Gulf-Europe Relations Face an Uncertain Future

It is not very clear where the Gulf region stands on the European foreign policy agenda.  There stands a number of factors preventing the EU from taking a more defined stance in relation to the GCC.  There is a fundamental matter of norm divergence where the EU’s stance on governance issues do not always coincide with the realities of the region.  The Iran issue looms large where so far Europe has failed to articulate the clear policy lines around which an opening towards Tehran could occur.  Furthermore, the election of Donald Trump as President in the United States has isolated Europe in terms of its normative approach to foreign policy, as the USA focus is now firmly on hard security matters alone.  The UK’s exit from the EU means that Europe’s relations with the Gulf region will be primarily driven at the bilateral rather than the multilateral level especially as the UK begins to define its foreign policy priorities as being separate from those of the EU. What this ultimately means is that Europe is likely to have an even less coherent approach to the Gulf region than has been the case so far.

Diverging Priorities

As far as the EU is concerned, the issue of promoting a strategic relationship with the GCC countries does not feature at the top of its attention list despite the fact that many of the current geo-political and geo-economic issues that dominate European headlines are directly tied to Middle Eastern stability in ensuring which the GCC states have a key role. Europe as a whole, remains hesitant and unsure of how to structure relations with the GCC in a mutually beneficial way.  The result is that ties between the two regions remain stuck in simple cooperation with no consensus either within Europe or the Gulf on where the relationship should be heading.

There are several reasons for this impasse. For one, both sides are preoccupied with issues closer to home. For Europe, this includes the continuing refugee crisis, the still unresolved Eurozone financial crisis involving primarily Greece but other EU states as well, and discussions about the future direction of the EU given the UK’s impending exit. Europe no doubt faces a crisis of identity. While public opinion mostly continues to support the project of an ever-closer EU, populist parties throughout the continent have begun to push back on certain idealist notions in the wake of the refugee crisis and economic uncertainty.

The situation is not very different for the GCC states either where just about every major geostrategic potential threat that the GCC states have been concerned about has materialized in recent years. This includes the rise of militant extremist movements including Daesh/ISIS; the widespread fragmentation of states throughout the Middle East including Syria, Libya, and Yemen alongside the rise of militias and non-state actors; increased concerns and doubts about the continued willingness and ability of the US to act as the core external security guarantor for the Arab Gulf states; and the move by Iran, as the main geopolitical rival of the GCC states, to take advantage of the situation and expand its influence at the expense of the Arab Gulf states. In addition to the precarious regional environment, there is also an increasingly uncertain economic outlook leading to shrinking government budgets and the need to implement restraint, if not austerity measures.  Combined with this is a large and increasingly well-educated youth segment is pushing for its voice to be heard.

Within this multitude of threats and challenges, the role of the EU as an actor that can, on the one hand, assist the GCC states in their economic reform plans while, on the other, injecting itself to reverse or even halt some of the negative external developments is unclear at best. From the economic angle, Europe is fast being replaced by Asia as far as the GCC states are concerned. Already most of the GCC’s trade with the rest of the world is with Asian states including China, India, South Korea, and Japan. In 2016, GCC-EU trade totaled €138.6 billion which was slightly less than the GCC trade with China alone.  Outside Asia, the US is emerging as the second preference of choice due to the region’s continued dependence on the US as an external security guarantor. German Chancellor Merkel hinted during her May visit to Saudi Arabia that the EU had an interest in re-starting the Free Trade Area (FTA) negotiations with the GCC, but the fact that those negotiations have remained on ice since 2008 is symptomatic of Europe’s steadily declining importance in the GCC’s overall business environment.

The same holds true for the foreign and security policy front. The two blocs’ divergence on strategic issues can be seen, for example, in the case of the nuclear agreement with Iran. For the GCC, the Joint Comprehensive Plan of Action (JCPOA) agreed to by the EU3+3 and Iran in July 2015 became a cause of concern particularly because they felt that they were never adequately consulted on the issue. While officially the GCC Foreign Ministers stated on August 3, 2015 that “once fully implemented, the JCPOA will contribute to the region’s long-term security, including by preventing Iran from developing or acquiring a military nuclear capability,” the GCC states also voiced their fundamental reservations about the deal and expressed the view that full implementation of the nuclear accord will prove difficult. These reservations have never been sufficiently recognized in European corridors of power where there is the conviction that the nuclear deal holds within it the potential for a more peaceful Middle East.

The GCC states, however, disagree with this view.  The GCC states are in no doubt that Iran will use the period of the agreement to continue to pursue its research activities in the nuclear field and thus enhance its capabilities. Here, the hope voiced by many in Europe that domestic change could happen in Iran that would change the internal dynamics when the nuclear agreement expires is seen as “naïve” hope.  There also exists deep concern in the GCC countries about Europe’s perceived willingness to look the other way regarding possible Iranian transgressions of the accord. In this context, the GCC states are not convinced that Europe, and Russia as another signatory to the accord, will deal effectively with potential violations by Iran. Instead, it is thought that Europe will provide Iran with the benefit of doubt in order not to risk a possible escalation in tensions that could in turn endanger the JCPOA.

