transcript
Speaker 1:
[00:00] We have now had almost two months of war with Iran, and the toll for civilians, for critical infrastructure across the Middle East, and to the broader global economy are clear. But several key questions remain. We have tentative ceasefires holding between both the US and Iran, and between Israel and Lebanon, but the status of these is under question. Just today, Vice President Vance delayed his trip to Islamabad for the second round of high-level negotiations with Iranians. But today, we're not going to be looking at the questions of what comes tomorrow and in the coming week. We're looking further ahead. After the end of this conflict, what will this mean for the economies of the Middle East? What will it mean for the security landscape across the region? How will diplomatic and political ties shift? And how will the Middle East's geopolitical role have been transformed? Today, we are asking the question, has the Iran War transformed the Middle East's future? Welcome to a special live episode of State of Play. We have an all-star cast of Middle East program experts to take us through these questions today. I am very excited to be joined by Susan Ziadeh, who was previously US. Ambassador to Qatar, as well as several other senior positions in the US government, and is a non-resident senior advisor with the Middle East program. We also have Vali Nasr, who is the Majid Khedori Professor of International Affairs and Middle East Studies at SICE at Johns Hopkins University, also a senior non-resident advisor in the Middle East program. Joining us remotely, we have Michael Ratney, who most recently served as the US. Ambassador to Saudi Arabia, who is also a non-resident senior advisor with the Middle East program. And of course, Mona Yacoubian, the director and senior advisor in the Middle East program. So lots of senior advisors. I'm grateful because I'm going to be asking you some really big questions today about how the region has already been transformed. What is actually, you think is still going to be constant when the dust settles. And I want to start with the economic piece because I think many of the economic implications are perhaps becoming a little bit clearer. But maybe to start off with, can we focus up with Iran and Vali? How do you imagine Iran's economy will look after at least, we've had 41 days, I think so far, of conflict. How do you expect the contours of the economy to look after this war?
Speaker 2:
[03:06] Well, Iran's economy was already under maximum pressure sanctions, and it was in very dire straits. That was why there was a massive uprising in Iran in January, 2026 to protest the conditions of the economy and the state of the country. And now you've had war, which has, by Iran's own estimates, until now has incurred $270 billion in damage to Iran's infrastructure. So one way of looking at it is that after this war, Iran would be even in a bigger hole than it was before. The other way is that any kind of an agreement that the United States and Iran have, and that is actually an Iranian object of negotiating with the US, would actually lift economic sanctions on Iran and would actually allow greater Iranian integration into the global economy. Now, Iran really sees the endpoint of this war to be the endpoint of maximum pressure sanctions. It'd be the endpoint of US isolating Iran completely out of the global economy. And then Iran is also thinking about things like collecting tolls on the passage of ships through the Strait of Hormuz, which it thinks it would give it additional sources of revenue. So one other way of looking at this is that any settlement to this war would actually provide Iran with an economic lifeline.
Speaker 1:
[04:26] That's really interesting that we focus so much on the destruction. And I think I saw someone say a million Iranians are expected to have lost their jobs as a result of this. But then, you know, these real benefits might accrue. And I suppose thinking about who they accrue to is also going to be interesting. Sanctions relief, who will that actually, who will benefit from that? Will that be regular Iranians or will it go through the regime?
Speaker 2:
[04:51] I think it always is regular Iranians. I think it's the talking point to say that in any regime around the world, that all economic benefit is only goes to the leadership. A lot does, but they still have to meet payroll. They still have to feed their population. And also, sanctions relief allows many other actors to get involved in the economy. People who import medicine, people who import varieties of commercial goods that then feeds factories, etc. You know, the chokehold on Iran's economy that is increasing poverty would obviously become more relaxed. So that's obviously to the benefit of the regime, but it's also to the benefit of the people. And then finally, I would say that any kind of a reconstruction, if the money for it comes, ultimately will employ people, whether they are Afghan refugees in Iran or Iranian labor. But end of the day, reconstruction itself is also generates economic benefits. Absolutely.
Speaker 1:
[05:47] My guess is if we shift towards the Arab Gulf states, they're probably not looking to have some kind of windfall at the end of this conflict in terms of new streams of money coming in. But of course, they would benefit from the end of the destruction to oil flows and whatnot. Susan, what are you looking out for as you think about some of the economic consequences for the Gulf after this?
