The heightened interest in cryptocurrencies across the Gulf is taking place alongside global efforts to both regulate digital assets and attract cryptocurrency firms.
On March 19, Saudi Crown Prince Mohammed bin Salman will begin his first visit to the United States as presumptive heir to the throne. The extensive trip is scheduled to run through April 8 and involve visits to multiple cities. The crown prince will be aware of the need to polish his image in the United States since concerns regarding the recent corruption crackdown and detention of prominent Saudis, the humanitarian crisis in Yemen, and other issues could impact diplomacy and investment. Hence the visit is scheduled to include a measure of personal outreach by MbS to the U.S. public and opinion makers, including meetings with the editorial staffs of major newspapers and a scene-setting interview with the CBS television program “60 Minutes.” This visit comes at a crucial time, with Saudi social and political changes and economic reform gaining steam and Trump administration policies toward Iran growing more confrontational. Despite a general improvement in relations, or at least in atmospherics, between Washington and Riyadh since Donald J. Trump became president, several issues are unresolved and even most areas of convergence are works in progress requiring careful attention. Here’s what’s likely to dominate the conversations.
GCC Unity and a Potential Summit
The United States is seeking a resolution of the Qatar boycott, while the quartet of countries imposing the embargo, led by Saudi Arabia and the United Arab Emirates, appear content to slowly squeeze Doha into making significant concessions. Washington is uncomfortable with the boycott for several reasons. First, it threatens the interoperability of the key U.S. bases and other military assets in the countries in question, particularly Qatar and Bahrain. Second, Gulf Arab disunity plays into the hands of Iran, which, Washington will argue, ought to be facing the most united front possible. Third, Washington has long promoted greater integration and interoperability among Gulf Arab defense assets and institutions, with an eye to the creation of an integrated missile defense system. The Qatar boycott pushes in the opposite direction. Fourth, Washington has made it clear that it does not share the quartet’s view of Doha as an intolerably bad actor even while it is urging modifications in Qatari conduct.
The administration has been pressing the issue in calls with Gulf Cooperation Council leaders, trips to the Gulf region by U.S. envoys, and additional trips for UAE and Qatari leaders to the United States. While the boycott is into its 10th month, it is not high on the agenda of the boycotting countries, particularly Saudi Arabia, who have moved on to what they see as more urgent issues. The reverse is true for Qatar. The Saudis will also argue that the boycott is designed to promote meaningful Gulf Arab unity, which will only be possible if Qatar ends behavior that directly threatens the interests of its GCC allies.
Qatar has only one obvious source of leverage with the quartet: U.S. pressure to end the boycott. Consequently, Doha has worked assiduously to strengthen ties with Washington, including through a recent strategic dialogue with senior U.S. policymakers, and extensive overtures to the policy-framing community in Washington. Outreach has even extended, controversially, to winning over previously unfriendly parts of the Jewish-American community. Qatar has also gained considerable ground by promising the United States greater cooperation on counterterrorism, a military base expansion, civil aviation, energy, and a range of other issues. And the Pentagon, which always sought a quick resolution to the standoff, appears to have joined with the State Department to overcome the White House’s inclination to bitterly criticize Qatar for supporting extremism and financing terrorism. Any impact on the U.S. stance resulting from the replacement of Secretary of State Rex Tillerson, who was viewed by the quartet as siding with Qatar, with CIA Director Mike Pompeo, remains to be seen.
The Trump administration is hoping to announce another GCC-U.S. summit meeting, possibly at Camp David, later this year. But Trump has made it clear that the atmosphere will have to be much improved for him to participate in such a meeting. That can’t happen if the boycott remains unresolved. Washington has made it clear that it isn’t considering alternatives to its present array of forces in the Gulf, including Al Udeid Air Base in Qatar, which is the forward operating headquarters of U.S. Central Command and hosts at least 10,000 U.S. military personnel.
By raising the summit issue, Washington will be pressing Riyadh for a resolution to the boycott. But the United States is not making any specific aspect of relations with any of the parties contingent on a quick resolution, leaving it with little apparent leverage with either side. Unless the Trump administration has quietly secured certain commitments from Qatar and is prepared to be a co-signatory to a new agreement between Gulf Arab countries, it’s not clear what Washington could do to incentivize the quartet to abandon its boycott. U.S. diplomacy may require the full array of meetings with Gulf Arab leaders planned for the coming weeks, and possibly much more than that, before a resolution can be achieved.
