Israel has signalled its enthusiasm for the rail network, and this was first mooted by former Transport Minister Yisrael Katz in 2017 and repeated by him during his visit to Abu Dhabi in July 2020 as a way to promote peace in the region and strengthen trade and economic ties between the Gulf and the Mediterranean. Subsequently, Israel’s Ministry of Transport announced in March 2021 that the railway project was officially moving ahead in the National Planning Commission.


 	
A trilateral connect between India, UAE and Israel is already taking shape without having a formal institutional framework. Rony Yedidia-Clein, Israel’s Deputy Chief of Mission in Delhi indicated on October 20 that a meeting between the three foreign ministers may take place soon on the sidelines of Dubai Expo. Meanwhile, the Consuls General of India and Israel in Dubai have already taken the initiative of hosting an India-Israel-UAE business meet in October 2021. And the International Federation of Indo-Israel Chambers of Commerce (IFIICC), has launched at its international headquarters in Dubai. It describes itself as an innovative global organisation committed to empowering trusted sustainable strategic partnerships and with a mission to ‘foster innovation, commerce, investment, cultural exchange and goodwill between the diasporas of India, Israel and world citizens.’


 	
Having established a US $3-billion investment fund in partnership with India’s National infrastructure Investment Fund, DP World has made several key investments in India since 2019, to emerge as an integrated logistics and supply chain company.



The road ahead
While there is little doubt that the geopolitical landscape in West Asia is changing rapidly, formidable challenges will have to be overcome if the multi-modal corridor linking India with Europe is to become a reality. At the political level, Saudi Arabia would have to agree to allow Israel-bound shipments through its North-South railway. A small but symbolic step was taken in March 2018, when Air India’s inaugural Delhi-Tel Aviv flight was given permission to overfly Saudi Arabia. A lot has happened since then, including the Abraham Accords and former Israeli PM Netanyahu’s supposedly secret visit to Saudi Arabia. There are indications that the US is urging Riyadh to move forward in establishing diplomatic ties with Tel Aviv, and some progress on the Palestinian front may just be the catalyst needed for this to happen. Jordan has been reluctant to comment on the proposed railway corridor but may take a pragmatic position once there is greater clarity on the funding of the Jordanian section. And Egypt will need some reassurance that it won’t have too much of an impact on its Suez Canal revenues. Michael Tanchum has calculated that the India-ArabMed corridor would cut shipping times between Mumbai to Piraeus from 17 days at present to 10 days via the multi-modal link. That is an attractive proposition in itself but the economic viability of a project of this nature will depend largely  on freight volumes. This is where India’s nimble foreign policy moves in the region and its evolving trade policy could play an important role. After dragging its feet for years, India has now placed its Free Trade Agreement (FTA) negotiations with UAE, Israel, and the EU on a fast track. India’s foreign trade will cross US $700 billion in the current year and the EU remains one of our largest trading partners. The moves currently underway to build supply chain resilience by reducing dependence on China and moving some manufacturing facilities to India, combined with India’s own programme of Performance-Linked Incentives (PLIs) to attract global majors to manufacture in India is likely to give a strong impetus to these trends.

India’s foreign trade will cross US $700 billion in the current year and the EU remains one of our largest trading partners.


India has the opportunity to take a long-term, strategic view of this project. Companies like IRCON can bid aggressively to participate in the unfinished legs of the project in Saudi Arabia and Jordan on the assumption that funding will come from local or international financial institutions. A starting point could be a detailed study carried out over the next few months to examine the viability, impact, and trade potential of the proposed India-ArabMed corridor in comparison with established shipping routes, and an attempt to quantify the direct and indirect benefits of plugging more effectively into supply chains in West Asia and Europe.

### Pegasus in the Room: Law of surveillance and national security’s alibi

“Surveillance is not new, but technology has permitted surveillance in ways that are unimaginable,” noted Justice Sanjay Kishan Kaul, in his conclusion in the Puttaswamy judgement that declared a fundamental right to privacy.

Pegasus, a modern surveillance tool developed by Israel’s NSO group, can tap phones, listen to encrypted audio streams, and read encrypted messages. Data released by the Pegasus Project consortium confirms Pegasus spyware targeted hundreds of verified phone numbers of Indian journalists, political leaders, constitutional heads, dissidents, activists and private individuals. The Pegasus scandal has shaken the very foundations of Indian democracy and raised questions about the extent to which national security can be used as a defence by the State for surveillance of its citizens. The answers to these questions will shape individual rights, democratic and constitutional establishments, and the Indian polity in the years to come.

"The law of surveillance in India is nascent when it concerns advanced surveillance technologies like Pegasus. However, the current legal framework provides some safeguards to the fundamental right to privacy, allowing proportionate derogation only in national, not in private, interest."


The law of surveillance in India is nascent when it concerns advanced surveillance technologies like Pegasus. However, the current legal framework provides some safeguards to the fundamental right to privacy, allowing proportionate derogation only in national, not in private, interest. This piece argues that the national security alibi is infructuous in the Pegasus scandal. The government should adhere to international democratic norms governing surveillance technology.
Law and Rules of Surveillance in India
Israel’s NSO Group, the cyber-arm firm which created Pegasus, in its statement maintained that they sell the snooping malware only to vetted governments and intelligence agencies. On being questioned, the Union Government has not admitted to dealing with the NSO group or using the Pegasus spyware. However, the Union Minister for Information Technology, Ashwini Vaishnav, stated in the Parliament that, “there are established procedures and protocols through which lawful interception of electronic communication is carried out for national safety and security”.

He referred to Section 5 (2) of the Indian Telegraph Act, 1885 (IT Act, 1885), Section 69 of the Information Technology Act, 2000 (IT Act, 2000) and the Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009 (IT Rules, 2009) as established procedures for lawful interception by the competent authorities.

 	Section 5 (2)

The right to privacy in the context of surveillance was first argued in 1996 in People’s Union for Civil Liberties (PUCL) v Union of India. PUCL filed a Public Interest Litigation challenging the constitutional validity of Section 5(2) of the IT Act, 1885, which allows interception by authorised agencies. The Supreme Court declined to strike down the provision as unconstitutional; however, the court, shielding the right to privacy, stressed that any interception by a public authority should satisfy two statutory preconditions, i.e., ‘public emergency’ and ‘interest of public safety’.

In 2017, the PUCL judgement was upheld by a nine-judge bench of the Supreme Court of India in Justice K S Puttaswamy (Retd) and Anr. v Union of India and Ors that declared the Right to Privacy to be fundamental right. The court premised the ruling on the principle that, “Privacy is the ultimate expression of the sanctity of the individual”. Furthermore, the court observed that any restriction on the right to privacy must satisfy the “principle of proportionality and legitimacy,” i.e., the restriction must be backed by law for a legitimate state aim and be proportionate.

The court premised the ruling on the principle that, “Privacy is the ultimate expression of the sanctity of the individual”.


The Bombay High Court scrutinised the applicability of the right to privacy for protection against surveillance in 2019 in Vinit Kumar v Central Bureau of Investigation and Ors. The High Court reiterated the necessity of fulfilling the threshold of ‘public emergency’ and ‘interest of public safety’ for interception under Section 5(2) of IT Act, 1885 and ruled that any evidence procured in violation of law will not be admissible in court.

 	Section 69

Section 69 of the IT Act, 2000 empowers competent authorities, with reasons for interception recorded, to place an interception device, provided, “it is necessary or expedient so to do in the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign states or public order or for preventing incitement to the commission of an offence”. However, Section 69 does not authorise any agency to install spyware to hack a mobile device for this. In fact, Section 66, read with Section 43 of the IT Act, 2000, criminalises the hacking of a device.

 	IT Rules

The government revised the IT Rules in December 2018 on the pretext of improving transparency and accountability and tackling crime and terrorism. Through a Statutory Order, the government designated 10 central agencies as “security and intelligence agencies” and authorised them to intercept, monitor and decrypt “any information generated, transmitted, received or stored in any computer”. The rules also define the terms ‘intercept’, ‘monitor’ and ‘decrypt’.

The State draw rules to decide how a specific provision in the primary statute will be operated. These rules become the delegated legislation created by the State. The government used this inherent power to tweak the IT Rules, 2009; downgraded the safeguards for individual’s privacy; crafted all-encompassing definitions authorising the use of hacking tools like Pegasus and gave blanket surveillance powers to agencies that are not even responsible for national security, e.g., the Delhi Police and the Directorate of Revenue Intelligence. These agencies now collect data without legislative or judicial oversight under the powers conferred in Section 69 (1) of the IT Act, 2000, read with Rule 4 of the IT Rules, 2009.

The government changed the purpose and objective of the law in the statute book and the context in which it is implemented and now using these revised rules as a legal backup for surveillance of citizens through hacking tools like Pegasus.
In the Name of Security
The Union Minister in Parliament reasoned national safety and security for lawful surveillance and referred to the Ministry of Home Affairs’ response to a 2019 RTI as a “sufficient” basis to deny claims of any “association” between the Government of India and Pegasus. However, the Home Ministry’s 2019 response neither confirmed nor denied the use of Pegasus.

Transparency and accountability being foundations of a democratic government, it is essential to balance national security with democratic freedoms and constitutional rights, i.e., the right to privacy, the right to information, and press freedom. The Right to Information Act, 2005 (RTI Act, 2005) should achieve this goal, but in the past couple of years, public authorities have denied more information than shared on pertinent issues citing the justification of ‘national security’. Section 8(1) of the RTI Act, 2005 lays down the proviso related to national security, albeit indirectly. Public authorities are required under Section 8 (2) and (3) to furnish all information that is for larger public interest and is not restricted by the Official Secrets Act, 1923.

Transparency and accountability being foundations of a democratic government, it is essential to balance national security with democratic freedoms and constitutional rights, i.e., the right to privacy, the right to information, and press freedom.

None of the central legislation defines the term ‘national security’, including the National Security Act, 1980. The government, without defining the term, is continuing to expand the concept to include internal matters. In Venkatesh Nayak v Ministry of Home Affairs, the government said, “National Security covers not only the matters concerning defence and foreign relations but also political and economic stability as well as public order”. Now the government invokes the alibi of national security regularly to deny access to information and shut down dissenters, using it to violate accountability and transparency.

For a democracy to function well, citizens need access to information. However, what happens when the government and its agencies curtail the freedom and rights of the citizens in the garb of national security by deploying spyware for widespread mass surveillance of prominent Indians? To remove arbitrariness, the functioning of public agencies should be made more transparent and accountable, as without legislative or judicial oversight, the disproportionate use of powers would destroy constitutional freedoms and guarantees.

As a democracy, we should comply with the democratic norms and values on which global systems rest, even if not legally enforceable. On surveillance, national security, and access to information, two international instruments could be helpful: International Principles on the Application of Human Rights to Communication Surveillance, 2013, and Tshwane Principles on National Security and the Right to Information, 2013.

As a democracy, we should comply with the democratic norms and values on which global systems rest, even if not legally enforceable. On surveillance, national security, and access to information, two international instruments could be helpful: International Principles on the Application of Human Rights to Communication Surveillance, 2013, and Tshwane Principles on National Security and the Right to Information, 2013.

The 2013 Principles on Communication Surveillance articulate what international human rights law requires of governments in the digital age, and provide a mechanism to evaluate and change domestic laws to ensure a human rights-based approach and safeguard against surveillance by law enforcement agencies. The 2013 Tshwane Principles provide detailed recommendations on balancing national security and public access to information. The Principles reverse the onus of proof, of why the information should be released or withheld, from an individual to the government.
Parting note
The government is accountable for protecting constitutionally guaranteed rights; therefore, cybersecurity breaches need an independent inquiry. India immediately needs to enact a data protection law that upholds the constitutional right to privacy. The current surveillance laws already provide conditions under which surveillance is permissible; however, the IT Rules that misconstrue the law's objectives need to be revoked. Surveillance technologies that are invasive beyond reasonable limits, like Pegasus, should be banned. Reforms are also required to ensure judicial oversight over public agencies.

### Turkey’s return to Africa and its implications

With shifts in geopolitics and business, Africa, which is known for its abundant natural resources, rapidly increasing population, and free markets, has become a battleground for many countries seeking opportunities and influence. In comparison to the past, the rise of new forces such as China, India, Brazil, Turkey, and the Gulf states has made it more competitive as a multipolar continent. As a result of the increased interest in Africa and the diversification of players on the continent, former colonial powers with active agendas on are gaining ground.

New forces are emerging on the continent; while some try to build relationships based on common geographies, histories, and bonds established through struggles against colonialism and slavery, others practice a new type of neo-imperialism with new power and capital components. There is a race between the world’s leading powers for geostrategic positioning and to get access to Africa’s abundant natural resources.

When considering Turkey’s position in Africa’s evolving and developing process, it appears that it differs significantly from the norms and practices followed by the more developed powers such as the United States, the United Kingdom, or France. Western governments’ long history of promoting dictatorships, secret arms shipments, and business interests through financial assistance, as well as their divisive policies, have done more harm than good to continental countries. Turkey has a greater reputation in this regard than countries that are involved in the region and consider themselves conventional African partners. This condition benefits Turkey in all aspects of the economy.

Turkey has a greater reputation in this regard than countries that are involved in the region and consider themselves conventional African partners. This condition benefits Turkey in all aspects of the economy


If the independence and autonomy of the continent’s nations, and their political equality, mutual confidence, common projects like Tukey’s win-win policy, cultural and educational assistance, cooperation studies, and investment rests on diplomatic ties, it is essential to sketch out the parameters of Turkey’s Africa policy. Turkey’s Foreign Minister, Mevlüt Çavuşoğlu, said that Turkey’s vision of cooperation with Africa is “based on a policy of mutual gain based on equality, transparency, and sustainability,” which is essentially a description of Turkey's continental policy.
Turkey’s comeback to Africa
After the Ottoman Empire faded from history, Turkey’s rulers preferred to concentrate on Europe rather than Africa. However, the rapid evolution of global processes at the dawn of the 21st century, as well as the emergence of new global growth developments and approaches to key aspects of the world’s rapidly evolving situation, necessitated the emergence of new visions in Turkish foreign policy. As a result, Turkey has had to develop new domestic and foreign policies, especially since 2002, in light of its own growth. With the declaration of 2005 as the “Year of Africa” within the framework of the Africa Action Plan adopted in 1998, Turkey’s dynamic foreign policy towards the African continent, especially after 2010, and the multidimensional policy tools it applied significantly increased its ties with Africa.

Turkey’s renewed interest in Africa, as well as its opening to the continent, came at a time when many countries were pursuing political, military, and commercial initiatives with African nations. Turkey’s expansion into Africa centred around three pillars: Economic policies, expansion of diplomatic missions, and humanitarian assistance. Especially in the last 15 years, Turkish President Recep Tayyip Erdoğan has played an important role in reviving ties with the continent as a result of his visits.

Turkey’s renewed interest in Africa, as well as its opening to the continent, came at a time when many countries were pursuing political, military, and commercial initiatives with African nations. Turkey’s expansion into Africa centred around three pillars: Economic policies, expansion of diplomatic missions, and humanitarian assistance

Turkey’s presence in Africa
When it came to improving Turkey’s reputation, the country concentrated on maintaining good ties with Africa as a whole and attempting to establish itself through its various institutions in various African countries. Turkey has made a concerted effort to broaden its policies in Africa and raise its profile since the AK Party came to power. Turkey has increased its number of embassies from 12 in 2003 to 43 by 2021, as it seeks to strengthen its ties with Africa.



The number of Turkish embassies in Africa has increased from 12 in 2003 43 in 2021.

Source: African.bussinnes. Erdoğan’s ambition drives Turkey’s Africa surge

TIKA (Turkish Cooperation and Coordination Agency), DEIK (The Foreign Economic Relations Board of Turkey), Maarif Foundation Schools, Yunus Emre Institute, Red Crescent, Anadolu Agency, Diyanet Foundation, and several NGOs have also been engaged in Africa besides the government itself. As Turkey's ties with Africa have improved, so has the number of high-ranking visits. During his time as Prime Minister and President of Turkey, Recep Tayyip Erdoğan visited nearly 30 African countries.

Turkey’s institutional presence in Africa has begun to take shape at the levels where France, the United Kingdom, the United States, and China are situated, as a result of the changing ties. All of these efforts can be seen as evidence of Turkey's multifaceted foreign policy awareness, as well as an indication of promising prospects for Turkey's long-term survival and effectiveness in the continent.

Turkey’s institutional presence in Africa has begun to take shape at the levels where France, the United Kingdom, the United States, and China are situated, as a result of the changing ties. All of these efforts can be seen as evidence of Turkey's multifaceted foreign policy awareness, as well as an indication of promising prospects for Turkey's long-term survival and effectiveness in the continent.


Turkey, like all other countries, is an important player in the promotion of soft power. The country's rich history, civilisational uniqueness, moral and political stance against colonialism and oppression, as well as its exceptional soft power capacity, set it apart from others. Turkey's institutions, NGOs, and historical links with various African countries' cultural and civilisational relations are a big source of soft power.

Similarly, one of Turkey's main benefits is that it can interact with a wide range of countries thanks to the ideals and principles that it shares with Muslims across the continent. Furthermore, having a secular system of government gives it an advantage over the Gulf states and other powers when it comes to reaching out to other societies. Aside from these, Turkish TV series have become one of the country’s most powerful soft power outlets on the continent in recent years, and their popularity is growing. On the continent, Muslims and Christians alike are enthralled by Turkish television shows. The Turkish history drama series, “Dirilis Ertugrul” has, according to Aliyu Dahiru, an independent researcher and analyst with HumAngle, become a popular drama in Nigeria that has raised interest in the Ottoman empire.
The Turkish defence industry in Africa
Turkish defence businesses are increasingly attempting to expand their footprint in Africa as local manufacturing expands in the defence industry. Turkey's Presidency of Defence Industries (SSB) released a strategy plan for 2019–23, with the goal of increasing local content of defence equipment to 75 percent  and exports to US $10.2 billion by 2023.

Some African countries have recently begun to join in the buying of Turkish equipment. According to a United Nations report on African arms sales, “Turkey's defence industry exported 40 wheeled armoured personnel carriers to Burkina Faso in 2018, 20 to Chad, three to Ghana, six to Mauritania and 25 to Senegal.

In addition, Algeria, Nigeria, Rwanda and Tunisia are amongst the African countries that receive Turkish-produced armoured personnel carriers. Most of them are Cobra brand armoured vehicles produced by Otokar. Turkey also exported assault rifles and handguns to several African countries.

In 2019, another Turkish armoured vehicle manufacturer, Katmerciler, received an export order of US $20 million from an “unidentified African country,” as it was made known.

Katmerciler, a Turkish defence contractor, is expanding its influence in Africa with the signing of a contract to supply 118 armoured vehicles to Kenya earlier this month.

Many Africans favour the Turkish government's pro-sovereignty rhetoric. It shares the views of many Africans who see the West's human rights, economic liberalisation, and democracy discourses as hypocritical. Turkey, consistently, stresses reverence for the developed world's sovereignty and territorial integrity, as well as the question of establishing a fair and sustainable global economy. Turkey's rhetoric of "The World Is Bigger Than Five" (the United States, the United Kingdom, France, Russia, and China) is still a powerful voice in the democratisation of local and foreign affairs


As the Turkish defence industry's domestic vehicle manufactureing becomes more visible in Africa, the military industry's exports to Africa may rise in the coming years.

Similarly, Turkish SIHA unmanned aerial vehicles (UAVs), ATAK attack helicopters, and ALTAY tanks, all of which are made in Turkey, may be favoured by African governments.

Turkey wants to strengthen ties between the African and Turkish military, in addition to defence industry exports. The Turkish army has a facility in Mogadishu, Somalia's capital, where Somali soldiers are trained. Also, The Turkish Armed Forces (TSK) continue to train the Libyan army under the terms of a Memorandum of Understanding (MoU) on security and military cooperation agreed on December 26, 2019 between Turkey and the UN-recognised legitimate government of Libya.
The world is bigger than five
Turkey's initiative to foster peace and social justice has accelerated the speed at which it is assisting in the resolution of conflicts, especially in African countries like Libya and Somalia. As a result, the Turkish government continues to establish and promote partnerships and cooperation to keep Africa peaceful and stable. Turkey's status as a rising power, in addition to humanitarian aid and soft power, is quite appealing. Many Africans favour the Turkish government's pro-sovereignty rhetoric. It shares the views of many Africans who see the West's human rights, economic liberalisation, and democracy discourses as hypocritical. Turkey, consistently, stresses reverence for the developed world's sovereignty and territorial integrity, as well as the question of establishing a fair and sustainable global economy. Turkey's rhetoric of "The World Is Bigger Than Five" (the United States, the United Kingdom, France, Russia, and China) is still a powerful voice in the democratisation of local and foreign affairs.

 

### Until the next time…. The Gaza ceasefire is welcome news

As a fragile ceasefire starts to take hold in Gaza, there is a dismal sense of déjà vu. An egregious provocation that stoked the embers, the rockets fired by Hamas at civilian targets in Israel, the retaliation by Israel using overwhelming and disproportionate force, the collateral mayhem in Gaza with searing images of dead women and children, the willful destruction of vital infrastructure in a place that is already teetering on the precipice of collapse…We saw this showreel play out during the three-week conflict in 2008 that left over a thousand Palestinians and a dozen Israelis dead. The action replay in 2014 was longer and more violent, going on for some seven weeks and leaving over 2000 dead, most of them Palestinians. The 2021 conflagration, in contrast, has been mercifully shorter, lasting eleven days but still claiming some 250 lives. But the pattern is similar. Each round is followed by frantic calls for a ceasefire, accompanied by behind-the-scenes efforts by the US administration and by Egyptian intelligence officials working to cobble together a fresh ceasefire. And each round concludes with Israeli claims of delivering a crushing blow to Hamas and its ‘terrorist infrastructure’ while Hamas asserts that it has again demonstrated its steadfastness in resisting the Israeli aggression. Like two veteran pugilists, they will gather their breath and start preparing for the next round. Despite these familiar and depressing similarities, the latest round has also produced significant departures from the pattern. These have implications that go beyond the local developments and some may even transcend regional politics. It is useful to look at each of these elements and into some of the additional questions that they raise:
A tale of three conflicts
While much of the attention is rightfully focused on the destruction in Gaza, it shouldn’t diminish the impact of Gaza on two other theatres. The escalation started with clashes in the Sheikh Jarrah neighbourhood of East Jerusalem when Palestinians gathered to protest an anticipated eviction order and the blatantly one-sided law that allows Jewish citizens to claim properties in East Jerusalem and the West Bank that they may have owned before 1948 but denies the same right to Palestinians who lost their properties in West Jerusalem or in Israel proper.

The situation clearly demands a fresh initiative, but it would have to be quite different from the Trump/Kushner ‘deal of the century’ which seemed to look at the West Bank and Gaza as a real estate play


The clashes soon spread to the nearby Al Aqsa mosque. But the violence also moved beyond East Jerusalem, spilling into West Bank towns like Ramallah, Nazareth and Bethlehem which saw clashes between Palestinian residents and Israeli security forces. More important, for the first time in several decades, mixed cities like Jaffa, Tiberias, Acre and Lod have witnessed communal violence. This has served a timely reminder that 21 percent of Israel’s citizens are Palestinian, who not only face unequal laws but also resent their discriminatory application in neighbouring areas of the West Bank. Israel’s treatment of its Palestinian citizens has often drawn comparisons with apartheid South Africa and while the two situations are quite dissimilar, the question of whether Israel can remain both a Jewish and a democratic state is entirely legitimate.
A boost for Netanyahu?
PM Netanyahu is clearly an able practitioner of the motto: ‘Never waste a crisis’. His approach of forging a coalition government with the support of Israel’s ultra-right and religious parties to consolidate his position as Israel’s longest serving prime minister had appeared to have run its course. After Israel’s fourth general elections in two years, Netanyahu was finding it difficult to cobble a coalition of the required 61 members in the 120 seat Knesset. Even the cynical attempt to bring in the Arab Islamist party Ra’am, which has four seats, collapsed when the ultra-right found it a step too far. On May 5, President Rivlin invited Yair Lapid, leader of the centrist Yesh Atid party, to form a government within 28 days. The following day saw clashes between Israeli police and Palestinians protesting against an expected Supreme Court decision to evict six Palestinian families from their homes in the Sheikh Jarrah neigbourhood of East Jerusalem and hand their properties to Israeli settlers. On May 7, Israeli police stormed the holy Al Aqsa mosque, prompting a Hamas ultimatum to vacate the site by May 10. The Israelis didn’t, and Hamas fired its first barrage of rockets into Israel that night. That brought on the massive Israeli counterstrikes and also returned Netanyahu to centre stage to assert his security-first doctrine. The next few weeks will be crucial in determining if Yair Lapid can form a government with the support of a string of smaller parties including Ra’am or the baton passes back to a re-invigorated Netanyahu. Or will the country have to endure a fifth round of elections?
Undercurrents in the Potomac
The escalation in Gaza has had a curious run in Washington DC. It started with a fairly well-worn and predictable script. President Biden, a longtime supporter of Israel, came out with a statement that asserted Israel’s right to self-defense and seemed to leave a call for a ceasefire as a post-script. But the ground was shifting in his own party’s previously rock-solid support for Israel. Significantly, the discomfiture with the White House wasn’t just coming from the known stalwarts of the party’s newly energised progressive wing like Sen. Bernie Sanders and Representatives Alexandria Ocasio-Cortez and Rashida Tlaib, who spoke passionately about violation of Palestinian human rights by Israel. In the Senate, 28 members representing over half the Democratic caucus issued a statement calling for an urgent ceasefire. In the House, Rep. Gregory Meeks, Chairman of the influential Foreign Affairs Committee, was telling the Democratic members of his panel that he would ask President Biden to delay the proposed US $735 million weapons package to Israel.

The White House swung into action as it got the party’s message. After the initial greenlight for Israeli military action, it issued a firm statement on May 17 calling for a ceasefire and followed it up on May 19 with a readout conveying Biden’s own tough message to Netanyahu to ensure a rapid de-escalation. Once the ceasefire agreement was announced on May 20, Biden was happy to address the media and claim credit for ‘quiet and relentless diplomacy’, including his own six phone calls with Netanyahu.

India has been walking the tightrope and trying to maintain a balance between its traditional support for the Palestinian cause and its rapidly expanding relationship with Israel.


The rapid evolution of the White House position probably contributed to the fact that the ceasefire came within days rather than weeks. It also showed the shift taking place amongst Democrats as younger members of the American Jewish community have tended to gravitate towards J-Street, the vocal Jewish PAC which argues for a more balanced US policy towards Israel and for a two-state solution that secures the legitimate needs and national aspirations of both Israelis and Palestinians. The fact that the initiative to call for a ceasefire was led in the Senate by Sen. Jon Ossoff, the 34-year-old newly elected Senator from Georgia who is also seen as a face of a new generation of American Jews in the Congress, is, perhaps, testimony to the shifts underway.
The Awkwardness of the Abraham Accords
The violence at Al Aqsa and the ferocity of Israeli bombing of Gaza have created an awkward situation for Gulf countries like UAE and Bahrain, which had established diplomatic ties with Israel as part of the Abraham Accords signed in August 2020. The Emiratis have moved rapidly over the last few months to announce a slew of finance, technology, agriculture, tourism and security related deals with Israel; and within Abu Dhabi, there is little support for Hamas and its overtly Islamist agenda. But the brazen actions of Israeli police in Al Aqsa mosque, that too on Leylat al Qadr, the holiest night in the month of Ramadan, is a different proposition altogether. An attack on the third holiest Muslim mosque demanded a firm stance and evoked tough statements from the Organisation of Islamic Countries and from Abu Dhabi and Riyadh. It also provided a reminder that the unresolved political and national aspirations of the Palestinians still have the potential to upset the regional calculus. UAE had been quick to underscore that the Abraham Accords had helped forestall an imminent annexation of several areas of the West Bank by Israel. But in the absence of a durable peace process, the clock was ticking on this moratorium.
Whither Palestine?
The relentless spread of Jewish settlements under the benign watch of the Netanyahu administration has not only reduced the map of the West Bank to a piece of Swiss cheese but also raised questions about the economic and political viability of a Palestinian state. There is no indication that a future Israeli government would roll back the illegal settlements, and in the absence of the political will needed for this, the very principle of a two-state solution is undermined. The situation clearly demands a fresh initiative, but it would have to be quite different from the Trump/Kushner ‘deal of the century’, which seemed to look at the West Bank and Gaza as a real estate play and raised more questions than it answered. Will the Biden administration have the stomach to wade into an issue that has bedeviled almost every previous administration in the last fifty years? And will the progressive wing of the Democrats be able to sustain the kind of momentum needed for a genuine peace process to get off the ground? Equally important, will the Palestinian leadership be able to get its act together and arrive at some sort of a modus vivendi between the Palestine Authority in Ramallah and Hamas in Gaza that enables them to speak with one voice? The next few months may provide some answers.
India’s tightrope act
India has been walking the tightrope and trying to maintain a balance between its traditional support for the Palestinian cause and its rapidly expanding relationship with Israel. A bit of perspective might be in order. India recognised Israel in 1948 but full diplomatic relations were only established in 1992 by the Narasimha Rao government. Until then, Israel had a small footprint in Mumbai through its consulate while India had no representation in Israel. In contrast, India accorded diplomatic status to the office of the Palestine Liberation Organisation in Delhi as early as 1980 and treated Yasser Arafat as head of state once the PLO declared an independent state of Palestine with its capital in East Jerusalem in 1988. India initially opened its representative office in Gaza in 1996 and moved it to Ramallah once Hamas took control of Gaza and the influence of the PLO leadership was largely confined to the West Bank. India’s ties with Israel grew steadily but the relationship was largely kept under wraps and India continued to voice full-throated support for the Palestinian cause at the UNSC and elsewhere. There was a subtle shift during the Vajpayee government, which saw the first publicly announced ministerial visits from India to Israel, while Ariel Sharon became the first Israeli Prime Minister to visit India in 2003. The election of PM Narendra Modi in 2014 brought a more fundamental shift, with President Pranab Mukherjee becoming the first Indian head of state to visit Ramallah in 2015 and PM Modi becoming the first head of government to visit Israel in 2018. In between the two landmark visits, India not only received Palestine President Mahmoud Abbas in 2017 but also started to nuance its position on the status of East Jerusalem even while it reiterated its continued support for a two-state solution. The present crisis has again brought out the difficulties inherent in taking a balanced position. Having provided timely and unstinting military support to India, Israel has reason to feel aggrieved over the statement by India’s Permanent Representative to the United Nations urging both sides to show restraint, desist from actions that exacerbate tensions and refrain from trying to change the existing status quo, including in East Jerusalem and its neighbourhood. The Indian tricolour was conspicuously absent from the flags posted by Netanyahu when he tweeted to thank the countries that had resolutely stood by Israel.
The way forward
The deep-rooted structural issues related to the Israel-Palestine conflict are unlikely to be resolved by the band-aid provided by the latest ceasefire. While the conflict has again attracted the attention of the international community, it will need a concerted effort by all key players to impart some substance to the dormant peace process. While the US administration will have to do the heavy lifting and the UNSC has to play a facilitating role, it will be vital to bring on board key regional players like Egypt, Jordan and Qatar, along with Saudi Arabia and UAE. Egypt has diplomatic ties with Israel and controls the crucial Rafah crossing into Gaza. Despite the antipathy of the Sisi government towards Hamas, its intelligence agencies have always had a fair degree of influence. Jordan, as the other country that has maintained long-standing diplomatic ties with Israel, has notional control over the Al Aqsa mosque in Jerusalem in an arrangement that goes back to the 1967 war. It also provides vital international access for Palestinians in the West Bank and also has a large Palestinian population of its own. Qatar, on the other hand, is important because of its ties with Hamas and its continued financial support to sustain some form of an administration in Gaza. Moreover, former Hamas head, Khaled al Meshaal, and several other senior Hamas leaders continue to operate out of Doha. Former Palestinian security chief, Mohammed Dahlan, is based in Abu Dhabi and the Saudis enjoy influence with President Mahmoud Abbas and his acolytes. Israel, on its own, has shown little interest in offering a ray of hope to the Palestinians. Its overwhelming military superiority and the presence of a benign political setup in Washington have tended to shrivel the incentive for a negotiated solution. At the same time, a status quo that pits the growing adventurism and impunity of Israeli settlers against the seething resentment of the Palestinians is clearly unsustainable. Without a sustained effort by the international community, another conflagration is almost inevitable. This Gaza ceasefire is welcome, until the next time…

### Water scarcity in the Middle East: Beyond an environmental risk

This article is part of GP-ORF series — From Alpha Century to Viral World: The Raisina Young Fellows Speak.

The Middle East region is currently facing simultaneous security, climate change and water scarcity crises. Water scarcity is a pressing environmental issue in the Middle East and is increasingly becoming an additional source of conflict in the already unstable region. The region’s annual internal water resources amount to only 6 percent of its average annual precipitation, against a world average of 38 percent<1>. Home to about 6 percent of the world’s population, it has just 1 percent of the world’s freshwater resources. Nearly two-thirds of the region’s population live in areas that lack sufficient renewable water resources, and over 60 percent live in areas with high surface water stress compared to the global average of about 35 percent<2>. Meanwhile, nearly 70 percent of the Middle East’s economic activities are conducted in areas of high or very high water stress, more than three times the global average of 22 percent<3>. Despite the recent advances in water supply technology and management, extreme scarcity, poor governance, changing hydrology and ascending demands in different sectors are driving the overexploitation of the region’s scarce water resources. The high subsidies undermine incentives for efficient water management.

Although the Middle East has remarkable transboundary freshwater resources, the lack of mutual concession on water allocation in shared rivers and aquifers add a layer of complexity and potential conflict to the water scarcity situation in the region. Freshwater from the region’s main transboundary rivers — the Tigris-Euphrates, the Nile and the Jordan — are used for agricultural, industrial and domestic purposes at unsustainable volumes. However, most water policy measures are aimed at increasing access through further exploitation of aquifers or desalination of seawater, rather than at saving water and ensuring efficient management<4>.

The worsening water scarcity situation undermines human security and contributes to factors that increase the risks from violence, fragility and conflict, leading to insecurity and displacement throughout the Middle East. As a conflict-ridden regional system, Middle East geopolitics is characterised by failed states, political instability, forced displacement, military conflicts and chronic insecurity. Over the past decades, potential causes of insecurity have widened and diversified considerably in the region. Apart from traditional sources of tensions, socioeconomic and environmental issues increasingly contribute to causing and fueling conflict in the turbulent Middle East<5>. As trends in the region demonstrate, water scarcity combined with massive population growth and urbanisation is the most pressing environmental issue in the Middle East and is increasingly becoming an additional source of conflict in an already unstable region.
Power asymmetry and struggle for hydro-hegemony
As a strategic asset, water is no longer only linked to environmental issues and food security but also plays a critical role in regional security arrangements. States view water as a means for political leverage and as a source of power. Water in the Middle East is a source of state power, and water scarcity is highly intertwined with national security<6>. Many scholars have noted that conflicts over transboundary waters cannot be interpreted without understanding the power relations and the significance of upstream-downstream positioning of the competing or conflicting states<7>.

Historically, although power asymmetry is the main reason for the absence of wars in transboundary waters, it is also an important obstacle in adopting common measures and cooperative mechanisms in the basin for managing water scarcity. The severe imbalance of power among riparian states leads to an asymmetric allocation of transboundary waters and the absence of war does not imply the absence of conflict in the basin<8>. In the Middle East, the hydro-political conflict has occurred when downstream states are weak and unable to adapt to water scarcity, and where the relative strength is extremely asymmetric — for example, between Israel and Palestine or Turkey and Iraq.

According to the framework of hydro-hegemony — an analytical structure to study how hegemony and power asymmetries influence transboundary water politics — relative power imbalance inevitably leads to hydro-hegemony in the basin, in which a superior power controls water flows and forces weaker states to follow its instructions<9>. Power in its greatest form determines who the hegemon is. The hegemon has an asymmetric capacity to coerce a weaker state and writes the agenda for all riparian states within the river basin. Apart from the geographical position, the framework suggests that the use of force and consent tied together with the enforcement of rules on a basin is a stronger determinant than international laws on the non-navigational use of international watercourses or riparian position. Upstream states use water to garner more power, while downstream countries use power to source more water — Turkey, for instance, is an upstream hegemon; Ethiopia is an upstream state but is not a hegemon; Egypt, on the other hand, is a downstream hegemon. In this context, the international water law has been manipulated by the powerful riparian for power expression and to urge compliance<10>.

In asymmetric circumstances, when the upstream state is the basin's hegemon, cooperation is least likely to materialise. In contrast, when the downstream state is the basin's hegemon, cooperation is likely to proceed, yet the agreement is often imposed along the benefits of the stronger riparian<11>. For example, the strategic location and hydro-hegemony of Turkey on the Euphrates and Tigris, and Israel on the Jordan River allow the countries to maintain an upper hand over Syria and Iraq, and Palestine, respectively. Although power relations of basin states evolve through coexisting, conflictual and cooperative interactions, efficient transboundary water management that facilitates cooperation is hard to attain. In the context of asymmetric power in the basin, where water governance is applied as water is perceived as a public good, the hydro-hegemon dictates the mechanism of cooperative adaptation to the weaker riparian in a coercive engagement. Under the running asymmetries in power over the region’s main transboundary rivers — the Tigris, Euphrates and the Jordan — the weak downstream riparian states are apparently unable to change the arrangements, which leaves no room for negotiation and reconciliation while escalating the rising water conflict in the Middle East.
Beyond borders: Emerging international security threat
Transboundary water arrangements are inherently political and determined by the broader social-security context of riparian states. In the Middle East, which continuously suffers from chronic disorder, water supply systems are increasingly becoming both political lever and objectives of strategic action as states perceive access to water as an issue of national security. Therefore, the maldistribution of transboundary freshwater combined with growing populations and urbanisation, the absence of the rule of international water law and dwindling water resources demonstrate that water is becoming an increasingly critical trigger of interstate politics and conflict. In semi-arid zones such as the Middle East, war over water is highly probable as the hydro-hegemony is building massive dams over shared rivers, effectively weaponising water to achieve their strategic interests.

In recent decades, Turkey has pursued the vast and ambitious Southeastern Anatolia Project that entails the construction of 22 dams on the Tigris and Euphrates, curtailing nearly 80 percent of water flow into Iraq and Syria<12>. For Turkey, hydro-dams are not just sources of energy and revenue, but potent levers of geopolitical pressure to shape the security arrangements in the Levant and Iraq, aimed at Kurdish politics. By controlling 90 percent and 44 percent, respectively, of the water flows of the Euphrates and the Tigris, Ankara refuses to be bound by international treaties and dismisses its neighbours’ demands for a formal water-sharing agreement to regulate the flows in the basin<13>. Given the backdrop of political tensions arising from Turkey’s incursions into northern Syria and Iraq, there is also a risk that Ankara will increasingly use water as a weapon in a future conflict with its regional rivals and neighbours.

The situation is similar in the Nile and the Jordan transboundary basin; Egypt and Israel have been manipulating ongoing turmoil to push their ambitious agenda to be regional hydro-hegemons<14>. Power asymmetry in the Jordan River basin and advanced technology enables Israel to seize the water resources in Palestine and neighbouring Arab countries, as water can be used as a determinant lever in Israel’s continuing occupation of the West Bank. Apart from being used as a domination tool, water conflict has indeed been the main trigger in wars, such as the Six Day War in 1967. A growing number of studies also show that water scarcity, drought and climate change have played a direct role in the deterioration of Syrian socioeconomic conditions and violent civil war, as well as the emergence of extremist armed groups in Iraq or Syria, such as ISIS<15>.

Water scarcity in the Middle East is an issue of global importance, transforming conflict among riparian states into key regional and international security concerns. Water scarcity is a threat multiplier and its socioeconomic effects have serious implications for international security — aggravating factors can lead to massive displacement and migration flows, pressing concerns for food security, environmental degradation, political instability, social insurgency, state failure, interstate violent conflict and the re-emergence of extremism and terrorism, with all capable of triggering domino effects outside the region.

International communities and water-related institutions should initiate and advocate a constructive political dialogue among the riparian states, aiming at international cooperation to pave the way for sustainable solutions to water scarcity in the Middle East. To initiate an effective international cooperation and reconciliation, water scarcity in the region should first be recognised as the most worrisome security threat due to its profound destabilising potential and domino effects. Multilateral initiatives should be built upon the establishment of transboundary water resource management agreements, which help navigate local political barriers and may lead to the adoption of an integrated framework to manage water demand and supply in the longer term.

While cooperation and negotiation may not be welcomed by all riparian states, the constructive involvement of foreign powers and institutions can balance the negotiating field in the basin, encourage hydro-hegemons to consider water as a public good and facilitate an effective transboundary water governance in the Middle East. Along with recalibrating national water strategies and management by riparian states, water diplomacy is likely to become increasingly determinant. To do so, the international community and institutions, like the European Union, can provide financial and technical support to boost cross-border cooperation. They can moderate and facilitate negotiations among riparian nations, initiate and lead regional cooperation platforms and monitor the implementation of treaties as a third party.

If current trends persist, there is a significant risk of imminent conflicts and wars over water in this region, with vast spillover impacts. The international community must act now.
Endnotes
<1> UNDP-RBAS and Sida, Water Governance in the Arab Region: Managing Scarcity and Securing the Future, New York, UNDP-RBAS, 2013.

<2> Beyond Scarcity: Water Security in the Middle East and North Africa (Washington, DC: World Bank Publications, 2018), pp. 9–11.

<3> “Beyond Scarcity,” pp. 10–14

<4> Johan Schaar, “A Confluence of Crises: on Water, Climate and Security in the Middle East and North Africa,” SIPRI Insights on Peace and Security, no. 2019/4 (2019).

<5> Tareq Baconi, Testing the Water: How Water Scarcity Could Destabilize the Middle East and North Africa (London: European Council on Foreign Relations, 2018), pp. 4–7.

<6> Mark Zeitoun, Power and Water: The Hidden Politics of the Palestinian-Israeli Conflict (London: I.B. Tauris, 2008), pp. 113-126.

<7> Mark Zeitoun and John Anthony Allan, “Applying hegemony and power theory to transboundary water analysis,” Water Policy 10 (2008): 3–12; Filippo Menga, “Reconceptualizing hegemony: The circle of hydrohegemony,” Water Policy 18 (2006): 401–418.

<8> Zeitoun and Allan, “Applying hegemony,” 8

<9> Mark Zeitoun and Jeroen Warner, “Hydro-hegemony: A Framework for Analysis of Trans-boundary Water Conflicts,” Water Policy 8 (2006): 435–460.

<10> Melvin Woodhouse and Mark Zeitoun, “Hydro-hegemony and international water law: grappling with the gaps of power and law,” Water Policy 10 (S2) (2018): 103–119.

<11> Zeitoun, “Power and Water,” pp. 34

<12> Paul Hockenos, “Turkey’s Dam-Building Spree Continues, At Steep Ecological Cost,” Yale Environment 360, Yale School of the Environment, 3 October 2019.

<13> Connor, Dilleen, “Turkey’s dam-building program could generate fresh conflict in the Middle East,” The Strategist, Australian Strategic Policy Institute, 5 November 2019.

<14> Semih Kuhalah, “Water troubles in Israel and their influence on the Arab-Israeli conflict,” The Institute for Palestine Studies, Beirut, Paper no. 9 (2020): 5–7.

<15> Amjad Al Adaylah, Conflict on Water in the Middle East War and Peace (Amman: Dar El Shorouk Publication, 2020), pp. 112–117; Peter H. Gleick, “Water, Drought, Climate Change, and Conflict in Syria,” Weather, Climate, and Society, 6(3) (July 2014), pp. 331–340.

### Bridging the Gulf: Towards a New Politics and Economics of a Dynamic Geography

Few regions in the world today are as consequential as the Gulf. The Gulf, which was viewed as a theatre for great power making wars, now houses one of the most radical organisations in the world that promotes extremism and violence. Given the region’s centrality in the global energy economy as a key oil exporter, the Arab Spring, and developments since then have shaken the regional security order in the Middle East, impacting the entire world. Even as the Gulf embraces economic diversification to move beyond its oil business, it confronts some of the most difficult challenges that have arisen within as a result of external actors such as the US and China.

The Raisina 2019 conversation on ‘Bridging the Gulf – Towards New Politics and Economics of a Dynamic Geography’ investigated some of the predominant tensions in the region while also exploring the aspiration for change, emerging from ongoing economic transformations and the challenges faced in this process. The discussion explored potential solutions to these challenges that could create a stable and sustainable environment in the region.

Various analysts view the Gulf as a battleground between Saudi Arabia and Iran, nations that have been rivals for regional hegemony for years. The bitterness between the two nations has intensified after the US re-imposed sanctions on Iran in 2018. The US and its allies continue to blame Iran of being a hegemon in the region, which Iran has refuted several times.

According to Volker Perthes, “Ironically, Saudi Arabia and Iran are the main antagonists rather being protagonists of a common regional order, irrespective of their understanding of the need for domestic reforms.” The US re-imposition of sanctions on Iran has weakened the Iranian economy through by impacting oil exports. Seyed Mohammad Kazem Sajjadpour, while reiterating that Iran is not a hegemonic power in the region, stated, “Iran is willing to cooperate with Saudi Arabia to diffuse tension in the region.” Nevertheless, one cannot overlook the unabated tension in the region that has pushed back the domestic reforms initiated by both countries. In Iran, President Rouhani failed to capitalise on the reform process that was initiated after sanctions were removed by the Obama administration. It is believed that in spite of the revenue generated through increased oil exports, supported by higher oil prices over several months, the Iranian economy continued to see sluggish growth and rising unemployment. This led to nationwide protests.

In the case of Saudi Arabia, its resilience to global oil price falls was tested. This prompted Prince Muhammad Bin Salman to take decisive action towards an economic transformation of the kingdom, which was built on cheap gasoline, electricity and water over the past several decades. Vision 2030 laid down the specific goals that could help Saudi Arabia prepare for a future beyond oil. However, the continuing low oil prices affected the pace of the Kingdom’s transformation from a petro-state into a diversified economy. This situation led to a shrinking of the state budget, and a suspension of large projects, which in turn increased unemployment. The sharp increase in oil exports led by a shale boom for the US, particularly in Asia, made the conditions challenging for even Saudi Arabia, let alone high-cost oil producers. This put a strain on Saudi Arabia’s diversification plans, the biggest fallout of which was observed with the delay of the initial public offering (IPO) of 5 percent of Saudi Aramco, which was aimed at raising $100 billion for investments in other sectors.

The long-standing discrepancy continues between the Gulf and the Maghreb countries (or countries in Northern Africa). This incongruity also acts as a stumbling block for the development of the region. Countries from the Gulf and the Maghreb disagree on several issues of regional and economic importance, primarily due to disparity in geo-strategic priorities, incongruity of economic interests, and political positioning.

As noted by Dalia Ghanem- Yazbeck, security concerns of the Maghreb do not always align with those of the Gulf. For instance, Yemen, the main concern for the Gulf, is not a significant concern for the Maghreb, highlighting the difference between the regions’ geo-strategic priorities. On the economic front as well, there is a striking difference in the MaghrebGulf trade relationship vis-à-vis trade between Maghreb and the European Union (EU). For instance, while less than one percent of Maghreb export goes to the Gulf Cooperation Council (GCC), accounting for 2.5 percent of GCC import, all Maghreb states except Libya have trade agreements with the EU, signifying the depth of Maghreb-EU trade. In addition, Algeria remains the third largest energy provider to the EU after Russia and Norway. Moreover, the political positioning of the Maghreb countries and the Gulf is distinct, as seen with respect to Hezbollah. While GCC designated Hezbollah as a terrorist organisation, Algeria stood with Tunisia and Lebanon to oppose the move. Some of the Maghreb countries, including Algeria, even refused to support the Islamic Military Counter Terrorism Coalition which was founded in 2015. Morocco, which was part of this alliance, called back its forces a year after, owing to its friction with Saudi Arabia for being neutral to the Gulf crisis resulting from blockade on Qatar.

One of the solutions suggested by Sajjadpour to alter the current regional disorder in the Gulf, was the outright rejection of zero-sum thinking in the region and the creation of a cognitive map to enable better understanding between them. The creation of a regional security order built on common interests, threat perceptions, and mutual trust amongst countries in the Gulf and Maghreb could be an additional solution to bridge the proverbial gulf. However, any transformation without bringing transparency, good governance, and modern education in the region would remain unsustainable and incomplete.

This essay originally appeared in Raisina Dialogue Conference Report 2019

### China inks a strategic gambit with Iran in West Asia

China’s foreign minister Wang Yi undertook a whirlwind trip of the Middle East (West Asia) last month, covering Saudi Arabia, UAE, Turkey, Oman, Bahrain and Iran. Wang’s trip comes at a crucial juncture, with US President Joe Biden re–evaluating most facets of the China–US relationship, and the Middle East, being a traditional sphere of influence for Washington DC, increasingly looking to hedge its own security and economic interests. Here, Beijing today comes in as a natural actor.

However, the most critical part of Wang’s Middle East jaunt was the stopover in Iran. The foreign minister is the first top ranking official to visit Tehran since President Xi Jinping’s visit in 2016 when the two sides signed a comprehensive strategic partnership agreement. In between, both China and Iran have worked towards an expansive 25–year long programme wherein Beijing will invest in Tehran’s ailing economy, burdened by years of sanctions, in return for China getting unprecedented access to the country’s lucrative but languishing oil and gas sector. This new China–Iran partnership has been envisaged to be worth over US$ 400 billion according to reported estimates. “China firmly supports Iran in safeguarding its state sovereignty and national dignity,” Wang said, adding weight behind the Iranian government.
This new China–Iran partnership has been envisaged to be worth over US$ 400 billion according to reported estimates.

These developments come at a juncture when China and the US are embroiled over various geopolitical intricacies, including the Iran nuclear agreement (known as the Joint Comprehensive Plan of Action or the JCPOA), which the US unilaterally exited from in 2018 under the presidency of Donald Trump as part of his ‘maximum pressure’ campaign against Tehran.

The strategic deal between Iran and China gives Beijing a geopolitical edge as far as narratives go. However, the operationalisation of this massive deal is not going to be easy, and China’s commitments seemingly have various ‘strategic exits’ to safeguard both its investments and geopolitical state of play regionally and internationally. To drive this point home further, after Wang left Iran, Chinese Foreign Ministry spokesperson Zhao Lijiang answering questions in Beijing on the Iran–China deal said: “The plan focuses on tapping the potentials in economic and cultural cooperation and charting course for long–term cooperation. It neither includes any quantitative, specific contracts and goals nor targets any third party, and will provide a general framework for China–Iran cooperation going forward.”
The operationalisation of this massive deal is not going to be easy, and China’s commitments seemingly have various ‘strategic exits.’

The above statement suggests that within the US$ 400 billion umbrella, no specifics have been agreed upon yet between the two sides, making the figure largely speculative and arguably overreaching. It is also imperative to highlight here that despite this development, China’s economic cooperation with the Gulf states still remains much more expansive and operational, highlighted recently by the UAE becoming a regional manufacturing hub for China’s Sinopharm Covid–19 vaccine. However, while the numbers themselves were perhaps constructed to create a narrative, for Iran, this economic push comes at a critical juncture.
Iran, the JCPOA and China
Iran is scheduled to go into elections in June, and with Tehran still working around the change of power in Washington DC, and how to go ahead with the Biden administration, much remains at stake as an overarching deal with Beijing has had mixed reactions within Iran. More than 200 people were reported to have gathered outside the Iranian parliament to protest the pact, with some viewing as Iran ‘selling out’ to China. Beijing has long called for the US to return to the JCPOA accord, while Iran has said that it will not renegotiate the deliverables agreed upon when the agreement was signed between Tehran and the P5+1 states in 2015 under the administration of then President Barack Obama, when Biden was Vice President.
Beijing has long called for the US to return to the JCPOA accord, while Iran has said that it will not renegotiate the deliverables agreed upon when the agreement was signed between Tehran and the P5+1 states in 2015.

Within Iran, there is also a plausible tussle around the elections. Iran’s outreach to the West, led by President Hasan Rouhani and Foreign Minister Jawad Zarif, which culminated with the JCPOA, faced stiff internal pushbacks from hardliner factions who did not want a rapprochement, and these divisions are still playing out as Iran mulls over offers to restart talks with Europe and the US. While scholars such as Karim Sadjadpour highlight that Iran needs an enemy such as the US to thrive against, the binding factor remains that all P5+1 participants want to prevent a nuclear bomb in Iran, including China. Iran’s electoral politics is more than often US and Israel centric, so much so that its hardliner lawmakers tabled a legislation in January in an attempt to legally mandate the government to commit to the destruction of Israel by 2040. China, with its new partnership with Iran, will now have to manage a steer away from being labelled as taking sides in the Middle East, especially when it has equally fledging relations with the likes of Israel and its Arab partners via the recently culminated Abraham Accords.

Beijing upgrading its relations with Tehran at this juncture adds critical weight for Iran and its diplomacy. Economic sanctions against Iran have decimated its major industries, specifically oil and gas. In December 2020, the US had installed further sanctions on individual Chinese companies who were continuing to conduct trade of petrochemicals from Iran. Beijing sees this as coercive actions by the US, and by association an opportunity, as Washington DC tightens its strategic and tactical policy tools in the South China Sea and the larger Indo–Pacific region. And the apt reaction against the same from a Chinese perspective, is to further solidify its massive Belt and Road Initiative (BRI) architecture.
Beijing upgrading its relations with Tehran at this juncture adds critical weight for Iran and its diplomacy.

Beijing’s BRI pitch
‘Balance of power’ considerations compel nations to protect themselves from threats by adding to their own power that of other states through alliances. China sees the following strategic opportunities in its relationship with Iran.

Even as the JCPOA logjam continues, China has stepped into the row. China moving closer to Iran on economic and security issues comes shortly after members of the Quadrilateral Security Dialogue — US, Japan, Australia and India — convened for its first–ever summit. Amid an overhaul of Hong Kong’s electoral system, the Biden administration has levied sanctions against the Chinese and Hong Kong. In a separate development, the US, UK, Canada joined hands with the European Union to impose sanctions against Chinese officials and state–run enterprises operating in Xinjiang, in retaliation for its policies against Uighurs. This is significant considering that the first sanctions against Beijing since an EU armaments embargo in 1989 following the Tiananmen Square incident. In light of this, Wang’s tour of the Middle East takes the sting out of the West’s criticism of China over Xinjiang, and signals its pushback against the West using stopovers in the major Islamic capitals.
China moving closer to Iran on economic and security issues comes shortly after members of the Quadrilateral Security Dialogue — US, Japan, Australia and India — convened for its first–ever summit.

Meanwhile, political uncertainty in Pakistan has led China to scout for other alternatives. Delays and impediments involving the China–Pakistan Economic Corridor (CPEC) projects in Pakistan may have led to China’s growing interest in infrastructure investments in Iran. Pakistan’s Gwadar port, which China manages, provides it with a shorter route for oil imports from the Gulf vis–à–vis the sea route through the Malacca Strait. Beijing sees Chabahar port in Iran as another option for its crude supplies, which could complement Gwadar. Both port cities also have a sister–city pact, with the Iranians increasingly seeing Gwadar as an opportunity and not a rivalry. China sees Iran as vital to its aim of getting a footing in a region where the US has military bases which seek to check Iranian influence amidst questionable success. Besides, China’s plan to develop Iran’s Jask port which is strategically located near the Hormoz Strait, gives it control over an important sea lane. This can challenge the US naval dominance, and permit China to monitor the US Navy’s Fifth Fleet based in Bahrain.
Conclusion
Despite Wang’s projection behind Iranian interests, a lot more needs to unfold to determine Beijing’s vision in propping up Iran almost exclusively. Unanswered questions, such as whether Iranian expansionism in neighbouring conflicts such as Syria, Iraq and Yemen will be an obstacle for China around its investments in Iran, and how Beijing markets the same with its other potential BRI partners in the Gulf, specifically Saudi Arabia and the UAE, remain. Can the BRI become a common binding between the Shia–Sunni divide in the region? History is usually not kind towards answering this question, and economics alone has proven to be an insufficient interlocuter, as the western example has shown over the decades.

While China’s push into Iran is impressive on paper, how Beijing puts this into practice will be the major point to follow. The Chinese foreign ministry spokesperson stepping away from that US$ 400 billion commitment between Beijing and Tehran a day after Wang left Iran arguably highlights the cleavage between opportunity and risk in China’s Iran outreach.
A rescinding US power presence and regional players becoming more aware and responsible for their own security requirements is going to leave a geopolitical ‘big power’ vacuum.

However, irrespective of the multi–layered questions, China is indeed going to play a critical role in this region over the coming time. A rescinding US power presence and regional players becoming more aware and responsible for their own security requirements is going to leave a geopolitical ‘big power’ vacuum. How Beijing answers this could be a pivotal moment in the region’s geopolitics.

For China, ultimately, Iran is one more square in its ambitious geopolitical chessboard. However, for Iran, the Chinese partnership could be the start of an expansive new chapter altogether if Beijing holds true to its commitment.

### Analysing Iranian Defence Minister’s visit to India

Iran’s Defence Minister, Brigadier General Amir Hatami, became the first defence minister of the country to visit India in 40 years, opening a new and significant avenue of cooperation between Tehran and New Delhi. More than just the bilateral, Hatami’s visit on the sidelines of the AeroIndia 2021 event in Bengaluru to take part in the first conclave for the defence ministers of the Indian Ocean Region (IOR) brings Tehran back into New Delhi’s balancing act in West Asia (Middle East), as it continues to work towards maintaining relations between the Gulf, Israel and Iran. Hatami was invited to attend the event during Indian Defence Minister Rajnath Singh’s visit to Iran in September 2020.

The Iranian defence minister’s visit comes at an interesting time, not just with regard to West Asia’s geopolitics, but considering the recent Improvised Explosive Device (IED) explosion in New Delhi near the Israeli embassy, which Israel’s Ambassador to India, Ron Malka, highlighted as a terror attack against the mission. Initial reports pointed towards the possibility of an Iranian hand, as a letter recovered at the bombing site names an individual or group who identify themselves as “Sarallah India Hezbollah” as those behind the attack. This bombing brought to the forefront a previously similar act, when in 2012 an Israeli diplomat’s vehicle was attacked around the same region of New Delhi by motorcycle-borne assailants using a magnetic sticky explosive to target the car. Iran was once again at the forefront of the blame game.
This bombing brought to the forefront a previously similar act, when in 2012 an Israeli diplomat’s vehicle was attacked around the same region of New Delhi by motorcycle-borne assailants using a magnetic sticky explosive to target the car.
The complexities explained above and spillover of West Asia’s regional feuds, now largely between Israel and the Gulf on one side, thanks to the Abraham Accords; and Iran on the other, are the geopolitical realities New Delhi has to balance as it attempts to keep good and insulated relations with the Gulf capitals, Israel and Iran all at the same time. The 2019 naval exercise between India, Russia and Iran in the Indian Ocean and the Gulf of Oman is a prime example of this balancing act in play as Moscow’s increasing role in West Asia is also being factored in. However, India’s relations with the Gulf capitals have been quickly outpacing those with Tehran, and arguably, even Jerusalem. From security and defence to economic cooperation, investment and people-to-people contact, Riyadh and Abu Dhabi hold significant capacity in the Indian capital today.

On the opposite side, India-Iran ties have arguably been moving at a snail’s pace, both from an economic and strategic points of view. The much discussed and quite optimistically coveted Chabahar Port project remains New Delhi’s major strategic play in Iran while other facets of the bilateral have been nothing to drive home about. These choices have made the traditional Indian balancing act in the region a little difficult, as relations with Tehran languish behind in the cue. Tensions have also surfaced more than often over the past years, from the detention of Indian oil tanker MT Desh Shanti carrying oil from Iraq to India in 2013 at the height of US sanctions against Iran, to the more recent reports of New Delhi being dropped as a partner in the construction of the Chabahar-Zahedan rail line.
India-Iran ties have arguably been moving at a snail’s pace, both from an economic and strategic points of view.
However, Iran may after all become an important point of contact diplomatically in the near future, and the reason behind this will not be energy security for India or the geopolitical wrangling in West Asia, but an increasingly challenging situation in Afghanistan. The Taliban recently visited Tehran to hold consultations with the Iranian establishment, spending four days in the country to shore up support for their space in the intra-Afghan dialogue taking place in Doha. Iran is often an outlier in the Afghan debate with its tumultuous relations with the US taking precedence, however, both Iran and the Taliban share a striking common goal, that of an immediate exit of US forces from the country and the region. This stance is, of course, despite the fact that Iran supported the US effort against the Taliban in the immediate aftermath of the 9/11 terror attacks.

The neighbourhood dynamic for the Taliban is not necessarily the easiest one to manage. While the Taliban may display a sense of autonomy with regard to its policies on how to approach neighbouring states, using its Doha office almost like an official diplomatic outpost, Pakistan’s strong patronage of the Taliban may ultimately prevail as the strongest rudder for the group’s policies despite efforts by its leadership to mitigate the same. To put this in perspective, recent reports of Iran conducting a ‘surgical strike’ across the border into Pakistan to rescue Revolutionary Guard Corps (IRGC) personnel who were kidnapped in 2018 by a group identifying as Jaish-ul-Adl operating in the Sistan and Baluchistan Province bordering Iran and Pakistan, highlights the often challenging relationship between Islamabad and Tehran.
The neighbourhood dynamic for the Taliban is not necessarily the easiest one to manage.
Meanwhile, Tehran has also used Afghanistan as a resource pitstop, criticised for using hundreds of Afghan Shia refugees joining the Iran-backed Fitimiyoun Brigade to fight in Syria in aid of Iran’s campaign to keep President Bashar al-Assad in power. However, many of these Shi’ite fighters have finished campaigns and returned to Afghanistan, giving Tehran a direct play within the complex Afghan jihad theater to use the Brigade as a possible pressure point, specifically against the rapidly increasing power of the Taliban and by extension, Pakistan. It also remains to be seen what the Taliban’s reaction to the Fitimiyoun will be if the former does gain significant or absolute power over Kabul while maintaining the common goal of an eventual full exit of US and other foreign militaries. Scholar Kanishka Nawabi, while reminding us that Iran’s use of Afghan Shia proxies dates back to the era of Shah of Iran Mohammad Reza Pahlavi, many of these Afghan Shi’ite fighters today are in fact getting officially integrated into Syrian society by obtaining Syrian passports and settling down in Iran’s increasingly strong sphere of influence in the region. Similarly, Iranian proxies in Afghanistan are allocated 50-60 visas per month, which are then re-sold in the Afghan black market at a significant mark up, including to local Afghan politicians. Nawabi’s branding of the Fitamiyoun as ‘Iran’s good Taliban’ offers a perspective of where Tehran may see the Fitamiyoun fitting in. All of this is also a reminder that Afghan jihadist groups are only part of the complexities, with foreign groups also forming a significant section of the problem. The outliers, as always, are the everyday Afghan people.

These regional fissures will be critical for New Delhi to understand and work with if US President Joe Biden’s administration commits to a full US military withdrawal by May. The Taliban has already warned that a US failure to do so and not abide by the US-Taliban agreement signed last year in Doha will lead to an escalation in violence, which could include NATO targets. In this eventuality, New Delhi’s outreach to Tehran with regard to the Afghan theater and the Taliban alike could become an important play in its deck of cards. This, of course, will not be easy to manage either, with Iran’s survivalist state mindset firmly entrenched into how the country governs its affairs, India will arguably be pushed by the Iranians to commit further to the Iranian economy, global and regional views and hedge and re-balance in some capacity from its close relations with Riyadh and Jerusalem. The recent positive developments with the chimera of India-Iran relations that is the Chabahar Port project, adds a small yet much needed spring to the bilateral ties for the time to come.
New Delhi’s outreach to Tehran with regard to the Afghan theater and the Taliban alike could become an important play in its deck of cards.
Hatami called the invitation for Tehran to attend the Indian Ocean Region defence ministers’ meet as a “turning point” for India and Iran, calling the bilateral standing at a “good level.” The apparent absence of senior attendees from the likes of the UAE, which is also a member of the Indian Ocean Rim Association (IORA), indicates a more concentrated and designed effort by New Delhi to host Iran at this particular meet without other geopolitical complexities coming into play.

Beyond the Indian Ocean Region and India’s balancing act in West Asia, Afghanistan is placed to become a significant point of contact for New Delhi and Tehran. However, while for India, managing anything relating to Afghanistan with Iran is not going to be an easy ask, it could become a significant geopolitical play to commit towards considering the limited options New Delhi has as the Afghan theater evolves further towards a chaotic and messy affair in the months (and perhaps years) to come.

### Israel’s rapid vaccination drive against COVID-19

The tiny state of Israel has become a world leader in inoculating its population against the coronavirus. Israel’s total population is nine million and it has already vaccinated 20 percent of its population.

The apprehension witnessed in many other parts of the world against the vaccine is absent here and people are queuing outside health care centres to get the jab and regain lost freedoms.

Every day, over a hundred thousand Israelis are vaccinated, some days the number has been as high as 150,000.

Israel was among the first nations to purchase the vaccine and it did so by promising the pharmaceutical giant Pfizer that in exchange for 10 million doses it would provide medical data of its citizens including age, gender, and medical history. Any information on the side effects and general efficacy of the vaccine would also be shared for research purposes. Identifying details, however, would remain private.
Every day, over a hundred thousand Israelis are vaccinated, some days the number has been as high as 150,000.

In December, German Chancellor Angela Merkel appeared with folded hands in the Bundestag as she pleaded to the leaders of different states to impose a harsh lockdown and bring down the death rate. England was grappling with a new strain of COVID-19 that forced British Prime Minister Boris Johnson to also impose a full lockdown.

Whilst Germany, which is seen as a paragon of medical efficiency, and the UK, which has a robust health care system, struggled to contain the virus, Israel’s regulatory authority had cleared the Pfizer vaccine giving the country a leg up in the race to inoculate.

For a small country, and one whose people have been historically persecuted, speed was of significance. It prioritised the most vulnerable: The elderly, the health care workers, and those with pre-existing medical conditions. It has already vaccinated more than 72 percent of those aged 60 and above of its population.
For a small country, and one whose people have been historically persecuted, speed was of significance.

A public health care system is another significant reason that led it on a path to rapid vaccination. Systems were already in place and worked efficiently, which smoothened the process of inoculation.

Israel has also cracked deals with other vaccine manufacturers such as the American Moderna and Britain’s AstraZeneca. Moderna has reportedly promised vaccines for six million people.

Israel is being complimented for its efforts but many say it deserves to be chastised for ignoring the Palestinians; 4.5 million Palestinians live in the crowded West Bank and Gaza and have not received vaccines from Tel Aviv.

The Human Rights Watch said that under the Fourth Geneva Convention, Israel has an obligation to provide medical supplies, “including to combat the spread of pandemics.” It said that according to international human rights law, Israel must vaccinate Palestinians living under its control in a fair and non-discriminatory manner.
The Palestinian Authority is reportedly trying to secure the vaccine from other sources with financial support from the World Health Organisation.

“Nothing can justify today’s reality in parts of the West Bank, where people on one side of the street are receiving vaccines, while those on the other do not, based on whether they’re Jewish or Palestinian,” said Omar Shakir, the director at Human Rights Watch (HRW) for Israel and Palestine. “Everyone in the same territory should have equitable access to the vaccine, regardless of their ethnicity.”

But the Israeli media has quoted officials who said that the Palestinian Authority has not asked Israel for help. The PA is reportedly trying to secure the vaccine from other sources with financial support from the World Health Organisation (WHO).

Hamas, which controls Gaza, is an arch-enemy of the state of Israel and is not expected to seek or accept support from Israel even during a pandemic. Reports suggest that the Palestinians have instead opted to coordinate with the Russians.
In addition to the vaccination drive, the Israeli government has imposed severe restrictions.

Sputnik V, Russia’s vaccine against COVID-19, has reportedly been approved by the PA. Meanwhile, Israel has started to vaccinate at least the Palestinians in its prisons.

Despite the speedy inoculations, the number of infections in Israel rose before they eventually start to climb down. In addition to the vaccination drive, the Israeli government has imposed severe restrictions. Furthermore, it is expected to raise fines from US$ 1,500 to US$ 3,000 on businesses that defy the lockdown. Those who organise weddings and parties might be fined US$ 6,000.

This is an election year for Benjamin Netanyahu who has been prime minister since 2009. Bibi, as he is nicknamed, is fighting these elections in a much stronger position than the last when his corruption scandals were fresh in the minds of his compatriots. This time, however, he has signed peace deals with four Islamic nations, and expedited Israel’s recovery from the coronavirus.

The rest of the world can perhaps learn something from Israel. Even some Arab capitals are in awe of their hostile, but effective neighbour.

### China-Turkey extradition treaty and implications on Uyghurs

China has recently ratified its extradition treaty with Turkey aimed at strengthened judicial cooperation to facilitate a crackdown on transnational criminals including terrorists. The treaty was signed during Turkish President Recep Tayyip Erdoğan’s visit to Beijing in 2017. However, the Turkish Parliament is yet to ratify it. If ratified by Ankara, the extradition treaty will have a devastating effect on the 50,000 strong Uyghur diaspora living in Turkey. Besides Turkey, China has already signed such extradition treaties to promote judicial assistance with 81 countries including Pakistan, Afghanistan and many Central Asian republics. Uyghurs who live in China’s north-western frontier province of Xinjiang speak a Turkish dialect and are considered ethnically Turkic. Because of its strong cultural, linguistic and religious linkages, Turkey has remained a popular destination for Uyghur emigrants in exile. After the 1950s, Ankara hosted many Uyghur leaders form China, who set up associations to preserve their culture and promote the cause of an independent Eastern Turkestan, but with little success.
Turkish politicians consider the Uyghurs as the forefathers of primordial Turkism.

Since 1990, the Uyghur diaspora in Turkey has become more vibrant and has attracted widespread attention globally through demonstrations, conferences, meetings and briefings. As China became a larger global economic player, Beijing started exerting pressure on Ankara to curb anti-Chinese activities by the Uyghur diaspora but with little effect. Ankara continued to tolerate, support and approve Uyghur activities. Most Turkish leaders and politicians felt historically and culturally attached to the Uyghur population of Xinjiang. Turkish politicians consider the Uyghurs as the forefathers of primordial Turkism. Such was the cultural bond between Uyghurs and Turks that until recent times the Eastern Turkestan flag and Turkish national flag were hung alongside each other in different cities of Turkey. On 28 July 1995, Erdoğan, then the mayor of Istanbul, named a section of Blue mosque in the heart of city after İsa Yusuf Alptekin, the leader of the Eastern Turkestan independence movement. In 2015, Turkish diplomats helped many Uyghurs in Southeast Asian countries to travel to Turkey and provided them with travel documents. China’s monumental rise and its hegemonic pursuits through the inauguration of the much-hyped Belt and Road Initiative (BRI) in 2013 increased the geo-strategic importance of its restive Xinjiang manifold. Three out of the six major BRI land corridors run through Xinjiang and under the guise of heightened security, the Chinese Communist Party (CCP) started repressive Sinicisation, hi-tech surveillance, re-education camps and increased the socio-economic exploitation of the indigenous Uyghur population. More than one million people were interned in re-education camps. Uyghur women — the powerful symbols of cultural identity — were forced to go for sterilisation, abortion and implantation of contraceptive devices through state-sponsored campaigns. This cultural onslaught and ethnic cleansing of Uyghurs in recent years has become the reeling point for Uyghur exiles in Turkey to highlight human rights violations committed by the CCP.
Beijing was also successful in arm-twisting many of the Muslim countries to stay silent at these forums.

Beijing exploited its economic prowess to subdue increased criticism against it for human rights violations, forced labour, and cultural genocide of the Uyghurs at global forums. Beijing was also successful in arm-twisting many of the Muslim countries to stay silent at these forums. Under China’s economic obligations, Muslim countries also defended and commended China’s efforts in “protecting and promoting human rights through development.” Major Islamic countries including Saudi Arabia, Pakistan, Turkey, Malaysia and Iran have toed the official line of Beijing at these global forums when it comes to the ill-treatment of Uyghurs by the CCP. China, in the past, has used economic diplomacy and forced Muslim countries like Tajikistan and Kazakhstan to sign Extradition treaties and deport Uyghur exiles, who were sentenced to jail or executed. Turkey, the second home of the Uyghurs, is facing tremendous economic pressure because of the ill-conceived policies of President Erdoğan after the July 2016 coup attempt. Erdoğan believed that the West, particularly the US, are not trustworthy partners and that Washington was behind the instigated coup. Furthermore, Ankara’s behaviour towards Greece, the weaponisation of Syrian refugees, undermining the US’ Kurdish alleys, and the destruction of the last remains of democracy at home has led to a serious economic downturn, paving the way for increased Chinese influence. The relationship between NATO and Turkey soured further after Erdoğan purchased the S-400 missiles from Russia. Erdoğan turned to Beijing for a US$3.6 billion (£2.9bn) loan for investments in infrastructure and credit swap lines to boost its foreign reserves. Both the countries have started train services via Greater Central Asia and China is Ankara’s largest import partner. Beijing is also trying hard to pressurise Turkey to stop Uyghur activists in the country from protesting against the CCP by using its COVID-19 vaccine diplomacy.
If Turkey ratifies the treaty, this will be last nail in the coffin of Uyghur culture as China will silence the biggest Uyghur diaspora outside Xinjiang.

The Uyghur exiles who fled from China to Turkey did not have citizenship documents and Ankara publicly denounced the treatment of Uyghur minorities till early 2019 as a “disgrace for humanity.” However, after early 2019, given its increased economic dependence on Beijing, Ankara has also been accused of secretly sending some Uyghurs back to China. Erdoğan has even praised the CCP on the Xinjiang issue. Ankara will face pressure from within and outside its Parliament if it ratifies the extradition treaty with China. The opposition and Turkish lawmakers have already decided to oppose the treaty as most of the clauses are ambiguous, as was stated by Yurter Ozcan, a representative in the US of the Turkish opposition Republican People’s Party. Erdoğan himself will also face criticism and protests if he ratifies the extradition treaty. Externally, there will be immense pressure on Erdoğan from NATO allies, especially when Ankara wants a good relationship with the European Union and as it tries to recalibrate its fraught relationship with the US after the recent sanctions. If Turkey ratifies the treaty, this will be last nail in the coffin of Uyghur culture as China will silence the biggest Uyghur diaspora outside Xinjiang. The treaty will become another instrument in the hands of China for the prosecution of its enslaved Uyghur minority.

### The Abrahamic Middle East — Will Israeli-Arab alignment on Iran create a new equilibrium for peace?

This article is part of the series — What to Expect from International Relations in 2021.

In the final days of 2020, the Abraham Accords, that pushed years of secretive Arab-Israeli talks of cooperation into the mainstream, got a further boost as Morocco announced in December 2020 that it would establish formal diplomatic ties with Israel, joining the UAE, Bahrain and Sudan to become the fourth Arab state to do so.

While political history and geo-economic realities aided by President Donald Trump’s popularity in both the Arab capitals and in Israel helped these processes through, the incoming administration of President-elect Joe Biden may have a much more conservative approach to the Middle East when compared to the relative free hand that the Trump administration offered on many issues. This includes issues like human rights, especially for actors such as Saudi Arabia’s heir apparent, Crown Prince Mohammed bin Salman, whom Trump claimed he shielded during the fallout from the murder of Saudi journalist Jamal Khashoggi in 2018.

The incoming administration of President-elect Joe Biden may have a much more conservative approach to the Middle East when compared to the relative free hand that the Trump administration offered on many issues.


Despite the Arab world and Israel’s wishes for a second term for Trump, which many believe may have aided the pace with which the Abraham Accords were finalised and expanded, it is the question of Iran that remains the nucleus of these diplomatic manoeuvres. The coordination has been palpable between the US and allies in the region, beginning with the assassination of Iran’s celebrated commander Gen. Qasem Soleimani in January 2020, a reported assassination of senior Al Qaeda leader in Tehran in August 2020 (which Iran denies), and the assassination of noted Iranian nuclear scientist Mohsen Fakhrizade in the outskirts of Tehran in November 2020. The assassination of Fakhrizade brings back the era beginning in 2010, when more than four noted Iranian nuclear scientists were assassinated, allegedly by Israel, to stall Iran’s nuclear ambitions and to derail the West’s nuclear negotiations with the country which eventually led to the 2015 JCPOA agreement.

Trump withdrew the US from the JCPOA in 2018, much to Israel and the Arab world’s delight. Now, the Biden administration, staffed with Obama-era protagonists, is expected to get back into negotiations with Iran. This is going to become the main challenge between the US and the Middle East, from regional peace to even the success of the Abraham Accords itself. However, the next few years will not only be about these dynamics, but also how Iran navigates its own polity. With elections in the Islamic Republic slated for mid 2021, familiar divisions have already surfaced, with Ayatollah Khamenei backed by the IRGC returning to the traditional anti-US stance with gusto, while President Hassan Rouhani voting to veto a bill by his country aimed to boost uranium enrichment, while suggesting Iran is willing to return to the 2015 JCPOA agreements as it reels under sanctions once again.

Despite the Arab world and Israel’s wishes for a second term for Trump, which many believe may have aided the pace with which the Abraham Accords were finalised and expanded, it is the question of Iran that remains the nucleus of these diplomatic manoeuvres.


However, for the Biden administration, the challenges also remain mammoth. As the US struggles with the COVID-19 pandemic, a challenging global economy and domestic political fissures, Biden is expected to concentrate significantly more on the US, and not as much around big, bold foreign policy overtures. However, he is still expected to give priority to the JCPOA, which raises anxiety amongst the Arab capitals along with Israel, leading to consolidation of both power and interests to develop mechanisms to deal with Iran sans a strong American hand at play.

Despite the narrative of ‘peace’ around the Abraham Accords, it is not to be forgotten that the harbinger of this accord is deterrence — both political and military — against Iran, which despite its economic troubles, has made significant strides using asymmetrical tactics and implementation of militias across theatres such as Syria, Iraq, Yemen and so on. Over the next year specifically, further clarity on the Biden administration’s overtures and Iran’s willingness would define whether the centrality of peace and stability woven around the Accords is sustainable or not.

### The challenges for Oman’s new ruler

Less than a year ago, Sultan Haitham bin Tarik took charge of Oman with much hope on January 11, after the passing away of the kingdom’s longest-serving ruler Sultan Qaboos bin Said. It soon gave way to the tough task at hand, with the country registering COVID-19 cases from February this year. Lockdowns in the capital city of Muscat and other parts of the country in the later months have led to reduced business activity and even job losses. Apart from the economic challenges, Sultan Haitham also has to deal with the changing political landscape in the Middle East.
A tough year
Just as Sultan Haitham was settling down in his new job, COVID-19 struck Oman in February. Omani pilgrims returning from Iran tested positive coinciding with the spread of the pandemic to different parts of the world.

To control the spread of the disease, Oman enforced lockdowns in a staggered manner resulting in businesses taking a big hit. In January, Oman had passed its budget based on oil at USD 58 per barrel, whereas the price since then has hovered around the USD 40 per barrel mark due to low international demand.

The double blow—less revenues from oil exports and corporate tax—has forced Oman to raise money from international markets to cover the deficit. In a statement released to the official Oman News Agency (ONA) in October, the Ministry of Finance said that it had issued two tranches of international bonds for maturity periods of seven years and twelve years amounting to USD 2 billion in total.
The home challenge
In his first national speech, Sultan Haitham laid down the outline of the country’s growth path, with the primary focus being the youth. He highlighted the importance of the small and medium enterprises in the country’s progress with special emphasis on startups based on innovation, artificial intelligence and advanced technologies.

In August, Sultan Haitham revamped the Council of Ministers, which saw the appointment of new ministers and merger of several ministries. Ministries like Tourism and Heritage, Manpower and Civil Service (now Labour), and Justice and Legal were merged while some new ones have come up like Housing and Urban Planning, Higher Education, Research & Innovation, Transport, Communications & IT, Commerce, Industry & Investment Promotion.

The crucial foreign ministry saw long-serving Yousuf bin Alawi bin Abdullah making way for Sayyid Badr bin Hamad bin Hamoud al Busaidi as the new foreign minister of Oman. The changes Sultan Haitham has brought about in the government structure are geared towards meeting the aspirations of the people and to give a new direction to the country’s progress.

Under its new ruler, Oman has embarked to meet the objectives of “Vision 2040”, which will be implemented from 2021. The strategic approaches of this vision have been defined in accordance with priority goals, on top of which come a high-quality education system and an effective scheme of research and innovation to build a knowledge-based economy.

Under its new ruler, Oman has embarked to meet the objectives of “Vision 2040”, which will be implemented from 2021. The strategic approaches of this vision have been defined in accordance with priority goals, on top of which come a high-quality education system and an effective scheme of research and innovation to build a knowledge-based economy.


“Empowerment of nationals with expertise and dynamic skills to meet challenges at the local and international levels, the achievement of sustainable healthcare and an administration that supports economic diversification are some of the key objectives of this vision,” the official state Oman News Agency reported. The agency reported that focus is on creating an enabling environment so that “the private sector could take the lead in shaping up the national economy.”'
Oman and the Middle East
For decades, Oman maintained ‘strategic neutrality’ in the volatile Middle East region, particularly in the Late Sultan Qaboos era. Oman has often been referred to as an ‘Oasis of peace’ in a region wrecked by conflicts.

The country played a key role in the Iran-US nuclear accord, hosting secret meetings and paving the way for the deal to be signed in 2015. In 2017, Oman refused to take sides when Saudi Arabia, the UAE and Bahrain took the lead in cutting trade and diplomatic ties with Qatar over ‘political differences’.

Another instance of Oman’s role as a neutral player in the region came to the fore in October 2018, after the visit of Israeli Prime Minister Benjamin Netanyahu. The Israeli PM made a rare visit to Oman and met the then ruler Sultan Qaboos. Soon reports started doing the rounds that Oman is mediating to settle the dispute between Israel and Palestine.

Muscat has maintained equidistance and has been friends with almost all the key powers in the region. However, this policy has come under strain as Israel breached the ‘pariah firewall’ to establish diplomatic ties with the UAE and Bahrain in the last few months. Before the UAE and Bahrain, Jordan and Egypt were the only two Arab countries to have established diplomatic ties with Israel.

Muscat has maintained equidistance and has been friends with almost all the key powers in the region. However, this policy has come under strain as Israel breached the ‘pariah firewall’ to establish diplomatic ties with the UAE and Bahrain in the last few month


In November, international media outlets reported that Israeli PM Benjamin Netanyahu held secret talks with Crown Prince Mohammed bin Salman in the presence of US Secretary of State Mike Pompeo in the city of Neom in Saudi Arabia. 

Oman is on a wait-and-watch mode as countries in the region make their moves vis-à-vis Israel and recalibrate their stand over the Palestine issue. As more countries adjust their ties with Israel, it will be interesting to note how Oman maintains a neutral stand in the shifting sands of Middle East politics as the country has good ties with all the major players in the region. 
Why Oman matters to India 
India’s ties with Oman date back to almost 5,000 years ago. Modern diplomatic ties were established in 1955 and the relationship was upgraded to a strategic partnership in 2008.

The bilateral ties got a big boost after Indian Prime Minister Narendra Modi visited Oman in February 2018 and met the then ruler Sultan Qaboos. Both the countries signed pacts in areas like health, peaceful uses of outer space, tourism and military cooperation.

India is among Oman’s top trading partners. For Oman, India was the third largest (after th UAE and China) source for its imports and the third largest market (after the UAE and Saudi Arabia) for its non-oil exports in 2018. During 2019-20, bilateral trade was valued at USD 5.93 billion. There are over 4,100 Indian enterprises and establishments in Oman with an estimated investment of USD 7.5 billion. Oman is also an important source of remittance as nearly 500,000 Indians are employed in various sectors of the Omani economy.
Conclusion
The biggest challenge in the last 10 months of Sultan Haitham’s rule has been controlling the COVID-19 pandemic, which saw an average of 2,000 cases a day at its peak in July in a country of 4.5 million. Since February, Oman has registered 122,081 cases, with recoveries at 113,260 and 1,380 deaths till November 22.

A slowing economy and COVID-19 have forced the exit of over 277,000 foreign workers including 100,000 Indians in the first ten months of the year. Many businesses are struggling, employees have faced salary cuts and some businesses have shut down as well.

The non-oil sector, particularly tourism, is reeling under the impact of the pandemic. In 2019, Oman recorded 3.5 million tourist arrivals, providing a key source of non-oil revenue and jobs to locals at various levels.

In the coming days, the challenge for Sultan Haitham is to vaccinate the country’s population, navigate the economy through uncharted waters and provide jobs to thousands of Omani youths who are graduating from colleges and universities every year.

### A secret visit and a historical rapprochement: Israel and Saudi Arabia

At 7:30 pm on November 22, a flight took off from Tel Aviv and dropped off the radar near Neom, a futuristic Saudi city on the shores of the red sea.

While the flying cars Neom promises may be sometime in the distant future, an equally unimaginable but political event seemed to have occurred.

Onboard the historic flight was Israeli Prime Minister Benjamin Netanyahu, according to Israeli paper Haaretz. He flew to meet Mohamad Bin Salman (MBS), the Crown Prince of a country that is home to two of the holiest sites in Islam and is seen by many as the leader of the Sunni Muslims in the world.

Since the formation of the state of Israel in 1948, Arabs, often led by Saudi Arabia, have refused to acknowledge the new state. Diplomatic ties and normalisation with Israel had always been linked to Palestinians having their own state, according to the Saudis’ Arab Peace Initiative of 2002.

But lately, encouraged by Donald Trump, winds of peace have been blowing between Israel and the Saudi-led bloc of Arab nations, only if to contain common enemy Iran.

Encouraged by Donald Trump, winds of peace have been blowing between Israel and the Saudi-led bloc of Arab nations, only if to contain common enemy Iran.


Saudi Arabia wanted to keep it hush-hush and so Prince Faisal bin Farhan Al Saud, Saudi Foreign Minister, was quick to tweet a denial of Netanyahu’s visit. On Sunday, he said: “I have seen press reports about a purported meeting between HRH the Crown Prince and Israeli officials during the recent visit by @SecPompeo. No such meeting occurred. The only officials present were American and Saudi.”

Israeli media and political circles, however, were abuzz with the talk of the visit and few tried to disprove the reports. Yoav Galant, the Israeli education minister, analysed the meaning of the visit on a radio station. “An axis is emerging that includes Israel, the United States, and anyone who shares against Iranian Shiite extremism. The very act of holding the meeting and making it public - even if it is semi-formal - is very important.”

Since the Islamic revolution in 1979 Iranian clerics have made a mortal enemy out of Israel partly to appear as better Muslims, and hence better leaders of the Muslim world than Saudi Arabia. It has intermittently questioned Riyadh’s custodianship of the holy mosques, a threat that directly challenges the rule of the Sauds. Such policies, combined with Iran’s recent regional expansion from Tehran to Lebanon through Syria and Iraq, has antagonised both the Saudis and the Israelis.

Instead of simply managing Iran, the young and restless crown prince decided to confront the threat and opted for a two-pronged approach.

First, slow and secret rapprochement with Israel and the formation of a regional and global alliance against Iran. Over the last few months, MBS tacitly backed peace deals between Israel and three Arab countries: The United Arab Emirates, Bahrain, and Sudan.

Secondly, promoting a more accommodative face of Islam to change its image in the world. Saudi Arabia has long been seen as a supporter of the Wahhabi ideology which many of the terrorist networks, responsible for many terrible terror attacks, espoused to. While the Saudi government has not directly been linked to any such acts, indirect Saudi funding has reportedly often ended up with extremist elements.

In an interview with The Guardian MBS blamed Iran for Saudi Arabia’s adoption of hard-line Sunni Wahhabism. Saudi royals, he said, “didn’t know how to handle” Iran’s emergence as the ideal of Islamists all over the region.

The recent visit was also to come up with a strategy to deal with America’s president-elect Joe Biden who has been critical of Saudi Arabia and more considerate of Palestinian aspirations. MBS and Netanyahu worry that Biden may seek to revive the Iran nuclear deal signed during Barack Obama’s presidency, but scrapped by Trump. A new deal would mean Iran would be able to sell its oil and make money which it could if it wanted, use to fund its proxies in the region and continue to expand and threaten Tel Aviv and Riyadh.

MBS and Netanyahu worry that Biden may seek to revive the Iran nuclear deal signed during Barack Obama’s presidency, but scrapped by Trump


Whichever way it swings, India is safe as it friends with everyone: both Saudi Arabia and Iran, as well as Israel and Palestine. But India’s position has shifted, even if slightly. It has more often been spotted in the Israel-Saudi-America orbit. That decision has so far been advantageous.

Last year when the Indian government stripped Kashmir of its special status, there was no criticism from the Saudi bloc.

### What does Biden’s victory mean for the Middle East?

Donald Trump tried to dismantle the rules-based world order established by America after the second world war. Joe Biden might resurrect it. But since almost half of America voted for Trump, the superpower has lost its moral standing and cannot, anymore, be seen as the leader of the free world.

Some of America’s staunchest western allies wished Trump gone since he adopted a nakedly transactional foreign policy based entirely on short-sighted local interests.

After the results of a contentious election were announced in Biden’s favour and he was declared the 46th president of the United States of America, Canada, France, and Germany were the first to congratulate and expressed a desire to “work together,” with a like-minded leader in Washington.

Biden’s presidency is expected to upend the policy pursued by Trump in Europe and to a large extent in the Middle East too.


Biden’s presidency is expected to upend the policy pursued by Trump in Europe and to a large extent in the Middle East too. In the latter, however, American policy resonates far and wide and the ramifications are often lethal. Many countries in the Middle East are still governed by authoritarians- religious leaders, monarchs, and autocrats.

The two pillars of the Islamic world are Sunni Saudi Arabia and Shia Iran. Since Iran’s Islamic revolution in 1979, the Persian nation has been challenging the hegemony of Saudis who see themselves as the leaders of the Muslim world.

George W Bush bombed Iraq and Afghanistan, Obama shied away from participating militarily in the Syrian and Yemeni wars and signed a nuclear deal or the Joint Comprehensive Plan of Action (JCPOA) with Iran. The pact was seen as America’s tacit nod to Iran to have its own region of influence.

That did not bode well with Saudi Arabia. When Trump came to power and his son-in-law and Middle East adviser Jared Kushner befriended the Saudi crown prince, Mohammad bin Salman (MBS), Trump leaned massively towards Riyadh. In 2018 Trump walked out of the JCPOA even though the US’s European allies, who were co-signatories to the deal, objected.

Iran went through harsh sanctions but did not come to the table to renegotiate the deal with Trump. They waited for the day he was replaced by a democrat and last week their prayers were heard.

Biden has already promised to return to the Iran-US nuclear deal if Iran abides by its commitments and refrains from making a nuclear bomb.

In a CNN op-ed, Joe Biden said Iran was closer to making a bomb now than before owing to Trump reneging on a commitment made by the American government under Obama and Biden who was then the vice president. He said he had a “smarter way,” to deal with Iran. “There are reports that Iran has stockpiled 10 times as much enriched uranium as it had when President Barack Obama and I left office,” wrote Biden. “I will offer Tehran a credible path back to diplomacy. If Iran returns to strict compliance with the nuclear deal, the United States would re-join the agreement as a starting point for follow-on negotiations.”

Iranians are quietly heaving a sigh of relief, but Saudi Arabia has many reasons to be anxious.

Biden spoke of reengaging with Iran, but was very critical of the Wahhabi kingdom and especially its impetuous crown prince. Biden blamed MBS for ordering the killing of Saudi journalist Jamal Khashoggi and for the bloodshed in the ongoing war in Yemen.


Biden spoke of reengaging with Iran, but was very critical of the Wahhabi kingdom and especially its impetuous crown prince. Biden blamed MBS for ordering the killing of Saudi journalist Jamal Khashoggi and for the bloodshed in the ongoing war in Yemen. He said that his administration will stop selling weapons to Riyadh and make them “in fact the pariah that they are.” He added there is “very little social redeeming value in the present government in Saudi Arabia.”

With Saudi Arabia, the United Arab Emirates, Bahrain and Egypt in one bloc and Iran, Qatar, and Turkey in another, Biden is going to have to walk a tightrope. He can re-enter negotiations with Iran but it might be hard to push the Saudis, traditional American allies, too far.

US’s rapprochement with Iran, however, might prove to be a windfall for countries like India who were purchasing Iranian crude at a discounted price.


US’s rapprochement with Iran, however, might prove to be a windfall for countries like India who were purchasing Iranian crude at a discounted price. Trump had withdrawn the exemption given to a few countries, including India, from the sanctions and that helped Indian taxpayers buy cheaper crude.

But Biden is also pro-Israel and if not for Saudi fears, for Israel’s safety concerns it would need to figure out how to keep a check on Iran’s regional expansion and its armed militias spread from Tehran to Baghdad to Syria and Lebanon. Can Iran promise it would contain its proxies in the region if Biden re-joins the deal?

### Data localisation in emerging markets: The case of Turkey

The internet’s age of adolescence is over. For decades, we tolerated many things, waiting for the kid to grow up. But now as an adult, the internet has responsibilities. Every sovereign nation is now discussing how to regulate the Internet according to its own economic and social priorities. Once a free and homogenous network, the global Internet has effectively been split into three co-existing blocs (the so-called “splinternet”):

 	The American bloc is dominated by global big tech companies, namely Google, Facebook, Amazon and Apple. While there are strong calls for antitrust action against the companies in the USA, so far real legal or policy action has been extremely limited. The American bloc gives the big tech companies a free hand for surveillance.
 	The Chinese bloc is dominated by the Chinese Communist Party through its shareholder and management relations with the large Chinese internet companies, namely Alibaba, Tencent and Baidu. In China, state surveillance dominates through Chinese big tech.
 	The third bloc is the EU, characterised by prioritising individual rights and individual ownership of data, the so-called “bourgeois” internet, in a clear rebuke to the business models of American big tech.

The other countries around the world are at a crossroads whether to follow one of these models or design their own. While China is the only emerging market country that has enforced strict data localisation requirements for many years and restricted the activities of global big tech behind the so-called Great Internet Wall, many other emerging market countries implemented bits and pieces of data localisation requirements without a coherent internet policy strategy. This piece summarises the recent experience in Turkey with the purpose of illuminating how a mid-sized, emerging market G20 member approaches internet policy issues and what types of political and policy challenges it faces.
Turkish social media controversy
It should be reminded that, in terms of internet and social media usage rates, Turkey is among the top countries globally (6th largest on both Twitter and Instagram). The increasing number of digital platforms has caused political polarisation, disinformation and social manipulation propaganda to occur. Hyper-partisan approaches, political polarisation and a severe lack of trust became the main characteristics of contemporary media platforms. In an environment where disinformation has become the norm, not the exception, a significant number of foreign government supported outlets have also become major sources of news on social media – Sputnik (Russia), Independent (Saudi Arabia), DW (Germany) and BBC (UK). Large disinformation campaigns have been implemented throughout election campaigns since 2018.

Over time, with disinformation and social media gathering speed and the additional triggering effects caused by Covid-19, there has been an urgency for new regulations in 2020. An unofficial draft bill surfaced in early April 2020, seeking to expand the scope of social media surveillance and monitor online users, as many people have become victims of actions conducted by fake profiles. According to the draft bill, social network providers that had more than 1 million daily users were required to open a representation office in Turkey, and those who wished to have accounts on these platforms had to create their accounts with their Turkish ID number to prevent fake profiles. The bill also included a forced data localisation provision for social media outlets.

The social media debate has become one of the hottest topics over the summer of 2020. This was further galvanised on 11 June, 2020, when Twitter announced the takedown of 7,340 accounts that tweeted about 37 million times in a rare action of its kind. At the same time, the Stanford Internet Observatory Cyber Policy Center published a white paper regarding these fake accounts and their effects on the political atmosphere. Most of the accounts taken down were claimed to be affiliated with the ruling AK Party.
Data-localisation: Quo Vadis?
Data localisation requirements under Turkish law have so far been sector-specific and, hence, limited in scope. Several sectors are already under obligation to keep primary and secondary data in Turkey: banking, e-sim technology companies, finance, healthcare and energy.

When the social media law discussed above was formally enacted in July 2020, the Turkish ID number requirement for social media logins was dropped and the data localisation measure became a request to the outlets “to take the necessary measures towards hosting Turkey-based users' data in Turkey” without enforcement. With no clear enforcement mechanism for the data localisation requirement in the Turkish social media law, Turkey diverged from the Russian approach of forced data localisation in social media and approximated to the social media regulation approaches of other G20 member emerging markets such as South Africa and India.

Yet another blow towards forced data localization came from the "Personal Data Protection Board" in September 2020, rendering the Convention No. 108 of the Council of Europe (to which Turkey is a signatory) on cross-border transfers of personal data not applicable for Turkey. As a background, Turkey recognised protection of personal data as a fundamental right in its constitution in 2010. In 2016, with the implementation of legislation, the "Personal Data Protection Board" was established as the independent supervisory authority.

Since the Board was established, it has refused to announce a list of safe harbour countries to which personal data of Turkish citizens can be transferred without permission. In the EU legislation and in many other jurisdictions, data protection authorities announce such a list of countries that provide protection of personal data at equal or better standards. Turkey’s refusal to announce such a list is based on diplomatic reciprocity, because no other country, most importantly not the EU, recognises Turkey as a safe harbour. It was nevertheless possible to transfer personal data under the Convention No. 108 to which Turkey is a signatory. With this decision, the Board put Turkish law before international convention and effectively restricted transfer of all personal data, including those on social media, to other countries.

The repercussions of these wide-ranging data localisation requirement and administrative restrictions are yet to be seen. Given the fact that the historical reason for Turkey to establish a personal data protection system was mainly to comply with EU requirements and candidacy obligations, attempting to harmonise Turkish legislation with the European system based on the Data Protection Directive 95/46/EC, the utilization of the same legal framework to restrict data transfers will potentially attract a lot of reaction.
Towards a more informed and global discussion
Recent debates and policy actions in Turkey present a mixed picture. Apparently, the splinternet trend has echoed with the policy makers in Turkey. Yet there is no clear and consistent strategy on to what extent and in which areas data should be localised. Different government departments in executive or legislative branch take reactive and sporadic actions to localize or not to localize data.  The level of awareness and discussion regarding the security and economic benefits of forced data localisation is extremely limited. The arguments of politicians are shaped more by existing polarised political positions rather than an informed debate. The outcome is a patchy regulatory framework and an uncertain policy environment.

Turkey should engage in strong dialogue with other emerging economies of similar size, possibly within the G20 framework, on its data localisation strategy and overall internet policy. This dialogue can start by sharing experiences to formulate a more informed and balanced approach. The dialogue can then progress towards creating common policy frameworks that would constitute an alternative to the three existing internet blocs and serve the economic and social priorities of emerging market countries.

### Israel’s normalisation with UAE and Bahrain: A prognosis for the region

The reasons for the signing of the ‘peace deal’ between Israel and the UAE and Bahrain, known as the ‘Abraham Accords’ can be summarised in a single word: realpolitik. Discreet relations already existed between all three countries and the ceremony in the White House merely marked the consummation of the surreptitious camaraderie. Despite the denunciation of the pact, amongst the Palestinians, it holds great significance for peace in the Middle East and prefigures the consolidation of an anti-Turkey-Qatar alliance in the region. This deal is also expected to herald in an era of greater economic and technological engagement between Israel, the industrialised Gulf and other Arab states. This essay analyses the impacts of the deal for the economy and security of the region and also looks at what it means for the Palestinian struggle.
Enhanced economic engagement
The first Arab state to establish full relations with Israel was Egypt in the Camp David Accords of 1978. Cairo, under President Anwar Sadat, drew a barrage of opprobrium for making peace with the ‘Zionist Enemy.’ Camp David resulted in a moral boost for Tel Aviv as its foremost Arab enemy decided to abandon aggression and embrace friendship. To Egypt, a vital strategic relationship developed with the US and Cairo received millions of dollars every year in aid due to this. A similar peace agreement was signed between Jordan and Israel in 1994, following the Oslo Accords that promised a reconciliation between Israel, the Palestinian Liberation Organisation (PLO) and the eventual realisation of the two-state solution.

While Israel’s peace agreement with Egypt and Jordan led to an enhanced security cooperation, failed to deepen economic and people-to-people relations between the two states. In contrast, one of the main reasons for ‘normalisation’ with UAE and Bahrain is greater economic and technological cooperation. As the global price of oil plummets and UAE’s reserves of the resource dwindle, Abu Dhabi and Manama are looking to diversify their economic base. They stand to benefit from Israel’s sophisticated technological industry and particularly the state-of-the-art seawater-desalination knowhow. UAE, in its capacity as the most industrialised Arab state, and Israel, with its impressive technical prowess, have a great deal to gain from a deepening of their economic ties.

A stronger bilateral relation between Israel and UAE, guaranteed by the US is what Abu Dhabi seeks.


UAE also hopes to bolster its standing in the United States where several Congressmen and Senators were calling to impose sanctions on Abu Dhabi for its involvement in the civil war in Syria. Mohammed bin Zayed (MbZ) hopes that, in case the Democrats win the presidential elections later this year, nominee Joe Biden would not be antagonistic to UAE’s interests in the region. A stronger bilateral relation between Israel and UAE, guaranteed by the US is what Abu Dhabi seeks.
The security dimension
On the security front, all three signatories to the pact aim for the continued presence of American troops in the region. Saudi Arabia, Israel, UAE, Bahrain and others in the region are beneficiaries of American military deployment in the Middle East. It tilts the power balance in the region in their favour and its withdrawal would leave these states to fend for themselves, an ominous prospect that none of them desire. Already, talks are underway between the US and UAE for the selling of F-35 fighter jets. Interoperability between the Gulf kingdoms and Israel facilitated by their common benefactor America, entrenches America’s security alliance in the region and also gives fresh impetus to the emerging anti-Turkish-Qatar coalition.

US Secretary of State Mike Pompeo pointed out that the deal may signify a growing cooperation between Arab states and Israel to counter the threat posed by Iran. However, what has been receiving lesser attention is the fact that the pact might mean a consolidation of an anti-Turkey and anti-Qatar alliance in the Middle East. The greatest threat for the Arab monarchies comes not from Iran, but from a clamouring for democracy within. Saudi Arabia and UAE hardly dread anything more than the rise of political Islam in their countries. Turkey and Qatar have over time become ardent supporters of political Islam and have liaised with one another to aid and assist Islamist political groups in the region. Though the Gulf states have staved off the threat from political Islam for the time being by brutally suppressing the Arab spring protests early last decade, Turkish president Recep Tayyip Erdogan’s assiduous efforts to revive the Islamists have irked them no end. Ankara is at odds with the Gulf regimes in the conflagration in Libya and the prolonged civil war in Syria. The Gulf states along with Egypt boycotted Qatar in 2017 for Doha’s backing of Islamists.

The greatest threat for the Arab monarchies comes not from Iran, but from a clamouring for democracy within.


Turkey has also been vociferously speaking out against Israel’s brutal treatment of the Palestinians and the expansion of settlements in the West Bank, irritating Prime Minister Benjamin Netanyahu. Israel also prefers to engage with the Gulf monarchies rather than with the democratic political Islamists due to the latter’s connections with Hamas in Gaza. This overlapping security interests between UAE, Saudi Arabia, Bahrain and Israel, supported and aided by a generous America would strengthen the security cooperation of this alliance. The threat of Iran, whilst an effective tool to convince pro-retrenchment congressmen in Washington, may not be as significant a cause for greater security relations between Israel and the Gulf states as a common dislike for Turkey and Qatar.
The Palestine question
The Arab Peace Initiative spearheaded by Saudi Arabia in 2002 laid out that the Arab states would normalise relations with Israel only when an independent Palestinian state is established. The Abraham Accords clearly contravene the provisions of that initiative. However, MbZ did not want to come across as blatantly apathetic to the Palestinian cause and instead claimed that he had secured a promise from Netanyahu to drop his plans of annexing the West Bank. Subsequent statements by Netanyahu clarified that he had only committed to the suspension of annexation rather than the abandonment of the plan. With protests against Netanyahu just having ended and trial against him for corruption ongoing, he would be reluctant to make any move that only panders to his far-right base and fails to appeal to the majority of the population. For good measure, Netanyahu’s rival Benny Gantz is waiting in the wings to seize his opportunity to outshine him.

On the other side, even if Netanyahu had agreed to abandon plans of annexation, there would still be good reason for the Palestinians to call this agreement a betrayal of their cause. Middle East expert Avi Shlaim pointed out in a recent article that “the creeping annexation of the West Bank has been going on for the last 53 years and the accord can do nothing to stop it,” and that Netanyahu’s recent plan to “formally annex roughly a third of the West Bank, including the settlement blocs and the Jordan Valley, would be a unilateral and illegal land grab; he deserves no reward for putting it on hold.”

The Gulf states are tired of waiting for the venal Palestinian administration to negotiate with Israel over a solution to their conflict.


As far as Palestine is concerned, the accord signifies a decoupling of UAE’s relations with Israel and its commitment, or the lack of it, to a two-state solution. The Gulf states are tired of waiting for the venal Palestinian administration to negotiate with Israel over a solution to their conflict. Moreover, the potential for economic advancement is too great for the Gulf states to pass over in favour of ersatz concern for the plight of Palestinians. Ergo, the strife between Israel and Palestine will be one that can only be resolved through internal negotiations between Israel and the Palestinian Authority

Some argue that normalisation of relations with Israel would give Arab states greater leverage over Tel Aviv and enable them to push more effectively for an expeditious resolution of the conflict. This argument is flawed chiefly for two reasons: First, Egypt and Jordan could do very little over the past few decades to facilitate cooperation between Israel and Palestine, let alone help achieve a solution. Palestinian resentment has only deepened, their internal schism (between PA and Hamas) widened and settlements in the West Bank only expanded. Second, all signs are that the UAE and Bahrain do not really give much importance to the Palestine question and have greater priorities in mind with regard to their engagement with Israel. Therefore, it can be surmised that whilst the Arab-Israeli conflict has thawed considerably, it has had no bearing on the continued tensions surrounding Israeli-Palestine conflict.

Prasanna Aditya is Research Intern at ORF.

 

### Comparing Erdogan’s outreach to India and China

In the United Nations General Assembly 2019, Turkish President Recep Tayyip Erdogan broached the revocation of Article 370 of the Indian Constitution and urged the international community to pay attention to Kashmir. A self-styled champion of Muslims around the world, Erdogan had met the Chinese President Xi Jinping three months earlier and the Chinese press reported him as saying that ‘people in Xinjiang are living happily.’

Until very recently, Erdogan was seen as the only Muslim leader in the world with the gall to stand up to China’s human-rights abuses in Xinjiang. In 2019, he called the internment camps in the province a ‘great cause of shame for humanity’ and urged Beijing to close down its ‘concentration camps.’ As the Prime Minister in 2009, he went so far as to condemn the Urumqi riots between Uighurs and Han Chinese as ‘simply put, a genocide. There’s no point in interpreting this otherwise.’ Erdogan’s current stance vis a vis the Uighurs is unrecognisable to his previous position. The rationale behind this turnabout? Trade. Expanding economic relations with Beijing requires him to toe China’s line and stay quiet over human rights issues. Whilst Erdogan uses Islam as a convenient tool to bolster his position at home, he wouldn’t use it in any way that sabotages Turkey’s economy.

"Expanding economic relations with Beijing requires him to toe China’s line and stay quiet over human rights issues."


As Ankara’s ties with its traditional Western allies weaken, it has been looking to explore alternative areas to ensure continuous growth of its economy. President Xi Jinping’s flagship Belt and Road Initiative (BRI) accorded with Turkey’s Middle Corridor Project that seeks to connect China with Turkey through Central Asia and the Caucasus. Chinese investments inundate Turkey to such a large extent that Beijing ranks as Ankara’s third largest trade partner. When Erdogan raised his voice for the Uighurs in early 2019, China closed its consulate in Izmir, an important coastal city. Since then, Erdogan has taken a muted role in regard to the Uighurs. His party struck down a motion in parliament that sought to establish an ad hoc committee to investigate abuses in Xinjiang. What’s more, an explosive report by Telegraph described how Turkey is helping to deport Uighur dissidents back to China by first transporting them to third-countries in Central Asia.

What prevents Erdogan from taking a similar approach to India? That is, why is he not prioritising economic relations with New Delhi over his impulse to denounce India’s internal activities in Kashmir? The answer is Pakistan. Pakistan and Turkey are long-standing allies. Being part of the Western camp during the Cold War, they cooperated on security and strategic issues through organisations such as the Baghdad Pact (later known as the Central Treaty Organisation) and Regional Cooperation for Development (RCD). Whilst Islamabad supported Turkey on its dispute with Cyprus, Ankara had Pakistan’s back in the Kashmir conflict. It endorsed a UN-monitored plebiscite to resolve the issue, as opposed to India’s policy of solving the dispute through bilateral negotiation with Pakistan.

"Pakistan and Turkey are long-standing allies. Being part of the Western camp during the Cold War, they cooperated on security and strategic issues through organisations such as the Baghdad Pact (later known as the Central Treaty Organisation) and Regional Cooperation for Development (RCD)."


Moreover, India’s non-aligned stance made it more difficult for Turkey to reach out to New Delhi. Prime Minister Turgut Ozal attempted to initiate economic ties with India by visiting the country in 1986. The visit was reciprocated by Prime Minister Rajiv Gandhi in 1988, but it did not contribute to a rise in bilateral trade.

With the end of the Cold War, however, relations were expected to take off. But such hopes were dashed when Turkey condemned India’s use of force in Kashmir in the Organisation of Islamic Cooperation summit in 1991. In the early 2000s Ankara came around to supporting a solution for the Kashmiri conflict through negotiations between India and Pakistan, endorsing a view closer to India’s policy. With the major stumbling block between closer relations out of the way, economic relations expanded between the two countries. Trade amounts to as much as $10 billion between the two countries with Turkey importing from India a great deal more than it exports. With the economy at the forefront, relations were set to deepen in security and political fronts as well until Erdogan threw the ner in the works by inveighing against India at the UNGA for its internal policy regarding Kashmir.

"Trade amounts to as much as $10 billion between the two countries with Turkey importing from India a great deal more than it exports."


Prime Minister Narendra Modi responded to Erdogan’s speech by meeting with the leaders of Greece, Armenia and Cyprus, Turkey’s rivals in the region, on the sidelines of the summit. Modi also cancelled a scheduled trip to Turkey in November 2019 and put on hold a $2.3 billion worth naval deal with a Turkish company that was meant to reduce the trade imbalance between New Delhi and Ankara. Instead, Modi signed a defence agreement with Armenia, Turkey’s neighbouring enemy, worth $40 million. Erdogan ratcheted up tensions when he visited Islamabad in February 2020 and said that Kashmir was ‘as close to Turkey as it is to Pakistan.’

Presiding over a sagging economy and a strained relationship with its traditional Western allies, Erdogan’s Turkey needs to strengthen its engagement with countries like India and China. Pandering to Islamabad’s desire to demonise India would only deny Turkey the advantages it would accrue through a closer economic and strategic relationship with New Delhi. Turkey’s optimal strategy lies in decoupling its ties with Pakistan and India and not letting its engagement with one impinge on the other.

"When push comes to the shove, Turkey will have to side with America in its impending super-power rivalry with China."


Furthermore, despite Erdogan’s attempts to drift away from America and Europe, Turkey is still very much a part of the Western alliance. It cannot afford to wholly extricate itself from the West nor is it in its best interests. Therefore, when push comes to the shove, Turkey will have to side with America in its impending super-power rivalry with China. When Ankara makes that hard choice, Pakistan will be deeply embedded in the Chinese camp. In such a situation, camaraderie with India, a country squarely opposed to Chinese aggression, would only benefit Ankara.

From India’s perspective, Turkey will be a key strategic ally in the Middle Eastern region. Both secular democracies and middle-income countries, India and Turkey are, as a senior Turkish lawmaker said last year, ‘natural allies.’ The two countries have abundant opportunities to expand their relationship in terms of economy, strategy and security and Erdogan’s obsession over Kashmir would only delay its blossoming. India would have no option but to expand its outreach to Ankara’s nemeses in the region, namely Greece, Cyprus and Armenia, if Erdogan continues to cause hassle to New Delhi. Previously, India has not denounced Turkey’s aggression in its neighbourhood. For instance, Turkey’s invasion of Northern Cyprus in 1974 elicited no major response from New Delhi. However, India condemned Ankara’s military incursion into Syria in October 2019 and urged it to exercise restraint. Whether this move remains an aberration in Indo-Turkish bilateral relations or becomes the norm depends on Erdogan’s actions in the future. The 75th session of UNGA scheduled to take place virtually this month might provide an answer. If Erdogan refrains from broaching Kashmir again, it would prove significant for the future course of relations between India and Turkey.

"India would have no option but to expand its outreach to Ankara’s nemeses in the region, namely Greece, Cyprus and Armenia, if Erdogan continues to cause hassle to New Delhi."


At the same time, Ankara has to be careful about its deepening ties with China. Beijing’s ‘debt-trap diplomacy’ involves lavishing client states with generous loans and extracting political or economic concessions when a country fails to pay back its debt. Whilst diversifying its foreign relations is a beneficial enterprise, Turkey shouldn’t drift off so much from the West that it becomes difficult for it to choose sides between America and China should a direct confrontation arise between the two. Erdogan’s silence over the Uighurs can be explained by political expediency and realpolitik but getting lured into a complex entanglement with China would have potentially insidious consequences.

The author is a research intern at ORF.

### ‘Neo-Ottomanism’ in Turkish foreign policy

A month after he converted the fabled Hagia Sophia, a cathedral-turned-mosque-turned-museum, into a mosque again, Turkish President Recep Tayyip Erdogan has opened the Chora Church in Istanbul for Muslim worship. This is the latest in a series of moves by Erdogan to remake his country’s image from a staunchly secular, pro-western nation-state into a devout Islamic state.

Such an attitude is evident in his hostility toward Israel for its occupation of the West Bank and in other occasions when he came out in solid support of pan-Islamic causes. As he delivered his speech on Hagia Sophia’s conversion, he said that next in line was the ‘liberation’ of Al-Aqsa mosque in Jerusalem, the third holiest site in Islam. Erdogan’s angry reaction to the ‘peace deal’ between Israel and the UAE was striking especially when compared to the loud silence of the Arab countries on the issue. Erdogan’s boisterous efforts to revivify Islamist Turkey, viewed in conjunction with his equally headstrong approach to foreign policy has been dubbed ‘neo-Ottomanism’ due to its resemblance to the conduct of the former empire that reigned in Turkey for over five centuries.
Domestic political imperatives
Presiding over the right-wing Justice and Development Party (AKP), Erdogan has been in power now for over 16 years. Being well-ensconced in his position, however, has not made him immune to political threats from the opposition. He suppressed an attempted coup d'etat by his own military in 2016 that sought to overthrow him. In 2018, he introduced the executive presidential system, considerably reducing the authority of the judiciary and the parliament. Fatigue of the Turkish masses with Erdogan’s rule was manifest in the Istanbul mayoral elections in 2019 in which Ekrem İmamoğlu of the Republican People’s Party (CHP) trounced AKP’s candidate not once but twice, after Erdogan called a rerun. That AKP took a drubbing in Istanbul, the cradle of Erdogan’s political rise, points to the precariousness of his current position.

"Erdogan’s recourse to historic symbols such as Hagia Sophia and the Chora Church are attempts to salvage himself from the political morass he finds himself in."


For good measure, local governments have received plaudits for their adept handling of the Covid-19 pandemic which has led to comparisons with Erdogan’s own approach towards the pathogen. Erdogan’s recourse to historic symbols such as Hagia Sophia and the Chora Church are attempts to salvage himself from the political morass he finds himself in. Pandering to the population’s predilection for glorifying totems of the Ottoman empire might protect him in the short-term. But as vox populi steadily tilts against his favour, Erdogan has to find different ways to retain his position in the presidential elections scheduled to take place in 2023.
Regional supremacy
‘Neo-Ottomanism’ abroad roughly refers to a reinvigoration of Turkish influence in the Middle Eastern region and making Ankara the pre-eminent power in the neighbourhood. The driving force behind Erdogan’s assertive foreign policy is his ambition to achieve regional supremacy in the Middle East. Erdogan sent his troops to North Western Syria last year in order to expel the People’s Protection Units (YPG), a Kurdish militia that helped the US in its fight against eliminating ISIS. Turkey now enjoys de facto control over substantial swathes of territory in northern Syria where the Turkish lira is the recognised currency.

"The bad blood between Turkey and the Gulf states harks back to the Arab Spring of 2011. Ankara was actively supporting the protests, detesting the long-reigning Arab monarchies in favour of the blossoming of moderate Islamist groups and their entry into politics."


The engagement in Syria has brought Turkey in the crosshairs of the oil-rich Gulf monarchies. Saudi Arabia and UAE have placed their bets on Syrian President Basher-al Assad who seemed to be on the brink of an overthrow until when in 2015 Russia and Iran decisively intervened to prop him up. The bad blood between Turkey and the Gulf states harks back to the Arab Spring of 2011. Ankara was actively supporting the protests, detesting the long-reigning Arab monarchies in favour of the blossoming of moderate Islamist groups and their entry into politics. Erdogan portrayed Turkey as a model of political Islam which was compatible with democracy. When the despot Hosni Mubarak was overthrown in Egypt and Mohammed Morsi of the Muslim Brotherhood won power in a democratic election, Turkey was overjoyed. However, the rulers in Saudi Arabia and UAE, in deep dread of a spill over effect that might also eventually have them overthrown, led concerted efforts to depose Morsi and aided the rise of Abdel Fatteh al-Sisi, the current president of Egypt.

As Arab Spring failed to deliver what Turkey expected it would, its hostility toward the Gulf States deepened. Saudi Arabia harbours a unique malice against Ankara due to Erdogan’s endeavour to pose as the rightful representative of Sunni Muslims around the world. Simultaneously, Turkey’s solidarity with Qatar, the only Gulf state actively supporting political Islam, also expanded. Now, Doha remains Ankara’s only ally in the region.

"As refugees fleeing the civil war in Syria arrived on Turkey's shores, Erdogan threatened to open the door for them into Europe. With that move, Ankara lost its standing as a reliable gatekeeper and also began to lose its moral case for entry into the EU."


Another dimension of Erdogan’s quest for supremacy is his disdain for the West, not least towards America. Erdogan’s approach towards the West belie Turkey’s previous image of a pro-Western NATO ally seeking admission into the European Union (EU). This change was exemplified by Erdogan’s willingness to use the refugee crisis in 2015 as a political bargaining tool with Brussels. As refugees fleeing the civil war in Syria arrived on Turkey's shores, Erdogan threatened to open the door for them into Europe. With that move, Ankara lost its standing as a reliable gatekeeper and also began to lose its moral case for entry into the EU. Just last year, he did the unthinkable by procuring the S-400 missile system from Moscow, plunging the Western security alliance into consternation. Imposing sanctions would definitely be a strong possibility if Erdogan makes another move that dismays Washington.
Disputes with Mediterranean neighbours
The eastern Mediterranean region has been a strategically significant area for Turkey. Erdogan’s military intervention in Libya is a case in point. He has deployed the Turkish army and mercenaries from Syria to prop up the UN-recognised Government of National Accord (GNA) in Tripoli. On the other hand, UAE, Saudi Arabia and Egypt provide arms and ammunition to the rival Libyan National Army (LNA) led by the renegade military chief Khalifa Haftar, flouting a UN-arms embargo. Turkey’s success in warding off the threat from the LNA prodded al-Sisi of Egypt to consider directly intervening in the conflict.

"Erdogan has also antagonised the EU by refusing to recognise the Exclusive Economic Zones (EEZ) of neighbouring Cyprus and Greece in their eastern Mediterranean shores."


Erdogan’s engagement in Libya can be explained by his deeper economic aspirations in the country’s coast. Erdogan signed a deal with Fayez al-Serraj, the Prime Minister under the GNA, that granted Turkey rights to drill for oil and natural gas in Libyan shores. This agreement was denounced by the EU as infringing ‘upon the sovereign rights of third states does not comply with the law of the sea.’

Erdogan has also antagonised the EU by refusing to recognise the Exclusive Economic Zones (EEZ) of neighbouring Cyprus and Greece in their eastern Mediterranean shores. Erdogan unilaterally sent drilling equipment into Cyprus’ marine territory in 2018 and conducted operations which led to Turkey being denounced as a ‘pirate state’ by Cyprus. His reluctance to find a diplomatic solution to the dispute was evinced in his speech on August 26 in which he said ‘Turkey will make no concessions in the eastern Mediterranean.’
Realignment
Erdogan has indirectly contributed to closer relations between its hostile neighbours. An axis of anti-Turkish states determined to secure their right to the minerals in their nautical territory has crystallised lately. The EastMed Gas Forum was formed last year by Cyprus, Greece, Israel, Jordan, Italy and the Palestinian Authority to pose a united front towards a belligerent Turkey. France, a country vocally critical of Erdogan’s exploits in Libya and elsewhere, applied for membership in the organisation early this year. Faced with such redoubtable opposition, it remains to be seen how Erdogan would handle the pressure while also securing Turkey’s interests in the region.

"Tehran has borne the brunt of President Trump’s maximum pressure campaign and shares an animosity toward Saudi Arabia and UAE with Ankara."


At the same time, there has been a detente between Iran and Turkey, despite their differences in Syria. Tehran has borne the brunt of President Trump’s maximum pressure campaign and shares an animosity toward Saudi Arabia and UAE with Ankara. Foreign Minister Javed Zarif of Iran said in a statement that his country supports the Turkey-backed GNA in the Libyan conflict. The two countries view the Kurdish-dominated Syrian Democratic Force in Syria as an enemy. Iran also maintains ties with Qatar, a close ally of Ankara’s.

Circumstances have engendered a sort of ‘alliance of pariahs’ between Turkey, Qatar and Iran in the Middle East. However, the strategic convergence between Iran and Turkey is not likely to last long. If America decides to ease economic pressure on Tehran and take a non-confrontational approach (which will be likely in a Biden presidency) or relations warm between Iran and the Gulf monarchies, the Islamic Republic’s new-found affinity with Ankara will cease to be of much significance.
Conclusion
Forceful imposition of Islam at home and bellicosity abroad have animated Erdogan’s presidency. Presiding over unwieldy military engagements has taken its toll on the treasury. The military is over-stretched and the economy is taking a slump. This combination has spawned conditions at home that contribute to Erdogan’s sagging popularity. His recourse to displaying Turkey’s Islamic heritage through symbols like Hagia Sophia is a desperate attempt to boost his popularity and might not guarantee his political survival in the long-term. Soon, he might realise he has bitten off more than he could chew.

The author is a research intern at ORF.

### The maritime implications of growing China-Iran strategic ties

Iran's recent decision to drop India from the Chabahar-Zahidan railway line project has been the subject of some consternation in Indian strategic circles. The development has generated disquiet in New Delhi, where some have questioned the timing of the move by Iran. As Indian observers see it, the railway line was part of a strategic endeavour: the development of Chabahar port and an associated rail-links to circumvent Pakistan and its traditional obstruction of India’s overland routes into Central Asia and Afghanistan. Amidst US sanctions, as Delhi searched for suppliers and funding, Tehran suddenly (and unilaterally) decided to go it alone. Oddly, this comes at a time when China has made itself available to assist in the project.

More worrying for Indian watchers is the prospect of a comprehensive military and trade partnership between Iran and China. Beijing, ostensibly, has undertaken to invest $400 billion in key sectors of Iran’s economy, in return for an assured supply of Iranian fuel for the next 25 years. The proposed investment is the biggest China has ever pledged to any country as a part of its Belt and Road Initiative (BRI), and envisages huge expenditure in building Iran’s oil and gas and infrastructure sector ($280 billion and $120 billion respectively). Beijing also plans to station over 5,000 Chinese security personnel to protect the investments in Iran.

The implications of a China-Iran strategic partnership are particularly stark in the maritime arena. According to a leaked 18 page draft agreement, parts of which were published by the New York Times last week, Chinese construction companies are set to initiate multiple infrastructure projects along Iran’s Gulf coastline, including free-trade zones in Abadan, a city on the eastern bank of the Shaṭṭ Al-ʿArab River, and on the island of Qeshm, where Tehran is planning a major hub for oil production and storage. China will also build infrastructure at Jask, a port city just outside of the Strait of Hormuz, only 250 miles away from Gwadar, where a Chinese company has already developed and operating a port. Observers say a rudimentary Chinese naval presence at Jask could lead to greater joint military training and exercises between Iran, China and Pakistan, enhancing China’s regional security profile.

China will also build infrastructure at Jask, a port city just outside of the Strait of Hormuz, only 250 miles away from Gwadar, where a Chinese company has already developed and operating a port. Observers say a rudimentary Chinese naval presence at Jask could lead to greater joint military training and exercises between Iran, China and Pakistan, enhancing China’s regional security profile.


To be sure, there is no cause for alarm yet. It is worth noting that the Iranian Revolutionary Guards navy (IRGCN), that is responsible for the waters of the Gulf, is opposed to any foreign naval presence at Iranian ports. The IRGCN controls the Imam Ali naval base in Chabahar, and also has a presence in Bandar-e-Jask and the island of Qeshm. An armed force of radicalized cadres loyal to Iranian Supreme Leader, Ayatollah Khomeini, the Revolutionary Guards’ Corps has a two point agenda: to protect the revolution and counter the United States. The IRGCN, that uses asymmetric tactics to harass the USN in the Straits of Hormuz, has been instrumental in keeping foreign military activity in Iranian ports to a minimum, and there have been no foreign bases on Iranian soil since 1979. As much as the Iran-China pact creates possibilities for greater Chinese influence in Gulf region, analysts say the IRGC leadership is unlikely to allow a substantial PLA presence in Iranian ports.

In the wider context of Western Indian Ocean region, however, the China-Iran agreement has greater significance. The PLA, which already possesses base in Djibouti, has been gradually expanding its military footprint on Africa’s Eastern seaboard, and in the Northern Indian Ocean. A comprehensive strategic pact with Iran, analysts posit, could allow China to establish military presence along the Iran-Pakistan coastline; the PLA could even assist in the creation of a surveillance network to monitor US and Indian naval activity in the region. With the benefit of Chinese support, and an oil terminal outside the Hormuz, Iran could also be emboldened into adopting a more aggressive stance inside the Persian Gulf.

A comprehensive strategic pact with Iran, analysts posit, could allow China to establish military presence along the Iran-Pakistan coastline; the PLA could even assist in the creation of a surveillance network to monitor US and Indian naval activity in the region.


Notwithstanding the abundant caution the PLAN has displayed in the Gulf region so far, there has been an uptick in Chinese naval engagements with Iran and other regional states. Last year, the PLAN held a trilateral exercise with Iran and Russia, signalling a desire for greater presence in the Northern Indian Ocean. If Iran builds a permanent base in the Indian Ocean, as announced by the head of the IRGCN last year, analysts say Chinese warships could well be frequent visitors at the facility. A proposed a tie-up between Gwadar and Chabahar, could exacerbate India’s predicament. For the Indian navy, already troubled by the China - Pakistan maritime nexus, the development of China-Iran naval ties isn’t good news

Expectedly, many in New Delhi are blaming the United States for the dip in Indian fortunes in Chabahar. The crisis of faith in India-Iran relations, they aver, could well have been avoided had Washington not systematically alienated Tehran. As US sanctions have forced India to reduce its oil imports from Iran, Tehran has lost faith in New Delhi as a reliable partner. What is more, pressure from the Trump Administration has forced the Iranian government’s hand in ways that have hurt Indian interests.

As US sanctions have forced India to reduce its oil imports from Iran, Tehran has lost faith in New Delhi as a reliable partner. What is more, pressure from the Trump Administration has forced the Iranian government’s hand in ways that have hurt Indian interests.


This also highlights a contradiction in India's maritime relationship with the US: it's a relationship that works well in the Eastern Indian Ocean, where Indian and American interests neatly align, but is somewhat constrained in the Western Indian Ocean, where there is a divergence of perspectives. Importantly though, New Delhi’s strategic interests are "weighted west": the oil flows are from west, the bulk of trade is west, as is the diaspora, and India major investments. Not only are India and the US badly coordinated in the Western Indian Ocean, observers say Washington’s Iran policy actively impinges on Indian interests.

Policymakers in Washington and New Delhi must, then, recognize the need for better coordination on Iran. Greater Chinese naval presence in the Northern Indian Ocean in coming years raises the prospects of greater instability and elevated tensions in the Gulf region. The USN and IN have every reason to work together in the Western Indian Ocean, synergizing operations to preserve peace, even as they strive to exert strategic influence in the littorals.

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### Middle East energy challenges and India

India is the closest of all the great powers to the Gulf: less than four days sail from Fujairah, the UAE’s Indian Ocean port, to the world’s largest refinery, Jamnagar in Gujarat. Yet New Delhi has often been concerned about the security of its oil and gas supplies. As the Middle East faces geopolitical realignment amidst pandemic, market slump and energy technology transformation, those concerns need to be redefined.

The Covid-19 outbreak has accelerated energy trends that were already underway. The collapse in oil prices has been partly reversed but only by unprecedentedly deep cuts in production from the OPEC+ alliance. Revenues from oil exports by the Organisation of Petroleum Exporting Countries (OPEC) were $1.13 trillion in 2012, but dropped to $418 billion in 2016 following the oil price crash, and look likely to come in below $350 billion this year.

Keeping the economy going during the pandemic, and reviving and retooling it afterwards, requires heavy spending.


Sectors targeted for diversification, such as tourism, aviation, trade and logistics, have also been badly hit by the coronavirus pandemic. Iran was one of the earliest viral hotspots and has since experienced a resurgence of cases. The Gulf Cooperation Council (GCC) countries are among the highest in the world in reported cases per capita, though this may reflect extensive testing, and identified deaths remain low.

Middle Eastern energy exporters, facing sharp economic contractions, have been caught in a dilemma. Keeping the economy going during the pandemic, and reviving and retooling it afterwards, requires heavy spending. But most were already running budget deficits before Covid-19 struck, and are in danger of running down their sovereign wealth funds and foreign exchange reserves. They are stuck between stimulus and fiscal consolidation and achieving neither.

It is likely that post-viral stimulus packages in Europe and, depending on the results of the November elections, the US, will focus heavily on ‘green’ spending to encourage electric vehicles and other non-oil technologies. The date of ‘peak oil demand,’ at which world consumption of oil begins to decline, was typically estimated in the 2030-40 range. But it may now come earlier, as the massive demand destruction of the pandemic shutdowns is followed by a slow economic recovery, new ways of working involving less commuting and business travel, and increased policy support for battery cars, bans on single-use plastics and other curbs on petroleum use.

Political instability is nothing new in the Middle East. It had already intensified in late 2019, in the shape of massive protests in Lebanon, Iran and Iraq, and the enforced departure of long-time presidents in Sudan and Algeria. The internationalised civil wars in Libya and Yemen have grown more intractable. The Assad regime in Syria has largely regained control over a ruined country, but faces economic crisis, tightened sanctions and Turkish intervention.

Last year, Iran retaliated against stifling US sanctions on its oil exports with a spate of sabotage and deniable attacks, including mining of tankers and the September drone and missile attack on Saudi Arabia’s key Abqaiq oil processing facility. This year, tangible retaliation by Iran has been muted. But it has steadily reduced compliance with its side of the 2015 Joint Comprehensive Plan of Action (JCPOA), expanding its nuclear activities. A recent string of mysterious explosions at nuclear, military and civilian sites, including power and chemical plants, is widely assumed to be the doing of Israel, with US encouragement or assistance. Iran has been hoping to wait out the Trump administration, but at some point, the domestic political pressure to strike back may be irresistible.

The US policy drift away from the Middle East has continued, as the country turns to confrontation with China, wrestles with its own internal problems, and sees the region as less important given its own new-found oil- and gas-exporting status. Washington indicated that Riyadh was on its own following the Abqaiq attacks. Amid March’s brief oil price war between Saudi Arabia and Russia, it intervened politically to demand OPEC moved to cut output and shore up prices to protect American shale drillers, a move that would have been almost unthinkable a decade ago.

China’s position in the region has grown in recent years, though not as much as it might have given its dependence on Middle Eastern petroleum imports. Its energy investments focus mostly on Iraq, and to some extent the UAE. The Middle Kingdom has a naval base at Djibouti at the mouth of the Red Sea, and has developed Pakistan’s port of Gwadar, though this remains more of a propaganda point for now. A massive economic-political deal between China and Iran, initiated in 2016 and supposedly leaked in more detail this month, remains mostly aspirational. Neither China nor Russia has done much to protect Tehran diplomatically or economically from US sanctions.

Russia’s financial role is weak, and as an energy exporter itself, it is a competitor of the Gulf countries. It has worked surprisingly well on coordinating oil output with them via the OPEC+ framework, and develops nuclear power plants in Iran and Egypt. But in political and military terms, it mostly plays a role as a spoiler in weak states such as Syria and Libya. Regional political upheaval is, on the whole, good for Moscow.

Bearing in mind its experiences of past oil crises, India might well be wary of threats to its supply. In the first quarter of 2020, 60% of its oil imports came from the Gulf, even though it has had to drop purchases from Iran to zero. Last year, 55% of its liquefied natural gas (LNG) imports were also from the Gulf. Yet current low prices and abundant supply might encourage a feeling of complacency.

After COVID-19, the Middle East will need much more investment, both in hydrocarbons and renewable energy.


Despite its proximity and importance to the Gulf as a customer and labour partner, India’s energy investments remain limited, primarily in the UAE and Oman. Its attempts to develop Iran’s strategic Chabahar port have run into trouble. Conversely, Saudi Arabia, Abu Dhabi National Oil Company and others want to build and buy refineries, petrochemical plants and storage facilities in India to serve its vast and growing market.

India can be much bolder in its engagement with the Middle East, and particularly the Gulf. After Covid-19, the region will need much more investment, both in hydrocarbons and renewable energy. With its rich solar resources, it could export electricity and/or hydrogen to India, which needs both clean electricity and reasonably priced gas to replace polluting coal.

Without taking sides in regional conflicts, and while remaining a friend to all, New Delhi can explore arrangements to improve mutual energy security. US containment and confrontation of some countries and coddling of others has not brought sustainable peace, while vague proposals for collective security have been and gone. India could be the mediator and guarantor for a more solid diplomatic settlement, with the promise of assuring its own future energy supplies.

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Robin M. Mills is CEO of Qamar Energy and author of The Myth of the Oil Crisis.

### Strait talking: The China question extends from Malacca to Hormuz

China’s supposed multi-billion dollar deal with Iran comes at a time of increasing alarm bells over Beijing’s expansionist foreign and military policy designs. From the recent fallouts between India and China in Ladakh amidst the high Himalayas, which saw 20 Indian troops killed (and unnumbered Chinese fatalities), to the South China Sea where two US aircraft carriers have been running patrols and freedom of navigation operations (FONOPS) missions, Asia is rapidly becoming the center of global geo-political headwinds.

Amidst these developments, two major global maritime and geo-political chokepoints will inadvertently play a significant role on how China’s take on increasing pressure over boundary issues and how its aggressive brand of ‘wolf warrior’ approach to diplomacy’ plays out globally. Both, the Malacca Strait, traversing between the geographies of Indonesia, Malaysia and Singapore in the Pacific and the Strait of Hormuz, opening into the Gulf of Oman and the Arabian Sea in the Middle East are going to become inflection points, examples of which have already started to take shape.

The Malacca Strait, traversing between the geographies of Indonesia, Malaysia and Singapore in the Pacific and the Strait of Hormuz, opening into the Gulf of Oman and the Arabian Sea in the Middle East are going to become inflection points, examples of which have already started to take shape


The proposed China – Iran deal, estimated to be over $400 billion, is expected to have significant infrastructure development in and around the Strait of Hormuz, via which 20% of the world’s oil trade travels through. The narrow piece of water separating the Arab world from Iran has already played host to many crisis situations over the past year, with the return of tanker wars in 2019 similar to those witnessed in the 1980s, Iranian boats trying to harass oil tankers, and instances of oil tankers wanted for smuggling by the UN being hijacked and ending up in Iran. Researchers Elisa Catalano Ewers and Ariane Tabatabai recently highlighted that, as per plans of the Iranian government, Tehran wants to completely bypass the Strait of Hormuz to export its oil by March 2021. Ewers and Tabatabai rightly underline this as a “game changer”, as if this plan comes to fruition, potentially aided by Chinese money, it could weaponise the Strait of Hormuz significantly, and offer both Iran and the Arab world an unchained playground for asymmetric warfare and kinetic actions against one and other. For countries such as India, this eventuality would be a significant foreign and domestic policy challenge, as its top oil suppliers, critical to its economic story, are in the Middle East.

On the other side of the Indian Ocean, the Malacca Strait is also in the middle of renewed strategic flashpoint. India and the United States have also conducted a Passage Exercise (PASSEX) between the American aircraft carrier group USS Nimitz and Indian Navy battleships around the archipelago of the Andaman and Nicobar Islands, a few hundred kilometers from the mouth of the Malacca Strait and within actionable distance of major trade sea routes that service China. Malacca, which feeds into the South China Sea, in 2016, carried 90% of all oil flowing into South China Sea, mostly from suppliers in the Middle East and Africa. Along with the US – India exercise, an expansion of the Malabar naval exercise between India, US and Japan, which now may also include Australia this year, will add a new dimension to Asia’s geo-politics, and highlight a growing sense of urgency to push-back on China’s quasi-hegemonic methods to territorial claims that while have been in their narratives for years, are now backed by political will and military might.

Both the Malacca Strait and the Strait of Hormuz may bring trade, and more directly energy security, very near to the center of the developing situation in Asia, and the US’s renewed political and military interests in the region to put tactical checks on China and not just strategic ones. However, none of these blueprints will be easy to build upon. In the Middle East, Beijing has good relations with the likes of UAE and Saudi Arabia; both having deals as part of China’s Belt and Road Initiative, and a strategic infusion of the military kind in Iran may disrupt its geo-strategic balance in that region. In Southeast Asia, ASEAN countries are already looking to distance themselves by arguing for a non-alignment 2.0 in parallel to a potential Cold War 2.0  being played out between Beijing and Washington D.C.

Both the Malacca Strait and the Strait of Hormuz may bring trade, and more directly energy security, very near to the center of the developing situation in Asia, and the US’s renewed political and military interests in the region to put tactical checks on China and not just strategic ones


However, the Arabian Sea will increasingly be expected to bring into the extended understandings of India’s partner nations such as France, Japan and the US, who at times have differing understandings of the constructs around the idea of the Indo-Pacific. In fact, both India and China play a similar deck of cards when it comes to their policies in dealing with the intricacies of West Asia between the Arab block, Iran and Israel. This entails walking a thin line between them, and not fall into the trappings of any poles of power and their regional agendas. However, if the Iran deal turns out the way it is being portrayed, China’s delicate balance will be significantly disrupted, and not even its investments with the Arab world may be able to salvage its positions, making the Arabian Sea a fairly complicated water body to operate in. These eventualities must be factored into Indian and Western sensibilities today, as this part of the IOR finds little mention when Indo-Pacific strategies are discussed and deliberated upon.

If the Iran deal turns out the way it is being portrayed, China’s delicate balance will be significantly disrupted, and not even its investments with the Arab world may be able to salvage its positions, making the Arabian Sea a fairly complicated water body to operate in


The Asian power struggle is going to be a long-term agenda, with New Delhi potentially becoming a fulcrum point. India may have balked on being so in the past, however the Ladakh crisis has arguably re-designed its entire approach to China from here on. And these new strategic overplays in Asia will be visible from Hormuz to Malacca, and beyond.

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Kabir Taneja is a Fellow at the Observer Research Foundation

### Is India’s Chabahar calculus in trouble?

The Chabahar-Zahedan railway link construction moving ahead without India’s involvement will not, on its own, derail India’s investment in Chabahar. Read against ongoing developments — Iran also going ahead with developing the Farzad-B gas block without India; the China-Iran economic and security partnership currently being finalised — and the tea leaves suggest a different picture. When set against continuing US sanctions on Iran and Chinese moves in the broader region, an element of urgency emerges.

India’s ‘coup’ with Chabahar as a preferred development partner spelled particular optimism for a credible outreach, finally, to Afghanistan and onward to Central Asia. It also meant, finally, the potential to circumvent perceived Chinese encirclement as it developed the Gwadar port, and then CPEC, on India’s western flank.

But there continues to be an active conversation on the role and strength of Chabahar in India’s calculus. In light of ongoing and recent developments, what are key costs for India as it seeks to pursue these above-stated objectives?
The road and railway to Afghanistan
Immediately, a first set of costs arises for India’s access to Afghanistan.

A recent report stated that Iran would be, without Indian help, continuing with the construction of a railway link from the southeastern Chabahar port to Zahedan, near the Afghan border, citing funding delays by New Delhi. Days after the report appeared, Iran denied the claim that India had been dropped from the project, stating that it had never “inked any deal with India regarding the Zahedan-Chabahar” railway in the first place. It later added that “the doors were still open for India” to join the project at a later date. This raises the question of whether India and Iran are on the same page. Is this another episode in Iran’s playbook to play potential investors against each other, or does it betray a deeper, festering malaise in the bilateral relationship due to a perception of India being under Washington’s thumb?
If Chabahar is seen as the fulcrum for India’s outreach to Afghanistan (and Central Asia), then it is India’s long-standing ties with Iran that should be the lever allowing its connectivity ‘machinery’ to work, not a simple railroad link.

Pulling back, the current political situation in Afghanistan — including but not limited to, the forthcoming negotiations between Kabul and the Taliban; the foreseeable withdrawal of US troops from the country and the continuing violence — along with international sanctions on Iran have already been problematic for India to navigate. The waiver India was able to negotiate allows it to continue developing Chabahar and pursue ties with Afghanistan. But between bilateral see-saws, at stake for New Delhi are the questions of a) continued and b) degree of access to Afghanistan. If Chabahar is seen as the fulcrum for India’s outreach to Afghanistan (and Central Asia), then it is India’s long-standing ties with Iran that should be the lever allowing its connectivity ‘machinery’ to work, not a simple railroad link.

The 2016 landmark trilateral agreement between India, Iran, and Afghanistan brought together the three countries as natural partners to seamlessly develop and strengthen trade complementarities (and which critically reduced dependence on Pakistan). India’s engagement on the ground, however, has proceeded in fits and starts. Budget allocations and disbursements, ongoing operational hurdles, and the international environment have all tended to spark another round of debate on the role and place of Chabahar in India’s strategic vision as progress remains slow and difficult. A key project has been linking Chabahar, via railroad, to the 215km-long Zaranj-Delaram highway in Afghanistan that India has already built, which Iran is now proceeding to do on its own. India and Afghanistan have been sending exports through the port since 2019, with goods travelling via truck from the port to the Afghan border. Last year, over $1 billion in Afghan goods were exported from the port, with the potential for that number to double by the end of this year.
What works in India’s favour is its unique positioning in the region.

Critically, any limitations to India’s use of ground networks between Iran and Afghanistan, regardless of who builds them, will leave it only with the India-Afghanistan air freight corridor established in 2017. While the air route has provided Afghanistan greater access to Indian markets and allowed Afghan businessmen to leverage Indian trade networks for their benefit — to the extent that Kabul is investing in an expansion of its air corridor programme with five other countries — the limitations for India are obvious, as notes one observer, “in terms of not just trade and economic assistance but also military assistance.”

What works in India’s favour is its unique positioning in the region. Its close relationship with the US and Israel make it an unusual ally to Iran, but also an ideal actor to oversee a sustainable economic partnership between Kabul and Tehran. Even as Iran considers developing a closer economic and strategic partnership with China, it must realise the advantage of working with New Delhi, its only partner that enjoys a sanctions waiver from the US for Chabahar and which has an aversion to a Taliban takeover in Afghanistan.

On its end, India’s infrastructure-building commitments must reflect resolve and urgency so that it can carve itself as a regional stakeholder, and a reliable partner for Iran and Afghanistan. Repeated instances of a disjointed India-Iran bilateral, whether due to operational and bureaucratic glitches, or in the context of US and China, will inevitably result in reduced Indian presence, influence, and leverage at Chabahar that will first and foremost pose costs to its relationship with Afghanistan.
Connecting the dots in the region
A second, longer-term cost to India regards its leadership in regional connectivity.

Iran has stood at the crossroads of the Silk Road Economic Belt — the overland tranche of China’s Belt and Road Initiative (BRI) — and the Indian-backed International North-South Transport Corridor (INSTC), with Gwadar and Chabahar the most visibly representative competing poles of approach and presence in the Arabian Sea. Deteriorating US-Iran ties have slammed the door largely shut on the promise of the INSTC. Periodic agreements and MOUs to explore logistics potential and efficiency gains have failed to amplify Indian involvement in the multi-modal corridor, even as Iran, Russia, Azerbaijan, and other stakeholders strive to build and make stretches of the route attractive for localised demand and supply. Sanctions have crippled once-heady visions of expanding participation in the INSTC to international heavyweights, such as Japan and South Korea; even at Chabahar, which received an exemption on humanitarian grounds, supplies have been hard to come by.
Iran has stood at the crossroads of the Silk Road Economic Belt — the overland tranche of China’s Belt and Road Initiative (BRI) — and the Indian-backed International North-South Transport Corridor (INSTC), with Gwadar and Chabahar the most visibly representative competing poles of approach and presence in the Arabian Sea.

Meanwhile, China is expanding its footprint in the region as it strengthens ties with Iran, Saudi Arabia, UAE, Egypt and other MENA countries. While a cautious newcomer, it is increasingly more relevant as a key investor, trading partner and source of tourism for countries in the Middle East. Importantly, even as BRI sees hurdles in other parts of the world, a convergence of interest has led to relatively greater receptivity from China’s MENA partners. As of mid-2019, 21 MENA countries had signed BRI contracts; Chinese firms have almost doubled their work in the region from 2007-2012 to 2013 onwards; and Arab states have already begun using China’s BeiDou Satellite Navigation System. Infrastructure development — stadiums, railways, industrial parks, 5G highways, clean energy projects — are a concrete testament to Chinese engagement under an expanding BRI umbrella. This overland groundwork is coupled with China’s maritime port-industrial park complexes that dot the Middle Eastern rim. Between and beyond Djibouti and Gwadar lie the likes of UAE’s Khalifa port and KIZAD Logistics Park; Egypt’s Port Said and TEDA-Suez Zone; Oman’s Duqm port and industrial park; and Saudi Arabia’s Jizan port and Economic City.

The 25-year, $400 billion agreement being finalised between China and Iran includes allocations in Iran’s transport and manufacturing sector, as well as hydrocarbon industries, with Chinese companies, equipment, and workers being given right of way. China has not stepped in to fund the Chabahar-Zahedan railway link, and actual disbursements of Chinese finance may never reach promised sums — not to mention some skepticism and project delays (China’s current investment in Oman’s Duqm port, for instance, is far from the $10 billion originally pledged). Whether Chinese firms agree to expose themselves to US sanctions also remains to be seen. Yet, China’s continued, relative, and even symbolic progress vis-a-vis India’s much slower pace — characterised by one academic as New Delhi’s “risk-avoidance diplomacy” — leaves large room for Iran to eventually become another principal “production node” in China’s BRI that is seeing momentum in the Middle East.

Will China’s primacy in Iran’s production and consumption networks limit the potential of India’s access to Central Asia, Russia, and Europe through Chabahar as the east-west movement of goods and investment is prioritised? India’s competitiveness will definitely suffer the more its engagement at Chabahar remains restricted and the more the INSTC becomes a collection of localised multi-modal connections. In question then are India’s levers of engagement in its extended neighbourhood to the west, and its reputation and projection as a credible economic and development partner (to the tune of becoming an ineffective player caught between the US and China). Furthermore, if a re-reading of history sees a Chinese push in Iran as Beijing’s raise to New Delhi’s ante of reviewing Chinese investments and temporarily banning a number of Chinese apps, itself in response to the recent border clash, it could cement the idea of hitting interests in third countries as another line of attack in response to bilateral conflicts. Chinese actions on this front would not bode immediately well for India’s regional connectivity plans.
A re-reading of history may see this episode cement the idea of hitting interests in third countries as another line of attack in response to bilateral conflicts. Chinese actions on this front would not bode immediately well for India’s regional connectivity plans.

Equally pressing is China’s expanding presence in the Arabian Sea and the Red Sea. Even as Chabahar has never been India’s to lose in the first place, its participation in the Arabian Sea port broke perceived China’s maritime encirclement. If China pursues investments at Chabahar, whether as part of this deal or otherwise, paving the way for Gwadar and Chabahar to become “sister ports,” it will aggravate India’s security calculus in the immediate Western Indian Ocean — both for itself and for any connectivity projects it develops as a runner-up to China. Not to forget here is the probability of greater Chinese security presence shadowing its growing economic footprint in this region, hastened by big-ticket BRI projects. To wit: an expanding presence of Chinese submarines in the Indian Ocean; the 2019 joint naval exercise between China, Iran, and Russia; the burgeoning China-Pakistan security relationship.

Bilateral equations will continue to play out in the region — whether Iran’s diplomacy towards China even as it seeks to keep an eye cocked west; whether Arab states’ hedging between US and China; whether India’s ties with Iran as it strengthens its relationship with the US. In view of the immediate and longer-term costs to Indian interests vis-a-vis Afghanistan and signaling as a regional stakeholder and partner, however, day to day changes in bilateral ties cannot — should not — be what propel forward India’s policy options at Chabahar, year by year, decade by decade.

### UAE navigates the post-COVID19 era: #WeAreAllResponsible

In some markets in the Middle East we are already living the ‘new normal’. With the easing of restrictions and the gradual return to economic and social normalcy, it is a good time to reflect on the initial impact of COVID-19 on various aspects of our society and economy.  According to PWC Middle East, April is likely to be the lowest point of the regional recession so far. The road to recovery is mirroring a ‘Nike-swoosh’ curve or an elongated U-curve, rather than the bounce-back V-curve that the world hoped for in the early phases of the lockdown.

Globally, there is a consensus that based on key economic indicators the road to recovery will take longer than initially expected. The recently updated World Bank reports forecast a 5% contraction in 2020 and a 4% increase in 2021. In a review of past recessions, the World Bank coined the current one as “the deepest recession in eight decades”. In turn, the Organisation for Economic Co-operation and Development (OECD) offered : the first being a U-shaped recovery of 6% contraction in 2020 and a 5% increase in 2021; and the second a W-shaped recovery. All reports come to a similar conclusion that regardless of the recovery scenario, the economy in 2021 will still be smaller than it would have been without the current pandemic.

Given the region’s dependency on global economic prospects, particularly for Gulf Cooperation Council (GCC) markets; it is no surprise that the regional indicators mimic the global trends. In short, when the world economy struggles, the Middle East economies struggle as well. The World Bank predicts a 4.2% contraction in 2020 for GCC markets, followed by a 2% expansion in 2021. These figures seem optimistic for many of us in the region, given the relatively high dependency of the GCC on the global economy. Arguably, we expect that GCC economies would be hit at least equally, if not more severely than the global economy. This view is supported by several lead indicators, including Purchase Managers Index (PMI), Apple Mobility Trends, point of sale transactions and check clearing rates, which all experienced severe declines in April. With a few market exceptions, the month of May seems to mark the start of the slow recovery with economic activity showing various rates of partial rebound.

In the latest PWC Middle East CFO Pulse Survey, 35% of companies in the region predict that their businesses will take 3 to 6 months to return to “business as usual” and another 27% forecasted an even longer timeline of 6 to 12 months. Consumer confidence is also showing a lower rate of expectancy, despite the numerous pricing and discount tactics that companies are adopting. Overall there is a cautious approach to spending, underlined by the uncertainty around economic health, job security and general concerns about the public’s resumption of ‘normal’ social and economic engagements and spending.

"Overall there is a cautious approach to spending, underlined by the uncertainty around economic health, job security and general concerns about the public’s resumption of ‘normal’ social and economic engagements and spending."


Closer to home, the UAE seems to be making pronounced efforts in striking the delicate balance between protecting public health and enabling economic recovery. Since the announcement of a gradual reopening on 27 May, we have seen a domino effect of easing of restrictions and an encouragement to return to ‘normalcy’ while adhering to the basic precautionary measures while in public. With the looming fear of the pandemic’s crippling economic impact in the “Great Lockdown”—a term coined by Gita Gopinath, economic counsellor and director of the IMF’s Research Department—leaders are ‘leaving no stone unturned’ to bolster the economy. Financial stimulus packages were announced early, a phased but rather quick approach to easing of restrictions was adopted, and governments announced relief packages for residents and businesses.

There is, however, a tangible shift in moving responsibility from the government—as the ‘protector’—to the individual and the public. Perhaps it is best coined in the evolution of the public awareness campaign messaging from #StayHome to #WeAreAllResponsible. This is a notable shift in approach from government mandated directives via lockdowns, movement restrictions and nationwide sterilization programs, to more of a ‘you are responsible’ one. Over the past few months, the government provided a wealth of information about precautionary measures and medical details about the virus, essentially equipping the public with the ability to assess risk for their employees, families and themselves. The messaging is now focused on bolstering economic activity while giving responsibility and choice to the public to resume their lives, while adhering to the basic precautionary measures.

Here I draw a parallel to the global “consumer choice” theory whereby the consumer was provided with the necessary information based on which they can make informed decisions about their consumption. Having said that, given the gravity of this pandemic on public health, the public is still “on a leash”—so to speak—whereby the government, perhaps building on Skinner’s 1938 Operant Conditioning Theory still directs behavior through reward and punishment for adherence to precautionary measures. The government still maintains a degree of control by punishing non-compliance with basic public health precautionary measures, in the form of financial penalties.

On the societal front, several trends are emerging with a direct impact on businesses and economies. The most prevailing one perhaps is the noticeable increase in online shopping. According to the “ issued by Dubai Future Foundation, UAE e-commerce platforms recorded unprecedented growth rates during the months of the lockdown. Given the relatively advanced state of the UAE’s digital infrastructure and the equally “digitally enabled” population, the transition from ‘bricks-and-mortar’ to online was smooth, at least for the consumer. Early reports show a 560% increase in searches for online grocery shopping in the UAE between January 2020 and March 2020, according to analytics by SEMrush. While it is still too early to assess the real impact of this consumer shift on the future of off-line retail, early indications show that there is a significant rise of online shopping adopters. Based on reports from retail giants in the region, such as EMAAR and MAF, the move to online shopping has softened the revenue losses but has not eliminated it completely.

"Given the relatively advanced state of the UAE’s digital infrastructure and the equally “digitally enabled” population, the transition from ‘bricks-and-mortar’ to online was smooth, at least for the consumer."


Closely related is the emergence of leaner supply chains, with many businesses seeking cost compression, opting to tweak their business models to deliver products and services to consumers directly. Taking restaurants as a case-in-point, there has been a notable increase in ‘own-delivery’ by many of the UAE-based restaurants, which invariably led to an outcry by aggregators. A public campaign #UAERestaurantsUnite was launched by FooDiva writer Samantha Woods, yielding an unexpected five million impressions in only one month. While many restaurants hailed the campaign as a key enabler to their survival during lockdown and dine-in restrictions, this also created a tension between restaurants and aggregators who saw this campaign as an attack on their current business model. Despite that, Delivery Hero reports a 92% year-on-year revenue increase in Q1 2020, and UberEats searches rose by 97% up to April 2020. The World Economic Forum estimates the UAE’s e-commerce market to be valued at $27.2 billion in 2020.

Another prevailing trend—which is perhaps not scientifically measured yet—is consumer demand for increased transparency. This is not a new trend per say; it existed in the food industry since the last decade, resulting in more regulations and policies attuned to sources of origin and key changes in on-pack ingredient claims. In the wake of the pandemic we have witnessed industries, such as aviation, showcasing their hygiene practices rather openly. As early as March, aviation giants such as Emirates Airlines posted videos of in-cabin cleaning and hygiene practices, thus circumventing consumer concerns around flying. Similarly, restaurants, gyms and hotels have also adopted this transparent approach to reassure consumers and entice them to return to their facilities. With the increased awareness of the public about health and safety, this trend may well become common across industries with more pronounced ‘contact-based’ premises.

The ‘new normal’ is already here. As countries ease off restrictions and markets resume economic activity, we are all experiencing the impact of the pandemic on consumer behavior, spending and consumption patterns, as well as societal norms. The undisputed fact is that economically we are falling short of where we expected to be in 2020. Government response has varied globally. Within the region we have seen a broad range of fiscal policies that have been rolled out rapidly and are now being monitored, evaluated and fine-tuned to achieve the desired results. While the situation is fluid and change is by all means the new norm, we have all gone through a rigorous lesson in agility and adaptability that is in itself the new normal.

### Pipelines to swords: How COVID-19 shifted focus from energy cooperation to securitisation in the Eastern Mediterranean

Eastern Mediterranean countries were eager to engage in building a common energy market and invest in infrastructure at the beginning of the year. However, Covid-19 has brought their plans to a halt. The economic repercussions of Covid-19 and the consequences for global energy prices have led to drastic reconsiderations by governments and private investors on cost-intensive energy infrastructure projects. The potential to boost regional cooperation by means of this energy integration has been equally diminished. As the developments surrounding Covid-19 make the energy component far less reliable, the approaches of Eastern Mediterranean countries now focus on security cooperation to deal with contest and threats — a trend that will lead to additional securitisation in the Eastern Mediterranean basin.

Geopolitically situated in between energy-rich Gulf countries and energy-hungry European countries, Eastern Mediterranean countries have mainly had a transit function and were dependent consumers.


To understand the impact of Covid-19 on the security structure in the area, one has to look into the regional developments concerning energy. Geopolitically situated in between energy-rich Gulf countries and energy-hungry European countries, Eastern Mediterranean countries have mainly had a transit function and were dependent consumers. Yet, the major natural gas field discoveries in the 2000s and 2010s presented Cyprus, Israel and Egypt with a real game changer for the region. The island of Cyprus, which is a member of the EU since 2008, doesn’t have a connection to electricity or the pipeline grid of mainland Europe and has thus exclusively imported its energy via sea. After the discovery of the Aphrodite gas field (6 trillion m³ natural gas) in 2011, the country now stands to become an energy provider. Israel — in the past believed to be a land without natural resources and geopolitically isolated for most of its short history due to the conflict with the Palestinians and a whole array of other issues with its neighbors — was blessed with an estimated gas reserves of 800 bil­lion to 1 trillion m³. Egypt, which already had its own oil and gas industry, has grappled to satisfy its continuously rising domestic energy demand. Energy sufficiency was achieved only after the Zohr gas field (850 billion m³) was discovered in 2019. The already existing gas liquefaction terminals are putting Egypt in the position to become an important energy hub for the region. With the hope to avail themselves of the new-found energy riches, Egypt, Cyprus, and Israel went to look for a buyers’ market and found it near Greece, Jordan and the Palestinian Authority (PA). Together these countries founded the Eastern Mediterranean Gas Forum (EMGF) in early 2019, to coordinate gas trade, set prices, align energy policies, merge infrastructures and thereby secure energy supply. This trans-regional forum is special in several respects, bringing together Israel and PA, Egypt and Jordan for a sole purpose of converging national interests around energy cooperation. The existing security cooperation between some of these countries (Israel and Egypt or the PA) supported and in some cases facilitated cooperation on the energy market in an otherwise difficult diplomatic climate. However, in January 2020, the Covid-19 virus changed the setup dramatically. Greece, Cyprus and Israel had just signed a deal to realise the EU-funded EastMed pipeline (aimed to connect Israel and Cyprus to Greece and thereby to the EU pipeline grid) when China ordered the Wuhan region to go to full lockdown. The economy in the area, which is a transport and industry hub, came to a near halt and China’s ever-growing economy was severely affected. As the economy lay idle for weeks, energy demand for the entire country tumbled, an effect that globally spread as quickly as the virus itself. The International Energy Association quantifies the decline in energy demand as 25 percent per week for countries in full lockdown and a weekly average of 18 percent for countries in partial lockdown.

In January 2020, the Covid-19 virus changed the setup dramatically. Greece, Cyprus and Israel had just signed a deal to realise the EU-funded EastMed pipeline (aimed to connect Israel and Cyprus to Greece and thereby to the EU pipeline grid) when China ordered the Wuhan region to go to full lockdown.


This fall in demand naturally drove global energy prices down. In combination with the Russia-Saudi Arabia oil price war of March 2020, the global price drop was even further catalysed. Due to the Covid-19-induced fall in energy demand, Saudi Arabia requested Russia to diminish its oil production as a price regulation mechanism. When Russia refused, Saudi Arabia increased its oil production as well and thereby initiated a zero-sum race in which no one wanted to give in. The short economic war was resolved by OPEC+ but the additionally produced oil that would have typically lowered world prices and could have been offset or curbed by an increase in demand now coincided with the corona-induced disappearance of global energy demand. This oil glut ultimately led to the historic first of a negative oil price for future May trades. These developments squandered the potential for the emerging energy market in the Eastern Mediterranean. Trust in the energy sector is harmed, the future of the EastMed pipeline is unclear and the EMGF has lost its drive. The latter is especially important, since the EMGF does not only bear weight in respect to energy, but it is also a balancing effort against Turkey’s influence in the region. Turkey, which sees itself as a regional power, is an energy hub between Russia, Iran, energy-rich countries like Azerbaijan, and Europe. However, it remains without any noteworthy energy resources and feels threatened by the aspiring energy players in the EMGF. While energy cooperation with Israel would initially have been an option for Turkey, bilateral relations were cool during the last years and caused Israel to approximate itself to Greece and Cyprus instead. Against the backdrop of the Cyprus dispute, which put Greece and Turkey against each other ever since the Turkish invasion of North Cyprus in 1974, the energy-related ambitions of Cyprus and its allies marginalises Turkish interests on the regional energy market. Turkey’s goal is national energy security and reduction of import dependence. Due to this Turkey went ahead to drill for gas on the shores of the disputed Turkish Republic of Northern Cyprus and made a maritime agreement with Libya in late 2019 that created an exclusive economic zone (EEZ) between the two countries all across the Mediterranean intended to stop pipeline projects in the region. The EU has threatened sanctions over Turkish drillings within the sea boundaries of EU member state Cyprus and also denied accepting the legally doubtful Libyan-Turkish EEZ.

Against the backdrop of the Cyprus dispute, which put Greece and Turkey against each other ever since the Turkish invasion of North Cyprus in 1974, the energy-related ambitions of Cyprus and its allies marginalises Turkish interests on the regional energy market.


As Covid-19-related economic repercussions have rendered the unifying, cooperation-creating element of a common energy market in the Eastern Mediterranean (temporarily) redundant, the regional hegemony is still contested by a cornered Turkey, the second underlying principle of cooperation — that of security — is reemerging. One sign of the securitisation is Egypt’s declaration on 11 May to form an “anti-Turkey alliance,” which officially includes Greece, Cyprus, the UAE and France, and aims to counter Turkish excavations in the Mediterranean as well as provocative fly-overs by Turkish airplanes. Egypt, which also likes to be seen as the initiator of the EMGF, now resorts to another transnational consortium to balance Turkey. However, this time it bears a clear message for a heightened security instead of an energy forum. Another sign of securitisation is for example Israel’s ballistic missile test on 2 June. Conducted offshore due to “safety concerns,” the high precision missiles destroying two floating targets was actually a show of Israeli maritime capabilities. Turkey will most likely remain drilling for oil and not sway from its energy-related approach to regional dominance, but the concerted energy-based effort of the other Eastern Mediterranean countries has been impeded by the Covid-19 pandemic and it seems that, as energy cooperation loses its traction, securitisation of the Eastern Mediterranean is poised to increase.

### Medical diplomacy by India and Europe can restrain Iranian hardliners

In March, Iran became the first major COVID-19 hotspot outside Asia and until April, remained as one of the worst affected. In all, Iran’s fight with COVID-19 has been costly, with over 100,000 cases and a death toll of over 6,500. Iran’s Health Ministry has even warned of a resurgence of COVID-19 cases, despite a flattened curve after two months of containment efforts.

Despite the severity of the situation, the Donald Trump administration has doubled down on its “maximum pressure” campaign by announcing new sanctions on Iran.

The American calculation seems to have been aimed at one of two possible outcomes. Either the two-front challenge of a domestic health crisis and tighter sanctions coaxes Tehran to return to the negotiating table for a new nuclear deal. Alternatively, the incumbent regime capitulates under heightened domestic protests over its incapability to handle the ongoing emergency. However, this policy is turning out to bear counterintuitive results.
Surge of Iranian hardliners
Contrary to intended US outcomes, the situation seems to be devolving with the consolidation of Iranian hardliners. The pro-reform, moderate and/or non-ideological technocratic faction of the Iranian political spectrum is under duress — in stark contrast to their popularity following the 2015 finalisation of the Iran Nuclear Deal. Trump’s withdrawal from the same and his subsequent “maximum pressure” campaign has hastened the downturn of the moderates’ fortunes — all whilst validating the hardliners’ mistrust over the US’s dependability.

Amidst the coronavirus pandemic, calls for consolidating “insular rule internally and hard power abroad” against “hostile foreign forces” are increasing. According to a poll, moderate President Hassan Rouhani is now less popular than his 2017 election opponent and conservative Ebrahim Raisi — who was recently elevated by Iran’s Supreme Leader to the position of judiciary chief.
Trump’s withdrawal from the same and his subsequent “maximum pressure” campaign has hastened the downturn of the moderates’ fortunes — all whilst validating the hardliners’ mistrust over the US’s dependability.

The current crisis has also presented the Islamic Revolutionary Guard Corps (IRGC) with an opportunity to engage in a public relations campaign following its heavy-handed response to the November 2019 protests and their January 2020 shooting of a Ukrainian civilian aircraft. Reportedly, the IRGC has now been projecting “itself as the guardian of public health and the champion of the fight against the invisible enemy.”

Even moderate Foreign Minister Javad Zarif’s call for unity and continued global engagement was discounted in the Supreme Leader’s address on the Iranian New Year. In the speech, Ayatollah Ali Khamenei defended Iran’s “model of religious governance, rejected US assistance, and suggested that the United States could be behind the COVID-19 outbreak.”
Where are the good cops?
Iranian hardliners’ rising influence is set to hasten Tehran’s pivot away from its initial strategy against “maximum pressure” — to remain compliant with the nuclear deal and gather political support from the international community. Already, this shift in Iranian foreign policy has led to a string of attacks — on oil tankers in the Persian Gulf and even Saudi oil refineries. Iran’s missile barrage on the US’s Al Asad military base in Iraq also demonstrated that it “could land missiles with extreme precision, circumventing US-manufactured air defence systems.” Tehran has also reduced its compliance to the nuclear deal by tripling its stockpile of enriched uranium.

These retaliatory escalations raise the prospect of miscalculations with US forces, and as a result threaten the interests of other powers. India and the European Union for instance, have announced their congruent support for the Iran Nuclear Deal and its pursuit of a nuclear-free Iran under a “non-proliferation framework” that seeks “international peace, stability and security.”
Powers like Europe and India — that have been advocates for a peaceful pathway to a nuclear-free Iran, hold an imperative to balance the fallout from heightened US antagonism.

If the situation however devolves into a US-Iran conflict, the EU’s plans for pan-Eurasian connectivity under the Trans-European Transport Network (TEN-T) would be upended. Also, another wave of north-bound refugees could exacerbate Europe’s challenge with anti-immigrant populist movements posing an existential threat to the EU experiment. For India, its strategic investment in Iran’s Chabahar Port and its International North-South Transport Corridor (INSTC) connectivity project would be at risk. Moreover, a US-Iran conflict can reverse US-India partnership’s gains on isolating Pakistan over its support for transnational terror networks. Much like in the case of the US war in Afghanistan, an American military effort in Iran would once again increase US operational dependence on neighbouring Pakistan — to effectively degrade the solidifying bipartisan consensus in Washington against Islamabad’s duplicity on counterterrorism efforts.

Hence, powers like Europe and India — that have been advocates for a peaceful pathway to a nuclear-free Iran, hold an imperative to balance the fallout from heightened US antagonism. And the coronavirus pandemic, offers an apt opportunity to do so by strengthening the Iranian moderates’ call for continued Iranian global engagement over reactionary belligerence.
Medical diplomacy by Europe and India
Although humanitarian items like medicines and pharmaceutical equipment do not fall under the purview of US sanctions, nations have been reluctant to do business with Iran.

This stems from nations’ experience with the Trump administration threatening coercion to seek compliance on its “maximum pressure” campaign. For instance, after the US withdrew from the Iran Nuclear Deal, transatlantic relations worsened as European powers refused to follow suit. However they caved on trade as multinational companies (like France's Total, Germany’s Siemens and Denmark’s Maersk) refused to do business with Iran out of fear of US sanctions. Similarly, India ceased import of Iranian oil in face of US secondary sanctions, despite having favourable arrangements like 60-day creditline, free insurance, and cheaper shipping.
Although humanitarian items like medicines and pharmaceutical equipment do not fall under the purview of US sanctions, nations have been reluctant to do business with Iran.

However, amidst the COVID-19 pandemic, European nations have employed the INSTEX — a French-registered trade mechanism developed to circumvent US-led payment channels, launched in 2019 against Trump’s policy of economic coercion. In March, Germany announced the first successful transaction with Iran under INSTEX. Subsequently, Germany, France and the UK used the system to send medical supplies worth Euro 5 million to Iran. This move was even met with equanimity from the US president: “Medical good?... that doesn’t bother me.” This presents a window of opportunity for India to engage with Iran — without incurring US coercion that may have held it back thus far.

Since lifting its ban on exporting Hydroxycholoroquine — an antimalarial drug with “anecdotal” evidence of being effective against the novel coronavirus, India has exported the same and other common drugs to about 24 countries and donated supplies to another 31 countries under its “medical diplomacy” initiative. As of mid-April, requests from Iran on such supplies however, were reportedly on hold following a call between Zarif and his Indian counterpart on “illegal and unilateral US sanctions.” If India and its European partners now together heed to Iranian requests, they could also contribute in arresting Iranian hardliners’ recent surge.

Without such a timely gesture of apolitical international cooperation in face of a pandemic, the current spate of crises compounded by US pressures will definitely alter the Iranian moderates’ fortunes in the upcoming 2021 presidential elections. Time is of the essence, as one would recall: after the George W. Bush administration’s ‘Axis of Evil’ antagonism followed moderate Iranian President Mohammad Khatami’s 1998 call to break the “wall of mistrust” between Iran and the US, conservative hardliner and firebrand politician Mahmoud Ahmadinejad rose to power and impeded Iranian engagement for the entirety of his eight-year rule.

Hence, India and Europe’s medical diplomacy can be pivotal in strengthening Iranian moderates’ call for continued global engagement even in times of greater antagonism by the US.

Abhimanini Sawhney is a research intern at ORF Mumbai.

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### Israel must bring its diverse communities together in Covid19 fight

Much like in other countries, it took Israel — and Israelis — a while to adjust to the unprecedented situation caused by the Covid-19 pandemic. The main difficulty is to reach out to the insular communities that are disconnected from governmental policies. Israel had spotted the danger of the virus early and took the first necessary measures — isloating and quarantining those arriving from China — in February. A week later, Italy and many Southeast Asian countries were added to the list, eventually leading to a ban on entry from many European states. Until 2 March, when the country voted for the third time in a year, it seemed that the situation was under complete control. Even on 9 March, when Israel celebrated the Purim holiday, all appeared ok. Although municipalities had cancelled carnival processions and masquerades, the government was afraid to introduce a complete ban on mass events. So, parties and traditional festivities went on in many communities. But soon after it became clear that celebrating Purim had caused a drastic rise in the number of infected people. On 19 March, Prime Minister Benjamin Netanyahu imposed a state of emergency on the entire country; only ten people would be allowed to come together, the necessary amount of men that is necessary to pray. Soon, as the number of infected rose to the thousands, the police began to fine those violating the quarantine regulations, and Shin Bet, the internal security service, started accessing the mobile phones of those infected to track their contacts. But the synagogues and Yeshivas, the religious schools, continued to operate as usual. On 25 March, the government decided to tighten the regulations and banned people from gathering altogether. Health Minister Yaakov Litzman, a representative of the ultra-orthodox community and member of the religious Yahadut ha-Torah party, objected to this measure and demanded an exception for religious schools and synagogues. It soon became apparent that leaders of the ultra-orthodox community had differing opinions on the quarantine regulations. After weeks of stalling, the leader of the Lithuanian ultra-orthodox group Chaim Kanievsky finally called on his followers to obey the decisions of the government. Other religious authorities urged believers to pray from home, relying on the Jewish principle of Piquah Nefesh, which focuses on saving lives before anything else. Nevertheless, the number of violations grew steadily. Jerusalem´s ultra-religious neighbourhoods and cities such as Bnei Brak continued celebrating weddings, praying and studying together. But the ultra-orthodox society, which lives 365 days a year under its own laws, could not understand or simply underestimated the threat to their community. In the government’s measures restricting free movement and assembly, it saw an attempt to prevent believers from practising their customs and traditions.
The results were devastating
By the end of March, ultra-orthodox cities and quarters were leading in numbers of Covid-19 infections. Litzman has tested positive after he allegedly continued to pray in the synagogue. The situation became even more complicated with Passover on 9 April, another important Jewish holiday and a central event of the Jewish calendar. The government had to place Bnei Brak under a total closure, with military units keeping close watch. To ensure Israelis didn’t ignore the isolation and visit family and friends on passover, the government imposed a general quarantine throughout the country, with thousands of police officers guarding the streets. Israel’s ultra-orthodox community interprets laws and directions in their way. Their respective spiritual leaders are more influential than the prime minister, and they simply speak another language and consume other media. The state did not immediately realise that it needed to share information on the Covid-19 virus and precautionary measures in Hebrew as well as other languages, including Yiddish and Arabic. This misunderstanding of cultural codes has led to numerous virus hotspots. Although the government has made headway within the ultra-orthodox community, with the advent of the Muslim holy month of Ramadan, it has another challenge on hand. The Israeli leadership should learn from its mistakes and develop a policy to prevent large gatherings, as is traditional while breaking the daily fast, during this month. Israel is still afloat, but given the heterogeneity of multifaceted Israeli society, the situation may change in a matter of days. East Jerusalem continues to be a black hole amid the pandemic where minimal checks are made. Despite the “Stay Home” campaign, awareness of the dangers of the virus among the Arab community is rather low. But the Arab community appears willing to comply with the state’s regulations. Also, an impressive number of medical personnel in Israel belong to the Arab community. Israel is also providing the Palestinian Authority with humanitarian assistance since the virus doesn‘t recognise walls and fences. In 2015, former President Reuven Rivlin made a famous speech about the tribes of Israeli society living next to but separate from each other. He said that Israeli communities are drifting apart and do not constitute a shared society anymore. But as the Covid-19 crisis rages on, the various communities can no longer afford to exist on their own and be disconnected from the central government and its efforts to combat the pandemic.

### COVID-19: China's ‘Health Silk Road’ diplomacy in Iran and Turkey

As the COVID19 pandemic flares up and countries grapple to respond, China has positioned itself as a good samaritan in public health, introducing a unique kind of power diplomacy. This outreach is perhaps required by Beijing today, at a time of increasing US-China rivalry and speculations over Chinese supremacy around the world. Having endured the virus outburst and multiplied the production of medical equipment, China is well stationed to export and aid countries with its supplies. The Chinese propaganda, engrossed in the Communist Party’s response to the pandemic, appears to be a part of the coordinated campaign to promote Beijing’s dominance, interests and image.

Ever since China successfully contained the virus within its borders, it has been eyeing for opportunities to resume its trade with other countries. Experts believe that their humanitarian aid has political ends which needs a prudent observation. In a recent telephonic conversation with the Italian Prime Minister Giuseppe Conte, Chinese President Xi Jinping expressed his desire to establish a “health silk road” as part of China’s ambitious One Belt One Road Initiative (BRI). This has been perceived with utter criticism from several states that are wary of increasing Chinese leverage and influence. Unfortunately, Iran and Turkey, two important gateways to western markets, have seemingly already bit the bait to China’s game play.

Additionally, the Communist Party’s effort to export their supplies to the world has met with reproval as countries such as Turkey, Netherlands and Spain decided to cease trade over ‘substandard’ and ‘poor’ quality products. Since Iran is engulfed with US sanctions and has limited sources to rely upon, they have accepted all the aid they can to contain the outbreak. Amidst a wall of criticism, China’s COVID-19 diplomacy can only flourish, if the West Asian giants Iran and Turkey stay satisfied.
China, the West, and COVID-19 diplomacy in Iran
The launch of Xi’s overreaching BRI project has amplified Iran’s potential value to China as an important juncture in a progressing regional connectivity network. Because of the US restrictions, trading medical supplies to Iran has been difficult for many companies. Even though Europe through INSTEX – aiming to protect companies doing business with Iran from American sanctions – recently facilitated the export of medical goods to Iran, they are grappling with their own rising virus cases.

The Iranian foreign ministry welcomed the first transaction through the INSTEX mechanism, however, they found it “insufficient”, thereby forcing Iran to majorly rely on China – (which claims to be recovering from the virus) for getting test kits and other medical equipment. As a result, Beijing has been able to woo the Iranians with their donation of over 400,000 masks and a waste disposal facility worth 1 million euros. They have also donated 500 prefabricated rooms with beds, desks and chairs. There have been about 21 aid aircrafts sent from China to Iran overall. More recently, China sent 15 tonnes of medical supplies to Tehran, including 1512 cartons of diagnostic kits, oxygen-breathing apparatus, body temperature monitors, hospital disinfectants, ordinary and N95 masks, clothing, gloves, and protective glasses. In another package, Iran received COVID-19 detection kits, oxygen generators, and anti-coronation drugs from China.

To further its solidarity with Tehran, Beijing sent valuable Chinese Red Cross donations including five medical experts to share their experiences in the fight against the virus. In a tweet, the Iranian Ambassador to China, Mohaammad Keshaavarzzadeh, said: “China is undoubtedly the most experienced in the fight against the Coronavirus and is more determined to help us.” Furthermore, China has been urging the US to remove the sanctions on Iran. “Continued sanction on Iran was against humanitarianism and hampers Iran’s epidemic response and delivery of humanitarian aid by the UN and other organizations,” China’s ministry of foreign affairs said in a tweet.

There is no doubt that China has emerged as an all-weather ally for Tehran, led by the country’s own requirements as it fights a significant outbreak. However, as we have witnessed in the past, Chinese “debt trap diplomacy” often comes into play in the country’s outreach activities, hampering a weaker state’s capacity of self-reliance. Likewise, China’s “humanitarian activities” in Iran could arguably exploit Iran in the future, taking advantage of its current isolation and the ensuing public health emergency. Finding a deeper friend in China amidst the ensuing chaos may require Iran to mollycoddle Beijing’s global visions, such as the “health silk route” and beyond.
The Turkey – China balance
Turkey, the second hardest hit country in the region after Iran saw its first case of COVID-19 on 11 March and since then, the number of cases have risen to 42,282 with a death toll of 908 as per the official data obtained on 10 April. As the fight against the virus shifted from East Asia to West Asia and beyond, China sent 50,000 rapid detection kits to Turkey on 23 March and another 300,000 a few days later. Furthermore, China offered information sharing to Turkey through video conferences on treating patients suffering from COVID-19. Turkish Health Minister Fahrettin Koca stated: "We have brought a special drug used in China, which is claimed to have resulted in improvements in intensive care patients, cutting their time in care from 11-12 days to 4 days."

Turkey’s geopolitical position, as Iran’s neighbor, is valuable to China’s BRI, facilitating transportation and allowing Chinese products to reach Turkey and Europe easily. President Recep Erdogan, on his visit to China in 2019 said: “The cooperation that has continued among our countries for hundreds of years now also involves the development of the belt and a road.” Demands to increase the trade volume to $50 billion was made. The Ankara - Istanbul High Speed Railway was the first BRI project completed by China in Turkey. Simultaneously, Baku - Tbilisi - Kars railway project got completed in 2017, with Chinese plans of reaching 25,000 km of rail network by 2023 in Turkey alone. Despite these economic initiatives, Ankara and Beijing have disagreed on China’s policies and actions relating to the country’s Uighur Muslim population in the restive Xinjiang province. Turkey, which sees itself as the leader of the Islamic world, on several occasions has staunchly opposed China’s oppression of the Uighurs. However, to not jeopardize their larger economic relationship, Erdogan has not taken any concrete actions against Beijing as well.

While the COVID-19 pandemic has spread from China along the routes of the BRI, Beijing is using those same logistical hubs, ports and corridors to provide medical support to partner countries such as Iran, Turkey and beyond. However, Ankara has also raised concerns on the quality of these supplies. Faulty Chinese equipment included having insufficient filters and failing to fit the mouths adequately, thereby resulting in increased COVID-19 cases in hospitals. A member of the Turkish government’s coronavirus scientific advisory committee, Ates Kara, cautioned on the increased margin of error on the antigen tests, generating a high risk of false negatives.

Meanwhile, Iran might not have the luxury to stop itself from falling into the trap of this Chinese diplomacy, Turkey being an emerging economy has the leisure of denying China’s often roguish outreach – subordination of Uyghur Muslims and supply of cheap faulty medical products.

Highly criticized for covering up and not preventing the virus from turning into a dangerous global pandemic, China is making an effort to reinstate its persona as a symbol of support, strength and leadership. Now that the US and Europe are preoccupied with the pandemic, China is attempting to turn the tables to its favor by delivering aid globally. Despite China being the starting cause of the plague, Beijing is determined to win the post-virus narrative, while the west continues to battle the economic and societal fallouts of the virus. However, “health silk route” and other outreach aside, the post-COVID-19 world may not be the pushover that China may think it is, with countries already lining up to strengthen their domestic laws to ward off China’s predatory policies.

### Despite Coronavirus outbreak, India-Israel friendship continue to shine

At a time when SARS-COV2 virus has taken the entire world under its blanket, halting trillion dollars of trades and confining billions to their houses, Coronavirus has definitely brought world to a standstill. However, the pandemic could not slow down the pace of the rising bilateral cooperation between India and Israel. In fact, the two nations not only collaborated to beat the pandemic, but also brought  each other closer in the time of need. Their friendship is certainly a yardstick for many others.
India inspired- No contact diplomacy
In order to contain the spread of Coronavirus in Israel, Prime Minister Benjamin Netanyahu encouraged Israelis to adopt the Indian style of greetings- Namaste, as opposed to mainstream handshakes. At a press conference in Israel, he spoke about considering small steps such as adopting the “Indian Namaste,” with proper demonstrations. He believed that embracing the Indian custom of greeting will help in slowing person-to-person contact and helping in mitigating the spread of the novel Coronavirus. He added “we love to embrace. We love to shake hands. We love to kiss. No more”.

In terms of soft power diplomacy, India has always aced the test in Israel. This recent development has proved the admiration both countries holds for each other. This is symbolic of invigorating partnership between India and Israel and opening up of major cultural exchanges.
Netanyahu dials ‘friend’ Modi
Prime Minister Narender Modi had a telephonic conversation with his counterpart from Israel to discuss the prominent effects of Coronavirus. Both countries are facing an upward trend in the rising Coronavirus outbreak. Though the number of cases in Israel are high, the number of deaths due to the virus in India is higher. Tackling this reality is becoming even more difficult for the two with challenging demand and supply of essential goods.

According to the statement released by the Ministry of External Affairs, both leaders had a discussion of ways to collaborate for assistance and countering the Coronavirus. “The leaders reviewed the excellent progress in bilateral relations. They also exchanged views on the global situation in the context of COVID-19 pandemic,” it said.
India exempts Israel from an export ban
Israeli Prime Minister Benjamin Netanyahu at a press release mentioned about reaching out to his ‘friend’ Narender Modi to stabilize “supply lines” of essential materials owing to the massive disturbance triggered by COVID-19. While reviewing the economic implications of the virus, PM Netanyahu told reporters, “I also spoke to the Prime Minister of India, my friend Narendra Modi. We are dependent on supply lines from various countries. We are looking into it all the time.”

In light of the lack of supplies, Israeli prime Minister Benjamin Netanyahu requested Narendra Modi to approve an exemption and allow ‘the exports of masks and pharmaceutical raw materials’ to Israel. This request was presented after India came to a decision of terminating the export of these products to meet its own domestic requirements considering the rapid spread of novel coronavirus. India approved to Netanyahu’s demand to supply them N95 face masks for medical teams and raw materials for the Israeli pharmaceutical industry.

India is a major exporter of raw materials of pharmaceuticals worldwide, and the Israeli pharmaceutical industry is heavily dependent for imports from India. The ban imposed by India could have created a shortage of medicines and masks in Israel as India is also the largest producers of face masks in the world. Many countries in the world are facing an acute shortage of masks due to a sudden rise in demand of face masks. India’s approval for exporting medical gears to Israel in the time of need exemplifies remarkable friendship between the two.
Israel’s support for Junta Curfew
The call for ‘Junta Curfew,’ by Indian Prime Minister Narendra Modi was a well appreciated step to accomplish the intention of the exercise that is central to handling COVID-19- ‘social distancing’. Such extraordinary steps are essential keeping in mind the upcoming challenging time. Israel, thus, extended its support to India for a Junta Curfew on March 22, to fight the Coronavirus outbreak.

Israeli Embassy to New Delhi shared pictures of their citizens endorsing India’s initiative of Junta Curfew with a hashtag #JuntaCurfewChallenge. The official twitter handle of Israel Embassy mentioned that the “Israelis in India and across the world, join our Indian brothers and sisters in the #JuntaCurfewChallenge today, as we all pledge to #StayHomeStaySafe in the global fight against COVID-19.” Israeli Ambassador Maya Kadosh also broadcasted that she’ll be working from home to take part in the Junta Curfew. She also indicated that over 3000 Israeli nationals present in India are also supporting the curfew by staying at home.
India signs defence contract with Israel, amidst Coronavirus financial crisis
The Defence Ministry of India signed a massive contract for purchasing more than 16,000 light machine guns from an Israeli firm for frontline troops. The ministry on March 19 declared that it signed a Rs 880 crore deal for the light machine guns with Israel and said that the “Indian Armed Forces' long-standing requirement of a modern state-of-the-art Light Machine Gun (LMG) has finally fructified. The Acquisition Wing of Ministry of Defence has signed the capital acquisition contract with Israel Weapons Industries for procurement of 16,479 LMGs at a cost of Rs 880 crore with the approval of Defence Minister Rajnath Singh.”

The deal was highly criticized by activists around the world. They claimed that the deal amount could have been put into a better use during an epidemic crisis. The deal was introduced on the life expense of doctors on the frontline in India, where they have been continuously complaining of a shortage of medical face masks and proper gears. Despite a considerable concern for the Indian medical staff, India went ahead in signing the agreement.
Air India evacuates hundreds of Israelis back to Tel Aviv
India and Israel have been incessantly cooperating with each other in keeping their citizens safe. Due to Indian government’s move to impose a nationwide lockdown to prevent Coronavirus from spreading further, several hundred Israelis were left stranded in India. With a joint effort of Israeli Embassy and Government of India, Air India was assigned the task to evacuate the Israeli nationals from India, back to Israel. “We are doing such flights on the request from the government (external affairs ministry),” a government official said.

Israel thanked the Indian Government for helping evacuation of over 500 Israeli nationals. This was done in two trips, one each on March 26 and March 27. “Today, we are evacuating 317 Israelis. In another flight tomorrow, 200 more Israelis to be evacuated. Indian govt has helped us a lot, I want to thank them; Israel took drastic measures to fight Coronavirus, the situation there is under control,” said Ambassador Ron Malka. The rest of the Israelis were successfully evacuated from India in the second trip on March 27. The symbolic gesture of helping foreign nationals in the middle of an outbreak is a sheer gesture of growing trust and friendship between the two nations.

India and Israel's ties have become much stronger significantly in recent years, especially under Modi and Netanyahu. Though the defence trade deals forms the bedrock of their partnership, both states are progressively relying on each other or find ways to allude to their entente cordiale.

The author is a Research Intern at ORF, Delhi

### India’s revamped interests defines Chabahar and its relations with Iran

India’s long-awaited proposal to establish a trade route with landlocked Afghanistan and former Soviet republics in Central Asia and Europe through an alternative land-sea route conveyance was realised with the India-Iran-Afghanistan trilateral and the India-Iran bilateral agreements inked in May 2016. The agreements signed on the sidelines of Indian Prime Minister Narendra Modi’s historic visit to Tehran, a first such visit by serving PM after Atal Bihari Vajpayee’s visit in 2001. While the trilateral agreement entails New Delhi’s participation in the development of two berths with capital investment of $85 million, the bilateral agreement involving the India Ports Global Private Limited (IPGPL) and Iran’s Arya Banader engages New Delhi to develop and operate two terminals and five berths for ten years, following a 18-month lease, at Shahid Beheshti Port in Chabahar of Sistan and Baluchestan province in Southeastern Iran. The bilateral agreement also allocates a $150 million line of credit for the development of the port, while an additional $500 million credit is made available for Iran to import rail tracks and operationalise the port. Also, the MoU between Indian Railway Construction Limited (IRCON) and Tehran’s Construction, Development of Transport and Infrastructure Company (CDTIC) to establish a rail network between Chabahar and the capital of Sistan and Baluchestan Province, Zahedan, facilitates credit of over $1.6 billion.

Despite the modest financial allocations, phase one of the port is underutilised at 10 per cent of the total capacity due to broader geopolitical tensions, which primarily includes President Donald Trump’s sanctions against Iran.


In December 2017, Iranian President Hassan Rouhani inaugurated the Phase One of the Shahid Beheshti Port’s five-phase development plan, which expanded the port capacity from 2.5 million tonnes to 8.5 million tonnes at the cost of $1 billion. Despite the modest financial allocations, phase one of the port is underutilised at 10 per cent of the total capacity due to broader geopolitical tensions, which primarily includes President Donald Trump’s sanctions against Iran. Against such a backdrop, Shahid Beheshti Port is gaining renewed potential following New Delhi and Tehran’s diplomatic, industrial and economic policy decisions.
India’s revamped interests
The developments in bilateral relations, including Indian Minister of External Affairs Subrahmanyam Jaishankar’s visit to Tehran for 19th India-Iran Joint Commission Meeting, his Iranian counterpart Javad Zarif’s visit to New Delhi for ORF’s Raisina Dialogue and essentially the India Union Budget for 2020-21 fiscal, demonstrates a series of proactive measures aimed at promoting the India-Iran mutual interests in the development of the Shahid Beheshti Port. While the two high-ranking leaders expressed their intent to expedite the development and fully operationalise the port in Chabahar, Indian Ministry of External Affairs (MEA) earmarked $13.9 million in fiscal 2020-21, which constitutes 0.5 per cent of the MEA budget, for the development of the port. Although MEA allotted funds for the port in all the fiscal budgets since 2016-17, the latest budget allocation gains greater geopolitical significance, following the heightened US-Iran tensions over the killing of Iranian General Qasem Soleimani. In addition to doubling the allocation from the previous fiscal of $6.25 million, the Indian ambassador to Iran floating an idea of India-Iran Preferential Trade Agreement (PTA), at a time when the country is under US’s sanctions, demonstrates New Delhi’s financial as well as political determination to develop the port as a viable alternative connectivity to Afghanistan and also boost bilateral trade relations.

Although MEA allotted funds for the port in all the fiscal budgets since 2016-17, the latest budget allocation gains greater geopolitical significance, following the heightened US-Iran tensions over the killing of Iranian General Qasem Soleimani.


While many experts lament over the slow pace of operationalisation of the port, high-ranking officials in Tehran undoubtedly hold that New Delhi’s participation is the sine qua non to avail conditional waivers against the Trump’s sanctions. Similar waivers were inconceivable, should China or Russia have engaged in the port development. Besides, the potential exponential growth in trade and commerce between India and landlocked Afghanistan and Central Asian Republics is quintessential for the economic sustainability of the project.
New Delhi self-defines interests
The existence of an “accommodative bargaining” equation in India-US relations prompted New Delhi to invest a multi-aligned diplomatic approach with the US to garner formal exemptions for Shahid Beheshti Port in Chabahar at the US-India 2+2 Dialogue in December last year. Despite the earlier asserted exemptions in 2018, New Delhi’s posture to seek the written assurance demonstrates its political and diplomatic reliability, which further informs the likely acceleration in equipping the port with heavy machinery and tools required to handle the cargo. The lack of waivers defeats Tehran’s objective to infuse socio-economic and infrastructure development in the less developed southeastern region. The same also defeats the objective to expand the prosperity through port infrastructure-led development, which will further bring stability and peace in the restive Sistan and Baluchestan area. Here, any realist policymaker in Tehran should quell the prospects of China and Russia joining the port project, at least in the immediate term. With approving conditional exemptions on the India-led Chabahar entity, the US has strengthened New Delhi’s hands to balance China’s presence in the Indo-Pacific region.

Any realist policymaker in Tehran should quell the prospects of China and Russia joining the port project, at least in the immediate term.


Multiple projects in Iran are overshadowed by the consequences of the sanctions, as international entities, including European firms, have been flinching from investments in Iran. In such a context, India’s political reliability and financial commitment and diplomatic will only strengthen New Delhi’s intent to maintain strategic autonomy and self-define its relations with Iran and its interests in Chabahar, even in the face of the prevailing US government and its sanctions. The Indian posture imperatively implies that Trump’s sanctions never hindered New Delhi to deliver on its commitments to develop the port, but those very sanctions flinched European and Chinese firms to deliver heavy machinery to equip the port. India’s unhindered commitment towards the project was manifested in its continuity in budget allocations in all fiscals since 2016-17. Such a defining nature will prompt India to pursue a mutually prosperous and progressive relationship with Iran over the coming years as New Delhi prioritises its connectivity initiatives in West Asia as well as the strategic advantage in the northwestern Indian Ocean Region (IOR).
Wider prospects
Despite steadfastly sticking to its commitment, New Delhi now ought to prove its logistical capabilities in accomplishing the full potential of the port in an attempt to maintain its credibility in the global connectivity realpolitik. Apart from circumventing Pakistan, the success of the Chabahar plausibly weakens the commercial and economic viability of the China Overseas Port Holding Company (COPHC)-owned Gwadar Port, which is protruded as the key feature of the China-Pakistan Economic Corridor (CPEC), China’s flagship project under the President Xi Jinping’s ambitious Belt and Road Initiative (BRI). Besides, a successful Chabahar buttresses India as a viable alternative against the giant shipbuilding and port building nations in the region and extended neighbourhood, particularly in Africa. In the immediate term, New Delhi should burnish its multi-alignment credentials to absorb investments into the port project from the public and private sector, boost maritime cooperation among IOR countries to enhance the transit of goods, and foster regional partnerships for the Chabahar port. Based on the similarities in energy demand and geopolitical interest, New Delhi should explore all possible opportunities to collaborate with Japan under the Asia-Africa Growth Corridor. Japan’s participation will boost the multilateral characteristics of the transit hub in the region, unlike the COPHC-owned Gwadar port, which will further entice multilateral investments to solidify regional economic partnerships that proliferates the sustainability factor of the port.

### Russia and Israel: Towards a pragmatic partnership

In the first two months of 2020, the Russian President Vladimir Putin and Israel Prime Minister Benjamin Netanyahu have already met twice, with the meetings taking place within a week of each other. While the Russian leader was in Israel to attend events related to commemoration of the 75th anniversary of the liberation of the Auschwitz concentration camp, Netanyahu visited Moscow en-route from Washington where US President Donald J. Trump announced his plan for a comprehensive peace agreement between Israel and Palestine. The Prime Minister noted that his previously unannounced visit on January 30 was a sign of mutual trust between the two sides, as Russia was his first stop the day after the American plan was unveiled, ahead of his return to Israel.

In recent years, there has been a marked uptick in the bilateral visits at the highest level between the two countries. In fact, the Israeli leader has visited Moscow eleven times in his fourth term in office, including the January 2020 meeting, while Putin has visited Tel Aviv twice between 2012 and 2020.

Two key developments took place during Netanyahu’s visit to Moscow. The first was the release of Israeli national Naama Issachar, who was pardoned by the Russian president in a goodwill gesture, after having been held in Russia since April 2019 on drug charges. The case had been closely followed in Israel and her release was seen as a positive sign for the bilateral relationship, as well as a win for Netanyahu ahead of the March general elections. The second was the discussion on Trump’s Middle East peace plan.

Russia has criticized the US plan, instead calling for direct negotiations between Israel and Palestine and international support for the process. It has argued that all the competing factions must be on the negotiating table for any progress on the peace process.

Russia, which maintains regular contacts with all the Palestinian factions, including Hamas, has been interested in playing the role of a power broker. In fact, Putin’s visit to Israel on January 23 this year was followed by a visit to Palestine, where he met Palestinian president Mahmoud Abbas, discussing the anticipated US peace plan besides bilateral issues. Palestine wants Russia to play a larger role in the peace process, as the trust deficit with the US has grown after US recognized Jerusalem as Israel’s capital and decided to relocate its embassy from Tel Aviv. In fact, after the US announcement to the effect in 2017, Moscow remained critical of the move and held on to its position of East Jerusalem being the capital of a future Palestinian state.

Since the announcement of the Trump plan, President Mahmoud Abbas has declared that the Palestinian Authority is cutting all ties with US and Israel. He also affirmed that Palestinians would refrain from engaging in a US-led peace process and would rather prefer a multilateral one.

As far as Moscow’s role in the peace process is concerned, there is a view that its close relationship with other Arab states could help in breaking the stalemate as it is on good terms with all the stakeholders and they believe Moscow could lead an amicable settlement of the dispute with a bipartisan approach. Meanwhile, as a member of the Middle East quartet and UNSC, Russia has tried to play its part by attempting to hold Israel-Palestine talks, but without much success.

Apart from a resurgence in the political relationship, Russia and Israel have also decided to improve their economic ties. As of now, the volume of trade remains modest. Russian exports to Israel were at USD 1.9 billion in 2018. It exports a number of products to Israel including crude petroleum, precious metals and stones, food products, chemical products etc. Russian imports from Israel stood at USD 764 million in 2018 with products such as electrical machinery and equipment, edible vegetables, pesticides, plastics etc. There exists a potential to further increase trade between the two countries.

Regionally, apart from Turkey, whose trade with Russia stands at $16.5 billion, Moscow has a relatively low level of trade partnership with the Middle East. Negotiations for the free-trade agreement between Israel and the Eurasian Economic Union are on, with the sixth round of talks scheduled for March 2020. Israel and the Eurasian Economic Union (EAEU) may sign a free trade agreement as early as in 2021, which is expected to boost the volume of trade between the states.

In 2015, Russia and Israel signed a military cooperation pact, to step up military and technological cooperation. Moscow also purchased a package of drones from Israel for USD 300 million. The presence of a large Russian diaspora in Israel has helped forge a special bond, with more than 17% of Israel’s population being Russian-speakers. President Putin made a statement

last year that Russia believes Israel to be a ‘Russian-Speaking Country.’ Russia views them as ‘sootechestvenniki’ or compatriots. Last year, Moscow also announced pension to 4500 Red Army veterans living in Israel for their military service. The diaspora is also considered to have significant political influence in Israeli politics. With a potential to have an effect on 15 to 17 seats in the Knesset, they are an important constituency for all parties.

In an overcrowded Middle East, the relationship between Moscow and Jerusalem has been centered on ‘co-operation’ especially in the Syrian civil war. Russia’s rising clout as an influential actor in the region cannot be underestimated, with Russia aiming to get back to “the top of global politics” through its foreign policy interventions. The gradual US retrenchment has allowed Russia to step in and fill the vacuum as a regional power broker even though US still remains a pre-eminent player in the region. Moscow wants to convey the message to the Middle East states that it is a reliable ally that believes in multilateral engagement to resolve disputes. Given its proximity to the region, Russia remains concerned about instability in the Middle East and its impact on national security.

The Syrian civil war has created an opportunity for Russia to be viewed as a trusted player in the region. Even as Russia has established its military presence in Syria, Israel finds it critical to counter the challenges posed by Iran and other non-state actors in Syria. It expects Russia to help in containing Iran’s military presence especially on the Israeli-Syrian border. The two sides have tried to avoid a zero-sum game in the region while keeping the diplomatic and information channels open. Back in 2015, in the wake of Russian intervention in Syria, the two sides established a hotline between the respective militaries to avoid any potential clash in the region. This was helpful in de-escalating the situation in the aftermath of an incident in 2018 involving the crash of IL-20 aircraft, avoiding a diplomatic fallout. The co-operation between the two has helped both the states to accomplish their raison d'etre in a war-ravaged Syria.

In this context, Israel remains an important regional actor for Russia. The two countries have strategic interests that glues them together, especially in the Middle East. As a result, despite their differences on Iran, Hamas and Hezbollah among others, they have pursued closer ties. Even in Syria, the two sides try not to step on each other’s toes.

Having presented itself as a reliable player in the region, Russia has engaged with both Israel and Iran, marking a highlight of Putin’s foreign policy maneuvers. Russia has been able to accomplish this by following a pragmatic policy that does not engage in alliance relationships. Israel too has wanted to diversify its foreign partnerships and has broadened its reach while remaining committed to its alliance with the US.

Looking at the trend of the past few years, the Israel-Russia relationship does not look fragile. The post-Soviet period has seen a steady development of ties and it has passed the test of time despite the complexities involved. Russia and Israel are most likely to continue their entente based on their pragmatic policies. Incrementalism adopted by both Russia and Israel in their foreign policy approach is yielding the desired results, making the Russia-Israel relationship a classic example of ‘realpolitik’.

______________________________________________________________________________________________________

Pritish Gupta is a Research Intern at ORF.

### Israel’s absorption of Bnei Menashe Jews from India

In the late 1970s, a few individuals from a small group located in North East India, began to research the origins of their religious traditions and their ancestry. Their research led them to discover an ancestral connection to Israel. This particular group, known as Bnei Menashe or ‘sons of Menashe’ are believed to be the descendants from the lost tribe of Menashe. In the early 1980s, members of the group made contact with an organization in Israel expressing an interest in returning to their ancient homeland.

On request of this tribe, the chief Rabbis of Israel investigated these people and found that they still observe Shabbat, maintain Kosher dietary laws, celebrate biblical fests, marry within their tribe and are clinging for a hope of returning one day to the land of Israel. After almost two decades of their recognition as ‘Jews’ from one of the lost tribes of Israel, they are still struggling to be accepted fully as members of the mainstream Israeli society.

Their story and struggles are not any different from the Jewish community from Ethiopia, called as Beta Israel. Although, the Beta Israel are large in proportion, they continue to face similar issues such as that of Bnei Menashe Jews. This particular Indian Jewish community is termed not only as ‘impure’, but continue to face discrimination on the basis of their religious identity and demographic background. Out of almost 11,000 Bnei Menashe Jews, only around 4,000 Jews have been able to immigrate to Israel, while about 7,000 of them are said to be waiting for immigration to the Jewish state. Bnei Menashe Jews in Israel have been allocated areas of highly unstable lands of West Bank where education, security and employment remains a major concern. A fair assumption can be made that the spatial segregation of the Bnei Menashe in West Bank was a result of their low socio-economic and educational status in contrast to the larger Israeli society.

Israel’s policies addressing issues of immigration, absorption and diaspora affairs have often placed the Jews coming from developing countries such as India and Ethiopia in the underdeveloped periphery, where scanty economic and inferior education opportunities have always been a bone of contention. Israel has witnessed several protests by vocal minority groups where demonstrators were found insisting greater equality and an end to discrimination by the Israeli government and wider society as a whole. A major question that arises is that are Bnei Menashe Jews like Beta Israel are only a tool to fulfill political agendas and for boosting the Jewish population, especially in the disputed territories of West Bank?

Jews of the Bnei Menashe community left India, hoping to unite with their ancestral homeland and with their Jewish brothers and sisters. For them, Israel is more than just a land of ‘milk’ and ‘honey’, but an opportunity to get immersed into the life of a Jewish state. Despite their expectations of a better life, they have been subjected to discrimination by other Jews in Israel’s society. They are racially discriminated and often separated from the mainstream Jewry by being categorized as ‘Chinese’. They are also religiously discriminated by other Jews due to the skepticism that still surrounds their claims of a past Jewish connection. Therefore the immigration of a ‘non-Halachic’ Jewish descent has remained a vexed subject in Israel with the right-wing invigorating it and the left-wing dejecting it, not only because they believe it would “contribute to further oppression of the Palestinians” but also because they tend to doubt the authenticity of the Bnei Menashe’s claim to lost tribe’s status.

When  Prime Minister Narendra Modi visited Israel in July 2017, several members of the Bnei Menashe community gathered to greet him. Prime Minister Modi appreciated the contribution of Indian Jews to the state of Israel and for bringing the two societies closer. It was believed that the strategic partnership between India and Israel had reached a new height and the solution to the issue of Indian Jewish immigration to Israel will be addressed. But unfortunately, immigration of Bnei Menashe has by far remained too slow. Several policy analysts have therefore been raising questions on the reluctance of Israeli authorities instead of  expediting the process of Bnei Menashe’s migration. They claim that the reason behind a slow migration may be their inferior skills and education. It is also believed that even after proving their Jewish identity, they are still considered as the lesser Jewish of all.

It took years of struggle for a few thousand Bnei Menashe Jews to settle in Israel but their living conditions has barely improved. According to a Knesset Research and Information Center report, most Bnei Menashe have been able to find employment quickly, but their wages remain meagre: at the minimum wage level, or below it. The study also discovered that they are more inclined to keep to themselves and not blend within the Israeli society. Isaac Thangjom, community leader of the Bnei Menashe in Israel mentioned that “It would not be an understatement to say we are the weakest and most miserable community in Israel.” However, the community refrains from raising these issues at the societal levels allegedly because of the fear that it could affect their chances of being reunited with their relatives. This is because the members of Bnei Menashe are concerned that their relatives will not be accepted as eligible for Israel’s immigration list.

After years of barring the Bnei Menashe from immigrating to Israel by the former governments, the Netanyahu government in 2012 passed the long-awaited resolution that restarted the aliyah of the remaining 7,000 Bnei Menashe Jews in India. However, it’s already 2020 and only about 4,000 Jews have been able to make aliyah to Israel while 7,000 Bnei Menashe Jews still remain in India. Clearly, the absorption policies for this Indian Jewish community has not reached its potential yet.

### Sense for sensibility: Maritime domain awareness through the information fusion centre - Indian Ocean Region

The 2008 Mumbai Terrorism act dented India’s image and brought its lackadaisical coastal security architecture and meagre maritime domain awareness (MDA) to light. The event served as a catalyst for India to recalibrate its maritime strategy by emphasising that incidents at sea have massive consequences on land.

Soon after 26/11, the Indian Navy launched the Information Management and Analysis Centre (IMAC) in Gurugram. Jointly administered by the Indian Navy and Indian Coast Guard, its specific task is to enhance India’s National Maritime Domain awareness by tracking fishing boats and commercial vessels near India’s coast using data feed from space-based and terrestrial sensors as well as from other naval sources.

In early 2017, at the inaugural summit of the Indian Ocean Rim Association (IORA) in Indonesia, India made two key announcements regarding cooperation with member countries to enhance international Maritime Domain Awareness in the Indian Ocean. First, India’s intent to host the Information Fusion Centre - Indian Ocean Region (IFC-IOR) in India using white Shipping Agreements. Second, India proposed the setting up of the IORA Centre of Excellence (ICE) in the coastal city of Kochi in India. A network of think tanks was envisaged to develop a resource repository on Ocean, available on a digital platform to policymakers, academics and researchers in all IORA member states.

While there has been progress on the white shipping agreements and the setting up of the Information Fusion Centre for shared Maritime Domain Awareness enhancement, there has been no progress reported on the ICE or the network of think tanks.
Information Fusion Centre - IOR
The scale and scope of the white commercial maritime activities in the Indian Ocean make it untenable for individual countries to keep track of the grey foreign vessels or the black illegal vessels. Collaborative efforts are essential to address the twin requirements of situational awareness and law enforcement to safeguard global commons. IFC-IOR was launched in Gurugram in the National Capital region, in Decmeber of 2018. It is collocated with Information Management and Analysis Centre (IMAC) which is jointly administered by the Indian Navy and Indian Coast Guard. Its task is to go beyond the bilaterals and collate, fuse and disseminate intelligence on ‘White Shipping’ in the Indian Ocean. For common understanding of IORA nations, the threats in the region have been divided into six broad categories: Piracy/Sea Robbery/Sea Theft, Maritime Terrorism, Contraband Smuggling, Irregular Human Migration, Illegal Unreported Unregulated (IUU) Fishing and Maritime Incidents. Four sectors are being undertaken by the Centre to assess and analyze the maritime safety and security situation: Gulf of Guinea (GoG), Gulf of Aden, Arabian Sea, and the Bay of Bengal and South East Asia.

India has already signed information exchange agreement with 22 countries and one multinational construct — the Virtual Regional Maritime Traffic Centre which facilitates 30 other countries to create a virtual network for exchange of information under the international cooperation framework. The initial information Exchange at the IFC-IOR is being undertaken by virtual means using telephone calls, faxes, emails and video conferencing over internet. The IFC-IOR also aims to base 40 international liaison officers from its International partner countries. Currently only a few countries like France and Singapore have appointed liaison officers while UK has announced its intent to appoint one.

Since March 2018, France is focusing its efforts under the Joint Strategic Vision of India-France Cooperation in the Indian Ocean Region for reinforcing assets for combating piracy and all kinds of maritime trafficking in the Southern Indian Ocean.

The shared MDA efforts point to a major shift in India’s foreign policy approach. Since the late 1960s till 2015, India used non-alignment as a policy tool to keep distance from the shared security providers in the Indian Ocean. In 2015, Prime Minister, Narendra Modi launched the Security and Growth of All in the Region (SAGAR)– India's Vision for defence and security in the Indian Ocean Region in Seychelles. The backbone of SAGAR’s architecture is cooperation. Under the programme, Modi announced the ambitious Coastal Surveillance Radar System (CSRS) project to enhance international maritime domain awareness network establishment. The CSRS includes eight surveillance radars each in Seychelles and Mauritius, six in Sri Lanka, and ten in Maldives, all linked to over 50 sites on the Indian coast with a primary objective of coastal surveillance including small vessels that escape traditional radars. Recently, in October 2019, Bangladesh signed a pact for India to develop a coastal surveillance system. A similar arrangement is also supposed to be on way with Myanmar and Thailand.

There are already three similar MDA initiatives globally: Singapore focuses on south-east Asia; Madagascar is run by the European Union to focus on the African coast and the Southern Indian Ocean; and the Mediterranean Sea MDA focuses on Europe. The IFC IOR, once fully operational, is poised to cater to the information needs of the strategically most important, busy and large sea lanes of communication ning the Indo-Pacific waters.

India should learn from Singapore’s challenges in leading common maritime domain awareness for South East Asian countries: that information sharing should necessarily be followed by information sense making. “Comprehensiveness should lead to greater comprehension”. Practically this is hard to implement. While member countries agree that information sharing is the only path toward creating common operational picture to address common maritime threats, standardisation issues are being faced by them during fusing and analyses of data. Even when the countries are agreeing to share information, they are ending up duplicating efforts either due to extra regional power influences, or due to domestic political motivations or simply because they have different domestic organisational formats for data storage and analysis. A wide range of stakeholders fail to recognize that shared development spaces will lean on non-standard domestic institutional structures for data. Singapore’s member partners also highlight a need to converge other adjacent domains including air, space and cyber with the sea and terrestrial domains. The countries are grappling with data integrity and restricted jurisdiction of law enforcement agencies. How India intends to overcome these in IFC-IOR or ICE is not clear.

Moreover, while a need of network of think tanks to promote academic information and data sharing on ocean resources is essential for any region, there is also a need for a strong think tank network to develop policy options to address issues of maritime security, institution building and shaping strategic discourse on the Indian Ocean maritime order. India’s ICE announcement neither gives adequate clarity on the availability of domestic institutional support for an academic resource centre nor on a network of think tanks for common policy studies.

Traditionally, for India, information sharing liaison arrangements of a bilateral nature have been more productive. Multilateral arrangements give mixed results because either the domestic information agencies have restricted scope in coordinating their relationships with their own foreign services or the foreign services themselves do not willingly share useable data equitably with all their foreign counterparts unless there is a specific short term goal being met through a certain piece of data or information sharing.

The most recent IFC IOR report of October 2019 reported that an Iranian flagged crude oil tanker was reportedly hit in the Red Sea by two suspected rockets/missiles on 11 Oct, 2019 off the coast of Saudi Arabia. The details of the vessel still remain unconfirmed but there were reports pertaining to oil spill in the Red Sea. While the report shared the information about the vessel and activities following the same, it is not evident from the report how each member country made sense of this information under a cooperative framework. The US-Iran conflict may give IORA members an opportunity to test how information sharing is followed by information sense making towards fostering peace and stability. Given the complexities of India’s relations with Iran and the United States, India may be tested as a neutral net security provider in the Indian Ocean region. India needs to enhance its own strengths vis a vis China and other extra regional powers rather than just expand partnerships to fill the information voids.

 

### "Triangle of sea power" in Gulf of Oman poses a challenge to US-led Indo-Pacific Order

The Chinese People's Liberation Army Navy (PLAN), Russian Navy and the Islamic Republic of Iran Navy (NEDAJA) held the Marine Security Belt, a trilateral maritime exercise covering 17,000 square kilometres across the Gulf of Oman and the northern Indian Ocean Region (IOR) on 27-30 December. The naval exercise, involving in-port exchange and on-shore maritime exercise had 14 vessels. It included the PLAN’s guided-missile destroyer Xining (Hull 117), the Russian Baltic Fleet’s Neustrashimyy-class frigate “Yaroslav Mudry” (Hull 727), and NEDAJA’s frigate Alborz (Hull 72). According to Iran Navy’s deputy commander Rear Admiral Gholamreza Tahani, the trilateral exercise – the first-ever such large-scale naval exercise in the region involving major powers since the 1979 Islamic Revolution victory in Iran – primarily centered on anti-piracy and counter-terrorism tactics.

The trilateral exercise – which is now upgraded to be an annual feature – not just signalled growing maritime cooperation and coherence in naval strategies among China-Russia-Iran, but also served as a clear geopolitical message to the United States and its allies of an emerging new regional maritime alliance in the region. Although China and Russia downplayed the geopolitical significance amid regional maritime tensions in official transcripts, Tehran projected the trilateral exercise as a counter to the US presence in the region. The exercise demonstrates the three countries’ convergence in the perception of maritime threats and geopolitical interests, which if sustains over the long-term, may result in the rise of an Iran-centered Russia and China-backed collective security framework in the region. In the past, Iran, Russia and China have individually pronounced on multiple international platforms their intention to establish such a framework.

At the 74th United Nations General Assembly (UNGA) in September, Iranian President Hassan Rouhani announced Hormuz Peace Endeavour (HOPE) to promote peace and enhance maritime security in the Strait of Hormuz. Over 21-million barrels of oil a day or one-third of global sea-traded oil pass through the 167 kilometre-long Strait of Hormuz that separates the Gulf of Oman and the Persian Gulf. HOPE strives to realise a Hormuz Strait Community (HSC) summit to engage on a comprehensive set of regional security and cooperation issues and eventually actualise the withdrawal of US troops and its allies from the region that are considered to be threating the existence of Iran.

Earlier, in July, Russian president’s special envoy for the Middle East and African countries and Deputy Foreign Minister Mikhail Bogdanov too had affirmed Moscow’s Collective Security Concept for the Persian Gulf Region. The Russian framework emphasises, “inclusive regional security” by involving all the regional countries “on the basis of equality” to ensure maritime security and maintain peace, “for all nations” in the region, which exemplifies an attempt to fortify international and regional players diplomatic resolve against exclusive US-led coalition’s maritime operations in the region. Nevertheless, Moscow’s proposed inclusive plan to involve extra-regional partners including the US along with the EU, China, India and others in addition to Gulf regional states is a mere diplomatic ploy to demonstrate its intent to uphold multilateral frameworks against alleged US’ unilateral actions in the region. The mention of basic equality in the Russian framework further invokes basic tenets of multilateral consultations that Tehran alleges to be missing in the US-led operations across the region.

Subsequently, Beijing too welcomed Moscow’s proposal and emphasised its universal security vision for Gulf region through “common, comprehensive, cooperative and sustainable security” by developing “friendly relations on the basis of mutual respect and non-interference” in internal affairs. Beijing’s chorus with Moscow on collective security in the Persian Gulf epitomises the gradually emerging convergence between the Cold War communist rivals, especially following President Trump’s 2017 National Security Strategy that marks Beijing and Moscow as twin revisionist powers challenging the US-led international order and eroding US interests.
A Brewing Zero-Sum Game
The trilateral exercise in the Gulf of Oman and northern IOR gain greater significance as the waters along Iranian border are poised to witness escalated maritime tensions, following President Trump’s withdrawal from Joint Comprehensive Plan of Action (JCPOA) in May 2018. Trump administration’s subsequent unilateral sanctions as part of its “maximum pressure” strategy against oil-centered Iran’s economy cornered Tehran. Against such a backdrop, set-aside the potential, the China-Russia-Iran joint naval drill in its current form itself served as a counterbalance to the US interests in the region. Further, the trilateral exercise demonstrated that any nation could not be isolated in a multipolar world with national interests as divergent as the US driving the west on one side and the gradually evolving Russia-China convergence on the other.

Following the US killing of the Islamic Revolutionary Guard Corps’ (IRGC) Quds Force General Qasem Soleimani early in January 2020, Tehran is liable to uptick its military cooperation, especially naval exchanges, with like-minded regional and extra-regional countries. To safeguard territorial sovereignty and political integrity, Tehran hones all its diplomatic and strategic forces to weaken the US presence in the region, especially the US-led International Maritime Security Construct (IMSC) that ensures freedom of navigation and safe passage through the Persian Gulf, the Gulf of Oman and Bab el-Mandeb. The IMSC, which is considered as “undesirable security arrangement” in the region by Tehran, highlights the divided west over the security alliance. While the United Kingdom and Australia embrace the US-led IMSC, Japan and France have chosen to remain independent with their respective “survey and research” activities and European Union alternative.

With Iran’s geographic-regional advantage, China’s subtle diplomatic-economic influence and Russia’s strategic-military superiority, the divided west acts as an impetus to expand the trilateral platform, beyond the regional states to actively promote the anti-US campaign in the region. Such inclinations were resonated in Chinese Foreign Minister Wang Yi and his Iranian counterpart Mohammad Javad Zarif’s joint statement that hyphenates Beijing-Tehran in opposing unilateralism and upholding multilateralism against “bullies”, without any reference to the US, on 31 December in Beijing.

In-line with their intention to counterbalance the US beyond the Gulf region, namely in the Indo-pacific region, the current geopolitical conditions appear to be fertile for China and Russia to gradually build sub-regional alliances and quasi-partnerships with a long-term motivation to balance US-led Indo-Pacific strategy. In addition to the China-Russia-Iran trilateral, the Chinese and Russian strategic intent and motivation are manifested in their unprecedented joint naval drill with South Africa trilateral. The trilateral “Mosi” was held in waters adjacent to Cape Town to build a multilateral task force that counters security threats in the southern tip of Africa on 24-29 November. The two first-ever trilateral with Iran in the northern IOR and South Africa in the western IOR in a of one month demonstrate the resolve and coordinated efforts of Beijing and Moscow to challenge the US-led Indo-Pacific order by stepping up military-to-military naval cooperation.
Implications for India
Despite Indian media’s modest coverage on the four-day trilateral naval exercise, the event signifies a surge in the tempo of military exchanges between China and littoral states in the IOR. The exercises in the far seas demonstrate Beijing’s blue-water navy capabilities to protect China’s exponentially expanding energy, economic and strategic interests under President Xi Jinping’s Belt and Road Initiative (BRI) around the world. In addition, the ongoing sixth China-Pakistan naval exercise, Sea Guardians-2020, in the north Arabian Sea on 6-14 January informs China’s expanding military-centric coalitions beyond its economic and foreign policy centric coalitions.

Although Beijing denies the naval exercises’ link with the regional situation, China’s aims to maximise geopolitical gains in the wake of tensions between Iran and the US. The trilateral exercise hosting PLAN from Iran’s southeastern port city of Chabahar in the Gulf of Oman and BRI’s long-term agenda of enhancing Beijing’s holistic maritime power by building naval assets and developing a broader marine economy across IOR imperils India’s regional interests.

Despite India’s access to Oman’s strategic Duqm Port for military use and logistical support, the significant disruptions to the Indian energy sector that imports two-thirds of oil through the Strait of Hormuz due to a potential US-Iran conflict in the region creates a dilemma among the policymakers on New Delhi’s Raisina Hill. The dilemma emerges primarily to traverse the complex Iran-US conflict, while it is advisable that India optimises Japan’s approach to maintain the balance of power by establishing an independent task force in the region to safeguard the free flow of oilers headed towards India. The US sanctions and China’s expanding cooperation with Iran challenges India’s energy security and its diplomatic-economic investments in the Chabahar port that ensures land-based access to Central Asia through Afghanistan.

### India’s middle east conundrum

Iran’s retaliation for the killing of its top commander Qasem Soleimani was quick. Two airbases housing US troops in Iraq were hit by more than a dozen ballistic missiles from Iran further escalating an already tense situation. Most regional and extra regional stakeholders in the Middle East have been calling for de-escalation and India has been no exception. India’s entanglement in the US-Iran dynamic is not new but this time stakes could be much higher.

Until May 2019, India was the second largest buyer of crude oil from Iran, after China. But after the U.S. ended its sanctions waiver, which had allowed India to import Iranian crude oil, India’s energy ties with Iran have undergone a change. Tehran had previously attracted Indian buyers with lucrative provisions such as free shipping and extended credit, but the U.S. diktat to cease oil imports from Iran has led New Delhi to change its calculus.

In 2018-19, despite mounting US pressures to cut oil imports, India had purchased 479,500 barrels of crude oil per day, more than what it had purchased in the previous fiscal year. After the Trump administration ended its Iran sanctions waivers for a select few countries last year, the U.S. encouraged its oil-producing allies, including Saudi Arabia and the United Arab Emirates, to boost production and stabilize the international oil markets, which would have otherwise entered a tumultuous phase due to the absence of Iranian crude oil. In an interesting shift, there has been an increase in India’s oil imports from the United States, outpacing imports from its traditional suppliers in the Middle East.

While purchasing crude oil from Iran has become increasingly difficult for India, New Delhi has ramped up the purchase of crude oil from the U.S. India has also got assurances from the UAE, which has promised to cover for any shortages that India would face owing to the current situation. Continuing tensions in the Strait of Hormuz and the proximate region have made India nervous.

The ongoing crisis could have further ramifications, as India’s dependence on imported crude oil hit a multi-year high of 84 percent last year. Even as consumption has steadily ticked up in recent years, India’s domestic oil output has fallen from 36.9 million tonnes in 2015-2016, to 34.2 million tonnes in the most recent fiscal year, raising concerns in New Delhi about the future of the country’s energy security. It is therefore important for India that the Middle East region remains stable and a military confrontation or conflict wouldn’t serve its interests. India also have extensive trade, investment, security and people-to-people ties with countries in the region. As Indian External Affairs Minister S. Jaishankar underlined during his meeting with U.S. Secretary of State Mike Pompeo last year, “energy security is part of it but there are other concerns as well about diaspora, regional security and trade.”

The U.S. sanctions regime has certainly affected India’s relations with Iran, where New Delhi has important strategic and economic interests. In addition to the purchases of Iranian crude oil, which have now been curtailed, these include the ambitious Chabahar port project in southeastern Iran—which India has a major stake in developing—and Indian investments in Iran’s oil and gas sector.

Though India had earlier stated that it only adheres to United Nations sanctions and not to unilateral sanctions by a foreign country, it has been less explicit in expressing its discontent regarding the U.S. policy toward Iran. That is despite the fact that U.S. sanctions have clearly hurt India’s trade with Iran. Indian fossil fuel companies are now hesitant to do business with Iran, and foreign companies, including those from Europe, are refusing to participate in the Chabahar project, slowing its development.

Despite assurances from the U.S. that its sanctions regime would spare non-fossil-fuel-related business between India and Iran, US secondary sanctions target companies which indulge in Iran’s port and shipping sector, which make Indian investments in Chabahar and other associated developments around it vulnerable. Having comprehensive trade ties with Iran is simply not viable for any Indian entity at the moment. Though the U.S. has issued India a waiver to develop Chabahar port, the Trump Administration’s crippling economic sanctions on Iran have ensured that companies remain wary of engaging Iranian ports, resulting in slowing down of trade via Chabahar. Just last month, India and Iran had decided to accelerate Chabahar port cooperation during Jaishankar’s visit to Tehran.

As a result, the Iranian issue has emerged as one big irritant in an otherwise robust Indian-U.S. partnership. The Trump administration’s hawkish position on Iran has made things difficult for Indian diplomacy, though there are signs that Washington is not keen to push the Iran issue beyond a certain point when it comes to Indian-U.S. engagement. During his meeting last year with Indian Prime Minister Narendra Modi on the sidelines of the recent G-20 summit in Osaka, Japan, U.S. President Donald Trump was keen to play down this issue: “We have a lot of time. There's no rush, they can take their time. There is absolutely no time pressure.”

But New Delhi faces a different timetable. India’s Middle East policy has traditionally tried to balance the three poles in the region: the Arab Gulf states, Israel and Iran. As Trump turns the screws on Iran, this policy that will increasingly become untenable.

### Of shifting sand dunes in West Asia

In quoting Ella Leya from her brilliant debut on fiction, “The Orphan Sky”, a certain piece embodies the Middle East, “.. is a desert of shifting sand dunes. Unpredictable. Erratic. Harmony changes into dissonance, the immediate outlives the profound, esoteric becomes cliched. And all, vice versa”

For a region without one dull day, Middle Eastern (West Asia) history has been replete with incidents barely predictable until a few days into their existence, the immediate always outliving the profound, with harmony and dissonance being as interchangeable as the central characters behind them.

Around 2 years ago, the Middle East was a house split down many rooms. The coalition of Saudi Arabia, UAE & Bahrain had imposed a blockade on Qatar, and severed diplomatic ties, in an effort to bring about regime change in the small emirate. (In a war of narratives and information, the troika had accused Qatar of being the world’s leading sponsor of terror and state sponsored news outlets had been spewing venom ever since)

The traditional rivalry between Saudi and Iran had touched new heights, with proxy wars in Yemen & Syria & re-imposing of US sanctions on Iran (Trump had visited Riyadh in 2017, and in the backdrop of a sizeable arms deal, had articulated an agenda for empowering the Arabian side of the gulf against Iran, and of re-imposing sanctions on Iran). The Saudi-UAE coalition seemed unstoppable in Yemen, while the future looked bleak for Iran and Qatar, economically and militarily.

“We are a primary target for the Iranian regime,” Prince Mohammed bin Salman of Saudi said in 2017. “We won’t wait for the battle to be in Saudi Arabia. Instead, we’ll work so that the battle is for them in Iran.”

Circa Nov 2019, there seem to be thawing of tenuous relationships in war-ridden Yemen, easing of the blockade by Saudi-UAE against Qatar and most unbelievably, the semblance of some reconciliation between Saudi and Iran. And there’s one reason for this extremely inexplicable chain of events - USA’s clear intentions not to soil their hands in the Middle East anymore.

Thought through or not, two clear indications by the USA in the last few months have made the previous blur on the wall writing extremely clear to Saudi. That the USA has little interest in partaking in any conflict in the region. US withdrawal from Syria, and their non-response to the September 14 attacks on Saudi oil facilities by Houthi rebels (Iran was accused of the attacks by proxy but has denied responsibility), have had a painful awakening to a new reality for Saudi.

Trump did some tough talking against Iran after the attack, but avoided any military response. This would have raised serious questions for the Saudis about US commitment to Saudi security, which has underpinned the strategic relationship for years now.

For a coalition, previously used to raw power, by mutual support, the hold is not as mighty as it used to be. Fitch downgraded Saudi Aramco's rating following the September 14 attack on the key oil facilities that temporarily slashed its output by half. This sent a shiver down the Saud family, as Aramco was preparing for an IPO, and the timing could not have been worse.

Qatar, on the other hand, held on almost seamlessly despite the sanctions and the blockade and managed their international media narrative well. Hardly a dent to the previously imagined regime change and economic collapse.  The decision that the football teams of Saudi Arabia, the UAE and Bahrain would now take part in the Gulf Cup in Qatar is a clear sign of reconciliation.

The Iranian ploy to keep its heels dug in, despite mounting international pressure, seems to have paid off, at-least in some quarters. Recently, the UAE held direct maritime security talks with Iran, and pulled back from the war in Yemen, where it had allied with the Saudis in a battle against the Iranian-backed Houthi rebels. A larger reconciliation with Saudi here seems around the corner.

In recent weeks, there were reports of an olive branch from the Saudi crown prince, Mohammed bin Salman, asking for de-escalation with Iran (The leaders of Iraq and Pakistan had offered to mediate). Iran welcomed the gestures, stating publicly that it was open to talks with Riyadh.

In just about two years, the world, its players and their roles seem to have drastically changed in the region. Mohammed bin Salman’s decisions now seem to be products of re-think on a variety of issues.

A possible power sharing arrangement with the Iran backed Houthis in Yemen, complete reconciliation with Qatar, and a larger conciliatory approach to issues might be grudgingly added into the Saudi playbook, as it has belatedly realised that it alone has to bear the burden of war or dissonance in the region.

### The evolution of India’s West Asian policy

India’s vision to establish itself as a powerful and prosperous state in Asia has led it down various paths in terms of its foreign policy towards West Asia. Over the years, New Delhi has adapted its foreign policy to suit the evolving needs and conditions of global politics — from the ideologically-driven Non-Aligned Movement to a policy based on greater pragmatism. Today, the increasing multipolarity of the global order has enabled India to pursue its policy of strategic autonomy greater freedom when it comes to international relations and trade.

To understand this transformation, we must first consider the ideological foundations of Indian foreign policy. During the Cold War years of global bipolarity, India’s foreign policy followed the principles of the 1955 Non-Aligned Movement (NAM) which PM Jawaharlal Nehru founded. After decades of international sidelining and subjugation, NAM aimed to use Afro-Asian solidarity to shape international relations from offices beyond Washington and Moscow. Thus, the non-aligned values of sovereignty, territorial integrity and non-interference in domestic politics were a crucial component of Indian’s foreign policy fabric. In the West Asian context, this was reflected in the Nehru-Nasser alliance, through which India supported the Arabs against Western interference, particularly in the case of Palestine and the 1956 Suez Crisis.

After decades of international sidelining and subjugation, Non-Aligned Movement aimed to use Afro-Asian solidarity to shape international relations from offices beyond Washington and Moscow.


By 1991, the Cold War formally ended with the dissolution of the USSR. Half a decade before the dissolution, changes were well on the way and the Soviet Union’s sphere of influence was incrementally receding. The US-sponsored version of neo-liberalism emerged as the final evolutionary form of global governance. Such unipolarity presented India with significantly less flexibility of options in setting its West Asian policy.

One example of this was the Gulf Crisis. On 2 August 1990, the V.P. Singh coalition government faced a threat to its geopolitical interests. Iraqi forces on the orders of President Saddam Hussain had invaded Kuwai, an oil-producing country. As the international community began to rally against Iraqi hostility, New Delhi failed to publicly align itself with either side. Iraq, a non-aligned secular state in a sea of Gulf monarchies, was India’s natural ally to for ideological reasons. Iraq was also one of the few Middle Eastern countries that supported India’s claims on Kashmir. Thus, upon Iraq’s invasion of Kuwait, India was faced with a serious policy dilemma — would it stick to its traditional stance as a non-aligned power and take a stand against Western intervention in the conflict? Or, would it stand by the Gulf states and adhere to the policies of the US, considering new economic opportunities and a changing world order?

The Singh government eventually chose a third option: ambiguity. India failed to formally condemn Iraq for the invasion due to their strong relationship. Instead, they stressed on the security of the 185,000 Indian expatriates stranded in the region. Foreign Minister I.K. Gujral was caught embracing Iraqi Prime Minister Saddam Hussain and became an infamous symbol of India’s weak-willed diplomacy. According to the Far Eastern Economic Review (6 September 1990), India encouraged “the soonest possible withdrawal of Iraqi forces.” Despite this, they maintained their strong opposition to any intervention outside of the UN framework. Gujral gave warnings for what he saw as great power politics eating away at the true multilateral foundations of the United Nations.

Upon Iraq’s invasion of Kuwait, India was faced with a serious policy dilemma — would it stick to its traditional stance as a non-aligned power and take a stand against Western intervention in the conflict? Or, would it stand by the Gulf states and adhere to the policies of the US, considering new economic opportunities and a changing world order?


In the months to follow, India’s stance on the issue grew more pronounced as V.P. Singh gave way to a new government led by Chandra Shekhar. It had become clear that India’s inaction would cost it in the future, particularly through poor relations with the Gulf countries and their Western allies. Through this calculation, India supported the UN Security Council Resolution 678 in November 1990- which authorised the use of force against the Iraqi army if they refused to withdraw before 15 January 1991. India did not contribute its military forces in the coalition against the Iraqi army, however, New Delhi found itself pressured into supporting the US led coalition against the Iraqi army through intelligence and assistance. In January 1991, India allowed American military planes to refuel at Indian facilities, which was met with great opposition. The decision was largely seen as political rather than functional, as the US made it clear to the world which side India stood on. In this sense, the Gulf crisis was treated by the US as a “test of friendship”, as described by former Indian foreign secretary Muchkund Dubey.

However, India was not ready to discard its commitments to South-South cooperation yet. On 2 March 1991, the UN adopted Resolution 686 after an 11-1-3 vote, India and China being two of the three abstainers. The resolution largely dealt with settling the boundary dispute, rebuilding the affected areas of Kuwait, and Iraqi liability for damage. However, Indian representatives disagreed with the continuation of the ‘authorisation of force’ clause of Resolution 678. The act of abstaining signaled India’s ideological commitment to non-interference, especially considering an overly eager United States, who they feared was trying to subdue Iraq beyond the parameters of the conflict.

Nonetheless, as one of the first political crises of the post-Cold War world, the Gulf War acted as the US’ public announcement that a new world order had arrived. While the fear of a Washington-centric system gripped Indian leaders, the crisis also called into question the ideological burdens and relevance of non-alignment. India was forced to face the realities of a neoliberal world in which economic benefits came with political costs.

Increased multipolarity has enhanced India’s ability to truly pursue its national interests internationally, without involving itself in messy political alliances or ideological factions. This freedom is synonymous with the idea of ‘strategic autonomy.’


As we near the end of the second decade of the 21st century, it has become clear that the gears of the international machine are once again in motion. American hegemony is being challenged economically, militarily, diplomatically and culturally. Multipolarity is growing with the rise of regional powers such as Russia, China, Saudi Arabia, Iran and India. Without an overt need to appease Washington, India can conduct its foreign policy with a significant amount of independence. Increased multipolarity has enhanced India’s ability to truly pursue its national interests internationally, without involving itself in messy political alliances or ideological factions. This freedom is synonymous with the idea of ‘strategic autonomy.’

In the past, India has managed a successful balancing act in a tripolar West Asia. Now, the restructuring of West Asia’s geopolitical landscape has allowed India to engage with West Asian states with even less political maneuvering. Through a strictly business attitude, India has pursued its most favourable economic opportunities without the burden of managing political ramifications.

One such act of political maneuvering is India’s response to the simmering crisis in the Persian Gulf, which continues to be a region of unsurpassable importance. In terms of energy security, trade and people-to-people ties, stability in the Gulf is a major priority in India’s foreign policy calculations. The crisis began on 8 May 2018, when President Donald Trump withdrew the United States from the Joint Comprehensive Plan of Action (JCPOA). This decision reinstated sanctions against Iran due to unverified claims of non-compliance.

With Iranian crude oil comprising 10% of India’s energy imports, India needed a concise strategy to eliminate tensions and reduce market instability.


India’s most obvious concern was energy security. With Iranian crude oil comprising 10% of India’s energy imports, India needed a concise strategy to eliminate tensions and reduce market instability. In the meantime, the Trump administration granted waivers to eight heavy consumers of Iranian oil, including India. This gave them until 2 May 2019, to either completely end oil imports from Iran or face sanctions from the United States. By 24 May 2019, Indian Ambassador to the United States — Harsh Vardhan Shringla — announced that India had ended oil imports from Iran, in keeping with American requests. However, in a Parliament session during early July, Minister of State for External Affairs, V. Muraleedharan, made it clear that India’s “bilateral relations with Iran stand on their own and are not influenced by India’s relations with any third country.” While oil imports had significantly decreased, this was expressed as a short term measure. Furthermore, the Indian government had no intention of suspending trade or infrastructure development in Iran.

Despite acknowledging their comprehensive partnership with the United States that has only grown under PM Narendra Modi’s vision, Indian foreign policymakers have stuck to their traditional stance on strategic autonomy. The Indian External Affairs Minister S. Jaishankar’s meeting with US Secretary of State Mike Pompeo in late June 2019 reflected this strength. Jaishankar clarified that as a nation that imports 85% of its oil primarily through the Gulf, India will push for a diplomatic resolution of the matter to secure its interests. Moreover, he maintained that India will use its own metrics to assess its foreign policy, not the United States’. During PM Modi’s meeting with Iranian President Hassan Rouhani on 26 September at the UN General Assembly, he confirmed that in order to maintain peace and stability in the region, India will continue to prioritise diplomacy and dialogue over isolation.

Such an assertion of strategic autonomy reflects India's current foreign policy towards West Asia. India's policy is motivated by its active pursuit of economic opportunities in West Asia, whether it be vis-a-vis energy security or greater connectivity and trade through the development of Chabahar Port in the Iranian case. In a time when global powers are shifting inwards, India has taken up an important role as one of the few nations willing to stand behind the promise of globalisation.

The author is a research intern at ORF.

### West Asia’s tech-talent balance

Even as West Asian economies make efforts to move away from overdependence on oil, they are running against time to overcome another challenge – maintaining the technology-talent balance.

For decades a large number of expatriate workforces have kept the region’s well-oiled industrial machine running. Now, the advent of cutting-edge technology presents an opportunity of a lifetime, to optimize and considerably reduce reliance on imported labor.

The region merely needs to leap from its reputation of being end-users to become innovators in a manner that localizes employment. This is already beginning to happen, albeit at some costs.

Since the onset of the oil windfall, the region’s reliance on the outside workforce to build its infrastructure and set up industries has been a win-win situation for both sides. While millions of surplus labor from South Asia built their homes and educated their children with money earned in the Gulf, numerous skylines sprung up across the region, and goods and services became easily available.

Even though this equilibrium isn’t under imminent threat, a new wave of reforms is beginning to re-orient the old economic order across the region. Hi-tech lies at the core of this – promising to boost efficiency and further this transformation.
Talent blind spot 
Striking the right balance is the key though, which consulting firm Korn Ferry describes as the “talent blind spot”. In other words, the challenge for business leaders is not to get distracted by the compelling promise of transformative technology.

According to a Korn Ferry report, by 2030, the UAE alone is likely to experience a skilled labor gap worth $40 billion, making up five percent of the economy. So, despite the thrust on technology, these economies cannot rely on it completely.

“They see technology as the best way forward to meet their business demands and that means the people problem goes to the bottom of the list,” Korn Ferry’s Danny Lenders told a business weekly. It is obvious that at least some business leaders may be underestimating talent as an organizational risk, something they could ill-afford.
Labour market efficiency
Industry observers say gaps remain in terms of business dynamism and labor market efficiency in the Middle East and North Africa (MENA) region.

According to the World Economic Forum Global Competitiveness Report, 2018, this factor, alongside limited technological and ICT readiness, hinders the region’s capacity to innovate and that “the quality of the country’s human capital remains a key constraining factor”.

“The segmentation of the labor market into different groups of workers, with little mobility among them, adds to the rigidity of the economy in most countries in the region and reduces the utilization of available talent,” the report said.

Citing another example of Saudi Arabia – which happens to be MENA’s largest market – the report said that the country’s labor market efficiency (102nd in the world) is “impaired by a number of constraints and regulations that segment the market and decrease the overall level of efficiency and talent utilization”.

WEF hasn’t been the only one pointing toward a mismatch in talent utilization in the region. A GCC-India Corridor report by investment bank Alpen Capital was even more explicit in its findings.

“A limited pool of local talent, increasing emphasis on nationalization of jobs and high attrition rates are hindering the growth of labor-intensive sectors in the GCC,” it said in its 2017 report.
Innovation deficiency 
Abu Dhabi-based social scientist, Dr. Farid Azzi, chooses to call this phenomenon innovation deficiency, which according to him is a well-observed, noted and documented in the Arab world. He attributes this to structural as well as cultural reasons. Much of the Arab countries’ economies are rentier or semi-rentier economies which don’t motivate economic diversity and thus innovation, according to Dr Azzi.

According to him, lack of economic competitiveness, the distortion between the job market and system of education, and the lack of resources allotted to innovation, research and development have led to this situation.

Dr. Farid also points to a lack of scientific culture within the populace, consumerism and youth marginalization as possible reasons. “There exists a widespread fatalistic attitude accepting western technological and scientific domination,” he says.
Artificial intelligence
Nevertheless, companies have started embracing technology across their value chain as part of their digital transformation strategy. Technology adoption is making giant strides with artificial intelligence (AI) becoming a buzzword all over the region.

Observers believe that the current climate of AI support and investment is potentially a game-changer for the Middle East, with several Gulf Cooperation Council (GCC) countries leading the change.

A survey conducted by Artificial Intelligence & Intelligent Automation (AIIA) Network, says 40 percent of industry professionals from leading government entities in the region have allocated an AI budget of about $500,000–$1 million. Twenty percent of the respondents allocated a budget of $1 million and above.

Some timely government support has built momentum to this end. In October 2017, UAE Vice President and Ruler of Dubai, Mohammed bin Rashid al-Maktoum, launched a “One Million Arab Coders” program – an educational platform offering free programs for those interested in developing digital skills.

The objective behind this initiative is to train one million young Arabs in computer programming, position them at the forefront of the fast-moving industry and teach them coding – the language of the future.

Similar programs have been launched elsewhere in the region to make the youth aware of the opportunities. Entrepreneurs, on the other hand, are focused on the root cause and are seeking solutions.

The talent deficit is there in the West as well, however, a lot more is being done to address this issue relative to the Middle East, leaders such as Omer Farooqui, Founder and Chief Innovation Officer of the tech-education startup, Coded Minds  believe.

For Farooqui, it’s a matter of going back to school and making a new beginning in the changed circumstances. “I truly hope this is fixed soonest as I fear the children of today will not be ready with the relevant skills at hand for the job requirements within as soon as the next decade,” he said.

While it may be difficult to replace a South Asian construction worker with a local one, but at some stage, technology will empower them enough to tilt the balance in their favor.

___________________________________________________________________________________________________________________________________

Ehtesham Shahid is a senior Indian journalist based in Dubai.


### Akram Zaoui

Akram Zaoui is an Associate Fellow, Geopolitics at ORF Middle East (ORF ME), where his research examines the implications of the current geopolitical transition at the confluence of the African, Arab, and Mediterranean areas, with a particular interest in geoeconomics and its effects on national development and security, as well as regional integration, resilience, and stability.
He joined ORF ME in January 2026, bringing over eight years of experience at the intersection of civil society, consulting, and policy research across Africa, Europe, and the Middle East.
He previously served as Senior International Relations Specialist and Chargé de Mission (Advisor) to the Executive President of the Policy Center for the New South (PCNS), a leading African think rank. In this capacity, he played a central role in the centre’s strategic development and external positioning, overseeing key partnerships and engagements with peer institutions, international organisations, senior policymakers, and thought leaders. His work focused on building platforms for policy dialogue and cooperation on African integration, Atlantic relations, Mediterranean partnerships, and global governance and international development.
He also served at University Mohammed VI Polytechnic (UM6P), Morocco’s leading university, advising senior academic leadership and contributing to flagship courses and high-level research seminars on comparative politics, decision-making and geopolitics.
Earlier in his career, while based in Paris, he contributed to advisory and policy projects with Volentia, a boutique strategic advisory consultancy, and Institut Montaigne, a leading independent French think tank.
He holds a dual master’s degree in Corporate and Public Management from HEC Paris and Sciences Po, as well as a bachelor’s degree in History from Université Paris 1 Panthéon-Sorbonne.

### Kabir Taneja

Kabir Taneja is the Executive Director of the Observer Research Foundation’s Middle East office. He previously focused on India’s relations with the Middle East (West Asia), examining domestic political dynamics, terrorism, non-state militant actors, and the region’s evolving security architecture.
He is the author of books, book chapters, journal articles, and op-eds, and is a regular contributor to Indian and international media. He frequently speaks at international conferences.

### Clemens Chay

Dr Clemens Chay is Senior Fellow for Geopolitics at ORF Middle East. His research focuses on the history and politics of the Gulf Arab states and the broader geopolitical dynamics of the region. His recent analyses have examined great power involvement in the Middle East and developments in conflict zones including Gaza and Iran.

Previously, he served as Research Fellow at the National University of Singapore's Middle East Institute, where he provided expert counsel to policymakers and the private sector. Committed to public outreach, he spearheaded an educational series titled “Bridging the Gulf.”

From 2015 to 2018, Clemens taught at Durham University, where he completed his PhD in Middle Eastern and Islamic Studies under the auspices of the Al-Sabah Programme. His published work includes academic research, institutional commentaries, and media contributions. He has been featured in the BBC, CNA, SCMP, TIME Magazine, and the New York Times.

Clemens holds an MSc in Defence, Development, and Diplomacy from Durham University and a BA in Political Science from Sciences Po Paris. He also studied at the American University of Kuwait.

### Fatima Mohammed Alwari

Dr. Fatima Alwari is an Assistant Professor of Media and Communication at the American University of Sharjah (AUS), where she teaches media studies and communication. Her academic work is complemented by her service on the Editorial Board of the Journal of Formative Design in Learning.
Dr. Fatima's expertise spans public policy design, strategic communication, and youth development. Before joining AUS, she worked across several strategic government entities in the UAE. Most recently, she served as a Senior Consultant at the Knowledge Fund Establishment (KFE), where she contributed to high-impact education initiatives, stakeholder engagement efforts, and corporate communication strategies for the government of Dubai.
Her earlier public-sector roles include positions at the Ministry of Economy, The Education and Human Resources Council, and the National Programme for Advanced Skills, where she supported national strategies and programmes related to entrepreneurship, skills development, and education policy. Dr. Fatima also gained international diplomatic experience through roles with the UAE Embassy in Washington, DC, and the Permanent Mission of the UAE to the United Nations in New York.
She holds a PhD in Social Science from University College London, where her doctoral research examined the evolution of UAE youth development policies and how young Emiratis perceive and engage with national youth initiatives. She also holds a Master of Science in Strategic Communication from Columbia University and a Bachelor of Arts in Mass Communication from the American University of Sharjah.

