Oman’s regional role in a time of challenge and change

During his 50-year reign, Sultan Qaboos bin Said al-Said transformed Oman from an isolationist country into one that punched well above its weight in international affairs. Oman has distinguished itself as a player that is able to maintain strong working relationships with countries across the Middle East, despite fierce rivalries and deep-set conflicts. The sultanate’s focus on balanced foreign policy, conflict resolution, and skillful mediation makes it unique among Arab governments.

When Sultan Qaboos passed away in January 2020, it was a profound moment for a country so tied to its ruler. His leadership style and personality became as central to the Omani identity as any head of state can be to their nation. Clearly, his successor would have big shoes to fill. The new monarch, Sultan Haitham bin Tariq al-Said, has taken power in a year of unprecedented hardship. The dual challenges of a global pandemic and depressed oil prices are forcing Gulf Cooperation Council (GCC) states to take drastic measures. Oman is particularly hard hit because it does not have the same natural resources endowment or financial reserves to endure a prolonged period of difficulty that most other GCC member states do.

A difficult environment

This is an especially onerous year for a transition in leadership. Oman, like the GCC in general, is grappling with unprecedented budgetary issues and grave questions about its economic outlook. Consequently, foreign policy cannot be as active and well-funded for the foreseeable future. In the case of Oman in particular, that has major implications for the rest of the GCC, the Middle East, and outside powers like the United States. Oman’s independent and creative foreign policy has been a boost to a region fraught with instability. Now, the combination of a new sultan and enormous adversity means Muscat’s trademark foreign policy may be diminished. Omani prominence in the region was largely tied to Sultan Qaboos’ decades in power and carefully cultivated personal relationships. It will take considerable time and effort for Sultan Haitham to work toward a similar stature.

Within the GCC, the gravity of Oman’s economic crisis is only matched by that of Bahrain. But unlike Oman, Bahrain has a much wealthier outside government that provides a consistent stream of support: Saudi Arabia. A decline in energy prices is placing considerable pressure on Oman, where oil and gas account for around 70 percent of revenues and 60 percent of exports. Compounding the issue of natural resource dependency, Oman has one of the youngest populations in the world and a youth unemployment rate of over 13 percent. Fitch forecasts that Oman’s fiscal deficit this year will be equivalent to 20 percent of GDP and government debt will reach 80 percent of GDP. Furthermore, because of COVID-19, it is an extremely difficult time to attempt to diversify and promising growth industries like tourism are also being hit hard.

The country’s State Council is in the process of drafting laws introducing a value-added tax (VAT) and income tax. However, in a region accustomed to generous government subsidies and a tax-free environment, such steps are likely to create political strife. Amid such a profound economic and fiscal crisis, the most logical sources of badly needed aid are neighboring Saudi Arabia and the UAE, which together represent almost three-quarters of the GCC’s GDP. Large-scale assistance from the Saudis and Emiratis would be very helpful as Muscat tries to keep its economy afloat, but this aid would also likely come at a cost in foreign policy terms. Those lenders would attempt to use their leverage to pressure Oman to align itself more closely with them on policy matters. This vulnerability brings into question the sustainability of Oman’s role as a neutral arbiter.

Relations with Saudi Arabia and the UAE

The UAE, in particular, is a crucial Omani trading partner. In 2018, it was the top Arab country for Omani exports and by far the largest source of Omani imports (35 percent of the total). In the past several years the Emiratis have become much more activist on the foreign policy front. Emirati Crown Prince Mohammed bin Zayed al-Nahyan (MbZ) and Saudi Crown Prince Mohammed bin Salman al-Saud (MbS) have formed a powerful alliance that exerts its influence across the Middle East and beyond. Whether explicit or implicit, aid from those two crown princes is accompanied by pressure to support their foreign policy ambitions.

The Saudi-Emirati bloc and Oman diverge on many foreign policy points, including the war in Yemen, relations with Iran, and the Qatar blockade. Oman did not join the Saudi- and Emirati-led coalition in Yemen in 2015 and has instead focused on mediation and humanitarian efforts there. Unlike the Saudis and Emiratis, Oman maintains a working relationship with Iran and does not characterize Tehran as a clear-cut adversary. Since the Saudis, Emiratis, and others initiated a blockade of Qatar in 2017, Oman has not only declined to participate in the blockade but in fact increased its engagement with Doha. In 2018, trade between Oman and Qatar increased by over 100 percent compared to the previous year.

Despite the economic importance, Omani-Emirati relations are often politically tense. In 2018 (as well as 2011), Oman arrested members of a sophisticated spy ring backed by Abu Dhabi. There is widespread suspicion in Oman about Emirati meddling in its internal affairs. The Emiratis have also sought to infringe on the sovereignty of Oman’s Musandam Peninsula, a strategically located Omani exclave that juts out into the Strait of Hormuz and borders the UAE. The two countries have a history of territorial disputes and in an unusual incident an Omani citizen was shot and killed by Emirati authorities at the border in January 2020.

