As Gulf Donors Shift Priorities, Arab States Search for Aid

Gulf states—especially Kuwait, Qatar, Saudi Arabia, and the UAE—have long been the rich uncles of a MENA region in which hydrocarbon reserves are distributed unevenly. As employers, their oil-and-gas-driven economies have absorbed millions of workers from Arab and other countries, and these workers have in turn sent home remittances that have kept local economies afloat. As donors and investors, the Gulf states have been a major presence in the MENA region for decades but significantly ramped up their involvement after the 2011 Arab uprisings. Sometimes cooperating with each other and sometimes competing, Gulf states have given billions of dollars in grants, loans, and investments to less wealthy Arab states, as well as financed costly military interventions in Libya and Yemen (and to a lesser extent Syria).

The Gulf states’ ability to play the rich uncle role, however, might now be waning. Shortly before the coronavirus pandemic hit the region, the International Monetary Fund (IMF) had issued a startling report on the GCC. Rising supplies of fossil fuels from diverse sources plus a global push to substitute renewable sources had created an “era of oil abundance,” which meant that the oil exporters “may need to be ready for a post-oil future sooner rather than later.” The IMF warned that Gulf states were far behind the curve in diversifying their economies and government revenue sources away from hydrocarbons, requiring government downsizing and private sector development. Spending by Gulf states had risen in the last decade, the report said, “with a notable acceleration in the wake of the Arab Spring in 2011,” although the oil price shock of 2014 prompted some recalibration. The IMF report made the stunning prediction that if the Gulf states did not make major changes soon, “the region’s financial wealth could be depleted by 2034.”

Then came the pandemic. While so far the public health aspects have not hit the Gulf states nearly as hard as Iran or European countries, the economic ramifications have hit the Gulf with what the IMF has called a “double whammy” of a health crisis and a collapse in oil prices. The crisis has also gutted some of the other sectors on which the limited diversification of Gulf economies has relied: tourism, business travel, logistics, and services. While these sectors will eventually recover, they might do so slowly and in ways that necessitate changes in Gulf states’ plans, if, for example, Chinese energy needs and/or trade patterns between the United States and China change significantly. Whatever happens in the post-pandemic global economy, the Gulf states will need to redouble efforts to focus on what the IMF has urged: “To meet pressing challenges from the expected peak in global oil demand” and from “demographic trends, including the ongoing rise in working age population.”

The economic predicament facing the Gulf states varies from country to country. On one side of the spectrum are the relatively hydrocarbon-poor states, such as Bahrain and Oman, who often receive priority assistance from their rich neighbors. These two countries reportedly received $20 billion in March 2011 from other Gulf states, who also mounted a military intervention to crush a popular uprising in Bahrain. On the other end are the relatively wealthy Gulf states with small numbers of citizens (although they boast many migrant workers) and large financial reserves, such as Kuwait, Qatar, and the United Arab Emirates. And right in the middle is all-important Saudi Arabia, with large hydrocarbon and fiscal reserves but also a sizable, diverse population accustomed to generous government benefits.

To take Saudi Arabia as an example of the changes underway in Gulf states, the kingdom has recently taken significant domestic austerity steps: tripling its value-added tax to 15 percent, cutting a cost-of-living allowance for government employees, and reducing spending on Crown Prince Mohammed bin Salman’s pet megaprojects. Even before the crisis, the kingdom had begun looking for ways to end its costly and unsuccessful military intervention in Yemen. Questions are now being raised about whether Saudi Arabia can afford to continue buying arms at the level it has in recent years.

The crown prince’s ambitious plans for a domestic economic transition had already gone off track well before the pandemic, due partly to reckless and brutal steps that depressed needed foreign investment. But according to Gulf-watcher Karen Young, the pandemic crisis is accelerating one aspect of his plans: “What does survive . . . is the restructuring of the labor market, as many foreign workers will lose their jobs and leave the kingdom, making room for more nationals to enter by necessity.” Indeed, while data are still scarce, reports of foreign workers and contractors leaving in droves—and tensions between those who remain and Gulf citizens—are increasing.

