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GCC-EU trade soars 77% on back of Ukraine crisis

GCC EU reps UAE minister Al Zeyoudi and Dombrovskis European Commission Wam
Dr Thani bin Ahmed Al Zeyoudi, the UAE’s minister of state for foreign trade met with Vladis Dombrovskis, European Commissioner of Trade to discuss economic ties
  • Trade between GCC and EU reached almost €175bn in 2022
  • New EU special representative to the Gulf starts role on June 1
  • Opportunities growing as EU and Gulf focus on energy transition

Energy exports from the GCC sent its trade with the European Union soaring last year.

Trade between the two regions increased to nearly 175 billion euros ($186 billion) last year after the global energy market disruption caused by Russia’s invasion of Ukraine.

Trade with the Gulf jumped 77 percent from approximately $124 billion in 2021, according to latest official figures shared with AGBI.

They show that imports from Saudi Arabia more than doubled, and trebled from Qatar, as the bloc of 27 nations sought to end its dependence on Russian fossil fuels.

The European Commission unveiled the REPowerEU Plan after 85 percent of Europeans said the EU should source other markets for gas and oil as soon as possible to support Ukraine. 

The EU’s biggest GCC trade partners in 2022 were Saudi Arabia ($81 billion), the UAE ($53 billion) and Qatar ($33 billion).

Globally, the EU's balance of -$461 billion last year represented the highest deficit ever recorded.

New leadership

Luigi Di Main, Italy's former minister of foreign affairs, has taken up a new role as EU special representative for the Gulf.

He is tasked with further developing a “stronger, comprehensive and more strategic partnership” with the region, a statement from the Council of the EU reveals. Di Maio will start on June 1, with an initial mandate of 21 months.

Dr Thani bin Ahmed Al Zeyoudi, the UAE’s minister of state for foreign trade, led a delegation of senior officials and business leaders to Brussels in April, aiming to strengthen economic ties and promoting investment opportunities with Belgium and the wider EU.

Al Zeyoudi said: “We see great importance in strengthening our economic ties with the EU especially in high potential sectors such as digital trade, e-commerce and innovation where we are actively working to promote collaboration.”

It is an ambition shared by Europe, which insisted both sides have “much to gain” from a stronger partnership. 

A Commission spokesperson told AGBI that increasing trade and investment, fighting climate change, ensuring global health and energy security and a smooth green transition are all issues of “strong mutual interest”.

According to Commission figures, the EU and the GCC combined represent 20 percent of the global economy, 17.5 percent of global trade, and cover more than half of global foreign direct investments. 

“A privileged trade and investment relationship between the EU and the GCC and its members is increasingly important and has clear further potential,” the spokesperson added.

Energy transition

EU imports from the GCC are traditionally led by fuel and mining products as well as chemicals, while exports to the bloc include machinery and transport equipment, chemicals and agriculture and raw materials.

But opportunities are growing as both regions prioritise energy transition. A stronger partnership with the Gulf region has a key role to play in the implementation of the REPowerEU. 

This includes an increase of liquefied natural gas supplies, measures to stabilise oil markets, cooperation on hydrogen, energy efficiency and faster deployment of renewable energy. 

Top-level talks took place in Germany in March to boost trade and investment with Saudi Arabia, with experts describe the potential for collaboration on producing cost-competitive hydrogen as “huge”. 

Analysts told AGBI the two countries have the resources, infrastructure and skills to build on an initial agreement signed in 2021 to encourage bilateral cooperation in the sector.

“The promising societal and economic changes underway in the GCC countries, based on ambitious transformative agendas and their further development, offer a wide range of opportunities for cooperation and investment,” the Commission spokesperson explained.

Free trade delays

The EU and GCC launched negotiations for a free trade agreement in 1990 but negotiations were suspended in 2008.

However, the EU-GCC Dialogue on Economic Diversification has been working since 2019 to build partnerships and identify new business opportunities and areas of economic cooperation between the two regions, as well as between the EU and individual GCC countries.

And late last year, Dr Naif Falah Mubarak Al-Hajraf, secretary-general of the GCC, stressed the importance of advancing areas of joint cooperation.

The Commission spokesperson said the EU is also seeking to strengthen GCC cooperation on economic integration “with well-functioning and fair markets where enterprises can compete on their merits on a level playing field”.

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