### Reem Sagahyroon

Reem holds a bachelor's degree in Biology with a minor in Environmental Sciences from the American University of Sharjah, and recently completed her Masters in Public Health with a focus on Environmental Health and Epidemiology/Biostatistics at Boston University. She has previously interned with the Massachusetts office of Energy and Environmental Affairs, where she contributed to data synthesis and analysis related to Environmental Justice policies as well as with the Bee’ah Group in their consultancy, research, and innovation department.

### Giada Kabrit

Giada Kabrit has recently joined ORF Middle East as Project Assistant and Intern Coordinator. She holds a Bachelor’s degree in European Studies from Maastricht University and a Master’s degree in Mediterranean Studies from the Centre International de Formation Européenne (CIFE).
 Previously, Giada interned at the European Union Delegation to Lebanon in the Political, Press, and Information section in Beirut, and at the NATO Defense College in Rome, where she contributed to academic policy and engagement initiatives in defense and security training programs.

### Elizabeth Heyes

Elizabeth Heyes is a Junior Fellow – Technology and Innovation Policy at the Observer Research Foundation (ORF) Middle East. Her research explores how emerging technologies intersect with governance, trade, and digital transformation in the Gulf Cooperation Council (GCC) region. She focuses on issues such as data governance, AI strategies and international connectivity in sustainable technologies and digital infrastructure.

Before joining ORF ME, Elizabeth worked at Asia House, a London-based think tank and advisory firm focused on Asia–Gulf commercial, trade and investment relations. There, she authored reports on GCC AI regulation, GCC-Asia cooperation in sustainability and the energy transition and organised high-level dialogues in Riyadh, Jeddah, and Dubai bringing together policymakers, investors and executives to discuss innovation and trade partnerships.

Earlier in her career, Elizabeth worked in documentary production, conducting field research and interviews with ministers and business leaders across the GCC on topics related to digital transformation, economic diversification and technology adoption.

Elizabeth holds a BA in Modern Languages (Arabic and French) from the University of Oxford and an MSc in Security, Intelligence, and Strategic Studies from the Erasmus Mundus consortium (University of Glasgow, Università di Trento, Charles University Prague). Her master’s dissertation examined labour policies in Saudi Arabia, Qatar, and the UAE, analysing the promotion of technology-focused career paths to integrate citizens into innovation sectors amid shifting economic priorities.

### Parul Bakshi

Parul Bakshi is Fellow – Energy and Climate at the Observer Research Foundation (ORF) Middle East, where her research spans the themes of energy transition, energy security, geopolitics of energy, decarbonization strategies, and sustainability. She is also a Visiting Research Fellow at the Oxford Institute for Energy Studies (OIES), contributing to research on global energy markets and transitions.
Previously, she served as a Researcher at the Institute for Future Initiatives at the University of Tokyo, and at Ghent University in Belgium. She was also a recipient of the Japan Foundation Indo-Pacific Partnership Fellowship. Earlier in her career, Parul worked as a Research Fellow at the Florence School of Regulation – FSR Global, where her work focused on energy security in South Asia, cross-border electricity trade, interoperability and open standards in power systems, and green hydrogen policy.
Parul holds a doctorate from Jawaharlal Nehru University, India, where her research examined Japan’s post-Fukushima energy transition toward renewables, drawing comparative lessons from Germany’s Energiewende.
She is the co-editor of India–Japan Relations @70: Building Beyond the Bilateral (2022) and Geographies of Exchange between India and Japan (2024). Her work has appeared in international journals and platforms including The Pacific Review, Australian Journal of International Affairs, Environment: Science and Policy for Sustainable Development, The Diplomat, The East Asia Forum, and The Japan Times.

### Anjali Rao Koppala

Anjali Rao Koppala is the Head of Communications – ORF Global at Observer Research Foundation Middle East, where she oversees the Centre’s strategic communications, digital engagement, and content amplification initiatives.
With a decade of experience spanning international media and the non-profit sector, Anjali has worked at the intersection of storytelling and social impact that included reporting on global affairs in newsrooms to shaping compelling narratives for development organizations. Her career has involved collaborating with diverse stakeholders, including grassroots entities like SEWA Bharat, philanthropic platforms such as ACT Grants, and research institutions like WRI India that are addressing key socio-economic challenges.
Anjali holds a Masters in Development Studies from Azim Premji University, Bangalore, and a Postgraduate Diploma in Journalism from the Asian College of Journalism.

### Leigh Mante

Leigh is a Junior Fellow, Climate and Energy at ORF Middle East. Her research focuses on advancing climate adaptation, urban resilience, finance, diplomacy, and just energy transitions in emerging economies.
Prior to joining ORF ME, she served as a Diplomat with the U.S. Agency for International Development where she helped design and coordinate multimillion dollar programs in clean energy, urban development, and climate resilience. As a former Donald M. Payne Fellow, she led climate and health program integration at USAID/Indonesia. She also consulted for the U.S. International Development Finance Corporation where she identified opportunities for private sector investment in conservation and coastal resilience in the Dominican Republic.
Leigh brings an interdisciplinary background in data analysis, global health, and climate policy, with professional experience across Asia, the Caribbean, Africa, and the U.S. She holds a Master of International Affairs in Energy and Environment from Columbia University’s School of International and Public Affairs and a Bachelor of Arts in Global Public Health and Mathematical Statistics from the University of Virginia.

### Maggie Sprenger

Maggie is the co-founder and General Partner of Audere Capital, a private equity firm investing in advanced technologies that underpin societal resilience. She is a Kauffman Fellow, a Presidential Leadership Scholar, a Visiting Fellow at the National Security Institute, and was a Raisina Fellow. She is one of three curators of the Deep Tech Network. Maggie is the co-author of Innovation Empires: Technology, Capital, and the Future of Global Power. She holds a MBA from Wharton, and is based in New York.

### Eszter Karacsony

Eszter Karacsony is an Non-Resident Fellow at Observer Research Foundation (ORF) Middle East.
Her research focuses mainly on interregional relations between the Gulf states and the European Union (EU), covering both the EU member states’ diplomatic and economic presence in the region, and the Gulf states’ engagement with EU countries.
Before joining ORF Middle East, Eszter worked as Research Analyst at the French think tank Institut Sapiens, where she facilitated expert working groups specialized in various fields of public policy. She also wrote analytical studies on the political and socio-economic challenges France was facing.
Prior to that, Eszter had held the position of Project Officer to the Director of the French Institute of International Relations (Ifri), where she worked on geopolitical foresight and risk.
Eszter started her professional carrier as Programme Manager at the European Forum for Urban Security (Efus) where she was responsible for institutional relations with the European Commission, the European Parliament and the European Committee of the Regions. Furthermore, she managed EU co-funded projects and oversaw the Forum’s outreach and network development in Central and Eastern Europe.
Eszter holds a Master's degree in EU-International Relations and Diplomacy Studies from the College of Europe (Bruges Campus), a Master's degree in European Politics and Public Affairs from Sciences Po Strasbourg and a Master's degree in Contemporary History from the University of Strasbourg.
Eszter is a Raisina Young Fellow and an Atlantic Dialogues Emerging Leader. Eszter is equally the co-editor of ORF Global Quarterly.

### Cauvery Ganapathy

Dr. Cauvery Ganapathy is a Fellow (Climate and Energy) at ORF ME. An International Relations analyst, she had previously been a strategic risk assessment consultant. Her research focuses primarily on energy security, and explores the interrelated domains of politics of energy and transitions, cooperative and strategic frameworks in the fields of critical minerals and nuclear energy, and the leveraging of resources.
Cauvery has been a recipient of the Fulbright-Nehru Doctoral Fellowship to the University of California, Berkeley, where she worked on the final part of her thesis at the Renewable and Appropriate Energy Laboratory (RAEL). She has earned her PhD and Masters in International Relations from Jadavpur University, India and has a Bachelors in Political Science from St.Xavier's College, Kolkata, India.
Cauvery has been a recipient of the Wrangler Pavate Fellowship to the University of Cambridge as Visiting Research Faculty at POLIS and a Senior Visiting Fellow, Sidney Sussex College, Cambridge. She has previously been a Research Associate with the Office of Net Assessment (ONA) under the US Department of Defense with a focus on China in South Asia and the Indo-Pacific. She began her career as a Fellow and Program-Coordinator of Global India Foundation, Kolkata, and has presented and published at various national and international forums in that capacity and beyond. Cauvery has researched the origins of the Indian nuclear industry as an intern at the National Institute of Advanced Studies,(NIAS) Bangalore.

### Siddharth Yadav

Siddharth Yadav is a Fellow in Technology with an academic background in history, literature and cultural studies. He acquired BA (Hons) and MA in History from the University of Delhi followed by an MA in Cultural Studies of Asia, Africa, and the Middle East from SOAS, University of London. Subsequently, he completed his doctoral research at Birkbeck College, University of London. His research focuses on the socio-cultural and philosophical implications of emerging technologies like artificial intelligence, virtual reality, robotics and brain-computer interfaces.

### Pranjal Sharma

Pranjal Sharma is an economic analyst, advisor and author who focuses on technology, globalisation and inclusive growth. He serves on boards of enterprises and non-profit entities which are leveraging emerging technologies for sustainable, equitable growth.
His latest book The Next New: Navigating the Fifth Industrial Revolution, published by HarperCollins, is the first in the world to chronicle the impact of the fifth industrial revolution while quantifying the magnitude of revenue shifts globally. He lives in New Delhi, India. 

### Mahdi Ghuloom

Mahdi Ghuloom is a Junior Fellow in Geopolitics at the Observer Research Foundation (ORF) - Middle East, where he focuses on the Arab Gulf States, examining their economic competitiveness, political institutions, and diplomacy. He has more than five years of experience spanning three years of economic policy research within the Bahraini government (mainly at the Bahrain Economic Development Board with a short term at the Prime Minister’s Office), one year of political risk analysis in a security consultancy (Le Beck International), and his current role which he began in February 2025.
Mahdi holds a bachelor’s degree in Economics and Politics from the University of Essex, a master’s in Policy Analytics from the University of Exeter (where he was awarded the Department’s Excellence Scholarship in recognition of his quantitative expertise) as well as a second master’s in Practical Ethics from St Cross College, University of Oxford, focusing on ethical dilemmas in political contexts.

### Samriddhi Vij

Samriddhi is an Associate Fellow, Geopolitics at ORF Middle East, where she focuses on producing research and furthering the dialogue on regionally relevant foreign policy initiatives. Her research focuses on economic diplomacy and economic peace, often working at the intersection of geoeconomics and peace building.

She holds a Masters in Public Policy from the Harvard Kennedy School, a Masters in Economics from Delhi School of Economics and a Bachelors in Economics from Hans Raj College, Delhi University.

She has previously worked with United Nations Executive Office of the Secretary General, New York where she engaged directly with the UN Secretary General and senior UN leadership to facilitate decision making on high priority global challenges. Additionally, she worked with Harvard University’s Belfer Centre and Middle East Initiative to research great power competition in the Arabian Gulf. She has also assisted in teaching multiple courses at Harvard University centered on the Middle East, Mediation and Economics.

Earlier in her career, she led program management nationally for primary grades, life skills and girls’ education at Pratham Education Foundation, India.

### Mannat Jaspal

Mannat Jaspal serves as the Director & Fellow - Climate and Energy at ORF Middle East, responsible for expanding the research center to support innovative, impactful, and policy-relevant efforts in the region and beyond. Her research and programmatic focus lie at the intersection of geopolitics, geoeconomics, and climate & energy policy, with expertise in climate finance, transition finance, carbon markets, MDB reforms, and just energy transitions.

Previously, Mannat was part of the Geoeconomics Studies Programme at ORF New Delhi, where she authored policy briefs, op-eds, and special reports on sustainable finance and just energy transitions for ORF and key government stakeholders. She also curated The Energy Transition Dialogues 2023, fostering dialogue and partnerships to accelerate renewable energy investments and climate finance across India and the Global South.

Earlier in her career, she led the "Social Impact Measurement and Management" division at a multinational consulting firm and worked with UNDP on projects spanning education, health, livelihoods, and gender. Her professional experience extends across Asia, the Middle East, and Africa.

Mannat holds a Master’s in Economics and International Finance from the University of Warwick, awarded through the prestigious India-Warwick Scholarship.

Previous research publications can be accessed here.

### Mohamed AlSharhan

Mohamed AlSharhan is the Managing Director of the World Governments Summit Organization at the UAE Prime Minister's Office. Mohamed held the position of the Deputy Managing Director between 2020 and 2023. Between 2018 and 2020, AlSharhan was the Projects Manager at the Dubai Future Foundation, where he led a number of projects such as Dubai 10X and the FIRST Global Championship for Robotics and Artificial Intelligence, which witnessed the participation of 191 teams from different countries around the world, and the CEO Summit hosted under the patronage of the Crown Prince of Dubai, His Highness Sheikh Hamdan bin Mohammed Al Maktoum.
Prior to joining the Dubai Future Foundation, Al Sharhan worked as an engineer specialized in sustainable transport, and as a researcher at Masdar Institute in the field of transport and sustainable development between 2011 and 2013.
Mohamed is a National Expert at the UAE Presidential Court since 2019. In 2019, he was selected as a participant in the first Global Secondment Program for Emirati Leaders by the Mohammed bin Rashid Center for Leadership Development and was a graduate of the Impactful leader's program in 2023.
Al Sharhan holds an MSc in Engineering Systems and Management in 2013 from the joint Higher Education program between Masdar Institute and the Massachusetts Institute of Technology (MIT), a Masters in Leadership and Innovation from Rochester Institute of Technology in the US, and a Bachelor of Science in Civil Engineering in 2011 from the American University of Sharjah in the UAE.

### Leila Alagroobi

Leila has a demonstrated history of working in the Supply Chain Industry, External Relations, Communications and Public Affairs with previous roles in Group Business Development & Corporate Finance M&A as well as Legal having completed 7 years of work experience in leading international law firms and institutions. Leila currently sits within DP World’s Group Government Relations and Public Affairs department and her scope includes project management, strategic partnerships, business development and intelligence at DP World being a key liaison between the group, multilateral organisations and government. In addition, Leila sits as an advisory board member at Amaly Legacy.
Holding a Bachelor of Laws - LLB from The University of Law, London and having completed several years studying French Civil Law at Paris Sorbonne University, she has also completed a Diploma of Education in Business & Supply Chain Management from Rotterdam School of Management, Erasmus University and Certification from LSE in Business, International Relations & Political Economy.

### Aakanksha Tangri

Aakanksha Tangri is the founder of Re:Set which helps organizations attract and retain the best talent by reducing employee burnout, stress and disengagement and improving employee productivity, happiness and team dynamics through its science-backed and customized well-being solutions and programs.

She is a Visiting Fellow at ORF Middle East.

Aakanksha has been named on the Forbes Middle East 30 Under 30 list for her work with Re:Set.

A CNN and VICE News journalist turned entrepreneur, Aakanksha has worked on notable stories including with former U.S. President Barack Obama, Canadian Prime Minister Justin Trudeau, the late celebrity chef Anthony Bourdain, and soccer star David Beckham.

She graduated with a B.A (Hons. Journalism Specialist) from the University of Toronto with academic distinction and completed her Masters in International Affairs and South Asian Studies from Columbia University.

Her passions lie at the crossroads of mental health and policy, geopolitics, harnessing the power of storytelling, scoping out new cafes, taking endless photos of her dog and fervently watching cricket.

### Olesya Makarova

Olesya joined ORF Middle East as the Project and Admin Coordinator in the summer of 2024. Being one of the first employees at ORF Middle East, she has been instrumental in establishing the Dubai headquarters. Olesya holds two university degrees: an LLB in Civil Law and BSc in Business Management with a major in Finance from King's College London. A lifelong learner, she is currently pursuing the CFA Charter.

Having a professional background in investment research, financial modeling, and fundraising, combined with an entrepreneurial mindset and understanding of the startup ecosystem, Olesya works on partnerships and manages the operations. She also contributes to research for ORF Middle East.

In her free time, Olesya thrives on an active lifestyle. She plays padel, enjoys sunrise yoga, hiking, and horse-riding.


### The Return of Nuclear Competition

The following excerpt is from Chapter 3 — New Arenas of Great-Power Competition of ORF Global Quarterly: Disruption and Recalibration.


In early February 2026, the Trump Administration announced that it would not extend the Strategic Arms Reduction Treaty (New START), allowing it to lapse.[1] This decision is best understood in the context of intensifying strategic competition between the United States (US) and China over trade, critical minerals, and supply chains, as well as their reciprocal efforts to expand and modernise nuclear arsenals. The emerging nuclear competition is increasingly being shaped by a key structural driver: the expansion of Chinese military power.
Given this backdrop, two issues warrant closer examination. The first is the potential resumption of nuclear testing by certain Nuclear-Weapon States (NWS). The second concerns regional proliferation, the erosion of extended deterrence guarantees, the weakening of monitoring and surveillance mechanisms, and the broader decline of nuclear arms control—developments that risk intensifying nuclear competition.
Testing New Nuclear Designs
China, according to the United States (US), conducted a nuclear test in June 2020. While Beijing has vehemently denied the claim, two seismic events in close proximity to each other was detected by an International Monitoring Station (IMS) of the Comprehensive Test Ban Treaty Organization (CTBTO) in Kazakhstan.[2] The tremor was recorded at 2.75 on the seismic scale.[3] Although clear evidence of China’s conduct of a supercritical nuclear test is unavailable from Open Source Intelligence (OSINT), if such a test did occur as American officials allege, China may have carried out a secretive decoupling test designed to conceal seismic and optical activity.[4] The latter is likely to have been detected by American intelligence, which possesses advanced seismic monitoring capabilities. If China did conduct a test, it was likely associated with a newly designed warhead. At the United Nations Conference on Disarmament (UNCD) in early February 2026, an American official presented data supporting Washington’s claim.[5] China, for its part, declared the American allegation “completely groundless.”[6]
As Table 1 indicates, among all NWS, Beijing has a strong incentive to conduct additional testing, having carried out only about 46 nuclear tests (including the June 2020 test)—far fewer than the US which has conducted more than 1,000, and Russia, with over 700. This disparity may partly explain China’s decision to test what was most likely a newly designed low-yield device.
Table 1. Nuclear Tests, by Country

Source: Arms Control Association[7]
Regardless of the uncertainty around China’s alleged nuclear test in 2020, it has at the very least provided an impetus for a renewed round of nuclear testing. The June 2020 test during the first Trump Administration—an event Washington highlighted and raised an alarm over—reinforced the push for nuclear testing under the second Trump Administration. In October 2025, the Trump Administration announced that it would resume nuclear testing,[8] ending a hiatus of more than three decades. The US has several new warhead designs developed under its Reliable Replacement Warhead (RRW) programme, initiated in early 2005 by the United States Congress.[9]
These factors have created the conditions for competitive nuclear modernisation among the US, China, and Russia, with potential implications for other nuclear-armed states. They also explain why Washington declined to renew the New START Treaty, which expired on 4 February 2026.
Arms Control Takes a Back Seat
The American decision to let the New START Treaty lapse indicates that the US views nuclear arms control more as a constraint than as a mechanism for regulating and managing nuclear competition. Concluded in 2011, the treaty capped strategic nuclear weapons at 1,550 and required renewal every five years.[10]
Meanwhile, China has emerged as a key variable in contemporary nuclear competition. The growth in China’s capabilities represents the most critical factor driving the revival of nuclear competition among the nuclear powers. Chinese nuclear capabilities are expanding rapidly,[11] which the US regards as both a strategic challenge and threat. Beijing is expanding its triad of nuclear delivery capabilities.[12] Although the US and Russia possess about 90 percent of the world’s nuclear weapons, the Trump Administration has called for a trilateral agreement among Washington, Moscow, and Beijing, framing it as a “new, improved, and modernized treaty designed to endure well into the future.”[13] The US does not regard Russia as a peer competitor, despite its nuclear strength.[14] A tripartite agreement has been rejected by both Moscow and Beijing.[15] The latter considers its arsenal, despite ongoing expansion, too limited to justify constraints imposed by an arms control agreement. Moscow, meanwhile, prefers an agreement that also includes the other two recognised nucleararmed states, France and the United Kingdom (UK), whose arsenals are smaller than China’s.[16]
The European states with nuclear weapons are also considering the possibility of an independent “Euro-deterrent”. This reassessment comes against the backdrop of the Russian invasion of Ukraine, rising doubts about US commitment to extended deterrence for Washington’s European allies in the North Atlantic Treaty Organization (NATO) under the Trump Administration, and the rapid expansion of the nuclear arsenals of China, India, Pakistan, and North Korea.[17] France maintained an independent nuclear deterrent, whereas the UK has relied on the US for Trident missiles and their maintenance. There is now a call for a “fully independent British nuclear deterrent.”[18] France has offered to extend its nuclear deterrent guarantee to European allies—signalling a shift in Paris’ defence policy.[19] A plausible outcome could be France and the UK consolidating their capabilities in coordination with Germany to establish an independent European nuclear deterrent, particularly if Washington’s nuclear guarantee weakens.
The growth in China’s nuclear capabilities represents the most critical factor driving the revival of nuclear competition among the nuclear powers.
In contrast to Europe, Northeast Asia remains a key region where the American nuclear umbrella is expected to remain robust. In an official communiqué and in official testimony before the United States House Foreign Affairs Subcommittee on East Asia and the Pacific, the Trump Administration has emphasised that for Japan and South Korea, the US’s nuclear deterrent guarantee will remain intact and robust.[20]
Beyond proliferation arising from competition among the NWS and de-facto nuclear-armed states, a bilateral nuclear pact between Saudi Arabia and Pakistan, concluded in September 2025, could trigger regional proliferation in West Asia.[21] The Saudi–Pakistan nuclear partnership is likely to intensify Iran’s drive to develop its nuclear weapons capability. Iran’s nuclear ambitions, regardless of the ruling regime, pose a proliferation risk, as they could compel Türkiye and Egypt to reconsider both their nuclear posture and their designation as Non- Nuclear Weapon States (NNWS). Consequently, horizontal proliferation may potentially gain greater traction as strategic competition and the pursuit of dominance among the region’s major powers generate strong incentives for nuclear expansion. Dyadic conflicts between India and China, and between India and Pakistan—rooted in deep territorial, historical, and cultural animosities—are also likely to accelerate vertical proliferation as part of this renewed round of strategic competition among the NWS.
More broadly, nuclear proliferation driven by uncertainties surrounding Washington’s extended deterrence guarantee to NATO’s European members is creating conditions for a potential Euro-deterrent. In addition, the integrity and reliability of monitoring mechanisms of the CTBTO for detecting seismic activity triggered by nuclear tests have come under scrutiny, particularly following the alleged Chinese nuclear test of June 2020. Finally, the expiration of the New START Treaty will serve as a catalyst for vertical proliferation in strategic nuclear weapons.
Conclusion
Various factors are driving the revival of nuclear competition among major powers. However, the most decisive factor shaping this shift is dyadic great-power strategic competition between the US and China. Beijing has abandoned its selfrestraint on nuclear expansion and now seeks to neutralise American nuclear superiority both quantitatively and qualitatively. Although Russia retains a substantially larger nuclear arsenal than China, the US-Russia nuclear relationship is increasingly becoming only secondary to the nuclear rivalry between Beijing and Washington. Sino-Russian cooperation on arms control, even if only tacit, is intended to create leverage and counterbalance American nuclear strength. The possible emergence of a Euro-deterrent would introduce a quadrangular contest involving the designated NWS and Germany. Nuclear states with smaller arsenals such as India, Pakistan, and North Korea may seek to expand their capabilities. China-US nuclear competition could adversely affect the China- India nuclear dyad by compelling New Delhi to pursue further nuclear expansion.
This, in turn, would place greater competitive pressure on the India–Pakistan nuclear dyad. Beyond South Asia, regional proliferation in the Middle East is likely to intensify in the wake of the Saudi Arabia-Pakistan nuclear pact and Iran’s renewed nuclear ambitions. Türkiye and Egypt, in responding to the acquisition of and cooperation of key states in securing nuclear weapons, risk undermining nuclear restraint and weakening the broader non-proliferation regime.



Kartik Bommakanti is Senior Fellow, Defence and National Security, Observer Research Foundation.



[1] Jack Detsch, “Trump Says He Won’t Extend Nuclear Arms Treaty with Russia,” Politico, February 5, 2026, https://www.politico.com/news/2026/02/05/trump-nuclear-arms-treaty-russia-00767497.
[2] “12 Seconds Apart: Twin Seismic Pulses in China That Set Off US Nuclear Alarm,” NDTV, February 19, 2026, https://www.ndtv.com/world-news/china-nuclear-test-how-a-2020-tremor-through-central-asia-unmasked-chinasnuclear- secrets-11057352.
[3] “12 Seconds Apart: Twin Seismic Pulses in China That Set Off US Nuclear Alarm”.
[4] Joseph Rodgers and Joseph S. Bermudez Jr., “Satellite Imagery Analysis of China’s Alleged 2020 Nuclear Test at Lop Nur,” Center For Strategic & International Studies, February 13, 2026, https://www.csis.org/analysis/satellite-imageryanalysis- chinas-alleged-2020-nuclear-test-lop-nur#:~:text=While%20the%20U.S.%20Geological%20Survey,hide%20 optical%20and%20seismic%20signatures.
[5] Rodgers and Bermudez Jr, “Satellite Imagery Analysis of China’s Alleged 2020 Nuclear Test at Lop Nur”.
[6] Richard Stone, “Allegations of a Chinese Nuclear Blast May Reignite Weapons Testing,” Science, February 24, 2026, https://www.science.org/content/article/allegations-chinese-nuclear-blast-may-reignite-weapons-testing.
[7] Nuclear Testing Tally: Fact Sheet & Briefs, Arms Control Association, October 2025, https://www.armscontrol.org/ factsheets/nuclear-testing-tally#:~:text=United%20Kingdom:%20(45%20total%20nuclear,Not%20a%20CTBT%20 signatory.
[8] Max Matza, “Trump Directs Nuclear Weapons Testing to Resume for First Time in Over 30 Years,” BBC, October 30, 2025, https://www.bbc.com/news/articles/c4gzq2p0yk4o.
[9] Jonathan Medalia, “The Reliable Replacement Warhead Program: Background and Current Developments,” CRS Report for Congress, June 12, 2007, pp. 17-25.
[10] “New START Treaty,” U.S. Department of State, https://www.state.gov/new-start-treaty.
[11] Hans M. Kristensen et al., “Chinese Nuclear Weapons, 2025,” Bulletin of Atomic Scientists, March 12, 2025, https:// thebulletin.org/premium/2025-03/chinese-nuclear-weapons-2025/.
[12] Ann Scott Tyson, “As US and Russia Unbind from Nuclear Treaty, China’s Arsenal Has Been Growing,” The Christian Science Monitor, March 3, 2026, https://www.csmonitor.com/World/Asia-Pacific/2026/0303/As-US-and-Russia-unbindfrom- nuclear-treaty-China-s-arsenal-has-been-growing.
[13] Fred Weir, “Russia is Finding Post-START Arms Control a Harder, Multipolar Project,” The Christian Science Monitor, February 13, 2026, https://www.csmonitor.com/World/Europe/2026/0213/new-start-russia-us-arms-controlnuclear- weapons-china#:~:text=%E2%80%9CThe%20U.S.%20clearly%20doesn’t,one%20is%20on%20the%20 horizon.%E2%80%9D; Xiaodon Liang, “New START Expires As U.S. Urges ‘Modernized’ Treaty,” Arms Control Today, March 2026, https://www.armscontrol.org/act/2026-03/news/new-start-expires-us-urges-modernized-treaty.
[14] Weir, “Russia is Finding Post-START Arms Control a Harder, Multipolar Project”.
[15] Enoch Wong, “China Rejects Trump Proposal to Join US-Russia Nuclear Disarmament Talks,” South China Morning Post, August 27, 2025, https://www.scmp.com/news/china/diplomacy/article/3323375/china-rejects-trump-proposal-joinus- russia-nuclear-disarmament-talks.
[16] Weir, “Russia is Finding post-START Arms Control a Harder, Multipolar Project”.
[17] Paula Soler, “Q&A: What Does the End of Nuclear Arms Control Mean for Europe,” The Parliament, February 6, 2026, https://www.theparliamentmagazine.eu/news/article/qa-what-does-the-end-of-nuclear-arms-control-mean-for-europe.
[18] Brian Wheeler, “UK Must Build Own Nuclear Missiles, Say Lib Dems,” BBC, March 15, 2026, https://www.bbc.com/news/articles/cy0dz1k0rr4o.
[19] President Delivers Speech on France’s Nuclear Deterrence, Embassy of France (UK), March 4, 2024, https://uk.diplomatie.gouv.fr/en/president-delivers-speech-frances-nuclear-deterrence.
[20] Ministry of Foreign Affairs, Government of India, https://www.mofa.go.jp/press/release/pressite_000001_02104.html; “Rep. Bera Presses Trump Official on U.S. Extended Deterrence Commitments to South Korea,” U.S. Representative Ami Bera, March 26, 2026, https://bera.house.gov/news/press-releases/rep-bera-presses-trump-official-on-us-extendeddeterrence- commitments-to-south-korea.
[21] “Pakistan Extends Nuclear Deterrence to Saudi Arabia,” Arms Control Association, October 2025, https://www. armscontrol.org/act/2025-10/news-briefs/pakistan-extends-nuclear-deterrence-saudi-arabia.

### Roundtable Roundup: The Future of the GCC Data Centre Industry

The Gulf’s rapidly expanding data centre sector has become central to the region’s wider ambitions around artificial intelligence (AI), cloud computing, and digital-economic transformation. Across the GCC, governments are positioning digital infrastructure as a strategic pillar of economic diversification, while hyperscale operators and cloud providers increasingly view the region as an attractive destination for investment due to its strategic position in global cable networks, strong state backing, and comparatively fast project approval timelines.
These themes formed the basis of a recent closed-door roundtable convened by the Observer Research Foundation Middle East (ORF ME) as part of its “From Market to Policy” series, examining the future of the GCC data centre industry. Participants with expertise across infrastructure, technology, policy, and energy sectors discussed the opportunities driving the market, as well as the challenges associated with scaling critical digital infrastructure given the current uncertain geopolitical environment.
The discussion took place against the backdrop of surging global demand for compute capacity. According to the International Energy Agency (IEA), global electricity consumption from data centres is projected to more than double by 2030, driven largely by AI workloads and hyperscale expansion. Participants noted that the GCC remains steadfast in pursuing its goal to become a major cloud and AI hub despite regional disruption, particularly as demand for AI infrastructure accelerates.

Strategic Geography and the Race for Digital Infrastructure
Participants emphasised that the GCC’s geographic position between Europe, Asia, and Africa remains one of its strongest structural advantages. Combined with growing subsea cable connectivity and strong government-led digital strategies, this has strengthened the region’s attractiveness as a cloud and AI infrastructure hub. It was highlighted that hyperscale demand across the GCC has increased significantly over the past several years, driven both by domestic digital transformation agendas and by international firms seeking scalable infrastructure markets that are less saturated than other global hubs such as Northern Virginia and Frankfurt. Participants noted that relatively streamlined planning processes in several GCC states have allowed projects to move from approval to construction far more quickly than in North America or Europe.
This speed was widely viewed as a competitive advantage. One participant observed that the region’s ability to mobilise labour and accelerate delivery timelines has made it particularly attractive for hyperscale operators seeking rapid deployment capacity. Saudi Arabia’s plans to significantly expand hyperscale capacity were referenced as evidence that governments remain confident in long-term demand growth with project ambitions becoming increasingly large in scale. Broader market forecasts similarly indicate continued expansion. Recent industry estimates project the GCC data centre market, valued at US$3.48 billion in 2024, is projected to almost triple to reach US$9.49 billion by the end of the decade as AI adoption, cloud localisation requirements, and digital economy initiatives continue to expand.
Participants also discussed the strategic importance of subsea cable infrastructure and connectivity corridors. While Gulf states have historically sought to position much of their submarine cable infrastructure on the Gulf of Oman, beyond the Strait of Hormuz as a safeguard against longstanding geopolitical tensions with Iran. Yet planned expansion of cable landing stations and connectivity corridors remains necessary to improve redundancy, resilience, and the region’s long-term role as a global digital transit hub. However, the growing concentration of strategic digital infrastructure along these routes may itself increase exposure during periods of geopolitical escalation. Cable systems and landing stations remain vulnerable not only to intentional attacks, but also to accidental damage resulting from disruption to commercial shipping routes and maritime incidents in and around Hormuz. As a result, the Arabian Sea cost cable expansion projects outlined in roundtable discussion may require not only greater physical and network redundancy, but also more robust geopolitical risk insurance mechanisms and closer defence and maritime security coordination between cable operators and the Gulf states hosting them.
Despite the geopolitical risks, participants generally remained optimistic about long-term growth. Several, however, noted that the sector’s rapid expansion may also warrant reassessment, particularly around land availability, power supply, and supply chain resilience.

Resilience, Security and the Limits of Speed
A major theme throughout the discussion was the tension between speed and resilience.
Participants noted that while GCC states have been highly successful in accelerating infrastructure deployment, resilience considerations are becoming increasingly important as data centres evolve into strategic national infrastructure assets. The discussion referenced growing concerns around geopolitical risk, particularly in light of the ongoing regional conflict,which has underscored the critical importance of protecting digital infrastructure for sustaining long-term growth. Several participants argued that resilience should not be understood purely in terms of redundancy at the facility level. Instead, resilience was framed as a broader systems-level challenge involving site selection, power access, connectivity, governance structures, and supply chain diversification. Particular concern was raised around the concentration of hyperscale facilities within relatively limited geographic clusters which can create concentration of risks during periods of disruption.
Supply chains were repeatedly identified as a key factor in sustaining the momentum of digital infrastructure projects. Participants stressed that disruptions to semiconductor components, electrical systems, cooling technologies, and other critical inputs could potentially delay projects more significantly than physical infrastructure damage itself. This is because supply chain disruption can create cascading delays across investment cycles, financing, and deployment schedules. South Korean officials warned in March 2026 that the conflict could disrupt supplies of key semiconductor manufacturing materials from the Middle East, including helium, which is essential for chip production and is primarily produced by Qatar. In terms of getting key material into the Gulf too, high shipping fuel prices make logistics more expensive, on top of the operational disruption of having to navigate alternative routes beyond the Strait of Hormuz.
Cybersecurity also emerged as a growing concern, particularly given the increased risk of Iranian cyber operations targeting critical infrastructure amid escalating regional conflict. Gulf data centres and cloud infrastructure were discussed not only as commercial assets, but increasingly as strategic infrastructure vulnerable to both cyber and hybrid attacks. In April 2026, US cybersecurity and intelligence agencies warned that Iranian-linked hackers had intensified attacks against critical infrastructure systems, including operational technology and industrial control systems. As dependence on hyperscale cloud systems grows, the resilience of data centres against cyber disruption is becoming increasingly intertwined with broader national security planning.

Energy, Talent and Long-Term Competitiveness
The roundtable also examined the relationship between data centres, energy systems, and workforce development. Participants noted that power availability is increasingly becoming one of the defining constraints shaping global data centre deployment globally. While the GCC benefits from comparatively strong energy resources, securing reliable grid access for hyperscale projects is becoming more complex as demand intensifies. This is shifting competition away from simply attracting investment toward questions of grid resilience, transmission infrastructure, and long-term generation capacity. As a result, renewable integration, battery storage, district cooling systems, and advanced energy management technologies are increasingly becoming strategic considerations rather than purely sustainability objectives.
Talent development emerged as another key issue. Participants observed that much of the global expertise required to operate advanced data centre infrastructure remains concentrated in more mature markets such as North America and Europe. While GCC universities and institutions are increasingly developing programmes related to AI, semiconductors, and digital infrastructure beyond specialist institutions like MBZUAI and KAUST, participants argued that further investment in local skills ecosystems will be necessary to sustain long-term growth. However, discussion suggested that long-term competitiveness will depend not only on technical education, but also on building deeper operational capability, regulatory maturity, and resilience cultures across both public and private sector institutions. Several participants argued that even highly advanced infrastructure can remain vulnerable without sufficiently trained operators, robust contingency procedures, and regular resilience testing, reinforcing the need for closer collaboration between governments, academia, and hyperscale operators on workforce development and knowledge transfer.

Conclusion
The roundtable highlighted both the scale of the GCC’s digital infrastructure ambitions and the complexity of the challenges accompanying that growth. Participants broadly agreed that the region possesses significant structural advantages, including geographic connectivity, government support, energy availability, and comparatively rapid deployment capacity.
At the same time, discussions reflected a growing recognition that the next phase of growth will require greater emphasis on resilience, governance, and long-term systems planning. As data centres increasingly underpin AI development, cloud services, and wider economic activity, they are also becoming more strategically significant and therefore more exposed to geopolitical, operational, and supply chain risks.
Rather than slowing momentum, participants generally viewed these challenges as part of the natural maturation of the sector. The discussion suggested that the GCC’s long-term competitiveness may ultimately depend not only on how quickly infrastructure can be built, but on how effectively resilience, energy planning, talent development, and policy frameworks can evolve alongside it.



Elizabeth Heyes is a Junior Fellow in Emerging Technologies at ORF Middle East.

### Foreign Policy Survey 2025: Young India and the Middle East

Key Findings 

 	Support for India’s foreign policy remains high. Eighty-six percent of respondents hold a positive perception of India’s foreign policy. Overall support has remained consistently high across all five iterations of ORF’s Foreign Policy Survey so far.
 	India’s urban youth remain committed to multilateralism despite strains in the global order. Seventy-eight percent of respondents view the United Nations as an effective and efficient platform for managing global crises. While 44 percent of respondents believe that cooperation through multilateral institutions should remain India’s preferred mode of engagement over other formats, 92 percent support India’s bid to secure a permanent seat at the United Nations Security Council.
 	Bilateral economic cooperation with the UAE guarantees growth and prosperity for India. Seventy-six percent of the respondents are of the view that continued bilateral economic cooperation with the UAE will remain essential to India’s growth story.
 	Russia and Japan are deemed India’s most trusted partners amidst declining support for the United States (US). India’s urban youth are most satisfied with India’s bilateral ties with Russia (72 percent) and Japan (69 percent) and believe that both will remain India’s leading partners over the next decade. Support for the US has dropped from 83 percent in 2024 to 56 percent in 2025.
 	Cross-border terrorism and border conflicts with China and Pakistan are viewed as India’s biggest challenges. Ninety-two percent of respondents name cross-border terrorism as India’s biggest foreign policy challenge, followed by border conflicts with China (89 percent) and with Pakistan (88 percent).
 	There is strong urban youth backing for Operation Sindoor and India’s Pakistan policy. Ninety-three percent of respondents agree that Operation Sindoor was an effective response to cross-border terrorism originating from Pakistan. Seventy-eight percent support India’s decision to keep the Indus Water Treaty (IWT) in abeyance.
 	Border infrastructure and enhanced troop deployment has furthered India’s regional security goals.  Eighty-one percent of respondents support these activities in the region, followed by support for counter-terrorism initiatives (80 percent), nuclear deterrence (79 percent), maritime exercises and joint patrolling (77 percent), and developing security and defence infrastructure in neighbouring countries (74 percent).
 	Concerns over China’s activities in the neighbourhood persist. As in the previous year, Chinese ownership of the Hambantota port in Sri Lanka remains a major concern (71 percent). Other sources of apprehension are Bhutan-China border talks (69 percent) and the docking of Chinese spy vessels and submarines in Sri Lanka and the Maldives (69 percent).
 	Urban youth have little trust in Pakistan, Bangladesh, and Afghanistan. Among India’s neighbours, respondents trust Nepal the most (66 percent), followed by Bhutan (62 percent) and Thailand (59 percent). Trust for Pakistan, Bangladesh, and Afghanistan remains the lowest.
 	HADR and connectivity fuel the success of India’s Neighbourhood First Policy. Respondents name India’s role as a first responder in the provision of HADR (81 percent) as the most successful component of the ‘Neighbourhood First’ policy, followed by connectivity with neighbouring countries (80 percent).
 	India’s involvement in the Middle East is viewed positively. Eighty-five percent of India’s urban youth trust the IMEC to become the future of connectivity efforts in the Middle East.  Eighty percent of respondents consider I2U2 as essential to fostering cooperation efforts in the Middle East.
 	The Middle East is seen as a new hub of economic growth and technological innovation. Seventy-seven percent of respondents view financial capitals in the Middle East as emerging centres of global economic growth and technological innovation.
 	India-Middle East partnership is expected to reshape trade and energy cooperation. Seventy-nine percent of respondents agree that India-Middle East trade cooperation will redefine economic partnerships in the coming decade, while 82 percent expect the relationship to shape the future of energy cooperation.
 	The Indian diaspora is a key architect of growth in the Middle East. Eighty-one percent of respondents consider the Indian diaspora as essential to economic progress and prosperity in the region.
 	US tariff policies under Trump are seen as a sign of economic decline. Seventy-five percent of respondents agree that the Trump administration’s use of trade tariffs signals a decline in the US’s global economic standing.
 	BRICS is an alternative to the West-led global system. Seventy-three percent of respondents see the potential of BRICS as a credible alternative to the West-led global order.
 	FTAs will pave the way for India’s US$10-trillion economy. Eighty-one percent of respondents agree that FTAs are important for India to realise its ambitions of growing into a US$10-trillion economy.

Results of the PROBIT Model 

 	There was a strong baseline consensus across almost all the core issues. The high values of the intercepts obtained from the PROBIT models indicate broad approval of India’s foreign policy and strong consensus on security-related questions, including perceptions of China–Pakistan collusion and Operation Sindoor.
 	The respondents’ geographic location emerged as the most consistent differentiator. Geographic location emerged as the most significant variable explaining perceptions on foreign policy approval, security responses, multilateralism, and US economic power.
 	The consumption of news has influenced respondents’ institutional and economic views. Following foreign policy or international news significantly increased approval of India’s foreign policy and optimism about multilateral engagement, trade, and energy cooperation. However, its impact on core security threat perceptions was limited.
 	Income and occupation were important determinants of economic optimism. Perceptions regarding Middle East economic hubs and trade cooperation were significantly conditioned by income and occupational status, with middle-income groups and economically active respondents displaying differentiated optimism.
 	Demographics played a limited role in explaining responses. Age and education did not emerge as statistically significant explanatory variables in most models, suggesting that foreign policy attitudes in 2025 were broadly common across social groups, while the divergences in responses were largely explained by location and information.

Introduction
The global order today is marked by uncertainty. With active conflicts persisting across various strategic theatres, the steady weaponisation of trade and economic interdependence by the US, and the seeming overall collapse of the West-led rules-based order, global stakeholders are increasingly confronted with complex choices to navigate the current world order to uphold their interests and pursue their compulsions.
At a time when uncertainty defines the current global order, the Middle East has emerged as a complex geography. While global attention remains focused on the region’s protracted conflicts and intra- and inter-regional wars, it is also making rapid strides in advancing geo-economic, technological, energy, and environmental cooperation. The Middle East has emerged as an important hub of technological innovation, including Artificial Intelligence and Automated Systems, supported by sustained investments in research and development. Cities in the Middle East now serve as key nodes in global trade and connectivity architectures. Following the success of COP28 in 2023,[1] the United Arab Emirates and several other countries in the region are taking the lead in fostering cooperation for a just green transition and advancing broader climate and environmental initiatives.
Over the past decade, India-Middle East ties have grown at an unprecedented pace, driven in large part by Prime Minister Narendra Modi’s efforts to place the region at the centre of India’s foreign policy calculus. While India’s ties with the Middle East have a historical context of ancient trade routes and cultural commonalities, over the last decade the region has emerged as a key area of priority for India. Three critical long-standing interests appear to be driving India’s focus on the Middle East: energy imports from the region; remittances generated by the vast Indian diaspora; and expanding security partnership, particularly in defence procurement and intelligence cooperation.[2]
Building on this momentum, 2025 was an active period for India-Middle East ties. In 2025, Prime Minister Modi visited three countries in the region, including Saudi Arabia,[3] Oman, and Jordan.[4] Furthermore, New Delhi hosted the Amir of Qatar, Sheikh Tamim Bin Hamad Al-Thani, in February 2025.
As India charts its path towards becoming the world’s third-largest economy, partnerships with the Middle East are likely to remain a cornerstone of its growth strategy. India’s embeddedness in the region is marked by its interest in the India-Middle East-Europe Economic Corridor (IMEC), conceptualised during India’s G20 presidency, and the I2U2 (India-Israel-UAE-USA) grouping. Market complementarities between India and Middle Eastern economic hubs continue to shape the trajectory of India’s economic growth. The India-United Arab Emirates Comprehensive Economic Partnership Agreement signed in 2023, along with the India-Oman Comprehensive Economic Partnership Agreement concluded in December 2025, signals New Delhi’s growing emphasis on strengthening trade ties with the region. Taken together, these developments suggest that the India-Middle East trade partnership could reshape economic alignments in the coming decade.
India remains committed to enduring peace in the region to facilitate a stable order in the Middle East. Its balanced, multi-stakeholder engagement has paved the way to ensure New Delhi’s diplomatic ties with the region remain undisrupted. This, in many ways, has evolved as a critical currency to play a larger role in facilitating dialogue among stakeholders. What Prime Minister Modi said about how this is “not an era of war” encapsulates New Delhi’s active diplomatic engagement with the region. As the crisis in the Middle East remains vulnerable to negatively impacting global de-nuclearisation efforts, New Delhi’s approach of active diplomacy is likely to augur well to usher in stability in the region.
In the aftermath of Operation Sindoor, India exerted effort to garner global support and solidarity, as well as raise awareness about the long arc of cross-border terrorism emanating from Pakistan, impinging on India’s national security. The Middle East was a vital geography in India’s outreach, with three separate delegations of Members of Parliament visiting various countries across the region.[5]
Public support remains essential to the credibility and sustainability of foreign policy choices. As India continues to engage the Middle East across the vast spectrum of shared opportunities that presents itself, this volume, ORF Foreign Policy Survey 2025: Young India and the Middle East, assesses how India’s urban youth view the country’s diplomatic, economic, and security partnerships with the region. This edition of ORF’s annual Foreign Policy Survey builds on the findings of the previous iterations (2021, 2022, 2023, and 2024) and delineates how India’s urban youth view the country’s foreign policy choices and its engagements with the Middle East, the evolving world order, and its neighbours.
Given the respondents’ overwhelming support for the UAE as a critical economic and strategic partner, this report offers a special section, ‘India-UAE Spotlight’, on the various aspects of India-UAE relations. The respondents are of the view that economic partnership with the UAE will be a pillar of India’s growth and prosperity. Furthermore, policy frameworks such as the India-UAE Comprehensive Economic Partnership Agreement, which seek to consolidate such complementarities are favoured as the most consequential dimension of the bourgeoning bilateral relations between the two countries.
Global geopolitics is undergoing a churn today amidst the war in the Middle East which, along with the subsequent strain in the global energy market, has demonstrated how countries that may not be directly involved in the conflict are left vulnerable to the fallout. The disruptions in the global energy market pose detrimental cascading effects on various other sectors, carrying long-term consequences. Indeed, India’s youth, the primary stakeholders in India’s economy in the coming years, must remain cautious of the trajectory of this conflict. (This survey, however, does not capture the opinions of India’s urban youth about the specific conflict that broke out on 28 February 2026 as the survey was concluded in 2025.)

1.1 Context and Rationale for the Poll 
Since 2021, ORF’s Foreign Policy Surveys have sought to map urban youth perceptions of India’s foreign policy, its relations with other countries and regions, and its responses to regional and global crises. The inaugural edition, conducted against the backdrop of the COVID-19 pandemic, examined shifts in the global order and India’s response. It surveyed 2,037 respondents aged 18-35, was administered in eight regional languages in addition to English, and covered 14 cities.[6]
Subsequent editions expanded both sample size and demographic reach. The 2022 edition focused on 75 years of India’s independence, covering 5,000 respondents ages 18-35 across 19 cities, with questionnaires administered in 11 languages.[7] The third edition examined urban youth perceptions of multilateralism and India’s place in the world.[8] The fourth edition, released in July 2025, centred on ‘Young India and the China Challenge.’[9] The emphasis on a particular theme, along with a consistent focus on the broader contours of India’s foreign policy apparatus, has helped ascertain insights into how India chooses to engage with the world. This latest edition focuses on the Middle East and explores how Indian youth perceive India’s growing engagement with the region.
Over time, foreign policy has become an increasingly important factor in a country’s domestic calculus, transitioning from an issue that seemed to capture the interests of only the elites to finally finding resonance with the larger public. Attempts to gauge how different groups in India see and understand India’s international engagement have also increased in response to this change. While over the years, different organisations and individuals have examined Indian public opinion on foreign policy, much of this work has remained fragmented, focusing on individual issues rather than offering a holistic overview.
A survey conducted by the Brookings Institution in 2018 covered 290 respondents from India’s strategic community.[10] In 2019, Aidan Milff, Paul Stanlinand, and Vipin Narang undertook an assessment of public attitudes towards India’s foreign policy since the 1960s, based on data from the annual and biannual surveys conducted by the Indian Institute of Public Opinion (IIPO) between 1959 and 1988. These IIPO surveys covered 1,000 to 1,500 respondents, targeting individuals with basic literacy levels from the four metropolitan cities of Delhi, Kolkata, Chennai, and Mumbai.[11] In their analysis, the authors also take into account the 2006 Chicago Council Survey, which focused on US and international public opinion on the rise of India and China, and the Gallup World Poll conducted between 2008 and 2016.[12] The Chicago Council survey had responses from 2,458 Indians aged eighteen and above, excluding those without formal education.
In 2009, Devesh Kapur analysed Indian public opinion on foreign policy using data from a pan-India survey conducted between 2005 and 2006, which covered 2,12,563 interviewees and examined perceptions of India’s position in the world.[13] In 2013, the Lowy Institute and the Australia India Institute released a survey titled India Poll, based on a sample of 1,233 respondents.[14]
In August 2022, the Stimson Center released findings from ‘Confidence and Nationalism in Modi’s India’, a telephonic survey of 7,000 Indians that assessed public attitudes towards India’s international conflict scenarios. Conducted in 12 languages across 28 Indian states and union territories, the survey focused primarily on China, Pakistan, and the US.[15] The Bharat Pulse Survey in 2024 polled people across five categories, one of which was foreign policy.[16]
Some issue-specific surveys have also been conducted over the years. These include surveys following the 1991 Gulf War, the 1998 Pokhran-II nuclear tests, the 1999 Kargil war, the 2003 Iraq War, and the 2008 civil nuclear deal, alongside broader surveys assessing public opinion on foreign policy themes.[17] In 2019, there was a paper on the findings of a survey on the implications of counter-insurgency operations in Kashmir.[18]
In recent years, there have also been attempts to gauge the perceptions of the youth belonging to India’s neighbouring countries towards India as well as other countries in the region. In 2024, an ORF report, ‘Young Bhutan and the World’, drew insights from a survey of 115 respondents from Bhutan (who were then pursuing higher education) that asked questions about how they perceive India’s role in their country.[19] In 2024, the Carnegie Endowment for International Peace also conducted the second edition of a nationally representative online survey of 1,206 Indian-American adults. It had 100 questions covering different aspects of India-US ties.[20] The Pew Research Center conducted a survey between January and April 2025 to gauge how respondents from 24 countries view India.[21] It also conducted a survey in 2023 among 2,611 Indian adults to see how Indians view the leadership of the prime minister as well as India’s influence on and relations with other countries.[22] The Takshashila Institution released their first Pulse of the People: State of India-China Relations Survey Report in 2024, which had 11 questions about India and China and received responses from 655 individuals  between the 16-86 age group.[23]
The limitations related to some of these surveys include the size of the sample, the demographic chosen, as well as the concentration of responses among only literate, urban individuals. While ORF’s Foreign Policy Survey is also limited to perspectives from the urban youth, it attempts a more encompassing view of India’s foreign policy, targeting a demographic that constitutes over 26 percent of the country’s population.
By examining perceptions of India’s foreign policy trajectory, its relations with other countries, and its standing in its neighbourhood—alongside a focused assessment of New Delhi’s growing partnership with the Middle East—this present survey provides insights into how young Indians expect India to navigate its external engagements. Responses were analysed across multiple parameters like age, employment, gender, occupation, geography, income, and familiarity with the news.

1.2 Sample Design and Description 
The 2025 edition of the Foreign Policy Survey is driven by the central question of how India’s urban youth perceive the country’s engagements with the Middle East. It highlights young Indians’ perspectives on the nation’s global engagement, with a particular focus on the Middle East, and on India’s expanding socio-political and economic footprints globally. Conducted by Impetus Research, the survey collected national-level data from a representative sample of 5,058 respondents ages 18-35 across 19 Indian cities. The survey was conducted between 8 October and 26 November 2025. A structured questionnaire was administered in 11 languages (Assamese, Bangla, Gujarati, Kannada, Marathi, Odia, Punjabi, Tamil, Telugu, Hindi, and English).
The sample was drawn using a stratified, multi-stage cluster sampling approach. As Census data do not provide population figures for the 18-35 age cohort, the sample frame and state-wise sample size for this group were estimated using linear interpolation based on data from the Report of the Technical Group on Population Projections (November 2019) by the National Commission on Population, Ministry of Health and Family Welfare, drawing on the estimated 2018 population derived from the 2011 Census.
Fieldwork was conducted through face-to-face interviews using internet-enabled tablets, ensuring real-time data capture and enhancing response accuracy. Only individuals from urban households were included in the study, maintaining the focus on the urban youth demographic. The survey was programmed to function offline in low-connectivity environments and to synchronise the results in real time when cellular or Wi-Fi networks became available. Additionally, every interviewer was provided with a unique user ID to access the programmed survey. For the ‘India-UAE Spotlight’ questions, 530 respondents from 11 cities were surveyed between the 18-35 age group.
Table 1 presents the sample composition by region. The gender composition of the sample was 55.75 percent (2,820) male and 44.24 percent (2,238) female. To ensure heterogeneity in responses, data were collected by considering various socio-economic characteristics, including income brackets, education qualifications, employment status, and regional representation. The survey included respondents from diverse educational, occupational, and income backgrounds. Detailed breakdowns are provided in Tables 2, 3, and 4.
Table 1: Sample Composition, By Region




Region
No. of Respondents
Percentage


North
1,544
30.53


South
1,047
20.70


East
1,347
26.63


West
1,120
22.14


Total
5,058
100



Table 2:  Sample Composition, By Education




Education Degree
No. of Respondents
Percentage


No formal education
64
1.26


Upto class 10th
1,041
20.58


Upto class 12th
1,374
27.16


Undergraduate degree or equivalent
585
11.56


University graduate
1,509
29.83


Postgraduate degree/Professional or Higher
472
9.33


Doctorate or equivalent
7
0.13


Declined to specify
6
0.11


Total
5,058
100



Table 3: Sample Composition, by Occupation




Occupation
No. of Respondents
Percentage 


Self-employed Professional
325
6.42


Businessman/Trader
480
9.48


Government Sector Employee
81
1.60


Private Sector Employee
1,229
24.29


Skilled Worker
391
7.73


Unskilled Worker
105
2.07


Housewife
1,144
22.61


Unemployed – Seeking Employment
220
4.34


Student
1,063
21.01


Retired
0
0


Declined to specify
20
0.39


Total
5,058
100



Table 4: Sample Composition, By Income




Income
No. of Respondents 
Percentage 


Below INR 30,000 per month
2,347
46.40


INR 30,001–60,000
1,538
30.41


INR 60,001–90,000
447
8.83


INR 90,001–120,000
148
2.93


INR 120,001–150,000
66
1.30


Above INR 150,000 per month
71
1.40


Don’t Know/ Can’t      Say
297
5.87


Declined to specify
144
2.85


Total
5,058
100



1.3 Methodology
The methodology was two-pronged. In the first stage, the report addressed questions relevant to the report's central concern, presenting the frequency distribution of the surveyed respondents' perceptions of critical questions related to India's foreign policy and its relations with countries in the Middle East. In the second stage, econometric analyses—mostly probit models—were employed to examine relationships between respondents’ perceptions and their socio-economic and demographic characteristics. This provided deeper insights into the spatial (across regions) and vertical (education and income) classification of the various responses and explained whether perceptions were determined by socio-economic and regional characteristics.
Read the full report here.



[1] Manann Donoghoe et al., “The successes and failures of COP28,” The Brookings Institution, December 14, 2023, https://www.brookings.edu/articles/the-successes-and-failures-of-cop28/
[2] Dhruva Jaishankar, Vishwa Shastra: India and the World (New Delhi: Penguin Random House India, 2024), pp. 279-280.
[3] Elizabeth Roche, “Modi’s Saudi Arabia Visit Sets Tone For Long-term Engagement,” The Diplomat, April 28, 2025, https://thediplomat.com/2025/04/modis-saudi-arabia-visit-sets-tone-for-long-term-engagement/
[4] “Visit of Prime Minister to Jordan, Ethiopia, and Oman (December 15 - 18, 2025),” Ministry of External Affairs of India, December 11, 2025, https://www.mea.gov.in/press-releases.htm?dtl/40443/Visit_of_Prime_Minister_to_Jordan_Ethiopia_and_Oman_December_15__18_2025
[5] “India's Global Outreach on Operation Sindoor: Full List of Delegation Members and Destinations,” The Hindu, May 22, 2025, https://www.thehindu.com/news/national/india-diplomatic-push-operation-sindoor-delegation-leaders-countries-mission-details/article69590359.ece
[6] Harsh Pant et al., The ORF Foreign Policy Survey 2021: Young India and the World, August 2021, Observer Research Foundation, https://www.orfonline.org/research/the-orf-foreign-policy-survey-2021-young-india-and-the-world
[7] Harsh V Pant et al., The ORF Foreign Policy Survey 2022: India @75 and the World, November 2022, Observer Research Foundation, https://www.orfonline.org/research/the-orf-foreign-policy-survey-2022
[8] Harsh V Pant et al., The ORF Foreign Policy Survey 2023: Young India and the Multilateral World Order, Observer Research Foundation, February 2024, https://www.orfonline.org/research/the-orf-foreign-policy-survey-2023-young-india-and-the-multilateralworld-order
[9] Harsh V Pant et al., The ORF Foreign Policy Survey 2024: Young India and the China Challenge, Observer Research Foundation, July 2025, https://www.orfonline.org/research/foreign-policy-survey-2024-young-india-and-the-china-challenge
[10] Dhruva Jaishankar, “Survey of India’s Strategic Community,” Brookings Institution, March 2019, https://www.brookings.edu/wp-content/uploads/2019/03/Survey-of-India%E2%80%99s-StrategicCommunity.pdf
[11] Aidan Milliff and Paul Staniland, “Public Opinion Toward Foreign Policy in a Developing World Democracy: Evidence from Indian Views of China,” SocArXiv, March 2021.
[12] Marshall M. Bouton et al., “The United States and the Rise of China and India: Results of a 2006 Multination Survey of Public Opinion,” The Chicago Council of Global Affairs, https://globalaffairs.org/research/public-opinion-survey/2006-chicago-council-survey
[13] Devesh Kapur, “Public Opinion and Indian Foreign Policy,” India Review 8, no. 3 (August 13, 2009): 286–305, https://doi. org/10.1080/14736480903116818
[14] Rory Medcalf, “India Poll 2013” (Sydney, 2013), https://www.lowyinstitute.org/ publications/india-poll-2013
[15] Christopher Clary, Sameer Lalwani, Niloufer Siddiqui, and Neelanjan Sircar, “Confidence and Nationalism in Modi’s India,” Stimson Center, August 2022, https://www.stimson.org/2022/confidence-and-nationalism-in-modis-india/
[16] Bharat Pulse Survey Results, NewsX Live, https://www.youtube.com/playlist?list=PLDPE5u-MQ9P45jltJ4zyl7tJfSPJpih-y
[17] Shivaji Kumar, “India’s Public Opinion and Foreign Policy: A View from New Delhi,” India Review 17, no. 4 (August 8, 2018): 353–71, https://doi.org/10.1080/14736489.2018.1510158.
[18] Gautam Nair and Nicholas Sambanis, “Violence Exposure and Ethnic Identification: Evidence from Kashmir,” International Organization 73, no. 2 (2019): 329–63.
[19] Aditya Gowdara Shivamurthy, Young Bhutan and the World, Observer Research Foundation, February 2025, https://www.orfonline.org/research/young-bhutan-and-the-world-a-preliminary-survey-of-perceptions-on-foreign-policy
[20] Sumitra Badrinathan, Devesh Kapur, and Milan Vaishnav, “Indian Americans at the Ballot Box: Results from the 2024 Indian American Attitudes Survey,” Carnegie Endowment for International Peace, October 2024, https://carnegieendowment.org/research/2024/10/indian-american-voters-election-survey-us?lang=en
[21] Sneha Gubbala, Andrew Prozorvosky, “How people in 24 countries view India,” Pew Research Center, August 2025, https://www.pewresearch.org/short-reads/2025/08/13/how-people-in-24-countries-view-india/
[22] Pew Research Center, “Views of India Lean Positive Across 23 Countries,” Pew Research Center, August 29, 2023, https://www.pewresearch.org/ global/2023/08/29/views-of-india-lean-positive-across-23-countries/
[23] Anushka Saxena, Manoj Kewalramani, and Amit Kumar, “Pulse of the People: State of India-China Relations,” December 2024, The Takshashila Institution, https://takshashila.org.in/content/publications/20241217-pulse-of-the-people.html

### India and the UAE: A New Strategic Compact

Prime Minister Narendra Modi’s brief stopover in Abu Dhabi on May 15 en route to his European tour covering the Netherlands, Sweden, Norway, and Italy may be short, but it is strategically consequential. Modi is expected to meet President Sheikh Mohamed bin Zayed Al Nahyan (MBZ), continuing a pattern of high-level political engagement that has come to define India-UAE ties in recent years.


The timing of the visit is particularly significant. Escalating tensions in the Gulf—including Iranian actions affecting the Strait of Hormuz and attacks on strategic UAE targets like Fujairah—have once again highlighted the fragility of global energy supply chains. For India, which remains heavily dependent on imported hydrocarbons, the UAE has emerged as a critical anchor of energy security. The discussions are hence expected to focus heavily on ensuring uninterrupted oil and LNG supplies, deepening long-term energy arrangements, and exploring alternative energy cooperation at a moment of considerable uncertainty in global markets.


As the Gulf undergoes a profound geopolitical churn, India is seeking to position itself not merely as an economic stakeholder but as a credible security partner with long-term interests in regional stability.

Equally important is the security dimension of the relationship. The Letter of Intent signed earlier this year for a Strategic Defence Partnership (SDP) marked a major shift in institutionalising strategic cooperation. Modi’s visit is likely to push this agenda further, especially in defence manufacturing, maritime security, interoperability, cybersecurity, special operations, and counter-terrorism cooperation. As the Gulf undergoes a profound geopolitical churn, India is seeking to position itself not merely as an economic stakeholder but as a credible security partner with long-term interests in regional stability.
The visit also carries strong political symbolism. India’s outreach signals solidarity following recent attacks that affected not only Emirati infrastructure but also Indian nationals. At the same time, New Delhi continues to balance its complex regional ties, particularly with Iran, underscoring India’s preference for pragmatic multi-alignment rather than bloc politics in West Asia. Another important issue likely to feature prominently is contingency planning for the diaspora. With nearly four million Indians working in the UAE, disruptions in regional air routes or maritime traffic have direct implications for India’s overseas population management.
Beyond immediate concerns, the visit reinforces the remarkable transformation in bilateral relations over the past decade, evolving from a largely transactional partnership centred on hydrocarbons and expatriate labour into one of India’s most substantive strategic relationships in West Asia. Earlier, the engagement was primarily defined by the Gulf’s role as an energy supplier and as a destination for millions of Indian workers. Today, however, the relationship has acquired a far wider strategic canvas, encompassing trade, defence, technology, infrastructure, food security, renewable energy, logistics, and advanced innovation sectors. The political chemistry between PM Modi and President MBZ has accelerated this shift, giving the partnership unprecedented strategic direction and institutional depth.
Economic interdependence has emerged as the central pillar of this new partnership. The Comprehensive Economic Partnership Agreement in 2022 marked a turning point by institutionalising a framework for deeper economic integration. Bilateral trade has since expanded rapidly, with the UAE emerging as one of India’s largest trading partners and a key export destination. More importantly, the relationship is no longer confined to oil. Non-oil trade, investments in infrastructure, ports, logistics, fintech, digital commerce, and manufacturing are now central drivers of engagement. The UAE has also positioned itself as a major investor in India’s long-term growth story, especially in sectors like renewable energy, urban infra, food corridors, and strategic industrial projects. The economic relationship increasingly reflects a logic of long-term strategic interdependence rather than short-term commercial exchange.


The political chemistry between PM Modi and President MBZ has accelerated this shift, giving the partnership unprecedented strategic direction and institutional depth.

The strategic and security dimensions of the partnership have also deepened greatly. Cooperation now extends well beyond traditional counter-terrorism coordination into areas such as maritime security, intelligence sharing, defence manufacturing, cybersecurity, and military interoperability. The proposed SDP reflects India’s growing ambition to be seen as a security provider in the wider Indian Ocean and Gulf region. For the UAE, India offers a stable, increasingly capable partnership at a time when the regional security architecture remains uncertain and external power commitments appear less predictable. This convergence has become particularly crucial amid rising tensions in West Asia, disruptions in maritime trade routes, and the broader militarisation of regional geopolitics.
At the geopolitical level, the India-UAE partnership reflects the changing nature of the emerging multipolar order. Both countries see themselves as pragmatic stakeholders seeking strategic autonomy in a fragmented international system. Cooperation is driven less by ideology and more by functional convergence—economic diversification, technological modernisation, energy transition, and regional stability. The UAE’s Vision 2031 and India’s own developmental ambitions create natural complementarities, particularly in areas such as clean energy, AI, space-tech, smart infrastructure, and digital connectivity. Platforms such as I2U2 and the India-Middle East-Europe Economic Corridor further illustrate how both are trying to shape new regional architectures that are economic, technological, and connectivity-driven rather than security-centric.
The UAE has effectively become India’s most important strategic gateway into the Gulf and wider West Asian region. Abu Dhabi’s ability to maintain working relationships across rival regional blocs gives New Delhi valuable diplomatic flexibility in an increasingly polarised environment. At the same time, the UAE sees India as a trusted long-term partner with scale, market depth, tech capacity, and geopolitical credibility. Unlike many external actors in the region, India is perceived as relatively free from ideological baggage or interventionist ambitions, making it an attractive strategic partner for Gulf states seeking diversified partnerships. The result is a relationship that is no longer peripheral to either country’s foreign policy priorities, but one that increasingly occupies a central place in their respective visions for regional order and global influence.
The brevity of Modi’s visit, therefore, should not obscure its importance. The focus is unlikely to be on headline-grabbing announcements; rather, it will be on implementation, consolidation, and crisis management. That itself is indicative of how mature and consequential the partnership has become. At a time when global politics is increasingly shaped by volatility and fragmentation, India’s relationship with the UAE has emerged as one of the key pillars of its West Asia policy, essential not only for economic resilience and energy security, but also for India’s broader aspirations as a leading power in an uncertain multipolar world.



This commentary originally appeared in Financial Express.

### ORF Global Quarterly: Disruption and Recalibration

Editors’ Note
The start of 2026 has been marked by disruption, conflict, and profound uncertainty. The capture of Venezuela’s President, Nicolás Maduro, by United States (US) special forces and the subsequent regime change in the country; transatlantic tensions over Greenland; the US Supreme Court’s ruling on tariffs under the International Emergency Economic Powers Act (IEEPA); and joint US-Israel military operations in Iran followed by Tehran’s retaliation in surrounding countries are only a few of the developments that are reshaping the global landscape. Additionally, the closure of the Strait of Hormuz as the war in the Middle East erupted, with its cascading energy shocks, has further underscored the fragility of interconnected commercial systems. While it is too early to predict the long-term consequences of these events, what is certain is that they will influence geopolitics and geoeconomics for decades to come.
The first issue of ORF Global Quarterly, published in January 2026, identified the megatrends likely to define 2026 across six domains. This second issue builds upon that foundation, presenting data-driven analyses of nine megatrends identified under two critical domains: Geopolitics, Security, and Defence and Geoeconomics and Trade. Many of these global dynamics are closely tied to the ongoing developments of the year’s early months, underscoring the need for rigorous and timely scholarship. The impact of these trends on countries in the Global South are particularly significant and must be assessed through a deeper analysis of the underlying causes of the structural, cross-border transformations that are occurring. The collaborative effort that produced this issue—involving ORF’s centres in India, the Middle East, and the United States—provides comprehensive background, empirical data, and granular analyses of the tectonic shifts the world is undergoing.
This issue includes single essays on each of the five trends within Geopolitics, Security, and Defence. Authors were given discretion to determine their focus. For example, the chapter “New Arenas of Great-Power Competition” examines, among the originally identified regions and domains in the first issue, rivalry in the Arctic and explores emerging strategic races in space and undersea-cable technology.
For trends whose underlying causes and potential implications for the Global South are closely interconnected, two essays were commissioned to address them collectively. This applies to the Geoeconomics and Trade chapters that analyse the trends: “Global South in the Crossfire: Strategic Competition and Managed Interdependence”, as well as “Building a Resilient Trade Architecture in the Global South”.
Disruptions will continue—even heighten—in the future. While these disruptions generate uncertainty, they also create opportunities to restructure institutions, recalibrate relationships, and redefine rules that no longer fit the new geopolitical and geoeconomic realities of our times. Many countries in the Global South will require partners and multilateral frameworks to achieve equitable leverage in trade, security, technology, energy, and sustainability. Leaders and citizens alike are examining the challenges ahead and exploring how best to position their countries and economies in the emerging landscape. It is our continued hope that this quarterly publication provides valuable insights to guide those strategic choices.
Looking ahead, the third issue of this series will aim to unpack trends identified in the Technology, and Climate and Energy Transitions domains. These thematic areas do not stand alone; their interpretation requires a broader understanding of the geopolitical and geoeconomic shifts explored in this issue.
Read the journal here.



All views expressed in this publication are solely those of the authors, and do not represent the institution, its affiliates, or partners.
Sharon Stirling is Chief Operating Officer, ORF America and Director, ORF Global.
Eszter Karacsony is Non-Resident Fellow, ORF Middle East.

### Shifting Sands: A Middle East in Conflict and Transition

Editors’ Note 
The Middle East is undergoing a churn that began in October 2023 with Hamas’s attack on Israel. Since then, Israel has mobilised a maximalist military campaign across the region, leading to a direct confrontation in February-end involving the United States (US) and Israel on one side and Iran on the other. In March, the US and Israel again targeted Iran, prompting Tehran to mobilise a strategy of striking neighbouring Gulf states to intensify the conflict and turn it into a global one, hoping it would shift the tide against Washington, DC, through international economic shocks.
Today the conflict resembles a new Cold War. A resumption of hostilities remains likely amid a precarious ceasefire, as the core drivers of these military exchanges—chief among them Iran’s nuclear programme—remain unresolved. Instead, the closure of the Strait of Hormuz, through an Iranian blockade and a counter-blockade by the US, has disrupted maritime trade, energy supplies, and food security, with cascading effects on global economic outcomes. As economies absorb the impact of high prices and disrupted supply of essential commodities—from oil and gas to fertilisers—regional geopolitical dynamics continue to shift and realign, reinforcing a narrative of instability in the near term.
This report seeks to align these developments within a focused research scope, examining how the Middle East may be analysed in the coming weeks and months within global systems.
In the first chapter, Mahdi Ghuloom argues that the Iran-US-Israel conflict and its ramifications on the Gulf States have shaken the region’s “oasis model” and pushed its foreign policy towards short-term economic recovery and hard security imperatives. While long-term strategic ambitions remain in place, the conflict has exposed vulnerabilities across the GCC, particularly around trade chokepoints, expatriate confidence, tourism, and defence. In response, the Gulf states are likely to prioritise investment reassurance, domestic stabilisation, alternative trade corridors, and deeper defence cooperation with the United States and its allies.
Samriddhi Vij and Akram Zaoui follow with a review of key aggregates to assess how non-Gulf economies in the Middle East and North Africa (MENA) differ in their ability to cushion their economies against shocks, and how the Middle East crisis both catalyses and reveals diverging trajectories. While energy exporters fare better—with North African producers positioned to benefit—the structural driver of resilience remains a commitment to better policymaking and reform which, in turn, is informed by more robust domestic institutions.
Focusing on chokepoints, energy, and connectivity, Mannat Jaspal and Reem Sagahyyroon argue in their chapter that the Strait of Hormuz crisis has triggered one of the world’s most severe energy shocks in recent history, disrupting over 13 million barrels per day of supply and exposing the fragility of global energy systems. While prices remain temporarily contained due to reserves, alternative routes, and stockpiling, structural constraints—damaged infrastructure, limited pipeline capacity, and rising insurance risks—will prolong supply uncertainty.
The ceasefire offers limited relief, and energy shortages are far from over. Extending their view beyond energy, Cauvery Ganpathy and Leigh Mante examine the centrality of the Middle East to multiple global supply chains, apart from oil and gas, making it difficult to localise and limit the impact of the crisis. This essay explores the longer-term effects of supply chain upheavals and infrastructural damage on food, water, and economic security within the region and beyond.
Finally, sustainability and the protection of technological assets in conflict zones have expanded beyond military concerns into the civilian domain. Elizabeth Heyes investigates how technological infrastructure is increasingly exposed to geopolitical, climate, and cyber risks that are interconnected and difficult to contain. The report closes with an article by Siddharth Yadav, which considers how technological sovereignty may evolve and argues that recent developments in the Middle East have shifted the debate from an abstract policy concern to an immediate strategic priority.
Read the report here.



All views expressed in this publication are solely those of the authors, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel.

### AI’s Next Trajectory: The Inference Innovation

Much of the recent discourse on Artificial Intelligence (AI) has focused on the rising costs of training compute, with costs for state-of-the-art large language models (LLMs) growing at a rate of 2.4x per year. Inference refers to what happens when a trained AI model is put into real-world use. Every time a chatbot is asked a question, asked to translate a sentence, or to generate an image, the model is performing inference—taking user input and producing an output based on what it has already learned. While training is a one-time, upfront cost, inference happens continuously each time the system is used. This makes it a recurring and long-term expense.  For example, over US$ 100 million spent on training ChatGPT-4 translates into approximately US$ 250 million annually in inference costs.


India’s AI bottleneck is no longer language model development, but the economics of inference.

Therefore, India’s AI bottleneck is no longer language model development, but the economics of inference. With improved access to GPUs and the push to design sovereign chips, the success of AI deployment in India increasingly depends on developing context-aware, adaptable, and scalable AI systems. However, design does not automatically enable the manufacturing (fabrication) of semiconductors, as this is a highly sophisticated, multi-step process that requires specialised Extreme Ultraviolet (EUV) systems. These systems, primarily made by the Dutch company ASML, use light with 0.13 nm precision to etch nanometre-scale, AI-enabling chips on silicon wafers, which are necessary for sovereign chips.
Today, India’s AI trajectory is increasingly shaped not by the ability to build models, but by the ability to deploy and operate them under country-specific constraints. Large, general-purpose systems are expensive to operate, require continuous cloud access, and are optimised for environments with abundant compute and stable infrastructure. Further, the volume of real-time queries will continue to grow, turning inference into a persistent and expanding cost centre for enterprises and governments.
This is compounded by the shift toward multimodal systems, model collaboration, and specialised models, which require running not just LLMs but also vision, speech, and recommendation models in parallel, often under tight latency constraints. In the Indian context, this growth runs up against structural limits, making naive scaling economically and operationally unviable. As a result, inference is no longer just about optimising LLMs but also about orchestrating diverse, task-specific models efficiently across environments. Accordingly, new optimisation techniques and system-level innovations will become increasingly necessary.


Today, India’s AI trajectory is increasingly shaped not by the ability to build models, but by the ability to deploy and operate them under country-specific constraints.

Material Limitations, Performance Constraints and Physical Limits 
As hardware increasingly becomes a limiting factor in AI deployment, even delaying infrastructure development, the locus of innovation shifts from model development to model execution. Geopolitical constraints on silicon, or “Siliconpolitik”, with China producing the vast majority of metallurgical-grade silicon (over 80 percent of global silicon metal supply as of 2026), pose a stark vulnerability for all countries in the AI race. The dominance of Taiwan's TSMC in sub-7 nm manufacturing and its recent introduction of a new technology (NU2) for producing chips for mobile applications, laptops, and artificial intelligence further incentivises companies to maintain their entrenched dependence.
Further, bottlenecks in High Bandwidth Memory (HBM), driven by supply constraints in crucial DRAM components and the physical limits of memory gains, pose new, concrete challenges for frontier LLMs, potentially requiring new hardware. HBM enhances memory capacity in frontier LLMs by stacking memory (DRAM) components in a 3D manner to increase density and reduce the need for multiple, interconnected accelerators (GPUs). As models move towards trillions of parameters, conventional HBM is proving insufficient. This is due to bandwidth pressure: inference is dominated by the movement of model weights from memory (DRAM) to compute units (GPU cores). As models grow larger, they require the continuous streaming of vast amounts of data, but HBM bandwidth, while high, does not scale proportionally with model size. This results in underutilised compute, with processors spending cycles waiting for memory. Accordingly, for modern 7B, 70B, or 1T+ parameter models, the bottleneck is not compute speed, but memory bandwidth—how quickly the GPU can access model weights.
These constraints have significant cost implications, as DRAM prices have surged dramatically in late 2025 and into 2026, with some reports indicating increases of 130 percent. Thus, research is increasingly focused on techniques to increase the memory bandwidth available for processing and decoding tokens (text generation) without losing model accuracy. Accordingly, new inference techniques to overcome these hardware, material, and performance limitations are becoming essential. For example, the 3D-DRAM Simulator (ATLAS) is a framework that models how data moves in and out of memory, how fast it happens, and where bottlenecks occur—enabling engineers to design hardware components more efficiently. Additionally, ActiveFlow is a framework that lets AI models run on devices with limited memory by intelligently moving model weights between fast DRAM and slower flash storage. It predicts which parts of the model will be needed next, reducing DRAM usage by up to 40 percent without compromising performance.


Accordingly, for modern 7B, 70B, or 1T+ parameter models, the bottleneck is not compute speed, but memory bandwidth—how quickly the GPU can access model weights. 

Additionally, beyond silicon-based chips, researchers are increasingly focusing on new materials such as Gallium Nitride (GaN) and Silicon Carbide (SiC), superatomic semiconductors, and bismuth-based microchips. This is because traditional silicon scaling is hitting physical and efficiency limits, especially for power, heat, and high-frequency performance. For example, Dennard scaling (power-efficiency scaling) broke down in the mid-2000s, meaning performance improvements no longer come with proportional energy efficiency gains. The expectation of performance doubling every 18–24 months has weakened; however, there is no clear evidence that silicon-based transistors have reached their limits for inference.

Inference Constraints and Trade-offs 
Novel inference approaches are proving to be crucial for improving model performance as models become more complex and physical constraints accumulate. Thus, even if GPU access improves and computation becomes cheaper, these gains cannot improve efficiency without addressing other constraints. Further, cloud-based inference, while reliant on expanding data centre infrastructure, depends on hyperscalers and has environmental consequences. Training a single large AI model can emit hundreds of tonnes of CO₂, comparable to the lifetime emissions of multiple cars. Additionally, inference dominates lifecycle energy use—in some cases, accounting for about 90 percent of total energy consumption once systems are deployed at scale.
In India’s context, simply improving inference efficiency does not necessarily reduce structural dependence. Many of these optimisation approaches remain tightly coupled to specific hardware stacks, cloud infrastructure, and model architectures controlled by a small set of external actors. For example, quantisation and kernel-level optimisations are often designed around NVIDIA’s CUDA and TensorRT stack, making them difficult to port efficiently to alternative hardware such as AMD GPUs or emerging RISC-V accelerators. At the cloud layer, managed inference services such as AWS SageMaker, Azure ML, and Google Vertex AI bundle optimisation with proprietary infrastructure, creating lock-in through APIs, tooling, and pricing models.


Inference dominates lifecycle energy use—in some cases, accounting for about 90 percent of total energy consumption once systems are deployed at scale.

Today, inference efficiency is increasingly shaped by hardware–software co-design, where chip architecture, memory systems, and energy availability determine which optimisation techniques are viable. Research shows that low-precision inference can significantly reduce compute and energy consumption without major accuracy loss when aligned with hardware capabilities. However, the trade-off is between efficiency and fidelity.
Low-precision inference (e.g., INT8, FP8) reduces memory usage, bandwidth requirements, and energy consumption, improving speed and reducing cost—especially on hardware designed for it. However, this comes at the risk of numerical error: reducing precision can lead to small losses in model accuracy, instability in edge cases, or degraded performance on complex tasks. Thus, maintaining both efficiency and accuracy simultaneously requires new paradigms—but these paradigms should not depend on foreign hardware or frameworks. Crucially, chips themselves must be designed for local realities, rather than relying on reverse engineering or the bottom-up, application-driven approach that currently dominates.

The Way Forward
As India develops domestic semiconductor capabilities, these constraints present an opportunity to co-design chips and inference systems tailored to local conditions. The Design-Linked Incentive scheme under the Indian Semiconductor Mission has enabled firms such as Mindgrove Technologies and InCore Semiconductors to develop indigenous processor and accelerator intellectual property (IP), often using global electronic design automation (EDA) tools. This hybrid approach enables India to focus on application-specific, low-power accelerators—including NPUs optimised for quantised inference, RISC-V processors optimised for edge AI inference—while integrating into global supply chains for fabrication and tooling.


While India faces constraints in scaling frontier cloud-based models, this does not mean abandoning frontier or multimodal AI—it means adapting approaches to local realities with dynamic constraints.

The way forward lies less in prescriptive shifts and more in rebalancing attention. Greater emphasis on inference within public AI initiatives could help surface new optimisation techniques and system designs suited to local constraints. Finally, sustained focus on efficient model design and edge-compatible deployment environments can expand the range of viable applications. While India faces constraints in scaling frontier cloud-based models, this does not mean abandoning frontier or multimodal AI—it means adapting approaches to local realities with dynamic constraints. Accordingly, inference innovation will become increasingly important as new hardware, software, and system-level approaches are developed.



This commentary originally appeared in Observer Research Foundation.

### The Maritime Insurance Chokepoint: Securing India’s Sea-Borne Trade

Iran’s closure of the Strait of Hormuz reduced daily oil tanker traffic to less than 10 percent of its pre-war levels. This unprecedented drop in the passage of tankers was driven not just by the increase in attacks, but by the collapse of affordable insurance cover. By March 2026, all 12 members of the International Group (IG) of Protection and Indemnity (P&I) clubs had issued 72-hour cancellation notices on parts of their war-risk cover in the Gulf. Consequently, hull premiums surged from 0.15-0.25 percent to 5-10 percent per voyage. At an additional US$10-14 million per trip, voyages became commercially unviable. The Strait was, in effect, priced shut. Recent US blockade measures have further disrupted maritime flows, highlighting how geopolitical tensions are impacting both critical sea routes and insurance costs.
The episode exposes how, without adequate cover, financing is withdrawn, and charterers refuse to load cargo. Elevated premiums alone can create trade chokepoints, even in the absence of a physical or military blockade. For emerging maritime economies such as India, these shocks translate into immediate and compounding vulnerabilities.
With over 95 percent of India’s trade by volume and around 70 percent by value transiting sea lanes, the stakes are considerable. The impact extends to Indian seafarers, who constitute one of the world’s largest maritime labour forces, exposing them to operational risks, stranding, wage delays, and uncertainty when insurance cover and voyages are disrupted. The country has recently approved a US$1.38 billion (INR 12,980 crore) sovereign-backed Bharat Maritime Insurance Pool to provide domestic coverage across hull, cargo, P&I, and war-risk segments, particularly for high-risk routes. However, as maritime routes become increasingly volatile, the need to further strengthen India’s maritime insurance capacity has become urgent.

Maritime Insurance Architecture
Maritime insurance operates across several layers: Hull and Machinery cover for physical vessel damage; P&I for third-party liabilities, such as pollution, cargo loss/damage and crew injury (the IG of P&I clubs, which insures approximately 87 percent of global tonnage, is near-universal); and war-risk insurance, a separately priced add-on.


Two features of this system are particularly notable. First, premium pricing is anticipatory: it adjusts ahead of military escalation, not after. Second, a ratchet effect persists: premiums rise quickly but fall slowly, even as conditions stabilise. Brief conflicts can translate into months of elevated shipping costs.

At the core of war-risk premium pricing sits the Joint War Committee (JWC) of Lloyd’s of London. Its high-risk designations can trigger premium escalations and coverage withdrawal within periods as quick as 72 hours. Two features of this system are particularly notable. First, premium pricing is anticipatory: it adjusts ahead of military escalation, not after. Second, a ratchet effect persists: premiums rise quickly but fall slowly, even as conditions stabilise. Brief conflicts can translate into months of elevated shipping costs.
Thus, as maritime insurance architecture evolved into a market-driven system centred on international underwriting clubs rather than a policy instrument, states largely treat maritime insurance and war-risk pricing as a commercial cost of shipping rather than a strategic variable in trade or economic resilience planning. The Hormuz crisis has brought into focus the systemic role of maritime insurance in determining trade continuity, particularly for developing economies.

India’s Exposure
Systemic Gaps and Structural Dependence
Historically, India has had limited strategic engagement with this London-centred architecture for underwriting global war-risk. With less than 1 percent of global shipping tonnage, India lacks the heft to influence freight markets, risk pooling, and insurance availability during periods of stress. Consequently, India’s maritime sector remains dependent on external markets, without robust domestic mechanisms to respond when global insurers withdraw or reprice.
Despite these constraints, India has augmented its strategic petroleum reserves, introduced schemes such as RELIEF, and increased domestic risk retention by expanding the state-owned General Insurance Corporation of India’s (GIC Re) reinsurance capacity over the past decade. In 2022, GIC Re set up a marine cargo pool to cover shipments from high-risk zones such as Ukraine, Russia, and Belarus, demonstrating that India can assemble coverage. However, such cover largely remains reactionary to global pressures.
India’s policy attention has also broadened. While the Insurance Regulatory and Development Authority of India (IRDAI) oversees the domestic market, the International Financial Services Centres Authority (IFSCA) at GIFT City has sought to position it as a hub for foreign reinsurers. However, uptake has remained limited. The government declined IFSCA’s proposed domestic P&I club in December 2022, but asked for its revival within weeks of the Hormuz crisis.


India has thus yet to establish a sovereign backstop capable of stabilising premiums or guaranteeing cover during market stress, or a domestic P&I club of meaningful scale. Without measures such as these, India’s insurance resilience continues to rely on the very external markets it seeks to insulate itself from, further compounded by global reinsurance structures.

Even with the Bharat Maritime Insurance Pool, these initiatives remain fragmented and reactive, serving as post-facto risk-mitigation measures rather than instruments that build structural insurance capacity or resist market dislocation. India has thus yet to establish a sovereign backstop capable of stabilising premiums or guaranteeing cover during market stress, or a domestic P&I club of meaningful scale. Without measures such as these, India’s insurance resilience continues to rely on the very external markets it seeks to insulate itself from, further compounded by global reinsurance structures. Domestic insurers, including GIC Re, operate within exposure limits and cede excess risk to international reinsurers, who rely on retrocession. This constraint was evident during the Hormuz disruption when GIC Re had to scale back cover in the absence of viable risk-sharing mechanisms.

Energy, Workforce, and Institutional Vulnerabilities
Around 30 percent of India's crude oil imports and 54 percent of its LPG supply transits the Strait of Hormuz. When insurance costs spiked in March 2026, freight costs rose, threatening domestic inflation. India's strategic petroleum reserves are designed for physical supply disruptions, not for prolonged economic strain from elevated premiums.


For a country seeking to raise its share of the global maritime workforce to over 20 percent, the absence of a domestic P&I ecosystem also represents a labour welfare concern.

This dependence extends to India's maritime workforce. Approximately 80 percent of Indian seafarers serve on foreign-flagged ships covered by foreign P&I clubs. When these clubs reduce coverage in high-risk zones, crews face stranding, wage delays, and uncertainty about repatriation. The Hormuz crisis impacted 23,000 Indian seafarers, leaving 768 of them stranded on 28 Indian ships in the Gulf. For a country seeking to raise its share of the global maritime workforce to over 20 percent, the absence of a domestic P&I ecosystem also represents a labour welfare concern.
Institutional fragmentation across the Ministry of Finance (MoF), the Ministry of Ports, Shipping and Waterways (MoPSW), and the Ministry of Petroleum and Natural Gas (MoPNG), with no single body empowered to monitor market signals or coordinate responses in real time, further compounds these vulnerabilities. India’s response in March 2026 appeared to rely on ad hoc inter-ministerial coordination rather than a dedicated, pre-established institutional system, revealing a significant limitation given the speed and scale at which such shocks unfold.

Policy Recommendations

 	Create a single nodal authority for maritime risk: Maritime insurance intersects insurance regulation, shipping policy, and energy security, split among the IRDAI under the MoF, the MoPSW, and the MoPNG. No standing mechanism exists to bring them together with the authority to act in a crisis. Coordination takes time the market does not provide; cover could lapse before a government position is confirmed. The March 2026 inter-ministerial group was a reasonable improvisation, but a permanent, pre-established institutional framework is necessary.


 	Establish a Sovereign Maritime Risk Pool: A sovereign risk pool anchored by GIC Re needs to be capitalised in advance and automatically triggered by JWC designations, not assembled mid-crisis. The US, for instance, deployed a US$20 billion reinsurance facility within days, and kept voyages moving. India's RELIEF scheme, by contrast, absorbs costs after a disruption but was not designed to prevent them. Given the ratchet effect in premiums, any sovereign instrument must be built for duration, not individual episodes. The Bharat Maritime Insurance Pool is an important step in this direction, marking a move towards institutionalising sovereign capacity to manage maritime insurance shocks.


 	Fast-track a domestic P&I club: The 1950 Japan P&I Club, established under comparable conditions of high external dependence and a limited fleet, offers a useful precedent: it scaled incrementally and reached IG associate status within a decade. Similarly, India must build a P&I club in parallel with its existing fleet-building initiatives to allow both to strengthen each other.


 	Build sovereign reinsurance depth: A domestic P&I club that continues to cede war-risk exposure to international reinsurers solves less than it appears to. GIC Re withdrew war-risk cover in the Gulf precisely because its reinsurance partners pulled back, leaving Indian refiners exposed when they need protection the most. To expand its risk-bearing capacity, India needs stronger sovereign reinsurance buffers, including dedicated war-risk reserves. Without this, all institutional improvements will remain contingent on external markets.


 	Build international pricing influence: India should seek more structured engagement with global risk-pricing forums. JWC designations move markets quickly, yet India has limited visibility into these processes. Formal participation may not be feasible, given the market-based nature of these bodies. However, informal engagement or observer-level access would be a material improvement. Early visibility will create room for diplomatic engagement and market coordination before decisions take effect.

India’s response in March 2026 appeared to rely on ad hoc inter-ministerial coordination rather than a dedicated, pre-established institutional system, revealing a significant limitation given the speed and scale at which such shocks unfold.
Conclusion
Maritime insurance is critical to trade flows. The Hormuz crisis demonstrates that trade disruptions can arise as much from financial and insurance systems as military action. While diplomacy, naval escorts, and fiscal measures address immediate shocks, the deeper challenge is to build institutional capacity to manage such risks at scale and protect India’s trade. Maritime insurance lies at the heart of economic resilience, and India’s priority must be a forward-looking framework that can withstand volatility and disruptions. 



This commentary originally appeared in Observer Research Foundation.

### Pakistan Is Finally Back In Middle East's 'Good Books'. But Can It Stay There?

US President Donald Trump's decision to extend the ceasefire with Iran indefinitely, as both sides search for a continuation of dialogue amidst a standoff over the Strait of Hormuz, has once again put Pakistan at the centre of a delicate diplomatic position as it plays the role of conduit between the Ayatollah and Trump.
The diplomatic position Rawalpindi, and by association Islamabad, today finds itself in is expected to be a boon for the embattled country's international standing - but also, perhaps more narrowly, help it return into the good graces of the Middle East. This is both an enviable and challenging space to be in for the only Islamic nation in the world that has nuclear weapons. Anchoring these political overtures, at least in part, is a defence deal that Pakistan in 2025 signed with its long-standing patron and partner in the Gulf, Saudi Arabia. The deal saw mobilisation of a few thousand Pakistani soldiers accompanied by a fleet of fighter jets to bolster its Arab partner's defences amidst a US-Iran war that has spilt over across the region.

The Saudis have maintained a delicate balance in the war despite their energy installations being targeted, and have postured in a way that indicates a realisation that the crisis with Iran is one for the long term and not something the current conflict will necessarily resolve. Continuing to have a diplomatic presence, followed by a China-brokered normalisation of ties between Riyadh and Tehran in 2023, allows Saudi Arabia to keep a door ajar at a time when the probability of Iran gaining an upper hand in the Gulf security architecture remains high. While Iran's leadership maintains that it seeks good relations with its neighbours, for the Gulf states, Iran, with a Shia-majority population of over 93 million people and as the 17th largest country in the world, has always presented a bigger security challenge.
The Flattery
Amidst the noise encapsulating the war, especially that coming from the White House, on April 9, Saudi Foreign Minister Faisal bin Farhan Al Saud and his Iranian counterpart, Abbas Araghchi, held a phone conversation. This, in fact, was a precursor and foundational exchange for allowing Pakistan's military leader, Field Marshal Asim Munir, to become a host and allow Islamabad to position itself as a self-styled mediator. From the perspective of the US - with Trump already bowled over by Munir's "flair" and Pakistan's role as a strategic toady - ingratiating the American leader with kind and an inherent lack of self-respect, by allowing him 'victories' in way of subscribing to his idea that the 2025 military exchange with arch-rival India was the eighth war he stopped, Pakistan offered a relatively low-risk entry into a renewed diplomatic track. To take the strategic flattery further, Pakistan is perhaps the only second country on record suggesting that Trump should indeed receive the Nobel Peace Prize - an award the US president has made no bones about wanting to be felicitated with. That the US, over the decades, has continued to fall prey to the same Pakistani game time and again is an indictment of the Pentagon's hubris of wanting to be the sole hegemonic power in the world. This is despite internal divisions, specifically amongst MAGA supporters, over whether the US should continue play the role of the world's policeman or not.
From the perspective of the US - with Trump already bowled over by Munir's "flair" and Pakistan's role as a strategic toady - ingratiating the American leader with kind and an inherent lack of self-respect, by allowing him 'victories' in way of subscribing to his idea that the 2025 military exchange with arch-rival India was the eighth war he stopped, Pakistan offered a relatively low-risk entry into a renewed diplomatic track. 
Nothing To Lose
The cost of failure for Pakistan if Iran and the US return to a military conflict is also minimal. For, costs can be imposed only if there is anything at all available to impose them against. A Pakistani headline in its own press recently read: "Pakistan returned $2 billion debt to the United Arab Emirates by taking a new debt from Saudi Arabia".

Irrespective of the success of US-Iran talks, Rawalpindi, for its own narrow interests, has further strengthened the Pakistan Army's role as the main political actor in the state it runs. However, it now benefits from the fact that the Iran war has pushed concerns around long-term security for the Arab states into the limelight. Pakistan has a nuclear status, along with hardened and battle-tested armed forces, and economic destitution that can be leveraged by petrodollars. For the Saudis, for example, Pakistan has been a military backend for long - one that they have funded for decades. From helping clear out the 1979 Siege of Mecca by militants led by Juhayman al-Otaybi to sending troops to protect Mecca and Medina itself during the first Gulf War in 1990, Pakistan has fully utilised its curious combination of military strength and Islam to navigate the region's geopolitics in a bid to keep its economy afloat.

Amidst all this, Iran has its own mistrusts with Pakistan. There are Iranian power ecosystems that quip about Pakistan not being an Islamic country altogether. Tehran and Rawalpindi had a short military exchange in early 2024, and even amidst the current kerfuffle, the Iranian press linked to the powerful Islamic Revolutionary Guard Corps (IRGC) has reported busting a terror cell following infiltration from Pakistan's border. The differences run deep. But today, both nations, prisoners of geography as they are, are driven by mutually beneficial short-term gains.

Over the past few years, Pakistan has seen itself slide out of favour in the Gulf. The US-Iran war has changed that. Munir and company have taken full advantage of it. But expecting this moment to change long-term fortunes for Pakistan is questioning history itself.



This comentary originally appeared in NDTV.

### Large but Uneven: Mapping the IMF’s Footprint in the MENA Region

Introduction
In recent decades, the International Monetary Fund (IMF) has evolved from being a lender of last resort to a substantial presence in the economic architecture of the Middle East and North Africa (MENA) region: it maintains active surveillance, lending, staff visits or staff engagements with 18[a] of the 22 sovereign entities it classifies as MENA countries.[1]
Most MENA countries are considered ‘rentier states’, or countries that derive large amounts of their government revenues from renting their indigenous resources to external agents.[2] For decades, the social contract in Arab states has been predicated on the distribution of rents through bloated public sector employment and low taxation, in exchange for political consent.[3] This structural rigidity means that when external rents (aid, remittances, and oil) decline, the state lacks the domestic tax base to compensate, transforming temporary liquidity crunches into chronic solvency crises.[4] Additionally, the region is characterised by instability and conflict. The resultant issues of high youth unemployment rates and anaemic private sectors have become a feature of the regional system.[5],[6] Consequently, the IMF is no longer a temporary stabiliser but has become a relatively permanent substitute for a functioning fiscal state. This is further entrenched by the region’s geopolitical centrality, making it “too strategic to fail.” As such, the IMF is likely to be frequently compelled to provide “life support” to systems unable to reform, enabling a unique “stabilised stagnation.”
Notably, whether it is Egypt seeking to avoid collapse or Saudi Arabia validating its non-oil growth to foreign investors, the road to fiscal credibility for the MENA countries increasingly runs through the Fund, via programme reviews (periodic assessment of IMF-supported programmes),[7] Article IV reports (annual economic health checks conducted by the IMF),[8] and regional surveillance exercises (broader IMF assessments of economic trends and risks across a geographic region).[9] However, although the IMF is engaged with multiple MENA countries, its ability to enforce genuine structural transformation is inversely correlated to a state’s geopolitical leverage or its internal dysfunction.
In this context, this brief aims to go beyond a mere inventory of IMF programmes and categorise MENA countries not by the type but by the quality of their engagement with the Fund. It dissects the IMF’s engagement across the region into four categories: structural borrowers, resilience partners, surveillance clients, and holdouts.
The first category of structural borrowers represents the ‘life support model’, where nations rely on IMF financing to maintain basic economic stability. The next category, resilience partners, operates on an insurance model, using credit lines as a precautionary safety net to reassure global markets rather than for immediate cash. The third—surveillance clients—includes the wealthy Gulf Cooperation Council (GCC) states, where the IMF acts as a consultant, validating economic plans for investors instead of enforcing spending cuts. The final category of the holdouts represents the frozen model, where conflict or politics prevents effective IMF engagement.

The Structural Borrowers
This category consists of states that have effectively ceded macroeconomic sovereignty to the IMF in exchange for solvency: Egypt, Jordan, Mauritania, and Somalia (see Table 1). These four countries have in common weak domestic revenue mobilisation characterised by low tax-to-GDP ratios.[10],[11],[12] As of 2025, the focus of these countries has shifted from emergency stabilisation to structural adjustment.
Table 1: The Structural Borrowers




Country
Programme Status


Egypt
Extended Fund Facility


Jordan
Extended Fund Facility + Resilience and Sustainability Facility


Mauritania
Extended Fund Facility + Extended Credit Facility + Resilience and Sustainability Facility


Somalia
Extended Credit Facility (Post Heavily Indebted Poor Countries Agreement)



Source: Author’s own, using various open sources.
Egypt represents the too-big-to-fail dilemma. A 46-month Extended Fund Facility (EFF) worth US$3 billion was approved in 2022 and augmented in 2024 to around US$8 billion to help navigate the impact of the Gaza crisis, which demanded a more robust external package.[13],[14],[15] This has underpinned a renewed stabilisation push: the unification of the exchange rate, the crushing of the parallel currency market, and rebuilding gross reserves from US$47.2 billion in 2024–25 to a projected US$66.5 billion by 2028–29.[16],[17],[18] Yet, the programme’s core structural ambition, the ‘state ownership policy’ designed to limit the state’s economic footprint and enhance the private sector, has faced stiff institutional resistance.[19],[20],[21],[22] By late 2025, the IMF’s acceptance of the recalibrated fiscal and privatisation targets suggested that the Fund was focusing on preventing the collapse of the Egyptian economy rather than promoting the transformation of its market structure. Consequently, it can be inferred that Egypt is paid to remain stable and not necessarily to reform.[23],[24]
In contrast, Jordan exemplifies the ‘solvency trap’, a condition where a state remains creditworthy through permanent austerity yet fails to generate the growth needed to escape debt dependence. Amman, as the region’s model student, consistently meets the Fund’s fiscal and monetary targets under its EFF, for instance, maintaining gross international reserves at US$20 billion.[25] In 2024–25, it also secured a Resilience and Sustainability Facility (RSF) arrangement worth US$700 million to address longer-term vulnerabilities in the water and electricity sectors and enhance its capacity to respond to public health emergencies, including future pandemics.[26] However, this macro-compliance masks a micro-crisis. Unemployment remains dangerously high at 21 percent in 2024 (with youth unemployment even higher at 46 percent), demonstrating that a state can be perfectly solvent in the eyes of the IMF even as it fails to generate inclusive growth amid issues such as chronic water poverty and the fiscal strain of hosting a large number of refugees.[b],[27],[28],[29],[30]
At the same time, Mauritania and Somalia illustrate the Fund’s role in state-building. Mauritania, grappling with the volatility of its extractive-dependent model, is seeking to advance a green transition and diversify into non-extractive sectors.[31] It has been running a combined Extended Credit Facility (ECF)/EFF and RSF package, framed by the IMF as supporting both macro-stability and climate resilience in a low-income, commodity-dependent economy.[32],[33] Meanwhile, Somalia is navigating a fragile transition from state collapse to functional sovereignty under its new National Transformation Plan (2025–2029), which aims to strengthen governance, economic transformation, human capital, and climate resilience.[34] In Somalia, the completion of the Heavily Indebted Poor Countries (HIPC) agreement in 2023 for debt relief and the approval of a new ECF arrangement in 2023–24 signalled a shift from arrears clearance to long-term capacity-building.[35] Therefore, the ECF is more about constructing the basic structure of the state—in the form of a tax collection, a functioning currency, and public financial management systems—from a very low institutional baseline.[36]

The Resilience Partners
This category represents the IMF’s ideal end-state for MENA economies: a relationship based on partnership rather than pressure, utilising insurance-style credit lines.
Table 2: The Resilience Partner




Country
Programme Status


Morocco
Flexible Credit Line + Resilience and Sustainability Facility



Source: Author’s own, using various open sources.
Morocco is the sole success story in this mapping, largely because it treats the IMF as an advisor rather than a saviour. In 2025, Rabat secured another two-year, US$4.5-billion Flexible Credit Line (FCL), the successor to the 2023 US$5-billion FCL, a facility that remained unused, serving as a liquidity backstop rather than emergency financing.[37],[38],[39] This was complemented by an RSF arrangement geared toward climate resilience and green investment, with IMF staff repeatedly describing Morocco’s policy framework and institutions as “very strong”.[40],[41] Unlike its regional peers, Rabat utilises the FCL purely as insurance, to protect the economy and keep foreign reserves strong, rather than as a lifeline for survival.[42] Specifically, the FCL functions as a ‘reputational anchor’ by signalling to global markets that Morocco has immediate access to liquidity if needed, effectively using the IMF’s stamp of approval.[43]
The critical insight here is domestic ownership. The reforms are home-grown initiatives driven by the country’s ‘New Development Model’, not foreign diktats imposed by the Fund.[44] This dynamic is precisely what is missing in the first category of countries (Egypt, Jordan, Mauritania, and Somalia). The Morocco case suggests that IMF programmes in the MENA region succeed only when there is domestic ownership and the Fund serves as a technical validator of a coherent national strategy. Otherwise, when the IMF attempts to substitute for a lack of domestic strategy, the result is usually stagnation.

The Surveillance Clients
This group is the largest. To these countries, the IMF does not act as a lender, but as an auditor, consultant, or warning system. This group includes the region’s wealthiest states (GCC) as well as its most fragile solvent ones.
Table 3: The Wealthy and the Fragile Surveillance Clients




Country
Programme Status


Saudi Arabia
Article IV Consultation 2025


UAE
Article IV Consultation 2025


Qatar
Article IV Consultation 2025


Kuwait
Article IV Consultation 2025


Oman
Article IV Consultation 2025


Bahrain
Article IV Consultation 2025


Djibouti
Article IV Consultation 2025


Algeria
Article IV Consultation 2025


Iraq
Article IV Consultation 2025


Libya
Article IV Consultation 2025


Yemen
Article IV Consultation 2025 (After 11-year hiatus)



Source: Author’s own, using various open sources.
In the Gulf, the IMF has effectively transformed into a high-level technical consultancy. The GCC states do not need the Fund’s liquidity, but they aggressively court its approval. Consider the cases of the three largest GCC economies: Saudi Arabia, the UAE, and Qatar. For Saudi Arabia, the 2024 and 2025 Article IV reports emphasise robust non-oil growth, labour market gains, and the importance of calibrating its ‘Vision 2030’ investment plans to avoid overheating and fiscal strain.[45],[46] For the UAE, Article IV consultations have focused on integrating fiscal frameworks across the emirates and testing a system that remains well-capitalised and resilient.[47]
For Qatar, meanwhile, the IMF has increasingly become a resource on revenue management, as Article IV reports frame the North Field LNG expansions as an upside growth anchor, projected to boost liquefaction capacity by nearly 85 percent by 2030, thereby necessitating fiscal discipline in the face of volatile hydrocarbon receipts.[48] However, the challenge of smoothening gas revenue while implementing the ‘Third National Development Strategy’ amid energy price volatility remains.[49],[50],[51]
In the other three Gulf economies, the nature of IMF involvement is the same, but the focus is on stabilising fiscal positions rather than strengthening the government’s large-scale diversification programmes. For Kuwait, Article IV reports have become a sort of macro early warning system, repeatedly stressing the risks from an outsized public wage bill, procyclical subsidies, and the slow pace of structural reform, even as hydrocarbon revenues continue to underpin the fiscal position.[52] In Oman and Bahrain, the IMF has evolved to focus on debt reduction and fiscal balance programmes.[53],[54] In Oman, IMF staff highlight an important turnaround: debt-to-GDP ratios falling to the mid-30 percent in 2025, sustained fiscal and external surpluses, and a commitment to a non-hydrocarbon primary balance path. In Bahrain, Article IV surveillance is explicitly tied to the kingdom’s ‘Fiscal Balance Program’, with IMF staff tracking non-oil revenue targets and debt trajectories that anchor expectations.[55]
States outside the Gulf have shallower IMF involvement. While the IMF has conducted Article IV consultations, it has received a muted response from these states, often due to domestic politics. Article IV consultations and the 2025 Debt Sustainability Analysis have classified Djibouti’s external public debt as “in distress and unsustainable,” urging debt restructuring and prudent fiscal management.[56],[57] However, these warnings have failed to encourage the needed policy reform. Similarly, in Iraq, the Fund’s recurring Article IV warnings, which have focused on the bloating public-sector wage bill amid a slowing non-oil economy, are disregarded by the political class. Article IV reports explicitly point to high debt-stress risks and call for urgent policy action.[58]
A similar situation is replicated in Libya, where the Article IV consultations and staff statements are key avenues for highlighting the central bank’s limited ability to implement reforms due to political disputes and governance arrangements that pressure the exchange rate, thereby adversely affecting fiscal policymaking.[59] The IMF’s repeated calls for a unified budget have failed to gain political traction, but it has acknowledged the progress based on past advice on financial inclusion and data gaps.[60] In Algeria, Article IV reports have repeatedly flagged the state-led, hydrocarbon-dependent model as a source of mounting fiscal vulnerability and called for diversification and governance reforms, which have received limited traction.[61] In Yemen, the IMF resumed Article IV consultations in 2025 after an 11-year hiatus, framing the work as rebuilding basic economic statistics and policy dialogue after a decade of war.[62]

The Holdouts
This final group of countries represent the limits of technocracy. Political fragility in these states has effectively vetoed good economics. The IMF is either absent, or else its presence is limited by conflict or neutralised by geopolitical rents.
Table 4: The Holdout Countries




Country
Programme Status 


Lebanon
Stalled Extended Fund Facility; Staff Visit 2025


Syria
Delayed: Last Article IV 2009; Staff Visit 2025


Tunisia
Rejected Extended Fund Facility


Sudan
Heavily Indebted Poor Countries and ECF Process Paused


Iran
Delayed: Last Article IV 2018


West Bank and Gaza
Delayed: Last Ad Hoc Liaison Committee Reports 2023



Source: Author’s own, using various open sources.
In Lebanon, the political elite are deeply enmeshed with the financial sector, making it difficult to achieve the required economic reforms, as the recovery programme is at odds with elite vested interests.[63] A staff-level agreement was reached in April 2022 for an EFF of about US$3 billion, but it remains unratified as prior actions on bank restructuring, bank evaluation, and debt restructuring have stalled. While IMF staff visited the country in September 2025 and stated that the engagement is likely to continue, it exists only on paper.[64] In contrast, the IMF is beginning to re-engage with Syria after over a decade. Article IV consultations were suspended in 2009, but the staff visit to Damascus in November 2025 was hoped to pave the way for consultations to resume.[65],[66] The visit focused on supporting the government to develop the most fundamental fiscal and monetary capacities as Syria begins to rebuild after the fall of the Assad regime.[67]
The IMF is largely absent in the other countries in this category (Tunisia, Sudan, Iran, and the West Bank and Gaza), with active conflicts rendering standard monitoring impossible or due to states’ unwillingness to engage with the Fund. These stalled trajectories expose the fragility of the IMF’s leverage in the face of political realities. Tunisia demonstrates the power of the geopolitical veto—President Kais Saied neutralised IMF pressure by leveraging European fears of migration.[68] Despite a 2022 staff-level agreement on a US$1.9-billion programme, Saied publicly rejected Fund ‘diktats’ in 2023, while the European Union simultaneously explored an over-€1-billion migration and budget-support package, illustrating how geopolitical rent can substitute for structural reform.[69],[70],[71]
Iran’s last Article IV consultations were in 2018, and there is no clarity on when they can resume.[72] For the West Bank and Gaza, the IMF’s primary vehicle is a recurrent ‘Report to the Ad Hoc Liaison Committee,’ which serves as a form of monitoring: staff assess macro-fiscal conditions and the impact of restrictions to outline reforms, even without a full sovereign IMF membership.[73] The last such report was released in 2023, and there is still no clarity on the future of IMF engagement in the state.[74] Similarly, Sudan illustrates a case of conflict-driven paralysis. After clearing arrears in 2021, gaining HIPC eligibility, and having the IMF approve a US$2,472.7-million ECF, the conflict in Sudan resulted in a freeze on all Fund engagement, suspending Article IV consultations and halting progress toward debt relief.[75],[76],[77]

The IMF’s Crisis of Traction
The four-group mapping presented in this brief reveals a striking feature of the IMF’s footprint in the MENA region: the Fund’s influence is not determined by the depth of its expertise, but by the political economy of the state it is attempting to transform. The IMF does not lack diagnostic clarity; indeed, its Article IV reports increasingly offer some of the sharpest public assessments of macro-fiscal and governance fragilities in the region. However, the political elasticity for reform is the challenge; countries bend the IMF’s prescriptions to the limits of their domestic coalitions or geopolitical leverage. Consequently, the IMF has become structurally necessary but insufficient as a catalyst of transformation in the MENA region, highlighting a ‘crisis of traction’.

Domestic Ownership as Core Determinant of Reform Trajectories
A clear pattern is evident across the four groups: the IMF’s success is not primarily a function of conditionality design or financial firepower, but of the degree to which domestic elites internalise and champion reform. Morocco exemplifies this dynamic. Its relationship with the Fund operates on a model of voluntary partnership rather than coercion. The country draws on the IMF’s expertise to reinforce a pre-existing national development strategy rather than to substitute for its absence. This alignment produces a rare situation in the region wherein macroeconomic prudence, institutional strengthening, and long-term planning coexist within a coherent policy architecture.
In the countries of the first category (structural borrowers), the Fund seeks to engineer transformation in a scenario where political actors are either unwilling or unable to manage economic interests or sustain painful adjustments. Egypt’s recurrent crises highlight this dynamic: despite repeated programme cycles, structural reform has been circumscribed by the state’s entrenched economic networks. Similarly, Jordan’s exemplary macro-compliance masks deeper socio-economic challenges, such as stagnant labour markets and limited private-sector dynamism. Mauritania and Somalia face the opposite challenge: they are not resisting reform but lack the foundational state capabilities necessary to operationalise it. In all these cases, the absence of a clear, credible, and government-driven development vision limits the transformative reach of IMF engagement, regardless of financial scale or programmatic ambition.

Inverse Relationship Between National Wealth and IMF Leverage
The third category of countries (surveillance clients) exposes an unconventional dynamic: the wealthier the state, the more the IMF is treated as a high-end advisory firm rather than a disciplinarian. In the Gulf states, hydrocarbon revenues eliminate the IMF’s traditional leverage, transforming Article IV consultations into exercises in technical benchmarking rather than mechanisms of policy conditionality. Saudi Arabia, the UAE, and Qatar actively solicit Fund evaluations not because they require liquidity, but because external validation enhances investor confidence and strengthens the reputational credibility of national development strategies.
Among the smaller Gulf economies, where fiscal constraints are more binding, the Fund’s advice on wage bills, subsidies, and debt trajectories carries greater urgency, yet even here it confronts political economy limits that soften its impact. However, the wealth of nations is inversely correlated to the IMF’s leverage. As a result, in the relatively under-resourced countries in the first group, the IMF can command a higher degree of compliance with its macro-fiscal advice.

Political Vetoes Trump IMF’s Technocratic Power
The fourth category of countries (the holdouts) underscores the hard boundary of technocratic influence: the IMF cannot induce reform where political elites possess both the capacity and incentive to resist it. In Tunisia, the president’s ability to neutralise the leverage of a staff-level agreement illustrates how the Fund’s ability to influence reform can be easily vetoed by the political elite. In Lebanon, elite coalitions have resulted in a stalemate: the IMF’s programme exists only on paper, while the underlying institutional impetus remains paralysed.
In other contexts, the IMF is sidelined not by strategic resistance but by conflict and fragmentation. In Sudan, the collapse of state authority rendered the HIPC-ECF trajectory inoperative. In the West Bank and Gaza, the IMF’s engagement is constrained by the absence of sovereignty and by conflict dynamics. In Iran, the delay or suspension of Article IV consultations reflects the existence of political realities beyond the scope of technical remedies. Even Syria’s renewed engagement stems not from a triumph of technocratic persuasion but from a shift in political conditions (the fall of the Assad regime), which created space for the reconstruction of basic fiscal and monetary institutions. The IMF’s inability to shape outcomes in these cases is not a failure of economic reasoning but a reminder that political vetoes fundamentally surpass the reach of technocratic institutions.

Stabilised Stagnation of Uneven Engagement
Taken together, the four groups reveal a region increasingly characterised by a form of stabilised stagnation. The IMF has become essential for preventing disorderly macroeconomic crises, rebuilding reserves, guiding monetary frameworks, and offering credible external assessments. These achievements coexist with a persistent inability to influence the deeper structural parameters of development. With a few exceptions, IMF programmes in the MENA region have not generated sustained diversification, meaningful improvements in productivity, substantial gains in private-sector dynamism, or durable shifts in the distributional architecture of the state.
This situation is deeply problematic. Macroeconomic solvency without microeconomic transformation creates a veneer of stability on profound developmental fragilities. It produces states that remain solvent in international markets but are unable to generate employment, broaden opportunity, or foster competitive economic ecosystems. It also reinforces a political economy in which external technocratic support substitutes for, rather than catalyses, domestic institutional renewal. If maintained, this situation risks entrenching a future in which the region repeatedly avoids collapse but rarely escapes stagnation.

Conclusion
The assessment presented in this brief suggests that the IMF’s challenge in the MENA region is not a lack of expertise but misaligned elite incentives. There is a fundamental asymmetry between the IMF’s technocratic authority and the region’s political economy. The Fund’s capacity to shape outcomes is contingent on political conditions, which vary sharply across the region.
Where elites embrace reform, exemplified by Morocco’s domestic ownership of its resilience agenda, the IMF amplifies domestic strategy. Where elites resist, as seen in the ‘stabilised stagnation’ of Egypt or the elite capture in Lebanon, the IMF is a bystander that documents vulnerabilities it cannot correct.
The coming years will require a more differentiated approach that recognises the heterogeneity of state capacity, political constraints, and geopolitical rents. Only by embedding its programmes within credible domestic coalitions and by acknowledging the limits of technocratic authority can the IMF hope to evolve from a stabilising to a transformative force.



Samriddhi Vij is Associate Fellow, Geopolitics, ORF Middle East.



All views expressed in this publication are solely those of the author, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel. 

Endnotes
[a] These are: Egypt, Jordan, Mauritania, Somalia, Morocco, Saudi Arabia, UAE, Qatar, Kuwait, Oman, Bahrain, Djibouti, Algeria, Iraq, Libya, Yemen, Lebanon, and Syria.
[b] These refugees are mostly those fleeing the conflict in Syria.
[1] “Regional Economic Outlook Middle East and Central Asia,” International Monetary Fund, October 2025, https://www.elibrary.imf.org/downloadpdf/display/book/9798229023016/9798229023016.pdf
[2] Andrzej Guzowski, “Rentier State as an Obstacle to Development in the Middle East,” Politikon: The IAPSS Journal of Political Science, October 2013, https://doi.org/10.22151/politikon.21.3
[3] Hazem Beblawi, “The Rentier State in the Arab World,” Arab Studies Quarterly, March 1987, https://www.jstor.org/stable/41857943
[4] Adeel Malik, “Rethinking the Rentier Curse,” International Development Policy Revue Internationale de Politique de Développement, June 2017, https://www.jstor.org/content/oa_chapter_edited/10.1163/j.ctt1w8h356.10?seq=1 
[5] “Youth: MENA's Future Wealth,” International Monetary Fund, August 2017, https://www.imf.org/en/news/seminars/conferences/2017/08/08/morocco-opportunities-for-all/morocco-conference-chart-of-the-week/chart-of-the-week-1.
[6] “What’s Holding Back the Private Sector in the Middle East and North Africa?,” European Bank for Reconstruction and Development, https://www.ebrd.com/home/what-we-do/office-of-the-chief-economist/beeps/business-environment-enterprise-performance-survey-reports/whats-holding-back-private-sector-mena.html
[7] A Review of IMF-Supported Lending Programs, "A Review of IMF-Supported Lending Programs," International Monetary Fund, May 2019, https://www.imf.org/en/Blogs/Articles/2019/05/20/a-review-of-imf-supported-lending-programs
[8] “IMF Policy Advice,” International Monetary Fund, https://www.imf.org/en/about/factsheets/imf-surveillance
[9] IMF Annual Report 2023, "Economic Surveillance," International Monetary Fund, 2023, https://www.imf.org/external/pubs/ft/ar/2023/what-we-do/economic-surveillance/
[10] World Population Review, “Tax to GDP Ratio by Country,” World Population Review, 2025, https://worldpopulationreview.com/country-rankings/tax-to-gdp-ratio-by-country
[11] World Population Review, “Tax to GDP Ratio by Country.”
[12] Organization for Economic Co-operation and Development, “Revenue Statistics in Africa 2025: Mauritania,” OECD, 2025, https://www.oecd.org/content/dam/oecd/en/topics/policy-sub-issues/global-tax-revenues/revenue-statistics-africa-mauritania.pdf.
[13] “Press Release No. 22/441,” International Monetary Fund, December 2022, https://www.imf.org/en/news/articles/2022/12/16/pr22441-egypt-imf-executive-board-approves-46-month-usd3b-extended-arrangement
[14] “Egypt Approves $91 Billion Budget for 2025/26,” Reuters, March 2025, https://www.reuters.com/world/africa/egypt-approves-91-billion-budget-202526-2025-03-26/
[15] Alvin R. Cabral, "IMF Approves Egypt's $8bn Loan Package to Boost its Economy," The National, March 2024, https://www.thenationalnews.com/business/economy/2024/03/30/imf-loan-programme-for-egypt-expanded-to-8bn-to-boost-its-economy/
[16] "Arab Republic of Egypt IMF Country Report No. 24/98," International Monetary Fund, April 2024, https://www.imf.org/-/media/files/publications/cr/2024/english/1egyea2024001.pdf.
[17] "Arab Republic of Egypt IMF Country Report No. 24/274," International Monetary Fund, August 2024, https://www.imf.org/-/media/files/publications/cr/2024/english/1egyea2024002-print-pdf.pdf
[18] State Information Service, “Infograph: IMF Forecasts Rise in Egypt Gross International Reserves,” Government of Egypt, September 2024, https://sis.gov.eg/en/media-center/news/infograph-imf-forecasts-rise-in-egypt-gross-international-reserves/
[19] Eduard Cousin, " Egypt’s Economy Stabilises, But Poverty Challenges Persist,” Al Jazeera, December 2025, https://www.aljazeera.com/economy/2025/12/5/egypts-economy-stabilises-but-poverty-challenges-persist
[20] “Press Release No. 24/429,” International Monetary Fund, November 2024, https://www.imf.org/en/news/articles/2024/11/20/pr-24429-egypt-imf-mission-concludes-visit-to-egypt-for-the-4th-review-under-the-eff
[21] “Press Release No. 25/58,” International Monetary Fund, March 2025, https://www.imf.org/en/news/articles/2025/03/11/pr-2558-egypt-imf-completes-4th-rev-eff-arrangement-under-rsf-concl-2025-art-iv-consult
[22] Beesan Kassab, “New Law To Regulate State Ownership: Pushing Through The IMF Review With The Same Old Recipe,” Mada Masr, June 2025, https://www.madamasr.com/en/2025/06/03/feature/economy/new-law-to-regulate-state-ownership-pushing-through-the-imf-review-with-the-same-old-recipe/
[23] “Frequently Asked Questions On Egypt and the IMF,” International Monetary Fund, July 2025, https://www.imf.org/en/countries/egy/egypt-qandas
[24] “Egypt Cuts 2024–2025 Privatization Targets,” MEES, April 2024, https://www.mees.com/2024/4/26/economics-finance/egypt-cuts-2024-2025-privatization-targets/9ae62470-03c8-11ef-943c-d528d031ee9e
[25] “Press Release No. 25/221,” International Monetary Fund, June 2025, https://www.imf.org/en/news/articles/2025/06/25/pr25221-jordan-imf-completes-3rd-rev-eff-arrangement-approves-us-700-mill-arrangement-under-rsf
[26] “Press Release No. 25/221,” International Monetary Fund
[27] “Jordan Unemployment Rate,” CEIC Data, Accessed December 2025, https://www.ceicdata.com/en/indicator/jordan/unemployment-rate
[28] Zafiris Tzannatos, “A Macroeconomic Accounting of Unemployment in Jordan: Unemployment is Mainly an Issue for Adults and Men,” Economic Research Forum (ERF), February 2025, https://theforum.erf.org.eg/2025/02/24/a-macroeconomic-accounting-of-unemployment-in-jordan-unemployment-is-mainly-an-issue-for-adults-and-men/
[29] "Managing Water Scarcity in Jordan," Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), 2025, https://www.giz.de/en/projects/water-sector-governance
[30] “Jordan Operational Data Portal,” United Nations High Commissioner for Refugees, 2025, https://data.unhcr.org/en/country/jor.
[31] "Islamic Republic of Mauritania," International Monetary Fund, December 2023, https://www.elibrary.imf.org/view/journals/002/2023/444/article-A001-en.xml.
[32] “Press Release No. 25/240,” International Monetary Fund, July 3, 2025, https://www.imf.org/en/news/articles/2025/07/03/pr25240-mauritania-imf-comp-4th-rev-of-ext-arr-under-ecf-and-eff-arr-and-3rd-rev-of-rsf-arr
[33] “Islamic Republic of Mauritania: Technical Assistance Report-Technical Assistance Project on Public Debt Projections and Analysis: Scoping Mission,” International Monetary Fund, November 2024, https://www.elibrary.imf.org/view/journals/019/2024/089/article-A001-en.xml
[34] Ministry of Planning, Investment and Economic Development, “National Transformation Plan (NTP) 2025-2029 Report,” Federal Government of Somalia, March 2025, https://mop.gov.so/national-transformation-plan-ntp-2025-2029-report/.
[35] “Press Release No. 23/372,” International Monetary Fund, November 2023, https://www.imf.org/en/news/articles/2023/11/01/pr23372-somalia-imf-reaches-sla-on-36-month-ecf-arrangement
[36] “Press Release No. 25/341,” International Monetary Fund, October 2025, https://www.imf.org/en/news/articles/2025/10/10/pr-25341-somalia-imf-completes-agreement-on-the-4th-review-of-the-ecf-arrangement
[37] “Press Release No. 25/085,” International Monetary Fund, April 2025, https://www.imf.org/en/news/articles/2025/04/02/pr25085-morocco-imf-executive-board-approves-new-two-year-flexible-credit-line-arrangement
[38] “Press Release No. 23/104,`” International Monetary Fund, April 2023, https://www.imf.org/en/news/articles/2023/04/03/pr23104-imf-executive-board-approves-two-year-billion-flexible-credit-line-arrangement-for-morocco
[39] Imane Lechheb, “Morocco Secures New $4.5 Bln Credit Line from IMF, Says It’s a Safety Net,” Hespress English, April 2025, https://en.hespress.com/107181-morocco-secures-new-4-5-bln-credit-line-from-imf-says-its-a-safety-net.html.
[40] “Morocco: Second Review Under the Arrangement Under the Resilience and Sustainability Facility,” International Monetary Fund, November 2024, https://www.imf.org/en/Publications/CR/Issues/2024/11/25/Morocco-Second-Review-Under-The-Arrangement-Under-the-Resilience-and-Sustainability-558830
[41] “Press Release No. 25/085,” International Monetary Fund, April 2025, https://www.imf.org/en/news/articles/2025/04/02/pr25085-morocco-imf-executive-board-approves-new-two-year-flexible-credit-line-arrangement
[42] Lechheb, “Morocco Secures New $4.5 Bln Credit Line from IMF, Says It’s a Safety Net.”
[43] Lechheb, “Morocco Secures New $4.5 Bln Credit Line from IMF, Says It’s a Safety Net.”
[44] “Morocco: Second Review Under the Arrangement Under the Resilience and Sustainability Facility,” International Monetary Fund, November 25, 2024, https://www.elibrary.imf.org/view/journals/002/2024/324/article-A001-en.xml
[45] “Saudi Arabia 2024 Article IV Consultation: Press Release,” International Monetary Fund, September 2024, https://www.imf.org/en/publications/cr/issues/2024/09/03/saudi-arabia-2024-article-iv-consultation-press-release-staff-report-and-informational-annex-554530
[46] “Saudi Arabia: Concluding Statement of the 2025 Article IV Mission,” International Monetary Fund, June 26, 2025, https://www.imf.org/en/news/articles/2025/06/25/saudi-arabia-concluding-statement-of-the-2025-article-iv-mission
[47] “Press Release No. 25/326,” International Monetary Fund, October 2025, https://www.imf.org/en/news/articles/2025/10/02/pr-25326-united-arab-emirates-imf-staff-completes-2025-article-iv-mission
[48] Handan Kazancı, "Qatar to Boost LNG Production to 142 MTPA by 2030," Energy Terminal, February 2024, https://www.aa.com.tr/en/energy/lng-lpg/qatar-to-boost-lng-production-to-142-mtpa-by-2030/40801
[49] Council of Ministers Secretariat General, “Third Qatar National Development Strategy,” State of Qatar, Accessed in 2026, https://cm.gov.qa/en/Pages/Third-Qatar-National-Development-Strategy-2024-2030.aspx
[50] “Qatar: 2024 Article IV Consultation — Press Release; Staff Report; and Statement by the Executive Director for Qatar,” International Monetary Fund, February 2025, https://www.imf.org/-/media/files/publications/cr/2025/english/1qatea2025001-print-pdf.pdf
[51] “Press Release No. 25/313,” International Monetary Fund, September 2025, https://www.imf.org/en/news/articles/2025/09/25/pr-25313-qatar-imf-staff-concludes-staff-visit-to-qatar
[52] “Kuwait: 2024 Article IV Consultation – Press Release; Staff Report; and Statement by the Executive Director for Kuwait,” International Monetary Fund, December 2024, https://www.imf.org/en/publications/cr/issues/2024/12/07/kuwait-2024-article-iv-consultation-press-release-staff-report-and-statement-by-the-559194
[53] “Press Release No. 25/393,” International Monetary Fund, November 2025, https://www.imf.org/en/news/articles/2025/11/24/pr-25393-oman-imf-staff-concludes-staff-visit
[54] “Press Release No. 25/391,” International Monetary Fund, November 2025, https://www.imf.org/en/news/articles/2025/11/24/pr-25391-the-kingdom-of-bahrain-imf-staff-completes-2025-article-iv-mission
[55] “Press Release No. 24/445,” International Monetary Fund, November 2024, https://www.imf.org/en/news/articles/2024/11/27/pr-24445-the-kingdom-of-bahrain-imf-executive-board-concludes-2024-article-iv-consultation
[56] “Djibouti: 2025 Article IV Consultation — Press Release and Staff Report,” International Monetary Fund, September 2025, https://www.imf.org/-/media/files/publications/cr/2025/english/1djiea2025001-source-pdf.pdf
[57] “Djibouti: Staff Report for the 2025 Article IV Consultation – Debt Sustainability Analysis,” International Monetary Fund, September 2025, https://www.elibrary.imf.org/view/journals/002/2025/276/article-A003-en.xml
[58] “Press Release No. 25/243,” International Monetary Fund, July 2025, https://www.imf.org/en/news/articles/2025/07/08/pr-25243-iraq-imf-executive-board-concludes-2025-article-iv-consultation
[59] “Libya: 2025 Article IV Consultation — Press Release and Staff Report,” International Monetary Fund, June 2025, https://www.imf.org/-/media/files/publications/cr/2025/english/1lbyea2025001-print-pdf.pdf
[60] Mission Concluding Statement, "Libya: Staff Concluding Statement of the 2025 Article IV Mission," International Monetary Fund, April, 2025. https://www.imf.org/en/news/articles/2025/04/15/mcs-04162025-libya-staff-concluding-statement-of-the-2025-article-iv-mission
[61] “Algeria: 2025 Article IV Consultation — Press Release and Staff Report,” International Monetary Fund, September 2025, https://www.imf.org/-/media/files/publications/cr/2025/english/1dzaea2025001-source-pdf.pdf
[62] “Yemen: Concluding Statement of the 2025 IMF Article IV Mission,” International Monetary Fund, October 9, 2025, https://www.imf.org/en/news/articles/2025/10/09/imf-cs-yemen-2025-imf-article-iv-mission
[63] Yousef Saba and Nadine Awadalla, “World Bank Berates Lebanon's Elite for 'Zombie' Economy,” Reuters, January 2022, https://www.reuters.com/world/middle-east/lebanese-govt-revenues-fell-by-nearly-half-2021-world-bank-says-2022-01-25/
[64] “Press Release No. 25/316,” International Monetary Fund, September 2025, https://www.imf.org/en/news/articles/2025/09/25/pr-25316-lebanon-imf-staff-concludes-visit-to-lebanon
[65] “Syria and the IMF,” International Monetary Fund, Accessed December 2025, https://www.imf.org/en/countries/syr
[66] “Press Release No. 25/377,” International Monetary Fund, November 2025, https://www.imf.org/en/news/articles/2025/11/17/pr-25377-syria-imf-staff-concludes-staff-visit-to-damascus
[67] Widyane Hamdach, “The Fall of Bashar al-Assad: Winners, Losers, and Challenges Ahead,” Georgetown Journal of International Affairs, May 7, 2025, https://gjia.georgetown.edu/2025/05/07/the-fall-of-bashar-al-assad-winners-losers-and-challenges-ahead/
[68] Cecilia Macaulay, “Tunisia-EU Migration: Deal Signed To Strengthen Borders,” BBC News, July 2023, https://www.bbc.com/news/world-africa-66222864
[69] “Press Release No. 22/353,” International Monetary Fund, October 2022, https://www.imf.org/en/news/articles/2022/10/15/pr22353-tunisia-imf-staff-reaches-staff-level-agreement-on-an-extended-fund-facility-with-tunisia
[70] Tarek Amara, “Tunisian President Rejects IMF 'Diktats', Casting Doubt On Bailout,” Reuters, April 2023, https://www.reuters.com/world/africa/tunisian-president-rejects-imf-dictats-says-public-peace-not-game-2023-04-06
[71] “EU May Still Loan Tunisia $1 Bln If It Secures IMF Support,” Reuters, July 2023, https://www.reuters.com/world/africa/eu-may-still-loan-tunisia-1-bln-if-it-secures-imf-support-2023-07-17
[72] “Iran and the IMF,” International Monetary Fund, Accessed in December 2025, https://www.imf.org/en/countries/irn
[73] “West Bank and Gaza: Report to the Ad Hoc Liaison Committee,” International Monetary Fund, September 2023, https://www.imf.org/en/publications/cr/issues/2023/09/12/west-bank-and-gaza-report-to-the-ad-hoc-liaison-committee-539149
[74] “West Bank and Gaza Report to the Ad Hoc Liaison Committee,” International Monetary Fund, September 2023, https://www.imf.org/-/media/files/publications/cr/2023/english/1wbgea2023003.pdf
[75] “Press Release No. 21/200,” International Monetary Fund & World Bank Group, June 29, 2021, https://www.imf.org/en/news/articles/2021/06/29/pr21200-sudan-joint-statement-david-malpass-kristalina-georgieva-on-behalf-of-world-bank-group-imf
[76] “Press Release No. 21/199,” International Monetary Fund, June 2021, https://www.imf.org/en/news/articles/2021/06/29/pr21199-sudan-to-receive-debt-relief-under-the-hipc-initiative
[77] “Press Release No. 21/198,” International Monetary Fund, June 29, 2021, https://www.imf.org/en/news/articles/2021/06/29/pr21198-sudan-imf-executive-board-approves-extended-credit-facility-arrangement

### When conflicts rewire banks

Banking systems do not merely weaken under conflict. They are structurally transformed. Yet this institutional dimension – how banking itself is reorganised under conflict – remains largely absent from the policy debate. Under conditions of armed conflict and state rupture, banking shifts away from decentralised intermediation towards directed, survival-orientated finance. Market allocation weakens, state priorities dominate and the changes persist long after the disruption ends. Yet the policy conversation has concentrated on sanctions, commodities and trade – the institutional reorganisation of banking under conflict remains less well examined.
Banking systems are the primary channel through which macroeconomic damage under conflict is transmitted. Research in the International Monetary Fund’s April 2026 World Economic Outlook shows that output in conflict-affected economies falls cumulatively by roughly 7% within five years – losses that exceed those from financial crises or severe natural disasters and that persist a decade later. Public debt rises by up to 14% of gross domestic product during wartime. Yet the mechanism itself – how banking is rewired under conflict – remains poorly understood.

What economic history reveals
The historical record is remarkably consistent. Work by the National Bureau of Economic Research documented this transformation in real time during the second world war. Banks were converted from commercial intermediaries into instruments of sovereign finance: interest rates were suppressed, credit was directed and balance sheets became concentrated in government paper. In the UK, the Bank of England’s holdings of government securities rose to £62.6m by November 1918 from £11m in July 1914 – to 33% from 13% of total assets. The pattern extends further back: research on the Napoleonic period shows the Bank of England supporting wartime borrowing through liquidity provision and managed debt issuance, while evidence from the seven years’ war points to short-term crowding out of private credit followed by longer-run financial deepening.
What followed was equally consequential. Across advanced economies, financial repression – interest-rate caps, capital controls, directed lending and a tighter government-bank nexus – liquidated public debt at roughly 3% to 4% of GDP per year in the UK and the US between 1945 and 1980. Real rates were negative roughly half the time. In the UK, the cash ratio was formalised in 1946, and a liquidity requirement was introduced in 1951, steering banks towards government paper for decades. The saver, pension fund and depositor all paid the bill.

Figure 1. Four dimensions of rewiring
Before, during and after conflict





Source: Author’s framework








Recent experience confirms the pattern – and reveals that the rewiring is not only institutional but behavioural. Households respond to conflict by withdrawing deposits, hoarding cash and shifting savings into foreign currencies or digital assets. Depositors and banks move in the same direction: towards precaution, away from intermediation.
Kuwait after 1990 illustrates the balance-sheet consequences. The 1992 debt-settlement programme transferred large volumes of impaired loans from banks to the state in exchange for government bonds. Banks emerged with stronger capital positions, but at the cost of shifting private losses onto the sovereign.
In Ukraine, asset quality deteriorated rapidly following the 2022 invasion. Banks remained profitable in 2023, largely through central bank instruments and margin expansion rather than broad-based lending, while the authorities prioritised payments continuity through pre-designed operational resilience. The credit channel contracted sharply. The payments channel was actively preserved.
In fragile and conflict-affected states, this pattern becomes persistent. Formal banking narrows while payments, remittances and household transactions migrate to mobile money, cash networks and informal transfer systems. In several settings, mobile money volumes now exceed formal bank transfers many times over. The formal system does not disappear – it hollows out, retaining the regulatory architecture while losing the economic substance. The result is not collapse but bifurcation.
The conflict in the Middle East and the associated oil production crisis introduces a further dimension: the direct targeting of financial centres as theatres of insecurity. Major international banks have evacuated or restricted access to their offices. The threat is no longer limited to borders and boundaries but also to financial hubs.
Technology is altering the form of this adjustment without changing its logic. Digital payment rails, mobile money and stable-value digital instruments expand the channels through which transactions continue when formal banking is impaired. Reports from blockchain analytics firms indicate that stablecoin flows linked to conflict-affected economies surged markedly during 2025.
Regarding the conflict, reports suggest that stablecoins have been used at scale – by state institutions to settle trade and by ordinary citizens to protect savings as national currencies depreciate. Disruption may not reduce financial activity as much as relocate it – across borders, beyond regulated balance sheets and into systems only partially visible to supervisors.
The evidence – historical and contemporary – points to a consistent pattern. The policy response has not kept pace.

Three practical conclusions could follow
First, central banks and systemic risk authorities could benefit from an operational framework for conflict and geopolitical disruption. Not merely a financial stability contingency plan but a pre-designed architecture for payments continuity, emergency liquidity provision and collateral management under physical disruption. Recent experience, notably in Ukraine, has demonstrated that pre-designed resilience works. Improvisation would not have.
Second, financial and market regulators must treat the sovereign-bank loop as a geopolitical transmission channel. Banks hold sovereign debt; sovereign distress weakens bank balance sheets; weakened banks, in turn, raise sovereign borrowing costs further. This loop has persisted for decades. Regulatory and prudential frameworks must account for it.
Third, post-conflict planning must confront the reconstruction gap. Rebuilding requires long-duration project finance – infrastructure, housing, energy – spanning 10- to 30-year horizons. But banks emerging from conflict hold shortened balance sheets, impaired capital and portfolios concentrated in sovereign paper. Development finance institutions, multilateral lenders and governments will need to provide the long-duration capital that banking systems rewired for survival cannot. The instruments must be created now.
Banks, in such conditions, are not simply private intermediaries. They are part of the national continuity infrastructure. Once rewiring begins, it does not reverse when the disruption ends. It becomes the new operating structure. The question is no longer whether policy frameworks need updating. It is whether they can be redesigned while conflicts are still reshaping the systems they are meant to govern.



This commentary originally appeared in ORF America.

### Big Aspirations for Small Modular Reactors: Understanding India’s Strategy on SMRs

 SMRs: An Overview
In the global nuclear energy sector, small modular reactors (SMRs) are seen as one of the most promising technologies, for many reasons. They have a power capacity of up to 300 megawatts electrical (MWe) per unit, approximately one-third of the generating capacity of conventional reactors.[1] Owing to their modular design, they can be assembled in factories and then transported to installation sites, ensuring reduced construction times and costs. In the long term, this modularity will allow for economies of serial production and scaled deployment as energy demand increases.[2]
SMRs occupy less space, resulting in a smaller exclusion zone of approximately 0.5 kilometres around each, compared to the 1–1.5-kilometre zones required for traditional nuclear power plants.[3] This increases flexibility in site selection and reduces land procurement issues and associated social costs.
SMRs can be used to supply power to remote locations, as well as to areas with small-scale grids that are unable to accommodate excess capacity. They provide a reliable and continuous supply of power, unlike renewable energy sources, such as wind or solar. Therefore, they can be integrated with renewable energy to provide a base-load capacity for industrial decarbonisation. While traditional reactors require refuelling every one to two years, SMRs are refuelled after three to seven years.[4]
SMRs possess inherent passive safety systems that do not require human intervention or external power to shut them down in the event of an accident.[1] This feature is particularly important for countries with limited experience in handling nuclear energy.[5]
According to the International Energy Agency’s (IEA) projections, SMRs may begin to play a significant role in decarbonisation from the mid-2030s, provided that regulatory and investment decisions concerning their deployment are made within this decade.[6] Some estimates suggest that the global market size for SMRs will reach US$300 billion by 2040.[7] An International Atomic Energy Agency (IAEA) report states that there are at least 68 active SMR designs at various stages of development worldwide.[8] However, only two SMR nuclear power plants (NPPs) are currently operational: the world’s first floating power unit[2] in Russia, Akademik Lomonosov, which has two KLT-40S reactors[3] of 35 MWe each; and the first land-based High-Temperature gas-cooled Reactor Pebble-bed Module (HTR-PM) demonstration plant[4] in China, comprising two reactors with a combined installed capacity of 210 MWe. Several SMRs are in advanced stages of construction in Argentina, China, Russia, and the United States (US).[9]

India’s SMR Push
The Nuclear Power Corporation of India Ltd (NPCIL), a public sector undertaking under the Department of Atomic Energy (DAE), operates 24 reactors across seven nuclear power plants, with eight more reactors under construction.[10] Currently, India’s nuclear power capacity stands at 8.78 gigawatts (GW), representing only 1.74 percent of the country’s total installed generation capacity.[11] Nuclear energy accounts for 3.1 percent of its overall electricity generation.[12]
By 2040, India is projected to drive nearly 25 percent of the growth in global energy demand.[13] New Delhi hopes that accelerated increase in nuclear capacity will help meet this demand as well as achieve net-zero carbon emissions by 2070.
Despite the slow expansion of nuclear power in previous decades, the Indian government has set an ambitious target of 100 GW of nuclear power capacity by 2047. By 2031–32, the capacity is expected to increase to 22.38 GW.[14] SMRs have an important role in these plans. During the Budget 2025 announcement, a Nuclear Energy Mission was launched with an outlay of INR 20,000 crore for research and development of SMRs.[15]
This push for SMRs is driven by several imperatives. Rapid growth in renewable energy, coupled with a lack of adequate storage facilities, has led to increasing instability in the country’s power grid.[16] SMEs are intended to provide base-load capacity in the hybrid energy systems.
SMRs can also be a viable solution for repurposing retired coal-based power plants while taking advantage of the existing infrastructure, such as transmission networks, rail connectivity, and water availability. Thus, they will avoid the need for scouting new areas and displacing people from their homes. The Indian government has identified ten decommissioned thermal power plants as potential sites for conversion into nuclear power units.[17]
Another potential application for SMRs as a captive generation source would be in data centres, which are among the most energy-intensive facilities. In 2024, data centres accounted for approximately 1.5 percent of global electricity consumption.[18] India's data-centre capacity is expected to increase fivefold by 2030, from the current 1.7 GW to 8 GW.[19] As External Affairs Minister S. Jaishankar put it, “If data is the new oil, then data centres are the new refineries that will need to be powered.”[20]

Challenges and Prospects
In its quest for SMRs, India faces a number of hurdles. The first challenge is technological. The country’s indigenous small reactors are based on Pressurised Heavy Water Reactor (PHWR) technology. However, as they are not modular, it leads to scalability issues. Currently, 15 PHWRs with capacities ranging from 200 to 220 MWe are operational in India.[21] The government plans to deploy additional PHWRs of 220 MW, known as Bharat Small Reactors (BSR). They are being upgraded to reduce their carbon footprint and make them suitable for industrial decarbonisation.[22]
Under the Nuclear Energy Mission, the Bhabha Atomic Research Centre (BARC) is developing three new types of SMRs: the 200 MWe Bharat Small Modular Reactor (BSMR-200), the 55 MWe Small Modular Reactor (SMR-55), and a high-temperature gas-cooled reactor of up to 5 megawatts thermal (MWth) intended for hydrogen production.[23] At least five indigenously developed SMRs are expected to be operational by 2033.[24]
Both the BSMR-200 and SMR-55 will be based on pressurised light water reactor technology.[5] The BSMR-200 is meant for captive power generation in energy-intensive industries (steel, aluminium, cement), to repurpose decommissioned fossil fuel-based power plants, and for off-grid applications in remote areas.[25] It is at an advanced stage of obtaining financial and administrative sanction.[26] A demonstration unit will be commissioned six years after project approval.[27] According to media reports, no foreign collaboration is being considered at this point.[28] The Road Map for Achieving the Goal of 100 GW of Nuclear Capacity by 2047, published by the Central Electricity Authority, estimates that the installed capacity of BSMRs will reach 5 GW by 2047.[29]
The SMR-55 will provide energy to remote off-grid locations.[30] The lead twin units of these reactors are expected to be operational at a DAE site by 2033.[31]
The high-temperature gas-cooled reactor being developed for hydrogen generation aims to decarbonise the transport sector and process industries. Lead units of this reactor will be deployed at DAE sites, while subsequent units will be set up at end-user industries or decommissioned thermal power plants.[32]
The second challenge is the constraint of public funding. Nuclear energy projects are extremely capital-intensive. However, since its inception, India’s nuclear energy sector has been state-owned and controlled, which has led to the slow expansion.
The global nuclear energy economy landscape is diverse. Among the top five nuclear energy producers, the US is dominated by private companies, whereas in China, France, Russia, and South Korea, atomic energy is state-owned and controlled. According to IEA estimates, private financing will be critical for the future of nuclear energy in many parts of the world.[33]
The incremental investment required to achieve a capacity of 100 GW in India by 2047 is estimated to be approximately INR 19 lakh crore. The prevailing view is that reaching this target is hardly possible without private financing from both domestic and foreign investors.[34] On 18 December 2025, in a major development, the Indian Parliament passed the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Bill, 2025. This repeals the Atomic Energy Act, 1962, and the Civil Liability for Nuclear Damage Act, 2010, providing a unified legal framework for the nuclear energy sector.[35]
The Atomic Energy Act, 1962, restricted nuclear power generation and related activities to the central government or government companies.[36] The NPCIL was the sole entity operating nuclear power plants. The SHANTI Act will permit any government or private company, as well as joint ventures, to obtain licences for building, owning, operating, or decommissioning nuclear power plants or reactors; for nuclear fuel fabrication; for transportation or storage of nuclear fuel; for the import, export, or acquisition of nuclear fuel, prescribed substances, or equipment; and for the import or export of any technology or software that may be used for the development, production, or use of prescribed substances or equipment. However, it restricts eligibility to entities incorporated in India. Sensitive activities, such as enrichment or isotopic separation of prescribed or radioactive substances, management of spent fuel, production and upgradation of heavy water, and mining in onshore or offshore areas containing uranium and thorium, are reserved exclusively for the central government or its wholly owned institutions.[37]
The SHANTI Act also revises the nuclear liability regime, addressing the primary concern associated with India’s Civil Liability for Nuclear Damage Act (CLNDA). The CLNDA granted Indian nuclear operators a right of recourse whenever “the nuclear incident has resulted as a consequence of an act of supplier or his employee, which includes supply of equipment or material with patent or latent defects or sub-standard services.”[38] This provision was inconsistent with the existing international nuclear liability regime, which is based on the principle of exclusive liability of the operator of the nuclear installation.[39] Consequently, both foreign and domestic suppliers of nuclear equipment refrained from investing in nuclear projects in India. Under the SHANTI Act, the operator’s right of recourse applies only if it is explicitly included in the contract between the parties or in cases of deliberate acts causing nuclear damage. However, the rules and regulations for implementation of the Act are yet to be finalised.[40]
India’s decision to open up its nuclear energy sector mirrors the government’s previous move to liberalise the space industry, which, like atomic energy, used to be under the exclusive control of the state. As a result, the number of space start-ups increased from one in 2022 to nearly 200 in 2024.[41]
It is likely that the next step following the adoption of the SHANTI Act will be the introduction of a revised Foreign Direct Investment (FDI) policy for the nuclear energy sector. According to India’s consolidated FDI policy, the nuclear energy industry is listed among the prohibited sectors. However, there are no restrictions on FDI in the manufacturing of equipment and other supplies for nuclear power plants.[42] According to media reports, the government is considering allowing FDI of up to 49 percent in the nuclear sector. An initial cap may be set at 26 percent and later relaxed. Majority ownership in any joint venture would remain with an Indian entity.[43]
In addition to legal reforms, financial incentives aimed at engaging the private sector, such as the inclusion of nuclear energy in green taxonomy, are in the pipeline.[44] Nuclear energy has already been recognised as green in the European Union, China, Russia,[45] and South Korea.[46] The Government of India is currently developing a climate finance taxonomy, under which, in line with recommendations from the NITI Aayog,[47] investors in SMR projects may be granted access to green bonds, concessional financing, and climate-linked incentives. The draft framework was released in May 2025.[48]
Many public and private companies have already expressed interest in SMR projects. The Indian Railways has identified sites to set up small nuclear power plants to meet its energy requirements.[49] The Adani Group is in talks for the construction of eight BSMR-200 units in Uttar Pradesh. Other Indian conglomerates, such as the Tata Group, Reliance Industries Ltd, and the JSW Group, are also considering expanding into the nuclear sector.[50]
The IEA estimates that shorter construction and payback periods make SMRs more attractive to private investors.[51] However, the design approaches and norms currently applied to SMRs are the same as those used for large nuclear power plants. As a result, initial SMR projects have inherited the problems of conventional reactors, such as high costs, complexity, and lengthy construction times. SMR technologies can realise their full potential through a ‘paradigm shift’ in these areas.
Another potential obstacle is societal acceptance of nuclear energy projects. Public perceptions of nuclear energy remain mixed due to safety and displacement concerns. Historically, the construction of nuclear power plants has faced strong resistance politically and from local communities. Therefore, large-scale deployment of SMRs in India would require well-designed awareness campaigns focusing on safety, development, and job opportunities. Outreach strategies could emphasise their advantages over conventional nuclear power plants, such as more efficient land use, enhanced security features, and no need for local displacement.[52]
Another challenge lies in ensuring a sustainable fuel supply chain. Many SMR designs require high-assay low-enriched uranium (HALEU), enriched between 5 percent and 20 percent U-235. Currently, only Russia manufactures HALEU on a commercial scale. [53]
Other difficulties in the large-scale deployment of SMRs, and therefore in achieving the target of 100 GW of nuclear capacity by 2047, include accelerating land acquisition (which typically takes more than four years) and obtaining other necessary clearances; increasing uranium supplies as well as processing and fabrication capabilities; managing spent fuel due to the increased demand for nuclear fuel; recruiting and training a qualified workforce; and ensuring effective security management.[54]

Scope for Foreign Collaborations
To accelerate the SMR development in the country using advanced imported technology, foreign collaborations would be necessary. According to media reports, the state-run power generator National Thermal Power Corporation Ltd (NTPC) is in discussions with Électricité de France (EDF) of France, Rosatom State Corporation of Russia, and Westinghouse Electric Corp. of the US to build SMRs in India.[55] Negotiations are also underway with Korea Hydro & Nuclear Power, as well as the US firms GE Vernova Inc. and Holtec International Corp.[56] But no binding agreements have been signed so far.
Moscow appears to be a natural choice for collaboration, given the two countries’ positive history of cooperation in nuclear energy. To date, Russia remains India’s sole on-ground partner in this field and is currently constructing the country’s largest nuclear power plant at Kudankulam, Tamil Nadu.
Apart from the Akademik Lomonosov, Rosatom State Corporation is constructing the world’s first onshore small nuclear power plant (SNPP) based on the RITM-200N reactor in Yakutia, Russia.[57] Since 2012, 10 RITM-200 reactors have been manufactured for five Russian Project 22220 multi-purpose nuclear icebreakers. The demonstration lead-cooled fast reactor BREST-OD-300, which falls under the energy output criteria for SMRs, is also under construction.[58] Several other SMR designs are at various stages of development.
Currently, for export markets, Rosatom State Corporation offers floating power units based on the KLT-40S and RITM-200M reactors, designed for coastal areas, islands, or archipelagos, and an onshore small nuclear power plant (SNPP) for continental data centres or industrial clusters.[59] The state corporation has signed agreements to build SMRs with Uzbekistan and Myanmar.[60]
Russia has offered to cooperate with India in building SNPPs, with the possibility of their deep localisation, including transfer of the construction work to New Delhi.[61] Rosatom State Corporation and India’s Ministry of Ports, Shipping and Waterways have established a working group to explore the potential for floating nuclear power plants in India.[62] Moscow’s proposal on SMRs was discussed during the Russia–India summit in New Delhi on 4–5 December 2025.[63]
Parallel negotiations are taking place with other entities too. Rosatom and the Maharashtra State Power Generation Company (MAHAGENCO) have discussed the development of an SVBR-100 SMR that would be capable of utilising thorium-based fuel in Maharashtra.[64] Rail Vikas Nigam Ltd (RVNL), a public sector unit of the Ministry of Railways, is in talks with Rosatom to build SMRs to meet its energy requirements as well.[65]
Other prospective partners for India include the US and France. Although Washington’s and Paris’s nuclear power plant projects in India did not reach the implementation stage in the past, due to suppliers’ concerns about exposure to unlimited liability, the adoption of the SHANTI Act could potentially open the way.
In the US, several SMR designs are currently under development. Kairos Power is constructing a Hermes low-power demonstration reactor, based on fluoride salt-cooled, high-temperature reactor (KP-FHR) technology, in Tennessee.[66] NuScale’s VOYGR SMR design has been certified by the US Nuclear Regulatory Commission.[67] Other mature designs include the BWRX-300 by GE Hitachi Nuclear Energy (GEH), the AP300 SMR by Westinghouse, and the SMR-300 by Holtec International.
Last year, the US took several steps to facilitate collaboration with India. In January 2025, three Indian nuclear entities—the Indira Gandhi Centre for Atomic Research, the Bhabha Atomic Research Centre, and Indian Rare Earths—were removed from the US export control list, which restricts the export of certain goods from US companies.[68] During Indian Prime Minister Narendra Modi’s visit to the US in February 2025, the two sides agreed to pursue private sector collaboration, particularly in advanced SMRs, involving large-scale localisation and technology transfer.[69]
In March 2025, in a breakthrough, the US Department of Energy granted authorisation to the American company Holtec International to sell the SMR-300 for deployment in India. Larsen & Toubro, Tata Consulting Engineers, and the company’s subsidiary, Holtec Asia, were named as eligible entities with whom it could share the necessary technical information.[70] Previously, under the India–US civil nuclear deal, American entities were permitted to export nuclear reactors and equipment to India, but were prohibited from engaging in design or manufacturing within the country.[71]
When it comes to France, the French Alternative Energies and Atomic Energy Commission (CEA), the EDF, Naval Group, and TechnicAtome are jointly developing the NUWARD SMR, based on pressurised water reactor technology, which will be capable of delivering 400 MWe of power. The conceptual design is scheduled to be finalised by mid-2026, while commercialisation of the project is planned for the 2030s.[72]
In November 2023, France’s EDF signed a Memorandum of Cooperation with Bharat Heavy Electricals Limited (BHEL), under which both parties will also explore collaboration on a NUWARD SMR.[73] During PM Modi’s visit to France in February 2025, the two sides adopted a Declaration of Intent on collaboration in co-designing, co-developing, and co-producing SMRs and advanced modular reactors.[74]
Collaboration on SMRs has also been identified as a promising area in bilateral visionary documents between India and a number of countries. In the India–Japan Joint Vision for the Next Decade, a ten-year strategic prioritisation for economic and functional cooperation adopted in August 2025 during Prime Minister Modi’s visit to Japan, joint research on SMRs and advanced reactors is highlighted as a promising avenue to advance next-generation technology and innovation partnership.[75] Under the “India–UK Vision 2035”, endorsed by the prime ministers of India and the United Kingdom (UK) during their meeting in July 2025, both called for engagement on next-generation nuclear technologies, such as SMRs, within the framework of the India–UK Nuclear Cooperation Agreement.[76] India has also agreed to explore collaboration on SMRs with Singapore,[77] the United Arab Emirates (UAE),[78] and Canada.[79]
Rosatom is likely to become New Delhi's first foreign partner in SMR deployment, considering that only Russia’s small-capacity nuclear power plant has reached the stage of commercial operation. In India’s Road Map for Achieving the Goal of 100 GW of Nuclear Capacity by 2047, only Russian SMRs (marine or land-based) are mentioned as potentially available for import.[80]
At the same time, in the long run, India will seek to diversify its SMR collaborations, as adoption of multiple technologies will allow it to hedge against geopolitical uncertainties. For instance, the US has imposed sanctions on nearly 70 Rosatom’s subsidiaries and related individuals,[81] including JSC Rusatom Overseas, which is responsible for SMR development as the sectoral integrator.[82] So far, these restrictions have not significantly affected Rosatom’s projects abroad, but the risk cannot be ruled out.
India could also explore collaboration on the deployment of SMRs in countries of the Global South. It already has positive experiences of cooperating with Russia in third countries, such as the Rooppur NPP in Bangladesh, where Indian companies participate in construction and installation work, and supply of non-critical materials and equipment.[83] India has also discussed collaboration with the US on developing next-generation SMR technologies for export.[84]

Conclusion
India has set an ambitious goal to achieve 100 GW of nuclear power capacity by 2047. Given the country’s growing energy demand, flexible and scalable SMRs can help it meet its net-zero target by complementing conventional nuclear reactors and renewable energy sources. By integrating SMRs into its energy mix, India can address land constraints, repurpose retiring coal-fired thermal power plants, supply energy to data centres, and contribute to industrial decarbonisation.
The large-scale deployment of SMRs in India requires legal reforms and huge investment. A significant step was taken with the adoption of the SHANTI Act, which removed suppliers’ liability and established a legal framework for private participation in nuclear energy. Further reforms in FDI policy and green taxonomy are also anticipated.
However, there are several challenges. These include high capital intensity, negative public perceptions, lengthy construction timelines for nuclear projects, the need to establish a conducive regulatory framework, and geopolitical risks. The future development of small-scale nuclear power in India will depend on the ability to attract private investment into the sector, address public concerns, introduce indigenous technology, and secure favourable agreements with foreign vendors.
When it comes to international cooperation in nuclear energy, India regards the diversification of foreign partnerships as key to ensuring energy security and mitigating geopolitical risks. Among its potential partners in SMR development, Russia is India’s first choice, given Moscow’s leadership in SMR technologies and the history of mutually beneficial cooperation in nuclear energy, though it is also in discussions with several other countries for potential collaboration.



Leyla Turayanova is Visiting Fellow at the Observer Research Foundation and Research Fellow at the Centre for the Indo-Pacific Region of the Primakov National Research Institute of World Economy and International Relations of the Russian Academy of Sciences.



All views expressed in this publication are solely those of the author, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel.

Endnotes
[1] Passive or inherent safety features rely on physical phenomena such as gravity, pressure differences, or natural heat convection, and do not require an active power source to accomplish safety functions.
[2] A floating power unit, or floating nuclear power plant, is a non-self-propelled vessel that hosts one or more nuclear reactors.
[3] A modular reactor unit belonging to a class of pressurised water reactors; an advanced version of the KLT-40 reactor used in nuclear-powered icebreakers.
[4] The HTR-PM is a Generation IV SMR design consisting of two pebble-bed modules (each of 250 megawatts thermal) that drive a single 210 MWe steam turbine.
[5] A pressurised water reactor (PWR) is a light water-cooled and moderated nuclear reactor, the most widely used worldwide.
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[79] “English translation of Press Statement by the Prime Minister during the Joint Press Statement with the Prime Minister of Canada”, Ministry of External Affairs, Government of India, March 2, 2026, https://www.mea.gov.in/Speeches-Statements.htm?dtl/40837/english+translation+of+press+statement+by+the+prime+minister+during+the+joint+press+statement+with+the+prime+minister+of+canada+march+02+2026.
[80] Central Electricity Authority, Road Map for Achieving the Goal of 100 GW of Nuclear Capacity by 2047.
[81] US Department of State, “Sanctions to Degrade Russia’s Energy Sector,” January 10, 2025, https://2021-2025.state.gov/office-of-the-spokesperson/releases/2025/01/sanctions-to-degrade-russias-energy-sector/.
[82] Rosatom, “Small Nuclear Power Plants,” https://rosatom.ru/en/rosatom-group/small-nuclear-power-plants/.
[83] Dipanjan Roy Chaudhury, “India Will Soon Get to Bid for Bangladesh Nuclear Power Plant Work,” Economic Times, July 11, 2018, https://economictimes.indiatimes.com/news/politics-and-nation/india-will-soon-get-to-bid-for-bangladesh-nuclear-power-plant-work/articleshow/64940450.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst.
[84] “India-USA Joint Statement during the Official State Visit of Prime Minister, Shri Narendra Modi to USA,” Ministry of External Affairs, Government of India, June 23, 2023, https://www.mea.gov.in/bilateral-documents.htm?dtl/36711/indiausa+joint+statement+during+the+official+state+visit+of+prime+minister+shri+narendra+modi+to+usa.

### AI Advertising and the Authenticity Paradox

The rapid evolution of artificial intelligence (AI) has pushed advertising into a new era in which this frontier technology is no longer confined to internal analytics and automation operations, but is producing creative outputs, generating human images, voices, and other visuals in the place of actors, voice-over artists, or set designers. Compared to time-, money- and people-intensive traditional advertising, brands can now operate with unprecedented efficiency and scale by using generative AI (gen-AI) – a type of artificial intelligence with the capacity to generate text, images, video, audio, and other media. However, the trade-off inherent to producing captivating yet affordable campaigns is that maintaining authenticity as a brand and a trusting relationship with the consumer is also essential. This presents a fundamental tension, whereby increased reliance on synthetic content risks eroding perceptions of credibility and authenticity on which effective advertising depends; the more artificial advertising becomes, the more likely consumers are to seek “real”, authentic content.


Increased reliance on synthetic content risks eroding perceptions of credibility and authenticity on which effective advertising depends; the more artificial advertising becomes, the more likely consumers are to seek “real”, authentic content.

This article explores the perspectives of both companies and consumers in relation to AI use, assessing its impact on how consumers interpret and respond to advertising. This requires weighing the benefits of scale and efficiency against potential drawbacks related to consumer trust and unethical use of human-made creative products.

The Rise of AI Advertising: Frictionless, Cheap, and Accessible
The advertising industry pre-AI could not have been considered a totally “honest” one, presenting only the most idealised qualities of the product or company, and digitally altering images of products and people. However, it is only now, with the rise of gen-AI, that the human creativity necessary to think up the campaign, film it, or act in it has the potential to be so significantly reduced. The proliferation of gen-AI tools such as OpenAI’s Sora and Meta’s competitor application Vibes has made it all the more easy for users to create still images, video, and audio, bringing enormous advantages to businesses, which can now advertise far more cheaply while still maintaining “unprecedented realism”.
Aside from cost, researchers have also highlighted that gen-AI advertising can reduce the risk of reputational damage to brands. AI-generated characters that have come to populate social media  – known as “virtual influencers” (VIs) – are predominantly created and managed by third-party marketing agencies, AI startups, or brands themselves, meaning that they are unlikely to stray off-message or engage in controversial behaviour in the same way as human influencers or celebrities. Use of the latter has resulted in customer backlash when their actions or personal views do not align with the company’s image or the values of its consumer base. In the highly publicised case of Kanye West, the artist’s antisemitic comments resulted in him being dropped by sportswear giant Adidas, resulting in 600 million euros in lost revenue in the three months following the split. By comparison, VIs represent a highly controllable advertising asset, allowing brands to maintain consistency in messaging and minimise reputational risk.
AI-generated virtual influencers Imma, Rozzy, and Miquela 

Source: Virtual Humans
From a company’s perspective, AI advertising offers operational efficiency and enables fast, lower-cost production and reduced potential for PR blowback. However, while these advantages make AI an increasingly attractive tool for brands, they also raise a fundamental question about whether content that is optimised for performance and control can still achieve the emotional resonance required to build genuine connections with audiences.

The Authenticity Gap: Human Touch vs Artificial Perfection
Marshall McLuhan’s often-cited theory on how media shapes the perception and interpretation of content, “the medium is the message”, is particularly relevant to the increasing use of synthetic content in advertising. In the case of gen-AI, the artificiality of the medium itself is likely to shape how audiences interpret a brand’s messaging. For brands and industries for which modernity and innovation are core selling points, obvious use of AI can be an asset. An example of this would be Nike’s recent “Never Done Evolving” campaign, which used AI-generated visuals to depict a tennis match featuring a young Serena Williams, reinforcing the brand’s message that its products are defined by high-tech innovation. However, for companies whose positioning does not rely so heavily on a futuristic image, AI content – even the most realistic – may fail to generate genuine emotional engagement or even damage consumer confidence.


In the same way that celebrities who are paid to endorse a brand are not always perceived as reliable spokespeople, AI-generated influencers or characters in advertisements are similarly not perceived as trustworthy.

Studies consistently show that while audiences may admire the visual polish and innovation of AI-generated content, they often perceive it as “too perfect”, which can feel artificial or unsettling, as well as lacking emotional relatability. According to some statistics, human influencers continue to outperform in emotionally driven sectors because they embody lived experience and authentic human behaviour that AI struggles to authentically replicate. In the same way that celebrities who are paid to endorse a brand are not always perceived as reliable spokespeople, AI-generated influencers or characters in advertisements are similarly not perceived as trustworthy. This is because, being virtual, they cannot have had a real user experience.
Figure 1: Comparison of Engagement between Virtual and Human Influencers 

Source: The Impact of AI-Generated Advertising and Virtual Influencers on Consumer Perception and Brand Authenticity
Though studies show that consumers – particularly younger generations – are still able to detect AI-generated imagery, the alarming rate of technological advancement means that the gap between perceptible artificiality and complete realism may soon close. However, even as this distinction becomes harder to detect, consumers’ awareness of gen-AI usage in advertising has increased alongside concerns that imperceptible AI advertising may manipulate buying behaviour. This has prompted debate around whether disclosure is necessary, as simply knowing that a piece of content is AI-generated affects perceptions of credibility and willingness to engage.

Ethical Considerations for Brands, Consumers, and Creatives
While disclosure of AI-generated content can sometimes reduce perceived credibility, a lack of transparency risks far greater backlash, fostering suspicion and eroding trust if it is later revealed. Regulatory frameworks are beginning to reflect consumer demand for transparency, with new laws worldwide requiring disclosure of AI-generated content. An example of this is the EU’s AI Act, which mandates the use of watermarks or metadata indicating AI-generated content, with practical guidance for businesses using the technology being provided by a European Commission Code of Practice. AI-generated content in adverts must not “misrepresent products or create impressions that consumers would not form if they knew the content was AI-generated,” explicitly incorporating gen-AI transparency requirements into well-established accountability standards for traditional advertising content.


Regulatory frameworks are beginning to reflect consumer demand for transparency, with new laws worldwide requiring disclosure of AI-generated content.

Creative and advertising industry experts have raised concerns about the implications of generative AI for both intellectual property and the future of human creativity. Among the most prominent concerns from the industry pertains to the unauthorised use of original, human-made creative content in gen-AI model training, raising intellectual property and legal risks. Then there’s the broader concern that increasingly sophisticated AI-generated outputs may devalue human creativity over time. Seemingly in response, some companies have begun experimenting with counter-positioning strategies – such as clothing brand Aerie’s promise not to feature AI bodies in their campaigns – to signal authenticity and build trust with consumers in an increasingly synthetic advertising landscape. While this may be an effective short-term differentiation strategy, Emma De La Fosse of communications firm Edelman UK suggests that we are unlikely to see a wholesale rejection of AI in the creative industries, and that creatives instead “need to lean in and make sure they are the ones wielding the tool”. The question, then, is not whether AI has a role, but how to use it without diluting the credibility that makes advertising effective.

Conclusion: Toward a Transparent Future
The future of advertising is unlikely to be a binary choice between human creativity and AI. Instead, it will be defined by how effectively brands assess whether their identity and customer base align with – and are likely to respond to – gen-AI content versus traditional authenticity. AI offers unmatched efficiency, scalability, and creative potential, but without trust and transparency when declaring AI use, these advantages risk diminishing returns.


The future of advertising is unlikely to be a binary choice between human creativity and AI. Instead, it will be defined by how effectively brands assess whether their identity and customer base align with – and are likely to respond to – gen-AI content versus traditional authenticity.

Policy will likely continue to evolve alongside the pace of development in gen-AI tools. Businesses have already pushed back against blanket “Made with AI” labelling policies in favour of more nuanced approaches that allow for clarity without undermining creative intent, instead adopting systems such as “AI info” icons that can be expanded to show how and to what extent AI was used in the creation of the content. This reflects a broader recognition that the impact of disclosure depends on how it is communicated and interpreted by audiences. As industry voices increasingly argue, the real opportunity lies in combining AI’s capabilities with human creativity, emotional intelligence, and recognition of consumers' desire for transparent and honest communication with the businesses they engage with.



This commentary originally appeared in Observer Research Foundation.

### Levelling Up: How AI is Transforming Video-Game Development

Policy discussions about artificial intelligence (AI) have largely ignored the video-game industry. This omission is untenable given that the global gaming market generated in excess of US$180 billion in annual revenue in 2025, surpassing the global film and music industries combined. It is also growing fast in regions like the Asia-Pacific, the Middle East, and Latin America that feature prominently in development agendas. Game studios were among the earliest commercial adopters of pathfinding algorithms, Goal-Oriented Action Planning (GOAP), behaviour trees, and procedural generation, often deploying AI techniques at scale years before they gained traction in other sectors. AI researchers, for their part, have long used game environments as testbeds for reinforcement learning and agent design. The two fields are not adjacent but rather have been structurally entangled for decades.


The connection between gaming and AI is architectural, built into the hardware that both industries depend on.

The connection between gaming and AI is architectural, built into the hardware that both industries depend on. NVIDIA, founded in 1993, developed the graphics processing unit (GPU) to meet the rendering demands of video games. For over a decade, the GPU market was driven almost entirely by gamers who wanted faster frame rates and richer, smoother visual environments. The parallel-processing architecture of GPUs, however, turned out to be well-suited to the operations underlying machine learning. By the early 2010s, researchers had begun repurposing gaming GPUs for neural network training, and NVIDIA pivoted to serve both markets. The dynamic between gaming and AI is not of parallel industries occasionally intersecting, but one of co-evolution. The recent introduction of generative AI techniques in game development has jump-started another evolutionary dynamic that can have implications for labour markets, creative economies, and the global distribution of technological capacity.

A Long Alliance
AI and video games have been entangled since the industry’s inception, though the nature of that entanglement has changed with each technological generation. In the 1970s and 1980s, games like Pong and Pac-Man relied on simple rule-based logic to govern opponent behaviour. These systems were rudimentary, but they helped to establish the principle that software could simulate decision-making in real time, a principle that would scale dramatically in subsequent decades. By the 1990s, developers had adopted finite state machines (FSM) to give in-game enemies and allies more believable movement and reactions. Titles like GoldenEye 007 (1997) demonstrated how augmenting NPC (Non-Player Character) intelligence through relatively simple FSMs could transform a player’s experience of a game world, imbuing it with a density and unpredictability that linear and scripted encounters could not replicate.
The 2000s brought behaviour trees and GOAPs. Games like F.E.A.R. (2005) famously used these architectures to enable layered NPC conduct. F.E.A.R. became particularly notable for its enemy AI that evoked tactical dynamism rather than mere reactive movements. Procedural content generation matured in parallel with titles like Minecraft (2011) and No Man’s Sky (2016), using algorithms to generate worlds rather than replicating or hand-crafting every asset to produce near-infinite variations from finite rule sets. The through-line across these developments was the gaming industry functioning as an overlooked but consequential laboratory for AI techniques, stress-testing them at commercial scale in conditions that academic research environments could not provide.

Generative AI as a New Toolkit
Traditional game AI could execute behaviour, but it could not generate content. Generative AI introduces a qualitatively different capability that cannot be surmised as a single phenomenon. In asset creation, tools powered by diffusion models and large language models can generate concept art, texture variations, and 3D model drafts much faster than humans. These are tasks that previously required hours or days of specialist work. For narrative design, large language models enable dynamic NPC dialogue that responds to player input contextually rather than cycling through fixed dialogue trees. The result is the possibility of emergent storytelling that adapts to individual playthroughs, a prospect that has been discussed theoretically in game design for years but has only recently started becoming technically viable.


As the requirement for human capital in game development is shrinking due to AI, questions about market access and industrial geography that go well beyond the games sector are becoming more critical.

World-building benefits from similar advances. Generative systems can produce terrain, architecture, and environmental detail procedurally with a consistency and aesthetic quality that established algorithmic approaches struggled to achieve. Rapid prototyping may be the most transformative near-term application. Small teams, or even individual developers, can now produce functional game prototypes in much shorter time frames.
The distinction that matters for policy is not between AI-assisted and non-AI development since that boundary is becoming outdated. More importantly, as the requirement for human capital in game development is shrinking due to AI, questions about market access and industrial geography that go well beyond the games sector are becoming more critical. If the barriers to entry in game development are falling, the question becomes who is positioned to walk through the door, and that is a question with geo-economic dimensions.

Labour and Industry Dynamics
The productivity gains that generative AI offers carry a corollary that is uncomfortable but unavoidable: some of the work currently performed by human specialists will be automated or restructured. Concept artists, texture designers, quality assurance testers, and junior writers occupy roles that are most immediately exposed to displacement. Generative tools can now approximate, if not yet match, the output of these positions. The gaming industry lost an estimated 14,600 jobs in 2024, surpassing the 10,500 recorded in 2023. While the causes of these layoffs cannot be singularly ascribed to AI adoption in lieu of other factors such as post-pandemic overcorrection and rising production costs, the coincidence with accelerating AI adoption is difficult to ignore.


The skills gap is real, but AI workflows are still new for most sectors, which means that latecomers are not as far behind as they might assume.

New categories of work are emerging alongside these losses. Prompt engineering, AI pipeline integration, training-data curation, and the oversight of AI-generated content all require human judgment and technical fluency that the tools themselves cannot provide.
Studios that once hired artists who could paint digitally now seek artists who can direct an AI model and refine its output to prevent generic and low-quality output, in other words, AI slop. This is a hybrid competency, part aesthetic judgement and part technical orchestration, that training and education systems will need to adjust for. The transition presents a genuine opening for emerging markets hoping to build a competitive game-development workforce. The skills gap is real, but AI workflows are still new for most sectors, which means that latecomers are not as far behind as they might assume.

Conclusion
The relationship between AI and the video-game industry is entering a phase that differs from its predecessors not in degree but in kind. For decades, AI was a component of the in-game mechanics. It is now becoming a component of development studios. This shift carries consequences for labour markets, creative industries, and the global distribution of development capacity that policymakers have been slow to reckon with, in part because gaming continues to be treated as a consumer entertainment product rather than as a crucial economic sector.


The countries and companies that act now to build enabling conditions rather than waiting for them to materialise will be best positioned to capture the value that this transformation creates.

Policy responses need to move beyond the binary of unconditional acceptance or instinctive dismissal. Players, developers, and policymakers bring legitimate but competing interests to the table, and durable outcomes will depend on frameworks that take all three seriously rather than privileging one at the expense of the others. For emerging markets in particular, the opportunity is genuine but conditional. It depends on deliberate investment in infrastructure, skills, and legal institutions, not simply on the availability of cheaper tools. The countries and companies that act now to build enabling conditions rather than waiting for them to materialise will be best positioned to capture the value that this transformation creates. Those who treat gaming as peripheral to the AI agenda will find, in time, that they have misunderstood both.



This commentary originally appeared in Observer Research Foundation.

### The Egypt-GCC Economic Relationship in an Era of Strategic Transformation

Introduction
Since the political realignments of 2011, the strategic axis between the Arab Republic of Egypt and the Gulf Cooperation Council (GCC) states has functioned as the geopolitical centre of gravity in the Middle East and North Africa region. This relationship—characterised by unprecedented coordination on security, regional diplomacy, and regime stabilisation—has been reinforced by substantial financial flows, evolving from emergency fiscal support (2013–2016) into an era of sovereign investment and asset acquisition (2017–present).
This transition is unfolding amid a profound geoeconomic transformation. The aggressive national development strategies of GCC states—such as Saudi Vision 2030 and We the UAE 2031—alongside the global energy transition and intensifying United States (US)–China competition over supply chains, are collectively redefining the logic of capital allocation, localisation, and industrial policy across the region.
Yet, beneath this deep strategic alignment lies an economic paradox. Despite historic levels of political convergence and sovereign capital inflows—exemplified by the US$35-billion Ras El Hekma deal—Egyptian–GCC economic integration remains structurally shallow, asymmetric, and inconsistent. While Egypt has successfully attracted billions of dollars in foreign direct investment (FDI), an estimated 76 percent of these inflows remain concentrated in non-tradable sectors such as real estate and construction, limiting their capacity to generate sustainable industrial upgrading or balance-of-payments relief.
A closer examination of the trade relationship reveals the core of this asymmetry. Despite geographical proximity and massive capital injections, Egypt’s exports to the GCC remain trapped in a low-value-added “farm and quarry” model, dominated by primary agricultural and extractive goods. At the same time, GCC investments in Egypt have largely bypassed tradable, productivity-enhancing sectors. As GCC states intensify localisation mandates and industrial nationalisation policies, this structure leaves Egypt increasingly exposed to emerging “localisation traps” and regulatory barriers.
This paper argues that this outcome is not accidental, nor can it be explained by a lack of political will. Rather, it reflects a deeper structural failure: the absence of a functional “missing middle”. This refers to the systemic lack of institutional, financial, and logistical connective tissue required to translate macro-level strategic alliances into micro-level industrial co-creation. In the absence of this middle layer, sovereign capital flows and private sector trade flows remain disconnected, preventing Egyptian Small and Medium Enterprises (SMEs) from integrating into GCC value chains despite strong complementarities.
By departing from generalised narratives of so-called “Arab economic integration,” this analysis provides a granular, corridor-specific diagnosis of the Egypt–GCC economic relationship. It identifies three core structural divergences that collectively constrain integration: a regulatory misalignment exemplified by the growing tension between GCC localisation policies—such as the Saudi Regional Headquarters Program—and Egypt’s export capacities; logistical frictions that sever production hubs from high-potential markets like the UAE; and a persistent investment–trade disconnect, whereby capital is systematically channelled into non-tradable sectors that fail to support industrial upgrading.
By quantifying the cost of these divergences—estimated at over US$3 billion annually in unrealised Egyptian export potential[1]—the paper moves beyond diagnosis towards institutional architecture. It challenges the persistence of an outdated model of comparative advantage based on raw material exchange and factor substitution, proposing instead a transition towards industrial co-creation, in which Gulf capital, Egyptian industrial capacity, and shared value-chain governance are strategically aligned.
To rigorously diagnose this failure, the study adopts a targeted analytical scope. While the Egypt–GCC relationship encompasses vital flows of labour migration, remittances, tourism, and services, this analysis deliberately focuses on merchandise trade and industrial investment. This scoping reflects the analytical premise that although labour and remittances have historically functioned as stabilising mechanisms, they do not provide a pathway to sustainable structural transformation. The bottleneck lies specifically within the trade–investment nexus of the industrial sector, which requires distinct policy interventions.
The paper is organised in three sections. Section 1 establishes the geoeconomic context, tracing the evolution from “geopolitical rent” to conditional capital and mapping the convergences and divergences between Egypt’s development trajectory and GCC national strategies. Section 2 deconstructs the architecture of trade, introducing country-specific archetypes—from Saudi Arabia’s “Industrial Wall” to the UAE’s “Re-export Hub” model—to explain why integration fails differently across partners. Finally, Section 3 synthesises these findings into a policy framework, outlining a three-pillar architecture designed to construct the “missing middle” and unlock the latent industrial potential of the Egypt–GCC economic corridor.

I. Geoeconomic Context: Structural Divergence in an Era of Strategic Alignment
To understand the paradox of deep strategic alignment alongside shallow industrial integration between Egypt and the GCC states, it is necessary to examine the structural evolution of Egypt’s political economy since 2011.[a] The current phase represents a transition from a stabilisation-based relationship—anchored in geopolitical considerations—to an asset-based paradigm governed by commercial logic. This transition has exposed long-standing structural weaknesses within Egypt’s industrial base that constrain its capacity to function as a credible partner in regional value chains.

1.1. From “Geopolitical Rent” to Conditional Capital
In the aftermath of the 2011 political transitions, Egypt’s economic relationship with key GCC partners was shaped by a logic of “geopolitical rent.” Severe capital flight, declining foreign reserves, and macroeconomic instability necessitated large-scale external support. Between 2013 and 2022, Egypt received an estimated US$92–114 billion in financial assistance from Saudi Arabia, the United Arab Emirates (UAE), and Kuwait, primarily in the form of central bank deposits, grants, and fuel support. While this inflow helped avert macro-fiscal collapse, it also contributed to an “aid-for-reform” trap, whereby the availability of external liquidity reduced the urgency of implementing politically costly structural reforms.
This model reached its limits in 2023. Amid tightening global financial conditions and rising domestic investment needs within the Gulf, unconditional support was formally curtailed. This shift was articulated during the World Economic Forum in Davos in January 2023, when policymakers from the Gulf region signaled that future engagement would be guided by investment discipline and return-on-investment (ROI) considerations.[2] Consequently, Egypt–GCC economic relations have transitioned towards equity-based participation and asset acquisition, exemplified by large-scale transactions such as the Ras El Hekma development deal—a US$35-billion agreement between Egypt and Abu Dhabi’s ADQ sovereign wealth fund for the development of a next-generation city on Egypt’s Mediterranean coast.[3] Under this new paradigm, capital inflows are no longer politically agnostic; they are increasingly contingent on commercial viability and institutional reform.

1.2. The Investment–Industrial Disconnect
Despite a headline surge in FDI, the sectoral allocation of capital reveals a persistent misalignment between investment inflows and productive capacity. In fiscal year 2023/2024, Egypt recorded a historic US$46.1 billion in net FDI inflows. However, data from the General Authority for Investment indicate that approximately 76 percent of this capital was concentrated in non-tradable sectors, particularly construction and real estate, driven largely by land-based mega-projects.[4]
In contrast, the manufacturing sector—which is central to export diversification and regional supply-chain integration—attracted less than 3 percent of total FDI.[5] This pattern suggests that FDI is functioning primarily as a store of value rather than as a catalyst for industrial upgrading. The resulting dynamic resembles a “Dutch Disease” effect, in which capital gravitates toward high-rent, non-tradable activities while the tradable sector remains structurally undercapitalised. As a result, record investment figures have not translated into a commensurate expansion of export capacity or technological upgrading, limiting Egypt’s ability to integrate into higher-value GCC production networks.

1.3. Structural Determinants of Industrial Fragility: The “Missing Middle”
At the core of Egypt’s limited industrial integration lies the “missing middle” phenomenon. Unlike peer economies such as Türkiye—where medium-sized enterprises (20–100 employees) play a central role in driving export complexity—Egypt’s industrial structure is characterised by a pronounced dualism. A vast number of low-productivity micro-enterprises coexist with a small number of large, often state-affiliated conglomerates, while medium-sized firms account for a disproportionately small share of employment and output.
Two interrelated structural factors reinforce this imbalance. First, the expansion of state-owned enterprises and military-affiliated entities into civilian economic sectors has contributed to distortions in market competition. These entities often operate under differentiated regulatory and cost structures, which can discourage private investment and raise entry barriers. The cement sector provides a salient example: the entry of large state-owned capacity in 2018 generated excess supply, contributing to price compression and the exit of several private producers.
Second, Egypt’s weak integration into global value chains constrains industrial upgrading. High-technology products account for only an estimated 4–8 percent of total manufacturing exports, reflecting limited technological depth and skills absorption. This structural profile positions Egypt predominantly as a supplier of primary commodities and low-value-added goods, while GCC economies increasingly source advanced industrial inputs from East Asia and other technologically advanced regions.
In summary, the Egypt–GCC economic corridor is situated between two temporal logics: a political alliance that has matured into a strategic partnership, and an Egyptian industrial structure that remains insufficiently equipped to meet the commercial demands of that partnership. Without targeted reforms to address capital allocation, competitive neutrality, and firm-level scaling, the shift from geopolitical support to investment-led engagement risks reinforcing existing asymmetries rather than generating meaningful industrial co-creation.

1.4. Strategic Determinants: National Visions, Localisation, and Global Shifts
The transformation of the Egypt–GCC economic relationship is being driven by a synchronised wave of national development strategies aimed at post-hydrocarbon diversification. While Egypt’s Vision 2030 and State Ownership Policy Document prioritise fiscal stabilisation through FDI attraction, GCC frameworks—most notably Saudi Vision 2030, We the UAE 2031, Oman Vision 2040, and Qatar National Vision 2030—are backed by capital surpluses and increasingly enforce industrial localisation as a regulatory objective. This divergence in strategic intent has produced a complex convergence–divergence dynamic, reshaping the contours of regional economic integration.

1.4.1    Convergences: Pathways for Industrial Co-Creation
Despite growing competitive pressures, several niche areas continue to offer scope for non-zero-sum integration where factor endowments are complementary rather than duplicative.
Green Hydrogen and Renewable Energy:
Renewable energy represents the most significant axis of strategic alignment. Saudi Arabia (through the NEOM Green Hydrogen Project), Oman (via large-scale targets under Vision 2040), and Egypt are leveraging high solar and wind endowments to access European energy markets.[6] This has enabled cross-border integration rather than pure competition. Notably, Saudi Arabia’s ACWA Power has committed substantial investment in green ammonia production within Egypt’s Suez Canal Economic Zone (SCZONE), effectively embedding Egyptian geography into a broader Gulf-led energy value chain.
Food Security and Agribusiness:
Qatar’s Third National Development Strategy (2024–2030) and parallel food security initiatives in the UAE rely on outward investment rather than domestic self-sufficiency. Given severe climatic constraints, Gulf states increasingly view Egypt as a strategic agricultural reservoir. Investments by firms such as Al Dahra and large-scale projects in sugar and grain production illustrate a form of vertical integration that links Gulf capital with Egyptian land and labour, sustaining a durable corridor of complementarity.[7]
Selective Industrial Synergies:
Bahrain offers a distinct model of cooperation shaped by tighter fiscal constraints. The potential integration between Aluminium Bahrain (Alba) and Egypt’s metallurgical and refining capacity illustrates how specific supply-chain gaps—rather than broad industrial overlap—can generate mutually beneficial value chains without triggering localisation-driven competition.[8]

1.4.2    Divergences: The Emergence of the “Localisation Trap”
Alongside these convergences, the dominant regional trend is a shift from donor-based engagement toward competitive industrial policy. This transition has given rise to what may be described as a “localisation trap”, whereby regulatory frameworks in GCC states increasingly incentivise firms to relocate production and capital locally rather than exporting from Egypt.
Saudi Arabia’s Procurement and Headquarters Mandates:
Saudi Arabia’s Regional Headquarters (RHQ) Program and the enforcement mechanisms of the Local Content and Government Procurement Authority (LCGPA) exemplify this shift. Mandatory local content thresholds—reaching approximately 40–42 percent in sectors such as electrical infrastructure—function as de facto non-tariff barriers. As a result, Egyptian conglomerates have been compelled to establish manufacturing facilities within the Kingdom to retain market access, redirecting fixed capital formation away from Egypt’s domestic industrial base.[9]
Technological Divergence in the UAE:
The UAE’s Operation 300bn strategy prioritises advanced Industry 4.0 sectors, including aerospace, advanced pharmaceuticals, and clean technologies. This focus exceeds the current technological depth of Egyptian manufacturing, creating a widening capability gap. The UAE’s In-Country Value (ICV) framework further reinforces this divergence by structurally favoring domestically produced inputs in public procurement, disadvantaging imported Egyptian goods.
Logistics and Port Competition:
Regional competition is also intensifying in logistics and transport. Oman’s Duqm port and green hydrogen hub, alongside Kuwait’s Mubarak Al-Kabeer Port under New Kuwait 2035, are positioning themselves as alternative transshipment and bunkering nodes. These initiatives increasingly compete with Egypt’s SCZONE and Ain Sokhna, raising the risk of overcapacity and fragmenting regional logistics flows.[10]

1.4.3    Global Strategic Context: Corridor Competition and Multi-Alignment
These regional dynamics are further shaped by global geopolitical shifts. The proposed India–Middle East–Europe Economic Corridor (IMEC), backed by the United States and key Gulf states, presents a long-term strategic challenge to the Suez Canal by offering alternative ship-to-rail connectivity. While GCC capitals frame IMEC as a diversification and resilience tool, Egypt remains cautious, seeking complementarities that preserve the canal’s centrality.[11]
Simultaneously, deeper GCC engagement with China through the Belt and Road Initiative (BRI) and BRICS platforms reinforces a multi-alignment strategy that heightens competition among regional logistics hubs. In this context, Egypt faces mounting pressure to upgrade its industrial and logistical offerings to remain relevant within both Western- and China-linked trade architectures.[12]
Synthesis:
These trends indicate that the era of automatic Arab economic integration is receding. Strategic alignment at the political level now coexists with regulatory and industrial competition at the economic level. Without targeted reforms to enhance technological capability, competitive neutrality, and export sophistication, Egypt risks being drawn into a localisation-driven equilibrium in which regional integration increasingly occurs through capital relocation rather than cross-border industrial co-creation.

II. Institutional Frameworks, Trade Architecture, and Comparative Analysis
2.1. The Institutional Deficit: Bilateralism Over Multilateralism
To properly situate the trade patterns and country-specific divergences analysed in Sections 2.2 and 2.3, it is first necessary to examine the institutional architecture governing Egypt–GCC economic relations. Despite the scale and strategic importance of these ties, the relationship remains weakly institutionalised at the bloc level and overwhelmingly driven by bilateral arrangements between Cairo and individual Gulf capitals.
Unlike Egypt’s economic relationship with the European Union (EU)—anchored in a legally binding Association Agreement that governs tariffs, standards, competition policy, and dispute resolution—Egypt’s engagement with the GCC operates through fragmented and shallow multilateral mechanisms. In formal terms, trade is governed by the Greater Arab Free Trade Area (GAFTA), which entered into full force in 2005 and successfully eliminated most tariff barriers on goods. However, GAFTA has proven largely ineffective in addressing non-tariff barriers (NTBs), harmonising technical standards, or constraining national industrial policies. As a result, it has failed to function as a platform for meaningful production integration or value-chain coordination.
Efforts to deepen collective economic cooperation have been sporadic and largely symbolic. In the aftermath of the 2011 regional uprisings, the GCC floated a proposal for a form of confederal expansion to include Jordan and Morocco, with Egypt positioned as a strategic partner. This initiative, however, stalled quickly and did not translate into binding economic arrangements. Over the past decade, the Egypt–GCC Strategic Dialogue—launched in 2011 and periodically revitalised—has served primarily as a forum for political and security coordination rather than a vehicle for economic rule-making. Issues central to trade integration, such as local content rules, industrial subsidies, or procurement policies, remain firmly outside its scope.
In practice, the relationship is structured around a pronounced “hub-and-spoke” model. Major investment decisions, trade concessions, and industrial partnerships are negotiated bilaterally between Egypt and individual GCC states—most notably Saudi Arabia, the UAE, and Qatar—rather than through the GCC Secretariat or a unified institutional framework. This preference for bilateralism allows Gulf states to fully leverage their national development visions, fiscal capacities, and regulatory autonomy. For Egypt, however, it produces an asymmetric bargaining environment in which access to Gulf markets is contingent on compliance with country-specific rules rather than predictable, bloc-wide norms.
This institutional deficit has direct implications for trade outcomes. In the absence of binding multilateral constraints on industrial policy and non-tariff barriers, economic integration has not evolved towards diversification or intra-industry trade. Instead, it has crystallised into a narrow and repetitive exchange structure, where national strategies—rather than collective rules—shape commercial flows. The following section demonstrates how this institutional configuration translates into a standardised trade basket characterised by low-complexity Egyptian exports and strategic, high-value imports from the GCC, setting the foundation for the asymmetries and country-specific divergences analysed thereafter.

2.2. General Patterns: The Standardised Trade Basket
An examination of Egypt’s bilateral trade matrices with GCC states reveals a strikingly stable and homogeneous structure across destinations. Despite differences in market size and political relations, Egypt’s trade profile with Saudi Arabia, the UAE, Kuwait, and Qatar exhibits a high degree of standardisation, reflecting a factor-driven rather than efficiency-driven pattern of exchange. This structural uniformity points to a persistent division of labour in which Egypt supplies low-complexity goods, while the GCC provides energy and industrial inputs.[13]
2.2.1.   The Export Profile: The “Farm and Quarry” Model
Egypt’s export basket to the GCC is dominated by primary commodities and semi-processed materials, a configuration that can be described as a “farm and quarry” model. Exports are largely derived from natural endowments rather than industrial upgrading, and the composition remains broadly consistent across partner states.
The “Farm” Component (Agribusiness):
Agricultural products (HS Codes 07 and 08) constitute the most consistent non-oil export category. Fresh fruits and vegetables account for a substantial share of Egyptian exports across the bloc. For instance, edible vegetables alone account for 16 percent of Saudi Arabia's total imports from Egypt, while in the UAE, processed foods represent 7 percent of the export basket.[b] This trade is driven primarily by the GCC’s structural food security deficit rather than by Egypt’s competitive advantage in high-value agribusiness.
The “Quarry” Component (Raw and Semi-Finished Materials):
The second dominant export category comprises mineral products and construction inputs (HS Codes 25 and 74). These goods feed the Gulf’s infrastructure and real estate megaprojects but are typically exported in raw or semi-finished form. A prime example is the Saudi market, where refined copper exports capture a 17-percent share of the inbound trade flow from Egypt.[c] The limited presence of downstream processing reflects Egypt’s persistent “missing middle,” constraining its ability to move up regional value chains.
Crucially, complex manufactured goods—such as machinery, electronics, or automotive components—remain statistically insignificant in Egypt’s export basket to the GCC. This is starkly illustrated by the UAE market, where Egypt holds a 0-percent market share in the multi-billion-dollar "miscellaneous manufactured articles" category.[d] This confirms the absence of meaningful industrial integration despite decades of trade engagement.
Table 2.1: Standardised Export Basket: Egypt's Market Share in Key ‘Farm & Quarry’ Sectors (2024)




Partner Country
‘Farm’ Component (Agriculture Share)
‘Quarry’ Component (Materials Share)


Saudi Arabia
16% (Edible Vegetables) | 14% (Edible Fruits)
17% (Refined Copper) | 8% (Apparel & Textiles)


UAE
7% (Processed Foods) | 6% (Edible Vegetables)
3% (Precious Metals/Stones) | 2% (Apparel)


Kuwait
9% (Edible Vegetables) | 7% (Edible Fruits)
31% (Carpets & Floor Coverings) | 5% (Chemicals)


Qatar
10% (Edible Vegetables) | 9% (Edible Fruits)
6% (Cocoa Preps) | 5% (Furniture & Bedding)


Oman
22% (Edible Fruits) | 18% (Edible Vegetables)
71% (Raw Cotton) | 38% (Tobacco)


Bahrain
15% (Edible Fruits) | 14% (Edible Vegetables)
23% (Tobacco) | 18% (Printed Matter)



Source: Trade Map[14]
2.2.2.   The Import Profile: Energy and Petrochemical Dependence
In contrast, Egypt’s import basket from the GCC is equally standardised but strategically concentrated. Imports are anchored in the energy value chain, reinforcing a structural dependence on Gulf hydrocarbons and petrochemical derivatives.
Hydrocarbon Dominance:
Mineral fuels and energy-intensive inputs account for the overwhelming majority of imports. While direct fuel shipments are often managed through strategic channels, the reliance is evident in related sectors. For instance, "Inorganic Chemicals"—a key energy-derivative sector—account for 6 percent of Saudi Arabia's total exports to Egypt, ranking among the top industrial categories. This volume renders the trade balance highly sensitive to global energy price fluctuations, maintaining a deficit that non-oil exports struggle to cover.
Petrochemical Inputs:
Plastics and polymer derivatives (HS Code 39) represent the second-largest import category, serving as essential feedstock for Egypt’s domestic industrial base. For example, "Plastics and articles thereof" constitute 7 percent of Saudi Arabia's total global exports that are directed to Egypt, highlighting the heavy reliance on Gulf inputs for Egyptian manufacturing[e]. Similarly, in the UAE–Egypt channel, plastics represent a steady 6 percent of the export flow, confirming a dependency loop where Egypt imports intermediate goods to manufacture finished consumer products.[f]
Table 2.2: The Industrial Disconnect: Egypt’s Absence in High-Value GCC Import Markets




Target Market
High-Value Import Category
Total GCC Import Demand (Approx.)
Egypt's Market Share


Saudi Arabia
Machinery & Mechanical Appliances
~$9 Billion+
~0%


UAE
Miscellaneous Manufactured Articles
$15.9 Billion
0%


Kuwait
Optical & Precision Instruments
$811 Million
< 0.1%


Qatar
Electrical Machinery & Equipment
~$6 Billion
0%


Oman
Motor Vehicles & Parts
$3 Billion
~0%


Bahrain
Machinery & Appliances
High Demand
0%



Source: Trade Map14
2.2.3.   The Structural Trade Deficit
The interaction between low-value, factor-based exports and high-value, strategically essential imports produces a chronic structural trade deficit between Egypt and the GCC bloc, aside from episodic anomalies such as gold re-exports. This imbalance is not merely a function of trade volumes but reflects an underlying terms-of-trade inequality driven by a persistent complexity gap.
Egypt must export large quantities of agricultural produce and raw materials to offset the cost of energy and petrochemical imports, a gap that currency depreciation has historically failed to close. Absent a shift toward higher-complexity manufacturing and deeper integration into regional value chains, the standardised nature of this trade basket is likely to perpetuate asymmetrical outcomes despite sustained political alignment.
Table 2.3: Generalised Structure of Egypt–GCC Trade Patterns (2024)




Partner Country
 ’Farm’ Component (Top Agribusiness Exports)
’Quarry’ Component (Top Material Exports)
‘Import Trap’ (Key Imports from GCC)
Structural Logic


Saudi Arabia
Vegetables & Fruits (~16% market share)
Refined Copper

(~17% market share)
Petroleum Products & Plastics

(Industrial inputs)
“Industrial Wall”

(Food-for-fuel exchange under localisation constraints)


United Arab Emirates
Processed Foods

(~7% market share)
Precious Metals

(~3% market share)
Electronics & Refined Fuels

(Re-export intensive)
“Tech Arbitrage”

(Transit and value-chain upgrading hub)


Kuwait
Vegetables & Fruits

(~9% market share)
Carpets & Flooring

(~31% market share)
Diesel & Oil Products

(Energy inputs)
“Labour Substitute”

(Goods–remittances linkage)


Qatar
Vegetables & Fruits

(~10% market share)
Cocoa & Furniture

(~6% market share)
Chemicals & Plastics

(Gas derivatives)
“Food Security Alignment”

(Strategic agribusiness dependence)


Oman
Edible Fruits

(~22% market share)
Raw Cotton

(~71% market share)
Iron Ores & Metals

(Raw materials)
“Factor-Driven Exchange”

(Limited industrial depth)


Bahrain
Edible Fruits

(~15% market share)
Tobacco & Printed Products

(~23% market share)
Aluminum & Metal Inputs

(Manufacturing integration)
“Niche Complementarity”

(Sector-specific value chains)



Source: Trade Map14

2.3. Strategic Divergences: Country-Specific Archetypes of Engagement within the GCC
While the aggregate data confirms the dominance of a standardised Egyptian export basket centred on agribusiness and basic materials, bilateral trade relationships with GCC partners are far from homogeneous. Beneath this apparent uniformity lie distinct country-specific mechanisms shaped by regulatory regimes, logistical roles, demographic structures, and strategic state objectives. This section identifies six archetypal modes of engagement that explain how similar trade baskets generate divergent economic outcomes across the bloc.
2.3.1. Saudi Arabia: The ‘Industrial Wall’ (Regulatory Divergence)
Saudi Arabia represents the most structurally complex and contested market for Egyptian exports. Unlike other GCC partners where trade remains largely consumption-driven, the Saudi market exhibits absorption capacity for intermediate industrial goods. Egypt maintains a notable market share in refined copper and related articles (approximately 17 percent), as well as textile floor coverings, indicating partial integration into Saudi construction and industrial supply chains.[g]
However, this integration is increasingly constrained by regulatory transformation. The Local Content and Government Procurement Authority (LCGPA) and its Mandatory List requirements have introduced localisation thresholds (e.g., 40 percent local content in transmission and infrastructure projects). As a result, the relationship is shifting from complementary trade toward regulatory competition. Egyptian firms are now incentivised to relocate capital and production to Saudi Arabia rather than export from Egypt, reinforcing a vertically asymmetric structure in which Egypt exports semi-finished inputs while importing high-value energy derivatives and polymers.
2.3.2. United Arab Emirates: The ‘Re-export Hub’ (Logistical Divergence)
Trade with the UAE is statistically inflated and structurally distinct. High bilateral trade values are driven disproportionately by pearls, precious stones, and metals (notably gold), reflecting a transit-oriented relationship rather than deep industrial integration.
The UAE functions as a logistical hub mediating triangular trade. This creates a “tech arbitrage” dynamic where value is captured through logistics rather than manufacturing. This disconnect is starkly evident in the unrealised potential data: while the UAE imports a colossal US$15.8 billion in “Miscellaneous Commodities” globally, Egypt captures a zero-percent share of this market.[h] Similarly, Egypt holds a zero-percent market share in the high-value “Clocks and Watches” segment, highlighting the failure to penetrate core Emirati luxury and industrial sectors.³
2.3.3. Qatar: The ‘Procurement Nexus’ (Strategic Divergence)
Trade with Qatar follows a distinct state-led logic. The post-2017 expansion in Egyptian agricultural exports is closely aligned with Qatar’s food security strategy rather than private-sector market dynamics. Data shows that “Edible Vegetables” and “Edible Fruits” now account for 10 percent and 9 percent of Qatar's total imports from Egypt, respectively.[i]
This relationship operates as a procurement corridor insulated from broader industrial competition, anchored in government-to-government coordination through entities such as Hassad Food. While this model provides stability, it remains narrow in scope, limited to specific food security mandates.
2.3.4. Kuwait: The ‘Factor Substitution’ Model (Demographic Divergence)
Kuwait represents a legacy model in which merchandise trade is structurally weak relative to the size of the economy. Egypt’s high market shares in “Edible Vegetables” and “Edible Fruits” accounting for 9 percent and 7 percent of imports, respectively, are closely correlated with household demand linked to the Egyptian expatriate community.[j]
This pattern suggests that trade flows are shaped less by strategic business-to-business integration and more by demographic-driven consumption. The broader economic relationship is characterised by factor substitution: Egypt exports labour, while Kuwait exports capital in the form of remittances and financial inflows. As Kuwait accelerates labor nationalisation policies, this model faces increasing fragility due to the absence of a robust industrial trade backbone.
2.3.5. Oman: The ‘Factor-Driven Exchange’ and Emerging Logistics Rivalry
Trade with Oman is characterised by a highly concentrated factor-based exchange. Egypt holds a substantial market share in specific niches, such as “Tobacco Products”, which account for 38 percent of Oman's imports from Egypt, and “Edible Fruits” at 22 percent.[k] This pattern highlights a persistent value-added gap, where trade is driven by raw or semi-processed goods.
Looking forward, the relationship is evolving into a latent logistics rivalry. Oman’s Vision 2040, centered on the Port of Duqm and green hydrogen infrastructure, positions the country as a potential competitor to Egypt’s Suez Canal Economic Zone. Unlike regulatory barriers in Saudi Arabia, the Omani divergence is infrastructure-driven, with both countries developing parallel capabilities to serve overlapping global trade routes.
2.3.6. Bahrain: The ‘Niche Complementarity’ Model (Fiscal Divergence)
Bahrain’s trade relationship with Egypt is constrained by scale and fiscal capacity. Unlike larger GCC economies, trade is concentrated in narrow industrial verticals. Egypt holds a significant 23-percent share in “Tobacco Products” and 18 percent in “Printed Matter”, reflecting a targeted value-chain linkage.[l]
This results in a pattern of niche complementarity rather than comprehensive economic integration. While structurally limited in aggregate impact, these targeted value-chain linkages exhibit higher sectoral synergy than broader but shallower trade relationships elsewhere in the bloc.

2.4. The Cost of Misalignment: Unrealised Export Potential
The structural disconnects analysed above—whether regulatory (Saudi Arabia), logistical (UAE), or demographic (Kuwait)—have a quantifiable economic cost. Data from the International Trade Centre (ITC) reveals massive “unrealised export potential” for Egypt across the GCC. This gap represents the difference between what Egypt could theoretically export based on its supply capacity and GCC demand, versus what it actually exports.14
Table 2.4: Unrealised Export Potential Matrix (2024 Estimates)




Target Market
Actual Exports (Approx.)
Unrealised Potential (Lost Opportunity)
Top Sector with Potential


Saudi Arabia
~$2.7 Billion
$1.4 Billion
Processed Foods & Cables


UAE
~$2.2 Billion
$1.1 Billion
Agricultural Produce & Textiles


Kuwait
~$480 Million
$350 Million
Fresh Produce & Carpets


Qatar
~$100 Million
$29 Million
Fruits & Vegetables


Oman
~$180 Million
$110 Million
Citrus & Building Materials


Bahrain
~$50 Million
$40 Million
FMCGs & Foodstuffs



Source: Trade Map14
The structural divergences identified in the matrix in Table 2.4 have a quantifiable economic cost. Aggregate data indicates over US$3 billion in annual unrealised export potential for Egypt across the GCC. This table represents the tangible price of the “missing middle” and the “localisation trap”. Crucially, the majority of this untapped potential lies not in hypothetical high-tech industries, but within Egypt’s existing productive capacity—specifically in agribusiness, textiles, and building materials. The failure to capture this value is driven less by a lack of demand and more by the specific non-tariff barriers, logistical frictions, and regulatory misalignments diagnosed in this section. Consequently, bridging this gap requires moving beyond traditional trade diplomacy toward the targeted institutional and industrial interventions proposed in the following framework.

III. From Analysis to Architecture: A Policy Framework for Forging the ‘Missing Middle’
3.1. The Strategic Imperative: Beyond Optimisation to Co-Creation
The preceding analysis confirms that the Egypt-GCC relationship suffers from a critical failure of architecture, not intention. The quantifiable cost of this failure—over US$3 billion in unrealised export potential identified in Section 2.4—is driven not by a lack of demand, but by a structural void. The core pathology identified throughout this study is the “missing middle”—the absence of the essential connective tissue required to translate macro-level strategic alliances into micro-level commercial reality. This “middle” consists of the institutional, financial, and logistical ecosystems that allow SMEs to integrate into cross-border value chains.
The failure to construct this middle ground is the direct legacy of an obsolete division of labour—with the Gulf as the industrial engine and Egypt as the agricultural heartland—that is no longer compatible with the era of co-creation. Therefore, the challenge for the next decade is not to generate more political will nor allocate more top-level sovereign capital, but to deliberately and strategically architect this “missing middle”.
Consequently, any policy intervention aimed merely at optimising the existing trade framework is destined to fail. The strategic imperative is to engineer a paradigm shift towards “Industrial Co-Creation”. The following framework proposes a three-pillar architecture designed to forge these missing links.

3.2. Pillar I: The Institutional Architecture: Forging the Missing Links
The critical failure of the “missing middle” is, at its core, an institutional void. The current landscape lacks the executive capacity and operational focus to perform the granular work of true economic integration. The solution lies in launching a series of targeted, agile, and results-oriented initiatives designed to forge the missing institutional links.
3.2.1.   Sector-Specific Market-Creation Taskforces
The first step should be to launch sector-specific “Market-Creation Taskforces”. These would be temporary, high-impact teams focused on priority industries like construction materials, pharmaceuticals, or food processing. A KSA-Egypt Construction Supply Chain Taskforce, for example, would be composed of procurement executives from Saudi giga-projects and technical experts from leading Egyptian materials firms. Their mandate would be highly specific and time-bound: within six to nine months, identify a concrete portfolio of supply chain gaps and produce a bankable roadmap for a pre-vetted group of Egyptian suppliers to fill them. This shifts the dynamic from passively seeking market access to actively engineering market creation. These taskforces would function as strategic “advance teams”, doing the on-the-ground due diligence and technical alignment needed to connect major GCC demand directly to Egyptian industrial capacity.
3.2.2.   A Curated GCC-Egypt Industrial Opportunity Platform
To overcome the informational asymmetries that prevent SMEs from connecting with large-scale projects, the second initiative is to build a curated, digital B2B platform. This will not be a simple business directory but a secure, transactional ecosystem. On the GCC side, major corporations and projects would post specific, long-term, high-volume procurement needs. On the Egyptian side, only industrial firms that have passed a rigorous, jointly-agreed-upon audit for capacity, quality control and financial stability would be listed. This platform would serve as a trusted digital intermediary, de-risking the discovery and engagement process for both parties. It would provide the informational certainty that the current market lacks, allowing a procurement manager in Dubai to confidently identify and engage a certified specialty chemical manufacturer in Egypt, knowing they have already met a verified standard.
3.2.3. A Bilateral Regulatory Coherence Programme
Non-tariff barriers, particularly divergent standards and certifications, remain a critical hurdle. Rather than attempting a monumental, top-down harmonisation of all regulations, a more pragmatic approach is a Bilateral Regulatory Coherence Programme focused on mutual recognition in priority sectors. This programme would establish permanent working groups between counterpart national standards bodies. Their task would not be to rewrite entire rulebooks, but to establish regulatory green lanes. For products within a priority sector identified by a Market-Creation Taskforce, this programme would ensure that a product certified as safe and high-quality in Cairo is automatically accepted as such in Riyadh or Kuwait City, and vice versa. This surgical approach eliminates specific, critical barriers to trade without the immense effort of full regulatory alignment, creating the predictability necessary for building resilient supply chains.

3.3. Pillar II: The Financial Architecture: Building the Capital Pipelines
The institutional void is mirrored by a critical financial disconnect. While GCC sovereign capital is abundant and has been deployed at scale in Egyptian megaprojects and acquisitions, these headline figures mask a profound market failure. Capital flows move through a few large, well-established channels, while the vast industrial and SME ecosystem, the very engine required for diversified co-creation, remains capital-starved. The financial “missing middle” is a problem as sovereign capital at the top is immense, but the pipelines to deliver it to the productive base are narrow.
3.3.1. Capital Aggregation through Co-Investment Platforms
There is a fundamental scale mismatch. GCC sovereign investors have a large capital appetite, while Egyptian industrial SMEs require multiple small investments. The transaction costs and perceived risks of managing dozens of small, individual deals are prohibitive for large institutional investors. The solution is to launch specialised Co-Investment Platforms led by trusted financial intermediaries, such as established regional investment banks or private equity firms with a deep footprint in Egypt. These lead partners would perform the granular due diligence to identify and bundle a portfolio of 10-15 high-potential, pre-vetted Egyptian industrial firms. This curated portfolio would then be offered as a single, investable vehicle to GCC sovereign wealth funds and large family offices. To catalyse the creation of these platforms, the government can offer a “first-loss” guarantee, absorbing a pre-defined initial percentage (e.g., 10-15 percent) of any potential losses on the portfolio. This powerful de-risking mechanism incentivises the lead partner and attracts end-investors. This can be coupled with targeted tax incentives, such as a reduced capital gains tax for returns generated through these certified platforms.
3.3.2. Strategic Capital through Anchor-Led Supply Chain Funds
Financial capital alone is not enough. To be truly effective, it must be paired with strategic direction and guaranteed market access. Many Egyptian firms lack not only the funds to expand, but also the certainty of offtake required to justify the investment. This initiative involves major GCC industrial champions anchoring smaller, dedicated Supply Chain Development Funds. The anchor corporation’s fund would make strategic equity investments in its own potential Egyptian suppliers. For example, a GCC construction giant could invest directly into several Egyptian manufacturers of high-grade steel, glass and aluminum. The Egyptian firm receives strategic capital, funds that come with a guaranteed customer. The GCC anchor secures a resilient, cost-effective and geographically proximate supply chain. This creates a powerful, self-reinforcing ecosystem where investment directly fuels trade. The government's role here will be of strategic alignment. The government can offer a “Golden License” package specifically for the Egyptian SMEs receiving these funds. This would grant them an expedited approval for permits, factory expansions and import licenses for machinery. This directly enhances the investment's ROI and operational speed, making the proposition significantly more attractive to the GCC anchor.
3.3.3. Risk Mitigation through Joint Trade Finance & Hedging Facility
Currency volatility and access to affordable trade finance are significant operational barriers that deter both equity investment and cross-border trade, particularly for SMEs. The final piece of the financial architecture is a crucial enabling tool: a specialised Trade Finance & FX Hedging Facility, established as a joint venture between GCC and Egyptian commercial banks. This facility would offer two core products. First, accessible, multi-currency lines of credit to finance the trade flows generated by the other two initiatives. Second, it would provide affordable, long-term currency hedging instruments.
By mitigating the foreign exchange risk for GCC investors repatriating profits and for Egyptian exporters managing costs, this facility removes a key source of friction. This facility requires a direct government and central bank catalyst. The Central Bank of Egypt (CBE), in coordination with its GCC counterparts, can provide a crucial liquidity backstop or favorable swap lines to participating commercial banks, lowering their cost of funds and enabling more competitive financing rates. Furthermore, the government can provide sovereign guarantees on a portion of the trade finance extended to SMEs through this facility, expanding the pool of eligible companies and encouraging commercial banks to lend to a segment they might otherwise deem too risky. This proactive de-risking by the state is essential to get a private sector-led facility off the ground.

3.4. Pillar III: The Logistical and Digital Architecture: The ‘Green Lane’ Digital Corridor
The analysis reveals that the primary logistical challenge between Egypt and the GCC is a crippling “information deficit” and a high degree of procedural friction. The corridor is characterised by opaque and paper-intensive processes that impose immense time and cost burdens. The strategic imperative is to replace this archaic system with a digital corridor. This requires moving beyond optimising individual ports to creating an integrated, end-to-end ecosystem.
3.4.1. Digital AEO Green Lane
Traditional Authorised Economic Operator (AEO) or trusted trader programmes are a step in the right direction, but they are often siloed nationally and their benefits are not always realised in practice at the destination port, still requiring manual checks and paperwork. The first step is to create a joint, digitally-native GCC-Egypt Trusted Partner status. This status would be programmatically linked to the “Industrial Opportunity Platform”. A pre-vetted Egyptian supplier on the platform would automatically be eligible for this tier. Crucially, their certification and all required shipping documentation on a secure digital ledger. When a shipment from a “Trusted Partner” leaves a departure port, its digital credentials are automatically and instantly transmitted to customs officials in the arrival port. This allows for true pre-arrival clearance, with the system flagging the shipment for a green lane upon arrival. This transforms customs from a bureaucratic hurdle into a simple, predictable tollgate.
3.4.2. Interoperability Bridge for Connecting National Single Windows
Most countries have invested heavily in their own national “Single Window” customs platforms (e.g., Egypt's Nafeza,[15] KSA's Fasah,[16] and UAE's Dubai Trade[17]). These are powerful domestic systems, but they often do not communicate well with each other, forcing exporters and freight forwarders into manual data entry for each leg of the journey. Instead of attempting to build a single, monolithic super-system, the far more pragmatic approach is to begin by building bilateral secure Interoperability Bridges that can later be expanded. A focused, bilateral pilot programme between high-volume ports, for instance, between Egypt's Nafeza and Saudi Arabia's Fasah, would be launched. This would include mapping core data fields (e.g., shipper, consignee and vessel number) and develop mechanisms for the two systems to communicate. When an exporter files their manifest on Nafeza, the essential data is automatically pushed to Fasah. Saudi customs can then perform risk assessment and even issue preliminary clearance while the vessel is still in transit. This single step eradicates the information lag that is responsible for a significant portion of port dwell time and associated costs. This system can be expanded to include multiple ports to communicate with each other.
3.4.3. Predictive Logistics Platform
Strategic agreements between key logistical hubs, like the MOU between Egypt's Suez Canal Economic Zone (SCZONE) and Oman's Special Economic Zone Authority at Duqm (SEZAD), are rich in potential but often remain dormant due to a lack of operational integration. The key to activating this corridor is to provide predictability. This can be achieved by launching a Predictive Logistics Platform. Using data from containers, real-time vessel tracking and port terminal information, the platform would provide all parties in the supply chain with a single source of highly accurate, dynamic Estimated Time of Arrival (ETA). This transparency will be revolutionary. It allows an importer in the Gulf to shift from a costly "just-in-case" inventory model to a lean "just-in-time" model, unlocking immense working capital. It transforms the physical corridor from a simple shipping lane into a reliable, intelligent and financially attractive supply chain model, a powerful incentive for businesses to shift their trade flows onto this route.

Conclusion
This study demonstrates that the paradox of the Egypt–GCC economic relationship—characterised by high strategic alignment yet limited industrial integration—is not a predetermined outcome, but the result of a structural gap: the “missing middle”. While sovereign capital flows and basic commodity trade exist, the connective tissue required for deep value-chain integration—robust institutions, financial mechanisms, and logistics infrastructure—remains largely absent.
The consequences of this inertia are measurable. Over US$3 billion in potential annual exports remain unrealised due to regulatory divergence, logistical friction, and the prevailing investment bias toward non-tradables, particularly real estate. These patterns reinforce dependency rather than foster partnership, leaving Egypt vulnerable to external shocks and regulatory barriers, such as Saudi Arabia’s localisation mandates or the UAE’s re-export hub dynamics.
Correcting this asymmetry is a strategic imperative. In a rapidly shifting global order, characterised by intensified US–China competition and the expansion of the BRICS+ bloc, the Egypt–GCC corridor must leverage its combined strengths: Gulf capital and energy resources, alongside Egyptian labor and industrial depth. The opportunity lies in moving beyond the “Farm and Quarry” model towards genuine industrial co-creation.
This transition requires both internal and external reforms. Domestically, Egypt must dismantle bureaucratic barriers, empower the private sector, and align investment incentives with industrial development. Externally, the GCC states and Egypt must construct institutional, financial, and logistical architectures to facilitate value-chain integration. Policy tools such as co-investment platforms, market-creation taskforces, and digital trade corridors could operationalise this vision.
Ultimately, the sustainability and strategic value of the Egypt–GCC relationship will be measured not by capital inflows or real estate projects, but by the density and resilience of integrated industrial supply chains. The foundation for this transformation exists—the political will and financial resources are present. The task ahead is to build the architecture that converts alignment into shared industrial capacity, ensuring a durable and mutually beneficial partnership.
Annexure 
(Data used for all the appended tables are from the International Trade Centre: https://www.trademap.org/Index.aspx.)

                              


Ahmed Dawoud is Head, Data Analytics Unit, Egyptian Center for Economic Studies (ECES).
Samriddhi Vij is Associate Fellow, Geopolitics, ORF Middle East.



All views expressed in this publication are solely those of the authors, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel.

Endnotes
[a] The 2011 revolution marked the end of the Mubarak era and triggered severe macroeconomic instability—including capital flight, a collapse in tourism revenues, and a sharp decline in foreign reserves—creating Egypt's structural dependence on GCC financial support in the years that followed.
[b] See Annexure, Table 7 and Table 2.
[c] See Annexure, Table 7.
[d] See Annexure, Table 3.
[e] See Annexure, Table 6.
[f] See Annexure, Table 1.
[g] See Annexure, Table 7.
[h] See Annexure, Table 3.
[i] See Annexure, Table 12.
[j] See Annexure, Table 17.
[k] See Annexure, Table 22.
[l] See Annexure, Table 27.
[1] International Trade Centre, "Export Potential Map: Egypt–GCC Countries Data," ITC, 2025, https://exportpotential.intracen.org/en/
[2] Mohammed Al-Jadaan (Saudi Finance Minister), remarks at the World Economic Forum, Davos, January 2023, cited in "Why Unconditional Gulf Financing for Egypt Is Dwindling," The New Arab, February 15, 2023, https://www.newarab.com/analysis/why-unconditional-gulf-financing-egypt-dwindling
[3] ADQ, "ADQ-Led Consortium to Invest USD 35 Billion in Egypt," ADQ, February 2024, https://www.adq.ae/newsroom/adq-led-consortium-to-invest-usd-35-billion-in-egypt/
[4] General Authority for Investment and Free Zones (GAFI), Annual Investment Report 2023/2024 (Cairo: GAFI, 2024), https://www.gafi.gov.eg/
[5] GAFI, Annual Investment Report 2023/2024
[6] Keninstitute, “Green Hydrogen Projects in Oman and Egypt: Mechanical Systems Behind the Revolution”, keninstitute, https://keninstitute.com/green-hydrogen-projects-in-oman-and-egypt-mechanical-systems-behind-the-revolution/
[7] Lara Moussa et al., "Impact of Water Availability on Food Security in GCC: Systematic Literature Review-Based Policy Recommendations for a Sustainable Future," Environmental Development 54, no. 9 (2024), https://doi.org/10.1016/j.envdev.2024.101122
[8] Mysteel, "Alba Chooses Egypt for Its First Alumina Refinery," Mysteel, 2025, https://www.mysteel.net/news/5097806-alba-chooses-egypt-for-its-first-alumina-refinery
[9] Ministry of Economy and Planning, Kingdom of Saudi Arabia, "Accelerating the Economic Transformation of Saudi Arabia through Investments," 2024, https://mep.gov.sa/files/en/KnowledgeBase/EconomicReports/Documents/Ministry%20of%20Economy%20&%20Planning%20-%20Investment%20Report.pdf
[10] Karim Tolba, "Powerlist: Top Ports in the Middle East," Logistics Middle East, 2022, https://www.logisticsmiddleeast.com/news/top-middle-east-ports
[11] Afaq Hussain and Nicholas Shafer, "The India–Middle East–Europe Economic Corridor: Connectivity in an Era of Geopolitical Uncertainty," Atlantic Council, 2025, https://www.atlanticcouncil.org/in-depth-research-reports/report/the-india-middle-east-europe-economic-corridor-connectivity-in-an-era-of-geopolitical-uncertainty/
[12] Chen, "Strategic Synergy between Egypt 'Vision 2040' and China's 'Belt and Road' Initiative," Outlines of Global Transformations: Politics, Economics, Law 11, no. 5 (2018), https://doi.org/10.24942/2542-0240-2018-11-5-219-245
[13] International Trade Centre, "Export Potential Map: Egypt–GCC Countries Data," ITC, 2025, https://exportpotential.intracen.org/en/
[14] International Trade Centre, "Trade Map: Bilateral Trade Statistics," ITC, 2024, https://www.trademap.org/Index.aspx
[15]Nafeza, “National Single Window for Trade ‘Nafeza’”, https://www.nafeza.gov.eg/en
[16] Fasah, https://www.fasah.sa/trade/home/en/
[17] Dubai Trade, https://www.dubaitrade.ae/en/

### Has the Iran War Triggered Another Semiconductor Crisis?

The COVID-19 pandemic exposed the intricate and fragile nature of the global semiconductor supply chain. That shock prompted major powers to reassess their technology development strategies and brought the issue of technological and supply chain sovereignty to the forefront. Now, amid a massive global push to restructure supply chains, the Iran war has sparked fresh concerns about another potential crisis. The conflict is gradually contributing to shortages of a critical element underpinning the semiconductor manufacturing ecosystem: helium. This comes on top of an existing and widespread memory chip shortage, driven by surging AI data centre demand. While each factor alone is cause for concern, their combined impact could have severe ramifications for semiconductor and broader technology supply chains in the near future. Together, they reiterate the pressing need to strengthen and diversify supply chains.


The closure of the Strait of Hormuz, accompanied by multiple Iranian attacks on QatarEnergy’s Ras Laffan Industrial City, the world’s largest LNG export facility, has effectively halted production and shipping. This poses a significant risk to future global helium supply.

The Iran War and Its Impact on Helium Supply
Semiconductor fabrication relies heavily on helium, particularly during the etching process. Over time, this dependence has made the semiconductor industry the gas’s largest global consumer. Helium, however, is largely obtained as a waste gas from liquefied natural gas (LNG) plants. Qatar provides nearly 34 percent of the global supply via three plants, two of which utilise LNG byproducts. The closure of the Strait of Hormuz, accompanied by multiple Iranian attacks on QatarEnergy’s Ras Laffan Industrial City, the world’s largest LNG export facility, has effectively halted production and shipping. This poses a significant risk to future global helium supply.
Figure 1: Global Helium Production in 2025 (in million cubic metres)

Source: Reuters
Though helium spot prices have already shot up, this is not an immediate concern because the industry largely operates on long-term contracts. Moreover, the oversupply of preceding years is effectively acting as a cushion against short-term shocks. However, a prolonged shortage will likely force suppliers to declare force majeure on their contract customers. While this is a concern for all major semiconductor manufacturers, it is particularly worrisome for Taiwan and South Korea, both of which procure the majority of their helium supplies from Gulf Cooperation Council (GCC) nations.

The Memory Chip Supply Crunch
Memory chips constitute one of the most critical categories of semiconductors, forming a cornerstone of modern digital and consumer electronics. However, the prevailing supply chain model, established over multiple decades, led to the concentration of memory chip manufacturing largely in three companies: South Korean giants Samsung Electronics and SK Hynix, along with the US-based Micron Technology. Collectively, they account for over 90 percent of the dynamic random-access memory (DRAM) market.
Figure 2: DRAM Market Share by Revenue

Source: Reuters
With the rapidly accelerating demand for high-bandwidth memory (HBM), driven by global hyperscaler AI data centres, all major memory chip manufacturers have gradually shifted production toward HBM. However, due to a much more complex manufacturing process, HBM chip yields are lower than those of DRAM, and its expansion has come at the cost of DRAM manufacturing capacity and efficiency. This shift has created a supply chain chokepoint for traditional memory chips used in consumer electronics such as smartphones and PCs. As a result, DRAM inventory levels have declined, accompanied by steep price increases over the past year.
Figure 3: Decline in Average DRAM Supplier Inventory Levels

Source: Reuters
Furthermore, the shortage presents a broader macroeconomic risk: it threatens to derail billions of dollars’ worth of digital infrastructure investments committed by AI hyperscalers. While both Samsung and SK Hynix have committed investments to expand memory chip capacity, the latter has indicated that the shortfall is expected to last at least until 2027.

Compounding Disruptions
While each of the above factors is sufficient cause for concern in isolation, their convergence could have severe consequences for technology supply chains and national economies in the near future. An example is already playing out in South Korea, where the stock market plummeted by over 12 percent on March 4, 2026, its worst drop in history.


An impending helium shortage in the coming months could further escalate the situation, leading to an even larger global memory chip supply crunch. 

South Korean industry, including semiconductor manufacturing, is heavily reliant on fossil fuels, with over 70 percent of its crude oil imported from the Middle East, largely through the Strait of Hormuz. With Samsung and SK Hynix collectively accounting for 80 percent of the HBM market and 70 percent of the DRAM market, disruptions could trigger cascading effects across the global economy. This risk is amplified by growing investments from AI hyperscalers and steadily rising demand for consumer electronics. An impending helium shortage in the coming months could further escalate the situation, leading to an even larger global memory chip supply crunch.

Rethinking the Architecture of Tech Supply Chains
The supply shortages triggered by the COVID-19 pandemic prompted a near-universal push to diversify semiconductor supply chains. However, these efforts come after nearly four decades of deep, globalisation-led economic interdependence. As such, it will likely be a while before these initiatives can fully materialise. During this period of transition, the industry remains ill-prepared to absorb supply chain shocks, whether from rapidly escalating demand driven by technological innovation or from large-scale regional conflicts that disrupt critical trade routes.
Although this does spell trouble for the global economy in the short run, it nevertheless serves to underscore the importance of ongoing supply chain diversification initiatives, placing a reminder on their criticality. Simultaneously, it places renewed responsibility on emerging manufacturing hubs such as India, which recently inaugurated its first Assembly, Test, Marking, and Packaging (ATMP) facility in partnership with Micron.
As the global semiconductor supply chain evolves, these new entrants will play a critical role in stabilising markets against future shocks and disruptions. In the meantime, the industry is left grappling with the remnants of a largely profit-centric offshoring model, one whose failures should serve as a crucial reminder when formulating the tech supply chains of the future.



Prateek Tripathi is an Associate Fellow with the Centre for Security, Strategy and Technology (CSST) at the Observer Research Foundation.

### Roundtable Roundup: Catalysing Waste to Energy in the Gulf and Beyond

KEY DISCUSSION POINTS 
The State of Waste-to-Energy in the Gulf 
The Gulf Cooperation Council (GCC) countries are estimated to experience rapid population growth, increasing energy consumption and waste generation. To illustrate, the total waste collected in the GCC increased by 153.7 percent to 262.7 million tonnes between 2019 and 2023. High waste production can largely be attributed to socio-cultural factors such as higher disposable income, preferences for convenience, and a general lack of public awareness of waste management options.

Despite waste management progress, recycling composes less than 5 percent, while more than 85 percent of the region’s waste is processed through landfills, releasing harmful toxins and carbon emissions. Waste-to-Energy (WtE) refers to the generation of electricity or heat from waste treatment. It is becoming an increasingly feasible and economically viable process to generate value from waste, with large municipal-scale proof-of-concepts emerging across the region with highly efficient energy outputs. Within the waste hierarchy, WtE intersects waste management, circular economy, and energy transition goals, but it must be positioned carefully so that it complements rather than undermines recycling. Rather, WtE should serve as a downstream solution for irrecoverable residual waste, offering a pathway to shift from incineration-based disposal towards integrated systems that treat waste as a feedstock for energy, industrial fuels, and low-carbon products. (See Figures 1 and 2).

Figure 1: Waste Hierarchy



Source: European Commission

Figure 2: Municipal Waste Treatment in 2024



Source: CEWEP

Common processes to transform waste to energy include incineration, gasification, anaerobic digestion, and pyrolysis. Incineration directly combusts waste into steam for electricity or heat through boilers or steam turbines, while gasification partially oxidises waste to produce synthetic gas that can be converted into a chemical feedstock. Pyrolysis converts organic and inorganic waste into liquid fuel through thermal degradation. Anaerobic digestion transforms organic waste into biogas and digestate through anaerobic microorganisms.

In the Gulf Cooperation Council (GCC) context, municipal-scale thermal WtE via incineration dominates for mixed residual waste. However, there remains unharnessed opportunities to diversify towards gasification, pyrolysis, and anaerobic digestion. Aviation, cement, and industrial fuels and heavy industries have the largest decarbonisation potential, while organic pathways through AD and composting can support agriculture. Reaping the maximum economic and environmental benefits of these processes requires stronger waste segregation policies, synergised social and economic policy incentives, and improving the bankability of decentralised projects.
Challenges and Bottlenecks
1. Inadequate upstream waste segregation processes may lead to losses in energy output and economic value. 

Despite progress, the GCC countries’ waste segregation policies remain largely inadequate, inhibiting waste recovery potential. In most cases, proper waste segregation is crucial to obtain high quality feedstock for Waste-to-Energy facilities. Large municipal-level facilities require segregated waste to maximise combustion efficiency. Likewise, smaller and decentralised facilities require single source feedstock at a scale that is consistently available in order to generate sufficient output and reach bankability. Because unsegregated waste is not mandated at the source, it requires facilities to bear the burden of extensive preparation, drying, and transport processes, with each additional step raising costs, reducing product efficiency and recoverable energy. One way to overcome this challenge is by anticipating this uncertainty when developing WtE facilities and tailoring facility designs to the expected calorific value gathered from waste in order to minimise energy loss later on. 

2. Waste-to-Energy is inherently capital-intensive, and its outputs are costly in comparison to subsidised fossil fuels and inexpensive landfill waste disposal strategies.

Existing economic incentives are largely misaligned to environmental policies. Many GCC countries have highly subsidised fuels and inexpensive landfill taxes, reducing the economic competitiveness of WtE outputs. Moreover, WtE is energy-intensive, requiring high temperatures to combust waste into heat, steam. The cost-intensity of WtE is exacerbated by waste procurement models that reward the amount of waste tonnage collected for landfills, contradicting environmental policies that aim to divert waste away from landfills for recycling and recovery. One way to overcome the cost dilemma is through the development of auxiliary waste-to-energy plants that are coupled with industries like aluminum which can directly leverage WtE outputs like heat. However, incentivising industries to co-locate with WtE plants must be initiated by the government in order to be economically attractive.

3. The GCC faces a strategic trade-off between logistical efficiency offered by decentralised plants and the industrial scale offered by centralised facilities.

While decentralised WtE plants minimise transport costs and energy loss incurred from moving high-moisture waste over long distances, centralised facilities are beneficial for generating high value electricity with very little transmission losses. Industrial plants co-located with decentralised facilities require access to consistently available heat which may be challenging to obtain from small plants. Without synergetic coordination between decentralised and large municipal facilities, private actors may also absorb high value waste streams, leaving municipal authorities responsible for managing costly and non-recyclable waste fractions.

4. Entrenched social behaviors contribute to high waste production, hindering the scalability of waste reuse, recycling, and recovery processes.

In the Gulf region, social behaviors contribute to waste generation and aversion towards waste infrastructure construction in residential areas. Waste disposal is highly driven by socioeconomic status, with the high-income Gulf countries generating high amounts of daily organic and inorganic waste due to higher disposable income and preferences for takeaway food consumption. High waste-generating behaviors combined with a shortfall in proper government waste segregation mandates and limited behavioural change campaigns has resulted in poor manual waste sorting at the household level compared to other countries. This leads to4. waste management challenges and reduced combustion efficiency.
Policy Recommendations 
1. Improve source waste segregation and pre-treatment through government mandates and data-driven monitoring.

The GCC should combine its strengths in infrastructure construction with additional municipality, industry and household-level mandates for proper on-site waste segregation systems. Municipalities need mandatory source segregation and enforceable pre-treatment waste requirements. Combining industry quotas with standardised integration standards for cement, steel, and aviation industries that clarify specifications such as calorific value, contaminants, and traceability would ensure consistent high quality and consistent waste inputs for energy recovery and help bridge supply-demand gaps. WtE facilities can also leverage AI and machine learning to optimise energy integration processes and waste sorting and help reduce costs.

2. Build a cohesive ecosystem of decentralised and centralised waste-to-energy solutions to derive maximum value out of all waste streams.

GCC countries can leverage in-country assessments of waste output distributions to help bridge gaps between smaller WtE private sector players and municipal facilities, essentially building a portfolio of cohesive technologies that ensure WtE supply meets industry-specific or grid demand. Building an understanding of waste production streams will help inform the most strategic pathways to co-locate waste-to-energy plants with industries. Co-location would leverage waste heat for industrial processes and district cooling, helping to reduce energy loss and transport costs while driving efficiency. Clustering smaller facilities will further help guarantee consistent feedstock availability. While incineration dominates municipal WtE facility models, anaerobic digestion and pyrolysis are often overlooked and underfunded options to capitalise on organic waste streams which constitute a large portion of the Gulf’s waste mix.

3. Improve bankability by moving beyond reliance on tipping fees towards innovative financing structures that capitalise on system efficiencies.  

A government-fostered ecosystem can help address project bankability challenges. Governments can contribute to blended financing structures through minimum revenue guarantees, first loss blended finance structures, green sukuk structures, and stronger offtake agreements with better public-private partnership (PPP) risk allocation for feedstock and pricing to help bridge the “missing middle.” Supporting interconnected waste-to-value ecosystems can enable smaller WtE players to generate multiple revenue streams from selling industrial steam, specialised fuels such as bio-fuels or methanol, or carbon capture and storage (CCS) credits which can add value but should be applied selectively.

4. Institute economic and social policy incentives that incentivise positive environmental outcomes and disincentivise poor environmental outcomes.

Policies should anchor WtE firmly within the waste hierarchy, by prioritising reducing, reusing and recycling waste first prior to energy recovery.  Shifting away from rewarding “inputs” towards “outputs” in the form of the value recovered from waste will enhance the attractiveness of WtE. For example, evolving contracts away from rigid minimum tonnage guarantees towards flexible residual-waste supply and performance or recycling-aligned targets will ensure cities are not penalised for waste reduction.  This can also be achieved by instituting higher landfill taxes, enforcing mandates for WtE products in key industries, or through offtake agreements. Addressing social aversion to waste facilities can be achieved through awareness campaigns or community benefit funds that redistribute funds to public community infrastructure for those living in close proximity to waste facilities.
Conclusion
Given rapid advancements in waste-to-energy technology and infrastructure, the GCC countries can further catalyse the sector by enhancing and enforcing mandates for waste source segregation and industry adoption for WtE outputs, and supporting campaigns to improve social behavior and awareness of positive waste management behaviors. Additionally, GCC countries can help coordinate between decentralised and centralised WtE facilities, ultimately developing a strong ecosystem of value-generating infrastructure.  The long-term strategic value lies in converting waste into low-carbon molecules, not just power. Through gasification-to-syngas, WtE can produce SAF and green methanol which aligns with the GCC’s broader investments in low-carbon fuels for aviation and shipping. To strengthen their socioeconomic incentive policies, the GCC countries can glean key takeaways from other regions such as Europe and South Asia which have succeeded in spearheading zero-waste policies.



SPEAKERS 

 	Aidan Kennedy, General Manager at Sharjah Waste to Energy
 	Veena Munganahalli, Founder – Managing Director, Sencirc Holding Ltd
 	Sivapalan Kathiravale, Head of Research and Development, Tadweer Group
 	Nadia Ibrahim, Regional Lead-Regenerative Climate & Circularity - SJ Group
 	Simmi Sareen, Managing Director, Climake
 	Amani Al-Othman, Professor and Petrofac Endowed Chair in Renewable Energy, American University of Sharjah
 	Mannat Jaspal, Director, Climate and Energy at ORF Middle East 

The session was moderated by Ms. Leigh Mante, Junior Fellow, Climate and Energy at ORF Middle East.

### The Geopolitical Implications of the Looming AI Bubble

Global spending on artificial intelligence (AI) is projected to reach US$ 2.52 trillion in 2026, with investments heavily concentrated in capital-intensive infrastructure and compute capacity. Microsoft, Alphabet, Amazon, and Meta alone are expected to commit between US$ 635 and US$ 665 billion, while Oracle has disclosed a five-year US$ 300 billion compute deal beginning in 2027. On the supply side, Nvidia is providing US$ 100 billion to OpenAI, and Amazon has pledged US $8 billion to Anthropic. These figures reflect a surge of capital increasingly driven by competitive urgency and speculative expectations as much as by demonstrated returns, raising concerns that valuations across the AI ecosystem are outpacing underlying profitability.
The trajectory of the investments within the AI sector mirrors the classic dynamics of an economic bubble. Intense competition among firms to secure technological leadership has fostered rapid capital deployment, reinforced by investor enthusiasm and fear of missing out. Media amplification and optimistic projections of transformative productivity gains have further accelerated this momentum, encouraging firms to scale infrastructure and acquire compute at unprecedented levels, often financed through aggressive spending commitments. However, as with past speculative cycles, this expansion depends on the realisation of expected growth rates and revenue streams that remain uncertain.
Should the sector fail to deliver commensurate returns, the current phase of exuberance could give way to distress. Slower-than-anticipated adoption, diminishing marginal gains from scaling, or constraints in monetisation may prompt reassessment among investors and firms alike. In such a scenario, the unwinding of positions could be swift, leading to sharp corrections in valuations, reduced capital expenditure, and broader financial strain across interconnected industries.

Assessing the Drivers and Durability of an AI Bubble
The paramount questions in this domain concern whether the contemporary AI market constitutes an economic bubble and, consequently, the likelihood of its rupture. As of October 2025, US equity analysts at Goldman Sachs contended that AI had not yet formed a bubble, pointing to public market valuations and transaction volumes that remained subdued relative to prior episodes. This assessment was reinforced by the robust performance of the 'Magnificent Seven' US technology firms (Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla), which continued to generate substantial free cash flows, execute share buybacks, and distribute dividends. Nonetheless, they cautioned that the escalating dependence of these corporations on debt to finance AI ventures posed a material risk to macroeconomic stability. Sam Altman, Chief Executive of OpenAI, the parent company of ChatGPT, has similarly observed that investors are exhibiting excessive enthusiasm for the current phase of AI advancement.
Despite these perspectives, the pronounced overvaluation of technology equities, coupled with the unpredictability of market volatility it induces, renders the emergence of an AI-centric economic bubble highly plausible. Although market capitalisations of AI stocks appear to rise steadily, this sustained increase is predicated on perceptions of enduring viability. This trajectory likely reflects a self-reinforcing feedback loop, in which rising prices attract further investment, which in turn drives prices higher.
The formation of an economic bubble does not inherently imply permanent, irrevocable damage to an economy. The optimal strategy for managing such situations is to sustain the bubble until equilibrium is restored. While this scenario is difficult to navigate and requires substantial additional capital, it prevents the ensuing sharp economic decline and low-risk appetite conditions that typically follow a bubble’s burst. China exemplifies this approach, exhibiting most symptoms of an economic bubble in the 2000s yet averting financial catastrophe by prolonging expansion until stabilisation occurred.

Major AI breakthroughs warrant vigilant monitoring, with controlled dissemination to safeguard returns on infrastructure investments.
Sustaining such a bubble necessitates circumventing critical pitfalls. Foremost, mitigating interdependence among industry leaders is essential, as it could trigger cascading failures. This requires diversification beyond the current oligopoly of dominant firms. Secondly, inadequate regulatory oversight and inconsistent government policies must be avoided. The US is performing well on this front, as the government has demonstrated proactive support for research and development. Finally, a counterintuitive measure involves deliberately tempering disruptive innovations that might prematurely render current infrastructure obsolete before sunk hardware costs are recouped. Major AI breakthroughs warrant vigilant monitoring, with controlled dissemination to safeguard returns on infrastructure investments.

US–China Strategic Competition in the AI Race
The US–China geopolitical rivalry over AI hardware and strategy significantly fuels concerns about an emerging AI economic bubble, exposing acute vulnerabilities in supply chains, investment risks, and uncertain paths to AGI. The global AI landscape faces a critical impasse, with China dominating the mining of rare earth minerals essential for manufacturing graphics processing units (GPUs) and other hardware vital for training AI models, while the US hosts leading designers and producers, notably Nvidia. This bifurcation has intensified the geopolitical race between the superpowers.
The US and China diverge markedly in their strategic prioritisation of AI. The American AI Action Plan underscores a resolute commitment to substantial investment, prioritising dominance in this domain even if it entails lags in other technological arenas. The United States (US) is so intent on this path that it aims to be the first nation to develop artificial general intelligence (AGI), which would confer an overwhelming strategic advantage on the global stage. Conversely, China pursues a more balanced approach, allocating resources to AI alongside other emerging technologies. Should an AI-centric economic bubble inflate and subsequently burst, the US risks ceding significant ground to China.

The US–China geopolitical rivalry over AI hardware and strategy significantly fuels concerns about an emerging AI economic bubble, exposing acute vulnerabilities in supply chains, investment risks, and uncertain paths to AGI. 
The central pillar of the current US strategy is heavy investment directed toward vast data centres that host immense computational capacity. This addresses the principal perceived barrier to AGI: insufficient compute scale. Between 2024 and 2025, Google, Amazon, Microsoft, and Meta spent approximately US$ 750 billion on such infrastructure to power their AI models, with projections estimating an aggregate of US$3 trillion invested in data and compute by 2029. These investments, however, carry manifold risks. They demand exorbitant upfront capital for asset-intensive builds, relying on specialised chips from firms like Nvidia, which rapidly become obsolete due to continual innovation. Entire data centres could become redundant should breakthroughs emerge in optimising models or alternative compute paradigms.
Compounding this is the mounting scepticism surrounding the viability of the prevailing US AI paradigm, centred on scaling and innovating Large Language Models (LLMs) to achieve AGI. Researchers have demonstrated that current models falter in genuine logical reasoning and rational cognition, merely simulating these through pattern-based predictions derived from training data. Consequently, this trajectory appears unlikely to deliver AGI, further casting doubt on the rationale for current investments and the inflated valuations of technology equities.
Collectively, these vulnerabilities suggest that US ambitions rest on precarious foundations. An AI bubble collapse could destabilise the economy, enabling China to supplant it as the preeminent technological power. Sustaining such a bubble until equilibrium, however, could secure enduring US ascendancy over decades.

Consequences of an AI Bubble Burst
Should an AI-centric economic bubble inflate and subsequently burst, the United States would bear the brunt of the fallout, furnishing China with a critical window to entrench itself as the preeminent technological superpower. This realignment would have profound implications across financial, technological, and geopolitical-strategic domains, underpinned by the axiom that technological supremacy buttresses military prowess, economic influence, and soft power, enabling China to shape international norms and institutions in its image.

 	
Financial Implications


A bubble collapse could catalyse profound economic disruptions, contingent on the severity of US impairment and China’s opportunistic gains. A protracted recession might accelerate de-dollarisation, as nations diversify reserves amid perceptions of US fiscal vulnerability. International organisations such as BRICS‑led initiatives have already pushed forward alternative payment systems, leading to visible impacts such as the use of the RMB in the total value of money flowing in and out of China rising in the first eight months of 2024; cross‑border RMB transactions increased by 21.1 percent compared with the same period in 2023. Power structures in global commerce could realign, positioning China at the epicentre through its Belt and Road Initiative (BRI) and dominance in critical supply chains, while institutions such as the World Trade Organisation witness diminished US influence, fostering Sino-centric trade paradigms.


