The GCC will not be spared, as the region’s governments try to make sense of an untested leader entering at a particularly turbulent time. Yet for all of Mr Trump’s controversy, GCC governments remain tepidly optimistic about his arrival.
The following briefing, put together by our experts in the region, outlines where that optimism comes from and the hidden challenges that the region may face.
2. 2
The early days of the Trump
presidency already indicate
a profound shift in US policy
towards the Middle East.
The administration’s immigration
crackdown and refugee ban targeting
seven Middle Eastern and North
African countries prove to be early
tests in diplomatic relations between
the US and regional powers. In
following through on his ‘America
First’ pledge, President Trump is
implementing bold policies that may
very well change the world order.
The GCC will not be spared, as the
region’s governments try to make
sense of an untested leader entering
at a particularly turbulent time. Yet
for all of Mr Trump’s controversy,
GCC governments remain tepidly
optimistic about his arrival.
At the heart of this relationship are
security and economic cooperation.
As former US Vice President Joe Biden
noted on a visit to the UAE last year,
bilateral trade between the US and
UAE alone surpassed US$25 billion in
2015. Defense ties also run deep, as the
GCC proved to be one of the largest
purchasers of US defense technology
in recent years.
While many of Mr Trump’s policies
remain to be seen, the president’s
remarks on key security and economic
issues, such as trade, energy and
international cooperation suggest a
new attitude towards the UAE and the
wider GCC.
This briefing outlines where that
optimism comes from and the hidden
challenges that the region may face.
Visa and travel restrictions
for Middle East nations
The Trump administration sent
shockwaves through the world with
the signing of an executive order
impacting travel to the US for many
from the Middle East and North Africa
region. Citing security concerns,
the order is a far-reaching measure,
which is already impacting countries
and companies in the region. The
order imposes a 120-day suspension
of the US refugee programme and
indefinitely bans admission of
Syrian refugees. Additionally, the
order implements a travel ban on
individuals traveling into the US from
seven Muslim-majority nations –
Iraq, Iran, Syria, Yemen, Somalia,
Sudan and Libya (with certain
exceptions).
The order has been met with
controversy both in the US and
abroad, as politicians, heads of state
and business leaders have reacted to
the new measure. Legal resistance
within the US, and Trump’s firing of
the former US Attorney General Sally
Yates for not enforcing the executive
order, further add to public scrutiny.
2
“The GCC will
not be spared,
as the region’s
governments try
to make sense
of an untested
leader entering at a
particularly turbulent
time. Yet for all of Mr
Trump’s controversy,
GCC governments
remain tepidly
optimistic about his
arrival.
3. 33
An additional controversy is the fact
that many Middle East nations in
which Trump has business interests
– Egypt, Saudi Arabia, Turkey and
the UAE – do not face any new travel
restrictions based on the executive
order, a sensitive accusation for the
administration when considering that
President Trump’s latest tax returns
(and the exact nature of his overseas
holdings) have not yet been disclosed.
Still in its very early days, the order is
already having a moderate effect on
GCC businesses, as UAE airlines have
been forced to change their pilot and
crew rosters for inbound flights to the
US.
The executive order will have a
profound impact on the wider
region and the seven Muslim-
majority nations directly named;
however, given that many regional
powerhouses are currently exempt
from travel restrictions, this
measure may only have a nominal
direct impact on the GCC. Regional
businesses and governments will be
watching closely as the legal battles
related to this action play out in US
courts.
Stronger GCC relations at the
expense of Iran…
For the GCC, Mr Trump’s greatest
promise is his pledge to renegotiate
the nuclear deal with Iran, a central
issue of contention the Gulf states had
with the Obama administration.
The Joint Comprehensive Plan of
Action (JCPOA), better known as the
nuclear deal between the P5+1 and
Iran, lifted international sanctions
in exchange for Iran eliminating
its stockpile of medium-enriched
uranium, cutting its stockpile of
low-enriched uranium by 98%, and
reducing by nearly two-thirds the
number of gas centrifuges for 13
years. For the next 15 years, Iran will
only enrich uranium up to 3.67%,
essentially halting any nuclear
weapons efforts for that time but not
dismantling the programme.
During the presidential campaign,
Mr Trump repeatedly bashed the
nuclear deal, saying that dismantling
it would be his ‘number one priority’.
Lieutenant General Michael Flynn, his
nominee for national security adviser,
and Mike Pompeo, his nominee for
CIA director, have both taken a hard
line on Iran as well. That is music to
the ears of Gulf leaders, who felt that
the Obama administration had given
Iran free reign to meddle in the region,
emboldening the country to extend its
influence across the Middle East and
beyond. The lifting of sanctions and a
cash transfer of US$1.3 billion as part
of the deal would provide Iran with
the resources to potentially increase
its support of groups like Hezbollah,
and the Houthi rebels of Yemen, with
whom the GCC states are fighting a
pitched battle.