Gulf states are now facing painful choices. While their revenues from oil and gas become less reliable and generally decline, they must concentrate more of their efforts on keeping peace at home—helping their populations cope with the dislocations of massive economic change—and in the immediate neighborhood, especially Bahrain, Oman, and Yemen. Yet the active, even outsized, role they have played in the MENA region and in world affairs has been built on massive foreign aid and investment, and they will thus be loath to give up that role.

As the MENA region continues the long, difficult journey away from dependence on oil—which almost certainly will entail more episodes of turmoil beyond the 2011 and 2019 uprisings—the Gulf states might well have a diminished ability to influence affairs outside their immediate neighborhood. Other Arab states have already started looking elsewhere (to international financial institutions, China, and the United States) for the external financing and foreign investment that most of them still need. And those donors will attach significantly different economic and political strings than the Gulf donors have done.

This compendium of short essays by Carnegie scholars explores how the oil-exporting Gulf states’ priorities regarding engagement with the MENA region are changing, as well as how those changes are affecting the fortunes of several countries that have long relied on Gulf generosity.

MENA countries have been by far the top recipients of Saudi aid over the past ten years. The dual economic impact of the coronavirus and low oil prices, however, may lead Saudi Arabia to restructure and rationalize its development aid. In the words of one Saudi, the country is already seeking to end the perception of being “an ATM.” Saudi Arabia is likely to accelerate a mindset change that had begun before the crisis, taking a more transactional approach to aid that prioritizes pragmatic political and economic gains for the kingdom over its previous goals related to a loosely defined Arab and Islamic solidarity. The kingdom might henceforth favor loans and forward contracts on commodity exchanges over grants.

What is clear right now is that Saudi aid has become less attractive in some recipient countries, where there has been popular mobilization after the Arab Spring against the perceived curbs on independence that such aid brings. Meanwhile, Saudis have grown resentful of “ungrateful” Arab brothers. Apart from government aid, remittances from Arab labor in Saudi Arabia are expected to take a big hit.

The states most likely to lose out in this recalibration (unless their regimes’ survival is at stake) will be those that have traditionally benefited from Saudi Arabia’s largesse if they continue to resist its political conditionality—Jordan, Lebanon, Palestine, and to some extent Egypt—all of whom have already seen instances in which aid was frozen, decreased, or cut off. MENA countries also will have to compete for Saudi resources (state aid as well as private aid and investments) with other countries/regions that have regained strategic importance to the kingdom (South Asia, sub-Saharan Africa, Sudan, and food security destinations elsewhere), as well as with new commitments related to its G20 presidency.

Yet Saudi Arabia must continue certain kinds of aid even if it decreases aid amounts. For example, aid to its neighbors Bahrain and Yemen remains critical to Saudi’s security. And both development and humanitarian aid help the kingdom’s international image. The incapacity to develop alternative foreign policy tools, in addition to potential U.S. and Western aid retrenchment, will keep the pressure on Saudi Arabia to use bilateral and, to a lesser extent, multilateral channels of aid to maintain international support and influence. The centrality of the financial tool in Saudi foreign policy will continue, especially in places where regional foes are contesting Saudi influence (especially Yemen, but also Iraq, Syria, and maybe Libya). The entirety of Saudi aid will continue to be difficult to document, especially as the kingdom has ways to compensate for decreased resources such as giving off-the-books financial aid, reneging on previous pledges, and exerting influence within Arab or Islamic multilateral institutions.

Between 1971 and 2016, the United Arab Emirates channeled more than $60 billion in aid to foreign recipients. It became one of the world’s top donors in 2013, exceeding the United Nations’ aid target of 0.7 percent of gross national income. In 2018, UAE foreign aid contributions totaled $7.79 billion to forty-two states.

The roots of foreign aid policy, as with many things in the UAE, go back to its founder Sheikh Zayed Al Nahyan, who made supporting Arab Muslim nations a priority upon independence in 1971. While the government states that the “UAE’s aid has only humanitarian objectives,” other considerations factor in, such as advancing the country’s international standing, increasing its soft power, and fulfilling political objectives.

As in other Gulf states, the UAE’s foreign assistance policy has become more professional and bureaucratized over time. In 2008, it established the Office for the Coordination of Foreign Aid, which was then subsumed in 2013 under the newly created Ministry of International Cooperation and Development (MICAD). A token of the rising importance of aid in UAE foreign policy was the 2016 merger of the powerful Ministry of Foreign Affairs with MICAD, which involved the allocation of a high number of ministers (six) and the appointment of Abdullah bin Zayed (son of the country’s founder) as head of the combined ministry.