 	
Tech Sector Implications


The US tech sector, heavily reliant on AI infrastructure investments, would face cascading failures from asset write-downs and eroded investor confidence. Dominant firms such as Nvidia, Google, Amazon, Microsoft, and Meta, having poured hundreds of billions into data centres and specialised chips, risk obsolescence amid supply chain frictions and paradigm shifts, amplifying market volatility. This vulnerability could fracture innovation pipelines, ceding proprietary advancements in AGI to China and precipitating a broader contraction in Silicon Valley’s oligopolistic dominance.


 	
Geopolitical Implications


The military consequences of this shift would include heightened tensions over Taiwan and the South China Sea, as a diminished US deterrent emboldens Chinese territorial assertiveness, generating cascading security dilemmas across South Asia and the Indo-Pacific. Existing international groupings, such as the Quadrilateral Security Dialogue (Quad), encompassing the US, Japan, India, and Australia, could become vulnerable to fracture, as European and Indo-Pacific partners would need to pivot towards pragmatic engagement with China. The AUKUS pact, too, could falter amid eroded US credibility, further unravelling Western-led security architectures.

Conclusion
In summary, the formation of an economic bubble around AI technology stocks appears increasingly probable, if not already underway. To avert a profound geopolitical realignment, the US must sustain this bubble until equilibrium is restored. Failure to do so risks China supplanting the US as the preeminent technological superpower, precipitating shifts in global paradigms, the erosion of existing alliances, and heightened security risks across the Indo-Pacific and South Asia.



This commentary originally appeared in Observer Research Foundation.

### Reverberating Effects for Fertiliser, Food and Water Security in Times of  Conflict

Observer Research Foundation Middle East, as part of the contribution to the UN Water Conference Academic Hub, and in collaboration with the United Nations University Institute for Water, Environment and Health (UNU-INWEH), will be co-hosting today’s session entitled ‘Reverberating Effects for Fertilizer, Food and Water Security in Times of Conflict.’ 
Panelists


 	Joseph Glauber, Research Fellow Emeritus, International Food Policy Research Institute (IFPRI) and Former Chief Economist for the US Department of Agriculture
 	Mohammed Mahmoud, Middle East Climate and Water Policy Lead at UNU-INWEH (UNU-INWEH) and Chief Executive Officer of the Climate and Water Initiative (CWI)
 	Shruti Jain, Associate Fellow, Centre for Development Studies, Observer Research Foundation
 	Frederic Schneider, Senior Fellow at the Middle East Council on Global Affairs 

Moderator


 	Leigh Mante, Junior Fellow, Climate and Energy, Observer Research Foundation Middle East

Leigh Mante - Moderator
Framing


 	Mounting tensions around key maritime chokepoints and trade routes due to the US-Israel-Iran conflict reveal globally entrenched dependencies on singular corridors for food and fertiliser trade. Approximately one-third of global seaborne fertiliser trade transits through the Strait of Hormuz. Prolonged blockages at such key chokepoints may risk food shortages in later planting seasons. Recent attacks on water infrastructure also threaten destabilised water security in the Middle East.
 	This conversation highlights the 2026 United Nations Water Conference Interactive Dialogue: Water for Cooperation, underscoring the critical role of water not only as a shared resource, but also as a strategic lever for cooperation, stability, and peace, particularly in times of heightened geopolitical tensions.

Dr Joseph Glauber
Differing responsive capacities to global food supply chain shocks


 	Despite high import dependence across multiple food commodities, Gulf states are relatively insulated from short-term shocks, supported by strong oil revenues and existing food stockpiles.
 	Concerns arise for countries such as Iraq and Iran, where a prolonged closure of the Strait of Hormuz would require securing alternative routes. These alternatives present significant challenges, including Iran’s reliance on Caspian Sea infrastructure and Iraq’s dependence on costly overland transport options.

Ceasefire implications and spillover effects of a prolonged conflict on regional food security


 	Even with the announced two-week ceasefire, commerce is unlikely to return to normal quickly and will instead recover gradually, as risks remain high and continue to drive up transport insurance costs, among other barriers.
 	If the disruption extends into the second half of the year, its effects will be felt across South and Southeast Asia, coinciding with key harvest periods for commodities such as second-crop rice.
 	Higher fertiliser prices will force farmers to make trade-offs, including in crop selection.
 	As energy and fertiliser costs account for a significant share of production expenses, sustained cost increases - without corresponding rises in output prices - will strain profit margins.

Long-term food resilience and lessons from prior conflicts


 	Unlike previous crises, such as the Russia-Ukraine war or the 2007–2008 global food price spikes, global food stocks are higher, alleviating pressure on agricultural commodity prices for grains and oilseeds.
 	Past disruptions suggest that diversification strategies tend to provide only short-term mitigation. Long-term diversification remains constrained, particularly for commodities such as mineral-based fertilisers and ammonia, which are geographically concentrated. Cost considerations further shape supplier selection across many countries.

Dr Mohammed Mahmoud 
Impacts of the ongoing conflict on water and immediate responses


 	Given the region’s heavy reliance on desalination within a water-stressed context, continued risks to desalination infrastructure will force difficult trade-offs - namely, which water-dependent sectors should be prioritised and where production cuts should occur
 	Water security vulnerability across Gulf countries remains high, though it varies based on local conditions such as groundwater availability, desalination capacity, infrastructure location, and exposure to contamination on land and at sea

Future of water management and distribution strategies in the region


 	Attacks on key water infrastructure such as desalination plants will fundamentally reshape the equation of how national water demands are managed.
 	Traditionally, Gulf states’ water management strategies have focused on addressing drought and optimising the use of scarce water resources to support socioeconomic growth, while sustaining energy production and other industrial activities.
 	In recent years, acute and short-term disruptions to water infrastructure, particularly in Oman and the UAE, have largely stemmed from extreme weather events. Current military attacks represent a new frontier, requiring additional strategic considerations.
 	Gulf countries are likely to reprioritise their approaches to water security. Although each faces distinct challenges - Kuwait with ongoing groundwater remediation constraints, Bahrain and Oman with exposure to sea-level rise, and the UAE and Saudi Arabia with the pressures of large and growing populations - a common thread is the need to account for military dimensions.
 	The upcoming UAE–Senegal co-hosted water conference later this year presents an opportunity for regional collaboration. However, the emphasis on water sovereignty among Gulf countries is likely to remain a key barrier to progress. Likewise, revisiting the GCC Unified Water Strategy poses a range of technical challenges that could hinder implementation.

Threats of potential oil spill leakages on future water desalination efforts


 	The extent to which oil spills impair desalination plants’ ability to produce potable water depends on the scale of the spill, the degree of contamination, and the type of pollutants involved (e.g., heavy metals and other toxic substances).
 	The non-static nature of Gulf waters, driven by both surface and deep-water currents, can provide some dilution that may mitigate acute impacts. However, proximity to the spill remains a decisive factor in determining the extent of this benefit.
 	Groundwater, often considered a backup to desalination, is highly vulnerable to contamination if spills occur on land and seep into the soil. This risk was evident during the Gulf War, with consequences in Kuwait still observed today.

Dr Frederic Schneider
Impacts of the ongoing conflict on fertiliser and food and immediate responses


 	The GCC is a dual-risk hub as a major food importer and critical energy and fertiliser exporter. Natural gas and sulfur from the region are essential global fertiliser feedstocks, while damage to infrastructure like the Qatar Fertiliser Company requires significant reparation time, further constraining export capacity.
 	Some countries are better equipped to respond to shocks. Oman and Saudi Arabia have access to alternative routes through the Arabian Sea and the Red Sea; the UAE has large strategic food reserves; and Qatar has experience managing previous blockades.

Vulnerability of Global Supply Chains


 	India is highly exposed ahead of the Kharif planting season due to dependence on Gulf feedstocks such as natural gas, sulfur, and phosphate for domestic and imported fertilisers, reducing year-end harvest yield. These risks are further exacerbated by essential household fuel (LPG) shortages.
 	Brazil imports 85 percent of its fertiliser, half of which transits through the Strait of Hormuz. Disruptions threaten the upcoming soybean season, creating ripple effects across global livestock feed supply chains.
 	The MENA Region also faces supply risks. Egypt’s weak fiscal position makes it unable to absorb price surges, while conflict-ridden areas face intensified humanitarian impacts.
 	Substituting nitrogen-intense urea is challenging; with alternatives requiring higher volumes and often resulting in lower crop yields.

How the current crisis differs from the Russia-Ukraine shock


 	The ongoing crisis does not yet reflect Ukraine price spike levels.
 	Europe is shielded by significant stockpiles built up before the January 2026 carbon levy, while the Global South faces severe exposure, with rising fertiliser and transport costs expected to trigger a surge in consumer food prices over the next 6-12 months.

Limited diversification pathways for fertilisers


 	Russia and Belarus are major producers of ammonia and urea, while China houses large stockpiles. Despite sanction exemptions for fertiliser exports from Russia, all three have enacted export restrictions to prioritise domestic demand. Additionally, drone strikes on Russian plants have further hindered production capacity to fill short-term gaps.
 	Morocco holds vast phosphate reserves, but processing requires sulfur which is largely sourced from the Gulf, thus creating complications for substitution.
 	Transitioning from natural gas to renewable-based “green” ammonia remains a long-term aspiration. Current project pipelines are concentrated in the GCC, leaving them exposed to the same regional trade risks as traditional exports. Green ammonia is not yet cost-competitive for production to accelerate in Global South countries.

Prospects for food and water cooperation to build resilience


 	Building redundancy and diversification is key. Emulating strategies from the hydrocarbon sector may provide immediate shock buffers. This includes 1) developing an international stockpile system modeled after the IEA oil system; 2) establishing offshore reserves for critical fertilisers; 3) developing shared GCC infrastructure, logistics corridors, and joint reserves to absorb regional shocks.

Shruti Jain
Impacts of the ongoing conflict on the Global South and immediate responses


 	The ongoing conflict exposes global dependencies on few suppliers and trade corridors, translating to higher logistics costs, insurance premiums, and fertiliser prices.
 	While high-income GCC states can leverage financial capacity and storage reserves to manage shocks, lower-income countries face “hidden costs” like food inflation, higher food transportation costs, delayed remittances, and reduced access to water and sanitation.
 	Although the Indian government has assured buffer stocks for the next few quarters, a prolonged conflict will risk farmer tradeoffs.

Impacts on smallholder farmers and households in India


 	Smallholder farmers in India already work with low capital and within limited margins. The timing of fertiliser use is very important, given the upcoming Kharif planting season, and a 15-day delay could result in lower yields. High input costs may force farmers to reduce fertiliser use or transition to lower-value crops, resulting in lower yields and rising household food bills.
 	Commercial LPG shortages are affecting restaurants and urban food access, sparking an urban-to-rural migration shift with the potential to threaten productivity of small and medium-sized enterprises and long-term GDP contraction.

Government responses to mitigate impacts


 	Subsidies: The government has capped urea prices and implemented statutory pricing for DAP/phosphatic fertilisers. While subsidies help protect farmers from high costs, they also intensify national fiscal pressures.
 	Trade Diversification: The government is facilitating long-term supply agreements with Southeast Asian partners while increasing imports from Russia and Morocco.
 	Market Regulation: The government has invoked the Essential Commodities Act to prevent hoarding and black markets from emerging across federal states.

### Policy Pathways for Food and Water Security in the MENA Region

Introductory Essay: Mainstreaming Food and Water Security Amid the Strait of Hormuz Crisis

In the recent years, food and water security have moved from the margins to the mainstream of policy discourse, sitting at the centre of strategic planning for governments worldwide. This shift is particularly pronounced in the Middle East and North Africa (MENA), one of the most water-scarce regions globally with water availability about 10 times lower than the global average.[1] The region accounts for just 1.4 percent of the world’s renewable freshwater resources while hosting approximately 6.3 percent of the global population.[2]

As a result, countries—especially the Gulf Cooperation Council (GCC) with no permanent rivers—rely primarily on groundwater and desalination for drinking, industrial, and agricultural purposes. The GCC region produces roughly 40 percent of the world’s desalinated water, operating more than 400 desalination plants along their coasts.[3] The reliance on desalination for total water supply varies across member states:  61 percent in Qatar, 59 percent in Bahrain, 47 percent  in Kuwait, 41 percent in  United Arab Emirates, 23 percent in Oman, and 18 percent in Saudi Arabia.[4] Meanwhile, several states—including Syria, Jordan, and Palestine—rely on shared water systems, making transboundary governance and resource management crucial for broader social and economic development.

These geographical and structural constraints of limited freshwater availability and arid climatic conditions are being exacerbated by climate change. The MENA region is also the world’s most vulnerable and disproportionally impacted by climate change,[5] experiencing accelerated warming, declining precipitation, rising seas, and increasingly frequent and severe droughts. Furthermore, the interlinkages between water and food security are equally critical and coming under increasing strain. Much of the region remains heavily dependent on food imports, exposing it to global market volatility and supply chain disruptions.

The Strait of Hormuz Crisis and Emerging Risks

The Strait of Hormuz crisis has once again exposed the fragility of critical resource systems in the region. In the context of the current escalating conflict involving the Unites States (US) and Israel, and Iran, attacks have extended beyond the energy assets to include critical water infrastructure, most notably the desalination plants. Iran has accused the US of attacking a desalination plant on Qeshm Island which affected the water supply for 30 villages in the country.[6] In retaliation, Iran attacked a water desalination plant near Muharraq in Bahrain—a country that relies on desalination for more than 90 percent of its drinking water requirements.[7]

Such incidents are not without precedent. In 2019 and 2022,[8] Yemen’s Houthi launched a series of drone and missile attacks on Saudi Arabia’s desalination facilities at Al-Shuqaiq, highlighting the vulnerability of civilian infrastructure in an asymmetric warfare. More recently, Iran has threatened to target desalination infrastructure used by the US and Israel in West Asia in response to any attacks on its own domestic fuel and energy infrastructure—signalling an alarming escalation in the weaponisation of water systems.[9] Besides military strikes, desalination plants are also vulnerable to contamination of seawater via oil spills and power outages owing to cyberattacks and fuel shortages.

The crisis has had profound impacts on food security as well. The Gulf region imports between 80–90 percent of its food needs, and it is estimated that as much as 70 percent of it passes through the Strait of Hormuz.[10] Besides regional food availability coming under stress, global agricultural markets are also affected with rising energy prices and the concomitant increase in shipping and transportation costs.

At the same time, the Middle East supplies 30 percent of global fertilisers.[11] With the waterway under attack,  the shipments have stalled. The price for Middle East granular urea jumped by 40 percent, trading at US$665 per metric ton on 20 March compared to US$485 only a few weeks earlier.[12] The situation could deteriorate when other countries impose protectionist policies in response—for instance, China is expected to withhold urea and phosphate exports until August 2026—a decision that could cause the regional crisis to spiral into global disruptions.[13]

Towards Resilience and Regional Cooperation 

Despite these challenges, the countries of the Gulf region have made notable progress in overcoming some of the structural limitations. Investments in advanced desalination technologies, decentralised plants, renewable energy integration, controlled-environment agriculture, global food supply partnerships, and strategic food reserves have contributed to a more comprehensive framework for long-term resilience.

The United Arab Emirates stands out with its focus on innovation and international collaborations focusing on water management, sustainable agriculture, and climate adaptation. It will co-host the United Nations Water Conference with Senegal later this year, reflecting a commitment to accelerating action on sustainable water management and advancing collective solutions to both water and food security for the region and the world. This gathering will provide an opportunity for governments, international organisations, and research institutions to exchange ideas and advance solutions pertaining to these pressing challenges—now more critical than ever.

The timing of this volume is therefore particularly significant. While the essays were commissioned before the Hormuz crisis, their relevance has only intensified in the light of recent developments. Together, they highlight the specific experiences, innovations, and policy debates emerging from the region while offering in-depth perspectives on the multifaceted dimensions of water and food security. The contributions explore a wide range of themes, including technological solutions to water scarcity, national security implications, agricultural innovation in arid environments, geopolitical risks affecting food supply chains, the food-water-energy nexus, and country-led policy frameworks aimed at strengthening regional resilience.

It is our hope that this collection helps bridge the gap between academic analysis and policy application, offering valuable perspectives for decision-makers, development practitioners, and researchers alike. By bringing together diverse voices and perspectives from the region, this publication underscores the importance of interdisciplinary research, policy engagement, and international cooperation in addressing issues related to food and water security—one of the most defining security and existential challenges of our time.

Policy Pathways for Food and Water Security in the MENA Region reflects a shared commitment by the Observer Research Foundation Middle East (ORF ME) and Rabdan Security and Defence Institute (RSDI) to foster meaningful dialogue on issues that are shaping the future stability and prosperity of the region. Over the past year, ORF ME and RSDI have collaborated on two well-attended, policy-oriented panel discussions on water and food security, first in Dubai and subsequently in Abu Dhabi. These events brought together regional experts, government stakeholders, and international researchers to examine the strategic implications of resource scarcity, agricultural sustainability, technological innovation, and supply-chain resilience. The strong interest generated by these discussions demonstrated not only the urgency of the subject but also the value of sustained scholarly engagement on the subject.

We extend our gratitude to all the authors who contributed to this compendium for their timely and thoughtful analyses. ORF ME and RSDI will continue to collaborate with the authors and the wider community engaging on food and water security policy to further advance evidence-based policymaking and strengthen sustainable and inclusive resource management in the region.

Read the report here.

Mannat Jaspal is Director and Fellow, Climate and Energy, ORF Middle East, United Arab Emirates.

Kristian P. Alexander is Senior Fellow and Lead Researcher, Rabdan Security and Defense Institute (RSDI), United Arab Emirates.

All views expressed in this publication are solely those of the authors, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel.

Endnotes

[1] “Water Emerges as a Dangerous New War Target in West Asia,” The New Indian Express, March 23, 2026, https://www.newindianexpress.com/world/2026/Mar/22/water-emerges-as-a-dangerous-new-war-target-in-west-asia

[2] Salman Zafar, “Water Scarcity in MENA,” EcoMena, March 15, 2026, https://www.ecomena.org/water-scarcity-in-mena/

[3] Mohamed A. Hussein, “How Much of the Gulf’s Water Comes from Desalination Plants?,” Al Jazeera, March 12, 2026, https://www.aljazeera.com/news/2026/3/12/how-much-of-the-gulfs-water-comes-from-desalination-plants

[4] Hussein, “How Much of the Gulf’s Water Comes from Desalination Plants?”

[5] IEA, Climate Resilience is Key to Energy Transitions in the Middle East and North Africa, Paris, IEA, 2023, https://www.iea.org/commentaries/climate-resilience-is-key-to-energy-transitions-in-the-middle-east-and-north-africa

[6] Vivian Nereim, “Vital Desalination Plants in Iran and Bahrain Are Attacked,” The New York Times, March 8, 2026, https://www.nytimes.com/2026/03/08/world/middleeast/desalination-plants-iran-bahrain.html

[7] Hussein, “How Much of the Gulf’s Water Comes from Desalination Plants?”

[8] Michael Christopher Low, “An Iranian Attack on Desalination Plants is a Nightmare for Gulf States,” The Straits Times, March 11, 2026, https://www.straitstimes.com/opinion/an-iranian-attack-on-desalination-plants-are-a-nightmare-for-gulf-states

[9] Harikishan Sharma, “After Fuel, Water: With Iran’s Threats to Desalination Plants, Understanding the Gulf Countries’ Dependency,” The Indian Express, March 24, 2026, https://indianexpress.com/article/explained/iran-threats-desalination-plants-gulf-water-dependency-10595489/

[10] Christian Henderson, “Calories, Circulation, and Crisis: The Gulf States and the Regional Food System During Wartime,” Jadaliyya, March 16, 2026, https://www.jadaliyya.com/Details/47248

[11] Prime Sarmiento, “Middle East Crisis Poses Risk to Fertilizer Supply,” China Daily, March 23, 2026, https://global.chinadaily.com.cn/a/202603/23/WS69c08f48a310d6866eb3f301.html

[12] Sarmiento, “Middle East Crisis Poses Risk to Fertilizer Supply”

[13] Josh Linville, “China and Iran Redraw Fertilizer Trade Lines,” StoneX Market Intelligence, February 17, 2026, https://www.stonex.com/en/insights/china-and-iran-redraw-fertilizer-trade-lines/

 

### Iran’s Geoeconomic Strategy

Trapped since its founding on the margins of the international political economy, the Islamic Republic is nonetheless carrying its current struggle against Israel and the United States onto the terrain of geo-economics — that is, at the intersection of the spheres of geopolitics and economics.

This option is all the more surprising when one considers two factors. The first is that since 28 February 2026, it is two countries that collectively concentrate first-rate and deeply interconnected geo-economic nodes that have been mounting a coordinated assault against it. The second is that Iran's marginal position within globalisation is itself explained by the deployment against it of a quintessentially geo-economic instrument: sanctions.

Yet, by weaponising the economic geography of its immediate environment, Iran has carried out a reversal: redirecting the pressure exerted on its own territory — the stakes of which are its survival as a sovereign state — to the heart of the international economy, and into the political system and socioeconomic fabric of the United States.
Making a Virtue of Necessity
The economic and technological balance of power — which determines the capacity to finance and sustain military operations — is, to put it mildly, unfavourable to Iran. Faced with the scale and interconnectedness of the military-industrial complexes, innovation ecosystems, and capital markets of the United States and Israel, Iran is relegated to the periphery.

Even setting aside the United States, Israel would constitute, in economic and technological terms, a superior adversary to the Islamic Republic. In 2024, Israeli GDP was nearly 14% higher than Iran's, even though Iran's population is more than nine times larger.

This situation is partly the result of Israel's successful integration into three major pillars of US political economy — political, financial, and technological — namely Washington, New York, and Silicon Valley. It is in Washington that military and financial support for Israel is decided; Israel is the leading recipient of US aid — $300 billion (€260 billion) in real terms since its founding in 1948, and $21.7 billion (€19 billion) between October 2023 and October 2025. In New York, Israel is the third most represented foreign country on the Nasdaq stock index, which is technology-heavy. As for Silicon Valley, it is home to technology companies that have made substantial investments in Israel. In 2025 alone, Israeli cybersecurity companies Wiz and CyberArk were acquired for a combined total of $57 billion (€50 billion).

Conversely, through an ideology glorifying self-sufficiency and because of the sanctions imposed on it, Iran finds itself largely isolated from international trade, financial, and technological flows. This situation has degraded Iran's potential for growth, innovation, and therefore defence. It has pushed the country to develop armament programmes relying on domestic R&D capabilities and convoluted supply chains of reduced efficiency. These programmes have themselves suffered from an economic environment depressed by poor economic management, the damaging effects of which have been amplified by the macroeconomic shock of sanctions. As a result, Iran's GDP contracted by more than a third between 2012 and 2024.

Making a virtue of necessity, Iran has chosen to employ a "poor man's strategy." A flagship example of this strategy is the Shahed 136 drone, produced by its defence industry, with a unit cost estimated at between $20,000 and $50,000 (€17,000–€43,000). Intercepting it can cost several million dollars. The use of naval drones, or the possible use of floating mines to blockade the Strait of Hormuz — through which nearly 20% of global oil consumption and 19% of liquefied natural gas trade passes — would follow the same logic of maximum yield.
The Centrality of the Strait of Hormuz
Making sense of Iranian retaliation against neighbouring Gulf monarchies, whose combined GDP is nearly five times that of Iran, pushes this same logic to new levels.

Extending the conflict to their territory implies, for the Gulf states, three levels of damage: the direct material damage sustained, the loss of export revenues from goods and services, and future costs — for example, in terms of unrealised foreign direct investment or increased insurance premiums — linked to the degradation of these countries' reputations as safe and business-friendly environments.

While the damage and losses to date already amount to several tens of billions of dollars, Goldman Sachs has estimated that a two-month prolongation of the conflict could lead to GDP contractions of up to 14% for Kuwait and Qatar, which are more dependent on the Strait of Hormuz for their exports. Beyond this, the diversification efforts of sub-regional economies could be threatened, jeopardising the prosperity of the six monarchies in the post-oil era.

However, the assets of the Gulf states' sovereign wealth funds and public pension funds — exceeding $6 trillion (€5.2 trillion) — should allow them to weather the coming crisis and uncertainty. It is the deep integration of the Gulf monarchies into globalisation, and the centrality of the Strait of Hormuz to their exports and to the global energy market, that lie at the heart of Iran's geo-economic calculus.

Beyond sectors such as logistics, tourism, and air and maritime transport, it is the disruptions introduced into the international energy market — which the International Energy Agency has described as the greatest shock the sector has ever experienced — that have lodged this crisis at the very heart of globalisation. Several consequences are possible. The first concerns a deterioration in consumers' purchasing power, particularly in the United States, due to inflationary pressure driven by rising fuel prices and other hydrocarbon-derived products (fertilisers, plastics, other chemicals). The second would see the crisis spread to production, notably by disrupting industrial supply chains, including in cutting-edge sectors and for high-technology-intensive products such as semiconductors. The third would see the contagion extend to the financial sector, as the prospect of central banks raising benchmark interest rates to combat inflation depresses credit, raises the cost of public borrowing, and weighs on stock market prices.
A Costly and Risky Gamble
Through its geo-economic pressure campaign, Iran hopes to activate a series of corrective forces to restrain US President Donald Trump. A broad coalition of discontented actors would together exert mounting pressure on Washington: consumers-as-voters ahead of US midterm elections, financial markets, major industrial players (particularly in the energy-hungry artificial intelligence sector), European and, to a lesser extent, Asian allies.  Beyond this, Iran hopes to permanently deter the United States from the temptation of regime change, to provoke a rift between Washington and Tel Aviv, and to force negotiations leading to respect for its sovereignty, recognition of its place in the region, and a lifting of economic sanctions.

But this strategy is not without costs. It durably harms relations between Iran and its Gulf neighbours. It could also galvanise other countries into forming a coalition against the Islamic Republic, on the grounds that it is holding the international economy to ransom. It is also likely to place additional pressure on developing countries barely recovering from the economic shocks induced by the pandemic and the war in Ukraine — isolating Iran even within the Global South. Yet, with its very existence under siege, Tehran has judged these costs to be relative — and, ultimately, unavoidable.



This commentary originally appeared Orient XXI.         

### A West Asia Security Rethink Amid America’s Role

As the United States and Israel-led war against Iran enters its second month — with conflicting viewpoints from Washington DC and Tel Aviv on what the aims of this conflict are and under what conditions they intend to seize their respective military operations — regional countries in West Asia are re-thinking their security future. The closure of the Strait of Hormuz along with Iran’s ‘scorched earth’ policy of striking any targets across the Persian Gulf even remotely attached to American interests is leading to demands for a strategic reset.

U.S. President Donald Trump’s view that he and his team were surprised that Gulf states were targeted by Tehran as a response to the U.S.-Israel military strikes has surprised many. For a long time, Iran has said that if it was targeted and the regime’s collapse made a state aim, the conflict would become regional. However, regional security has always been a minefield as far as interests are concerned; some tough questions and issues will have to be navigated, the trailers of which are visible today.
Pakistan’s attempts to claw its way back in
Pakistan’s attempt to insert itself as a mediator between Iran and the U.S. has, as expected, ruffled feathers in India. For Islamabad — or more accurately Rawalpindi, given self-anointed Field Marshal Asim Munir’s central role in the country’s political direction — the access it has built with Mr. Trump over the past year provides it an opportunity to further strengthen this relationship. However, more importantly, this is also an opportunity for Pakistan to reorient itself toward West Asia’s Islamic identity, as it was often on the peripheries of this identity due to its long-standing economic troubles.

The Iran conflict has provided Pakistan’s leaders the rare opportunity to break through some of these shackles; its position as the only Muslim-majority country with a nuclear weapon, is one in demand as of today. The fact that Pakistan hosted the Foreign Ministers of Türkiye, Saudi Arabia and Egypt, last week, as a consortium, and attempted to leverage its access to Tehran as a neighbouring state highlights its exploration of new security arrangements that are more rooted in regional and Islamic cooperation.
Stirrings within the Gulf
Countries such as Kuwait, which has also been on the receiving end of Iranian aggression, have gone ahead and even criticised constructs such as the Arab League. Kuwait’s Foreign Minister Sheikh Jarrah Jaber Al-Ahmad Al-Sabah in an address to other Arab Foreign Ministers, has said that the League has struggled to address the fast-moving challenges being faced.
Israel’s strike against Hamas in Doha, Qatar, in 2025, was a testament to this thinking. In addition, the Arab state’s relationship with the U.S. will also come under the spotlight.
The leaders of Saudi Arabia, Jordan and Qatar have also met to commit to deepened security cooperation. Until a few years ago, Saudi Arabia and Qatar were fundamentally at odds, with Riyadh imposing an economic blockade on Qatar over regional geopolitical differences. Today, everyone in the Arab construct, from the United Arab Emirates and Saudi Arabia to Kuwait and Bahrain, is looking to side-step their own intra-Gulf differences, of which there are many, to manage these immediate challenges. Many of these Gulf states had built insurance ecosystems with Iran, either through economic cooperation, or in Saudi Arabia’s case, a very public détente brokered by China in 2023, bringing the Shia and Sunni seats of power to a level of normalisation for the first time since 2016.

But these “new” regional security ideations will continue to have fundamental problems. For example, while Iran’s actions are shaping responses today, Israel’s display of unfettered dominance of air power from the Red Sea to the Persian Gulf will also create anxieties. Israel’s strike against Hamas in Doha, Qatar, in 2025, was a testament to this thinking. In addition, the Arab state’s relationship with the U.S. will also come under the spotlight. While security cooperation is expected to increase, the Gulf states may have to be operationally more agile and unilaterally active instead of exclusively banking on the U.S.
The U.S. has fallen short
From the 2019 drone attack on Saudi oil facilities by the Houthis to the current conflict, direct American involvement in protecting the Gulf states has clearly not been sufficient. Recent comments by the White House that the Trump administration could ask its Gulf partners to commit finances to help cover the cost of the conflict with Iran raise further questions about what the U.S. role in regional security will be. A high level of American energy self-sufficiency means that Mr. Trump has actionable leverage. However, more than the supply of oil and gas, it is the management of international pricing that remains hugely volatile.

After this war, the West Asian security architecture will face hard questions. Beyond the role of the U.S., can a fool-proof system be created without Iran’s buy-in? Will hedging security demands to Asian countries, including India — the main buyers of oil and gas — in the coming decades, be a successful tactic in matters of security? Can the Gulf act unanimously to pursue a common security aim despite internal fractures?

Hard questions await in the aftermath of a war reshaping West Asia as we have known it since the Second World War.



This commentary originally appeared in The Hindu.

### Dominance without Control: Naval Dynamics in Operation Epic Fury

After years of acrimony with Iran, the US began a joint operation called ‘Epic Fury’ in partnership with Israel, aiming for regime change in Tehran. To establish naval dominance in the operation, the US Navy deployed two carrier task groups in the region. However, following the initial assault, the operation has evolved into a naval encounter requiring swift adaptation by the US after Iran decided to impose a selective blockade on a key chokepoint of global energy trade – the Strait of Hormuz. Iran has targeted at least 16 commercial vessels transiting through the narrow waterway, halting all traffic into the Persian Gulf, and as a consequence, disrupting global supply chains. As the conflict enters its second month, it is important to understand why, despite initial military success and naval dominance, the US now faces its biggest challenge yet: reopening the Strait of Hormuz to commercial shipping.


Iran has targeted at least 16 commercial vessels transiting through the narrow waterway, halting all traffic into the Persian Gulf, and as a consequence, disrupting global supply chains.

Strategically, controlling access to the Persian Gulf gives Iran the leverage to deny the US the operational success it seeks. As the conflict moves toward attrition, this article argues that, despite establishing conventional naval dominance, the US will find it difficult to counter Iran’s well-formulated sea-denial strategy and establish control over the Strait of Hormuz. With reports indicating an impending US ground operation to establish control over the waterway, this article examines the current naval warfare dynamics of Operation Epic Fury.

Decapitation and Shock: Conventional Force Dominance 
The precision and pace of US and Israeli strikes on senior Iranian leaders and key military assets in the early phase established US networked warfare superiority, giving it a decisive advantage. The US’s multi-domain intelligence, surveillance, and reconnaissance (ISR) dominance enabled swift decision-making and dynamic targeting of Iran’s naval assets. This mass targeting destroyed and incapacitated more than 150 Iranian vessels and auxiliary craft, including multiple flagship assets like a drone carrier, a submarine, and an entire fleet of frigates. Major Iranian naval bases and support infrastructure were also targeted, degrading Iran’s capacity to mount a coordinated naval campaign east of Hormuz. Additionally, the torpedoing of the IRIS Dena in the Indian Ocean, about 20 nautical miles off the coast of Sri Lanka, resoundingly demonstrated the bandwidth of American naval dominance. Then, the Israeli decapitation strike, eliminating the IRGC naval commander coordinating Iran’s blockade, further reflected operational astuteness. How the US translates this naval dominance into sustained battlespace control will determine the outcome of the operation.

Iran’s Leverage: Denying the Strait 
Blocking the Strait of Hormuz to international shipping using an anti-access/area-denial (A2/AD) strategy has become an inevitable reality for this generation of Tehran’s decision-makers, to ensure regime survivability. Their perspective was shaped by the events of the Tanker War in 1988, during which a US frigate suffered heavy damage after it hit an Iranian naval mine while on patrol in the Central Persian Gulf. In response, Washington retaliated with Operation Praying Mantis, destroying two oil terminals, sinking a corvette, a missile boat, and severely damaging a second corvette. It was a devastating loss for Iran. Consequently, this forced Iran’s strategists to recalibrate and acknowledge the limits of conventional deterrence against a more capable adversary. Over time, they refined their approach, learning from subsequent US campaigns in the region. They concluded that the only way to establish deterrence was to adopt an asymmetric naval strategy centred on effective, distributed unconventional capabilities (referred to as ‘mosaic defence’) that could disrupt access to the Persian Gulf. The result was a force structure built around decentralised command and control, and layered asymmetric capabilities geared towards shallow-water warfare.


Whatever remains of Iran’s capabilities is designed for maritime guerrilla warfare. The principal component of this strategy is Iran’s minelaying capacity. Iran reportedly possesses 3,000 to 4,000 naval mines of various types, thus retaining the capacity to ensure that transit in the region cannot resume until a comprehensive counter-mine mission is completed.

Despite losing frontline naval assets, including minelayers, in the initial phase of the operation, which rendered Iran’s conventional forces largely ineffective, Tehran retains the resilience to sustain an extended sea-denial campaign (Refer to Table 1). Whatever remains of Iran’s capabilities is designed for maritime guerrilla warfare. The principal component of this strategy is Iran’s minelaying capacity. Iran reportedly possesses 3,000 to 4,000 naval mines of various types, thus retaining the capacity to ensure that transit in the region cannot resume until a comprehensive counter-mine mission is completed. Traditionally, mine-clearing missions, even under perfect conditions, take weeks, and this is Iran’s strategy right now – to buy more time.
Concomitantly, to deter such a mission, Iran has developed a fleet of fast-attack craft armed with missiles and torpedoes that could swarm any incoming naval force. Completing this strategic ploy are mobile batteries armed with anti-ship cruise missiles, located in a network of tunnels and caves marking the rugged terrain overlooking the chokepoint. Moreover, the inductions of midget submarines and uncrewed systems, including one-way attack drones, have further solidified this tactic, as they can relay targeting information for mass fires and, if necessary, complete the kill chain themselves. The region's geography restricts the manoeuvrability of large vessels, making them easy targets for highly mobile Iranian assets and, conversely, making such shoot-and-scoot assets difficult to engage for the US. However, the success of this strategy rests on Iran’s ability to preserve its localised ISR networks. Tehran anticipated US hesitation to undertake such high-risk mine-clearing operations, which is the key rationale behind Iran’s strategic posture. Every day of Iran’s blockade tests the resilience and endurance of US logistical networks and combat systems, thereby intensifying strategic pressure on Washington, without requiring outright naval success.




Table 1: Estimated Functional Combat Capability of Iran for A2/AD Operations (Approximate)*


Asset Type
Pre-Op Estimate
Likely Lost/Incapacitated
Possibly Still Functional
Strategic Effect


Midget Submarines
16 – 20
2 – 4
12 – 16
Sub-Surface Mine-Laying and ISR Capacity Remains


Major Surface Combatants
9 - 10
8 – 9
1 – 2
Conventional Surface Combat Capability Degraded


Patrol/Coast Craft
400 +
120 – 160
240 – 280
Residual Swarm Threat in Coastal Waters


Support Vessels
60 +
5 – 10
50 +
Sustained Area-Denial Operations


Naval Mines
3000 – 4000
N.A.
N.A.
Persistent Mine Threat



*Data is compiled by the author using various sources. Primary sources are The IISS Military Balance 2026 (Vol. 126); Janes Fighting Ships 2024–2025; Benjamin Jensen, How to Lose a Navy in 10 Days, CSIS (12th March 2026)

Countering an Asymmetric Force: The Real Test for the US Navy
Therefore, the main operational constraint the US currently faces is the prospect of clearing the narrow waterway of Iranian naval mines. The US Navy's capability for such a complex operation has been severely depleted, as Washington recently decommissioned its Avenger-class mine-countermeasure vessels. Its replacement, the Independence-class Littoral Combat Ships (LCS), are either undergoing maintenance or deployed outside the operational area. Notably, concerns exist regarding the Independence-class ships’ mine-clearing capability, their AN/AQS-20 system, and the associated uncrewed modules.
Furthermore, any mine-clearing mission would require an escort from frontline US surface combatants, which would entail a significant risk. Prolonged clearance sorties will put them within range of Iranian sea-skimming anti-ship cruise missiles and torpedoes. Additionally, Iranian multi-domain uncrewed systems — whether aerial (UAVs, unmanned aerial vehicles), surface (USVs, unmanned surface vessels), or underwater (UUVs, unmanned underwater vehicles) — will likely saturate the battlespace, further extending denial and persistence. Similarly, one-way attacks by USVs and UUVs, along with Iranian midget submarines, will likely threaten surface ships with surprise attacks, compressing US reaction time. These threats also negate any possibility of US forces conducting escort missions for commercial shipping.


Washington’s lack of political groundwork and strategic cooperation with its partners before the conflict leaves the US deprived of allied mine-clearing expertise and support.

With the US confirming that it has deployed uncrewed drone speedboats for patrols for the first time in an active conflict as part of its operations against Iran, this indicates US tactical flexibility. The US could plausibly expedite the deployment and use of improved uncrewed mine-countermeasure systems to reduce risk to conventional manned assets. Washington’s lack of political groundwork and strategic cooperation with its partners before the conflict leaves the US deprived of allied mine-clearing expertise and support. While US Secretary of War Pete Hegseth stated that Washington had air superiority over the Strait of Hormuz, it remains unclear whether this aerial superiority can translate into US control of the waterway. However, continuous US airstrikes do stretch Iran’s ability to sustain the blockade indefinitely.

What Next: Breaking The Deadlock 
As this effective deadlock continues and Operation Epic Fury enters its second month, three possible scenarios could emerge:
Scenario 1: The US is unable to counter Iran’s selective blockade of the Strait of Hormuz, given the risk surrounding sustained counter-mine operations. This stalemate provides Iran with a psychological advantage, and it will most likely keep charging a toll on ships seeking to transit through, establishing this as the new normal. This will most likely lead to higher energy prices, putting pressure on the US to secure a diplomatic end to the conflict. Even a limited mine presence or missile threat can sustain the blockade through insurance risk alone, without any need for kinetic engagement.
Scenario 2: The US is mobilising amphibious and airborne forces for a possible assault on Iranian positions adjacent to the Strait, including strategically important islands. A ground assault would trigger a vertical escalation of the conflict, with Iranian ground forces resolutely defending their positions and perhaps even initiating a counterattack. Such an operation could also invite retaliation from Iran-backed Houthi forces based in Yemen, to implement an additional naval blockade of the Bab-el-Mandeb Strait, opening another front of operations, and further paralysing global energy trade.
Scenario 3: Washington is attempting to assemble a combined maritime task force with the help of regional Gulf partners and NATO allies, including France and the UK. If this initiative succeeds, such a force would lend greater legitimacy and naval capability for mine-clearing operations and/or escort missions for commercial shipping. If the Iranians engage this task force to sustain the blockade, they will invite a more comprehensive international response, weakening their diplomatic position. Alternatively, upon encountering such a massive naval coalition, Iran may de-escalate, lift its selective blockade, and seek a diplomatic solution to the conflict.


The conflict demonstrates that naval dominance without mine-clearing capacity cannot guarantee maritime control in a contested littoral. The outcome of this conflict ultimately rests on the US ability to remain tactically flexible and cogitate a new strategy to counter Iran’s asymmetric sea-denial capacity.

Conclusion: Dominance is not Control
There is a sharp disparity between the strategies of the two forces as the conflict enters its second month. Iran’s asymmetric flexibility contrasts with the US's strategic multi-domain dominance, making this conflict a clear clash between sea control and sea denial, and underscoring important lessons for future naval warfare. It resembles another ongoing conflict, albeit in a different maritime theatre – the Black Sea, where innovative but far less capable Ukrainian forces have implemented a concerted sea-denial strategy against a highly capable Russian Navy. Similarly, Iran is precipitating a sea-denial strategy against a far more capable naval force, perhaps the most dominant navy in the world, where both sides’ resilience, endurance, and persistence are being tested. Iran’s long-range strike attempts against the US naval base in Diego Garcia in the Indian Ocean illustrate that Tehran retains the ability to engage US forces in the wider battlespace beyond Hormuz. As reports indicate the US has only been able to destroy a third of Iran’s missile arsenal, if such attacks continue, it will force US planners to switch to a defensive posture, reducing operational concentration near Hormuz. The conflict demonstrates that naval dominance without mine-clearing capacity cannot guarantee maritime control in a contested littoral. The outcome of this conflict ultimately rests on the US ability to remain tactically flexible and cogitate a new strategy to counter Iran’s asymmetric sea-denial capacity. Counter command, control, communications, intelligence, surveillance, and targeting (C-C5ISR-T) efforts could prove crucial in such a formulation to disrupt Iranian decision-making and operational reach. In a sea-denial operation, the side that exercises effective control over time and information, not territory alone, ultimately shapes the outcome.



This commentary originally appeared in Observer Research Foundation.

### Rethinking Resilient Food Systems: Mitigating Food Supply Chain Shocks in the MENA Region

Introduction 
Food security exists when all people have continuous physical and economic access to sufficient, safe, and nutritious food that meets dietary needs and preferences for a healthy life.[1] It is defined by four pillars: 1) the physical availability of food; 2) economic and physical access to food; 3) food utilisation; and 4) the stability of these components over a period of time. Achieving food security relies on maintaining the integrity of food systems—the interconnected elements and activities involved in the production, processing, distribution, and preparation of food.[2] As these systems are increasingly vulnerable to disruptions, the concept of food system resilience—the capacity to provide sufficient, appropriate, and accessible food over time and across levels in the face of shocks—becomes critical. [3]
In the Middle East and North Africa (MENA), food system resilience is under constant pressure. The region is home to approximately 519 million people and is projected to grow at an annual rate of 1.7 percent, with populations increasingly shifting from rural to urban areas.[4],[5],[6] The region has long suffered from food insecurity due to limited arable land and water resources, geopolitical tensions and conflict, economic instability, structural poverty, and intensifying climate shocks. Together, these factors increase reliance on food imports and expose the region to disruptions in trade corridors, constraining access to safe, affordable, and nutritious food. Food supply chain shocks refer to external disruptions that restrict food availability, access, and nutrition, either temporarily or over prolonged periods.[7]
Differences in economic development and political stability across MENA countries shape their existing capacities to absorb and adapt to shocks in the food supply chain. Given the rise and prolonged duration of regional conflicts, combined with aggravated droughts and water scarcity, strategising how to maintain food system resilience amidst external shocks is crucial.
Table 1: MENA Countries: Overview




Country
Population, Total (2024)
Income-Level and Fragility (World Bank)
Oil-Importer/Oil-Exporter Status
Global Food Security Index 2022 Ranking out of 113
Employment in Agriculture (% of Total Employment)
Agriculture, Forestry, and Fishing (Value Added to GDP)


Algeria
46,814,308
Middle-Income
Developing Oil Exporter
68
9% (2023)
13.1 % (2023)


Bahrain
1,588,670
High-Income
Oil Exporter
38
1% (2023)
0.3% (2023)


Djibouti
1,168,722
Middle-Income
Developing Oil Importer
-
1% (2023)
2.6% (2024)


Egypt
116,538,258
Middle-Income
Developing Oil Importer
77
19% (2023)
13.7% (2024)


Iran
91,567,738
Middle-Income
Developing Oil Exporter
-
14% (2023)
13% (2024)


Iraq
46,042,015
Middle-Income with Conflict
Developing Oil Exporter
-
8% (2023)
3.4% (2024)


Israel
9,974,400
High-Income
-
24
1% (2023)
1.3% (2024)


Jordan
11,552,876
Middle-Income
Developing Oil Importer
47
3% (2023)
5.1% (2024)


Kuwait
4,973,861
High-Income
Oil Exporter
50
2% (2023)
0.5% (2024)


Lebanon
5,805,962
Middle-Income with Conflict
Memorandum
-
3% (2023)
1.0% (2023)


Libya
7,381,023
Middle-Income with Conflict
Memorandum
-
9% (2023)
1.7% (2024)


Malta
574,346
High-Income
-
-
1% (2023)
0.2% (2023)


Morocco
38,081,173
Middle-Income
Developing Oil Importer
57
30% (2023)
10.1% (2024)


Oman
5,281,538
High-Income
Oil Exporter
35
6% (2023)
2.6% (2024)


Qatar
2,857,822
High-Income
Oil Exporter
30
2% (2023)
0.3% (2024)


Saudi Arabia
35,300,280
High-Income
Oil Exporter
41
3% (2023)
2.5% (2024)


Syria
24,672,760
Low-Income with Conflict
Memorandum
113
15% (2023)
43.1% (2022)


Tunisia
12,277,109
Middle-Income
Developing Oil Importer
62
13% (2023)
9.3% (2023)


United Arab Emirates
10,876,981
High-Income
Oil Exporter
23
1% (2023)
0.7% (2023)


The West Bank and Gaza
5,289,152
Middle-Income with Conflict
Developing Oil Importer
-
6% (2022)
5.7% (2022)


Yemen
40,583,164
Low-Income with Conflict
Memorandum
111
29% (2023)
28..7% (2018)



Source: Authors’ own, using data from the World Bank[8],[9],[10] and Economist Impact[11]

Methodology 
The geographical scope of the MENA region in this paper includes Algeria, Bahrain, Djibouti, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Malta, Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, the United Arab Emirates, the West Bank and Gaza, and Yemen. The region is analysed using the World Bank’s cross-sectional classifications of income, hydrocarbon status, and conflict; (1) higher-income countries, including Qatar, the UAE, Kuwait, Saudi Arabia, Bahrain, and Oman; (2) middle-income countries, including developing oil-exporting Algeria and Iran and oil-importing Jordan, Egypt, Tunisia, Morocco, and Djibouti; (3) middle-income, conflict-affected countries, including oil-exporting Libya and Iraq and oil-importing Lebanon and the West Bank and Gaza; and (4) low-income, conflict-affected countries, including Syria and Yemen (see Table 1).
The paper utilises the DPSIR framework (Driving Forces–Pressures–State–Impact–Responses) to evaluate factors influencing MENA’s food supply chain shocks and responses. This framework links environmental stressors to market-led shocks, which affect food supply chain stability in the region. Driving forces include structural environment that render MENA’s food systems vulnerable, such as demographic trends, agro-climatic conditions, the food-energy-water nexus, and political economy dynamics. Pressures that impact affordability, access, and availability arise from external events such as geopolitical conflicts and pandemics.
The paper utilises the World Bank’s Logistics Performance Index variables to measure trade and logistics pressures, such as shipping disruptions, and chokepoints, varying across MENA countries. The ‘state’ measures the present conditions following the environmental stressors, including economic and financial challenges affecting food inflation and storage losses. ‘Impact’ includes economic macro-implications, such as rising energy consumption for access to potable water, nutritional trends, high import bills, longer shipping durations, and food wastage. ‘Responses’ measures the current mechanisms that reduce pressures and mitigate impacts—this includes food and water import diversification, logistics capacity building, price stabilisation, and resource optimisation. Based on these findings, the paper suggests policy recommendations tailored to MENA countries. 
Figure 1: DPSIR Framework
 
Source: Authors’ own 
Figure 2: DPSIR Methodology

Source: Authors’ own 

Structural Vulnerabilities and Contextual Realities Shaping MENA Food Systems 
Water Scarcity
The MENA region faces acute water scarcity, driven by climate change and its limited share—around 1 percent—of global freshwater resources.[12] Rising demand from agriculture, industrialisation, energy production, and urbanisation is placing increasing stress on water supplies, with consumption in Gulf Cooperation Council (GCC) countries exceeding 500 litres per person per day.[13] Some of the most water-stressed countries include Kuwait, Cyprus, Oman, Qatar, and Bahrain.[14] By 2050, it is estimated that two-thirds of MENA countries will have less than 200 cubic meters of renewable water resources per capita per year, compared to 7,000 cubic meters in other regions.[15]
Figure 3: Water Stress Rankings

Source: Aqueduct Country Rankings[16]
Water scarcity in the MENA region is undermining food systems. As approximately 70 percent of agriculture is rain-fed, water scarcity leads to an overall decline in agricultural production and changes in crop types.[17] Saudi Arabia is projected to have the largest losses in agricultural productivity, with about a 65 percent reduction from current levels by 2050.[18] In the same period, the Republic of Yemen and the Syrian Arab Republic are projected to lose 35 percent and 13 percent of their agricultural production. Similarly, Iran and Lebanon will lose about 5 percent of their production. Water scarcity will also impact the crop baskets, with the replacement of staples with less water-intensive crops. For instance, the government of Egypt has reduced the legal rice cultivation area due to water shortages and Saudi Arabia plans to phase out wheat and corn production to secure water availability.[19] Water scarcity’s impact on the agricultural sector has also extended to the livelihoods of the producers, especially smallholder farmers. It has been observed to potentially trigger migration in the MENA region to urban centres.[20]
Many MENA countries currently rely on desalinated water for immediate consumption. Saudi Arabia holds some of the world’s largest desalination plants, including the Al Jubail facility, which produces over 1.4 million cubic meters of water daily. The Saline Water Conversion Corporation produces about 20 percent of the world’s desalinated water.[21] Increased adoption of desalination, however, has drawbacks; foremost is the increase in salinity levels in the Gulf and Red Sea, which has a detrimental impact on the marine biodiversity, species persistence, fisheries, and coastal communities. Moreover, desalination leads to heightened use of energy—Saudi Arabia alone consumes about 300,000 barrels of oil per day to power the plants.[22] Additionally, the large, fixed nature of desalination facilities and their integration into industrial and domestic systems heightens their vulnerability to kinetic attacks, as demonstrated in the Israel-US-Iran conflict.[a],[23] Therefore, the region must look at long-term sustainable solutions to address growing water scarcity concerns.
Figure 4: Agricultural Production Losses by 2050

Source: World Bank, 2023[24]

The Natural Resource Curse
Certain North African countries are endowed with fertile land and free-flowing water resources, yet this has reinforced the ‘resource curse’, increasing the risk of conflict over resource governance, inhibiting progress towards resilient food systems, and heightening water insecurity.[25] Transboundary management and control of the region’s scarce water resources have historically represented a centre of geopolitical competition. The Nile River, which flows through Ethiopia and Egypt, exemplifies these tensions, with competing national demands. Despite dialogue coordination efforts led by the African Union, the European Union, and the US, the countries failed to close a binding agreement. Ethiopia prefers a flexible and sovereign approach to dam management, while Egypt prefers fixed legal guarantees.[26] Amidst the diplomatic gridlock, Ethiopia inaugurated its Grand Ethiopian Renaissance Dam (GERD) in 2025, which it pursued unilaterally to secure a domestic and exportable power source, support domestic agriculture, and enhance regional influence. However, the dam poses risks to downstream water access in Egypt and Sudan. Egypt’s agriculture sector consumes 79 percent of Egypt’s freshwater withdrawals. Given projected population increases in Egypt coupled with increasing drought, domestic water shortages are expected to intensify.[27]
Despite access to land and water resources for agriculture, these countries have fallen short in developing holistic food systems due to a manifestation of the resource curse combined with external influence. Donors and the global community have encouraged policies that favour monocropping strategies for cash crop exports, which have depleted water as well as land grabbing, where land is transferred from smallholder farmers to foreign investors and enterprises.[28],[29] These strategies have historically dominated the MENA region’s food security agenda, as seen in Morocco and Tunisia. Land monopolisation for the commercial production of hybrid non-local varieties has exhausted soil and depleted water availability in Morocco. Likewise, the influx of agricultural investments in the Tunisian village of “El-Ititez 1” for jojoba production and export has depleted land and water.[30]

Pressures: Headwinds for Food Security and Food System Resilience 
Geopolitical Impacts and Tensions 
The rise in global shocks, including the COVID-19 pandemic and geopolitical tensions like the Russia-Ukraine war and US-Israel-Iran conflict, has threatened food value chain stability and negatively impacted household capacity to cope, leading to compromised nutritional outcomes. MENA countries exhibit varying degrees of vulnerability to food supply chain shocks, depending on political-economic instability, hydrocarbon dependency, and food import percentages.


 	COVID-19 Pandemic

The COVID-19 pandemic destabilised food value chains on both the supply and demand sides and increased food prices. Although countries experienced similar impacts, such as labour and raw material shortages, the severity of impacts is distinguishable between high- and middle- to lower-income countries.[31] During the pandemic, high-income countries experienced supply-driven impacts such as logistical bottlenecks and supply chain disruptions, while lower-income countries saw demand-driven impacts as a result of a loss of income and increased linkages to poverty, which reduced their purchasing power and altered their capacity to make nutritious food consumption choices.[32]
In the MENA region, the beginning of the pandemic affected food availability less than during the 2008 economic crisis. Conversely, food security dimensions of accessibility and utilisation shifted to a much larger extent. Food accessibility was restricted by changes in food transport costs, food assistance distribution mechanisms, and food shortages in supermarkets and compounded by economic uncertainty, abrupt job losses, and food price hikes.[33]  This relationship was more pronounced in lower-income countries, which experienced greater income-responsiveness due to rising poverty and reduced income levels, contributing to a contraction in food consumption demand.[34] To illustrate, the pandemic contributed to over 10 million full-time job losses in the MENA region, influencing household capacity to adapt to changes in food prices.[35]


 	Russia’s War in Ukraine and US-Israel Conflict with Iran

Russia’s war in Ukraine exacerbated food insecurity already intensified by the COVID-19 pandemic and ongoing interregional political instability, conflict, or economic reform. Following the invasion, prices of food commodities and fertiliser surged, as both are major exporters of wheat, maize, rapeseed, sunflower seeds, and sunflower oils, as well as key fertiliser macronutrients. [36],[37] The ongoing US-Israel-Iran conflict threatens to replicate patterns observed during the Russia-Ukraine war.
The Russia-Ukraine war has resulted in rising energy prices further exacerbating fertiliser costs, since natural gas is essential for its production.[38] Likewise, delays in Liquefied Natural Gas (LNG) production and the closure of the Strait of Hormuz as the US and Israel attacked Iran on 28 February immediately raised Middle East urea prices.[39] Furthermore, countries deploying modern technologies to optimise agricultural operations are also experiencing increased costs because of the Russia-Ukraine war since technologies rely on stable energy resources.[40] In the short-term, higher oil prices and fuel shortages have raised production costs, contributing to increased food prices.[41]
MENA’s reliance on Ukraine for nearly one-third of its cereal imports heightened vulnerability to supply disruptions.[42] However, food availability vulnerabilities varied according to the political and economic context of each country. Middle-income countries like Algeria and Jordan experienced moderate vulnerability due to lower export dependence levels. They responded to the shock by diversifying trade partnerships to maintain the trade flow of staple cereal products.[43] Developing oil-importing countries like Egypt and Tunisia were moderately vulnerable due to high import dependence rates compounded by growing populations in Egypt and internal political conflicts in Tunisia. They overcame food availability pressures by expanding food storage capacities and wheat production infrastructure or securing food aid from Gulf states.[44] Lower- to middle-income countries with conflict, like Lebanon, Libya, and Yemen, were highly vulnerable to the crisis due to multiplied effects from internal political-economic instability and food aid reliance which was entangled in delayed shipments.[45]
Conflicts within MENA can damage infrastructure, impose roadblocks or sanctions, and disrupt the movement of goods, weakening food supply chains. For example, the closure of key maritime chokepoints during the Israel-US-Iran conflict compromised agricultural deals, leaving exports headed to MENA stranded at port due to heightened freight costs.[46] Food also becomes less accessible in conflict zones. Increasing political instability can lead to neglect of the agriculture sector, resulting in a lack of support for farmers seeking agricultural support, credit, or insurance.[47]

Current Scenario of the MENA Economies 

 	Economic and Financial Challenges

As MENA countries are high food importers, geopolitical pressures and external shocks to food value chains can impact domestic food prices. Domestic food prices in the region are also vulnerable to currency depreciation, especially for conflict-prone areas such as Yemen and Lebanon, as a weaker local currency increases retail food prices and reduces disposable incomes. For instance, due to ongoing conflicts and climate effects in Lebanon, the average food inflation in 2025 remained as high as 23.9 percent.[48]
Crude oil and agricultural commodity prices are closely correlated, as oil is a key input in agricultural processing and transportation.[49] Higher oil prices spill over to higher prices for transport and fertiliser, which leads to an increase in retail food prices. Volatility in oil prices can directly affect the countries’ exchange rates, fiscal capacity, and subsidies. Thus, with decreasing oil prices for oil exporters such as Algeria or Iraq, currency weakness and spikes in food inflation were observed.[50] Additionally, a correlation between biofuel and crude oil prices was established, in which biofuel became more competitive as crude oil prices increased—leading to higher food prices, particularly for sugar, maize, and vegetable oils.[51] To combat high inflation, several MENA countries have resorted to high food subsidies, which impact fiscal costs in the long term.[52] Countries such as the UAE, Algeria, and Egypt adopted new price ceilings and loosened import restrictions, which eased domestic inflation but came at a cost of declining government revenue.[53]
Table 2: Food Inflation in Select MENA Countries 2025




Country
Food Inflation 2025 (Year on Year %)


Lebanon
23.9


Egypt
6.9


Tunisia
5.7


Morocco
0.4


Jordan
0.8


Saudi Arabia
1.5


UAE
0.4



Source: Trading Economics[54]
Investment in agriculture and food value chains is crucial to ensure food system resilience. It creates multiplier effects for allied sectors and enhances food production efficiency. Sector investments improve food supply chains, promoting regional and international connectivity.[55] In most MENA countries, however, food security is threatened by insufficient public and private investment in agriculture. For North African countries, the average share of agriculture in government expenditure is above the global average; however, this number is relatively small when considering the share of agriculture in the region’s Gross Domestic Product (GDP). The Food and Agriculture Organization’s Agriculture Orientation Index (AOI)[b] indicates that, except for Kuwait, all MENA countries demonstrate lower agriculture expenditure than their GDP weight. On average, the AOI for North African countries remains low, while the index remains highest in three Gulf Cooperation Council (GCC)[c] countries—Kuwait, the UAE, and Bahrain.[56] Lebanon, Algeria, and Egypt have some of the lowest AOI in the region.
In addition to investment in agriculture and agricultural value chains, rapid climate change in MENA requires scaling up adaptation finance for the adoption of climate-smart agriculture (CSA). In the region, the main source of funding is public, in the form of grants and funds. The fund, however, has been primarily targeted at mitigation rather than adaptation, which is required for the adoption of CSA.[57] While a large percentage of farmland was under small-scale management, only about 1.5 percent of climate finance was received for small-scale agri-food systems in the region.
Table 3: AOI Index for MENA Countries




Country
AOI Index (2019-21)


Algeria
0.20


Bahrain
0.58


Egypt
0.11


Iran
NA


Iraq
NA


Jordan
0.13


Kuwait
1.18


Lebanon
0.08


Libya
NA


Mauritania
0.25


Morocco
0.30


Oman
0.25


Qatar
NA


Saudi Arabia
0.31


Sudan
NA


Syrian Arab Republic
0.23


Tunisia
0.35


United Arab Emirates
0.61


Yemen
NA


Somalia
NA



Source: FAO[58]

Impact of the Drivers and Pressures on Food Resilience in MENA

 	Import Dependence 

Climate change-driven impacts on lower agricultural production in the MENA region accounted for a rise in food prices. As food demand remains inelastic, an increase in food prices will not lower its demand. In order to match the reduction in supply and fulfil its domestic consumption, the MENA region is increasingly turning to imports.[d],[59] In 2024, the GCC countries imported US$60 billion worth of agri-food and seafood, with an annual growth rate of 6.7 percent. Among the exporters, India was the largest supplier with 12.6 percent of exports, followed by Brazil with 11 percent, the US with 5.7 percent, and the Netherlands with 7.8 percent export share.[60]
There is a growing gap between agricultural supply and demand in the region. The region already has one of the highest cereal dependencies in the world, which is coupled with growing food subsidies and decreasing availability of land and water. Figure 5 shows the share of kilocalories consumed that are sourced from imports. A decrease in agricultural production in the region could lead to a loss of about US$50 billion in net agricultural exports by 2050.[61] Growing import dependence could also expose the region to price volatility, as MENA countries would be susceptible to geopolitical and global climate shocks.
Figure 5: Share of Kilocalories Supplied by Imports in MENA Countries

Source: INRAE, CIRAD[62]


 	Consumption Trends and Nutritional Paradox 

Urbanisation, geopolitical risks, and income growth have reshaped consumption patterns in the MENA region.[63] Urban households with higher disposable incomes consume more processed food, fats, sugar, fruits, vegetables, dairy products, and animal-sourced proteins; in rural households, diets still include staples such as maize, rice, millet, and cassava.[64] This implies that the dietary consumption patterns of rural households are more at risk of getting impacted by growing environmental stressors, leaving them with limited alternatives for their nutritional intake. Additionally, with greater dependence on processed food through imports, diets have become less micronutrient-rich and more calorie-dense, especially among children and adolescents.[65]
The MENA region also faces a double burden of malnutrition, driven by unequal access to nutritious food: undernutrition persists in rural communities and North African countries, while obesity is more prevalent among middle- and upper-income groups in urban centres and Gulf countries.[66] According to the FAO, around 52 million individuals in the region face chronic undernutrition, while 58 percent of adults are obese.[67]  The MENA region also displays extremes in the food security spectrum—while the UAE and Israel perform well with scores above 74 in the Food Security Index 2022, Syria and Yemen are the worst-performing countries globally with scores of 36.3 and 40.1.[68]

Evaluation of Existing Response Mechanisms 
1. Supply-Driven Responses from Oil-Exporting Countries 
Given high food import dependencies, several GCC countries have outsourced their food production through land acquisitions and diversified trade partnerships. Gulf countries such as the UAE, Saudi Arabia, Qatar, and Kuwait have acquired over half a million hectares in several African economies such as Sudan, Egypt, and Ethiopia.[69]  Table 4 indicates the current size under contract for crops in several GCC countries, with UAE and Saudi Arabia emerging as leading investors in African land deals. Explorations to expand the UAE’s footprint in farm deals are also ongoing in Latin America—UAE-based investors are exploring land deals in Mexico and Colombia.[70]
Table 4: Land Deals for Crops in Africa by GCC Countries (in Ha)




Country
UAE
Saudi Arabia
Qatar
Kuwait


Egypt, Arab Rep.
119331
42000
Nil
Nil


Ethiopia
11000
322286
Nil
Nil


Namibia
220
Nil
Nil
Nil


Sierra Leone
23500
Nil
Nil
Nil


Sudan
65400
21271
203081
189777


Morocco
561
1200
Nil
Nil


Congo, Rep.
19000
Nil
Nil
Nil


Kenya
Nil
40468
40000
Nil


Mauritania
Nil
Nil
3200
3200


Algeria
Nil
Nil
1811
Nil



Source: Land Matrix[71]
The UAE is increasingly leveraging its developed transport logistics (through sea, air, and road) to strengthen its food supply chains—it initiated the construction of a new US$150-million project to expand the Jebel Ali port in 2024.[72] This has given rise to triangular partnerships between the GCC countries, South Asia, and Africa for ensuring food security, wherein the GCC countries complement Africa’s land and labour with capital and logistics. 
Despite the growing trend of outsourcing food production, research indicates that this approach can have adverse effects on food security, especially in the rural regions.[73] In several cases where land acquisitions occur without adequate consideration or compensation to local communities, it has often contributed adversely to the social fabric and the environment. Similarly, in several African nations, while land acquisitions led to an increase in non-local staple crop production, they decreased the dietary diversity in local communities.[74] In many cases, land acquisitions do not take Environmental, Social and Governance (ESG) indicators into consideration, exacerbating existing sustainability-related concerns for local communities. Thus, while outsourcing food production can enable several countries to access and ensure food supply chains, they need to be supported with transparency and adherence to ethical standards. Acquiring nations must ensure robust governance and nullify the negative impacts faced by local communities. This can be achieved by ensuring that local communities are well-compensated and provided alternative livelihoods as well as better use of ESG metrics.
Further, other means to outsource food production and processing include investing in food parks and food corridors, as well as strengthening trade agreements. The UAE and India have agreed to set up a food corridor and several food parks to centralise production and process shipping to the UAE.[75] UAE-based companies are also investing heavily in Asian and African countries to build food-security infrastructure in the form of cold storage, terminals, and logistics hubs. Similarly, in the I2U2 framework (India-Israel-UAE-US), leaders’ statement committed to investing about US$2 billion to construct in India and provide climate-smart technologies to reduce food wastage and increase yields.[76]
The Saudi Agricultural and Livestock Investment Company (SALIC), a subsidiary of its sovereign wealth fund (Public Investment Fund), is investing in agribusinesses across countries to support sustainable food supply systems. It is acquiring assets in regions such as South America and Australia to increase access to essential imports such as livestock.[77] Additionally, the country is investing up to US$700 million to develop special economic zones and infrastructure in Africa for several sectors, including agricultural goods.[78]
The MENA countries have also signed several trade agreements which enable trade diversification, cut tariffs, and improve trade that would ease large-scale food imports. For instance, the European Free Trade Agreement between European countries and GCC states provides preferential trading conditions for the import of agricultural products.[79] The UAE’s Comprehensive Economic Partnership Agreements (CEPA) with countries such as India, Indonesia, Türkiye, Cambodia, and Jordan covers tariff reduction, particularly for imports of staples, processed food, rice, sugar, and meat.[80] Similarly, the US has FTAs with several MENA countries, such as Bahrain, Jordan, Oman and Morocco, for enhanced agri-food access.[81] Additionally, Morocco, Egypt, Tunisia and the North Africa region have ongoing trade agreements with the EU for improved access to agricultural goods, particularly for cereals.[82]
As a long-term strategy for ensuring resilient food supply chains, investing in food parks and dedicated corridors is more stable, as it addresses the ‘missing middle’ in supply chains. Investment in infrastructure development is also characterised by lower risks than outsourcing production through the acquisition of farmlands, as overseas farmland control is often paired with conflict and ethical constraints. In addition, trade agreements follow a rules-based system with better transparency and shock-proof mechanism.

2. Demand-Driven Responses to Food Supply Chain Shocks by Oil-Importing Countries
In response to the COVID-19 pandemic, a 2022 study by El-Shal et al. on social safety nets and food security during the pandemic highlights how vulnerable households responded to shocks by smoothing consumption or income.[83] Declines in income, rising unemployment, and increasing poverty altered food consumption patterns. When smoothing consumption, households reduced or shifted spending, often selling assets or substituting towards cheaper staples at the expense of more nutritious foods such as fruits and vegetables.[84] Conversely, when smoothing income, households responded by relying on precautionary savings or social safety nets like cash transfer programmes.[85] During the pandemic and in other cases, emergency cash transfers in the region resulted in improved short-term food security, but effects fade in the medium to long term without complementary interventions. To illustrate, Lebanon’s humanitarian cash assistance programme improved dietary intake during the programme, but this impact was weakened post-completion.[86]
In response to shocks from the Russia-Ukraine war, oil-exporting countries such as Algeria, Libya, and GCC states were able to leverage additional hydrocarbon revenues from the rise in fuel prices to mitigate the food crisis.[87] Countries without oil-export revenues have mitigated war impacts by replacing food subsidies with social safety programmes. Middle-income countries like Egypt and Algeria instituted such programmes targeting the poor. In the absence of subsidies, food aid from international organisations or neighbouring GCC countries provided a short-term solution, especially for lower-income countries in conflict like Syria, Lebanon, and Libya.[88] However, declining humanitarian funding underscores the limits of relying on external assistance over the long term.[89]
Overall, the MENA region has relied on subsidies to stabilise prices and buffer against economic shocks. However, subsidies are increasingly more challenging to sustain due to shrinking fiscal spaces and soaring debt levels.[90] For example, many MENA countries subsidise agricultural inputs such as seeds and fertilisers, which account for a large share of public spending and further drive debt in countries like Egypt, Jordan, and Tunisia.[91] Untargeted subsidies mostly benefit higher-income farmers and households, perpetuating inequality. For instance, although food subsidy targeting in Egypt has improved, more than half of the households in the wealthiest 20 percent reap the benefits. Likewise, in Tunisia, the wealthiest households receive three times the per capita amount received by the poorest from food and energy subsidies.[92] While international lending institutions such as the International Monetary Fund (IMF) have placed pressure on energy subsidy reform, subsidies on food staples have hardly shifted due to fear of social unrest and gaps in governance that inhibit the potential for reform.[93] This creates inefficiencies, since subsidies cause market distortions, where lower food prices lead to higher demand, overconsumption, and misguided production increases.
Historically, MENA countries have leveraged participation in the virtual water market[e] to supplement domestic food production and strengthen food security.[94] Water-scarce countries import water-intensive agricultural products to reduce internal resource burdens and meet local food demands. However, this strategy’s effectiveness and sustainability is determined by import diversification levels, internal alignment between domestic agricultural and international trade policies, and adequate valuation of tradeoffs between domestic production and imports.
Egypt’s strategy, for instance, has evolved towards fostering imports of high-demand wheat, maize, and soybeans from Eastern Europe, South America, and the US supplemented by a self-sufficiency policy to produce 50 percent of wheat internally.[95] This dual diversification and domestic production strategy should theoretically ensure a degree of protection from volatile international markets. However, Egypt’s heavy dependence on Russia and Ukraine for wheat tested its strategy’s resiliency, prompting further supply diversification and refocusing imports towards commodities with less exposure to shocks. In contrast, Morocco was historically a net-importer of virtual water in the form of cereal from Europe and Latin America. However, recent years have seen reduced virtual water imports due to an export-oriented agricultural policy favouring economic gain from the production of high-value fruits and vegetables. The production of these crops is reliant on water-intensive irrigation methods and may thus be unsustainable in the long run as the country depends on increasingly precarious rainfall.[96]
Figure 6: Evaluation of Trinity of Response Mechanisms

Source: Authors’ own
Table 5: Current Responses to Food Supply Chain Shocks




Response Type
Response
Sustainability
Efficiency
Equity


Demand-Driven
Targeted Cash Transfers[97]
Unsustainable in the long-term without sustainable livelihood pathways
Efficient for temporary shocks because it improves consumption, access, and food security temporarily (e.g.,  Lebanon, Yemen, Jordan)
Requires adequate targeting to prevent negative spillovers like tensions between vulnerable groups excluded from the cash transfer


Food Subsidies[98]
Unsustainable in the long-term, but challenging to reform in the short-term
Inefficient because it increases fiscal burden and diverts resources away from other public services, and causes economic distortions
Despite improvement, food subsidies tend to benefit middle- and high-income groups (e.g., in Egypt and Tunisia)


Humanitarian Food Assistance[99]
Unsustainable in the long-term; requires complementary initiatives to achieve resilience
Efficient for temporary shocks because it maintains food access
Damaged infrastructure, insecurity, and fuel shortages impede equitable food distribution and access


Virtual Water Imports
Sustainable in the long-term when paired with water cost valuation, climate-resilient food production, and diversification of import sources
Efficient for regulating domestic water and energy-use
Potential inequity in water-exporting countries if trade is not aligned with the true cost of water


Supply-Driven
Outsourcing
Unsustainable in the long term due to costs associated with ethical and ESG constraints
Efficient for building supply chains with customized consumption requirements
Inequitable due to negative impact on local communities


Food Park and Land Acquisitions
Sustainable in the long-term due to filling the ‘missing middle’ gap in infrastructure development
Efficient for building alternate routes and shock-resilient supply chains
Equitable with mutual regional benefits


Trade Diversification
Sustainable due to rules-based agreements for diversified trade partners
Efficient for ensuring alternate trade partners
Equitable with mutual benefits for trade partners



Source: Authors’ own 

Policy Recommendations
This analysis shows that political stability and economic capacity define shock impact intensity and coping capacity.[100] Pursuing self-sufficiency is not feasible for most MENA countries given the diversity in food demands, land, and water constraints. Thus, mitigating food supply chain shocks to sustain resilient food systems and safeguard food security requires multi-pronged solutions that sustain food supply and ensure that consumers retain physical and financial access to food. The following recommendations are tailored to the political and financial capacity of MENA countries, incorporating supply and demand-driven strategies.

1. Reallocate capital, water, land, and technological resources. 
High-Income Economies 
High-income, oil-exporting countries with strong sovereign wealth funds and economic diversification imperatives such as the GCC should strategically distribute financing between infrastructure, training, and research and development for sustainable food systems.[f] This cluster has the financial capacity and political will to catalyse innovation for food security and food system modernisation.[101] Agriculture comprises less than 3 percent of GDP for each country, so achieving self-sufficient production is highly unrealistic given climate restraints and the diversity of consumer demand (see Table 1).
Despite abundant capital, investments are heavily skewed towards agri-technologies such as vertical and indoor farming, which primarily produce high-value crops like leafy greens and do not meet broader food basket needs or nutritional standards.[102] Moreover, many popular agri-technologies are imported from temperate regions and are energy-intensive, requiring additional optimisation to meet local heat and humidity conditions.[103]
Agri-tech investments should be directed towards fostering research and development and optimising locally-rooted production of drought-tolerant crop varieties, open-field farming, and net houses, and improving food storage and reducing food loss and waste. Continuing to engage in virtual water trading will help complement forthcoming trade partnerships and reduce domestic dependency on water-intensive food production.[104] Exploring the feasibility of cleaner fuel alternatives like solar for desalination would also help reduce extra energy burdens. 
Middle-Income Economies 
Middle-income, oil-exporting countries like Algeria and Iran can leverage additional state expenditures from oil-revenue spikes to absorb shocks to food supply chains. Middle-income, oil-importers like Egypt, Morocco, and Tunisia, where the agricultural share of GDP wavers between 9 and 14 percent, must balance the expansion of agricultural production with economic and resource depletion implications. Countries like Egypt and Morocco have expanded agricultural operations for economic development purposes, yet they must balance high-value crops for export versus fostering local subsistence farming and cover-cropping for domestic consumption.[105],[106]
Furthermore, incorporating water-energy-food considerations (WEF) in policy planning is crucial to ensure energy and agriculture do not compete for limited water resources. Overcoming water scarcity limitations requires an integrated water management approach focused on demand-side management through agricultural subsidy reform, alignment of siloed policies, and diversification of virtual-import sources towards affordable and stable food suppliers. Redesigning agricultural subsidies to reflect the true value and costs of water use would incentivise efficient farming practices and smarter water resource allocation.
Aligning agriculture, trade, and social safety net policies would enable a flexible government response, preventing an over- or under-reaction during food supply chain shocks. Since food import diversification capacity can be constrained by the concentration of international suppliers, these countries should also invest in climate-resilient agricultural practices. For instance, enhancing efforts to improve soil fertility and management would help bridge this gap.[107] Although Jordan is home to a modernising food production system, the nutritional outcomes of refugee groups must be considered in food system planning.[108]  Given Djibouti’s minimal agricultural production and high food insecurity from undernourishment and rising obesity, the country must leverage its successful ventures to develop social safety nets and wean off food aid dependency.[109]
Middle-Income, Conflict-Affected Economies 
Middle-income, conflict-affected, oil-importing countries like Libya and Iraq must optimise resource distribution, improve agricultural sector productivity, and develop targeted social safety net policies. For both countries, agriculture composes less than 5 percent of GDP. In Libya, food insecurity stems from a lack of economic access rather than availability. In the short-term, food security will be best addressed through humanitarian assistance, but investments in drought-resistant technologies for production in the drylands will help improve long-term food security.
In Iraq, the potential for increasing wheat yield is high. As the country recovers from conflict, directing investments towards climate-smart agriculture to improve yields will help close the wheat import and production gap. Developing targeted social policies would also improve food access.[110] Lebanon is also recovering from conflict and contending with an influx of refugees suffering from malnutrition. While present government investment towards agriculture is low, existing resources can be reallocated away from crops produced beyond the local full self-sufficiency level to be exported into low-self-sufficiency, high-nutrition, low-resource-intensive crops which would reduce reliance on foreign imports.[111] The ongoing conflict in the West Bank and Gaza necessitates immediate policy attention towards enabling physical access to food aid and vouchers.
Low-Income, Conflict-Affected Economies
With declining foreign aid and reduced efforts from regional institutions, conflict-affected, low-income countries like Syria and Yemen can turn to European partnerships to fill the funding gap for emergency food aid in the short-term. However, this risks creating a new system of dependency. Thus, leveraging the capacity of local and regional actors to deliver food donations and wean off donor-driven humanitarian assistance in the long-term is crucial. Partnering with the private sector to develop infrastructure that links displaced communities to financing mechanisms that will grant them access to food also presents a viable option.[112] Shifting reliance on food aid dependency through policies that strengthen economic livelihoods in the agriculture sector would also help increase food access in the long-term.[113]

2. Invest in quality infrastructure and reduce trade bottlenecks.
High-Income Economies 
For high-income MENA economies such as the GCC countries, most perform relatively well in terms of trade logistics. According to the World Bank’s Logistics Performance Index (LPI) 2023, the UAE tops the MENA list with a score of 4.0 out of 5.0, followed by Israel (3.6), Bahrain (3.5), Qatar (3.5), and Saudi Arabia (3.0).[114] Except for the UAE, the rest of the high-income countries’ scores range from 3.6 to 3.5, above the global average of 3.0. However, despite the above-average global benchmark, the region faces barriers due to chokepoints in trade routes. Freight volatility is common for trade routes connecting MENA countries, and crucial bottlenecks include the Red Sea and the Strait of Hormuz.
For the GCC countries, their strategic geographical location can be leveraged to access alternative trade routes, reduce logistical hurdles, and ensure food security for the region. The region can accrue benefits from Asia, Africa, and Europe through enhanced investments in infrastructure and dedicated trade corridors. Countries such as the UAE, Saudi Arabia, and Qatar, have already enhanced their operations to find alternative routes and connect to Asia through the Jebel Ali port, the King Abdullah port, and the Hamad port. Land connectivity in the region has also been strengthened by the Gulf Railway project, which seeks to connect the GCC countries (from Kuwait to Oman) and reduce reliance on maritime trade.[115] The GCC Railway Project can provide alternative gateways that can reduce the time spent and wastage for perishable goods by preventing congestion and cost-heavy re-routing in the region.
The project can be further integrated into the proposed economic corridors, such as the India-Middle East-Europe Economic Corridor (IMEC) and the Middle East-Africa Corridor, to ensure a cost-effective ship-to-rail transit network that supplements the existing maritime and road routes between India, the UAE, Saudi Arabia, Jordan, Israel, and Europe. The Saudi railway network is already planned to connect with the UAE’s Etihad Rail at Ghuwaifat, leaving a missing link of 300 km from al-Haditha in Saudi Arabia to Haifa in Israel.[116] The integration into proposed and existing economic corridors can provide dual-coast access for African routes through not only the UAE but also Saudi Arabia and Oman. The Corridor can include dedicated food terminals that handle grains, cold storages, and harmonised customs.
Middle-Income Economies 
Unlike high-income MENA economies, middle-income countries such as Djibouti, Egypt, Lebanon, Jordan, Tunisia, Morocco, Algeria, Iraq, Iran, and Libya have weaker linkages in terms of customs clearances and transport-related infrastructure. Except for Egypt, other countries in the bracket have LPI ranks lower than 3.0 and consistently lag in clearance times, documentation, and predictability.[117]
On the customs clearance end, fast lanes and single-window systems can be built to provide faster clearances. Sanitary and Phytosanitary certificates (SPS) can be digitalised to allow a quicker paperless clearance procedure. Further, middle-income MENA countries can leverage inland food corridors, allowing economies to cushion maritime shocks. The 90-km-long Djibouti Regional Economic Corridor (DREC) connects Djibouti to Ethiopia and is key in ensuring food security for the country.[118] The functioning corridor can enhance sourcing diversification for other MENA countries and be extended to Egypt as a bridge hub, connecting Red Sea ports to the Mediterranean region. Similarly, grain ports, inland clearance hubs, silos and SPS testing facilities can be built along North Africa, catering to Morocco, Algeria, Tunisia, Libya, and Egypt. 
Low-Income Economies 
For low-income MENA countries like Yemen and Syria, LPI scores are among the lowest globally, which translates into higher costs and longer transit times. Both Yemen and Syria are heavily reliant on imports to meet the demand for food; thus, it becomes more crucial for the economies to ensure robust supply chains for agricultural goods. In Yemen, severe conflicts in the region have led to the destruction of cranes at the Al Hodeidah port and a ban on commercial containers.[119] This diverted shipping traffic to Aden, which has not only added pressure on a single port and double taxation but also underutilisation of other ports.
The long-term solution lies in restoring the countries’ logistics infrastructure through public-private partnerships (PPPs), which can mobilise private capital when budgets are limited. This includes viability funding where capex is publicly funded and the terminals and food storage nodes are run privately under lease to stabilise operations. In 2025, Syria signed an agreement worth US$800 million with a UAE-based logistics company to rebuild the country’s maritime infrastructure, enhance modernisation of terminal operations, streamline cargo handling, and facilitate smoother trade.[120] The solution, however, requires added efforts towards mediation to ensure the safe movement of goods and removal of import restrictions on the Yemeni and Syrian ports.

3. Leverage market-based instruments to manage price and supply volatility. 
Commodity markets are considered crucial in determining price transparency, improving product quality, reducing market risk, and reducing transaction costs.[121] In the MENA region, only a few countries have commodity exchanges for agricultural goods—including the Egyptian Commodity Exchange (Egycomex) and the Iran Mercantile Exchange. The establishment of a MENA Commodity Exchange can benefit from better price signals, risk transfers, and standardised contracts.
For several MENA countries, food wastage comes from a lack of storage and logistics; a structured commodity exchange can crowd-in investment to warehouses and meet quality standards. The warehouse receipt system allows stored agricultural commodities to serve as collateral against financial instruments. The system enables farmers to make sales throughout the year instead of a particular season. It also allows governments to procure from certified warehouses faster during a crisis. For large importers, hich include most MENA countries—exchanges through the derivatives markets provide management of price risk during price spikes. Malawi is an example of how an import-reliant country mitigated food security risks by using hedging instruments. The country bought physical call options for maize, which enabled price protection and delivery of 60,000 metric tons of maize during price spikes.[122] The commodity exchange markets, however, require an effective regulatory mechanism to prevent market manipulation.[123] Thus, building commodity exchanges requires MENA economies to have a robust and stable regulatory mechanism in place. Other challenges associated with utilising price mechanisms include a lack of financial knowledge, technical capacity and physical infrastructure.

Conclusion
The MENA region’s arid environment and limited arable land drive limited domestic food production, resulting in a reliance on food imports to meet local demand.[124] This import dependence renders the region vulnerable to geopolitical and environmental pressures. MENA’s comparatively low ranking on the Global Food Security Index for adaptation and sustainable development further underscores the need to build holistic food system resilience strategies.[125] Given the variability of food supply chain shocks, undertaking a proactive approach is crucial to mitigate short-term impacts and safeguard long-term food security. This includes optimising climate-resilient food production where applicable, enabling food access through structured social policies, and strengthening food trade corridors, storage, and infrastructure to complement domestic food availability.
In anticipation of shocks, increasing food availability and nutrition can be accomplished by reallocating capital towards R&D for drought-resistant and nutritious crop varieties, harnessing virtual water trade in high- and middle-income MENA countries, and investing in climate-smart agriculture in arable middle-income economies. In lower- to middle-income conflict-affected countries, pre-emptively developing targeted and robust social safety net policies to improve access, especially among vulnerable refugee groups, is crucial. Moreover, sustaining local economic activities amidst conflict, in addition to cash transfers, would help maintain food access.
Food supply chains can be protected and enhanced by improving infrastructure, which can allow reliable flows, affordability, less spoilage, and stability. MENA economies must invest in the digitalisation of port operations, identify alternative routes to minimise time, integrate into inter-regional trade corridors, and leverage inland transportation through the GCC Railway Project. Dedicated modern food terminals with grain handling, cold storage, and harmonised customs can further smooth the supply chains. Focus can be laid on strengthening customs clearance and leveraging viability funding with public-private partnerships to rebuild and operationalise trade infrastructure. Commodity Exchanges are relevant for the region to combat price risks and prevent food wastage. The efforts, however, need to be supplemented with strong regulatory frameworks and robust infrastructure. Despite the region’s high import dependence, targeted efforts can strengthen MENA countries’ responses and mitigate food insecurity during food supply chain shocks.



Shruti Jain is Associate Fellow, Centre for Development Studies, ORF.
Leigh Mante is Junior Fellow, Energy and Climate Change Programme, ORF Middle East.



All views expressed in this publication are solely those of the authors, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel. 

Endnotes 
[a] In March 2026, the United States attacked a desalination plant in southern Iran, and Iran retaliated by attacking a desalination facility in Bahrain.
[b] Defined as agriculture’s share of government expenditure divided by agriculture’s value-added share of GDP.
[c] The GCC countries are the UAE, Saudi Arabia, Qatar, Kuwait, Bahrain, and Oman.
[d] Some 40 percent of MENA’s current food requirements is being supplied by imports.
[e] This concept refers to the amount of water used in the production of traded agricultural goods and explains the amount of water indirectly traded between countries.
[f] The GCC’s most active Sovereign Wealth Funds include the Saudi Public Investment Fund, the Qatar Investment Authority, the Abu Dhabi Investment Authority, Mubadala, ADQ, and the Kuwait Investment Authority.
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[90] Oumeyma Chelbi, “MENA Food Subsidies Are Here to Stay – For Now,” Middle East Council on Global Affairs, 2025, https://mecouncil.org/publication/mena-food-subsidies-are-here-to-stay-for-now/
[91]Nejla Ben Mimoune and Hana Elshehaby, “Food Insecurity in the Middle East and North Africa,” Middle East Council on Global Affairs, 2023, https://mecouncil.org/publication/food-insecurity-in-the-middle-east-and-north-africa/.
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[93] Chelbi, “MENA Food Subsidies Are Here to Stay – For Now.”
[94] Heather Elaydi, “Factsheet: Virtual Water Trade in the WANA Region,” WANA Institute, https://wanainstitute.org/sites/default/files/fact_sheets/Virtual_Water_1.pdf
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[97] Anis Ben Brik, “Assessing the Impact of Cash Transfer Programmes on Socioeconomic Outcomes in the MENA Region: A Systematic Review,” Social Policy and Society, 2025, https://doi.org/10.1017/S1474746425101267
[98] Federica Alfani, Maria Eugenia Genoni, and Johannes Hoogeveen, “MENA: Uniform Cash Transfers Are Better than Subsidies,” World Bank Blogs, 2022,
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[100] M. Anis Salem and Natasha Banks, “Toward Arab Food Security,” The Cairo Review, 2020, https://www.thecairoreview.com/essays/toward-arab-food-security/#:~:text=Having%20reliable%20food%20in%20stock,challenges%20across%20the%20MENA%20region.%20Mitigating%20shocks%20to%20the%20food%20supply%20chain%20requires%20developing%20comprehensive%20policy%20frameworks.
[101]Rami Zurayk, Fidele Byiringiro, and Reem Nejdawi, “Assessing Food Systems in the Arab Region,” United Nations ESCWA, 2025, unescwa.org/publications/assessing-food-systems-arab-region?__cf_chl_tk=sAbxqMZ5XcjwNho1ZiwYm26u9VYzVkkB3Oo1OflPR9k-1765949546-1.0.1.1-JXsqCoPjxMXzyi.ZdLdSXm.Dpum5Qy.gVv_RiC5krqA.
[102] Valentina Olabi, “GCC Agri-Nutrients: Ensuring Food Security in an Environmentally-Conscious World,” Gulf Petrochemicals and Chemicals Association, September 27, 2024, https://gpcachem.org/2024/09/27/gcc-agri-nutrients-ensuring-food-security-in-an-environmentally-conscious-world/
[103] ORF Middle East, “Roundtable Roundup: AgriFoodTech in the UAE,” ORF Middle East, 2025, https://orfme.org/event/roundtable-roundup-agrifoodtech-in-the-uae/
[104] Elizabeth Stifel, “The Quiet Power of Virtual Water Trade in Shaping Global Resource Dynamics,” IWMI, 2025,  https://www.iwmi.org/news/the-quiet-power-of-virtual-water-trade-in-shaping-global-resource-dynamics/.
[105] Martin Keulertz and Rabi Mohtar, “The Water-Energy-Food Nexus in Libya, UAE, Egypt and Iraq,” Istituto Affari Internazionali, 2022.
[106] Aida Delpuech and Arianna Poletti, “Preserving Oases’: The Fight for Water by Moroccan Farmers,” Al Jazeera, November 11, 2022, https://www.aljazeera.com/news/2022/11/11/preserving-oases-the-fight-for-water-for-morocco-farmers#:~:text=%E2%80%9CMorocco%20is%20among%20the%20world's,expense%20of%20local%20subsistence%20farming.
[107] Delpuech and Poletti, “Preserving Oases’.”
[108] Zurayk, Byiringiro, and Nejdawi, “Assessing Food Systems in the Arab Region.”
[109] United Nations ESCWA, “Arab Food Security Monitoring Framework: Country Reviews,” 2021, https://www.unescwa.org/sites/default/files/pubs/pdf/arab-food-security-country-reviews-english.pdf.
[110] United Nations ESCWA, “Arab Food Security Monitoring Framework: Country Reviews.”
[111] Bassel Daher et al., “Food Security under Compound Shocks: Can Lebanon Produce Its Own Mediterranean Food Basket?,” 2022, https://doi.org/10.3389/fsufs.2022.969248.
[112] Allison Lombardo and Stewart Patrick, “The Painful, Seismic Shift in Humanitarian Aid—and What’s Next?,” Carnegie Endowment for International Peace, 2025, https://carnegieendowment.org/research/2025/12/the-painful-seismic-shift-in-humanitarian-aidand-whats-next?lang=en.
[113]Mohammed Ghaleb Al-Wahbani, “The Impacts of Declining International Aid on the Humanitarian and Economic Situation in Yemen,” SEMC, 2025, https://reliefweb.int/report/yemen/impacts-declining-international-aid-humanitarian-and-economic-situation-yemen.
[114] Jean-François Arvis et al., Connecting to Compete 2023: Trade Logistics in an Uncertain Global Economy: The Logistics Performance Index and Its Indicators, Washington, DC: World Bank, 2023, https://lpi.worldbank.org/sites/default/files/2023-04/LPI_2023_report.pdf
[115] The Daily Tribune (TDT), “$250 Billion Gulf Railway Ranked Third Largest Mega Project in the World, According to Statista,” GCC Railway, September 9, 2024, https://www.gccrailway.com/250-billion-gulf-railway-ranked-third-largest-mega-project-in-the-world-according-to-statista-the-daily-tribune/
[116] PwC Middle East, “Trade Corridors,” PwC Middle East, Middle East Economy Watch, April 2024, https://www.pwc.com/m1/en/publications/middle-east-economy-watch/april-2024/trade-corridors.html
[117] Arvis et al., Connecting to Compete 2023
[118] Global Center on Adaptation, “Djibouti Regional Economic Corridor,” https://gca.org/gca-project/djibouti-regional-economic-corridor/
[119] Arab Urban Development Institute, “The Gulf Railway,” https://araburban.org/en/infohub/projects/?id=10271
[120] IntelliNews, “Syria Signs $800mn Strategic Deal with DP World to Upgrade Ports,” IntelliNews, July 14, 2025, https://www.intellinews.com/syria-signs-800mn-strategic-deal-with-dp-world-to-upgrade-ports-390901/
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[124] Nejla Ben Mimoune and Hana El Shehaby, “Breaking the Cycle: How Can the MENA Region Tackle Food Insecurity?,” Middle East Council on Global Affairs, 2023, https://mecouncil.org/wp-content/uploads/2023/02/MECGA_Issue-Brief-12_Nejla-Ben-Mimoune-Hana-Elshehaby_Final-WEB.pdf.
[125] Anna Kozielec, Jakub Piecuch, Kamila Daniek, and Lidia Luty, “Challenges to Food Security in the Middle East and North Africa in the Context of the Russia–Ukraine Conflict,” Agriculture 14, no. 1 (2024): 155, https://doi.org/10.3390/agriculture14010155.

### Risk and Resilience: India’s Energy Security in a Volatile Middle East

Renewed conflict in the Middle East has once again underscored the enduring link between geopolitical instability and global energy markets. As tensions escalate in a region central to global hydrocarbon supply and maritime energy trade, concerns have resurfaced over disruptions to key shipping routes, energy flows, and commodity prices.

While the immediate effects of such crises are often reflected in price volatility, their implications for import-dependent economies such as India extend far beyond short-term market fluctuations. Disruptions in global energy trade can quickly transmit into domestic economic pressures through higher import costs, supply constraints, and inflationary spillovers across multiple sectors.
Background: Exposure and Policy Response
As the world’s third-largest importer of crude oil, the fourth-largest importer of liquefied natural gas (LNG), and the second-largest consumer of liquefied petroleum gas (LPG), India remains particularly exposed to disruptions in global energy supply. This scale of demand is matched by a high degree of regional concentration: Approximately 45 percent of India’s crude oil, 60 percent of its natural gas, and over 90 percent of LPG imports originate from the Middle East.

This structural dependence amplifies India’s vulnerability to disruptions in critical maritime chokepoints such as the Strait of Hormuz, through which a significant share of global oil and LNG shipments transit. As of mid-March, over 1.6 million tonnes of crude oil, along with 320 thousand tonnes of LPG and about 200 thousand tonnes of LNG, are stranded aboard Indian-flagged vessels awaiting passage through the strait.

In response to tightening supplies, the government has invoked provisions under the Essential Commodities Act, 1955, enabling the regulation and redistribution of natural gas across sectors. The order, issued by the Ministry of Petroleum and Natural Gas (MoPNG), allows authorities to divert both domestically-produced gas and imported LNG toward priority sectors while curtailing supply to non-essential users.

Under this framework, gas allocation has been restructured to prioritize household consumption and mobility (PNG and CNG), LPG production, and fertilizer manufacturing, while supply to industrial and commercial users, including manufacturing units and city gas distribution-linked industries, is being curtailed to between 70 to 80 percent of recent consumption levels. Refineries, meanwhile, are receiving reduced allocations of around 65 percent, with the state-owned gas company GAIL overseeing the reallocation of supplies.

These initial measures emphasize the central role of gas in the current crisis, with supply constraints transmitting unevenly across sectors depending on end-use. LNG and LPG shortages, in particular, pose significant challenges for Indian policymakers.

Approximately 45 percent of India’s crude oil, 60 percent of its natural gas, and over 90 percent of LPG imports originate from the Middle East.

LNG: Fertilizer Production, Power, and Industrial Activity
Natural gas is essential for ammonia production, which underpins urea and other fertilizers. Roughly 40 percent of India’s fertilizer imports originate from the Middle East, linking energy disruptions directly to agricultural supply chains. India imports approximately 60 percent of LNG used in urea manufacturing from Qatar, and 30 out of 32 urea plants rely on natural gas as feedstock.

As LNG availability tightens, several fertilizer producers have advanced maintenance shutdowns to manage reduced gas supply. While stockpiles remain adequate in the short term, prolonged disruptions could increase input costs and contribute to food price inflation. At the same time, India has reportedly begun exploring additional urea imports from China.

This pressure is compounded by fiscal constraints. India’s fertilizer subsidy is already among the largest components of public expenditure, with urea subsidy outlays exceeding USD $10.9 billion annually over the past six years and budgeted at approximately USD $12.7 billion for the current fiscal year. Additional subsidies of around INR ₹192 billion (USD $2 billion) have recently been proposed to offset rising input costs.

Beyond fertilizers, LNG disruptions are also affecting industrial and urban energy systems. The city gas distribution (CGD) sector, supplying piped natural gas (PNG) for households and compressed natural gas (CNG) for transport, faces rising input costs as LNG becomes more expensive and domestic gas availability tightens. In this context, the immediate impact is likely to be price increases for urban consumers, while industrial users connected to CGD networks may face deeper supply curtailments.

The current supply disruptions also coincide with a period of elevated electricity demand driven by heatwaves and rising cooling needs. Peak power demand is expected to exceed 270 gigawatts, surpassing previous records. In this context, gas-based power plants play an important balancing role, providing flexibility during peak demand periods. However, reduced LNG availability risks constraining this flexibility at a time when grid stability is most critical.

In response, the government has directed coal-based power plants to increase output to meet rising demand, reinforcing coal’s role as the backbone of India’s electricity system. While this ensures short-term supply security, it also implies a shift from gas to coal in the power mix, with implications for emissions and air quality.


LPG: Household Consumption and Small-Scale Industry
LPG, which serves as a primary cooking fuel for a vast share of the population, represents one of the most immediate points of vulnerability. Nearly 330 million households and over three million businesses rely on LPG cylinders, making India the world’s second-largest consumer of the fuel. This widespread dependence also explains its classification as a priority sector under current allocation measures.

The scale of reliance is further reinforced by welfare schemes such as the Pradhan Mantri Ujjwala Yojana (PMUY), which has expanded access to subsidized LPG connections to over 100 million low-income households. This limits the government’s ability to fully pass through rising global prices, creating a trade-off between fiscal burden and inflation management.

In response to tightening supply conditions, the government has directed refineries to maximize LPG output by diverting hydrocarbon streams, including butane and propane away from petrochemical production. This has reportedly led to a 40 percent increase in domestic production. However, structural dependence on imports remains significant, with India requiring an estimated 29 to 34 LPG cargoes per month to meet demand.

Recent reports indicate that two previously-stranded LPG tankers carrying around 90,000 tonnes of LPG reached the Indian coast, offering temporary relief. However, these inflows are unlikely to offset the broader supply disruption, particularly given uncertainties around key export hubs such as Qatar’s Ras Laffan facility, one of the largest LPG export terminals supplying India.

Efforts to diversify supply are underway, including agreements by public-sector oil companies to import 2.2 million tonnes of LPG annually from the United States, which would account for roughly 10 percent of India’s demand, with initial shipments already received. However, should the crisis persist, longer transit routes, higher freight costs, and ongoing disruptions to Middle Eastern production limit the effectiveness of such diversification strategies.

For India, reducing vulnerability will require a combination of diversified sourcing, expanded reserves, flexible infrastructure, and accelerated energy transition.

Diversification, Resilience, and the Energy Transition
The effects of these disruptions are not confined to individual sectors. Energy shortages are beginning to ripple across a broader set of industrial activities, including petrochemicals, manufacturing, and small-scale industries that rely on gas-based inputs. Early indications, such as production disruptions in segments of the steel sector, suggest that prolonged supply constraints could translate into a wider industrial slowdown and cost escalation. Taken together, these developments illustrate how disruptions in global energy trade can transmit through multiple channels, from household fuel consumption and fertilizer production to industrial output and electricity systems, highlighting the systemic nature of energy security risks for import-dependent economies such as India.

Worryingly, with reports of significant damage to Qatar’s Ras Laffan complex, one of the world’s largest LNG and LPG export hubs and a critical supplier to India, the energy crisis seems poised to deepen. Prior to the crisis, global LNG markets were expected to move toward oversupply, with new capacity putting downward pressure on spot prices. Disruptions at Ras Laffan have reversed this outlook in the near term, tightening markets, increasing reliance on higher-priced spot cargoes, and introducing uncertainty around recovery timelines. Moreover, the heightened risk that critical energy infrastructure across the region may become a target suggests that recovery could extend well beyond the immediate crisis, potentially taking months or longer for production to stabilize. India is therefore likely to face a combination of supply tightness and inflationary pressures, particularly across gas-linked sectors necessitating continued demand management.

The broader macroeconomic dimension is also becoming increasingly important. In response to global uncertainty, the government has proposed the creation of an INR ₹573 billion (USD $6.20 billion) economic stabilization fund to manage external shocks and supply chain disruptions, reflecting the growing fiscal implications of energy volatility. In the longer term, expanding LPG and LNG storage infrastructure, which has been under discussion, could provide an important buffer against disruptions. At the same time, accelerating the domestic energy transition will be central to reducing structural dependence on imported fossil fuels. India’s renewable energy capacity reached approximately 254 gigawatts by November 2025, with domestic solar manufacturing capacity exceeding 144 gigawatts annually. However, sustaining this transition will require continued investment not only in generation capacity, but also in grid infrastructure, storage, and system flexibility, particularly as higher shares of variable renewable energy are integrated into the system.

Alongside supply-side strategies, improving energy efficiency represents another important, though often overlooked, dimension of energy security. Reducing overall energy demand through efficiency measures across industry, buildings, and transport can help limit exposure to volatile global fuel markets while supporting both economic and environmental objectives. In this sense, efficiency improvements offer one of the most cost-effective tools for enhancing resilience. The current crisis highlights that energy security is no longer defined solely by access to resources, but rather by the resilience of systems that connect them. For India, reducing vulnerability will require a combination of diversified sourcing, expanded reserves, flexible infrastructure, and accelerated energy transition. In an increasingly uncertain global energy landscape, resilience will depend not only on what India imports, but on how effectively it can absorb and adapt to disruption.



This commentary originally appeared in South Asian Voices.

### South Asia’s Integrated Grid and Clean Energy Transition

Introduction
On 15 June 2025, Nepal began exporting 40 megawatts (MW) of electricity to Bangladesh through India’s transmission network. The three countries had signed a trilateral agreement in October 2024 and ceremonially launched the partnership with token trading in November 2024. The June 2025 commencement established the framework for seasonal electricity flow from Nepal to Bangladesh via India for the next five years. For South Asia, where cross-border electricity trade (CBET) has been limited to bilateral arrangements, this marked a historic moment.
South Asia, despite being one of the fastest-growing economies with rising energy demand, remains among the least connected. Currently, the electricity grids of Bangladesh, Bhutan, India, and Nepal (BBIN) subregions are interconnected, and discussions to connect Sri Lanka’s grid to India are at an advanced stage. Given that grid interconnection currently exists only among the BBIN countries, CBET remains largely limited to this subregion.
Electricity trade between India and Nepal began in the 1970s, and in the 1980s between India and Bhutan through government-to-government (G2G) arrangements. The turning point came in 2013, when the electricity grids of India and Bangladesh were interconnected and trade began on commercial terms. Since then, CBET in the BBIN subregion has nearly tripled, from 7.8 terawatt hours[1] (TWh) in 2013 to 21 TWh[2] in 2024, while trading capacity increased from 1400 MW in 2010 to 5273 MW in 2023.[3]

Why Integration Matters 
A regionally integrated grid in South Asia is both logical and necessary. It allows countries to leverage diverse energy resources and complementarities in demand. Nepal and Bhutan are rich in hydropower, while India and Sri Lanka have abundant renewable resources. The region holds over 350 gigawatts (GW) hydropower potential, 1,000 GW of solar, and 1,289 GW of wind potential.[4] By interconnecting grids, countries can share these resources, balance supply and demand, and reduce the region’s carbon footprint. Such integration directly supports national clean energy transition goals. For example, India views Nepal and Bhutan’s hydropower as a vital balancing resource to enable it to achieve its target of 500 GW of non-fossil energy by 2030.[5] Similarly, Bangladesh will need to draw on hydropower from Bhutan and Nepal, as well as India’s renewable potential, to meet its target of 30 percent renewable energy by 2040.[6]
Regional integration also reduces the need for costly reserve capacity, allowing countries to redirect resources towards social and developmental priorities. An analysis by the South Asia Regional Initiative for Energy Integration (SARI/EI) programme estimated that integration could save Bangladesh, India, and Nepal a combined US$17 billion in capital expenditure through efficiency gains due to integration.[7] A 2017 World Bank study projected that regional integration in South Asia could save US$94 billion and reduce GHG emissions by 8 percent[8] between 2015 and 2040. Beyond cost savings, an integrated grid enhances energy security by diversifying resources and strengthening resilience during crisis. An analysis by SARI/EI showed the benefits of regional energy cooperation during the COVID-19 epidemic, where Bangladesh and Nepal[9] adjusted their imports from India to meet their reduced demand, but India maintained its imports from Bhutan since hydropower is crucial for Bhutan’s economy.
The relevance of CBET is particularly pronounced for smaller economies. Power exports accounted for roughly 16 percent of Bhutan’s Gross Domestic Product in 2021 and constituted a major revenue source for Nepal. For example, the Nepal Electricity Authority earned a net profit of NPR 4.57 billion from electricity trade in the fiscal year 2024–25.[10] For Bangladesh, CBET offers access to competitively priced electricity compared to domestic fossil-fuel-based generation, especially during peak periods. While CBET represents only a small fraction of India’s overall power supply, its strategic value is significant. For India, CBET has emerged as an instrument of regional energy diplomacy, strengthening economic ties with neighbours while supporting its broader clean energy transition goals. 

Current Policy Environment 
Recognising the value of energy cooperation, countries in the region are stepping up. India has taken the lead in advancing regional integration, a role consistent with its central location, size, and evolving energy sector. Under the Modi government, India has strengthened the policy architecture for CBET in South Asia.
India’s CBET guidelines of 2016, updated in 2018, established a policy framework, designated a nodal authority, opened Indian Power Exchanges to neighbouring countries, and enabled trilateral trade. India’s foreign policy further reinforces these measures. The Neighbourhood First policy prioritises energy cooperation with its South Asian neighbours, while the Act East policy extends this vision towards the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and the Association of Southeast Asian Nations (ASEAN), where energy connectivity is seen as a bridge between South Asia and Southeast Asia. Together, these frameworks provide diplomatic scaffolding for regional energy integration.
Other BBIN countries have embedded CBET in their policy frameworks. For example, Nepal’s Hydropower Policy and Electricity Act laid the foundational framework, and more recently it signed an MoU with India to export 10,000 MW of power over the next decade.[11] While Bhutan has been strategically exporting 70 percent of its hydropower to India,[12] CBET was incorporated in its Sustainable Hydropower Development Policy 2021 and subsequently formalised in the recently adopted National Energy Policy 2025. Meanwhile, Bangladesh’s Power Sector Master Plan 2025 recognises cross-border electricity imports as a strategy to meet its demand and clean energy targets. 
Despite periodic political shifts in the BBIN region, CBET has largely persisted, reflecting policymakers’ recognition of its strategic value. Though challenges remain, the continuity of recent trilateral and bilateral exchanges suggests a growing resilience in regional energy cooperation. 

Market-Based Trade: A New Era 
While the policy environment has evolved favourably, the transition toward market-based mechanisms represents another crucial development. This has largely been enabled by the Government of India’s policies. In 2021, Nepal became the first neighbouring country to sell power in India’s day-ahead market and later also to buy during dry seasons. Bhutan followed, buying power to cover winter shortages caused by maintenance-related shutdowns of key plants. Both Nepal and Bhutan are selling and buying power in the day-ahead and real-time markets of the Indian Energy Exchange, marking a departure for Bhutan from its traditional G2G model. Bangladesh also explored accessing India’s power markets through the exchange platform by using the marginal capacity in the existing Baharampur–Bheramara transmission interconnection link but ultimately prioritised the available capacity for the Nepal–India–Bangladesh trilateral trade.
While market-based trade currently accounts for a small share of the total CBET in South Asia, it represents a meaningful structural shift. It introduces transparency, short-term flexibility, and price discovery absent in conventional bilateral contracts and could lay the foundation for a regional power pool.
In parallel, India is undertaking several reforms in the power market domain, which will ultimately benefit its South Asian neighbours. Initiatives like market coupling and the introduction of products like ancillary services are expected to deepen the market depth and improve system efficiencies. These market reforms will create new opportunities for regional participants.

What South Asia and the Middle East can Learn from Each Other 
Both South Asia and the Middle East can draw lessons from each other’s regional integration efforts. Although South Asia lacks a formalised regional structure, the volume of power trade, spurred by hydropower bilateral agreements and market-based power trade, is significantly higher than in the Middle East. By contrast, electricity trade in the Middle East remains limited despite strong physical interconnections. Cross-border exchanges are largely confined to emergency support and reserve sharing, with commercial energy trade estimated at around 1.098[13] TWh annually.
In South Asia, power flows began under bilateral—and now trilateral—arrangements even before common grid codes or markets were established. Hydropower exports from Bhutan and Nepal through long-term contracts sustained cross-border power flows and justified transmission investments. Market-based mechanisms were introduced gradually, complementing rather than replacing these contracts. Another distinctive feature is the complementarity of resource endowments and differences in system size: hydropower-rich countries export clean, firm power, while larger systems provide transmission corridors and market access.
At the same time, South Asia can draw lessons from the Middle East, particularly the Gulf Cooperation Council (GCC)’s emphasis on institutional clarity and operational reliability. The establishment of a dedicated regional entity with a clear mandate has enabled high levels of grid stability and rapid emergency response. South Asia’s integration efforts, by contrast, remain institutionally fragmented and heavily dependent on ad hoc coordination.




Energy Storage in the Context of Regional Cooperation in South Asia

Energy storage will play a growing role in South Asia’s power systems as renewable penetration increases. India alone would require 61 GW of energy storage by 2030 as per a study by the India Energy & Climate Centre, with additional storage needs emerging across other neighbouring systems to manage variability and provide short-duration flexibility. Various analyses establish that storage complements CBET by enhancing the utilisation of regional interconnections and enabling more efficient regional dispatch. When combined with hydropower-based flexibility in Nepal and Bhutan, coordinated planning of storage and transmission can significantly improve system reliability and reduce overall system costs in South Asia.



The GCC experience also highlights the value of proactive regional transmission planning. Early investment in interconnections, standardised operational protocols, and coordinated system operations reduced congestion risks and enhanced reliability. As CBET volumes grow in South Asia, stronger regional planning institutions and closer coordination, particularly for transmission development and system operations, will become increasingly important. 

Challenges to Scaling CBET 
Despite recent milestones, CBET in South Asia remains far below its full potential, which stands at 43.8 GW by 2043[14] as per a study by the SARI/EI programme. This gap reflects a set of challenges that continue to constrain regional integration.


 	Transmission Bottleneck: Cross-border transmission is central to integration, yet expansion in the BBIN subregion is constrained by limited corridors. Most existing interconnections operate near capacity, while new links remain under construction or in planning. Progress is frequently stalled by financing constraints, right-of-way disputes, and disagreements over sharing development costs. The India–Sri Lanka interconnection illustrates these challenges. Though the pre-feasibility studies were undertaken in 2002 and the MoU signed in 2010, the project could not advance because the two countries could not agree on the cost allocation.
 	Policy and Market Harmonisation: An interconnected grid requires common grid codes, operating standards, and market rules. Some progress has been made, such as the adoption of the common minimum grid code (CMGC) under the South Asia Infrastructure Regulations (SAFIR), which is intended to provide baseline standards across the region. However, the CMGC remains voluntary in nature and does not have a legal mandate. Moreover, market maturity across the region remains uneven. While India operates a sophisticated power market, other BBIN countries continue to rely on single-buyer models, creating challenges to market integration.
 	Geopolitics: Political tensions and instability remain significant impediments. The prolonged impasse between India and Pakistan has prevented potentially low-hanging projects, such as the Amritsar–Lahore transmission link. Even within BBIN, political turbulence—first in Bangladesh and then in Nepal—has delayed and heightened risk perceptions. China’s growing involvement in South Asian hydropower and transmission projects under the Belt and Road Initiative further adds to the geopolitical complexity.
 	Finance and Private Sector Engagement: Regional integration projects are resource intensive and require significant investments. A World Bank study estimated that South Asia would need US$1,390 billion for adding 750 GW of electricity generation[15] during 2015–2040. Another SARI/EI study projected US$1,056 billion in investments needs for generation[16] for the BIMSTEC region by 2030. India alone requires about US$385 billion over the next decade, as per its National Electricity Plan.[17] So far, most funding is from the public sector and development banks like the Asian Development Bank. Private sector participation remains limited, largely due to concerns over bankability, political stability, and returns.
 	Public Consensus: Beyond technical and financial hurdles, public opinion can make or break regional projects. In Nepal, for instance, the US$500 million Millennium Challenge Corporation Compact faced significant resistance despite its clear benefits, largely due to narratives shaped in political and media circles. Without trust-building and transparent engagement of civil society, legislators, and the media, regional projects risk prolonged delays or outright rejection.
 	Regional Institutions: Experiences from the European Union and other regions demonstrate the importance of strong, legally mandated institutions to anchor integration. South Asia lacks such an institutional anchor. The SAARC energy framework has been largely ineffective, primarily due to political mistrust. As a result, subregional platforms such as BBIN and alternative groupings like BIMSTEC have emerged as more practical vehicles for cooperation, but they remain limited in capacity. 

The Way Forward 
Despite persistent constraints, regional integration within the BBIN subregion can be accelerated through a structured, multidimensional strategy addressing institutional, financial, technical, and social challenges. The following priorities can guide these efforts:


 	Expand and Jointly Plan Transmission Infrastructure: To realise CBET’s potential, the BBIN region must accelerate the build-out of 400 kV and HVDC interconnections. A Regional Transmission Master Plan, jointly developed and owned by all BBIN countries, would optimise costs, reduce redundancies, and identify high-impact corridors. This process should be anchored by a dedicated transmission utilities forum, drawing on global best practices. Integration of the BBIN grid with Sri Lanka, Southeast Asia, and the Middle East must also be actively pursued to position South Asia as an energy hub. Equally important is the development of transparent cost-sharing and tariff methodologies, which will reduce disputes and give confidence to private investors in cross-border projects.
 	Harmonise Policies, Regulations, and Grid Operations: Stronger transmission corridors alone cannot deliver integration unless regulatory and operational rules are aligned. The CMGC provides a foundation, but its provisions need to be incorporated into domestic grid codes to ensure consistency in scheduling, settlement, and system operations. A regional regulatory task force—under SAFIR or another empowered body—could monitor compliance, resolve disputes, and oversee alignment of rules. Over time, these voluntary measures should evolve into binding agreements, drawing lessons from Europe, where minimum standards gradually transformed into enforceable EU network codes under the European Network of Transmission System Operators for Electricity (ENTSO-E).
 	Roadmap for Regional Power Market Integration: Transitioning from bilateral G2G contracts to competitive market-based trade requires a phased roadmap. In the short term, countries should adopt flexible power purchase agreements (PPAs) that allow the sale of surplus electricity in regional exchange platforms. Cross-border participation in India’s markets should be scaled up, providing neighbouring countries access to different products, such as green day-ahead markets and ancillary services markets. In the medium term, efforts should focus on creating a regional power exchange where BBIN countries hold equity stakes. The SARI/EI programme demonstrated the feasibility of such an exchange, highlighting substantial efficiency gains.[18] Over the long run, market coupling across national platforms and the eventual establishment of a South Asian power pool would deepen integration, enhance liquidity, and provide price signals that attract private investments.
 	Mobilise Private Sector Finance: Achieving integration at scale will require significant capital beyond public and multilateral sources. Innovative financing mechanisms such as blended finance, partial risk guarantees, and green bonds must be mainstreamed to lower risk perceptions and crowd in private capital. A dedicated regional investment facilitation forum, comprising Development Financial Institutions (DFIs), financial institutions, investors, regulators, and policymakers, should be created. The forum can build a robust pipeline of projects, design standardised risk-mitigation tools, create separate funds for regional projects, leverage donor technical assistance, and build capacities. It could also pilot digital innovations, including AI/ML-enabled monitoring and reporting platforms, thereby increasing transparency and investor confidence. Successful models of regional public–private partnership should be widely showcased to build momentum and crowd in further investment.
 	Strengthen Regional and Subregional Institutions: Even with infrastructure, rules, and financing in place, integration will falter without strong institutional anchors. Global experience underscores that legally mandated institutions are indispensable for sustained cooperation. Empowering BIMSTEC or establishing a dedicated BBIN Secretariat with a legal mandate could provide the necessary coordination platform. These institutions should not only plan and monitor projects but also serve as neutral arbiters for dispute resolution. Parallel to this, specialised forums for regulators, system operators, transmission utilities, and market operators can enhance technical coordination.
 	Engage Civil Society and Build Public Support: Technical and institutional reforms must also be matched by social acceptance. Proactive engagement of civil society, media, academia, and legislators is essential to build trust and share a positive narrative on regional energy cooperation. Initiatives such as the South Asia Regional Parliamentary Forum, established with support from SARI/EI and the South Asia Regional Energy Partnership (SAREP), illustrate the potential of bipartisan networks of parliamentarians to act as champions of regional integration. Expanding such networks and equipping them with robust evidence of economic, environmental, and social benefits will help foster an enabling political environment.Equally important is early and transparent engagement with local communities on issues related to right-of-way, land acquisition, and the environmental and social impacts of transmission corridors and hydropower projects. Clear compensation frameworks, credible grievance redress mechanisms, and consistent application of environmental and social safeguards will be critical to building public confidence and sustaining support for cross-border electricity infrastructure.


 	Launch Flagship Regional Projects and Strengthen Data Sharing: Finally, the BBIN region must move beyond discussions to implementation by launching a few flagship joint projects, whether generation plants or transmission interconnections, that clearly demonstrate cost- and benefit-sharing arrangements. Such proof-of-concept projects will provide practical lessons, build confidence, and establish replicable models for future initiatives. Equally important is institutionalising data sharing. Transparent and accessible information will improve regional planning, support analysis and modelling of future scenarios, and foster a culture of evidence-based policymaking. Tools like the South Asia Energy Database should be further strengthened to include real-time data on trade flows, market prices, and grid operations.

An integrated grid would enable South Asia—particularly the BBIN subregion, to harness wind, solar, and pumped storage while ensuring reliability. Deeper integration within BBIN and BIMSTEC can move to market coupling and eventually to a regional power pool. Emerging initiatives such as the India–Middle East–Europe Economic Corridor (IMEC) and ‘One Sun, One World, One Grid’ could connect South Asia to other regions like Southeast Asia and the Gulf. By connecting solar-rich geographies across time zones, renewable power can flow seamlessly across borders. Regional integration is not only a tool for cost savings and energy security but also a strategic enabler of the clean energy transition.
As South Asia stands at the threshold of a clean energy revolution, regional integration offers a pathway to transform not just how countries generate and trade power, but how they cooperate on their shared sustainable future. An integrated grid is no longer optional but essential for a resilient and sustainable South Asia.



Monali Zeya Hazra is an independent regional energy specialist with over a decade of experience advancing regional energy cooperation and cross-border electricity trade in South Asia.



All views expressed in this publication are solely those of the author, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel.

Endnotes
[1] Rajiv Ratna Panda, “Clean Energy Transition in South Asia: Current Scenario and Future Outlook” (Presentation, SAGE-RIS-USAID-SAREP Workshop, New Delhi, India, June 17–19, 2023).
[2] Namrata Mukherjee et al., “International Best Practices on the Business and Financial Models for Developing Cross-Border Electricity Transmission Infrastructure," USAID and South Asia Regional Energy, August 2024.
[3] Monali Zeya Hazra, “South Asia Power Trade and Markets”(Presentation, Deep Dive Workshop on Enabling Frameworks for Renewable Energy, Multi-lateral Power Trade (RE-MPT), Asia Clean Energy Forum, Manila, Philippines, June 2024), https://asiacleanenergyforum.adb.org/wp-content/uploads/2024/06/Monali-Zeya.pdf.
[4] Maitreyi Karthik and Rajiv Ratna Panda, “How South Asia’s Massive Renewable Energy Potential Can Boost Green Hydrogen Production,” Down to Earth, January 24, 2023, https://www.downtoearth.org.in/renewable-energy/how-south-asia-s-massive-renewable-energy-potential-can-boost-green-hydrogen-production-87307.
[5] Government of India, “The Solar Surge: India’s Bold Leap Toward a Net Zero Future,” August 18, 2025, https://www.pib.gov.in/PressNoteDetails.aspx?ModuleId=3&NoteId=155063&reg=3&lang=2.
[6] “Renewable Energy, Accelerating Energy Delivery for Growing Economy”, Bangladesh Investment Development Authority, https://investbangladesh.gov.bd/investment-sector/renewable-energy.
[7] Dr Probal Ghosh et al., “Gains from Multilateral Electricity Trade Among BBIN Countries,” South Asia Regional Initiative for Energy Integration, Integrated Research and Action for Development (IRADe), 2018, p. 21, https://irade.org/Gains%20from%20Multilateral%20Electricity%20Trade%20among%20BBIN%20Country.pdf.
[8] Michael Toman and Govinda Timilsina, “The Potential Gran from Regional Electricity Trade in South Asia,” World Bank, March 16, 2017, https://blogs.worldbank.org/en/developmenttalk/potential-gain-regional-electricity-trade-south-asia.
[9] Dr. Jyoti Parikh et al., “Learning from Covid-19 Experience – A Framework for a Resilient Regional Electricity Grid for Bangladesh, Bhutan, Nepal and India,” Energy Insights, 2020, https://irade.org/IRADe%20Operating%20the%20BBIN%20grid%20druing%20the%20COViD%20pandemic%20-%20lessons%20learnt.pdf.
[10] “Nepal Earns NPR 4.57 Billion Profit from Power Trade in FY 2024-25,”Asia Pacific News, August 17, 2025, https://globaltransmission.info/nepal-earns-npr4-57-billion-profit-from-power-trade-in-fy-2024-25/.
[11] Gopal Sharma, “India to Import 10,000 MW of Hydroelectricity from Nepal Over 10 Years,” Reuters, January 4, 2024, https://www.reuters.com/world/asia-pacific/india-import-10000-mw-hydroelectricity-nepal-over-10-years-2024-01-04/.
[12] “Bhutan’s Hydropower Sector: 12 Things to Know,” Asian Development Bank, https://www.adb.org/features/bhutan-s-hydropower-sector-12-things-know.
[13] Namrata Mukherjee and Rajiv Ratna Panda, “Conference Proceeding: Deepening Cross Border Electricity Trade and Regional Electricity Market Development for Sustainable Energy in the South Asia Region,” South Asia Forum for Infrastructure Regulations (SAFIR) and South Asia Regional Energy Partnership (SAREP), 2024, https://www.safirasia.org/sites/default/files/SAFIR%20-SAREP%20Conference%20Proceedings%202023.pdf.
[14] Pankaj Batra et al., “Prospects for Sustainable Energy Infrastructure Development and Role of Cross-Border Energy Trade in South Asia: Challenges, Opportunities and Way Forward,” Integrated Research and Action for Development (IRADe), March 2021, https://irade.org/Sustainable-Energy-Infrastructure-Development-REPORT.pdf.
[15] Govinda R. Timilsina et al., “How Much Could South Asia Benefit from Regional Electricity Cooperation and Trade,” World Bank, 2015, https://openknowledge.worldbank.org/server/api/core/bitstreams/bb4188a2-202c-53aa-8bda-2adedf7dcaa5/content.
[16] V.K. Kharbanda et al., “BIMSTEC Energy Outlook 2030,” Integrated Research and Action for Development (IRADe), December 2017, https://bimstec.org/images/publication_pdf_file/1696657299_SARI-EI%20Report%20on%20BIMSTEC%20Energy%20Outlook-2030,%20low%20res,%2012th%20March,2018%20-Rajiv%20-SARI-EI-IRADe.pdf.
[17] Archana Rao, “India’s Growing Power Sector in 2025: Investor Outlook,” India Briefing, March 3, 2025, https://www.india-briefing.com/news/indias-power-sector-in-2025-investor-outlook-36367.html.
[18] S.K. Ray and Gaurav Jain, ”Integrated Research and Action for Development (IRADe),” South Asian Regional Power Exchange (SARPEX) Mock Exercise – Key Findings, https://irade.org/South%20Asian%20Regional%20Power%20Exchange%20%28SARPEX%29%20-%20Key%20Findings.pdf.

### From Satellites to Synthetic Biology: The Dual-Use Dilemma

In the ongoing Iran war, electronic interference, such as GPS spoofing or jamming, was reportedly used to disrupt signals and mislead navigation systems. This is seen as yet another example of how non-kinetic tactics that can disrupt communications and real-time intelligence collection have increasingly become part of modern warfare.
These tactics are not limited to space-based technologies, and extends to nuclear technology, artificial intelligence, biotechnology, etc. Notably, such technologies were developed to advance human well-being – for instance, satellite networks for disaster monitoring and cutting-edge biotechnology tools for vaccine production.
Yet many of these technologies can also be repurposed for military applications, like battlefield surveillance, or misused by malicious actors for cyber-attacks and weapons development. This dual potential renders them ‘dual-use’ technologies. The rapid advancement and diffusion of such technologies pose significant governance challenges, especially in balancing their beneficial use with the risks they entail.

Understanding dual-use technologies
Dual-use technologies refer to tools, materials or knowledge that have both commercial or civilian use and military applications. The term ‘dual-use’ was explicitly mentioned in a 1993 report, “Technologies Underlying Weapons of Mass Destruction”, published by the United States Office of Technology Assessment.
Initially associated with nuclear technology, where the same materials can be used for energy generation and weapons development, the term now encompasses a wider range of emerging technologies.


Dual-use technologies refer to tools, materials or knowledge that have both commercial or civilian use and military applications.

Advancements in fields such as AI, additive manufacturing, biotechnology, cyber technologies, and advanced communication systems have altered the dual-use landscape. Technological development of these innovations is carried out within research institutions and private companies. But their growing accessibility, including digital diffusion, heightened the risk of their misuse.
Therefore, the primary challenge in dual-use technology governance lies in addressing the ‘dual-use dilemma’: promoting technological progress and innovation while preventing misuse and associated risks.

The original dual-use dilemma: Nuclear technology 
The most prominent example of dual-use technology is nuclear technology, where its materials and equipment (such as uranium enrichment and high-speed centrifuges), knowledge, and infrastructure can be used for both civilian energy production and nuclear weapons development.
The Treaty on the Non-Proliferation of Nuclear Weapons (NPT) is one of the major global frameworks aimed at:


 	Preventing the dissemination of nuclear weapons.
 	Promoting cooperation in the peaceful application of nuclear energy.
 	Advancing the goal of nuclear disarmament.

Verification and compliance are facilitated by the International Atomic Energy Agency (IAEA), while the Nuclear Suppliers Group (NSG) manages export control arrangements. The dual-use challenge, however, extends beyond the nuclear domain.

Commercial space in modern warfare
Commercial space technology is an example of how civilian innovations have gathered strategic significance. Satellite systems are necessary for supporting global communications, navigation, power grids, and emergency humanitarian services, but they are often used to aid military operations as well. The same systems can provide real-time intelligence and surveillance, and coordination capabilities for military operations.
As mentioned earlier, non-kinetic tactics that can disrupt communications and real-time intelligence collection have been used during recent conflicts, demonstrating that space-based technologies are increasingly being used as an instrument of modern warfare.
Similarly, the growing role of commercial satellite entities in warfare highlights how they are becoming embedded in geopolitics and international security. This has raised questions over the extent to which they provide information and services in contested regions – even under diplomatic pressure – and to what extent they will be held accountable for their actions.


The dual-use nature of commercial space technologies raises questions about how critical infrastructure for civilian and humanitarian purposes can be protected while preventing escalation of armed conflict into outer space.

These developments also raise legal and ethical questions, particularly regarding the blurring of traditional legal confines of armed conflict and what constitutes a lawful target.
There are several frameworks that apply to warfare in space, including the United Nations Outer Space Treaty, International Humanitarian Law, and the UN Charter. But recent conflicts highlight how the behaviour of state and non-state actors are evolving faster than existing laws. The dual-use nature of commercial space technologies raises questions about how critical infrastructure for civilian and humanitarian purposes can be protected while preventing escalation of armed conflict into outer space.

Biotechnology and biosecurity risks
Additionally, new governance concerns are emerging in the case of biological sciences. A key challenge lies in the potential use of materials, equipment, knowledge, and processes – originally intended for beneficial applications such as vaccine development, disease surveillance, and agricultural research – by malevolent actors to cause harm.
This ‘dual-use dilemma’ led to the formulation of various safeguards to increase awareness regarding the potential risks of dual-use research in biological sciences. While the Biological Weapons Convention (BWC) remains the primary framework to curb the development and use of biological weapons, the risks of misuse and exploitation of these technologies have been aggravated by advances made in –


 	DNA synthesis technology.
 	Mirror biology.
 	The convergence of AI with biotechnology.
 	Increased democratisation of specialised knowledge through do-it-yourself (DIY) labs.

For instance, advances in nucleic acid synthesis enable researchers to order custom-made DNA sequences from companies for legitimate research activities such as the development of diagnostics or vaccines. However, the same technology could be misused to develop or modify pathogens with advanced features like the ability to evade immune surveillance.
To minimise these risks, some companies have begun screening DNA synthesis orders against databases of potentially dangerous organisms to ensure their use is legitimate and not intended to create harm. However, challenges in implementing these measures remain, including the ambiguity in defining ‘sequences of concern’, limitations in developing tools and infrastructure to support screening, and measures to facilitate compliance with screening.
The oversight landscape is further complicated by the convergence of AI with biotechnology. AI-biotech tools hold considerable promise in areas such as drug design, vaccine candidate prediction, and genomics. At the same time, there are concerns about the potential for deliberate misuse in developing bioweapons. Although safeguards to minimise risk are actively being deployed in these tools, the key challenge remains in balancing risk mitigation with the need to sustain scientific progress.

Why dual-use technologies are difficult to regulate
These emerging risks highlight challenges in the governance of dual-use technologies. There are at least two key characteristics of dual-use technologies that pose complex governance challenges: technological ambiguity and strategic value.
Technological ambiguity – Dual-use technologies often lack clear distinctions between civilian and military applications, making it difficult to distinguish between legitimate and potentially harmful uses. For instance, the Global Positioning System (GPS) was initially designed by the US Department of Defense for military purposes but was later adapted to improve safety and navigation in the commercial aviation sector.
Similarly, the infrastructure, tools, and materials used for legitimate purposes can be diverted for harmful ones. Although export controls for dual-use items seek to restrict the flow of materials, equipment, and software to limit the proliferation of illegal weapons of mass destruction (WMD), enforcement remains challenging.
Strategic value – Historically, scientific knowledge and technology have contributed greatly to military, political, and economic power, shaping national interests. Owing to their potential security implications, dual-use technologies have significant geopolitical value. Resultantly, states seek to ensure technological advantages, while limiting its access by adversaries. But uncertainty over the intent and capabilities of an adversary creates fear and can lead to arms race.

Governing dual-use dilemma
Various international treaties and export control arrangements are in place aimed at regulating the use, transfer, and proliferation of these technologies. These mechanisms span across multiple sectors and agencies, reflecting the different risks associated with each technological domain. Governance of dual-use technologies encompasses:


 	Preventing the development of dual-use technologies for malicious purposes.
 	Limiting access to tools, materials, and knowledge associated with these technologies.
 	Enabling their safe and secure handling and responsible use.

Moreover, key frameworks governing dual-use technologies are outlined in the table below:




Governance Objective
Policy Tool
Example Framework


Preventing malicious development
International treaties banning weaponisation
Biological Weapons Convention (BWC), Chemical Weapons Convention (CWC)


Controlling access to sensitive technologies
Export controls, licensing, and technology transfer restrictions
Nuclear Suppliers Group, Wassenaar Arrangement, and Australia Group


Monitoring compliance and peaceful use
Safeguards, inspections, and verification systems
International Atomic Energy Agency (IAEA) under the Treaty on the Non-Proliferation of Nuclear Weapons (NPT)



Adapting governance for emerging technologies 
However, given the rapid advancement of emerging technologies, which continue to expand the scope of dual-use risks, the governance frameworks need to evolve accordingly. Existing frameworks remain central to global security, but they are increasingly challenged by rapid scientific innovation.
Strengthening governance mechanisms requires recognising the role of private companies in developing and operating dual-use technologies that are increasingly embedded in geopolitics and modern warfare. It also requires an expansion of oversight to address emerging risks at the intersection of AI and biotechnology.
Eventually, managing the use of these technologies not only rests on regulation but also on cultivating a responsible and ethical ecosystem that fully recognises the security implications of technological advancement.



This commentary originally appeared in The Indian Express.

### The EU’s ‘Geopolitical Actorness’ in the Gulf: Purpose, State of Play, and Potential

Introduction 
In the current decade, the European Union (EU) has been confronted with the reality of a “harsh world”,[1] “characterized by raw power politics”[2] and “geostrategic competition”.[3] In this world, as then European Commission Vice-President Josep Borrell said in 2020, “we see increasingly the use of force in different ways” and the weaponisation of “economic and other instrument[s].”[4] Given the EU’sroximity to current and potential hotspots, its economic and security stakes, and thus its stability, are increasingly exposed to adverse impacts.
The EU sees its vital interests being threatened and its capacity to shape the international environment to its advantage severely tested.[5] The Union’s vital interests are, as outlined by the Egmont Institute, “those that determine the very survival of the EU’s social model, which is based on the core values of security, prosperity, democracy and equality.”[6] In essence, it can be understood as the preservation of the EU’s internal functioning and welfare structure, which is linked to the shaping of its external environment in ways necessary to sustain its peaceful, stable, and prosperous existence.
Consequently, the EU feels it “must relearn the language of power and conceive of Europe as a top-tier geostrategic actor.”[7] Against this backdrop, the Union’s “geopolitical consciousness”[8] has been growing in the current decade, compelling the EU to revisit its approach to its external actions. In the course of this process, Russia’s invasion of Ukraine in 2022 catalysed the Union’s “awakening as a geopolitical player.”[a],[9]
The EU’s approach to its external actions can perhaps be best understood through its open strategic autonomy (OSA) concept, which “refers to the capacity of the EU to act autonomously in strategically important policy areas […] [while] aim[ing] for multilateral cooperation wherever possible and appropriate.”[10] This requires the identification and mitigation of the Union’s vulnerabilities and dependencies.[11] Although the OSA has been shaping multiple EU policy areas,[12] it is particularly significant in the context of the Union’s vital interests: physical and economic security, prosperity, and overall stability. As such, the strategic rationale inherent to the EU’s geopolitical awakening[13] can be interpreted as the recognition of the need to reassess and reshape its external engagements in line with its OSA concept to protect its vital interests.
However, this geopolitical awakening does not automatically mean that the EU is capable of acting on its strategic rationale. This paper aims to explore the extent to which the EU can translate its intention to implement an external policy that safeguards its vital interests into concrete actions that yield tangible results. To support this assessment, the concept of ‘geopolitical actorness’ can be utilised as an analytical guiding tool.

‘Geopolitical Actorness’: An Analytical Guiding Tool
The EU’s ‘actorness’ was first outlined by political scientist Gunnar Sjöstedt in 1977[14] to refer to the then European Community’s “capacity to behave actively and deliberately in relation to other actors in the international system.”[15] Following this foundational definition, the Union’s ‘actorness’ has been further nuanced in the academic literature and adapted to different policy fields and regions. This analysis draws on Sjöstedt’s initial conceptualisation of  ‘actorness’ and adapts it in line with the specific definition of ‘geopolitical actorness’ as put forward by scholars Dealan Riga and Liridon Lika.[16] According to Riga and Lika: “[g]eopolitical actorness can be understood as the integration of strategic thinking into the EU’s engagement with global affairs.”[17] They note that “the imperative for geopolitical actorness goes beyond the requirements of global actorness and emphasizes the need for novel approaches to political alliances and economic interdependencies.”[18]
Building on these interpretations, this paper defines the EU’s geopolitical actorness as the capacity to integrate its strategic rationale into its relations with third parties, and to actively and deliberately act on this rationale through strategically redefined relations to achieve tangible results. This interpretation of geopolitical actorness goes beyond viewing an actor’s capacity to deploy ‘hard power’ (and, by extension, a focus on the military and defence domains, which are often associated with geopolitical weight and influence). The concept is understood more comprehensively, referring to the actor’s general external action-capacity and ability to achieve security, prosperity, and stability related results, guided by a strategic logic. Therefore, it also encompasses domains such as economy, diplomacy, and politics.
This paper assesses the EU’s geopolitical actorness in relation to the Gulf—a region that is of particular significance to its vital interests. The Gulf region is significant for the Union given its proximity to the continent[19] and its strategic position as a “gateway between Europe, Asia and Africa.”[20] This spatial scope allows for a regional-level interpretation of the EU’s geopolitical actorness as the analysis extends beyond the EU’s interactions with individual states, and also focus on its ties with the Gulf Cooperation Council (GCC). The current study understands EU-Gulf relations[21] as the Union’s engagements and interactions with the GCC and its six member states: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE).[22] This understanding is consistent with how the EU describes its relations with the Gulf.[23]
The paper is structured around the following lines of enquiry: it evaluates whether the EU’s strategic rationale is discernible in its relations with the GCC and its members through a content analysis of leadership statements and strategic documents; and it explores the EU’s capacity to translate its strategic rationale into concrete actions to yield tangible results in its ties with the Gulf. This analysis will draw on factors that either help or hinder the Union’s interactions with regional actors: 1) the existence of EU political backing to the actions to be taken, together with the availability and effective deployment of the instruments and means required to carry them out; 2) the presence of supporting institutional procedures, frameworks, and mechanisms; and 3) the counterparts’ stance regarding their engagements with the Union, and ways the EU can make them interested in engaging.

A Strategic Turn
In two occasions, in October 2021 and October 2025, the EU’s successive High Representatives for Foreign Affairs and Security Policy/Vice-Presidents of the European Commission, Josep Borrell and Kaja Kallas, made remarks relevant to the present analysis.[b] While those remarks differed in their respective assessments of the intensity, level, and depth of engagement between the EU and the Gulf in the given period, they both recognised the strategic relevance of the EU’s ties with the Gulf.  On 18 October 2021, Borrell stated that the “European Union is quite absent from the region. […] The Gulf wants an increased European Union presence and we have a strategic interest to engage with them. They play a key role [i]n foreign policy issues.”[24] Subsequently, “[e]nhanced and more focused cooperation between the European Union […] and member states of the Gulf Cooperation Council […] has become a priority for the EU, with a view to jointly addressing a series of global and regional challenges. Building on strong ties established over decades of a close trading and investment relationship, the EU is now seeking to put relations on a more secure footing, with new impetus and a much broader scope.”[25] Reflecting this rationale, in her remarks on 6 October 2025, Borrell’s successor, Kallas, outlined a reinvigorated dynamic with promising prospects, “EU–GCC relations are entering a dynamic new phase. Our strategic partnership is deepening: from trade and investment to climate action, energy, security, and humanitarian cooperation.”[26]
As such, amid its growing geopolitical consciousness and subsequent awakening, the EU’s ties with the Gulf have gained heightened significance. However, this temporal overlap does not automatically imply a causal link between the two. To establish such causality, it is essential to examine whether connections between global geopolitical transformations and the enhancement of EU-Gulf ties can be identified; and if the areas particularly concerned by the Union’s vital interests have been integrated into the strategic framework that shapes its relations with the Gulf. Two documents, in particular, can serve as references. The first, a unilateral EU document, the ‘Joint Communication to the European Parliament and the Council - A Strategic Partnership with the Gulf’ issued in 2022 by the European Commission and the High Representative of the Union for Foreign Affairs and Security Policy;[27] and the second, the ‘First European Union-Gulf Cooperation Council Summit Joint Statement’ from 2024.[28]
The joint communication from 2022, which serves as the EU’s “first ever Strategy for the Gulf region,”[29] clearly illustrates the causal connection between geopolitical shifts and the Union’s attempts to strengthen ties with the Gulf. The document states: “At a time of insecurity and significant challenges to the rules-based international order both in Europe and in the Gulf region, and as the world faces the consequences of the Russian aggression against Ukraine and the COVID-19 pandemic and the urgent imperative of the green and digital transition, the European Union stands much to gain from a stronger and more strategic partnership with the Gulf Co-operation Council (GCC) and its member states.”[30] Several areas of partnership detailed in the joint communication fall under the scope of the EU’s vital interests, such as economic cooperation for prosperity, collaboration in the field of security of supply with a specific focus on energy, and coordinated and joint efforts for a stable Middle East.
On economic cooperation and sustainable energy supply, the joint communication describes the EU’s relations with the GCC and its member countries as one that can allow the Union to strengthen its OSA. The document states: “A privileged trade and investment relationship between the EU and the GCC and its members is of strong mutual interest […]. This is even more relevant in a fast changing geopolitical context where the EU must build alliances and platforms of cooperation to pursue its objectives and enhance its open strategic autonomy.”[31] The document also emphasises that stability in the Middle East—in the shared neighbourhood of the EU and the GCC countries—is a fundamental goal for the EU and strongly contingent on the Gulf’s actions and engagements: “With Gulf states increasingly active in their own region and in the broader Middle East and beyond, it is clear that lasting stability in the EU’s broader neighbourhood will require close cooperation with them.”[32]
These policy areas are also included in the EU-GCC 2024 bilateral joint statement, which is structured around two main areas of cooperation: “partnership for sustainable prosperity and security” and “partnership for long-lasting stability and peace.”[33]
The development of an enhanced cooperation framework saturated with particular strategic significance—as covered in the two documents—is the initial and essential condition for the EU’s geopolitical actorness in the Gulf. The EU should now act based on the objectives and pathways established in this framework. Effective action is subject to the Union’s resources and resource-mobilisation capacity, as well as the partners’ continued willingness and interest in engaging with each other.

Internal Political Backing, Instruments, and Actions
A prerequisite for the EU to be capable of acting on its set objectives is internal political backing, both for its unilateral strategy and its bilateral engagements. The EU’s strategic partnership with the Gulf (2022) was granted this support by the Council of the EU (Council), which brings together government representatives from the 27 member states. The approval took the form of ‘Council conclusions,’[34] which serve to express a “political position on a specific topic.”[35] The conclusions stated, “The Council welcomes the Joint Communication […] and calls for its swift and efficient implementation.”[36] Furthermore, consistent with the substance of the joint communication, the Council conclusions also highlighted the strategic importance of these relations for the EU: “Building a strategic partnership with the Gulf Cooperation Council and its Member States, as part of enhancing EU engagement in the broader region, is a key priority for the European Union.”[37]
In addition, political support has been provided not only to determine the future direction and substance of the cooperation, but also for the use of specific instruments that might facilitate the achievement of the set objectives through enhanced economic and commercial relations and elevated political ties. In the case of the EU’s engagement with the Gulf, free trade agreements (FTAs) and strategic partnership agreements (SPAs) serve this purpose. The main aim of an FTA is market liberalisation, whereas an SPA seeks to provide a more comprehensive and strengthened cooperation framework for political and economic collaboration.[38] SPAs are the EU’s tools for “a tailor made partnership with each one of the Member States of the GCC,” and they have “three legs, the first is political […] the second leg is trade and investments except the [market] liberalization [which is under the remit of FTAs] […] and the third one is sustainability.”[39]
To engage in FTA negotiations on behalf of the Union, the European Commission needs an authorisation and negotiation directives from the Council.[40] Having received this political backing, the EU and the UAE launched free trade negotiations[c] in the first half of 2025.[41] Furthermore, an EU-GCC FTA is also under consideration.[42] The launch of SPA negotiations also requires a green light from the Council. This was provided in July 2025: the “[European] Commission welcome[d] the adoption of the EU mandate by the Council to launch negotiations with the six GCC countries.”[43]
In addition to these bilateral tools, the EU is also keen on involving the Gulf states as partners in other initiatives designed to strengthen the region’s security, prosperity, and stability. The EU-initiated ‘Palestine Donor Group’ (PDG) is an example. Seeking to bring together international and regional actors to support the effective implementation of the Palestinian Authority’s Reforms, it started to materialise in the second half of 2025.[d]
Another example of the potential association of the Gulf states to EU initiatives are triangular cooperation opportunities under the Global Gateway projects. The Global Gateway initiative—'predominantly addressed to middle- and low-income nations’[44]—is an EU external investment instrument to foster development,[45] in some cases through joint ventures with trusted third parties that are willing to be financially involved. This initiative, with a strong development cooperation and geoeconomic rationale,[e] aims to “narro[w] the global investment gap worldwide”[46] and “boost smart, clean and secure links in digital, energy and transport sectors, while also strengthening health, education and research systems across the world.”[47] As suggested in the 2022 joint communication, “[u]nder Global Gateway, the EU and Gulf partners could explore joint initiatives in third countries through triangular cooperation, financial support, capacity building and technical assistance.”[48] In the same document, the broader Middle East region and Africa were named as the potential target regions of  “a joint venture with the Gulf to foster sustainable investments.”[49]
In addition to these instruments, exploring cooperation opportunities between the parties under minilateral and multilateral mechanisms could also be a viable approach to foster the achievement of the defined objectives. One such example is the India-Middle East-Europe Economic Corridor (IMEC).[f] This multi-regional project seeks to establish and enhance digital, energy, and transport connectivity between the Euro-Mediterranean, the Middle East, and the Indo-Pacific.[50] Given its geographical location, the Gulf (particularly Saudi Arabia and the UAE as signatory countries) has a pivotal role in the project’s effective implementation. Should the project be realised, it will contribute substantially to the EU’s supply security, prosperity, and economic stability. However, the project’s completion is dependent on a stable Middle East.
The list of instruments presented in this subchapter is illustrative, showcasing the tools in the EU’s arsenal to advance its strategically motivated cooperation objectives. However, considering the instruments’ significance with respect to the enhancement and elevation of EU-Gulf ties, the FTAs and SPAs might hold outstanding importance.
The EU’s international negotiations, for instance the ones of FTAs and SPAs, are based on a solid legal basis and well-established institutional procedures that enable goal identification, agenda setting, and implementation. In the realm of trade agreement negotiations, notable results have been achieved; the Union has established the “world's largest network of trade agreements”.[51] Details of institutional involvement in international negotiations are outlined in the Treaty on the Functioning of the European Union.[g],[52] The scope of action of EU actors and institutions may vary depending on the form and content of the agreement, considering the areas covered and the competences involved at the EU or member states level.
In addition to the Brussels-based institutional ecosystem—where the establishment of the Directorate-General for the Middle East, North Africa and the Gulf[53] demonstrates the region’s increasing importance for the EU—other key institutional actors, either permanently stationed or frequently present in the region, play a role in upholding and advancing the EU’s interests. For instance, EU Delegations in the GCC states[54] are instrumental in implementing the Union’s external policies, acting as a bridge between Brussels and their host country, and enhancing the understanding of the Union and its actions within the local context.[55] Such Delegations are present in Saudi Arabia (‘accredited also to the GCC and covering Bahrain and Oman’[56]), the UAE, Kuwait, and Qatar. The latter opened after Borrell’s 2021 press remarks on the need to enhance the EU’s engagement and presence in the Gulf.[57] Furthermore, the first EU Special Representative for the Gulf region was appointed in mid-2023, to contribute to enhancing the Union’s strategic objectives and interests in the region, in coordination with and in support of the EU’s existing diplomatic networks.[58]
Alongside the EU’s own institutional framework and mechanisms supporting its strategic actions in the region, there are several dedicated bilateral platforms to facilitate the collaboration. The present paper focuses on some notable examples from the perspective of strengthening political and economic collaboration, essentially at the level of top leaders and ministers. The historical foundation and “legal basis for institutional cooperation” between the EU and the GCC is the 1989 Cooperation Agreement, complemented by bilateral ‘Cooperation Arrangements’ (signed between 2016 and 2021) between the European External Action Service (the EU’s diplomatic service) and the respective foreign ministries of the GCC countries.[59] Since the end of 2021, when the EU declared its aim to elevate and strengthen ties with the Gulf, new institutional platforms have been established and activated at multiple levels. The joint communication specifically mentions the organisation of an EU-GCC Summit to take place every two years (thereby ensuring the sustained continuity of exchanges at the highest levels), sectoral ministerial meetings to complement the EU-GCC Joint Council and the EU-GCC troika meeting, and an annual political dialogue.[60] The highest-level platform, the EU-GCC Summit, has already convened its first meeting in Brussels, with the next iteration scheduled for 2026 in Saudi Arabia.[61]
The EU’s institutional and procedural preparedness—coupled with its strategic approach, political will, cooperation means, and instruments—feeds into its geopolitical actorness. The partners’ receptiveness and sustained interest are also key factors of this ‘actorness’. However, if these were to waver, it could hinder the EU’s capacity to act in the region in accordance with its strategic rationale.

It Takes Two to Tango
An effective outcome of efforts to enhance and elevate EU-Gulf cooperation is contingent upon both sides’ interests and engagement within a symmetrical partnership dynamic. Any collaboration should be hinged upon achieving benefits that both parties identify and acknowledge. As such, the EU’s geopolitical actorness is also dependent on its ability to capitalise on the will of its partners to collaborate when it serves and supports its vital interests, and to present a form of cooperation that also resonates with the counterparts’ aims.
The EU’s ability to recognise and build upon the Gulf partners’ will to engage is illustrated by the change in the scope and ambition of cooperation between the two sides from end-2021 onwards. Additionally, the EU has presented a collaboration system and initiatives that seem to resonate with the interests of its Gulf counterparts and appeal to them. In its strategy for the Gulf, the EU stresses the shared aims and gains in areas strongly linked to its vital interests: “A privileged trade and investment relationship between the EU and the GCC and its members is of strong mutual interest”[62], and “Preserving peace, security and stability in the wider Gulf region is a key priority for the EU, and an important shared interest with the GCC and its Member States […].”[63] Furthermore, it specifically mentions, that the “EU has a lot to offer to the Gulf partners, as the world’s biggest single market, trading bloc and investor, a leader in research and innovation, and an important mediator and promoter of multilateralism, democracy and social transformation including human rights and gender equality.”[64] The relevance of what is on offer is particularly important when viewed in relation to the economic and social transformations underway (to varying degrees and speeds) in the Gulf countries, guided by their long-term ‘vision’ plans[65] and related strategic goals.
For instance, GCC states seek to diversify their economy which entails the reduction of their dependence on fossil fuel exports.[66] This goal can serve as an essential—but not necessarily exclusive—explanation for the Gulf countries “forging new alliances and expanding trade partnerships”[67] with actors from the East and the West.[68]  At the time of writing this paper, “GCC states, through free trade agreements, are negotiating with a number of international partners”  including the ‘United Kingdom, China, Türkiye, Japan, Indonesia, New Zealand, Pakistan, and South Korea’.[69] “These negotiations aim to enhance trade and investment flows, diversify income sources, and open new markets for Gulf products.”[70] Given these dynamics shaping the Gulf actors’ external cooperation in recent years, it is particularly important for the EU to put forward an ‘attractive’ collaboration offer. An essential source of the EU’s attractiveness is its internal market of around 450 million consumers[71] and its commercial relations with the Gulf. In 2024, the EU was “the GCC's second-biggest trade partner,” “number two import partner,” and “fourth-biggest export partner”.[72]
Indeed, the EU’s offer appears to have met with interest. Nayef Falah M. Al Hajraf, the then GCC Secretary General was quick to welcome the EU’s 2022 joint communication as soon as it was issued, expressing “the keenness of the Cooperation Council to strengthen the Gulf-European strategic partnership and strengthen it in all fields to serve common interests.”[73] This statement and the subsequent progressive deepening of bilateral relations highlights that the collaboration aligns not only with the EU’s interests and goals but also with those of the GCC. Underpinning this logic, in October 2025, Jasem Mohamed AlBudaiwi, the current GCC Secretary General, “pointed out that the relations between the GCC and the EU are historic and constitute a strategic partnership based on many solid foundations that achieve mutual benefits for both sides.”[74]
In addition to these EU-GCC bloc-to-bloc developments, advancements—indicating mutual interest in enhanced bilateral engagements—can be observed not only on the front of the EU-UAE FTA, but also regarding the tailored SPAs the EU is keen to negotiate with each Gulf state. A pivotal moment in this process was the launch of SPA negotiations with Qatar[75] and the UAE,[76] announced in December 2025.
However, further progress could be constrained by factors that have impeded the advancement of EU-Gulf cooperation in the past. For instance, previous EU-GCC FTA negotiations were suspended in 2008[77] for various reasons, primary of which was the parties’ diverging stance on labour rights[78] and standards.[h] In the past decade or so, the EU has sought to integrate a trade and sustainable development chapter into its FTAs, “encompassing provisions on protection of the environment, labour rights and climate change.”[79] Consequently, the issue appears to be a matter of concern in discussions on the potential EU-GCC FTA and the EU-UAE FTA,[80] and will require flexibility and concessions from both sides for the negotiations to move forward.[i]
Although FTAs represent only one component of the evolving relations, any blockage on this front could hinder the overall cooperation dynamic. If this were to occur, the EU’s capacity to translate its strategic thinking into tangible results would be under doubt. To prevent such a scenario, the EU must manage this matter—and any other potential impediments, whether stemming from internal or external factors—with agility, such as by proposing or consenting to compromises that are acceptable to both sides while ensuring the EU’s credibility is unharmed and its vital interests are not affected. When accepting any compromise, the EU shall ensure that it does not jeopardise neither the existing internal political support that initially granted the mandate for its action, nor its international clout.
An additional potential challenge might be linked to the EU’s internal legislation concerning corporate “sustainability reporting and [sustainability] due diligence requirements.”[81] In December 2025, the GCC states expressed concerns over the legislation’s impact on their companies’ operations in the EU market: “[D]espite the simplifications proposed by the European Parliament, aimed at alleviating the burdens of certain provisions and removing others, these changes still fall short of the GCC States’ expectations and continue to constitute a source of harm and a potential source of wide-ranging risks to the interests of GCC companies operating in the European market.”[82]
As these examples show, in spite of the broad convergence of interests across many areas, there are also instances of divergences, which may strain cooperation. Considering its vital interests, credibility and proclaimed principles, the EU’s leaders should carefully weigh trade-offs and act accordingly. Provided the benefits of cooperation outweigh the drawbacks from its absence, the EU will need to first ensure that its partners remain interested in cooperating, and then negotiate and interact with them in ways that deliver results that are acceptable for all parties and do not harm the Union’s credibility and main interests in any way. The potential for this exists but remains to be substantiated.
The February 2026 outbreak of hostilities between Iran, on one side, and Israel and the United States, on the other—which has already harmed the Gulf states’ infrastructures and threatened the lives of their citizens[83]—could challenge the effectiveness and prospects of the EU-Gulf cooperation in the security domain. However, a coordinated de-escalation and post-conflict stabilisation planning could also inject new momentum and dynamism into EU-Gulf cooperation, and open avenues for a revised security architecture aligned with the parties’ interests.

Conclusion 
The existing and potential impacts of the ongoing great-power competition on the EU’s vital interests and international clout has prompted it to undertake a geopolitical awakening. Consequently, the Union’s external approach is increasingly being defined by a strategic rationale to safeguard its security, prosperity, and stability. Taking a step further, transforming this logic into action and tangible results requires capacity. To uncover the interplay between the EU’s strategic rationale and its capacity to translate it into concrete outcomes that support its vital interests, the concept of geopolitical actorness can serve as an analytical guiding tool.
The EU’s strategic rationale is clearly discernible in its relations with the GCC and its members. As the Union’s 2022 joint communication indicates, strengthened cooperation with the Gulf holds significance in a geopolitical environment shaped by great-power competition and conflict. Indeed, the EU views revitalised, enhanced, deepened, and expanded relations with the GCC and its member states as beneficial for preserving its vital interests.
The EU has the political will, the means and instruments, and supporting institutional structures, procedures, and mechanisms to steer its relations in accordance with its strategic rationale. Importantly, the cooperation it has put forward also reflects and appears to meet the GCC’s and its member countries’ interests. The commitment of all parties to a sustained engagement is crucial to achieving the intended goals.
These observations suggest that in the case of its relations with the Gulf, the EU is capable of translating its strategic rationale into concrete actions. However, to affirm its geopolitical actorness, the Union needs to demonstrate that it can deliver tangible results. Yet, challenges, whether already discernible or latent, could hinder the momentum. The EU will need to act with strategic agility, including making concessions and adjustments to achieve outcomes that are acceptable to all parties, but only to the extent that neither its credibility nor its key interests—in third areas or with respect to its other relations—are compromised.



Eszter Karacsony, Non-Resident Fellow, ORF Middle East.



All views expressed in this publication are solely those of the author, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel.

Endnotes
[a] While the ‘awakening’ was triggered by Russia’s war launched against Ukraine in February 2022, a growing EU geopolitical ‘awareness’/ ‘consciousness’ has already been emerging for a few years.
[b] 18 October 2021: Remarks by the High Representative/Vice-President Josep Borrell at a press conference (Luxembourg);
6 October 2025: Remarks by High Representative/Vice-President Kaja Kallas at a joint press conference after the 29th EU-GCC Joint Council and Ministerial Meeting (Kuwait)
[c] The United Arab Emirates (UAE) uses the term ‘comprehensive economic partnership agreement’ instead of ‘free trade agreement’.
[d] All six Gulf states and the GCC joined the first meeting of the PDG held in Brussels in November 2025. See: https://north-africa-middle-east-gulf.ec.europa.eu/document/download/c5746285-9d42-491e-a0cf-5003e531365e_en?filename=Participants%20for%20press-PDG.pdf.
[e] Research Interview with an expert source from EU circles, October 2025.
[f] The signatories are the EU, France, Germany, India, Italy, Saudi Arabia, the UAE, and the United States.
[g] Details are provided in Article 207 and Article 218 of the Treaty on the Functioning of the European Union (TFEU).
[h] Research interview with an expert source with in-depth knowledge in the EU, in October 2025.
[i] This observation is based on an interview conducted with an expert with in-depth knowledge of the European Union, in October 2025.
[1] “Why European Strategic Autonomy Matters,” European External Action Service, https://www.eeas.europa.eu/eeas/why-european-strategic-autonomy-matters_en.
[2] Josep Borrell, “Europe Must Learn Quickly to Speak the Language of Power,” European External Action Service, October 29, 2020, https://www.eeas.europa.eu/eeas/several-outlets-europe-must-learn-quickly-speak-language-power_und_en.
[3] Borrell, “Europe Must Learn Quickly to Speak the Language of Power.”
[4] Borrell, “Europe Must Learn Quickly to Speak the Language of Power.”
[5] Josep Borrell, “Europe is Rediscovering the Harshness of the World,” March 15, 2024, https://www.eeas.europa.eu/eeas/us-speech-high-representative-josep-borrell-georgetown-university-%E2%80%9Ceurope-rediscovering-harshness_en.
[6]  JSTOR, “Priority Regions and Issues,” Egmont Institute, 2011, https://www.jstor.org/stable/pdf/resrep06670.6.pdf?refreqid=fastly-default%3A65b5f99c271ed513261868beaf0afae7&ab_segments=&initiator=&acceptTC=1.
[7] Borrell, “Europe Must Learn Quickly to Speak the Language of Power.”
[8] “Elements For A Doctrine: In Conversation With Charles Michel,” Groupe d’Études Géopolitiques, September 8, 2021, https://geopolitique.eu/en/2021/09/08/elements-for-a-doctrine-in-conversation-with-charles-michel/.
[9] Borrell, “Europe is Rediscovering the Harshness of the World.”
[10]  Henning Kroll, “Assessing Open Strategic Autonomy. A Two-Dimensional Index to Quantify EU-27 Autonomy in Industrial Ecosystems and Strategic Technologies,” Joint Research Centre (JRC), 2024, https://publications.jrc.ec.europa.eu/repository/handle/JRC136359.
[11] Kroll, “Assessing Open Strategic Autonomy. A Two-Dimensional Index to Quantify EU-27 Autonomy in Industrial Ecosystems and Strategic Technologies.”
[12] “Open Strategic Autonomy, Economic and Research Security in EU Foreign Policy,” European Commission, https://cordis.europa.eu/programme/id/HORIZON_HORIZON-CL2-2025-01-DEMOCRACY-04.
[13] Josep Borrell, “Europe in the Interregnum: Our Geopolitical Awakening after Ukraine,” Groupe d’Études Géopolitiques, March 24, 2022, https://geopolitique.eu/en/2022/03/24/europe-in-the-interregnum-our-geopolitical-awakening-after-ukraine/.
[14] William Wallace, “The External Role of the European Community,” International Affairs 54, no. 4 (October 1978): 666–667, https://doi.org/10.2307/2617335.
[15] Christian Rauh, “International Recognition of European Union ‘Actorness’: Language-Based Evidence from United Nations General Debate Speeches 1970–2020,” International Interactions (Routledge, 2025), 796.
[16] Dealan Riga and Liridon Lika, “The EU as a Geopolitical Actor: Opening Actorness Theoretical Framework”, in EU Geopolitical Actorness in a Changing World, Palgrave Macmillan, 2024.
[17] Riga and Lika, “The EU as a Geopolitical Actor: Opening Actorness Theoretical Framework.”
[18] Riga and Lika, “The EU as a Geopolitical Actor: Opening Actorness Theoretical Framework.”
[19] “EP Debate: EU’s Commitment to Promote Regional Stability and Security in the Middle East,” EEAS, November 23, 2022, https://www.eeas.europa.eu/eeas/ep-debate-eu%E2%80%99s-commitment-promote-regional-stability-and-security-middle-east_en.
[20] “What we do?,” The European Union, North Africa, the Middle East and the Gulf, https://north-africa-middle-east-gulf.ec.europa.eu/what-we-do_en.
[21] “EU – Gulf Bilateral Relations,” EEAS, May 2, 2024, https://www.eeas.europa.eu/eeas/eu-%E2%80%93-gulf-bilateral-relations_en.
[22] “Member States,” General Secretariat of the Gulf Cooperation Council (GCC), https://www.gcc-sg.org/en/AboutUs/MemberStates/Pages/default.aspx.
[23] “EU – Gulf Bilateral Relations,” EEAS.
 [24] “Foreign Affairs Council: Remarks by the High Representative/Vice-President Josep Borrell at the Press Conference,” EEAS, October 18, 2021, https://www.eeas.europa.eu/eeas/foreign-affairs-council-remarks-high-representativevice-president-josep-borrell-press-conference_en.
[25] “A Strategic Partnership with the Gulf Old Ties, New Impetus,” European Parliamentary Research Service (EPRS), December, 2022, https://www.europarl.europa.eu/RegData/etudes/BRIE/2022/739228/EPRS_BRI%282022%29739228_EN.pdf.
[26] “EU-GCC: Remarks by High Representative/Vice-President Kaja Kallas at the Joint Press Conference Following the 29th EU-GCC Joint Council and Ministerial Meeting,” EEAS, October 6, 2025, https://www.eeas.europa.eu/eeas/eu-gcc-remarks-high-representativevice-president-kaja-kallas-joint-press-conference-following-29th_en.
[27] “Joint Communication to the European Parliament and the Council. A Strategic Partnership With the Gulf,” European Commission and High Representative of the Union for Foreign Affairs and Security Policy, May 18, 2022, https://www.eeas.europa.eu/sites/default/files/documents/Joint%20Communication%20to%20the%20European%20Parliament%20and%20the%20Council%20-%20A%20Strategic%20Partnership%20with%20the%20Gulf.pdf.
[28] “1st European Union-Gulf Cooperation Council Summit Joint Statement,” Consilium, October 16, 2024, https://www.consilium.europa.eu/media/k3wf2ewp/eu-gcc-joint-statement-final-2.pdf.
[29] European Commission DG MENA, “What we do?.”
[30] “Joint Communication to the European Parliament and the Council. A Strategic Partnership With the Gulf,” European Commission and High Representative of the Union for Foreign Affairs and Security Policy.
[31] “Joint Communication to the European Parliament and the Council. A Strategic Partnership With the Gulf,” European Commission and High Representative of the Union for Foreign Affairs and Security Policy.
[32] “Joint Communication to the European Parliament and the Council. A Strategic Partnership with the Gulf,” European Commission and High Representative of the Union for Foreign Affairs and Security Policy.
[33] “1st European Union-Gulf Cooperation Council Summit Joint Statement,” Consilium.
[34] “Council Conclusions on a Strategic Partnership with the Gulf,” Council of the European Union,  June 20, 2022, https://data.consilium.europa.eu/doc/document/ST-10038-2022-INIT/en/pdf.
[35] “Council Conclusions and Resolutions,” Consilium,  https://www.consilium.europa.eu/en/council-eu/conclusions-resolutions/.
[36] “Council Conclusions on a Strategic Partnership with the Gulf,” Council of the European Union.
[37] “Council Conclusions on a Strategic Partnership with the Gulf,” Council of the European Union.
[38] Observer Research Foundation Middle East, “Strategic Opportunities Ahead For The EU And The Gulf States,” YouTube video, October 17, 2025, https://www.youtube.com/watch?v=rpxxzo-ORv0.
[39] Observer Research Foundation Middle East, “Strategic Opportunities Ahead for The EU and The Gulf States.”
[40] “EU Trade Agreements,” Consilium, https://www.consilium.europa.eu/en/policies/trade-agreements/.
[41] “EU-United Arab Emirates Free Trade Agreement,” European Commission Directorate-General for Trade (DG TRADE), https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/gulf-region/eu-united-arab-emirates-agreement_en.
[42] “1st European Union-Gulf Cooperation Council Summit Joint Statement,” Consilium.
[43] “Commission Welcomes the Adoption of the EU Mandate by the Council to Launch Negotiations with the Six GCC Countries,” European Commission DG MENA, July 18, 2025, https://north-africa-middle-east-gulf.ec.europa.eu/news/commission-welcomes-adoption-eu-mandate-council-launch-negotiations-six-gcc-countries-2025-07-18_en.
[44] Dr. Olaf Wientzek et al., "Global Gateway" Slowly Gathers Momentum,” Konrad Adenauer Stiftung, October 2023, https://www.kas.de/documents/252038/22168750/%E2%80%9CGlobal+Gateway%E2%80%9D+is+slowly+gaining+momentum.pdf/10d61c17-e5e1-efa7-4939-568cbcdda1b2?version=1.0&t=1698749582144.
[45] “Joint Communication to the European Parliament, the Council, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank. The Global Gateway,” European Commission and High Representative of the Union for Foreign Affairs and Security Policy, December 1, 2021, https://international-partnerships.ec.europa.eu/document/download/461c4d47-86b1-46a2-a20a-9fcad0bce90f_en?filename=joint_communication_global_gateway.pdf.
[46] “Global Gateway Overview,” European Commission Directorate-General for International Partnerships (DG INTPA), https://international-partnerships.ec.europa.eu/policies/global-gateway/global-gateway-overview_en.
[47] “What is the Global Gateway?,” European Commission, https://commission.europa.eu/topics/international-partnerships/global-gateway_en.
[48] “Joint Communication to the European Parliament and the Council. A Strategic Partnership with the Gulf,” European Commission and High Representative of the Union for Foreign Affairs and Security Policy.
[49] “Joint Communication to the European Parliament and the Council. A Strategic Partnership with the Gulf,” European Commission and High Representative of the Union for Foreign Affairs and Security Policy.
[50] “Audition de M. Gérard Mestrallet, envoyé spécial du Président de la République pour le corridor économique Inde-Moyen-Orient-Europe (IMEC),” Sénat, April 2, 2025, https://www.senat.fr/compte-rendu-commissions/20250331/etrang.html#toc3.
[51] “EU-United Arab Emirates Free Trade Agreement,” European Commission DG TRADE.
[52] “Consolidated version of the Treaty on the Functioning of the European Union,” Official Journal of the European Union, 2012, https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12012E/TXT:en:PDF.
[53] “Middle East, North Africa and the Gulf,” European Commission,  https://commission.europa.eu/about/departments-and-executive-agencies/middle-east-north-africa-and-gulf_en.
[54] “Gulf Cooperation Council (GCC) and the EU,” EEAS, https://www.eeas.europa.eu/eeas/gulf-cooperation-council-gcc-and-eu_en.
[55] Julien Abratis, “The Role of EU Delegations in Public Diplomacy. Challenges and Opportunities,” Sciences Po, 2020, https://www.sciencespo.fr/public/sites/sciencespo.fr.public/files/ABRATIS%20Julien%20-%20Thesis%20EAP.pdf.
[56] “Gulf Cooperation Council (GCC) and the EU,” EEAS.
[57] Josep Borrell at the press conference.
[58] “EU Special Representatives,” EEAS, https://www.eeas.europa.eu/eeas/eu-special-representatives_en; “Council Decision (CFSP) 2023/963 of 15 May 2023 Appointing the European Union Special Representative for the Gulf Region,” Official EN Journal of the European Union, 2023, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32023D0963.
[59] “EU – Gulf Bilateral Relations,” EEAS.
[60] “Joint Communication to the European Parliament and the Council. A Strategic Partnership with the Gulf,” European Commission and High Representative of the Union for Foreign Affairs and Security Policy.
[61] “First EU-Gulf Cooperation Council Summit,” Consilium, 16 October 2024, https://www.consilium.europa.eu/en/meetings/international-summit/2024/10/16/.
[62] “Joint Communication to the European Parliament and the Council. A Strategic Partnership with the Gulf,” European Commission and High Representative of the Union for Foreign Affairs and Security Policy.
[63] “Joint Communication to the European Parliament and the Council. A Strategic Partnership with the Gulf,” European Commission and High Representative of the Union for Foreign Affairs and Security Policy.
[64] “Joint Communication to the European Parliament and the Council. A Strategic Partnership with the Gulf,” European Commission and High Representative of the Union for Foreign Affairs and Security Policy.
[65] “EU – Gulf Bilateral Relations,” EEAS.
[66] GFA Consulting Group et al., “EU – GCC Dialogue on Economic Diversification Gulf Cooperation Council (GCC) Countries. Assessment of the Challenges and Opportunities for the Development of Blue Economy Projects in GCC Member Countries,” April 2021, https://www.eeas.europa.eu/sites/default/files/documents/Blue%20Economy%20projects%20in%20the%20GCC%20Report%202021%2004.pdf; “Renewable Energy Markets GCC 2023,” International Renewable Energy Agency, 2023, https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2023/Dec/IRENA_Rnewable_energy_markets_GCC_2023.pdf.
[67] “5 Ways the GCC is Supporting Global Cooperation,” World Economic Forum, May 13, 2025. https://www.weforum.org/stories/2025/05/gcc-supporting-global-cooperation/.
[68] “5 Ways the GCC is Supporting Global Cooperation,” World Economic Forum, May; “Statement Issued by the Ministerial Council of the Gulf Cooperation Council During its 161st Session,” General Secretariat of the GCC, September 9, 2024, https://www.gcc-sg.org/en/MediaCenter/News/Pages/news2024-9-9-4.aspx.
[69] “HE GCCSG: The Strategic Geographical Location, Political Stability, & Strong Economic Foundations of the GCC States have Made them Global Investment Destination & Major Platform for International Partnerships,” General Secretariat of the GCC, December 4, 2025, https://www.gcc-sg.org/en/MediaCenter/News/Pages/news2025-12-4-3.aspx.
[70] “HE GCCSG: The Strategic Geographical Location, Political Stability, & Strong Economic Foundations of the GCC States have Made them Global Investment Destination & Major Platform for International Partnerships,” General Secretariat of the GCC.
[71] “Strengthening the Single Market in a New Geoeconomic Context,” Consilium,  https://www.consilium.europa.eu/en/european-council/president/strengthening-the-single-market-in-a-new-geoeconomic-context/.
[72] “Gulf Region,” European Commission DG TRADE,  https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/gulf-region_en.
[73] “Welcoming the Announcement of the Strategic Partnership Paper with EU: GCC Secretary General Stresses Strategic Gulf-European Relations, Keenness to Enhance it Across All Fields to Serve Common Interests,” General Secretariat of the GCC, May 18, 2022, https://www.gcc-sg.org/en/MediaCenter/News/Pages/news2022-5-18-8.aspx.
[74] “HE GCCSG: The GCC-European Strategic Partnership is a Model for Joint Stability & Security Amid Accelerated & Unprecedented Regional & Global Challenges,” General Secretariat of the GCC,  October 6, 2025, https://www.gcc-sg.org/en/MediaCenter/News/Pages/news2025-10-6-1.aspx.
[75] “Qatar–EU Joint Statement: Launch of Negotiations for a Qatar–EU Strategic Partnership Agreement (SPA),” EEAS, December 6, 2025, https://www.eeas.europa.eu/eeas/qatar%E2%80%93eu-joint-statement-launch-negotiations-qatar%E2%80%93eu-strategic-partnership-agreement-spa_en.
[76] “Joint EU-UAE Statement on the Launch of the SPA Negotiations,” EEAS, December 12, 2025, https://www.eeas.europa.eu/delegations/united-arab-emirates/joint-eu-uae-statement-launch-spa-negotiations_en.
[77] “Gulf Region,” European Commission DG TRADE, https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/gulf-region_en.
[78] Leila-Maria Faddoul, “The Key Obstacles to the GCC-EU Free Trade Agreement in 2025,” Anwar Gargash Diplomatic Academy, 2025 https://www.agda.ac.ae/docs/default-source/2025/leila-maria-faddoul_agda-insight_final-draft.pdf?sfvrsn=e4a1633b_1.
[79] “Trade and Sustainable Development in EU Free Trade Agreements,” Marc Jütten, November 2023, https://www.europarl.europa.eu/RegData/etudes/BRIE/2023/754613/EPRS_BRI(2023)754613_EN.pdf.
[80] “EU Negotiations of TSD Chapters Update,” TSD Expert Group, October 7, 2025, https://ec.europa.eu/transparency/expert-groups-register/core/api/front/document/122884/download.
[81] “Council and Parliament Strike a Deal to Simplify Sustainability Reporting and Due Diligence Requirements and Boost EU Competitiveness,” Consilium,  https://www.consilium.europa.eu/en/press/press-releases/2025/12/09/council-and-parliament-strike-a-deal-to-simplify-sustainability-reporting-and-due-diligence-requirements-and-boost-eu-competitiveness/.
[82] “GCC States Warn of the Implications of the EU’s Proposed Corporate Sustainability Due Diligence Legislation,” General Secretariat of the GCC, December 5, 2025, https://www.gcc-sg.org/en/MediaCenter/News/Pages/news2025-12-5-1.aspx.
[83] “Statement Issued by the 50th Extraordinary Meeting of the Ministerial Council of the Gulf Cooperation Council (GCC) Regarding the Iranian Aggression Against the GCC,” General Secretariat of the GCC, March 1, 2026, https://www.gcc-sg.org/en/MediaCenter/News/Pages/news2026-3-1-2.aspx.

### Fortifying Bahrain: Allied Reinforcements Amid Iranian Aggression

In the volatile theatre of Middle Eastern geopolitics, Bahrain has emerged as a precarious outpost, acutely exposed to Iran’s mounting belligerence. According to Wall Street Journal estimates, the small Gulf island maintains the region’s most limited stockpile of ballistic missile interceptors, a consequence of prolonged fiscal constraints, societal reluctance toward extravagant defense budgets, and inherent logistical and territorial limitations.

This vulnerability has now reached a critical juncture: since February 28, Bahrain has been the third most attacked Gulf state in Iran’s offensive campaign. This reality underscores the urgent need to augment defensive resources and secure allied support, as Iran’s low-cost projectiles attempt to overwhelm Bahrain’s finite defense arsenal. Even if Manama’s current reserves withstand the immediate barrage, the prospect of a prolonged or recurring confrontation persists.
As the war continues, Bahrain’s defenses will face mounting pressure, likely prompting both immediate appeals for allied support and longer-term contingency planning.
A review of the Bahrain Defense Force’s sequential data disclosures reveals a declining pattern in intercepted missiles and drones (Figure 1), even as these threats endure with unpredictable intensity. Iran’s latest incursions have exacted a human toll: a drone assault on Sitra near the BAPCO refinery injured 32 people and prompted the refinery’s parent company to declare force majeure, legally pausing export commitments from its gas, oil, and petrochemical subsidiaries. One Bahraini woman was also killed after being struck by debris from an Iranian drone that hit a building.  Additionally, an Iranian drone damaged a water desalination plant in the country. While the water supply was not affected, the strike highlights the indiscriminate nature of Iran’s aggression. As the war continues, Bahrain’s defenses will face mounting pressure, likely prompting both immediate appeals for allied support and longer-term contingency planning.

Figure 1: Trends in Missile and Drone Interceptions by Bahrain Defense Force (Dissected from Cumulative Data, February 28–March 16, 2026).


Alliances Under Examination
Historically, Bahrain has navigated its security landscape through a focused reliance on select partners outside the Gulf region, reinforced by its hosting of the U.S. Fifth Fleet and the United Kingdom’s unique Naval Support Facility. The presence of American and British bases on the island has fostered an implicit ethos of reciprocity, though without explicit obligations. While U.S. support for Bahrain during the war has remained out of the public eye, British Prime Minister Keir Starmer conveyed to Bahrain’s King that four RAF jets stationed in Qatar could defend the Kingdom. RAF Typhoons reportedly intercepted two drones bound for Jordan and Bahrain, reinforcing these assurances. The United Kingdom’s contributions, grounded in a recently disclosed 2012 Defense Cooperation Agreement, have remained limited in public view, largely confined to the jets and a courtesy visit by the United Kingdom’s Senior Defense Advisor for the Middle East to Bahrain’s military command.

Diplomatic backing, on the other hand, has been robust and multifaceted. The Bahrain News Agency has documented a steady stream of leader-to-leader engagements globally since the conflict’s onset. On March 11, Bahrain marshalled 135 co-sponsors for a UN Security Council resolution insisting on “the immediate cessation of all attacks by the Islamic Republic of Iran against Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, and Jordan.” Occupying the Arab seat on the Council this year and next, Bahrain’s diplomatic leverage has intensified amid the ongoing turmoil. As the Crown Prince and Prime Minister noted at the EU-Gulf Cooperation Council (GCC) summit, declarations from the GCC, the GCC-EU Ministerial Meeting, and the Arab League’s emergency session articulated a unified rebuke of Iran’s violations.
While U.S. support for Bahrain during the war has remained out of the public eye, British Prime Minister Keir Starmer conveyed to Bahrain’s King that four RAF jets stationed in Qatar could defend the Kingdom. 
Perhaps the clearest test of Bahrain’s strategic alliances has been the activation of Article II in the Comprehensive Security Integration and Prosperity Agreement (C-SIPA), which links Bahrain, the United Kingdom, and the United States in a framework for security cooperation. The March 5 convening of its Defense Working Group deliberated on “mutual commitments to enhance security cooperation and collective deterrence against external threats,” marking an early test for the pact. While the agreement stops short of constituting a formal mutual defense treaty, the extent to which these provisions are implemented will profoundly influence regional perceptions of Western security pledges in the Gulf.

Looking ahead, Bahraini officials are pursuing further diversification of their defense partnerships. This includes a new defense pact with France, which President Emmanuel Macron’s office touted in February as fostering “new opportunities for industrial cooperation in defense.” Bahrain’s security relationship with Israel stemming from the Abraham Accords, as well as a potential relationship with Ukraine, also offer avenues to broaden the Kingdom’s network of security cooperation in times of crisis.
Domestic Security and Economic Threats
The Bahraini government may face pressure on two fronts: abroad and from within. Allied solidarity, therefore, must extend beyond aerial defense to counter Iran’s multifaceted threats. Tehran’s arsenal includes clandestine networks, propaganda warfare, and espionage aimed at internal erosion. During the current war, Bahrain has detained at least four suspects allegedly colluding with the Islamic Revolutionary Guard Corps (IRGC), as well as others accused of circulating footage endorsing Iran’s actions. Iran’s preoccupation with Bahrain derives from its significant Shia demographic, which Tehran seeks to co-opt ideologically. Opposition elements within Bahrain have often amplified discord through protest calls and disregard for wartime solidarity, flouting a recent edict banning public gatherings on roads and public squares. Foreign allies could bolster Bahrain’s fortitude through intelligence collaboration, identifying emerging threats and tracking foreign actors seeking to sow internal division.
Much of Bahrain’s industrial capacity and energy infrastructure is concentrated in relatively small areas, meaning even limited attacks can generate disproportionate economic disruption. 
Economically, another threat is emerging as Iran continues to target critical infrastructure and disrupt economic activity. Much of Bahrain’s industrial capacity and energy infrastructure is concentrated in relatively small areas, meaning even limited attacks can generate disproportionate economic disruption. In addition to the force majeure declared by BAPCO Energies, Aluminium Bahrain, one of the world’s largest aluminum smelters, has also declared force majeure due to disruptions in the Strait of Hormuz.

In response, policymakers have focused on reassuring the public about the availability of essential goods and services. The Crown Prince and Prime Minister has visited commercial markets, while the Minister of Industry and Commerce has conducted inspection visits to monitor the availability of goods and price stability. Yet Bahrain has limited capacity to improve its fiscal outlook in the short term. Preemptive international assistance is essential to safeguard import channels, while post-conflict recovery and growth will require sustained global support.
Reinforcing Gulf Deterrence
Reflecting on Bahrain’s resilience since the upheaval of 2011, the Kingdom has eradicated its previous security complacencies. However, the ongoing war elevates interference to direct kinetic assaults, with renewed implications for internal security. This shift amplifies the need for international partnerships. Looking ahead, Bahrain, like other Gulf states, is likely to increase military spending and seek allied support, particularly as defense expenditures already exceed 10 percent of government spending.
With military spending rising and alliances in focus, Bahrain can no longer afford to prepare for distant contingencies. 
With military spending rising and alliances in focus, Bahrain can no longer afford to prepare for distant contingencies. The conflict has already begun, and if past precedents are any indication, similar challenges may arise in the future. Addressing them will require reliable access to military equipment and supplies, an expansion of the defense forces, and strengthened vigilance over internal security and national cohesion.

The West’s response to Bahrain’s security needs will also carry broader signaling effects across the Gulf. If Iran perceives Bahrain as the most vulnerable link within the region, it may intensify pressure on the small island state. Overt allied support could therefore strengthen deterrence for Bahrain and the wider Gulf. In this context, a renewed push for a collective Gulf defense framework, supported by external partners, may become increasingly important to guard against persistent regional threats.



This commentary originally appeared in Gulf International Forum. 

### Rethinking the Energy Security Architecture:  Securitization, Resilience and Transition

Spotlight 


 	Much like a carbon price, energy markets may soon incorporate a permanent security premium, reflecting exposure to geopolitical realities and infrastructure risks.


 	Building resilience through decentralisation and diversification of energy sources, trade routes and partnerships will become key to ringfencing the energy systems from volatile pricing and sudden supply chain disruptions.


 	The energy transition agenda is closely tied to energy sovereignty and must be viewed as a central pillar of long term energy security.

Energy security has always been deeply intertwined with geopolitics. The oil shocks of the 1970s reshaped the global energy system.  The 1973 oil embargo, imposed by the Arab members of the Organisation of the Petroleum Exporting Countries (OPEC), triggered the 1973 Oil Crises, quadrupling energy prices and wreaking havoc in the global economy. In response, major oil consuming countries established the International Energy Agency(IEA) in 1974, encouraging the establishment of strategic petroleum reserves (SPRs) and coordinated emergency responses to manage supply disruptions.
The current United States-Israel-Iran conflict around the Strait of Hormuz represents another significant inflection point for the global energy system. Both transportation channels and energy infrastructure are increasingly attacked and weaponized. Since mid-December 2025, Brent crude prices have surged more than 100% reaching its peak last week at USD $119 per barrel. The disruption of the strategic passage - through which roughly one-fifth of global energy supplies transit – have sent ripple effects across food prices, commodity markets and stock exchanges.
The IEA and G7 declaration to release 400 million barrels of oil has done little to stabilise markets or assuage investors. The oil prices continues to sit firmly in triple digits. The ongoing crisis underscores a crucial reality – that energy security cannot be viewed with the myopic lens of supply availability and price stability alone. It is shaped by not only demand supply dynamics but also geopolitical signals, logistical chokepoints, financial exposure and technological vulnerabilities.
Much like the recalibration that followed the oil shocks of the 1970s, this conflict is likely to compel governments and institutions alike to rethink how energy security is defined and managed in the twenty first century. Future strategies will need to increasingly adopt a broader risk-management paradigm spanning across financial systems, supply chains, infrastructure protection, and geopolitical uncertainty.

India: A Case in Point 
These dynamics are particularly relevant in the case of India. Given the geographical proximity and historically reliable supply, the Middle East has long been a steadfast partner for India’s growing energy needs.  Today, India imports 40 percent of its crude oil and 60% of its natural gas from the region. However, the ongoing crises around the Strait of Hormuz highlights the depth of this dependence and vulnerabilities inherent in such concentrated exposure.
India has made significant progress in diversifying its crude oil sourcing – from nearly 40 countries – and maintains modest reserves of around 50 days of crude oil and refined products in pipelines, offshore vessels, above ground tanks within its distribution network. However, the situation is far more constrained in the gas markets. In addition to significant natural gas imports, nearly 90% Liquified Petroleum Gas and Natural Gas Liquids imports originate from the Middle East.
Supply shortages inevitably translate to higher energy prices – and here lies the double whammy. Elevated energy prices depreciates the currency, coupled with widening current account deficit and weak capital inflows, increase the risk of stagflation. Estimates suggest that if oil prices continue to rise towards USD$100 per barrel, India’s current account deficit could likely move towards 3% of GDP as opposed to baseline forecasts of 1.5% of GDP.
Energy security, therefore, is not merely a question of supply but a matter of national and economic security.

The Trifecta: Securitization, Resilience and Transition
The lessons learnt from the emerging crises point to the need for a more comprehensive framework for energy security – one that balances securitization, resilience, and the transition : what might be called the trifecta of energy security.

Securitization
At the core of this framework is Securitization and Risk management, which will become central to protecting energy systems from future geopolitical and supply chain shocks. Much like a carbon price, energy markets may soon incorporate a permanent security premium, reflecting exposure to geopolitical realities and infrastructure risks.
The first dimension is physical. Countries will to need to strengthen their oil and gas stockpiles to prepare for contingencies in an increasingly volatile world. Global oil demand continues to exceed 105 million barrels per day sustained by sectors including transport, aviation, petrochemicals and hard to abate industries. Besides reserves, Energy infrastructure of national strategic importance - such as powerplants, refineries, LNG terminals, electricity transmission networks, pipelines - should be treated as critical national security assets with protections comparable to military installations.

Ukraine wartime experiences offer several valuable lessons in this regard: diversification and decentralization of energy infrastructure; maintaining strategic stockpiles of fuel and critical components; protecting energy infrastructure through physical and military defences; and strengthening digital and cybersecurity components.
The second dimension is digital. In an increasingly techno-digital era, warfare is not confined to the physical battlefield anymore, but also extends to the cyberspace. Therefore, strengthening cybersecurity defences across energy systems is essential, as demonstrated by the Russian cyberattacks of three power distribution companies in Ukraine in 2015 and 2016, which caused localised electricity blackouts.
Ukraine wartime experiences offer several valuable lessons in this regard: diversification and decentralization of energy infrastructure; maintaining strategic stockpiles of fuel and critical components; protecting energy infrastructure through physical and military defences; and strengthening digital and cybersecurity components. 

Resilience
Beyond securitisation and protection, building resilience through decentralisation and diversification of energy sources, trade routes and partnerships will become key to ringfencing the energy systems from volatile pricing and sudden supply chain disruptions. Alternative pathways and corridors - such as the India Middle East Europe Corridor proposed during India’s G20 Presidency;  the emerging Eastern Mediterranean gas networks; the Euro Asia interconnectors;  the Lobito Corridor in Africa; Arctic energy and shipping corridors  - are all examples of efforts already underway.

Decentralisation or distributed generation – rooftop solar, microgrids and localised storage -  will reduce reliance on single points of failure such as one long transmission network or large centralised power plants. This will make the energy system more flexible and resilient to conflict, cyberattacks or supply shocks.
The Russia Ukraine war was an eye-opening moment for Europe, exposing the risk of dependence on a single supplier – Russia – for its gas imports. The crises in Hormuz could serve as the impetus to accelerate diversification efforts to build a robust and resilient web of networks and channels for energy cooperation. Diplomatic cooperation and strategic partnerships will be key to achieving these goals.
Decentralisation or distributed generation – rooftop solar, microgrids and localised storage -  will reduce reliance on single points of failure such as one long transmission network or large centralised power plants. This will make the energy system more flexible and resilient to conflict, cyberattacks or supply shocks.
At the same time, resilience will depend on systems capability. This included strengthening capabilities in maritime monitoring, satellite surveillance, market data analytics, commercial licensing, contractual compliance, port security, payment systems, risk shipping insurance, reinsurance mechanisms, contract enforcement and real time supply chain intelligence.

Transition
Finally, the energy transition agenda – closely tied to energy sovereignty– must be viewed as a pillar of long term energy security. Investments in in renewables plus storage, nuclear energy, and grid optimization are likely to gain momentum. Following the energy crises triggered by Russian invasion of Ukraine, investments in clean energy and technologies increased in Europe, reflecting an effort to secure control over domestic energy infrastructure. Similar trends are likely to unfold again.

Securing strategic reserves of crucial critical minerals – through domestic exploration and overseas mineral resource development cooperation and repatriation, along with development of domestic processing capacities – will be key to avoiding such vulnerabilities.  
While the proponents of “Drill Baby Drill” campaign emphasise energy dominance through fossil fuel expansion, leaders around the world including in India, South Korea and Europe have called for less dependence on fossil imports while accelerating electrification, renewables and efficiency. Renewables have become cheaper to their fossil fuel counterpart and present a safer, sustainable, and faster-to-market alternative.
However, critical minerals – essential ingredients for the clean energy technologies – are, much like oil and gas, concentrated in a few geographies. The processing and refining of these critical minerals is even more concentrated – China refines 90% of the graphite and rare earth minerals and 60% of global lithium and cobalt. Ac countries move away from fossil fuels, they should avoid replacing old dependencies with new ones.
Securing strategic reserves of crucial critical minerals – through domestic exploration and overseas mineral resource development cooperation and repatriation, along with development of domestic processing capacities – will be key to avoiding such vulnerabilities.
The energy security architecture must be rethought and rebuilt -  one that integrates securitisation of critical infrastructure, resilience through decentralisation and diversification of energy sources, trade corridors and partnerships, and an accelerated energy transition aimed at both reducing exposure and building buffers to volatile fuel markets and global disruptions.



This commentary originally appeared in NDTV.

### The EU’s CBAM and Gulf Countries: An Analysis of Early Evidence

On 1 January 2026, imports of certain carbon-intensive goods into the European Union (EU) became subject to additional charges under the Carbon Border Adjustment Mechanism (CBAM). This brief evaluates the impacts of this mechanism on Gulf Cooperation Council (GCC) countries—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE). Aluminium is the main impact channel for GCC countries, with exposure varying across GCC members. Bahrain and the UAE are the most affected, both in absolute terms and relative to GDP. Saudi Arabia and Oman face more limited exposure, while Kuwait and Qatar are largely unaffected. Under current CBAM rules, which consider only direct emissions for aluminium, the carbon intensities for primary aluminium made by GCC producers are similar to the EU and lower than key competitors China and India. There is, therefore, scope for GCC producers to offset demand decreases by increasing their market share. Future outcomes will depend on indirect emissions coverage, EU compensation reforms, anti-resource shuffling measures, and GCC decarbonisation initiatives.
Attribution: Niven Winchester, “The EU’s CBAM and Gulf Countries: An Analysis of Early Evidence,” ORF Issue Brief No. 864, Observer Research Foundation, March 2026. 

Introduction
Since the European Union Emissions Trading System (EU ETS) became operational in 2005, carbon leakage—the increases in emissions elsewhere due to the offshoring of emissions via imports—has been a concern for policymakers. Historically, the EU has addressed leakage concerns by providing support for energy-intensive, trade-exposed industries via free allocation of EU Allowances (EUAs) and a national indirect cost compensation system.
The free allocation system uses product-specific benchmark emissions values, expressed in tonnes of carbon dioxide (CO2) per unit of product. The amount of free allocation for each firm depends on its recent output and the benchmark emission values for the product it produces. The national indirect cost compensation system allows member states to provide funds to certain installations to compensate them for increases in electricity costs due to the EU ETS.
In 2023, the EU established the Carbon Border Adjustment Mechanism (CBAM) as a new tool to combat emissions leakage.[1] The CBAM applies carbon charges to imports of emissions-intensive goods while phasing out free allocations for EU producers. The mechanism was implemented in two phases. In the transitional phase, which lasted from 1 October 2023 to 31 December 2025, importers were required to report emissions, but no charges were applicable. In the definitive phase, which started on 1 January 2026, financial obligations for importers will be rolled out over a nine-year period.
A large body of academic studies has evaluated border carbon measures like the CBAM. Modelling studies generally find that leakage rates under unilateral climate policy are positive but modest, and that carefully designed border carbon levies can reduce them.[2],[3],[4] The welfare effects of border carbon measures, however, are mixed. Domestic producers often benefit from improved competitiveness, while consumers face higher prices. Macro models frequently show that though border carbon measures can reduce leakage, this is at a cost to welfare in both the imposing and targeted countries. Internationally, border carbon adjustments may disproportionately burden developing countries.[5] Some studies conclude that the CBAM may be a catalysis for the adoption of carbon prices in other jurisdictions.[6]

The CBAM Framework: An Overview
The CBAM specifies a phase-in of carbon charges on imports and a phase-out of domestic support. Carbon levies will apply to EU imports from all third countries, except those closely integrated with the EU’s carbon market (Iceland, Liechtenstein, Norway and Switzerland).[a] Under the system, importers of certain emission-intensive goods must purchase and surrender CBAM certificates related to the greenhouse gas (GHG) emissions embedded in those goods. The price of CBAM certificates is linked to the price of EUAs. If an exporter incurs a carbon cost in their home country, they can offset this against their CBAM obligation, which prevents emissions being charged twice. As EU producers are required to surrender EUAs for their emissions, the mechanism is intended to align EU and imported carbon costs.
Embedded emissions that count towards the CBAM include direct emissions (scope 1) and, for some products, indirect GHG emissions (scope 2). Direct emissions are gases released during the production process, such as on-site fuel combustion. Indirect emissions are GHGs from electricity generation for the production process. Emissions from the production of some input materials that are themselves included in the CBAM (known as precursors) are also included in the calculation of embedded emissions. Embedded emissions calculations are based on plant-level data or, if unavailable, European Commission default values.[7]
CBAM-covered goods include cement, iron and steel, aluminium, fertilisers, electricity, and inorganic chemicals (hydrogen, ammonia and derivatives). In the definitive phase, CBAM obligations for cement and fertilisers include both direct and indirect emissions. Other covered goods are only required to surrender CBAM certificates for direct emissions (and precursors, if applicable).
Coinciding with obligations for importers, free allocations for CBAM-covered products produced in the EU will be phased out by 2034 using a ‘CBAM factor’, which prescribes the proportion of free allowances received. The CBAM factor will fall sharply over the next eight years. Producers will receive 97.5 percent of the free allocation in 2026, 95.0 percent in 2027, 51.5 percent in 2030, 14.0 percent in 2033, and 0 percent in 2034.[8]
A key requirement for the mechanism to comply with World Trade Organization (WTO) rules is that imported goods face carbon costs comparable to those levied on EU producers. Accordingly, the CBAM factor is also to be used to adjust how much of the emissions embedded in imported goods are subject to the CBAM. The formula for each product is: Emissions subject to the CBAM = Embedded emissions – [EU benchmark] × [CBAM factor].[9]
If emissions embodied in an imported good equal the EU benchmark for that product, 2.5 percent of the embedded emissions will be subject to the CBAM in 2026. This CBAM obligation will rise as the CBAM factor falls, and is 2.5 percent in 2026, 5 percent in 2027, 48.5 percent in 2030, 86 percent in 2033, and 100 percent from 2034. The progressive rollout of the CBAM, the CBAM factor and the CBAM obligation (the percent of emissions embedded in imports subject to charges) is shown in Figure 1.
Figure 1: CBAM Factors and CBAM Obligations (%)

Source: European Union, “Regulation (EU) 2023/956”.[10]
In terms of indirect emissions, products for which indirect emissions are currently included in CBAM obligations (cement and fertilisers) are not included in indirect cost compensation systems. In the future, the CBAM may be extended to indirect emissions for more sectors.[11] Scholars have argued that if indirect emissions are more broadly included in the CBAM, the EU’s national indirect cost compensation payments should be reduced.[12] If indirect emissions are included for these sectors, reducing these compensation payments will likely be necessary to comply with WTO rules and avoid perceptions of unfairness. Failure to adjust compensations alongside the inclusion of indirect emissions in CBAM could undermine international climate cooperation and affect negotiation dynamics.
In December 2025, the EU released proposals to strengthen the efficacy of the CBAM, including expanding its scope to cover specific steel- and aluminium-intensive products and introduce additional anti-circumvention measures (e.g., by classifying pre-consumer scrap metal, such as aluminium offcuts, as a CBAM precursor).[13]

Impacts on Producers
As the CBAM specifies charges, it will impact producers both within and outside the EU through two channels. First, decreased support for EU producers and levies on imports will increase the prices that consumers pay for CBAM-covered goods, which will decrease EU demand for these products.
Second, as decreases in EU support and carbon charges depend on emission intensities, demand will shift from emission-intensive sources to less emission-intensive sources. This effect, ceteris paribus, will decrease demand for commodities produced by more emission-intensive producers and increase it for goods produced by less emission-intensive producers.
Considering both effects, demand for goods produced by firms with relatively high emission intensities will fall. Producers with relatively low emission intensities, however, could experience an increase in the demand for their products if the increase in their market share is sufficiently large.

Gulf Countries’ Exposure to CBAM
In 2023, the most recent year for which consistent data is available, the UAE exported US$2.7 billion worth of goods covered by the CBAM, more than any other GCC country. Bahrain had the next largest value of covered exports (US$1.3 billion), followed by Saudi Arabia (US$565 million), and Oman (US$400 million). Exports of CBAM-covered goods from both Kuwait and Qatar were less than US$1 million.[b]
Figure 2: GCC Exports of CBAM-Covered Goods to the EU (2023, US$ million)

Source: Author’s calculations based on data from the World Bank[14] and United Nations.[15]
Note: Other products include cement, fertilisers, and inorganic chemicals.
Accounting for economic size, the value of CBAM-covered exports from Bahrain was 2.89 percent of its Gross Domestic Product (GDP). The UAE (0.53 percent), Oman (0.38 percent), and Saudi Arabia (0.05 percent) had the next highest covered export values as a proportion of GDP. Corresponding values for Kuwait and Qatar were less than 0.0005 percent.[c]
The exposure of GCC countries is driven by aluminium exports. This commodity accounts for 99.2 percent of Bahrain’s exports of in-scope goods, and between 68.1 percent and 75.3 percent of covered exports from the UAE, Oman, and Saudi Arabia. The importance of aluminium for GCC countries is reiterated by global production rankings. Although global aluminium production is dominated by China—which accounted for 59 percent of world production in 2024—the UAE is the world’s seventh-largest producer of aluminium, Bahrain the ninth, and Saudi Arabia the thirteenth.[d],[16]

Aluminium and CBAM
Aluminium products covered by the CBAM include unwrought aluminium (aluminium in a basic form that has not been processed into finished products), bars, sheets, plates, foil, tubes/pipes, certain fitted tubes, and articles of aluminium. For covered aluminium products, the embedded emissions factored into CBAM calculations include direct emissions and precursor emissions from unwrought aluminium, if it is used as an input.[17] As noted above, indirect emissions from electricity used in the production of aluminium are not currently included.

Aluminium Production
Unwrought aluminium can be produced by primary and secondary routes. Production via the primary route involves mining bauxite, refining it into alumina (also known as aluminium oxide), and then smelting it using carbon anodes (blocks of carbon) and electrolysis to get aluminium. For CBAM purposes, direct emissions from primary aluminium production include CO2 emissions from the consumption of carbon anodes and perfluorocarbons released during the smelting process (‘anode effects’). Emissions from the production of alumina and carbon anodes are not currently included in embedded emissions calculations, as they are considered raw materials.[18] Indirect emissions for primary aluminium can account for up to 80 percent of total emissions,[19] as aluminium smelting requires large amounts of electricity. But, as noted above, they are not currently included in the CBAM.
In the secondary route, aluminium is made by melting and refining scrap aluminium. In CBAM calculations, direct emissions from secondary aluminium arise from fuels used in scrap preparation and processing and precursor emissions from inputs of any unwrought aluminium.[20]
Although the CO2 intensity of secondary aluminium is significantly lower than that of primary aluminium, limited scrap supply means that primary aluminium is needed to meet global demand. In 2024, for instance, primary aluminium accounted for 66 percent of global production and secondary aluminium 34 percent.[21] The shares of secondary aluminium in total production in Bahrain (4 percent), Saudi Arabia (9 percent) and the UAE (3 percent) are significantly lower than those in the EU27 (84 percent), China (20 percent) and India (30 percent).[22] Consequently, this brief focuses on the impact of the CBAM on producers of primary aluminium.
The impact of the CBAM on GCC producers will depend on the CO2 intensity of their aluminium production relative to their competitors. A 2025 study by Hasanbeigi and Springer estimates the CO2 intensity of aluminium production in major producing countries/regions.[23] Using these estimates, this brief calculates the ‘CBAM CO2 intensity’ of primary aluminium production, where CBAM CO2 intensity is the amount of CBAM-covered emissions, measured in tonnes of carbon dioxide equivalent (CO2e) per tonne of aluminium (t Al).[e]
As per these calculations, the CBAM CO2 intensities of primary aluminium in Bahrain, the UAE, and Saudi Arabia are estimated to be between 1.60–1.65 tCO2e/t Al.[f]  The CBAM CO2 intensities for GCC countries are similar to that for the EU27 (1.65), lower than those for China (2.28) and India (1.75), but slightly higher than those for Norway (1.53) and Iceland (1.59).
These estimates indicate that, in the EU market, the CBAM will increase the price of aluminium from GCC countries (due to border charges) and the EU (due to reduced free allocations) by about the same amount and will increase the cost of aluminium from China and India by a relatively larger amount. The CBAM will give a price advantage to aluminium from Norway and Iceland, but as these nations account for a relatively small share of global production and nearly all their aluminium production is already exported to the EU, this will have a minor market impact. Overall, there is scope for GCC aluminium producers to increase their EU market share, though this may not be enough to offset the CBAM-induced decrease in EU demand for aluminium.
This brief also calculates illustrative CBAM levies for select countries/regions by combining CBAM CO2 intensities with EUA projections by the Dutch bank ABN AMRO.[24] Forecasts indicate EUA prices will rise steadily, from 93 euro (US$109) in 2026 to 188 euro (US$220) in 2034 (Figure 3). Concurrently, CBAM charges for GCC countries will rise from US$4/t Al in 2026 to nearly US$350 in 2034. Assuming an aluminium price of US$2750/t Al, these levies will equate to ad valorem charges of 0.2 percent in 2026 and 12.7 percent in 2034. These figures indicate that the initial impacts of the CBAM will be relatively small but will increase sharply over time.
Figure 3: Illustrative CBAM Charges, US$/t Al

Source: Author’s calculations, based on Hasanbeigi and Springer’s calculation of CO2 intensities of aluminium production[25] and projected EUA prices from ABN AMRO.[26]
The estimates above are intended to provide order-of-magnitude indications and are sensitive to underlying assumptions, including the path of EUA prices and changes in EU and global aluminium demand. However, the central conclusion that CBAM levies will be modest initially but will increase sharply over the phase-in period appears robust across a range of plausible assumptions.

Indirect Aluminium Emissions
As indirect emissions account for a large share of aluminium production, they may be included in the CBAM in the future. With indirect emissions included, the CO2 intensity of primary aluminium production in Bahrain and the UAE is around 7.1 CO2e/t Al, while that in Saudi Arabia is about 10.0.[g]  These numbers are lower than the CO2 intensity of aluminium production in China (12.0) and India (13.8). The key driver of these differences lies in the electricity used in the production process. India and China rely on electricity from coal, while GCC countries mainly use gas-fired electricity.
Meanwhile, the CO2 intensity of primary aluminium production in the EU when indirect emissions are included is 5.0 CO2e/t Al. This reflects the large proportion of low-carbon electricity generation in the region. Yet, although this intensity is lower than that of GCC countries, it does not necessarily mean that the CBAM will advantage EU producers. This is because national indirect cost compensation schemes use the “marginal plant approach,” in which compensation calculations typically use CO2 emissions factors of fossil fuel plants rather than actual electricity CO2 factors.[27] An indication that electricity payments are substantial is that European Aluminium, a member-based industry association, supports the exclusion of indirect aluminium emissions from the CBAM.[28] Consequently, EU producers could face substantial decreases in domestic support if indirect emissions were included in the CBAM and indirect cost compensations were wound down.
Secondary Aluminium and Resource Shuffling
The average CO2 intensity of secondary aluminium is 0.5 tCO2/t Al, with only small variations across producers.[29] As this is significantly lower than that of primary aluminium, the CBAM creates incentives for resource shuffling—the export of secondary aluminium to the EU, while primary aluminium is diverted to other markets. Current or proposed measures under the CBAM do not track firm-wide production portfolios or constrain exports of high-carbon aluminium to third markets. This leaves scope for significant resource shuffling.
Decarbonisation Initiatives
The above estimates for CBAM CO2 intensities and carbon charges reflect operations in 2023. As part of broader national strategies, GCC aluminium producers have ambitious plans to transition to clean energy, improve energy efficiency, and increase secondary aluminium production. Several of these green transformation initiatives are also motivated by the CBAM.[30]
 Emirates Global Aluminium, for example, plans to reduce its CO2 intensity by 25 percent by 2035 (relative to 2020), and to reach net zero by 2050.[31] In Saudi Arabia, key efforts to lower the CO2 intensity of aluminium include building the world's largest solar process steam plant to reduce refinery emissions, expanding recycling, and collaborating internationally on developing low-carbon smelting technologies to achieve carbon neutrality by 2050.[32] Aluminium Bahrain has stated that its decarbonisation efforts align with the national strategy to reduce GHG emissions by 30 percent by 2035 (relative to 2019), and achieve net zero by 2060.[33] Effective implementation of these strategies will be key to minimising the impact of the CBAM on GCC countries.

Conclusion
The EU’s CBAM entered its definitive phase on 1 January 2026. From this date, imports of covered goods face carbon charges that rise rapidly over time. At the same time, free allocations for domestic producers under the EU ETS are being phased out. The mechanism, therefore, affects both imported and EU-produced goods.
The initial impacts of the CBAM will be modest. This reflects the low initial coverage of embedded emissions and relatively limited CBAM obligations in the early years. Effects will, however, intensify over the next eight years as the CBAM is phased in and EUA prices are projected to rise.
For GCC countries, exposure to the CBAM is highly concentrated in aluminium. Bahrain and the UAE are particularly exposed in both absolute terms and relative to GDP. Saudi Arabia and Oman face more moderate exposure, while Kuwait and Qatar are largely unaffected.
Under current rules, only direct and precursor emissions from aluminium are covered. On this basis, the CO2 intensity of GCC aluminium production is similar to that of the EU and lower than that of China and India. As a result, CBAM-related price increases for GCC aluminium exports to the EU are comparable to those faced by EU producers and lower than those applied to some major competitors. This creates some scope for GCC producers to maintain or increase EU market share, although this may not offset the overall decline in EU demand.
The outlook would change materially if indirect emissions from electricity use were included in the CBAM. In that case, carbon charges on GCC aluminium exports would rise substantially. GCC producers would still be advantaged relative to those in China and India, who mainly rely on coal-fired electricity, but they will be disadvantaged relative to EU producers. The impact on competitiveness would depend critically on whether EU indirect cost compensation schemes are reduced in parallel. If compensation remains in place, GCC producers could be placed at a considerable disadvantage.
The CBAM also creates incentives for resource shuffling towards secondary aluminium, which has a much lower CO2 intensity. As GCC aluminium is mostly primary aluminium, global resource shuffling would see GCC aluminium exports to the EU diverted to other markets.
With the definitive phase of the CBAM in effect, decarbonisation and market-diversification strategies will be central to outcomes for GCCs. Ongoing investments in clean electricity, energy efficiency, and recycling will reduce future CBAM liabilities and help preserve market access. While the CBAM poses challenges, it has already acted as a catalyst for green transformation in the GCC aluminium sector. Gulf countries may also respond to the CBAM by implementing domestic carbon pricing for some products.
Looking ahead, other EU climate policies, including the Emissions Trading System 2 (ETS2), which covers emissions from fuels used in transport and buildings, may ultimately pose a larger risk to GCC economies than the CBAM.



Niven Winchester is Senior Fellow, ORF Middle East.



All views expressed in this publication are solely those of the author, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel. 

Endnotes
[a] Iceland, Liechtenstein, and Norway participate in the EU ETS, and Switzerland has an ETS linked to the EU ETS
[b] The trade data are from the United Nations Commodity Trade Statistics (UN Comtrade) Database (United Nations, 2025) and are extracted from the World Integrated Trade Solution (WITS) database (World Bank, 2025) at the Harmonised System six-digit level and then assigned to the commodities listed in Table 1.
[c] Abdou et al. (2025) include both trade exposure and emissions intensity in calculating CBAM exposure and reach similar conclusions. Specifically, they find that the UAE has the most emissions exposed to CBAM, while Oman has the greatest burden as a percent of GDP.
[d] In global ranking calculations, the 27 member states of the EU are included in one region.
[e] The CBAM CO2 intensity estimates are approximated from Figure 9 in Hasanbeigi and Springer (2025) and exclude emissions from alumina production, which is not covered in the CBAM.
[f] Hasanbeigi and Springer (2025) do not include estimates for Oman. As GCC countries using similar aluminium production process, the CO2 intensity for Oman is likely similar to that for other GCC countries.
[g] Like direct CO2 intensity calculations, these numbers are estimated from Figure 9 in Hasanbeigi and Springer (2025).
[1] European Union, “Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 Establishing a Carbon Border Adjustment Mechanism (Text with EEA Relevance),” Official Journal of the European Union, 130/52, May 16, 2023, https://eur-lex.europa.eu/eli/reg/2023/956/oj.
[2] Niven Winchester, Sergey Paltsev, and John M. Reilly, “Will Border Carbon Adjustments Work?,” The B.E. Journal of Economic Analysis & Policy 11, no. 1 (2011): 1–29, https://doi.org/10.2202/1935-1682.2696.
[3] Frédéric Branger and Philippe Quirion, “Would Border Carbon Adjustments Prevent Carbon Leakage?,” Energy Economics 46, 2014, 61–70, https://doi.org/10.1016/j.ecolecon.2013.12.010.
[4] Jie Zhong and Jun Pei, “Carbon Border Adjustment Mechanism: A Systematic Literature Review of the Latest Developments,” Climate Policy 24, no. 2 (2023): 228–42, https://doi.org/10.1080/14693062.2023.2190074.
[5] Christoph Böhringer, Edward J. Balistreri, and Thomas F. Rutherford, “Carbon Policy and the Structure of Global Trade: Distributional Impacts of Border Carbon Adjustments,” World Economy 41, no. 1 (2018): 194–214, 194–221, https://doi.org/10.1111/twec.12535.
[6] Michael A. Mehling, Geoffroy Dolphin, and Robert A. Ritz, “The European Union’s CBAM: Averting Emissions Leakage or Promoting the Diffusion of Carbon Pricing?,” Journal of Environmental Policy & Planning 27, no. 6 (2025): 687–705, https://doi.org/10.1080/1523908X.2025.2591794.
[7] Directorate-General for Taxation and Customs Union, European Commission, “Guidance Document on CBAM Implementation for Installation Operators Outside the EU,” 2023, https://taxation-customs.ec.europa.eu/system/files/2023-12/Guidance%20document%20on%20CBAM%20implementation%20for%20installation%20operators%20outside%20the%20EU.pdf.
[8] European Commission, “Guidance Document on CBAM Implementation”.
[9] European Commission, “Carbon Border Adjustment Mechanism (CBAM): Questions and Answers,” July 19, 2024, https://sede.agenciatributaria.gob.es/static_files/Sede/Tema/Aduanas/Mercancias_trat_especial/CBAM/CBAM_FAQ_1721664049.pdf.
[10] European Union, “Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 Establishing a Carbon Border Adjustment Mechanism (Text with EEA Relevance)”.
[11] European Union, “Regulation (EU) 2025/2083 of the European Parliament and of the Council of 8 October 2025 Amending Regulation (EU) 2023/956 as Regards Simplifying and Strengthening the Carbon Border Adjustment Mechanism (Text with EEA Relevance),” Official Journal of the European Union, 2025/2083, October 17, 2025, https://eur-lex.europa.eu/eli/reg/2025/2083/oj.
[12] “A CBAM without Indirect Emissions? A Half‑Built Bridge to Decarbonisation,” Bellona Europa, June 23, 2025, https://eu.bellona.org/2025/06/23/a-cbam-without-indirect-emissions-a-half-built-bridge-to-decarbonisation/.
[13] European Commission, https://ec.europa.eu/commission/presscorner/detail/en/ip_25_3088.
[14] “World Integrated Trade Solution (WITS),” World Bank, https://wits.worldbank.org.
[15] “United Nations Commodity Trade Statistics Database (UN Comtrade),” United Nations Statistics Division, http://www.comtrade.un.org.
[16] Ali Hasanbeigi and Cecilia Springer, “Aluminum Climate Impact 2025: An International Benchmarking of Energy and CO₂ Intensities,” Global Efficiency Intelligence, 2025, https://www.globalefficiencyintel.com/aluminum-climate-impact-2025-an-international-benchmarking-of-energy-and-co2-intensities.
[17] European Commission, “Guidance Document on CBAM Implementation”.
[18] European Commission, “Guidance Document on CBAM Implementation”.
[19] “US Aluminium Smelting and Energy Costs: 3 Key Growth Factors,” Fastmarkets, October 21, 2025, https://www.fastmarkets.com/insights/us-aluminium-smelting-and-energy-costs-3-key-growth-factors/.
[20] European Commission, “Guidance Document on CBAM Implementation”.
[21] Hasanbeigi and Springer, “Aluminum Climate Impact 2025: An International Benchmarking of Energy and CO₂ Intensities”.
[22] Hasanbeigi and Springer, “Aluminum Climate Impact 2025: An International Benchmarking of Energy and CO₂ Intensities”.
[23] Hasanbeigi and Springer, “Aluminum Climate Impact 2025: An International Benchmarking of Energy and CO₂ Intensities”.
[24] ABN AMRO, “ESG Economist - Scenarios Shaping EU ETS Prices,” September 16, 2025, https://www.abnamro.com/research/en/our-research/esg-economist-scenarios-shaping-eu-ets-prices.
[25] Hasanbeigi and Springer, “Aluminum Climate Impact 2025: An International Benchmarking of Energy and CO₂ Intensities”.
[26] ABN AMRO, “ESG Economist – Scenarios Shaping EU ETS Prices.”
[27] European Commission, "Guidelines on Certain State Aid Measures in the Context of the System for Greenhouse Gas Emission Allowance Trading Post-2021 (Text with EEA Relevance)," Official Journal of the European Union C 317 (September 25, 2020): 5–22, eur-lex.europa.eu(01).
[28] European Aluminium, European Aluminium Position Paper on CBAM, April 23, 2025, https://european-aluminium.eu/wp-content/uploads/2025/04/2025-04-23-European-Aluminium-Position-Paper-on-CBAM.pdf.
[29] Hasanbeigi and Springer, “Aluminum Climate Impact 2025: An International Benchmarking of Energy and CO₂ Intensities”.
[30]  “Gulf Aluminium Producers Push for Green Transformation Amid EU Carbon Tax Pressure,” GCC Business Watch, October 14, 2024, https://gccbusinesswatch.com/news/gulf-aluminium-producers-push-for-green-transformation-amid-eu-carbon-tax-pressure/.
[31] Emirates Global Aluminium (EGA), EGA 2024 Sustainability Report 2024, https://www.ega.ae/media/csdg3lpg/ega-2024-sustainability-report.pdf.
[32] “Saudi Ma’aden, GlassPoint Seek to Build World’s Largest Solar Powered Steam Plant,” Arab News, June 5, 2022, https://www.arabnews.com/node/2096826/business-economy.
[33] Aluminium Bahrain (Alba), Powering a Sustainable Future: ESG Report 2024, https://www.albasmelter.com/en/esgreport/index.html.

### Japan’s Energy Dilemma in An Era of Volatility

Energy shocks are once again rippling across global markets and Asia sits on the front line.

The escalating conflict in the Middle East has already triggered the largest surge in global natural gas prices since the Russia-Ukraine conflict in 2022. For Asia’s import-dependent economies, the risks are immediate: Roughly 87% of crude oil and 86% of liquefied natural gas transiting the Strait of Hormuz is bound for Asian markets.

The disruption is already visible in shipping routes and prices. Major Japanese LNG shipping operators including Nippon Yusen, Mitsui O.S.K. Lines and Kawasaki Kisen Kaisha have instructed vessels to avoid or wait near the Persian Gulf as security risks rise. As Asian buyers scramble for replacement cargoes on the spot market, the cost of transporting LNG from the Atlantic basin to Asia has surged to around $264,000 per day, roughly six times higher than in late February.

Prime Minister Sanae Takaichi confirmed that the country holds about 254 days of strategic oil reserves, a cushion designed to withstand supply disruptions. Electricity supply, however, is far more exposed.

Between 30% to 40% of Japan’s power generation relies on LNG, yet the country maintains only two to three weeks of LNG feedstock for electricity generation. In an increasingly volatile geopolitical environment, this dependence turns fuel supply into a question of national security rather than simply one of energy economics.

Japan’s reliance on Middle Eastern stability runs deeper than direct imports. The country has not purchased crude oil from Iran since 2019 after U.S. sanctions were imposed, yet much of the oil and LNG shipped to Japan still passes through the Strait of Hormuz.

Japan's LNG imports from the Middle East — specifically Qatar, Oman and the UAE — make up 11% of its total. In an interconnected gas market where many long-term LNG contracts are indexed to crude benchmarks, instability in the Middle East translates into higher costs for Asian consumers, even when physical supply remains intact.
Japan retired nearly 1,200 megawatts of coal-fired capacity over the past three years without adding new units, limiting the extent to which coal can offset rising gas prices.
This comes at a moment when, after more than a decade of forecasts predicting declining energy consumption, the country’s latest Strategic Energy Plan now anticipates electricity demand rising by around 5.8% by 2034 compared with 2024 levels.

Higher LNG prices are already creating knock-on effects across regional energy markets. As gas becomes more expensive, utilities in Japan are exploring whether some power generation can switch back to higher-grade thermal coal, a shift that has already pushed up seaborne coal prices. On the other hand, Japan retired nearly 1,200 megawatts of coal-fired capacity over the past three years without adding new units, limiting the extent to which coal can offset rising gas prices.

The energy turmoil also comes at a politically sensitive moment for Japan. Takaichi is facing a major economic test as surging global energy prices threaten to feed into higher electricity bills and inflation at home. Japan imports almost all of its energy, meaning that volatile fuel prices combined with a weak yen could quickly raise costs for households and industry. For a government that campaigned on easing the burden of rising living costs, the sudden resurgence of energy price shocks underscores how tightly Japan’s economic stability remains tied to global fuel markets.

The United States has been increasing LNG exports to Japan, accounting for roughly 8.7% of imports in 2024. The latest disruption could push Japan to rely more heavily on U.S. LNG imports.

At the same time, the crisis may reinforce Tokyo’s continued participation in Russia’s Sakhalin-2 LNG project, which still supplies around 9% of Japan’s LNG. Japanese policymakers have repeatedly argued that maintaining stakes in Sakhalin remains essential for energy security because of its geographic proximity and lower transport costs. The question now is whether Japan’s next phase of energy security will focus on reshaping LNG supply chains or on reducing dependence on them.

In this context, attention inevitably returns to nuclear power, a source Japan largely abandoned after Fukushima but which now sits at the center of the country’s energy security debate.

Takaichi already signaled support for expanding the role of nuclear energy, while Yuichiro Tamaki, leader of the Democratic Party for the People, recently argued that Japan should operate all available nuclear reactors to offset the economic impact of the Iran conflict and rising electricity prices. Such calls suggest that rising energy security concerns may create rare areas of cross-party alignment in Tokyo, even as local opposition and regulatory scrutiny continue to complicate reactor restarts.

The timing is also symbolically charged. This month marks the 15th anniversary of the Fukushima No. 1 nuclear power plant disaster, an event that reshaped Japan’s energy policy and public attitudes toward nuclear power for more than a decade. Japan’s latest Strategic Energy Plan envisions nuclear energy providing around 20% of electricity generation by 2040. Recent polling also indicates that a majority of Japanese respondents now support restarting reactors that meet post-Fukushima safety standards, reflecting growing concern over energy security and electricity prices.
Niigata Prefecture’s Kashiwazaki-Kariwa plant, the world’s largest nuclear-power station, faced years of regulatory scrutiny and local political resistance despite repeated efforts to restart its reactors.
In practice, however, expanding nuclear generation remains far from straightforward. Of the 33 reactors technically operable in Japan today, only 15 have restarted. Even those that eventually resumed operations illustrate how slow the process can be.

Niigata Prefecture’s Kashiwazaki-Kariwa plant, the world’s largest nuclear-power station, faced years of regulatory scrutiny and local political resistance despite repeated efforts to restart its reactors. Another nine reactors across Japan have applied for restart approval but face uncertain timelines as safety reviews and local negotiations continue. The gap between policy ambition and operational reality limits how quickly nuclear energy can reduce Japan’s reliance on imported LNG.

Expanding renewable power remains central to Japan’s long-term strategy for reducing energy vulnerability. Meeting the country’s clean power ambitions could require around ¥38 trillion in investment by 2035 to expand renewable generation and strengthen electricity infrastructure.

Scaling domestic clean energy would reduce exposure to volatile fuel imports while supporting the electrification of data centers, semiconductor manufacturing and other strategic industries expected to drive Japan’s next phase of economic growth. Achieving this will require faster permitting, grid expansion and clearer policy alignment that treats clean energy infrastructure as a strategic national asset rather than merely an environmental objective.

Taken together, the latest geopolitical shock exposes a deeper tension in Japan’s energy strategy. Electricity demand is rising again, LNG markets remain volatile, nuclear restarts are progressing slowly and renewable expansion requires vast investment and policy coordination.

Japan therefore finds itself again at an energy crossroads. Continuing to rely on global LNG markets leaves the country vulnerable to geopolitical shocks, yet reducing that dependence will require accelerating nuclear restarts, renewable deployment and grid investment simultaneously.

Energy security for Japan will increasingly be defined not by how successfully it navigates the global fuel market, but also by how quickly it can redesign its power system to depend less on it.



This commentary originally appeared in The Japan Times.

### Syria’s Economy Remains on Life Support – a Recovery is Not in Sight

An assessment of Syria’s trajectory 14 months after the fall of the Assad regime requires a shift in direction, from the cessation of conflict to state-building. The current discourse has focused heavily on narratives of global support for President Ahmed al-Sharaa and large investment pledges by the Gulf countries to stabilise the country. However, there is a dissonance between international diplomatic signalling and empirical macro-economic constraints on the ground. Understanding the granular mechanics of this transition is essential to identifying the structural blockages that might be preventing a genuine recovery in Syria.
Negative Stabilisation and Bootstrapped Recovery
The current environment in Syria is best understood as a state of "negative stabilisation". This is a fragile equilibrium where the absolute collapse of the state has been averted, yet the foundational institutional prerequisites for sustainable renewal are missing. There have, however, been crucial localised developments. The removal of rent-extracting Assad-era security checkpoints and the unification of previously fragmented internal tariffs have eased domestic trade. By eliminating the toll mechanisms, the logistical friction historically imposed on internal supply chains has drastically reduced. This direct reduction in transportation costs prevents the artificial inflation of the prices of basic commodities, enabling basic goods to reach urban markets at fairer prices, which actively stimulates latent domestic demand. This has provided some localised economic stimulus, allowing basic commerce to circulate across the country.

However, over one million refugees and an estimated two million internally displaced persons (IDPs) are returning to their communities in Syria, which is increasing the demographic pressure on the country. These pressures can manifest as severe strains on already weak municipal infrastructure and a demand-side shock for basic provisions. Consequently, the localised economic stimulus generated by the easing of internal trade can be rapidly absorbed and largely offset by this population surge, leading to marginal supply-side improvements being swallowed by consumptive needs. This dynamic further thrusts the Syrian economy into a weak equilibrium, making it inherently unstable.

Magnifying these challenges is the fact that there is no centralised external guarantor willing to completely underwrite Syria’s reconstruction. The most plausible candidate would not be a singular global superpower, but rather a regional coalition spearheaded by Gulf sovereign wealth — specifically Saudi Arabia, which facilitated the initial conversation between US President Donald Trump and Mr al-Sharaa. This absence of a guaranteed financial backstop has given rise to what can — optimistically — be termed a “bootstrap model” of endogenous recovery.

An important engine of Syria’s decentralised stabilisation has been diaspora remittances, which the Syrian Central Bank has described as a “lifeline” for the economy. Estimates suggest remittance inflows stood at US$4 billion annually in 2025, accounting for 15-20 per cent of the unofficial GDP. In the immediate post-conflict period, these transfers primarily financed basic consumption like food, fuel, and rent. However, recent local reporting indicates that Syria’s micro-, small- and medium-sized enterprises are witnessing a revival, especially after sanctions were rolled back. While systematic data on this structural shift remains limited, qualitative evidence suggests that diaspora capital is playing a growing role in localised economic reactivation in the absence of formal credit markets.

Despite these small wins, an estimated 90 per cent of the Syrian population remains mired in poverty, and the formal financial system is effectively crippled by a severe liquidity crisis. These issues were laid bare in February 2025, when the Central Bank had to fly in reserve banknotes from Russia to maintain circulation. According to World Bank reporting, this liquidity crunch has resulted in weekly bank withdrawal limits of approximately US$38 for ordinary Syrians, which dampens economic activity.

This financial triage has successfully secured a baseline of societal survival, but, at best, has led to negative stabilisation — the macro-economic reality still presents a severe challenge. The World Bank estimates that Syria’s physical reconstruction will require a staggering US$216 billion in capital expenditure. This is 10 times Syria’s GDP, which is an estimated US$21.4 billion. While the endogenous bootstrap model has established a fragile economic floor and shielded the population from immediate crisis, Syria is structurally and institutionally incapable of scaling. Addressing a US$216 billion reconstruction bill requires a fundamental shift in international de-risking mechanisms and domestic governance, a shift that current geopolitical trends do not yet support. Therefore, this "bootstrap" dynamic does not necessarily lead to a genuine macroeconomic recovery, but can be understood as a survival mechanism born of necessity. Endogenous, localised capital will find it difficult to bridge the country’s infrastructural deficit and therefore, without significant external institutional funding, Syria might remain trapped in a low-level equilibrium of mere subsistence.
Low-Level Economic Equilibrium
The core challenge facing the Syrian political economy is its inability to transition from informal survival to formalised macro-economic recovery, leading to a low-level economic equilibrium — stagnation. This stagnation is driven by three main issues.

First, there is a vast gap between geopolitical pledges and actual capital deployment. The narrative of Syrian reconstruction is currently driven by headlines about mega-investments. President al-Sharaa has claimed that the transitional state has attracted US$28 billion in foreign investments over a 10-month period. This includes a US$14 billion package announced in August 2025, and a subsequent US$5.3 billion framework of bilateral agreements signed with Saudi Arabia in February 2026 covering aviation, telecommunications, and water infrastructure.  However, the deployment gap tells a different story. These deals are often criticised as taking the form of non-binding Memoranda of Understanding (MoUs) that lack enforceable legal frameworks. The reality is that the actual disbursement of institutional foreign direct investment remains unclear in public reporting, and highly limited relative to headline pledges. Capital is being pledged for regional stability, but translating this into bankable, executed projects remains uneven.

Second, Syria suffers from a profound sovereignty deficit. National economic integration has proven difficult because of territorial fragmentation. The interim government does not exercise control over the entire country, with pockets of the north-east still under the control of ethnic Kurdish-led Syrian Democratic Forces (SDF), while areas south of Damascus are controlled by members of the Druze religious minority. In the north-east, while a framework was reached to integrate SDF structures into the national institutions, the agreement has proven hard to implement. The interim government has reportedly taken over of Syria’s largest oilfields, but continued inter-communal violence underscores how fragile the transition remains. This fragmentation leads to uncertainty over resource collateral and the fiscal insolvency of the central government.

Third, the residual architecture of international sanctions maintains a legal quarantine around the formal economy. While the US terminated broad sanctions and also repealed the Caesar Act (an American law imposing severe sanctions on members of the Syrian regime), Syria remains on the Financial Action Task Force’s (FATF) “grey-list”, a designation highlighting systemic vulnerabilities regarding money laundering and terrorist financing. As a result, global banks and investors remain sceptical about the safety of their assets in Syria, leaving the country disconnected from normal global banking and investment channels.

Evaluating this "bootstrap" model yields a bifurcated verdict. As a survival mechanism, it has worked. It has functioned as a resilient system, preventing famine, absorbing over three million returning refugees and IDPs, and establishing a certain degree of localised commercial stability. However, as an engine for macro-reconstruction, it has failed. An informal cash economy cannot bootstrap a US$216 billion infrastructural deficit.

Ultimately, Syria’s economic paralysis is also a direct symptom of its political fracture. A foundational axiom of political economy is that sustainable macro-economic developments are inevitably tethered to political stability. Large-scale capital investment demands the certainty of a consolidated state and the rule of law. Until this foundational political stability is achieved, the prospect of transitioning Syria from a fragile survival economy more akin to a failed state to a developing nation will remain in limbo.



This commentary originally appeared in National University of Singapore.

### The Hidden Costs of US-Israel-Iran Conflict

Amid the ongoing US-Israel conflict with Iran, renewed tensions at key maritime chokepoints have once again added pressure on crucial global supply chains. With disruptions at the Strait of Hormuz—the prime maritime link between the Gulf and world economy— the traffic of global oil, liquified natural gas and fertiliser has been severely impacted. According to UNCTAD, about 38 percent of crude oil, 13 percent of chemicals such as fertilisers and 2.4 percent of dry bulk including grains get transported via the Strait of Hormuz. With the rise in natural gas prices, there has been a substantial increase in prices of select nitrogenous fertilisers, which worsens their access especially to least developed countries such as Sudan, Somalia, Tanzania and Mozambique. Data also indicates that Asia remains highly dependent on Gulf fertiliser exports, fuelling widespread risks to agricultural production in the year ahead. As the world’s largest importer of urea and diammonium phosphate (DAP), India is already looking to diversify purchases from countries such as Indonesia, Belarus, Russia and China. With increasing input costs, the risk of double food inflation heightens globally as a result of rising farming costs and supply-side shortage in food production. Any further extension of the conflict bears spillover consequences for global food supply chains and water availability for West Asia, potentially exacerbating food and water insecurity.

With disruptions at the Strait of Hormuz—the prime maritime link between the Gulf and world economy— the traffic of global oil, liquified natural gas and fertiliser has been severely impacted. 
The closure of the Strait of Hormuz exposes the fragility of the Middle East’s entrenched dependencies on food imports and singular trade corridors. Although lessons from prior global shocks have led to an uptick in domestic food storage capacities and diversified trade routes, these strategies are not immune to mounting logistical pressures. All GCC states reportedly have built strategic reserves to withstand crises for up to 6 months. However, not all GCC countries have geographic access to alternative shipping routes for food imports. Saudi Arabia’s access to the Red Sea and Oman’s ports on the Arabian Sea provide partial buffers, but countries without this advantage would need to rely on re-exports from Saudi Arabia or Oman. GCC countries are actively carving alternate sea-road gateways, but these options are unlikely to be sustainable in the long-term, lacking capacity to absorb full trade diversion and already facing bottlenecks. With other food imports rerouted through the Cape of Good Hope, fuel and transport costs surge in tandem, translating to higher food prices down the road.
Water presents another looming point of concern, surfacing through attacks on physical infrastructure and silently embedded within food trade patterns. Recent attacks on desalination facilities in Bahrain and Iran call into question the sustainability of highly centralised water management and distribution strategies, especially since GCC countries rely on desalination for up to 90 percent of freshwater needs. Beyond kinetic attacks, another concern lies in the long-term implications for virtual water imports. As a water-scarce region, the GCC heavily relies on imports of water-intensive products like meat and cereals from water-abundant nations like Brazil and India. If the conflict ensues beyond grain storage thresholds and encroaches into global harvest seasons, the Gulf risks, at least temporarily, losing a portion of its water budget. With rising global fertiliser prices and heightened climate impacts in producer economies, future crop yields may weaken and key exporters outside of the region may be pressured to halt food exports, as they previously did during the Russia-Ukraine conflict.
The conflict risks creating reverberating effects for its Middle East and North Africa and South Asian (MENASA) neighbors’ food security. If the Gulf chooses to increase its agricultural imports from MENA countries like Morocco, Egypt, Sudan, and Jordan, this would incite higher domestic food inflation, exacerbating previously elevated levels from the Russia-Ukraine War and COVID-19 pandemic. Furthermore, the Gulf is home to migrant workers from India, Bangladesh, and Pakistan, where remittances compose between 3.4 to 9.4 percent of their national GDP. Even nationals from Egypt, Yemen, and Sudan would be affected, as remittances compose between 7.6 - 15 percent of their GDP.  Uncertainty in migrant earnings from Gulf workers or the ability to secure work contracts has the potential to reduce income sent home, straining household food security.

With the food and energy supply chains closely interwoven, energy disruptions through the Strait of Hormuz have led to surges in crude oil prices, fertiliser shortages, and increased logistics costs, thereby fueling inflation and raising retail food prices. 
The conflict in West Asia has a far-reaching impact on global food and agricultural supply chains. With the food and energy supply chains closely interwoven, energy disruptions through the Strait of Hormuz have led to surges in crude oil prices, fertiliser shortages, and increased logistics costs, thereby fueling inflation and raising retail food prices. High fertiliser costs are likely to have a detrimental impact on farmers worldwide, as they face thin profit margins, often leading them to choose less input-intensive crops. The chokepoint has also led to the falling out of several export deals for agricultural goods across nations. About 400,000 metric tonnes of Indian basmati rice have been held up at ports due to rising freight costs. This largely affects the top five importers of Indian basmati rice, including Saudi Arabia, Iran, Iraq, the UAE, and Yemen. Additionally, about 200 containers of perishable goods from India, such as onions, bananas and grapes, were stranded in ports and holding zones with uncertain outcomes. Similarly, oil price spikes after the conflict have a serious impact on Brazil’s ethanol-sugar demand—driving up prices of the basic food essential. On the other hand, high logistics costs also increase the risk of higher global grain prices and reduced availability, as Brazil remains the largest supplier of corn and soybeans. For Sri Lanka’s tea industry, the conflict has disrupted key shipping consignments of Ceylon tea to the Gulf region, resulting in reduced prices for Sri Lankan farmers. In Australia, oil price surges have raised concerns about food shortages, following farmers’ inability to transport food across the nation. The country faces the risk of “going back to 1940” in terms of rationing to counter food shortages caused during World War II.
For West Asia, the global food supply chain disruption underscores the need to explore multi-origin procurement systems for grains, edible oil and pulses by securing supply chains across South Asia, Europe, East Africa and Latin America. In addition, investing in building last-mile inland distribution systems and dedicated food corridors can improve connectivity to alternative ports. Globally, food security-centric trade agreements must be encouraged to reduce the risk of global food inflation and enable farmers worldwide to fetch fair prices for their produce by expanding market access. The WTO Trade Dialogues on Food concluded that “trade in food is a moral obligation,” underscoring that the multilateral trading system is pivotal to preventing a collapse in global food supplies. Trade Facilitation Agreements in the food sector can address long-standing concerns such as tariff escalation, export bans, and the need for standardised, fast-tracked, and transparent regulations on traceability, quality, and phytosanitary measures, especially during a global crisis. Moreover, FAO proposes a Food Import Financing Facility (FIFF) as an emergency financing mechanism for eligible food-import-dependent countries by providing balance-of-payment support for essential food imports during a global crisis, allowing the countries to keep importing through normal commercial channels.
Commodity market exchanges could further help manage risks for farmers and importers by allowing flexibility, providing symmetric information and avoiding panic selling. A heavy dependence on global supply chains for chemical fertilisers also underscores the need to promote climate-smart agriculture practices. Measures such as nutrient management, regenerative farming, bio-fertilisers and precision farming can help lower the need for chemical fertilisers in the long run. Improving supply-chain infrastructure at nodal trade routes, including storage facilities, digital logistics networks, warehousing, and cold chains, can cushion the impact of geopolitical shocks by extending the shelf life of commodities and enabling real-time tracking and demand forecasting.



This commentary originally appeared in Hindustan Times.

### Iran’s Hormuz Blockade Anchored in Successful Securitization

Iran has long threatened to cut off access to the Strait of Hormuz, a concern featured in nearly every strategic risk-mapping and war-gaming scenario involving Iran and maritime disruptions since the 1970s. Given the debilitating impact such a move could have on the global economy, Tehran’s potential leverage has always been considerable. Yet, nearly five decades of negotiations never saw Iran fully deploy its most potent instrument of power. That calculus changed with the US-Israel airstrikes of March 2026 and the first-ever comprehensive blockade of the maritime chokepoint. Its perpetuation will depend on the differing abilities of Iran and the US to securitize its relevance.

Securitization is the ability of governments to frame a specific issue as an existential threat, transforming it into a rallying cause that justifies the adoption of any discretionary means to address it, including actions outside established rules, norms and laws.

By making the Strait of Hormuz the focus of its military campaign, the Iranian government appears to have successfully securitized access to the chokepoint as central to its ability to fight for national survival. Through multi-pronged and asymmetric attacks that have effectively closed the Strait, Iran has successfully weaponized the risk aversion of countries and companies while absorbing considerable costs, on the grounds that control of the chokepoint is the central variable in how this war ends for them.

The US government, by contrast, despite all the military might it is bringing to bear so far, has been unable to securitize the cause of the war to its own population.
Nearly five decades of negotiations never saw Iran fully deploy its most potent instrument of power.
Escorting tankers through an active conflict zone does not register as a proximate security concern for the American people — a reality shaped largely by the shift in the oil-for-security calculus since the US became energy self-sufficient through the shale revolution.

The US Navy’s failure so far to break the blockade owes in part to the limited appetite of the American public for casualties in a distant theater, particularly for a cause that feels remote to most Americans, aside from gas prices. Even a determined Trump administration won’t likely be able to securitize this particular war objective.
Iran’s existential gamble: passing along the pain
Iran’s stakes, on the other hand, are decidedly existential. Uninterrupted passage through the Strait of Hormuz is as important to the Iranian economy as it is to its Persian Gulf neighbors and the wider international community.

While the US$43 billion Iran earned from energy exports in a particularly profitable 2024-25 was modest relative to its Gulf neighbors, this trade — conducted largely through the Strait — accounted for nearly 57% of Iran’s export revenue that year.

This dependence was always an important reason not to block the waterway. Yet the US-Israeli threat has been judged existential enough to warrant deploying this most valuable lever, with Iran calculating that the US-Israeli war campaign would in any case prevent Iranian energy exports — whether through sanctions or physical interdiction.
Pressuring export-oriented and import-dependent Gulf states enough to compel the US and Israel to halt operations in exchange for restored passage through the Strait gives Tehran a negotiating lever it would otherwise lack.
The calculation, then, has been to absorb the foreign exchange loss while ensuring the pain was shared by other Gulf producers and global supply chains alike. Pushed to the wall, Iran’s decision not to allow the conflict to be contained within its borders is a considered strategy. Pressuring export-oriented and import-dependent Gulf states enough to compel the US and Israel to halt operations in exchange for restored passage through the Strait gives Tehran a negotiating lever it would otherwise lack.

When the dust settles, Iran will have earned the ire of its Gulf neighbors — a high price in a fragile neighborhood. Yet, any resulting recalibration among Gulf states regarding the costs of strategic partnership with the US and their willingness to normalize ties with Israel, however marginal, would serve Tehran’s long-term objective of weakening American and Israeli partnerships in the region.
US naval capabilities in an age of asymmetric warfare
Although the US Navy has escorted vessels through the Strait during the tanker wars of the 1980s, the situation differs materially today on four main counts.

First, the US Navy of the 1980s was a nearly 600-ship fleet facing an adversary with no comparable counter-attack capability. Today, however, it fields just 294 to 297 ships against an Iran leveraging drone warfareand other asymmetric tools that force larger militaries into wars of attrition. Risking a US carrier and its crew to escort commercial vessels would be seen as a poor calculation in an America heading into the midterms.

Second, Iran’s ability to threaten both commercial vessels and US warships with an inexpensive and abundant supply of mines has set a dangerous precedent. As outlined in a report by the Center for Maritime Strategy, the critical gap in the US Navy’s capabilities is mine countermeasures.

MH-60S Knighthawk helicopters conducting aerial mine sweeps have been found to leave residual material behind, posing risks to vessels even after a sweep is deemed complete. Further, Iran, Russia and China have collectively acquired the world’s largest stockpile of sea mines, while the US Navy currently operates just four 40-year-old mine countermeasure ships, all expected to be decommissioned by 2027.

Third, the threat surface is far more expansive than in the 1980-90s. Even the territorial waters of mediators such as Oman and the broader Indian Ocean remain viable targets in Iranian calculations, expanding the scope and exposure of any US naval escort mission.Iran has also deployed inexpensive GPS jamming technology to disrupt navigation along the Strait and into the Indian Ocean.
By choking this artery of international trade, Tehran has ensured the Strait’s closure reverberates globally in ways that attribute economic pain to US-Israeli miscalculations. Accepting damage to their own earnings while inviting the wrath of neighbors who championed diplomacy fits no rational-actor model.
Fourth, the traditional command-and-control architecture of warfare no longer applies in the Iranian case. Following the killing of the Supreme Leader and, arguably, Qasem Soleimani before him, Iran’s military responses have involved a dispersed mix of sub-national and non-state actors, including proxies such as the Houthis — a structure whose intentions and capabilities the US military must constantly factor into its defensive calculus.

By choking this artery of international trade, Tehran has ensured the Strait’s closure reverberates globally in ways that attribute economic pain to US-Israeli miscalculations. Accepting damage to their own earnings while inviting the wrath of neighbors who championed diplomacy fits no rational-actor model. Yet it would be an error to judge Iran’s retaliation in the Strait of Hormuz as ill-advised or impulsive.

The Iranians are seasoned players of the long game, and their ability to securitize Hormuz is rooted in the recognition that the US cannot do the same. Tehran is banking on this fundamental incongruence to keep the Strait blocked and hold crucial leverage.



This commentary originally appeared in Asia Times.

### The Trump-driven Push for a ‘New Middle East’

The war in Iran is escalating to dangerous proportions. Trump’s declaration of a unilateral victory and Iran’s three preconditions for a ceasefire seem worlds apart. Several American planes have been downed, with the latest being a refuelling plane over Iraq, many US bases hit, and its regional allies scrambling for interceptions. Adding to this,  Iran, being a defiant and wayward actor to potentially mine the Strait of Hormuz, has added another layer to an already combustible situation. The lethality and precision strikes carried out by the United States (US) and Israel, which already exceed 6,000 rounds, may have set a new ceiling for kinetic action conducted using air power. However, the achievements for Washington and Tel Aviv on the ground are qualitatively different from what either may have anticipated before the war with Iran began. The evolving trend lines of the conflict suggest that the US may have bitten off more than it can chew.


The lethality and precision strikes carried out by the United States (US) and Israel, which already exceed 6,000 rounds, may have set a new ceiling for kinetic action conducted using air power.

What compelled the Trump administration to start the Iran war? Two factors appear particularly significant. The first lies in the spiral set in motion after the Trump administration decided to pull out of the JCPOA in 2018. The second was the Trump administration’s decision to double down on its negotiations with the Iranian regime, demanding that Iran completely halt its enrichment capability. The Trump administration’s proposal that Iran’s enrichment facility be located outside the country but in the region for civil purposes was met with equal scorn from Tehran. In the end, the failure of the Geneva negotiations between Iran and the US, led by Steve Witkoff and Jared Kushner, appears to have pushed the administration to take the ill-advised decision to bomb Iran. In the process, Trump may have boxed himself in, leaving him with limited options since the 12-day war campaign against Iran in June 2025.
At the heart of this historical decision lie the political ambitions of two politicians—Donald Trump and Benjamin Netanyahu. Leading up to the decision, the two leaders appeared to converge on the necessity of using kinetic options on Iran for various reasons, albeit with different political ends. For both, Iran appeared to be at its weakest, with its regional proxies debilitated and its economy spiralling downward, pushing the people to the brink. The mass protests in Iran in January 2026 fed the speculation that regime change in Iran is possible with external help. For Israel, the Iranian threat was always existential, but the political moment which started with the October 7 attacks by Hamas bulged to meet with the serendipitous resilience of Netanyahu. He realises that under the Trump administration, Israel may have its last chance to compel Washington’s hand, without appearing to do so.


For Israel, the Iranian threat was always existential, but the political moment which started with the October 7 attacks by Hamas bulged to meet with the serendipitous resilience of Netanyahu.

The Trump administration found itself buoyed by the military success in Venezuela to replicate the seamless operation in Iran. If continued military campaigns against Iran’s proxies—which are largely non-state actors—have proven inconclusive since the  October 7 attacks, it was inevitable that America’s military campaign, led by aerial raids,  would fall short of enforcing capitulation on Iran. The only outside chance of forcing the Iranian regime to fall would have been the convergence of mass internal uprising with external military assistance. Even then, an effective blow to the Iranian regime would not have come unless the security apparatus inside the country revolted against the Mullah regime, which was perhaps never a concrete reality and in the post-bombing period appears an even distant dream. There is a strong rally-around-the-flag affect which has bound the Iranians loyal to the regime even more tightly than before, attenuating external pulls.
Trump seems increasingly forlorn amidst his decision to enter the war with Iran. The rising cost of the war, coupled with a domestic political scene which is increasingly getting disenchanted with Trump’s decision, is weighing heavily on the administration. Even externally, his allies in the Middle East as well as Europe do not seem aligned with the US’s position. America’s trans-Atlantic allies were still balancing against Washington’s decisions apropos support to Ukraine when the weight of the Iran war began to drag the Europeans into the war, enforcing a reprioritisation in their own internal and external outlook. In the latest, Italy’s Prime Minister Giorgia Meloni is struggling to avoid the repercussions of Trump’s decision on Iran in a referendum at home. The United Kingdom initially declined to allow America to use its bases for launching attacks against Iran before eventually granting limited permission.