Oman’s regional role

If Omani foreign policy becomes less independent and neutral, that will make it more difficult for the U.S., and other actors like the European Union, to engage effectively with the Middle East. Oman was one of the most instrumental players in the evolution of the Iran nuclear deal. During his remarks on the day of the deal’s implementation, U.S. Secretary of State John Kerry said, in part, “Today, more than four years after I first traveled to Oman at the request of President Obama to discreetly explore whether the kind of nuclear talks that we ultimately entered into with Iran were even possible.” The Omanis provided a back channel to Tehran and facilitated the transfer of billions of dollars of Iranian funds. Oman has also acted as an intermediary during U.S.-Iran negotiations over captives. In 2017, Iranian President Hassan Rouhani visited Muscat, reflecting Oman’s willingness to engage with the Iranians at a high level.

While others have played a decidedly counterproductive role in Yemen, Oman has made a generally positive impact. UN Special Envoy for Yemen Martin Griffiths praised Oman for playing a “pivotal role” in helping Yemenis. The Omanis also play a constructive role in Arab-Israeli negotiations and hosted Israeli Prime Minister Benjamin Netanyahu in Muscat in 2018.

Continuity or change under Sultan Haitham?

In his first public remarks as head of state, Sultan Haitham promised to uphold his predecessor’s foreign policy. He said, “We will follow the same line as the late sultan, and the principles that he asserted for the foreign policy of our country, of peaceful coexistence among nations and people, and good neighborly behavior of non-interference in the affairs of others.” But that will be easier said than done under the current circumstances, and the Saudi-Emirati alliance may seek to exploit Oman’s need for fiscal resources to curtail its foreign policy independence.

It may not be a coincidence that within days of expressing support for the Emirati decision to normalize relations with Israel, Oman secured a $2 billion bridge loan coordinated by First Abu Dhabi Bank (as well as Bank Muscat). This could be a sign of what is to come for ties between Muscat and Abu Dhabi. The energy-rich UAE would certainly like to see Oman fall in line on regional matters by taking steps like dialing back their level of engagement with Qatar and Iran.

Notably, on Aug. 18, Sultan Haitham named Badr al-Busaidi the country’s new foreign minister, as part of a broader cabinet reshuffle that also included a new finance minister. This contrasts with the government of Sultan Qaboos, who himself headed the Ministry of Foreign Affairs, with Yusuf bin Alawi bin Abdullah serving as the minister responsible for the portfolio. Although Sultan Haitham has extensive experience in foreign affairs, having worked as an undersecretary and secretary-general in the ministry, this new appointment is a means of decentralization. Sultan Haitham is transferring authority to other individuals across numerous ministries, making Foreign Minister al-Busaidi and others more responsible for implementation. Al-Busaidi, like bin Abdullah before him, is a longtime foreign policy specialist who will hope to continue the country’s balanced approach to international affairs.

While the Obama administration benefited greatly from Oman’s foreign policy, the Trump administration has not paid much attention to the sultanate. President Donald Trump mostly focuses his GCC engagement on Saudi Arabia and the UAE. During Trump’s presidency, MbS and MbZ have become more emboldened and subject to less scrutiny from Washington for their conduct. To a degree, Trump has compromised the Omanis by committing to a relationship with the Saudi-Emirati bloc that is high on enthusiasm and low on accountability.

It is in America’s strategic interest for Oman to maintain its foreign policy independence. Oman does not host a U.S. military base or buy huge amounts of American weapons like some other GCC states, but it is a valuable regional player with an outsized impact. The sultanate has also been an important U.S. military partner of long standing, including hosting U.S. military facilities at Thumrait and Masirah Island and providing the U.S. Navy access to the ports of Duqm and Salalah. If Joe Biden is elected president, the U.S. will probably adopt a new outlook toward the GCC that is more balanced and brings the Omanis into the conversation to a greater extent. If a future President Biden wants to recommit the U.S. to some form of the Iran nuclear deal, Muscat is very likely to be a major part of the equation, as it was the first time around. On the Yemen front, President Biden and Sultan Haitham could work together to try to meaningfully address the world’s largest humanitarian crisis. What remains to be seen, though, is whether or not Oman can preserve its traditional foreign policy approach.

Bayly Winder is an incoming MBA student at the University of Oxford and an independent Gulf analyst. He worked on Iran policy at the State Department and was a Fulbright Scholar in Kuwait. Mr. Winder’s research interests include U.S.-GCC relations and regional economic issues. He received a B.A. in political science from Johns Hopkins University. The views expressed in this piece are his own.

Photo by ANDREW CABALLERO-REYNOLDS/AFP via Getty Images