In January 2017, the revamped ministry launched its strategy, “Promoting Global Peace and Prosperity: UAE Policy for Foreign Assistance, 2017–-2021.” It identifies three aid priority areas—infrastructure, government effectiveness, and women’s empowerment—likely chosen to highlight components of the UAE’s brand and ensure that the UAE will not only support others financially but provide its expertise in the process. To further its brand, the UAE notes its commitment to fulfilling the Sustainable Development Goals of recipient states and its inclusion, since 2014, as the first participant member in the Development Assistance Committee of the Organization for Economic Cooperation and Development.

Yet other motives behind and beyond UAE’s humanitarian diplomacy have become apparent. Neighboring Arab states remain top recipients of aid, namely Egypt, Jordan, Morocco, Sudan, and Yemen. The UAE has a stake in supporting these states since the onset of the Arab Spring. For instance, aid in 2013 jumped 375 percent, with Egypt receiving 78.6 percent of it, coinciding with the UAE-supported Egyptian military takeover of the country. The same trend was evident in 2018, with close to half of Emirati aid directed to Yemen. Another notable 2018 aid recipient was Ethiopia, which has become a top priority for the UAE given its interest in the Horn of Africa.

Thus, while the pandemic and ensuing deep recession may force Emirati officials to pause and rethink strategy, the UAE cannot easily relinquish its aid policy given its multipurpose character. The challenge will be managing its aid policy in a post-coronavirus world where the government is openly discussing a novel reality that entails “government restructuring . . . and new national priorities,” in the words of the UAE vice president. 

Qatar and Kuwait rely on foreign assistance as an essential tool of regional influence and rank among the top international donors, but the two states have played their hands quite differently. Kuwait has generally worked within international or Gulf state frameworks, while Qatar has often been a maverick.

Kuwait was the first Gulf state to provide aid to Arab states, establishing its Kuwait Fund for Arab Economic Development in 1961, the year of its independence. More than other Gulf states, Kuwait has delivered significant assistance through UN channels; for example, in 2013, Kuwait allocated $300 million to UN aid for Syrians. Kuwait has also hosted international conferences to raise funds. In 2018, one such event raised $30 billion in commitments for reconstruction aid to Iraq, with Kuwait itself contributing $2 billion. During the Arab uprisings, Kuwait—which saw significant opposition protests of its own—generally hewed close to the policies of Saudi Arabia and the UAE, for example contributing $4 billion to the Gulf effort to support the 2013 Egyptian military coup and participating in the Gulf effort to crush the 2011 Bahrain uprising.

By contrast, Qatar has taken an independent approach toward foreign aid, seeking to amplify its global role and to position itself as a regional mediator in conflicts such as those in Lebanon, Sudan, and Yemen prior to 2011. Qatar also established itself as a key interlocutor on areas such as Gaza, which it has consistently supported. Beginning in 2011, Qatar used its foreign assistance to side with protestors and opposition groups amid the Arab uprisings. Notably, Qatar provided $8 billion in assistance to Egypt between 2011 and 2013 and was a strong political and financial supporter of the government of Egypt’s then president Mohamed Morsi—one of several factors contributing to a 2017 Saudi and UAE blockade of Qatar as well as an ongoing crisis within the GCC.

At the onset of the coronavirus pandemic, the two countries have continued to provide assistance, most recently to Gaza and Iran. In early April, Kuwait was named the World Health Organization’s top contributor to coronavirus response operations, with a contribution of $60 million. However, the economic impact of the virus outbreak has also necessitated a turn inward. Among the economic stimulus measures that the two countries have introduced, Kuwait increased its budget for government institutions by $1.6 billion for fiscal year 2021, and Qatar is providing its private sector with $20 billion in economic incentives. As Kuwait and Qatar increase domestic expenditures amid a competitive and unstable market for oil and gas, their ability to provide regional assistance and, by extension, maintain their international standing is unclear.