Speaker 3:
[06:14] Well, of course, the closing of the Strait of Hormuz had a huge impact on all the countries of the GCC. Some were impacted more than the others. I would include the ones that were most impacted. I would include Iraq, Kuwait, Bahrain and Qatar, because they don't have very many alternative sources. I mean, Iraq can export a little bit of oil through the north, through their pipelines. But the vast majority of their oil comes out through the Persian Gulf. The same for Qatar, where so much of their budget is based upon the export of LNG. So, these places are hurting. Of course, Saudi, and I know Michael will point to Saudi, does have alternative routes. In the UAE, you have the port of Fujairah, where you can export oil. They are developing other ports, for example, in Hurfakan, which was a smaller port, and now they're looking to develop it, because it's outside the Straits of Hormuz. And Oman, of course, the same thing. But at the end of the day, I think all of these countries are looking at how they can first take care of their global responsibilities in terms of exports, whether it was energy or the flow of goods through alternative means. And that may need some cooperation among them, which will be a bit of a sticking point. But if you're looking at things, for example, like shared roadways, the Saudis have now opened up roadways to foreign trucks, for example, or a regional railroad system, where the aluminum that's produced in Bahrain can then be exported. So they're looking at measures that can possibly alleviate this situation and make the Straits of Hormuz less a problem. But in addition to that, their economic model, which is based upon tourism, trade, aviation, artificial intelligence investment, has been hit because all of those things depend upon security. And being able to attract foreign direct investment, attracts the talent, the human resources, to be able to develop those industries and give them additional sources of revenues that moves them away from their hydrocarbon economy. So all of these issues are things that they have to grapple with. The only saving grace I think at the moment for a number of these countries is that they have fairly large sovereign wealth funds. And so that gives them a little bit of cushion in the short run. But it does not, it helps them get over this particular period if it doesn't go on too long. But at the end of the day, their economic model and what they have based their income on to date, which is their hydrocarbon sector, has to be looked at in terms of export and how they manage all of that. Interesting.
Speaker 1:
[09:25] Michael, can I turn to you for Saudi Arabia in particular? How do you think Saudi leaders are thinking about the future of their economy?
Speaker 4:
[09:36] Yeah, so this war is something close to their worst case scenario, not their worst case scenario, which would involve far more Iranian rockets and drones attacking energy infrastructure. But their worst case scenario in the sense that they had been trying mightily to transition away from a dependence on energy exports and towards, as Susan was saying, economic activity like tourism or manufacturing. That requires investors and visitors to come to the country. It's hard to attract investors and visitors as long as you have rockets and drones coming in and threatening the population. So I think as the Saudis look ahead, my sense, at least for the moment, is the model already under a bit of stress, they weren't reaching the foreign direct investment targets that they had wanted. It was clearly not going to be an easy task to move away from an energy dependent model. Nonetheless, I think they're committed to it. I tend to think it's a fairly resilient model in the sense that once the war is over and people are comfortable then visiting again, I think they will resume with all of their energy to try to put things back to an appearance of business as usual. I think the Emirates will do that as well. Now, the big question is, you know, to what degree can they do that? How fundamental a change in mindset has this war caused among potential investors, among tourists and other sorts of visitors coming to the country? We won't know that yet until the war is definitively behind us.
Speaker 1:
[11:09] And then we mustn't forget the Levant, of course, as well, and Lebanon is, you know, under a tenuous ceasefire, but attacks continue and huge uncertainties about its own future. That's not to speak of Syria, you know, the rest of the Levant. So, Mona, are any contours emerging of what you think the future for the Levant looks like?
Speaker 5:
[11:30] I think so. I think it's important to note, though, the distinction between oil-rich countries and the direct impacts that they have felt, and then these ripple effects that we have seen throughout the Levant. We've seen, and Egypt. So, Jordan, Egypt realizing, and Syria, Lebanon, all of them having to contend with higher fuel prices, higher food prices. We've even seen in Egypt the need to ration fuel, to close shops and cafes earlier in the evening. So, you're seeing real effects in that regard. Lebanon, of course, is contending it. This is the second front of this war. As you noted, it is currently under a ceasefire, but they've paid an enormous price. They were already contending with a very, very significant economic crisis. Was in a meeting earlier last week with the Lebanese economics minister who noted that just in five weeks of conflict, Lebanon has witnessed anywhere between a five and seven percent contraction in its GDP. And of course, Syria, which is seeking to emerge from years of conflict and seeking to stabilize, has also had effects in terms of, again, the impacts of higher food and fuel prices. But if there's a silver lining, and maybe we'll talk more about this, it's interesting to see where Syria is actually positioned, perhaps, to be a winner out of this in the sense that Gulf countries are increasingly looking to Syria to play that critical bridging role between the Gulf and Europe. And there's more discussion about, can there be additional pipelines, economic corridors that are built out to sort of minimize the importance of the Strait of Hormuz and actually elevate Syria's importance in this emerging Middle East?
Speaker 1:
[13:25] Wherever possible, I'm going to try and draw our optimism. So thank you, Mona, for giving us one tiny silver lining.
