Donald Trump has quickly made it clear that the guiding light in his relationships with Arab countries of the Gulf will be his trademark transactionalism. In the first days of his new term, he announced that he was entertaining the idea of Saudi Arabia being his first foreign destination—if the Kingdom helped bring down oil prices and increased its investments in the United States to $1 trillion. Rulers in the rest of the Gulf Cooperation Council (GCC) countries have taken note, and have been quick to announce large-scale investments into the United States.
But the new administration’s investment “gifts” warrant caution. When it comes to Trump, not everything that glitters is gold. And some of the business “opportunities” that the administration is arranging could lock Gulf countries into very costly obligations with potentially few economic or political benefits—for regional countries or, in the long run, for the United States.
Many commentators have suggested that the Trump administration’s more transactional and personalistic approach to politics suits the GCC countries. Saudi Arabia, Qatar, and the United Arab Emirates have invested billions of dollars in Jared Kushner’s private equity firm; Abu Dhabi hosted the Bitcoin Mena conference in December, which included speakers such as Eric Trump and the new U.S. special envoy to the Middle East, Steve Witkoff; and the governor of Saudi Arabia’s sovereign wealth fund, Yasir Al-Rumayyan, was spotted with Trump at high-profile golf and UFC tournaments. By also cementing relations with key figures around the administration—like Sam Altman of OpenAI and Elon Musk of Tesla—the theory is that the Gulf should be in a better position to get something in return.
But what is it, exactly, that the Gulf wants in return? To be a global technological hub for artificial intelligence (AI) and to use these tools at home? To produce the latest chips? To influence U.S. security policy in the region? It’s entirely possible that some of these bets may pay off. But doing so comes with some real risks. For one, it strengthens the Trump administration’s perception of the Gulf states as a piggy bank that it can draw from whenever it needs. It also empowers a new emerging American elite centered around Trump that is clearly willing to put everything up for negotiation, leaving nothing safe. And it could cost a lot of money.
Gambling on Stargate
Consider Stargate, a $100 billion AI project that Trump unveiled on his second day in office, in which Abu Dhabi is a major investor. Stargate intends to expand its investment to $500 billion over the next four years by building new infrastructure for OpenAI, which would assume operational responsibility, as well. The project entails the construction of large data centers in the United States, the purchase of ever more computer chips, and a dramatic increase in energy capacity to train these new AI systems. Dreams of artificial general intelligence and intense competition among the U.S.-based tech oligopoly have created a business model that requires heavy capital expenditure, akin to an arms race.
But it’s a business model that is highly susceptible to technological and financial disruption. For example, the release of DeepSeek in January—requiring far less energy and capital—put OpenAI’s energy- and cost-intensive model into question. As climate reporter and writer Kate Aronoff put it, “there is nothing inevitable, though, about the tremendous energy demand that AI boosters say they’ll need.” The risk to Gulf states who have heavily invested in Altman’s company, and in a sector dominated by specific personalities, is that it could potentially lock them into an investment model that is clearly cost-intensive but less clear in terms of profitability.
In fact, the Emirates’ experience with the semiconductor industry serves as a useful lesson. In the late 2000s, Abu Dhabi’s sovereign wealth fund, Mubadala, made a multibillion-dollar investment in the struggling semiconductor company Advanced Micro Devices, and spun off a new company, GlobalFoundries. Key to the plans was building a factory (or “fab”) in Abu Dhabi as part of the emirate’s diversification efforts. “In four years, you’ll see the first foundry in Abu Dhabi,” said Mubadala chairman Waleed Al Mokarrab Al Muhairi at an energy conference in 2009. “It is an industry-changing move to create, at home, this business.” In 2011, however, GlobalFoundries announced that its plans to set up a fab in Abu Dhabi were being put on hold. Given the winner-takes-all model of the semiconductor industry, GlobalFoundries could not match capital expenditure increases of the Taiwanese firm TSMC without operating at a loss. In fact, Abu Dhabi had to prioritize the company’s existing fabs in the United States, Germany, and Singapore, just to keep pace with the global market. GlobalFoundries quietly discarded its plans to set up shop in the emirate and Abu Dhabi has since been trying to partially exit from its costly investment.