With deep reductions in international aid and an almost complete cut in U.S. funding to Palestinians since 2018, the West Bank economy has been in a free fall. In Gaza, Palestinians also face the almost insurmountable challenge of trying to subsist while under Israeli blockade. And now, as a result of the coronavirus, the Palestinian Central Bureau of Statistics estimates that from March to May 2020 the Palestinian Authority (PA) will lose $2.5 billion with a GDP contraction of 14 percent. The prime minister reported an increase in the budget deficit to $1.4 billion.

Financial support from Gulf Arab states, particularly from Saudi Arabia and Qatar, has been a lifeline to the occupied Palestinian territories through difficult times. With oil futures at one point going below zero, however, Gulf aid is in serious jeopardy with potentially devastating impacts on Palestinians who, like everyone else but with the added challenge of military occupation, will be attempting to dig out from the economic fallout of the pandemic. Palestinians can ill-afford a loss of aid from the Gulf, which is why the Palestinian Authority (PA) was quick to smooth over tensions with Saudi Arabia following a Palestinian caricaturist’s critique of the Arab role in the plunging oil prices.

Before the coronavirus, Saudi budgetary support to the PA was keeping public sector employees paid, allowing for some semblance of governance in those parts of the West Bank under the PA’s limited control. The kingdom is the PA’s biggest funder, providing $20 million per month since 2013. Saudi money also facilitates low-key Palestinian housing and development in East Jerusalem and allows for the continued operations of the UN Relief and Works Agency (UNRWA), the UN body providing essential services to Palestinian refugees in the region. With U.S. withdrawal of funding impacting one-third of the UNRWA’s total budget, Saudi Arabia became the agency’s third-largest donor, providing $160 million in support in 2018. According to the Saudi ambassador to the UN, over a period of two decades, the kingdom has provided Palestinians with $6 billion in humanitarian relief and development assistance and an additional $1 billion for Palestinian refugees.

On occasion, Saudi aid has been delayed as a way to express displeasure with the PA, including when Crown Prince Mohammad bin Salman flirted with the idea of openly backing the 2020 U.S. peace proposal between Israel and Palestine. Money from the kingdom resumed, however, when King Salman took back the Palestine file, although the flow is once again shut off with falling oil prices. The nose dive in oil prices will also impact remittances from Palestinian workers, which account for approximately 16 percent of Palestine’s GDP and are likely to fall by about 20 percent due to the pandemic.

Qatari largesse is primarily directed at Hamas-controlled Gaza. This aid flow is continuing despite the pandemic—at least for now. In March, Qatar announced that it would deliver $150 million over six months to the enclave. In contrast, in fiscal year 2019, Qatar provided $170.3 million in budgetary support to the PA. Qatari aid is responsible for housing construction, infrastructure, and subsistence in Gaza.

The UAE does not provide financial assistance to the PA and is even more unlikely to do so in the future as the relationship has soured over a number of years. When aid has been extended to Palestinians, it has generally gone toward humanitarian relief or reconstruction in Gaza, arguably as a way to bolster the Palestinian President’s arch-enemy, ousted Fatah-strongman Mohammad Dahlan, who hails from Gaza and whom the UAE hosts. In fact, a recent UAE air transport of medical supplies for the PA to combat the coronavirus—which was not coordinated with Palestinian officials and which landed in Tel Aviv—was rejected by Palestinian leader Mahmoud Abbas because it was seen as an underhanded attempt at normalizing ties with Israel. The supplies were then redirected to Hamas in Gaza, where virus cases have recently spiked.

All told, Palestinians in the West Bank and Gaza will be facing severe economic challenges for the foreseeable future, irrespective of the pandemic.

Saudi Arabia has been one of the two biggest donors to Jordan in the last few decades—the other being the United States. Over the years, Jordan and Saudi Arabia have often taken similar positions on major regional and international affairs, including relations with the United States, efforts on an Arab-Israeli settlement, and opposition to radical Arab regimes. That does not mean that the two countries’ positions have always been identical. At times, Jordan has pursued internal reform policies, including allowing peaceful Islamist political parties to operate, which were presumed not to gain Saudi approval. And there have been differences on regional issues as well that have led to suspensions in Saudi aid, for example during the 1990s when Saudi and Gulf aid stopped because of Jordan’s refusal to support a military intervention after the Iraqi invasion of Kuwait.

