Economics Is Not What Holds the GCC Together

3 MINS READSep 15, 2016 | 16:12 GMT
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Economics Is Not What Holds the GCC Together

One of the primary purposes of the founding of the Gulf Cooperation Council (GCC) was to promote cooperation among the energy-reliant economies lining the Persian Gulf. In reality, however, its members' shared security interests are what binds them together. Regional instability and the need for protection from their Shiite neighbors, rather than oil and natural gas, will continue to unite the Gulf states in the coming years.

This is not to suggest that the GCC's role as an economic union has been completely overshadowed by its security objectives. It has been slow, though, to reach some of its economic goals. For example, easing trade and the flow of people among member states was an early ambition of the GCC, expressed six months after its foundation in the Unified Economic Agreement of November 1981. The accord declared the bloc's intention to move toward "harmonized" legal, social and economic systems. But disagreements on how to go about fulfilling that promise delayed the creation of a customs agreement and common market for years. When a deal for the former was finally signed in 2003, it took another 12 years of debate over how to allocate revenue before the customs union was actually implemented.

Even with the customs union in place, trade between the GCC's members is low, and many continue to rely heavily on trade agreements with non-GCC states. Currency and infrastructure integration within the bloc likewise has lagged. Since its inception, the GCC has committed to linking the transportation networks of its members. But the union's proposed railroad is expensive and inefficient. Its completion date, originally set for 2018, has been indefinitely postponed. Talks of creating a common currency have similarly stalled as Kuwait, Oman and the United Arab Emirates have opted instead to safeguard their own expanding economies. The implementation of a common currency will become even more unlikely as Gulf states gradually make progress toward their final goal: economic diversification. Collectively, the GCC's gross domestic product is $1.4 trillion, but most of it comes from oil and natural gas. Though this has always been a structural weakness for the bloc, a steep dive in oil prices and the diminishing appeal of the Gulf social contract — distributing oil revenues in exchange for fealty — have more recently left GCC members scrambling to diversify their economies with newfound urgency. In the coming years, the GCC's individual members will continue to seek out their own economic policies, diversification strategies and interests abroad. Nevertheless, the security they gain from standing together will far outweigh the benefits of striking out on their own, ensuring that the bloc remains whole in spite of the forces threatening to divide it.

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