assessments

The Gulf Cooperation Council: Finding Safety in Numbers

8 MINS READSep 14, 2016 | 09:15 GMT
The GCC: Finding Safety in Numbers
(Stratfor)
Summary

Editor's Note: This is the third installment of a seven-part series examining how the world's regional economic blocs are faring as the largest of them — the European Union — continues to fragment.

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.

The bloc's path will not be easy, though. Issues of succession, competing diversification strategies and differing foreign policy visions will fuel the rivalry that divides the GCC's members. Even so, the Gulf states recognize that they are stronger — and safer — together than they are apart, an awareness that will ensure that the organization forges steadily ahead in spite of the dissension from within.

In the mid-20th century, the discovery of some of the largest oil reserves ever seen spurred rapid development throughout the Middle East. Around the same time, the British military withdrew from the region, and the states it left behind became increasingly cognizant of their vulnerability. In 1976, the foreign ministers of Saudi Arabia, Bahrain, Kuwait, Qatar, Oman, the United Arab Emirates, Iran and Iraq met in Muscat to discuss the creation of a joint security and defense policy for the Gulf region. As initially envisioned, the new organization, the GCC, would serve as an economic and security union spanning the Persian Gulf, uniting states whose economies were overwhelmingly driven by the same commodities: oil and natural gas.

But in 1979, their designs were disrupted. The Islamic Revolution swept through Iran, installing a fundamental strain of Shiism as the governing doctrine of the state. Iran's new leaders meant to export their ideology to Shiite communities in the region as well, a goal that threatened the largely Sunni Arab Gulf states. Coupled with Iran's sharply anti-West stance, the Gulf states had little choice but to scrap their plans for Iranian membership. Two years later, in May 1981, the modern GCC was established without the Shiite-led Iran and Iraq. Its relationship with the two has been uneasy ever since.

Safety First

Today, the GCC comprises Saudi Arabia, Bahrain, Kuwait, Qatar, Oman and the United Arab Emirates. With its common market and customs agreement, the union has made economic cooperation a clear priority, and a value-added tax that is currently in the works suggests even further alignment of members' economic policies to come. Nevertheless, the security imperatives that instigated the GCC's formation continue to take precedence. The Iran-Iraq War (1980-1988), the Tanker Wars (mid-1980s) and the Iraqi invasion of Kuwait (1990) confirmed, in the GCC's eyes, its need for a united defense against aggression from the region's Shiite states. (These conflicts also led the bloc's smaller states to seek shelter under the military umbrella provided by larger members, such as Saudi Arabia and the United Arab Emirates.) In 1984, the GCC created the Peninsula Shield Force, a 10,000-strong army drawn from all of the bloc's members. The force was not heavily deployed until 2011, when Shiites in Bahrain rose up against King Hamad bin Isa al-Khalifa, shaking the Gulf states' belief that generous handouts had insulated their ruling families from unrest.

The GCC's role in Middle Eastern security and politics has since grown. Emerging threats to the Gulf states, including the passage of Iran's nuclear deal with the West and the rise of the Islamic State, have knitted the bloc's members closer together, as has their common desire to preserve the familial monarchies ruling all six states. Though the Gulf states' foreign policy agendas sometimes differ, the organization, more often than not, is able to operate cohesively with the help of supranational entities such as the GCC Secretariat, the GCC Supreme Council and the GCC Ministerial Council. In 2015, the bloc also established a GCC police force headquartered in Abu Dhabi, and a joint intelligence and surveillance center is to be built in Riyadh. Information sharing is common among GCC states, though some bigger and more expensive joint security projects, such as missile defense, have been repeatedly delayed by wariness and arguments over command-and-control assignments.

A Slow Start

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 slower, however, to reach some of its economic goals. For example, easing trade and the flow of people among members 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. As a bloc, the GCC is the European Union's fifth-largest export market, and Asian economies have become the primary destination of Gulf oil and natural gas. Many of the bloc's trade partners, including the United States and European Union, have established bilateral deals with individual members as well. Bahrain and Oman, for instance, both signed free trade agreements with the United States in the 2000s. These states, which are less developed and more oil-poor than their fellow GCC members, depend on these agreements as well as trade within the bloc, which accounts for more than 25 percent of their total trade. (By comparison, intra-GCC trade accounts for less than 10 percent of the total trade of Saudi Arabia, the United Arab Emirates, Qatar and Kuwait, which export the bulk of their energy assets to countries outside the organization.)

In addition to trade, currency and infrastructure integration within the bloc 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 Saudi-based Gulf Monetary Council still seeks the development of a khaleeji ("of the Gulf") currency, but its efforts have taken a back seat as GCC members grapple with tough labor reforms and low oil prices.

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.

Defense Trumps Discord

These diversification efforts have fomented competition among the Gulf states because many of the sectors in which they will find success — or already have found success - overlap. All of the GCC members, for instance, have identified shipping, airlines, downstream hydrocarbons and financial services as priority industries. Some, especially the United Arab Emirates, Kuwait and Qatar, have even made great strides in building out these areas of their economies. Part of their success lies in the fact that they are demographically distinct from Saudi Arabia, Bahrain and Oman. In fact, even though homogeneity in language and heritage bonds the GCC, each of its members is becoming more and more willing to highlight its differences to inspire nationalism among its population. Yet doing so risks ratcheting up the tension that competition has already created among the Gulf states. If these fissures continue to widen, the GCC's more economically stable states may choose to hunker down and nurture their own people while refusing to shoulder the burden of fellow members with larger economic issues to work through, such as Saudi Arabia, Bahrain and Oman.

Meanwhile, the Gulf states' diverging foreign policy visions for the bloc will undermine GCC unity even more. Qatar, for example, often finds itself ideologically isolated by the rest of the bloc, in part because it tends to more frequently support Islamist proxies and political parties in a bid to increase its own influence in the region. This dynamic was made apparent in Tunisia and Egypt after the Arab Spring, and in Syria more recently, when GCC members supported different factions in each country. Riyadh has encouraged the bloc to overcome its differences and act as a single unit that Saudi Arabia — which has the largest population and area in the GCC — could then lead. Smaller Gulf states, however, have consistently resisted Saudi dominance in an effort to avoid suffering the consequences of Riyadh's military decisions themselves. Nowhere is this clearer than the GCC-led intervention in Yemen, where the participation of Saudi Arabia and the United Arab Emirates contrasts sharply with the relative neutrality of Kuwait and Oman.

In the coming years, these sources of friction will create conflict among the members of the GCC. Individual governments 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.

Get unlimited access with a Stratfor Worldview Subscription.

Article Search

Copyright © Stratfor Enterprises, LLC. All rights reserved.

Stratfor Worldview

OUR COMMITMENT

To empower members to confidently understand and navigate a continuously changing and complex global environment.

GET THE MOBILE APPGoogle Play