Energy, Technology, and Infrastructure in the Gulf: A Strategic Outlook
Gulf states are navigating a complex geopolitical and economic landscape, balancing traditional energy dominance with diversification into renewables, expanding their technological capabilities amid intensifying U.S.-China competition, and investing in infrastructure to solidify their role as a global trade and logistics hub. This balancing act is underpinned by a combination of strategic hedging, economic pragmatism, and a long-term vision that seeks to position the region at the center of global energy transitions, digital economies, and infrastructure connectivity.
Energy: Retaining Dominance While Managing Transition
Despite global efforts to accelerate the shift toward renewables, hydrocarbons remain the economic backbone of Gulf states, and their strategies reflect a deliberate effort to shape—not merely react to—the energy transition. Saudi Arabia, the UAE, and Qatar collectively control over 48% of the world’s proven oil reserves and 41% of its natural gas reserves, ensuring their continued leverage in global markets. OPEC+ remains the primary instrument for managing production and price stability, with Riyadh acting as the key orchestrator of supply adjustments. In 2023, Saudi Arabia led voluntary production cuts of 1 million barrels per day, signaling its ability to manipulate global oil supply even as demand fluctuates. However, U.S.-Saudi energy relations have evolved; Washington's increased shale production has diminished its direct reliance on Gulf oil, prompting Saudi Arabia to deepen energy ties with China, which now imports nearly 1.8 million barrels per day from the kingdom. Meanwhile, Russia’s participation in OPEC+ reflects a growing transactional relationship between Riyadh and Moscow, where Saudi Arabia gains leverage against Western political pressure while Russia secures market stability amid sanctions.
Security concerns remain paramount in the region’s energy calculus. The Strait of Hormuz, through which over 20% of global oil flows, remains a strategic chokepoint, with Iran repeatedly demonstrating its ability to disrupt transit through naval maneuvers, drone strikes, and cyber operations. The Red Sea and Bab el-Mandeb Strait have also become volatile, as evidenced by Houthi attacks on Red Sea shipping, underscoring the fragility of regional supply chains. While the U.S. Navy remains the primary security guarantor, Gulf states are expanding military partnerships beyond Washington, including with China, which opened its first overseas military base in Djibouti near the Bab el-Mandeb Strait. These shifts indicate a broader push by Gulf states to diversify their security partnerships, but aim to deepen reliance on the U.S. through a bilateral defence cooperation agreement.
At the same time, Gulf states are positioning themselves as key players in emerging energy markets. Saudi Arabia aims to dominate the global blue hydrogen market, investing $8.4 billion in hydrogen projects, while the UAE has committed $50 billion to renewables through Masdar, reflecting a strategic hedge rather than a full-scale transition. Qatar, already the world’s largest LNG exporter, is investing $30 billion to expand LNG production by 64% by 2027, reinforcing hydrocarbons as a long-term economic pillar. These moves signal that Gulf states are not abandoning fossil fuels, but rather integrating them into the global energy transition in a way that maintains market dominance.
Technology: A Strategic Battleground in U.S.-China Competition
The Gulf’s digital transformation is unfolding in the shadow of great power competition, as U.S. and Chinese technological spheres increasingly clash. Saudi Arabia and the UAE are aggressively investing in AI, cybersecurity, and digital infrastructure, with the GCC digital economy expected to reach $400 billion by 2030. Yet, these investments are drawing increased scrutiny from Washington, particularly regarding Chinese tech penetration into critical infrastructure.
Huawei’s 5G rollout across Saudi Arabia, the UAE, and Qatar has triggered U.S. concerns over cybersecurity risks, with Washington pressuring Gulf states to curb Chinese technological influence. However, for Riyadh and Abu Dhabi, technological independence is as important as security ties with the U.S., leading them to pursue a pragmatic hedging strategy. The UAE has already become a hub for Chinese AI and cloud computing companies, while Saudi Arabia has signed multiple AI cooperation agreements with Chinese firms as part of Vision 2030.
Cybersecurity is another major priority, driven by escalating cyber threats from Iran, Hezbollah, and other regional actors. The UAE has responded by establishing the Cyber Security Council, while Saudi Arabia has invested in offensive cyber capabilities, signing cybersecurity pacts with U.S. and European firms. These developments highlight how digital security has become a core pillar of national security strategies in the Gulf, intertwined with broader geopolitical alignments.
Infrastructure: Gulf States as a Global Logistics Hub
Gulf states are aggressively investing in infrastructure to cement their role as a global trade and logistics hub, leveraging their strategic location at the crossroads of Asia, Africa, and Europe to position themselves as indispensable players in global commerce. Infrastructure development is not just about economic diversification—it is a geopolitical tool that enables Gulf states to assert influence over the flow of goods, energy, and capital between major economic blocs. Saudi Arabia’s Vision 2030, with its $500 billion infrastructure portfolio, includes flagship projects like NEOM, a planned smart megacity integrating advanced logistics, AI-driven trade hubs, and sustainable urban development. Beyond NEOM, Saudi Arabia is modernizing its Red Sea and Gulf port infrastructure, enhancing connectivity to global markets while preparing for the long-term shift in maritime trade routes.