Speaker 5:
[13:31] One point for me.
Speaker 1:
[13:33] Are there any other silver linings that you might think about as it relates to the future trajectory of the Middle East's economy? Does this accelerate the transition towards renewables? Does it encourage even quicker strategies to diversify? Is there anything?
Speaker 2:
[13:51] Well, I wouldn't necessarily call it a silver lining. I mean, there's sort of other dimensions to this. One is that the rest of the world is also going to try to go around the Strait of Hormuz. That's not necessarily good for the region. In other words, the rest of the world would not want to rely on urea for fertilizer to the extent that it does. But a country like India relied on the Persian Gulf region for 90% of its cooking oil. And it doesn't want to be in that situation again. So the way in which we thought about the Gulf as becoming sort of a hub of global trade in varieties of ways, that's going to be problematic. Secondly, I think the challenge is not just the Strait of Hormuz. You know, there's a lot of these ways of thinking about a pipeline going to the north or railway, et cetera. It also requires a peace with Iran between these countries. Right. In other words, if I mean, message from Iran is that the Strait of Hormuz, closing Strait of Hormuz is about America. But hitting infrastructure in the in the Gulf countries is about the Gulf countries as policies and hosting US bases. And you can see there are very different responses. Some like Qatar basically got the message and decided they want to back away from the war. Whereas UA for a period actually was leaning into the war even more. So I think that's another issue, that unless there is peace between these countries and Iran, there's very little they can do in terms of actually changing. And thirdly, you might say that their own expenditures would have to change. I think a lot more money would have to go into building resilience rather than just simply restoring what was there before.
Speaker 1:
[15:37] And of course that also, if Gulf states do start to look inward, then that affects some of the external strategies, whether through aid, they were increasingly playing a role as quite major donors in the humanitarian sector and also investment in developing countries around the world. Maybe I can take your point about the security to transition us towards the security future of Middle East. And I've heard some kind of contradictory things about the future of US bases in the region, the future of the US military presence. There was a prominent Emirati analyst, Abdul Khalid, excuse me, Abdul Khalid Abdullah, who floated on Twitter the idea that the UAE might consider whether or not US bases should remain after this war. I don't know, do you think that opinion is widespread? Is that reflected of something broader or is that, should we not extrapolate too much from that?
Speaker 3:
[16:37] I'm not sure I would extrapolate a lot from it. Although what's interesting is it came from a commentator who does have close relations with the leadership in the UAE. But the UAE may have other ideas in terms of their security architecture and their relations with other countries in the region, and in this case, namely Israel. And that's a relationship that other countries in the region don't have at the moment. And it's unclear whether they will seek them or not at the moment. I think the presence of the Americans for now is fairly secure. I think there will be many countries that will be looking for alternatives in the sense of additions rather than subtractions. For example, you saw today there were meetings between the Pakistanis and the Qataris on the issue of Pakistani soldiers being based in Qatar. Now, the Pakistanis had done this before in 2022 during the World Cup for a security proviso. This, of course, is different. I believe, and Michael can speak to this, the same thing is happening with the Saudis. At the same time, when you talk about aid, the Emiratis pulled out of their deal with Pakistan in terms of aid, that was picked up by the Saudis and the Qataris to be able to cover the expense of that aid. So you see shifting patterns even in terms of external actors, whether it's economic relations or whether it's the security architecture.
Speaker 1:
[18:20] Michael, can I turn to you on the Pakistan piece? Because of course, there was the Saudi-Pakistan Defense Act that we saw, was that last year? We've lost track of time at this point. It was last fall. Okay, thanks, Mona.
Speaker 4:
[18:36] Yeah. I mean, this question is tied up in a much, much larger question, which is what is the future of the whole Gulf psychology surrounding their security relationship with the United States? I honestly don't think we can answer that until the dust has settled. I think in the meantime, there's going to be a lot of commentary. There's going to be people who say, well, really what the Gulf, the Saudis and others are going to want to do is double down on the relationship with the United States. It's the one that is the most longstanding. It's the deepest one. There's others that will say, no, they're going to pull up the stakes and move on and just try to pursue other security relationships that they deem more reliable. I think the reality is probably somewhere in between. The fact that the Saudis forged this mutual defense agreement with Pakistan is an example of that. It's obviously an imperfect example because although they may derive some benefit from it, the Pakistanis and the Saudis have a very, very longstanding relationship going back at least to the first Gulf War. The Pakistanis were heavily involved diplomatically right now. But at the end of the day, the Saudis and others have to ask themselves, who will defend Saudi Arabia in the event of an attack by their principal adversary, the Iranians? I don't see it being Pakistan. I don't see it being China. I don't see it being any of the other countries that have been spoken of as potential partners or hedging part of the Saudis. On the other hand, we've proven that they can't depend on the United States. The United States, US Central Command may well have had plans to defend Saudi Arabia, but they never had any obligation to do so, or certainly not orders to do so by the US leadership. So I think it leaves them scratching their head. What are they going to do going forward? Vali wrote a bit about this in Foreign Affairs in the article I commented. The Saudis are not going to stop looking for other potential partners. It's just this war, both the kind of experience leading up to this war, in which they had grave frustrations about how easy or difficult it was to purchase armaments from the United States, to an effort to formalize the defense relationship that would have been part of a broader normalization package that eventually really obviously didn't come to fruition. And now a full scale war in which it was never clear and still is not clear what the United States would do to protect them or other Gulf partners. So I think there will be some very serious soul searching going on. I don't know that it's going to lead to an abandonment of the relationship with the United States, but I do think they're going to look to kind of flesh out other relationships with other countries that can supplement the relationship with the United States and perhaps give them what they're not getting from us.
