Global investment dynamics around 5G investment continue to be the signal bearer of future geopolitical relations: not just in Europe and Asia, but increasingly also in the traditionally energy-focused markets of the Middle East. On Wednesday, former U.S. Ambassador to Iraq, Douglas Silliman—who currently serves as President of the Arab Gulf States Institute in Washington—spoke before the Economic Club of New York on the future of economic and political ties between the U.S. and Persian Gulf States, and pointed to 5G as a harbinger of future global trade configurations.

Silliman noted “a growing perception in the Middle East that the world is becoming multipolar,” and that this is being expressed particularly through the increasing inclination of countries in the region to favor [Chinese telecommunications giant] Huawei for 5G telecommunications infrastructure buildouts.

Cheaper

Silliman said that while doubts abide in the Gulf region over the quality of Chinese technology goods, and while many countries “would like to buy American,” for the cost of one telecommunications operating system they can buy 4 or 5 Chinese ones, and even if 1 or 2 are defective, it is still economically advantageous for them for implement these cheaper Chinese technology solutions than U.S.-made ones.

As the economic reach of China expands and primary end-use markets for oil tilt toward Asia, political change will inevitably result, as Gulf countries will seek closer political ties to the Far East, in tandem with trade relationships.

How this, in turn, will impact relations between the Middle East and the U.S. and Europe remains unclear. But, Silliman noted, the trend to watch is not so much the money flowing from China to the Middle East, for oil, but rather the reverse—from the Middle East to China, for 5G and other technology products.

Singapore model

As Gulf States look eastward for new energy markets, Silliman noted, these states will also likely look to appropriate the political development framework of Singapore, and the leadership model of Lee Kuan Yew. Silliman said the Singapore model provides a better cultural fit for the Gulf States, offering the prospect of economic liberalization and growth without the “encumbrances of democracy.”

Silliman noted that issues of sustainability, climate change, energy development and diversification are also playing out in the Gulf States. These issues are not philosophically motivated, but rather economic, reflecting rising awareness of the opportunity costs involved, for example, in the use of hydrocarbons for domestic services such as water desalinization.

He also noted a high probability of disruptive social change emerging in the Gulf States over the next decade-plus. This will arise as a generation of youth in Saudi Arabia and—many of them educated abroad in the U.S., U.K. and Australia—come to the realization that the traditional, socialist-monarchist Gulf State model in which governments extract resources, selling them on the open market, and using the money to support dependent populations is not going to offer a lot of opportunity.

As the economic viability of this model wanes over the next 10 to 20 years, Silliman said it remained to be seen how turbulently these changes would manifest in the Gulf region.

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