GCC members , particularly the United Arab Emirates and Saudi Arabia, have paid the price for their security alignment with the United States and are now far more wary of the costs of being drawn into Washington’s strategic confrontation with Tehran.

The ongoing confrontation between the US and Iran suggests that a different Iran will now shape a different Middle East—one where both Tehran’s internal political calculus and its external relationships are fundamentally altered. Iran’s willingness to strike targets across the region has unsettled the security assumptions of Gulf monarchies and introduced a new phase of volatility in its relations with the Gulf Cooperation Council. GCC members , particularly the United Arab Emirates and Saudi Arabia, have paid the price for their security alignment with the United States and are now far more wary of the costs of being drawn into Washington’s strategic confrontation with Tehran. For Washington, the lessons are stark: the war underscores the limits of conventional superiority against an adversary that thrives in asymmetric warfare. Iran’s “precise mass” strategy, deploying large numbers of relatively inexpensive drones and missiles, has shifted the cost equation, forcing the US to expend far more expensive defensive systems while highlighting the urgent need to expand munitions production at scale. At the same time, Tehran’s move to close the Strait of Hormuz, a vulnerability studied since the Tanker War of the 1980s, represent one of the most consequential escalatory risks with global economic repercussions. The targeting of Iranian naval assets such as the IRIS Dena and the wider maritime theatre also indicates that the conflict’s strategic geography is edging closer to the Indo-Pacific. For India, this shift places its traditionally balanced geopolitical posture under unprecedented scrutiny, as disruptions around the Strait of Hormuz directly threaten its energy security, maritime trade routes, and broader strategic calculations in the western Indian Ocean.
Trump’s economic bet on the Middle East had four legs: an intra-regional wager in the I2U2 group built on the momentum of the Abraham Accords; the “Board of Peace” proposal aimed at steering reconstruction efforts in Gaza; the India–Middle East–Europe Economic Corridor (IMEC) as a bridge to connect its energy promise across the Indo-Mediterranean space; and finally, Trump’s technology bet on the region, which was just beginning to take off. All of these now remain fraught as Iran continues to refuse a ceasefire. In the end, this war may well become a test of resolve and of each side’s ability to withstand a prolonged war of attrition. A Trump-size force remains militarily intent on changing the character of the Middle East.



This commentary originally appeared in Observer Research Foundation.

### From Barrels to Molecules: Gulf’s Emerging Multi-energy Export Model

For half a century, the Gulf’s geopolitical influence travelled in tankers of crude oil; today, it is beginning to move in cargoes of liquefied gas, molecules of hydrogen, clean-energy carriers, carbon management solutions, and electrons transmitted across borders. Rather than abandoning hydrocarbons, Gulf states are repositioning themselves as multi-energy exporters, seeking to convert resource endowments, sovereign capital, and strategic geography into long-term influence across the next generation of global energy trade.
This emerging export model rests on three enduring advantages. First, the Gulf combines vast hydrocarbon reserves with some of the world’s most competitive solar and wind resources, enabling parallel investment in both legacy and low-carbon energy systems. Second, sovereign wealth funds and state-owned energy companies provide patient capital capable of financing large-scale infrastructure, from LNG trains and nuclear plants to hydrogen hubs and carbon-capture networks. Third, the region’s geography, situated between Europe, Asia, and Africa, positions it as a natural corridor for energy trade. Together, these allow the Gulf not merely to adapt to the energy transition but to shape its emerging commercial architecture.

LNG: Enduring Baseline of Gulf Energy Exports
LNG remains the most mature and commercially secure pillar of the Gulf’s evolving export model, providing both continuity with the hydrocarbon era and the financial foundation for diversification into lower-carbon energy systems.


Competition from the United States and Australia, evolving climate policy, and the risk of demand plateauing beyond the 2030s mean that LNG is best understood not as the endpoint of Gulf export strategy, but as the stabilising bridge enabling the transition toward a broader multi-energy portfolio.

Qatar’s North Field expansion is expected to nearly double LNG production capacity from 77 million tonnes per annum (mtpa) to about 142 mtpa by 2030, reinforcing its position among the world’s dominant gas exporters. In parallel, ADNOC’s Ruwais LNG project in the UAE will add about 9.6mtpa, with more than 80 percent of capacity already secured through long-term agreements ahead of its planned 2028 start-up. Designed as one of the region’s lowest-carbon LNG facilities, Ruwais will be powered by clean electricity and advanced digital optimisation.
Together with enduring long-term contracts with major Asian buyers, these developments underscore LNG’s continued role as the Gulf’s most bankable export channel even amid global decarbonisation pressures.
From a feasibility perspective, LNG differs from emerging clean-energy exports in one crucial respect: the infrastructure, shipping networks, and contractual frameworks are already established. This maturity allows Gulf producers to monetise existing gas reserves while financing investments in hydrogen, ammonia, and carbon management. Yet it also exposes LNG to long-term uncertainty. Competition from the United States and Australia, evolving climate policy, and the risk of demand plateauing beyond the 2030s mean that LNG is best understood not as the endpoint of Gulf export strategy, but as the stabilising bridge enabling the transition toward a broader multi-energy portfolio.

Hydrogen: Next Strategic Export Frontier
Hydrogen is being positioned to extend the Gulf’s energy influence into a decarbonising global system. Across the region, governments and state-backed developers are advancing large-scale projects that link abundant renewable resources, existing industrial infrastructure, and export-oriented energy strategy.
Saudi Arabia’s NEOM green hydrogen project is expected to produce around 600 tonnes per day of green hydrogen once operational, supported by more than 4 GW of dedicated solar and wind capacity. In the UAE, Masdar and ADNOC are advancing green and blue hydrogen initiatives tied to domestic industry and future export corridors, while Oman’s Hydrom framework and the Sur hydrogen cluster aim to position the country as a major exporter of green fuels to Europe and Asia.


Hydrogen is viewed as a long-term strategic extension of Gulf export capability, one that could reshape global energy trade if technological, financial, and geopolitical conditions align.

Despite this momentum, hydrogen exports remain structurally more uncertain than LNG. Large-scale deployment depends on falling electrolyser costs, reliable water supply through desalination, and bankable long-term offtake agreements in importing regions. Transport logistics, certification standards, and price competitiveness against alternative decarbonisation pathways will ultimately determine commercial viability. As a result, hydrogen is viewed as a long-term strategic extension of Gulf export capability, one that could reshape global energy trade if technological, financial, and geopolitical conditions align.

Ammonia: First Scalable Hydrogen Export 
Ammonia is emerging as the most commercially viable pathway for exporting low-carbon hydrogen from the Gulf, enabling producers to utilise existing global shipping, storage, and industrial-use infrastructure while hydrogen markets mature. Several flagship Gulf projects are therefore structured around ammonia rather than direct hydrogen trade.
Saudi Arabia’s NEOM project is designed to produce roughly 1.2 mtpa of green ammonia, positioning the Kingdom among the earliest large-scale suppliers of hydrogen-derived fuels. It also successfully shipped 40 tonnes of blue ammonia to Japan, marking one of the world’s first cross-border trades in low-carbon ammonia and signalling early demand from Asian importers. In parallel, UAE-linked producer Fertiglobe has secured European offtake through Germany’s hydrogen-import tenders, while Oman is advancing integrated hydrogen-to-ammonia zones such as Hyport Duqm to anchor future clean-fuel exports.


Ammonia, unlike pure hydrogen, has existing transport logistics and end-use markets. Yet long-term competitiveness will depend on falling hydrogen production costs, large-scale renewable deployment, credible certification systems, and sustained import demand.

Ammonia, unlike pure hydrogen, has existing transport logistics and end-use markets. Yet long-term competitiveness will depend on falling hydrogen production costs, large-scale renewable deployment, credible certification systems, and sustained import demand. Ammonia could represent a bridge between Gulf hydrocarbons and a future clean-molecule export economy, shaped by global policy and market environment.

Regional Grid: Transmitting Clean Electrons
While still at a nascent stage, clean-power trade represents a potential long-term extension of the region’s energy-export model. The GCC Interconnection Grid already links national power systems, providing resilience, reserve sharing, and a foundation for future electricity trade. Historically used primarily for emergency balancing rather than commercial exchange, the same infrastructure could enable higher penetration of renewables and eventual cross-border clean-power flows as solar and wind capacity expands across Saudi Arabia, the UAE, and Oman.
Looking outward, several concepts under discussion envision high-voltage direct current (HVDC) connections transmitting renewable electricity from the Gulf toward neighbouring regions, including South Asia, North Africa, and potentially Europe. These proposals remain technically feasible but commercially complex, requiring multilateral coordination, long-distance subsea transmission, stable regulatory frameworks, and bankable long-term power-purchase agreements.
Compared with LNG or ammonia, direct electricity export faces higher geopolitical and infrastructure barriers, yet it also offers a compelling strategic logic. Where renewable generation costs are low, exporting electrons rather than fuels could ultimately provide a more efficient decarbonisation pathway for importing regions.

Carbon Management: A Low-Carbon Hedge
Carbon capture, utilisation, and storage (CCUS) is emerging as a parallel export logic for the Gulf, sustaining the competitiveness of hydrocarbon value chains in a carbon-constrained world. Qatar’s large-scale capture facilities at Ras Laffan, the UAE’s operational Al Reyadah and upcoming Habshan project, and Saudi Arabia’s Jubail CCS Hub collectively signal a shift toward embedding carbon management within core export infrastructure.


Looking outward, several concepts under discussion envision high-voltage direct current (HVDC) connections transmitting renewable electricity from the Gulf toward neighbouring regions, including South Asia, North Africa, and potentially Europe.

CCUS builds directly on existing industrial systems, allowing Gulf producers to preserve hydrocarbon revenues while lowering lifecycle emissions. Yet its long-term viability depends on policy credibility beyond the region, robust carbon-pricing mechanisms, trusted monitoring and verification frameworks, and sustained demand for low-carbon fuels in Europe and Asia. If these conditions materialise, carbon management could evolve into a distinct export service, anchoring hydrogen, LNG, and industrial decarbonisation partnerships. In this sense, CCUS represents not a departure from the Gulf’s hydrocarbon foundations, but their strategic adaptation to the economics and geopolitics of deep decarbonisation.

Emerging Multi-Energy Order
Rather than replacing hydrocarbons, the region is layering new export vectors onto an existing foundation, using gas revenues, sovereign capital, and industrial infrastructure to finance entry into lower-carbon energy systems. This transition is therefore evolutionary rather than disruptive, defined by sequencing, scale, and strategic hedging rather than abrupt transformation.
Whether this emerging multi-energy model succeeds will depend on bankable offtake, water and land availability, grid and shipping infrastructure, and credible carbon-accounting frameworks, to determine which export pathways mature commercially. At the same time, geopolitical stability and sustained demand from Europe and Asia remain preconditions for long-term influence.
If realised, the Gulf’s shift from exporting barrels of crude to exporting molecules, electrons, and carbon solutions could reshape the architecture of global energy trade. The question is not whether the Gulf will remain central to the energy system, but how that centrality will be redefined in a decarbonising world.



This commentary originally appeared in Observer Research Foundation.

### Building A Heat Resilience Roadmap for the Gulf Region

Introduction
The Gulf Cooperation Council (GCC) countries have been experiencing record-breaking warm temperatures, with Dubai, Doha, and Riyadh, in 2024, ranked among the top cities with the most dangerous summer heat globally.[1] Projections indicate that maximum temperatures in GCC cities during the summer are likely to increase by approximately 0.6°C per decade through the end of the century, potentially exceeding 55°C under a business-as-usual scenario.[2] Although the Middle East and North Africa (MENA) region, more broadly, is projected to experience temperatures warming at twice the global average, the Gulf region is particularly expected to experience exacerbated thermal discomfort.[3] In Gulf cities, humidity from coastal areas combined with heat absorption from urban materials and fewer green landscapes contribute to the urban heat island (UHI) effect, raising temperatures to uncomfortably high levels.[4] Prolonged “heat waves” strain urban systems, leading to health crises, compromised infrastructure, and supply chain vulnerabilities.[5],[6] In parallel, the Gulf’s urban population is projected to increase by 90 percent in 2050.[7] The subsequent increase in cooling demand will not only add pressure to the electricity grid and finite resources but also exacerbate greenhouse gas emissions and the perilous cycle of escalating heat.[8],[9]
Currently, the Gulf lacks a unified heat resilience and sustainable cooling agenda which may undermine national development objectives. The region is actively pivoting to non-oil sector activities, encoding such reforms in national development plans. These measures range from a “golden license” scheme to attract investments and industrial manufacturing in Bahrain, developing renewable-powered cities in Saudi Arabia, strengthening logistics and supply chain facilities in the United Arab Emirates, transforming Kuwait into a financial hub, bolstering tourism through large-scale infrastructure in Qatar, and investing in digital infrastructure in Oman.[10] Solidifying a  proactive approach to prepare for and cope with extreme heat is crucial to safeguard economic prosperity, protect public health, strengthen infrastructure resilience, and achieve net-zero objectives.
‘Heat resilience’ refers to the capacity of urban systems to absorb and resist high-temperature events and maintain a city’s coping capacity through adaptive measures.[11] Protecting an urban population from chronic heat requires a structured heat governance framework comprising immediate emergency responses and medium- to long-term efforts to mitigate risks and promote sustainable adaptation.[12] This paper compares the progress and gaps in GCC countries’ existing extreme-heat, sustainable cooling and climate-resilient urban adaptation policies. It argues for the development of a regional GCC strategy that integrates anticipatory early warning systems, occupational safety measures, health system preparedness measures, and long-term urban planning with sustainable cooling. The subsequent recommendations aim to reinforce each country’s respective development goals, coinciding with thematic areas for capital inflows such as digital transformation and climate technology integration into existing and forthcoming infrastructure.[13]

The Impacts of Extreme Heat in the Gulf 
Extreme heat paralyses progress towards the objectives set out by the GCC countries as part of their development goals. The negative impacts are seen in various domains, discussed in turn in the following paragraphs.
Health: Heat stimulates the ozone and air pollutants, exacerbating respiratory illnesses, inducing heat stress, and raising respiratory mortality rates.[14] Across the GCC countries, labourers in outdoor construction, oil-fields, and agriculture, for example, are at greater risk of heat illness and injury, with low-income families experiencing a double burden of occupational heat and indoor chronic exposure.[15] Without climate action, the death rates from non-optimal temperatures are projected to reach up to 65.79 per 100,000 people in the Gulf region by 2090.[16] Opportunities lie in implementing heat-health early warning systems and spreading awareness of preventive heat protocols to reduce pressure on medical services.
Figure 1. Projected Death Rates from Non-Optimal Temperatures (Gulf, 2030-2090)

Source: Climate Impact Lab and the United Nations “Our World in Data”[17]
Labour and Economy: Extreme heat undermines labour productivity and the Gulf’s economic output. By 2030, the UAE is predicted to experience the largest heat stress-induced job losses and a 2.6-percent reduction in total working hours. Qatar is expected to be the most negatively impacted, losing 5.3 percent of its total working hours from heat stress, followed by Bahrain at 4.1 percent.[18] As tourism becomes integral to the GCC’s diversification trajectory, hotter temperatures may impede tourism and compromise job security for service industries. For instance, Mecca will experience 182 days of dangerous heat by 2050, exposing millions of tourists to health risks.[19] Opportunities exist in revamping fixed worker bans to adhere to changing temperatures and mandating protective cooling gears during peak heat.
Supply Chains: Extreme heat destabilises global supply chains, transport infrastructure, and local production. Many GCC countries rely on food and manufactured imports while striving to become global trade hubs. Analysts suggest a linkage between heat and reduced operating incomes of suppliers in global supply chain networks, resulting in customers severing relationships with suppliers exposed to heat levels above historical expectations.[20] Extreme heat also threatens domestic food production, exacerbating water insecurity, reducing crop yields, and degrading soil quality.[21] Opportunities lie in exploring sustainable cooling alternatives for logistics and supporting research and development for drought-resistant seed varieties.
Rising Energy Demand and Infrastructure Strain: Without improvements in energy efficiency, cooling demand in the GCC is expected to nearly triple by 2030.[22] A rise in cooling demand has historically led to power outages in Kuwait, and increased temperatures will increase cooling load demand in the UAE by 40 percent in 2080.[23],[24] The GCC has the highest level of AC ownership within MENA (80 percent of household owners).[25] At present, there are limited incentives from GCC governments to reduce electricity demand, due to an abundance of fossil fuel resources heightening accessibility to on-demand cooling.[26] However, there are opportunities in mandating energy-efficient measures for old and new buildings and regulating demand-side energy consumption.

Heat Resilience and Sustainable Cooling Measures in the GCC
This section evaluates progress and gaps in the development of national policies that acknowledge heat as a mounting risk, and the corresponding anticipatory measures such as heat action plans, warning systems, and worker protection efforts. The Global Heat Health Information Network (GHHIN), World Meteorological Organization (WMO), and UN Office for Disaster Risk Reduction (UNDRR) developed global standards and best practices for national heat action plans (HAPs).[27] Also, National Heat-Health Action Plans (HHAPs) coordinate multi-sectoral responses to extreme heat impacts on health, while Heat-Health Warning Systems (HHWS) integrate climate forecasts and predetermined levels of heat stress to inform public health interventions.[28]

Anticipatory Heat Policies 
As part of UNFCCC reporting guidelines and the Cancun Adaptation Framework, many GCC countries have started developing National Adaptation Plans (NAPs) that urge countries to outline climate risks and coping strategies, laying the foundation for coordination and climate finance.[29]  However, only Kuwait’s NAP acknowledges heat stress risk. Although Oman, Qatar, Saudi Arabia, and the UAE are actively developing NAPs, they have separately developed national strategy plans acknowledging extreme heat risk.
Yet, there is no formal HHAP at the national level though Qatar, Saudi Arabia, and the UAE have enacted labour-specific heat action policies, complementing peak summer outdoor working bands initiated by all GCC member states.[30]  These bans are defined by fixed hours, with the exception of Qatar which mandated the use of Wet-Bulb Globe Temperature (WBGT) index instruments that adjust banned work hours based on variable heat exposure.[31] Although these measures are useful, research suggests that working bans are highly insufficient despite high compliance levels. For instance, a study in Kuwait demonstrated “substantial increases in the risk of occupational injury from extremely hot temperatures” even with the midday work ban policy.[32] Existing heat awareness policies also exclude other vulnerable populations such as the youth and elderly.[33],[34]
There is also an increasing regional commitment to strengthen heat resilience efforts, as evidenced by the Sixth Arab Regional Platform for Disaster Risk Reduction in February 2025.[35] However, progress in establishing predictive warning systems remains limited. While each GCC country disseminates extreme heat alerts through their respective meteorological departments, only Saudi Arabia has developed a Heat-Health Warning System, with its application limited to the Hajj.[36] This research is supplemented by external literature claiming that only 5 percent of Arab countries have comprehensive multi-hazard early warning systems (MHEWS) despite increased MHEWS reporting.[37]
Table 1. Heat Resilience Policies and Initiatives in the GCC 




 


Country
National Adaptation Plan (NAP) Status[38]
National Climate Plan that Considers Heat as Risk
Heat Action Plan (HAP)
Heat Warnings and Thermal Stress Indicator[39]
Heat-Health Warning System (HHWS)
Worker Protection Bans and Campaigns[40]


Bahrain
No information
No information
No information
 

Yes
No
Yes

Ring the Safety Bell Campaign[41]


Kuwait
Yes[42]
Yes[43]
No (adhoc basis)[44]
Yes
No
Yes

Ministry of Interior Delivery Bike Ban[45]


Oman
In development [46]
Yes [47]
No information
Yes
No
Yes


Qatar
In development [48]
Yes[49]
Limited

Heat Stress Legislation by Ministry of Labour [50]
Yes - WGBT
No
Yes

SafeSummer Campaign (cooling suits)[51]

Ministry of Public Health Workplace Wellness Support Project[52]


Saudi Arabia
In development
No information
Partly

Preventing Effects of Working in High-Temperatures – Saudi Arabia[53]

Heat Protection Plan during Hajj[54]
Yes -

Heat Index
Yes[55]

Hajj Heat-Health Warning System
 

Yes


The United Arab Emirates
In development
Yes [56]
Partly

Dubai Technical Guidelines for Heat Stress Management

Abu Dhabi – National Centre of Meteorology Action Plan Against Extreme Weather[57]
Yes
No
Yes

Smart-Tech (heat sensors)[58]

Cooling Vests[59]



Source: Author’s own, using various open sources. The list of worker protection campaigns is indicative.

Sustainable Cooling Initiatives and Policies 
Cooling demand in the GCC is expected to triple by 2030, with air-conditioning projected to account for 60 percent of additional power generation required in the region and 1.5 million barrels of oil per day needed to meet fuel demands.[60]  Based on an analysis of historical ‘cooling degree days’ (CDD)[a] in GCC capital cities, Doha experiences the highest CDDs, while Riyadh, the lowest. Furthermore, Abu Dhabi experiences the highest cooling costs due to high tariffs, while Muscat experiences the lowest.[61]
Although ACs are a critical life-saving measure, the persistence of potent hydrofluorocarbons (HFCs) in Heating, Ventilation and Air Conditioning (HVAC) and refrigeration systems creates environmental challenges that are difficult to mitigate.[62]  The heavy subsidisation of oil and gas has enabled wide accessibility to AC systems and consumer perception of cooling abundance, resulting in a lack of urgency among both public and private sectors to pursue energy-efficient measures. This has also led to limited education and sustainability training in critical industries like construction in countries like Oman and Saudi Arabia.[63] Coping with extreme heat in the built environment requires instituting energy-efficient cooling measures, passive urban designs, district cooling in new developments, and retrofitting older buildings.
To be sure, political commitment to sustainable cooling is gradually gaining momentum. The Kigali Amendment to the Montreal Protocol aims to accelerate HFC phase-down through passive cooling measures, energy-efficient cooling appliances, and natural refrigerants. As of December 2025, five out of six GCC countries have either accepted or ratified the Kigali Amendment, signifying collective will to shift towards sustainable cooling.[64] The UAE helped reinforce sustainable cooling at COP28 by leading the Global Cooling Pledge, an initiative to reduce cooling-related emissions by 68 percent from 2030 to 2050; urge development of National Cooling Action Plans (NCAPs) that advise cooling strategies tailored to national contexts, and establish minimum energy performance standards.[65],[66]
Nevertheless, the UAE is the only GCC country to sign the Global Cooling Pledge and no country has instituted NCAPs. Across the region, the enforcement of energy efficiency and sustainable design solutions remains uneven. The UAE leads in the integration of its National Green Building Codes and mandatory Pearl and Al Sa’fat rating systems that holistically evaluate buildings on energy efficiency, water conservation, materials selection, and site sustainability.[67],[68],[69] Bahrain and Qatar also have comprehensive energy efficiency mandates. Bahrain’s National Energy Efficiency Action Plan (NEEAP) mandates thermal insulation and energy demand reduction initiatives, and Qatar’s Global Sustainability Assessment System (GSAS) represents the first performance-based system in MENA.[70],[71]
For their part, Kuwait and Saudi Arabia have instituted building standards but face implementation challenges, while Oman’s regulations have only recently been inaugurated. Kuwait has deployed minimum energy performance requirements for new and regulated buildings but struggles to regulate cooling due to low electricity costs.[72] The Saudi Energy Efficiency Program (SEEP) updates regulations for new buildings but faces challenges due to a lack of skilled personnel and unaligned government regulations.[73] Oman’s Building Code, which seeks to enhance resilience to extreme heat and flooding, is still new.[74]
Retrofitting is one urban adaptation strategy for existing buildings. It modernises standing HVAC systems, with an energy reduction potential of more than 20 percent and significant cost savings.[75] The International Energy Agency (IEA) also notes that health benefits gleaned from energy efficiency retrofits could exceed their implementation costs by up to three times.[76] However, retrofitting remains largely underutilised in Bahrain, Kuwait, and Oman due to a lack of financing incentives for the high installation costs.[77],[78] Saudi Arabia and the UAE, meanwhile, have successfully encouraged retrofitting through incentives and specific policy objectives, with Dubai hoping to retrofit 30,000 buildings by 2030.[79],[80]
District Cooling (DC) systems distribute centralised cooling to a select number of buildings, providing energy efficiency and cost savings of at least 40 percent.[81] An emerging market for DC exists in Bahrain, Kuwait, and Oman, but has yet to be scaled due to high initial installation and operational costs.[82],[83],[84] Qatar, Saudi Arabia, and the UAE, on the other hand, have well-established DC plants.[85]
Table 2: Sustainable Cooling Policies and Initiatives in the GCC




 


Country
Kigali Amendment to the Montreal Protocol[86]
Global Cooling Pledge[87]
National Cooling Action Plan[88]
Policy on Energy Building Performance Standards[89]
Policies Incentivising Retrofitting
District Cooling Market[90]


Bahrain
Ratification
No
No
Yes (National Energy Efficiency Action Plan - NEEAP)
Limited (National Energy Efficiency Action Plan – NEEAP)
Growing Market


Kuwait
Approval
No
No
Yes (Building Energy Conservation Code)
Limited (Kuwait Energy Efficiency Technologies Program)
Growing Market


Oman
Ratification
No
No
Yes (Oman Building Code)
Limited (Oman Net Zero Report 2022)
Growing Market


Qatar
No Information
No
No
Yes (Global Sustainability Assessment System - GSAS)
Limited (Qatar National Development Strategy)
Well-established


Saudi Arabia
Acceptance
No
No
Yes (Saudi Arabia Energy Efficiency Program - SEEP)
Advanced (Saudi Arabia Royal Decree for Energy Efficiency)
Well-established


The United Arab Emirates
Acceptance
Yes
No
Yes (National Green Building Codes)
Advanced (Dubai’s Demand Side Management Strategy)
Well-established



Source: Author’s own, using various open sources.

Sectoral Strategies to Strengthen Heat Resilience
Despite growing concern for extreme heat in the Gulf region, policies remain largely reactive. Formal HHAP, HHWS, and NCAPs have yet to be instituted, and legislation remains constrained to a few sectors like labour or tourism. The implementation of energy efficiency and urban planning measures also varies by country due to high upfront costs of solutions and heavily subsidised electricity that curtails urgent policy enforcement. This evaluation thus underscores the need for a unified GCC heat resilience policy framework to facilitate the development of national HHAPs, HHWS, and CAPs, refine sector-specific heat-health integration policies, and foster scaling and adoption of private-led adaptive measures across labour, tourism, and urban planning. Heat surveillance and sustainable cooling offer strong entry points for private financing but necessitate favourable policy frameworks and public-private cooperation to scale.
The following paragraphs outline sector-specific recommendations to inform a regional heat resilience agenda for the Gulf:
Health: Leverage artificial intelligence (AI) and data analytics to enhance heat surveillance and inform rapid emergency responses, embed heat surveillance indicators in national electronic health records, and improve communication of heat-health risks to the public. Saudi Arabia has already deployed thermal imaging technology and AI-powered drones to monitor heat waves during the Hajj.[91] There are opportunities to pilot dynamic mapping tools to detect UHI.[92] Strengthening AI and data analytics aligns with national objectives to advance digital transformation and climate technology, enabling engagement with the private sector and startups in the Gulf.[93] This also breeds opportunities for public-private partnerships (PPPs) to enhance the implementation and financing of heat action plans.
The GCC can learn from Cairo, where PPPs between the local government and companies like IBM and Vodafone Egypt have led to the deployment of smart city technologies to monitor heat.[94] Deploying heat-health alerts and implementing education programmes for schools and vulnerable outdoor workers would also help improve adoption of preventive measures.
Labour: Enforce flexible midday work bans that align with heat index alerts and urge adoption of cooling uniforms. Learning from Qatar, other GCC countries can adopt globally recognised heat indicators such as Wet-Bulb Globe Temperature (WBGT) in addition to other predictive measures such as heat mapping. Given that peak heat hours tend to precede worker ban hours, countries can use these measures to encourage adjustable work bans in lieu of pre-fixed hours. Moreover, the labour industry can mandate companies to adopt smart-tech cooling vests for outdoor workers in the summer.
Urban Planning: Update, streamline, and develop regional green building code guidelines for new buildings; harmonise retrofitting standards across the GCC countries; and promote research and development (R&D) for sustainable cooling innovations.[95] For new buildings, improve public procurement standards to incentivise reflective materials and shade structures. National governments should mandate that construction practices adhere to building designs that naturally reduce energy consumption and high indoor temperatures. After construction, governments must monitor compliance through recurring energy audits.

Roadmap for Implementation and Financing 
Short-Term Heat Preparation and Early Response
The GCC should establish a regional heat task force chaired by Chief Heat Officers appointed by respective national climate change agencies to lead the heat resilience mandate and urge large-scale adoption of these sector-specific interventions. These officers will coordinate responsibilities among labour, health, meteorological, and energy agencies and oversee public-private partnerships.[96] This would help overcome challenges of fragmented governance and limited financing and increase data transparency regarding extreme heat impacts.
The regional task force should first adapt GHHIN-WMO-UNDRR guidelines to the region in order to facilitate country development of comprehensive HHWS contextualised to unique urban municipalities and HHAPs that bridge efforts between the municipal and national level.[97],[98] Regional guidelines can also recommend heat stress indicators, demonstrate multifaceted uses of smart sensors and UHI-detection tools, and outline strategies for heat-health integration. When developing HHAPs, the GCC should leverage its regional platform to establish a forum for cross-sharing lessons and liaise with other heat-affected regions.
The GCC can learn from cities that have developed clear adaptation frameworks that facilitate vertical coordination between the municipal and national government and horizontal coordination between health, labour, and meteorological departments.[99] For instance, Saudi Arabia is collaborating with Singapore to develop occupational heat exposure interventions.[100] Another lesson can be learned from Ahmedabad, India which developed a comprehensive Heat Action Plan in 2013 to help reduce heatwave mortality and set precedence for replication across the region.[101] Europe and North America also have well-established HHAP and HHWS, with HHAPs helping to avert up to 23 percent of expected deaths in Europe.[102]

Long-Term Adaptation and Sustainable Cooling
To minimise each country’s carbon footprint, the regional heat task force must also guide the development of NCAPs involving energy and urban planning ministries to bolster effective energy-efficient measures in the short-term and develop a long-term roadmap for developing sustainable cooling technologies.
As scientists continue to test emerging sustainable cooling technologies, the Gulf should institute financing incentives and policy reforms to expand upon historically effective passive cooling, retrofitting, and DC initiatives in the short to medium-term. The Gulf Organisation for Research and Development’s Sustainable Construction Code offers new opportunities to prioritise consistent standards for passive cooling techniques for energy and water efficiency at a regional level.[103] The regional task force can also lead fundraising efforts by piloting a “Heat Resilience Fund”, leveraging a combination of sovereign wealth funds, rebates, tax credits, and incentive programmes to help enhance the financial viability of retrofitting.[104]
Pairing green bonds or green sukuk[b] with tax incentives can also help finance energy retrofitting in the Gulf.[105] Bahrain, Oman, and Kuwait can overcome previous challenges that inhibit DC adoption by integrating regional technical expertise and prioritising DC construction in upcoming large-scale infrastructure projects as part of national development plans.[106] Increasing consumer awareness of energy-saving practices and energy-efficient buildings is equally crucial and can be achieved through informational workshops and media advertising. Expanding local cooling industries would also help foster the green job market and attract talent in line with national objectives to develop sustainable infrastructure.
Moving forward, the Gulf regional countries should capitalise on emerging technologies in sustainable cooling such as refrigerator compressors, thermoelectric cooling, solar-driven cooling, and indirect evaporative cooling. Refrigerator compressors specifically designed for propane (R-290) offer up to 15 percent more energy-efficient compared to conventional products. These have been piloted in UAE, Kuwait, and Qatar.[107] Thermoelectric cooling presents a potential green alternative to HFC refrigerants and has been piloted in niche settings like solar-powered car cooling and supply chain refrigeration but has yet to be scaled for large-scale air-conditioning purposes.[108],[109]
A solar hybrid cooling system integrates photovoltaic technology with vapour compression or uses solar thermal energy to drive absorption cooling systems, converting the sun’s heat into cooling. A study comparing compression systems and absorption cooling systems in the Gulf reveals that solar-driven compressor systems can achieve up to 99.1 percent GHG emissions reductions in Dubai, while solar absorption cooling systems may be the most financially viable with an internal rate of return of 38.8 percent in the same location.[110]  Researchers in Saudi Arabia are piloting indirect evaporative cooling systems enhanced with nanotechnology that operate like passive cooling processes and provide cooling relief by absorbing water from the air.[111] Early studies in a King Abdullah University of Science and Technology (KAUST) villa village in Saudi Arabia have noted that IEC-mechanical vapour compression hybrids can reduce annual electricity consumption by up to 33 percent.[112]
Although these are nascent technologies, the GCC countries should continue investing in R&D since it coincides with Gulf national plans on climate technology and development.[113] Encouraging digital ministries to cultivate proper policy frameworks to guide development of these technologies will help meet challenges associated with cooling AI data centres and building resilient cold storage supply chains. To harmonise policies with rapid technological growth, GCC states should continue to lead innovation workshops, convening public and private actors.[114] Scaling emerging technologies like thermoelectric cooling would require confronting high costs and supply chain vulnerabilities of critical minerals.[115] The GCC countries should thus continue to strengthen domestic mineral capabilities and forge trade partnerships to overcome this issue.[116]

Conclusion
Building a unified GCC heat resilience framework and regional platform is crucial to safeguarding progress towards diversification and sustainability objectives outlined in national development plans. As climate change and urbanisation intensifies heat, existing policy and programmatic responses across the GCC remain fragmented, targeted to a few sectors, and insufficiently scaled.
To sustain the region’s visions for the future, GCC countries must immediately strengthen anticipatory planning through integrated HHWS and HHAPs; harmonise heat detection, heat-health integration and energy-efficient design standards and policies; deploy financing incentives to advance retrofitting and district cooling in the short to medium-term; and invest in R&D and policy development to cultivate emerging sustainable cooling technologies in the long term. Inter- and intra-regional collaboration, public-private partnerships, and alignment of regional guidelines with global best practices will help catalyse progress and cement the Gulf’s visibility as a champion of heat resilience and sustainable cooling innovation.



Leigh Mante is Junior Fellow, Energy and Climate Change Programme, ORF Middle East.



All views expressed in this publication are solely those of the author, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel.

Endnotes
[a] The metric of ‘cooling degree days’ (CDD) measures energy cooling demand for buildings.
[b] Refers to Sharia-compliant certificates that operate like green bonds without charging interest.
[1] John Calabrese, “From Floods to Heatwaves: Navigating the Gulf’s New Climate Reality,” Gulf International Forum, April 2024, https://gulfif.org/from-floods-to-heatwaves-navigating-the-gulfs-new-climate-reality/.
[2] Mansour Almazroui, “Summer Maximum Temperature over the Gulf Cooperation Council States in the Twenty-First Century: Multimodel Simulations Overview,” Arabian Journal of Geosciences 13, no. 477 (2020), https://doi.org/10.1007/s12517-020-05537-x.
[3] Kathryn A. Miller, et al., Living on the Edge: The Implications of Climate Change for Six Countries in the Middle East North Africa Region, Greenpeace Research Laboratories Technical Report (Review) 02-2022, (2022), https://www.greenpeace.org/static/planet4-mena-stateless/2022/11/b57fcf2f-greenpeace-living-on-the-edge-full-english.pdf.
[4] U.S. Environmental Protection Agency, “What are Heat Islands?,” 2025, https://www.epa.gov/heatislands/what-are-heat-islands.
[5]World Meteorological Organization, “Heatwave,” https://wmo.int/topics/heatwave.
[6] Mohammed Raouf, “Climate Change in the GCC: Security Threats and Opportunities in International Cooperation,” Gulf Research Center, 2024, https://www.grc.net/single-commentary/142.
[7] Mohamed Abdelraouf, “Sustainable Cities in the Gulf: The Case of the GCC Countries,” Gulf Research Center, 2025, https://www.grc.net/single-commentary/236.
[8] Nada AlSaeed, “How Gulf Countries’ Golden Schemes are Paving the Way to a Sustainable Future,” World Economic Forum, 2025, https://www.weforum.org/stories/2025/04/gulf-countries-golden-schemes/.
[9] Calabrese, “From Floods to Heatwaves: Navigating the Gulf’s New Climate Reality.”
[10] AlSaeed, “How Gulf Countries’ Golden Schemes Are Paving the Way to a Sustainable Future.”
[11] Sustainability Directory, “Heat Resilience,” December 2025, https://energy.sustainability-directory.com/term/heat-resilience/.
[12] World Meteorological Organization, Extreme Heat Risk Reduction: Towards a Common Global Framework, Report of the Expert Consultation, December 2024, https://www.undrr.org/media/107175/download?startDownload=20251021.
[13] KPMG, Unlocking Diversification in the GCC States, World Governments Summit 2024 (August 2024), https://assets.kpmg.com/content/dam/kpmg/ae/pdf-2024/08/unlocking-diversification-en.pdf.
[14] Al Hurini et al., “The Impact of Increased Heat on the Physical, Mental, and Social Health Domains of Adults in the United Arab Emirates in 2024,” Cureus, December 2024, https://doi.org/10.7759/cureus.74951.
[15] Ali Raza, “Heatwaves and Public Health: Understanding the Rising Threat of Extreme Heat Events,” Journal of Environmental Science and Health, 1, no. 1 (2025), https://www.imdpi.com/index.php/jesh/article/view/43.
[16] Climate Impact Lab and UNDP, “Estimated Change in the Death Rate from Non-Optimal Temperatures,” Our World in Data, 2024, https://ourworldindata.org/grapher/change-heat-death-rate?time=earliest.2090&country=ARE~QAT~KWT~OMN~SAU~BHR.
[17] Climate Impact Lab and UNDP, “Estimated Change in the Death Rate from Non-Optimal Temperatures.”
[18] Jamila El Mir, “Heat Resilience: A Matter of Both Adaptation and Mitigation for the GCC,” in Climate-Resilient Cities, ed. Anvita Arora et al. (Springer Cham, 2024), 47-61, https://doi.org/10.1007/978-3-031-73090-0_3.
[19] Calabrese, “From Floods to Heatwaves: Navigating the Gulf’s New Climate Reality.”
[20] Raouf, “Climate Change in the GCC: Security Threats and Opportunities in International Cooperation.”
[21] Yasmeen Yaqoobi, “Climate Change and Human Security in the GCC,” TRENDS Research & Advisory, 2022, https://trendsresearch.org/insight/climate-change-and-human-security-in-the-gcc/.
[22] PwC, Unlocking the Potential of District Cooling | Strategy& Middle East (2012), https://www.strategyand.pwc.com/m1/en/reports/unlocking-the-potential-of-district-cooling.pdf.
[23] Zhang Zhuoya, “Middle East Insights: Countries take Active Measures to Combat Climate Change as Extreme Heat Sweeps Across the Gulf,” CGTN, July 8, 2024, https://news.cgtn.com/news/2024-07-08/Gulf-countries-take-active-measures-to-combat-climate-change-1v4GNKPBCEM/p.html.
[24] Afifa Mohammed et al., “On the Cooling Energy Impacts of Combined Urban Heat Mitigation Strategies in Subtropical Urban Building Environment,” Energy and Buildings 309 (2024), https://doi.org/10.1016/j.enbuild.2024.113918.
[25] International Energy Agency, The Future of Electricity in the Middle East and North Africa (Paris, September 2025), https://www.iea.org/reports/the-future-of-electricity-in-the-middle-east-and-north-africa
[26] Lena Gurriaran et al., “Warming-Induced Increase in Power Demand and CO2 Emissions in Qatar and the Middle East,” Journal of Cleaner Production 382 (2023), https://doi.org/10.1016/j.jclepro.2022.135359.
[27] Global Heat Health Information Network, An Assessment of Heat Action Plans: Global Standards, Good Practices, and Partnerships, 2025, https://www.undrr.org/media/108606/download?startDownload=20251021.
[28] G7 Germany, From the G7 Health Communique to Action: Health and Climate – Heat Preparedness through Early Warning Systems, November 2022, https://heathealth.info/wp-content/uploads/G7-report-heat-EWS.pdf.
[29] UNDP Climate Promise, “What are National Adaptation Plans and Why Do They Matter?,” 2025, https://climatepromise.undp.org/news-and-stories/what-are-national-adaptation-plans-and-why-do-they-matter.
[30] International Labour Organization, Heat and OSH Policy Brief, June 2024, https://doi.org/10.54394/FCLI7133.
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### Reading The Tea Leaves in The Conflict in West Asia

The US under President Donald Trump deployed a formidable military armada across West Asia, on land and sea, and the tensions with Iran have now spilled over into a region-wide conflict. The killing of Iran’s Supreme Leader Ayatollah Ali Khamenei in the US and Israeli joint strike left Tehran’s Islamic regime without its political and religious centre. Khamenei had been its anchor since 1989. While Ali Khamenei had not named his successor, his son, Mojtaba Khamenei, has been chosen as the third Ayatollah since 1979.
How success in the military action against Iran will be defined from an American perspective is largely unknown. Barack Obama, Joe Biden, and now, Trump have all chased drawing down the American role in the region as a foreign policy goal. But, today, the US is close to being entrenched in another protracted conflict.
Politically, Trump has been clear that Iran is a threat, and Tehran with a nuclear weapon is not acceptable. However, he has also been consistent over the years that there will be no conventional ground invasions or military incursions into foreign territory. American planning thus relies on three assets — technology, supremacy in the skies, and clandestine operations inside Iran largely dependent on Israeli capabilities.

The process the US seems to be banking on, considering it does not want another years-long military campaign, is one based around contained but consistent strikes leading to regime change.
In the summer of 2025, the US bombed some of Iran’s core nuclear facilities using its top tier technological and military products. Operation Midnight Hammer mobilised stealth B-2 bombers with their escorts entering and exiting Iran without any trouble. The aircraft deployed the GBU-57 Massive Ordinance Penetrator (MOP) bombs, exclusively in operation by the US military, and the only system globally available to target facilities deep inside the earth. However, even as the weapons landed on their intended targets, the debate of how effective they were in decommissioning the alleged nuclear programme continues even today.
The process the US seems to be banking on, considering it does not want another years-long military campaign, is one based around contained but consistent strikes leading to regime change. However, historically, such aims, whether in Afghanistan or elsewhere, have hardly been planned without on-ground military deployment in support of pre-existing opposition or other local political entities. Expecting a swift political turnover in Iran using even the best technologies and tactics, from a distance, may well be a fictional endeavour. Anything beyond, will need American military presence on the ground.
The consequences of a military campaign, as massive as it may be, also need to be fleshed out. To begin with, equating any such adventurism in Iran to the success of the raid to capture Nicolas Maduro in Venezuela is a poor comparative. What may be a better example in comparison, despite the problems it comes with, is the 2003 Iraq war. Despite its fall outs, of which there are many, it’s still seen by many in the US as a quasi-successful campaign where Saddam Hussein was replaced with a somewhat functional democratic process which sustains till today.

Military power, no doubt, can sway outcomes. Overwhelming power, can shape theatres, bring entities to negotiating tables, and even at times cause defeat.
The ongoing situation is also giving fuel to the likes of Al Qaeda and the Islamic State (ISIS). ISIS leadership last month released its first audio message in two years. Once again, tensions inside Syria between new president Ahmed Al Sharaa and Kurdish groups such as the SDF threaten to give more space to ISIS on the ground. Al Qaeda, a more traditionalist jihadist structure, can use attacks against Iran and the ongoing conflict between Taliban and Pakistan to galvanise fresh support.
Military power, no doubt, can sway outcomes. Overwhelming power, can shape theatres, bring entities to negotiating tables, and even at times cause defeat. But Iran, in all likelihood, is not such a case, considering its big population, vast geography, and entrenched civilisational history.
The idea that technological prowess with modern military power is enough to push political change has been disproven multiple times over the past decades. Even in the Russia-Ukraine conflict, technology, by itself, has not provided any political breakthroughs on the battle frontlines as conventional warfare met its match with cheap tech-enabled asymmetric warfare.
Trump may have to accept that the campaign against Iran may be long-term. But West Asia is now staring at total recalibration with no clarity on what lies at the end of the tunnel.



This commentary originally appeared in Hindustan Times.

### Washington’s and Tehran’s Gambles Plunge the Middle East into Crisis

Spotlight

 	The US-Israel strikes on Iran on 28 February, exposing diplomatic talks as a ruse, reflect a gamble built on miscalculation – regime change as a war aim with no clear endgame.
 	Iran has retaliated without restraint – striking Gulf Arab infrastructure, closing the Strait of Hormuz, and targeting global energy supplies to prove American military action carries a global price tag.
 	Gulf Arab states, caught between Tehran’s strikes on civilian and energy infrastructures and Washington’s war, face a stark choice – containment or an independent self-defence stance that could further inflame the region.

On the morning of 28 February, the United States and Israel launched what they termed “pre-emptive” strikes on Iran, plunging the Middle East into a new military confrontation – the second in less than a year, following last June’s twelve-day Israel-Iran war. The attacks did not merely signal a breakdown in diplomacy; they exposed it as a fiction. Three rounds of indirect talks between Washington and Tehran, the last concluding just two days earlier in Geneva, were revealed as a strategic ruse. War, it appears, had already been decided.
As American bombs fell on Tehran, President Donald Trump delivered an eight-minute address to the nation, setting out an ambitious and deeply destabilising trifecta of war aims: the destruction of Iran as a military adversary, the dismantlement of its nuclear programme, and regime change.
By day five, the endpoint of this campaign remains as unclear as its ultimate objectives. Already, Trump’s gamble is unravelling in ways he did not anticipate. His own admission that his “biggest surprise” has been the indiscriminate nature of Iran’s retaliation against Arab states – both in target selection and intensity – speaks to a fundamental miscalculation at the heart of this operation. A new front has opened with Hezbollah resuming attacks on Israel, while aviation networks have ground to a halt and energy prices are soaring.
The deeper danger lies in Tehran’s perception of this conflict as existential. A cornered adversary fighting for survival does not fight rationally – it fights desperately. But Tehran is also making its own calculated gamble. By striking Gulf Arab states and targeting the arteries of an interdependent global economy, Iranian retaliation unveils a message: that Washington’s war will not be contained, that American military action carries a global price tag, and that the world will be made to feel it.

Trump’s war, America’s burden
The current hostilities are a war of choice, not a war of necessity. Despite Trump’s claims of “imminent threat”, his own officials acknowledged in closed-door briefings with congressional staff that no intelligence existed suggesting Iran planned to strike first. Among those briefed was Senator Mark Warner – one of the Gang of Eight, the congressional leaders privy to the most sensitive classified intelligence – who rejected the “imminent threat” framing outright and stated that “the timing of this war was dictated by Bibi Netanyahu”. A Senate vote to rein in Trump’s war-making authority subsequently failed, largely along party lines, leaving the president unchecked.
The war is also, in no small part, a creation of Trump’s own making. In his first term, he tore up the hard-earned JCPOA – the deal that constrained Tehran’s nuclear programme in exchange for sanctions relief, restricting uranium enrichment to 3.67 per cent until 2031. The consequences were predictable: Iranian stockpiles surged by over 50 per cent between October 2024 and February 2025. His “maximum pressure” campaign of 2019, designed to cripple the regime through sanctions, achieved the opposite – entrenching the leadership while deepening popular resentment.
The more immediate trigger was a trap of Trump’s own construction. By massing US military assets in the region – his theatrical “armada” – Trump framed the deployment as coercive diplomacy. But for a leader whose political identity is built on the performance of victory, failed talks left only one offramp: military action. The catalyst came from US-Israel intelligence, gathered after months of surveillance, fixing the location of senior military figures alongside Khamenei. What makes this particularly damning is that, meanwhile, three rounds of indirect US-Iran talks had taken place, with Oman serving as the mediating party. Oman, which typically conducts its diplomacy with studied discretion, broke from form: Foreign Minister Sayyid Badr Albusaidi publicly affirmed that a deal was within reach and that Iran had agreed to “zero stockpiling”. Without stockpiled material, nuclear weaponisation is impossible. The diplomacy was working, but Trump gave the order anyway.
What has been achieved thus far is significant but incomplete. Unlike last June’s “intentionally limited strikes” on nuclear capabilities, the current campaign is far broader in scope – yet air power alone is unlikely to achieve regime change in a country three times the size of Iraq in 2003. The most consequential development remains leadership decapitation: Supreme Leader Ayatollah Ali Khamenei is among the casualties, alongside the systematic destruction of the Islamic Revolutionary Guard Corps’ (IRGC) command structure. US forces have struck approximately 2,000 targets across Iran’s military and strategic infrastructure, with officials declaring “decisive offensive progress” and complete control of Iranian airspace described as imminent. Yet the question that hangs over all of it remains unanswered: to what end?
The endgame remains dangerously vague. Trump has offered timelines ranging from a few days to four weeks – a variance that itself signals the absence of a coherent plan. If regime change is the objective, the timeline is fanciful; history offers no examples of imposed regime change achieved in weeks. The latest reports of the US arming Kurdish groups to spark a popular uprising are a foreboding sign, risking civil war and, at worst, another failed state in the Middle East.

Iran’s desperate calculus
Facing the threat of collapse, the Iranian regime has responded without shackles. Stripped of its proxy network and forward shield in the post-7 October campaign, Iran has abandoned the calculated restraint that previously characterised its retaliations. What is unfolding now is categorically different: a regime with nothing to lose, determined to drag both the region and the world into a quagmire.
Iran’s retaliation has escalated in deliberate steps. The first two days saw strikes on US bases hosted on neighbouring soil; within days, the targets shifted to civilian infrastructure – Dubai International Airport, Kuwait International Airport, the Era Tower in Bahrain and sites across Riyadh. The intent is clear: to force Gulf Arab neighbours into pressuring Washington to halt the spiral. Tehran’s gamble is that these states’ access to Trump makes them the most viable de-escalating actors. The price is steep, however. These strikes cross red lines for neighbours who, after years of rapprochement with Tehran, had agreed not to permit their airspaces to be used for offensive operations against Iran. Strong statements have already been issued by the Gulf Cooperation Council.
For now, the Gulf states are relying on defence systems that have performed commendably. But if Tehran’s desperation translates into sustained attacks on civilian areas and energy facilities, that calculus will shift. As the UAE’s Diplomatic Adviser to the President, Anwar Gargash, has indicated, an “active self-defence stance, independent of the US-Israel campaign” cannot be ruled out. The Gulf will respond in action, not just words.
By days three and four, Iran escalated further, targeting the energy infrastructure of Gulf states – another major red line crossed. QatarEnergy, one of the world’s largest LNG suppliers, suspended production following attacks on its facilities at Ras Laffan and Mesaieed Industrial City. Saudi Aramco confirmed the temporary shutdown of its Ras Tanura refinery – processing around 550,000 barrels per day – after a drone strike. Most consequentially, Iran has effectively closed the Strait of Hormuz, warning it would “burn any ship” attempting to transit – a chokepoint through which nearly a fifth of the world’s oil exports pass. European gas prices have surged 45 per cent, a severe blow to a continent still navigating its transition away from Russian energy. Global markets are rattled.
With Iran’s top brass eliminated, the Islamic Republic’s resolve now rests on its “mosaic defence” strategy – dispersing power to junior commanders through a deliberately decentralised structure. The regime has moved quickly to signal institutional continuity, establishing an Interim Leadership Council, though reports on succession remain unsettled, with Khamenei’s son Mojtaba emerging as the frontrunner. Simultaneously, Iranian intelligence has reportedly made secret outreach to Washington seeking an offramp. What is clear is this: Iran will continue to absorb strikes like a sponge – endurance as strategy – while threatening global connectivity. The regime is severely wounded, but not yet broken.

Two gambles, no winners
Trump has, in effect, dropped a loaded machine gun – and it is now firing in all directions. Convinced that the enemy does not get a vote, the American president is discovering what Iraq and Afghanistan already demonstrated: regime change is far harder than it looks, and wars unfold in ways no plan survives. For a president who campaigned against endless wars, this conflict offers no end date – and may yet define his legacy. His brand of muscle-and-money diplomacy will also cast a long shadow over Arab allies who believed they understood how to navigate his dealmaking instincts.
For Iran, the threat remains existential – and a cornered adversary does not surrender its remaining arsenal quietly. Despite US claims of “localised air superiority”, a destroyed navy, and an 86 per cent reduction in ballistic missile attacks, Iran’s cheap one-way Shahed drones continue to overwhelm air defences. That Iran has now extended strikes beyond the Middle East – targeting Turkey, Cyprus and Azerbaijan – signals a regime still capable of strategic disruption, however desperate.
What this war will ultimately reshape is threat perception. For Arab states, the existential menace is shifting – from Israel’s unchallenged military dominance to Iran’s unshackled retaliation. Gulf leaders have made it clear that Tehran’s conduct is exhausting regional patience and eroding hard-won friendships – leaving the Islamic Republic increasingly isolated at precisely the moment it can least afford to be. Should a power vacuum emerge in Tehran, regional instability will compound. Whatever the outcome, trust in an unpredictable American president – among even his closest allies – will not easily be restored.



This commentary originally appeared in Istituto Affari Internazionali (IAI).

### Leveraging AI for a Gender-Responsive Care Economy

Artificial intelligence (AI) is increasingly presented as a solution to mounting pressures on care systems worldwide. In much of the Global South, however, care systems remain shaped by chronic underinvestment, widespread informality, and heavy reliance on women’s labour. Introducing AI into this context is therefore not a neutral technological shift. Without deliberate attention to these structural conditions, AI is likely to reinforce existing inequalities rather than alleviate them.

Demographic transitions are intensifying strain on health and social care systems, as ageing populations and rising chronic disease increase demand for health and social care services. For instance, the World Health Organization (WHO) estimates a global shortfall of 11 million health workers by 2030, highlighting a widening gap between care needs and available human capacity. These pressures have accelerated AI adoption, privileging efficiency gains over considerations of informality, labour precarity, and the gendered organisation of care work.
The Gendered Labour Behind Global Care Systems
Any assessment of AI’s role in expanding care systems must begin by recognising the gendered and informal nature of care work. Globally, women spend 3.2 times more hours on unpaid care work than men, much of which occurs in informal settings. Domestic work alone employs 75.6 million people worldwide, 81 percent of whom are informally employed, with nearly 82 percent based in developing and emerging economies. In low-income contexts, unpaid care also includes essential tasks such as collecting water and fuel. A United Nations International Children’s Emergency Fund (UNICEF) study estimates that women and girls collectively spend around 200 million hours each day on water collection, often at the expense of education, health, and participation in the labour market.
Globally, women spend 3.2 times more hours on unpaid care work than men, much of which occurs in informal settings.
Paid care work also remains highly gendered, with women comprising approximately 70 percent of the global health and social care workforce, providing essential services to an estimated five billion people, and contributing labour valued at over US$ 3 trillion annually. Yet, women are concentrated in lower-paid and frontline roles and hold only around 25 percent of leadership positions. Furthermore, analysis from the International Labour Organization–World Health Organization (ILO–WHO) global sectoral survey indicates that women face a 24 percent pay gap compared with men in these sectors.
Gendered Risks and Structural Biases in AI-Driven Care
Introducing AI into care systems demands scrutiny, not only because care work is gendered but also because the sector remains largely informal and unevenly integrated into digital economies. A common assumption holds that care work’s relational and emotional labour makes it resistant to automation. At the same time, AI can automate routine care-related tasks, particularly domestic work, with estimates suggesting that up to 40 percent of household labour could be automated within the next decade. While both claims are well established, they apply to different forms of care and carry distinct implications. For households, automating these tasks may free up time, but for paid care workers whose livelihoods depend on them, automation reduces both labour demand and income security.

The pressing concern is the digital divide, which plays a central role in shaping how AI affects care work. Women in low- and middle-income countries are 14 percent less likely than men to use mobile internet, leaving around 885 million women excluded from internet connectivity, most of them in South Asia and sub-Saharan Africa. These disparities—driven by social norms, limited education, and unpaid care burdens—determine who can access AI-complementary roles and who remains in work exposed to automation.

Platformisation is increasingly framed as a pathway to formalising care work, but emerging evidence points to more ambiguous outcomes, as seen in India, where platforms such as Uber offer domestic help on demand. While they provide flexible work, care workers often remain outside social protection, with limited pay, job security, and bargaining power, and are also at risk of algorithmic discrimination. Without safeguards, platform-mediated care can scale informality and precarity rather than enable equitable opportunities.
Women in low- and middle-income countries are 14 percent less likely than men to use mobile internet, leaving around 885 million women excluded from internet connectivity, most of them in South Asia and sub-Saharan Africa.
Beyond access, the design of AI systems can reproduce deeper structural biases. Many models are trained on labour and economic datasets that systematically undercount unpaid and informal care work. A 2024 United Nations Educational, Scientific and Cultural Organization (UNESCO) assessment of large language models found persistent gendered associations, linking women to domestic and caregiving roles and men to authority and economic leadership. When embedded in policy-facing or administrative AI tools, these patterns risk reinforcing the long-standing undervaluation of care rather than correcting it.

Governance also remains a risk, as AI-enabled care technologies operate in highly intimate settings and generate sensitive data on health, household routines, and levels of surveillance. In the absence of strong regulatory frameworks, women—particularly domestic workers, informal caregivers, and care recipients—have limited control over how this data is collected, shared, or monetised.
Designing Gender-Responsive AI for Equitable Care Economies
Realising this potential, however, depends on deliberate policy choices rather than technological adoption alone. Leveraging AI effectively in care systems requires treating the care economy as a central component of economic development. The scale of the opportunity is substantial: in India alone, the care economy is projected to exceed US$ 300 billion by 2030 and generate over 60 million jobs, while the World Economic Forum (WEF) estimates that investments of US$ 3.1 trillion in care and social jobs could generate a comparable boost to GDP and create over 10 million jobs in the United States. In this context, AI—if deployed deliberately—can reduce repetitive care burdens and support more equitable outcomes.

AI adoption in the care economy must therefore begin by addressing the structural care and skills burden borne by women. A 2025 World Economic Forum (WEF) report identifies unpaid care as one of the main reasons women cannot engage in AI-driven upskilling or reskilling. Heavy unpaid care responsibilities limit the time available for learning, meaning that AI-led transitions will exclude women unless supported by complementary policies such as subsidised childcare, flexible work arrangements, and accessible training programmes.

Bridging the gender digital divide is central to this transition. Without targeted investments in digital literacy and job-linked training for women care workers, AI adoption will continue to shift value towards digitally mediated roles. India can leverage national initiatives such as Digital India and Skill India, while states can implement context-specific training programmes to prepare women for AI-complementary roles.
Enablers of more equitable AI adoption in the care economy by supporting digital skilling, fair task allocation, and pay transparency.
As care work becomes increasingly platform-mediated, these platforms can serve as key enablers of more equitable AI adoption in the care economy by supporting digital skilling, fair task allocation, and pay transparency. This approach can ensure that AI promotes formalisation and upward mobility rather than reproducing informality.

Finally, AI design, procurement, and governance choices will determine outcomes. Tools must be evaluated for their impact on women’s paid and unpaid workloads and their potential to intensify algorithmic surveillance. Robust data governance is critical given the sensitivity of care-related information. Clear rules on consent, purpose limitation, and data minimisation are essential, with additional safeguards for children, older persons, and informal care recipients. When embedded within sustained public investment in care infrastructure, workforce protections, and strong governance, AI can support more resilient and gender-responsive care systems.

 



Sharon Sarah Thawaney is the Executive Assistant to the Vice President (Development Studies), Nilanjan Ghosh, at the Observer Research Foundation.

Disclaimer: This commentary originally appeared in Observer Research Foundation. 

### Governing Biotechnology’s Dual-Use Security Dilemma

Treating biotechnology as a strategic security asset deepens the dual-use dilemma, fuels techno-nationalist competition, fragments research cooperation, and risks worsening biosecurity unless managed through cooperative governance.

Securitisation of biotechnology creates a dual-use security dilemma with significant policy implications. While biotechnology is increasingly treated as a strategic asset, framing its dual-use capabilities in security terms can trigger exceptional policy measures that constrain international collaboration, deter beneficial research, and heighten biosecurity risks. The perception of biotechnology as a strategic asset intensifies the dual-use dilemma, as states pursue competitive techno-nationalist strategies. Amid shifting geopolitics, weakening multilateral frameworks, and the rapid convergence of biotechnology with artificial intelligence, policymakers must recognise this dilemma and manage innovation through balanced, cooperative mechanisms that safeguard security while harnessing the benefits of scientific openness.
Biotechnology and Techno-Nationalism
Biotechnology has advanced significantly over the past few decades, impacting numerous sectors. Applications of recombinant DNA technology and CRISPR-Cas in disease management, the development of gene-edited crops for food and nutritional security, and the production of mRNA vaccines to address the COVID-19 pandemic illustrate notable achievements. Moreover, the convergence of biotechnology with artificial intelligence (AI) is underway—exemplified by the first fully AI-discovered drug candidate, rentosertib, discovered by Insilico Medicine in 2025.
This turn towards techno-nationalism in biotechnology, coupled with shifting geopolitics, is reshaping its identity from a developmental tool to one of strategic and security concern. Consequently, as biotechnology becomes integrated into national strategies, its framing through a security lens lays the foundation for securitisation and the implementation of exceptional policy measures.
Recognising biotechnology’s potential to address global challenges, an emerging policy discourse characterises it as a strategic asset. Governments, including the United States (US), China, Japan, Australia, South Korea, and India, have formulated strategies that position biotechnology and the broader bioeconomy at the centre of economic growth and technological competitiveness, shaping industry policy. In this context, the US National Security Strategy (2025) identifies biotechnology as part of its core national interest, while the European Union (EU)’s proposed Biotech Act emphasises biomanufacturing. This turn towards techno-nationalism in biotechnology, coupled with shifting geopolitics, is reshaping its identity from a developmental tool to one of strategic and security concern. Consequently, as biotechnology becomes integrated into national strategies, its framing through a security lens lays the foundation for securitisation and the implementation of exceptional policy measures. 
The Dual-Use Security Dilemma in Biotechnology
The development and deployment of emerging technologies have historically been approached with caution due to their dual-use nature—the potential to produce both harmful and beneficial applications. This dual-use characteristic generates a security dilemma with broad policy implications. In a traditional ‘security dilemma’, measures by one state to enhance its security—such as increasing military strength or economic power—create uncertainty about its intentions and capabilities, triggering insecurity in other states. Such dynamics can escalate tensions and spiral into competitive cycles, as exemplified by historical arms races.
For instance, the infrastructure, materials, tools, and knowledge used to develop a vaccine or conduct genomic surveillance of a disease outbreak can be redirected for harmful purposes, making it arduous to distinguish between activities intended for public health security and those intended to create harm by bad actors.
In the case of biotechnology, this dilemma is deepened by low distinguishability—the ease with which a state can differentiate between military or harmful and civilian applications of a technology—through its technical characteristics as well as through political economy structures. For instance, the infrastructure, materials, tools, and knowledge used to develop a vaccine or conduct genomic surveillance of a disease outbreak can be redirected for harmful purposes, making it arduous to distinguish between activities intended for public health security and those intended to create harm by bad actors. The same applies from a political economy perspective; deeply integrated civil and military sectors, or interwoven state–business relations, are more likely to have dual-use technologies diverted for defence purposes. From an external standpoint, low distinguishability can make threat assessment and verification processes cumbersome, reinforcing uncertainty and sowing mistrust among states, thereby deepening the dual-use security dilemma.
Securitising Biotechnology: From Protection to Insecurity
Amid this ambiguity, shifting biotechnology from a developmental to a strategic tool, and framing it as a security concern or securitising it, can generate insecurity and prompt exceptional policy measures. A notable example is the tensions between the US and China over Huawei’s 5G technology, where the company was treated as an existential threat and exceptional measures, including sanctions and semiconductor export restrictions, were imposed by the US. Similarly, through legislation, regulatory measures, and public discourse, biotechnology risks may be constructed in ways that limit international scientific collaboration, including data-sharing. Consequently, precautionary measures such as export controls and restrictions on foreign investment or funding may be implemented. While protective in intent, long-term securitisation can amplify threat perceptions, institutionalise exceptional measures, and fragment global research ecosystems and joint responses to transnational biological threats.
USA-China Interplay in Biotechnology
This is evident in the interplay between the US and China over biotechnology. The US views China’s dominance in the sector as a national security threat. The Australian Strategic Policy Institute (ASPI) released its Critical Technology Tracker, highlighting that China and the US are locked in intense competition to lead the field. A recent report by the National Security Commission on Emerging Biotechnology (NSCEB) noted that China’s expanding biotechnology sector could surpass the US, necessitating increased domestic investment and innovation.
A recent report by the National Security Commission on Emerging Biotechnology (NSCEB) noted that China’s expanding biotechnology sector could surpass the US, necessitating increased domestic investment and innovation.
As a countermeasure, the Biosecure Act was signed into law in December 2025 by US President Donald Trump. Initially introduced in 2024 to limit US agencies from procuring technology or contracting with certain Chinese biotechnology companies deemed threats to national security, the revised legislation now establishes an Office of Management and Budget to compile a list of companies, such as those associated with the Chinese military, that pose a risk to the US. Further, earlier this month, the US introduced the Biosecurity Modernization and Innovation Act to broaden the national biosecurity framework, taking cognisance of rapid advancements in the field and the risk of losing leadership to foreign adversaries. Collectively, these measures illustrate how securitisation can shape legislation, industry policy, and research collaboration while reinforcing mutual insecurity.
Biotech at the Defence–Civil Interface 
Biotechnology’s military applications further complicate the dual-use security dilemma. Defensive applications include protecting against chemical, biological, radiological, and nuclear (CBRN) threats, enhancing human combatant performance, advancing military medicine, and optimising troop deployment pathways. These measures are intended to strengthen military capabilities. China’s incorporation of biotechnology into its military-civil fusion strategy underscores its use of the technology for defence, while NATO identified biotechnology and human enhancement (BHE) technologies as a strategic imperative in 2019, culminating in the organisation’s first international strategy on BHE in 2024. Similarly, Russia’s investments in BHE aim to counter Western advancements and maintain military superiority.

While biodefence programmes are integral to national security, the overlap of their technical characteristics with offensive capabilities complicates threat assessments—and ambiguity can create uncertainty over intent—reinforcing the dual-use security dilemma. Low levels of distinguishability are particularly evident where civil and military dimensions converge—most notably in the case of China and its military. Consequently, biotechnology capabilities may be perceived as offensive by strategic competitors or adversaries. For instance, China’s genomic surveillance programme came under scrutiny over concerns regarding the alleged misuse of genetic data and human rights abuses; since then, China has strengthened the regulation of human genetic resource data.
While biodefence programmes are integral to national security, the overlap of their technical characteristics with offensive capabilities complicates threat assessments—and ambiguity can create uncertainty over intent—reinforcing the dual-use security dilemma.
Compounding this fusion is the possibility of misuse by malicious non-state actors, particularly given the growing accessibility of biotechnology tools. The democratisation of knowledge and resources through do-it-yourself (DIY) bio communities and large-language models (LLMs), alongside the increasing accessibility and affordability of these technologies, can be exploited by malicious actors. As states reduce collaboration, funding, or access to tools and knowledge, securitisation may push experimentation into less regulated spaces, thereby reducing oversight and transparency and exacerbating biosecurity risks.

Collectively, this demonstrates that exceptional policy measures through securitisation can produce unintended consequences, such as the fragmentation of global research ecosystems, restrictions on data-sharing during health emergencies, and the diversion of funds away from beneficial advances, including the development of novel vaccine platforms. By fueling mistrust among nations, accelerating techno-nationalist competition, and pushing research into less regulated spaces, the securitisation of biotechnology can deepen the dual-use security dilemma. Managing the dual-use security dilemma in biotechnology requires safeguarding against legitimate threats while preserving science diplomacy. This necessitates awareness of the unintended consequences of securitisation, where uncertainty over capabilities and intent can hamper beneficial scientific cooperation and even prompt malicious actors to develop their own biological weapons. The Biological Weapons Convention (BWC) remains the bulwark against the deliberate misuse of biological sciences. Strengthening confidence-building measures and verification mechanisms under the BWC would be beneficial. Norm-building efforts that emphasise responsible science, rather than exceptional policy responses, are needed to reduce threat perceptions. Science cooperation in biotechnology can be incorporated into multilateral and minilateral arrangements to foster trust, goodwill, and a collective commitment to addressing global challenges. Finally, as AI accelerates biological research, norms and frameworks are needed to govern the responsible development of AI-biotechnology tools without hampering innovation.
Managing the dual-use security dilemma in biotechnology requires safeguarding against legitimate threats while preserving science diplomacy. This necessitates awareness of the unintended consequences of securitisation, where uncertainty over capabilities and intent can hamper beneficial scientific cooperation and even prompt malicious actors to develop their own biological weapons.
Conclusion
The shift of biotechnology from a developmental tool to a strategic asset reflects a broader geopolitical turn in which scientific capabilities are increasingly viewed through the lens of strategic competition. This, however, frames biotechnology as a security concern, deepening the dual-use security dilemma. Measures intended to enhance security can erode trust, fragment research ecosystems, and restrict data-sharing, thereby worsening biosecurity risks. Governance can be strengthened through verification mechanisms under the Biological Weapons Convention (BWC), embedding science cooperation within multilateral frameworks, and developing shared norms for innovations such as AI-biotechnology tools. These steps will help policymakers prevent cycles of insecurity and mistrust while harnessing biotechnology as a powerful tool for global health, nutrition, and resilience.

 



Lakshmy Ramakrishnan is an Associate Fellow with the Centre for New Economic Diplomacy at the Observer Research Foundation.

Disclaimer: This commentary originally appeared in Observer Research Foundation..

### The Future of Think Tanks in the Age of AI

Artificial intelligence (AI) appears to be following the “move fast and break things” ethos of Silicon Valley. Popularized by Facebook’s (now Meta) Mark Zuckerberg, “move fast and break things” prioritizes rapid innovation and rollout over all else to secure a competitive edge. While Facebook did secure a competitive advantage in the digital world, it has also offered us a cautionary tale. Its swift rollout without meaningful regulation contributed to documented detrimental impacts to mental health and the proliferation of harmful disinformation. Now, the idea of moving fast and breaking things in the AI race has led leaders, including those in government, to further advocate for deregulation to ensure market dominance. The Trump Administration's Executive Order from December 2025 — Ensuring a National Policy Framework for Artificial Intelligence — illustrates this dynamic, proposing a “minimally burdensome national policy framework for AI.”
There are growing concerns that AI might dramatically change employment as we know it. Last year’s UNCTAD Technology and Innovation Report forecast that AI could affect roughly 40% of global jobs within 10 years, though effects will vary by national readiness. The ‘ideas industry’ will not be immune to this. Historically, public policy think tanks have served as hubs of expertise and research, offering policymakers, leaders, and members of the public carefully curated insights on some of society's most pressing challenges. Their reputations are based on analysis, deep subject matter knowledge, and the ability to synthesize complex information into actionable recommendations. But as artificial intelligence rapidly transforms the landscape of research and knowledge production, think tanks face an existential question: what is their role when AI agents can conduct research at speeds no human could match?
The exponential growth in AI's capacity to analyze information, identify patterns, and generate insights is reshaping the research landscape. Researchers worldwide are already embracing AI tools at scale. A Frontiers report titled "Unlocking AI's untapped potential: Responsible innovation in research and publishing" revealed that more than 50% of researchers now use AI in manuscript peer review. But this enthusiasm warrants scrutiny. Scholars Lisa Messeri and M.J. Crockett caution in "Artificial intelligence and illusions of understanding in scientific research" that researchers risk a paradox: generating more content while comprehending less. Recently, Moltbook offered a window into an AI-only digital space. On a superficial level, one could be impressed by the “intelligence” displayed by the AI agents, but under scrutiny the prevalence of AI slop was apparent, and the conversations these AI agents had were essentially a reflection of their training data. Therefore, the fundamental danger lies in treating AI as a trusted intellectual partner rather than as a powerful tool demanding constant human evaluation and oversight.
Think tanks can therefore reposition themselves as essential curators and conveners in an era of information overload. They should become what society urgently needs: trusted arbiters of expertise in a world saturated with both information and disinformation. When anyone can generate a sophisticated-looking research paper with AI in minutes, the ability to distinguish rigorous analysis from sophisticated nonsense becomes invaluable. The role of think tank researchers may no longer involve spending months writing reports because an AI could draft them in hours. Instead, their expertise may be needed to evaluate AI-generated research and identify its limitations and biases critically.
Perhaps most critically, think tanks are positioned to resolve a central paradox of our era. The more AI-generated content saturates our lives, the more urgently we crave authentic, human dialogue with credible experts. As our world grows increasingly digital, the capacity to disconnect and engage face-to-face remains desirable. Trust cannot be built through algorithms. It requires sustained human connection, particularly in international disputes where empathy and understanding develop only through genuine face-to-face interaction. Part of the answer requires democratizing a historically closed, exclusive field and fostering greater openness in knowledge sharing so that beneficiaries can hone what may be the most critical skill for our AI-driven future, the ability to ask the right questions.
Stuart Russell, a Professor of Computer Science at the University of California-Berkeley, warned against "AI solutionism" while speaking at the World Economic Forum’s Annual Meeting of the Global Future Councils. While Russell acknowledges that AI applications present significant promise across diverse fields, he also emphasized that AI isn't a cure-all.  He stated, “if we are creating systems more powerful than ourselves, then there is an obvious question: How do we retain power over entities more powerful than ourselves forever?” Perhaps one of the solutions to retaining power over AI is to further champion spaces which prioritize human dialogues and connection. We need more spaces to do so, as traditional third places such as libraries, community centers, and cafes have become increasingly inaccessible for communities. Think tanks now have the opportunity to evolve to serve as accessible, neutral grounds where diverse perspectives converge and where trust and understanding deepen through face-to-face exchange. As the digital world continues to dramatically streamline various aspects of our work, promising to optimize our time, we must begin using that reclaimed time to engage in human connection and dialogue.



Katherine Salinas is Senior Program Coordinator for the Technology Policy program at ORF America.
Disclaimer: This commentary originally appeared on ORF America website.

### US-Israel Strikes Tip Middle East into A New Crisis

The US and Israel finally decided to cross a Rubicon that had been looming over the Middle Eastern strategic landscape for some time. Their coordinated strikes on Iranian targets were not merely tactical operations; they were a political statement about deterrence and credibility while underlining the limits of diplomacy in a polarised geostrategic landscape.
Israel’s ‘Roaring Lion’ and US’s ‘Epic Fury’ were crafted as instruments of coercive diplomacy by other means, aimed at degrading Iran’s nuclear and missile infrastructure while reasserting a fraying regional order. With the targeted killing of Iranian supreme leader, Ayatollah Ali Khamenei, both sides have entered a point of no return.
US President Trump framed the strikes as “major combat operations” against “imminent threats,” underscoring US’s shift toward muscular unilateralism. Israeli PM Netanyahu situated the assault within its long-standing doctrine of preemption, arguing that an Iran on the cusp of nuclear capability constitutes an existential challenge that cannot be managed, only neutralised.
The convergence of American maximalism and Israeli insecurity has produced a moment of decisive escalation. At the heart of the crisis lies Iran’s nuclear trajectory. The June 2025 US-Israeli strikes had damaged facilities but failed to eliminate Tehran’s capacity to regenerate. Reports of covert rebuilding and IAEA’s concerns reinforced suspicions that Iran was edging closer to weapons-grade enrichment.


Israeli PM Netanyahu situated the assault within its long-standing doctrine of preemption, arguing that an Iran on the cusp of nuclear capability constitutes an existential challenge that cannot be managed, only neutralised.

The US’s insistence on zero enrichment and the dismantling of facilities proved incompatible with Tehran’s red lines. The collapse of the Geneva talks was less a diplomatic accident and more the culmination of irreconcilable strategic aims.
The nuclear dimension, even though central, is not the only variable here. Israel’s security calculus has been shaped by Iran’s ballistic missile arsenal and its network of proxies, even if Hezbollah and Hamas have been degraded and Syria’s Assad regime has fallen. For Israel, the prospect of Iran crossing the nuclear threshold—even symbolically—would irreversibly alter the regional balance. Months of joint planning with the US reflect a shared assessment: deterrence, once eroded, must be restored dramatically.
Trump’s ‘maximum pressure 2.0’ policy has provided the broader scaffolding. After setbacks in 2024 that appeared to embolden Iran’s so-called ‘Axis of Resistance’, the US has sought to reclaim regional initiative. Military deployments since Jan 2026 were both signalling devices and operational preparation.
The strikes thus blended preventive logic with alliance management and reputational stakes.


The regional implications are immediate and combustible. Iranian retaliation against Israel and US bases in the region signals that escalation is no longer hypothetical but unfolding.

Since Dec 2025, widespread protests fuelled by economic collapse and harsh repression have exposed fissures within Iran. Trump’s rhetoric urging Iranians to “take over your govt” has injected an overt regime-change undertone. While external force rarely produces orderly political transitions, the perception of regime vulnerability and the seduction of the idea of regime change may have narrowed the window for action in the US and Israel.
The regional implications are immediate and combustible. Iranian retaliation against Israel and US bases in the region signals that escalation is no longer hypothetical but unfolding. Proxies in Iraq and Yemen have hinted at sustained attrition, even if their capabilities are diminished. The Strait of Hormuz, the world’s most sensitive energy choke point, now sits at the epicentre of strategic anxiety. Gulf states hosting US assets face the unenviable task of balancing deterrence with de-escalation.
The humanitarian and political consequences could be profound. Civilian casualties, infrastructure damage and displacement risk deepening societal fractures. A weakened clerical establishment might confront intensified internal unrest, potentially reshaping alignments—consolidating Israel’s ties with Sunni Arab states while fragmenting Shia influence. Saudi has expressed full solidarity with those targeted nations and pledged to provide “all its resources” and “all its capabilities” to support them in any measures they take even while making clear that it would not allow its airspace or territory to be used for strikes on Iran. But a protracted conflict could just as easily destabilise Lebanon and Iraq, compounding an already fragile regional order.
Globally, the shockwaves are evident in energy markets. Oil price volatility threatens to exacerbate inflationary pressures and slow growth in Europe and Asia. Russia and China, both invested in Iran strategically and economically, have condemned the strikes, but have limited means to assert themselves. The episode also tests the resilience of nuclear non-proliferation norms. Equally significant is what this moment reveals about American statecraft.


Russia and China, both invested in Iran strategically and economically, have condemned the strikes, but have limited means to assert themselves.

The willingness to privilege force over multilateral and diplomatic consensus reflects a recalibration of US grand strategy. Legal debates over pre-emption and sovereignty will persist, but the message is unmistakable: the US is now prepared to act decisively when it judges the balance tilting away. The latest conflagration is the product of accumulated mistrust, failed diplomacy and strategic impatience. Israel and the US may succeed in degrading Iran’s capabilities and reasserting deterrence. But retaliation already underway underscores the inherent volatility of coercive gambits in a crowded geopolitical theatre.
The Middle East finds itself, once again, at a deeply precarious strategic crossroads and the international community, such as it exists, confronts a familiar yet formidable challenge: how to prevent a calculated strike from cascading into a conflagration whose costs—human, economic and strategic—would far exceed the gains sought.



This commentary originally appeared in The Times of India.

### Tehran Reenters the Global Geopolitical Spotlight

In late 2013, the White House in Washington DC — then under President Barack Obama — embarked on a multi-national, complicated, and ambitious journey to negotiate with Iran to curtail its nuclear programme. The United States, along with some of its allies, particularly Israel, was at a level convinced that Tehran had set out to develop a nuclear weapons programme. The negotiations, which involved a consortium of United Nations Security Council Members along with Germany, collectively known as the P5+1, managed to reach an agreement in 2015 called the Joint Comprehensive Plan of Action (JCPOA). The aim was to install guardrails around the Shia power’s nuclear activities, which its then President Hassan Rouhani and the Supreme Leader Ayatollah Khamanei maintained, was only for civil use.

The Trump years
In 2018, as the first presidency of Donald Trump began, the U.S. exited the agreement leaving not just Iran but also its allies in Europe in the lurch. Russia and China, technically allies for Iran, but not wanting a nuclearised West Asia, were also left stumped. Mr. Trump had long advocated that the JCPOA was farcical and negotiated in a way which did not secure American interests. Fast forward to 2025. Now, in Mr. Trump’s second run as President, the U.S., with Israel, bombed Iran’s nuclear and air defence sites followed by a narrative that the country’s capacities to pursue such weapons lied in tatters.

However, a few months following the attacks, Mr. Trump is now chasing a deal through diplomacy, in a very similar manner as Mr. Obama did and succeeded, albeit not a perfect one. Israel’s Prime Minister Benjamin Netanyahu, who in a speech at the United Nations in 2012 had shown a drawing depicting the various stages at which Iran’s nuclear programme had progressed, kept stopping Tehran as a non-negotiable security aim. With Mr. Obama, and even President Joe Biden later, Mr. Netanyahu had limited success. But with Mr. Trump, it was an opportunity as the Israeli leader managed to market his state’s celebrated intelligence apparatus’s assessment that Iran was racing towards nuclear weapons. While the U.S.’s assessments differed, Mr. Netanyahu’s whisperings in Mr. Trump’s ear won the battle.
Trump’s second run as President, the U.S., with Israel, bombed Iran’s nuclear and air defence sites followed by a narrative that the country’s capacities to pursue such weapons lied in tatters.
Now, in 2026, even as the U.S. moves notable military capacity in the region while simultaneously holding talks with Iran, hosted by long-time mediator Oman, Mr. Trump seemingly wants his own JCPOA. The language from the White House today resembles that of the pre-Obama era. “... I insisted that negotiations with Iran continue to see whether or not a deal can be consummated,” he said. “If it can, I let the Prime Minister know that will be a preference. If it cannot, we will just have to see what the outcome will be,” Mr. Trump said while meeting Mr. Netanyahu, who, once again, had to rush to the White House as U.S. interlocutors met their Iranian counterparts in Muscat.
No escalation is what the Arab powers want
Arab powers of the Gulf, who over the past year or two have committed hundreds of billions of dollars of investment towards Mr. Trump, despite their own troubles with Tehran, do not want to see military escalation. And it is not just them. Others across the world would rather see talks succeed than fail, avoiding pushing the region into another conflict which could run for years should it spread. Iran has made no bones that it retains the kinetic capacity to strike back — a claim that is increasingly being taken seriously by analysts and officials alike. Further threats from Tehran that any strikes this time will be met by retaliation targeting U.S. military facilities in the region, largely situated in the Gulf states, have led to anxieties peaking. The stress is not coming from Iran’s intentions, but more from an inability to predict or influence Mr. Trump’s thinking.
The stakes for India
The Iran file coming back as a point of geopolitical friction, at a moment when the world identifies more as a disordered than an ordered one, poses renewed challenges for many. India, for example, was a supporter of the erstwhile JCPOA process. In fact, New Delhi had highlighted to its peers in Tehran the perks of such an agreement, such as ease of sanctions and a return of oil trade. Iran was at a point one of the top two oil suppliers for India, only to lose out as U.S. pressure peaked. JCPOA was seen as the way out. But even as focus usually comes down to oil, or the Chabahar Port, a long-standing Indian connectivity investment, Tehran remains an important political player — for its fractious relationship with Pakistan, its practicality with the Taliban in Afghanistan, and its posturing in Central Asia vis-à-vis Turkish and Pakistani influences. Iran offers much for India than just its West Asia policies.

Finally, Iran also stands at a crossroads. Internal protests have been consistent, gnawing into the state’s political stability. The ‘moderates’, once powerful, have had to align with their conservative peers to build a nationalists narrative following the U.S. bombings. Domestic power plays, much like before, will heavily impact external outcomes. Any success of these talks will be a better option moving forward than the alternatives being presented by the largest American military build-up in the region since 2003.



This commentary originally appeared in The Hindu.

### Mapping Energy Landscapes in the Gulf: Systems, Policies, and Transition Pathways

Introduction
The Gulf Cooperation Council (GCC), comprising the United Arab Emirates, Qatar, Kuwait, Bahrain, Oman, and Saudi Arabia, sits at the core of global energy markets. Together, GCC states supply close to one-third of internationally traded crude oil and a growing share of global liquefied natural gas (LNG), anchoring their continued relevance in an evolving global energy system.[1] At the same time, each country has articulated long-term national strategies that place energy transition, system efficiency, and economic diversification at the centre of future growth.
Yet the Gulf’s energy transitions are unfolding within a distinct structural context. GCC economies remain highly hydrocarbon-intensive, power systems are overwhelmingly reliant on natural gas, and demand profiles are shaped by rapid population growth, energy-intensive industrialisation, extreme cooling needs, and water desalination. As a result, decarbonisation pathways across the region are less about rapid fuel substitution and more about system optimisation, careful sequencing, and managing structural constraints alongside clean-energy scale-up.
The bloc has accounted for over 55 percent of the region’s growth since 2000 and today represents around 37 percent of the regional Gross Domestic Product (GDP), despite comprising only about 12 percent of the population.[2] Looking ahead, oil-exporting GCC economies are expected to continue outperforming the wider region, supported by strong non-oil activity and sustained energy revenues. This economic backdrop shapes both the pace and priorities of national energy transitions.
While the Gulf is often discussed as a single energy bloc, its transition pathways diverge sharply at the national level, shaped by the priorities and constraints articulated in its capitals, from Abu Dhabi and Doha to Kuwait City, Manama, Muscat, and Riyadh.
This report provides a country-level primer on the Gulf’s current energy landscapes, tracing how each system has evolved and how national strategies frame the next phase of transformation. It does not assess whether stated targets are sufficient, achievable, or aligned with global climate pathways. Instead, it offers a factual, system-level overview of energy mixes, power-sector structures, policy frameworks, and clean-energy deployment trajectories across the GCC.
For each capital, the analysis is structured consistently across six sections: energy system characteristics and emissions profiles; policy and decarbonisation frameworks; the energy mix; the structure and evolution of the electricity sector; recent energy landscape developments; and the key challenges and systemic constraints shaping future pathways, followed by a forward-looking outlook. Data and indicators are drawn primarily from the latest International Energy Agency (IEA) databases to ensure cross-country comparability and are supplemented by national statistics and sector-specific sources where relevant.
By mapping these foundational elements across countries, the report establishes a baseline for understanding how GCC energy systems are transitioning from strategy formulation toward on-the-ground execution. As regional coordination deepens across grid interconnections, hydrogen and ammonia supply chains, and clean-technology manufacturing, these country profiles provide a reference point for analysing emerging patterns of cooperation, competition, and system divergence within the Gulf.
Read the report here.



Parul Bakshi, Fellow, Energy and Climate, ORF Middle East.



All views expressed in this publication are solely those of the author, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel.

Endnotes
[1] Oman Observer. GCC leads global oil reserves and exports. GCC leads global oil reserves and exports https://omanpetroleumandenergyshow.com/newfront/news/13400 (2025).
[2] IEA. The Future of Electricity in the Middle East and North Africa. (2025).

### Mapping Gulf Sovereign Wealth Funds in the Global Energy Transition: Capital, Technology, and Diplomacy

Introduction
Over the past decade, the Gulf’s political capitals have become increasingly important to understanding the geography of global state capital. The region’s sovereign wealth funds (SWFs) illustrate how financial power is now central to industrial strategy, technology acquisition, and clean-energy diplomacy. Together, Gulf SWFs account for about 40 percent of global SWF assets, and six of the ten largest funds worldwide, underscoring their systemic weight.1
Gulf SWFs are, however, no longer passive financial actors but system-shaping institutions. By absorbing first-mover risks in commercially immature sectors, they de-risk the transition for private investors, accelerate project pipelines, and create investable ecosystems aligned with national diversification and global climate objectives.
Their patient, long-horizon capital enables the transfer of technology, operational know-how, and manufacturing capability across borders, helping local markets scale complex industries more rapidly. In parallel, their outward investments have become a form of economic statecraft, projecting capital to forge industrial alliances, reshaping supply chains, and extending diplomatic influence across multiple regions.
Once synonymous with oil rents and fiscal stabilisation, Gulf SWFs have evolved into active engines of diversification, diplomacy, and technological leadership. Investment activity reflects this dominance, according to Deloitte, Gulf SWFs invested USD 82 billion in 2023 and USD 55 billion in the first nine months of 2024, accounting for nearly two-thirds of all sovereign wealth deployment globally.1 Their strategies now extend beyond asset management to shaping the direction of energy systems and strategic industries.
As the global energy transition accelerates, Gulf SWFs are emerging as central actors in new clean-energy supply chains. They are deploying patient, long- horizon capital into renewable energy, hydrogen, critical minerals, green industrial manufacturing, and smart-grid infrastructure; sectors that simultaneously support domestic economic diversification and extend Gulf strategic influence across the Global South and Global North.
Their expanding role also reflects a shift away from traditional passive wealth management toward more interventionist climate and industrial mandates, raising new questions about the robustness of emerging green investment frameworks.
The scale of their impact is significant given how Gulf Cooperation Council (GCC) SWFs are projected to control no less than USD 18 trillion in assets by 2030, a roughly 50-percent increase from today.2 Currently, the Gulf controls USD 4.9 trillion, representing 38 percent of all global SWF assets, concentrated primarily in the Abu Dhabi Investment Authority (ADIA), the Public Investment Fund (PIF), and the Kuwait Investment Authority (KIA).3
Figure 1: Total SWF Assets Under Management (AUM), in $bn

Source: Deloitte, 2025 
Against this backdrop, this report undertakes a structured mapping of major Gulf sovereign and quasi-sovereign wealth funds (SWFs) in energy and clean-technology sectors. Its objective is to provide a concise, evidence- based landscape highlighting flagship transactions and partnerships, planned commitments, geographic footprints (Domestic/Global South/Global North), and the diplomatic linkages that enable or follow investment flows.

Scope and Coverage 
This mapping focuses strictly on fund-level investments and commitments, where SWFs act as direct equity investors or formally announced co-investors. Domestic project developers and operating arms (e.g., QatarEnergy Renewable Solutions, national utilities, and IPP SPVs) are treated separately unless the SWF explicitly appears in the project’s equity or funding structure.
Many project details are based on public announcements, MoUs, and financial/ industry media reporting. These often indicate strategic intent rather than completed deployment. SWFs often use subsidiaries, affiliates, or third-party funds (LP positions) that can obscure direct ownership. Equity participation is recorded only when explicitly disclosed by the fund, project sponsor, or credible financial media.
It should be noted that this is not an exhaustive record of all SWF-funded energy or technology projects. Rather, it synthesises publicly available information to assess directional flows of capital and strategic intent across the Gulf’s leading funds.
As the figure below indicates, a small number of Gulf SWFs hold a disproportionately large share of regional assets. To reflect the political geography of these systems, this report follows the four principal Gulf capitals—Abu Dhabi, Doha, Kuwait City, and Riyadh—each anchoring a distinct architecture of state capital and investment strategy.
Figure 2: Estimated Total GCC SWFs, by Country’s Assets Under Management

Source: Alhajaraf, 2025 
The major Gulf SWFs included in this report are:

Across these four capitals, national decarbonisation strategies have been articulated alongside broader climate and competitiveness commitments. Their domestic energy targets and overseas investment patterns form part of a shared Gulf effort to reshape global energy systems while advancing long-term economic diversification.
Figure 3: Renewable Energy Targets 

Sectors covered: Utility-scale renewables (solar, wind), green hydrogen and derivatives, grid and storage systems, green industrialisation (local manufacturing and supply-chain localisation), critical-minerals and mining tied to the energy transition, climate tech, and relevant finance instruments (green bonds, transition funds).
Together, these funds demonstrate how Gulf capital is shifting from passive wealth preservation to active global influence, reshaping domestic economies, enabling technology acquisition, and redefining the geography of the energy transition.
Read the report here.



Parul Bakshi, Fellow, Energy and Climate, ORF Middle East.



All views expressed in this publication are solely those of the author, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel.

### Countdown to the India AI Impact Summit 2026: Insights from ORF’s Pre-Summit Engagements

Introduction
The countdown to the India AI Impact Summit 2026 is nearly over. Scheduled to be hosted by India in New Delhi on 19–20 February 2026, the Summit will be the largest-ever gathering of AI stakeholders in the world. The convening is the fourth in a series of annual international AI Summits, the first of which took place in the United Kingdom in 2023; the second in South Korea in 2024; and the third in France in 2025, with India as co-chair.
Across these three years, there has been a marked increase in global interest and representation at the Summits: from 28 states and a few tech companies taking part in 2023;[1] to more than 100 states and a host of tech organisations, multilateral bodies, and civil society organisations (CSOs)—over 1,000 representatives in all—attending the Paris Summit in 2025.[2],[3] The numbers are expected to be even higher in the New Delhi gathering.
The emphasis has shifted too. In the initial years, the overriding concern was around AI safety and regulation—the curbs and guardrails that AI development requires.  Conversations then transitioned to a focus on the actions being taken to build and govern AI. Four years into the deliberative process, with AI use having become widespread, India views this moment as opportune for nurturing a better understanding of the impact of AI.[4] The emphasis on AI safety and governance, though, will continue to retain their importance.
Importantly, this is the first AI Summit to be hosted by a country in the Global South. A primary point of focus will be how AI can support the Global South’s development and growth. With the broad theme, ‘Welfare for All, Happiness of All’, and the guiding mantra of ‘People, Planet, Progress’, the Summit weaves a concern for the Global South into the very fabric of its design. The seven chakras or thematic pillars of the conference are: (1) Human capital; (2) Inclusion for social empowerment; (3) Resilience, innovation and efficiency; (4) Promoting scientific cooperation; (5) Democratising AI resources; (6) AI for economic development and social good; and (7) Safe and trusted AI.[5] Taken together, their developmental and social-economic-environmental imperative is apparent.
Another centrepiece of the Summit will be India’s effort to position itself as the “AI use case capital of the world.”[6] Its sheer size and scale are an advantage: with India’s multiple demographic, economic, and consumer groups, it would not be an overstatement that if an AI solution succeeds in India, it might find application in other geographies across the globe. Conversely, AI tools developed in other parts of the world, if adapted, are likely to find practical use in India. Showcasing AI use cases, and promoting related knowledge exchanges, will thus be a core priority.
Between August 2025 and January 2026, Observer Research Foundation (ORF) hosted a series of pre-Summit events on many of the above themes and allied issues. Held in different parts of the world, the convenings brought together AI experts from governments, businesses, CSOs, think tanks, and academia. Their insights, and the points of consensus achieved, will inform deliberations at the New Delhi gathering, and contribute towards the Leaders’ Declaration with which the AI Impact Summit will conclude.
This report compiles the principal takeaways and recommendations from ORF’s 22 pre-Summit events, and acts as a ready reckoner for the AI-related opportunities and challenges that confront the world today.

Pre-AI Summit Events Hosted by ORF
Between August 2025 and January 2026, ORF and its partners organised 22 pre-Summit events across locations in the Global North and Global South. These engagements sought to address themes aligned with the Summit’s priorities, were widely attended by prominent AI stakeholders, and resulted in rich insights and recommendations. The following table presents an overview of the events.[a]




 
Convening
Date
Location
ORF Partners


1
India-AI Impact Summit: Aspirations and Ambitions
14 Aug 2025
New Delhi, India



2
AI and Sustainability: Code, Compute, Conserve
4 Sep 2025
Nagpur, India
IIM Nagpur


3
India Day @ UNGA
24 Sep 2025
New York, US
Reliance Foundation; United Nations in India


4
At the Heart of Development: Aid, Trade, and Technology
24 Sep 2025
New York, US
Reliance Foundation; United Nations in India


5
The AI Imperative: Dial LLM for Growth – Raisina Forum for Future of Diplomacy
4 Oct 2025
New Delhi, India
Ministry of External Affairs, Government of India


6
A New Reckoning: The Dual-Use Implications of Frontier Technologies – Raisina Forum for Future of Diplomacy
5 Oct 2025
New Delhi, India
Ministry of External Affairs, Government of India


7
AI@India: Work, Markets, and Cities in Transition
1 Nov 2025
Odisha, India
XIM University


8
Towards Inclusive, Responsible and Impactful AI Cooperation: Expectations from the AI Impact Summit in India
3 Nov 2025
Cairo, Egypt
Egyptian Centre for Economic Studies (ECES)


9
V Spain–India Forum: Technological Innovation as a Driver of Development in the Health Sector
5 Nov 2025
Barcelona, Spain
Fira Barcelona; SmartCity


10
V Spain–India Forum: AI Governance, Talent and Knowhow: Towards a Knowledge Economy and Spain–India Innovation Ecosystems (in-person)
5 Nov 2025
Barcelona, Spain
Fira Barcelona; SmartCity


11
Women’s Health Futures: Innovation, Equity, and Lifelong Wellbeing
8 Nov 2025
New Delhi, India
Manchanda’s Endoscopic Center (MEC)


12
AI as a Teacher’s Ally: Empowering Educators in the Digital Age
12 Nov 2025
Kolkata, India
N/A


13
Breaking Barriers: Capacity, Data, and Inclusion in AI @ T20 South Africa
13 Nov 2025
Johannesburg, South Africa
South African Institute of International Affairs


14
Competing for the Future: AI's Role in Economic Transformation and Global Power @ Doha Forum
8 Dec 2025
Doha, Qatar
Doha Forum


15
The Need for New Deals: A North-South Bridge and the Future of AI
16 Dec 2025
Menlo Park, US
Carnegie India


16
The New Techno-Order: The Race to Rule the 21st-Century Economy
25 Nov 2025
Cape Town, South Africa



17
Workshop on Safe AI Adoption at Scale
25 Nov 2025
Cape Town, South Africa
EkStep Foundation


18
India Think Tank Forum 2026
12-13 Jan 2026
Ragjir, India
Nalanda University


19
Beyond Agentic Threats: Fostering Cyber Resilience
14 Jan 2026
Geneva, Switzerland
Carnegie India and Permanent Mission of India to the United Nations (Geneva)


20
AI for People
16 Jan 2026
Paris, France
Embassy of India, Paris


21
The DPI Exchange: New Corridors for Innovation and Inclusion
27 Jan 2026
Dubai, UAE



22
Secure Frontiers, Shared Futures
29 Jan 2026
Abu Dhabi, UAE
Emirates Center for Strategic Studies and Research (ECSSR)



Thematic Breakdown and Analysis
The events hosted by ORF revealed the emergence of a distinctly Global South-oriented AI agenda that called for technology to be shaped by the contexts it serves and not merely adopted from elsewhere. The following thematic analysis distils the principal threads that ran across these discussions. 

1. AI for Development and the Global South 
A thread across all events was an emphatic agreement on the need to centre AI development and discourse around the needs and aspirations of developing countries. The ministerial and senior UN participants at the UNGA side event in New York, ‘At the Heart of Development’ and ‘India Day @ UNGA’, framed aid, trade, and technology as primary levers for achieving the Sustainable Development Goals (SDGs), with India’s digital public infrastructure (DPI) presented as a transformative scalable platform for the broader Global South.
The Cairo roundtable echoed this framing by proposing a Global AI Infrastructure Fund and a Multilingual AI Fund to support AI development for the Global South, and to prevent the monopolisation of compute capacity and foundation models by wealthy nations and incumbents. In a similar vein, the Johannesburg T20 roundtable, ‘Breaking Barriers’, highlighted how continuing competition between US and Chinese AI ecosystems risks marginalising countries that are neither producers nor sizeable consumers of frontier models while calling for interoperability standards for mitigating such marginalisation. The events saw a resounding agreement on ensuring that AI governance and development do not leave the world’s majority population as passive recipients but instead empower them as co-creators of the future. 

2. Inclusion: Health, Education, and Gender 
A number of events focused on how AI can serve historically marginalised populations. The women’s health roundtable in New Delhi brought together government officials, hospital leaders, and foundation heads to argue for interoperable, annotated health datasets that capture women-specific profiles, the integration of gender indicators into digital health frameworks, and AI-readiness training for frontline health workers. An event in Kolkata on “AI as a Teacher’s Ally” emphasised lightweight AI tools for resource-constrained schools; and called for teachers, administrators, and parents to actively participate in the development of educational AI. The Barcelona health session proposed cross-border AI sandboxes linked to India’s Ayushman Bharat Digital Mission (ABDM) and the EU Health Data Space, as well as representative, multi-population datasets to reduce algorithmic bias. These discussions underscored the principle of intersectoral inclusion, which can be achieved only through deliberate design choices, local data, and community agency.

3. Human Capital and Talent Transformation
The workforce dimension of the AI transition surfaced repeatedly through the programmes. The Bhubaneswar roundtable, “AI@India: Work, Markets, and Cities in Transition”, examined how automation is disrupting and reshaping employment across sectors. The discussion identified the core challenge as not just displacement but the speed and flexibility with which individuals and institutions can adapt to AI-driven change. The Barcelona panels similarly argued for a shift from producing narrow, highly specialised AI engineers towards hybrid talent models that combine domain expertise with AI literacy. Several events converged on the recommendation that skilling and reskilling must be embedded within broader institutional reforms ranging from university curricula and vocational training ecosystems, to cross-border talent mobility frameworks.

4. Governance, Regulation, and Trust
Almost every event grappled with the tension between enabling innovation and managing risk. In New Delhi, the dual-use implications of frontier technologies like AI, quantum computing, and biotechnology were examined through a security lens, with panellists stressing the need for adaptive regulatory frameworks and early-warning mechanisms to detect risks before they propagate. The Barcelona panels and the Johannesburg roundtable both cautioned against importing regulatory templates wholesale. They emphasised that regulations should be use-case–based, proportionate to actual harms, and sensitive to the compliance capacity of smaller firms.
The Abu Dhabi event on ‘Secure Frontiers, Shared Futures’ advanced the argument that cybersecurity and resilience should be framed as enablers of AI adoption, while noting the benefits of interoperable, context-specific validation frameworks over a single global standard. And the Paris convening saw arguments for making inclusion a deliberate design choice, not an afterthought. Speakers stressed that trust—between people, institutions, and countries—will be the defining currency of AI adoption. Across these discussions, a consensus emerged that trust in AI should be built through transparency, user literacy, culturally relevant training data, and infrastructure resilience.

5. Sustainability and Infrastructure Resilience
The environmental cost of scaling AI received sustained attention. The Nagpur ‘Tech Huddle’ on AI and sustainability examined the energy and water demands of data centres against India’s net-zero commitments, calling for responsible AI deployment, energy-efficient solutions, and incentives for renewable-powered compute. The Abu Dhabi panels deepened this by noting the benefits of treating AI infrastructure as critical national infrastructure, and emphasised the need for governments to strengthen the resilience of AI infrastructure to prevent the creation of single points of failure. The UAE's approach of integrating AI deployment into national energy planning, updating grid codes, and investing in small modular reactors (SMRs) was highlighted as a model. Overall, these events positioned the AI-energy nexus and AI’s fast-growing resource-intensity as a central policy challenge that the Summit should address.

6. The Convergence and Symbiosis of AI and Digital Public Infrastructure 
India’s DPI stack featured prominently in discussions as a high-potential toolset for building AI ecosystems from the bottom, up. The Dubai roundtable on ‘The DPI Exchange’ made the most detailed case, arguing that every DPI layer generates structured, purposive, high-quality data that AI models require. This allows AI solutions to be built atop DPIs—in other words, DPI could power AI. At the same time, AI can strengthen DPI too. Several Indian examples of this were presented, e.g., the use of AI to detect payment frauds, and the integration of voice AI into digital identity services. The benefits of DPI in African contexts were also highlighted, and much interest expressed in exploring the ‘AI+DPI’ approach to empowerment. The Spain–India Forum positioned DPI as the infrastructure through which small and medium enterprises (SMEs), startups, and underserved groups can participate more meaningfully in the AI economy. Collectively, the events highlighted DPI’s significance as a service-delivery mechanism and AI enabler.

7. International Cooperation and Other Partnership Architectures 
Finally, ORF’s events sketched a vision of the partnership architectures needed to realise equitable AI development and adoption. In Geneva, speakers outlined the possibility of a “third way” for bridging the gap between deregulatory approaches and centralised control. South–South cooperation featured prominently in the New York and Cairo events; India–Europe collaboration was the focus in Barcelona; and possible India–UAE–Africa linkages were explored in Dubai, Abu Dhabi, and Johannesburg. The latter roundtable proposed an AI Transparency Forum modelled on the Financial Stability Board, while the Cairo event envisioned a Middle East and North Africa (MENA) regional alliance combining energy, talent, data, and industrial capacity. Across the board, plurilateral, interoperable arrangements that respect local context while enabling cross-border collaboration were identified as pathways for equitable AI futures. Another observable trend was the interest in building ‘startup bridges’, and creating mechanisms for AI-focused startups to innovate jointly and collaborate across borders.

Recommendations
1. AI systems should be governed in ways that prioritise trust and resilience rather than relying solely on static compliance frameworks.
Pre-Summit discussions noted the absence of universal “gold standards” for AI safety, with governance instead evolving through use-case-specific validation. Moreover, conversations on cybersecurity highlighted how failures in AI-enabled critical systems erode public trust, making resilience a prerequisite for public support for adoption. Regulatory sandboxes were presented as practical tools for testing and scaling AI products while achieving a balance between innovation and safety. With these considerations in mind, stakeholders should work towards adaptive, context-sensitive governance frameworks that prioritise real-world robustness and accountability over rigid, one-size-fits-all rules, recognising that trust is essential for adoption while overly prescriptive approaches can introduce unnecessary barriers to innovation.
2. Crafting local data protection regimes and infrastructures should be a priority in order to address data sovereignty and curb data extraction from the Global South. 
Several discussions underscored that current AI development pathways remain heavily data-extractive, with data generated in the Global South frequently being used to train models whose economic and strategic benefits are felt elsewhere. Without regulatory intervention, countries risk becoming mere data suppliers while remaining dependent on externally developed models and platforms. Imbalances in data access and the digitisation of legacy data systems between countries often exacerbate these dynamics. Investing in local data protection laws and trusted privacy-protecting infrastructures is thus crucial, with clear stipulations about the consent needed for personal data to be used to train AI models, and frameworks for addressing new, emerging forms of data such as synthetic data.
3. Stronger investments need to be made in AI-fluent human capital through targeted skilling and upskilling programmes and the development of hybrid talent models.
There is a global AI talent shortage, with the demand for AI-aware and AI-trained workers outstripping supply. Newer kinds of collaborations between governments, the tech industry, and educational institutions need to be forged to build a stronger AI skills pipeline. Besides, AI reskilling and upskilling programmes must be designed across sectors, and AI-focused micro-credentials and introductory modules integrated into technical and vocational education and training (TVET). Across discussions, it was also noted that narrow definitions of “AI talent” risk excluding domain experts in health, mobility, agriculture or public services, whose contextual knowledge is essential for effective AI deployment. As such, discussions on education need to frame AI as an assistive tool, while emphasising agility in training systems. Finally, hybrid talent strategies enabling human–AI collaboration must be evolved. As teachers and trainers will typically lead the implementation of such strategies, substantial investments in building their capacities must be made.
4. India can help define global standards for AI deployment by leveraging its vast user base as a testbed for use-case innovation.
An advantage India enjoys is its ability to deploy AI solutions at an unmatched scale. Its young demographic, linguistic and sectoral diversity, and the presence of tech hubs that demand context-specific solutions, could allow it to become a living AI laboratory. This can address a potential bottleneck in global AI deployment: the power to develop scalable, context-sensitive use cases that can work in complex, resource-constrained environments. Knowledge-exchange mechanisms to connect practitioners with their counterparts across the Global South can accelerate this process by enabling countries facing similar challenges to co-develop and implement solutions rather than building from scratch. As such, India's path to AI leadership should centre on scaling deployment across its domestic market, promoting cross-border learning corridors, and exporting proven solutions across the South in order to position itself as the world's use-case capital, rather than competing in a frontier model race it need not win.
5. Taking inspiration from the Indian approach, open and interoperable DPI could become a foundation for building inclusive AI ecosystems.
Proprietary systems drive market concentration, risking the creation of a ‘digital underclass’ across swathes of the Global South. The wider adoption of India’s DPI model was strongly recommended as it could act as a counterweight by generating locally valuable data at population scale, while avoiding platform dependency. This data—buttressed by robust consent and data-sharing mechanisms—could prove valuable for building and training AI models. AI solutions developed in this manner would reflect local realities and nuances, boosting the accuracy of outputs. Importantly, access to a common, shared digital infrastructure would allow smaller AI firms to build AI systems on an equal footing as incumbents, creating a more level playing field, and fostering more inclusive innovation ecosystems in the Global South.
6. AI ambitions must be integrated with energy infrastructure planning, and efforts to promote energy and water security.
Discussions at pre-Summit events repeatedly emphasised the growing energy- and water-intensity of AI infrastructure, and the risks this poses to grid stability and water availability for local communities. Negotiating these energy requirements should be mainstreamed into efforts to advance the SDGs and existing climate commitments; and environmental costs must be factored into the present “compute-first” race, that often prioritises innovation without sufficiently considering carbon footprints and the region-specific climate vulnerabilities. Renewable energy sources and SMRs could be explored as power sources for AI infrastructure. Additionally, AI should strategically be incorporated into the management of the very systems it makes vulnerable. For example, AI-enabled predictive systems for grid management, water security, and natural disaster planning systems can enable self-sustaining and more resource-efficient data centre ecosystems. Planning standards for AI infrastructure should be conceptualised, and these should explicitly link compute expansion with energy and water security, disaster preparedness, and development goals.
7. Tech middle powers and Global South states should form coalitions for AI cooperation.
Across conversations, participants recommended that tech middle powers—such as India, Australia, Japan, Brazil, and South Africa—should forge partnerships with other Global South countries to promote AI development and governance. This would help generate valuable new streams of cooperation to set AI standards and frameworks, co-develop AI capabilities and applications, and make global supply chains more resilient. Today, the US tends to control the upper end of the AI value chain for advanced computing, while China largely controls access to the critical minerals needed for electronics manufacturing. Coalitions for AI cooperation are therefore seen as increasingly necessary to counter the potential limits that the United States and China could set on domestic innovation in other countries.



Siddharth Yadav, Fellow, Technology, ORF Middle East.
Elizabeth Heyes, Junior Fellow, Technology, ORF Middle East.
Anirban Sarma, Director, Centre for Digital Societies, ORF.

Annex
Key Discussion Points at Pre-Summit Events



1
India-AI Impact Summit: Aspirations and Ambitions | New Delhi, India | 14 Aug 2025



●      The main issues on the India AI Impact Summit agenda, and its expected outcomes

●      The global landscape of AI development and India’s place in this ecosystem


2
AI and Sustainability: Code, Compute, Conserve | Nagpur, India | 4 Sep 2025 



●      AI applications across education, healthcare and sustainability sectors for large-scale social impact

●      Balancing AI innovation with ethics, safety and regulatory experimentation

●      Energy efficiency, compute demand and environmental sustainability of AI systems


3
India Day @ UNGA | New York, US | 24 Sep 2025



●      India’s SDG journey

●      India’s global partnerships

●      AI for development

●      Women-led empowerment strategies


4
At the Heart of Development: Aid, Trade, and Technology | New York, US | 24 Sep 2025



●      Aid, trade and technology as key levers of the development agenda

●      Multipolar world dynamics and India’s leadership role within it

●      South-South cooperation


5
The AI Imperative: Dial LLM for Growth – Raisina Forum for Future of Diplomacy | New Delhi, India | 4 Oct 2025



●      Global AI cooperation and India’s leadership role in shaping inclusive AI governance

●      Human capital, capacity building and democratization of AI resources

●      Safe, trusted and accountable AI frameworks for sustainable growth

●      Action-oriented AI diplomacy through summits, showcases and multistakeholder engagement


6
A New Reckoning: The Dual-Use Implications of Frontier Technologies – Raisina Forum for Future of Diplomacy | New Delhi, India | 5 Oct 2025



●      Dual-use risks of frontier technologies across AI, quantum and biotechnology domains

●      Geopolitical competition shaping technology development and national security considerations

●      Regulatory frameworks, early warning systems and risk detection mechanisms

●      Human agency, ethics and responsible use of advanced technologies


7
AI@India: Work, Markets, and Cities in Transition | Odisha, India | 1 Nov 2025



●      AI transforming work, markets and urban systems through innovation, disruption and human augmentation

●      Education, employment and enterprise adapting to AI-driven changes in skills and job structures

●      Skilling and inclusive adaptation challenges of AI-led economic transition

●      AI-enabled urban governance balancing efficiency, resilience, sustainability and citizen-centered design


8
Towards Inclusive, Responsible and Impactful AI Cooperation: Expectations from the AI Impact Summit in India | Cairo, Egypt | 3 Nov 2025



●      The emerging role of AI middle powers

●      Inclusive and democratised AI cooperation between India, MENA and other Global South regions

●      AI infrastructure, compute access and shared capacity-building models

●      Regional partnerships linking energy, talent, data and industrial ecosystems

●      Local-language AI, digital public infrastructure and low-resource AI applications


9
V Spain India Forum: Technological Innovation as a Driver of Development in the Health Sector | Barcelona, Spain | 5 Nov 2025



●      India–Spain collaboration on AI, digital health, biotechnology and sustainable infrastructure

●      Health-sector innovation through AI, data interoperability and public digital infrastructure

●      Importance of AI governance, trust, transparency across sectors

●      Public–private partnerships supporting climate resilience, energy transition and smart infrastructure

●      Definitions of “AI talent” as currently too narrow, benefiting from expanded consideration of hybrid skills


10
V Spain India Forum: AI Governance, Talent and Knowhow: Towards a Knowledge Economy and Spain–India Innovation Ecosystems | Barcelona, Spain | 5 Nov 2025



●      AI governance, talent development and knowledge-economy transformation

●      India–Spain collaboration across innovation ecosystems, research and deployment

●      European strength in IP creation and regulation as complimentary to India’s large scale and cost-effective deployment and engineering capacity

●      Trust, transparency and human oversight in AI adoption as practices that inspire public confidence

●      Digital public infrastructure enabling inclusion, SME participation and scalable AI adoption


11
Women’s Health Futures: Innovation, Equity, and Lifelong Wellbeing | New Delhi, India | 8 Nov 2025



●      Women’s health innovation through AI, digital health and biotechnology applications

●      Ethical, inclusive deployment of AI in healthcare and public health systems

●      Health data interoperability, governance and real-world clinical validation

●      Capacity building for women-focused healthcare delivery and health workforce digitisation


12
AI as a Teacher’s Ally: Empowering Educators in the Digital Age | Kolkata, India | 12 Nov 2025



●      AI applications supporting teachers through automation, personalization and time-saving tools

●      Teacher training, digital literacy and evolving educator roles in AI-enabled classrooms

●      The role of educators in diffusing responsible AI use

●      Low-cost, offline-first AI tools for resource-constrained education settings

●      Co-design of educational AI involving teachers, administrators and education stakeholders


13
Breaking Barriers: Capacity, Data, and Inclusion in AI @ T20 South Africa | Johannesburg, South Africa | 13 Nov 2025



●      AI capacity-building, data governance and inclusion challenges across Global South contexts

●      Competing AI platforms, models and governance approaches shaping the global AI landscape

●      Ethical AI frameworks, harms identification and limitations of current regulatory enforcement

●      Interoperability, open standards and infrastructure requirements for scalable AI systems


14
The New Techno-Order: The Race to Rule the 21st-Century Economy | Cape Town, South Africa | 25 Nov 2025



●      Which states are winning the global tech war, and how this contest is shaping global supply chains, standards and access to cutting-edge technologies

●      Is the emerging techno-order locking developing countries out of the technologies that will define the future


15
Workshop on Safe AI Adoption at Scale | Cape Town, South Africa | 25 Nov 2025



●     Multistakeholder discussion of an AI Adoption Use Case Framework

●     Explore value creation and points of friction across AI use cases ·       Establish a shared understanding of how AI & DPI persist


16
Competing for the Future: AI's Role in Economic Transformation and Global Power | Doha, Qatar | 8 Dec 2025



●      The geostrategic nature of AI development and regulation amidst great power competition

●      Integration of AI in digital public infrastructure to drive last-mile adoption

●      Investment in small language models, next-gen architectures, and application-layer innovation


17
The Need for New Deals: A North-South Bridge and the Future of AI | Menlo Park, US | 16 Dec 2025



●     The need to focus on selected issues at the Summit rather than trying to address all AI issues

●     Widening performance gap between open-source and proprietary models

●     AI infrastructure, especially the need to prioritise data centres over semiconductor manufacturing in the near term

●     AI talent development and access to capital  


18
India Think Tank Forum 2026 | Rajgir, India | 12–13 Jan 2026



●      India’s evolving AI landscape and its societal, governance and policy implications

●      National resilience, security, multilateralism and military issues in a changing global context

●      Strengthening the think tank ecosystem through inclusion, gender equality and cross-sector dialogue


19
Beyond Agentic Threats: Fostering Cyber Resilience | Geneva, Switzerland | 14 Jan 2026



●       Dual-use risks and defensive potential of agentic AI in cyber operations

●       Cascading vulnerabilities from interconnected and abandoned agentic AI systems

●       Cyber resilience through AI-enabled detection, response and system adaptation

●       Governance, data access and Global South participation in AI safety frameworks


20
AI for People | Paris, France | 16 Jan 2026



●      The role of frugal AI in promoting sustainability, energy efficiency, and making AI viable in developing economies

●      Improving governance systems with AI rather than just private-sector productivity

●      AI as the foundation of a new multilateralism that focuses on cooperation, equity, and collective progress


21
The DPI Exchange: New Corridors for Innovation and Inclusion | Dubai, UAE | 27 Jan 2026



●      Digital public infrastructure enabling innovation, inclusion and cross-border cooperation

●      Open, interoperable architectures supporting decentralized AI and competitive digital markets

●      Regulatory frameworks balancing data protection, innovation and market scalability

●      Foundational infrastructure linking identity, payments, data and AI applications in both urban and rural areas in the Global South


22
Secure Frontiers, Shared Futures | Abu Dhabi, UAE | 29 Jan 2026



●      Sustainable and resilient AI infrastructure linking energy, water, climate and compute planning

●      Geopolitical and security implications of hyperscale AI and digital infrastructure concentration

●      Cybersecurity, resilience and trust in AI-enabled critical sectors

●      Data sovereignty, context-sensitive governance and Global South AI participation



Endnotes
[a] The Annex to the report provides details of the main issues discussed at each event.
[1] “India, 27 Other Nations, and EU Sign First International Declaration to Address AI Risks,” The Economic Times, November 3, 2023, https://timesofindia.indiatimes.com/business/international-business/india-27-other-nations-and-eu-sign-first-international-declaration-to-address-ai-risks/articleshow/104904367.cms
[2] “Paris Action Summit 2025: A Turning Point in AI Governance amidst Global AI Divides,” JustAI, February 15, 2025, https://justai.in/paris-ai-action-summit-2025-a-turning-point-in-ai-governance-amidst-global-divides/
[3] Jerry Fisayo-Bambi, “World Leaders and Tech Giants Converge in Paris for AI Summit,” EuroNews, February 10, 2025, https://www.euronews.com/next/2025/02/10/world-leaders-and-tech-giants-converge-in-paris-for-ai-summit
[4] Press Information Bureau, Government of India, https://www.pib.gov.in/PressReleasePage.aspx?PRID=2209578&reg=3&lang=1
[5] “Working Groups at the AI Impact Summit: Driving Global Collaboration across Seven Themes of AI Impact,” India AI Impact Summit 2026, https://impact.indiaai.gov.in/working-groups
[6] “India Can be Global AI Use Case Capital: MeitY Secretary,” The Economic Times, January 13, 2026,  https://economictimes.indiatimes.com/tech/artificial-intelligence/india-can-be-global-ai-use-case-capital-meity-secretary/articleshow/126491043.cms?from=mdr

### Greening Half the World: Leveraging the New Development Bank for Green Finance

The BRICS+ Context and the Role of Emerging Economies in the Green Transition
In an era of rising minilateralism and newly forged alliances amidst a disruptive global world order, the BRICS grouping has emerged as a powerful and collective voice representing the Global South. Originally comprising Brazil, Russia, India, and China in 2006—with South Africa joining in 2010—the group has expanded following the Johannesburg Declaration in 2023.[1] As of 2026, the enlarged membership comprises ten member countries:[2] the five founding members and five  additional members, viz., Egypt, Ethiopia, Indonesia, Iran and the United Arab Emirates (UAE).
In addition to full membership, BRICS allows countries to contribute as “partners”. Through an agreement in the Johannesburg Declaration, formalised at the 2024 Kazan Summit,[3] BRICS can invite partner countries to the Leaders’ Summit and other engagements. This mechanism promotes inclusive representation and South-South cooperation on sustainable development by reinforcing shared interests and policy convergences. At the time of writing this report,[4] ten countries hold partner status:[5] Belarus, Bolivia, Cuba, Kazakhstan,  Malaysia, Nigeria, Thailand, Uganda, Uzbekistan, and Vietnam.
More than 30 countries[6] expressed interest in participating in the BRICS grouping as either members or partners in 2024—a strong reflection of its growing popularity and rising significance. While the initial mandate of the grouping was economic integration and expanded market access, the collective agenda has since expanded given the geopolitical, geographic, and demographic profiles of the countries.
Today, the grouping stands as a crucial axis for impact, particularly in accelerating green transitions. As emerging economies poised to drive the majority of future energy demand, and consequently emissions, BRICS countries hold tremendous potential to mitigate climate impacts at the lowest marginal cost of abatement.
Moreover, green transitions are an urgent priority for these countries, which as emerging economies face disproportionately severe climate impacts due to their geographical location, economic sensitivity, and weaker adaptive capacity, despite low historical contributions to global emissions and modest per capita energy consumption. All BRICS+ countries, except Iran and Egypt, have already announced net-zero targets, signalling a strong commitment to climate action. The 2025 Brazilian BRICS Presidency Declaration[7] reaffirmed the group’s firm commitment to the Paris Agreement and to mobilising collective efforts in addressing the global climate challenges.
Table 1: Emissions, Population Share, and Net-Zero Targets of BRICS+ and Additional NDB Members




Country
% of Global Emissions 
% of Global Population 
Net-Zero Target Year


Brazil
2.44
2.60
2050


Russia
4.84
1.76
2060


India
8.22
17.8
2070


China
29.20
17.3
2060


South Africa
1.07
0.786
2050


Egypt
0.73
1.43
-


Ethiopia
0.36
1.62
2050


Indonesia
2.49
3.48
2060


Iran
1.98
1.12
-


United Arab Emirates
0.50
0.133
2050


Bangladesh
0.42
2.13
-


Algeria
0.47
0.575
-



Source: Authors’ own; data sourced from World Bank Group, Population, total;[8] and UNFCCC, Actor tracking[9]
BRICS countries have made substantial progress in advancing clean energy, even as they balance their rising energy demand due to critical development imperatives. The UAE, for example, despite historical reliance on fossil fuels export revenues, is now spearheading and investing in decarbonisation, driven by evolving economic strategies and geopolitical realities. These shifts are critical as emerging geographies have the highest carbon abatement potential in terms of cost.
However, climate finance remains the most persistent bottleneck for emerging economies in transitioning to net-zero pathways. To address this, BRICS countries have committed to a BRICS Cooperation Framework for Enhancing Financing for Climate Action in the Leaders' Framework Declaration on Climate Finance released in July 2025.[10]
Read the rest of the report here.
All views expressed in this publication are solely those of the authors, and do not represent the Observer Research Foundation, in its entirety or its officials and personnel.




Endnotes
[1] Ministry of Foreign Affairs and the Social Communication Secretariat of the Presidency of the Republic of Brazil, “About the BRICS,” BRICS Brasil, 2025.
[2] Ministry of External Affairs, Government of India, “Brief on BRICS”.
[3] BRICS Brasil, “About the BRICS”
[4] BRICS Brasil, “About the BRICS”
[5] BRICS Brasil, “About the BRICS”
[6] BRICS Brasil, “About the BRICS”
[7] Ministry of Foreign Affairs and the Social Communication Secretariat of the Presidency of the Republic of Brazil, “BRICS Presidency Declaration reinforces group’s commitment to climate action, energy transition, and reform of global governance institutions,” BRICS Brasil, 2025.
[8] World Bank Group, “Population, total”.
[9] Actor Tracking, UNFCCC, Global Climate Action NAZCA.
[10] Ministry of Foreign Affairs and the Social Communication Secretariat of the Presidency of the Republic of Brazil, “Leaders' Framework Declaration on Climate Finance,” University of Toronto.

### A Case for Asia’s Own CERN: Harnessing Scientific Diplomacy

In the post-World War II era, Conseil Européen pour la Recherche Nucléaire (CERN) emerged as a leader in scientific innovation and research. In the subsequent years, it consolidated its position driven by scientific and technological breakthroughs such as the development of the World Wide Web (WWW) and the discovery of the elusive Higgs boson. Asia, on the other hand, was steadily bolstering its manufacturing capabilities, thereby firmly cementing its place within global technology supply chains in the post-Cold War era.
With Asia’s growing prowess in critical technologies such as semiconductors, artificial intelligence (AI), quantum technology, and nuclear and clean energy, as well as its dominance over critical mineral supply chains that underpin these sectors, it is natural to ask whether the continent is ready for its own iteration of CERN. The answer appears to be yes, though this will require a certain level of cohesion and interoperability among major Asian economies, which is currently lacking.

The Foundational Vision Behind CERN
The idea for the Conseil Européen pour la Recherche Nucléaire (CERN), also known as the European Council for Nuclear Research, was conceived in the 1940s with the intent of utilising scientific cooperation to help usher in an era of peace, act as a force for unity in a post-war Europe, and simultaneously attempt to inhibit the brain drain of European scientists to the United States (US). In 1953, the CERN convention was signed by twelve member states, which explicitly states its intent: “The Organization shall have no concern with work for military requirements and the results of its experimental and theoretical work shall be published or otherwise made generally available.”


Scientific innovation needs a breeding ground, free from politics and bureaucratic constraints, an idea that informed the creation of CERN and remains central to its success.

Over the next 70 years, CERN has emerged as one of the world’s leading research institutions, particularly in the domain of nuclear and particle physics. CERN began operating the world’s largest and most sophisticated particle accelerator, the Large Hadron Collider (LHC), in 2008. The LHC has played a major role in advancing discoveries in particle physics and the Standard Model. The discovery of the Higgs boson, the particle responsible for giving mass to elementary particles, in 2012, remains one of its most significant breakthroughs.
CERN has also driven innovation across fields such as computing, networking, medicine, and data processing, including the invention of the World Wide Web (WWW) by Tim Berners-Lee in 1989, serving as a notable example. Moreover, the organisation has remained aligned with the original intent of the CERN convention. It has established itself as a global hub for scientific innovation while promoting peace and cooperation among its members and partners. It currently hosts 25 member states, alongside associate member states, including Brazil, India, and Pakistan. The organisation maintains international cooperation agreements with non-member states from virtually every continent. CERN’s facilities are utilised by over 600 institutes and universities from around the globe.

Asia’s Emergence as a Global Manufacturing Hub
Being largely driven by the rise of the East Asian Tiger economies in the 1960s, Asian manufacturing took centre stage with the onset of the Third Industrial Revolution. This was further reinforced by the proliferation of digital technologies such as the internet, which led to an industry model pioneered by Silicon Valley, in which manufacturing was offshored to Asian economies, reducing labour and manufacturing costs, thereby achieving economies of scale and maximising profits.
Fuelled by the ideology of globalisation purported in the 1980s, this economic interdependence model played a major role in establishing Asia as a hub for manufacturing. China emerged as a global leader in multiple established and emerging technologies, including semiconductors, AI, quantum technology, and green energy, enabled by strategic planning and government-backed initiatives such as the Made in China 2025 policy. Beijing also dominates the majority of critical mineral supply chains that support these technologies, including rare-earth elements. Moreover, China has been in the process of developing the world’s largest particle collider, the Circular Electron Positron Collider (CEPC).
Taiwan has established itself as the undisputed leader in semiconductor manufacturing, with the Taiwan Semiconductor Manufacturing Corporation (TSMC) becoming the world’s largest contract chip manufacturer. Japan ranks as the third-largest contributor to global manufacturing output and is a leader in robotics, engineering, and semiconductors on the international stage. South Korea, supported by major chaebols such as Samsung, is similarly a world-leading manufacturing giant in areas such as memory chips and digital electronics.


With the creation of CERN, Europe strategically utilised scientific diplomacy to mend the wounds of the Second World War while promoting regional peace and stability, thereby demonstrating the effectiveness of scientific cooperation as an invaluable diplomatic tool.

Singapore has prospered as a global trade hub, reflecting its ease of doing business and foreign direct investment (FDI) policies. Thailand and Vietnam are emerging as regional logistical hubs, excelling in electronics and semiconductor assembly, testing, marking, and packaging (ATMP). As of 2025, nearly 84 percent of the Philippines’ population is online, indicating a high level of digital connectivity. Indonesia is one of the pivotal nations within the critical mineral supply chains, particularly for nickel and copper mining.
India, while not yet a major manufacturing hub, has exemplified its importance through a service-led approach. India’s approach towards Digital Public Infrastructure (DPI), alongside its indigenisation of space and nuclear technologies, serves as a model for other Global South nations. India also benefits from a massive demographic dividend, which is yet to reach its full potential.

The Strategic Case for an Asian CERN
Scientific innovation needs a breeding ground, free from politics and bureaucratic constraints, an idea that informed the creation of CERN and remains central to its success. However, one of the major drawbacks of CERN has been its focus on pure scientific innovation while being disengaged from technology translation, a cornerstone of the modern world. On the other hand, while Asia’s manufacturing capabilities have certainly been economically beneficial, several prominent Asian nations continue to face a general lack of technological and scientific innovation. Despite its ambition, China’s Circular Electron Positron Collider (CEPC) is facing cost overruns and may not see the light of day without regional cooperation.
The situation creates scope to establish an Asian equivalent of CERN, potentially an ‘Asian Organisation for Scientific Research and Innovation’, which would combine fundamental scientific research with Asia’s strength in technology translation and manufacturing. A focus on semiconductors, AI, quantum technology, and nuclear and clean energy could enable Asian economies to leverage expertise across multiple domains, deepen cooperation, and reduce dependence on Western technology. Asian nations, such as China, Indonesia, Singapore, Vietnam, the Philippines, Thailand, and India—alongside western-backed allies like Japan, South Korea, and Taiwan—could potentially fund this initiative. Given its historical discontent with Western dominance, Russia could also play a role in this endeavour.

Scientific Cooperation as a Mediator for Regional Stability
The gradual shift in the global order has coincided with an increase in conflicts and geopolitical tensions. In the West, this is exemplified by the Russia-Ukraine conflict and the emerging strains in US-NATO relations, as well as the recent American military action in Venezuela. On the other hand, Asia has witnessed escalating tensions in the South China Sea driven by China’s increasing territorial ambitions, whether in relation to Taiwan, the Philippines or more recently, Japan. Moreover, the continent has simultaneously witnessed armed conflicts, including the India-Pakistan and Thailand-Cambodia confrontations. All of this has unfolded amid growing strategic competition between the US and China, which has further escalated regional tensions.


An Asian equivalent of CERN could serve as the nucleus of innovation in the region, promoting ideological diversity and cooperation.

With the creation of CERN, Europe strategically utilised scientific diplomacy to mend the wounds of the Second World War while promoting regional peace and stability, thereby demonstrating the effectiveness of scientific cooperation as an invaluable diplomatic tool. As fissures gradually emerge in the prevailing geopolitical order, an Asian equivalent of CERN could play a similar role by fostering scientific cooperation as a foundation for regional harmony and building a unified Asian front. Scientific diplomacy could also serve as a critical tool for easing China–Taiwan tensions, one of the primary sources of instability in Asian geopolitics. India’s emphasis on strategic autonomy positions it well to lead such an initiative, especially amid its dissatisfaction with Washington’s repeated use of tariffs as a negotiating tool and its relative easing of tensions with China.

Conclusion: Establishing a Culture for Innovation
Human progress has long relied on technological innovation. Rather than remaining hostage to Western policy shifts—including the United States’ turn towards tariffs—Asia has an opportunity to develop its own hub for technological innovation. The continent needs to recognise its immense scientific potential while gradually reducing its over-reliance on Western technological innovation, focusing its efforts on addressing inadequacies while making a committed effort to refine them. An Asian equivalent of CERN could serve as the nucleus of innovation in the region, promoting ideological diversity and cooperation.
Furthermore, an Asian equivalent of CERN can serve as a global message, portraying a unified Asia prepared to overcome its internal disputes and emerge as a leading hub for scientific and technological innovation, surpassing the West in influence. The endeavour could play a significant role in alleviating intra-regional conflict within the continent while also addressing the brain drain dilemma affecting multiple Asian economies, including India, in recent decades. It could ensure that technology fosters human progress and addresses developmental and societal needs rather than being directed merely towards territorial objectives or garnering geopolitical clout.



This commentary originally appeared in Observer Research Foundation.

### As Green Energy Pathways Ease, India Should Pay Special Attention to Round-The-Clock Renewables

As the Union budget approaches, India faces a defining choice in how it plans its energy future.
Energy assessments indicate that electricity demand will expand by over 6% annually in the second half of this decade, driven by industrial growth, urbanization, data centres and the electrification of transport and buildings.
This demand surge will test the capacity of states to deliver reliable and affordable power. In this context, the ambition of a developed India by 2047 depends not only on capacity addition, but also on how energy planning is embedded in state-level development strategies.
Clean energy has, therefore, become central to India’s growth narrative. Yet, the spatial distribution of this transition is uneven. Renewable capacity additions, manufacturing investments and supply-chain ecosystems are clustered in a handful of renewable-rich states.
Meanwhile, coal-dependent states, long the backbone of India’s industrial economy, risk being marginalized in the next phase of growth.

A budgetary push for renewable energy round-the-clock (RE-RTC)—reliable clean power delivered through solar, wind and storage—offers an answer. 
The challenge is not abstract climate compliance. It is economic: limited diversification, mounting fiscal stress and declining investment attractiveness at a time when growth is becoming increasingly energy-intensive. Without policy recalibration, the energy transition risks widening regional disparities.
This raises a key question: Can India’s clean-energy strategy be redesigned to place coal-dependent states at the centre of the next development cycle?
A budgetary push for renewable energy round-the-clock (RE-RTC)—reliable clean power delivered through solar, wind and storage—offers an answer. By addressing the old reliability constraint, RE-RTC enables three interlinked development dividends that the budget can reinforce.
The first dividend is accelerated and more inclusive state-level growth. Despite rapid capacity addition, industrial productivity, urban services and digital infrastructure remain tied to coal because standalone solar and wind cannot guarantee uninterrupted supply.
RE-RTC changes this by delivering assured power without gaps.
Storage-backed renewables can be deployed within 2-3 years, far faster than the 6-7 years required for new coal capacity, allowing states to respond quickly to demand growth.
By helping the grid maintain its balance and meet peak power demand, RE-RTC lets clean power function as a dependable input for manufacturing clusters, data centres, small firms and infrastructure projects.
Evidence of this growth dividend is already visible. According to Lok Sabha data, India’s production-linked incentive (PLI) scheme for high-efficiency solar photovoltaic manufacturing had generated nearly 43,000 jobs by October.
Gujarat accounts for more than half of this employment, illustrating how states that align industrial policy, infrastructure spending and renewable deployment are making clear gains.

As renewable tariffs fall and system flexibility improves, such contracts heighten the risk of stranded assets and constrain fiscal space.
The second dividend is financial resilience for states and electricity distribution companies (discoms). Both are under strain from rising procurement costs, legacy coal-based power purchase agreements (PPAs) and weak balance sheets.
Yet, many continue to contract new coal capacity through long-term PPAs, locking in high fixed costs for decades. As renewable tariffs fall and system flexibility improves, such contracts heighten the risk of stranded assets and constrain fiscal space.
Coal-based power is also increasingly exposed to fuel availability risks, logistical disruptions and water-stress risks that raise costs for states.
Battery energy storage system (BESS) costs, central to RTC supply, have fallen by over 80% in the past decade. Recent competitive bids have delivered effective tariffs in the ₹2.1-2.8-per-unit range, making storage-backed renewables increasingly competitive with new coal-based power.
Strategic budget support can accelerate this shift while improving discom creditworthiness.
RTC deployment also strengthens states’ ability to crowd in external capital. In 2025, Rajasthan led the country in fresh investment commitments, with a dominant share directed towards solar energy, followed by Maharashtra, Gujarat and Odisha.
The third dividend lies in public health and development outcomes. Poor air quality imposes economic costs through lost productivity, higher healthcare expenditure and reduced quality of life.

Healthier workforces improve labour productivity and reduce public health expenditure, complementing budget investments in human capital.
Unlike partial renewable substitution, RE-RTC can displace coal generation across the day, delivering sustained air-quality improvements rather than episodic gains.
These benefits have direct fiscal relevance. Healthier workforces improve labour productivity and reduce public health expenditure, complementing budget investments in human capital. They also enhance urban liveability, a key factor for attracting investment and skilled talent to industrial regions.
As the budget approaches, choices around power procurement, storage and grid investment will shape how states plan for energy demand. States that do not adjust their energy strategies risk facing higher costs, tighter fiscal constraints and reduced investment.
RE-RTC is not just a transition slogan, but a fiscally and economically sound pathway that aligns energy reliability with development priorities.



This commentary originally appeared in MINT.

### Why India’s Round-The-Clock Renewable Energy Story Must Be Written in Coal-Rich States

As India steps into 2026, it enters a decisive phase of its development journey. Goldman Sachs Research forecasts demand for power- driven by the rapid expansion of data centres & AI-led digital infrastructure alone will increase 50 per cent by 2027 and 165 per cent by the end of the decade, alongside urbanisation and industrial growth. How states meet this surge in demand will shape not only their energy and emissions systems, but their ability to participate in India’s next growth cycle. A Viksit Bharat by 2047 will be built not only on national ambition, but on how decisively states align growth, energy security and resilience today.
There is little doubt that India’s renewable energy transition is central to this ambition. Clean energy is no longer just an environmental necessity; it is a driver of competitiveness, investment and long-term growth. Yet the geography of this transition remains uneven. Capacity additions, manufacturing clusters and capital flows have concentrated in a small group of renewable-rich states.
India’s coal-dependent states have powered national growth for decades, yet today rank among the lowest on key socio-economic indicators. Deep dependence on coal for employment, revenues and electricity, coupled with limited renewable potential and weaker industrial diversification, has left them exposed to fiscal stress, climate shocks and declining competitiveness. For these states, the risk is no longer just falling behind on climate goals, but missing the next phase of development altogether.
This raises a critical question: can the energy transition be shaped not as a constraint for coal-dependent states, but as a catalyst for their growth and convergence?
Renewable energy round-the-clock (RE-RTC), or reliable clean power delivered through a combination of solar, wind and storage, allows coal-dependent states RE-RTC) to overcome the barriers that have long kept them outside India’s renewable growth story, and offers three critical development dividends that can enable this shift.
The first dividend of adoption of RE-RTC is a new phase of state-level economic growth. The biggest constraint holding back renewable-led development has been reliability. Despite India’s impressive gains in renewable capacity, economic activity and industrial productivity remain closely tied to coal because standalone solar and wind cannot guarantee uninterrupted supply. RE-RTC changes this equation by delivering assured power across the day, including during peak demand periods.
Crucially, RE-plus-storage projects can typically be implemented within two to three years, compared to six to seven years for new coal-fired capacity, allowing states to respond far more quickly to rising electricity demand. Storage-backed renewables can also provide peak power, grid balancing and ancillary services- capabilities that are becoming increasingly valuable as demand becomes more complex and climate variability intensifies.
For states, this reliability turns renewable energy from a supplementary resource into a dependable input for growth-critical sectors such as manufacturing, data centres, logistics, urban infrastructure and MSMEs. It lowers operational risk, reduces exposure to fuel price volatility and improves competitiveness in global markets where carbon intensity increasingly shapes investment decisions.
Early evidence of this dynamic is already visible. India’s Production-Linked Incentive (PLI) scheme for high-efficiency solar PV manufacturing has generated around 43,000 jobs nationwide, including over 11,000 direct jobs, as of October 2025, according to Lok Sabha data. Gujarat alone accounts for more than half of this employment, underscoring how states that align industrial policy with renewabledeployment are beginning to capture tangible gains.
The second dividend is fiscal and financial resilience. Many state governments and distribution companies (DISCOMs) are already under strain from rising power procurement costs, legacy coal-based power purchase agreements and weak balance sheets. Yet several DISCOMs continue to contract new coal-based capacity through long-term PPAs, often locking in supply for decades.
As renewable tariffs continue to fall and system flexibility improves, long-term coal contracts expose DISCOMs to higher fixed costs, stranded asset risk and reduced operational flexibility. Coal-based power is increasingly vulnerable to fuel availability risks, logistics bottlenecks and water scarcity. RTC renewable contracts, by contrast, offer long-term price certainty and lower operating costs, insulating states from external shocks.
The economics of storage, a critical enabler of RTC supply, have improved sharply, with battery energy storage system (BESS) costs declining by more than 80 per cent over the past decade. Recent competitive bids have yielded effective tariffs as low as ₹2.1–₹2.8 per unit, highlighting the growing cost competitiveness of storage-backed renewables. By shifting a portion of baseload procurement toward RTC renewables, states can stabilise DISCOM finances, improve creditworthiness and reduce long-term fiscal liabilities.
Most importantly, RTC also opens a pathway to unlock international climate and development finance. States scaling renewable infrastructure are already attracting significant capital. In 2025, Rajasthan led India in fresh investment commitments, with a dominant share directed towards solar energy, followed by Maharashtra, Gujarat and Odisha. At the national level, the renewables sector attracted a record USD 3.4 billion in foreign direct investment in FY 2024–25, reflecting strong global investor confidence in India’s clean energy pipeline.
Global investors, development banks and climate funds are actively seeking large-scale, bankable clean-energy projects with predictable cash flows—precisely the profile that RTC projects offer. For coal-dependent states, this ability to crowd in international finance is particularly significant, as it can support grid modernisation, economic diversification and just transition pathways.
The third, often underappreciated, dividend of RE-RTC lies in public health and development outcomes, where poor air quality imposes heavy economic costs through lost productivity, higher healthcare expenditure and reduced quality of life. RTC renewables can displace coal generation across the entire day, delivering sustained air-quality gains. Cleaner air is not a peripheral benefit; it is a development multiplier.
In 2026, the energy choices made by states will shape their development trajectories for decades. States that delay adaptation risk being caught in a transition they did not plan for, facing financial stress, environmental liabilities and declining investment appeal. RE-RTC is not an ideological pivot; it is a pragmatic development strategy.



This commentary originally appeared in Energy World.

### Gaza Outlook Remains Dim, Despite Some Progress

Earlier this week, Israel partially re-opened the Rafah border crossing between Gaza and Egypt, almost two years since it was shut, renewing hope among residents of the devastated enclave, and raising confidence that a ceasefire that began last October would move into its second stage. This followed the inauguration of the Board of Peace — an initiative ostensibly designed to coordinate international involvement in Gaza’s reconstruction — by United States President  Donald Trump at the World Economic Forum in Davos in January. There was a glaring omission in the announcement of the board, however: Gaza was not mentioned at all. Instead, the body was positioned as an “international organisation that seeks to promote stability, restore dependable and lawful governance, and secure enduring peace in areas affected or threatened by conflict”.
This universal framing reveals a dual purpose. First, the board aims to operate in conflict zones where the United Nations has been deemed ineffective — or so the argument goes. Second, and more tellingly, it establishes a structure fundamentally subordinate to its chairman, Mr Trump, who retains “exclusive authority to create, modify, or dissolve subsidiary entities as necessary or appropriate to fulfil the Board of Peace’s mission”. The implication is stark: While nations may vote or participate, Mr Trump remains the ultimate arbiter of what the board will or will not do.
Where Gaza is concerned, Jared Kushner, Mr Trump’s son-in-law, unveiled a presentation featuring skyscrapers lining the Strip’s coast, new cities, and plans for a Washington investment conference to attract private capital. Mr Kushner, also the architect of the Abraham Accords that normalised relations between Israel and several Arab states, declared at Davos: “Let’s plan for catastrophic success.”
The reality is less novel. Behind the polished veneer of the Board of Peace lies a repackaged “Gaza Riviera” vision first floated in March 2025, which drew immediate criticism for its detachment from conditions on the ground.

Progress or Profits?
In many ways, the Board of Peace represents progress from UN Security Council Resolution 2803, adopted last November — except for one critical distinction. Reconstruction will now be monetised, with the chairman demanding US$1 billion in membership fees from countries seeking permanent seats, while also standing to profit from prospective waterfront development in Gaza. Out of the 60 invitations sent out by the Trump administration — including to Singapore — just 26 countries have signed on to the initiative.
From an organisational perspective, the founding executive committee of the board includes top Trump Administration officials, private equity chief Marc Rowan, World Bank President Ajay Banga, and former United Kingdom Prime Minister Tony Blair, among others. Nickolay Mladenov, a former UN Middle East envoy, was appointed High Representative of Gaza, spearheading the difficult task of turning the fragile ceasefire into sustainable peace.
Mr Mladenov faces a Herculean task: Coordinating with the 15-member National Committee for the Administration of Gaza (NCAG) — a Palestinian technocratic body — while formulating a programme acceptable to Palestinians, Israelis, and Americans alike. The NCAG, led by Ali Shaath, a former deputy planning minister under the Palestinian Authority, comprises technocrats charged with rebuilding Gaza while remaining strictly apolitical. This mandate is deliberately narrow: The committee has no authority to address sovereignty, demilitarisation, or governance.
However, the conflict’s roots remain fundamentally political, focusing on competing claims to land and self-determination that persist to this day. The silver lining may be this: Gaza’s future has advanced through the Trump Administration’s determination to progress from ceasefire to demilitarisation, governance, and reconstruction. This shift equally reflects a willingness to follow through on the 20-point peace plan issued last September.
The reality on the ground, however, presents a mixed picture. Following Hamas’ release of 20 living hostages last October, the Israeli military only recently retrieved the remains of the final Gaza hostage, while Israel returned 15 unidentified Palestinian remains from the war. This final exchange signals, in some measure, a willingness among the parties to move forward. Humanitarian aid into the Strip has also increased, although the UN and its partners warn that it represents little more than a Band-Aid for now. The reopening of the Rafah crossing provides another glimmer of optimism, but so far, only for “limited passage of residents”.
Whether the reopening proves sustainable remains at Israel’s mercy — as does the ceasefire itself. In air raids conducted by Israeli forces on January 31, more than 30 were killed across the Strip, marking a pattern of deadly strikes that has persisted since last October’s truce.

Major Sticking Points Unanswered
Despite bold declarations at the top, three major sticking points remain unresolved — each with direct bearing on ground realities. First, Hamas’ disarmament has yet to occur, which in turn affects Israeli threat perceptions. When Phase 1 rolled out, Hamas deployed armed fighters and police across Gaza to reassert authority, creating a patchwork of competing armed groups — including those backed by Israel — vying for influence.
President Trump’s claim that Hamas would “likely” surrender its weapons, coupled with a warning to choose “the easy way or hard”, has yet to materialise. At this stage, Hamas’ decisions directly affect Palestinian factionalism and the viability of any unified leadership, though the group recently stated it is prepared to transfer governance of Gaza to the NCAG. That disarmament remains purely theoretical months into the ceasefire, alongside continuous Israeli strikes, is a dangerous omen for any lasting peace.
Second, Israel’s withdrawal to the so-called “yellow line” under Phase 1 was meant to be temporary. But the Chief of Staff of the Israel Defense Forces, Lieutenant-General Eyal Zamir, called the line “a new border,” raising fears it could become permanent — a concern heightened by reports that Israel has been moving yellow markers deeper into Palestinian territory.
Third, and directly linked to security concerns, is the establishment of an International Stabilisation Force (ISF) mandated by Mr Trump’s peace plan. This effort has stalled amid widespread reluctance, mainly a result of ambiguity over its mandate, and Israeli insistence that Hamas disarm before such a force is deployed.

The Paradox of Peace
Gaza’s future remains trapped within a security paradigm. Israeli control over the Strip depends on how it assesses the threat posed by Hamas and the radicalism it has instilled in supporters. Conversely, Hamas’ willingness to cede control rests on Israeli commitment to withdrawal, and the viability of alternative Palestinian leadership. This mutual intransigence has produced a deadlock that Mr Trump’s Board of Peace will struggle to resolve, leaving the President reliant on coercion and threats.
More worryingly, Israel’s security Cabinet approved 19 new West Bank settlements last December, while reports indicate excess soil from Tel Aviv is being prepared for settler farm expansion — evidence that its territorial ambitions extend far beyond Gaza. Meanwhile, Mr Trump himself appears increasingly distracted by mounting tensions with Iran, and the looming US mid-term elections, suggesting Gaza may no longer command the presidential attention it once did.
Ultimately, the Board of Peace reveals how progress in Gaza remains beholden to one man. President Trump has stated this categorically: “I don’t need international law.” The only constraint on his power, he asserts, is his “own morality.” The question then becomes: When his term ends in three years, will the board simply wither away — along with Gaza’s prospects for peace?



This commentary originally appeared in National University of Singapore.

### The DPI Exchange: New Corridors for Innovation and Inclusion

The Observer Research Foundation in partnership with ORF Middle East convened "The DPI Exchange: New Corridors for Innovation and Inclusion" on 27 January 2026. Organised as a pre-summit event for the 2026 India AI Impact Summit, the event gathered policy professionals, researchers, and private-sector leaders to examine how digital public infrastructure (DPI) is shaping inclusive growth, competition, and artificial intelligence (AI) development across the Global South. The event included two sessions titled New Diplomacy: The AI-DPI Convergence and Frameworks for Cooperation and Maximal Markets: DPI, Enterprise and Innovation. Discussants explored the convergence of public infrastructure, private innovation, regional coordination, and the need for establishing open, interoperable architectures to counter market concentration and prevent the Global South from becoming dependent on external platforms and extractive data practices.

Key Takeaways

 	Open systems and interoperability: Open protocols were identified as being essential for preserving market competition and accelerating innovation. Discussants noted that proprietary systems have historically enabled rapid commercialisation while contributing to market concentration and creating structural barriers to entry. Open networks offer a viable alternative by preventing control by a few dominant intermediaries and supporting broader participation and locally relevant innovation. This distinction is crucial to African markets where open architectures can allow African economies to shape their own digital trajectories through South-South partnerships rather than importing externally designed models.
 	Cultivating accessibility and trust: DPI is a promising vehicle to serve populations at the margins, such as nomadic or undocumented groups, rather than just formally documented users.  Addressing such forms of exclusion requires technical sophistication as well as cultivating public trust towards digital platforms. To promote digital inclusion, the discussion noted the role of building local capacity and utilizing youth as inter-generational knowledge intermediaries as possible approaches to bridging this gap outside urban centres.
 	Promoting DPI-AI synergy: Open networks were observed as being critical for generating high-quality, interoperable data necessary to fuel AI to enable diverse and decentralized AI development. The discussion explored how India’s layered DPI model is showcasing this synergy by deploying AI to deepen infrastructure reach through voice-based interfaces for users with linguistic constraints while simultaneously safeguarding trust through real-time fraud detection and transaction monitoring. This approach reinforces the ability of the Global South to build AI ecosystems that are inclusive and development-oriented and contextually relevant.
 	Preventing over-regulation: Discussants highlighted the importance of balancing oversight with flexibility to facilitate private-sector participation through a ‘middle-path’ regulatory approach. In the African context, wherever markets are fragmented, cross-border data flows and regional interoperability are essential for scaling digital services. The gap between policymakers and the private sector must be narrowed through partnerships and regulatory sandboxes to ensure that frameworks remain grounded in technological and market realities. Public and private systems need to be integrated to ensure innovation is scalable, interoperable, and aligned with broader development goals.

### Secure Frontiers, Shared Futures

This convening, held on 29th January 2026 in partnership with the AI Impact Summit, Observer Research Foundation and Emirates Center for Strategic Studies and Research (ECSSR), served as an official pre-summit dialogue ahead of the AI Impact Summit in New Delhi. The subject matter comprised the status of India–UAE cooperation, particularly in the areas of strategic digital infrastructure, cyber resilience and AI governance. Discussions comprised two core panels: (1) Powering the Future: Building Resilient and Sustainable AI Infrastructure, which examined the physical, energy and investment foundations of AI at scale in the UAE, India and globally; and (2) Securing the Digital Frontier: Navigating New Vulnerabilities, focusing on cybersecurity, data sovereignty and trust frameworks amid deepening digital integration between India, the UAE and global partners.
Key Takeaways

 	AI infrastructure is now a strategic and physical concern, not just a digital one. Hyperscale AI systems place unprecedented demands on energy, water and land, with data centres increasingly comparable to critical national infrastructure. Without deliberate planning, AI expansion risks exacerbating grid stress, environmental strain and systemic vulnerabilities.
 	Resilience must be designed in from the outset. Centralised, hyper-concentrated compute creates single points of failure vulnerable to climate events, grid collapse, or targeted attacks. Distributed and decentralised AI infrastructure—supported by cross-border partnerships—was repeatedly emphasised as essential for long-term resilience.
 	Energy-AI interdependence is becoming a core policy challenge. AI cannot rely on public grids at scale without displacing citizen needs. Participants highlighted the growing role of clean energy, small modular nuclear reactors and dedicated AI energy infrastructure to ensure both sustainability and social legitimacy.
 	The Global South risks a new ‘compute divide’ without access-oriented models. Democratizing access to compute power, high-quality data and semiconductor supply chains is critical to preventing a two-tier AI world of ‘haves and have-nots’. India–UAE collaboration was framed as a potential model for inclusive AI development.
 	Cybersecurity risks scale with integration, not just sophistication. As financial systems, ports, health infrastructure and energy grids become digitally interconnected, attack surfaces multiply. Static security approaches are insufficient; adaptive, AI-enabled resilience and shared incident-response mechanisms are increasingly necessary.
 	There is no single global standard for ‘trusted AI’, but shared principles matter. While universal certification regimes remain unlikely, alignment around baseline practices such as red-teaming, transparency, explainability and culturally contextual risk assessment can lower transaction costs and build trust across borders.
 	Geopolitical credibility will define AI leadership as much as technology. In a polarised global landscape, the ability to work credibly with multiple partners, while safeguarding sovereignty, data and national interests was identified as a decisive advantage. Think tanks and research institutions were underscored as vital in filtering noise, shaping consensus and translating leadership vision into actionable governance frameworks.

### ORF Global Quarterly: Navigating Megatrends for 2026

Setting the Compass: 2026
Welcome to the first edition of ORF Global Quarterly. This is the signature publication of ORF Global, a new virtual centre established in 2025 to serve as a collaboration hub for ORF’s three India locations—Delhi, Mumbai, and Kolkata— and two overseas affiliates, ORF America and ORF Middle East. The virtual centre helps identify themes for ORF’s international convening and research, and acts as a curator for its scholarly research, publications, and insights from our dialogues.
ORF Global Quarterly is designed to amplify prominent voices, insights, and perspectives from Global South countries which, despite their demographic significance and increasing economic weight, are often under-represented in scholarly literature. Authors are scholars of the Observer Research Foundation located in three regions (India, the Middle East, and North America) and invited contributors from ORF’s community around the globe.
In late 2025, as we were considering the audience, purpose, and scope of this publication, we decided to launch with a broad assessment of the 2026 landscape. For our first edition, we identified six domains: Geopolitics, Defense, and Security • Geoeconomics and Trade • Technology • Climate and Energy Transitions • Agriculture, Health, and Urbanization • Education, Skills, Labor, and Immigration. Why these six? These domains cover a broad spectrum of transformative inter-state dynamics, international organizing principles, and socioeconomic structures changing around us rapidly.
We invited our ORF scholars to look ahead into 2026 to predict and guide our readers through a variety of megatrends—transformative, long-term, structural global changes—that are expected to be pivotal for Global South actors in these six domains.
When analyzing global challenges, perspective matters. Whether megatrends are perceived as opportunities or challenges depends on geography, priorities, and geopolitical standpoint. In other words, what is of greatest significance in Brazil may resonate differently in Malaysia—or in Germany.
There are numerous qualitative trends and risk analysis available, but they are typically done through a Global North perspective. In 2025, ORF Global conducted a scoping exercise and review of 20+ prominent and publicly available risk and megatrend reports published since the beginning of the decade. We found that the ways in which trends and risks may affect different actors are primarily analyzed by organizations based in the United States, United Kingdom, and the European Union. These reports came from corporate ecosystems, think tanks, international organizations, and public institutions, and they are predominantly produced in English with a Western frame of reference. The conclusion is apparent: forward-looking, open-access megatrends literature rarely reflects Global South perspectives. This inaugural edition of ORF Global Quarterly seeks to bridge that gap.
To identify and assess the megatrends in the six domains, ORF Global Quarterly applies a new methodology that departs from the typical approach of response-driven surveys. Our scholars reviewed more than 170 unilateral, bilateral or multilateral declarations, announcements, and statements in recent years, looking for references to long-term, structural changes. We believe, in most cases, the comparative analysis of openly stated goals in strategic documents and statements, and what they imply, is a more meaningful indicator of intent and focus than data collected through voluntary response surveys.
These essays were contributed and edited in December 2025 and recent events were closely monitored until early January for relevant updates. Subsequent quarterly editions in 2026 will provide deeper dives into the megatrends of these domains.
We understand the world is unpredictable, turbulent, and complicated. We hope ORF Global Quarterly provides you with perspectives that are unique and valuable, outlining risks and opportunities in ways that help you understand, prepare for, and navigate the year ahead.
Read the journal here.

### Grey-Zone Warfare and Cyber Precursor To Conventional Conflict

Contemporary conflict between State actors is increasingly unfolding in the grey-zone arena, an ambiguous space that lies below the threshold of declared war yet delivers strategic effects traditionally associated with kinetic campaigns. The epicentre of this alteration lies in the cyber domain, which has emerged not merely as an adjunct to military power but as a decisive battlespace in its own right. The pattern of growth is distinctive, cyber operations are used to weaken, confuse, or paralyse an adversary’s critical infrastructure even before conventional forces and tactics are employed.
Power grids, telecommunications networks, transport systems, and command-and-control architectures have become the first targets in what can be described as non-kinetic opening salvos of modern war. One such recent case is the January 2026 power grid failure in Venezuela, which was followed by the capture of its President, Nicolas Maduro, in Caracas by the US, an example of the use of the Grey-zone tactic in conflicts between State actors. US officials described the raid as the conclusion of months of covert surveillance, operational planning, and the use of cyber and electronic capabilities, which played a role in deactivating Venezuelan air defences and critical infrastructure before the kinetic attack.
This shift showcases a deeper strategic logic. Disabling electricity or communications does not incite the instant political costs of missile strikes, but it holds the power to cripple a state’s capability to govern, mobilise, or defend itself. In grey-zone rivalry, the aim is not sudden battlefield victory but strategic confusion, forcing the adversary into paralysis while sustaining plausible deniability. Cyber operations, therefore, serve as both a coercive instrument and a force multiplier for conventional military power.


US officials described the raid as the conclusion of months of covert surveillance, operational planning, and the use of cyber and electronic capabilities, which played a role in deactivating Venezuelan air defences and critical infrastructure before the kinetic attack.

The notion that cyber operations could serve as the “first strike” of a conflict is no longer theoretical. Over the past few years, several cases have established how cyber intrusions into critical infrastructure can shape the battlespace without triggering formal escalation. Attacks on power grids are the most potent target in this context. Electricity is the backbone of modern society; its disruption cascades across military readiness, economic activity, health care, public morale, and governance.
Unlike kinetic attacks, cyber operations can be pre-positioned years in advance. Malware may lie dormant within supervisory control and data acquisition (SCADA) systems, industrial control networks, or supply-chain hardware, awaiting activation at a politically or militarily opportune moment, such as the attack on the Ukrainian power grid in 2015-16. When triggered, such implants can produce effects that appear to be technical failures or natural outages, complicating attribution and delayed response. This combination of stealth, deniability, and strategic impact makes cyber operations an ideal instrument for grey-zone coercion.
Recent discourse around the US' cyber operations targeting Venezuela’s power infrastructure has further sharpened global understanding of the integration of cyber and kinetic operations. While ground forces carried out the visible part of the operation, cyber operations created conditions that reduced resistance and reduced decision-making time for the Venezuelan military.
A cyber intrusion into the power grid forced military installations to switch to backup power. This transition typically introduces short but critical delays as systems reboot and stabilise, creating temporary blind spots or a ‘moss-window’ period in surveillance and air defence coverage.
In parallel, cyber operations targeted Venezuela’s air defence systems, including radar networks, focusing on intrusion in the software that processes radar data. This manipulation of the internal network system results not only in an apparent system failure but also in a misleading operational picture, which is often more dangerous because operators do not realise that they are compromised.
Equally important was the disruption of the communication network in the El Volcan area, including cyber interference with encrypted communications and the severing of key fibre-optic links, which can disrupt this command chain at critical moments. When communication fails, the command system also fails, thereby delaying defensive action.


Cyber operations targeted Venezuela’s air defence systems, including radar networks, focusing on intrusion in the software that processes radar data.

Another dimension of the operation appears to have involved the exploitation of surveillance infrastructure. Many States, including Venezuela, have invested heavily in “smart city” technologies such as networked cameras and biometric systems, often sourced from China, for example, from ZTE. These surveillance tools, designed for national security, can be repurposed as intelligence assets by an external actor.
Taken together, these measures establish a clear model of cyber–kinetic synchronisation. Cyber operations degraded power supply, distorted situational awareness, and paralysed decision-making, while conventional forces executed the final phase.
What is particularly enlightening is the stress on long-term preparation. Such operations require years of intelligence collection, supply-chain compromise, insider access, and dormant malware implants. This reinforces a central lesson for all States; cyber vulnerability is often embedded long before a crisis becomes visible.
India’s recent experience highlights both growing susceptibility and a degree of resilience in the face of cyber-enabled pressure. During the India–China standoff following the Galwan clash of 2020, Chinese intrusions into Indian power grid networks suggested an intent to signal access to critical infrastructure rather than to trigger immediate disruption. The subsequent Mumbai power outage (2020), attributed to a Chinese state-sponsored cyber intrusion, reinforced concerns about how civilian grids could be leveraged as strategic pressure points during geopolitical crises. At the same time, India managed to prevent escalation, restore services swiftly, and avoid systemic collapse, reflecting institutional coping capacity even amid uncertainty.
Looking ahead, the challenge is compounded by the prospect of China–Pakistan collusivity, where cyber operations against power, communications, or transport networks could be used to create friction and delay decision-making during a crisis without crossing the threshold of open conflict. These episodes reveal a persistent gap between India’s rising strategic exposure and its still-evolving cyber deterrence posture, even as crisis management and restraint have so far prevented grey zone actions from translating into broader instability.
Assessing India’s Preparedness: Structural Gaps and Strategic Blind Spots
India has made measurable progress in recognising cyber threats, yet significant vulnerabilities persist, particularly in the context of grey-zone warfare. Institutionally, cybersecurity remains disjointed across civilian, military, and sector-specific agencies. While entities such as the National Critical Information Infrastructure Protection Centre (NCIIPC) exist, coordination between central authorities, state governments, and private power operators remains uneven.


India has made measurable progress in recognising cyber threats, yet significant vulnerabilities persist, particularly in the context of grey-zone warfare.

A critical weakness lies in the civilian-military divide; power grids, ports, and telecommunications networks are largely civilian-owned and operated, yet their interruption has direct national security implications. Cyber defence exercises rarely simulate integrated cyber-kinetic scenarios that encompass extended pressure. This leaves India better prepared for isolated cyber incidents than for coordinated campaigns aligned with military escalation.
Another concern is supply-chain vulnerability, as much of India’s infrastructure relies on imported hardware and software, including components from suppliers in geopolitically sensitive regions. While awareness of supply-chain risks has grown, comprehensive auditing and diversification remain incomplete. As global experience demonstrates, compromised hardware does not announce itself during peacetime; its effects manifest only when activated.
India faces acute shortages of human capital and specialised expertise that bridges information technology and operational technology; cyber defence of industrial control systems requires a dedicated area. Training, retention, and integration of such knowledge into strategic planning remain inconsistent.
Furthermore, grey-zone's cyber warfare exploits one of India’s most enduring strategic dilemmas of attribution. India’s declaratory posture on cyber retaliation remains underdeveloped. Without explicit signalling of red lines and proportional response mechanisms, adversaries may calculate that the benefits of cyber coercion outweigh the risks. Deterrence in cyberspace, unlike nuclear deterrence, depends as much on insight and credibility as on capability.
Addressing these challenges requires a conceptual shift. Cyber defence must be integrated into India’s broader military planning, rather than treated as a technical adjunct. Regular red-teaming of critical infrastructure, joint civilian-military exercises, and scenario planning for cyber-enabled grey zone conflict are essential.


Deterrence in cyberspace, unlike nuclear deterrence, depends as much on insight and credibility as on capability.

Equally important is strategic communication. India must demonstrate its capability to detect, attribute, and respond to cyber aggression. Deterrence does not require mirroring an adversary’s methods but convincing them that cyber coercion will enforce costs, whether through diplomatic, economic, or cyber means.
Grey-zone warfare has fundamentally altered the sequencing of the conflicts. Cyber operations targeting power grids and critical infrastructure are no longer secondary acts of espionage; they are emerging as the first blows in modern state-on-state confrontation. The experiences of India during tensions with China, the strategic logic illustrated by operations against Venezuela’s infrastructure, and the growing complexity of cyber-kinetic integration.
For India, the challenge is not merely technological but strategic. Without deeper integration, clearer doctrine, and stronger deterrence signalling, cyber vulnerabilities will continue to offer adversaries a low-risk, high-impact avenue for coercion. In the grey zone, the absence of preparation is a vulnerability itself, which can be exploited in the times to come.



This commentary originally appeared in Hindustan Times.

### Digital Public Infrastructure and The Future of Digital Payments: Lessons from Pix and UPI

Executive Summary
Digital public infrastructure (DPI) has become a cornerstone of inclusive growth and innovation in the Global South, with Brazil’s Pix and India’s Unified Payments Interface (UPI) standing out as transformative examples. Together, they account for nearly two-thirds of global instant payment transactions, providing millions of individuals and small enterprises with access to secure, instant, and affordable financial services. These real-time payment systems demonstrate how open, interoperable, and low-cost public digital platforms can expand financial inclusion, strengthen state capacity, and foster public and private sector coordination.
Anchored in the principle of digital payments as a public good, they highlight the importance of promoting innovation with regulatory oversight to drive adoption at scale.
Yet key challenges remain. Existing digital divides and uneven institutional capacity continue to hinder equitable adoption of digital payments, especially across low-income economies. Data protection and interoperability across jurisdictions also require sustained coordination. Addressing these barriers will require strengthening foundational DPIs such as digital IDs and data-sharing frameworks, balancing regulation with innovation to build trust and adaptability, and deepening cross-border cooperation to align technical and regulatory standards. Together, these steps are essential to scaling the PixUPI model and enabling a Global South–led, inclusive digital payments ecosystem.

I. Introduction
Every minute, millions of people in Brazil and India send money instantly to buy goods, pay bills, or transfer funds to friends and family through digital payment systems that now dominate global real-time transactions. Known as Pix in Brazil and UPI in India, their rapid adoption over the last decade has generated considerable attention. By 2024, UPI and Pix had become the world’s most utilized real-time payment systems, accounting for 48 percent and 15 percent of global transactions, respectively.
The success is not accidental. While they were designed and implemented independently, Pix and UPI are part of Brazil and India’s digital public infrastructure (DPI), built on the principles of inclusivity and interoperability, with a transformative impact on the lives of their citizens. DPI refers to a set of digital building blocks that allow governments to deliver services safely, efficiently, and at scale. Like roads connecting people and markets, DPI connects identities, money, and data. Three systems form its backbone. First, digital IDs, which enable individuals to prove their identities and access a broader range of goods and services. Second, data-sharing frameworks, which allow secure transfers of information across institutions. Third, digital payment systems, which enable governments, businesses, and individuals to send and receive money instantly, at low cost.
Together, this digital ID-payments-data exchange stack incentivizes public and private sector innovation, improves governance, and creates inclusive digital economies.
While many countries have digital payment systems, they operate in silos and are often proprietary in nature (for example, internet banking, mobile payments, and credit cards), which impose higher costs for both providers and users. In contrast, Pix and UPI are based on open protocols and standards that are interoperable across different financial providers regulated by the central bank. Their mobile-native design lowers barriers for those historically excluded from formal financial services but who now have access to mobile phones and cellular networks, while their governance models keep costs low and innovation high.
The significance of these systems extends beyond Brazil and India. As digital payments have become a necessary and critical infrastructure for inclusive digital transformation, Pix and UPI are increasingly viewed as models for the next generation of digital payment systems that other countries can adopt and adapt as per their own needs and priorities. In forums such as the United Nations, G20, and the BRICS, Pix and UPI are recognized as examples of how countries of the Global South can build trusted and low-cost real-time digital payment systems at a population scale. Their rapid and growing diffusion underscores a broader shift: countries are turning to DPI to shape their economic trajectories with digital payments as a key enabler for inclusive growth and better, more equitable development outcomes.
This paper examines how DPI laid the foundation for Pix and UPI, and how these systems can serve as blueprints for future digital payment systems tailored to the needs and priorities of the Global South. First, it describes the evolution of DPI in Brazil and India and analyzes their development, governance, and adoption in each country. It then assesses their broader economic impact, before turning to the lessons from the design and implementation of Pix and UPI as countries adopt a DPI framework to advance financial inclusion and digital payments at scale.

II. Evolution of Digital Public Infrastructure in India And Brazil
The idea of DPI is not new. The internet and the Global Positioning System (GPS) were both funded by the United States government in the 1970s and 1980s and eventually emerged as global public goods. The COVID-19 pandemic, however, underlined the importance of creating DPI at a population scale with the objective of reaching citizens who needed assistance, including through financial transfers to mitigate the impact of the lockdown measures imposed by countries around the world. This has spurred interest in how countries can create DPI to address developmental challenges, and improve state capacity to do so at the population scale.
At the UN General Assembly session in 2023, DPI was recognized as a critical accelerator to achieve the Sustainable Development Goals (SDGs). In 2023, interest in DPI deepened under India’s presidency of the G20, where it became a central theme across multiple workstreams. The New Delhi Leaders’ Declaration recognized DPI as a “safe, secure, trusted, and inclusive,” framework, which is respectful of human rights, personal data, privacy, and intellectual property rights, fostering resilience and enabling service delivery and innovation.
As DPI is a relatively new term, it is presented globally in various forms and with differing levels of usage and outcomes. The term digital public infrastructure can refer to either: (i) a specific operational digital platform that demonstrates these characteristics, and/or (ii) a broader approach to designing and developing digital platforms that incorporate them. Although definitions of DPI are not yet standardized, defining principles are increasingly widely accepted (see Box 1).

India’s DPI approach has come under the spotlight for transforming the lives of its citizens in just over a decade. Built on open application programming interfaces (APIs), consent-based interoperability, and a three-layered structure of identity, payments, and data, India’s DPI design has enabled the creation of essential government services and platforms, while also allowing private sector players to use these DPIs for innovative business models, all grounded in public trust. It is estimated that by 2030, the economic value added from DPIs to India could reach 2.9-4.2 percent of the country’s gross domestic product (GDP).
India’s success with DPI demonstrates how modular, interoperable, and inclusive infrastructure can drive large-scale adoption and innovation, offering a potential roadmap for other countries. Aadhaar, UPI, and Data Empowerment and Protection Architecture (DEPA) exemplify these principles (Figure 1). Aadhaar provides a biometric ID for over 1.42 billion citizens. It supports services such as the Aadhaar-enabled Payment System (AePS), Aadhaar Payments Bridge (APB), electronic Know Your Customer (eKYC), and eSign. UPI connects bank accounts to multiple apps, facilitating instant transactions, promoting financial inclusion, and increasingly replacing cash for routine payments. Between 2023 and 2024, it accounted for 70 percent of digital payment transactions, far surpassing credit and debit cards. DEPA provides a secure framework for citizens to access and share their data on their own terms.

By contrast, Brazil’s DPIs primarily focus on government platforms, with Pix as the main exception. Brazil’s approach to digital platforms has emphasized the modernization of government services, focusing on creating efficient, secure, and user-friendly public systems. While Pix stands out as a widely adopted payment platform reflecting broader DPI principles, most other Brazilian digital initiatives remain oriented toward delivering specific governmental functions rather than building a fully integrated public digital ecosystem.
Brazil’s digital transformation has evolved over six decades (see Figure 2). It began with state-owned information technology (IT) enterprises, which, in the 1960s, built foundational data systems, such as the taxpayer registry, known as CPF. Beginning in 2000, e-government initiatives emphasized transparency, inclusion, and interoperability, supported by key policies such as the Access to Information Act (2012) and the Internet Bill of Rights (2014). In 2019, the shift toward “government as a platform” marked a turning point, with the launch of GOV.BR, electronic signatures, and large-scale service digitalization, which were accelerated further by the pandemic. By 2020, 89 percent of federal services had been digitized, laying the groundwork for a more integrated approach to DPI.
Starting in 2023, the focus has shifted to building foundational DPIs in payments, data exchange, and digital identity. Pix, Brazil’s instant payments system, has become a global benchmark, onboarding over 70 million people by 2022 and projected to contribute $37.9 billion to Brazil’s GDP by 2026 (or 2.0 percent of forecast GDP). Conecta GOV offers secure interoperability through APIs, which have been adopted by approximately 1,000 services, resulting in an estimated savings of $800 million. The new National Identity Card (CIN), linked to the taxpayer number (CPF), anchors Brazil’s digital ID ecosystem and has proven critical in disaster response, such as identifying displaced families during the 2024 floods in Rio Grande do Sul. Alongside these foundational DPIs, domain-specific initiatives in health, education, and the environment, such as the Rural Environmental Registry, are emerging, reflecting the government’s effort to integrate DPI into broader social and sustainability agendas.

III. DPI Framework for Pix and UPI
The DPI framework helps explain the success of Pix in Brazil and UPI in India. Both were created not just as payment tools but as public goods, built on openness, interoperability, and scalability to support inclusive, flexible, and locally adapted digital systems.


Inclusive Design and Public Purpose
Inclusive design and public purpose are the foundational principles of DPI, ensuring accessibility for all citizens regardless of socioeconomic background. Pix and UPI embody this by being user-friendly, affordable, and designed to reach those often excluded from formal finance. UPI 123Pay, for instance, enables people without smartphones or internet access to make digital payments via simple phone calls. Pix is free of charge for individuals, operates 24 hours a day, 7 days a week, and is increasingly used by municipalities for services like tax and utility payments. Beyond inclusion, their public purpose lies in enabling broad societal impact. They act as backbones for service delivery, unlock innovation and entrepreneurship, and strengthen both local and global digital ecosystems. By prioritizing universal access over profit motives, Pix and UPI demonstrate how DPI can function as an equalizer and provide a replicable blueprint for other countries seeking inclusive digital payments frameworks tailored to local needs.

Efficiency and Public Benefit
Building on inclusive design, Pix and UPI demonstrate how DPI can deliver efficient and tangible public benefits at scale. By significantly reducing the transition and onboarding costs, they make payments instant, secure, and nearly cost-free, saving time and money for millions of users while allowing merchants to pass the savings directly to consumers. Both systems sustain themselves through minimal fees, such as Pix’s 0.22 percent average merchant charge or UPI’s capped interchange, while enabling banks, fintechs, and small businesses to compete on a level playing field. Their architecture improves transparency, generates financial histories that expand access to credit, and provides fertile ground for innovation in services ranging from bill payments and insurance to investment and digital credit. In practice, this demonstrates how efficiency and public benefit, when grounded in transparent governance and open participation, can transform digital payments into public goods that promote affordability, innovation, and long-term financial inclusion.

Open Architecture and Interoperability
Equally important to their success and public benefit is the commitment to open architecture and interoperability, which makes Pix and UPI not just efficient, but adaptable and innovation friendly. Both systems were built as shared public rails on common standards and modular design, allowing banks, fintechs, and third-party providers to integrate seamlessly without creating siloes. UPI's open APIs and extensible protocol have supported the addition of new features, such as offline payments, e-mandates, and purpose-specific vouchers, into the core system. In contrast, Pix's adoption of ISO 20022 standards and its unique identifier (Pix Key) system ensures smooth transfers across institutions and wallets. This openness prevents vendor lock-in, encourages competition, and allows ecosystems to evolve rapidly, with services like QR-code payments, micro-credit, and digital insurance emerging on top of the same public backbone. By mandating interoperability from the start, both platforms turned instant payments into dynamic platforms for continuous innovation.

Security, Privacy, and Trust
The openness and reach of Pix and UPI are reinforced by strong governance and security measures that sustain trust, the cornerstone of any DPI. Transactions require two-factor authentication and device-level verification, such as a phone unlock PIN. Both systems operate on closed financial networks, accessible only to authorized participants, and transactions are end-to-end encrypted and digitally signed to ensure auditability and prevent unauthorized access. While fraud levels remain relatively low, it remains a concern since a large section of the rapidly expanding user base are new to digital payments. To address this, central banks have launched consumer education campaigns and tightened safeguards. Pix enables rapid dispute resolution with immediate account blocking and reversals. UPI offers a real-time, multi-party framework with 24-hour transaction reversals. Regulators have also introduced stricter licensing rules and transfer caps. For example, Brazil's Central Bank recently implemented the "Pix Teto," capping transfers via unauthorized providers at 15,000 Brazilian Real, or roughly $850 and moving up licensing deadlines to enhance security. These safeguards reinforce user confidence and show how public digital infrastructures can maintain security, privacy, and trust.

Adaptability and Scalability
Finally, the adaptability and scalability features of DPI allow it to grow and stay relevant over time. UPI's modular architecture allows new features to be added easily, as seen with UPI Lite, which enables instant low-value payments up to 200 ($2.25) without a PIN on basic phones, expanding access beyond smartphones. Other innovations include programmable bill payments and e-RUPI vouchers. Pix is following a similar path with "Pix Automático" for recurring transfers, offline payments for low-connectivity areas, and small-scale lending tools. Adaptability ensures features can evolve with demand, and scalability ensures reliability as the volume of transactions increases over time. These qualities make Pix and UPI durable, user centric and, future-ready models for other countries seeking to build resilient digital payment ecosystems.
Collectively, these defining principles of DPI illustrate how Pix and UPI realize the promise of DPI, guided by inclusion, efficiency, openness, trust, and adaptability. Their success highlights the potential of digital payment systems, when designed as public goods, to expand access, reduce costs, and promote ongoing innovation. Just as importantly, they demonstrate that robust governance and state capacity are key for sustaining trust and scaling adoption. These lessons extend well beyond Brazil and India, offering a roadmap for countries seeking to build resilient, future-ready payment ecosystems, as we outline in the next section.

IV. Pix and UPI In the Context Of DPI: Institutional Framework, System Design, and Adoption
Institutional Framework India's financial inclusion drive over the last decade enabled the rapid growth of digital payments. Starting in 2014, the Jan Dhan Yojana (JDY) brought almost half a billion people into the banking system within a decade. The proportion of adults with a bank account increased from 34 percent in 2011 to 89 percent in 2024, with women and men equally likely to have access to a formal financial account. Coinciding with the rapid increase in financial access, the government launched UPI in 2016 that now accounts for around 85 percent of all digital transactions in India. The National Payments Corporation of India (NPCI), a non-profit entity jointly owned by the Reserve Bank of India and 56 commercial banks, established the principles of the UPI architecture as open, interoperable, and inclusive, providing the institutional framework and regulatory foundation for both the public and private sectors to build payment applications at scale.
Brazil's rapid adoption of digital payments was similarly enabled by a strong institutional framework led by the Central Bank of Brazil (Banco Central do Brasil, BCB). Pix, launched in 2020 as part of the central bank's broader agenda to modernize the national payment system, aimed to enhance competition, reduce transaction costs, and expand access. Designed as a public infrastructure project, Pix required mandatory participation for larger banks and provided incentives for regulated private payment banks to participate, thereby generating immediate network effects. The BCB prioritized user experience throughout the development process, establishing regulations to ensure accessibility, non-discriminatory use, and free peer-to-peer transactions. Fast settlement cycles, network-level transaction limits, and integration of traditional banks, fintechs, and payment service providers created a secure, low-risk environment that fostered innovation, economic growth, and financial inclusion across Brazil.

System Design
Both UPI and Pix exemplify DPI principles through features such as open APIs and layered interoperability. However, they differ in their governance and technical design. Pix is a central bank-led, state-owned system with centralized settlement and distributed access, while UPI is coordinated by the semi-autonomous NPCI on a decentralized common platform. Brazil adopted the ISO 20022 standard to accelerate the launch of Pix and ensure interoperability, whereas India developed a new XML-based UPI protocol that emphasizes flexibility, pluggable authentication, and real-time dispute resolution. Pix's mandatory participation for large institutions accelerated network effects, while UPI's open API framework fostered fintech innovation, both within banks and among fintechs. Table 1 summarizes these comparative features.

Adoption at Scale
The uptake of UPI and Pix has been remarkably rapid. In July 2025, UPI processed over $29 billion in payments through 19.46 billion transactions. In contrast to the same month last year, when there were 14.43 billion transactions, registering an increase of about 34 percent in just one year. The UPI system now serves over 491 million individuals and 65 million merchants, connecting over 675 banks in a single platform.

The adoption of UPI has followed different pathways across diverse population segments and geographical regions in India. Initially, the adoption was focused in urban areas, with higher concentrations of digitally literate, middle-to-high income users with operating banking connections. Gradually, the system has expanded into suburban and rural areas as smartphone penetration increased by over 75 percent from 2014 to 2024, and telecom infrastructure improved, registering an increase of 285 percent in internet connections during the same period.

In Brazil, from the launch of Pix operation in November 2020 through July 2025, the number of transactions has increased by about 700 percent across all income groups. Currently, 160 million individuals and over 15 million merchants use the payment system. Pix has had different adoption patterns across Brazilian segments of society, similar to the Indian case. The highest adoption rate initially was among young, urban populations with higher digital literacy and bank accounts. But the system has a progressive penetration in larger demographic segments, such as older age groups and lower-income groups. Demographic analysis also shows outstanding adoption in rural areas and smaller municipalities, where banking infrastructure is limited.


Factors Driving the Widespread Adoption of Pix and UPI
The broad adoption and diffusion of UPI and Pix arise from intentional design choices in technology, governance, and stakeholder engagement. Both systems were designed to make digital payments more accessible and user-friendly, bringing hitherto excluded segments of the population into the digital ecosystem. Unlike traditional retail payment systems, they were built for mobile platforms rather than card-based infrastructure, ensuring payments could be made anywhere without reliance on point-of-sale terminals or ATMs.
Regulatory support and collaboration were crucial in establishing trust and interoperability. In India, NPCI governs UPI with strict rules, while enabling fintechs to offer digital wallets or prepaid payment instruments (PPIs). In Brazil, Banco Central do Brasil (BCB) provides Pix infrastructure and owns its rulebook, which requires mandatory participation from institutions with more than 500,000 accounts and includes precise API specifications that enable seamless integration for payment service providers.
Network effects on both the supply and demand sides have accelerated usage. On the supply side, both UPI and Pix have reliable infrastructure, with NPCI handling transition settlement in India, while BCB processes Pix payments and manages APIs and rulebooks. This enabled seamless interoperability between banks, credit cooperatives, fintechs, and payment institutions. On the demand side, low or zero costs created strong incentives for adoption. In India, UPI transactions are free for users, with minimal or reduced interchanged fees for merchants. In Brazil, Pix payments are also free for payers, while carrying merchant service charges that are significantly lower than those for credit or debit cards, thereby lowering barriers to entry for businesses and promoting widespread usage.
Finally, they have made constant improvements and security enhancements. In India, new features like Bharat BillPay for Business, designed to streamline business-to-business (B2B) transactions, and UPI Circle, which allows users to fully or partially delegate payments to other trusted users to support financial inclusion for those with limited digital capacity. In Brazil, BCB is rolling out innovations such as Offline Pix, for in-person transactions using static or dynamic QR codes at a physical store, rather than online, and "Pix Parcelado," which allows users to pay for purchases in installments, similar to a credit card, along with improved fraud detection and fund freezing protocols. These continuous upgrades keep both systems relevant, secure, and adaptable to the evolving needs of new users.

Impact on Financial Ecosystems and Behavior
Both UPI and Pix have had a considerable impact on financial inclusion, albeit with varying levels of impact across demographics and geographical areas. Pix has been able to reduce transaction costs for person-to-person transfers that incurred substantial fees in Brazil's banking system. Similarly, UPI has been particularly effective in enabling micro-entrepreneurs and small businesses to participate in the digital economy through streamlined merchant payment systems.
Building on the expansion in bank account ownership, UPI has facilitated usage by decreasing the barriers to formal financial services. Populations in areas with limited access to banking infrastructure can now access the digital payments network through mobile phones. By encouraging the adoption of digital payment habits, UPI has reduced the need for physical visits to banks and simplified account management. This has expanded the practical utility of bank accounts that were often opened but remained unused. The payment platform has stimulated micro-entrepreneurship, enabling small vendors and service providers to accept digital payments without the need for point-of-sale systems. As a result, new income opportunities, particularly for women and rural entrepreneurs, have emerged, improving transaction records and reducing the risks associated with cash.
However, despite these gains, large portions of the informal sector continue to face challenges in accessing digital financial services due to factors such as poor internet connectivity, low digital literacy, and limited access to smartphones, which continue to hinder full adoption. Additionally, the increased reporting of UPI transactions in the Annual Information Statement has raised concerns regarding Goods and Services Tax (GST) compliance. Many informal vendors fear that sudden increases in digital receipts could trigger tax notices if they are not aligned with previously filed returns, prompting some to remove QR codes or return to cash-only transactions. This tension underscores how regulatory and administrative pressures can impede the adoption of digital payments, despite UPI's role in promoting financial inclusion.
Pix has also had a profound impact on Brazil's financial ecosystem, reshaping both institutional structures and user behavior. Its public-sector design and compulsory integration requirements created an inclusive digital infrastructure that rapidly embedded itself across the banking sector, fintech landscape, and merchant networks. By reducing transaction costs and simplifying access, Pix lowered barriers to digital banking, incentivizing both individuals and businesses to shift away from cash-based practices. For consumers, this has normalized the use of instant digital payments in everyday transactions, deepening engagement with the formal financial system. For merchants and micro-entrepreneurs, the platform's low fees and ease of use have expanded the adoption of electronic payments, generating transaction records that support credit assessments and furthering the formalization of economic activity.
The interoperability of Pix has also spurred fintech innovation, as new entrants leverage the system's infrastructure to develop complementary financial products and services, from digital wallets to small-scale lending platforms. Taken together, these shifts demonstrate how a state-led payments initiative can simultaneously drive efficiency in the financial system, expand access to services, and alter behavioral norms surrounding money management and financial participation. This new approach to building digital payment systems highlights how design choices aligned with the goal of financial inclusion and access can create enabling conditions for rapid adoption, especially when digital payments are embedded within a larger DPI framework. We explore this in detail in the next section.

V. Towards A Global South-Led Model of Digital Payments: Lessons from Pix and UPI
The success of UPI and Pix as digital-first, mobile-native, inclusive-by-design payment systems has garnered wide attention, especially in countries of the Global South. Their success offers valuable lessons for other countries seeking alternatives to legacy systems that are both costly and ineffective in the context of rapid digital transformation. Our review shows that there is considerable potential for the diffusion of a Pix-UPI model based on the principles of DPI. However, replicating this model requires a careful understanding of policy choices, institutional frameworks, and technology deployment that enabled Brazil and India to create a vibrant digital payments ecosystem at scale within a decade.
Three key lessons emerge from the rapid adoption of Pix and UPI over the last decade. First, universal financial inclusion is a necessary condition for these new digital payment models to be adopted at scale. As noted in Section II, India's financial inclusion accelerated over the last decade, with nearly 500 million adults gaining access to the formal financial ecosystem through bank accounts, a large majority of which were opened through the Aadhaar e-KYC process, thereby making them verifiable and trusted. Brazil achieved almost universal coverage of bank accounts by the mid-1980s, thereby creating a large user base that is conversant with financial payments. Similar to India, Brazil's Cadastro de Pessoa Fisica (CPF) facilitates authentication for financial transactions and is embedded in almost all registries, both public and private.
Second, regulatory institutions play a key role in ensuring that the new digital payment systems are accessible, convenient, and trusted. As Brazil and India became more digitized over the last decade, the digital payments ecosystem leveraged the expansion of fast and reliable data networks, as well as mobile phone penetration, across all segments of the population. While a negligible transaction fee mandated by BCB and NPCI has often been cited as a key factor for the rapid growth of the two platforms, the experience of Brazil and India also shows the impact of design choices (such as QR codes and voice-based interfaces) that reduce barriers for users, especially for those who are new to the digital payments ecosystem. One key lesson from this is that countries seeking to adopt new digital payment systems need to balance regulation with innovation, ensuring that they are inclusive and adaptable to the needs of the expanding and evolving digital economy.
Third, digital payment platforms built on the principles of DPI — openness, interoperability, and trust facilitate both adoption and usage at scale. As we have outlined in Section III, both Pix and UPI constitute the payment layer in the DPI Stack, leveraging both digital ID and existing data exchange protocols. Through their rapid adoption and usage, Pix and UPI demonstrated both the market making and market shaping power of the DPI approach. Brazil and India have chosen open standards and protocols to enable both the public and private sectors to connect to digital payments gateways managed by trusted entities. They not only set the regulatory framework but also actively invested in the foundational technology (Bharat Interface for Money, or BHIM, was the first downloadable UPI application), thereby ensuring that these systems are country-owned and managed.
For other countries of the Global South to follow this path, the overarching lesson from Pix and UPI is that it is possible to build an inclusive, scalable, and efficient digital payments ecosystem if there is a clear public purpose, willingness to invest in digital public infrastructure, and adequate state capacity to guide policy, regulation, and implementation.
As digital payments become a critical enabler for an inclusive digital economy, there is an emerging discussion on whether the Pix-UPI model can become an alternative cross-border payment mechanism. In 2023, Brazil’s Central Bank initiated a pilot with India’s UPI marking the first steps toward a bilateral real-time payments system, potentially setting the stage for future integrations across Latin America, as well as with Europe, Middle East, Asia and Africa.  However, this would require sustained cooperation among countries to align regulations, ensure interoperability, and harmonize data-sharing protocols. Creating such coordination mechanisms would catalyze the diffusion of the PixUPI model among countries of the Global South, enabling them to reap the benefits of a digital payments ecosystem that leaves no one behind.



The authors would like to thank Kamya Chandra, Tanushka Vaid, and Jeffrey D. Bean for their review of an earlier draft of this paper. This background paper reflects the personal research, analysis, and views of the authors and does not represent the position of the institution, its affiliates, or partners.

### Roundtable Roundup : AgriFoodTech in the UAE

KEY DISCUSSION POINTS 
The State of AgriFoodTech in the UAE
Driven by high food-import dependence and changing food consumption patterns due to rapid population growth and lifestyle trends, the United Arab Emirates (UAE) government frames food security as a national priority. The UAE’s National Food Security Strategy 2051 outlines ambitions to produce 50 percent of food domestically and ultimately secure the top spot on the Global Food Security Index by 2051. AgriFoodTech has emerged as a rapidly growing sector in the Gulf, with technology increasingly utilised as a key tool to optimise production and distribution amidst the region’s climate and water constraints. AgriFoodTech combines aspects of AgriTech which leverages technology to improve production and efficiency of agricultural outputs, and FoodTech which improves efficiency and sustainability of processing, distribution, and consumption.

Farming operations in the UAE consists of three dominant methods: open-field, greenhouses, and indoor and vertical farming which leverage low to high-tech tools. Open-field farming can produce food basket staples like wheat, yet faces exposure to extreme heat and limited water resources. Greenhouses help shield fruit and vegetable crops from extreme weather, facilitating longer growing seasons. Indoor and vertical farming methods deploy controlled-environment agriculture systems, optimising growing conditions and regulating water consumption to produce leafy greens and high-value crops such as berries and specialty herbs.

Discussants collectively agreed that food production self-sufficiency comprises only one aspect of food security. Given the large influx of tourists and residential melting pot in the UAE, consumers demand access to a diversity of products which can only be acquired through imports. Stabilising food security and mitigating food supply chain shocks thus requires strengthening food storage capacities and forging diversified partnerships.

In the UAE context, policy enablers for AgriFoodTech must shift away from saturated markets towards research and development (R&D) for locally-rooted efforts to produce seed varieties that prioritise resilience and adaptation to local climate conditions. Furthermore, bureaucratic regulations should be streamlined and financing incentives should be repurposed to derisk the industry.
Challenges and Bottlenecks
1. Policies and market incentives have enabled an influx of imported technologies which are not tailored to local climate conditions.

Policy and market incentives have largely been concentrated towards advancing implementation of imported technologies designed for temperate climates which require significant adjustments to adhere to the Gulf’s specific climate and water limitations. To illustrate, artificial intelligence is increasingly adopted in the region to promote production efficiency. However, AI use should be cautioned against the need to train models for local heat and humidity conditions and growing patterns. The UAE government has progressed in promoting innovations by funding efforts which support local farmers with suitable technology uptake and facilitates offtake agreements for products. However, cost and scaling challenges persist for local startups.

2. Technology-driven production methods do not meet local food basket demands.

In recent years, the UAE has observed an over-allocation of financing and subsidies towards high tech segments like indoor and vertical farming, leading to a skewed market and a need to synchronise policies with the local context. The highly technology-driven market has resulted in a trend of misalignment between external technologies and consumer demand. For example, although vertical farming has accelerated in recent years, these methods largely produce leafy greens which are insufficient in fulfilling the full gambit of food security and the local food basket. These processes are also highly capital and energy-intensive. Thus, companies may struggle to commercialise if they are unable to identify niche markets or cement a strong product-market fit. Since vertical farming is most suitable for high-value crops like strawberries, it caters to very specific demographics, complicating returns-on-investment generation to accommodate for high indoor farm maintenance costs. Although domestic demand and consumer purchasing power is relatively higher for locally-produced products in the GCC, these products still struggle to compete with lower-priced imports.

3. Farming operations must contend with scarce water resources and high energy costs.

Farming operations must confront scarce water resources and high energy costs. Ensuring access to water is a challenge but has evolved to become less of a bottleneck due to advancements in desalination and wastewater reuse technologies. Governments currently bear the cost burden of developing desalination infrastructure, while farmers bear usage costs. Increased adoption of agritechnologies like hydroponics and precision agriculture helps promote efficient water-use, but small-scale farmers still experience high upfront costs and technical obstacles inhibiting adoption. The government of Abu Dhabi has acquired under Khalifa University the AgX R&D center to promote and derisk indoor farming technologies and growing methods. Moreover, indoor and controlled-environment agriculture is highly energy-intensive and constrained by high energy pricing. For instance, large-scale indoor farms deploying artificial lighting and cooling systems require substantial amounts of power to sustain operations. Independent and private operations must pay commercial electricity rates which can be very costly and undermine financial viability.

4. Regulatory complexity and varying administrative requirements present challenges to operational scaling.

Policies and operational requirements differ across ministries and between the seven emirates. For instance, licensing categories are not fully harmonised, and startups often fall under the same regulatory frameworks as large corporations, even though their capacities and operating models differ. Consequently, startups sometimes find it challenging to navigate the administrative processes and associated costs, and would benefit from additional support to engage more effectively with existing compliance requirements.

5. Agriculture is considered a high-risk industry, inhibiting adequate capital allocation.

Regarding financing, public subsidies are misaligned to market needs, while private investors tend to be more cautious with extending financing for AgriTech due to the high risk perception despite capital abundance. Financing is disproportionately channeled towards high-tech software solutions, resulting in underfunding for operations-heavy sectors like food waste management, a sector crucial to food security. Similarly, existing public growth funds tend to target early-stage companies or those with high revenue. When combined with regulatory barriers, these factors undermine the potential for local farmers and startups to scale operations. Moreover, smallholder farmers lack coordinated production strategies, resulting in an influx of supply and fall in prices during peak harvesting periods. Likewise, during off-peak tourism seasons, producers risk the potential for food and income loss due to falling demand.
Policy Recommendations
1. Recalibrate policy and market incentives towards research and development (R&D) to bolster locally-rooted innovations. 

Prioritise research and talent development for locally-contextualised crop varieties, regenerative agriculture methods to enhance soil quality and agriculture ecosystem health, biotechnology, and bioenergy in order to meet nutrition and sustainability  demands. AgriTech innovations such as vertical farming must also be complemented by greenhouses or open-field farming to meet nutritional needs. Investors should also consider long growth cycles required to validate cultivation of drought and heat-resistant seeds, flatland, protein and fiber-rich and nutritional crop varieties. Similarly, increasing financing from the public sector and industry consortiums for R&D for the efficient cultivation of local animal protein and livestock breeds is also a time-intensive process, but would help build towards creating products that meet local food basket demands.Confronting rising energy needs for novel technologies that lack access to subsidised agri-tariffs will require policy incentives and public financing support to explore the feasibility and cost-structure of cleaner technologies such as solar, biofuel, and nuclear-powered desalination. Lastly, linking food security to the national security agenda may help unlock defense funding for R&D.

As products reach commercialisation, partnerships with grocers and Hotels, Restaurants, and Catering (HORECA) industries should adapt to unique harvest cycles and local crop calendars, ensuring products remain competitive against cheaper imported goods during peak winter production months while maintaining consumer willingness to pay a premium.

2. Reprogram financing to de-risk the agriculture industry. 

Redirect capital towards mechanisms that de-risk innovation such as agri-guarantees, crop insurance, and microfinance solutions. Instituting de-risking instruments will help catalyse efforts to develop protein and fiber-rich agricultural products, addressing nutrition concerns in the long-term. Through agri-guarantees, governments or third-parties cover a portion of the capital expenditure to alleviate the initial financial burdens on farmers. Similarly, instituting regulatory frameworks to ensure farmers have access to low-premium crop insurance would help protect them from potential crop losses from extreme heat and drought. Microfinance operates with more flexible requirements, enabling finance access for small-scale farmers. Moreover, joint public-private ventures, enhanced foreign-local firm linkages, and developing shared infrastructure will help reduce overall costs for limited resources like energy and water. At the government level, carefully revising farmer subsidies to be more output-oriented, rewarding finished agricultural products as opposed to raw material inputs, has the potential to increase efficiency, productivity, and sustainable resource use when integrated with other policies. 

3. Establish consolidated governance frameworks to facilitate scaling and alleviate administrative burdens. 

Develop a clear governance and policy framework to facilitate inter-misterial coordination, adapt to rapid technology expansion, and alleviate administrative burden on startups and small-scale farmers. Given AI and data-monitoring adoption within the agriculture sector, developing cohesive policy frameworks would help guide protocol development for data management and security. Harmonising licensing specifications across the Emirates and clearly differentiating regulatory treatment for small-medium sized enterprises versus large corporations would facilitate operational growth.
Conclusion
The UAE government has strongly encouraged technology adoption and innovation to enable domestic food production and promote food security. While certain policies demonstrate an over-reactive approach leading to an oversaturation of certain sectors, other sustainable food system components like food loss and waste management and nutrition require further R&D, investment, and government support. The government should thus recalibrate policies and repurpose financing incentives towards holistic efforts that promote resilience across the entire food value chain from product origination to storage, transport, consumption, and waste management.
SPEAKERS

 	Ahmad Mukhtar, FAO Representative (a.i) to the United Arab Emirates, FAO
 	Hassan Halawy, CEO, Elite Agro Projects LLC
 	Juan Carlos Motamayor, CEO, Topian Aquaculture (NEOM)
 	Lara Hussein, CEO and Co-Founder, The Waste Lab
 	Daria Shchurik, Vice President of Growth, Product & Marketing in AgTech, Greeneration
 	Fadi Sbaiti, Vice President / General Manager, Khalifa University AgX
 	Aya Hallak, Partner, Strategy& Middle East - PwC Network
 	Mannat Jaspal, Director & Fellow, ORF Middle East
 	Shruti Jain, Associate Fellow, Centre for Development Studies, ORF

The session was moderated by Ms. Leigh Mante, Junior Fellow, Climate and Energy at ORF Middle East.

### Recommendations for the U.S. AI Action Plan

Introduction
The United States (US) stands at a defining moment in the global contest for technological leadership. Its AI Action Plan (2025)[1] sets an ambitious direction for AI development that is anchored in innovation, deregulation, and national resilience. The accelerating pace of technological and geoeconomic change, however, demands an even more precise and future-proof approach. As competing artificial intelligence ecosystems mature and the global economy increasingly demands dependable compute capacity, connectivity, and trusted digital infrastructure, the US can no longer rely solely on its domestic capability or current market dominance to ensure long-term leadership in the AI industry.
This report outlines a set of recommendations designed for the US’s AI Action Plan to extend and diversify the parameters of its strategic approach. The recommendations were drafted in response to the Request for Information in September 2025 issued by the US Office of Science and Technology Policy on how existing federal laws and regulations may impede AI development and adoption. Drawing on emerging trends in workforce disruption, infrastructure vulnerability, allied cooperation, public trust, and multilateral engagement, it argues that the next phase of US AI strategy must look beyond near-term competitiveness and toward long-term system resilience. By embedding anticipatory workforce planning, decentralising compute and energy networks, rebuilding data confidence, and deepening partnerships with both allies and swing states, the US can secure a durable advantage in an increasingly contested technological landscape. Strengthening these pillars will not only reinforce the US’s position in the AI century but shape global norms in a way that reflects its values and strategic interests.

Recommendations to Advance US Leadership in AI
The US AI Action Plan prioritises deregulation, innovation, and national resilience as a means to entrench the country’s leadership in the global AI economy. Yet, to ensure sustained dominance, the strategy must go further. Embedding foresight into workforce planning, securing resilient infrastructure, rebuilding public confidence, and coordinating with trusted allies will extend US influence globally. The following 10 recommendations outline a path to achieve that goal.

1. Prioritising partnerships over markets
An express purpose of the AI Action Plan is to export the US’s AI technology stack across countries to prevent and counter the spread of rival AI ecosystems. This policy approach has been consistent with the Framework for AI Diffusion enacted by the previous administration. Under the Trump administration, the US tech export policy is more pragmatic and open towards strategic partners, particularly with Gulf countries. However, the language used in the Plan falls short of considering countries within and adjacent to the US sphere of tech diffusion as equal partners, and instead relegates them to the status of mere “markets to capture”.[2]  
The road to tech supremacy, however, is long and constantly evolving—it is nigh impossible to completely onshore the AI value chain. The threat of rival AI ecosystems, therefore, needs to be addressed through the creation of partnerships based on trust and shared goals. Towards this end, the broad approach outlined in the AI Action Plan must emphasise the necessity of mutually beneficial partnerships with nations across the world. A useful strategy can be to use the US-India TRUST (Transforming the Relationship Utilizing Strategic Technology) initiative[3] as a template for bilateral agreements on technology cooperation with ‘swing’ countries in the Global South.

2. Building a future-proof workforce for the AI economy
Given the speed of development in AI, the particular AI skills in demand are subject to rapid change from year to year. For example, computer programmers, who have historically been highly sought after in the technology and software industries, have for the last couple of years seen around a 25-percent reduction in job opportunities as their tasks increasingly become automated by generative-AI tools.[4] While the Plan correctly emphasises AI literacy and retraining, these measures risk being reactive rather than strategic. To safeguard the American workforce, the US should establish a National AI Workforce Foresight Council—a joint initiative between the Departments of Labor, Education, the National Science and Technology Council and the National Science Foundation—to model how automation and generative technologies will transform sectors over the next decade. Through close consultation with academics, economists, and industry innovators, the council would anticipate shifting skill demands before displacement occurs. This would ensure federal investments target emerging competencies, in addition to guarding against current retraining initiatives quickly becoming redundant.

3. Harmonising federal standards
The AI Action Plan emphasises the need for avoiding bureaucratic red-tape and onerous regulations that can hinder AI development. As it currently stands, however, the landscape of AI regulation in the US is a patchwork of laws at the state level. In 2024, state-level lawmakers in 45 states introduced 635 AI-related bills out of which 99 were passed.[5] In 2025, around 260 AI-related bills were introduced by August, with 22 of them being passed.[6] Meanwhile, since 2022, national strategies for AI regulation have been driven by a series of executive orders, putting them at the risk of discontinuity as White House administrations change.
Given that AI is a distributed technology, the absence of federal-level regulation will make the process of AI development and deployment unpredictable. For a company aiming to deploy an AI model nationally, this uncertainty creates a costly compliance matrix, discourages long-term investment and can create unnecessary internal data borders that hinder the flow of data, digital goods and services across the digital economy. The light-touch, industry-driven approach articulated in the AI Action Plan thus needs to be codified in federal regulation.  To address this, the next phase of the AI Action Plan should prioritise collaboration with Congress for passing baseline federal regulation aimed at harmonising standards nationally while also providing a long term and stable policy signal. 

4. Establishing a locally distributed data centre network 
The current US compute infrastructure landscape is dangerously concentrated in a few hyperscale providers clustered in specific regions. This bottleneck poses risks to economic resilience, national security and regional energy stability alike. In 2025, an incident in Virginia illustrated this vulnerability when roughly 60 data centres simultaneously disconnected from the grid, creating a sudden power surge and forcing operators to rapidly cut generation to prevent failures.[7]  To mitigate these risks, the US should adopt a distributed compute strategy that incentivises the development of mid-sized, regionally based data centres powered by US-made semiconductors and locally sourced energy. Grants and tax credits should reward firms that decentralise infrastructure away from established centres, ensuring resilience against physical, cyber, or market shocks.

5. Diversifying the AI energy supply chain
The US AI Action Plan’s call to “Build, Baby, Build!” must be extended to the country’s energy foundations. AI data centres and semiconductor manufacturing facilities will continue to increase national energy demand exponentially. The US should prioritise a resilient mixed-energy grid by incorporating greater capacity and diversity from next-generation nuclear, geothermal and renewables produced domestically.[8] China’s dominance in solar production, for instance, has strengthened its overall energy capacity, freeing resources to expand investment in energy-intensive AI systems. The country is also increasingly coordinating data centre energy demand with the construction of green electricity facilities.[9] While the Trump administration has already identified increased fossil fuel extraction as a priority, developing additional domestic capacity in alternative scalable energy technologies would narrow the gap on that particular advantage while creating demand for the construction of new domestic manufacturing hubs for batteries and turbines. By expanding the sources of energy inputs that feed AI infrastructure, America further reduces its exposure to foreign supply chains.

6. Embedding coordination within a US-led AI bloc
AI leadership cannot be achieved in isolation, and should be pursued by adopting a leadership position within a strong alliance network. The US should extend the National AI Research Resource (NAIRR) pilot framework to include trusted allied research institutions under strict US-defined governance standards.[10] Such coordination would expand access to frontier data and research while ensuring alignment with American norms on open innovation and free expression. Parallel consultations will harmonise regulatory sandboxes and end-use ethics codes to resolve inconsistencies. Ensuring interoperability of technologies among allies, in particular across defence and commerce, will reinforce US leadership in global rulemaking.

7. Reinstating AI safety leadership
The current AI Action Plan rightly prioritises infrastructure, talent, and investment but neglects safety frameworks that ensure US AI systems are trusted, interoperable, and—as a result—globally adopted. Recent proposals such as the AI LEAD Act, which seeks to make companies legally liable for unsafe AI products, reflect growing concern in Congress over accountability.[11] Yet, overreliance on liability mechanisms could discourage firms from releasing advanced systems for fear of litigation. Establishing a strong, coordinated AI safety body would help mitigate that risk by ensuring products meet pre-deployment testing and certification standards before reaching the market. The Center for AI Standards and Innovation (CAISI), renamed from the AI Safety Institute in February 2025, should therefore be tasked not only with setting technical benchmarks but with making safety and security a driver of innovation. A reinstated National AI Safety and Security Directorate within the National Institute of Standards and Technology could coordinate these efforts, uniting government, academia and industry to ensure US-made AI becomes the global standard for secure, dependable, and high-performance systems.

8. Re-energising multilateral engagement
The AI Action Plan states the criticality for the US of countering Chinese influence in international bodies. This sentiment will remain theoretical without re-energising multilateral engagements and international partnerships. The US must aggressively fund expert participation in international standards-setting bodies like the International Organization for Standarization (ISO) and the International Electrotechnical Commission (IEC). The US must also use high-level forums like the G20 and the Organisation for Economic Co-operation and Development (OECD) to promote cooperation, best practices and interoperable policies. This can be achieved through formal coalitions with like-minded countries to build AI data commons that connect different ecosystems, as well as setting common-sense red-lines on AI development that can be viable alternatives to competing regulatory models.

9. Promoting reliability and stability
The US stack, which includes cloud infrastructure, foundation models, and open-source frameworks, is not just a product to be sold, but a foundational platform. Like any digital platform, it depends on widespread and deep adoption. Securing this global proliferation of the US AI ecosystem requires the prioritisation of stable and reliable access to American AI stacks, particularly for emerging markets.  Countries evaluating their national AI strategies need confidence that access to US tech will not suddenly be disrupted amidst shifting trade negotiations or domestic policy pivots. Nations may be forced to diversify supply chains and sell alternatives if the US is perceived as an unreliable partner. A first step towards signalling reliability can be mandating that new bilateral and multilateral trade agreements include clauses that protect access to defined commercial AI infrastructure and services from sudden interruption, with the exception of defined national security risks.

10. Strengthening public trust through transparent data governance and confidence-building initiatives
Public participation underpins AI success by ensuring that innovative models are built on the most comprehensive datasets possible. For example, voluntary genetic data sharing is foundational to US leadership in fields such as AI-enabled healthcare and genomics research, while access to high-quality mobility data is essential to providing accurate predictive models in the transportation industry. Yet, distrust of data collection, intensified by high-profile privacy and misuse scandals, threatens public cooperation in data sharing, as citizens fear loss of privacy, surveillance, or exploitation for commercial or political ends.[12] Alongside robust safety standards to avoid data breaches, as outlined in the fifth recommendation, the US government should launch a National AI and Data Trust Initiative, led by the Office of Science and Technology Policy and the Department of Health and Human Services. This initiative would combine public education with strong enforcement of privacy guarantees, making it clear that data collection benefits the American people.

Conclusion
The recommendations outlined in this report point to a series of structural adjustments required to sustain US competitiveness in AI and supporting industries. Evidence across workforce capability, regulatory coherence, infrastructure resilience and international alignment, indicates that current arrangements must be improved to absorb future scaling and the likely pace of change associated with advanced AI systems.
A more anticipatory framework would help address these gaps. Integrating this report’s ten considerations into the next phase of the AI Action Plan will support US policymakers in ensuring that domestic AI infrastructure, governance mechanisms and international partnerships evolve in a manner that reinforce durable technological leadership over the long term. By coupling innovation with foresight, resilience and trust, the AI Action Plan can serve as a more stable framework for US technological leadership. In doing so, it would position the US to guide the evolution of global AI systems in a manner aligned with its strategic and governance priorities.



Siddharth Yadav, Fellow, Emerging Technologies, ORF Middle East.
Elizabeth Heyes, Junior Fellow, Emerging Technologies, ORF Middle East.



All views expressed in this publication are solely those of the authors, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel.

Endnotes
[1] The White House, “America’s AI Action Plan: Winning the Race,” July 2025.
[2] Sebastian Mallaby et al., “The Opportunities and Risks of Trump’s AI Action Plan,” Council on Foreign Relations, July 24, 2025.
[3] The White House, “United States-India Joint Leaders’ Statement,” February 13, 2025.
[4] Andrew Van Dam, “More than a quarter of computer-programming jobs just vanished. What happened?,” The Washington Post, March 14, 2025; Molly Kinder et al., “Generative AI, the American worker, and the future of work,” Brookings, October 10, 2024.
[5] “2025 State AI Wave Building After 700 Bills in 2024,” Business Software Alliance.
[6] “AI Legislation Across the US,” Retail Industry Leaders Association, September 8, 2025.
[7] Tim McLaughlin, “Big Tech’s Data Center Boom Poses New Risk to US Grid Operators,” Reuters, March 20, 2025.
[8] “What is US electricity generation by energy source?,” US Energy Information Administration, February 29, 2024.
[9] “Country Rankings,” International Renewable Energy Agency, July 10, 2025; Nina Nurmamat, “China Hopes to Power AI Boom with Green Energy in New Data Centre Strategy,” South China Morning Post, June 5, 2025.
[10] “National Artificial Intelligence Research Resource Pilot,” U.S. National Science Foundation.
[11] Dick Durbin and Josh Hawley, “Aligning Incentives for Leadership, Excellence, and Advancement in Development (AI LEAD) Act,” United States Senate on the Judiciary.
[12] Colleen McClain Park, Michelle Faverio, Monica Anderson and Eugenie, “How Americans View Data Privacy,” Pew Research Center, October 18, 2023.

### IMEC: A Blueprint for Transcontinental Energy Integration

The India-Middle East-Europe Economic Corridor (IMEC) represents one of the most ambitious energy partnerships of the 21st century, with the United States (US), Saudi Arabia, the United Arab Emirates (UAE), the European Union (EU), France, Germany, and Italy as partners. Conceived as a transcontinental artery, the corridor is designed to move energy, goods, and capital more efficiently between India, the Middle East and Europe, thereby deepening economic integration and shared prosperity.
Linking continents, cultures, and markets, IMEC establishes a dynamic framework for economic growth and wealth creation. Envisioned as a vital artery of global trade, the corridor connects regions that collectively represent 40 percent of the world’s population and 50 percent of global GDP.  Secure, reliable, and affordable energy flows to and from IMEC partners serve as the fundamental lifeblood for economic growth across the globe.
IMEC partners currently dominate global energy markets, accounting for more than one‑third of world trade in crude oil and petroleum products. In the financial year ending March 2025, they supplied 27 percent of India’s crude oil imports, underlining the corridor’s importance for India’s growth and energy security.


The energy flows that underpin IMEC will remain dominated by conventional fuels as they continue to outperform alternatives on reliability, affordability, and security. 

In the near term, the energy flows that underpin IMEC will remain dominated by conventional fuels as they continue to outperform alternatives on reliability, affordability, and security. The corridor, therefore, builds on existing supply chains—pipelines, tanker fleets, and port and logistics infrastructure—that have demonstrated resilience amid repeated episodes of global volatility.
India’s rapidly growing demand for energy, combined with plans for two new greenfield refineries that will expand refined product export capacity, makes it a natural anchor for long‑term energy partnerships through IMEC. These investments will not only meet domestic needs but also position India as a significant exporter to IMEC markets, reinforcing its role as the largest foreseeable growth market for energy.
Over the longer term, IMEC is expected to attract hundreds of billions of dollars in investment, creating high‑value jobs and ushering prosperity across partner regions. However, mobilising this capital at scale will require a blend of private investment and substantial public funding to de‑risk projects and accelerate the development of a future‑ready low‑emission energy network.
Plans to increase low‑emission energy flows are advancing, but their success hinges critically on affordability: without incentives to reduce production costs and offtake guarantees to secure demand, low‑emission energy will struggle to compete, and adoption is likely to fall short of expectations, especially in the Global South. Initiatives to build transcontinental electricity transmission—especially cooperation among the UAE, Saudi Arabia, and India—aim to create integrated power pools that can trade electricity across borders and time zones.


Plans to increase low‑emission energy flows are advancing, but their success hinges critically on affordability: without incentives to reduce production costs and offtake guarantees to secure demand, low‑emission energy will struggle to compete, and adoption is likely to fall short of expectations, especially in the Global South.

Shared grids will allow IMEC countries to meet demand with the least‑cost mix of conventional and low‑emission energy. Most of the least expensive low-emission energy production sites are located in India, Saudi Arabia, and the UAE, helping reduce electricity costs. Integrated grids across different time zones will allow for round-the-clock availability of both conventional and low-emission electricity. These efficiencies will reduce low-emission energy costs for millions of consumers.
IMEC also envisions large-scale trade in conventional and low-emission hydrogen from low-cost production hubs in India and the Middle East to European markets. Both India and Middle Eastern partners possess abundant low‑emission energy resources at strategic locations and are setting ambitious hydrogen production targets that could make them major global suppliers.
The European Union’s commitment to import low‑emission hydrogen by 2030 sends an important long‑term demand signal but is complicated by the EU’s Carbon Border Adjustment Mechanism (CBAM). CBAM is a discriminatory trade barrier masked as an environmental policy, which risks raising costs and slowing the low‑emission energy flows that IMEC seeks to expand.
India has set a 2070 net‑zero emissions target, reflecting its developmental priorities and differing capacities relative to the Global North, despite diplomatic pressure for a 2050 alignment. CBAM will shift the burden of emissions reduction onto the Global South, potentially delaying net‑zero achievement not only for India but for other developing economies as well.


CBAM is a discriminatory trade barrier masked as an environmental policy, which risks raising costs and slowing the low‑emission energy flows that IMEC seeks to expand.

CBAM conflicts with the UNFCCC principle of “common but differentiated responsibilities,” which assigns a greater share of emissions reduction obligations to advanced economies. Many products exported from India have higher embedded emissions than EU benchmarks, which under the Carbon Border Adjustment Mechanism (CBAM) would translate into higher import tariffs linked to EU Emissions Trading System (ETS) carbon prices—eroding competitiveness and constraining trade diversification.
Such auction‑based carbon pricing at the border risks creating trade friction, suppressing growth in partner countries, and undermining IMEC’s core objective of enhanced connectivity and economic integration. IMEC partners should prioritise aligning trade and energy policies, including coordinated efforts to defer the application of CBAM to energy trade within the corridor.


IMEC partners should prioritise aligning trade and energy policies, including coordinated efforts to defer the application of CBAM to energy trade within the corridor.

A more constructive approach would redirect CBAM‑linked revenues into technology transfer and measures that improve the affordability of low‑emission technologies in the Global South. This reorientation would support a fairer, more inclusive transition, ensuring that IMEC fulfils its promise as a corridor of shared prosperity powered by secure, affordable, and low-emission energy.



This commentary originally appeared in Observer Research Foundation.
Read the detailed report here

### China’s Evolving CBDC Architecture

China is entering a new phase in the development of its central bank digital currency (CBDC). From January 2026, holdings of the digital yuan (e-CNY) will earn interest linked to demand deposit rates, shifting the currency from digital cash toward “digital deposits.” Globally, China continues to lead in large-scale CBDC deployment, while other major initiatives have progressed more gradually. The digital euro, for instance, remains in a preparatory phase, with issuance unlikely before 2030, and India’s pilot programmes are advancing at a more measured pace compared with China’s rapid rollout.

Interest and Influence
China’s decision to make the digital yuan interest-bearing could be seen as an experiment that serves both domestic and strategic ends, though it is far from clear that it represents a coordinated geopolitical push. Domestically, one might interpret the move as an attempt to deepen adoption of the e-CNY by enhancing its attractiveness relative to cash and existing digital payment instruments. Linking returns to demand deposit rates could position the digital yuan as a store of value. At the strategic level, the implications are uncertain. While some observers frame the e-CNY as a vehicle for gradual de-dollarisation, the evidence suggests a cautious, incremental approach rather than a concerted effort to displace the dollar. One could imagine that expanded use of the digital yuan in cross-border trade might reduce reliance on the dollar in certain corridors. More broadly, it could subtly enhance China’s regional financial influence by offering alternative settlement infrastructure aligned with its trade networks. Whether these developments eventually lead to a broader shift in the global monetary order remains speculative, but they do point to an emerging pathway through which China might influence the evolving architecture of digital money.


While some observers frame the e-CNY as a vehicle for gradual de-dollarisation, the evidence suggests a cautious, incremental approach rather than a concerted effort to displace the dollar.

Signals and Shifts
It is possible to envisage scenarios in which the dollar’s global dominance gradually weakens, although such outcomes remain far from certain. On the one hand, internal developments in the United States, including rising political polarisation or prolonged uncertainty around trade and tariff policy, could over time affect perceptions of governance and institutional stability that underpin the dollar’s safe-haven status. On the other hand, developments outside the US could incrementally enhance the appeal of alternative currencies. If large economies such as China were to sustain reforms and maintain macroeconomic stability, their currencies could become more credible for international use, provided they are perceived as stable, reliable, and sufficiently liquid to support large-scale trade and reserve demand.
Some early signs of this dynamic may already be visible, particularly in contexts shaped by sanctions and geopolitical realignments. For instance, a growing share of China–Russia trade is now settled in yuan and roubles, shifting away from the US dollar. Beyond Russia, China has signed trade settlement arrangements with several Middle Eastern economies, including the UAE, Saudi Arabia, and Qatar, supported by the expansion of its Cross-Border Interbank Payment System (CIPS).
Beyond energy, there are indications that yuan usage in cross-border trade could be expanding incrementally. An Indian firm reportedly used the yuan to settle coal imports from Russia, while Bangladesh opted to make payments in yuan for the construction of its nuclear power plant. Taken together, these developments could point to a slow and uneven diversification of currency usage in global trade, driven less by systemic transformation and more by pragmatic responses to evolving geopolitical and economic conditions.

Digital Ambitions
CBDCs can be understood as a sovereign response to private innovation in global payments. While stablecoins promise programmable, borderless value transfer, particularly for cross-border trade and settlement, CBDCs offer governments regulatory assurance, monetary sovereignty, and greater control over payment systems. The newly released Action Plan on Further Strengthening the Digital RMB Management Service System aims to expand the domestic use of the e-CNY while simultaneously building the technical and institutional infrastructure required for scale.


The PBOC has framed the digital yuan as a tool for enhancing financial inclusion and improving payment efficiency. However, critics argue that the same features that enable programmability and traceability could also expand the central bank’s capacity for financial surveillance and control, raising concerns about privacy and autonomy.

In September, the People’s Bank of China took a further step by establishing the RMB International Operations Center in Shanghai. Designed as a blockchain-based services platform, the centre seeks to develop on-chain settlement tools and cross-chain transfer capabilities, with the explicit goal of promoting the use of the digital yuan in cross-border transactions. This signals a shift from viewing the e-CNY as a domestic payments instrument towards positioning it as a settlement layer for international trade.
The PBOC has framed the digital yuan as a tool for enhancing financial inclusion and improving payment efficiency. However, critics argue that the same features that enable programmability and traceability could also expand the central bank’s capacity for financial surveillance and control, raising concerns about privacy and autonomy.
China’s approach also stands in sharp contrast to developments in the United States. While cryptocurrency transactions and stablecoins remain banned in mainland China, the PBOC continues to invest heavily in a state-issued digital cash alternative that leverages blockchain infrastructure under centralised oversight. By contrast, the US has adopted a stablecoin-friendly posture. President Donald Trump has issued an executive order prohibiting the creation of a US CBDC, citing risks to financial stability, individual privacy, and national sovereignty. The divergence underscores a broader ideological split: where China is pursuing state-led digital money as a strategic instrument, the US is allowing private digital currencies to dominate its innovation frontier.


The divergence underscores a broader ideological split: where China is pursuing state-led digital money as a strategic instrument, the US is allowing private digital currencies to dominate its innovation frontier.

CBDC Momentum
China remains among the most advanced major economies in operationalising a retail central bank digital currency. While many jurisdictions are still debating design choices or legislative frameworks, Beijing has already deployed institutional infrastructure and is experimenting with cross-border functionality. However, China’s international ambitions in this space have not been without setbacks. Efforts to establish a multilateral cross-border payment platform, known as mBridge, encountered difficulties last year when the Bank for International Settlements withdrew from the project. This episode highlights the geopolitical constraints that continue to shape, and in some cases limit, the global scalability of China’s digital currency ambitions.
These developments suggest that China’s CBDC project is entering a more mature phase. The decision to make the e-CNY interest-bearing could meaningfully strengthen its domestic appeal and accelerate adoption, although its longer-term impact will only become clear over time. While it is tempting to frame the digital yuan as an explicit instrument of de-dollarisation, the evidence so far points to a more incremental and uneven process. The dollar’s dominance is being chipped at in specific contexts and corridors, often driven by sanctions, trade frictions, or transactional convenience, rather than by a coordinated shift away from the US currency.
What is clearer is that momentum around CBDCs is building across China, India, and several other jurisdictions, even as the United States pursues a markedly different, private-sector-led approach to digital money. As the use of the yuan in cross-border trade and settlement expands, particularly alongside new digital infrastructure, it will be important to closely watch how payment patterns, trade relationships, and currency preferences evolve. Whether this marks a structural reordering of the global monetary system or a short-term adaptation to current geopolitical conditions remains an open question.



This commentary originally appeared in Observer Research Foundation.

### Smart Climate Governance: Beyond The “Hot & Cold” Approach

The current Paris Agreement climate governance model based on nationally determined commitments (NDCs) will deliver only ~15 percent global greenhouse gas emission cuts by 2035, far short of the 45–60 percent needed for the 1.5°C target. Despite a COP29 goal of mobilising US$300 billion per year until 2035, there are several implementation challenges that a mere declaration of commitments cannot resolve. Designing smart systems to help realise such ambitions is equally important. To add to this, there are political constraints like the current US administration revoking its climate financing commitments, amounting to a loss of at least US$18 billion, roughly 6 percent of the US$300 billion target. The time is ripe to discuss how climate governance can be redesigned smartly to move beyond the “hot and cold” approach.


There are political constraints like the current US administration revoking its climate financing commitments, amounting to a loss of at least US$18 billion, roughly 6 percent of the US$300 billion target.

Why Do the UNFCCC and The Paris Agreement Frameworks Fall Short?
The fundamental issues lie in the scientific misunderstanding around decarbonisation, the lack of integrated systems thinking seen in the design of these frameworks and the assumptions that underpin them, how actors have been incentivised to prioritise decarbonisation and the uneven representation of relevant actors in the climate governance platforms.

Nationally Determined Commitments are a Structural Flaw 
NDCs were introduced as a bottom-up approach—a divergence from the Kyoto Protocol’s top-down approach—in the hope that it would encourage more climate participation. It was also the only political consensus possible at the time. However, owing to their discretionary nature, binding constraints, and the inherent difficulty for sovereign states to manage global commons, the NDCs were structurally misdesigned.
NDCs do not systemically promote decarbonisation. For instance, the carbon credit system and purchase of Renewable Energy Certificates under Article 6.2 of the Paris Agreement, incentivise countries to rely on offsets, which do not lead to real carbon reductions. NDCs imply trade-offs, encouraging sector-by-sector decarbonisation rather than transforming entire energy grid systems, which would be the optimal net-zero pathway for a country. Further, NDCs with its five-year ratchet mechanism under Article 4.2 of the Paris Agreement (progressive climate commitments) focus on flow (carbon emissions) instead of stock (carbon accumulated). For example, if a country emits 10 tons of carbon (flow) but buys credits for 10 tons of “avoided deforestation”, they can claim “net zero” on paper, but in reality, the stock in the atmosphere has still increased by 10 tons. This ratchet mechanism and the leeway for offsetting (without actual carbon reduction) create a clash of the temporalities, reinforcing a five-year policy cycle and creating an illusion of progress towards net zero despite the country only meeting an accounting goal, not a climate goal.


NDCs imply trade-offs, encouraging sector-by-sector decarbonisation rather than transforming entire energy grid systems, which would be the optimal net-zero pathway for a country.

The Paris Agreement, at the time of conception, hoped that flow reductions would turn the carbon concentration curve downward. Ten years later, that hasn’t happened. COP outcomes are simply declarations and lack effective implementation systems, especially where there is no corresponding domestic legislation.

Failure to Address Buy-Side & Sell-Side Constraints Produced the Biggest Market Failure 
The persistent gap in climate financing is fundamentally a market failure due to a deep structural misalignment where technically viable climate transition projects are blocked by outdated financial metrics. A primary issue on the buy-side (capital allocation) is that returns are evaluated using traditional risk-adjusted methods that exclude climate externalities and expected climate impact from the profit and loss accounts and projected cash flows. This makes decarbonisation seem financially unattractive, while the internal rate of return (IRR) for fossil fuel investments is overstated in comparison to clean energy investments. Due to this gap, private capital continues to flow towards fossil fuels, which are deemed more financially attractive. ESG disclosures alone cannot cause a substantive shift in investment behaviour; there has to be an impact on cash flows and pricing for alignment of investor incentives.


For emerging markets and developing economies (EMDEs), borrowing costs are often three to five times higher than in advanced economies, despite faster growth, manageable debt, and strong economic fundamentals.

On the sell-side (capital supply and risk pricing), this problem is compounded by biased sovereign risk assessment and debt sustainability frameworks that inflate the borrowing costs for countries in the Global South. For emerging markets and developing economies (EMDEs), borrowing costs are often three to five times higher than in advanced economies, despite faster growth, manageable debt, and strong economic fundamentals. These frameworks focus on short- to medium-term debt and liquidity indicators and treat additional borrowing, regardless of its productive use, as a fiscal risk. They fail to fully account for the long-term benefits, resilience, and revenue-generating potential of climate investments (and focus on the upfront capital required). As a result, EMDEs are penalised through unfavourable financing terms, higher discount rates, shorter maturities and refinancing risk. This makes even ‘rational’ engineering projects, like low-carbon grids, financially unattractive because they are evaluated through short-term commercial lenses rather than the long-term concessional framework required for climate infrastructure. Even Small Island Developing States (SIDS) suffer from a similar structural constraint.
To add to this, climate (and debt) governance forums are fragmented (UNFCCC, G20, MDBs, regional bodies (like ASEAN), etc.), which creates further complexity for countries to navigate finance and technical support. Global North seeking stronger NDCs instead of fixing financeability will only lead to a further rise of non-traditional financing like bilateral lending from China, different forms of SDR rechanneling, etc., given the economic and diplomatic opportunities they offer.


Climate inaction is fundamentally an implementation failure rather than an ambition failure.

Despite the risk of a mutually reinforcing lowest common denominator ambition cycle embedded in the design of NDCs, ambitions rose primarily due to rapid technological maturity (solar PV, wind, battery storage) and decarbonisation pathways becoming viable for nearly every major sector, turning clean energy into one of the cheapest and commercially attractive forms of new energy generation. Thus disproving the assumptions of perceived trade-offs, static systems and passive consumers. Consequently, natural market alignment should have occurred as these technological advancements represented “good investments”, especially in emerging markets. Yet, this has resulted in one of the biggest market failures due to market fragmentation and misaligned incentives. Climate inaction is fundamentally an implementation failure rather than an ambition failure. Countries repeatedly showcase ambition, but no credible process exists to translate that into scalable and predictable finance.

Suggestions For Climate Governance Redesign
Taking a Scientific Integrated Systems Approach:

 	Replace the Centrality of NDCs: Replace the five-year NDC cycle with Long-term Low Emission Development Scenarios (LT-LEDS) under Article 4.19 in the Paris Agreement. These should be a 30–50 year investment roadmap for countries that look at economy-wide technical modelling rather than just sectoral emissions targets.
 	Shift Approach from “Flow” to “Stock”: Climate governance must stop focusing solely on annual emission "flows" (which allow for offsetting) and instead focus on addressing the total atmospheric "stock" of greenhouse gases (as this is what determines temperature rise) through a structured approach in the Paris Agreement for carbon dioxide removal (CDR) mechanisms. Currently, there is no commitment placed on carbon extraction in the Paris Agreement.
 	Simplify and Coordinate Governance: Reduce the extreme complexity and bureaucratic bottlenecks in current processes like the Green Climate Fund and REDD+ to ensure Least-Developed Countries (LDCs) and SIDS can actually access timely technical and financial support. There also needs to be more coordinated responses from governance forums and institutions (UNFCCC, G20, MDBs, regional bodies (like ASEAN), etc.) tackling climate and debt issues.
 	Strengthen Private Sector Participation: Despite the private sector having a disproportionate climate impact—100 companies contribute over 70 percent of the global carbon emissions—and the need for private capital to support climate transition, they are represented in the climate negotiations by public-sector bureaucrats rather than their own leadership. Without formal representation, private enterprise lacks the direct incentive to engage with climate governance objectives.

Addressing the Market Failure:

 	Use Public Finance to Unlock Private Finance: Employ a complementary two-pronged approach where both public and private capital work together rather than in isolation, as they mutually reinforce each other, would prove useful. Structural constraints that prevent private capital from flowing into emerging markets can be addressed by using public finance as a ‘market marker’—by expanding the fiscal space and providing long-term concessional loans to subsidise large clean energy infrastructure projects and to make them “investable” for the private sector. Further, increased use of de-risking mechanisms such as pooled guarantee funds, liquidity facilities, etc., can lower this perceived risk of EMDEs for private investors.
 	Reform Debt Sustainability Frameworks and Loan Terms: Reform international debt frameworks to differentiate between "productive" borrowing (e.g., clean energy infrastructure) and "non-productive" consumption-based borrowing. MDBs must transition from short-term commercial loans to long-term concessional loans (“patience capital”) that match the lifespan of climate infrastructure and address the maturity mismatch.
 	Update Global Financial Standards: While global standards like the IFRS Sustainability Disclosure Standards issued by the International Sustainability Standards Board (ISSB) mandate climate-related financial disclosures that enable investors to assess climate risk and incorporate it into risk-adjusted valuation models, these accounting standards do not require financial recognition of climate impact in its profit and loss accounts or cash flows. Future climate-related costs (asset devaluation, expected regulatory costs, etc.) must be provisioned for today as a notional expense (‘internal carbon pricing’) so they are reflected in the projected cash flows, much like depreciation accounts for future wear and tear of plant and machinery. Addressing this gap will make decarbonisation appear less punitive to the shareholders by correcting the distorted IRR for clean energy investments when compared to fossil fuel investments.

Conclusion
The sweet spot for smart climate governance lies at the intersection of designing incentives for both countries and the private sector, addressing structural constraints and de-risking pathways for countries seeking climate finance, unlocking both public and private finance (as mutually reinforcing forces), leveraging and synergising existing institutions and policy levers, and ultimately, keeping models and solutions simple yet effective and scalable.



This commentary originally appeared in Observer Research Foundation.
This analysis draws on the key insights from a discussion with climate experts - Dhruba Purkayashtha (Adviser, Observer Research Foundation, India), Lisa Sachs (Director, Columbia University’s Center on Sustainable Investment), and Olivier Colom (Former Senior Diplomatic Adviser to President Nicolas Sarkozy). 

### The Emerging 'Hybrid Professional': GenAI's Impact on Skill Demand Changes in the UAE

Introduction
The global economy is grappling with a profound paradox. While Generative Artificial Intelligence (GenAI) is being adopted at unprecedented speeds, its promise of a productivity revolution remains largely unfulfilled. This disconnect between individual efficiency gains and lagging organisational performance highlights a critical uncertainty: firms and nations are investing billions in a technology whose impact they do not yet fully understand. Global models offer broad predictions, but they are insufficient for navigating the high-stakes reality of a nation like the United Arab Emirates (UAE), where immense, state-driven AI ambition collides with unique economic and demographic pressures. The UAE's national strategies for economic diversification and workforce nationalisation (what the UAE government refers to as “Emiratisation”) are being forged at the very moment AI is set to redefine the nature of work itself.
This challenge is particularly acute in a labour market where expatriate workers have historically dominated most sectors, particularly in low- and semi-skilled roles. The rationale of this analysis, therefore, stems from the urgent need to understand how AI can be leveraged to create high-value jobs for the national workforce of the UAE, aligning technological transformation with the strategic goals of Emiratisation.
This report confronts this uncertainty by moving beyond speculation to provide a high-resolution map of AI's real-world impact on the UAE’s labour market. The challenge for policymakers and business leaders is not the absence of ambition, but a lack of granular, empirical evidence. It is one thing to know that AI will transform skills; it is another to know precisely which skills, in which jobs, and through what mechanism. Answering these questions is impossible with generic, top-down analyses that treat occupations as monolithic blocks.
This report introduces a novel, task-level methodology to analyse AI's impact. By deconstructing over 23,000 online job postings into their constituent tasks, the authors’ proprietary analytical pipeline creates the Job Automatability Index—a bottom-up, data-driven measure of automation exposure. This approach allows one to pinpoint the true loci of change, revealing a sharp occupational polarisation hidden within broad sectoral trends. This report not only identifies the roles most exposed to substitution and those insulated from change, but, most importantly, it diagnoses the mechanics of augmentation and redefinition that will shape the future of high-skill professional work. It provides the first empirical baseline of AI’s impact on the UAE, offering actionable insights for navigating the complex interplay between technological disruption and national ambition.

Literature Review
GenAI is transforming the nature of work at an unprecedented speed and scale, raising urgent questions about its economic impact.[1] While global models provide a foundational understanding of this disruption, they are structurally ill-equipped to navigate the UAE’s distinct reality. Unlike the mature labour markets of the Global North, the UAE is defined by a severe demographic imbalance—where expatriates dominate the workforce—and a state-mandated urgency to integrate nationals into the private sector (‘Emiratisation’).
This creates a specific, high-stakes paradox: national strategies are pushing citizens toward administrative and white-collar roles that are now the primary targets of AI automation. Global models cannot account for this collision between workforce nationalisation and technological substitution. This review synthesises established research to pinpoint this critical gap, arguing that the UAE requires a bespoke empirical framework to ensure that AI becomes a tool for strategic economic leverage rather than a barrier to national ambition.

A New Technological Paradigm: Disruption of Speed and Scope
The current technological wave driven by GenAI is fundamentally distinct from previous shifts in its speed and scope.[2] Its adoption rate is unmatched: ChatGPT, for example, reached 100 million users in only two months—a milestone that took the internet seven years—dramatically reducing the adaptation timeline for workers, firms, and governments.[3]
Simultaneously, its scope extends beyond the routine administrative tasks disrupted by earlier technologies[4] to target core cognitive functions, like coding, design, and analysis, long considered the domain of high-skilled professionals.[5] Nearly 70 percent of occupations may now face substantial automation of their core functions,[6] confirming that GenAI is not merely another wave of automation but a paradigm shift targeting the core of the knowledge economy.

Skills-Based Transformation: The Four Occupational Archetypes
The most effective analysis of AI’s impact views occupations not as monolithic jobs to be eliminated but as dynamic bundles of tasks. This skill-first approach reveals that AI is a polarising force, sorting roles into four distinct archetypes: created, augmented, disrupted, and insulated.[7] Created occupations, such as AI engineering, are a small but rapidly growing segment of deep technical experts, with hiring growing 30 percent faster than the overall market in 2024.[8] Insulated roles, like nurses and construction specialists, are shielded by their reliance on physical dexterity and in-person interaction.
Critical transformations occur in the other two categories. Disrupted occupations, such as administrative assistants, are defined by a high concentration of automatable skills, creating an urgent need for skills-based career transitions. Augmented occupations represent the future of professional work. In roles like software engineering, AI automates routine components (e.g., code generation), freeing professionals to focus on higher-value human skills. Firms using AI code assistants, for instance, increased the hiring of software engineers but prioritised candidates with 13.3 percent more non-programming skills like project management.[9] This framework reframes the central question from job loss to skill evolution, highlighting a clear trend: the future belongs to those who can blend AI literacy with uniquely human skills.

Emerging Dynamics: Inequality and the Productivity Paradox
This skills transformation is not unfolding in a uniform manner. A consistent finding is that AI’s impact deepens gender inequality, as women, globally, are overrepresented in “disrupted” occupations while men are concentrated in “augmented” or “insulated” roles.[10] For instance, recent US-based data indicates that 79 percent of working women hold jobs susceptible to automation, compared to only 58 percent of men. This disparity is compounded by a persistent gender gap in the AI talent pipeline itself.[11]
Simultaneously, a “productivity paradox” has emerged, where surging individual efficiency is failing to translate into organisational profit. On one hand, AI adoption is exploding from the bottom up: three-quarters of knowledge workers now use AI to complete tasks faster and more effectively.[12] On the other hand, this surge in personal productivity is vanishing before it reaches the bottom line, with nearly 80 percent of businesses reporting no meaningful financial gains from their AI initiatives.[13]
This disconnect stems from a critical strategic failure: firms are using AI for tactical acceleration rather than fundamental reinvention. Making an employee faster at their existing job merely frees up their time; it does not automatically reconfigure that time into revenue-generating activities. True value is unlocked only through a deliberate, top-down strategy that overhauls entire workflows. However, these complex, high-impact projects are stalling, with an estimated 90 percent remaining stalled in the experimental phase, preventing the deep, systemic changes required to drive profit.

The Regional Imperative and the Identified Research Gap
Global frameworks are essential for identifying what is changing, but they cannot explain how and why it is changing in a specific socio-economic context like the UAE.[14]
This report, therefore, identifies a critical research gap: the absence of granular, empirical, real-time evidence tracking the evolution of skill demands within the high-stakes UAE market. Existing global models cannot capture the complex interplay of national policy, demographic pressures, and technological disruption. This study is designed to fill that void. By analysing thousands of online job postings, it will move beyond broad projections to provide concrete, data-driven evidence of the specific hybrid skill sets that UAE employers are demanding now. Such an analysis is not merely academic; it is an essential tool providing policymakers, educators, and business leaders with actionable insights to build a future-ready workforce in one of the world's most dynamic economies.

Methodology
This study employs a novel, multi-stage methodology to measure the impact of AI by distilling job roles into their constituent tasks, creating a high-resolution measure of automation potential. The process comprises four key stages: (1) Data Collection and Pre-processing, (2) ISCO-08 Occupational Classification, (3) a proprietary AI-driven Task-Level Decomposition pipeline, and (4) construction of a weighted Job Automatability Index.

Data and Classification
The analysis is built on a dataset of 23,739 unique online job postings from the UAE's leading public portals (LinkedIn, Bayt, and Dubizzle) during June-July 2025, representing an estimated 30 percent of the online market. As this data source predominantly captures medium- and high-skilled formal employment, low-skilled roles often filled through agencies are underrepresented. Therefore, the scope of this study is explicitly focused on quantifying the impact of AI on the formal, skilled labour market.
Rigorous pre-processing ensured data quality by removing duplicates, standardising names, and removing unstructured text. Each posting was then programmatically classified using the International Labour Organization’s (ILO) ISCO-08 taxonomy. This globally recognised framework enables the aggregation of granular findings into meaningful occupational groups, ensuring comparability with international labour market research.

AI-driven Task-Level Decomposition
To capture granular skill shifts, the authors developed a robust AI pipeline that deconstructs each job posting into its core tasks. The pipeline systematically executes a three-stage analysis using Gemini 2.5 Pro, with constrained decoding at each stage to guarantee structured, machine-readable JavaScript Object Notation (JSON) output.


 	Task Extraction: The pipeline first configures the Large Language Model (LLM) as a specialised occupational analyst to extract a standardised list of one-15 tasks from each job description. A structured prompting framework required the model to ground every task directly in the source text, standardise outputs into a verb-object format (e.g., “analyse financial data”), and consolidate semantic redundancies.
 	Importance Classification: Second, the model evaluates the relative importance of each extracted task, classifying it as Primary (core function), Secondary (significant but non-central), or Ancillary (supporting duty). This classification is performed on all of a job’s tasks simultaneously to ensure an accurate assessment of the role’s internal hierarchy.
 	Automatability Assessment: In the final stage, the pipeline assesses each task's automation potential against a rigorous analytical framework derived from established industry benchmarks and technical documentation. The framework defines clear features for Automatable Tasks (e.g., routine content generation, procedural workflows) and Not-Automatable tasks (e.g., strategic planning, empathetic interaction, physical capabilities). The model was required to justify each classification, creating a transparent and auditable analytical trail. 

Job Automatability Index Construction
The task-level data were synthesised into a single metric: the Job Automatability Index. The index is a weighted proportion of a job's responsibilities susceptible to automation. Primary tasks were assigned a 60 percent weight, secondary 30 percent, and ancillary 10 percent. A dynamic scaling mechanism normalises these weights to sum to 100 for every job, ensuring robust comparability across roles with varying numbers of tasks. The final index score is the sum of the scaled weights of all tasks classified as 'Automatable'. Technical details can be found in Annex A.

Analytical Framework
The framework employs a tripartite standard to ensure findings are both statistically significant and practically meaningful. A subgroup's deviation from the mean was deemed robustly significant only if it met three criteria:


 	Practical Magnitude: An effect size of at least a small magnitude (|Cohen’s d| ≥ 0.2).
 	Statistical Stability: A 95 percent confidence interval, constructed via a non-parametric percentile bootstrap (1,000 resamples), that does not contain zero.
 	Statistical Significance: A p-value that remained significant (p_adj_ < 0.05) after adjusting for multiple comparisons using the Benjamini-Hochberg procedure.

This triangulation ensures that the conclusions are based on differences that are statistically improbable, stable, and of practical relevance. Technical details can be found in Annex A.

Methodological Rigour and Validation
To ensure the rigour and validity of the AI pipeline, the authors implemented a two-pronged strategy combining internal safeguards with external expert validation.


 	Internally, constrained decoding to a JSON schema eliminated randomness, while a strict 'grounding rule' prevented model hallucination,[a] rendering the process replicable and auditable.
 	Externally, a random sample of outputs was audited by three independent labour market experts. The model achieved over 90 percent concordance with expert consensus, with remaining discrepancies stemming primarily from subjective disagreements among the experts. This confirms that the model performs at a level comparable to human experts in this complex domain and functions as a high-speed analytical engine, not an opaque creative agent.

Profiling the UAE Labour Market
To properly contextualise the findings of the Job Automatability Index, this section first establishes an empirical profile of the UAE’s online labour market. The analysis examines the dataset's scope and coverage, its geographic and occupational distribution, and prevailing work arrangements. This foundation provides the necessary real-world context for interpreting the subsequent automation analysis.

Data Coverage and Scope 
The analysis is built on a dataset of 23,739 unique online job postings from June-July 2025, providing a comprehensive snapshot of the UAE labour market. The data encompasses 5,197 distinct companies across 36 economic sectors and includes postings from all seven emirates, ensuring a nationally representative sample.

Geographic Concentration
The UAE’s online labour market is highly concentrated, with job posts in Dubai (69.8 percent) and Abu Dhabi (23.8 percent). Together, these two emirates constitute over 93 percent of all job postings, confirming their role as the nation's primary engines of employment (Table 1).
Table 1: Geographic Distribution of Online Job Postings Across UAE Emirates




Emirate
Share (%)


Dubai
69.8


Abu Dhabi
23.8


Sharjah
3.9


Ras al-Khaimah
1.2


Ajman
0.9


Fujairah
0.3


Umm Al Qawain
0.1



Source: Authors’ own with the online job postings dataset (n=23,739).

