The Gulf states are turning to Asia in a big way. Here’s why it matters.

King Salman of Saudi Arabia recently wrapped up a four-week, five-country visit to Asia that highlighted the rapidly growing density and complexity of ties between the Gulf Cooperation Council (GCC) and Asian states. Largely under the radar, these growing ties between the Gulf and Asia have the potential to reshape geopolitical patterns and relationships.

The Gulf States emerged after 2011 as the center of gravity within both a Middle East in transition and an international economy still recovering from the global financial crisis. The developed and emerging Asian economies that are leading the rebalancing of geoeconomic power across the world have a particularly keen interest in the issues of energy dependence and security of access to resources. Those interests might be expected to lead to new strategic policies — but thus far have not yet materialized into a serious challenge to the U.S.-led regional order.

The Middle East’s shift toward Asia

The United States steadily reduced its reliance on Middle East energy over the past decade and a half, but Asia grew more dependent on imported energy in the same period. High rates of population growth, urbanization and industrialization have ensured that domestic demand for energy in Southeast Asian states doubled between 1990 and 2007 — and is projected to be three times its 2007 level by 2030, with much of that increase set to come from GCC states.

China and India have joined Japan and South Korea as voracious consumers of Gulf oil and gas that now goes east in far larger quantities than west. According to the French think tank IFRI, Gulf States’ exports to Japan, South Korea, China and India are more than three times larger than to the United States and the European Union, and the figure is set to grow over the remainder of this decade.

The shift goes beyond oil and gas

Oil and gas ties have, over the past decade, moved far beyond simple transactions between buyers and sellers of energy to encompass developments across the upstream and downstream sectors. The Abu Dhabi government-owned Mubadala Development Co. has been particularly active in the upstream sector across Southeast Asia through a joint venture in gas exploration with the Malaysian National Petroleum Company (Petronas) in Malaysia as well as participation in oil field development in Vietnam, Thailand and Indonesia.

In 2013, the UAE signed a $6.75 billion agreement to establish a petroleum storage facility with a capacity of 60 million barrels of crude oil in the Malaysian state of Johor and has an additional oil storage agreement that places up to 6 million barrels of Abu Dhabi crude oil in Korea’s Strategic Petroleum Reserve. Abu Dhabi has also awarded significant slices of its 40-year onshore oil field concession to East Asian partners,…

Read the full article from the Source…

Leave a Reply