Speaker 2:
[21:16] I would just add one other issue here, which is important, is that to what extent does the United States want all of these bases? I mean, in the New York Times reported that the 17 bases have been severely damaged. Some of them may not make sense, like would the United States want again to have the headquarters of the Fifth Fleet be so deep inside the Persian Gulf where it couldn't defend it and it was severely damaged? Maybe next time they would want to build it on Oman. After all, that's where the US is carrying out the blockade. And so in other words, it also raises certain questions for the US. Because the US ultimately not only didn't, wasn't able or willing to defend the Gulf countries, couldn't actually be able to defend itself. These bases were damaged beyond what was the expectation that Iranians would do that. And so this whole model that you could just put these bases around Iran, and be able to defend them as well is also, I think, an issue for the US to sort out rather than just for the Gulf.
Speaker 5:
[22:18] So maybe I'll pull on both of these threads and also put in a plug for a future initiative that the Middle East program is looking at, which is this whole question of the emerging order in the Middle East. And what is it going to look like? How do we understand the impacts of this conflict with Iran in terms of shaping a regional order? I think Michael is exactly right when he notes that, look, the dust hasn't settled. These countries are right in the throes of it. We're not going to know, but we are going to sort of, we, the Middle East program, we're going to launch a series of publications, conversations like this one, to really start to dig at where is the region headed? How are these power dynamics shifting? I do want to just make one quick comment on Abdelhalik's tweet and Susan's very appropriate reaction. I mean, I think this is really all about signaling at this point, signaling that we're taking a pause and we're rethinking, we're reassessing which way things go, we don't know. But I think it's fair to say already prior to the Iran War, the region was moving into a multipolar era. My sense is that multipolarism is actually going to accelerate. I think we're going to see many more players. It's not either or, it's yes and, and what does that look like? One question I just put out there is, and how does the regions, the Gulf in particular's ambitions outward, how are those shifting? In particular, the Horn of Africa, which we've been focused on as an area of real competition amongst various Gulf actors, are we going to see instead more of an inward turn? Or does the Red Sea and does the Horn actually take on even greater importance in view of everything that we've watched, particularly with the strait being implicated in this latest conflict?
Speaker 1:
[24:15] So let's move to some of the, oh, did you want to say something?
Speaker 3:
[24:18] Well, two things. One, I think that for some of the leaders in the Gulf, you might say, oh, well, you have commentary where do we really need the bases? I could see someone like the King of Bahrain going, yes, we do need this naval base, and it's very important for us to have it here. Because for them, it's a sense of security and they see it as a major deterrent. In other words, what I'm trying to say is, each country has very different ways of looking at this and different considerations, and also their internal dynamics shapes how they look at their security architecture, as in the case of Bahrain. And if we look at the horn, the only comment I want to say is, I don't think that that's going away. I don't think that countries in the region are going to pull back. I think they look at these issues in the horn as existential in particular. For sure, Saudi and Michael can address that, but also the UAE has so much invested in that direction, I cannot see them pulling back at this juncture.
Speaker 4:
[25:21] Hey, Susan, can I ask you something? It was always kind of an article of faith that the Qataris and others in the Gulf wanted US military installations because it disincentivized the Iranians from attacking. The mere presence of the US base, they aren't US bases, they're Qatar and other bases in which there's a US presence, but their mere presence made it less likely that Iran would attack them. That seems to have been proven false, no? So I'm wondering whether that is changing the psychology of the Qataris and others about the desirability of having these bases. The Qataris in particular, they were attacked by Israel, then by Iran, and now in this current war, multiple times by the Iranians, in large measure, because there was a US military presence there.
