YOU CAN'T TRUST UNCLE SAM
U.S. Security Guarantees Under Scrutiny in Gulf States
- U.S./Israeli attacks on Iran triggered Iranian retaliation that disrupted ports, airports, energy infrastructure, and trade, revealing the limits of American security guarantees.
- Gulf states may renegotiate U.S. defense arrangements, pursue strategic autonomy with diverse military suppliers and domestic defense industries, and strengthen regional institutions like the GCC.
- To safeguard economies and influence, Gulf nations could diversify investments, expand trade/delivery routes, cautiously engage Iran, and leverage sovereign wealth funds to pressure the U.S. and other partners.
The Arab states of the Persian Gulf have suffered major economic and security costs in the wake of the U.S./Israeli attack on Iran. Iranian missile and drone retaliation hit airports, ports, and energy infrastructure, disrupting aviation, trade, tourism, and hydrocarbon exports, and damaging the Gulf’s reputation as a stable business hub.
Attacks on shipping and energy facilities, such as the disruption at Fujairah port and the Shah gas field in the United Arab Emirates (UAE), show how quickly a U.S./Israel war on Iran can spill over onto Gulf territory. Or “What happens in Iran doesn’t stay in Iran.”
UAE businessman Khalaf Ahmad al-Habtoor, a former business partner of U.S. president Donald Trump, publicly castigated Trump, “You have placed the countries of the Gulf Cooperation Council [GCC] and the Arab countries at the heart of a danger they did not choose…Who gave you permission to turn our region into a battlefield?” If Habtoor represents elite thinking in the Gulf, and local sources confirm he does, Gulf countries will reduce their future exposure to the U.S. They might:
Demand a new security framework with the U.S
Washington’s security guarantees did not adequately protect them from Iran’s retaliation, and they now see American security cooperation as an “acute vulnerability” according to Badr Albusaidi, the foreign minister of Oman. The New York Times reports the Gulf countries are looking elsewhere for solutions to countering Iran’s attack drones: “Saudi Arabia reached out to Ukraine, a nation with experience fending off Russian drones modeled on Iranian ones. The United Arab Emirates got help from France and Australia. And several Gulf governments asked Italy to provide anti-drone and anti-aircraft systems.
Despite the grand-sounding relationships: Saudi Arabia, Qatar, Kuwait, and Bahrain are “major non-NATO allies,” and the UAE is a “major defense partner,” the U.S. lacks resupply capability for its alleged friends or will ensure available weapons flow to Israel first.
Trump’s admission “we were shocked” that Iran struck at U.S. allies, and that he went to war with Iran "out of habit," shows he is not serious and makes the case for the internal critics of exclusive ties to the U.S.
Possible steps are to renegotiate defense arrangements with Washington (with clear commitments to defend Gulf territory) including the status of forces agreements (SOFA); demand consultation mechanisms, such as “dual-key” requirements for major military operations; seek burden-sharing agreements, including compensation for infrastructure damage or interceptor costs (Qatar invested USD1.8 billion to upgrade Al Udeid Air Base for the Americans); pushing for integrated regional air and missile defense systems; and, shelving Trump’s signature project, the Abraham Accords.
This could resemble a formal Gulf–U.S. security compact rather than the current informal arrangement, but the U.S. will resist the compact if Israel opposes it.
Pursue strategic autonomy.
If the war accelerates a shift away from total reliance on the U.S., the Gulf countries may: expand military procurement from multiple suppliers (Europe, South Korea, possibly China), though the U.S. will oppose this and will block any local attempt to make foreign systems interoperable with U.S. weapons; invest more in domestic defense industries, such as Saudi Arabian Military Industries or EDGE (UAE) especially in air defense, drones, and cyber; strengthening joint GCC military command structures.
Strategic autonomy would reduce the risk of being dragged into conflicts initiated by external actors.
Rebuild relations with Iran.
Even if tensions remain, Gulf states have a strong incentive to prevent another war and engage with Iran in a “cold peace” as they are “neighbors forever,” though Saudi duplicity – privately urging Trump to attack Iran while publicly pledging Saudi territory would not be used to attack Iran – will make rebuilding confidence a lengthy process. And if the Gulf states enter active combat against Iran, other than fending off drones and missiles, Iran may attack the most critical infrastructure, such as water desalination plants. And there is always the possibility of Trump suddenly declaring victory, pulling out, and leaving the locals exposed to Iran’s wrath.