While it is too early to tell how the AI investment model will fare, it is crucial that investors in the Gulf establish some sort of guardrails on these deals. Gulf states may have deep pockets, but that doesn’t mean that they can afford for American tech CEOs to take them for a ride.
To be sure, Gulf leaders are at least somewhat aware of these risks, and they haven’t put all of their AI eggs in an American basket. They’ve created important relations with Chinese firms and announced AI investments in Europe. Even Saudi Aramco has adopted China’s DeepSeek AI technology for its operations in its flagship data center in Damman. But if the Gulf states let the Trump administration force them to choose a side—as the Biden administration did when it forced the Emirati AI firm G42 to divest from China—they’ll be left to pick up the tab.
No Defense Guarantees
Part of the reason GCC countries are so eager for American favors is that they hope the United States will come to their aid in a conflict. But the last two American administrations proved that the United States doesn’t have the political will to directly protect or respond to attacks against the GCC states—especially after the Houthi attacks against Saudi Arabia in 2019 and Abu Dhabi in 2022.
But clarity on the lack of U.S. support in these situations has actually led to some positive developments. The Gulf states have shifted toward a strategy of diplomacy and de-escalation with Iran, culminating in the Chinese-brokered rapprochement between Saudi Arabia and Iran in March 2023. As Century International fellow Veena Ali-Khan has noted, this detente has “transformed into a vital deconfliction channel, helping to contain some of the potential escalation and fallout from the widening regional war”—even after October 7.
Now, however, as Trump restores his policy of “maximum pressure” on Iran, the Gulf states’ newly developed emphasis on de-escalation could put them in an awkward position. Partnering closely with an administration that consistently provokes and enrages global allies and adversaries may also undermine some of the positive initiatives that Gulf states have been involved in over the past five years. It will be crucial that the GCC maintains these relations with Iran and other global powers and resists pressure to abrogate them.
The new administration looks at the Gulf as its personal ATM. Trump even seems to expect the GCC states to help fund a fantastical Gaza scheme that amounts to forced displacement of Palestinians.
In a post-October 7 region, GCC states are also more cautious about normalizing relations with Israel, fearing significant domestic political pressure. But it doesn’t seem like Israel or the United States even care about these new political dynamics. Trump’s outrageous proposal to resettle Palestinians from Gaza and turn it into the “Riviera of the Middle East”—which has been enthusiastically endorsed by Israeli prime minister Benjamin Netanyahu—demonstrates just how out of touch the new administration is with the realities in the Middle East. Trump even has said he expects Saudi Arabia and other GCC states to “spend some money” on a scheme that amounts to forced displacement. Having Gulf states fund and legitimize such a plan is obviously a political nonstarter.
But putting aside the absurdities of the plan, it signals something else that is deeply problematic: that the new administration looks at the GCC as its personal ATM. The Trump administration clearly thinks that if it allows the Gulf states access to strategic investment and military deals, that it can rely on them to cough up money to fund entirely fantastical reconstruction plans in Gaza.
Some Gulf leaders are pushing back. For example, Trump’s statements forced Saudi Arabia’s foreign ministry to reaffirm its position of not establishing ties with Israel without the creation of a Palestinian state. “You can’t just go and sort of invest billions without that political clarity and come back to see yet another conflict,” said Anwar Gargash, one of the Emirates’ top diplomats, partly in response to Trump’s plan. It is important that the GCC holds a tough line with the United States and Israel, making it clear that they won’t go along with the new administration’s plans without some real political concessions.