Once the division of the 1990s was healed, Saudi and Saudi-led aid to Jordan steadily increased over two decades. In 2011, the Saudis led a Gulf effort along with Kuwait and the UAE to provide $5 billion in aid to Jordan in an effort to help it deal with the aftermath of countrywide protests. In fact, the Gulf Cooperation Council went so far as to invite Jordan and Morocco to join in May 2011, but they did not join in the end.

The Jordan-Saudi relationship began to decline after 2014, which coincided with a sharp downturn in oil prices as well as the rise of a new Saudi leadership. It is largely assumed, although not publicly stated, that the new Saudi leadership expected Jordan to adhere to Saudi positions on issues including the civil wars in Syria and Yemen, the blockade against Qatar, and Iran’s rising power, as well as on outlawing the Muslim Brotherhood. For various reasons, Jordan has adopted positions on these issues that are sympathetic, but not identical, to Saudi views.

The Saudis have not provided any direct bilateral assistance to Jordan since 2014. A combined Gulf package of $2.5 billion from Kuwait, Saudi Arabia, and the UAE after a new wave of protests in Jordan in 2018 largely took the form of loan guarantees and deposits in the Central Bank of Jordan, with little if any direct budget support. Meanwhile, the UAE and Qatar have extended smaller bilateral packages.

For many reasons, the era of huge Saudi aid to Jordan and their strong alliance is over—although the two countries will probably try to avoid any major public rift. Meanwhile, Jordan has become far more dependent on aid from other sources, especially the United States ($1.275 billion annually). Jordan will try to protect its expatriate population of more than 400,000 workers in Saudi Arabia, who have been bringing in more than half of the estimated $3 billion in remittances each year. But the drop in oil prices and the impact of the coronavirus pandemic will likely affect the existing numbers of workers as well as the Gulf’s ability to absorb more workers.

In sum, Jordan is already experiencing the fallout of the oil era’s end and the region’s need to transition to a new and more productive economic model.

Since 2016, the once-significant financial support of Gulf Arab countries for Lebanon has slowed to a trickle. Between 2003 and 2015, 76 percent of foreign direct investment in Lebanon came from the Gulf states. Over the past decade, remittances averaged about 20 percent of Lebanon’s GDP annually—with an estimated 60 percent coming from the Gulf countries. And between 2006 and 2008, Saudi Arabia and Kuwait—in response to reconstruction needs following Israel’s war on Lebanon—deposited $2.5 billion in Lebanon’s central bank. Those factors showed Lebanon’s high level of dependence on Gulf political support and financial inflows.

Gulf support nearly ceased by 2016, however, triggered by a decline in oil prices in 2014 and the growing polarization between Saudi Arabia and Iran, who previously coexisted as influencers in Lebanon, albeit uneasily. In 2016, Saudi Arabia halted a $3 billion package to the Lebanese army and another $1 billion for the internal security forces.

While the decline in oil prices shrank the Gulf states’ fiscal space for support, the key impetus for these decisions was political. With the onset of the Syrian uprising in 2012 and Iran’s military and financial support for the Syrian regime of Bashar al-Assad, tensions rose between Iran and Arab countries in the Gulf led by Saudi Arabia. Lebanese Hezbollah combatants were deployed to Syria to fight alongside the Syrian military, while the party’s political and security roles in Lebanon visibly increased.

From the perspective of the Gulf states, Lebanon looked increasingly like an Iranian outpost. The negative fallout was best embodied in a 2017 episode when then Lebanese prime minister Saad al-Hariri resigned while on a visit to Saudi Arabia and for several days appeared to be unreachable. He was finally able to return to Lebanon due to international—specifically French—efforts. Gulf support for Lebanon, however, has remained at its nadir. This was evident in the modest levels of Gulf pledges at the CEDRE conference of 2018, held to bolster Lebanon’s economy.

Lebanon’s economic collapse in October 2019 triggered new calls for the Arab Gulf states to provide financial aid to Lebanon. However, given even greater tightening of Gulf fiscal capacities as a result of the coronavirus pandemic, as well as continuing tensions between Arab states and Iran, this support is unlikely to be forthcoming.

Gulf states have played large roles in Egypt’s economy as employers, investors, and donors for many years, but after 2011, they took center stage in its politics as well. The tense intra-Sunni rivalry between Saudi Arabia and the UAE on one side (supporting national militaries) versus Qatar and Turkey on the other (supporting the Muslim Brotherhood) played out roughly in Egypt as well as other MENA countries, particularly around the time of the 2013 military coup.

