Echoes of an Imperial Folly?

The US President Donald Trump, in his first foreign business trip of his second term, visited three major Arab states—Saudi Arabia, Qatar and the United Arab Emirates (UAE) during May 13-15, for securing significant new investment for the US economy. Trump arrived in the Saudi capital, Riyadh, on Tuesday, May 13, to meet the country’s de facto leader Crown Prince Mohammed bin Salman. He attended a summit of Gulf leaders in the city on May 14, before travelling to Qatar that same day, and then ending his three-day trip in the United Arab Emirates (UAE) on May 15. Saudi Arabia was also the first country that Trump visited during his first term of office. This highlights the high level of economic importance Saudi Arabia enjoys in Trump’s foreign policy.

Significance of Trump’s Visit to Arab States

Donald Trump has pushed the US economy to the brink of recession and a potential supply chain meltdown, writes CNN. Consumer prices are expected to rise nearly 2 per cent because of the tariffs that still remain in place, Job losses are expected to hit an extra 4,56,000 by the end of the year. With rising unemployment and inflation, it appears America is on the verge of stagflation.

President Trump now desperately needs money to bail out the USA from the current mess. His advisers might have reminded him that during the financial crisis of 1971, when the US President Richard Nixon was compelled to end US dollar’s unique status as world’s reserve currency due to inadequate gold reserve, the USA and Saudi Arabia established a Joint Commission for economic cooperation in June 1974, which helped the US to retain the hegemony of US currency through the creation of Petro-dollar. As per the agreement, Saudi Arabia agreed to price its oil exports exclusively in USD dollars, ensuring a steady global demand for the US currency. Moreover, Saudi Arabia also agreed to invest its surplus oil revenues in USD Treasury bonds and securities, recycling petrodollars back into the USD economy. In exchange, the United States provided military aid and protection to Saudi Arabia and its monarchy, cementing a strategic alliance. The arrangement bolstered the USD dollar’s status as the world’s primary reserve currency, with countries needing dollars to purchase oil. This arrangement supported low interest rates, a robust bond market, and the dollar’s strength against other currencies. The USD was able to run significant trade deficits as petrodollars were reinvested into the US economy.

After fifty years, this deal expired on June 9, 2024. Now, the USA needs another such deal to bailout its economic crisis. However, prior to Trump’s visit to the Arab States, five major global developments had immensely increased the significance of the visit.

First, Putin and Xi vowed to strengthen ties when the two leaders met in Moscow the previous week and rejected what they described as Washington’s attempt to contain them.

Second, on May 10, Trump negotiated a ceasefire between India and Pakistan, who were at war since May 7.

Third, after the USD-China Economic and Trade Meeting in Geneva, a joint statement of the world’s two largest economies, on May 12, announced a deal that would see USD tariffs on China fall to 30 per cent from 145 per cent, while China would reduce tariffs on the USD to 10 per cent from 125 per cent.

Fourth, Luiz Inacio Lula da Silva, President of Brazil, one of the key members of BRICS, began his five-day state visit in China on May 10, at the invitation of counterpart President Xi Jinping. The Brazilian President was in China to attend the Summit between China and the 33-member Community of Latin American and Caribbean States (CELAC). Two-thirds of Latin American countries have joined Beijing’s trillion-dollar Belt and Road Initiative (BRI) programme. On Wednesday, Colombia became the latest country to join this massive global initiative. China has surpassed the United States as the biggest trading partner of Brazil, Peru and Chile, among others. On Tuesday (May 13), President Lula and President Xi Jinping participated in the opening ceremony of the 4th CELAC-China Forum (CCF), an intergovernmental cooperation platform that fosters dialogue between developing countries and advances the interests of the Global South. Latin America has emerged as a key battleground in US President Donald Trump’s confrontations with China.

Fifth, on May 14, BRICS Transport Ministers’ Meet in Brasilia (Brazil), was held where Nitin Gadkari - the Minister of Road Transport and Highways represented India. It may be recalled, immediately after taking his presidential oath for the second term, Trump declared, “BRICS is dead, will impose a 100 per cent tariff if the dollar is replaced”.

