stratEGIC Monthly (April 2022):
Investing in the Future—
Green Hydrogen, Smart Cities
and Saudi-Turkish Rapprochement
by Nikola Zukalová
The third issue of the stratEGIC Monthly, featuring three analyses of key issues that defined the Euro-Gulf space in April 2022, centres on:
Oman, the GCC and the Green Hydrogen Boom
Saudi Arabia and Turkey Become Official
Smart Cities in Arabia
1. Seizing the Green Hydrogen Momentum
On 20 April, the German TÜV Rheinland issued the First Green Hydrogen and Green Ammonia Certificate to the Green Hydrogen & Chemicals SPC, the joint venture of India’s ACME Group and Norway’s Scatec ASA, for the production of green hydrogen and green ammonia as part of the Greenfield Project in Oman, a photovoltaic (PV) powered hydrogen-ammonia plant. The same week, the US-based H2-Industries partnered with Oman’s Public Establishment for Industrial Estates - Madayn to develop a $1.4 billion waste-to-hydrogen plant in Oman with a PV solar power installation, which will include also a large electrical storage. This is consistent with Oman’s increased efforts to benefit from the boom around green hydrogen and its projected role in the global energy transition race for low-carbon energy sources. Muscat has steadily invested in developing local hydrogen sector and positioning itself as a major hub for production and export of green hydrogen and ammonia. The Sultanate announced several large scale green hydrogen projects, including Hyport Duqm and SalalaH2, and is currently scouting more sites. The sector’s projected future is bright — the European Union, for example, plans to invest around €400 billion (EUR) in green hydrogen by 2030, the United Nations recently launched the Green Hydrogen Catapult initiative, which includes the Saudi major ACWA Power, to scale up green hydrogen production and make it more affordable, and the PWC expects the demand for green hydrogen to accelerate after 2030 and reach between 150-500 million metric tonnes per year by 2050, estimated to create a $10 trillion (USD) global green hydrogen market that could account for about a fourth of the world’s energy demand.
Amid this boom, Oman’s strategic position and geographic landscape suitable for solar and wind projects has attracted international companies searching for sites to develop cost-effective production of green hydrogen. Notably European majors from Germany, the Netherlands, the United Kingdom and Belgium, among others, have partnered with the Sultanate on green hydrogen and ammonia production to help achieve the European countries’ ambitious energy transition goals that require sourcing green energy from abroad. For Oman, the green hydrogen boom could be an opportunity to address domestic challenges such as depleting fossil fuels reserves and propping up national economy as well as boost its international position, helped by the Sultanate’s image as a stable country with a distinct approach to foreign affairs. The establishment of a Directorate General of Clean Energy and Hydrogen Power at the Ministry of Energy and Minerals and a company to develop the sector and calls for regulation by Sultan Haitham bin Tariq in March this year further attests to the importance Muscat ascribes to the sector in its future development plans. Apart from Oman, the United Arab Emirates and Saudi Arabia have also invested heavily in the green hydrogen industry, capitalising on decades of oil and gas industry experience and available finances, even proposing a hydrogen pipeline link to Europe. The quest for renewable energy sources will reshape the current geopolitical landscape in the coming years and the Gulf countries, while retaining their hydrocarbons capacities, are determined not to miss the next wave, which could herald in a new chapter of Euro-Gulf cooperation.
2. Becoming Official: Turkey and Saudi Arabia
As April 2022 closed, Saudi Arabia and Turkey reset their relations. This comes after years of acrimony over competing strategic interests in Syria, Iraq, and the Horn of Africa, which was complicated by an Ankara-Doha axis and Bahrain-Egypt-Saudi Arabia-United Arab Emirates Quartet (during the 2017-2021 intra-GCC crisis). With the 28 April visit of Turkish President, Recep Tayyip Erdogan, to Saudi Arabia, it seems that a new chapter, perhaps a new book, is being drafted. Many questions as to why now and what it means for regional — perhaps even international — security have been raised. Bringing Saudi Arabia and Turkey onto the same strategic page is deeply significant and is driven by a wide assortment of core geo-strategic interest-intersections which include trade and investment, Iran and the emergent regional nexus that clusters Bahrain, Egypt, Israel, Jordan, Morocco and the UAE together. Saudi Arabia and Turkey are both security pillars and their collaboration can do much to stabilise the wider region. Realising the constructive ways they can do so has been a gradual process but unforeseen events have helped speed it up.
The Russia-Ukraine war exposed a string of shared interests, including food and energy security, defence and the threat of a resurgent Russia in the Black Sea and beyond. Turkey relies on Russia for 68% of its wheat and on Ukraine for 17%. And, despite the January 2020 inauguration of the TurkStream natural gas pipeline, Ankara has been trying to reduce unwanted dependence on Russian energy products—it depends on Russia for 41% of its natural gas and 17% of its oil. Saudi Arabia, and the Gulf Cooperation Council (GCC) more generally, can help cushion Turkey’s energy shift as its weens-off of Russian hydrocarbons as part of NATO efforts to isolate Moscow. Turkey views Russia’s Black Sea ambitions — in Ukraine and Georgia — as a clear challenge just as Saudi Arabia (and indeed much of the Arab world) has not forgotten Russia’s role in pulverising Aleppo or its wider ambitions in the East Mediterranean and Africa. With all the economic and political consequences containing Russia entails, Ankara and Riyadh require both regional and international allies to increase defence and deterrence capabilities and political clout while expanding their trade and investment portfolios. The war in Ukraine has forced a rethink and reconciliation in Saudi-Turkey relations as, partially, a consequence of Russian regional revivalism.
3. Smart Cities in Arabia
The war in Ukraine is also exposing the level of unwanted dependency for suppliers and consumers of hydrocarbons. With the EU twisting itself in knots over how to untangle its economic life from Russian gas supplies, the states of the GCC are reinforcing their interest in developing smart cities that are simultaneously Global Cities as well as environmentally sustainable. This has less to do with fluctuating energy prices and more to do with the recognition that: 1. hydrocarbons are a finite resource that will eventually be exhausted and 2. now is the time to invest in sustainable, environmentally friendly and attractive urban spaces.
Last month, Kuwait took another step in joining Bahrain, Oman, Qatar, Saudi Arabia and the UAE in the drive towards realising smart city projects with the approval of $6.8 billion in funding for 30,000 residential units — that will house some 400,000 people — in the 64 square-kilometres South Saad Al-Abdullah Smart City, jointly developed with South Korean partners since 2016. This is the most recent in a long string of investments, across the GCC, that aim to address challenges such as rapidly growing populations and the associated growing demands, climate change, technological revolution and energy transition. The interest in constructing smart cities is more than simply keeping up with the times or reducing reliance on hydrocarbons. All the countries of the GCC also face demographic pressures and, increasingly, are turning to Smart Cities to tap the innovation potential of their youthful populations while, simultaneously, reducing internal challenges to the status quo. It may be argued, in that way, that developing Smart Cities also contributes to social development and through it a more acute sense of connection to cities and to the State—stakeholders in a stakeholder society. There are many residual impacts that are already being felt such as a brewing soft nationalism that coexists with but also, in many ways, supersedes religious identity throughout the region. All in all, the proliferation of Smart Cities across the Gulf region can also be understood in strategic terms: planning for the future to provide more stable polities fuelled by the engines of innovation and economic change.