In 2019, a Gulf newspaper quoted an unnamed official at the Central Bank of Egypt on the astronomical sum of assistance Gulf states had given since 2011: $92 billion. While difficult to verify, the article included some credible details, such as $8 billion in deposits from Saudi Arabia, $6 billion from the UAE, and $4 billion from Kuwait, as well as more than $30 billion in loans to finance petroleum purchases. Assistance from Qatar was apparently included in the gross sum too.

What the newspaper did not mention is that Gulf aid to Egypt since 2011 has ebbed and flowed in several waves. In the first year after the January 2011 revolution, while the Supreme Council of the Armed Forces oversaw the initial transition, all the Gulf donors made contributions to stabilizing the Egyptian economy. After Mohamed Morsi of the Muslim Brotherhood’s Freedom and Justice Party won the presidency in June 2012, however, Qatar emerged as his most enthusiastic political and financial backer in the Gulf (along with Turkey). Qatar deposited $7 billion in Egypt’s Central Bank, while Saudi Arabia gave $1 billion.

The July 2013 military coup by then defense minister (later president) Abdel Fattah el-Sisi unleashed an even larger avalanche of assistance from Kuwait, Saudi Arabia, and the UAE, estimated at $30 billion. The UAE was particularly active in urging and championing the coup and reportedly funded opposition to Morsi as part of its ideological struggle with the Brotherhood and bitter rivalry with Qatar. The UAE also has been a major investor in Egypt and tried for a while—without much success—to persuade Sisi to implement a consultant-written economic reform vision similar to those popular in the Gulf.

While Gulf assistance was enormous, it fell off sharply after oil prices plummeted in the second half of 2014. By 2016, Egypt was obliged to seek $12 billion in relief from the IMF, with the Central Bank director announcing unceremoniously that “it has been a year since we received any money” from the Gulf. The UAE and Saudi Arabia did eventually contribute half of the $6 billion Egypt needed to raise in external funds to qualify for the IMF loan in 2016–2017, but Saudi Arabia was noticeably slow and reluctant. Relations with Sisi had soured due to differences over several regional issues. For example, he refused to send ground troops to support the Saudi air war against Yemen, and he provided support to Syria’s Bashar al-Assad. Sisi had to cede sovereignty over two Red Sea islands to the kingdom to patch the rift, provoking protests and lawsuits in Egypt.

Apart from waning government-to-government assistance, declining employment opportunities in the Gulf and diminishing investments and trade from the Gulf will be major losses to the Egyptian economy. About one-half of the nearly 10 million Egyptians abroad work in the Gulf—most in Saudi Arabia, by far—sending home remittances of more than $20 billion annually. With an exodus of expatriates expected from the Gulf as a result of the pandemic and oil crash, Egypt will feel keenly both the drop in remittances and the additional pressure on the local labor market. In addition, Gulf funds have made up some 10–20 percent of all foreign direct investment in Egypt in recent years; now it is unclear to what extent Gulf investors will continue to have the capital to invest there.

Egypt will continue to have large external financing needs (reportedly $10 billion in 2020 alone) and increasingly is having to look to non-Gulf sources, whose support comes with different conditions. Egypt received a $12 billion IMF loan in 2016, for which it had to raise an addition $6 billion in external financing—nearly half of that came from China, with the rest from the Gulf and the United States. Egypt is now requesting more money from the IMF earlier than expected due to the pandemic-induced recession. It recently obtained $2.8 billion in emergency IMF funding and is trying to raise another $9 billion. The IMF has now agreed to another standby loan—this time for $5.2 billion over one year, tied to unspecified economic reforms—while Egypt continues to seek $4 billion from other sources. Will Gulf states be among them? Maybe, but they will not be offering anywhere near the amounts they provided in 2013.

The relationship between Gulf countries, particularly Saudi Arabia, and their long-term partner the Moroccan monarchy has undergone notable changes in recent years. Diminishing oil revenues, a Saudi leadership that is more hard-nosed in how it spends its money, and shifts in Morocco’s foreign policy strategy have all played a role. The result is a relationship increasingly grounded in pragmatism as opposed to what was once an ideologically based, mutually supportive relationship.