Outcome of the Visit

It is now widely accepted that Trump conducts the government like a CEO of a transnational corporation, and that is how he approaches diplomacy. Before leaving for Middle East, President Donald Trump said Sunday night that the Defense Department planned to accept a Boeing 747-8 jet to replace Air Force One as a “Gift, Free of Charge.” from the Qatari royal family that would be retrofitted and used as Air Force One during the president’s second term, reports CNN. Democrats quickly condemned the news, saying, “It’s not just bribery, it’s premium foreign influence with extra legroom.” Casting aside the criticism In a post on Truth Social, Trump said the multimillion dollar jet would be used on a temporary basis “in a very public and transparent transaction.” Ironically, the US which provided billions of dollar aid through USAID has become an aid recipient now!

On May 13, the first day of his visit, President Donald J Trump announced Saudi Arabia’s USD 600-billion commitment to invest in the United States. The deal focused on energy security, defense industry, technology leadership, and access to global infrastructure and critical minerals. The United States and Saudi Arabia signed the largest defense sales agreement in history—nearly USD 142 billion, providing Saudi Arabia with state-of-the-art warfighting equipment and services from over a dozen USD defense firms. The sales that the USA intends to complete fall into five broad categories: (i) air force advancement and space capabilities, (ii) air and missile defense, (iii) maritime and coastal security, (iv) border security and land forces modernisation, and (v) information and communication system upgrades.

Trump also announced he was lifting sanctions on Syria to improve the country’s new government. American sanctions on Syria had been in place for over a decade, meant to apply pressure and economic pain against the dictatorship of former President Bashar al-Assad, who was ousted in December. A day after a surprise US announcement said it would lift all sanctions on the Islamist-led government, US President Donald Trump urged Syria’s president Ahmed al-Sharaa to sign onto the Abraham accords with Israel, a White House spokesperson said.

President Trump argued in his speech that it is through this kind of commerce and economic development that the Middle East would transcend violence and division. Underscoring his commitment to deal-making, Trump was joined by a number of business leaders including billionaire ally Elon Musk, Open AI CEO Sam Altman, BlackRock CEO Larry Fink and Nvidia CEO Jensen Huang. The high-profile executives are meeting a Saudi Arabia eager to diversify its oil-rich economy by increasing its artificial intelligence capabilities.

Trump signed a landmark agreement with Qatar on Wednesday to generate an economic exchange worth at least USD 1.2 trillion. During the visit, Trump announced economic deals totalling more than USD 243.5 billion between the United States and Qatar, including a historic sale of Boeing aircraft and GE Aerospace engines to Qatar Airways. The centerpiece of these agreements is Qatar Airways’ purchase of 160 Boeing jets worth USD 200 billion, signed in Doha in the presence of Trump and Qatar’s Emir. GE Aerospace secured a landmark order from Qatar Airways, including a USD 96 billion agreement to acquire up to 210 American-made Boeing 787 Dreamliner and 777X aircraft powered by GE Aerospace engines. This represents Boeing’s largest-ever wide body order and largest-ever 787 order, supporting an estimated 1,54,000 USD jobs annually.

Trump announced more than USD 200bn of deals between the US and the UAE which includes a USD 14.5bn agreement with Boeing, GE Aerospace and Etihad Airways

President Donald Trump made a very successful trip to three wealthy Arab states and announced investment agreements worth more than USD 2 trillion for projects in defense, aviation and artificial intelligence, among other ventures, during his trip this week to the Middle East, where he was joined by dozens of prominent business executives who took part in the deals. His decision to end sanctions on Syria and become the first US president to meet with a Syrian leader in 25 years signaled an element of risk and engagement that does not fit neatly with the viewpoint of a conservative political leader.

Impact of Trump’s Visit on Turkey and Israel

Incidentally, Trump’s Middle East trip coincided with a great week for Turkey’s President Recep Tayyip Erdogan who emerged as Trump’s peacemaker proxy. After separatist Kurdish militant group—Kurdistan Workers’ Party (PKK)—announced ending a four-decade insurgency, Turkey’s historical city Istanbul, that bridges Europe and Asia, is expected to host direct talks between Ukraine and Russia for the first time since 2022 where Ukrainian and Russian representatives met with Erdoğan and US Secretary of State Marco Rubio. Meanwhile, India’s trade relations with Turkey faces new challenges after Ankara backed Islamabad and condemned New Delhi’s recent strikes on terror camps in Pakistan and Pakistan-occupied Kashmir (PoK). Its stance has sparked nationwide calls in India to boycott goods from Turkey and avoid travelling to the country with tourism already taking a hit.