Saudi Arabia’s Nuclear Program
One of the newest and most complex topics that will certainly be discussed during the visit are Saudi Arabia’s plans to develop its own nuclear energy industry in order to focus its oil reserves on generating foreign exchange. Both sides will be looking for ways to allow Saudi Arabia to make U.S. companies the core of a Saudi nuclear energy program, but significant problems must be overcome. There are serious concerns that Riyadh may also seek to develop a nuclear capability that could position it to transition to nuclear weapons development should Iran return to its own, far more advanced, nuclear program. Therefore, Washington has been seeking Saudi acquiescence to a set of “gold standard” commitments, known as 123 Agreements, limiting the country’s options far beyond its existing commitments from the Non-Proliferation Treaty (NPT). These involve not transferring nuclear technology to any third party, and, crucially, not enriching uranium or reprocessing plutonium. Saudi Arabia believes it possesses significant reserves of uranium that it hopes to mine and process, thereby providing another source of valuable energy.
The United States notes that the UAE readily agreed to the gold standard restrictions when it began purchasing U.S.-made reactors to generate electricity. But the UAE does not possess large domestic reserves of uranium. Saudi Arabia theoretically has the option of seeking to purchase civilian nuclear technology, such as reactors, from Russia, Taiwan, South Korea, or others. There are even concerns that Saudi Arabia could turn to another ally, Pakistan, which is a nuclear power that is not a party to the NPT and has a history of selling nuclear technology outside of normative international frameworks.
Such anxieties have reinforced Washington’s determination to try to ensure that Saudi Arabia’s nuclear program remains peaceful, is centered around cooperation with the United States, and does not lead to any form of nuclear weapons proliferation. There is speculation that the Trump administration may waive or water down the gold standard demands in order to ensure this outcome. Saudi Arabia implies it will not accept fewer prerogatives than Iran has secured through the Joint Comprehensive Plan of Action, the international nuclear agreement, which does not prohibit Tehran from enriching uranium for civilian purposes. However, the JCPOA does require Iran, while its terms are in effect, to limit all such activity and submit to exceptionally intrusive inspections and other terms Saudi Arabia is unlikely to consider. One possible compromise would be to decouple the issues of enrichment and reprocessing, with Saudi Arabia enriching its own uranium, but only to a civilian and nonweapons grade, while not reprocessing plutonium, which would help ensure the program does not contain a stealthy military component.
Washington continues to be uncomfortable with the humanitarian impact of the war in Yemen. Immediately after Saudi Arabia criticized the U.S. recognition of Jerusalem as Israel’s capital as “unjustified and irresponsible,” the White House issued a terse statement by Trump asking Saudi Arabia to do more to facilitate humanitarian relief for the Yemeni people. Trump can leverage long-standing U.S. support for the Saudi-led coalition, including uninterrupted weapon sales, to insist that Washington has been more helpful to Riyadh on Yemen since he was elected. The United States is also likely to point to ongoing concern in Congress as a reason for maximizing humanitarian relief efforts in Yemen. Saudi Arabia is likely to ask for greater cooperation against Iran’s and Hezbollah’s support for the Houthis and on the interdiction of weapons shipments to the rebel group.
Israeli-Palestinian Peace Process
The Trump administration is reportedly preparing an effort to revive Israeli-Palestinian negotiations and unveil a plan for Middle East peace. From its earliest days, the Trump administration has been discussing an “outside-in” approach bringing Arab countries, especially Saudi Arabia, into the process in order to encourage Israel to make concessions toward the Palestinians and provide Palestinians support and political cover for their own compromises. However, Trump’s statement in December 2017 recognizing Jerusalem as Israel’s capital, and subsequent statements that he has “taken Jerusalem off the table,” make resuscitating Israeli-Palestinian negotiations far more difficult. Saudi Arabia’s official reaction to the Jerusalem announcement was strikingly negative.
Mutual concerns about Iran provide a clear incentive for Gulf countries to want to explore prospects for more cooperation with Israel. Small steps toward closer ties are visible, but it’s not clear that the Saudi and other Arab governments would be willing or able to insist that Palestinians enter formal talks if the terms are unacceptable to them. The politics of the Palestinian issue also greatly limit how far countries like Saudi Arabia can and will go in developing closer bilateral ties to Israel. That is all complicated by mounting Palestinian fears that the traditional final status framework for negotiations has been unilaterally restructured by the United States in favor of Israel through pronouncements on Jerusalem. Without a robust effort to repair the diplomatic and political contexts, it’s unlikely that new talks can be convened, let alone successfully concluded.
Saudi Arabia and its allies have been heartened by the tougher line the Trump administration has adopted toward Iran. Saudi perceptions of Iran as a primary national security threat have been exponentially increased by a series of attempted missile attacks on Saudi cities launched from Yemen by the Houthis. Saudi officials have said that these attacks constitute “acts of war” by Iran against Saudi Arabia. Riyadh will make the case that this escalation is not only a threat regarding Yemen but part of a broader pattern of regional destabilization. The Saudis will press for an integrated U.S.-led response designed to force Iran to change its behavior and contain and, ultimately, roll back the expansion of its influence in many parts of the Arab world.