Saudi Arabia and other Gulf states saw the Moroccan kingdom’s fate as closely tied to their own until just a few years ago. In the immediate aftermath of the 2011 protests, Gulf states pledged $5 billion in financial aid and political support to Morocco, even inviting the North African monarchy to join the GCC. In 2015, Saudi Arabia also signed a defense cooperation agreement with Morocco, which has long played a role in providing security in the Gulf, and made a reported $22 billion investment in Morocco’s military industries. It is not clear whether all the aid ever materialized.

In terms of investment, Gulf states until recently were major investors in the country, particularly in real estate, construction, and tourism. However, diminished oil revenues and the rise of Saudi Crown Prince Mohammed bin Salman brought about new priorities. Saudi direct investments in Morocco declined by 69 percent in 2018 compared to 2017 and by 78 percent compared to 2015.

The crisis within the GCC was an inflection point in this transformation. Morocco’s relations with Gulf leaders—old ties with Saudi Arabia and the UAE and burgeoning ones with Qatar (which by 2016 had emerged as the fifth-highest investor in the country)—made Rabat unwilling to pick a side in the 2017 dispute, irritating Saudi and Emirati leaders. Meanwhile, Morocco has gradually shrunk away from supporting key initiatives of the mercurial Saudi leadership, such as the military intervention in Yemen.

Even in North Africa, Morocco appears uninterested in blindly following its formerly close partners. Local news outlets close to the security services have been open in their criticism of the UAE. A rumor has been circulating that Morocco rejected a proposal from the UAE to recognize its Libyan patron General Khalifa Haftar in exchange for cheap access to Libyan oil and lucrative deals for Moroccan companies. Morocco has been supporting the UN process in Libya and helped broker the Skhirat agreement in 2015 that established the Government of National Accord—which is currently battling Haftar’s forces in western Libya.

Morocco has been adjusting to the decrease in Gulf support, adopting a more active and self-reliant approach that includes asserting its influence in Africa and reaching out to a new set of partners including China and Russia. An example of this is the current coronavirus pandemic crisis. Saudi Arabia’s support during the crisis has gone to global institutions rather than bilaterally to friends and supporters. Morocco has not benefited from any Gulf support so far. Instead the country is relying on its own resources, creating a substantial fund of $1 billion to manage the crisis, and on support from the International Monetary Fund in the form of a precautionary liquidity line it unlocked to deal with longer-term economic impacts.

Gulf countries have fewer financial interests in Tunisia than in other countries in the region, but the recent collapse of oil prices will likely have important first- and second-order effects there. In the short term, Tunisia, whose economy is expected to contract by 4.3 percent in 2020 due to the impact of the coronavirus, will lose one small but important pot of foreign assistance. In 2016, Qatar helped organize the “Tunisia 2020” donor conference, which netted significant pledges from the Gulf, many of which are still being paid out. Qatar made one of the largest pledges—$1.25 billion (second only to Germany’s $1.35 billion), Saudi Arabia pledged $750 million, and Kuwait pledged $500 million. More recently, in January 2019, Saudi Arabia granted Tunisia a $500 million loan following a visit by Crown Prince Mohammed bin Salman the previous month. Thus, the potential withdrawal of Gulf money could leave Tunisia with a crucial budget gap.

In the long term, the financing gap could push Tunisia closer to China. Europe and the United States will continue to be the country’s primary economic partners, but China, which has been steadily increasing its investment in Tunisia, could seize the opportunity to take on some of the large, showy projects that Saudi Arabia, Kuwait, and Qatar have funded in the past: stadiums, ports, and healthcare facilities, as well as tourism projects such as the Tunis Economic City and Tunis Lake district. Even in a booming economy, the Gulf states have often failed to make good on their investment pledges. A pause of Gulf investment is therefore likely, leaving China the room it needs to grow its footprint in a country with great geostrategic importance due to its position between Europe, Africa, and the Middle East.

Finally, Qatar’s diminishing economic role in Tunisia could affect the political scene. Ennahda, the dominant party in parliament, has long been criticized for its close ties to Qatar and Turkey. If Qatar is no longer a financial player in Tunis, its real or perceived ability to buy political influence will decrease.