Speaker 3:
[26:07] Well, if you buy the argument that it was because there was a base there, and I'm not sure I buy that argument 100 percent. That's what I would say to begin with. Second of all, I think they still want to have the deterrent. In a country like Qatar, which is a small country and a small population, having that base there, and don't forget, our armaments and our missile defense system did work in all of these countries, and that was an important relationship between all of these countries and the United States in terms of a missile defense system. Now, whether it could be taken to a better level in terms of integrated combined missile defense system would be the ultimate test for the, shall we say, the unity of the GCC countries. But I think the idea that it's simply the basis is not really the explanation per se.
Speaker 2:
[27:09] I think this is actually really the basis for where they're going. The other side of it is what the Iranians are putting on the table in front of them, because they ultimately have to react to that as well. For the first time, it's a very clear message to them, that if you have bases and if your airspace is used against us, we will attack you. It's the first time also that deterrence has actually been tested. In other words, you're dealing with a different Iran, which is it's now tasted and attack. It's certain red lines have now been crossed and it may be crossed again. It's also possible that different GCC countries may react differently to what's on the table. So even the presumption that there would be one Gulf response. If I can pull on what Susan said, let's say UAE and Saudi Arabia continue to compete over the Horn of Africa, and this war doesn't actually lead them to bury the hatchet in Yemen or Horn of Africa, you could actually see maybe they will go in different directions in terms of how they manage this going forward.
Speaker 5:
[28:18] I think we're... Sorry, Will, you're losing control.
Speaker 2:
[28:20] No, no, it's fine.
Speaker 5:
[28:20] It's interesting. I do want to just pick up on this because I think that's exactly what we're already seeing hints of, which is a differentiation across the GCC countries in terms of this question about Iran, and how to manage Iran, and what to do with Iran. So rather than seeing the GCC countries come together and build a consensus, which in my view seems to be the most effective way to deal with this complexity of threats, I think we're actually seeing greater divergence among them, and Iran actually now becoming, it was in the past, it seemed to have not been, and now yet again, another source of tension amongst them as to what do we do? How do we engage? How do we move forward?
Speaker 3:
[29:04] But make no mistake, they all see the Iranian threat, and they're all unified in the sense that they want the Straits of Hormuz open without tolls, with free passage, that they're 100 percent, I think, in unity on. The question is, how do we deal with this issue? How do we expend it? What kind of relations we have? And you have from Oman on one side, that is always looking at how to position themselves as an intermediary, as a mediator, a friend to all, and then you have on the far other side, a country like Bahrain, which has a history with Iran, which is not a particularly good history, and a fear from their domestic population, and then you have everything in between. So for sure, this is a very, very different landscape, depending upon what country you're looking at, and their historical experience too, which shapes their thinking.
Speaker 5:
[30:08] And their demography.
Speaker 3:
[30:09] Yes, and their demography.
Speaker 1:
[30:11] Okay, so you have brought us to the future of diplomatic and political ties, which is great, because that's where I wanted to go next anyway. So thank you.
Speaker 3:
[30:18] Well, okay.
Speaker 1:
[30:19] But let's keep on the inter-GCC dynamics for now. So you said that there will be important differences with how they think Iran should be dealt with, although they all treat Iran as a threat. Is that the most important difference though, or do you think there are other cleavages that will resurface as it comes to, I'm thinking, of course, Saudi Arabia and the UAE in particular, their rift opened up wide in Yemen just months before this all started. So Michael, can I turn to you? How do you expect the future of GCC unity to be going forward?
Speaker 4:
[31:01] Yeah, I would say I'm unfortunately a little bit pessimistic on that. I think there's this moment right now in which they have a common cause to some degree. They're all being attacked by the same adversary. But I think the things that have divided them, and I should add, the things that have made it difficult for the United States to forge a truly common air defense and military organization, I think will persist for a lot of reasons. I mean, at some level, they're competitors, particularly the UAE and Saudi Arabia. And I think, particularly in a post-war environment, where they're all keen to get back to business, that competition will reassert itself. I think in terms of foreign policy, where there was great differences between the Saudis and the Emiratis on approach to regional proxies and regional conflicts, I think once they're past the, shall we say, distraction of this Iran war, I think that will reassert itself. And I think perhaps the central issue, GCC-wide, is going to be the relationship with Israel. The Emiratis, clearly, they made a strategic decision to forge their relationship with Israel. It's not something they're prepared to walk away from or apologize for. I think the Bahrainis, to some degree, are in the same category. And that affects their risk tolerance, affects their behavior. I think on the other end, you have the Omanis and the Kuwaitis that have, at this point, no interest in a relationship with Israel, grave distrust of what the Israelis are doing in the region. And somewhere in the middle, you have the Saudis that obviously had been dabbling with the idea of the relationship with Israel. And I don't think they've given up on it. I think if the formula is there and they can justify it to their population, they would go ahead. But again, as Vali wrote, right, I think the Saudis are looking at Israeli behavior in the region and they have some trepidation about this notion that Israel should become, I mean, I know the word hegemon is used, but if nothing else, sort of the biggest fish in the pond, the one that kind of throws their weight around and around which other countries have to react. So I think the Saudis have real trepidation about where Israel is regionally. But on the other hand, they, somewhere between the Kuwaitis and the Emiratis, I think they recognize that the Middle East is a region in which they and the Israelis ultimately are going to have to coexist. How that all plays out post-war, it's going to be some time, but I suspect a lot of the internal rivalries are going to re-emerge.
