DUBAI, May 9 (Reuters) – Surging oil prices mean the big Arab countries of the Gulf — especially Saudi Arabia — look set to gain financially as well as politically from U.S. President Donald Trump’s decision to pull out of the Iran nuclear deal.
In 2014, Saudi Arabia was willing to see oil prices tumble during a supply glut partly, diplomats said, because cheaper oil cut the income of arch-rival Iran, limiting Tehran’s capacity to finance proxy wars against Saudi interests in the region.
It was a painful trade-off which also hurt the Saudi economy. Now, Riyadh faces an ideal situation: Trump’s decision appears likely to reduce Iran’s oil income while giving the Gulf Arab states room to boost their own energy exports.
A United Arab Emirates economic official agreed Trump’s decision could help Arab oil exporting economies.
Higher oil income would improve liquidity in the UAE banking sector, aiding the whole financial industry despite any rise in geopolitical tensions related to Iran, he told Reuters.
In other, possibly smaller ways, Trump’s decision is bad news for some countries in the Gulf. European countries are trying to preserve the nuclear deal but it could collapse entirely, raising the danger of worse conflict in the region.
“This will impact how the region is viewed by foreign investors. There will be more negativity, more highlighting of the risks,” said one UAE banker.
Dubai, traditionally a centre for Iranian business, may suffer as companies, already cautious about trading with Iran, become more so because they see a greater risk of U.S. legal action against them. The UAE’s exports to Iran are worth about 5 percent of its gross domestic product.
Oman, which has been hoping Iranian investment will support industrial expansion plans, may suffer. Last year, Oman’s central bank signed a memorandum of understanding with its Iranian counterpart in order to boost trade.
But much trade with Iran is expected to continue, possibly through barter deals, which flourished under sanctions that prevailed before the nuclear deal took effect in 2016.
And apart from Dubai and Oman, the wealthy Gulf oil exporting states have minimal trade and investment links with Iran, meaning they have little to lose.