The Saudis may be tempted to activate the defense pact with Pakistan, but the Pakistan armed forces are busy fighting the Taliban, who have pledged to help Iran if it was attacked by the U.S. Pakistan probably won’t commit to fight Iran unless the Saudis take the lead which would in turn hazard Saudi desalination plants (Saudi Arabia is 70% reliant on desalinated water). And Iran allowed a Pakistani commercial oil tanker to pass through the Strait of Hormuz, so Islamabad must also consider future forbearance by Tehran, or potential alternate suppliers, before it decides to fight.
Possible responses are: limiting U.S. warship visits and military unit deployments; opening direct diplomatic channels with Tehran; establishing maritime deconfliction mechanisms in the Strait of Hormuz, through which roughly one-fifth of global oil trade passes; multinational (GCC, Iraq, Iran) coast guard units to ensure maritime safety; non-aggression or “non-interference” understandings; economic cooperation where possible (trade, transport, electricity grids); and resolving territorial disputes, i.e., Greater Tunb, Lesser Tunb, and Abu Musa (Iran, UAE) or the Arash/Durra gas field (Kuwait, Saudi Arabia, Iran)
Strengthen regional institutions.
The war highlights the need for stronger Gulf coordination and reforms could include revitalizing the Gulf Cooperation Council as a real security bloc; joint missile defense and intelligence sharing; and coordinated maritime security patrols, giving the region a collective voice in crises rather than reacting individually.
Reduce economic vulnerability.
Because the Gulf economies depend on stability and global trade, war has exposed major risks.
Remedies are: Accelerate economic diversification programs such as Saudi Vision 2030; expand overland and pipeline routes that bypass the Strait of Hormuz; and invest more in logistics hubs outside the conflict zone (Red Sea, Gulf of Oman, Arabian Sea) to reduce the ability of any single conflict to disrupt Gulf economies.
According to Sanam Vakil, “These developments carry particular significance at a moment when Gulf governments are attempting to transform their economic models.” Moving the economy from a rentier hydrocarbon model to finance, tourism, technology, and logistics presupposes the surety of the hydrocarbon assets that will fund the transformation, and the presence of the expatriate workers needed to make the whole thing work.
The biggest loser in the Gulf from the conflict may be Iraq, which declared force majeure on foreign-operated oilfields. Nearly all of Iraq’s oil exports, about 3.3 million barrels per day, flow through the Strait of Hormuz (second only to Saudi Arabia,), and about 90% of total government revenue is from oil exports. Wood Mackenzie estimates Iraq is losing USD3.3 billion daily based on a 70% decline in Petroleum output, and Iraq’s GDP could shrink by 3.5% this year.
The cash crunch comes when Trump is pressing Iraq to nominate a prime minister of his liking, and Iran-backed militias are attacking American forces in the country.
Iraq is also suffering power cuts in advance of the peak season as it lost access to natural gas after the U.S./Israel attack on Iran’s South Pars gas field.
Use diplomatic leverage.
The Gulf states have significant potential leverage as their sovereign wealth funds invest hundreds of billions of dollars globally and they control a large share of global energy exports. After the war, they may use investment policy to influence U.S. and European decisions; deepen ties with China, Turkey, and India as balancing partners; and promote a regional security dialogue that includes Iran, Iraq, and the GCC.
This may be where the Gulf states can pressure the U.S. According to Forbes, “The six Gulf countries’ eleven sovereign wealth funds (SWF) invest about USD2 trillion in the U.S, which is over 35% of their total assets under management.” The Gulf states also hold about USD307 billion in U.S. Treasuries…Disinvesting from SWF commitments may expose them to losses if the U.S. economy sags due to the Iran War, but if they stopped rolling over maturing Treasuries, yields would rise, meaning higher borrowing costs for the U.S.
The Gulf states can put their USD2 trillion investment commitments to Trump “under review” and they have a perfect excuse: We have to repair the war damage and restock out magazines. This will undercut Trump’s claims that he is rebuilding American industry and creating jobs.
In fact, the Financial Times reports, “A number of Gulf countries have begun an internal review to determine whether force majeure clauses can be invoked in current contracts,” and “the prospect of an investment review by the wealthy states had caught the White House’s attention.”
A “regretful” invocation of force majeure would suit the style of the Gulf: avoiding a noisy break with the U.S. but communicating displeasure in the only language Trump understands, dollars and cents.
The GCC states are a center of Trump family business activity, such as from real estate and golf to crypto and tech?adjacent ventures. Once Trump leaves the office, it may be time to renegotiate some of those deals, as Trump’s successor, even if a Republican, may not be interested in making the effort to protect the Trump family fortune.
Summary
After the war, Gulf countries may pursue a three-part strategy:
- Renegotiate security relations with the United States.
- Reduce dependence on external powers through strategic autonomy.
- Build regional diplomacy—including cautious engagement with Iran—to prevent another war.
By James Durso for Oilprice.com
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