Speaker 2:
[33:28] I think building on what Hank said, the idea of the GCC is a 1980s idea, right? In some ways, it's an old idea, and it's survived until now. I think this war was catastrophic enough or big enough to literally sort of shake it at its foundation, because it already was coming apart in many ways, between UAE and Saudi Arabia already. There were different pieces of it was coming apart. But I think the reaction to the war may push it even further. I mean, it's not just that UAE's alliance with Israel has because of Gaza, because of these sorts of things. But I think for the rest of GCC, the danger is that UAE and Bahrain will invite Israel's conflict with Iran permanently into the GCC, right? Because you have to see, okay, the next phase. Israel is not going to give up on Iran. Iran is not going to give up on this conflict. And if Israel and UAE forge a much tighter security relationship, that ultimately basically means that UAE and Bahrain will be operating as Israel's basis around Iran. And that even in Iranian eyes changes UAE very differently from the way they approach Qatar and Kuwait, etc. And then UAE is also doubling down on this I2U2 idea that their main outside partner is India. It's this axis of India and Israel for them as this alternative to the US., where the Saudis are going with Pakistan and US and then Turkey and others. And so, you know, the pressure that's being brought to bear should also, for us, we should question, we could think about GCC kind of like the way we say Southwest in the US or Northeast as a sort of a geographic destination. But it may not have much more, you know, explanatory view, explanatory use in the future, that they may have very different sort of approaches to security going forward. And then I would add with UAE, there's also one additional dimension here, which is the three disputed islands, which is very much there. You know, the Iranian belief is that UAE actually was hoping for an American ground invasion of Harg Island, because on the back of that, they were going to attack these three islands and perhaps defend them with Israeli air, in other words. So some of the venom between Iran and UAE is just particular to these two. It's a different case from the rest of the Gulf.
Speaker 5:
[36:11] Can I just jump in exactly on this question? Because I keep toying with this idea that there's really no return to the status quo ante, that we are entering into something new. We can't go back. And I mean, I'm going to put this to you, Susan, and I'd love, you know, other's thoughts as well. But I mean, just picking up on Vali's points, over time, is the GCC going to become obsolete? Are we going to see completely new alliances that pull in actors from outside the region so you could see, think what you were framing as sort of the UAE, Israel, India, with the US as well. On the one hand, you could see Saudi, Pakistan, Turkey, and perhaps Qatar. Should we actually, you know, throw out the old way of thinking about alliances and how countries are defining themselves and start to really think about entirely new alliances and coalitions that actually expand even beyond the Middle East and start to bring in other actors?
Speaker 3:
[37:20] I'm not sure I would throw the baby out with the bathwater altogether. But I think it is a huge challenge to the GCC in terms of, I mean, they've always been more economically foundational, although they had an army. They did use it during the 2011 uprisings in Bahrain, when the Saudi armies were marching across the causeway into Bahrain, quote unquote, to restore order. So, I mean, you have seen on occasion where they have worked in a collective kind of way. But by the same token, yes, there are going to be these other kinds of outside actors. I think the Turkey peace has been there for quite some time, at least in Qatar. And you saw that during the embargo in 2017, where you had Turkish soldiers on Qatari soil and a Turkish base there, basically sending a signal to the other, to Saudi and the Emirates that we have backing here. I think, and Turkey and Pakistan have their own interests where Iran is concerned and want to have entree into the GCC, where they've been held at bay for so long, particularly Turkey, because the memories of the Ottoman, the Ottoman influence and hegemony over that area is something that still is in the minds of many Gulf people. So I think that Turkey, Egypt even, interestingly enough, just because there's always the fear if something happens to Egypt, the rest of the region goes. And people in the Gulf understand that. And so this is why they're constantly pouring money and investment and now it's more investment rather than just budget assistance into Egypt. But yes, I think they will be cultivating these ties. It'll be part of their security architecture. I do believe you've got a nascent arms industry in a place like Turkey, just as you have arms industry in Israel that could be of use to the Emirati. So you're gonna start seeing these other kinds of relationships emerge even in the security sphere. You did see it, for example, during the embargo, when the countries around Qatar cut off ties, and you started seeing foodstuffs coming from Iran, from Azerbaijan, from Turkey, across the Gulf, to be able to supply food for Qatar when their landline to Saudi Arabia was cut off and their airspace was cut off through all the different countries surrounding them. So yes, you will see these kinds of ties. Does that mean you will not have ties with GCC countries per se? No, you will still have them, because you have histories. You have tribes that cross from one country to another. You have family names that are the same ones. You have marriages that tie royal families across the region and trading families where you have ties. So there are economic, social, cultural, linguistic, tribal linkages that I don't think you can just cut off and say these no longer are applicable. But I think there will be other kinds of security, economic, strategic ties that broaden the relationships with certain GCC countries, and those external relations might be bilateral. Or it may be, in the case of something like the UAE and Bahrain, where they're seen as partnered more with those two countries together as opposed to other countries.
