Trump has reshaped the Middle East, made business more difficult

• Despite his explicit repudiation of his predecessor’s policies, Trump has sustained a broader trajectory of refocusing the US on other geopolitical priorities.
• Nevertheless, Trump’s policy choices have reshaped the Middle East; Saudi Arabia, the UAE and Israel are more powerful, while Iran is more aggressive and a greater threat to the US’s partners.
• Trump has been bad for business. Sanctions, violence, instability, political spats affecting commercial ties and reputational risk are all of increasing concern to global businesses operating in the region.

Continuity and change

Nearly four years after Trump began his engagement with the Middle East and North Africa with a visit to Saudi Arabia, it is diffcult to choose an image that best encapsulates his impact. That inaugural visit produced a contender: Trump standing with Saudi and Egyptian leaders behind a glowing orb as they jointly pledged to destroy extremism.

Other candidates include Trump announcing the killing of Islamic State (IS) leader Abu Bakr al-Baghdadi, the smoke billowing from Saudi Arabia’s oil installations in Abqaiq and Khurais following a precision Iranian strike, the wreckage outside of Iraqi capital Baghdad’s airport of the vehicle carrying Iranian military commander Qassem Soleimani or the foreign ministers of the UAE and Bahrain signing normalisation agreements with the Israeli prime minister.

These moments underscore the significant – and lasting – consequences of Trump’s decisions but obscure some broader continuities between Trump and his predecessor, former US president Barack Obama (2009-17). Trump moved to reverse elements of Obama’s policies by signalling the US’s unwavering commitment to Israel, withdrawing from the 2015 Iran nuclear deal, retaliating against the Syrian government’s use of chemical weapons and bolstering the US’s relationship with Saudi Arabia, the UAE and Egypt.

Yet, Trump – like Obama – avowed a desire to wind down US military commitments in the region and refocus US strategy on competition with China. Just as Obama’s did, Trump’s various efforts to withdraw US forces have been frustrated by security developments and military opposition. Where Obama sought to create a regional balance of power between Saudi Arabia and Iran that would permit US withdrawal, Trump extended a regional carte blanche to the kingdom in exchange for geopolitical support and arms sales.

A new Middle East

A Biden administration will face a Middle East that has been reshaped by its de-prioritisation under both Obama and Trump and the policy choices made by Trump over the last four years.

An increasingly assertive Saudi-Emirati-Israeli axis that seeks to defeat Turkey and Iran’s quests for regional influence is transforming the regional order. The results include the fracturing of the Gulf Cooperation Council (GCC) amid a boycott of Qatar led by Saudi Arabia and the UAE, escalating confrontation with Turkey in Syria and Libya, tensions with Iran that threaten war and the continuation of the Yemeni quagmire.

Iran has been weakened but hardly defanged. Tehran’s audacious attacks on ships off the UAE’s coast and on Saudi oil facilities reflected the efficacy of the Islamic republic’s asymmetric capabilities. Trump’s “maximum pressure” sanctions campaign is suffocating Iran’s economy but doing little to reduce Iranian influence in Iraq, Syria and Lebanon. The campaign is, however, making a return to nuclear diplomacy less likely: once bitten, Tehran will likely be twice shy should a Biden administration seek to re-join the nuclear deal. The increased likelihood that Iran will pursue a nuclear weapon as the only credible security guarantee is already triggering a regional arms race.

Outside of the Gulf, Israel and Iran, the Trump administration’s impact is notable by its absence. The US has had little influence over the course of conflicts in Syria and Libya. Popular uprisings have shaken Algeria, Sudan and Lebanon, but the US has done little to influence the subsequent political transitions.

Tricky business

The Trump administration’s policies have severely complicated the regional business environment. The most obvious complication relates to the aggressive use of sanctions against Iran, Syria and associated actors. Despite European governments’ efforts to create mechanisms to facilitate trade in some sectors and China’s ringing condemnations of the US’s unilateral approach, companies are not willing to risk violating US sanctions. Sanctions, once imposed, are diffcult to unwind. Even if a Biden administration seeks change, global businesses will be navigating a compliance minefield for years to come.

The Trump administration’s aggressive tactics have prompted Iran to unleash its arsenal of asymmetric capabilities. Although Tehran previously supported terrorist attacks on US interests, harassed the US military and threatened commerce via the Strait of Hormuz, attacks since 2019 demonstrate the fundamental vulnerability of the Gulf’s critical infrastructure. Although the Trump administration’s killing of Soleimani forced Iran to recalibrate its tactics, Tehran will likely continue to calculate that its adversaries’ desire to avoid war will allow it significant leeway to commit deniable acts of sabotage, terrorism and war.

Trump proudly promotes “wins” for US businesses in the Gulf, but his transactional approach has ultimately hurt business. The administration’s lack of interest in human rights issues has emboldened some states to take actions – such as targeting dissidents and tolerating civilian casualties – that will likely result in the curtailment of arms sales under a Biden administration.

Reputational risks have increased for Western firms when engaging with countries such as Saudi Arabia amid the ongoing fallout from the 2018 murder of Saudi journalist Jamal Khashoggi in Istanbul (Turkey) by agents of the Saudi state. Moreover, the increasing assertiveness of regional leaders has led to the increased politicisation of business with an increase in formal and informal boycotts and attempts to use commercial ties as leverage in political disputes.

In 2020, increased political and security risks to business were exacerbated by a historic drop in oil prices and the COVID-19-induced global economic downturn.

Trump card

Despite gloomy economic conditions, the Trump administration’s valedictory regional gambit – brokering normalisation with Israel – is a potential silver lining for regional businesses. Reduced tensions could foster economic integration spanning the Gulf and the Eastern Mediterranean, unlocking new business opportunities (such as cross-border infrastructure and tourism). Although still a long way off, better integration could help decon􀃖ict and deduplicate investment and help decrease dependence on hydrocarbon rents by tapping the region’s underutilised human capital.

However, obtaining these benefits requires stabilising the regional political and security environments – likely to be a key focus of the next administration. A Biden administration would have its work cut out to reach pragmatic accommodations with regional players to contain conflict risks. The US Congress – even if controlled by the Democrats – will undoubtedly have its own priorities, including conditioning engagement on improving human rights. The US is no longer the only power regionwide: China’s burgeoning economic, diplomatic and security interests, alongside Russia’s interventionist escapades, will continue to complicate attempts at “grand bargains”.