When Israel and the US launched coordinated action against Iran last year during the 12-day war, the strategic rationale was front and centre. That Iran cannot be allowed to develop nuclear weapons remains an existential demand for Tel Aviv and guides Washington's regional security and dominance imperatives. The Trump administration's withdrawal from the JCPOA, leading Iran to block the IAEA from inspecting its nuclear sites, became the turning point for the Trump administration's hardening stance against Tehran. This inflexion point coincided with the perfect regional storm started by the October 7 attacks by Hamas and Iran's brazen siding with regional proxies to make it a Zionist-Islamist war.
It Can't Be 'Stability' Alone
In all these, the Trump administration used its economic lens to look for its own interests in the region. In the absence of any direct economic interests in the Middle East, strategic goals alone couldn't have been persuasive enough for the Trump administration, which is openly fixated on economic benefits. Furthermore, a military engagement in Iran - a definitely long-drawn one - is a starkly counterintuitive proposition to Trump's political promise of being a President who did not start new wars, rather stopped them. Yet, to see the Trump administration take his bold but unpredictable chances against Iran makes it certain that there are economic underpinnings that may be guiding his extant strategic logic. Specifically so, because Trump's second presidency remains strongly tethered to an economic rationale in the region, and generally so because Iran's proxies across the region, which acted as its layered defence network, are incapacitated and at their weakest.
American economic interests in the Middle East have dwindled over the years, even as America has turned its fortunes from being an energy importer from the region to a net energy exporter to the world. As such, at the forefront of strategic interests in the Middle East for the US is its alliance with Israel. It remains the only country in the region that America can truly rely on, despite its military presence scattered across the region. Yet, the Trump administration's current bets in the Middle East are all economic at heart. One of the key issues on which the Trump administration has focused since his first term has been the question of regional normalisation between Israel and other partners through the Abraham Accords, on which the broader network of regional economics could be based. While the US came as the enforcer, the UAE was the economic behemoth of the region, and India was a player that commanded across-the-board good relations in the region and represented the anchor of the Indo-Pacific as one of the most dynamic regions in the world economically.
Spanner In Trump's Works
These goals were interrupted by the Hamas attacks on Israel on October 7, 2023, throwing the region into a tailspin. Not surprisingly, the Biden administration's efforts after the Trump administration were built to consolidate rather than experiment or neglect in the region. As such, it was under his administration that India, Israel, the UAE and the United States convened the first leaders' summit on July 14, 2022, to establish the I2U2 Group. The following year, another economic initiative India-Middle East-Europe Economic Corridor (IMEEC), was announced in September 2023 following a meeting in New Delhi between the leaders of India, the US, the United Arab Emirates (UAE), Saudi Arabia, Italy, France, Germany, and the European Commission on the sidelines of the G20 Summit. These economic initiatives under the Biden administration built on the efforts by the first Trump administration to re-engage with a Middle East that was rapidly changing, just like American interests in the region. The IMEEC alone is expected to significantly reduce transhipment times from Europe to Asia and accrue savings to the tune of $5.4 billion annually on Asia-Europe trade.
The 3 'Pegs' For Middle East
The second Trump administration came to office after the war in Europe and the Middle East had changed the region considerably. But his presidency took on an extended economic rationale, which placed the Middle East on three pegs: first, enforcing peace in the region may be difficult, but if there was any time in history when regional peace and stability could be externally induced, it was now; second, much of America's economic interests, most prominently its desire to supply energy to the Indo-Pacific countries after Trump resumed drilling oil and gas, banked on peace and stability in the Middle East, and America saw Iran as the outlier in Trump's peace project. It is not a surprise that Iran chose economic centres in the UAE as legitimate targets despite the country's own rather neutral stance in the current conflict and Abu Dhabi housing very few US assets and interests compared to other countries in the region. A devastating blow to the UAE's image as the financial hub in the region could serve as a warning to America's potential economic bets in the Middle East.
The Board Of Peace Project
Trump's economic plan for the Middle East had too many conditionalities to begin with. The Board of Peace project for reconstruction in Gaza and post-war governance has largely seen economically consequential players wait on the side. This may have opened gates for Trump's inner circle to get a hand on the project - Jared Kushner and Steve Witkoff - albeit without any clarity on finances, timeline and global and regional mandate. At present, the initial pledges stand at $7 billion from nine members, with an additional commitment of $10 billion from the US. This stands markedly short against estimates from the UN, the European Union and the World Bank, that rebuilding Gaza will cost $70 billion. Yet, the mustering of America's big businesses and a free-market plan for Gaza may be somewhat obvious in its economic design.
Second, picking the I2U2 and IMEEC from where he left the Abraham Accords in his first term was always on Trump's mind, but regional flux always proved more overwhelming. In the end, Trump's urgent push to bring "stability" to the Middle East may have been driven by two strong factors: his bet to turn the region - in particular Saudi Arabia and the UAE - into tech hubs from a semiconductor and AI standpoint, and establishing energy supply chains from the US to the Indo-Pacific. This even as America's energy supplies to the region are rising, and, more importantly, Trump's Venezuela gamble is paying off in enhancing his energy game.
However, a long-drawn conflict in the Middle East could push crude prices northwards, and if it nudges prices to $100 or more, that could potentially add at least half a percentage point to global inflation. For the Trump administration, which is battling inflation at home, time is of the essence. These projects, if successful in the Middle East, could change the flow of American aid to the region, especially Israel. Since October 7, 2023, some estimations put American aid to Israel at above $17 billion, making it a hard sell for any administration domestically. The Trump administration's economic gamble is intending to change the flow of economic aid to the region to potentially gain from the region.
All that rides on a peaceful Middle East. But peace in the Middle East has never been a function of great power assertion.
(Vivek Mishra is Deputy Director with the Strategic Studies Programme at the Observer Research Foundation.)
Disclaimer: These are the personal opinions of the author
