Why energy is the key to a better Gulf Union

Justin dargin

If one were to divine a birthday for the concept of the Gulf Union, perhaps it would be December 19, 2011. That date will likely be etched in the annals of history as it was when King Abdullah of Saudi Arabia made a farsighted entreaty, a call to arms so to speak, to the assembled heads of the Gulf States gathered at the 32nd GCC Summit in Riyadh.

In his televised speech to the various leaders, King Abdullah stated confidently, “I ask you today to move from a stage of cooperation to a stage of union in a single entity.” The import of this speech cannot be overestimated in terms of setting forth quite plainly the appeal for the countries of the Gulf Cooperation Council (GCC), Bahrain, Oman, Kuwait, Qatar, Saudi Arabia, and the UAE, to forge a more perfect union.

Undoubtedly, what King Abdullah had at the forefront of his mind were issues of regional stability and common efforts to confront regional security challenges. Yet, while security is a paramount concern in this vision, there are other factors that are just as vital in constructing a collective Gulf endeavor. The formation of a Gulf Union is seemingly inexorable due to the clear political support it has from the very highest levels. However, there are other structural forces that ensure that when the Gulf States eventually unify in one polity, the underlying components to make it a success would have already been deeply embedded.

Therefore, the birthday of the future Gulf Union may hark back to the day of this fateful speech, and perhaps one could go back even farther to the GCC’s founding charter that boldly announced that eventual integration is the goal of the Council’s establishment. Nonetheless, the pedigree of the Gulf’s unionist efforts may be discovered in the patient efforts over the years to construct closer energy ties between the GCC members. In the discourse of regional integration, and the conceptualization of why States decide to unify, energy is often the overlooked key to the puzzle. Energy is not just for running industrial machines or for air conditioning our homes. Indeed, it is the very glue that can encourage sworn enemies to fatefully embrace.

Energy as an impetus

As a case in point, it must not be forgotten that the impetus for the European Union is not to be found in the much heralded creation of the single monetary unit, the Euro, but rather in the humble commodities of coal and steel. French Foreign Minister Robert Schuman first proposed the European Coal and Steel Community (ECSC) on May 9, 1950 as a means to make conflict between European countries not just “unthinkable, but materially impossible.” The trade in these natural resources later birthed the myriad joint European organizations that formed the sinews of what subsequently became the supranational body that we know of today, the European Union.

While the Gulf countries are not motivated by the same concerns that drove Europe in the bloody aftermath of World War Two, they are drawn by the desire to capitalize on each other’s strengths in order to forge a common front. In that vein, these countries have taken considerable steps over the past decade in order to leverage their considerable energy assets to drive forward regional economic growth and to engage collective challenges. Although often disregarded and dismissed, energy cemented these emergent trade and economic relationships.

Despite various steps toward Gulf integration, major hurdles remain. The much anticipated pan-GCC currency, intended to promote movement toward a cohesive regional monetary union, met with numerous delays. Furthermore, there are disagreements over how to manage issues relating to Iran, and as to Arab countries that are currently in the throes of political transformation and upheaval.

Energy collaboration

And, while these areas of cooperation have experienced some setbacks in the field of energy collaboration, there have been shining successes. For example, while experiencing some initial problems, Qatar overcame them and successfully completed the Dolphin natural gas pipeline, which binds together Qatar’s mammoth North Field with the gas distribution networks of the UAE and Oman. Moreover, cross-border Gulf renewable energy investment is becoming a reality as Masdar (the Emirati renewable energy investment vehicle) seeks to invest in Saudi Arabian solar potential, and eyes to further investment in other Gulf countries. Energy is clearly the basic building block for closer GCC integration and will ultimately serve as a catalyst for further economic, political and military collaboration, and possibly, union.

Still, the crowning achievement of Gulf cooperation has been the development of the Gulf Cooperation Interconnection Project (GCCIP). The GCCIP is essentially a pan-Gulf power grid that connects the GCC member states. While focused on transporting power amongst the various Gulf power grids, its importance is not limited to that. The GCCIP represents Gulf cooperation at its most elevated peak. Even though the Gulf leaders did not move forward with the GCCIP for an overt political purpose, nonetheless, the very design of this project created a dense web of interdependence that obligates the Gulf countries to coordinate a whole host of issues that are not necessarily directly related to the development of an efficient regional power grid.

By collaborating through the GCCIP, the Gulf countries must ensure, at the very least, that they have a harmonized pricing structure, a legal/regulatory structure to manage power exports, and a strategy to improve their natural gas production. The GCCIP also has numerous spillover effects in the financial sector and in the overall GCC economies which would then promote deeper and more substantive integration in other areas.

Conventional wisdom asserts that the carnage of the Iran-Iraq War was the impetus for the GCC’s establishment in 1981. But, with history as a guide, the war merely expedited an evolution inscribed in the region’s DNA. Due to common regional interests, and an overarching common social/cultural background, the Gulf States would have ultimately established something akin to the GCC in the absence of any regional conflict. Each halting step towards integration, whether in the financial, military, economic or energy sector, will encourage deeper integration and collaboration in other sectors. In the age of an ever-connected and integrated world, the Gulf countries can ill afford not to work together for the common good. While there is much speculation about the inevitable formation of the Gulf Union, without a doubt, the essential building blocks are, without a doubt, being set day by day for this eventuality.

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Justin Dargin is a leading Middle East energy expert specializing in the Gulf energy sector, emergent carbon markets and regional industrialization. He was a former Research Fellow with The Dubai Initiative/Harvard University, where he won a Harvard award for his research with the region, and he is a Fulbright Scholar of the Middle East. He is a specialist in international law and energy law with a focus in carbon trading, the global oil and gas market, the legal framework surrounding the Gulf energy sector, and Middle Eastern geopolitics.