Diversify Risk
Some Gulf leaders and commentators seem to think that if the Gulf states invest so heavily with key figures in and around the Trump administration, they will be able to leverage these investments to curb some of the president’s most egregious excesses. In part, they’re correct: curbing those excesses is a desperate necessity to ensure regional stability. If there is one political bloc in the region that can realistically moderate the behavior of Washington, it is the GCC.
On the other hand, a deeply transactional mode of politics creates a situation where everything is potentially up for negotiation. The point of enduring political institutions and partnerships is precisely to avoid such a situation. Gulf states may expend important political and economic capital just to calm a bull in a china shop—or at worst, pay for its damages.
Instead, Gulf states might look toward continuing to develop and bolster their relations with other states and committing to strengthening regional partnerships and global institutions so that the United States is not the ultimate arbiter of political decision-making in the region.
Here are just a few of the specific steps that GCC states could take:
- Increase their investment exposure to Asian markets and diversify foreign currency reserves away from the U.S. dollar.
- Build upon and expand the scope of the 2023 Beijing agreement to include cooperation on non-security issues and bring in other countries, like Iraq.
- Continue to insist that reconstruction plans in Gaza are off the table without the recognition of a Palestinian state.
- Revive discussions with Iran on collective security issues and serve as a back channel for senior U.S. and Iranian officials.
In addition, the Gulf states can seek out broad-based regional security arrangements, which can function as a stabilizing mechanism and a bulwark against the vagaries of U.S. foreign policy. The GCC could also continue to develop relationships with actors in the United States who are not entirely wedded to the Trump project. Doing so not only protects the Gulf from the inconsistencies of future administrations, but also sends a signal that maximalist U.S.–Israeli politics are not the only game in town.
Washington seems to want to remake the world according to an atavistic imperialism—a project as dangerous and destabilizing for the Middle East as it is for Americans. The GCC countries can’t ignore Trump, but they can hedge their bets and keep their options open. After all, there are no guarantees that Trump’s contradiction-plagued foreign policy will pan out as he hopes.
Header Image: Donald Trump looks over at Crown Prince of Saudi Arabia Mohammad bin Salman al-Saud as they line up for the family photo during the opening day of Argentina G20 Leaders’ Summit 2018 at Costa Salguero on November 30, 2018, in Buenos Aires, Argentina. Source: Daniel Jayo/Getty Images
Tags: persian gulf, U.S. Foreign Policy, donald trump
Will Gulf Countries Think Trump’s Glitter Is Gold?
Donald Trump has quickly made it clear that the guiding light in his relationships with Arab countries of the Gulf will be his trademark transactionalism. In the first days of his new term, he announced that he was entertaining the idea of Saudi Arabia being his first foreign destination—if the Kingdom helped bring down oil prices and increased its investments in the United States to $1 trillion. Rulers in the rest of the Gulf Cooperation Council (GCC) countries have taken note, and have been quick to announce large-scale investments into the United States.
But the new administration’s investment “gifts” warrant caution. When it comes to Trump, not everything that glitters is gold. And some of the business “opportunities” that the administration is arranging could lock Gulf countries into very costly obligations with potentially few economic or political benefits—for regional countries or, in the long run, for the United States.
Many commentators have suggested that the Trump administration’s more transactional and personalistic approach to politics suits the GCC countries. Saudi Arabia, Qatar, and the United Arab Emirates have invested billions of dollars in Jared Kushner’s private equity firm; Abu Dhabi hosted the Bitcoin Mena conference in December, which included speakers such as Eric Trump and the new U.S. special envoy to the Middle East, Steve Witkoff; and the governor of Saudi Arabia’s sovereign wealth fund, Yasir Al-Rumayyan, was spotted with Trump at high-profile golf and UFC tournaments. By also cementing relations with key figures around the administration—like Sam Altman of OpenAI and Elon Musk of Tesla—the theory is that the Gulf should be in a better position to get something in return.