Yet analysts warn that while Trump
could nullify the nuclear accord, he
would risk isolating the US from the
international community as well as
hamper a possible rapprochement
with Russia. The sheer mechanics
of unwinding the deal, analysts say,
could also make it a non-starter.
…but will the US maintain
defense support?
Trump also singled out America’s
allies, who have not paid their
agreed share in NATO and other
alliances. In stark terms, he warned,
“We’ve defended other nations’
borders while refusing to defend
our own and spent trillions and
trillions of dollars overseas while
America’s infrastructure has fallen
into disrepair and decay. We’ve
made other countries rich while the
wealth, strength and confidence of
our country has dissipated over the
horizon.”
The message was aimed at European
states, as well as South Korea, Japan
and others; however, Trump has
also been critical of US financial and
military support in Middle Eastern
affairs.
In a 2016 interview with the NewYork
Times, then-candidate Trump gave
a similar criticism of US support for
Saudi Arabia for the Kingdom’s role in
the global fight against ISIS, stating,
“We are not being reimbursed for
the our protection of many of the
countries…including Saudi Arabia.”
For GCC countries, this rhetoric only
underscored long-held fears that the
US may be turning away from security
guarantees.
The GCC has been one of the largest
defense spenders in recent years, as
most have reinforced their militaries
and begun to cultivate new alliances
in the event that the US defense
support wanes. His message may have
confirmed their concerns.
Building on trade
PresidentTrump’scampaignpromises
centred on the reinvigoration of US
industry and countering the influence
of multinational institutions, and his
speech reconfirmed his intention to
‘buy American and hire American.’
For countries that have embraced
globalization, that could spell
newfound turbulence.
The UAE may be one of them. US trade
with the UAE stands at about 33.5%
of the total trade with GCC nations.
From 2010 to 2015, US exports to the
UAE increased by 97%, exceeding
US$22 billion. 2015 also marked the
seventh consecutive year that the UAE
was the largest export market for US
goods and services in the region. This
trend continued into 2016, as the US
Department of Commerce states that
trade between the UAE and the United
States reached $12.84 billion in the
first half of 2016, compared with $11.9
billion over the same period in 2015.
In addition to trade, more than 1,500
US organisations have a presence in
the UAE, with an estimated 50,000-
60,000 US citizens living in the
country.
As the relationship between the
US and UAE is largely driven by
US exports, Trump’s threats of
enacting import tariffs on foreign
manufactured goods may have only
a nominal impact on bilateral trade
with the UAE. Meanwhile the dirham
peg to the US dollar will fuel continued
demand for US products and services
in the country.
From 2010 to 2015,
US exports to the UAE
increased by 97%,
exceeding
US$22 billion.
4. 4
As a result, it is unlikely that a move
by the new administration to curb
imports (and the risk for potential
trade wars with other countries) would
directly impact the business interests
of US and Emirati organisations in the
near term.
Oil and energy
A cornerstone of the Trump campaign
was a pledge to lead a resurgence in US
industry, especially in the energy and
manufacturing sectors.
The US energy renaissance of the past
decade made possible by fracking has
presented a dramatic new challenge to
the GCC. The technology has changed
the global supply dynamics, turning
the US – historically dependent on
imports of oil – into a self-sufficient
producer, and more recently, an
exporter.
President Trump has pledged to create
‘complete energy independence’
for the US. This pledge includes a
variety of strategies to increase US
oil production through changes
to regulations and environmental
policies, as well as implementing
measures to encourage investment
in US shale companies to increase
exploration and production activities.
The confirmation of former
ExxonMobil CEO Rex Tillerson to the
position of Secretary of State only
underscores Trump’s determination
in this area.
An increase in US production could
impact an already over-supplied
global oil market, with a potential
increase in production driving global
oil prices lower, impacting GCC
government revenues even further.
Another more dramatic scenario
would be Mr Trump’s pledge to ban
US imports of foreign oil. The US
imports approximately 16 per cent
of its oil from the Persian Gulf, and –
while a ban on imports may reduce
oil production globally, causing prices
to potentially recover – it would have
profound economic consequences and
political implications on the region.
A Trump-induced disruption to the
global oil market would create further
uncertainty in a region already facing
the challenges of over-reliance on
hydrocarbons.
Business interests and
potential conflicts of interest
A controversy surrounding the
new administration is the potential
for conflicts of interest related to
President Trump’s business dealings
in the region. While the president has
pledged to hand over his commercial
interests to his family, creating
what has been referred to as a ‘half-
blind’ trust, his ties in the UAE and
elsewhere remain under scrutiny.