Defense ties between the USA and Turkey are also getting stronger. It is reported that the United States has approved a potential sale of missiles worth USD 304 million to Turkey. The proposed sale includes advanced air-to-air missiles and support systems. However, the sale requires final approval from the US Congress. According to Bloomberg, this development comes as both NATO allies (USA and Turkey) work to reset strained relations and strengthen trade and military cooperation. In 2019, Turkey purchased the Russian-made S-400 air defense system, which caused friction with Washington. As a result, the US imposed sanctions and removed Turkey from the F-35 fighter jet programme. Despite these setbacks, Turkey remains hopeful of rejoining the F-35 programme.

Upset with Trump’s visit to Arab States, side stepping Israel on his multi-stop tour, Israel escalated its deadly bombardments in the Gaza Strip which killed more than 100 people on Thursday, reports The Washington Post. According to political analysts, Trump’s Middle East trip shifts focus from Israel to wealthy Gulf alliances. Reacting on the deadly bombardment, the US president Donald Trump said on Thursday he wanted the US to “take” Gaza and turn it into a “freedom zone”, a possible reiteration of a plan he put forward in February for the US to take control of the Palestinian territory to allow for its reconstruction as a luxury leisure and business hub. “I’d be proud to have the United States have it, take it, make it a freedom zone,” Trump said in Qatar. Unfortunately, the Arab leaders failed to demand clearly from President Trump that peace and economic development in the Middle East were within reach and depend on one critical condition: the admission of Palestine to the United Nations as its 194th member state. For this to become a reality, the United States must lift its veto on Palestine’s entry to the UN.

Observations

Vastly indebted US economy (the government currently has USD 36.21 trillion in federal debt) now bears a resemblance to the Spanish economy of 17th century. Text books of economic history reveals Spain’s economic decline was characterised by stagnation in agricultural productivity, the backbone of its economy. The expulsion of the Moriscos (Muslim converts to Christianity) in 1609, who were predominantly skilled agricultural workers, exacerbated labor shortages and diminished agricultural output. This expulsion, which affected approximately 3,00,000 people, led to a significant decline in food production and periodic famines. The manufacturing sector, too, suffered from neglect and protectionist policies. The crown’s emphasis on maintaining its colonial monopoly stifled domestic industries, leading to a reliance on imports and a chronic trade deficit. The Castilian wool industry, once a pillar of Spain’s economy, witnessed a swift decline as demand for high-quality English wool grew.

As Spain grappled with burgeoning debts, rampant inflation, and economic stagnation, its once-dominant empire began to unravel, revealing the fragile foundations of its vast geopolitical ambitions. The crown’s usual resort to short-term loans from Genoese and German bankers created a precarious debt structure. The inability to service these debts led to multiple declarations of bankruptcy, notably in 1607, 1627, and 1647.

The emerging economies of other European nations, namely the Great Britain, France, Holland et al posed as major challengers to Spain’s hegemony. In this century, the USA is facing similar challenges from China and East Asia.

As the free market liberal economy is on a decline, the USA may be exploring an alternative religion based socio economic model of governance in Abrahamic philosophy. Abraham is widely considered the common father of the Abrahamic religions: Judaism, Christianity, and Islam. He is revered by each faith as a patriarch, prophet, or spiritual ancestor.

Suggestively, before making his way back to Washington on Air Force One, President Trump concluded his gulf tour with a visit to the Abrahamic Family House — an interfaith complex that houses a mosque, synagogue and church. On the first day of his Middle East visit in Riyadh, President Trump said that it was his “dream” for Saudi Arabia to join the Abraham Accords, which he initiated, in 2020, with an aim to broker peace between Arabs and Jews. “It’s my fervent hope, wish and even my dream that Saudi Arabia… will soon be joining the Abraham Accords,” the US President hoped. If earnestly implemented, Abraham Accords may change the politics and economy of the MENA (Middle-East and North Africa) region in near future.

Views expressed are personal