But what is it, exactly, that the Gulf wants in return? To be a global technological hub for artificial intelligence (AI) and to use these tools at home? To produce the latest chips? To influence U.S. security policy in the region? It’s entirely possible that some of these bets may pay off. But doing so comes with some real risks. For one, it strengthens the Trump administration’s perception of the Gulf states as a piggy bank that it can draw from whenever it needs. It also empowers a new emerging American elite centered around Trump that is clearly willing to put everything up for negotiation, leaving nothing safe. And it could cost a lot of money.
Gambling on Stargate
Consider Stargate, a $100 billion AI project that Trump unveiled on his second day in office, in which Abu Dhabi is a major investor. Stargate intends to expand its investment to $500 billion over the next four years by building new infrastructure for OpenAI, which would assume operational responsibility, as well. The project entails the construction of large data centers in the United States, the purchase of ever more computer chips, and a dramatic increase in energy capacity to train these new AI systems. Dreams of artificial general intelligence and intense competition among the U.S.-based tech oligopoly have created a business model that requires heavy capital expenditure, akin to an arms race.
But it’s a business model that is highly susceptible to technological and financial disruption. For example, the release of DeepSeek in January—requiring far less energy and capital—put OpenAI’s energy- and cost-intensive model into question. As climate reporter and writer Kate Aronoff put it, “there is nothing inevitable, though, about the tremendous energy demand that AI boosters say they’ll need.” The risk to Gulf states who have heavily invested in Altman’s company, and in a sector dominated by specific personalities, is that it could potentially lock them into an investment model that is clearly cost-intensive but less clear in terms of profitability.
In fact, the Emirates’ experience with the semiconductor industry serves as a useful lesson. In the late 2000s, Abu Dhabi’s sovereign wealth fund, Mubadala, made a multibillion-dollar investment in the struggling semiconductor company Advanced Micro Devices, and spun off a new company, GlobalFoundries. Key to the plans was building a factory (or “fab”) in Abu Dhabi as part of the emirate’s diversification efforts. “In four years, you’ll see the first foundry in Abu Dhabi,” said Mubadala chairman Waleed Al Mokarrab Al Muhairi at an energy conference in 2009. “It is an industry-changing move to create, at home, this business.” In 2011, however, GlobalFoundries announced that its plans to set up a fab in Abu Dhabi were being put on hold. Given the winner-takes-all model of the semiconductor industry, GlobalFoundries could not match capital expenditure increases of the Taiwanese firm TSMC without operating at a loss. In fact, Abu Dhabi had to prioritize the company’s existing fabs in the United States, Germany, and Singapore, just to keep pace with the global market. GlobalFoundries quietly discarded its plans to set up shop in the emirate and Abu Dhabi has since been trying to partially exit from its costly investment.
While it is too early to tell how the AI investment model will fare, it is crucial that investors in the Gulf establish some sort of guardrails on these deals. Gulf states may have deep pockets, but that doesn’t mean that they can afford for American tech CEOs to take them for a ride.
To be sure, Gulf leaders are at least somewhat aware of these risks, and they haven’t put all of their AI eggs in an American basket. They’ve created important relations with Chinese firms and announced AI investments in Europe. Even Saudi Aramco has adopted China’s DeepSeek AI technology for its operations in its flagship data center in Damman. But if the Gulf states let the Trump administration force them to choose a side—as the Biden administration did when it forced the Emirati AI firm G42 to divest from China—they’ll be left to pick up the tab.
No Defense Guarantees
Part of the reason GCC countries are so eager for American favors is that they hope the United States will come to their aid in a conflict. But the last two American administrations proved that the United States doesn’t have the political will to directly protect or respond to attacks against the GCC states—especially after the Houthi attacks against Saudi Arabia in 2019 and Abu Dhabi in 2022.
But clarity on the lack of U.S. support in these situations has actually led to some positive developments. The Gulf states have shifted toward a strategy of diplomacy and de-escalation with Iran, culminating in the Chinese-brokered rapprochement between Saudi Arabia and Iran in March 2023. As Century International fellow Veena Ali-Khan has noted, this detente has “transformed into a vital deconfliction channel, helping to contain some of the potential escalation and fallout from the widening regional war”—even after October 7.
