After signing a US$142 billion (£107 billion) arms cope with Saudi Arabia, Donald Trump mentioned the US bond with that nation was “more powerful than ever”. He was additionally reportedly fairly happy with the present of a personal jet from Qatar.
However these preparations are simply the most recent developments in an extended historical past of the Gulf monarchies supporting the structure of American international energy. And whereas the six Gulf states (Saudi Arabia, United Arab Emirates, Kuwait, Qatar, Bahrain and Oman) have lately began redirecting their power and commerce ties eastward, particularly in direction of China, they continue to be deeply embedded within the US-led monetary order.
As I discover in my latest ebook, Crude Capitalism, the Gulf states have been instrumental within the rise of American international financial dominance.
With oil rising because the dominant fossil gasoline by means of the second half of the twentieth century, the Gulf’s nationalised petroleum industries generated huge quantities of earnings. A lot of this was invested again into the US monetary markets, notably treasury bonds (basically a long-term mortgage to the US authorities). This gave the US entry to low cost overseas capital and bolstered the worldwide dominance of the greenback.
Put merely, the Gulf states weren’t peripheral to the US’s rising monetary energy – they have been a vital contributor.
This association additionally concerned a political cut price: US army safety for the Gulf monarchies in alternate for funding flows and power stability. The consequence was an internet of US army bases throughout the area and a deep alignment between authoritarian Gulf regimes and western strategic pursuits.
However a lot has modified prior to now 20 years. China’s rise as a world manufacturing hub has pushed an enormous enhance in oil consumption, shifting the course of the Gulf’s oil exports away from the US and western Europe in direction of China and east Asia.
These power ties have been accompanied by a lot deeper commerce interdependence and an enormous enhance in Chinese language investments within the Gulf. In 2005, China was chargeable for simply 9% of the Gulf’s imports. As we speak, that determine is over 20%, whereas the US and EU’s share has fallen from 45% to 16%. China has additionally lately overtaken the US as the biggest overseas investor in Saudi Arabia.
From Beijing’s perspective, the Gulf is a crucial power lifeline. From the Gulf’s facet, China’s persevering with demand for oil, fuel and petrochemicals is a crucial a part of its financial future.
For the second, that financial state of affairs seems fairly strong. In 2024, Gulf international locations held round US$800 billion in overseas reserves (foreign exchange and different property), which is greater than India or Switzerland. Their sovereign wealth funds (a state owned funding fund) handle one other US$4.9 trillion of property.
Non-public wealth, together with that held by ruling households, stood at US$2.8 trillion in 2022, and is anticipated to succeed in US$3.5 trillion by 2027.
A lot of this cash is invested domestically, in sectors together with infrastructure, actual property and renewable power. However an astonishing quantity flows instantly into US markets.
Oil be again
In response to US Treasury information, complete Gulf holdings of American securities (bonds, shares and company debt) rose from US$611 billion in 2017 to over US$1 trillion in 2024. Outdoors of Canada and monetary hubs like London and Eire, the Gulf is now the biggest overseas investor within the US inventory market.
One other route by means of which Gulf wealth flows again into the US is by way of army procurement. In response to the Stockholm Worldwide Peace Analysis Institute, the Gulf states accounted for 22% of all international arms imports between 2019 and 2023 – greater than every other area on this planet.
Riyadh, cash to construct.
Kashif Hameed/Shutterstock
The US provides the overwhelming majority of those weapons. On this method, Gulf spending helps the American army business, and in return, these states grow to be extra carefully tied to the US army’s umbrella.
These deep army, monetary and strategic ties assist clarify the true focus of Trump’s go to to the Gulf. A lot of the dialogue may have centred on large funding pledges made by Gulf states to the US – together with Saudi Arabia’s promise to speculate as much as US$600 billion, and the UAE’s dedication to a US$1.4 trillion funding over ten years.
And such pledges mirror a broader agenda which entails increasing offers in synthetic intelligence, crucial minerals, power infrastructure and superior manufacturing.
So Trump travelling to the area isn’t just about non-public jets and spectacle. It’s concerning the persevering with relevance of a structural relationship important to American energy, and a deepening monetary integration between the Gulf and the US.
For even because the Gulf reorients its power flows eastward, it stays deeply tied to US finance, the US army business and US property. In an period of weakening US international energy – and the attainable spectre of a deeper conflict with China – that is what’s going to outline Trump’s go to.