Occupational and Sectoral Profile of a Mature Knowledge Economy
The UAE labour market is defined by its demand for high-skilled expertise, a clear indicator of a mature knowledge economy. ‘Professionals’ (38.5 percent) and ‘Managers’ (29.1 percent) together constitute over two-thirds (67.6 percent) of all advertised roles. Demand within these categories is concentrated in strategic functions: ‘Business and Administration Professionals’ (15.7 percent), ‘Science and Engineering Professionals’ (8.5 percent), and various commercial and services managers (Tables 2 and B.1).
Table 2: Distribution of Online Job Postings by Major Occupational Category (ISCO-08 Level 1)




Job Category (ISCO Level-1)
Share (%)


Professionals
38.5


Managers
29.1


Technicians and Associate Professionals
13.7


Service and Sales Workers
7.2


Clerical Support Workers
5.8


Craft and Related Trades Workers
2.8


Plant and Machine Operators, and Assemblers
1.5


Elementary Occupations
1.4


Agricultural, Forestry and Fishery Workers
0.0



Source: Authors’ own, using online job postings dataset (n=23,739).
This occupational structure is driven by a sophisticated and diversified sectoral base. While anchored by large industries like IT & Technology (18.2 percent) and Hospitality (12.0 percent), the economy's maturity is evident in its long tail of specialised, knowledge-intensive sectors, including Legal, Design, and Environmental Services. The collective demand from this diverse ecosystem sustains the market's strong orientation toward high-calibre professional and managerial talent (Tables 3 & B.2).
Table 3: Top 10 Sectors by Share of Online Job Postings




Sector
Share (%)


IT & Technology
18.2


Hospitality & Travel
12.0


Real Estate & Construction
10.1


Consulting & Professional Services
7.5


Human Resources & Staffing
7.3


Financial Services
7.0


Education
5.6


Retail
4.9


Manufacturing
4.8


Healthcare & Life Sciences
3.9



Source: Authors’ own, using online job postings dataset (n=23,739).

Work Arrangements and Market Dynamics
Analysis of work arrangements and applicant data reveals a labour market that is simultaneously traditional, highly competitive, and demanding. The market is defined by a strong adherence to on-site work (89.7 percent), a stark contrast to post-pandemic global trends. This traditional structure coexists with intense competition, as 77.6 percent of all job listings attract more than 90 applicants. This dynamic is further complicated by a 26 percent job reposting rate, which suggests that despite a large applicant pool, employers face challenges in finding candidates with the precise qualifications they require. Together, these factors depict a highly selective environment where a surplus of applicants competes for specific, high-value roles (Tables 4, 5, 6).
Table 4: Distribution of Online Job Postings by Required Work Arrangement




Work Arrangement
Share (%)


On-site
89.7


Remote
5.7


Hybrid
4.6



Source: Authors’ own, using online job postings dataset (n=23,739).
Table 5: Distribution of Online Job Postings by Applicant Volume




Number of Applicants
Share (%)


0 – 30
7.8


30 – 60
8.5


60 – 90
6.2


90 – 120
77.6



Source: Authors’ own, using online job postings dataset (n=23,739).
Table 6: Distribution of Online Job Postings by Reposting Status




Reposted?
Share (%)


Not-Reposted
74


Reposted
26



Source: Authors’ own, using online job postings dataset (n=23,739).

Summary of Key Findings
This descriptive analysis profiles the UAE’s online job market as a landscape of concentrated opportunity. It is geographically centred in Dubai and Abu Dhabi and structurally dominated by demand for high-skilled Professionals and Managers. This demand is fuelled by a sophisticated economic base, combining dominant sectors like Technology and Hospitality with a long tail of specialised, knowledge-intensive industries. Operationally, the market remains traditional, with a strong preference for on-site work, and is exceptionally competitive, with a high volume of applicants for most roles.
This profile is derived from a substantial dataset of over 23,000 postings, estimated to represent 30 percent of the total online market. While not a complete census, this robust sample provides a data-driven and directionally accurate snapshot of the dominant forces shaping the UAE’s skill demand.
This empirical foundation provides the critical context for the core analysis of this report: determining the susceptibility of this economic structure to transformation by Generative AI.

The Impact of AI on the UAE Labour Market
This section assesses the susceptibility of the UAE labour market to automation driven by Generative AI. By applying the Job Automatability Index to a dataset of over 23,000 online job postings, it establishes a quantitative baseline for the potential impact of AI on high-skill occupations. The analysis will first explore the overall degree of task automatability across the market, considering the broad implications for future skill demands and productivity. Subsequently, the chapter moves beyond this aggregate view to investigate the significant heterogeneity present within the labour force. This granular approach is essential for identifying the specific sectors and job roles most exposed to technological disruption, as well as those that remain relatively insulated, providing a more detailed forecast of the forthcoming structural shifts.

A Question of Role, Not Place: The Irrelevance of Geography and Work Mode
The analysis reveals a notable invariance in AI automation exposure regarding both geography and work arrangement. Mean Automatability Index scores are statistically indistinguishable between roles in Dubai (29.57) and Abu Dhabi (27.29) and similarly aligned between on-site (28.67) and remote (25.83) positions (Tables 7, 8). Although minor variances occasionally register weak statistical significance (p < 0.10), their negligible effect sizes confirm that these differences are sampling artefacts rather than systemic trends.
This invariance leads to a critical conclusion: AI’s transformative potential is a function of a role’s intrinsic tasks, not its circumstantial context. For example, a Data Analyst in Abu Dhabi faces the same high level of AI exposure as one in Dubai because the core tasks of their roles—such as data entry, analysis, and report generation—are fundamentally the same and highly susceptible to automation. The impact of Generative AI is therefore best understood as a fundamental, task-based shift—not a regional phenomenon or a byproduct of work policy. This finding necessitates the deeper occupational and sectoral analysis provided in the following sections.
Table 7: Automatability Index / Emirates




Emirate
Mean
N
Cohen's d
p-value
Sig.
Effect


Fujairah
31.78
53
0.124
0.6126

Negligible


Not Specified
25.69
2672
-0.109
0.0000
*
Negligible


Sharjah
26.26
833
-0.087
0.0272
*
Negligible


Abu Dhabi
27.29
5037
-0.048
0.0011
*
Negligible


Dubai
29.57
14699
0.040
0.0000
*
Negligible


Umm Al Qawain
29.28
25
0.029
0.9376

Negligible


Ras al-Khaimah
29.24
247
0.027
0.8952

Negligible


Ajman
28.72
173
0.007
0.9376

Negligible


Dataset Average
28.53
23739
0.000


Reference



Source: Authors’ own with the online job postings dataset (n=23,739).
Note* p < 0.05 or meaningful effect with robust CI.
Cohen's d: Standardised effect size (0.2=small, 0.5=medium, 0.8=large).
p-values adjusted for multiple comparisons using FDR correction. 
Table 8: Automatability Index / Work Type




Work Type
Mean
N
Cohen's d
p-value
Sig.
Effect


Remote
25.83
902
-0.103
0.0091
*
Negligible


Hybrid
26.86
731
-0.064
0.1395

Negligible


Not Specified
28.74
7868
0.008
0.5247

Negligible


On-site
28.67
14238
0.005
0.5247

Reference


Dataset Average
28.53
23739
0.000


Reference



Source: Authors’ own with the online job postings dataset (n=23,739).
Note* p < 0.05 or meaningful effect with robust CI.
Cohen's d: Standardised effect size (0.2=small, 0.5=medium, 0.8=large).
p-values adjusted for multiple comparisons using FDR correction.

Sectoral Fault Lines: Where the Transformation Hits Hardest
Sectoral analysis reveals a market defined by broad-based exposure rather than isolated pockets of risk. While headline averages range from 40.83 (Investment & Venture Capital) to 8.3 (Creative Services), the vast majority of sectors do not deviate meaningfully from the market average, registering only "Negligible" or "Small" effect sizes (Table 9). The sole exception is the Wellness & Fitness sector (10.8), whose "Medium" and “Significant” effect sizes confirm a unique concentration of roles insulated by physical and interpersonal tasks.
This widespread exposure confirms that GenAI is a cross-cutting technological wave, whose impact is determined by occupation, not industry. Sectors as diverse as Real Estate (34.09) and Financial Services (29.14) have similar exposure levels, revealing that a sector is merely a heterogeneous collection of roles. The high score for Investment & Venture Capital, for instance, stems not from the automation of investing itself, but from its concentration of analysts and researchers whose data-synthesis and report-generation tasks are highly susceptible to automation. Therefore, while sectoral data confirms AI's pervasive reach, it is an insufficient lens. A granular, occupation-level analysis is required to identify the true epicentres of change, a task the following section undertakes.
Table 9: Automatability Index / Sector 




Sector
Mean
N
Cohen's d
p-value
Sig.
Effect


Creative Services
8.33
3
-0.775
0.0890
*
Medium


Wellness & Fitness
10.81
167
-0.680
0.0000
***
Medium


Investment & Venture Capital
40.83
170
0.471
0.0000
***
Medium


Executive Offices
38.93
31
0.399
0.0473
*
Small


Holding Companies
37.89
86
0.359
0.0043
***
Small


Healthcare & Life Sciences
19.22
507
-0.359
0.0000
***
Small


Education
19.93
738
-0.331
0.0000
***
Small


Environmental Services
37.06
55
0.327
0.0378
**
Small


Design Services
36.76
58
0.315
0.0378
**
Small


Consumer Services
20.80
35
-0.297
0.0915
*
Small


Legal Services
34.71
24
0.237
0.4760

Small


Retail
34.60
646
0.233
0.0000
***
Small


Real Estate & Construction
34.09
1328
0.214
0.0000
***
Small


Government & Public Sector
33.78
193
0.201
0.0118
**
Small


Wholesale & Distribution
33.75
14
0.200
0.7023

Small


Media & Communications
24.12
208
-0.169
0.0266
*
Negligible


Events Services
32.91
55
0.168
0.2748

Negligible


Automotive
32.50
7
0.152
0.8227

Negligible


Agriculture
32.44
7
0.150
0.8227

Negligible


Aerospace & Defence
32.39
11
0.148
0.7185

Negligible


Manufacturing
32.25
629
0.143
0.0010
*
Negligible


Hospitality & Travel
24.94
1572
-0.138
0.0000
*
Negligible


Food & Beverage
31.87
130
0.128
0.2522

Negligible


Professional Organizations
25.56
6
-0.114
0.8844

Negligible


Consulting & Professional Services
31.02
979
0.095
0.0105
*
Negligible


Facilities Services
30.47
68
0.074
0.7899

Negligible


Human Resources & Staffing
26.61
962
-0.074
0.0450
*
Negligible


Security Services
29.74
43
0.046
0.8227

Negligible


IT & Technology
27.46
2385
-0.041
0.0642

Negligible


Energy & Utilities
29.57
375
0.040
0.5856

Negligible


Entertainment
29.29
138
0.029
0.8227

Negligible


Advertising & Marketing
29.16
156
0.024
0.8357

Negligible


Financial Services
29.14
912
0.024
0.6462

Negligible


Transportation & Logistics
28.35
335
-0.007
0.9131

Negligible


Unspecified
28.71
10650
0.007
0.7023

Negligible


Non-Profit & Social Services
28.67
55
0.005
0.9678

Negligible


Research
0.00
1






Dataset Average
28.53
23739
0.000


Reference



Source: Authors’ own with the online job postings dataset (n=23,739).
Note* p < 0.05 or meaningful effect with robust CI.
Cohen's d: Standardised effect size (0.2=small, 0.5=medium, 0.8=large).
p-values adjusted for multiple comparisons using FDR correction.

Occupational Polarisation: The True Locus of AI's Impact
Shifting from sectoral to occupational analysis reveals the true contours of AI's impact: not widespread, uniform exposure, but sharp polarisation. The data cleaves the labour market into distinct groups based on the nature of their core tasks, with routine cognitive work being the most vulnerable.
The Highly Exposed: Routine Cognitive Work
This vulnerability is most pronounced among Clerical Support Workers, who are a clear outlier with an average Automatability Index of 53.84 and a "Large" effect size (Cohen’s d = 0.960). Their extreme exposure stems from a role composition defined by structured, information-based tasks—data entry, scheduling, document management—that are highly susceptible to automation. This alignment is so direct that specific roles like General/Keyboard Clerks reach an automation potential of 73.00 (Tables 10, 11).
Accounting for 6 percent of total employment, this high susceptibility signals massive, near-term labour market disruption. This dynamic points not to occupational elimination but to a productivity paradigm shift: fewer AI-augmented workers will manage a substantially larger volume of tasks. Such a shift will likely create transitional employment pressures that persist until reskilling and adaptation—whether through individual or policy-led initiatives—can be achieved.
Table 10: Automatability Index / Occupation (ISCO-08 Level 1)




Occupation (ISCO-08, Level 1)
Mean
N
Cohen's d
p-value
Sig.
Effect


Clerical Support Workers
53.84
1373
0.960
0.0000
***
Large


Elementary Occupations
7.55
327
-0.809
0.0000
***
Large


Craft and Related Trades Workers
12.38
660
-0.626
0.0000
***
Medium


Plant and Machine Operators, and Assemblers
12.75
360
-0.608
0.0000
***
Medium


Technicians and Associate Professionals
39.39
3260
0.408
0.0000
***
Small


Service and Sales Workers
20.31
1701
-0.318
0.0000
***
Small


Skilled Agricultural, Forestry and Fishery Workers
21.62
8
-0.265
0.2149

Small


Managers
22.81
6910
-0.232
0.0000
***
Small


Professionals
29.25
9140
0.028
0.0096
*
Negligible


Dataset Average
28.53
23739
0.000


Reference



Source: Authors’ own with the online job postings dataset (n=23,739). 
* p < 0.05 or meaningful effect with robust CI.
Cohen's d: Standardized effect size (0.2=small, 0.5=medium, 0.8=large).
p-values adjusted for multiple comparisons using FDR correction.
The Highly Insulated: Manual and Physical Work
At the opposite pole, occupations grounded in physical labour are the most insulated from GenAI. Elementary Occupations (7.55) and Craft Workers (12.38) exhibit the lowest automatability scores, their resilience rooted in tasks requiring dexterity and mobility in unpredictable environments (e.g., Manual Labourers, 7.11). This insulation is specific to cognitive AI; the long-term threat from robotics unfolds over a slower, capital-intensive, multi-decade horizon. This provides a longer time for adaptation. Furthermore, roles like Personal Care Workers (9.42) blend physical tasks with empathy, a quality exceptionally difficult to automate, creating an even more durable barrier.
The Arena of Augmentation: Professionals and Managers
The most critical finding, however, concerns the UAE's dominant high-skill occupations, where AI's primary role will be augmentation, not replacement. The unremarkable scores for Professionals (29.25) and Managers (22.81) mask a decisive internal heterogeneity. For example, low-exposure roles like Teaching Professionals (10.87) contrast sharply with high-exposure Business and Administration Professionals (36.04) (Table 11). This variance demonstrates that AI is poised to automate the routine cognitive components of knowledge work—data analysis and reporting—thereby amplifying the value of strategic, creative, and interpersonal skills that machines cannot fully replicate, at least as of this research.
Table 11: Automatability Index / Occupation (ISCO-08 Level 2)




Occupation (ISCO-08, Level 2)
Mean
N
Cohen's d
p-value
Sig.
Effect


General/Keyboard Clerks
73.00
305
1.704
0.0000
***
Large


Other Clerical Workers
67.41
59
1.491
0.0000
***
Large


Recording Clerks
55.41
178
1.029
0.0000
***
Large


Manual Labourers
7.11
97
-0.823
0.0000
***
Large


Cleaners/Helpers
7.15
162
-0.822
0.0000
***
Large


Food Prep Assistants
7.24
49
-0.817
0.0000
***
Large


Building Trades (excl. Elec.)
9.03
179
-0.750
0.0000
***
Medium


Bus/Admin Assoc. Prof.
47.95
1828
0.736
0.0000
***
Medium


Personal Care Workers
9.42
69
-0.734
0.0000
***
Medium


Drivers/Operators
9.57
279
-0.730
0.0000
***
Medium


Teaching Professionals
10.87
884
-0.686
0.0000
***
Medium


Health Professionals
11.72
819
-0.653
0.0000
***
Medium


Customer Service Clerks
45.51
831
0.649
0.0000
***
Medium


Metal/Machinery Trades
11.90
231
-0.640
0.0000
***
Medium


Executives/Officials
13.93
184
-0.561
0.0000
***
Medium


Refuse/Elementary Workers
14.80
18
-0.527
0.0419
**
Medium


Electrical Trades
14.88
154
-0.525
0.0000
***
Medium


Personal Service Workers
15.18
912
-0.517
0.0000
***
Medium


Handicraft/Printing Workers
15.42
10
-0.503
0.1206

Medium


Food/Wood/Craft Trades
15.78
86
-0.490
0.0000
***
Small


Health Assoc. Professionals
16.17
233
-0.475
0.0000
***
Small


Protective Services
18.29
82
-0.393
0.0000
***
Small


Agricultural Workers
20.14
7
-0.322
0.1951

Small


Production Managers
20.85
2768
-0.303
0.0000
***
Small


Bus./Admin Professionals
36.04
3733
0.288
0.0000
***
Small


ICT Technicians
36.02
203
0.287
0.0003
***
Small


Legal/Social Assoc. Prof.
21.80
308
-0.258
0.0000
***
Small


Hospitality/Retail Mgrs
22.76
847
-0.223
0.0000
***
Small


Assemblers
23.10
12
-0.208
0.2792

Small


Sci/Eng Assoc. Prof.
33.41
688
0.187
0.0000
*
Negligible


Plant/Machine Operators
23.78
69
-0.182
0.0833

Negligible


Sci/Eng Professionals
33.03
2009
0.172
0.0000
***
Negligible


Admin/Commercial Mgrs
25.10
3111
-0.135
0.0000
***
Negligible


Legal/Social Professionals
30.77
380
0.086
0.1358

Negligible


ICT Professionals
27.05
1315
-0.057
0.0399
*
Negligible


Sales Workers
29.09
638
0.021
0.5686

Negligible


Forestry/Fishery Workers
32.00
1






Not Found
0.00
1






Dataset Average
28.53
23739
0.000


Reference



Source: Authors’ own with the online job postings dataset (n=23,739).
Note* p < 0.05 or meaningful effect with robust CI.
Cohen's d: Standardised effect size (0.2=small, 0.5=medium, 0.8=large).
p-values adjusted for multiple comparisons using FDR correction.

Core vs. Periphery: The Mechanics of Occupational Transformation
The occupational polarisation previously identified is not random; it is governed by a precise mechanism. The nature of AI's impact—whether it substitutes, augments, or redefines a role—depends entirely on which tasks it automates: a job's core value-creating functions or its peripheral administrative duties. Analysing the task-level data through this lens reveals three distinct archetypes of transformation.
Substitution: When AI Automates the Core
The most disruptive transformation occurs when AI targets an occupation's "vulnerable core." This dynamic defines clerical roles, where primary, value-creating tasks like data entry and document management are highly automatable—reaching 73.5 percent for General/Keyboard Clerks. Here, AI is not an auxiliary tool but a direct substitute for the role's fundamental purpose. The logical outcome is not total job extinction but structural consolidation: fewer workers, augmented by AI, will absorb a vastly larger workload, creating substantial and near-term displacement pressure.
Augmentation: When AI Automates the Periphery
Augmentation is a far more common scenario, which occurs when AI targets peripheral tasks while leaving a "safe core" intact. Hospitality/Retail Managers exemplify this archetype. Their core functions of strategy and interpersonal leadership are highly insulated (13.8 percent primary automation), yet nearly 36 percent of their secondary administrative duties are not. In this model, AI functions as a powerful productivity engine, automating routine burdens to liberate professionals. This allows them to dedicate their full attention to the high-value, uniquely human activities that drive success, from mentorship to strategic innovation.
Redefinition: When AI Transforms the Core Itself
Redefinition is the most profound and consequential transformation, which targets the UAE's dominant knowledge-worker occupations. For roles like Business and Scientific Professionals, AI automates a substantial portion of both primary (31.0 percent) and secondary (42.6 percent) tasks. This dual pressure does not simply augment the role; it fundamentally redefines its core purpose. An engineer's value shifts from performing complex calculations to directing an AI that models thousands of scenarios. A business analyst's expertise shifts from generating reports to interrogating AI-synthesised data for strategic insights.
Table 12: Automatability Index (Primary, Secondary, Ancillary) / Occupation (ISCO-08 Level 2)




Occupation (ISCO-08, Level 2)
N
Primary
Secondary
Ancillary
Dominant Impact


Admin/Commercial Mgrs
3111
18.1
35.3
24.2
Mixed


Assemblers
12
12.6
43.9
21.1
Augmented


Building Trades (excl. Elec.)
179
4.1
16.1
13.5
Insulated


Bus./Admin Assoc. Prof.
1828
43.3
54.8
29.3
Disrupted


Bus./Admin Professionals
3733
31.0
42.6
29.7
Mixed


Executives/Officials
184
9.2
19.8
13.4
Insulated


Cleaners/Helpers
162
1.4
14.0
19.7
Insulated


Customer Service Clerks
831
43.5
49.9
24.1
Disrupted


Drivers/Operators
279
3.5
19.4
12.8
Insulated


Electrical Trades
154
7.1
25.1
28.7
Insulated


Food Prep Assistants
49
2.4
14.2
14.2
Insulated


Food/Wood/Craft Trades
86
11.4
22.9
10.0
Insulated


General/Keyboard Clerks
305
73.5
63.6
30.5
Disrupted


Handicraft/Printing Workers
10
10.0
22.3
20.0
Insulated


Health Assoc. Professionals
233
12.7
21.0
16.5
Insulated


Health Professionals
819
4.8
19.3
24.7
Insulated


Hospitality/Retail Mgrs
847
13.8
35.8
26.8
Augmented


ICT Technicians
203
32.0
41.9
27.5
Disrupted


ICT Professionals
1315
23.8
30.3
23.2
Insulated


Manual Labourers
97
6.0
8.3
4.0
Insulated


Legal/Social Professionals
380
28.0
31.6
23.6
Mixed


Legal/Social Assoc. Prof.
308
17.1
28.4
18.3
Insulated


Agricultural Workers
7
5.7
46.2
21.4
Augmented


Metal/Machinery Trades
231
5.3
23.1
16.4
Insulated


Recording Clerks
178
58.4
50.2
21.8
Disrupted


Other Clerical Workers
59
69.8
60.8
18.9
Disrupted


Personal Care Workers
69
3.9
19.5
10.0
Insulated


Personal Service Workers
912
10.8
22.0
15.9
Insulated


Production Managers
2768
14.6
29.7
21.6
Mixed


Protective Services
82
8.5
35.5
11.9
Insulated


Refuse/Elementary Workers
18
6.3
23.2
14.4
Insulated


Sales Workers
638
21.8
37.4
26.5
Mixed


Sci/Eng Assoc. Prof.
688
29.3
38.7
24.6
Mixed


Sci/Eng Professionals
2009
31.1
33.4
24.8
Mixed


Plant/Machine Operators
69
20.0
29.4
21.8
Mixed


Teaching Professionals
884
7.1
16.3
14.2
Insulated



Source: Authors’ own with the online job postings dataset (n=23,739).
This dynamic forges the "hybrid professional," whose value is no longer measured by their ability to execute cognitive tasks, but by their skill in orchestrating them. For this critical segment of the workforce, deep domain expertise must fuse with AI literacy. Mastering this new paradigm of AI-assisted professional work is not an option—it is the new definition of competence.

Discussion and Implications
The findings of this study move beyond a simple quantification of automation to reveal the precise mechanics of a transformation that is already underway. Crucially, the analysis demonstrates that the UAE's labour market is not merely facing a shift in efficiency, but a fundamental re-architecture of how value is created across the economy.  This core insight leads to a series of strategic implications for policymakers, educators, and business leaders as they navigate the transition to an AI-driven economy.

Principal Findings: A New Framework for Understanding Transformation
This analysis produced three principal findings that, when taken together, form a cohesive narrative of change.


 	The Invariance of Impact: First, it is established that within the UAE's formal skilled labour market, AI exposure is fundamentally a function of a role’s tasks, not its geography or work mode. This invariance confirms that AI is a structural, cross-cutting force that cannot be mitigated by regional policy or specific work arrangements.
 	The Polarisation of Occupations: Second, the analysis reveals that the true fault lines of disruption are occupational, not sectoral. The labour market is cleaving into three distinct groups: a highly exposed cohort of Clerical Support Workers facing substitution; a highly insulated group of Manual and Physical Workers shielded by the current limits of AI and robotics; and the largest and most critical group, Professionals and Managers, who are entering an era of augmentation and redefinition.
 	The Mechanics of Change: Finally, the argument moves beyond identifying who is affected to explain how. By analysing the automation of core versus peripheral tasks, three distinct mechanisms can be identified: substitution for roles with a vulnerable core (e.g., Clerical), productivity enhancement for roles with a safe core (e.g., Hospitality Managers), and profound redefinition for the knowledge workers whose core tasks are themselves being transformed (e.g., Business & Engineering Professionals). 

Strategic Implications for Policy and Practice
These findings are not merely descriptive; they form a strategic map for action. The challenge for the UAE is not to halt automation, but to manage its consequences and harness its potential to accelerate national economic and human capital goals.
A Portfolio Approach to Reskilling for Human Capital and Education 
A one-size-fits-all approach to AI upskilling is destined to fail. The evidence calls for a targeted, portfolio-based national skills strategy:


 	Reskilling for the Disrupted: The high exposure of Clerical Support Workers (53.84 percent automation) signals a near-term risk of transitional unemployment. Policy should focus on urgent reskilling initiatives that create pathways from these roles into adjacent, more insulated occupations (e.g., from administrative support to event coordination or personal services).
 	Upskilling for the Augmented: For the majority of the professional workforce, the challenge is not replacement but redefinition. Higher education and corporate training must pivot from teaching discrete, automatable skills (e.g., basic data analysis, report writing) to cultivating the durable human skills that AI amplifies. Curricula should prioritise strategic thinking, complex problem-solving, creativity, and—most critically—the executive function of directing and validating AI systems. This is the new definition of professional competence.

A Strategic Opportunity for Migration, Expatriate Policy, and Emiratisation 
The polarisation of AI's impact presents a unique strategic opportunity to reshape the labour market in alignment with national priorities.


 	Automation as a Policy Lever: The roles most susceptible to automation, both clerical (substitution) and manual (long-term robotics), are predominantly held by the expatriate workforce. This allows automation to serve as a de facto policy lever, reducing reliance on expatriate labour for routine tasks without causing widespread disruption to the national workforce.
 	Strategic Workforce Calibration:The polarisation of risk offers a dual opportunity. For Emiratisation, it mandates a pivot away from placing citizens in vulnerable administrative roles and toward the high value 'hybrid' positions of the future. Simultaneously, it addresses the heavy reliance on expatriate labour in routine service sectors. As AI automates these "heavy-lifting" tasks, the UAE can effectively decouple economic growth from low-skilled labour importation, shifting its migration policy to prioritise the specialised, high-technical talent required to maintain an AI-driven economy.

Solving the Productivity Paradox for National Economic Strategy 
The findings affirm that the primary barrier to realising the economic potential of AI is not the technology itself, but its superficial implementation. The government and industry leaders can play a crucial role in overcoming this paradox by:


 	Incentivising Deep Integration: Policy can shift from promoting AI adoption in general to incentivising deep, systemic integration. This could include grants, tax credits, or support programmes for projects that use AI to reinvent entire business processes, not just accelerate old ones.
 	Fostering a Pro-Innovation Environment: Addressing the intense competition in the job market requires not just more jobs, but better ones. By fostering an environment where firms can translate AI-driven productivity into growth, innovation, and the creation of new high-value roles, the UAE can ensure that the benefits of automation are broadly shared.

Scope for Future Research
Future research should pursue longitudinal studies to track skill demand changes over time, broaden data sources to include non-digital job markets, and conduct firm-level case studies to qualitatively explore how the process of "role redefinition" is being managed in practice.

Annex A
A.1. Job Automatability Index Formulation
The Job Automatability Index is a weighted score (0-100) representing the proportion of a job's responsibilities susceptible to automation. The score is constructed by first calculating a normalised weight for each task and then summing the weights of all automatable tasks.

A.2. Effect Size Calculation (Cohen's d)
To quantify the practical magnitude of the difference between a subgroup's mean score and the total population's mean score, Cohen's d is calculated using the pooled standard deviation.

Where:


 	μ_group and μ_total are the mean Automatability Index scores for the subgroup and the total sample, respectively.
 	n_group and n_total are the number of observations (jobs) in the subgroup and the total sample.
 	s_group^2 and s_total^2 are the variances of the scores for the subgroup and the total sample.

A.3 Benjamini-Hochberg (B-H) Procedure
The Benjamini-Hochberg (B-H) procedure controls the False Discovery Rate (FDR) by identifying the largest rank k for which the following condition holds:

Where:


 	p_(k) is the k-th p-value when all m p-values are ranked in ascending order
 	m is the total number of hypothesis tests conducted
 	Q is the chosen False Discovery Rate (e.g., 0.05)

Annex B
Table B.1: Detailed Occupational Distribution of Online Job Postings by Sub-Major Group (ISCO-08 Level 2)




Row Labels
Percent


Professionals
38.5


Business and Administration Professionals
15.7


Science and Engineering Professionals
8.5


Information and Communications Technology Professionals
5.5


Teaching Professionals
3.7


Health Professionals
3.5


Legal, Social and Cultural Professionals
1.6


Managers
29.1


Administrative and Commercial Managers
13.1


Production and Specialized Services Managers
11.7


Hospitality, Retail and Other Services Managers
3.6


Chief Executives, Senior Officials and Legislators
0.8


Technicians and Associate Professionals
13.7


Business and Administration Associate Professionals
7.7


Science and Engineering Associate Professionals
2.9


Legal, Social, Cultural and Related Associate Professionals
1.3


Health Associate Professionals
1.0


Information and Communications Technicians
0.9


Service and Sales Workers
7.2


Personal Service Workers
3.8


Sales Workers
2.7


Protective Services Workers
0.3


Personal Care Workers
0.3


Clerical Support Workers
5.8


Customer Services Clerks
3.5


General and Keyboard Clerks
1.3


Numerical and Material Recording Clerks
0.7


Other Clerical Support Workers
0.2


Craft and Related Trades Workers
2.8


Metal, Machinery and Related Trades Workers
1.0


Building and Related Trades Workers (excluding Electricians)
0.8


Electrical and Electronics Trades Workers
0.6


Food Processing, Woodworking, Garment and Other Craft and Related Trades Workers
0.4


Handicraft and Printing Workers
0.0


Plant and Machine Operators, and Assemblers
1.5


Drivers and Mobile Plant Operators
1.2


Stationary Plant and Machine Operators
0.3


Assemblers
0.1


Elementary Occupations
1.4


Cleaners and Helpers
0.7


Labourers in Mining, Construction, Manufacturing and Transport
0.4


Food Preparation Assistants
0.2


Refuse Workers and Other Elementary Workers
0.1


Not Found
0.0


Skilled Agricultural, Forestry and Fishery Workers
0.0


Market-oriented Skilled Agricultural Workers
0.0


Market-Oriented Skilled Forestry, Fishery and Hunting Workers
0.0


Grand Total
100.0



Source: Authors’ own with the online job postings dataset (n=23,739).
Table B.2: Complete Sectoral Distribution of Online Job Postings.




Row Labels
Sum of count (in %)


IT & Technology
18.2


Hospitality & Travel
12.0


Real Estate & Construction
10.1


Consulting & Professional Services
7.5


Human Resources & Staffing
7.3


Financial Services
7.0


Education
5.6


Retail
4.9


Manufacturing
4.8


Healthcare & Life Sciences
3.9


Energy & Utilities
2.9


Transportation & Logistics
2.6


Media & Communications
1.6


Government & Public Sector
1.5


Investment & Venture Capital
1.3


Wellness & Fitness
1.3


Advertising & Marketing
1.2


Entertainment
1.1


Food & Beverage
1.0


Holding Companies
0.7


Facilities Services
0.5


Design Services
0.4


Events Services
0.4


Environmental Services
0.4


Non-Profit & Social Services
0.4


Security Services
0.3


Consumer Services
0.3


Executive Offices
0.2


Legal Services
0.2


Wholesale & Distribution
0.1


Aerospace & Defense
0.1


Agriculture
0.1


Automotive
0.1


Professional Organizations
0.0


Creative Services
0.0


Research
0.0


Grand Total
100.00



Source: Authors’ own with the online job postings dataset (n=23,739).



Ahmed Dawoud is Economist and Head of Data Science, The Egyptian Center for Economic Studies.
Ahmed Habashy is AI Engineer, The Egyptian Center for Economic Studies (ECES).



All views expressed in this publication are solely those of the authors, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel. 

Endnotes
[a] Large Language Models (LLMs) are inherently stochastic, meaning they often generate different outputs for the same input. Constrained decoding mitigates this by forcing the model to select the most probable output within a fixed structure, ensuring that if the analysis is repeated, the results remain identical.
[1] McKinsey & Company, “The Economic Potential of Generative AI: The Next Productivity Frontier,” June 14, 2023; Microsoft and LinkedIn, “2024 Work Trend Index Annual Report: AI at Work Is Here. Now Comes the Hard Part,” 2024.
[2] Tyna Eloundou et al., “GPTs are GPTs: Labor Market Impact Potential of LLMs,” Science 384, no. 6702 (2024): 1306-1308.
[3] Hao Zhang, “The Future of Work: AI's Impact on Employment and Social Structures in the Digital Age,” in Proceedings of the 2nd International Conference on Management Research and Economic Development (2024).
[4] Daron Acemoglu and David Autor, “Skills, Tasks and Technologies: Implications for Employment and Earnings,” in Handbook of Labor Economics (Elsevier (North-Holland), 2011), pp. 1043–1171.
[5] Edward Felten, Manav Raj, and Robert Seamans, “How will Language Modelers like ChatGPT Affect Occupations and Industries?,” SSRN, March 1, 2023, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4375268.
[6] Aria Zarifhonarvar, “Economics of ChatGPT: A Labor Market View on the Occupational Impact of Artificial Intelligence,” Journal of Electronic Business & Digital Economics 3, no. 2 (2023): 100-116.
[7] Karin Kimbrough and Moreno Carpanelli, “Preparing the Workforce for Generative AI: Insights and Implications,” LinkedIn Economic Graph Research Institute, August 23, 2023; Moreno Carpanelli, M. Baird, and C. Jara-Figueroa, “Generative AI's Influence on Employment Patterns,” LinkedIn Economic Graph, June 2024.
[8] Access Partnership, AI and the Global Economy: Unlocking Growth and Reshaping Work, 2024.
[9] M. Baird et al., “Early Evidence on the Impact of GitHub Copilot on Labor Market Outcomes for Software Engineers,” Working Paper No. #5, LinkedIn Economic Graph Research Institute, September 2024.
[10] M. Baird, M. Carpanelli, and S. Lara, “Generative AI and Gender: Global Measures of Workers in GAI Classifications,” LinkedIn Economic Graph, March 6, 2024; World Economic Forum and LinkedIn, “Gender Parity in the Intelligent Age,” White Paper, March 2025; Kimbrough and Carpanelli, “Preparing the Workforce for Generative AI.”
[11] OECD, “The AI Workforce: What LinkedIn Data Reveals About 'AI Talent' Trends in OECD Countries,” OECD.AI Policy Observatory, May 22, 2025.
[12] Microsoft and LinkedIn, “2024 Work Trend Index Annual Report”; Fabrizio Dell'Acqua et al., “Navigating the Jagged Technological Frontier: Field Experimental Evidence of the Effects of AI on Knowledge Worker Productivity and Quality,” Harvard Business School Technology & Operations Mgt. Unit Working Paper No. 24-013, 2023.
[13] McKinsey & Company, “Seizing the Agentic AI Advantage: A CEO Playbook to Solve the Gen AI Paradox and Unlock Scalable Impact with AI Agents,” QuantumBlack, AI by McKinsey, June 2025.
[14] T. Isherwood and V. Chandran, “The State of Gen AI in the Middle East's GCC Countries: A 2024 Report Card,” McKinsey & Company, 2024.

### Swords and Shields: Navigating the Modern Intelligence Landscape

Introduction
In his 1998 book, Seeing Like a State, social scientist James Scott articulated the concept of the metis: the naturally imbibed knowledge of social circumstances that actors can only gather from practical experience of said circumstances.[1] For Scott, this concept took the clearest expression in what he perceived as the state’s innate panache for foreign policy and its associated “metis-laden” disciplines of war and diplomacy—this provides the cognitive basis upon which policymakers may adapt to rapid geopolitical, strategic, and tactical change while “making the best out of limited resources.”[2]
Scott’s premise holds a unique value for national intelligence services reckoning with the incendiary geopolitics of the 2020s. Rapid advancements in communications technology have enabled today’s wars to break past the constraints of the local or regional with unprecedented pace to acquire a more global flavour. Today, it is easier than ever for a Mexican or Colombian drug cartel to send members overseas to acquire mastery over new strategies of drone warfare and ISR (or Intelligence, Surveillance, and Reconnaissance) honed on Ukraine’s frontlines,[3] or for private military companies such as the United States (US)-based Academi to step in to provide strategic services to the embattled government of Haiti, struggling against gang violence.[a],[4] Geopolitical volatility manifests in other ways too. Quick access to cheap, miniaturised, and technologically advanced military and commercial platforms has enabled non-state and proxy actors to deploy outsized strategic authority against conventionally stronger global powers to achieve their vested interests. And with the ubiquitous and pervasive forces of social media and instant communication reshaping the knowledge that guides how one interacts with and responds to their surroundings—in other words, one’s individual metis—new and increasingly regenerative forms of transnational ideological affiliation and radicalisation are mushrooming.
It is this volatile techno-geopolitical landscape that contextualises and reshapes the character of national intelligence today. While geography structures strategic planning in national politics, the international politics of the 2020s is being defined by the redistribution of global power and the upending of entrenched hegemons. The change is both vertical and horizontal. It is embodied by the fragmentation of the integrated global economy of the 1990s by its very architects in the Global North, the reconfiguration of multilateralism as those Global North preeminent powers come to contend with an increasingly vociferous Global South, and the exponential pace of technological advancement that has elevated the profile of transnational digital giants to unprecedented levels, and centred scientific achievement as the primary metric of power and legitimacy within the international system.
Such geopolitical volatility has also brought to the fore key questions that national intelligence services, including India’s own, must grapple with. How are new forms of social and political affiliation, gestated by the proliferation of digitally interconnected geographies, reshaping intelligence priorities? Are private intelligence actors challenging government intelligence agencies on their own turf, and if so, how can the latter adapt to this new reality? How is human intelligence (HUMINT) adapting to the ascendancy of open-source intelligence (OSINT) and ubiquitous technical surveillance (UTS)—the latter defined as “the widespread collection of data and application of analytic methodologies for the purpose of connecting people to things, events, or locations”?[5] How, in turn, can intelligence agencies secure national interest with the greatest efficiency by synthesising cross-informational flows across multiple sources, including public digital and commercial ones? And in an increasingly fractious world, how can India best integrate the core principles of its grand strategy into its approach to foreign intelligence?
These are some of the questions that this paper seeks to examine. To that end, it explores four key technological and geopolitical trends, and their implications for contemporary intelligence practice: digitally-connected transnational geographies; the global race for rare-earth elements (REEs); the changing nature of HUMINT amid the rise of UTS; and the role national intelligence can play in securing a nation’s technological and supply needs, and the rise of private sector intelligence actors (PSIAs) within national security intelligence ecosystems. The paper concludes with an assessment of what India can do in light of these changes, emphasising on its potential as a bridging power through a measured expansion of existing liaison agreements with security partners.

Digital Geography and Changing Strategic Demands
Now in its fourth decade of existence, the public internet has entered a stage of its life where its broader social impact can be conclusively gauged over the long term. Digital communications today have made for a world that is as spatially small as it is socially fractured. The telescoped domain of cyberspace has, in many ways, bridged the constraints of physical geography, and contributed towards a world where new, trans-border forms of social and political affiliation may emerge more quickly. It challenges established ideological and cognitive frameworks, even as it expands the scope and speed of narrative construction and dissemination worldwide by both state and non-state actors. This rise of “geotechnography”—“a collision of geography, technology, and society” typified by the “despatialisation” engendered by contemporary digital technologies and the friction between natural human “rootedness in land” and the conflicting “new sense of self built by engaging with social media and other global digital platforms”—presents unprecedented challenges and opportunities for national intelligence services, and is reflected in the emergence of new strategies developed within this context.[6]
As social media collapses distances between continents, ideology has become increasingly prone to intersectionality. Whereas the spread of transnational forms of social or political association was once restricted by the limitations of physical geography and analogue technology, immediate digital communication across social media platforms has made it easier for such forms of identity to spread faster and at scale. In the days after the 7 October attacks by Hamas on Israel, and Israel’s ensuing response, the war in Gaza emerged as a flashpoint around which groups of otherwise different stripes—from left-wing activists to proscribed Islamist organisations—rapidly coalesced, aided by the scale and ubiquity of social media.[7]
Indeed, the scale of Gaza-related movements since 2023 speaks to the wider role that geotechnography has come to occupy within the contemporary global security landscape. Amplified by social media, the dynamics of an otherwise regional conflict have rapidly entered the daily lexicon of domestic politics and forged unlikely partnerships between activists of varied political stripes. Intelligence services monitoring these trends must therefore prepare for the rapid spread of political movements shaped by transnational affiliation and their wider implications for national security.
Unlike in the past, where revolutionary political ideologies such as Marxism reached a certain stage of theoretical maturation and stability before being gradually disseminated by the forces of early-20th century society and technology, geotechnography today makes for the rise of ideologically amorphous and more volatile forms of social and political identity for intelligence services to contend with in order to maintain internal security. The rise of such “salad-bar extremism”— where a discerning diner can pick and choose aspects from a global smorgasbord of political and extremist beliefs to fit their stance at any given time—portends a more capricious security landscape for governments into the near future.[8]
Added pressures on decision cycles—as a result of geotechnography and the rapid construction of narrative and frameworks of social/political affiliation by way of social media and other digital mechanisms—have contributed towards the rise of strategic intelligence disclosure (SID) and the renewed focus on strategic communications as a dimension of contemporary intelligence activity.[9] Faced with the prospect of facing weaponised narratives that rapidly connect and self-perpetuate across disparate geographies through digital media, national intelligence services—long accustomed to maintaining total secrecy over the information they hold—have been compelled to strategically declassify parts of the intelligence they hold in order to construct counter-narratives of their own.
In the lead-up to the war in Ukraine in February 2022, Western intelligence services, fearing the prospect of a Russian assault on Ukraine where the Kremlin held the informational advantage, embarked on a process of strategic declassification, aimed at pre-empting Russian strategic communications in the event of Ukraine’s invasion.[10] The purpose of this operation had been the establishment of a public-facing credible premise for the Western counter-response that seemed increasingly inevitable. As narratives become increasingly easy to construct and broadcast through digital media for purposes of subversion, SID is likely to grow as a form of anticipatory, and even coercive, variant of intelligence activity.
Finally, the puncturing of physical geography by digital tools and the transnational connections it gestates necessitates a closer focus on global challenges even by medium-sized intelligence bureaucracies traditionally focused on developments within their region. Key global intelligence services, such as Israel’s Mossad[11] and India’s Research and Analysis Wing (R&AW),[12] have historically been focused on security developments within their own neighbourhood, gathering intelligence and prosecuting covert action with a regional focus. At a time when physically distant forms of identity have been brought into closer dialogue by the forces of geotechnography, it is incumbent upon national intelligence agencies—including those with a traditionally regional focus due to both budgetary and strategic constraints—to develop the analytical capabilities to better relate global developments to local ones in order to pre-empt the proliferation of sudden, volatile forms of social and political identity in a more fractious geopolitical landscape.

Rare-Earth Elements: Shaping Intelligence Strategy 
Despite the increased power of digital media to erode some geographical limitations, physical geography continues to bear vital influence on geopolitics today. Perhaps nowhere is this clearer than with regard to the geopolitics of rare-earth elements (REEs)—an increasingly central feature of the modern security landscape. Just as competition over energy and other mineral resources drove conflict over the past century and in recent decades, from uranium and coltan in the Congo to oil in the Middle East, the estimated growth of global industrial demand for REEs by between three to sevenfold by 2040 will likely shape the international politics in the coming years.[13] This has already been demonstrated by the US-Ukraine Minerals Deal of April 2025,[14] and closer to home, Pakistan’s efforts to attract US investment and strategic backing in the form of a critical minerals agreement.[15] The securitisation of commerce in the REEs space suggests new roles for national intelligence agencies to adopt in helping their governments to establish strategic advantage in this domain.
As with the wider question of geotechnography, establishing an intelligence advantage for oneself within the global REEs environment will require governments to dedicate more resources to enable their intelligence services to have a global mission and reach. Global supply chains, including REEs, tend to be distributed across a variety of interconnected national jurisdictions. Emblematic of the kind of “weaponised interdependence” that international relations scholars such as Henry Farrell and Abraham Newman describe, such global dispersal enables adversaries to apply pressure at any single point to leverage against one’s own state.[16] Securing the state against such threats will require national intelligence services, including those that are more regionally-focused, to develop the required assets and capabilities to deploy globally, and thus maintain one’s strategic edge in a more competitive age.
Covert action—primarily through acts of sabotage and denial—are similarly likely to be used by national intelligence services to prevent adversaries and competitors from acquiring or developing a strategic advantage in the global REEs landscape, just as it was often deployed during the Cold War as superpowers rushed to secure raw materials for their fissile programmes and national deterrents, most notably during the Congo Crisis of the 1960s.[17] Recent intelligence operations such as the Mossad’s so-called ‘Operation Grim Beeper’ in September 2024 targeting pagers and handheld radios owned by Hezbollah fighters and cadres in Lebanon, have demonstrated the ability of the world’s most powerful intelligence services to embed themselves within supply chains to deliver kinetic effect against adversaries.[18]
Translated into the world of REEs, these principles can be re-applied to the denial or disruption of competitors’ rare-earth supply chains. In Myanmar, rebels of the Kachin Independence Army (KIA) have taken advantage of the country’s ongoing civil war to cement their control over key rare-earth deposits of dysprosium and terbium, leveraging its control over the deposits to grow its relationship with neighbouring China as an (illicit) trade partner to the north.[19] Its actions may serve as a sign of things to come—one where intelligence-linked special operations forces (SOF)/insurgent outfits are leveraged by competing nation-states to deny opponents access to REEs supply chains in order to maintain one’s own advantage.
Mining REEs is also accompanied by environmental concerns that may be leveraged against competitors by national intelligence services. As local activism increasingly becomes a target for politicisation and espionage by national intelligence services, the possibility of obstructing adversaries’ REE ambitions through a variety of kinetic efforts, including astroturfed activism and information warfare, is a real one. Indeed, national intelligence services such as the UK’s Secret Intelligence Service (SIS) have already declared “green spying”—the use of measurement and signature intelligence (MASINT), imagery intelligence (IMINT), and other means to gather intelligence on the total carbon emissions produced by states—as a top priority.[20] The danger of such ‘green spying’ and its weaponisation in coordination with other tools, such as the SID described above, is considerable, and may be leveraged to pre-emptively limit competitors from achieving strategic advantage and autonomy within the global REEs landscape.

The Human Factor
Despite the rise of digital tools of espionage, the human aspect of intelligence—the standard fare of the global espionage landscape, involving human spies in target nations gathering secrets and facilitating operations—will endure. However, it will need to adapt to a new, increasingly transparent age. While the temptation in such an age may be to turn away from HUMINT in favour of OSINT, a more effective strategy—one articulated by a variety of intelligence scholars—would preserve the human component at the heart of espionage, while informing its use with an appreciation of the ascendancy of OSINT and digital tools. Yet although its strategic importance remains undiminished, HUMINT in the 2020s is clearly heading into a new era, one where OSINT can be utilised by private actors to uncover state secrets and deception, and the rise of UTS poses unprecedented difficulties to the standard requirements of maintaining cover or conducting espionage activities in hostile states.[21]
Social media and the permanence of one’s digital footprint have made it increasingly difficult for intelligence officers to maintain cover and avoid detection by the governments they are spying against. This dimension of modern espionage has birthed its own branch of intelligence activity, called social media intelligence (SOCMINT), defined as “the surveillance and analysis of open platform social media social media sources”, and is dovetailing with the rise of the OSINT industry.[22]
The emergence of such digitally-driven forms of ‘generated reality’ and espionage forces a rethinking of how intelligence is conceived, beyond the simple collection of secret intelligence or the processing of vast amounts of data gathered through both secret and commercial or public channels. It has similarly come to underpin intelligence competition between great powers such as the US and China, and been recognised as such by the two, with the Federal Bureau of Investigation (FBI) broadcasting warnings and advertorial films to warn service members of the risks.[23] The emergence of SOCMINT and OSINT as independent branches of intelligence has also been driven by organisations such as Bellingcat, which have utilised a combination of social media metadata and other digital tools across commercial and digital platforms to uncover the identities of foreign intelligence officers. Bellingcat’s exposure of Olga Kolobova in 2022, a Russian GRU operative based in Europe under the alias ‘Maria Adela’, captured not only the changing character of this landscape but also the growing power of commercial tech actors within this space.[24]
Beyond the digital realm, traditional HUMINT operations must contend with the rise of what observers often refer to as UTS. As governments increasingly invest in surveillance technologies to further UTS for reasons of public safety or control, it has become more difficult for human spies to operate undetected despite the use of sophisticated tradecraft. Intelligence professionals increasingly note the difficulty of operating undetected in heavily digitally-surveilled cities, with even adversary counterintelligence services relying on UTS rather than physical surveillance of enemy agents and intelligence officers to track and impede simple acts of tradecraft, from organising meetings between case officers and their agents to concealing their identity or presence even within highly populated urban agglomerations.[25] Advances in biometric technology can be used to stop the entry of spies at a nation’s border or limit the availability of foreign passports to be used by other agencies in their own operations.[26]
Yet while the rapid pace of technological advancement may make for a more transparent world where the standard cloak-and-dagger fare of traditional espionage would become obsolete, HUMINT will not only endure but grow increasingly valuable—as hinted at in a December 2025 speech by the chief of Britain’s SIS, Blaise Metreweli.[27] In a more fractured geopolitical landscape, governments will require access to both high-grade intelligence at the level of an adversary’s political and elite leadership to maintain decision advantage, and also at the lowest rungs of its strategic apparatus, and even within its civil society. Indeed, the digitally-fuelled transparency challenging the basic tenets of the intelligence profession is likely to drive a return to the analogue tradecraft of HUMINT. As former Central Intelligence Agency (CIA) officer and intelligence scholar David Gioe has noted, “Technological sources provide vast volumes of intelligence, but HUMINT remains fundamental for truly understanding adversaries’ capabilities and intentions.”[28]
Israel’s intelligence failure on 7 October 2023, for instance—caused partially by its initial neglect of HUMINT reports in favour of digital surveillance tools against Hamas—shows that even in a digitally-underpinned strategic landscape, maintaining decision advantage and security necessitates a strong focus on HUMINT.[29] Additionally, as states seek to deliver kinetic effect against adversaries through covert action, a reliance on human operative is likely to persist.
Such HUMINT operations, however, will need to be conducted alongside cyber-operations and a sophisticated hold over technological innovation in the fields of AI and biometrics. As formal intelligence officers come under greater scrutiny by adversary counterintelligence services utilising UTS to their advantage, intelligence services have increasingly returned to the use of agents operating under ‘non-official cover’ (NOC), i.e., where intelligence officers operate informally and without the protection of their governments or the cover of diplomatic immunity.[30] Russia’s Soviet-era Illegals programme—where intelligence officers are sent to target countries to assimilate and operate for years and even decades under deep cover as citizens of that country—continues unabated, particularly in countries such as Argentina and Slovakia, where identities are easier to obtain and local counterintelligence systems are weaker.[31]
Given the enduring importance of HUMINT even at a time when geolocation, metadata mining, and open-source tools have made it easier for private investigators to uncover state secrets, national intelligence agencies are also likely to dedicate more time and resources to technologies able to circumvent today’s advanced biometrics and facial recognition systems. While exact details regarding such innovation remain highly classified, recent developments provide hints of the importance this issue has been accorded in recent years within contemporary intelligence thinking. The appointment of Metreweli as Chief of the SIS in October 2025 reflects some of these trends.[32] Metreweli, whose previous position was Director-General of the agency’s ‘Q’ Division, tasked with managing technology for in-house use, is alleged to have led projects meant to secure the identities and covers of British intelligence officers or predict and evade increasingly sophisticated biometric surveillance technologies.[33] Her experience and subsequent appointment as chief of Britain’s foreign intelligence service underscores a wider trend within the global intelligence landscape, one where technological innovation to mitigate against the challenges of UTS to HUMINT is prioritised, holding the potential to determine the primary objectives of a national intelligence service, and the possible career incentives of delving into such a space for its officers.

Private Sector Intelligence: Partner or Competitor?
Intelligence is no longer the monopoly of the state. Rapid technological advancement and the growing salience of whole-of-system approaches to national security have contributed to the rise of private sector players as intelligence actors, with tectonic ramifications for national intelligence services. These relationships have been well-documented. Edward Snowden’s disclosures in 2013 about the US government’s siphoning of user data from tech firms like Google, Yahoo, and other social media companies—often without their knowledge—caused a brief rift between the US national security company and Silicon Valley.[34] The rift is rapidly healing though, with the US intelligence community now among the largest buyers of commercially available data (CAI) available from Big Tech companies.[35] Likewise, governments have a long and storied history of cooperation with private sector intelligence actors (PSIAs), with the private detective agency Pinkerton, for instance, having worked with both business elites in 19th-century United States against trade unions, and the Union government against the Confederacy during the American Civil War (1861-1865).[36]
To be sure, the balance of this dynamic has shifted in recent years. Public-private partnerships have grown in scale, particularly in the technological domain, which intersects more closely than ever with geopolitics. Yet even as such partnerships have significantly augmented the strategic standing of engaged governments, through the production of cutting-edge innovations, they are equally threatened by adversaries seeking to acquire or otherwise undercut the technological advantage possessed by such states as a result of engagement with the private sector. In such circumstances, PSIAs have become increasingly central to the global intelligence landscape, especially given their expertise in such domains as corporate espionage and geopolitical risk—harbingers of a new generation of corporate security that overlaps almost routinely with international geopolitics. Of these, the former, once viewed as primarily the prerogative of business conglomerates, is now increasingly utilised by revisionist powers such as China to purloin technological expertise.
China’s actions are mainly targeted against the United States, and its technological muscle that is primarily sequestered in the startup ecosystem of Silicon Valley, itself increasingly the target of corporate and industrial espionage conducted by PSIAs acting as proxies or fronts for rival powers.[37] It also conducts industrial espionage, against smaller countries such as the Netherlands and its robust semiconductor manufacturing ecosystem,[38] besides its purported ally Russia, where industrial secrets about critical defence technologies have allegedly been stolen by China’s intelligence services through private contractors.[39] Unlike the strategic bureaucracies of foreign countries—long the focus of national intelligence services—the private sector possesses its own cultures, organisational structures, and repositories of strategically sensitive material. With their expertise in collecting such information for mainly corporate entities, PSIAs are equally, if not better placed than their government counterparts in navigating the distinctive topography of the private sector.
As with corporate espionage, conducted through both cyber and analogue human means, geopolitical risk is another domain where PSIAs have established a first-mover advantage over national intelligence agencies. Intelligence gathered by PSIAs is often processed into risk analysis reports for business clients, summarising the overall challenges and opportunities of investing or beginning operations in a certain place or region arising from its geopolitics.[40] Such information guides subsequent decision-making within global businesses and conglomerates, and is even quantified within the insurance premiums placed on later activities, generating precedents that determine the extent to which a country can attract foreign investment.[41] Through such processes, PSIAs, and the geopolitical risk companies they often work alongside, hold the ability to alter real-world geopolitics and geoeconomics. National intelligence services, traditionally focused on state-sponsored threats, or at most, counterterrorism, must therefore increasingly adapt to a world where PSIAs have secured first-mover advantage by providing bespoke solutions to private sector businesses—a role that the government has traditionally been separated from in free-market economies.
At another level, the accumulation of vast quantities of user data by large tech firms and social media megacorporations, and the subsequent rise of what social scientist Shoshana Zuboff has described as “surveillance capitalism”—the commodification of personal data by large digital conglomerates “to manipulate and control the emotions of populations”—has further augmented the power held by private sector actors within the global intelligence landscape.[42] Once a monopoly enjoyed by those states possessing advanced technologies to collect data from digital platforms in pursuit of national security, governments and their spy agencies now increasingly rely on “commercially available information”, sourced and often purchased from private corporations, as evidenced by a January 2022 report to the former Director of National Intelligence Avril Haines in the United States, published under the erstwhile Biden administration and outlining the US intelligence community’s strategy for gathering and purchasing big data from private sector actors.[43]
Today, private data providers such as Amazon Web Services conduct the primary cloud computing services for the UK’s three primary intelligence services—SIS, MI5, and GCHQ[44]—as well as for those of the United States—the CIA, FBI, and the NSA through its “Secret Region” programme.[45] Examples such as these point towards the growing power of private-sector/Big Tech actors as stakeholders within contemporary intelligence, besides raising questions surrounding the traditionally sacrosanct position of national sovereignty in international politics and citizen rights.
Yet they equally provoke questions for a nation’s sovereignty and security: PSIAs, transnational corporations, and social media giants, like their counterparts elsewhere in the state sector, are not only driven primarily by commercial interests, but operate with far less oversight than the latter. While this has advantages for an attacking party that aims to leverage cooperation with such firms for access to vast quantities of an adversary’s data, it leaves it equally vulnerable to reliance on such an entity which, in pursuit of commercial interests, may do the same for said adversary.
Recent incidents in India have once again brought the double-edged nature of such cooperation to the fore. During Operation Sindoor in May 2025, Pakistani terrorist organisations were reported to have collected imagery, intelligence, and data on Indian military movements from commercial satellite imagery platform Maxar technologies—which was, in parallel, being used by India’s armed forces.[46] Likewise, prayers made in Delhi High Court in November 2025 have pointed to the possible mass harvesting of passenger data by consultancy firm KPMG from the DigiYatra smartphone application.[47] Examples such as these demonstrate some of the associated risks of working with private sector firms with limited accountability, particularly in the intelligence and national security space.
Going forward, national intelligence services must adapt to an increasingly fraught intelligence landscape, where they are no longer the primary stakeholders. As corporate espionage bleeds into national security, and assessments of geopolitical risk within the private sector increasingly determine the geoeconomic trajectories, government spies will need to adapt their skills, while involving themselves more deeply within the world of PSIAs using a combination of offensive, defensive, and passive means. The growing power of Big Tech, propelled by their access to enormous quantities of data beyond the reach of even large intelligence services, portends massive changes within the global intelligence landscape.

Implications for India
India’s emergence as the world’s fourth largest economy in the world, and according to the Lowy Institute Asia Power Index, the third most powerful state in the continent, demands a recalibration of its intelligence strategy.[48] Such a reordering must be underpinned by recognition of the changes within the global intelligence landscape discussed in this paper, and an ability to adapt to them on the basis of internal course correction and external diplomacy.
The complexity of global supply chains and its weaponisation by adversaries has implications for India’s national security, creating a greater role for the intelligence services within this space. Ensuring supply chain security is particularly important with regards to REEs, a matter that acquires greater urgency given the near monopoly of China in this sector and the export restrictions strategy that it is implementing. This can potentially trigger a scramble for securing alternative sources. In this context, the civil war in Myanmar assumes significance as geopolitical competition over its mineral resources has been a key driver of conflict. Since 2021, Chinese intelligence services have actively supported and sponsored proxy insurgent groups and ethnic armed organisations (EAOs) in mineral-rich regions of the country, squeezing India’s supply chains and leaving New Delhi vulnerable to pressure from Beijing.[49] Calibrated violence has also been exercised by both the Burmese junta and insurgent groups in the vicinity of India’s regional connectivity projects, enabling adversaries to set a precedent of leveraging control over vital supply chain nodes for short-term gains.[50] As India grows, and likely contends with a broader variety of competing state and non-state actors in regions like Myanmar endowed with (rare-earth) mineral reserves, it must take steps to establish the necessary countermeasures to both plug vulnerabilities against exploitation, and escalate the costs of such aggression for potential competitors.
Similarly, the growing centrality of geopolitical risk within international trade presents a range of challenges and opportunities for India’s national security for which the country’s intelligence services must be prepared. Geopolitical risk assessments play an increasingly important role in factoring into insurance premiums and business decisions, particularly amid the splintering of the post-1991 global economic order.[51] Fluctuations within global insurance rates has outsized impact on global trade, and may even be weaponised by proxy agencies and organisations acting on behalf of competing states. As geopolitics acquires greater importance within the C-suite, and economic security increasingly underpins national security, national intelligence services, including India’s, will need to pay greater attention to its implications for India’s economy and international trade, and particularly the role of PSIAs as primary actors of interest within this area. In this context, Indian intelligence agencies will need to equip themselves by developing a niche understanding of key trends in geoeconomic intelligence.
They will also need to adapt tradecraft and strategies as HUMINT evolves, and nations compete for technological superiority for quicker and streamlined processes of all-source assessment and intelligence analysis. Recent media reports suggest that Indian intelligence have been primarily reliant on TECHINT in dealing with internal security challenges, often at the expense of HUMINT.[52] While the foreign intelligence picture is less clear, such reports point toward key gaps within India’s intelligence architecture. A greater emphasis on growing its HUMINT capacities while remaining cognisant of the technological constraints shaping it, is vital.
Reforms within India’s intelligence apparatus in the past decade have established the foundations for future adaptation. The Multi-Agency Centre, the primary intelligence-sharing network for India’s intelligence services, was upgraded in early 2025, with a greater focus on real-time intelligence analysis and streamlining.[53] The setting up of the National Intelligence Grid has complemented this information sharing between agencies by linking their databases. The intelligence successes in Operation Sindoor in May 2025 suggest closer cooperation between India’s foreign and domestic intelligence agencies, a far cry from the bureaucratic infighting that has long characterised inter-agency relations.[54] Moreover, efforts have been made to grow intelligence diplomacy with all stakeholders in mineral-rich, strategically sensitive spaces within India’s neighbourhood, such as in Myanmar.[55] All of these point towards growing political will to tailor intelligence requirements to a changing geostrategic landscape. It also underlines that, to a certain extent, Indian intelligence agencies will need to shed their reticence to undertake more diplomatic engagements to advance national interests.
At the diplomatic level, India’s primary strength within the global intelligence landscape lies in its potential as a bridging power, leveraging its ability as a liaison partner to exercise greater influence on the world stage, while remaining cognisant of the counterintelligence concerns that inevitably accompany any decision to share intelligence with partner states. The minilateralism characterising much of India’s foreign policy today equally defines the nature of the intelligence liaison platforms that it leads or participates in.
The Indian Navy’s Information Fusion Centre-Indian Ocean Region (IFC-IOR), based in Gurugram, for example, enables New Delhi to share maritime signals intelligence with a number of regional and global partners, and augments India’s position within the region as a liaison partner.[56] Likewise, the Colombo Security Conclave—convened by the National Security Advisors of India, Sri Lanka, the Maldives, Mauritius, and Bangladesh—provides a useful mechanism for the sharing of intelligence within manageable frameworks, despite challenges posed by domestic instability within other member states such as Bangladesh.[57] India’s strategic autonomy also burnishes its credentials as a bridging power within the global intelligence landscape, convening intelligence chiefs from around the world, often representing nations in conflict or competition, in New Delhi once a year.[58]
India’s bilateral intelligence-sharing partnerships will also support its efforts to adapt to the strategic realities described previously. Technological liaison through frameworks such as the initiative on Critical and Emerging Technologies (iCET) signed with the erstwhile Biden administration in the US, followed by the implementation of the TRUST framework in 2025 with President Donald Trump, has enabled India to equip its intelligence services with the resources to adapt to a changing global security environment.[59] Yet India must also remain aware of the imbalanced power dynamic baked into such an equation, given today’s great-power transactionalism and propensities for leverage.
India may equally choose to develop formal strategies around the use of SID for purposes of effective strategic communication. In a more transparent world, governments have increasingly taken to strategic declassification of portions of their intelligence (after properly sanitising it) as a means of coercive public diplomacy against adversaries, seeking to delegitimise and galvanise international pressure against them. Western agencies, for instance, continuously publicised SIGINT and imagery intelligence (IMINT) about Russian troop movements along Ukraine’s borders in late 2021 and early 2022 to buy time ahead of what had come to be seen as an inevitable Russian military operation against Ukraine.[60] Russia too, has employed a similar strategy—having intercepted communications among Germany’s military staff on the supply of Taurus missiles to Ukraine in early 2024, and released it on RT, Russia’s state broadcaster.[61]
India itself is no stranger to its use, with the R&AW having intercepted, taped, and subsequently ‘leaked’ Pervez Musharraf’s telephone calls to military commanders during the 1999 Kargil War to prove Pakistan’s culpability as an aggressor.[62] Yet a more formalised doctrine (classified or otherwise), centred around audio/audio-visual intelligence/satellite imagery, and packaged for audiences accustomed to more visual means of news consumption on platforms such as social media, would buttress India’s own strategic communications.
The national security implications of weaponised geopolitical risks also demand change within the mandate of India’s national intelligence services. The domains of geopolitical risk, and the rise of PSIAs require new forms of expertise and engagement with the private sector in domains ranging from technology to international finance. The establishment of In-Q-Tel, a venture capital firm focused on emerging technologies, by the CIA in the late 1990s, has helped the US maintain its strategic and technological edge over both partners and competitors today.[63] This paper recommends that the government dedicate resources to a similar fund for the R&AW. Establishing smooth liaison channels with India’s indigenous R&D ecosystem, much of which exists as part of the private sector, is vital, emphasising self-sufficiency as India grows as an independent power in a more competitive world.

Conclusion
The sheer pace of technological advancement, geopolitical volatility, and social change, combined, have produced unprecedented challenges for today’s spy services. It raises new questions, some of which are as philosophically-infused as they are policy relevant. In a changing geopolitical and technological order, what really is the new final frontier for national intelligence services?
As the speed of processing, synthesising, and disseminating intelligence becomes as vital as the traditional mechanics of sensing and responding, what new mantles will intelligence communities worldwide be required to take on? In a digital environment increasingly permeated with deepfakes and sophisticated AI imagery and data, how can they discern truth from deception in order to secure national polities—while avoiding the propensity to perceived politicisation as agents of censorship? And do these shifts suggest that technology is blurring the lines between ‘upstream’ strategic and ‘downstream’ tactical information—just as 9/11 and the ascendance of counterterrorism as a national security priority broke down the walls between foreign and domestic intelligence in the first two decades of this century?
Adapting to these fast-paced changes demands strategic agility even as states grapple with these existential questions. Yet as the world heads into the mid-2020s, the geopolitical winners of tomorrow will be those whose intelligence services can most credibly demonstrate this kind of adaptability. The stakes are high, and none more so than for India, as it looks to the future with renewed confidence and optimism.



Samir Saran is President, ORF.
Archishman Ray Goswami is Non-Resident Junior Fellow, ORF; and a DPhil International Relations candidate at the University of Oxford.



All views expressed in this publication are solely those of the authors, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel.

Endnotes
[a] Academi was founded as Blackwater in 1997, and was used to provide security for US forces in Iraq in the early 2000s during the War on Terror.
[1] James Scott, Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed (New Haven, CT: Yale University Press, 1998), pp. 6-7.
[2] Scott, Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed, pp. 315.
[3] Henry Ziemer, “The Future of Criminal Drone Use in Latin America,” War on the Rocks, September 9, 2025, https://warontherocks.com/2025/09/the-future-of-criminal-drone-use-in-latin-america/
[4] “Blackwater Founder to Deploy Nearly 200 Personnel to Haiti as Gang Violence Soars,” NPR, August 15, 2025, https://www.npr.org/2025/08/15/nx-s1-5503316/blackwater-erik-prince-haiti-gang-violence
[5] Office of the Inspector General: Audit Division, Audit of the Federal Bureau of Investigation's Efforts to Mitigate the Effects of Ubiquitous Technical Surveillance, Washington DC, Department of Justice, 2025, https://oig.justice.gov/sites/default/files/reports/25-065_t.pdf
[6] Samir Saran and Anirban Sarma, Geotechnography: Mapping Power and Identity in the Digital Age (Gurugram: Penguin Random House India, 2025), pp. xiv-xv.
[7] Tara Varma and Kevin Huggard, “France Responds to the Israel-Gaza Crisis,” Brookings, December 15, 2023, https://www.brookings.edu/articles/france-responds-to-the-israel-gaza-crisis/
[8] Alexander Meleagrou-Hitchens and Moustafa Ayad, The Age of Incoherence? Understanding Mixed and Unclear Ideology Extremism, Program on Extremism, Washington DC, George Washington University, 2023, https://extremism.gwu.edu/sites/g/files/zaxdzs5746/files/2023-06/the-age-of-incoherence-final.pdf
[9] DV Gioe and Michael Morrell, “Spy and Tell: The Promise and Peril of Disclosing Intelligence for Strategic Advantage,” Foreign Affairs 103, no. 3 (2024): 138-152, https://www.foreignaffairs.com/united-states/spy-and-tell-gioe-morell.
[10] Joakim Brattvol, “Intelligence Disclosure As A Strategic Messaging Tool,” NATO, December 16, 2024, https://archives.nato.int/uploads/r/nato-archives-online/0/b/1/0b1691efa2718c16b63a16cc08c168381cf6a61fca31c04064991855a97e0279/2024-12-16_Intelligence_disclosure_as_a_strategic_messaging_tool_ENG.pdf
[11] Tamir Libel, “Looking for Meaning: Lessons from Mossad’s Failed Adaptation to the Post-Cold War Era, 1991–2013,” Journal of Intelligence History 14, no. 2 (2015): 90, https://www.tandfonline.com/doi/abs/10.1080/16161262.2015.1033238.
[12] Kajal Basu, “A 'RAW' and Present Danger,” The Indian Express, December 7, 2023, https://www.newindianexpress.com/opinions/2023/Dec/06/a-rawand-present-danger-2639197.html
[13] Mureji Fatunde, “The Race to Produce Rare Earth Elements,” MIT Technology Review, January 5, 2024, https://www.technologyreview.com/2024/01/05/1084791/rare-earth-materials-clean-energy/
[14] Gracelin Baskaran and Meredith Schwartz, “What to Know About the Signed U.S.-Ukraine Minerals Deal,” CSIS, May 1, 2025, https://www.csis.org/analysis/what-know-about-signed-us-ukraine-minerals-deal
[15] “US Strategic Minerals Signs MoU on Critical Minerals in Pakistan,” US Embassy and Consulates in Pakistan, September 8, 2025, https://pk.usembassy.gov/u-s-strategic-metals-signs-mou-on-critical-minerals-in-pakistan/
[16] Henry Farell and Abraham Newman, “Weaponized Interdependence: How Global Economic Networks Shape State Coercion,” International Security 44, no. 1 (2019): 43, https://direct.mit.edu/isec/article/44/1/42/12237/Weaponized-Interdependence-How-Global-Economic.
[17] Jasmine Owens and Tara Drozdenko, “The DRC and America’s Nuclear Weapons,” Outrider Foundation, February 28, 2019, https://outrider.org/nuclear-weapons/articles/drc-and-americas-nuclear-weapons
[18] John Paul Rathbone, Max Seddon and James Kynge, “How Israel’s ‘Operation Grim Beeper’ Rattled Global Spy Chiefs,” Financial Times, December 27, 2024, https://www.ft.com/content/f578b6c0-d534-4a04-ae25-3b97d11b6e71
[19] Timothy McLaughlin, “A Rebel Army Is Building a Rare-Earth Empire on China’s Border,” Bloomberg, July 18, 2025, https://www.bloomberg.com/news/features/2025-07-18/as-us-and-china-feud-over-rare-earths-rebels-control-myanmar-s-mines
[20] “MI6 'Green Spying' on Biggest Polluters to Ensure Nations Keep Climate Change Promises,” Sky News, April 30, 2021, https://news.sky.com/story/mi6-green-spying-on-biggest-polluters-to-ensure-nations-keep-climate-change-promises-12286458
[21] Shawn Benson, “Intelligence After Next: Deciphering Ubiquitous Technical Surveillance with Data-Driven Analytics and Artificial Intelligence,” MITRE Corporation, June 11, 2024, https://www.mitre.org/news-insights/publication/deciphering-ubiquitous-technical-surveillance
[22] Robert Dover, “SOCMINT: A Shifting Balance of Opportunity,” Intelligence and National Security 35, no. 2 (2020): 227, https://www.tandfonline.com/doi/abs/10.1080/02684527.2019.1694132.
[23] “The Nevernight Connection,” FBI – Federal Bureau of Investigation, September 30, 2020, https://www.youtube.com/watch?v=N5V7G9IBomQ
[24] Christo Grozev, “Socialite, Widow, Jeweller, Spy: How a GRU Agent Charmed Her Way Into NATO Circles in Italy,” Bellingcat, August 25, 2022, https://www.bellingcat.com/news/2022/08/25/socialite-widow-jeweller-spy-how-a-gru-agent-charmed-her-way-into-nato-circles-in-italy/
[25] “Ubiquitous Technical Surveillance Has Made Spying More Difficult,” The Economist, July 1, 2024, https://www.economist.com/technology-quarterly/2024/07/01/ubiquitous-technical-surveillance-has-made-spying-more-difficult
[26] “Revealed: the Advanced Technology Held in Our Passports,” Thales, March 15, 2024, https://dis-blog.thalesgroup.com/identity-biometric-solutions/2024/02/22/revealed-the-advanced-technology-held-in-our-passports/
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[28] David Gioe, “‘The More Things Change’: HUMINT in the Cyber Age,” in The Palgrave Handbook of Security, Risk, and Intelligence, ed. Robert Dover, Huw Dylan, Michael S. Goodman (London: Palgrave Macmillan, 2017), 215
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### Inside America’s New Defence Tech Ecosystem

Emerging technologies are now at the heart of modern geopolitics and defence planning. The race for dominance is most evident between the United States (US) and China, with both regarding Artificial Intelligence (AI) and autonomy as elements in future conflicts. While the US Air Force Secretary Frank Kendall has described it as a technology-driven arms race, a 2024 Department of Defence (DOD) report to Congress and a Congressional Research Service study on emerging military technologies note that China has already made significant gains in AI and autonomous systems. This has sharpened the urgency for the US to maintain an edge.


This growth is less about a sudden surge and more about how private innovation is aligning with state priorities, fueling the broader US-China technology rivalry.

The private sector is also deeply involved in this competition. While the private sector’s engagement in defence is not new, the scale and focus have shifted. For example, in the US, the number of startups working on autonomous systems alone has grown to 110, start-ups working on space technology to 84, and start-ups in Advanced computing and software to 134 in 2023. This growth is less about a sudden surge and more about how private innovation is aligning with state priorities, fueling the broader US-China technology rivalry.
Figure 1: Defence Tech Start-up Proliferation

Source: McKinsey & Company

Understanding the New Defence Tech Landscape
Figure 2 below compiles a catalogue of products developed by some of the leading US-based defence tech companies. These products are categorised by their primary functions, such as command and control, communications, or execution. Products with multiple roles are also highlighted to reflect their cross-functional capabilities.
Figure 2: Catalogue of Products by New Defence Tech Companies and their Categorisation

Source. Author’s compilation
Three focus areas emerge for the weapon systems from the above figure:


 	Dominance of Intelligence, Surveillance, and Reconnaissance (ISR) and Multi-Function Platforms: Emphasis on persistent sensing, surveillance, and intelligence with overlapping roles in command or execution. Prominent firms include Anduril, BlackSky, Planet Labs, and Hawkeye 360.
 	Rise of Software-Defined Command and Control: Emergence of cloud native, Scalable, AI-enabled command platforms that shorten decision cycles. Major firms in this domain include Palantir, Anduril’s Lattice, and Shield AI Hivemind
 	Tactical Edge AI and Autonomy Focus: Frontline autonomous systems and AI at the tactical edge. Prominent firms include Shield AI, Skydio, Anduril, and Dedrone.

These patterns also highlight how defence innovation is converging on a new design logic rather than isolated products.
Towards this, companies are prioritising three interconnected principles:
Modularity: These systems are designed to ensure individual parts can be upgraded or replaced without redesigning the entire platform. This approach, which the Pentagon refers to as the Modular Open Systems Approach (MOSA), facilitates easier technology upgradation, reduces costs over the life of a programme, and brings in multiple suppliers to compete on different parts of the system.
Scalability: Platforms can scale from small-unit missions to theatre-level deployments, allowing militaries to expand capacity without redesigning core systems.
Network Centricity: Every product is built to plug into wider digital networks, enabling seamless data sharing and coordinated operations across services and allies.
Furthermore, the products are designed not only for military missions but also for dual-use commercial use-cases and humanitarian assistance and disaster relief (HADR) operations. This reflects a broader trend where commercial-grade innovation and cost-effective modularity are increasingly displacing traditional, purpose-built defence hardware, enabling faster adaptation and broader operational relevance across sectors.

Institutional Shift in Defence Tech Philosophy
Initiatives such as the Defence Innovation Unit (DIU) and AFWERX exemplify the US DOD’s pivot toward rapid prototyping, dual-use innovation, and direct collaboration with startups. According to their official website, DIU exists to “rapidly prototype and field dual-use capabilities that solve operational challenges at speed and scale,” enabling commercial technology to move into military use on short timelines. The Replicator Initiative under DIU aims to deploy thousands of autonomous systems within 18 to 24 months—a pace that challenges traditional DOD timelines.
Embedded within the Air Force Research Laboratory, AFWERX combines its Ventures, Spark, Prime, and SpaceWERX divisions into a single innovation pipeline that connects emerging companies to Air Force and Space Force missions. These elements reduce the procurement timeline to as little as 12 weeks and drive over 10,400 contracts totalling over US$7.24 billion since 2019. Concepts of Mosaic Warfare and Joint All-Domain Command and Control (JADC2) are reshaping force structure. Mosaic Warfare envisions combat systems as disaggregated, interoperable tiles rather than centralised platforms, enabling resilience and adaptability. JADC2 envisions integration of military capability across domains into a real-time, AI-powered decision network.


JADC2 integrates land, air, sea, space, and cyber domains into a unified network, utilising AI and real-time data to provide commanders with a comprehensive view of the battlefield and facilitate faster, more accurate decision-making.

Concepts of Mosaic Warfare and JADC2 are reshaping force structure. The term “mosaic” reflects how smaller force structure elements can be rearranged into many different configurations or force presentations, and Mosaic Warfare envisions combat systems as disaggregated, interoperable tiles rather than centralised platforms, enabling resilience and adaptability. JADC2 integrates land, air, sea, space, and cyber domains into a unified network, utilising AI and real-time data to provide commanders with a comprehensive view of the battlefield and facilitate faster, more accurate decision-making.
A notable development is the creation of the Executive Innovation Corps, a new US Army Reserve unit launched to embed senior technology leaders part-time and remotely into defence modernisation efforts. Commissioned on 13 June 2025, the unit’s initial members include Shyam Sankar (CTO of Palantir), Andrew “Boz” Bosworth (CTO of Meta), Kevin Weil (Chief Product Officer at OpenAI), and Bob McGrew (former OpenAI Chief Research Officer). Bringing experienced leaders from major technology firms directly into military modernisation gives the Army access to cutting-edge expertise and commercial best practices without requiring full-time service. This helps bridge the gap between rapidly evolving civilian technology and slower defence acquisition cycles, accelerating the adoption of AI, data, and software-driven capabilities in military operations.

Venture Capital Engagements and Lobbying
The venture capital community is increasingly aware of the rise of defence technology, which is why many firms are focusing on recruiting experts from the field to strengthen their credibility and access. These firms are embedding themselves within the Pentagon and congressional network. Venture Capitalists hire veterans and ex-DOD officials not only for insight into battlefield challenges but also for their access and credibility in competitive acquisition processes. Shield Capital has recruited several high-profile former defence officials to strengthen its ties to national security. Its National Security Advisors Board is filled with former national security officials. Shield Capital also hosts national security hackathons in collaboration with DIU, SOCOM, and the Chief Digital and Artificial Intelligence Office, positioning itself at the intersection of policy and innovation.


The integration of intelligence, speed, and adaptability into defence platforms is no longer a future ambition but is becoming an active reality.

Other major VC firms, such as Founders Fund and Andreessen Horowitz, have also similarly drawn talent from within the military and defence community, signalling a growing preference for leadership with operational defence experience. These firms are also leveraging media narratives and advisory roles to align Pentagon agendas with Silicon Valley’s interests, effectively creating a new lobbying class that merges venture capital with national security policy.

Conclusion
The rise of software-defined, AI-integrated, and modular defence systems signals a fundamental shift in how military power is being reimagined. The integration of intelligence, speed, and adaptability into defence platforms is no longer a future ambition but is becoming an active reality. For India, this evolution offers important cues. Programmes such as IDeX, DAIC, and DAIPA show that early steps have been taken to support innovation and AI integration in defence. However, as global players move toward more adaptive and integrated systems, there is a growing need for India to keep pace by enabling faster development cycles, closer collaboration between users and innovators, and a stronger focus on technologies suited to its own strategic needs. The priority should be to build systems aligned with India’s unique operational requirements, particularly across domains such as space, edge autonomy, and real-time command platforms. As the architecture of modern warfare continues to evolve, India’s ability to adapt, absorb, and innovate at scale will be crucial in shaping its strategic autonomy and defence resilience.



This commentary originally appeared in Observer Research Foundation.

### Developing an Effective Trilateral Partnership

The relationship between India and China is one of Asia’s great paradoxes. The two nations are continental neighbours and civilizational peers, and their bilateral trade in FY 2024-2025 amounted to approximately $128 billion,  signifying a deep economic co-dependence. Yet, this economic reality is built upon a foundation of growing amount of strategic distrust, frozen by the decades-old border dispute which rose to the fore again in the Himalayas in 2020.
Indian scholars have often noted another source of friction as China’s strategic calculus perceives India as a South Asian power, not an emerging global one, leading to a persistent disconnect. These issues are further compounded by fundamental differences in foreign policy; Beijing often segregates political disputes from economic engagement, while New Delhi defines bilateral collaboration more holistically where a secure border is the non-negotiable prerequisite for a healthy economic relationship.


Indian scholars have often noted another source of friction as China’s strategic calculus perceives India as a South Asian power, not an emerging global one, leading to a persistent disconnect.

This Chinese approach is evident even in the US-China dynamic, where massive trade coexists without strategic trust. However, the situation is different with India, as India’s External Affairs Minister S. Jaishankar has emphasized, the relationship“ cannot be normal if the peace and tranquillity in the border are as is disturbed”. This principle, the primacy of the border, makes strategic trust an essential, not optional, ingredient for any meaningful deepening of India-China ties. Without it, the immense economic potential remains capped by political and security risks.
Instead of India and China pursuing a relatively uncertain bilateral relationship, a trilateral framework involving the UAE offers a more stable and pragmatic path forward. This model creates a new geoeconomic architecture where the unique strengths of each nation can be leveraged for mutual gain. India offers its vast and growing market, immense human capital and a rapidly scaling manufacturing base.
In this framework, it would secure access to UAE and Chinese capital along with Chinese technology for its development. China offers its world-class technology, advanced logistics and vast capital reserves. A UAE-based framework would grant it a de-politicized and reliable gateway into the Indian market. The UAE also offers its established neutrality, world- class infrastructure, sophisticated financial centres, and robust legal systems. As an economic hub connecting Asia’s two largest engines of growth, it would further its ambition of being a global nexus for capital and trade.


As an economic hub connecting Asia’s two largest engines of growth, it would further its ambition of being a global nexus for capital and trade.

It is precisely within the China-India deadlock that the UAE emerges as a unique geoeconomic player. Having successfully developed its foreign policy to one of strategic neutrality and business-first pragmatism, the UAE has cultivated deep, trusted and independent relationships with both Asian giants. It is positioned not as a political mediator, but as a geoeconomic guarantor, and its role extends beyond providing capital.
Given its formation of deep strategic and economic alliances with both New Delhi and Beijing, the UAE is uniquely positioned to act as a guarantor of trust. Both India and China have an interest in maintaining their strong relationship with the UAE, so they have a powerful incentive to honour agreements made under its aegis. This structure creates a ‘trust-by-proxy,’ where the UAE’s credibility underwrites the commercial engagement, allowing the two South Asian powers to realize common geoeconomic interests.



This commentary originally appeared in AGDA.

### AI’s Expanding Water Footprint and the Case for Circularity

While Artificial Intelligence (AI) holds a world of possibilities in its application, its impact on the environment demands a closer scrutiny to ensure its sustainable use and deployment. Studies have shown that AI data centres produce electronic waste, consume large amounts of water, rely on critical minerals and rare elements, and use massive amounts of electricity. This presents a paradox: as AI’s computing capabilities increase productivity and conserve resources, they simultaneously drive an exponential rise in energy and water consumption. Training ChatGPT, for example, consumes 1.287 gigawatt-hours of electricity, which is almost equal to the annual electricity consumption of 120 American households. Large-scale data centres, on the other hand, are water guzzlers as they require enormous amounts of water during construction and, once operational, to cool electrical components.


These resource-development-community-city tensions are not incidental but inherent to the socio-technical assemblage that sustains AI systems.

In an already water-stressed world, these trade-offs must be carefully examined as data centres have created tension between technological progress and ecological sustainability in many places. For instance, Chile instituted its first National Artificial Intelligence Policy in 2021, updated in 2024, to transform the country into a ‘global hub’ in the Southern Hemisphere by attracting technology investments to overcome digitalisation and sustainability challenges. In 2019, Google proposed constructing a second data centre in the Cerrillos municipality of Santiago, Chile, with an investment of US$200 million, designed to extract 169 litres of water per second to cool its servers. The project faced resistance from the local community, demonstrating how AI-led infrastructure expansion can intersect with everyday lived experiences and climate extremities, including drought, groundwater depletion, and chronic water inequality.
These resource-development-community-city tensions are not incidental but inherent to the socio-technical assemblage that sustains AI systems. As Bruno Latour argues, the AI ecosystem is a hybrid assemblage of servers, algorithms, minerals, water, workers, energy grids, and ecosystems functioning together as co-constituting agents. The ecological footprint of AI, therefore, is a direct expression of the heterogeneous network it mobilises and not a side effect. The important question is how to align the growth of AI and its resource demands with planetary boundaries and current ecological contexts.

AI and Water Consumption
The water footprint of AI extends to three areas: i) on-site data centre cooling, ii) electricity generation, and iii) semiconductor manufacturing. Typically, electricity generation followed by cooling accounts for the largest share of water use by AI. A comparative evaluation of the water consumption of Llama-3-70B and GPT-4 in 11 African countries found that generating a 10-page report with Llama-3-70B consumed about 0.6 litres of water, while generating the same report with GPT-4 consumed about 53 litres. With 33 percent of the global population still offline, this demand is expected to increase in the future.


It is also important to consider how such water demand and consumption affect region-specific water geographies, as the value of one litre of water varies by location depending on prevailing levels of water stress.

AI-related water consumption also varies with season and the time of day. Research shows that water consumption is 23 percent higher in the summer than in the winter due to increased cooling demands. Overall, this water demand is on an upward trajectory. For example, Google’s data centres consumed 5.6 billion gallons of water in 2023, a 24 percent increase from 2022. These data centres house thousands of servers that run 24/7, generating immense heat and risking failure from overheating if not adequately cooled. In 2022, cooling issues during a heatwave in the United Kingdom forced a shutdown of Google and Oracle data centres in London. Amazon, meanwhile, has more than 100 data centres worldwide, each with 50,000 servers to provide cloud computing services.
It is also important to consider how such water demand and consumption affect region-specific water geographies, as the value of one litre of water varies by location depending on prevailing levels of water stress. Figure 1 below shows that most data centre hubs are being built in regions already facing water scarcity, drought, flooding, and declining water quality. For example, although Caucaia, a city in northeast Brazil, is water-stressed, tech companies have set up data centres there due to its strategic location near international undersea data cables.
Figure 1: Data Centres in Water-Stressed Regions

Source: The Guardian
India’s projected data centre construction boom, driven by digitalisation, cloud adoption, and initiatives such as the Data Centre Policy, is expected to put further pressure on basic infrastructure in an already water-stressed country. Megacities, including Mumbai, Chennai, and Hyderabad, are already grappling with climate vulnerability, water shortages, and competing domestic and industrial water demands. The expansion of water-intensive digital infrastructure in such sensitive hydro-ecological contexts reflects a structural imbalance and raises concerns about the ecological externalities of digital transformation.

Pathways Towards Circularity
Recognising the ecological footprint of AI, the European Union and the United States (US) have begun introducing legislation to address these challenges, although such policies remain exceptions rather than the norm. Approximately 80 percent of the water used in data centres evaporates, while the remainder is discharged into municipal wastewater systems. This presents significant scope for water reuse and for embedding circularity within the AI water ecosystem to minimise its overall water footprint.
In Washington state, US, Microsoft and the City of Quincy have collaborated to construct the Quincy Water Reuse Utility to treat discarded cooling water from data centres for reuse, thereby reducing the pressure on potable water sources. A similar approach is deployed in Douglas County, Georgia, where Google uses municipal wastewater to cool its data centre. Similarly, 20 Amazon Web Services (AWS) data centres use treated wastewater for their cooling, with plans to expand this practice in more than 120 locations across the US by 2030.


Approximately 80 percent of the water used in data centres evaporates, while the remainder is discharged into municipal wastewater systems. This presents significant scope for water reuse and for embedding circularity within the AI water ecosystem to minimise its overall water footprint.

In some places, on-site rainwater harvesting can supplement cooling needs while reducing stormwater runoff. Discarded cooling water from data centres can also be used for irrigation. Meta, for example, has invested in water infrastructure that allows spent cooling water to be used to irrigate non-edible crops in Idaho, US. Similarly, Denmark’s Odense Data Center uses outdoor air for cooling through indirect evaporative cooling technology. It uses the residual heat to warm local settlements. After cooling the servers, the heated air is used to heat water via water coils, connected with the district’s heating network, reaching the local community. This heat recovery infrastructure has the capacity to recover 100,000 MWh of energy per year, enough to warm 6,900 homes.
These examples demonstrate that embedding circularity into the AI ecosystem is feasible and necessary. Studies have found that in areas where practices such as closed-loop cooling systems, wastewater reuse, and rainwater harvesting are implemented, potential freshwater savings of 50-70 percent are feasible. While such initiatives are largely concentrated in high-income geographies, they illustrate the possibilities for global scale-up.

Conclusion
Water, energy, and computing, today, are interlinked systems — interdependent, dynamic, and vulnerable. A systems-thinking approach is needed to govern this complex reality. To ensure sustainability, the relationship between water and AI must be envisioned as inherently reciprocal. On the one hand, minimising the water footprint of AI infrastructure through smarter, circular, and efficient use of resources is a non-negotiable imperative. On the other hand, AI’s analytical and predictive capabilities must be leveraged for data-driven decision-making to address water crises and governance challenges. Balancing technological progress with environmental stewardship and water conservation is an imperative, as it intertwines with our digital futures.



This commentary originally appeared in Observer Research Foundation.

### The Golan Heights: From Demilitarisation To a Pursuit of Peace

The dramatic collapse of the Ba’athist Syria under the Bashar al-Assad government in December 2024 triggered a dramatic recalibration of the Golan Heights’ status in West Asia. Israel rapidly asserted military control over the remaining Syrian portions of the territory, leaving little space for ambiguity in its strategic calculus. Benjamin Netanyahu asserts the stance that the Israel Defence Forces (IDF) presence in the region acts as a deterrent, echoing historic domestic anxieties of renewed Syrian aggression. However, Ahmed al-Sharaa's newly consolidated Hayat Tahrir al-Sham (HTS) regime has pivoted sharply from the historic hostility. Favouring Israel, Syria has refused to engage with Hamas, expelled factions of the Popular Front for the Liberation of Palestine and Hamas, arrested two senior Palestinian Islamic Jihad figures, and attempted to thwart smuggling attempts between Iran and Hezbollah. With Netanyahu’s demand for the complete demilitarisation of Southern Syria in the provinces of Quneitra, Deraa, and Suweida, is it a possibility that Sharaa could cede control of the region? The answer would be no unless he wants to face catastrophic domestic outrage, which could impact his nascent government and fracture his image. Thus, Sharaa’s “quest for inner grace” sparks curiosity about whether the new Syrian regime is merely seeking legitimacy and co-operation from key players such as the United States (US), or if it has any possible past links with Israel.


It is widely speculated that this goodwill project was a back channel that Israel used to silently fund 12 Syrian rebel groups, with the notorious media reports of 2017 identifying the specific group as the Fursan al-Jawlan ("Knights of the Golan")

Israeli Involvement in the Syrian Civil War
In 2019, an outgoing Israeli military commander confirmed in an interview that his government had been arming some anti-Assad rebels in Syria. Over the years, there have also been news reports of Syrian rebels being treated in Israeli hospitals. Under “Operation Good Neighbour,” Israel sought to leverage humanitarian aid and other altruistic initiatives, such as public education and economic incorporation, to turn the dissatisfied Syrians in the Golan region against the Assad government. The 2011–12 incidents at the Majdal Shams square, resulting in the Syrian Civil War, are an epitome of the same. It is widely speculated that this goodwill project was a back channel that Israel used to silently fund 12 Syrian rebel groups, with the notorious media reports of 2017 identifying the specific group as the Fursan al-Jawlan ("Knights of the Golan"), a group based in the rebel-held town of Jubatha al-Khashab that lies just opposite the Druze town of Buq'atha in the Israeli-held Golan Heights. The identities of other rebel groups have not been disclosed, but many internet reports portray these funds in a different light. It is speculated that Israel funded these rebel groups to protect the power vacuum along the border from being usurped by Iran-backed Hezbollah and other such linked outfits.

HTS’ Fundings & the Türkiye connection 
The new climate in Damascus and intermittent signs of “progress” of bilateral relations for the first time since the 1973 Yom Kippur war pose certain questions, such as whether or not Israel in any way funds HTS.
Fursan al-Jawlan was a faction of the Free Syrian Army that was ideologically distinct from HTS because of its nature. HTS is an offshoot of the al-Qaeda outfit and remains a designated terrorist group by the United States (US) and the United Nations Security Council (UNSC). So, Israel did not fund HTS, but the other opposing secular groups served the same purpose as HTS. Moreover, HTS has historically been an independent self-funding rebel grouping because it considered itself to be either apostates or infidels. However, in the new political environment, they want to actively rebuild relationships with other countries to legitimise the government internationally.
Then President-elect Donald Trump told a press conference that Türkiye was behind Assad's downfall, calling it an "unfriendly takeover."  al-Sharaa, with roots from Golan, is claimed to have established backdoor intelligence channels with the US. Some speculate they may have sold intelligence to Türkiye as well through intermediaries such as NGOs. It is essential to note that one of the cornerstones of Sharaa’s policy is to lift Western sanctions and enable Syria to engage globally, especially with the US. If Syria wants to achieve a relationship with the US, it will have to become a deterrent of Islamic and Jihadist forces such as Hezbollah, Islamic Revolutionary Guard Corps (IRGC), and ISIS and ensure their end of the bargain for peace and unity in the region. The realpolitik pursued by non-state actors such as Hamas and the Houthis fragments Arab consensus and impedes multilateral conflict resolution mechanisms, contributing to heightened regional fragility.


Then President-elect Donald Trump told a press conference that Türkiye was behind Assad's downfall, calling it an "unfriendly takeover." 

This translates to them maintaining cordial relationships with Israel and Türkiye. Syrian rebels have received refuge in Türkiye. At the Bab-al-Hawa crossing on their official border with Türkiye, HTS collected up to US$15 million per month as a toll fee. Israel receives unequivocal support from the Trump administration in a “blanket manner” without any preconditions, which undermines other key players in the region who have symbolic influence, such as Saudi Arabia, the United Arab Emirates (UAE), and Türkiye.

Conclusion 
Despite Sharaa's recent diplomatic overtures, Netanyahu has maintained a firm position on two critical issues: Israel refuses to withdraw to the pre-2024 demarcation line and continues to insist upon UN-regulated demilitarisation of the Southern Syrian Region. This impasse has characterised bilateral relations since early 2025, with neither side willing to modify its core demands.
The normalisation of Israeli-Syrian relations faces significant structural constraints that have produced a diplomatic stalemate throughout 2025. Syria's categorical rejection of participation in the Abraham Accords until Israeli forces withdraw from the Golan Heights further circumscribes potential diplomatic frameworks for engagement.​


Syrian President al-Sharaa has explicitly conditioned any final peace agreement on Israel’s withdrawal to pre-December 8, 2024, boundaries.​

The Golan Heights question is the principal obstacle to bilateral progress. Syrian public sentiment towards the occupation remains deeply adversarial, constraining the Sharaa government's negotiating latitude on territorial concessions. This position reflects both domestic political imperatives and Syria's limited capacity to sustain renewed conflict, given its economic fragility. Syria's political trajectory remains uncertain amid contradictory pressures. While the Assad government maintained steadfast opposition to Israel, Damascus cannot reconcile with Israel and Washington without addressing territorial disputes or jeopardising regime stability. The Trump administration has demonstrated a willingness to mediate agreements that disproportionately favour Israeli security interests, as evidenced by Netanyahu's maximalist negotiating positions. However, the Sharaa government appears unwilling to accept arrangements that perpetuate historical grievances or legitimise territorial losses inherited from the Assad era. Syrian President al-Sharaa has explicitly conditioned any final peace agreement on Israel’s withdrawal to pre-December 8, 2024, boundaries.​ Sustainable Israeli-Syrian normalisation requires Israel’s endearing commitment to genuine confidence-building measures rather than unilateral demands. Progress depends on constructing non-coercive frameworks that address the Golan Heights’ sovereignty through equitable settlements accommodating both parties' core security interests. Without substantive Israeli engagement on territorial status and phased withdrawal mechanisms, diplomatic pathways remain foreclosed.​



This commentary originally appeared in Observer Research Foundation.

### India and the UAE Could Define ‘Eastern’ Ethics for AI

Conversations about cooperation in Artificial Intelligence (AI) usually revolve around material engagement, using technology, collaborating on innovation and organising talent pipelines.
However, without an overarching ethical framework, the progress of AI is bound to be obtuse, perhaps even perilous. Concerns that ethical modelling in AI should not replicate the Anglocentrism of most of the world’s knowledge systems are leading to the bifurcation within the thinking on AI ethics between “Western” and “Eastern” models.
As AI becomes integral to our everyday lives, the question of how to infuse it with human values has become critical. Yet, “human values” are not monolithic. The global conversation on AI ethics has been largely dominated by Western perspectives, overlooking a rich tapestry of Eastern metaphysical traditions.


The global conversation on AI ethics has been largely dominated by Western perspectives, overlooking a rich tapestry of Eastern metaphysical traditions.

Eastern and Western models of AI ethics differ in profound ways in their attitudes on questions like “what is the nature of truth”, “what is more important–individual or societal well-being”, and “what kind of information should be curtailed or restrained for the common good”. While Western ethics in AI primarily arises from analytical rationalism and individual rights, Eastern ethics often prioritise holistic harmony, interconnectedness, and community responsibilities. Each shapes AI governance frameworks in distinctive directions.

Western vs Eastern Paradigm
Western philosophy roots its ethical discourse in dualistic models, materialism and the pursuit of individual rights, with foundational values such as privacy, utility, autonomy, and transparency at the core of its AI regulatory frameworks. The dominant Western paradigm, influenced by the Enlightenment and scientific empiricism, approaches AI through the lens of risk-based regulations that underscore functional capability assessments, rights-based protections, and utility maximisation. Questions such as “Does AI violate individual freedom?” or “How do we ensure fairness in automated decisions?” reflect this tradition.
Conversely, Eastern philosophical systems underline collective well-being, compassion and interdependence. In AI ethics, this translates into a focus on harmony, societal benefit, and ideas like a post-anthropocentric view of the use of technology that highlights empathy for all sentient beings.
This variance is revealed in practice. Eastern-inspired AI ethics treat digital minds, even hypothetical ones, as worthy of respect and ethical attention, with “sacred code[1]” approaches viewing the development of AI as a spiritual as well as a technical obligation. In the West, the emphasis on universal rules and rights, and utilitarianism, has led to an AI ethics focused on principles like individual privacy, autonomy and fairness. The EU’s General Data Protection Regulation, for instance, is a landmark regulation built on the sanctity of an individual’s data. In this view, a “good” AI respects personal freedoms, avoids discriminating against individuals and is transparent in its decision-making to ensure accountability. The United States (US) approach to algorithmic fairness and transparency is centred on protecting individual rights and reducing risks to consumers, favouring compliance, explainability and accountability. These frameworks, while pioneering global standards, sometimes face challenges adapting to contexts where community benefit outweighs individual utility.​


The EU’s General Data Protection Regulation, for instance, is a landmark regulation built on the sanctity of an individual’s data.

In the eastern framing, an AI is considered “ethical” if it enhances social cohesion, aids in collective development and operates with compassion. While this can be misinterpreted to justify intrusive surveillance, its core ideal is to use technology to foster a more interconnected and supportive society. The focus shifts from “what are the AI’s rules?” to “what is the AI’s role and responsibility within the community?”

India’s and the UAE’s approach
Eastern frameworks, especially in countries like India and the United Arab Emirates, emphasise inclusive development, balancing innovation with societal responsibilities, as well as broader notions such as human-centric AI and equitable technological access. Here, ethical frameworks are designed not only to mitigate risk but to actively promote social welfare, dignity, and human flourishing for the widest possible constituency.​ The difference between this and Western-style utilitarianism is two-fold. In the ‘Eastern’ version, the focus is far more on community needs than on individual rights, and there is a much greater focus on inner development and growth rather than an external, societal rules-based approach. The Eastern way highlights interconnectedness, the dissolution of ego boundaries, and the need to surrender to higher ethical and moral forces. In contrast, utilitarianism presumes stable agents making rational calculations to maximise collective utility.
India and the UAE have been considered here because these two countries, while representing differing approaches to state and government structures, and shared disposition towards heightened security measures, have increasingly converged on outcomes of providing greater access to, utility from digital public goods for their citizens.


The Indian framework prioritises safety, reliability, privacy, accountability, and a thoughtful commitment to non-discrimination, positioning AI as a tool for public good secured in collective values rather than individual rights alone.​

India’s approach to AI ethics is grounded in constitutional values of inclusivity, equality and societal advancement. “AI for All” is a guiding principle–one that insists technology serve even the most marginalised demographics, bridging digital divides and reinforcing positive human values throughout AI development. The Indian framework prioritises safety, reliability, privacy, accountability, and a thoughtful commitment to non-discrimination, positioning AI as a tool for public good secured in collective values rather than individual rights alone.​
The UAE, meanwhile, balances rapid AI technological adoption with the development of standards of ethical governance that explicitly integrate Eastern values of harmony and interconnectedness. The country’s “AI Principles and Ethics” guidelines explain core values: fairness, accountability, transparency, explainability, resilience, safety, human dignity, and sustainability. The UAE treats these guidelines as a “living document”, meaning ethical standards continuously progress to address new challenges and civic needs while ensuring that all members of society, regardless of background, benefit. The UAE also links AI ethics with sustainability, establishing a strong connection between technology, environmental stewardship and long-term societal well-being.​
The two countries already have an existing agreement to collaborate on the development and application of AI technologies in space, energy, healthcare and supply-chain sectors. However, they may have a more critical role in constructing eastern ethics for AI.
Ethics need to be practised, not just written. To promote the practicality of Eastern AI ethics, India and the UAE could take several steps.
One would be to draft an “Eastern AI Ethics Charter” that encompasses overarching principles and sector-specific regulations applicable regionally. For example, an AI system deployed for targeted government benefit distribution can be programmed not only for efficiency but also to ensure inclusivity and non-harm, prioritising the most vulnerable and avoiding bias. This means the AI is explicitly trained to detect and correct for historical biases (caste, gender, or rural/urban divides).
Another example could be: The AI flags a cluster of families as "high-risk for malnutrition" because it correlates low ration supplies with a recent failure of the local water pump. It then alerts the rural government social worker, not with a punitive "this person is at risk" message, but with a supportive one: "Community cluster 'A' may face nutritional challenges. Recommend prioritising visits and checking on 'X' and 'Y' supplies."


The two countries could also act globally through promoting a pluralistic way of thinking in international forums and contributing to discussions on ethical governance at the UN, OECD, BRICS and the G20.

Another approach would be to work on co-piloted projects in the areas of health care and education to assess the feasibility of ethical frameworks. It would be important to invest in training for engineers, doctors, teachers and policymakers on algorithmic fairness, bias mitigation and ethical reasoning. The two countries could also act globally through promoting a pluralistic way of thinking in international forums and contributing to discussions on ethical governance at the UN, OECD, BRICS and the G20.
They could also move towards creating a new moral vocabulary for technology. The West has codified rules of rights and threats, while the East can develop ideas of principles for relations and responsibilities. India and the UAE can collaborate to create a new and culturally sensitive, internationally accepted system of ethics. Such a collaboration would be an example of ethical interoperability needed in the Global South.



This commentary originally appeared in Observer research Foundation.



[1] This simply means an approach to coding (or broadly technology creation) where the emphasis is not only on how efficiently the code or technology works but also ethical or moral aspects of what it does. So, as an example, not only how smoothly X or Instagram works, but also what these products do to human attention, and brains in what is increasingly called the ‘attention economy’.

### Strengthening Media and Information Literacy in Africa

The digital world has accelerated thedemocratisation of information, rendering every user a de facto editor, fact-checker, and amplifier. Social media plays an integral part in shaping societies’ collective perception, influencing political discourse, and even disrupting peace.
Although it has empowered voices once unheard, it has also left citizens vulnerable to hearsay, propaganda, and disinformation campaigns. For Africa, a continent marked by rapid technological adoption, this presents both opportunity and peril. In 2024, a pivotal survey on political disinformation in Africa revealed that a significant majority of respondents in Botswana, Kenya, Mauritius, Nigeria, and South Africa prefer social media over traditional news sources like radio, television, and websites, leaving them increasingly vulnerable to disinformation. This shift underscores a broader global trend highlighted in the World Economic Forum's Global Risks Report, where misinformation and disinformation were identified amongst the top global threats, surpassing even extreme weather events.
Disinformation has the power to disrupt elections, fuel communal tensions, and weaken democratic institutions. Disinformation campaigns are often orchestrated by both domestic actors and foreign powers. Thus, strengthening Media and Information Literacy (MIL) within the African region is essential, not just as a civic skill but even as a tool for peace building.

Africa’s Vulnerabilities 
Africa’s information environment carries several distinctive vulnerabilities. First, the speed of digital penetration has exposed vast populations to the online space without the gradual development of information habits. The absence of prior exposure to curated media could make it difficult to distinguish credible information from propaganda.
In 2021, Nigeria banned Twitter (now X) after the platform deleted a tweet by then-President Muhammadu Buhari that was deemed to incite violence. The government claimed the platform was undermining national stability, but the move was widely criticised as censorship. The seven-month ban revealed that restrictive local regulatory steps do little to curb misinformation and instead weaken public trust, this is one crucial reason why Africa’s fight against disinformation must prioritise MIL.

While many can navigate devices with ease, far fewer can evaluate, verify, and interpret the flood of information they encounter.
Second, the social media ecosystem in Africa is dominated by global platforms with weak local moderation systems. Content in African languages such as Amharic, Oromo, Hausa, etc., often slips through algorithmic filters, making disinformation particularly potent. Third, Africa’s youth, being digital natives, thus they play an integral role in amplifying the dissemination of false information,  through peer networks.
Finally, the geopolitical dimension cannot be ignored. Competing narratives from China, Russia, and Western countries are increasingly shaping African online discourse. There have been numerous instances where actors deploy state-sponsored media outlets, bot networks, and disinformation campaigns to influence policy preferences, geopolitical alignments, and public opinion. For example, during elections in Mali and the Central African Republic, Russian-linked networks such as the Wagner Group’s media arms coordinated online campaigns to spread disinformation within the African region.

The Spread of False Narratives 
False narratives now travel faster than institutions can respond. A 2024 report by the Africa Center for Strategic Studies identified 23 disinformation campaigns targeting African countries, with 16 linked to Russian actors. Political parties reportedly paid influencers to spread misinformation, including fake endorsements and fabricated narratives, as seen in the 2023 Nigerian presidential elections. This manipulation of public perception underscores the vulnerability of electoral processes to digital interference.
Even the health sector is not immune to these challenges. In Uganda, during the 2022–2023 Ebola outbreak, misinformation campaigns falsely claimed that the disease was exaggerated or caused by witchcraft, undermining public health efforts and complicating containment measures. During the COVID-19 outbreak, it was revealed by an online survey conducted amongst 452 citizens of Cameroon, Nigeria, and Senegal, that the abundance of conflicting information about COVID-19 made them reluctant to adopt public health recommendations.
Efforts to combat this digital disinformation are underway, with organisations like Fact-Check Ghana, UNESCO and African Centre for Media & Information Literacy (AFRICMIL) working to promote fact-based public discourse and media literacy. However, the rapid evolution of digital platforms and the increasing sophistication of disinformation tactics pose significant challenges to these initiatives.

Digital Uptake Without Critical Literacy
In a region often constrained by resources, growing digital adoption has become a catalyst for economic activity and social mobility. It reflects high levels of functional digital literacy i.e. the everyday ability to communicate, transact, and participate online. Yet the functional use of the digital landscape should not be mistaken for critical literacy. While many can navigate devices with ease, far fewer can evaluate, verify, and interpret the flood of information they encounter.

Africa’s high baseline of digital literacy has not yet been matched by a comparable level of MIL, leaving communities vulnerable to the unchecked spread of misinformation and deliberate disinformation campaigns.
While Africans have embraced mobile tools, the ability to evaluate sources, verify claims remains underdeveloped till date. A study by Camri in 2020 across seven African countries found that MIL is largely absent, with South Africa the only nation to include even limited misinformation literacy in its school curriculum. Internet penetration itself is uneven; as of 2023, only about 37 percent of Africans were online, and just 27 percent used mobile internet. These gaps mean that while connectivity is growing, the region remains acutely vulnerable to misinformation and disinformation. The paradox is clear - people are more connected than ever, yet less equipped to critically judge the content they consume and share.
In such an environment, the responsibility to judge what is shared and consumed online becomes not merely personal but collective. In a digital ecology where a false voice can amplify faster than a fact, the burden falls on each user to pause, scrutinise, and verify before acting.
This urgency sets the stage for a need to recalibrate the current landscape of MIL across Africa.

National and International Responses to the MIL Gap 
Across Africa, governments, civil society organisations, and international donors have launched initiatives to promote media literacy. Notably, the African Centre for Media & Information Literacy (AFRICMIL) has emerged as a continental reference point. In May 2025, the African Commission on Human and Peoples’ Rights and related bodies urged states to develop national media and information literacy policies, along with legal frameworks for regulating digital platforms and ensuring information integrity.  Such calls reflect growing recognition that piecemeal, donor-driven efforts must yield to structural regulation and policy support. UNESCO and other international organisations have also invested heavily in journalist trainings, workshops, and awareness campaigns in countries such as Nigeria, South Africa, and Ghana.
A particularly significant effort was UNESCO’s “Media and Information Literacy for Youth Civic Engagement in Africa” project. It reached over 2,400 youth leaders and 230 youth organisations in Burkina Faso, Burundi, Ethiopia, Gabon, Namibia, and Nigeria. More than half of the participants were women, and the programme deliberately embedded MIL principles into the policies of youth organisations, rather than limiting itself to one-off workshops. Participants were able to identify hate speech and disinformation, but also a shift in their everyday behaviour, their “language on social networks changed,” reflecting more responsible and civic-minded engagement. This shows that structured, well-designed initiatives can deliver tangible outcomes when they are integrated into institutional practice.
However, most programmes have focused on journalists or urban elites, while everyday users—the teachers, elders, health workers, or market women who are the real conduits of information, rarely receive systematic support. As a result, Africa’s high baseline of digital literacy has not yet been matched by a comparable level of MIL, leaving communities vulnerable to the unchecked spread of misinformation and deliberate disinformation campaigns.

Towards an African MIL Model
If Africa is to strengthen resilience against both misinformation and disinformation, it must develop a distinctly African MIL model. Such a model would need to cater to the local areas, languages, and community structures, while drawing lessons from global practices. Central to this effort would require the strengthening of fact checking organisations to institutionalise verification and simultaneously ensuring that MIL becomes a universal civic skill accessible to all citizens.
MIL needs to be introduced to the masses from the foundational level itself. That would require governments and educational institutions to embed MIL into school curricula and could also introduce training modules for teachers and professors within these institutes to ensure effective participation of all in understanding what MIL is all about.
Making people of rural areas and other informal networks aware about MIL and it’s importance forms crucial to address the misinformation crisis. The best way this information could reach them would be through their trusted sources such as health workers, local leaders, religious leaders, teachers, amongst others and should be disseminated. It would be important that this information is available in local languages.
While AI has been leveraged mostly to proliferate social media with false information, one cannot dismiss its crucial role in fighting the very same issue its proficient in creating. AI tools could prove advantageous for fact checking and local language moderation.
Fact-checking organisations such as Africa Check, Ghana Fact, Namibia FactCheck and Dubawa would play a critical role in identifying falsehoods and verifying claims. Yet their impact depends on more than debunking; it requires capacity-building, training, and collaboration with educators, journalists, and civil society. At the same time, every citizen must be equipped with the basic MIL skills to question, cross-verify, and interpret the information they consume daily.
Only when professional fact-checking structures and citizen-level literacy work in tandem can African societies build true resilience against disinformation, ensuring that digital connectivity translates into informed, democratic participation rather than confusion and control.



This commentary originally appeared in Observer Research Foundation. 

### The US War Department and the STEM Recalibration

The United States (US) is a significant investor in research and development (R&D) across various sectors, and its military R&D is a key driver of its superpower status. As per 2022 statistics, the US Department of Defense (DoD) consumes 38 percent of the total federal R&D funds. In 2023, the US defence R&D spending saw a massive hike, from US$73 billion in 2022 to US$89 billion, signalling preparation for major conflicts. In 2024, the DoD accounted for nearly 40 percent of the world's defence spending. For a long time, such extensive R&D spending drew science, technology, engineering and mathematics (STEM) talent from around the world, reinforcing US technological, economic and cultural power. This “American Dream” drew talent to work at the cutting edge of STEM, which had a big indirect DoD imprint via universities, national labs, startups, and the big defence contractors. However, for many domestic and international reasons, it has now mutated into the Department of War. This shift comes at a time when the US polity is becoming inward-looking and illiberal with overseas talent, raising a question of whether global STEM talent would empower the Department of War as it did its earlier avatar, the DoD?


The directive aims to incentivise a high-performance civilian and military workforce while streamlining offboarding processes to shed dead weight from the overall workforce.

On 5 September 2025, the US renamed the Department of Defense as the Department of War, reverting to the pre-1947 title. The White House Executive Order signed by US President Donald Trump has transmuted this Department with what the White House says “....focus on our own national interest and our adversaries’ focus on our willingness and availability to wage war to secure what is ours.” Executive Orders on defence matters in the US are typically bipartisan and are often not recalled. A decision as big as a change of such important nomenclature may not be overturned anytime soon, as it was in 1947. On 30 September 2025, US Secretary of War Pete Hegseth announced 10 new War Department directives, of which the one ‘Modern Workforce Management’ is relevant here. The directive aims to incentivise a high-performance civilian and military workforce while streamlining offboarding processes to shed dead weight from the overall workforce.

The Great American Dream of STEM Talent
STEM talent, especially from developing economies, during the 20th century, was motivated by the promise of opportunities and stable and progressive careers. Even during the Cold War, this talent largely leaned towards the US, drawn by the vividness of the American Dream and the perception of the US as a “Force for Good” with science as an endless frontier. After the Soviet Union’s fall, the US was often described as a hyperpower; although it engaged in numerous conflicts across the world, it maintained a narrative of acting as a ‘Force for Good’ and a force that was ‘of Defense’. The US-bound STEM talent was of two kinds: one that migrated for a fulfilling life with no angst against their homelands, and the other that migrated due to stifling conditions back home. However, the directive given by the Secretary of War now indicates that the US now seeks talent that is prepared for a protracted period of war, indicating that it would not be the same circumstance as it was during the last 80 years. 

R&D Policies: The US’s Biggest Export to the World
Many developing economies that once fed the US STEM pipeline have since absorbed lessons from US R&D policy. They now operate their own R&D policies modelled on the US but infused with native characteristics and necessities and constrained resources. In October 2025, Vietnamese Prime Minister Lê Thành Long announced work on a national plan to build high-quality human resources for advanced STEM sectors, with targets for 2045. Nigeria’s ‘Renewed Hope’ agenda under the leadership of President Bola Ahmed Tinubu includes the 3 Million Technical Talent (3MTT) project to develop a future-ready workforce. The directive aims to incentivise a high-performance civilian and military workforce while streamlining offboarding processes to shed dead weight from the overall workforce. The United Arab Emirates (UAE), under its talent-identification programme known as the ‘Hamdan Talent Scale’ intends to retain its domestic talent at the primary and secondary school levels, and train them as the country transitions from a resource-based to a talent-based economy.


The directive aims to incentivise a high-performance civilian and military workforce while streamlining offboarding processes to shed dead weight from the overall workforce.

The Dilemma of STEM Talent: Doves versus Hawks 
Today, STEM talent has multiple destinations and is increasingly retained at home, owing to progressive and anachronistic national policies that many countries have begun to espouse. STEM talent is often idealistic and peaceful by nature, wanting to be part of productive endeavours that are of global good—be it making vaccines, advancing sustainable technologies or pursuing interplanetary missions. Such projects are now feasible in several non-Western countries with their inherent competencies. A certain fraction of this international talent that once readily worked with or benefited from the DoD may now avoid association with the Department of War, irrespective of the humongous resources at this renamed department’s disposal. This pacifist set of people is difficult to attract or retain by institutions that have chosen to go from defence to offence. Furthermore, with the difference of geopolitical opinions emerging frequently between the US government and its allies and partners, it would become difficult for talent—be it individuals, startups and larger commercial entities—to convince their institutions, professional societies, clientele and stakeholders about their affiliation with the Department of War.


A certain fraction of this international talent that once readily worked with or benefited from the DoD may now avoid association with the Department of War, irrespective of the humongous resources at this renamed department’s disposal.

However, with news of green card holders joining a shrinking US military as active and reserve forces, those STEM professionals aspiring for may be among those who may not hesitate to be aligned with the Executive Order of 5 September 2025. The post-Ukraine War world has seen enough mercenaries come out across the geopolitical spectrum, fighting battles that are not theirs. In the coming confrontations, STEM talent operating as innovation mercenaries, freelancers and private contractors, although lesser in number than the pacifist lot, should come as no surprise. It is this amenable cohort that might join as innovation mercenaries, working at the intersection of civil-military fusion, resembling a more organised form of Operation Paperclip, not only for the US but also for China, Russia, and Europe.



This commentary originally appeared in Observer Research Foundation. 

### The Saudi Arabia-Pakistan Defence Agreement: Perspectives from India and the Middle East

In September 2025, Saudi Arabia and Pakistan signed a Strategic Mutual Defence Agreement (SMDA). The agreement revitalises an old strategic cooperative arrangement between Islamabad and Riyadh and comes amid a churn in the international order that has impacted both the Middle East and South Asia alike. While strategic and fraternal ties between the two states are not new, what requires examination is the recalibration, intent, language, and timing of this renewed understanding between the home of the two Holy Mosques, on one side, and on the other, the Islamic world’s only state with nuclear weapons.
Relations between Saudi Arabia and Pakistan go back seven decades, and Pakistani military personnel being deployed for Saudi security requirements is also an institutionalised process cemented over the years. In essence, the signing of the SMDA itself is not a tectonic geopolitical event. However, a section of the language used in the statement, although vague, calls for a “collective defence” framework, which piqued the interest of analysts, including in India.
The timing of the agreement between the two countries also offers a glimpse into why New Delhi, while downplaying the agreement, has highlighted that it was aware of the negotiations that were taking place, and that its own interests and concerns regarding the same were communicated to Riyadh. However, the actualisation of this deal—a boon for Pakistan in the post-Operation Sindoor landscape—had more to do with the events taking place in the Middle East, not necessarily those between India and Pakistan. Nonetheless, the impact on Indian strategic interests could be severe.
The ongoing geopolitical shifts in the Middle East, such as Israel’s stamp of outright, and often unchallenged, military superiority, and the state’s decision to strike Hamas in Doha, have played a role in escalating the language of the SMDA. While Saudi Arabia has no shortage of funds in its national coffers, it does lack a military that has either a qualitative edge over Israel or the numbers and deep experience on the battlefield. From bolstered Israeli ambitions following the 7 October terror attacks, the war in Gaza, and the possibility of a nuclear Iran remaining largely intact despite a ‘12-day war’ in May this year, Riyadh’s anxieties have offered Pakistan an unexpected economic and strategic lifeline. Today, Pakistan is seen as an extension of the Middle East, a posture it has not particularly been allowed to have for much of the past 20 years, despite being a Muslim state and part of multiple Islamic forums.
This report aims to investigate this agreement between Saudi Arabia and Pakistan from multiple lenses: strategic, geopolitical, economic, bilateral, and regional, to assess the impact it could have in both the near and distant future. The first chapter by Sushant Sareen examines what the SMDA means for Islamabad politically and, in general, for Rawalpindi. This is a critical start to understanding Pakistan’s own dynamics, as the country’s Prime Minister Shahbaz Sharif acclimatises to the reality of not being able to conduct any foreign visit without Army Chief Asim Muir shadowing him.
In the second chapter, Kartik Bommakanti and Rahul Rawat take a deeper look into the impact the Saudi-Pakistan arrangement could have on Indian defence posture. This is particularly relevant after the successes of Operation Sindoor, which has fundamentally remoulded Indian defence thinking at scale for the first time since the Kargil war in 1999.
Moving forward, the Saudi-Pakistan deal will likely have a profound impact on regional and international positions as well. In the Middle East, the ongoing war in Gaza, Israel’s stated aims of disintegrating entities such as Hamas and Hezbollah, Syria’s delicate revival under a former jihadist of the name Ahmed Al Sharaa, Iran’s continuing quiet contestation with Israel following the ‘12-day war’, are all geopolitical realities that have played a part in Riyadh’s requirements from its own bilateral relationship with Pakistan.
Mahdi Ghuloom, in the third chapter, looks at the SMDA from two lenses: the Saudi-Pakistan bilateral, and how the Gulf region views the same. Some argue that Pakistan has, after a long time in the peripheries, moved back into the mainstream of Middle East geopolitics. The impact of this has wider repercussions and not just regional ones.
In the fourth chapter, Samriddhi Vij analyses how India’s ‘geoeconomics first’ outreach to the Gulf, seen as a success story of Prime Minister Narendra Modi’s government since 2015, could be impacted by a ‘return’ of Pakistan in the region’s security calculus. Eszter Karacsony then adds another layer to the discourse and describes how the European Union would try to calibrate its ties with India and Saudi Arabia when the question of Pakistan is thrown into the mix. As an economic bloc with a dwindling geopolitical footprint, the European continent remains a driver of both global trade and politics.
Finally, Atul Kumar writes about the elephant in the room: China. The Pakistan-China bonhomie is well-known, and during Operation Sindoor, Chinese weapons were on Pakistan’s frontlines. Beijing is an economic power and influencer in the Middle East—involved in critical domains like defence, energy security, and high technology—and utilises its power to shape geopolitical realities in a region fraught with upheavals and uncertainties.
The report looks to add colour to the different dimensions of the Saudi Arabia-Pakistan agreement, which can have a direct impact on New Delhi’s relationship with Islamabad. How other powers, capitals, and interlocutors handle these divergences between two nuclear powers in a fragile global order will have far-reaching impacts on international politics and diplomacy.
Read the report here.



This special report originally apperaed in Observer Research Foundation.

### The Hanoi Convention and the Contest to Shape Global Cybercrime Norms

At the signing ceremony of the United Nations Convention against Cybercrime held on 25–26 October, 72 states signed the ‘Hanoi Convention’. The treaty criminalising cybercrime has shifted the focus back to the exigencies and challenges facing global cyberspace governance. Adopted by the United Nations General Assembly (UNGA) on 24 December 2024, the Convention has been hailed as a triumph of multilateralism amid widening polarisation that curtailed avenues for international cooperation. However, such a multilateral consensus was achieved not by resolving the definitional disagreements over what constituted cybercrime, but by diluting the existing principles. While regional frameworks laid the normative groundwork for a global convention, consensus was a consequence of the influence of ‘norm entrepreneurial’ states striking strategic bargains. 

Evolution of Cybercrime Norms: Regional to Global
Despite global recognition of the transnational nature of cybercrime, the marked differences in the construction of the crime itself precluded the formation of a consensus, as apparent in disparate localised frameworks. Several regional instruments dealing with cybercrime emerged, such as the Budapest Convention on Cybercrime (2001), the SCO Agreement on Cooperation for International Information Security (2009), the Arab Convention on Combating Informational Technology Offences (2010), and the African Union Convention on Cyber Security and Personal Data Protection (2014), among others. Varying in scope, the instruments had limited capacity for cross–border enforcement, and the fragmented normative landscape often impeded effective investigation in the criminal use of Information and Communication Technologies (ICTs).


The transboundary nature of ICTs and their extensive use as tools for cross-border terrorism necessitated harmonising regional frameworks to enable states to coordinate action effectively at the global level. 

The transboundary nature of ICTs and their extensive use as tools for cross-border terrorism necessitated harmonising regional frameworks to enable states to coordinate action effectively at the global level. Even though the Budapest Convention was regarded as the de facto international instrument on cybercrime, most non-Western states did not ratify it. At the UN, initial normative discussions on cybercrime took place primarily through an open-ended Intergovernmental Expert Group tasked with conducting a ‘Comprehensive Study on Cybercrime’. Eventually, Russia and 17 other co-sponsors took on the role of ‘norm entrepreneurs’ by proposing a cybercrime treaty.  The resolution passed in the UNGA despite opposition from the US and the EU, with various human rights organisations opposing it as well. In 2019, the UNGA consolidated the parallel processes to establish an open-ended Ad Hoc intergovernmental committee (AHC) to negotiate and draft an international convention on countering the use of ICTs for criminal purposes. Following intense negotiations between 2021-2024, the UN Convention on Cybercrime was adopted unanimously without a vote. 

The Politics of Defining ‘Cybercrime’ 
Despite its comprehensive provisions, the Budapest Convention failed to garner universal acceptance – it faced criticism for excluding the Global South from the negotiation process and for providing leeway for cross-border operations, raising concerns over territorial sovereignty. While the UN-led process was intended to be more egalitarian and representative, defining cybercrime and its related provisions revealed an inherent ideological tussle even within the AHC negotiations. Nonetheless, there was a degree of consensus on categorising cybercrimes as either ‘cyber-dependent’ — offences that can only be committed through the use of ICT devices — or ‘cyber-enabled’ — traditional offences that are facilitated by the use of ICT. 
The European Union (EU) consistently advocated for a narrow construction of cybercrime by limiting its application to cyber-dependent crimes. The stance was based on the argument that a broader construction of cybercrime risked disproportionate interference with human rights and fundamental freedoms. The EU cautioned against including national security matters under the scope of ‘cybercrime’, asserting that it could potentially threaten an open, free, and secure cyberspace. Despite their initial opposition, countries such as the United States and Australia eventually called for both cyber-dependent as well as cyber-enabled crimes to be included, albeit judiciously. 


The influence of revisionist states in defining the cybercrime norms reveals newer dynamics at play within the international order. Global cyberspace governance remains an evolving domain, and who gets to define the emergent norms has become a battleground for intense competition between states.

On the other hand, Russia and China lobbied for a broader construction of cybercrime to include the criminalisation of the use of ICT for spreading disinformation, cross-border cyber-enabled espionage, and cyber operations targeting critical infrastructure. To this end, Russia also registered its protest against the final naming of the Convention, when its title was scaled down to ‘UN Convention against Cybercrime’ from the original mandate to draft a ‘comprehensive international convention on countering the use of ICTs for criminal purposes’. Other revisionist states, such as Pakistan and Iran, were also vocal on issues such as the removal of human rights safeguards from the text of the convention.
Overall, the proposals in AHC on defining cybercrime reflected a broader pattern of systemic erosion of the liberal character of global norms in cyberspace governance. Most Western states opposed proposals to include content-related cybercrimes such as “extremism–related offenses” and “terrorism-related offenses”. The US and its allies participated in AHC primarily to prevent Russia and China from setting the tone of the negotiations. However, the compromised draft was eventually adopted by the AHC – states did not block the convention’s passage and swing voters like Indonesia, Mexico, Singapore, and South Africa ultimately supported the treaty.

Implications for Global Governance
The Hanoi Convention is the first international criminal justice treaty to have been negotiated and adopted in over 20 years, reflecting the reluctant will of member states to combat cybercrime. While the adoption of the convention marks a critical step in multilateral cooperation and in consolidating the normative framework for tackling cybercrime, the development is marred by a few caveats. First, while the treaty was adopted unanimously and 72 countries signed the convention in Hanoi, the real test lies in its ratification by states. Historically, even after becoming signatories, states take considerable time to ratify multilateral treaties, as this requires aligning national legislation with treaty provisions. Second, the influence of revisionist states in defining the cybercrime norms reveals newer dynamics at play within the international order. Global cyberspace governance remains an evolving domain, and who gets to define the emergent norms has become a battleground for intense competition between states. The US and its allies moved from vehement opposition to a Russia-led treaty on cybercrime to seeking definitional bargains, and finally to conditional acceptance of the UN convention. However, the fundamental challenge for the convention will be to bridge the gap between normative consensus and the creation of an accountable, robust global governance model.



This commentary originally appeared in Observer Research Foundation.

### From Gaza to Afghanistan: Is it All Down to the ‘Moderates’?

The much-talked-about Gaza peace summit held in Sharm El-Sheikh, a resort town in Egypt on the coast of the troubled Red Sea, was a postcard backdrop for US President Donald Trump to orchestrate a declaration with regional and world leaders towards a ceasefire and enduring peace amidst the Israel–Hamas war. The summit was co-convened with Egypt’s President Abdel Fattah El-Sisi, Qatar’s Emir Tamim bin Hamad Al Thani and Türkiye’s President Recep Tayyip Erdoğan. Israel, Hamas, and the Palestinian Authority were missing from this exercise. Beyond the optics of leadership summits, however, implementation is increasingly being outsourced to ideological moderates on the ground.
Policies and diplomacy designed to create off-ramps from enduring conflicts in the recent past have arguably prioritised predominantly short-term gains over institutionalised resolutions. For Trump, the headline — that his mediation stopped a conflict — is important, whether ceasefires and political thaws endure or not. The stakeholders in these American overtures have also recognised that delivering short-term victories suits their short-term requirements to mitigate and control legacy geopolitical crisis points, such as Gaza.
The implementation of summit and leadership-level agreements requires ideological stents to clear up and manage ground realities. For any success to be achieved in this field, efforts have previously been made to distinguish Islamist jihadists and their extremist ideologies from Islam as a religion. Scholar Alex P. Schmid has noted that in the post-9/11 era, some considered all non-violent extremists as ‘moderates’. The broader ‘war on terror’ era — anchored in the protracted wars in Iraq and Afghanistan — blurred ideological distinctions and conflated them with military objectives within narrow strategic constructs. Despite both wars stretching over two decades, the urgency to end them, followed by the inability to do so — while being embroiled in nation-building efforts — stretched capacities in all directions instead of focusing them on a few.


The theorising behind moderates being well placed to rapidly fill political gaps does not provide the depth required for long-term political stability, which depends more on fostering normalised ties between warring parties.

Radical Islam arguably gained momentum after 9/11. Groups such as Hamas and Hezbollah used it for territorial and political gains, with the rank-and-file often motivated by ideology while the leaderships were driven by power. The roots of such extremism are often traced back to the advent of the Muslim Brotherhood in Egypt, founded by schoolteacher and preacher Hassan al-Banna in 1928. In the 1970s, Islamist extremism was galvanised around the Palestine issue, with aircraft hijackings becoming a model for holy wars aimed at achieving political outcomes. In the 1990s, it was used by Pakistan to radicalise and deploy fighters in Kashmir against India as part of state policy. Post-9/11, it received another ideological boost, magnifying the US, the West, and Israel as enemies for their actions in Iraq and Afghanistan.
However, pining for moderates to become prevailing political powers in some of these theatres is a double-edged sword. In Afghanistan, the country’s only two presidents since 2001, Hamid Karzai and Ashraf Ghani, were pro-Western technocrats from elite circles. In February 2020, under the first Trump presidency, the US and the Taliban signed an ‘exit deal’ for the former to finally bring an end to a 20-year ordeal. For the Taliban and its ideology, this was a victory — a defeat of a superpower. In August 2021, Kabul fell, Ghani fled, and the Taliban regained complete control.
A tired West, with little appetite for further conflict, wanted a ‘moderate’ Taliban it could deal with. Noticing this, figures such as Sirajuddin Haqqani of the notorious Haqqani Network, Mullah Yaqoob, son of Taliban founder Mullah Omar, Mullah Baradar, and Amir Khan Muttaqi — all of whom assumed key ministries in Kabul — positioned themselves as ‘moderates’. Their tacit support for policies such as allowing school education for girls challenged the group’s ideological emir based in Kandahar, Hibatullah Akhundzada, creating internal divisions within the Taliban that are playing out even today. All of this created an identity crisis, if you will, between ideological purity and power-driven pragmatism.


A moderate Hamas leadership, meanwhile, if propped up, may not have much longevity and would likely be viewed as a stooge of Western backing. Any moderate architecture would also remain contrary to Israel’s stated aim, that of dismantling Hamas entirely.

These same divisions are expected to play out in Gaza following the summit in Sharm El-Sheikh, as the political direction of the crisis remains uncharted. Scholar Muhammad Shaheda has argued that Israel’s sustained, maximalist military campaign against Hamas since 2023 could push the group’s leadership — already reeling from the decapitation of legacy figures such as Yahya Sinwar and Ismail Haniyeh — into a corner where it might be lulled into a process of “reintegration and moderation.” Shaheda further adds that “maximalist demands,” such as the full disarmament of Hamas, will alienate moderates and reaffirm the hardliners. This view has some merit, as reports have previously suggested that certain Hamas leaders were leaning towards disarming large weapons. Others, meanwhile, believe that full disarmament will not be on the cards, as resistance through military means is enshrined in the group’s ideology.
The theorising behind moderates being well placed to rapidly fill political gaps does not provide the depth required for long-term political stability, which depends more on fostering normalised ties between warring parties. In Afghanistan, the Taliban’s main contestation came from within. In an effort to gain acceptance from the international community, the group even attempted to challenge the centrality of the emir and extend power to Shia Hazara representatives, which only lasted a short while. Over the past year, Kandahar has recaptured most facets of power across the state.
A moderate Hamas leadership, meanwhile, if propped up, may not have much longevity and would likely be viewed as a stooge of Western backing. Any moderate architecture would also remain contrary to Israel’s stated aim, that of dismantling Hamas entirely. However, by definition, there is still no clarity on what the “destruction” of Hamas entails, nor on the kind of political construct envisioned for a post-Hamas Gaza. The main play, as of today, centres on an International Stabilization Force (ISF) under a United Nations mandate. Hamas, for its part, will push for a role in any Palestinian political overhaul — much like Hezbollah in Lebanon, which holds parliamentary representation. However, this would be unacceptable to not just the US and Israel, but to most Arab powers in the region as well.


The simple fact that extremist groups use violence to swiftly achieve their aims puts moderates on the back foot, as they rely more on nuance, education, and dialogue, and are often not even based on the ground in these theatres (though there are exceptions). Placing the burden of political and ideological rehabilitation on ‘moderates’ alone is not enough to shift the needle on the ground.

Finally, moderate powers in current theatres that can serve as case studies, such as Afghanistan and Gaza, have not been able to argue their way into representation, let alone power. The simple fact that extremist groups use violence to swiftly achieve their aims puts moderates on the back foot, as they rely more on nuance, education, and dialogue, and are often not even based on the ground in these theatres (though there are exceptions). Placing the burden of political and ideological rehabilitation on ‘moderates’ alone is not enough to shift the needle on the ground.
Moderates, by themselves, can influence the construct of institutions, governance, and, by extension, power. But they have limitations. With hostile actors taking control of states from Afghanistan to Syria, and now even Mali in West Africa on the brink, moderate politics, particularly within Islam, may offer ideological alternatives and steer societal change for the better in the long term. In the short term, however, traditional political negotiation, mediation, and compromise are needed to deliver the stability required for moderate forces to find space to attempt delicate, long-term cultural and religious shifts.



This commentary originally appeared in Observer Research Foundation.

### Diplomacy and Decarbonization: 70 Years of Saudi–Japan Energy Relations

On 22 September 2025, Tokyo hosted the 8th Ministerial Meeting of the Japan–Saudi Vision 2030 (JSV 2030), marking the latest milestone in a relationship that this year celebrates 70 years of diplomatic ties between Japan and Saudi Arabia.
Over seven decades, energy has not only anchored but also continually reshaped this partnership.
Earlier this year, Japan’s Minister of Economy, Trade and Industry Muto Yoji visited Saudi Arabia to attend the Japan–Saudi Arabia Business Council and the Japan–Saudi Vision 2030 Ministerial Roundtable.
During his visit to Dhahran, Minister Muto held bilateral talks with Prince Abdulaziz bin Salman, Saudi Arabia’s Minister of Energy.
The two ministers reaffirmed that, as both nations pursue energy transitions, it is vital to do so in ways that ensure energy security and economic stability, a principle that continues to define the pragmatic core of Japan–Saudi energy diplomacy.
These meetings reflect how a relationship once centered on oil security has steadily expanded.
Japan’s long-standing dependence on stable hydrocarbon supplies is now complemented by shared priorities in clean fuels, hydrogen and ammonia value chains, advanced materials, and energy technology cooperation, all closely aligned with Saudi Arabia’s Vision 2030 diversification strategy.
Historically, Japan’s reliance on Middle Eastern crude has been a structural reality of its post-war industrial development. Even today, over 90 percent of Japan’s crude oil imports come from the Middle East, making supply stability central to its economic planning.
In this regard, Saudi Arabia has been one of Japan’s most consequential partners. Over time, long-term contracts, strategic oil stockpiling, and supply assurances have built a deep foundation of mutual trust.
Among the most notable components of this framework is Saudi Aramco’s leased crude-oil storage in Okinawa, established in 2011 and expanded several times since.
The facility — approximately 9 million barrels by 2022 — provides Japan priority access to stored supplies in emergencies, making it a strategically significant pillar of Japan’s energy security.


Both nations have established long-term decarbonization targets — Japan for 2050, Saudi Arabia for 2060 — and the bilateral energy relationship is increasingly rooted in clean-energy innovation rather than replacing the foundation of crude.

While Japan’s LNG portfolio has historically been diverse, Saudi Arabia has in recent years expanded its own gas capabilities.
The Hawiyah gas-storage project, which became operational in 2024, highlights Riyadh’s growing interest in playing a larger role in global gas markets, a development that could eventually align with Japan’s future gas needs.
As global climate commitments evolve, Saudi–Japan energy relations have naturally adapted.
The transformation is gradual and collaborative. Both nations have established long-term decarbonization targets — Japan for 2050, Saudi Arabia for 2060 — and the bilateral energy relationship is increasingly rooted in clean-energy innovation rather than replacing the foundation of crude.
One of the most visible symbols of this shift is the Japan–KSA Lighthouse Initiative for Clean Energy Cooperation (Manar), launched in July 2023 during Prime Minister Kishida’s visit to Riyadh.
The initiative supports high-impact projects for hydrogen, ammonia, e-fuels, carbon recycling, direct air capture, and advanced materials, creating a shared roadmap for joint clean-energy industrialization.
Since its launch, Saudi institutions and Japanese research bodies have advanced this agenda. In 2024, the King Abdullah Petroleum Studies and Research Center (KAPSARC) and Japan’s Institute of Energy Economics (IEEJ) signed an MoU to deepen collaboration across hydrogen, ammonia, CCUS, and carbon recycling.
Operational progress is visible as well. In 2020, Saudi Aramco, SABIC, and Japan’s IEEJ successfully demonstrated the production and shipment of 40 tonnes of blue ammonia from Saudi Arabia to Japan for zero-carbon power generation. This end-to-end value-chain test demonstrated the technical feasibility of future clean-fuel flows between the two nations.
The partnership is also expanding into technology and services. In April 2025, Japanese drone company Terra Drone signed an MoU with Aramco for advanced aerial inspection of oil and gas facilities. Test runs are expected soon, with potential full-scale operations by 2027 — reflecting how the bilateral energy ecosystem increasingly includes digital and industrial technologies.
To support these transitions, financing frameworks are strengthening. In May 2024, the Saudi Power Procurement Company (SPPC) signed two power purchase agreements with a consortium led by Marubeni to procure power from the Al Ghat Wind Project (600 MW) and Wa’ad Al Shamal Wind Project (500 MW).


JBIC is also supporting regional interconnection, including the Saudi–Egypt transmission link designed to enable power exchange and enhance renewable grid integration.

The Japan Bank for International Cooperation (JBIC) has been proactive in financing Saudi clean-energy infrastructure. Its financing of the Rabigh Solar PV Project — a 300 MW IPP co-financed with Mizuho Bank and Al Rajhi — marked JBIC’s first such financing and will supply power to SPPC under a 25-year agreement.
JBIC is also supporting regional interconnection, including the Saudi–Egypt transmission link designed to enable power exchange and enhance renewable grid integration.
In 2024, JBIC renewed its memorandum of understanding with Saudi Arabia’s Public Investment Fund (PIF) to expand collaboration in decarbonization, digital transformation, and smart-city infrastructure — reinforcing a shared commitment to shaping the next phase of clean-energy development.
Looking ahead, the task for both nations is to scale early-stage successes into commercially viable, long-term ventures.
While global market dynamics, technology costs, and international competition will shape the pace of progress, the foundations of cooperation are strong.
Japan contributes technological expertise, industrial systems, and financing.
Saudi Arabia brings scale, competitive renewable resources, world-class infrastructure, and a strategic diversification drive under Vision 2030.
If the Lighthouse projects progress from demonstration to full commercialization, the Saudi–Japan model could become a global reference point for transregional clean-energy cooperation.
Seventy years since the establishment of diplomatic relations, the Saudi–Japan partnership stands as an evolving example of adaptive energy diplomacy, a relationship anchored in stability and now expanding into low-carbon technologies, clean-fuel innovation, and integrated industrial collaboration.
As energy systems continue to transform, the operating logic remains clear: the bilateral energy relationship is not being replaced, but strengthened and re-engineered for a new era.



This commentary originally appeared in Saudi Gazette.

### Securing the Transition: Unlocking India–Japan Collaboration on Critical Minerals

The 11th India–Japan Energy Dialogue and Indian Prime Minister Narendra Modi’s visit to Tokyo in August put energy at center stage, with critical minerals as one of the key aspects of economic strategies.
At the end of August, India’s Ministry of External Affairs released a Fact Sheet on India–Japan Economic Security Cooperation, identifying semiconductors, critical minerals and clean energy, etc, as priority sectors for collaboration. Both governments pledged support for private sector–led initiatives and emphasized cooperation through multilateral frameworks such as the Mineral Security Partnership, the Indo-Pacific Economic Framework, and Quad Critical Minerals Initiatives.
Concrete measures have been taken in this direction, like India’s Ministry of Mines and METI signed a Memorandum of Cooperation in August, while Toyota Tsusho expanded its rare earths refining project in Andhra Pradesh, India to set up a stable supply chain. Meanwhile, initiatives like the battery supply chain roundtable organized by JETRO in India signal appetite for further cross-border links.
Yet despite this momentum, much of the agenda still consists of frameworks, dialogues, and memoranda rather than large-scale projects. This “pending promises” gap is striking, particularly given Japan’s own track record of building durable supply chain architecture in response to past crises (see author’s analysis in Japan NRG, June 2, 2025), and India’s rising urgency to reduce its critical mineral dependencies.
While opportunities span joint exploration, refining, recycling, and technology collaboration, persistent challenges of policy execution, infrastructure, and investor confidence continue to weigh on delivery. Whether Tokyo and New Delhi can now translate complementary strengths into concrete outcomes will determine whether critical minerals become a genuine pillar of their partnership, or remain aspirational.

Diplomacy and Ambitions
Japan’s resource security architecture has been steadily reinforced over the past two decades through institutional and legal innovation. The Supply Chain Diversification Programme, launched in 2020 with a budget of $2 billion, was an early step, providing subsidies for Japanese firms to relocate production out of China, initially to ASEAN, and later to India and Bangladesh under its expanded second phase.
The Economic Security Promotion Act (2022) gave this approach a statutory backbone, mandating supply chain risk assessments for strategic goods. It established a new system of subsidies and insurance for companies, and enhanced public–private coordination across critical sectors such as minerals, semiconductors, and energy.
Flow of JV survey implementation system

Source: JOGMEC
The result is a distinctive playbook that combines financial incentives, statutory authority, and institutional depth to build supply chain resilience. Despite gaps, these tools provide Tokyo with a relatively well-developed framework to confront today’s fractured geopolitics.
On the other hand, India has entered the critical minerals race with growing urgency. According to the Ministry of Mines, India met 80% of its lithium and cobalt requirements and 90% of its rare earth element demand through imports in 2023, underlining its dependence on external supply. The launch of the National Critical Minerals Mission (NCMM) in January 2025 signalled a strategic shift, from being primarily a consumer to an ecosystem builder across exploration, processing, and recycling.
Components of NCMM



Source: Pres Information Bureau, Government of India
The scale of India’s dependency is stark. Imports from China surged dramatically in recent years; lithium by 921% and nickel by 137% in 2024 and graphite by 85% between 2022–24 . This rising reliance has sharpened the policy push to diversify. Early-stage deals have been pursued with Zambia, Mongolia, and the Democratic Republic of Congo, while domestic players are being encouraged to accelerate exploration.
Institutional mechanisms have also expanded. Khanij Bidesh India has been tasked with overseas acquisitions, while Indian Rare Earths Limited and private explorers are mobilized to strengthen refining and recycling capacity. The NCMM is designed to coordinate these efforts under a single umbrella.
There is a reason for India to dig locally. India holds 6.3% of global rare earth reserves, with deposits including neodymium and praseodymium. In 2023, significant lithium reserves were identified in Jammu and Kashmir, though exploration remains at an early stage. India is also in the top five producers of natural graphite, with 3.1% of global reserves and growing capability in producing spherical graphite for EV batteries.
However, critical mineral auctions have struggled to draw investor interest, due to unclear reserve data, concerns over mining capabilities, and inadequate technology.
In refining, however, India is beginning to scale. The International Energy Agency projects its global share of refined copper capacity will rise from 2.1% in 2023 to 3.5% by 2035. This aligns with India’s ambition to become not only a major consumer but also a processing hub within critical mineral value chains.

From dialogue to delivery
India and Japan have the foundations for deeper critical minerals cooperation, but the real test lies in whether these frameworks can translate into bankable projects.
A flagship example is Toyota Tsusho’s rare earth venture in Andhra Pradesh, launched with Indian Rare Earths in 2012 and now run through its subsidiary, Toyotsu Rare Earths India, has become a critical supply chain node. The facility processes thousands of tons of rare earth oxides for export to Japan, proving that joint projects can move from MoU to market.
Indian industrial groups such as JSW, Vedanta, and Adani are also reportedly exploring partnerships with Japanese firms on battery technologies and minerals projects.
Beyond individual ventures, the two countries share a converging outlook. Their official lists of critical minerals overlap and this provides a clear platform for scaling cooperation into practical, investor-ready ventures.
Further pathways for collaboration include:


 	Joint Exploration & JVs: India allows 100% FDI under the automatic route for mining and exploration of metal and non-metal ores, which opens the door for Japanese capital and technology to participate directly in local exploration. Further, Japan and India (e.g. via JOGMEC + KABIL) could undertake JV exploration in other countries based on Japanese expertise in such ventures.
 	Processing & Refining Close to Market: Japanese investment in Indian refining (for example, rare earth oxides or magnets) could fast-track supply chain integration, with lower environmental clearance and less capital risk. For example, both countries already have footholds in the copper supply chain. Japan is the third-largest refiner by company ownership and the fifth by location, while India is bringing new capacity online.
 	Recycling / Urban Mining: The India–Japan Clean Energy Partnership, signed in 2022, names recycling as a candidate for future collaboration. Expanding capacities for recycling of e-waste and end-of-life batteries in India, using Japanese recycling technology, could reduce import dependence and improve environmental outcomes.
 	Regulatory Incentives & Project Support: India eliminated customs duties on 25 minerals, reduced Basic Customs Duties (BCD) on others, accelerated environmental and mining clearances, and introduced financial incentives for exploration.
 	Human Capital, Standards & Agile Pipelines: Scaling of refining, recycling, and processing will require investment in training and ESG standards.

Together, these initiatives would not only bolster supply chain resilience but also offer a portfolio of investable opportunities. For Japanese firms, India provides scale, growth, and market proximity; for Indian stakeholders, Japan offers technology, financing, and credibility in global markets. For global investors, their convergence is a hedge against geopolitical risk.

Pending promises: Gaps in delivery
Progress on critical minerals has been limited compared to Japan’s strides with partners like Australia, Chile, or France. India–Japan initiatives remain disproportionately heavy on paper promises and discussions.
Meanwhile, the JBIC’s 2024 survey reaffirmed India as the most promising long-term destination for Japanese firms, while also revealing declining business planning ratios. Many companies remain cautious, citing policy uncertainty, legal complexity, infrastructure bottlenecks, and execution risks.
This gap underscores the broader problem: India–Japan critical minerals cooperation has momentum in vision but remains patchy in delivery. For now, the partnership risks lagging behind the pace of both market demand and competitor alliances. Without credible midstream and downstream infrastructure, even expanded exploration risks stalling at the mine gate.
Both need to proceed to co-financed mines, processing hubs, and recycling plants. For India, this means mobilising Japanese capital and technology to unlock its resource potential. For Japan, the upside is securing resilient access at a time when diversification is no longer optional but essential.

Conclusion
As global competition over critical minerals intensifies, the risks of autarky and fragmented supply chains are becoming clearer. If markets segment along geopolitical lines, prices will rise, volatility will increase, and supply shocks will ripple more widely. Neither India, Japan, nor even China benefits from such an outcome.
What is needed instead are transparent international markets where rules and standards encourage open flows, while balancing national security concerns. Especially so because demand and technological shifts constantly reshape which minerals are "critical."
India and Japan are well placed to build on their complementarities. Japan brings capital, technology, and institutional depth in refining, recycling, and standards-setting; India offers scale, a growing manufacturing base, and untapped reserves. Together they cover significant ground across copper, graphite, rare earths, and lithium; minerals central to electric vehicles, semiconductors, and renewable energy.
Institutional frameworks are already in place. These initiatives provide scaffolding for long-term cooperation, but credibility will depend on whether the two sides can move quickly from frameworks to deliverable projects that attract investors.




This commentary originally appeared in Japan NRG.

### Beijing’s Middle East Playbook in a Changing Global Order

Introduction
While Beijing’s foreign policy is not focused on the Middle East—or ‘Western Asia’, the term used more frequently by the Chinese to refer to Turkey, the Levant, Iraq, Iran, and the Gulf countries—its footprint in the region is expanding. Many of the People’s Republic of China’s short-term aims, such as securing energy, have remained unchanged since the Cold War, but the country’s rise on the global stage is increasingly creating a need for a long-term strategy suited to the changing world order. Since the start of the Gaza war, Chinese diplomats have adopted a more vocal stance on Middle East issues like the Israeli-Palestinian conflict, leveraging tensions with the West to boost their country’s public image and try to undermine United States dominance. This stance, however, comes with new risks and responsibilities. The strong regional presence of the US, which is increasingly engaging in global power competition with China and trying to curb its influence, presents additional limitations. The aim of this brief is to map Chinese interests in the Middle East and North Africa (MENA) to better understand possible strategies for the future against the backdrop of turbulent global politics.
China uses a hierarchical system of international partnerships. Five MENA countries have comprehensive strategic partnerships with China—Algeria, Egypt, Iran, Saudi Arabia, and the United Arab Emirates (UAE)—and thus enjoy the closest relations. Israel, meanwhile, has a unique ‘innovative comprehensive partnership’, whereas the remaining countries in the region maintain various lower levels of partnership. In terms of multilateral cooperation, China has the China-Arab States Cooperation Forum (CASCF), the China-GCC Strategic Dialogue with the Gulf Cooperation Council, and the Forum on China-Africa Cooperation (FOCAC), which includes North African countries. It has also helped expand intergovernmental organisations to the region. BRICS now includes Iran, Egypt, and the UAE, while the Shanghai Cooperation Organization (SCO) includes Iran with Egypt, Qatar, Saudi Arabia, Kuwait, and the UAE as dialogue partners.
The rest of this brief explores China’s interests in the region: the economic basis for its partnerships; Beijing’s approach to issues of regional security; and the implications for the Chinese Communist Party’s legitimacy worldwide and how the MENA region plays into its larger aim of establishing a new world order.

China’s Economic Stakes in the Middle East
China’s current priorities in the Middle East are primarily economic, led by Beijing’s long-term vision for building prosperity through economic strength, and its desire to prevent another ‘century of humiliation’—the period between the devastating First Opium War and the founding of the People’s Republic of China, during which the decline of Imperial China led to subjugation by Japan and the West. The modern Chinese economy is built on manufacturing and industry, making it the world’s biggest importer of oil and natural gas, with the Middle East as a crucial source. Beyond energy, the region also provides an export market to absorb surplus Chinese goods and offers exciting investment opportunities for Chinese enterprises.
The Middle East has six of the world’s top oil-producing countries and around half of all known oil reserves.[1] China is its largest consumer, with demand expected to increase in the next five years as the planned peak of carbon emissions in 2030 approaches, and the country scrambles to meet its ambitious output goals.[2] In 2024, Saudi Arabia, Iraq, the UAE, Oman, and Kuwait accounted for an estimated 232.56 million metric tons of Chinese oil imports, and a large amount of sanctioned Iranian oil was also imported through Malaysia and other transit hubs.[3] Saudi Arabia was China’s top supplier until the sanctions imposed by the West in response to Russia’s invasion of Ukraine in 2022, restructured the global energy market by reducing the demand for Russian oil, thereby making it cheaper. In 2024, Russia exported an impressive 108.5 million metric tons to China as opposed to Saudi Arabia’s 78.64 million metric tons, despite steep Saudi price cuts.[4] For China, diversification away from Middle Eastern hydrocarbons—even to a limited extent—presents strategic advantages given US dominance in the region and the legacy of regional instability. Still, as it stands, the country is only able to decrease its dependence to a very limited extent. Gas imports reflect a similar trend to oil, while cooperation on nuclear and other forms of energy, like hydrogen, is increasing.
China’s ability to continuously expand its economy is the root of its global power, and domestic overcapacity makes it critical to secure export markets abroad. Despite the common perception that the vast majority of its economic ties with the Middle East are related to energy imports, Chinese exports to the region reached nearly US$229 billion in 2022, compared to US$278 billion in imports.[5] Moreover, China is a top-five source for imports in every country in the region.[6] The region also serves as a transit hub—60 percent of China’s trade with Europe and Africa passes through the UAE alone.[7] The trade relationship is favourable for China, as it exports a wide range of consumer and industrial products in exchange for the region’s hydrocarbons, and plays an outsized role in the local economies. The trade balance is more concerning for Middle Eastern countries, especially those looking to build post-hydrocarbon economies. And while the affordability of Chinese products is good for consumers, local companies often cannot compete with China’s economies of scale. These tensions have prevented China from securing a beneficial free trade agreement (FTA) with any local country, despite negotiations on a China-GCC FTA underway since 2004.[8]
Figure 1: China’s Trade Footprint in the Middle East

Source: Carnegie Endowment for International Peace[9]
The Belt and Road Initiative (BRI), launched in 2013 propelled China to become the primary foreign investor in the Middle East by 2016—a position it has held on to since.[10] While BRI investments were initially focused on the energy sector, they have since expanded to include infrastructure projects like desalination plants or railways and eventually technology like 5G mobile networks or artificial intelligence, much of which is dual-use technology. Western investors work within extensive regulatory frameworks, seek external financing, and are slow to conclude agreements, so Chinese companies have filled the gap. To be sure, these investments have sometimes been met with US pressure—in December 2023, for example, major Abu Dhabi AI company G42, which is led by the country’s national security adviser, suddenly announced that it would divest from its extensive cooperation with Chinese companies and instead sign a major deal with Microsoft following negotiations between the UAE and the US.[11] Still, China has generally been successful in portraying itself as an essential partner for local countries, and in some cases, even pushing others out.[12] It has also secured investments from the richer Gulf countries. Several Gulf sovereign wealth funds have significant Chinese investments—in 2022, the Abu Dhabi Investment Authority, one of the world’s largest sovereign wealth funds, joined the top 10 shareholders in Shenhua Energy, China’s biggest coal company.[13]

Chinese Security Interests in the Region
Although China has extensive economic ties to the Middle East, Beijing has generally been careful not to become embroiled in the region’s conflicts or come in direct competition with the United States, which still dominates the region militarily. The Indian Minister of External Affairs, S. Jaishankar, summed it up as follows: “For the last 20 years, the United States has been fighting but not winning in the Middle East, and China has been winning but not fighting in the Middle East.”[14] Still, China has security interests in the region, and it is taking an increasingly bold approach to the region’s security issues. Mediation is one front, with Beijing playing a key role in securing agreements between Saudi Arabia and Iran and between the Hamas and Fatah Palestinian factions in the past two years.
China’s dependence on Middle Eastern hydrocarbons makes it necessary to protect energy production and ensure its safe transportation to China, as well as other global shipping. While it was unwilling to directly intervene in the Red Sea crisis following the outbreak of the Gaza war in October 2023, the Chinese reportedly negotiated safe passage for Chinese ships.[15] Chinese business relies heavily on the security infrastructure propped up by the United States to protect their interests, but the nation also maintains a naval base with 200 marines in Djibouti at the strait connecting the Gulf of Aden to the Red Sea for anti-piracy operations. It has even sponsored a joint maritime force with Saudi Arabia, Iran, the UAE, and Oman—although it has yet to commit ships to the effort.
While combatting terrorism is in the interest of the entire international community, it is especially important for China because of its concerns that a rise in terrorism—especially the Islamic terrorism prevalent since the 2004 US invasion of Iraq— ­­­­­­­­­­­­­could spark an escalation in the Muslim Uyghur majority’s use of jihad against the government in the Xinjiang Autonomous Region in western China. Such a conflict could destabilise the region and undermine China’s reputation abroad.[16] Uyghur fighters from the Chinese mainland are present throughout the Middle East, especially in Syria, where some have even been given positions in the new government due to their role in toppling the Assad regime and their longstanding ties to the Hayat Tahrir al-Sham group currently in power.[17]
The government has also alleged that al-Qaeda and other groups like the Taliban have trained, financed, and supplied Uyghur fighters with weapons.[18] China is increasingly exposed to terrorist threats as it expands its global presence: the 2015 execution of a Chinese citizen by ISIS and the massacre of 22 by a group affiliated with al-Qaeda just days later was a wake-up call.[19] China has been slowly adopting a more serious approach to counterterrorism, although its efforts are still in the early stages. For now, these are generally limited to the SCO, which conducts joint military exercises, cooperation in areas such as Internet surveillance, and other activities.[20]
China is the fourth-largest arms exporter in the world, with many of these arms going to the Middle East. Unlike the West, Beijing is willing to sell military technologies including drones, fighter jets, and ballistic missile systems without domestic strings attached, making it a valuable alternative supplier. Chinese defence products also have the advantage of affordability and accessibility despite the Russo-Ukrainian and Gaza wars, which have constrained US and European sales. The Middle East’s cooperation with the Chinese could even be used as a negotiation tactic to secure deals with the West.[21] Besides weapons, China is also exporting technology like BeiDou, a competitor to the American GPS system, for military use by local countries. While preference is still given to US defence products, China is expanding its share of the market and slowly expanding joint training programmes and defence exercises.
Some of these defence products end up in Iran, which has been dramatically weakened by Israel’s attacks on it and its proxies like Hamas and Hezbollah since the 7 October Hamas attack. China has an interest in supporting Iran’s efforts to regain its strength because it stands to benefit from a regional balance of power that is difficult to achieve without Iran as a pillar. Iran is China’s partner in countering US influence in the Middle East, and its systematic weakening could allow the American grip to strengthen. US sanctions provide an obstacle to increased cooperation, but China can use illicit trade and various forms of diplomatic support to strengthen Tehran. Support for Iran can, however, weaken China’s public image, which is in contradiction with its broader strategy.
Some analysts go as far as to characterise this strategy as one of ‘wedging’, whereby China tries to deliberately exploit divisions between the US and the countries of the Middle East to increase its own power on the global stage.[22] Indisputably, China is trying to position itself as the champion of the Global South and the ‘coalition of the oppressed’—a posture that originates in the ideology of Mao Zedong, the founder of the People’s Republic.[23] China seems to have learned from the so-called Arab Spring, during which it was initially reluctant to take a strong stance because it perceived the uprisings to be detrimental to its own domestic stability, leading to a loss of credibility in the eyes of local populations.[24] When the Gaza war broke out, Chinese diplomats had a very different strategy and openly criticised Israel’s actions, reaffirming the Palestinians’ right to armed struggle as a means for self-determination, even in international institutions like the United Nations and the International Court of Justice.[25]
Still, there have been very few concrete actions. China’s current policy thus both frustrates many Arabs in the region and causes tensions with Israel, an important trade partner. One explanation is that China sees the Gaza crisis as a setback for the reconciliation process between Israel and the Arab countries, of which it does not see itself as a benefactor because of the expected results, such as normalisation between Israel and Saudi Arabia, and the US security pact that comes with it. If achieved, this could undermine the balance of power as well as China’s efforts to create a new regional security architecture that would displace US supremacy by facilitating greater intra-regional responsibility for defence and prevent the emergence of a ‘Middle East NATO’. Such a security architecture would enable China to play an increasingly significant role without having to replace the US as a security guarantor.

An Opportunity to Expand Chinese Legitimacy
China also has an interest in promoting ties with the Middle East to boost its international legitimacy. It seeks to promote a world order more favourable to the People’s Republic of China than the existing neoliberal order led by the US—and its messaging focused on creating a more equitable world order resonates in the Arab world.[26] Cooperation with the MENA countries allows China to familiarise more of the world with its diplomatic initiatives, and set itself apart as a leader of the future. China’s first Arab policy paper in 2016 already highlighted the consensus between China and the Arab States on state sovereignty, as well as similar positions on reforming the United Nations and the Doha Round negotiations.[27] In more recent years, policy papers and joint declarations with MENA countries have focused on the Xi Jinping government’s new initiatives—part of Xi Jinping Thought on Diplomacy, the current foreign policy doctrine of the People’s Republic—namely the Global Security Initiative (GSI), the Global Development Initiative (GDI), and the Global Civilization Initiative (GCI).[28] While these contain principles rather than concrete policies, their spread increases Chinese soft power in the diplomatic sphere.
The region is now a key source of votes for China in international forums. For example, 22 of the 30 states that supported China’s position in the 2016 Permanent International Court of Arbitration case[a] regarding the South China Sea were Arab League members.[29] As a whole, the Arab States support the One China Principle and are some of the few that affirm that Taiwan is an integral part of the territory of the People’s Republic of China.[30] About 10 Middle Eastern countries also consistently defend China’s position on the Uyghur human rights issue when it comes up at the UN Human Rights Committee nearly every year. At a more practical level, cooperation with the Middle East helped legitimise BRI projects in regions where Gulf countries already have legitimacy and facilitated ambitious projects by reducing the amount of risk that any one party had to bear. In Central Asia, for instance, China and the Gulf countries cooperate on investments in the renewables market.[31] The benefit for China is significant, since the BRI is a foundational element of Chinese foreign policy but it has been losing momentum in recent years.
A key threat to Chinese global ascendance, of course, is the increasing US-China competition. In the new Trump era, MENA countries that are especially close to China may be forced to either realign their positions in favour of the West or seek more from China to compensate for the cost of not doing so. Western pressure will only increase as China’s presence in the region grows, which means that its current strategy is greatly increasing its risks. Still, if the US continues to lose legitimacy given its stances on issues like the Palestinian question, China could gain, especially as it tries to position itself as a supporter of national sovereignty and local strategic autonomy in the eyes of the Global South. The West, of course, is not the only concern. India, for example, which is already in a strategic rivalry with China in South Asia, is also taking on a larger role in the Middle East as it rises on the global stage. It, too, has an interest in maintaining the status quo and is supporting new initiatives that threaten Chinese economic power, such as the India-Middle East-Europe Corridor.[32]

Conclusion
Even though Beijing’s foreign policy is not focused on the Middle East, China has clear interests in the region. Given its national strategy of building prosperity through economic strength, economic interests provide the basis for its partnerships: the Middle East is a crucial source of oil and natural gas, provides an export market to absorb surplus Chinese goods, and presents funding and investment opportunities for Chinese enterprises. In terms of security, China has tried not to get embroiled in the region’s many conflicts, but its expanding footprint makes both its citizens and goods increasingly vulnerable. China also has new opportunities to engage in this sphere, even if it remains mindful to avoid perceptions that it is infringing on national sovereignty the way the US is often. Finally, China could use its engagement with the Middle East to boost its legitimacy and gain support in international forums.
As China rises on the global stage and faces significant geopolitical headwinds, its ability to adapt its Middle East playbook to maintain the current delicate balancing act will be a crucial test of its broader ambitions on the global stage. The ambitions of other countries like the US could limit its ability to expand its regional influence, especially as global power competition increases. However, it seems to also have opportunities to make strides in the current geopolitical environment, albeit with new risks. The Middle East could prove to be both an opportunity and a liability for China as it seeks to redefine its role in the world.



Lillian Aronson is Research Assistant, Hungarian Institute of Foreign Affairs




Endnotes 
[a] Both China and the Philippines claim the Scarborough Shoal, one of the most contested maritime features in the South China Sea. The Philippines brought the case to the Permanent Court of Arbitration following an escalation in the dispute in 2012, since which the Chinese coastguard has maintained a constant presence in the area. China did not consent to the arbitration and was supported by 30 others in opposing it, two-thirds of which were from the MENA region: Algeria, Bahrain, Comoros, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, the State of Palestine, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, the UAE, and Yemen. Despite their claims that the court lacked the necessary jurisdiction to arbitrate the case, it ultimately ruled in favour of the Philippines in 2016. Since then, 27 governments including the Philippines, India, and many OECD members have publicly called for the ruling to be respected, but many countries continue to oppose the ruling. In the MENA region, Syria has opposed it, while the others have remained silent.
[1] Ekrem Biceroglu, Muhammed Emin Canik, Ahmet Dursun, “Middle East Plays Vital Role in Global Oil Production,” Anadolu Agency, November 8, 2023, https://www.aa.com.tr/en/economy/middle-east-plays-vital-role-in-global-oil-production/2965593.
[2] Climate Action Tracker, “China,” September 17, 2024, https://climateactiontracker.org/countries/china/.
[3] Chen Aizhu, “China’s Crude Oil Imports from Top Supplier Russia Reach New High in 2024,” Reuters, January 20, 2025, https://www.reuters.com/markets/commodities/chinas-crude-oil-imports-top-supplier-russia-reach-new-high-2024-2025-01-20/.
[4] Aizhu, “China’s Crude Oil Imports from Top Supplier Russia Reach New High in 2024”
[5] China–Arab States Cooperation Forum, “China-Middle East Economic and Trade Cooperation Is Going to Be a Big Success!,” February 6, 2023, http://www.chinaarabcf.org/zagx/sssb/202302/t20230206_11019989.htm.
[6] Jonathan Fulton and Michael Schuman, “China’s Middle East Policy Shift from ‘Hedging’ to ‘Wedging,’” Atlantic Council, September 5, 2024, https://www.atlanticcouncil.org/in-depth-research-reports/report/chinas-middle-east-policy-shift-from-hedging-to-wedging/.
[7] Jon Alterman, “China and the Middle East,” April 19, 2024, https://www.csis.org/analysis/china-and-middle-east.
[8] Ministry of Commerce of the People’s Republic of China, “China-GCC FTA,” March 8, 2025, http://fta.mofcom.gov.cn/topic/engcc.shtml.
[9] Amr Hamzawy, “The Potential Inroads and Pitfalls of China’s Foray into Middle East Diplomacy,” Carnegie Endowment for International Peace, March 20, 2023, https://carnegieendowment.org/posts/2023/03/the-potential-inroads-and-pitfalls-of-chinas-foray-into-middle-east-diplomacy?lang=en.
[10] Camille Lons, Jonathan Fulton, Degang Sun, and Naser Al-Tamimi, “China’s Great Game in the Middle East,” European Council on Foreign Affairs, October 21, 2019, https://ecfr.eu/publication/china_great_game_middle_east/.
[11] Ben Bartenstein, Mackenzie Hawkins, Nick Wadhams, and Dina Bass, “G42 Made Secret Pact with US to Divest from China Before Microsoft Deal,” Bloomberg, April 16, 2024, https://www.bloomberg.com/news/articles/2024-04-16/g42-made-secret-pact-with-us-to-divest-from-china-before-microsoft-deal.
[12] Xia Sun, “Will China Engage More on Middle East Security?,” Middle East Council on Global Affairs, April 24, 2025, https://mecouncil.org/blog_posts/will-china-engage-more-on-middle-east-security/.
[13] Shi Weijun, “Meeting in the Middle,” Cheung Kong Graduate School of Business, April 2, 2024, https://english.ckgsb.edu.cn/knowledge/article/meeting-in-the-middle/.
[14] Jon Alterman, “China and the Middle East,” April 19, 2024, https://www.csis.org/analysis/china-and-middle-east.
[15] “Houthis Grant ‘Safe Passages’ for Russian, Chinese vessels amid Red Sea chaos,” New Arab, January 19, 2024, https://www.newarab.com/news/russia-china-ships-granted-safe-passage-yemens-houthis.
[16] Mordechai Chaziza, “China’s Counter-Terrorism Policy in the Middle East,” in Terrorism and Counter-Terrorism in China: Domestic and Foreign Policy Dimensions, ed. Michael Clarke (Oxford University Press, 2018), 141–156.
[17] “Militant Uyghurs in Syria Threaten the Chinese Government,” The Economit, January 9, 2025, https://www.economist.com/china/2025/01/09/militant-uyghurs-in-syria-threaten-the-chinese-government.
[18] Liu Xiaoxiao, “‘Dongtu’ Kongbu Zhuyi yu Zhongguo Zhengfu Duice” (“‘East Turkistan’ Terrorism and Chinese Government Countermeasures”), XueshuTansuo 10 (2004):86.
[19] Mathieu Duchâtel, “Terror Overseas: Understanding China’s Evolving Counter-Terror Strategy,” European Council on Foreign Relations, October 2016, https://ecfr.eu/wp-content/uploads/ECFR_193_-_TERROR_OVERSEAS_UNDERSTANDING_CHINAS_EVOLVING_COUNTER_TERROR_STRATEGY.pdf.
[20] Yamei Xue and Benjamin Mwadi Makengo, “Twenty Years of the Shanghai Cooperation Organization: Achievements, Challenges and Prospects,” Open Journal of Social Sciences 9 (2021): 10.
[21] Liu Xuanzun, “Chinese Aviation Equipment Attracts Middle Eastern Interest at Dubai Airshow,” Global Times, November 14, 2023, https://www.globaltimes.cn/page/202311/1301817.shtml.
[22] Jonathan Fulton and Michael Schuman, “China’s Middle East policy shift from ‘hedging’ to ‘wedging,’” Atlantic Council, September 5, 2024, https://www.atlanticcouncil.org/in-depth-research-reports/report/chinas-middle-east-policy-shift-from-hedging-to-wedging/.
[23] James Gethyn Evans, “Maoism, Anti-Imperialism, and the Third World,” Made in China, November 8, 2021, https://madeinchinajournal.com/2021/11/08/maoism-anti-imperialism-and-the-third-world/.
[24] Ahmed Kandil, “China and the ‘Arab Spring’: A New Player in the Middle East?,” European Institute of the Mediterranean, July 5, 2012, https://www.iemed.org/publication/china-and-the-arab-spring-a-new-player-in-the-middle-east/.
[25] Kandil, “China and the ‘Arab Spring’: A New Player in the Middle East?”
[26] Hasan Alhasan, “Contesting the West: China’s Middle East strategy,” International Institute for Strategic Studies, June 25, 2024, https://www.iiss.org/online-analysis/online-analysis/2024/06/contesting-the-west-chinas-middle-east-strategy/.
[27] The State Council of the People’s Republic of China, “China’s Arab Policy Paper,” January 13, 2016, https://english.www.gov.cn/archive/publications/2016/01/13/content_281475271412746.htm.
[28] Masaaki Yatsuzuka, “Current Status of China-Middle East Relations: What Xi Jinping’s Visit to Saudi Arabia Means,” The Japan Institute of International Affairs, January 23, 2023, https://www.jiia.or.jp/en/column/2023/01/middle-east-africa-fy2022-03.html.
[29] Asia Maritime Transparency Initiative, “Arbitration Support Tracker,” July 18, 2023, https://amti.csis.org/arbitration-support-tracker/.
[30] “Riyadh Arab-China Summit for Cooperation and Development Issues Final Communique,” Saudi Press Agency, December 9, 2022, https://www.spa.gov.sa/w1824646.
[31] Dawud Ansari, Jacopo Maria Pepe, and Rosa Melissa Gehrung, “The Gulf States, China, and Central Asia’s Green Energy Sector,” German Institute for International and Security Affairs, January 22, 2025, https://www.swp-berlin.org/publikation/the-gulf-states-china-and-central-asias-green-energy-sector.
[32] Alberto Rizzi, “The Infinite Connection: How to Make the India-Middle East-Europe Economic Corridor Happen,” European Council on Foreign Affairs, April 23, 2024, https://ecfr.eu/publication/the-infinite-connection-how-to-make-the-india-middle-east-europe-economic-corridor-happen/.

### Sea of Hope: The Blue Economy Imperatives for the Global South With Reference to India

Executive Summary 
The Blue Economy 
Oceans cover over 70 percent of the Earth’s surface and contain 97 percent of its water, underpinning food security, climate regulation, and oxygen production. The Blue Economy refers to the sustainable use and regeneration of marine resources, spanning fisheries, aquaculture, maritime trade, coastal management, and tourism.
The scale of oceanic influence underscores the importance of the Blue Economy: 80 percent of global trade is sea-based, 40 percent of the global population live in coastal regions, and over 3 billion people depend on the oceans for their livelihoods. The estimated natural capital of the Blue Economy is valued at US$25 trillion, with an annual output of goods and services estimated at US$2.5 trillion, placing it on a par with the seventh-largest global economy in GDP terms. Yet these figures are only the tip of the iceberg.
The Blue Economy intersects with maritime trade and port infrastructure. Although maritime shipping underpins 80 percent of global goods movement, it accounts for 3 percent of global greenhouse gas emissions and contributes to a large part of oceanic degradation. Sustainable seaport practices—through cleaner technologies, waste management, and ecosystem conservation—are therefore essential. These practices not only minimise ecological footprints but also enhance the resilience of marine ecosystems.
Another critical frontier is blue carbon. Coastal ecosystems such as mangroves, seagrasses, and salt marshes are carbon sinks. Tapping into blue carbon markets—where Global South nations act as net sellers—offers innovative pathways for climate financing and ecosystem restoration. India can lead this shift by pioneering nature-based solutions and institutional frameworks to mobilise blue carbon as a developmental asset.

This Report
This report, Sea of Hope: The Blue Economy Imperatives for the Global South with Reference to India, published by the Observer Research Foundation (ORF) and DP World, explores ways to advance the Blue Economy from a Global South lens, with specific reference to India. It examines thematic areas including sustainable maritime practices, port development, nature-based climate solutions, and innovative financing tools.
The Blue Economy offers both opportunities and challenges; overcoming the challenges will enhance the opportunities further. This necessitates a strategic realignment of policy, institutional, regulatory, and financing frameworks. This volume calls for a renewed Global South agenda for the Blue Economy, with India as its focus. Combining academic insights with strategic pathways for policymakers, practitioners, and industry regulators, it underscores the need for policy development in the Global South to enable a sustainable Blue Economy. 

Recommendations

 	Making a Business Case for the Blue Economy

To mobilise private-sector engagement, it is essential to present the Blue Economy as a viable business opportunity. Historically, companies have been hesitant to invest in environmental and social infrastructure due to perceived low financial returns. However, this narrow focus on economic rate of return (return on investment, or RoI) should give way to a broader recognition of the social rate of return, especially as sustainability increasingly influences consumer preferences, investor sentiments, and regulatory frameworks.


 	Promoting Innovation and Green Finance

It is critical to fund research in low-emission shipping technologies, carbon capture onboard vessels, and AI-driven logistics for route optimisation. Leveraging blue bonds and sustainability-linked loans can help raise capital for port upgrades, emission-reducing technologies, and ecosystem restoration.


 	Establishing Market-Based Instruments: Payments for Ecosystem Services (PES)

Innovative financing mechanisms such as Payments for Ecosystem Services (PES) can monetise and incentivise the preservation of marine and coastal ecosystems. Downstream beneficiaries—tourism operators, fisheries, and coastal developers—can be encouraged to compensate those who maintain or restore these services upstream.


 	Rebalancing Climate Finance: Adaptation vs. Mitigation

Given the acute climate risks faced by coastal populations in the Global South, equitable climate finance must redress this imbalance. Adaptation finance is not merely a technical requirement but a justice imperative—ensuring that all nations, especially those that are historically marginalised, can access the resources necessary for resilient ocean-based development.


 	Greening Maritime Infrastructure

Decarbonising shipping fleets requires transitioning from heavy fuel oil to low-emission alternatives such as LNG, green hydrogen, ammonia, and electric propulsion. By retrofitting existing ships with energy-saving technologies, such as air lubrication systems, hull coatings, and waste heat recovery, fuel consumption and emissions can be reduced. Further, aligning operations with IMO 2023 and 2050 GHG reduction strategies enhances compliance and reduces the environmental footprint of the shipping industry.


 	Developing Sustainable Ports

Incorporating green building principles, shore power (cold ironing) facilities for ships at berth, and LED-based lighting systems can reduce operational carbon footprints and can facilitate designing eco-ports. By deploying advanced waste reception and treatment systems to handle ship-borne and port-generated waste, including oil residues, ballast water, and plastics, challenges of waste management can be handled. Automating and digitising port logistics to improve efficiency and reduce congestion can help in minimising emissions from idling vessels and trucks.


 	Enhancing Multimodal Connectivity and Hinterland Integration

Developing multimodal logistics corridors (rail-road-sea integration) to shift freight away from carbon-intensive road transport and reducing emissions across the supply chain can build seamless logistics corridors. Ports can also anchor marine industrial clusters, including green shipbuilding, aquaculture hubs, coastal tourism, and clean energy zones.


 	Supporting Coastal Resilience and Ecosystem Services

Investing in Nature-Based Solutions (NbS) or green buffers such as mangrove belts, salt marshes, or dune systems around port perimeters can help enhance natural coastal protection and biodiversity. Further, working with governments, industry practitioners and scientists on marine spatial planning can ensure that port expansions and shipping routes minimise habitat disruption and avoid sensitive ecological zones.


 	Community Engagement and Inclusive Development

For livelihoods integration, it is critical to ensure that port expansion projects take into consideration the needs of local fishing communities and small-scale traders, including provisions for alternative livelihoods and inclusive stakeholder consultations. Investing in skills building for training local youth and workers in marine logistics, ship repair, and renewable energy operations can help build human capital for the Blue Economy.


 	Partnerships for Bolstering Regional and Global Initiatives

Alliances like the Getting to Zero Coalition, Clean Cargo Working Group, and World Ports Sustainability Program (WPSP) enable co-development of solutions and sharing of best practices. Regional Blue Economy platforms can bolster collaborations between governments and multilateral institutions on initiatives such as IMO’s Blue Solutions, UNCTAD’s Port Management Programme, and Africa’s Integrated Maritime Strategy 2050. Public-Private Partnerships (PPPs) can diversify investment risk, foster technological innovation and operational efficiency, and increase the total factor productivity. Their success, however, depends on clear regulations and well-designed contracts. In this context, cross-sector coordination and alignment in regulatory and governance architecture become important to reduce the transaction costs of business and diminish, if not eliminate, any opportunity for regulatory arbitrage.
Read the report here.


All views expressed in this publication are solely those of the authors, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel.

### Mirror Biology: Governing the Next Frontier of Life Sciences

In a pre-emptive move towards ensuring the responsible application of emerging biological sciences, scientists have urged caution in the development of a new—albeit hypothetical—form of life arising from research in mirror biology, without opposing its exploration altogether. While mirror molecules hold promising applications in drug development and plastic degradation, the creation of mirror organisms, such as mirror bacteria, raises serious concerns, since their implications for health and the environment—pathogenicity, toxicity, and ecological disruption—are unknown. Although the creation of mirror organisms is still decades away, the possibility of a breakthrough discovery that accelerates research and development remains. In this context, the scientific community has reached near-consensus. While research on mirror molecules is encouraged for their therapeutic and industrial potential, science policy should discourage efforts to create mirror organisms, emphasising the need to balance technological innovation with biosecurity and ethical safeguards.


While research on mirror molecules is encouraged for their therapeutic and industrial potential, science policy should discourage efforts to create mirror organisms, emphasising the need to balance technological innovation with biosecurity and ethical safeguards.

Chirality and Mirror Life 
Chiral molecules are mirror images of each other, like left and right hands, and cannot be perfectly aligned (non-superimposable mirror images). This property, known as chirality or handedness, determines how biomolecules such as DNA, RNA, and proteins interact and function. For instance, the immune system’s ability to recognise and destroy pathogens relies on these chiral differences. All known life on Earth is homochiral, meaning that it uses only one type of handedness: DNA and RNA are made of right-handed nucleotides, while proteins are built from left-handed amino acids. Mirror biology is an emerging field that explores the creation and behaviour of mirror-image biological systems. It includes the study of mirror molecules—synthetic versions of natural biomolecules with opposite chirality—and the more speculative mirror organisms, which would be entirely new, self-replicating life forms built from these components.

Benefits and Potential Applications 
Over the past couple of decades, advances in synthetic biology have enabled the construction of mirror versions of biological molecules. Scientists have synthesised mirror-image proteins, DNA and RNA molecules, and membrane-bound cell compartments. The development of these mirror molecules holds considerable potential for therapeutic and industrial applications. Mirror versions are relatively more resistant to degradation within the body, suggesting that when used as drugs, they could remain stable and active for longer in the body. Studies investigating mirror-image proteins, DNA, and RNA molecules as drug candidates for metabolic disorders, inflammatory diseases, cancer, and infectious diseases are already underway. Mirror-image molecules are being developed to detect proteins and metabolites for diagnostics, while mirror antimicrobial peptides are being explored to counter antimicrobial resistance (AMR).


Mirror biology is an emerging field that explores the creation and behaviour of mirror-image biological systems. It includes the study of mirror molecules—synthetic versions of natural biomolecules with opposite chirality—and the more speculative mirror organisms, which would be entirely new, self-replicating life forms built from these components.

From the industrial perspective, mirror image glucose, which is sweet but not metabolised by natural enzymes, is being studied as a non-caloric sweetener. To address plastic pollution, scientists have synthesised plastic-degrading enzymes, though they often break down in the environment. The synthesis of non-biodegradable mirror-image versions of such enzymes offers a potential solution. Thus, the development of mirror molecules holds considerable promise in therapeutics and industrial applications, particularly if production can be scaled efficiently and safely.
Research into mirror organisms—such as mirror bacteria—however, carries much greater risk. The synthesis of mirror bacteria is decades away, requiring substantial financial and technological investment. However, as researchers continue to assemble mirror-image cellular components and with advances in AI, it is increasingly plausible that a mirror-image self-replicating cell could be created—one that may behave unpredictably. A mirror bacterium could potentially evade the immune system of humans, animals, and plants, behave like a tumour cell and sequestrate oxygen, nutrients, and physical space within a host, and could even damage the environment if it escapes its natural predators and outcompetes other organisms for resources. These possibilities illustrate a crucial policy distinction: mirror molecules offer tangible benefits with manageable risks, whereas mirror organisms present profound uncertainties that could prove catastrophic.

The Global Scientific Response 
Debate over mirror biology intensified in December 2024, when nearly 40 leading experts in synthetic biology, ecology, and immunology jointly published a Science Policy Forum article and a 299-page technical report. Collectively, they cautioned that the emergence of mirror organisms could introduce risks without historical precedent—threatening human health, biodiversity, and ecological stability.
In February 2025, scientists commemorated 50 years since the Asilomar Conference on recombinant DNA—a pioneering gathering that defined the first global norms for biosafety in biotechnology. Convened at Asilomar State Beach, California, in 1975, the conference produced guidelines that influenced the US National Institutes of Health’s regulatory framework for research on recombinant DNA technology and the biosafety level (BSL) system used worldwide. Echoing that spirit, scientists now urge for proactive guardrails on emerging life science technologies, including mirror biology.
Over the past year, deliberations have expanded globally, recognising mirror biology as a defining governance challenge for twenty-first century life sciences. Conferences and workshops were hosted by the University of Manchester, the US National Academies for Science, Engineering, and Medicine, Institut Pasteur with the Mirror Biology Dialogues Foundation (MBDF), the Nuclear Threat Initiative’s Biosecurity Innovation Risk Reduction Initiative (BIRRI), and the UK Government Office for Science.


As the twenty-first century unfolds as the ‘century of biology,’ research into mirror biology exemplifies the paradox of innovation and security. While scientific curiosity drives solutions to global challenges, the same technology also opens pathways to unprecedented risks. For instance, in contrast to other disruptive technologies such as gene editing, which modify existing organisms, mirror organisms represent a life form that does not exist naturally, and which can evade current biosurveillance measures and resist existing countermeasures.

Innovation and Security: A Dual-Use Paradox 
As the twenty-first century unfolds as the ‘century of biology,’ research into mirror biology exemplifies the paradox of innovation and security. While scientific curiosity drives solutions to global challenges, the same technology also opens pathways to unprecedented risks. For instance, in contrast to other disruptive technologies such as gene editing, which modify existing organisms, mirror organisms represent a life form that does not exist naturally, and which can evade current biosurveillance measures and resist existing countermeasures.
Compounding this uncertainty is its dual-use potential. Tools and components of legitimate research could be repurposed by malicious actors, although the technical expertise and infrastructure required would render covert efforts even more challenging. Further, unlike most dual-use technologies, mirror organisms do not exist yet, presenting a unique opportunity to shape governance before the technology materialises.

Recommendations: Global Governance and Science Diplomacy 
To ensure that mirror biology develops within a safe and responsible framework, a multi-layered governance strategy is essential. This will enable a shared understanding of risks, legal and institutional safeguards, and facilitate beneficial research, while preventing the creation of mirror organisms.
1. Clarifying the Scope of Mirror Biology 
Firstly, the scientific community must foster a shared understanding of what constitutes mirror biology and clearly distinguish between the synthesis of mirror molecules and that of mirror organisms, both of which together constitute the emerging domain of mirror biology. This distinction is critical to enabling beneficial research whilst ensuring the responsible and ethical development of life sciences. A global moratorium on the creation of self-replicating mirror organisms could be implemented until thorough risk assessments are conducted. Such a pause would not halt scientific progress but would clarify the boundary between low-risk and high-risk studies under strict oversight.
2. Global Oversight Mechanisms
A legal and institutional regime to oversee mirror biology is equally necessary. Establishing an advisory committee under the aegis of the World Health Organization (WHO) or the United Nations (UN) could create a coordinated structure to evaluate research proposals and classify projects by risk. Existing multilateral mechanisms, including the Biological Weapons Convention (BWC), the Environmental Modification (ENMOD) Convention, and the Australia Group, could be leveraged to regulate the use and transfer of mirror biology technologies.
3. International Scientific Cooperation 
As effective global governance relies on national implementation, countries should include mirror biology within their biosecurity and dual-use research oversight frameworks. Risk assessments should be conducted by funding agencies and review boards for relevant experiments. Identification barcodes or safety switches could be incorporated into experimental systems to minimise the impact of unintended release and enhance containment. Governments can use existing institutional mechanisms to coordinate policy with emerging global norms.


Embedding science diplomacy within mirror biology governance will be central to these efforts. Discussions on mirror biology should form part of diplomatic engagements to ensure early coordination between multilateral institutions and scientific experts. Science diplomacy can translate technical knowledge into policy legitimacy, build trust amongst nations, and mediate asymmetries in decision-making by including actors from the Global South.

4. Responsible Science Communication and Diplomacy 
International forums convened under the WHO, the UN, or other multilateral bodies can bring together key stakeholders—scientists, industry bodies, civil society, science policy researchers, and government agencies—to deliberate the risks and opportunities of mirror biology. Such forums would also serve as platforms for science diplomacy, helping align technical consensus with political legitimacy. This would cultivate a shared global understanding of mirror biology-related research while ensuring transparency around funding sources, patents, commercial interests, and potential conflicts of interest.
Embedding science diplomacy within mirror biology governance will be central to these efforts. Discussions on mirror biology should form part of diplomatic engagements to ensure early coordination between multilateral institutions and scientific experts. Science diplomacy can translate technical knowledge into policy legitimacy, build trust amongst nations, and mediate asymmetries in decision-making by including actors from the Global South.
Finally, promoting responsible innovation requires vigilance against misinformation and disinformation. Scientists, policymakers, and the media must responsibly communicate mirror biology’s potential and risks accurately, avoiding both hype and alarmism. This will help sustain public trust while reinforcing the scientific and ethical boundaries of acceptable research.

A Pause Worth Taking
Mirror biology remains an emerging domain, yet it demands governance today. The scientific community has already begun to anticipate its risks, seeking to align innovation with precaution. As with recombinant DNA technology, responsibility must precede capability: mirror molecules may advance medicine and sustainability, but mirror organisms pose ecological and biosecurity threats of an unknown scale. Diplomatic engagement must therefore include mirror biology, ensuring this frontier science evolves under foresight instead of reaction—demonstrating that the governance of scientific innovations can be proactive, not solely responsive to their consequences.



This commentary originally appeared in Observer Research Foundation.

### Gaza Ceasefire Tests America’s Middle East Clout

The United States (US) President Donald Trump arrived in Israel as a deal between the Jewish state and Hamas was negotiated, leading to the release of 20 alive Israeli hostages under captivity since 7 October 2023, in exchange for almost 2,000 Palestinian detainees from prison. The exchange was executed smoothly, effectively removing a significant obstacle that had stood in the way of a lasting ceasefire.
Not far from Tel Aviv, Trump later gathered with leaders from across the Islamic world for a ‘Summit for Peace’ in the city of Sharm el-Sheikh. “This is the end of the age of terror and death,” Trump claimed during a one-hour long address to Israel's parliament, the Knesset. In Egypt, Trump, alongside Egyptian President Abdel Fatteh al-Sisi, convened with leaders from Qatar and Türkiye, as well as a diverse group of European heads of state, to present a united front for the new peace initiative.


“This is the end of the age of terror and death,” Trump claimed during a one-hour long address to Israel's parliament, the Knesset.

However, these recent successes also rekindle the question of Washington’s enduring power in the Middle East.
Since two years of war in the Gaza strip since Hamas’s audacious terror attack in 2023, the probability of peace no longer appears far-fetched. There were three core political reorientations over the past month which culminated in the realisation of this much needed off-ramp, which also included the deaths of over 67,000 Palestinians in the Gaza strip. While this is the official figure, several estimates suggest that the actual numbers may be considerably higher.
The first reorientation—an Israeli miscalculation—of conducting an air strike against Hamas negotiators in Qatar’s capital Doha, resulted in a domino effect. It not only agitated the White House, directly challenging Trump’s peace initiatives which culminated in Egypt and Israel yesterday, but also pushed Trump personally to further turn the keys on Israeli Prime Minister (PM) Benjamin Netanyahu who with the Qatari strike crossed a certain threshold. The Qatari leadership has been a forefront mediator on the Gaza crisis, and has hosted the political office of Hamas since 2012, set up at the request of the US presidency of Barack Obama.
Second, Trump’s pressure on Netanyahu was greater than the pressure the Israeli PM faced from his right-wing coalition partners, especially Finance Minister Bezalel Smotrich and the National Security Minister Itamar Ben-Gvir. Both Smotrich and Ben-Gvir have previously threatened to rock the coalition boat if a deal with Hamas was agreed upon and the stated aim of elimination of Hamas from Gaza was not achieved. These internal political tensions also contributed to the rare civil–military strain that unfolded over the course of the Gaza war.


Scholar Daniel Byman highlights that while Hamas’ capacities—both in manpower and otherwise—were weakened by relentless Israeli operations since 2023, war fatigue was also taking hold within Israeli society.

Finally, both Hamas and Israel were at a threshold. Scholar Daniel Byman highlights that while Hamas’ capacities—both in manpower and otherwise—were weakened by relentless Israeli operations since 2023, war fatigue was also taking hold within Israeli society. Mandatory military service, coupled with a declared ‘seven-front war,’ was creating social strain and, by extension, mounting pressure on Netanyahu to strike a deal and bring the hostages home. Although Netanyahu received adulation for the agreement during Trump’s Knesset speech, Israeli streets have been flooded over the past few months, with thousands of protesters demanding that the Israeli leader strike a deal and bring back the people. Ultimately, Netanyahu capitulated and became the first Israeli leader to sign an agreement of such nature with Hamas.
Going forward, the road to the peace agreement and the future of Gaza remains rocky. Hamas prevails in the Gaza Strip, and alternative political systems are yet to be stitched together. Netanyahu is unlikely to renege on his aim to permanently dismantle Hamas from the region. However, the US provided a personalised touch, which can be looked upon by Hamas as guarantees, to push this agreement over the line. While the risk for the same has been dispersed between the US and its partners in Egypt, Türkiye, Qatar, among others, Washington remains the proverbial ace of spades of the deck.


The US provided a personalised touch, which can be looked upon by Hamas as guarantees, to push this agreement over the line.

This raises fundamental questions about the future of American power in the Middle East. While direct US military intervention, at least under Trump, will not happen in the region, American political buy-in into the Middle East’s political processes has gone up instead of down. This impacts any attempts to reorient US grand strategy for the future. Through the administrations of Obama, Biden, and now Trump, a missing ‘Asia Pivot’ remains constant, implying that contestation with China is yet to receive clear policy and strategic clarity.
While the term ‘Asia Pivot’ today is lost amidst the myriad of conflict flash points peppered across the world, other China-specific ideations, such as de-coupling and de-risking, have also seemingly lost steam. In an era where middle powers are prophesying multipolarity, multi-alignment, and strategic autonomy, it is these states that are challenging hegemonic designs of power and politics that have prevailed following the Second World War. For the likes of both the US and China, managing these middle powers may end up being a harder task than managing each other.


The US remains the main geopolitical arbitrator. Instead of boots on the ground, it is political pressure and economic benefits that are leveraged.

For the time being, the US remains the main geopolitical arbitrator. Instead of boots on the ground, it is political pressure and economic benefits that are leveraged. However, it is worth noting that many of its allies, specifically amongst the Arab states, still seek deep security guarantees. Following the Israeli strikes, Qatar argued for and received the same. The US influence in the region far supersedes anyone else, including Russia, China, and even the Europeans, who have a colonial history behind them. This is a reality, fortunately or unfortunately, Washington will have to navigate as its own hesitations over the future of ‘Pax Americana’ unravel.



This commentary originally appeared in Observer Research Foundation.

### Between New Delhi & Kabul, a fine balance

On December 24, 1999, an Indian Airlines flight (IC 814) operating between Kathmandu in Nepal and New Delhi was hijacked, and after moving through a few cities, eventually taken to Kandahar in southern Afghanistan, the ideological home of the Taliban. The hostage crisis ended on December 31. During this period, India’s current National Security Adviser, Ajit Doval, was one of the main negotiators. A then middle-level Taliban official, Amir Khan Muttaqi, was director general of administrative affairs. Twenty six years later, both these personalities are at the centre of an unconventional geopolitical reality, a quasi-normalisation between the Taliban-led interim government in Kabul and the Indian government as interim foreign minister Amir Khan Muttaqi arrived on his maiden visit to New Delhi.
The chaotic withdrawal of US forces from Afghanistan in August 2021 was a watershed moment. While an upending global order today makes the events of that time less relevant and prevalent, the US fighting a 20-year war against terrorism only to end up replacing the old Taliban with a new one, via the 2020 agreement between the two sides signed in Qatar under President Donald Trump’s first term.


The hostage crisis ended on December 31. During this period, India’s current National Security Adviser, Ajit Doval, was one of the main negotiators.

A US withdrawal was always imminent, leaving behind both a threat and an opportunity for regional powers to securitise their interests with an insurgency now back to running a State. Within this construct, every neighbour took an individualistic strategic approach as convergences on how to deal with the Taliban became minimal.
Central Asia, at large, decided to engage economically almost immediately. Iran became a core political and economic partner as well. India played the long game culminating in hosting Muttaqi this month, committing to upgrading the “technical mission” in Kabul to full embassy status, and re-committing to a slew of developmental projects aimed at the betterment of the Afghan people. Many of these neighbours of Kabul had actively promoted anti-Taliban movements in the 1990s.
For the Taliban, the visit is a political victory. India is the largest economic power in the region, and with Afghanistan’s economy riddled with sanctions and lack of funds, getting any aid and investment into areas such as food and health security is critical to maintain the group’s domestic checks and balances. Despite the veneer of power, Afghanistan under the Taliban remains flimsy. Over the past four years, the interim government led by the likes of Mullah Baradar, Sirajuddin Haqqani (the interim interior minister), Mullah Yaqoob (Mullah Omar’s son and interim defence minister) along with Muttaqi amongst others, have attempted to promote an ideologically pragmatic approach. This, increasingly, was seen as a challenge to emir-ul-momineen Hibatullah Akhundzada’s ideological centrality from Kandahar. In 2025, this gap has shrunk. Kandahar, arguably, has much greater control over Kabul. Before Muttaqi’s arrival, reports had suggested that Akhundzada had given special directives over the trajectory of the India–Afghanistan bilateral.
However, for New Delhi, while hosting Muttaqi is a realistic and unavoidable strategy, the dance is delicate. Today, for both India and the Taliban, an unsaid convergence is on Pakistan. India had started taking baby steps with its Taliban engagement in 2021 itself with foreign secretary Vikram Misri meeting Muttaqi in Dubai in January. Operation Sindoor along with the Taliban’s own deteriorating security and familial feuds with Pakistan’s military and intelligence have since turbo-charged the outreach. The Taliban had condemned the Pahalgam terror attacks and rejected the Pakistan-pushed propaganda of Indian missiles targeting Afghan soil. This led to the first phone call between minister of external affairs S Jaishankar and Muttaqi in May. Since then, India upped its risk and ultimately gave the Taliban what they wanted, institutional access to New Delhi.


Operation Sindoor along with the Taliban’s own deteriorating security and familial feuds with Pakistan’s military and intelligence have since turbo-charged the outreach.

This rattling of status-quos reverberated in Pakistani power corridors, with reports suggesting air strikes conducted against the Tehrik-e-Taliban Pakistan (TTP) in Kabul, a militant group and its affiliates Rawalpindi tries to peddle as India-backed due to its own incapabilities of cleaning their own home of extremism. During Muttaqi’s press conference at the Afghan embassy in Delhi, he reiterated that the patience of Afghans should not be tested as witnessed by the erstwhile Soviet Union and later, the US. This message from the Taliban, aimed at Pakistan, from New Delhi, carries strategic benefits for the short term at least.
India’s own push in its talks with Muttaqi was mostly about development, something the Afghan people associate the country most with. This course correction was needed after New Delhi stopped issuing visas in 2021. In essence, the message remains that New Delhi will continue to help with projects aimed at betterment of the people. Within this as well, the announcement of helping to build housing for displaced Afghans, being pushed back across the border by Pakistan in their thousands, adds another layer of building capacities via positive narratives.
Finally, Muttaqi may have also received some indirect feedback on social issues. His visit to the Deoband seminary in Uttar Pradesh, the intellectual home of the Deobandi movement which underlines the Taliban’s ideology, is expected to push for a more inclusive Afghanistan. The seminary elders, while celebrating the Taliban’s ouster of the US, had pushed for the same, including schooling for girls but remaining in favour of gender segregation in educational institutions. All in all, the visit has opened a delicate new chapter between India and the new powers in Afghanistan.



This commentary originally appeared in Hindustan Times.

### How AI Can Deliver Quality Learning at Scale

India’s learning crisis meets new opportunities: AI can bridge gaps, personalise instruction, and expand educational equity.

One of the biggest challenges in India’s education system is delivering quality learning at scale—across languages, terrains, and institutional types—to the 24.69 crore children enrolled in its schools. Large-scale assessments such as PARAKH(Performance Assessment, Review, and Analysis of Knowledge for Holistic Development) highlight persistent foundational gaps. In Grade 3, only 55 percent of students were able to secure marks up to 99; and in Grade 9, only 31 percent were able to employ advanced concepts involving numbers, fractions, and decimals.

In this context, this article examines how India can leverage Artificial Intelligence (AI) to improve learning outcomes, particularly for children in rural areas or enrolled in government or low-cost private schools.
The COVID Learning Experiment
The COVID-19 pandemic unexpectedly became a nationwide experiment in digital education, revealing both the vulnerabilities and the latent potential of India’s digital infrastructure. When schools closed, governments rapidly deployed a range of digital platforms, such as DIKSHA, WhatsApp/Google classrooms, and video-based lessons. According to a report by the Boston Consulting Group (2021) in collaboration with state governments of Jharkhand, Madhya Pradesh, and Rajasthan, when regular, offline mode of schooling halted during 2020, nearly two million households signed up for digital education within eight weeks. Many users accessed content on basic mobile phones, via applications such as YouTube and WhatsApp, making learning more accessible in low-resource settings.  In rural Rajasthan, 96 percent of teachers learned to use the DIKSHA platform during the pandemic and integrated it into lesson plans and assessments. Similarly, 95 percent of students across grades 9-12 used it to access digital textbooks and interactive worksheets in the state.
Interventions during the pandemic were seldom perfect, but they demonstrated that with intent and coordination, technology can deliver high-quality educational content at scale—even to underserved communities.

These interventions during the pandemic were seldom perfect, but they demonstrated that with intent and coordination, technology can deliver high-quality educational content at scale—even to underserved communities. These efforts laid the groundwork for more advanced technologies such as AI to augment and further this rapid evolution in personalising learning, driving equity, and informing governance—essential elements in achieving quality learning for all.
Use Cases of AI to Deliver Quality at Scale in India
The following are the five most crucial use cases of AI in India that closely relate to delivering quality learning.

 	AI for Students: Personalised Learning Paths and Remediation

One of the core advantages of AI in education is its ability to tailor instruction to the learner. Unlike traditional models that assume uniform pace and prior knowledge, AI systems can assess a student’s level in real-time and adjust the difficulty, format, or pace of content accordingly. For example, MindCraft, a platform specifically for rural students, helps them transcend language barriers and geographical disadvantages by offering tailored learning content. It includes an AI-powered tutor that teaches using visual cues, fosters interactive problem-solving, and provides career guidance and mentorship based on diagnostic assessments.
Natural Language Processing (NLP) systems are now capable of translating textbook concepts in English and other languages into vernacular languages and generating voice-assisted explanations to help bridge learning gaps.

Furthermore, AI can also be equipped to integrate multilingual and culturally contextualised content, supporting tribal and first-generation learners. Natural Language Processing (NLP) systems are now capable of translating textbook concepts in English and other languages into vernacular languages and generating voice-assisted explanations to help bridge learning gaps.

 	AI for Teachers: Planning, Differentiation, and Support

According to UDISE+ (Unified District Information System for Education+) 2024–25 data, there are over 1 lakh single-teacher schools in India. The numbers compound when smaller schools and teacher absenteeism are taken into account, resulting in one teacher often handling multiple grades or subjects. Moreover, the majority of their time is consumed by non-teaching/instructional duties such as administrative work, record-keeping, and non-academic tasks, including preparing registers and conducting surveys.

AI tools can play a crucial role in supporting/augmenting teachers by preparing lesson plans, automating routine tasks, grading assignments, and analysing student performance, thereby reducing time spent on non-instructional tasks and enhancing teaching effectiveness.  According to McKinsey, technology can help save 20-30 percent of teachers’ time, which can instead be devoted to classroom instruction.



Source: McKinsey, 2020

An NCERT (National Council of Educational Research and Training)-supported study (2024) revealed that teachers who receive pre-service with AI-assisted lesson planning tools were better able to identify student needs and adapt their instruction. AI-enabled platforms also generated low-prep assessments and automatically grouped students by performance, saving valuable time.

 	AI for Assessments: Early Warning and Real-Time Feedback

In traditional education systems, assessments are periodic and summative, and too late to drive timely interventions. In contrast, AI-enabled assessments can prove to be formative and ongoing, offering students real-time feedback and providing teachers with actionable insights.

For instance, IIT (Indian Institute of Technology) Bombay’s TARA (Teacher’s Assistant for Reading Assessment) application employs speech processing and machine learning to automatically evaluate Oral Reading Fluency. It records children reading aloud age-appropriate passages, then computes metrics such as ‘Words Correct Per Minute’ (WCPM) and also analyses expression (phrasing, intonation, stress) to approximate the reading stage of students. The system works in both English and Hindi and has been validated to match human expert scoring. It has already been deployed at a large scale: over 7 lakh students across 1,200 Kendriya Vidyalaya schools covering Grades 3–8.
Teachers who receive pre-service with AI-assisted lesson planning tools were better able to identify student needs and adapt their instruction.

Another relevant dataset is the ASER Children’s Speech Dataset, which comprises thousands of audio clips in Hindi, Marathi, and English from children aged 6-14 reading at various levels. They built an ASR (Automatic Speech Recognition)-based classifier that predicts reading proficiency with 86 percent accuracy (for English). This dataset highlights the feasibility of large-scale speech-based reading level assessment in regional Indian languages.

 	AI for Governance and System Monitoring

Beyond classrooms, AI can also help governments and education departments monitor progress, allocate resources, and evaluate impact more efficiently. For example, through predictive analytics and AI-powered dashboards, systems such as SDMS (Student Database Management System)-UDISE+ and Pradhan Mantri (PM) eVidya are helping administrators identify schools or regions at risk of poor performance or high dropout rates, thereby facilitating targeted interventions such as remedial programmes, resource allocation, and teacher support.

Nagaland’s Department of School Education has implemented an AI-based system to monitor teacher attendance using geo-positioning and analytics. The system aims to generate real-time data on whether teachers are present in the school compound, which allows block or district officers to follow up. Another example of how AI can be used to establish a supply chain or resource accountability mechanism is the Kitab Vitran App in Uttar Pradesh. Using QR codes, the app allows teachers to scan and confirm receipt of the Grade 3 supplementary books and reading materials for Hindi and Mathematics. This data is monitored in real-time by officials, enabling prompt corrective action in the event materials are delayed or go missing.

These tools undoubtedly have potential. However, they are yet to be leveraged for full teacher performance or school effectiveness monitoring, or predictive models of system‐level failure beyond obvious resource gaps.

 	AI for Inclusive Education: Assistive Technologies and Language Equity

AI also opens up new possibilities for making education truly inclusive, a key mandate under the 2020 National Education Policy (NEP). It can also support learners with disabilities via assistive AI tools, which offer multilingual/ dialectical support (translation, local language content), adapted to their learning styles, pace, and socio-cultural contexts.
AI also opens up new possibilities for making education truly inclusive, a key mandate under the 2020 National Education Policy (NEP).

Several AI apps are being used to support children with autism and learning disabilities: the Screening Tool for Autism Risk using Technology (START) app enables non-specialists to assess autism using mobile-based child tasks and parent inputs in low-resource settings. Additionally, platforms such as CognitiveBotics offer AI-powered therapy through interactive games and chatbots, showing improvements in social and communication skills.
Recommendations for a Responsible AI Future in Education
Nonetheless, the use of AI for learning is not a silver bullet. It cannot replace the skills of a human teacher, and concerns due to infrastructure gaps are irrefutable. Accordingly, the success of any AI intervention depends on how thoughtfully it is designed, governed, and embedded in real-world systems. Therefore, the need of the hour is AI integration, which is also backed by strong ethical safeguards, aligned with educational equity goals, and with a teacher-first approach.

While mobile penetration has increased, challenges in school infrastructure and uneven accessibility at home remain significant for AI-enabled education in rural, tribal and low-resource settings. These gaps mean that AI integration (particularly for students) cannot rely on school-based infrastructure alone; it is more scalable to leverage households’ mobile phones. That too carries its own set of disadvantages: device sharing, gender divide in accessibility, digital illiteracy, unreliable electricity or internet, and privacy concerns.
AI integration (particularly for students) cannot rely on school-based infrastructure alone; it is more scalable to leverage households’ mobile phones.

Eight recommendations can be made to overcome these challenges and deliver AI-powered quality learning to all children in India. First, AI innovations should be designed as offline-first, low-bandwidth, so that the AI tool can function smoothly without constant internet, caching content and syncing when possible. Second, apps should work on low-end phones and allow voice, image inputs, and small file sizes. Setting up shared community access points such as village centres, gram panchayat halls, or local schools, which can host charging stations and devices in households that lack them. Access priority should be given to girls and excluded groups, while training them and their parents to use devices confidently and safely. There is a need to expand mobile networks (4G/5G) to unserved villages and equip schools with solar or battery backup for consistent power. Within schools, teachers should be supported with contextualised tools that generate lesson plans, auto-grade assessments, and suggest group activities, allowing them to focus more on actual teaching. Equally important is investing in teacher capacity by co-designing AI tools with educators and offering short blended training programmes like IIT-Madras’ “AI for Educators.”Finally, ethical AI use should be ensured through anonymised data, bias audits, and adoption of open-source or auditable models, guided by NITI Aayog’s Responsible AI framework.

As India moves to operationalise NEP 2020 and scale foundational learning initiatives, AI offers an unprecedented opportunity—not just to push content, but to truly transform how every child learns.

 



Arpan Tulsyan is a Senior Fellow at the Centre for New Economic Diplomacy, Observer Research Foundation.

### Can India and Japan deliver on their energy agenda?

Indian Prime Minister Narendra Modi’s embrace of Xi Jinping and Vladimir Putin in the northern Chinese port city of Tianjin on Monday — his first visit to China in seven years — is getting a lot of attention, and rightly so.

The cordial atmosphere and optics sent a clear message to Washington: India won’t be bullied by the Trump administration or given an ultimatum on trade or security.

But Modi’s visit to Tokyo the week before was, arguably, more productive when it came to high-level cooperation. It was reported that the two countries “agreed to significantly ramp up cooperation in a number of areas, including trade, security and people exchanges.”

As geopolitics in the Indo-Pacific shifts, energy has become central to how India and Japan define their partnership. Rising demand in South Asia, Japan’s search for secure alternatives and the shared urgency of decarbonization have made energy cooperation a test case for whether the two democracies can align climate goals with economic security in an uncertain global order.

Modi’s Aug. 29-30 visit to Tokyo, where he met with Prime Minister Shigeru Ishiba, came on the heels of the 11th India-Japan Energy Dialogue, held on Aug. 25. Co-chaired by Manohar Lal, India’s minister of power, and Yoji Muto, Japan’s minister of economy, trade and industry, the meeting reaffirmed a longstanding framework that dates back to 2006.

This institutional base was expanded in 2022 with the India-Japan Clean Energy Partnership, which created sectoral working groups on clean fuels, efficiency and resilient supply chains.

As two of Asia’s largest carbon emitters after China, both governments know that energy cooperation cannot remain rhetorical. Progress so far has been modest but not negligible. The challenge is to build on these frameworks, scale them up dramatically and align projects with the urgency of climate commitments and the realities of energy security.

Within the energy sector, delivery has been visible, though limited in scale. Since 1958, through Official Development Assistance, Japan has extended loans worth more than ¥1.5 billion to safeguard India’s energy availability.

Its financing has supported 14.1 gigawatts of projects by fiscal year 2024-2025 across wind, solar, hydro, cogeneration, storage and thermal capacity, only a modest rise from around 9.3 GW a decade earlier. This underlines how longstanding engagement has produced steady but gradual results, not yet transformative in scale.

Meanwhile, the Japan Bank for International Cooperation's 2024 survey reaffirmed India as the most promising long-term destination for Japanese firms, yet also pointed to falling business planning ratios. While some companies see opportunity, others remain cautious, citing policy uncertainty, legal complexity, underdeveloped infrastructure and execution risks.

Addressing these bottlenecks will require deeper institutional reforms, smoother regulatory pathways and more transparent risk-sharing mechanisms if Japanese capital is to flow at the scale India needs.

Modi’s visit sought to inject renewed political momentum. Japan pledged to invest up to ¥10 trillion in India over the next decade, doubling its earlier 2022 commitment.

Japanese companies already average around ¥1 trillion annually in foreign direct investment and cumulative inflows since 2000 now exceed ¥6.3 trillion ($43 billion), making Japan India’s fifth-largest investor.

Alongside this, project pipelines are beginning to take shape. ACME Group’s partnership with Japan’s MOL will build a green ammonia facility in Odisha, India, capable of producing 400,000 tons annually by 2030, with exports directed to Japanese power and chemical sectors. Hitachi Energy has been selected to deliver a 950-km HVDC transmission system that will transmit 6 GW of renewable energy in India.

Sojitz and Suzuki, working with Indian Oil and local cooperatives, are investing nearly ¥59.4 billion ($400 million) to scale biogas, embedding Japanese technology in rural India while boosting farmer incomes. Entrepreneurs are setting up a green hydrogen Centre of Excellence in Uttar Pradesh, while Toyota and Suzuki are expected to use India as a base to manufacture hybrid and electric vehicles for export to Africa and Southeast Asia.

These initiatives show that Japanese technology, capital and risk instruments are embedding steadily into India’s clean energy landscape. The question is whether this pipeline can expand quickly enough to meet the urgency of the climate and energy transition challenge.

Meanwhile, external pressures are sharpening. The Trump administration’s renewed tariff measures are reshaping global trade flows while China’s dominance over clean-energy supply chains remains a strategic concern. For both India and Japan, this makes resilient, diversified cooperation not just desirable, but essential.

The Modi-Ishiba Joint Vision 2035, unveiled in Tokyo, reflects this reality. Framed around broader economic and security ties, it places energy at the core, from hydrogen and ammonia to next-generation mobility, emissions monitoring and semiconductor resilience. Japan also promoted the Joint Crediting Mechanism, enabling emission-reduction projects in India to generate credits for both countries.

Japan’s financing institutions and technology partnerships could also help integrate gender-responsive planning into just climate and energy transition projects, aligning bilateral cooperation with global equity debates and enhancing both nations’ credibility ahead of COP30, the 30th United Nations Climate Change Conference scheduled for later this year in Brazil.

Energy security in the Indo-Pacific can no longer be separated from energy transition, and India-Japan cooperation is central to both. As Modi’s Tokyo visit shows, the two countries are not starting from scratch. The challenge is to transform steady, incremental progress into scaled, system-wide change.

That change includes expanding renewable and grid infrastructure beyond pilot projects and balancing investments in evolving technologies such as hydrogen, perovskite cells and carbon capture with a sustained push on proven renewables like solar, wind and energy efficiency. The task also means ensuring finance flows faster and with fewer hurdles, while embedding clean-energy transition and gender equity into project design.

If New Delhi and Tokyo can align ambition with delivery, they will not only advance their own climate pledges but also set a standard for resilient, inclusive energy cooperation in the Indo-Pacific.



This article originally appeared in The Japan Times.

### Convergence in Grand Strategies: The France-UAE Partnership in AI

Introduction
In the realm of foreign policy, a ‘grand strategy’ is a concept that addresses a fundamental challenge: “aligning means and ends” over an extended period of time.[1] As scholars Therry Balzacq and Mark Corcoral note, it helps to “understand and explain how and why a state interacts with other actors in a given way and how it combines various military, diplomatic, economic, and cultural instruments to achieve its ends in a largely coherent fashion.”[2] The strategy determines the path and sets the boundaries of a state’s foreign policy; it aligns internal and external policy objectives; and as researcher Michael Eskenazi elaborates, “helps with the allocation of resources between short-term needs and long-term goals.”[3]
A ‘grand strategy’ may comprise different sectoral domains, policy and strategic objectives, as well as different timeframes for achieving various goals. It is nourished by the experiences of the past but defined in the present while being future-oriented. The grand strategy reflects the structural dynamics of a country’s strategic environment based on the long-term trajectories of the transnational trends shaping them. Therefore, to best serve a state's interest in an evolving global context, the grand strategy should not be a static framework but an adjustable structure. As diplomat Martin Briens and historian Thomas Gomart suggest in their joint study, a grand strategy is constructed through an “analysis of the changing international system and is intended to steer it based on a state’s desired role in this system.”[4]

Integrating Megatrends into Grand Strategies 
A grand strategy calls for understanding and anticipating structural transformations, also referred to as ‘megatrends’ or global trends. These underlying megatrends can be observed in the present but they gradually unfold and have a lasting, transnational impact over the long term (perhaps in 10+ years).[5] To prepare for and capitalise on the potential impacts of these trends, states can make use of strategic foresight to fashion their foreign policy, which, as Briens and Gomart put it, “must begin by identifying and joining up the major areas of transformation of the international system.”[6] According to the United Nations (UN), the current megatrends—which inevitably transform a state’s strategic environment and (re)define its room to manoeuvre—are climate change, demographic shifts, urbanisation, the emergence of digital technologies, and inequalities.[7]
For the purpose of this brief, ‘grand strategy’ refers to a state’s intention and subsequent resource mobilisation to define, sustain, and adapt its role on the global stage, with the overarching goal being the effective pursuit of its national interests. Such pursuit calls for the coordinated and strategic use of political, diplomatic, economic and military tools and means. Depending on their key purposes and the issues they focus on, as well as the predominance of the type of tools and means used, some grand strategies can be characterised as ‘adaptative’ while others may be mainly ‘shaping’ or ‘controlling’.[8] This brief focuses on the first category.
A grand strategy cannot be analysed as a stand-alone guiding thread, as it is inherently designed and implemented in reaction to other states’ external actions and vision.[9] As Eskenazi puts it, “strategic policy is not only about the subject government’s objectives and actions; it is also about how the subject government perceives other governments’ objectives and actions.”[10] When key elements and objectives of grand strategies correlate, cooperation between states in specific sectors can facilitate or even catalyse the achievement of national goals; structured and lasting international partnerships become tools serving the parties’ joint interests. Such cooperation can only last if the countries involved are trusted partners and their grand strategies are neither mutually exclusive nor contradictory.
This brief focuses on one of the five transformative megatrends identified by the UN—the emergence and growth of digital technologies,[11] and more specifically, of artificial intelligence (AI).[12] It analyses how states’ grand strategies reflect a specific transformative megatrend; and how convergence in these strategies can lead to transnational cooperation as a means of achieving national objectives. The case study is the cooperation in AI between the United Arab Emirates (UAE) and France.
Analysing these two states’ AI cooperation is particularly pertinent as both are top AI players in their respective regions. According to the Global AI Index 2024, France leads within the European Union (EU) and is fifth globally in terms of AI capacity (implementation, innovation, investment scale and intensity),[13] whereas the UAE ranks third in the Middle East and is 20th globally. Stanford University’s Global AI Vibrancy Tool 2024, which measures national progress in AI, ranks the UAE first in its region and fifth globally,[14] while France ranks first in the EU and sixth globally.[15] The rankings suggest that a France-UAE bilateral AI cooperation has significant potential to shape both the European and Middle Eastern AI landscapes, with wider international implications. 

France-UAE Cooperation in AI 
A strategic partnership, with a renewed roadmap for 2020-2030, and regular strategic dialogues since 2008,[16] have shaped the cooperation between France and the UAE.[17] The current multi-sectoral partnership grew out of a primarily security and energy policy-oriented collaboration,[18] gradually encompassing new fields of cooperation including science and technology. During his visit to France in March 2025, H.H. Sheikh Abdullah Bin Zayed Al Nahyan, Deputy Prime Minister and Minister of Foreign Affairs of the UAE, “affirmed the UAE’s commitment to strengthening its strategic relations with France and leveraging all available opportunities to develop and enhance bilateral cooperation frameworks for the prosperity of both nations.”[19]
AI is emerging as a new pillar of the bilateral partnership: the two countries signed a framework cooperation agreement on AI[20] shortly before the AI Action Summit in Paris in February 2025. They have also expressed interest in supporting projects that seek to advance AI value chains in both countries. The initiatives will address the infrastructure and talent-related needs of the parties.[21] To further the partnership, French Minister of Economy, Finance and Industrial and Digital Sovereignty Eric Lombard, and Minister Delegate  in charge of Artificial Intelligence and Digital Affairs Clara Chappaz, visited the UAE in early May 2025.[22]
The objectives and practical goals of this cooperation are deeply rooted in the two states’ grand strategies and, as such, in the role they aim to play in the international AI race and governance. A prominent manifestation of the UAE’s grand strategy is its document, ‘Centennial 2071’,[a] which calls for making a “diversified knowledge economy” one of its sectoral pillars.[23] The UAE seeks to become a global leader in and regional hub for AI,[24] as mentioned in its International Stance on Artificial Intelligence Policy[25] and its National Strategy for Artificial Intelligence 2031.[26] In accordance with these objectives, H.E. Omar Sultan Al Olama, UAE Minister of State for Artificial Intelligence stated that in the latter strategy, “The UAE will build an AI economy, not wait for one. […] The UAE has a vision to become one of the leading nations in AI by 2031 in alignment with the UAE Centennial 2071, creating new economic, educational, and social opportunities for citizens, governments and businesses […].”[27]
The means and tools to facilitate becoming a global leader in AI are also spelt out in these strategic documents. One of them is international cooperation; the country “supports establishing international alliances for governing, securing and developing AI systems”, and is “dedicated to strengthening […] national and international partnerships, anchored in shared values of cooperation, responsibility, and transparency, to advance AI development and tackle global challenges.”[28] As stated in its International Stance on Artificial Intelligence Policy, such collaborations can “enhance the UAE's status as a hub for AI innovations.”[29] Thus, international partnerships and alliances are perceived through the lens of the UAE’s grand strategy as cornerstones of the pursuit of national interest.
Numerous similarities can be observed between the UAE’s AI strategy and France’s dedicated sectoral grand strategy. The France 2030 investment plan is aimed at “sustainably transforming key sectors of our [the state’s] economy, and positioning France not only as a player but as a leader in the world of tomorrow”; it wants France “to regain its environmental, industrial, technological, health and cultural independence and to position itself as a leader in strategic sectors.”[30] Accordingly, and in line with the main objectives set by President Emmanuel Macron for the country’s progress in AI, France’s National AI Strategy, implemented in multiple phases, seeks to make France “a global leader in artificial intelligence.”[31] To further define the road ahead, a new landmark document, ‘Make France an AI Powerhouse’, was also published in February 2025.[32] The latter highlights that the AI vision advanced by Paris builds on the country’s strategic strengths and potential; as President Macron said, “France has everything it needs to secure its place in the AI revolution. […] At the heart of Europe, at the heart of the AI revolution, France is a crossroads for all those who want to create and innovate. In this regard, France aims to host and reinforce its talents, corporates, as well as cutting-edge infrastructures for the development and use of AI, to serve its innovation ecosystem, from startups to industry and research laboratories.”[33]
Like the UAE, France too, views partnerships with trusted states as a means of national goal achievement, and has upheld the cooperation agreement concluded with the UAE in February 2025 as a prominent example.[34] The French strategy also focuses on the importance of cooperation in research and training—officialised by a protocol agreement—between the French engineering school École Polytechnique and the Emirati Mohamed bin Zayed University for Artificial Intelligence (MBZUAI).[35] France and the UAE will thus mutually reinforce each other’s research and development capacity and address needs related to talent.
A talent pool has been identified by both states as a cornerstone for the development, maintenance and adaptation of their respective AI ecosystems. Building this pool goes hand-in-hand with attracting tech firms and industries that look for skilled workforce and are also willing to invest in training. Once it is considered by investors as a promising hub for talents, knowledge and innovation, with a transparent and consistent regulatory framework, the UAE believes its virtuous circle of AI ecosystem development can take off. As the Emirati National Strategy for Artificial Intelligence notes, the UAE does not yet have a “strong AI talent hub, (but) it is building attractors that will grow the technical community here (in the country) quickly.”[36]
The areas covered by the France-UAE AI cooperation framework respond to the two states’ primary needs in terms of investment in essential physical infrastructure, training talents, attracting entrepreneurs and fostering research and innovation. The Global AI Index 2024 report noted that the UAE has room for improvement in the domain of skilled talent, where France scores higher;[37] while France is predominantly in need of investment in physical infrastructure located within its territory, according to a diplomatic source.[38] Such investments can be partially provided by the UAE, as it has the financial resources.[39] To advance its digital sovereignty objectives, having its entire AI infrastructure capability within its own territory is vital for France.[40] As for the UAE, investing in physical infrastructure is a well-tested business model with the promise of future gains this new technology could provide.[41] France is a particularly attractive investment destination due to its abundant and accessible low-carbon electricity mix[42] (especially nuclear energy), indispensable for the highly energy-intensive AI infrastructure. Additionally, Paris seeks to encourage Emirati investments in the French AI start-up ecosystem.[43]
Strengthening economic ties through investments is already a core component of the Franco-Emirati Strategic Partnership. To this end, the UAE-France High-Level Business Council was set up in 2022,[44] while a bilateral Investors Meetup platform was started in 2023.[45] Within these collaborative mechanisms AI has become a key target sector for corporate investment. As the bilateral cooperation in AI is embedded in a broader long-standing strategic partnership, with operative platforms, it is likely to grow further.

When Interests Converge
The most important feature of the France-UAE cooperation agreement on AI is the decision to set up a 1.4 gigawatt (GW)[b] campus dedicated to AI in France’s Île-de-France region by the end of the decade, requiring EUR 8.5 billion (around US$10 billion) investment for “its first operational phase”.[46],[47] The financing will come from a consortium of ‘Franco-Emirati champions’[48] including Bpifrance, a French public investment bank, MGX, a prominent Emirati investment fund in AI and advanced technologies, the French startup Mistral AI, one of the leading European actors in Generative AI, and NVIDIA, a global leader in AI computing infrastructure from the United States (US).[49] The complementary profile and fields of expertise of the partners allow for setting up a full-scale AI ecosystem, covering the entire AI lifecycle. Beside the core partnership of the joint venture, others such as École Polytechnique, EDF (Electricité de France), France’s national electric utility company, RTE (Réseau de Transport d'Electricité), the country’s electricity transmission operator, Sipartech, French telecommunication infrastructure operator, and Bouygues, a leading company in construction, energy and telecommunication, will also be involved.[50]
The AI campus project, a concrete output of the cooperation between Paris and Abu Dhabi, also has a symbolic message to the international community: it shows that France and the UAE are assertive and legitimate AI powers. Building on this dynamic, as they consolidate their positions as AI leaders, it will be interesting to observe whether the two countries’ national identities[51] (sense of self) get redefined. National identity evolution takes time, and the states’ narratives about their roles needs to draw upon tangible and sustainable action, like the AI campus.
The collaboration—grounded in converging strategic visions, shared objectives and toolsets—holds the promise of yielding further tangible results. Such promise also stems from the integration of the AI cooperation framework into a historical and comprehensive partnership between Paris and Abu Dhabi.
Table 1 : Converging Factors in the French and Emirati Grand Strategies[52]





UAE
France


Recognition of opportunities as the AI revolution becomes a  megatrend
Yes
Yes


Having an AI Grand Strategy
Yes.

National Strategy For Artificial Intelligence 2031
Yes.

“Make France an AI powerhouse” strategy;

The National Strategy for Artificial Intelligence


Existence of a comprehensive global partnership framework in which the AI strategy is embedded
Yes, a bilateral Strategic Partnership with France
Yes, a bilateral Strategic Partnership with the UAE


Ambition – scope of action
Regional – in the Middle East, Global
Regional – at the European level, Global


Objectives
Becoming leader in AI;

building a reputation as an AI destination;

becoming a competitive regional hub for AI
Becoming leader in AI;

creating a reputation for talent formation;

becoming a leading hub for generative AI in Europe


Transnational collaboration identified as means of national goal achievement
Yes
Yes


Sectoral partnership in AI
Yes, framework cooperation agreement in AI with France
Yes, framework cooperation agreement in AI with UAE


Concrete projects
Yes.

Jointly establishing Europe’s largest AI campus (1.4 GW) in Île-de-France
Yes.

Jointly establishing Europe’s largest AI campus (1.4 GW) in Île-de-France



Conclusion
The AI components of the French and Emirati grand strategies are complementary and have significant convergences. Both states are among the leading AI powers in their respective regions and are positioning themselves as global players as well. To sustainably address their needs and remedy potential deficiencies, bilateral cooperation in AI is considered an essential means of national goal achievement, embedded in a broader France-UAE partnership framework.
Even though both countries claim to be—or aim to become—among the world’s AI leaders, they could still cooperate and engage in constructive competition. Their geographical positions, strategic visions, and resources allow them to serve as AI hubs in their respective regions and facilitate inter-regional cooperation.
The UAE-France AI partnerships is an illustrative example of how ‘grand strategies’ that recognise and build on a specific megatrend can guide countries’ interstate relations to capitalise on emerging opportunities.



Eszter Karacsony is Associate Fellow, Geopolitics and Program Lead, ORF Middle East.



All views expressed in this publication are solely those of the author, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel.

Endnotes
[a] This is the UAE government’s “full-vision plan” for the next five decades (2021-2071).
[b] Originally, in February 2025, the 1 GW campus was announced.
[1] “The Enduring Appeal of Grand Strategy,” in The Oxford Handbook of Grand Strategy, ed. Thierry Balzacq and Ronald R. Krebs (Oxford Academic, 2021) pp. 5, https://academic.oup.com/edited-volume/35431/chapter-abstract/303226718?redirectedFrom=fulltext
[2]Oxford Research Encyclopedias, “Summary to Thierry Balzacq and Mark Corcoral,” Oxford Research Encyclopedias, https://oxfordre.com/internationalstudies/display/10.1093/acrefore/9780190846626.001.0001/acrefore-9780190846626-e-498
[3]Michal Eskenazi, “Abstract,” in The Making of Foreign Policy. On Paradigms and Grand Strategies, Mitvim, 2015, pp. 1, https://mitvim.org.il/wp-content/uploads/Michael_Eskenazi_-_The_Making_of_Foreign_Policy_-_August_2015.pdf
[4]Martin Briens and Thomas Gomart, “Preparing for 2050: From Foresight to Grand Strategy,” Politique étrangère, no. 4 (2021): ii.
[5]European Commission Competence Centre on Foresight, “The Megatrends Hub,” European Commission Competence Centre on Foresight, https://knowledge4policy.ec.europa.eu/foresight/tool/megatrends-hub_en Aloysius Teh and Adithi Pandit, “The Power of Megatrends for Strategists and Decision Makers: Why All Organisations Need to Consider Megatrends,” Deloitte, 2023, https://www.deloitte.com/nz/en/Industries/government-public/perspectives/the-power-of-megatrends-for-strategists-and-decision-makers.html
[6] Briens and Gomart, “Preparing for 2050,” pp. v.
[7]United Nations, Executive Summary in Report of the UN Economist Network for the UN 75th Anniversary Shaping the Trends of Our Time, United Nations, 2020, pp. 2, https://www.un.org/development/desa/publications/wp-content/uploads/sites/10/2020/10/20-124-UNEN-75Report-ExecSumm-EN-REVISED.pdf
[8] “A Three-dimensional Study of Grand Strategy. An Interview with Simon Reich,” Sciences Po Center for International Studies, 2021, https://www.sciencespo.fr/ceri/en/content/three-dimensional-study-grand-strategy-interview-simon-reich
[9]“The Making of Foreign Policy.”
[10]“The Making of Foreign Policy.”
[11]“Executive Summary,” in Report of the UN Economist Network for the UN 75th Anniversary Shaping the Trends of Our Time.
[12]“Artificial Intelligence (AI),” United Nations, https://www.un.org/en/global-issues/artificial-intelligence
[13]Joe White and Serena Cesareo, “The Global AI Index,” Tortoise Media, 2024, https://www.tortoisemedia.com/data/global-ai
[14] “Global AI Power Rankings: Stanford HAI Tool Ranks 36 Countries in AI,” Stanford University, 2024, https://hai.stanford.edu/news/global-ai-power-rankings-stanford-hai-tool-ranks-36-countries-in-ai
[15] Loredana Fattorini et al., The Global AI Vibrancy Tool, Stanford University, 2024, pp. 21, https://hai.stanford.edu/assets/files/global_ai_vibrancy_tool_paper_november2024.pdf
[16]United Arab Emirates Ministry of Foreign Affairs, “UAE and France. A Strategic Partnership and Consensus in Facing Global Challenges,” United Arab Emirates Ministry of Foreign Affairs, 2022, https://www.mofa.gov.ae/en/missions/paris/media-hub/embassy-news/9-global-challenges
[17] United Arab Emirates Ministry of Foreign Affairs, “The 12th Session of the UAE-France Strategic Dialogue Endorses Ambitious 10-Year Bilateral Roadmap,” United Arab Emirates Ministry of Foreign Affairs, 2020, https://www.mofa.gov.ae/en/mediahub/news/2020/6/3/03-06-2020-uae-france
[18] Ministère de l'Europe et des Affaires étrangères, “Relations bilatérales,” Ministère de l'Europe et des Affaires étrangères, 2025.
[19]“Abdullah Bin Zayed, French Minister of Economy, Finance and Industry, Explore Joint Cooperation,” United Arab Emirates Ministry of Foreign Affairs, 2025, https://www.mofa.gov.ae/en/mediahub/news/2025/3/11/11-3-2025-uae-france2
[20] Ambassade de France à Abu Dhabi, “Chronologie Bilatérale," Ambassade de France à Abu Dhabi, https://ae.ambafrance.org/Chronologie-bilaterale-350
[21] “Dîner de Travail avec Son Altesse Cheikh Mohamed Bin Zayed Al-Nahyan.”
[22] Ambassade de France à Abu Dhabi, “Visite aux Emirats Arabes nis d’Eric Lombard et de Clara Chappaz (5 mai 2025)," Ambassade de France à Abu Dhabi, 2025, https://ae.ambafrance.org/Visite-aux-Emirats-arabes-unis-d-Eric-Lombard-et-de-Clara-Chappaz-5-mai-2025
[23]U.AE, “UAE Centennial 2071,” U.AE, https://u.ae/en/about-the-uae/strategies-initiatives-and-awards/strategies-plans-and-visions/innovation-and-future-shaping/uae-centennial-2071
[24]Government of the United Arab Emirates, UAE's International Stance on Artificial Intelligence Policy (Government of United Arab Emirates, 2024), https://uaelegislation.gov.ae/en/policy/details/uae-s-international-stance-on-artificial-intelligence-policy
[25]Government of United Arab Emirates, UAE's International Stance on Artificial Intelligence Policy.
[26]United Arab Emirates Minister of State for Artificial Intelligence Office, UAE National Strategy For Artificial Intelligence 2031 (United Arab Emirates Minister of State for Artificial Intelligence Office, 2018), https://ai.gov.ae/wp-content/uploads/2021/07/UAE-National-Strategy-for-Artificial-Intelligence-2031.pdf
[27]Ministerial Forward to United Arab Emirates Minister of State for Artificial Intelligence Office, “UAE National Strategy for Artificial Intelligence 2031,” pp. 7.
[28]Government of United Arab Emirates, UAE's International Stance on Artificial Intelligence Policy.
[29] Government of United Arab Emirates, UAE's International Stance on Artificial Intelligence Policy.
[30] Igasnier, “France 2030: Building on Your Side the France of Tomorrow,” Business France, https://world.businessfrance.fr/nordic/france-2030-building-on-your-side-the-france-of-tomorrow/
[31] Gouvernement, Stratégie Nationale pour l’Intelligence Artificielle – 2e phase : Conquérir les Talents et Transformer Notre Potentiel Scientifique en Succès Economiques (2021), pp. 6, https://www.enseignementsup-recherche.gouv.fr/sites/default/files/2021-11/dossier-de-presse---strat-gie-nationale-pour-l-intelligence-artificielle-2e-phase-14920.pdf Quote translated from French to English by Eszter Karacsony.
[32] “Make France an AI Powerhouse,” Elysée, 2025, https://www.elysee.fr/admin/upload/default/0001/17/d9c1462e7337d353f918aac7d654b896b77c5349.pdf
[33]“Make France an AI Powerhouse,” pp. 2.
[34]“Make France an AI Powerhouse,” pp. 23.
[35]“Make France an AI Powerhouse,” pp. 14.
[36]United Arab Emirates Minister of State for Artificial Intelligence Office, “UAE National Strategy for Artificial Intelligence 2031,” pp. 28.
[37]White and Cesareo, “The Global AI Index.”
[38]Interview conducted with a diplomatic source, 2025.
[39]Interview conducted with a diplomatic source, 2025.
[40]Interview conducted with a diplomatic source, 2025.
[41]Interview conducted with a diplomatic source, 2025.
[42]International Energy Agency, Energy System of France, IEA.
[43]Interview conducted with a diplomatic source, June 2025.
[44]TotalEnergies, https://totalenergies.com/news/press-releases/uae-france-high-level-business-council-meeting-was-held-participation-over-50
[45]“Visite aux Emirats Arabes Unis d’Eric Lombard et de Clara Chappaz (5 mai 2025).”
[46] “Press Kit - Choose France 2025,” Business France, 2025, pp. 8, https://en.media.businessfrance.fr/assets/dp-choosefr-2025-en-2005-11h23-1-1-pdf-9570c-aba4d.html
[47]TotalEnergies, https://totalenergies.com/news/press-releases/uae-france-high-level-business-council-meeting-was-held-participation-over-50
[48] “Dîner de Travail avec Son Altesse Cheikh Mohamed Bin Zayed Al-Nahyan.”
[49]“MGX, Bpifrance, Mistral AI et NVIDIA Annoncent la Création d’une Joint-Venture pour Développer en France le Plus Grand Campus IA d'Europe,” bpifrance, 2025, https://presse.bpifrance.fr/mgx-bpifrance-mistral-ai-et-nvidia-annoncent-la-creation-dune-joint-venture-pour-developper-en-france-le-plus-grand-campus-ia-deurope
[50] “MGX, Bpifrance, Mistral AI et NVIDIA Annoncent la Création d’une Joint-Venture pour Développer en France le Plus Grand Campus IA d'Europe.”
[51]David M. McCourt, “Culture, Identity, and Grand Strategy,” in The Oxford Handbook of Grand Strategy, ed. Thierry Balzacq and Ronald R. Krebs (Oxford Academic, 2021), pp. 303-321, https://academic.oup.com/edited-volume/35431/chapter/303228362
[52] Table made by the author.

### A Widening Gulf Between Israel and Qatar

An Israeli air strike against an office in Qatar’s capital Doha, targeting a meeting organised by the political leadership of Hamas, has brought the spillover of the October 7 terror attack into downtown Arab capitals. Qatar, which has hosted Hamas’s political office since 2012, heeding then US President Barack Obama’s request (one backed by Israel, as per Qatar’s prime minister), has positioned itself as a mediator of regional political crevasses. In 2024, Qatar pondered permanently closing down the Hamas office and ceasing its own mediation efforts following a lack of movement from all parties involved and the public narrative turning against it for becoming a conduit for extremist groups such as Hamas and the Taliban.
The intended target, Hamas’s leadership, was not hit. Instead, the strike on the small island state’s capital, Doha — which is vying to take on the likes of Dubai as the centre of Arab power, culture, economy, and money — has pushed a bigger wedge into the already tense relationship between Israel and its Gulf neighbours. While most Gulf states are not averse to the idea of Hamas being demolished and alternative political outcomes redefining Palestinian politics, specifically in Gaza, a global galvanisation against Israeli military actions is taking shape. This has complicated the neutrality that Arab powers were attempting following the signing of two critical political agreements: first, the 2020 Abraham Accords, and second, the 2023 normalisation between Saudi Arabia and Iran facilitated by China.


While most Gulf states are not averse to the idea of Hamas being demolished and alternative political outcomes redefining Palestinian politics, specifically in Gaza, a global galvanisation against Israeli military actions is taking shape. This has complicated the neutrality that Arab powers were attempting

However, the Venn diagram of strategies driving Israeli actions and the expected response from Gulf states is an even more complicated one. Qatar has hosted the Hamas political office since 2012. The Qatari Prime Minister, Mohammed bin Abdulrahman bin Jassim Al Thani, during a hurriedly arranged trip to Washington D.C. following the Israeli strike, explicitly stated in an interview that the push to open such a facility in Doha came from both the US and Israel alike. A report suggesting that Israel’s intelligence agency, the Mossad, reneged on an on-ground operation utilising agents in an effort to preserve its own outreach to the Qatari establishment adds some merit to Al Thani’s claim. Earlier this year, a scandal had also erupted when two aides of Israeli Prime Minister Benjamin Netanyahu were arrested for allegedly being on the payroll to promote Qatari interests in the Jewish state. Both countries have no official diplomatic ties.
The complications mentioned above represent fundamental crevasses on two core fronts. The first is Israel’s declared military aim of eradicating Hamas, and the second is its simultaneous attempt to negotiate a truce with the militant group aimed at freeing the remaining Israeli hostages and recovering the bodies of those who have died in captivity since October 2023. In essence, both these strategic aims are in direct conflict. Israel’s push to use hard power to browbeat Hamas into submission, leading to the release of the hostages, has been two years in the making without the desired results. Hamas itself is looking to hold out as long as it can, despite incurring immense losses and damage, showing no inclination to loosen its chokehold on Gaza or to acknowledge the civilian casualties that Palestinians are incurring.
The regional spillover, however, is getting heated. Qatar, which received across-the-board support within the Gulf Cooperation Council (GCC), convened a meeting in Doha to strategise a joint response against Israel. This included participation by the leadership of Iran, a state which itself launched missiles against US military facilities in Qatar only a few months ago, as the “12-day war” unfolded.


The US unwillingness to come to the aid of its Arab partners against Israel has reignited the debate on American security guarantees.

Qatar has explicitly pushed others, such as the United Arab Emirates (UAE), to review their diplomatic normalisation with Israel as part of the Abraham Accords. Saudi Arabia — which, along with the UAE, imposed an economic blockade on Doha between 2017 and 2021 for what Riyadh viewed as Qatar’s unwillingness to align with their regional geopolitical positions — has now declared that all its resources are at Qatar’s disposal against Israel. Only four years ago, Abu Dhabi and Riyadh had demanded that Qatar curb its support for the Muslim Brotherhood and for political Islam more broadly across the region. This was also the lens through which both countries perceived Qatar’s backing of the Brotherhood and groups such as Hamas.
Israel’s actions have managed to propel it into perhaps another undesired position: that of the premier and uncontested military power in the region, specifically when it comes to air superiority. Scholar Sanam Vakil has gone as far as to assess that Israel has replaced Iran as the biggest security threat to Gulf states. By melding cyber operations, electronic warfare, satellite intelligence and other means into its air campaigns, Israel has arguably demonstrated that no target across the region is beyond its reach. Of course, deep human intelligence built over the years by Mossad also delivered flawlessly. The US unwillingness to come to the aid of its Arab partners against Israel has reignited the debate on American security guarantees. The 2019 drone attacks against Saudi oil facilities were the last major red flag for Arab powers about Washington’s unwillingness to militarily deploy for their aid. The Israeli strike against Hamas inside Qatar has reopened that Pandora’s box, as President Donald Trump remains unwilling to challenge Israel’s actions.


While Doha itself may not push Abu Dhabi to opt out of the Abraham Accords, an Israeli decision to annex the West Bank could break the camel’s back.

Finally, the path forward for regional cooperation is more muddled than ever before. It is further exacerbated not only by Israel–Arab tensions, but by Israel’s preference to prioritise military victory over political management. Doha’s wish for a stringent response will also test the often-fractious resilience of pan-Arab unity, specifically that of Saudi Arabia and the UAE. Qatar has already signalled to the UAE that it ought to review its diplomatic normalisation with Israel. While Doha itself may not push Abu Dhabi to opt out of the Abraham Accords, an Israeli decision to annex the West Bank could break the camel’s back. This is further magnified by an increasing disquiet on the Arab street over Gaza, and now Qatar, along with the gap between the policies Arab monarchies are pursuing and what their populations are consuming on social media and are prioritising in public discourse instead.



This article originally appeared at Observer Research Foundation.

### Israel's Strike on Qatar Tilts the Balance Against Gulf-Israel Relations

Introduction
For a long time, Qatar, just like the rest of the Gulf States, was seen as untouchable, a largely safe space for diplomacy and negotiation. The Gulf is seen as an island of stability, one that can mediate between conflict actors while being largely distant from it. Yet, that image was tested recently in June 2025 when Iran chose to strike U.S. interests on Qatari soil in retaliation for U.S. bombings of its nuclear sites during the Israeli campaign against it. Even with reportedly advance warning, the Iranian aggression set the tone for conflict coming home.

At the same time, Tehran’s support for an emboldened Hamas undermined the Doha-mediated negotiations with Israel, paving the way for their repeated collapse. These factors, in turn, prompted, though it can never be justified, Israel’s decision to carry out a precision strike against Hamas in Qatar. Notably, while Qatar was likely angry at Iran, it still chose to welcome the Iranian President Masoud Pezeshkian to Doha for an emergency Arab-Islamic summit in response to the Israeli attack: the two attacks are not seen as equal, as the Iranian one came with enough warning and did not kill anyone, while the Israeli one failed on both accounts.
A Prompt for Gulf Unity in the Face of U.S.-Israel Shortcomings
Israel’s strike against Qatar poses a serious challenge to the Abraham Accords. The risk for Israel is that all of the Gulf states rally behind their united GCC flag, perhaps even prompting more regional integration on foreign policy. Only two states out of six have normalized relations with Israel, which does not tilt the balance in its favor. Moreover, Israel may eventually find itself pushed into appeasing the Gulf as a bloc and having to push for a heavier task of seeking to normalize with the GCC as a whole, especially if it hopes to secure normalization with Saudi Arabia. The Kingdom is unlikely to take the risks Bahrain and the UAE took and counter public sentiment, which, after the strike on Qatar, is likely more anti-Israel than ever. Saudi Arabia will likely consider the need for all other countries to join it in any normalization effort. This would thin out any public reaction, and would require Qatari, Omani and Kuwaiti buy-in.
Another critical consideration is the erosion of confidence in the U.S. security guarantee in the Gulf... Washington may try to frame such lapses as exceptions tied to specific administrations, but Gulf leaders are unlikely to take that reassurance at face value.
Another critical consideration is the erosion of confidence in the U.S. security guarantee in the Gulf. This perception had already weakened after Washington failed to defend Saudi oil facilities during the 2019 attack attributed to Iran. The latest blow came when the U.S. provided Qatar with little to no warning of the Israeli strike—despite reports that Prime Minister Benjamin Netanyahu had notified his American counterparts barely an hour beforehand.