Now, however, as Trump restores his policy of “maximum pressure” on Iran, the Gulf states’ newly developed emphasis on de-escalation could put them in an awkward position. Partnering closely with an administration that consistently provokes and enrages global allies and adversaries may also undermine some of the positive initiatives that Gulf states have been involved in over the past five years. It will be crucial that the GCC maintains these relations with Iran and other global powers and resists pressure to abrogate them.
In a post-October 7 region, GCC states are also more cautious about normalizing relations with Israel, fearing significant domestic political pressure. But it doesn’t seem like Israel or the United States even care about these new political dynamics. Trump’s outrageous proposal to resettle Palestinians from Gaza and turn it into the “Riviera of the Middle East”—which has been enthusiastically endorsed by Israeli prime minister Benjamin Netanyahu—demonstrates just how out of touch the new administration is with the realities in the Middle East. Trump even has said he expects Saudi Arabia and other GCC states to “spend some money” on a scheme that amounts to forced displacement. Having Gulf states fund and legitimize such a plan is obviously a political nonstarter.
But putting aside the absurdities of the plan, it signals something else that is deeply problematic: that the new administration looks at the GCC as its personal ATM. The Trump administration clearly thinks that if it allows the Gulf states access to strategic investment and military deals, that it can rely on them to cough up money to fund entirely fantastical reconstruction plans in Gaza.
Some Gulf leaders are pushing back. For example, Trump’s statements forced Saudi Arabia’s foreign ministry to reaffirm its position of not establishing ties with Israel without the creation of a Palestinian state. “You can’t just go and sort of invest billions without that political clarity and come back to see yet another conflict,” said Anwar Gargash, one of the Emirates’ top diplomats, partly in response to Trump’s plan. It is important that the GCC holds a tough line with the United States and Israel, making it clear that they won’t go along with the new administration’s plans without some real political concessions.
Diversify Risk
Some Gulf leaders and commentators seem to think that if the Gulf states invest so heavily with key figures in and around the Trump administration, they will be able to leverage these investments to curb some of the president’s most egregious excesses. In part, they’re correct: curbing those excesses is a desperate necessity to ensure regional stability. If there is one political bloc in the region that can realistically moderate the behavior of Washington, it is the GCC.
On the other hand, a deeply transactional mode of politics creates a situation where everything is potentially up for negotiation. The point of enduring political institutions and partnerships is precisely to avoid such a situation. Gulf states may expend important political and economic capital just to calm a bull in a china shop—or at worst, pay for its damages.
Instead, Gulf states might look toward continuing to develop and bolster their relations with other states and committing to strengthening regional partnerships and global institutions so that the United States is not the ultimate arbiter of political decision-making in the region.
Here are just a few of the specific steps that GCC states could take:
In addition, the Gulf states can seek out broad-based regional security arrangements, which can function as a stabilizing mechanism and a bulwark against the vagaries of U.S. foreign policy. The GCC could also continue to develop relationships with actors in the United States who are not entirely wedded to the Trump project. Doing so not only protects the Gulf from the inconsistencies of future administrations, but also sends a signal that maximalist U.S.–Israeli politics are not the only game in town.
Washington seems to want to remake the world according to an atavistic imperialism—a project as dangerous and destabilizing for the Middle East as it is for Americans. The GCC countries can’t ignore Trump, but they can hedge their bets and keep their options open. After all, there are no guarantees that Trump’s contradiction-plagued foreign policy will pan out as he hopes.
Header Image: Donald Trump looks over at Crown Prince of Saudi Arabia Mohammad bin Salman al-Saud as they line up for the family photo during the opening day of Argentina G20 Leaders’ Summit 2018 at Costa Salguero on November 30, 2018, in Buenos Aires, Argentina. Source: Daniel Jayo/Getty Images
Tags: persian gulf, U.S. Foreign Policy, donald trump