Structural Limitations

Current events and developments provide a rather bleak outlook, as far as functional drivers of the GCC-EU relationship are concerned. At the same time, structural factors also ensure that a number of differences and incompatibilities remain in place. This includes the fact that the EU and the GCC are institutionally two quite different organizations trying to build an institutional set of ties; that the bilateral approach to relations of individual member states on both sides tends to dominate the multilateral approach; and that there are often different expectations put forward vis-à-vis the other side regarding policy priorities. Each of these factors plays a role in determining the effectiveness and forward movement of building relations between the EU and the GCC. It is these differences that prevent a truly functional partnership from emerging.

Within this context, the model character of the EU in terms of regional integration has begun to fade. Until recently, the European integration experience was viewed largely positively by the Arab Gulf states. Given the history of antagonistic regional relationships and the existing mutual (mis)perceptions between the GCC and their neighbors Iran and Iraq, Europe was seen as potentially having something valuable to offer the Gulf given its own history of strife and national animosity.  But with the multitude of challenges facing the EU, it has become increasingly difficult to identify where Europe can bring actual value to the priority issue list for the GCC states.  The inability to produce tangible results in bilateral ties has resulted in the GCC, to some degree, turning away from the EU and looking at other models of regional integration such ASEAN and MERCOSUR. While the GCC has moved on to capture the momentum of change and globalization, Europe has treaded mostly in the same place. The result is that whereas in the past the GCC states have looked toward Europe for a variety of reasons – from trade, technology, and education to even foreign policy issues – the level of determination to build and maintain wide-ranging strategic ties with Europe has declined.

BREXIT

The UK decision to leave the EU is going to have a significant impact on the furthering of EU-GCC relations. As part of the arguments put forward for the move to leave the EU, the British government stated that this would allow the UK to have greater sovereignty and regain complete control over its affairs – domestic and external. Trade is in this regard bound to be a key area with Prime Minister Theresa May and other members of her government making it no secret that they will seek new trade deals with numerous partners around the world including the GCC states. Prime Minister May attended both the GCC summit meeting in Bahrain in December 2016 and visited Saudi Arabia in early April 2017 during which she stated her readiness to engage in trade talks that could see agreements being implemented once the formal process of disengagement with the EU has been accomplished. She stated that the countries of the Gulf were “important for us in terms of security, they are important for us in terms of defense and yes, in terms of trade … Gulf security is our security and Gulf prosperity is our prosperity.”  It was also reported that British Chancellor of the Exchequer, Philip Hammond, met with his counterpart from Qatar, Sherif al-Emadi, to discuss a draft free trade treaty text to be ready in December 2017.

In this context, the UK is introducing itself to the GCC states in its new form and as an alternative to the rest of Europe. This, in turn, could increase competition over the GCC states among European countries. The GCC states, in turn, are certainly responsive to such overtures given their own efforts for economic diversification and seeking investment opportunities both inside the Gulf and in terms of foreign direct investment abroad. Trade between the UK and the GCC stood at $37.5 billion in 2016 and Qatar has already announced a plan to invest more than $6 billion in Britain over the next five years.

The fact that as far as the GCC is concerned, the free trade deal with the EU has never materialized despite being discussed for more than 25 years, and with negotiations being suspended since 2008, there is an impetus for concluding an FTA with the UK. For the GCC states, being able to complete a framework agreement with the UK, that would become active once its exit from the EU is formally agreed upon, would be a signal to the EU that Brussels needs to rethink its strategy when it comes to a broader EU-GCC deal. At the same time, it is premature to argue that UK can advance this issue significantly given that the exact terms of any future trade deal cannot be decided upon until the UK’s future relationship with the EU becomes clear. This constrains the UK’s capacity in the medium term. At the same time, it is clear that as far as a common EU Foreign and Security Policy is concerned the departure of Britain from the EU severely impacts the role the latter will play going forward especially in an environment such as the Gulf region.

The Way Ahead

Given the volatile environment in the entire Middle East, alongside the relatively dim prospects for conflict resolution in the region, GCC-Europe relations are likely to experience greater periods of tension rather than moments of constructive engagement. Far from relations between the EU and the GCC states continuing along similar trajectories as in the past, there is the likelihood of increased divergences in outlook and policy priorities.

This does not mean that some of these trends cannot be reversed. But in order to do so, Europe and the GCC must begin to better understand the limitations which impact their relationship and focus on concrete areas of cooperation that can give their ties a better foundation. To state that relations can develop into the institutional equivalent of a strategic partnership ignores the realities on the ground. Nevertheless, given that the EU and the GCC do share common interests, including a commitment to the stability and security of the critical Gulf region, a determined effort to divide those interests into functional parts should be undertaken in an attempt to regain the initiative. Such an effort can include working at both the bilateral as well as multilateral levels to structure ties: for example, better coordination of aid programs to support economic development in particular in the Mediterranean region; devoting more human resources to strengthening the overall relationship; and focusing on areas of cooperation such as renewable energy, education and research, and business to business ties.

Yet, it is on the issue of foreign policy and regional security that the true effectiveness of EU-GCC relations will be measured. On this front, coming to an understanding on the steps to be taken to de-escalate tensions and return the Gulf region to a more positive forward trajectory will prove much more difficult. This is primarily due to the fact that zero-sum thinking prevails in much the Gulf providing only little openings on which compromises put forward by the EU can be forged. For its part, Europe must understand clearly that the Gulf region is going through multi-level transitions that are bound to be disruptive and that whatever happens in the region will have an impact beyond the regional borders. It is thus imperative that Europe begins to engage with all regional actors in a more systematic and strategic manner than has been the case so far.