Speaker 1:
[41:04] So let's talk a bit more about the strategic relationships that might emerge and shift as a result of this war. And we've not really talked about China and Russia so far. So do you expect China and or Russia to play a significantly different role in the Middle East going forward? That's a huge question. I don't know who wants to take a first stab at that.
Speaker 2:
[41:26] I think they definitely will be part of the hedging strategy. I mean, less United States, if indeed that becomes a case, does not mean more Iran per se. It means that they're going to rely on another great power that might provide them with certain balance, if you would. Ultimately, you could say at the larger strategic level, the US has lost certain stature in the region. It started the war that it thought would finish in two days, we're still several weeks into it, and they don't have a pathway to end it. They were not able to provide the kind of security that the region thought that they would be able to provide. So, if the United States' stature at the global level is hurt by that, it's always the China is the main beneficiary. And I would also add that the Iranians have put the Chinese on the table in quite a big way. It continues to talk about that will the management of the Strait of Hormuz could involve the Chinese, that the Chinese did play a behind the scenes role in facilitating the talks with the Islamabad. Behind Pakistan is China in a way. It's the United States, but also China as well. And I also think that ultimately, if and at any time that any Gulf countries decides to sort of deepen their relationship with Iran, they have to go to Beijing. That's what the Saudis did. I mean, ultimately, the United States is not the facilitator in creating a kind of a relationship with Saudi that you can basically hang your hat on. Sorry, with Iranians, that you can hang your hat on. Only the Chinese can do that. And I think an important lesson still is, as we're going through this war, the Houthis have not started shooting at Saudi Arabia and UAE yet, I would say, which is, that's something the Chinese negotiated. And if it begins to collapse, the first place the Saudis would go is back to Beijing to try to shore it up. So the Chinese have that cart to play, which is with Iran and Pakistan as well.
Speaker 5:
[43:41] And I think the Chinese have invested heavily in their relations with the Gulf though, in particular. I mean, if you look at the balance of trade and other things between China and the Gulf and with Iran, it's orders of magnitude more. And I also think the Gulf plays this important role as China seems to have benefited in terms of its strong position with respect to being a leader in the renewable energy sector. And here too, ties to the Gulf, I think, are going to continue to be really important. I guess the question really for both China and Russia, both of which have ties to Iran but also value ties with the Gulf, is how they continue to balance those two things going forward. I mean, I don't see them, they're not going to withdraw from the region. On the contrary, I think both Russia and China have a role to play going forward. Again, in particular, I think China playing a growing role perhaps in the region.
Speaker 1:
[44:39] So I could keep going and keep going, but I want to start drawing us to a close now because we've covered a lot. But as always, I want to end with our quick fire round of questions. Please answer if you have something to say, of course. Firstly, can you sum up the Middle East's future or how it's been transformed in one word or phrase? Is there anything that comes to mind?
Speaker 5:
[45:04] Uncertain. That's easy.
Speaker 2:
[45:06] Yeah.
Speaker 1:
[45:09] Michael, is there anything?
Speaker 4:
[45:12] Continued volatility.
Speaker 1:
[45:13] Okay.
Speaker 2:
[45:15] I think we're in an interregnum, basically.
Speaker 3:
[45:20] I'd say realignment.
Speaker 1:
[45:21] Realignment.
Speaker 2:
[45:22] Okay.
Speaker 1:
[45:23] A variety.
Speaker 2:
[45:24] Okay.
Speaker 1:
[45:25] That was good. So then the great power question, so of the US, Russia, or China, who do you expect to emerge up the most and down the most after this war? I think we just talked about that a little bit. Do you all think China comes out up the most after this war?
Speaker 3:
[45:43] I do.
Speaker 2:
[45:44] I do, too, as well.
Speaker 5:
[45:45] Same here.
