Since the beginning of the 21st century, the importance of economic factors in a country's power and international relations has been increasing day by day, especially finance and technology. One of the variables that had the greatest impact on global power structure last year was the rise of the Middle East. Nowhere is this more evident than in the fact that four of the five new members invited to join the BRICS summit are from the Middle East, namely Saudi Arabia, the United Arab Emirates (UAE), Iran, and Egypt. The main reason for this is the energy crisis triggered by the Russia-Ukrainian war, which has boosted the revenues of the Middle Eastern oil-producing countries. Among the top 10 rankings of Global Finance Magazine's "World's Richest Countries in 2023", Qatar and the UAE ranked 4th and 6th respectively. In addition, the financial sanctions imposed on Russia by Western countries led by the United States have caused these Middle East countries to lose trust in Western financial institutions. Previously, under the pressure of climate change, Gulf oil exporting countries have been forced to devote themselves to economic diversification, actively develop green energy, and reduce their reliance on oil. As a result, these Middle East oil-producing countries find that Northeast Asian countries are their best partners whose high-tech expertise perfectly meets their needs. It is against this background that economic interactions between Gulf Cooperation Council (GCC) countries and Northeast Asian countries have strengthened in a big way in recent years, last year in particular.
The Middle East Pivot to Asia 2023: Soaring Trade Reshapes The Global Landscape report published by HSBC and Asia House at the end of last year, found that the shift to Asia is being driven by the GCC’s social and economic reform programs, expanding capital markets, growing energy demand in Asia, and rising middle class population. Trade between GCC countries and Asia's emerging economies surged by 34.7% from US$383 billion in 2021 to US$516 billion in 2022. It is expected to reach US$757 billion by 2030, almost double the amount in 2021, and surpass trade with developed economies by 2026. The interaction between the GCC and Asian economies is particularly representative of China. Total trade between the Gulf region and China increased by 50.6%, from US$166 billion in 2012 to US$250 billion in 2022. That is close to GCC’s total trade with the United States, Britain and Western Europe, which has remained at $266 billion over the past decade. The UAE's trade volume with China has increased by as much as 37%, from US$78 billion in 2021 to US$107 billion in 2022, exceeding its total trade with the United States, the United Kingdom and Western Europe. During the same period, Saudi Arabia's trade volume with China had the second largest increase (28%), rising from US$82.1 billion to US$105 billion. The higher average oil prices in 2022 than in 2021 is certainly the main reason. But there is also significant growth in non-oil industries, especially in the Gulf region where economic diversification and digitalization play a crucial role, such as cloud computing, artificial intelligence and fin- tech. The GCC’s increasing economic cooperation with Northeast Asia, especially with China, continues to prosper. Renewable energy, hydrogen, electric vehicles (EV) and green building sectors are the main drivers.
According to Global SWF, a platform that counts global sovereign fund investments, the value of M&A and investment in China by Gulf region funds has jumped from US$100 million in 2022 to US$2.3 billion in 2023. These sovereign funds with the largest management scale in the Middle East not only set up offices in China to directly invest in Chinese companies, but also set up joint ventures with Chinese companies or became investors, invested in Chinese venture capital funds, and bet on Chinese technology companies. In terms of investment by sectors, Middle East sovereign funds prefer China's new energy, biotechnology, artificial intelligence and new consumption. Among them, the new energy industry chain is the most favored by Middle East funds. For example, in 2023, three Chinese new energy vehicle companies received financial support from the Middle East. CYVN Holdings, a subsidiary of the UAE's sovereign fund Abu Dhabi Investment Authority, has invested in NIO(蔚來) twice, investing US$1.1 billion in June and another US$2.2 billion in December to subscribe for 294 million ordinary shares of NIO. The Saudi Arabian Ministry of Investment signed a US$5.6 billion agreement with Human Horizons (華人運通), and Jordan's largest private company Manaseer Group signed a strategic cooperation agreement with Ch-Auto Technology Corporation (長城華冠).
In addition, the Qatar Investment Authority purchased a 4.26% stake in Kingdee Software (金蝶軟件), an enterprise management software and cloud service provider, for US$200 million in December last year. Furthermore, the GCC has recently been actively negotiating free trade agreements (FTAs) with Asian countries, simultaneously conducting FTA negotiations with China, Japan, ASEAN, and New Zealand. At the end of last year, South Korea took the lead and became the first country in East Asia to reach an FTA agreement with the GCC. Obviously, the GCC oil-producing countries intend to break away from the past agreement with the United States to trade oil in US dollars and instead strengthen economic relations with Northeast Asian countries that are in line with their national interests. This will undermine the currently U.S.-dominated international financial system in favor of the de-dollarization pushed by China and Russia, and at the same time replenish the Western funds withdrawn from China. This is a huge change in the global power sector that we must be concerned about.
（Adjunct Distinguished Professor of Diplomacy and Director of Center for WTO Studies, College of International Affairs, National Cheng-chi University）