Over the long term, Washington may try to frame such lapses as exceptions tied to specific administrations, but Gulf leaders are unlikely to take that reassurance at face value. That is, even if enhanced defence cooperation agreements with the U.S. are scrambled to reassure them. Instead, they may accelerate efforts to build domestic arms industries, diversify suppliers, and reduce their reliance on U.S. security commitments. Such moves could also encourage the development of a more cohesive GCC defense architecture, as reflected in the planned GCC Joint Defence Council meeting in Doha, and lessen the likelihood of intra-Gulf rifts like the 2017–2020 diplomatic crisis.
Accelerating the Prospect of a “Cold Accords”
The U.S. relationship with the Gulf was pivotal in enabling the Abraham Accords, and Israel places high strategic value on its ties with the UAE and Bahrain. Yet these relationships remain fragile. The prospect of a “cold peace” or “Cold Accords” is ever-present, especially after the UAE recently signalled its willingness to scale back relations over the threat of West Bank annexation. Both Abu Dhabi and Manama openly condemned the Israeli strike on Qatar, and President Sheikh Mohammed bin Zayed’s immediate visits to Doha and Manama underscored the seriousness of their response. His stop in Bahrain in particular suggested an effort to coordinate at the highest level on how both states should recalibrate their relations with Israel in the wake of the attack.
Israel has jeopardized its standing with the Abraham Accords signatories. The Accords were never a binding alliance; they are a framework that ebbs and flows with circumstance.
Building more durable relations will therefore require patience and restraint. By striking Qatari territory—an integral part of Gulf sovereignty and stability—Israel has jeopardized its standing with the Abraham Accords signatories. The Accords were never a binding alliance; they are a framework that ebbs and flows with circumstance. The circumstances as they stand are not in favor of growth: both the UAE and Bahrain will see their national interests harmed by virtue of the political risk premium on any investments in the Gulf region following the Israeli attack. This alone, if not the need to showcase a brotherly-solidarity front in the Gulf, will be enough for a slowdown of the relationship between Israel and its Gulf partners, with reports already indicating that the UAE has barred Israeli firms from a Dubai Defence Expo in light of its aggression against Qatar. The UAE has also summoned the Israeli Deputy Ambassador, David Ohad Horsandi, to its foreign ministry to condemn the same, with the ambassador, Yossi Avraham Shelley, appearing to have left the country a while back over a row in a bar – or at least taking a backseat while continuing to reside in the UAE ever since.
Conclusion
For Gulf leaders—including the Abraham Accords signatories who are currently marking their fifth anniversary—the priority will be preventing any repeat of the Israeli strike on Qatar. Yet, Israeli Ambassador to the U.S. Yechiel Leiter declared after the attack: “We have put terrorists on notice, wherever they may be … we’re going to pursue them, and we’re going to destroy those who will destroy us.” Such rhetoric makes clear that Israel may contemplate similar actions in the future. For the UAE and Bahrain, repeated aggressions would leave little choice but to recalibrate their ties with Israel. They may not sever relations outright, but repeated aggressions would almost certainly push the Abraham Accords into a “cold” phase—formal on paper, but increasingly hollow in practice.

If Israel is to listen to its own President, Isaac Herzog, who has reportedly recently said that “the Abraham Accords are a watershed” and that “there should be no steps taken that should hurt these steps in any way”, then finding a peaceful resolution with Qatar will be essential. Otherwise, the fragile gains of the Accords risk eroding into little more than diplomatic symbolism.



This article originally appeared at The Institute for Peace & Diplomacy.

### The Future of Global A.I.

Introduction: The Present and Future of Digital Intelligence
Artificial Intelligence (AI)—a technology that was once conjured in the accelerationist dreams of science-fiction writers to challenge conventional notions of human identity through a technological ‘other’—has now found its way into national and global discourses on the future of geopolitical and geo-economic formations. Nations have begun racing to leave their footprint on the digital foundations of the future. BOND’s ‘Trends in Artificial Intelligence’ report of May 2025 attempts to quantify the undulations of the ongoing technological shift.[1] The report charts the evolution of AI in recent decades and attributes unprecedented developments in the field to breakthroughs in large language models (LLMs). This is exemplified by the launch of OpenAI’s ChatGPT in November 2022, which was facilitated by an existing and accessible global internet infrastructure and the proliferation of digital datasets over the last three decades. The unfolding AI revolution is further acting as a “compounder” of growth in digital user engagement, developer ecosystem growth, and capital investment.[2] These factors primed the global economy for innovation, investment and the adoption of AI in the financial, social, geopolitical, and technical spheres in a much shorter time scale than previous technological cycles.
A crucial observation made in the report is that global connectivity has been a key determinant of the pace of AI scaling. While previous digital platforms had to build their foundational infrastructure from the ground up, AI developers and deployers have been able to leverage approximately 5.5 billion digitally connected people. It also underscores the importance of enabling infrastructure as, “[the] document is filled with user, usage and revenue charts that go up-and-to-the-right…often supported by spending charts that also go up-and-to-the-right.”[3]
While the trends highlighted may seem unidirectional, the trajectory of growth metrics also reveals an intricate and fast-evolving economic context. AI-focused entities, including both legacy companies and startups, are facing a higher degree of cash burn relative to their revenue. Rising pre-training costs, falling inference costs, and performance convergence across frontier models are favouring application programming interface (API) developers and deployers over foundation model developers. The global competitive arena is also intensifying with challenges to Big Tech by agile AI-native startups, the achievements of China in AI foundation models and AI-powered robotics despite years of United States (US) sanctions, and noteworthy innovations in open-source models.
The accelerating development and adoption of AI products, services and platforms present both challenges and opportunities for regions like the Middle East and North Africa (MENA) and India that have ambitions of integrating AI into their economies. Data presented in the report suggests that the mobile user bases in India and MENA are primed for AI products and services on mobile platforms. For the Middle East, AI is a crucial enabler of economic diversification beyond its hydrocarbon industries, whereas for India, AI can be transformative for its world-leading digital public infrastructure, public service delivery, and digital payments platforms.
Although the BOND report provides extensive data sets to support an optimistic investment message for the AI sector, it pays insufficient attention to longitudinal risk factors such as disproportionately high valuations of AI companies and the impact of AI on the labour market. For instance, the report highlights the discrepancy between the high valuations of AI startups and their low revenues, but it does not expand on the correlations between the ongoing AI boom and the dot-com bubble of the 1990s, revealing an optimistic bias.[4] The report notes that AI adoption is leading to a global “cognitive automation”, which is particularly threatening to white-collar jobs.[5] Whether workers can adapt to and work symbiotically with AI will decide the future of work and displacement risk, according to the report. It projects that while AI will lead to job displacement, it will also create new categories of jobs in AI development, management, and ethics. However, due to the paucity of data on the long-term effects of cross-sectoral white-collar job-function automation, optimistic predictions along these lines (including the BOND report) often rely on truisms, such as callbacks to innovation cycles of the past and presuming that the rate of job creation will match job losses.
Given the comprehensive nature of the BOND report, the following pages will provide an overview of key assessments for policymakers and extrapolate the implications for emerging markets in the AI space, like the Middle East and India.
Section 1 will follow the thematic areas covered in the report in the following order: the pace and scale of AI adoption; AI model economics vis-a-vis developers and deployers; the emerging competitive landscape and geopolitical competition; Physical AI and the future of work; and the road to artificial general intelligence (AGI). The second section will explore how global trends in AI development present a unique set of challenges and opportunities for the capital-rich markets of the Middle East and the strong user base of the Indian market.

Key Assessments
Pace and Scale of AI Adoption and Development: AI Everywhere All at Once
The BOND report notes that the current wave of AI development and adoption is unprecedented when compared to previous technological waves. It uses OpenAI’s ChatGPT as a benchmark to showcase the explosive growth of user adoption as the platform achieved 1 million users within five days, 800 million weekly active users within 17 months, and registered 90 percent of its users from non-US geographies by its third year.[6]
The expansion of the developer ecosystem is a key factor enabling the growth of AI adoption. The report highlights NVIDIA’s ecosystem reaching six million developers over seven years. More strikingly, Google Gemini’s ecosystem saw a 500-percent increase to seven million developers in one year.[7] The growth of the AI developer community is also seen in the 175-percent rise in AI-related repositories on GitHub and an increase in developers integrating AI in their workflows from 44 percent to 66 percent between 2023 and 2024.[8]
It underlines the historic surge in capital expenditure (capex) as a core factor enabling the flourishing of the AI landscape. Collectively, the “Big Six” (Apple, Amazon, Alphabet, Meta, Microsoft, NVIDIA) US tech companies invested US$212 billion in capex (a 63 percent per year increase) in 2024.[9] It also notes that a decade ago, capex, as a share of their revenue, stood at eight percent, and has now increased to 15 percent, indicating an industry-wide prioritisation of AI development.
On the end-user side, a distinguishing factor between AI products like ChatGPT and earlier technologies like the internet is that today’s products are presented with  “easy-to-use” interfaces and are accessible on ubiquitous mobile devices, requiring less technical literacy compared to the early internet.[10] Therefore, by leveraging accessibility, current AI models can penetrate an already primed user base. A noteworthy example of this phenomenon is ChatGPT, which “hit the world stage all at once, growing in most regions simultaneously.”[11]
The BOND report indicates that a primed global user base, expanding developer ecosystem, and surging capex have created a recursive feedback loop wherein growing compute power (resulting from increased capex) leads to more powerful frontier models. More powerful models then drive engagement with the global developer community, which leads to the proliferation of AI applications and services. New products and services, in turn, increase user demand and expectations that necessitate increasing investment in compute power/resources.

The Economic Nuances of AI Development: Expensive to Build, Cheap to Run
Even though user adoption and AI development are trending “up-and-to-the-right”,[12] as the authors of the BOND report state, the economics of AI are evolving in a more nuanced manner. The report provides a comparison of the high and rising costs of training frontier AI models against the plummeting inference costs for end-users. Training new frontier models, as Anthropic’s CEO Dario Amodei has stated, will likely start costing billions of dollars from 2025.[13] Consequently, the barrier to market entry for new entrants will be steep, and regions like the Middle East and India, which have ambitious AI goals, will need to cultivate public-private partnerships (PPPs) to provide for the necessary up-front investment.
Compared to the training costs of frontier models, the running or inference costs are sharply declining due to increases in hardware efficiency gains. The report cites the increase in energy efficiency between NVIDIA’s 2014 Kepler GPU (Graphics Processing Unit) and the 2024 Blackwell GPU, which uses 105,000 times less energy per token generated than the former.[14] Such efficiency gains have led to a 99.7-percent drop in inference costs for consumers between January 2023 and January 2025. Big Tech companies like Google and Amazon are strategically manoeuvring this dynamic landscape by investing in custom AI silicon like the former’s Tensor Processing Units and the latter’s Trainium chips. Custom hardware not only reduces operational inefficiencies but also adds to vertical integration, supply chain risk-mitigation, and optimises hardware for specific software environments, which makes such offerings more lucrative than general-purpose GPUs.[15]
Based on benchmarks like the LMSYS (Large Model Systems) Arena, the report has identified a rapid convergence in the performance of frontier models.[16] As the gap between the capabilities of mid-to-upper tier models of AI companies narrows for most common tasks, differentiating between models based on raw performance becomes challenging for monetisation strategies.[17] The report notes that a fall in inference costs in conjunction with convergence in performance is propelling developer usage by offering them more choice and ways to experiment with AI systems.[18] Moreover, the rise of open-weight models like China’s DeepSeek and Meta’s Llama is adding another layer of pressure to monetisation problems in the AI race. Authors of the report suggest that if performance convergence continues and developers decide that open-source models offer good-enough performance with the added benefit of cheaper running costs, the value proposition of proprietary foundation models may continue to decrease. This may allow the Middle East and India to adopt open-source models to limit dependence on proprietary offerings, given the already volatile relationship between the US and China.
The matrix of high development/training cost, low inference cost, advances in open-source models, along with a surge in AI development and adoption, has led to remarkable revenue growth for many AI companies. However, this has been accompanied by increasing operational costs and heavy losses in some cases. Case in point, the report notes that OpenAI’s revenue grew to US$3.7 billion in 2024, against its US$5-billion compute expense.[19] Despite losses, leading AI companies are experiencing skyrocketing valuations, with OpenAI reporting a US$5-billion loss but receiving US$300 billion in valuation, and Anthropic receiving a US$61.5-billion valuation despite a US$5.6-billion burn in 2024.[20] The report suggests that markets are optimistic about the future of AI despite recurrent failures in monetisation.
The steep rise in token processing and the continuous increase in developer activity are mentioned to illustrate the economic principle of Jevons Paradox, meaning that the usage of AI increases by order of magnitude as inference costs plummet. Amodei has similarly stated the importance of the “scaling curve”, where the deployment of resources by AI companies increases as inference gets cheaper.[21] This growth in usage, in turn, dramatically increases the need for computational resources, capex on GPUs and data centre capacity, and total energy consumption. This creates a scenario where efficiency gains drive resource consumption faster than they can manifest, creating a series of challenges for sustainable scaling.
A prime example of the scaling problem can be seen in the data centre market. In 2024, global IT (Information Technology) data centre capex reached US$455 billion and continues to accelerate.[22] The skyrocketing increase in energy consumption is a consequence of this expansion. In 2024, data centres accounted for 1.5 percent of the world’s electricity consumption, marking a 12-percent per-year increase since 2017 at more than four times the growth rate of total global electricity consumption.[23] The growing energy demand and pressures on local energy grids can become a bottleneck for future growth—a problem that market leaders like the US are already facing.[24]

The Global Competitive Landscape: Closing Ranks, Building Moats
In an era of increasing geopolitical competition, countries are supporting efforts to achieve digital sovereignty. The BOND report notes a growing interest in Sovereign AI projects, as demonstrated by NVIDIA’s partnerships in countries like France, Spain, Switzerland, Ecuador, Japan, Vietnam, and Singapore.[25] OpenAI has also entered into a partnership with the UAE (United Arab Emirates) under its OpenAI for Countries programme, which aids countries in building sovereign AI capabilities.[26] Whether such partnerships will yield actual sovereignty is another question since importing the US stack will only increase foreign dependence.
The intensification of global competition due to China’s quick ascent in the AI race is the biggest factor catalysing digital sovereignty efforts. AI development and deployment in China have been markedly faster compared to the internet adoption curve from the 1990s. In R&D (Research & Development), the nation has a leading position in AI-related patents and publications.[27] China-made frontier models, like DeepSeek, Alibaba’s Qwen, Baidu’s Ernie, are converging in terms of performance with leading proprietary models from the US, such as OpenAI’s GPT 4.1 and Anthropic’s Claude Sonnet.
The report also mentions the trend of scaling unsupervised reinforcement learning during model training. Chinese subject matter experts have produced a body of research regarding a model training paradigm called ‘Absolute Zero’,[28] which completely uses self-play for generating and learning from interactions with the model’s environment. It is not aided by human-generated data at any given point in time. If successful, this paradigm will greatly reduce dependence on human-curated datasets that have been a bottleneck for model training. Furthermore, China has also been leading in robot installations in the industrial sector, demonstrating a commitment towards the large-scale integration of AI in its economy. The report also highlights more positive sentiment toward AI by the Chinese population when compared to the US, which may lead to faster adoption and a more permissive policy environment.[29]
The nexus of continuously advancing frontier models, performance convergence of open-source models, the rise of Chinese AI, and various countries pursuing sovereign AI capabilities is creating a fluctuating dynamic that can impede the US’s leading position in the AI sector, potentially leading to a multipolar landscape with rival AI ecosystems.[30] While the US models currently lead in many general-purpose LLM benchmarks, China’s integration of robotics in real industrial processes may give it an edge in manufacturing, automated logistics, and resource optimisation.

Physical AI and the Not-So-Human Future of Work
The report notes how AI is treading into traditional economic sectors. Anduril, a company specialising in AI-powered autonomous systems, has doubled its revenue year-over-year between 2023-2024. In the mining industry, KoBold Metals is implementing AI-enabled exploration techniques to improve the efficiency of critical mineral deposit discovery. In agriculture, Carbon Robotics’ LaserWeeder has treated over 230,000 acres of land and reduced herbicide use.[31] The rapid adoption of AI in capital-intensive sectors like defence, mining, and agriculture indicates that the Return on investment (ROI) for AI in such sectors is reaching the threshold where the inertia towards technological adoption is being overcome.
The report also observes that the next generation of digital natives will likely first encounter the internet through multimodal AI-first interfaces through conversational interactions rather than web- and application-based services. A consequence of this generational shift, particularly for regions with large, unconnected or rural populations, can be a narrowing of the digital divide as the availability of natural language-based interfaces will lower the required technical literacy skills.
It posits that the dizzying speed of AI development will radically alter job markets, with data from the US showing a 448-percent increase in AI-related job postings between 2018 and 2025 that coincided with a 9-percent decrease in non-AI IT job postings during that time. The report also highlights tech companies adjusting their expectations and considering AI literacy as a baseline skill for their workers, and even applauding Jensen Huang’s remark that workers are more likely to lose their jobs to “somebody who uses AI” rather than AI itself.[32] The specific rise in demand for AI-related jobs, as well as a general expectation of AI literacy in the workforce, suggests that AI will likely become a general-purpose technology like the internet rather than a specific one like the products and services categories.
Although the report presents strong indicators of rapidly evolving labour market conditions in the tech sector, total factor productivity (TFP) is a crucial metric for understanding the broader economic impact of AI. Daron Acemoglu, 2024 Nobel laureate in the economic sciences, argues in a paper on the macroeconomics of AI that in the next decade, AI advances will lead to modest advances in TFP growth at about 0.064 percent yearly increases.[33] This conclusion is derived primarily by adjusting the number of AI-exposed jobs in the US labour market (about 20 percent) to jobs that can be profitably automated by AI (about 5 percent). Acemoglu further tempers expectations by incorporating the negative impact of AI-driven products and services on social welfare, a factor not emphasised in the BOND report. The report, with its focus on developed markets, also does not present data on how the labour market impact of AI may differ in Global South countries where the size of informal or unregulated economic sectors (as percentage of GDP) can be as high as 35 percent.[34] Furthermore, if the technology leads to the creation of new jobs, specifically in domains such as Reinforcement Learning through Human Feedback (RLHF), the question of job quality is left unanswered. This issue is particularly relevant for developing regions where the prevalence of exploitative click-work, data and content moderation jobs is already seen as generating net negative social impact.[35]

The Road to AGI
The BOND report posits conjectures about the possibility of AGI, though the arguments are primarily based on industry sentiment rather than data and scientific consensus. Speaking on the threats posed by AI, the report refers to the concept of ‘Mutually Assured Deterrence’ (MAD) arising from the increased competition and apprehension regarding the unpredictable consequences of AI development.[36] However, the concept seems to rest on shaky ground when compared to its counterpoint in the nuclear domain, as the weaponisation of AI can manifest in non-obvious ways such as disinformation campaigns, controlled disruptions, and sabotage. Although it may be difficult to chart the future of AI, a prescient and responsible step towards mitigating unintended consequences will be the development of international norms and cooperative research.

Implications for the Middle East and India
Leveraging a Vast Base of Mobile-First Users That De-Risks Market Entry 
In the Global South, India has emerged as a leader in user adoption for mobile-based engagement with AI applications like ChatGPT, with over 70 million active monthly users by April 2025, representing 13.5 percent of its global user base.[37] South Asia broadly surpassed 100 million active monthly users, and MENA has crossed 20-30 million, with Egypt leading in early adoption.[38] The popularity and market penetration of mobile devices and mobile-based digital services indicate market readiness for targeted AI services. The existence of a ready and willing user base reduces market entry risks and signals a cross-sector readiness for integrating AI. Market trends suggest that if enterprises in regions like India aim to capitalise on this user base, they will need to optimise their offerings for mobile interfaces, multimodality (mainly voice), environments with varied bandwidth and diverse local languages.

Data Centre Capacity-Building through Energy Infrastructure 
As mentioned in the earlier sections, high capex requirements are one of the bottlenecks for entrants, regardless of whether they are model developers or hyper-scalers. The report demonstrates the resulting AI infrastructure imbalance of this high cost of entry by noting that the Global South (excluding China) has less than 10 percent of global data centre capacity despite having 50 percent of global internet users.
Addressing this gap, the Indian government launched the IndiaAI mission in 2024 with a US$1.24-billion budget, a significant portion of which was directed towards increasing data centre capacity by 500 MW by 2028.[39] Following the “up-and-to-the-right” trend, the Indian data centre market is expecting private investments to the tune of US$20-25 billion by 2030, and is projected to exceed 4.5 GW capacity during the same period.[40] In January 2025, Reliance Industries announced plans to build a world-leading data centre in India with a 3GW capacity that will likely be powered by NVIDIA chips.[41] The country is also set to launch homegrown chips in the 20nm-90nm range, which, though not cutting edge, are ubiquitously deployed in telecom, automotive and industrial applications.[42]
While the Indian approach towards infrastructure involves generating investments while promoting long-term local capacity-building, the Middle East is leveraging its capital pool to strengthen its tech partnerships with the West to import the US tech stack. Major AI infrastructure and chip deals were struck during President Trump’s visit to the region in May 2025, including a US$600-billion two-way investment package with the Kingdom of Saudi Arabia (KSA), and a US$200-billion deal with the UAE. The Abu Dhabi-based G42 secured a guaranteed import of 500,000 cutting-edge Nvidia chips per year, as well as a partnership with US entities to build a 5GW AI data centre campus in the UAE, enabling the country to become a regional hub for AI training and inferencing.[43] However, a true sovereign AI strategy must go beyond imports to shoring up native production capacity.
Since infrastructure development will be crucial for AI development in India and the Middle East, preparing the energy grid to absorb the surge in demand will be a critical issue. To address this potential bottleneck, policymakers should explicitly include projected AI-sector energy demands in national energy strategies and increase investment in alternatives like nuclear energy.[44] Furthermore, to prevent data centres from adding pressure to local grids, regulators should co-locate power plants and AI data centres, if feasible.

Customisable Open-Source Models for Sovereign AI
On the geopolitical front, the US-China rivalry, along with the rise of open-source models, presents challenges for India and the Middle East, which will necessitate the adoption of a broader non-aligned stance and selective partnerships with American and Chinese entities. In this respect, open-source platforms like Hugging Face and models like Meta’s Llama and DeepSeek will allow the Middle East and India to reduce dependency on proprietary offerings and further customise models for local contexts and regional languages.
Investing in regional customisation will be a particularly good move for India, given its linguistic diversity and large rural population. As highlighted in the BOND report, the next generation of internet user may have their first interaction with the internet through multimodal AI platforms. Prioritising the development of multilingual AI models, such as Falcon Arabic in the UAE and the Bhashini platform in India, may help significantly lower the digital barrier to entry, increase digital inclusion, and accelerate user adoption for a large swathe of the digitally marginalised populations while unlocking an untapped user base for AI developers and deployers.

AI in Education
Policies for integrating AI in national educational curricula and conducting large-scale awareness and educational campaigns will be imperative for the creation of new user bases. The premise of next-generation internet users and erstwhile unconnected groups having an AI-first experience necessitates a thorough integration of AI (including AI development and basic usage skills) throughout the educational pipeline. In India, OpenAI, in collaboration with the IT Ministry, has launched the OpenAI Academy India under the IndiaAI mission, marking the first expansion of the company’s international educational platform. The country has also launched a broader mission of integrating AI and machine learning in schools, demonstrating a commitment towards future-readiness.[45] In the Middle East, raising AI literacy has seen obstacles due to the lack of local AI talent and regulatory strategies for integrating AI in education.[46] The UAE has been a leader[47] in encouraging AI proficiency literacy by taking decisive actions such as mandating AI learning in classrooms from 2026.[48]
From an end-user perspective, it is essential to also educate the workforce on the risks associated with AI usage, such as exposing personal information, AI hallucination errors, inherent bias of AI models, disinformation risks, and the limitations of their knowledge base. Through the example of public appraisal of AI in China, as presented in the report, public sentiment towards AI will be a key factor for promoting user adoption growth and developing a supportive regulatory regime.[49] Therefore, continuous and consistent information campaigns about the opportunities and risks of AI use will be necessary to ensure responsible AI uptake.

Conclusion
The BOND report concludes that the current trajectory and pace of AI development and adoption is unprecedented, propelled by a feedback loop of expanding capex, a flourishing developer ecosystem, and a primed market eager to engage with user-friendly AI products. The economics of AI are following a more labyrinthine pathway due to the ballooning training costs of frontier models, coupled with a welcome decline in inference costs.
Seen in conjunction with converging performance metrics and innovations in the open-source space, this combination of factors offers incumbents and entrants in the frontier model space a steep hill to climb to achieve sustainable revenue generation. The ensuing rivalry between the US and China—the two poles of the emerging techno-polar world—is pushing countries to shore up their AI infrastructure. Furthermore, the integration of AI in physical industries, along with shifting labour market trends, highlights the importance of investing in upskilling and information initiatives to prepare sustainable conditions for future market growth. Riding the waves generated by this technological tsunami will require nations to assess their local demands and make targeted investments.
For instance, Middle Eastern countries like Saudi Arabia and the UAE have the advantage of possessing substantial capital reserves to import AI stacks and accommodate hyper-scalers in the short to medium term while strategically addressing bottlenecks such as an energy infrastructure capable of absorbing exponentially growing AI workloads in the long term.[50] India is home to one of the biggest market-entry-friendly, primed user bases that can be harnessed through accessible products that are customised for local needs. A critical challenge for Global South players going forward will be how they are able to synergise their specific advantages and disadvantages to build coalitions and strengthen partnerships to stay connected in an increasingly distributed digital world.



Siddharth Yadav is Fellow, Technology, ORF Middle East.



All views expressed in this publication are solely those of the author, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel.

Endnotes
[1] Mary Meeker, Jay Simons, Daegwon Chae and Alexander Krey, Trends - Artificial Intelligence (AI), May 2025, https://www.bondcap.com/report/pdf/Trends_Artificial_Intelligence.pdf
[2] “Trends - Artificial Intelligence (AI),” Slide 21.
[3] “Trends - Artificial Intelligence (AI),” Slide 2.
[4] Siddharth Yadav, “Bytes and Bubbles: Comparing the 90s Dot-Com Bubble and the AI Race,” ORF Middle East, April 8, 2025, https://orfme.org/expert-speak/bytes-and-bubbles-comparing-the-90s-dot-com-bubble-and-the-ai-race/
[5] “Trends - Artificial Intelligence (AI),” Slide 324.
[6] “Trends - Artificial Intelligence (AI),” Slide 6.
[7] “Trends - Artificial Intelligence (AI),” Slide 39.
[8] “Trends - Artificial Intelligence (AI),” Slide 147-148.
[9] “Trends - Artificial Intelligence (AI),” Slide 4.
[10] “Trends - Artificial Intelligence (AI),” Slide 2.
[11] “Trends - Artificial Intelligence (AI),” Slide 7.
[12] “Trends - Artificial Intelligence (AI),” Slide 2.
[13] “Trends - Artificial Intelligence (AI),” Slide 116.
[14] “Trends - Artificial Intelligence (AI),” Slide 130.
[15] “Trends - Artificial Intelligence (AI),” Slide 157.
[16] “Trends - Artificial Intelligence (AI),” Slide 142.
[17] “Trends - Artificial Intelligence (AI),” Slide 144.
[18] “Trends - Artificial Intelligence (AI),” Slide 144.
[19] “Trends - Artificial Intelligence (AI),” Slide 5.
[20] “Trends - Artificial Intelligence (AI),” Slide 177.
[21] Dario Amodei, “DeepSeek and Export Controls,” darioamodei.com, January 2025, https://www.darioamodei.com/post/on-deepseek-and-export-controls
[22] “Trends - Artificial Intelligence (AI),” Slide 118.
[23] “Trends - Artificial Intelligence (AI),” Slide 125.
[24] International Energy Agency, “Energy and AI,” 2025, https://iea.blob.core.windows.net/assets/dd7c2387-2f60-4b60-8c5f-6563b6aa1e4c/EnergyandAI.pdf
[25] “Trends - Artificial Intelligence (AI),” Slide 77.
[26] “Introducing OpenAI for Countries,” OpenAI, May 7, 2025, https://openai.com/global-affairs/openai-for-countries/
[27] “AI Patents by Country Revealed: The Top 15 Nations Dominating the 2025 Landscape,” Rapacke Law Group, May 20, 2025, https://arapackelaw.com/patents/ai-patents-by-country/
[28] Anirudhha Shrikhande, “A Deep Dive into Absolute Zero: Reinforced Self-Play Reasoning with Zero Data,” ADaSci, May 14, 2025, https://adasci.org/a-deep-dive-into-absolute-zero-reinforced-self-play-reasoning-with-zero-data/
[29] “Trends - Artificial Intelligence (AI),” Slide 292.
[30] “Trends - Artificial Intelligence (AI),” Slide 337.
[31] “Trends - Artificial Intelligence (AI),” Slide 304-306.
[32] “Trends - Artificial Intelligence (AI),” Slide 336.
[33] Daron Acemoglu, “The Macroeconomics of AI,” MIT, May 2024, https://shapingwork.mit.edu/wp-content/uploads/2024/05/Acemoglu_Macroeconomics-of-AI_May-2024.pdf
[34] “Informal Economy Sizes: Informal Economy Size as Percentage of GDP,” World Economics, https://www.worldeconomics.com/Informal-Economy/
[35] Mohammad Amir Anwar, “Africa’s Data Workers are Being Exploited by Foreign Tech Firms – 4 Ways to Protect Them,” The Conversation, March 31, 2025, https://theconversation.com/africas-data-workers-are-being-exploited-by-foreign-tech-firms-4-ways-to-protect-them-252957
[36] “Trends - Artificial Intelligence (AI),” Slide 8.
[37] “Trends - Artificial Intelligence (AI),” Slide 316.
[38] “Trends - Artificial Intelligence (AI),” Slide 6.
[39] Milin Stanley, “AI-Led DC Capacity in India to Surge by 500 MW in 4 Years, Doubling Market Size,” IndiaAI, August 23, 2024, https://indiaai.gov.in/article/ai-led-dc-capacity-in-india-to-surge-by-500-mw-in-4-years-doubling-market-size
[40] Sobia Khan, “India’s Data Centre Capacity Set to Surpass 4,500 MW by 2030, Backed by $25 bn Investments,” The Economic Times, May 29, 2025, https://economictimes.indiatimes.com/industry/services/property-/-cstruction/indias-data-centre-capacity-set-to-surpass-4500-mw-by-2030-backed-by-25-bn-investments/articleshow/121457835.cms
[41] Manish Singh, “Reliance Plans World’s Biggest Data Center in India, Report Says,” TechCrunch, January 23, 2025, https://techcrunch.com/2025/01/23/reliance-plans-world-biggest-ai-data-centre-in-india-report-says/
[42] Nigel Pereira, “India’s First Atmanirbhar Semiconductor Chip is Finally Here,” Sify, June 9, 2025, https://www.sify.com/science-tech/indias-first-aatmanirbhar-semiconductor-chip-is-finally-here/
[43] Dylan Patel et al., “AI Arrives in the Middle East: US Strikes A Deal with UAE and KSA,” SemiAnalysis, May 16, 2025, https://semianalysis.com/2025/05/16/ai-arrives-in-the-middle-east-us-strikes-a-deal-with-uae-and-ksa/
[44] Mannat Jaspal and Siddharth Yadav, “Powering the AI-Nuclear Nexus: Strategic Integration of Nuclear Energy for AI Infrastructure in Gulf Nations,” ORF Middle East, May 5, 2025, https://www.orfonline.org/research/powering-the-ai-nuclear-nexus-strategic-integration-of-nuclear-energy-for-ai-infrastructure-in-gulf-nations
[45] Ruchika Kumari, “From Textbooks to Tech: How Indian Schools are Embracing AI in Education,” Times Now, June 8, 2025, https://www.timesnownews.com/education/from-textbooks-to-tech-how-indian-schools-are-embracing-ai-in-education-article-151814947
[46] Aida Traidi, “AI Integration in Education in the MENA Region: Will it Be a Driver for Social Inequality?” Global Campus Arab World, 2024, https://repository.gchumanrights.org/server/api/core/bitstreams/d3c58797-06ec-469e-bf66-d07490a34f07/content
[47] “UAE Leads Arab World in AI Learning Surge, Says Coursera Report,” Arabian Business, June 11, 2025, https://www.arabianbusiness.com/industries/technology/uae-leads-arab-world-in-ai-learning-surge-says-new-coursera-report
[48] Issa Alkindy, “UAE Schools to Begin Teaching Mandatory AI Classes From Age of Four,” The National, May 4, 2025, https://www.thenationalnews.com/news/uae/2025/05/04/sheikh-mohammed-announces-introduction-of-ai-as-curriculum-subject-in-uae-schools/
[49] “Trends - Artificial Intelligence (AI),” Slide 292.
[50] Faiza Virani, “Dubai and Abu Dhabi Lead the Gulf AI race,” Business Recorder, August 7, 2025, https://www.brecorder.com/news/40376811/dubai-and-abu-dhabi-lead-the-gulf-ai-race#:~:text=By%202030%2C%20analysts%20forecast%20that,AI%20Abu%20Dhabi%20Dubai%20GCC

### The Rise of Soft Power in the Gulf: A Comparative Analysis of GCC Strategies

Introduction
Soft power, a concept introduced by political scientist Joseph Nye in the late 1990s,[1] is often referred to as a country’s ability to influence others through attraction and persuasion rather than coercion or payment. Nye articulated that while hard power relies on military and economic means to compel behaviour, soft power operates through cultural appeal, political values, and foreign policies that are seen as legitimate or morally authoritative.
The foundational elements of soft power are often categorised into three primary resources:​ culture, political views, and foreign policy.[2] The global appeal of a nation's culture, encompassing arts, traditions, and popular media, can enhance its attractiveness. For instance, the widespread popularity of Korean music and films has significantly contributed to the country’s soft power.[3] ​Further, when a nation upholds values such as human rights and the rule of law by aligning its actions with these principles, it bolsters its credibility and influence internationally. Lastly, policies perceived as legitimate and morally upright, particularly those that consider the interests of other nations, can enhance a country's soft power.[4] ​
In more recent years, emerging literature also suggests that economic investments can qualify as soft power when they are designed or perceived to enhance a country’s attractiveness, build long-term influence, or foster goodwill, rather than to extract immediate strategic concessions.[5] For countries of the Gulf region, for example—the United Arab Emirates (UAE), Saudi Arabia, Bahrain, Oman, Kuwait, and Qatar—this includes investments by sovereign wealth funds in prestigious international assets (such as sports clubs, universities, or cultural institutions), development financing in the Global South, and infrastructure investments that visibly improve public welfare in recipient countries. These differ from hard power tools like sanctions, military aid, or coercive conditionalities, which aim to compel behaviour.
Soft power investments rely on voluntary attraction; they work best when they are non-threatening, benefit both parties, and are aligned with a country’s broader image as a constructive global player. In contrast, an economic tool becomes hard power when it is used transactionally, such as when aid is tied to diplomatic recognition or investment is leveraged for exclusive access to strategic assets. Ultimately, the distinction lies not just in the nature of the investment, but in the intent behind it and the perceptions it generates.
However, the measurement of soft power presents challenges due to its intangible nature. Traditional metrics have included indicators such as the number of cultural institutions abroad, international students hosted, and global public opinion surveys.  Recent advancements have introduced more comprehensive indices. For instance, the Global Soft Power Index (GSPI),[6] which has been released by Brand Finance every year since 2020, ranks 193 nations on  55 metrics of soft power. The index aims to provide a systematic approach to measuring soft power by capturing its multifaceted characteristics across culture, business, and diplomacy, including “strong and stable economy”, “influential in arts and entertainment”, “food the world loves”, and “helpful to countries in need”.
The performance of GCC countries in the GSPI has exhibited notable shifts since its inception, reflecting their evolving international influence and strategic initiatives. The Global Soft Power Index rankings from 2020 to 2025 (see Table 1) reveal distinct trajectories for GCC countries, reflecting their evolving diplomatic, cultural, and economic engagement strategies on the world stage. Most prominently, the UAE rose steadily from 18th in 2020 to a top-10 global soft power rank by 2023, maintaining it through 2025. Saudi Arabia climbed from 26th in 2020 to 18th in 2024, before dipping slightly to 20th in 2025. Qatar improved its soft power ranking from 31st in 2020 to 21st in 2024, before slipping to 22nd in 2025.





Table 1. Global Soft Power Ranking (2020-25)


 Country
2020[7]
2021[8]
2022[9]
2023[10]
2024[11]
2025[12]


United Arab Emirates
18
17
15
10
10
10


Kingdom of Saudi Arabia
26
24
24
19
18
20


Bahrain
 Data not available
65
68
50
51
51


Kuwait
 Data not available
42
36
35
37
40


Oman
 Data not available
51
49
46
49
49


Qatar
31
26
26
24
21
22



Source: Brand Finance, “Global Soft Power Index”, https://brandirectory.com/softpower
In sum, understanding and quantifying soft power requires a nuanced lens that goes beyond traditional cultural and diplomatic tools to include economic investments that enhance a country's global appeal and influence. As the Gulf countries increasingly leverage sovereign wealth funds and strategic global assets to shape perceptions and foster goodwill, their trajectories in the Global Soft Power Index reveal how these tools are being deployed, with varying degrees of success. The divergence in rankings among GCC states reflects the effectiveness of their soft power strategies, rooted in foreign policy, political values, cultural outreach, and economic engagement.

Soft Power Pathways for Gulf Countries
The Gulf countries are engaging across all four categories of soft power: cultural appeal, political values, foreign policies, and economic investments. However, each of them has specific strengths. Starting with the UAE, which is the top-ranked Gulf soft power. According to the country’s government data sources,[13] the UAE’s outward foreign investment stock exceeded US$262 billion in 2023, averaging an annual growth rate of 13.4 percent since 2016. It is also the Gulf country with the highest level of outward investment flows since 2022. The conversation around such investments has been amplified through world-class convenings such as the Expo, COP28, and the World Governments Summit hosted by the UAE. While it is likely to maintain this position, Saudi Arabia is another Gulf nation that has seen a steady rise of soft power in the past few years.
Saudi Arabia has been utilising its economic toolkit for soft power, though its approach is complex and multifaceted. The Kingdom's soft power push is, in part, a strategic necessity to mend an international image damaged by the military intervention in Yemen (2015)[14] and the killing of journalist Jamal Khashoggi in 2018.[15] The Kingdom has been the leading provider of bailout assistance in the Middle East and beyond since 1963, representing[16] around 60 percent of the Gulf States’ foreign assistance in that period, estimated at US$206 billion. Iraq, Egypt, Pakistan, and Syria have been the top recipients of such Saudi assistance. According[17] to the United Nations Office for the Coordination of Humanitarian Affairs (OCHA), Saudi Arabia is one of the top five global humanitarian donors in 2025 and has maintained a leading position as a donor from the region for several years. As its sovereign wealth fund,[18] the PIF, is reportedly pivoting to focus more on domestic mega-projects to achieve the ambitious goals of Vision 2030, this internal realignment could have contributed to the decline in ranking from 2024 to 2025.
Qatar is the third-ranked country in the Gulf for soft power, and is particularly known for utilising its foreign policy for such purposes. An important tool for Qatar’s foreign policy is the Al-Jazeera media network, which scholars have identified[19] as a proponent of the state’s political positions. This means that the network has been observed[20] to promote a new brand of pan-Arabism as a mix between political Islam and pan-Arabism. The network was launched in 1996, and a decade later, in 2006, an English-language segment was launched, effectively promoting Qatar’s foreign policy and securing its soft power across global and Arab households.
Qatar has also been engaging in mediation as part of its foreign policy, particularly since the 2007-08 mediation between the Yemeni government and Houthi rebels.[21] Qatar has hosted negotiations for some of the more critical conflicts in the world, including the talks between Hamas and Israel since 7 October, as well as in Afghanistan and Sudan. These are generally complemented by efforts such as the Doha Forum. However, the most high-profile Gulf country that utilises mediation in foreign policy for soft power is Oman. The sultanate is credited with the success of the 2015 Iran nuclear deal and was dubbed[22] the ‘Switzerland of Arabia’ for such efforts. A decade later, in 2025, the Americans and Iranians are in Oman for talks again on securing a deal to calm[23] tensions between them.
In terms of political values, it is the Kingdom of Bahrain that appears to have invested heavily in promoting tolerant and pluralistic values both locally and on the global stage. In 2025, the Kingdom credited[24] itself with the United Nations General Assembly’s adoption of 28 January as the International Day of Peaceful Coexistence. This development was shortly after the Kingdom established[25] the King Hamad Global Center for Coexistence and Tolerance in 2018. This strategy is important as it seeks to mend an international image that was severely affected by the government's crackdown on the Pearl Square protest movement[26] and its aftermath. Bahrain is also particularly known for commemorating[27] the Shiite Ashura season annually for its local community, and it has made meaningful outreach to the Christian and Jewish communities. Ashura, which marks the martyrdom of Imam Hussein, is a deeply significant event in Shia Islam, symbolising resistance against injustice. By facilitating these commemorations, Bahrain affirms its commitment to religious tolerance and inclusion.[28] According to Rabbi Marc Schneier, Bahrain is the country with the only[29] indigenous Jewish community still in existence on the Arabian Peninsula, which is active in public life. Moreover, as a testament[30] to Bahrain’s positioning on tolerant values, the Roman Catholic pontiff, Pope Francis, now deceased, visited the Kingdom in November 2022, participating in a conference titled ‘East and West for Human Coexistence’.
Lastly, Kuwait is a Gulf country that has invested in its cultural appeal throughout the Arab world. Before its independence, the Al-Arabi monthly magazine was a household name across the Arab world, sharing knowledge and spotlighting[31] Arab culture even before the advent of television. When theatre and television became popular, it was Kuwait that stood out in the Gulf, with its plays and soap operas dominating the cultural scene at large. As a result, Kuwait was named[32] the Arab Capital of Culture and Media for 2025 by the Arab League Educational, Cultural and Scientific Organization (ALECSO), a designation[33] it earned back in 2001. Moreover, Kuwait’s cultural offices abroad host exhibitions showcasing such leadership in the arts and media, with one held[34] as recently as February 2025. 

Policy Recommendations for Enhancing Gulf Soft Power
Studying the evolution of soft power across GCC states reveals not only divergent trajectories but also lessons about cost-efficiency, strategic focus, and reputational returns. While strict causation between specific initiatives and Global Soft Power Index rankings cannot be established, the correlation between such investments and shifts in ranking provides a useful lens for analysis.
Value-based diplomacy has proved to be the most cost-efficient tool in comparative terms. Bahrain has made notable gains using relatively low-cost strategies centred on cultural heritage and pluralism. Bahrain registered a 14-place leap from rank 65 in 2021 to 51 in 2024 after its sustained efforts in interfaith diplomacy, including the high-profile papal visit and UN-recognised ‘Day of Peaceful Coexistence’. These results show that targeted, value-driven outreach can yield high visibility without massive capital expenditure.
Further, investments in hosting and mediating are the fastest catalysts for visibility. The UAE’s jump from rank 18 in 2020 to a top-10 global position by 2023, and its sustained ranking at the 10th position in 2024 and 2025, coincides with a string of globally visible efforts like Expo 2020, the Abraham Accords, COP28, and the World Governments Summit. Similarly, Qatar’s soft power rise, from the 31st position in 2020 to the 21st in 2024, has been powered by high-stakes mediation roles (notably in Afghanistan and Israel-Gaza conflicts). Oman, while consistent, remained stuck in the high 40s despite its diplomatic credibility, suggesting that quiet diplomacy without parallel global amplification limits momentum.
As a result, trailing countries need sharper branding and institutionalisation. Kuwait’s soft power score dipped from 35 in 2023 to 40 in 2025, and Oman showed minor regression after some progress, moving from 46 in 2023 to 49 in 2024 and 2025. These fluctuations suggest a lack of strategic follow-through. Unlike the UAE or Qatar, these states have not institutionalised their soft power agendas through global media networks, world-class convenings, or strategic communications. For such countries, a focused strategy that consolidates soft power identity and invests in supporting infrastructure (like think tanks or cultural centres abroad) is essential to ensure durability.
Saudi Arabia’s soft power journey illustrates the importance of sustained international engagement. The Kingdom achieved a steady ascent from the 26th position in 2020 to the 18th in 2024 by aligning its sovereign wealth investments and humanitarian leadership with Vision 2030. Its subsequent dip to the 20th position in 2025 offers a crucial insight. This slight decline likely reflects the strategic pivot to prioritise domestic mega-projects, suggesting that even a powerful national narrative requires consistent international reinforcement through overseas investments to maintain momentum in the global rankings. This indicates that while scale and structural leverage are key, maintaining high visibility is equally critical.
Therefore, it is key to institutionalise soft power efforts that integrate foreign policy, cultural affairs, political values, and sovereign investment promotion under one narrative strategy through global convenings and outreach.

Conclusion
As the Gulf countries transition from regional to global players, soft power has emerged as a critical lever for shaping international perception and advancing national interests. The UAE, Saudi Arabia, and Qatar have gained ground through strategic investments, event diplomacy, and media influence. However, countries like Bahrain, Oman, and Kuwait are still refining their pathways. It is important to not only understand these divergences but also consider why they emerge.
Going forward, the most sustainable soft power strategies will be those that are consistent and visible, rooted in authenticity, reinforced through institutional coherence, and amplified on the global stage. As the global order becomes increasingly multipolar, the Gulf’s ability to shape perceptions and cultivate trust may prove to be as consequential as its economic heft.




Endnotes
[1] Joseph Nye, “Soft Power: The Origins and Political Progress of a Concept,” Palgrave Communications 3 (2017), https://doi.org/10.1057/palcomms.2017.8.
[2] Jonathan McClory, The New Persuaders: An International Ranking of Soft Power, Institute for Government, https://www.instituteforgovernment.org.uk/sites/default/files/publications/The%20new%20persuaders_0.pdf
[3] Minsung Kim, “The Growth of South Korean Soft Power and Its Geopolitical Implications,” Journal of Indo-Pacific Affairs (2022), https://www.airuniversity.af.edu/JIPA/Display/Article/3212634/the-growth-of-south-korean-soft-power-and-its-geopolitical-implications/
[4] “The New Persuaders: An International Ranking of Soft Power.”
[5] Daniele Carminati, “The Economics of Soft Power: Reliance on Economic Resources and Instrumentality in Economic Gains,” Economic and Political Studies (2021), https://doi.org/10.1080/20954816.2020.1865620.
[6] Brand Finance, “Global Soft Power Index,” Brand Finance, https://brandirectory.com/softpower
7 Brand Finance, “Global Soft Power Index.” 
[7] Brand Finance, “Global Soft Power Index 2020,” Brand Finance, https://static.brandirectory.com/reports/brand-finance-nation-brands-2020-preview.pdf
[8] Brand Finance, “Global Soft Power Index 2021,” Brand Finance, https://mcy.gov.ae/ar/wp-content/uploads/sites/3/2024/08/Global-Soft-Power-Index-2021.pdf.
[9] Brand Finance, “Global Soft Power Index 2022,” Brand Finance,https://mcy.gov.ae/ar/wp-content/uploads/sites/3/2024/08/Global-Soft-Power-Index-2022.pdf.
[10] Brand Finance, “Global Soft Power Index 2023,” Brand Finance, https://mcy.gov.ae/ar/wp-content/uploads/sites/3/2024/08/Global-Soft-Power-Index-2023.pdf.
[11] Brand Finance, “Global Soft Power Index 2024,” Brand Finance, https://static.brandirectory.com/reports/brand-finance-soft-power-index-2024-digital.pdf
[12] Brand Finance, “Global Soft Power Index 2025,” Brand Finance, https://brandfinance.com/insights/global-soft-power-index-2025-the-shifting-balance-of-global-soft-power
[13] Ministry of Economy UAE, “Open Data,” https://www.moec.gov.ae/en/moec-opendata.
[14] Thomas Juneau, “Saudi Arabia’s Costly War in Yemen: A Neoclassical Realist Theory of Overbalancing,” International Relations (2024), https://doi.org/10.1177/00471178241231728
[15] “Jamal Khashoggi: All You Need to Know About Saudi Journalist's Death,” BBC News, 2021, https://www.bbc.com/news/world-europe-45812399
[16]  “Gulf Bailout Diplomacy,” International Institute for Strategic Studies, 2023, https://www.iiss.org/research-paper/2023/11/Gulf-Bailout-Diplomacy/.
[17] Financial Tracking Service, Total Reported Funding 2025, United Nations Office for the Coordination of Humanitarian Affairs, 2025, https://fts.unocha.org/global-funding/overview/2025.
[18] Hadeel Al Sayegh, Iain Withers, and Anousha Sakoui, “Saudi Wealth Fund to Cut Overseas Investments,” Reuters, 2024, https://www.reuters.com/world/middle-east/financial-technology-leaders-attend-saudi-investment-conference-2024-10-29/.
[19] Philip Pherguson and Karim Pourhamzavi, “Al Jazeera and Qatari Foreign Policy: A Critical Approach,” Journal of Media Critiques (2015), https://www.ceeol.com/search/article-detail?id=496211.
[20] Sam Cherribi, The Symbolic World of al Jazeera (Oxford University Press EBooks, 2017), https://doi.org/10.1093/acprof:oso/9780199337385.003.0002.
[21] Sultan Barakat, “Qatari Mediation: Between Ambition and Achievement,” Brookings Doha Center, 2014, https://www.brookings.edu/wp-content/uploads/2016/06/final-pdf-english.pdf
[22] James Worrall, “‘Switzerland of Arabia’: Omani Foreign Policy and Mediation Efforts in the Middle East,” The International Spectator, 2021, https://doi.org/10.1080/03932729.2021.1996004.
[23] Jon Gambrell, “Oman to Host Key Iran-US First Meeting,” AP News, 2025, https://apnews.com/article/iran-us-talks-oman-nuclear-program-5813e0814efcd99616428086de6ba0be.
[24] “UN Recognition of International Day of Peaceful Coexistence a Historic Achievement for Bahrain: Journalists,” Bahrain News Agency, 2025, https://www.bna.bh/en/news?cms=q8FmFJgiscL2fwIzON1%2BDknLYSBJpcwSG3CsSOCVDWs%3D.
[25] “King Hamad Global Center for Peaceful Coexistence,” King Hamad Global Centre for Peaceful Coexistence, https://khgc.org.bh/about-us.
[26] “Bahrain crackdown on protests in Manama's Pearl Square,” BBC News, 2011, https://www.bbc.com/news/world-middle-east-12755852
[27] “Bahrain Model in Tolerance, Pluralism,” Bahrain News Agency, 2025, https://www.bna.bh/en/ConstitutionalCourttoconsiderConstitutionalCase1/Bahrainmodelintolerancepluralism.aspx?cms=q8FmFJgiscL2fwIzON1%2BDtGb16aspIu5cn6Bh0Q6rcU%3D.
[28] “Bahrain’s Ashura Season: A Testament to Religious Freedom,” Citizens for Bahrain, 
2025, https://www.citizensforbahrain.com/2025/07/14/bahrains-ashura-season-a-testament-to-religious-freedom/
[29] Rabbi Marc Schneier, “Bahrain Is a Beacon of Religious Tolerance and Coexistence,” Arab News, 2022, https://www.arabnews.com/node/2188981.
[30] Elizabeth Monier, “Religious Tolerance in the Arab Gulf States: Christian Organizations, Soft Power, and the Politics of Sustaining the ‘Family–State’ beyond the Rentier Model’,” Politics and Religion (2023), https://doi.org/10.1017/s175504832300007x.
[31] Abdullah Al Shayji, “Kuwait’s Soft Power Is Its Biggest Asset,” Gulf News, 2018, https://gulfnews.com/opinion/op-eds/kuwaits-soft-power-is-its-biggest-asset-1.2180201.
[32] “Kuwait Named Arab Culture, Media Capital for 2025 Achievement,” Kuwait News Agency, 2025, https://www.kuna.net.kw/ArticleDetails.aspx?id=3215278&language=en.’
[33] “Kuwait Celebrates as ‘Capital of Culture and Arab Media 2025’ with Panel Discussion,” Times Kuwait, 2024, https://timeskuwait.com/kuwait-celebrates-as-capital-of-culture-and-arab-media-2025-with-panel-discussion/.
[34] “Kuwait Cultural Office in London Unveils ‘Huna AlKuwait’ Exhibition’,” Kuwait News Agency, 2016, https://www.kuna.net.kw/ArticleDetails.aspx?id=3220773&language=en.

### Energy Transitions in the Gulf: Realities, Risks, and the Road Ahead

Introduction: Transition Turbulence
Energy transition globally, which seemed unstoppable only a few years ago, has run into unexpected turbulence caused by rising costs, high-profile corporate failures, and an abrupt shift in American political priorities. The Gulf region, however, has managed to stay on track and even accelerate progress, remaining one of the global bright spots in this domain.

There are many opinions about what the ‘energy transition’[1] is or should be. Many environmentalists and European policymakers see it as the rapid replacement of fossil fuels, and in Germany’s case, nuclear power,[2] with renewable energy, batteries, electric vehicles, and similar technologies. Although climate is the most urgent priority in the global renewable energy discourse, the emphasis has often been on boosting renewables rather than merely curbing carbon dioxide and other greenhouse gas emissions.

The Gulf’s vision is rather different: it also sees a swift adoption of many of these systems, but within a more diverse energy framework where oil and gas remain important, though produced and used in a cleaner way. The United Arab Emirates (UAE), Saudi Arabia, Qatar, and Oman have advanced somewhat different but have broadly aligned policy platforms. Excluding Qatar, the countries have deadlines for net-zero greenhouse gas emissions goals: 2050 for the UAE and Oman, and 2060 for Bahrain, Kuwait, and Saudi Arabia. Several other targets for emissions reduction, the expansion of renewable energy capacity, efficiency improvements, and sector-specific goals—particularly for the oil and gas industry—have been identified.[3]

Major oil- and gas-exporting regions, other than the Gulf, have had different approaches. Norway, Australia, and Canada have seen tensions in domestic politics, but have largely sought to preserve their fossil fuel industries while embedding techniques such as carbon capture and electrification, and simultaneously promoting renewable energy and electric vehicles. Russia has continued investing heavily in its fossil fuel resources, doing very little for low-carbon energy beyond nuclear power,[4] and obstructing international climate action.[5] The United States (US) has also moved sharply in this direction under the second Trump administration.

Approaches in Latin America, notably Brazil, have vacillated between extremes depending on the political forces in power; however, the economic importance of oil and gas has generally remained. Policies in Azerbaijan (the host of the COP29 climate conference in 2024) and Malaysia, by contrast, are closer to those of the GCC (Gulf Cooperation Council). Finally, a group of the more politically troubled countries of Libya, Iraq, Iran, Venezuela, and Nigeria, have been unable to formulate a consistent climate policy or consistently follow long-term plans because of short-term imperatives. These include dealing with insurgencies and civil wars, rival governments, international sanctions, disputed elections, and economic crises.

Progress So Far

The progress in the Gulf region’s energy transition journey can be understood through a few parameters. Summarised in Table 1 are key statistics:

Table 1. Low-Carbon Energy in the GCC: Status and Targets 



 
Bahrain
Kuwait
Oman
Qatar
Saudi Arabia
UAE


Net-Zero Target (Year)
2060
2060
2050
None
2060
2050


Renewable Capacity, 2024 (GW)
0.069
0.114
0.722
1.699
4.743
6.144


Renewable Target
5% by 2025

10% by 2035
15% by 2030
30% by 2030
18% by 2030
50% by 2030
32% by 2030 (incl. nuclear)


Nuclear Capacity, 2024 (GW)
0
0
0
0
0
5.6


CO2 Emissions from Energy, 2024 (Mt)
NA
105.6
87.7
135.6
636.4
302.5


CCS Capacity Target (Mt/y)
NA
NA
16.3 (2050)
11 (2035)
44 (2035)
10 (2030)


Hydrogen production Target (Mt/y)
0.1 (2030)
0.3 (2030)
1 (2030)

3.75 (2040)
0.2 green (2030)
2.9 (2030)

4 (2035)
1 green, 0.4 blue (2030)

7.5 (2040)



Sources: International Renewable Energy Agency,[6], Energy Institute,[7] national publications

The GCC countries have advanced in areas where there is a clear economic or strategic rationale and competitive advantage—for instance, in the renewable energy space, particularly solar power. The UAE and Saudi Arabia have set a few records for the lowest-cost procurement of utility-scale solar power and constructed several of the world’s largest single-site solar farms. These include the Al Dhafra plant in Abu Dhabi (2 GW), the Al Shuaibah plant in the Mecca province of Saudi Arabia (2.06 GW), and the multi-phase Mohammed bin Rashid solar park in Dubai, which is expected to reach 6.26 GW by 2029 and 7.26 GW by 2030. In 2015, the six GCC countries had a total of 196 megawatts of installed renewable capacity; by 2024, it reached 13,491 megawatts (13.5 GW). Compared to the situation ten years ago, this represents an almost unimaginable step forward.

Given the cost inflation and rising interest rates from 2022, the trend of ever-lower bid prices has halted but not reversed, and further falls could resume owing to overcapacity in Chinese solar manufacturing. In any case, solar photovoltaic power is already cheaper than gas-fired generation, even at the generally low gas prices prevailing in the Gulf. It has been cheaper than oil for over a decade.[8] Wind power is also cost-competitive in parts of Saudi Arabia and Oman.

Kuwait and Bahrain are the two laggards on renewables in the Gulf region, with only 114 and 69 megawatts of installed capacity, respectively, in 2024. This is not to ignore the signs of progress, too. Bapco Energies, Bahrain’s oil company, agreed in May 2024 to develop 2 GW of wind power.[9] Kuwait, which suffered from power shortages in 2024-25, signed a deal with Chinese companies in March 2025 to build 3.5 GW of solar projects.[10]

Solar photovoltaic power for residences is sparsely used despite the low cost of utility-scale solar and the still moderate price of grid electricity. The absence of additional incentives (such as carbon prices, priority grid access, tax credits, or premium electricity prices for solar) and various other issues of cost and misaligned incentives are also contributing factors.[11] However, solar water heating is being adopted widely at the domestic level, encouraged by building codes. Distributed solar installations for businesses have become increasingly popular in the UAE and Saudi Arabia.

The UAE witnessed a watershed moment in January 2025 when Abu Dhabi’s clean energy development company, Masdar, and main utility, Emirates Water and Electricity Company (EWEC), announced that they would build a 5.2-GW solar farm with 19 gigawatt-hours of batteries, which would output a steady 1 GW. Simple calculations suggest a cost of about US$60 per megawatt-hour for generated electricity,[12] a highly cost-competitive estimate even with gas-fired generation.

Similar projects should be applicable across the GCC and the broader Middle East. Saudi Arabia has also launched several battery energy storage (BESS) projects. Dubai is expected to complete a pumped hydroelectric storage facility at the mountain exclave of Hatta in mid-2025, while other UAE emirates, Ras Al Khaimah, Oman, and Saudi Arabia are also considering pumped hydro plants for longer-term seasonal energy storage. A small percentage of national land areas should be sufficient to accommodate enough solar energy to meet all future electricity needs, as well as additional requirements for desalination, electric vehicles, electrified industry, and ‘green’ hydrogen production. This is particularly true in the case of the relatively sparsely populated Saudi Arabia and Oman.

The UAE has also implemented a major civil nuclear programme, developing 5.6 GW of capacity. Further nuclear expansion, whether by larger traditional reactors or small modular reactors (SMRs), has been raised as a possibility. Saudi Arabia is also seeking nuclear power,[13] and none of the other GCC countries are likely to pursue it. Nuclear power appears to be relatively expensive when compared to renewables, proving to be advantageous in large-scale generation independent of daily, seasonal, and weather-related fluctuations.
Energy Efficiency: Tackling the Subsidy Challenge
Beyond the solar/hydroelectric and nuclear domains, an important subsidy reform was initiated in Saudi Arabia and the UAE in 2015-16, which raised the price of electricity, gas, and water closer to fully cost-reflective levels, and road fuels towards international market levels. This catalysed the rationalisation of consumption, better aligning the pricing of competing energy sources and increasing the viability of distributed solar power. Progress on subsidy reform has slowed in recent years, with remaining subsidies allocated towards road fuels in a few GCC countries, subsidised electricity and water prices for GCC citizens in general, and continuing very low electricity prices in Kuwait.

Other energy efficiency policies have included building and appliance standards, retrofit programmes, the establishment of energy service companies, and the promotion of district cooling. The thermal desalination of water is being gradually replaced by the more efficient and flexible, electrically driven reverse osmosis method.

Nevertheless, GCC energy consumption per capita and per unit of Gross Domestic Product (GDP) remains high by international standards. This is partly due to the hot and often humid climate, which necessitates the heavy use of air-conditioning, with water needs met almost entirely by desalination, and a large proportion of energy-intensive industry. However, low levels of energy efficiency are also a legacy of many years of cheap and abundant energy, and urban design that is car-centric and makes little use of natural shade and cooling.
Decarbonising the Hydrocarbon Sector
The national oil and gas industries, which remain the bedrock of the GCC economies, have also sought to improve their environmental performance. This includes traditional measures to improve energy efficiency, reduce flaring, and cut methane leakage. Reported figures on flaring and methane emissions vary widely between sources, but the Energy Institute shows a fall of about 12 percent from a peak in 2016 to 2023.[14] GCC flaring levels are already low when compared to their neighbours, Iran and Iraq, and other major producers like Russia and the US, among others.

In some bolder moves, Saudi Aramco, the Abu Dhabi National Oil Company (ADNOC), and QatarEnergy have also implemented carbon capture and storage (CCS) projects. The ADNOC-Emirates Steel facility can capture up to 0.8 million tonnes of carbon dioxide annually; Aramco captures 0.8 million tonnes annually from the Hawiyah gas plant, and for enhanced oil recovery in the Uthmaniyah field. QatarGas injects 2.1 million tonnes, captured annually from its gas processing, into a deep saline formation.[15]

ADNOC is electrifying its onshore and offshore operations; the latter is facilitated by the US$3.8-billion ‘Project Lightning’. This reduces the use of smaller, inefficient on-site gas turbines and draws electricity from the national grid, including a rising share of solar and nuclear power. ADNOC reports that this saved 4.8 million tonnes of greenhouse gas emissions in 2023, out of its total upstream emissions of 24 million tonnes of carbon dioxide equivalent: a notable share of the national emissions estimated at 340.8 million tonnes in 2023.[16] It projects that the carbon intensity of its offshore production will drop from 7.3 kg CO2 equivalent per barrel of oil equivalent (BOE) in 2021 to 6.3 CO2e in 2025 and 2.4 CO2e from 2028 onwards.[17] Similar integration has occurred among industrial facilities, notably Emirates Steel and Emirates Global Aluminium (EGA).

The power generation sector has already switched almost entirely from oil to gas, except in Saudi Arabia and Kuwait. Saudi Arabia burns up to 1.4 million barrels per day of crude and fuel oil during the summer for power generation. It targets replacing its oil consumption for electricity, with 50 percent gas and 50 percent renewables by 2030.[18] The current pace of deployment suggests that this target will be missed but that substantial progress will be made, and it could be achieved three to four years later. This results in substantial savings of carbon dioxide emissions, and releases oil for export (although Saudi Arabia has to balance this against its OPEC obligations).
Institutions and Capabilities
The GCC’s sovereign wealth funds (SWFs) and strategic investment companies have played an important role in the energy transition to date, as have their national oil companies (NOCs). NOCs generate the most national wealth; the various SWFs and other bodies invest it in the domestic economy and save it overseas. International investments, including taking positions in perceived ‘industries of the future’, may also have a strategic angle by securing stakes in key technologies that may be brought to the host country, or helping hedge against future declines in oil and gas demand.

These roles vary widely. Some of the GCC NOCs, notably Saudi Aramco, ADNOC, and QatarEnergy, are investing heavily in international oil and gas projects. This tends to be weighted more towards gas, as a lower-carbon fuel with a perceived longer runway.

Strategic investors, notably Abu Dhabi’s Masdar (now jointly owned by strategic state investor Mubadala, national oil company ADNOC, and the government’s holding vehicle ADQ), are injecting higher amounts of capital into renewables and hydrogen both at home and abroad. Such entities include Masdar, which targets 100 GW of capacity by 2030, Acwa Power of Saudi Arabia (more than half-owned by the Public Investment Fund (PIF) and other Saudi government entities), Amea Power (a private Abu Dhabi company), and Nebras Power, a venture of the Qatar Electricity and Water Company.

These firms own a range of renewable generation and other energy assets across the Middle East and North Africa, Sub-Saharan Africa, Central Asia, South-East Asia, Europe, the US, and other geographies. While some smaller projects may be politically inspired, and these companies may benefit from the backing of their national governments, their investments target attractive commercial returns. They are increasingly skilled and cost-competitive project developers, especially in geographies less favoured by Western companies. Masdar, in particular, has also been an active acquirer of renewable companies and assets in the US, Europe, and Africa. Both Masdar and Acwa are highly active in the Caspian-Central Asia region (notably Uzbekistan, Azerbaijan, and Kazakhstan), an area little followed by Western renewable players.

Saudi Arabia’s PIF has a more domestic focus on energy transition, including positions in electric vehicle makers linked to factories in the Kingdom. But PIF’s stake in Acwa gives it exposure to one of the largest deployers of international renewables and reverse osmosis desalination. So far, such dual approaches seem largely to have avoided tensions between sourcing funds from domestic hydrocarbon production, deploying them into hydrocarbon projects elsewhere, and investing in new and low-carbon energies.
The More Challenging Next Steps
Having made good progress and built the foundation for energy transition, GCC countries should prioritise faster progress and tackle the more challenging areas of decarbonisation.

First, it should be acknowledged that progress in reducing greenhouse gas emissions has been limited. Figures from different databases are inconsistent and also vary from national statistics.[19] However, they suggest that the rate of emissions growth has slowed since 2012, and was negative in 2017, 2018, and 2020. (It increased again in 2021-23.) Strong economic and population growth has driven a continuing rise, offset at times by subsidy reform and the effect of periods of lower oil prices.

The largest group of emissions comes from the power sector, representing 37 percent;[20] industry (fuel combustion plus processes) contributes a further 30 percent; transport, 20 percent; and the oil and gas industry, 11 percent (buildings, waste, and agriculture represent the remainder). Decarbonising power appears to be a solved, or at least, solvable problem owing to multiple components working in tandem: the oil-to-gas transition in the short term, accompanied by improved generation efficiency, the use of reverse osmosis desalination; and a wholesale switch to solar and wind plus batteries and, in some cases, nuclear power. A small proportion of gas-fired plants may be equipped with carbon capture or converted to burn hydrogen or ammonia to provide flexible backup.

GCC countries do not face some of the constraints common to other countries while achieving a higher share of renewable energy. Open land for solar power and transmission lines is readily available in every state except Bahrain. Demand patterns, with a high and long summer peak for air-conditioning, match quite well with solar output with a moderate amount of battery capacity, unlike the situation in north-western Europe where winter is the period of high demand.

Nevertheless, Bahrain and Kuwait in particular have made little progress in renewables, though there are signs of change. The other GCC countries can also move faster on their commitments. Decarbonisation of the electricity grid could be taken on at a faster pace, lowering costs, improving reliability, and creating export earnings if there were better connectivity within the GCC countries and their neighbours. Intra-GCC electricity trade in 2021 amounted to only 0.15 percent of total generation, compared to 5 percent in the EU.[21] While interconnections to Egypt, Jordan, and Iraq are either in place or under construction, these will only modestly boost export potential.

The burden of increasing demand on the electricity sector could also be improved by better energy efficiency. After a flurry of subsidy reforms and efficiency programmes around 2015-16, progress appears to have slowed, and there has been little or no improvement in Kuwait in particular. Electric vehicles will moderately contribute to electricity demand growth. A 10 percent share of the UAE fleet by 2030 would consume on average 100-150 MW−a small fraction of the 42 GW installed at the end of 2023.

The decarbonisation of the power sector unlocks considerable potential for the decarbonisation of industry, via conversion to direct electric drive of a few processes, and the use of electric heating. Concentrated solar thermal can provide process heat in some situations. Some industries, especially in the medium term, will be quicker and easier to decarbonise using CCS, such as iron and steel. Cement, in particular, produces carbon dioxide as an unavoidable by-product, and eliminating emissions requires CCS or a switch to novel materials. In the medium term, hydrogen’s role is mostly in decarbonising ammonia and urea production, but it can also aid in iron-making and perhaps serve as a backup fuel for other industries.

Oman, Saudi Arabia, the UAE, and Qatar—roughly in that order—have made efforts to develop their industries for low-carbon hydrogen and derivatives, but have been constrained by factors including higher-than-expected costs, the difficulty of transporting hydrogen over long distances, and the reluctance of potential buyers in Europe, Japan, South Korea and elsewhere, to sign up for long-term contracts at the premium prices required. The hydrogen project at Saudi Arabia’s new city of Neom is the largest single commitment (and is due to start production in December 2026), but it faces commercial obstacles to profitability.

Several of the Gulf’s national oil companies have net-zero targets (Sharjah National Oil Company 2032, ADNOC 2045, Saudi Aramco 2050, and Petroleum Development Oman 2050). Decarbonisation rests mostly on a combination of curbing methane leaks, carbon capture and storage, and electrification. The challenge of industrial decarbonisation is not so much in technology, but in the size of investment required and the commercial incentive. Businesses operating in competitive markets, often export-oriented, include the petrochemical and aluminium industries (both large contributors to the Gulf region’s GDP). Customers willing to pay sizeable ‘green premiums’ for the offtake of large quantities of low-carbon materials are scarce. The EU’s Carbon Border Adjustment Mechanism will, when fully implemented, offer some advantage to Gulf businesses that can switch to lower-carbon production.

Otherwise, strong progress in industrial decarbonisation must await direct government direction, the implementation of local or GCC-wide carbon pricing or similar limits, and/or the wider international spread of carbon pricing mechanisms and CBAMs. Saudi Arabia and the UAE have made some progress on voluntary carbon markets, while from January 2025, the UAE requires larger companies to report their emissions—[22] the first step to developing a carbon pricing or trading model.

Electric vehicles are an increasingly common sight on UAE roads, with a 3-5-percent share in new sales in 2023. There are estimates that this figure could reach 15 percent by 2030.[23] GCC countries and cities have various targets for EV deployment in taxi fleets and in general. Urban and intercity rail projects are also underway, with the Dubai Metro being operational since 2009 and followed by Doha (2019) and Riyadh (December 2024). In 2022, it was estimated that the Dubai Metro had saved 2.6 million tonnes of CO2 emissions since its inception. The UAE’s Etihad Rail, which links to Oman and expands the Saudi system, offers further emissions reductions.

The relatively short distances typically driven in GCC countries, except for Saudi Arabia, make range less of a challenge. There is a current lag in the setting up of charging, but improvements at a suitable pace should be feasible. There are few direct incentives for EVs, but they may not be required as electric vehicles become increasingly competitive in lifetime cost and performance. This would be aided by raising fuel prices at least to international parity, as the UAE has done from August 2015.

The Gulf’s important maritime and aviation sectors face challenges from decarbonisation pushes. On the one hand, they are well-placed to manufacture the synthetic fuels (ammonia, ‘green’ methanol, hydrogen-derived synthetic jet fuel, or other options) that are required for near-zero carbon transport. On the other hand, they have disquiet about the rising costs and about setting precedents for the forced phase-out of oil in some key markets. Bahrain, Oman, Saudi Arabia and the UAE voted against the International Maritime Organisation’s decision in April 2025 to introduce a carbon pricing system for large ships.[24]

Overall, the Gulf’s economies remain relatively simple, with a limited number of large emitters, often state-owned, and equipped with modern infrastructure. Deep decarbonisation at reasonable costs appears achievable without requiring any major technological advances.
Long-term Goals
The existing Gulf economy and its future direction are not in conflict, but they are in tension. Oil and gas remain the bedrock of the region’s economy. They can be produced more cleanly and efficiently, and the Gulf’s low extraction costs and low carbon footprint of production should enable it to be the leading player in the global hydrocarbon industry by mid-century and beyond. However, the continued success of that model faces stronger competition from non-fossil alternatives and the growing impact of worsening climate change.

There has been much discussion, particularly in Europe, of ‘stranded assets’ and ‘unburnable reserves’, although it has mostly faded since 2022. The concept is that some or most fossil fuel assets will become unviable before the end of their normal operational life or the depletion of their reserves because of climate policy. This appears plausible in Europe because of increasingly strict legislation and public opposition to new fossil fuel development. It does not appear very likely on a global scale in the medium or even long term. However, renewable electricity, electric vehicles, and the electrification of home and industrial heating are likely to pose an increasing challenge to demand for the three main fossil fuels in different ways and on different timelines.

Depending on the production policy of the OPEC+ group (and, of course, whether it survives and continues to maintain an influence on markets), this could lead to a fall in oil and gas prices, or  a fall in demand (requiring lower production), or a combination of the two. The GCC countries—particularly, Kuwait, Qatar, Saudi Arabia and the UAE—would consider that their very low production costs and low upstream carbon footprint would leave them as the ‘last person standing’. They do not exactly face the stranded asset risk (except perhaps in some of their overseas investments), but are exposed to a future of lower hydrocarbon revenues. This challenge of potential falling revenues−which are perennially volatile−has been faced since at least the 1970s.

Dubai, Oman, and Bahrain, in particular, have been aware of the need to diversify their economies, exports, and sources of government revenue for a long period because of their relatively limited and higher-cost oil and gas resources. This has led to substantial progress, particularly in the UAE, and more recently, in Saudi Arabia and Oman. Therefore, though an important driver, worries about a future of declining oil and gas revenue are only one part of the climate imperative for the GCC.

The wealthy GCC countries will not be immune to the impact of heatwaves, rising sea levels, dust storms, droughts, torrential downpours, and other climatic dangers. Even if they were, they are surrounded by large, climate-vulnerable neighbours with deep political and security problems. They are also deeply embedded in global supply chains and vulnerable to the dangers of interruptions in world trade, particularly food imports.

For reasons of self-interest as well as enlightened internationalism, the GCC has to plan for a world where oil and gas demand may be significantly more constrained or naturally declining within the next two to three decades, and well within the lifetime of most Gulf citizens and major capital investments being made today. The shift in mood during the last two years since COP28 in Dubai in November 2023 has suggested a slower energy transition and a longer role for hydrocarbons.

The Gulf has manifold strategic opportunities by leveraging its assets in hydrocarbon-adjacent technologies, carbon capture and storage potential, high-quality renewable energy resources, geographic centrality, deployable capital, and political multipolarity. This covers the production of low-carbon materials for export, including ‘green’ steel, aluminium and ammonia, hydrogen and synthetic fuels, and electricity, as well as potential future materials. Recent investments in the mining sector, both at home (mostly in Saudi Arabia) and abroad (particularly in Africa), play into various energy transition as well as geo-economic themes.

Yet, these opportunities, though promising, will not generate the rents that have historically flowed from oil and gas. To continue building on the GCC’s high-income base, such assets need to be combined with investments in advanced technology and embedded into more sophisticated value chains. This includes making big strategic bets in emerging strategic energy technologies, as GCC countries are already doing in areas such as AI and aerospace.

Gulf-based research and development has picked up in recent years, but remains low: in the UAE’s case, it rose from 0.5 percent of GDP in 2011 to 1.49 percent in 2021. However, in the other GCC countries, it stands at 0.5 percent or less. This still compares unfavourably to the world average of 2.68 percent, or the high-income countries’ 2.93 percent. The relatively poorer Egypt and Jordan outperform all the GCC other than the UAE in this regard.[25] Israel’s R&D spending is at 6 percent of GDP, and the region still lacks world-class universities, although this has been improving.

Such a technology-focussed approach would benefit from greater regional integration, both within the GCC and with neighbours, to build critical mass. The GCC, with its small population and economy compared to the US, EU, or China, has frequently suffered from too much duplicative competition instead of different countries seeking varying competitive niches. They can also forge international alliances with like-minded partners—India in particular being an obvious candidate.

There are political hurdles to overcome in forging such collaboration, but the GCC states can at least use their existing institutions. The Organisation of Petroleum-Exporting Countries (OPEC), of which Saudi Arabia, the UAE, and Kuwait are among the leading members, could evolve from a body mostly focussed on managing the oil market to one helping its members adapt to and take advantage of energy transition opportunities. The Organisation of Arab Petroleum Exporting Countries renamed itself the Arab Energy Organisation in 2024, and all the GCC states (except Oman) are members: a welcome shift in focus. Similarly, the Arab Petroleum Investment Corporation (APICORP), whose shareholders again include all the GCC members other than Oman, and which already had many non-oil investments, renamed itself The Arab Energy Fund (TAEF) in December 2023, with a new focus on decarbonisation opportunities.

While the 2010s could be seen mostly as a decade of preparation, the 2020s so far have been a decade of delivery, and the 2030s will call for the GCC to embrace the decade of transformation to a cleaner energy system and a more diversified and robust economy. Political dangers, trade turbulence, over-confidence in the long-term invulnerability of oil and gas, and the risk of excessive retrenchment in the face of low oil prices are all risks to this progress.



Endnotes
[1] "What Is a Sustainable Energy Transition, and Why Is It Key to Tackling Climate Change?" UN Development Programme, February 3, 2025, https://climatepromise.undp.org/news-and-stories/what-sustainable-energy-transition-and-why-it-key-tackling-climate-change.

[2] "What Are Germany’s Nuclear, Coal, and Fossil Gas Phase-Out Strategies?" Agora Energiewende, February 18, 2025, https://www.agora-energiewende.org/about-us/the-german-energiewende/what-are-germanys-nuclear-coal-and-fossil-gas-phase-out-strategies.

[3] “UAE Energy Strategy 2050,” Government of United Arab Emirates, last modified May 7, 2025, https://u.ae/en/about-the-uae/strategies-initiatives-and-awards/strategies-plans-and-visions/environment-and-energy/uae-energy-strategy-2050; “Saudi & Middle East Green Initiatives,” Government of Saudi Arabia, last modified July 17, 2025, https://www.sgi.gov.sa/about-sgi/sgi-targets/reduce-carbon-emissions.

[4] Shraddha Kakade, “No Looking Back: Energy Transition in Russia,” Emerging Technology Nesa, October 11, 2023, https://etn.news/buzz/no-looking-back-energy-transition-in-russia.

[5] Marianna Poberezhskaya et Ellie Martus, “Climate Obstruction in Russia: Surviving Resource Dependent Economy, Authoritarian Regime and Disappearing Civil Society.” Climate Obstruction Across Europe (2024): 229-257, https://doi.org/10.1093/oso/9780197762042.003.0009

[6] International Renewable Energy Agency, Renewable Capacity Statistics, March 26, 2025, Abu Dhabi, International Renewable Energy Agency, https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2025/Mar/IRENA_DAT_RE_Capacity_Statistics_2025.pdf.

[7] Energy Institute, Statistical Review of World Energy 2025, June 26, 2025, London, Energy Institute, 2025, https://www.energyinst.org/data/assets/pdf_file/0007/1658077/Statistical-Review-of-World-Energy.pdf.

[8] PwC Middle East, Emirates Solar Industry Association and Manaar Consulting, “Sunrise in the Desert: Solar Becomes Commercially Viable in the Middle East,” (paper presented at the ESIA press conference for the World Future Energy Summit (WFES), Abu Dhabi, United Arab Emirates January 17, 2012).; International Renewable Energy Agency, Rethinking Energy, September 8, 2014, Abu Dhabi, International Renewable Energy Agency, 2014, https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2014/IRENA_REthinking_fullreport_2014.pdf.; Harry Apostoleris, Ahmed Al Ghaferi, and Matteo Chiesa, "What Is Going On with Middle Eastern Solar Prices, and What Does It Mean for the Rest of Us?" Progress in Photovoltaics: Research and Applications 29 (2021): 638–648. https://doi.org/10.1002/pip.3414.

[9] “Masdar And Bapco Energies Plan 2GW Wind Projects in Bahrain,” Power Technology, May 2, 2024, https://www.power-technology.com/news/masdar-bapco-energies-2gw-wind-bahrain/?cf-view.

[10] Anna Vassileva, "Chinese Companies to Develop 3.5 GW of Solar Projects in Kuwait," Renewables Now, March 21, 2025, https://renewablesnow.com/news/chinese-companies-to-develop-3-5-gw-of-solar-projects-in-kuwait-1272663/.

[11] Sim, Li-Chen and Karen E. Young, “What Impedes Solar Energy Deployment? New Evidence from Power Developers in the Arab Gulf States,” Energy for Sustainable Development 84 (2025): 101597, https://doi.org/10.1016/j.esd.2024.101597.

[12] Marek Kubik (@mlkubik), “For comparison Lazard's 2024 LCOE provides ranges for Nuclear from $142-222/MWh and CCGTs range from $45-108/MWh (without carbon cost) or $61-134/MWh (with carbon cost),” LinkedIn discussion, January 23, 2025, https://www.linkedin.com/feed/update/urn:li:activity:7288081599223533568/.

[13] Robin Mills, “In Washington, the Stars May Align to Help Riyadh’s Nuclear Ambitions,” Arabian Gulf Business Insight, January 22, 2025, https://www.agbi.com/opinion/energy/2025/01/robin-mills-saudi-arabia-nuclear-ambitions; Robin Mills, “Does Nuclear Energy Have a Role in Gulf Cooperation Council Countries?” Oxford Institute for Energy Studies 139 (February 2024): 75-78, https://www.oxfordenergy.org/wpcms/wp-content/uploads/2024/02/OEF-139-.pdf.

[14] Energy Institute, Statistical Review of World Energy 2025, June 26, 2025, London, Energy Institute, 2025, https://www.energyinst.org/__data/assets/pdf_file/0007/1658077/Statistical-Review-of-World-Energy.pdf.

[15] QatarEnergy LNG, The Pioneer: Issue 166, December 2024, Doha, QatarEnergy LNG, 2024, https://www.qatarenergylng.qa/Portals/0/DNNGalleryPro/uploads/2024/12/4/ThePioneer166English_Spread_1.pdf.

[16]  Energy Institute, Statistical Review of World Energy 2024, June 20 2024, London, Energy Institute, 2024, https://www.energyinst.org/__data/assets/pdf_file/0007/1658077/Statistical-Review-of-World-Energy.pdf.

[17] Japan Bank for International Cooperation, Project Lightning Environmental & Social Impact Assessment: Prepared for KEPCO, KIC and EDF, June 2022, Tokyo, Japan Bank for International Cooperation, 2022, https://www.jbic.go.jp/ja/business-areas/environment/projects/image/63408_2.pdf.

[18] “Power and Electricity,” Government of Saudi Arabia, last modified July 17, 2025, https://my.gov.sa/en/content/power-electricity#section-1.

[19] Joint Research Centre - European Commission at al., “GHG emissions of All World Countries” Publications Office of the European Union, Luxembourg, 2024, https://data.europa.eu/doi/10.2760/4002897, JRC138862.

[20] Author’s calculations based on data from Research Centre - European Commission at al., “GHG Emissions of All World Countries,” Publications Office of the European Union, Luxembourg, 2024, https://data.europa.eu/doi/10.2760/4002897, JRC138862.

[21] Robin Mills, “The Reach of the GCC’s Booming Renewables Sector Exceeds Grasp,” Arab Gulf States Institute, March 24, 2025, https://agsi.org/analysis/the-reach-of-the-gccs-booming-renewables-sector-exceeds-grasp/

[22] United Arab Emirates, Federal Decree-Law No. 11 of 2024 on the Reduction of Climate Change Effects, issued by the President of the United Arab Emirates (2024), https://uaelegislation.gov.ae/en/legislations/2558/download.

[23] PwC Middle East, eMobility Outlook 2024: UAE Edition, June 13, 2024, Dubai, PwC, 2024, https://www.pwc.com/m1/en/publications/documents/2024/emobility-outlook-2024-uae-edition.pdf.

[24] Declan Bush, “IMO Approves Historic Carbon Price Agreement,” Lloyd’s List, April 11, 2025, https://www.lloydslist.com/LL1153160/IMO-approves-historic-carbon-price-agreement.

[25] “Research and Development Expenditure (% of GDP),”World Bank Group, April 23, 2023, https://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS.

### Embedding AI in Education: UAE’s Path to Strategy 2031

Many federal governments, with exceptions such as the European Union countries (Recital 56 and Annex III), lack a legally binding comprehensive framework for responding to Artificial Intelligence (AI) in teaching, learning, and research. In this context, the United Arab Emirates (UAE) has adopted a decisive approach to integrating AI into its education strategies and goals, from K-12 to higher education, facilitated by the Ministry of Education’s strategic objectives. Simultaneously, these positive steps are contributing towards Objectives 5 and 6 of the UAE National Strategy for AI (2031).
Building AI Talent and Research Capacity in the UAE
Objective 6 aims to enhance knowledge production in the UAE, including university and commercial research and development (R&D), which will necessitate increased research investment and attract world-class academics to work in the UAE. The UAE aims to achieve this by establishing the National Virtual AI Institute, initiating the Key Thinkers programme, and setting up an AI library. To this end, the United Arab Emirates University (UAEU) has launched the High-Performance Computing Center (UAEU-HPC) — a strategic initiative aimed at empowering advanced research and fostering innovation in AI and data analytics. It enables the processing of massive datasets and the creation of complex simulation models, aiding advanced projects in areas such as genome analysis, climate modelling, material science, and security scenario simulations. Concurrently, the Mohamed bin Zayed University of Artificial Intelligence’s (MBZUAI) Institute of Foundation Models (IFM) is positioning the UAE as an epicentre of culturally inclusive research and development in AI — with innovations like JAIS, an open-source Arabic large language model and Nanda, an open-source Hindi language model.

Additionally, the MBZUAI has partnered with industrial entities such as IBM and GE Healthcare, as well as international academic and research institutions like the Weizmann Institute of Science, China Medical University, Carnegie Mellon University, Technology Innovation Institute, and École Polytechnique, to foster academic and research collaborations beyond borders.

The MBZUAI is also offering bachelor’s, master’s, and doctoral degrees in AI courses, similar to UAEU’s undergraduate minor in Artificial Intelligence. Joining these educational efforts is the Zayed University (ZU), which offers certification in AI for higher education and the AI literacy for students programme. The American University of Sharjah (AUS) has also established an AI Hub, a digital space for advancing AI education within the AUS community.

These endeavours are also advancing Objective 5 of the UAE National Strategy for AI (2031) to upskill and train talent for future jobs. Objective 5 aims to attract and train talent for future jobs that will be AI-enabled, as part of an effort to address long-term unemployment resulting from automation. The MBZUAI offers AI courses for executives and leaders in both government and the private sector — including data analytics and AI for leadership — for upskilling and successful implementation of these AI initiatives. This contributes to the training of government employees, part of Objective 5.

The UAE is equipping its students, citizens, and employees with market-relevant AI skills and establishing itself as an innovation hub through its partnerships with global education and research entities. Thus, these educational initiatives are simultaneously advancing Objectives 5 and 6 of the UAE National Strategy for AI.
Rising Adoption Among Students and Faculty
Beyond the UAE’s top-down supply of investments and initiatives, there is a pervasive demand for GenAI by higher education pedagogical actors. For example, a recent study using an online bilingual (Arabic and English) survey at UAE universities revealed high familiarity and weekly use of GenAI tools by university students across various disciplines and levels of study to complete their academic work. Additionally, faculty members are integrating GenAI tools into their teaching practices, such as lesson planning, brainstorming activity ideas, providing individualised feedback, and assisting students, demonstrating the transformative potential of AI in education. The study reveals that using AI-powered video games and interactive tutorials assists in teaching complex computer science concepts, enhancing student engagement.
AI Education in Early Schooling
Complimenting the positive reception of GenAI in higher education is the active integration of AI literacy in kindergarten within UAE public schools from 2025. This AI curriculum encompasses essential AI knowledge, such as “Foundational AI concepts, data and algorithms, software tools, ethical awareness, real-world applications, innovation and project design, and engagement with policy and community issues”. Furthermore, this AI integration is conducted in cycles to align with the developmental stages of students. For example, in kindergarten, AI is introduced through stories, visuals, and plays. In elementary grades, starting in cycle 1, students compare human and machine learning abilities, focusing on developing digital thinking tools. During cycle 2 of middle school, students learn about AI design, bias, and algorithms. In cycle 3 of high school, they begin to tackle real-world issues and learn advanced AI concepts like command engineering. Reinforcing the AI curriculum are initiatives such as the Artificial Intelligence National Championships organised by the UAE’s Ministry of Education, which is open to students of all cycles, to encourage their AI skills and learning. These efforts in the educational sphere prepare the youngest segment of the UAE’s population for an AI-enabled future, helping achieve Objective 5 of the UAE’s National Strategy for AI (2031).
Challenges
AI in education still requires significant effort, constant monitoring, and further development to avoid pitfalls arising from bias in AI algorithms. For example, to ensure the A-level exam results aligned with those of previous years, the UK government employed an algorithm to designate grades to exams. This algorithm systemically downgraded students from public schools while upgrading those from private schools, as it relied on historical school performance as a criterion in its grading process. The technology was fed existing biases, thereby enabling future bias. Further, there remain research gaps pertaining to GenAI’s impact on skill development and long-term knowledge retention. A 2025 study contended that there exists a risk of de-skilling due to excessive automation. Similarly, another study highlighted that using ChatGPT did not increase intrinsic motivation or long-term learning outcomes, though it provided short-term benefits such as improving essay scores.

While ChatGPT is widely used, there is a need for Gen AI and AI literacy among faculty and students, which will necessitate workshops and literacy programmes. Concerns over copyright—such as lawsuits against Meta for using copyrighted books to train AI models—and data privacy—such as WhatsApp’s AI chatbot sharing user contact details—are intensifying the risks of integrating AI into research production, including the potential for plagiarism. Moreover, rampant accommodation of AI in education also poses a risk of exacerbating issues of equity arising from unequal access to technology.

Despite these challenges, incorporating AI in the UAE’s education ecosystem contributes to Sustainable Development Goals (SDGs) such as Quality Education (SDG 4), since GenAI has the potential to cater to diverse learners’ needs and styles while fostering equitable education for learners from all socioeconomic backgrounds. Simultaneously, as highlighted above, AI in the UAE’s education space promises the fulfilment of various objectives of the UAE National Strategy for AI (2031) and signals its growing stature as a potential global AI leader.
Conclusion
In summary, the increasing innovations and initiatives by educational institutions in the field of AI are not only fulfilling the promises of Objective 5 and 6, but they are also paving the way for the UAE’s ambition to become a leader in AI research and development, fostering an AI-literate and informed population. While there remain complexities with AI in the educational sphere, responsible engagement from UAE actors can enhance AI’s benefits in education and help meet the objectives of the UAE’s National Strategy for AI (2031).



Mehak Kapur (PhD) is a researcher and writer in international relations and political science.

### Qatar and Italy: Emerging Power-Brokers in Syria’s New Order

With Syria entering reconstruction without the United States (US) leadership, a new diplomatic landscape is taking shape. Regional powers and emerging global actors are vying for influence in what may become the first true test of diplomatic tactics in a post-American multipolar contest.
Six months after the fall of the Bashar al-Assad regime, Syria is reopening itself to investment. The Damascus stock exchange resumed trading at the beginning of June after a six-month closure, defying inflation, currency devaluation, and extensive infrastructure damage. The US and the European Union (EU) created momentum by lifting their sanctions—even if three brigades and their leaders have been targeted by Brussels for recent human rights violations. Electricity will be back in the North of the country with the reopening of the Turkish pipeline. Despite the rare momentum, Syria’s transition is fragile because of how strategic its territory is for foreign powers—mainly Türkiye, Israel, Iran, Russia, the Gulf, and the EU.
The US’ gradual retrenchment from Middle Eastern politics, accelerated by shifting priorities toward Asia and domestic isolationist impulses, has created a strategic vacuum in the region. President Trump has three main objectives for Syria: preventing the resurgence of the Islamic State of Iraq and Syria (ISIS), zero US-designated terrorists in government positions, and joining the Abraham Accords—the latter being unlikely as long as Israel controls the Golan Heights’ Syrian territory. The rest, as Trump believes, is Syria's "mess" to figure out. For the moment, the US administration does not intend to do more, thus leaving space for other actors to intervene. This provides a significant opportunity for middle powers from the Gulf and Europe to reshape regional dynamics.
Qatar and Italy, previously cautious during the civil war, now see an opening to expand their influence in Syria. Their return would not only test their diplomatic weight amid dominant powers but also introduce new models of engagement and power-brokering in the region. Italy stands out particularly because it is aiming to bridge European and international engagement with the new Syrian authorities, its strong strategic relations with pivotal regional actors, and its historical commercial ties with Syria. Qatar’s stance is crucial as it has been a consistent supporter of the Syrian opposition and is now championing national consensus, unity, and inclusive political processes, making it a key regional actor for securing Arab and broader international backing for Syria’s transition.

Qatar's Emergence as a Regional Mediator
Within this delicate context, Qatar has three main assets: its diplomatic agility, financial leverage, and pragmatism. Its consistent support for Syrian opposition groups since 2011—and its refusal to normalise relations with the Assad regime—grants it a diplomatic advantage in the post-Assad transition, and unique credibility with emerging Syrian authorities. Doha reopened its embassy on 15 December 2024, just days after Assad's ouster (and the reopening of the Turkish embassy), and established direct communication channels with Hay'at Tahrir al-Sham (HTS), showing rapid diplomatic engagement. The Qatari Emir's visit to Damascus in January 2025 marked the first by a foreign head of state, followed by the Palestinian President Mahmoud Abbas on 18 April. Strong diplomatic relations with all factions (including Kurds, Druze, and Alawite, as well as the tens of thousands of fighters in the Free Syrian Army that respond to Türkiye) will be key to achieving long-term stability. Tensions persist, and civilians continue to fall victim: since December 2024, at least 33 Alawite women and girls have been kidnapped in coastal areas such as Tartus, Latakia, and Hama. In addition, in early May 2025, around 15 Druze civilians were reportedly extrajudicially executed by transitional government forces near Damascus and al‑Suwayda. Tensions persist with Kurdish factions as well, notably over security operations and occasional clashes with Türkiye-backed forces—but these dynamics are still unfolding. In this context, Qatar's Foreign Ministry spokesperson, Majed Al-Ansari’s claim that Doha is ready to mediate between Syrian factions if conflicts emerge, remains to be seen.
Qatar has also proved to have significant financial and technical leverage. In January 2025, Doha announced plans to contribute to Syria's reconstruction efforts (estimated between US$250-400 billion), with specific commitments including 400 megawatts of electricity supply and infrastructure rehabilitation. Qatar's comprehensive approach includes humanitarian aid, airport operations support, and public sector salary assistance for three months. Furthermore, the joint Qatar-Saudi initiative to settle Syria's World Bank debt demonstrates a new coordinated Gulf engagement. Qatar has also resumed Qatar Airways flights to Damascus since January, following its support for the reopening of Damascus International Airport.
Qatar has a pragmatic positioning in this new multipolar context. By maintaining relationships with Türkiye, Iran, and the Western powers while engaging with Syria's new authorities, it reflects the "Arab approach to mediation" that leverages cultural sensitivity and regional understanding over formal, legal processes. Furthermore, by maintaining ties with rivals (Iran, Israel, Hamas), Qatar avoids ideological alignment and positions itself as a trusted and pragmatic intermediary.

Italy: a strategic bridge between Europe and Syria
Italy’s approach to post-conflict Syria is defined by its ability to steer diplomatic institutions, a strong network of regional alliances, and longstanding economic engagement. Italy is positioning itself as a bridge between Syria and the EU. In July 2024, Rome led a coalition (including Austria, Cyprus, the Czech Republic, Greece, Croatia, Slovakia, and Slovenia) to revise the EU’s Syria strategy. Despite strong objections from Berlin, Prime Minister Meloni persuaded other EU leaders to back a more lenient stance toward Assad, distancing herself from Brussels’ traditional emphasis on democracy and human rights. Though the EU-wide initiative fell flat, the Italian government still formalised its diplomatic shift on 27 July when it appointed a new ambassador to Syria. After the fall of Assad’s regime, Rome hosted a meeting of the so-called Quintet on Syria (US, EU, United Kingdom, France and Germany), which was key to beginning discussions about lifting EU and US sanctions. Italy was one of the first European countries to meet the new Syrian authorities with Foreign Minister Tajani’s visit to Damascus in January 2025, where he met Syrian   al-Sharaa and Foreign Minister al-Shaibani. Italy’s pragmatic stance on re-engaging with Syria, combined with efforts to ease sanctions, has made it a key facilitator for channelling European support and investment into Syria.
Italy also has strong strategic relations with pivotal regional actors: Saudi Arabia and Türkiye. Its partnership with Saudi Arabia has been elevated to a strategic level, characterised by frequent high-level visits, comprehensive sectoral agreements (nearly €10 billion worth of deals, spanning energy, defence, logistics, and cultural collaboration), and coordinated actions to achieve regional stability, including for Syria. The above makes Rome one of Saudi Arabia’s main European partners in its Vision 2030 economic diversification plans. Simultaneously, bilateral trade between Italy and Türkiye exceeded €30 billion in 2024, with over 1,600 Italian companies operating in the Turkish market, and cooperation including defence industry joint ventures, like the Leonardo and Baykar UAV projects.
Before the war, Italy was Syria’s second-largest export market, with strong trade in machinery and industrial goods. This legacy leaves Italian firms well-positioned to participate in future reconstruction efforts. Rome maintained a steady flow of humanitarian assistance throughout the conflict, allocating over €45 million annually since 2019 for Syrians inside the country and in neighbouring host states. This continuity has preserved Italy’s reputation as a reliable partner. As Syria enters a new phase, Foreign Minister Tajani announced plans to restart economic cooperation in key sectors, a clear intent to turn these humanitarian links into a broader recovery agenda.

Shared interests and opportunities in Syria’s new order
Stability in Syria serves both Italy’s and Qatar’s strategic interests, encompassing migration management, economic revival, regional influence, and energy security.
For Italy, humanitarian and development goals in Syria are directly linked to the imperative of reducing irregular migration flows across the Mediterranean. Syria remains one of the largest sources of displaced populations in the region, and instability there risks fueling further refugee movements. By investing in reconstruction, Italy aims to enable the voluntary return of refugees, reduce migratory pressure on Europe, and mitigate the risk of terrorism spillovers from Syria’s ungoverned spaces. Italy’s continued support for humanitarian projects reflects this pragmatic approach to national and regional security. Economic recovery is another major driver of Italy’s engagement. Before the war, Italy and Syria enjoyed robust trade relations, with annual Italian exports exceeding €1 billion. The conflict severed these ties, but Rome now sees reconstruction as an opportunity to re-establish its presence in the Syrian market. But only if stability and access can be ensured.
Geopolitically, Syria offers Qatar a rare opening in the Levant. The prolonged isolation of Damascus has allowed Moscow and Tehran to consolidate their roles as Syria’s primary external backers, giving them a major foothold in the Eastern Mediterranean. Since Assad’s fall, active involvement in Syria allows Doha to challenge Iran’s regional axis (Iran–Syria–Hezbollah) and helps limit Russian dominance, offering Damascus alternative diplomatic and economic partnerships. The Qatari engagement also reveals a broader strategic goal: counterbalancing Turkish influence in Syria, despite the deep ties between Doha and Ankara. Humanitarian assistance and support for reconstruction are likewise instrumental. Doha frames its engagement in Syria (investments in education, public services, and refugee assistance) as a response to the aspirations of the Syrian people, which simultaneously works to restore its international image after years of criticism over its support for extremist factions.
Energy security is another area of convergence. Syria’s geographic position makes it a strategic corridor linking the Gulf to the Mediterranean, with potential to serve as a transit hub for gas exports. For Qatar, stabilising Syria is key to reviving long-term ambitions such as the proposed Qatar–Türkiye pipeline, which would connect its North Dome gas field—the largest in the world—to European markets. The project would reduce Qatar’s reliance on maritime chokepoints like the Strait of Hormuz and the Suez Canal, enhancing its role as a global energy supplier. Italy, which is heavily dependent on imported gas and eager to diversify away from Russian supplies since 2022, would find such a pipeline geopolitically attractive. However, with high construction costs (estimated at US$10 billion), EU regulatory constraints, the absence of long-term European gas agreements, and a broader shift toward renewables, the project still faces steep hurdles.
With no single hegemon, middle powers will have to broker common interest-based coalitions.If Qatar and Italy manage to balance relations with Saudi Arabia and mobilise Europe, a successful Gulf-EU model would counter China’s “chequebook diplomacy” and Russia’s militarised approach.



Cecilia Vidotto Labastie is Research Manager at the Gender in Geopolitics Institute, specialising in MENA geopolitics and EU external action.

### AI Hallucinations in the Legal Field: Present Experiences, Future Considerations

When legal AI invents cases, the risk is real—justice, credibility, and ethics hang in the balance without strong safeguards and human oversight.

Artificial Intelligence (AI) hallucinations refer to instances where AI systems generate outputs that are factually incorrect, misleading, or fabricated, often with a convincing degree of plausibility. In the legal sector, this phenomenon poses serious implications. Legal professionals are increasingly using AI tools to streamline research, draft pleadings, and synthesise legal arguments. However, these systems operate on probabilistic prediction rather than grounded legal reasoning. Consequently, they may generate references to non-existent case laws, statutes, or judicial opinions, presenting them with stylistic accuracy that creates an illusion of authority. This could lead to grave implications, such as courts relying on fictitious precedents, erroneous filings, and professional misconduct among advocates.

Legal professionals are increasingly using AI tools to streamline research, draft pleadings, and synthesise legal arguments.


The root causes of AI hallucinations include flawed or biased training data, lack of proper grounding in real-world legal facts, and the inherent limitations of large language models (LLMs) that prioritise linguistic coherence over factual verification. Semantic drift, where models misinterpret or distort meanings over time and corpus bias, where the AI is trained on incomplete or outdated legal texts, also contribute to these errors. A striking example comes from OpenAI’s report, which revealed that its latest models—o3 and o4 mini—hallucinated at rates of 33 percent and 48 percent, respectively, during a Question and Answer (Q&A) test. Alarmingly enough, the reasons for increased hallucinations continue to remain ambiguous.

The legal field—grounded in accuracy, evidence, and ethical responsibility—cannot afford such statistical guessing. AI tools lack the deductive logic and professional judgment that lawyers apply to validate legal arguments. When hallucinations go unchecked, they may mislead even seasoned practitioners, undermine public confidence in judicial proceedings, and expose attorneys to sanctions. Therefore, understanding the technical and ethical dimensions of AI hallucinations is crucial for ensuring that legal AI systems are used responsibly, with human oversight, factual verification, and rigorous training protocols in place.
India and the World: Cases of AI ‘acting up’
Recent global incidents underscore the gravity of these risks. In India, the Bengaluru bench of the Income Tax Appellate Tribunal (ITAT) was compelled to retract a tax ruling in Buckeye Trust v. PCIT-1 Bangalore after discovering it was based on fictitious case laws generated by an AI tool. The cited judgments were entirely non-existent, prompting a swift withdrawal, which highlights the perils of relying on unverified AI outputs.

AI tools lack the deductive logic and professional judgment that lawyers apply to validate legal arguments. 


Similarly, in the United Kingdom (UK), the High Court of Justice King’s Bench Division, using its ‘inherent powers’ (used to regulate its own procedures and to enforce lawyers' duties in court), opined, addressing concerns over lawyers' suspected use of generative AI tools without proper verification of their output. Dame Victoria Sharp, President of the King’s Bench Division, emphasised the risk to public trust and judicial integrity, urging legal institutions to enforce strict professional and ethical compliance. Lawyers could otherwise face sanctions, from public admonishment to facing contempt of court proceedings and referral to the police.

In the United States (US), the case of Wadsworth v. Walmart Inc. saw sanctions against three attorneys for citing eight fake cases created by their firm’s AI platform, MX2.law. Despite remedial steps, the court emphasised that the duty to verify legal sources is non-delegable and that blind reliance on AI tools violates professional standards. These cases illustrate the nuances of AI misuse: it is not merely a technological flaw but a failure of legal diligence and ethical oversight. As AI tools become more sophisticated and accessible, their misuse—either intentional or inadvertent—can severely undermine legal credibility, court procedures, and client trust.

Hence, unchecked usage without rigorous human verification may result in a decreased transformative potential of enhancing legal efficiency and inevitably hinder justice systems, universally. Ensuring accountability, training, and regulatory frameworks is crucial worldwide.
The Necessary Steps
India already has policies in place that may assist in mitigating its current AI hallucination conundrum.  The NITI Aayog’s Responsible AI - Approach Document, Part 1 (2021) outlines key principles: Safety and Reliability, Accountability, and Transparency to guide AI development and deployment. It mandates error testing and ongoing monitoring of AI systems to ensure reliable performance, minimising unintended harm. Its accountability principles emphasise stakeholder responsibility for AI’s impact, while transparency requires documentation and external audit mechanisms. This may serve as a foundational framework in mitigating the risks of AI hallucinations.

These cases illustrate the nuances of AI misuse: it is not merely a technological flaw but a failure of legal diligence and ethical oversight.


Addressing AI hallucinations in the legal field requires a collaborative approach involving AI model developers, deployers, courts, legal associations, and professionals. First, developers of law-focused models could prioritise data quality over volume, ensuring training datasets are diverse, current, and drawn from authoritative legal sources to minimise hallucinations. AI systems could be designed with built-in transparency, mandating disclosures about model architecture, their data sources, and performance benchmarks. Legal AI tools must undergo regular internal audits, bias mitigation, and data cleaning, with results published for public scrutiny. Its outputs could be accompanied by real-time citations linked to verified legal databases, enabling users to trace the origin of the information.

Furthermore, courts can institutionalise transparency by mandating disclosure of AI use in legal filings, as seen in recent standing orders by US judges and encourage compliance via Bar Council guidelines. Law firms and courts can establish internal governance codes that require human verification of AI-generated content. Additionally, legal professionals need to be trained in AI literacy, equipping them to cross-check citations, assess accuracy, and report errors. Legal bodies or associations such as the Society of Indian Law Firms could also develop standardised guidelines to ensure the responsible use of AI in practice by firms, akin to research and higher education institutions that are mandating guidelines for the ethical use of AI.  Adherence to these codes of ethics could also serve as a form of industry self-regulation.

This may serve as a foundational framework in mitigating the risks of AI hallucinations.


To harness the benefits of AI in law without compromising integrity, a robust framework of human oversight, ethical standards, and technical transparency is essential. Only through collaborative vigilance can legal AI systems truly serve justice rather than distort it.



Debajyoti Chakravarty is a Research Assistant at the Observer Research Foundation.

Disclaimer: This commentary originally appeared on ORF website.

### The Consistent Setbacks to a Proverbial ‘New Middle East’

As old conflicts resurface, the ‘new Middle East’ risks becoming a mirage, revealing the fragility of regional transformation amid deep-rooted political fault lines.

The violence and instability that erupted in Syria over the past few weeks were not unexpected. Today’s geopolitical climate suffers from a kind of attention deficit disorder, where surface-level deal-making, ceasefires, and headline-driven conflict resolution appear to be prioritised over tackling long-standing and deep-rooted political fault lines. The terror attack by Hamas against Israel in October 2023 and the ensuing war in Gaza, which continues unabated, has put a spanner in the region’s forward-looking trajectories. Debates over the ‘new Middle East’ have shifted dramatically, moving from early optimism to present-day uncertainty.
The terror attack by Hamas against Israel in October 2023 and the ensuing war in Gaza, which continues unabated, has put a spanner in the region’s forward-looking trajectories.

Since 2023, the war in Gaza, a domestically edgy and paranoid Israel, a surviving Hamas, disruptions in critical waterways such as the Red Sea, Israel- and US-led strikes against Iran’s nuclear programme, and Iranian retaliation with missiles targeting American military facilities in Qatar have opened a proverbial pandora’s box in a geography striving for a new era of development, economic growth, wealth, and business. From the proposed India–Middle East–Europe Economic Corridor (IMEC) to Dubai, Abu Dhabi, Doha, and now Riyadh angling for centrality in the global financial and diplomatic highways, the projections of what a ‘new Middle East’ would look like are today arguably off track. Many Arab states are now looking to place themselves on a pedestal of neutrality. Simultaneously, they are also realising that doing so will become increasingly difficult moving forward. A quintessential example of this has been Saudi Arabia, which was slow to take a strong political position on Israel’s actions in Gaza, but has now made its policy clear, with any rapprochement with Israel being attached to the recognition of a Palestinian state.

The past few months have been more reminiscent of the old Middle East than anything new. Beneath the veneer of Dubai’s gleaming towers, the grand ideations driving Neom in Saudi Arabia, and ambitions to make the region a global hub for AI, hi-tech products, semiconductors, and the future of innovation — lie fundamental geopolitical questions that were previously brushed under the carpet to be delt with another day, but are now rearing their ugly heads. An idea that is increasingly popular in the West today is that regional powers will take on the onus of policymaking to find collective solutions to crisis points. Foreign presence in the Middle East, largely American and European, is expected to scale down and be re-oriented to address emerging threat perceptions, particularly the rise of China as a superpower and Russia’s rebranding as the main strategic challenge for continental Europe.
The euphoric normalisation of al-Sharaa’s power grasp at breakneck speed by the West arguably underplayed and ignored the difficult ethnic and political challenges that simmered beneath the iron fist of the Assads, who belonged to the minority ethnoreligious Alawite sect in a Sunni-majority state.

In some ways, it is Syria that is going to be a litmus test. Since the fall of Bashar al-Assad’s nearly three-decade rule and the end of the Ba’athist regime’s half-century grasp on power in Damascus, self-declared lapsed-jihadist and chief of the Hay’at Tahrir al-Sham (HTS) — which was only delisted as a terror group in Washington in July 2025 — Ahmed al-Sharaa (formerly known as Abu Mohammed al-Jolani), now faces the task of walking a tightrope and aligning more with Arab states backed by the US and Europe than with Iran, Russia, and China, the now-sidelined patrons of the Assad family. However, the euphoric normalisation of al-Sharaa’s power grasp at breakneck speed by the West arguably underplayed and ignored the difficult ethnic and political challenges that simmered beneath the iron fist of the Assads, who belonged to the minority ethnoreligious Alawite sect in a Sunni-majority state.

The March 2025 massacre of Alawites in the country’s coastal areas in and around the Latakia governate — despite Alawite elders having agreed in principle to back Al Sharaa’s ascendency — showcases the difficult task ahead for intra-Syrian integration. The tensions spilled over a few months later, this time in Suwayda in southern Syria, where clashes between groups belonging to the Bedouin tribe (who are mostly Sunni) and the Druze community — such as those led by Sheikh Wahid Al-Bous and Sheikh Hikmat al-Hijri — resulted in over 1,000 fatalities. The violence was sparked by the abduction of a Druze merchant on a highway. In response, Israel bombed al-Sharaa’s military headquarters in Damascus. Adding another layer of complexity, the Druze are considered an important minority in Israel, and Prime Minister Benjamin Netanyahu’s government has vowed to protect their interests in Syria. The attacks against al-Sharaa occurred despite recent contactbeing established between the new Syrian leadership and Israel.
Ideological and political fractures, including the challenge of building intra-ethnic frameworks, present a difficult task under the kind of geopolitical contestation currently underway in the Middle East.

Syria is not alone in this boat. Lebanon is another state going through a fragile makeover as President Joseph Aoun attempts to stitch the country back together in the wake of a weakened Hezbollah. Geopolitical brinkmanship can only take the proverbial horse to water — but for it to take a drink, it must be willing, thirsty, and find itself in a safe space. Ideological and political fractures, including the challenge of building intra-ethnic frameworks, present a difficult task under the kind of geopolitical contestation currently underway in the Middle East. However, at the end of the day, they are as critical to resolve as Syria’s economic destitution. One cannot be resolved without addressing the other. Brushing ideology- and ethnicity-related conflicts under the carpet and believing that money alone can resolve a complicated state structure’s dilemmas is conceptually flawed. Saudi Arabia has announced US$6.4 billion in investments for Syria, while the United Arab Emirates has already signed a US$800 million deal to take over the critical port of Tartous on the Mediterranean coast. Furthermore, the US has also removed sanctions and delisted al-Sharaa and his immediate circle from terrorist-designations, despite concerns raised by security agencies.

Finally, the very idea of a ‘new Middle East’ is neither theoretical nor too ambitious to achieve. In fact, the Abraham Accords, the I2U2, and the IMEC are tangible realities steering the region towards change. Ultimately, security enables economic prosperity, and the Middle East’s core concern today is the future trajectory of its security landscape. While post-2023, Israel is playing an outsized and often overreaching role, other regional actors and stakeholders will have to wade into this quagmire to ensure a level geoeconomic playing field for the future. The equity to shape a ‘new Middle East’ must come from within the region, and it is time for regional actors to acknowledge this responsibility openly.

 


This commentary originally appeared in ORF.

### United States’ Crypto Vision

Cryptocurrency has moved to the centre of US economic strategy, with the Trump administration embracing regulation and reserve-building to assert financial leadership in a changing global order.

The Trump administration’s approach to cryptocurrency has evolved significantly between its first and second terms, reflecting a broader shift in the role of digital assets within American economic and geopolitical strategy. What was once a peripheral issue has increasingly become central to policy discourse in Washington. Cryptocurrency now appears to be positioned not only as a financial innovation but also as a potential instrument for reinforcing the global role of the US dollar. These developments suggest a growing entwinement of crypto policy with broader macroeconomic objectives. While certain regulatory and institutional measures have been initiated, several critical questions remain unresolved. Importantly, the trajectory of US crypto policy under President Donald Trump cannot be examined in isolation. Rather, it must be understood within the wider context of the administration’s evolving economic priorities, strategic motivations, and vision for restoring American financial leadership in a changing global order.
As the United States moves to integrate crypto more deliberately into its economic architecture, other countries are racing to define their own strategic postures

Among the most notable legislative efforts under the Trump administration’s renewed crypto agenda is the introduction of a robust regulatory bill designed to bring clarity to the digital asset ecosystem. The Financial Innovation and Technology for the 21st Century Act (FIT21) represents a landmark legislative initiative aimed at establishing a comprehensive regulatory framework for digital assets in the United States. At its core, the bill seeks to delineate the respective roles and responsibilities of federal regulatory bodies, primarily the US Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), in overseeing the rapidly evolving cryptocurrency sector. As a result, FIT21 is increasingly positioned to serve as the foundational framework for digital asset regulation in the United States. Its emphasis on regulatory clarity, market integrity, and innovation signals a shift in Washington's attitude toward crypto from scepticism to structured engagement.
Institutional Shift
The evolving relationship between traditional banking and the cryptocurrency sector has entered a new phase, driven by regulatory shifts and growing institutional interest. A major catalyst was the repeal of Staff Accounting Bulletin (SAB) 121 in January 2025. Previously, this SEC rule required banks to treat customer-held crypto assets as liabilities on their balance sheets, thereby discouraging banks from offering custodial services due to the regulatory and capital burdens it imposed. With its repeal, banks now have a clearer pathway to enter the crypto custody space without disproportionately affecting their financial reporting.

This regulatory shift was accompanied by a significant leadership transition at the SEC, wherein former Chair Gary Gensler was succeeded by Paul S. Atkins, a proponent of more permissive regulatory approaches. Under Atkins’s leadership, the SEC is anticipated to re-evaluate the applicability of the Howey Test, the longstanding legal framework used to determine whether a financial instrument qualifies as a security under US law. A potential narrowing of this definition would reduce the number of crypto assets falling within the SEC’s regulatory purview, thereby facilitating greater latitude for banks and financial technology firms to develop and offer a broader array of cryptocurrency-related products and services.

Major financial institutions have begun to signal a strategic shift toward the integration of digital assets within their service portfolios. Citigroup has announced its potential entry into the crypto custody space, while JPMorgan has also permitted cryptocurrency purchases. These developments underscore a measured yet increasing institutional confidence in the viability and strategic relevance of digital assets within the conventional banking sector. No longer situated at the periphery of financial innovation, cryptocurrencies are progressively reshaping core banking functions, including asset custody, payment systems, and regulatory compliance frameworks. As regulatory clarity continues to advance, traditional banking entities are well-positioned to assume a central role in the next phase of the evolving crypto-financial ecosystem.
The Bitcoin Reserve
The United States has emerged as the most prominent sovereign holder of Bitcoin, largely through the accumulation of assets seized in high-profile criminal investigations, including operations targeting the Silk Road marketplace, dark web illicit trade, and ransomware networks. As of early 2025, the US government holds approximately 200,000 BTC. However, recent policy developments indicate a shift in the federal government's approach from passive custodianship to strategic asset management.
The United States has emerged as the most prominent sovereign holder of Bitcoin, largely through the accumulation of assets seized in high-profile criminal investigations, including operations targeting the Silk Road marketplace, dark web illicit trade, and ransomware networks.

In March 2025, President Donald Trump signed an executive order establishing a Strategic Bitcoin Reserve, thereby centralising all confiscated Bitcoin holdings under a unified federal framework. This marked a departure from previous practices under which seized digital assets were routinely liquidated through public auctions and reflects an evolving geopolitical calculus. Rather than viewing Bitcoin solely as a forfeited financial instrument, the new policy frames it as a strategic digital asset with implications for monetary sovereignty, economic security, and foreign policy. This repositioning suggests that state actors are beginning to incorporate digital assets into broader macroeconomic and geopolitical strategies, signalling the emergence of Bitcoin as a non-traditional reserve asset in a multipolar financial order.
Global Crypto Race
As the United States moves to integrate crypto more deliberately into its economic architecture, other countries are racing to define their own strategic postures. El Salvador and the Central African Republic have already adopted Bitcoin as legal tender, albeit with mixed success. Meanwhile, China continues to expand its central bank digital currency, the e-CNY, which now facilitates cross-border transactions in pilot programs involving multiple countries.

Russia and Iran have turned to crypto to bypass sanctions, exploring stablecoins and Bitcoin-based settlements for international trade. The European Union is pursuing a Digital Euro with a cautious but firm regulatory orientation. The Middle East is witnessing increased activity, too, with the UAE positioning itself as a crypto-friendly hub, attracting talent and capital.

The emergence of Bitcoin and other digital assets as instruments of state strategy is reshaping the financial architecture of the global order. Whether through adoption, regulation, or competition, nations are no longer viewing crypto merely as speculative technology but as a pillar of future economic influence. For the US, the challenge is twofold: to lead in innovation while safeguarding systemic stability. The US’s evolving crypto vision from deregulation to reserve strategy may offer one blueprint, but it is by no means the only path forward. The global crypto race is underway, and its winners will likely shape the contours of 21st-century power.



This commentary originally appeared in ORF.

### Bridging the Financing Gap for the SDGs: A Framework for Renewed Action

Introduction
Since the adoption in 2015 of the 17 Sustainable Development Goals (SDGs) and their associated targets, progress has fallen short of the trajectory required. The world is “leaving more than half the world behind,”[a],[1] with 48 percent of the 138 SDG targets (among a total of 169) being moderately or severely off-track. And over 30 percent have either seen no movement or even regressed below the 2015 baseline.

Compounding the challenges is the changing global order. Growing inequalities between and within countries, exacerbated by the COVID-19 pandemic, are fuelling ethnonationalism and protectionism. Recent geopolitical developments in the United States (US) have led the world’s largest economy to withdraw from the 2030 Agenda for Sustainable Development through an announcement at the UN General Assembly effectively denouncing it.[2] Additionally, the US has also withdrawn from the UNFCCC (United Nations Framework Convention on Climate Change), the Paris Agreement, the Loss and Damage Fund, and the World Health Organization (WHO), effectively closing any financial and technical contribution from the government to the global SDGs agenda.

While the US’s withdrawal from the Paris Agreement and its broader disengagement from the SDGs agenda by 2030 may influence Multilateral Development Banks (MDBs)—including the World Bank Group and regional banks like the Asian Development Bank, where it is the largest shareholder—these institutions appear to remain committed to financing global development goals, at least at the time of writing. There is a need to catalyse change in global governance and order, particularly among the MDBs. In September 2024, the heads of major MDBs presented their reform plans to the United Nations (UN) leadership, outlining steps to become a better, bigger, and more effective system. The UN Secretary-General emphasised that these MDB reforms are vital to unlocking greater volumes of affordable, long-term financing to bridge the SDGs funding gap, as per the Joint UN and MDB statement in September 2024.[3]

A key constraint to meeting the SDGs is the lack of development financing. The Third International Conference on Financing for Development (FFD), held in Addis Ababa from 13–16 July 2015, provided a new global framework for financing sustainable development policies and financial flows to economic, social, and environmental priorities under the provisions of the Addis Ababa Action Agenda.[4] A decade later, the UN Inter-Agency Task Force Report on Financing for Sustainable Development stated that SDG funding is at a crossroads.[5] This deficit is at the core of the sustainable development crisis, with developing countries requiring additional annual investments of US$4 trillion to meet their targets. The crisis has been compounded by international conflicts, supply chain disruptions, escalating climate-related disasters, fading multilateralism, and increasing trade barriers.

There is a compelling need to increase finance flows in developing countries, drawing from both domestic and international public and private finance sources. However, most developing countries have high fiscal deficits and unsustainable public debt, which were exacerbated during the pandemic. They also face inflationary pressures, which have, in turn, eroded their fiscal headroom to invest in SDG implementation and social safety nets. Increasing climate vulnerability and the growing need for public expenditure on climate adaptation and disaster management further constrain fiscal space. These challenges are often accompanied by progressively lower sovereign credit ratings, leading to a vicious cycle of a climate fiscal trap in many low-income developing countries. For many countries, interest payments on this account exceed spending on health and education, and crowd out public investment.

The path forward requires interventions at various levels: from increasing domestic public finance, optimising public expenditure towards SDG priorities, leveraging public finance to enable private investment, and reforming the international financial architecture to create a bigger and better global impact on the SDGs.

With the changing global governance, shifting power equations, and the possible emergence of a new paradigm of a multipolar or regional world order, the Fourth International Conference on Financing for Development (FfD4) held in Seville, Spain in June 2025 provided a unique opportunity to reform financing at all levels, including the international financial architecture. Although attendance was not as high as hoped, the summit underscored that without a rigorous  governance overhaul, anchored in transparency, accountability and robust oversight, headline commitments made by countries will fail to translate into real-world impact.[6]

This brief outlines critical approaches to increasing finance for development in developing countries—both from domestic and international sources and encompassing public and private finance. It outlines recommendations for reforming the international financial architecture.
A Framework for Renewed Action on SDGs Financing
Achieving the Sustainable Development Goals by 2030 requires a fundamental shift in how resources are mobilised and allocated globally. With widening financing gaps, geopolitical tensions, and rising climate risks, there is an urgent need for a comprehensive approach that addresses both the scale and quality of investment. This calls for coordinated action across national budgets, private sector capital, and international financial systems to ensure that resources flow where they are most needed and with greater impact. The following framework outlines three priority areas for advancing a renewed global financing effort:

 	Boosting Domestic Public Finance: Increasing public resources and improving the quality of public expenditure and private finance for the SDGs.
 	Private Finance: Increasing contributions from private businesses and financial institutions towards meeting the SDG targets.
 	International Development Finance: Reforming the International Financial Architecture, including Multilateral Development Banks (MDBs) for sustainable development.

Each of these are discussed in turn in the following paragraphs.
Boosting Domestic Public Finance
Most developing countries, particularly LDCs (Least Developed Countries), face increasing imbalances in public finances due to high structural deficits and unsustainable public debt. Their fiscal deficits and public debt are rising again after a period of contraction in public spending and debt levels following exceptional surges during the pandemic years.7 Coupled with increasing inflationary pressures and increasing geopolitical tensions, developing countries are unlikely to find adequate fiscal space to invest in meeting the SDGs and increase their social protection payments. Interest payments are increasing and crowding out much-needed public investment for sustainable development.8 In many countries, interest payments are exceeding development expenditure on essential services, like primary health and education. Tax-to-GDP revenues for developing countries have stagnated at ~15 percent, and for LDCs, at 10-12 percent, calling for systematic reforms.

To increase public revenues from domestic sources, both in absolute terms and relative to GDP, developing countries need to implement comprehensive tax reforms. These include cross-cutting reforms in taxation, such as value-added taxation, international agreements for fair tax sharing from e-commerce, transnational companies, and Global Value Chains (GVCs) with minimal market distortion. The digitisation of tax administration would boost public finance in developing countries. It may be useful to consider a small ad valorem tax on global wealth and a speculative financial transactions tax, along with exploring land and asset monetisation avenues. Developing countries need to align public expenditures with outcomes directed to SDG indicators—prioritising investments in public health, primary education, water and sanitation, air pollution reduction, and increasing investment allocation to social protection programmes. There are two high-level aspects to mobilising and directing domestic resources towards achieving the SDGs:

 	Increasing public resources, such as domestic tax and non-tax revenues, both the tax base and rate, and focusing on non-tax revenue.
 	Improving the quality (and composition) of public expenditure at federal and sub-sovereign levels.

Wide-ranging taxation reforms across developing countries could help increase public resource revenues from domestic sources in both absolute and relative-to-GDP terms. Tax reforms could, inter alia, include:

 	Goods and Services Tax: Implementing Value-Added Indirect Taxation as Goods and Services Tax in developing countries, including Least Developed Countries (LDCs), with technical support from multilateral institutions to ensure efficient design and implementation.
 	International Agreement on Fair Tax-Sharing: Establish frameworks for equitable taxation of e-commerce, transnational companies, and Global Value Chains (GVCs). While developing countries hold value addition in GVCs, consumption-based taxation systems often prevent them from receiving a fair share of tax revenue.
 	Wealth/High-Value Transaction Tax: Address growing inequality through modest taxes on wealth or high-value transactions. This approach can complement traditional income taxation, which suffers from limited effectiveness in many developing countries due to administrative challenges, leading to widespread tax evasion and leakage. Most developing countries tax formal income as a direct tax, and there is tax leakage due to poor administration and rampant tax evasion.
 	Land and Asset Monetisation: Leverage public land and asset monetisation initiatives to finance infrastructure investments through ‘Land-Based Infrastructure Financing’ mechanisms, which capture the increased value of land from new infrastructure to generate funds. For example, The Delhi Metro Rail Corporation (DMRC) in India used land parcels around metro stations for commercial development. This approach can be integrated into MDB interventions to develop climate-resilient infrastructure while generating revenue.
 	Manage Climate Action Expenditure: While SDGs 7 and 13 remain time-sensitive and critical towards meeting global climate goals in line with the Paris Agreement, developing countries must focus selectively on climate mitigation towards meeting NDCs, and enhance focus on adaptation and resilience to address the local adverse effects of climate change.
 	Adopt a Sustainable Budgeting Taxonomy: Instead of adopting a Green Taxonomy and Green Budgeting as popularly advocated, it may be useful to consider SDG-aligned budgeting for Public Financial Management, with outcome indicators derived from SDG indicators (Sustainable Budgeting instead of Green Budgeting). The process will require countries to balance selective climate mitigation efforts with enhanced adaptation and resilience measures.
 	Leverage Public Finance: Facilitate the strategic use of public finance to leverage capital mobilisation from domestic private sources through risk sharing and guarantees and increase Gross Fixed Capital Formation through Public-Private Partnerships. Increased contingent liabilities on the public exchequer need to be well-managed for better risk allocation between public and private finance to extend the impact of limited public resources.

Exploring Private Sector Financing for SDGs  
For decades, governments have prioritised industrial competitiveness and economic growth. While this has lifted billions of people out of poverty, it has led to the unsustainable depletion of natural resources—a pattern that remains inextricably linked to economic growth and development. Therefore, delinking economic activity from resource depletion is now crucial. The scale of investment required to meet SDG targets exceeds the public financing capabilities of governments, necessitating private-sector development approaches that go beyond the conventional improvements in a business-enabling environment. This must also recognise that meeting many SDGs represents natural monopolies or classic market failures requiring both state intervention and regulatory action to reshape markets. Multiple mechanisms, such as policy incentives, public-private partnerships for climate-resilient infrastructure, and increasing development outcomes through risk-sharing arrangements and government guarantees, would be required to maintain this balance.

Domestic public finance resources, while important, need to be complemented by private finance, both domestic and international. However, private investment in the SDGs has underperformed. According to the Financing for Sustainable Development Report 2024, “Private sector development, a key driver of sustainable growth and development, has stalled in recent years.”[7] The Addis Agenda’s vision of private sector investment and innovation being an instrument to meet SDGs, since private business activity is considered an engine of inclusive growth and job creation, has fallen short of expectations.

It is important to reduce the misplaced onus on private business and finance to meet SDGs and create jobs without easing the binding constraints of government and market failures[8].  The Addis Agenda expectations from the private sector were inflated, and the international development agenda did not focus on interventions that could have led to higher private sector contributions. Instead, most development interventions focused only on a broad business-enabling environment, such as the World Bank’s Doing Business[9] and investment climate reforms. Subsequently, the Paris Agreement further burdened private businesses and finances with investments for climate goals. Developing countries have moved away from industrial policy on heeding advice from MDBs. Today, the need for industrial policy is felt in the overarching market failures to counter the global effects of climate change arising from unabated greenhouse gas (GHG) emissions.

While the broader enabling environment for business has improved in many developing countries, private businesses have failed to deliver on the SDGs. Meeting these targets requires a massive investment of up to US$4.5 trillion per annum till 2030. Private sector development approaches need to go beyond Doing Business and Investment Climate and recognise that meeting many key SDGs naturally causes monopolies or classic market failures. Thus, this calls for state intervention and regulatory action to shift markets towards SDGs through policy rents. The following private sector development and financing approaches could be considered:

 	Public-Private Partnerships (Private Provision of Public Services): Return to Public-Private Partnerships as development models for SDGs to increase private sector provisioning for public services. The entire range of PPPs, from Design Build Operate (DBO) to Design Build Finance and Operate (DBFO) for many SDGs, such as primary health, education, water and sanitation, and access to electricity, need to be aligned with the Universal Service Obligations (USO) of governments.
 	Industrial Policy (Greening Private Sector Development): Private business and finance must be directed, via greening private sector development interventions, primarily through Green Industrial Policy for hard-to-abate industrial sectors, to make the production function of the economy account for the marginal social cost of production. While this may, in the near term, reduce aggregate demand in the economy, over the medium term, it will enable the shift towards green manufacturing, creating new jobs and pathways out of poverty. According to the Green Industrial Policy,[10] “Greening the economy is a goal which will require enormous investment. As markets are currently failing to provide the required incentives for environmental sustainability, governments must intervene and provide ‘policy rents’ for investments in sustainability while withdrawing rents from polluting investments.”
 	Financial Inclusion for SME Business (Improving Access to Finance): Nearly all financial inclusion initiatives in developing countries have focused on retail financial inclusion and banking the unbanked. This has yielded gains in financial inclusion; however, progress has slowed over the last few years. While financial inclusion has helped improve distributional equity, access to credit for small and medium enterprises (SMEs) has remained a constraint to job-creating private investments, especially in LDCs. The lack of supportive financial regulation has also limited the expansion of Alternative Credit Systems, such as Person-to-Person (P2P) lending. This is despite technology reducing information asymmetry between businesses and the banking system. Capital markets have remained narrow, shallow, and underdeveloped in LDCs, with no contribution towards improving access to finance for private sector development. International development work needs to focus on improving payment systems and credit infrastructure, and developing institutions for secured lending, such as collateral registries and credit bureaus.
 	Aligning Sustainable and Green Finance: The last decade since the Addis Agenda and the Paris Agreement has seen the alignment of sustainable and responsible green investment finance standards and codes[b] with the SDGs. This fragmented format of standards and codes has not been conducive to direct private finance towards sustainable development.[11] Moreover, these standards were voluntary and often driven by institutional compacts between banks, asset management companies, and insurance agencies, which did not achieve their purported objectives. As of 2022, these standards and codes have converged into the International Financial Reporting Standards (IFRS) and the International Sustainability Standards Board (ISSB),[12] which are wider in scope than climate finance. Standardising and subsequently harmonising finance standards will be key to their universal application.
 	Improving Central Banking and Financial Regulation: The Network for Greening Financial System (NGFS) started operations in 2018; since then, the central banks of 140 countries have become part of it. While mitigating climate-related financial risks remains key to global financial stability, it is also imperative that the regulatory mechanism shifts the intermediation for domestic finance towards the SDGs through various instruments. Banking regulations in most developing countries use the Basel three-pillar approach of a) disclosure, b) oversight, and c) capital. Most developing countries have underdeveloped financial markets, necessitating a shift in intermediation through directed lending and interest subvention. The IMF Article IV Assessment and the joint Financial Sector Assessment Program of the World Bank need to be modified to account for new realities of climate and sustainability. A new framework is also needed to define financial stability in developing countries.

Reforming the International Financial Architecture
The global development landscape is undergoing a period of disruption marked by growing fiscal pressures, geopolitical shifts, and deepening inequalities. At the heart of this challenge lies the urgent need to enhance and redirect development financing, particularly for countries in the Global South. MDBs and the broader International Financial Architecture (IFA) play a pivotal role in bridging the financing gap required to achieve the SDGs. However, existing structures and mechanisms have proven to be inadequate in scale, reach, and responsiveness. Reforming these institutions—enhancing the effectiveness of Official Development Assistance (ODA), leveraging private finance, and realigning global governance systems—has become a key priority. The following section outlines critical dimensions of these reform efforts and opportunities to mobilise impactful and equitable finance for sustainable development:

a) Enhancing the effectiveness of ODA.

While ODA has progressively increased since the 2022 FFD Monterrey, reaching a peak of US$210 billion in 2022, it has started declining from 2024. Even at the highest levels, ODA has fallen short of the UN-defined target of 0.7 percent of the Gross National Income (GNI) of Annex 1 countries. The Addis Agenda recognised the key role of international public finance by directing ODA towards key SDGs in developing countries and LDCs. It also underscored the need to mobilise other public and private finance to meet them. An important indicator was added to SDG17 in 2022 on additional financial resources mobilised by using ODA, including a set of cascading sustainable development criteria to only count flows aligned with the SDGs.

Therefore, the key question is how ODA from developed countries can be increased and or made effective in the present geopolitical situation where large and richer OECD countries are withdrawing from them and development aid/contributions from Europe are faced with reduced budget allocations. The global governance order (the UN and MDBs) must engage with developed countries both directly and through mobilisation to work towards meeting the commitments made thus far—which is using ODA to leverage commercial finance. To address ODA constraints, the UN has defined six sub-indicators for data: a) official sustainable development grants; b) official concessional sustainable development loans; c) official non-concessional sustainable development loans; d) Foreign Direct Investment; e) mobilised private finance on an experimental basis; and f) private grants.

Given that FSDR 2024 underscores the lack of adequate international financing flows towards meeting SDGs, it is important that the overall ODA, including MDB financing, be directed and leveraged to achieve SDGs. To effectively channel ODA, including MDB financing, there is a need to expand lending by enhancing their capital bases, using callable capital optimally, increasing private capital mobilisation, and reducing the cost of finance for developing countries.

b) Mobilising international private finance by leveraging ODA.

The UNDP’s private finance initiative for SDGs[13] provides the approach of (a) leveraging private finance, (b) aligning capital, and (c) strengthening policy and institutions. Attempts have been made in international development to focus private finance on sustainable development, with the primary instrument being the mobilisation of commercial/private finance via ODA. While this has increased the mobilisation of private finance to US$150 billion over the last five years, it remains a fraction of what is required for the world to meet SDGs, as per the OECD report on SDG Finance Mobilisation.[14] Meeting SDGs requires a shift in the way overall ODA works to move private capital mobilisation from ‘ex-post’ ODA interventions in developing countries, to ‘ex-ante’ mobilisation to minimise the distortionary cost of sovereign and forex risks. This approach requires catalytic investment, investment banking through development finance, and risk mitigation through contingent guarantees derived from developed countries.

c) Increasing the SDG impact of ODA by directing it to SDGs.

ODA comprises bilateral and multilateral aid counted as grant equivalent; it increased to about US$220 billion in 2022 (US$150 billion in bilateral and US$70 billion in multilateral). Given the various conflicts and informal migration worldwide, a substantial share of ODA has been directed to humanitarian aid and refugee management. At the same time, there is a need to focus ODA on social sector SDGs through public finance transfers to developing countries. The fragmentation of bilateral ODA through common regional platforms should be reduced, and in its place, bilateral aid assistance should be instituted, and private philanthropy integrated into ODA where transfers are made to leverage private capital. In terms of innovative financial instruments, the ODA could provide risk mitigation and credit enhancement for LDC sovereign borrowings and provide forex hedging through contributions to TCX or similar structures.[15]

D) Restructuring the International Financial Architecture.

The last round of US$650 billion allocations for IMF Special Drawing Rights (SDRs) occurred during the COVID-19 pandemic in 2021-22 where a disproportionate share was allocated to developed countries and large G20 developing economies. While the G20 agreed to re-channel US$100 billion of the SDRs to developing countries, leading to the establishment of the IMF’s Resilience and Sustainability Trust (RST) and Poverty Reduction and Growth Trust (PRGT), the impact has been limited. Similar mechanisms for rechannelling ‘excess’ SDRs directed to specific SDGs and developing countries could advance targets such as Energy Transition and Primary Healthcare. Beyond scaling up RST and PRGT, more such mechanisms are required to allow for zero-interest and concessional financing to LDCs as currently provided by PRGT.

High-level restructuring of the International Financial Architecture comprises governance reforms, sovereign debt management, and increased finance for sustainable development with a focus on climate action.[16] Governance reforms are necessary to enhance the global legitimacy of International Financial Institutions (IFIs), starting from the IMF Quota Alignment, which does not reflect today’s economic reality. The IMF quota realignment would strengthen the voice of the Global South countries, aiding in the redistribution of voting rights at the World Bank. However, achieving consensus on the reallocation of IMF quotas and changing the overarching governance of IFIs is politically challenging. Therefore, these inputs are limited to increasing finance for sustainable development, including climate action, with a focus on the role of the IMF.

e) Reforming Multilateral Development Banks

Many notable MDB reform initiatives have been undertaken through various initiatives and forums over the last three years.

 	Boosting MDB Capacity:[17] An independent review of MDB Capital Adequacy Frameworks, 2022 – G20 and COP
 	Climate Finance Framework:[18] An independent high-level expert group on climate finance – COP
 	The Triple Agenda:[19] Strengthening Multilateral Development Banks

These reports and initiatives primarily focus on climate action but have wider implications for overall SDGs, as the suggested reforms would impact MDB operations at scale. In addition to the estimation of global climate investment to meet the requisite goals, the focus of the aforementioned committee reports are directed towards: (a) increasing MDB lending capacity, also with the use of ‘Callable Capital’; (b) increasing the role of MDBs in mobilising private and commercial capital, which is derisking and crowding in private finance; and c) creating a third institutional mechanism for overarching risk mitigation through the increased use of guarantees from MDBs which have been concentrated in the Multilateral Investment Guarantee Agency (MIGA) thus far.

It would be useful to include new-generation MDBs and regional development banks in these reforms, specifically AIIB, ADB for Asia, and NDB for BRICS-Plus countries. The current loan portfolios of AIIB and NDB are lower than those of IBRD and ADB, but both institutions have a total capital of about US$100 billion, which can be leveraged many times over to increase the scale of overall MDB lending equivalent to that of existing MDBs. Integrating these newer MDBs in the overall reform agenda would be useful in addressing financing gaps in the SDGs. While these three initiatives have been crystallised into reports providing the overarching blueprints and analytical work for MDB reforms, translating them into institutional action remains crucial.
The Economic Imperative of Green and Sustainable Growth
Meeting the SDGs also presents economic opportunities for greening economic growth in developing countries. The UN estimates that achieving the SDGs could generate 380 million new jobs and unlock US$12 trillion in market opportunities by 2030. These are concentrated in four economic systems: food and agriculture, cities, energy and materials, and health and well-being—sectors that collectively comprise 60 percent of the global real economy.

To realise this potential, a paradigm shift from shareholder capitalism to a stakeholder-driven market economy is essential. This transformation requires bringing the private sector to the forefront of sustainable development efforts through innovative partnerships, aligned incentives, and integrated reporting frameworks that measure both financial and social returns. By recalibrating corporate objectives to balance profit motives with environmental stewardship and social progress, businesses can evolve from passive observers to active architects of sustainable solutions. This shift is not merely idealistic—it represents a strategic imperative for businesses to capture emerging market opportunities, mitigate risks, and secure long-term viability in a resource-constrained world increasingly defined by transparency and accountability to multiple stakeholders.

Even amidst the current geopolitical situation and emerging world order, the 2030 Development Agenda can still create progress for the six billion people in the developing world with alternative governance and institutional approaches.

India has pioneered alternative governance models through initiatives like the International Solar Alliance (ISA), Coalition for Disaster Resilient Infrastructure (CDRI), and Global Biofuel Alliance (GBA) and can lead the Global South. These efforts, coupled with green and blue economy diplomacy, offer fresh pathways for sustainable development. Strengthened international and regional cooperation via regional development banks, multipolar trade and development groupings, and bilateral agreements can complement global financial reforms championed through platforms like the G20, BRICS, QUAD, COP, and other forums, and FfD. The Seville Commitment[20] from FfD4 underscores the urgency of mobilising US$4 trillion annually to achieve the SDGs. With its leadership in BRICS-Plus, India has shown how innovative governance and financing models can work for emerging economies. Moving forward, BRICS-Plus can drive reforms to harmonise trade rules, boost cross-border infrastructure, promote green investments, and strengthen local currency mechanisms to reduce dependence on existing international financial architectures.

Ultimately, achieving the SDGs by 2030 will depend on bold policy and institutional reforms to unlock sustainability-aligned capital, and redesign international financial systems for sustainability and inclusivity. The aim is equity and ensuring that no one is left behind in the global transition.



Endnotes
[a] “Leave No One Behind” is a fundamental principle of the 2030 Development Agenda.

[b] These include disclosures to ESG (Environment Social Governance) and impact investments.

[1] “SDG Indicators,” https://unstats.un.org/sdgs/report/2023.

[2] Sustainable Development Goals, United Nations, https://www.un.org/sustainabledevelopment/blog/2024/09/press-release-un-secretary-general-and-heads-of-multilateral-development-banks-to-enhance-collaboration-to-address-the-challenges-of-achieving-the-sdgs/

[3] IMF, Fiscal Monitor, April 2025, Washington DC, International Monetary Fund, 2025, https://www.imf.org/en/Publications/FM; DESA and FSDO, Financing for Sustainable Development Report 2024, April 2024, Washington DC, Department of Economic and Social Affairs, 2024, https://desapublications.un.org/publications/financing-sustainable-development-report-2024

[4] Sustainable Development Goals, Addis Ababa Action Agenda, 2015, https://sustainabledevelopment.un.org/index.php?page=view&type=400&nr=2051&menu=35.

[5]   “Financing for Sustainable Development Report 2024”

[6] “4th International Conference on Financing for Development,” https://financing.desa.un.org/ffd4.

[7] Department of Economic and Social Affairs, United Nations, Financing for Sustainable Development Report 2024, April 2024, https://desapublications.un.org/publications/financing-sustainable-development-report-2024

[8] Richardo Hausmann, Dani Rodrik, Andres Velasco, Growth Diagnostics, March 2005, https://drodrik.scholar.harvard.edu/sites/scholar.harvard.edu/files/dani-rodrik/files/growth-diagnostics.pdf

[9]  World Bank, “Doing Business 2004-2020,” https://archive.doingbusiness.org/en/doingbusiness

[10]  UNEP, “Green Industrial Policy,” UN Environment Programme, https://www.unep.org/explore-topics/green-economy/what-we-do/economic-and-trade-policy/green-industrial-policy

[11] OECD, “Leveraging Private Finance for Development,” https://www.oecd.org/en/topics/sub-issues/leveraging-private-finance-for-development.html

[12] IFRS Foundation, “About the International Sustainability Standards Board,” https://www.ifrs.org/groups/international-sustainability-standards-board

[13] UNDP, “Private Finance for the SDGs,” https://sdgprivatefinance.undp.org

[14] OECD, “Official Development Assistance,” Organisation for Economic Co-operation and Development, https://www.oecd.org/en/topics/policy-issues/official-development-assistance-oda.html

[15] TCXFund, “About the Fund: Who We Are,” 2021, https://www.tcxfund.com/about-the-fund/.

[16] MDB Reform Accelerator, “The Reform of the Global Financial Architecture: Toward a System That Delivers for the South,” April 25, 2024, https://mdbreformaccelerator.cgdev.org/the-reform-of-the-global-financial-architecture-toward-a-system-that-delivers-for-the-south/#:~:text=This%20report%20issues%20specific%20and,infrastructure%20and%20trade%20routes%2C%20and.

[17] Ministero dell'Economia e delle Finanze, “Boosting MDBs’ Investing Capacity: An Independent Review of Multilateral Development Banks’ Capital Adequacy Frameworks,” https://www.dt.mef.gov.it/export/sites/sitodt/modules/documenti_it/news/news/CAF-Review-Report.pdf

[18] Amar Bhattacharya et al., A Climate Finance Framework: Decisive Action to Deliver on the Paris Agreement. Summary, November 2023, Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science, 2023, https://www.lse.ac.uk/granthaminstitute/wp-content/uploads/2023/11/A-Climate-Finance-Framework-IHLEG-Report-2-SUMMARY.pdf.

[19] G20, The Triple Agenda Report, https://www.g20.in/content/dam/gtwenty/gtwenty_new/document/Cover%20with%20Inside%20page%204%20oct.pdf

[20] Sustainable Development Goals, United Nations, https://www.un.org/sustainabledevelopment/blog/2025/07/ffd4-closing-press-release/.

### The Power of the Stars: Harnessing Nuclear Fusion for Energy Needs

From tokamaks to laser beams, fusion energy research is transforming science’s most ambitious dream into a clean energy revolution

 

Harnessing nuclear fusion—the process that powers the Sun and stars—has been a beacon of hope for scientists and energy pioneers alike. Unlike nuclear fission, which splits heavy atomic nuclei, fusion combines light atomic nuclei, such as isotopes of hydrogen, to release immense amounts of energy. This energy, derived from the fusion of hydrogen into helium, has the potential to provide humanity with an almost limitless, carbon-free, and sustainable source of power.
Why Fusion is Revolutionary
Nuclear fusion offers profound advantages over existing energy sources. Its primary fuel sources—deuterium (extracted from seawater) and tritium (produced in reactors)—are abundant and widely available. A gram of fusion fuel can make as much energy as burning 10 tonnes of coal, underscoring its extraordinary energy density. Moreover, fusion reactors produce no greenhouse gases (GHG) during operation, significantly reducing the environmental footprint compared to fossil fuels. Fusion generates minimal long-lived radioactive waste, addressing one of the major drawbacks of current nuclear fission technologies.

Fusion reactors produce no greenhouse gases (GHG) during operation, significantly reducing the environmental footprint compared to fossil fuels.


Despite its potential, achieving fusion remains an immense scientific and engineering challenge. It requires creating and sustaining extreme conditions, including temperatures exceeding 150 million degrees Celsius, effective plasma confinement, and achieving net energy gain. However, recent advancements in key areas have brought us closer to achieving the milestone of a self-sustaining fusion reaction, or ‘ignition’:

 	Materials Science: Innovations in advanced materials capable of withstanding extreme heat, radiation, and mechanical stress are crucial for reactor walls and plasma-facing components.
 	Magnetic Confinement: Devices such as tokamaks and stellarators employ powerful magnetic fields to confine superheated plasma and minimise energy losses. The International Thermonuclear Experimental Reactor (ITER), an international project in France, exemplifies collaborative progress in this domain.
 	Inertial Confinement: Laser-driven systems, such as the National Ignition Facility (NIF), concentrate immense energy onto tiny fuel pellets to replicate the extreme conditions necessary for fusion.
 	High-Temperature Superconductors: Advances in superconducting magnets have dramatically improved magnetic field strength and efficiency, enabling the development of compact, cost-effective reactor designs.

These breakthroughs are bridging the gap between theory and practical realisation, positioning fusion as a cornerstone of sustainable energy for the future.

The heat generated by fusion reactions is converted into electricity through conventional power generation methods.

Prominent Fusion Reactor Designs in Research

 	Tokamak (ITER and Other Facilities)

The Tokamak design relies on magnetic fields to confine plasma at temperatures exceeding 100 million degrees Celsius within a vacuum chamber. This confinement prevents plasma from contacting the reactor walls, shaping it into a toroidal (doughnut-like) form. Plasma heating techniques include Ohmic heating, neutral beam injection, and high-frequency wave oscillations. The heat generated by fusion reactions is converted into electricity through conventional power generation methods. The ITER, located in Cadarache, France, represents the largest and most complex fusion device under development. A global collaboration involving India, China, the European Union (EU), Japan, Korea, Russia, and the United States (US), ITER exemplifies international commitment to advancing fusion energy.

 Source: ITER, France


 	Mini Tokamak (Tokamak Energy and Commonwealth Fusion Systems)

Mini Tokamaks, or spherical Tokamaks, employ high-temperature superconducting magnets to confine plasma in a compact, apple-core-shaped configuration. These magnets enable stronger and more efficient fields, facilitating smaller reactor designs. Key experiments include the US’s National Spherical Torus Experiment-Upgrade (NSTX-U) and the United Kingdom’s  Mega Ampere Special Tokamak (MAST). Companies such as Tokamak Energy (UK) and Commonwealth Fusion Systems (US) are leading efforts to develop compact fusion power plants based on this technology.



Source: MIT-PSFC/CFS

Source: Max Planck Institute for Plasma Physics


 	Stellarator Stellarators use intricately designed magnetic coils to produce a helical magnetic field, allowing for plasma confinement without requiring a plasma current. This eliminates the need for pulsed operation, a key advantage. However, the engineering complexity and high cost of the magnets are significant challenges. Notable Stellarators include Wendelstein 7-X (Germany), the Helically Symmetric Experiment (HSX) (USA), and the Large Helical Device (Japan).


 	Linear Colliding Beams Reactor (TAE Technologies)

This design involves injecting plasma packets into a central chamber where they rotate rapidly within a solenoid. Fusion occurs through collisions and magnetic confinement. TAE Technologies, a leader in this approach, has built multiple prototypes and aims to produce electricity within the decade. With more than US$1.2 billion in funding and 1,500 granted patents, TAE is a prominent player in fusion innovation.


Source: TAE Technologies


 	Magnetised Target Reactor (General Fusion)

The Magnetised Target Fusion (MTF) approach combines magnetic and inertial confinement. Plasma is confined within a spinning ball of liquid metal, and fusion conditions are achieved through rapid compression. General Fusion, founded by Dr Michel Laberge, is developing its LM26 machine to reach fusion conditions by 2025. With over 150 patents filed, the company is advancing cost-effective fusion technologies.


Source: General Fusion


 	Fusion Micro Reactor (Avalanche Energy)

Fusion microreactors utilise electric fields instead of magnetic fields to confine plasma. Avalanche Energy's microreactor, Orbitron, has potential applications in distributed clean energy generation and space propulsion. The Pentagon's Defence Innovation Unit has contracted Avalanche Energy to develop prototype fusion propulsion systems for space exploration, targeting deployment by 2027.

The National Ignition Facility (NIF) at Lawrence Livermore National Laboratory in California achieved ignition, producing 3.15 megajoules of energy from a 2.05 megajoule input, a historic breakthrough akin to the Wright Brothers’ first flight.

The Breakthrough Moment in Fusion
Despite the saying that ‘fusion is always 30 years away’, significant milestones have been achieved. The Tokamak Fusion Test Reactor (TFTR) in the US and the Joint European Torus (JET) in the UK demonstrated key advances in plasma temperature and energy density. In December 2022, the National Ignition Facility (NIF) at Lawrence Livermore National Laboratory in California achieved ignition, producing 3.15 megajoules of energy from a 2.05 megajoule input, a historic breakthrough akin to the Wright Brothers’ first flight.

A laser bay at the National Ignition Facility in California.
Source: Lawrence Livermore National Laboratory


 	India’s Fusion Research Landscape: India’s fusion research is spearheaded by the Institute for Plasma Research (IPR) in Gandhinagar, housing two tokamaks: ADITYA (commissioned in 1989) and SST-1 (a new-generation tokamak). Both are integral to advancing India’s capabilities in fusion technology. However, private sector involvement remains minimal, which could accelerate research and development in this critical field.
 	Economic Potential: The global fusion industry, valued at an estimated US$40 trillion [4], offers immense opportunities for economic growth. By securing a proportionate share, India could add US$6.8 trillion to its economy. Fusion energy can also reduce India’s dependence on imported fossil fuels, bolstering energy security and economic resilience.
 	Fostering a Scientific Research Environment: Incorporating private sector players into fusion research can emulate success stories from other critical sectors, such as defence and space. Companies, including Zen Technologies and Adani Defence, have demonstrated the benefits of public-private collaboration. Similar initiatives in fusion research could generate direct and indirect employment while fostering innovation.
 	Advancing Cutting-Edge Technologies: Fusion research drives advancements in materials science, diagnostics, and superconducting magnet systems. These innovations have applications beyond energy, influencing defence, space, and medical technologies. For instance, nuclear research has already revolutionised fields such as cancer treatment, agriculture, and space exploration.

The Way Forward
For India, a country with an ever-growing energy demand, fusion represents a transformative opportunity. With a strong foundation in nuclear science and technology, India is already a contributing partner in ITER and has the potential to leverage fusion advancements to meet its energy and climate goals. Investments in indigenous fusion research, collaborations with global programmes, and fostering a skilled workforce will be critical for India's leadership in this emerging field.

The successful development of commercial fusion reactors could redefine energy geopolitics, reduce dependence on fossil fuels, and support the transition to a carbon-neutral economy.


Globally, the successful development of commercial fusion reactors could redefine energy geopolitics, reduce dependence on fossil fuels, and support the transition to a carbon-neutral economy. However, challenges such as high initial costs, scalability, and regulatory frameworks must be addressed to ensure that fusion becomes an accessible and equitable energy solution.

As we stand at the threshold of a fusion-powered future, the journey is as inspiring as the destination. The quest to replicate the power of the stars on Earth is not just a scientific endeavour; it is a testament to humanity's ingenuity and determination to create a sustainable, energy-secure world for generations to come. To expedite fusion energy research, India must:

 	Allocate increased resources to fusion research institutions.
 	Encourage private sector participation through incentives and joint ventures.
 	Diversify research approaches, exploring various plasma confinement and energy extraction methods.
 	Leverage international collaborations to share expertise and accelerate progress.

Fusion energy represents a monumental opportunity for humanity. Achieving this breakthrough could not only secure carbon-free energy but also position India as a global leader in science and technology. With strategic investments and collaborations, the dream of fusion energy can become a reality within our lifetimes, reshaping our energy future and combating climate change.

 

 


This commentary originally appeared in ORF.

### Chokepoint Checkers: Iran’s Strait of Hormuz Gambit

Iran’s threat to blockade the Strait of Hormuz reveals the high geopolitical and geoeconomic stakes tied to one of the world’s key energy arteries.

 

In the aftermath of the coordinated United States (US)-Israel airstrikes on Iran’s nuclear facilities, the Islamic Parliament of Iran passed a resolution recommending a blockade of the Strait of Hormuz—a 32-kilometre-wide passageway between Iran and Oman that opens in the Arabian Sea. Although the final decision rests with Iran’s Supreme National Security Council, the resolution underscores the geoeconomic reverberations of a military conflict rooted in entrenched geopolitical rivalries.

Unfettered access to the Strait of Hormuz is vital to global energy security. Close to 25 percent of daily global oil production (21 million barrels per day or bpd) and 20 percent of global seaborne liquified petroleum gas (LPG) trade (11.5 billion cubic feet per day) pass through this maritime chokepoint. Over 80 percent of this energy supply is destined for major Asian economies––China, India, South Korea, and Japan.

Map 1: The Strait of Hormuz

Source: Al Jazeera

This is essentially the sixth instance in the past 15 years that Tehran has issued a threat to cordon off the Strait of Hormuz. Over the years, the frequency and seriousness of its threats have escalated in tandem with external pressure and conflict—especially in the context of its nuclear programme and oil export capacity. However, this 2025 parliamentary vote marks the first formal legislative endorsement of such a move, suggesting a new threshold in Iran’s strategic calculus.
Hormuz’s vitality for Iran and the world
The Strait of Hormuz’s geostrategic location apropos of Iran grants Tehran disproportionate geoeconomic leverage. Unlike other trade routes such as the Red Sea and the Panama Canal, the Strait of Hormuz cannot be circumvented by ships to reach the desired destinations. However, a naval blockade or mining of the seaways by Iran would entail significant economic ramifications for the country itself. The resulting ripple effect would also engulf its Asian partners (Arab and Southern) and the global insurance and shipping industry.

The Strait of Hormuz’s geostrategic location apropos of Iran appropriates Tehran with a disproportionate geoeconomic deterrence.


While Iran may leverage this geostrategic fulcrum as part of its non-kinetic pressure tactics against the US, the decision will not be cost-free. In 2023, he energy sector (oil and gas) comprised 54.4 percent of Iranian exports, estimated at US$ 53 billion. 77 percent of Iran’s oil exports were destined for China (at heavily discounted rates), totalling 1 million bpd and generating approximately US$ 40 billion in government revenue for Tehran. Iran would be able to alienate Beijing—its largesttrade and the sole energy trade partner—if it blockades the Strait of Hormuz. This would also impact critical Iranian imports such as refined petroleum products, medicines and pharmaceuticals, and agricultural goods.

A potential blockade will also have repercussions for Tehran’s bilateral ties with Gulf states, which bear hefty economic stakes in keeping Hormuz open. The United Arab Emirates (UAE), Qatar, and Saudi Arabia export approximately 3 million bpd, 1.5 million bpd, and 5.5 million bpd of oil, respectively, relying instrumentally on the Strait of Hormuz. While Saudi Arabia’s East-West pipeline and the UAE’s Abu Dhabi Crude Oil Pipeline serve as bypass infrastructure apropos of Hormuz, they will not be able to offset the holistic supply chain shocks due to undercapacity issues. Qatar stands to suffer the most acute disruption, as it lacks bypass infrastructure and channels all its energy exports through the Ras Laffan Industrial City on the Persian Gulf.. The recent decision taken by Iran to launch a contained, and perhaps even an orchestrated military attack against a US military base in Qatar has shattered any illusory sense in the Gulf that it can sit out a broader Israel–Iran conflict. This situation extends beyond the question of oil because cities—such as Doha, Abu Dhabi, Dubai, and Riyadh—are pitching themselves as global financial centres backed on being safe havens in a region otherwise known for volatility and turmoil.

The closure of the Strait of Hormuz will also impact the energy security of key economic partners such as India and China among other Asian economies. For instance, India, China, Japan, and South Korea import 2.8 million bpd, 4.5 million bpd, 1.8 million bpd and 1.7 million bpd, respectively, through the Hormuz. Consequently, a closure would impact over 10 million bpd of crude and most Gulf-origin LNG bound for Asia, severely disrupting energy flows to key economies and driving up global prices up to US$ 150 per barrel of oil, as per some estimates. For India, a blockade of the Strait of Hormuz could also trigger domestic social and economic disturbances/upheavels, considering Indian seafarers constitute nearly 10 percent of the global merchant navy workforce.

A potential blockade will also have ramifications for Tehran’s bilateral ties with Gulf states, which have significant economic stakes in keeping Hormuz open.


Iran’s Hormuz blockade could also result in surging shipping costs and war-risk and political-risk insurance premiums, raising the cost of doing business in the global energy sector. In the aftermath of 2019’s short-lived ‘tankers war’ in Hormuz, war-risk premiums increased from 0.1 to 0.5 percent, translating to over US$ 0.5 million in added cost per voyage for a Very Large Crude Carrier (VLCC). Insurance firms can also classify the Gulf as ‘high-risk’ , increasing underwriting costs by 300–500 percent. In 2019, VLCC charter rates jumped from US$ 30,000 per day to over US$ 150,000 per day. A similar or worse trend is likely amid a blockade.
Conclusion
In 2025, despite the scale and severity of the now-dubbed 12-day war between Israel and Iran, blocking the waterways of Hormuz is an unlikely reality. For Tehran, maintaining diplomatic consistency with states it has functioning relations with—especially in the Global South and Asia—-stands at odds with its measures such as disrupting energy security or orchestrating maritime blockades, which risk escalating global oil prices.. In that aspect, this 12-day war had a non-conventional impact, as oil prices tumbled, quite contrary to the pre-war anticipations, when Israel and Iran exchanged fire. Nonetheless, several Asian importers have experienced their share of issues with Tehran. Both New Delhi and Seoul have had their ships seized  by Iran in 2021 on frivolous charges such as environmental damage when sailing through the Persian Gulf. These were seen as pressure tactics by entities such as the Islamic Revolutionary Guard Corps (IRGC) over frozen payments worth billions in Asian countries due to sanctions.

Global chokepoints do not operate in isolation. If the Strait of Hormuz faces blockades today, its impact will reverberate across global trade, including via other similar geopolitical and geoeconomic bottlenecks such as the Malacca Strait, the Suez Canal, and beyond. As narratives of continuity of interests across theatres such as Europe, the Middle East, and the Indo-Pacific are promoted, siloed approaches to security of trade, and more specifically energy, do not stand. Energy remains a foundational pillar of both geopolitics and geoeconomics, influencing actors across the spectrum—from major powers to microstates.

 


This commentary originally appeared in ORF.

### Bridging the Climate Finance Gap in Africa through Debt Swaps

As international climate finance retreats, Debt-for-Climate swaps offer African countries a promising pathway to reconcile fiscal constraints with urgent adaptation and resilience needs.

 

Many African economies are at the convergence of two crises, soaring debt burden and climate vulnerability. Over the past decade, public debt levels have risen sharply across the continent, and climate shocks, such as devastating floods and prolonged droughts, have exacerbated the vulnerable situation African economies face. The continent is home to some of the most climate-vulnerable countries in the world; however, many of these nations face unsustainable debt levels that limit their fiscal capacity for climate adaptation and resilience-building.

Public debt levels in Africa have risen sharply over the past decade: by 2022, they reached US$ 1.8 trillion, a 183 percent increase from 2010. While this debt burden has serious economic implications, the precarity is further exacerbated by the particularly high levels of climate vulnerability that African nations face.

Despite these challenges, international support has receded in recent years. At a time when Africa urgently needs support from the international community, many countries have scaled back their aid commitments. Most notably, the United States, which accounted for 8 percent of all climate funding in 2024, has halted contributions to initiatives such as the US Agency for International Development (USAID), the International Green Fund and the Fund for Responding to Loss and Damage. In 2023, USAID provided US$3 billion in climate finance to developing countries; however, President Donald Trump’s administration now plans to suspend the organisation. The United Kingdom, which reduced its aid budget from 0.5 percent of Gross Domestic Product (GDP) to 0.3 percent, has also proposed aid cuts, as have Germany, France, and the Netherlands. African countries must explore alternative approaches to climate funding that do not worsen their debt burdens. One such strategy could be employing Debt-for-Climate swaps, which allow countries to reduce their debt obligations in exchange for committing to climate investments.

Africa’s Public Debt Crisis
A well-designed swap can free up fiscal space by enhancing the debtor government’s repayment capacity and can help avoid socio-economic hardships associated with debt distress. Additionally, the agreement can help countries direct funds toward climate action without increasing debt burdens.

Public debt levels in Africa have risen sharply over the past decade: by 2022, they reached US$ 1.8 trillion, a 183 percent increase from 2010. While this debt burden has serious economic implications, the precarity is further exacerbated by the particularly high levels of climate vulnerability that African nations face. The continent is home to some of the world’s most climate-vulnerable countries, with many economies lacking the resilience to adapt. Climate-related events impose costs on governments for reconstruction and recovery, forcing them to increasingly borrow from international banks or donors. At the same time, a high level of debt reduces the capacity of governments to invest in climate-resilience projects because a high share of government spending is directed towards debt servicing. In Africa, the trend of growing debt servicing obligations has worsened over the years. In 2010, there were nine African countries where debt obligations comprised over 10 percent of total revenue; by 2022, the number had increased to over 20. 

Figure 1: African countries in debt distress and climate vulnerabilit
Source: International Monetary Fund and University of Notre Dame 
This situation is especially worrying for countries such as Chad, Niger and Guinea-Bissau which, as shown in Figure 1, have high levels of climate vulnerability and limited fiscal space to adapt or respond to these challenges. These countries will be hit hardest by the retreat of international support in climate aid and are likely to struggle to mobilise funds domestically for climate mitigation and adaptation. In such cases, innovative financing solutions such as Debt-for-Climate swaps can play a role in bridging the gap between debt servicing and climate adaptation. 

What are Debt-for-Climate Swaps? 
A Debt-for-Climate swap involves the lender reducing or restructuring a portion of a debtor country’s debt. In exchange, the debtor country commits to investing equivalent funds into climate-related projects. A well-designed swap can free up fiscal space by enhancing the debtor government’s repayment capacity and can help avoid socio-economic hardships associated with debt distress. Additionally, the agreement can help countries direct funds toward climate action without increasing debt burdens. While each agreement may differ, the general structure of a swap agreement can be represented by the figure given below.
Figure 2: Debt-for-Climate swap structure
Source: Climate Policy Initiative 
The first swap agreement was signed between US-based non-profit Conservation International and Bolivia in 1987. Under the agreement, Conservation International acquired US$ 650,000 of the Bolivian government’s debt for a discounted price. In return, the Bolivian government agreed to protect the Beni Biosphere Reserve and create three adjacent protected areas. Since 1987, several other countries have entered similar swap agreements. These include Costa Rica, the Philippines, Belize, Barbados and Seychelles - with a total of 140 swaps to date. Ecuador undertook the world’s largest debt swap in 2023, in an agreement that involved Credit Suisse buying US$ 1.6 billion of sovereign debt for US$ 644 million. In return, the government committed to spending US$ 118 million annually for 20 years on conservation in the Galápagos, including the protection of a marine reserve that serves as a migratory corridor for marine wildlife. The old debt will be replaced with a cheaper-to-service US$ 656 million "Galápagos Bond" maturing in 2041 and insured by the US International Development Finance Corporation (DFC).


To make these instruments work in the African context, a three-fold approach is essential. First, African-led multilateral institutions can consider playing a central role in underwriting and supporting the swap agreement. Second, channelling swap savings into green and sustainability-linked bonds can provide an impact-driven approach for climate priorities. Lastly, developing a standardised term sheet can streamline negotiations. 


However, while this instrument offers promise, it also comes with significant limitations. Debt-for-climate swaps have long gestation periods and involve complex and lengthy negotiations with multiple stakeholders, including debtors, creditors, multilateral institutions, local communities, and private sector actors. Negotiating a mutually acceptable agreement among diverse interests requires considerable time, resources and trust. In addition, tracking the impact of the swap on climate adaptation and mitigation can be costly due to the complex financial structures involved. Sometimes the funds from these swaps are managed in jurisdictions abroad that are known for having weak transparency rules. For example, the Galápagos Life Fund from Ecuador’s swap was incorporated in Delaware, a low-tax US jurisdiction, and did not disclose its project portfolio. Further, swap agreements can involve complex conditionalities, which often undermine their effectiveness. El Salvador, for instance, saved US$ $352 million on a US$ $1 billion debt but had to accept several strict conditions such as monetary penalties, interest rate adjustments and mandatory debt redemption in case of breaches. These conditionalities not only impose financial management costs on the debtor countries but also limit their autonomy in deciding how swap savings must be spent. These factors can limit the scalability and broader adoption of debt-for-climate swaps, especially in countries with low technical and institutional capacity. 

Making Debt-for-Climate Swaps Work for Africa
The following recommendations may be considered to make swap agreements viable and scalable in the African context: 


 	
Leveraging the multilateral system to assist with swap agreements


Debt-for-climate swaps require strong underwriters who can guarantee the credibility of the swap. The multilateral development system is well-positioned to play this role because of its ability to mitigate operational and financial risks. Multilateral development banks (MDBs) can assist in the early stages of the swap agreement by helping countries build the necessary technical skills. While many African countries have made national commitments towards climate action, they often lack the expertise to formulate fundable projects. MDBs can provide technical assistance and data-driven advice to help countries develop projects that align with their goals. African-led institutions such as the African Development Bank, the African Union’s African Climate Policy Centre, and regional development banks can be leveraged to play a central role. Once the swap is completed,  the debtor country is expected to report on progress. To assist with transparency and accountability obligations, a green monitoring agency could be established to generate annual audits of the debtor countries. 


 	
Blend swap savings into green and sustainability-linked bonds


Debt-for-climate swap savings can be channelled into green and sustainability-linked bonds, which many African countries already have experience using. Green bonds can be tied to measurable Key Performance Indicators (KPIs), while sustainability-linked bonds provide debtor countries more space to channel funds towards their priorities. Through this blended model, countries can enhance climate action while also incentivising accountability and growth. 


 	
Create a template-based and stakeholder-driven negotiation model


Debt-for-Climate swaps agreements are complex and involve an array of stakeholders and issues that need to be considered, making them costly and time-consuming to negotiate and implement. For example, due to extensive multi-stakeholder negotiations, the Seychelles debt swap took four years to finalise. To facilitate the negotiation process, a debt-for-climate swap term sheet, similar to a term sheet for an investment deal, could serve as a template. The term sheet could take advantage of existing taxonomies and standards, such as the Climate Bonds Initiative (CBI) Climate Bonds Taxonomy, the European Union (EU) sustainable finance taxonomy, and the United Nations Framework Convention on Climate Change (UNFCCC) Reducing Emissions from Deforestation and Forest Degradation (REDD+) Safeguards.

Conclusion 
Given that many African countries find themselves in a precarious position of managing rising debt and climate vulnerability, Debt-for-Climate swaps offer a way to ease the burden. However, this instrument is accompanied by several challenges, such as long gestation periods, transparency issues and complex conditionalities, which can make it difficult for countries with institutional constraints to effectively carry them out.  To make these instruments work in the African context, a three-fold approach is essential. First, African-led multilateral institutions can consider playing a central role in underwriting and supporting the swap agreement. Second, channelling swap savings into green and sustainability-linked bonds can provide an impact-driven approach for climate priorities. Lastly, developing a standardised term sheet can streamline negotiations. With these reforms, Debt-for-Climate swaps could serve as a viable tool for African economies to bridge their climate financing gap.



This commentary originally appeared in ORF.

### The Future of Ocean Finance: Scaling Blue Bonds

Once a niche asset, blue bonds are riding a wave of climate urgency and investor interest—but scaling them demands stronger rules and broader buy-in.

 
The global bond market, the largest asset class in the international financial market, was valued at US$ 141.34 trillion in 2024. By 2030, the figures are expected to reach US$ 166.81 trillion. On the other hand, the blue economy is valued at US$3 trillion annually. Beyond their economic value, blue ecosystems play a vital role in climate action, capturing up to 30 percent of human-generated carbon dioxide. It is no surprise that blue bonds have emerged as a promising financial instrument in the fight against climate change.
Despite this potential, SDG 14 (life below water) currently receives the second lowest amount of invested capital compared to any other SDGs. With increasing awareness about the critical nature of healthy oceans and sea ecosystems to our well-being, blue bonds are well-poised to see rapid growth. In comparison to green bonds 10 years ago, blue bonds are at an inflexion point in 2025. Between 2018 and 2022, 26 blue bonds—with a combined value of US$5 billion—were issued globally. The market grew 10 percent year-on-year in 2024. By 2030, it is estimated that the blue bond market will hit US$70 billion. However, blue bonds remain a nascent asset type within the broader sustainable debt market.


Climate-themed blue investments face liquidity concerns and are often perceived as high-risk and low-return investments. A key approach to address this issue and attract institutional investors is to offer attractive returns. In addition, blue bonds can be structured with longer maturities that align with the time horizons of ocean-related projects.


As the blue bond matrix gradually expands, questions about its effectiveness and long-term viability are also bound to emerge. The following case studies aim to offer optimism and caution about the role of blue bonds as a mainstream climate finance vehicle. Unless coupled with stronger frameworks and verification standards, blue bonds risk becoming more symbolic than substantive.
Case Studies: Seychelles and Ecuador 
The Seychelles blue bond, the world’s first sovereign blue bond, was issued in 2018. Since then, it has played a central role in shaping the global landscape of blue bonds. It was facilitated by the World Bank and the Global Environment Facility (GEF), and raised US$15 million from international investors. The proceeds support marine protected areas (MPAs), fisheries management, and small-scale fishers. One of the most significant outcomes of the project was the Seychelles governmentexceeding their goal to protect 30 percent of the Exclusive Economic Zone (EEZ) and Territorial Sea. However, the deal’s heavy reliance on multilateral guarantees and concessional capital highlighted its limited scalability. Without a substantial de-risking mechanism, it is difficult for developing countries to replicate such an effort. It is also tough for the government to redirect its financial resources toward adaptation. If the government decides to support a different area of the blue economy, it must renegotiate terms with investors. Thus, while Seychelles stands as a pioneering example, it also highlights the role of institutional capacity and external support in determining project viability.
In 2023, Ecuador initiated one of the largest blue bond-related debt-for-nature swaps in history by converting US$1.63 billion in sovereign debt into a US$656 million blue bond issuance. The transaction was structured by Credit Suisse and is expected to lead to a 1.6 percent reduction of Ecuador’s non-financial public sector debt stock. Furthermore, the fund is expected to generate US$323 million for marine protection in and around the Galápagos Islands, which is one of the world’s most biodiverse marine regions, over the next 18.5 years. The Galápagos bonds are insured fully by the U.S.-backed International Development Finance Corporation, and partly by private reinsurers and the Inter-American Development Bank. This means that the burden of risk has been transferred to state-backed agencies. Therefore, deals remain limited to countries possessing suitable debt volumes, technical expertise, and risk profiles. There are also concerns about whether local groups have been sufficiently consulted and involved in the bond’s design and operation.

Policy Recommendations for Mainstreaming Blue Bonds
The following policy shifts and revisions are essential to ensure blue bonds become a mainstream financing tool.

Market Development and Integration
There is a critical need to develop integrated blue bond taxonomies and verification standards. Similar to the International Capital Market Association (ICMA) principles that helped mature the green bond market, blue bonds require dedicated frameworks to guard against ‘greenwashing’. Transparency and accountability frameworks must be equally strengthened, which includes greater clarity on operational elements such as use of proceeds, selection criteria, and frameworks for managing proceeds. Clear guidance on these aspects is essential to ensure investor confidence and that blue bonds deliver on their social and ecological promises. The Ecuador case underscores the risks of neglecting inclusive policy design, while the Seychelles experience reveals how rigid bond conditions can hinder fund reallocation. To ensure blue bonds remain responsive to evolving climate, social, and economic needs, more flexible financial structures are essential.

Expanding the Role of the Private Sector
There is a critical need to develop integrated blue bond taxonomies and verification standards. Similar to the International Capital Market Association (ICMA) principles that helped mature the green bond market, blue bonds require dedicated frameworks to guard against ‘greenwashing’.

Thus far, most blue bond issuance has been sovereign or multilateral-led. Expanding the role of the private sector is key to scaling the market and making it more mainstream. Recent issuances such as BDO Unibank Inc.’s US$100 million blue bond in the Philippines and Korea’s Export-Import Bank’s US$1 billion maritime-focused blue bond show that private actors can successfully raise capital for the blue economy sectors. However, governments and international financial institutions must extend technical assistance and risk mitigation strategies/measures to encourage more stakeholder participation.

Improving the Risk-Return Profile
Climate-themed blue investments face liquidity concerns and are often perceived as high-risk and low-return investments. A key approach to address this issue and attract institutional investors is to offer attractive returns. In addition, blue bonds can be structured with longer maturities that align with the time horizons of ocean-related projects. A range of de-risking tools, such as guarantees, first-loss provisions, and insurance, can be used to improve risk profiles. To scale blue bond issuance, such financial mechanisms must be made readily available and easily accessible.
Climate-themed blue investments face liquidity concerns and are often perceived as high-risk and low-return investments. A key approach to address this issue and attract institutional investors is to offer attractive returns.

Blue bonds have the potential to channel substantial finance into ocean ecosystems to make them more resilient. Their popularity is expected to increase in the next few years, especially among shipping groups, chemical sectors, sustainable tourism, and sea transport sectors, where investors can combine impact and return. The path forward will require a collective effort to scale institutional capacity, build investor confidence, and centre local community engagement in bond design and implementation.



This commentary originally appeared in ORF.

### The Impact of Trump’s Energy Policy Reset on the UAE’s Transition Agenda

Introduction 
United States (US) President Donald Trump’s stated energy policy, framed in the context of an “energy emergency”,[1] is expected to have a substantial impact on the trajectory of international energy transitions and global warming redressal pathways. Given the US’s previous commitment to the Paris Climate agenda,[2] its retraction will arguably result in dampening the momentum to meet emission reduction targets internationally while creating disruptions in the mitigation architecture. The gaps thus created, whether in terms of abandoning climate finance modules supporting the green agenda in developing countries, or by way of curbing the systematic integration of renewable energy into its large-scale infrastructure, can effectively compromise the international community’s efforts towards energy transition and the redressal of climate change.
This paper contextualises the likely impact of this policy reset both nationally and internationally. It makes the case that middle powers such as the United Arab Emirates (UAE)—[3] a country that harbours a robust multifaceted partnership with the US based on considerable alignment of multi-sectoral interests, while also demonstrating a commitment to the cause of transitioning its fossil-fuel-based economy—may be uniquely positioned to mitigate some of the gaps thus created through proactive and targeted initiative.
The paper builds on four areas of consideration. First, identifying the implications of the energy policy reset on American government and non-government entities connected to the energy transition agenda. Second, it makes the case for incorporating the energy transition into the UAE’s future plans, given the country’s commitment to economic diversification. Third, should this emerge as a viable rationale undergirding the UAE’s energy transition, this paper will evaluate whether it would be reasonable to expect the state to remain committed to its climate agenda regardless of how US policies may transform. Finally, the paper will delineate that the UAE should build on its momentum in the energy transition space instead of underplaying its ambitions. The analysis will explore the possibility of the UAE positioning itself at the heart of the energy transition agenda, by ingraining a more equitable system of burden-sharing while mitigating the gaps left by the US. This can be accomplished through climate finance models that are better anchored in the ideas of just and sustainable energy transitions.

Why the Reset? 
President Trump’s announcement of the country’s withdrawal from the Paris Climate Agreement, and the subsequent freeze on the Bipartisan Inflation Act (BIA), the Inflation Reduction Act (IRA), and the Department of Energy’s (DoE) clean energy programmes, along with the parallel reinvigoration of fossil fuel exploration marks not just an incremental change but an overhaul of the US’s place in the international energy and climate change equation. The calculus behind the “unleashing of American energy”[4] is two-fold: first, that the US should not remain vulnerable to any external shocks born of supply chain bottlenecks and energy market disruptions; and second, the equating of energy dominance with strategic autonomy and critical leverage.
Two compelling threads tie together the Trump administration’s problematic assessment that prompts such a reset:
First, the US’s exigent concerns, something that the Trump administration is perhaps more cognisant of, differ from the obvious urgency of climate change dilemmas. For instance, while it is true that clean energy options are competitive, especially when economies of scale are achieved, fracking presents a more immediate solution for the country given its substantial shale reserves.[5] This is because the Levelized Cost of Energy (LCOE)[6] of utility-scale clean sources such as onshore wind and solar energy in the US is much lower than fossil fuels, although data for 2023 and 2024 indicates a marginal increase.
Also, the continued insufficiency of grid capacity has been aggravating the headwinds that renewables have been facing in the US,[7] just as cost overruns are being questioned. The undeniable lacunae in the pace and form of transition pathways are among the issues that the Trump administration has flagged with the energy transition.[8] Differing viewpoints within the US DoE leadership have also highlighted a clear causality between the investments in climate science and the less-than-ideal pace in energy development in a manner that would address issues of affordability, accessibility, reliability, and energy poverty.[9] Further, the Trump administration’s budget cuts suggest a particular reluctance against investment in climate science. Energy Secretary Chris Wright has, for instance, argued before the Congressional Committees looking into the funding cuts to the clean energy programmes, that climate science is “highly politicized.”[10]
While the issues with renewable energy options and the transition itself have been magnified in Trump’s energy doctrine, the obviousness of shale gas and its use as a platform well-suited to the stated economic goals of the Trump administration have been amplified, and not always inaccurately. By being integral to the country’s energy self-sufficiency as well as the Trump administration’s hopes for energy dominance, the shale-gas revolution has led to dramatic changes in the US’s geo-economic and geopolitical calculations.
A second pertinent concern and prudent strategic calculation that this policy reset hopes to address is the need to de-risk the US’s supply chains based on the recognition that the clean energy pathways grant lopsided leverage to China, since they have a monopoly on rare-earth raw materials supplies[11] as well as renewable energy hardware—both of which are essential inputs in the transition. This concern can also be tied to the administration’s demands for reshoring energy manufacturing locally.
On the grounds of national interest, when an administration harbours both of these beliefs, and not always erroneously, the Trump energy reset is a natural progression. Combining to underwrite this policy reset are: the strategic calculus inherent in the disagreement that the Trump administration has with the implications of the energy transition supported by the IRA; the calls for ceasing the pursuit of renewable energy integration into the Department of Defense’s (DoD) future plans; concerns regarding the vulnerabilities that China’s rare-earths monopoly may introduce into the US’s energy infrastructure and supply chains; and finally, the continuing and enhanced commitment to fracking.

The Broad Impact of the Reset 
In an interdependent world, the change in the US’s energy policy can broadly be expected to have compounding ramifications on three clusters of actors. These are discussed in turn in the following paragraphs.
The first and most potent impact of this changed policy landscape will be on public and private entities within the US, which have benefited from supply-side incentives under previous administrations. This assumption is based on the twin problematics of the Trump administration’s funding and tax credit freezes under the IRA on proposed and ongoing clean energy projects, as well as the repercussions of the imminent trade war with China—a nation with a higher concentration of rare-earths raw materials and processing capabilities.
There are three caveats to this expectation. First, the renewable energy industry in the US is mature today, and the substantial sunk costs in the field make a complete reversal and shunning of the cleaner pathways highly unlikely. Given the investments already made and the employment numbers tied to it, while it would be reasonable to expect a recalibration in the US’s funding commitments internationally, the complete or arbitrary abandonment of ongoing domestic projects only because they belong to the clean energy vertical may be unlikely. What could happen, however, is a slowdown in the pace and an increase in costs.
Another consideration that may also offset the anticipated losses to the industry and the limitations on the clean energy transition is the state and federal policy demarcations inherent in the US polity. States that insist on keeping to their transition trajectories may face a spate of litigation. The creation of California’s US$25-million fund in January 2025 to underwrite litigation to challenge the IRA rollbacks under Trump is symptomatic of this.[12]
The second set of actors likely to feel the greatest impact of the Trump energy reset are the countries for which the clean energy transition was underwritten by the US’s commitments and mobilisation of funding. The Trump administration has, for instance, withdrawn from the Just Energy Transition Partnership (JETP)[13] and Power Africa initiatives, impacting both the energy transition process and access to electricity for millions in South Africa (US$1.063 billion) and Indonesia and Vietnam (US$3 billion).[14] While partners like the European Union (EU) and the United Kingdom (UK) remain committed to the initiatives, the withdrawal by a progenitor of the initiative will compound adverse repercussions on the fulfilment of the agenda.
A third group that can be expected to feel the domino effect of the Trump reset is those engaged in climate research, with organisations, institutes, and researchers reporting a withdrawal, since February 2025, of federal grants and funding to any studies with even the term “climate and clean energy” in their proposal.[15]

Impact on the UAE 
The UAE does not feature on either of these three indices, and could reasonably be expected to bypass any ripple effect from the reset. This is primarily because the UAE has built its renewable energy industry proactively in a top-down approach and remains committed to the cause of clean energy for reasons that are independent of the US’s approach. This is despite the considerable collaboration that the two partners have had over the last few years.
Just as the Trump energy policy is based on the administration’s interpretation of what the US’s urgent concerns are,[a] the UAE has come to a different conclusion when faced with a similar, though not identical, problem set. For a petro-economy to invest in clean energy in the manner that the UAE is committed to,[16] reveals a recognition that the essence of energy security remains in the diversification of resource supplies alone—whether in terms of the country of import or the particular kind of energy it chooses to prioritise in its energy basket. The multidimensional strategy adopted by the UAE represents the kind of dichotomy inherent in the global energy consumption patterns. The year 2024 saw the simultaneous installation of 600GW of solar energy plants worldwide,[17] alongside global clean energy investment that reached more than US$2 trillion for the first time.[18] The same period also saw a record-high coal consumption registered at 8.7 billion tonnes.[19]
With the US shifting gears from its role as a development finance and clean energy facilitator, the gaps that will be created in the international transition and mitigation portfolios will need a group of committed actors to come together to fill the space. The UAE could position itself as one of the principal actors in such a framework, and may do well to rally more stakeholders to the cause so as to maintain momentum in the domain. The country has simultaneously evolved as a node of connectivity, an innovation hub, and a responsible investment facilitator with a very different risk calculus than actors in traditional development finance. This places the UAE in a position where it could serve as a practical fulcrum for pushing the clean energy agenda effectively in the absence, temporary or otherwise, of the US.
While the centrality of the US to the transition over the past decades means that no actor can expect to remain insulated by the changes originating in DC, the UAE’s continuing commitment to the transition pathways, born more organically from its own long-term goals and ambitions, is unlikely to suffer due to any drawdown from the US. It could only accelerate further, given the value that the country sees in the enterprise. This proposition could be explored through the bilateral partnerships continuing between the two sides in the clean energy sector presently, and also the inherent value that the energy transition has for the UAE’s long-term diversification agenda. 

US-UAE Partnerships in Clean Energy
The UAE-US engagement in the field of clean energy is founded principally on three levers, viz., the value of the UAE as an investor underwriting renewable energy and clean-tech funding internationally in collaboration with and in the US. Second, on the sharing of research and best practices in the field of clean energy, particularly solar, batteries, and now, nuclear. Third, on the two countries forming a partnership to propel the climate change mitigation order, with a commitment to working on subjects of climate finance and methane reduction, among others.[20]
Furthering their comprehensive bilateral partnership on multiple fronts, the high mark of the US-UAE collaboration in the field of clean energy came in 2023 through the announcement of the Partnership for Accelerating Clean Energy (PACE) with a commitment of US$100 billion to fund 15 GW (new) of renewable energy projects by 2035.[21] The arrangement proved complementary due to the deliberate intent of the UAE’s sovereign wealth fund to enhance the scope of investment in innovations and technologies of the renewable energy space, and the US’s receptiveness to investment in the field while enabling assistance through the provisions of the IRA. The first tranche of US$20 billion consisted of a commitment led by MASDAR and a consortium of private American investors. The funding arrangement was agreed as a mix of private sector cash and debt financing from the American side.[22]
Although the Trump administration’s energy reset can be reasonably expected to affect the UAE’s investments in the US by way of the drawdown on the IRA, which may increase the cost of projects, in addition to factoring in any potential litigation. The status of the joint collaborations has been stable, as shown in Table 1.
Table 1.  Status of Clean Energy US-UAE Partnerships (as of March 2025)




US-UAE Partnership (Entities)
Project
Quantity of Generation
Status 


US Government’s Power Africa Initiative-UAE’s Averi Finance ( US$10 billion)
Connecting 500,000 homes in Sub-Saharan Africa to enhance clean energy access.
8GW of power generation projects
Ongoing


US Government’s Power Africa-UAE’s AMEA Power (US$5 billion)
Renewable Energy capacity acceleration in Africa
5GW
Ongoing


MASDAR (Acquisition of 50 percent stake in Terra-Gen)
30 renewable power sites of wind, solar, and battery storage (California, New Mexico, Nebraska, and Texas)
3.8GW (with 5.1GWh of energy storage)
Ongoing


ADNOC’s 35 percent stake acquisition of ExxonMobil’s clean energy facility in Texas
Proposed hydrogen and ammonia production
900,000 tonnes of low-carbon ammonia
Ongoing


UAE’s G42 and Microsoft (US$1 billion)
Development of a state-of-the-art green data centre campus in Kenya, run entirely on renewable geothermal energy and designed with state-of-the-art water conservation technology.
Part of a comprehensive digital package working on the facilitation of clean energy transitions in the country
Ongoing


ADNOC (XRG) and Occidental
Carbon dioxide capture and storage
500,000 tonnes/year*
Ongoing



Based on data from MASDAR and ADNOC project status on official websites, March 2025.
*The quantity was announced in May 2025, when this paper was under review. 

The Value of Energy Transition to the UAE’s Diversification Agenda
In addition to climate change mitigation objectives, the UAE recognises the renewable and clean energy space to be an industry of the future and bases its strategy on this clear premise.[23] The finite nature of its fossil fuel reserves serves as a sobering reality—however muted and distant—which means that the diversification of the economy from its hydrocarbon-reliant model is non-negotiable. If the UAE is to achieve its own goals vis-à-vis the net-zero commitments at COP28, it will have to transition away from fossil fuels and triple its renewable energy capacity by 2030.[24] By this marker, the country cannot afford to slow down, much less temporarily halt, its pursuit of the clean energy transition.
The UAE has developed a segmented policy framework which recognises that only a multidimensional energy transition will be able to ensure energy security while being cognisant of its clean energy commitments. There is an institutional recognition that the traditional energy choices of oil and gas must be phased out, albeit gradually, and that their displacement would have to be comprehensive without being disruptive, with an eye on a timeline.
Figure 1.  UAE Electricity Production, by Source: Electricity Supplied [GW (e)*h]
 
 Source: IAEA, 2024[25]
Given that natural gas is a mainstay of the UAE economy and its national energy plans,[26] its use as a bridge fuel will continue for the foreseeable future. Simultaneously, the country is committed to investing in more gas and nuclear power over the next decade to power data centres, as well as allocating more chemicals to provide liquid coolants for such systems.[27]
The country’s commitment to achieve 100GW of clean energy by 2035 and a net-zero target by 2050 is fundamental to their operational goals, and not just a simplistic normative preference. The energy transition pathway that the UAE has set up for itself[28] must be considered as part of an economic transformation and not just an energy diversification strategy. It makes fiscal sense for the UAE to make the substantive CAPEX investments due to the competitive costs from the economies of scale that stem from the comprehensive expansion of clean energy options to its entire economy.
In line with this logic, the country has been diversifying its energy portfolio. It is home to one of the world’s largest solar generation facilities at Al Dhafra.[29] This single-site solar park carries at its full capacity the ability to offset 2.1 million tonnes of CO2 annually.[30]  It is, however, yet to reach the same amount of power output as the Xinjiang and Golmud plants of China and India’s Bhadla, respectively,[31] which are recognised as the largest solar power producers in the world. The country has also been investing in R&D for carbon capture technologies, with projects for the largest Integrated Carbon Capture project in the MENA region.[32] Additionally, the Barakah nuclear facility, with its four nuclear reactors endowed with a capacity of 5,321 Mwe, accounts for 20 percent of the country’s electricity supply at present. Once fully operational, the facility is expected to produce 40 TWh of clean energy for at least six decades.
Energy efficiency is a central deliverable in the UAE’s energy transition projects. Due to the lack of any massive demonstrations of this principle, energy efficiency rarely gets its due during discussions. However, it is a crucial variable that could make a substantial difference, and one that the leaders of the clean energy space in the UAE take cognisance of. The integrated smart grids and smart metering in the deployment strategies of the UAE focus on this aspect, and are something that companies like MASDAR[33] and ADNOC[34] see as key deliverables in their business models.
The UAE’s architecture in the industry also makes a case for an expansion and entrenchment of the co-location energy systems model. Price invariably directs activity in the energy industry, so the co-location option alongside integrated energy efficiency pathways creates a circular subset in the sector, which can offset both cost and emissions. The UAE’s establishment of the first Battery Energy Storage System (BESS) giga-scale unit in the world[35] appears to streamline this understanding. By adopting co-location, the country could generate considerable value through the capture of waste heat in existing energy infrastructure and funnelling this byproduct into long-duration energy storage.

The UAE’s Comparative Strengths in the Domain
It is in the twin areas of Battery Energy Storage (BESS) and civilian nuclear energy that the UAE could capitalise on its comparative advantages forged by three interlinkages in its economy that a deliberate policy architecture has generated.


 	As a country with the first AI ministerial role in the world,[36] the Emirates has positioned itself at the centre of the next-generation technology disruption that can be ushered in through Artificial Intelligence (AI) and High-Performance Computing (HPC). The UAE has been building credibility as a leader in the international data industry and ecosystem.[37] Its role in the mining of data and the digital economy necessitates that the UAE ensure reliable grid-scale energy to meet the mammoth energy and cooling demand that such facilities generate. Apart from the technical logic, policy and demand signalling suggests that there is a clear preference that this energy be of a low-carbon form.[38] There is a recognition that the kind of sizeable pressure on the grid[b] that a single data-mining sector can impose[39] makes it entirely impractical to meet this demand through renewable forms of energy alone by completely shunning fossil fuel. The majority of the electricity generation for this purpose has been low-carbon.


 	This low-carbon pathway to undergird the data-mining ecosystem commends nuclear energy as a reliable grid-scale low-carbon option, making it an excellent answer for the pursuit of the UAE’s digital as well as clean energy goals and targets. As a baseload guarantor option, it is also a form of energy that is relatively impervious to market fluctuations. Primarily due to their modular nature and capacity customisation options, Small Modular Reactors (SMRs) are uniquely suited to underwriting the energy requirements that data mining has. While SMRs remain an ambition pending design standardisation and operational modalities being tested, it is a domain that the UAE is deeply invested in. The Emirates Nuclear Energy Corporation is at the centre of this effort and is presently working on the development of SMRs, advanced nuclear reactors, and hydrogen fuel cells under their ADVANCE programme.[40]


 	It is in the vertical of storage solutions (batteries) that the UAE could capitalise on its comparative advantages most, and establish a formidable clout, if it continues to build on the momentum. The country recognises that batteries are the next frontier, and it has the potential to actualise many of the clean and sustainable energy transition objectives through a recognition that different types of storage solutions cater to different problems. The UAE is demonstrating impressive foresight and capacity-building in the domain. Emblematic of this is the country’s establishment of the world’s first giga-scale Solar and BESS project that couples solar energy generation with storage capacity, which will generate 1GW of baseload power from renewable energy.[41] The 6GWh ENERCAP factory in the Dubai Industrial City[42] is another example of this drive.

Seeking Complementarities with the US in a New Policy Landscape
There is a temporal context within which the policy approach emerging from the US must be situated. The Trump administration’s energy policy reset, while expected to have a substantive and long-lasting impact on global energy transitions, could undergo an equally dramatic reversal with a change of guard in Washington. What is more abiding, however, is the value that the US and the UAE see in partnering with each other across multi-domain questions.
While there have been differences between the Republican and Democratic approaches to the country in the area of sharing of advanced technology, on the issue of cooperation in the renewable and clean energy sphere, there has been a bipartisan commitment in the US towards the partnership with the UAE. Given the bipartisan nature of the engagement in the sphere, it would be reasonable to expect a continuing partnership in the domain, which could build on the following complementarities between the two sides:


 	The Abraham Accords reworked the narrative of engagement beyond that of politics to one of connectivity and investment in the Gulf, and the UAE-US collaboration could substantially enhance this potential. Under its outlay, the UAE is poised to play a critical role in the facilitation of the multi-modal India-Middle East-Europe Economic Corridor (IMEC),[43] for one, and become an important node of connectivity which the US can benefit from in sustaining viable inroads in the region. Through this mode of engagement, the nation can also participate in the multi-modal interlinkages from Asia through Europe.


 	Deployment of AI and the necessary expansion of data centres is a central policy prerogative of both the US[44] and the UAE,[45] and one in which the partners appear to be actively seeking synergies. There is a demonstrable receptiveness on the part of the Trump administration to the UAE’s ambitions of becoming an industry leader in data and AI, marked by the willingness to share advanced chips technology[46] with the Gulf nation. It is also playing a role in facilitating the building of the world’s largest AI campus outside of the US.[47] These specific deals, such as the ones involving nuclear commerce, tend to have a much longer engagement timeline in terms of investments and project lead times. A commitment to such strategic pathways could thus be interpreted as developing a well-assessed stake in the long-term growth of each other.


 	Again, the US has a military presence internationally which, even when reduced, is likely to persist. As part of this, the US DoD has a mandate to ensure energy resilience in the face of any potential [48] As part of this, establishing microgrids across all military installations is a prudent investment. The smart grids that the UAE is developing and deploying effectively at the domestic level could offer modular support options to these efforts at a fraction of the cost. While the Trump administration has made it clear that emissions reduction is no longer a target, cost savings and a faster turnaround timeline will undoubtedly remain desirable priorities. The degree of collaboration that the two partners could have in the field of propelling energy technologies through the funding and standardisation of the results of expensive R&D is substantial. It is not one that the Trump administration’s energy reset automatically eschews, given the economic benefits and competitiveness it could introduce.


 	Hydrogen, which is currently the only viable option for long-duration energy storage, presents another important area of potential collaboration between the two countries. There is also considerable value in the derivatives of green hydrogen, such as ammonia and synthetic methane, particularly in hard-to-abate sectors such as construction, shipping, and aviation, although the substantially non-competitive pricing and the lack of supply make Sustainable Aviation Fuel (SAF) a less viable option at the moment.


 	Relatedly, the coincidence of interests that the US and the UAE have in engaging with India on issues of connectivity, green hydrogen, and perhaps, the enhancement of a cooperative framework relating to nuclear commerce, could evolve as another mutually beneficial subject for the two countries to consolidate collaboration in. Similarly, collaborating with the UAE could generate a lasting impact on the US’s ability to access raw materials critical to its supply chains from the Global South at a time when China and Russia have increased their presence in the Middle East-North Africa (MENA) region and other parts of Africa.


 	Finally, the UAE, alongside its Gulf Cooperation Council (GCC) partners, is today consciously working to position itself as a networked region building prosperity across different regional and sub-regional clusters. This makes it a valuable partner for the US at a time when Washington appears to be refashioning its engagements internationally. The UAE brings considerable experience through its logistics network into multi-modal connectivity models. This could prove particularly beneficial to countries looking to engage with Africa.

The African continent, with 18 percent of the world’s population and only 2 percent of air travel is about to finalise the African Continental Free Trade Area Agreement (AfCFTA) which, when realised, is expected to increase intra-African maritime trade by 62 percent—this roughly translates to a demand for nearly 100 vessels capacity addition.[49] The role that companies such as MASDAR and ADNOC can play alongside entities like DP World and the Abu Dhabi Ports (ADP) group, which already has a sizeable presence in the logistics of the continent—[50] with a presence in ports, dry ports, and SEZs—is substantial. The benefits of this engagement can accrue to the UAE’s partners equally if the focus remains on finding areas of cooperation despite differences.
The pursuit of energy security as well as clean energy pathways is rooted in specific spatial and temporal contexts, rarely ever uniform across borders. A universality in response to even exigent concerns stemming from them thus becomes an unrealistic expectation. While the UAE and the US differ on the need, urgency, and modalities to act on global warming through the facilitation of the energy transition, it is reasonable to expect that the two could cooperate, and even expand collaboration on technologies of the future, where the national and strategic international interests of both converge. 

Recommendations: UAE’s Distinguishing Proposition 
Showing up for the Global South
The country’s template of transition which builds on a supplementing or phasing out of fossil fuels instead of any immediate overhaul of national energy systems driven by an exclusively green agenda, resonates far more with the ecosystem of countries of the Global South where economic development and energy access issues continue to be the preponderant motivations. In its engagements with the Global South, the UAE builds on the COP26 commitments of wealthier and more industrialised nations to provide technology transfers and financial assistance, but distinguishes itself from the positions of these countries that insisted on fossil-fuel-bereft pathways to growth. The long-term aversion of countries such as Germany, for instance, to fund fossil-fuel-based projects in the African continent[51] is, by any metric, an expensive compulsion to impose on countries with abysmally low per capita incomes and large-scale gaps in energy access.
It may be reasonable to expect that in a climate finance regime where countries like the UAE assume a greater role, such impositions would not proliferate, given the segmented energy transition policy that the country has repeatedly committed to in its own net-zero ambitions. The clean energy projects undertaken by Emirati entities such as MASDAR as they participate in Africa’s transition story[52] reflect this approach. Just as the UAE’s Etihad 7 programme,[53] while being committed to providing 100 million people on the African continent with clean energy by 2035, works on the premise of gradual transition towards cleaner forms of energy while recognising the developmental needs of these countries. By building on these models, the UAE could play a singular role in facilitating energy access animated by principles of a more equitable, sustainable, and just transition in the Global South.
Extrapolating the lessons from such templates, the UAE and its partners could help redesign the normative considerations of the forms of energy that countries of the Global South choose for themselves, by helping underwrite funding mechanisms that pay heed to these urgent and contextual concerns of the developing countries. Importantly, the abject energy poverty and access issues on the continent offer the UAE an avenue for expanding its stake in the energy markets as well, while opening avenues for the country to introduce energy efficiency and clean energy pathways into the hard-to-abate sectors, such as logistics. 

Reimagining Transition Finance 
The UAE’s championing of the Global Finance Framework launched at COP28,[54] and its commitment to meeting the financing gaps through the private sector banks in the country by 2030, could prove to be a valuable alternative at a time a major actor in the field, such as the US, is retracting from a similar erstwhile role. The UAE has been instrumental alongside partners such as Brazil[55] in coming up with ways to create reliable and affordable financing mechanisms and enhancing access to international climate funds. The country has included the provision of financial support to clean energy projects through instruments such as soft loans in countries of the Global South as an important part of its foreign policy and international outreach.[56]
The influence that the Trump administration is expected to wield on international financial institutions also means that for most countries, at least for now, transition finance could become difficult to avail of. The UAE could rally its GCC partners, along with the EU, to forge a more inclusive discussion around the subject of Climate Finance to try and offset the resulting gaps.
A combination of blended finance instruments that integrate private and public finance with the support of the Sovereign Wealth Funds of these countries could have a positive impact on the field. Similarly, the parameters of risk aversion and returns on investment (RoI) would also likely be different in the context of the UAE engaging with the developing world—in that perhaps the compliance sought by the UAE would be more stringent in technical terms and time deliverables instead of a focus on national socio-political contexts of these countries. Further, the long gestation period of the RoIs on renewable energy do not correspond to the bottom-lines that banks are looking at, and it is natural to expect that private capital/bank capital will flow to mature markets with lower risks. The UAE, through its ability to steer investments through its Sovereign Wealth Funds, for instance, could rally its partners and resources to the operation of climate investment funds such as the African Green Investment Initiative.[57]

Facilitating Public-Private Industry Policy Building Focused on Energy Transition
The UAE could build on two specific pursuits as the pillars of its distinguishing proposition in this changed energy policy landscape. First, it could systematically mainstream climate change concerns in its own public and private sector operations. This would help integrate clean energy options into the country’s production and consumption models. Second, the country could work on developing a model for incentivising adherence to climate change and clean energy commitments through price points that reward transition.
With its substantial institutional commitments to renewable energy projects nationally and internationally—as highlighted earlier in this paper—and its evolving techno-dominant approach to deployment of public goods, the country could aspire to benchmark a template where combinations of government accelerator programmes and private-sector-led innovation projects could benefit from industry-wide best practises to ease into the energy transition.
The UAE could also draw upon its partnerships with countries such as the US, France, and India to build on an industry-specific programme of training and upskilling that caters specifically to the needs of industries connected to the energy transition.[58] The fields of nuclear technology, the hydrogen economy, and the optimisation of battery technology offer avenues for exploring such cooperation.

Burden-sharing as an Invested Stakeholder
Contributing to the cause of burden-sharing need not be based on any inherently democratised approach to the issue of global policymaking. It could, instead, be a function of recognising that differentiated responsibilities and clusters of influence could be an effective component of burden-sharing. While the tenor and tone of the Trump administration may have overshadowed its fundamental message, arguably, a focus on equity without addressing the burden of debt is neither a wise nor a sustainable long-term template for cooperation between states.
The Trump years will necessarily cause disruption. Disruptions, however, have their own upsides. The normalisation of a different prism in International Relations, where issue-based congruence between countries is as palatable as ideological alignment, may become a more commonplace practice as a result of this particular approach of the Trump presidency. Sector-specific alignment of interests and a more equitable distribution of burden in particular domains may then consolidate progress in bilateral ties. The simultaneous expectation of burden-sharing as an essential part of the value addition a partner could bring to any equation is central to the Trump administration’s international outreach. As a committed stakeholder in global energy transitions and the provision of energy security and economic diversification at a local level, the UAE could deliver on such an expectation. The Gulf actor’s approach, both to this expectation as well as in service of its own interest and ambition in emerging as a clean energy forerunner, could be built on modelling itself into a viable alternative that could mitigate some of the gaps created by the Trump policy reset. Additionally, the nation could also induce elements of a more equitable and sustainable energy transition model into the process. 

Conclusion 
Transitions tend to not be uniform or linear.[59] This is true for the energy transition. Given that the US has three percent of the world’s energy resources and 16 percent of the world’s energy demand, an indefinite shunning of renewable energy is not likely to be a viable long-term option.[60]  It is possible, therefore, that the “Trump energy reset” may eventually be limited to the temporal aspects of the incumbent government. Nevertheless, as of early 2025, and likely through 2028, the US and the UAE can be expected to continue looking at the issue through separate prisms. This difference in approach to a problem that is interpreted differently based on differing contexts lies at the nub of the apparent distinctions between the two on the subject.
What may thus serve both countries better is to identify areas of differentiated responsibilities and domains where cooperation based on even non-comparable asset classes, such as the ones flagged under complementarities earlier in this paper, could forge collaborations in the field of clean energy and its ancillary concerns, where they can and must.



Cauvery Ganapathy is Non-Resident Fellow, ORF Middle East.




Endnotes
[a] EIA expects that in 2026, the United States will begin importing more gasoline and jet fuel than it exports while remaining a net exporter of distillate fuel oil.
[b] Small data centres with about 500-2000 servers consume about 1-5MW of power while the larger ones (100,000 sq. ft.) consume anywhere between 20-100MW of power.
[1] The White House, “Declaration of a National Emergency,” January 20, 2025, https://www.whitehouse.gov/presidential-actions/2025/01/declaring-a-national-energy-emergency/
[2] Manjana Milkoreit, “The Paris Agreement on Climate Change-Made in USA?,” Perspectives on Politics 17, no. 4 (2019), pp. 1019-37, https://web.archive.org/web/20200305064542id_/https://www.cambridge.org/core/services/aop-cambridge-core/content/view/4687F2B504D5984BA7F5299CA3878DBF/S1537592719000951a.pdf/div-class-title-the-paris-agreement-on-climate-change-made-in-usa-div.pdf
[3] The Belfer Center for Science and International Affairs, “Project on Middle Powers,” Harvard Kennedy School, https://www.belfercenter.org/middle-powers
[4] The White House, “Unleashing American Energy,” https://www.whitehouse.gov/presidential-actions/2025/01/unleashing-american-energy/
[5] Washington, US Department of Interior, Order No.3418- Unleashing American Energy (Washington: 2025), https://www.doi.gov/sites/default/files/document_secretarys_orders/so-3418-signed.pdf
[6] US Energy Information Administration, “Levelized Costs of New Generation Resource in the Annual Energy Outlook,” March 2022, https://www.eia.gov/outlooks/aeo/pdf/electricity_generation.pdf
[7] Lori Bird, Andrew Light, and Ian Goldsmith, “US Clean Power Development Sees Record Progress, As Well As Stronger Headwinds,” World Resource Institute Insights, February 21, 2025, https://www.wri.org/insights/clean-energy-progress-united-states
[8] Daniel Yergin, Peter Orszag and Atul Arya, “How to find a Pragmatic Path Forward,” Foreign Affairs, March/April 2025, https://www.foreignaffairs.com/united-states/troubled-energy-transition-yergin-orszag-arya.
[9] Ishan Thakore, “In Colorado, U.S. Energy Secretary Chris Wright Says Climate Change Alarmism Has Hurt Energy Development,” Colorado Public Radio, April 4, 2025, https://www.cpr.org/2025/04/03/chris-wright-golden-renewable-energy-lab-climate-change-energy-development/
[10] WVLT News, “U.S. Secretary of Energy Chris Wright Makes a Stop in Oak Ridge,” YouTube video, 26:20 min, February 28, 2025, https://www.youtube.com/watch?v=SuYX1bcU1do&t=870s
[11] Gustavo Ferreira and Jamie Critelli, “China’s Global Monopoly on Rare-Earth Elements,” Parameters 52, no. 1(2022), pp. 57-72
[12] Elizabeth Vella Moellar, Michael S. McDonough, and William E. Fork, “California v. Trump 2.0: Navigating Policy Collisions and Business Opportunities,” Pillsbury Law, March 12, 2025, https://www.pillsburylaw.com/print/v2/content/1054052/california-trump-conflicts-business-opportunities.pdf
[13] Tim Cocks, Francesco Guarascio and Fransiska Nangoy, “US Withdraws from Plan to Help Major Global Polluters Move from Coal,” Reuters, March 7, 2025, https://www.reuters.com/sustainability/climate-energy/us-withdrawing-plan-help-major-polluters-move-coal-sources-2025-03-05/
[14] A. Anantha Lakshmi, Attracta Mooney, and Rob Rose, “US Pulls out of $45bn Global Climate Finance Coalition,” Financial Times, March 6, 2025, https://www.ft.com/content/e8b7f9cf-063b-45bc-a861-6d46047738d7
[15] “Outcry as Trump Withdraws Support for Research That Mentions ‘Climate’,” The Guardian, February 21, 2025, https://www.theguardian.com/environment/2025/feb/21/trump-scientific-research-climate
[16] U.ae, “UAE Energy Strategy 2050,” Telecommunications and Digital Government Regulatory Authority, https://u.ae/en/about-the-uae/strategies-initiatives-and-awards/strategies-plans-and-visions/environment-and-energy/uae-energy-strategy-2050
[17] IRENA, World Energy Transitions Outlook 2024: 1.5°C Pathway, Abu Dhabi, IRENA, 2024, https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2024/Nov/IRENA_World_energy_transitions_outlook_2024_Summary.pdf
[18] United Nations Climate Change, “COP29 UN Climate Conference Agrees to Triple Finance to Developing Countries, Protecting Lives and Livelihoods,” United Nations Framework Convention on Climate Change, https://unfccc.int/news/cop29-un-climate-conference-agrees-to-triple-finance-to-developing-countries-protecting-lives-and
[19] IEA, Coal 2024, Paris, IEA, 2024, https://www.iea.org/reports/coal-2024
[20] UAE-USA United, “US-UAE Partnership on Clean Energy,” https://www.uaeusaunited.com/story/uae-us-partnership-clean-energy
[21] U.S. Embassy and Consulate in the United Arab Emirates, “US-UAE Partnership to Accelerate Transition to Clean Energy,” United States Government, https://ae.usembassy.gov/fact-sheet-u-s-uae-partnership-to-accelerate-transition-to-clean-energy-pace/
[22] Embassy of the United Arab Emirates, “A Shared Vision for Energy Security and Innovation,” UAE USA United, https://www.uae-embassy.org/uae-us-shared-vision-energy-security-innovation
[23] U.ae, “UAE Energy Strategy 2050”
[24] U.ae, “UAE Energy Strategy 2050”
[25] Country Nuclear Power Profiles, “United Arab Emirates Country Highlight: 2024,” International Atomic Energy Agency, https://cnpp.iaea.org/public/countries/AE/profile/highlights
[26] U.ae, “UAE Energy Strategy 2050”
[27] “The United Arab Emirates First Long-Term Strategy Demonstrating Commitment to Net Zero by 2050,” UNFCC, https://unfccc.int/sites/default/files/resource/UAE_LTLEDS.pdf
[28] U.ae, “UAE Energy Strategy 2050”
[29] World Economic Forum, “UAE’s Al Dhafra Solar Plant Is the World’s Largest,” Video, 01:40 min, November, 2023, https://www.weforum.org/videos/solar-plant-uae-al-dhafra/
[30] World Economic Forum, “UAE’s Al Dhafra Solar Plant Is the World’s Largest”
[31] Tom Gill, “The 15 Biggest Solar Farms in the World,” The Eco Experts, March 2024, https://www.theecoexperts.co.uk/solar-panels/biggest-solar-farms
[32] Abu Dhabi National Oil Company, https://www.adnoc.ae/en/News-and-Media/Press-Releases/2023/ADNOC-to-Invest-in-One-of-the-Largest-Integrated-Carbon-Capture-Projects-in-MENA,
[33] “Masdar-The Greenest City in the World,” Energy Digital,  May 17, 2020, https://energydigital.com/smart-energy/masdar-greenest-city-world
[34] “ADNOC’s Decarbonization Drive: Targets 25 Reduction by 2030,” Oil & Gas Middle East, July 9, 2024, https://www.oilandgasmiddleeast.com/news/adnocs-decarbonisation-drive-targets-25-reduction-by-2030
[35] “UAE President Witnesses Launch of World’s First 24/7 Solar PV Battery Storage Gigascale Project to Be Built in Abu Dhabi,” MASDAR, January 14, 2025, https://masdar.ae/en/news/newsroom/uae-president-witnesses-launch-of-worlds-first-24-7-solar-pv-battery-storage
[36] “‘Not Repeating Same Mistake’: World's First AI Minister Says UAE's Tech Journey Is a Learning from the Past,” Khaleej Times, January 21, 2025, https://www.khaleejtimes.com/uae/not-repeating-same-mistake-worlds-first-ai-minister-says-uaes-tech-journey-is-a-learning-from-t
[37] World Economic Forum, Inclusive Deployment of Blockchain: Case Studies and Learnings from the UAE, January 2020, https://www3.weforum.org/docs/WEF_Inclusive_Deployment_of_Blockchain_Case_Studies_and_Learnings_from_the_United_Emirates.pdf
[38] Jennifer Aguinaldo, “Nuclear Power Will Help Region Achieve AI Ambitions,” Middle East Business Intelligence, May 6, 2024, https://www.meed.com/artificial-intelligence-key-to-regions-power-projection
[39] Thomas Spencer and Siddharth Singh, “What the Data Centre and AI Boom Could Mean for the Energy Sector,” IEA Analysis, October 18, 2024, https://www.iea.org/commentaries/what-the-data-centre-and-ai-boom-could-mean-for-the-energy-sector
[40] Emirates Nuclear Energy Company, “ENEC launches ADVANCE Program to Accelerate Decarbonization through Advanced Nuclear Technologies,” November 29, 2023, https://www.enec.gov.ae/news/latest-news/enec-launches-advance-program-to-accelerate-decarbonization-through-advanced-nuclear-technologies/
[41] “UAE President Witnesses Launch of World's First 24/7 Solar PV, Battery Storage Gigascale Project to Be Built in Abu Dhabi”
[42] “Enercap Holdings and Apex Investments Form Supercap Energy Storage Joint Venture,” The National, September 16, 2024, https://www.thenationalnews.com/advertorial/2024/09/16/enercap-holidings-and-apex-investments-form-supercap-energy-storage-joint-venture/
[43] Navdeep Suri et al., “India-Middle East-Europe Economic Corridor: Towards a New Discourse in Global Connectivity,” Observer Research Foundation, April 2024, https://www.orfonline.org/research/india-middle-east-europe-economic-corridor-towards-a-new-discourse-in-global-connectivity
[44] OpenAI, “Announcing the Stargate Project,” https://openai.com/index/announcing-the-stargate-project/
[45] US-UAE Business Council, The UAE’s Big Bet on Artificial Intelligence, February 2024, https://usuaebusiness.org/wp-content/uploads/2024/02/SectorUpdate_AIReport_Web.pdf
[46] Mackenzie Ferguson, ed., “UAE and US Forge Landmark Deal for Cutting-Edge AI Chips,” Opentools AI, May 17, 2025, https://opentools.ai/news/uae-and-us-forge-landmark-deal-for-cutting-edge-ai-chips
[47] “Trump Agrees for UAE to Build Largest AI Campus outside the US,” The Guardian, May 16, 2025, https://www.theguardian.com/us-news/2025/may/15/trump-artificial-intelligence-uae
[48] US Government Publishing Office, Congressional Record Volume 170, no. 190 (2024), pp. S7318, www.gpo.gov
[49] “Review of Maritime Transport 2023: Facts and Figures on Africa,” UNCTAD, September 27, 2023, https://unctad.org/press-material/review-maritime-transport-2023-facts-and-figures-africa
[50] Melissa Cyril, “UAE Dominates GCC Investments in Africa, Port Infrastructure and Renewables a Key Area of Focus,” Middle East Briefing, March 18, 2024, https://www.middleeastbriefing.com/news/uae-dominates-gcc-investments-in-africa-port-infrastructure-renewables-a-key-focus-area/
[51] Kyra Bos and Joyeeta Gupta, “Stranded Assets and Stranded Resources: Implications for Climate Change Mitigation and Global Sustainable Development,” Energy Research & Social Science 56 (2019), https://doi.org/10.1016/j.erss.2019.05.025
[52] “Masdar Advances 10GW Africa Growth Plan to Advance Energy Transitions in 6 Sub-Saharan African Nations,” MASDAR, December 7, 2023, https://masdar.ae/en/news/newsroom/masdar-advances-10gw-africa-growth-plan
[53] “UAE Launches Etihad 7 Renewable Energy,” Dubai Eye, January 18, 2022, https://www.dubaieye1038.com/news/local/uae-launches-etihad-7-renewable-energy-programme
[54] COP28 UAE, COP28 Declaration on a Global Climate Finance Framework, December 2023, https://www.cop28.com/en/climate_finance_framework
[55] “UAE, Brazil Align on G20 Agenda,” Zawya, November 18, 2024, https://www.zawya.com/en/economy/gcc/uae-brazil-align-on-g20-agenda-dz19hwou
[56] The Official Portal of the UAE Government, UAE Net Zero 2050, https://u.ae/en/more/uae-net-zero-2050
[57] UAE Consensus, “African Green Investment Initiative,” COP28, https://www.cop28.com/en/african-green-investment
[58] Hala Abou Ali and Atif Kubursi, “The Green Energy Transition: Employment Pathways for MENA,” The Economic Research Forum, https://theforum.erf.org.eg/2025/01/28/the-green-energy-transition-employment-pathways-for-mena/
[59] Daniel Yergin et al., “The Troubled Energy Transition-How to Find a Pragmatic Path Forward,” Foreign Affairs, February 25, 2025, https://www.foreignaffairs.com/united-states/troubled-energy-transition-yergin-orszag-arya
[60] Centre for Sustainable Systems, “US Energy System Factsheet,” University of Michigan, https://css.umich.edu/publications/factsheets/energy/us-energy-system-factsheet

### The European Union A.I. Act 2024: Understanding the Context and Exploring its Future

Introduction
The rapid development of artificial intelligence (AI) and generative AI platforms in recent years has served as a global wake-up call for the public and governments about the need to manage emerging, transformative technologies. At present, regulators around the world are working to formulate governance frameworks to tackle the highly dynamic field of AI. This dynamism is largely driven by the wide range of projections surrounding AI’s future trajectory. Industry leaders such as Sam Altman, CEO, OpenAI, paint an optimistic picture, stating that AI development will lead to the dawn of “The Intelligence Age”.[1] Others, meanwhile, highlight the dangers of AI and warn that, without regulation, an “AI Fukushima” may be inevitable.[2] The Centre for the Study of Existential Risk at Cambridge University, for instance, considers AI a potentially catastrophic threat to human civilisation.[3]
Bold statements on both technological utopias and dystopias make it difficult to develop a cohesive picture of a plausible future. Yet, regardless of the divergent perspectives, studies have indeed established the need for effective regulation to tackle AI-driven issues such as labour displacement, asymmetric wealth transfer between nations, violations of civil and human rights, and environmental impact.[4]
To address these issues, governments have released guidelines for responsible AI development and participated in multilateral discussions on AI regulation. The results have largely taken the form of prescriptive ethical guidelines and transparency obligations, instead of legally binding rules. In 2021, all 193 member states of the United Nations Educational, Scientific and Cultural Organization (UNESCO) adopted the ‘Recommendation on the Ethics of Artificial Intelligence’, which provided a roadmap for developing ethics guidelines for AI.[5] In 2023, the Indian government published a proposal for the Digital India Act (DIA),[6] informed by the governance principles outlined in NITI Aayog’s 2018 National Strategy for Artificial Intelligence.[7] The DIA proposes a “principles and rules-based” approach, guided by openness, safety and trust, accountability, quality of service, and redress mechanisms.[8]
In the United States (US), the Trump administration has released an Executive Order on ‘Removing Barriers to American Leadership in Artificial Intelligence’, aimed at supporting and deregulating the AI industry.[9] This pro-innovation deregulatory approach is in contrast to the earlier Executive Order issued by the Biden administration that emphasised safety, accountability, and transparency in AI development.[10] The shift away from AI safety principles is further underscored by the scrapping of the AI Risk Management Framework and Risk Management for Artificial Intelligence and Human Rights developed by the National Institute for Standards and Technology (NIST) and the US Department of State, respectively, under the previous US administration. To date, there has been no federal policy on AI regulation despite the introduction of over a thousand bills on AI policy in the US Congress.[11] The White House, however, has opened the federal AI policymaking process to stakeholder consultation and is set to release an AI Action Plan.
In November 2023, the United Kingdom (UK) hosted the Bletchley Park AI Safety Summit. Subsequently, the government released its AI governance consultation outcome in February 2024, recommending five cross-sectoral principles: safety, security, and robustness; appropriate transparency and explainability; fairness; accountability; and governance, contemptibility, and redress.[12] Most recently, in early 2025, France and India co-hosted the Paris AI Action Summit (PAIAS), where the declaration on “open, inclusive, transparent, ethical, safe, secure, and trustworthy” AI development was signed.[13] PAIAS also marked a point of global divergence on AI regulation with the US and the UK abstaining from signing the declaration while announcing pro-innovation deregulatory approaches that align with their national interests. While European Union (EU) member states unanimously endorsed the PAIAS pledge, the EU simultaneously signalled a tilt towards deregulation. At the Summit, European Commission (EC) President Ursula von der Leyen stated that the EU needed to cut regulatory red-tape and announced an investment package of 200 billion euros to accelerate AI development and adoption.[14] As AI platforms become increasingly capable, their strategic significance for the global economy rises in proportion.
In this policy landscape, the EU Artificial Intelligence (EU AI) Act is an important piece of legislation that establishes the world’s first legally enforceable regulatory framework for AI systems within the EU. In the global technology sector, the EU has come to occupy a leadership position in technology regulation. The EU General Data Protection Regulation (GDPR), implemented in 2018, quickly became a clarion call for data protection and the gold standard for measuring government policies globally.[15] As the first enforceable legislation for AI development, the EU AI Act has the potential to become a governance template for other nations. To understand its relevance and potential impact, this paper examines the EU AI Act and its risk-based approach to regulating AI systems according to the level of risk they pose.
The following sections explore the AI Act within the broader context of the EU’s Digital Strategy. The first section will focus on various directives and policies adopted by the EU throughout the past two decades that established the regulatory priorities outlined in the AI Act. The second section will explore the AI Act itself as well as the policy discussions leading to its ratification. The last section will analyse how industry leaders, and expert and civic groups have responded to the AI Act and its various provisions.

Contextualising the EU’s Digital Strategy
In August 2024, the EU released the Artificial Intelligence Act, the world’s first formalised legal and regulatory framework for governing AI systems.[16] Initially proposed by the European Commission (EC) in April 2021, the AI Act came into force following a series of dialogues with member states, citizen groups, and industry consortiums.[17] The AI Act is designed as a framework to govern AI systems across the public and private sectors. However, systems operating in domains such as national security and law enforcement remain exempt under specific conditions.[18] The AI Act is the latest iteration of the broader Digital Strategy adopted by the EU over the past 25 years to harmonise the digital legislative frameworks of its member states and formulate a unified governance and enforcement mechanism.[19]

e-Commerce Directive
The introduction of the e-Commerce Directive in 2000 was the first notable step taken by the EU to develop its digital strategy for the 21st century.[20] The Directive was designed to “create a legal framework to ensure the free movement of information society services between Member States,”[21] with its scope remaining limited to online information services, online retail, online advertising, online professional services, and online contracting.[22] Articles 14 and 15 of the Directive set liability rules for online service providers, reflecting a preference for an outcome-based approach over preventive measures. Article 14 requires them to remove access to illegal content upon acquiring knowledge of it, exempting them from liability if they act promptly;[23] and Article 15 prevents EU member states from imposing general monitoring obligations.[24]
The e-Commerce Directive acted as a cornerstone of the EU’s digital strategy in the 2000s, as highlighted in the EU’s i2010 policy framework released in 2005.[25] However, the preconditions for the risk-based approach of the EU AI Act subsequently emerged from an increased emphasis on end-user safety and broad-spectrum consumer rights protections in the EU’s Digital Agenda 2020 and accompanying policy reforms. This policy framework aimed to facilitate the secure and efficient movement of digital goods and services across national borders, improvement of the quality of networks and services, establishment of a single consolidated EU market, and protection of human and civil rights.[26] Several steps concerning consumer rights were taken.

The GDPR and the Digital Single Market
The EU’s preventive approach is exemplified in Regulation (EU) 2016/679 or the General Data Protection Regulation (GDPR) released in 2016.[27] The GDPR was introduced based on the stipulation in Article 8 of the EU Charter of Fundamental Rights on the protection and responsible processing of EU citizens’ personal data.[28] Signalling the EU’s precautionary approach, the GDPR puts forth regulations on the collection and processing of personal data,[29] enshrines rights of data subjects, and establishes the principle of “data protection by design” for online service providers.[30]
Subsequently, the Digital Single Market (DSM) Directive, released in 2019, addressed the deregulatory approach of the e-Commerce Directive regarding limited liability of online service providers. Article 17 of the DSM Directive specifies that online service providers must take steps to acquire authorisation from copyright holders before making user-generated content available in the public domain to prevent copyright infringement.[31] As legal scholar Gerald Spindler notes, this provision identifies service providers as active participants as their operation includes “making available to the public” content that may be protected by copyright, thus holding them liable for copyright infringement taking place on their platforms.[32] Although this approach imposed on large service providers the monumental task of filtering and categorising millions, if not billions, of user-generated items posted on their platforms every day, it highlighted a policy shift towards a precautionary approach in the EU’s Digital Strategy.

Digital Services Act Package
The next set of regulations aimed at protecting the rights of users was the Digital Services Act Package, comprising the Digital Market Act (DMA) and the Digital Services Act (DSA), adopted by the European Parliament in 2022 and released as a single set of rules applied to the EU market.[33] The DMA aims to identify ‘gatekeepers’ in the digital market and prevent the creation of monopolies and so-called ‘digital walled gardens’ by enshrining a set of compliance obligations.[34] In terms of impact, the European Commission initiated proceedings against US-based companies Alphabet, Apple, and Meta in March 2024, based on concerns of non-compliance with the obligations specified in the DMA.[35]
While the DMA established the liability of ‘gatekeepers’, the DSA sought to introduce liability standards that the e-Commerce Directive had left unaddressed.[36] Media scholar Amélie P. Heldt has identified disinformation and its associated harms as primary causes necessitating the ratification of stricter liability standards, as presented in the DSA.[37] Learning from the criticisms of legislations proposed by member states, the European Commission opted to take a more controlled approach with the DSA.[38] It did not add general monitoring mandates but expanded the operating standards for service providers regarding the takedown of illegal content.[39] The DSA demanded that service providers make online recommender systems more transparent. Additionally, the DSA introduced compliance obligations for risk management and assessment for very large online platforms (VLOPs).[40] Online traders and sellers are now also subject to wide-ranging due diligence and transparency obligations.[41]
The EU’s regulatory approach, in place till it was superseded by the AI Act, provides the rationale behind the outcome-oriented and risk-based framework within which the EU AI Act was crafted. First, the amendments and reforms made to the provisions laid out in the e-Commerce Directive of 2000 targeted specific domains such as copyright (through the DSM strategy), indicating a reluctance to overregulate and a collaborative attitude towards the industry. Through the DSA, the liability system for service providers also focused on improving end-user redress mechanisms and establishing compliance regimes, instead of imposing proactive content monitoring mandates.[42] Second, compared with the legislations passed by countries like Germany and France that were criticised as attempts at “overpolicing”, the European Commission took an ostensibly balanced approach with the DSA limiting new obligations to online marketplaces. Third, the DSA and the GDPR were enshrined based on the principles stated in the EU Charter of Fundamental Rights. The consumer-focused approach of the DSA, the GDPR, and even the DMA makes a strong reappearance in the risk-based categories outlined in the 2024 AI Act and the preceding discussions between policymakers, expert groups, business consortiums, and civic groups.

The EU AI Act
Objectives of the AI Act
In 2020, the White Paper on Artificial Intelligence, published by the European Council, highlighted the risks posed by AI systems to the fundamental rights of EU citizens outlined in the EU Charter.[43] Additionally, the paper emphasised the need for increased investment in the AI sector to support EU’s competitiveness against the tech sector in North America and Asia.[44] Since 2018, the need for increased investment and broader socioeconomic adoption of AI has been a central theme in AI policy discussions, as outlined in the European Commission’s Coordinated Plan on Artificial Intelligence.[45] To address these issues, the EU AI Act aims to establish a horizontal regulatory framework across the EU to prevent the fragmentation of the EU single market due to the distributed nature of AI development and deployment.[46] The AI Act is based on provisions from the Treaty on the Functioning of the European Union (TEFU), specifically Article 16 that enshrines the protection of EU citizens’ personal data and Article 114 that authorises the EU legislator to harmonise national laws and regulations for establishing and ensuring the functioning of the EU internal market.[47]
Prior to the AI Act, the European Commission used a ‘soft-law’ approach based on the 2019 Ethics Guidelines on Trustworthy AI, prepared by the High-Level Expert Group on Artificial Intelligence (AI HLEG), set up by the Commission in 2019. The AI HLEG proposed seven non-binding guidelines: human agency and oversight; technical robustness and safety; privacy and data governance; transparency; diversity, non-discrimination, and fairness; societal and environmental well-being; and accountability.[48] Based on the AI HLEG guidelines, public consultations, and an impact assessment study published in 2020,[49] the European Commission adopted a tiered risk-based approach for regulating AI systems.

Regulating AI Through a Risk-Based Approach
The AI Act presents itself as adopting “a clearly defined risk-based approach” to enshrine “proportionate and effective” set of rules for AI systems.[50] Novelli et al. have noted that risk-based approaches involve three phases: risk assessment and categorisation; impact assessment; and risk management.[51] By adopting a risk-based approach, the regulation first considers risk as a regulatory concern.[a] The risk categories of the AI Act are designed by calculating the foreseeable risk of AI systems causing degrees of harm to the health, safety, and fundamental rights of individuals. Based on the calculation, AI systems seen as posing unacceptable risk are prohibited. Systems seen as posing tacitly acceptable risks are further categorised into ‘high-risk’, ‘moderate risk’, and ‘limited risk’ systems.
In terms of risk management, law and economics scholar Cary Coglianese states that risk-based approaches can broadly take four forms: eliminating all risk; reducing risk to an acceptable level; reducing risk till costs are feasible; and balancing risk reduction with cost of regulation.[52] As the following sections will show, the AI Act relegates the most ubiquitous types of AI systems (e.g., LLMs and chatbots) to ‘moderate risk’ and ‘limited risk’ categories with lighter compliance obligations, and reserves the higher categories with stricter rules for systems posing the risk of severe harm. The tiered design of the AI Act helps reduce unnecessary regulatory burden and cost of regulation. By enshrining a ‘proportionate and effective’ framework, the AI Act seeks to avoid overregulation and create a conducive environment for innovation. 

Risk Category: Unacceptable Risk
The definition of AI systems in the Act is based on their ability to operate with varying levels of autonomy from human intervention due to their adaptiveness and self-learning capabilities.[53] The Act further characterises AI systems as having the ability to derive models or algorithms and draw inferences through the process of “obtaining the outputs, such as predictions, content, recommendations, or decisions, which can influence physical and virtual environments.”[54] AI systems that fall within the purview of the Act may either be products in themselves or components of a product.[55]
As the first priority, the regulation explicitly bans the use of AI systems that pose unacceptable risk to the safety, livelihoods, and rights of EU people.[56] The scope of this category extends to systems that employ subliminal techniques and are used for social scoring, and those designed to conduct real-time biometric identification in public spaces.[57] The regulation defines subliminal techniques as “manipulative or deceptive techniques that subvert or impair person’s autonomy, decision-making or free choice in ways that people are not consciously aware of.”[58] For systems employing subliminal techniques that pose unacceptable risk, the regulation cites examples such as ‘machine-brain interfaces’ and virtual reality, revealing a future-oriented and anticipatory approach towards dangers that are in the speculative realm so far.[59] While efforts to minimise such dangers should be appreciated, this categorisation does raise the question of whether the AI Act is instituting unnecessary roadblocks for platforms (‘machine-brain interfaces’ in this case) that are still in their infancy.
Another type of AI systems that are prohibited under the AI Act involves those designed for ‘social scoring of natural persons’,[60] likely an implicit reference to the social scoring system in China that has received widespread scrutiny.[61] The regulation bans AI systems that use data points on “social behaviour in multiple contexts or known, inferred or predicted personal or personality characteristics” to classify individuals or groups in ways that can lead to detrimental outcomes.[62] In a move reminiscent of the 2002 sci-fi film, Minority Report, the AI Act also prohibits predictive assessments by AI regarding a person’s potential future criminal behaviour or their use in legal proceedings against persons who have not actually committed any crime.[63] The prohibition of social scoring is related to the unacceptable risks of mass surveillance, prompting a ban on the indiscriminate scraping of facial images from the internet or CCTV footage to expand facial recognition databases.

High-Risk Systems
Following the prohibition of AI systems posing unacceptable risk, the AI Act enshrines the classification of high-risk AI systems. Such systems are distributed along eight categories.[64] These include biometric identification technologies like remote identification and emotion recognition, permitted for law enforcement under strictly defined conditions. High-risk classification also covers AI used in critical infrastructure management, educational and vocational training contexts, and employment contexts such as candidate recruitment, evaluation, and monitoring. Systems determining access to public services, benefits, emergency services, credit scoring, and insurance are also classified as high-risk. Additionally, law enforcement tools for victim or crime assessment, polygraph-like tools, evidence evaluation, and risk assessments also fall in this category. AI systems used in migration and border control for risk assessment and application processing as well as in judicial systems for legal research or influencing elections and voter behaviour are included.[65] General-purpose AI models trained with over 10²⁵ floating point operations (FLOPs) may also be deemed high-risk under the AI Act.[66]

Limited-Risk and Minimal-Risk Systems
The AI Act enshrines categories of ‘limited risk’ and ‘minimal risk’ for AI systems that do not pose any significant foreseeable threat to the rights and freedoms of people. The ‘limited risk’ category includes systems like chatbots, synthetic content such as deepfakes, AI-edited or AI-altered content, and biometric and emotional identification systems that require user consent.[67] As the name suggests, ‘minimal risk’ systems are those that pose no meaningful threat to users. This category includes tools such as spam filters and ad blockers.[68]

Exemptions and Compliance Obligations
The aforementioned use cases of high-risk AI systems (stated in Annex III of the AI Act) have some built-in exemptions for systems that only perform procedural tasks and inconsequential actions.[69] Providers of AI systems that do not meet the exemption criteria have to meet extensive compliance requirements. General-Purpose Artificial Intelligence (GPAI) models with high compute are subject to similar requirements and must additionally provide appropriately detailed summary of the data used for training the models. Compliance requirements for AI systems in the limited-risk and minimal-risk categories are confined to transparency obligations. For generative AI models and systems used to generate synthetic content, providers must watermark the AI-generated or AI-edited content, inform users that they are interacting with an AI system, and acquire user consent when deploying systems that require biometric identification.[70]

Feedback on the AI Act
Clear Objectives and Regulatory Priorities
As policy scholar Daniel Mügge notes, the dynamism of the AI sector forces policymakers to rely on speculative projections about the risks and benefits of AI systems.[71] For instance, despite being the global leader in terms of research and innovation, the US still lacks a federal regulation on AI. The AI regulatory landscape in the US consists of a patchwork of various state-level regulations. In contrast, the EU AI Act, with its risk-based approach, provides a clearer set of regulatory objectives and priorities for the EU to harmonise and “rationalise” government interventions.[72] Additionally, as previous sections have shown, the AI Act uses a balanced and proportionate approach for risk identification and classification, and for distributing regulatory burden, allowing for an efficient use of government resources.[73] The Act has also been recognised for promoting the concept of collaborative governance for AI systems.[74] Efforts on holding multistakeholder public discussions and formation of diverse expert groups ahead of the release of the regulation increase confidence and trust in the regulatory process.
Another strength of the Act is its realist stance on the global AI race. Although the regulation repeatedly and consistently emphasises risks of AI and prevention of harm to individuals, the policy discourse surrounding the AI Act has been focused on ensuring the “broadest possible uptake of AI in the [EU] economy.”[75]
The AI Act correctly leaves room for further amendments and iterations to its risk categories based on annual reviews, avoiding misidentification of AI systems and unnecessary regulatory hurdles for AI developers. However, as the following sections will show, the realist stance of the AI Act also leaves room for drawbacks, such as rigid risk categories and lacklustre risk-benefit analyses, that question the Act’s purportedly proportional approach. Additionally, implementation challenges can hinder the effectiveness of the regulation.

Lack of a Cohesive Regulatory Vision
As mentioned earlier, the AI Act is an attempt to implement a “proportionate and effective” regulatory approach designed to responsibly promote competitiveness in the EU tech sector and reduce regulatory burden on AI developers. However, stimulating continent-wide innovation requires a cohesive economic approach complementing regulatory measures. This includes establishing adequate implementation and compliance mechanisms, securing risk-tolerant funding for startups and small and medium-sized enterprises (SMEs), investing in infrastructure to support the compute and energy requirements of AI developers, and public consultations that equitably represent stakeholders’ interests. Although the EU AI Act is an attempt at formalising a streamlined horizontal approach to prevent regulatory overlap and friction between EU member states, critics have noted that the Act in conjunction with guidelines like the 2025 AI Code of Practice (the Code) and the 2022 AI Liability Directive falls short of establishing an innovation-friendly framework.[76]
The Code has received pushback from AI sector leaders and rights groups for proposing untenable compliance requirements and underrepresenting civil society stakeholders and SMEs during consultation rounds.[77] Moreover, the Code (in addition to the AI Act) will be applicable to AI systems if their output is used within the EU, irrespective of the location of their developers or deployers.[78] Consequently, the US Mission to the European Union has characterised the Code as a proxy tariff on US AI firms that are leading global AI development due to its cross-border scope.[79] Unlike the GDPR that popularised the Brussels Effect[80] and positioned the EU as a leader in global tech regulation landscape, attempting to control the trajectory of AI development—wherein industry leaders are almost exclusively American or Chinese firms[81]—may have little impact beyond delaying the entry of foreign AI models into the EU market and pushing native enterprises to more permissive markets.
The implementation of the AI Act has also been experiencing roadblocks across member states as the European Committee for Standardization (CEN) and European Committee for Electrotechnical Standardization (CENELEC) reported that the development of technical standards to be used by AI developers for compliance―expected to be released in August 2025—will likely be delayed by a year.[82] The AI Liability Directive, proposed by the European Commission in 2022 to harmonise civil liability rules for AI-related harms, has also been rescinded in 2025 due to disagreements among EU member states. Further, the appointment of fundamental rights bodies by EU member states mandated in the AI Act has also been running behind schedule, signalling a lack of shared priorities.[83]

Generality and Ambiguity of Risk Categories
The primary drawback of the AI Act stems from its effort to harmonise regulations across the EU. The optimisation towards harmonisation limits the regulation in many cases to the use of blanket categories and ambiguous language. For instance, the definitions of ‘harm’ and ‘high-risk’ remain unclear, given that Annex III identifies entire fields of application as high-risk while simultaneously exempting AI technologies solely used for military purposes.[84] Veal and Borgesius have noted the problematic approach to assessing harm caused by AI systems;[85] the Act sees harm as an outcome occurring in a small and defined timescale caused by a single or a small set of definitive events. Instead, they argue, “harm can accumulate without a single event tripping a threshold of seriousness, leaving it difficult to prove.”[86] Such “cumulative harms” often depend on several factors such as personal inclinations of users and algorithmic optimisations towards user engagement.[87]
A narrowly defined concept of harm thus dilutes enforcement by ignoring long-term behavioural distortions. An example of this issue can be found in Annex III of the Act, which describes the scope of the ‘high risk’ category. The Act states that systems intended to be used for affecting “voting behaviour” will be categorised as ‘high risk’.[88] However, the Act does not provide any examples of use cases or operational scenarios depicting how AI systems may affect people’s voting behaviour. This omission raises questions about such systems as algorithmic recommender systems.
The AI Act classifies AI systems used for creating deepfakes and synthetic information and recommender systems as limited-risk and minimal-risk systems, respectively. However, algorithmic systems deployed by social media platforms have been playing an increasingly important role in sociopolitical discourse; their role in exacerbating political polarisation has been acknowledged by researchers.[89] For instance, Elon Musk’s social media platform X has been identified as playing a non-trivial role in affecting the 2024 US presidential election as well as exacerbating political tensions in foreign nations.[90]
Algorithmic recommender systems are optimised to maximise engagement and outrage is an excellent indicator of engagement.[91] If a malicious actor does intend to deploy AI systems in this manner, as Veal and Borgesius have argued, the cumulative effects of such systems may manifest in timescales beyond the scope of the AI Act.[92] This lack of clarity in the Act raises questions about the regulatory stance on AI systems used on social media platforms.
Arguably, the most striking example of blanket categorisation in the absence of empirical evidence is the prohibition of subliminal manipulation techniques in the AI Act. The regulation specifically mentions platforms like brain-computer interfaces (BCIs) and virtual reality (VR) as posing unacceptable risk. The risk factor is the ability of BCIs and VR to manipulate end users, channelling stimuli outside of conscious perception.[93] Although attempting to mitigate such entrenched risks is useful, it should be noted that BCI and VR platforms that could pose such risks do not exist yet.
The efficacy of advanced BCI platforms currently being developed is limited and highly specific to neuromuscular rehabilitation and restoration of motor functions.[94] A promising modality for BCI development gaining traction today focuses on vision restoration.[95] Any BCI technology for this purpose will require a two-way connection between a machine and the nervous system, specifically the visual cortex. The presence of this connection also opens a possible avenue for subliminal manipulation. This possibility has led to the emergence of policy considerations regarding the protection of ‘neuro rights’.[96] Simultaneously, the Act relegates AI tools like recreational chatbots to limited- and minimal-risk categories. However, recent events, such as a lawsuit against the company Character AI over acute mental health risks posed by its chatbot, indicate that AI manipulation may not be limited to subliminal stimuli.[97] Such cases, while specific, highlight the presence of unprecedented risk factors and unknown unknowns, necessitating a more flexible categorisation to achieve the AI Act’s objective of proportionality.
A responsible approach to handling such specialised domains will require ongoing dialogue and evaluation of platforms on a case-by-case basis. Instead, the AI Act paints with a broad brush, without clarifying any parameters or criteria for what causes a risk factor to become unacceptable.[98] A premature prohibition of modalities that are central to technology platforms will do little beyond stifling innovation. This limitation in the AI Act also extends to VR, identified as a platform that can pose unacceptable risk, despite its market penetration not yet reaching a level that warrants such concerns.
The two instances mentioned above raise the broader question of why this risk category was outlined in the first place, if it specifies use cases that have not developed to cause any actual harm. One possible explanation is that the objective of the AI Act is to present itself as a safeguard against unethical practices, fostering a more receptive environment for public and private investments in AI.[99] Two interrelated elements are relevant in this respect: the risk acceptability and the broader ethical principles of the AI Act.

Asymmetric Ethical Standards
The concept of risk acceptability is crucial for facilitating discussions on AI trustworthiness. This approach was adopted by the AI HLEG while developing ethical principles to guide AI regulation in the EU. Simultaneously, applying the risk acceptability criteria first necessitates identifying the stakeholders for whom the risk should be deemed acceptable. An obvious explanation is that potential risks should primarily be acceptable to the public or end users as long as they align with the law. However, as policy scholars Laux et al. have noted, trustworthiness and risk regulation are multilayered governance factors. They argue that the trustworthiness of an AI regulation depends on “causal relationships”, such as trust in public institutions, confidence in the regulatory process, belief in a regulation’s objectives and effectiveness, and society’s overall attitude towards technology.[100]
The AI Act adopts a paternalist (as opposed to participatory) approach to risk regulation by establishing an “epistemic asymmetry of laypeople versus experts” that could lead to political asymmetry in the future.[101] In other words, the risk-based approach of the Act creates room for misalignments between public perception of risk and expert assessments.
Further asymmetries emerge if the AI Act is evaluated in relation to the role of the EU in the global AI race. Despite being home to some of the largest Western economies, none of the world’s 10 biggest AI companies are headquartered in the EU.[102] The 2024 Mario Draghi Report on European Competitiveness, which argued for an aggressive change in the industrial policy of the Union, highlighted the EU’s lagging position in AI development specifically and technology in general.[103] The report also highlighted the lack of consistent financing for startups and frontier tech SMEs, onerous compliance regimes (including the AI Act), migration of startups to less risk-averse capital markets like the US, and Europe’s dependence on foreign tech infrastructure and supply chains as significant bottlenecks for its innovation ecosystem.[104] Following the release of the report, EU officials have publicly supported and advanced initiatives like the EU-HPC (High-Performance Computing) and EuroStack to accelerate technology development in the region.[105]
While the aforementioned initiatives are new, the inertia in the EU’s AI industry was noted in the 2020 White Paper on Artificial Intelligence, published by the European Commission, that acknowledged the EU’s unfavourable position. Nevertheless, the EU has taken the lead in developing governing principles for AI systems, based on ethical principles, while avoiding overregulation. To advance this objective, as mentioned in previous sections, the European Commission established multistakeholder groups like the AI HLEG that formulated ethical guidelines for ‘trustworthy AI.’[106] However, the guidelines were criticised as the composition of the AI HLEG was seen as overrepresenting industry members and underrepresenting academia and civil society.[107] Thomas Metzinger, an ethical philosopher and former member of the AI HLEG, has characterised guiding principles like trustworthiness as attempts at “ethics washing”;[b] he also termed AI ethics debates held in the EU as “marketing ploy[s]” to facilitate the creation of future markets for AI developers.[108]
The regulatory scope of the AI Act also presents indicators of possible epistemic and political asymmetry. In 2022, the European Parliament Committee on Legal Affairs (CLA) urged the Committee on the Internal Market and Consumer Protection and the Committee on Civil Liberties, Justice, and Home Affairs to remove regulatory exemptions for AI systems used by the national security and military apparatus of EU member states from the AI Act.[109] The Act repeatedly emphasises the protection of consumer rights, civil liberties, fundamental rights, and principles like transparency and trustworthiness as a priority. However, the European Parliament’s generalised approach to maximising harmonisation prevented it from adopting the amendment proposed by the CLA.
When the decision to not adopt the CLA recommendation is seen in conjunction with the previously mentioned prohibition of certain AI systems (concerning subliminal manipulation via BCIs and VR) that have not evolved enough to pose a credible threat to the public, the AI Act falls short of presenting a principled regulatory vision. Nevertheless, shortcomings of the regulation can be addressed through the provisions of the final text of the EU AIA, such as in articles concerning review and evaluation, that mandate the European Commission to annually evaluate the list of prohibited systems, high-risk systems, add new use-cases, modify existing categories and remove categories.[110] Given that AI developers and deployers had been given 36 months to set up compliance mechanisms, definitive conclusions on the efficacy of the AI Act will have to wait until impact assessments are conducted in the future.

