Trade and Cooperation Between the EU and the Gulf States

The six GCC member-states – Saudi Arabia, the United Arab Emirates (UAE), Qatar, Oman, Bahrain, and Kuwait – increasingly prioritise regional and international connectivity, along with the expansion of renewable energy in order to develop alternative business models beyond the export of fossil fuels.

Following the outbreak of the Russian invasion of Ukraine, the Gulf states’ potential as reliable, energy-rich anchors of stability in Europe’s immediate neighbourhood gained greater significance, prompting stronger engagement by Berlin and Brussels in the Gulf region. However, the latest US-Israel war with Iran represents a stress test for the key economic pillars underpinning the partnership between Europe and the Gulf states: trade flows through the Strait of Hormuz, the main maritime gateway to the Arabian Peninsula, have been disrupted, while Iranian attacks on civilian targets have called into question the GCC’s image as a safe haven for international business and financial flows.

Nevertheless, this report argues in favour of deepening the economic partnership between the EU and the GCC. Especially in the volatile geopolitical environment of today, a comprehensive free trade agreement featuring regulatory harmonisation, targeted investment promotion, and close cooperation on sustainable energy and industrial development would offer substantial benefits for the EU. Using the Gulf states’ existing free trade agreement with the European Free Trade Association (EFTA) countries – Norway, Switzerland, Iceland, and Liechtenstein – as a case study, this paper shows that the EU has lost market shares to competitors benefiting from trade agreements. EFTA exports to the GCC grew by around 45 percent more than EU exports following the conclusion of the agreement. On the import side as well, EFTA countries exhibit significantly stronger rates of integration with the Gulf region.

These findings suggest that the agreement has not only enabled EFTA states to generate stronger export growth, but has also stimulated import expansion, particularly in resource-related and intermediate-goods-intensive sectors. At the same time, the effects of the EFTA FTA demonstrate that a purely tariff-focused agreement would offer only limited economic benefits for Brussels. Only a forward-looking framework that extends beyond traditional trade issues can unlock the full strategic potential of the partnership in an increasingly geopolitically charged environment.