Trump’s business interests in the
region include ties with a luxury
property developer with whom
Trump partnered to develop an 18-
hole golf course described as the
‘Beverly Hills of Dubai.’ Trump enjoys
a longstanding relationship with
that company’s chairman, who was
recently Trump’s guest at his New
Year’s party, in which Trump publicly
praised him as a good friend and
business associate.
The property developer has expressed
interest in expanding its business
relationship with the Trump brands.
Shortly before his inauguration,
Trump announced that he had
declined a US$2 billion deal with the
company, describing it as a potential
conflict of interest.
Despite this specific deal not
materialising, the company’s
chairman expressed hope that the
election of Trump will benefit his
business, telling journalists in January,
“Naturally, I think we will benefit
from the strength of the brand going
forward.”
President Trump maintains that
there is no law or US Constitutional
requirement barring him from
having business interests while
serving as president. As legal and
ethics experts will look into Trump’s
business interests, it is clear that the
organisation’s international assets
will remain a source of controversy, in
both the UAE and elsewhere.
Ultimately, the unlikely rise of
President Trump may prove a mixed
blessing in the GCC. He promises
the region a key change on its most
central issue, but he may also
4
In addition to the policy
implications for the
region, the president has
already used the bully
pulpit (via his Twitter
account) to attack brands
and organisations that
he disagrees with, and
in turn has changed the
global communications
landscape.
“
5. 5
introduce new challenges that
might have a notable effect on the
region’s economies. As the world
works to determine what elements
of Mr Trump’s campaign rhetoric
will transform into actual US foreign
policy, the region’s leaders will
cautiously begin to navigate this new
geopolitical climate.
Communication implications
In addition to the policy implications
for the region, the president has
already used the bully pulpit (via his
Twitter account) to attack brands and
organisations that he disagrees with,
and in turn, has changed the global
communications landscape.
Tweets and remarks complaining
about the costs associated with
government contracts are recent
examples of the unprecedented
reputational risks organisations face
as a result of direct and unprovoked
confrontation from the new
president. In the case of one Fortune
500 aerospace company, Mr Trump
publicly criticised the company’s costs
for government contracts via Twitter,
resulting in shares in the company
falling immediately. While the decline
was only temporary, it was enough to
cause market uncertainty.
Trump’s similar attack on US
automotive companies for
outsourcing automotive production
- and his threats of implementing
a ‘border tax’- created a similar
controversy, which played out in the
public domain.
In an issue that hit closer to home
in the GCC, in 2016, then-candidate
Trump stated his public support for
the US Justice Against Sponsors of
Terrorism Act (JASTA), commonly
known as the ‘9/11 bill’.
The act passed the U.S. Congress
in September 2016, and allows
US citizens to directly sue foreign
governments and entities for damages
resulting from acts of terrorism.
The legislation was met with a swift
negative response from Saudi Arabia
(home to 15 of the 9/11 hijackers),
which has threatened to liquidate the
country’s estimated US$750 billion in
total U.S. assets.
As the controversy plays out between
both governments, a harsh tweet or
remark by President Trump could have
profound commercial consequences
for organisations in the US and GCC.
In a new communications era where
one man’s social media presence
can move markets and impact global
commercial decisions, both US and
GCC companies must consider the
reputational risks associated with
being on the wrong side of the new
administration.
As the GCC is home to a number
of individuals, institutions and
governments with complex and
controversial relations with the US,
it will only be a matter of time before
President Trump turns his criticism
towards organisations within the GCC.
When that day comes, businesses will
need to be ready to respond quickly
and appropriately.
HassanFattahiswiththeAbuDhabi
officeofBrunswick,andJamesAllanis
5
6. 6
Brunswick
Group
Brunswick is an
advisory firm
specializing in critical
issues and corporate
relations.
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offices in 14 countries. Founded
in 1987, Brunswick has grown
organically, operating as a
single profit center, allowing us
to respond seamlessly to our
clients’ needs, wherever they are
in the world.
Brunswick helps clients use
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their strategic objectives while
strengthening and protecting
their corporate reputation.
As a leading corporate and
financial communications firm in
the UAE, Brunswick has
advised government
related entities and private
companies on some of the most
prominent corporate
transactions, capital raisings and
crises.
Our clients operate in
different sectors from
financial services to real
estate and are based across the
Middle East and North Africa
region.
For further information please
contact:
uaeoffice@brunswickgroup.com
The Authors
Our Partners
Rupert Young
Partner, Head of Brunswick Gulf
Dubai
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Partner
Dubai
Alex Blake-Milton
Partner
Dubai
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Partner
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Partner
Abu Dhabi
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Partner
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Dubai
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