Recommendations and Conclusion
The EU AI Act is a pioneering regulatory effort to control the unpredictable dynamism of AI development. Being the first legally binding framework for governing AI, the Act is emblematic of the EU’s leadership position in global technology governance. Resulting from over two decades of Digital Strategy evolution, the risk-based approach of the AI Act—much like the GDPR—establishes a potential policy template for other governments. By enshrining a tiered classification of AI systems, ranging from unacceptable risk to minimal risk, the Act can increase enforcement efficiency by clarifying and rationalising regulatory priorities.
The AI Act should also be commended for attempting to balance innovation with safety by identifying risks to fundamental rights and consumer rights from AI systems as a regulatory concern. However, the AI Act is not without its limitations: the narrow definition of ‘harm’ in the AI Act limits harm assessment to events occurring in a short timescale triggered by definitive events;[111] the risk categories enshrined in the Act at times rely on speculative harms and untested scenarios, potentially imposing unnecessary regulatory obstacles on nascent technologies by anticipating use cases without empirical evidence; and the AI Act’s expert-driven tiered approach can create asymmetries between public perception and official assessments of acceptable risk.[112]
The following recommendations are designed to address the aforementioned issues with the AI Act.

a. Refine the definition and assessment criteria of ‘harm’. 
The AI Act needs to address cumulative harm caused by AI systems, instead of relying solely on its current event-based interpretation, which identifies harm through specific incidents. Timescale issues can be addressed through operational scenarios and illustrative use cases for prohibited and high-risk AI systems, as released by the EC, helping clarify regulation enforcement and reduce ambiguity in AI development. Given that the AI Act sees interference in election processes and voting behaviour as a high-risk area, the definition of harm should include cumulative and longer-term effects on individuals, groups, and democratic processes. Additionally, the EC should establish multidisciplinary forums—in addition to the AI HLEG—comprising economists, human rights scholars, social scientists, and technologists to delineate gradations of harm (such as cumulative or instantiated) and proportionate regulatory responses for future iterations of the Act.

b. Clarify risk category thresholds. 
Future iterations of the AI Act need to address certain AI use cases mentioned in the ‘unacceptable risk’ category. Risks posed by AI systems should not be underestimated, particularly when considered in conjunction with invasive technological platforms like BCIs and VR. However, the ambiguous language of the regulation creates unnecessary uncertainties and regulatory walls for nascent technologies that can make contributions to society, particularly through medical applications, for example. If certain AI systems or components are seen as posing unacceptable risk, the EU needs to provide exhaustive explanations and risk benchmarks for such classification through expert and civic consultations. To ensure that the proposed regulatory methods are feasible for mitigating potential future harms, the EU needs to develop evidence-based methodologies to explicate when and how AI systems cross the risk thresholds. Establishing more rigorous and transparent standards for risk assessment and management would allow the EU to avoid overregulation and address tangible risks posed by AI systems.

c. Improve stakeholder participation and diversity. 
The explicitly risk-based approach of the AI Act requires standards of risk acceptability to be established in a democratic and transparent manner. A top-down paternalist approach can create misalignments between public expectations and governance mechanisms.[113] The EU needs to move towards a more participatory approach that incorporates public opinion and diverse viewpoints in the regulatory process. This can be achieved by establishing engagement mechanisms for non-industry stakeholders to foster inclusive and democratic dialogues. Beyond expert consultations, the EC should establish deliberation forums for citizens, consumer advocacy groups, academia, and civil society organisations to raise concerns and interrogate the trade-off between innovation and foreseeable risk. Moreover, online platforms and forums can be created to solicit public feedback, understand concerns, and inform the public about emerging AI technologies and upcoming regulatory changes. By investing in transparent and participatory governance processes, the EU can better align regulations with public expectations to reinforce the legitimacy of its AI governance framework.

d. Create a participatory global regulatory ecosystem. 
Since AI development and its associated risks are rarely confined to national borders, the EU should proactively coordinate with international partners and standard-setting bodies. This can include establishing a liaison office, in addition to the proposed EU AI Office, dedicated to technology diplomacy and cross-border coordination efforts. Given the EU’s pioneering efforts in technology regulation, it could spearhead the creation of international working groups, along with emerging players in the field like India and the UAE, to harmonise transparency standards, align classifications of risk, develop inclusive and diverse ethical standards, and establish cross-border end-user redress mechanisms and interoperability standards for compliance tools.
Collaboration between the EU and emerging frontier technology markets like the UAE and India can be supported through existing projects like the India‒Middle East‒Europe Economic Corridor (IMEC) that targets connectivity as a core mission.[114] The co-hosting of 2025 PAIAS by France and India further indicates Europe’s interest in liberalising trade, connectivity, and technology diplomacy with India. As part of its Middle East engagement, the PAIAS also saw the signing of MoUs between France and the UAE for investments in AI and energy infrastructure.[115] The three jurisdictions are also more aligned on responsible AI development, compared with the US and the UK, which have shifted focus away from safety and ethical considerations. Using existing alliances and strategic platforms for creating a globally united front through common reference points and interests can help reduce conflicting rules across jurisdictions and encourage responsible innovation.
Adopting the recommendations mentioned above will allow the AI Act to adapt to evolving social-technical realities. The iterative design of the AI Act, with annual review processes and regular impact assessments, will help alleviate concerns regarding definitions and enforcement mechanisms, and enable a fair and equitable distribution of regulatory burdens. The possibility of the AI Act becoming a regulatory template for other jurisdictions will ultimately depend on whether the regulation is able to evolve in conjunction with public sentiment and industry changes.




Endnotes
[a] The AI Act defines ‘risk’ as the likelihood of foreseeable or possible harm transforming into actual harm, whether it is physical, economic, or psychological.
[b] Ethics washing, similar to the concept of greenwashing, refers to performative actions by companies and regulators that signal a commitment to governing principles like trustworthiness to allay public scepticism. Metzinger’s comments were made in reference to the emphasis placed on governing principles like trustworthiness in the EU AIA while prohibitions against controversial AI platforms like autonomous weapon systems were diluted seemingly due to industry intervention. See: https://www.cambridge.org/core/journals/asian-journal-of-law-and-society/article/on-the-governance-of-artificial-intelligence-through-ethics-guidelines/992BD33CA7CBBE83E2FBBF6B0179896C
[1] Sam Altman, “The Intelligence Age,” September 23, 2024, https://ia.samaltman.com.
[2] Ian Sample, “‘An AI Fukushima is Inevitable’: Scientists Discuss Technology’s Immense Potential and Dangers,” The Guardian, November 22, 2024, https://www.theguardian.com/science/2024/nov/22/an-ai-fukushima-is-inevitable-scientists-discuss-technologys-immense-potential-and-dangers.
[3] “Risks from Artificial Intelligence,” Centre for the Study of Existential Risk, University of Cambridge, https://www.cser.ac.uk/work/research-themes/risks-from-artificial-intelligence/.
[4] Kristalina Georgieva, “AI Will Transform the Global Economy. Let’s Make Sure It Benefits Humanity,” International Monetary Fund, January 14, 2024, https://www.imf.org/en/Blogs/Articles/2024/01/14/ai-will-transform-the-global-economy-lets-make-sure-it-benefits-humanity.
[5] “193 Countries Adopt First-Ever Agreement on the Ethics of Artificial Intelligence,” United Nations News, November 25, 2021, https://news.un.org/en/story/2021/11/1106612.
[6] Sanhita Chauriha, “How the Digital India Act Will Shape the Future of the Country’s Cyber Landscape,” The Hindu, October 9, 2023, https://www.thehindu.com/sci-tech/technology/how-the-digital-india-act-will-shape-the-future-of-the-countrys-cyber-landscape/article67397155.ece.
[7] “National Strategy for Artificial Intelligence,” NITI Aayog, June 2018, https://www.niti.gov.in/sites/default/files/2023-03/National-Strategy-for-Artificial-Intelligence.pdf.
[8] Chauriha, “How the Digital India Act Will Shape the Future of the Country’s Cyber Landscape”
[9] The White House, “Removing Barriers to American Leadership in Artificial Intelligence,” January 23, 2025, https://www.whitehouse.gov/presidential-actions/2025/01/removing-barriers-to-american-leadership-in-artificial-intelligence/
[10] The White House, Executive Order on the Safe, Secure and Trustworthy Development and Use of Artificial Intelligence, November 1, 2023, https://www.federalregister.gov/documents/2023/11/01/2023-24283/safe-secure-and-trustworthy-development-and-use-of-artificial-intelligence
[11] Kevin Frazier and Adam Thierer, “1,000 AI Bills: Time for Congress to Get Serious About Preemption,” Lawfare, May 9, 2025, https://www.lawfaremedia.org/article/1-000-ai-bills--time-for-congress-to-get-serious-about-preemption
[12] United Kingdom Office for Artificial Intelligence, A pro-innovation approach to AI regulation, Department of Science, Innovation, and Technology, 2023, https://www.gov.uk/government/publications/ai-regulation-a-pro-innovation-approach/white-paper.
[13] Palais de l’Élysée, “Statement on Inclusive and Sustainable Artificial Intelligence for People and the Planet,” February 10-11, 2025, https://www.politico.eu/wp-content/uploads/2025/02/11/02-11-AI-Action-Summit-Declaration.pdf.
[14] Justin Hendrix, “Podcast: Paths Diverge at the Paris AI Action Summit,” TechPolicy Press, February 16, 2025, https://www.techpolicy.press/podcast-paths-diverge-at-the-paris-ai-action-summit/
[15] Giovanni Buttarelli, “The EU GDPR as clarion call for a new global digital gold standard,” International Data Privacy Law 6, no. 2 (2016), https://academic.oup.com/idpl/article/6/2/77/2404469?login=false.
[16] Directorate-General for Communication, European Commission, https://commission.europa.eu/news/ai-act-enters-force-2024-08-01_en, 2024.
[17] “EU AIA: first regulation on artificial intelligence,” European Parliament, June 18, 2024, https://www.europarl.europa.eu/topics/en/article/20230601STO93804/eu-ai-act-first-regulation-on-artificial-intelligence
[18] European Parliament, Artificial Intelligence Act: deal on comprehensive rules for trustworthy AI, December 9, 2023, https://www.europarl.europa.eu/news/en/press-room/20231206IPR15699/artificial-intelligence-act-deal-on-comprehensive-rules-for-trustworthy-ai
[19] Council of the EU. https://www.consilium.europa.eu/en/press/press-releases/2024/05/21/artificial-intelligence-ai-act-council-gives-final-green-light-to-the-first-worldwide-rules-on-ai/pdf/, 2024.
[20] European Parliament, “Directive 2000/31/EC on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Directive on electronic commerce),” Official Journal L 178, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32000L0031
[21] ‘Directive 2000/31/EC’, p. 2
[22] ‘Directive 2000/31/EC’, p. 4
[23] ‘Directive 2000/31/EC’, p. 13
[24] ‘Directive 2000/31/EC’, p. 13
[25] ‘E-Commerce Directive’, European Commission, June 7, 2022, https://digital-strategy.ec.europa.eu/en/policies/e-commerce-directive
[26] ‘Digital agenda for Europe’, European Parliament, April 2024, https://www.europarl.europa.eu/factsheets/en/sheet/64/digital-agenda-for-europe
[27] European Parliament, “Regulation (EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation),” Official Journal L 119/1, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:02016R0679-20160504
[28] European Commission, Legal Framework of EU Data Protection, https://commission.europa.eu/law/law-topic/data-protection/legal-framework-eu-data-protection_en; European Union, “Charter of Fundamental Rights of the European Union,” Official Journal of the European Union, 2012,  https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:12012P/TXT.
[29] ‘Regulation (EU) 2016/679’, pp. 6-7, 9-11
[30] ‘Regulation (EU) 2016/679’, pp. 15-17, 19-20
[31] European Parliament, “Directive (EU) 2019/790 on copyright and related rights in the Digital Single Market and amending Directives 96/9/EC and 2001/29/EC,” Official Journal L 130, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019L0790.
[32] Gerald Spindler, “EU Internet policy in the 2020s,” in Research Handbook on EU Internet Law (Cheltenham, UK: Edward Elgar Publishing, 2023), https://www.elgaronline.com/edcollchap/book/9781803920887/book-part-9781803920887-7.xml.
[33] “The Digital Services Act package,” European Commission, https://digital-strategy.ec.europa.eu/en/policies/digital-services-act-package
[34] “About the Digital Markets Act,” European Commission, https://digital-markets-act.ec.europa.eu/about-dma_en
[35] “Digital Services Act: Questions and Answers,” European Commission, https://digital-strategy.ec.europa.eu/en/faqs/digital-services-act-questions-and-answers
[36] Amélie P. Heldt, “EU Digital Services Act: The White Hope of Intermediary Regulation,” in Digital Platform Regulation: Global Perspectives on Internet Governance, ed. Terry Flew and Fiona R. Martin (Switzerland: Palgrave Macmillan, 2022), 69-84, https://library.oapen.org/bitstream/handle/20.500.12657/56979/1/978-3-030-95220-4.pdf#page=82.
[37] Heldt, “EU Digital Services Act,” 70-71
[38] Two useful examples are the ‘Avia Law’ proposed in France and ‘NetzDG’ proposed in Germany, see: “French Avia Law declared unconstitutional: what does this reach us at EU level?,” EDRi, June 24, 2020, https://edri.org/our-work/french-avia-law-declared-unconstitutional-what-does-this-teach-us-at-eu-level/; Diane Lee, “Germany’s NetzDG and the Threat to Online Free Speech,” Yale Law School, October 10, 2017, https://law.yale.edu/mfia/case-disclosed/germanys-netzdg-and-threat-online-free-speech.
[39] Spindler, “EU Internet policy in the 2020s,” 8.
[40] European Parliament, “Regulation (EU) 2019/1150 on promoting fairness and transparency for business user of online intermediation services,” Official Journal L 186, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019R1150
[41] “Regulation (EU) 2019/1150”
[42] Heldt, “EU Digital Services Act,” 72
[43] “White Paper on Artificial Intelligence – A European approach to excellence and trust,” European Commission, February 19, 2020, Brussels, https://commission.europa.eu/document/download/d2ec4039-c5be-423a-81ef-b9e44e79825b_en?filename=commission-white-paper-artificial-intelligence-feb2020_en.pdf
[44] “White Paper on Artificial Intelligence,” 4
[45] European Commission, “Coordinated Plan on Artificial Intelligence,” COM(2018) 795 final, December 7, 2018, https://eur-lex.europa.eu/resource.html?uri=cellar:22ee84bb-fa04-11e8-a96d-01aa75ed71a1.0002.02/DOC_1&format=PDF.
[46] Tambiama Madiega, “Artificial intelligence act,” European Parliament Research Service, March 2024, https://www.iisf.ie/files/UserFiles/cybersecurity-legislation-ireland/EU-AI-Act.pdf.
[47] Madiega, “Artificial intelligence act,” 2.
[48] European Commission, “Ethics Guidelines for Trustworthy AI,” High-Level Group on Artificial Intelligence, April 8, 2019, https://digital-strategy.ec.europa.eu/en/library/ethics-guidelines-trustworthy-ai.
[49] European Commission, “Impact Assessment Laying Down Harmonised Rules on Artificial Intelligence (Artificial Intelligence Act) And Amending Certain Union Legislative Acts,” April 21, 2021, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52021SC0084&qid=1619708088989.
[50] European Parliament, “Regulation (EU) 2024/1689 of the European Parliament and of the Council of 13 June 2024 laying down harmonised rules on artificial intelligence and amending Regulations (EC) No 300/2008, (EU) No 167/2013, (EU) No 168/2013, (EU) 2018/858, (EU) 2018/1139 and (EU) 2019/2144 and Directives 2014/90/EU, (EU) 2016/797 and (EU) 2020/1828 (Artificial Intelligence Act),” Official Journal, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32024R1689&qid=1731278257144.
[51] “Regulation (EU) 2024/1689,” 7
[52] Claudio Novelli, Federico Casolari, Antonio Rotolo, Mariarosaria Taddeo and Luciano Floridi, “AI Risk Assessment: A Scenario-Based, Proportional Methodology for the AI Act,” Digital Society 3, no. 13 (2024), https://link.springer.com/content/pdf/10.1007/s44206-024-00095-1.pdf.
[53] “Regulation (EU) 2024/1689,” 4
[54] “Regulation (EU) 2024/1689,” 4
[55]  “Regulation (EU) 2024/1689,” 4
[56] “Regulation (EU) 2024/1689,” 52
[57] “Regulation (EU) 2024/1689,” 51-53
[58] “Regulation (EU) 2024/1689,” 8
[59] “Regulation (EU) 2024/1689,” 8
[60] “Regulation (EU) 2024/1689,” 9
[61] Zeyi Yang, “China just announced a new social credit law. Here’s what it means,” MIT Technology Review, November 22, 2022, https://www.technologyreview.com/2022/11/22/1063605/china-announced-a-new-social-credit-law-what-does-it-mean/.
[62]  “Regulation (EU) 2024/1689,” 9
[63]  “Regulation (EU) 2024/1689,” 9
[64] “Regulation (EU) 2024/1689,” 127-129
[65] “Regulation (EU) 2024/1689,” 127-129
[66] “High-level summary of the AI Act,” EU Artificial Intelligence Act, February 27, 2024, https://artificialintelligenceact.eu/high-level-summary/
[67] “EU AI Act Risk Categories: Each Category Explained,” Captain Compliance, May 13, 2024, https://www.captaincompliance.com/education/eu-ai-act-risk-categories/
[68] “EU AI Act Risk Categories: Each Category Explained”
[69]  “High-level summary of the AI Act”
[70] “High-level summary of the AI Act”
[71] Daniel Mügge, “EU AI sovereignty: for whom, to what end, and to whose benefit?” Journal of European Public Policy 31, no. 8 (2024): 2200-2225, https://www.tandfonline.com/doi/pdf/10.1080/13501763.2024.2318475.
[72] Martin Ebers, “Truly Risk-based Regulation of Artificial Intelligence: How to Implement the EU’s AI Act,” European Journal of Risk Regulation, (2024): 1-20, https://www.cambridge.org/core/services/aop-cambridge-core/content/view/E526C1D0D7368F9691082220609D60F4/S1867299X24000783a.pdf/truly_riskbased_regulation_of_artificial_intelligence_how_to_implement_the_eus_ai_act.pdf.
[73] “Truly Risk-based Regulation of Artificial Intelligence”
[74] Celso Cancela-Outeda, “The EU’s AI act: A framework for collaborative governance,” Internet of Things 27, (2024): 1-11, https://www.sciencedirect.com/science/article/pii/S2542660524002324?ref=pdf_download&fr=RR-9&rr=8f4aa75c9b53ed08.
[75] “Coordinated Plan on Artificial Intelligence”
[76] Oliver Roberts, “EU AI Act’s Burdensome Regulation Could Impair AI Innovation,” Bloomberg Law, February 21, 2025, https://news.bloomberglaw.com/us-law-week/eu-ai-acts-burdensome-regulations-could-impair-ai-innovation
[77] Pieter Haech, “EU Rules for advanced AI are step in wrong direction, Google says,” Politico, February 10, 2025, https://www.politico.eu/article/google-eu-rules-advanced-ai-artificial-intelligence-step-in-wrong-direction/; Cynthia Kroet, “Big Tech watered down AI Code of Practice: report,” Euro News, April 30, 2025, https://www.euronews.com/next/2025/04/30/big-tech-watered-down-ai-code-of-practice-report
[78] Theophile Maizire, “EU’s AI Code of Practice: Third Draft,” techUK, March 11, 2025, https://www.techuk.org/resource/eu-s-ai-code-of-practice-third-draft.html
[79] Kroet, “Big Tech watered down AI Code of Practice”
[80] Raluca Csernatoni, “The EU’s AI Power Play: Between Deregulation and Innovation,” Carnegie Endowment Europe, May 20, 2025, https://carnegieendowment.org/research/2025/05/the-eus-ai-power-play-between-deregulation-and-innovation?lang=en&center=europe&mkt_tok=ODEzLVhZVS00MjIAAAGai-WxBUpbSvUpmBxHR3_HTYaA49dy6ctmkOW3RFh935KBXLI5y2eroEvmBtAFy2ZjCkfjD0LR071tp3iHkhHpZFdHg80exHkTGEk9.
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[87]  Veale and Borgesius, “Demystifying the Draft EU Artificial Intelligence Act”
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[98] Barbara Prainsack and Nikolaus Forgó, “New AI Regulation in the EU seeks to reduce risk without assessing public benefit,” Nature Medicine 30, (2024): 1235-1237, https://www.nature.com/articles/s41591-024-02874-2.
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### Sketching the Future: Bahrain Between Two Visions

Since 2024, Bahrain has started revealing the skeleton of what will emerge as a national Vision 2050. While the launch and the details of the Vision remain largely unknown, it has largely intrigued citizens, especially as the Vision 2030 remains under implementation due to several challenges over the years. The strength of this Vision is that it encompasses various topics of interest aside from economic goals, such as societal development aims. A vision of this calibre can set the tone of how national identity in the Kingdom evolves by the middle of the century.

In October 2024, during the third Royal Address of the Sixth Legislative Term, the King of Bahrain, Hamad bin Isa al-Khalifa, underscored “the importance of completing the plans derived from the Bahrain Economic Vision 2030,” while mentioning that “work is accelerated on its next version for the year 2050”. Months earlier, the Crown Prince and Prime Minister Salman bin Hamad al-Khalifa directed the cabinet to commence consultations on Vision 2050, “with the legislative authority, the private sector, professional institutions, and civil society organisations”.
The Quiet Formation of Vision 2050
More than a year later, it remains unclear what consultations have been held. In a recent July 2025 interview with some politicians, a local newspaper, Akhbar al-Khaleej reported statements attributed to two MPs, Maryam Saleh al-Dhain, and Abdullah Hasan al-Dhaen, that hinted such consultations may be taking place. It appears that these consultations are happening behind closed doors with select representatives. However, this has not prevented any leaks to the press.  In July 2025, BFT Media, an active social media account focused on Bahrain’s economy, revealed key principles of the Vision. It claimed that Vision 2050 will focus on 1) investing in human capital; 2) improving infrastructure; and 3) supporting the legislative environment. The new vision, it is claimed, is driven by these three key words: human, infrastructure, and legislation.

Sheikh Nasser bin Hamad al-Khalifa, the King’s Representative for Humanitarian Work and Youth Affairs, recently delivered a keynote address at the 28th Saint Petersburg International Economic Forum 2025 (SPIEF). He noted that Vision 2050 will focus on “innovation, digital transformation, sustainability, and income diversification”. He also highlighted human capital and “investment in people as the foundation for national progress”.
Vision 2030: Achievements to Date
Looking ahead, such a vision must be measurable. The Vision 2030, launched in 2008, had several KPIs included in it. Below is a summary of the achievements in Bahrain since its launch. Firstly, Bahrain set out to enhance productivity and skills, said to be tracked through metrics such as real GDP per capita growth, amongst others. While GDP per capita is typically reported by credible sources in current prices (which may not reflect real GDP per capita), it indicates the magnitude and the trend of growth. It is also worth noting that while per capita measures are useful, it is still susceptible in the case of Bahrain to the ‘Will Rogers Phenomenon’ due to the large amounts of migration the country experiences—the Kingdom’s Human Development Report from 2018 has a box which explains the potential shortcomings of such a measure. Nonetheless, between 2008 and 2024, the change in GDP per capita was US$ 4,812.16, a change of 19.9 percent according to the International Monetary Fund.



Source: IMF

The second measure under this pillar was Foreign Direct Investment (FDI). On this measure, the change between 2008 and 2023 in terms of FDI stock was US$ 28,343 million, a change of 192 percent, according to the United Nations Conference on Trade and Development (UNCTAD). Notably, the Vision 2030 does not specify whether this should be measured in flows or stock.



Source: UNCTAD

The third measure under this pillar is productivity. According to the International Labour Organisation (ILO), Output per hour worked (GDP constant 2021 international $ at PPP) rose from 42.66 to 48.03 between 2008 and 2025.



Source: ILO

Other successes exist too in other pillars. Under the quality healthcare pillar, Bahrain aimed to raise life expectancy. According to the UN Population Division, this has improved by almost four years since 2008, reaching 81.42 years for both sexes in 2024.



Source: UNPD
Measurements in Flux
However, some metrics are hard to track. One such measure is the number of new medium-to-high wage jobs held by Bahrainis, and the government's open data portal lacks such data reporting. The case is similar to the public sector wage bill as a share of GDP, or the share of households earning above the national minimum income, and even the share of recurrent expenditure financed by recurrent revenues. Some raw data can be calculated, but it remains unclear why the government has not provided those calculations. For example, data on the goal of improving educational institutions in independent quality reviews and examinations, or data on improvements in provider performance according to healthcare regulatory standards, can be researched, but given that they are mentioned in the Vision, perhaps they ought to be collated and summarised by the government. Where the government does collate it, such as the case with Bahraini labour participation, it is sporadic. The case is similar to the concentration of air and water pollutants, which is not fully captured by the Supreme Council for Environment’s open data.

In another example, Bahrain’s Vision 2030 sought to “transform the economy in the longer-term by capturing emerging opportunities”. This would focus on knowledge-based sectors and increasing the output of high-value-added goods and services. The parameter set out was quite vague, and the future vision could benefit from a detailed identification of such emerging sectors, as it did with “high-potential” sectors such as tourism, business services, manufacturing, and logistics.

Additionally, as part of an objective of focusing on “developing high quality policies”, creating “predictable, transparent and fairly enforced regulatory system”, and the public sector becoming “more productive” and “accountable for delivering better quality services via leaner organisations and operations”, Vision 2030 relied on World Bank data for these measurements. This included the ‘quality of administration index’, the ‘public-sector accountability index’, the ‘regulatory quality ranking’, and the ‘ranking for government effectiveness and accountability’.

The changing nature of how the World Bank captures these measures to date means it's slightly unclear whether the latest world governance indicators by the World Bank are wholly useful to evaluate the vision. It appears some of the above indicators were discontinued. Nonetheless, the following are some of the available indicators. Bahrain’s percentile rank went down from 23.08 in 2008 to 11.27 in 2023 on the voice and accountability indicator. In the government effectiveness indicator, it went up from 66.5 in 2008 to 74.53 in 2023. Lastly, in the regulatory quality indicator, it went up from 72.33 in 2008 to 83.96 in 2023.

This may indicate that using international calculations as part of the KPIs is a mistake and that it requires backup measures. The World Economic Forum’s infrastructure ranking has not been updated for several years, and the Economist Intelligence Unit’s Livability Index is hard to access in full time series, harming the transparent tracing of the Vision’s achievements.
Conclusion
As Bahrain drafts its new vision, and likely inspires neighbours to do the same, an evaluation of 2030 was necessary. Moving forward, more transparency is needed on the process in place to draft the vision. Snippet details being revealed here and there about this vision may distract people from its ultimate goal: unity around national prosperity. It also takes away from the royal directives to make this drafting process a truly participatory one. Moreover, if the evaluation of the Vision 2030 reveals one thing, it’s that the KPIs of Vision 2050 ought to be clear, consistently measured, and shared.



Mahdi Ghuloom is a Junior Fellow, Geopolitics at the Observer Research Foundation (ORF) - Middle East.

### France’s strategic potential: Having agency in the Middle East's regional stabilisation

P5 and E3 are acronyms with significant geopolitical weight. The first term refers to the five permanent members of the United Nations Security Council (UNSC) whereas the second stands for the three European/European Union (EU)[1] countries involved in the negotiation of the 2015 Iranian nuclear agreement[2]. Among the limited number of states being part of these multilateral structures, France is the only transcontinental EU Member State with an assigned seat at both negotiation tables. These seats are historically designed to grant their occupant a decisive voice and substantial geostrategic leverage in international negotiations over conflict prevention and resolution.

Looking beyond traditional multilateral fora for conflict prevention and resolution
Amid mounting geopolitical tensions and rising risk of state-based armed conflict escalation and multiplication, the actors around historic multilateral negotiation tables confront their increasingly divergent or even hostile worldviews. At this point, such differences render these setups unable to fulfil their original functions. As adversity grows and traditional multilateral fora are losing effectiveness and credibility, the international security landscape is further deteriorating. Yet, for the states involved, these multilateral structures continue to provide platforms to highlight standpoints, bring them to the forefront and dialogue with countries having conflicting views and interests. While the conversation continues, its impact, if any, remains modest.
In this context, the prominence of strategic bilateral security and economic partnerships between regional powers is increasing. Such cooperations can, to some extent, counter fragmentation dynamics and facilitate dialogue to advance conflict resolution. This paper argues that a country capable of leveraging partnerships of this nature in conflict-prone regions, while also having a seat at multilateral negotiation tables, has significant strategic potential to shape the course of mediation efforts and peacebuilding initiatives. For states with their security and economic interests being directly impacted by regional tension-escalation, the incentives to capitalise on their positions and partnership constellations in the international arena are particularly strong.

France, a transcontinental multilateral actor and a key regional strategic partner
France is the only P5 and E3 state with geographically distant territories in Europe, America and Asia. The country is both a Euro-Atlantic and Indo-Pacific power with its national borders and strategic environments extending from the Atlantic to the Pacific. France geographically delineates the Indo-Pacific as spanning “from the eastern shores of Africa to the Pacific”. This definition also includes in this large geographic space three states of the Arabic Peninsula, located at the Southern parts of the Gulf: Yemen, Oman and the United Arab Emirates (UAE). Having 93% of its exclusive economic zone in the Indian and Pacific Oceans, it is indispensable for France to ensure the continuity of trade flows and connections between its mainland in Europe and the Pacific, through the Gulf. Consequently, any crisis and disruption in the Middle East – at the intersection of pathways between continents – poses direct risks to France’s security and economic interests. In line with this assessment, one of the main pillars of the country’s Indo-Pacific Strategy is the restoration and preservation of inter-regional stability. Therefore, France aims to uphold “alongside its partners, access to common areas in a context of strategic competition and increasingly restrictive military environments” and participate “in the maintenance of strategic stability and military balances of power through international action based on multilateralism”.

France’s strategic military presence in the Middle East – security partnership with the UAE
Consistent with this geostrategic rational, France engages in partnerships in the wider Indo-Pacific with trusted regional powers that are geographically well positioned and willing to play the role of stabilising forces. In the Gulf, the UAE emerged as a natural interlocutor and became a privileged partner with whom France has “forged an exceptional relationship” based on “mutual trust”. The partnership has notably a longstanding economic and security component. The UAE describes itself as a country that “serves as a strategic economic partner for France in the region, owing to its geographic advantage and global connectivity”, and one that has an “extensive and diversified” defence and security cooperation with Paris. The latter was established in 1995 and has been gradually elevated ever since, with the 2009 reinforced bilateral defence agreement marking a milestone in the partnership. This evolving historic cooperation allowed for the establishment of French military bases in the UAE, thereby enabling France through its Army’s sustained presence in the region to have its forces on the ground in a geostrategic hotspot. Thanks to these military bases in the UAE – the only French ones in the Gulf – Paris has become an actor of the Middle Eastern security architecture. This collaboration also provides a framework for France “to reaffirm its solidarity [with the UAE] through security guarantees” and aims to strengthen the military and defence capabilities of the Emirates.
Considering both countries’ high economic and security stakes in the region, they regularly reaffirm their shared interest for peaceful coexistence in the Middle East. In May 2025, both “parties expressed their continued commitment to peace, stability, and security in line with international law and emphasized the need to find just and sustainable solutions to the crises in the region”. Grounded in this strategic cooperation – the two countries naturally turn to one another amid regional conflict outbreaks and gravitate toward mutually reinforcing de-escalation efforts. As tensions raised between Iran and Israel in June 2025, France and the UAE actively engaged in multiple bilateral exchanges as well as in distinct discussions with other regional partners. On 13 June, the President of France, Emmanual Macron, stated that the country stands by its regional partners – like the UAE – and is ready and willing to support them by French forces. During a subsequent phone conversation with the President of the UAE, His Highness Sheikh Mohamed bin Zayed Al Nahyan, the Emirati leader “underlined the importance of intensifying regional and international efforts to bring about an immediate end to the escalation and prioritise dialogue and diplomacy to contain the crisis and reach a peaceful solution”. His Highness also emphasized the role and responsibility of the UNSC – with France as one its permanent members – in “preventing further escalation and taking urgent and necessary measures to achieve a ceasefire and reinforce international peace and security”.

France’s unique strategic potential to have agency in regional stabilisation efforts
For regional and global efforts to be efficient and lasting, they shall be complementary and mutually reinforcing. Based on this rational, France’s strategic potential to have agency in conflict-resolution efforts is unique. The country is not only the single Euro-Atlantic and Indo-Pacific P5 and E3 member, but it is also a strategic economic and security partner of the UAE, a main regional actor in the Middle East located between France’s mainland and overseas territories. By thoughtfully leveraging its diverse diplomatique positions, connections and assets, France could avoid being sidelined of the peacebuilding efforts and take an active role in the region’s stabilisation.
Being both a Euro-Atlantic and an Indo-Pacific power could allow France to move beyond a merely Euro-centric perspective by bringing a multi-regional viewpoint to the negotiation table. However, to be accepted and perceived as a legitimate actor in this process, the country has a challenging task. It needs to value the stance of its partners from the Middle East while actively coordinating with its peer EU Member States and dialoging with the other P5 powers.



Eszter Karacsony is an Associate Fellow (Geopolitics) and Programme Lead, Observer Research Foundation- Middle East.



[1] Since the agreement’s negotiation, the United Kingdom left the European Union.
[2] The Joint Comprehensive Plan of Action (JCPoA).

### Iraq on the Sidelines of Regional Conflict

Amidst Israel’s confrontation with Iran and its broader campaign against the Axis of Resistance, Iraq has remained largely outside the spotlight. As Iran’s regional influence wanes under sustained Israeli and American pressure, Iraq’s Iran-aligned factions are recalibrating, opting for restraint over confrontation and prioritising political survival over ideological loyalty. With elections approaching and regional dynamics in flux, Iraq’s political players are focused on managing domestic matters and less concerned with what is happening in the neighbourhood.

Iraq has been a bystander in the ongoing conflict between Israel and Iran. Despite Israel’s ongoing military operations in Gaza, its systematic efforts to degrade Hezbollah’s capabilities in Lebanon, regular airstrikes in Syria, and now open conflict with Iran, Iraq has resisted being drawn into this escalating regional confrontation.  Iraq, which has endured two decades of war, occupation, and political instability since 2003, has thus far remained on the sidelines. Nevertheless, the Iran-aligned Popular Mobilisation Forces (PMF) in Iraq have expressed support for Iran. Asaib Ahl al-Haq's spokesman, Jawad al-Talibawi, affirmed loyalty to Iran’s Supreme Leader and warned Washington of the consequences of siding with Tel Aviv. Statements from Asaib Ahl al-Haq and Kataib Hezbollah signalled their readiness to confront US forces should they intervene militarily on Israel’s behalf.  The US took the decision to launch Operation Midnight Hammer on 21 June 2025, striking three Iranian nuclear sites, Fordo, Natanz, and Isfahan, with B-2 Spirit bombers and submarine-launched Tomahawk missiles.

It is, therefore, all the more surprising that the PMF did not respond to the US strikes on Iran, given their track record of targeting American personnel, bases, and assets across the region. Since regional tensions escalated following the 7 October 2023 Hamas attack against Israel, Iran-aligned militias have launched over 180 attacks on US forces in Iraq, Syria, and Jordan. These include the deadly strike in Jordan by Kataib Hezbollah, a leading PMF faction and sister group to the Islamic Resistance in Iraq, which killed three American service members and injured 40 at the Tour 22 logistics base in Jordan on 28 January 2024. The US Embassy in Baghdad, the Erbil airbase, and multiple sites across the Kurdistan Region have also been repeatedly targeted in 2023. Against this backdrop, their silence following the 21 June strikes is not only uncharacteristic but also politically significant.

This restraint can be partly explained by the weakening of Iran’s Axis of Resistance. Tehran’s forward defence posture - developed by the late Quds Force commander Qasem Suleimani - relied on a network of armed groups including Hezbollah, Asaib Ahl al-Haq, Kataib Hezbollah, and the Houthis to project power and threaten Israel’s security. Following the 2006 Israel-Hezbollah war, this axis constrained Israel’s freedom of action, largely confining it to operations in Gaza and the West Bank. However, Israel’s post-7 October 2023 campaign to reassert deterrence, underpinned by years of planning and intelligence gathering, rapidly dismantled key elements of the network: Hezbollah was severely degraded, Hamas was decimated, and the Houthis were struck hard. The collapse of the Assad regime in Syria, the longstanding cornerstone of Iran’s regional strategy, further severed critical supply lines to Hezbollah and other allied groups. Consequently, Iran-aligned groups in Iraq are in no position to confront the US or Israel, otherwise they face the same existential threat as their counterparts in the Axis of Resistance. Moreover, Israel has established air superiority over the Islamic Republic and forced the Iranian leadership into accepting a ceasefire, meaning it has the operational freedom and capability to target Iran-aligned PMFs at will.

Israel’s 12-day campaign of sustained strikes against Iran. This, coupled with its success in drawing the US into the conflict, marks a significant threshold in the regional balance of power. The operation has not only exposed vulnerabilities in Iran’s defence posture but has also introduced a continuous threat to its security architecture. For the foreseeable future, Iran is unlikely to be viewed as a major threat to Israeli security, a shift that will reverberate across the strategic landscape of the Middle East.

Iran’s influence across the region has notably diminished. Its ability to project power and shape political outcomes in neighbouring states, once a hallmark of its regional strategy, has been curtailed by military setbacks, the weakening of allied groups, and the collapse of key strategic partnerships. As a result, Tehran now faces growing constraints in leveraging its networks to influence domestic politics in countries like Iraq, Lebanon, and Syria.

The weakening of Iran’s regional posture is also reshaping the PMF’s domestic political calculus. With Tehran’s ability to project power diminished, its allied groups in Iraq are recalibrating their strategies, not least because they face growing scrutiny at home. The upcoming parliamentary elections in November 2025 have raised the stakes, overt military action alienates voters already disillusioned by years of instability and militia dominance. Instead, PMF factions appear to be prioritising political consolidation over confrontation, seeking to entrench their influence through the ballot box rather than the battlefield.

This recalibration is also shaping Iraq’s external posture, particularly in its relations with the US and Gulf Arab states. Baghdad has sought to maintain a careful balance, avoiding overt alignment with either Washington or Tehran, yet the weakening of Iran’s regional position has created new diplomatic space. US officials have quietly welcomed the PMF’s restraint, interpreting it as a sign that Iraq’s political leadership may be gaining greater influence over armed actors. At the same time, Gulf Arab states, especially Saudi Arabia and the UAE, are watching closely for signs that Iraq might pivot further away from Iran’s orbit. While such a shift remains tentative, the current moment presents an opportunity for Baghdad to reassert its sovereignty and recalibrate its regional relationships.

As Iraq approaches its November elections, the interplay between domestic politics and shifting regional dynamics will be critical to watch. The PMF’s current restraint may prove temporary, particularly if the conflict between Israel and Iran recommences or if US forces become more directly involved. However, the combination of electoral pressure, diminished Iranian influence, and a newly emerging regional environment offers Baghdad a rare window to assert greater political independence. Whether Iraq’s leaders can seize this moment to strengthen state institutions and rebalance foreign relations will shape not only the country’s trajectory but also its role in the new region.



Neil Quilliam is a foreign affairs specialist with extensive experience consulting with government officials and corporate clients on geopolitics and energy issues in the Middle East.

### The Dangerous Romanticism of Orchestrating Regime Change in Iran

US President Donald Trump’s decision to conduct tactical strikes against three core Iranian nuclear sites, Fordow, Natanz and Esfahan, has brought Washington into what was predominantly a war between Israel and Iran. Despite the US intelligence apparatus suggesting a lack of evidence that Tehran was galloping towards nuclear weapons, Israeli whispers into Trump’s ears that Iran was indeed close to getting nuclear warheads won the intelligence race.

Iran responded by launching missiles against the largest US military facility in the Middle East, the Al Udeid base in Qatar, bringing a new dimension to the conflict. This is the first time in Qatar’s history that the country has had to respond to military aggression from one of its friendly neighbours. Doha has previously hosted talks on Iran’s nuclear programme and mediated between Hamas, Israel, and the US.

The proverbial strategic ball is now in Iran’s court, and perhaps more specifically, decisions that the country’s Supreme Leader, Ayatollah Khamenei, may take. While awaiting further retaliation by Iran, the idea of a regime change has been played around with by actors in both Israel and the US alike. Despite his own team saying the US strikes were only to target Iran’s nuclear programme with no intention of orchestrating political change, Trump took to social media to first demand Iran’s “unconditional surrender,” and more recently, asked why there should not be a regime change in the country if its leaders cannot “make Iran great again”.
The narrative of regime change is not new for the US. Contemporary examples such as Afghanistan and Iraq stand out as mostly failed endeavours costing the American exchequer trillions of dollars.
The geopolitics of romanticising regime change 
The narrative of regime change is not new for the US. Contemporary examples such as Afghanistan and Iraq stand out as mostly failed endeavours costing the American exchequer trillions of dollars. In 1953, a coup d’etat backed by the intelligence agencies of the UK and the US took down the elected Iranian government of Mohammed Mosaddegh and replaced him with the pro-Western Mohammed Reza Pahlavi, the Shah of Iran. The main reason for Western intervention here was what came to be known as the Abadan crisis, in which Mosaddegh took the decision to nationalise the country’s oil assets away from the control of the Anglo-Iranian Oil Company (predecessor of what is today known as BP) and expelled Western refiners from Abadan.

The ouster of Mosaddegh in essence set the movement towards the 1979 Islamic Revolution in which the Shah was ousted, and Ayatollah Khomenei, then living in exile in France, returned to Tehran to take charge and became the spiritual and political Supreme Leader. The underpinnings of the Iranian power elites since then have been rooted in ideology, theology, and geopolitics, in which Israel and the US have been marketed as existential threats and main rivals.
In 2025, regime change in Iran may well be a pipe dream. Not necessarily only due to Iran’s position in the region and beyond, but because such endeavours have been detrimental to US security interests, ranging from Iraq in 2003 to Libya in 2011.
However, in 2025, regime change in Iran may well be a pipe dream. Not necessarily only due to Iran’s position in the region and beyond, but because such endeavours have been detrimental to US security interests, ranging from Iraq in 2003 to Libya in 2011. Both Baghdad and Tripoli remain strangulated by their political inability to recover since Saddam Hussein and Muammar Gaddafi were removed from power. Iran has been dealt severe blows by Israel, to the point where even the most pessimistic assessments of its military capabilities have been surpassed. Israel demonstrated a near-total domination of Tehran’s airspace.
Domestic and Regional Intricacies  
The Iranian Supreme Leader is not merely a political head of the country, but also a spiritual and religious one. Ayatollah Khamenei, now in his late 80s and in charge since 1989, has deeply rooted the Revolutionary movement in Iran over the past decades. The absence of immediate political alternatives means that any targeting of the top leadership could only lead to an initiation of the Ayatollah’s own succession plans, as has been seen in the way the top military leadership, including those of the Islamic Revolutionary Guard Corps (IRGC), were replaced after being killed in targeted Israeli strikes.

However, it is the religious positioning of the Iranian Revolution and the potential impact of a direct challenge to it that requires further consideration. Much like Israel’s posture of being the land of Jewish identity and security, Iran is looked upon similarly by millions of Shia Muslims living across the world. An overt targeting of the Ayatollah could reverberate across nations and regions (15-17 percent of India’s Muslim population is Shia). This could also upend the delicate balancing of sectarian divides, which are today suppressed but persist in the Middle East, to come out more viscerally once again and spill into neighbouring Arab states.
The absence of immediate political alternatives means that any targeting of the top leadership could only lead to an initiation of the Ayatollah’s own succession plans, as has been seen in the way the top military leadership, including those of the Islamic Revolutionary Guard Corps (IRGC), were replaced after being killed in targeted Israeli strikes.
Beyond the sectarian spillovers, even moderates within Iranian society who, despite the odds, brought into power Masoud Pezeshkian—the only moderate candidate in the country’s 2024 elections—may predominantly rally around Iranian nationalist fervour rather than opposing the regime. Israel’s military campaign in Gaza and the associated civilian casualties have generated a negative posture against the state across political divides. A prolonged military campaign against Iran could entrench such a public opinion, even though the Iranian diaspora living in the West would support the idea of unseating the current power structures.

In all of this, the centrality of the IRGC itself would be a crucial actor. The IRGC’s wide net of influence across Iranian society, economy, and polity has the Ayatollah’s patronage as its core tenet. IRGC’s impunity in the system is backed by the fact that it operates directly under the Supreme Leader’s tutelage and has strong equities built into this very structure for its survival as an institution. Even in the Ayatollah’s succession plans, pushed into top gear since 2022, the IRGC is widely expected to have a strong say. A space where both these powerful circles in Iran now face a challenge is Israel’s dominance in the air. Consistent degradation of the inventory and personnel of the IRGC will force it to scramble and come up with countermeasures. With next to no air defence remaining, it may look to push the remaining capacities of groups such as Houthis in Yemen and Hezbollah in Lebanon into a long-term framework. What is usually degraded does not necessarily mean it has been destroyed. But for now, Iran’s proxies are expected to have limited impact, with Hezbollah recently suggesting it has no plans to attack Israel in way of showcasing support and loyalty towards Iran.
Israel’s military campaign in Gaza and the associated civilian casualties have generated a negative posture against the state across political divides. A prolonged military campaign against Iran could entrench such a public opinion.
Israel’s Upper Hand 
The question of aiding or outrightly orchestrating political change as a strategy will come from Israel and not the US. Washington D.C. may not advise Israel otherwise, but will not become a sponsor for the same unless US military assets in the region are targeted further and casualties take place. Trump, by striking Iran, has already challenged one of his main campaign deliverables: not to enter another foreign war. The Iranian regime may play this card to ensure it is a quagmire ahead for the White House if its survivability is challenged.

The above play brings much of the region under scrutiny. The neighbouring Gulf states, home to some of the world’s largest economic success stories of the recent past, are in uncharted territory as the conflict breaks beyond the guardrails. Israel’s continuous tactical successes against Iran, meanwhile, seem to be motivating the country’s decision makers to skirt international pressure and inflict as much damage as possible—not only against Iranian nuclear and military sites but also IRGC facilities to weaken the regime’s hold. Gnawing away at Iran’s capacity will remain an enticing strategy for Israeli strategists. The recent targeting of the IRGC’s Basij and Alborz forces, units specifically tasked with internal security and protection of the regime’s political stability, supports such a hypothesis. The Evin Prison, known to hold opposition political leaders as prisoners, was also hit in a possible bid to try and free the captives held there.

Finally, despite erratic interventions by Trump, announced via his social media account, the fundamental challenges that bog down Iran and Israel will persist. Israel has taken advantage of an open window to neutralise the Iranian security apparatus, pushing Tehran into survival mode. How Iran navigates this episode will have a direct and long-term impact on the stability of its political architecture, the protection of which remains Tehran’s foremost objective.



Kabir Taneja is a Deputy Director and Fellow with the Strategic Studies programme at the Observer Research Foundation.

### The EU’s challenge: Play the role of a strategically prudent but assertive actor

Much has changed since July 2015, when the European Union (EU) has taken on the role of a coordinator and facilitator of the Joint Comprehensive Plan of Action on Iran’s nuclear programme (JCPoA), and earned recognition for it from the international community. Ten years later, the agreement no longer holds. The EU has lost influence in the region and appears to be a mere bystander in the recently launched nuclear talks between the United States (US) and Iran. It is within this context that military tensions between Israel and Iran have drastically escalated in the EU’s wider southern neighbourhood.

Recognising the major strategic importance of the Middle East for its own security, stability, and prosperity, the EU repeatedly stated that conflict resolution and de-escalation in the region are among its key priorities. Having learnt from past setbacks, the EU understands that it should carefully assess the degree and form of its involvement in any regional mediation and peace-building efforts. For the EU to influence conflict resolution  that serves its own interest, its actions need to be perceived as beneficial, credible, and legitimate. Strategic awareness and caution come across as guiding tools in defining the Union’s role and action amid the escalating conflict between Tel Aviv and Tehran. However, if the EU aims to remain relevant to the  conflict resolution process, directly impacting its security environment, it should avoid falling into the trap of a prolonged ‘wait-and-see’ approach.

As the Union advocates for a region-led initiatives by its strategic partners in the Middle East, mediation efforts guided by the Gulf states, with EU support, may allow it to play a prudent but active role in the conflict resolution. The Gulf countries have a great potential to be called upon and accepted as mediators as they are indispensable powers for regional stability. They are located at a geographically strategic position between the belligerents and engage at varying levels with both of them. In 2020, the United Arab Emirates (UAE) and Bahrain signed the Abraham Accords – a historic normalisation agreement with Israel; while Riyadh normalised its diplomatic relations with Tehran. Additionally, both the UAE and Iran became members of the expanded BRICS with Saudi Arabia’s membership yet to be finalised. The constellation of these bi- and multilateral relations and setups can serve as leverage for the Gulf states to position themselves as trusted intermediaries in negotiations between the parties.

The EU is equally aware of the Gulf states’ position and role as powers with a significant stabilising potential in the region. As it was outlined in the first EU-GCC Summit Joint Statement in October 2024, the Union “recognize[s] that GCC states play a fundamental role in dispute mediation and resolution to preserve peace and security regionally and across the globe”. Building on the Gulf states’ central role in the region, and their shared interest in restoring and maintaining peace and stability, the EU has already been strongly involved with them in “coordination on regional crises in the broader Gulf, Middle East region and the North and Horn of Africa”.

As the Israel-Iran conflict lasts and escalates, the EU’s willingness to step in and take on an active role in its resolution, and the (re)negotiation of the agreement on Iran's nuclear programme, was explicitly stated on 17 June 2025 by Kaja Kallas, the EU’s High Representative (HR) for Foreign Affairs and Security Policy: “I also took note of the support of the EU ministers in the European Union for my involvement – in the de-escalation. I will spare no efforts in this respect”. The Union strongly advocates the restoration of regional security through diplomatic solutions which can lead to enduring conflict resolution: “The EU will continue to contribute to all diplomatic efforts to reduce tensions and to find a lasting solution to the Iranian nuclear issue which can only be through a negotiated deal”. However, to achieve a lasting solution the EU endorses, it should contribute to stabilisation efforts but in an agile manner. The latter could entail, based on precedent, supporting and cooperating with regional partners having the potential to be recognised by the belligerents as mediators.

The unfolding Israel-Iran armed conflict can serve as catalyst for enhancing EU-GCC cooperation on bi-regional stability, and for elevating the existent EU-GCC Regional Security Dialogue to a higher level. By supporting stabilisation initiatives led by its regional strategic partners, the EU could engage in the de-escalation process in an active yet measured manner. For this approach to be fruitful, the EU should closely coordinate with the Gulf states, providing  them with appropriate assistance. Undoubtedly, the success of such initiatives depends heavily on the willingness of the belligerents to accommodate them, and on the involvement of other regional or global powers. Whether such conditions materialise remains to be seen. Nonetheless the EU should be prepared for various scenarios.



Eszter Karacsony is an Associate Fellow (Geopolitics) and Programme Lead, Observer Research Foundation- Middle East.

### Energy Security as Risk: As Tensions Mount in the Strait of Hormuz

The Strait of Hormuz—a narrow yet strategic waterway between Iran and Oman—is responsible for almost one-fifth of the global crude oil trade. In 2022, the oil flow through the Strait averaged 21 million barrels per day. Key OPEC players from the region, including Saudi Arabia, Iraq, the United Arab Emirates, Kuwait as well as Iran, are heavily reliant on this chokepoint for their crude exports. Likewise, Qatar, as one of the largest liquefied natural gas (LNG) exporters, depends on the Strait for nearly all of its LNG shipments.

The significance of the Strait in ensuring global energy security is immense. This crucial reality offers a strong bargaining chip in the hands of the Iranians, who, in the past, have threatened to block the passage in response to the United States (US) and European sanctions back in 2012. The same threat now looms large as tensions escalate in the region.

Oil markets have sharply reacted to the unfolding events.  Crude prices have risen by nearly 12 percent since the military attack. While oil supply from the region has not been disrupted so far, the anticipation of a disastrous flare up is making markets uneasy. Freight rates between the Gulf and Japan for fuel shipments have already doubled, and QatarEnergy has instructed its tankers to hover outside the Strait of Hormuz and enter only a day before loading. While the Bahrain-based US Fifth Fleet does provide some maritime security, commercial shipping remains wary of operating in contentious waters. The United Kingdom (UK) and Greece authorities have also advised their ships to avoid the southern Red Sea and the Gulf of Aden in anticipation of further escalation. A full or even partial blockage of the Strait would raise shipping and insurance costs, spike global energy prices and exacerbate inflationary pressures.

Historically, crude exports from the region majorly flowed towards the West. This justified the Saudi Arabia-led Arab producers embargo imposed on oil during the Israel-Egypt war in 1973. But today, the landscape has changed dramatically. Asian markets, including China and India, are its major recipients. Besides, China, having brokered a rapprochement between Saudi Arabia and Iran, might even put pressure on Iran to prevent any disruption that could cause energy prices to balloon. At the same time, United      States,      under the Trump administration, would like to keep oil prices in check, making US intervention likely if the situation escalates. On the other hand, Russia, for its part, has little incentive to de-escalate the situation – standing to gain from higher oil prices which could potentially make its own discounted oil more appealing to buyers looking to hedge against Gulf volatility.

Moreover, the blockage will be a major blow strategically and financially for Iran. As the world’s ninth largest oil producer, Iran earned an estimated US$ 53 billion from net oil exports revenues in 2023. The country exports 2 million barrels of crude and refined fuel each day out of the 3.3 million barrels of crude oil it produces. Iran is also the third largest producer of natural gas in the world accounting for 6 percent of the global production.

Blocking the Strait goes against its own interest and will hurt its friends more than its adversaries. Ironically, the one country in the region that would be least affected from a blockage of the Strait is Israel whose supply comes from the Mediterranean, from countries including Azerbaijan, the US, Brazil, Gabon,  and Nigeria.

While the Israeli attack initially focused on the Iranian nuclear and military facilities, recent developments indicate critical energy infrastructure has been struck including the South Pars gasfield, Fajr Jam gas plant, Shahran oil depot, Shahr Rey oil refinery and Tehran fuel depots.

However, all of these targets were catering to domestic fuel and power supply, while the oil-exporting infrastructure remains untouched— for now. Should this change, in response, Iran could adopt a “if I can’t export, no one else will” stance, to force regional pressure on Israel to de-escalate. However, this is not 1973. Today’s oil producing countries from West Asia are asserting strong geopolitical influence and are primarily focused on looking out for their own interests, particularly as they pursue diversification strategies beyond hydrocarbons. UAE , Saudi Arabia, and Qatar will strengthen diplomacy in an effort to ensure peace and stability in the region— key to their long term economic and geopolitical ambitions.

While some argue that blocking the Strait is not technically possible, Iran has the capability to attack tankers and disrupt maritime traffic, enough to dissuade risk-averse commercial shipping companies from making the voyage.

In anticipation of such scenarios, key Gulf producers including Saudi Arabia and the UAE, have already sought out alternative routes. Saudi Arabia operates twin oil and liquid gas pipelines which connect Abqaiq on the Gulf to Yanbu on the Red Sea coast capable of carrying up to 7 million barrels a day. The UAE’s onshore oil fields are linked to the port of Fujairah on the Gulf of Oman bypassing the Strait of Hormuz and capable of carrying 1.5 million barrels a day.

The preparedness and resilience of the UAE and Saudi Arabia is crucial to ensure global trust in the region’s energy reliability, stabilise energy markets and reinforce their geopolitical relevance. Most importantly, this crisis strengthens the case for alternative trade corridors like the India-Middle East-Europe Economic Corridor (IMEC) which envisions land and sea connectivity from the UAE to the Mediterranean. Such infrastructure corridors will become crucial, almost indispensable, as the world looks to de-risk energy and supply chains in an increasingly volatile world.



Mannat Jaspal is the Director and Fellow of Climate and Energy, Observer Research Foundation–Middle East

### Escalating Israel-Iran Tensions: Experts React

On 13 June 2025, the long-simmering tensions between Israel and Iran erupted into direct, overt conflict. Israel's large-scale air strikes targeting  Iran's nuclear and military infrastructure prompted Tehran to retaliate with ballistic missiles and drones. This escalation has shattered the region's fragile security architecture and has reignited open confrontation in the Middle East. The immediate aftermath has sent shockwaves across the globe, raising urgent questions about regional stability, global energy security, and the coherence of international alliances. As the world grapples with the fallout,  the authors offer their initial analysis on the key aspects of this rapidly evolving crisis.
Energy Security as Risk: As Tensions Mount in the Strait of Hormuz 
The Strait of Hormuz—a narrow yet strategic waterway between Iran and Oman—is responsible for almost one-fifth of the global crude oil trade. In 2022, the oil flow through the Strait averaged 21 million barrels per day. Key OPEC players from the region, including Saudi Arabia, Iraq, the United Arab Emirates, Kuwait as well as Iran, are heavily reliant on this chokepoint for their crude exports. Likewise, Qatar, as one of the largest liquefied natural gas (LNG) exporters, depends on the Strait for nearly all of its LNG shipments.

The significance of the Strait in ensuring global energy security is immense. This crucial reality offers a strong bargaining chip in the hands of the Iranians, who, in the past, have threatened to block the passage in response to the United States (US) and European sanctions back in 2012. The same threat now looms large as tensions escalate in the region.

 Oil markets have sharply reacted to the unfolding events.  Crude prices have risen by nearly 12 percent since the military attack. While the Bahrain-based US Fifth Fleet does provide some maritime security, commercial shipping remains wary of operating in contentious regions. The United Kingdom (UK) and Greece authorities have advised their ships to avoid the southern Red Sea and the Gulf of Aden in anticipation of further escalation. A full or even partial blockage of the Strait would raise shipping and insurance costs, spike global energy prices and exacerbate inflationary pressures.  

 Historically, crude exports from the region majorly flowed towards the West. This justified the Saudi Arabia-led Arab producers embargo imposed on oil during the Israel-Egypt war in 1973. But today, the landscape has changed dramatically. Asian markets, including China and India, are its major recipients. Besides, China, having brokered a rapprochement between Saudi Arabia and Iran, might even put pressure on Iran to prevent any disruption that could cause energy prices to balloon.

Moreover, the blockage will be a major blow strategically and financially for Iran. As the world’s ninth largest oil producer, Iran earned an estimated USD 53 billion from net oil exports revenues in 2023. The country exports 2 million barrels of crude and refined fuel each day out of the 3.3 million barrels of crude oil it produces. Iran is also the third largest producer of natural gas in the world accounting for 6 percent of the global production. 

Blocking the Strait goes against its own interest and will hurt its friends more than its adversaries. Ironically, the one country in the region that would be least affected from a blockage of the Strait is Israel whose supply comes from the Mediterranean, from countries including Azerbaijan, the US, Brazil, Gabon,  and Nigeria.

While the Israeli attack initially focused on the Iranian nuclear and military facilities, recent developments indicate critical energy infrastructure has been struck including the South Pars gasfield, Fajr Jam gas plant, Shahran oil depot, Shahr Rey oil refinery and Tehran fuel depots. In response, Iran could adopt a “if I can’t export, no one else will” stance, in order to force regional pressure on Israel to de-escalate. However, this is not 1973. Today’s oil producing countries from West Asia are asserting strong geopolitical influence and are primarily focussed on looking out for their own interests, particularly as they pursue diversification strategies beyond hydrocarbons.

While some argue that blocking the Strait is not technically possible, Iran has the capability to attack on tankers and disrupt maritime traffic—enough to dissuade risk-averse commercial shipping companies from making the voyage. 

In anticipation of such scenarios, key Gulf producers including Saudi Arabia and the UAE, have already sought out alternative routes. Saudi Arabia operates twin oil and liquid gas pipelines which connect Abqaiq on the Gulf to Yanbu on the Red Sea coast capable of carrying up to 7 million barrels a day. The UAE’s onshore oil fields are linked to the port of Fujairah on the Gulf of Oman bypassing the Strait of Hormuz and capable of carrying 1.5 million barrels a day.

The preparedness and resilience of the UAE and Saudi Arabia is crucial to ensure global trust in the region’s energy reliability, stabilise energy markets and reinforce their geopolitical relevance. Most importantly, this crisis strengthens the case for alternative trade corridors like the India-Middle East-Europe Economic Corridor (IMEC) which envisions land and sea connectivity from the UAE to the Mediterranean. Such infrastructure corridors will become crucial, almost indispensable, as the world looks to de-risk energy and supply chains in an increasingly volatile world.

Mannat Jaspal is the Director and Fellow of Climate and Energy, Observer Research Foundation–Middle East.
Did the US Know? What it Means for Regional Stability
In the turbulent hours following Israel airstrikes on Iran, the communication coming out of the White House was equally turbulent. In the immediate aftermath of the attack, President Trump and Secretary of State Marco Rubio flatly denied any United States (US) involvement. However, quite quickly and suddenly, this communication reversed. President Trump admitted complete foreknowledge of what he later called an “excellent” strike. This confusing reversal has left a crucial question hanging: was the US a surprised spectator or a willing accomplice? 

This question has been widely debated and two competing scenarios have gained traction. The first posits that the initial denials were true. The Trump administration was genuinely pursuing diplomacy with Iran, only to be blindsided by a unilateral Israeli action. Trump’s subsequent claim of being "in the know" was an act of political damage control, a measure to avoid the perception that America's foremost ally had completely disregarded its wishes.

The second, and more complex, possibility is that the initial American denials were part of a calculated, high-stakes diplomatic manoeuvre. With nuclear negotiations deadlocked over Iran’s refusal to agree to zero uranium enrichment, the US allowed its ally to act as an instrument of coercive pressure. Washington could have given Israel a tacit “yellow light” to demonstrate the severe alternative to a diplomatic compromise. This aligns with President Trump’s remarks, in which he warned Tehran that after giving them “chance after chance” to make a deal, that the consequences of failure would be “much worse than anything they know”. He also warned that Israel has access to the most lethal American military equipment and they know how to use it. In this calculated move, the Israeli strike was a message intended to force Iran to abandon its red lines and accept a deal under duress.

Either scenario will induce more volatility in the Middle East. If the “surprise” scenario is true, it signals a dangerous erosion of America's traditional role as the region's security guarantor. A unilateral Israeli strike that sabotages core US policy shatters the perception that Washington can effectively manage its allies and de-escalate crises. This is further compounded by the administration's difficulty in delivering the swift resolution to the wars, as was initially promised by President Trump. When other nations see that the US cannot rein in its closest partner, the credibility of its security commitments could weaken. This could create a power vacuum and dramatically increase regional volatility.

Conversely, the "calculated manoeuvre" scenario sets a precedent for using military strikes as a tool of coercive diplomacy. This approach may yield a short-term concession, but it will erode any future good-faith negotiations, especially given the strikes were conducted days before the sixth round of US-Iran Nuclear Talks. This will make a sustainable, peaceful resolution to this conflict nearly impossible.

In either case, surprise spectator or willing accomplice, this will only deepen mistrust and fuel instability. Iran is already convinced that the US knew of the attack. Regional actors will doubt Washington’s reliability and the Middle East will face even more volatility as unilateral actions replace genuine cooperation—a  reality that is already manifesting with Iran cancelling the scheduled round of Iran-US nuclear negotiations.

Samriddhi Vij is an Associate Fellow (Geopolitics), Observer Research Foundation- Middle East.
The EU’s challenge: Play the role of a strategically prudent but assertive actor
Much has changed since July 2015, when the European Union (EU) has taken on the role of a coordinator and facilitator of the Joint Comprehensive Plan of Action on Iran’s nuclear programme (JCPoA), and earned recognition for it from the international community. Ten years later, the agreement no longer holds. The EU has lost influence in the region and appears to be a mere bystander in the recently launched nuclear talks between the United States (US) and Iran. It is within this context that military tensions between Israel and Iran have drastically escalated in the EU’s wider southern neighbourhood.

Recognising the major strategic importance of the Middle East for its own security, stability, and prosperity, the EU repeatedly stated that conflict resolution and de-escalation in the region are among its key priorities. Having learnt from past setbacks, the EU understands that it should carefully assess the degree and form of its involvement in any regional mediation and peace-building efforts. For the EU to influence conflict resolution  that serves its own interest, its actions need to be perceived as beneficial, credible, and legitimate. Strategic awareness and caution come across as guiding tools in defining the Union’s role and action amid the escalating conflict between Tel Aviv and Tehran. However, if the EU aims to remain relevant to the  conflict resolution process, directly impacting its security environment, it should avoid falling into the trap of a prolonged ‘wait-and-see’ approach.

As the Union advocates for a region-led initiatives by its strategic partners in the Middle East, mediation efforts guided by the Gulf states, with EU support, may allow it to play a prudent but active role in the conflict resolution. The Gulf countries have a great potential to be called upon and accepted as mediators as they are indispensable powers for regional stability. They are located at a geographically strategic position between the belligerents and engage at varying levels with both of them. In 2020, the United Arab Emirates (UAE) and Bahrain signed the Abraham Accords⸺a historic normalisation agreement with Israel; while Riyadh normalised its diplomatic relations with Tehran. Additionally, both the UAE and Iran became members of the expanded BRICS with Saudi Arabia’s membership yet to be finalised. The constellation of these bi- and multilateral relations and setups can serve as leverage for the Gulf states to position themselves as trusted intermediaries in negotiations between the parties.

The EU is equally aware of the Gulf states’ position and role as powers with a significant stabilising potential in the region. As it was outlined in the first EU-GCC Summit Joint Statement in October 2024, the Union “recognize[s] that GCC states play a fundamental role in dispute mediation and resolution to preserve peace and security regionally and across the globe”. Building on the Gulf states’ central role in the region, and their shared interest in restoring and maintaining peace and stability, the EU has already been strongly involved with them in “coordination on regional crises in the broader Gulf, Middle East region and the North and Horn of Africa”.

The unfolding Israel-Iran armed conflict can serve as catalyst for enhancing EU-GCC cooperation on bi-regional stability, and for elevating the existent EU-GCC Regional Security Dialogue to a higher level. By supporting stabilisation initiatives led by its regional strategic partners, the EU could engage in the de-escalation process in a manner that is active yet measured. For this approach to be fruitful, the EU should closely coordinate with the Gulf states, providing  them with appropriate assistance. Undoubtedly, the success of such initiatives depends heavily on the willingness of the belligerents to accommodate such initiatives, and on the involvement of other regional or global powers. Whether such conditions materialise remains to be seen,l but the EU should be prepared for various scenarios.

Eszter Karacsony is an Associate Fellow (Geopolitics) and Programme Lead, Observer Research Foundation- Middle East.
Neighbour on the Brink: Gulf Anxiety Over a Destabiliszed Iran
The Arab Gulf States were amongst the Arab countries that condemned Israel’s ongoing campaign against Iran. For these nations, several threats have grown acute as the conflict continues. Firstly, and most importantly, is the threat of nuclear contamination. Months ago, Qatar said an attack on Iran’s nuclear sites could contaminate waters. Bahrain was amongst the countries that released an official statement this week on radiation levels in the Kingdom. This, along with  concern of misinformation causing panic amongst the population, are major worries.

On the night of 15-16 June, unconfirmed social media reports, suggested that Iranian missiles heading to Israel were sighted in some of the Gulf skylines. The reports were later denied by authorities as being within Kuwaiti airspace, for example. This scene solidifies the perception that this conflict is way too close to home. In a worst-case scenario, a cornered Iranian regime might seek to draw US interests in the Gulf into the conflict. At the very least, it may push the Iranian military to consider such a tactic for strategic purposes.

Amidst this, some Gulf countries are maintaining communication with Iranian officials, including the Iranian Foreign Minister Abbas Araghchi. This has increased speculation that these same countries may involve themselves as mediators to resolve this conflict. Still, as with most observers, the Arab Gulf states are likely surprised by how well the Israeli campaign is going. The threat of the Iranian regime collapsing or severely weakening is becoming increasingly likely, and with it come further concerns that the Gulf find themselves yet with another neighbour that’s completely destabilised, and incommunicable. 

Lastly, a further minor concern is materialising for the Shiite populations from the Gulf who were visiting Iran at the start of the campaign. An outspoken Bahraini MP, Mamdooh al-Saleh, has been in the media raising the case of such stranded citizens in Iran, who are now considering travelling to the Kingdom by land. Beyond this, the Arab Gulf states are likely keeping an eye out for aviation routes and the safe return of any citizen who is abroad during the conflict.

Finally, the Gulf’s concern go beyond the spillover effect. Humanitarian concerns for the affected populations are significant. The region has endured considerable hardships since October 7, and this conflict is an extension of its ramifications. Looking ahead, the Gulf will want to distance itself from the conflict out of economic interest while simultaneously engaging to help resolve it and mitigate its potential harms and spillovers.

Mahdi Ghuloom is a Junior Fellow, Geopolitics at the Observer Research Foundation (ORF) - Middle East.

### Bahrain-Iran challenges and potential rapprochement during Trump 2.0

As Bahrain navigates its ties with Iran, Trump’s return could shift the equation—will rapprochement persist, or will US pressure stall progress?

This article is part of the series - Raisina Edit 2025



A concrete rapprochement between Iran and Bahrain would mean the recent regional ‘détente’ with Saudi Arabia would be complete. Indeed, Bahrain is the ‘missing link’ in this rapprochement between the Gulf States and Iran. Although the attack on the Saudi Arabian embassy in Tehran led Bahrain to cut ties with Iran in 2016, Bahrain-Iran relations have challenges of their own.

Between 2007 and 2010, a notable figure was the ambassador of Iran to the Kingdom of Bahrain, Hossein Amir-Abdollahian, who served as the Foreign Minister (FM) of Iran under former President Ebrahim Raisi. In May 2024, both he and Raisi died in a helicopter crash in Iran. Abdollahian was very familiar with Bahrain, considering he was one of the few Iranian ambassadors to Bahrain who did not have to be recalled to Iran during his tenure in the Kingdom. He was also perceived to have close relations with the main opposition group at the time, Al-Wefaq, who were in parliament until 2011 before leaving the institution and starting to operate clandestinely.
Although the attack on the Saudi Arabian embassy in Tehran led Bahrain to cut ties with Iran in 2016, Bahrain-Iran relations have challenges of their own.
Abdollahian’s time as FM did not yield any warming of relations between Iran and Bahrain despite this familiarity with the Kingdom. There were reportedly ‘secret talks’ between Iran and Bahrain in 2022–2023 in light of a ‘détente between Saudi Arabia and Iran. However, the only real indication that this was leading to anything was when an Iranian parliamentary delegation attended a global assembly in Manama in 2023. With the visit came Iranian hopes that “we should further trust the path of diplomacy and take steps in this direction,” per the Iranian Foreign Ministry spokesman.

The most tangible hints of these ‘secret talks’ working was when a week before his death, Abdollahian spoke of his keenness to “enter a new phase” with the Gulf, adding, “We welcome the Bahraini government's action in starting the release of political prisoners and evaluate it positively both sides are considering further steps towards the normalisation of relations.” However, this may have only irritated Bahraini authorities as a further sign of interference in its domestic affairs.

Indeed, the Gulf Kingdom remains concerned about Iran’s alleged interference in its internal affairs. This is because of at least two reasons. First, the radicalised opposition groups of Bahrain now largely reside alongside Iranian proxies in Tehran, Lebanon and Iraq – believed to be supported by entities such as the Islamic Revolutionary Guard Corps (IRGC). Second, Bahrain is wary of historic Iranian claims to Bahrain’s territory. For example, the editor of the most hardline Iranian daily, Kayhan, a direct appointee of the Iranian Supreme Leader Khamanei, charged in 2018 that Iran ‘owns’ Bahrain.
The radicalised opposition groups of Bahrain now largely reside alongside Iranian proxies in Tehran, Lebanon and Iraq – believed to be supported by entities such as the Islamic Revolutionary Guard Corps (IRGC).
Though Bahrain may be able to dismiss the second as empty rhetoric, the allegations of Iranian interference were compounded during and shortly after the unrest that Bahrain witnessed in the last decade. A piece by the Washington Institute in 2017 highlights several examples of a growing network of bomb making facilities and weapons stores that were discovered during those years, all seemingly attributed to Iran. Bahrain has also charged several prisoners of being trained by the IRGC to carry out attacks in Bahrain.

On the charge of hosting the allegedly radicalised opposition, Iran can hardly make a case against it. One figure, Sheikh Isa Qassim, a prominent cleric seen by all sides as the spiritual leader of the dissolved Al-Wefaq political society, lives in Iran after having had his citizenship revoked by Bahrain and regularly speaks against Bahrain. Moreover, the Deputy Secretary-General of Al-Wefaq has been pictured attending state ceremonies in Iran. Also, Murtadha al-Sanadi, a United States (US)-designated figure of the Islamic Wafa Party, is also believed to be residing in Iran. Even when Bahrain updated its terror list in 2025, it appears most Iranian-based individuals and entities remained, with at least one of them even being sanctioned by the US in the previous Trump administration.

The recent escalation between Iran and Israel may have led Bahrain to consider addressing the challenges to prioritise regional security. Bahrain reportedly joined other Gulf countries in promising neutrality during a meeting with Iran in Doha when the tit-for-tat attacks between Israel and Iran were underway last year. Aiding this, Iran today has a new foreign minister and a new government, which has seen successive signs of friendlier relations with Bahrain. The author argues this is possible now with Bahrain talking to diplomatic officials in Iran with no historical qualms with Bahrain.
Even when Bahrain updated its terror list in 2025, it appears most Iranian-based individuals and entities remained, with at least one of them even being sanctioned by the US in the previous Trump administration.
Case in point, when Abbas Araghchi, the first Iranian FM to visit Bahrain in 17 years did so in October 2024, he met with the King of Bahrain Hamad bin Isa Al-Khalifa, who Iranian media quoted as having spoken about good memories of his trip to Tehran in 2002 and meeting with the Supreme Leader Ali Khamenei, while reportedly expressing ‘hope’ that he would come to Tehran again. Still, this came a few days after Bahrain’s Council of Representatives strongly condemned statements made by Kamal Kharazi, head of Iran’s Strategic Council on Foreign Relations and former FM. Kharazi had mentioned the ‘separation’ of Bahrain from Iran in 1971, describing it as an ‘unforgivable betrayal’ by the former Shah Mohammad Reza Pahlavi, based on what he called a ‘fake referendum’. Likely, this was not a statement forgiven by Bahrain but ignored temporarily due to other priorities.

Moreover, Iran itself holds Bahrain to great significance in regional standards due to Bahrain’s geographical proximity and people-to-people ties but also because Bahrain hosts the US fifth fleet and established normalised relations with Israel as part of the Trump-led Abrahamic Accords.

With Trump’s return comes a risk that Bahrain steers away from the recent prospects of rapprochement in the eyes of Iran. This is especially the case if President Trump seeks to capitalise on Bahrain’s unfixed ties with Iran in favour of supporting his ‘Maximum Pressure’ campaign on the Islamic Republic through pushing Bahrain to increase its participation in US-led security initiatives in the region. Trump will also inherit a Comprehensive Security Integration and Prosperity Agreement (C-SIPA) with Bahrain that President Biden’s administration signed, which it could utilise in this campaign against Iran. The campaign is most recently designed to ‘collapse’ Iran’s economy and slash Iran’s oil exports, per US Treasury Secretary Scott Bessent. However, it will likely expand in scope in the coming months.
The campaign is most recently designed to ‘collapse’ Iran’s economy and slash Iran’s oil exports, per US Treasury Secretary Scott Bessent.
Yet, it is also possible that Trump seeks to influence Bahrain to use the leverage of rapprochement with Iran as part of his diplomatic ambitions to secure a nuclear deal.  Bahrain, like other Gulf countries, is also signaling its want for a more important role in key negotiations on the global and regional scale. Some Gulf countries also resisted the former nuclear deal with Obama for not being involved enough as mediators, with Oman as the only one involved per reports – causing a wave of surprise across the Gulf at the time. Bahrain could decide to strategically park its long-standing points of contention with Iran, which this article has highlighted, to play its small part in aiding US efforts for a nuclear deal and gain credit for this constructive role.



Disclaimer: This article was originally published by ORF. 

Mahdi Ghuloom is a Junior Fellow at the Observer Research Foundation (ORF) – Middle East.

### Telecom AI: Increasing AI Integration in Networks of the Future

This article is part of the essay series - Nations, Networks, Narratives: World Telecommunication and Information Society Day 2025.  



The past two decades have witnessed a revolution in telecommunication technologies. The 2000s saw the introduction of 3G technology, which offered a higher bandwidth (up to 21 Mbps) that allowed support for multimedia applications and services on mobile phones, to 5G in 2020, which pushed data rates up to the gigabytes per second scale and facilitated optimisation techniques like network slicing. Current trends in telecom technologies suggest that the following years will see the introduction of 5G-A (Advanced) and 6G technologies. One crucial element of the evolution of telecom has been the integration of machine learning (ML) and artificial intelligence (AI) algorithms for complexity management in telecom networks. The role of AI in the 3G era was limited to fault detection and predictive maintenance. From 4G onwards, AI began to play a more expansive role in telecom networks such as optimisation of network resources, data traffic management, spectrum allocation and eventually for developing AI-driven customer support systems.
AI and telecommunications form a recursive feedback loop where AI is used to manage complexity and facilitate more devices and services on the networks, and the injection of more devices and services in turn increases the demand for more powerful and capable AI systems. 
AI and telecommunications form a recursive feedback loop where AI is used to manage complexity and facilitate more devices and services on the networks, and the injection of more devices and services in turn increases the demand for more powerful and capable AI systems. Till 5G networks, the integration of AI was an added feature to optimise network performance. On the other hand, the upcoming 5G-A and 6G technologies are being designed to be “AI-native” by having AI built into their architectures from inception, such as by co-locating AI capabilities with Radio Access Network functions (RAN). A notable benefit of AI-native architectures will be the capability to extend AI services to edge computing through “multi-tenancy” or hosting edge AI applications, voice, data and video on the same telecom networks, thereby reducing latency. While AI-native telecom networks will be crucial for technological projects like smart cities, Internet of Things (IoT), autonomous driving and so forth, they also intensify risks such as unethical surveillance capabilities, data harvesting that may infringe on consumer privacy, and increased energy consumption that may put increasing pressure on local energy infrastructures.
Promises of ubiquitous AI in networks
The most significant benefit that AI offers for advanced networks is managing network complexity arising from the exponentially larger number of digitally connected devices that have entered the market over the previous decades. The ubiquitous spread of digitalisation is creating a scenario where human capabilities may not be enough to handle ever-increasing network traffic created by billions of devices that are active at any given moment. AI algorithms in this context can be used for efficiently analysing vast streams of network data by employing modalities like Convolutional Neural Networks (CNNs) to predict areas of congestion and anomaly detection, Long Short-Term Memory (LSTM) Networks for predicting traffic demand trends and Generative Adversarial Networks to generate synthetic data for training models with limited data to protect privacy.

AI-driven solutions are already being integrated into the telecom industry. For instance, telecom industry leader Vodafone has partnered with Google Cloud to embed generative AI into its network infrastructure to streamline network engineering, analyse contractual data, and provide real-time information to field technicians to reduce the number of field dispatches. A foundational promise of future networks with embedded AI is automating operational decisions and creating a “zero-touch paradigm” where minimal human intervention will be required for network management. Telecoms are already making headway towards this paradigm shift through initiatives like China Mobile’s Level 4 autonomous networks that have demonstrated the ability to increase data analysis efficiency by over 70 percent and reduce annual operational expenditure by US$ 7 million by using generative AI solutions to increase network optimisation.
The ubiquitous spread of digitalisation is creating a scenario where human capabilities may not be enough to handle ever-increasing network traffic created by billions of devices that are active at any given moment.
Another crucial benefit of AI-native telecom networks is increased security against cyber threats and fraud that can target consumers as well as network operators. In 2024 alone, the global telecom industry experienced a record-breaking rise in ransomware attacks, indicating that increasing digital connectivity across the globe to bridge the digital divide must be accompanied by scalable cybersecurity measures. To address this issue, AI-native networks may offer the benefit of leveraging Threat Intelligence Platforms (TIPs) that, instead of relying on historical data, can perform real-time data analysis to promptly identify emerging threat patterns through predictive capabilities. Moreover, AI-enabled TIPs can also automate threat detection and redressal mechanisms and bring the zero-touch paradigm to cybersecurity as well.
Dual-use Risks
While telecom AI offers a range of benefits, the increasing integration of automotive modalities in networks presents risks and policy challenges. Due to its nature as a dual-use technology, AI can also be used by bad actors to implement increasingly sophisticated threats such as AI-generated malware attacks, enhanced phishing campaigns and automated vulnerability exploitation. Furthermore, the expansive capabilities of AI-native networks also raise ethical questions about government overreach and surveillance operations. In the US, the Department of Defense has already established a FutureG team to study the impact and development of 6G technology. One emerging modality of import is Integrated Sensing and Communication (ISAC) that will allow the integration of sensing capabilities directly in the 6G network infrastructure. This sensor integration will enable methods such as high-precision positioning, environment mapping, object detection and gesture recognition by allowing AI systems to analyse radio waves, “effectively transforming the network into a distributed sensor array.” While the initial use of such methods likely will be in the defence sector, the potential for sophisticated surveillance techniques in civilian environments needs extended deliberation by policymakers.
One emerging modality of import is Integrated Sensing and Communication (ISAC) that will allow the integration of sensing capabilities directly in the 6G network infrastructure.
Another risk of expanding AI adoption is the rise in AI biases. Various examples have been brought forth in recent years of biased representation of certain demographics and genders in the training data and output of generative AI. In the telecom AI context, such issues can manifest through biased pricing and service offerings, biased allocation of resources and bandwidth to specific areas, problematic customer service instances, fraud detection systems unfairly flagging demographic groups and so forth. Similar to generative AI, policies for regulating telecom AI should focus on ensuring that training datasets for AI models do not reflect historical biases through algorithmic transparency requirements. Furthermore, international collaboration through inter-governmental and public-private partnerships is required to arrive at collectively accepted technical benchmarks that can provide best practices and guidance for telecom operators.
Concluding Remarks
A major policy challenge arising from increasingly sophisticated AI systems, generally, and in the telecom sector specifically, is the flexibility and adaptiveness of regulations in the face of a fast-moving technology. Furthermore, with the emergence of AI agents that can operate across systems and make decisions, there arises a complex set of questions regarding unpredictable emergent behaviour resulting from interactions between autonomous agents. Attempts at regulating such a dynamic set of technologies may require policy approaches to be flexible with an emphasis on co-regulation of networks by the public as well as the private sector. Given the complexities emerging from growing network traffic, regulations may be more efficacious if they are outcome and principles-based, with a focus on desired results and collectively agreed upon governance standards rather than the means of achieving such results. The distributed nature of telecommunication networks and the threat of cross-border security risks will also require increased collaboration through international platforms such as the International Telecommunications Union and the Global Coalition on Telecommunications. Such platforms can be used to promote multi-stakeholder engagements, prevent regulatory fragmentation, and also prevent onerous regulations that may hinder innovation.





Disclaimer: This article was originally published by ORF. 


Siddharth Yadav is a Fellow with the Technology vertical at the ORF Middle East.

### The State of the Global Energy Transition

Attribution: Mannat Jaspal and Jesse Scott, “The State of the Global Energy Transition,” ORF Issue Brief No. 802, May 2025, Observer Research Foundation.

Introduction
The energy transition today is not only an instrument for delivering climate action but is also a key part of the toolkit of policymakers and industry leaders to advance diplomatic efforts and economic growth agendas. Globally, such policies are reshaping the role of fossil fuels in the energy mix and redefining the relationship between economic growth and carbon emissions.

At the heart of current policy debates are two perspectives: one sees advantages in delaying the phase-down of fossil fuels, and the other focuses on the merits of accelerating innovation leadership in clean-energy technologies. On fossil fuels, policy ideas range from advocating a complete phase-out to outright climate change denial. On clean energy, concerns include missing out on emerging global markets—such as solar and electric vehicles (EVs)—and replacing fossil fuel dependencies with new vulnerabilities in critical minerals supply chains.

Different jurisdictions are projecting divergent messages. The European Union (EU), a leader in climate regulation, is implementing a Carbon Border Adjustment Mechanism (CBAM) to price and tax carbon emissions entering its borders. Meanwhile, in the United States (US), the Trump administration is aggressively advocating the expanded use of fossil fuel, referring to it as “liquid gold”.[1] Elsewhere, countries are grappling with how to balance decarbonisation targets with energy security, economic competitiveness, and development needs. These sharp contrasts in political signalling reflect the complex interrelationships between climate, energy, national security, and economic goals—often sensationalised in the media and by activist discourses on both sides.

A realistic starting point for the clean energy transition is the recognition that, over the last 150 years, fossil fuels have lifted millions out of poverty and shaped the modern world. Today, fossil fuel energy and feedstock-based products are deeply enmeshed in our daily lives: shaping how we live, dress, eat, and communicate. The rise in global population and Gross Domestic Product (GDP) has mirrored the growth in fossil fuel use, underscoring its role in driving economic prosperity—albeit at the cost of rising emissions.[2] By 2040, the global population is projected to grow by 20 percent, and GDP by 90 percent,[3] putting immense pressure on the energy system, with global energy demand anticipated to rise by at least 50 percent.[4] Another key reality is that countries start the energy transition from different situations, depending on their natural resource endowments, infrastructure, level of economic development, energy access, and historical contributions to greenhouse gas emissions.

Looking ahead, digital and green areas are driving fast-growth industries and cutting-edge technologies. Every major economy is vying for leadership in key areas of information technology and clean energy. Despite differing starting points, countries are aiming for the same core menu of solutions for the energy transition: prioritising energy efficiency, expanding renewable electricity and electrification of end-use, adopting indirect electrification for intensive energy loads through e-fuels such as green hydrogen or its derivatives, and pursuing carbon removal by both natural (forests) and technological (carbon capture and storage) means.

The energy transition today is poised between these perspectives. On the one hand, oil, coal, and natural gas still provide around 4/5ths of global primary energy.[5] On the other hand, International Energy Agency (IEA) tracking shows that of the US$3-trillion investment in energy in 2024, US$2 trillion flowed to clean-energy technologies and infrastructure.[6]
Technological Factors
Solar and wind have become powerful, cost-effective alternatives to fossil fuels in several sectors. However, their variable nature and intermittency require partnership with large grids for balancing, along with energy storage technologies. Battery energy storage systems (BESS) are crucial for managing short-term demand peaks and supply surpluses. Longer-duration energy storage solutions include hydroelectric dams and various thermal technologies. Other clean energy sources—such as nuclear, geothermal, and run-of-river hydro—offer steady (baseload) and/or dispatchable power. Improving energy efficiency, decarbonising the electricity sector, and scaling electrification in key end-use sectors—such as building heating and cooling, passenger and short-haul transportation, and low-temperature industrial heat—are the lowest-hanging fruit in the energy transition landscape in much of the world.

The transportation sector has been one of the biggest clean technology growth areas with the rise of electric vehicles. While EVs have won the race in short-haul and passenger transport, there is less certainty about the dominant technologies for long-haul trucking, shipping, and aviation sectors, where weight and distance require more energy-dense fuels, perhaps including fuel cells, e-fuels, or sustainable biofuels.

Similarly, transitioning high-temperature industrial processes—typically those requiring over 600 degrees centigrade—remains challenging. While many processes below this threshold can use alternatives like geothermal heat, for example, hard-to-electrify processes still lack widely commercialised, scalable technologies and involve high capital costs.[7] For example, in the cement industry globally, nearly half of emissions come from the decomposition of limestone into lime and CO2.[8] Yet, credible roadmaps exist for achieving carbon-neutral cement production in Europe by 2050, with the potential for carbon-negative outcomes over the value chain.[9] Alternative solutions such as carbon capture and storage (CCS), hydrogen, and sustainable biofuels have gained policy attention. For example, where some processes continue to emit CO2, in G20 countries at least 95 percent of these emissions need to be captured by means of CCS by 2030.[10]

Many low-carbon technologies are off-track to deliver in line with climate targets. According to McKinsey,[11] the gap between current progress and required deployment is substantial. So far, the biggest successes have come from less complex or more commercially viable technologies, such as solar PV. In contrast, while the CCS pipeline appears large on paper, most projects have not reached final investment decisions (FID), putting their realisation at risk.[12] For hydrogen, clean production must scale up 25 times in Europe and nearly 20 times in the US by 2030. Similarly, only around 25 percent of projected sustainable aviation fuel (SAF) capacity in Europe and 30 percent in the US has reached FID.[13] During this middle phase of the energy transition, hybrid systems may emerge, with fossil fuels increasingly serving as backup support for baseload renewables, rather than the other way around as it currently stands.

On the other end of the spectrum, fossil fuel companies are leveraging technological innovations to reduce fugitive emissions and to improve energy efficiency. For example, satellite and Artificial Intelligence (AI)-based[14] advancements have greatly improved methane leak detection and resolution. The electrification of mining equipment, drilling fleets,[15] and fracking units is also helping to curtail carbon emissions to a certain extent.

Figure 1: Global Power Capacity by Technology (2015-2023)



Source: IRENA Renewable Energy Statistics Data[16]
Political Considerations
The political momentum for climate action, carbon neutrality, and international cooperation on energy transitions has been unprecedented since the historic 2015 Paris Agreement, ratified by over 195 parties[17] and covering 90 percent of global emissions.[18] According to the United Nations, 107 countries responsible for 82 percent of global GHGs have committed to net-zero targets by mid-century, either through law, policy documents, or official announcements.[19] This policy signalling has encouraged more than 9,000 companies, over 1,000 cities, and 600 large financial institutions to join the ‘Race to Zero’ pledge, launched in 2020, aiming to halve global emissions by 2030.[20]

The industrial policies of many countries today—such as the European Green Deal, launched in 2019, the US Inflation Reduction Act of 2020 passed under the Biden Administration (although its future is unclear under the current Trump 2.0 presidency), and India’s Atmanirbhar Bharat, launched in 2020—all aim to boost domestic manufacturing and establish market leadership in clean energy, making energy transition technologies pillars of the economic agenda. Similarly, large-scale infrastructure initiatives like China’s Belt and Road Initiative include energy projects in their portfolio of international investments—energy accounts for 46 percent of Chinese investment in the MENAT (Middle East and North Africa plus Turkey) region, exceeding US$126 billion between 2005 and 2022.[21]

It is therefore unsurprising that hydrocarbon-exporting countries like the Arab Gulf states—heavily reliant on fossil exports for revenues—are looking to diversify and explore cleaner energy alternatives. The United Arab Emirates (UAE) and Saudi Arabia, for example, have made notable domestic investments in renewable energy and hydrogen production,[22] and have emerged as prominent capital providers for energy transitions globally. Their aims include becoming more energy self-reliant, as well as managing their exposure to changes in global market demand for fossil fuels and/or the effects of carbon tariffs and sustainability regulations. Nonetheless, as of 2024, in the Middle East, only US$ 0.20 is invested towards clean energy for every dollar spent on fossil fuels.[23] Announced pledges aim to raise this to US$ 0.70 per dollar in fossil fuels by 2030.[24] Globally, to be on track for net-zero emissions by 2050, annual oil, coal and gas investments must fall by more than half—from just over US$ 1 trillion in 2024 to below US$ 450 billion per year by 2030.[25]

Meanwhile, clean energy, climate security, and related geopolitical risks are rising issues for diplomacy between states. Bilateral and multilateral trade agreements contain important chapters on clean energy. Over the past five years, India has deepened cooperation with both the EU and the US through agreements on renewable energy, storage, and grid modernisation.[26] Most recently, under Trump 2.0, the US-India partnership has expanded to include a focus on liquefied natural gas (LNG) as a means of reinforcing energy security while facilitating a transition towards lower-carbon fuels.[27]

Crisis situations are increasingly shaping policy decisions. For instance, while limited in operating hours and emissions, Germany’s 2022 move to temporarily suspend coal power plant closures amidst gas shortages drew global attention.[28] Energy security is a pressing concern, especially for countries in the Global South. But energy security means a number of different, interlinked things: the availability of energy supply, the cost of energy to consumers and to the economy as a whole, the resilience of energy systems against external shocks—including climate-induced extreme weather—and questions of national security or dependency.

The affordable availability of energy is a central issue. Globally, 685 million people still lack a reliable energy source,[29] impacting health, education, and economic development. Most of them rely on traditional biomass fuels, but expanding access need not depend on coal—particularly in rural areas, where solar microgrids, CNG cooking systems, and waste-to-energy units are often faster and more cost-effective solutions. Many societies also have large groups of energy-poor consumers, who have access in principle but struggle to pay bills.

Since 2022, Russia’s invasion of Ukraine, its impact on gas markets, and energy-related sanctions by the EU and US have demonstrated how rich countries can use energy as a geopolitical weapon. This has, in turn, strengthened the case for accelerating energy transitions. The EU’s response to the 2022-23 energy crisis was to double down on renewable energy deployment. That strategy, however, has led to growing awareness about the importance of the critical minerals and supply chains that are crucial for clean energy proliferation. The concentration of these resources in a few countries poses global risks to energy transitions worldwide. For instance, in early 2025, in a stand-off with the US, China banned exports of gallium and germanium—key metals for electronics and semiconductor manufacturing.[30]

Just and inclusive transition policies are an important political dimension of the energy transition. These include support and retraining for displaced fossil fuel workforces, land and water rehabilitation in areas affected by badly managed extraction, and education reforms to equip the next generation of workers with skills for the clean energy sector. Another crucial aspect of the energy transition is shielding vulnerable energy consumers—those in energy poverty as well as energy-intensive industries—from price shocks, whether caused by global fossil fuel market volatility or the upfront investment costs of clean energy.

A key challenge is that many governments and policymakers continue to treat climate and energy transition goals as “tomorrow” problems, which they can avoid tackling with bold decisions today. This tendency does not help business planning, leading to frustration—both publicly and privately. Without appropriate policy signalling from governments, businesses struggle to secure financing and build value chains essential to their transition strategies. This uncertainty delays investments and innovation in moving from brown to green.
Financial Imperatives
As noted above, IEA tracking shows that investments in clean energy are now twice those in fossil fuels (see Figure 2).[31] In 2023, global investments in renewable capacity additions rose by 27 percent year-on-year from 2022.[32] Wind and solar PV now yield 2.5 times more energy per dollar invested compared to a decade earlier.[33] At the same time, fossil fuel investments are increasingly facing uncertainties owing to the financial risk of stranded assets.

This acceleration in clean energy investment can be attributed to strong policy support and fundamental technological advancements that increase the competitiveness of renewables. Energy security imperatives have helped to reinforce policy support, for example towards accelerated permitting processes for new power generation sites.

Figure 2: Global Investments in Clean Energy and Fossil Fuels (2015-2024)



Source: World Energy Investment 2024 [34]

Nonetheless, this big picture remains concerning because of the geographic concentration of clean-energy investments. The majority continues to flow into advanced economies and China (see Figure 3), while emerging markets and developing economies (EMDEs) receive only 15 percent of the total global clean-energy spending.[35] In 2023, for every US dollar invested in battery storage in advanced economies and China, only one cent reached other EMDEs.[36] This pattern will not result in a global energy transition. Ensuring that investment flows into these countries is essential.

Figure 3: Annual Investments in Clean Energy by Select Country and Region (2019-2024)



Source: World Energy Investment 2024[37]

The fundamental problem is the higher cost of capital in developing countries—typically at least twice that of advanced economies.[38] This cost difference is owing to often misplaced sovereign and political risk assessments. Global credit rating agencies follow antiquated methodologies that fail to reflect the changing realities of developing economies or account for local conditions, which domestic ratings agencies may better understand and price. A lack of local currency lending for clean energy also pushes up borrowing costs, making hedging unaffordable and pushing the least developed countries towards unsustainable debt situations. Additionally, the majority of energy investments in EMDEs are made through the public sector, primarily governments and state-owned enterprises.[39]

Financing costs also reflect climate risks and their disproportionate impact on many developing countries. As a result, countries most vulnerable to climate change—and most in need of clean energy investment—face a premium on borrowed capital. The type of finance available in EMDEs also reflects investment biases—debt financing is prominent in the power sector in Asia, while equity shares dominate the fuel supply, particularly in the Middle East and Eurasia.[40] In such scenarios, it becomes increasingly difficult for Global South countries to escape from dependencies on fossil fuels.

Global investments in energy transition technologies (see Figure 4) must rise sharply to meet net-zero targets. Crucially, investments in renewable energy—including power generation, grids, and storage—need to double to deliver the target of tripling global renewable capacity by 2030.[41] Simultaneously, investments in low-emission fuels must grow tenfold, while the rate of energy efficiency improvements should double.[42] To meet the COP28 UAE Consensus targets, between 2024 and 2030, annual investments in renewable power, grids and flexibility, energy efficiency, and conservation must increase almost four times to US$ 4.5 trillion each year from US$ 1.29 trillion.[43]

While there is a strong business case for certain mature technologies—notably solar PV—many clean-energy technologies will continue to rely on regulatory support and concessional financing mechanisms to ensure off-take and scale in the near term. Delivering an energy transition that meets global and national targets is not a chicken-and-egg problem; conscious and prudent investments in crucial clean-energy technologies must lead the way. If investments lag, innovation and manufacturing advancements will also stagnate, derailing progress and jeopardising targets.
Conclusion: The Middle Transition
The current “mid-way” stage of the energy transition is not simple. Fossil fuels remain a huge factor in global trade, geopolitics, and macroeconomics. The energy transition requires a pragmatic and inclusive approach—across technologies and through partnerships among governments, the private sector, investors, and civil society. Cooperation is essential to overcome the technological constraints, political bottlenecks, and financial gaps discussed in this brief.

Four priorities can guide us to the future, enabling us to track progress through the “noise” of news and debate.
Inclusivity
Achieving climate action goals requires both an “all clean technologies on deck” and an “all parties on deck” approach. Investments in renewable energy sources, energy efficiency, sustainable fuels, and clean hydrogen are critical to support maximum decarbonisation, along with CCS and nuclear energy where countries/sectors choose these options. Although the recent UNFCCC COPs held in the UAE (COP28) and Azerbaijan (COP29), respectively, faced criticism for being hosted by oil producers, meaningful action on climate and energy transitions cannot be achieved in isolation. These COPs reflect an effort to mobilise all countries, including those with substantial fossil fuel revenues. 
Policy Certainty
Well-designed and consistent government policies are essential to provide investors clarity, give businesses the confidence to invest, and also to influence consumer perceptions and behaviour to promote the uptake of clean technologies and circular economy practices of repair and recycling. Besides the well-known instruments of carbon pricing, subsidies for renewables, tax credits, product mandates, and stricter emissions regulations, a skilled workforce will be key to the success of the energy transition. This requires integrating education and training programmes into policy planning. Robust climate risk modelling—covering both adaptation and policy risks—should be undertaken across the economy.
Scaled-up Infrastructure and Financing
Scaling renewable and grid infrastructure is crucial for the energy transition: without them, clean electrification will struggle to keep pace with growing energy demand. Development finance institutions and multilateral banks need to move beyond discussions about blended finance to making actual de-risking investments in early-stage projects, attracting private investment via guarantees and first-loss capital. While some efforts are underway, a significant scale-up is needed. Transition finance mechanisms, supported by harmonised policies and credible standards, must scale up to enable decarbonisation in high-emitting sectors. Additionally, there is an urgent need to review the rating metrics that unfairly penalise developing countries by putting high-risk premiums on capital. 
International Cooperation
An inclusive, cooperative, and equitable approach remains essential to build consensus and momentum toward achieving global climate goals. Platforms such as the G20, BRICS,[a] and new initiatives such as IMEC (India–Middle East–Europe Economic Corridor) and I2U2,[b] can be leveraged to reinforce and ring-fence the energy transition agenda, preventing setbacks from geopolitical rifts or national-level changes in government. However, for international agreements and partnerships to be effective, they must move beyond talk and small-scale cooperation. Key global actors, including India, the UAE, and the EU, must prioritise radically joined-up and scaled-up clean energy financing and technology cooperation to accelerate decarbonisation.
Endnotes
[a] BRICS is an intergovernmental organisation comprising 10 countries—Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Indonesia, Iran and the United Arab Emirates.

[b] I2U2 is a strategic partnership formed between India, Israel, United Arab Emirates, and the US.

[1] Ed Pearcey, “‘Drill, Baby, Drill’: Trump Hails America’s ‘Liquid Gold’, ” Power Technology, January 21, 2025, https://www.power-technology.com/news/drill-baby-drill-trump-hails-americas-liquid-gold/?cf-view

[2] Samantha Gross, “Why Are Fossil Fuels So Hard to Quit?,” Brookings Institution, June 8, 2020, https://www.brookings.edu/articles/why-are-fossil-fuels-so-hard-to-quit/

[3]  Copenhagen Economics, Energy Transitions Commission, The Future of Fossil Fuels: How to Steer Fossil Fuels Use in a Transition to a Low-carbon Energy System, January 2017, London, Energy Transitions Commission, 2017, https://www.energy-transitions.org/wp-content/uploads/2020/05/ETC-Copenhagen-Economics-The-future-of-fossil-fuels-Summary-Paper.pdf

[4] “The Future of Fossil Fuels: How to Steer Fossil Fuels Use In a Transition to a Low-carbon Energy System”

[5] Hannah Ritchie and Pablo Rosado, “Fossil Fuels,” Our World in Data, January 2024, https://ourworldindata.org/fossil-fuels#article-citation

[6] IEA, World Energy Investment 2024: Overview and Key Findings, June 2024, Paris, International Energy Agency, 2024,  https://www.iea.org/reports/world-energy-investment-2024/overview-and-key-findings

[7] Mannat Jaspal and Neha Khanna, A Roadmap for Green and Transition Finance in India, Observer Research Foundation and Climate Policy Initiative, September 2024, https://www.orfonline.org/public/uploads/posts/pdf/20240911145312.pdf

[8] “A Roadmap for Green and Transition Finance in India”

[9] The European Cement Association, “CEMBUREAU’s Net Zero Roadmap,” CEMBUREAU, https://cembureau.eu/library/reports/cembureau-s-net-zero-roadmap/

[10] IRENA, World Energy Transitions Outlook 2024, November 2024, Abu Dhabi, International Renewable Energy Agency, 2024, https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2024/Nov/IRENA_World_energy_transitions_outlook_2024.pdf

[11] Diego Hernandez Diaz et al., “The Energy Transition: Where Are We Really?,” Mckinsey & Company, August 27, 2024, https://www.mckinsey.com/industries/electric-power-and-natural-gas/our-insights/the-energy-transition-where-are-we-really#/

[12] Diaz et al., “The Energy Transition: Where Are We Really?”

[13] Diaz et al., “The Energy Transition: Where Are We Really?”

[14] Shell, “Reducing Methane Emissions,” https://www.shell.com/what-we-do/oil-and-natural-gas/flaring/_jcr_content/root/main/section/call_to_action_copy/links/item0.stream/1717058731986/fff5cf570e2deae605c4888bd894629d48a25290/methane-infographic-factsheet.pdf

[15]  ExxonMobil, 2024 Advancing Climate Solutions Executive Summary, Houston, ExxonMobil Corporate, 2024, https://corporate.exxonmobil.com/-/media/global/files/advancing-climate-solutions/2024/2024-advancing-climate-solutions-report.pdf

[16] IRENA, Renewable Energy Statistics 2024, July 2024, Abu Dhabi, International Renewable Energy Agency, 2024, https://www.irena.org/Publications/2024/Jul/Renewable-energy-statistics-2024

[17] United Nations, “Climate Action: The Paris Agreement,” https://www.un.org/en/climatechange/paris-agreement

[18] “CAT Net Zero Target Evaluations,” Climate Action Tracker, December 14, 2023, https://climateactiontracker.org/global/cat-net-zero-target-evaluations/.

[19] United Nations, “For a Livable Climate: Net-zero Commitments Must be Backed By Credible Action,” https://www.un.org/en/climatechange/net-zero-coalition

[20] “For a Livable Climate: Net-zero Commitments Must be Backed By Credible Action”

[21] Ariel Ezrahi, An Energy and Sustainability Road Map for the Middle East, Washington DC, Atlantic Council, 2024, https://www.atlanticcouncil.org/in-depth-research-reports/report/an-energy-and-sustainability-road-map-for-the-middle-east/

[22] Ezrahi, “An Energy and Sustainability Road Map for the Middle East”

[23] IEA, World Energy Investment 2024: Middle East, June 2024, Paris, International Energy Agency, 2024, https://www.iea.org/reports/world-energy-investment-2024

[24] “World Energy Investment 2024: Middle East”

[25] “World Energy Investment 2024: Overview and Key Findings”

[26] Ministry of External Affairs, https://www.mea.gov.in/bilateral-documents.htm?dtl/38322/, 2024

[27] Office of Communications, The White House, https://www.whitehouse.gov/remarks/2025/02/remarks-by-president-trump-and-prime-minister-narendra-modi-of-the-republic-of-india-in-joint-press-conference/, 2025

[28] Darrell Proctor, “Germany Restarts Coal-Fired Generation to Support Winter Power Supply,” Power, October 5, 2023, https://www.powermag.com/germany-restarts-coal-fired-generation-to-support-winter-power-supply/

[29] “Bridging the Energy Gap Takes Center Stage at UN’s International Clean Energy Day Celebrations,” IRENA, January 24, 2025, https://www.irena.org/News/articles/2025/Jan/Bridging-the-Energy-Gap-Takes-Center-Stage-at-UNs-International-Clean-Energy-Day-Celebrations

[30] Mannat Jaspal, The Energy Quest: Elevating the Quad’s Role in the Indo-Pacific, Observer Research Foundation and Australian National University,  December 15, 2023, https://www.orfonline.org/research/the-energy-quest-elevating-the-quad-s-role-in-the-indo-pacific

[31] International Energy Agency (IEA), World Energy Investment 2024: Overview and Key Findings, June 2024, Paris, IEA, 2024, https://www.iea.org/reports/world-energy-investment-2024/overview-and-key-findings

[32]“World Energy Transitions Outlook 2024”

[33] “World Energy Investment 2024: Overview and Key Findings”

[34] Holly Young, “Who is funding fossil fuel expansion?,” Deutsche Welle, December 11, 2024, https://www.dw.com/en/who-is-funding-fossil-fuel-expansion/a-70666716; “World Energy Investment 2024”

[35] “World Energy Investment 2024: Overview and Key Findings”

[36]“World Energy Investment 2024: Overview and Key Findings”

[37] “World Energy Investment 2024: Overview and Key Findings”

[38] Michael Purton, “Clean Energy Investment is Set to Double That of Fossil Fuels – Here’s How Developing Nations Can Also Benefit,” World Economic Forum, August 28, 2024, https://www.weforum.org/stories/2024/08/clean-energy-investment-just-transition/

[39] “World Energy Investment 2024: Overview and Key Findings”

[40] Cecilia Tam et al., “Who is Investing in Energy Around the World, and Who is Financing It?,” International Energy Agency, June 25, 2024, https://www.iea.org/commentaries/who-is-investing-in-energy-around-the-world-and-who-is-financing-it

[41] “World Energy Investment 2024: Overview and Key Findings”

[42] “World Energy Investment 2024: Overview and Key Findings”

[43] “World Energy Transitions Outlook 2024”



Disclaimer: This brief was originally published by ORF. 

### AI and Soft Power: The UAE’s Strategy for Global Cooperation

Artificial Intelligence (AI) entered mainstream public consciousness with the release of OpenAI’s ChatGPT in November 2023. Since then, governments across the world have been actively working to regulate and tame AI. Countries such as the United States (US), Canada, the United Kingdom (UK), India, Germany, and France—with the notable exception of the People’s Republic of China—have adopted hybrid frameworks combining both government and private sector for AI regulation, innovation, and development in their respective territories. As is customary in global politics, these developments have become a race to the top. Given AI’s implications on national security, media discourse is inundated with growing competition between the US and China (e.g., What DeepSeek Revealed About the Future of U.S.-China Competition). At the same time, AI is also enabling new avenues of global collaborations and cooperation, exemplified by partnerships such as the European Union (EU)-US Administrative Arrangement on Artificial Intelligence for the Public Good.
Objective 2: Developing AI for the UAE or All?
Amid this climate, the United Arab Emirates’ (UAE) AI ministry-led grand vision includes 8 strategic objectives that explicitly identify and contribute to its state-centred purpose of ‘being the leader’ in the global techno-political landscape by offering avenues of global cooperation and the public good. Objective 2, in particular, expresses the UAE’s ambition to strengthen its competitive advantage in key sectors—namely, resource and energy, logistics and transport, and tourism and hospitality—through AI development.
Tourism and Hospitality as Soft Power
Within the tourism and hospitality sector, the UAE’s strategy includes developing AI technologies that can predict tourists’ preferences and provide customised services. At first glance, this may not appear directly relevant to the purpose of ‘inter-state’ cooperation. However, in practice, it significantly benefits the UAE’s tourism diplomacy as soft power. Engaging in tourism and hospitality enhances the travel experience, contributing to destination branding. It not only reinforces a positive image but also positively impacts the host country’s economy. For instance, Abu Dhabi’s Tourism Strategy 2030, part of its broader economic strategy, witnessed a 26 percent rise in international visitors in 2024, and is looking forward to future international collaborations and entertainment projects such as World Abu Dhabi’s Harry Potter World. This signals Abu Dhabi’s openness and cultural engagement.

Furthermore, soft power often operates by capturing the global imagination, where a country becomes symbolically linked to a cultural product—South Korea with K-pop or Japan with Anime. The UAE has consciously invested its soft power by hosting the Expo 2020 and by branding Dubai as an ‘influencer capital’. As a result, it is beneficial for the states to develop their tourism industries, soft power, which can translate into economic and political gains. For example, Thailand’s tourism diplomacy extended visa-free travel for Chinese citizens—a move readily reciprocated by China, resulting in a bilateral agreement of mutual visa exemption (2024).

Refining tourism and hospitality experiences through AI can create long-lasting positive impressions among international visitors in the destination state. This has the potential to enhance the tourists' perception of the area in an enjoyable way, ultimately fostering more profitable interstate relations with the UAE. This aligns with the UAE’s broader strategic goal of developing leadership and a favourable image in the global arena.
Logistics and Transport for Globalisation
In logistics and transport, the UAE seeks to use its assets, management companies, and airport infrastructure as a testing ground for AI solutions to address global challenges such as air traffic management, baggage handling, aeroplane boarding, and airspace congestion. Many countries ,such as the US, Canada, and India, face a decreasing number of air traffic controllers. Moreover, the absence of standardised global traffic rules for coordination exacerbates delays, flight cancellations, and increased safety concerns for the passengers. Additionally, the current inefficient baggage handling process causes travellers' luggage to go missing or get damaged, contributing to the overall unpleasant travellers’ experience. Nonetheless, AI offers promising solutions. For instance, with AI integration, airport authorities can find the shortest path for baggage transportation. These systems can improve baggage tracking via enhanced luggage classification systems. For example, “ALIX™ (Augmented Luggage Identification eXperience), IDEMIA Public Security’s solution empowered by artificial intelligence (AI) and Biometrics, helps digitalise and automate the luggage identification process by providing each bag with an augmented digital luggage tag.” It enhances the airport's ground operations by speeding up the identification of luggage, including misplaced and lost items, through the use of images. On a broader level, the entire system of flying affects the movement of people and goods across nations—a key element of globalisation which shapes everyday tourism diplomacy among states.

By offering its assets and infrastructure to test AI-driven solutions, the UAE not only opens avenues for collaboration with other states facing similar challenges but also enhances its prestige, reinforces its reputation for reliability, and strengthens its position as an innovation hub among both state actors and global travellers through tourism diplomacy.
Resource and Energy for the Global Public Good
While the tourism and logistics sectors provide a clear map for strengthening overall globalisation, inter-state cooperation, and soft power of the UAE, the resource and energy sector has the potential to contribute to the global public good, particularly in the context of climate change. According to the objective details, the UAE is the world’s fifth-largest oil exporter while transitioning to renewable sources of energy and is also working on water desalination. In this case, the UAE is planning its proof-of-concept AI (e.g., Energyai by Adnoc) that can provide estimates about the demand and supply of world consumption of oil. Further, with smart grids and water recycling projects, the UAE offers opportunities to support small companies to test and improve this infrastructure via financial platforms such as Hub 71 and MGX.

Though this approach of using AI for the UAE’s benefit may seem domestically focused, if the objective materialises during implementation, the UAE can offer global opportunities for finding solutions to pressing issues such as growing water scarcity. For example, if the UAE found a sustainable and cost-effective water desalination technology, it could resolve the brine disposal issue that affects the marine ecosystem or provide infrastructure solutions to the less developed nations and landlocked regions in those countries (e.g., areas in Rajasthan in India) facing freshwater shortages. Simultaneously, this materialisation can also help build cooperation among states to resolve their internal issues of water scarcity and join the UAE’s initiatives to innovate.

Thus, a glance at Objective 2 of the UAE’s AI strategy highlights a strong potential for global cooperation for the public good. However, it unfolds against the backdrop of declining trust in international relations of 2025, especially with Washington’s strategy of protectionist politics such as tariffs and withdrawal from multilateral agreements such as the 2015 Paris Climate Agreement. In addition, while the government-led AI grand vision of the UAE has the benefit of being implemented without the complexity and confusion of the public-private partnerships (PPPs), it still relies on attracting companies and talent for innovation. Logistically, the government-run model of the UAE can clash and pose complications in the workings of the bilateral agreements with states that work with PPP models on questions of AI responsibility, ethics, and modes of innovation.

Moreover, the UAE, much like other countries, must grapple with broader challenges tied to AI: algorithmic bias, intellectual property, and data protection and privacy concerns that hinder cooperation (and ultimately the realisation of ‘public good’) and its overall goal of being a global leader in AI. In light of the global political and economic challenges created by the Trump Administration's tariffs, the UAE’s AI framework offers improved opportunities and a platform for global cooperation aimed at the public good.



Mehak Kapur (PhD) is a researcher and writer in international relations and political science.

### The Gulf in Trump’s Gulf Visit: Missing Voices, Missed Chances

President Trump’s 2025 trip to the Gulf reflects a policy of selective engagement driven by economic pragmatism, but it also reveals a degree of strategic neglect. While Saudi Arabia, the United Arab Emirates and Qatar received presidential attention, other Gulf Cooperation Council (GCC) states (Bahrain, Kuwait, and Oman) were excluded and not even met with bilaterally during the GCC-US Summit. It is thus essential to examine the motivations behind Trump’s selective itinerary and explore the missed opportunities for both the US and the sidelined Gulf states.
Why Bahrain, Kuwait, and Oman were Left Out
President Trump’s 2017 visit singled out Saudi Arabia as the sole Arab country he visited in his then-first foreign trip as President. The Kingdom was the only Gulf country that had the privilege of a US Presidential visit at the time. However, in 2025 things were vastly different. This time around, Trump did not visit Israel, but he did visit two other Gulf countries, the United Arab Emirates (UAE) and Qatar. However, for the other three Gulf countries─Bahrain, Kuwait and Oman─the visit fell short of their expectations of it becoming a full Gulf tour. As many have pointed out, Trump prioritised countries that could offer sizable commercial deals, while Bahrain, Kuwait, and Oman lacked the financial heft required. There are also signs that the diplomatic tensions with Kuwait may be behind this lack of outreach, as President Trump may continue to hold the view that his Secretary of Commerce, Howard Lutnick, had shared. He believes that Kuwait is imposing high tariffs on US goods despite the US spending “nearly US$100 billion” to liberate Kuwait. These are statements that faced backlash in Kuwait and motivated a visit to Lutnick by the Kuwaiti Ambassador to the US. This came almost a month after Kuwait’s Prime Minister Sheikh Ahmad Abdullah Al-Ahmed Al-Sabah warned that President Trump’s economic decisions would have “repercussions” for the entire world and seemed to be “only looking for his benefits”.
Underrating the Importance of All Gulf Partners
President Trump may have been remiss in discounting the importance of visiting these three countries. Kuwait is a major non-NATO Ally that hosts the US Central Command (CENTCOM); Oman is leading mediations between the US, Iran, and the Houthis; and Bahrain is a partner to the Comprehensive Security Integration and Prosperity Agreement (C-SIPA) and home to the US Navy’s Fifth Fleet. A visit by Trump would likely have found paths for more defence and diplomatic partnerships. Though it is worth noting that since President Trump’s visit, the US Secretary of Homeland Security Kristi Noem has visited Bahrain.

While a visit to these three countries may not have happened for various reasons, bilateral meetings on the sidelines of the GCC-US Summit seemed definite. Yet President Trump chose not to hold such meetings, even though his 2017 visit to Saudi Arabia included them, and his immediate predecessor also held them during his 2022 visit to Jeddah. This likely led to lost opportunities, such as Bahrain and Oman leveraging their free trade agreements with the US to argue for exemptions to the recent tariffs.

Meeting these countries' leaders would have served both sides. For Kuwait, Oman and Bahrain, a presidential audience would have eased frictions, and for Trump, it would have served his economic interest in the region. For example, both Kuwait and Bahrain would want to buy more US liquefied natural gas (LNG) in the summer, and Trump could have utilised a visit or at least a bilateral meeting in Saudi Arabia to secure long-term offtake agreements with US LNG companies. These would have aligned with the Trump administration’s ambition to boost the US energy industry.

Outside economic deals, President Trump could have utilised a more inclusive Gulf visit to ensure countries like Bahrain, Oman, and Kuwait continue to place their bets on the US rather than diversifying their strategy. While the US may be more concerned that the UAE or Saudi Arabia shift towards China, Russia, or other powers, the same concern ought to be raised for Bahrain, Kuwait, and Oman. If these three countries feel sidelined by the US, they too may begin to diversify their foreign policy portfolios.
Conclusion 
President Trump’s 2025 Gulf visit was marked by an emphasis on transactional diplomacy, prioritising countries with immediate economic value. Bahrain, Kuwait, and Oman, to varying degrees, offer the US critical military access, diplomatic mediation, and commercial partnerships. Ignoring their importance risks accelerating a trend of hedging among the Gulf States. A more inclusive and forward-looking regional strategy should be implemented by Washington. In the future, a visit by the US Vice President to these three countries may be a rational choice for the Trump administration.



Mahdi Ghuloom is a Junior Fellow, Geopolitics at the Observer Research Foundation (ORF) - Middle East.

### Strengthening EU Geopolitical Resilience Through Gulf Partnerships

“For several years now, the world has been undergoing a significant shift from an era of cooperation and integration to one of competition and friction. This shift is not a new phenomenon: previous editions of this report already highlighted a trajectory towards the unilateral pursuit of national interests, fragmentation of global decision-making and a weakening of multilateral institutions. […] The world seems destined to live with ‘permanent instability’ for the foreseeable future”, notes the European Union (EU) in its ‘Global Trends to 2040’ report.

This persistent and sobering assessment of the evolving geopolitical climate has compelled the EU for years to revisit its external action strategy to navigate its volatile environment better. Since the early 2020s, the geopolitical dimension of resilience has gained prominence in the EU’s policy agenda. Broadly, ‘geopolitical resilience’ refers to the Union’s aim to strengthen its Open Strategic Autonomy (OSA) and role as a global leader. OSA—a key concept for the European Union—provides the EU the capacity to “act autonomously in strategically important policy areas […] [while it] aims for multilateral cooperation wherever possible and appropriate.”

This means that autonomous action and strategic partnerships with third countries/parties are not mutually exclusive but complementary in achieving the objectives for geopolitical resilience. Based on the EU’s own framework and taxonomy, four core vulnerabilities must be monitored and addressed: raw material and energy supply, value chains and trade, financial globalisation, and security and demography.
Connectivity Through the Gulf: Resilient Supply and Secure Trade
This paper argues that targeted strategic partnerships—in line with the OSA concept—can be instrumental in reinforcing the EU’s geopolitical resilience and reducing regional instability. Among neighbouring regions, the Gulf stands out for its direct impact across all four areas of the EU’s geopolitical resilience. Geographically positioned at the juncture of Europe, Asia, and Africa, the Gulf is one of the EU’s key economic partners and regional stabilising forces. The Gulf countries’ relevance in the main areas of geopolitical resilience was underscored in the Union’s announcement of the EU-Gulf Strategic Partnership in 2022. “The Gulf is a dynamic neighbouring region and an important gateway between Europe, Asia and Africa. The security and stability situation of the Gulf region bears direct consequences for the EU […] At a time of insecurity and significant challenges to the rules-based international order both in Europe and in the Gulf region […] the European Union stands much to gain from a stronger and more strategic partnership with the Gulf Co-operation Council (GCC) and its member states.”一Joint Communication of the European Commission and the High Representative for Foreign Affairs and Security Policy on the EU-Gulf Strategic Partnership.

Owing to their geographic positioning on the Arabian Peninsula, Gulf states are vital to Europe’s intercontinental connectivity. As increasingly assertive middle-powers, the Gulf Cooperation Council (GCC) members are essential partners of interregional connectivity projects. Notably, out of the six GCC member countries, two countries–the United Arab Emirates (UAE) and Saudi Arabia–are also signatories of the India–Middle East–Europe Economic Corridor (IMEEC) project, a multi-modal connectivity project with the potential to become a ‘new economic pathway of globalisation’. This corridor, comprising maritime and land-based components, aims to enhance port and railway infrastructures, facilitate energy transport (through power lines and pipelines for green hydrogen), and improve data transmission via undersea digital cables.

According to the EU’s perspective, IMEEC aligns with its Global Gateway strategy, which supports projects that promote ‘smart, clean, and secure links in digital, energy, and transport sectors.’ With Gulf countries at its core, this corridor can significantly contribute to the EU’s geopolitical resilience in raw materials, energy supply,  and trade route security.
Trade and Investment: The Attractiveness of Gulf Economies
Beyond the Gulf’s role as an interregional connector, the GCC also comprises one of the EU’s key economic partners. The GCC is the EU’s sixth-largest trade partner and export destination, and its tenth-largest importer. In 2023, GCC countries were also among the main recipients of the EU Foreign Direct Investments (FDIs), with a total amount of €235.9 billion (‘EU outward FDI stock in the GCC region’).

Since the mid-2000s, some Gulf states have emerged as attractive investment destinations, thanks to their dynamic business ecosystem and pro-investment policies aligned with the GCC’s economic diversification strategies. Amid global geopolitical tensions, the Gulf states continue to maintain their ‘smart geopolitical neutrality’ and are increasingly attracting FDIs that are redirected from other, more geopolitically unstable destinations. This trend can contribute to the EU’s financial resilience—not only during times of peace but also in periods of geopolitical turbulence.
Regional Stability: Diplomacy and Mediation in the Gulf
The EU recognises that “[i]nstability in the wider Gulf region has a direct bearing on the EU’s security and economic interests, and reverberates not only in the EU’s neighbourhood but also in other areas of common interest”. As such, the diplomatic engagement of GCC members with all their neighbouring countries in the region affects the EU’s security and stability.

Gulf-led dialogues and mediation efforts can considerably support conflict resolution and de-escalation. The EU’s involvement in such initiatives should be calibrated with regional partners, balancing the benefits of a more joined-up and integrated approach with the risks of discrediting and jeopardising delicate regional dynamics.
Institutional Adaptation: Acknowledging the Gulf’s Strategic Importance
The recent institutional changes within the EU can reflect the Union’s growing awareness of the Gulf’s direct and indirect impact on the main areas of its geopolitical resilience. Following the announcement of the EU-GCC Strategic Partnership in 2022, the EU appointed its first Special Representative (EUSR) for the Gulf in 2023, and launched the Directorate-General for the Middle East, North Africa, and the Gulf (DG MENA) at the European Commission in 2025.

The EUSR’s mandate is closely aligned with the EU’s geopolitical resilience goals, as the EUSR “seeks the best ways to contribute to the stability and security of the region by engaging and supporting dialogue and long-term regional solutions with individual Gulf partners and relevant regional organisations.” for the Gulf. Concerning the strategic objectives of the recently established DG MENA, whose name and scope reflect a Gulf-specific focus, is tasked with ‘ensuring common sustainable prosperity and resilience’ with regional partners.
Conclusion
An increasingly volatile and conflictual geopolitical landscape, with the consequent need to reinforce the EU’s resilience in its strategic environment, contributes to recognising the Gulf region’s growing importance for the EU’s security, stability and prosperity. Cooperation with Gulf countries can help mitigate vulnerabilities in supply chains, enhance secure trade routes, open new financial investment opportunities, and contribute to bi-regional security.

The EU’s acknowledgement of the Gulf's growing strategic relevance is indeed reflected in some of its institutional restructuring—from the creation of the European Commission (with the DG MENA) and the European External Action Service (with the EUSR for the Gulf region). The institutional ecosystem's transformation offers a valuable lens to monitor and predict geopolitical shifts and priorities. The question now worth exploring is how the recently created institutions will evolve in the medium and long term.



Eszter Karacsony is an Associate Fellow (Geopolitics) and Programme Lead, Observer Research Foundation- Middle East.

### UAE’s Critical Minerals Dilemma

The United Arab Emirates’ (UAE) pursuit of a cleaner and more efficient energy architecture, along with its aspiration to become a hub of the Fourth Industrial Revolution, are among the most distinctive features of its evolving global identity, and in many ways, represent a crucial part of the country’s value proposition.

Given their focus on domains such as power generation and transition infrastructure, the digital revolution and AI ambitions of countries, battery components in clean mobility options, and defence manufacturing, the relevance of critical minerals is arguably sector-agnostic. For the UAE, secure and reliable access to these scarce and highly-valued minerals will determine whether they fully actualise their economic diversification strategy or merely add a vertical alongside their legacy hydrocarbon-wealth-based economy.

While securing reliable access to these minerals is integral,  the energy demands of the data centres highlight a fundamental paradox inherent in the otherwise complementary paths of the energy transition and the digital revolution.
Value of critical minerals to data centres 
The UAE’s ambitions of integrating AI and the digital ecosystem into every aspect of its national life will be underpinned by a vast network of data centres. These data centres generate a substantial demand for critical minerals due to their operational, structural, and energy requirements.

Generic list of critical minerals commonly used in data centres



Gallium 
Neodymium


Copper
Aluminium


Beryllium
Dysprosium


Manganese
Lithium


Hafnium
Palladium


Barium
Zinc



For instance, the high-density computing ecosystems in data centres need highly conductive materials which have robust structural integrity and can ensure thermal stability, helping with heat dissipation and efficient power distribution. Copper is an invaluable raw material in this regard, with palladium, silver, and bismuth being among the other options.

Similarly, the magnetic storage technologies that ensure efficient data storage and retrieval are tied to the use of highly specialised materials such as barium, which are central to ferrite magnets. These help achieve data integrity objectives by guarding against Electromagnetic Interference (EMI)─an essential characteristic for resilient data architectures and maintenance of signal integrity.

Again, the centrality of lithium-ion batteries to the back-up systems of data centres places the UAE right in the middle of a very competitive market with high concentrations.

Estimates suggest that by 2030, the demand exclusively from data centres could lead to an increase of global demand for copper and silicon by 2 percent, 3 percent for REEs, and 11 percent for minerals like gallium.
Value of critical minerals to energy transitions
Arguably, climate concerns are not yet the organising principle in the policy formulations of the UAE, akin to any other hydrocarbon-based economy. They may be appreciated as a value-addition and an ambitious supplement to a well-thought-out economic diversification policy. Regardless of the origins of this agenda, net zero remains a robust national pursuit and thereby invokes a preoccupation with critical minerals.

Generic list of critical minerals important for the energy transition



Aluminium 
Chromium


Gallium
Copper


Selenium
Boron


Neodymium
Molybdenum


Cobalt
Nickel


Lithium
Dysprosium



The essential use of critical minerals, including rare earths, in the whole spectrum of low-carbon pathways central to the transition makes the reliable and assured availability of these minerals a pressing concern for the UAE.



Source: IEA, May, 2021

Copper and aluminium, for instance, are essential raw materials in renewable infrastructure and the power transmission lines and grids. Lithium is essential for high-efficiency lithium-ion batteries. Cobalt and copper are important for energy storage and performance. Similarly, neodymium is central to the permanent magnets used in wind turbines and EVs.
Paradox
The essential benefits of combining the two pathways are undoubtedly abundant for the UAE-

 	The use of data and AI is integral to how efficiency drivers could be induced into the mix within energy utilities.
 	By transforming energy production and management, this digital architecture could effectively help integrate renewables into the power sector and the grid.
 	Furthermore, AI can also help decarbonise the hard-to-abate sectors by introducing energy efficiency.

Yet, ironically, the use of AI and the necessarily uninterrupted functioning of data centres lead to considerably higher energy consumption by a country. A single prompt through ChatGPT3, for instance, consumes 10 times more energy than a simple Google search. Even when AI becomes less energy-intensive, it would be reasonable to expect that the number of applications based on it will increase even further, thereby compounding the potential paradox.
Features of the paradox

 	At present rates, data centres are indicated to be consuming a little more than 5 percent of the world’s electricity figure which is expected to double over the next five years.
 	While it is emissions from such consumption that are the larger issue where the cost to the environment is concerned and not the consumption itself, there is nevertheless an inherent disjunct. The fossil fuel-based options are presently in play to meet pressure on the grid. SMRs and hydrogen fuel cells can, theoretically, introduce efficiency by standardisation, customisation and cost-optimisation into the operation of data centres. Yet, these options remain conceptual, and can most reasonably be expected to come up against issues of scalability and prohibitive CapEx commitments for deployment, even when the technologies are fool-proofed and design standardisation is achieved.
 	Again, mining for critical minerals itself is a highly energy-intensive activity built on fossil fuels.
 	Both the mining of critical minerals, which geographic realities place in areas of water scarcity, as well as the use of scarce water resources for the cooling of data centres, are equally counterintuitive to the sustainability pathways the UAE hopes to pursue.

Recommendations for a critical minerals strategy 

 	The creation of a National Critical Minerals Doctrine integrating the UAE’s foreign policy to domestic industrial and transition pathways that are committed to enmeshing clean energy goals with global investment strategies, such that resource allocation is more effective.
 	Creation and declaration of a sector-wise qualification through a National Critical Minerals list would be a useful step for the country. IRENA’s list for the ranking of critical minerals for the global energy transition offers a good template to build on.
 	Capacity building in recycling, reprocessing, and the development of alternative technologies and chemistries can be used to create a circular critical minerals ecosystem from older or stranded assets in the country.
 	Building expertise in the development and deployment of engineered liquids can substantially reduce the amount of water consumption required for cooling data centres, in addition to the potential benefits from higher system density from the same-sized installations.
 	The UAE could leverage investments made conditional on improvements in the mining, separation, processing, and alloying processes of critical mineral supply chains, and establish a dual-pricing mechanism with a green premium that may be preferred by countries seeking also to avoid the over-exposure to China in the domain.
 	Initiate a binding agreement with regional and extra-regional partners to replicate Europe’s Climate Neutral Data Centre Pact and incentivise the private sector through preferential pricing to abide by it. Such an agreement could build on IRENA’s Collaborative Framework on Critical Minerals for the Energy Transition.
 	Further harnessing simultaneous engagement with African and Latin American nations, Balkan and Central Asian countries that are rich in these minerals, alongside partnerships with India and France in the field, will prove a very effective hedge where access to critical minerals is concerned.
 	To draw from a model such as Open Price Exploration for National Security (OPEN) AI metals programme, which enables transparency in actual costs, methods of extraction and processing, and labour policies, throughout the critical minerals value chain. This could also tie in with the World Economic Forum’s proposal on creating a market data sharing on critical minerals, and help with incentivising the adoption of best practices.
 	Sustained R&D and human resource development based on upskilling cognizant of industry requirements should be central to any critical minerals strategy that the UAE adopts.
 	Embedding manoeuvring room for course correction in investment pathways should be prioritised, given the possibility that progress in battery chemistry and emerging technology may change the value hierarchy of these minerals.

Use-case partnerships based on complementarities to implement the recommendations 



Strategy 

 
Potential partners


Capacity building (recycling, reprocessing, alternative technologies and chemistries) 

 
Japan, India and France


Development and deployment of engineered liquids

 
US, Germany, France, UK, Netherlands


Dual-pricing mechanism with a green premium

 
Saudi Arabia, India and France  


Climate Neutral Data Centre Pact
GCC countries 

 


Supply chain diversification 
Angola, Zambia, DRC, Kenya, Brazil, Peru, Chile, Montenegro, Albania, Uzbekistan, Kazakhstan, Tajikistan, Kyrgyzstan  



Conclusion
The UAE’s ability to harness critical minerals for its diversification goals will depend on how it leverages its comparative advantages, such as stable baseload capacity and lower sensitivity to short-term price shifts, while navigating the paradox between its twin transition pathways. Through the adoption of the suggested measures, it could develop a comprehensive approach that bridges the gaps between its aspirations and achievements, while mitigating some of the dichotomy in its twin pursuits.



Cauvery Ganapathy is a Non-Resident Fellow at the Observer Research Foundation Middle East

### Assessing Trade within the Abraham Accords

In 2020, Bahrain, Morocco, and the United Arab Emirates (UAE) normalised relations with Israel, becoming the first Arab signatories of the Abraham Accords. The UAE’s and Bahrain’s foreign ministers stood alongside President Trump and Prime Minister Netanyahu in the White House to sign the historic declaration, sending shockwaves across the Gulf countries. In December, Morocco followed suit in and signed the declaration. Five years on, the economic outcomes of the accords tell a complex story. While the UAE has leveraged normalisation to establish a robust trade relationship with Israel, Bahrain and Morocco’s economic ties with Israel remain limited, shaped by domestic sensitivities, weak structural alignment, and the absence of formal trade deals. This piece examines how trade between Israel and its Abraham Accords partners has evolved since 2020, and why, despite diplomatic success, the economic dividends have been asymmetrical.

Today, the Abraham Accords have remained intact despite the challenges. None of the countries has rescinded on the declaration, and bilateral relations continue to flourish with the embassies operating in each country. Bahrain is expected to announce a new ambassador to Israel after its first ambassador, Khaled Yousef Al Jalahma, was promoted to the role of Undersecretary of Political Affairs in the Bahraini Foreign Ministry. Meanwhile, a new Israeli ambassador to the UAE, Yossi Shelly, was received by Emirati officials in February.

As for the economic relationship, total goods trade between Israel and the Abraham Accords countries did appear to dip in 2023, seemingly because of the aftermath of October 7, yet it has gained more than US$ 1 billion. However, this figure only offers a partial insights. Beneath it lies key asymmetries and structural trends that merit closer scrutiny. The following sections delve into these dynamics.



Source: UN Comtrade Database
Free Trade Agreements
Among the three Abraham Accords signatories, the United Arab Emirates (UAE) has emerged as Israel’s most engaged economic partner. It has also boasted more agreements, including one akin to a free trade agreement known as the Comprehensive Economic Partnership Agreement (CEPA). While security agreements between Israel and both Morocco and Bahrain have emerged, this has not extended to trade. Both countries have not hosted many public delegations, given that they have a vocal boycott social movement against Israel and companies viewed as serving Israeli interests. Even Bahrain’s Free Trade talks with Israel appear to have paused after some press attention in 2022. A similar move towards an economic agreement between Israel and Morocco appears to have fizzled out.

These differing levels of engagement are reflected in trade volumes. According to the United Nations (UN) Comtrade Database, total trade in goods throughout 2021-2024 between the UAE and Israel reached US$6.4 billion, while reaching approximately US$576 million between Morocco and Israel, and US$50 million between Bahrain and Israel.
Abraham Accords Countries’ Total Trade in Goods with Israel, US Dollars



Country
2021
2022
2023
2024
2021-2024


Bahrain
$6,617,000
$12,743,000
$18,224,722
$12,781,000
$50,365,722


Morocco
$41,755,000
$56,169,000
$238,356,873
$239,622,000
$575,902,873


UAE
$1,221,410,000
$2,528,309,000
$1,265,753,252
$1,428,880,000
$6,444,352,252



Source: the UN Comtrade Database
Trade Balance
When comparing the total trade figures between 2021 and 2024, Israel has a cumulative trade deficit with each of the Abraham Accords countries. This means on average, across these four years, Israel has been importing more than it’s been exporting to Bahrain, Morocco and the UAE. This may be due to geopolitical reasons, such as boycotts of Israeli products. Year-on-year, however, there have been ongoing shifts. As demonstrated in the graphs below, in some years, there is sometimes a trade surplus for Israel with each of these countries, and there has not been a long enough trading period for clear patterns to emerge and assess the likely trajectory of the trade balance.
Israel’s Trade Balance with the Abraham Accords Countries, US Dollars



Country
2021
2022
2023
2024
2021-2024


Bahrain
$1,011,000
$(8,425,000)
$(13,598,266)
$323,000
$(20,689,266)


Morocco
$19,683,000
$20,329,000
$(3,126,397)
$(43,486,000)
$(6,600,397)


UAE
$(452,398,000)
$(1,253,615,000)
$(65,610,994)
$(421,512,000)
$(2,193,135,994)



Source: the UN Comtrade Database


Trade Structure
Still, the picture of trade is unclear from simply looking at cumulative values. It is in Israel’s and the US’s interest to ensure the economic dividends of the accords are tangible across the board, should it remain future-proof, and more policy attention ought to be directed towards the reasons these trade figures are panning out as such. One way to analyse where attention should be paid more to is by exploring the breakdown of trade by products.

Using the same UN Comtrade data but aided by calculations from the International Trade Centre (ITC) Trade Map, we can find out whether the export and import profiles of Israel and its partner Abraham Accords countries are complementary.

Starting with Bahrain, which has the lowest trade value with Israel, we find that the top three defined imports that Bahrain gets from the world as of 2024: “Ships, boats and floating structures”, “Inorganic chemicals; organic or inorganic compounds of precious metals” and “Ores, slag and ash” are not exported by Israel to Bahrain at all. Instead, the top export from Israel to Bahrain is “Articles of iron or steel”, which is ranked as the 15th type of product imported into Bahrain in 2024. Similarly, of the top 10 products which Bahrain exported to the world in 2024, only four were exported to Israel and small quantities. Israel has, however, found a limited market from Bahrain in both aluminium and Textiles, but even then, both these products, which represent Israel’s top imports from Bahrain, did not exceed US$3 million in trade value in 2024. This could indicate a mismatch between Bahrain and Israel’s trade structures, and has been joked about, “it’s like getting a cat and dog to mate”.

Moving on to Israel’s trade with Morocco, the picture appears to be more complementary: the top two products Israel exported to Morocco in 2024: “Electrical machinery and equipment and parts thereof”, and “Plastics and articles thereof”, are within the top five imports of Morocco from the world in 2024. Similarly, the top Moroccan export to Israel: “Articles of apparel and clothing accessories, not knitted or crocheted”, is within the top five of its total exports to the world in the same year. Moreover, the second top Moroccan export to Israel: “Sugars and sugar confectionery” represented 8 percent of Israeli imports of this product from the world in 2024.

Lastly, moving on to the UAE, Israel’s top 2024 export to the Emirati market, in the form of Jewellery: “Natural or cultured pearls, precious or semi-precious stones, precious metals, ..” represented 4 percent of Israel’s exports of that product in the same year. Interestingly, the same product was the top export of the UAE to Israel, representing 10 percent of Israeli imports of the product from the world in 2024. This indicates that trade between the two countries is complementary, especially as the same could be said about most of the other top products these two countries trade with each other: they go in both directions and play to the comparative advantage of each country in each of the product categories.
Conclusion
While the Abraham Accords have endured diplomatically and many analysts have tackled the various dimensions of the relationships between Israel on the one hand and Bahrain, Morocco, and the UAE on the other, the trade dimension remains underexplored. The UAE-Israel relationship dominates in scale and institutional depth, benefiting from formal agreements like the CEPA. In contrast, Bahrain and Morocco’s trade ties with Israel remain limited, shaped by trade structure mismatches and perhaps domestic sensitivities. While Israel tends to run trade deficits with the UAE, Morocco, and Bahrain, this represents a net gain for the Abraham Accords countries, especially the UAE, which has effectively leveraged normalisation to secure a favourable cumulative trade surplus and diversify its economic partnerships. Bahrain, by contrast, has not seen meaningful trade gains and its limited volumes and structural mismatch with Israeli demand point to an economic relationship that remains largely symbolic. As the Abraham Accords enter their fifth year, their economic promise will depend not only on political continuity but also on targeted policies that address structural trade gaps and enhance complementarity. This is a necessary step if normalisation is to translate into economic dividends for all signatories.



Mahdi Ghuloom is a Junior Fellow, Geopolitics at the Observer Research Foundation (ORF) – Middle East.

### Codifying Climate Action in the Heart of a Petrostate

Climate-specific legislation is becoming a necessity for all economies, regardless of their development pathways. Even with the gaps highlighted, it must inspire replication.

Framed through the lens of a petrostate, structurally committed to transitioning, the United Arab Emirates’ (UAE) first standalone climate law, Federal Decree Law No. (11) of 2024, titled On the Reduction of the Effects of Climate Change (Decree), enshrines climate ambition and governance in national legislation.

Notably, the law was enacted just weeks after hosting UNFCCC COP28 (Dubai, 2023), and shortly after the launch of the UAE’s Third Nationally Determined Contribution (NDC), its most ambitious climate targets yet.

With the potential to shape regional climate ambition and inspire similar legal frameworks across the Global South, it signals a shift from strategy to statute in similarly situated nations.
I.     Contextual Significance
The UAE一an OPEC member and a net hydrocarbon exporterencapsulated prior climate efforts in net-zero pledges and integrated climate policies.

Set to come into force on 30 May 2025, the law builds on existing sectoral strategies一such as the UAE Green Growth Strategy, the National Energy Strategy 2050, National Climate Change Plan. It has been designed in alignment with the UAE’s existing state capacity.

The law understands the strengths and constraints of the UAE’s governance model. It is performative, building on existing structures rather than introducing new ones. It uses pre-established institutions. It provides regulatory, institutional, and national security[1] architecture, cross-sectoral coherence, and places climate change at the heart of national planning.
II.     Unique Features
1.     A Climate Council with Executive Mandate:
The legislation establishes a layered architecture to climate governance by building incrementally on existing institutions while enhancing them. Article 5 designates the Ministry of Climate Change and Environment (MOCCAE) as the national authority, which determines annual targets for emission reduction for all sectors.

MOCCAE coordinates with local authorities within each Emirate to develop climate risk assessments and localised adaptation plans, in alignment with nationally determined pathways to achieve emissions reduction and climate neutrality. This decentralised-yet-coordinated structure addresses one of the most persistent problems in climate governance globally: fragmentation.
2.     Mandatory mitigation and adaptation plans:
The established framework for coordinated climate action across federal and local authorities mandates the development of sector-specific and regional climate mitigation and adaptation plans. MOCCAE, in collaboration with local authorities, is tasked with developing these plans.

These plans apply to all emission sources. They aim to assess key climate-related risks in each sector, establish response measures and early warning systems, and ensure implementation of necessary adaptation actions (Article 7). This horizontal mainstreaming is key to ensuring that climate action is not siloed but embedded across sectors like energy, transport, water, etc.
3.     Carbon Registry:
Article 6 establishes a national carbon credit registry. It is a foundational step toward enabling a domestic carbon market architecture in the UAE. This centralised platform will record issuance, transfer, and retirement of carbon credits, ensuring transparency.

The registry complements the UAE’s increasing role in voluntary carbon markets.

Moreover, the registry strengthens the UAE’s capacity to participate in Article 6 mechanisms of the Paris Agreement, particularly Article 6.2 (voluntary cooperative approaches) and Article 6.4 (global carbon market mechanism). This positions the UAE as a regional hub for carbon trading, in line with its Net Zero by 2050 Strategic Initiative.
4.     Emissions Accounting and MRV Integration:
Creating a legal bridge between domestic data systems and the Paris Agreement’s Enhanced Transparency Framework (PA-ETF), Article 6 mandates the development of a comprehensive greenhouse gas (GHGs) emissions measurement system. This merits special mention because it integrates the national GHG inventory with sector-specific reporting obligations and the legally binding measurement, reporting, and verification (MRV) mechanism under PA-ETF.
5.     Enforcement and Penalties:
Future ministerial regulations or guidelines will define sector-specific reporting obligations, compliance pathways, methodologies, formats, and timelines. Such regulations would operationalise the general provisions, while allowing flexibility, as global climate obligations evolve. This enforcement framework brings private and public actors under a unified accountability structure. Non-compliance is addressed through regulatory penalties (Article 15).
6.     Private Sector Integration:
Acknowledging private enterprises’ role, particularly in emissions-intensive industries, Article 12 mandates industrial facilities to submit emissions data and mitigation plans. Making climate action no longer voluntary CSR but a regulatory compliance.
7.     Cross-Cutting Human and Social Focus:
Social equity is embedded by recognising vulnerable groups, prioritising public health, and promoting environmental education.
III.     Gaps and Limitations
1.     Missing Elements on climate action
Marking an evolution from climate tucked within broader environmental concerns, the law is exclusively climate-focused. It addresses mitigation, adaptation, low-emissions development, and institutional coordination. However, it is notably silent on the just transition.

This is a glaring gap. Particularly, in light of the UAE’s role in shaping the outcome of the first Global Stocktake (GST) under the Paris Agreement at COP28. The GST outcome operationalised the transition away from fossil fuels, based on national circumstances.
2.     Lack of Climate Justice Framework:
There is no recognition of intra- or intergenerational equity, rights of future generations, protection of the most vulnerable, and common but differentiated responsibilities and respective capabilities (CBDR-RC). CBDR-RC is the cornerstone of the UNFCCC climate framework, used to balance economic interests with ecological imperatives.
3.     Limited Public Engagement Provisions:
Public participation is not embedded as a principle or process.
4.     Implementation Risks:
Federal-Emirate alignment could prove complex in practice, especially if economic interests diverge. While enforcement is mandated, the extent of sanctions, penalties, and legal remedies for non-compliance is still somewhat vague. These grey areas will need refining through future regulations. The Decree’s true test will lie in how effectively it reshapes the UAE’s emissions trajectory and institutional reporting and oversight over the next decade.
 IV.     Potential for Success
The Decree does not merely restate net-zero ambitions. It creates binding obligations, translating political commitments into justiciable responsibilities, enhanced by the following enabling factors:
1.     Climate Data Infrastructure:
MOCCAE, as the lead implementing agency, already has a climate data infrastructure in place. For instance, the UAE’s Third BUR (2022) showcased a transparent GHG inventory, outlined sector-specific mitigation efforts and data gaps. The law aligns itself with existing capacities in UAE institutions and leverages digital infrastructure.
2.     Centralised Climate Governance:
A “whole-of-government” approach is reinforced by empowering MOCCAE to coordinate national climate policy across ministries, local governments, and key sectors. This top-down clarity will ensure consistency across the seven Emirates and harmonise efforts across line ministries such as energy, transport, industry, and agriculture.
3.     Regional Leadership in Legal Integration of MRV:
The UAE positions itself as a regional leader by creating a legal chain of climate data, from source-level emissions tracking and national inventory to international reporting. This increases accuracy and ensures accountability. Few countries have embedded MRV systems into their legislation with such foresight and granularity. Such an explicit legal backbone for GHG data flows is still emerging in the MENA region.
4.     Economic Diversification Strategy:
The UAE’s strategy of economic diversification, including heavy industry, transport, petrochemicals, tourism, information technology, telecommunications, renewable energy, aviation, aligns well with the Decree’s objectives. This synergy reduces the risk of resistance from entrenched hydrocarbon lobbies.
5.     Private Sector Mobilisation:
The UAE has signalled strong support for carbon markets and voluntary climate action by domestic enterprises. MOCCAE’s 2023 initiative to develop a national framework for voluntary carbon markets complements the Decree’s provision on carbon credit registries. The Decree arrives when market actors are primed for regulatory clarity.
6.     Global Investment Climate:
As capital increasingly flows to climate-aligned jurisdictions, the law strengthens the UAE’s position as a green finance destination. Sovereign wealth funds, ESG investors, and development banks are more likely to view the UAE as a partner of choice.
V.     Model for the Global South and Beyond
The law signals that fossil-fuel dependence can coexist with climate ambition. The Decree could serve as a template for developing economies seeking to legally operationalise their climate commitments without undermining national priorities and sustainable development goals.

It enhances legal literacy by eschewing dense technical statutory language, it remains clear, accessible, and operational. The drafting reflects a deliberate choice to make climate law legible to government officials, lawyers, businesses, communities, and all relevant stakeholders. This offers a blueprint for integrated climate governance, especially in regions where the environmental rule of law remains nascent.

It demonstrates to resource-constrained nations that climate law need not be voluminous or verbose to be effective. Nor does it need to be maximalist by proliferating overly ambitious targets that remain unimplemented.

Climate-specific legislation is becoming a necessity for all economies, regardless of their development pathways. Even with the gaps highlighted, it must inspire replication. It lays the foundation for a new form of legal diplomacy─beyond declarations of ambition, to embedding it in legal architecture.



[1] National security here must not be understood in the traditional sense, rather, it should be recognized as a strategic shift. Climate Change is a risk multiplier affecting economic stability, food and water security, energy reliability, population health, and geopolitical positioning.



Anushree Tripathi, LL.M. (Cantab), is a Climate Change Lawyer based in Dubai, United Arab Emirates, and an Advocate of the Supreme Court of India.

### From Innovation to Participation: Why Open Data Matters in the Gulf

The modernisation of the global economy in the 21st century has been closely linked to the ubiquitous spread of digitalisation and datafication across both the public and private sectors. A corollary of this co-evolution of technology and governance mechanisms has been the evolution of knowledge economies arising from an increased collaboration between government, private sector, and academic ecosystems. A key component for strengthening a knowledge economy is the availability of knowledge or data generated and collated by the government for the use of different stakeholders. In the Gulf countries, as in most countries, this has resulted in the proliferation of Open Data Portals.

For the Gulf countries, the role of open and transparent data for strengthening the knowledge economy has become crucial. For instance, the region has seen high investment in Smart City initiatives, such as Saudi Arabia’s Neom and the United Arab Emirates’ (UAE) Masdar City.  It has also been actively encouraging the digital transformation of its governance infrastructure, which will require robust integration of technological platforms such as the Internet of Things (IoT), Artificial Intelligence (AI), and big data. Given that such projects and priorities require various domains of expertise and cannot be solved for by the public sector alone, Gulf countries may need to take a proactive approach to strengthen their knowledge economies by investing more in open data for stakeholders and experts across economic sectors.

Across the Gulf countries, barring Kuwait, which has no centralised portal, this has resulted in 14,729 datasets published. Most of this is led by Saudi Arabia and the UAE, which have surpassed other Gulf countries by thousands of datasets.
Datasets Published by Gulf Country, as of the 6th of May 2025



Open Data Portal
Datasets Published


Saudi Open Data Platform
10,916


UAE’s Bayanat
3,146


Bahrain Open Data Portal
448


Qatar Open Data Portal
159


Oman Open Data Portal
60



Sources: Saudi Arabia Open Data Portal, Bayanat, Bahrain Open Data Portal, Qatar Open Data Portal, Oman Data Portal
The Downsides of Open Data
 While GCC countries have initiated Open Data Portals in recent years, the initiatives have faced bottlenecks. Research indicates that some inertial factors include: the lack of apparent benefits of maintaining open data platforms, pressure on government resources, inadequate operational coordination between government departments, lack of whole-of-government approach, legal ambiguity and risk of violating privacy standards by publishing sensitive data and technical issues such as lack of interoperable machine-readable formats for data publication.

An important factor here is the “lack of clear or apparent benefits of maintaining open data platforms”. For instance, the public may not necessarily appreciate the importance of maintaining such open data platforms; therefore, the benefit of open data platforms as a service may not be clear to governments, perhaps because it is not seen as a service outside the purview of researchers and analysts. Moreover, if anything, publishing raw open data without context and analysis may lead to confusion and misplaced scrutiny.
 The Case for Open Data
 There are benefits, nonetheless. Firstly, there is a global mandate for open data. The United Nations (UN) has identified building, monitoring and maintaining national data systems and evaluation programs as key components of its Sustainable Development Goals (SDGs). The UN SDG preamble assigns to member states the responsibility for developing rigorous, high-quality, accessible, and reliable data sources and indicators at a national level.

Furthermore, dissemination of knowledge and data sharing practices by governments has become a useful indicator and predictor of long-term economic growth, particularly for developing countries. According to World Bank researchers, government data sharing and transparency practices can lead to increased scientific research and innovation, more accurate macroeconomic forecasts, and better effectiveness of monetary policies by making data available to “a broad brain trust”.

Still, open data practices cannot be implemented without decisions “at the highest level of policy” to mandate the release and maintenance of legally permissible data collected by governments and public institutions. Achieving this will require overcoming various administrative, legal and technical obstacles, as open data, by definition, needs to be free to use, reuse and share, accessible, machine-readable, timely, non-proprietary, maintained and should meet privacy and international standards.
A Path to Advancing e-Participation
One incentive for policymakers to engage with open data practices and maintain their open data portals to the highest standard is to improve their interaction with their citizens. Although Gulf countries may largely follow the tradition of having appointed rather than elected governments, the desire to encourage participation of citizens in governance and policymaking is still present. For instance, Gulf governments care about being competitive in e-Government in all its dimensions, as evidenced by their engagement with the UN e-Government Survey, and one way in which e-Government can be judged is by focusing on the use of online services to facilitate interaction between citizens and government.

This can be derived from the UN E-Participation Index (EPI). There are three levels to the index: e-Information, which is defined as “enabling participation by providing citizens with public information and access to information without or upon demand”; e-Consultation, which is defined as “engaging citizens in contributions to and deliberation on public policies and services”; and e-Decision-Making, which is defined as “empowering citizens through co-design of policy option and co-production of service components and delivery modalities”. Notably, e-Information leads to e-Consultation, as people cannot give proper input to governments without the government providing basic information. Moreover, both lead to e-Decision-Making, during which “citizens become the protagonists by leading the policymaking process”.

In 2024, Saudi Arabia emerged as the leading Gulf country in terms of the e-Participation Index, while Qatar and Kuwait remained below the world average of 0.4893. Saudi Arabia was ranked 7th in the world for its EPI score, moving 36 ranks higher than the 2022 report. Bahrain also made significant improvements by going up 71 ranks to be included in the top 20 globally. This indicates that Saudi Arabia and Bahrain have been taking e-participation very seriously over the past few years.



 
Gulf Countries EPI Ranking



Country
Rank 2024
Rank 2022
Change


Saudi Arabia
7
43
+36


Bahrain
18
89
+71


United Arab Emirates
37
18
-19


Oman
61
50
+11


Qatar
92
101
+9


Kuwait
130
67
-63



Source: UN E-Participation Index

One way to understand why Saudi Arabia is doing so well in e-Participation is to look at its survey responses to the E-Government Survey. In addition to having an open data portal, the Saudi government has dedicated e-Participation platforms such as “Tafaul”, “Istitlaa”, “Watani”, and the “Private Sector Feedback Platform”. This incentivises the government to ensure its open data portal is up to date, serving to maximise the utility of such platforms, while also acting as additional data points on the number and content of draft policies and legislation.

The development of aforementioned e-Participation platforms is part of a larger strategy by Saudi Arabia to cultivate a knowledge-based partnership between the public and private sectors to achieve the mandate of the Kingdom’s Vision 2030 of becoming one of the top ten most competitive economies of the world. By prioritising and normalising public-private consultations in legislative practices to create a “safe and stable investment environment,” the position of Saudi Arabia in the EPI rankings reflects a whole-of-government approach and administrative streamlining that can serve as a model for neighbouring jurisdictions.
Conclusion
Saudi Arabia and Bahrain’s leadership in the e-Participation Index demonstrates the value of investing in open data ecosystems—not only to promote innovation, economic growth, and sustainability, but also to enhance citizen engagement. Their progress offers a policy model for neighbouring Gulf states aiming to strengthen digital governance, enhance transparency, and build more inclusive knowledge economies. This is especially true for the Gulf countries, which may have ineffective open data efforts.



Siddharth Yadav is a Fellow with the Technology vertical at the Observer Research Foundation (ORF) – Middle East.

Mahdi Ghuloom is a Junior Fellow, Geopolitics at the Observer Research Foundation (ORF) – Middle East.

### Artificial intelligence checks in: How it is changing the travel sector

The travel industry runs on personal interaction and here technology is making relationships more efficient. Travellers and service providers are leaning on artificial intelligence (AI) for more informed decisions. Price comparison, destination assessment and consumer behaviour are being enabled by new technology tools.
AI agents will not just automate travel searches and bookings, but they will also match human intelligence in many tasks by the end of the decade, said a recent report by the World Travel and Tourism Council.
As many as 94 per cent of travel and tourism industry leaders consider AI to be critical to their business. “AI-powered assistants like Trip.com’s TripGenie saw a 200 per cent surge in usage in 2024, revolutionising trip planning and customer experiences. With 91 per cent of travel businesses planning to increase their tech investments, the industry is on the brink of its most significant transformation since the dawn of the internet,” said the report.
The increasing need for personalisation is driving demand for super apps (a mobile or web application that combines multiple services into one platform). The report said that most survey respondents wanted a single platform integrating flights, hotels, activities, and payments for frictionless travel. For now, this is a challenge because hotels and airlines prefer their own apps to ensure consumer loyalty.
The increasing adoption of facial recognition technology is changing consumer experience: from airports to hotels. At airports across the world, facial recognition is used for terminal entry and immigration. India’s DigiYatra has transformed terminal entry at airports. Since its launch in 2022, DigiYatra has been used by more than 11 million users and it has clocked 45 million journeys. The fast-track immigration programme is active in seven airports for international travellers.
In Abu Dhabi, the government uses facial recognition for “smart tourism”. The Department of Culture and Tourism - Abu Dhabi (DCT Abu Dhabi), through its licensing and regulatory compliance department, has deployed an advanced facial recognition system at hotels, for both guests and employees. This was done in partnership with the Federal Authority for Identity, Citizenship, Customs & Port Security (ICP).
Saleh Mohamed Al Geziry, director general for tourism at DCT Abu Dhabi, has said: “The integration of the face recognition system underscores our shared commitment to pioneering advancements in smart tourism. This initiative reflects our commitment to leveraging innovation to enhance the guest experience while maintaining the highest standards of safety and security for both guests and hospitality sector employees. By working closely with ICP and our hotel partners and national authorities, we are ensuring a seamless, safer and more connected journey for every visitor.”
The hospitality and airline industries also use facial recognition technology for processing payments and check-ins. While mobile-based check-ins have become common in hotels, facial identification can eliminate the concept of loyalty cards. Travellers can walk in and out of hotels without having to check in at the front office. Cameras can recognise regular visitors and debit the payment from their digital account. In each of these cases, consumers will have to insist on privacy from service providers.
GenAI chatbots are convenient for travel planning and booking. Travel agents and customers are using these AI tools to identify and evaluate what’s available at destinations. Since most itineraries are unique, AI can help curate experiences. Supported by AI tools, human advisors are helping consumers get better options in selecting restaurants and places to visit in unfamiliar destinations. AI bots can trawl through the menus and prices of thousands of restaurants and offer personalised options for travellers.
In the travel sector, the consumer and service provider relationship will be shaped by the use of emerging technologies.



This commentary originally appeared in Business Standard.

### The India-UAE Partnership in Next-Generation Energy Sectors

India and the UAE are forging a future-focused energy alliance through strategic cooperation in nuclear power, critical minerals, and green hydrogen

The energy partnership between India and the United Arab Emirates (UAE) has evolved into a cornerstone of their bilateral relations, driven by mutual interests in energy security, technological collaboration, and sustainable development. Over the past decade, the two nations have expanded their cooperation beyond traditional hydrocarbon trade to encompass cutting-edge domains such as civil nuclear energy, critical mineral supply chains, and green hydrogen production.

This transformation reflects both countries’ ambitions to position themselves as global leaders in the energy transition while addressing domestic economic priorities.  Their collaboration spans many agreements, joint ventures, and long-term strategic initiatives. This partnership is further strengthened by deeply rooted cultural ties and a shared vision for regional stability, exemplified by recent high-level engagements, including the April 2025 visit of H.H. Sheikh Hamdan bin Mohammed Al Maktoum, Crown Prince of Dubai, who emphasised “the familial bond” between the nations.
Nuclear Energy Cooperation: Operationalising the Barakah Partnership
 The landmark Memorandum of Understanding (MoU) signed in September 2024 between India’s Nuclear Power Corporation of India Limited (NPCIL) and the UAE’s Emirates Nuclear Energy Company (ENEC) marks a paradigm shift in bilateral relations. Under this agreement, Indian nuclear engineers and technicians will participate in the operations and maintenance of the Barakah Nuclear Power Plant, the Arabian Peninsula’s first nuclear facility. The $20 billion plant, comprising four reactors with a combined capacity of 5,600 MW, became fully operational in 2023 under South Korean technical oversight. India’s entry into this project signifies the UAE’s confidence in India’s nuclear expertise, developed through decades of operating 24 domestic reactors with a total capacity of 8,180 MW (as of July 2024), including indigenous pressurised heavy-water reactors (PHWRs) at facilities like Kudankulam.

This collaboration between the two nations extends beyond technical assistance to encompass expertise sharing, supplier sourcing, human resource development and nuclear consulting services in future nuclear projects. The MoU establishes a framework for NPCIL and ENEC to cooperate on sourcing nuclear goods and services, operational best practices, and safety protocols. For India, the Barakah partnership provides critical opportunities to validate its indigenously developed 700 MW PHWRs in international markets. At the same time, the UAE gains access to India’s cost-competitive nuclear supply chain and operational experience in diverse climatic conditions. The agreement also aligns with the 2022 India-France-UAE trilateral framework, which identified nuclear energy as a key area for technological collaboration, enhancing India’s credentials as a responsible nuclear power and potentially easing its access to global nuclear trade networks under the Nuclear Suppliers Group (NSG) regime.
Critical Minerals: Securing Supply Chains for the Energy Transition
The September 2024 MoU between UAE’s International Resources Holding (IRH) and an Indian consortium comprising Oil India Limited (OIL), Khanij Bidesh India (KABIL), and Oil and Natural Gas Corporation Limited (ONGC) Videsh marks a significant step in addressing both nations’ critical mineral deficits. This strategic partnership aims for global collaboration in securing a comprehensive supply chain for critical minerals, focusing on project identification, due diligence, development strategies, risk management, and offtake strategies. India’s National Critical Minerals Mission (2024), backed by a budget of ₹34,300 crore, aims to secure supply chains through domestic exploration and international partnerships, thereby reducing dependence on lithium and cobalt imports. The UAE, seeking to diversify its economy beyond hydrocarbons, is leveraging its financial capacity to acquire global mining assets, complementing India’s geological survey expertise.
Green Hydrogen: Building a Transnational Value Chain
India and the UAE aim to be the global leaders in green hydrogen production, capitalising on their complementary advantages in renewable energy resources and industrial capacity. The UAE leads in cost competitiveness, with a 2023 levelized cost of hydrogen (LCoH, measured in US dollars) at $2.7/kg, projected to fall to $1.7/kg by 2030, while India follows closely at $3.2/kg (2023), expected to reach $1.8/kg by 2030.

The UAE National Hydrogen Strategy and India’s Green Hydrogen Mission, while having their distinct national contexts, exhibit significant complementarity that can be leveraged for mutual benefit in the global green hydrogen landscape. The UAE strategy aims to position the nation as a top global producer of low-carbon hydrogen by 2031, encompassing both blue hydrogen (from natural gas with Carbon Capture and Utilisation technologies, or CCUs) and green hydrogen (from renewables). It focuses on decarbonising domestic industries and establishing itself as a key energy exporter, leveraging its existing energy infrastructure and strategic geographic location. The UAE is actively pursuing collaborations and developing infrastructure, including potential hydrogen oases, to facilitate both domestic use and export of hydrogen and its derivatives like ammonia. Their 2031 production target is 1.4 million tonnes per annum (mtpa) of low-carbon hydrogen.

In contrast, India’s National Green Hydrogen Mission, launched in 2023, has the ambitious goal of establishing the country as a global hub for Green Hydrogen production, usage, and export, specifically focusing on hydrogen produced from renewable energy sources. India possesses vast potential for abundant and cost-effective renewable energy like solar and wind, crucial for large-scale green hydrogen production. The mission aims to drive down production costs through incentives, boost domestic demand by mandating consumption in specific sectors, and facilitate exports through supportive policies. India has set a target to develop a Green Hydrogen production capacity of at least 5 MMT per annum by 2030. Given India's focus on green hydrogen and the UAE's strategic need to meet growing global demand for clean energy and potentially diversify its hydrogen export portfolio beyond blue hydrogen, a partnership between the two nations holds considerable promise. India can be a reliable supplier of cost-competitive green hydrogen to meet the UAE's export ambitions and domestic needs as the world transitions towards cleaner fuels, while the UAE's established infrastructure, financial resources, and export expertise can facilitate the global distribution of Indian green hydrogen. This synergy can accelerate the deployment of green hydrogen technologies and contribute significantly to both nations' energy transition and decarbonisation goals.
Conclusion
The India-UAE energy partnership exemplifies how historical ties can evolve into a multifaceted alliance addressing 21st-century challenges. In nuclear energy, their complementary capabilities in plant operations and technology development create a model for South-South cooperation. The critical minerals alliance demonstrates innovative approaches to securing supply chains through joint exploration and processing investments, while green hydrogen collaborations showcase how policy alignment and technological co-creation can accelerate cost reductions in clean energy.

With bilateral trade projected to reach US$ 100 billion by 2030, sustained energy collaboration will remain pivotal in achieving climate and economic goals, reshaping global energy geopolitics, and reinforcing the “familial bond” articulated by both leaderships. This partnership not only underscores the strategic convergence of two nations but also offers a blueprint for Global South cooperation in balancing development with sustainability.



Rakshith Shetty is a Consultant with the Ministry of Commerce and Industry, Government of India.

### AI safety on the chopping block: How US-China rivalry is redefining regulation

“The AI future is not going to be won by hand-wringing about safety,” stated United States (US) Vice President J.D. Vance at the 2025 Paris AI Action Summit (PAIAS). His remark underscores three realities: first, AI will be a defining technology for the future; second, there will be winners and losers in the AI race; third, regulatory approaches will determine whether a nation can capitalise on AI’s transformative power. The significance of AI for the future of humanity has become a truism in tech and geopolitical circles, with industry leaders predicting that humanity is either at the dawn of “The Intelligence Age” or “the race to human extinction”. Governments are contending with the reality that, regardless of which outcome emerges, cutting-edge AI research and innovation are largely concentrated in the US and China. Indeed, zero-sum efforts in both Washington and Beijing to outdo the other in the AI race appear to have increasingly marginalised the scope for joint endeavours.
Furthermore, the drive to win the AI race is superseding commitments towards responsible innovation and international cooperation, particularly amongst leading AI powers. Triangulated between its existing economies of scale in the research and development (R&D) sector, geopolitical imperatives driving efforts towards global leadership as an AI power, and a shift towards deregulatory policies at home, the US’s AI policy has catalysed a growing divide within AI governance doctrines worldwide. Underpinning this division is the distinction between two interrelated regulatory issues: AI safety and AI security. This paper will explore how the two concepts are relevant for the evolving regulatory approaches of governments globally.

AI safety vs. AI security
Defining the terms: Differentiating between AI safety and security may appear to be an exercise in semantics, but it can play a crucial role in defining policy approaches to AI regulation. The key difference between the two lies in how they target intent and origin of risk as matters of regulatory concern. AI safety has an ethical dimension and focuses on mitigating unintended consequences arising during the life cycle of systems that may be secure and aligned with the goals of developers and regulatory standards. A safety perspective focuses on internal risks of AI systems like biased training data, biased algorithms, and misalignment between the intended use of an AI system and the actual output of the system. Conversely, AI security entails protecting the integrity of systems, their components, and dependent systems from external threats. A regulatory focus on security will emphasise identifying threats that seek to exploit or misuse AI systems. An ideal approach would involve prioritising both safety and security. However, a focus on safety can require establishing guidelines and frameworks after years of consultations with stakeholders, like in the case of the 2024 EU Artificial Intelligence Act (AIA). Whereas security may help regulatory expediency as it can be achieved in the short term by enforcing existing cybersecurity frameworks and data protection regulations.
A rogue Anglo-sphere: Governments have begun prioritising either safety or security to define their strategic orientation. For instance, the United Kingdom (UK) and the US, two countries that abstained from signing the PAIAS AI Pledge, have staked their position as pro-security. On the heels of the Summit, the UK Department of Science, Industry and Technology (DSIT) renamed its AI Safety Institute to ‘AI Security Institute’ (ASI). Speaking at the 2025 Munich Security Conference, UK Technology Secretary Peter Kyle stated that the unfolding “AI revolution” requires regulatory reorientation and that the new ASI will not be “deciding what counts as bias or discrimination.” Instead, the institution will focus on mitigating external threats and investigating AI systems regardless of which jurisdictions they come from in coordination with the UK’s allies.
Across the Atlantic, Elizabeth Kelly, the director of the US AI Safety Institute established under the Biden administration, stepped down from her role following the release of President Trump’s executive order on AI that marked the end of Biden-era pro-safety domestic policies. From a geoeconomic perspective, the executive order on AI designed to promote “America’s global AI dominance” epitomises a pro-security shift. Internationally, this shift, along with the tariff war between the US and China and the questionable success of existing export controls for advanced US AI chips, may lead to stricter restrictions to further isolate Chinese supply chains. Singapore is already under investigation by Washington due to allegations that DeepSeek was able to bypass US export controls by acquiring Nvidia chips through the island nation. A focus on AI security may lead to the emergence of non-tariff trade barriers to tech diffusion, as demonstrated by Western calls to ban China’s DeepSeek R1 AI model due to security concerns considering that the model in question can be run locally (preventing cross-border transfer of data), is less resource intensive and priced significantly lower that Western offerings.
Undecided EU: The safety-security dynamic is also gaining momentum in the EU as the first compliance deadline of the pro-safety risk-based EU AIA came into effect in February 2025. Ethicists involved in drafting the ethical guidelines for the AIA have characterised the regulation as a veiled attempt at “ethics-washing” AI to appease public concerns and accelerate AI adoption across the European market. The announcements made by European leaders during PAIAS for increasing public-private investments in AI development and reducing regulatory burdens for developers may lend credence to such criticisms for some. Previous regulations like the 2016 General Data Protection Regulation (GDPR) have become policy templates for other jurisdictions, allowing the EU to secure a leadership position in tech regulation. Similarly, a pioneering regulation like the EU AIA also has the potential to set global standards for AI governance. Whether subsequent iterations of the AIA retain the regulation’s original framework or adopt a stance that prioritises external threats over internal risk factors will prove to be globally consequential.

Systemic risks and global fragmentation
As countries leading the AI race make bets on AI safety versus security, the resulting fragmentation of global AI governance will also affect two key areas: labour markets and environmental sustainability. Leaders like J.D. Vance optimistically argue for AI’s potential to contribute to productivity and job creation without paying much attention to job displacement, an inevitable phenomenon, according to Gilbert Houngbo, Director-General, International Labour Organisation. The 2025 International AI Safety (IAS) Report prepared for the PAIAS suggests that current general-purpose AI systems can impact 60 percent of jobs in advanced economies and 40 percent in emerging markets.
AI development is a rapidly growing problem for environmental sustainability goals and a contributor to greenhouse gas (GHG) emissions. As long as scaling laws hold, AI development will entail investments in bigger data centres and more expansive infrastructures, which will proportionally increase environmental impact due to increased resource consumption. For instance, Microsoft made a climate pledge in 2020 of becoming carbon-negative by the end of the decade. Yet, its carbon emissions grew 30 percent by 2023 due to its investments in AI development. The withering support for sustainability principles in favour of regulatory efficiency in countries leading the AI race has the potential to become a model for emerging players as well. The remapping of the global AI governance landscape presents some systemic risks and leaves crucial questions unanswered. As governments in the West shift away from cooperative relationships towards competitiveness, what will remain of declarations and pledges signed for promoting responsible AI development? How effective will “pinky-promises” like MoUs and non-binding agreements like the PAIAS Pledge be in the face of geopolitical and economic pressures for scaling AI investment? Such open questions add weight to UN Secretary-General António Guterres’s pressing statement, “Are we ready for the future? The answer is easy. No”.



This commentary originally appeared in ORF.

### U.S. AI Action Plan: Recommendations to the National Science Foundation and the Office of Science and Technology Policy

Introduction 
The Donald Trump administration is prioritising the enhancement of United States (US) leadership in artificial intelligence (AI) through deregulation, private-sector investment, and strategic policy development. To this end, President Trump announced the Stargate Project on 21 January 2025. The joint venture—whose initial equity funders are OpenAI, SoftBank, Oracle, and MGX—aims to invest up to US$500 billion in AI infrastructure across the US by 2029. Stargate will focus on constructing data centres, building new AI infrastructure, enhancing AI capabilities, and creating “hundreds of thousands of American jobs”.[1]
Shortly thereafter, on 23 January 2025, President Trump issued Executive Order 14179, marking a clear shift in American domestic and foreign policy on AI development. The Trump administration aims to “sustain and enhance America’s global AI dominance to promote human flourishing, economic competitiveness, and national security.”[2] To achieve this objective, the US will need to balance a domestic pro-innovation approach with a pro-security foreign policy.
This report is in response to the White House call for public comment regarding the development of an AI Action Plan.[3] The authors recommend two sets of interventions for the proposed Action Plan: reprioritising domestic policy through the US AI Safety Institute (AISI) and adjusting export controls.[a]

Modifying the Mandate and Operations of US AISI
The US AI Safety Institute (AISI) was established in 2023 with a focus on AI risk mitigation, regulatory oversight, and responsible AI deployment. However, President Trump’s emphasis on the “removal of barriers to American AI innovation” and “global leadership in AI”[4] may necessitate a shift in AISI’s priorities towards minimising bureaucratic and regulatory hurdles, boosting AI competitiveness, and building a more pro-business AI ecosystem. The following actions could be considered.
Shifting Towards Self-Regulation and Market-Driven AI Governance


 	Industry Self-Regulation:Increasingly, AISI will need to advocate for market-driven AI governance and light-touch regulations. In certain sectors, it could work towards replacing AI compliance requirements embedded in law with voluntary, industry-driven standards, similar to Australia’s Voluntary AI Safety Standard, which includes guardrails that apply to all organisations across the AI supply chain.[5] Such an approach would encourage self-regulation while allowing businesses to rapidly scale AI applications. AISI should push for upholding industry’s self-regulation commitments by establishing mechanisms for transparency and information-sharing.[6]


 	Legal Compliance:In areas such as national security and critical infrastructure, more stringent requirements for legal AI compliance should be retained. AISI could identify and list these domains, differentiating them from those where self-regulation may suffice.


 	Light-Touch Transparency Requirements: Prior to Executive Order 14179 issued by the Trump administration, Executive Order 14110,[7] issued under then President Joe Biden, had served as federal guidance for AI regulation. In the absence of a federal regulation, the US AI landscape is governed primarily by state-led initiatives. As Executive Order 14179 calls to establish a pro-innovation approach without introducing onerous regulatory burdens for the AI sector, issuing federal transparency requirements for highly capable, multi-modal frontier AI models can be considered a light-touch measure. Developers can be directed to ensure that AI-generated output from models that cross a defined monthly user threshold have latent identification elements like machine-readable watermarks. This approach will facilitate inter-state regulatory consistency and correspond with state-led bills like the Artificial Intelligence Policy Act[8] passed by the state of Utah and the AI Transparency Act[9] passed by the state of California in 2024.

Adopting a More Pro-Business Approach to AISI’s Strategic Goals


 	AI Regulatory Sandboxes:AISI’s Strategic Goals call for addressing the underdeveloped testing, evaluation, verification, and validation (TEVV) methods for AI.[10] AISI could actively begin supporting the establishment of AI regulatory sandboxes where firms can experiment with advanced AI models and associated TEVV in real-world settings before full-scale deployment. This would also enable AI startups and corporations to develop breakthrough applications without regulatory delays.


 	AI Skilling:AISI’s present Strategic Goals highlight the importance of “supporting institutions, communities and coordination, around AI safety.”[11] This could be expanded to consider supporting AI sustainability rather than just safety. In keeping with President Trump’s vision of job creation,[12] a core element of AI sustainability will be to create new jobs through AI re-skilling. AISI should, therefore, prioritise the design and execution of AI workforce training and re-skilling programmes, which include sensitisation about AI safety. The launch of a National AI Workforce Initiative within AISI that partners with private firms to train American workers in AI-driven industries could be considered.[b]

Building R&D Capacities and Leveraging International Collaborations 


 	National AI Acceleration Fund:AI innovation and leadership will require increased investments in domestic research and development (R&D). A National AI   Acceleration Fund could be set up within AISI to drive R&D investment in areas such as autonomous systems, defence AI, and industrial automation.


 	Public-Interest AI: The establishment of computing clusters that serve public interest may help align domestic policy with President Trump’s goal of using AI to promote human flourishing. For instance, California introduced CA SB53 to construct a public computing cluster, CalCompute,[13] to offer researchers and businesses the resources to develop AI that serves the public interest. Similarly, the federal government can establish a National Compute Cluster to facilitate the development of frontier open-source AI models. Given that Chinese open-source frontier models have emerged as a critical threat to American leadership in the global AI landscape, frontier models facilitated by a National Compute Cluster will help sustain American competitiveness in the open-source market.


 	International Network of AI Safety Institutes: US AISI is part of the International Network of AI Safety Institutes, launched in 2024.[14]It must collaborate with the Network’s members on joint R&D projects, which could boost domestic capacities for innovation. As AISI reprioritises its areas of work, it must strategically seek out these international partnerships.

Adding Flexibility to Export Controls to Foster Strategic Partnerships
Increasing Export Caps Through the ‘Validated End-User’ Authorisation Programme 
On 15 January 2025, the Bureau of Industry and Security released the Framework of Artificial Intelligence Diffusion (FAID) as the latest amendment to US export controls regulating the diffusion of advanced chips and computing capacity. The methodology adopted by FAID divides countries into three tiers. Entities based in top-tier countries are eligible for ‘Universal Validated End-User’ (UVEU) authorisation, which would allow them to manufacture, deploy, and export cutting-edge chips with negligible restrictions in top-tier countries.
While FAID has succeeded in setting clear standards for acquiring licences, a case-by-case approach towards middle-tier countries may be beneficial. Longitudinally, increasing the export cap on compute capacity from UVEUs to ‘National Validated End-User’[c] (NVEU) entities in countries that have economic and military agreements with the US should be considered. For instance, the export limit on compute for NVEU-authorised entities and one-time export licences for entities in middle-tier countries should be increased if the host country implements adequate protocols for cybersecurity, supply-chain independence from embargoed countries, physical systems security, and model weight security, among others. Increasing compute export to large and strategic markets will ensure that favoured middle-tier countries, such as those participating in alliances like I2U2 (India, Israel, United Arab Emirates, and US), are better able to meet their compute requirements, ensuring a deeper integration into the US supply chain and meeting President Trump’s stated goal of sustaining American leadership in AI development.
Creating a Pathway to Acquire UVEU Authorisation 
In order to cultivate a cooperative geopolitical and technological international order that disincentivises bad actors, US export controls should incentivise regulatory and governance alignment with strategic partners. Middle-tier countries may be more likely to establish supply-chain independence from embargoed nations if a pathway exists for acquiring UVEU status.[15] In the absence of such a pathway, private entities and countries in the middle tier may perpetually face uncertainties in developing local AI ecosystems which will, in turn, hinder the consolidation of a US-led global AI ecosystem. Formulating a path to a ‘Conditional Universal Validated End-User’ status for middle-tier countries based on government-to-government agreements, compliance verification, and regularly validated security protocols should be considered in the forthcoming AI Action Plan.
Exempting Open-Weight Frontier Models
An exemption to US export controls in FAID applies to AI developers in middle-tier countries that develop open-source models, even when said models exceed the 1026 FLOPs limit.[16] However, the recent release of open-weight models like DeepSeek R1 suggests that algorithmic distillation and optimisation techniques can be used to develop open models that are competitive with closed frontier AI models in the US. Since the release of R1, officials  from South Korea, Australia, Italy and Taiwan have called to ban the use of Chinese frontier models selectively[17] whereas some US officials have demanded a complete ban of DeepSeek models in the US.[18] While implementing national security measures is the prerogative of governments to prevent the malicious use of AI and illicit cross-border transfer of data, an outright ban of open-weight models can stifle research and innovation in the global AI sector, considering the innovations made by Chinese AI developers, which have also been highlighted by industry leaders in the US.[19]
To facilitate collaborative research and development in line with the 2024 G7 declaration,[20] research and selective adoption of open-weight Chinese frontier models should not intensify restrictions on middle-tier countries in the FAID framework, provided all other security requirements for NVEU authorisation are met. Furthermore, narrowing US export controls to restrict the development of open models in middle-tier countries may counter US interests by allowing China to position itself as an alternative provider of open-source stacks.[21] To avoid this scenario, international partnerships, accelerator programmes, and research collaborations can be used to cultivate an open-source ecosystem that aligns with US interests. Building on previously stated recommendations, the establishment of an International Democratic Compute Cluster between the US and key partners should be considered.

Conclusion
The recommendations outlined in this report are pursuant to the Trump administration’s objective of sustaining and enhancing US leadership in AI development. The recommendations articulate necessary regulatory tools like R&D initiatives, acceleration funds, and public-interest compute clusters while minimising the regulatory burden on AI developers based in the US. However, given that the AI supply chain and consumer base are globally distributed, sustaining US leadership will involve incentivising countries to integrate into the US AI ecosystem.
To facilitate such integration, it can be useful to introduce gradations in the middle tier of FAID based on inter-governmental ties and agreements. Recent advances in open-weight frontier-model development in China present the possibility of an alternative AI ecosystem that is misaligned with the strategic and national security interests of the US and its allies. While narrow export controls may be effective in the short term, a balanced approach that accounts for the computing and infrastructure needs of geopolitically aligned countries may be more sustainable for ensuring US leadership.




Endnotes 
[a] Executive Order 14179 tasked the National Science Foundation and the Office of Science and Technology Policy to develop the AI Action Plan. Accordingly, this report’s recommendations are directed at these two agencies.
[b] At the AI Action Summit in Paris in February 2025, US Vice President JD Vance emphasised that “the Trump administration will maintain a pro-worker growth path for AI so it can be a potent tool for job creation” and that it “will guarantee American workers a seat at the table”. See: https://www.presidency.ucsb.edu/documents/remarks-the-vice-president-the-artificial-intelligence-action-summit-paris-france
[c] Countries situated in the middle-tier of the FAID are not eligible for UVEU authorisation and are limited to NVEU authorisation, licensing options and limited exemptions. The FAID emphasises the need to secure government-to-government agreement between the US and the host country before an entity from a middle-tier country can apply for NVEU status. Furthermore, US companies are required to keep half of their AI compute within US borders, companies in top-tier countries are required to keep 75 percent of their AI compute in top-tier countries and no more than 7 percent in any one middle-tier country.
[1] “Announcing the Stargate Project,” OpenAI, January 21, 2025, https://openai.com/index/announcing-the-stargate-project/
[2]“Removing Barriers to American Leadership in Artificial Intelligence,” The White House,  January 23, 2025, https://www.whitehouse.gov/presidential-actions/2025/01/removing-barriers-to-american-leadership-in-artificial-intelligence/
[3] “Public Comment Invited on Artificial Intelligence Action Plan,” The White House, February 25, 2025, https://www.whitehouse.gov/briefings-statements/2025/02/public-comment-invited-on-artificial-intelligence-action-plan/
[4] “Removing Barriers to American Leadership in Artificial Intelligence,” The White House
[5] Voluntary AI Safety Standard: Guiding Safe and Responsible Use of Artificial Intelligence in Australia, Department of Industry, Science and Resources, Australian Government, September 5, 2024, https://www.industry.gov.au/publications/voluntary-ai-safety-standard#:~:text=
[6] Melissa Heikkila, “AI Companies Promised to Self-regulate One Year Ago. What’s Changed?,” MIT Technology Review, July 22, 2024, https://www.technologyreview.com/2024/07/22/1095193/ai-companies-promised-the-white-house-to-self-regulate-one-year-ago-whats-changed/
[7] Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence, The White House, October 30, 2023, https://bidenwhitehouse.archives.gov/briefing-room/presidential-actions/2023/10/30/executive-order-on-the-safe-secure-and-trustworthy-development-and-use-of-artificial-intelligence/
[8] Jason I. Epstein et al., “Utah Law Makes AI Subject to Consumer Protection Laws,” The National Law Review, March 21, 2024, https://natlawreview.com/article/utah-law-makes-ai-subject-consumer-protection-laws
[9] Titus Wu, “Law on AI Watermarks, Detection Tool Enacted in California,” Bloomberg Law, September 19, 2024, https://news.bloomberglaw.com/artificial-intelligence/law-on-ai-watermarks-detection-tool-enacted-in-california
[10] The United States Artificial Intelligence Safety Institute: Vision, Mission and Strategic Goals, NIST, May 21, 2024, https://www.nist.gov/system/files/documents/2024/05/21/AISI-vision-21May2024.pdf
[11] The United States Artificial Intelligence Safety Institute: Vision, Mission and Strategic Goals, NIST, May 21, 2024, https://www.nist.gov/system/files/documents/2024/05/21/AISI-vision-21May2024.pdf
[12] Jack Kelly, “Revitalizing the Job Market: Key Takeaways from President Trump’s Address,” Forbes, March 5, 2025, https://www.forbes.com/sites/jackkelly/2025/03/05/revitalizing-the-job-market-key-takeaways-from-president-trumps-address/
[13] “Senator Wiener Introduces Legislation to Protect AI Whistleblowers and Boost Responsible AI Development,” Scott Wiener, February 28, 2025, https://sd11.senate.ca.gov/news/senator-wiener-introduces-legislation-protect-ai-whistleblowers-boost-responsible-ai
[14] “Mission Statement,” International Network of AI Safety Institutes, November 20–21, 2024, https://www.nist.gov/system/files/documents/2024/11/20/Mission%20Statement%20-%20International%20Network%20of%20AISIs.pdf
[15] Barath Harithas, “The AI Diffusion Framework: Securing U.S. AI Leadership While Preempting Strategic Drift,” Center for Strategic and International Studies, February 18, 2025, https://www.csis.org/analysis/ai-diffusion-framework-securing-us-ai-leadership-while-preempting-strategic-drift
[16] Lennart Heim, “Understanding the Artificial Intelligence Diffusion Framework,” RAND, January 14, 2025, https://www.rand.org/pubs/perspectives/PEA3776-1.html
[17] “Which Countries Have Banned DeepSeek and Why?,” Al Jazeera, February 6, 2025, https://www.aljazeera.com/news/2025/2/6/which-countries-have-banned-deepseek-and-why
[18] Anthony Cuthbertson, “DeepSeek Users in the US Could Face Million-Dollar Fine and Prison Time under New Law,” The Independent, February 5, 2025, https://www.independent.co.uk/tech/deepseek-ai-us-ban-prison-b2692396.html
[19] Dario Amodei, “On DeepSeek and Export Controls,” January 2025, https://darioamodei.com/on-deepseek-and-export-controls; Jay Hilotin, “DeepSeek AI Is a ‘Gift to the World’: The Biggest Story out of China Right Now, Here’s Why,” Gulf News, January 28, 2025, https://gulfnews.com/special-reports/deepseek-ai-is-a-gift-to-the-world-the-biggest-story-out-of-china-right-now-heres-why-1.500023386
[20] G7, G7 Industry, Technology and Digital Ministerial Meeting, G7 Italia, March 14-15, https://www.g7italy.it/wp-content/uploads/G7-Industry-Tech-and-Digital-Ministerial-Declaration-Annexes-1.pdf
[21] Gregory C. Allen, “DeepSeek, Huawei, Export Controls, and the Future of U.S.-China AI Race,” Center for Strategic and International Studies, March 7, 2025, https://www.csis.org/analysis/deepseek-huawei-export-controls-and-future-us-china-ai-race

### Between war and peace: Will the Israel-Hamas deal survive?

After 15 months of war, on 15 January 2025, Israel and Hamas finally agreed on a Hostage-Prisoner deal. Heralded as a breakthrough, the agreement helped reconcile Israel’s demand for the unconditional release of all hostages and Hamas’s insistence on a permanent ceasefire. These diametrically opposite demands were bridged by the introduction of a phased approach and replacing the term “permanent ceasefire” with “sustainable calm”. However, perfecting the terms of the deal was only the starting point. While these adjustments were proposed in May 2024, the deal was only finalised seven months later in January 2025. The key factor that determined the fate of the agreement was political ripeness, and this factor continues to dictate its future. This article aims to understand the political conditions that were necessary to finalise the deal and discuss the political environment which might lead to its breakdown.
Building political ripeness for peace: Why the deal happened?
The final Israel-Hamas agreement, while a significant turning point, was not substantially different in content from earlier iterations that were rejected in mid-2024 by Israeli Prime Minister Benjamin Netanyahu. The deal’s core elements—a phased exchange of hostages and prisoners, provisions for humanitarian aid, and the gradual lifting of certain restrictions on Gaza—remained largely consistent. What fundamentally changed was the timing. The eventual agreement was a product of domestic and international political dynamics. Reflecting on this, Biden told confidants that Netanyahu was trying to perpetuate the conflict to save his political future and assist Trump in the November election. This was evident through the proposal Netanyahu rejected in mid-2024, reportedly sabotaging the deal by introducing last-minute impossible demands. These demands included Israeli presence in the Philadelphi Corridor, which was not just unacceptable to Hamas but also to Egypt as it violated the Camp David Accords.

Domestically, at the time, Netanyahu’s political calculus was built on his right-wing coalition, which opposed any concessions to Hamas and the domestic public, which largely supported the war. Further, prolonging the war shifted public focus to national security, away from Netanyahu’s widely unpopular judicial reforms and calls for an early election over the security failures of October 7. By delaying, Netanyahu aimed to avoid an election he was uncertain of winning. This domestic context made any perceived compromise politically untenable. By early 2025, however, the domestic landscape in Israel had shifted significantly. Prolonged military operations in Gaza had failed to deliver a decisive victory, and public frustration was mounting. According to a survey conducted by the Mitvim Institute, 77 percent of center-right voters and over 50 percent identifying as right-wing voters gave the government a relatively low grade (1-5). This was compounded by widespread protests by families of hostages, creating a political impetus for Netanyahu to reach a deal. In 2025, Israel also entered a new election cycle, with the next legislative elections scheduled for October 2026. Finalising a deal closer to Israel’s next election cycle allowed Netanyahu to present himself as the leader who “secured the hostages”.

Internationally, the impending US election in November 2024 introduced a new dynamic that further influenced Netanyahu’s decision-making. Netanyahu has historically had a close relationship with Donald Trump, whose administration was significantly more aligned with his policies than the Biden administration. Until Trump was in the White House, Netanyahu delayed the deal until he could negotiate under a more favorable US administration, hoping to improve the outcomes of the deal. Further, Donald Trump’s strong support for Israel created an environment in which Netanyahu could align his actions with the Trump presidency. Reaching an agreement after Trump’s election allowed Netanyahu to frame the deal as a joint success, strengthening the U.S.-Israel alliance and securing political. Biden, in his announcement of the deal on 15 January 2025, stated: “This is the exact framework of the deal I proposed back in May. Exact.” Thus, the terms of the final deal were not markedly different from the earlier proposals that Netanyahu had rejected, and his earlier intransigence was less about the specifics of the agreement and more about political timing.

However, none of the outcomes that Netanyahu hoped for were achieved. Neither did the Trump administration help achieve a more favorable deal and nor did the domestic audience, particularly the far right, perceive the deal positively, which is visible in the developing political ripeness for escalated military action.
Developing political ripeness for war: Will the deal sustain?
The Israel-Hamas agreement remains inherently precarious due to the constantly evolving political climate. Its phased structure and the deliberate ambiguity of terms like “sustainable calm” also introduce multiple points of potential failure, leaving the deal vulnerable to exploitation by hardline factions or breakdowns at each stage. The early signs of this breakdown are visible just a few weeks into the agreement with Hamas, postponing the scheduled handover of hostages, alleging that Israel has delayed the return of Palestinians and inhibited the entry of essential supplies to Gaza. This increasing ripeness for war is again enabled by domestic and international factors.

Domestically, Netanyahu’s governing coalition, already fragile, shrank to a razor-thin majority after the Otzma Yehudit (Jewish Power) Party withdrew in protest over the cease-fire agreement. Additionally, Finance Minister Bezalel Smotrich of the National Religious Party-Religious Zionism had also threatened to leave the coalition if the cease-fire extends beyond its first phase. If Smotrich had followed through, Netanyahu’s government would have collapsed, pushing Israel into early elections—an outcome Netanyahu wants to avoid. This political instability has incentivised Netanyahu to take a hardline stance. While he initially accepted the cease-fire due to mounting pressure, Netanyahu has since shifted to comforting his right-wing allies. His political survival is contingent on demonstrating that he has not compromised Israel’s security, thus making a return to military action an increasingly likely scenario.

Internationally, President Trump, who initially claimed full credit for the deal, now seems to be introducing elements of volatility. In a joint press conference with PM Netanyahu, President Trump announced his plans of “taking over Gaza” and “owning” it, which sparked widespread outrage from Hamas officials claiming the plan to be a “recipe for generational chaos”. Donald Trump’s return to the White House in January 2025 has fundamentally altered the incentives for Netanyahu, who feels emboldened to escalate military operations, significantly impacting the sustainability of the ceasefire. Furthermore, Trump's aggressive remarks have undermined the already fragile peace. Trump’s warning that "all hell will break loose” if Hamas does not comply with the terms of the deal coupled with his inaugural remarks, "[w]e will measure our success not only by the battles we win, but also by the wars that we end, and perhaps most importantly, the wars we never get into.” has sent mixed signals about the US position. This has raised questions about whether the administration will itself enforce the agreement or tacitly encourage Israeli military escalation.

All these factors are contributing to a growing political ripeness for war rather than peace. Netanyahu’s incentives remain unchanged: ensuring his political survival, particularly as he navigates domestic challenges ahead of Israel’s 2026 elections. Meanwhile, Trump’s recent remarks have eliminated external pressure for de-escalation, replacing it with a geopolitical environment that rewards confrontation. As Netanyahu seeks to consolidate his political standing, the risks of renewed hostilities are mounting. The pertinent question is not whether the Israel-Hamas deal will break down but for how long it can foster stability and prevent a return to war.



Samriddhi Vij is a Research Assistant at ORF Middle East.

### UAE’s economic engagement in Africa

In FY23, the United Arab Emirates (UAE) is poised to emerge as Africa’s largest development partner and investor (US$ 110 billion) in a five-year timeline, overtaking historically strong economic partners like the European Union, the United States and China. Collectively, Abu Dhabi invested/pledged US$ 97 billion in FY22 and FY23 in critical economic sectors such as logistics, energy, minerals and mining. Due to these sizable investments, the UAE emerged as the continent’s fourth largest investor in the past decade behind the EU, China and the US. The UAE is also the largest GCC investor in the continent. These massive investments also helped expand non-energy trade between the African countries and UAE from US$ 20 billion in 2012 to US$ 60 billion in 2022.
The UAE’s deepening economic cooperation with the African continent comes at a time when China’s economic engagement is sliding and the EU and the US are viewed as paternalistic, pushy and slow in releasing funds. Abu Dhabi’s investments and economic cooperation are critical as the continent faces an infrastructure development gap of US$ 150 billion, which is widening every year. These sizable investments by the UAE have yielded Abu Dhabi with significant geopolitical and geoeconomic heft in Africa. This article analyses the UAE’s geoeconomic strategy in Africa and the strategic and economic reasonings behind it.

Emirati economic strategy and investments 
The economic and security priorities of the Emirates have driven UAE-Africa relations for over two decades. Beginning in 2000, investors and banks from the Dubai Emirate have been prominent economic partners in many countries of Africa. For Dubai, in the 2000s, this was a strategic priority as diversified investments hedged against its limited oil and gas reserves—as compared to Abu Dhabi. Africa’s untapped natural resources, markets, and promising and burgeoning middle class offered appealing opportunities in the logistics, tourism, infrastructure development, energy, gold and agriculture sectors. Over the past two decades, the Horn of Africa, Maghreb and Central Africa emerged as priority regions for Emirati investors.
The UAE’s geoeconomic strategy for investing in Africa is three-pronged: strategic, economic and financial. Concerns about the long-term relevance of oil-rich countries in the global economic order and the financial returns thereof in the era of the green transition; maintaining its relevance as a haven of globalisation and as a global financial connector; and establishing its economic heft and gaining political currency in East Africa and along the Red Sea are the respective economic, financial and strategic priorities of the UAE in Africa.
Following these strategic and economic imperatives, the UAE consolidated its economic heft in Africa between 2000 and 2023. In 2023, the UAE’s total FDI stock (US$ 60 billion) in Africa surpassed China (US$ 42.1 billion), which has been the largest bilateral creditor alongside the US (US$ 56.29 billion)  for the past decade. The most significant sectors of Emirati investment were logistics (port development, roads, railways, land ports), energy (oil, gas, solar, wind, hydel) and mining (gold, CRMs, steel, iron and aluminium).
Map 1: The UAE companies’ ports in Africa

Source: DataWrapper
In the logistics sector, the UAE’s DP World and the Abu Dhabi Port Group manage ten and three ports, respectively, across thirteen countries. The Abu Dhabi Port Group is also in talks with Ghana, Madagascar, Mozambique and Sudan to manage and develop their ports. The aim is to establish the Emirates as a logistics connector between Asia, Africa and Europe, instrumentalising the UAE’s geostrategic location. These investments build into the economics-driven foreign policy approach of the UAE. Its connectivity investments in Africa build economic partnerships with resource-rich African nations and emerging markets, and ‘friendshore’ emerging and established trade routes, critical for Emirati trade.
Map 2: The UAE’s renewables investments in Africa

Source: DataWrapper
The UAE is also investing in new and old energy sources in Africa. Abu Dhabi has invested approximately US$ 9 billion in Africa in the past decade and pledged another US$ 4.5 billion for the rest of this decade. Spanning solar, wind, batteries, hydrogen, wind and thermal power, the UAE invested/pledged approximately  US$ 14 billion in 23 countries of the continent (see Map 2). The UAE’s approach to renewables is two-pronged: advocacy for a slow phase-out of fossil fuels and investment in CRM, s and metals sectors to secure/build the resources necessary for powering the green transition. In an economy uplifted largely by energy trade and development, these investments are hedging mechanisms for the future. 

Geopolitical and geoeconomic implications
Naturally, as with the Chinese BRI, the UAE’s sizable investments accorded it with economic and political heft in Africa. Investments in the Horn of Africa and along the Red Sea route were as strategic as they were economic. Close to US$ 110 billion worth of UAE-Europe trade passes through the Red Sea. Countries along the Red Sea and in the Horn are also politically fragmented, fragile and prone to coups and regime changes. Establishing interdependent economic partnerships is one way of ensuring access to the Red Sea. Another trend emerging from the UAE’s economic engagements in Africa and the political instability of these countries is Abu Dhabi’s growing defence partnerships in Africa.
Abu Dhabi pursues a three-pronged security strategy with African nations where the UAE has sizable investments. This strategy focuses on capacity building, defence industry collaborations and equipment procurement, and establishing Emirati military outposts in Africa. Today, seven African countries (Yemen, Eritrea, Somaliland, Somalia, Chad, Libya, and Egypt) have Emirati military bases. In other countries (Rwanda, Nigeria, Mauritania, Algeria, Tanzania, etc.), the UAE instrumentalises capacity building and defence industry collaborations to protect its economic interests in Africa.
Another notable geoeconomic development pertains to the UAE’s logistics and connectivity strategy in Africa. The Emirates aims to establish itself as a logistics connector between Asia, Africa and Europe, instrumentalising the UAE’s geostrategic location. Its investments in Africa build into Abu Dhabi’s economics-driven foreign policy approach. Its connectivity investments in Africa build economic partnerships with resource-rich African nations and emerging markets, and ‘friendshore’ emerging and established trade routes, critical for Emirati trade. Additionally, DP World and the ADP Group are controlled by Emirati royal families, thus making it easier for the government to align UAE’s geopolitical aims with economic investments.
ADP Group is a relatively newer player in the logistics sector as opposed to the established and larger DP World. Yet, since 2022, the ADP Group has expanded operations on the eastern African coast of Africa, in Sudan, Tanzania, Angola, Egypt and Congo-Brazzaville through concession and cooperation agreements. Concession agreements and public-private partnerships are the instruments utilised by these two logistics companies to expand the UAE maritime connectivity, logistics and connectivity brand in Africa. Instances can be found in Tanzania (Dar-es-Salaam), Somalia (Bosaso) and Senegal (Dakar) where 20 or 30-year concession agreements were signed after these companies funded the expansion of ports therein.
Notably, the Eastern and Central African regions are also areas of geopolitical interest for China and Russia. In many nations such as Rwanda, Puntland, Mozambique, Guinea, Senegal, etc. UAE’s economic engagement predates even the BRI, China’s transnational connectivity initiative. However, the trends of Sino-Emirati competition and collaboration in Africa indicate that their relationship is one of shared interests in the continent. The UAE and China quietly compete over concessions and projects in Africa, alongside complementarity and mutual interests. Economic growth and increased trade with Africa are in both their interests.

Conclusion 
The UAE’s foreign policy in Africa is unique. Economic engagement through logistics and big-ticket infrastructure investments are the cornerstone of the UAE’s Africa policy. As of 2025, the UAE seems to be the only country which can go toe-to-toe with China in Africa. However, the UAE’s economics-driven foreign policy is rather complementary than confrontational to China, its largest trading partner. The UAE is also part of the India-Middle East-Europe Economic Corridor and a member of the BRICS+ Group – some members of which are part of the International North-South Transport Corridor (INSTC). The UAE has expressed interest in the INSTC as well. However, geopolitical problems with Iran and the US sanctions on Iran and Russia are substantial hurdles. Nonetheless, the UAE seems to be poised to play a pivotal role in global connectivity paradigms and the emerging global order due to its economic heft, geopolitical non-alignment and economic multi-alignment.



Prithvi Gupta is a Junior Fellow with the Strategic Studies Programme at the Observer Research Foundation.

### GloBE(al) pressures for tax reforms: The GCC’s new investment attraction challenge

While observing the latest tax developments in the Gulf Cooperation Council (GCC) states, it seems that the market is finally opening to tax advisories: the demand for their services has likely never been higher than it is in 2025. Most credit for this is owed to the Global Anti-Base Erosion Model Rules (GloBE, also known as Pillar Two)—an international tax reform framework attributed to the Organisation for Economic Co-operation and Development (OECD). All of the Gulf states are members of this framework, and policies in line with it have been racing to the surface, effectively ensuring the implementation of a global minimum corporate tax rate of 15 percent on large companies operating in more than one country. Specifically, these are multinational companies with annual consolidated revenue of or above 750 million euros.

While the framework does not force countries to enforce such a tax, it incentivises them to do so, at the very least, with what is known as a domestic minimum top-up tax. The main mechanism by which they are encouraged to do so is because of a set of rules in Pillar Two, which allows countries to enforce higher taxes on parent entities of in-scope multinational companies paying an effective tax rate of less than 15 percent in other jurisdictions. These rules are coined as the Income Inclusion Rule (IIR) and the Under-Taxed Payments Rule (UTPR). Therefore, as more countries legislate such rules, jurisdictions with low-tax environments may feel like they are losing out on fiscal revenue that could be theirs, especially as the company itself is ending up incurring the same costs elsewhere, making the tax exemptions/deductions rather ineffective.
Balancing revenue and investments
As the Gulf States seek to diversify their revenue streams, one may expect Pillar Two to be welcomed with open arms by local economists seeking long-resisted tax reforms that achieve such a goal. The International Monetary Fund (IMF) certainly welcomes it, should they need validation. However, as such economists will note: tax reforms face strong resistance in these countries mainly because of a fear that it will dry up investments. While revenue diversification is important, so is the diversification of the Gross Domestic Product (GDP), and boosting non-oil sectors requires a matched level of capital to compete with the oil and gas sector. Multinational companies play a big part in bringing such capital to their countries through Foreign Direct Investment (FDI), and for a region within a wider region facing a reputation of geopolitical instability, low-tax environments for large multinationals have seemingly gone a long way in boosting FDI—at least in the eyes of many analysts and policymakers.

Nonetheless, Bahrain was the first to announce what is known as a Qualified Domestic Minimum Top-up Tax (QDMTT). Countries adopting this would ensure that if multinationals located in their territory have an effective tax rate below 15 percent, they would be the countries charging the top-up tax, rather than another jurisdiction. For Bahrain, that meant all multinationals within the scope of having a consolidated revenue of or above 750 million euros, given Bahrain has no flat Corporate Income Tax (CIT) for the “effective tax rate” terminology to be applicable.

Other Gulf countries soon followed suit by introducing similar legislation. Kuwait, which already had a CIT of 15 percent followed the QDMTT model, rendering the exemption on the CIT for Kuwaiti-national and GCC-national companies useless for approximately 370 companies—crucially including 20 local companies with operations abroad. The UAE, which had a 9 percent CIT, also, introduced the QDMTT, and Qatar, which has a 10 percent CIT is in the process of passing a similar legislation. The reasons for these Gulf countries are clear: their effective tax rate was lower than 15 percent (in Kuwait, for most cases) and thus the logic above on introducing a DMTT followed. Oman, however, is a curious case. Oman has a CIT of 15 percent in place, yet has also decided to introduce a QDMTT—preferring to hedge its bets on risking losing potential fiscal revenue due to differences in the calculation methodology and required adjustments for the OECD framework. It has also uniquely introduced the IIR, which other Gulf countries have not, allowing it to enact a top-up tax on an eligible parent entity in Oman operating in a low-tax jurisdiction.

The obvious country that stands out now that I have listed all the other five Gulf States is Saudi Arabia. There has been no indication that the Kingdom is introducing Pillar Two-relevant tax reforms. Firstly, it has a CIT of 20 percent in place, likely placing most companies above the necessary effective tax rate of 15 percent. However, it also provides significant exemptions/reductions: 1) to Saudi nationals and GCC-national companies; 2) to companies that have joined under their Regional Headquarters Program (RHQ - which has attracted 571 companies to date); and to companies in some of the special economic zones, otherwise known as ‘Free Zones’. This may be due to differing priorities in Saudi Arabia, emphasising FDI attraction over revenue diversification. However, it may very well remove the exemptions for GCC-national companies, especially if it feels that IIR legislation spreads beyond Oman and across the region: a QDMTT imposed on Saudi companies in the GCC may be an easier pill to swallow than it is combined with an IIR that also effectively punishes companies for investing in Saudi Arabia.

While Saudi Arabia’s strategy may make sense in the short term, it may become ineffective as more countries implement the IIR and UTPR rules. The companies it seeks to attract will still feel the financial burden of the global minimum tax, and the Kingdom will only lose out on much-needed non-oil fiscal revenue. The beauty of GloBE, or perhaps its curse in this case, is that it is designed to withstand such strategies.
Navigating the investment landscape post-GloBE
Lastly, a big question for Gulf countries looking ahead is what alternative incentives they can provide to attract investments. Little clarity has also been provided on whether free zones in Gulf countries that have introduced Pillar Two will continue to offer the tax exemptions they typically have, especially as there are no exceptions in the framework. Matters are also more complicated as many Gulf-based Free Zones had committed to exemptions lasting 20+ years, per a benchmark by EY.

One way forward is for Gulf countries to shift towards expenditure-based tax incentives. For example, the UAE is considering a Research and Development (R&D) expenditure-based tax incentive, offering a potential 30-50 percent tax credit which will be refundable subject to certain conditions. Another incentive being considered is a refundable tax credit for high-value employment activities. It will be granted as a percentage of eligible salary costs for employees engaged in high-value employment activities. This includes C-suite executives and other senior personnel performing core business functions.

Indeed, as this critical juncture dawns upon the Gulf states, they will likely carefully recalibrate their policies to maintain investment attractiveness—as the UAE is starting to do. Gulf countries may also consider introducing cost-based incentives in terms of deducting or exempting companies from value-added taxes (VAT), which are reportedly not covered under the GloBE rules. Some may even consider introducing direct subsidies to counter the impact of Pillar Two. However, the framework may resist such perceived abuse of its purpose by enacting a No Benefit Requirement (NBR) rule.
Conclusion
Only time will tell how the tax landscape evolves in the Gulf. One thing is certain though: transparency over its future is essential. Many companies may view the speed of the latest developments as a warning sign that the landscape is becoming unpredictable, yet potentially consequential for any future investments they seek to make—or keep—in the region. Though the GloBE rules are, indeed, set to become global, likely offsetting the negative effects of reducing tax holidays and levelling the playing field, these rules were introduced many years ago. However, some Gulf countries implemented them in a clear rush only recently. With the global and regional competition over investments rising, the Gulf countries may want to play to their strength: as beacons of stability and predictability in an otherwise turbulent region.



Mahdi Ghuloom is a Research Associate at the Observer Research Foundation (ORF) – Middle East

### The UAE-Africa digital nexus: Opportunities for Global South partnerships in the age of AI

The world is witnessing an arms race for technological superiority reminiscent of the Cold War between the United States and the erstwhile Soviet Union in the previous century. Although the players have changed, the race towards grasping the first-mover advantage for achieving “AI supremacy” or “Quantum supremacy” is ushering in a new era of global competition, rivalries and potential partnerships. Integrating AI into global value chains is now a determining factor for economies aiming to capitalise on the AI revolution. Major capital holders like the United Arab Emirates can cement their position in the MENA region by leveraging their economic strength, strategic location and technological expertise. On the other hand, resource-rich geographies like Africa are facing difficulties in promoting AI development due to investment bottlenecks in tech infrastructure and capacity. The 2024 Government AI Readiness Index by Oxford Insights identified Sub-Saharan Africa as a ‘nascent’ market for AI development due to the uneven distribution of digital services and internet availability. This digital divide between the Emirates and the larger African continent can be bridged through strategic investment in key nodes of the AI development pipeline that balance the UAE’s tech ambitions with African concerns such as local capacity-building and data sovereignty.
Africa’s AI landscape
Recognising the need to invest in the AI sector, the African Union (AU) as well as various African countries are developing Africa-centric AI policy frameworks. In 2024, the AU released the Continental Artificial Intelligence Strategy (CAIS) proposal aligning with the AU’s Agenda 2063. The proposal highlights the need to promote growth in AI development for key sectors like agriculture, healthcare and education while mitigating risks such as foreign dependency, privacy violation and job displacement. Countries like Ethiopia, Rwanda, Senegal, Nigeria and South Africa have also released their respective national AI strategies. According to the AU CAIS, three areas require policy focus:

AI skills development: The CAIS highlights the need to integrate AI into the education pipeline starting from primary education through to higher education to foster “talent capabilities.” However, the integration needs to follow regional sensibilities as stated by Ministers from Southern African countries during the 2022 UNESCO-Southern Africa sub-Regional Forum on Artificial Intelligence (SARFAI) insisting on the need to develop “Africa-centric AI curricula” based on heritage and indigenous knowledge systems. The CAIS also identifies limited awareness of AI in the workforce as the biggest inhibitor to AI adoption and suggests government investment in up-skilling and re-skilling programmes at workplaces.

Data availability: Factors contributing to the low availability of high-quality and large datasets are attributed to “affordability, limited skills and lack of content that appeals to users.” By 2022, Sub-Saharan Africa had the highest percentage (19%) of unconnected populations living in areas without mobile broadband globally. Ngozi Okonjo-Iweala, Director General of the World Trade Organization has stated that this digital divide can further exclude rural and underserved communities from AI-driven benefits. Additionally, the under-representation of African languages on the internet and digital systems creates a barrier to data collection and analysis. Authors of the CAIS have attributed the proliferation of English language AI models to the hegemony of advanced countries that “threatens African cultural systems and linguistic diversity.”

AI infrastructure and HPC capacity: Access to HPC systems, in addition to material resources and AI-startup ecosystems, is critical for training AI foundation models. The Toubkal in Morocco is the only supercomputer on the continent, indicating a limited availability of computing required to develop AI at scale. Sparse data collection coupled with computing creates a feedback loop as developers “need data to develop and grow their infrastructure, and they need infrastructure to collect and analyse data.” Regarding data collection and distribution, the CAIS notes that only 10 percent of the data centre demand is met in the continent. Africa has over 150 data centres mostly concentrated in countries like Nigeria, Kenya, Mauritius and South Africa. 70 percent of the IT load in the continent is accounted for by the South African market with around 300 megawatts of live supply. While the number of data centres is expanding, the growth remains uneven with some countries having more capacity than others.
UAE-Africa AI Corridor
The UAE’s strategic location at the crossroads of Africa, Europe and Asia can facilitate the creation of a technology nexus in the region. The UAE has invested in infrastructure projects in Africa including in ports, logistics centres and green energy projects. The UAE has additionally committed USD 4.5 billion towards climate-related projects in Africa aligning with the sustainable development goals outlined in policy frameworks like the AU CAIS and Agenda 2063. In terms of AI, G42 in collaboration with Microsoft is investing USD 1 billion to construct a geothermal energy-powered powered data-centre in Kenya to run its could platform Azure in the new ‘East Africa Could Region’. The goals of this partnership include research and development of large-language models in Swahili and other local languages along with skill transfer programmes which will be used to develop an open-source large language model trained in Swahili and English.

However, to establish partnerships in the AI sector the UAE will have to compete with players like the US and China that have been actively investing in Africa’s tech sector. China has been encouraging companies to follow a “go out policy” under the framework of its Belt and Road initiative and its component Digital Silk Road initiative. Chinese investment flows into Africa increased from US$ 75 million in 2003 to US$ 5 billion in 2021 and China has further pledged US$ 51 billion to African infrastructure projects over the next three years. On the other hand, the recent US investments include the establishment of the Digital Transformation with Africa government initiative launched in 2022 that helped create pledges of US$ 800 million aimed at accelerating the digitalisation of Africa.

Investment in Africa will require precision as there is widespread discontent in African countries regarding conditional foreign investment, labour exploitation by foreign tech companies, data sovereignty concerns and foreign tech giants undercutting domestic enterprises. Foreign tech and AI companies are seen as not prioritising national development goals and even contributing to the exclusion and oppression of underprivileged groups. According to Seydina Moussa Ndiaye, a member of the UN High-Level Advisory Body on AI, the West-centric approach to AI development raises concerns about “digital colonisation.” To ensure sustainable collaboration, a UAE-Africa partnership will require a measured approach.
Recommendations
Due to the international scramble for African rare-earth mineral deposits, the continent has often found itself in disadvantageous relationships with advanced economies. However, there is potential for a mutually beneficial partnership between the Emirates and Africa in the AI sector. The UAE can leverage its capital and expertise in AI development and align its investments with African interests stated in the AU CAIS while gaining access to new markets and resources critical for its own AI infrastructure. The collaboration should include:

Investing in AI infrastructure: Environmental factors like high temperatures are an obstacle to data centre construction in Sub-Saharan Africa. Cooling mechanisms are crucial for data centres designed to offer 99.9 percent uptime. The UAE can capitalise on its experience in developing state-of-the-art liquid-cooling systems and large solar-powered data centres to create sustainable AI ecosystems in Africa. Doing so will also align with the sustainable development goals outlined in the AU’s Continental AI Strategy.

Supporting AI startups: The UAE can set up funding and mentorship initiatives for African AI startups to aid local capacity-building and scaling. Promoting initiatives like the Microsoft-G42 partnership to help AI developers create local language AI models (such as Pawa and InkubaLM) will help preserve linguistic diversity and enable the development of AI systems that are Africa-centric.

Enabling knowledge transfer: The UAE and Kenya signed a memorandum in 2024 focused on investment in AI infrastructure and systems for the creation of a “digital corridor.” This template can be utilised to enable programmes like the UAE AI Camp established in 2018 to create up-skilling programmes in collaboration with schools, universities and research institutions in Africa.



Siddharth Yadav is a PhD scholar with a background in history, literature and cultural studies.

### Triangularising agricultural diplomacy: Building a food security corridor across GCC, South Asia, and Africa

In 2022, the Global Food Security Index ranked all Gulf Cooperation Council (GCC) states in the Top 50 most food-secure states in the world. Interestingly, all the GCC countries ranked even higher than India and Brazil, one of the largest food producers in the world. Despite achieving a high degree of food security, for a region that imports 85 percent of its food, the issue continues to hold relevance. This was underscored in the United Arab Emirates (UAE) Food Security Minister, Mariam Hareb Almheiri’s statement, “[a]s food security is a pressing resource security challenge for the UAE, we have a keen interest in increasing agricultural efficiency through the adoption of new methods and diversifying the pattern of agricultural investment abroad (…) to support sustainable development and bridge the nutritional gap”. While bilateral trade between Africa-GCC and South Asia-GCC has furthered the food security agenda, a tripartite partnership between South Asia, Gulf and Africa might be the “diversification of agricultural investment abroad” that is needed. This article aims to understand the current status of food security partnerships and advocate for a comprehensive food corridor across the three regions.
Trade partnerships in South Asia vs direct investments in Africa
GCC food imports in 2022 stood at 34.15 million MT, with Saudi Arabia and UAE accounting for about 80% of the total regional agricultural imports. South Asia (particularly India) dominates the food exports to GCC. This food trade is facilitated by structured trade partnerships, which focus on market access. For example, in 2022 the UAE and India agreed to a US$ 7 billion food security corridor during the Comprehensive Economic Partnership Agreement (CEPA), connecting Indian farms directly to the UAE ports, and food trade between the two nations soared. Similar partnerships can be seen through the South Asia-GCC belt with Pakistan signing a Free Trade Agreement (FTA) with GCC with a focus on food imports. These partnerships leverage South Asia’s established agricultural systems and supply chains. High-yield crop varieties and refined farming techniques used in South Asia, along with their expertise in effective pest management and cold chain logistics, help efficiently produce and transport food to the GCC. Thus, while engaging with South Asia, GCC is an importer of food that utilises existing farming systems.

In contrast, GCC is more closely involved in food production and transportation in Africa. This was highlighted by a property valuer of farms, “[t]hey [GCC countries] want to produce it here, take it to the Gulf, and then store it for twenty years or more to boost food security,”. As a result, GCC has enhanced their food security by direct land acquisitions in Africa which homes 60 percent of the world's uncultivated arable land. Food demand in the Arabian Gulf varies widely, with the UAE ($39 billion) and Saudi Arabia (US$20 billion) agricultural imports from Africa valuing far more than countries like Qatar (US$1.5 billion) and Oman (US$667 million).

This is reflected in the extent of investments GCC countries have in Africa. Saudi Arabia and the UAE have substantially more tracts of land investments. Hence, neither the GCC nor Africa are monolithic. While UAE, Saudi Arabia, Qatar, and Kuwait all hold large farmlands in Sudan, Kenya and Tanzania receive greater agricultural investments from Qatar and Saudi Arabia respectively. These lands are used to grow crops like cereals and fruits, which are tailored to GCC dietary needs. Take, for example, Saudi Star which developed a rice farm of 15,000 hectares in Ethiopia, with plans to cultivate an area of up to 500,000 hectares. While cultivating these lands, GCC countries have introduced modern agriculture techniques to increase crop yield. Additionally, GCC nations often develop agricultural support infrastructure like irrigation systems and ports that strengthen supply chains. The Qatar Fund for Development funds solar-powered irrigation facilities in Senegal, while DP World operates ports and logistics centres in nine African countries. These investments also extend to agro-processing units in Africa, enabling the production of value-added products that meet GCC needs before export.

Therefore, in South Asia, the emphasis is on improving market access and utilising existing agricultural systems while GCC directly invests in African agriculture to build infrastructure from scratch. This approach leverages the unique strengths of these regions: the mature food production industry in South Asia and vast arable land in Africa.
Triangularisation across South Asia-Gulf-Africa
The GCC approach to food security in South Asia and Africa hints at opportunities for triangulation: symbiotic collaboration between South Asia, the GCC and Africa to combine their respective strengths for mutual benefit. South Asia contributes advanced agricultural expertise, the GCC provides financial resources, and Africa offers vast untapped arable land.

South Asia's technological advancements in agriculture like crop management software and genetically enhanced seeds, offer solutions to the persistent productivity lag in African agriculture. A study by the Atlantic Council, suggests that replicating the productivity boosts achieved during India's 1960s Green Revolution alone could add $200 billion to Africa's economy by 2030. This study also reports that the Indian agricultural sector shares challenges with Africa, like climate change and limited mechanisation. Hence, solutions that have proven useful in South Asia could help Africa.

As a result, South Asian agri-tech firms could improve yields on GCC-funded farms in Africa. Such partnerships will also address the escalating threats of climate change which increasingly risks rendering lands marginal. The importance of such collaborations was also echoed by Dr Ismahane Elouafi of the International Center for Biosaline Agriculture (ICBA), “[r]esources are the most vulnerable to climate change, so we have to protect them, address the challenges facing people in marginal environments, and diversify crops. But we can only do that through partnership. We need to plan and act together.”

Support for similar South-South collaborations has been increasing with the United Nations Capital Development Fund working to extend India’s agricultural technologies to Asia and Africa. However, these partnerships are limited and centred on India-Africa. Expansion of these partnerships could help other South Asian countries, particularly stronger agricultural economies like Pakistan and Bangladesh, access new markets.

Triangulation of these regions holds important benefits for all. For South Asia, this partnership opens new markets for scaling agricultural innovations and boosting export-driven growth, expanding the existing collaborations. For example, 100,000 Indian Kirloskar pump sets are working along the Nile River to green the desert lands in Egypt. Despite the desirability of these partnerships, challenges remain as highlighted by Felix Matati, Minister for Commerce, Trade and Industry, Zambia, “[A]frican countries would prefer Indian investment as we understand each other. You have cost-effective technology, which we want. We can understand each other better as we are both from the south. India-Africa trade has been lacking clear visibility. We want to change that”. A lack of structural trade engagements between the two regions and Africa's infrastructure deficits hinder trade efficiency. These are the exact gaps that the GCC countries are equipped to address and promote tripartite partnerships, given their heavy investments in African infrastructure and farmland.

The Gulf can both facilitate these partnerships and benefit from them. This boosts GCC food security by enhancing land productivity and securing a stake in emerging agri-tech. Fostering economic stability in Africa and South Asia also helps the GCC gain stable trading partners and geopolitical relevance. Beyond food security, these partnerships build on GCC’s existing ambitions, especially of UAE and Saudi Arabia, to become a global logistics hub.

Africa also gains from the resultant accelerated agricultural development without the hefty R&D investments typically required for such advancements. The infusion of proven practices from South Asia, supported by GCC capital, can help Africa overcome longstanding productivity challenges and improve growth. While these technologies might be first adopted on GCC-supported farmlands, they will have important spillover benefits through knowledge transfer among the local populations.
Four pillars enabling triangulation of agricultural trade
While the benefits of this triangulation are evident, it is important to define the pillars that can enable such a tripartite partnership. There are four essential pillars: GCC-led negotiations, structured trade partnerships, integration with existing trade frameworks and private sector involvement in food trade. These pillars will not work in isolation but collaborate to strengthen the triangulation approach.

Building on the first pillar, GCC leadership will be pivotal in facilitating negotiations between South Asia and Africa to establish comprehensive FTAs that create a seamless food security corridor across the three regions. To strengthen the second pillar of structured partnerships, these FTAs should go beyond tariff reductions to include technology transfer, infrastructure development, and sustainability goals. Further, a successful model of triangulation will utilise the third pillar of existing trade agreements, such as the India-UAE CEPA and the African Continental Free Trade Area (AfCFTA). The CEPA’s success in reducing tariffs and streamlining food supply chains can be expanded to include African nations, leveraging Gulf investments in agriculture. Similarly, the AfCFTA, which harmonises trade policies across 54 African nations, provides a framework for eliminating barriers and fostering intra-African trade. By aligning Gulf-backed infrastructure investments with AfCFTA goals, agricultural goods and expertise can move seamlessly across borders. Integrating these agreements under a unified strategy will allow South Asia’s agri-tech innovations to enhance productivity on African farms supported by GCC investments.

For the success of any such trade policy, the final pillar of private sector adoption is crucial. These agreements must be developed in consultation with leading private sector players, particularly Food Tech companies in South Asia, such as Ninjacart and DeHaat, which are revolutionising agri-supply chains. GCC-based firms like Agthia and Al Dahra, which focus on food production and distribution can provide insights on the current trade gaps and solutions. African players like The African Plantation Company can help understand and bridge on-ground implementation needs. Such collaborations will align trade agreements with market needs and encourage private sector presence in the emerging food security corridor.

In conclusion, each region can contribute to and gain from this tripartite partnership. South Asia offers agricultural technologies, Africa provides arable land, and the GCC supplies financial investments. Further, South Asia can access new markets, Africa can achieve economic growth through improved agricultural productivity and the GCC can enhance food security. Thus, triangulation through structured trade agreements can enable these regions to address their unique gaps by building on their respective strengths.



Samriddhi Vij is a Research Assistant at ORF Middle East.

### Harnessing Satellite Internet for Resilient Digital Connectivity in the Gulf 

The global internet backbone relies heavily on submarine cables, which form an intricate web of physical connectivity under oceans and seas. These cables, while enabling high-speed internet access worldwide, remain vulnerable to accidental cuts, natural disasters, and geopolitical tensions. For regions like the Gulf, with its own share of such tensions, this internet dependency poses significant risks to economic and social stability, underscoring the pressing need for resilient and reliable connectivity.
Recent technological advancements, exemplified by SpaceX’s Starlink, offer an alternative: satellite-based internet connectivity. This innovation bypasses terrestrial infrastructure and is proving transformative in diverse scenarios, such as flood disaster relief in Brazil, widespread protests and internet shutdown in Iran, emergency aid in the Gaza Strip, and maintaining communication during conflicts, as evidenced in Ukraine.
Armenia, a landlocked nation with complex geopolitical realities, has recently embraced Starlink to enhance its digital resilience. Through regulatory approvals and strategic deployment plans, Armenia aims to mitigate risks associated with its dependence on a single submarine cable through Georgia. By looking at the Armenian case, countries in the Gulf region can glean a great deal of initiatives and lessons in their endeavor for tech security. There is no doubt that such cases will resonate in the Gulf region, particularly the UAE, where Starlink has recently received regulatory approval, which seeks to strengthen its position as a global digital hub.

Opportunities for the UAE and Beyond
Satellite internet presents a multitude of opportunities for the UAE and the wider Gulf region. One of the most significant advantages is enhanced resilience and security. Satellite-based systems, as demonstrated in Armenia and Ukraine, provide critical resilience during crises. Unlike submarine cables, which are susceptible to sabotage or natural disruptions, a constellation of satellites ensures uninterrupted connectivity. For the UAE and Arab Gulf nations, where energy and digital infrastructure are essential, adopting satellite technology can effectively safeguard economic activities and national security.
Additionally, satellite internet has the potential to bridge the digital divide in remote areas. As of 2021, the UAE’s rural population stands at 12%, while Saudi Arabia’s is 15%.1 In rural Armenia, where mountainous terrains hindered broadband access, Starlink’s capabilities have proven transformative. Similarly, Gulf nations can utilize satellite connectivity to serve sparsely populated desert regions and offshore projects, fostering inclusivity and innovation.
The economic benefits of satellite internet are also profound. By integrating satellite-based connectivity, Gulf nations can attract global tech investments and bolster key industries such as tourism, finance, and logistics. High-speed internet in remote locations could enhance tourism experiences in desert resorts, and improve operational efficiency in oil and gas fields. Such integration aligns with the region's economic trajectory, where expanding existing sectors or fostering new industries creates opportunities for investments, drives job creation, and fuels sustained economic growth.
Furthermore, satellite internet offers strategic independence by reducing reliance on submarine cables that traverse politically sensitive regions. This autonomy aligns with the UAE’s aspirations to lead in digital transformation and technological innovation, offering a reliable alternative to traditional infrastructure. As stated by Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai, on the celebration of the UAE’s 53rd National Day last month, “Dubai and the UAE are committed to being at the forefront of global digital transformation and become an international centre of excellence for future industries.”2 Satellite internet will offer significant benefits to aid this vision.

Satellite Internet Brings Risks and Challenges
Despite its advantages, satellite internet poses several challenges and risks. One of the primary concerns is the high cost associated with its deployment and operation. For instance, a Starlink Community Gateway station, designed to provide coverage to thousands across an entire province, requires a one-time upfront cost of $1.25 million and an additional fee of $75,000 per Gbps per month. Individual household units are priced at approximately $500, with monthly fees of $1003. Such costs could be prohibitive for mass adoption unless Gulf governments step in to subsidize expenses or incentivize public-private partnerships.
Regulatory challenges also present significant hurdles. As demonstrated in Armenia, the allocation of frequency spectrums and other regulatory frameworks are pivotal for enabling satellite operations. Gulf countries must navigate similar landscapes, ensuring that swift approvals are granted while addressing concerns about data sovereignty and the private ownership of critical infrastructure. Additionally, there is a growing concern about dependence on private entities like SpaceX. The dominance of such companies in the satellite internet space raises questions about data privacy and control. Privacy, both at the governmental level and within individual households, has long been a deeply ingrained cultural and traditional value in the region. Governments must establish robust agreements with operators to safeguard national interests and prevent potential misuse of the infrastructure.
Geopolitical implications add another layer of complexity. The strategic value of satellite internet can exacerbate geopolitical tensions, as its deployment in conflict zones has sometimes raised concerns about misuse. Furthermore, as conflicts evolve, so do the technologies involved, increasing the likelihood that satellite internet infrastructure could become a strategic target. The significant investment required for this technology amplifies the stakes, making its protection even more critical during periods of heightened tension. Gulf nations must prepare for these diplomatic challenges and ensure that the multi-use nature of this technology is effectively managed. Addressing these risks requires a comprehensive approach, combining robust policies and proactive engagement with stakeholders to maximize the benefits of satellite internet while mitigating its challenges. 

Maximizing Opportunities and Minimizing Risks
Optimizing for the numerous opportunities presented by satellite internet whilst minimizing risks requires a comprehensive policy analysis. Pilot programs in remote areas, such as oil fields or desert communities, can demonstrate feasibility and build public confidence. The Gulf region should prioritize deploying Starlink or similar satellite services to enhance digital resilience, whilst taking into consideration a multitude of policy implications and recommendations.
To fully leverage the opportunities provided by satellite internet, comprehensive regulatory frameworks are essential. Gulf nations must establish clear policies for licensing, data governance, and spectrum allocation, as has been done by the UAE in June of 2024. Collaborating with private operators such as SpaceX can ensure alignment with both national security objectives and broader economic goals. Integrating rural and remote areas into the internet ecosystem should be prioritized. Enhanced connectivity in these regions can drive entry into the financial ecosystem, foster e-commerce opportunities, support tourism in less accessible areas, enable exploration, and strengthen education and healthcare services. This integration not only fosters inclusivity but also propels economic growth and social development.
Investing in local ground stations is another critical step. These facilities will localize data processing and enhance encryption security, forming a foundation for future satellite internet initiatives. Partnerships between public entities and private corporations can further accelerate this transformation. Incentives such as tax breaks and grants will encourage collaboration and innovation, driving affordable and scalable deployment models for end-users. To maximize efficiency, hybrid models combining satellite and terrestrial networks should be explored. Integrating Starlink’s backhaul capabilities with existing telecom infrastructure, for instance, can enhance connectivity across urban and rural landscapes.
Addressing digital sovereignty remains a pressing concern. Gulf governments must negotiate terms that ensure data ownership and robust encryption standards. Armenia’s approach to establishing localized infrastructure offers valuable insights for maintaining control over sensitive data. Promoting regional cooperation is also pivotal. By pooling resources, Gulf nations can create an interconnected and resilient network, fostering digital sovereignty while supporting economic integration across the region. Lastly, the geopolitical complexities associated with satellite internet require proactive strategies. Engaging with international organizations and fostering stronger regional and diplomatic initiatives will be crucial to safeguarding satellite internet infrastructure and addressing the geopolitical tensions that may arise from its adoption.
Satellite internet represents a transformative opportunity for the UAE and Gulf region, offering unparalleled resilience, inclusivity, and strategic independence. By learning from Armenia’s recent adoption of Starlink and addressing associated risks, Gulf nations can position themselves as leaders in the digital economy. With the right policies and investments, the skies above the Gulf could soon host not just stars, but the future of global connectivity.

### The UAE at 53: From importer to exporter of innovation

The United Arab Emirates (UAE) recently celebrated its 53rd anniversary. From a small desert nation in the Arabian Gulf to a regional power with global ambitions, the rapid transformation of the UAE has been remarkable. During this time, the country saw unprecedented growth, with the nominal GDP increasing from US$939 million in 1971 to US$514 billion in 2023. While several factors have contributed to UAE’s evolution, the country’s focus on business and innovation have been central factors in enabling rapid growth.
Innovative technologies have enhanced the ease of doing business and enabled the UAE’s integration into global supply chains, thereby stimulating the economy. However, this progress has been dependent on imported expertise and technologies, with foreign firms leading major developments. To sustain this trajectory, the UAE must pivot from being an adopter of innovation to becoming a creator and exporter of transformative technologies. As the UAE celebrate its 53rd National Day, this article outlines how imported innovation has aided past successes and how indigenising innovation is needed to ensure future competitiveness.

Importing innovation to establish regional relevance
The UAE has leveraged innovative technologies to become a global investment hub by improving the ease of doing business, relying on imported technological capital for rapid implementation. This technology has streamlined establishing businesses and processing visas, which has been a strong focus for the Emirati leadership. HE Sultan Ahmed bin Sulayem, Chairman of the Ports, Customs, and Free Zone Corporation highlighted, “Adopting modern technologies like blockchain will significantly contribute to improving the business environment and enhancing Dubai's position as a major center for global trade.”
This vision has translated into action with the time required to start a new business reducing from 19 days (2003) to 4 days (2019). Through the Basher platform, a new company can now be registered in 15 minutes, utilising digital documents and AI-driven approvals. Further, using the Work Bundle platform which consolidates services from multiple government entities, now work visas can be processed in five days versus 30 days previously. These policies have boosted investor confidence and Hatem ElSafty, Founder and CEO of Business Link, stated, “The UAE’s business-friendly policies and forward-thinking approach have made it a hub for foreign investment.” Improved investor confidence has resulted in FDI net inflows (percent of GDP) increasing from 1.6 percent (2008) to 6 percent (2023) and enabled UAE to rank 16 in the World Bank’s Ease of Doing Business Report 2020, climbing from rank 68 in 2008. Positioned in the intersection of Europe, Asia, and Africa, this technology-driven ease of doing business has facilitated UAE’s integration into global supply chains. Again, the Emirati leadership has been intentional in achieving this transformation. During COP28, HE Dr Thani Al Zeyoudi, UAE Minister of State for Foreign Trade announced, “[F]rom the development and deployment of new technology to building consensus for integration into global supply chains, the UAE welcomes the chance to lead this essential transformation of trade.”
Building on this vision, the UAE has developed high-capacity and technologically advanced airports and ports. For example, Jebel Ali, one of the largest ports globally, handled 14.5 million Twenty-Foot Equivalent Units (TEUs) in 2023—60 percent higher than the busiest container port in the U.S (Port of Los Angeles), which moves 9 million TEUs annually. Further, Khalifa Port is also ranked as one of the most advanced ports internationally. Biometric systems and AI-driven logistics have expedited passenger and cargo processing, making the UAE a convenient centre of trade. The physical infrastructure is aided by digital systems like the Dubai Trade Portal that utilise blockchain to digitise customs systems, reducing clearance times to 5 minutes. Innovations like Smart Gates and AI-powered passenger flow management have significantly improved the tourist experience. These investments led Dubai Airport to become the busiest airport for international passengers, welcoming 89.1 million passengers in 2016. UAE’s focus on advanced technologies has positioned it as an indispensable leader in an increasingly multipolar world. The India-Middle East-Europe Economic Corridor (IMEC) highlights this relevance, as the UAE’s geographic and logistical prowess is key for connecting regions. What makes the UAE a successful model and a desired destination is that the UAE leadership knew how to maximise the nexus of business acumen, leveraging geopolitical positioning and advantageous expediency—this could not have happened without the importation of innovation. 

Exporting innovation to establish global competitiveness
While the UAE trajectory has been one of the greatest successes of modern times, certain shifts in strategy might be needed to continue this growth. The UAE's top exports are dominated by mineral fuels and oil (62 percent). While the Ministry of Economy states that innovation is a key focus industry, it does not feature in the top 10 exports from the UAE. Thus, the UAE is currently an importer of innovation, with advancements being achieved through international collaborations. For example, UAE airports were automated by French firms like Groupe ADP and advancements in AI were achieved in partnership with firms like Microsoft.
Vision documents such as the National Innovation Strategy, have highlighted the intent for innovation and the leadership also echoes this commitment. “We want to be among the most innovative nations in the world,” said Shaikh Mohammad, Ruler of Dubai. While the Abu Dhabi Department of Economic Development (ADDED) made significant efforts to promote such growth in digital competencies by establishing a Competence Center, it was also developed in partnership with the Italian Ministry of Economic Development. Further, the UAE's technology partnerships with the U.S., have also been key to advancing its technological capabilities. As the UAE charts a strategy to become “the most innovative nation”, the strategy should gradually decrease importing innovation through international partnerships and increase indigenizing innovation. This process will bring about a great deal of benefits that complement the National Innovation Strategy. This can help address a critical gap and make the UAE’s innovation ecosystem more independent and mature. A focus on indigenising innovation will enable the UAE to move from being a consumer of innovation to a global leader driving transformative change.
To help achieve the UAE’s goal of being an exporter of innovation, it needs to become technologically autonomous, where local firms develop innovations for home consumption and international export. Currently, the UAE spends only 1.5 percent of its GDP on R&D compared to the United States, which spends 3.5 percent. With the U.S. economy 54 times larger than the UAE, the divide in dollar amounts is even larger. Every dollar invested in R&D has been found to generate US$3.5 in economic activity. Importing economies lack the same multipliers, as imported technologies come with usage restrictions and do not stimulate domestic innovation ecosystems. To achieve this, an attitudinal shift towards innovation is needed where firms are encouraged to not view the UAE as a market for the technologies that have been developed in their home countries but to begin innovating new technologies in the UAE. Largest global companies should be incentivised to move their global headquarters to the UAE, and local firms need to develop exportable world-class technologies.
Along with redesigning strategic partnerships, current capacity gaps need addressing, too. The UAE Ministry of Industry and Advanced Technology outlined six pillars to service investors: ‘Ease of Doing Business’; ‘Utilities & Infrastructure’; ‘Access to Market’; ‘Technology’; ‘Financing’; ‘Talent’. While the country has fared well in most of these categories, there is still an overreliance on external talent.
Thus, the most important enabler of technological autonomy will be building the capacity of the workforce. Nearly 92 percent of the UAE’s total workforce is international, and only 4 percent of Emiratis are employed in the private sector. Self-reliance is key to becoming an exporter of innovation, and skills need to be transferred from international to local labour. While the UAE leadership has developed incentive programmes like the Emirati Salary Support Scheme and Merit Program to enhance the skills of Emiratis, according to a Victoria University study, “Expatriates are not keen to pass on their experience to the UAE national employees or that UAE nationals do not get enough training”.
Thus, well-intentioned initiatives like “Emiratisation” have faced certain challenges as the private sector resists Emiratis due to higher costs, skill gaps, and Emiratis' preference for public-sector roles. Further, these policies of boosting Emirati presence in the workforce have had inadvertent effects, as they are often focused on numerical quotas, resulting in Emiratis being hired in administrative roles that limit skill-building. Implementation of standardised quotas across 14 industries also does not account for industry-specific dynamics. Private companies need 3 percent of their workforce as Emiratis across industries like finance to hospitality, and this industry-agnostic policy ignores the unique skill needs and workforce capacity of each sector. Shifting to outcome-based metrics like career growth and retention with sector-specific policies is needed. Evaluation systems tracking job satisfaction and contributions should be introduced, and this data should be dynamically fed into programming.
Even beyond Emiratisation, scholarship programmes that send Emirati students for education and training abroad highlight the government’s commitment to improving citizen capacity. However, according to the World Bank, the UAE employs 6.7 million individuals. With a total Emirati population of 1.5 million, reliance on international labour is inevitable. Thus, the UAE needs to increase the number of high-potential citizens to improve its permanent capacity. This is exceedingly important as other Gulf countries begin to attract labour, and KSA has mandated companies to move their regional headquarters to Riyadh. Crafting policies that provide enhanced benefits and social protection to permanent residents will help retain skilled international talent. These high-potential individuals understand the UAE economy, and retaining them by creating a lasting stake in the country is key to fostering sustainable innovator flow. Without such benefits, talent might leave for countries that offer more financial compensation. Even in advanced economies like the United States, immigrants are responsible for around 36 percent of innovation. While provisions were made for foreigners to acquire Emirati citizenship, this remains limited. Expanding these policies will help domesticate innovation and enable the UAE’s transition to an exporter of innovation. As the UAE looks to become a global competitor, it needs to transform from an importer to an exporter of innovation by indigenising innovation and developing a highly skilled citizenry. The process of exporting innovation cannot happen quickly, but the UAE’s track record of quick transformations suggests that the UAE can be a tech exporter much quicker than other states with the same goal.



Samriddhi Vij is a Research Assistant at ORF Middle East.

### AI innovation in the UAE: Strategic use of AI-specific regulatory sandboxes

Ever since the breakthrough launch of OpenAI’s ChatGPT in November 2022, every major economy globally has incorporated Artificial Intelligence (AI) in its national strategy. Apart from the United States and China, the usual suspects in tech development and innovation, emerging players like the United Arab Emirates and India are placing heavy bets on AI. The global AI market size was estimated to be US$ 196.63 billion in 2023 and is projected to grow at a CAGR of 36.6 percent till 2030. Reports suggest that revenue from AI products and services in the UAE will increase from US$ 5.22 billion to US$ 46.33 billion over the next five years, representing a CAGR growth of 43.9 percent. The potential of an AI-driven gold rush has concurrently spurred a race amongst jurisdictions to establish regulatory and governance frameworks given the unpredictable—and often opaque—nature of AI development. Countries like the US, China, India, UAE and international bodies like the United Nations and OECD have released their versions of guiding principles, best practices and ethical guidelines for AI development. After over three years of deliberation, the European Union Artificial Intelligence Act (EU AIA) released in August 2024, became the world’s first legally binding governance framework for AI. During that time, the world saw the arrival of multi-modal generative AIs and speculative ideas like Artificial General and Super Intelligence becoming foreseeable technologies. This timescale represents the truism in tech discourse that innovation far outpaces policy changes. Recognising this speed differential, regulators are expanding their AI-specific regulatory toolkit. Regulatory sandboxes are emerging as relevant legal frameworks that can enable governments to strike the balance between innovation and safety. Countries like Spain and the United Kingdom have already begun piloting their versions of AI sandboxes in 2024. AI sandboxes can be useful tools for emerging players like the UAE who want to compete in the global AI market and capitalise on their geopolitical and economic positioning.

AI sandboxes: Pros and cons
Sandboxes are controlled environments designed to test novel technologies under regulatory supervision. An AI-specific sandbox can provide a testing environment where developers test AI models, algorithms and APIs (Application Programming Interfaces) using limited and approved datasets. Regulators may afford temporary legal exemptions to test products in conditions that approximate the real world. Developers may be asked to produce documentation to prove how AI products meet transparency and explainability standards. AI models can be evaluated on factors like bias mitigation during training, risk management protocols and compliance with relevant data protection laws prior to market rollout. A benefit of sandboxes is the speed with which they can be implemented and tuned to meet jurisdictional requirements and use cases. By establishing a controlled collaborative environment for developers and regulators, sandboxes can facilitate the creation of venture capital investment, speed up market entry for SMEs and help create an adaptive regulatory environment for fast-paced technologies.
However, sandboxes are not without their drawbacks. For instance, sandboxes are generally designed on a small scale with a limited number of participating cohorts. The UK’s 2024 AI Airlock framework took five, whereas the 2021 ‘SANDBOX’ programme by Dubai Silicon Oasis only took twelve participants out of several hundred. A reliance on sandboxes in highly dynamic fields with short innovation cycles, like the tech sector, can lead to the ballooning of sandbox programmes as developers identify competitive benefits. This could lead to inefficient and ineffective implementation of the frameworks by regulators and cause unpredictable impacts on regulation, consumer protection and competition. A second drawback arises due to the desire to attract talent and private investment in the AI sector by all major economies globally. High levels of global demand can allow enterprises to engage in regulatory arbitrage or “forum shopping” as they look for the most permissive and pro-business sandboxes. This scenario can cause a downward spiral of governance standards by regulators across jurisdictions as they compete to attract participants under the pressure of producing sandbox successes.