Speaker 4:
[45:46] China gained more while we were all eating breakfast than any other player in the region gained in the entire duration of this conference.
Speaker 1:
[45:56] Okay. So then the final one, so is there one word or phrase that you wish you could ban pundits from using when talking about this war or the future of the Middle East more broadly?
Speaker 2:
[46:08] Regime change.
Speaker 1:
[46:09] Oh, regime change. Okay. That's a good one.
Speaker 3:
[46:13] My word is bazaar, because it's always we're in the bazaar, and it's such an Orientalist trope. Negotiations are negotiations and that's how they should be described no matter who the actor is.
Speaker 1:
[46:27] Yeah.
Speaker 3:
[46:27] So that's my bet noire.
Speaker 1:
[46:28] Okay.
Speaker 2:
[46:30] I don't have one word, but I cannot also talk these two. So I think they captured it very well.
Speaker 1:
[46:36] Okay. So let me try and then sum up what I have heard you say. This was a big one. So let's see. Okay. So firstly on how the Middle East economic future has transformed. So Vali, you said, of course, there's the damage to Iran's economy, but there also could be benefits as a result of the deal that ends this conflict, as it relates to sanctions relief, as it relates to tolls of shipping going through the Strait of Hormuz, perhaps. And then yes, you know, the regime will benefit to some degree, but all Iranians will probably benefit from that influx of investment and the reconnection of Iran to the world. On the Gulf, I think you highlighted how different countries are going to be emerging differently from this. So we have Iraq, Kuwait, Bahrain, and Qatar who are the most affected because they lacked those alternative routes. Saudi, the UAE, Oman had alternatives. New roadways are being built, rail, and to some degree, they have been cushioned by their sovereign wealth funds. But Michael, I think you said the model is ultimately resilient. The Saudis, to the best of their extent, will be trying to revert to business as usual, trying to attract that investment that is so critical to diversifying their economies. In the Levant, we have seen a huge negative impact to Lebanon, and the toll it has taken on its GDP. But Syria might actually be positioned to benefit somewhat from being a hub between the Gulf and Europe. So more broadly, though, we might see other countries and other states around the world trying to diverse away from their reliance on the Strait of Hormuz, and that would have real consequences for some of these Gulf economies. And then, you know, these efforts to build resilience as well, that we should see. So it sounds like there were really important economic transformations as a result of this war. On the security side, I think you said for now, Susan, you think the presence of the US is secure. You expect Gulf states to have additions, not subtractions, when it comes to diversifying their security relationships. I think, you know, it is very difficult to know what the Gulf psychology will look like, Michael. And I think this is an important flag for this whole discussion is, we are still in this war. Some of these things we just cannot know yet. And so, but some of the signals that we have seen from the prominent Emirati analyst are signaling a reassessment of some of these security ties. But there are questions about, you know, Iranians have tested the deterrence that existed of having US bases. Did those US bases actually attract more attacks rather than deter them? Does the US even want to have these bases in the Middle East going forward? Will we see more competition in the Horn of Africa? Different considerations are going to be at play. But some of this does come back to diversifying the relationships, which gets into the diplomatic and the sort of geopolitical consequences. You've talked about these new coalitions or alignments that seem to be emerging on one side with Saudi Arabia, Turkey and Pakistan, on the other, the UAE, Israel and India. This war has shaken the foundations of the GCC. It may not really have much meaning as a political block anymore after this. I think you all said that these differences between GCC states are important. They're persistent. We will continue to see competition for business, different foreign policy priorities, a different stance on proxies and regional conflicts, and a different relationship with Israel as well going forward. For now though, of course, they do all see Iran as a threat. They all want to see the Strait of Hormuz open. That's their common cause, but they have different ideas of how to get there. Finally, on the broader geopolitical piece, the US has lost stature and it still has no pathway to end this conflict. China has been a big beneficiary of it. The Iranians have inserted them into the conversation about the negotiations in Islamabad, but there are also opportunities as it relates to China for its renewables prowess and the ties that it has with the Gulf. So I think, that was an effort to sum up. I think a really rich conversation and I'm so grateful to you all. It seems to me the answer is yes, this war has transformed the future of the Middle East. Of course, there are some constants, some of these old tensions that we saw, we're going to revert to them after this is over. But some big questions about the future of the region still remain. Mona, you flagged the Middle East program here is going to be doing work on that. So to those of you watching, listening at home, I hope that you will come to the CSIS Middle East program. I think today has given you a taste of the range of our and depth of our expertise on the Middle East. I'm so grateful to you, Susan, Vali, Michael, Mona, for joining me for this discussion. To everyone at home, please look at the analysis that we have on the CSIS website. I will, of course, link to Vali's piece and to others that we have mentioned in this discussion. We hope to see you again. Thank you so much.