Friction in bilateral relations between Saudi Arabia and Morocco abruptly flared into a minor diplomatic spat in early February, when the Moroccan ambassador to Saudi Arabia was recalled from Riyadh for consultations in Rabat. The boycott of Qatar, the Saudi-led war in Yemen, a Moroccan bid for the 2026 World Cup, and an Al Arabiya documentary involving the Western Sahara issue have provided abundant fuel for political disputes between the two monarchies. Yet in the week leading up to the diplomatic rift, the Saudi-Moroccan Business Council met in Casablanca to explore areas for strengthening commercial collaboration. Growing economic engagement between Saudi Arabia and Morocco offers an incentive for both sides to prevent simmering political tensions from boiling over into commercial spheres.

A series of tit-for-tat events since the 2017 Gulf crisis is testing Saudi-Moroccan relations. Morocco’s attempts to remain a neutral actor during the Saudi-led boycott of Qatar frustrated officials in Riyadh. Meanwhile, Saudi Arabia voted for a North American bid to host the 2026 World Cup instead of supporting Morocco’s proposal, and Moroccan Foreign Minister Nasser Bourita announced on Al Jazeera that Rabat was re-evaluating its role in the Saudi-led coalition fighting in Yemen. Most recently, the Saudi news channel Al Arabiya aired a documentary questioning Morocco’s sovereignty over the Western Sahara region – a move that appeared to prompt the Moroccan ambassador’s return to Rabat.

Despite these recent tensions, economic ties between Saudi Arabia and Morocco have deepened significantly over the past three decades. Total trade volume between the two countries hovered between $1.6 billion and $2.3 billion during the 1990s before rising to $11.6 billion in 2011 following high global oil prices. An invitation for Morocco to join the Gulf Cooperation Council in 2011, which would have entitled the North African monarchy to partake in the bloc’s economic coordination framework, represented an apex in prospective cooperation. Morocco’s lukewarm reception to the invitation and internal disagreements among GCC states over the extension of membership rights ultimately prevented the proposal from materializing. Rather, Morocco received substantial economic aid from Gulf Arab states: Saudi Arabia joined the United Arab Emirates, Qatar, and Kuwait to provide $5 billion in economic aid to Morocco between 2012 and 2017.

The Saudi-Moroccan economic relationship goes further than economic aid grants. Improving the quantity and quality of Saudi investments in Morocco remains an important pillar of this relationship. Saudi Arabia served as Morocco’s fifth largest inward foreign direct investment partner in 2017, contributing 6.1 percent of total foreign direct investment. Notably, the UAE ranked as the third largest foreign investor and contributed 10.3 percent of total foreign direct investment into Morocco. The combined Saudi and Emirati portion of foreign investments in Morocco is surpassed only by France and the United States, which respectively contributed 31.4 and 21.4 percent. In late 2015, Saudi Arabia agreed to invest $22 billion in Morocco’s military industry.

Investments from Saudi Arabia have helped Morocco enhance its connectivity and commercial infrastructure, a key pillar of the country’s economic development strategy. The Saudi government invested in the nearly $2 billion TGV high-speed train project, a decadelong development project that will cut the travel time between Casablanca and Tangier in half. Businesspeople in the two countries hope to further improve maritime connectivity. The Saudi-Moroccan Business Council is actively campaigning for the development of a direct maritime shipping lane between Morocco and Saudi Arabia. As trade accounts for nearly 80 percent of Morocco’s gross domestic product, enhancing trade linkages and securing investments in the requisite infrastructure are critical for the long-term health of the Moroccan economy.

Morocco has historically looked toward Europe for its primary trading partners – Spain and France are its largest. Saudi Arabia ranked as Morocco’s 10th largest import partner in 2016, accounting for a modest 1.9 percent of Moroccan imports, but the Gulf Arab state remains a key supplier of energy. The vast majority of bilateral trade volume consists of Saudi exports to Morocco, of which around 86 percent is comprised of crude oil and petroleum products. Approximately 90 percent of Morocco’s energy needs are imported, and therefore improving the security of energy supplies and stability of prices remain strategic priorities for the country. Morocco has taken steps to diversify its energy mix by improving efficiency and promoting renewable energy, but the country will nevertheless rely on energy imports to meet future demand, which is expected to double between 2015 and 2030.

Even Morocco’s attempts to diversify energy sources – such as the country’s goal for renewable energy to constitute 42 percent of its energy mix by 2020 – reveal the influence of Saudi capital. The Moroccan Agency for Solar Energy, a semi-governmental entity charged with developing the country’s renewable energy sector, works closely with the Saudi-based ACWA Power Group, and signed a 20-year power purchase agreement for the development of three photovoltaic solar facilities in Ouarzazate, Laayoune, and Boujdour. The latter two projects are in the contested Western Sahara region. Earlier in 2016, the Saudi ambassador to Morocco expressed support for Moroccan territorial claims to Western Sahara when announcing that a delegation of Saudi investors would visit the “Moroccan Sahara.” ACWA Power also collaborated with the Argan Infrastructure Fund, an entity founded by European and African development banks, to develop the Khalladi Wind Farm in Tangier.

Beyond the energy sector, tourism serves as a potential sphere for enhancing commercial cooperation between the two countries. The tourism sector contributes 8.1 percent to Morocco’s GDP, and the country’s Vision 2020 aims for Morocco to be among the world’s top 20 most-visited tourist destinations by 2020. Saudi King Salman bin Abdulaziz’s annual summer holiday to Tangier in 2017 cost a reported $100 million; the figure equates to approximately 1.3 percent of Morocco’s total annual tourism revenue. In an attempt to portray Saudi Arabia as a growing destination for domestic tourism, King Salman opted to spend his 2018 summer holiday in Neom, a Saudi megacity currently under development. Nevertheless, Saudi citizens spent an average $23.5 billion per annum on tourism outside the kingdom in 2016 and 2017, leaving plenty of tourism revenue available for Morocco to capture.

The Saudi-Moroccan Business Council has promoted a variety of other commercial initiatives. For example, the council aims to establish an investment fund and a joint industrial zone, which reflects a recent model of development projects pursued by Saudi Arabia, Egypt, and Jordan. Other initiatives include forming a committee for joint investments, organizing a permanent exhibition in Jeddah and Riyadh on key sectors of the Moroccan economy, and developing stronger commercial ties with Africa. While the Horn of Africa garners a great deal of Gulf attention as a gateway into the continent, Saudi businesspeople likewise view Moroccan counterparts as viable partners for exploring investment opportunities in African markets. In late January, the Saudi-Moroccan Business Council planned a joint trip to Gabon to explore opportunities related to food security.

The economic relationship between Saudi Arabia and Morocco is far from indispensable, but, despite the geographic distance between the two countries, it has the potential for mutually beneficial growth in the coming years. The current Saudi-Moroccan tensions and the underlying political determinants may disrupt this growth. However, there are many commercial actors quietly hoping that tensions subside and economic forces remain unhindered.