The Trump administration seems to largely share this view and, crucially from a Saudi perspective, has linked the JCPOA with the same pattern of Iranian conduct that Saudi Arabia finds so threatening. Trump and his aides have been harsh in their criticism of the JCPOA and are threatening to withdraw from the agreement if it is not renegotiated or “fixed.”
But the second of the Trump administration’s main criticisms of the JCPOA dovetails precisely with Riyadh’s misgivings: its failure to address Iran’s missile testing and development and Tehran’s support for nonstate actors. Saudi Arabia will greatly encourage these efforts, particularly considering recent initiatives by European countries to craft additional agreements with the United States that address these concerns. The missile issue links worries about Iran’s nuclear program, which would rely on missiles to form a credible threat, with regional issues, especially the menace of the Houthis’ Iranian-supplied rockets. However, Saudi Arabia is likely to warn Washington against falling into a trap whereby Iran can blame the United States for any collapse of the agreement and then cite that as an excuse to resume nuclear research and development as well as persist with efforts to expand its regional influence.
Syria and Iraq
Both Saudi Arabia and the United States have viewed the consolidation of the strategic position of Iran and its proxies in Syria and Iraq with alarm. The U.S. military role in Syria has been expanding from an exclusive focus on the Islamic State in Iraq and the Levant to countering the Iranian presence in Syria. The emphasis is on preventing the creation of a land bridge linking Iran with Lebanon. There is not much Riyadh can accomplish alone in Syria. But it might be able to do more in cooperation with the United States, especially if Washington and Riyadh can convince Moscow and Ankara it’s not in their interests to have Iran consolidate a dominant position in Syria. Both Saudi Arabia and the United States have been squeezing Hezbollah with political pressure in Lebanon and new sanctions, though it remains unclear how coordinated these efforts are, or could become.
In Iraq, Saudi Arabia’s diplomatic and political outreach to key constituencies, including Sunni and Shia Arab leaders as well as Kurdish groups, are making modest but steady inroads against Iran’s former domination of much of Iraqi politics. Washington, Riyadh, and their allies in the region will have to work together to succeed in promoting an Iraqi national agenda that is much more independent of Iran’s influence without false hopes that Tehran can be driven out of Iraq. Washington retains a significant military and political presence in Iraq, but much of it has been focused in recent years on defeating ISIL. Reconstruction in Iraq, particularly in the Sunni Arab areas liberated from ISIL, will be key to this effort. At a recent donor conference in Kuwait City, the Trump administration refused to contribute financially to Iraqi reconstruction but extended a $3 billion credit line. Gulf countries pledged significant donations, including $1.5 billion from Saudi Arabia.
Trade, Investment, and Technology
Saudi Arabia is trying to diversify its economy and move away from dependence on oil revenue, and therefore is looking for international investment opportunities and foreign investment in the kingdom. A possible initial public offering of a portion of Saudi Aramco, which is one of the world’s most valuable companies, is still being strongly considered. The Trump administration has already pressed Saudi authorities to list any Aramco stock offerings on the New York Stock Exchange, and that’s likely to be reiterated at upcoming meetings. Saudi officials will be hoping to facilitate more U.S. investment in Saudi Arabia and looking for investment opportunities for their Public Investment Fund in the United States. On an earlier U.S. trip, MbS visited Silicon Valley to encourage partnership in high-tech and other growing industries. This extended visit will also take MbS to New York City (organized by Michael Bloomberg), with additional stops in Seattle (hosted by Bill Gates), San Francisco, Los Angeles, Houston, and Boston.
Two Capitals in Transition
Riyadh is not the only capital in transition. MbS will be meeting with a Trump administration that, in the latest of innumerable shake-ups, is replacing its secretary of state with its CIA chief. Riyadh and its allies in the quartet will certainly welcome this change. They had long believed Tillerson was unduly sympathetic to Qatar regarding the boycott. But any practical impact of this shift on U.S. policy remains to be seen. Both Washington and Riyadh feel the relationship, which had grown frayed during the era of former President Barack Obama, has been effectively repaired. But now the administration in Washington and the crown prince in Riyadh will be seeking to move beyond reacquaintance, reassurance, and optics to the territory of practical give and take. That can certainly bring partners closer together. But it can also highlight differences. Both sides have made it clear they like and agree with each other. But how far each is willing to go to support the other’s agenda and priorities is about to be tested.
The regulations introduced to travel and civil status laws will limit the state’s ability to intervene in the private sphere.
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