July 9, 2021

Climate change and diversification key factors in UAE-Saudi rivalry. After the UAE and Saudi Arabia failed to reach an agreement last week on boosting oil output, OPEC+ ministers canceled this week’s meetings, and the uncertainty has resulted in volatile trading in oil markets and speculation that the UAE might exit the alliance. During the pandemic, oil producing countries cut way back on production, and now that wealthier nations are resuming pre-Covid spending and travel norms there isn’t enough product. Every member of the OPEC+ consensus-based decision-making body agrees that oil output should increase, but they don’t agree on by how much and for how long. The UAE, who has been saddled with a low baseline of production based on 2018 calculations, is reportedly idling 31% of its capacity, the highest percentage of any OPEC+ members, and even with a shift to the 2020 baseline it will be sitting on substantial reserves. While there are political aspects at play and Saudi and the UAE are no doubt competing for similar investor profiles and status as the leading business hub in the region, it also seems that UAE – who has been diversifying its economy for longer than Saudi, is keenly aware that oil isn’t going to generate a lot of income for much longer. With an increasing demand for clean energy, prices for oil could spike in the short term but then rapidly drop, and if the UAE is forced to save its sales for the late game it will be disproportionately impacted and have fewer petrol dollars to invest in its own economic diversification along the way. Further, if UAE-Saudi tensions continue, there could be far reaching impacts on intelligence, diplomatic, and security issues in the region as diverse as the War in Yemen, the sustainability of the Abraham Accords, opposition to the Iranian nuclear deal, and internal political security within Saudi Arabia.

Lebanon’s deepening humanitarian crisis prompts aid offers from Qatar to Israel. After over 200 people died and 6,500 were injured in a still-unexplained explosion in Beirut’s port last August, Lebanon has spiraled into further political and economic disarray. Prime Minister Hassan Diab resigned in response to the outrage and Prime Minister Designate Saad Hariri still hasn’t been able to put together a new Cabinet. Lebanon, which has been in financial trouble for several years, is now experiencing fuel, medicine, and food shortages and more than half of its population is living in poverty. Despite its high proportion of arable land, Lebanon’s agricultural sector has been underdeveloped and took a further hit in April when Saudi Arabia suspended Lebanese produce imports after a shipment of pomegranates was found to contain millions of contraband Captagon pills. According to the World Bank, the financial crisis is one of the worst since the mid-1800s and could have regional and global effects. On Tuesday, caretaker Prime Minister Diab warned that a “social explosion” is pending as citizens without electricity or access to goods become desperate and fights are erupting at fueling stations and markets. Lebanese Hezbollah leader Hassan Nasrallah has asserted that the fuel shortage could be easily resolved if Lebanon would accept Iranian oil shipments and that if Lebanon doesn’t act fast he will negotiate directly with Tehran to get the oil into the Port of Beirut. Israel, who wants to keep any Iranian oil tankers far from its shores, has offered Lebanon aid, as has Qatar who has promised 70 tonnes of food a month to Lebanese armed forces. The U.S. and France, recognizing the significant role Lebanon plays as a stabilizing force in the region, have also pledged more assistance to the military.

Over the past year China has systematically attacked democratic institutions in Hong Kong and laid a devastating groundwork of fear to contain their return. According to data from the Georgetown Center for Asian Law in Washington, since the Hong Kong national security law was implemented by the Chinese last summer, there have been 130 arrests with about half of those arrested formally charged. While the total number of arrestees might not seem that large given China’s power grab, those targeted represent a wide range of offenders, sending the message that all levels of civil society – universities, media outlets, artists, activists, are vulnerable to punishment. The law is so vague and indiscriminately applied that residents of Hong Kong have remarked to the media that it might be easier to live in Beijing where the line between illegal and legal is more clearly demarcated. Earlier this week, Chinese officials held a forum where they discussed how to further expand the law, and the penalties for protest activity or “conspiracy to commit subversion” will likewise expand. China is even invoking colonial-era law to punish non-violent political dissenters with life sentences. In addition to attacking Hong Kong’s civil liberties, establishments and culture, the law targets Hong Kong’s economic ties to the West, including a significant number of technology companies. International businesses who once trusted Hong Kong’s judicial system to protect commercial rights and local staff are now worried about their safety and are contemplating departure. While China might not face direct military opposition to its sweeping human rights abuses in Hong Kong, there are indicators that countries are actively looking to limit and punish the behavior through other means. For a deeper analysis of Chinese expansion and security and business implications stay tuned for an upcoming TAG Spotlight on China.