There is a new news about every month about how different Gulf states may devote incredible amounts of money, hundreds of billions of dollars, if no billion, in deals made with the new Trump presidency in the US. Saudi Arabia announced in January that its investments in and trade with the US would increase to over$ 600 billion ( €530 billion ) over the next four years. Then, according to US President Donald Trump, the sum could reach$ 1 trillion ( €884 billion ). Additionally, recent reports suggest that the US will soon provide Saudi Arabia with an arms package worth more than$ 100 billion. The United Arab Emirates announced in March that they would invest more than$ 1.4 trillion in the US over the next ten years, a move that was not overdone. According to analysts, the pledge, which will concentrate on manufacturing, semiconductors, artificial intelligence, and power, is one of the largest international funding commitments in US background. Trump is scheduled to travel to Saudi Arabia, the UAE, and Qatar in mid-May to more discuss all of those arrangements. However, there’s a problem with what the Gulf state refer to as a kind of great “investment diplomacy”: falling oil prices. Middle Eastern countries who rely on fuel for their federal income are faced with lower oil prices due to COVID pandemic. Although several oil-producing countries have been attempting to diversify their federal income aside from hydrocarbons to sectors like tourism, financial services, and technology, they are all still heavily reliant on them. Tim Callen, a visiting fellow at the Arab Gulf States Institute in Washington and expert on the economies of the Gulf states, said,” There have been very impressive ] Saudi changes in the last ten years. ” Oil is still the beat of the market, but when oil goes down, it creates an environment that is not as beneficial as when it is higher,” Trump said. On April 2, Brent crude, an oil that is frequently used as a global benchmark, was just over$ 74. It dropped to around$ 65 per barrel within a week after receiving tariff announcements, and it hasn’t really recovered since. According to rumors of a worldwide recession brought on by chaotic US plans, oil prices continued to decline. They decreased even further this year as a result of OPEC +’s agreement to pump more oil, along with the Organization of Petroleum Exporting Countries and its supporters led by Russia. Lower costs come down more quickly on the market and less of it is in need, to put it simply. Analysts have also released new forecasts over the past week, confirming that petrol prices will probably be reduced into 2026. These countries ‘ dependence on fuel to fund their national budgets may encounter issues as a result of these forecasts. The International Monetary Fund has stated that Saudi Arabia needs oil prices of around$ 91 per barrel to balance its planned budget in 2025. Between$ 43 and$ 45, the sole amount required for the UAE and Qatar is between$ 43 and$ 45. The region’s richest oil producers naturally have different financial commitments, in addition to “investment politics.” Saudi Arabia has to pay for its long-term vision 2030, which is a long-term strategy to upgrade the nation and expand away from oil. In addition, the Gulf state are being asked to commit to local tasks, such as rebuilding Lebanon, helping Egypt through its financial problems, and, if the fight breaks out, constructing rebuilding in Gaza. Saudi Arabia has also stated that it will give the World Bank’s$ 15 million bill to the fresh Syrian government. What effects will this have on the large purchases in the Gulf? Callen told DW that” UAE and Qatar are in a unique position because even at these petrol prices they may make current account surpluses.” ” But” Saudi Arabia won’t, though. Therefore, there will definitely be pressure on Saudi investing, from the local reform agenda to the commitments that President Trump will seek to achieve. The amount is$ 15 million, according to him, and it would be “reasonably feasible” for them to do so with Syria. A “much larger commitment,” Callen remarked. Funding more than$ 50 billion in reconstruction in Gaza would be a different. In the past, Callen said, the Saudis have tended to cut back on spending when fuel prices have decreased, but in terms of commerce, expense, and restoration in the region, at these petrol prices, there will have to be some pretty cautious decisions about where priories lie. There is a need for new receiving dollars, according to Karen Young, a senior research professor at Columbia University’s Center on Global Energy Policy, because of the government’s twin deficits in both the macroeconomic account and the current accounts, which determine how much the government is spent. Some experts believe that the Gulf states ‘ diversification away from oil may accelerate if that doesn’t get met with increasing export receipts. A location like Saudi Arabia would be more appealing as a manufacturing hub in the Middle East, for instance, given the lower taxes the Trump administration has imposed on them. The issue with those tips is that the oil wealth will be used primarily to finance Royal growth strategies, and there will be less of that. Promises to Donald Trump? There are essentially no fresh funds to invest unless you borrow, according to Callen.” Without the current account surplus, there are no new resources to unless you borrow,” said Callen. There’s another element, also, as Saudis will either have to borrow money from international capital markets or they will have to reallocate their investments. Gulf state made related big-spend promise to Trump when he was in company last year. However, the majority of them didn’t come to fruition. According to researchers, this is the environment in which these new pledges may be viewed. The UAE would spend more than a third of their federal income in the US if they invested$ 140 billion annually over the course of the next ten years. Neil Quilliam, a brother in Chatham House’s Middle East and North Africa program, told Arabian Gulf Business Insight last week that that is” no viable.” Quilliam said the goal of the commitment is more to send a message to the Trump administration. And with fuel prices falling, Callen claimed that “it’s yet less likely that these promises can be kept,” even worse. He noted that if Saudi Arabia invests or spends$ 600 billion in the US over the next four years, that would be equivalent to$ 150 billion a year, or 12 % of its own annual gross domestic product. Callen came to the conclusion that” that’s just unrealistically huge.”
