‘America’s era in the Gulf coming to an end’

Professor Tim Niblock, who has had an outstanding career developing and teaching Gulf studies, was awarded an honorary doctorate by the University of Exeter at a ceremony hosted by His Highness Dr Shaikh Sultan Bin Mohammad Al Qasimi, in Sharjah, UAE, on September 26. Weekend Review caught up with him to get his views on how and why United States’ trade with the Gulf nations is being eclipsed by China and India’s and on the fear over a possible deal between the US and Iran. Excerpts:

How energy-secure do you think Gulf states are? What effect does rising domestic energy consumption have on Gulf states’ ability to export oil, their legitimacy at home and their influence on the global stage?

There has been a lot of publicity on this recently and on projections that Saudi Arabia would be consuming most of its oil by 2030. These projections are based on the idea that oil production does not go up much, and Saudi Arabia of course does have potential to increase its production. A lot of publicity has been given to hydraulic fracturing [fracking] in the United States [to extract shale oil, shale gas and other hydrocarbons] but I think a lot of that is exaggerated. The US is now consuming about 18 million barrels of oil per day [bpd] [and] it is projected to consume about 16 million bpd by 2030. The amount of oil produced through fracking in the US will be able to cover part of that, but not all of it. There will also be an increase in energy coming from renewable sources, a certain amount of nuclear power and also oil coming from biological sources. The US will still need to import oil in 2030 but that may not need to come from the Gulf.

So the US’s demand for Gulf oil will go down or go out completely. But the kind of oil demand that will come from Asia, particularly China and India, is very substantial. By 2030, according to present estimates, China will need an extra 7 million bpd, and India will need an extra 4 million bpd. The idea that the oil price is going to slump is misguided.

As far as Saudi Arabia is concerned, yes, consumption is going up at the moment. But there is a lot the government can do to cut down on consumption. It is of course moving towards renewable sources, and there is a lot of time to reduce consumption by 2030, or at least stop it from rising so much. So yes, I think this is a problem but not one that is going to drastically reduce the income that they can get from oil sales.

How is the US’s role in the region changing? America’s handling of the situation in Egypt, from Mubarak’s fall to Mursi’s ouster, and more recently its reluctance to take action on Syria, have put it at odds with Gulf states. Do you think the Gulf states are losing faith in America as their strategic ally and guarantor of their security?

I think there is this idea around in the Gulf and I think there is a good reason for it. The US is going into a period where it is clear that its power position in the world is going to be different from what it used to be. In December 2012, the US National Intelligence Council issued a report called “Global Trends 2030: Alternative Worlds”, which plotted out how the power of the US relative to other states might develop through to 2030. What came out clearly showed US’s power declining over time. The lines of China and India are both on the rise, and one of the graphs shows China overtaking the US just after 2030. India comes behind that. Europe, of course, is also on the way down. The conclusion the report draws is that the US will no longer be a superpower — that stage is now coming to an end, and there will be a division of power at the top. That means that the US then has to choose very carefully, which areas of the world are essential to its security interests. What emerges is that East Asia and the Pacific are going to be the US’s main concern and interest. This so-called pivot to Asia, which was mentioned as far as defence policy is concerned, has economic logic to it as well in that by 2030 the US will not need Gulf oil.

At the moment, the US’s overall trade with the Gulf is limited. The trade now is oil going in one direction and arms going in the other. If you take away the oil and if the arms imports in the Gulf become more diversified, the trade between the two would become very low. The US is now only the sixth largest trading partner of Gulf countries. The figures include the GCC, Iran and Iraq, but Saudi Arabia and the UAE are, by far, the biggest trading countries in the Gulf. So the extent of the US’s economic interest in the Gulf is not very great. And when you consider that the justification given to Congress for US involvement in the Gulf have always been that this area is vital to US infrastructure, and that US industries would grind to a halt without access to Gulf oil, then the whole of that argument is undermined.

But there are a lot of complications in that argument. One can say that the US has to be concerned about its allies and not just itself. And European allies in particular are very dependent on Gulf oil. One could also say that the US has this fixation with Israel and that it needs to remain in the area, and there is the concern over Iranian nuclear weapons and so on. But the bottom line is that the US is going to have to prioritise where its key security interests lie, and it is clear that its security interests are in East Asia and the western Pacific as a whole. Obama is often referred to as the first Pacific president.

I think to the extent that Gulf countries are beginning to worry about whether the US will be there in the long term is justified, and clearly they are beginning to worry because one sees it being mentioned now. It is unlikely that one will see an immediate withdrawal of America’s strategic interests in the Gulf. But these kinds of things are long-term processes.

Given recent developments, do you think there are well-founded fears in the Gulf of an American “grand bargain” with Iran that may see a reconciliation between the two states at the expense of the Gulf Arab states’ interests?

Very certainly. There is a fear among decision-making circles in Saudi Arabia that sooner or later the US is going to do a deal with Iran. That will leave Saudi Arabia and the Gulf states out in the cold. I should say that that perception is one that one finds elsewhere too. I was speaking to a former Chinese ambassador to Iran and he made an interesting and surprising comment that to China, Saudi Arabia is more important than Iran because in the case of Saudi Arabia, China knows where it stands. In the case of Iran, although they both need each other at the moment, sooner or later the US will patch up with Iran and China must not be in a position where it has put all its eggs in the basket of Iran. China needs to therefore have good relations with all Gulf states and it can be a bit more confident in its relationship with Saudi Arabia so that each side knows where it stands and what needs each side has from the other.

Do you foresee a strategic realignment in the region any time soon, where the GCC starts looking eastwards to China for an ally and Iran looks to the US?

I think sooner or later, and probably sooner rather than later, Iran is going to find a way of reopening its links with Western countries. It’s strongly in its interest to do so. As far as Saudi Arabia and the other Gulf countries are concerned, at the moment, they are already very closely linked with Asian countries economically. Historically, the EU has been the largest trade partner of the Gulf states. Last year, in 2012, the EU was still the largest partner but the Chinese were just below it. EU trade with the eight Gulf states (GCC, plus Iran and Iraq) came to about $205 billion (Dh752 billion), imports and exports taken together, and Chinese trade came to $203 billion (Dh745 billion). Under that was India. Japan was very important in the past and remains important but it is now fourth. Then came South Korea, followed by the US. So, economically, if you like, the shift has already taken place. The likelihood is that China will become the largest trading partner of the Gulf this year, 2013. India is likely to remain third but its trade is also increasing very quickly.

On the strategic side, the shift will take longer. China gains very much from the present state of affairs. It doesn’t have to spend any money on a strategic presence in the Gulf and can leave it to the US to protect the sea lanes. It can benefit economically from the area without having any strategic cost.

The US is going to need to choose its priorities. The presence in the Gulf does cost quite a lot, even though the Gulf states finance quite a lot of it. But the US is already moving over to East Asia, and that’s a process which will probably continue. Whether the US will be able or willing to continue to provide strategic cover to Gulf states is questionable in the longer term. If the US is not going to do that, to what extent will it look to its European allies for more strategic involvement? The British are serious about [a repeat of military deployment “east of Suez” and] it seems to be proceeding at quite a high level, but in the past, Gulf states have not regarded European countries very seriously in terms of strategic involvement as they do the US.