Sandboxes and their relevance for the UAE
The UAE is emerging as a key player in the global AI race, placing fifth on Stanford University’s global AI index in 2024 for AI “vibrancy.” Driven by the need to diversify its economy amidst a global deceleration of oil demand growth, the UAE has been intensifying its efforts to future-proof its position. For instance, in 2017, the UAE became the first government in the world to appoint an AI minister. Subsequently, in 2018, it established the UAE Council for Artificial Intelligence and Blockchain. Signalling its growing talent pool and digital infrastructure, the UAE recently developed its native AI foundation model named Falcon, with its latest iteration Falcon 3, outperforming many leading AI models from Silicon Valley on small infrastructures. However, the expansion of economic priorities has not been without obstacles for the Emirates. The US$ 1.5 billion strategic investment by Microsoft to acquire a minority stake in the Emirati company G42, alongside G42’s deployment of Nvidia’s H100 and H200 chips has pulled the UAE deeper into the geopolitical tensions between the US and China. Given the UAE’s internal drive for economic diversification and external pressures to avoid geopolitical sinkholes, the UAE will need tools to swiftly and effectively craft an AI-specific governance framework.
In this context, Core42 (a subsidiary of G42) has stated that it has developed a specialised sandbox framework for the deployment of Nvidia’s H100 and H200 chips. The sandbox is referred to as a “regulated technology environment” (RTE) and is designed to provide a secure space for deploying and testing emerging technologies. Although no further information has been released regarding the framework of the sandbox, Core42 has specified its priorities of aligning with US export restrictions while maintaining “technological sovereignty.” These priorities align with the blueprint published by the UAE Council for AI that identifies effective governance and regulation as a foundational step for ultimately transforming the UAE into the globally preferred AI destination.
Since governance priorities currently seem to revolve around respecting US export controls, localising data generated in the UAE and cultivating a local ecosystem for AI development, the government may allow a broad range of foundation models and API developers to access AI sandboxes to encourage local capacity-building. The UK’s ‘AI Airlock’ framework takes a contrasting approach that is sector-specific by focusing on medical diagnostics and patient care. Such a targeted approach creates a clear risk profile as assessment of success or failure can done relatively efficiently while including humans in the diagnostic loop to minimise harm. Although the crossover between the regulatory environments of the UK and UAE is limited, AI Airlock builds the case for balancing broad frameworks with narrow ones for tackling unpredictable technologies like AI.
Another challenge for crafting AI-specific sandboxes is that AI models and platforms—once developed—can be exported to other jurisdictions. While being effective in reducing undue regulatory burden, UAE’s current approach of issuing a “patchwork of decrees” will not suffice to address such concerns. Countries differ in their data and consumer protection laws, bias mitigation standards, availability of high-quality datasets and enabling policies. In this respect, the jurisdictional specificity of sandboxes raises concerns about international regulatory consistency. Therefore, sandboxes should be considered interim measures rather than replacements for legislative frameworks. Legislations offer the benefit of creating a comparatively longitudinal and consistent ruleset for developers as well as opportunities for aligning national regulation with internationally agreed-upon principles, thus facilitating cross-border partnerships. An over-reliance on sandboxes can lead to fragmented regulatory regimes and global competition for private investment in AI could lead to some jurisdictions lowering barriers to market entry that jeopardise responsible innovation.

Going forward
Although questions remain about how the AI landscape will evolve in the UAE in the near future, its regulatory approach will need to balance the need to generate investment with cross-border alignment and the development of a legislative framework. The UAE enjoys a strategic position between the US, EU, and Asia, offering opportunities to align local regulatory sandboxes with international frameworks by leveraging its trade and geopolitical relationships. Investment in UAE-based data centres and cloud infrastructure can address the problem of data localisation while allowing room to shape transparency, liability and compliance standards that minimise regulatory conflict across borders. Risks associated with sandboxes can be further minimised if regulators can create a phased model that incorporates AI sandboxes in a process geared towards forming permanent legislative frameworks. Finally, regulators can avoid regulatory stagnation by introducing sunset clauses for products that pass the sandbox stage with a requirement for reauthorisation after a determined period. The aforementioned recommendations can help close regulatory gaps while maintaining a pro-business approach that balances innovation with safety.



Siddharth Yadav is a PhD scholar with a background in history, literature and cultural studies.

### GCC-Iran Rapprochement: Challenges and Opportunities in 2025

The start of 2025 has been marked by a series of shocks, especially in the Middle East. The effects of the Gaza war continue to reverberate across the region, while Lebanon witnessed widespread devastation due to Israel’s military campaign against Hezbollah. Syria, too, entered a new post-Assad era—one fraught with hope and uncertainty. Against this backdrop, the shifting international landscape, especially with the incoming Trump administration, will further influence regional and global dynamics. While reconstruction efforts in Gaza, Lebanon, and Syria demand global attention, the broader process of regional rapprochement should be a central focus in 2025. Driven by international, regional, and domestic dynamics, 2025 will present both challenges and opportunities for the continuation of regional rapprochement efforts.

Testing GCC-Iran Rapprochement 
Since 2021, the region has witnessed a gradual trend of rapprochement, starting with the thawing of the Gulf Cooperation Council (GCC) crisis. In early 2021, Saudi Arabia and Qatar turned a new page after a three-and-a-half-year boycott, dubbed the al-Ula agreement. 2022 saw a series of high-level visits from respective GCC states and Türkiye. However, the most significant effort toward reconciliation has been the GCC-Iran rapprochement, particularly the 2023 Chinese-brokered Saudi-Iran normalisation. While some have questioned the durability of these efforts, reducing it to be a part of a Saudi strategy to buy time. While that may not be inaccurate, the Saudi-Iran rapprochement is more than that, as evidenced by its resilience despite subsequent regional shocks.
In essence, the Saudi-Iranian normalisation was not merely about changing the framework of their relations, but fundamentally altering the very nature of Saudi-Iranian relations—shifting it from one predominantly shaped by external factors, such as Western pressures, to something more intrinsic.
2025 will, however, present several challenges for this strategic GCC-Iran rapprochement. The first challenge is Trump—the president who withdrew from the Joint Comprehensive Plan of Action (JCPoA) in May 2018. The Gaza war and the Iranian support for Hamas have made Iran both a political and military target for the US and Israel, exasperating Iranian anxieties. However, the Trump administration recognises that such maximum pressure campaigns on Iran will not reap the desired results, as Iran’s nuclear programme is now too advanced to be easily curtailed.
That said, the fiery rhetoric from both Netanyahu and Trump will fuel Iranian anxiety—something the Saudi ruling elite must manage, as they will seek to avoid getting caught in the middle of the triangular demonisation between Washington D.C., Tel Aviv, and Tehran. This triangular tension will put pressure on not just Saudi’s rapprochement with Iran, but the GCC’s reproachment with Iran as well.
Given that the Trump administration will be ushered into a region very different to the one he saw in 2017, coupled with a growing consensus that Trump may seek a deal with Iran instead of pursuing military action, the GCC-Iran rapprochement is likely to withstand the Trump test. However, even if the GCC-Iran rapprochement seems to weather this external pressure, the real tests will come from within the region, especially the one posed by the Houthi rebels which has the potential to disrupt the aforementioned progress.

Houthi threat: A threat and an opportunity 
The 2022 Saudi-Houthi truce has always been fragile. Despite the hope that the Saudi-Iranian rapprochement will lead to enhanced Saudi-Houthi dialogue, cracks in the truce have appeared sporadically, as illustrated by a Houthi attack on a Saudi base in September 2023. As a result, Abdul-Malik al-Houthi has been fueling anti-Saudi rhetoric, deepening tensions between the two. The Gaza war has only boosted Houthi extremism, posing a serious concern to Saudi security and emerging as the most significant challenge to the GCC-Iran rapprochement. If the Houthi rebels escalate their actions against Saudi and other GCC states, they will observe Iran’s response to gauge its commitment to improving relations. If Tehran’s response falls short of their expectations, it could potentially fracture the Gulf rapprochement.
However, Houthi escalation with GCC states can serve as an opportunity to strengthen the rapprochement process. Akin to the Gaza war, where GCC and Iran have been able to find common ground, the Houthi situation may hold similar potential. During Iranian President, Masoud Pezeshkian’s visit to New York in September 2024, he briefly spoke about the difficulty of dealing with extremism within the Houthis. He said, “Even in our country [Iran], there are those who disagree with us and have their own beliefs, so we try to avoid uncalculated actions within our country, so how can we control those who are outside our state and are ideologically and emotionally motivated”.
While this was a very implicit criticism of the Houthis from the Iranian president, these remarks generated some interest in Saudi Arabia. Perhaps this can serve as a foundation to enhance dialogue between the GCC and Iran. By expanding upon the notion of regional spoilers of Gulf rapprochement and linking this with incentives to an economically and geopolitically weakened Iran, the Houthi escalation can be a space for GCC-Iran cooperation. The nature of such cooperation will become more evident as 2025 unfolds.

Conclusion
Having withstood the test of the Gaza war, the GCC-Iran rapprochement is proving to be a crucial security pillar that needs to be maintained. This rapprochement is not only vital for the GCC states and Iran but is also emerging as a foundational security bedrock for the region. It critically intersects with other pressing regional issues, including the reconstruction efforts in Gaza, Lebanon, and Syria, as well as the broader challenges posed by the incoming Trump administration and can thus contribute significantly to bringing stability to the region.



Abdulaziz Alghashian is the Director of research and a Senior Fellow at ORF Middle East. 

### Saudi Arabia’s diversified support for a two-state solution

More than a year has passed since the horrific attacks that took the lives of 1,200 innocent Israeli citizens on Oct. 7, 2023, a devastating day that led to many more devastating days in Gaza, where tens of thousands of innocent people have died and countless more have experienced suffering on an industrial scale. All hopes that the war might soon wind down are fading, as the conflict has expanded regionally and internationally and attention has been diverted to a hot cease-fire in Lebanon and the dramatic events unfolding in Syria.

This war has illustrated the precarious and unhealthy state of Arab-Israeli relations. It has also shown that no single leader has the power or can muster the political will needed to achieve peace. The resolution of this conflict will require a new dynamic of collective leadership that can look beyond the present moment to transform this disastrous situation into an opportunity to advance peace, stability, and security. Saudi Arabia is a key actor that can help support a credible path to peace, but it cannot do it alone. In order to bridge the gap between the current reality on the ground and the implementation of a two-state solution, all stakeholders need to do their part. The Saudis have taken an important step by establishing and leading a global alliance devoted to implementing the two-state solution.

What Saudi Arabia has done is create a new focal point and generate momentum upon which other states can gradually build. Notably, the alliance held its first meeting in Riyadh, lending a great deal of symbolic authority to this push for peace. With that said, the world has been here before. There have been peace initiatives and “pushes” toward resolution before, but none has reached the desired end goal. While there are many reasons for this, one is a lack of sustained effort to maintain the momentum moving in the direction of a two-state solution. This then raises the question of how a coalition supporting the establishment a two-state solution or any other peace process can be sustained — what is missing? One element that may be absent is diversification within the processes leading to the two-state solution.

One of the main characteristics of Saudi Arabian thought on economic and foreign policy development is calculated diversification. In line with this broader approach, there should be two components to a diversified peace process: resequencing peace before normalization and a movement toward regional integration.
Fusing peace and normalization
The most significant support the Saudis are giving the Palestinians currently is in what they are not doing, which is normalizing relations with Israel. Immediately prior to the events of Oct. 7, the Saudi government seemed on the verge of entering into a normalization agreement with Israel brokered by the United States. In exchange for this potentially ground-breaking change in policy, the Saudis would refrain from engaging with US strategic competitors (namely China), the US would not prevent the development of a Saudi domestic nuclear energy program, and Israel would not deny the possibility of the eventual establishment of a Palestinian state — a complicated construct that was not particularly popular among Palestinians. Hamas’ Oct. 7 attacks and the ensuing Israeli reprisals on Gaza halted the discussions, and the Saudis increased their demands for normalization from a “credible pathway” toward a two-state solution to clear demands for “irreversible steps” that would result in the “recognition of a Palestinian state on the 1967 borders, with East Jerusalem as its capital.”

As the Israeli attacks on Gaza intensified, and Yemen, Iran, and Lebanon were drawn into the conflict, threatening a regional conflagration, Saudi Arabia’s position hardened. The language of Saudi demands remained somewhat malleable, however, in line with its broader approach to relations with Israel, which has enabled the kingdom to move closer to an agreement that achieves its domestic priorities while also distancing itself from an unpopular alignment with Prime Minister Benjamin Netanyahu’s right-wing government. Within the context of the US elections and an expanding regional war, the Saudis continued to insist that there would be no normalization with Israel until there is a Palestinian state.

The Saudi foreign minister, Prince Faisal bin Farhan Al Saud, reiterated Crown Prince Mohammed bin Salman’s public support for the Palestinians in an October 2024 opinion piece in The Financial Times, in which he called for an immediate cease-fire, an end to the insecurity and suffering on both sides, and a return to serious efforts to achieve a just solution to the conflict. The chief Saudi diplomat reaffirmed Saudi Arabia’s commitment to the proposition that “Palestinian statehood is a prerequisite for peace, rather than its byproduct. This is the only path that can lead us out of this cycle of violence and into a future where both Israelis and Palestinians can live in peace, with security and mutual respect.”

Prior to the events of Oct. 7, the notions of peace and normalization held by each side were far apart, and the Saudi attempt to straddle the divide in pursuit of its own agenda without securing adequate guarantees for the Palestinian position doomed the negotiations to failure. Riyadh’s subsequent return to principle and renewed commitment to Palestinian statehood have garnered national and regional praise. Hashtags like “no relations without a state” and “Saudi Arabia is triumphing for Palestine” have made the rounds on Saudi social media. Given the strong popular support for the Palestinians at home and throughout the region, Saudi officials are unlikely to reverse their position on the issue any time soon.

That said, one can expect that there will be a strong discursive effort to prove otherwise. For instance, reports of a Saudi-Israeli “breakthrough” recently made the rounds once again. However, immediately, Saudi officials tacitly sought to shoot down the story, which was additionally denied by the Israeli prime minister’s office, particularly due to the reporting’s allusions to a vague ostensible agreement regarding a two-state-solution. More such sensational rhetoric is likely in the coming years. This speaks to the need to for those pushing for a two-state solution to be more vocal and invest in a sustained effort to keep the discourse constructive and aimed at finding a solution.

It is now imperative for the Saudi analytical community to flesh out what “credible” and “irreversible” steps toward a two-state solution would look like. Equally, Saudi experts must not just speak about Israel but speak directly to Israelis, and to clearly communicate Riyadh’s message about the unbreakable link between peace and a Palestinian state.
Palestinian regional integration
Saudi Arabia is in a position to facilitate not only the creation of a peace framework but also its implementation. This would involve a process of linking Palestinian requirements with regional initiatives that would help integrate Palestine into the wider global community.

The Saudis know that the lack of a two-state solution resulting in a Palestinian state where Palestinians can live in dignity is detrimental to the security of the region. The Saudis see a Palestinian state not only as a right but as a necessity, the lack of which will harm real regional stability and prosperity — conditions that are crucial for Saudi Arabia to realize its own ambitions for its diversification process. As Foreign Minister Prince Faisal bin Farhan Al Saud said nearly a year ago, “we need stability and only stability will come through resolving the Palestinian issue.”

This is where Saudi Arabia’s economic diversification and its desire for regional stability can be leveraged in the service of diversifying the peace process to support a two-state-solution. A great deal of attention has been paid to the potential for Israeli integration into the region, but nowhere near as much attention has been paid to Palestinian integration.

If the Saudi ruling elite can diversify the kingdom’s own economy, strategic relations, and military cooperation, there should be no reason why Saudi support for the Palestinian issue could not similarly be diversified. In Riyadh, diversification is central to Saudi Vision 2030, an overarching framework designed to transition the country from an oil-centric economy into a multifaceted, diversified, and self-sustaining economic powerhouse. The Saudis, and their reform-minded Gulf neighbors, know they cannot achieve these ambitious goals without regional stability. At the 2024 World Economic Forum in Riyadh, the Saudi Minister of Finance Mohamed al-Jadaan said, “Today, to me, geopolitical risks are possibly the number one risk as you look at the global economy … policymakers will need to be very agile in dealing with this,” adding, “the region needs stability.”

To that end, Saudi Arabia’s investment in a more stable and integrated region is precisely the opportunity that a future Palestinian economic vision requires. The Saudi ruling elite can help build a Palestinian economic vision — a Vision 2035 for example — that acts as an economic horizon within a broader political framework linking Saudi domestic objectives to realistic Palestinian development goals and Israeli concessions to credible pathways for success. This would build confidence within the Saudi ruling elite that Palestinian projects are forward looking. The current Saudi leadership is of a generation where notions of business and tech investment are more appealing than traditional slogans. This is why there ought to be a re-articulation of support for Palestinian objectives that resonates with Saudi officials and others in the region.

If this reframing of efforts is successful, the resulting Saudi assistance could be instrumental in strengthening institutions needed for Palestinian state building, the provision of skills training, adoption of anti-corruption measures, and linkage of Palestinian projects with regional and international initiatives. In turn, this diversification of support for Palestinian aspirations will contribute to the building blocks of the two-state solution. Prince Turki Al-Faisal, a former Saudi spy chief who often reflects the kingdom’s official discourse, indicated in a recent interview that such an approach is not out of the question. When asked what Saudi Arabia could contribute to advance the Palestinian cause, the prince replied, “not just [Saudi] money, but technical knowhow.”

The Saudi diversification of support for Palestine need not only be in linking Saudi businesses together with their Palestinian counterparts but also institutes to institutes, initiatives to initiatives, and people to people. This will help Palestinians integrate with the region and do the heavy lifting of a regional approach to the two-state solution. And importantly, this step need not wait for an “acceptable” Palestinian political elite; rather it would entail a process of investing in a Palestinian civil society and business elite, which could then produce new political realities for the future and capitalize on a diversification of interlocutors within Palestine. The Saudis can amplify this diversification and internationalize the process by spearheading an Arab and Islamic donor conference where potential investors can support current and future initiatives to boost Palestinian economic agency. Indeed, this could serve as a natural next step, following on from the Global Alliance for Implementation of the Two-State Solution conference the Saudi government hosted in Riyadh in late October.
Conclusion
The road to a two-state solution has never been easy. The ongoing war in Gaza, the subsequent psychological trauma, and a growing sense of extremism all indicate turbulent times ahead. Even the announced appointments of new Israeli and American ambassadors to each other’s capitals signify that annexation of Palestinian lands by Israel may be on the horizon. Notwithstanding the obstacles ahead, representatives of the pro-two-state-solution community — whether Arabs, Israelis, or others — must vocalize and harmonize their voices.

A new discourse is needed to encourage all stakeholders to engage in this peace process by both addressing their concerns and elucidating incentives. Advocates for an independent Palestine ought to highlight the devastating consequences that failure to achieve peace will bring, including the spillovers and irreversible damage such a scenario will have on the region. At the same time, the discourse should underscore that diversifying the peace process and integrating the Palestinians into the broader Middle East can generate important opportunities for all sides. While the incoming Trump administration may be welcomed by the extreme-right Netanyahu cabinet, the US president-elect is preoccupied with peace to do business. Diversifying the peace process and Palestinian regional integration, therefore, would not be antithetical to Donald Trump’s preferred vision for the Middle East. That is precisely why Saudi Arabia and other proponents of a two-state-solution need to be more proactive about constructively influencing and steering the discourse to incentive all of the stakeholders to pursue this solution to the Israeli-Palestinian conflict.

Disclaimer: This article was originally published by Middle East Institute.

Abdulaziz Alghashian is the Director, Research and a Senior Fellow at ORF Middle East. 

### Justice on trial: The ICC, Israel, and the politics of accountability

The International Criminal Court’s (ICC) Pre-Trial Chamber-I (PTC) recently issued arrest warrants against Israeli Prime Minister Benjamin Netanyahu and Defence Minister Yoav Gallant alongside three Hamas figures. The warrants focus on crimes against humanity and war crimes, specifically an alleged ‘starvation strategy’ employed by the Israeli leaders against Palestinian civilians.
The case has brought renewed scrutiny to the ICC, igniting questions about its jurisdiction, impartiality, and effectiveness. 
The ICC prosecutes individuals for genocide, war crimes, and crimes against humanity under the Rome Statute, acting only through referrals from signatory states or the United Nations Security Council (UNSC). The ICC operates as a court of last resort, complementing national criminal justice systems through the principle of ‘complementary jurisdiction’ outlined in Articles 17–19 of its statute. This principle limits the ICC's role to prosecuting crimes only when national courts fail to act due to unwillingness or incapacity. International criminal law jurisprudence, as seen in the cases of Congolese warlord Thomas Lubanga and former Libyan Security Chief Al-Tuhamy Mohamed-Khaled offers precedents.

Jurisdictional questions
The ICC's mandate restricts its jurisdiction to the 124 ‘state parties’ that are signatories to the Rome Statute, and Israel is not among them. This raises a challenge to the court's jurisdiction over alleged crimes involving Israeli leaders. The PTC reiterated that its focus is on crimes committed within a state party—Palestine—relying on the 2012 UN General Assembly resolution that recognised Palestine as a non-member observer state capable of ratifying treaties. Israel contests this, arguing that Palestine lacks statehood to confer jurisdiction and that any such jurisdiction should instead align with the Oslo Accords, which limit Palestinian authority over Israeli nationals. The PTC, however, dismissed Israel’s challenge as premature, asserting that jurisdictional challenges can only be made after the issuance of an arrest warrant or summons. The contrasting positions highlight the challenge posed by the non-harmonisation of international agreements, particularly when ICC's judgments intersect with these frameworks.
Even if one were to accept the ICC's jurisdiction claim, questions arise regarding the applicability of complementary jurisdiction in the Israeli context. Israel has a robust judicial system that acts as a counterweight to its executive and legislature. For instance, the Israeli Supreme Court recently annulled the government’s reasonableness limitation law, marking the first time in the country’s history that one of its Basic Laws was overturned. Similarly, the attorney general has demonstrated principled defiance against alleged attempts by senior leaders to manipulate the justice system in the context of the ICC case. These underscore the resilience of Israel’s legal framework. This makes ICC intervention problematic and raises broader concerns about the court's interpretation of its mandate. 

Immunity conundrum 
Personal immunity traditionally shields serving senior officials from prosecution in foreign jurisdictions for actions performed in their official capacity. This principle is rooted in customary international law and supported, in part, by provisions of the Vienna Convention on Diplomatic Relations. However, officials, including heads of state, have no immunity under an ICC arrest warrant, even if they are from a non-state party. The tribunals for Yugoslavia (ICTY) and Rwanda (ICTR), and the indictments of Russian President Putin and Prime Minister Netanyahu, among others, exemplify this. However, such overrides are fraught with political and legal complexities. State parties often subordinate their obligations under the Rome Statute to their national interests, and international law is subject to multiple interpretations.
Mongolia, a state party, refused to arrest President Putin during his recent visit, citing Article 98 of the Statute, which allows states to reject surrender requests if they conflict with their international obligations. Mongolia emphasised that no customary international law rule overrides or negates the immunity of heads of state or governments even in ICC cases. Similarly, in 2017, Jordan declined to detain then-Sudanese President Omar Al-Bashir, who was attending an Arab League summit there. Jordan argued that it was not obligated to do so because he was a head of state of a non-ICC member and had immunity under the 1953 Convention on the Privileges and Immunities of the Arab League. The ICC, however, dismissed these arguments, referencing Article 27 of the Statute, per which official capacity does not exempt individuals from accountability.
Then, there are dissenting voices from state parties. Prime Minister Petr Fiala of Czechia, criticised the ICC for undermining its authority by equating democratically elected Israeli leaders with terrorist groups. Complicating matters for ICC are proposals such as the Malabo Protocol, which seeks to amend the Statute of the proposed African Court of Justice and Human Rights to include criminal jurisdiction while granting immunity to sitting heads of state and senior government officials.

Selective justice?
Over 90 percent of all individuals indicted by the ICC are African, leading to allegations of ‘selective application’ of justice. Notably, the inclusion of immunity in the Malabo Protocol has been argued by some as a response to African criticisms of the ICC. Another criticism of the ICC is its perceived deference to powerful states, evidenced by instances such as the UNSC’s 2002 decision to exempt US soldiers from prosecution—a policy annulled only after global outrage over the Abu Ghraib scandal. Although the US, a non-signatory, opposes ICC investigations into its forces, exemplified by the American Service-Members’ Protection Act, it has selectively supported ICC probes, such as those against Russia. This duality raises questions about the ICC’s ability to act independently of external influences and geopolitical rivalries. Furthermore, the ICC’s limitations in prosecuting leaders of its signatory states, undermine its legitimacy as an impartial arbiter of justice. 

Merit of charges 
The charge against Israeli leaders pertains to the use of starvation as a method of warfare and the denial of aid to Gaza’s civilian population, distinct from genocide. The warrant specifically targets Israel’s leadership under the principle of command responsibility, citing public admissions of policies that allegedly caused starvation, as evidence. Notably, Minister Galant’s directive for a ‘complete siege’ of Gaza, which included halting supplies of electricity, food, and fuel is referenced. Israel has also been accused of blocking humanitarian aid, rejecting shipments for items like crutches and maternity kits over dual-use concerns. While temporary border crossings were reopened, their effectiveness, it is argued, was undermined by subsequent military actions.
International humanitarian law mandates unhindered access to aid for civilians in conflict zones. However, ICC’s assertions in the current case warrant discussion. In mid-2024, when the prosecutor submitted applications for warrants before the PTC, the Integrated Food Security Phase Classification (IPC) Famine Review Committee reported that “the amount of food and non-food commodities allowed into the northern governorates increased” and “the response in the nutrition, water, sanitation and hygiene (WASH), and health sectors was scaled up,” with no evidence of famine. Further, sporadic instances of hindering aid flows or politically charged statements do not meet the ICC’s threshold for a deliberate ‘policy’ or ‘organised and regular pattern.’ These arguably render the legal basis for the charges more tenuous, with the ICC at risk of overreach by engaging in a politicised interpretation of a complex humanitarian crisis. Ultimately, the ICC’s proceedings will hinge on the sufficiency of evidence to prove intent, balanced against Israel’s assertions of national security in the context of an ongoing conflict.

Credibility challenge
ICC’s arrest warrants for Israeli leaders and Hamas figures highlight the challenges of delivering justice in contentious environments. While the court aims to hold perpetrators accountable, its actions raise important questions surrounding jurisdiction, complementarity, and legitimacy. The absence of permanent UNSC members—Russia, China, and the US—undermines the ICC’s authority, as they can veto referrals. The absence of influential global players like India and the withdrawal of important signatory states constrains the ICC’s jurisdictional scope and diminishes its relevance. Its inconsistent record—14 of 32 cases initiated since its creation remains unresolved—intensifies these challenges.
The need of the hour is comprehensive reforms through the ICC’s Assembly of State Parties. In addition to an Independent Expert Review to enhance cooperation and case management, a rigorous vetting system for selecting judges and officials, streamlining the admissibility process for cases and increased cooperation with a wider stakeholder set—especially increased victim participation—are necessary. Establishing a permanent framework to address allegations of bias could strengthen trust in the court’s neutrality. Importantly, the ICC must foster stronger partnerships with regional courts, like the African Court on Human and Peoples’ Rights, to promote complementary justice systems. It must also engage more with non-signatory states to expand its legitimacy, reach and enforcement capabilities. Above all, the ICC must uphold its commitment to justice while navigating geopolitical realities.
Each year, countless lives are lost due to armed conflict. According to the Peace Research Institute Oslo, 2023 witnessed 59 ‘state-based conflicts’ across 34 countries—the highest since 1946. Further, they reported that 13 national governments were responsible for “one-sided violence” against their citizens. In such settings, where local courts may be unable to provide justice, the ICC has a crucial role. However, without substantial reforms, the ICC risks erosion of credibility and failure to fulfil its mandate of delivering justice for the world’s gravest crimes.



Jaibal Naduvath is Vice President at the Observer Research Foundation.
Dharmil Doshi is a Research Assistant at the Observer Research Foundation

### What does Donald Trump’s win mean for peace in the Middle East?

In his public address to his supporters after winning, the newly elected 47th President of the United States (US), Donald Trump, said, “I’ll stop wars”, without explicitly mentioning the ongoing war in Gaza. He also asserted that during 2017-2020, his presidency saw no major civil wars involving the US, reiterating his intent to restore world peace. “This will truly be a golden age of America”, he emphasised, while constantly pledging that the Republicans would make America great again through his “America First” policy. This article traces the currency of President Trump’s claims to restore world peace, particularly its implications for peace in the Middle East, by analysing America’s foreign policy in the region during his earlier presidency while simultaneously evaluating the possible impact of his presidential victory on the Middle East.

The Daesh crisis and the Obama vs Trump debate
Trump became the 45th President of the United States in January 2017, winning 306 votes as opposed to 232 won by the Democratic candidate Hillary Clinton. During his predecessor Barack Obama’s tenure in 2014, Daesh (also known as ISIS/ISIL or the Islamic State), a former affiliate of al-Qaeda in Iraq, gained global attention when its militants occupied large swathes of land in both Iraq and Syria by taking advantage of sectarian strife in Iraq and the ongoing Syrian civil war. The same year, the Obama administration launched a targeted military operation called “Inherent Resolve”, using US and allied troops to aid other non-specified coalition efforts to counter Daesh rather than engaging in significant ground operations.
The Trump administration continued implementing Obama’s strategy, although employing the new “rules of engagement”, which involved “greater risks in return for faster, more decisive operations”. As a result, backed by the US-led coalition airpower, Mosul was recaptured by Iraqi forces in July 2017 and Raqqa by the Syrian Democratic Forces (SDF) in October 2017 after months-long battles. By December 2017, Iraq declared its victory over Daesh and in February 2019, the SDF besieged Daesh in the village of Baghouz, its last territorial enclave, thus ending ISIS’ physical caliphate in both Iraq and Syria. It is worth noting that within two and a half years of Obama’s military campaign, Daesh lost its only international border with Türkiye, and approximately half of its territory had already been liberated by the time Trump joined the office. The remaining territory was recaptured within the next nine months, demonstrating the rigour of Trump’s military operations.
During Trump’s tenure, significant tactical changes were made to Obama’s military strategy. For instance, Trump “delegated authority to the right level to aggressively and promptly move against enemy vulnerabilities.” In other words, fewer sign-offs were required when those on the ground requested airstrikes due to a faster decentralised approval process. As proclaimed by Trump himself, “We have made, alongside our coalition partners, more progress…in the past several months than in the past several years.” Rather than establishing peace in the Middle East, Trump’s broader objective in defeating Daesh has been to prevent American casualties, illustrating his “America first” motto. That being said, Daesh was almost defeated within a year of Trump’s presidency, which eventually paved the way for reconstruction and peacebuilding initiatives in the recaptured territories of both Iraq and Syria.

From 2017 to 2020: Trump’s foreign policy in the Middle East
During Trump’s time in office, although his constant “wading in and out of conflicts” risked further destabilisation in the region, he significantly reduced the US presence in Iraq and Afghanistan, fulfilling his promise to pull the US out of endless wars. In 2018, Trump withdrew from the Iran nuclear deal, which aimed to have P5+1 sanctions lifted on Iran in exchange for its agreement to serious restrictions on its nuclear development. The US withdrawal from the deal was seen as a new crisis in the making. Around the same time, the Trump administration pursued a maximum pressure campaign against Iran, thereby increasing the risks of escalation and conflict with Iran. However, Trump did not respond to 
Iran’s provocations in the Persian Gulf in the summer of 2019, thereby maintaining peace in the Middle East.
About the Israel and Palestine issue, Trump defended Israel’s right to security throughout his first term while simultaneously acknowledging the right of the Palestinians to freedom. This can be seen in his endorsement of the two-state solution in 2018, claiming that it would work best for the broader peace in the Middle East. He stated in a press conference, “My vision presents a “win-win” opportunity for both sides, a realistic two-state solution that resolves the risk of Palestinian statehood to Israel’s security.” Trump also mentioned unveiling a plan for a final peace deal within months, stating, “It is a dream of mine to be able to get that done prior to the end of my first term.” However, Palestinians have been sceptical of the promises made by Trump, particularly citing his controversial decision to relocate the US embassy from Tel Aviv to Jerusalem back in 2017.

Ongoing war in Gaza and Trump’s renewed pledge for peace
Fast forward to 2024. Trump has won the 2024 presidential election in the US, defeating the Democratic candidate Kamala Harris. In her closing pitch for the presidential campaign, Harris promised to end the war in Gaza, a rather weak attempt to change the narrative regarding her party’s unrelenting military support to Israel. Trump has also pledged to bring “peace” to the Middle East, suggesting that he would end the ongoing war in Gaza, which has killed around 45,000 individuals,  devastated the region, and brought neighbouring countries such as Lebanon, Yemen, Syria, and Iran to be engulfed in the war. Although indecisive in his statements regarding foreign policy, Trump has a reputation for keeping the promises he made during his campaign.
The Gaza war poses a serious threat to peace in the Middle East and beyond, therefore, it is inevitable that Trump would make some difficult decisions, balancing his support for Israel and his commitment to world peace. For months during his campaign, Trump has asserted to end the ongoing war in Gaza, even setting a timeline for Israel, asking it to end its campaign against Hamas by the time he officially enters office. If reports are to be believed, Trump has pressured Hamas to backpedal on key issues during recent ceasefire and hostage-release talks with Israel. For instance, Hamas has now conceded to temporary intervention through Israeli forces staying in the Gaza Strip after the fighting ends, as well as agreed to provide a complete list of hostages, including Americans, who will be released as part of the ceasefire agreement. Trump's warning that he wants to see a deal before he enters office has been perceived as "a big factor" in these recent concessions. Trump has been opposed to wars, and it is doubtful that his support for Israel would include an extension of the ongoing war in the region.
Trump will prioritise his promise to “Make America Great Again”. Consequently, his foreign policy would emphasise cutting down on war funding to external actors, including Israel, while also restraining American military assistance. Trump has already made several statements throughout his campaign asserting his intention to end the ongoing war in Gaza. Although he has had a complex relationship with Israeli Prime Minister Benjamin Netanyahu, Trump, it is believed, can pressure him to end the war, adding to the domestic pressure on Netanyahu in Israel. Alternatively, Trump might push for Netanyahu’s exit, if required, while keeping his support for Israel intact. Trump has a reputation for maintaining strong relations with leaders in the Arab world who could, in turn, further influence Hamas for the safe return of hostages. However, it is still unclear how Trump would navigate his desire to show strong support for Israel while also bringing the war to an ultimate closure, recognising Palestinian rights to humanity, dignity and freedom.

Conclusion
Trump’s previous tenure was marked by strategic military initiatives prioritising quick results, as evident in his approach to defeating Daesh while maintaining an “America First” stance. His past actions, such as his stance on the Israel/Palestine issue and his abrupt withdrawal from the Iran nuclear deal, depict a leader with indecisive decision-making and a lack of lasting diplomatic solutions. However, Trump's 2024 election victory signals a new phase in US foreign policy towards the Middle East, with the potential for both progress and setbacks. While his renewed "America First" approach may lead to a more restrained US presence in the region, his promise to end the war in Gaza and broker peace is fraught with complexities. Ultimately, his second term will test his ability to balance competing interests and navigate the delicate dynamics of Middle Eastern geopolitics.



Sabine Ameer is a doctoral researcher in Politics and International Relations at the University of Glasgow,

### The fall of Assad and the battle for Syria’s future: Regional and global ramifications

The Syrian civil war, in hibernation for many years, has come back with gusto as the long-standing government of Bashar al-Assad collapsed in an undramatic fashion. This ended the 60-year reign of the Assad family and the Arab Socialist Ba’ath Party which took power following the 1963 military coup. A coalition of rebel militias, spearheaded by Hayat Tahrir al-Sham (HTS)—an offshoot of Al Qaeda, led by 42-year-old Abu Mohammed al-Jolani, remains at the forefront of governing the current juggernaut. The country’s armed forces have seemingly disintegrated, capitulated, or simply switched sides. 
HTS has, ironically, conducted a shock-and-awe offensive of its own. The Syrian crisis has been rankled loose by regional instability over the past year, starting with the terror attack by Hamas against Israel in October 2023 and the subsequent geopolitical consequences in Gaza, Yemen, Lebanon, and Iran. The Syrian war never really went away, it was brushed under the carpet, managed, and even forgotten. Regionally, however, it has always been a potpourri of tussles between local groups and foreign powers, particularly between the Arab states, Türkiye, Iran, Israel, the United States (US), and Russia. 
In essence, the conflict from 2011 onwards can be contextualised through three main strategic views: domestic, regional, and international. 

Domestic 
HTS and its figurehead Jolani have been taking on Assad’s forces in a gambit of cities across Syria over the past few weeks. In the past years, HTS produced a quasi-state with its own governance structure, taxation and revenue system, and healthcare. HTS is, of course, not the first group to fine-tune this model. Al-Shabaab in Somalia has mobilised similar strategies for some time now. The Taliban in Afghanistan has continued to do so since 2021 as the only formal political power in the country. Furthermore, Jolani himself has also stated that he has no interest in furthering sectarian or ethnic fault lines while simultaneously hinting towards the establishment of an ‘Islamic government’. He has advised his followers not to damage surviving public institutions (hospitals, healthcare, and police, among others).
However, the HTS and various other rebel militias, including the Kurdish-led Syrian Democratic Forces (SDF) lead euphoric scenes on the streets of Syrian cities, highlighting the mounting pressure against the former state’s regressive system. Reports of the army’s widespread abandonment of military positions sheds light on the tactical, strategic, and moral depletion of the security architecture which the Russians were supposed to help rebuild. On the other hand, the HTS was much better prepared, using military academies, hybrid weapons, and formalised command and control structures, built with the help of former generals and commanders who previously worked under Assad. 
The future of Syria’s political order is up in the air. The country’s dire economic situation has been pushed further into an abyss. If the HTS stakes claim, Jolani could be well on his way to becoming the next theocrat, opening a new chapter of uncertainty to a region that is already ablaze. The Syrian Prime Minister Mohammad Ghazi al-Jalali’s call to have free and fair elections, while also facing the reality of having to hand over the city’s keys to Jolani could fracture internal views on how the country should proceed. While Jolani is unlikely to agree, if others such as the SDF give the idea of elections momentum, it could be seen as an opening by both regional and Western powers to influence impending outcomes. 

Regional 
Since the civil war started, Iran has played a critical role in making sure that Damascus remains close to Tehran. Over the years, Syria became ground zero for Iran-backed proxies while acting as a weapons trade route to arm Hezbollah in Lebanon. The former Iranian military general, Qasem Soleimani, who was assassinated in Baghdad by a US drone strike in 2020, was widely known to be the chief architect of this setup.  
Assad himself was unpopular amongst most of the neighbouring countries. While his subservience to Iran (and Russia) in return for a retention of power was seen as problematic, a slow return to the Arab fold had been underway since 2023. In November 2011, Syria was suspended from the Arab League for being unable and unwilling to stop violence against protesters. For Arab states, support for the anti-Assad movement in its initial years became unavoidable as the country’s  Sunni Arab majority resisted the decades-long rule by the Assad family, which belonged to the Alawite minority—an ethno-religious group practising a branch of Shia Islam. 
Now, with Assad seemingly destined for the annals of history, Jolani presents a big challenge. In his speeches, the HTS leader has said that he wants to put an end to Iran and Russia’s interventions. While all these overtures are strategically palatable to Arab capitals and Israel alike, his ideological opposition to what they have sided with remains a core challenge. Arab powers such as the United Arab Emirates (UAE) and Saudi Arabia have actively undermined the Muslim Brotherhood and its ecosystems across the Middle East, while Israel continues its fight against Hamas, which emerged from the Sheikh Ahmed Yassin-led Mujama al-Islamiya, a charity affiliated with the Brotherhood working in the West Bank and Gaza. In the long term, Jolani’s candidature as the head of Syria will be an uncomfortable reality for almost everyone, albeit for diverse reasons. 
Nevertheless, regional management via power rivalries is already underway. Russia, Türkiye, and Iran recently met in Qatar to discuss the developments in Syria where all three states have overlapping interests through various groups. Ankara, for example, has supported and honed the Syrian National Army, a coalition of anti-Assad organisations. Previously, Israel and Russia maintained a line of communication over the former’s airstrikes inside Syria targeting Iran-backed proxies. With a minefield of groups and interests at play, mistakes by anyone could have consequences for many.

Global 
If Syria does come under HTS rule, it will be the second state after Afghanistan to have had a successful militant takeover, an indictment of the two-decade-long ‘War on Terror’. Jolani, much like Sirajuddin Haqqani, the Taliban interim government’s Interior Minister in Kabul, continues to have a US$10 million bounty on his head by the United States (US). Both have appeared on Western media off late, giving interviews as individuals in positions of power. 
The impact that the Taliban’s victory in Afghanistan has had on Islamist groups cannot be understated. In 2021, HTS-held territories such as Idlib congratulated the Taliban through prayers aired across the geography on loudspeakers from mosques. During the same period, HTS ideologue Abd al-Rahim ‘Atun gave a lecture on “the Taliban as a model”. Their victory was seen as an aspirational blueprint for others. If the US can be defeated, then the likes of Assad can certainly be removed. The Taliban itself has congratulated the HTS and offered guidance on the path forward. 
Russia and Iran’s role in Assad’s survivability, cannot be understated. In 2015, Damascus invited Moscow to intervene in the country’s battle with the so-called Islamic State (also known as the Islamic State of Iraq and ash-Sham (ISIS) or Daesh in Arabic). Though Moscow’s support was existential, it arguably has changed since the war in Ukraine, where Russian military and economic capacities have been bogged down. While Russian Foreign Minister Sergei Lavrov said that Syria cannot be allowed to fall into the hands of terror groups, he offered little to no practical support to Assad, much like  Iran. That said, Russia’s intervention could still have a second play, as it would look to maintain its air and naval bases in the country’s Tartus and Latakia governorates—Moscow’s only remaining tactical presence in both the Middle East and the Mediterranean. 
Beyond the above-mentioned intricacies, a Jolani-led Syria would be one more blow to global counter-terrorist ambitions. With Somalia, Afghanistan, Yemen, and now potentially Syria as success stories, Islamist militant groups, specifically in the African Sahel, might feel emboldened to try and take over the slew of fragile states in West Africa. All these realities stand tall as the consequence of both global security failures and symptoms of American recidivism from actively playing the role of global policeman. The latter is further highlighted by incoming president Donald Trump’s statement saying that the US should not intervene.  

Conclusion
Whether it is Syria, Yemen, or the crisis in Gaza and Lebanon, the envisioned ‘new’ Middle East is at odds with the ‘old’. The current events are not sudden, but a symptom of the past decade, with  an undercurrent of the Arab Spring era. Beyond the country’s own fate, a churn in both regional and international geopolitics is going to have a rupturing effect if the regional problems do not find regional solutions. The potential nuclearisation of the Middle East also remains an international worry. What happens in Syria going forward will have an impact much beyond the region, as its new political reality unfolds in the coming months.  



Kabir Taneja is Deputy Director of the Strategic Studies programme at the Observer Research Foundation

### COP29 and the future of carbon trading: Decoding Article 6

The COP29 unfolded a saga of dramatic events. The Argentinian government withdrew its delegation, while two major developing country groupings—the Least Developed Countries (LDCs) and the Alliance of Small Island States (AOSIS)—staged a temporary walkout, citing exclusion from the negotiation process. India and Nigeria publicly denounced the proposed climate finance deal of US$300 billion a year for developing countries by 2035, falling far short of the US$1.3 trillion a year that was deemed necessary. Adding to the controversy, no consensus emerged over phasing out of fossil fuels neither at the COP nor the G20. All of this played out against the backdrop of another Trump presidency and its concerning implications on global climate action.
Yet, if there is one significant takeaway from this year’s COP29—akin to the landmark agreement on the Loss and Damage Fund at COP 28—it is the groundbreaking new deal on Article 6 of the Paris Agreement, which governs international carbon trading. The agreement is historic for bringing to close over a decade-long series of negotiations and vindicating the perseverance of carbon trading advocates.

Unpacking carbon trading
The operationalisation of Article 6 is touted to be a significant source of international climate finance and transfer of emerging technologies, crucial for developing countries that often struggle with domestic resource mobilisation to invest in climate mitigation and adaptation projects.
The nitty-gritty of the text is yet to be completed, and the UNFCCC Secretariat needs to iron out pending issues and finalise the details in the upcoming months. 

Article 6.2 (Cooperative Approaches)
Article 6.2 of the Paris Agreement allows voluntary bilateral or multilateral cooperation among countries or other entities, including companies, for implementing Nationally Determined Contributions (NDCs) by trading Internationally Transferred Mitigation Outcomes (ITMOs). ITMOs refer to the transferrable units of emission reductions or removals that one country can sell to another to meet its NDC requirements, and the former must make corresponding adjustments in their national emission inventories to avoid double counting of the same emission reduction.
The Secretariat has committed to developing voluntary frameworks and templates for participating countries for authorisation and reporting. The COP29 final text also ignites the debate on the functionality and interoperability of the ITMOs with the Article 6.4 mechanism on an international registry.

Article 6.4 (Centralised Mechanism)
Article 6.4 of the Paris Agreement, also known as the Paris Agreement Crediting Mechanism (PACM), is a successor to the Kyoto Protocol’s Clean Development Mechanism (CDM). It provides a standardised mechanism and a centralised platform to generate and trade emission reduction credits among countries and companies, fostering international cooperation at a global scale to meet climate targets.
Unlike the decentralised governance under Article 6.2, where countries negotiate directly with each other, Article 6.4 has a centralised governance mechanism under a supervisory body which oversees the entire process from project registration to issuance of emission reductions and compliance of reporting guidelines, etc.
The Supervisory Board will be responsible for laying out the rules to ensure regulatory stability and standards on baselines, additionality, suppressed demand, leakage, reversal risk measures and post-crediting monitoring, among others. The text acknowledged issues around the timelines for both—authorisation before issuance and ending CDM operations—while at the same time transitioning CDM projects into the 6.4 framework.

Article 6.8 (Non-Market Approaches)
Article 6.8 of the Paris Agreement defines a framework for non-market approaches (NMAs) through capacity building or concessional/grant funding to promote mitigation and adaptation efforts while at the same time advancing sustainable development goals.
The COP29 text encourages participating parties to utilise and engage with the NMA Platform to support the implementation of NDCs.

Persisting challenges: Transparency, accountability, and additionality  
As the standards and methodologies dictating Article 6 are due to be completed by next year to facilitate operationalisation by 2025, the COP29 left several questions unanswered. Primary among them are concerns pertaining to transparency and accountability, which have plagued the carbon trading ecosystem for a long time now, rendering serious reputational and economic challenges. According to a nature study, covering almost one-fifth of the credit volume issued to date and accounting for 1 billion tons of CO2e, less than 16 percent of the carbon credit issued constituted real emission reductions.
Firstly, disclosures are not always mandatory. For instance, countries participating in Article 6.2 do not have to necessarily disclose how they avoid double counting of credits. While the countries are expected to submit an annual report with pertinent details to the UNFCCC, no deadlines or penalties have been specified.
Secondly, the process, timing, and format of authorisation are also unclear. For context, authorisation refers to countries authorising or approving in advance certain mitigation outcomes for international use, whether in bilateral agreements, compliance mechanisms or voluntary carbon markets.
Thirdly, the concern of revoking authorisation after issuance remains. While the text states that any changes to authorisation after the first transfer (mitigation outcome is transferred internationally for the first time to another country or company) will be limited to exceptional circumstances to avoid double counting, it still leaves room for manoeuvring and ambiguity.
Fourthly, tracking across jurisdictions and mechanisms will be a challenge with multiple parallel registries under operation, such as a national registry, an international registry, and a mechanism registry.
Fifthly, there is still an open debate on transitioning CDM projects to the Article 6.4 mechanism and whether the Supervisory Board should review the CDM projects for additional considerations.

Strengthening developing country participation 
For countries to truly reap the fruits of the financial innovation offered by international carbon markets, there has to be a strong emphasis on ensuring transparency and accountability in the entire value chain. One of the means to achieve this will be if we can gradually move towards an inter-operational international registry not just across countries but also across mechanisms (Article 6.2, 6.4 and VCM). Such a system will facilitate credit tracking, prevent double counting, as well as harmonise methodologies and standards. This will bring the much-needed certainty and credibility crucial for the success of Article 6.
The Secretariat has been advised to provide optional and additional registry services and support for countries which lack formalised national systems/registries to facilitate their participation in Article 6, including the issuance of credits (ITMOs) and transfer to the international registry (enabling corresponding adjustments where required).
While developing countries like Saudi Arabia and India have cited concerns of national sovereignty owing to over-regulation and data sharing, it is important for these countries to strategically leverage such provisions to their advantage and strike a healthy balance between protecting domestic interest and capitalising from international cooperation.
Another point of reflection is the selection of sectors for authorisation in the international carbon markets. Host countries should be mindful in the sector selection, reserving the low-hanging fruits to fulfil their own Nationally Determined Contributions (NDCs) and opting difficult to fund projects and sectors for funnelling international climate finance. For instance, Ghana aims to issue ITMOs for renewable energy and cooking fuel as opposed to switching light bulbs or planting trees on smallholder plantations, which are cheaper options for the country to manage at its dime
Similarly, for India, solar and wind energy are low-cost options today. India has notified a list of high-cost alternatives, which include 13 activities that may be considered for trading under Article 6.2 of the Paris Agreement. More recently, in October 2024, the Bureau of Energy Efficiency also issued a list of approved sectors under the Central Government’s Carbon Capture and Trading System (CCTS) eligible for the Offset Mechanism.




Mechanism
Activities, Sectors and Technologies


Article 6.2
GHG Mitigation Activities: Renewable energy with storage (only stored component);  Solar thermal power; Off- shore wind;  Green Hydrogen; Compressed biogas; Emerging mobility solutions like fuel cells; High end technology for energy efficiency; Sustainable Aviation Fuel; Best available technologies for process improvement in hard to abate sectors; Tidal energy, Ocean Thermal Energy, Ocean Salt Gradient Energy, Ocean Wave Energy and Ocean Current Energy; High Voltage Direct Current Transmission in conjunction with the renewable energy projects; Green Ammonia; Carbon Capture Utilization and Storage


Offset Mechanism CCTS
Phase 1 1.     Energy- Green Hydrogen (through electrolysis); RE with Storage; Offshore Wind; Green Hydrogen production through Biomass; Compressed Biogas; Energy efficiency improvements 2.     Industries- Green ammonia usage, feedstock changes in chemical industries. 3.     Agriculture- Systematic Rice Intensification; Biochar; Agroforestry 4.     Waste handling and disposal- Biochar, Landfill Gas Capture 5.     Forestry- Afforestation; Institutional Forestry 6.     Transport- Modal Shift;  Electric Vehicles/Bus Phase 2 7.     Fugitive Emissions- CF4 emission reduction; Recovery and utilization of gas from oil fields 8.     Construction-Limestone calcined clay cement (LC3: 9.     Solvent use- Industrial solvent reduction 10.  Carbon capture and storage of CO2 and other removal- Post-combustion carbon capture technologies


Compliance Mechanism CCTS
Iron & Steel; Cement; Pulp & Paper; Petrochemical; Textile; Aluminium; Refinery; Fertilizer; Chlor Alkali



Table 1: Lists the activities, sectors and technologies identified by the Government of India under Article 6.2 and its official Offset and Compliance Mechanism of the Carbon Credit Trading Scheme.
The interaction of the Voluntary Carbon Market with Article 6 should also be strategically managed and leveraged since the VCM operates independently and does not directly impact NDC accounting.
As they say, any plan is as good as its implementation. Similarly, the effectiveness and impact of these newly established rules and standards will only become apparent if they sustain the test of time and maintain credibility. It is essential to recognise that this is a dynamic process, and the mechanism to course correct should be integral to its design. Ensuring transparency and environmental integrity should remain a priority and be consistently mainstreamed in policy design and negotiations if carbon markets are to endure and prove its mettle.



Mannat Jaspal is a Director and Fellow - Climate and Energy at the ORF Middle East

### From Gaza to Tehran: Illusions and delusions of a ‘new’ Middle East

The killing of Hamas Chief Yahya Sinwar by the Israeli military in the southern Gaza Strip was an inevitable outcome. Since October last year, a core aim for Israel has been to eliminate, and consequently degrade, Hamas hierarchically. After Ismail Haniyeh and Hassan Nasrallah of Hezbollah, Sinwar was perhaps the final wild card in the deck; the expectation was that now the Israeli military operations could draw down.
However, the exit of Sinwar, Haniyeh, and Nasrallah arguably represents only a part of Israeli thinking, considering similar destruction of leadership had been conducted previously, as seen by the deaths of Abbas Al-Muwasi, Khalil al-Wazir, amongst others. The assassination of Hezbollah and Hamas leadership was always a political decision and not a tactical challenge. Israel has repeatedly shown significant penetration within the ranks of most of these groups and beyond that, even within Iranian polity and society. For years now, Israel and Iran have been involved in a clandestine war. Israel has targeted the Iranian nuclear programme and assassinated scientists inside the country. As part of its counter, over the years, Tehran has built the ‘Axis of Resistance’, a conglomerate of militant groups supported by strategic and geopolitical aims rather than ideology or theology.
Israel has targeted the Iranian nuclear programme and assassinated scientists inside the country.

Israel’s Prime Minister, Benjamin Netanyahu, has an odd but important commonality with his nemesis, Iran. While Tehran, with the foundations of its theocratic polity rooted in the 1979 Islamic Revolution, is seen as a quintessential survivalist state, Netanyahu is also seen as a quintessential survivalist politician. Although the current crisis may be the most significant one of his career, which has been marked by decades of moving in and out of power, both graciously and brusquely, it also intricately intertwines with his own legacy and brand.
Since December 2022, Netanyahu has led Israel backed by a coalition with its foundations in far-right Zionist politics, or what scholar Mairav Zonszein has titled ‘Israel’s hidden war’. Before the war, Netanyahu faced corruption charges and mass protests across the country, challenging his government. These internal challenges, highlighted as being seen as an opportunity by Hamas as distractions, were not just political but military as well, with Israeli reservists refusing to show up for volunteer duties.
Tensions between the Israeli military and the Netanyahu government have persisted throughout the war. Defence Minister Yoav Gallant has often been vocally dismissive of some of the decisions being taken. Gallant’s planned trip to the United States (US) was undercut by Netanyahu as a thaw between US President Joe Biden and the Israeli leader took place. The US, politically and militarily, is a lifeline for Israel, even though the current crisis has highlighted this reliance, especially on military supplies, as a major point of weakness for the latter.
Gallant’s planned trip to the United States (US) was undercut by Netanyahu as a thaw between US President Joe Biden and the Israeli leader took place.

On the other hand, Iran’s strategies of the recent past are equally shaken. As the country awaits an Israeli response to the missile strikes it launched to avenge the leadership losses of Hamas, Hezbollah, and the all-powerful Islamic Revolutionary Guard Corps (IRGC), which ‘manages’ these proxies, Ayatollah Khamenei risks slipping into a conflict which may prove costly. On the sidelines of this military brinkmanship, Iran, however, has mobilised regional diplomacy quite effectively. To rally support, Iranian Foreign Minister Abbas Araghchi has made whirlwind tours of the region, making their own and the Palestinian’s case. This included a stop in Saudi Arabia, a fundamental foe, but with whom it normalised relations last year after a nearly seven-year gap. The fact that Crown Prince Mohammed bin Salman met Araghchi showcased the anxiety within the Kingdom as well.
The Iranians have since played smart, mobilising and playing off Arab fears of a prolonged regional war and the costs that would entail, forcing Riyadh into a corner to listen, if not align. Effectively, in the minds of many, Iran is doing what many Arab populations would have expected or wanted Saudi Arabia, the United Arab Emirates (UAE), and Egypt to do. That is, push back against Israel as civilian casualties continue to mount in Gaza and Lebanon. Parallelly, newer institutions and instruments of regional politics, such as the Abraham Accords, while strained, have not collapsed even though signatory Bahrain has recalled its ambassador from Israel in response. Flights and commerce between the UAE and Israel continue even as public-facing engagements have been scaled back to mitigate domestic and regional moods.
While the Arab world will not have strong feelings about Hamas’s destructions at the hands of Israel, trying to manage the Palestinian question, resistance, and loosening Iran’s grip on the same is an ideation Arab powers could sell to Israel through already existing backchannels.

But the contestations between Saudi and Iran will also persist. These tensions are institutional, beginning from the Shia-Sunni divide and extending to the struggle for strategic supremacy across the Middle East (West Asia). This tussle may first be visible within Hamas after the death of Sinwar. Hamas, despite gaining from Iranian support, is a Sunni organisation. Any mainstreaming of it towards a moderate bend, moving from a design of ‘Huntingtonian’ civilisation war to one of realistic political brinkmanship, will be attractive to Saudi and UAE and push them to mobilise influence. Riyadh and Abu Dhabi, both Sunni states, have exponentially more economic power than Iran. While the Arab world will not have strong feelings about Hamas’s destructions at the hands of Israel, trying to manage the Palestinian question, resistance, and loosening Iran’s grip on the same is an ideation Arab powers could sell to Israel through already existing backchannels.
Finally, the other side of this conflict may give rise to a ‘new’ Middle East, just not the way it was being envisioned prior to October 2023. Has the backbone of Hamas and Hezbollah been broken? Yes. Will this mean an end to resistance movements, both militant and political? Most likely not. Do current engagements resolve the core issue —the Iran–Israel contestation? The answer is no. The political future of the region remains uncertain even as military realities dictate the escalation ladder, making the ongoing status quo a dangerous one to prevail in the near future.



Kabir Taneja is the Deputy Director of the Strategic Studies Programme at the Observer Research Foundation

### Biden, Netanyahu, and the game theory spectacle in the Middle East

Biden’s legacy in the Middle East has been characterised by his unwavering support for Israel, ushering a comparative paradigm tracing back to his predecessors, most significantly Truman, who recognised Israel as an independent state in 1948. The core reasons for historically strong US support for Israel have been the Jewish population’s history of persecution and for America to secure a democratic ally in the Middle East in a strategically volatile Gulf. Another explanation of America’s support for Israel can be traced back to Mearsheimer and Walt’s ‘The Israel Lobby’ (2007). The theory conjectures that Bush’s war on Iraq (2002) was to secure Israel’s, and by extension, America’s position in the Middle East, given Iraq’s history of conflict with Israel and Saudi Arabia. A pro-Israel policy is a legacy that Biden inherited but what he leaves behind for the next administration is critical.
America, since the 1970s, has provided billions to Israel in military aid and will continue to do till 2028, backed by a Congressional Understanding. Since 2021, Biden's policy focus in the region has been to develop a Middle-East ‘security network’ by way of which Israel has some regional assurances. This network, which primarily involved the UAE, Saudi Arabia, and Jordan, assisted Israel in intercepting the attacks on it by Iran in April this year. Yet, Israeli ground actions in Gaza and now inside Lebanon have become progressively less controllable by Biden. The Israeli decision to conduct a precision strike inside Beirut to kill Hassan Nasrallah was conveyed to U.S. Secretary of Defense Llyod Austin after the Israeli jets had scrambled, irking the Biden administration. A prerequisite for building a security cushion inside the Middle East requires consistency and trust, both of which are absent in the current Israel-US conversations. This may be because there is a fundamental divide in the vision and end goal that both DC and Tel Aviv seek in the region. For Biden, a lame-duck president, peace in the region through a ceasefire may be his last moonshot at a legacy. For Netanyahu, his cabinet’s push to reshape the Middle East by establishing a long-lasting deterrence weighs heavier. Between an escalation of dominance in the region by Israel and the creation of the Palestinian state lies the danger of a regional war which seems the most immediate possibility.
What has added to Biden’s conundrum is the US’ successively depleting control over other Middle-East powers such as Iran. Trump’s withdrawal from the JCPOA (Joint Comprehensive Plan of Action) was a lost opportunity for the Biden administration. Subsequently, the question of what could a nuclear Iran mean for the region has grown starker for US allies in the region—Israel and Saudi Arabia—which seek their own security guarantees from the US. Resultantly, under Biden’s presidency, Iran’s violation of IAEA’s terms notwithstanding, Netanyahu, Tehran, and Riyadh have all wrangled with DC on whether the JCPOA should be revived. Now that Iran has attacked Israel twice within months, that conversation has been further relegated.
While the Biden administration has called Iran “dangerous” and remains a steadfast ally of Israel, the US has depicted a milder regional approach urging Netanyahu to find alternatives to striking Iranian oil fields and advising Israel against attacking Iranian nuclear sites. However, in a vague comment later the same week, on 3 October, Biden indicated that the US and Israel might be in talks regarding attacking Iran’s oil industry. But again, Tel Aviv has demonstrated America’s limited control over it: as America advised Israel to refrain from escalating its attacks on Hezbollah, with Biden calling for a ceasefire. Israel has intensified operations in Beirut and its purported attack on UNIFIL personnel inside Lebanon may have spotlighted Biden in an undesirable way.
The Biden administration is torn between standing with an ally and battling a perception that it is the US which is fuelling the war. An election year in the US has made this gap seem even more yawning. The US-Israel relations may be witnessing its most testing moment. The Israel-Hamas war and ensuing regional tensions have laid bare deep divisions in the American social fabric. While there is a clear assessment of the indispensability of Israel as the US’ most important ally in the Middle East, indeed in the world, the campus protests and rising antisemitism in the US suggest there is a growing gap between the political dispensation and a rapidly changing demography in the US which is symbolic of a generational divide. As protests across America and the world against Israel intensified, the Democratic party sought to recalibrate as it saw at stake the votes of 3.5 million Arab Muslims residing in the States.
In the larger global strategic puzzle, Israel has been an important cog in America’s Middle East wheel, particularly with its strategic dependence on Israel. To be sure, through Israel’s tech advancements, the US wants to influence industrial expansion in the UAE, given the billions worth of technology trade between the US and UAE, with expanding AI developments. More importantly, Israel serves as a counterbalance to Russian-Chinese joint influence in the region with both taking clear positions against Israel since Israel’s response to the 7 October attacks.
For the Biden administration, the growing influence of China in the Middle East has piled on its regional strategic calculations. Not only has China condemned Israel’s actions but its growing footprints in the region through its investments depict a more favourable view of it than of the US. China-led negotiations between Tehran and Riyadh may well have sown the seeds for a future talk between the two sides, should Israel’s actions compel them to. As such, Israel’s actions will become the greatest externality shaping the course of Biden’s negotiations with the ‘Arab Quint’ to shape America’s regional interests. Perhaps the starkest example in this regard is the Saudi-Israel normalisation. As much as Saudi Arabia wants Iran to cut to size and a region without its ‘axis of resistance’, normalisation with Israel without definitive forms in the negotiations for a Palestinian state is hard to imagine.
Meanwhile, domestic political trends in the US chart two different paths for US-Israel relations under a Kamala Harris government or a Donald Trump administration, even if varying slightly. For Israel, particularly the Netanyahu government, a Trump administration would be more favourable. Preliminary signals have already been sent with Harris skipping Netanyahu’s address to a joint session of the US Congress earlier this year and his rather public meeting with Trump on the same trip. That the Democrats rejected an Israel-only Bill, stopping a 17.6-billion dollar funding towards Israel earlier this year has also signalled a prospective policy stance under a likely Harris administration.
Before the recent Israel-Hamas conflict, America's Middle East policy had focused on peaceful diplomacy and a gradual reduction of influence fronted by its withdrawal from Afghanistan, which allowed China to gain a foothold in the region. Biden wouldn’t want to risk turning the Middle East into a battleground between China and the US. Moreover, the fallout from the 7 October events, including the strain on US-Saudi relations, could give China a greater opportunity to further its influence. However, Biden may be racing against time to leave behind a legacy of supporting Israel for maintaining significant US stakes in the Middle East, in turn allowing it to refocus more attention on the Indo-Pacific.
Despite US Secretary of State Antony Blinken’s 10-time visit and Biden’s “countless talks” with Israel a cease-fire deal remains elusive. Israel has signalled a choice for independent decision-making when required and the US has refused to supply the IDF towards its specific attacks which might harm civilians. As neither Hamas nor Israel refuses to back down, the situation is turning into a classic game theory spectacle.
As Kamala slightly edges Trump out in popular support according to the latest polls and Netanyahu becomes increasingly unpopular among the American populace, will Kamala uphold Biden’s Israel policies? It is clear, as of now, that Kamala views Iran as a destabilising force in the Gulf. She has stated support for Israel but also expressed concern regarding the killing of thousands of Palestinians. She has also assured that the US would continue to pressure Israel for a ceasefire, a stronger stance than Biden. As Arab-Americans hope for Harris’ distance from Netanyahu, currently, there isn’t much difference between Biden’s and Harris’ Middle-East approach, as she could inherit an increasingly volatile Gulf.



Vivek Mishra is the Deputy Director of the Strategic Studies Programme at the Observer Research Foundation 
Kashvi Chaudhary is a Research Intern at the Observer Research Foundation

### Hezbollah’s exploding pagers: What does it mean for offensive cyber operations?

On 17 September 2024, in an unprecedented development, thousands of pagers reportedly belonging to the members of the Hezbollah cadres exploded across Lebanon. The explosions, which appeared to be large-scale, coordinated attacks, killed more than 40 people and injured thousands. A day later, in the apparent second wave of attacks, walkie-talkies exploded in Hezbollah strongholds in eastern and southern parts of the Lebanese capital, Beirut. Both Hezbollah and Lebanon blamed Israel. These attacks mark a new phase of hostilities in the latest round of conflict in West Asia. However, it also opens a new chapter in electronic sabotage and offensive cyber operations.
Initial reports suggested that Israeli intelligence agencies may have rigged the pagers at the production level by planting a small amount of explosive material in the device model that Hezbollah ordered from a Taiwanese company, Gold Apollo. Other reports suggested that the devices were produced by a Hungarian firm, BAC, through a licensing deal with Gold Apollo. The explosives were then reportedly activated through a code or an error message.


In the apparent second wave of attacks, walkie-talkies exploded in Hezbollah strongholds in eastern and southern parts of the Lebanese capital, Beirut.

In warfare, states have eternally looked for new ways to surprise their adversaries with spectacular tactics on and off the battlefield. Even then, the hacking and rigging of Hezbollah’s communication devices shows once again the deep reach of Israeli security and intelligence agencies. The symbolic message is that despite the intelligence failure of the October 7 Hamas raid last year, Israel retains its capability to target its adversaries the way it wants and at the time that it chooses to.

Israel’s use of cyber and other advanced tech 
In the preceding decades, Israel has often upped the ante against its adversaries by engaging in unconventional tactics and advanced technology.
First, in 2010, Israel and the US deployed Stuxnet malware against Iran’s nuclear programme. The virus caused such damage that, according to the International Atomic Energy Agency, between 2009 and early 2010, Iran was forced to replace approximately 1,000 centrifuges at Natanz due to damage caused by Stuxnet, dealing a severe blow to its nuclear ambitions. This showed the acute physical impact of cyber weapons for the first time. Then came the Israel Defense Forces’ bombing of the Hamas’ technology division in the Gaza Strip in May 2019 to thwart a potential cyberattack. The Israeli response set a precedent by being the first instance of a military countering a cyberattack in real time amidst a conflict situation.
In addition, Israel has been blamed for running a decades-long covert campaign to target Iran’s scientists spearheading the nation’s quest for atomic weapons and ballistic missiles. In one of the most prominent targeted killings, Israeli intelligence agencies reportedly used an AI-enabled, remotely operated sniper machine gun to kill top nuclear scientist Mohsen Fakhrizadeh in Absard, Iran, in 2021. This was the first documented long-range use of such a device.


Israel has been blamed for running a decades-long covert campaign to target Iran’s scientists spearheading the nation’s quest for atomic weapons and ballistic missiles.

However, Israel’s reported targeting of Hezbollah’s communication devices potentially begins a new phase in pursuing geopolitical rivalries in cyberspace. 

Lowering the threshold for cyberattacks  
Disruptive attacks on critical national infrastructure, including Distributed Denial of Service, malware and ransomware attacks, by adversarial state and non-state actors have now been a regular occurrence in cyberspace. Israel and its adversaries—Iran, Hezbollah, and Hamas—have frequently launched cyberattacks against each other’s critical infrastructure. However, sabotaging and targeting communication devices will likely lower the threshold for cyberattacks, opening a new chapter in offensive cyber operations. This is also the first time we have seen such extensive physical damage and human casualties being caused by electronic sabotage and cyber tactics. Non-state actors, including terrorist organisations, may find these tactics alluring to fulfil their intentions of committing large-scale, mass-casualty terrorist attacks.


Disruptive attacks on critical national infrastructure, including Distributed Denial of Service, malware and ransomware attacks, by adversarial state and non-state actors have now been a regular occurrence in cyberspace.

More importantly, these attacks raise complex questions about the distinction between targeting combatants and civilians. This critical distinction has guided states and their militaries for centuries but has also progressively weakened with the use of advanced tech in modern warfare. Regarding cyberspace, International Humanitarian Law (IHL) explicitly mentions that “cyberattacks must not be directed against civilians or civilian objects.” Admittedly, the targeting in this case was specific: only the pagers and walkie-talkies used by Hezbollah cadres. Yet, as ground reports suggested, their impact was not limited to the cadres. A panel of United Nations human rights experts has already termed the rigging of pagers as “malicious manipulation” and “terrifying violations of international law.”

Supply chain vulnerabilities 
States have constantly attempted to sabotage and disrupt their adversaries’ critical infrastructure, including communication networks. The US, for instance, has long alleged that the Chinese government planted backdoor vulnerabilities in Huawei telecom equipment. However, the purported tampering of Hezbollah’s pagers is the first known instance of hardware tampering at the production level. This exposes how supply chain vulnerabilities can be weaponised with catastrophic outcomes. The opaqueness of supply chains spread far and wide and sometimes concentrated in a handful of countries aggravates this concern.
The strategic benefits of exploiting such a vulnerability are up for debate. However, given its potential for disruption and destruction, at least in the short term, more actors may be tempted to leverage it to target their adversaries. Moreover, while it may be difficult for non-state actors to get such deep physical access at the equipment manufacturing stage, determined state actors can have their way with the right resources.


The opaqueness of supply chains spread far and wide and sometimes concentrated in a handful of countries aggravates this concern.

Mitigating this possibility will be a major cybersecurity challenge with the advent of the Internet of Things (IoT) and the proliferation of smart electronic and communication devices. By 2023, it was estimated that the world would have 43 billion IoT-connected devices. Often designed with limited computational power and inadequate encryption capabilities, these devices are more susceptible to cyberattacks.

Conclusion 
The sabotaging of Hezbollah’s communication devices and the targeting of civilians has carried the consequences of cyber warfare to the physical realm. This has broader implications for cyberspace stability if other actors decide to emulate it. It also has a psychological impact by aggravating the vulnerability inherent in relying on modern electronic devices. Mitigating this risk will, therefore, require further strengthening of anti-sabotage measures for electronics, securing supply chains, establishing stricter export control measures for the transfer of sensitive technology and enforcing accountability for responsible state behaviour in cyberspace.



Sameer Patil is the Director, Centre for Security, Strategy and Technology at the Observer Research Foundation. 

### Following the shifts in the Middle East's lucrative defence sector

The recent attacks in Lebanon against Hezbollah using rigged pagers and walkie-talkies, purportedly orchestrated by Israel, has opened a new front in the conflict which has threatened to envelop the region since October last year. While the audaciousness of these strikes claims most of the headlines, the geopolitics of the region, and the traditional positions states have taken over the decades, were adrift much before the ongoing conflict in Gaza and now, southern Lebanon.
The influential president of the United Arab Emirates (UAE), Mohammed bin Zayed Al Nahyan, conducted his maiden visit to the White House in Washington D.C. where Abu Dhabi was conferred the title of ‘major defence partner’, second only to India. On the surface, it sounds bewildering that the UAE leadership, a close ally of the United States (US) over the years, is only visiting now since assuming presidency in 2022. However, beneath the surface and the swinging changes in the Middle East’s strategic postures over the years lie bare for all to see. From continuing dealings with Russia to normalising ties with the Taliban in Afghanistan, Abu Dhabi often comes off as the state in the region with policies that the US would ideally like to pursue, but cannot, only enjoying the political placebos by association. “We’re in less geostrategic and more geoeconomic phase,” Anwar Gargash, a noted Emirati senior diplomatic advisor said.

Remoulding the defence strategy
One of the most visible metrics of changes in the region’s strategic postures, specifically in the Arab world, is the increased competition in the arms market and a visible loosening of US-centric control of the defence sector. Five Arab states are the top weapons-importing states in the world (between 2019 and 2023), with Saudi Arabia at number two, and the UAE, Qatar, Kuwait, and Egypt also on the list. While Western equipment still reigns supreme in both the current warehouses of most of these states, and in their aspirational shopping lists, two major factors have shifted how such purchases are and will be considered in the coming time. First is the drastic shifts in how modern conflicts are fought, with asymmetric warfare led by technological innovations taking precedence over conventional formats, witnessed in theatres such as Ukraine and Nagorno-Karabakh between Armenia and Azerbaijan. While much attention is diverted to both the effectiveness and technological advancements pushing asymmetric strategies to the forefront, at the end of the day, it is the much lower (and often negligible) cost of such equipment which is the biggest attraction.
Beyond the technology question of developing capabilities for non-conventional, asymmetric and low-yield conflicts, changes in ideating on strategy and geopolitics have further pushed changes in the regional actors’ requirements. At the core of these changes are political considerations gamed for the future. These are led by facts such as the US looking to disengage in capacity as a net security provider. While this does not mean that Washington will pull out of the region militarily, but it will lessen its presence and posture. Politically, the US is already more risk-averse in getting involved. Saudi Arabia learnt this the hard way, when in 2019, the drone strikes launched by Yemen’s Houthi militants targeting the Kingdom’s main oil facilities—oil that funds Saudi polity and security almost exclusively—was met with a muted American response. Although some, including Riyadh, thought a Republican dispensation of former president Donald Trump would demonstrate more resolve in providing protection, it was not to be as the real estate mogul prioritised bluster over substance. The reaction to these events of the past five years has been seen on the diplomatic ground within the region. The Saudis normalised their diplomatic relations with Iran and opened negotiation channels with the Houthis in Yemen. The UAE has maintained the basic sanctity of the Abraham Accords despite the events in Gaza. Smaller states, like Bahrain, are also looking to iron out their long-standing clinks with Tehran.

Enter the new defence winners 
The aforementioned geopolitical factors means that diversification of risk was mobilised in various sectors. The terminology of ‘strategic autonomy’, arguably travelling from India, is finding many clients across the Arab world. The demand for this kind of autonomy meant that smaller defence manufacturers were able to directly take on Western supremacy in certain areas.
Countries such as China, Türkiye, South Korea, amongst others, have been able to make space for their defence offerings taking advantage of more liberal terms and conditions of engagement between themselves and clients in the region. For example, while the UAE wanted to purchase the MQ-9 Reaper drones from the US for its fleet, conditions were being applied on how and when Abu Dhabi could deploy these assets. To circumvent this, the Emiratis went for the Chinese copy,  Wing Loong II. Beijing, at least publicly, had no major conditions attached to its sales.
Türkiye , meanwhile, has made tremendous strides in the unmanned aerial vehicle (UAVs) segment. Turkish President Recep Tayyip Erdogan has found defence cooperation as a very useful conduit to iron out differences with his neighbours in the Middle East while simultaneously getting much-needed funds pumped into the state’s ailing exchequer. In 2023, Saudi Arabia purchased drones from Türkiye’s Baykar Technology, manufacturers of the famous Bayraktar TB2 drones which have been sold to dozens of countries. Other operators of the Baykar family of UAVs include Qatar, UAE (reportedly), Pakistan, Azerbaijan, Libya, amongst others. In January, noted UAE defence conglomerate Edge Group finalised the integration of its Desert Sting guided bombs with the TB2 systems, highlighting a new era of cooperation between Ankara and Abu Dhabi.
South Korea is another defence manufacturer making its presence known. South Korean air defence systems have found takers in both Riyadh and Abu Dhabi, with the latter looking to invest significant political and economic heft behind Seoul’s defence manufacturing goals specifically in military aviation. Egypt also chose South Korea to set up a supply chain for self-propelled howitzers and may sign a deal for 100 T-50 jet trainers in the near future. The fact that South Korea is intricately aligned with and benefitting from Western, particularly American technologies to build its indigenous industries, is another attraction for these Arab powers.

The Israel-Iran conundrum  
One of the core attractions of the Abraham Accords signed in 2020 was the probability of Arab powers accessing Israel's defence technologies. The war in Gaza today complicates these exchanges significantly. Furthermore, Israel’s apprehension to share air superiority in the region with the UAE in way of Abu Dhabi’s wish to purchase top-of-the-line F-35 Lightning-II stealth fighter jets from the US further added to complications.
Meanwhile, for the likes of China, selling weapon systems to both Iran and Arab partners is a balance it navigates. While for Iran, China maybe its most consequential partner; this may not be the same for China, as it looks to bolster defence and economic ties with Saudi Arabia and the UAE. Nonetheless, China and Iran have a robust history of arms supplies where the consistency of these exchanges is prioritised over big-ticket, marketable sales, driven by cooperation built upon anti-Westernism. The fact that on the sidelines of the Gaza war, China has sacrificed its relations with Israel in favour of the Arab position, which is closer to Iran’s than Israel’s, Beijing is keeping the bigger economic picture in mind, as highlighted by Gargash.

Conclusion
Today, the defence market in the Middle East is wide open for aspiring players such as India. While defence industries have been designated as a core engine for India’s economic designs, the competition is stiff, and fast. India’s marketing of its indigenous fighter aircraft LCA Tejas in places such as Egypt was ill-designed and lacked understanding of how Cairo approaches its acquisitions. To compete effectively, New Delhi needs to bridge the wide gap between technological and production prowess, and what its companies and Defence Attaches have been tasked to push.
On paper, India is in a good position to not only sell defence products in the Middle East but co-produce, specifically in areas such as shipping and aeronautics. In practice, much is available to be incubated on the back of great political relations across the region should New Delhi be nimble enough to take these opportunities based on its industrial competitiveness, and not only what political wish would want its industry to achieve.



Kabir Taneja is a Fellow with the Strategic Studies Programme at the Observer Research Foundation.

### Uncharted Territories: The Promise of Deep Tech for India and UAE

Introduction
Deep Tech, characterised by advanced and innovative technologies, is fundamentally reshaping our world, providing nations with unparalleled opportunities to enhance their economic prosperity and pursue distinct development objectives. It encompasses various cutting-edge technologies, including advanced materials, artificial intelligence (AI), quantum computing, computational chemistry, advanced communications, biotechnology, robotics, and big data—technologies based on substantial scientific or engineering innovation.[1] Deep Tech acquires prominence with the intertwining of technology and geopolitics, particularly in the context of the competition for technological supremacy. Beyond it, Deep Tech also has the potential to address complex societal challenges, such as healthcare, climate change, and cybersecurity.
Deep Tech has witnessed a surging interest from venture capital funding. Globally, Deep Tech startups accounted for approximately 20 percent of total venture funding over the past half-decade, up from about 10 percent a decade ago.[2] In India, too, the Deep Tech innovation ecosystem is thriving, giving rise to multiple startups. Currently, the country has over 3600 Deep Tech startups, with over 480 being established in 2023 itself.[3] This report gives an overview of the Deep Tech innovation ecosystems in India and the United Arab Emirates (UAE), and then delves into India’s bilateral and minilateral engagements in this domain. It concludes by outlining potential collaboration opportunities with the UAE, which has emerged as a significant tech actor by fostering investments and innovation.
Figure 1: Venture Capital Funding in Deep Tech

Source: BCG[4]

Understanding Deep Tech Dynamics
While the term ‘Deep Tech’ was coined a while ago, it has only gained a precise definition over the last decade.[5] The Deep Tech innovations are ‘deep’ because they are sophisticated answers to complex challenges. It must be noted that our understanding of what qualifies as Deep Tech continually evolves.[6] As scientific and technological advancements progress, the threshold for what is considered cutting-edge and revolutionary shifts. Deep Tech technologies are based on tangible engineering innovation or scientific advances and discoveries.[7] As noted above, current examples of Deep Tech include AI, quantum computing, biotechnology and genomics, aerospace, advanced materials, robotics, drones, advanced communications like 6G, and green energy, amongst others.[8] These innovations hold the potential to transform industries, generate high-skilled jobs, and expand investments. However, realising this potential requires overcoming complex scientific, engineering and structural challenges.
Figure 2: The Universe of Deep Tech

Source: Jelvix[9]
To harness the burgeoning potential of Deep Tech, mapping its trajectory and broader trends, along with strategic planning, is crucial. Maximising its benefits demands a focus on effective regulation, innovation and entrepreneurship, infrastructure development, investments, and human capital and talent cultivation. Moreover, given the importance of developing a robust Deep Tech ecosystem, government-backed investment and international collaborations are key in developing a more favourable investment landscape. 

Deep Tech Ecosystems in India and the UAE
Backed by government programmes, academia and private investments, the Deep Tech landscape in India has been gaining momentum, particularly since 2020 when funding in Deep Tech companies peaked to about US$ 4 billion, while the number of deals peaked in 2021 at 337.[10] Deep Tech startups are driving innovation in key sectors like AI, blockchain, drones, cybersecurity, Internet of Things (IoT), big data and robotics. The premier academic institutions in the country are collaborating with industry leaders in fields like AI, robotics, quantum computing, blockchain and extended reality. For instance, the Indian Institute of Technology (IIT) Madras is partnering with the Taylor & Francis Group to advance AI and data science research.[11] IBM is collaborating with 11 top-tier academic institutions, including the Indian Institute of Science Bengaluru and IIT Kharagpur to boost advanced training and research in quantum computing.[12]
The Indian government has taken several steps to promote the adoption of Deep Tech and create a conducive ecosystem for their development. In December 2021, the Ministry of Electronics and Information Technology (MeitY) released the “National Strategy on Blockchain,” which elucidated its vision to adopt blockchain in various sectors like healthcare, agriculture, finance, voting and e-governance while laying the groundwork for establishing a “National Blockchain Framework,” under which it will work towards building a national-level infrastructure for blockchain.[13] NITI Aayog is working on AIRAWAT, an AI-specific Cloud Computing infrastructure, which will focus on Research & Development (R&D) to help businesses and governance use cases.[14] The Department of Science and Technology (DST) has signed a Memorandum of Understanding (MoU) with IBM to establish a quantum computing education & research initiative in India.[15]
Figure 3: Deep Tech Funding in India

Source: MeitY[16]
The UAE has rapidly emerged as a global hub for innovation and technology. With a bold vision to diversify its economy and reduce its reliance on oil, the country is rapidly advancing in various sectors, including Deep Tech, and has gained recognition for fostering innovation.[17] This dynamic transformation is driven by the UAE’s forward-thinking leadership, strategic investments from local financial institutions, and a conducive business environment. This gives startups linkages and opportunities with regulatory sandboxes and accelerators, yielding market access opportunities.
While economic diversification has been underway in the UAE for well over two decades, 2020 served as a landmark year. Deep Tech became a key economic contributor with the establishment of the Advanced Technology Research Council (ATRC) and later its entities—Technology Innovation Institute, ASPIRE, and VentureOne—working to shape a thriving R&D ecosystem in Abu Dhabi.[18] The shift led to attracting a talent pool of experts from around the world and incubating the country’s exceptional Science, Technology, Engineering, and Mathematics (STEM) talent into thriving R&D careers. From space exploration and quantum technology to directed energy, the UAE has established itself as a testbed for the world’s innovators. 

India’s Bilateral Engagements
India’s efforts in developing a vibrant Deep Tech ecosystem have been bolstered by its bilateral engagements with other like-minded nations from around the world. The UAE, having already established itself as a pivotal trade partner for India, particularly after the signing of the Comprehensive Economic Partnership Agreement in 2022, is playing a key role in this engagement.[19] After the launch of the Initiative on Critical and Emerging Technology (iCET) in 2023, the United States (US) has also become an important partner for India in the Deep Tech domain. Likewise, other partners like Japan, Australia, France, and the United Kingdom (UK) are collaborating with India on this ambitious endeavour.

UAE
In 2016, India and the UAE signed an MoU on Technical Cooperation in Cyber Space and Combating Cyber Crime.[20] Both countries are also cooperating in the area of space exploration since an MoU was signed in 2016 between the Indian Space Research Organisation (ISRO) and the United Arab Emirates Space Agency with the stated objective of “exploration and use of outer space for peaceful purposes”. Subsequently, ISRO launched the UAE’s Nayif-1 nanosatellite in 2017.[21]
In 2018, India and the UAE signed an MoU to establish a bilateral AI bridge with the aim of creating US$ 20 billion in economic benefits over the next decade.[22] The MoU focuses on open bilateral engagement through a Joint Working Group comprising both countries. It aims to foster an innovation ecosystem by involving governments, startups, academia and industry associations, while promoting further investment in AI.[23]
At the 11th meeting of the India-UAE High Level Joint Task Force on Investments held in October 2023, both countries signed an MoU that will focus on facilitating industrial investments and technology transfer, and enable the deployment of key technologies in industry through joint industrial and technological cooperation and development.[24] It enlists seven key areas including supply chain resilience, renewable energy, healthcare, space systems, AI, Industry 4.0, and standardisation and metrology.[25] To strengthen supply chain resilience, the UAE and India will identify opportunities for raw material supply and share best practices in industrial enablement and incentive programmes.[26] The two nations will collaborate to advance energy storage technologies, Smart Grid deployment, and renewable energy and energy efficiency R&D in the energy sector.[27]
In the field of healthcare and life sciences, they will collaborate on developing pharmaceuticals, the application of biotechnology, and further research in these areas.[28] The MoU also emphasises the intention to strengthen space industries through commercial development, the launch of small satellites, space exploration, and the licensing of space-related materials.[29] Both countries will work together to deploy AI technologies in various industries, including space, energy, healthcare, and supply chains, while advancing machine learning and data analytics capabilities.[30] Moreover, the agreement emphasises the implementation of Industry 4.0 technologies, real-time data processing, autonomous robotics, and additive manufacturing in key industries.[31] Under this MOU, industrial and academic collaborations, collaborative R&D initiatives, and the exchange of best science and technology policy practices will be encouraged, further solidifying the partnership’s comprehensive nature.[32]
In January 2024, both countries signed an agreement on green hydrogen development and investment, and launched a feasibility study on an undersea cable connecting them as part of India’s “One Sun, One World, One Grid Initiative”.[33]
Prime Minister Modi’s visit to the UAE in February 2024 witnessed the signing of a total of eight MoUs between the two countries, including one between the Ministry of Investment of the UAE and India’s MeitY, setting out a framework for the expansion of bilateral investment cooperation in the digital infrastructure sector, with a special emphasis on data centre projects in India.[34] The MoU marks a significant step towards developing opportunities in digital infrastructure and AI between both nations. This reflects the lead taken by the UAE and India in furthering regional and digital connectivity. Through the MoU, both countries will jointly explore, assess and evaluate the technical and investment potential of developing data centre projects in India with an initial capacity of up to 2 gigawatts.[35] The MoU will also promote and facilitate investments in Digital Public Infrastructure, AI and aspects related to R&D and innovation.[36] Both countries will assess the technical and investment potential of developing an AI computing capacity of eight exaflops for use by the government, public and private sectors, and academia to support the deployment of a supercomputer cluster in India.[37] The agreement focuses on creating strong and effective collaboration by building relationships between public and private organisations in the UAE and India, while also facilitating knowledge exchange.[38]

United States
The Indo-US Science and Technology Forum, established under an agreement between the Indian and US governments in March 2000, is an autonomous bilateral organisation jointly funded by both governments to promote science, technology, engineering and innovation through substantive interaction among government, academia and industry.[39] The DST, Government of India and the US Department of State are the respective nodal agencies to advance this cooperation. Its flagship programmes include the US-India Artificial Intelligence Initiative[40] and the US-India Science & Technology Endowment Fund (USISTEF).[41]
However, in January 2023, both countries established a much more promising mechanism in the iCET.[42] It includes joint efforts to promote the development of emerging and Deep Tech such as AI, semiconductors, telecommunications, quantum technology and communications. In addition, iCET aims to enhance bilateral collaboration on resilient semiconductor supply chains by supporting the development of a semiconductor design, manufacturing and fabrication ecosystem in India.[43] This involves encouraging collaborations for developing robust semiconductor manufacturing infrastructure in India.[44] The US-India Private Sector Task Force is examining opportunities for immediate- and long-term strategies that will conjoin their respective semiconductor ecosystems.[45] Major US semiconductor corporations such as Micron Technology, Lam Research, Applied Materials and Google have announced significant investments in R&D, workforce development and manufacturing in India.[46]
Meanwhile, the India US Joint Task Force on 5G/6G and Open Radio Access network (O-RAN) technologies is attempting to develop standards, promote research collaborations and deployment trials of the next generation communication technologies.[47] For this, the Bharat 6G Alliance from India and Next G Alliance from the US have joined hands to onboard relevant stakeholders from government, private sector, academia, research institutions, and standards development bodies.[48]
Another area of collaboration is quantum technology. Both countries have established the Quantum Entanglement Exchange, as a platform for knowledge sharing between their respective research ecosystems.[49] India’s SN Bose National Centre for Basic Sciences, Kolkata has joined the Quantum Economic Development Consortium, set up under the United States’ National Quantum Initiative Act of 2018. It contributes in developing skilled human resources and standards.[50] Moreover, under the USISTEF, a dedicated grant programme has been established to support co-development and commercialisation of AI and quantum technologies.[51] India’s Centre for Development of Advanced Computing (C-DAC) also participates in the US Accelerated Data Analytics and Computing (ADAC) Institute, that brings together 11 research institutions.[52]
The second meeting of iCET was held in June 2024 in New Delhi, and a joint fact sheet at the end of the meeting charted the initiative’s future.[53] It contained provisions regarding bridging innovation ecosystems, space technology cooperation, defence innovation and industrial cooperation, advanced telecommunications, biotechnology and biomanufacturing, securing semiconductor supply chains, clean energy and critical minerals, AI, quantum computing and High Performance Computing (HPC).[54]

Japan
In July 2023, India and Japan joined hands to develop a resilient semiconductor supply chain and a vibrant tech ecosystem.[55] This partnership includes five areas: “semiconductor design, manufacturing, equipment research, establishing resilience in the semiconductor supply chain, and talent development,” spanning both the public and private sectors.[56] India and Japan intend to share technical knowhow, research, and innovation between the two countries’ ecosystems.[57] Once mature, this collaboration is also expected to include miniaturisation, integration of AI, and quantum technologies.[58]
“India-Japan Digital Partnership”, launched in 2018, expanded cooperation under the IT sector, focusing more on “Digital ICT Technologies”.[59] The first India-Japan Startup Hub in Bengaluru has been set up to identify selected Indian startups for the Japanese market and for potential Japanese investors.[60]
Science & Technology (S&T) Cooperation was formalised through an inter-governmental agreement signed in 1985.[61] Recent initiatives include the establishment of three India-Japan Joint Laboratories in the area of ICT (AI, IoT and Big Data); the initiation of the DST–Japan Society for the Promotion of Science Fellowship Programme for young researchers; and an MoU for the third phase of the Indian Beam Line at KEK (High Energy Accelerator Research Organisation) Tsukuba for advanced materials research.[62]
ISRO and Japan Aerospace Exploration Agency (JAXA) collaborate actively in X-ray astronomy, satellite navigation, lunar exploration and the Asia Pacific Regional Space Agency Forum (APRSAF).[63] They signed a Memorandum of Cooperation (MoC) in November 2016 to pursue future cooperative activities in the use and exploration of outer space exclusively for peaceful purposes. Under this MoC, the two nations signed the Implementation Arrangement concerning collaborative activities on APRSAF/SAFE (Space Applications for Environment) Agromet Project in November 2019 on rice crop area and air quality monitoring, and on Indian Regional Navigation Satellite System Range and Integrity Monitoring Station in March 2021.[64]
The India-Japan Emerging Tech Corridor is a platform launched by the Embassy of India, Tokyo, to foster synergies between the two countries.[65] This endeavour will explore cooperation in technologies and innovation leveraging India’s cost-effective, innovative ecosystem, and the high-tech industrial base of Japan. The initiative will offer opportunities to innovators, startups, and Deep Tech creators to explore co-development models and commercial pathways for new partnerships.[66] The unique platform will enable and intensify cooperation for security, defence, disaster relief, law enforcement and first responder services. This will be a stepping stone for Micro, Small, and Medium Enterprises (MSMEs) to share views and build confidence for future collaborations.[67]

Australia
The Australia-India Strategic Research Fund (AISRF) is Australia’s largest fund dedicated to bilateral science collaboration and is jointly funded and managed by both governments.[68] The objectives of the AISRF are to increase the uptake of leading-edge S&T by supporting collaboration between Australian and Indian researchers in strategically focused, cutting-edge R&D projects; strengthening strategic alliances between Australian and Indian researchers; and facilitating India and Australia’s access to the global S&T system.[69] It has helped build science, technology and innovation partnerships between Australian and Indian researchers and institutions. The fund has supported research collaboration in over 20 different mutual priority areas including AI, biotechnology, quantum technology and ICT.[70] For instance, under it, the Centre for Quantum Computing at the University of New South Wales has been working with the Indian Institute of Science to tackle the problem of noise in quantum electronic devices. This has led to the discovery of a new state of matter, the development of new techniques for the production of atomic-scale germanium and silicon transistors, and the repeated production of quantum electronic devices with the lowest levels of electrical noise to date.[71] The team is also working on a 10-qubit quantum integrated circuit device.[72]
An India-focused expansion of the International Space Investment (ISI) Initiative was announced in March 2022.[73] The AUD 25 million expansion is supporting Australian organisations to work both with the Indian Space Research Organisation (ISRO) and the broader Indian space sector in the fields of satellite communication, navigation systems, earth observation and its applications, and big data analytics.[74] In April 2024, the Australian Government announced funding for three collaborative space projects as part of the ISI initiative.[75] The projects will receive a total of AUD 18 million, each including a number of Australian and Indian partners. They will help address climate change, boost manufacturing, and advance AI, among other objectives.[76]

France
Based on the Indo-French Roadmap on Cyber Security and Digital Technology announced in 2019, India and France are pursuing bilateral cooperation on advanced digital technologies such as supercomputing, cloud computing, AI and quantum technologies, including cooperation in the framework of the Global Partnership on Artificial Intelligence.[77] Subsequently in October 2023, a five-year MoU was signed between MeitY and the Ministry of Economy, Finance and Industrial and Digital Sovereignty of the French Republic on cooperation in digital technologies.[78]
India and France entered into a strategic partnership in July 2023 known as “Horizon 2047,” which includes bilateral scientific cooperation as one of its main tenets.[79] Subsequently, the second meeting of the Indo-French Joint Committee of Science and Technology was held in January 2024 to enhance collaborative scientific partnership between the two countries. Under this, they have agreed to explore cooperation in energy conservation and storage, quantum technologies, cyber-physical systems, affordable healthcare, climate change, and geospatial technologies. Additionally, both parties agreed to incorporate Deep Tech startups from both countries into the scope of Indo-French science, technology, and innovation collaboration.[80] The Indo-French Centre for the Promotion of Advanced Research established in 1987 will serve as the pivotal instrument in this regard.

United Kingdom
Building on the 2030 Roadmap for India-UK future relations launched in 2021, both countries signed a landmark agreement to collaborate on science and innovation in April 2023.[81] The MoU will enable quicker and deeper collaboration on science, driving economic growth and creating skilled jobs. The agreement will remove red tape standing in the way of major collaborations while unleashing a raft of new joint research schemes aiming to deliver progress on some of the biggest issues facing the world, from climate change and pandemic preparedness to AI and machine learning.[82] India was also named as a partner for the UK’s International Science Partnerships Fund, carrying forward the UK-India science partnership built through the Newton-Bhabha Fund. It will kick off with two new joint UK-India research programmes, one of which is a £ 3.3 million UK-funded (matched by India) technology and skills partnership programme that will enable UK and Indian researchers to develop skills, technologies and knowledge in areas such as AI, machine learning and bio-imaging.[83]
The UK-India Emerging Tech Exchange Programme aims to promote partnership between the two countries in emerging technologies like AI and semiconductors.[84] In January 2024, 10 startups were selected—five from each country—for a three-month programme.

Israel
The India-Israel Industrial R&D and Technological Innovation Fund is a cooperative initiative between the DST and the Israel Innovation Authority (IIA), Government of Israel, established in 2018 to promote, facilitate and support joint industrial R&D between companies from both countries.[85] Both countries advanced this partnership further by signing an MoU on industrial R&D cooperation in 2023, that covered technologies like AI, quantum and semiconductors, synthetic biology etc.[86]

Germany
India and Germany aim to utilise synergies and institutional linkages forged between the two countries through existing cooperation. During their meeting in February 2023 in New Delhi, Prime Minister Narendra Modi and German Chancellor Olaf Scholz agreed to deepen and widen this cooperation and to work towards a roadmap for innovation and technology with a view to using scientific and technological knowledge for the economic development of both countries as well as to address global challenges.[87]
Keeping in mind that academia–industry cooperation is key to catalyse Indo-German strategic research and development partnerships, significant progress has been achieved by the jointly funded Indo-German Science and Technology Centre, under which projects have been supported on national priority areas such as advanced manufacturing, Embedded System and ICT, sustainable energy/environment, biotechnology/bioeconomy, bio-medical technology/water and wastewater technology, and smart cities/e-mobility.[88]
India has participated in major science projects in Germany, such as the Facility for Anti-Proton and Ion Research at Darmstadt and the Deutsche Elektronen Synchrotron for experiments in advanced materials and particle physics.[89]
The Indo-German Digital Dialogue has been an important instrument to facilitate cooperation regarding digital transformation. This includes the support of digital innovations and business models in areas like Industry 4.0 and AI as well as the promotion of 5G/6G technologies and startup ecosystems.[90] The framework for cooperation in the field of AI is laid out in the Joint Declaration of Intent between MeitY and the German Federal Ministry of Economics and Technology (now the Federal Ministry of Economic Affairs and Climate Action) of May 2017.[91]

India’s Minilateral Engagements
Deep Tech entails years of research, innovation and development, and as such, it requires substantial and continued investments and support for sustained periods. Consequently, going beyond bilateral engagements is critical for India to emerge as a Deep Tech hub. Since multilateral organisations have not provided opportunities for advancing tech cooperation, India has pursued cooperation with minilaterals like the Quad and I2U2, which have proven to be effective platforms for honing its Deep Tech capabilities.

Quad
In 2021, the Quad, which brings together India, Australia, Japan and the US, established a Critical and Emerging Technology Working Group to ensure that the standards and frameworks for key technologies such as 5G, AI and quantum computing are governed by “shared interests and values”.[92] Subsequently, the Quad Investors Network (QUIN) was launched in May 2023.[93] It comprises a network of investors who seek to encourage investment in these novel technologies. The QUIN launched the Quad Center of Excellence in Quantum Information Sciences in June 2023, to link together researchers and institutions across the Quad countries “to drive greater technological cooperation, market access, and cross-border investments” in the field of quantum information sciences and to build resilient and reliable supply chains.[94]
The Quad is working to advance secure and resilient telecommunications infrastructure across the Indo-Pacific. At the 2023 Quad Summit, the leaders announced cooperation with Palau to establish a deployment of O-RAN capabilities, the first in the Pacific.[95] The development of O-RAN capabilities represents a significant commitment to supporting the modernisation of telecommunications infrastructure in the Pacific. The Quad has also produced an O-RAN Security Report, which gives a risk-based assessment of O-RAN technology, demonstrating how it can be constructed in a manner as secure as traditional RAN networks.[96]
In partnership with the Australian Strategic Policy Institute, the inaugural Quad Technology Business and Investment Forum convened in December 2022 in Sydney. It aimed at aligning private capital with the Quad’s strategic technology interests.[97] The forum kick-started a substantive partnership among Quad governments, technology companies and investors.
Through its work on horizon scanning, the Quad is recognising and affirming the important role of synthetic biology in promoting bio-manufacturing, including by exploring opportunities to expand cooperation through Track 1 and 1.5 dialogues.[98]

I2U2
After the first I2U2 (India, Israel, UAE and US) summit in July 2022 agreed on increasing joint investment in six important areas including energy and space, a Joint Business Coalition was created in April 2023.[99]
In September 2023, the US Office of the Under Secretary for Economic Growth, Energy and Environment signed an MoU with the US-UAE Business Council, the UAE-India Business Council and the UAE-Israel Business Council to create the I2U2 Private Enterprise Partnership.[100] This public-private partnership will focus on seven key sectors, including energy, technology and space, and mobilise the private sectors within the I2U2 countries to identify, explore, and participate in specific projects that further the goals of this initiative.[101] A new joint space venture has been announced under it for furthering cooperation in the applications of space data.[102]

India-South Korea-US Trilateral Technology Cooperation
In 2023, India, South Korea and US decided to establish a trilateral focusing on emerging technologies.[103] This newly-established mechanism between the three countries is one of the first diplomatic tech cooperation agreements that New Delhi has signed up for.[104] At the Trilateral Technology Dialogue held in March 2024, the three countries explored opportunities for collaboration in semiconductors, biotechnology, space, AI, and quantum computing.[105]

Digital Connectivity as part the IMEEC
At the G20 summit in September 2023, US President Joe Biden announced the India-Middle-East-Europe Economic Corridor (IMEEC) comprising the US, the European Union, France, Germany, Italy, Mauritius, UAE, Saudi Arabia, and Israel.[106] It is a multi-modal and multifaceted project. Its connectivity envisages not only physical dimensions involving rail and shipping networks, but also digital and financial.[107]
This rail and shipping route would include advanced fibre optics, clean hydrogen pipelines and economic zones stretching from India, through the UAE, Saudi Arabia, Jordan and Israel, to Piraeus Port in Greece.[108] The IMEEC comprises two separate corridors: The East Corridor connecting India to the Arabian Gulf, and the Northern Corridor connecting the Arabian Gulf to Europe. The White House press release states that the participants intend “to link both continents to commercial hubs and facilitate the development and export of clean energy; lay undersea cables and link energy grids and telecommunication lines to expand reliable access to electricity; enable innovation of advanced clean energy technology; and connect communities to secure and stable Internet.”[109]A transcontinental fibre-optic network has been proposed to improve internet connectivity between the regions involved as the digital initiative of the project. However, laying a network of railway lines and roads, and establishing digital connectivity across countries requires a high-level of coordination and planning. Digital connectivity, in particular, requires laying of undersea fibre optic cables. Since the corridor also passes through Jordan and Israel, this throws up geopolitical challenges that would require a fine balance of economic and diplomatic manoeuvring.[110]
India and the UAE can play a major role in addressing some of these issues. India is the only major nation to have cordial relations with the regional governments including Israel and Iran. This puts it in a prime position to act as a via media between the US and Israel on the one hand, and Saudi Arabia and UAE on the other. The UAE, meanwhile, can contribute with its investment and technical capabilities. Laying a transcontinental fibre-optic network is a massive endeavour and will require sizeable investments, planning, coordination and technical expertise, all of which are strengths that the UAE possesses. The burgeoning partnership between India and the UAE, compounded by the fact that both countries are also members of the I2U2, puts them in a prime position to collaborate on this initiative and implement it effectively. 

Opportunities for India-UAE Deep Tech Partnership
With their strategic geographic locations and a forward-thinking shared aspiration to become global technology hubs, India and the UAE are uniquely positioned to forge a robust Deep Tech partnership. This potential collaboration would unite their startup ecosystems and build upon existing bilateral tech cooperation grounded in trust and a mutual commitment to innovation and entrepreneurship. Leveraging the UAE’s substantial capital, robust infrastructure, and regulatory focus, combined with India’s vast pool of tech talent and expansive market, this partnership could be transformative. To this complementary mix, we can add the large Indian diaspora residing in UAE, which is already contributing in various capacities to India and the UAE’s growth stories.

Quantum Computing
Quantum computing is an area that is ripe for collaboration between the two countries. India has been working in the field as part of its National Quantum Mission, with the Tata Institute of Fundamental Research having developed a 3-qubit quantum computer based on superconducting qubits,[111] and the Indian Institute of Technology, Mandi, currently working on a room-temperature photonic quantum computer.[112] The UAE has also joined the race to build a viable quantum computer. It plans to build its first simple quantum chips by late summer 2024, before building a fully-fledged quantum computer at its Quantum Research Centre.[113] The endeavour is being implemented by Abu Dhabi’s Technology Innovation Institute, a part of UAE’s Advanced Technology Research Council.[114]
Quantum computing is still in its incipient stages and, as such, is a resource- and skill-intensive technology. Collaboration will be a key ingredient in its development, particularly given a global shortage of talent in the field, not to mention the massive amounts of investment required for its practical implementation.[115] India’s experience in the field, coupled with its vast amount of talent, could benefit enormously from the UAE’s substantial investment capabilities, thereby providing a tremendously viable opportunity for both countries to collaborate in the field. With potential applications in agriculture, medicine, energy, optimisation, logistics, and various other areas, quantum computing holds massive potential for the future. [116] Both countries will mutually benefit from any progress made in it. As prominent members of I2U2, they could, for instance, also initiate an investor network within the grouping, that seeks to replicate the template of QUIN and the subsequent establishment of the Quad Centre of Excellence in Quantum Information Sciences in 2023.[117]

Investments and Tech Bridges
Tech bridges present another potential collaborative opportunity for India and the UAE. Both countries possess a sizeable number of leading tech firms, startups and entrepreneurs, and the time is ripe for the creation of an “Arabian Sea Hub” focusing on Deep Tech, co-incubated by both nations, similar to the India-UAE startup bridge (that was established in 2022[118]) and the India-UAE AI bridge, mentioned previously. A working group can be established by entities such as the UAE Ministry for Artificial Intelligence, the ATRC, Invest India, Startup India and MeitY to target and explore investments, joint projects, research partnerships and knowledge exchange in areas like AI, quantum computing, aerial mobility and counter-drone technologies, biotechnology and sustainable technologies. The UAE’s aspirations in advanced technologies, along with its business-friendly environment, provide an ideal environment for this endeavour, presenting a new and fruitful avenue for Indian investors, startups, skilled professionals and academia.
An Arabian Sea Hub could also provide other nations in the region, such as Oman and Saudi Arabia, and proximate African nations, like Kenya and Ethiopia, with an opportunity to collaborate and invest in Deep Tech ventures. The UAE has supported African countries in developing fields like agriculture, and would serve as a welcome ally in furthering their interests in enhancing their Deep Tech capabilities.[119] Given common cultural ties, not to mention shared time zones and short distances, working with developers in the region would be much more convenient and cost-effective as compared to others. This would go a long way in ensuring the UAE’s commitment to establishing global partnerships in order to advance its industrial and technological capabilities.

Energy Collaboration
One potential area of collaboration between India and the UAE, which promises mutual benefits, is in the domain of energy. The modern energy landscape’s gradual shift from fossil fuels to cleaner and more sustainable alternatives presents a significant opportunity. India and the UAE can leverage synergies in the renewable energy sector to create a sustainable future. UAE-backed investments and technology partnerships can reinforce India’s ambitious aspirations to become a global hub for solar photovoltaic manufacturing. This can be achieved, for instance, via the formation of joint ventures for the production of high-efficiency solar panels for export and domestic markets. Both countries can also merge synergies to create specialised research facilities to capitalise on their respective expertise in the concurrent development of state-of-the-art technologies for producing green hydrogen, wind and solar energy. The UAE’s financial strength and India’s research prowess can propel clean energy innovation, offering hope for a brighter, more sustainable future. 

Conclusion
Though India’s Deep Tech sector has been rapidly expanding over recent years, it nevertheless has to overcome several challenges. Sustained funding is one such challenge. According to the National Association of Software and Service Companies (NASSCOM), there has been a significant decline in funding for Indian startups.[120] In 2023, Indian Deep Tech startups raised about US$ 850 million, which is a 77 percent decline over the previous year.[121] The long development timelines inherent to Deep Tech and the risks associated with it serve as major barriers to investment. Investors are currently favouring smaller, seed-stage Deep Tech ventures with low-risk profiles.
Deep Tech also faces several challenges at a global level which, therefore, affect both India and the UAE. By definition, Deep Tech ventures require a significant amount of talent and expertise. This has been an obstacle in areas like quantum technology, which is facing a global talent shortage.[122] The evolving regulatory landscape in most Deep Tech fields also poses a challenge. For instance, AI regulation is still in its rudimentary stages and is likely to undergo a major shift in the future.[123] The uncertainty created by any incoming regulation is likely to hinder investment and collaboration. The lack of a universal consensus in regulations relating to Deep Tech areas like AI, quantum computing and biotechnology further compounds the problem and impedes collaboration.
The ethical and responsible use of Deep Tech is another important facet which needs to be addressed. Biotechnology and AI raise serious ethical concerns over privacy, data security and potential misuse. Transparency and responsibility are essential components in utilising these emerging technologies, and any collaborative efforts in these areas will need to take these into account.
Deep Tech is fundamentally driven by groundbreaking technologies. To fully realise their potential, collaborations that nurture innovation, investment, and talent are indispensable. The growing prominence of tech-based partnerships in global politics underscores the imperative and rationale for India to forge alliances with like-minded nations. The UAE emerges as a prime candidate for such cooperation. While government initiatives, including seed funding, academic exchanges, industry collaborations, and memoranda of understanding, are essential catalysts, the organic interplay between the Indian and UAE innovation ecosystems will ultimately determine the pace and direction of this Deep Tech partnership. 




About the authors
Prateek Tripathi is Research Assistant, Centre for Security, Strategy and Technology (CSST), ORF.
Sameer Patil is Director, CSST, ORF.




 Endnotes
[1] Sean Michael Kerner, “Deep Tech,” TechTarget, https://www.techtarget.com/searchenterpriseai/definition/deep-tech
[2] Jean-François Bobier, Anne-Douce Coulin, Constant Morez, Greg Emerson, Kaustubh Wagle, and Antoine Gourévitch, “An Investor’s Guide to Deep Tech,” BCG, https://web-assets.bcg.com/a8/e4/d3f2698b436aa0f23aed168cd2ef/bcg-an-investors-guide-to-deep-tech-nov-2023-1.pdf
[3] “Indian deep tech startups count surges in 2023 but funding plummets 77%: Nasscom,” The Economic Times, June 22, 2024, https://economictimes.indiatimes.com/tech/startups/indian-deep-tech-startups-count-surges-in-2023-but-funding-plummets-77-nasscom/articleshow/111183848.cms
[4] Bobier et al., “An Investor’s Guide to Deep Tech”
[5] Kerner, “Deep Tech”
[6] Ellen Glover, “Deep Tech, Explained,” built in, January 26, 2024, https://builtin.com/artificial-intelligence/deep-tech
[7] “What is Deep Tech?,” Tech Works, https://www.techworks.org.uk/about/what-is-deep-tech
[8] Glover, “Deep Tech Explained”
[9] Alexey Itsekson, “What Is Deep Tech And How Does It Define Our Future?” Jelvix, https://jelvix.com/blog/what-is-deep-tech
[10] “Exploring The DeepTech Landscape: Innovations, Opportunities & Challenges,” Software Technology Parks Of India, Ministry Of Electronics & Information Technology, Government Of India, March, 2024 https://stpi.in/en/knowledge-center/publication/exploring-deeptech-landscape
[11] “IIT Madras Partners With Taylor & Francis Group For Data Science And AI To Amplify Research,” India Today, September 23, 2021, https://www.indiatoday.in/education-today/news/story/iit-madras-partners-with-taylor-francis-group-for-data-science-and-ai-to-amplify-research-1856455-2021-09-23
[12] “Exploring The DeepTech Landscape: Innovations, Opportunities & Challenges”
[13] Prateek Tripathi, “The Growing Role Of Blockchain In Indian Governance,” Observer Research Foundation, November 27, 2023, https://www.orfonline.org/expert-speak/the-growing-role-of-blockchain-in-indian-governance
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[69] “Australia – India Strategic Research Fund: Collaborative Research Projects Round 15,” Department of Science & Technology, Government of India, https://dst.gov.in/callforproposals/australia-india-strategic-research-fund-collaborative-research-projects-round-15
[70] “Collaborating with India on Science and Research,” Department of Industry, Science and Resources, Australian Government, https://www.industry.gov.au/science-technology-and-innovation/international-collaboration-science-and-research/collaborating-india-science-and-research
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[76] “Boosting Australian – Indian Commercial Space Partnerships”
[77] Sagnik Chakraborty, “Indo-French digital partnership”, Gateway House, September 12, 2019, https://www.gatewayhouse.in/digital-partnership/
[78] “Cabinet Approves MoU between India and France on Cooperation in the Field of Digital Technologies,” PMINDIA, October 11, 2023, https://www.pmindia.gov.in/en/news_updates/cabinet-approves-mou-between-india-and-france-on-cooperation-in-the-field-of-digital-technologies/
[79] Samaya Dharmaraj, “India, France Advancing Research in Clean Energy, AI, Quantum Tech,” opengovasia, January 20, 2024, https://opengovasia.com/2024/01/20/india-france-advancing-research-in-clean-energy-ai-quantum-tech/
[80] Dharmaraj, “India, France Advancing Research in Clean Energy, AI, Quantum Tech”
[81] “UK to Boost Tech and Innovation Ties with India,” GOV.UK, May 27, 2023, https://www.gov.uk/government/news/uk-to-boost-tech-and-innovation-ties-with-india
[82] “UK and India Sign Landmark Research Agreement,” GOV.UK, April 26, 2023, https://www.gov.uk/government/news/uk-and-india-sign-landmark-research-agreement
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[84] “UK – India Emerging Technologies Accelerator Program,” t-hub, https://programs.t-hub.co/emerging-tech/
[85] “Call For Proposals Indo – Israel,” Technology Development Board, Ministry of Science and Technology, Government of India, https://tdb.gov.in/israel/
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[87] “India – Germany Vision to Enhance Cooperation in Innovation and Technology,” Ministry Of External Affairs, Government Of India, February 25, 2023, https://www.mea.gov.in/bilateral-documents.htm?dtl/36298/IndiaGermany_Vision_to_Enhance_Cooperation_in_Innovation_and_Technology
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[89] “India – Germany Vision to Enhance Cooperation in Innovation and Technology”
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[105] Cho and Walia, “India-South Korea-US Trilateral Technology Cooperation”
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[113] Ben Flanagan, “Abu Dhabi Enters Race to Build a Viable Quantum Computer,” Wired, March 22, 2024, https://wired.me/technology/abu-dhabi-uae-to-build-quantum-computer/
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[121] Nasscom community, India’s Deep Tech Dawn: Forging Ahead
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### India-Middle East-Europe Economic Corridor: Towards a New Discourse in Global Connectivity

Setting the Context
The India-Middle East-Europe Economic Corridor (IMEC) was announced in September 2023 following a meeting in New Delhi between the leaders of India, the US, the United Arab Emirates (UAE), Saudi Arabia, Italy, France, Germany, and the European Commission on the sidelines of the G20 Summit. The Israeli port of Haifa is integral to the proposed corridor, but the growing fallout of the unprecedented terror attacks carried out by Hamas in Israel on 7 October 2023 has temporarily cast a shadow over the ambitious plan. Enthusiasm for the plan, however, can be seen from the statement of US President Joe Biden, who described the signing of the memorandum of understanding to establish the corridor as a “real big deal,” one that would include transport, data, renewable electricity grids, and clean hydrogen pipelines.[1]

Geopolitical and geoeconomic considerations underpin the rationale for the IMEC. The proposal emerged from the womb of the 2020 Abraham Accords and the I2U2 grouping, which added India to the US-Israel-UAE grouping in October 2021. The first virtual summit of the I2U2 in July 2022 suggested that its focus areas would include strategic transport links. Saudi Arabia was crucial for the project, and it was brought into the equation just as the US-led efforts to drive a possible establishment of diplomatic ties between Riyadh and Tel Aviv were gathering momentum. These elements were at play when the National Security Advisors of India, the US, UAE, and Saudi Arabia met in Riyadh in May 2023. Israel was an early and enthusiastic advocate of the project, with one former Israeli minister describing the transport link as a “peace train” that would foster peace and prosperity in the region.

However, most of this optimism was predicated on the assumption that the conflict-resolution process among the major countries in West Asia witnessed in recent years would continue or, at the very least, the countries could manage their differences more effectively. These positive trends were evident in the way the Arab quartet of Egypt, Saudi Arabia, the UAE, and Bahrain buried the hatchet with Qatar; the normalisation of Türkiye’s ties with Saudi Arabia and the UAE; the flowering of relations between Israel and the UAE; and the restoration of diplomatic relations between Iran and Saudi Arabia.

The chain reaction following the 7 October 2023 attacks has temporarily derailed this process, and some old fissures are again coming to the fore. Israel’s massive retaliatory attacks on Gaza are widely seen as excessive and disproportionate and have triggered a wave of anger in the Arab world. The incendiary rhetoric emerging from Israeli Prime Minister Benjamin Netanyahu and a range of Israeli politicians and the manifest unwillingness or inability of the Biden administration to push for an early ceasefire have also led to increasingly sharp criticism from Riyadh and Abu Dhabi. Amid rising anti-US sentiment in the region, there is now a genuine concern that the war could drag on and even widen into a regional conflict with accompanying collateral damage on the political front.

A regional dimension of the conflict has already emerged due to the attacks being launched by Houthi militias in Yemen on shipping with presumed Israeli links as it traverses the narrow Bab al Mandab Strait that connects the Arabian Sea to the Red Sea and onwards with the Suez Canal. The Red Sea is one of the major arteries of global trade, accounting for an estimated 30 percent of container volumes and 12 percent of international trade.[2] Its criticality for global supply chains had already become apparent in March 2021 when just one stranded ship led to a week-long closure of the Suez Canal. The situation caused by repeated missile, drone, helicopter, and boat-mounted attacks by Houthi forces since 21 November 2023 has made the situation much worse than the temporary blockage in 2021. The world’s five largest shipping companies have declared the passage too risky for operations and are re-routing container ships and tankers bound from Asia to Europe and the US via the Cape of Good Hope. The lengthy detour adds about 3,500 nautical miles (6,482 km) to the journeys, which now takes an additional week or longer and typically adds US$1 million in fuel costs for a round trip from Shanghai (China) to Rotterdam (Netherlands).[3] Apart from a significant increase in insurance premiums, the longer journey time curtails global shipping capacity by 20 percent, leading to higher prices and supply chain disruptions. According to one report, it will impact the shipment of about 24 percent of chemicals, 22 percent of flat-rolled steels used in the automotive industry, and 22 percent of insulated wires and batteries for automobiles.[4]

This matters for India because virtually all its exports to its two largest markets, Europe and the US, pass through this single channel. India’s integration into global value chains is set to increase as improved infrastructure brings down the cost of logistics, and manufacturing gets a boost from the production-linked incentives (PLI) programmes. The European Union (EU) is India’s largest trading partner, with bilateral trade touching an estimated US$136 billion in 2022-23.[5] It is also India’s second-largest export market, with exports crossing US$61 billion. The US is India’s second-largest trading partner but the largest destination of exports at US$78.5 billion in 2022-23.[6] As India’s trade with Europe and the US grows, it would be in India’s strategic interest to promote the IMEC as an alternate corridor that lends a degree of redundancy to the existing trade route.

Notably, from a geopolitical perspective, the prevailing situation is not conducive to the kind of active cooperation between Israel, Jordan, Saudi Arabia, and the UAE envisaged in the IMEC. It also plays into geoeconomic concerns in Cairo and Ankara that the proposed corridor is bypassing them. Egypt sees it as an unnecessary competitor for its lucrative Suez Canal monopoly, while Türkiye believes that a rail corridor from Basra through Iraq is not only more viable but also reinforces its position as a bridge between Asia and Europe.
Key features of the IMEC
According to initial reports, the IMEC will have an eastern leg that would take container traffic from India to the UAE on the well-established shipping routes from India’s west coast, joining the corridor's land route. The goods would move by rail from the UAE to Israel’s Haifa port on the Mediterranean coast after transiting through Saudi Arabia and Jordan.

The western leg of the corridor would put the containers back on ships in Haifa and take them to European ports across the European Union, France, Italy, and Germany for onward transmission by European rail networks to their final destinations. The attraction of the two-way transport link lies in reducing the dependence on the Suez Canal and creating a route that could be 40 percent faster because high-speed freight trains would travel at 120 kmph, which is about four times faster than the pace of ships.[7]

Some commentators have compared the corridor to China’s Belt and Road Initiative (BRI), but there is a crucial difference.[8] As an economic corridor, the IMEC is not limited to trade in goods alone. Given the growing imperative of cyber security, a secure, high-speed data pipeline that could potentially facilitate the export of India’s IT services to Europe and West Asia is also proposed.

The inclusion of electricity grids in the corridor framework is also particularly significant from an Indian perspective. As part of its leadership of the International Solar Alliance, India has already promoted the ‘One Sun, One World, One Grid’ initiative, an ambitious attempt to connect the world’s vital regional grids into a common green grid that can transfer renewable energy from one region to another. It would leverage different time zones to maximise the use of solar power and reduce the need for expensive energy storage systems.

Equally forward-looking is the plan to incorporate clean hydrogen pipelines into the corridor. There is a strong belief that clean hydrogen could be the most effective long-term alternative to fossil fuels, and the Indian government has already allocated US$2.5 billion to promote the country’s emergence as a green hydrogen hub. Several of India’s most prominent business groups, including Reliance Industries, the Adani Group, Larsen & Toubro Limited, and ReNew Energy Global, have announced multibillion-dollar investments to develop their own green hydrogen projects, as have corridor members like the UAE and Saudi Arabia. Prices of electrolysers are expected to lower significantly as production ramps up, and green hydrogen using renewable energy may well follow the same price curve as for solar and wind energy. However, scepticism also remains over the viability of hydrogen as an alternative mass fuel and the available technologies to transport it safely and economically worldwide.[9]
Political Will and Geoeconomic Gains
These plans may appear futuristic, but the first steps to develop intercontinental green transit corridors linking Asia and Europe are underway. A sense of urgency was also reflected in the announcement in New Delhi that a high-level meeting would be convened within 60 days to commit the participating countries “to develop and commit to an action plan with relevant timetables.”

The political will and resolve of participating countries will be tested as they start coordinating to meet the array of challenges. Each vertical integral to the corridor will pose a distinct and separate set of hurdles. A starting point will be addressing the issues of technology, finance, and commercial viability for the physical infrastructure in terms of railway links, clean hydrogen pipelines, and electricity and data cables. At the same time, problems of soft infrastructure related to harmonising standards for ports, railways, and customs will also need to be addressed.

The challenges are real, as are the opportunities that could emerge from a project that is based on trendlines and projections to 2030 and beyond. It takes advantage of a geopolitical and geoeconomics paradigm that did not exist a decade ago. Without the rapidly falling prices of renewable energy, the idea of green hydrogen and interconnected electricity grids would have been impossible. However, for the present—and at least for the near future—the IMEC project must deal with the realities of the emerging situation in West Asia. At the time of writing this paper, the contours of a resolution are decidedly indistinct. The outrage in the Arab world is real and is bound to have a chilling effect on a high-profile project that proposes active cooperation with Israel.

Amid the prevailing gloom in West Asia, it is essential to note that the proposed corridor is a long-term connectivity project. It will likely be several years before the detailed project reports and financing options are finalised. A lot can change during this period, and in the shifting sands of West Asia, that should provide some impetus for the preparatory work to continue.

This report highlights three key connectivity verticals (transport, digital, energy), their geostrategic drivers, and considerations by highlighting the critical work areas in the initial stages. It also includes an overview of the future opportunities created by the IMEC.
Transport Connectivity
The IMEC is the latest of several connectivity projects mobilised over the past two decades. These corridors demand immense economic and political capital from participating states to see them towards fruition. The announcement of the IMEC on the sidelines of the G20 Summit in New Delhi was seen as a new era of cooperation between India, West Asia (Middle East), and Europe, bound together through their partnerships with the US.

Intra-continental transport projects are complex, long-term initiatives. New Delhi’s experiences with the North-South Transportation Corridor, conceptualised in 2000 and inked in 2003 and designed to connect and bridge economic gaps between India and Russia using Central Asia (more specifically Iran and Azerbaijan), offers a good glimpse into the number of opportunities and the equal (if not greater) number of challenges associated with such big-ticket projects. While India’s experience with the Chabahar Port does not infuse confidence in the integrity of such projects, such initiatives are becoming increasingly popular, mainly due to the global sense of urgency to diversify supply chains out of China.
The Railways Link
From India's transportation perspective, the IMEC primarily focuses on shipping routes. Ports on the country’s Western coast, such as Mumbai, Kandla, Mangalore, Mormugao, and Kochi, are already major transit points. Trade with the Gulf states, particularly the UAE, is already a major area of bilateral cooperation between New Delhi and Abu Dhabi. This preexisting ecosystem between the two IMEC partners offers a convenient economic route to tap into without requiring any further immediate large-scale infrastructure development. While ports in the UAE, such as Jabel Ali in Dubai, are being touted as an ideal destination for their geographic and economic positioning, marketing the port in Fujairah, on the Gulf of Oman on the UAE’s eastern seaboard, could also make more geopolitical sense as it removes the contentious waterways of the Strait of Hormuz from the equation.

Figure 1: The UAE Rail Network



Source: The National[10]

With port facilities in India already available, the focus will be on the IMEC’s above-land designs, specifically in West Asia. The participating countries in the region are not known for their rail networks, and while some functioning lines, the integration will take time. The UAE’s Etihad Rail network is expected to cover the country’s Western coast, including the Jebel Ali and Khalifa ports, up to Ghuweifat next to the Saudi border (see Figure 1). On the Saudi side, the rail networks are improving rapidly, even as the reliance on trucks to move goods remains significant. Like the UAE, Saudi Arabia also plans for a much more extensive rail network in the coming years. Rail lines connecting Saudi borders with Jordan, such as Al Haditha and Al Quorayat, are also complete or close to completion (see Figure 2). While the network is small, the plans aim to cover the most significant ports and economic zones by rail.[11]

Figure 2: The Saudi Rail Network



Source: Maximillian Dorrbecker[12]

The centrality of the UAE and Saudi Arabia for the over-land movement of freight will likely feed into the smaller neighbouring states that are planned to be part of the IMEC, such as Jordan and Israel. For example, the intra-link rail deal between the UAE and Oman (the country is not part of the IMEC) could be a good blueprint for other countries to follow if they aim to join the corridor project.[13]
Regulatory Landscape
While the centrality of rail links and feeding into localised infrastructure programmes such as Saudi Arabia’s ‘Vision 2030’ and its National Transport and Logistics Strategy (NTLS) is important, the other challenge is to synchronise the movement of logistics and build a standard tariff and taxation regime that can be operationalised in parallel to the local tariff policies of individual states. Best practices on this front, already employed by multilateral systems such as the EU and ASEAN, can serve as good examples to build upon for a workable regulatory framework for the IMEC.

However,  the growing economic rivalry between Saudi Arabia and the UAE will present some challenges. Saudi Arabia is now aiming to become a “leading business and transportation centre,” challenging the UAE’s dominance on this front.[14] In 2021, Saudi Arabia imposed new tariffs for its neighbours in the Gulf Cooperation Council (GCC), targeting goods[a] from “free zones” that offer preferential tax and customs treatments. This includes the port region of Jebel Ali and its accompanying port infrastructure. These moves are seen as part of Saudi Crown Prince Mohammed bin Salman’s grand economic plans to transform the kingdom into a regional market power like the UAE, but at a grander scale.[15] This rivalry and Saudi Arabia’s efforts to attract investment away from other GCC states make building an overarching common tariff regime complex. Indeed, bureaucratic issues within and among countries that are part of the IMEC will make it challenging to promote the corridor.

Given that good infrastructure (in the form of roads and ports, although the rail networks need to be strengthened) already exists in the participating countries, the priority will be to establish conducive policies and regulatory frameworks for a thriving transportation corridor.
Furthering connectivity
Prioritise regulatory frameworks to make the corridor an attractive proposition for businesses from day one, calculating from a container loaded in Mumbai and off-loaded on the Mediterranean coast of Europe. Pivot towards the centrality of economic and political security of land routes in West Asia. This will be critical, specifically after the ongoing crisis in Gaza.  Framework of financing corridor projects for transportation requirements over the next decade along with American and European partners. Put forward India’s experience in freight railways in building regulatory and management plans. Offset Indian human talent against the Western technological edge. Annual consultation roundtable to secure land-based transport and regulatory systems between all members. The first such meeting should be mobilised in the first half of 2024.
Digital Connectivity
Digital connectivity is a critical component of the corridor. Once completed, it promises high speed and a secure flow of information and data, which is crucial for economic growth and regional integration. There are three potential building blocks for the IMEC’s digital connectivity: an undersea data cable, a telecommunications network, and digital payment ecosystems. With its significant technology footprint, India can contribute substantially to these digital initiatives.

The IMEC’s promise of digital connectivity hinges on the thriving digital connectivity among its partners through a web of undersea data cables that dot the region. Several data cables currently connect parts of Asia, the Persian Gulf, and European countries (see Table 1).

Table 1: Major data cables connecting Asia, the Persian Gulf, and Europe 



Undersea cable project
Major countries Involved
Cost
Undersea cable project
Major countries Involved


PEACE
Egypt, Somalia, Djibouti, Malta, Pakistan, France, Somalia, Kenya, Seychelles, Cyprus
425
China-ASEAN Information Harbor, PEACE Cable International Network, Telecom Egypt
192


Gulf Bridge International Cable System
Qatar, Bahrain, Saudi Arabia, Oman, Iran, Iraq, UAE, Kuwait, India
445
Gulf Bridge International, Inc.
51.2


Flag Europe Asia
Egypt, Jordan, Spain, UAE, Saudi Arabia, China, Japan, India, Italy, UK, Thailand, Malaysia
720
Global Cloud Xchange
0.5


SEA-ME-WE-4
India, Bangladesh, Djibouti, Maldives, Pakistan, France, Sri Lanka, Italy, Malaysia, Egypt, Singapore, Saudi Arabia
600
Algerie Telecom, Bangladesh Submarine Cable Company, Bharti Airtel Limited, CAT Telecom, Du, FT, Pakistan Telecommunication Company Limited, Saudi Telecom Company, Sri Lanka Telecom Limited, TATA Communications, Telekom Malaysia Berhad, Tunisie Telecom, Verizon
12.8


Falcon
Yemen, Saudi Arabia, Kuwait, Oman, Iraq, Iran, Qatar, India, Sudan, Egypt, Bahrain
900
Global Supply Exchange
2.56


Europe India Gateway
Egypt, UK, UAE, Gibraltar, Saudi Arabia, Monaco, India, Oman, Portugal, Libya
700
SubCom LLC
28


AAE-1
Egypt, Yemen, Oman, Italy, Greece, Djibouti, Qatar, UAE, China, Saudi Arabia, Pakistan, Malaysia, France, India, Myanmar, Thailand, Cambodia, Vietnam
800
China Unicom, CIL, Djibouti Telecom, Etisalat, GT5L, HKT (PCCW Global), Mobily, Omantel, Ooredoo, OTE Globe, PCCW Global, PTCL, Reliance Jio Infocomm Limited, Retelit, Telecom Egypt, Telecom Yemen, TOT Public Co Ltd., Viettel
80



Source: Submarine Cable Almanac[16]

These high-capacity network links and several terrestrial cables are critical in expanding the internet bandwidth in the region and connecting more people online. China’s HMN Tech company has a significant presence in some of these data cables. Notably, the firm expanded its market share from a mere 7 percent of total undersea cable projects in 2012 to 20 percent by 2019.[17] Its flagship project is the PEACE Cable, which starts in Pakistan and ends in France, connecting Europe, Africa, and Asia,[18] and has a carrying capacity of 192 terabytes per second.

The IMEC is looking to disrupt this Chinese corporations-dominated market by proposing to lay down a high-speed data cable along the east corridor (connecting India to the Arabian Gulf) and the northern corridor (connecting the Arabian Gulf to Europe).[19] Given the strategic purpose that this cable will serve for the corridor, IMEC partners must aim to build a super-capacity data pipeline. This will benefit the partner countries and the African continent, where HMN Tech has occasionally sought a more significant market share under China’s Digital Silk Road (DSR) initiative.[20]

The IMEC partners can leverage their technological capabilities and financial heft to establish a strategic presence in this domain. This will require substantial investments from the US, India, the UAE, and Germany and the continued engagement of their tech, telecoms, and undersea cable companies in the project. The successful execution of this project will offer the partner countries an opportunity to create their own regulatory and cybersecurity frameworks to secure undersea cables, which can then be applied to other cable projects in the region.
Telecommunications network
Telecommunications connectivity is the backbone of the regional economies’ advance into the digital sphere. Consequently, many IMEC partners are upgrading their telecom networks from legacy 3G/4G to 5G wireless systems. However, this upgrade is not cheap; one estimate suggests an average baseline cost of between US$3 billion to US$8 billion for a national 5G rollout per country, with an additional 20-35 percent investment required to expand coverage.[21]

Like undersea cables, the 5G market is dominated by Chinese telecom companies such as Huawei, Zhong Xing Telecommunication Equipment (ZTE), and China Unicom. Huawei has acquired 29 percent and ZTE 11 percent of global 5G revenues by aggressively offering 5G technology cheaper than Western firms.[22] Notably, they are not only capturing new markets but also aiming to replace the existing standards ecosystem, as seen from Huawei’s proposal in 2020 to replace the current Transmission Control Protocol/Internet Protocol (IP) with a new IP standard that it claims is faster.[23]

The IMEC partner countries must take a strategic view of the telecom networks in their region and halt the further onslaught of Chinese companies. Regional governments can procure secure and trustworthy telecom hardware and potentially provide financial incentives to the region's low- and middle-income countries to enable them to purchase such hardware. To operationalise this, as an initial effort, the IMEC countries must constitute a task force or working group on telecom technologies that rallies not just the government agencies but also telecom firms and the technical community to promote cooperation.
Digital payment ecosystems
At the heart of deeper economic and commercial exchanges lies the greater integration of the digital payment ecosystems. While greater internet penetration will enable people and businesses to efficiently manage trade and investments across the IMEC, the development of interoperability between payment systems will catalyse convenience in payments and remittances. Currently, SWIFT (Society for Worldwide Interbank Financial Telecommunication) is the widely accepted system for cross-border interbank settlements. However, retail payments for low-value transactions remain a pain point.

India has aggressively promoted its Unified Payments Interface (UPI) for cross-border payments and remittances. Among the IMEC partners, Saudi Arabia, the UAE, and France have allowed UPI to be used for fund transfers and remittance payments. UPI is the ideal option for an integrated payments ecosystem among IMEC partners. However, to achieve this, the National Payments Corporation of India must secure UPI from financial frauds and cybercrimes, devise more significant incentives for financial institutions to participate, make its Application Programming Interface genuinely open source, and develop greater linkages with international payment networks. In addition, it must traverse divergent payment system regulations across the IMEC partners.

Establishing digital connectivity for the IMEC is not without challenges, especially given the recent re-emergence of geopolitical faultlines in West Asia. However, the buildout process can be boosted if partners understand the mutual trade and tech imperatives guiding their participation. The IMEC’s projects offer a potentially viable counter to the Chinese companies’ dominance under the DSR and give India a prominent position in the emerging arc of prosperity. The next big opportunity, beyond digital, for the IMEC is energy and energy security. The task of energy transition is also intertwined with digital technologies, from production to consumption.
The Energy Corridor
Emerging economies such as India are faced with the trilemma of ensuring energy access and affordability while trying to achieve a transition to green energy. Moreover, the transition towards green energy will impact the environment, energy security, and geopolitical relationships. The shift to newer forms of energy will bring newer supply chains for these green technologies and a change in the power dynamics related to energy. For India and much of the emerging world, this is an opportunity to rethink energy security at home and become a more prominent node in the global energy landscape. Integrating energy corridors as a focal point within the IMEC can be a crucial facilitator for resolving the energy trilemma. It also offers India a means to bolster its leadership in the green energy transition. Two critical priority areas have been identified as part of the IMEC efforts to enable cooperation around energy.
Interconnected Grids for Renewable Energy
The intermittent nature of renewable energy presents the most significant hurdle to its expansion. Providing round-the-clock renewable energy currently depends upon the availability of storage technologies, particularly battery storage. However, utility-scale battery storage is costly, estimated at around US$345 per kWh for lithium ion-based battery storage systems in 2020 and projected to decrease to only US$143 per kWh by 2030, even in the most optimistic scenarios.[24] Emerging economies such as India are already struggling to access finance for the energy transition. Currently, India's annual finance flow to green sectors is only one-fourth of the amount needed to achieve its nationally determined contributions.[25] A renewable energy expansion pathway that relies on battery storage will substantially increase the energy transition cost.

The interconnected grid project, part of the IMEC, provides an alternate pathway for reliable renewable energy supply. In 2023, India held talks with the UAE and Saudi Arabia on grid interconnectivity.[26] The IMEC will span regions with the highest potential for renewable energy, particularly solar. West Asia, in particular, has some of the highest solar irradiance worldwide.

India can benefit from the corridor as an exporter and import of green energy. On the import side, drawing power from the interconnected grid system when renewable energy generation is low can reduce the need to build newer battery storage infrastructure. This will be particularly important in improving the share of renewable energy generation, which is currently only around 25 percent on average.[27] On the export side, India’s ambitious renewable targets mean that at certain times of the day, many states will produce excess solar energy that may not be evacuated and integrated into the grid. The cross-border transfer of this excess capacity will aid in the better utilisation of renewable energy infrastructure, thereby improving the profitability of renewable energy generators.

The interconnected grid can also provide an essential fillip to the growth of renewable energy in West Asia. While this region has among the highest potential for solar power, the development of renewable energy continues to lag behind other areas. For example, the UAE, Saudi Arabia, and Israel are among the top 20 countries with the maximum solar potential,[28] but the share of renewable energy in the power mix remains below 10 percent in these countries. By providing access to a broader market, the interconnected grid can increase the sources of demand for renewable energy from this region and act as a fillip for more significant investment.

Most importantly, the interconnected grid is a unique opportunity for India to demonstrate its credentials as a leader in the green energy transition. As part of its leadership of the International Solar Alliance, India has floated the India of ‘One Sun, One World, One Grid’ to create a common grid that can transfer renewable energy across different parts of the world. The IMEC power corridor can be the first example of translating intent into action, providing a template for further projects.
Green Hydrogen Corridor
Hydrogen, mainly green hydrogen produced using renewable energy, is expected to be a crucial future fuel for deep decarbonisation. Given its high energy density, hydrogen is essential for decarbonising hard-to-abate sectors, such as heavy industries and long-distance transport, where other forms of fuel may not be well suited.

India already has strong ambitions to grow its green hydrogen infrastructure. The central government has already approved an incentive plan of US$2.1 billion to create green hydrogen production infrastructure to produce 5 million metric tonnes by 2030. The private sector has also identified green hydrogen as a priority area, with companies such as Reliance Industries, Adani Enterprises, and JSW Energy setting up a green hydrogen manufacturing capacity of a cumulative 3.5 million metric tons. Similarly, other countries in the IMEC, such as the UAE and Saudi Arabia, have strong plans for green hydrogen expansion.

The proposed green hydrogen corridor can boost green hydrogen growth in the whole region. One significant hurdle to green hydrogen expansion is the lack of demand from industries that may be unwilling to shift their production processes to use green hydrogen. The IMEC can be an essential step in resolving this problem by creating an export corridor for green hydrogen and expanding the available market beyond domestic borders.

The second most significant impediment to green hydrogen growth remains the high cost of production. Currently, the cost of green hydrogen is as high as US$6-8 per kg.[29] The price will have to reduce substantially for widespread adoption to around US$1 per kg. This will hinge on technology development and the ability to produce and utilise cheap and effective electrolysers. In addition to physical infrastructure, the green hydrogen corridor can act as a technological corridor. This can lead to the co-development of green hydrogen technologies across countries that are part of the corridor by transferring technical and human resources. Eventually, this can speed up the development of green hydrogen technology and could be essential for countries in this region to become leaders in the global green hydrogen economy.

The inclusion of energy as a vital part of the IMEC is an acceptance that cooperation will be essential to ensure an ambitious and equitable energy transition. In particular, the focus on interconnected grids and green hydrogen can prove instrumental in resolving some of the critical bottlenecks that can impede the energy transition in the future. While there will be many challenges to implementing this corridor, particularly related to mobilising the finance to build the physical infrastructure and harmonising standards and regulations across different countries, the IMEC announcement is an essential first step towards establishing an effective green transit corridor that connects Asia and Europe.
The IMEC: Facilitating a New Era of Connectivity and Trade?
The IMEC is ambitious but not the result of capricious thinking. It is grounded in reality, cognisant of the benefits and costs, undertaken based on the long-term vision of the various advantages to be reaped by the participating economies, and, most importantly, will redefine the regional geoeconomic order.

The agreement on the principles for the IMEC presents a blueprint to boost economic growth among the participating economies by connecting the two continents of Asia and Europe. With the participating economies accounting for US$47 trillion—or about half the global GDP—the formidability of the IMEC as an economic force is undeniable.[30]

The IMEC underscores the importance of enhancing global connections and forming new trade routes. A vital component of the project’s two main corridors—the eastern corridor linking India with the Arabian Gulf and the northern corridor connecting the Arabian Gulf to Europe—is a railway system, which is envisaged as a consistent and economical cross-border ship-to-rail transit solution that complements current maritime and road routes, facilitating the movement of goods and services among India, the UAE, Saudi Arabia, Jordan, Israel, and Europe. In tandem with the railways, there are plans to develop electric cables, digital infrastructure, and hydrogen pipelines. While symbolising a fresh approach to global collaboration and a redefined perspective on globalisation, the IMEC has the potential to usher in a new era of globalisation, not merely based on an ideological or security pact but a collective effort to foster a brighter future for all participating nations. Still, several aspects related to the corridor require further exploration:
Supply Chain Resilience
Economic corridors are crucial for supply-chain resilience. In recent years, supply chain shocks have become more frequent due to factors such as the pandemic, conflicts and war conditions, and economies' insulating tendencies.[31] While international economic corridors have garnered substantial attention in global discussions due to their ability to promote trade and exploit complementarities, their importance in combating systemic supply chain shocks is often understated.

How can the IMEC help ensure supply chain resilience in the participating nations? A significant component of improving resilience is reducing the ‘transaction costs’ of trading. Transport costs and regulatory differences among countries are estimated to account for between 29 percent and 16 percent of the overall trade cost.[32] The high transaction cost arising through these avenues indicates that a more enhanced and comprehensive approach to supply chain connectivity, encompassing border and transport infrastructure and policies, is needed.

An economic corridor that caters to the needs of the factor and product markets and ensures their constant supply and demand helps create a certain amount of resilience in the new supply chain created within the corridor. This insulates the system from shocks in other parts of the world. The IMEC can do precisely that. It will help the participating nations exploit India’s affordable human capital and abundant natural capital that classify the factor market, thereby creating a resilient supply side while also helping cater to the needs of an already developed product market in the high-income economies of the US, EU, West Asia and India’s growing western and southern parts.
BRI vs the IMEC: A Comparison
Some commentators have termed the IMEC as a response to China’s BRI. The BRI is a result of China's shift to a ‘consumption-led growth’ approach; China’s 13th five-year plan (2016-2020) explicitly pledged to promote "consumption-led growth" by enhancing domestic purchasing power. Given the unstable nature of the external sector, which relies on volatile international trade and finance, China needed a reliable growth engine within the domestic economy as a protective measure. This prompted notable increases in wages and labour expenses in the country over the past ten years. Concerned that their exports could become less competitive, Chinese decision-makers thought about moving components of the production process to regions with abundant and affordable labour and natural resources. The BRI is, therefore, an initiative to access the ‘factor’ markets in Africa and South Asia, as well as the ‘product’ markets in the EU, West Asia, and the US.

While explicitly promoting Beijing's strategic objectives, the BRI has attracted significant debate and scrutiny.[33] By launching projects of dubious merit to ensure and expand Chinese access to resources and local markets, the BRI has been characterised as an instrument of Beijing's ‘debt-trap diplomacy’. It showcases China's ambition to extend its influence worldwide, resulting in substantial debt challenges for several susceptible economies. Examples include Sri Lanka's Hambantota port and the 22 African nations grappling with financial difficulties. The China-Pakistan Economic Corridor is another example of Beijing pushing its strategic development agenda.[34] This is akin to ‘market imperialism’.

The IMEC, on the other hand, is more a project of mutual respect and partnership to take advantage of the existing complementarities. The opportunity to meet the aspirations of over 6 billion people in the developing world and not just the top 1 billion population of the developed world can be served by the IMEC, which provides a replicable framework[35] for other such plurilateral frameworks in different regions. Establishing a trade and connectivity corridor involving India, West Asia, and Africa, as well as connectivity links to Africa and subsequently to South America, will be pioneering initiatives that can be outcomes of this process.
Holistic trade facilitation through the IMEC
It is imperative to recognise the synergistic relationship between transport connectivity, which encompasses physical infrastructure and international regulations, and trade facilitation, which involves customs procedures and infrastructure at the border. Although the value of both aspects in augmenting trade is unquestionable, the link between transport and trade facilitation is not always clear in policy dialogues. A recent report[36] identified four conditions that should be satisfied for trade facilitations: enhanced coordination, unified policy approach, inclusion and sustainability, and digital advancements. These are some of the issues that the IMEC should consider:

 	Enhanced Coordination: The IMEC’s biggest challenge will be maintaining continuity in cooperation and coordination between the participant countries. The rail-route construction will require about US$20 billion in funding, likely coming from West Asia.[37] In addition, the IMEC plans to build power lines and pipelines for green energy transport, which will incur huge costs. This will require investments from both governmental and private sources. Therefore, external and internal policy coordination is essential for developing trade infrastructure for efficient trade and transport facilitation. Often, transport connectivity and customs facilities are disjointed, leading to inefficiencies.
 	Unified Policy Approach: Regional trade policies should integrate trade facilitation and transport cooperation. The IMEC is expected to do this for the corridor to be thriving.
 	Inclusion and Sustainability: There is an inherent need for inclusivity and climate change considerations. The IMEC has already taken climate considerations into account, given its emphasis on renewables and green hydrogen. However, sustainable procurement and production mechanisms need to be built into the framework for infrastructure development.
 	Digital Advancements: The pandemic highlighted the importance of digital trade facilitation. Adopting frameworks like the United Nations agreement on cross-border paperless trade can address supply chain disruptions and promote resilient, sustainable, and inclusive trade. The IMEC’s focus on digital connectivity as a critical component covers this aspect.

The IMEC and India: The Way Ahead
The convergence of several enabling factors from India’s business ecosystem—from the demand and supply sides and system-wide—has enabled the economy to emerge as one of the brightest spots in the global arena, with India touted as the “next great economic power”.[38] The demand arises from the ‘consumer boom’ phenomenon depicted by the vast population base of 1.42 billion, with real incomes predicted to grow at 4.6 percent; context-appropriate innovation by Indian corporations and firms operating in India by understanding the aspirations of the middle class; and the new source of demand emerging from the country’s urgent need for a green transition. Conversely, a robust supply ecosystem is created by the demographic dividend, access to finance, and extensive physical capital and infrastructure development, including the digital space that has taken the incarnate of digital public goods. Added to these demand and supply drivers are facilitating factors like domestic policy reforms that are bringing in certain robustness in the existing regulatory statutes and are reducing the transaction costs of doing business, the geopolitical sweet spot that India is presently occupying, and the dividend that the economy is drawing from its extensive diaspora.

Notably, India’s trade facilitation activities are both outcomes and enabling factors of good geopolitics. The IMEC bears ample testimony of this. India’s decision to exit the Regional Comprehensive Economic Partnership (RCEP) drew some criticism of the country’s protectionist outlook. However, since 2021, India has signed numerous trade agreements, such as with the UAE and, more recently, with the European Free Trade Association.[39] The advantage of the IMEC is that it provides a template for the Indian economy to align with the global value chain (GVC). India’s present GVC participation rate is below the worldwide average.[40] With the global pandemic and subsequent crisis in Ukraine bringing about the need for diversification of commodity value chains, GVCs are also undergoing transition. This has presented significant opportunities for newer countries to step up in existing value chains and capture a more substantial market share. Between 2000 and 2018, the share of advanced economies in GVC exports reduced from 78 percent to 72 percent, but it was still higher compared to their share in the global GDP (60 percent) and exports (64 percent).[41]  During the same period, the share of emerging economies in GVC exports increased from 14.6 percent to 21 percent, mainly due to China, whose share increased from 3.6 percent to 8 percent.[42]

India has a massive opportunity in this context. So far, India’s inward-looking protectionist policies have impeded fully utilising the opportunities the shift in GVCs offers to attract lead firms. The default policy is undergoing significant changes, accelerating since the pandemic with the introduction of PLIs and the rapid advancement of large-scale infrastructure projects. India has substantial benefits as a production and supply hub, thanks to its strategic location along crucial trade routes linking the Far East and Southeast Asia with Europe, Africa, and West Asia. This advantage is bolstered by its large consumer market, closeness to major Asian manufacturing centres, and an expanding workforce. Nonetheless, further efforts are required to capitalise on these opportunities. Policy literature[43],[44] suggests India’s GVC engagements can be enhanced through free trade agreements, trade facilitation policies, the rationalisation of its customs and trade procedures, and the engagement of its vast MSME sector with global lead firms. The IMEC can serve this purpose. The IMEC creates India’s critical entry linkages with the GCC nations. While the Arab region is among India’s top three trade partners, with trade exceeding US$240 billion during the financial year 2022-23, trade with GCC countries alone amounted to over US$184 billion.[45] Creating a free trade region with the GCC can enhance this trade by another 40 percent, considering a linear extrapolation based on the India-UAE FTA projected figures over the next five years. A recent Computable General Equilibrium analysis[46] based on the Global Trade Analysis Project model suggests that a potential economic integration achieved through the India-GCC FTA can be mutually beneficial and enhance welfare, resulting in a win-win situation.

The current IMEC design is an ideal template for India-GCC trade and the creation of regional value chains, but it has more significant implications. For India, the Arab region can provide a product market, while India is the factor market. Again, the complementarities created between India and the GCC make it a perfect factor market catering to the needs of the broader EU and US markets. India intends to develop its ports for its maritime trade, which perfectly complements Saudi Arabia’s plans for developing special economic zones. The GCC is also interested in developing food parks and investing in agro-based industries in India. Specifically, Saudi Arabian business houses could potentially invest in areas like renewable energy generation projects, energy storage, electricity transmission and green hydrogen, which are covered under the IMEC. The IMEC, therefore, is an ideal template that can be replicated in many other cases to attract foreign direct investment. However, India must work on reducing the transaction costs of doing business within its economy.

With the depletion of oil reserves, the GCC countries are already diversifying their economies towards other services, including those in the financial domains. As trade and investment in the India-GCC region increase, there will be a bigger need for risk management and hedging. This will necessitate the development of either a sovereign fund or even adequate risk management institutions. Therefore, India and the GCC also need to think of uniform financial regulatory mechanisms for hedging the risks arising from a volatile geoeconomic environment that percolates into price risk. This will also necessitate substantial regulatory reforms from the Indian side, including removing the commodity transaction tax, bringing in more sophisticated trading instruments, and enabling conditions for the cross-border fungibility of financial products.

The creation of a risk financing system by the IMEC countries, perhaps in the form of a sovereign fund catering to this need and some other fiscal mechanisms (such as tax holidays or PLI equivalent schemes), can encourage Indian companies to partner with other corporations (outside India but part of the corridor) or move on their own to take advantage of the corridor through ancillary opportunities that emerge from it. A 50:50 principle of resource-sharing may work here, where the economies through which the corridor will pass can access financing and partner with Indian businesses.
Financing the IMEC
The take-off, continuity, and flourishing of the IMEC are contingent upon several factors, the most critical of which is finance. Initial estimates suggest that the cost of each of the routes in the transport corridor can range anywhere between US$3 billion to US$8 billion. Securing the funding for this capital expenditure is not easy. Projects in economic corridors require the cooperation of diverse actors across nations and are, therefore, subject to substantial risks. Exploring effective and low-risk strategies for funding these ventures is becoming increasingly important to attract private investments that are looking for a stable risk-adjusted return. However, the risk premiums that financial institutions encounter while investing in transborder transport or economic corridors often act as a significant barrier for banks and financial institutions to place their investible funds. Even the strong creditworthiness that esteemed multinational companies bring to these initiatives is frequently insufficient to overcome the concerns of high corruption and political instability that are common in many nations.

However, the IMEC declaration can hinge upon the G7's June 2023 commitment to mobilise US$600 billion in funding from private and public sources over five years.[47] This initiative seeks to finance infrastructure development in emerging economies, serving as a strategic counter to the BRI. According to statements made by US President Joe Biden, this move exemplifies the practical advantages of establishing partnerships with democratic entities.[48] Furthermore, the ambitions of the IMEC to enhance the logistics of hydrogen energy are congruent with the strategic priorities of both the US and the EU, focusing on transitioning Europe's energy reliance away from Russian fossil energy sources. Hence, the EU and the US will have substantial interest in financing the capital expenditure associated with the corridor.

From a European lens, the IMEC shines with layered significance. It is not just talk, but Europe's chance to walk the walk, turning those grand visions and proclamations into tangible reality. This corridor could weave into the EU’s Global Gateway initiative, acting as a powerful ally in hitting its targets of fostering sustainable growth, boosting infrastructure investment, and tightening diplomatic bonds with countries along its path. Moreover, the EU has a hefty treasure chest—around US$300 billion earmarked for the Global Gateway[49]—ready to bankroll the bricks and mortar needed for IMEC-inspired projects.

At the same time, investments must also pour in from Saudi Arabia and the UAE. Saudi Arabia has already committed US$20 billion for the corridor. However, what becomes crucial in this context is to introduce innovative financing instruments as the capex for IMEC may have high gestation periods, and returns might take time to flow. This brings in the roles of Islamic financial products from the Arab economies. This will encourage interest-free loans from the Arab economies, which will help the cause of capital expenditure, and offer their banking and the financial system the necessary stake in the project with a share of the profits.

For both the UAE and Saudi Arabia, India is a major destination for investment due to its massive potential in terms of its demographic dividend, natural capital, green energy, and digital potential. In October 2023, the UAE declared its intention to invest US$75 billion in India over time, while Saudi Arabia put forth a US$100 billion investment objective.[50] The recent financial commitments came from the largest sovereign wealth fund in the UAE, the Abu Dhabi Investment Authority (ADIA), which has allocated about US$5 billion in funds for investments in India. The ADIA has received the green signal for its operation through the tax-neutral GIFT City finance hub in India’s Gujarat.[51]

Table 2: FDI Equity Inflow from UAE and Saudi Arabia into India



Country
FDI Equity Inflow (in US$ million)
Percentage of total FDI Inflow


UAE
18008
2.70


Saudi Arabia
3224
0.48



Source: Department for Promotion of Industry and Internal Trade[52]

The tables in the Appendix list the major investors, both private and sovereign, from these two economies.
Conclusion
It is imperative to recognise the synergistic relationship between transport connectivity, which encompasses physical infrastructure and international regulations, and trade facilitation, which involves customs procedures and infrastructure at the border. Although the value of both aspects in augmenting trade is unquestionable, the link between transport and trade facilitation is not always clear in policy dialogues. The IMEC is the template of this synergy.

The IMEC presents significant opportunities and substantial challenges. It can potentially boost commerce between India and Europe and transform the trade dynamics between Asia and Europe, predominantly through the Suez Canal.

Despite its immense potential, the IMEC confronts challenges stemming from the need to maintain collaborative spirits across multiple states with varying ambitions. Unlike the BRI, which is singularly financed and overseen by China, the aspirations of the various IMEC economies with economic and social heterogeneities need to be reconciled for a single goal. Furthermore, the trade route must be designed to align with market conditions to ensure its long-term viability. At the same time, events such as the 7 October attacks in Israel could slow down the ambitious plan.

For India, the IMEC counters the criticism it faced regarding its protectionist policies after its exit from the RCEP. It will enable India and other participating states to exploit complementarities, allow Indian MSMEs to be integrated with the GVC, enhance the consumer and producer surpluses (or benefits), boost the competitiveness of Indian corporations, and promote overall economic well-being. As such, the IMEC sets a new template for global connectivity and trade facilitation, but only time will tell how it unfolds.
Appendix: Major Investments from Saudi Arabia and the UAE in India
Table 1: Major Investors from Saudi Arabia in India



Investor
Project Outlook


Saudi Aramco
Saudi Aramco and Abu Dhabi National Oil Company (ADNOC) have partnered with Indian public oil giants, Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL), to form a joint venture, acquiring a 50% share in Ratnagiri Refinery and Petrochemicals (RRPCL). Additionally, Aramco Asia India is discussing potential business growth with India's private refineries, like Reliance Industries.


SABIC
SABIC has invested over US$100 million in its Bengaluru technology and innovation centre, a major investment by a Saudi company in India. This move aims to boost research capabilities to address rising market needs in India and globally. SABIC currently operates in several Indian cities, including Bengaluru, Mumbai, Delhi-NCR, Chennai, Pune, and Vadodara.


Alfanar Energy
Alfanar Energy entered the Indian market in 2016, inaugurating a 50 MW wind project in Gujarat with Suzlon-supplied turbines. It also won a 300 MW bid in the Solar Corporation of India's (SECI) 2,000 MW wind auction in February 2018, aiming to develop this project in Bhuj, Gujarat. These projects represent a significant investment of nearly US$600 million by Alfanar. Additionally, the company is expanding its presence in India's solar sector, with projects started in 2018 steadily advancing.


Public Investment Fund (PIF)
Saudi Arabia's Public Investment Fund (PIF) has acquired a 2.04% stake in Reliance Retail, valued at US$1.3 billion, and a 2.32% stake in Reliance Jio, valued at US$1.5 billion, alongside additional investments in various other ventures.


Zamil Air Conditioners India Private Limited
Zamil Air Conditioners India Private Limited (ZAC India), a subsidiary of Saudi Arabia’s Zamil Industrial Investment Company, entered the Indian Air Conditioner Industry in 2013. Between March 2019 and December 2020, Zamil invested approximately US$15 million in the manufacture of air conditioners.


Saudi Aramco and ADNOC
Saudi Aramco, UAE-based ADNOC, and the state of Maharashtra are collaborating to establish a mega oil refinery worth US$44 billion.


Maaden
The Saudi Arabian Mining Company (Maaden) has signed two MoUs with Indian firms IPL Co and KRIBHCO, amounting to US$2 billion. These agreements involve the transfer of five million tonnes of phosphate fertilisers from Saudi Arabia to India.


Ministry of Investment, Saudi Arabia
The Ministry of Investment in Saudi Arabia has signed an agreement to produce specialised agricultural chemicals within the Kingdom with the Indian company UPL Limited. The value at stake is US$1 billion.



Source: Invest India[53]

Table 2: Major Investors from UAE in India



Investor
Project Outlook


DP World
DP World, a global supply chain solutions firm, has a portfolio of 78 operating marine and inland terminals supported by over 50 related businesses in 40 countries across six continents. In India, DP World operates terminals in Kochi, Mundra, and JNPT with investments in ICDs.


Sharaf Group
The UAE-based conglomerate is active in shipping and logistics, retail, travel and tourism, IT, industrial, hospitality and real estate, and financial services sectors. It has two subsidiaries operating in the shipping and logistics sector in India: Hind Terminals Private Limited and Samsara Shipping Private Limited


Lulu Group
It is one of the largest retail companies in the UAE. The company’s presence in India includes the Lulu International Convention Centre and Hotel in Thrissur, Kerala, and a Hypermarket in Kochi.


Emaar Properties
Emaar is one of the largest real estate developers in West Asia. In India, it has created a portfolio of properties in Gurugram, Delhi, Mohali, Lucknow, Jaipur, Indore, and Chennai. The company has developed over 11,500 residential and commercial units, with 8,500 units currently under development.



Source: Invest India[54]
Endnotes
[a] The targeted goods also included those with Israeli commercial inputs.

[1] S Ronendra Singh, “”This is a real big deal,” says Joe Biden, announcing India-Middle East-Europe economic corridor”, Business Line, September 9, 2023, https://www.thehindubusinessline.com/news/this-is-a-real-big-deal-says-joe-biden-announcing-india-middle-east-europe-economic-corridor/article67289032.ece

[2] “Red Sea shipping disruption hits 5-month mark: Adverse impact of trade will be visible in the new fiscal”, Global Trade Research Initiative, March 2024, pp. 3, https://gtri.co.in/gtriFlagshipReportsd.asp?ID=37

[3] Susan Stigant, “Houthi attacks in the Red Sea disupt global supply chains”, United States Institute of Peace, December 22, 2023, https://www.usip.org/publications/2023/12/houthi-attacks-red-sea-disrupt-global-supply-chains

[4] Kenji Asada and Kaori Yoshida, “Red Sea attacks threaten to cut global shipping capacity 20%”, Nikkei Asia, December 23, 2023, https://asia.nikkei.com/Spotlight/Supply-Chain/Red-Sea-attacks-threaten-to-cut-global-shipping-capacity-20#:~:text=NEW%20YORK%20%2D%2D%20The%20series,that%20could%20reignite%20inflationary%20pressures.

[5] Sushma Ramachandran, “India – EU FTA is a win-win for both economies”, Deccan Herald, December 14, 2023, https://www.deccanherald.com/opinion/india-eu-fta-is-a-win-win-for-both-economies-2810694

[6] Ibid.

[7] Michael Tanchum, “India’s Arab-Mediterranean Corridor: A Paradigm Shift in Strategic Connectivity to Europe”, National University of Singapore, South Asia Scan, August 2021, pp 4 https://www.isas.nus.edu.sg/papers/indias-arab-mediterranean-corridor-a-paradigm-shift-in-strategic-connectivity-to-europe/

[8] Maroof Raza, “IMEC vs BRI: What’s the future?”, The Financial Express, October 1, 2023, https://www.financialexpress.com/business/defence-the-imec-versus-the-bri-whats-the-future-3259961/

[9] Adam Tooze, “Hydrogen is the future – or a complete mirage”, Foreign Policy, July 14, 2023, https://foreignpolicy.com/2023/07/14/hydrogen-is-the-future-or-a-complete-mirage/

[10] Tom Evans, “Etihad Rail: What’s next for mega project after first passenger journey?”, The National, January 26, 2024, https://www.thenationalnews.com/uae/transport/2024/01/26/etihad-rail-map-route-explained/

[11] “Looming risks may derail Gulf Railways project”, Economist Intelligence Unit, September 21, 2023, https://www.eiu.com/n/looming-risks-may-derail-gulf-railway-project/

[12] WikiMaps - https://en.wikipedia.org/wiki/List_of_railway_stations_in_Saudi_Arabia#/media/File:Rail_transport_map_of_Saudi_Arabia.png

[13] Syed Sadain Gardazi, “Oman and Etihad Rail signs $3 billion agreement for UAE – Oman network”, Forbes, February 21, 2023, https://www.forbesmiddleeast.com/industry/transport/oman-and-etihad-rail-signs-%243b-agreement-with-mubadala-for-uae-oman-network

[14] David Ottaway, “Saudi Arabia and the United Arab Emirates turn rival allies”, Wilson Centre, July 20, 2021, https://www.wilsoncenter.org/article/saudi-arabia-and-united-arab-emirates-turn-rival-allies

[15] “Saudi customs tariff rules target UAE free zones”, Economist Intelligence Unit, July 7, 2021, https://www.eiu.com/n/saudi-customs-tariff-rules-target-uae-free-zones/

[16] Wayne Nielsen, “Submarine Cable Almanac,” November 2023, https://subtelforum.com/almanac/.

[17] Joe Brock, “U.S. and China Wage War beneath the Waves – over Internet Cables,” Reuters, March 24, 2023, https://www.reuters.com/investigates/special-report/us-china-tech-cables/.

[18] “About Us,” PEACE Cable International Network CO, http://www.peacecable.net.

[19] “Memorandum of Understanding on the Principles of an India - Middle East - Europe Economic Corridor,” Ministry of External Affairs Government of India, September 9, 2023, https://www.mea.gov.in/Images/CPV/Project-Gateway-Multilateral-MOU.pdf.

[20] Joe Brock, “U.S. and China wage war beneath the waves – over internet cables,” Reuters, March 24, 2023, https://www.reuters.com/investigates/special-report/us-china-tech-cables/.

[21] ET Bureau, “India's 5G rollout cost to be highest among 15 emerging nations: study”, The Economic Times, November 26, 2022, https://economictimes.indiatimes.com/industry/telecom/telecom-news/indias-5g-rollout-cost-to-be-highest-among-15-emerging-nations-study/articleshow/95773987.cms.

[22] Bevin Fletcher, “Huawei still dominates telecom equipment market”, Fierce Wireless, December 16, 2021, https://www.fiercewireless.com/wireless/huawei-still-dominates-telecom-equipment-market.

[23] Anna Gross and Madhumita Murgia, “China and Huawei propose reinvention of the internet,” The Financial Times, March 28, 2020, https://www.ft.com/content/c78be2cf-a1a1-40b1-8ab7-904d7095e0f2.

[24] Wesley Cole, A. Will Frazier, and Chad Augustine, “Cost Projections for Utility-Scale

Battery Storage: 2021 Update,” National Renewable Energy Laboratory, June 2021, https://www.nrel.gov/docs/fy21osti/79236.pdf

[25] Neha Khanna, Dhruba Purkayastha, and Shreyans Jain, “Landscape of Green Finance in India 2022,” Climate Policy Initiative, August 2022, https://www.climatepolicyinitiative.org/publication/landscape-of-green-finance-in-india-2022/

[26] Shipla Samant, “India, UAE hold talks to link grids through sub-sea cables”, The Economic Times, June 16, 2023, https://economictimes.indiatimes.com/news/india/india-uae-hold-talks-to-link-grids-through-subsea-cables/articleshow/101027556.cms?from=mdr

[27] "Electricity and Carbon Tracker”, Centre for Social and Economic Progress, January 2023, https://carbontracker.in/

[28] “Global Photovoltaic Power Potential by Country”, Centre for Social and Economic Progress, 2023, https://globalsolaratlas.info/global-pv-potential-study

[29] Soroush Basirat, “Hydrogen unleashed: Opportunities and challenges in the evolving H2-DRI-EAF pathway beyond 2024,” Institute for Energy Economics and Financial Analysis, February 2024, https://ieefa.org/resources/hydrogen-unleashed-opportunities-and-challenges-evolving-h2-dri-eaf-pathway-beyond2024#:~:text=The%20hydrogen%20development%20sector%20is%20also%20grappling%20with,to%20decline%20to%20USD2.5%2Fkg%20to%20USD4.0%2Fkg%20towards%202030.

[30] Mohammad Shahnawaz, “Strategic crossroads: Exploring the geopolitical dimensions of the India-Middle East-Europe Economic Corridor, The Financial Express, September 14, 2023, https://www.financialexpress.com/business/defence-strategic-crossroads-exploring-the-geopolitical-dimensions-of-the-india-middle-east-europe-economic-corridor-3243568/

[31] Anshu Siripurapu and Noah Berman, “The contentious US – China trade relationship”, Council on Foreign Relations, September 2023, https://www.cfr.org/backgrounder/contentious-us-china-trade-relationship

[32] Stela Rubinova and Mehdi Sebti, “The WTO trade cost index and and its determinants”, World Trade Organisation, January 2021, https://www.wto.org/english/res_e/reser_e/ersd202106_e.htm#:~:text=We%20show%20that%20transport%20and,accounting%20for%20at%20least%2014%25

[33] Anthea Mulakala, “India’s Approach to Development Cooperation”, The Palgrave Handbook of Development Cooperation for Achieving the 2030 Agenda, 2019, Palgrave Macmillan, pp. 10

[34] Soumya Bhowmick, “Forgotten promises: The China-Pakistan Economic Corridor”, Observer Research Foundation, June 15, 2023, https://www.orfme.org/dev/expert-speak/forgotten-promises-the-china-pakistan-economic-corridor

[35] Samir Saran and Gautam Chikermane, “Globalisation gone rogue: Is IMEEC the way forward?”, Observer Research Foundation, September 11, 2023, https://www.eurasiareview.com/11092023-globalization-gone-rogue-is-imeec-the-way-forward-oped/

[36] “Integrated approaches to trade and transport facilities: Measuring readiness for sustainable, inclusive, and resilient trade”, Asian Development Bank, December 2022, https://www.adb.org/sites/default/files/publication/850146/integrated-approach-trade-transport-facilitation.pdf?utm_source=blog-hyperlink&utm_medium=referral&utm_campaign=blog-rci&utm_id=blog-trade-resilience

[37] Ram Singh, “A Corridor of Immense Promise”, BusinessLine, September 11, 2023, www.thehindubusinessline.com/opinion/a-corridor-of-immense-promise/article67296263.ece.

[38] Bhaskar Chakravorti and Gaurav Dalmia, “Is India the world’s next great economic power?”, Harvard Business Review, September 6, 2023, https://hbr.org/2023/09/is-india-the-worlds-next-great-economic-power

[39] “India and EFTA sign trade and economic partnership agreement”, EFTA, March 10, 2024, https://www.efta.int/Free-Trade/news/EFTA-and-India-sign-Trade-and-Economic-Partnership-Agreement-540631

[40] Koushan Das, “Integrating with global value chains: Sector opportunities and challenges in India”, India Briefing, February 6, 2023, https://www.india-briefing.com/news/how-india-can-integrate-with-global-value-chains-sector-opportunities-foreign-investment-27130.html/

[41] Das, “Integrating with global value chains”

[42] Das, “Integrating with global value chains”

[43] Nilanjan Ghosh. “Regional Comprehensive Economic Partnership: Issues and Concerns for India”, in Raychaudhury, A., P De, and S Gupta (eds.) World Trade and India: Multilateralism, Progress and Policy Response. New Delhi: Sage Publishers. 2020, pp. 81-102, https://www.researchgate.net/publication/344951357_Regional_Comprehensive_Economic_Partnership_Issues_and_Concerns_for_India

[44] Saon Ray and Smita Miglani, “India’s GVC integration: An analysis of upgrading efforts and facilitation of lead firms”, ICRIER, February 2020, https://icrier.org/pdf/Working_Paper_386.pdf

[45] “Hope India – GCC Free Trade Agreement becomes a reality very soon: Official”, Press Trust of India, July 12, 2023, https://www.ndtvprofit.com/economy-finance/hope-india-gcc-free-trade-agreement-becomes-a-reality-very-soon-official#:~:text=The%20Arab%20region%20is%20the,(Rs%2015.14%20lakh%20crore).

[46] Saba Ismail and Shahid Ahmed. "Economic Effects of Tariff Liberalization of Prospective India-GCC FTA: A Computable General Equilibrium Analysis," Foreign Trade Review, vol. 54(3),  August.2019, pp. 224-252, https://journals.sagepub.com/doi/10.1177/0015732519854934

[47] Squire Patton Boggs, “The India-Middle East-Europe Economic Corridor (IMEC): What We Know and What Comes Next,” Lexology, September 21, 2023, https://www.lexology.com/library/detail.aspx?g=7d3eb6d2-94fa-4f4d-be2a-37b01ea03cb4#:~:text=The%20IMEC%20announcement%20builds%20on,partnering%20with%20democracies.%E2%80%9D%20IMEC's%20objective

[48] Jean-Loup Samaan, “The India-Middle East Corridor: a Biden Road Initiative?,” The Atlantic Council,  October 6, 2023, https://www.atlanticcouncil.org/blogs/the-india-middle-east-corridor-a-biden-road-initiative/

[49] Chloe Teevan and San Bilal, “The Global Gateway at Two: Implementing EU strategic ambitions,” ECDPM Briefing Note No. 173, November 2023, https://ecdpm.org/application/files/3317/0106/6016/Global-Gateway-At-Two-Implementing-EU-Strategic-Ambitions-ECDPM-Briefing-Note-173-2023.pdf

[50] Archana Rao, “Outlook for Sovereign Wealth Fund Investments in India,” India Briefing, March 4, 2024. https://www.india-briefing.com/news/sovereign-wealth-fund-investments-india-outlook-2024-31398.html/

[51] “UAE wealth fund plans $4-5 billion in investments via India's new finance hub: Sources,” The Economic Times, February 7, 2024, https://economictimes.indiatimes.com/industry/banking/finance/uae-wealth-fund-plans-4-5-billion-in-investments-via-indias-new-finance-hub-sources/articleshow/107487482.cms?from=mdr.

[52] Department for Promotion of Industry and Internal Trade, Government of India, “Quarterly Fact Sheet: Fact Sheet on Foreign Direct Investment (FDI) Inflow From April, 2000 To December, 2023,” https://dpiit.gov.in/sites/default/files/Fact%20Sheet%20December%202023_1.pdf

[53] “Saudi Arabia”, Invest India, https://www.investindia.gov.in/country/saudi-arabia

[54] “United Arab Emirates”, Invest India, https://www.investindia.gov.in/country/united-arab-emirates

### The Dragon in the Sands: Unpacking China’s Presence in Contemporary West Asia

Introduction
China is slowly extending its reach as a regional power. While some analysts are of the view that Beijing’s strategic interests are largely constrained to its claims on waters around the South China Sea, Chinese diplomacy is posturing itself as an ‘alternative power’ of a larger scale. Today, Beijing is open and willing to take advantage of political vacuums left behind by the West, or created by those who would want to manage pressures and challenges imposed by the West.

West Asia (or the Middle East) is emerging as a premier playground for these new geopolitical fissures as Arab states look to renegotiate their historical relations with the United States, Iran’s relations with Washington continue to be in spiral around an under-appreciated issue of nuclear deterrence, and a push is in play to normalise relations between Israel and Saudi Arabia. The recent terror strike against Israel conducted by Hamas, killing over one thousand, and the following Israeli retaliation in Gaza, have highlighted divergences between the US and China in their approaches. While the US has put its entire weight behind Israel, Beijing is attempting to walk a middle, vague path, calling for restraint and highlighting that they are a friend to both sides.

Beyond these regional trends, the global order is also under duress. The US today is increasingly discussed, in the words of former US Secretary of Defense Robert M Gates, as a “dysfunctional superpower”.[1] The frameworks of multipolarity, multilateralism and minilateralism are being re-shaped and re-constructed amid issues of climate change, food security, and global health. In all of these, Beijing’s role is not insular nor is it avoidable as it continues to be an economic and military power, the world’s biggest factory and consumer, and more than often the refiner of natural resources. Yet, the narrative of the supposed ‘end’ of US hegemony is also being overstated. Both China and the US are moving forward, and closer, to potential confrontation as they wrangle for ‘superpower’ status in an order where they cannot co-exist. Regional and middle powers, and even small states, are thus scrambling to protect their interests and security.

Keeping these fast-moving trends at the centrestage, this Special Report looks into the evolution of China’s developing influence in West Asia. In the opening chapter, I delve into a scene-setting, broader debate on great-power competition in the region and how regional faultlines will be navigated by both West Asian states and China alike; I ponder why this shift in power has the endorsement of some of America’s oldest partners.

In the second chapter, Cinzia Bianco examines the developing bonhomie between China and the regional heavyweight, Saudi Arabia, how energy security binds the two, and how Washington may start looking at Riyadh and the region as a ‘Western flank’ of its Indo-Pacific strategy and Asia pivot. The third chapter by Mandana Tishehyar looks at the centrality of Iran, whose bilateral relations with the US remain on tenterhooks. The chapter investigates the ideation of Beijing’s position from an ‘Asian’ lens of India and China, where New Delhi is also expected to be a key stakeholder of the region as Tehran looks towards these new poles of power for its future alignments.

Taking on from these two central powers of the Islamic world, the fourth essay is on Israel—one of America’s most trusted and critical partners in the region. Gedaliah Afterman and Dominika Urhová offer a glimpse on how even Israel, which has deep security ties with the US, is looking to gain the most out of both Washington and Beijing. And the fact that China offered its helping hand in mediating between Israel and Palestine can potentially become a more serious proposition than many would expect.

In the penultimate chapter, Jonathan Fulton underlines how the United Arab Emirates has the most advanced and evolved relationship with China, and in that context how Abu Dhabi and others in the region must navigate the incoming duopoly of a US–China competition. And finally, in the last chapter, Mohammed Soliman tackles the subject of technology—one of the most critical sectors of China’s outreach to West Asia—and the probabilities of Chinese tech in the sphere of 5G, for instance, co-existing with that of the US in areas such as defence and military.

The aim of this report is to showcase a blueprint that can be gleaned from how countries in West Asia are navigating the reality of US-China competition.

~ Kabir Taneja
I. Great-Power Competition and the Centrality of the West Asian Theatre
Kabir Taneja

Given its severity and effects on global politics and economics alike, the COVID-19 pandemic is seen as a harbinger of a new ‘equilibrium’, translated as the balance of power, spinning off from Henry Kissinger’s definition of geopolitics.[2] While the post-Second World War order was arguably already adrift, the pandemic and the events that immediately succeeded it—Russia’s aggression against Ukraine and worsening US-China competition—changed the thinking of other aspirational states.

Scholar Ashley Tellis has outlined these new challenges from the multipolarity point of view, a design of geopolitics that looks to spread power across multiple ‘poles’, offering equity and, by association, ending the concept of hegemonic superpowers. Tellis notes that this view is fundamentally against the interests of the US.[3] Nonetheless, many smaller regional and middle powers, including some of the US’s closest allies in West Asia, endorse such a shift.

Today, West Asia is perhaps the one region where the hedging of risk and interest between the power and interests of the US and China is most visible. Saudi Arabia and the UAE have been close partners of the US for decades and became even more militarily intertwined with Washington after the September 2001 terrorist attacks. From oil and economics to the familial politics of the Arab monarchies, the US had access and sway across the spectrum in the region, to the benefit of some and scorn of others.

In 2023, great-power competition is very much at play in West Asia. The Crown Prince of Saudi Arabia and heir apparent Mohammed bin Salman looks towards China as both a source and destination of investments. Smaller Arab nations such as Bahrain and Kuwait are also looking into Chinese investments as being economically viable and geopolitically safer, as most offers come with less strings attached, if at all, other than the expectations of good returns. That the political hierarchies of a communist China and largely monarchic Gulf work with a common principle of concentration of power at the top adds to Beijing’s attractiveness as a stakeholder. This is best indicated by the growing defence cooperation between China and the Gulf states. Over the past two months, there have been reports of the UAE conducting its first air exercises with China in the Xinjiang region, where Beijing is accused of mistreatment of ethnic Uyghur Muslims of the region.[4] Riyadh is setting up first-of-its-kind Saudi-China naval drills off the Chinese coast in Zhanjiang, near the South China Sea, where the US-China conflict is anchoring itself in the Indo-Pacific over Beijing’s territorial claims and Taiwan’s security.[5]

Additionally, the UAE purchased the Chinese Wing Loong II armed drones, which are knockoffs of the US’s MQ-9 ‘Reaper’ used in counterterror activities in Afghanistan and Iraq. Abu Dhabi opted for the Chinese version after the US imposed conditions and operational restrictions on selling the MQ-9s, which China did not. This free access to tech has reportedly allowed Abu Dhabi, for example, to deploy the drones to states such as Ethiopia to be used in favour of the government as the conflict in its Tigray region raged.[6]

Beyond the rise of a valid option to attain certain defence equipment and technologies, Beijing has also been able to market itself as a peace broker. The détente achieved between Saudi Arabia and Iran in April 2023 was announced in China. This was as much of a strategic move for China’s prowess as it was both Tehran and Riyadh pulling Beijing into the region for their individual and regional aims. Iran, now firmly seen in the China-Russia bloc, had already developed deep ties with Beijing, signing a 25-year strategic bilateral deal in 2021, worth an estimated US$400 billion.[7]

The action of Gulf states is not too difficult to unpack. There is, arguably, a generational change in strategic thinking underway. The rise of China presents an opportunity to spread risk in a way that Russia, or even the erstwhile Soviet Union, did not beyond a point. The direct challenge to US supremacy by a rising China, which translated into a hegemonic approach to global architectures in security, trade, and other institutions of ‘globalisation’ (such as those part of the Bretton Woods system of monetary management), is birthing a new breed of breakout states that are finding space by playing China against the US and vice versa to achieve their aims by developing a level of strategic autonomy. This can also be seen via Beijing’s clout within the construct of the Global South, as witnessed in the expansion of the BRICS grouping into BRICS-Plus where, despite New Delhi and Moscow’s presence, it is Beijing that pulls much of the weight.[8]

The examples emitting out of West Asia today of the roles being played by the US, China, and the Gulf powers is a laboratory of sorts, where the concepts of multilateralism, multipolarity, and minilateralism are being tested. While some analysts proclaim that Saudi Arabia and the UAE will become powers in the upcoming multipolar world order, there are big questions that will first need to be answered.[9] For instance, as of 2023, the GDP gap between the world’s second and third largest economies (China and Japan, respectively) is nearly US$14 trillion. By the logic of numbers, the immediate future of geopolitics is rooted in bipolarity, with the US and China leading with significant margins. While the likes of India are expected to close these gaps at a healthy pace over the next decade, till then, how would narratives of multipolarity survive under the reality of a US-China competition as Pax Americana attempts to protect its hegemony against its challenge in Pax Sinica?[10]

West Asia will be the place to watch for answers to such pivotal questions. 
II. Saudi Arabia-China Relations: More than Mere Tactics
Cinzia Bianco

Relations between Saudi Arabia and China have been growing for years now, especially since the two parties entered into a Comprehensive Strategic Partnership in 2016.[11] Starting as purely economic in nature, their ties have since expanded into more strategic domains, including security and defence, and are grounded in compatible visions of multi-polarity.[12] Despite Beijing increasingly buying underpriced Iranian and Russian oil after 2022, energy relations are still at the core of China-Saudi relations. Since 2019, China has been the single largest buyer of Saudi crude oil, as Riyadh sends on average over one-quarter of its oil to China.[13] And in the past two years, cooperation has gone beyond the energy domain.

The Gulf monarchies’ eagerness to diversify their partnerships, increasing those with Asian countries and specifically China, has been a crucial consequence of the progressive retreat of the United States from its role as security guarantor in the region. Saudi Arabia, for instance, has experienced a souring of relations with the US as those with China have thrived. Indeed, it is not a coincidence that Saudi-China relations have grown stronger under the administration of US President Joe Biden, whose relationship with the Saudi leadership has been particularly weak.

The March 2021 visit by Chinese Foreign Minister Wang Yi to Riyadh was a turning point. Saudi policymakers were particularly pleased that the Kingdom was the first stop in Yi’s regional tour and that he met with Crown Prince Mohammad bin Salman at a time when he was still being shunned by US and European leaders for his alleged role in the murder of a US-based Saudi journalist. The two sides discussed China’s role in supporting Saudi Arabia’s Vision 2030, especially in infrastructure development and joint investments in the manufacturing industry. A few months later, China’s Cosco Shipping Ports acquired a 20-percent stake in Saudi Arabia’s Red Sea Gateway Terminal—the largest terminal at its largest port in Jeddah.[14] Despite a substantial slowing down of funds through China’s Belt and Road Initiative (BRI) after the COVID-19 pandemic, Saudi Arabia was the single largest recipient of BRI funds in 2022, getting around US$5.5 billion.[15]

More sensitive areas have also been explored, such as cooperation in nuclear energy, 5G telecommunications and digital technologies. These led to Huawei becoming the dominant 5G operator in the Gulf and opening a new data centre for cloud computing in Riyadh in 2023 despite explicit US opposition.

On the diplomatic front, Beijing successfully persuaded Riyadh not to join the anti-China camp, especially on the issues of Taiwan and Xinjiang. It won Riyadh over with its anti-hegemonic narratives, which are also at the base of Saudi Arabia’s engagement with the Global South and its interest in joining BRICS in January 2024. This stronger diplomatic connection was exemplified by Riyadh’s offer for Beijing to host the March 2023 signing of the Saudi-Iran agreement to reopen diplomatic relations after a decade of intensified regional geopolitical rivalry, in exchange for a vague commitment to leverage Chinese-Iranian economic relations should Tehran break the deal.

The 2021 visit also marked the acceleration of Saudi-Chinese cooperation in defence, especially on Saudi Arabia acquiring hardware that the US has long refused to sell to it. Between 2016 and 2020, China had already increased its arms transfers to Saudi Arabia by 386 percent compared to 2011-2015.[16] In 2021, Saudi Arabia acquired the Dong Feng-series missiles—part of a 2018 deal that also included Wing Loong II drones—and media speculation claimed that Beijing might be working towards building a manufacturing site for ballistic missiles on Saudi soil.[17]

In January 2022, Chinese Minister of National Defence Wei Fenghe held video talks with Saudi Arabia's Deputy Defence Minister Khalid bin Salman, officially agreeing that the two militaries should improve practical cooperation and further enhance bilateral relations. Two months later, Saudi Arabia’s Advanced Communications and Electronics Systems Company (ACES) signed a strategic agreement with the state-owned China Electronics Technology Group Corporation (CETC) to set up a research and development centre and provide manufacturing support for unmanned aerial vehicle (UAV) payload systems, including communications units, flight control units, camera systems, radar systems and wireless detection systems. As cooperation headed towards the electronic warfare domain, the US grew increasingly concerned that Saudi Arabia, which deploys NATO architecture, would try to make NATO hardware interoperable with Chinese systems, potentially creating a backdoor for the latter into US-made defence hardware. China and Saudi Arabia conducted a joint naval military drill in October 2023, called “Blue Sword 2023,” in Zhanjiang city of South China's Guangdong province.[18] In 2019, their two navies held a drill at the King Faisal Naval Base in Jeddah.

All of these strands of cooperation were cemented with the December 2022 summit, when leaders of the Gulf states received Chinese President Xi Jinping with full honours. As part of the visit, a bilateral Saudi-Chinese summit produced 34 agreements, with ideas for joint projects of strategic value in science, technology, energy, people-to-people engagements, investment, trade, and finance. As a follow-up, recognising the deficit in Chinese soft power, Saudi Arabia has started teaching Mandarin as a compulsory course in its high schools.[19]

A crucial theme that emerged at the December 2022 summit was the shared Saudi-Chinese dislike of Western sanctions. Indeed, all Gulf monarchies are particularly concerned that the West may impose sanctions on China—as it did on Russia—because of the growing tensions in the Taiwan Strait. Given their dependence on China as a fossil fuels market, such a scenario would deal a blow to the monarchies’ economies. These concerns pushed Riyadh and Beijing to discuss reducing exposure to the US Dollar by trading energy in other currencies.[20]

It would be imprudent, however, to judge Saudi-Chinese relations as being simply based on tactical opportunism. Rather, Saudi Arabia appreciates that China is offering it a future-oriented vision for the wider Middle East-North Africa (MENA) region that views Saudi Arabia as a pillar and the leader of the wider Arab and Islamic world. Indeed, China’s global neo-mercantilist approach rests on Beijing’s ability to deploy geopolitics of connectivity linking up to growing markets in Africa and Europe, transiting through the Arabian Peninsula. Such a project would guarantee decades of strategic engagement greater than those the US has in the region.

This does not necessarily mean that Riyadh is willing to sacrifice its relations with the US for China. Saudi and other regional leaders have shown that they are also wary of Beijing, following past experiences such as the predatory clauses inserted in the repayment contracts of Chinese investments in Oman, Beijing’s tendency to take its own companies and personnel to work on projects instead of creating jobs locally, and even its tendency to under-deliver.[21] The economic slowdown in China has also played a significant role in lowering its attractiveness. The US is still the country with the most significant security posture in the Gulf, and it is possible that this heft may even be strengthened, especially under a potential Republican administration following Biden’s.

Riyadh may also become aware that there could be a price to pay—at least in terms of missed opportunities—for excessively close relations with China. For example, contacts with sanctioned Chinese defence firms recently led to the collapse of a mega-deal between Saudi firm SCOPA Defence and a US counterpart RTX, which would have provided Saudi Arabia with the technological know-how to build sophisticated air defence systems.[22] In August 2023, the US also expanded restriction of exports of sophisticated Nvidia and Advanced Micro Devices artificial intelligence chips beyond China to other regions, including undisclosed countries in West Asia.[23] A fully open trade regime with China could place Saudi Arabia on an export control list.

Moreover, if the US-China relationship worsens, it could reduce the space for Saudi Arabia to hedge between them. Washington may start looking at the Gulf as the Western flank of the Indo-Pacific, an approach that could lead to weaponising some aspects of the Gulf-China interdependence, such as the Saudi-China oil relations. The Gulf could get fully caught into the US-China rivalry, which would have an impact on Saudi stability. Indeed, a key moment of reckoning in Riyadh will be when its extreme hedging ceases to be about simply maximising gains and start being about minimising risks.
III. The New Asian Giants and Iran
Mandana Tishehyar

Despite ups and downs in their relationship, China and India have had similar strategies since becoming independent after the Second World War. The nascent governments in the two countries, drawing on their colonial experiences, avoided the capitalist economic model: China adhered to Maoist communism; India opted for Nehruvian socialism. The remnants of economic colonialism were slowly eradicated in both countries, and since the 1980s, left-wing approaches gradually gave way to capitalist economic policies. Both Asian countries have been witnessing relatively rapid economic growth since the 1990s.[24] Today, however, Western governments view the two countries in vastly different ways—India has become a friend or ally of the West, while China has been labelled a rival or enemy.

The West’s approach to the two countries is based on the differences in their political (and not economic) structures. China has traditionally had a centralised and authoritarian political system, whereas India has historically been inclined towards a decentralised one, with power dispersed among its various institutions.[25] In recent decades, however, India and China have followed similar approaches in various areas. Both have constructed their material development on an export-oriented economic model and prioritised their secure access to global consumption markets. Energy security is also a priority for both countries, as they need to import energy. As the most populous countries in the world, both benefit from cheap unskilled workforce and skilled experts, particularly in the modern sciences. They are quietly competing with each other in different parts of the world, including the Persian Gulf, Africa, Central Asia, East Asia, Europe, and Latin America. Additionally, both actively participate in various regional and international institutions and organisations, such as the Non-Aligned Movement, the Group of 77, the Shanghai Cooperation Organisation (SCO), and the BRICS (Brazil, Russia, India, China, and South Africa). Both countries seek a change in the structure of the international system, moving away from a unipolar or uni-multipolar framework towards one that is multipolar and without the hegemonic domination of a superpower.[26] Finally, in recent years, both countries have resisted pressure from the US and its European allies to impose economic sanctions on Russia because of the Ukraine war.

Despite their resistance to Western sanctions against Russia, the two emerging powers have recognised the West's imposition of sanctions on Iran and have generally taken similar approaches to it in recent decades. From the time of their independence in the 1940s until the end of the monarchy in Iran in the late 1970s, during the Cold War, China and India saw Iran as part of the Western bloc and aligned themselves with the East. Since the 1970s and the beginning of the era of detente, they gradually began to establish closer ties with Iran. Although initially, neither country embraced the Islamic Revolution in Iran, they both started to increase their cooperation with Iran about a decade later.

Iran's partnerships with the two Asian giants at the beginning of the 21st century showed promise. Moreover, given Iran’s ‘Look to the East’ policy,[1] it was expected to expand its ties with India and China. However, Iran's economic, political, cultural, and scientific partnerships with the two countries have declined over the past two decades. While the two great powers have established distinct international identities and have taken different approaches towards Iran in various situations, both have approached Iran in a similar manner in the economic sphere. Since the US’s withdrawal from the Iran Nuclear Deal in 2018, China and India have reduced their cooperation with Iran in the energy sector and refrained from making long-term investments in various fields. They have also not considered Iran as a significant market for exporting their goods and have refused to pay their debts for the oil purchased from Iran under the pretext of US sanctions.[27]

Despite the US’s decision to exclude the Chabahar Port from sanctions and the lack of transport-related sanctions against Iran, India has not paid serious attention to the North-South transport corridor[2] and the development of Chabahar Port.[28] Additionally, China has not made significant investments to implement the East-West transport project within the Belt and Road Initiative framework inside Iran. This is even though both countries have repeatedly emphasised their interest in cooperating and participating in various economic projects in Iran during diplomatic talks.

To be sure, this is not the first time that Iran has been put aside from the great-power game. During the Great Game in the 19th and 20th centuries, Russia and Britain colonised nearly all the territories neighbouring Iran. However, due to its strategic position and geopolitical features, which connected various economic zones and cultural complexes, Iran was considered a buffer zone according to an agreement between the two powers. Although Iran managed to maintain its political independence and territorial sovereignty, it was unable to attract the economic presence, capital investment, and infrastructure development of powerful governments. It was only after the structural transformation of the international system and the balance of power in the post-First World War era that Iran began making gradual changes in its relations with other countries.

At present, it appears unlikely that Iran will resolve its strained relations with the Asian powers through bilateral cooperation. It would seem that Iran’s strategic isolation can be overcome, and its relations with regional, continental, and global powers will improve only if there is a significant shift in the balance of power. This could involve the establishment of a multipolar system or the emergence of a post-polar world where regions, rather than national units, play a prominent role. In such a scenario, Iran will be better positioned to serve as a hub for energy production, facilitate trade and transport in the east, west, north, and south of Asia, and attract foreign investments. Additionally, Iran will have the opportunity to engage in broader cultural, social, and political interactions with the rest of the world. The new approaches of China, India, and other great powers within the framework of the SCO and BRICS, and the acceptance of new members, including Iran, show the slow alteration of trends at the international level and the change of approaches towards cooperation with Iran and the improvement of its position in the new world order.

Now is the time to remember the famous Persian poet Hafez Shirazi, who said “a brand-new world must be built, and a brand-new human.”
IV. The Israel-China-U.S. Triangle and the Changing West Asian Equation
Gedaliah Afterman and Dominika Urhová

As tensions between the United States (US) and China continue to intensify, West Asia is emerging as a new theatre of competition. The US is increasing pressure on China, and Beijing is responding by reaching out to West Asian nations. Israel, which has good relations with both the US and China, is increasingly being forced to choose sides.

Other West Asian countries too, are reshaping their strategies to navigate the new superpower dynamics. Although the US remains their main security guarantor for now, these states are getting drawn to China's growing economic might. Indeed, China is the largest trading and investment partner for most West Asian countries.[29] The growing engagement is especially visible in the case of the United Arab Emirates (UAE) and Saudi Arabia. Israel too, has attracted significant attention from China. Beijing’s eyes are set on Israel’s innovation and high-tech capabilities, as well as the quality of its national infrastructure.

A push towards realignment and de-escalation in West Asia, including the Beijing-facilitated Saudi Arabia–Iran rapprochement in March 2023, along with its more recent efforts to normalise ties between Israel and Saudi Arabia, as well as the announcement of the India-Middle East-European Union Economic Corridor—which could be a potential rival to China’s Belt and Road Initiative—are ushering a new phase of superpower dynamics in the region.[30],[31]

The Israel-China relationship has grown substantially in recent years, with China becoming one of Israel’s leading trading partners.[32] However, in comparison to other countries in the region, Israel’s special relationship with the US limits its ability to strengthen its ties with China beyond a point. Unlike other countries, the US-Israel strategic relationship means a significant level of Israeli dependence on US military assistance and weapons systems, Washington’s veto rights at the UN Security Council, and US financial guarantees. The two countries also share fundamental values and security concerns.

As such, Israel has been facing a new challenge in managing its relationships with the two rival superpowers. While on the one hand, it tries to leverage the opportunities from China’s growing economic and regional heft, it also seeks to safeguard its strategic ties with the US and avoid becoming a pawn between the two superpowers.
US-China Competition in West Asia
As China works to expand its influence on the international stage, West Asia is becoming a focus of its activity. It wants to capitalise on West Asia’s energy resources, geostrategic location, and growing focus on technology.

Leading regional players are recognising that the US is redirecting its attention away from West Asia and towards the Indo-Pacific, and they are exploring alternatives to reduce their dependence on Washington. While, for many in the region, energy resources remain the driving force behind their ties with Beijing, it is China’s shift from a focus on energy imports towards infrastructure, technology, and renewable energy that may prove to be a game-changer.

Aiming to translate its economic clout into diplomatic influence, Beijing has in recent months also been stepping up its mediation role.[33] While it will likely remain cautious, this move is seen as a significant divergence from its traditional attitude towards West Asia.

From Washington’s perspective, growing Chinese influence across the region is a challenge to some of its long-lasting trusted partnerships and, consequently, to its national interests. China’s deepening cooperation with key US allies, such as Saudi Arabia, the UAE, and Israel in particular, are causes of rising concern.
China-Israel Relations: From Bilateral to Regional
The Israel-China relationship has improved significantly. In the past two decades, Chinese companies have negotiated around 500 recorded investment deals with Israel, the majority related to Israel’s technology sector, including telecommunications, artificial intelligence, and cloud computing.[34] With US perceptions of China shifting, Washington has repeatedly pressured Israel to limit its cooperation with China to prevent espionage and intellectual property theft, and to protect Israel's (and the US’s) national interests.

As Israel’s innovation-focused relations with China have grown, with 2018 marking a peak of Chinese investment in Israel's hi-tech sector, so have US concerns and its pressures on Israel to limit its relationship. To some extent, Israel has been responsive—it established a foreign investments advisory committee in 2019, and turned down Chinese bids for potentially security-sensitive infrastructure projects.[35]

While Israel’s allegiance to the US is clear, it also feels that the US is attempting to, sometimes unreasonably, limit its economic opportunities with China.  It fears that US interest in the region might diminish, forcing it to engage more with a dominant China. Thus, the Israeli government will have to carefully balance its foreign policy if it wants to continue fostering good ties with China, while also keeping its alliance with the US intact.
A New Strategic Equation
Despite the geopolitical shifts and disagreements, the US remains Israel's staunchest ally. But if mismanaged, Israel Prime Minister Benjamin Netanyahu's planned China visit in October, amidst already existing tensions, may strain the relationship further.

Looking beyond the Israel-China bilateral relationship, some view the visit as a reaction to perceived slights from US President Joe Biden’s administration, while others believe it to be a strategic move to leverage the competition between Beijing and Washington to Israel’s advantage. Netanyahu is reported to have said that “China's entry into the region could be beneficial for Israel in terms of maintaining the American presence in the Middle East.”[36] From this perspective, Netanyahu’s trip may incentivise the US to maintain its role in the region and double-down on efforts to facilitate normalisation between Israel and Saudi Arabia.

Indeed, while the management of the Israel-China-US triangle remains important, in many ways it already represents the strategic past rather than the future. Amid the intensifying superpower competition and following the Abraham Accords of 2020 towards normalising Arab-Israeli relations, a new regional strategic equation is emerging in West Asia.
Middle Powers Realigning
Superpower competition, the ongoing war in Ukraine, concerns over long-term US regional commitment and China’s growing influence, as well as the impact of the Abraham Accords, are leading West Asian actors, including Israel, to rethink their strategic positions. China-US tensions have also prompted Washington to re-engage in the region on a larger scale using the opportunities created by the Abraham Accords. In 2021 it established I2U2, a minilateral grouping comprising the US, Israel, India, and the UAE. So far, the I2U2 framework has focused primarily on economic cooperation, refraining from adopting an overtly political stance.[37]

The UAE and Israel have also been actively exploring the creation of new minilaterals with their counterparts in Asia. Israel-Japan-UAE trilateral cooperation is being actively developed between the three countries’ governments, academia, and business sector. Last year, experts from Israel, the UAE, and South Korea attended a workshop in Abu Dhabi, discussing ways to strengthen cooperation and create synergies.

These new inter-regional partnerships can empower larger powers such as India and smaller ones such as Israel and the UAE and similar others, to create platforms for cooperation free of the member countries' strategic differences. For the US, it is an opportunity to leverage these opportunities to reshape its regional engagement and regain regional trust by becoming a catalysing factor in future cooperation frameworks. The India-Middle East-EU Economic Corridor announced by President Biden at the G20 meeting in New Delhi in September has also brought the economic and strategic potential of such cross-regional cooperation to a new high.

Whether these initiatives lead to any practical advances or not remains to be seen. A more active China can play this game, too. Beijing’s offer to mediate between Israel and the Palestinians was dismissed by many as unrealistic, but following the Saudi-Iran rapprochement, a Beijing-led move to bring together Israel and Saudi Arabia could be taken more seriously.[38]  So would proposals for regional connectivity projects under the BRI.

These developments, together with the forthcoming presidential elections in the US in 2024, make achieving Saudi-Israel normalisation an important goal for the US. Real progress in its ties is imperative not only in terms of Washington’s new strategy in the region, or even to score domestic points, but most importantly, to win an advantage in the superpower competition. With both powers ready to push their agendas forward, whichever can turn vision into reality will gain considerable clout in West Asia and beyond. 
V. China-UAE Relations in an Era of Strategic Competition
Jonathan Fulton

Events over the past year have drawn attention to China’s growing involvement in West Asian affairs. In December 2022, Saudi Arabia hosted Chinese President Xi Jinping and an accompanying delegation for a China-Saudi bilateral, and China-Arab League and China-Gulf Cooperation Council (GCC) meetings. Billions of dollars’ worth of memorandums of understanding and contracts were signed, and perceptions of Chinese influence in the Middle East – North Africa (MENA) region were greatly enhanced.[39] Two months later, Iranian President Ebrahim Raisi visited Beijing, Iran’s first state visit in 20 years.[40] This was followed a month later by the dramatic announcement in Beijing that Saudi Arabia and Iran had agreed to resume diplomatic relations, with China acting as a mediator.[41] Taken together, these events have signalled a new height for Chinese involvement in the region.

While greater attention has focused on China’s relations with Saudi Arabia and Iran—the two largest countries in the Gulf—the United Arab Emirates (UAE) is worth watching. Among countries in the MENA region, the UAE has the most developed and multifaceted relationship with China. The China-UAE bilateral meets a diverse and dynamic set of interests for both countries and comes with fewer political complications than Riyadh and Tehran. At the same time, the pressures coming from beyond the region in the form of great-power competition between China and the US is a complicating factor that must be considered, given the dense and long-standing political, security, and economic cooperation between Abu Dhabi and Washington.

The growth in the China-UAE bilateral has largely been driven by targeted coordination at the government level, a trend demonstrated by three consequential state visits. The first occurred in January 2012 when then Premier Wen Jiabao travelled to the UAE, where the two governments announced that they had signed a strategic partnership agreement.[42] This is an important designation in Chinese foreign policy, committing to cooperate more closely on regional and international affairs.[43] The UAE was the first Gulf state to establish this level of diplomatic relations with China, an indication that it serves a range of Chinese interests. The strategic partnership established consensus on 12 points, each of which were meant to develop deeper cooperation in diplomatic, economic, energy, security, and non-governmental ties.[44]

There were several reasons why the UAE was chosen for this designation before its larger neighbours. Foremost is that it boasts the region’s premier logistics hub in Jebel Ali Free Zone (JAFZA), making it a regional base of operations for Chinese multinational corporations and state-owned enterprises (SOEs). In the early 2010s, over 200 Chinese companies had set up regional headquarters in JAFZA, servicing contracts across MENA.[45] As one Chinese banker noted in 2014, “the infrastructure is good and also the culture there makes it easier. Chinese companies use Dubai as a gateway to the MENA region.”[46] Dubai is also the site of Dragonmart, a massive Chinese retail centre with over 3,500 shops, as well as a large community of over 4,000 private Chinese businesses. This resulted in a Chinese expatriate population estimated to be 200,000 (in the early 2010s), by far the largest in MENA (a dramatic increase from the approximately 50,000 expatriates in 2006).[47] By 2023, the Chinese embassy in Abu Dhabi estimated that there were over 400,000 Chinese citizens residing in the Emirates.[48] That the UAE enjoys a stable political environment with a defence cooperation agreement (DCA) with the US also made it an attractive partner, as Beijing could develop its presence in the Emirates without making a corresponding security commitment.

The second state visit occurred in December 2015, when Sheikh Mohammed bin Zayed, then the de facto leader and now president of the UAE, visited Beijing.[49] This was the highest-level trip to China from the UAE since Xi had taken office. In addition to being president of the UAE, Sheikh Mohammed is also the ruler of Abu Dhabi, the largest and wealthiest emirate in the federation, and after this visit, China’s presence in the country began to evolve.[50] While Dubai was central to bilateral ties, Abu Dhabi now took a more strategic turn. In particular, the Khalifa Industrial Zone Abu Dhabi (KIZAD) became an important node for Chinese SOEs. Shortly after the visit, COSCO SHIPPING signed a 35-year agreement with KIZAD in a US$738-million deal that doubled the port’s container handling capacity.[51] The following year, a consortium from Jiangsu province signed a 30-year lease in KIZAD, representing an investment of US$300 million.[52]

Building upon this momentum, the UAE hosted Xi for a state visit in 2018. The most notable outcome was the elevation of the bilateral relationship to a comprehensive strategic partnership (CSP), the highest level in China’s diplomatic hierarchy. To have a CSP with China, the bilateral relationship needs to include high levels of political trust and strong economic ties, and the partnering state needs to be perceived as “playing an important role in international economics and politics.”[53] That the UAE had been elevated to this level is proof of its importance as a pillar in China’s approach to West Asia. After the CSP was signed, the UAE appointed Khaldoon al Mubarak as the presidential special envoy to China, while from China’s side, State Councillor and former Foreign Minister Yang Jiechi steered the partnership.

Since then, cooperation has intensified, most visibly during the COVID-19 pandemic when the UAE took part in clinical trials for Sinopharm. After the vaccine was cleared, it became the first vaccine available in the country. During a 2021 visit by Chinese Foreign Minister Wang Yi, the two countries announced that Sinopharm China National Biotech Group and the UAE’s G42 would manufacture and distribute HayatVax, with the goal of producing 200 million vaccines a year in the UAE.[54] Given the urgency inherent during the pandemic period, this agreement was indicative of deep levels of political trust.

Yet this has not come without complications. The UAE has a DCA with the US, by far its most important extra-regional partner. Emirati cooperation with China did not raise any red flags in Washington until 2017, when the US released its National Security Strategy, which identified great-power competition as its new strategic framework and China and Russia as its main rivals. At that point, it became clear to all US partners and rivals that maintaining a balanced approach to relations with Beijing and Washington would not be an easy task. For Emirati leadership, avoiding taking sides is seen as a necessity, a point made by Presidential Advisor Anwar Gargash in a speech in late 2022 when he said, “the UAE has no interest in choosing sides between great powers.”[55]

At the same time, the perception of US retrenchment affects many in the Gulf, as the US government has clearly identified the Indo-Pacific as its priority. The US’s withdrawal from Afghanistan reinforced this fear, and despite efforts to demonstrate that it continues to see the Gulf in important strategic terms, local actors remain concerned.

This tension is exacerbated by the increasingly strategic turn in China’s approach to the Gulf, where security and military cooperation with the UAE is on the rise. This represents a shift; until recently, China has had a modest outreach in regional security affairs. The CSP, however, called for increased military and security cooperation, specifically more frequent high-level military visits and joint personnel training, and there have been steady results. Arms sales, for example, have intensified. The UAE has bought armed unmanned aerial vehicles from China for combat in Yemen and Libya.[56] In early 2022 the UAE announced its largest ever purchase from China, buying 12 L-15 Falcon training jets, with a price tag of between US$10 million and US$15 million each, and an option to purchase another 36 at a later date.[57] In early 2023, a research and development deal was signed between Norinco and International Golden Group to create a technology innovation laboratory, where the two will focus on “basic, utility and frontier technologies, carry out aviation research and development as well as talent cultivation, and build a technology cradle.”[58] In terms of joint training, the two countries announced that they would hold a joint air force exercise in August 2023, called the China-UAE Falcon Shield, in Xinjiang.[59]  And most significant is a persistent rumour that China was developing a military facility in the UAE, first reported in 2021.[60] Soon after, the UAE government announced that construction had been stopped while also denying that there was a military component to the structure.[61] In 2023, the story resurfaced.[62] If true, this would likely strain the UAE-US relationship.

In the coming days, states and regions around the world will need to recalibrate their foreign policies to meet the changing landscape of US-China competition. Given the complexities of the Gulf region and its deep ties to both China and the US, the UAE is in a particularly challenging position that will require creative statecraft.
VI. Bytes and Beltways: Decoding Beijing's Tech-Centric Geopolitics in the Gulf
Mohammed Soliman

As China pursues a grand strategy aimed at displacing the US-led global order, technology has emerged as a fourth pillar alongside the political, military, and economic elements of its plans. A test case is the Arabian Gulf. Since the 2010s, China has been strategically enhancing its influence in West Asia, with a particular focus on the Gulf states, leveraging technology as a potent tool. This approach involves the deployment of Chinese software and hardware, coupled with joint technology and cyber initiatives. By utilising technology statecraft, Beijing aims to establish China's geopolitical footprint in the region without resorting to conventional military expansion.

Recognising the difficulty of directly contesting US dominance in the region, China has opted to seize the opportunities arising from the evolving dynamics in the Arabian Gulf as regional capitals prioritise the digital transformation of their economies. Historically, the United States has been the dominant foreign presence in the region, but China has identified fissures in US power on display during the Arab Spring and conflicts in countries like Syria, Iraq, and Libya. As American dominance wanes, China is seeking to exploit the resulting gaps by deepening its connections with countries across West Asia.
China’s Long Game in the Gulf
In his book, The Long Game: China’s Grand Strategy to Displace American Order, Rush Doshi, National Security Council official, argues that China aims to replace the American order on both regional and global scales.[63] He posits that China has pursued this goal through three successive "strategies of displacement" at the military, political, and economic levels.[64] The initial strategy aimed to weaken American regional influence; it was followed by an effort to establish Chinese regional dominance; and the third strategy, characterised as one of expansion, now seeks to achieve both global and regional objectives simultaneously. In the context of the Arabian Gulf, the region inches closer to a dual hierarchical structure, with Washington as the main security guarantor and Beijing as the primary economic partner. China brokering an agreement between Saudi Arabia and Iran and its attempts to secure a naval base in the Gulf are all indications that China aims to displace the US-centric security architecture in the region.[65],[66] Technology has been a core element of this strategy of displacement.
China’s Tech Statecraft in the Gulf
As part of Saudi Arabia’s efforts to widen its political and economic influence in the region, Riyadh is reshaping its ties with both the United States and China, transitioning from traditional energy-focused connections to modern ones centred around technology and cybersecurity. China’s role in building 5G networks in Saudi Arabia, the UAE, and Qatar, and the capital investment that Saudi Arabia and the UAE deployed in technology companies in China, reflect the central role of technology in advancing China's Gulf strategy.[67]  Despite the US’s resistance to the strengthened ties between China and the Gulf, the Gulf nations continue to forge ahead. For instance, during the China-Saudi Arabia Summit, the Saudi Ministry of Communications and Information Technology (MCIT) signed an MoU with Huawei to establish a 10-gigabits-per-second mobile internet network and a cloud computing centre within Saudi Arabia.[68] This deal underscores Saudi Arabia's determination to incorporate Chinese technology in its digital advancement, despite US efforts to dissuade such reliance due to security concerns. Furthermore, given the global shift in supply chains and the need for proactive industrial strategies, Saudi Arabia is prioritising the localisation and domestic production of vital tech-reliant sectors like electric vehicles (EVs).[69] EVs have become central to Riyadh's endeavours to diversify its economy and transition to cleaner energy sources. Another noteworthy outcome of the summit was the agreement for joint Chinese-Saudi production of EVs. Enovate Motors, a Chinese EV manufacturer, signed an MoU to establish an automobile factory in Saudi Arabia capable of producing 100,000 cars annually.[70]
Disputed Regional Hegemony
Amid escalating tensions between the United States and China, GCC nations find themselves in a precarious position. China's role as a large oil buyer cannot be underestimated, especially in the Gulf region, where oil exports are a cornerstone of economic stability. Furthermore, post-pandemic recovery has solidified the interdependence between Gulf economies and China's growth goals.[71] However, beneath these economic interactions lies a complex strategic calculation. Beijing recognises that the Gulf states have increasingly leaned on their security alliance with the United States, a partnership bolstered by shared concerns such as the threat posed by Iran and its proxies. Robust US military presence in the region, seen in significant troop deployments and US arms exports, has served as a vital deterrent against potential security risks.

Nonetheless, China's ambitions extend beyond mere economic and technological cooperation. Instead, China is pursuing a multifaceted strategy aimed at challenging the established US-led security architecture in West Asia. Its overarching objective is to establish a new order with China at the forefront. Achieving this involves a gradual process of disputing and undermining US hegemony. In the initial phase, China seeks to chip away at the foundations of the US-led order by creating alternative economic and technological frameworks. By cultivating relationships and partnerships that operate outside the traditional Western-dominated structures, China looks to lessen its reliance on the prevailing global order.

In the next phase, China aims to put forth a comprehensive alternative to the US-led security architecture. This intention is manifested through Beijing's active efforts to establish a military base in the Arabian Gulf, alongside the noticeable uptick in military sales to Arab states.[72] By building a network of partnerships and alliances centred around its economic and technological order, China aims to establish a sphere of influence that challenges US clout in global affairs. This vision encompasses not only economic and technological realms but extends into diplomacy, security, and international governance.
U.S. Containment and the Future of Chinese Tech Statecraft
The Biden administration's National Security Strategy (NSS), building upon the 2017 framework initiated by the Trump administration, emphasises great-power competition. The 2022 NSS focuses on the "decisive decade," driven by emerging technologies like AI, data, and information networks. This strategy aims to manage separation from China and implement a “tech containment" approach.[73]

China's global tech influence, underscored by its affordable and globally integrated technology, aligns with its goal to become a "high-end innovation power," exemplified by 5G leadership through Huawei. Bipartisan concerns over China's 5G dominance bolstered the tech containment strategy, with the Clean Network Initiative excluding Huawei.[74] This strategy involves enhancing domestic capabilities, reshaping China's supply chain, forming a US-centred tech alliance, and limiting China's tech access. Legislative actions, such as the Chips and Science Act, support US semiconductor growth, while export controls restrict China's semiconductor access.[75] Seeking allies for its tech rivalry with China, the US strategically designs its approach to both slow China's semiconductor progress and strengthen its own tech coalition. This tech-focused blueprint is now integral to shaping the evolving global order.

The US strategy of tech containment could potentially influence China's efforts to establish a technology- and economy-centric framework in the Gulf region. While a complete assessment remains difficult, the export control measures employed by the US might impact China's semiconductor industry and its sophisticated technical proficiencies. These effects could extend to the implementation of specific agreements with the UAE and Saudi Arabia. Given the rapid pace of digital transformation in these countries, delays in realising these technological partnerships could undermine confidence in Chinese technologies. Consequently, such developments would offer a notable signal regarding the trajectory of the larger technological rivalry between the US and China. 
Conclusion
China is working to bolster its geopolitical influence in West Asia by forging technology initiatives in region. This approach allows China to solidify its presence without conventional military expansion while enhancing its economic heft. Gulf states that prioritise digital transformation has presented China with opportunities to form partnerships that may prove pivotal in reshaping regional dynamics. This aligns with China’s strategy to displace US influence regionally and globally.

In this context, China's activities in the Gulf, such as brokering agreements and fostering technological integration, demonstrate its strategy to shift the balance of power. As the US-China tech rivalry evolves, Gulf states must navigate economic ties with China while maintaining security alignment with the US. This conundrum will continue to reshape the order in the Gulf region and beyond, as China's ascent transforms the global landscape.
Endnotes
[1] The ‘Look to the East’ policy (Persian: نگاه به شرق) is a strategy in Iran’s foreign policy that has been proposed since the beginning of Mahmoud Ahmadinejad’s presidency in 2005.

[2] The International North–South Transport Corridor (INSTC) is a 7,200-km (4,500-mile) multi-mode network of ship, rail, and road route for moving freight between India, Iran, Azerbaijan, Russia, Central Asia and Europe.

[1] Robert M Gates, “The Dysfunctional Superpower”, Foreign Affairs, September 29, 2023,

[2] Henry Kissinger, White House Years (Boston: Little Brown Company, 1979, pp. 907)

[3] “Will India take America’s side against China? A conversation with Ashley J Tellis”, Foreign Affairs Podcast, September 21, 2023.

[4] Jack Lau, “China, UAE set for joint air force training in military first, as Beijing forges closer Middle East ties”, South China Morning Post, July 31, 2023.

[5] Adam Lucente, “Saudi Arabia and China to hold joint naval training as ties deepen”, Al Monitor, September 28, 2023.

[6] “UAE air bridge provides military air support to Ethiopia gov’t”, Al Jazeera, November 25, 2021.

[7] Farnaz Fassihi and Steven Lee Myers, “China, with $400 billion Iran deal, could deepen influence in Mideast”, The New York Times, March 27, 2021.

[8] Hasan Alhasan, “With BRICS expansion, China and Middle Eastern powers grow closer”, International Institute for Strategic Studies, August 31, 2023.

[9] Andrew England, “Bridges with everyone: how Saudi Arabia and UAE are positioning themselves for power”, The Financial Times, August 23, 2023.

[10] Samir Saran and Akhil Deo, Pax Sinica: Implications for an Indian Dawn (India: Rupa Publications, 2019, pp. 13)

[11]Jonathan Fulton. "China-Saudi Arabia Relations Through the ‘1+ 2+ 3’Cooperation Pattern." Asian Journal of Middle Eastern and Islamic Studies 14.4 (2020): 516-527.

[12] Cinzia Bianco and Alicja Bachulska, “An open relationship: What European governments can learn from China-Gulf cooperation,” European Council on Foreign Relations, February 21 2023.

[13]Robert Mogielnicki, “Strong China-Gulf Energy Ties Spill Into Key Regional Issues”, Arab Gulf States Institute in Washignton, September 14 2023.

[14] Bianco and Bachulska, “An open relationship: What European governments can learn from China-Gulf cooperation.”

[15] “Saudi Arabia received $5.5bln in Chinese BRI investments in H1-2022,” Zawya, July 27 2022.

[16] Dora Feith and Ben Noon, “How Biden Can Reverse China’s Gains in Saudi Arabia” Foreign Policy, July 7 2022.

[17] Zachary Cohen, “CNN Exclusive: US intel and satellite images show Saudi Arabia is now building its own ballistic missiles with help of China,” CNN, December 23 2022.

[18] Adam Lucente, “Saudi Arabia and China to hold joint naval training as ties deepen," Al Monitor, September 28 2023.

[19] Ramadan al-Sherbini, “Saudi Arabia: More than 28,000 study Chinese language in Mecca”, Gulf News, August 31 2023.

[20] Summer Said and Stephen Kalin, “Saudi Arabia Considers Accepting Yuan Instead of Dollars for Chinese Oil Sales,” Wall Street Journal, March 15 2022.

[21] “China's Silk Road initiative makes prey of Oman, Maldives,” Nikkei, July 26 2018.

[22] Stephen Kalin, “Arms Megadeal Collapsed When China, Russia Links Emerged”; Wall Street Journal, September 15 2023.

[23] Jack Dutton, “US bans Nvidia, AMD AI chips' export to some Mideast countries, amid China fears,” Al Monitor, August 31 2023.

[24] “An Asian century, illustrated”, Nikkei Asia, 2016.

[25] Barbara Smith and Marti Flacks, “How supporting democracy benefits the US-India partnership”, Centre for Strategic and International Studies, November 1, 2022.

[26] John Humphrey and Dirk Messner, “Unstable multipolarity? China’s and India’s challenges for global governance”, German Institute of Development and Sustainability, 2006.

[27] Richa Mishra, “Third party currency payments for Iran fraught with delays, additional costs”, Business Line, May 30, 2022.

[28] Zein Basravi, “Iran’s Chabahar port spared from US sanctions in rare cooperation”, Al Jazeera, June 20, 2020.

[29] Nurettin Akcay, “Beyond Oil: A new phase in China – Middle East engagement”, The Diplomat, January 25, 2023.

[30]Paul Salem, “The oncoming Saudi – Israeli normalization”, Middle East Institute, September 5, 2023,

[31]Mohammed Soliman, “India’s economic corridor to Europe via Saudi, UAE: A win for US, West Asia”, Al Monitor, September 11, 2023,

[32]Tomer Fadlon, Trends in trade between Israel and China over the past decade (2013-2022), Tel Aviv, The Institute for National Security Studies, 2023.

[33]Amr Hamzawy, “The potential inroads and pitfalls of China’s foray into Middle East diplomacy”, Carnegie Endowment for International Peace, March 20, 2023.

[34]Dale Aluf, “Israel – China relations amidst Sino – US rivalry”, Asia Times, February 11, 2023.

[35]Felicia Schwartz, “Amidst US pressure, Israel rejects Chinese bid for major infrastructure projects”, The Wall Street Journal, May 26, 2020.

[36]Ben Caspit, “Netanyahu gambles on Iran-US relations with trip to China”, Al Monitor, June 30, 2023.

[37]Narayanappa Janardhan and Gedaliah Afterman, “I2U2 summit overlooks geopolitics in favor of economic collaboration”, Regional Affairs (blog), The Arab Gulf States Institute in Washington, July 26, 2022.

[38]James Shotter and Yuan Yang, “China steps up diplomacy with offer to mediate in Israeli – Palestinian conflict”, The Financial Times, June 14, 2023.

[39] Song Niu and Danyu Wang, “’Three Summits’ and the New Development of China-Arab States Relations in the New Era,” Asian Journal of Middle Eastern and Islamic Studies 17(1) (2023), 15-30.

[40] Jonathan Fulton, “Iran’s Economic Future is Uncertain. It’s No Surprise Why Raisi Visited China,” Atlantic Council IranSource, February 22, 2023,

[41] Vivian Nereim, “Saudi Arabia and Iran Agree to Re-establish Ties in Talks Hosted by China,” The New York Times, March 10, 2023,

[42] “China, UAE to Build Strategic Partnership: Wen,” China Daily, January 16, 2012.

[43] “Quick Guide to China’s Diplomatic Levels,” South China Morning Post, January 20, 2016.

[44] Jonathan Fulton, China’s Relations with the Gulf Monarchies (Abingdon: Routledge, 2019), 152-153.

[45] Emma Scott, “China’s ‘One Belt, One Road’ Strategy Meets the UAE’s Look East Policy,” China Brief (2015) 15(11).

[46] Dominic Dudley, “A New Silk Road,” Bloomberg Businessweek, August 16, 2014.

[47] Binsal Abdul Kader, “Chinese Community in UAE Grows Fourfold in 10 Years,” Gulf News, August 10, 2016.

[48] Xuena Zhang, “The 400,000 Chinese Expatriates’ Community in the UAE: What Makes Them Build Lives in the UAE,” Gulf News, May 11, 2023.

[49] “Sheikh Mohammed bin Zayed Begins China Visit at Great Wall,” The National, December 13, 2015,

[50] Jonathan Fulton, “China – United Arab Emirates Relations in the Belt and Road Era." Journal of Arabian Studies 9(2) (2019): 253-268.

[51] Anthony McAuley, “China’s Cosco to Build and Operate New Container Terminal at Khalifa Port,” The National, September 28, 2016.

[52] McAuley, “China’s Cosco to Build”

[53] Georg Strüver, “China’s Partnership Diplomacy: International Alignment Based on Interests of Ideology”

The Chinese Journal of International Politics 10 (1) (2017): 31-65.

[54] Sylvia Westall, Adveith Nair, and Farah Elbahrawy, “China Picks UAE to Make Millions of Vaccines, Boosting Gulf Ties,” Bloomberg, March 28, 2021,

[55] Anjara Sankar, “UAE Has No Interest in Choosing Sides between Great Powers, Says Anwar Gargash,” The National, November 14, 2022.

[56] Royal United Services Institute, “Armed Drones in the Middle East: United Arab Emirates,” (continuously updated),

[57] Rory Reynolds, “UAE’s Ministry of Defence to Buy L-15 Falcon Jets from China,” The National, February 23, 2022,

[58] Liu Xuanzun, “China Boosts Defense Cooperation with UAE as US Influence Wanes in Middle East,” Global Times, February 23, 2023.

[59] Nadeem Ebrahim and Aimee Look, “In the Shadow of US-China Rivalry, Arab Allies Tread Delicate Ground,” CNN, August 18, 2023.

[60] Gordon Lubold and Warren P. Strobel, “Secret Chinese Port Project in Persian Gulf Rattles U.S. Relations with U.A.E.” The Wall Street Journal, November 19, 2021.

[61] Mostafa Salem, Jennifer Hansler and Celine Alkhaldi, “UAE Suspends Multi-Billion Dollar Weapons Deal in Sign of Growing Frustration with US-China Showdown,” CNN, December 15, 2021.

[62] John Hudson, Ellen Nakashima, and Liz Sly “Buildup Resumed at Suspected Chinese Military Site in UAE, Leak Says,” The Washington Post, April 26, 2023.

[63] Rush Doshi, “The Long Game: China’s grand strategy to displace American order”, Brookings Institution, August 2, 2021,

[64] Doshi, “The Long Game: China’s grand strategy to displace American order”

[65] “China brokered Saudi-Iran deal driving ‘wave of reconciliation’, says Wang”, Al Jazeera, August 21, 2023.

[66] Gordon Lubold and Warren P Strobel, “Secret Chinese port project in Persian Gulf rattles relations withj UAE”, The Wall Street Journal, November 19, 2021.

[67] Phate Zhang, “NIO secures $1.1 billion investment from Abu Dhabi fund”, CNEVPOST, June 20, 2023.

[68] Mohammed Soliman, “The GCC, US-China tech war, and the next 5G storm”, Middle East Institute, September 1, 2020,

[69] Yahya Alqahtani, “From oil wells to power cells: How Saudi Arabia and its Gulf neighbors are securing their future through battery technology”, Middle East Institute, August 24, 2023.

[70] “Saudi Arabia signs $5.6 billion deal with Chinese EV company”, Reuters, June 12, 2023.

[71] Laura He, “China’s economy is in trouble. Here’s what’s gone wrong”, CNN, August 23, 2023.

[72] Alvite Ningthoujam, “The Middle East: An emerging market for Chinese arms exports”, The Diplomat, June 25, 2021.

[73] Mohammed Soliman, “Tech containment is core to Washington’s Cold War 2.0 strategy”, The National Interest, October 27, 2022.

[74] “Clean Network Initiative: All about US initiative to purge Chinese tech companies from 5G network”, The Hindustan Times, November 22, 2020.

[75] Amy Hawkins, “Chip wars: How semiconductors became a flashpoint in the US-China relationship”, The Guardian, July 5, 2023.

### The I2U2: Where Geography and Economics Meet

Introduction
In July 2022, India, Israel, the United States (US), and the United Arab Emirates (UAE) in a hybrid summit announced the establishment of a new minilateral grouping called the I2U2. The four countries envision their alliance as an ad-hoc, informal, issue-specific and geoeconomic initiative.[1]

The I2U2 is only one of a number of minilateral forums that have been created in the past several years. Unburdened by the complexities of decision-making and institutional constraints of larger organisations, “minilaterals (which often involve three to nine countries) offer an edge vis-à-vis flexibility, informality, select membership, and a goal-oriented focus.”[2] This shift towards multi-alignment is driven by the growing importance of geoeconomics, which is shaping the way countries collaborate and form partnerships to advance their economic interests. By focusing on shared economic interests, member countries are able to build trust, overcome political differences, and develop an expansive agenda for cooperation that integrates geopolitics and geoeconomics. Acknowledging the practicality of this paradigm shift, the joint statement of the I2U2 countries, released following the July summit, said the “grouping is intended to mobilise private sector capital and expertise to modernise infrastructure, advance low carbon development pathways for industries, improve public health and access to vaccines, advance physical connectivity, create new solutions for waste treatment, explore joint financing opportunities, and lastly, promote the development of critical emerging and green technologies, while focussing on food and energy security.”[3]

To be sure, all four countries have their own motivations for joining the grouping. For India, the I2U2 provides a forum to bolster its renewed strategic engagement with West Asia. India also has a robust bilateral relationship with each of the three countries and thus there is a strong economic rationale for its participation in I2U2. India’s total trade with UAE amounted to US$ 73 billion in 2022, making UAE India’s third largest trading partner.[4] UAE is also India’s second largest export destination and accounts for 40 percent of India’s total trade with the Arab world. Israel, meanwhile, is one of India’s top suppliers of defence equipment and a key technology partner in different domains including defence, space, agriculture, and cybersecurity.[5] For its part, the US is India’s largest trading partner and second-largest foreign investor, with bilateral trade reaching US$ 119 billion in 2022 and investments accounting for 18 percent of total Foreign Direct Investment.[6]

From Israel’s perspective, I2U2 is a continuation of the Abraham Accords and presents a new opportunity to build a platform where it can combine its old partners (the US and India) with the new (UAE) through a wider economic and strategic partnership. The Accords formalised ties between Israel and the UAE,[7] while also enabling Israel to extend its outreach into the Arab world and beyond.  This aligns with Israel’s larger goal of encouraging more countries in the region to normalise relations with it.

The Emiratis view I2U2 as a coalition that is agile and purposeful. They are of the view that such a grouping, with a focus on complementarities, will help solve global challenges such as those related to security in food, energy, and water. The UAE knows these challenges only too well, given its own food and water shortages, with an annual rainfall of only 100mm and importing 85 percent of its food supplies.[8] UAE also sees I2U2 as a platform that can serve its interests in strengthening bilateral ties with the other three nations, while placing itself as the bridge between West Asia and South Asia.

For the United States, the grouping is a low-hanging fruit, following the Abraham Accords, through which it can nurture relationships with its allies and partners bilaterally as well as multilaterally, especially in the West Asian region. This also helps the US in checking the expanding Chinese footprint in the region, particularly in the fields of investment, innovation, and technology. US participation also indicates that it has shed its traditional strategic and security lens and now views the world order in a trans-regional and multilateral way.
Setting the Context
I2U2’s seeds were sown in October 2021, when the foreign ministers of the four countries held a virtual meeting to address issues concerning maritime security, infrastructure, and transport.[9] Its launch in July reflects some of the broader changes that have recently taken place in global geopolitics, especially in West Asia.

The first crucial development was the establishment of Israel’s diplomatic ties with UAE and Bahrain in August 2020 through the signing of the Abraham Accords orchestrated by the Trump administration. Relations with UAE have grown since then, at a pace that has surprised observers. Their bilateral trade  (excluding software) reached US$ 2.5 billion in 2022.[10] As the Accords opened room for increased interactions between Israel and its Gulf neighbours, it has become less difficult for other partners like the US and India to engage with the region through plurilateral forums.[11]

The outbreak of the Russia-Ukraine war in early 2022, along with the impacts of the COVID-19 pandemic, are pointing to a new era where realist considerations of shared threats push geographically divergent countries to come together and find solutions to pressing global challenges. Among the most crucial are global economic deceleration, increasing debt, supply chain break-downs, trade wars, energy insecurity, food crises, widening inequalities, large-scale poverty, and worsening climate change.[12]

The 2022 World Development Report, Finance for an Equitable Recovery has highlighted how the growing disparities between and within nations, along with slower than expected post-pandemic global recovery has “made the economic and social costs of dwindling growth more visible.”[13] This strengthens the rationale for the I2U2 to gather and manage the current multiple crises facing the region and beyond.

The I2U2 countries intend to give primacy to their economic strengths over their differing political and security concerns, and utilise the available opportunities for mutually beneficial cooperation. They will leverage “India with its growing economy, and massive human resource and talent, Israel with its niche technical know-how in a number of important fields, UAE with its vast capital and advancing innovative policies, and USA’s extensive international clout and capabilities in every conceivable area.”[14]

Since the establishment of I2U2, several meetings have taken place between officials and private sector representatives from the four countries. One of the areas that have been explored in the discussions is shoring up business-to-business (B2B) relations. During the February 2023 meeting of the four sherpas, an I2U2 Business Forum was established to accelerate joint business ventures in core economic and technological sectors.[15] There is also a proposal among private sector entities to form an enterprise called the ‘I2U2 Hub’ in UAE, which will serve as an ideation centre. It aims to utilise the network of its business members in forging economic partnerships with companies and institutions involved in research in any of the six identified sectors, with an incentive of sharing profits of intellectual property amongst the partnering institutions.
Key Projects
Distinguishing it from other regional forums like the Quadrilateral Security Dialogue (Quad), Negev Forum, and AUKUS, I2U2 initially aims to focus on an economic agenda. It has identified six sectors for intervention—i.e., water, energy, transportation, space, health, and food security. The grouping envisions an active role for private capital and technology, declaring a strong commitment “to collaborate on propelling joint investments, resource mobilisation and new initiatives for seeking optimal mitigation strategy.”[16] Underscoring the practical nature of the discussions and initiatives undertaken, Prime Minister Narendra Modi in his remarks at the summit said the I2U2 “has set a positive agenda and its framework is a good model for practical cooperation in the face of increasing global uncertainties.”[17]

Two key global concerns are being prioritised by the grouping—food security and clean energy—which have local, trans-regional and long-term dimensions.
Food corridor project
Some 820 million people across the globe are suffering from hunger[18] and many regions are facing a looming food crisis. The I2U2’s food security project aims to address food insecurity by capitalising on the member countries’ comparative advantages across financial, technological, agricultural and knowledge domains.

The project will use Israeli and American technology to establish integrated food parks in the states of Gujarat and Madhya Pradesh, with future expansion planned for other states, including Telangana, Andhra Pradesh, and Maharashtra. The project is being financed by the Abu Dhabi Development Holding Company (ADQ)— an active sovereign wealth fund that has committed an overall investment worth US$2 billion.[19] The broader objective of the initiative is to create alternate supply chains among countries with similar goals, to guarantee food security that is environmentally sustainable.

The project will be driven through a comprehensive public-private partnership model, involving the concerned state governments, the central government, and the private sector spearheaded by the Confederation of Indian Industry (CII). Some of the private firms that have been selected for developing the value chains include ITC, Innoterra and Olam. DP World has been designated as the logistics partner for operationalising the food corridor through development of eco-friendly integrated logistics services like container terminals at seaports, private rail rakes, regional procurement centres, and warehousing and refrigeration facilities.

Analysts note that the project will not only help the Gulf countries achieve food security, but also “enable India to increase the value of its food production by taking advantage of advanced investments and technology that will enter its agriculture sector.”[20] This, in turn, will help enhance Indian farmers’ incomes and support job creation through development of post-harvest activities. Being a food-surplus nation and a large producer of wheat, dairy, vegetables and fruits, India has a lot to offer, and gain from this project. Highlighting its significance, Indian Foreign Secretary Vinay Mohan Kwatra explained that “the proposed food parks have a set of objectives that include how to reduce trade barriers between I2U2 economies, how to harmonise food quality and safety standards, and how to use this opportunity to benchmark India as a top exporter of perishables through access to strategic markets of the Gulf and European region.”[21]
Hybrid renewable energy project
To reduce the use of fossil fuels and increase the share of renewables in energy production as agreed at COP27,[22] the second I2U2 project will establish a 300-megawatt hybrid renewable energy facility (wind and solar) in Gujarat. The facility will be complemented by an advanced battery storage technology that will be developed with the help of Israeli expertise, and Emirati and American investments. It aims to bring down battery storage costs and make renewable energy an attractive option for the industrial sector. The project is currently valued at US$330 million, and the financing will be done through public-private partnership.

UAE-based companies like Masdar have shown strong interest in “exploring opportunities to serve as critical knowledge and investment partners in the renewable energy space,”[23] particularly in the context of UAE’s position as host of COP28 scheduled in December 2023. For India, its reliance on coal—which generates 70 percent of its electricity—and the limitations in importing Liquefied Natural Gas, has motivated the country to diversify its energy mix. This has incentivised Indian companies to participate in renewable energy projects to contribute to the country’s goal of achieving 500 gigawatts of non-fossil fuel capacity by 2030.[24] A feasibility study on the project, funded by the US Trade and Development Agency (USTDA), has already given a green light to the project.
Potential Challenges
The first potential challenge for the I2U2 is that individual countries may give primacy to their own security interests, which may be in contrast to those of another. For example, “Iranian rivalry is central to the US and Israeli outlook of West Asia,”[25] while India and UAE might have a different perspective. Although the four countries have so far been able to keep these security considerations at bay, the situation with regard to Iran remains unpredictable.

Meanwhile, the US and India are wary of China’s footprint in the region, which the latter is expanding through trade deals, infrastructure investments and security cooperation. Israel and UAE, for their part, have a more positive view of China, with UAE upgrading its ties to a Comprehensive Strategic Partnership[26] and Israel engaging China in defence and technical cooperation.[27]

A second set of concerns are related to institutional bottlenecks. There could be lack of synergy in the working cultures of business people from the four countries, and accountability mechanisms may be vague. The sherpas of the respective countries should acknowledge these potential roadblocks and streamline processes to enforce checks and balances.
India’s Stakes
India’s position as the glue that binds West Asia with South Asia makes its active participation in the grouping of utmost importance. At the same time, India can leverage investments, innovation and technology from I2U2 to accelerate its own journey towards becoming the world’s third largest economy in the coming decade. I2U2 can also be a force-multiplier for the ‘Make in India’ initiative by pushing for manufacturing facilities to be set up in the country, particularly in the fields of artificial intelligence, fintech, transportation, and space.

To ensure fruitful cooperation with the other three countries, India could take a cue from the US and designate I2U2 nodal officers in each of its embassies in the three countries. The sherpa, along with these nodal officers, can form a Coordinating Committee that will help streamline official communication and monitor progress. The I2U2 grouping could potentially become a catalyst for India to spearhead similar minilateral groupings with its other partners in South Asia and Africa.
Conclusion
The four member nations of I2U2 should create a consolidated roadmap to bring their plans to fruition. There is a need to institutionalise a system of regular meetings between the foreign ministers and an annual summit of the leaders to keep the grouping active and ensure timely implementation of decisions. The member countries can devise an institutional framework with dedicated resources, professionals, and clear goals. For this, like the G20, it can establish joint Task Forces on specific sectors with participation from government, academia, think tanks, and the private sector. These task forces can act as both, ‘idea banks’ and implementing agencies. Additionally, Centres of Excellence can be established across geographies of the four countries focusing on specific sectors like cybersecurity, healthcare, and outer space. Lastly, the four countries would need to institute legislations pertaining to taxation, customs, and arbitration to facilitate project implementation. 

As an alternative to the dismal performance of most multilateral institutions, minilaterals like I2U2 provide hope for more effective and mutually beneficial international cooperation. Keeping in mind the global nature of challenges faced by countries across the world, a platform like the I2U2 can provide a sound framework to explore opportunities, support collective resolution of global challenges, and unlock avenues for greater convergence of interests and actions between countries.

Navdeep Suri is Distinguished Fellow at ORF.

Hargun Sethi was a Research Intern at ORF.

Endnotes

[1] “Partnerships and economy are best way to overcome today’s complex challenges: UAE President at I2U2 Leaders’ Summit,” WAM- The Emirates News Agency, July 14, 2022.

[2] Amalina Anuar and Nazia Hussain, “Minilateralism for Multilateralism in the Post-COVID Age,” Nanyang Technological University Policy Report, January 2021.

[3] The White House, “Joint Statement of the Leaders of India, Israel, the United Arab Emirates, and the United States (I2U2),” 2022.

[4] Embassy of India, Abu Dhabi, UAE, “Bilateral Economic and Commercial Relations,” November 2022, https://indembassyuae.gov.in/bilateral-eco-com-relation.php

[5] Navdeep Suri and Hargun Sethi, “30 years of bilateral ties: What Indo-Israeli relations look like,” Observer Research Foundation, September 12, 2022.

[6] Shishir Gupta, “India reported highest FDI inflow worth $83 billion in 2021-22: Centre,” Hindustan Times, May 20, 2022.

[7] Navdeep Suri and Hargun Sethi, “Growing UAE-Israel ties shows political intent to deepen relations between the two countries,” Observer Research Foundation, October 22, 2022.

[8] Omnia Al Desoukie, “The UAE’s new food strategy: reducing imports and investing in agtech,” Food Matters Live, September 14, 2021.

[9] “I2U2- New Formations for better Growth,” Centre of Policy Research and Governance, July 20, 2022.

[10] “UAE-Israel trade hits record high to reach $2.56bn n 2022,” Arab News, January 23, 2023.

[11] Niranjan Marjani, “Contextualizing the I2U2 for India,” Times of India, July 13, 2022.

[12] Ishani Agnihotri, “I2U2: The Aspects and the Prospects,” Indian Council of World Affairs, August 16, 2022.

[13] World Bank, World Development Report 2022: Finance for an Equitable Recovery.

[14] Daniel Markey, “What You Need to Know About the I2U2,” United States Institute of Peace, July 28, 2022.

[15] Muhammad Aamir, “Inaugural I2U2 Business Forum convened to accelerate joint investments in key sectors,” WAM- The Emirates News Agency, February 22, 2023.

[16] Debasis Bhattacharya, “I2U2 Grouping: Transformational Force for Global Good and India’s Strategic Imperatives,” Vivekananda International Foundation, August 9, 2022.

[17] “I2U2 has set positive agenda, good model for practical cooperation: PM Modi,” Indian Express, July 15, 2022.

[18] “UN Report: Global hunger numbers rose to as many as 828 million in 2021,” Food and Agriculture Organization of the United Nations, June 6, 2022.

[19] Sachin Parashar, “UAE’s $2 billion and US, Israel tech for India food parks,” The Times of India, July 15, 2022.

[20] Nerea Belmonte, “The India-Arab Emirates-Israel route, an alternative for global food security,” Atalayar, August 4, 2022.

[21] “I2U2 summit unveils USD 2 billion initiative to develop food parks across India,” The Print, July 15, 2022.

[22] “COP27: Causes and Effects of Climate Change,” SGS, November 3, 2022.

[23] “I2U2 Summit: UAE to invest $2bn in food parks in Gujarat, MP, to boost food security,” United News of India, July 14, 2022.

[24] Prime Minister’s Office, Government of India.

[25] Agnihotri, “I2U2: The Aspects and the Prospects”

[26] Mohamed Bin Huwaidin, “China’s strategic partnership with the UAE: Foundation and prospects, Comparative Strategy,” Comparative Strategy, April 15, 2022.

[27] “Israel-China Relations in an Era of Strategic Rivalry and Great Power Competition,” Strategic Assessment, July 2022.

### Middle Eastern Quad? How Abraham Accords opened West Asia for India

On 18 October, the foreign ministers of the United States, India, Israel, and UAE met virtually to enhance cooperation and partnerships between these states on the back of the Abraham Accords, signed in December 2020, normalising relations between Israel and a grouping of Arab states led by the UAE. While some have already christened this meet as a similar ‘design’ to that of the Quad, being built in the Indo-Pacific, the dynamics in West Asia (Middle East) are in fact much more complex for such a narrative to find space.

The US readout of the meeting highlighted trade, climate change, energy, maritime security as the core points of debate, along with generally expanding economic and political cooperation in the region. Meanwhile, India highlighted an “expeditious follow up” to this new ‘minilateral’, possibly hinting towards an institutionalisation of this dialogue process.

This “Indo-Abrahamic” construct, a term coined by scholar Mohammed Soliman, has great potential for expansive economic cooperation for all four members involved despite the challenges the region brings with itself, but perhaps more than anything else, solidifies a rapidly expanding India-US collaboration that today stretches from the Indo-Pacific to the Mediterranean and beyond.

External Affairs Minister S Jaishankar’s visit to Israel coincided with an Indian Air Force (IAF) contingent taking part in the Blue Flag 2021 military exercise. Interestingly, part of the IAF fleet and personnel arrived at Israel’s Ovda Air Force Base from Egypt, concluding exercises with the Egyptian armed forces. Both Egypt (along with Syria) and Israel fought the Yom Kippur War in 1973, and Israel’s Prime Minister Naftali Bennett last month visited the country for the first time in a decade, signalling another thawing of a major friction point in the region.

India’s diplomacy this past week in the Middle East, highlighted by a fast expansive military cooperation component as part of its outreach, has offered more political and diplomatic space for the balancing act it has had to orchestrate to protect its economic and political interests amidst the various fissures of the region over the decades, working with all three main centres of power in the region, the Sunni Arab camp led by UAE and Saudi Arabia, the Jewish power centre in Israel and the seat of power for Shia Islam in Iran.

This sense of diplomatic thaw in the wider Middle East region is not a one-off event today. While these overtures at play remain fluid and riddled with local political and societal complexities, efforts to try and bridge gaps led by regional actors themselves are pushed further by a spreading sense of the US turning into a recessionist power in the region.

While the long-term future of the American security umbrella was increasingly under scrutiny in the post-War on Terror era, an amalgamation of events over the years, ranging from the Arab Spring and Iran making significant strides in its nuclear programme to the likes of Saudi and UAE recalibrating their economy designs to adjust for future economic trends that move away from hydrocarbons, have pushed the three poles of power in the region to review their long-standing differences

While the long-term future of the American security umbrella was increasingly under scrutiny in the post-War on Terror era, an amalgamation of events over the years, ranging from the Arab Spring and Iran making significant strides in its nuclear programme to the likes of Saudi and UAE recalibrating their economy designs to adjust for future economic trends that move away from hydrocarbons, have pushed the three poles of power in the region to review their long-standing differences. These shifts, along with the Abraham Accords, are highlighted by events such as Saudi-Iran talks in Baghdad, ending of the Qatar blockade and attempts to fix rifts within the Gulf Cooperation Council (GCC), UAE calling for ‘management’ of rivalries with Iran and Turkey and so on.

India has been relatively quick in taking advantage of these intricacies. Prime Minister Narendra Modi’s visit to Israel in 2017, along with late president APJ Abdul Kalam’s visit to UAE in 2003 and Saudi King Abdullah Bin Abdul Aziz Al Saud’s visit to India in 2006, was one of the pivotal political moments for India in developing West Asia strategies over the past two decades. The momentum between the two regions and their strategic interests has only gone up. From the UAE providing mid-air refuelling to India’s new Dassault Rafale fighter aircraft on their delivery flight from France to a gambit of military exercises over the past two years despite challenges posed by the COVID-19 pandemic shows a sense of urgency from both regions to expand political and economic ties.

However, beyond the overtures mentioned above, the quick-paced collaborations in the region with Western states add a new dimension to India’s ‘Look West’ policy, which today stands out as an excellent Indian example of long-term diplomacy, stretching across party and government lines over the years. Strategically, the trade-offs between the Gulf nations and India on the fast-paced advancement of bilateral relations have been palpable.

For the Gulf, India continues to provide a significant market, including for hydrocarbons, despite the narratives of ‘energy transitions’ around the climate change debate. While the likes of Saudi Arabia try to end their economy’s almost exclusive dependency on oil, the Indian market and its growth projections are critical to Saudi’s economic transformation plans that also have a strong component of political transformation, movin