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Some firming of oil prices was to be expected, given the Saudi-led coalition’s assault on Yemen and surging violence in Iraq and Libya – especially as markets are not projecting a major surge in short- or even medium-term Iranian output following the framework nuclear deal signed in Lausanne on 2 April. But market fundamentals suggest the oil price will remain soft into H2 2015, with little sign of a major shift in Saudi thinking ahead of the scheduled 5 June Organisation of the Petroleum Exporting Countries (Opec) ministerial meeting in Vienna.

A year on from the Al-Ula agreement that ended the boycott of Qatar by three of its Gulf Co-operation Council (GCC) neighbours – Bahrain, Saudi Arabia and the UAE – Qatar is enjoying a fresh period of political calm. Indeed, in many ways it now looks to be in a better place than most of its erstwhile foes in the GCC.

Vice President, Prime Minister and Ruler of Dubai Sheikh Mohammed Bin Rashid Al-Maktoum (MBR) announced a reshuffle of the federal cabinet on 25 September, alongside what he termed “a new government strategic approach that will lay the foundations of work for the next 50 years”.

There are many reasons for environmentalists to be suspicions about the UAE's stewardship of the upcoming UN Climate Conference COP28, but it could prove a historic mistake for the mostly western critics to underestimate the summit's president-designate Sultan Al-Jaber. While detractors fear the event is morphing into a vehicle for hydrocarbons industry lobbying, the UAE claims it is serious about renewable energy and is recruiting a potentially powerful southern alliance to its side.

As the low price of a barrel of oil begins to tip the fiscal balances of countries across the Gulf region, there is a cogent argument that says now would be an excellent time to wind down energy subsidies. In a time of relative austerity, so the argument goes, the population will find it easier to accept that it needs to assume its share of the burden; lower oil prices also mean the rise in cost to businesses and consumers need not be too dramatic.

There are positive signs – but no yet conclusive evidence – that speed is picking up in Oman’s efforts to rebalance its economy, supporting the creation of a more diverse business environment in which a new generation of entrepreneurs can operate more easily. The shift away from hydrocarbons dependency could, ironically, be helped by higher oil prices, after three bleak years in which budget and fiscal targets have been missed.

Few can feel comfortable in a region where Gulf Co-operation Council (GCC) countries will need to borrow some $148bn next year to cover their budget shortfalls, as Moody’s Investors Service predicted in a report issued on 5 December. Fiscal deficits will not be closed any time soon, not least because new revenue generators like the value added tax (VAT) due to be introduced in Saudi Arabia and the UAE in January are often matched by new spending commitments to ensure social and political stability is maintained

Suspicions about Saudi Arabia’s nuclear intentions are growing in the United States, amid evidence of undeclared uranium activities in the north and other undisclosed activity. The concerns led the US House of Representatives Intelligence Committee in early August to insert a provision in the Intelligence Authorisation Bill which requires the US administration to investigate Riyadh’s efforts to develop a nuclear capability.

Announcing job losses and investment cutbacks, many of Big Oil’s flagship companies have been making dramatic announcements of changes in strategic direction. This is most marked among European majors BP, Eni, Royal Dutch Shell and Total, if not by their US peers ExxonMobil and Chevron Corporation; it suggests that many industry leaders now see their futures as diversified energy companies, rather than old-style international oil companies (IOCs).

GSN’s year-end Perspective/Agenda feature provides a look back – and forwards – at key events across the region in 2020-21. It gives an opportunity to update the Risk Grades included with each of our regular Risk management reports. After another year of tragedy, Yemen is effectively a failed state (rated F6, the bottom political and financial grades). Qatar has shown itself to be robust in the face of its neighbours’ boycott, its finances warranting an upgrade to 1, putting it on a par with the UAE. Iraq’s political standoffs and financial woes remain deeply troubling, but the situation is improving rather than deteriorating and the prospect of higher oil prices next year should help further; it has been upgraded from E5↑ to D4↓. Oman’s fiscal challenges continue to mount, prompting a downgrade of its economic rating to 3. 

Budget talks in Baghdad are going down to the wire over the thorny issue of allocations to the Kurdistan Regional Government (KRG). The negotiations are the latest manifestation of a long-running dispute between Iraq’s centre and its periphery that has proved stubbornly immune to resolution since the late Saddam Hussein’s Baathist regime was ousted in 2003. There is added friction in the Baghdad-Erbil standoff, with Iraqi Shia parties increasingly vexed at what they view as a resurgence of Kurdish independence hopes.

On 22 July, Iranian President Hassan Rouhani inaugurated a new oil pipeline running from Goreh in Bushehr province to a terminal at Jask in Hormozgan province, on the Gulf of Oman. The 1,000km, 42-inch link provides a strategically important new export outlet for Iranian crude.

Russia’s invasion of Ukraine continues to roil global oil and gas markets – particularly in Europe where countries are chasing alternative supplies to reduce their heavy energy dependency on Russia.

Tempers are fraying over the early-October decision by members of the Organisation of the Petroleum Exporting Countries and their allies in the Opec+ group to cut oil production. The most prominent members, Russia and Saudi Arabia, remain in a cosy alliance and western efforts to drive a wedge between Moscow and the Gulf countries have yet to show any returns. Riyadh and Abu Dhabi seem unfazed by any possible reputational risks, while they continue to sweat the global economy for revenues.

Even before the new Gaza war shattered comfortable assumptions about regional security, the global economic climate had been hostile, as shown in analysis of the International Monetary Fund's new reports on the global outlook and regional economic performance.