Meanwhile, the UAE has solidified its dominance in maritime logistics, with Jebel Ali handling 15 million TEUs annually, making it the largest port in the Middle East and a key transshipment hub linking Asian manufacturing centers with Western consumer markets. The UAE’s DP World, one of the largest port operators globally, manages a vast network of ports, free zones, and logistics corridors across the Middle East, Africa, and South Asia, extending Emirati commercial influence far beyond its borders. These investments underscore the Gulf’s broader ambition: not only to integrate more deeply into global supply chains but also to shape how trade routes evolve in an era of shifting global power dynamics.
A key geopolitical shift in infrastructure development is the intensifying competition between China’s Belt and Road Initiative (BRI) and the India-Middle East-Europe Economic Corridor (IMEC). The IMEC project, announced at the 2023 G20 Summit, is being framed as a Western-backed alternative to BRI, aiming to establish a new economic corridor that links India to Europe via the Middle East through a multi-modal transportation network combining rail and maritime infrastructure. The initiative is designed to bypass Chinese-led projects, reducing Beijing’s influence in global infrastructure development while deepening trade integration between the Gulf, South Asia, and Europe.
However, rather than taking sides, Gulf states are hedging their bets, engaging with both BRI and IMEC to maximize economic opportunities while maintaining strategic flexibility. Saudi Arabia and the UAE have been among the largest Gulf recipients of Chinese BRI investments, particularly in port and logistics infrastructure. Jeddah Islamic Port and Abu Dhabi’s Khalifa Port have seen significant Chinese-backed upgrades, reinforcing their roles as regional trade hubs. At the same time, Saudi Arabia has signaled strong support for IMEC, recognizing the potential to deepen economic integration with India and European markets.
Another critical component of Gulf infrastructure strategy is the I2U2 initiative, a multilateral economic partnership between India, Israel, the UAE, and the United States. Initially envisioned as a technology and infrastructure-focused mini-lateral framework, I2U2 seeks to enhance trade connectivity, food security, clean energy cooperation, and technological collaboration across its member states. For the Gulf, particularly the UAE, I2U2 represents another avenue to diversify economic partnerships beyond traditional Western and Chinese engagements while strengthening ties with both India and Israel, two rising players in global technology and supply chain logistics. While I2U2 is not a direct competitor to IMEC or BRI, it aligns with the broader Gulf strategy of engaging in multiple economic and strategic partnerships simultaneously, allowing Gulf states to reinforce their position at the intersection of global trade while hedging against over-dependence on any single geopolitical bloc. The UAE, as a key logistics and financial hub, is leveraging I2U2 to expand its role in global food corridors, digital trade, and renewable energy, further solidifying its status as a central player in shaping new economic corridors in a multipolar world.
This dual-track strategy highlights the Gulf’s pragmatic approach to infrastructure diplomacy: rather than aligning fully with either China or the U.S.-India-Europe axis, Gulf states are ensuring they remain central to competing trade networks. By positioning themselves as pivotal transit hubs, they retain leverage over global supply chains, securing investment from multiple partners while avoiding over-reliance on any single global power. This approach also reflects a broader shift toward strategic autonomy, where Gulf states are no longer passive participants in global trade but active architects of new economic corridors that will shape global commerce for decades to come.
The Trump Factor in the Gulf’s Strategic Calculus
The return of Donald Trump to the presidency introduces significant variables into the Gulf’s energy, technology, and infrastructure strategies. His administration previously prioritized U.S. energy independence, leading to increased domestic production that reduced Washington’s reliance on Gulf oil. A second Trump term could see renewed pressure on Saudi Arabia and OPEC+ to increase production, disrupting their supply-cut strategies to maintain price stability.
On the technology front, Trump’s administration escalated tensions with China over 5G and AI, a trend that would likely intensify in a second term. This could force Gulf states into harder choices between U.S. security partnerships and Chinese technological investments. Meanwhile, infrastructure initiatives like IMEC, framed as a counter to China’s BRI, could receive increased backing—or be sidelined depending on Washington’s priorities.
Trump’s transactional approach to foreign policy also introduces greater unpredictability in U.S.-Gulf relations. His past administration’s shift away from multilateral security commitments means Gulf states may accelerate their diversification strategies, seeking deeper ties with China, Russia, and India to hedge against Washington’s unpredictability.
Ultimately, Gulf leaders will need to reassess their geopolitical positioning, balancing economic pragmatism with evolving U.S. foreign policy under Trump. Their ability to adapt to shifting U.S. priorities while maintaining strategic autonomy will be crucial in navigating the next phase of global power realignment.