The true price of oil: how the Gulf states have won the war in Ukraine

3 mins read

By Carl Sjölin Fagerlind

IN 1938 NEVILLE Chamberlain famously said, “in war, whichever side may call itself the victor, there are no winners, but all are losers”. These words seem especially poignant today, seeing the war in Ukraine. Should Putin against all odds succeed in his invasion, it will have been at such a massive cost that Russia will undoubtedly be far worse compared with before the war. Equally so, should Ukraine succeed in retaking its lost territories, it will still take decades to recover from the physical and psychological damage that has been wrecked on the country. But while there are no winners in war, there certainly are those that win from war. As this piece will make clear, nowhere is this as evident as with the Gulf states – that is a problem.

Ever since the invasion of Ukraine and the subsequent decoupling of European energy markets from Russia, the price of fossil fuels has been consistently high. For the oil- and gas-rich Arab nations of the Gulf this has led to massive profits. The Economist estimates that in the coming five years, the Gulf states could earn over $3 trillion because of the war, to put this in context, that is roughly the GDP of India!

Naturally, the Gulf states are doing everything to capitalize on this opportunity. Qatar, already the world’s largest exporter of liquefied natural gas (which can be shipped on tankers) is expanding its extraction capacity by 60% over the coming years and recently signed two massive long-term deals with Germany and China respectively. Saudi Arabia too has used its influence in OPEC to further push international oil prices upwards, even as the kingdom made record profits in 2022. Profits do not only come from the energy sector. As Europe and America closed themselves off from Russian finances and tourism, many wealthy Russians have turned to Dubai to avoid Western sanctions.

Money is, of course, not the only benefit. While the nations of the Gulf have supported UN resolutions to denounce the invasion, they have not provided any significant support for Ukraine as they consider the war a regional issue outside their responsibility. In essence, they have carefully taken a balanced approach which allows them to be courted by both sides. Ever since the invasion, leaders from the EU and US have been playing down previously tough rhetoric on human rights issues to appease the authoritarian petrostates, hoping to secure increased energy exports. Meanwhile, the Gulf states maintain positive relations with Putin’s regime by staying out of the conflict in Ukraine, increasing trade with an isolated Russia, and cooperating on keeping the price of fossil fuels high.

Some analysts, therefore, believe that the Gulf’s balanced position could be key in negotiating a peace deal in Ukraine. Saudi Arabia in particular shows an open interest in playing such a role, having already mediated in two different prisoner swaps between the two sides at the end of 2022. This could be a positive development, but begs the question: Why would they want an end to the war?

So far the Gulf states have chiefly acted to make the situation even more profitable to themselves, an opportunity they would lose if the war ended. At the same time, any argument about a humanitarian will to end the war seems ridiculous when looking at how these states treat their own subjects. Thus, it seems that the only reason for one of these regimes to try ending the war would be for the chance to boast about bringing peace to the world. Autocrats’ vanity tends to be strong, so a Gulf-mediated end to the war might not be entirely impossible, but they will most likely want the conflict to drag on nonetheless.

Whenever the war eventually ends, the effects thereof will unfortunately remain. The Russian regime has shown its true colours and the West is unlikely to freely return to dependence on Russian energy. So this enhanced position of the Gulf is likely to stay.

But while war profiteering is morally contemptible, what does it truly matter? Put simply, without oil and gas to keep Western economies running, Ukraine might lose its much-needed support in the fight against tyranny. Paying the Gulf states money and homage enables the fight for human rights and democracy by holding back the Russian invasion. Though consequently, trillions of dollars will go to other dictatorships where they will be used, in part, to uphold these oppressive regimes. So in order to continue the fight for democratic principles in Europe, it seems that the same fight is being abandoned in the Middle East.

This Faustian bargain is very hard to justify, but enabling the Gulf states’ growing power is arguably the lesser of two evils. It is impossible to weigh the freedom of one human being against another, but there are no indications that if the Gulf regimes are suddenly stripped of their power, democracy will ultimately follow. If Ukraine loses the fight, democracy for an entire country is snuffed out and threatened wherever Putin wants to expand next. This choice is bitter but rather obvious.

Is there a third option then? In the last year, higher fossil fuel prices have decreased energy consumption and spurred investment in renewables all around the world. By some estimates, the clean energy transition has been sped up by 5-10 years by the war. A total transition to renewables will take time, but evidently, can be accelerated with the right incentive. And the quicker it goes, the quicker despotic regimes like both Russia and the Gulf states lose the source of their power.

For now, it seems inevitable that some of the world’s most oppressive governments are becoming the true winners of the war in Ukraine. Though that victory can be cut short by hastening the move away from fossil fuels. They may be winning this war, but they will not win the next.

By: Carl Sjölin Fagerlind

Photography: Loïc Manegarium

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