- US keen to export tech to Gulf
- Wary of Chinese influence
- Gulf frustrated by slow progress
Gulf countries are likely to face mounting pressure to adopt American technology as the US tries to exploit its best-in-class semiconductor and artificial intelligence products to muscle China out of their markets before the Asian superpower catches up.
The US is walking a fine line between increasing the regional uptake of its chips and software to entrench the GCC into the American camp, and ensuring the region does not become a back door for China, industry watchers say.
Nicholas Klein, co-chair of law firm DLA Piper’s national security and global trade practice in Washington, DC, says there is genuine interest in Gulf ambitions to develop as a tech centre and that there are many joint ventures with US companies.
“The US is generally in favour, but these partnerships will require government-to-government engagement to prevent leakages from the Gulf to China,” he says. “If that becomes an issue, it will impact these countries’ ability to access American technology.”
In recent years Washington has built a multi-agency firewall aimed at keeping Chinese hands off its most advanced tech.
It centres on export controls overseen by the Commerce Department’s Bureau of Industry and Security (BIS). The controls generally block foreign nationals and companies from accessing sensitive US hardware and software without a licence.
The Committee on Foreign Investment in the United States (CFIUS) and the Treasury Department also target China through restrictions on inbound and outbound tech investments, respectively.
“There are new rules coming out on a weekly basis really across the board,” says Klein, noting he is getting many inquiries from the Gulf about them.
Klein expects enforcement of export-control violations tied to technology and China “to blow up” in 2025 and produce “a ton of cases”.
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Accessing US chips has become harder for the Gulf since October 2023, when BIS expanded year-old licensing requirements from China and Macau to 43 other countries, primarily in the Middle East, Central Asia and Africa.
Sam Winter-Levy, a fellow for technology and international affairs at the Carnegie Endowment for International Peace, says that for the past year the US government has been “slow-walking” approvals for large-scale orders.
“There’s a lot of frustration in the Gulf about approving licences on a case-by-case basis. There are concerns that BIS just doesn’t have the capacity to do that, and that’s contributed to long wait times,” Winter-Levy says.
But Washington does not want to prevent GCC access to American technology, only ringfence it from China.
In fact, sources say the US is likely to push its chips even harder on Gulf countries for the next couple years, or so long as it retains the innovation edge over China and, therefore, the most leverage on ambitious AI go-getters such as the UAE and Saudi Arabia.
To relax the export restrictions, in September BIS allowed overseas data centres to be pre-cleared to procure the necessary hardware or software without going through the process every time.
If the US approach appears contradictory, it is because this is a “hard issue” full of “competing interests” and “unavoidable trade-offs,” says Winter-Levy.
“On the one hand, US technology companies want to export US technology – that’s how they make money,” he says. “On the other hand, the national security establishment is very concerned about preserving the US technology lead over adversaries that are trying to access that technology.
“States like those in the Gulf are in between: they have very close ties to the US, but they also have good relationships with China.”
According to Winter-Levy, while a coherent approach to the issue has yet to emerge, Washington is “trying to strike an appropriate balance, without being too restrictive or too lax”.
The outgoing Biden administration is expected to release a global strategy on AI shortly. The outcome of the November 5 presidential election is unlikely to change the current course of action drastically, sources say.
Less clear is whether the Gulf is willing to give the US everything it wants.
According to Mohammed Soliman, director for strategic technologies and cyber security at the Washington, DC-based Middle East Institute, recent deals between Microsoft and G42 in the UAE and the Public Investment Fund and Google Cloud in Saudi Arabia point to a new playbook favoured by Washington which engages agencies such as the Commerce Department and National Security Council.
“They integrate the Gulf further into the US-led tech ecosystem while minimising compliance risks,” says Soliman.
SuppliedThe Microsoft agreement required G42 to cut relationships with Huawei.
But China’s tech presence in the Gulf remains visible. Huawei, for instance, has agreed to develop a 5.5G wireless network in Kuwait with STC’s local affiliate.
“The feeling I get from talking to people in the Gulf is, that’s not our fight, that’s your fight,” says Kristian Coates Ulrichsen, a fellow for the Middle East at the Baker Institute in Houston.
“We don’t have skin in the game, we don’t have a bone to pick with China, so leave us out of it. Don’t make us pick sides, because we won’t.”